GLAS-AIRE INDUSTRIES GROUP LTD.
3137 Grandview Highway
Vancouver, B.C. V5M 2E9 Canada
Commission File Number: 1-14244
INFORMATION STATEMENT
PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
RULE 14f-1 THEREUNDER
Introduction
This Information Statement is being mailed on or about May 5, 1999 to
holders of record on May 4 1999 of shares of $0.01 par value common stock of
Glas-Aire Industries Group Ltd. ("Glas-Aire"), a Nevada corporation. It is being
furnished in connection with the appointment of three additional directors to be
effected 10 days after this Information Statement has been sent to Glas-Aire's
stockholders of record.
Change in Control
On April 16, 1999, Edward Ting, the chairman of the board of directors of
Glas-Aire, and Viola Ting, Mr. Ting's wife, sold an aggregate of 513,915 shares
of the $0.01 par value common stock of Glas-Aire to Speed.com, Inc.
("Speed.com"), a Delaware corporation, in a private transaction. Speed.com is a
wholly-owned subsidiary of Regency Affiliates, Inc. ("Regency"), also a Delaware
corporation.
The purchase price for the shares was $1,863,000 with $1,213,000 of the
purchase price paid in cash and the balance of $650,000 paid in the form of a
promissory note due January 1, 2000 which bears interest at the rate of 7.5%.
The indebtedness evidenced by the promissory note is secured by a first priority
security interest in 200,000 of the shares purchased by Speed.com. In addition,
payment of the indebtedness evidenced by the promissory note is guaranteed by
Mr. William R. Ponsoldt, Sr., president and a director of Speed.com and
president, chief executive officer and chairman of the board of directors of
Regency.
The cash in the amount of $1,213,000 was borrowed from National Trust
Company, an affiliate of Statesman Group, Inc. which is a controlling
shareholder of Regency. The loan is unsecured and is due on demand.
Subsequent to the transfer of the 513,915 shares, Speed.com owns,
beneficially and of record, approximately 35.8% of the issued and outstanding
shares of Glas-Aire, including 3,000 shares previously purchased on the open
market, constituting a change in control of the company.
Pursuant to the Contract for the Purchase and Sale of Securities, Messrs.
Edward Ting and Clement Cheung resigned as directors of Glas-Aire and, by
consent minutes dated April 16, 1999, Messrs. William R. Ponsoldt, Sr. and Marc
H. Baldinger were elected to fill the vacancies created by their resignations.
Neither Mr. Ting nor Mr. Cheung resigned as a result of any disagreement with
Glas-Aire. In addition, Speed.com has requested that Messrs. Richard H.
Williams, Todd M. Garrett and Craig Grossman be elected to Glas-Aire's board of
directors. The board of directors approved resolutions electing these three
persons to the board subject to satisfying the minimum 10 day notice provision
of Rule 14f-1 adopted under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
<PAGE>
Reason for Information Statement
Because a majority of its directors is being changed otherwise than at a
meeting of stockholders, Glas-Aire is required by Rule 14f-1 promulgated under
the Exchange Act, to provide its stockholders and the Securities and Exchange
Commission with certain information not less than 10 days prior to the date on
which the change will take place, or such other time period as may be
established by the Commission. This Information Statement is being filed with
the Commission and sent to stockholders in compliance with that rule.
Information Relating to the Company's Securities
As of the date of this Information Statement, there are outstanding
1,444,417 shares of Glas-Aire's common stock (as adjusted for 158,872 shares of
treasury stock held by Glas-Aire). Each outstanding share of common stock
entitles the record holder thereof to one vote on all matters which are to be
presented to stockholders for their consideration. The common stock is the only
issued and outstanding stock of the company.
