<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1996
REGISTRATION NO. 333-3252
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ORION ACQUISITION CORP. II
(EXACT NAMES OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 6799 (A BLANK CHECK COMPANY)
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
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DELAWARE 13-3863260
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYEE
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1430 BROADWAY, 13TH FLOOR
NEW YORK, NEW YORK 10018
(212) 391-1392
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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William L. Remley
Orion Acquisition Corp. II
1430 Broadway, 13th Floor
New York, New York 10018
(212) 391-1392
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
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<S> <C>
Richard L. Campbell, Esq.
Campbell & Fleming, P.C.
250 Park Avenue
New York, New York 10177
(212) 351-4930
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Richard L. Campbell, Esq. James M. Jenkins, Esq.
250 Park Avenue 700 Midtown Tower
New York, New York 10177 Rochester, New York 14604
(212) 351-4930 (716) 232-6500
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Campbell & Fleming, P.C. Harter, Secrest & Emery
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. /X/
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (1) (1) REGISTRATION FEE
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Units consisting of one share of Common Stock, $.01 par
value, and one Class A Warrant to purchase one share
of Common Stock (2)(3)................................ 920,000 $10.00 $9,200,000 $ 3,172.41
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Common Stock, $.01 par value (4)........................ 920,000 $9.00 $8,280,000 $ 2,855.17
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Class B Warrants to purchase one Unit (5)............... 368,000 $5.625 $2,070,000 $ 713.79
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Units, issuable upon exercise of the Class B Warrants,
consisting of one share of Common Stock, $.01 par
value, and one Class A Warrant to purchase one share
of Common Stock (3)(6)................................ 368,000 $.125 $ 46,000 $ 15.86
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Common Stock, $.01 par value (6)........................ 368,000 $9.00 $3,312,000 $ 1,142.07
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Representatives' Warrants to purchase Units............. 80,000 $5 (7)
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Units, issuable upon exercise of the Representatives'
Warrants, consisting of one share of Common Stock,
$.01 par value, and one Class A Warrant to purchase
one share of Common Stock (8)......................... 80,000 $11.00 $ 88,000 $ 30.34
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Common Stock, $.01 par value (6)........................ 80,000 $9.00 $ 720,000 $ 248.28
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Representatives' Warrants to purchase Class B
Warrants.............................................. 32,000 $.001 $5 (7)
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Class B Warrants, issuable upon exercise of the
Representatives' Warrants (8)......................... 32,000 $5.775 $ 184,800 $ 63.72
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Units, issuable upon exercise of the Class B Warrants,
consisting of one share of Common Stock, $.01 par
value, and one Class A Warrant to purchase one share
of Common Stock (8)................................... 32,000 $.25 $ 8,000 $ 2.76
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Common Stock, $.01 par value (9)................ 32,000 $9.00 $ 288,000 $ 99.31
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Total................................................... *$8,343.71
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(b).
(2) Includes 120,000 Units which the Underwriters have the option to purchase to
cover over-allotments.
(3) Together with such indeterminate number of additional securities as may be
issued pursuant to the anti-dilution provisions of the Class A Warrants and
the Class B Warrants pursuant to Rule 416(a).
(4) Issuable upon exercise of the Class A Warrants.
(5) Includes 48,000 Class B Warrants which the Underwriters have the option to
purchase to cover over-allotments.
(6) Issuable upon exercise of the Class A Warrants issuable upon exercise of the
Class B Warrants.
(7) No registration fee required pursuant to Rule 457(g).
(8) Together with such indeterminate number of additional securities as may be
issued pursuant to the anti-dilution provisions of the Representatives'
Warrants pursuant to Rule 416(a).
(9) Issuable upon exercise of the Class A Warrants issuable upon exercise of the
Representatives' Class B Warrants.
* $8,311.99 previously paid
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 14, 1996
ORION ACQUISITION CORP. II
800,000 UNITS, AT $10.00 PER UNIT, EACH UNIT CONSISTING OF ONE SHARE OF COMMON
STOCK AND
ONE REDEEMABLE CLASS A WARRANT ENTITLING THE HOLDER THEREOF TO PURCHASE, UPON
CONSUMMATION
OF A BUSINESS COMBINATION, ONE SHARE OF COMMON STOCK AT A PRICE OF $9.00
320,000 REDEEMABLE CLASS B UNIT PURCHASE WARRANTS, AT $5.625 PER CLASS B
WARRANT,
EACH CLASS B WARRANT ENTITLING THE HOLDER THEREOF TO PURCHASE, UPON THE
CONSUMMATION OF A BUSINESS COMBINATION, ONE UNIT AT A PRICE OF $.125
Orion Acquisition Corp. II, a Delaware corporation (the "Company"), hereby
offers in a Specialized Merger and Acquisition Allocated Risk Transaction(SM)
("SMA(2)RT(SM)") 800,000 Units (the "Units"), each consisting of one share of
Common Stock, par value $.01 per share (the "Common Stock"), and one Redeemable
Class A Common Stock Purchase Warrant (the "Class A Warrants"), and 320,000
Redeemable Class B Unit Purchase Warrants (the "Class B Warrants"), each
entitling the holder thereof to purchase one Unit for $.125 at the time of a
Business Combination, as defined. The Units and the Class B Warrants, which are
being offered in the same offering, will be sold and traded separately. The
Common Stock and the Class A Warrants will become separable and transferable at
such time as H.J. Meyers & Co., Inc. ("H.J. Meyers") may determine, but in no
event will H.J. Meyers allow separate trading of the securities comprising the
Units until the preparation of an audited balance sheet of the Company
reflecting receipt by the Company of the proceeds of this offering and the
filing by the Company with the Securities and Exchange Commission of a Current
Report on Form 8-K which includes such audited balance sheet (the "Separation
Date"). H.J. Meyers and Northeast Securities, Inc. ("Northeast") will act
severally but not jointly as representatives (the "Representatives") of the
several underwriters (the "Underwriters"). Each Class A Warrant will entitle the
holder thereof to purchase one share of Common Stock at a price per share of
$9.00, commencing upon the consummation of a Business Combination, as defined,
until the fifth anniversary of the date of this Prospectus. Each Class B Warrant
will entitle the holder thereof to purchase one Unit at a price per Unit of
$.125 commencing upon the consummation of a Business Combination until the first
anniversary of such date. (The Class A Warrants and the Class B Warrants are
sometimes hereinafter collectively referred to as the "Warrants.") Furthermore,
the Warrants are redeemable, each as a class, in whole and not in part, at the
option of the Company, at a price of $.05 per Warrant at any time, upon not less
than 30 days' prior written notice to the registered holders thereof, provided
that the Company has consummated a Business Combination, as defined, and that
the last sale price of the Common Stock, if the Common Stock is listed for
trading on an exchange or interdealer quotation system which provides last sale
prices, or, the average of the closing bid and asked quotes for the Common
Stock, if the Common Stock is listed for trading on an interdealer quotation
system which does not provide last sale prices, on all 10 of the trading days
ending on the day immediately prior to the day on which the Company gives notice
of redemption, has been $11.00 or higher.
Prior to this offering, there has been no public market for the Units, the
shares of Common Stock or the Warrants and there can be no assurance that such a
market will develop for any of such securities after the completion of this
offering. The offering prices of the Units and the Class B Warrants and the
exercise prices and terms of the Warrants have been arbitrarily determined by
the Company and the Representatives, and bear no relationship to the Company's
assets, book value, or other generally accepted criteria of value. For
additional information regarding the factors considered in determining the
initial public offering prices of the Units and the Class B Warrants and the
exercise prices and the terms of the Warrants, see "Risk Factors" and
"Underwriting." The Company anticipates that the Units, the Common Stock, the
Class A Warrants and the Class B Warrants will be quoted on the OTC Bulletin
Board under the symbols " ," " ," " " and " ," respectively.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD
THE LOSS OF THEIR ENTIRE INVESTMENT. SEE
"RISK FACTORS" (PAGE 18)
AND "DILUTION."
THIS OFFERING WILL NOT BE CONDUCTED IN ACCORDANCE WITH RULE 419 OF REGULATION C
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). RULE 419 OF THE ACT WAS
DESIGNED, ACCORDING TO THE SECURITIES AND EXCHANGE COMMISSION, TO
STRENGTHEN REGULATION OF SECURITIES OFFERINGS BY BLANK CHECK COMPANIES
WHICH CONGRESS HAS FOUND TO HAVE BEEN A COMMON VEHICLE FOR FRAUD AND
MANIPULATION IN THE PENNY STOCK MARKET. THE COMPANY IS A BLANK CHECK
COMPANY BUT IS NOT SUBJECT TO RULE 419 OF THE ACT BECAUSE THE
COMPANY'S NET TANGIBLE ASSETS AFTER ITS RECEIPT OF THE PROCEEDS
OF THIS OFFERING WILL EXCEED $5,000,000. ACCORDINGLY, INVESTORS
IN THIS OFFERING WILL NOT RECEIVE THE SUBSTANTIVE PROTECTION
PROVIDED BY RULE 419 OF THE ACT. SEE "RISK
FACTORS." (PAGE 18)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)(3)
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<S> <C> <C> <C>
Per Unit $10.00 $.600 $9.400
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Per Class B Warrant $5.625 $.5625 $5.0625
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Total(4) $9,800,000 $660,000 $9,140,000
</TABLE>
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(1) Does not include additional compensation to the Representatives in the form
of a non-accountable expense allowance of 3% of the gross proceeds of this
offering. For indemnification arrangements with the Underwriters and
additional compensation payable to the Representatives, see "Underwriting."
(2) Before deducting estimated offering expenses, including the Representatives'
non-accountable expense allowance of $290,400 payable by the Company.
(3) Used as a basis for calculating the underwriting discounts with respect to
the Units. A portion of the net proceeds from the sale of the Class B
Warrants equal to the discounts and the Representatives' non-accountable
expense allowance attributable to the sale of the Units will be deposited
into escrow with the Proceeds Escrow Agent (as defined). See "The
Company -- Escrow of Offering Proceeds."
(4) The Company has granted the Underwriters a 30-day option to purchase up to
120,000 additional Units and/or 48,000 additional Class B Warrants upon the
same terms and conditions as set forth above, solely to cover
over-allotments, if any. If such over-allotment options are exercised in
full, the total Price to Public, Underwriting Discounts and Proceeds to
Company will be $11,270,000, $759,000, and $10,511,000, respectively. See
"Underwriting."
The Units and the Class B Warrants are being offered by the Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to its right to withdraw, cancel or modify this
offering and to reject any order in whole or in part. It is expected that
delivery of certificates will be made at the offices of H.J. Meyers & Co., Inc.,
1895 Mount Hope Avenue, Rochester, New York 14620, on or about ,
1996.
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H.J. MEYERS & CO., INC. NORTHEAST SECURITIES, INC.
The date of this Prospectus is , 1996.
<PAGE> 3
"SMA(2)RT(SM)" AND "SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK
TRANSACTION(SM)" ARE SERVICEMARKS OF BRIGHT CAPITAL LIMITED ("BRIGHT"). BRIGHT
HAS GRANTED THE COMPANY, PURSUANT TO A LICENSE AGREEMENT EXECUTED BY BRIGHT AND
THE COMPANY, A NON-EXCLUSIVE LICENSE TO USE, FOR PURPOSES OF MARKETING THIS
OFFERING, THE SMA(2)RT(SM) AND SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK
TRANSACTION(SM) SERVICEMARKS.
THE SMA(2)RT(SM) SERVICEMARK HAS BEEN LICENSED TO THE COMPANY FOR PURPOSES
OF MARKETING THIS OFFERING AND IS BEING USED AS AN ACRONYM TO DESCRIBE THE RISK
ALLOCATION FEATURE OF THIS OFFERING. USE OF THE SMA(2)RT(SM) SERVICEMARK,
HOWEVER, SHOULD IN NO WAY BE CONSTRUED BY AN INVESTOR AS AN ENDORSEMENT OF THE
MERITS OF THIS OFFERING.
INVESTORS SHOULD BE ADVISED THAT A SMA(2)RT(SM), OR SPECIALIZED MERGER AND
ACQUISITION ALLOCATED RISK TRANSACTION(SM), IS IN NO WAY RELATED OR SIMILAR TO A
SPAC(SM), OR SPECIFIED PURPOSE ACQUISITION COMPANY(SM) (WHICH ARE SERVICEMARKS
OF GKN SECURITIES CORP.), AND INVESTORS SHOULD NOT CONSTRUE A SMA(2)RT(SM) AS
BEING SIMILAR TO A SPAC(SM) OR A SPECIFIED PURPOSE ACQUISITION COMPANY(SM). NONE
OF THE OFFICERS, DIRECTORS OR CONTROLLING PERSONS OF THE COMPANY OR THE
REPRESENTATIVES ARE AFFILIATED WITH ANY OF THE OFFICERS, DIRECTORS OR
CONTROLLING PERSONS OF THE OWNERS OF THE SPAC(SM) AND SPECIFIED PURPOSE
ACQUISITION COMPANY(SM) SERVICEMARKS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, THE
COMMON STOCK OR THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
THE COMPANY HAS REGISTERED THE SECURITIES, OR AN EXEMPTION FROM
REGISTRATION HAS BEEN OBTAINED (OR IS OTHERWISE AVAILABLE), ONLY IN THE STATES
OF COLORADO, DELAWARE, FLORIDA, HAWAII, ILLINOIS, LOUISIANA, MARYLAND, NEW YORK,
RHODE ISLAND, SOUTH CAROLINA AND THE DISTRICT OF COLUMBIA (THE "PRIMARY
DISTRIBUTION STATES") AND INITIAL SALES MAY ONLY BE MADE IN SUCH JURISDICTIONS.
MORE SPECIFICALLY, THE COMPANY HAS REGISTERED THE SECURITIES BY FILING IN
LOUISIANA, BY COORDINATION IN DELAWARE, ILLINOIS, MARYLAND, RHODE ISLAND AND
SOUTH CAROLINA AND BY NOTIFICATION IN COLORADO, FLORIDA AND NEW YORK. EXEMPTIONS
FROM REGISTRATION HAVE BEEN OBTAINED (OR ARE OTHERWISE AVAILABLE) IN HAWAII AND
THE DISTRICT OF COLUMBIA. PURCHASERS OF SECURITIES IN THIS OFFERING MUST BE
RESIDENTS OF THE PRIMARY DISTRIBUTION STATES. THE SECURITIES WILL BE IMMEDIATELY
AVAILABLE FOR RESALE IN EACH OF THE PRIMARY DISTRIBUTION STATES AND IN THE
COMMONWEALTH OF PENNSYLVANIA. UNLESS AN APPLICABLE EXEMPTION IS AVAILABLE,
PURCHASERS OF SECURITIES EITHER IN THIS OFFERING OR IN ANY SUBSEQUENT TRADING
MARKET WHICH MAY DEVELOP MUST BE RESIDENTS OF SUCH JURISDICTIONS. THE COMPANY
WILL AMEND THIS PROSPECTUS FOR THE PURPOSE OF DISCLOSING ADDITIONAL STATES, IF
ANY, IN WHICH THE COMPANY'S SECURITIES WILL BE ELIGIBLE FOR RESALE IN THE
SECONDARY TRADING MARKET.
<PAGE> 4
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information and
financial statements (including the notes thereto) appearing elsewhere in this
Prospectus. Unless otherwise indicated, all information in this Prospectus
assumes that the over-allotment options granted to the Underwriters are not
exercised. Investors should consider carefully the information set forth in this
Prospectus under the heading "Risk Factors."
THE COMPANY
BUSINESS OBJECTIVES
The Company, which is a "blank check" or "blind pool" company, was formed
on October 19, 1995 to serve as a vehicle to effect a merger, exchange of
capital stock, asset acquisition or other business combination (a "Business
Combination") with an operating business (a "Target Business"). The business
objective of the Company is to effect a Business Combination with a Target
Business which the Company believes has significant growth potential. The
Company intends to utilize the net proceeds of this offering, equity securities,
debt securities, bank and other borrowings or a combination thereof in effecting
a Business Combination.
The Company will seek to acquire a Target Business without limiting itself
to a particular industry. Most likely, the Target Business will be primarily
located in the United States, although the Company reserves the right to acquire
a Target Business primarily located outside the United States. In seeking a
Target Business, the Company will consider, without limitation, businesses which
(i) offer or provide services or develop, manufacture or distribute goods in the
United States or abroad, including, without limitation, in the following areas:
health care and health products, educational services, environmental services,
consumer-related products and services (including amusement and/or recreational
services), personal care services, voice and data information processing and
transmission and related technology development or (ii) is engaged in wholesale
or retail distribution. The Company will not acquire a Target Business unless
the fair market value of such business, as determined by the Company based upon
standards generally accepted by the financial community, including revenues,
earnings, cash flow and book value (the "Fair Market Value"), is at least 80% of
the net assets of the Company at the time of the consummation of a Business
Combination (the "Fair Market Value Test"). If the Company determines that the
financial statements of a proposed Target Business do not clearly indicate that
the Fair Market Value Test has been satisfied, the Company will obtain an
opinion from an investment banking firm that is a member of the National
Association of Securities Dealers, Inc. (the "NASD") with respect to the
satisfaction of such criteria. The Company has not had any contact or
discussions with any entity or representatives of any entity regarding a
Business Combination. While the Company may, under certain circumstances, seek
to effect Business Combinations with more than one Target Business, in all
likelihood, as a result of its limited resources, the Company will have the
ability to effect only a single Business Combination with a Target Business. The
Company does not intend to register as a broker-dealer, merge with or acquire a
registered broker-dealer, or otherwise become a member of the NASD.
BUSINESS EXPERIENCE OF PRINCIPALS
The executive officers and the other directors of the Company have business
experience which has provided them with skills which the Company believes will
be helpful in evaluating potential Target Businesses and negotiating a Business
Combination.
RETENTION OF INDEPENDENT INVESTMENT BANKER
The Company has engaged Ladenburg, Thalmann & Co. Inc., an independent
investment banking firm which is a member in good standing of the NASD
("Ladenburg") to assist the Company in identifying, evaluating, structuring and
negotiating potential Business Combinations and, assuming no conflict of
interest, to provide any required opinion with respect to the Target Business'
satisfaction of the Fair Market Value Test. Ladenburg will not participate in
this offering as an underwriter, dealer or otherwise.
3
<PAGE> 5
ESCROW OF INITIAL PUBLIC OFFERING PROCEEDS
Upon completion of this offering, an aggregate of $8,000,000 (or $9,200,000
if the Underwriters' over-allotment option with respect to the Units is
exercised in full), representing an amount equal to the gross proceeds from the
sale of the Units, will be placed in an escrow account maintained by Chemical
Bank, N.A. (the "Proceeds Escrow Agent"), subject to release upon the earlier of
(1) receipt by the Proceeds Escrow Agent of (i) written notice by the Company of
the Company's completion of a transaction or series of transactions in which at
least 50% of the gross proceeds from this offering are committed to a specific
line of business as a result of a Business Combination (including any redemption
payments), (ii) a written opinion of counsel of the Company, reasonably
acceptable to the Proceeds Escrow Agent, that a Business Combination was
approved by a vote of two-thirds of the shares of Common Stock of the Company,
as required by this Prospectus, that the holders of more than 20% of the Common
Stock of the Company have not elected to redeem their Common Stock, as required
by this Prospectus; and (iii) a written certification from the Company that the
fair market value of the Target as determined by the Company, based upon
standards generally accepted by the financial community (including revenues,
earnings, cash flow, and book value), exceeds 80% of the net value of the assets
of the Company, or (2) either (i) receipt by the Proceeds Escrow Agent of
written notification to distribute the escrow proceeds in connection with a
liquidation of the Company to the holders of Common Stock purchased as part of
the Units sold in this offering or in the open market thereafter, or (ii)
receipt by the Proceeds Escrow Agent of written notification to distribute part
of the escrow proceeds to the holders of record of Common Stock purchased as
part of the Units sold in this offering or in the open market thereafter who
elected to have their shares redeemed in accordance with the terms set forth in
this Prospectus. The Company will notify the Representatives and the NASD prior
to the release of funds from the escrow account. All proceeds held in the escrow
account will be invested, until released, in short-term United States government
securities, including treasury bills, cash and cash equivalents. Except as noted
below, the proceeds to the Company from the sale of the Class B Warrants will
not be placed in escrow. Rather, these proceeds will be used (i) to repay
indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, to
Bright pursuant to a license agreement executed by Bright and the Company, (iii)
to cover all the expenses incurred by the Company in this offering, including
the Underwriters' discounts and the Representatives' non-accountable expense
allowance, and (iv) to fund the Company's operating expenses, including
investment banking fees and the costs of business, legal and accounting due
diligence on prospective Target Businesses, until the consummation of a Business
Combination. In addition, a portion of the net proceeds from the sale of the
Class B Warrants equal to the Underwriters' discounts and the Representatives'
non-accountable expense allowance with respect to the Units, as noted in clause
(iii) above, will be placed in the above mentioned escrow account for the
benefit of purchasers of Common Stock as part of the Units sold in this offering
and in the open market thereafter. Management is unaware of any circumstance
under which this policy, through management's own initiative, may be changed.
STOCKHOLDER APPROVAL OF BUSINESS COMBINATIONS
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the Business Combination is such as would not ordinarily
require stockholder approval under applicable state law. In connection with such
request, the Company intends to provide stockholders with disclosure
documentation in accordance with the proxy solicitation regulations under the
Securities Exchange Act of 1934 (the "Proxy Rules"), including audited financial
statements, concerning a Target Business. All of the Company's present
stockholders, including all directors and the Company's executive officers, have
agreed to vote all of their respective shares of Common Stock in accordance with
the vote of the majority of the shares voted by all other stockholders of the
Company ("non-affiliated public stockholders") with respect to any such Business
Combination. A Business Combination will not be consummated unless approved by a
vote of two-thirds of the shares of Common Stock voted by the stockholders (in
person or by proxy). In addition, the Delaware General Corporation Law requires
approval of certain mergers and consolidations by a majority of the outstanding
stock entitled to vote. Holders of Warrants who otherwise do not own any shares
of Common Stock will not be entitled to vote on any Business Combination.
4
<PAGE> 6
REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer (the "Redemption Offer") to each of
the non-affiliated public stockholders of the Company the right, for a specified
period of time of not less than 20 calendar days, to redeem his shares of Common
Stock at a price equal to the Liquidation Value (as defined below) of such
shares as of the record date established for determining the stockholders
entitled to vote with respect to the approval of a Business Combination (the
"Record Date"). The Redemption Offer will be described in the disclosure
documentation relating to the proposed Business Combination. The "Liquidation
Value" for each share of Common Stock will be determined as of the Record Date
by dividing (A) the greater of (i) the Company's net worth as reflected in the
Company's then current financial statements as audited by the Company's
independent accountants, or (ii) the amount of the proceeds of the Company in
the escrow account (including interest earned thereon) by (B) the number of
shares held by non-affiliated public stockholders. In connection with the
Redemption Offer, if non-affiliated public stockholders holding 20% or less of
the shares of Common Stock elect to redeem their shares, the Company may, but
will not be required to, proceed with such Business Combination and, if the
Company elects to so proceed, will redeem such shares at their Liquidation Value
as of the Record Date. In any case, if non-affiliated public stockholders
holding more than 20% of the Common Stock elect to redeem their shares, the
Company will not proceed with such potential Business Combination and will not
redeem such shares. All existing stockholders of the Company and holders of
Warrants will be allowed to participate in a Redemption Offer only if they
purchase shares of Common Stock in this offering or on the open market
thereafter, and only as to any shares of Common Stock so purchased.
ESCROW OF OUTSTANDING SHARES
All of the shares of Common Stock and Series A Preferred Stock of the
Company outstanding immediately prior to the date of this Prospectus (the
"Escrowed Stock") have been placed in escrow with Campbell & Fleming, P.C. (the
"Share Escrow Agent"), until the earlier of (i) the occurrence of the
consummation of the first Business Combination or (ii) 18 months from the date
of this Prospectus provided that such 18-month period will be extended by six
months to 24 months from the date of this Prospectus if, prior to the expiration
of the 18-month period, the Company has become a party to a letter of intent or
a definitive agreement to effect a Business Combination (the "Extension
Criteria"). During the escrow period, the holders of the Escrowed Stock will not
be able to sell or otherwise transfer their respective shares of Escrowed Stock
(with the exceptions described below), but will retain all other rights as
stockholders of the Company, including, without limitation, the right to vote
escrowed shares of Common Stock, subject to their agreement to vote all of their
shares in accordance with the vote of a majority of the non-affiliated public
stockholders with respect to a consummation of a Business Combination or
liquidation proposal, but excluding the right to request the redemption of
Escrowed Stock pursuant to a Redemption Offer. Subject to compliance with
applicable securities laws, any such holder may transfer his, her or its
Escrowed Stock to a family member or to a trust established for the benefit of
himself, herself, or a family member or to another affiliated entity (with the
consent of the Representative which will not be unreasonably withheld) or, in
the event of the holder's death, by will or operation of law, or in the case of
its dissolution or merger, provided that any such transferee or successor must
agree as a condition to such transfer or succession to be bound by the
restrictions on transfer and succession applicable to the original holder and,
in the case of present stockholders other than the holders of 15,000 shares of
common stock sold in a private placement in January, 1996 (the "Placement
Shares"), that the transferor (except in the case of death) or successor will
continue to be deemed the beneficial owner (as defined in Regulation 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of such transferred shares.
Each of the executive officers and the other directors of the Company has
agreed to surrender his shares to the Company at the purchase price at which
such shares were acquired ($.10 per share) if he resigns prior to the
consummation of the first Business Combination.
5
<PAGE> 7
RESTRICTIONS ON SALE OF OUTSTANDING SHARES
All of the shares of Common Stock outstanding prior to the date of this
Prospectus other than the Placement Shares and the shares of Common Stock
issuable upon the exercise of options to purchase Units granted to entities
affiliated with the Company's officers and directors and the exercise of
warrants included in the units issuable upon exercise of such options
(collectively, the "Founders' Shares") are subject to an agreement with the
holders of the Founders' Shares not to sell or otherwise transfer such shares
for a period of 24 months from the date the currently outstanding Founders'
Shares were originally issued (October 25, 1995), but in no event earlier than
120 days following the consummation of the first Business Combination. However,
subject to compliance with applicable securities laws, any such holder may
transfer Founders' Shares to a family member or to a trust established for the
benefit of himself, herself, or a family member or to another affiliated entity
(with the consent of the Representative which will not be unreasonably withheld)
or in the event of the holder's death, by will or operation of law, or its
dissolution or merger, provided that any such transferee or successor must agree
as a condition to such transfer or succession to be bound by the restrictions on
transfer applicable to the original holder and that the transferor or its
principals, if the transferor is an entity (except in the case of death) will
continue to be deemed the beneficial owner (as defined in Regulation 13d-3
promulgated under the Exchange Act) of such transferred shares. The certificates
representing the Founders' Shares bear a restrictive legend with respect to such
restrictions and the Company's transfer agent will note such restrictions on the
Company's transfer books and records. See "Management -- Options to Purchase
Units."
The Placement Shares are subject to an agreement with the holders of the
Placement Shares not to sell or otherwise transfer such shares for a period
ending the earlier of 24 months from the date such shares were issued (January
31, 1996) or 60 days following the consummation of the first Business
Combination.
The Company has outstanding 110 shares of Series A Preferred Stock which
are held by CDIJ Capital Partners, L.P. ("CDIJ"), an affiliate of Bright. The
shares are convertible to Common Stock on the basis of one thousand shares of
Common Stock for each share of Series A Preferred Stock for a one year period
commencing upon the consummation of a Business Combination. The 110,000 shares
of Common Stock issuable upon conversion of the Company's outstanding Series A
Preferred Stock will be offered by a Prospectus at the time of a Business
Combination and thereafter will be freely tradable under applicable securities
laws. However, the holders of such shares have agreed not to sell or otherwise
transfer such shares until 60 days following the consummation of the first
Business Combination and to limit the volume of such sales to the amount that is
permitted by Rule 144 ("Rule 144") promulgated under the Securities Act of 1933,
as amended. Subject to other conditions, Rule 144 permits sales, within any
three-month period, of a number of shares that does not exceed the greater of 1%
of the total number of outstanding shares of the same class or, if the shares
are quoted on an exchange or on NASDAQ, the average weekly trading volume during
the four calendar weeks preceding the sale. See "Risk Factors -- Shares Eligible
for Future Sale."
POSSIBLE LIQUIDATION OF THE COMPANY IF NO BUSINESS COMBINATION
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit for
stockholder consideration a proposal to liquidate the Company and distribute to
the then holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, the amounts in the interest bearing
escrow account. Thereafter, all remaining assets available for distribution will
be distributed to the non-affiliated public stockholders of the Company after
payment of liabilities and after redemption of the Company's outstanding Series
A Preferred Stock at its liquidation value, $11,000. Since the proceeds to the
Company from the sale of the Class B Warrants will be used (i) to repay
indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, due
to Bright pursuant to a license agreement executed by Bright and the Company,
(iii) to cover all the expenses incurred by the Company in this offering,
including the Underwriters' discounts and the Representatives' non-accountable
expense allowance, and (iv) to fund the Company's operating expenses, including
investment banking fees and the costs of business, legal and accounting due
diligence on prospective Target Businesses, until the consummation of a Business
Combination, the amount per share remaining for distribution, in the event of a
liquidation
6
<PAGE> 8
of the Company, to the holders of Common Stock acquired as part of the Units
sold in this offering or in the open market thereafter, and exclusive of any
income earned on the proceeds held in the escrow account, will be approximately
equal to the initial public offering price per Unit in this offering (assuming
no value is attributed to the Warrants included in the Units offered hereby).
All of the present stockholders, including the Company's executive officers and
other directors and their affiliates, are required by the escrow agreement to
which their stock is subject to vote their shares of Common Stock in accordance
with the vote of the majority of all non-affiliated public stockholders of the
Company with respect to any liquidation proposal. See "The Company -- Escrow of
Outstanding Shares." Holders of Warrants, however, will only be entitled to vote
on any liquidation proposal, and allowed to participate in any liquidation
distribution, if they purchase shares of Common Stock in this offering or on the
open market thereafter, but only as to any shares of Common Stock so purchased.
Present stockholders, including officers, directors and their affiliates, will
not participate in any liquidation distribution with respect to the shares of
Common Stock owned by them as of the date of this Prospectus.
7
<PAGE> 9
THE OFFERING
Securities offered to the
public........................... 800,000 Units, at $10.00 per Unit and
320,000 Class B Warrants, at $5.625 per
Class B Warrant. Each Unit consists of one
share of Common Stock and one Class A
Warrant entitling the holder thereof to
purchase one share of Common Stock at a
price of $9.00. Each Class B Warrant
entitles the holder thereof to purchase one
Unit for $.125 per Unit at the time of a
Business Combination. The Units and the
Class B Warrants, which are being offered
in the same offering, will be sold and
traded separately. The securities
comprising the Units will become separable
and transferable at such time as H.J.
Meyers may determine, but in no event will
H.J. Meyers allow separate trading of the
securities comprising the Units until the
preparation of an audited balance sheet of
the Company reflecting receipt by the
Company of the proceeds of this offering
and the filing by the Company with the
Commission of a Current Report on Form 8-K
which includes such audited balance sheet.
See "Description of Securities."
Proposed OTC Bulletin Board
Symbols.......................... Units --
Common Stock --
Class A Warrants --
Class B Warrants --
Common Stock outstanding prior to
the offering..................... 90,000 shares.
Common Stock to be outstanding
after the offering(1)............ 890,000 shares.
Warrants:
Number of Class A and Class
B Warrants to be outstanding
after the offering(2)....... 800,000 Class A Warrants and 320,000 Class
B Warrants.
Exercise price of Class A
Warrants and Class B Warrants.... The exercise price of each Class A Warrant
is $9.00 per share of Common Stock and the
exercise price of each Class B Warrant is
$.125 per Unit, each subject to adjustment
in certain circumstances. See "Description
of Securities."
Exercise period............. The exercise period of the Class A Warrants
will commence upon the consummation of a
Business Combination and will expire at
5:00 p.m., New York City time, on the fifth
anniversary of the date of this Prospectus.
The exercise period of the Class B Warrants
will commence upon the consummation of a
Business Combination and will expire at
5:00 p.m., New York City time, on the first
anniversary of the date of a Business
Combination.
Redemption.................. The Warrants are redeemable by the Company,
each as a class, in whole and not in part,
at the option of the Company, at a price of
$.05 per Warrant at any time, upon not less
than 30 days' prior written notice to the
registered holders thereof, provided that
the Company has consummated a Business
8
<PAGE> 10
Combination and that the last sale price of
the Common Stock, if the Common Stock is
listed for trading on an exchange or
interdealer quotation system which provides
last sale prices, or, the average of the
closing bid and asked quotes for the Common
Stock, if the Common Stock is listed for
trading on an interdealer quotation system
which does not provide last sale prices, on
all 10 of the trading days ending on the
day immediately prior to the day on which
the Company gives notice of redemption, has
been $11.00 or higher.
(1) Excludes a total of 2,310,000 shares of Common Stock, consisting of: (i)
800,000 shares of Common Stock reserved for issuance upon the exercise of
the Class A Warrants, (ii) 320,000 shares of Common Stock reserved for
issuance upon exercise of the Units underlying the Class B Warrants, (iii)
320,000 shares of Common Stock reserved for issuance upon exercise of the
Class A Warrants comprising a part of the Units underlying the Class B
Warrants, (iv) 120,000 shares of Common Stock included in the Units subject
to the Underwriters' over-allotment option, (v) 120,000 shares of Common
Stock reserved for issuance upon the exercise of the Class A Warrants
included in the Units subject to the Underwriters' over-allotment option,
(vi) 48,000 shares of Common Stock reserved for issuance upon exercise of
the Units underlying the Class B Warrants subject to the Underwriters'
over-allotment option, (vii) 48,000 shares of Common Stock reserved for
issuance upon exercise of the Class A Warrants comprising a part of the
Units underlying the Class B Warrants subject to the Underwriters'
over-allotment option, (viii) 100,000 shares of Common Stock reserved for
issuance upon exercise of options to purchase Units granted to an affiliate
of certain executive officers and directors of the Company and a further
100,000 shares of Common Stock issuable upon exercise of the Class A
Warrants included in such Units, (ix) 110,000 shares of Common Stock
reserved for issuance upon conversion of the Company's outstanding Series A
Preferred Stock, (x) 80,000 shares of Common Stock included in the Units
reserved for issuance upon exercise of warrants to purchase 80,000 Units,
exercisable over a period of four years commencing one year from the date of
this Prospectus, being sold to the Representatives (the "Representatives'
Unit Purchase Warrants"), (xi) 80,000 shares of Common Stock reserved for
issuance upon the exercise of the Class A Warrants included in the Units
reserved for issuance upon exercise of the Representatives' Unit Purchase
Warrants, (xii) 32,000 shares of Common Stock included in the Units reserved
for issuance upon exercise of a warrant to purchase 32,000 Class B Warrants,
exercisable over a period of four years commencing one year from the date of
this Prospectus, being sold to the Representatives (the "Representatives'
Class B Warrants"), and (xiii) 32,000 shares of Common Stock reserved for
issuance upon exercise of Class A Warrants comprising a part of the Units
underlying the Representatives' Class B Warrants. See "Management,"
"Underwriting" and "Certain Transactions."
(2) Excludes (i) 100,000 Class A Warrants comprising part of the Units issuable
upon exercise of options granted to an affiliate of certain of the executive
officers and directors of the Company; (ii) 120,000 Class A Warrants and
48,000 Class B Warrants included in the Units and Class B Warrants subject
to the Underwriters' over-allotment option, (iii) an additional 48,000 Class
A Warrants comprising a part of the Units underlying the Class B Warrants
subject to the Underwriters' over-allotment options, respectively, (iv)
80,000 Class A Warrants included in the Units reserved for issuance upon
exercise of the Representatives' Unit Purchase Warrants, (v) 32,000 Class B
Warrants underlying the Representatives' Class B Warrants and (vi) 32,000
Class A Warrants underlying the Units underlying the Representatives' Class
B Warrants. See "Management" and "Underwriting."
THE SMA(2)RT(SM) STRUCTURE
Essentially, a Specialized Merger and Acquisition Allocated Risk
Transaction(SM) (SMA(2)RT(SM)) provides an investor in this offering with an
opportunity to purchase Units for $10.00 each, the proceeds of which will be
placed into escrow for the benefit of stockholders and will be returned if the
Company does not effect a Business Combination; and/or Class B Warrants (which
are exercisable into Units) for $5.75 each (the $5.625 purchase price plus the
$.125 exercise price), the proceeds of which will not be placed in escrow, but
rather will be used (i) to repay indebtedness, (ii) to pay the balance of a
$100,000 license fee, or $90,000, due to Bright pursuant to a license agreement
executed by Bright and the Company, (iii) to cover all of the Company's expenses
incurred in this offering, including the Underwriters' discounts and the
Representatives' non-accountable expense allowance, and (iv) to fund the
Company's operating expenses, including investment banking fees and the costs of
business, legal and accounting due diligence on prospective Target Businesses.
Consequently, if the Class B Warrants were exercised, holders of Class B
Warrants would pay substantially less for the Units issuable upon exercise of
such Class B Warrants than holders of Units and, accordingly, may realize a
higher return on their investment. Holders of Class B Warrants, however, risk
the loss of their investment if the Company fails to effect a Business
Combination, while holders of shares of Common Stock comprising part of the
Units benefit from the Company's escrow of an amount equal to the gross proceeds
from the sale of the Units in this offering.
9
<PAGE> 11
RISK FACTORS
The securities offered in this Specialized Merger and Acquisition Allocated
Risk Transaction(SM)(SMA(2)RT(SM)) involve a high degree of risk and immediate
substantial dilution and should not be purchased by investors who cannot afford
the loss of their entire investment. Prior to this offering there has been no
public market for the Units, the Common Stock, the Class A Warrants or the Class
B Warrants and there can be no assurance that such a market will develop after
completion of this offering. Such risk factors include, among others, the
following: the Company's lack of operating history and limited resources;
discretionary use of proceeds; no escrow security for the purchasers of the
Warrants; intense competition in selecting a Target Business and effecting a
Business Combination; and, because of the Company's limited resources, the
possibility that the Company's due diligence investigation of a potential
Business Combination will be restricted, especially in the case of a Target
Business outside the United States. Investors will incur immediate substantial
dilution. See "Risk Factors," "Dilution" and "Use of Proceeds."
USE OF PROCEEDS
The Company intends to use substantially all of the net proceeds of the
offering, together with the interest earned thereon, to attempt to effect a
Business Combination, including selecting and evaluating potential Target
Businesses and structuring, negotiating and consummating a Business Combination
(including possible payment of finder's fees or other compensation to persons or
entities which provide assistance or services to the Company). Approximately 82%
of the gross proceeds of the offering by the Company (representing an amount
equal to the $8,000,000 gross proceeds from the sale of the Units as a
percentage of the gross proceeds of this offering) will be held in an escrow
account maintained by the Proceeds Escrow Agent, until the earlier of written
notification by the Company to the Proceeds Escrow Agent (i) of the Company's
completion of a transaction or series of transactions in which at least 50% of
the gross proceeds from this offering is committed to a specific line of
business as a result of a consummation of a Business Combination (including any
redemption payments), or (ii) to distribute the escrowed proceeds, in connection
with a liquidation of the Company, to the then holders of the Common Stock
purchased as part of the Units sold in this offering or acquired in the open
market thereafter. All proceeds held in the escrow account will be invested,
until released, in direct investments in short-term United States government
securities, including treasury bills, cash and cash equivalents.
Except as noted below, the proceeds to the Company from the sale of the
Class B Warrants will not be placed in escrow. Rather, these proceeds will be
used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license
fee, or $90,000, due to Bright pursuant to a license agreement executed by
Bright and the Company, (iii) to cover all of the expenses incurred by the
Company in this offering, including the Underwriters' discounts and the
Representatives' non-accountable expense allowance, and (iv) to fund the
Company's operating expenses, including investment banking fees and the costs of
business, legal and accounting due diligence on prospective Target Businesses,
until the Company effects a Business Combination. See "Proposed
Business -- Servicemark License." However, in addition, a portion of the net
proceeds from the sale of the Class B Warrants equal to the Underwriters'
discounts and the Representatives' non-accountable expense allowance with
respect to the Units will be placed in the above-mentioned escrow account for
the benefit of purchasers of Common Stock as part of the Units sold in this
offering and in the open market thereafter. In addition, proceeds from the sale
of the Class B Warrants will be used for the general administrative expenses of
the Company, including legal and accounting fees and administrative support
expenses in connection with the Company's reporting obligations under the
Exchange Act. The Company may seek to issue additional securities if it requires
additional funds to meet its operating and administrative expenses. The Company
has agreed with the Representatives that it will not issue (other than pursuant
to this offering) any securities or grant options or Warrants to purchase any
securities of the Company without the consent of the Representatives for a
period of 18 months from the date of this Prospectus and for up to six
additional months if the Extension Criteria have been satisfied.
The Company has retained Ladenburg to aid in identifying, structuring,
negotiating and consummating a Business Combination. Ladenburg will be paid an
engagement fee of $3,500 per month, during the period
10
<PAGE> 12
commencing with the date of this Prospectus and terminating 18 months after such
date (the "Engagement Period") or up to six additional months if the Extension
Criteria are satisfied, and was issued 10,000 shares of Common Stock at a price
of $.10 per share as additional compensation for its agreement to act as the
Company's investment banker. The agreement with Ladenburg may not be extended
beyond the 18 month period, unless the Extension Criteria are satisfied, in
which case the agreement will be extended up to six additional months. If
requested by the Company, and assuming no conflict of interest, Ladenburg will
also be retained by the Company to render an opinion regarding the satisfaction
by a Target Business of the Fair Market Value Test, in consideration of a fee of
$50,000. If Ladenburg identifies the Target Business with which the Company
effects a Business Combination and the transaction is consummated, it will
receive additional compensation from the Company, the amount and form of which
will be subject to negotiation by the Company and Ladenburg at the time of the
introduction of the Target Business to the Company. Ladenburg will not
participate in this offering as an underwriter, dealer or otherwise.
