SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report: April 14, 1997
MILLENNIUM ELECTRONICS, INC.
(Exact name of registrant as specified in it charter)
Nevada 33-45838-C 33-0750730
------ ---------- ----------
(State of incorporation) (Commission (I.R.S. Employer
File Number) Identification Number)
31642 South Coast Highway, Suite 100, Laguna Beach, California 92699
(Address of principal executive offices)
Registrant's telephone number, including area code: (714) 499-0877
Beacon Capital Investment, Inc.
330 East main Street, Suite 206
Barrington, Illinois 60010
(Former name and address since last report.)
Exhibit Index at Page 6
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Item 1. Changes in Control of Registrant
As part of the transactions described under Item 2, below, a
change of control of Millennium Electronics, Inc., a Nevada
corporation (formerly named Millennium Computer, Inc. and
successor in interest to Beacon Capital Investment, Inc., a
Delaware corporation ("Beacon")) ("Registrant"), occurred on
April 1, 1997. Troy D. Barnes, the majority shareholder of
Millennium Memory, Inc., a California corporation ("Millennium
Memory"), acquired control of Registrant in exchange for his
shares of Millennium Memory in a merger of a subsidiary of
Registrant into Millennium Memory. The percentage of voting
securities of Registrant owned by Troy D. Barnes is 57%.
Control of Registrant was assumed from Registrant's
stockholders immediately prior to the merger. A copy of the
Agreement and Plan of Merger is attached hereto as Exhibit A.
Item 2. Acquisition or Disposition of Assets
On April 1, 1997, Registrant completed a merger with
Millennium Memory by which Millennium Memory has become a
wholly-owned subsidiary of Registrant.
Registrant issued 6,779,768 shares of its common stock in a
one-for one exchange for all of the issued and outstanding
common stock of Millennium Memory. The exchange rate was
established in arms length negotiations between Registrant's
predecessor, Beacon, and Millennium Memory. Beacon and
Millennium Memory had no prior affiliation with each other.
The parties determined the value of Registrant's shares based
upon its cash position, the virtual absence of any liabilities
and the value of its public company status. The parties
determined the value of Millennium Memory's shares based upon
a financial model utilizing Millennium Memory's existing
equity, its operating history and growth projections and the
price/earnings ratios of various similarly situated companies.
As part of the transaction, Beacon changed its name and state
of incorporation to Nevada through a reincorporation into
Registrant. The exchange rate in the reincorporation merger
was two and one-half shares of Beacon for one share of Registrant.
Millennium Memory became a wholly-owned subsidiary of Registrant
in a reverse triangular merger with a wholly-owned subsidiary of
Registrant. The transaction coincided with the closing of a
private placement of 1.5 million shares of Millennium Memory for
gross proceeds of $3.0 million.
Troy Barnes, President and Chairman of the Board of Millennium
Memory, succeeds Douglas P. Morris as President of Registrant.
Mr. Morris will continue to serve as Vice President of Capital
Markets for Registrant.
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Millennium Memory manufactures, through subcontractors, and
distributes memory upgrade components for PCs, laptop and
notebook computers, file servers and printers. The company
provides DRAM memory upgrade products to resellers, value
added resellers, value added distributors, OEMs, aggregators
and national and regional distributors.
Item 5. Other Events
On April 9, 1997, Registrant changed its name to "Millennium
Electronics, Inc."
Item 7. Financial Statements and Exhibits
The following financial statements, pro forma financial
information and exhibits are filed as part of this report:
(a) Financial Statements of business acquired.
1. Balance Sheets of Millennium Memory, Inc. as of December 31,
1995 and 1996.
2. Statements of Operations of Millennium Memory, Inc. for the
Years Ended December 31, 1995 and 1996.
3. Statement of Stockholders' Equity of Millennium Memory, Inc.
for the Years Ended December 31, 1995 and 1996.
4. Statements of Cash Flows of Millennium Memory, Inc. for the
Years Ended December 31, 1995 and 1996.
5. Notes to Financial Statements of Millennium Memory, Inc. dated
December 31, 1996.
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(b) Pro forma financial information.
1. Proforma Balance Sheet of Beacon Capital Investment, Inc. and
Millennium Memory, Inc. dated December 31, 1996.
2. Proforma Statement of Operations of Beacon Capital Investment,
Inc. and Millennium Memory, Inc. for the Three Months Ended
December 31, 1996.
3. Proforma Statement of Operations of Beacon Capital Investment,
Inc. and Millennium Memory, Inc. for the Year Ended September
30, 1996.
4. Notes to Financial Statements of Beacon Capital Investment,
Inc. and Millennium Memory, Inc.
(c) Exhibits.
1. Agreement and Plan of Merger dated as of December 31, 1996, by
and among Beacon Capital Investment, Inc., Millennium Memory,
Inc. and Troy Barnes, as amended.
2. Articles of Incorporation of Millennium Electronics, Inc., as
amended.
3. By-Laws of Millennium Electronics, Inc., as amended.
4. Financial Statements listed in Items 7(a) and (b).
(Remainder of page left blank intentionally.)
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Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MILLENNIUM ELECTRONICS, INC.
Date: April 14, 1997 By: /s/ Troy D. Barnes
-------------------
Troy D. Barnes
President
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Exhibit Index
-------------
Tab Exhibit Page
- --- ------- ----
A Agreement and Plan of Merger dated as of December
31, 1996, by and among Beacon Capital Investment,
Inc., Millennium Memory, Inc. and Troy Barnes, as
amended. (Omitted attachments will be furnished
upon request.) 7
B Articles of Incorporation of Millennium Electronics,
Inc., as amended. 62
C By-Laws of Millennium Electronics, Inc., as amended. 75
D Accountants' Report and Financial Statements. 99
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BEACON CAPITAL INVESTMENT, INC.
a Delaware Corporation
AND
MILLENNIUM MEMORY, INC.
a California Corporation
AND
TROY BARNES, THE PRINCIPAL SHAREHOLDER
OF MILLENNIUM MEMORY, INC.
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS..................................................................1
ARTICLE II
2.1. The Merger.......................................................4
2.2. Effective Time...................................................5
2.3. Conversion of Millennium Securities..............................5
2.4. Effect of Conversion.............................................5
2.5. Conversion of Capital Stock of Beacon Merger Sub.................5
2.6. Exchange of Shares...............................................5
2.7. Reorganization...................................................6
2.8. Escrow of Shares of Current Millennium Shareholders..............6
ARTICLE III
THE SURVIVING CORPORATION....................................................8
3.1. Surviving Corporation............................................8
3.2. Articles of Incorporation........................................8
3.3. Bylaws...........................................................8
3.4. Directors and Officers of Millennium.............................8
3.5. Effect of Merger.................................................8
3.6 Change of Name...................................................8
3.7. Beacon Directors and Officers of Beacon..........................8
3.8. Expiration of Warrants...........................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SOUND MEDICAL SHAREHOLDERS AND SOUND MEDICAL.................................9
4.1. Organization...................................................9
4.2. Capitalization.................................................9
4.3. Reorganization Related Reorganizations.........................9
4.4. Authority Relative to this Agreement..........................11
4.5. Approvals and Consents; Noncontravention......................11
4.6. Articles of Incorporation and Bylaws..........................12
4.7. Financial Statements..........................................12
4.8. No Undisclosed Material Liabilities...........................12
4.9. Absence of Certain Changes or Events..........................12
4.10. Litigation and Proceedings....................................13
4.11. Compliance with Laws, Rules and Regulations...................13
4.12. Contracts.....................................................13
4.13. Material Contract Defaults....................................14
4.14. Taxes and Tax Returns.........................................14
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4.15. No Subsidiaries................................................15
4.16. Title and Related Matters......................................15
4.17. Intellectual Property..........................................15
4.18. Real Property Leaseholds.......................................15
4.19. Accounts Receivables...........................................16
4.20. Inventory......................................................16
4.21. Insurance......................................................16
4.22. Environmental Matters..........................................16
4.23. Employees......................................................17
4.24. Certain Payments...............................................17
4.25. Relationships with Related Persons.............................18
4.26 Brokers........................................................18
4.27. Millennium Schedules...........................................18
4.28. Information....................................................19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BEACON....................................20
5.1. Organization...................................................20
5.2. Capitalization.................................................20
5.3. Reorganization Related Representations.........................21
5.4. Authority Relative to this Agreement...........................22
5.5. Approvals and Consents; Noncontravention.......................23
5.6. Articles of Incorporation and Bylaws...........................23
5.7. Financial Statements...........................................23
5.8. Undisclosed Material Liabilities...............................24
5.9. Absence of Certain Changes of Events...........................24
5.10. Litigation and Proceedings.....................................24
5.11. Compliance with Laws, Rules and Regulations....................24
5.12. Contracts......................................................25
5.13. Material Contract Defaults.....................................25
5.14. Taxes and Tax Returns..........................................26
5.15. No Subsidiaries................................................26
5.16. Cash Assets....................................................26
5.17. Intellectual Property..........................................26
5.18. Real Property Leaseholds.......................................26
5.19. Accounts Receivable............................................26
5.20. Inventory......................................................26
5.21. Insurance......................................................26
5.22. Environmental Matters..........................................26
5.23. Employees......................................................27
5.24. Certain Payments...............................................27
5.25. Brokers........................................................27
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5.26. Beacon Schedules................................................27
5.26. Information.....................................................28
5.27. Additional Information Available................................28
ARTICLE VI
CONDUCT PRIOR TO CLOSING....................................................28
6.1. Conduct of Business.............................................28
6.2. Millennium Shareholder Approval.................................28
6.3. Additional Covenants by Millennium and Millennium
Shareholders and Beacon.......................................28
6.4. Access..........................................................29
6.5. Compliance with Blue Sky Law....................................30
ARTICLE VII
CONDITIONS OF MILLENNIUM....................................................30
7.1. Representations................................................30
7.2. Compliance.....................................................30
7.3. No Material Adverse Change.....................................31
7.4. Certificate of Beacon and Beacon Merger Sub....................31
7.5. Resignations of Directors and Officers of Beacon...............31
7.6. Shareholder Approval...........................................31
7.7. Absence of Litigation..........................................31
7.8. Good Standing..................................................31
7.9. Employment Agreements..........................................31
7.10. Repayment of Loans to Barnes...................................31
7.11. Reverse Split..................................................31
7.12 Cancellation of Options........................................31
7.13. Approval by CoastFed...........................................32
7.14. Private Placement..............................................32
7.15. Regisration Rights.............................................32
7.16. Permit.........................................................32
ARTICLE VIII
CONDITIONS OF BEACON........................................................32
8.1. Representations................................................32
8.2. Compliance.....................................................32
8.3. No Material Adverse Change.....................................32
8.4. Private Placement..............................................32
8.5. Approval by CoastFed...........................................32
8.6. Key Man Life Insurance.........................................33
8.7. Directors and Officers of Beacon; Morris Consulting Agreement..33
8.8. Registration Rights............................................33
8.9. Certificate of Millennium......................................33
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8.10. Shareholders' Approval.........................................33
8.11. No Assertion of Dissenters' Rights.............................33
8.12. Absence of Litigation..........................................33
8.13. Good Standing..................................................33
8.14. Investment Letters.............................................33
8.15. Financial Statements...........................................33
8.16. Permit.........................................................34
ARTICLE IX
INDEMNIFICATION, SURVIVAL, TERMINATION AND EXPENSES.........................34
9.1. Nature and Survival of Representations.........................34
9.2. Indemnification................................................34
9.3. Adjustment In Beacon Common Stock..............................34
9.4. Other Remedies.................................................35
9.5. Termination....................................................35
9.6. Effect of Termination..........................................36
ARTICLE X
MISCELLANEOUS...............................................................36
10.1. Notices.......................................................37
10.2. Entire Agreement..............................................37
10.3. Effect; Assignment............................................38
10.4. Amendments; Waivers...........................................38
10.5. Further Assurances............................................38
10.6. Headings......................................................38
10.7. Counterparts..................................................38
10.8. Severability..................................................38
10.9. Governing Law.................................................38
10.10. Jurisdiction; Service of Process..............................38
10.11. Further Assurances............................................39
10.12. Legal Fees and Expenses.......................................39
10.13. Additional Condition to Closing...............................39
Attachments
Exhibit "A" - Current Millennium Shareholders
Exhibit "B" - Agreement of Merger and Officer's Certificate
Exhibit "C" - Employment Agreement
Exhibit "D" - Registration Rights Agreement
Exhibit "E" - Consulting Agreement
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "Agreement") among
Millennium Memory, Inc., a California corporation ("Millennium"); Troy
Barnes, the principal shareholder of Millennium ("Barnes"); and Beacon
Capital Investment, Inc., a Delaware corporation ("Beacon").
RECITALS
The Boards of Directors of Beacon and Millennium have each
determined that it is advisable and in the best interests of their
respective shareholders to enter into this Agreement and to engage in
the transactions contemplated hereby pursuant to which: (i) Beacon
Merger Sub, Inc. ("Beacon Merger Sub") will be formed by Beacon under the
laws of the State of California and merged into Millennium; and (ii)
shares of the common stock of Millennium will be converted into shares
of common stock of Beacon; and
Barnes and Millennium have made certain representations to
Beacon concerning the status, prospects and condition of Millennium,
which representations are contained in this Agreement; and
Beacon has made certain representations to Millennium and
Barnes concerning the status, prospects and condition of Beacon, which
representations are contained in this Agreement; and
The Boards of Directors of Beacon and Millennium have approved
the merger agreed to herein.
AGREEMENT
In consideration of the mutual agreements, representations,
warranties and covenants contained in this Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
Article I
Definitions
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"Breach"-- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if
there is or has been any inaccuracy in or breach of, or any failure to
perform or comply with, such representation, warranty, covenant,
obligation, or other provision.
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"Contract"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied)
that is legally binding.
"Governmental Authorization"--any approval, consent, license,
permit, waiver, or other authorization issued, granted or given by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district,
or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"IRC"--the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code
or any successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States
Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge"
of a particular fact or other matter if:
(a) such individual is actually aware of such fact or
other matter; or
(b) a prudent individual should be expected to discover
or otherwise become aware of such fact or other matter in the
course of conducting a reasonably comprehensive investigation
concerning the existence of such fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who
is serving, or who has at any time served, as a director, officer,
partner, executor, or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other
matter.
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"Legal Requirement"--any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty.
"Order"--any award, decision, injunction, judgment, order,
ruling, decree or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any
arbitrator.
"Ordinary Course of Business"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business"
only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person; and
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group
of Persons exercising similar authority).
"Permit"-- a permit issued under Section 25121 of the
California Corporations Code.
"Person"--any individual, corporation (including any non-
profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor
union, or other entity or Governmental Body.
"Private Placement" -- the offer and sale of shares of
Millennium's no par value, common stock prior to and as a condition to
the Closing of the Merger. In the Private Placement, a minimum of
1,250,000 Millennium shares and maximum of 1,500,000 Millennium shares
will be offered for sale by Millennium.
"Proceeding"--any action, arbitration, audit, hearing,
investigation (to the extent known by the Person) , litigation, or suit
(whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled
by such individual or one or more members of such individual's
Family;
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(c) any Person in which such individual or members of
such individual's Family hold (individually or in the
aggregate) a Material Interest; and
(d) any Person with respect to which such individual or
one or more members of such individual's Family serves as a
director, officer, partner, executor, or trustee (or in a
similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or
indirectly under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in
a similar capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a
similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse,
(iii) the individuals children or parents, and (iv) any other natural
Person who resides with such individual, and (b) "Material Interest"
means direct or indirect beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 5% of the outstanding voting
power of a Person or equity securities or other equity interests
representing at least 5% of the outstanding equity securities or equity
interests in a Person.
"Securities Act"--the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any
successor law.
"Securities Exchange Act "-- the Securities Exchange Act of
1934 or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
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"Shareholders of Millennium" -- All Persons who own shares of
Millennium Common Stock immediately prior to the Effective Time.
"Tax Return"--any return (including any information return),
report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the
determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.
"Threatened"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has been
given (orally or in writing).
Article II
The Merger
2.1 The Merger. Subject to the terms and conditions of this
Agreement, the General Corporation Law of the State of Delaware
("Delaware Statute") and the Corporations Code of the State of
California ("California Statute"), at the Effective Time (as defined in
Section 2.2 of this Agreement), Beacon Merger Sub will be merged with
and into Millennium (the "Merger") whereupon the separate existence of
Beacon Merger Sub shall cease and Millennium shall be the surviving
corporation ("Surviving Corporation").
2.2. Effective Time. The Merger shall become effective when
a properly executed Agreement of Merger and Officers' Certificate in the
form of those attached hereto as Exhibit B, are duly filed with the
Secretary of State of the State of California pursuant to the California
Statute. The time at which such Agreement of Merger and Certificate are
filed shall be referred to in this Agreement as the "Effective Time" and
the date on which the Effective Time occurs is referred to in this
Agreement as the "Effective Date".
2.3. Conversion of Millennium Securities. At the Effective
Time, all shares of common stock of Millennium outstanding ("Millennium
Common Stock") shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted ( "Converted", "Conversion"
or "Exchange") into shares of $.001 par value common stock of Beacon
("Beacon Common Stock"). Each share of Millennium Common Stock
outstanding immediately prior to the Effective Time shall be Converted
into one share of Beacon Common Stock. At the Effective Date, there
will be a minimum of 6,516,368 shares and a maximum of 6,778,868 shares
of Millennium Common Stock issued and outstanding all of which will be
Converted into a minimum of 6,516,368 shares and a maximum of 6,778,868
shares of Beacon Common Stock.
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2.3.1 Prior to, and as a condition of the closing
("Closing") of the Merger, Millennium shall sell additional shares of its
common stock in a non-public securities offering (the "Private
Offering"). The number of shares of Millennium Common Stock which will
be sold in the Private Offering cannot be determined until and unless
the Private Offering is completed. There are currently 5,203,868
shares of Millennium Common Stock issued and outstanding which, at the
Effective Time, shall be Converted into 5,203,868 shares of Beacon
Common Stock. Each share of Millennium Common Stock issued in the
Private Placement shall also be Converted into one share of Beacon
Common Stock at the Effective Time. Attached hereto as Exhibit "A", and
by this reference made a part hereof, is a list of the current
Shareholders of Millennium which sets forth the number of shares of
Millennium Common Stock owned by each and the number of shares of Beacon
Common Stock to be issued to each Shareholder in the Conversion.
2.4. Effect of Conversion. Each share certificate which
immediately prior to the Effective Time represents Millennium Common
Stock, shall be deemed for all purposes at and after the Effective Time
to evidence ownership of, and to represent the number of shares of,
Beacon Common Stock into which the shares of Millennium Common Stock
represented by such certificate immediately prior to the Effective Time
have been Converted pursuant to Section 2.3 hereof. Each Shareholder of
Millennium at the Effective Time shall, until such owner's certificate
for Millennium Common Stock has been surrendered for transfer or
exchange, be entitled to exercise any voting and other rights with
respect thereto and be entitled to receive any dividends or other
distributions, equivalent to the number of shares of Beacon Common Stock
into which the shares of Millennium Common Stock represented by such
certificate has been Converted.
2.5. Conversion of Capital Stock of Beacon Merger Sub. At
and as of the Effective Time, each share of the common stock of Beacon
Merger Sub shall be converted into one share of common stock of the
Surviving Corporation.
2.6. Exchange of Shares. The exchange of share certificates
shall be effected by Beacon. Beacon shall deliver to the Shareholders
of Millennium certificates for the shares of Beacon Common Stock in
exchange for stock certificates representing all shares of Millennium
Common Stock pursuant to the terms of this Agreement. Each holder of
an outstanding certificate or certificates representing Millennium
Common Stock shall be entitled, upon surrender of such certificate(s) to
Beacon, duly endorsed in blank or accompanied by stock powers duly
endorsed in blank, with signatures guaranteed by a bank or brokerage
firm, to receive a certificate representing the number of shares of
Beacon Common Stock into which Millennium Common Stock shall have been
converted pursuant to the Merger. As a condition to the Closing of the
Merger, Millennium is required to raise additional capital through the
sale of Millennium Common Stock. The Millennium Shareholders purchasing
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Millennium Common Stock in connection therewith ( the "New MMI
Shareholders"), will not be issued certificates from Millennium for such
Millennium Common Stock. At the Effective Time, Beacon will issue to
all Millennium Shareholders, including the New MMI Shareholders,
certificates for Beacon Common Stock in exchange for their Millennium
Common stock; provided, however, the New MMI Shareholders shall not be
required to deliver to Beacon at the Closing certificates for their
Millennium Common Stock. All Beacon stock certificates issued to the
Shareholders of Millennium at the Effective Time shall contain a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, (THE "ACT") OR ANY STATE SECURITIES
ACT AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES ACTS; (B) BEACON HAS BEEN FURNISHED WITH AN
OPINION OF COUNSEL ACCEPTABLE TO IT TO THE EFFECT THAT NO
REGISTRATION IS LEGALLY REQUIRED FOR SUCH TRANSFER; OR (C)
THESE SECURITIES ARE SOLD IN COMPLIANCE WITH RULE 144 AND/OR
RULE 145 PROMULGATED UNDER THE ACT.
2.7. Reorganization. It is the intent of the parties that
the Merger will qualify as a tax-free reorganization under Section
368(a)(1)(A) of the IRC and will report the Merger accordingly for
federal, state and local income tax purposes. The parties acknowledge
that no Person has obtained a revenue ruling from the IRS as to the tax
consequences and effect of the Merger.