Principal Stockholders
The following table sets forth as of the date of this Information Statement
certain information with respect to all those known by Glas-Aire to be record or
beneficial owners of more than 5% of its outstanding common stock, each
director, director nominee, and executive officer, a key employee and all
directors and officers as a group. Beneficial ownership has been calculated
based upon 1,444,417 shares of Glas-Aire's common stock being issued and
outstanding (as adjusted for 158,872 shares of treasury stock held by
Glas-Aire). Unless otherwise stated below, each such person has sole voting and
investment power with respect to all such shares of common stock.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class(1)
---------------- -------------------- -------------------
Speed.com, Inc.(2) 516,915 35.8%(2)
729 South Federal Highway
Suite 307
Stuart, Florida 34994
Alex Ding(3) 92,357 6.4%(3)
3137 Grandview Highway
Vancouver, B.C.,
Canada V5M 2E9
Omer Esen 4,440 (4)
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9
Linda Kwan 3,435 (4)
3137 Grandview Highway
Vancouver, B.C.
Canada V5M 2E9
Table continued on the following page
<PAGE>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class(1)
---------------- -------------------- -------------------
William R. Ponsoldt, Sr.(2) Nil 0.0%(2)
729 South Federal Highway
Suite 307
Stuart, Florida 34994
Chris G. Mendrop Nil 0.0%
1860 Blake Street
Denver, Colorado 80202
Marc Baldinger Nil 0.0%
850 Lighthouse Drive
Palm City, Florida 34990
Todd M. Garrett(5) Nil 0.0%(5)
201 Marsala Drive
Newport Beach, California 92660
Craig Grossman(5) Nil 0.0%(5)
7500 East Arapahoe Road
Suite 101
Englewood, Colorado 80112
Richard H. Williams(5) Nil 0.0%(5)
8600 South Ocean Drive
Suite 301
Jensen Beach, Florida 34957
Directors, a key employee and(3),(6)
executive officers as a group (6 persons) 100,232 6.9%(3),(6)
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(1) Excludes (i) 68,000 shares of common stock issuable upon exercise of the
Representative's Warrants issued in conjunction with a public offering
completed in May 1996; and (ii) 320,000 shares of common stock reserved for
issuance under Glas-Aire's stock option plans.
(2) Speed.com is a wholly-owned subsidiary of Regency Affiliates, Inc. Mr.
William Ponsoldt, Sr. serves as president, chief executive officer and
chairman of the board of directors of Regency. Mr. Ponsoldt disclaims
beneficial ownership of any of those shares.
(3) Includes 86,227 shares sold by the numbered company controlled by Alex Ding
in September 1998 to his mother, Ms. Sik Chun Fei. Mr. Ding may be deemed
to be the beneficial owner, although not the record owner of those shares.
(4) Represents less than 1%.
(5) Director nominee.
(6) Does not include the 516,915 shares owned by Speed.com.
<PAGE>
Directors and Executive Officers
The directors, executive officers and one of the key employees of Glas-Aire
are as follows:
Name Age Position
---- --- --------
William R. Ponsoldt, Sr. 57 Chief Executive Officer and Chairman
of the Board of Directors
Alex Yie Wie Ding 39 President, Chief Operating Officer,
Treasurer and Director
Omer Esen 56 General Manager, Vice President of
Operations, Secretary and Chief
Financial Officer
Linda Kwan 53 Financial Controller
Chris G. Mendrop 47 Director
Marc Baldinger 43 Director
Todd Maynard Garrett 34 Director Nominee
Craig Grossman 36 Director Nominee
Richard H. Williams 62 Director Nominee
William R. Ponsoldt, Sr. has been a director of Glas-Aire since April 16,
1999, and has served as chief executive officer and chairman of the board of
directors since April 17, 1999. Mr. Ponsoldt is the chairman of the board, chief
executive officer and president of Regency Affiliates, Inc. Mr. Ponsoldt has
been a director of Regency since June 1996, the chairman of the board since
August 1996 and president and chief executive officer since June 1997. During
the past five years, Mr. Ponsoldt has served as the portfolio manager for
several hedge funds.