To the extent that the Company's securities are used as consideration to
effect a Business Combination, the balance of the net proceeds of this offering
not expended will be used to finance the operations (including the possible
repayment of debt) of the Target Business. No cash compensation will be paid to
any officer or director in their capacities as such until after the consummation
of the first Business Combination. Since the role of the Company's current
directors and executive officers after a consummation of a Business Combination
is uncertain, the Company has no ability to determine what remuneration, if any,
will be paid to such persons after such consummation of a Business Combination.
11
<PAGE> 13
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the more
detailed financial statements appearing elsewhere in this Prospectus. Such
information should be read in conjunction with such financial statements,
including the notes thereto.
<TABLE>
<CAPTION>
MARCH 11, 1996
----------------------
AS
ACTUAL ADJUSTED(1)
-------- ----------
<S> <C> <C>
Balance Sheet Data:
Total assets....................................................... $265,359 $8,576,119
Total liabilities.................................................. 240,522 --
Series A preferred stock........................................... 1 1
Common stock and additional paid-in-capital(1)..................... 38,499 8,593,335
Subscription receivable on Series A preferred stock................ (11,000) --
Accumulated deficit during development stage....................... (2,663) (17,217 )
Total stockholders' equity including amount subject to
redemption(2)................................................... 24,837 8,576,119
</TABLE>
- ---------------
(1) Gives effect to the sale of the Units at the initial public offering price
of $10.00 per Unit, the sale of the Class B Warrants at the initial public
offering price of $5.625 per Class B Warrant and initial application of the
estimated net proceeds (after the payment of all estimated offering
expenses, including the Underwriters' nonaccountable expense allowance) of
$8,554,900 therefrom. See "Use of Proceeds". Assumes no exercise of the
Underwriters' over-allotment option or the Representatives' Warrants. See
"Underwriting".
(2) In the event the Company consummates a Business Combination, the redemption
rights afforded to the non-affiliated public stockholders may result in the
conversion into cash of up to 20% of the aggregate number of shares held by
the non-affiliated public stockholders, amounting to 160,000 shares, at a
per share redemption price equal to (A) the greater of (i) the Company's net
worth or (ii) the amount of proceeds of the Company in the escrow account
(including income earned thereon) divided by (B) the number of shares held
by non-affiliated public stockholders.
12
<PAGE> 14
THE COMPANY
BUSINESS OBJECTIVE
The Company, which is a "blank check" or "blind pool" company, was formed
in October 1995 to serve as a vehicle to effect a Business Combination with a
Target Business which the Company believes has significant growth potential. The
Company intends to utilize the net proceeds of this offering, equity securities,
debt securities, bank and other borrowings or a combination thereof in effecting
a Business Combination. The Company will seek to acquire a Target Business
without limiting itself to a particular industry. Most likely, the Target
Business will be primarily located in the United States, although the Company
reserves the right to acquire a Target Business primarily located outside the
United States. In seeking a Target Business, the Company will consider, without
limitation, businesses which (i) offer or provide services or develop,
manufacture or distribute goods in the United States or abroad, including,
without limitation, in the following areas: health care and health products,
educational services, environmental services, consumer related products and
services (including amusement and/or recreational services), personal care
services, voice and data information processing and transmission and related
technology development or (ii) is engaged in wholesale or retail distribution.
The Company will not effect a Business Combination with a Target Business unless
the Fair Market Value of such business is at least 80% of the net assets of the
Company at the time of consummation of such Business Combination. If the Company
determines that the financial statements of a Proposed Target Business do not
clearly indicate that the Fair Market Value Test has been satisfied, the Company
will obtain an opinion from an investment banking firm that is a member in good
standing of the NASD with respect to the satisfaction of such criteria. The
Company has not had any contact or discussions with representatives of any
Target Business regarding a consummation of a Business Combination. While the
Company may, under certain circumstances, seek to effect Business Combinations
with more than one Target Business, in all likelihood, as a result of its
limited resources, the Company will have the ability to effect only a single
Business Combination. The Company does not intend to register as a
broker-dealer, merge with or acquire a registered broker-dealer, or otherwise
become a member of the NASD.
BUSINESS EXPERIENCE OF PRINCIPALS
The executive officers and the other directors of the Company have business
experience which has provided them with skills which the Company believes will
be helpful in evaluating potential Target Businesses and negotiating and
consummating a Business Combination. Prior to their involvement with the
Company, none of the directors or the executive officers of the Company has been
involved in any "blind pool" or "blank check" offerings. See "Management."
RETENTION OF INDEPENDENT INVESTMENT BANKER
The Company has retained Ladenburg to aid in identifying, evaluating,
structuring, negotiating and consummating a Business Combination.
ESCROW OF OFFERING PROCEEDS
Upon completion of the offering by the Company, approximately 82% of the
gross proceeds therefrom (representing an amount equal to the $8,000,000 gross
proceeds from the sale of the Units as a percentage of the gross proceeds of
this offering) will be placed in an escrow account maintained by the Proceeds
Escrow Agent, subject to release upon the earlier of (1) receipt by the Proceeds
Escrow Agent of: (i) written notification by the Company of the Company's
completion of a transaction or series of transactions in which at least 50% of
the gross proceeds from this offering are committed to a specific line of
business as a result of a Business Combination (including any redemption
payments), (ii) a written opinion of counsel of the Company, reasonably
acceptable to the Proceeds Escrow Agent, that a Business Combination was
approved by a vote of two-thirds of the shares of Common Stock of the Company,
as required by this Prospectus, that the holders of more than 20% of the Common
Stock of the Company have not elected to redeem their Common Stock, as required
by this Prospectus, and (iii) a written certification from the Company that the
fair market value of the Target as determined by the Company, based upon
standards generally accepted by
13
<PAGE> 15
the financial community (including revenues, earnings, cash flow, and book
value), exceeds 80% of the net value of the assets of the Company, or (2) either
(i) receipt by the Proceeds Escrow Agent of written notification to distribute
the escrow proceeds in connection with a liquidation of the Company to the
holders of Common Stock purchased as part of the Units sold in this offering or
in the open market thereafter, or (ii) receipt by the Proceeds Escrow Agent of
written notification to distribute part of the escrow proceeds to the holders of
record of Common Stock purchased as part of the Units sold in this offering or
in the open market thereafter who elected to have their shares redeemed in
accordance with the terms set forth in this Prospectus. All proceeds held in the
escrow account will be invested, until released, in short-term United States
government securities, including treasury bills, cash and cash equivalents.
Except as noted below, the proceeds to the Company from the sale of the Class B
Warrants will not be placed in escrow. Rather, these proceeds will be used (i)
to repay indebtedness, (ii) to pay the balance of a $100,000 license fee, or
$90,000, due to Bright pursuant to a license agreement executed by Bright and
the Company, (iii) to cover all of the expenses incurred by the Company in this
offering, including the Underwriters' discounts and the Representatives'
non-accountable expense allowance, and (iv) to fund the Company's operating
expenses, including investment banking fees and the costs of business, legal and
accounting due diligence on prospective Target Businesses until the Company
effects a Business Combination. In addition, a portion of the net proceeds from
the sale of the Class B Warrants equal to the Underwriters' discounts and the
Representatives' non-accountable expense allowance with respect to the Units
will be placed in the above-mentioned escrow account for the benefit of
purchasers of Common Stock as part of the Units sold in this offering and in the
open market thereafter. As a result, if the escrowed funds are paid to the
holders of Units, the payment will equal the gross purchase price for the Unit
(plus any interest earned thereon), notwithstanding that the Company paid the
Underwriters' discounts and the Representatives' non-accountable expense
allowance out of such gross proceeds. To the extent that the proceeds from the
sales of the Class B Warrants are less than the expenses the Company incurs
seeking to effect a Business Combination, the Company would need additional
financing. There can be no assurance that the Company would be able to arrange
any such additional financing. Management is unaware of any circumstances under
which this policy, through management's own initiative, may be changed. See "Use
of Proceeds."
STOCKHOLDER APPROVAL OF BUSINESS COMBINATIONS
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the Business Combination is such as would not ordinarily
require stockholder approval under applicable state law. In connection with such
approval, the Company intends to provide stockholders with disclosure
documentation in accordance with the Proxy Rules, including audited financial
statements, concerning a Target Business. All of the Company's present
stockholders, including all directors, executive officers and their affiliates,
have agreed as a part of the escrow agreement to which their stock is subject to
vote their respective shares of Common Stock in accordance with the vote of the
majority of the shares voted by all non-affiliated public stockholders of the
Company with respect to any consummation of such Business Combination. See "The
Company -- Escrow of Outstanding Shares." A Business Combination will not be
consummated unless approved by a vote of two-thirds of the shares of Common
Stock (in person or by proxy). In addition, the Delaware General Corporation Law
requires approval of certain mergers and consolidations by a majority of the
outstanding stock entitled to vote thereon. Holders of Warrants who otherwise do
not own any shares of Common Stock will not be entitled to vote on any Business
Combination.
REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer to each of the non-affiliated
public stockholders of the Company the right, for a specified period of time of
not less than 20 days, to redeem his shares of Common Stock at a price equal to
the Liquidation Value of such shares as of the Record Date. The Redemption Offer
will be described in the disclosure documentation relating to the proposed
Business Combination. The Liquidation Value for each share of Common Stock will
be determined as of the Record Date by dividing (A) the greater of (i) the
Company's net worth as reflected in the Company's financial statements and
audited by the Company's
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independent accountants or (ii) the amount of the proceeds of the Company in the
escrow account (including all interest earned thereon) by (B) the number of
shares held by non-affiliated public stockholders. In connection with the
Redemption Offer, if non-affiliated public stockholders holding 20% or less of
the shares of Common Stock elect to redeem their shares, the Company may, but
will not be required to, proceed with such Business Combination and, if the
Company elects to so proceed, will redeem such shares at their Liquidation Value
as of the Record Date. In any case, if non-affiliated public stockholders
holding more than 20% of the Common Stock elect to redeem their shares, the
Company will not proceed with such potential Business Combination and will not
redeem such shares. All existing stockholders of the Company and holders of
Warrants will be allowed to participate in a Redemption Offer only if they
purchase shares of Common Stock in this offering or on the open market
thereafter, and only as to any shares of Common Stock so purchased.
ESCROW OF OUTSTANDING SHARES
All of the shares of Escrowed Stock outstanding immediately prior to the
date of this Prospectus have been placed in escrow with the Share Escrow Agent
until the earlier of (i) the occurrence of the first Business Combination, (ii)
18 months from the date of this Prospectus provided that such 18-month period
will be extended by six months to 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied. During the escrow period, the
holders of the Escrowed Stock will not be able to sell or otherwise transfer
their respective shares of the Escrowed Stock (with certain exceptions), but
will retain all other rights as stockholders of the Company, including, without
limitation, the right to vote escrowed shares of Common Stock, subject to their
agreement to vote their shares in accordance with a vote of a majority of the
non-affiliated public stockholders with respect to a consummation of a Business
Combination or liquidation proposal, but excluding the right to request the
redemption of Escrowed Stock pursuant to a Redemption Offer.
Each executive officer and director has also agreed to surrender his shares
to the Company at the purchase price at which such shares were acquired ($.10
per share) if he resigns prior to the occurrence of the first Business
Combination.
RESTRICTION ON SALE OF OUTSTANDING SHARES
All of the Founders' Shares are subject to an agreement with the holders of
the Founders' Shares not to sell or otherwise transfer such shares for a period
of 24 months from the date the currently outstanding Founders' Shares were
originally issued (October 23, 1995), but in no event earlier than 120 days
following the consummation of the first Business Combination. However, subject
to compliance with applicable securities laws, any such holder may transfer
Founders' Shares to a family member or to a trust established for the benefit of
himself, herself, or a family member or to another affiliated entity (with the
consent of the Representative which will not be unreasonably withheld) or in the
event of the holder's death, by will or operation of law, or its dissolution or
merger, provided that any such transferee or successor must agree as a condition
to such transfer and succession to be bound by the restrictions on transfer
applicable to the original holder and that the transferor or its principals, if
the transferor is an entity (except in the case of death) will continue to be
deemed the beneficial owner (as defined in Regulation 13d-3 promulgated under
the Exchange Act) of such transferred shares. The certificates representing the
Founders' Shares bear a restrictive legend with respect to such restrictions and
the Company's transfer agent will note such restrictions on the Company's
transfer books and records.
In addition, the holders of the Placement Shares have agreed not to
directly or indirectly sell, offer to sell, grant an option for the sale of,
transfer, assign, pledge, hypothecate or otherwise encumber any of the Placement
Shares without the prior written consent of the Company until the earlier of 24
months from the date such shares were issued (January 31, 1996) or 60 days
following the consummation of the first Business Combination.
The Company has outstanding 110 shares of Series A Preferred Stock which
are held by CDIJ, an affiliate of Bright. The shares are convertible to Common
Stock on the basis of one thousand shares of
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Common Stock for each share of Series A Preferred Stock during the one year
period commencing upon the consummation of a Business Combination. The 110,000
shares of Common Stock issuable upon conversion of the Company's outstanding
Series A Preferred Stock will be offered by a prospectus at the time of a
Business Combination and therefore will be freely tradable under applicable
securities laws. However, CDIJ, for itself and any transferees of the Series A
Preferred Stock, has agreed not to sell or otherwise transfer such shares until
60 days following the consummation of the first Business Combination and to
limit the volume of such sales to the amount that is permitted by Rule 144
("Rule 144") promulgated under the Securities Act of 1933, as amended. Subject
to other conditions, Rule 144 permits sales, within any three-month period, of a
number of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class or, if the shares are quoted on an exchange
or on NASDAQ, the average weekly trading volume during the four calendar weeks
preceding the sale. See "Risk Factors -- Shares Eligible for Future Sale."
POSSIBLE LIQUIDATION AFTER EIGHTEEN MONTHS IF NO BUSINESS COMBINATION
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit for
stockholder consideration a proposal to liquidate the Company and distribute to
the then holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, the amounts in the escrow account.
Thereafter, all remaining assets available for distribution will be distributed
to the non-affiliated public stockholders of the Company after payment of
liabilities and after redemption of the Company's outstanding Series A Preferred
Stock at its liquidation value, $11,000. Since the proceeds to the Company from
the sale of the Class B Warrants will be used (i) to repay indebtedness, (ii) to
pay the balance of a $100,000 license fee, or $90,000, due to Bright pursuant to
a license agreement executed by Bright and the Company, (iii) to cover all the
expenses incurred by the Company in this offering, including the Underwriters'
discounts and the Representatives' non-accountable expense allowance, and (iv)
to fund the Company's operating expenses, including investment banking fees and
the costs of business, legal and accounting due diligence on prospective Target
Businesses, until the Company effects a Business Combination, the amount per
share remaining for distribution, in the event of a liquidation of the Company,
to the holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, and exclusive of any income earned on
the proceeds held in the escrow account (which will be distributed to the
holders of Common Stock along with the funds in the escrow account), will be
approximately equal to the initial public offering price per Unit in this
offering of $10.00 per Unit (assuming no value is attributed to the Warrants
included in the Units offered hereby). All of the present stockholders,
including the Company's directors and executive officers and their affiliates,
are required by the escrow agreement to which their stock is subject, to vote
their shares of Common Stock in accordance with the vote of the majority of all
non-affiliated public stockholders of the Company with respect to any
liquidation proposal. Holders of Warrants, however, will only be entitled to
vote on any liquidation proposal, and allowed to participate in any liquidation
distribution, if they purchase shares of Common Stock in this offering or on the
open market thereafter, but only as to any shares of Common Stock so purchased.
All of the present stockholders, including the Company's directors, executive
officers and their affiliates, have agreed to waive their rights to participate
in any liquidation distribution with respect to the 90,000 shares of Common
Stock owned by them as of the date hereof. See "The Company -- Escrow of
Outstanding Shares."
To date, the Company's efforts have been limited to organizational
activities and this offering. The implementation of the Company's business
objectives is wholly contingent upon the successful sale of the Units and Class
B Warrants offered hereby. See "Proposed Business."
Essentially, a Specialized Merger and Acquisition Allocated Risk
Transaction(SM) (SMA(2)RT(SM)) provides an investor in this offering with an
opportunity to purchase Units for $10.00 each, the proceeds of which will be
placed into escrow for the benefit of stockholders, and shall be returned if the
Company does not effect a Business Combination; and/or Class B Warrants (which
are exercisable into Units) for $5.75 each (the $5.625 purchase price plus the
$.125 exercise price), the proceeds of which will not be placed in escrow, but
rather will be used to repay indebtedness, to pay a license fee to Bright, and
to cover all of the Company's expenses incurred in this offering. See "Use of
Proceeds." Consequently, if the Class B Warrants were
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exercised holders of Class B Warrants would pay substantially less for the Units
issuable upon exercise of such Class B Warrants than holders of Units and,
accordingly, may realize a higher return on their investment. Holders of Class B
Warrants, however, risk the loss of their investment if the Company fails to
effect a Business Combination, while holders of shares of Common Stock
comprising part of the Units benefit from the Company's escrow of an amount
equal to the gross proceeds from the sale of the Units in this offering.
The Company was organized under the laws of the State of Delaware on
October 19, 1995. The Company's office is located at 1430 Broadway, 13th Floor,
New York, New York 10018 and its telephone number is (212) 391-1392.
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RISK FACTORS
The securities offered hereby involve a high degree of risk, including, but
not limited to, the several factors described below. These securities should be
purchased only by persons who can afford a loss of their entire investment.
Investors should consider carefully the following risk factors inherent in and
affecting the business of the Company and this offering in evaluating an
investment in the securities offered hereby.
OFFERING NOT CONDUCTED IN ACCORDANCE WITH RULE 419
The Company's offering of Units and Class B Warrants is not being conducted
in accordance with Rule 419 promulgated by the Commission under the Securities
Act of 1933, as amended (the "Act"), which was adopted to strengthen the
regulation of securities offerings by "blank check" companies, which Congress
has found to have been common vehicles for fraud and manipulation in the penny
stock market. The Company is a "blank check" company not subject to Rule 419
under the Act because the Company's net tangible assets after its receipt of the
proceeds of this offering will exceed $5,000,000. Accordingly, investors in the
offering will not receive the substantive protections provided by Rule 419 under
the Act. Rule 419 under the Act requires that the securities to be issued and
the funds received in a blank check offering be deposited and held in an escrow
account until a Business Combination meeting specified criteria is completed.
Before a Business Combination can be completed and before the funds and
securities can be released, the blank check company is required to update the
registration statement with a post-effective amendment; and after the effective
date thereof the Company is required to furnish investors with the prospectus
produced thereby containing information, including audited financial statements,
regarding the proposed Target Business and its business. According to the rule,
the investors must have no fewer than 20 and no more than 45 days from the
effective date of the post-effective amendment to decide to remain an investor
or require the return of their investment funds. Any investor not making any
decision within said 45-day period is to automatically receive a return of his
investment funds. Unless a sufficient number of investors elect to remain
investors, all of the deposited funds in the escrow account must be returned to
all investors and none of the securities will be issued. Rule 419 under the Act
further provides that if the blank check company does not complete a Business
Combination meeting specified criteria within 18 months after the date of this
Prospectus, all of the deposited funds in the escrow account must be returned to
investors.
NO OPERATING HISTORY; LIMITED RESOURCES; NO PRESENT SOURCE OF REVENUES
The Company, incorporated on October 19, 1995, is a development stage
company and has not, as of the date hereof, attempted to seek a Business
Combination. Although certain of the Company's directors and its executive
officers have had extensive experience relating to the identification,
evaluation and acquisition of Target Businesses, the Company has no operating
history and, accordingly, there is only a limited basis upon which to evaluate
the Company's prospects for achieving its intended business objectives. None of
the Company's officers, directors, promoters or other persons engaged in
management-type activities, other than Bright, has been previously involved with
any blank check offerings. To date, the Company's efforts have been limited to
organizational activities and this offering. The Company has limited resources
and has had no revenues to date. In addition, the Company will not achieve any
revenues (other than investment income) until, at the earliest, the consummation
of a Business Combination. Moreover, there can be no assurance that any Target
Business, at the time of the Company's consummation of a Business Combination,
or at any time thereafter, will derive any material revenues from its operations
or operate on a profitable basis. See "Proposed Business" and
"Management -- Prior Blank Check Offerings."
"BLIND POOL" OFFERING
Prospective investors who invest in the Company will do so without an
opportunity to evaluate the specific merits or risks of any one or more Business
Combinations. As a result, investors will be entirely dependent on the judgment
of management in connection with the selection of a Target Business. There can
be no assurance that determinations ultimately made by the Company will permit
the Company to achieve its business objectives. See "Use of Proceeds" and
"Proposed Business."
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ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO PROSPECTIVE BUSINESS COMBINATIONS;
INVESTMENT IN THE COMPANY VERSUS INVESTMENT IN A TARGET BUSINESS
"Blind pool" and "blank check" offerings are inherently characterized by
the absence of substantive disclosure, other than general descriptions, relating
to the intended application of the net proceeds of the offering. The Company has
not yet identified a prospective Target Business. Accordingly, investors will
have no substantive information concerning consummation of any specific Business
Combination in considering a purchase of Units and/or Class B Warrants in this
offering. The absence of disclosure can be contrasted with the disclosure which
would be necessary if the Company had already identified a Target Business as a
Business Combination candidate or if the Target Business were to effect an
offering of its securities directly to the public. There can be no assurance
that an investment in the securities offered hereby will not ultimately prove to
be less favorable to investors in this offering than a direct investment, if
such opportunity were available, in a Target Business. See "Proposed Business."
SEEKING TO ACHIEVE PUBLIC TRADING MARKET THROUGH BUSINESS COMBINATION
While a prospective Target Business may deem a consummation of a Business
Combination with the Company desirable for various reasons, a Business
Combination may involve the acquisition of, merger or consolidation with, a
company which does not need substantial additional capital, but which desires to
establish a public trading market for its shares, while avoiding what it may
deem to be adverse consequences of undertaking a public offering itself,
including time delays, significant expense, loss of voting control, the time and
expense incurred to comply and compliance with various Federal and state
securities laws that regulate initial public offerings. Nonetheless, there can
be no assurance that there will be an active trading market for the Company's
securities following the completion of a Business Combination or, if a market
does develop, as to the market price for the Company's securities. See "Proposed
Business -- "Blind Pool" Offering -- Background."
LACK OF EXPERIENCE OF NORTHEAST
Northeast was organized in December 1989 and was first registered as a
broker-dealer and became a member firm of the NASD in April 1990. Northeast is
principally engaged in retail brokerage and market making activities and various
corporate finance projects. Although Northeast has acted as a placement agent in
private offerings, has participated as a member of the underwriting syndicate or
as a selected dealer in 13 public offerings and has acted as co-managing
underwriter in one public offering, as it is doing here, it has not acted as the
lead underwriter in any public offerings of securities. No assurance can be
given that Northeast's lack of experience as a lead underwriter of public
offerings will not adversely affect this offering and the subsequent development
of a liquid public trading market in the Common Stock. See "Risk Factors -- OTC
Bulletin Board; No Assurance of Public Market; Arbitrary Determination of
Offering Price; Lack of Public Market for Securities."
UNCERTAIN STRUCTURE OF BUSINESS COMBINATION
The structure of a future transaction with a Target Business cannot be
determined at the present time and may take, for example, the form of a merger,
an exchange of stock or an asset acquisition. The Company may form one or more
subsidiary entities to effect a Business Combination and may, under certain
circumstances, distribute the securities of subsidiaries to the stockholders of
the Company. There cannot be any assurance that a market would develop for the
securities of any subsidiary distributed to stockholders or, if it did, any
assurance as to the prices at which such securities might trade. The structure
of a Business Combination or the distribution of securities to stockholders may
result in taxation of the Company, the Target Business or stockholders. See
"Proposed Business" and "Management."
UNSPECIFIED INDUSTRY AND TARGET BUSINESS; UNASCERTAINABLE RISKS
While the Company will target industries located in the United States,
while reserving the right to acquire a Target Business located elsewhere, the
Company has not selected any particular Target Business or
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industry in which to concentrate its Business Combination efforts. None of the
Company's directors or its executive officer has had any contact or discussions
with any entity or representatives of any entity regarding a consummation of a
Business Combination. Accordingly, there is no basis for prospective investors
to evaluate the possible merits or risks of the Target Business or the
particular industry in which the Company may ultimately operate. In connection
with soliciting stockholder approval of consummation of a Business Combination,
the Company intends to provide stockholders with disclosure documentation in
accordance with the Proxy Rules, including audited financial statements,
concerning a Target Business. Accordingly, any Target Business that is selected
would need to have audited financial statements or be audited in connection with
the transaction. To the extent that the Company effects a Business Combination
with a financially unstable company or an entity in its early stage of
development or growth (including entities without established records of
revenues or income), the Company will become subject to numerous risks inherent
in the business and operations of financially unstable and early stage or
potential emerging growth companies. In addition, to the extent that the Company
effects a Business Combination with an entity in an industry characterized by a
high level of risk, the Company will become subject to the currently
unascertainable risks of that industry. An extremely high level of risk
frequently characterizes certain industries which experience rapid growth.
Although management will endeavor to evaluate the risks inherent in a particular
Target Business or industry, there can be no assurance that the Company will
properly ascertain or assess all such risks. See "Proposed Business."
In addition, to date, none of the Company's officers, directors, promoters,
affiliates or associates have had any preliminary contact or discussions with,
and there are no present plans, proposals, arrangements or understandings with
any representatives or owners of any business or company regarding the
possibility of consummating a Business Combination with such a business or
company.
PROBABLE LACK OF BUSINESS DIVERSIFICATION
As a result of the limited resources of the Company, the Company, in all
likelihood, will have the ability to effect only a single Business Combination.
Accordingly, the prospects for the Company's success will be entirely dependent
upon the future performance of a single business. Unlike certain entities which
have the resources to consummate several Business Combinations or entities
operating in multiple industries or multiple segments of a single industry, it
is highly likely that the Company will not have the resources to diversify its
operations or benefit from the possible spreading of risks or offsetting of
losses. The Company's probable lack of diversification may subject the Company
to numerous economic, competitive and regulatory developments, any or all of
which may have a material adverse impact upon the particular industry in which
the Company may operate subsequent to a consummation of a Business Combination.
The prospects for the Company's success may become dependent upon the
development or market acceptance of a single or limited number of products,
processes or services. Accordingly, notwithstanding the possibility of capital
investment in and management assistance to the Target Business by the Company,
there can be no assurance that the Target Business will prove to be commercially
viable. The Company has no present intention of either loaning any of the
proceeds of this offering to any Target Business or of purchasing or acquiring a
minority interest in any Target Business. Management is unaware of any
circumstances under which this policy, through management's own initiative, may
be changed. See "Use of Proceeds" and "Proposed Business."
PROCEEDS FROM SALE OF WARRANTS NOT PLACED IN ESCROW; WARRANTS NOT CURRENTLY
EXERCISABLE; WARRANTS EXERCISABLE SUBJECT TO THE COMPANY'S COMPLIANCE WITH
SECURITIES LAWS
Except as noted below, the proceeds to the Company from the sale of the
Class B Warrants will not be placed in escrow. Rather, these proceeds will be
used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license
fee, or $90,000, to Bright pursuant to a license agreement executed by Bright
and the Company, (iii) to cover all of the expenses incurred by the Company in
this offering, including the Underwriters' discounts and the Representatives'
non-accountable expense allowance, and (iv) to fund the Company's operating
expenses, including investment banking fees and fees of the Proceeds Escrow
Agent and the costs of business, legal and accounting due diligence on
prospective Target Businesses, until the Company effects a Business Combination.
In addition, a portion of the net proceeds from the sale of the Class B
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Warrants equal to the Underwriters' discounts and the Representatives'
non-accountable expense allowance with respect to the Units will be placed in
the escrow account with the Proceeds Escrow Agent for the benefit of purchasers
of Units in this offering and in the open market thereafter. Furthermore, the
Warrants are not exercisable until the Company effects a Business Combination,
of which there can be no assurance, provided the Company is then in compliance
with all filings required under the Federal and state securities laws, and
holders of Warrants who do not own shares of Common Stock will not be allowed to
participate in any liquidation distribution of the proceeds from the escrow
account. Consequently, in the event the Company does not effect a Business
Combination within 18 months from the date of this Prospectus, or 24 months from
the date of this Prospectus if the Extension Criteria have been satisfied, and
the stockholders of the Company elect to liquidate the Company, the holders of
Warrants will not receive any distributions and will lose their entire
investment in such Warrants. As such, an investment in the Warrants therefore
should be viewed as a highly speculative investment and should only be made by
an individual who can afford to lose his entire investment. Holders of Class B
Warrants would pay substantially less for the Units issuable upon exercise of
such Class B Warrants than holders of Units and, accordingly, may realize a
higher return on their investment than holders of Units. By way of illustration,
purchasers of Class B Warrants in this offering will pay $5.75 per Unit (the sum
of the $5.625 purchase price and the $.125 exercise price), while purchasers of
Units in this offering will pay $10.00 per Unit. The proceeds to the Company
from the sale of the Class B Warrants will not be placed in escrow for the
benefit of the holders of the Class B Warrants and will be used to repay
indebtedness and to cover all of the Company's expenses incurred in this
offering, including the Underwriters' discounts and the Representatives'
non-accountable expense allowance with respect to both the Units and the Class B
Warrants, to pay the Proceeds Escrow Agent and to pay the Company's costs of
evaluating potential Business Combinations and for administrative and operating
expenses, including investment banking fees. Holders of Class B Warrants risk
the loss of all of their investment if the Company fails to effect a Business
Combination, while holders of shares of Common Stock comprising part of the
Units are substantially protected from such loss by the Company's escrow of an
amount equal to the gross proceeds from the sale of the Units in this offering.
REPRESENTATIVES' ABILITY TO MAINTAIN REQUIRED MINIMUM NET CAPITAL
As registered broker-dealers, both of the Representatives are required
under the Exchange Act and the rules promulgated thereunder to maintain minimum
net capital in order to conduct their broker-dealer operations. Currently, each
of the Representatives has sufficient excess net capital to support its
broker-dealer operations, including its underwriting obligations to the Company.
In the event, however, that at any time any of the Representatives should be
unable to maintain their minimum net capital requirements, they will be required
to cease operations as a broker-dealer. Any such cessation of operations by any
of the Representatives could have a material adverse effect on the market price
and liquidity of the securities being offered hereby.
DEPENDENCE UPON EXECUTIVE OFFICERS AND BOARD OF DIRECTORS; NO PRIOR BLIND POOL
EXPERIENCE
The ability of the Company to successfully effect a Business Combination
will be largely dependent upon the efforts of its executive officers and the
Board of Directors. Notwithstanding the significance of such persons, the
Company has not entered into employment agreements or other understandings with
any such personnel concerning compensation or obtained any "key man" life
insurance on their respective lives. The loss of the services of such key
personnel could have a material adverse effect on the Company's ability to
successfully achieve its business objectives. None of the Company's key
personnel are required to commit a substantial amount of their time to the
affairs of the Company and, accordingly, such personnel may have conflicts of
interests in allocating management time among various business activities.
However, the executive officers and the other directors of the Company will
devote such time as they deem reasonably necessary to carry out the business and
affairs of the Company, including the evaluation of potential Target Businesses
and the negotiation and consummation of a Business Combination, and, as a
result, the amount of time devoted to the business and affairs of the Company
may vary significantly depending upon, among other things, whether the Company
has identified a Target Business or is engaged in active negotiation of a
Business Combination. Although the officers and directors of the Company have
substantial experience in buying and selling businesses, they have no prior
experience in "blind pool" or "blank check" offerings. The Company will rely
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upon the expertise of such persons, and the Board does not anticipate that it
will hire additional personnel. However, if additional personnel are required,
there can be no assurance that the Company will be able to retain such necessary
additional personnel. See "Proposed Business" and "Management."
CONFLICTS OF INTEREST
None of the Company's directors or executive officers are required to
commit their full time to the affairs of the Company and it is likely that such
persons will not devote a substantial amount of time to the affairs of the
Company. Such personnel will have conflicts of interest in allocating management
time among various business activities. As a result, the consummation of a
Business Combination may require a greater period of time than if the Company's
management devoted their full time to the Company's affairs. In addition, the
agreement with Ladenburg may not be extended beyond 18 months from the date of
this Prospectus unless the Extension Criteria are satisfied, in which case the
18-month period will be extended by up to six additional months. However, the
executive officers and other directors of the Company will devote such time as
they deem reasonably necessary to carry out the business and affairs of the
Company, including the evaluation of potential Target Businesses and the
negotiation and consummation of a Business Combination and, as a result, the
amount of time devoted to the business and affairs of the Company may vary
significantly depending upon, among other things, whether the Company has
identified a Target Business or is engaged in active negotiation and
consummation of a Business Combination. Prior to their involvement with the
Company, none of the directors or the executive officers of the Company has been
involved in any "blind pool" or "blank check" offerings. To avoid certain
conflicts of interest, the executive officers and directors of the Company, and
owners of five percent or more of the Company's Common Stock (before giving
effect to this offering ), have agreed that they will not, until the
consummation of the first Business Combination, introduce a suitable proposed
merger, acquisition or consolidation candidate to another blank check company.
For such purposes, suitable shall mean any business opportunity which, under
Delaware law, may reasonably be required to be presented to the Company. Certain
of the persons associated with the Company are and may in the future become
affiliated with entities engaged in business activities similar to those
intended to be conducted by the Company. Such persons may have conflicts of
interest in determining to which entity a particular business opportunity should
be presented. In general, officers and directors of a corporation incorporated
under the laws of the State of Delaware are required to present certain business
opportunities to such corporation. Accordingly, as a result of multiple business
affiliations, certain of the Company's directors and executive officers may have
similar legal obligations to present certain business opportunities to multiple
entities. In particular, Messrs. Kramer and Remley are between them Chairman of
the Board or the senior executive officer of each of Texfi Industries, a New
York Stock Exchange listed textile and apparel manufacturer; Weldotron
Corporation, an American Stock Exchange listed manufacturer of packaging
machinery and safety controls; CPT Holdings, a publicly-traded (OTC) steel
fabrication company; Sunderland Industrial Holdings Corporation, a private
holding company with various industrial manufacturing businesses engaged in
custom plastic injection molding; and Precise Technology, Inc., a plastic custom
injection molder. Mr. Kramer is also Chairman and principal owner of Republic
Properties Corporation, a major real estate developer. While neither Mr. Kramer
nor Mr. Remley are subject to any non-competition agreements or to any specific
contractual provisions requiring them to provide any of these named companies
(or any other businesses with which they may be affiliated) with rights of first
refusal as to any particular business opportunity, general corporate law
principles and fiduciary responsibilities make it highly likely that Target
Businesses in the same industries as the foregoing companies will be presented
first to such named businesses for their consideration as acquisition
opportunities. There can be no assurance that any of the foregoing conflicts
will be resolved in favor of the Company. See "Management."
LIMITED ABILITY TO EVALUATE TARGET BUSINESS MANAGEMENT; POSSIBILITY THAT
MANAGEMENT WILL CHANGE
The role of the present management in the operations of a Target Business
of the Company following a Business Combination cannot be stated with certainty.
Although the Company intends to scrutinize closely the management of a
prospective Target Business in connection with its evaluation of the
desirability of effecting a Business Combination with such Target Business, and
has retained Ladenburg to assist the Company in this regard, there can be no
assurance that the Company's assessment of such management will
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prove to be correct, especially in light of the possible inexperience of current
key personnel of the Company in evaluating certain types of businesses. While it
is possible that certain of the Company's directors or executive officers will
remain associated in some capacities with the Company following a consummation
of a Business Combination, it is unlikely that any of them will devote a
substantial portion of their time to the affairs of the Company subsequent
thereto. Moreover, there can be no assurance that such personnel will have
significant experience or knowledge relating to the operations of the Target
Business acquired by the Company. The Company may also seek to recruit
additional personnel to supplement the incumbent management of the Target
Business. There can be no assurance that the Company will successfully recruit
additional personnel or that the additional personnel will have the requisite
skills, knowledge or experience necessary or desirable to enhance the incumbent
management. In addition, there can be no assurance that the future management of
the Company will have the necessary skills, qualifications or abilities to
manage a public company embarking on a program of business development. See
"Proposed Business" and "Management."
POSSIBLE BUSINESS COMBINATION WITH A TARGET BUSINESS OUTSIDE THE UNITED STATES
The Company may effectuate a Business Combination with a Target Business
located outside the United States. In such event, the Company may face the
additional risks of language barriers, different presentations of financial
information, different business practices, and other cultural differences and
barriers. Furthermore, due to the Company's limited resources, it may be
difficult to assess fully these additional risks. Therefore, a Business
Combination with a Target Business outside the United States may increase the
risk that the Company will not achieve its business objectives.
COMPETITION
The Company expects to encounter intense competition from other entities
having business objectives similar to those of the Company. Many of these
entities, including venture capital partnerships and corporations, other blind
pool companies, large industrial and financial institutions, small business
investment companies and wealthy individuals, are well-established and have
extensive experience in connection with identifying and effecting Business
Combinations directly or through affiliates. Many of these competitors possess
greater financial, technical, human and other resources than the Company and
there can be no assurance that the Company will have the ability to compete
successfully. The Company's financial resources will be limited in comparison to
those of many of its competitors. Further, such competitors will generally not
be required to seek the prior approval of their own stockholders, which may
enable them to close a Business Combination more quickly than the Company. This
inherent competitive limitation may compel the Company to select certain less
attractive Business Combination prospects. There can be no assurance that such
prospects will permit the Company to achieve its stated business objectives. See
"Proposed Business."
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly larger number of
competitors, including competitors with greater financial, marketing, technical,
human and other resources than the initial competitors in the industry. The
degree of competition characterizing the industry of any prospective Target
Business cannot presently be ascertained. There can be no assurance that,
subsequent to a consummation of a Business Combination, the Company will have
the resources to compete in the industry of the Target Business effectively,
especially to the extent that the Target Business is in a high-growth industry.
See "Proposed Business."
ADDITIONAL FINANCING REQUIREMENTS
The Company has had no revenues to date and will be entirely dependent upon
the proceeds of this offering to implement its business objectives. The Company
will not achieve any revenues (other than investment income) until, at the
earliest, the consummation of a Business Combination. Although the Company
anticipates that the net proceeds of this offering will be sufficient to effect
a Business Combination,
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inasmuch as the Company has not yet identified any prospective Target Business
candidates, the Company cannot ascertain with any degree of certainty the
capital requirements for any particular Business Combination. In the event that
the net proceeds of this offering prove to be insufficient for purposes of
effecting a Business Combination (because of the size of the Business
Combination or other reasons), the Company will be required to seek additional
financing. There can be no assurance that such financing will be available on
acceptable terms, or at all. To the extent that additional financing proves to
be unavailable when needed to consummate a particular Business Combination, the
Company would, in all likelihood, be compelled to restructure the transaction or
abandon that particular Business Combination and seek an alternative Target
Business candidate, if possible. In addition, in the event of the consummation
of a Business Combination, the Company may require additional financing to fund
the operations or growth of the Target Business. The failure by the Company to
secure additional financing could have a material adverse effect on the
continued development or growth of the Target Business. The Company does not
have any arrangements with any bank or financial institution to secure
additional financing and there can be no assurance that any such arrangement, if
required or otherwise sought, would be available on terms deemed to be
commercially acceptable and in the best interests of the Company. See "Proposed
Business."
POSSIBLE USE OF DEBT FINANCING; DEBT OF A TARGET BUSINESS
There currently are no limitations on the Company's ability to borrow funds
to increase the amount of capital available to the Company to effect a Business
Combination. However, the Company's limited resources and lack of operating
history will make it difficult to borrow funds. The amount and nature of any
borrowings by the Company will depend on numerous considerations, including the
Company's capital requirements, the Company's perceived ability to meet debt
service on any such borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. There can be no
assurance that debt financing, if required or sought, would be available on
terms deemed to be commercially acceptable by and in the best interests of the
Company. The inability of the Company to borrow funds required to effect or
facilitate a Business Combination, or to provide funds for an additional
infusion of capital into a Target Business, may have a material adverse effect
on the Company's financial condition and future prospects. Additionally, to the
extent that debt financing ultimately proves to be available, any borrowings may
subject the Company to various risks traditionally associated with indebtedness,
including the risks of interest rate fluctuations and insufficiency of cash flow
to pay principal and interest. Furthermore, a Target Business may have already
incurred borrowings and, therefore, already be subject to all the risks inherent
thereto. See "Use of Proceeds" and "Proposed Business."
REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer to each of the non-affiliated
public stockholders of the Company the right, for a specified period of time of
not less than 20 calendar days, to redeem his shares of Common Stock at a price
equal to the Liquidation Value of such shares as of the Record Date. The
Redemption Offer will be described in the disclosure documentation relating to
the proposed Business Combination. In connection with the Redemption Offer,
should non-affiliated public stockholders holding 20% or less of the Common
Stock elect to redeem their shares, the Company may, but will not be required
to, proceed with the proposed Business Combination and, if the Company elects to
so proceed, will redeem such shares at their Liquidation Value as of the Record
Date. In any case, if non-affiliated public stockholders holding more than 20%
of such Common Stock elect to redeem their shares, the Company will not proceed
with the proposed Business Combination and will not redeem any shares of Common
Stock. As a result of the foregoing, the Company's ability to consummate a
particular Business Combination may be impaired. Moreover, holders of Common
Stock prior to the date of this Prospectus and holders of Warrants will only be
allowed to participate in a Redemption Offer if they purchase shares of Common
Stock in this offering or on the open market thereafter, but only as to any
shares of Common Stock so purchased.
