PROSPECTUS
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885,749 Class A Warrants
819,803 Class B Warrants
2,591,301 Shares of Common Stock
(par value $.01 per share)
(Issuable upon the exercise of Class A and Class B Warrants)
FIRST SOUTH AFRICA CORP., LTD.
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This Prospectus is being delivered to the holders of 885,749 redeemable
Class A warrants (the "Class A Warrants") and to the holders of 819,803
redeemable Class B warrants (the "Class B Warrants") that were issued by First
South Africa Corp., Ltd., a Bermuda corporation (the "Company"). The Class A
Warrants and Class B Warrants were issued by the Company as part of its initial
public offering (the "Initial Public Offering"), which was declared effective on
January 24, 1996. The Warrants include those issued on the closing of the
Initial Public Offering upon the automatic conversion of warrants acquired by
certain persons in the Company's private placement in November 1995. One Class A
Warrant entitles the registered holder thereof to purchase one share of Common
Stock $.01 par value ("Common Stock"), and one Class B Warrant at an exercise
price of $6.50, subject to adjustment, until January 24, 2001. One Class B
Warrant entitles the registered holder thereof to purchase one share of Common
Stock at an exercise price of $8.75, subject to an adjustment, until January 24,
2001. This Prospectus is being delivered to facilitate the exercise of such
Warrants.
The Class A Warrants and the Class B Warrants are subject to redemption
by the Company at a redemption price of $.05 per Warrant on 30 days' prior
written notice, provided the average of the closing bid prices of the Common
Stock exceeds $9.10 with respect to the Class A Warrants or $12.25 with respect
to the Class B Warrants (subject to an adjustment in each case) for 30
consecutive business days ending within 15 days of the date on which notice of
redemption is given.
See "Description of Securities".
AN INVESTMENT IN THE COMPANY'S SECURITIES INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" ON PAGE 5.
Warrants may only be exercised if, at the time of exercise, the Common
Stock is registered (and the Registration Statement of which this Prospectus
forms a part is current) under the Securities Act of 1933 (the "1933 Act") and
registered or qualified for sale under applicable state securities laws, or the
issuance of such Common Stock is exempt from such registration and/or
qualification.
A copy of this Prospectus, accompanied by a copy of the Company's latest
Annual Report to Shareholders and Proxy Statement, will be sent to a holder of
Warrants prior to such Warrantholder's election to exercise Warrants.
The Common Stock of the Company is traded on The Nasdaq National Market
("Nasdaq") under the symbol FSACF. On April 1, 1998, the closing bid price of
the Common Stock on the Nasdaq was $7-7/16 per share.
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Price to Underwriting Discounts Proceeds to the
Public And Commissions(1) Company
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Per Class A Warrant.... $6.50 $287,868 $5,469,500
Per Class B Warrant.... $8.75 $746,179 $14,177,401
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(1) Assuming payment of the Warrant Solicitation Fee
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The date of this Prospectus is April 23, 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations promulgated thereunder, and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at 7 World Trade Center, Suite 1300, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material may be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated into this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended June 30,
1997 (File No. 0-27494);
2. The Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1997 (File No. 0-27494);
3. The Company's Quarterly Report on Form 10-Q for the quarterly period
ended December 30, 1997 (File No. 0-27494);
4. The Company's Current Report on Form 8-K (filed on May 8, 1997) as
amended on Form 8-K/A (filed on July 3, 1997);
5. The Company's Current Report on Form 8-K (filed on September 10,
1997); and
6. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, which was filed on January 1,
1996 (File No. 0-24624 ) as amended on Form 8-A/A (filed on January
16, 1996).
All Registration Exhibits which have been previously filed with
the Company's Registration Statement on Form S-1 (Registration No.
333-33561), are incorporated herein by reference.
All documents or reports subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this offering shall be deemed to be incorporated by reference into this
Prospectus and to be a part of this Prospectus from the date of filing of such
document. Any statement contained herein, or in a document all or a portion of
which is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
This Prospectus does not contain all the information set forth in the
Registration Statement (No. 33-99180) on Form S-1 (the "Registration Statement")
of which this Prospectus is a part, including exhibits relating thereto, which
has been filed with the Commission in Washington, D.C. Copies of the
Registration Statement and the exhibits thereto may be obtained, upon payment of
the fee prescribed by the Commission, or may be examined, without charge, at the
office of the Commission.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON (INCLUDING ANY
BENEFICIAL OWNER) TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, UPON THE
WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY AND ALL OF THE
INFORMATION THAT HAS BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS (OTHER
THAN EXHIBITS UNLESS SUCH EXHIBITS ARE EXPRESSLY INCORPORATED BY REFERENCE IN
SUCH DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO FIRST SOUTH AFRICA MANAGEMENT
CORP., 2665 SOUTH BAYSHORE, SUITE 702, COCONUT GROVE, FLORIDA 33133, ATTENTION:
MR. CLIVE KABATZNIK, (305) 857-5009.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial statements
and notes thereto appearing elsewhere or incorporated by reference in this
Prospectus. References to a fiscal year are to the Company's fiscal year ended
June 30 of that year (e.g., references to "fiscal 1997" are to the Company's
fiscal year ended June 30, 1997).