Alex Yie Wie Ding has served as president since February 1995, and chief
operating officer and treasurer since June 1996. From 1991 until February 1995,
Mr. Ding served as the general manager. Mr. Ding has been a director of
Glas-Aire since 1991. Mr. Ding's responsibilities include managing and advising
senior staff, as well as manufacturer representative agencies, on a variety of
important issues. He is also responsible for new business development, analysis
and evaluation of major projects and maintaining high level contact with key
customers. From September 1988 to June 1991, Mr. Ding was general manager of
Hing Wor Inc., a clothing manufacturer based in Montreal. Mr. Ding serves on the
board of the Better Business Bureau of the Lower Mainland of British Columbia,
and he is the president of Sunbrite Business Association. Mr. Ding has a
bachelors degree (1984) in civil engineering and a post-graduate diploma in
management (MBA Level 1, 1986), both from McGill University.
Omer Esen has served as vice president of operations for Glas-Aire since
February 1995, assumed the additional positions of secretary and chief financial
officer in November 1996 and, in 1997, was appointed as the general manager. In
that position, Mr. Esen plans, organizes, directs and controls all operations
including production, research and development, customer service,
purchasing/inventory control, quality assurance and management information
systems. From 1992 until 1995, Mr. Esen was employed as vice president of
operation for West Bay Sonship Yachts Ltd. (Vancouver), one of the world's
leading manufacturers of 58 - 100 foot yachts, where he managed manufacturing
operations as well as developed and installed various computerized business
control systems. During Mr. Esen's tenure, the company's revenues grew from $2
million to $15 million. From 1988 until 1992, Mr. Esen was director of
operations for DBA Communication Systems Inc. in Vancouver, a design and
manufacturing firm for small business telecommunications equipment and systems.
Mr. Esen holds a bachelors degree in electrical engineering from Faraday House
Engineering College in London, England and a diploma in business administration
from the University of British Columbia.
<PAGE>
Linda Kwan served as Glas-Aire's accounting manager from March 1995 until
November 1996, at which time she was appointed as the controller. Ms. Kwan is a
member of the Certified Management Accountants of Canada. From 1992 to 1995, Ms.
Kwan operated as a private consultant, providing accounting consulting services
to small businesses and individuals. From 1983 to 1992, Ms. Kwan worked with
York-Hanover Developments, Ltd., a large real estate developer located in
Toronto. While with York-Hanover Group, Ms. Kwan held a number of positions,
eventually rising to the position of Corporate Controller with responsibility
for all of the firm's accounting functions. Ms. Kwan was graduated from Hong
Kong Technical College with a degree in commercial business and accounting.
Chris G. Mendrop has been a director of Glas-Aire since its inception. He
is the chief executive officer of Blake Street Group LLC, Blake Street
Securities LLC and Blake Street Advisors LLC (collectively the "Blake Street
Group"). He has served as the chief executive officer of each of the companies
included in the Blake Street Group since those companies were formed in January,
March and July 1998. From July 1992 until January 1998, Mr. Mendrop was the
chief executive officer of Corporate Development Capital, Inc., an investment
advisory and financial consulting firm located in Denver, Colorado. Mr. Mendrop
holds a Bachelor of Science degree in Economics from Colorado State University
and a Masters of Business Administration degree in Finance from the University
of Colorado.
Marc Baldinger has served as a director of Glas-Aire since April 16, 1999.
Mr. Baldinger is a senior officer in financial services for Riverside National
Bank, located in Palm City, Florida, and is responsible for portfolio
management, asset allocation and investment selection for Riverside's Trust
Department. He has been employed by Riverside since November 1996. From January
1994 to November 1996, Mr. Baldinger was employed as a certified financial
planner for American Express Financial Advisors, Inc. and Linsco Private Ledger.
Mr. Baldinger has a broad background in financial management and planning. Prior
to entering the financial planning business, Mr. Baldinger was the president of
Supreme Petroleum Company, which was a petroleum trading company.