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POSSIBLE LIQUIDATION OF THE COMPANY IF NO BUSINESS COMBINATION
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit for
stockholder consideration a proposal to liquidate the Company and distribute to
the then holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, the amounts in the interest bearing
escrow account. Thereafter, all remaining assets available for distribution will
be distributed to the non-affiliated public stockholders of the Company after
payment of liabilities and after redemption of the Company's outstanding Series
A Preferred Stock at its liquidation value, $11,000. Since the proceeds to the
Company from the sale of the Class B Warrants will be used (i) to repay
indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, due
to Bright pursuant to a license agreement executed by Bright and the Company,
(iii) to cover all the expenses incurred by the Company in this offering,
including the Underwriters' discounts and the Representatives' non-accountable
expense allowance, and (iv) to fund the Company's operating expenses, including
investment banking fees and the costs of business, legal and accounting due
diligence on prospective Target Businesses, until the consummation of a Business
Combination, the amount per share remaining for distribution, in the event of a
liquidation of the Company, to the holders of Common Stock acquired as part of
the Units sold in this offering or in the open market thereafter, and exclusive
of any income earned on the proceeds held in the escrow account, will be
approximately equal to the initial public offering price per Unit in this
offering ($10.00 per Unit assuming no value is attributed to the Warrants
included in the Units offered hereby).
There can be no assurance that the Company will effect a Business
Combination within 18 months from the date of this Prospectus or within 24
months from the date of this Prospectus if the Extension Criteria have been
satisfied. All of the present stockholders, including the Company's executive
officers and other directors and their affiliates, are required to vote their
shares of Common Stock in accordance with the vote of the majority of all
non-affiliated public stockholders of the Company with respect to any
liquidation proposal. Holders of Warrants, however, will only be entitled to
vote on any liquidation proposal, and allowed to participate in any liquidation
distribution, if they purchase shares of Common Stock in this offering or on the
open market thereafter, but only as to any shares of Common Stock so purchased.
Present stockholders, including officers, directors and their affiliates, will
not participate in any liquidation distribution with respect to the shares of
Common Stock owned by them as of the date hereof.
INVESTMENT COMPANY ACT CONSIDERATIONS
The regulatory scope of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. The Investment Company Act may, however, also
be deemed to be applicable to a company which does not intend to be
characterized as an investment company but which, nevertheless, engages in
activities which may be deemed to be within the definitional scope of certain
provisions of the Investment Company Act. The Company believes that its
anticipated principal activities, which will involve acquiring control of an
operating company, will not subject the Company to regulation under the
Investment Company Act. Nevertheless, there can be no assurance that the Company
will not be deemed to be an investment company, particularly during the period
prior to consummation of a Business Combination. If the Company is deemed to be
an investment company, the Company may become subject to certain restrictions
relating to the Company's activities, including restrictions on the nature of
its investments and the issuance of securities. In addition, the Investment
Company Act imposes certain requirements on companies deemed to be within its
regulatory scope, including registration as an investment company, adoption of a
specific form of corporate structure and compliance with certain burdensome
reporting, record keeping, voting, proxy, disclosure and other rules and
regulations. In the event of the characterization of the Company as an
investment company, the failure by the Company to satisfy such regulatory
requirements, whether on a timely basis or at all, would, under certain
circumstances, have a material adverse effect on the Company.
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STATE BLUE SKY REGISTRATION; RESTRICTED RESALES OF THE SECURITIES
The ability to register or qualify for sale the Units, the shares of Common
Stock and Class A Warrants comprising the Units and the Class B Warrants for
both initial sale and secondary trading will be limited because a significant
number of states have enacted regulations pursuant to their securities or
so-called "blue sky" laws restricting or, in many instances, prohibiting, the
sale of securities of "blind pool" issuers such as the Company within that
state. In addition, many states, while not specifically prohibiting or
restricting "blind pool" companies, would not register the securities to be
offered in this offering for sale in their states. Because of these regulations,
the Company has registered the securities being offered in this offering, or an
exemption from registration has been obtained (or is otherwise available), only
in the states of Colorado, Delaware, Florida, Hawaii, Illinois, Louisiana,
Maryland, New York, Rhode Island and South Carolina and in the District of
Columbia (the "Primary Distribution States") and initial sales may only be made
in such jurisdictions. More specifically, the Company has registered the
securities by filing in Louisiana, by coordination in Delaware, Illinois,
Maryland, Rhode Island and South Carolina and by notification in Colorado,
Florida and New York. Exemptions from registration have been obtained (or are
otherwise available) in Hawaii and the District of Columbia. In addition, such
securities will be immediately eligible for resale in the secondary market in
each of the Primary Distribution States and, pursuant to an exemption provided
to any nonissuer transaction except when directly or indirectly for the benefit
of an affiliate of the issuer, in the Commonwealth of Pennsylvania. Such
securities will be eligible for resale in the secondary market 90 days after the
date hereof in the states of Maine, Missouri, New Mexico, Oklahoma and Rhode
Island and 180 days after the date hereof in the state of Alabama, pursuant to
an exemption provided to a company which has securities registered pursuant to
Section 12 of the Exchange Act for the time period indicated. Because of
regulations enacted to prohibit the sale of securities of "blind pool" companies
as well as the unavailability of exemptions provided to companies whose
securities are listed on an exchange or are eligible for inclusion in recognized
securities manuals such as Standard & Poor's Corporation Records, it is not
anticipated that a secondary trading market for the Company's securities will
develop in any of the other 31 states until subsequent to consummation of a
Business Combination, if at all.
DIVIDENDS UNLIKELY
The Company does not expect to pay dividends prior to the consummation of a
Business Combination. The payment of dividends after consummating any such
Business Combination, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and general financial condition
subsequent to consummation of a Business Combination. The payment of any
dividends subsequent to a Business Combination will be within the discretion of
the Company's then Board of Directors. The Company presently intends to retain
all earnings, if any, for use in the Company's business operations and
accordingly, the Board does not anticipate declaring any dividends in the
foreseeable future. See "Description of Securities -- Dividends."
UNCERTAINTY OF SERVICEMARKS
The servicemarks SMA(2)RT(SM) and Specialized Merger and Acquisition
Allocated Risk Transaction(SM) are owned by Bright. Bright has granted the
Company a non-exclusive license to use, for the sole purpose of marketing this
offering, the SMA(2)RT(SM) and Specialized Merger and Acquisition Allocated Risk
Transaction(SM) servicemarks. There can be no assurance that a third party
owning or using a similar servicemark or trademark will not object to, or seek
to prohibit, the Company's use of the SMA(2)RT(SM) or Specialized Merger and
Acquisition Allocated Risk Transaction(SM) servicemarks. The Company does not
believe, however, that its business will be adversely affected if it is unable
to utilize either, or both, of these servicemarks. See "Proposed
Business -- Servicemark License," "Management -- Directors and Officers" and
"Certain Transactions."
AUTHORIZATION OF ADDITIONAL SECURITIES
The Company's Certificate of Incorporation authorizes the issuance of
10,000,000 shares of Common Stock. Upon completion of this offering (assuming no
exercise of the Underwriters' over-allotment option or any Warrants or other
options, or conversion of the outstanding Series A Preferred Stock), there will
be
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9,110,000 authorized but unissued shares of Common Stock available for issuance.
However, a total of 2,310,000 shares of Common Stock are reserved for issuance,
consisting of the following: 800,000 shares of Common Stock are reserved for
issuance upon the exercise of the Class A Warrants, 320,000 shares of Common
Stock are reserved for issuance upon exercise of the Units underlying the Class
B Warrants, 320,000 shares of Common Stock are reserved for issuance upon
exercise of the Class A Warrants comprising a part of the Units underlying the
Class B Warrants, 120,000 shares of Common Stock are included in the Units
subject to the Underwriters' over-allotment option, 120,000 shares of Common
Stock are reserved for issuance upon the exercise of the Class A Warrants
included in the Units subject to the Underwriters' over-allotment option, 48,000
shares of Common Stock are reserved for issuance upon exercise of the Units
underlying the Class B Warrants subject to the Underwriters' over-allotment
option, 48,000 shares of Common Stock are reserved for issuance upon exercise of
the Class A Warrants comprising a part of the Units underlying the Class B
Warrants subject to the Underwriters' over-allotment option, 200,000 shares of
Common Stock are reserved for issuance upon exercise of options to purchase
Units granted to an affiliate of certain executive officers of the Company,
110,000 shares of Common Stock are reserved for issuance upon conversion of the
Company's outstanding Series A Preferred Stock, 80,000 shares of Common Stock
are included in the Units reserved for issuance upon exercise of
Representatives' Unit Purchase Warrants, 80,000 shares of Common Stock are
reserved for issuance upon the exercise of the Class A Warrants included in the
Units reserved for issuance upon exercise of the Representatives' Unit Purchase
Warrants, 32,000 shares of Common Stock are included in the Units reserved for
issuance upon exercise of the Representatives' Class B Warrants, and 32,000
shares of Common Stock reserved for issuance upon exercise of Class A Warrants
comprising a part of the Units underlying the Representatives' Class B Warrants.
See "Management," "Underwriting" and "Certain Transactions." Although the
Company's Board of Directors has the power to issue any or all of such shares
without stockholder approval, the Company has agreed with the Representatives
that for a period of 18 months from the date of this Prospectus, and for up to
six additional months if the Extension Criteria have been satisfied, it will not
issue (other than pursuant to this offering) any shares of Common Stock or grant
Common Stock purchase options or warrants without the consent of the
Representatives, except in connection with effecting a Business Combination. See
"Underwriting." Although the Company has no commitments as of the date of this
Prospectus to issue any shares of Common Stock other than as described in this
Prospectus, the Company will, in all likelihood, issue a substantial number of
additional shares in connection with or following a Business Combination. To the
extent that additional shares of Common Stock are issued, the Company's
stockholders would experience dilution of their respective ownership interests
in the Company. Additionally, if the Company issues a substantial number of
shares of Common Stock in connection with or following a Business Combination, a
change in control of the Company may occur which may affect, among other things,
the Company's ability to utilize net operating loss carry forwards, if any.
Furthermore, the issuance of a substantial number of shares of Common Stock may
adversely affect prevailing market prices, if any, for the Common Stock and
could impair the Company's ability to raise additional capital through the sale
of its equity securities. See "Proposed Business" and "Description of
Securities."
The Company's Certificate of Incorporation also authorizes the issuance of
1,000,000 shares of preferred stock (the "Preferred Stock"), with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions and in such series as the Board of Directors, subject to the laws
of the State of Delaware, may determine from time to time. Accordingly, the
Board of Directors is empowered, without stockholder approval, 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
Common Stock and Warrants. The Company has agreed with the Representatives,
however, that for a period of 18 months from the date of this Prospectus, and
for up to six additional months if the Extension Criteria have been satisfied,
it will not issue any additional shares of Preferred Stock without the consent
of the Representatives, except in connection with the consummation of a Business
Combination. In addition, 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 does not currently intend to issue
any shares of Preferred Stock, there can be no assurance that the Company will
not do so in the future. As of the date of this Prospectus, the Company has
outstanding 110 shares of Preferred Stock, designated as Series A Preferred
Stock, which shares are non-
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<PAGE> 29
voting and convertible to 110,000 shares of Common Stock following consummation
of the first Business Combination. See "Proposed Business" and "Description of
Securities -- Series A Preferred Stock."
VOTING BY PRESENT STOCKHOLDERS
Upon consummation of this offering, an affiliate of certain of the
Company's directors and executive officers will own 40,000 shares of Common
Stock and an option to purchase 100,000 units, each unit being identical to the
Units issued in this offering, which together with 10,668 shares of Common Stock
owned by Mr. Robert D. Frankel, a director and 10,582 shares of Common Stock
owned by J. Thomas Chess, a director will represent approximately 24.0% of the
issued and outstanding shares of Common Stock (assuming no exercise of the
Underwriters' over-allotment option, the Representatives' Unit Purchase Warrants
or the Representatives' Class B Warrants or the conversion of the Series A
Preferred Stock) and approximately 24.0% of the voting power of the issued and
outstanding shares of Common Stock (subject to the foregoing assumptions). In
the election of directors, stockholders are not entitled to cumulate their votes
for nominees. Accordingly, as a practical matter, it is possible that management
will be able to elect all of the Company's directors and otherwise direct the
affairs of the Company. See "Principal Stockholders," "Certain Transactions" and
"Description of Securities."
OTC BULLETIN BOARD; NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF
OFFERING PRICE; LACK OF PUBLIC MARKET FOR SECURITIES
Prior to this offering, there has been no public trading market for the
Units, the Common Stock or the Warrants. The initial public offering prices of
the Units and the Class B Warrants and the respective exercise prices and terms
of the Warrants have been arbitrarily determined by negotiations between the
Company and the Representatives and bear no relationship to such established
valuation criteria such as assets, book value or prospective earnings.
NASDAQ has recently adopted a policy whereby it will not list the
securities of a "blind pool" company. The Company is seeking approval for
listing of the securities on the OTC Bulletin Board. The OTC Bulletin Board is
an NASD sponsored and operated inter-dealer automated quotation system for
equity securities not included in the NASDAQ system. The OTC Bulletin Board has
only recently been introduced as an alternative to "pink sheet" trading of
over-the-counter securities. Consequently, the liquidity and stock price of the
Company's securities in the secondary market may be adversely affected. There is
no assurance that a regular trading market will develop for any of the Company's
securities after this offering or that, if developed, any such market will be
sustained. Moreover, there can be no assurance that the Company's securities
will be listed on NASDAQ or any national securities exchanges following the
consummation of a Business Combination. See "Underwriting."
H.J. Meyers and Northeast, the Representatives, intend to serve as market
makers for the Company's securities. Neither the Company nor anyone acting on
the Company's behalf will take affirmative steps to request or encourage any
other broker-dealers to act as market makers for the Company's securities. To
date, there have not been any preliminary discussions or understandings between
the Company and any potential market makers, other than H.J. Meyers and
Northeast, regarding the participation of such market makers in the future
trading market, if any, for the Company's securities.
Moreover, no member of management of the Company or any promoter or anyone
else acting at the Company's direction will recommend, encourage or advise
investors to open brokerage accounts with any broker-dealer making a market in
the Company's securities and the Company does not intend to influence investors
with regard to their decisions as to whether to hold or sell their securities of
the Company.
POSSIBLE DELISTING FROM OTC ELECTRONIC BULLETIN BOARD; COMPLIANCE WITH PENNY
STOCK RULES
The Company's securities will be listed on the NASDAQ's OTC Electronic
Bulletin Board since the price of each security is $5 or more. If the price per
security for any of the Company's Units, Common Stock, Class A Warrants or Class
B Warrants were to drop below $5, that particular security of the Company would
come within the definition of a "penny stock" as defined in the Securities
Exchange Act of 1934, as amended
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(the "Exchange Act") and the rules thereunder. Unless such security is otherwise
excluded from the definition of "penny stock," the penny stock rules apply with
respect to that particular security. One other exemption from the definition of
a "penny stock" is for securities of an issuer which has assets in excess of $5
million, as represented by audited financial statements. In the present
situation, the Company will have assets in excess of $5 million and expects to
have audited financial statements shortly after its Registration Statement is
declared effective with the Securities and Exchange Commission. Once such
audited financial statements have been obtained, all of the securities of the
Company will not be considered "penny stock," even if their price falls below
$5, so long as the requirements for the other exception from the penny stock
rules are met. However, until such time as the Company has obtained audited
financial statements, the selling price of each security must be $5 or more in
order for such security not to be classified as a "penny stock."
The penny stock rules require a broker-dealer prior to a transaction in
penny stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
sales person in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that the broker-dealer, not otherwise exempt from
such rules, must make a special written determination that the penny stock is
suitable for the purchaser and receive the purchaser's written agreement to the
transaction. These disclosure rules have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If any security of the Company becomes subject to the penny
stock rules, it may become more difficult to sell such securities. Such
requirements, if applicable, could result in reduction in the level of trading
activity for that particular security of the Company and could make it more
difficult for investors to sell that particular security. No assurance can be
given that any security of the Company will continue not to be classified as a
penny stock.
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION
This offering involves an immediate and substantial dilution of $.36 per
share between the pro forma net tangible book value per share after the offering
of $9.64 and the initial public offering price of $10.00 per share allocable to
each share of Common Stock included in the Units (assuming no value is
attributed to the Class A Warrants included in the Units). The existing
stockholders of the Company, including an affiliate of certain of its executive
officers and directors, acquired their shares of Common Stock at prices
substantially lower than the initial public offering price and, accordingly, new
investors will bear substantially all of the risks inherent in an investment in
the Company. Similarly, if and to the extent that the net tangible book value
per share of the securities of the Target Business being acquired (when divided
by the number of shares of the Common Stock to be issued) is less per share than
the Company's current net tangible book value per share, the Company's public
stockholders will suffer further dilution, since the issuance of such shares
would result in an immediate dilution of the net tangible book value per share
of the then consolidated financial position of the Company and the business
being acquired. See "Dilution."
POSSIBLE NEED TO SECURE NEW OFFICE SPACE
The Company, pursuant to an oral agreement, utilizes and will utilize the
offices of Mentmore Holdings Corporation ("Mentmore"), a Delaware corporation of
which Richard L. Kramer, the Company's Chairman of the Board, and William L.
Remley, the Company's President and Chief Executive Officer, are, respectively,
Chairman of the Board and President, until the Company effects a Business
Combination. The Company will pay Mentmore $2,500 per month for rent, office and
secretarial services following completion of this offering. Management is
unaware of any circumstances under which the Company's utilization of these
offices, through management's own initiative, may be changed. In the event the
Company, for whatever reason, is no longer able to avail itself of this
arrangement, it may be forced to secure new office space and retain adequate
secretarial assistance. There can be no assurance that the Company, if required,
could secure such new office space and retain such secretarial assistance on
favorable terms. Failure to maintain a business office could adversely affect
the Company's operations. See "Proposed Business -- Facilities."
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SHARES ELIGIBLE FOR FUTURE SALE
None of the 90,000 shares of Common Stock outstanding as of the date of
this Prospectus are eligible for sale under Rule 144 ("Rule 144") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). However,
the 15,000 Placement Shares and the 110,000 shares of Common Stock issuable upon
conversion of the Company's outstanding Series A Preferred Stock will be
registered under the Securities Act for sale at the time of a Business
Combination and will be freely tradable at that time, subject, however, to the
volume limitations of Rule 144 and to the Private Placement holders' and CDIJ's
agreement not to sell or otherwise transfer such shares until 60 days after the
first Business Combination in the case of such 15,000 shares and 110,000 shares,
respectively. In general, under Rule 144, as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated), who has owned restricted
shares of Common Stock beneficially for at least two years is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or, if
the Common Stock is quoted on an exchange or NASDAQ, the average weekly trading
volume during the four calendar weeks preceding the sale. A person who has not
been an affiliate of the Company for at least three months immediately preceding
the sale and who has beneficially owned the shares of Common Stock to be sold
for at least three years is entitled to sell such shares under Rule 144 without
regard to any of the limitations described above. No prediction can be made as
to the effect, if any, that sales of such shares of Common Stock or the
availability of such shares for sale will have on the market prices for shares
of Common Stock or Warrants prevailing from time to time. Nevertheless, the sale
of substantial amounts of Common Stock in the public market would likely
adversely affect prevailing market prices for the Common Stock and Warrants and
could impair the Company's ability to raise capital through the sale of its
equity securities. See "Shares Eligible for Future Sale." The shares of Common
Stock owned immediately prior to the date hereof by all of the stockholders of
the Company, including the Placement Shares, have been placed in escrow. In
addition, the holders of the Placement Shares have agreed not to directly or
indirectly sell, offer to sell, grant an option for the sale of, transfer,
assign, pledge, hypothecate or otherwise encumber any of the Placement Shares
without the prior written consent of the Company until the earlier of 24 months
from the date such shares were issued (January 31, 1996) or 60 days following
the consummation of the first Business Combination. Furthermore, all of the
holders of Founders' Shares have agreed not to, directly or indirectly, sell,
offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of their shares of Common Stock or options
to purchase Units (and the securities issuable upon the exercise thereof)
without the prior written consent of the Company until two years from the date
that the Founders' Shares were issued (October 23, 1995) but in no event earlier
than 120 days following the consummation of the first Business Combination,
subject to any additional terms, conditions or restrictions that may be imposed
in connection with the consummation of a Business Combination. The Company has
agreed with the Representatives that it will not grant such consent without the
consent of the Representatives. See "Certain Transactions," "Shares Eligible for
Future Sale," "Description of Securities" and "Underwriting."
30
<PAGE> 32
USE OF PROCEEDS
The net proceeds to the Company after deducting underwriting discounts and
estimated expenses (including the Representatives' non-accountable expense
allowance) are estimated to be $8,554,900 ($9,925,900 if the Underwriters'
over-allotment option is exercised in full). Approximately 82% of the gross
proceeds of this offering (representing an amount equal to $8,000,000 gross
proceeds from the sale of the Units) will be held in an escrow account
maintained by the Proceeds Escrow Agent, until the earlier of written
notification by the Company to the Proceeds Escrow Agent (i) of the Company's
completion of a transaction or series of transactions in which at least 50% of
the gross proceeds from this offering is committed to a specific line of
business as a result of a Business Combination (including any redemption
payments), or (ii) to distribute the escrowed funds, in connection with a
liquidation of the Company, to the then holders of the Common Stock purchased as
part of the Units sold in this offering or in the open market thereafter. All
proceeds held in the escrow account will be invested, until released, in
short-term United States government securities, including treasury bills, cash
and equivalents.
The Company will use the net proceeds of this offering, together with the
income earned thereon, principally in connection with effecting a Business
Combination, including selecting and evaluating potential Target Businesses and
structuring and consummating a Business Combination (including possible payment
of finder's fees or other compensation to persons or entities which provide
assistance or services to the Company). The Company will not effect a Business
Combination with a Target Business unless the Fair Market Value of such business
is greater than 80% of the net assets of the Company at the time of such
consummation of a Business Combination. The Company has no present intention of
either loaning any of the proceeds of this offering to any Target Business or
purchasing a minority interest in any Target Business. Management is unaware of
any circumstances under which this policy, through management's own initiative,
may be changed. The Company does not have discretionary access to the monies in
the escrow account, including income earned on such amounts, and stockholders of
the Company will not receive any distribution of income (other than in
connection with the liquidation of the Company) or have any ability to direct
the use or distribution of such income. Thus, such income will cause the amount
in escrow to increase. The Company cannot use the escrowed amounts to pay the
costs of evaluating potential Business Combinations. The Company will use the
proceeds from the sale of the Class B Warrants (i) to repay indebtedness, (ii)
to pay the balance of a $100,000 license fee, or $90,000, to Bright pursuant to
a license agreement executed by Bright and the Company, (iii) to cover all the
expenses incurred by the Company in this offering, including the Underwriters'
discounts and the Representatives' non-accountable expense allowance, and (iv)
to pay the costs of evaluating potential Business Combinations, including
investment banking fees, the fees of the Proceeds Escrow Agent and the costs of
business, legal and accounting due diligence on prospective Target Businesses.
See "Proposed Business -- Servicemark License." Such funds also will be used for
the general and administrative expenses of the Company, including legal and
accounting fees and administrative support expenses in connection with the
Company's reporting obligations to the Commission. The Company does not
anticipate such fees and administrative expenses will exceed $100,000 per year.
The Company's anticipated
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<PAGE> 33
uses of the net proceeds from the sale of the Class B Warrants (assuming no
exercise of the Underwriters' over-allotment option) are quantified as follows:
<TABLE>
<CAPTION>
USE OF PROCEEDS AMOUNT PERCENTAGE
- ---------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Escrow Account(1)..................................................... $ 480,000 29.6%
Non-accountable Expense Allowance(2).................................. 290,400 18.0
Repayment of Indebtedness............................................. 100,000 6.2
License Fee........................................................... 90,000 5.5
Expenses of Offering.................................................. 194,750 12.0
Evaluation of Potential Business Combinations......................... 464,850 28.7
---------- -----
$1,620,000 100.0%
========== =====
</TABLE>
- ---------------
(1) Represents the amount of proceeds from the sale of Class B Warrants to be
added to the Escrow Account to be maintained by the Proceeds Escrow Agent,
which amount equals the Underwriters' discount with respect to the sale of
the Units (assuming no exercise of the Underwriters' over-allotment option).
See "The Company -- Escrow of Offering Proceeds."
(2) Represents the non-accountable expense allowance payable to the
Representatives in an amount equal to 3% of the gross proceeds from the sale
of Units and Class B Warrants (assuming no exercise of the Underwriters'
over-allotment option). See "Underwriting."
The Company may seek to issue additional securities if it requires
additional funds to meet its operating and administrative expenses. The Company
has agreed with the Representatives that for a period of 18 months from the date
of this Prospectus and for up to six additional months if the Extension Criteria
have been satisfied, it will not issue (other than pursuant to this offering)
any securities or grant options or warrants to purchase any securities of the
Company without the consent of the Representatives.
The Company has retained Ladenburg to aid in identifying, evaluating,
structuring, negotiating and consummating a Business Combination. Ladenburg will
be paid a retainer of $3,500 per month, during the Engagement Period or up to
six additional months if the Extension Criteria are satisfied, and was issued
10,000 shares of Common Stock at a price of $.10 per share as additional
compensation for its agreement to act as the Company's investment banker. The
agreement with Ladenburg may not be extended beyond the 18-month period, unless
the Extension Criteria are satisfied, in which case the agreement will be
extended up to six additional months. If requested by the Company, and assuming
no conflict of interest, Ladenburg will also be retained by the Company to
render an opinion regarding the satisfaction by a Target Business of the Fair
Market Value Test, in consideration of a fee of $50,000. If Ladenburg identifies
the Target Business with which the Company effects a Business Combination and
the transaction is consummated, it will receive additional compensation from the
Company, the amount and form of which will be subject to negotiation by the
Company and Ladenburg at the time of the introduction of the Target Business to
the Company.
The Company will use a portion of the net proceeds from the sale of the
Class B Warrants of the offering to repay indebtedness to several lenders
evidenced by a series of notes (the "Investor Notes"). The amount of this
indebtedness is $100,000 plus interest computed at the rate of 8% per year from
January 31, 1996. The proceeds of the borrowings under the Investor Notes were
used to pay the costs of this offering, including legal, accounting, printing
and other costs. The Investor Notes bear interest at 8% per year and both
interest and principal are payable in full upon the closing of this offering or
July 31, 1997, whichever is earlier.
Following receipt of the net proceeds from the sale of the Class B Warrants
in this offering, the Company believes it will have sufficient available funds,
assuming that a Business Combination is not consummated, to operate for at least
the next 24 months. To the extent that Common Stock is used as consideration to
effect a Business Combination, the net proceeds of this offering not theretofore
expended will be used to finance the operations (including the possible
repayment of debt) of the Target Business. No cash compensation will be paid to
any officer or director in their capacities as such until after the consummation
of the first Business Combination. However, the Company will pay rent for office
space and a fee for secretarial services to Mentmore, an affiliate of the
Company's Chairman and Chief Executive Officer of $2,500 per month commencing
upon the closing of this offering. See "Proposed Business -- Facilities." Since
the role of present management after a Business Combination is uncertain, the
Company has no ability to determine what remuneration, if any, will be paid to
such persons after a Business Combination. No portion of the gross
32
<PAGE> 34
proceeds from this offering will be paid to the Company's officers, directors,
their affiliates or associates for expenses of this offering. Management is not
aware of any circumstances under which the aforementioned policy may be changed.
The net proceeds from the sale of Class B Warrants in this offering, not
immediately required for the purposes set forth above, will be invested in
general debt obligations of the United States Government or other high-quality,
short-term interest-bearing investments, provided, however, that the Company
will attempt not to invest such net proceeds in a manner which may result in the
Company being deemed to be an investment company under the Investment Company
Act. The Company believes that, in the event a Business Combination is not
effected in the time allowed and to the extent that a significant portion of the
net proceeds from the sale of the Class B Warrants in this offering is not used
in evaluating various prospective Target Businesses, the interest income derived
from investment of the net proceeds from the sale of the Class B Warrants during
such period may be sufficient to defray continuing general and administrative
expenses, as well as costs relating to compliance with securities laws and
regulations (including associated professional fees). To the extent that a
Business Combination is not effected in the time allowed and the Company's
stockholders determine not to liquidate the Company, the Company believes that
such interest income, together with a small portion of the net proceeds from the
sale of the Class B Warrants in this offering, may be sufficient to defray
continuing expenses for a period of several additional years until the Company
consummates a Business Combination. If such remaining proceeds are insufficient
to maintain the operations of the Company, management will either attempt to
secure additional financing, or else will again recommend liquidation of the
Company to the stockholders. Since all of the present holders of the Company's
Common Stock have agreed to waive their respective rights to participate in a
liquidation distribution occurring prior to the first Business Combination, all
of the assets of the Company, including any interest and income earned on the
proceeds of this offering, which may be distributed upon such liquidation would
be distributed to the owners of the Common Stock other than the present
stockholders and to the holders of the Company's Series A Preferred Stock.
The Company will not pay or incur a liability for ten percent (10%) or more
in the aggregate of the net proceeds of this offering (through repayment of
indebtedness or otherwise) to NASD members, affiliates, associated persons or
related persons.
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<PAGE> 35
DILUTION
The difference between the public offering price per share of Common Stock
(assuming no value is attributed to the Class A Warrants included in the Units)
and the pro forma net tangible book value per share of Common Stock of the
Company after this offering constitutes the dilution to investors in this
offering. Net tangible book value per share is determined by dividing the net
tangible book value of the Company (total tangible assets less total
liabilities) by the number of outstanding shares of Common Stock.
At March 11, 1996, net tangible book value of the Company was $(125,239) or
$(1.39) per share of Common Stock. After giving effect to the sale of 800,000
shares of Common Stock included in the Units offered hereby (and assuming no
value is attributed to the Class A Warrants included in such Units) and 320,000
Class B Warrants offered hereby and the initial application of the estimated net
proceeds therefrom, the pro forma net tangible book value of the Company at
March 11, 1996, would be $8,576,119 or $9.64 per share, representing an
immediate increase in net tangible book value of $11.03 per share to existing
stockholders and an immediate dilution of $.36 per share to investors purchasing
Units in this offering ("New Investors"). The following table illustrates the
foregoing information with respect to dilution to New Investors on a per share
basis (assuming no value is attributed to the Class A Warrants included in the
Units):
<TABLE>
<S> <C> <C>
Public offering price per share of Common Stock(1)(2)............... $10.00
Net tangible book value per share of Common Stock before this
offering.......................................................... $(1.39)
Increase attributable to this offering.............................. 11.03
Pro forma net tangible book value per share of Common Stock after
this offering(3).................................................. 9.64
------
Dilution to New Investors........................................... $ .36
======
</TABLE>
The following table sets forth, with respect to existing stockholders and
investors in this offering, a comparison of the number of shares of Common Stock
acquired from the Company, the percentage ownership of such shares, the total
consideration paid, the percentage of total consideration paid and the average
price per share:
<TABLE>
<CAPTION>
AVERAGE TOTAL
SHARES PURCHASED(1) CONSIDERATION(1)
---------------------- -------------------------- PRICE
AMOUNT PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders......... 90,000 10.1 $ 27,500 0.003 $ 0.31
New Investors................. 800,000 89.9 8,000,000(2) 99.997 $ 10.00
------- ------ ---------- ------ ------
890,000 100.0% $ 8,027,500 100.0%
======= ====== ========== ======
</TABLE>
- ---------------
(1) If the Underwriters' over-allotment option is exercised in full, the
investors in this offering will have paid $9,200,000 for 920,000 shares of
Common Stock, representing 99.7% of the total consideration for
approximately 91.1% of the total number of shares of Common Stock then
outstanding. The foregoing tables also assume no exercise of the
Representatives' Unit Purchase Warrants, the Representatives' Class B
Warrants, warrants owned by an affiliate of certain of the Company's
directors and executive officers or the Warrants, or conversion of the
Series A Preferred Stock. See "Underwriting" and "Description of Capital
Stock -- Series A Preferred Stock."
(2) Assumes that no value is attributable to the Class A Warrants, and excludes
the consideration paid for the Class B Warrants.
(3) Pro forma net tangible book value after this offering assumes the initial
application of estimated net proceeds to the Company (after payment of all
offering expenses, including the Representatives' non-accountable expense
allowance) of $8,554,900. See "Use of Proceeds."
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<PAGE> 36
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of March 11, 1996, and as adjusted to give effect to the sale of the Units
and the Class B Warrants being offered hereby:
<TABLE>
<CAPTION>
AS
HISTORICAL ADJUSTED(1)
---------- ----------
<S> <C> <C>
Promissory Notes Payable, net of discount..................... $ 88,339 --
Common Stock, subject to possible redemption, 160,000 shares
at redemption value(3)...................................... $1,600,000
Preferred Stock, $.01 par value, 200 shares of Series A
authorized, 110 shares of Series A issued and outstanding;
1,000,000 shares authorized, 110 shares of Series A issued
and outstanding as adjusted................................. 1 1
Subscription receivable on preferred stock.................... (11,000) --
Common stock, $.01 par value, 200,000 shares authorized,
90,000 shares issued and outstanding; 10,000,000 shares
authorized, 890,000 shares issued and outstanding, as
adjusted(2)(3).............................................. 900 8,900
Additional paid in capital(3)................................. 37,599 6,984,435
Accumulated deficit during the development stage.............. (2,663) (17,217)
-------- ----------
Total capitalization........................................ $ 113,176 $8,576,119
======== ==========
</TABLE>
- ---------------
(1) Adjusted to give effect to the sale of 800,000 Units and the 320,000 Class B
Warrants offered hereby at the public offering price of $10.00 per Unit and
$5.625 Class B per Warrant, respectively, and the receipt by the Company of
the estimated net proceeds (after the payment of all offering expenses,
including the Representatives' non-accountable expense allowance) of
$8,554,900. See "Use of Proceeds."
(2) Excludes a total of 2,310,000 shares consisting of: (i) 800,000 shares of
Common Stock reserved for issuance upon the exercise of the Class A
Warrants, (ii) 320,000 shares of Common Stock reserved for issuance upon
exercise of the Units underlying the Class B Warrants, (iii) 320,000 shares
of Common Stock reserved for issuance upon exercise of the Class A Warrants
comprising a part of the Units underlying the Class B Warrants, (iv) 120,000
shares of Common Stock included in the Units subject to the Underwriters'
over-allotment option, (v) 120,000 shares of Common Stock reserved for
issuance upon the exercise of the Class A Warrants included in the Units
subject to the Underwriters' over-allotment option, (vi) 48,000 shares of
Common Stock reserved for issuance upon exercise of the Units underlying the
Class B Warrants subject to the Underwriters' over-allotment option, (vii)
48,000 shares of Common Stock reserved for issuance upon exercise of the
Class A Warrants comprising a part of the Units underlying the Class B
Warrants subject to the Underwriters' over-allotment option, (viii) 200,000
shares of Common Stock reserved for issuance upon exercise of options for
Units granted to an affiliate of certain of the executive officers of the
Company, (ix) 110,000 shares of Common Stock reserved for issuance upon
conversion of the Company's outstanding Series A Preferred Stock, which
shares of Common Stock will be offered for sale by a prospectus at the time
of a Business Combination, (x) 80,000 shares of Common Stock included in the
Units reserved for issuance upon exercise of the Representatives' Unit
Purchase Warrants, (xi) 80,000 shares of Common Stock reserved for issuance
upon the exercise of the Class A Warrants included in the Units reserved for
issuance upon exercise of the Representatives' Unit Purchase Warrants, (xii)
32,000 shares of Common Stock included in the Units reserved for issuance
upon exercise of the Representatives' Class B Warrants, and (xiii) 32,000
shares of Common Stock reserved for issuance upon exercise of Class A
Warrants comprising a part of the Units underlying the Representatives'
Class B Warrants. See "Management," "Underwriting" and "Certain
Transactions."
(3) In the event the Company consummates a Business Combination, the redemption
rights afforded to the non-affiliated public stockholders may result in the
conversion into cash of up to 20% of the aggregate number of shares held by
the non-affiliated public stockholders at a per share redemption price equal
to (A) the greater of (i) the Company's net worth or (ii) the amount of
proceeds of the Company in the escrow account (including interest earned
thereon) divided by (B) the number of shares held by non-affiliated public
stockholders.
35
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is currently in the development stage and is in the process of
raising capital. All activity of the Company to date has been related to its
formation and proposed financing. The Company's ability to commence operations
is contingent upon obtaining adequate financial resources through this offering.
All of the Company's costs to date have been paid out of available cash. The
Company will use the net proceeds of this offering, together with the income and
interest earned thereon, principally in connection with effecting a Business
Combination, including selecting and evaluating potential Target Businesses and
structuring and consummating a Business Combination (including possible payment
of finder's fees or other compensation to persons or entities which provide
assistance or services to the Company). The Company does not have discretionary
access to the income on the monies in the escrow account and stockholders of the
Company will not receive any distribution of the income (except in connection
with a liquidation of the Company) or have any ability to direct the use or
distribution of such income. Thus, such income will cause the amount in escrow
to increase. The Company cannot use the escrowed amounts to pay the costs of
evaluating potential Business Combinations and will use the proceeds from the
sale of the Class B Warrants (i) to repay indebtedness, (ii) to pay the balance
of a $100,000 license fee, or $90,000, to Bright pursuant to a license agreement
executed by Bright and the Company, (iii) to cover all the expenses incurred by
the Company in this offering, including the Underwriters' discounts, the
Representatives' non-accountable expense allowance with respect to both the
Units and the Class B Warrants, and the fees of the Proceeds Escrow Agent, and
(iv) to pay the costs of evaluating potential Business Combinations, including
investment banking fees and the costs of business, legal and accounting due
diligence on prospective Target Businesses. In addition, such funds will be used
for the general and administrative expenses of the Company, including legal and
accounting fees and administrative support expenses in connection with the
Company's reporting obligations to the Commission. The Company does not
anticipate such fees and administrative expenses will exceed $100,000 per year.
The Company has also retained Ladenburg, for the 18-month period commencing as
of the date of this Prospectus, to aid in identifying, structuring, negotiating
and consummating a Business Combination. Ladenburg will be paid a retainer of
$3,500 per month during the Engagement Period, with maximum compensation payable
thereunder to Ladenburg limited to $63,000 for such 18-month period, or $84,000
if the Extension Criteria are satisfied and the agreement with Ladenburg is
extended for the full six months. Ladenburg was issued 10,000 shares of Common
Stock at a price of $.10 per share as additional compensation for its agreement
to act as the Company's investment banker. If requested by the Company, and
assuming no conflict of interest, Ladenburg will also be retained by the Company
to render an opinion regarding the satisfaction by a Target Business of the Fair
Market Value Test, in either case in consideration of a fee of $50,000. If
Ladenburg identifies the Target Business with which the Company effects a
Business Combination and the transaction is consummated, it will receive
additional compensation from the Company, the amount and form of which will be
subject to good faith negotiations by the Company and Ladenburg at the time of
the introduction of the Target Business to the Company. Management has not yet
determined the criteria to be used in determining the amount of additional
compensation to be payable to Ladenburg. However, the Company does not presently
intend to issue its shares to Ladenburg in lieu of cash fees. Following receipt
of the net proceeds from the sale of the Class B Warrants in this offering, the
Company will have sufficient available funds, assuming that a Business
Combination is not consummated, to operate for at least the next 24 months. To
the extent that Common Stock is used as consideration to effect a Business
Combination, the balance of the net proceeds of this offering not theretofore
expended will be used to finance the operations of the Target Business. See "Use
of Proceeds." No cash compensation will be paid to any officer or director in
their capacities as such until after the consummation of the first Business
Combination. Since the role of present management after a Business Combination
is uncertain, the Company has no ability to determine what remuneration, if any,
will be paid to such persons after a Business Combination.
The net proceeds from the sale of the Class B Warrants in this offering not
immediately required for the purposes set forth above will be invested in
general debt obligations of the United States Government or other high-quality,
short-term interest-bearing investments, provided, however, that the Company
will attempt not to invest such net proceeds in a manner which may result in the
Company being deemed to be an investment company under the Investment Company
Act. The Company believes that, in the event a Business
36
<PAGE> 38
Combination is not effected in the time allowed and to the extent that a
significant portion of the net proceeds of this offering is not used in
evaluating various prospective Target Businesses, the interest income derived
from investment of such net proceeds during such period may be sufficient to
defray continuing general and administrative expenses, as well as costs relating
to compliance with securities laws and regulations (including associated
professional fees).
In the event that the Company does not effect a Business Combination within
18 months from the date of this Prospectus, or 24 months from the date of this
Prospectus if the Extension Criteria have been satisfied, the Company will
submit for stockholder consideration a proposal to liquidate the Company and
distribute to the then holders of Common Stock acquired as part of the Units
sold in this offering or in the open market thereafter, the amount held in the
escrow account. Thereafter, all remaining assets available for distribution will
be distributed to non-affiliated public stockholders of the Common Stock after
payment of liabilities and after payment of a liquidation distribution of
$11,000 to the holders of the Company's Series A Preferred Stock. To the extent
that a Business Combination is not effected in the time allowed and the
Company's stockholders determine not to liquidate the Company, the Company
believes that income from the escrow account, together with a small portion of
the net proceeds from the sale of the Class B Warrants in this offering, may be
sufficient to defray continuing expenses for a period of several additional
years until the Company consummates a Business Combination. However, because the
Company cannot estimate the amount of the proceeds from the sale of the Class B
Warrants that will be used to pursue a potential Business Combination, it cannot
estimate what amount of funds, if any, might be available to defray expenses or
for how long, if at all, such funds might be sufficient for that purpose. Since
all of the present holders of the Company's Common Stock have agreed to waive
their respective rights to participate in a liquidation distribution occurring
prior to the first Business Combination, all of the assets of the Company
including any income and interest earned on the proceeds of the offering, which
may be distributed upon such liquidation would be distributed to the owners of
the Common Stock issued as part of the Units in this offering or in the open
market thereafter, after payment of a liquidation distribution of $11,000 to the
holders of the Series A Preferred Stock.
PROPOSED BUSINESS
INTRODUCTION
The Company, a development stage entity, was formed in October 1995 to
serve as a vehicle for the acquisition of, or the merger or consolidation with,
a Target Business. The Company intends to utilize the proceeds of this offering,
equity securities, debt securities, bank and other borrowings or a combination
thereof in effecting a Business Combination with a Target Business which the
Company believes has significant growth potential. The Company's efforts in
identifying a prospective Target Business are expected to emphasize businesses
primarily located in the United States; however, the Company reserves the right
to acquire a Target Business located primarily elsewhere. While the Company may,
under certain circumstances, seek to effect Business Combinations with more than
one Target Business, as a result of its limited resources the Company will, in
all likelihood, have the ability to effect only a single Business Combination.