THE COMPANY
First South Africa Corp., Ltd., (the "Company") was organized to
acquire, own and operate seasoned, closely-held companies in South Africa with
annual sales in the range of approximately $5 to $50 million. The Company has
acquired through its wholly-owned subsidiary, First South African Holdings (Pty)
Ltd. ("FSAH"), sixteen businesses based in South Africa ("the Acquisitions")
that are as a group engaged in the following industry segments:
1. Processed foods.
2. Lifestyle Products.
3. Plastic packaging materials and machinery.
4. Air conditioning and refrigeration machinery components.
5. Metal washers used in the fastener industry.
In June 1997, FSAH transferred all of the shares of four of the
Acquisitions to First S.A. Food Holdings Ltd ("FSA Food") and completed (i) the
initial public offering, effected only in South Africa, of 5,000,000 ordinary
shares of common stock of FSA Food, which shares are listed on the Johannesburg
Stock Exchange, (ii) an institutional private placement in South Africa of
20,000,000 ordinary shares of common stock of FSA Food, and (iii) a private
placement of 12,500,000 ordinary shares of common stock to management and staff.
As of December 2, 1997, FSAH owned 70% of the issued and outstanding shares of
FSA Food.
In the quarter ended December 31, 1997, the Company, through its
subsidiary First SA Life Style Holdings, completed a number of acquisitions,
which expanded the scope of the Company's operations into the lifestyle products
industry, including:
(i) SA Leisure, a manufacturer of a broad range of injection molded
plastic furniture, household, luggage and do-it-yourself products (the terms of
the acquisition call for a payment of approximately $5.36 million in cash and
142,918 shares of common stock as well as an additional $2 million in shares of
First SA Lifestyle Holdings);
(ii) Republic Umbrella Manufacturers, an assembler and distributor of
a wide variety of umbrellas and other related outdoor products (the terms of the
acquisition call for a payment of approximately $4.33 million in cash as well as
an additional $640,000 in shares of First SA Lifestyle Holdings; an additional
payment, the value of which is contingent on future performances, shall be made
over the next year);
(iii) Galactex Outdoor (Pty) Ltd., the sole distributor of the
Weber-Stephens range of outdoor products in South Africa as well as a broad
range of other barbecue products (the terms of the acquisition call for a
payment of approximately $2.3 million in cash as well as an additional $1.1
million in shares of First SA Lifestyle Holdings).
In the quarter ended December 31, 1997, the Company also acquired
Pacforce, a company specializing in the production and sale of plastic packaging
materials. The terms of the acquisition call for an initial payment of
approximately $205,000 in cash, and approximately 34,000 shares of stock.
Additional payments contingent upon future performance shall be made over the
next three and a half years.
FSAH manages the Company's business interests in South Africa. FSAH
monitors the operational performance of its subsidiaries and seeks out
prospective acquisition candidates in businesses that complement or are
otherwise related to the Company's existing businesses, and in other businesses
that may be identified by the Company's management.
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The Company was formed in September 1995. The Company's principal
executive offices are located at Clarendon House, Church Street, Hamilton HM II
Bermuda, and its telephone number at such location is: (441) 295-1422. Certain
management, shareholder relations and administrative services are provided to
the Company by First South Africa Management Corp., a Delaware corporation that
is a wholly-owned subsidiary of the Company ("FSAM"). FSAM's principal executive
offices are located at 2665 South Bayshore, Suite 702, Coconut Grove, Florida
33133, and its telephone number at such location is (305) 857-5009.
THE OFFERING
Securities Registered(1)............2,591,301 shares of Common Stock to be
issued upon exercise of the Class A and
Class B Warrants issued in connection with
the Initial Public Offering. Each Class A
Warrant entitles the holder to purchase one
share of Common Stock and one Class B
Warrant for $6.50 until January 24, 2001.
Each Class B Warrant entitles the holder to
purchase one share of Common Stock for $8.75
until January 24, 2001. The exercise price
and number of shares issuable upon exercise
of the Class A Warrants and the Class B
Warrants are subject to adjustment in
certain circumstances.