2.8. Escrow of Shares of Current Shareholders of Millennium.
The parties agree that the value of Millennium is based, in part, upon
its projected future earnings. Inasmuch as the amount of Millennium's
future earnings are unknown, the parties agree to deposit a portion of
Beacon Common Stock issued at the Effective Time into an escrow (the
"Escrow"). At the Effective Time, 520,387 of the shares of Beacon
Common Stock (the "Escrow Shares") issued to the current shareholders of
Millennium shall be deposited on a pro rata basis into Escrow and
retained therein and released therefrom pursuant to this Section 2.8
also on the same pro rata basis. The Escrow Shares shall be released
from the Escrow on the following terms:
(i) one-fourth (1/4) of the total number of the Escrow
Shares deposited into the Escrow at the Effective Time shall
be released from Escrow and delivered to the respective
record holders thereof, if the total pre-tax earnings of
Millennium for the fiscal year ended December 31, 1996 are not
less than $700,000. In the event total "Pre-Tax Earnings" (as
defined below) for such period are less than $700,000, one-
fourth (1/4) of the total number of the Escrow Shares
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deposited into the Escrow at the Effective Time shall be
released from Escrow and delivered to Beacon for cancellation;
(ii) one-fourth (1/4) of the total number of the
Escrow Shares deposited into the Escrow at the Effective Time
shall be released from Escrow and delivered to the respective
record holders thereof, if the total Pre-Tax Earnings of
Millennium are not less than $200,000 for the three months
ended March 31, 1997. In the event total Pre-Tax Earnings for
such period are less than $200,000, one-fourth (1/4) of the
total number of the Escrow Shares deposited into the Escrow at
the Effective Time shall be released from Escrow and delivered
to Beacon for cancellation;
(iii) one-fourth (1/4) of the total number of the
Escrow Shares deposited into the Escrow at the Effective Time
shall be released from Escrow and delivered to the respective
record holders thereof, if the total Pre-Tax Earnings of
Millennium are not less than $220,000 for the three months
ended June 30, 1997. In the event total Pre-Tax Earnings for
such period are less than $220,000, one-fourth (1/4) of the
total number of the Escrow Shares deposited into the Escrow at
the Effective Time shall be released from Escrow and delivered
to Beacon for cancellation; and
(iv) one-fourth (1/4) of the total number of the
Escrow Shares deposited into the Escrow at the Effective Time
shall be released from Escrow and delivered to the respective
record holders thereof, if the total Pre-Tax Earnings of
Millennium are not less than $250,000 for the three months
ended September 30, 1997. In the event total Pre-Tax Earnings
for such period are less than $250,000, one-fourth (1/4) of
the total number of the Escrow Shares deposited into the
Escrow at the Effective Time shall be released from Escrow and
delivered to Beacon for cancellation.
The parties hereto agree that the number of Escrow Shares to
be released to the record holders or to Beacon, as the case may be, has
been determined through arms' length negotiation, and is based on the
anticipated, fair market value of the Escrow Shares at the Effective
Time. In determining the number of Escrow Shares to be released upon
satisfaction, or failure to satisfy, any of the criteria set forth
above, the fair market value of the Escrow Shares at the time of their
release shall be irrelevant, and neither the record holders nor Beacon
shall maintain they are, or otherwise will be, entitled to receive more
Escrow Shares as a result of an increase (or decrease) within the fair
market value of the Escrow Shares at the time they are released to the
record holders or to Beacon, as the case may be.
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The parties hereto agree that the number of Escrow Shares to
be released to the record holders or to Beacon, as the case may be, has
been determined through arms' length negotiation, and is based on the
anticipated fair market value of the Escrow Shares at the Effective
Time. In determining the number of Escrow Shares to be released upon
satisfaction, or failure to satisfy, any of the criteria set forth
above, the fair market value of the Escrow Shares at the time of their
release shall be irrelevant, and neither the record holders nor Beacon
shall maintain they are, or otherwise will be, entitled to receive more
Escrow Shares as a result of an increase (or decrease) within the fair
market value of the Escrow Shares at the time they are released to the
record holders or to Beacon, as the case may be. For purposes of this
Section 2.8 only, Pre-Tax Earnings shall mean net income before
provision of income taxes, determined in accordance with generally
acceptable accounting principles; provided, however, that any expense
item attributed to the release of the Escrow Shares from the Escrow or
to the issuance of any shares or options to employees as compensation,
shall not be deducted from revenues in determining Pre-Tax Earnings.
The Beacon Common Stock held in Escrow will appear as
issued and outstanding on Beacon balance sheets and will be legally
outstanding under applicable state law. All cash dividends on the
Beacon Common Stock held in Escrow will be distributed currently to the
record holders thereof, and the record holders thereof shall have full
voting rights with respect to the Beacon Common Stock delivered into
Escrow. No Beacon Common Stock delivered to the Escrow will be subject
to restrictions requiring their return to Beacon because of death,
failure to continue employment or similar restrictions. In no event
shall the record holders of the Beacon Common Stock held in Escrow have
the right to substitute other property for the Escrowed Shares.
ARTICLE III
THE SURVIVING CORPORATION AND OTHER MATTERS
3.1. Surviving Corporation. In the Merger, Beacon Merger Sub
shall merge into Millennium and Millennium shall be the Surviving
Corporation.
3.2. Articles of Incorporation. The Articles of
Incorporation of Millennium in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until amended in
accordance with applicable law.
3.3. Bylaws. The Bylaws of Millennium in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until
amended.
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3.4. Directors and Officers of Millennium. The directors and
officers of Millennium immediately prior to the Effective Time shall be
and shall constitute the directors and officers of the Surviving
Corporation to serve in accordance with the Bylaws of the Surviving
Corporation until their respective successors have been duly elected or
appointed and qualified.
3.5. Effect of Merger. The Merger will have the effects
specified in Section 1107 of the California Statute.
3.6. Change of Name. If requested by Millennium, the name of
Beacon will be changed in connection with the Merger subject to approval
by the Beacon Shareholders.
3.7. Beacon Directors and Officers. At the Effective Time,
the Directors and Officers of Beacon shall be as follows:
Directors Officers
--------- --------
Troy Barnes Troy Barnes - CEO/President and
Daniel Glick Chief Financial Officer
Douglas P. Morris Douglas P. Morris, Vice President of
Financial Markets
Celeste Barnes - Secretary
3.8. Expiration of Warrants. The Beacon Common Stock Purchase
Warrants which expire March 31, 1997 shall not be extended by Beacon.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
BARNES AND MILLENNIUM
Millennium and Barnes, represents and warrants to Beacon,
except as disclosed in this Agreement or in the Schedules attached
hereto, the statements made in this Article IV are correct and complete
as of the date hereof and will be correct and complete as of the
Effective Time:
4.1. Organization. Millennium is a corporation duly
organized, validly existing and in good standing under the laws of the
State of California and has all requisite licenses, qualifications,
corporate power and authority to own, lease and operate its assets and
to carry on its business as now being conducted, except where the
failure to be so existing and in good standing or to have such
qualifications, licenses, power and authority would not in the aggregate
have a material adverse effect on the business, operations or financial
condition of Millennium. Millennium is duly qualified to do business
as a foreign corporation and is in good standing under the laws of each
state or jurisdiction which requires such qualification except where the
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failure to be in good standing or to have such qualifications would not
in the aggregate have a material adverse effect on the business,
operations or financial condition of Millennium.
4.2. Capitalization. The entire authorized capital stock of
Millennium consists of 7,000,000 shares of common stock having no par
value, of which 5,203,868 shares are currently issued and outstanding
and of which not more than 6,778,868 will be issued and outstanding at
the Effective Time. There are no outstanding convertible securities,
warrants, options, or commitments of any nature which may cause
authorized but unissued shares of Millennium Common Stock to be issued
to any Person except as disclosed in Schedule 4.2 attached hereto. At
the Effective Time, all issued and outstanding shares of Millennium will
have been duly authorized, legally issued, fully paid, and non-
assessable, and not issued in violation of the pre-emptive or other
right of any Person. None of the outstanding equity securities or other
securities of Millennium was issued in violation of the Securities Act
or any other Legal Requirement.
4.3. Reorganization Related Representations.
4.3.1.There is no plan or intention by the
Shareholders of Millennium who own 5% or more of the Millennium stock to
sell, exchange, or otherwise dispose of a number of shares of Beacon
Common Stock received in the Merger that would reduce the Shareholders
of Millennium ownership of Beacon stock to a number of shares having a
value, as of the Effective Time, of less than 50% of the value of all of
the formerly outstanding stock of Millennium as of the same date.
Millennium stock and shares of Beacon stock held by the Shareholders of
Millennium and otherwise sold, redeemed, or disposed of prior or
subsequent to the Merger are considered in making this representation.
For purposes of this representation, the shares of
Millennium Common Stock exchanged for cash or other property,
surrendered by dissenters or exchanged for cash in lieu of fractional
shares of Beacon Common Stock are treated as outstanding Millennium
Common Stock as of the Effective Time. Moreover, Millennium Common
Stock and shares of Beacon Common Stock held by Millennium Shareholders
and otherwise sold, redeemed, or disposed of prior or subsequent to the
Effective Time are considered in making this representation.
4.3.2.Following the Effective Time, Millennium will
hold at least 90% of the fair market value of its net assets and at
least 70% of the fair market value of its gross assets, and at least 90%
of the fair market value of Beacon Merger Sub's net assets and at least
70% of the fair market value of Beacon Merger Sub's gross assets held
immediately prior to the Effective Time. For purposes of this
representation, amounts used by Millennium or Beacon Merger Sub to pay
reorganization expenses, and all redemptions and distributions (except
for regular, normal dividends) made by Millennium, are included as
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assets of Millennium or Beacon Merger Sub, respectively, immediately
prior to the Effective Time.
4.3.3.Millennium has no plan or intention to issue
additional shares of stock that would result in Beacon losing control of
Millennium within the meaning of Section 368(c) of the Code.
4.3.4.Following the Effective Time, Millennium will
continue its historic business or use a significant portion of its
historic business assets in a business.
4.3.5.Beacon, Beacon Merger Sub, Millennium, and the
Shareholders of Millennium will pay their respective expenses, if any,
incurred in connection with the transaction.
4.3.6.There is no intercorporate indebtedness
existing between Beacon and Millennium, or between Beacon Merger Sub and
Millennium, which was issued, acquired, or will be settled at a
discount.
4.3.7.At the Effective Time, 100% of the issued and
outstanding shares of Millennium Common Stock will be Exchanged solely
for voting stock of Beacon.
4.3.8.At the Effective Time, Millennium will not have
outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock in
Millennium that, if exercised or converted, would affect Beacon's
acquisition or retention of control of Millennium, as defined in Section
368(c) of the Code.
4.3.9.Millennium is not an investment company as
defined in Section 368(a)(2)(f)(iii) and (iv) of the Code.
4.3.10. On the Effective Date, the fair market value
of the assets of Millennium will exceed the sum of its liabilities plus
the amount of liabilities, if any, to which its assets are subject.
4.3.11. Millennium is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
4.3.12. None of the compensation received by any
shareholder-employees of Millennium will be separate consideration for,
or allocable to, any of their shares of Millennium Common Stock. None
of the shares of Beacon Common Stock received by any shareholder-
employee of Millennium will be separate consideration for, or allocable
to, any employment agreement; and the compensation paid to any
shareholder-employees will be for services actually rendered and will be
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commensurate with amounts paid to third parties bargaining at arms-
length for similar services.
4.3.13. No order has been entered revoking or
suspending for cause any license, permit or other authority of any
director or officer of Millennium, or of any corporation of which such
person is an officer or director, to engage in the securities business
or in the sale of a particular security or temporarily or permanently
restraining or enjoining any such person or any corporation of which he
is an officer or director from engaging in or continuing any conduct,
practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor
involving a security or any aspect of the securities business, or of any
felony.
4.4. Authority Relative to this Agreement. Millennium has
full corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by its Board
of Directors and have or will be duly and validly authorized by all of
the Shareholders of Millennium and no other corporate proceedings on the
part of Millennium are necessary to authorize this Agreement or to
consummate the transactions so contemplated. Subject to the laws of
bankruptcy, insolvency, general creditor's rights, and equitable
principles, this Agreement has been duly and validly executed and
delivered by Millennium and by Barnes and constitutes a valid and
binding agreement of Millennium and Barnes, enforceable against each of
them in accordance with its terms.
4.5. Approvals and Consents; Noncontravention.
4.5.1. Except for the filing of an Agreement of Merger
with the California Secretary of State, and obtaining a Permit under the
California Corporations Code, no consent, approval, or other action by,
or notice to or registration or filing with, any governmental or
administrative agency or authority is required or necessary to be
obtained by Millennium in connection with the execution, delivery or
performance of this Agreement by Millennium or the consummation of the
transactions contemplated by this Agreement.
4.5.2. No consent, approval, waiver or other action by
any Person under any material contract, agreement, instrument, or other
document, or obligation to which Millennium or Barnes is a party or by
which they or any of their assets are bound, is required or necessary
for the execution, delivery, and performance of this Agreement by
Millennium and Barnes, or the consummation of the transactions
contemplated by this Agreement.
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4.5.3. The execution, delivery, or performance of this
Agreement by Millennium and Barnes and the consummation of the
transactions contemplated by this Agreement will not: (i) violate or
conflict with the charter documents or Bylaws of Millennium; (ii)
violate or conflict with any law, regulation, order, judgment, award,
administrative interpretation, injunction, writ, or decree applicable to
Millennium or to Barnes or by which they or any of their assets are
bound, or any agreement or understanding between any administrative or
regulatory authority, on the one hand, and Millennium on the other hand;
or (iii) violate or conflict with, result in a breach of, result in or
permit the acceleration or termination of, or constitute a default under
any agreement, instrument or understanding to which Millennium is a
party or by which it or any of its assets are bound.
4.6. Articles of Incorporation and By-Laws. Attached hereto
as Schedule 4.6 are true and correct copies of the Articles of
Incorporation and Bylaws of Millennium. Such Articles of Incorporation
and Bylaws are in full force and effect and no amendments are pending
except as described in Schedule 4.6. Millennium is not in violation of
any provision of its Certificate of Incorporation or Bylaws. Schedule
4.6 also contains a list of all Board of Director minutes and
resolutions and all Shareholder minutes and resolutions of Millennium
since its inception, copies of which have previously been supplied to
Beacon.
4.7. Financial Statements. Attached hereto as Schedule 4.7
are unaudited financial statements of Millennium as of September 30,
1996 and audited financial statements for the years ended December 31,
1995 and 1994. Such financial statements are hereafter referred to as
the "Millennium Financial Statements." The parties acknowledge that
Beacon is required to file a Form 8-K with the Securities and Exchange
Commission within 15 days after the Effective Date. Such Form 8-K must
contain audited and other financial statements of Millennium and any
predecessor of Millennium which meet the requirements of such Form 8-K.
The Millennium Financial Statements are correct and complete in all
material respects and fairly present, in accordance with generally
accepted accounting principles, consistently applied, the financial
position of Millennium as of such dates and the results of operations
and changes in financial position for such periods.
4.8. No Undisclosed Material Liabilities. Millennium is not
subject to any material liability ($10,000 or more) of any kind
whatsoever (whether accrued, absolute, contingent, or otherwise) that
are, individually or in the aggregate, material to Millennium taken as a
whole other than:
(a) liabilities disclosed or provided for in the most
recent Millennium Financial Statements;
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(b) liabilities incurred in the ordinary course of
business since the date of the Millennium Financial Statements
consistent with past practice;
(c) liabilities contemplated by and arising under this
Agreement; and
(d) liabilities described in Schedule 4.8 attached
hereto.
To the knowledge of Millennium and Barnes, no circumstances
exist which would result in the imposition of any other liabilities.
4.9. Absence of Certain Changes or Events. Except as
contemplated by this Agreement or disclosed in Schedule 4.9, or except
in the Ordinary Course of Business consistent with its past practices,
since September 30, 1996, Millennium has not: (i) suffered any change in
its business, operations, properties, condition (financial or
otherwise), or prospects which has had or, to the knowledge of any of
its executive officers and Barnes, would likely have, individually or in
the aggregate, a material adverse effect on the business, properties,
assets or operations of Millennium; (ii) suffered any damage,
destruction or loss (whether or not covered by insurance) with respect
to any property or asset of Millennium and which has had, or to the
knowledge of Barnes, would likely have individually or in the aggregate,
a material adverse effect on the business, properties, assets or
operations of Millennium; (iii) incurred any liability or obligation
(absolute, accrued, contingent or otherwise), or suffered any material
bad debt or contingency in an amount in excess of $10,000; (iv) changed
accounting methods, principles or practices; (v) revalued any asset,
other than due to depreciation and amortization, (vi) paid, discharged
or satisfied any claims, liabilities or obligations in an amount in
excess of $10,000; (vii) entered into any commitment or transaction
material to Millennium taken as a whole in an amount in excess of
$10,000; (viii) declared, set aside or paid any dividend or distribution
in respect of any capital stock, or redeemed, purchased or otherwise
acquired any of these securities or modified its capitalization; (ix)
increased or established any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards),
stock purchase or other employee benefit plan, or otherwise changed the
compensation payable or to become payable to any officer or key
employees of Millennium, (x) canceled any debts or waived any claims in
an amount in excess of $10,000; (xi) transferred any assets in an amount
in excess of $10,000; (xii) made capital expenditures and commitments in
an amount in excess of $10,000; and (xiii) paid, loaned or abandoned
(other than payment of salaries or benefits or reimbursement of
expenses) any amount to, or sold, transferred or leased any properties
or assets to, or entered into any contract with, any of its officers or
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directors, or any affiliate or associate of any of its officers or
directors.
4.10. Litigation and Proceedings. Except as set forth in the
Schedule 4.10, there is no claim, action, proceeding or investigation
pending or, to the knowledge of Barnes, threatened by or against
Millennium or any Millennium Shareholder, or any property or asset of
Millennium, by any Person or any Governmental Authority which (i) is
reasonably likely to have, individually and in the aggregate, a material
adverse effect on the business, assets or operations of Millennium or
(ii) seeks to delay or prevent the consummation of the transactions
contemplated by this Agreement. As of the date hereof, neither
Millennium nor any property or asset of Millennium is subject to any
order, writ, judgment, injunction, decree, determination or award. Any
and all litigation or proceeding in which Millennium or Barnes, their
assets or properties are parties, are threatened to be parties is set
forth on Schedule 4.10.
4.11. Compliance with Laws, Rules and Regulations. Schedule
4.11 sets forth all material governmental licenses, permits and other
Governmental Authorization (or requests or applications therefor)
pursuant to which Millennium carries on its business. To the knowledge
of Millennium and Barnes, Millennium complies with all applicable
federal laws, rules and regulations and all applicable state and local
laws, rules and regulations relating to the operation of its business,
except to the extent that non-compliance would not materially and
adversely affect the business, operations, properties, assets or
condition of Millennium or except to the extent that non-compliance
would not result in the occurrence of any material liability for
Millennium.
4.12. Contracts. Schedule 4.12 sets forth a complete and
correct list of all leases and all material Contracts to which
Millennium is a party or by which any of its properties or assets are
bound. Millennium is not a party to any other material Contract. To
the knowledge of Millennium and Barnes, and subject to the laws of
bankruptcy, insolvency, general creditor's rights, and equitable
principles, all Contracts to which Millennium is a party or by which its
properties or assets are bound and which are material to its operations
taken as a whole, are valid and enforceable in all material respects.
For purposes of this Agreement, a "Material" agreement is an agreement
which can reasonably be expected to involve more than $25,000.
4.12.1. Millennium is not a party to or bound by, and
the assets of Millennium are not subject to, any material Contract or
instrument; any charter restriction; or any judgment, order, writ,
injunction or decree which materially and adversely affects, or in the
future is likely to (as far as Millennium can now foresee) materially
and adversely affect, the business, operations, properties, assets or
condition of Millennium.
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4.12.2. Millennium is not a party to any material:
(a) contract for employment of any officer or
employee that is not terminable on 30 days (or less)
notice (Schedule 4.22);
(b) profit sharing, bonus, deferred compensation,
stock option, severance pay, pension benefit or
retirement plan, agreement or arrangement (Schedule
4.12.2(b));
(c) Contract relating to the borrowing of money
(Schedule 4.12.2(c));
(d) guaranty of any obligation, other than one on
which Millennium is a primary obligor, for the borrowing
of money or otherwise (Schedule 4.12.2(d));
(e) consulting or other similar contract with an
unexpired term of more than thirty (30) days; (Schedule
4.12.2(e).);
(f) collective bargaining agreement;
(g) any agreement that restricts the right of
Millennium to engage in any place in any line of
business, solicit employees or customers or otherwise
compete in any line of business.
4.13. Material Contract Defaults. To the knowledge of
Millennium and Barnes, Millennium is not in default in any material
respect under the terms of any outstanding contract, agreement,
promissory notes, license, lease, or other commitment which is material
to the business, operations, assets, or condition of Millennium, and
there is no event of default or other event which, with notice or lapse
of time or both, would constitute a default in any material respect
under any such contract, agreement, lease, or other commitment in
respect of which Millennium has not taken adequate steps to prevent such
a default from occurring.
4.14. Taxes and Tax Returns. All Tax Returns and forms filed
by Millennium since its inception are set forth in Schedule 4.14
attached hereto. Millennium has filed all Tax Returns required to be
filed by it and has paid and discharged all taxes shown as due thereon
and has paid all taxes as are due, other than (i) such payments as are
being contested in good faith by appropriate proceedings and (ii) such
filings, payments or other occurrences that, individually or in the
aggregate, would not have a material adverse effect on the business or
operations of Millennium. Neither the IRS nor any other taxing
authority or agency, domestic or foreign, is now asserting or, to the
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knowledge of Millennium or Barnes, threatening to assess against
Millennium a material deficiency or claim for additional taxes or
interest thereon or penalties in connection therewith. Millennium has
not been granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of, any tax. The
accruals and reserves for taxes reflected in the most recent balance
sheet ("Balance Sheet") included in the Millennium Financial Statements
are adequate to cover all taxes accruable through such date (including
interest and penalties, if any, thereon) in accordance with generally
accepted accounting principles consistently applied.
The term "tax" or "taxes" means federal state, local, foreign,
and other taxes, including without limitation, income taxes, estimated
taxes, alternative minimum taxes, excise taxes, sales taxes, use taxes,
value-added taxes, gross receipts taxes, withholding taxes, stamp taxes,
transfer taxes, windfall profit taxes, environmental taxes and property
taxes, whether or not measured in whole or in part by net income, and
all deficiencies, or other additions to tax, interest, fines and
penalties.
4.15. No Subsidiaries. Millennium has no subsidiaries and
does not own any capital stock, security, partnership interest, or other
interest of any kind in any corporation, partnership, joint venture,
association, or other entity.
4.16. Title and Related Matters. Millennium has good and
marketable title to all of its inventory, interests in properties and
other assets which are reflected in the most recent Millennium Financial
Statements or acquired after that date (except properties, interests in
properties, and assets sold or otherwise disposed of since such date in
the ordinary course of business), free and clear of all mortgages,
liens, pledges, charges or encumbrances, except (i) statutory liens or
claims not yet delinquent; (ii) such imperfections of title and
easements as do not and will not materially detract from or interfere
with the present or proposed use of the assets or properties subject
thereto or affected thereby or otherwise materially impair present
business operations on such properties or in connection with such
assets; and (iii) such liens as are described in the Millennium
Financial Statements or in the Millennium Schedules. The offices and
equipment of Millennium that are necessary or used in the operations of
its business are in good operating condition and repair, normal wear and
tear excepted.
4.17. Intellectual Property. Schedule 4.17 hereto contains a
complete list and description of all Millennium's United States and
foreign (a) patents and patent applications; (b) trademark registrations
and applications for trademark registrations; (c) copyright
registrations and applications for copyright registrations; and (d)
unregistered trademarks, trade names, service marks and copyrights.