Todd M. Garrett has been nominated to the board of directors by Speed.com,
Inc., and will be elected to the board of directors as soon as the minimum 10
day notice provision of Rule 14f-1 adopted under the Exchange Act is satisfied.
Mr. Garrett currently works as an investment advisor in the Private Client
Department in the corporate headquarters of Cruttenden Roth, Incorporated in
Newport Beach, California. Mr. Garrett specializes in formulating investment
strategies through the selection of optimal investment combinations tailored to
client needs and objectives. His managed portfolios comprise both high net worth
individuals and institutional investors. Mr. Garrett has worked in the
investment industry for more than eight years. Furthermore, he has worked for
several investment banks that include Kidder Peabody & Co., Lehman Brothers,
Fidelity Investments and Sutro & Co. Mr. Garrett holds a Bachelor of Arts degree
in Business Economics from San Diego State University with an emphasis in
finance and accounting. Mr. Garrett is a member of the Association for
Investment Management and Research (AIMR) and is currently pursuing the
Chartered Financial Analyst (CFA) designation.
<PAGE>
Craig Grossman has been nominated to the board of directors by Speed.com,
Inc., and will be elected to the board of directors as soon as the minimum 10
day notice provision of Rule 14f-1 adopted under the Exchange Act is satisfied.
Since July 1998, Mr. Grossman has been the chief executive officer of On-Line
Mortgage Services, Inc. ("OMS"), a licensed retail mortgage broker in eleven
states. OMS provides retail residential mortgages on the internet and through
other retail channels. From September 1995 to July 1998, Mr. Grossman was vice
president of business development for CMP Mortgage Company (a subsidiary of JRMK
Companies) which is a large privately owned mortgage broker in Colorado. From
May 1994 to September 1995, Mr. Grossman was president and a member of the board
of directors of Regency Affiliates, Inc. Mr. Grossman has extensive experience
in real estate development and in the real estate industry.
Richard H. Williams has been nominated to the board of directors by
Speed.com, Inc. and will be elected to the board of directors as soon as the
minimum 10 day notice provision of Rule 14f-1 adopted under the Exchange Act is
satisfied. Since 1994, Mr. Williams has been chairman of Williams Resource
Group, which is involved in financial consulting services and acquisition
evaluations. From 1988 to 1993, Mr. Williams was chairman and chief executive
officer of Restor Industries, Inc., a Nasdaq National Market System listed
company engaged in the telecommunications service area (now "WAXS"). From 1987
to 1989, Mr. Williams was chairman, chief executive officer and 50% owner of
Telcom Services, Inc., an engineering consulting firm specializing in long haul
fiber optic systems. Telcom was responsible for building a $100 million fiber
optic system purchased by WilTel Communications and subsequently sold to
WorldCom. While at Telcom, Mr. Williams was responsible for winning a contract
to build a fiber optic system in Taiwan ROC and also built a short haul digital
microwave system in Chesterfield, Missouri. Prior to Telcom, Mr. Williams was
president of A&W Exploration Corp., an operating oil and gas company with
approximately 67 producing wells and $10 million in oil and gas partnerships.
Glas-Aire's directors are elected annually and serve until their successors
take office or until their death, resignation or removal. The executive officers
serve at the pleasure of the board of directors.
Pursuant to an underwriting agreement dated May 1995 between Glas-Aire and
Global Financial Group, Inc., Global may, in its discretion, designate one
person to either serve on Glas-Aire's board of directors or to attend board of
directors meetings as an observer. Global has not yet designated such person.
<PAGE>
Executive Compensation
Except for directors' fees, the following table summarizes all compensation
paid to the chief executive officer, the president and a director of Glas-Aire
during the last three fiscal years.