Common Stock outstanding
prior to the offering hereby........5,274,749 shares of Class A Common Stock
Common Stock trading symbol
on the Nasdaq National Market.......FSAC
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(1) Assumes exercise of all outstanding Class A Warrants and Class B Warrants.
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RISK FACTORS
An investment in the securities offered hereby is speculative in nature
and involves a high degree of risk. In addition to the other information
contained in this Prospectus, prospective investors should carefully consider
the following risk factors before purchasing the securities offered hereby.
Certain information incorporated by reference into this Prospectus include
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and is subject to the safe harbor created by that
act. These are several important factors that could cause actual results to
differ materially from those anticipated by the forward-looking statement
contained in such discussions. Additional information on the risk factors which
could effect the Company's financial results is included in this Prospectus and
in the Company's Annual Report for the fiscal year ended June 30, 1997 on Form
10-K and the Company's Quarterly Reports for the first and second quarters of
fiscal year 1998 on Form 10-Q and in other comments incorporated by reference
herein.
RISKS RELATING TO OPERATIONS IN SOUTH AFRICA
The Company's operations are conducted through its direct and indirect
subsidiaries located in South Africa. For the foreseeable future, the Company
expects to continue to focus all of its efforts in South Africa. The conduct of
the Company's business in South Africa exposes the Company to certain risks,
including the following:
POLITICAL RISKS. Historically, the social structure of South Africa was
governed according to the apartheid system. Racial tensions in South Africa have
from time to time resulted in social unrest, strikes, riots and other sporadic
localized violence. The apartheid system also resulted in the imposition of
international financial and trade sanctions against South Africa. Although a new
interim constitution was adopted providing for universal suffrage and the first
national election under the new constitution took place in April 1994, there can
be no assurance that social unrest, which could range in magnitude from civil
disobedience to civil war, will not occur. The Company's businesses in South
Africa have experienced politically-related work stoppages in the past, although
since 1994 no such disturbance has been material. In addition, certain other
countries in the region are currently engaged in or have had civil war with the
corresponding severe adverse economic and social conditions and effects.
Moreover, there can be no assurance as to the economic and tax policies which
the South African government may pursue and whether those policies may include
nationalization, expropriation and confiscatory taxation. Nationalization,
expropriation or confiscatory taxation, as well as currency blockage, political
changes, government regulation, strikes, political or social instability or
diplomatic developments could adversely affect the economy of South Africa and
could have a material adverse effect on the Company.
RISKS RELATED TO CURRENCY EXCHANGE. All of the Company's operating
subsidiaries do business in South African Rand and the Company's revenues are
generally received in such currency. Historically, there has been significant
inflation in South Africa (averaging 10-15% per annum in recent years) and
significant fluctuations in the exchange rate of the South African Rand. Because
South Africa's inflation rate would impact its economy both domestically and
internationally, and higher levels of inflation have frequently reduced the real
return on capital and investment (thereby lowering the demand for capital goods
including the types that the Company produces), South Africa's level of
inflation may increase the Company's risk related to currency fluctuation. The
U.S. Dollar equivalent of the Company's net assets and results of operations
will be adversely affected by reductions in the value of the Rand relative to
the U.S. Dollar. Similarly, if the exchange rate declines between the time the
Company incurs expenses in other currencies and the time cash expenses are paid,
the amount of South African Rand required to be converted into such other
currencies in order to pay such expenses could be greater than the equivalent
amount of such expenses in South African Rand at the time they were incurred.
The exchange rate for South African Rand against the U.S. dollar declined during
fiscal year 1997 during which period the average rate of exchange for the Rand
against the dollar was $1.00 to Rand 4.53 as compared with an average rate of
$1.00 to Rand 3.85 for fiscal year 1996. As of April 1, 1998, the Rand was
trading at approximately 5.04 Rand to the Dollar.
ECONOMIC RISKS. The economy of South Africa may differ unfavorably from
the U.S. economy in such respects as growth of gross domestic product or gross
national product, rate of inflation, taxation, capital reinvestment, resource
self-sufficiency and balance of payments position. South Africa may be
particularly susceptible to changes in the world price
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of gold and other primary commodities as these represent a majority of South
Africa's exports. Any such unfavorable aspects of the South African economy may
materially adversely affect the financial condition of the Company.