Millennium wholly owns the exclusive rights to all of the above-
described intellectual property and there are no known threatened
claims of any third party challenging the ownership, scope or validity
of any of the said intellectual property; to the Knowledge of Millennium
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and Barnes, there is no infringing use by any Person or entity of any of
said intellectual property; and to the Knowledge of Millennium, there
has been no disclosure of any of its trade secrets to any Person other
than Persons who have executed confidentiality/non-competition
agreements.
4.18. Real Property Leaseholds. Millennium leases its
facilities pursuant to the leases identified in the attached Schedule
4.18. Millennium is not bound by any other real property leases, and
Millennium does not own any real property.
4.19. Accounts Receivables. To the Knowledge of Millennium
and Barnes, all of Millennium's accounts receivable arose in the
Ordinary Course of Business, are "arms length" and bona fide, and are
correctly reflected in Millennium's books and records. To the Knowledge
of Millennium and Barnes, all of Millennium's accounts receivable (net
of reserves for doubtful accounts set forth on Millennium's financial
records) are collectible in accordance with their terms. To the
Knowledge of Millennium and Barnes, none of Millennium's accounts
receivable or contracts is subject to any set off, counterclaim or
adjustment by reason of any product liability, breach of warranty,
contract, accounting error or other claim.
4.20. Inventory. All inventory of Millennium, whether or
not reflected in its most recent Balance Sheet, consists of a quality
and quantity usable and salable in the ordinary course of business,
except for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value in
the Financial Statements or on the accounting records of Millennium as
of the Effective Date, as the case may be. All inventories not written
off have been priced at the lower of cost or market on a cost averaging
basis. The quantities of each item of inventory are not excessive, but
are reasonable in the present circumstances of Millennium.
4.21. Insurance. Millennium maintains insurance policies as
described on the attached Schedule 4.21.
4.22. Environmental Matters.
4.22.1. Neither Millennium nor any predecessor of
Millennium (i) has violated or is violation of any Environmental Law;
(ii) has owned or leased properties (including but without limitation,
soils and surface and ground waters) which are contaminated with any
Hazardous Substance; (iii) is actually or potentially or, to the
Knowledge of Barnes, allegedly liable for any off-site contamination;
(iv) is actually or potentially or, to the Knowledge of Barnes,
allegedly liable under any Environmental Law (including, without
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limitation, pending or threatened liens); (v) has failed to obtain all
permits, licenses and other authorization required under any
Environmental Law ("Environmental Permits"); or (vi) has failed to be in
compliance with its Environmental permits.
4.22.2. To the Knowledge of Barnes, neither Millennium
nor any of its predecessors, or their respective subsidiaries or joint
ventures, have any material Environmental Liabilities, and none of such
entities have had within the five (5) years preceding the date hereof a
material release of Hazardous Substances into the environment in
violation of any Environmental Law or Environmental Permit.
4.22.3. For the purposes of this Section 4.22, the
following terms have the following meanings:
"Environmental Laws" shall mean any and all federal,
state and local laws (including case law), regulations,
ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises,
licenses, agreements and governmental restrictions relating to
(i) human health, the environment or emissions, discharges or
releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment; (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof; or (3)
the pollution of the environment.
"Environmental Liabilities" shall mean all liabilities,
whether vested or unvested, contingent or fixed, which (i)
arise under or relate to Environmental Laws and (ii) relate to
actions occurring or conditions existing on or prior to the
Effective Time.
"Hazardous Substances" shall mean (1) those substances
defined in or regulated under the following federal statutes
and their state counterparts, as each may be amended from time
to time, and all regulations thereunder: the Hazardous
Materials Transportation Act; the Resources Conservation and
Recovery Act; the Comprehensive Environmental Response,
Compensation and Liability Act; the Clean Air Act; the Safe
Drinking Water Act (Clean Water Act); the Atomic Energy Act;
the Federal Insecticide, Fungicide, and Rodenticide Act; and
the Substances Control Act; (2) petroleum and petroleum
products including crude oil and any fractions thereof; (3)
natural gas, synthetic gas, natural gas liquids and any
mixtures thereof; (4) radon; (5) any other contaminant; and
(6) any substance with respect to which a Governmental
Authority requires environmental investigation, monitoring,
reporting or remediation.
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4.23 Employees.
4.23.1. Schedule 4.23 contains a complete and accurate
list of the following information for each employee or
director of Millennium, including each employee on leave of
absence or layoff status; name; job title; current
compensation paid or payable by Millennium and any change in
compensation since December 31, 1995; vacation accrued; and
service credited for purposes of vesting and eligibility to
participate under any pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee
Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan or any Director Plan.
4.23.2. No employee or director of Millennium is a
party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement")
that in any way adversely affects or is likely to adversely
affect (i) the performance of his duties as an employee or
director of Millennium, or (ii) the ability of Millennium to
conduct its business, including any Proprietary Rights
Agreement with Millennium or any current Millennium
Shareholder by any such employee or director. To Millennium's
and Barnes' knowledge, no director, officer, or other key
employee of Millennium intends to terminate his employment
with Millennium.
4.24. Certain Payments. Since its inception, neither
Millennium nor any director, officer, agent, or employee of Millennium
or any other Person associated with or acting for or on behalf of
Millennium has directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to
any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already
obtained, for or in respect of Millennium or any affiliate of
Millennium, or (iv) in violation of any Legal Requirement; or (b)
established or maintained any fund or asset that has not been recorded
in the books and records of Millennium.
4.25. Relationships with Related Persons. Neither Barnes nor
any other current Shareholder of Millennium nor any Related Person of
Barnes has, or since the inception of Millennium has had, any interest
in any property (whether real, personal, or mixed and whether tangible
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or intangible), used in or pertaining to Millennium. Neither Barnes or
any Related Person of Barnes is, or since the inception of Millennium
has owned (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction
with Millennium, other than business dealings or transactions conducted
in the Ordinary Course of Business at substantially prevailing market
prices and on substantially prevailing market terms, or (ii) engaged in
competition with Millennium with respect to any line of the products or
services of Millennium (a "Competing Business") in any market presently
served by Millennium. Except as set forth in Schedule 4.25, neither
Barnes, or any Related Person of Barnes is a party to any Contract with,
or has any claim or right against, Millennium.
4.26 Brokers. Millennium has not incurred nor will it incur
any brokerage, finder's, or similar fee in connection with the Merger or
the transactions contemplated by this Agreement. If the Merger is
Closed, Millennium will pay a consulting fee to Glick & Morganstern in
the amount of $50,000.
4.27. Millennium Schedules. Within twenty (20) days from the
date hereof, Millennium shall deliver to Beacon the following schedules
(collectively "Millennium Schedules") which consist of separate
schedules dated as of the date of execution of this Agreement and
instruments and data as of such date, all certified by the chief
executive officer of Millennium and by Barnes as complete, true, and
correct:
(a) A Schedule describing any and all options,
warrants or other rights to purchase the securities of
Millennium, together with copies of any documents relating
thereto (Schedule 4.2);
(b) A Schedule containing complete and correct copies of
the Articles of Incorporation and Bylaws, as amended, of
Millennium in effect as of the date of this Agreement and all
Board of Director and shareholder minutes and resolutions
adopted since its inception (Schedule 4.6);
(c) A Schedule including Millennium Financial Statements
(Schedule 4.7);
(d) A Schedule of all liabilities (exceeding $10,000)
included on the Millennium Financial Statements or arising
thereafter. This Schedule shall be updated as of the
Effective Date and such updated Schedule shall be delivered to
Beacon immediately prior to the Effective Time (Schedule 4.8);
(e) A Schedule setting forth a description of any
material adverse change in the business, operations, property,
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inventory, assets, or condition of Millennium since the date
of Millennium Financial Statements (Schedule 4.9);
(f) A Schedule describing any and all litigation or
proceeding to which Millennium is a party or threatened to be
party which is likely to effect, materially and adversely,
Millennium, its business or assets (Schedule 4.10);
(g) A Schedule describing all governmental licenses,
permits and other governmental authorizations (or requests or
applications therefor) pursuant to which Millennium carries on
or proposes to carry on its business (except those which, in
the aggregate, are immaterial to the present or proposed
business of Millennium) (Schedule 4.11);
(h) A Schedule containing a description of all leases
and all material contracts of Millennium (Schedule 4.12);
(i) A Schedule containing a description of all profit
sharing, bonus, deferred compensation, stock option, severance
pay, pension benefit and retirement plans (Schedule
4.12.2(b));
(j) A Schedule containing copies of all material
agreements, contracts or debentures under which Millennium is
obligated (Schedule 4.12.2(c));
(k) A Schedule containing a description of any guaranty
of any obligation, other than one on which Millennium is a
primary obligor, for the borrowing of money (Schedule
4.12.2(d));
(l) A schedule containing a description of consulting or
other similar contracts. (Schedule 4.12.2(e));
(m) A Schedule of all Intellectual Property owned by
Millennium (Schedule 4.17);
(n) A Schedule containing a description of all real
property leased by Millennium, together with a copy of all
lease agreements (Schedule 4.18);
(o) A Schedule of all insurance maintained by Millennium
(Schedule 4.21);
(p) A Schedule containing copies of all contracts for
employment of any officer or employee that is not terminable
on 30 days (or less) notice (Schedule 4.23); and
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(q) A Schedule of all other documents, disclosures, or
representations required to be disclosed by this Agreement or
required to be disclosed in order to set forth all material
facts regarding Millennium.
4.28. Information. The information concerning Millennium set
forth in this Agreement and in the Millennium Schedules is complete and
accurate in all material respects and does not contain any untrue
statement of material fact or omit to state a material fact required to
make the statements made in light of the circumstances under which they
were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BEACON
Beacon represents and warrants to Millennium and to each
Shareholder of Millennium, except as disclosed in this Agreement or in
the Beacon Schedules attached hereto, the statements made in this
Article V are correct and complete as of the date hereof and will be
correct and complete as of the Effective Time. Beacon Merger Sub has
not yet been formed, but will be formed under the laws of the State of
California prior to the Effective Time. The representations and
warranties to be made by Beacon Merger Sub will be true and correct at
the Effective Time. For purposes of this Article V, all of the
representations and warranties made by Beacon and referred to in this
Article V as made by "Beacon", shall also be deemed, for all purposes, to
be representations and warranties made by Beacon Merger Sub about the
status or condition of Beacon Merger Sub at the Effective Time to the
extent such representations and warranties are applicable to Beacon
Merger Sub.
5. Organization.
5.1. Beacon. Beacon is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all requisite licenses, qualifications, corporate power
and authority to own, lease and operate its properties and to carry on
its business as now being conducted, except where the failure to be so
existing and in good standing or to have such qualifications, licenses,
power and authority would not in the aggregate have a material adverse
effect on the business, operations or financial condition of Beacon.
Beacon is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each state or jurisdiction which
requires such qualification except where the failure to be so existing
and in good standing or to have such qualifications would not in the
aggregate have a material adverse effect on the business, operations or
financial condition of Beacon.
5.1.2. Beacon Merger Sub. At the Effective Time, Beacon
Merger Sub will be a corporation duly organized, validly existing and in
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good standing under the laws of the State of California and will have
all requisite licenses, qualifications, corporate power and authority to
own, lease and operate its properties and to carry on its business as
now being conducted, except where the failure to be so existing and in
good standing or to have such qualifications, licenses, power and
authority would not in the aggregate have a material adverse effect on
the business, operations or financial condition of Beacon Merger Sub or
Beacon. Beacon Merger Sub will be formed for the sole purpose of
effecting the Merger and will have no material assets or liabilities.
5.2. Capitalization. The capitalization of Beacon is
comprised of 25,000,000 shares of common stock, $.001 par value, of
which 1,160,458 shares are currently issued and outstanding. All
outstanding shares have been duly authorized, validly issued, and fully-
paid. All of the outstanding shares are non-assessable and free of
cumulative voting or pre-emotive rights. There are no outstanding or
presently authorized securities, warrants, options, or related
commitments of any nature of Beacon not disclosed in this Agreement, in
the Beacon Financial Statements or in the Beacon Schedules (Schedule
5.2.) attached hereto. None of the outstanding equity securities or
other securities of Beacon was issued in violation of the Securities Act
or any other Legal Requirement.
5.2.1 The capitalization of Beacon Merger Sub will,
at the Effective Time, consist of 25,000,000 shares of common stock,
$.001 par value, and 5,000,000 shares of preferred stock, no par value,
issuable in such series and with such characteristics, as determined
appropriate by the Board of Directors. Immediately prior to the
Effective Time, there will be 100 shares of Beacon Merger Sub common
stock issued and outstanding all of which will be owned by Beacon. In
connection with the Merger, such shares shall be converted into shares
of Millennium, all of which will, after the Effective Time, be owned by
Beacon.
5.3. Reorganization Related Representations.
5.3.1.This Agreement has been negotiated between
Millennium and Beacon at arms' length. The fair market value of the
Beacon stock received by each Shareholder of Millennium in the Merger
will be approximately equal to the fair market value of the Millennium
Common Stock surrendered in the Exchange.
5.3.2.Following the Effective Time, Millennium will
hold at least 90% of the fair market value of its net assets and at
least 70% of the fair market value of its gross assets, and at least 90%
of the fair market value of Beacon Merger Sub's net assets and at least
70% of the fair market value of Beacon Merger Sub's gross assets held
immediately prior to the Merger. For purposes of this representation,
amounts used by Millennium or Beacon Merger Sub to pay reorganization
expenses, and all redemptions and distributions (except for regular,
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normal dividends) made by Millennium are included as assets of
Millennium or Beacon Merger Sub, respectively, immediately prior to the
Effective Time.
5.3.3.Immediately prior to the Effective Time, Beacon
will be in control of Beacon Merger Sub within the meaning of Section
368(c) of the Code.
5.3.4 Beacon has no plan or intention to reacquire
any of its stock issued in the Merger.
5.3.5.Beacon has no plan or intention to liquidate
Millennium; to merge Millennium with or into another corporation; to
sell or otherwise dispose of the stock of Millennium except for
transfers of stock to corporations controlled by Beacon; or to cause
Millennium to sell or otherwise dispose of any of its assets or any of
the assets acquired from Beacon Merger Sub, except for dispositions made
in the Ordinary Course of Business or transfers of assets to a
corporation controlled by Millennium.
5.3.6.Beacon Merger Sub will have no liabilities
assumed by Millennium and will not transfer to Millennium any assets
subject to liabilities in the Merger.
5.3.7.Following the Effective Time, Beacon will cause
Millennium to continue its historic business or use a significant
portion of its historic business assets in a business.
5.3.8.Beacon, Beacon Merger Sub, Millennium and
Shareholders of Millennium will pay their respective expenses, if any,
incurred in connection with the transaction.
5.3.9.There is no intercorporate indebtedness
existing between Beacon and Millennium, or between Beacon Merger Sub and
Millennium, which was issued, acquired, or will be settled at a
discount.
5.3.10 At the Effective Time, shares of Millennium
stock representing control of Millennium as defined in Section 368(c) of
the Code, will be Exchanged solely for voting stock of Beacon. No
consideration other than Beacon Common Stock will be paid or received
(directly or indirectly, actually or constructively) for Millennium
Common Stock.
5.3.11. Beacon does not own, nor has it owned during the
past five years, any shares of the stock of Millennium.
5.3.12. Beacon is not an investment company as defined
in Section 368(a)(2)(f)(iii) and (iv) of the Code.
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5.3.13. None of the compensation received by any
shareholder-employees of Millennium will be separate consideration for,
or allocable to, any of their shares of Millennium stock. None of the
shares of Beacon Common Stock received by any shareholder-employee of
Millennium will be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any shareholder-
employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arms-
length for similar services.
5.3.14. No order has been entered revoking or
suspending for cause any license, permit or other authority of any
director or officer of Beacon, or of any corporation of which such
person is an officer or director, to engage in the securities business
or in the sale of a particular security or temporarily or permanently
restraining or enjoining any such person or any corporation of which he
is an officer or director from engaging in or continuing any conduct,
practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor
involving a security or any aspect of the securities business, or of any
felony.
5.4. Authority Relative to this Agreement. Beacon has,
and at the Effective Time, Beacon Merger Sub will have, the full
corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board
of Directors of Beacon and have or will have, prior to the Effective
Time, been duly and validly authorized by the shareholders of Beacon and
Beacon Merger Sub. Except for obtaining a Permit under the California
Corporations Code, no other corporate proceedings on the part of Beacon
or Beacon Merger Sub are necessary to authorize this Agreement or to
consummate the transactions so contemplated. Subject to the laws of
bankruptcy, insolvency, general creditor's rights, and equitable
principles, this Agreement has been duly and validly executed and
delivered by Beacon and constitutes a valid and binding agreement of
Beacon, enforceable against it in accordance with its terms.
5.5. Approvals and Consents; Noncontravention.
5.5.1. Except for incorporating Beacon Merger Sub,
obtaining a Permit under the California Corporations Code and for the
filing of an Agreement of Merger with the California Secretary of State,
no consent, approval, or other action by, or notice to or registration
or filing with, any governmental or administrative agency or authority
is required or necessary to be obtained by Beacon nor Beacon Merger Sub
in connection with the execution, delivery or performance of this
Agreement by Beacon or Beacon Merger Sub or the consummation of the
transactions contemplated by this Agreement.
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5.5.2. No consent, approval, waiver or other action by
any Person under any material contract, agreement, note, indenture,
lease, instrument, or other document, or obligation to which Beacon or
Beacon Merger Sub is a party or to which or by which any of their
properties or assets are bound is required or necessary for the
execution, delivery, and performance of this Agreement by Beacon or
Beacon Merger Sub or the consummation of the transactions contemplated
by this Agreement.
5.5.3. The execution, delivery, or performance of this
Agreement by Beacon and Beacon Merger Sub and the consummation of the
transactions contemplated by this Agreement will not (i) violate or
conflict with the charter documents or Bylaws of Beacon or Beacon Merger
Sub; (ii) violate or conflict with any law, regulation, order, judgment,
award, administrative interpretation, injunction, writ, or decree
applicable to Beacon or Beacon Merger Sub or by which any of their
property or assets are bound, or any agreement or understanding between
any administrative or regulatory authority, on the one hand, and Beacon
and/or Beacon Merger Sub on the other hand; or (iii) violate or conflict
with, result in a breach of, result in or permit the acceleration or
termination of, or constitute a default under any agreement, instrument,
note, indenture, mortgage, lien, lease, or other contract, arrangement,
or understanding to which Beacon or Beacon Merger Sub is a party or by
which any of their property or assets are bound.
5.6. Articles of Incorporation and Bylaws. Attached hereto as
Schedule 5.6 are true and correct copies of the Articles of
Incorporation and Bylaws of Beacon. Such Articles of Incorporation and
Bylaws are in full force and effect and no amendments are pending.
Beacon is not in violation of any provision of its Certificate of
Incorporation or Bylaws. Schedule 5.6 also contains all Board of
Director minutes and resolutions and all Shareholder minutes and
resolutions of Beacon since its inception. The Articles of
Incorporation and Bylaws of Beacon Merger Sub shall, at the Effective
Time, be in a form acceptable and approved by Millennium and Barnes.
Beacon Merger Sub will be formed prior to the Effective Time for the
sole purpose of effecting the Merger. At the Effective Time, it shall
have no liabilities, no assets, except for a limited amount of cash
(less than $500.00) and no operations.
5.7 Financial Statements. The audited financial statements
of Beacon for September 30, 1996 and 1995 ("Beacon Financial
Statements") are attached hereto as Schedule 5.7. The Beacon Financial
Statements are true and complete copies and fairly present, in
accordance with generally accepted accounting principles consistently
applied, the financial position of Beacon as of such dates and the
results of operations and changes in financial position for such
periods. Beacon Merger Sub will be formed prior to the Effective Time
for the sole purpose of effecting the Merger. At the Effective Time, it
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shall have no liabilities, no assets, except for a limited amount of
cash (less than $500.00) and no operations.
5.8. Undisclosed Material Liabilities. Beacon is not subject
to any material liability ($7,500 or more), whether accrued, absolute,
contingent or otherwise, which is not reflected as a liability in
Beacon's Financial Statements or disclosed in the Beacon Schedules. No
circumstances exist which, with the passage of time or otherwise, would
result in the imposition of liabilities not reflected or adequately
reserved against in the Beacon Financial Statements or described in the
Beacon Schedules.
5.9. Absence of Certain Changes or Events. Except as
contemplated by this Agreement or disclosed in Schedule 5.9 or except as
in accordance with its Ordinary Course of Business consistent with its
past practice, since September 30, 1996, Beacon has not (i) suffered any
change in its business, operations, properties, condition (financial or
otherwise), or prospects which has had, or to its knowledge could have,
individually or in the aggregate, a material adverse effect on the
business, properties, assets or operations of Beacon; (ii) suffered any
damage, destruction or loss (whether or not covered by insurance) with
respect to any property or asset of Beacon and which has had, or could
have, individually or in the aggregate, a material adverse effect on the
business, properties, assets or operations of Beacon; (iii) incurred any
liability or obligation (absolute, accrued, contingent or otherwise), or
suffered any material bad debt or contingency in an amount in excess of
$7,500; (iv) changed accounting methods, principles or practices, (v)
revalued any asset, other than due to depreciation and amortization;
(vi) paid, discharged or satisfied any claims, liabilities or
obligations in an amount in excess of $7,500; (vii) entered into any
commitment or transaction material to Beacon taken as a whole in an
amount in excess of $7,500; (viii) declared, set aside or paid any
dividend or distribution in respect of any capital stock, or redeemed,
purchased or otherwise acquired any of these securities or modified its
capitalization; (ix) increased or established any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing,
stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted
stock awards), stock purchase or other employee benefit plan, or
otherwise changed the compensation payable or to become payable to any
officer or key employees of Beacon; (x) canceled any debts or waived any
claims in an amount in excess of $7,500, (xi) transferred any assets in
an amount in excess of $7,500, (xii) made capital expenditures and
commitments in an amount in excess of $7,500; or (xiii) paid, loaned or
abandoned (other than payment of salaries or benefits or reimbursement
of expenses) any amount to, or sold, transferred or leased any
properties or assets to, or entered into any contract with, any of its
officers or directors, or any affiliate or associate of any of its
officers or directors.
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5.10. Litigation and Proceedings. Beacon is not involved in
any pending litigation or governmental investigation or Proceeding and,
to the Knowledge of Beacon, no litigation, claims, assessments, or
governmental investigation or Proceeding is Threatened against Beacon
or, to its Knowledge, is there is any basis for such action.
5.11. Compliance with Laws, Rules and Regulations. To the
Knowledge of Beacon, it complies with all applicable federal laws,
rules, regulations and all applicable state and local laws, rules and
regulations relating to the operation of its business, except to the
extent that non-compliance would not materially and adversely affect the
business, operations, properties, assets or condition of Beacon or
except to the extent that non-compliance would not result in the
occurrence of any material liability for Beacon.