<TABLE>
<CAPTION>
Annual Compensation
Name ---------------------------
and Fiscal year Other
principal ended annual
position January 31, Salary Bonus compensation
-------- ----------- ------ ----- ------------
<S> <C> <C> <C> <C>
Edward Ting 1999 $ 0 $ 13,528(1) $ 48,000(2)
Chief Executive Officer, 1998 $ 0 $ 5,140(1) $ 48,000(2)
Chairman of the Board 1997 $ 0 $ 6,801(1) $ 48,000(2)
Alex Y.W. Ding 1999 $ 57,575 $ 13,528(3) 0
President, Chief Operating Officer 1998 $ 51,097 $ 5,140(3) 0
1997 $ 49,357 $ 6,801(3) 0
Chris G. Mendrop 1999 $ 0 $ 0 $ 12,000(4)
Director 1998 $ 0 $ 0 $ 12,000(4)
1997 $ 0 $ 0 $ 12,000(4)
- ------------------------------
(1) Mr. Ting was paid bonuses of $13,528, $5,140 and $6,801 during the fiscal
years ended January 31, 1999, 1998 and 1997, respectively, pursuant to
Glas-Aire's profit sharing program described below.
(2) Represents consulting fees paid by Glas-Aire to Mr. Ting during the fiscal
years ended January 31, 1999, 1998 and 1997.
(3) Mr. Ding was paid bonuses of $13,528, $5,140 and $6,801 during the fiscal
years ended January 31, 1999, 1998 and 1997, respectively, pursuant to
Glas-Aire's profit sharing program described below.
(4) Represents consulting fees paid by Glas-Aire to Corporate Development
Capital, Inc. and Blake Street Group LLC of which Mr. Mendrop was a
shareholder and partner respectively during the fiscal years ended January
31, 1999, 1998 and 1997.
</TABLE>
Employment Agreements. Effective August 1, 1998, Glas-Aire entered into
amended and restated employment agreements with Edward Ting, Alex Ding, Omer
Esen and Linda Kwan. The agreements are for two year terms. In connection with
Edward and Viola Ting's sale of their shares to Speed.com, Mr. Ting agreed to
cancel his employment agreement with Glas-Aire. Under those employment
agreements, Messrs. Ding and Esen and Ms. Kwan are entitled to base annual
compensation of $72,000(US), $48,000(US) and $37,800(US), respectively. Messrs.
Ding, Esen and Ms. Kwan are paid in Canadian dollars and the US dollar figures
in the preceding sentence are based upon conversion at the average exchange rate
during the year. In addition to base compensation and the minimum bonuses as
provided in the agreements, Messrs. Ding and Esen and Ms. Kwan are entitled to
participate in the profit sharing program described below.
Directors. Glas-Aire paid $2,000 to each director (employee and
non-employee) during the fiscal year ended January 31, 1999 as compensation for
serving as directors.
Profit Sharing Program. Rather than paying its executives high salaries,
management believes it desirable to provide incentives through a profit sharing
program. Accordingly, in 1994, Glas-Aire adopted a profit sharing program which
provides that an amount equal to 10% of the company's income before income taxes
and provision for profit sharing may be distributed to officers and employees of
Glas-Aire. The first distributions pursuant to the plan, aggregating
approximately $83,000, were made in April 1995, based on the net income of the
company for the fiscal year ended January 31, 1995. The board of directors has
adopted an amendment to the profit sharing program under which the maximum
amount that can be distributed under the program in any one fiscal year is
$100,000. Distributions under the plan for the fiscal year ended January 31,
1999, aggregated approximately $89,496.
<PAGE>
Option Plans. Glas-Aire's board of directors has adopted an incentive stock
option plan (the "Qualified Plan") which provides for the grant of options to
purchase an aggregate of not more than 160,000 shares of Glas-Aire's common
stock. The purpose of the Qualified Plan is to make options available to
management and employees of the company in order to provide them with a more
direct stake in the future of the company and to encourage them to remain with
the company. The Qualified Plan provides for the granting to management and
employees of "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986 (the "Code").