GOVERNMENT REGULATORY CONSIDERATIONS. Generally, the making of loans by
the Company to its subsidiaries, the ability of those subsidiaries to borrow
from South African sources and the repatriation of dividends, interest and
royalties by those subsidiaries is regulated by the Exchange Control Department
of the South African Reserve Bank (the "Reserve Bank"). South Africa formerly
operated a dual currency system comprising the commercial rand and the financial
rand, which was abolished in 1995. The financial rand was the investment
currency, which traded at a discount to the commercial rand. No guarantee can be
given that the financial rand will not be reintroduced in the future with
possible adverse consequences on the U.S. dollar value of the Company's
investments in South Africa. Current South African Exchange Control Regulations
provide that, subject to any exemption which may be granted by the South African
Treasury (the "Treasury"), no non-resident of South Africa and no "affected
person" (which includes any entity (i) that may distribute 50% or more of its
capital, assets or earnings to a non-resident of South Africa or (ii) 50% or
more of the voting power of which is controlled by a non-resident of South
Africa) may provide any "financial assistance" to any South African resident.
"Financial assistance" is broadly defined to include any loans, guarantees,
sale/leasebacks, etc. Because FSAH will be deemed to be an "affected person,"
the Company is generally required to obtain the permission of the Treasury prior
to loaning money to, providing guarantees on behalf of, or otherwise providing
"financial assistance" to FSAH. Notwithstanding the above, a South African
company such as FSAH is permitted a certain level of local borrowing without
reference to the exchange control authorities and without prior consent. The
amount which any affected person may borrow is calculated in accordance with the
following formula:
100% + (PERCENTAGE SOUTH AFRICAN INTEREST X 100%)
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(percentage non-resident interest).
In addition, the terms of repayment of any such loan and the interest rate
(which is generally market-related) will be regulated.
Under other regulations, no person may, without permission, acquire any
security from a non-resident or make any entry in a security register which
involves the transfer of a security into or out of the name of a non-resident.
The control is exercised by placing the endorsement "non-resident" on all
securities owned by non-residents or in which non-residents have an interest.
The non-resident endorsement is placed on the share certificates by a bank and
is in practice easy to obtain.
Certain other regulations impact the remittance of dividends and
interest from South Africa, including any potential dividends to the Company
from a South African subsidiary. In practice, the South African Reserve Bank
does not restrict the remittance of genuine dividends from income earned by
South African companies although approval must be obtained. As a result, there
can be no assurance that a South African subsidiary would be permitted to
declare and pay a dividend to the Company.
ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO ACQUISITIONS
Although management of the Company will endeavor to evaluate the risks
inherent in any particular acquisition, there can be no assurance that the
Company will properly ascertain all such risks. Management of the Company will
have virtually unrestricted flexibility in identifying and selecting prospective
acquisition candidates. The Company does not intend to seek stockholder approval
for any acquisitions unless required by applicable law or regulations and
stockholders will most likely not have an opportunity to review financial
information on an acquisition candidate prior to consummation of an acquisition.
See "Description of Securities "
South African companies that may be acquired by the Company are subject
to South African GAAP which, in certain instances, may differ from U.S. GAAP.
Although the Company intends to prepare financial statements in accordance with
U.S. GAAP, the Company can provide no assurance that it will be able to do so.
Although the Company is unaware of any South African GAAP requirement that would
adversely affect it, there can be no assurance that the Company's
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financial condition or the ability of the Company to consummate future
acquisitions will not be adversely affected by differences between South African
GAAP and U.S. GAAP.
RISKS RELATED TO MANAGING NEWLY ACQUIRED BUSINESSES
Acquisitions may involve difficulties related to the integration of
acquired businesses, some of which may have different cultures, operating
methodologies, margins or business risks. The failure to timely integrate the
Company's business with that of an acquired entity may result in a material
adverse effect on the Company's results of operations and financial condition.
Further, acquisitions may involve a number of special risks, including diversion
of management's attention, failure to retain key acquired personnel and clients,
unanticipated events or circumstances, legal liabilities and amortization of
acquired intangible assets, some or all of which could have a material adverse
effect on the Company's results of operations and financial condition. Client
satisfaction or performance problems at a single acquired firm could have a
material adverse impact on the reputation of the Company as a whole.
HOLDING COMPANY STRUCTURE
The Company is a holding company with no operations or significant
assets other than its ownership of equity interests in direct and indirect
subsidiaries as described in this Prospectus (and cash on hand in the amount of
$19,147,855 as at December 31, 1997). The Company will rely on cash dividends
and other permitted payments from its subsidiaries, as well as its cash
holdings, to make principal and interest payments on outstanding indebtedness of
the Company. See "--Risks Relating to Operations in South Africa."