5.11.1 Beacon has made all filings with the United
States Securities and Exchange Commission ("SEC") that it has been
required to make under the Securities Act and the Securities Exchange
Act. The documents (including Beacon Financial Statements contained
therein) filed with the SEC, except as amended, complied in all material
respects with the requirements of the Securities Act and the Securities
Exchange Act and to the Knowledge of Beacon none of such documents
contained a misrepresentation of material fact or omitted to state a
material fact required to be stated therein to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
5.12. Contracts. Schedule 5.12 sets forth a complete and
correct list of all material leases and Contracts to which Beacon is a
party or by which any of its properties or assets are bound. Beacon is
not a party to any other material Contract. To the knowledge of Beacon,
and subject to the laws of bankruptcy, insolvency, general creditor's
rights, and equitable principles, all Contracts to which Beacon is a
party or by which its properties or assets are bound and which are
"Material" (as defined below) to its operations taken as a whole, are
valid and enforceable in all material respects. For purposes of this
Agreement, a "Material" agreement is an agreement which can reasonably be
expected to involve more than $7,500 or which involves any third party
payor relationships. Except as set forth in Schedule 5.12, Beacon is
not a party to any:
(a) contract for employment of any officer or
employee;
(b) profit sharing, bonus, deferred compensation,
severance pay, pension benefit or retirement plan,
agreement or arrangement;
(c) Contract relating to the borrowing of money;
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(d) guaranty of any obligation, other than one on
which Millennium is a primary obligor, for the borrowing
of money or otherwise;
(e) collective bargaining agreement; and
(f) any agreement that restricts the right of
Beacon to engage in any place in any line of business,
solicit employees or customers or otherwise compete in
any line of business.
5.13. Material Contract Defaults. To the Knowledge of
Beacon, it is not in default in any material respect under the terms of
any outstanding contract, agreement, promissory notes, license, lease,
or other commitment which is material to the business, operations,
assets, or condition of Beacon, and there is no event of default or
other event which, with notice or lapse of time or both, would
constitute a default in any material respect under any such contract,
agreement, lease, or other commitment in respect of which Beacon has not
taken adequate steps to prevent such a default from occurring.
5.14. Taxes and Tax Returns. All Tax Returns and forms filed
by Beacon since its inception are set forth in Schedule 5.14 attached
hereto. Beacon has filed all Tax Returns required to be filed by it and
have paid and discharged all taxes shown as due thereon and have paid
all taxes as are due, other than (i) such payments as are being
contested in good faith by appropriate proceedings and (ii) such
filings, payments or other occurrences that, individually or in the
aggregate, would not have a material adverse effect on the business or
operations of Millennium. Neither the IRS nor any other taxing
authority or agency, domestic or foreign, is now asserting or, to the
Knowledge of Beacon, threatening to assess against Beacon a material
deficiency or claim for additional taxes or interest thereon or
penalties in connection therewith. Beacon has not been granted any
waiver of any statute of limitations with respect to, or any extension
of a period for the assessment of, any tax. The accruals and reserves
for taxes reflected in the most recent Balance Sheet of the Beacon
Financial Statements are adequate to cover all taxes accruable through
such date (including interest and penalties, if any, thereon) in
accordance with generally accepted accounting principles consistently
applied.
The term "tax" or "taxes" is defined in Section 4.14 of this
Agreement.
5.15. No Subsidiaries. Beacon currently has no subsidiaries
and does not own any capital stock, security, partnership interest, or
other interest of any kind in any corporation, partnership, joint
venture, association, or other entity. Beacon will, prior to the
Effective Time, form Beacon Merger Sub as a wholly-owned subsidiary
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solely for the purpose of effecting the Merger. Neither Beacon nor
Beacon Merger Sub will have any other subsidiaries either prior to, or
at, the Effective Date.
5.16. Cash Assets. Beacon's sole asset is cash. Beacon shall
have cash assets of not less than $500,000 at the Effective Time.
5.17. Intellectual Property. Beacon has no intellectual
properties.
5.18. Real Property Leaseholds. Beacon has no leasehold
properties or equipment and Beacon does not own any real property.
5.19. Accounts Receivables. Beacon has no accounts
receivable.
5.20. Inventory. Beacon has no inventory.
5.21. Insurance. Beacon maintains no insurance policies.
5.22. Environmental Matters.
5.22.1. Neither Beacon nor any predecessor of Beacon (i)
has violated or is in violation of any Environmental Law; (ii) has owned
or leased any properties (including, without limitation, soils and
surface and ground waters) which are contaminated with any Hazardous
Substance; (iii) is actually or potentially or to its Knowledge, is
allegedly liable for any off-site contamination; (iv) is actually or
potentially or, to its Knowledge, allegedly liable under any
Environmental Law (including, without limitation, pending or threatened
liens); (v) failed to obtain all permits, licenses and other
authorization required under any Environmental Law ("Environmental
Permits"); or (vi) has failed to be in compliance with its Environmental
permits.
5.22.2. To the Knowledge of Beacon, neither it nor any of
its predecessors, or their respective subsidiaries or joint ventures
have any material Environmental Liabilities, and none of such entities
have had within the five (5) years preceding the date hereof a material
release of Hazardous Substances into the environment in violation of any
Environmental Law or Environmental Permit.
5.22.3. For the purposes of this Section 5.22, the
following terms have the meanings given to them in Section 4.22 hereof:
(i) "Environmental Laws"; (ii) "Environmental Liabilities"; and (iii)
"Hazardous Substances".
5.23. Employees. Beacon has no employees and Beacon Merger
Sub will have no employees.
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5.24. Certain Payments. Since its inception, neither Beacon
nor any director, officer, agent, or employee of Beacon or any other
Person associated with or acting for or on behalf of Beacon, has
directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to
pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or
in respect of Beacon or any affiliate of Beacon, or (iv) in violation of
any Legal Requirement, (b) established or maintained any fund or asset
that has not been recorded in the books and records of Beacon.
5.25. Brokers. Except as disclosed in Schedule 5.25, Beacon
has not incurred nor will it incur any brokerage, finder's, or similar
fee in connection with the Merger or the transactions contemplated by
this Agreement.
5.26. Beacon Schedules. Within twenty (20) days from the
date hereof, Beacon shall deliver to Millennium the following schedules
(collectively "Beacon Schedules") which consist of separate schedules
dated as of the date of execution of this Agreement and instruments and
data as of such date, all certified by the chief executive officer of
Beacon as complete, true, and correct:
(a) a Schedule describing any and all options, warrants
or other rights to purchase the securities of Beacon,
together with copies of any documents relating thereto
(Schedule 5.2);
(b) a Schedule containing complete and correct copies of
the Certificate of Incorporation and Bylaws, as amended, of
Beacon in effect as of the date of this Agreement and all
Board of Director and shareholder minutes and resolutions
adopted since its inception (Schedule 5.6);
(c) a Schedule including Beacon Financial Statements
(Schedule 5.7);
(d) a Schedule of all liabilities (exceeding $7,500)
included on the Beacon Financial Statements or arising
thereafter. This Schedule shall be updated as of the
Effective Date and such updated Schedule shall be delivered to
Millennium immediately prior to the Effective Time (Schedule
5.8);
(e) a Schedule setting forth a description of any
material adverse change in the business, operations, property,
inventory, assets, or condition of Beacon since the date of
Beacon Financial Statements (Schedule 5.9);
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(f) a Schedule containing copies of Beacon's SEC filings
(Schedule 5.11);
(g) a Schedule containing a description of all material
Contracts of Beacon (Schedule 5.12);
(h) a Schedule of all other documents, disclosures, or
representations required to be disclosed by this Agreement or
required to be disclosed in order to set forth all material
facts regarding Beacon.
5.26. Information. The information concerning Beacon and
Beacon Merger Sub set forth in this Agreement and in the Beacon
Schedules is complete and accurate in all material respects and does not
contain any untrue statement of material fact or omit to state a
material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
5.27. Additional Information Available. Beacon will make
available to each Shareholder of Millennium the opportunity to ask
questions and receive answers concerning the acquisition of Beacon
Common Stock in the Merger, and to obtain any additional information
which Beacon possesses or can acquire without unreasonable effort or
expense.
ARTICLE VI
CONDUCT PRIOR TO CLOSING
6.1. Conduct of Business. Prior to the Effective Date,
Millennium and Beacon shall conduct their respective businesses only in
the ordinary course consistent with past practice.
6.2. Millennium Shareholder Approval. Prior to the Effective
Time, Millennium will provide to the Shareholders of Millennium, full
disclosure of all material facts concerning the Merger and will obtain
approval from those persons who are shareholders of Millennium at the
time such approval is sought, to effect the Merger and related
transactions.
6.3. Additional Covenants by Millennium and Barnes and
Beacon. Between the date hereof and the Effective Time, except as
contemplated by this Agreement or in the Ordinary Course of Business or
with the prior written consent of the other parties, which consent shall
not unreasonably be withheld, neither Beacon nor Millennium shall:
(a) make any change in its Articles of Incorporation or
Bylaws;
(b) make any change in the authorized or issued shares
except as contemplated by this Agreement;
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(c) except for the payment of approximately $300,000 owed
by Millennium to Barnes and for distributions in the
approximate amount of those set forth in Schedule 6.3(c)
hereto, make any payment or distribution to shareholders or
purchase or redeem any shares of capital stock;
(d) mortgage, pledge, or subject to lien or encumbrance
any of its assets, tangible or intangible;
(e) cancel any debts or claims or waive any rights of
value;
(f) incur any indebtedness or guarantees or enter into
any commitment or make any material capital expenditures or
investments;
(g) except for a bonus of approximately $250,000 to
Barnes and/or pursuant to Millennium's new non-qualified
incentive stock option plan, make any loan, accrual or
arrangement for or payment of bonuses or special compensation
of any kind or any severance or termination pay to any of its
present or former officers or employees;
(h) make any material change in its method of
management, operation, or accounting; or
(i) except in the Ordinary Course of Business, enter
into any other material transactions;
(j) hire any Person as an employee except in the
Ordinary Course of Business;
(k) except for a bonus of approximately $250,000 to
Barnes and/or pursuant to Millennium's new non-qualified
incentive stock option plan, adopt any profit sharing, bonus,
deferred compensation, insurance, pension, retirement, or
other employee benefit plan, payment, or arrangement made to,
for, or with its officers, directors, or employees.
(l) except pursuant to Millennium's new non-qualified
incentive stock option plan, grant or agree to grant any
options, warrants, or other rights for its stocks, bonds, or
other corporate securities calling for the issuance thereof ;
(m) sell or transfer, or agree to sell or transfer, any
of its assets, property, or rights or cancel or agree to
cancel, any debts or claims; or
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(n) make or permit any amendment or termination of any
material contract, agreement, or license to which it is a
party.
6.4. Access. During normal business hours, Millennium shall
give access to Beacon (and its auditors, counsel and other authorized
representatives), and Beacon and Beacon Merger Sub agree to give access
to Millennium (and its auditors, counsel and other authorized
representatives) to each of their premises and books and records,
including minute books and stock transfer records, and (ii) all
contracts, agreements and documents whether or not listed in the
Schedules hereto; provided, however, that any such investigation shall
not affect any of the representations and warranties hereunder or the
right of any party hereto to rely thereon; and provided further, that
any such investigation shall be conducted in such a manner as not to
interfere unreasonably with the operation of the business of Millennium
and Beacon.
6.4.1.Confidentiality. Millennium, Barnes, Beacon
and Beacon Merger Sub agree to keep confidential any information
obtained pursuant to their respective inspections under this Agreement
unless (i) such information is ascertainable from public sources or is
or becomes public other than through the inspecting party or its
representatives, or (ii) disclosure of such information is required by
applicable securities or other laws. Moreover, in the event of the
termination of this Agreement, Millennium, Beacon Merger Sub and Beacon
agree that it will not disclose, utilize or exploit to its advantage any
information obtained from the other pursuant to its examinations under
this Agreement, unless necessary to comply with applicable law or to
enforce its rights hereunder.
The parties agree that a Breach of the provisions of Section
6.4 of this Agreement could cause irreparable damage to the other
parties. Consequently, each agrees that in the event of any breach of
any provision of this Section 6.4 of this Agreement, a non-breaching
party, at its option, in addition to any other remedies provided by law
or otherwise, may apply to any court of competent jurisdiction for the
entry of an immediate order to restrain or enjoin the breach of these
provisions and to otherwise specifically enforce the provisions of
Section 6.4 of this Agreement. Each party hereby expressly waives the
claim or defense in any such action that the aggrieved party has an
adequate remedy at law or in damages.
6.5. Compliance with Blue Sky Law. The parties shall jointly
take such action, make such filings and pay such filing fees as may be
reasonably necessary to comply with all applicable federal and state
blue sky laws, rules and regulations relating to the issuance of
securities in the Merger.
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Article VII
Conditions of Millennium
The obligation of Millennium to consummate the Merger is
subject to the fulfillment, by Beacon prior to or as of the Effective
Time, of each of the following conditions, any of which may, at the sole
option of Millennium, be waived:
7.1. Representations. The representations and warranties by
or on behalf of Beacon and Beacon Merger Sub contained in this Agreement
or in any certificate or documents delivered to Millennium pursuant to
the provisions hereof shall be true in all material respects at the
Effective Time as though such representations and warranties were made
at and as of such time.
7.2. Compliance. Beacon shall have performed and complied
with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it prior to or at the
Closing.
7.3. No Material Adverse Change. There shall not have
occurred (i) any material adverse change since September 30, 1996 in the
business, properties, results of operations or financial condition of
Beacon; or (ii) any loss or damage to any of the properties of or assets
of Beacon which will materially affect or impair its ability to conduct
after the Merger the business now being conducted by it or Millennium.
Beacon Merger Sub shall have no liabilities at the Effective Time.
7.4. Certificate of Beacon and Beacon Merger Sub. Beacon
shall have delivered to Millennium a certificate of Beacon, dated the
Effective Time, and signed by its President and Secretary to the effect
that (i) each of the representations and warranties of Beacon contained
herein and in the Beacon Schedules is true and the information set forth
in the Beacon Schedules is accurate and complete in accordance with the
terms thereof as of, the Effective Time; and (ii) Beacon has performed
all obligations and complied with all covenants required by this
Agreement to be performed and complied with by it prior to the Effective
Date.
7.5 Resignation of Directors and Officers of Beacon. The
current management of Beacon, except for Douglas P. Morris, shall resign
as officers and directors of Beacon.
7.6. Shareholder Approval. Beacon's shareholders shall have
approved the Merger.
7.7. Absence of Litigation. There shall not be any material
litigation, proceeding or governmental investigation pending, threatened
or reasonably believed by Millennium to be in prospect pertaining to
Beacon, Beacon Merger Sub or the Merger.
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7.8. Good Standing. Beacon and Beacon Merger Sub will be in
good standing in the States of Delaware and California respectively at
the Effective Time and each shall deliver a Certificate of Good Standing
to Millennium at the Effective Time.
7.9. Employment Agreements. Beacon shall, prior to the
Effective Time, enter into an Employment Agreement with Barnes on
mutually agreeable terms. Such Employment Agreement shall be in lieu
of and shall supersede and replace in total, any and all written or oral
employment agreements, understandings, relationships or course of
dealing between Millennium and Barnes relating to employment or
shareholder distributions. Such Employment Agreement shall be for a term
of five (5) years. Barnes compensation will be set forth in the
Employment Agreement. A copy of such Employment Agreement is attached
hereto as Exhibit C.
7.10. Repayment of Loans to Barnes. Millennium shall have
repaid its outstanding debt it to Barnes in the amount of approximately
$300,000.
7.11. Reverse Split. Beacon shall have effected a 1-for-2.5
reverse split of its issued and outstanding shares of common stock and
have made similar adjustments in the number of shares issuable upon the
exercise of outstanding options or warrants to purchase shares of Beacon
common stock and the purchase price thereof (See Schedule 5.2).
7.12. Cancellation of Options. Currently, certain Persons
own options to purchase 1,320,000 shares of Beacon Common Stock.
Following the reverse split referred to in Section 7.12, the number of
shares issuable upon the exercise of such options shall be 560,220. As
a condition of Closing, the number of shares issuable upon the exercise
of such options shall be reduced to not more than 264,000.
7.13. Approval By CoastFed. The approval of the Merger and
the Private Placement by CoastFed Business Credit Corporation, the
principal creditor of Millennium, must be obtained prior to the
Effective Date.
7.14. Private Placement. The Private Placement shall have
been completed and a minimum of $2,500,000 in gross offering proceeds
shall have been raised.
7.15. Registration Rights. The parties shall have entered
into the Registration Rights Agreement attached hereto as Exhibit "D".
7.16. Financial Statements. The closing of the Merger is
conditioned upon the availability, at the Effective Time, of such
audited and other financial statements as are required to be included in
a Form 8-K required to be filed by Beacon in connection with the Merger.
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7.17. Permit. Beacon shall have obtained the Permit.
Article VIII
Conditions of Beacon
The obligation of Beacon and Beacon Merger Sub to consummate
the Merger is subject to the fulfillment, by Millennium, prior to or as
of the Effective Time, of each of the following conditions, any of which
may, at the sole option of Beacon, be waived:
8.1. Representations. The representations and warranties by
or on behalf of Millennium and Barnes contained in this Agreement or in
any certificate or documents delivered pursuant to the provisions hereof
shall be true in all material respects at the Effective Time as though
such representations and warranties were made at and as of such time.
8.2. Compliance. Millennium shall have performed and
complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it prior to or at the
Closing at the Effective Time.
8.3. No Material Adverse Change. There shall not have
occurred (i) any material adverse change since September 30, 1996 in the
business, properties, results of operations or financial condition of
Millennium; or (ii) any loss or damage to any of the properties of or
assets of Millennium which will materially affect or impair its ability
to conduct after the Merger the business now being conducted by it.
8.4. Private Placement. The Private Placement shall have
been completed and a minimum of $2,500,000 in gross offering proceeds
shall have been raised.
8.5. Approval By CoastFed. The approval of the Merger and
the Private Placement by CoastFed Business Credit Corporation, the
principal creditor of Millennium, must be obtained prior to the
Effective Date.
8.6. Key Man Life Insurance. As a condition to the Merger,
Beacon must obtain a $3,000,000 key man life insurance policy on the
life of Troy Barnes prior to the Effective Time, with Beacon as the
named beneficiary of such life insurance policy
8.7. Directors and Officers of Beacon; Morris Consulting
Agreement. As a condition to the Merger, the current management of
Beacon, except for Douglas P. Morris, shall resign as officers and
directors of Beacon and the designees of Millennium shall be elected as
directors by Beacon's shareholders and appointed as officers of Beacon
by the newly elected directors of Beacon. Douglas P. Morris shall
remain as a director of Beacon and shall be appointed its Vice President
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of Capital Markets. Beacon and Morris shall enter into a one year
Consulting Agreement in the form attached hereto as Exhibit "E".
8.8. Registration Rights. The parties shall have enter into
the Registration Rights Agreement attached hereto as Exhibit "D".
8.9. Certificate of Millennium. Millennium shall have
delivered to Beacon a certificate of Millennium, dated the Effective
Time, and signed by the President and Secretary of Millennium and by
Barnes to the effect that (i) each of the representations and warranties
of Millennium contained herein and in Millennium Schedules is true and
the information set forth in Millennium Schedules is accurate and
complete in accordance with the terms thereof as of the Effective Time;
and (ii) Millennium has performed all obligations and complied with all
covenants required by this Agreement to be performed and complied with
by it prior to the Effective Date.
8.10. Shareholders' Approval. The shareholders of Millennium
shall have approved the Merger contemplated by this Agreement by the
requisite vote and pursuant to the California Statute, and Millennium
shall have furnished Beacon (i) a certified copy of the resolution or
resolutions duly adopted by the Board of Directors of Millennium and
(ii) a certified copy of the resolution or resolutions duly adopted by
the shareholders of Millennium entitled to vote thereon approving this
Agreement and the Merger.
8.11. No Assertion of Dissenters' Rights. No Shareholder of
Millennium shall have asserted or claimed any dissenter shareholder
rights in connection with the Merger.
8.12 Absence of Litigation. There shall not be any
litigation, proceeding or governmental investigation pending, threatened
or reasonably believed by Beacon to be in prospect pertaining to
Millennium or the Merger except as disclosed in the Millennium
Schedules.
8.13. Good Standing. Millennium will be in good standing in
the State of California at the Effective Time and shall deliver a
Certificate of Good Standing to Beacon at the Effective Time.
8.14. Investment Letters. All Shareholders of Millennium
shall deliver to Beacon a letter commonly known as an "investment
letter" agreeing that the shares of stock in Beacon are being acquired
for investment purposes, and not with a view to public resale.
8.15. Financial Statements. The closing of the Merger is
conditioned upon the availability, at the Effective Time, of such
audited and other financial statements as are required to be included in
a Form 8-K required to be filed by Beacon in connection with the Merger.
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8.16. Permit. As a condition to the Merger, Beacon shall
obtain a Permit under the California Code.
Article IX
Indemnification, Survival, Termination And Expenses
9.1. Nature and Survival of Representations. All
representations, warranties, and covenants made by any party to this
Agreement shall survive the Effective Time for two (2) years except for
provisions which by their very terms are not to be fully performed for a
longer period of time, and those covenants shall survive the Effective
Time until fully performed. All of the parties hereto are executing and
carrying out the provisions of this Agreement in reliance solely on the
representations, warranties, and covenants and agreements contained in
this Agreement and not upon any investigation which it might have made
or any representations, warrants, agreement, promise, or information,
written or oral, made by another party or another Person other than as
specifically set forth herein.
9.2. Indemnification. Within the period provided in
paragraph 9.1 and in accordance with the terms of that paragraph, each
party to this Agreement shall indemnify and hold harmless each other
party at all times after the date of this Agreement against and in
respect of any liability, damage, or deficiency, all actions, suits,
proceedings, demands, assessments, judgments, costs, and expenses which
exceed, in the aggregate, $10,000 exclusive of attorney's fees incident
to any of the foregoing, resulting from any misrepresentations, breach
of covenant or warranty, or nonfulfillment of any agreement on the part
of such party under this Agreement or from any misrepresentation in or
omission from any certificate furnished or to be furnished to a party
hereunder. Subject to such $10,000 limitation, and the terms of this
Agreement, the defaulting party shall reimburse the other party or
parties on demand, for any reasonable payment made by said parties at
any time after the Closing, in respect of any liability or claim to
which the foregoing indemnity relates, if such payment is made after
reasonable notice to the other party to defend or satisfy the same and
such party failed to defend or satisfy the same. No liability shall
arise against a party hereof regarding a settlement of any claim unless
such settlement was previously approved by such party.
9.2.1. Limitations on Amount--Barnes. Except as
otherwise provided in this Section 9.2.1, subsequent to the first
anniversary of the Effective Date, Barnes shall have no personal
liability for any breach of any representation or warranty made by
Barnes in this Agreement. Furthermore, except as otherwise provided in
this Section 9.2.1.1, the maximum amount Barnes shall be required to
pay hereunder is One Hundred Thousand Dollars ($100,000.00).