The Company may effect a Business Combination with a Target Business which may
be financially unstable or in its early stages of development or growth.
"BLIND POOL" OFFERING
BACKGROUND. As a result of management's broad discretion with respect to
the specific application of the net proceeds of this offering, this offering can
be characterized as a "blind pool" or "blank check" offering. Although
substantially all of the net proceeds of this offering are intended to be
utilized generally to effect a Business Combination, such proceeds are not
otherwise being designated for any more specific purposes. Accordingly,
prospective investors who invest in the Company will do so without an
opportunity to evaluate the specific merits or risks of any one or more Business
Combinations. Consummation of a Business Combination may involve the acquisition
of, or merger or consolidation with, a company that does not need substantial
additional capital but which desires to establish a public trading market for
its shares, while
37
<PAGE> 39
avoiding what it may deem to be the adverse consequences of undertaking a public
offering itself, such as the time delays and significant expenses incurred to
comply with the various Federal and state securities laws that regulate initial
public offerings.
UNSPECIFIED INDUSTRY AND TARGET BUSINESS. The Company will seek to acquire
a Target Business without limiting itself to a particular industry. Most likely,
the Target Business will be primarily located in the United States, although the
Company reserves the right to acquire a Target Business primarily located
outside the United States. In seeking a Target Business, the Company will
consider, without limitation, businesses which (i) offer or provide services or
develop, manufacture or distribute goods in the United States or abroad,
including, without limitation, in the following areas: health care and health
products, educational services, environmental services, consumer-related
products and services (including amusement and/or recreational services),
personal care services, voice and data information processing and transmission
and related technology development or (ii) is engaged in wholesale or retail
distribution. The Company will not acquire a Target Business unless the Fair
Market Value Test is satisfied. If the Company determines that the financial
statements of a proposed Target Business do not clearly indicate that the Fair
Market Value Test has been satisfied, the Company will obtain an opinion from
Ladenburg, or if Ladenburg has a conflict of interest with respect to a
particular Business Combination, another investment banking firm (which is a
member of the NASD) with respect to the satisfaction of such criteria. None of
the Company's directors or executive officers has had any preliminary contact or
discussions with any representative of any Target Business regarding
consummation of a Business Combination. Accordingly, there is no basis for
investors in this offering to evaluate the possible merits or risks of a
particular industry or the Target Business. In connection with stockholder
approval of a Business Combination, the Company intends to provide stockholders
with disclosure documentation in accordance with the Proxy Rules, including
audited financial statements, concerning a Target Business. Accordingly, any
Target Business that is selected would need to have audited financial statements
or be audited in connection with the transaction. To the extent the Company
effects a Business Combination with a financially unstable company or an entity
in its early stage of development or growth (including entities without
established records of revenue or income), the Company will become subject to
numerous risks inherent in the business and operations of financially unstable
and early stage or potential emerging growth companies. In addition, to the
extent that the Company effects a Business Combination with an entity in an
industry characterized by a high level of risk, the Company will become subject
to the currently unascertainable risks of that industry. An extremely high level
of risk frequently characterizes certain industries which experience rapid
growth. Although management will endeavor to evaluate the risks inherent in a
particular industry or Target Business, there can be no assurance that the
Company will properly ascertain or assess all risks.
PROBABLE LACK OF BUSINESS DIVERSIFICATION. As a result of the limited
resources of the Company, the Company, in all likelihood, will have the ability
to effect only a single Business Combination. Accordingly, the prospects for the
Company's success will be entirely dependent upon the future performance of a
single business. Unlike certain entities that have the resources to consummate
several Business Combinations or entities operating in multiple industries or
multiple segments of a single industry, it is highly likely that the Company
will not have the resources to diversify its operations or benefit from the
possible spreading of risks or offsetting of losses. The Company's probable lack
of diversification may subject the Company to numerous economic, competitive and
regulatory developments, any or all of which may have a material adverse impact
upon the particular industry in which the Company may operate subsequent to
consummation of a Business Combination. The prospects for the Company's success
may become dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Accordingly, notwithstanding
the possibility of capital investment in and management assistance to the Target
Business by the Company, there can be no assurance that the Target Business will
prove to be commercially viable. The Company has no present intention of either
loaning any of the proceeds of this offering to any Target Business or of
purchasing or acquiring a minority interest in any Target Business.
OPPORTUNITY FOR STOCKHOLDER EVALUATION OR APPROVAL OF BUSINESS
COMBINATIONS. The investors in this offering will, in all likelihood, neither
receive nor otherwise have the opportunity to evaluate any financial or other
information which will be made available to the Company in connection with
selecting a potential
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Target Business until after the Company has entered into a definitive agreement
to effectuate a Business Combination. As a result, investors in this offering
will be almost entirely dependent on the judgment of management in connection
with the selection of a Target Business and the terms of any Business
Combination.
Under the Delaware General Corporation Law, various forms of Business
Combinations can be effected without stockholder approval. In addition, the form
of Business Combination will have an impact upon the availability of dissenters'
rights (i.e., the right to receive fair payment with respect to the Common
Stock) to stockholders disapproving of the proposed Business Combination. Under
current Delaware law, only a merger or consolidation may give rise to a
stockholder vote and to dissenters' rights. Nevertheless, the Company will
afford holders of Common Stock the right to approve the consummation of any
Business Combination, whether or not such approval would be required under
applicable Delaware law. In connection with such approval, the Company intends
to provide stockholders with disclosure documentation in accordance with the
Proxy Rules, including audited financial statements, concerning a Target
Business. The Company's present stockholders have agreed in the escrow agreement
to which their stock is subject to vote their respective shares of Common Stock
in accordance with the vote of the majority of the shares voted by all
non-affiliated public stockholders of the Company with respect to the
consummation of any Business Combination. Pursuant to the Company's certificate
of incorporation, a Business Combination will not be consummated unless approved
by a vote of two-thirds of the shares of Common Stock voted by non-affiliated
public stockholders (in person or by proxy). In addition, the Delaware General
Corporation Law requires approval of certain mergers and consolidations by a
majority of the outstanding stock entitled to vote. Even if investors are
afforded the right to approve a Business Combination under the Delaware General
Corporation Law, no dissenters' rights to receive fair payment will be available
for stockholders if the Company is to be the surviving corporation unless the
Certificate of Incorporation of the Company is amended and as a result thereof:
(i) alters or abolishes any preferential right of such stock; (ii) creates,
alters or abolishes any provision or right in respect of the redemption of such
shares or any sinking fund for the redemption or purchase of such shares; (iii)
alters or abolishes any preemptive right of such holder to acquire shares or
other securities; or (iv) excludes or limits the right of such holder to vote on
any matter, except as such right may be limited by the voting rights given to
new shares then being authorized of any existing or new class.
LIMITED ABILITY TO EVALUATE MANAGEMENT OF A TARGET BUSINESS. The role of
the present management of the Company, following a Business Combination, cannot
be stated with any certainty. Although the Company intends to scrutinize closely
the management of a prospective Target Business in connection with its
evaluation of the desirability of effecting a Business Combination with such
Target Business, there can be no assurance that the Company's assessment of such
management will prove to be correct. While it is possible that certain of the
Company's directors or its executive officers will remain associated in some
capacities with the Company following consummation of a Business Combination, it
is unlikely that any of them will devote a substantial portion of their time to
the affairs of the Company subsequent thereto. Moreover, there can be no
assurance that such personnel will have significant experience or knowledge
relating to the operations of the particular Target Business. The Company also
may seek to recruit additional personnel to supplement the incumbent management
of the Target Business. There can be no assurance that the Company will have the
ability to recruit additional personnel or that such additional personnel will
have the requisite skills, knowledge or experience necessary or desirable to
enhance the incumbent management. In addition, there can be no assurance that
the future management of the Company will have the necessary skills,
qualifications or abilities to manage a public company intending to embark on a
program of business development.
SELECTION OF A TARGET BUSINESS AND STRUCTURING OF A BUSINESS
COMBINATION. Management of the Company will have substantial flexibility in
identifying and selecting a prospective Target Business. However, the Company's
flexibility is limited to the extent that it must satisfy the Fair Market Value
Test. If the Company determines that the financial statements of a proposed
Target Business do not clearly indicate that the Fair Market Value Test has been
satisfied, the Company will obtain an opinion from Ladenburg, or, if Ladenburg
has a conflict of interest with respect to such particular Business Combination,
from another investment banking firm that is a member of the NASD with respect
to the satisfaction of such criteria. As a result, investors in this offering
will be almost entirely dependent on the judgment of management in
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<PAGE> 41
connection with the selection of a Target Business. In evaluating a prospective
Target Business, management will consider, among other factors, the following:
(i) costs associated with effecting the Business Combination; (ii) equity
interest in and opportunity for control of the Target Business; (iii) growth
potential of the Target Business; (iv) experience and skill of management and
availability of additional personnel of the Target Business; (v) capital
requirements of the Target Business; (vi) competitive position of the Target
Business; (vii) stage of development of the Target Business; (viii) degree of
current or potential market acceptance of the Target Business, products or
services; (ix) proprietary features and degree of intellectual property or other
protection of the Target Business; (x) the financial statements of the Target
Business; and (xi) the regulatory environment in which the Target Business
operates. The Company has retained Ladenburg to assist the Company in
identifying, evaluating, structuring and negotiating potential Business
Combinations.
The foregoing criteria are not intended to be exhaustive and any evaluation
relating to the merits of a particular Target Business will be based, to the
extent relevant, on the above factors as well as other considerations deemed
relevant by management in connection with effecting a Business Combination
consistent with the Company's business objectives. In connection with its
evaluation of a prospective Target Business, management, with the assistance of
Ladenburg, anticipates that it will conduct a due diligence review which will
encompass, among other things, meeting with incumbent management and inspection
of facilities, as well as a review of financial, legal and other information
which will be made available to the Company.
The time and costs required to select and evaluate a Target Business
(including conducting a due diligence review) and to structure and consummate
the Business Combination (including negotiating and documenting relevant
agreements and preparing requisite documents for filing pursuant to applicable
securities laws and state "blue sky" and corporation laws) cannot presently be
ascertained with any degree of certainty. The Company's current executive
officers and directors intend to devote only a small portion of their time to
the affairs of the Company and, accordingly, consummation of a Business
Combination may require a greater period of time than if the Company's
management devoted their full time to the Company's affairs. However, each
officer and director of the Company will devote such time as they deem
reasonably necessary to carry out the business and affairs of the Company,
including the evaluation of potential Target Businesses and the negotiation of a
Business Combination and, as a result, the amount of time devoted to the
business and affairs of the Company may vary significantly depending upon, among
other things, whether the Company has identified a Target Business or is engaged
in active negotiation of a Business Combination. Any costs incurred in
connection with the identification and evaluation of a prospective Target
Business with which a Business Combination is not ultimately consummated will
result in a loss to the Company and reduce the amount of capital available to
otherwise complete a Business Combination or for the resulting entity to
utilize.
The Company anticipates that various prospective Target Businesses will be
brought to its attention from various non-affiliated sources, including
securities broker-dealers, investment bankers, venture capitalists, bankers,
other members of the financial community and affiliated sources, including,
possibly, the Company's executive officer, directors and their affiliates. While
the Company has not yet ascertained how, if at all, it will advertise and
promote itself, it may elect to publish advertisements in financial or trade
publications seeking potential business acquisitions. While the Company does not
presently anticipate engaging the services of professional firms that specialize
in finding business acquisitions on any formal basis (other than Ladenburg), the
Company may engage such firms in the future, in which event the Company may pay
a finder's fee or other compensation. In no event, however, will the Company pay
a finder's fee or commission to officers or directors of the Company or any
entity with which they are affiliated for such service. Moreover, in no event
shall the Company issue any of its securities to any officer, director or
promoter of the Company, or any of their respective affiliates or associates, in
connection with activities designed to locate a Target Business. See
"Management -- Conflicts of Interest." In addition, the Company has agreed with
the Representatives that any finder's fee in connection with the Company's first
Business Combination will require approval by the Company's Board of Directors.
The Representatives may act as finder in connection with a Business Combination
and receive compensation for such service, the amount and form of which will be
subject to negotiation at the time of introduction of the Target Business to the
Company. See "Underwriting."
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As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. The Company
will evaluate the possible tax consequences of any prospective Business
Combination and will endeavor to structure a Business Combination so as to
achieve the most favorable tax treatment to the Company, the Target Business and
their respective stockholders. There can be no assurance that the Internal
Revenue Service or relevant state tax authorities will ultimately assent to the
Company's tax treatment of a particular consummated Business Combination. To the
extent the Internal Revenue Service or any relevant state tax authorities
ultimately prevail in recharacterizing the tax treatment of a Business
Combination, there may be adverse tax consequences to the Company, the Target
Business and their respective stockholders. Tax considerations as well as other
relevant factors will be evaluated in determining the precise structure of a
particular Business Combination, which could be effected through various forms
of a merger, consolidation or stock or asset acquisition.
The Company may utilize cash derived from the net proceeds of this
offering, equity securities, debt securities or bank or other borrowings or a
combination thereof as consideration in effecting a Business Combination.
Although the Company's Board of Directors will have the power to issue any or
all of the authorized but unissued shares of Common Stock following the
consummation of this offering, the Company has agreed with the Representatives
that, for a period of 18 months from the date of this Prospectus, and for up to
six additional months if the Extension Criteria have been satisfied, it will not
issue (other than pursuant to this offering) any securities or grant options or
warrants to purchase any securities of the Company without the consent of the
Representatives, except in connection with effecting a Business Combination.
Although the Company has no commitments as of the date of this Prospectus to
issue any shares of Common Stock or options or warrants, other than as described
in this Prospectus, the Company will, in all likelihood, issue a substantial
number of additional shares in connection with the consummation of a Business
Combination. To the extent that such additional shares are issued, dilution to
the interests of the Company's stockholders will occur. Additionally, if a
substantial number of shares of Common Stock are issued in connection with the
consummation of a Business Combination, a change in control of the Company may
occur which may affect, among other things, the Company's ability to utilize net
operating loss carry forwards, if any.
There currently are no limitations on the Company's ability to borrow funds
to effect a Business Combination. However, the Company's limited resources and
lack of operating history may make it difficult to borrow funds. The amount and
nature of any borrowings by the Company will depend on numerous considerations,
including the Company's capital requirements, potential lenders' evaluation of
the Company's ability to meet debt service on borrowings and the then prevailing
conditions in the financial markets, as well as general economic conditions. The
Company does not have any arrangements with any bank or financial institution to
secure additional financing and there can be no assurance that such arrangements
if required or otherwise sought, would be available on terms commercially
acceptable or otherwise in the best interests of the Company. The inability of
the Company to borrow funds required to effect or facilitate a Business
Combination, or to provide funds for an additional infusion of capital into a
Target Business, may have a material adverse effect on the Company's financial
condition and future prospects, including the ability to effect a Business
Combination. To the extent that debt financing ultimately proves to be
available, any borrowings will subject the Company to various risks
traditionally associated with indebtedness, including the risks of interest rate
fluctuations and insufficiency of cash flow to pay principal and interest.
Furthermore, a Target Business may have already incurred debt financing and,
therefore, subject the Company to all the risks inherent thereto.
COMPETITION
The Company expects to encounter intense competition from other entities
having business objectives similar to that of the Company. Many of these
entities are well established and have extensive experience in connection with
identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater financial, technical, human and other
resources than the Company and there can be no assurance that the Company will
have the ability to compete successfully. The Company's financial resources will
be limited in comparison to those of many of its competitors. Further, such
competitors will generally not be required to seek the prior approval of their
own stockholders, which may enable them to close
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a Business Combination more quickly than the Company. This inherent competitive
limitation may compel the Company to select certain less attractive Business
Combination prospects. There can be no assurance that such prospects will permit
the Company to satisfy its stated business objectives.
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly large number of
competitors including competitors with increasingly greater financial,
marketing, technical, human and other resources than the initial competitors in
the industry. The degree of competition characterizing the industry of any
prospective Target Business cannot presently be ascertained. There can be no
assurance that, subsequent to a Business Combination, the Company will have the
resources to compete effectively, especially to the extent that the Target
Business is in a high-growth industry.
POSSIBLE LIQUIDATION OF THE COMPANY
In the event that the Company does not effect a Business Combination within
18 months from the date of this Prospectus, or 24 months from the date of this
Prospectus if the Extension Criteria have been satisfied, the Company will
submit for stockholder consideration a proposal to liquidate the Company and
distribute to the then holders of Common Stock acquired as part of the Units
sold in this offering or in the open market thereafter, the amounts in the
escrow account. Thereafter, all remaining assets available for distribution will
be distributed to the non-affiliated public stockholders of the Company after
payment of liabilities and after the payment of a liquidation distribution of
$11,000 to the Holders of the Series A Preferred Stock. Since the proceeds to
the Company from the sale of the Class B Warrants will be used (i) to repay
indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, to
Bright pursuant to a license agreement executed by Bright and the Company, (iii)
to cover all the Company's expenses incurred in this offering, including the
Underwriters' discounts and non-accountable expense allowance, and (iv) to fund
the Company's operating expenses, including investment banking fees and the
costs of evaluating Target Businesses, the per share value of the residual
assets remaining for distribution, in the event of a liquidation of the Company,
to the holders of the Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, and exclusive of any income earned
from the escrow account, will be approximately equal to the initial public
offering price per Unit in this offering ($10.00 per Unit assuming no value is
attributed to the Class A Warrants included in the Units). There can be no
assurance that the Company will effect a Business Combination within such
period. All of the Company's present stockholders have agreed as part of the
escrow agreement to which their stock is subject to vote their respective shares
of Common Stock in accordance with the vote of the majority of the shares voted
by all non-affiliated public stockholders of the Company with respect to any
such liquidation proposal. Holders of Warrants, however, will only be entitled
to vote on any liquidation proposal, and allowed to participate in any
liquidation distribution, if they purchase shares of Common Stock in this
offering or on the open market thereafter, but only as to any shares of Common
Stock so purchased. In addition, the present stockholders have waived their
rights to share in any liquidating distribution with respect to the 90,000
shares of Common Stock owned by them as of the date hereof. The Company's
outstanding Series A Preferred Stock will not participate in any liquidation
distribution in excess of $11,000.
CERTAIN SECURITIES LAWS CONSIDERATIONS
The Company has filed an application with the Commission to register the
Units, the Common Stock, the Class A Warrants and the Class B Warrants under the
provisions of Section 12(g) of the Exchange Act, and it will use its best
efforts to continue to maintain such registration until there has been a
consummation of a Business Combination or a liquidation of the Company. Such
registration will require the Company to comply with periodic reporting, proxy
solicitation and certain other requirements of the Exchange Act, including the
requirement that it submit to the Commission, prior to its dissemination, any
proxy material to be furnished to stockholders in connection with a proposed
Business Combination.
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Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, the Company will only be able to effect a
Business Combination with a prospective Target Business that has available
audited financial statements or has financial statements which can be audited.
FACILITIES
The Company, pursuant to an oral agreement, utilizes and will utilize the
offices of Mentmore Holdings Corporation, a Delaware corporation of which
Richard L. Kramer, the Company's Chairman of the Board, and William L. Remley,
the Company's President and Chief Executive Officer, are, respectively, Chairman
of the Board and President, until the acquisition of a Target Business.
Following completion of this offering, the Company will pay Mentmore $2,500 per
month for rent, office and secretarial services. Management is unaware of any
circumstances under which the Company's utilization of these offices, through
management's own initiative, may be changed.
SERVICEMARK LICENSE
The servicemarks SMA(2)RT(SM) and Specialized Merger and Acquisition
Allocated Risk Transaction(SM) are owned by Bright. Bright has granted the
Company a non-exclusive license to use, for the sole purpose of marketing this
offering, the SMA(2)RT(SM) and Specialized Merger and Acquisition Allocated Risk
Transaction(SM) servicemarks in consideration of a royalty equal to $100,000, of
which $10,000 has been paid and the balance of $90,000 is payable upon the
closing of this offering. There can be no assurance that a third party owning or
using a similar servicemark or trademark will not object to, or seek to
prohibit, the Company's use of the SMA(2)RT(SM) or Specialized Merger and
Acquisition Allocated Risk Transaction(SM) servicemarks. See "Certain
Transactions."
EMPLOYEES
As of the date of this Prospectus, the Company employs Mr. Kramer, Mr.
Remley and Mr. Richard C. Hoffman on a part time basis. Such persons will serve
as officers and director without compensation at least until completion of a
Business Combination. Mr. Hoffman may receive fees for legal services actually
rendered to the Company.
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MANAGEMENT
DIRECTORS AND OFFICERS
The current directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------------------------------------- --- -------------------------------
<S> <C> <C>
Richard L. Kramer................................... 46 Chairman of the Board
William L. Remley................................... 45 President, Treasurer, Director
Richard C. Hoffman.................................. 48 Secretary, Director
Robert D. Frankel................................... 47 Director
J. Thomas Chess..................................... 56 Director
</TABLE>
MANAGEMENT
Richard L. Kramer is an experienced investor and financial advisor who has
been closely involved with the acquisition, financing, and reorganization of
many public and private companies. He has been Chairman of the Board, cofounder,
and principal owner of Republic Properties Corporation, one of the nation's
largest commercial developers, since 1990. Mr. Kramer has also been Chairman of
the Board of each of Texfi Industries, a New York Stock Exchange listed textile
and apparel manufacturer since 1994; of Weldotron Corporation, an American Stock
Exchange listed manufacturer of packaging machinery and safety controls since
1994; of CPT Holdings, a publicly-traded (OTC) steel fabrication company since
1992; of Sunderland Industrial Holdings Corporation, a private holding company
with various industrial manufacturing businesses engaged in custom plastic
injection molding since 1989, of Precise Technology, Inc., a private plastic
custom injection molder since 1990, and of Mentmore Holdings, Inc., a private
management and financial services company since 1991. Mr. Kramer was also a
partner and principal of Western Development Corporation, a national shopping
center developer, from 1980 through 1992.
William L. Remley has been actively engaged in the analysis, acquisition
and management of a variety of industrial manufacturing companies for the past
five years. Since 1992, he has served as President and Director of CPT Holdings,
Inc., a publicly-traded steel fabrication company. Since 1989, Mr. Remley has
served as a director and President of Sunderland Industrial Holdings
Corporation, a private holding company with various industrial manufacturing
businesses engaged in custom plastic injection molding. Mr. Remley has also been
Vice Chairman and Chief Executive Officer of Weldotron Corporation, an American
Stock Exchange listed manufacturer of packaging machinery and safety controls
since 1994; Vice Chairman and Chief Executive Officer of Texfi Industries, Inc,
a New York Stock Exchange listed textile and apparel manufacturer since 1994, a
Director and Vice Chairman of Precise Technology, Inc., a plastic custom
injection molder since 1990, and a Director and President of Mentmore Holdings,
Inc. since 1991. Mr. Remley is also a principal in several private investment
funds.
Richard C. Hoffman has been Vice President and General Counsel of Mentmore
Holdings, Inc. since January 1995. He is also President of InterUrban
Management, Inc., a real estate brokerage and management company in Dallas,
Texas since September 1991. Mr. Hoffman was formerly a partner in the Dallas law
firm of Freytag, LaForce, Rubinstein & Teofan and its successor entities from
1985 to 1992, and served as Senior Real Estate Counsel for the Continental
Illinois National Bank in Chicago from 1978 to 1985. Mr. Hoffman is a Phi Beta
Kappa graduate of the University of Wisconsin (Madison), and received his law
degree from Harvard Law School in 1972.
Robert D. Frankel is a senior research and development executive with more
than 15 years of experience. Dr. Frankel has been the Chairman of the Board and
Executive Vice President for Research and Development for SIOS, Inc. since 1994.
He was the Vice President for Development and a Project Manager at Hampshire
Instruments from 1983 to 1993. Dr. Frankel was also a scientist at the
University of Rochester Laboratory for Laser Energetics from 1979 to 1983. Dr.
Frankel is a graduate of the State University of New York at Buffalo
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<PAGE> 46
with a degree in Electrical Engineering, and received his Ph.D. in Physiology
from the State University of New York at Buffalo Medical School.
J. Thomas Chess has practiced dentistry since 1964, and has been actively
involved with dental implants for 26 years. He has acted as a consultant to
several companies specializing in lasers and dental implants. Dr. Chess has been
a director of the Southwest Products Company since 1991, and was formerly a
director of The Dentist Company, the "for profit" company of the California
Dental Association, serving for one year of his six year tenure as Chairman of
the Board. Dr. Chess is a graduate of Bowdoin College and received his D.D.S.
from the Southern California School of Dentistry.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors receive no
compensation for serving on the Board of Directors other than the reimbursement
of reasonable expenses incurred in attending meetings. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board. The
Company has not entered into employment agreements or other understandings with
its directors or executive officers concerning compensation. No cash
compensation will be paid to any officer or director in their capacities as such
until after the consummation of the first Business Combination. Since the role
of present management after the consummation of a Business Combination is
uncertain, the Company has no ability to determine what remuneration, if any,
will be paid to such persons after the consummation of a Business Combination.
No family relationships exist among any of the named directors or the
Company's officers. No arrangement or understanding exists between any such
director or officer and any other person pursuant to which any director or
officer was elected as a director or officer of the Company.
There are no agreements or understandings for any officer or director of
the Company to resign at the request of another person and none of the officers
or directors of the Company are acting on behalf of, or will act at the
direction of, any other person.
The holder of the Company's outstanding Series A Preferred Stock is CDIJ,
an affiliate of Bright, a private company which owns and has licensed to the
Company, for the purpose of marketing this offering, the servicemarks
SMA(2)RT(SM) and Specialized Merger and Acquisition Allocated Risk
Transaction(SM). Bright is engaged in identifying, evaluating and acquiring
operating companies, and in forming companies with which to do SMA(2)RT(SM)
transactions, licensing the SMA(2)RT(SM) transactions, and identifying and
recruiting management teams for companies that wish to undertake SMA(2)RT(SM)
transactions.
Other than as set forth in this Prospectus, no other relationships exist
between and among management stockholders and non-management stockholders.
Moreover, there are no arrangements, agreements or understandings between
nonmanagement stockholders and management under which non-management
stockholders may directly or indirectly participate in or influence the
management of the Company's affairs. The Company has no knowledge of whether or
not non-management stockholders will exercise their voting right to continue to
elect the current directors to the Company's board. See "Conflicts of Interest."
Each of the Company's officers and directors has agreed with the Company
and the Representatives that he will not, at any time, purchase any of the Class
B Warrants being sold in this offering. In addition, stockholders who are
affiliated with Management have agreed among themselves that they may not
actively negotiate or otherwise consent to the sale or purchase of any portion
of their Common Stock or warrants as a condition to or in connection with a
proposed merger or acquisition transaction. Management is not aware of any
circumstances under which this policy, through their own initiative, may be
changed. Moreover, none of the proceeds from this offering may be used, directly
or indirectly, to purchase any of management's or any affiliate of management's
shares of Common Stock or warrants.
OPTIONS TO PURCHASE UNITS
The Company has granted an option to purchase 100,000 Units to Cranbrooke
Corporation, a Delaware corporation which is affiliated with Mr. Kramer and Mr.
Remley. The Units are identical to those to be sold pursuant to this offering
and each consists of one share of Common Stock and one Class A Warrant to
purchase one share of Common Stock at a price of $9.00 per share. The option is
exercisable for a period of
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<PAGE> 47
three years from the date of a Business Combination at an exercise price of
$12.50 per Unit. The option is fully vested; however, the options will be
canceled if Messrs. Kramer and Remley cease to serve as directors or executive
officers of the Company prior to the first Business Combination. The shares
issuable upon exercise of the options and underlying warrants may not be sold or
otherwise transferred until 120 days after the first Business Combination.
CONFLICTS OF INTEREST
None of the Company's directors or officers is required to commit his full
time to the affairs of the Company and it is likely that such persons will not
devote a substantial amount of time to the affairs of the Company. Such
personnel will have conflicts of interest in allocating management time among
various business activities. As a result, the consummation of a Business
Combination may require a greater period of time than if the Company's
management devoted their full time to the Company's affairs. However, each
officer and director of the Company will devote such time as he deems reasonably
necessary to carry out the business and affairs of the Company, including the
evaluation of potential Target Businesses and the negotiation of a Business
Combination and, as a result, the amount of time devoted to the business and
affairs of the Company may vary significantly depending upon, among other
things, whether the Company has identified a Target Business or is engaged in
active negotiation of a Business Combination. Prior to their involvement with
the Company, none of the directors or officers of the Company has been involved
in any "blind pool" or "blank check" offerings. To avoid certain conflicts of
interest, the officers and directors of the Company and owners of five percent
or more of the Company's Common Stock (after giving effect to this offering and
to the exercise of warrants owned by the an affiliate of certain of the
Company's directors and executive officers but without giving effect to the
exercise, if any, of the Representatives' Unit Purchase Warrants, the
Representatives' Class B Warrants, or the Warrants or the conversion of the
Series A Preferred Stock), will be required to agree that they will not, until
the completion of the first Business Combination, directly or indirectly,
introduce a suitable proposed acquisition, merger or consolidation candidate to
another "blind pool." For such purposes, "suitable" shall mean any business
opportunity which, under Delaware law, may reasonably be required to be
presented to the Company. Certain of the other persons associated with the
Company are and may in the future become affiliated with other entities engaged
in business activities similar to those intended to be conducted by the Company.
In the course of their other business activities, they may become aware of
investment and business opportunities which may be appropriate for presentation
to the Company as well as the other entities with which they are affiliated.
Such persons may have conflicts of interest in determining to which entity a
particular business opportunity should be presented. In general, officers and
directors of a corporation incorporated under the laws of the State of Delaware
are required to present certain business opportunities to such corporation.
Under Delaware law, officers and directors generally are required to bring
business opportunities to the attention of such corporation if: (i) such
corporation could financially undertake the opportunity; (ii) the opportunity is
within the corporation's line of business; and (iii) it would not be fair to the
corporation and its stockholders for the opportunity not to be brought to the
attention of such corporation. Accordingly, as a result of multiple business
affiliations, certain of the Company's key personnel may have similar legal
obligations relating to presenting certain business opportunities to multiple
entities. In addition, conflicts of interest may arise in connection with
evaluations of a particular business opportunity by the Board of Directors with
respect to the foregoing criteria. There can be no assurance that any of the
foregoing conflicts will be resolved in favor of the Company.
To minimize potential conflicts of interest, the Company is restricted from
pursuing any transactions with entities affiliated (by stock ownership or
otherwise) with an officer or director of the Company without the prior approval
of a majority of the Company's disinterested directors.
The directors and officers of the Company have agreed that neither they nor
any entity with which they are affiliated will be entitled to receive any
finder's fee in the event that they introduce the Company to a prospective
Target Business with which a Business Combination is ultimately consummated. In
addition, none of the directors or executive officers of the Company may
actively negotiate or otherwise consent to the purchase of any portion of such
person's securities in the Company as a condition to, or in connection with, a
proposed Business Combination.
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<PAGE> 48
In connection with any stockholder vote relating either to approval of a
Business Combination or the liquidation of the Company due to the failure of the
Company to effect a Business Combination within the time allowed, all of the
Company's present stockholders, including all of its officers and directors (and
any stockholders who are affiliated with its officers and directors), have
agreed to vote all of their respective shares of Common Stock in accordance with
the vote of the majority of the shares voted by all non-affiliated public
stockholders of the Company (in person or by proxy) with respect to such
Business Combination or liquidation.
PRIOR BLANK CHECK OFFERINGS
None of the Company's officers, directors, promoters or other persons
engaged in management-type activities has been previously involved with any
blank check offerings with the exception of Bright. Bright's experience is
comprised of licensing the SMA(2)RT(SM) structure and service marks to Initial
Acquisition Corp. and Orion Acquisition Corp. I.
CERTAIN TRANSACTIONS
In October 1995, the Company issued 40,000 shares of Common Stock to
Cranbrooke Corporation, a Delaware corporation which is affiliated with Richard
L. Kramer and William L. Remley, directors and officers of the Company, 5,000
shares of Common Stock to Robert D. Frankel, a director of the Company and 5,000
to J. Thomas Chess, a director of the Company, for a purchase price of $.10 per
share. In January 1996, the Company issued the 15,000 Placement Shares to three
accredited investors (including Messrs. Frankel and Chess) at a purchase price
of $0.50 per share (before deducting offering expenses). These three investors
also loaned $100,000 to the Company, which amount is to be repaid out of the
proceeds of this offering. See "Use of Proceeds."
The Company has entered into an oral agreement with Mentmore Holdings
Corporation, a Delaware corporation which is affiliated with Richard L. Kramer
and William L. Remley, to lease office space and to be provided with secretarial
and office services commencing upon the closing of this offering. The Company
will pay $2,500 per month to Mentmore for rent and such services. Management
believes that these terms compare favorably to any arrangement which might be
made with an unaffiliated party. See "Proposed Business -- Facilities."
In October 1995, Bright granted the Company a non-exclusive license to use,
for the sole purpose of marketing this offering, Bright's SMA(2)RT(SM) and
Specialized Merger and Acquisition Allocated Risk Transaction(SM) servicemarks.
In consideration of Bright granting the non-exclusive license to the Company,
the Company is paying a total of $100,000.00 to Bright. The value to be paid by
the Company was negotiated at arm's length, although no objective criteria were
used to measure the value of the license. One important consideration, however,
is that Bright previously licensed the SMA(2)RT(SM) name and structure to
Initial Acquisition Corp., which successfully completed an initial public
offering in May 1995. The Company believes that the value it is paying for the
license to use the SMA(2)RT(SM) structure and service marks in this offering
will enhance the prospects of successfully completing this offering because the
investment community will be more likely to readily understand the SMA(2)RT(SM)
structure by associating it with the previous SMA(2)RT(SM) transaction.
CDIJ, an affiliate of Bright, is the holder of the Company's outstanding
110 shares of Series A Preferred Stock, which it purchased for $11,000, and
1,000 shares of Common Stock, which it purchased for $.10 per share. CDIJ paid
cash for the Common Stock and issued a promissory note at an interest rate of
8%, payable upon the earlier of one year from the date of the note or the
closing of this offering, for the Preferred Stock.
The purchase prices for all Common Stock and Preferred Stock sold by the
Company prior to the date of this Prospectus were established by negotiations
between the Board of Directors and the various investors.
Richard C. Hoffman, Secretary and a Director of the Company, acts as
general counsel to the Company. The Company expects to pay Richard C. Hoffman,
P.C., a law firm of which Mr. Hoffman is sole shareholder, fees for legal
services rendered in connection with this offering.
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<PAGE> 49
The Company will require that any future transactions between the Company
and its officers, directors, principal stockholders and the affiliates of the
foregoing persons be on terms no less favorable to the Company than could
reasonably be obtained in arm's length transactions with independent third
parties and that any such transactions also be approved by a majority of the
Company's directors disinterested in the transaction. Management of the Company
has not yet ascertained the amount of remuneration that will be payable to the
Company's officers and directors following completion of a Business Combination.
Mr. Kramer, Mr. Remley and the other directors of the Company and Bright
may be deemed to be "promoters" of the Company.
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<PAGE> 50
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the date hereof, and as
adjusted to reflect the sale of the shares of Common Stock offered by the
Company hereby, based on information obtained from the persons named below, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known by the Company to be the owner of more than 5% of the outstanding shares
of Common Stock, (ii) each director, and (iii) all executive officers and
directors as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
AMOUNT AND SHARES OF COMMON STOCK
NATURE OF --------------------------
BENEFICIAL BEFORE AFTER
NAME OR GROUP(1) OWNERSHIP(2) OFFERING OFFERING(3)(4)
--------------------------------------------------- ------------ -------- --------------
<S> <C> <C> <C>
Cranbrooke Corporation(5).......................... 40,000(3) 44.4% 4.5%
Richard L. Kramer.................................. 0 0.0% 0.0%
William L. Remley(5)............................... 40,000(3) 44.4% 4.5%
Richard C. Hoffman................................. 0 0.0% 0.0%
Robert D. Frankel.................................. 10,668 11.8% 1.2%
J. Thomas Chess.................................... 10,582 11.8% 1.2%
Ladenburg, Thalmann & Co. Inc...................... 10,000 11.1% 1.1%
All executive officers and directors as a group
(five persons)................................... 71,250(3) 79.2% 8.0%
</TABLE>
- ---------------
(1) Each individual listed has an address in care of the Company. The address
for Cranbrooke Corporation is 1430 Broadway, 13th Floor, New York, New York
10018, Attention: President.
(2) Unless otherwise noted, the Company believes that each person named in the
table has sole voting and investment power with respect to all shares of
Common Stock beneficially owned by him or it.
(3) Excludes options to purchase 100,000 Units, each unit to be identical to the
Units issued in this offering, held by Cranbrooke Corporation. See
"Management -- Options to Purchase Units."
(4) Assumes no exercise of (i) the Underwriters' over-allotment option; (ii) the
Representatives' Unit Purchase Warrants, (iii) the Representatives' Class B
Warrants, (iv) the Warrants included in the Units offered hereby or (v) any
other warrants owned by any of the named persons and assumes no conversion
of the Series A Preferred Stock. See "Underwriting" and "Description of
Capital Stock -- Series A Preferred Stock."
(5) William Remley, a Director and President of the Company, is the President
and a Director of Cranbrooke, the owner of 40,000 shares of Common Stock of
the Company, as to which stock he disclaims beneficial ownership.
The shares of Common Stock and Series A Preferred Stock owned by the
Company's present stockholders, including the directors and executive officers
of the Company and their affiliates, including the Placement Shares, will be
placed in escrow until the earlier of (i) the consummation of the first Business
Combination, or (ii) 18 months from the date of this Prospectus, subject to
extension to 24 months from the date of this Prospectus if the Extension
Criteria have been satisfied. During such period, such stockholders will not be
able to sell or otherwise transfer their respective shares of Common Stock (with
certain exceptions), but will retain all other rights as stockholders of the
Company, including, without limitation, the right to vote such shares of Common
Stock (subject to their agreement, as discussed above, to vote their shares in
accordance with the vote of a majority of the shares voted by non-affiliated
public stockholders with respect to the consummation of a Business Combination
or liquidation proposal) but excluding the right to request the redemption of
escrowed shares pursuant to a Redemption Offer. Subject to compliance with
applicable securities laws, any such holder may transfer his, her or its Common
Stock held in escrow to a member of his family or to a trust established for the
benefit of himself, herself, or a family member or to another affiliated entity
(with the consent of the Representatives which will not be unreasonably
withheld) or in the event of his or her death, by will or operation of law, or
if any entity by its dissolution or merger, provided that any such transferee or
successor entity shall agree as a condition to such transfer or succession to be
bound by the restrictions on transfer or succession applicable to the original
holder and, in the case of present stockholders, that the transferor or its
principals, if the transferor is an entity (except in the case of death) will
continue to be deemed the beneficial owner (as defined in Regulation 13d-3
promulgated under the Exchange Act).
49
<PAGE> 51
Each of the Company's officers and directors has agreed with the Company
and the Representatives that he will not, at any time, purchase any of the Class
B Warrants being sold in this offering.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock, par
value $.01 per share. As of the date of this Prospectus, 90,000 shares of Common
Stock are outstanding, held of record by 12 persons. The holders of Common Stock
are entitled to one vote for each share held of record on all matters to be
voted on by stockholders. There is no cumulative voting with respect to the
election of directors, with the result that the holders of more than 50% of the
shares voting for the election of directors can elect all of the directors. The
holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of the funds legally available therefor.
In the event of the liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets remaining
available for distribution after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. All of the present stockholders of the Company have agreed to waive their
respective rights to participate in a liquidation distribution prior to the
consummation of the first Business Combination. Holders of shares of Common
Stock, as such, have no conversion, preemptive or other subscription rights, and
there are no redemption provisions applicable to the Common Stock. All of the
outstanding shares of Common Stock are, and the shares of Common Stock to be
issued in this offering, when issued against payment therefor, will be, validly
authorized and issued, fully paid and nonassessable. The Company has agreed with
the Representatives that for a period of 18 months from the date of this
Prospectus, and for up to six additional months if the Extension Criteria have
been satisfied, it will not issue (other than pursuant to this offering) any
shares of Common Stock or grant Common Stock purchase options or warrants
without the consent of the Representatives, except in connection with effecting
a Business Combination.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of "blank check" preferred stock, par value $.01 per share (the
"Preferred Stock"), with such designations, powers, preferences, rights,
qualifications, limitations and restrictions and in such series as the Board of
Directors, subject to the laws of the State of Delaware, may determine from time
to time. Accordingly, the Board of Directors is empowered, without stockholder
approval, 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 Common Stock. The Company has agreed with the
Representatives, however, that for a period of 18 months from the date of this
Prospectus, and for up to six additional months if the Extension Criteria have
been satisfied, it will not issue any shares of Preferred Stock without the
consent of the Representatives, except in connection with a consummation of a
Business Combination. In addition, the Preferred Stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. No shares of Preferred Stock other than 110
shares of Series A Preferred Stock are currently outstanding. Although the
Company does not currently intend to issue any additional shares of Preferred
Stock, there can be no assurance that the Company will not do so in the future.
SERIES A PREFERRED STOCK
As of the date of this Prospectus, the Company has outstanding 110 shares
of Series A Preferred Stock, owned by CDIJ. The purchase price for such shares,
$100.00 per share or $11,000 in the aggregate, is payable to the Company,
without interest, upon the earlier of January 31, 1997 or the closing of this
offering. The Series A Preferred Stock is non-voting, does not bear a dividend
and has a liquidation value of $100.00 per share. Each share of Series A
Preferred Stock will be convertible into 1000 shares of Common Stock for a
period one year following the consummation of a Business Combination. In the
event that a Business Combination does not occur within 18 months of the date of
this Prospectus, or 24 months if the Extension Criteria are satisfied, the
Series A Preferred Stock will be redeemed by the Company for its liquidation
value.
50
<PAGE> 52
The Company has agreed to register the Common Stock issuable upon conversion of
the Series A Preferred Stock at the time of a Business Combination.