RISKS RELATED TO OPERATIONS OF FSA FOODS
Two of the operating subsidiaries of FSA Foods each rely on a single
major customer for a substantial portion of their respective revenues. The loss
of any such major customer may have a material adverse effect on the financial
condition of the Company. There can be no assurance that such major customers
will continue to purchase the products of such FSA Foods subsidiaries.
POSSIBLE FLUCTUATIONS IN OPERATING RESULTS
There can be no assurance that the Company's operating subsidiaries will
continue to operate profitably, or that prior trends will be indicative of
future results of operations. Future results of operations may fluctuate
significantly based upon factors such as increases in competition, losses
incurred by new businesses that may be acquired in the future, currency
fluctuations, political changes, macroeconomic factors, the continued
availability of new materials and other circumstances that may not be reasonably
foreseeable at this time.
COMPETITION
The Company competes with a number of companies, from South Africa and
from other countries, offering similar products and services, some of whom may
have substantially greater financial, management, technical and other resources
than the Company. As a result of South Africa's recent political transformation,
some South African businesses may be adversely affected by increased competition
from foreign firms doing business in South Africa. In addition, South Africa has
historically imposed significant tariffs against a number of industrial
products. To the extent such tariffs are reduced or removed to comply with
international treaty requirements or otherwise, the Company would face much
greater pressure from globally competitive firms. There can be no assurance that
the Company will compete effectively with such other companies or that other
companies will not develop products which are superior to the Company's or which
achieve greater market penetration. In addition, the Company may experience
competition from other companies seeking to identify and consummate acquisitions
of South African companies. Such competition may result in the loss of an
acquisition candidate or an increase in the price the Company would be required
to pay for any such acquisition.
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LABOR RELATIONS
A significant number of South Africa's workers belong to either
registered or unregistered trade unions, and most of the major industries are
unionized. A number of the trade unions have close links to various political
parties. In the past, trade unions have had a significant influence in South
Africa as vehicles for social and political reform as well as the collective
bargaining process. It is uncertain whether labor disruptions will be used to
advocate political causes in the future. Significant labor disruptions could
have a material adverse effect on the financial condition of the Company.
South Africa has also recently enacted a new Labour Relations Act. The
Act entrenches the rights of employees to belong to trade unions and the rights
of representative trade unions to have access to the workplace. The right to
strike is guaranteed, as is the right to participate in secondary strikes, in
certain prescribed circumstances. The right to picket has also been entrenched.
The Act recognizes the rights of employers to belong to employers' associations.
Importantly, the Act envisages an increased role for employees in the decision
making of companies by providing, where a majority trade union so requests, for
the compulsory establishment of workplace forums to represent the interests of
employees where a company employs more than 100 employees. The range of issues
on which the workplace forum must be consulted include restructuring of the
workplace, partial or total plant closures, mergers and transfers of ownership
insofar as these affect employees, and retrenchments. The implementation of the
Labour Relations Act's provisions may have a material adverse effect on the
Company's cost of labor and consequently on its financial condition. New
legislation is currently being proposed regarding minimum conditions of labor.
Such legislation, if enacted, is expected to increase South African labor costs.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends upon the continued contributions of its
executive officers, most of whom are also principal stockholders of the Company,
and the continued contributions of the management of Starpak, L.S. Pressings,
Europair, FSA Foods and the FSA Foods Subsidiaries. The Company has obtained key
man insurance in the amounts of $2,000,000 on the lives of each of Michael Levy
and Clive Kabatznik. The business of the Company could be adversely affected by
the loss of services of, or a material reduction in the amount of time devoted
to the Company by, its executive officers.
CONTROL BY INSIDERS; OWNERSHIP OF SHARES HAVING DISPROPORTIONATE VOTING RIGHTS;
POSSIBLE DEPRESSIVE EFFECT ON THE PRICE OF THE COMPANY'S SECURITIES
The Company's founders and certain other shareholders own 1,822,500
shares of Class B Common Stock (excluding certain shares of Common Stock and
options), representing approximately 25.7% of the Company's outstanding capital
stock and approximately 63.3% of the total voting power (assuming no conversion
of the outstanding debentures and the increasing rate debentures and no exercise
of the other outstanding warrants and options) and are able to elect all of the
Company's directors and otherwise control the Company's operations. Furthermore,
the disproportionate vote afforded the Class B Common Stock could also serve to
impede or prevent a change of control of the Company. As a result, potential
acquires may be discouraged from seeking to acquire control of the Company
through the purchase of Common Stock, which could have a depressive effect on
the price of the Company's securities and will make it less likely that
shareholders receive a premium for their shares as a result of any such attempt.
See "Description of Securities."