9.2.1.1 The one year and $100,000 liability limitation
provided for in Section 9.2.1 shall be increased to $300,000 and to two
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years with respect to, and only to the extent of, Damages resulting from
breaches of representations and warranties by Barnes if Barnes had
actual knowledge at the time of Closing (rather than "Knowledge") that
such representations and warranties were false. Notwithstanding
anything else contained herein to the contrary, such limit of $300,000
shall not be applicable to Damages resulting from breaches of
representations and warranties which constitute fraud as defined at
common law (but with a standard of actual knowledge at the time of
Closing).
9.2.2.Limitations on Amount--Beacon and Millennium.
The maximum amount Beacon or Millennium shall be required to pay
hereunder for any breach of a representations or warranty, shall be Two
Hundred Thousand Dollars ($200,000.00). However, this limitation will
not apply to any breach of any of either Beacon's or Millennium's
representations or warranties of which such party had Knowledge at the
time of Closing or any intentional breach by such party of any covenant
or obligation, and Beacon or Millennium, as the case may be, shall be
liable for all damages with respect to such breaches.
9.2.3.Exceptions to Limitation of Millennium and
Beacon Liability. The liability limit of $200,000 agreed to in Section
9.2.2 above shall be increased to $300,000 with respect to, and only to
the extent of, Damages resulting from breaches of representations and
warranties by a Person if such Person had actual knowledge at the time
of Closing (rather than "Knowledge") that such representations and
warranties were false. Notwithstanding anything else contained herein to
the contrary such limit of $300,000 shall not be applicable to Damages
resulting from breaches of representations and warranties which
constitute fraud as defined at common law (but with a standard of actual
knowledge at the time of Closing).
9.3. Adjustment in Beacon Common Stock. In lieu of the
indemnification provided for in Section 9.2 above, if aggregate losses
or damages exceed the $10,000 limitation agreed to therein, the number
of shares of Beacon Common Stock issued to the Shareholders of
Millennium at the Effective Time shall be adjusted pursuant to this
Section 9.3.
9.3.1 If, as a result of a Breach by Beacon, the
aggregate losses or damages to the Shareholders of Millennium
exceed $10,000, Beacon shall issue additional shares of Beacon
Common Stock to the Shareholders of Millennium on a pro rata
basis in an amount equal to 125 % of such loss or damages.
Shares issued to the Shareholders of Millennium pursuant to
this Section 9.3.1 shall be valued at the price of $2.00 per
share.
9.3.2 If, as a result of a Breach by Millennium or by
Barnes, the aggregate losses or damages to Beacon exceed
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$10,000, Beacon shall, on a pro rata basis, cancel shares of
the Beacon Common Stock which were issued to those persons who
were shareholders of Millennium on the date of this Agreement.
The number of shares to be canceled hereunder shall be valued
at $2.00 per share and shall equal 125% of such loss or
damages.
9.3.3. The amount of loss or damages which are to be off
set by the cancellation or issuance of additional shares of
Beacon Common Stock pursuant to this Section 9.3 shall be
determined by the independent certifying accountants of Beacon
or by any other independent accountant or professional
selected by the Beacon Board of Directors who is engaged in
the business of valuating businesses or losses to businesses.
9.4. Other Remedies. The indemnification provisions set
forth in Sections 9.2 are in addition to, and not in derogation of, any
statutory, equitable or common law remedy any party may have for Breach
of any representation, warranty or covenant.
9.5. Termination. This agreement may be terminated at any
time prior to the Effective Time:
(a) by the mutual consent of Millennium and Beacon;
(b) by Millennium or Beacon if the Effective Time has
not occurred by March 31, 1997, or such other date, if any, as
the parties may agree to in writing; and
(c) by Millennium, or Beacon if any other party refuses
or fails to perform any covenant or agreement required to be
performed by it under this Agreement or if any representation
or warranty of any other party proves to have been inaccurate
or misleading in any material respect at the time it was made
or at the Effective Time and the other party refuses or fails
after notice to correct or make not misleading any such
misrepresentation or warranty.
(d) by Beacon for any reason within twenty (20) days
after it has received all of the Millennium Schedules.
(e) by Millennium for any reason within twenty (20) days
after it has received all of the Beacon Schedules.
9.6. Effect of Termination. If this Agreement is terminated
as permitted by Section 9.5. of this Agreement, such termination will be
without liability of any party (or any shareholder, director, officer,
employee, agent, consultant, or representative of such party) to the
other parties to this Agreement; provided, that if such termination
results from the failure of a party to use its or his best efforts to
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fulfill a condition to the performance of the obligations of the other
parties or to perform a covenant of this Agreement or from a breach by
any party to this Agreement, such party will be fully liable up to a
maximum of $7,500 for any and all damages, costs, and expenses
(including, but not limited to, reasonable counsel fees) sustained or
incurred by the other parties as a result of such failure or Breach.
9.6.1.Notwithstanding anything herein contained to
the contrary, the expenses associated with the Private Placement shall
be allocated among the parties as follows:
(i) If the Private Placement does not close because the
placement agent is unable to sell the minimum number of shares
by March 31, 1997, Beacon shall pay one-half (1/2) of the costs
and expenses of Millennium which are directly related to the
Private Placement. The maximum amount to be paid by Beacon
hereunder is $25,000.00. Millennium shall pay the balance of
such costs.
(ii) If the Private Placement does not close because
Millennium chooses not to close or is unable to close, or if
its financial position or other condition is adversely
affected prior to the Effective Time and as a result Beacon
chooses not to close, then in such event, Millennium shall pay
all of its costs and expenses which are related to the Private
Placement and Beacon shall not be responsible for any of such
costs and expenses.
(iii) If the minimum amount of the Private Placement is
raised and if Millennium is willing and able to move forward
with the Merger and if there is no adverse change to the
financial position or operations of Millennium but Beacon
refuses or is unable to close the Merger or if Beacon's
financial position or other condition is adversely effected
prior to the Effective Time and as a result Millennium chooses
not to close, then in such event, Beacon shall pay all of
costs and expenses of Millennium which are directly related to
the Private Placement up to a maximum of $50,000.00. Any
costs and expenses in excess of $50,000, shall be paid by
Millennium.
Article X
Miscellaneous
10.1. Notices. Any notice provided for by this Agreement and
any other notice, demand, or communication that any party may wish to
send another will be in writing and either delivered in Person,
transmitted by telecopier with receipt appropriately confirmed, or sent
by registered or certified United States mail, first class postage
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prepaid, return receipt requested, in a properly sealed envelope, and
addressed as follows:
Beacon
Douglas P. Morris
515 Red Cypress Road
Cary, IL 60013
with a copy to:
A. O. Headman, Jr.
Cohne, Rappaport & Segal
525 East 100 South, Fifth Floor
Salt Lake City, UT 84102
Millennium and Shareholders
Troy Barnes
31642 South Coast Highway, Suite 100
Laguna Beach, CA 92677
with a copy to:
John J. Giovannone
Sheppard, Mullin, Richter & Hampton
4695 McArthur Court
Seventh Floor
Newport Beach, CA 92660-1895
The parties to this Agreement may change their addresses for
notice by notice given in the manner provided above. Any notice,
demand, or other communication will be deemed given and effective as of
the date of delivery in Person or upon receipt as set forth on the
return receipt. The inability to deliver because of changed address of
which no notice was given or the rejection or other refusal to accept
any notice, demand, or other communication, will be deemed to be the
receipt of the notice, demand, or other communication as of the date of
such inability to deliver or the rejection or refusal to accept.
10.2. Entire Agreement. This Agreement, together with all
schedules and exhibits attached to this Agreement or referenced herein,
constitutes the entire agreement between the parties pertaining to the
subject matter of this Agreement and supersedes all prior agreements,
understandings, negotiations, and discussions, whether oral or written,
of the parties, including but not limited to the Letter of Intent
heretofore entered into by the parties and there are no warranties,
representations, or other agreements between the parties in connection
with the subject matter of this Agreement except as specifically set
forth in this Agreement and the Schedules and attachments hereto
-45-
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<PAGE>
10.3. Effect; Assignment. This Agreement and all of the
provisions of this Agreement will be binding and inure to the benefit of
the parties to this Agreement and their respective successors and
permitted assigns, but, except as expressly provided in this Agreement,
neither this Agreement nor any of the rights, interests, or obligations
under this Agreement will be assigned by operation of law or otherwise,
by any party to this Agreement without the prior written consent of the
other party. Nothing in this Agreement, express or implied, is intended
to confer upon any Person other than the parties to this Agreement and
their respective successors and permitted assigns, any rights, remedies,
or obligations under or by reason of this Agreement.
10.4. Amendments; Waivers. No supplement, modification, or
amendment of this Agreement will be binding unless executed in writing
by all parties to this Agreement. No waiver of any of the provisions of
this Agreement will be deemed or will constitute a waiver of any other
provision of this Agreement (regardless of whether similar), nor will
any such waiver constitute a continuing waiver unless otherwise
expressly provided.
10.5. Further Assurances. At any time and from time to time,
after the Effective Date, each party will execute such additional
instruments and take such action as may be reasonably requested by the
other party to confirm or perfect title to any property transferred
hereunder or otherwise to carry out the intent and purposes of this
Agreement.
10.6. Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.
10.7. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and
the same instrument.
10.8. Severability. If any part of this Agreement is deemed
to be unenforceable the balance of the Agreement shall remain in full
force and effect.
10.9. Governing Law. This Agreement shall be governed for
all purposes by the laws of the State of California applicable to
agreements executed and to be wholly-performed in the State of
California.
10.10. Jurisdiction; Service of Process. Any action or
proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against any of the parties
in the courts of the State of California, County of Orange, or, if it
has or can acquire jurisdiction, in the United States District Court for
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<PAGE>
the Central District of California, and each of the parties consents to
the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in
the preceding sentence may be served on any party anywhere in the world.
10.11. Legal Fees and Expenses. The prevailing party in any
proceeding brought to enforce or interpret any provision of this
Agreement shall be entitled to recover its reasonable attorney's fees,
costs and disbursements incurred in connection with such proceeding,
including, but not limited to the costs of experts, accountants and
consultants and all other costs and services reasonably related to the
proceeding, including those incurred in any bankruptcy or appeal, from
the non-prevailing party or parties.
10.12. Additional Condition to Closing. Notwithstanding any
provision contained in this Agreement to the contrary, the parties
acknowledge that the final Exhibits and Schedules referred to in this
Agreement have not been delivered to the respective parties. The
parties hereby acknowledge and agree that the Closing of the Merger
agreed to in this Agreement is expressly subject to and conditioned upon
the completion of, and delivery of, such Exhibits and Schedules in final
form and in a form which is satisfactory to and approved by all parties
hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement
the day and year first above written.
BEACON CAPITAL INVESTMENT, INC,
a Delaware corporation
Dated: December 31, 1996 By /s/ Douglas P. Morris
----------------------
Douglas P. Morris
President
MILLENNIUM MEMORY, INC.,
a California corporation
Dated: December 31, 1996 By /s/ Troy Barnes
---------------------
Troy Barnes
President
Dated: December 31, 1996 By /s/ Troy Barnes
----------------------
Troy Barnes, Individually
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<PAGE>
MERGER AGREEMENT
BEACON CAPITAL, INC./MILLENNIUM MEMORY, INC.
EXHIBIT A
Shares of
Shares of Beacon Capital
Millennium Investment
Shareholder Memory Owned to be Issued
- ----------- ------------ ------------
Troy Barnes Trust 4,127,760 4,127,760
Barry Morganstern 173,779 173,779
Daniel Glick 173,779 173,779
Bradley Barnes 728,550 728,550
Page 59 of 118
<PAGE>
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This First Amendment to Agreement and Plan of Merger
("Amendment") is entered into as of March 31, 1997, among Millennium
Memory, Inc., a California corporation ("Millennium"), Troy Barnes, the
principal shareholder of Millennium ("Barnes"), and Beacon Capital
Investment, Inc., a Delaware corporation ("Beacon").
RECITALS
The parties hereto are parties to that certain Agreement and
Plan of Merger dated as of December 31, 1996 (the "Agreement"); and
A condition to Millennium's obligation to consummate the
Merger is that Beacon shall have effected a 1-for-2.5 reverse split of
its issued and outstanding shares of common stock and have made similar
adjustments in the number of shares issuable upon the exercise of
outstanding options and warrants to purchase shares of Beacon common
stock and the purchase price thereof; and
Beacon has determined to satisfy that condition concurrently
with its reincorporation merger into its new wholly-owned Nevada
subsidiary, Millennium Computer, Inc. ("Nevada Corp."), by employing a
1-for-2.5 rate for the exchange of Beacon's shares for shares in Nevada
Corp.; and
Millennium is willing to permit both the reincorporation
merger and the satisfaction of the above-described condition to the
Merger through the reincorporation merger; and
The parties desire to enter into this Amendment in order to
clarify that Millennium's shares will be exchanged in the Merger on a
one-for-one basis for shares in Nevada Corp.;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
covenants contained in this Amendment, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Defined Terms. Capitalized terms used and not defined
herein shall have the meanings given them in the Agreement. The term
"Agreement" in the Agreement shall mean the Agreement as amended hereby.
2. Conversion of Millennium Securities. At the Effective
Time, all Millennium Common Stock shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into
shares of $.001 par value common stock of Millennium Computer, Inc., a
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<PAGE>
Nevada corporation which shall be the successor by merger to Beacon.
Each share of Millennium Common Stock outstanding immediately prior to
the Effective Time shall be converted into one share of the common stock
of Millennium Computer, Inc.
3. No Other Amendments. Except as amended hereby, the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
BEACON CAPITAL INVESTMENT, INC.,
a Delaware corporation
Dated: March 31, 1997 By: /s/ Douglas P. Morris
-------------------------------
Douglas P. Morris
President
MILLENNIUM MEMORY, INC.,
a California corporation
Dated: March 31, 1997 By: /s/ Troy Barnes
-------------------------------
Troy Barnes
President
Dated: March 31, 1997 /s/ Troy Barnes
------------------------------------
TROY BARNES, Individually
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<PAGE>
EXHIBIT B
FILED
In the Office of the
Secretary of State of the
STATE OF NEVADA
Dean Heller, Secretary of State
No. C3068-97
ARTICLES OF INCORPORATION
OF
MILLENNIUM HOLDINGS, INC.
The undersigned incorporator hereby forms a corporation pursuant to
the General Corporation Law of the State of Nevada. (Chapter 78 of
Nevada Revised Statutes.)
I.
CORPORATE NAME
The name of the Corporation is MILLENNIUM HOLDINGS, INC.
II.
REGISTERED OFFICE
The registered office of the Corporation in the State of Nevada is
Corporation Trust Company of Nevada, 1 East First Street, Reno, Nevada,
County of Washoe. The registered agent in charge thereof at such
address is The Corporation Trust Company.
III.
DURATION
The duration of the Corporation shall be perpetual.
IV.
GENERAL PURPOSES
The name of the business and the objects and purposes proposed to
be transacted, promoted and carried on, are to do any or all things
herein mentioned, as fully and to the same extent as natural persons
might or could do, and in any part of the world, viz:
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<PAGE>
"The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized
under the General Corporation Law of Nevada."
V.
CAPITAL STOCK
The total number of shares of all classes of capital stock which
the Corporation has the authority to issue is 30,000,000 shares which
are divided into two classes as follows:
5,000,000 shares of Preferred Stock (Preferred
Stock) $.001 par value per share, and
25,000,000 shares of Common Stock (Common Stock)
$.001 par value per share.
The designations, voting powers, preferences and relative,
participating, optional or other special rights, and qualification,
limitations or restrictions of the above classes of stock are as
follows:
Preferred Stock
---------------
1. Issuance in Series. Shares of Preferred Stock may be issued
in one or more series at such time or times, and for such
consideration or considerations as the Board of Directors may
determine. All shares of any one series of Preferred Stock
will be identical with each other in all respects, except that
shares of one series issued at different times may differ as
to dates from which dividends thereon may be cumulative. All
series will rank equally and be identical in all respects,
except as permitted by the following provisions of paragraph 2.
2. Authority of the Board with Respect to Series. The Board of
Directors is authorized, at any time and from time to time, to
provide for the issuance of shares of Preferred Stock in one
or more series with such designations, preferences and
relative, participating, optional, or other special rights and
qualifications, limitations or restrictions thereof as are
stated and expressed in the resolution or resolutions
providing for the issue thereof adopted by the Board of
Directors, and as are not stated and expressed in these
Articles of Incorporation or any amendment thereto including,
but not limited to, determination of any of the following:
(a) the distinctive serial designation and number
of shares constituting a series;
(b) the dividend rate or rates, whether dividends
are cumulative and, if so, from which date, the
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<PAGE>
payment date or dates for dividends, and the
participating or other special rights, if any,
with respect to dividends;
(c) the voting powers, full or limited, if any, of
the shares of the series;
(d) whether the shares are redeemable and, if so,
the price or prices at which, and the terms and
conditions on which, the share may be redeemed;
(e) the amount or amounts payable upon the shares
in the event of voluntary or involuntary
liquidation, dissolution or winding up of the
Corporation prior to any payment or
distribution of the assets of the Corporation
to any class or classes of stock of the
Corporation ranking junior to the Preferred
Stock;
(f) whether the shares are entitled to the benefit
of a sinking or retirement fund to apply to the
purchase or redemption of shares of a series
and, if so entitled, the amount of the fund and
the manner of its application, including the
price or prices at which the shares may be
redeemed or purchased through the application
of the fund;
(g) whether the shares are convertible into, or
exchangeable for, shares of any other class or
classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion
price or prices, or the rates of exchange, and
the adjustments thereof, if any, at which the
conversion or exchange may be made, and any
other terms and conditions of the conversion or
exchange; and
(h) any other preferences, privileges and powers,
and relating participating, optional or other
special rights, and qualifications, limitations
or restrictions of a series, as the Board of
Directors may deem advisable and as are not
inconsistent with the provisions of this
Certificate of Incorporation.
3. Dividends. Before any dividends on any class or classes of
stock of the Corporation ranking junior to the Preferred Stock
(other than dividends payable in shares of any class or
classes of stock of the corporation ranking junior to the
Preferred Stock) may be declared or paid or set apart for
payment, the holders of shares of Preferred Stock of each
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<PAGE>
series are entitled to such cash dividends, but only when and
as declared by the Board of Directors out of funds legally
available therefor, as they may be declared by the Board of
Directors providing for the issue of the series, payable on
such dates in each year as may be fixed in the resolution or
resolutions. The term "class or classes of stock of the
Corporation ranking junior to the Preferred Stock" means the
Common Stock and any other class or classes of stock of the
Corporation hereafter authorized which rank junior to the
Preferred Stock as to dividends or upon liquidation.
4. Reacquired Shares. Shares of Preferred Stock which have been
issued and reacquired in any manner by the Corporation
(excluding, until the corporation elects to retire them,
shares which are held as treasury shares but including shares
redeemed, shares purchased and retired and shares which have
been converted into shares of Common Stock) will have the
status of authorized and unissued shares of Preferred Stock
and may be reissued.
5. Voting Rights. Unless and except to the extent otherwise
required by law or provided in the resolution or resolutions
of the Board of Directors creating any series of Preferred
Stock the holders of the Preferred Stock shall have no voting
power with respect to any matter whatsoever.
Common Stock
- ------------
1. Dividends. Subject to the preferential rights of the
Preferred Stock, the holders of the Common Stock are entitled
to receive, to the extent permitted by law, such dividends as
may be declared from time to time by the Board of Directors.
2. Liquidation. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding up
of the Corporation, after distribution in full of the
preferential amounts, if any, to be distributed to the holders
of shares of Preferred Stock, holders of Common Stock shall be
entitled to receive all of the remaining assets of the
Corporation of whatever kind available for distribution to
Stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively. The Board of
Directors may distribute in kind to the holders of Common
Stock such remaining assets of the Corporation or may sell,
transfer or otherwise dispose of all or any part of such
remaining assets to any other corporation, trust or other
entity and receive payment therefor in cash, stock or
obligations of such other corporation, trust or other entity,
or any combination thereof, and may sell all or any part of
the consideration so received and distribute any balance
thereof in kind to holders of Common Stock. The merger or
consolidation of the Corporation into or with any other
-4-
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<PAGE>
corporation, or the merger of any other corporation into it,
or any purchase or redemption of shares of stock of the
Corporation of any class, shall not be deemed to be a
dissolution, liquidation or winding up of the Corporation for
the purposes of this paragraph.
3. Voting Rights. Except as may be otherwise required by law or
this Certificate of Incorporation, such holder of Common Stock
has one vote in respect of each share of stock held by him and
recorded on the books of the Corporation on all matters voted
upon by the Stockholders.
Other Provisions
----------------
1. Pre-emptive Rights. No Stockholder shall have any pre-emptive
right to subscribe to an additional issue of stock of any
class or series or to any securities of the Corporation
convertible into such stock.
2. Changes in Authorized Capital Stock. Subject to the
protective conditions and restrictions of any outstanding
Preferred Stock, any amendment to these Articles of
Incorporation which increases or decreases the authorized
capital stock of any class or classes may be adopted by the
affirmative vote of the holders of a majority of the
outstanding shares of the voting stock of the Corporation.
VI.
DIRECTORS
The number of directors constituting the initial Board of Directors
of the Corporation is one (1) and the name and address of the person who
is to serve as the initial director until his successors are elected and
qualified, is Douglas P. Morris, 330 East Main, Suite 206, Barrington,
IL 60010. At such time as the Corporation has more than three
Stockholders, the number of Directors of the Corporation shall be not
less than three (3). Subject to this Article VI, the number of
Directors of the Corporation, and the procedure for increasing or
decreasing the number of Directors, shall be determined in accordance
with the Bylaws of the Corporation.
VII.
INCORPORATOR
The name and mailing address of the incorporator of the Company is
A. O. Headman, Jr., 525 East 100 South, Fifth Floor, Salt Lake City, UT
84102.
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<PAGE>
VIII.
NON-ASSESSABILITY
Shares of the Corporation shall not be subject to assessment for
payment of the debts of the Corporation.
IX.
BYLAWS
The Board of Directors shall have the power to make, adopt, amend,
or repeal the Bylaws of the Corporation.
X.