WARRANTS
The statements under this caption relating to the Warrants are merely a
summary and do not purport to be complete. However, such summary contains all
information with respect to such Warrants which the Company believes to be
material to investors. Such summary is qualified in its entirety by express
reference to the warrant agreement ("Warrant Agreement") between the Company and
American Stock Transfer & Trust Company, copies of which have been filed with
the Securities and Exchange Commission. Copies of the Warrant Agreement are
available for inspection at the offices of the Company and at the Commission.
As of the date hereof, each Class A Warrant will entitle the registered
holder thereof to purchase one share of Common Stock at a price of $9.00 per
share, subject to adjustment in certain circumstances. The Class A Warrants will
be initially exercisable upon the consummation of a Business Combination and
expire at 5:00 p.m., New York City time, on the fifth anniversary of the date of
this Prospectus.
As of the date hereof, each Class B Warrant will entitle the registered
holder thereof to purchase one Unit, comprised of one share of Common Stock and
one Class A Warrant to purchase one share of Common Stock, at a price of $.125
per Unit, subject to adjustment in certain circumstances. The Class B Warrants
will be initially exercisable upon the consummation of a Business Combination
and expire at 5:00 p.m., New York City time, on the first anniversary of the
date of a consummation of a Business Combination.
The Units and the Class B Warrants will be sold and traded separately. The
Common Stock and the Class A Warrants will become separable and transferable at
such time as the Representatives may determine, but in no event before the
Separation Date. The Company may call the Warrants for redemption, each as a
class, in whole and not in part, at the option of the Company, at a price of
$.05 per Warrant at any time after the consummation of a Business Combination,
upon not less than 30 days' prior written notice, provided that the last sale
price of the Common Stock, if the Common Stock is listed for trading on an
exchange or interdealer quotation system which provides last sale prices, or,
the average of the closing bid and asked quotes, if the Common Stock is listed
for trading on an interdealer quotation system which does not provide last sale
prices, on all 10 of the trading days ending on the day immediately prior to the
day on which the Company gives notice of redemption, has been $11.00 or higher.
The warrant holders shall have exercise rights until the close of business on
the date fixed for redemption.
The exercise price and number of shares of Common Stock issuable on
exercise of the Class A Warrants are subject to adjustments under certain
circumstances, including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation of the Company. However, the Warrants
are not subject to adjustment for issuances of Common Stock at a price below
their respective exercise prices.
The Company has the right, in its sole discretion, to decrease the exercise
price of the Warrants for a period of not less than 30 days on not less than 30
days' prior written notice to the warrantholders, subject to compliance with
applicable laws such as, but not limited to, any prior notice provisions imposed
by the Commission, the NASD or any exchange on which the Company's Common Stock
is then listed. In addition, the Company has the right, in its sole discretion,
to extend the expiration date of the Warrants on five business days' prior
written notice to the warrantholders.
The Warrants may be exercised upon surrender of the warrant certificate on
or prior to the applicable expiration date of the Class A Warrant or Class B
Warrant, as the case may be, at the offices of the warrant agent, with the
exercise form on the reverse side of the warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
certified check or other good funds, payable to the Company) to the warrant
agent for the number of Warrants being exercised. The warrantholders do not have
the rights or privileges of holders of Common Stock, including, without
limitation, the right to vote on any matter presented to stockholders for
approval.
The Company is required either to maintain the effectiveness of the
Registration Statement of which this Prospectus is a part or to file a new
registration statement with the Commission, with respect to the securities
51
<PAGE> 53
underlying the Warrants prior to the exercise of the Warrants and to deliver a
prospectus as required by Section 10(a)(3) of the Securities Act with respect to
such securities to the holders of all Warrants prior to the exercise or
redemption of such Warrants (except, if in the opinion of counsel to the
Company, such registration is not required under the federal securities laws or
if the Company receives a letter from the staff of the Commission stating that
it would not take any enforcement action if such registration is not effected).
In addition, and subject to the foregoing, the Company is required to have a
current Registration Statement on file with the Commission and to effect
appropriate qualifications under the laws and regulations of the states in which
the initial holders of the Warrants reside in order to comply with applicable
laws in connection with such exercise. There can be no assurance, however, that
the Company will be in a position to be able to keep its Registration Statement
current or to effect appropriate action under applicable state securities laws,
the failure of which may result in the inability to exercise the Warrants or
effect a resale or other disposition of Common Stock issued upon such exercise.
Florida residents who purchase Class B Warrants will be unable to exercise these
warrants to purchase Units unless and until the Units issuable upon exercise of
the Class B Warrants have been registered for sale in Florida or are established
to be exempt from the requirement of such registration. Florida law generally
precludes the registration of securities that are not listed on a securities
exchange or the NASDAQ System when the offering price of such securities is
$5.00 or less per share. Because the "exercise price" of Class B Warrants is
$.125, the "offering price" of the Units issuable upon exercise of the Class B
Warrants could be considered not greater than $5.00 if the offering price of the
Class B Warrants is not added to its exercise price in making that
determination. For this reason, no permit to sell the Units issuable upon
exercise of the Class B Warrants in Florida has been obtained. There can be no
assurance that the Units issuable upon exercise of the Class B Warrants will
ever be registered in Florida or established to be exempt from the requirement
of such registration.
No fractional shares will be issued upon exercise of the Warrants. However,
if a warrantholder exercises all Warrants then owned of record by him, the
Company will pay to such warrantholder, in lieu of the issuance of any
fractional share which is otherwise issuable to such warrantholder, an amount in
cash based on the market value of the Common Stock on the last trading day prior
to the exercise date.
DIVIDENDS
The Company does not expect to pay dividends prior to the consummation of a
Business Combination. Future dividends, if any, will be contingent upon the
Company's revenues and earnings, if any, capital requirements and general
financial condition subsequent to the consummation of a Business Combination.
The payment of dividends subsequent to the consummation of a Business
Combination will be within the discretion of the Company's then Board of
Directors. The Company presently intends to retain all earnings, if any, for use
in the Company's business operations and accordingly, the Board does not
anticipate declaring any dividends in the foreseeable future.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The transfer and registrar agent for the Units and the Common Stock and the
transfer agent, registrar and warrant agent for the Warrants is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering (but prior to a Business
Combination), the Company will have 890,000 shares of Common Stock outstanding
(1,010,000 shares if the Underwriters' over-allotment option is exercised in
full). Of these shares, the 800,000 shares sold by the Company in this offering
(920,000 shares if the Underwriters' over-allotment option is exercised in full)
will be freely tradable without restriction or further registration under the
Securities Act, except for any shares purchased by an "affiliate" of the Company
(as defined in the Securities Act and the rules and regulations thereunder)
which will be subject to the limitations of Rule 144 promulgated under the
Securities Act. All of the remaining 90,000 shares are deemed to be "restricted
securities", as that term is defined under Rule 144 promulgated under the
Securities Act, as such shares were issued in private transactions not involving
a public offering. None of such shares are eligible
52
<PAGE> 54
for sale under Rule 144. However, 15,000 of such shares (the Placement Shares)
along with the 110,000 shares issuable upon conversion of the outstanding Series
A Preferred Stock are expected to be registered under the Securities Act at the
time of the Business Combination.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated), who has beneficially owned
the restricted shares of Common Stock to be sold for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the Common Stock is quoted on an exchange or NASDAQ, the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least the three
months immediately preceding the sale and who has beneficially owned the shares
of Common Stock to be sold for at least three years is entitled to sell such
shares under Rule 144 without regard to any of the limitations described above.
The holders of Founders' Shares have agreed not to, directly or indirectly,
sell, offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of their shares of Common Stock, 75,000
shares in the aggregate, until two years from the date the outstanding Founders'
Shares were issued (October 25, 1995), provided that such shares may in no event
be sold or otherwise transferred until 120 days following the completion of the
first Business Combination, subject to any additional terms, conditions or
restrictions that may be imposed in connection with the consummation of a
Business Combination. In addition, the holders of the Placement Shares have
agreed not to directly or indirectly sell, offer to sell, grant an option for
the sale of, transfer, assign, pledge, hypothecate or otherwise encumber any of
the Placement Shares without the prior written consent of the Company until the
earlier of 24 months from the date such shares were issued (January 31, 1996) or
60 days following the consummation of the first Business Combination. The
Company has agreed with the Representatives that it will not grant such consents
without the consent of the Representatives.
Prior to this offering, there has been no market for the Common Stock, the
Units or the Warrants and no prediction can be made as to the effect, if any,
that market sales of restricted shares of Common Stock or the availability of
such shares for sale will have on the market prices prevailing from time to
time. Nevertheless, the possibility that substantial amounts of Common Stock may
be sold in the public market would likely adversely affect prevailing market
prices for the Common Stock, the Units and the Warrants and could impair the
Company's ability to raise capital through the sale of its equity securities.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company and the Underwriters, the Company has agreed to sell to the Underwriters
named below, for whom the Representatives are acting as representatives, and the
Underwriters have severally and not jointly agreed to purchase, the number of
Units and Class B Warrants set forth opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF CLASS B
UNDERWRITER UNITS WARRANTS
---------------------------------------------------------------- --------- ---------
<S> <C> <C>
H.J. Meyers & Co., Inc. ........................................
Northeast Securities, Inc. .....................................
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel to
the Representatives and various other conditions. The nature of the
Underwriters' obligations are such that they are committed to purchase all of
the above Units and Class B Warrants if any are purchased.
As registered broker-dealers, each of the Representatives is required under
the Exchange Act and the rules promulgated thereunder to maintain minimum net
capital in order to conduct their broker-dealer operations. Currently, each of
the Representatives has sufficient excess net capital to support their broker-
53
<PAGE> 55
dealer operations, including their underwriting obligations to the Company. In
the event, however, that at any time any of the Representatives should be unable
to maintain their minimum net capital requirements, they will have to cease
operations as a broker-dealer. Any such cessation of operations by any of the
Representatives could have a material adverse effect on the market price and
liquidity of the securities being offered hereby. No assurance can be given,
however, that the firm will be able to maintain its required minimum net capital
at all times during or following the offering described herein.
The Company has been advised by the Representatives that the Underwriters
propose to offer the Units and the Class B Warrants directly to the public at
the public offering prices set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $. per Unit
and $. per Class B Warrant. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $. per Unit and $. per Class B Warrant
to certain other dealers. The Representatives have informed the Company that
they do not expect sales to discretionary accounts by the Underwriters to exceed
5% of the securities offered by the Company hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
agreed to pay to the Representatives a non-accountable expense allowance equal
to three percent of the gross proceeds derived from the sale of the Units and
Class B Warrants underwritten (including the sale of any Units and Class B
Warrants subject to the Underwriters' over-allotment option), $25,000 of which
has been paid to date.
The Company will reimburse the Representatives on a nonaccountable basis in
an amount equal to 3% of the gross proceeds of this offering ($290,400 if the
Underwriters' over-allotment option is not exercised).
The Company has agreed that no finder's or origination fees or similar
compensation will be paid to any of the Company's officers, directors or 5% or
greater stockholders or their respective affiliates in connection with or to
effect a Business Combination. If the Company enters into any finder's fee
agreement or similar agreement or arrangement with any person or entity other
than the Company's officers, directors or 5% or greater stockholders or their
respective affiliates in connection with or to effect the first Business
Combination (other than to Ladenburg), the finder's fee or other consideration
paid in connection therewith must be approved by the Company's Board of
Directors.
The Company has agreed, in connection with the exercise of Warrants
pursuant to solicitation by the Representatives, commencing one year from the
date of this Prospectus, to pay to the Representatives an aggregate management
fee of 10% of the respective Warrant exercise prices, 8% of which will be
reallowed to any selected dealer who is a member of the NASD who solicited the
exercise (which may also be one of the Representatives) for each Warrant
exercised, provided, however, that the Representatives will not be entitled to
receive such compensation in any Warrant exercise transaction in which (i) the
market price of the Common Stock of the Company at the time of the exercise is
lower than the exercise price of the Warrants in question; (ii) the Warrants are
held in a discretionary account under the control of the selected dealer; (iii)
disclosure of compensation arrangements is not made, in addition to the
disclosure provided in this Prospectus, in documents provided to holders of the
Warrants at the time of exercise; (iv) the exercise of the Warrants is
unsolicited; or (v) the solicitation of exercise of the Warrants was in
violation of Rule 10b-6 promulgated under the 1934 Act. In determining the
management fee, the calculation will exclude 10% of the respective Warrant
exercise prices, any underlying warrants, options or convertible securities. In
addition, unless granted an exemption by the Commission from Rule 10b-6, the
Representatives will be prohibited from engaging in any market-making activities
or solicited brokerage activities with regard to the Company's securities during
the periods prescribed by Rule 10b-6 before the solicitation of the exercise of
any Warrant until the later of (a) the termination of such solicitation
activity, or (b) the termination by waiver or otherwise of any right the
Representatives may have to receive a fee for the exercise of the Warrants
following such solicitations. As a result, the Representatives may be unable to
provide a market for the Company's securities during certain periods while the
Warrants are exercisable. The Company has agreed not to solicit Warrant
exercises other than through the Representatives.
The holders of Founders' Shares have agreed not to, directly or indirectly,
sell, offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of their shares of
54
<PAGE> 56
Common Stock, 75,000 shares in the aggregate, or any warrants to purchase Units
(and the securities issuable upon the exercise thereof) without the prior
written consent of the Company until two years from the date the outstanding
Founders' Shares were issued, (October 25, 1995), provided that such shares may
in no event be sold or otherwise transferred until 120 days following the
completion of the first Business Combination, subject to any additional terms,
conditions or restrictions that may be imposed in connection with the
consummation of a Business Combination. An appropriate legend has been marked on
the face of stock certificates representing all such shares of Common Stock.
The Company has agreed with the Representatives that for a period of 18
months from the date of this Prospectus, and for up to six additional months if
the Extension Criteria are satisfied, it will not issue (other than pursuant to
this offering) any securities or grant options or warrants to purchase any
securities of the Company without the consent of the Representatives except in
connection with effecting a Business Combination.
The Company has granted to the Representatives an option exercisable during
the 30-day period commencing on the date of this Prospectus to purchase from the
Company at the offering price less underwriting discounts, up to an aggregate of
120,000 additional Units and 48,000 additional Class B Warrants for the sole
purpose of covering over-allotments, if any. To the extent that the
Representatives exercise such option, the Representatives have the right to
require each Underwriter to purchase on a firm commitment basis approximately
the same percentage thereof that the number of Units and Class B Warrants to be
purchased by it or the Underwriters shown in the above table bears to the total
shown. The Company will be obligated, pursuant to the option, to sell such Units
and Class B Warrants to the Representatives or the Underwriters, as the
Representatives direct.
In connection with this offering, the Company has agreed to sell to the
Representatives, for nominal consideration, the Representatives' Warrants. The
Representatives' Warrants are initially exercisable at a price of $11.00 per
Unit and $5.775 per Class B Warrant for a period of four years, commencing one
year from the date of this Prospectus. The Units and Class B Warrants issuable
upon exercise of the Representatives' Warrants are the same as the Units and
Class B Warrants being sold in this offering. The Representatives' Warrants
contain anti-dilution provisions providing for adjustment of the number of
warrants and exercise price under certain circumstances. The Representatives'
Warrants grant to the holders thereof certain rights of registration of the
Units and Class B Warrants issuable upon exercise of the Representatives'
Warrants.
The Company has also agreed that, for a period of two years from the
closing of this Offering, if it participates in any merger, consolidation or
other transaction which H.J. Meyers & Co., Inc. has brought to the Company
(including an acquisition of assets or stock for which it pays, in whole or in
part, with shares of the Company's Common Stock or other securities), which
transaction is consummated within thirty-six months of the closing of this
Offering, then it will pay for the Representative's services an amount equal to
5% of the first $2 million of value paid or value received in the transaction,
2% of any consideration above $2 million and less than $4 million and 1% of any
consideration in excess of $4 million. The Company has also agreed that if,
during this two-year period, someone other than the Representative brings such a
merger, consolidation or other transaction to the Company, and if the Company in
writing retains the Representative for consultation or other services in
connection therewith, then upon consummation of the transaction the Company will
pay to the Representative as a fee the appropriate amount as set forth above or
as otherwise agreed to between the Company and the Representative.
Prior to this offering there has been no public market for any of the
Company's securities. Accordingly, the offering prices of the Units and Class B
Warrants and terms of the Class A Warrants underlying the Units were determined
by negotiation between the Company and the Representatives. Factors considered
in determining such price and terms, in addition to prevailing market
conditions, include an assessment of the Company's prospects. The public
offering prices of the Units and Class B Warrants do not bear any relationship
to assets, earnings, book value, or other criteria of value applicable to the
Company and should not be considered an indication of the actual value of the
Units or Class B Warrants. Such prices are subject to change as a result of
market conditions and other factors, and no assurance can be given that the
Units or Class B Warrants can be resold at their respective offering prices.
55
<PAGE> 57
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Nevertheless, it includes
all information concerning such agreements which the Company believes to be
material. Reference is made to copies of each such agreement which are filed as
exhibits to the Registration Statement.
LEGAL MATTERS
The legality of the securities being registered by the Registration
Statement of which this Prospectus is a part is being passed upon by Campbell &
Fleming, P.C., New York, New York. Harter, Secrest & Emery, Rochester, New York
has acted as counsel to the Representatives in connection with this offering.
EXPERTS
The financial statements included in this Prospectus have been audited by
BDO Seidman, LLP, independent certified public accountants, to the extent and
for the period set forth in their report appearing elsewhere herein, and is
included in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") under the
Securities Act with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and this
offering, reference is made to the Registration Statement, including the
exhibits and schedules filed therewith, copies of which may be obtained at
prescribed rates from the Commission at its principal office at 450 Fifth Street
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: 75 Park Place, New York 10007, and Northwestern Atrium Center, 500
West Madison Street, Suite 1400 Chicago, Illinois, 60604. Descriptions contained
in this Prospectus as to the contents of any agreement or other documents filed
as an exhibit to the Registration Statement are not necessarily complete and
each such description is qualified by reference to such agreement or document.
The Company intends to furnish to its stockholders annual reports
containing financial statements audited and reported upon by its independent
public accountants.
56
<PAGE> 58
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
MARCH 11, 1996
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Financial Statements:
Balance sheet as of March 11, 1996.................................................. F-3
Statement of operations for the period from October 19, 1995 (inception) to March
11, 1996......................................................................... F-4
Statement of stockholders' equity for the period from October 19, 1995 (inception)
to
March 11, 1996................................................................... F-5
Statement of cash flows for the period from October 19, 1995 (inception) to
March 11, 1996................................................................... F-6
Notes to financial statements......................................................... F-7
</TABLE>
F-1
<PAGE> 59
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Orion Acquisition Corp. II
New York, NY
We have audited the accompanying balance sheet of Orion Acquisition Corp.
II (a corporation in the development stage) as of March 11, 1996, and the
related statements of operations, stockholders' equity and cash flows for the
period from October 19, 1995 (inception) to March 11, 1996. 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 audit.
We conducted our audit 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 audit provides 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 Orion Acquisition Corp. II
as of March 11, 1996, and the results of its operations and its cash flows for
the period from October 19, 1995 (inception) to March 11, 1996, in conformity
with generally accepted accounting principles.
BDO Seidman, LLP
March 15, 1996
New York, New York
F-2
<PAGE> 60
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
MARCH 11, 1996
<TABLE>
<S> <C>
ASSETS
Cash.............................................................................. $115,283
Deferred registration costs (Note 3).............................................. 135,522
Deferred financing costs, net (Note 3)............................................ 14,554
-------
Total assets............................................................ $265,359
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses (Notes 3 and 5).................................................. $152,183
Notes payable, net of discount (Note 5)........................................... 88,339
-------
Total liabilities............................................................ 240,522
-------
Commitments (Note 4)
Stockholders' equity (Notes 1 and 5):
Convertible preferred stock, $.01 par value, shares authorized 200; 110 shares
subscribed................................................................... 1
Subscription receivable......................................................... (11,000)
Common stock, $.01 par value, 200,000 shares authorized 90,000 shares issued and
outstanding.................................................................. 900
Additional paid-in capital...................................................... 37,599
Accumulated deficit during the development stage................................ (2,663)
-------
Total stockholders' equity................................................... 24,837
-------
Total liabilities and stockholders' equity.............................. $265,359
=======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 61
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO MARCH 11, 1996
<TABLE>
<S> <C>
Interest income.................................................................... $ 283
Interest expense................................................................... 2,946
-------
Net loss........................................................................... $(2,663)
=======
Net loss per common share.......................................................... $ (.03)
=======
Weighted average common shares outstanding......................................... 90,000
=======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 62
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO MARCH 11, 1996
<TABLE>
<CAPTION>
ACCUMULATED
PREFERRED STOCK PREFERRED DEFICIT
------------------ STOCK COMMON STOCK ADDITIONAL (DURING THE TOTAL
SHARES SUBSCRIPTION -------------- PAID-IN DEVELOPMENT STOCKHOLDERS'
SUBSCRIBED AMOUNT RECEIVABLE SHARES AMOUNT CAPITAL STAGE) EQUITY
---------- ------ ------------ ------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of founders'
shares.................... -- $ -- $ -- 75,000 $750 $ 6,750 $ -- $ 7,500
Sale of private placement
shares
(see Note 5).............. 15,000 150 19,850 -- 20,000
Subscription receivable for
preferred stock (see Note
5)...................... 110 1 (11,000) -- 10,999 -- --
Net loss.................... (2,663) (2,663)
--- ------ ------------ ------ ------ ---------- ----------- -------------
Balance, March 11,1996...... 110 $ 1 $(11,000) 90,000 $900 $ 37,599 $ (2,663) $24,837
========== ======= =========== ====== ======= ========= =========== ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 63
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO MARCH 11, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................................ $ (2,663)
Adjustments to reconcile net loss to net cash provided by operating activities:
Changes in assets and liabilities -- accrued expenses........................ 2,946
--------
Net cash provided by operating activities.................................. 283
--------
Cash flows from financing activities:
Proceeds from sale of common stock.............................................. 27,500
Proceeds from issuance of notes payable......................................... 87,500
--------
Net cash provided by financing activities.................................... 115,000
--------
Net increase in cash.............................................................. 115,283
Cash, beginning of period......................................................... --
--------
Cash, end of period............................................................... $115,283
========
Supplemental disclosures of cash flow information:
The Company issued 110 shares of Series A preferred stock in exchange for a note
receivable totaling $11,000.
The Company has recorded $152,183 in accrued expenses relating to a license
agreement (Note 3) and other costs relating to the Proposed Offering.
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 64
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS OPERATIONS
The Company was incorporated in Delaware on October 19, 1995 for the
purpose of raising capital to fund the acquisition of an unspecified operating
business. All activity to date relates to the Company's formation and proposed
fund raising. To date, the Company has not elected a fiscal year end.
The Company's ability to commence operations is contingent upon obtaining
adequate financial resources through the Proposed Offering which is described in
detail in Note 2. The Company's management has broad discretion with respect to
the specific application of the net proceeds of the Proposed Offering, although
substantially all of the net proceeds of the Proposed Offering are intended to
be generally applied toward consummating a business combination with an
operating business ("Business Combination"). Furthermore, there is no assurance
that the Company will be able to successfully effect a Business Combination.
Upon the closing of the Proposed Offering, an aggregate of $8,000,000 of the net
proceeds will be held in an escrow account which will be invested until released
in short-term United States Government Securities, including treasury bills and
cash and cash equivalents ("Proceeds Escrow Account"), subject to release at the
earlier of (i) consummation of its first Business Combination or (ii)
liquidation of the Company (see below). The remaining proceeds from the Proposed
Offering will be used to pay for business, legal and accounting, due diligence
on prospective acquisitions, costs relating to the Proposed Offering and
continuing general and administrative expenses in addition to other expenses.
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the acquisition is such as would not ordinarily require
stockholder approval under applicable state law. All of the Company's present
stockholders, including all directors and the Company's executive officer, have
agreed to vote their respective shares of common stock in accordance with the
vote of the majority of the shares voted by all other stockholders of the
Company ("non-affiliated public stockholders") with respect to any such Business
Combination. A Business Combination will not be consummated unless approved by a
vote of two-thirds of the shares of common stock owned by non-affiliated public
stockholders.
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer ("Redemption Offer") each of the
non-affiliated public stockholders of the Company the right, for a specified
period of time not less than 20 calendar days, to redeem his shares of common
stock. The per share redemption price ("Liquidation Value") will also be
determined by dividing the greater of (i) the Company's net worth or (ii) the
amount of assets of the Company in the escrow account including all interest
earned thereon by the number of shares held by such non-affiliated public
stockholders. In connection with the Redemption Offer, if non-affiliated public
stockholders holding less than 20% of the common stock elect to redeem their
shares, the Company may, but will not be required to, proceed. The Company will
redeem such shares by applying the Liquidation Value to the number of shares to
be redeemed. In any case, if non-affiliated public stockholders holding 20% or
more of the common stock elect to redeem their shares, the Company will not
proceed with such potential Business Combination and will not redeem such
shares.
All shares of the common stock outstanding immediately prior to the date of
the Proposed Offering will be placed in escrow until the earlier of (i) the
occurrence of the first Business Combination, (ii) 18-months from the effective
date of the Proposed Offering or (iii) 24-months from the effective date of the
Proposed Offering if prior to the expiration of such 18-month period the Company
has become a party to a letter of intent or a definitive agreement to effect a
Business Combination, in which case such period, shall be extended six months.
During the escrow period, the holders of escrowed shares of common stock will
not be able to sell or otherwise transfer their respective shares of common
stock (with certain exceptions), but will retain all other rights as
stockholders of the Company, including without limitation, the right to vote
escrowed shares in accordance with a vote of a majority of the shares voted by
non-affiliated public stockholders with respect to a Business Combination or
liquidation proposal.
F-7
<PAGE> 65
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
If the Company does not effect a Business Combination within 18-months from
the effective date or 24-months from the effective date if the extension
criteria have been satisfied, the Company will submit for stockholder
consideration a proposal to liquidate the Company and, if approved, distribute
to the then holders of common stock (issued in the Proposed Offering or acquired
in the open market thereafter) all assets remaining available for distribution
after payment of liabilities and after having made appropriate provisions for
the payment of liquidating distributions upon each class of stock, if any,
having preference over the common stock.
2. PROPOSED PUBLIC OFFERING
The Proposed Offering calls for the Company to offer for public sale up to
800,000 units ("Units"). Each Unit consists of one share of the Company's common
stock and one Class A redeemable common stock purchase warrant ("Class A
Warrant"). The Proposed Offering also calls for the Company to offer for public
sale up to 320,000 Class B redeemable common stock purchase warrants ("Class B
Warrant"). Each Class A Warrant entitles the holder to purchase from the Company
one share of common stock at an exercise price of $9.00; each Class B Warrant
entitles the holder to purchase one Unit at an exercise price of $.125,
commencing on the date of a Business Combination, until the fifth anniversary of
such date for the Class B Warrants. The Class A Warrants and Class B Warrants
are redeemable, each as a class, in whole and not in part, at a price of $.05
per warrant upon 30 days' notice at any time provided that the Company has
consummated a Business Combination and the last sale price of the common stock
on all ten trading days ending on the day immediately prior to the day on which
the Company gives notice of redemption, has been $11.00 or higher.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Deferred Registration Costs
The Company has deferred registration costs (primarily professional fees
and a license fee) relating to the Proposed Offering. In January 1996, the
Company entered into a license agreement with Bright Capital, Ltd. for the right
to use certain service marks for the sole purpose of marketing such offering at
a cost of $100,000 which has been accrued for in total as of March 11, 1996. The
license fee is payable in installments of $10,000 upon execution of the license
agreement and $90,000 at the earlier of eighteen months from the date of
execution of the license agreement or the closing of the Proposed Offering. The
deferred registration costs will be charged to equity upon completion of the
Proposed Offering. Should the Proposed Offering prove to be unsuccessful, these
deferred costs, as well as additional expenses to be incurred, will be charged
to operations.
Deferred Financing Costs
Net unamortized costs incurred in connection with the private placement of
unsecured promissory notes (see Note 5) totaling $15,750 are being amortized
over eighteen months using the straight-line method. Amortization expense
charged to interest expense was $1,196 for the period from October 19, 1995
(inception) to March 11, 1996.
Income Taxes
The Company follows the Financial Accounting Standards Board ("FASB")
Statement No. 109. This statement requires that deferred income taxes be
recorded following the liability method of accounting and be adjusted
periodically when income tax rates change.
F-8
<PAGE> 66
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. COMMITMENTS
The Company presently occupies office space provided by a stockholder. Such
stockholder has agreed that, until the acquisition of a target business by the
Company, it will make such office space, as well as certain office and
secretarial service, available to the Company, as may be required by the Company
from time to time at no charge. Upon completion of the Proposed Offering, such
stockholder will be reimbursed by the Company for the costs of such office and
services on a monthly basis in the amount of $2,500.
The Company has retained an investment banker to act as a financial advisor
to the Company in structuring and negotiating a Business Combination for an
18-month period commencing on the date of the prospectus. The investment banker
will be paid an engagement fee of $3,500 per month during the engagement period
(18 months), with maximum compensation of $63,000 for such 18-month period. In
addition, the Company issued 10,000 shares of common stock at a price of $.10
per share as additional compensation for its agreement to act as the Company's
investment banker.
5. STOCKHOLDERS' EQUITY
The Units and the Class B Warrants, which are being offered in the Proposed
Offering, will be sold and traded separately.
Concurrent with the Proposed Offering, the Company intends to amend and
restate its certificate of incorporation to increase its authorized common stock
and preferred stock to 10,000,000 and 1,000,000 shares, respectively.
(a) Private Placement
In January 1996, the Company completed a private offering to a limited
group of investors which consisted, in aggregate, of $100,000 in unsecured
promissory notes bearing interest at 8% per annum. The notes are payable upon
the earlier of eighteen months or the completion of an initial public offering.
In addition, the Company also issued to the private placement investors 15,000
shares of common stock for $7,500. The notes have been discounted $12,500 for
financial statement reporting purposes as a result of the additional fair value
attributed to the common stock issued to the private placement shareholders. The
effective rate on the notes is approximately 18%.
(b) Preferred Stock
The Company is authorized to issue 200 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the Board of Directors.
The Company has outstanding 110 shares of Series A preferred stock, owned
by CDIJ Capital Partners, L.P., an affiliate of Bright Capital, Ltd. The
purchase price for such shares, $100.00 per share or $11,000 in the aggregate,
is payable to the Company, without interest, upon the earlier of twelve months
or on the closing of the Proposed Offering. The Series A preferred stock is
convertible into 1,000 shares of common stock for a period of one year following
the consummation of a Business Combination. In the event that a Business
Combination does not occur within 18-months from the effective date, or
24-months from the effective date if
F-9
<PAGE> 67
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the extension criteria are satisfied, the Series A preferred stock will be
redeemed by the Company at its original cost basis.
(C) Options
The Company has granted options to purchase 100,000 Units to Cranbrooke
Corporation, a Delaware corporation which is affiliated with two officers of the
Company. The option is exercisable for a period of three years from the date of
a Business Combination at an exercise price of $12.50 per Unit. The option is
fully vested; however, the options will be canceled if Mr. Kramer and Mr. Remley
cease to serve as directors or executive officers of the Company prior to the
Business Combination. The shares issuable upon exercise of the options and
underlying warrants may not be sold or otherwise transferred for 120 days
subsequent to the first Business Combination.
F-10
<PAGE> 68
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT
BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF ANY OFFER TO
BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR ANY SUCH
PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER, SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 13
Risk Factors.......................... 18
Use of Proceeds....................... 31
Dilution.............................. 34
Capitalization........................ 35
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 36
Proposed Business..................... 37
Management............................ 44
Certain Transactions.................. 47
Principal Stockholders................ 49
Description of Securities............. 50
Shares Eligible for Future Sale....... 52
Underwriting.......................... 53
Legal Matters......................... 56
Experts............................... 56
Additional Information................ 56
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ORION ACQUISITION CORP. II
800,000 UNITS,
EACH UNIT CONSISTING OF
ONE SHARE OF COMMON STOCK AND
ONE CLASS A
COMMON STOCK PURCHASE WARRANT
(THE CLASS A WARRANTS
ENTITLING THE HOLDERS
TO PURCHASE AN AGGREGATE OF
800,000 SHARES OF COMMON STOCK)
320,000 CLASS B
COMMON STOCK PURCHASE WARRANTS
(ENTITLING THE HOLDERS
TO PURCHASE 320,000 UNITS)
------------------------
PROSPECTUS
------------------------
H. J. MEYERS & CO., INC.
NORTHEAST SECURITIES, INC.
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 69
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Orion Acquisition Corp. II (the "Company") is incorporated in Delaware.
Under Section 145 of the General Corporation Law of the State of Delaware, a
Delaware corporation has the power, under specified circumstances, to indemnify
its directors, officers, employees and agents in connection with actions, suits
or proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any action, suit or
proceeding. Article Tenth of the Certificate of Incorporation and Article III of
the Bylaws of the Company provide for indemnification of directors and officers
to the fullest extent permitted by the General Corporation Law of the State of
Delaware. Reference is made to the Certificate of Incorporation of the Company,
filed as Exhibit 3.1 hereto.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (relating to liability for unauthorized acquisitions or redemptions
of, or dividends on, capital stock) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. Article Ninth of the Company's Certificate of
Incorporation contains such a provision.
The Underwriting Agreement filed herewith as Exhibit 1.1 contains
provisions by which each Underwriter severally agrees to indemnify the Company,
any person controlling the Company within the meaning of Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934,
each director of the Company, and each officer of the Company who signs this
Registration Statement with respect to information relating to such Underwriter
furnished in writing by or on behalf of such Underwriter expressly for use in
the Registration Statement.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with this
Registration Statement. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
<TABLE>
<S> <C>
Filing Fee -- Securities and Exchange Commission....................... $ 8,343.71
Filing Fee -- National Association of Securities Dealers, Inc.......... 2,893.68
Fees and Expenses of Accountants....................................... 12,500.00
Fees and Expenses of Counsel........................................... 75,000.00
Printing and Engraving Expenses........................................ 50,000.00
Blue Sky Fees and Expenses............................................. 30,000.00
Transfer and Warrant Agent fees........................................ 3,500.00
Miscellaneous Expenses................................................. 12,499.64
----------
Total........................................................ $194,737.03
==========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In October 1995, the Company sold to CDIJ, an affiliate of Bright, 1,000
shares of Common Stock for $100, which was paid in full at the time, and 110
shares of Series A Preferred Stock for $11,000, payable upon the closing of this
offering, in a transaction in which no commissions were paid. In October 1995,
the
II-1
<PAGE> 70
Company sold an aggregate of 74,000 shares of Common Stock, par value $.01 per
share ("Common Stock"), to its then directors, officers (and to an entity
affiliated with certain of its then directors and officers) and to certain other
persons at a price of $.10 per share for aggregate consideration of $7,400. In
January 1996, the Company sold 15,000 shares of Common Stock at a price of $0.50
per share or $7,500 in the aggregate and $100,000 in promissory notes (the
"Placement Securities") to three investors, all of whom represented to the
Company that they were "accredited investors" as such term is defined in
Regulation D promulgated by the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Securities Act"). H.J. Meyers and
Northeast Securities acted as placement agents for 75% and 25% of such offering,
respectively. The persons who acquired the Placement Securities are Robert D.
Frankel, J. Thomas Chess, both directors of the Company, and Eva Car
Enterprises, Ltd. To the Company's knowledge, none of these investors, nor any
of their affiliates, was, at the time of their investment in the Company, or
currently is, affiliated or associated with any of H.J. Meyers, Northeast, or
any other broker-dealer. The Company issued all such securities in reliance upon
the exemption from the registration requirements of the Securities Act contained
in Section 4(2) thereof.
ITEM 27. EXHIBITS.
<TABLE>
<C> <S> <C>
1.1 -- Underwriting Agreement.
**3.1 -- Amended and Restated Certificate of Incorporation.
*3.2 -- Bylaws of the Company.
**4.1 -- Form of Common Stock Certificate.
Form of Warrant Agency Agreement dated , 1996 between the Company and American
***4.2 -- Stock Transfer & Trust Company.
**4.3 -- Form of Class A Common Stock Purchase Warrant (included in Exhibit 4.2).
**4.4 -- Form of Class B Unit Purchase Warrant (included in Exhibit 4.2).
***4.5 -- Form of Representatives' Warrant Agreement.
4.6 -- Form of Representatives' Warrant (included in Exhibit 4.5).
**4.7 -- Form of Unit Certificate.
**5 -- Opinion of Campbell & Fleming, P.C.
**10.1 -- Form of Escrow Agreement for proceeds from sale of Units.
*10.2 -- Form of Escrow Agreement for outstanding Common Stock.
*10.3 -- License, dated August 25, 1995, between Bright and the Company.
***10.4 -- Management Unit Purchase Option.
**10.5 -- Form of Merger Advisory Agreement between the Company and H.J. Meyers & Co., Inc.
*10.6 -- Engagement Letter between the Company and Landenburg, Thalman & Co., Inc.
23.1 -- Consent of BDO Seidman, LLP (Included at page II-8).
23.2 -- Consent of Campbell & Fleming, P.C. (Included in Exhibit 5).
*24 -- Power of Attorney (Included at page II-7).
</TABLE>
- ---------------
* Previously filed.
** To be filed by Amendment.
*** Revised from form previously filed.
II-2
<PAGE> 71
ITEM 28. UNDERTAKINGS.
The undersigned small business issuer hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of an offering.
(d) The undersigned small business issuer hereby undertakes to provide
to the underwriters at the closing specified in the underwriting
agreements, certificates in such denominations and registered in such names
as required by the underwriters to permit prompt delivery to each
purchaser.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(f) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it
was declared effective.
(ii) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-3
<PAGE> 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 13th day of May,
1996.
ORION ACQUISITION CORP. II
By: /s/ Richard C. Hoffman
RICHARD C. HOFFMAN
SECRETARY
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------- -------------------------------- -------------
<C> <C> <S>
* Chairman of the Board May 13, 1996
- --------------------------------------------
RICHARD L. KRAMER
* President, Treasurer, Director May 13, 1996
- -------------------------------------------- Principal Executive Officer and
WILLIAM L. REMLEY Principal Accounting Officer
/s/ Richard C. Hoffman Secretary, Director May 13, 1996
- --------------------------------------------
RICHARD C. HOFFMAN
Director , 1996
- --------------------------------------------
ROBERT D. FRANKEL
Director , 1996
- --------------------------------------------
J. THOMAS CHESS
*By: /s/ Richard C. May 13, 1996
Hoffman
- --------------------------------------------
RICHARD C. HOFFMAN
ATTORNEY IN FACT
</TABLE>
II-4
<PAGE> 73
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Orion Acquisition Corp. II
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 15, 1996, relating to the
financial statements of Orion Acquisition Corp. II, which is contained in that
Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
New York, New York
May 13, 1996
II-5
<PAGE> 74
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGES
- ------- ----------------------------------------------------------------------- ------------
<C> <S> <C> <C>
1.1 -- Underwriting Agreement.................................................
**3.1 -- Amended and Restated Certificate of Incorporation. ....................
*3.2 -- Bylaws of the Company. ................................................
**4.1 -- Form of Common Stock Certificate.......................................
***4.2 -- Warrant Agency Agreement dated , 1996 between the
Company and American Stock Transfer & Trust Company....................
**4.3 -- Form of Class A Common Stock Purchase Warrant (included in Exhibit
4.2)...................................................................
**4.4 -- Form of Class B Unit Purchase Warrant (included in Exhibit 4.2)........
***4.5 -- Form of Representatives' Warrant Agreement.............................
4.6 -- Form of Representatives' Warrant (included in Exhibit 4.5).............
**4.7 -- Form of Unit Certificate...............................................
**5 -- Opinion of Campbell & Fleming, P.C. ...................................
**10.1 -- Form of Escrow Agreement for proceeds from sale of Units...............
*10.2 -- Form of Escrow Agreement for outstanding Common Stock. ................
*10.3 -- License, dated October , 1995, between Bright and the Company........
***10.4 -- Management Unit Purchase Option........................................
**10.5 -- Form of Merger Advisory Agreement between the Company and
H.J. Meyers & Co., Inc. ...............................................
*10.6 -- Engagement Letter between the Company and Landenburg, Thalman & Co. ...
23.1 -- Consent of BDO Seidman, LLP (Included at page II-8)....................
23.2 -- Consent of Campbell & Fleming, P.C. (Included in Exhibit 5)............
*24 -- Power of Attorney (Included at page II-7). ............................
</TABLE>
- ---------------
* Previously filed.
** To be filed by Amendment.
*** Revised from form previously filed.
<PAGE> 1
ORION ACQUISITION CORP. II
800,000 Units
Each Unit Consisting of One Share of Common Stock
and
One Class A Common Stock Purchase Warrant
and
320,000 Class B Unit Purchase Warrants
------------
UNDERWRITING AGREEMENT
------------
[EFFECTIVE DATE]
H.J. Meyers & Co., Inc.
1895 Mount Hope Avenue
Rochester, NY 14620
Attn: Michael S. Smith, Esquire
-and-
Northeast Securities, Inc.
1600 Stewart Avenue, Suite 300
Westbury, NY 15590
Attn: Stephen J. Perrone, President
As representative of the several Underwriters
Ladies and Gentlemen:
ORION ACQUISITION CORP. II, a Delaware corporation (the "Company"),
proposes to issue and sell to the one or more underwriters named in Schedule I
hereto (the "Underwriters"), including H.J. Meyers & Co., Inc. (H.J. Meyers)
and Northeast Securities Inc. (Northeast) (collectively the "Representatives" or
"you"), the representatives of the several Underwriters, pursuant to this
Underwriting Agreement (this "Agreement"):
(1) an aggregate of 800,000 Units (the "Units"), each
consisting of one share of the Common Stock, $.01 par value, of the
Company (the "Common Stock"), and one Class A Common Stock Purchase
Warrant (the "Class A Warrants"), each exercisable to purchase one
share of Common Stock at any time commencing on the date of the
business combination (the "Business Combination"), and ending on the
fifth
<PAGE> 2
anniversary of the effective date of the Registration Statement (the
"Effective Date"); and
(2) an aggregate of 320,000 Class B Unit Purchase Warrants
(the "Class B Warrants"), exercisable to purchase one Unit at any time
commencing on the date of the Business Combination and ending on the
fifth anniversary of the Effective Date.