DIVIDENDS UNLIKELY
The Company has not paid any cash dividends and does not anticipate
paying any such cash dividends in the foreseeable future. Earnings, if any, will
be retained to finance future growth.
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POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
The Class A Warrants and the Class B Warrants are redeemable by the
Company at a redemption price of $.05 per Warrant upon 30 days' prior written
notice if the average bid price per share of the Common Stock exceeds $9.10
(subject to adjustment) with respect to the Class A Warrants and $12.25 (subject
to adjustment) with respect to the Class B Warrants, for 30 consecutive trading
days ending within 15 days of the notice of redemption. Redemption of the
Warrants could force the holders to exercise the Warrants and pay the exercise
price therefor at a time when it may be disadvantageous for the holders to do
so, to sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants, or to accept the redemption price, which,
at the time the Warrants are called for redemption, is likely to be
substantially less than the market value of the Warrants. The average bid price
per share of Common Stock for the 30 consecutive trading days ending April 1,
1998 was $611/16 and the average bid price per Class A Warrant for such period
was $21/2 per Warrant.
See "Description of Securities - Warrants."
SHARES ELIGIBLE FOR FUTURE SALES; POSSIBLE DEPRESSIVE EFFECT OF FUTURE SALES
OF COMMON STOCK; REGISTRATION RIGHTS
Future sales of Common Stock by existing stockholders pursuant to Rule
144 under the Securities Act, or otherwise, including with respect to
outstanding Class A Warrants and Class B Warrants, or the possibility of such
sales in the public market, could have a material adverse affect on the market
price of the securities offered hereby. As of April 1, 1998, there is presently
an aggregate of 5,274,749 shares of Common Stock and 1,822,500 Class B Common
Stock outstanding (assuming no conversion of the Company's outstanding
debentures and increasing rate debentures and no exercise of the other
outstanding warrants and options). In addition, an aggregate of 2,591,301 shares
of Common Stock are issuable upon exercise of the Warrants issued by the Company
and upon exercise of the Warrants included in the Units sold in connection with
the Initial Public Offering. The 2,300,000 shares of Common Stock included as
part of the Units sold in the Initial Public Offering were freely tradeable
without restriction under the Securities Act immediately following the Initial
Public Offering. All other shares of Common Stock and the shares of Class B
Common Stock, are "restricted securities" as that term is defined under the
Securities Act, and in the future may be sold in compliance with Rule 144 under
the Securities Act or pursuant to a Registration Statement filed under the
Securities Act. Of the 5,274,749 shares of Common Stock issued and outstanding
as of the date of this Prospectus, 1,276,588 shares were issued to the FSAH
Escrow Agent pursuant to the terms of the FSAH Escrow Agreements between
American Stock Transfer and Trust Company ("Escrow Agent"), FSAH, the holders of
Class B Common Stock and the Company, respectively. In addition the Company has
issued 142,918 shares of Common Stock to the prior shareholders of SA Leisure
subject to a two-year lock-up period. Of the 1,822,500 shares of Class B Common
Stock issued and outstanding upon the date of this Prospectus, 729,979 shares
were issued to the FSAH Escrow Agent pursuant to the terms of the FSAH Escrow
Agreement. Such shares of Common Stock and Class B Common Stock (issued with
respect to the FSAC Escrow Agreements and the FSAH Escrow Agreement) are
"restricted securities" which in the future may be sold in compliance with Rule
144 or pursuant to a registration statement filed under the Securities Act. All
the shares of Common Stock issued pursuant to the FSAC Escrow Agreements will be
eligible for sale under Rule 144 in July 1998. All of the shares of Class B
Common Stock are currently eligible for sale under Rule 144. Rule 144 generally
provides that a person holding restricted securities for a period of one year
may sell every three months in brokerage transactions and/or market-maker
transactions an amount not to exceed the greater of (a) one percent (1%) of the
Company's issued and outstanding Common Stock, or (b) the average weekly trading
volume of the Common Stock during the four calendar weeks prior to such sale.
Rule 144 also permits, under certain circumstances, the sale of shares without
any quantity limitation by a person who is not an affiliate of the Company and
who has satisfied a two-year holding period.
D.H. Blair Investment Banking Corp., the Company's Underwriter in
connection with its Initial Public Offering ("D.H. Blair") and certain other
holders have the right to two demand registrations of the Units underlying the
Unit Purchase Options. The holders of the Unit Purchase Options also will have
certain piggyback registration rights. The exercise of registration rights may
involve substantial expense to the Company and have a depressive effect on the
market price of the Company's securities.