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS
A director or officer of the Corporation shall not be personally
liable to the Corporation or its stockholders for damages for breach of
fiduciary duty as a director or officer, except for: (1) acts or
omissions which involve intentional misconduct, fraud or a knowing
violation of law; or (2) the payment of dividends in violation of NRS
section 78.300. Any repeal or modification of the provisions of this
Article X by the stockholders of the Corporation shall be prospective
only, and shall not adversely affect any limitation on the personal
liability of a director or officer of the Corporation with respect to
any act or omission occurring prior to the effective date of such repeal
or modification. If the Nevada General Corporation Law hereafter is
amended to authorize the further elimination or limitation of the
liability of directors or officers, then the liability of a director or
officer of the Corporation, in addition to the limitation on personal
liability provided herein, shall be limited to the fullest extent
permitted by the amended Nevada General Corporation Law. In the event
that any of the provisions of this Article X (including any provision
within a single sentence) is held by a court of competent jurisdiction
to be invalid, void or otherwise unenforceable, the remaining provisions
are severable and shall remain enforceable to the fullest extent
permitted by law.
XI.
INDEMNIFICATION
This Corporation shall, to the fullest extent permitted by the
provisions of section 751 of the Nevada Revised Statutes, as the same
may be amended and supplemented, indemnify any and all persons whom it
shall have the power to indemnify under said section from and against
any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the indemnification provided for
herein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under the Bylaws, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action
in his official capacity and as to action in another capacity while
-6-
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<PAGE>
holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
XII.
AMENDMENT
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are granted subject to this
reservation.
The undersigned, for the purpose of forming a corporation under the
laws of the State of Nevada, does make, file, and record this
certificate, and does certify that the facts stated herein are true; and
has executed these Articles of Incorporation.
DATED this 12th day of February 1997.
/s/ A.O. Headman, Jr.
--------------------------------
A. O. Headman, Jr.
-7-
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<PAGE>
ACKNOWLEDGMENT
STATE OF UTAH )
)
COUNTY OF SALT LAKE )
On the 12th day of February 1997, personally appeared before me
A.O. Headman, Jr., who being by me first duly sworn, declared that he is
the person who signed the foregoing documents as an incorporator and
that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th
day of February 1997.
/s/ Lawayne Jones
--------------------------------
NOTARY PUBLIC
Residing at Salt Lake County
My commission expires:
August 9, 2000
NOTARY PUBLIC
Lawayne Jones
525 E. 100 So. Ste. 500
Salt Lake City, Utah 84102
My Commission Expires
August 9, 2000
STATE OF UTAH
-8-
Page 69 of 118
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAR 31 1997
NO. C3068-97
DEAN HELLER, SECRETARY OF STATE
ARTICLES OF MERGER
OF
BEACON CAPITAL INVESTMENT, INC.,
a Delaware Corporation into
MILLENNIUM HOLDINGS, INC.,
a Nevada Corporation
Pursuant to the provisions of Section 78.461 of the Nevada
Revised Statutes, Beacon Capital Investment, Inc., a Delaware
Corporation (hereafter the "Delaware Corporation"), and Millennium
Holdings, Inc., a Nevada Corporation (hereafter the "Nevada" or
"Surviving Corporation"), adopt the following Articles of Merger for the
purpose of merging the Delaware Corporation into the Nevada Corporation.
At the effective time of the merger (i) the Delaware Corporation will
merge (the "Merger") into the Nevada Corporation; and (ii) shares of the
common stock of the Delaware Corporation will be converted into shares
of the Nevada Corporation all upon the terms and conditions set forth
herein.
1) The laws of the State of Delaware and the State of Nevada, the
states under which the Delaware Corporation and the Nevada Corporation
are organized, permit the Merger.
2) The Nevada Corporation shall be the surviving corporation.
The name of the Surviving Corporation shall be MILLENNIUM COMPUTER, INC.
and it is to be governed by the laws of the State of Nevada.
3) The Articles of Incorporation of the Nevada Corporation shall,
as a result of the filing of these Articles of Merger and the adoption
of the plan of merger be amended to read as follows:
ARTICLE I. THE NAME OF THE CORPORATION IS MILLENNIUM
COMPUTER, INC.
4) The Plan and Agreement of Merger was adopted by the Boards of
Directors of the Delaware Corporation and the Nevada Corporation and was
submitted by the Board of Directors of the Delaware Corporation to the
stockholders of the Delaware Corporation pursuant to the General
Corporation Law of the State of Delaware.
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<PAGE>
5) As to each of the undersigned Corporations, the designation
and number of outstanding shares of each class entitled to vote as a
class on the Agreement and Plan of Merger are as follows:
Number of
Name of Voting Group Shares Votes Entitled
Corporation Designation Outstanding To Be Cast
----------- ----------- ----------- --------------
Nevada Corporation common stock 500 500
Delaware Corporation common stock 1,160,458 1,160,458
6) As to each of the undersigned Corporations, the total number
of shares voted for and against the Agreement and Plan of Merger,
respectively and as to each class entitled to vote thereon are as
follows:
Name of Voting Group Total Total
Corporation Designation Voted For Voted Against
----------- ----------- --------- -------------
Nevada Corporation common stock 500 -0-
Delaware Corporation common stock 833,604 -0-
The number of votes cast for the Plan by the stockholders of
all classes of both the Nevada Corporation and the Delaware Corporation
was sufficient for approval by the stockholders of both of the
constituent corporations.
7) The completed executed Plan and Agreement of Merger is on file
at the place of business of the Surviving Corporation at 31642 South
Coast Highway, Suite 100, Laguna Beach, CA 92699 and a copy of the Plan
will be furnished by the Surviving Corporation on request, without cost,
to any stockholder of the Surviving Corporation or any corporation who
was a party to this Merger.
8) The Nevada Corporation (the Surviving Corporation) hereby
authorizes service of process on it by registered or certified mail,
return receipt requested. In connection with any proceeding to enforce
any obligations or rights of dissenting shareholders of the Delaware
Corporation or in connection with any proceeding based on a cause of
action arising with respect to the Delaware Corporation.
9) The Nevada Corporation will promptly pay to the dissenting
shareholders of the Delaware Corporation the amount, if any, to which
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<PAGE>
they are entitled to under the provisions of the Delaware General
Corporation Law with respect to the rights of dissenting shareholders.
Dated: March 31, 1997
BEACON CAPITAL INVESTMENT, INC., a
Delaware corporation
By /s/ Douglas P. Morris MILLENNIUM HOLDINGS, INC.
---------------------------- a Nevada corporation
Douglas P. Morris
President and Secretary
By /s/ Douglas P. Morris
---------------------------
Douglas P. Morris
President and Secretary
STATE OF ILLINOIS )
) SS
COUNTY OF _________ )
Douglas P. Morris, subscribed and sworn to before me this 31st
day of March, 1997.
"OFFICIAL SEAL"
SHERRY R. GROSSEN
Notary Public, State of Illinois /s/ Sherry P. Grossen
My Commission Exp. 11/04/2000 -----------------------
Notary Public
My Commission expires: 11/4/00
Residing at: McHenry Co.
-3-
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<PAGE>
FILED
In the Office of the
Secretary of State of the
STATE OF NEVADA
APR 09 1997
No. C3068-97
Dean Heller, Secretary of State
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
MILLENNIUM COMPUTER, INC.
We the undersigned President and Secretary of Millennium Computer,
Inc. do hereby certify:
The Board of Directors of said corporation on the 8th day of April,
1997 adopted a resolution to amend the original articles as follows:
Article I is hereby amended as follows:
ARTICLE I
CORPORATE NAME
The name of this corporation is MILLENNIUM ELECTRONICS, INC.
The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 7,243,051; that
the said change and amendment has been consented to and approved by a
majority vote of the stockholders holding at least a majority of each
class of stock outstanding and entitled to vote thereon.
/s/ Troy D. Barnes
-----------------------------------
Troy D. Barnes, President
/s/ Celeste Barnes
-----------------------------------
Celeste Barnes, Secretary
-1-
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<PAGE>
ACKNOWLEDGMENT
State of California )
)
County of Orange )
On April 8, 1997, before me, Patricia A. Rawls,
Notary Public, personally appeared Troy D. Barnes and Celeste Barnes,
[ ] personally known to me or [X] proved to me on the basis of
satisfactory evidence to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same
in their authorized capacity, and that by their signatures on the
instrument the person, or the entity upon behalf of which the persons
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Patricia A. Rawls
--------------------------
Patricia A. Rawls
Comm. # 1002961
Notary Public - California
Orange County
My Comm. Expires AUG 22, 1997
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<PAGE>
EXHIBIT C
BYLAWS OF MILLENNIUM ELECTRONICS, INC.
(formerly named Millennium Computer, Inc. and Millennium Holdings, Inc.)
Page 75 of 118
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. OFFICES........................................................ 1
1.1. Business Office............................................... 1
1.2. Registered Office............................................. 1
ARTICLE II. SHAREHOLDERS.................................................. 1
2.1. Annual Shareholder Meeting.................................... 1
2.2. Special Shareholder Meetings.................................. 1
2.3. Place of Shareholder Meeting.................................. 1
2.4. Notice of Shareholder Meeting................................. 1
2.5. Fixing of Record Date......................................... 3
2.6. Shareholder List.............................................. 3
2.7. Shareholder Quorum and Voting Requirements.................... 4
2.8. Proxies....................................................... 4
2.9. Voting of Shares.............................................. 4
2.10. Corporation's Acceptance of Votes............................. 5
2.11. Informal Action by Shareholders............................... 6
2.12. Voting for Directors.......................................... 6
2.13. Shareholder's Rights to Inspect Corporate Records............. 6
2.14. Financial Statements Shall Be Furnished to the Shareholders... 8
2.15. Dissenters' Rights............................................ 8
ARTICLE III. BOARD OF DIRECTORS........................................... 8
3.1. General Powers................................................ 8
3.2. Number, Tenure, and Qualifications of Directors............... 8
3.3. Regular Meetings of the Board of Directors.................... 8
3.4. Special Meetings of the Board of Directors.................... 9
3.5. Notice of, and Waiver of Notice for, Special Director Meeting. 9
3.6. Director Quorum............................................... 9
3.7. Directors, Manner of Acting................................... 9
3.8. Director Action Without a Meeting.............................10
3.9. Removal of Directors..........................................10
3.10. Board of Director Vacancies...................................10
3.11. Director Compensation.........................................10
3.12. Director Committees...........................................11
ARTICLE IV. OFFICERS......................................................12
4.1. Number of Officers............................................12
4.2. Appointment and Term of Office................................12
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4.3. Removal of Officers...........................................12
4.4. President.....................................................12
4.5. The Vice-Presidents...........................................12
4.6. The Secretary.................................................13
4.7. The Treasurer.................................................13
4.8. Assistant Secretaries and Assistant Treasurers................13
4.9. Salaries......................................................13
ARTICLE V. INDEMNIFICATION OF DIRECTORS, OFFICERS, AGENTS AND
EMPLOYEES..................................................................13
5.1. Indemnification of Directors..................................13
5.2. Advance Expenses for Directors................................14
5.3. Indemnification of Officers, Agents, and Employees
Who Are Not Directors......................................15
ARTICLE VI. CERTIFICATE FOR SHARES AND THEIR TRANSFER.....................15
6.1. Certificates for Shares.......................................15
6.2. Shares Without Certificates...................................16
6.3. Registration of the Transfer of Shares........................16
6.4. Restrictions on Transfer of Shares Permitted..................16
6.5. Acquisition of Shares.........................................17
ARTICLE VII. DISTRIBUTIONS................................................17
7.1. Distributions.................................................17
ARTICLE VIII. GENERAL PROVISIONS..........................................18
8.1. Corporate Seal................................................18
8.2. Fiscal Year...................................................18
8.3. Evidence of Authority.........................................18
8.4. Articles of Incorporation.....................................18
8.5. Pronouns......................................................18
ARTICLE IX. EMERGENCY BYLAWS.............................................18
9.1. Emergency Bylaws..............................................18
ARTICLE X. AMENDMENTS.....................................................19
10.1. Amendments....................................................19
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BYLAWS OF MILLENNIUM HOLDINGS, INC.
ARTICLE I. OFFICES
1.1. Business Office. The Principal office of the corporation
shall be located at any place either within or outside the State of
Nevada as designated in the company's most current Annual Report filed
with the Secretary of State of the State of Nevada. The corporation may
have such other offices, either within or without the State of Nevada as
the Board of Directors may designate or as the business of the
corporation may require from time to time. The corporation shall
maintain at its principal office a copy of certain records, as specified
in section 2.13 of Article II.
1.2. Registered Office. The registered office of the
corporation, required by section 78.090, Nevada Revised Statutes, shall
be located within the State of Nevada and may be, but need not be,
identical with the principal office of the corporation. The address of
the registered office may be changed from time to time.
ARTICLE II. SHAREHOLDERS
2.1. Annual Shareholder Meeting. The annual meeting of the
shareholders shall be held at such time and on such date as shall be
fixed by the Board of Directors, for the purpose of electing directors
and for the transaction of such other business as may come before the
meeting.
2.2. Special Shareholder Meetings. Special meetings of the
shareholders, for any purpose or purposes, described in the notice of
meeting, may be called by the president, or by the Board of Directors or
by the Chairman of the Board of Directors, and shall be called by the
President at the request of the holders of not less than one-tenth of
all outstanding votes of the corporation entitled to be cast on any
issue at the meeting.
2.3. Place of Shareholder Meeting. The Board of Directors may
designate any place, either within or outside of the State of Nevada as
the place of meeting for any Annual or any Special Meeting of the
Shareholders.
2.4. Notice of Shareholder Meeting.
A. Required Notice. Written notice stating the place, day and
hour of any Annual or Special shareholder meeting shall be delivered not
less than 10 nor more than 60 days before the date of the meeting,
either personally or by mail, by or at the direction of the President,
the Board of Directors, or other persons calling the meeting, to each
shareholder of record, entitled to vote at such meeting and to any other
shareholder entitled by the Nevada Revised Statutes the Articles of
Incorporation to receive notice of the meeting. Notice shall be deemed
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to be effective at the earlier of: (1) when deposited in the United
States mail, addressed to the shareholder at his address as it appears
on the stock transfer books of the corporation, with postage thereon
prepaid; (2) on the date shown on the return receipt if sent by registered
or certified mail, return receipt requested, and the receipt is signed by
or on behalf of the addressee; (3) when received; or (4) 5 days after
deposit in the United States mail, if mailed postpaid and correctly
addressed to an address other than that shown in the corporation's
current record of shareholders.
B. Adjourned Meeting. If any shareholder meeting is adjourned to
a different date, time, or place, notice need not be given of the new
date, time, and place, if the new date, time, and place is announced at
the meeting before adjournment and such new date is within thirty (30)
days from the originally scheduled meeting date. If a new record date
for the adjourned meeting is, or must be fixed then notice must be given
pursuant to the requirements of paragraph (a) of this section 2.4, to
those persons who are shareholders as of the new record date.
C. Waiver of Notice. The shareholder may waive notice of the
meeting (or any notice required by the Act, Articles of Incorporation,
or Bylaws), by a writing signed by the shareholder entitled to the
notice, which is delivered to the corporation (either before or after
the date and time stated in the notice) for inclusion in the minutes or
filing with the corporate records. A shareholder's attendance at a
meeting:
1. waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business
at the meeting;
2. waives objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
D. Contents of Notice. The notice of each Special Meeting of
Shareholders shall include a description of the purpose or purposes for
which the meeting is called. Except as provided in this section 2.4(d),
or as provided in the corporation's Articles of Incorporation, or
otherwise in the Nevada Revised Statutes, the notice of an Annual
Shareholder Meeting need not include a description of the purpose or
purposes for which the meeting is called.
If a purpose of any shareholder meeting is to consider either: (1)
a proposed amendment to the Articles of Incorporation (including any
Restated Articles requiring shareholder approval); (2) a plan of merger
or share exchange; (3) the sale, lease, exchange or other disposition of
all, or substantially all of the corporation's property; (4) the
dissolution of the corporation; or (5) the removal of a director, the
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notice must so state and be accompanied by respectively a copy or
summary of the: (1) Articles of Amendment; (2) Plan of Merger or Share
Exchange; or (3) transaction for disposition of all the corporation's
property. If the proposed corporate action created dissenters' rights,
the notice must state that shareholders are, or may be entitled to
assert dissenters' rights, and must be accompanied by a copy of the
Nevada Revised Statues dealing with dissenters' rights. If the
corporation issues, or authorizes the issuance of shares for promissory
notes or for promises to render services in the future, the corporation
shall report in writing to all the shareholders the number of shares
authorized or issued, and the consideration received with or before the
notice of the next shareholder meeting. Likewise, if the corporation
indemnifies or advances expenses to a director, this shall be reported
to all the shareholders with or before notice of the next shareholder's
meeting.
2.5. Fixing of Record Date. For the purpose of determining
shareholders of any voting group entitled to notice of or to vote at any
meeting of shareholders, or shareholders entitled to receive payment of
any distribution or dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may
fix in advance a date as the record date. Such record date shall not be
more than 70 days prior to the date on which the meeting or the
particular action, requiring such determination of shareholders is to be
taken. If no record date is so fixed by the Board for the determination
of shareholders entitled to notice of, or to vote at a meeting of
shareholders, or shareholders entitled to receive a share dividend or
distribution, the record date for determination of such shareholders
shall be at the close of business on:
1. With respect to an Annual Shareholder Meeting or any Special
Shareholder Meeting called by the Board of Directors or any
person specifically authorized by the Board or these Bylaws to
call a meeting, the day before the first notice is delivered
to shareholders;
2. With respect to a Special Shareholder's Meeting demanded by
the shareholders, the date the first shareholder signs the
demand;
3. With respect to the payment of a share dividend, the date the
board authorizes the share dividend;
4. With respect to actions taken in writing without a meeting
(pursuant to Article II, section 2.11), the date the first
shareholder signs a consent;
5. And with respect to a distribution to shareholders, (other
than one involving a repurchase or reacquisition of shares),
the date the Board authorizes the distribution.
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When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof unless the Board of
Directors fixes a new record date which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the
original meeting.
2.6. Shareholder List. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make a complete
record of the shareholders entitled to vote at each meeting of
shareholders thereof, arranged in alphabetical order, with the address
of and the number of shares held by each. The list must be arranged by
voting group (if such exists, see Art. II. section 2.7) and within each
voting group by class or series of shares. The shareholder list must be
available for inspection by any shareholder, beginning two business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting. The list shall be available in the
corporation's principal office or at a place identified in the meeting
notice in the city where the meeting is to be held. A shareholder, his
agent, or attorney is entitled on written demand to inspect and, subject
to the requirements of section 2.13 of this Article II, to copy the list
during regular business hours and at his expense, during the period it
is available for inspection. The corporation shall maintain the
shareholder list in written form or in another form capable of
conversion into written form within a reasonable time.
2.7. Shareholder Quorum and Voting Requirements. If the
Articles of Incorporation or the Nevada Revised Business Corporation Act
provides for voting by a single voting group on a matter, action on that
matter is taken when voted upon by that voting group.
Shares entitled to vote as a separate voting group may take action
on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. Unless the Articles of Incorporation, the
Bylaws, or the Nevada Revised Business Corporation Act provide
otherwise, a majority of the votes entitled to be cast on the matter by
the voting group constitutes a quorum of that voting group for action on
that matter.
If the Articles of Incorporation or the Nevada Revised Business
Corporation Act provide for voting by two or more voting groups on a
matter, action on that matter is taken only when voted upon by each of
those voting groups counted separately. Action may be taken by one
voting group on a matter even though no action is taken by another
voting group entitled to vote on the matter.
Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is or must
be set for that adjourned meeting.
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If a quorum exists, action on a matter (other than the election of
directors) by a voting group is approved if the votes cast within the
voting group favoring the action exceed the votes cast opposing the
action.
2.8. Proxies. At all meetings of shareholders, a shareholder may
vote in person, or by a proxy which is executed in writing by the
shareholder or which is executed by his duly authorized attorney-in-
fact. Such proxy shall be filed with the Secretary of the corporation
or other person authorized to tabulate votes before or at the time of
the meeting. No proxy shall be valid after 11 months from the date of
its execution unless otherwise provided in the proxy. A shareholder may
appoint a proxy by transmitting or authorizing the transmission of a
telegram, teletype, telecopy or other electronic transmission.
2.9. Voting of Shares. Unless otherwise provided in the Articles
of Incorporation, each outstanding share shall be entitled to one vote
upon each matter submitted to a vote at a meeting of shareholders.
Except as provided by specific court order, no shares held by
another corporation, if a majority of the shares entitled to vote for
the election of directors of such other corporation are held by the
corporation, shall be voted at any meeting or counted in determining the
total number of outstanding shares at any given time for purposes of any
meeting. Provided, however, the prior sentence shall not limit the
power of the corporation to vote any shares, including its own shares,
held by it in a fiduciary capacity.
Redeemable shares are not entitled to vote after notice of
redemption is mailed to the holders and a sum sufficient to redeem the
shares has been deposited with a bank, trust company, or other financial
institution under an irrevocable obligation to pay the holders the
redemption price on surrender of the shares.
2.10. Corporation's Acceptance of Votes.
A. If the name signed on a vote, consent, waiver, or proxy
appointment corresponds to the name of a shareholder, the corporation if
acting in good faith, is entitled to accept the vote, consent, waiver,
or proxy appointment and give it effect as the act of the shareholder.
B. If the name signed on a vote, consent, waiver, or proxy
appointment does not correspond to the name of its shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept
the vote, consent, waiver, or proxy appointment and give it effect as
the act of the shareholder if:
1. the shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity;
2. the name signed purports to be that of an administrator,
executor, guardian, or conservator representing the
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shareholder and, if the corporation requests, evidence of
fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, or proxy
appointment;
3. the name signed purports to be that of a receiver or trustee
in bankruptcy of the shareholder and, if the corporation
requests, evidence of this status acceptable to the
corporation has been presented with respect to the vote,
consent, waiver, or proxy appointment;
4. the name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation
of the signatory's authority to sign for the shareholder has
been presented with respect to the vote, consent, waiver, or
proxy appointment; or
5. two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at
lease one of the co-owners and the person signing appears to
be acting on behalf of all the co-owners.
C. The corporation is entitled to reject a vote, consent, waiver,
or proxy appointment if the secretary or other officer or agent
authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
D. The corporation and its officer or agent who accepts or
rejects a vote, consent, waiver, or proxy appointment in good faith and
in accordance with the standards of this section, are not liable in
damages to the shareholder for the consequences of the acceptance or
rejection.
E. Corporate action based on the acceptance or rejection of a
vote, consent, waiver, or proxy appointment under this section is valid
unless a court of competent jurisdiction determines otherwise.
2.11. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken
without a meeting if one or more consents in writing, setting forth the
action, shall be signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to
authorize or take the action at a meeting at which all shares entitled
to vote thereon were present and voted. If written consents of less than
all the shareholders have been obtained, notice of such shareholder
approval by written consent shall be given at least ten (10) days before
the consummation of the action authorized by such written consent to
those shareholders entitled to vote who have not consented in writing
and to any non-voting shareholders. Such notice shall contain or be
accompanied by the same material that would have been required if a
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formal meeting had been called to consider the action. A consent signed
under this section has the effect of a vote at a meeting and may be
described as such in any document.