The Class A Warrant exercise price, subject to adjustment as described in the
agreement providing for the Warrants (the "Warrant Agreement"), shall be $9.00
per share. The Class B Warrant exercise price, subject to adjustment as
described in the Warrant Agreement, shall be $0.125 per Unit. In addition, the
Company proposes to grant to the Underwriters the Over-Allotment Option,
referred to and defined in Section 2(c), to purchase all or any part of an
aggregate of 120,000 additional Units and 48,000 additional Class B Warrants,
and to issue to you the Representative's Warrant, referred to and defined in
Section 12, to purchase certain further additional Units and Class B Warrants.
The 800,000 shares of Common Stock comprising the Units, together with
the 120,000 additional shares of Common Stock comprising the Units that are the
subject of the Over-Allotment Option, are herein collectively called the
"Shares." The Units, the Shares, the Warrants (including the Warrants comprising
the Units, the additional Warrants comprising the Units that are the subject of
the Over-Allotment Option and the Warrants issuable upon exercise of the
Representative's Warrant), the shares of Common Stock issuable upon exercise of
the Warrants and the shares of Common Stock issuable upon exercise of the
Representative's Warrant, are herein collectively called the "Securities." The
term "Representative's Counsel" shall mean the firm of Harter, Secrest & Emery,
counsel to the Representative, and the term "Company Counsel" shall mean the
firm of Campbell & Fleming, P.C., counsel to the Company. Unless the context
otherwise requires, all references herein to a "Section" shall mean the
appropriate Section of this Agreement.
You have advised the Company that the Underwriters desire to purchase
the Units and Class B Warrants as herein provided, and that you have been
authorized to execute this Agreement as representative of the Underwriters. The
Company confirms the agreements made by it with respect to the purchase of the
Units and Class B Warrants by the Underwriters, as follows:
1. REPRESENTATIONS AND WARRANTIES.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, each Underwriter that:
- 2 -
<PAGE> 3
(A) REGISTRATION STATEMENT; PROSPECTUS. A registration
statement (File No. 333-3252) on Form SB-2 relating to the public offering of
the Securities (the "Offering"), including a preliminary form of prospectus,
copies of which have heretofore been delivered to you, has been prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations of the Securities and
Exchange Commission (the "Commission") promulgated thereunder (the "Rules and
Regulations"), and has been filed with the Commission under the Act. As used
herein, the term "Preliminary Prospectus" shall mean each prospectus filed
pursuant to Rule 430 or Rule 424(a) of the Rules and Regulations. The
Preliminary Prospectus bore the legend required by Item 501 of Regulation S-K
under the Act and the Rules and Regulations. Such registration statement
(including all financial statements, schedules and exhibits) as amended at the
time it becomes effective and the final prospectus included therein are herein
respectively called the "Registration Statement" and the "Prospectus," except
that (i) if the prospectus first filed by the Company pursuant to Rule 424(b) or
Rule 430A of the Rules and Regulations shall differ from such final prospectus
as then amended, then the term "Prospectus" shall instead mean the prospectus
first filed pursuant to said Rule 424(b) or Rule 430A, and (ii) if such
registration statement is amended or such prospectus is amended or supplemented
after the effective date of such registration statement and prior to the Option
Closing Date (as defined in Section 2(c)), then (unless the context necessarily
requires otherwise) the term "Registration Statement" shall include such
registration statement as so amended, and the term "Prospectus" shall include
such prospectus as so amended or supplemented, as the case may be.
(B) CONTENTS OF REGISTRATION STATEMENT. On the Effective Date,
and at all times subsequent thereto for so long as the delivery of a prospectus
is required in connection with the offering or sale of any of the Securities,
(i) the Registration Statement and the Prospectus shall in all respects conform
to the requirements of the Act and the Rules and Regulations, and (ii) neither
the Registration Statement nor the Prospectus shall include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make statements therein not misleading; provided,
however, that the Company makes no representations, warranties or agreements as
to information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Underwriters specifically for
use in the preparation thereof. It is understood that the statements set forth
in the Prospectus with respect to stabilization, the material set forth under
the caption "UNDERWRITING," and the identity of counsel to the Representative
under the caption "LEGAL MATTERS," constitute the only information furnished in
writing by or on behalf of the Underwriters for inclusion in the Registration
Statement and Prospectus, as the case may be.
(C) ORGANIZATION, STANDING, ETC. The Company and each
subsidiary of the Company (a "Subsidiary") has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Delaware with full power and corporate authority to own its properties and
conduct its business as described in the Prospectus, and is duly qualified or
licensed to do business as a foreign corporation and is in good standing in
- 3 -
<PAGE> 4
each other jurisdiction in which the nature of its business or the character or
location of its properties requires such qualification, except where failure so
to qualify will not materially affect the business, properties or financial
condition of the Company or such Subsidiary, as the case may be.
(D) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company as of the date of the Prospectus is as set forth in
the Prospectus under the caption "CAPITALIZATION". The shares of Common Stock
issued and outstanding on the Effective Date have been duly authorized, validly
issued and are fully paid and non-assessable. No options, warrants or other
rights to purchase, agreements or other obligations to issue, or agreements or
other rights to convert any obligation into, any shares of capital stock of the
Company or any Subsidiary have been granted or entered into by the Company or
such Subsidiary, except as expressly described in the Prospectus. The Securities
conform to all statements relating thereto contained in the Registration
Statement or the Prospectus.
(E) SECURITIES. The Securities and the Representative's
Warrant have been duly authorized and, when issued and delivered against payment
therefor pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights of any security
holder of the Company. Neither the filing of the Registration Statement nor the
offering or sale of any of the Securities or the Representative's Warrant as
contemplated by this Agreement gives rise to any rights, other than those which
have been waived or satisfied, for or relating to the registration of any
securities of the Company, except as described in the Registration Statement.
(F) AUTHORITY, ETC. This Agreement, the Warrant Agreement, the
Representatives' Warrant, and the Stock Escrow Agreement, the Financial
Consulting Agreement and the M/A Agreement (each as hereinafter defined), have
been duly and validly authorized, executed and delivered by the Company and,
assuming due execution of this Agreement and such other agreements by the other
party or parties hereto and thereto, constitute valid and binding obligations of
the Company enforceable against the Company in accordance with their respective
terms. The Company has full right, power and lawful authority to authorize,
issue and sell the Securities and the Representative's Warrant on the terms and
conditions set forth herein. All consents, approvals, authorizations and orders
of any court or governmental authority which are required in connection with the
authorization, execution and delivery of such agreements, the authorization,
issue and sale of the Securities and the Representative's Warrant, and the
consummation of the transactions contemplated hereby have been obtained.
(G) NO CONFLICT. Except as described in the Prospectus,
neither the Company nor any Subsidiary is in violation, breach or default of or
under, and consummation of the transactions hereby contemplated and fulfillment
of the terms of this Agreement will not conflict with or result in a breach of,
any of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance pursuant to the
terms of, any contract, indenture, mortgage, deed of trust, loan agreement or
- 4 -
<PAGE> 5
other material agreement or instrument to which the Company or such Subsidiary
is a party or by which the Company or such Subsidiary may be bound or to which
any of the property or assets of the Company or such Subsidiary are subject, nor
will such action result in any violation of the provisions of the Certificate of
Incorporation or the By-laws of the Company or any Subsidiary, or any statute,
order, rule or regulation applicable to the Company or any Subsidiary of any
court or governmental authority.
(H) ASSETS. Subject to the qualifications stated in the
Prospectus: (i) the Company and each Subsidiary, as the case may be, has good
and marketable title to all properties and assets described in the Prospectus as
owned by it, including without limitation intellectual property, free and clear
of all liens, charges, encumbrances or restrictions, except such as are not
materially significant or important in relation to its business; (ii) all of the
material leases and subleases under which the Company or any Subsidiary is the
lessor or sublessor of properties or assets or under which the Company or any
Subsidiary holds properties or assets as lessee or sublessee, as described in
the Prospectus, are in full force and effect and, except as described in the
Prospectus, neither the Company nor any Subsidiary is in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by any party adverse to the rights of
the Company or such Subsidiary as lessor, sublessor, lessee or sublessee under
any such lease or sublease, or affecting or questioning the right of the Company
or such Subsidiary to continued possession of the leased or subleased premises
or assets under any such lease or sublease, except as described or referred to
in the Prospectus; and (iii) the Company and each Subsidiary, as the case may
be, owns or leases all such properties, described in the Prospectus, as are
necessary to its operations as now conducted and, except as otherwise stated in
the Prospectus, as proposed to be conducted as set forth in the Prospectus.
(I) INDEPENDENT ACCOUNTANTS. BDO Seidman, LLP, who have given
their report on certain financial statements filed or to be filed with the
Commission as a part of the Registration Statement, and which are included in
the Prospectus, are with respect to the Company, independent public accountants
as required by the Act and the Rules and Regulations.
(J) FINANCIAL STATEMENTS. The financial statements and
schedules, together with related notes, set forth in the Registration Statement
and the Prospectus present fairly the financial position, results of operations
and cash flows of the Company and the Predecessor on the basis stated in the
Registration Statement, at the respective dates and for the respective periods
to which they apply. Such financial statements, schedules and related notes have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the entire period involved, except to
the extent disclosed therein. The financial information for each of the periods
presented in the Registration Statement and the Prospectus present a true and
complete statement of the financial position of the Company and the Predecessor
at the dates indicated and the results of their operations for the periods then
ended. The Summary Financial Information and Selected Financial Data included in
the Registration Statement and the Prospectus present fairly the information
- 5 -
<PAGE> 6
shown therein and have been prepared on a basis consistent with that of the
audited financial statements included in the Registration Statement and the
Prospectus.
(K) NO MATERIAL CHANGE. Except as otherwise set forth in the
Prospectus, subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, neither the Company nor any
Subsidiary has: (i) incurred any liability or obligation, direct or contingent,
or entered into any transaction, which is material to its business; (ii)
effected or experienced any change in its capital stock; (iii) issued any
options, warrants or other rights to acquire its capital stock; (iv) declared,
paid or made any dividend or distribution of any kind on its capital stock; or
(v) effected or experienced any material adverse change, or development
involving a prospective material adverse change, in its business, property,
operations, condition (financial or otherwise) or earnings.
(L) LITIGATION. Except as set forth in the Prospectus, there
is not now pending nor, to the best knowledge of the Company, threatened, any
action, suit or proceeding (including any related to environmental matters or
discrimination on the basis of age, sex, religion or race), whether or not in
the ordinary course of business, to which the Company or any Subsidiary is a
party or its business or property is subject, before or by any court or
governmental authority, which might result in any material adverse change in the
business, property, operations, condition (financial or otherwise) or earnings
of the Company or such Subsidiary; and no labor disputes involving the employees
of the Company or any Subsidiary exist which might be expected to affect
materially adversely the business, property, operations, condition (financial or
otherwise) or earnings of the Company or such Subsidiary.
(M) NO UNLAWFUL PROSPECTUSES. The Company has not distributed
any prospectus or other offering material in connection with the Offering
contemplated herein, other than any Preliminary Prospectus, the Prospectus or
other material permitted by the Act and the Rules and Regulations.
(N) TAXES. Except as disclosed in the Prospectus, the Company
and each Subsidiary has filed all necessary federal, state, local and foreign
income and franchise tax returns and has paid all taxes shown as due thereon;
and there is no tax deficiency which has been or, to the best knowledge of the
Company, might be asserted against the Company or any Subsidiary.
(O) LICENSES, ETC. The Company and each Subsidiary has in
effect all necessary licenses, permits and other governmental authorizations
currently required for the conduct of its business or the ownership of its
property, as described in the Prospectus, and is in all material respects in
compliance therewith. The Company owns or possesses adequate rights to use all
material patents, patent applications, trademarks, mark registrations,
copyrights and licenses disclosed in the Prospectus and/or which are necessary
for the conduct of such business, and except as disclosed in the Prospectus has
not received any notice of conflict with the asserted rights of others in
respect thereof. To the best knowledge
- 6 -
<PAGE> 7
of the Company, none of the activities or business of the Company or any
Subsidiary is in violation of, or would cause the Company or such Subsidiary to
violate, any law, rule, regulation or order of the United States, any state,
county or locality, the violation of which would have a material adverse effect
upon the business, property, operations, condition (financial or otherwise) or
earnings of the Company or such Subsidiary.
(P) NO PROHIBITED PAYMENTS. Neither the Company nor any
Subsidiary nor the Predecessor have, directly or indirectly at any time: (i)
made any contribution to any candidate for political office, or failed to
disclose fully any such contribution in violation of law; or (ii) made any
payment to any federal, state, local or foreign governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments or contributions required or allowed by applicable law. The
Company's internal accounting controls and procedures are sufficient to cause
the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(Q) TRANSFER TAXES. On the Closing Dates (as defined in
Section 2(d)), all transfer and other taxes (including franchise, capital stock
and other tax, other than income taxes, imposed by any jurisdiction), if any,
which are required to be paid in connection with the sale and transfer of the
Units to the Underwriters hereunder shall have been fully paid or provided for
by the Company, and all laws imposing such taxes shall have been fully complied
with.
(R) EXHIBITS. All contracts and other documents of the Company
or any Subsidiary which are, under the Rules and Regulations, required to be
filed as exhibits to the Registration Statement have been so filed.
(S) SUBSIDIARIES. Except as described in the Prospectus, the
Company has no Subsidiaries. All of the capital stock of each Subsidiary is
owned by the Company.
(T) SHAREHOLDER AGREEMENTS, REGISTRATION RIGHTS. Except as
described in the Prospectus, no security holder of the Company has any rights
with respect to the purchase, sale or registration of any Securities, and all
registration rights with respect to the Offering have been effectively waived.
(U) INVESTMENT COMPANY STATUS. The Company is in compliance or
has secured a suitable exemption from the Investment Company Act of 1940.
(V) SECURITIES ACT RULE 419. The Company is exempt from the
provisions of Rule 419 of the Securities Act.
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<PAGE> 8
2. PURCHASE, DELIVERY AND SALE OF UNITS.
(A) PURCHASE PRICE FOR UNITS. The Units and Class B Warrants
shall be sold to and purchased by the Underwriters hereunder at the purchase
price of $9.40 per Unit (that being the public offering price of $10.00 per Unit
less an underwriting discount of 6 percent) and $5.058 per Class B Warrant (that
being the public offering price of $5.62 per Class B Warrant less an
underwriting discount of 10 percent) (respectively the "Purchase Price").
(B) FIRM UNITS.
(i) Subject to the terms and conditions of this Agreement,
and on the basis of the representations, warranties and agreements herein
contained the Company agrees to issue and sell to the Underwriters, severally
and not jointly, and each of the Underwriters agrees, severally and not jointly,
to buy from the Company at the Purchase Price, the number of Units and Class B
Warrants set forth opposite such Underwriter's name in Schedule I hereto
(collectively the "Firm Units").
(ii) Delivery of the Firm Units against payment therefor
shall take place at the offices of H.J. Meyers, 1895 Mt. Hope Avenue, Rochester,
New York 14620 (the "Representative's Offices") (or at such other place as may
be designated by agreement between you and the Company) at 10:00 a.m., New York
time, on [CLOSING DATE], or at such later time and date, not later than ten
banking days after the Effective Date, as you may designate (such time and date
of payment and delivery for the Firm Units being herein called the "First
Closing Date"). Time shall be of the essence and delivery of the Firm Units at
the time and place specified in this Section 2(b)(ii) is a further condition to
the obligations of the Underwriters hereunder.
(C) OPTION UNITS.
(i) In addition, subject to the terms and conditions of
this Agreement, and on the basis of the representations, warranties and
agreements herein contained, the Company hereby grants to the Underwriters an
option (the "Over-Allotment Option") to purchase from the Company all or any
part of an aggregate of an additional 120,000 Units and 48,000 Class B Warrants
at the Purchase Price (collectively the "Option Units"). In the event that the
Over-Allotment Option is exercised by the Underwriters in whole or in part, each
Underwriter shall purchase Option Units in the same proportion as the number of
Firm Units purchased by it bore to the total number of Firm Units, unless you
and the other Underwriters shall otherwise agree.
(ii) The Over-Allotment Option may be exercised by the
Underwriters, in whole or in part, within 30 days after the Effective Date, upon
notice by you to the Company advising it of the number of Option Units as to
which the Over-Allotment Option is being exercised, the names and denominations
in which the certificates for the Shares and
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<PAGE> 9
the Warrants comprising such Option Units are to be registered, and the time and
date when such certificates are to be delivered. Such time and date shall be
determined by you but shall not be less than four nor more than ten banking days
after exercise of the Over-Allotment Option, nor in any event prior to the First
Closing Date (such time and date being herein called the "Option Closing Date").
Delivery of the Option Units against payment therefor shall take place at the
Representative's Offices. Time shall be of the essence and delivery at the time
and place specified in this Section 2(c)(ii) is a further condition to the
obligations of the Underwriters hereunder.
(iii) The Over-Allotment Option may be exercised only to
cover over-allotments in the sale by the Underwriters of Firm Units.
(D) DELIVERY OF CERTIFICATES; PAYMENT.
(i) The Company shall make the certificates for the Shares
and the Warrants comprising the Units to be purchased hereunder available to you
for checking at least one banking day prior to the First Closing Date or the
Option Closing Date (each, a "Closing Date"), as the case may be. The
certificates shall be in such names and denominations as you may request at
least two banking days prior to the relevant Closing Date. Time shall be of the
essence and the availability of the certificates at the time and place specified
in this Section 2(d)(i) is a further condition to the obligations of the
Underwriters hereunder.
(ii) On the First Closing Date, the Company shall deliver
to you for the several accounts of the Underwriters definitive engraved
certificates in negotiable form representing all of the Shares and the Warrants
comprising the Firm Units to be sold by the Company, against payment of the
Purchase Price therefor by you for the several accounts of the Underwriters, by
certified or bank cashier's checks payable in next day funds to the order of the
Company.
(iii) In addition, if and to the extent that the
Underwriters exercise the Over-Allotment Option, then on the Option Closing
Date, the Company shall deliver to you for the several accounts of the
Underwriters definitive engraved certificates in negotiable form representing
the Units, Shares and the Warrants comprising the Option Units to be sold by the
Company, against payment of the Purchase Price therefor by you for the several
accounts of the Underwriters, by certified or bank cashier's checks payable in
next day funds to the order of the Company.
(iv) It is understood that the Underwriters propose to
offer the Units and Class B Warrants to be purchased hereunder to the public,
upon the terms and conditions set forth in the Registration Statement, after the
Registration Statement becomes effective.
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<PAGE> 10
3. COVENANTS.
COVENANTS OF THE COMPANY. The Company covenants and agrees with each
Underwriter that:
(A) REGISTRATION.
(i) The Company shall use its best efforts to cause the
Registration Statement to become effective and, upon notification from the
Commission that the Registration Statement has become effective, shall so advise
you and shall not at any time, whether before or after the Effective Date, file
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus of which you shall not previously have been advised and furnished
with a copy, or to which you or Representative's Counsel shall have objected in
writing, or which is not in compliance with the Act and the Rules and
Regulations. At any time prior to the later of (A) the completion by the
Underwriters of the distribution of the Units and Class B Warrants contemplated
hereby (but in no event more than nine months after the Effective Date), and (B)
25 days after the Effective Date, the Company shall prepare and file with the
Commission, promptly upon your request, any amendments to the Registration
Statement or any amendments or supplements to the Prospectus which, in your
reasonable opinion, may be necessary or advisable in connection with the
distribution of the Units and Class B Warrants.
(ii) Promptly after you or the Company shall have been
advised thereof, you shall advise the Company or the Company shall advise you,
as the case may be, and confirm such advice in writing, of (A) the receipt of
any comments of the Commission, (B) the effectiveness of any post-effective
amendment to the Registration Statement, (C) the filing of any supplement to the
Prospectus or any amended Prospectus, (D) any request made by the Commission for
amendment of the Registration Statement or amendment or supplementing of the
Prospectus, or for additional information with respect thereto, or (E) the
issuance by the Commission or any state or regulatory body of any stop order or
other order denying or suspending the effectiveness of the Registration
Statement, or preventing or suspending the use of any Preliminary Prospectus, or
suspending the qualification of the Securities for offering in any jurisdiction,
or otherwise preventing or impairing the Offering, or the institution or threat
of any proceeding for any of such purposes. The Company and you shall not
acquiesce in such order or proceeding, and shall instead actively defend such
order or proceeding, unless the Company and you agree in writing to such
acquiescence.
(iii) The Company has caused to be delivered to you copies
of each Preliminary Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriters and selected dealers to use the Prospectus
in connection with the sale of the Units and Class B Warrants for such period as
in the opinion of Representative's Counsel the use thereof is required to comply
with the applicable provisions of the Act and the Rules and Regulations. In case
of the happening, at any time within such period as a prospectus is
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<PAGE> 11
required under the Act to be delivered in connection with sales by an
underwriter or dealer, of any event of which the Company has knowledge and which
materially affects the Company or the Securities, or which in the opinion of
Company Counsel or of Representative's Counsel should be set forth in an
amendment to the Registration Statement or an amendment or supplement to the
Prospectus in order to make the statements made therein not then misleading, in
light of the circumstances existing at the time the Prospectus is required to be
delivered to a purchaser of the Units or Class B Warrants, or in case it shall
be necessary to amend or supplement the Prospectus to comply with the Act or the
Rules and Regulations, the Company shall notify you promptly and forthwith
prepare and furnish to the Underwriters copies of such amended Prospectus or of
such supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
shall not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements in the Prospectus, in
the light of the circumstances under which they are made, not misleading. The
preparation and furnishing of each such amendment to the Registration Statement,
amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriters, except that in the case that the
Underwriters are required, in connection with the sale of the Units or Class B
Warrants, to deliver a prospectus nine months or more after the Effective Date,
the Company shall upon your request and at the expense of the Underwriters,
amend the Registration Statement and amend or supplement the Prospectus, or file
a new registration statement on Form SB-2 (if applicable) or Form S-1, if
necessary, and furnish the Underwriters with reasonable quantities of
prospectuses complying with section 10(a)(3) of the Act.
(iv) The Company shall comply with the Act, the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder in connection with
the offering and issuance of the Securities.
(B) BLUE SKY. The Company shall, at its own expense, use its
best efforts to qualify or register the Securities for sale under the securities
or "blue sky" laws of such jurisdictions as you may designate, and shall make
such applications and furnish such information to Representative's Counsel as
may be required for that purpose, and shall comply with such laws; provided,
however, that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent to service
of process in any jurisdiction in any action other than one arising out of the
offering or sale of the Units. The Company shall bear all of the expense of such
qualifications and registrations, including without limitation the legal fees
and disbursements of Representative's Counsel, which fees, exclusive of
disbursements, shall not exceed $35,000 (unless otherwise agreed). After each
Closing Date the Company shall, at its own expense, from time to time prepare
and file such statements and reports as may be required to continue each such
qualification in effect for so long a period as you may reasonably request.
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<PAGE> 12
(C) EXCHANGE ACT REGISTRATION. The Company shall, at its own
expense, prepare and file with the Commission a registration statement (on Form
8-A or Form 10) under section 12(g) of the Exchange Act concurrently with the
completion of the Offering or promptly thereafter, but in no event later than 45
days from the Effective Date, and shall use its best efforts to cause such
registration statement to be declared effective and maintained in effect for at
least five years from the Effective Date.
(D) PROSPECTUS COPIES. The Company shall deliver to you on or
before the First Closing Date two signed copies of the Registration Statement
including all financial statements, schedules and exhibits filed therewith, and
of all amendments thereto. The Company shall deliver to or on the order of the
Underwriters, from time to time until the Effective Date, as many copies of any
Preliminary Prospectus filed with the Commission prior to the Effective Date as
the Underwriters may reasonably request. The Company shall deliver to the
Underwriters on the Effective Date, and thereafter for so long as a prospectus
is required to be delivered under the Act, from time to time, as many copies of
the Prospectus, in final form, or as thereafter amended or supplemented, as the
Underwriters may from time to time reasonably request.
(E) AMENDMENTS AND SUPPLEMENTS. The Company shall, promptly
upon your request, prepare and file with the Commission any amendments to the
Registration Statement, and any amendments or supplements to the Preliminary
Prospectus or the Prospectus, and take any other action which in the reasonable
opinion of Representative's Counsel may be reasonably necessary or advisable in
connection with the distribution of the Units and Class B Warrants, and shall
use its best efforts to cause the same to become effective as promptly as
possible.
(F) CERTAIN MARKET PRACTICES. The Company has not taken, and
shall not take, directly or indirectly, any action designed, or which might
reasonably be expected, to cause or result in, or which has constituted, the
stabilization or manipulation of the price of the Securities to facilitate the
sale or resale thereof.
(G) CERTAIN REPRESENTATIONS. Neither the Company nor any
representative of the Company has made or shall make any written or oral
representation in connection with the Offering and sale of the Securities or the
Representative's Warrant which is not contained in the Prospectus, which is
otherwise inconsistent with or in contravention of any thing contained in the
Prospectus, or which shall constitute a violation of the Act, the Rules and
Regulations, the Exchange Act or the rules and regulations promulgated under the
Exchange Act.
(H) CONTINUING REGISTRATION OF WARRANTS AND UNDERLYING COMMON
STOCK. For so long as any Warrant is outstanding, the Company shall, at its own
expense: (i) use its best efforts to cause post-effective amendments to the
Registration Statement, or new registration statements (which may be on Forms
SB-2, S-2 or S-3, as the case may be) relating to the Warrants and the Common
Stock and Units underlying the Warrants to become effective
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<PAGE> 13
in compliance with the Act and without any lapse of time between the
effectiveness of the Registration Statement and of any such post-effective
amendment or new registration statement; (ii) cause a copy of each Prospectus,
as then amended, to be delivered to each holder of record of a Warrant; (iii)
furnish to the Underwriters and dealers as many copies of each such Prospectus
as the Underwriters or dealers may reasonably request; and (iv) maintain the
"blue sky" qualification or registration of the Warrants and the Common Stock
and Units underlying the Warrants, or have a currently available exemption
therefrom, in each jurisdiction in which the Securities were so qualified or
registered for purposes of the Offering. In addition, for so long as any Warrant
is outstanding, the Company shall promptly notify you of any material change in
the business, financial condition or prospects of the Company.
(I) USE OF PROCEEDS. The Company shall apply the net proceeds
from the sale of the Units substantially for the purposes set forth in the
Prospectus under the caption "USE OF PROCEEDS," and shall file such reports with
the Commission with respect to the sale of the Units and the application of the
proceeds therefrom as may be required pursuant to Rule 463 of the Rules and
Regulations.
(J) TWELVE MONTHS' EARNINGS STATEMENT. The Company shall make
generally available to its security holders and deliver to you as soon as it is
practicable so to do, but in no event later than 90 days after the end of twelve
months after the close of its current fiscal quarter, an earnings statement
(which need not be audited) covering a period of at least twelve consecutive
months beginning after the Effective Date, which shall satisfy the requirements
of section 11(a) of the Act.
(K) NASDAQ, EXCHANGE LISTINGS, ETC. Within 10 days after the
Effective Date, the Company shall also use its best efforts to list itself in
Moody's OTC Industrial Manual or Standard & Poor's Corporation Records and to
cause such listing to be maintained for two years. After the Business
Combination, the Company shall immediately make all filings required to seek
approval for the quotation of the Securities on The Nasdaq Stock Market
("NASDAQ"), the NASDAQ-NNM or the New York Stock Exchange ("NYSE"), and shall
use its best efforts to effect and maintain such approval for at least two
years.
(L) BOARD OF DIRECTORS. The Company shall maintain a Board of
Directors comprised of a size and structure as the Company and Underwriters
jointly agree until completion of the Business Combination.
(M) PERIODIC REPORTS. For so long as the Company is a
reporting company under section 12(g) or section 15(d) of the Exchange Act, the
Company shall, at its own expense, furnish to its shareholders an annual report
(including financial statements audited by certified public accountants) in
reasonable detail. In addition, during the period ending five years from the
date hereof, the Company shall, at its own expense, furnish to you: (i) within
90 days of the end of each fiscal year, a balance sheet of the Company and its
Subsidiaries as at the end of such fiscal year, together with statements of
income, stockholders' equity and cash flows of the Company and its Subsidiaries
as at the end of such
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<PAGE> 14
fiscal year, all in reasonable detail and accompanied by a copy of the
certificate or report thereon of certified public accountants; (ii) as soon as
they are available, a copy of all reports (financial or otherwise) distributed
to security holders; (iii) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or filed with the
Commission; and (iv) such other information as you may from time to time
reasonably request. The financial statements referred to herein shall be on a
consolidated basis to the extent the accounts of the Company and its
Subsidiaries are consolidated in reports furnished to its shareholders
generally. In addition, during the period ending one year from the date hereof,
the company shall, at its own expense, furnish you monthly with Depository Trust
Company stock transfer sheets.
(N) CERTAIN OPTIONS. For a period of 90 days following the
First Closing Date, the Company shall not, without your prior written consent,
grant any options, warrants or other rights to purchase shares of Common Stock
at a price less than the initial public Offering price of the Shares comprising
the Units and Class B Warrants.
(O) WARRANT SOLICITATION. Upon the exercise of any Warrants on
or after the first anniversary of the Effective Date, the Company shall pay you
a commission of 10 percent of the aggregate exercise price of such Warrants, 8
percent of which may be reallowed by you to the dealer who solicited the
exercise (which may also be you), if: (i) the market price of the Common Stock
is greater than the exercise price of the Warrant on the date of exercise; (ii)
the exercise of the Warrant was solicited by a member of the National
Association of Securities Dealers, Inc. ("NASD"); (iii) the Warrant is not held
in a discretionary account; (iv) the disclosure of the compensation arrangements
has been made in documents provided to customers, both as part of the Offering
and at the time of exercise; and (v) the solicitation of the Warrant was not in
violation of Rule 10b-6 promulgated under the Exchange Act. The Company agrees
not to solicit the exercise of any Warrant other than through you, and shall not
authorize any other dealer to engage in such solicitation without your prior
written consent. No commission shall be paid to you on any Warrant exercised
prior to the first anniversary of the Effective Date, or on any Warrant
exercised at any time without solicitation by you.
(P) AVAILABLE SHARES. The Company shall reserve and at all
times keep available that maximum number of its authorized but unissued
Securities which are issuable upon exercise of the Warrants, the
Representative's Warrant, and the Warrants issuable upon exercise of the
Representative's Warrant, in each case taking into account the anti-dilution
provisions thereof.
(Q) INVESTMENT BANKING ADVISOR. The Company shall engage an
investment banking firm to advise the Company concerning potential business
combinations.
(R) STOCK ESCROW AGREEMENT. On or before the Effective Date,
the Company shall, and shall cause all of its current shareholders to, execute
and deliver to you an agreement with American Stock Transfer & Trust Company (or
other escrow agent
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<PAGE> 15
mutually acceptable to the Company and you), in the form previously delivered to
the Company by you, regarding the escrow of all shares of Common Stock and
Series A Preferred Stock owned by such shareholders (the "Stock Escrow
Agreement").
(S) FINANCIAL CONSULTING AGREEMENT. On the First Closing Date
and simultaneously with the delivery of the Firm Units, the Company shall
execute and deliver to you an agreement with you, in the form previously
delivered to the Company by you, regarding your services as a financial
consultant to the Company (the "Financial Consulting Agreement").
(T) M/A AGREEMENT. On the First Closing Date and
simultaneously with the delivery of the Firm Units, the Company shall execute
and deliver to you an agreement with you, in the form previously delivered to
the Company by you, regarding mergers, acquisitions, joint ventures and certain
other forms of transactions (the "M/A Agreement").
(U) MANAGEMENT. On each Closing Date, management of the
Company shall consist of Edward L. Kramer as Chairman of the Board, William L.
Remley as President, and Richard C. Hoffman as both Secretary and Treasurer.
Prior to the Effective Date the Company shall have obtained "key man" life
insurance coverage on the life of each of such officers, naming the Company as
beneficiary and having a face value of at least $1,000,000, for terms, and with
an insurance agency, mutually agreed upon by the Company and you. The Company
shall use its best efforts to maintain such insurance during the three-year
period commencing on the First Closing Date.
(V) PUBLIC RELATIONS. Prior to the Effective Date the Company
shall have retained a public relations firm acceptable to you, and shall
continue to retain such firm, or an alternate firm acceptable to you, for a
period of two years.
(W) BOUND VOLUMES. Within 90 days from the First Closing Date,
the Company shall deliver to you, at the Company's expense, three bound volumes
in form and content acceptable to you, containing the Registration Statement and
all exhibits filed therewith and all amendments thereto, and all other
agreements, correspondence, filings, certificates and other documents filed
and/or delivered in connection with the Offering.
4. CONDITIONS TO UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Units which they have agreed to
purchase hereunder are subject to the accuracy (as of the date hereof and as of
each Closing Date) of and compliance with the representations and warranties of
the Company contained herein, the performance by the Company of all of their
obligations hereunder, the execution, delivery and performance by each of the
parties thereto of all of their obligations under the Stock Escrow Agreement,
and the following further conditions:
(A) EFFECTIVE REGISTRATION STATEMENT; NO STOP ORDER. The
Registration Statement shall have become effective and you shall have received
notice thereof not later
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<PAGE> 16
than 6:00 p.m., New York time, on the date of this Agreement, or at such later
time or on such later date as to which you may agree in writing. In addition, on
each Closing Date (i) no stop order denying or suspending the effectiveness of
the Registration Statement shall be in effect, and no proceedings for that or
any similar purpose shall have been instituted or shall be pending or, to your
knowledge or to the knowledge of the Company, shall be contemplated by the
Commission, and (ii) all requests on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Representative's Counsel.
(B) OPINION OF COMPANY COUNSEL. On the First Closing Date, you
shall have received the opinion, dated as of the First Closing Date, of Company
Counsel, in form and substance satisfactory to Representative's Counsel, to the
effect that:
(i) the Company and each Subsidiary has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with full power and corporate
authority to own its properties and conduct its business as described
in the Prospectus, and is duly qualified or licensed to do business as
a foreign corporation and is in good standing in each other
jurisdiction in which the nature of its business or the character or
location of its properties requires such qualification, except where
failure so to qualify will not materially affect the business,
properties or financial condition of the Company or such Subsidiary;
(ii) to the best knowledge of such counsel, (A) the
Company and each Subsidiary has obtained, or is in the process of
obtaining, all necessary licenses, permits and other governmental
authorizations currently required for the conduct of its business or
the ownership of its property, as described in the Prospectus, (B) such
obtained licenses, permits and other governmental authorizations are in
full force and effect, and (C) the Company and each Subsidiary is, in
all material respects, in compliance therewith;
(iii) (A) the authorized capitalization of the Company as
of the date of the Prospectus was as is set forth in the Prospectus
under the caption "CAPITALIZATION;" (B) all of the shares of Common
Stock now outstanding have been duly authorized and validly issued, are
fully paid and non-assessable, conform to the description thereof
contained in the Prospectus, have not been issued in violation of the
preemptive rights of any shareholder and, except as described in the
Prospectus, are not subject to any restrictions upon the voting or
transfer thereof; (C) all of the Shares and all of the Warrants
comprising the Units have been duly authorized and, when paid for as
provided herein, shall be validly issued, fully paid and
non-assessable, shall not have been issued in violation of the
preemptive rights of any shareholder, and no personal liability shall
attach to the ownership thereof; (D) the shareholders of the Company do
not have any preemptive rights or other rights to
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<PAGE> 17
subscribe for or purchase, and there are no restrictions upon the
voting or transfer of, any of the Securities; (E) the Shares and the
Warrants comprising the Units, the Warrant Agreement and the
Representative's Warrant conform to the respective descriptions thereof
contained in the Prospectus; (F) all prior sales of the Company's
securities have been made in compliance with, or under an exemption
from, the Act and applicable state securities laws; (G) a sufficient
number of shares of Common Stock has been reserved, for all times when
any of the Warrants (including the Warrants issuable upon exercise of
the Representative's Warrant) are outstanding, for issuance upon
exercise of all of the Warrants; and (H) to the best knowledge of such
counsel, neither the filing of the Registration Statement nor the
offering or sale of the Units as contemplated by this Agreement gives
rise to any registration rights or other rights, other than those which
have been effectively waived or satisfied, for or relating to the
registration of any securities of the Company;
(iv) the certificates evidencing the Units, the Shares and
the Warrants comprising the Units and Warrants are each in valid and
proper legal form; and the Warrants are exercisable for shares of
Common Stock or Units in accordance with the terms of the Warrants and
at the prices therein provided for;
(v) this Agreement, the Warrant Agreement, the
Representative's Warrant, the Stock Escrow Agreement, the Financial
Consulting Agreement and the M/A Agreement have been duly and validly
authorized, executed and delivered by the Company and (assuming due
execution and delivery thereof by the Representative and/or American
Stock Transfer & Trust Company, as the case may be) all of such
agreements are, or when duly executed shall be, the valid and legally
binding obligations of the Company, enforceable in accordance with
their respective terms (except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the rights of creditors
generally); provided, however, that no opinion need be expressed as to
the enforceability of the indemnity provisions contained in Section 6
or the contribution provisions contained in Section 7;
(vi) to the best knowledge of such counsel, (A) there is
no pending, threatened or contemplated legal or governmental proceeding
affecting the Company or any Subsidiary which could materially and
adversely affect the business, property, operations, condition
(financial or otherwise) or earnings of the Company or such Subsidiary,
or which questions the validity of the Offering, the Securities, this
Agreement, the Warrant Agreement, the Representative's Warrant, the
Stock Escrow Agreement, the Financial Consulting Agreement or the M/A
Agreement, or of any action taken or to be taken by the Company
pursuant thereto; and (B) there is no legal or governmental
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<PAGE> 18
proceeding or regulation required to be described or referred to in the
Registration Statement which is not so described or referred to;
(vii) to the best knowledge of such counsel, (A) the
Company is not in violation of or default under this Agreement, the
Warrant Agreement, the Representative's Warrant, the Stock Escrow
Agreement, the Financial Consulting Agreement or the M/A Agreement; and
(B) the execution and delivery hereof and thereof and the incurrence of
the obligations herein and therein set forth and the consummation of
the transactions herein or therein contemplated shall not result in a
violation of, or constitute a default under, the Certificate of
Incorporation or By-laws of the Company, or any material obligation,
agreement, covenant or condition contained in any bond, debenture, note
or other evidence of indebtedness, or in any material contract,
indenture, mortgage, loan agreement, lease, joint venture or other
agreement or instrument to which the Company is a party or by which its
assets are bound, or any material order, rule, regulation, writ,
injunction or decree of any government, governmental instrumentality or
court;
(viii) the Registration Statement has become effective
under the Act, and to the best knowledge of such counsel, no stop order
denying or suspending the effectiveness of the Registration Statement
is in effect, and no proceedings for that or any similar purpose have
been instituted or are pending before or threatened by the Commission;
(ix) the Registration Statement and the Prospectus (except
for the financial statements, notes thereto and other financial
information and statistical data contained therein, as to which no
opinion need be rendered), comply as to form in all material respects
with the Act and the Rules and Regulations;
(x) all descriptions contained in the Registration
Statement or the Prospectus of contracts and other documents are
accurate and fairly present the information required to be described,
and such counsel is familiar with all contracts and other documents
referred to in the Registration Statement and the Prospectus or filed
as exhibits to the Registration Statement and, to the best knowledge of
such counsel, no contract or document of a character required to be
summarized or described therein or to be filed as an exhibit thereto is
not so summarized, described or filed;
(xi) the descriptions contained in the Registration
Statement and the Prospectus which purport to summarize the provisions
of statutes, rules and regulations are accurate summaries in all
respects, and such descriptions fairly present in all respects the
information shown, and the descriptions contained in the Registration
Statement and the Prospectus that concern matters
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<PAGE> 19
of law or legal conclusions have been reviewed by such counsel and are
correct;
(xii) the Stock Escrow Agreement has been duly and validly
executed and delivered by each party thereto (other than American Stock
Transfer & Trust Company); and
(xiii) except for registration under the Act and
registration or qualification of the Securities under applicable state
or foreign securities or blue sky laws, no authorization, approval,
consent or license of any governmental or regulatory authority or
agency is necessary in connection with: (A) the authorization,
issuance, sale, transfer or delivery of the Securities by the Company;
(B) the execution, delivery and performance of this Agreement by the
Company or the taking of any action contemplated herein; (C) the
issuance of the Representative's Warrant or the Securities issuable
upon exercise thereof; or (D) the execution, delivery and performance
of this Agreement by the Company or the taking of any action
contemplated herein.
Such opinion shall also state that such counsel has participated in the
preparation of the Registration Statement and the Prospectus, and nothing has
come to the attention of such counsel to cause such counsel to have reason to
believe that the Registration Statement at the time it became effective
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (except, in the case of both the Registration Statement and the
Prospectus, for the financial statements, notes thereto and other financial
information and statistical data contained therein, as to which no need be. Such
opinion shall also cover such matters incident to the transactions contemplated
hereby as you or Representative's Counsel shall reasonably request. In rendering
such opinion, Company Counsel may rely as to matters of fact upon certificates
of officers of the Company, and of public officials, and may rely as to all
matters of law other than the law of the United States or the State of Delaware
upon opinions of counsel satisfactory to you, in which case the opinion shall
state that they have no reason to believe that you and they are not entitled so
to rely.
(C) CORPORATE PROCEEDINGS. All corporate proceedings and other
legal matters relating to this Agreement, the Registration Statement, the
Prospectus and other related matters shall be reasonably satisfactory to or
approved by Representative's Counsel, and you shall have received from such
counsel a signed opinion, dated as of the First Closing Date, with respect to
the validity of the issuance of the Units, the form of the Registration
Statement and Prospectus (other than the financial statements and other
financial or statistical data contained therein), the execution of this
Agreement and other related matters as you may reasonably require. The Company
shall have furnished to Representative's Counsel such
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<PAGE> 20
documents as they may reasonably request for the purpose of enabling them to
render such opinion.