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POTENTIAL ANTI-TAKEOVER EFFECTS OF PREFERRED STOCK
The Company's Memorandum of Association authorizes the issuance of
5,000,000 shares of preferred stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without shareholder approval
(but subject to applicable government regulatory restrictions), to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
the Company's Common Stock. In the event of issuance, the preferred stock could
be utilized, under certain circumstances, as a method of discouraging, delaying
or preventing a change in control of the Company. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future.
LIMITED RIGHTS OF SHAREHOLDERS UNDER BERMUDA LAW AND BYE-LAWS OF THE COMPANY
The Company's corporate affairs are governed by its Memorandum of
Association and bye-laws, as well as the common law of Bermuda relating to
companies and the Companies Act 1981. The Company's bye-laws limit the right of
securityholders to bring an action against officers and directors of the
Company. The laws of Bermuda relating to shareholder rights, protection of
minorities, fiduciary duties of directors and officers, matters of corporate
governance, corporate restructuring, mergers and similar arrangements,
takeovers, shareholder suits, indemnification of directors and inspection of
corporate records, may differ from those that would apply if the Company were
incorporated in a jurisdiction within the United States. The rights of
shareholders in a Bermuda company may not be as extensive as the rights of a
shareholder of a United States company and, accordingly, the holders of the
Company's shares of Common Stock may be more limited in their ability to protect
their interests in the Company. In addition, there is uncertainty whether the
courts of Bermuda would enforce judgements of the courts of the United States
and of other foreign jurisdictions. There is also uncertainty whether the courts
of Bermuda would enforce actions brought in Bermuda which are predicated upon
the securities laws of the United States.
USE OF PROCEEDS
The Company will receive an exercise price of $6.50 per each Class A
Warrant exercised and $8.75 per each Class B Warrant exercised. Assuming that
all Warrants are exercised, the Company will realize proceeds in the amount of
$20,680,948. Such proceeds will be used by the Company primarily for potential
acquisitions and secondarily for working capital and other general corporate
purposes.
The Company will bear all expenses in connection with (i) the filing of
the Registration Statement of which this Prospectus forms a part; and (ii) the
Warrant Solicitation Fee, if any, payable to D.H. Blair.
DESCRIPTION OF SECURITIES
DESCRIPTION OF WARRANTS. The following is a summary of certain
provisions contained in a Warrant Agreement (the "Warrant Agreement") dated as
of January 24, 1996, as subsequently amended, between the Company and American
Stock Transfer & Trust Company, as Warrant Agent, which Warrant Agreement sets
forth all of the terms and provisions of the Warrants. This summary does not
purport to be complete and is qualified in its entirety by the terms of the
Warrant Agreement, a copy of which is filed as an Exhibit to the Registration
Statement.
CLASS A WARRANTS. Each Class A Warrant entitles the registered holder to
purchase one share of Common Stock and one Class B Warrant, at an exercise price
of $6.50 until January 24, 2001. The Class A Warrants are redeemable by the
Company on 30 days' written notice at a redemption price of $.05 per Class A
Warrant, if the closing price of the Company's Common Stock for any 30
consecutive trading days ending within 15 days of the notice of redemption
averages in excess of $9.10 per share (subject to adjustment by the Company, as
described below, in the event of any reverse stock split or similar events).
"Closing price" shall mean the closing sale price on the Nasdaq National Market.
The notice of redemption will be sent to the registered address of the
registered holder of the Class A Warrant. All Class A Warrants must be redeemed
if any are redeemed.
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<PAGE>
CLASS B WARRANTS. Each Class B Warrant entitles the registered holder to
purchase one share of Common Stock at an exercise price of $8.75 per share at
any time after issuance until January 24, 2001. The Class B Warrants are
redeemable by the Company on 30 days' prior written notice at a redemption price
$.05 per Class B Warrant, if the closing price of the Company's Common Stock for
any 30 consecutive trading days ending within 15 days of the notice of
redemption averages in excess of $12.25 per share (subject to adjustment by the
Company, as described below, in the event of any reverse stock split or similar
events). The notice of redemption will be sent to the registered address of the
registered holder of the Class B Warrant. All Class B Warrants must be redeemed
if any are redeemed.
GENERAL. The Class A Warrants and Class B Warrants were issued pursuant
to the Warrant Agreement among the Company, D.H. Blair and American Stock
Transfer & Trust Company as warrant agent (the "Warrant Agent") and are
evidenced by warrant certificates in registered form. The exercise price of the
Warrants and the number and kind of shares of Common Stock to be obtained upon
the exercise of the Warrants are subject to adjustment in certain circumstances
including a stock split of, or stock dividend on, or a subdivision, combination
or recapitalization of, the Common Stock or the issuance of shares of Common
Stock at less than the market price of the Common Stock. Additionally, an
adjustment would be made upon the sale of all or substantially all of the assets
of the Company for less than the market value, a merger or other unusual events
(other than share issuances pursuant to employee benefit and stock incentive
plans for directors, officers and employees of the Company) so as to enable
holders of Warrants, to purchase the kind and number of shares or other
securities or property (including cash) receivable in such event by a holder of
the kind and number of shares of Common Stock that might otherwise have been
purchased upon exercise of such Warrants. No adjustment for previously paid cash
dividends, if any, will be made upon exercise of the Warrants.