2.12. Voting for Directors. Unless otherwise provided in the
Articles of Incorporation, directors are elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting
at which a quorum is present. Shareholders do not have a right to
cumulate their votes.
2.13. Shareholder's Rights to Inspect Corporate Records.
A. Minutes and Accounting Records. The corporation shall keep as
permanent records minutes of all meetings of its shareholders and Board
of Directors, a record of all actions taken by the shareholders or board
of directors without a meeting, and a record of all actions taken by a
committee of the Board of Directors. The corporation shall maintain
appropriate accounting records.
B. Absolute Inspection Rights of Records Required at Principal
Office. If he gives the corporation written notice of his demand at
least five business days before the date on which he wishes to inspect
and copy, a shareholder (or his agent or attorney) has the right to
inspect and copy, during regular business hours any of the following
records, all of which the corporation is required to keep at its
principal office:
1. its Articles or Restated Articles of Incorporation and all
amendments to them currently in effect;
2. its Bylaws or Restated Bylaws and all amendments to them
currently in effect;
3. resolutions adopted by its Board of Directors creating one or
more classes or series of shares, and fixing their relative
rights, preferences, and limitations, if shares issued
pursuant to those resolutions are outstanding;
4. the minutes of all shareholders' meetings, and records of all
action taken by shareholders without a meeting, for the past
three years;
5. all written communications to shareholders generally within
the past three years, including the financial statements
furnished for the past three years to the shareholders;
6. a list of the names and business addresses of its current
directors and officers; and
7. its most recent Annual Report delivered to the Secretary of
State.
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C. Conditional Inspection. In addition, if he gives the
corporation a written demand made in good faith and for a proper purpose
at least five business days before the date on which he wishes to
inspect and copy, in which he describes with reasonable particularity
his purpose and the records he desires to inspect, and the records are
directly connected with his purpose, a shareholder of the corporation
(or his agent or attorney) is entitled to inspect and copy, during
regular business hours at a reasonable location specified by the
corporation, any of the following records of the corporation:
1. excerpts from minutes of any meeting of the Board of
Directors, records of any action of the Board of Directors or
a committee of the Board of Directors on behalf of the
corporation, minutes of any meeting of the shareholders, and
records of action taken by the shareholders or Board of
Directors and without a meeting, to the extent not subject to
inspection under paragraph A of this section 2.13.
2. accounting records of the corporation; and
3. the record of shareholders (compiled no earlier than the date
of the shareholder's demand).
D. Copy Costs. The right to copy records includes, if
reasonable, the right to receive copies made by photographic,
xerographic, or other means. The corporation may impose a reasonable
charge, covering the costs of labor and material, for copies of any
documents provided to the shareholder. The charge may not exceed the
estimated cost of production or reproduction of the records.
E. Shareholder Includes Beneficial Owner. For purposes of this
section 2.13, the terms "shareholder" shall include a beneficial owner
whose shares are held in a voting trust or by a nominee on his behalf.
2.14. Dissenters' Rights. Each shareholder shall have the right
to dissent from and obtain payment for his shares when so authorized by
the Nevada Revised Statutes, Articles of Incorporation, these Bylaws, or
in a resolution of the Board of Directors.
ARTICLE III. BOARD OF DIRECTORS
3.1. General Powers. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of the Board of
Directors.
3.2. Number, Tenure, and Qualifications of Directors. In the
event that there is only one shareholder of the Corporation, that
shareholder may determine the number of directors of the Company. In the
event there are more than three shareholders, the number of directors
which shall constitute the whole Board of Directors shall be determined
by resolution of the stockholders or the resolution of the Board of
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Directors, but in no event shall be less than three. The number of
directors may be decreased at any time either by the shareholders or by
a majority of the directors then in office, but only to eliminate
vacancies existing by reason of the death, resignation, removal or
expiration of the term of one or more directors. Each director shall
hold office until the next annual meeting of shareholders or until
removed. However, if his term expires, he shall continue to serve until
his successor shall have been elected and qualified or until there is a
decrease in the number of directors. Directors need not be residents of
the State of Nevada or shareholders of the corporation.
3.3. Regular Meetings of the Board of Directors. A regular
meeting of the Board of Directors shall be held without other notice
than this bylaw immediately after, and at the same place as, the Annual
Meeting of Shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of addition regular
meetings without other notice than such resolution. Any such regular
meeting may be held by telephone.
3.4. Special Meetings of the Board of Directors. Special
meetings of the Board of Directors may be called by or at the request of
the President or any one director. The person authorized to call
Special Meetings of the Board of Directors may fix any place, (but only
within the county where this corporation has its principal office) as
the place for holding any Special Meeting of the Board of Directors, or
such meeting may be held by telephone.
3.5. Notice of, and Waiver of Notice for, Special Director
Meeting. Notice of any special director meeting shall be given at least
two days previously thereto either orally or in writing. If mailed,
notice of any director meeting shall be deemed to be effective at the
earlier of: (1) when received; (2) five days after deposited in the
United States mail, addressed to the director's business office, with
postage thereon prepaid; or (3) the date shown on the return receipt if
sent by registered or certified mail, return receipt requested, and the
receipt is signed by or on behalf of the director. Any director may
waive notice of any meeting. Except as provided in the next sentence,
the waiver must be in writing, signed by the director entitled to the
notice, and filed with the minutes or corporate records. The attendance
of a director at a meeting shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business and at the
beginning of the meeting (or promptly upon his arrival) objects to
holding the meeting or transacting business at the meeting, and does not
thereafter vote for or abstain to action taken at the meeting. Unless
required by the Articles of Incorporation, neither the business to be
transacted at, nor the purpose of, any Special Meeting of the Board of
Directors need be specified in the notice or waiver of notice of such
meeting.
3.6. Director Quorum. A majority of the whole Board of Directors
shall constitute a quorum at all meetings of the Board of Directors.
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3.7. Directors, Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present when the
vote is taken shall be the act of the Board of Directors.
Unless the Articles of Incorporation provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct
the meeting through the use of, any means of communication by which all
directors participating may hear each other during the meeting. A
director participating in a meeting by this means is deemed to be
present in person at the meeting.
A director who is present at a meeting of the Board of Directors or
a committee of the Board of Directors when corporate action is taken is
deemed to have assented to the action taken unless: (1) he objects at
the beginning of the meeting (or promptly upon his arrival) to holding
it or transacting business at the meeting; or (2) his dissent or
abstention from the action taken is entered in the minutes of the
meeting; or (3) he delivers written notice of his dissent or abstention
to the presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting. The right of
dissent or abstention is not available to a director who votes in favor
of the action taken.
3.8. Director Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee of the Board of Directors may be taken without a meeting, if
all members of the Board of Directors or committee, as the case may be,
consent to the action in writing, and the written consents are filed
with the minutes of proceedings of the Board of Directors or committee.
3.9. Removal of Directors. The shareholders may remove one or
more directors at a meeting called for that purpose if notice has been
given that a purpose of the meeting is such removal. The removal may be
with or without cause. A director may be removed only if the number of
votes cast to remove him exceeds the number of votes cast not to remove
him.
3.10. Board of Director Vacancies. If a vacancy occurs on the
Board of Directors, including a vacancy resulting from an increase in
the number of directors:
(1) the shareholders may fill the vacancy;
(2) the Board of Directors may fill the vacancy; or
(3) if the directors remaining in office constitute fewer than a
quorum of the Board, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining
in office.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled before the vacancy
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occurs but the new director may not take office until the vacancy
occurs.
The term of a director elected to fill a vacancy expires at the
next shareholders' meeting at which directors are elected. However, if
his term expires, he shall continue to serve until his successor is
elected and qualifies or until there is a decrease in the number of
directors.
3.11. Director Compensation. Unless otherwise provided by
resolution of the Board of Directors, each director may be paid his
expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No
such payment shall preclude any director from serving the corporation in
any capacity and receiving compensation therefor.
3.12. Director Committees.
A. Creation of Committees. The Board of Directors may create one
or more committees and appoint members of the Board of Directors to
serve on them. Each committee must have two or more members, who serve
at the pleasure of the Board of Directors.
B. Selection of Members. The creation of a committee and
appointment of members to it must be approved by a majority of all the
directors in office when the action is taken.
C. Required Procedures. Sections 3.4, 3.5, 3.6, 3.7, and 3.8 of
this Article III, which govern meetings, action without meetings, notice
and waiver of notice, quorum and voting requirements of the Board of
Directors, apply to committees and their members.
D. Authority. Each committee may exercise those aspects of the
authority of the Board of Directors which the Board of Directors confers
upon such committee in the resolution creating the committee. Provided,
however, a committee may not:
(1) authorize distributions;
(2) approve or propose to shareholders action that the Nevada
Revised Statutes requires to be approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its
committees;
(4) amend the Articles of Incorporation pursuant to the authority
of directors to do so granted by sections 78.380 and 78.390 of
the Nevada Revised Statutes.
(5) adopt, amend, or repeal Bylaws;
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(6) approve a plan of merger not requiring shareholder approval;
(7) authorize or approve reacquisition of shares, except according
to a formula or method prescribed by the Board of Directors;
or
(8) authorize or approve the issuance or sale or contract for sale
of shares or determine the designation and relative rights,
preferences, and limitations of a class or series of shares,
except that the board of directors may authorize a committee
(or a senior executive officer of the corporation) to do so
within limits specifically prescribed by the Board of
Directors.
ARTICLE IV. OFFICERS AND CORPORATE BANK ACCOUNTS
4.1. Number of Officers. The officers of the corporation shall
be a President, a Secretary, and a Treasurer, each of whom shall be
appointed by the Board of Directors. Such other officers and assistant
officers as may be deemed necessary, including any vice-presidents, may
be appointed by the Board of Directors. If specifically authorized by
the Board of Directors, an officer may appoint one or more officers or
assistant officers. The same individual may simultaneously hold more
than one office in the corporation.
4.2. Appointment and Term of Office. The officers of the
corporation shall be appointed by the Board of Directors for a term as
determined by the Board of Directors. (The designation of a specified
term grants to the officer no contract rights, and the board can remove
the officer at any time prior to the termination of such term.) If no
term is specified, an officer shall hold office until he resigns, dies,
or until he is removed in the manner provided in section 4.3 of this
Article IV.
4.3. Removal of Officers. Any officer or agent may be removed by
the Board of Directors at any time, with or without cause. Such removal
shall be without prejudice to the contract rights, if any, of the person
so removed. Appointment of an officer or agent shall not of itself
create contract rights.
4.4. President. The President shall be the principal executive
officer of the corporation and subject to the control of the Board of
Directors, shall in general supervise and control all of the business
and affairs of the corporation. He shall, when present, preside at all
meetings of the shareholders and of the Board of Directors. He may
sign, with the Secretary or any other proper officer of the corporation
authorized by the Board of Directors, certificates for shares of the
corporation and deeds, mortgages, bonds, contracts, or other instruments
which the Board of Directors has authorized to be executed, except in
cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be
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<PAGE>
otherwise signed or executed; and in general shall perform all duties
incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
4.5. The Vice-Presidents. If appointed, in the absence of the
President or in the event of his death, inability or refusal to act, the
Vice-President (or in the event there be more than one Vice-President,
the Vice-Presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of
their appointment) shall perform the duties of the President, and when
so acting, shall have all the powers of and be subject to all the
restrictions upon the President. (If there is no Vice-President, then
the Treasurer shall perform such duties of the President.) Any Vice-
President may sign, with the Secretary or an Assistant Secretary,
certificates for shares of the corporation the issuance of which have
been authorized by resolution of the Board of Directors; and shall
perform such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
4.6. The Secretary. The Secretary shall: (a) keep the minutes
of the proceedings of the shareholders and of the Board of Directors in
one or more minute books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these Bylaws
or as required by law; (c) be custodian of the corporate records and of
any seal of the corporation and if there is a seal of the corporation,
see that it is affixed to all documents the execution of which on behalf
of the corporation under its seal is duly authorized; (d) when requested
or required, authenticate any records of the corporation; (e) keep a
register of the post office address of each shareholder which shall be
furnished to the Secretary by such shareholder; (f) sign with the
President, or a Vice-President, certificates for shares of the
corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (g) have general charge of the
stock transfer books of the corporation; and (h) in general perform all
duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him by the President or by the Board of
Directors.
4.7. The Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the
corporation; (b) receive and give receipts for moneys due and payable to
the corporation from any source whatsoever, and deposit all such moneys
in the name of the corporation in such banks, trust companies, or other
depositaries as shall be selected by the Board of Directors; and (c) in
general perform all of the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the
President or by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of
his duties in such sum and with such surety or sureties as the Board of
Directors shall determine.
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<PAGE>
4.8. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries, when authorized by the Board of Directors, may
sign with the President or a Vice-President certificates for shares of
the corporation the issuance of which shall have been authorized by a
resolution of the Board of Directors. The assistant treasurers shall
respectively, if required by the Board of Directors. The Assistant
Treasurers shall respectively, if required the Board of Directors, give
bonds for the faithful discharge of their duties in such sums and with
such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
4.9. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors.
4.10. Corporate Bank Accounts. The Corporation shall establish
such savings, checking and other bank accounts as deemed necessary or
prudent by the Board of Directors.
ARTICLE V. INDEMNIFICATION OF DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES
5.1. Indemnification of Directors. The corporation shall
indemnify any individual made a party to a proceeding because he is or
was a director of the corporation, against liability incurred in the
proceeding, but only if the corporation has authorized the payment in
accordance with section 78.751 of the Nevada Revised Statutes and a
determination has been made in accordance with the procedures set forth
in such section 78.751 that the director met the standards of conduct in
paragraph (a), (b) and (c) below.
A. Standard of Conduct. The individual shall demonstrate that:
(1) he conducted himself in good faith; and
(2) he reasonably believed that his conduct was in, or not opposed
to, the corporation's best interests;
(3) in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful.
B. No Indemnification Permitted in Certain Circumstances. The
Corporation shall not indemnify a director under this section 5.1 of
Article V:
(1) in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(2) in connection with any other proceeding charging improper
personal benefit to him, whether or not involving action in
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<PAGE>
his official capacity, in which he was adjudged liable on the
basis that personal benefit was improperly received by him.
C. Indemnification in Derivative Actions Limited. Indemnification
permitted under this section 5.1 of Article V in connection with a
proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with the proceeding.
5.2. Advance Expenses for Directors. If a determination is made,
following the procedures of section 78.751 of the Nevada Revised
Statutes that the director has met the following requirements; and if an
authorization of payment is made, following the procedures and standards
set forth in section 16-10a-906, then unless otherwise provided in the
Articles of Incorporation, the company shall pay for or reimburse the
reasonable expenses incurred by a director who is a party to a
proceeding in advance of final disposition of the proceeding if:
(1) The director furnishes the corporation a written affirmation
of his good faith belief that he has met the standard of
conduct described in section 5.1 of this Article V.
(2) the director furnishes the corporation a written undertaking,
executed personally or on his belief, to repay the advance if
it is ultimately determined that he did not meet the standard
of conduct (which undertaking must be in unlimited general
obligation of the director but need not be secured and may be
accepted without reference to financial ability to make
repayment); and
(3) a determination is made that the facts then known to those
making the determination would not preclude indemnification
under section 5.1 of this Article V or under the Nevada
Revised Statutes.
5.3. Indemnification of Officers, Agents, and Employees Who Are
Not Directors. Unless otherwise provided in the Articles of
Incorporation, the Board of Directors may indemnify and advance expenses
to any officer, employee, or agent of the corporation, who is not a
director of the corporation, to any extent consistent with public
policy, as determined by the general or specific action of the Board of
Directors.
ARTICLE VI. CERTIFICATE FOR SHARES AND THEIR TRANSFER
6.1. Certificates for Shares.
A. Content. Certificates representing shares of the corporation
shall at minimum, state on their face the name of the corporation and
that it is formed under the laws of Nevada; the name of the person to
whom issued; and the number and class of shares and the designation of
the series, if any, the certificate represents; and be in such form as
determined by the Board of Directors. Such certificates shall be signed
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<PAGE>
(either manually or by facsimile) by the President or a Vice-President
and by the Secretary or an Assistant Secretary and may be sealed with a
corporate seal or a facsimile thereof. Each certificate for shares
shall be consecutively numbered or otherwise identified.
B. Legend as to Class or Series. If the corporation is authorized
to issue different classes of shares or different series within a class,
the designation, relative rights, preferences, and limitations
applicable to each class and the variations in rights, preferences, and
limitations determined for each series (and the authority of the Board
of Directors to determine variations for future series) must be
summarized on the front or back of each certificate. Alternatively,
each certificate may state conspicuously on its front or back that the
corporation will furnish the shareholder this information on request in
writing and without charge.
C. Shareholder List. The name and address of the person to whom
the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the stock transfer books of the
corporation.
D. Transferring Shares. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall
be issued until the former certificate for a like number of shares shall
have been surrendered and canceled, except that in case of a lost,
destroyed, or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the corporation as the Board of
Directors may prescribe.
6.2. Shares Without Certificates.
A. Issuing Shares Without Certificates. Unless the Articles of
Incorporation provide otherwise, the Board of Directors may authorize
the issue of some or all the shares of any or all of its classes or
series without certificates. The authorization does not affect shares
already represented by certificates until they are surrendered to the
corporation.
B. Information Statement Required. Within a reasonable time after
the issue or transfer of shares without certificates, the corporation
shall send the shareholder a written statement containing at minimum:
(1) the name of the issuing corporation and that it is organized
under the law of the state of Nevada;
(2) the name of the person to whom issued; and
(3) the number and class of shares and the designation of the
series, if any, of the issued shares.
If the corporation is authorized to issue different classes of
shares or different series within a class, the written statement shall
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<PAGE>
describe the designations, relative rights, preferences, and limitations
applicable to each class and the variation in rights, preferences, and
limitations determined for each series (and the authority of the Board
of Directors to determine variations for future series).
6.3. Registration of the Transfer of Shares. Registration of the
transfer of shares of the corporation shall be made only on the stock
transfer books of the corporation. In order to register a transfer, the
record owner shall surrender the shares to the corporation for
cancellation, properly endorsed by the appropriate person or persons
with reasonable assurances that the endorsements are genuine and
effective. Unless the corporation has established a procedure by which
a beneficial owner of shares held by a nominee is to be recognized by
the corporation as the owner, the person in whose name the shares stand
on the books of the corporation shall be deemed by the corporation to be
the owner thereof for all purposes.
6.4. Restrictions on Transfer of Shares Permitted. The Board of
Directors (or shareholders) may impose restrictions on the transfer or
registration of transfer of shares (including any security convertible
into, or carrying a right to subscribe for or acquire shares). A
restriction does not affect shares issued before the restriction was
adopted unless the holders of the shares are parties to the restriction
agreement or voted in favor of the restriction. A restriction on the
transfer or registration of transfer of shares may be authorized:
(1) to maintain the corporation's status when it is dependent on
the number or identity of its shareholders'
(2) to preserve exemptions under federal or state securities law;
(3) for any other reasonable purpose.
A restriction on the transfer or registration of transfer or shares
may:
(1) obligate the shareholder first to offer the corporation or
other persons (separately, consecutively, or simultaneously)
an opportunity to acquire the restricted shares;
(2) obligate the corporation or other persons (separately,
consecutively, or simultaneously) to acquire the restricted
shares;
(3) require the corporation, the holders or any class of its
shares, or another person to approve the transfer of the
restricted shares, if the requirement is not manifestly
unreasonable;
(4) prohibit the transfer of the restricted shares to designated
persons or classes of persons, if the prohibition is not
manifestly unreasonable.
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A restriction on the transfer or resignation of transfer of shares
is valid and enforceable against the holder or a transferee of the
holder if the restriction is authorized by this section and its
existence is noted conspicuously on the front or back of the certificate
or is contained in the information statement required by section 6.2 of
this Article VI with regard to shares issued without certificates.
Unless so noted, a restriction is not enforceable against a person
without knowledge of the restriction.
6.5. Acquisition of Shares. The corporation may acquire its own
shares and unless otherwise provided in the Articles of Incorporation,
the shares so acquired constitute authorized but unissued shares.
ARTICLE VII. DISTRIBUTIONS
7.1. Distributions. The Board of Directors may authorize, and the
corporation may make, distributions (including dividends on its
outstanding shares) in the manner and upon the terms and conditions
provided by law and in the corporation's Articles of Incorporation.
ARTICLE VIII. GENERAL PROVISIONS
8.1. Corporate Seal. The Board of Directors may provide for a
corporate seal which may be circular in form and have inscribed thereon
any designation including the name of the corporation, Nevada as the
state of incorporation, and the words "Corporate Seal". The corporation
shall not be required to have a corporate seal.
8.2. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
8.3. Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary secretary, as to any action taken by
the shareholders, directors, a committee or any officer of
representative of the corporation shall as to all persons who rely on
the certificate in good faith be conclusive evidence of such action.
8.4. Articles of Incorporation. All references in these Bylaws to
the Articles of Incorporation shall be deemed to refer to the Articles
of Incorporation of the Corporation, as amended and in effect from time
to time.
8.5. Pronouns. All pronouns used in these Bylaws shall be deemed
to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the person or persons may require.
ARTICLE IX. EMERGENCY BYLAWS
9.1. Emergency Bylaws. Unless the Articles of Incorporation
provide otherwise, the following provisions of this Article IX, section
9.1 "Emergency Bylaws" shall be effective during an emergency which is
defined as when a quorum of the corporation's directors cannot be
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readily assembled because of some catastrophic event. During such
emergency:
A. Notice of Board Meetings. Any one member of the Board of
Directors or any one of the following officers; President, any Vice-
President, Secretary, or Treasurer, may call a meeting of the Board of
Directors. Notice of such meeting need be given only to those directors
whom it is practicable to reach, and may be given in any practical
manner, including by publication and radio. Such notice shall be given
at least six hours prior to commencement of the meeting.
B. Temporary Directors and Quorum. One or more officers of the
corporation present at the emergency board meeting, may be deemed to de
directors for the meeting, in order of rank and within the same rank in
order of seniority as is necessary to achieve a quorum. In the event
that less than quorum (as determined by Article III, section 3.6) of the
directors are present (including any officers who are to serve as
directors for the meeting), those directors present (including the
officers serving as directors) shall constitute a quorum.
C. Actions Permitted to Be Taken. The board as constituted in
paragraph (b), and after notice as set forth in paragraph (a) may:
(1) Officers' Powers. Prescribe emergency powers to any officer
of the corporation;
(2) Delegation of Any Power. Delegate to any officer or director,
any of the powers of the Board of Directors;
(3) Lines of Succession. Designate lines of succession of officers
and agents, in the event that any of them are unable to
discharge their duties;
(4) Relocate Principal Place of Business. Relocate the principal
place of business, or designate successive or simultaneous
principal places of business;
(5) All Other Action. Take any other action, convenient, helpful,
or necessary to carry on the business of the corporation.