Glas-Aire's board of directors has adopted a non-qualified stock option
plan (the "Non-Qualified Plan") which provides for the grant of options to
purchase an aggregate of not more than 160,000 shares of the company's common
stock. The purpose of the Non-Qualified Plan is to provide certain key
employees, independent contractors, technical advisors and directors of the
company with options in order to provide additional rewards and incentives for
contributing to the success of the company. These options are not incentive
stock options within the meaning of Section 422 of the Code.
The Qualified Plan and the Non-Qualified Plan will be administered by a
committee appointed by the board of directors which determines the persons to be
granted options under the stock option plans and the number of shares subject to
each option. No options granted under the stock option plans will be
transferable by the optionee other than by will or the laws of descent and
distribution and each option will be exercisable, during the lifetime of the
optionee, only by such optionee. Any options granted to an employee will
terminate upon his ceasing to be an employee, except in limited circumstances,
including death of the employee, and where the committee deems it to be in
Glas-Aire's best interests not to terminate the options.
The exercise price of all incentive stock options granted under the
Qualified Plan must be equal to the fair market value of such shares on the date
of grant as determined by the committee, based on guidelines set forth in the
Qualified Plan. The exercise price may be paid in cash or (if the Qualified Plan
meets the requirements of rules adopted under the Exchange Act) in common stock
or a combination of cash and common stock. The term of each option and the
manner in which it may be exercised will be determined by the committee, subject
to the requirement that no option may be exercisable more than 10 years after
the date of grant. With respect to an incentive stock option granted to a
participant who owns more than 10% of the voting rights of Glas-Aire's
outstanding capital stock on the date of grant, the exercise price of the option
must be at least equal to 110% of the fair market value on the date of grant and
the option may not be exercisable more than five years after the date of grant.
The exercise price of all stock options granted under the Non-Qualified Plan
must be equal to at least 80% of the fair market value of such shares on the
date of grant as determined by the committee, based on guidelines set forth in
the Non-Qualified Plan.
Certain Transactions
In May 1991, a company owned by Alex Yie Wie Ding acquired 48.97% of the
outstanding shares of Multicorp Holdings, Inc., from an unaffiliated party and
incurred an installment purchase obligation in the amount of CDN$375,000 with
respect to the purchase. Multicorp has made advances to Mr. Ding's company which
correspond to the company's payment obligations under the installment purchase.
In December 1992, prior to the exchange of Glas-Aire's stock with the
stockholders of Multicorp under which Glas-Aire acquired 100% of the outstanding
capital stock of Multicorp, Multicorp declared a dividend on the shares owned by
Mr. Ding's company in the amount of CDN$375,000. Mr. Ding's company then repaid
the advances previously paid to it in the amount of CDN$75,000 and made a loan
to Glas-Aire in the amount of CDN$300,000. The repayment schedule under the loan
corresponds to the repayment schedule under the installment purchase obligation
incurred by Mr. Ding's company to the former stockholder of Multicorp. In
essence, Glas-Aire has assumed the payment obligation to the former stockholder
of Multicorp. The loan from Mr. Ding's company was repaid in full (including
$26,745 of principal) during the year ended January 31, 1997.
<PAGE>
In May 1994, Glas-Aire made a loan in the principal amount of $300,000 to a
company controlled by Edward Ting, who served as the chairman of the board of
directors and chief executive officer of Glas-Aire until April 16, 1999. The
loan was not evidenced by a written agreement or promissory note, but bore
interest at the rate of 9% per annum. The loan was paid in full prior to January
31, 1995. In November 1994, the board of directors adopted a policy resolution
prohibiting Glas-Aire from making any loan or advance of money or property to a
director of the company and limiting Glas-Aire's ability to make such loans or
advances to officers of the Glas-Aire or its subsidiaries unless a majority of
independent disinterested outside directors determine that such loan or advance
may reasonably be expected to benefit Glas-Aire. Further, all future loans and
advances, if approved, will be made on terms that are no less favorable to
Glas-Aire than those that are generally available from unaffiliated third
parties. In March 1998, the board of directors rescinded these resolutions in
connection with their approval of the transaction described below in which
Glas-Aire granted a bank a security interest in a $500,000 deposit as collateral
for the issuance of a standby letter of credit (the "LC") to one of the
suppliers to a wholly-owned subsidiary of Electrocon International Inc. ("EII").