(D) COMFORT LETTER. Prior to the Effective Date, and again on
and as of the First Closing Date, you shall have received a letter from BDO
Seidman, LLP, certified public accountants for the Company, substantially in the
form approved by you.
(E) BRING DOWN. At each of the Closing Dates, (i) the
representations and warranties of the Company contained in this Agreement shall
be true and correct with the same effect as if made on and as of such Closing
Date, and the Company shall have performed all of their obligations hereunder
and satisfied all the conditions on their parts to be satisfied at or prior to
such Closing Date; (ii) the Registration Statement and the Prospectus shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all material respects
conform to the requirements of the Act and the Rules and Regulations, and
neither the Registration Statement nor the Prospectus shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; (iii) there shall have been, since the respective dates as of which
information is given, no material adverse change in the business, property,
operations, condition (financial or otherwise), earnings, capital stock,
long-term or short-term debt or general affairs of the Company from that set
forth in the Registration Statement and the Prospectus, except changes which the
Registration Statement and Prospectus indicate might occur after the Effective
Date, and the Company shall not have incurred any material liabilities nor
entered into any material agreement other than as referred to in the
Registration Statement and Prospectus; and (iv) except as set forth in the
Prospectus, no action, suit or proceeding shall be pending or threatened against
the Company which would be required to be disclosed in the Registration
Statement, and no proceedings shall be pending or threatened against the Company
before or by any commission, board or administrative agency in the United States
or elsewhere, wherein an unfavorable decision, ruling or finding would
materially adversely affect the business, property, operations, condition
(financial or otherwise), earnings or general affairs of the Company. In
addition, you shall have received, at the First Closing Date, a certificate
signed by the principal executive officer and by the principal financial officer
of the Company, dated as of the First Closing Date, evidencing compliance with
the provisions of this Section 4(e).
(F) TRANSFER AND WARRANT AGENT. On or before the Effective
Date, the Company shall have appointed American Stock Transfer & Trust Company
(or other agent mutually acceptable to the Company and you), as its transfer
agent and warrant agent to transfer all of the Shares and Warrants issued in the
Offering, as well as to transfer other shares of the Common Stock outstanding
from time to time.
(G) CERTAIN FURTHER MATTERS. On each Closing Date,
Representative's Counsel shall have been furnished with all such other documents
and certificates as they may reasonably request for the purpose of enabling them
to render their legal opinion to the
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<PAGE> 21
Underwriter and in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any of the
covenants, or the fulfillment of any of the conditions, herein contained; and
all proceedings taken by the Company on or prior to each of the Closing Dates in
connection with the authorization, issuance and sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Representative's Counsel.
(H) ADDITIONAL CONDITIONS. Upon exercise of the Over-Allotment
Option, the Underwriters' obligations to purchase and pay for the Option Units
shall be subject (as of the date hereof and as of the Option Closing Date) to
the following additional conditions:
(i) The Registration Statement shall remain effective at
the Option Closing Date, no stop order denying or suspending the effectiveness
thereof shall have been issued, and no proceedings for that or any similar
purpose shall have been instituted or shall be pending or, to your knowledge or
the knowledge of the Company, shall be contemplated by the Commission, and all
reasonable requests on the part of the Commission for additional information
shall have been complied with to the satisfaction of Representative's Counsel.
(ii) On the Option Closing Date there shall have been
delivered to you the signed opinion of Company Counsel, dated as of the Option
Closing Date, in form and substance satisfactory to Representative's Counsel,
which opinion shall be substantially the same in scope and substance as the
opinion furnished to you on the First Closing Date pursuant to Section 4(b),
except that such opinion, where appropriate, shall cover the Option Units rather
than the Firm Units. If the First Closing Date is the same as the Option Closing
Date, such opinions may be combined.
(iii) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the Option Units shall
be satisfactory in form and substance to you, and you and Representative's
Counsel shall have been furnished with all such documents, certificates and
opinions as you may request in connection with this transaction in order to
evidence the accuracy and completeness of any of the representations, warranties
or statements of the Company or its compliance with any of the covenants or
conditions contained herein.
(iv) On the Option Closing Date there shall have been
delivered to you a letter in form and substance satisfactory to you from BDO
Seidman, LLP, dated the Option Closing Date and addressed to you, confirming the
information in their letter referred to in Section 4(d) as of the date thereof
and stating that, without any additional investigation required, nothing has
come to their attention during the period from the ending date of their review
referred to in such letter to a date not more than five banking days prior to
the Option Closing Date which would require any change in such letter if it were
required to be dated the Option Closing Date.
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<PAGE> 22
(v) On the Option Closing Date there shall have been
delivered to you a certificate signed by the principal executive officer and by
the principal financial or accounting officer of the Company, dated the Option
Closing Date, in form and substance satisfactory to Representative's Counsel,
substantially the same in scope and substance as the certificate furnished to
you on the First Closing Date pursuant to Section 4(e).
(I) CANCELLATION. If any of the conditions provided by this
Section 4 shall not have been completely fulfilled as of the date indicated,
then this Agreement and all obligations of the Underwriters hereunder may be
cancelled at, or at any time prior to, either Closing Date by your notifying the
Company of such cancellation in writing or by telegram at or prior to the
applicable Closing Date. Any such cancellation shall be without liability of the
Underwriters to the Company, except as otherwise provided herein.
5. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to sell and deliver the Units and Class B Warrants are subject to
the following conditions:
(A) EFFECTIVE REGISTRATION STATEMENT. The Registration
Statement shall have become effective not later than 6:00 p.m. New York time, on
the date of this Agreement, or at such later time or on such later date as the
Company and you may agree in writing.
(B) NO STOP ORDER. On the applicable Closing Date, no stop
order denying or suspending the effectiveness of the Registration Statement
shall have been issued under the Act or any proceedings therefor initiated or
threatened by the Commission.
(C) PAYMENT FOR UNITS. On the applicable Closing Date, you
shall have made payment, for the several accounts of the Underwriters, of the
aggregate Purchase Price for the Units then being purchased, by certified or
bank cashier's checks payable in next day funds to the order of the Company.
If the conditions to the obligations of the Company provided by this Section 5
have been fulfilled on the First Closing Date but are not fulfilled after the
First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Option Units upon exercise of
the Over-Allotment Option shall be affected.
6. INDEMNIFICATION.
(A) INDEMNIFICATION BY THE COMPANY. As used in this Agreement,
the term "Liabilities" shall mean any and all losses, claims, damages and
liabilities, and actions and proceedings in respect thereof (including without
limitation all reasonable costs of defense and investigation and all attorneys'
fees) including without limitation those asserted by any
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<PAGE> 23
party to this Agreement against any other party to this Agreement. The Company
hereby indemnifies and holds harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Act, from and against all
Liabilities, joint or several, to which such Underwriter or such controlling
person may become subject, under the Act or otherwise, insofar as such
Liabilities arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of any material fact contained in (A) the Registration
Statement or any amendment thereto, or the Prospectus or any Preliminary
Prospectus, or any amendment or supplement thereto, or (B) any "blue sky"
application or other document executed by the Company specifically for that
purpose, or based upon written information furnished by the Company, filed in
any state or other jurisdiction in order to qualify any or all of the Securities
under the securities laws thereof (any such application, document or information
being herein called a "Blue Sky Application"); or (ii) the omission or alleged
omission to state in the Registration Statement or any amendment thereto, or the
Prospectus or any Preliminary Prospectus, or any amendment or supplement
thereto, or in any Blue Sky Application, a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company shall not be liable in any such case to the extent,
but only to the extent, that any such Liabilities arise out of or are based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company through you by or on behalf of any Underwriter specifically for use
in the preparation of the Registration Statement or any such amendment thereto,
or the Prospectus or any such Preliminary Prospectus, or any such amendment or
supplement thereto, or any such Blue Sky Application. The foregoing indemnity
shall be in addition to any other liability which the Company may otherwise
have.
(B) INDEMNIFICATION BY UNDERWRITERS. Each Underwriter,
severally and not jointly, hereby indemnifies and holds harmless the Company,
each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act,
from and against all Liabilities to which the Company or any such director,
nominee, officer or controlling person may become subject under the Act or
otherwise, insofar as such Liabilities arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement or any amendment thereto, or the Prospectus or any
Preliminary Prospectus, or any amendment or supplement thereto, or (ii) the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that any such Liabilities arise
out of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement or any amendment
thereto, or the Prospectus or any Preliminary Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company through you, by or on behalf of such Underwriter,
specifically for use in the preparation thereof. In no event shall any
Underwriter be liable or responsible for any amount in excess of the
compensation received by such Underwriter, in the form of underwriting discounts
or otherwise, pursuant to this
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<PAGE> 24
Agreement or any other agreement contemplated hereby. The foregoing indemnity
shall be in addition to any other liability which any Underwriter may otherwise
have.
(C) PROCEDURE. Promptly after receipt by an indemnified party
under this Section 6 of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify in writing the indemnifying
party of the commencement thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 6. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
subject to the provisions hereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided,
however, that if the indemnified party is any Underwriter or a person who
controls any Underwriter within the meaning of the Act, the fees and expenses of
such counsel shall be at the expense of the indemnifying party if (i) the
employment of such counsel has been specifically authorized in writing by the
indemnifying party, or (ii) the named parties to any such action (including any
impleaded parties) include both such Underwriter or such controlling person and
the indemnifying party and, in your judgment, it is advisable for such
Underwriter or controlling person to be represented by separate counsel (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of such Underwriter or such controlling person, it
being understood, however, that the indemnifying party shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys). No settlement of any action against an indemnified
party shall be made without the consent of the indemnified party, which shall
not be unreasonably withheld in light of all factors of importance to such
indemnified party.
7. CONTRIBUTION. In order to provide for just and equitable
contribution under the Act in any case in which (a) any indemnified party makes
claims for indemnification pursuant to Section 6 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding the
fact that the express provisions of Section 6 provide for indemnification
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<PAGE> 25
in such case, or (b) contribution under the Act may be required on the part of
any indemnified party, then such indemnified party and each indemnifying party
(if more than one) shall contribute to the aggregate Liabilities to which it may
be subject, in either such case (after contribution from others) in such
proportions that the Underwriters are responsible in the aggregate for that
portion of such Liabilities represented by the percentage that the underwriting
discount per Unit appearing on the cover page of the Prospectus bears to the
public Offering price per Unit appearing thereon, and the Company shall be
responsible for the remaining portion; provided, however, that if such
allocation is not permitted by applicable law, then the relative fault of the
Company and the Underwriters in connection with the statements or omissions
which resulted in such Liabilities and other relevant equitable considerations
shall also be considered. The relative fault shall be determined by reference
to, among other things, whether in the case of an untrue statement of a material
fact or the omission to state a material fact, such statement or omission
relates to information supplied by the Company or the Underwriters, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if the respective
obligations of the Company and the Underwriters to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita allocation of the
aggregate Liabilities (even if the Underwriters were to be treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the first sentence of
this Section 7. In addition, the contribution of any Underwriter shall not be in
excess of its proportionate share of the portion of such Liabilities for which
such Underwriter is responsible. No person guilty of a fraudulent
misrepresentation (within the meaning of section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this Section 7, the term "Company" shall include
any officer, director or person who controls the Company within the meaning of
section 15 of the Act. The Underwriters' obligations under this Section 7 to
contribute are several in proportion to their respective underwriting
obligations and not joint. If the full amount of the contribution specified in
this Section 7 is not permitted by law, then each indemnified party and each
person who controls an indemnified party shall be entitled to contribution from
each indemnifying party to the full extent permitted by law. The foregoing
contribution agreement shall in no way affect the contribution liabilities of
any persons having liability under section 11 of the Act other than the Company
and the Underwriters. No contribution shall be requested with regard to the
settlement of any matter from any party who did not consent to the settlement;
provided, however, that such consent shall not be unreasonably withheld in light
of all factors of importance to such party.
8. COSTS AND EXPENSES.
(A) CERTAIN COSTS AND EXPENSES. Whether or not this Agreement
becomes effective or the sale of the Units to the Underwriters is consummated,
the Company shall pay all costs and expenses incident to the issuance, offering,
sale and delivery of the Units and the performance of its obligations under this
Agreement, including without limitation: (i) all fees and expenses of the
Company's legal counsel and accountants; (ii) all costs and expenses
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<PAGE> 26
incident to the preparation, printing, filing and distribution of the
Registration Statement (including the financial statements contained therein and
all exhibits and amendments thereto), each Preliminary Prospectus and the
Prospectus, each as amended or supplemented, this Agreement and the other
agreements and documents referred to herein, each in such quantities as you
shall deem necessary; (iii) all fees of NASD required in connection with the
filing required by NASD to be made by the Representative with respect to the
Offering; (iv) all expenses, including fees (but not in excess of the amount set
forth in Section 3(b)) and disbursements of Representative's Counsel in
connection with the qualification of the Securities under the "blue sky" laws
which you shall designate; (v) all costs and expenses of printing the respective
certificates representing the Shares and the Warrants; (vi) the expense of
placing one or more "tombstone" advertisements or promotional materials as
directed by you (provided, however, that the aggregate amount thereof shall not
exceed $10,000); (vii) all costs and expenses of the Company and its employees
(but not of the Representative or its employees) associated with due diligence
meetings and presentations; (viii) all costs and expenses associated with the
preparation of a seven to ten minute professional video presentation concerning
the Company, its products and its management for broker due diligence purposes;
(ix) any and all taxes (including without limitation any transfer, franchise,
capital stock or other tax imposed by any jurisdiction) on sales of the Units to
the Underwriters hereunder; and (x) all costs and expenses incident to the
furnishing of any amended Prospectus or any supplement to be attached to the
Prospectus as required by Sections 3(a) and 3(d), except as otherwise provided
by said Sections.
(B) REPRESENTATIVE'S EXPENSE ALLOWANCE. In addition to the
expenses described in Section 8(a), the Company shall on the First Closing Date
pay to you the balance of a non-accountable expense allowance (which shall
include fees of Representative's Counsel exclusive of the fees referred to in
Section 3(b)) of $290,400 (that being an amount equal to 3 percent of the gross
proceeds received upon sale of the Firm Units), of which $20,000 has been paid
to you prior to the date hereof. In the event that the Over-Allotment Option is
exercised, then the Company shall on the Option Closing Date pay to you an
additional amount equal to 3 percent of the gross proceeds received upon sale of
any of the Option Units. In the event that the transactions contemplated hereby
fail to be consummated for any reason, then you shall return to the Company that
portion of the $20,000 heretofore paid by the Company to the extent that it has
not been utilized by you in connection with the Offering for accountable
out-of-pocket expenses; provided, however, that if such failure is due to a
breach by the Company of any covenant, representation or warranty contained
herein or because any other condition to the Underwriters' obligations hereunder
required to be fulfilled by the Company is not fulfilled, then the Company shall
be liable for your accountable out-of-pocket expenses to the full extent thereof
(with credit given to the $20,000 paid).
(C) NO FINDERS. No person is entitled either directly or
indirectly to compensation from the Company, the Underwriters or any other
person for services as a finder in connection with the Offering, and the Company
hereby indemnify and hold harmless the Underwriters, and the Underwriters hereby
indemnify and hold harmless the
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<PAGE> 27
Company from and against all Liabilities, joint or several, to which the
indemnified party may become subject insofar as such Liabilities arise out of or
are based upon the claim of any person (other than an employee of the party
claiming indemnity) or entity that he or it is entitled to a finder's fee in
connection with the Offering by reason of such person's or entity's influence or
prior contact with the indemnifying party.
9. SUBSTITUTION OF UNDERWRITERS.
(A) SUBSTITUTION. If any Underwriter defaults in its
obligation to purchase the numbers of Units which it has agreed to purchase
under this Agreement, you shall be obligated to purchase all of the Units not
purchased by the defaulting Underwriter unless such purchase shall cause you to
be in violation of the net capital requirements of Rule 15c3-1 of the Exchange
Act, in which case you, and any other Underwriters satisfactory to you who so
agree, shall have the right, but shall not be obligated, to purchase (in such
proportions as may be agreed upon among them) all of the Units. If you or the
other Underwriters satisfactory to you do not elect to purchase the Units which
the defaulting Underwriter or Underwriters agreed but failed to purchase, then
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company, except for (i) the payment by the
Company of expenses as provided by Section 8(a), (ii) the payment by the Company
of accountable expenses as provided by Section 8(b), and (iii) the indemnity and
contribution agreements of the Company and the Underwriters provided by Sections
6 and 7.
(B) FURTHER MATTERS. Nothing contained herein shall relieve a
defaulting Underwriter of any liability it may have for damages caused by its
default. If the other Underwriters satisfactory to you are obligated or agree to
purchase the Units of a defaulting Underwriter, either you or the Company may
postpone the First Closing Date for up to seven banking days in order to effect
any changes that may be necessary in the Registration Statement, any Preliminary
Prospectus or the Prospectus or in any other document or agreement, and to file
promptly any amendments to the Registration Statement, or any amendments or
supplements to any Preliminary Prospectus or the Prospectus, which in your
opinion may thereby be made necessary.
10. EFFECTIVE DATE. The Agreement shall become effective upon its
execution, except that you may, at your option, delay its effectiveness until
10:00 a.m., New York time, on the first full business day following the
Effective Date, or at such earlier time after the Effective Date as you in your
discretion shall first commence the initial public Offering by the Underwriters
of any of the Units. The time of the initial public Offering shall mean the time
of release by you of the first newspaper advertisement with respect to the
Units, or the time when the Units are first generally offered by you to dealers
by letter or telegram, whichever shall first occur. This Agreement may be
terminated by you at any time before it becomes effective as provided above,
except that the provisions of Sections 6, 7, 8, 13, 14, 15 and 16 shall remain
in effect notwithstanding such termination.
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<PAGE> 28
11. TERMINATION.
(A) GROUNDS FOR TERMINATION. This Agreement, except for
Sections 6, 7, 8, 13, 14, 15 and 16, may be terminated at any time prior to the
First Closing Date, and the Over-Allotment Option, if exercised, may be
cancelled at any time prior to the Option Closing Date, by you if in your sole
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriters for the resale of the Units agreed to be purchased hereunder,
by reason of: (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree; (ii)
trading in securities on the New York Stock Exchange or the American Stock
Exchange having been suspended or limited; (iii) material governmental
restrictions having been imposed on trading in securities generally which are
not in force and effect on the date hereof; (iv) a banking moratorium having
been declared by federal or New York State authorities; (v) an outbreak or
significant escalation of major international hostilities or other national or
international calamity having occurred; (vi) the passage by the Congress of the
United States or by any state legislature, of any act or measure, or the
adoption of any order, rule or regulation by any governmental body or any
authoritative accounting institute or board, or any governmental executive,
which is reasonably believed by you likely to have a material adverse effect on
the business, property, operations, condition (financial or otherwise) or
earnings of the Company; (vii) any material adverse change in the financial or
securities markets beyond normal fluctuations in the United States having
occurred since the date of this Agreement; or (viii) any material adverse change
having occurred since the respective dates for which information is given in the
Registration Statement and Prospectus, in the business, property, operations,
condition (financial or otherwise), earnings or business prospects of the
Company, whether or not arising in the ordinary course of business.
(B) NOTIFICATION. If you elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided by this Section 11
or by Section 10, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
12. REPRESENTATIVE'S WARRANT. On the First Closing Date, the
Company shall issue and sell to you, for a total purchase price of $5.00, and
upon the terms and conditions set forth in the form of Representative's Warrant
filed as an exhibit to the Registration Statement, a warrant entitling you to
purchase 80,000 Units and 32,000 Class B Warrants (the "Representative's
Warrant"). In the event of conflict in the terms of this Agreement and the
Representative's Warrant, the terms and conditions of the Representative's
Warrant shall control.
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<PAGE> 29
13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. The respective indemnities, agreements, representations, warranties,
covenants and other statements of the Company and the Underwriters set forth in
or made pursuant to this Agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of any other party, and
shall survive delivery of and payment for the Units and the termination of this
Agreement. The Company hereby indemnifies and holds harmless the Underwriters
from and against all Liabilities, joint or several, to which the Underwriters
may become subject insofar as such Liabilities arise out of or are based upon
the breach or failure of any representation, warranty or covenant of the Company
contained in this Agreement.
14. NOTICES. All communications hereunder shall be in writing and,
except as otherwise expressly provided herein, if sent to you, shall be mailed,
delivered or telegraphed and confirmed to you at H.J. Meyers & Co., Inc., 1895
Mt. Hope Avenue, Rochester, New York 14620, with a copy sent to James M.
Jenkins, Esq., Harter, Secrest & Emery, 700 Midtown Tower, Rochester, New York
14604; or if sent to the Company, shall be mailed, delivered, or telegraphed and
confirmed to it at Orion Acquisition Corp. II, 1430 Broadway, 13th Floor, New
York, New York 10018, with a copy sent to Richard L. Campbell, Campbell &
Fleming, P.C., 250 Park Avenue, New York, New York 10177.
15. PARTIES IN INTEREST. This Agreement is made solely for the
benefit of the Underwriters, the Company and, to the extent expressed, any
person controlling the Company or an Underwriter, as the case may be, and the
directors of the Company, nominees for directors of the Company (if any) named
in the Prospectus, officers of the Company who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns; and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not include any
purchaser, as such, from an Underwriter of the Units.
16. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
17. COUNTERPARTS. This Agreement may be executed in two or more
counterpart copies, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
- 29 -
<PAGE> 30
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding agreement between the Company and the Underwriters in accordance with
its terms.
Yours very truly,
ORION ACQUISITION CORP. II
____________________________
Richard L. Kramer
Chairman of the Board
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
H.J. MEYERS & CO., INC.
AS REPRESENTATIVE OF THE
SEVERAL UNDERWRITERS NAMED
IN SCHEDULE I HERETO
By:_________________________
Its
NORTHEAST SECURITIES, INC.
AS REPRESENTATIVE OF THE
SEVERAL UNDERWRITERS NAMED
IN SCHEDULE I HERETO
By:_________________________
Its
- 30 -
<PAGE> 31
SCHEDULE I
UNDERWRITING AGREEMENT DATED [EFFECTIVE DATE]
<TABLE>
<CAPTION>
NUMBER OF CLASS B
NUMBER OF UNITS WARRANTS TO BE
UNDERWRITER TO BE PURCHASED PURCHASED
<S> <C> <C>
H.J. Meyers & Co., Inc.
Northeast Securities, Inc.
TOTAL
-------- --------
800,000 320,000
</TABLE>
- 31 -
<PAGE> 1
Exhibit 4.2
WARRANT AGENCY AGREEMENT
AGREEMENT, dated this day of April, 1996, between ORION ACQUISITION
CORP. II, a Delaware corporation (the "Company"), and AMERICAN STOCK TRANSFER &
TRUST COMPANY, a New York corporation, as Warrant Agent (the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, in connection with (i) the offering to the public of 800,000
units (the "Units"), each unit consisting of one share of the Company's common
stock, $.01 par value ("Common Stock"), one Class A Common Stock Purchase
Warrant (the "Class A Warrants") and 320,000 Class B Unit Purchase Warrants (the
"Class B Warrants" and collectively with the Class A Warrants, the "Warrants"),
each Class A Warrant entitling the registered holder thereof to purchase one (1)
share of Common Stock and each Class B Warrant entitling the registered holder
thereof to purchase one (1) Unit; (ii) the over-allotment option granted to the
underwriters to purchase up to an additional 120,000 Units and 48,000 Class B
Warrants (the "Over- allotment Options"); (iii) the sale to Northeast
Securities, Inc., and H.J. Meyers & Co., Inc. (the "Representatives") and their
representatives, successors and assigns of warrants (the "Representatives'
Warrants") to purchase 80,000 Units and 32,000 Class B Warrants; and (iv) the
issuance to Cranbrooke Corporation of a Warrant to purchase up to 100,000 Units
(the "Cranbrooke Warrant") the Company will issue up to 1,500,000 Class A
Warrants (subject to increase as provided in the Representatives' Warrant
Agreement) and up to 400,000 Class B Warrants; and
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of certificates representing the
Warrants and the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the
Representatives, the holders of certificates representing the Warrants and the
Warrant Agent, the parties hereto agree as follows:
SECTION 1
Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to
<PAGE> 2
participate in the voting and in the distribution of earnings and assets of the
Company without limit as to amount or percentage.
(b) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business in New
York, shall be administered, which office is located on the date hereof at 40
Wall Street, 46th Floor, New York, NY 10005.
(c) "Exercise Date" shall mean, subject to the provisions of Section
5(b) hereof as to any Warrant, the date on which the Warrant Agent shall have
received both (i) the Warrant Certificate representing such Warrant, with the
exercise form thereon duly executed by the Registered Holder hereof or his
attorney duly authorized in writing, and (ii) payment in cash or by check made
payable to the Warrant Agent for the account of the Company, of the amount in
lawful money of the United States of America equal to the applicable Purchase
Price.
(d) "Initial Warrant Exercise Date" shall mean the date the Company
consummates a merger, exchange of capital, asset acquisition or other business
combination (a "Business Combination") with an operating business.
(e) "Initial Warrant Redemption Date" shall mean the date that the
Company consummates a Business Combination.
(f) "Applicable Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8, $9.00 for the Class A Warrants and $.125
for the Class B Warrants and further subject to the Company's right, in its sole
discretion, to decrease the Applicable Purchase Price for a period of not less
than 30 days on not less than 30 days' prior written notice to the Registered
Holders.
(g) "Registered Holder" shall mean the person in whose name any
certificate representing the Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6.
(h) "Registration Statement" shall mean the Registration on Form SB-2
filed by the Company with the Securities and Exchange Commission (the "SEC") on
April 5, 1996, as subsequently amended and declared effective by the SEC with
respect to the offering of the Units, the Common Stock and Warrants.
(i) "Subsidiary" or "Subsidiaries" shall mean any corporation or
corporations, as the case may be, of which stock having ordinary power to elect
a majority of the Board of Directors of such corporation (regardless of whether
or not at the time stock of any other class or classes of such corporation shall
have or may have voting power by reason of the happening of any contingency) is
at the time directly or indirectly owned by the Company or by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
-2-
<PAGE> 3
(j) "Transfer Agent" shall mean American Stock Transfer & Trust Company
or its authorized successor.
(k) "Underwriting Agreement" shall mean the underwriting agreement
dated _______________, between the Company and the Representatives, as
representatives of the several underwriters listed therein, relating to the
purchase by the several Underwriters for resale to the public up to 920,000
Units and 368,000 Class B Warrants.
(l) "Representatives' Warrant Agreement" shall mean the agreement dated
as of ________________ between the Company and the Representatives relating to
and governing the terms and provisions of the Representatives' Warrants.
(m) "Warrant Certificate" shall mean a certificate representing each of
the Class A Warrants and each of the Class B Warrants substantially in the form
annexed hereto as Exhibit A and Exhibit B, respectively.
(n) "Warrant Expiration Date" shall mean, unless the Warrants are
redeemed as provided in Section 9 hereof prior to such date, with respect to the
Class A Warrants, 5:00 p.m. (New York time) on _________________, and with
respect to the Class B Warrants, 5:00 p.m. (New York time) on the date which is
the first anniversary of the date of the Business Combination, or, if such date
shall in the State of New York be a holiday or a day on which banks are
authorized to close, then 9:00 a.m. (New York time) on the next following day
which in the State of New York is not a holiday or a day on which banks are
authorized to close, subject to the Company's right, prior to the Warrant
Expiration Date, in its sole discretion, to extend such Warrant Expiration Date
on five business days prior written notice to the Registered Holders.
(o) "Warrant Agent" shall mean American Stock Transfer & Trust Company
or its authorized successor.
SECTION 2
Warrants and Issuance of Warrant Certificates.
(a) Each Class A Warrant shall initially entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase at the
Applicable Purchase Price therefor from the Initial Warrant Exercise Date until
the Warrant Expiration Date one share of Common Stock upon the exercise thereof,
subject to modification and adjustment as provided in Section 8. Each Class B
Warrant shall initially entitle the Registered Holder of the Warrant Certificate
representing such Warrant to purchase at the Applicable Purchase Price therefor
from the Initial Warrant Exercise Date until the Warrant Expiration Date one
Unit upon the exercise thereof, subject to modification and adjustment as
provided in Section 8.
-3-
<PAGE> 4
(b) Upon execution of this Agreement, Warrant Certificates representing
800,000 Class A Warrants and 320,000 Class B Warrants to purchase up to an
aggregate of 1,120,000 shares of Common Stock (subject to modification and
adjustment as provided in Section 8) shall be executed by the Company and
delivered to the Warrant Agent.
(c) Upon exercise of the Over-allotment Option, in whole or in part,
Warrant Certificates representing up to 120,000 Class A Warrants and 48,000
Class B Warrants to purchase up to an aggregate of 168,000 shares of Common
Stock (subject to modification and adjustment as provided in Section 8) shall be
executed by the Company and delivered to the Warrant Agent.
(d) Upon exercise of the Representatives' Warrants as provided therein,
Warrant Certificates representing up to 80,000 Class A Warrants and up to 32,000
Class B Warrants to purchase up to an aggregate of 112,000 of Common Stock
(subject to modification and adjustment as provided in Section 8 hereof and in
the Representatives' Warrant Agreement) shall be countersigned, issued and
delivered by the Warrant Agent upon written order of the Company signed by its
Chairman of the Board, President or a Vice President and by its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary.
(e) Upon exercise of the Cranbrooke Warrant, in whole or in part,
Warrant Certificates representing up to 100,000 Class A Warrants to purchase an
aggregate of 100,000 shares of Common Stock (subject to modification and
adjustment as provided in Section 8), shall be countersigned, issued and
delivered by the Warrant Agent upon written order of the Company signed by its
Chairman of the Board, President or a Vice President and by its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary.
(f) From time to time, up to the applicable Warrant Expiration Date, as
the case may be, the Warrant Agent shall countersign and deliver Warrant
Certificates in required denominations of one or whole number multiples thereof
to the person entitled thereto in connection with any transfer or exchange
permitted under this Agreement. Except as provided in Section 7 hereof, no
Warrant Certificates shall be issued except: (i) Warrant Certificates initially
issued hereunder; (ii) Warrant Certificates issued upon any transfer or exchange
of Warrants; (iii) Warrant Certificates issued in replacement of lost, stolen,
destroyed or mutilated Warrant Certificates pursuant to Section 7; (iv) Warrant
Certificates issued pursuant to the Representative's Warrant Agreement and the
Cranbrooke Warrants (including Warrants in excess of the Representative's
Warrants or the Cranbrooke Warrant Agreement issued as a result of the
antidilution provisions contained in the Representative's Warrant Agreement and
the Cranbrooke Warrant Agreement, respectively); and (v) at the option of the
Company, Warrant Certificates in such form as may be approved by its Board of
Directors, to reflect any adjustment or
-4-
<PAGE> 5
change in the Applicable Purchase Price, the number of shares of Common Stock
purchasable upon exercise of the Warrants or the Redemption Price therefor made
pursuant to Section 8 hereof
SECTION 3
Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A for the Class A Warrants and Exhibit B for the Class B
Warrants (the provisions of which are hereby incorporated herein) and may have
such letters, numbers or other marks of identification or designation and such
legends, summaries or endorsements printed, lithographed or engraved thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any law or with any rule
or regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Warrants may be listed, or to conform to usage. The
Warrant Certificates shall be dated the date of issuance thereof (whether upon
initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen or
destroyed Warrant Certificates).
(b) Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President or any Vice President and by its Treasurer
or an Assistant Treasurer or its Secretary or an Assistant Secretary, by manual
signatures or by facsimile signatures printed thereon, and shall have imprinted
thereon a facsimile of the Company's seal. Warrant Certificates shall be
manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent,
issued and delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such officer of the
Company.
SECTION 4
Exercise.
(a) Warrants in denominations of one or whole number multiples thereof
may be exercised commencing at any time on or after the Initial Warrant Exercise
Date, but not after the applicable Warrant Expiration Date, upon the terms and
subject to the conditions set forth herein (including the provisions set forth
in Sections 5 and 9 hereof and in the applicable Warrant Certificate). A Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the Exercise Date, provided that the Warrant Certificate
representing such Warrant,
-5-
<PAGE> 6
with the exercise form thereon duly executed by the Registered Holder thereof or
his attorney duly authorized in writing, together with payment in cash or by
check made payable to the Warrant Agent for the account of the Company, of an
amount in lawful money of the United States of America equal to the Applicable
Purchase Price has been received in good funds by the Warrant Agent. The person
entitled to receive the securities deliverable upon such exercise shall be
treated for all purposes as the holder of such securities as of the close of
business on the Exercise Date. If Warrants in denominations other than one or
whole number multiples thereof shall be exercised at one time by the same
Registered Holder, the number of full shares of Common Stock which shall be
issuable upon exercise thereof shall be computed on the basis of the aggregate
number of full shares of Common Stock issuable upon such exercise. As soon as
practicable on or after the Exercise Date and in any event within three business
days after such date, if any Warrants have been exercised, the Warrant Agent on
behalf of the Company shall cause to be issued to the person or persons entitled
to receive the same a Common Stock certificate or certificates for the shares of
Common Stock and Class A Warrants Certificates, if applicable, deliverable upon
such exercise, and the Warrant Agent shall deliver the same to the person or
persons entitled thereto. Upon the exercise of any Warrants, the Warrant Agent
shall promptly notify the Company in writing of such fact and of the number of
securities delivered upon such exercise and, subject to subsection (b) below,
shall cause all payments of an amount in cash or by check made payable to the
order of the Company, equal to the Applicable Purchase Price, to be deposited
promptly in the Company's bank account.
(b) At any time upon the exercise of any Warrants after the date
hereof, the Warrant Agent shall, on a daily basis, within two business days
after such exercise, notify the Representatives or their successors or assigns
of the exercise of any such Warrants and shall commencing one (1) year from the
date hereof, on a weekly basis (subject to collection of funds constituting the
tendered Applicable Purchase Price, but in no event later than five business
days after the last day of the calendar week in which such funds were tendered),
remit to the Representatives an amount equal to 10% of the Exercise Price for
each Warrant being then exercised which was solicited by the Representatives or
one of the underwriters participating in this offering, unless the
Representatives shall have notified the Warrant Agent that the payment of such
amount with respect to such Warrant is violative of the General Rules and
Regulations promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or the rules and regulations of the National Association
of Securities Dealers, Inc. ("NASD") or applicable state securities or "blue
sky" laws, or the Warrants are those underlying the Representatives' Warrants or
the Cranbrooke Warrants, in which event, the Warrant Agent shall have to pay
such amount to the Company; provided, that the Warrant Agent shall not be
obligated to pay any amounts pursuant to this Section 4(b) during any week that
such amounts payable are less than $ 1,000 and
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<PAGE> 7
the Warrant Agent's obligation to make such payments shall be suspended until
the amount payable aggregates $ 1,000, and provided further, that, in any event,
any such payment (regardless of amount) shall be made not less frequently than
monthly.
(c) The Company shall not be obligated to issue any fractional share
interests or fractional warrant interests upon the exercise of any Warrant or
Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of
fractional interests. Any fraction equal to or greater than one-half shall be
rounded up to the next full share or Warrant, as the case may be, any fraction
less than one-half shall be eliminated.
SECTION 5
Reservation of Shares: Listing: Payment of Taxes: etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Warrants, such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of the
Warrants shall, at the time of delivery thereof, be duly and validly issued and
fully paid and non-assessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issue thereof, and that upon
issuance such shares shall be listed on each securities exchange, if any, on
which the other shares of outstanding Common Stock of the Company are then
listed.
(b) The Company covenants that if any securities to be reserved for the
purpose of exercise of Warrants hereunder require registration with, or approval
of, any governmental authority under any federal securities law before such
securities may be validly issued or delivered upon such exercise, then the
Company will file a registration statement under the federal securities laws or
a post effective amendment, use its best efforts to cause the same to become
effective, keep such registration statement current while any of the Warrants
are outstanding and deliver a prospectus which complies with Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Act"), to the Registered Holder
exercising the Warrant (except, if in the opinion of counsel to the Company,
such registration is not required under the federal securities law or if the
Company receives a letter from the staff of the Securities and Exchange
Commission (the "Commission") stating that it would not take any enforcement
action if such registration is not effected). The Company will use best efforts
to obtain appropriate approvals or registrations under state "blue sky"
securities laws. With respect to any such securities, however, Warrants may not
be exercised by, or shares of Common Stock issued to, any Registered Holder in
any state in which such exercise would be unlawful.
-7-
<PAGE> 8
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares of Common Stock upon
exercise of the Warrants; provided, however, that if shares of Common Stock are
to be delivered in a name other than the name of the Registered Holder of the
Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the Transfer
Agent to requisition from time to time certificates representing shares of
Common Stock or other securities required upon exercise of the Warrants, and the
Company will comply with all such requisitions.
SECTION 6
Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in part. Warrant Certificates to be so exchanged shall
be surrendered to the Warrant Agent at its Corporate Office, and the Company
shall execute and the Warrant's Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the Registered
Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at such office, books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.
(c) With respect to any Warrant Certificates presented for registration
of transfer, or for exchange or exercise, the subscription or exercise form, as
the case may be, on the reverse thereof shall be duly endorsed or be accompanied
by a written instrument or instruments of transfer and subscription, in form
satisfactory to the Company and the Warrant Agent, duly executed by the
Registered Holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made for any exchange or registration of
transfer of Warrant Certificates. However, the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith.
-8-
<PAGE> 9
(e) All Warrant Certificates surrendered for exercise or for exchange
shall be promptly canceled by the Warrant Agent.
(f) Prior to due presentment for registration or transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof of each Warrant represented
thereby (notwithstanding any notations of ownership or writing thereon made by
anyone other than the Company or the Warrant Agent) for all purposes and shall
not be affected by any notice to the contrary.
SECTION 7
Loss or Mutilation. Upon receipt by the Company and the Warrant Agent
of evidence satisfactory to them of the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate and (in the case of loss,
theft or destruction) of indemnity satisfactory to them, and (in case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall countersign and deliver in lieu thereof a new
Warrant Certificate representing an equal aggregate number of Warrants.
Applicants for a substitute Warrant Certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
SECTION 8
Adjustment of Applicable Purchase Price and Number of Shares
of Common Stock Deliverable.
(a) (i) Except as hereinafter provided, in the event the Company shall,
at any time or from time to time after the date hereof, issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the Applicable Purchase Price for the Warrants (whether or not the same shall be
issued and outstanding) in effect immediately prior to such Change of Shares
shall be changed, as to each class of Warrants, to a price (including any
applicable fraction of a cent to the nearest cent) determined by dividing (i)
the sum of (a) the total number of shares of Common Stock outstanding
immediately prior to such Change of Shares, multiplied by the Applicable
Purchase Price in effect immediately prior to such Change of Shares, and (b) the
consideration, if any, received by the Company upon such issuance, subdivision
or combination by (ii) the total number of shares of Common Stock outstanding
immediately after such Change of Shares; provided, however, that in no event
shall the Applicable Purchase Price be adjusted pursuant to this computation to
an amount in excess of the Applicable Purchase Price in effect immediately prior
to such computation,
-9-
<PAGE> 10
except in the case of a combination of outstanding shares of Common Stock.
For the purposes of any adjustment to be made in accordance with this
Section 8(a) the following provisions shall be applicable:
(A) Shares or equivalents of Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the day following
the record date for the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued without
consideration.
(B) The reclassification of securities of the Company other
than shares of Common Stock into securities including shares of Common Stock
shall be deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined in good faith by the Board of Directors of the Company
on the basis of a record of values of similar property or services.
(C) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(b) Upon each adjustment of the Applicable Purchase Price pursuant to
this Section 8, the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall be the number derived by multiplying the number
of shares of Common Stock purchasable immediately prior to such adjustment by
the Applicable Purchase Price in effect prior to such adjustment and dividing
the product so obtained by the applicable adjusted Purchase Price.
(c) In case of any reclassification or change of outstanding shares of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a Subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or other capital stock issuable upon exercise of the Warrants
(other than a change in par value, or from par value to no par value, or from no
par value to par value or as a result of
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<PAGE> 11
subdivision or combination) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such successor or purchasing
corporation, as the case may be, shall make lawful and adequate provision
whereby the Registered Holder of each Warrant then outstanding shall have the
right thereafter to receive on exercise of such Warrant the kind and amount of
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of
securities issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and shall
forthwith file at the Corporate Office of the Warrant Agent a statement signed
by its President or a Vice President and by its Treasurer or an Assistant
Treasurer or its Secretary or an Assistant Secretary evidencing such provision.
Such provisions shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section 8(a)
and (b). The above provisions of this Section 8(c) shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Applicable
Purchase Price or the number of shares of Common Stock purchasable upon exercise
of the Warrants, the Warrant Certificates theretofore and thereafter issued
shall, unless the Company shall exercise its option to issue new Warrant
Certificates pursuant to Section 2(e) hereof, continue to express the Applicable
Purchase Price per share and the number of shares purchasable thereunder as the
Applicable Purchase Price per share and the number of shares purchasable
thereunder were expressed in the Warrant Certificates when the same were
originally issued.
(e) After each adjustment of the Applicable Purchase Price pursuant to
this Section 8, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Applicable Purchase Price as so adjusted, (ii) the number of shares of Common
Stock purchasable upon exercise of each Warrant, after such adjustment, and
(iii) a brief statement of the facts accounting for such adjustment. The Company
will promptly file such certificate with the Warrant Agent and cause a brief
summary thereof to be sent by ordinary first class mail to each Registered
Holder at his last address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder whose
notice was defective. The affidavit of an officer of the Warrant Agent or the
Secretary or an Assistant Secretary of the Company that such notice has been
mailed
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<PAGE> 12
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
(f) No adjustment of the Applicable Purchase Price shall be made as a
result of or in connection with (A) the issuance or sale of shares of Common
Stock pursuant to options, warrants, stock purchase agreements and convertible
or exchangeable securities outstanding or in effect on the date hereof or
granted upon the consummation of and in connection with the first Business
Combination (as defined in the Registration Statement), or (B) the issuance or
sale of shares of Common Stock for cash.