EXERCISE OF WARRANTS. The Warrants will be exercised upon surrender of
the Warrant certificate at the offices of the Warrant Agent with the form
"Election of Purchase" on the reverse side of the Warrant certificate completed
and executed as indicated, accompanied by payment of the full exercise price (by
certified or bank check payable to the order of the Company) for the number of
Warrants being exercised. Shares of Common Stock issuable upon exercise of
Warrants and payment in accordance with the terms of the Warrants will be fully
paid and non-assessable.
RIGHTS OF WARRANTHOLDERS. The Warrants do not confer upon the holders of
Warrants (the "Warrantholders") any voting or other rights of the Shareholders
of the Company. Upon notice to the Warrantholders, the Company has the right in
its sole discretion to reduce the exercise price or extend the expiration date
of the Warrants. Although this right is intended to benefit the Warrantholders,
to the extent the Company exercises this right when the Warrants would otherwise
be exercisable at a price higher than the prevailing market price of the Common
Stock, the likelihood of exercise, and resultant increase in the number of
shares outstanding, may result in making more costly, or impeding, a change in
control in the Company.
The description above is subject to the provisions of the Warrant
Agreement, which has been filed as an Exhibit to the Company's Registration
Statement and which is hereby incorporated by reference.
WARRANT SOLICITATION FEE
In connection with the Initial Public Offering, the Company entered into
an underwriting agreement (the "Underwriting Agreement") with D.H. Blair,
pursuant to which it acted as the underwriter for the Company's offer and sale
of 2,000,000 Units. In addition to certain underwriting discounts, commissions
and a non-accountable expense allowance, the Underwriting Agreement contained
certain provisions which have a continuing effect upon the Company, in general,
and which relate to the exercise of the Warrants.
Upon the exercise of any Warrant(s) after January 23, 1997, the Company
will pay D.H. Blair a fee of 5% of the aggregate exercise price of the Warrants,
of which a portion may be reallowed to the dealer who solicited the exercise
(which may also be D.H. Blair) if: (i) the market price of the Company's Common
Stock is greater than the exercise price of the Warrants on the date of
exercise; (ii) the exercise of the Warrant was solicited by a member of the
National Association of Securities Dealers, Inc., (iii) the Warrant is not held
in a discretionary account; (iv) the disclosure of compensation arrangements has
been made in documents provided to customers, both as a part of the original
offering and at the time of
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<PAGE>
exercise, and (v) the solicitation of the Warrant was not in violation of Rule
10b-6 promulgated under the Securities Exchange Act of 1934, as amended. The
Company has agreed not to solicit the exercise of any Warrants other than
through the Underwriter.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon by Parker
Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York, New York
10036.
EXPERTS
The financial statements incorporated in this Prospectus by reference
from the Company's Annual Report on Form 10-K for the years ended June 30, 1997
and June 30, 1996 have been audited by Price Waterhouse, independent auditors,
as stated in their reports, which are incorporated by reference, and have been
so incorporated herein in reliance upon such firm, its reports and upon the
authority of such firm as an expert in accounting and auditing.
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<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS OR A SUPPLEMENT TO
THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OTHER PERSON. NEITHER
THIS PROSPECTUS NOR ANY SUPPLEMENT TO
THIS PROSPECTUS CONSTITUTES AN OFFER
TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN 885,749 CLASS A WARRANTS
THE SECURITIES TO WHICH IT RELATES OR 819,803 CLASS B WARRANTS
AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN 2,591,301 SHARES
ANY JURISDICTIONS WHERE, OR TO ANY COMMON STOCK
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS OR A
SUPPLEMENT TO THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THEREOF OR
THAT THE INFORMATION CONTAINED HEREIN
OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
FIRST SOUTH AFRICA CORP., LTD.
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Table of Contents Page
Available Information ...............2
Incorporation of Certain Documents...2
Prospectus Summary...................3
Risk Factors.........................5 April 23, 1998
Use of Proceeds......................10
Description of Securities............10
Warrant Solicitation Fee ............11
Legal Matters........................12
Experts..............................12