ARTICLE X. AMENDMENTS
10.1. Amendments. The corporation's Board of Directors may amend
or repeal the corporation's Bylaws unless:
(1) the Articles of Incorporation or the Nevada Revised Statutes
reserve this power exclusively to the shareholders in whole or
part; or
(2) the shareholders in adopting, amending or repealing a
particular Bylaw provide expressly that the Board of Directors
may not amend or repeal that Bylaw; or
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The corporation's shareholders may amend or repeal the
corporation's Bylaws even though the Bylaws may also be amended or
repealed by its Board of Directors.
ADOPTED THIS 19th day of February 1997.
/s/ Douglas P. Morris
---------------------------------
Douglas P. Morris,
President/Secretary
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<PAGE>
CERTIFICATE OF SECRETARY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned does hereby
certify that the undersigned is the secretary of the aforesaid
Corporation, duly organized and existing under and by virtue of the laws
of the State of Nevada; that the above and foregoing Bylaws of said
Corporation were duly and regularly adopted as such by the board of
directors of said Corporation.
DATED this 19th day of February 1997.
/s/ Douglas P. Morris
---------------------------------------
Douglas P. Morris, President/Secretary
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<PAGE>
EXHIBIT D
MILLENNIUM MEMORY, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996 AND 1995
Milenmem #5079 4/3/97
Page 99 of 118
<PAGE>
MILLENNIUM MEMORY, INC.
CONTENTS
As of December 31, 1996
================================================================================
Page
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Balance Sheets 2 - 3
Statements of Operations 4
Statement of Stockholders' Equity 5
Statements of Cash Flows 6 - 7
Notes to Financial Statements 8 - 14
Page 100 of 118
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Millennium Memory, Inc.
We have audited the accompanying balance sheets of Millennium Memory,
Inc. as of December 31, 1996 and 1995, and the related statements of
operations, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Millennium
Memory, Inc. as of December 31, 1996 and 1995, and the results of its
operations and cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ Singer Lewak Greenbaum & Goldstein LLP
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
March 5, 1997
Page 101 of 118
<PAGE>
MILLENNIUM MEMORY, INC.
BALANCE SHEETS
As of December 31,
================================================================================
ASSETS (Note 3)
1996 1995
------- --------
Current assets
Accounts receivable, net of
an allowance for
doubtful accounts of $136,000
and $30,000, respectively $ 6,193,241 $2,429,744
Inventories 663,882 564,988
Prepaid expenses 33,346 26,541
------ ------
Total current assets 6,890,469 3,021,273
Furniture and equipment, net (Note 2) 55,608 28,165
Other assets 208,539 43,440
--------- ---------
Total assets $7,154,616 $3,092,878
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Book overdraft $ 191,742 $ 336,084
Lines of credit (Note 3) 5,232,754 2,062,245
Accounts payable and accrued
liabilities (Notes 3, 4, and 9) 739,172 219,206
Income tax payable (Note 10) 10,881 2,600
--------- ---------
Total current liabilities 6,174,549 2,620,135
Subordinated debt - stockholder (Note 5) 298,811 298,491
The accompanying notes are an integral
part of these financial statements.
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<PAGE>
MILLENNIUM MEMORY, INC.
BALANCE SHEETS
As of December 31,
================================================================================
Commitments and contingencies (Notes 3
and 6)
Stockholders' equity
Common stock, no par value:
7,000,000 shares authorized,
5,203,868 and 4,127,760 shares
issued and outstanding, respectively
(Note 7) 43,400 5,000
Receivables from stockholder (Note 9) (151,339) -
Retained earnings 789,195 169,252
--------- ---------
Total stockholders' equity 681,256 174,252
--------- ---------
Total liabilities and
stockholders' equity $7,154,616 $3,092,878
========= =========
The accompanying notes are an integral
part of these financial statements.
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<PAGE>
MILLENNIUM MEMORY, INC.
BALANCE SHEETS
As of December 31,
================================================================================
1996 1995
-------- --------
Net sales (Note 8) $34,345,569 $11,976,797
Cost of sales 30,525,511 10,847,744
---------- ----------
Gross profit 3,820,058 1,129,053
Selling, general and
administrative expenses 2,560,119 833,462
--------- ----------
Income from operations 1,259,939 295,591
Other income (expense)
Other income 125,257 28,455
Interest expense (410,957) (151,324)
--------- ----------
Income before provision for
income taxes 974,239 172,722
Provision for income taxes (Note 10) 15,800 2,600
--------- ----------
Net income $ 958,439 $ 170,122
========= =========
Net income per share $ 0.18 $ 0.04
========= =========
Weighted average shares outstanding 5,203,868 4,127,760
========= =========
The accompanying notes are an integral
part of these financial statements.
-4-
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<PAGE>
MILLENNIUM MEMORY, INC.
BALANCE SHEETS
As of December 31,
================================================================================
Receivable Retained
Common Stock from (Deficit)
Shares Amount Stockholder Earnings Total
------ ------ ----------- -------- -----
Balance, December 31,
1994 4,127,760 $ 5,000 $ (870) $ 4,130
Net income 170,122 170,122
------- -------
Balance, December 31,
1995 4,127,760 5,000 169,252 174,252
Issuance of common
stock for services 1,076,108 38,400 38,400
Increase in receivable
from stockholder
(Note 9) $(151,339) (151,339)
Net income 958,439 958,439
Distribution to
stockholders (338,496) (338,496)
-------- --------
Balance, December 31,
1996 5,203,868 $ 43,400 $(151,339) $789,195 $681,256
========= ======= ========= ======= =======
The accompanying notes are an integral
part of these financial statements.
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<PAGE>
MILLENNIUM MEMORY, INC.
BALANCE SHEETS
As of December 31,
================================================================================
1996 1995
-------- --------
Cash flows from operating activities
Net income $ 958,439 $ 170,122
Adjustments to reconcile net income
to net cash used in operating activities
Depreciation and amortization 11,888 10,591
Allowance for doubtful accounts 128,399 30,000
Stock issued for services rendered 38,400 --
(Increase) decrease in
Accounts receivable (3,891,896) (2,459,744)
Inventories (98,894) (564,988)
Prepaid expenses (6,805) (20,223)
Other assets (12,519) (43,440)
Increase (decrease) in
Accounts payable and accrued
liabilities 424,494 219,206
Income tax payable 8,281 2,600
----------- -----------
Net cash used in operating
activities (2,440,213) (2,655,876)
----------- -----------
Cash flows from investing activities
Acquisition of furniture and equipment (39,331) (37,308)
Issuance of note receivable to
stockholder (151,339) --
----------- -----------
Net cash used in investing
activities (190,670) (37,308)
----------- -----------
Cash flows from financing activities
(Decrease) increase in book overdraft (144,342) 336,084
Net proceeds from line of credit
facility 3,170,509 2,062,245
Proceeds from stockholder note
payable 320 63,491
Increase in deferred offering cost (57,108) --
Distribution to stockholders (338,496) --
----------- -----------
Net cash provided by
financing activities 2,630,883 2,461,820
----------- -----------
Net decrease in cash (231,364)
The accompanying notes are an integral
part of these financial statements.
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<PAGE>
MILLENNIUM MEMORY, INC.
BALANCE SHEETS
As of December 31,
================================================================================
Cash and cash equivalents - beginning
of period -- 231,364
----------- -----------
Cash and cash equivalents - end of period $ -- $ --
=========== ===========
Supplemental disclosures of cash flow information
- -------------------------------------------------
During the years ended December 31, 1996 and 1995, the Company paid
income taxes of $7,519 and $0, respectively, and interest of
approximately $411,000 and $151,000, respectively.
Supplemental schedule of non-cash investing and financing activities
- --------------------------------------------------------------------
In 1996, the Company issued 1,076,108 shares of common stock for
compensation and services rendered valued at $38,400.
The accompanying notes are an integral
part of these financial statements.
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<PAGE>
MILLENNIUM MEMORY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
================================================================================
NOTE 1: SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Line of Business
---------------------------------
Millennium Memory, Inc. (the "Company") was incorporated in the
State of California on November 4, 1994. The Company is engaged in
the distribution of memory chips for computers and grants credit to
its customers throughout the United States.
Cash Equivalents
----------------
For purposes of the statements of cash flows, the Company considers
all highly liquid investments purchased with original maturities of
three months or less to be cash equivalents.
Inventories
-----------
Inventories, which are primarily memory chips, are stated at the
lower of cost (weighted average method) or market.
Furniture and Equipment
-----------------------
Furniture and equipment are stated at cost. Depreciation is
computed using the straight-line method over the useful lives of
the assets as follows:
Computer and telephone equipment 5 years
Office furniture 7 years
Test equipment 5 years
Betterments, renewals, and extraordinary repairs that extend the
lives of the assets are capitalized; other repairs and maintenance
charges are expensed as incurred. The cost and related accumulated
depreciation applicable to assets retired are removed from the
accounts and the gain or loss on disposition is recognized in
current operations.
Impairment of Long-Lived Assets
-------------------------------
The Company adopted, as of January 1, 1996, Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." The impact of such adoption was not material.
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<PAGE>
MILLENNIUM MEMORY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
================================================================================
Deferred Offering Cost
----------------------
Deferred offering cost of $152,580, which is included in other
assets at December 31, 1996 represents amounts paid for costs
associated with the Company's private placement offering ("PPO"),
are capitalized and will be recorded as a reduction to common stock
upon the completion of the PPO. In the event the PPO is not
successful, the deferred offering cost will be charged off to
expense.
Revenue Recognition
-------------------
The Company recognizes revenue from product sales at the time of
shipment net of expected returns. The Company has established
programs, under specified conditions, that enable its customers to
return product.
Income Taxes
------------
The Company has elected to be taxed under the provisions of
subchapter S of the Internal Revenue Code ("S" corporation
election). Under these provisions, the stockholders are liable for
income tax on their respective shares of the Company's taxable
income. In addition, there is a 1.5% tax on the Company's taxable
income for state purposes.
Estimates
---------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of sales and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
-----------------------------------
The Company measures its financial assets and liabilities in
accordance with generally accepted accounting principles. For
certain of the Company's financial instruments, including cash,
accounts receivable and accounts payable and accrued liabilities,
the carrying amounts approximate fair value due to their short
maturities. The amounts shown for the line of credit facility and
subordinated debt obligation also approximate fair value because
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Page 109 of 118
<PAGE>
MILLENNIUM MEMORY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
================================================================================
current interest rates and terms offered to the Company for similar
debt are substantially the same.
Concentrations of Credit Risk
-----------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash and trade
receivables. The Company places its cash with high quality
financial institutions and at times cash may exceed the FDIC
$100,000 insurance limit. The Company sells products in the United
States and extends credit based on an evaluation of the customer's
financial condition, generally without requiring collateral.
Exposure to losses on receivables is principally dependent on each
customer's financial condition. The Company monitors its exposure
for credit losses and maintains allowances for anticipated losses.
NOTE 2: FURNITURE AND EQUIPMENT
Furniture and equipment consisted of the following at December 31:
1996 1995
-------- --------
Computer and telephone equipment $61,411 $37,919
Office furniture 4,132 889
Test equipment 12,596 --
------- ------
78,139 38,808
Less accumulated depreciation
and amortization 22,531 10,643
------- -------
Total $55,608 $28,165
====== ======
NOTE 3: LINES OF CREDIT
As of December 31, 1996, the Company had a $7,000,000 line of
credit (accounts receivable credit line) expiring September 30,
1998. On the expiration date the line shall automatically and
continuously renew for successive additional terms of one year
unless terminated at the option of the Company or bank on the
anniversary date. The line bears interest at prime plus 3%.
-10-
Page 110 of 118
<PAGE>
MILLENNIUM MEMORY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
================================================================================
(Prime rate was 8.25% and 8.5% on December 31, 1996 and 1995,
respectively). The Company's ability to borrow money under this
line of credit agreement is based upon a percentage of defined
accounts receivable. Also, the line is collateralized by
substantially all assets of the Company and guaranteed by the
Company's majority stockholder.
The debt agreement contains certain restrictions as to adequate
insurance, Company advances and loans, and limits distributions to
stockholders. In addition, the Company is required to make a
credit facility fee payment of $3,500 per quarter in advance, and a
$50,000 loan fee is payable on the earlier of the third anniversary
date (September 1998) or the date the loan agreement is terminated
or terminates by its terms. The $50,000 loan fee is being accrued
annually over the term of the loan.
As of December 31, 1996, the Company had a $500,000 line of credit
(inventory credit line). The Company borrowed an initial amount of
$150,000 which is to be repaid on March 31, 1997. Any additional
advances are repaid by applying 25% of each advance from the
accounts receivable credit line. The Company's ability to borrow
money under this line of credit agreement is based upon a
percentage of defined inventory. This line of credit's remaining
terms are identical to the accounts receivable credit line.
The outstanding balances under accounts receivable and inventory
lines of credit agreements at December 31, 1996 were $5,082,754 and
$150,000, respectively, for an aggregate amount of $5,232,754. The
outstanding balance under the accounts receivable line of credit
agreement at December 31, 1995 was $2,062,245.
NOTE 4: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following
at December 31:
-11-
Page 111 of 118
<PAGE>
MILLENNIUM MEMORY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
================================================================================
1996 1995
-------- --------
Accounts payable $ 478,504 $ 141,271
Accrued commissions 211,607 46,751
Other accrued liabilities 49,061 31,184
-------- --------
Total $ 739,172 $ 219,206
======== ========
NOTE 5: SUBORDINATED DEBT - STOCKHOLDER
The Company obtained a line of credit from the majority stockholder
of the Company which is subordinated to the lines of credit (Note
3). The stockholder line of credit may not exceed $500,000.
Interest on the credit line is 7.60% per annum. The entire
principal and accrued interest must be paid in full on or before
December 31, 1997. The balance on the stockholder credit line was
$298,811 as of December 31, 1996.
NOTE 6: COMMITMENTS
Lease Agreements
----------------
The Company leases certain facilities for its corporate and
operations offices under non-cancelable operating lease agreements
that expire in 1998.
The minimum commitments under these lease agreements are as
follows:
Year Ended
December 31,
------------
1997 $ 60,000
1998 20,000
-------
Total $ 80,000
=======
Rent expense was approximately $57,000 and $22,000 for the years
ended December 31, 1996 and 1995, respectively.
-12-
Page 112 of 118
<PAGE>
MILLENNIUM MEMORY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
================================================================================
Employment Agreements
---------------------
The Company entered into a five year employment agreement with its
CEO and majority stockholder. Under the terms of the agreement,
the Company's CEO will receive an annual salary of $250,000, a
performance bonus to be determined by the board of directors, of
which nothing was granted for the year ended December 31, 1996, and
a monthly car allowance of $1,436.
NOTE 7: STOCKHOLDERS' EQUITY
Common Stock Split
------------------
On December 11, 1996, the Company's Board of Directors declared a
412.77607 to 1 stock split. All applicable share and per share
data have been adjusted for the stock split.
Common Stock Issued
-------------------
During the year ended December 31, 1996, the Company completed the
following common stock transactions of previously unissued common
shares:
o Issued to two consultants for services rendered 173,779 shares
each for an aggregate value of $12,400.
o Issued to an employee for services rendered 728,550 shares for
$26,000.
Options
-------
On December 11, 1996, the Company's Board of Directors adopted and
its stockholders approved the Company's 1996-1997 Incentive Stock
Option Plan. A total of 260,193 shares of Common Stock have been
reserved for the issuance under this plan. No shares, currently,
have been granted.
NOTE 8: SALES
During the years ended December 31, 1996 and 1995, the Company had
a major customer which accounted for approximately 50% and 12% of
total sales, respectively. At December 31, 1996 and 1995, the
amounts due from this major customer amounted to approximately
$4,785,000 and $890,000, respectively.
-13-
Page 113 of 118
<PAGE>
MILLENNIUM MEMORY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
================================================================================
NOTE 9: RELATED PARTY TRANSACTION
The Company pays, on behalf of the majority stockholder of the
Company, monthly lease payments for two vehicles of approximately
$2,160.
As of December 31, 1996, $151,339 of the receivable from
stockholder was offset against stockholders' equity.
As of December 31, 1996, the Company has commissions payable of
$191,397 to a shareholder of the Company. Also, the company paid
this shareholder approximately $136,000 of commissions for the year
ended December 31, 1996.
NOTE 10: PROVISION FOR INCOME TAXES
The Company's provision for state income tax for the years ended
December 31, 1996 and 1995 was $15,000 and $2,600, respectively.
The Company has not incurred a federal income tax liability since
it is an "S" corporation.
NOTE 11: SUBSEQUENT EVENTS (UNAUDITED)
On March 31, 1997, the Company completed a private placement
offering of 1,500,000 shares of common stock for total gross
proceeds to the Company of $3,000,000.
Simultaneously with the close of the offering, the Company
completed a merger whereby the Company was merged with a subsidiary
of Beacon Capital Investment, Inc., which immediately prior to the
merger with the Company, reincorporated in Nevada as Millennium
Computer, Inc. ("Beacon"). In the merger, each outstanding share
of common stock of the Company was converted into one share of
common stock of Beacon. For accounting purposes, the merger has
been treated as a recapitalization of the Company with the Company
as the acquirer (reverse acquisition).
-14-
Page 114 of 118
<PAGE>
Beacon Capital Investment, Inc./Millennium Memory, Inc.
Proforma Balance Sheet
December 31, 1996
Beacon Millennium Adjustments Proforma
------ ---------- ----------- --------
Cash $ 524,529 $ (191,742) d $ 2,700,000 $ 3,032,787
Accounts Receivable 6,193,241 6,193,241
Inventories 663,882 663,882
Prepaid assets 33,346 33,346
--------- --------- ---------- ----------
Total current assets 524,529 6,698,727 2,700,000 9,923,256
========= ========== ========== ==========
Furniture and equipment 55,608 55,608
Other assets 208,539 d (152,580) 55,959
--------- --------- ---------- ----------
$ 524,529 $ 6,962,874 $ 2,547,420 $10,034,823
========= ========== ========== ==========
Line of credit $ 5,232,754 $ 5,232,754
Account payable and
other liabilities $ 7,410 739,172 d $ 47,420 794,002
Income tax payable 10,881 10,881
--------- --------- ---------- ----------
Total current
liabilities 7,410 5,982,807 47,420 6,037,637
Subordinated debt 298,811 298,811
--------- --------- ---------- ----------
Total liabilities 7,410 6,281,618 47,420 6,336,448
Common stock 1,160 43,400 a,d (37,392) 7,168
Additional paid in
capital 581,015 a,b,c,d 3,261,531 3,842,546
Receivable from
stockholder (151,339) (151,339)
Retained earnings (65,056) 789,195 b,c (724,139) 0
--------- --------- ---------- ----------
Total stockholders'
equity 517,119 681,256 2,500,000 3,698,375
--------- --------- ---------- ----------
$ 524,529 $ 6,962,874 $ 2,547,420 $10,034,823
========= ========== ========== ==========
-1-
Page 115 of 118
<PAGE>
Beacon Capital Investment, Inc./Millennium Memory, Inc.
Proforma Statement of Operations
For The Three Months Ended December 31, 1996
Beacon Millennium Adjustments Proforma
------ ---------- ----------- --------
Net sales $12,982,557 $12,982,557
Cost of sales 11,834,190 11,834,190
---------- ----------
Gross profit 1,148,367 1,148,367
Selling, general
and administrative
expenses $ 21,045 802,786 823,831
--------- ---------- ----------
Income (loss) from
operations (21,045) 345,581 324,536
Other income (expense)
Other income 6,165 27,019 33,184
Interest expense (166,690) (166,690)
--------- ---------- ----------
Income (loss) before
provision for
income taxes (14,880) 205,910 191,030
Provision for income
taxes 3,600 e $ 72,800 76,400
--------- ---------- ---------- ----------
Net income (loss) $ (14,880) $ 202,310 $ (72,800) $ 114,630
========= ========== ========== ==========
Net income (loss)
per share $ (0.01) $ 0.04 $ 0.02
========= ========== ==========
Weighted average
shares outstanding 1,160,458 5,203,868 5,668,051
========= ========== ==========
-2-
Page 116 of 118
<PAGE>
Beacon Capital Investment, Inc./Millennium Memory, Inc.
Proforma Statement of Operations
For The Year Ended September 30, 1996
Beacon Millennium Adjustments Proforma
------ ---------- ----------- --------
Net sales $26,325,236 $26,325,236
Cost of sales 23,164,535 23,164,535
---------- ----------
Gross profit 3,160,701 3,160,701
Selling, general
and administrative
expenses $ 40,887 2,090,169 2,131,056
--------- ---------- ----------
Income (loss) from
operations (40,887) 1,070,532 1,029,645
Other income (expense)
Other income 12,158 119,933 132,091
Interest expense (344,927) (344,927)
--------- ---------- ----------
Income (loss) before
provision for
income taxes (28,729) 845,538 816,809
Provision for
income taxes 13,400 e $ 313,600 327,000
--------- ---------- ---------- ----------
Net income (loss) $ (28,729) $ 832,138 $ (313,600) $ 489,809
========= ========== ========== ==========
Net income (loss)
per share $ (0.02) $ 0.17 $ 0.09
========= ========== ==========
Weighted average
shares outstanding 1,160,458 4,934,841 5,668,051
========= ========== ==========
-3-
Page 117 of 118
<PAGE>
Beacon Capital Investment, Inc./ Millennium Memory, Inc.
Notes to Proforma Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The accompanying proforma financial statements present the accounts
of Beacon Capital Investment, Inc. ("Beacon") and Millennium
Memory, Inc. ("Millennium") as if the merger between the two
companies occurred on December 31, 1996 for the proforma balance
sheet and October 1, 1996 and October 1, 1995 for the proforma
statements of operations for the three months ended December 31,
1996 and for the year ended September 30, 1996, respectively. The
proforma balance sheet also assumes the private placement offering
issued by Millennium was funded on December 31, 1996.
The following adjustments to the accounts of Beacon and Millennium
would be required if the merger occurred as indicated above:
a. adjust common stock to equal 5,668,051 (excludes shares issued
in the private placement offering) shares of common stock
outstanding with a par value of $.001.
b. transfer Beacon's accumulated deficit of $65,056 to additional
paid in capital as Millennium is considered the accounting
acquirer.
c. transfer Millennium's retained earnings of $789,195 generated
as an S corporation to additional paid in capital in
accordance with Staff Accounting Bulletin 4B.
d. record the net proceeds from 1,500,000 shares of common stock
issued by Millennium in a private placement offering.
e. adjust provision for income taxes to reflect the Company being
taxed as a C corporation.
-1-
Page 118 of 118