Mr. Edward Ting, the then chairman of the board, and Mr. Clement Cheung, then a
member of the board of directors, were officers and directors of EII.
In November 1993, Mr. Alex Ding, the president of Glas-Aire, made a loan to
Glas-Aire in the principal amount of CDN$80,000. The loan was not evidenced by a
written agreement or promissory note, but bore interest at the rate of 10% per
annum. The loan was paid in full prior to January 31, 1995.
In late 1994, a company controlled by a former officer of Glas-Aire made a
loan to Glas-Aire in the principal amount of $100,000. The loan, which bore
interest at the rate of 10% per annum, was repaid in full prior to January 31,
1996.
Effective February 1, 1996, Glas-Aire entered into a consulting agreement
with Corporate Development Capital, Inc. ("CDC"), a corporation of which Chris
G. Mendrop, a director of Glas-Aire, was a controlling shareholder, pursuant to
which CDC agreed to assist Glas-Aire in the development of a long-term strategic
plan, including but not limited to the areas of management, marketing and
finance, and to perform certain other management consulting services for
Glas-Aire. As compensation for these services, CDC was paid $16,000 prior to the
closing of the public offering in May 1996 and received $4,000 per month for the
12 months thereafter. In addition, Mr. Mendrop was issued 12,800 shares of
Glas-Aire's common stock pursuant to the consulting agreement. All amounts due
under this agreement have been paid.
On March 31, 1998, Glas-Aire granted a bank a security interest in a
$500,000 deposit as collateral for the issuance of a standby letter of credit
(the "LC") to one of the suppliers to a wholly-owned subsidiary of Electrocon
International Inc. ("EII"). Mr. Edward Ting, the then chairman of the board, and
Mr. Clement Cheung, then a member of the board of directors, are officers and
directors of EII. As consideration for Glas-Aire agreeing to provide the
security for the LC, EII agreed as follows: (i) to issue Glas-Aire a warrant
exercisable for a period of five years from March 25, 1998, to purchase 250,000
shares of common stock of EII at an exercise price of $1.00 per share during the
first year, $1.10 per share during the second year, $1.20 per share during the
third year, $1.50 per share during the fourth year and $1.75 per share during
the fifth year; (ii) to pay Glas-Aire a fee in the amount of 1% of the
collateral, or $5,000, payable to Glas-Aire in advance for the six-month period
beginning on the date the LC was issued by the Bank, and an additional fee of
1%, also payable in advance, for the six-month period immediately following the
initial six-month period, if Glas-Aire's collateral continued to be utilized for
the LC, with the understanding that the collateral would be made available by
Glas-Aire to collateralize the LC for a period not to exceed one year; and (iii)
the pledge to Glas-Aire by Edward Ting of all shares of Glas-Aire common stock
currently held by him, his wife or under his control. Subsequently, the board of
directors approved a loan in the principal amount of $500,000 to EII secured by
100% of Edward Ting's Glas-Aire stock. EII used the proceeds of the loan to
among other things cause the bank to release Glas-Aire's $500,000 security
deposit that was being used as collateral for the LC. On April 16, 1999, the
loan (including principal and interest) was paid in full by Edward Ting and
Glas-Aire assigned the promissory note from EII to Mr. Ting.
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Glas-Aire has received representations from each person that served during
fiscal 1999 as an officer or director of the company confirming that there were
no transactions that occurred during Glas-Aire's most recent fiscal year which
required the filing of a Form 5.
Dated: May 5, 1999
GLAS-AIRE INDUSTRIES GROUP LTD.
William R. Ponsoldt, Sr., Chairman