(g) No adjustment of the Applicable Purchase Price shall be made if the
amount of said adjustment shall be less than $. 10, provided, however, that in
such case, any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time of and together with the next
subsequent adjustment that shall amount, together with any adjustment so carried
forward, to at least $.10. In addition, Registered Holders shall not be entitled
to cash dividends paid by the Company prior to the exercise of any Warrant or
Warrants held by them.
SECTION 9
Redemption.
(a) Commencing on the Initial Warrant Redemption Date, the Company may,
on 30 days prior written notice redeem all the Warrants at $.05 per Warrant,
provided that the last sale price of Common Stock, if the Common Stock is listed
for trading on an exchange or inter-dealer quotation system which provides last
sale prices, or, the average of the closing bid and asked quotes, if the Common
Stock is listed for trading on an inter-dealer quotation system which does not
provide last sale prices, on all 10 of the trading days ending on the day
immediately prior to the day on which the Company gives notice of redemption,
has been $11.00 or higher (subject to proportionate adjustment for stock splits
and reverse stock splits of such Common Stock from and after the date of this
Agreement). Notwithstanding the foregoing, the Warrants underlying the
Representatives' Warrants and the Cranbrooke Warrants are not subject to
redemption.
(b) In case the Company shall exercise its right to redeem all of the
Warrants, it shall give or cause to be given notice to the Registered Holders of
the Warrants, by mailing to such Registered Holders a notice of redemption,
first class, postage prepaid, at their last address as shall appear on the
records of the Warrant Agent. Any notice mailed in the manner provided herein
shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice. Not less than five business days prior
to the mailing to the Registered Holders of the Warrants of the notice of
redemption, the Company shall deliver or cause to be delivered to the
Representatives a notice
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<PAGE> 13
telephonically and confirmed in writing together with a list of the Registered
Holders (including their respective addresses and number of Warrants
beneficially owned) to whom such notice of redemption has been or will be given.
(c) The notice of redemption shall specify (i) the redemption price,
(ii) the date fixed for redemption, which shall in no event be less that thirty
(30) days after the date of mailing of such notice, (iii) the place where the
Warrant Certificate shall be delivered and the redemption price shall be paid,
(iv) that the Representatives are the Company's exclusive warrant solicitation
agents and shall receive the commission contemplated by Section 4(b) hereof, and
(v) that the right to exercise the Warrant shall terminate at 5:00 p.m. (New
York time) on the business day immediately preceding the date fixed for
redemption. The date fixed for the redemption of the Warrants shall be the
Redemption Date. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of the proceedings for such redemption
except as to a holder (a) to whom notice was not mailed or (b) whose notice was
defective. An affidavit of the Warrant Agent or the Secretary or Assistant
Secretary of the Company that notice of redemption has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 p.m. (New
York time) on the business day immediately preceding the Redemption Date. The
redemption price payable to the Registered Holders shall be mailed to such
persons at their addresses of record.
(e) The Company shall indemnify the underwriters and each person, if
any, who controls the underwriters within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from the
registration statement or prospectus referred to in Section 5(b) hereof to the
same extent and with the same effect (including the provisions regarding
contribution) as the provisions pursuant to which the Company has agreed to
indemnify the underwriters contained in Section I of the Underwriting Agreement.
(f) Five business days prior to the Redemption Date, the Company shall
furnish to the Representatives (i) an opinion of counsel to the Company, dated
such date and addressed to the Representatives, and (ii) a "cold comfort" letter
dated such date addressed to the Representatives, signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and,
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<PAGE> 14
in the case of such accountants' letter, with respect to events subsequent to
the date of such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities, including, without limitation,
those matters covered in Sections 6(d) and (i) of the Underwriting Agreement.
(g) The Company shall as soon as practicable after the Redemption Date,
and in any event within 15 months thereafter, make "generally available to its
security holders" (within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section 11(a) of the Act
and covering a period of at least 12 consecutive months beginning after the
Redemption Date.
(h) The Company shall deliver within five business days prior to the
Redemption Date copies of all correspondence between the Commission and the
Company, its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to such registration statement and
permit the Representatives to do such investigation, upon reasonable advance
notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as the
Representatives shall reasonably request.
SECTION 10
Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a ministerial
capacity for the Company and the underwriters, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity or value or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and non-assessable.
(b) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Applicable Purchase Price provided in this Agreement, or
to determine whether any fact exists which may require any such adjustment, or
with respect to the nature or extent of any such adjustment, when made, or with
respect to the method employed in making the same. It shall not (i) be
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<PAGE> 15
liable for any recital or statement of fact contained herein or for any action
taken, suffered or omitted by it in reliance on any Warrant Certificate or other
document or instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be responsible for
any failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omission in connection with this Agreement except for
its own gross negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel satisfactory
to it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
(d) Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board of Directors, President or any Vice President (unless
other evidence in respect thereof is herein specifically prescribed). The
Warrant Agent shall not be liable for any action taken, suffered or omitted by
it in accordance with such notice, statement, instruction, request, direction,
order or demand.
(e) The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder; the Company further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and reasonable counsel fees, for anything done or omitted by
the Warrant Agent in the execution of its duties and powers hereunder except
losses, expenses and liabilities arising as a result of the Warrant Agent's
gross negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own gross negligence or willful misconduct), after giving
30 days' prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation the Company shall
appoint in writing a new warrant agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in writing of
such resignation by the resigning Warrant Agent, then the Registered Holder of
any Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a bank or trust company having a
capital and surplus, as shown by its last published report to its
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<PAGE> 16
stockholders, of not less than $10,000,000 or a stock transfer company doing
business in New York City. After acceptance in writing of such appointment by
the new warrant agent is received by the Company, such new warrant agent shall
be vested with the same powers, rights, duties and responsibilities as if it has
been originally named herein as the warrant agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any further assurance, conveyable, act or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the resigning Warrant Agent. Not later
than the effective date of any such appointment the Company shall file notice
thereof with the resigning Warrant Agent and shall forthwith cause a copy of
such notice to be mailed to the Registered Holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party shall be a successor warrant agent under this Agreement without any
further act, provided that such corporation is eligible for appointment as
successor to the Warrant Agent under the provisions of the preceding paragraph.
Any such successor warrant agent shall promptly cause notice of its succession
as warrant agent to be mailed to the Company and to the Registered Holders of
each Warrant Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and any of its
or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effect as though it were not Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two years from the
date of exercise any Warrant Certificate received by it upon such exercise.
SECTION 21
Modification of Agreement.
The Warrant Agent and the Company may by supplemental agreement make
any changes or corrections in this Agreement (i) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained; or (ii) that they may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Warrant Certificates; provided, however, that this Agreement
shall not otherwise be modified, supplemented or altered in any respect except
with the consent in writing of the Registered
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<PAGE> 17
Holders representing not less than 66-2/3% of the Warrants then outstanding;
provided, further, that no change in the number or nature of the securities
purchasable upon the exercise of any Warrant, or the Applicable Purchase Price,
therefor, shall be made without the consent in writing of the Registered Holder
of the Warrant Certificate, other than such changes as are specifically
prescribed by this Agreement as originally executed. In addition, this Agreement
may not be modified, amended or supplemented without the prior written consent
of the Representatives, other than to cure any ambiguity or to correct any
provision which is inconsistent with any other provision of this Agreement or to
make any such change that is necessary or desirable and which shall not
adversely affect the interests of the underwriters and except as may be required
by law.
SECTION 12
Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed certified mail, return receipt requested, or delivered to a recognized
overnight delivery service if to the Registered Holder of a Warrant Certificate,
at the address of such holder as shown on the registry books maintained by the
Warrant Agent; if to the Company at Orion Acquisition Corp. II, 1430 Broadway,
13th Floor, New York, NY 10018, Attention: Chairman of the Board and President,
or at such other address as may have been furnished to the Warrant Agent in
writing by the Company; and if to the Warrant Agent, at its Corporate Office.
Copies of any notice delivered pursuant to this Agreement shall be delivered to
H.J. Meyers & Co., Inc., 1895 Mount Hope Avenue, Rochester, NY 14620, Attention:
Michael S. Smith, and Northeast Securities, Inc. at 1600 Stewart Avenue, Suite
300, Westbury, NY 11590, Attention: Mr. Stephen I. Perrone, President, or at
such other address as may have been furnished to the Company and the Warrant
Agent in writing.
SECTION 13
Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to conflicts of laws.
SECTION 14
Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors
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<PAGE> 18
and assigns and the holders from time to time of Warrant Certificates or any of
them. Except as hereinafter stated, nothing in this Agreement is intended or
shall be construed to confer upon any other person any right, remedy or claim or
to impose upon any other person any duty, liability or obligation. The
underwriters, acting through either Representative, are, and shall at all times
irrevocably be deemed to be, third-party beneficiaries of this Agreement, with
full power, authority and standing to enforce the rights granted to them
hereunder.
SECTION 15
Counterparts.
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the first date first above written.
[CORPORATE
SEAL] AMERICAN STOCK TRANSFER
& TRUST COMPANY
As Warrant Agent
By:_______________________
ORION ACQUISITION CORP. II
By:_______________________
Title:
By:_______________________
Richard C. Hoffman,
Secretary
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<PAGE> 1
Exhibit 4.5
ORION ACQUISITION CORP. II
REPRESENTATIVES' WARRANT AGREEMENT
REPRESENTATIVES' WARRANT AGREEMENT dated as of ___________,
_______ by and among ORION ACQUISITION CORP. II, a Delaware corporation (the
"Company") and H.J. MEYERS & CO., INC., ("H.J. Meyers"), and NORTHEAST
SECURITIES, INC. ("Northeast"), as representatives of the several underwriters
(the "Representatives").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representatives
warrants ("Warrants") to purchase (i) up to 80,000 units (the "Units"), each
Unit consisting of one (1) share of common stock, $.01 par value, of the Company
(the "Common Stock") and one (1) Class A Common Stock Purchase Warrant to
purchase one (1) share of Common Stock (the "Class A Warrants") and (ii) 32,000
Class B Unit Purchase Warrants to purchase one (1) Unit (the "Class B
Warrants"). The Class A Warrants and the Class B Warrants are sometimes
collectively referred to herein as the "Constituent Warrants"; and
WHEREAS, the Underwriters have agreed, pursuant to the
underwriting agreement (the "Underwriting Agreement") dated _________, ______ by
and among the Representatives and the Company, to act as the underwriters in
connection with the Company's proposed public offering of up to (i) 920,000
Units (the "Public Units"), each Public Unit consisting of one (1) share of
Common Stock and one (1) Class A Warrant, at a public offering price of $10.00
per Public Unit and (ii) 368,000 Class B Warrants, at a public offering price of
$6.25 per Class B Warrant (the "Public Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Representatives in consideration for, and as
part of the Representatives' compensation in connection with, the Underwriters'
acting as the underwriters pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the foregoing premises
which are incorporated into the terms hereof of and the payment by the
Representatives to the Company of $.01 for each Warrant purchased hereunder, the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. GRANT.
The Representatives and their Permitted Transferees, as hereinafter
defined ("Holders") are hereby granted the right to purchase, at any time from
_____________ until 5:00 p.m., New York time, on _____________, up to (i) 80,000
Units, each Unit
<PAGE> 2
consisting of one (1) share of Common Stock and one (1) Class A Warrant, at an
initial exercise price (subject to adjustment as provided in Article 8 hereof of
$11.00 per Unit (110% of the public offering price per Public Unit) and up to
(ii) 32,000 Class B Warrants, at an initial exercise price (subject to
adjustment as provided in Article 8 hereof) of $6.1875 per Class B Warrant (110%
of the public offering price per Class B Warrant), both subject to the terms and
conditions of this Agreement.
Each Class A Warrant is exercisable to purchase one (1) share of Common
Stock at an initial exercise price of $9.00 at any time from the consummation of
a Business Combination (as defined below) until 5:00 P.M. New York time
____________, at which time the Class A Warrants, unless the exercise period of
the then outstanding Class A Warrants has been extended, shall expire. Each
Class B Warrant is exercisable to purchase one (1) Unit at an initial exercise
price of $.125 at any time from the consummation of a Business Combination until
the first anniversary thereof. A "Business Combination" is any merger, exchange
of capital stock, asset acquisition or other business combination effected by
the Company. The Class A and Class B Warrants issuable upon exercise of the
Warrants are in all respects identical to the Warrants being purchased by the
Representatives for resale to the public (the "Public Warrants") pursuant to the
terms and provisions of the Warrant Agreement dated the date hereof between the
Company and American Stock Transfer & Trust Company (the "Public Warrant
Agreement"), a copy of which is attached hereto, except that the Constituent
Warrants included within the Warrants are not redeemable without the consent of
the Registered Holder thereof. The shares of Common Stock included in the Units
are referred to as the "Unit Shares," the Class A Warrant issuable upon the
exercise of the Class B Warrants are referred to as the "Unit Warrants", the
shares of Common Stock issuable upon exercise of the Constituent Warrants are
referred to as the "Warrant Shares," and the Unit Shares and the Warrant Shares
are collectively referred to as the "Shares." The Shares and the Constituent
Warrants are collectively referred to as the "Warrant Securities."
2. WARRANT CERTIFICATES.
The warrant certificates (the "Warrant Certificates") delivered and to
be delivered pursuant to this Agreement shall be in the form set forth in
Exhibit A for Units and Exhibit B for Class B Warrants, attached hereto and made
a part hereof, with such appropriate insertions omissions, substitutions, and
other variations as required or permitted by this Agreement.
3. EXERCISE OF WARRANTS.
The Warrants are exercisable during the term set forth in Section 1
hereof at the Exercise Price (defined below) per Unit or per Class B Warrant, as
the case may be, set forth in Section 6 hereof payable by certified or cashier's
check or money order
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<PAGE> 3
payable in lawful money of the United States, subject to adjustment as provided
in Article 8 hereof. Upon surrender of a Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the
Exercise Price (as hereinafter defined) for the Units or the Class B Warrants,
as the case may be, (and such other amounts, if any, arising pursuant to Section
4 hereof) at the Company's principal office in New York (1430 Broadway, 13th
Floor, New York, NY 10018), the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the Shares so purchased and a certificate or certificates for
the Public Warrants so purchased. The purchase rights represented by each
Warrant Certificate are exercisable at the option of the Holder thereof; in
whole or in part, (but not as to fractional Unit Shares or Constituent
Warrants). The Warrants may be exercised to purchase all or part of the Units or
the Class B Warrants, as the case may be, represented thereby. In the case of
the purchase of less than all the Units or the Class B Warrants, as the case may
be, purchasable on the exercise of Warrants represented by a Warrant
Certificate, the Company shall cancel the Warrant Certificate represented
thereby upon the surrender thereof and shall execute and deliver a new Warrant
Certificate of like tenor for the balance of the Units or the Class B Warrants,
as the case may be, purchasable thereunder.
4. ISSUANCE OF CERTIFICATES.
Upon the exercise of the Warrants and payment of the Exercise Price
therefor, the issuance of certificates for the Unit Shares, Constituent Warrants
or other securities, properties or rights underlying such Warrants, and upon the
exercise of the Constituent Warrants, the issuance of certificates for the
Warrant Shares or other securities, properties or rights underlying such
Constituent Warrants, shall be made forthwith (and in any event within three (3)
business days thereafter) without further charge to the Holder thereof; and such
certificates shall (subject to the provisions of Sections 5 and 7 hereof) be
issued in the name of or in such names as may be directed by, the Holders
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holders, and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Warrant
Certificates and the certificates representing the Unit Shares, the Constituent
Warrants, the Warrant Shares or other securities, property or rights (if such
property or rights are represented by certificates) shall be executed on behalf
of the Company by the manual or facsimile signature of the then present Chairman
or Vice Chairman of the Board of Directors or President or Vice President of the
Company under its corporate seal reproduced thereon, attested to by
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<PAGE> 4
the manual or facsimile signature of the then present Secretary or Assistant
Secretary or Treasurer or Assistant Treasurer of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
5. RESTRICTION ON TRANSFER OF WARRANTS.
The Holder of a Warrant Certificate (and its Permitted Transferee, as
defined below), by its acceptance thereof covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may be sold, transferred, assigned, hypothecated or
otherwise disposed of; in whole or in part, to any person (a "Permitted
Transferee"), provided such transfer, assignment, hypothecation or other
disposition is made in accordance with the provisions of the Securities Act of
1933 (the "Act"); and provided, further, that until _____________ (one year
after the Effective Date, defined below) only officers and partners of the
Representatives, and any underwriter, selling group member and their respective
officers and partners, shall be Permitted Transferees. Warrants to purchase
Units may be separately transferable from Warrants to purchase Class B Warrants.
6. EXERCISE PRICE.
a. Initial and Adjusted Exercise Price. Except as otherwise provided in
Section 8 hereof; the initial exercise price of each Warrant to purchase Units
shall be $ 11.00 per Unit, and of each Warrant to purchase Class B Warrants
shall be $6.1875 per Class B Warrant. The respective adjusted exercise prices
shall be the prices which shall result from time to time from any and all
adjustments of the initial exercise prices in accordance with the provisions of
Section 8 hereof.
b. Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. REGISTRATION RIGHTS.
a. Registration Under the Securities Act of 1933. The Warrants have not
been registered under the Act. The Warrant certificates shall bear the following
legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933 (the "Act"), and may not be offered
for sale or sold except pursuant to (i) an effective registration
statement under the Act, or (ii) an opinion of counsel, if such opinion
shall be reasonably satisfactory to counsel to the issuer, that an
exemption from registration under such Act is available.
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<PAGE> 5
b. Demand Registration.
(1) At any time commencing one (1) year and expiring five (5)
years after the effective date of the Company's Registration
Statement relating to the Public Offering (the "Effective
Date"), the Holders of the Warrants and the Warrant Securities
representing at least a Majority (as hereinafter defined) of
such securities shall have the right, exercisable by written
notice to the Company, to have the Company prepare and file
with the Securities and Exchange Commission (the
"Commission"), on one (1) occasion, a registration statement
on Form S-1, SB-2 (or Post-Effective Amendment on Form S-1 or
SB-2) or other appropriate form) and such other documents,
including a prospectus, as may be necessary in the opinion of
both counsel for the Company and counsel for the Holders, in
order to comply with the provisions of the Act, so as to
permit a public offering and sale, for a period of nine (9)
months, of the Warrant Securities by such Holders and any
other Holders of the Warrants and/or Warrant Securities who
notify the Company within fifteen (15) business days after
receipt of the notice described in Section 7(b)(2). The
Holders of the Warrants may demand registration without
exercising the Representatives' Warrants, and are never
required to exercise same.
(2) The Company covenants and agrees to give written notice of any
registration request under this Section 7(b) by any Holder(s)
to all other registered Holders of the Warrants and the
Warrant Securities within ten (10) days from the date of the
receipt of any such registration request.
(3) For purposes of this Agreement, the term "Majority" in
reference to the Holders of the Warrants or Warrant
Securities, shall mean in excess of fifty percent (50%) of the
then outstanding Warrants or Warrant Securities that (i) are
not held by the Company, an affiliate, officer, director;
employee or agent thereof or any of their respective
affiliates, members of their family, persons acting as
nominees or in conjunction therewith, or (ii) have not been
resold to the public pursuant to a registration statement
filed with the Commission under the Act.
c. Piggyback Registration. If at any time within the period commencing
one (1) year and expiring five (5) years after the Effective Date, the Company
should file a registration statement with the Commission under the Act (other
than in connection with a merger or pursuant to Form S-8) it will give written
notice by certified mail return receipt requested, at least thirty (30) days
prior to the filing of each such registration statement, to the Representatives
and to all other Holders of the Warrants and/or the
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<PAGE> 6
Warrant Securities of its intention to do so. If the Representatives or other
Holders of the Warrants and/or the Warrant Securities notify the Company within
twenty (20) days after receipt of any such notice, by certified mail return
receipt requested, of its or their desire to include any Warrant Securities in
such proposed registration statement, the Company shall afford the
Representatives and such Holders of the Warrants and/or Warrant Securities the
opportunity to have any such Warrant Securities registered under such
registration statement. Notwithstanding the provisions of this Section 7(c), the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7(c) (irrespective of whether a written request
for inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
If the underwriter of an offering to which the above piggyback rights
apply objects to such rights, such objection shall preclude such inclusion.
However, in such event, the Company will, within six (6) months of completion of
such underwriting, file at its sole expense, a registration statement relating
to such excluded Warrant Securities, which shall be in addition to any
registration statement required to be filed pursuant to Section 7(b), unless
such Holders had refused an opportunity provided with the consent of the
underwriter, to be included in the registration statement on the condition that
they agree not to offer the securities for sale without the prior written
consent of the underwriter for a period not exceeding 60 days from the effective
date of such registration statement.
If the underwriter in such underwritten offering shall advise the
Company that it declines to include a portion or all of the Warrant Securities
requested by the Representatives and the Holders to be included in the
registration statement, then (A) registration of all of the Warrant Securities
shall be excluded from such registration statement on the condition that all
securities to be registered by other selling security holders, if any, are also
excluded and (B) registration of a portion of such Warrant Securities allocated
among the Representatives and the Holders and any other selling security holders
in proportion to the respective numbers of securities to be registered by the
Representatives and each such Holder and other selling security holder. In such
event the Company shall give the Representatives and the Holders prompt notice
of the number of Warrant Securities excluded.
d. Covenants of the Company With Respect to Registration. In connection
with any registrations under Sections 7(b) and 7(c) hereof; the Company
covenants and agrees as follows:
(1) The Company shall use its best efforts to file a registration
statement within ninety (90) days of receipt of any demand
therefor; provided, however, that the Company shall not be
required to produce audited or
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unaudited financial statements for any period prior to the
date such financial statements are required to be filed in a
report on Form 10-K or Form 10-Q (or Form 10- KSB or Form
10-QSB), as the case may be. The Company shall use its best
efforts to have any registration statements declared effective
at the earliest possible time, and shall furnish each Holder
desiring to sell Shares such number of prospectuses as shall
reasonably be requested.
(2) The Company shall pay all costs (excluding fees and expenses
of Holder(s)' counsel and any underwriting discounts or
selling fees, expenses or commissions), fees and expenses in
connection with any registration statement filed pursuant to
Sections 7(b) and 7(c) hereof including, without limitation,
the Company's legal and accounting fees, printing expenses,
blue sky fees and expenses.
(3) The Company will take all necessary action which may be
required to qualify or register the Shares included in a
registration statement for offering and sale under the
securities or blue sky laws of such states as reasonably are
requested by the Holder(s), provided that the Company shall
not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to
do business under the laws of any such jurisdiction.
(4) The Company shall indemnify the Holder(s) of the Shares to be
sold pursuant to any registration statement and each person,
if any, who controls such Holders within the meaning of
Section 15 of the Act or Section 20(a) of the Securities
Exchange Act of 1934 (the "Exchange Act"), against all losses,
claims, damages, expenses or liability (including all expenses
reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become
subject under the Act, the Exchange Act or otherwise, arising
from such registration statement, but only to the same extent
and with the same effect as the provisions pursuant to which
the Company has agreed to indemnify the Representatives
contained in Section 8 of the Underwriting Agreement, and the
Holder(s) shall indemnify the Company to the same extent and
with the same effect as the provisions pursuant to which the
Representatives have agreed to indemnify the Company contained
in Section ___ of the Underwriting Agreement.
(5) The Holder(s) of the Shares to be sold pursuant to a
registration statement, and their successors and assigns,
shall severally, and not jointly, indemnify the Company, its
officers and directors and each persons, if any, who
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<PAGE> 8
controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against all losses,
claims, damages, expenses or liability (including all expenses
reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject
under the Act, the Exchange Act or otherwise, arising from
information furnished by or on behalf of such Holders, or
their successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same
effect as the provisions contained in Section ___ of the
Underwriting Agreement pursuant to which the Representatives
have agreed to indemnify the Company.
(6) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to
the initial filing of any registration statement or the
effectiveness thereof.
(7) If the manner of distribution proposed by the Holders of the
Warrants and the Warrant Securities is an underwriting, the
Company shall furnish to each Holder participating in the
offering and to each underwriter, a signed counterpart,
addressed to such Holder or underwriter of (i) an opinion of
counsel to the Company, dated the effective date of such
registration statement (and if such registration includes an
underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold
comfort" letter dated the effective date of such registration
statement (and, if such registration includes an underwritten
public offering, a letter dated the date of the closing under
the underwriting agreement) signed by the independent public
accountants who have issued a report on the Company's
financial statements included in such registration statement,
in each case covering substantially the same matters with
respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants'
letters, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(8) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within
the first full four fiscal quarters following the effective
date, make "generally available to its security holders"
(within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section
11(a) of the Act.
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<PAGE> 9
(9) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence
described below and any managing underwriter, copies of all
correspondence between the Commission and the Company or its
counsel or its auditors with respect to the registration
statement and permit the underwriter to do such investigation,
upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it
deems reasonably necessary to comply with applicable
securities laws or rules of the National Association of
Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to books, records and properties and
opportunities to discuss the business of the Company with its
executive officers and independent auditors upon notice, all
to such reasonable extent and at such reasonable times and as
often as any such underwriter shall reasonably request.
(10) In connection with an offering for which the Holders have
demand rights, the Company shall enter into an underwriting
agreement with the managing underwriter selected for such
underwriting by Holders holding a Majority of the Shares
requested to be included in such underwriting. In connection
with an offering for which the Holders have piggyback rights,
the Company shall have the sole right to select the managing
underwriter. Such underwriting agreement shall be satisfactory
in form and substance to the Company, a Majority of such
Holders and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and
such other terms as are customarily contained in agreements of
that type used by the managing underwriter. The Holders shall
be parties to any underwriting agreement relating to an
underwritten sale of their Shares and may, at their option,
require that any or all the representations, warranties and
covenants of the Company to or for the benefit of such
underwriters shall also be made to and for the benefit of such
Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such
Holders' ownership and their intended methods of distribution.
e. Further Registrations. The Company will cooperate with the Holder(s)
of the Warrants and Warrant Securities in preparing and signing one additional
registration statement, in addition to the registration statements discussed
above, required in order to sell or transfer the Shares and will supply all
information required therefor, but such additional registration statement
expenses or offering statement expenses will be prorated between the Company and
the Holders of the Warrants and Warrant Securities
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<PAGE> 10
according to the aggregate sales price of the securities being issued. The
provisions of Section 7(d) other than subsections (2) and (10) shall apply to
any such registration statement.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES: REDEMPTION.
a. (i) Except as hereinafter provided, in the event the Company shall,
at any time or from time to time after the date hereof; issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the applicable Purchase Price for the Warrants (whether or not the same shall be
issued and outstanding) in effect immediately prior to such Change of Shares
shall be changed to a price (including any applicable fraction of a cent to the
nearest cent) determined by dividing (i) the sum of (a) the total number of
shares of Common Stock outstanding immediately prior to such Change of Shares,
multiplied by the applicable Purchase Price in effect immediately prior to such
Change of Shares, and (b) the consideration, if any, received by the Company
upon such issuance, subdivision or combination by (ii) the total number of
shares of Common Stock outstanding immediately after such Change of Shares;
provided, however, that in no event shall the applicable Purchase Price be
adjusted pursuant to this computation to an amount in excess of the applicable
Purchase Price in effect immediately prior to such computation, except in the
case of a combination of outstanding shares of Common Stock.
For the purposes of any adjustment to be made in accordance with this
Section 8(a) the following provisions shall be applicable:
(1) Shares or equivalents of Common Stock issuable by way of
dividend or other distribution on any stock of the Company
shall be deemed to have been issued immediately after the
opening of business on the day following the record date for
the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have
been issued without consideration.
(2) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of
Common Stock shall be deemed to involve the issuance of such
shares of Common Stock for a consideration other than cash
immediately prior to the close of business on the date fixed
for the determination of security holders entitled to receive
such shares, and the value of the consideration allocable to
such shares of Common Stock shall be determined in good faith
by the
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<PAGE> 11
Board of Directors of the Company on the basis of a record of
values of similar property or services.
(3) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum
number of shares issuable (subject to readjustment upon the
actual issuance thereof) upon the exercise of options, rights
or warrants and upon the conversion or exchange of convertible
or exchangeable securities.
b. Upon each adjustment of the applicable Purchase Price pursuant to
this Section 8, the number of shares of Common Stock (but not the number of
Class A Warrants or Class B Warrants that may be obtained upon such exercise)
purchasable upon the exercise of each Warrant shall be the number derived by
multiplying the number of shares of Common Stock purchasable immediately prior
to such adjustment by the applicable Purchase Price in effect prior to such
adjustment and dividing the product so obtained by the applicable adjusted
applicable Purchase Price.
c. In case of any reclassification or change of outstanding shares of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a Subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or other capital stock issuable upon exercise of the Warrants
(other than a change in par value, or from par value to no par value, or from no
par value to par value or as a result of subdivision or combination) or in case
of any sale or conveyance to another corporation of the property of the Company
as an entirety or substantially as an entirety, then, as a condition of such
reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be, shall
make lawful and adequate provision whereby the Registered Holder of each Warrant
then outstanding shall have the right thereafter to receive on exercise of such
Warrant the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification change, consolidation, merger, sale or conveyance
and shall forthwith file at the Corporate Office of the Warrant Agent a
statement signed by its President or a Vice President and by its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary evidencing such
provision. Such provisions shall include provision for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for in
Section 8a. The above provisions of this Section 8c. shall
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<PAGE> 12
similarly apply to successive reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers, sales or conveyances.
d. Irrespective of any adjustments or changes in the applicable
Purchase Price or the number of shares of Common Stock purchasable upon exercise
of the Warrants, the Warrant Certificates theretofore and thereafter issued
shall, unless the Company shall exercise its option to issue new Warrant
Certificates, continue to express the applicable Purchase Price per share and
the number of shares purchasable thereunder as the applicable Purchase Price per
share and the number of shares purchasable thereunder were expressed in the
Warrant Certificates when the same were originally issued.
e. After each adjustment of the applicable Purchase Price pursuant to
this Section 8, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
applicable Purchase Price as so adjusted, (ii) the number of shares of Common
Stock purchasable upon exercise of each Warrant, after such adjustment, and
(iii) a brief statement of the facts accounting for such adjustment. The Company
will promptly file such certificate with the Warrant Agent and cause a brief
summary thereof to be sent by ordinary first class mail to each registered
Holder at his last address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder whose
notice was defective. The affidavit of an officer of the Warrant Agent or the
Secretary or an Assistant Secretary of the Company that such notice has been
mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
f. No adjustment of the applicable Purchase Price shall be made as a
result of or in connection with the issuance or sale of shares of Common Stock
pursuant to options, warrants, stock purchase agreements and convertible or
exchangeable securities outstanding or in effect on the date hereof or granted
upon the consummation of and in connection with the first Business Combination
(as defined in the Registration Statement). In addition, registered Holders
shall not be entitled to cash dividends paid by the Company prior to the
exercise of any Warrant or Warrants held by them.
g. Definition of Common Stock. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Certificate of Incorporation of the Company as it may be amended as of
the date hereof; or (ii) any other class of stock resulting from successive
changes or reclassification of such Common Stock consisting solely
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<PAGE> 13
of changes in par value, or from par value to no par value, or from no par value
to par value. In the event that the Company shall, after the date hereof, issue
securities with greater or superior voting rights than those of the shares of
Common Stock outstanding as of the date hereof; the Holder, at its option, may
receive upon exercise of any Warrant either shares of Common Stock or a like
number of such securities with greater or superior voting rights.
h. Reclassification. Merger or Consolidation. The Company will not
merge, reorganize or take any other action which would terminate the
Representatives' Warrants without first making adequate provision for the
Representatives' Warrants. In case of any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any consolidation of the Company with, or merger of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification or change of the outstanding
Common Stock except a change as a result of a subdivision or combination of such
shares or a change in par value, as aforesaid), or in the case of a sale or
conveyance to another corporation or other entity of the property of the Company
as an entirety, the Holder of each Warrant then outstanding or to be outstanding
shall have the right thereafter (until the expiration of such Warrant) to
purchase, upon exercise of such Warrant, the kind and number of shares of stock
and other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holder were the owner of the
shares of Common Stock underlying such Warrants and the Constituent Warrants
immediately prior to any such events at a price equal to the product of (x) the
number of shares issuable upon exercise of the Warrants and the Constituent
Warrants and (y) the Exercise Prices in effect immediately prior to the record
date for such reclassification, change, consolidation, merger, sale or
conveyance, as if such Holder has exercised the Warrants and the Constituent
Warrants. In the event of a consolidation, merger, sale or conveyance of
property, the corporation formed by such consolidation or merger, or acquiring
such property, shall execute and deliver to the Holders a supplemental warrant
agreement to such effect. Such supplemental warrant agreement shall provide for
adjustments which shall be identical to the adjustment to those provided in
Section 8. The provisions of this Section 8(h) shall similarly apply to
successive consolidations or mergers.
i. No Adjustment of Exercise Prices in Certain Cases. No adjustment of
the Exercise Prices shall be made:
(1) Upon the issuance or sale of (i) the Warrants, the Constituent
Warrants or the Shares; (ii) the shares of Common Stock and
the Public Warrants pursuant to the Public Offering; (iii) the
shares of Common Stock
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<PAGE> 14
issuable upon the exercise of the Public Warrants, or the
options, warrants, stock purchase agreements and convertible
or exchangeable securities outstanding or in effect on the
date hereof as described in the prospectus relating to the
Public Offering; or (iv) Common Stock upon the exercise of the
Constituent Warrants.
(2) If the amount of said adjustments shall be less than ten
($.10) cents per Unit or five ($.05) cents per Class B
Warrant, as the case may be, provided, however, that in such
case any adjustment that would otherwise be required then to
be made shall be carried forward and shall be made at the time
of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount
to at least ten ($.10) cents per Unit or five ($.05) cents per
Class B Warrant, as the case may be.
j. Dividends and Other Distributions. In the event that the Company
shall at any time prior to the exercise of all the Warrants declare a dividend
(other than a dividend consisting solely of shares of Common Stock) or otherwise
distribute to its stockholders any assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock), whether issued by
the Company or by another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof; to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value (other than the proceeds placed in the escrow account maintained by
Chemical Bank, N.A., pursuant to the Company's Registration Statement on Form
SB-2 filed with the Securities and Exchange Commission on April 5, 1996, as
amended (the "Registration Statement") that they would have been entitled to
receive at the time of such dividend or distribution as if the Warrants had been
exercised immediately prior to such dividend or distribution. At the time of any
such dividend or distribution, the Company shall make appropriate reserves to
ensure the timely performance of the provisions of this Section 8 (j).
k. Adjustment of Constituent Warrant Exercise Price and Shares Issuable
on Exercise of Constituent Warrants. With respect to any of the Constituent
Warrants underlying the Warrants, whether or not the Constituent Warrants have
been exercised and whether or not the Constituent Warrants are issued and
outstanding, the Constituent Warrant exercise price and the number of shares of
Common Stock underlying such Constituent Warrants shall be automatically
adjusted in accordance with Section 8 of the Public Warrant Agreement upon the
occurrence of any of the events described therein. Thereafter, the underlying
Constituent Warrants shall be exercisable at such adjusted exercise price and
for such adjusted number of underlying shares of Common Stock.
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<PAGE> 15
l. Subscription Rights for Shares of Common Stock of Other Securities.
In the event that the Company or an affiliate of the Company shall at any time
after the date hereof and prior to the exercise of all the Warrants, issue any
rights to subscribe for shares of Common Stock or any other securities of the
Company or of such affiliate to all the stockholders of the Company, the Holders
of the unexercised Warrants shall be entitled to receive, in addition to the
Unit Shares and Constituent Warrants or other securities receivable upon the
exercise of the Warrants, such rights at the time such rights are distributed to
the other stockholders of the Company.
m. Redemption of Constituent Warrants. Notwithstanding anything to the
contrary contained in the Public Warrant Agreement or elsewhere, the Constituent
Warrants underlying the Warrants cannot, under any circumstances, be redeemed by
the Company without the prior written consent of the Holders of the Warrants and
shall remain exercisable upon the same terms and provisions of the Public
Warrant Agreement (other than the exercise period, which shall be as set forth
in Section 1 hereof) irrespective of whether the Company has called the
Redeemable Warrants for redemption.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Units in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates representing
fractions of Shares or of Constituent Warrants upon the exercise of the
Warrants, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests, provided, however, that if a Holder exercises all Warrants
or Constituents Warrants (as the case may be) held of record by such Holder the
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of Unit Shares, Warrant Shares, Constituent Warrants or
other securities, properties or rights.
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<PAGE> 16
11. RESERVATION AND LISTING OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants and the Constituent Warrants, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable upon
the exercise thereof. The Company covenants and agrees that, upon exercise of
the Warrants and payment of the Exercise Price therefor, all the Unit Shares and
other securities issuable upon such exercise shall be duly and validly issued,
fully paid, nonassessable and not subject to the preemptive rights of any
stockholder. The Company further covenants and agrees that upon exercise of the
Constituent Warrants underlying the Warrants and payment of the respective
Common Stock Warrant exercise price therefor, all the Warrant Shares and other
securities issuable upon such exercises shall be duly and validly issued, fully
paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the Warrants and the Constituent Warrants shall be
outstanding, the Company shall use its best efforts to cause the Common Stock to
be listed (subject to official notice of issuance) on all securities exchanges
on which the Public Units, the Common Stock and the Constituent Warrants issued
to the public in connection herewith may then be listed or quoted.
12. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Agreement shall be construed as conferring
upon the Holders the right to vote or to consent or to receive notice as a
stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
a. the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings (maintained by
Chemical Bank, N.A., and described in the Company's Registration Statement), as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
b. the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
c. a dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation or merger) or a sale of all or substantially
all of its property, assets and business as
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<PAGE> 17
an entirety shall be proposed; then, in any one or more of said events, the
Company shall give written notice of such event at least fifteen (15) days prior
to the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. COMMON STOCK WARRANTS.
The form of the certificates representing the Class A and Class B
Warrants and the form of election to purchase shares of Common Stock upon the
exercise of the Class A and Class B Warrants and the form of assignment printed
on the reverse thereof shall be substantially as set forth in Exhibits A and B
to the Public Warrant Agreement, except that the exercise periods shall be as
set forth in Section 1 hereof. Each Class A Warrant issuable upon exercise of
the Warrants shall evidence the Holder's right to purchase one (1) fully paid
and non-assessable share of Common Stock at an initial exercise price of $9.00.
Each Class B Warrant issuable upon exercise of the Warrants shall evidence the
Holder's right to purchase one (1) Unit consisting of one (1) fully paid and
non-assessable share of Common Stock and one (1) Class A Warrant at an initial
exercise price of $.125. The exercise price of the Constituent Warrants and the
number of the shares of Common Stock issuable upon the exercise of the
Constituent Warrants are subject to adjustment, whether or not the Warrants have
been exercised and the Constituent Warrants have been issued, in the manner and
upon the occurrence of the events set forth in Section 8 of the Public Warrant
Agreement, which is hereby incorporated herein by reference and made a part
hereof as if set forth in its entirety herein. Subject to the provisions of this
Agreement and upon issuance of the Constituent Warrants underlying the Warrants,
each registered Holder of such Common Stock Warrant shall have the right to
purchase from the Company (and the Company shall issue to such registered
Holders) up to the number of fully paid and non-assessable shares of Common
Stock (subject to adjustment as provided herein and in the Public Warrant
Agreement), free and clear of all preemptive rights of stockholders, provided
that such registered Holder complies with the terms governing the exercise of
the Redeemable Warrants set forth in the Public Warrant Agreement, and pays the
applicable exercise price, determined in accordance with the terms of the Public
Warrant Agreement. Upon exercise of the Constituent Warrants, the Company shall
forthwith issue to the registered Holder of any such Common Stock Warrant in his
name or in such name as may be directed by him, certificates for the number
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of shares of Common Stock and Class A Warrants so purchased. Except as otherwise
provided herein and in Sections 1, 6(a) and 8(i), the Constituent Warrants
underlying the Warrants shall be governed in all respects by the terms of the
Public Warrant Agreement. The Constituent Warrants shall be transferable in the
manner provided in the Public Warrant Agreement, and upon any such transfer, a
new Common Stock Warrant Certificate shall be issued promptly to the transferee.
The Company covenants to, and agrees with, the Holder(s) that without the prior
written consent of two-thirds (2/3) in interest of the Holder(s), this Agreement
will not be modified, amended, canceled, altered or superseded, and that the
Company will send to each Holder, irrespective of whether or not the Warrants
have been exercised, any and all notices required by this Agreement to be sent
to holders of Constituent Warrants.
14. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered,
or mailed by registered or certified mail, return receipt requested:
a. If to the registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
b. If to the Company to the address set forth in Section 3 hereof or to
such other address as the Company may designate by notice to the Holders.
15. SUPPLEMENTS AND AMENDMENTS.
The Company and the Representatives may from time to time supplement or
amend this Agreement without the approval of any Holders of Warrant Certificates
(other than the Representatives) in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and the Representatives may
deem necessary or desirable and which the Company and the Representatives deem
shall not adversely affect the interests of the Holders of Warrant Certificates.
16. SUCCESSORS
All the covenants and provisions of this Agreement shall be binding
upon and inure to the benefit of the Company, the Underwriters, the Holders and
their respective successors and assigns hereunder.
-18-
<PAGE> 19
17. TERMINATION.
This Agreement shall terminate at the close of business on ___________.
Notwithstanding the foregoing, the indemnification provisions of Section 7 shall
survive such termination until the close of business on the later of the
expiration of any applicable statute of limitations or _______________.
18. GOVERNING LAW: SUBMISSION TO JURISDICTION.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State without
giving effect to the rules of said State governing the conflicts of laws, except
that matters concerning the validity of the issuance of securities shall be
determined and construed in accordance with the laws of Delaware. The Company,
the Representatives and the Holders hereby agree that any action, proceeding or
claim against it arising out of, or relating in any way to, this Agreement shall
be brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and irrevocably submits
to such jurisdiction, which jurisdiction shall be exclusive. The Company, the
Representatives and the Holders hereby irrevocably waive any objection to such
exclusive jurisdiction or inconvenient forum. Any such process or summons to be
served upon any of the Company, the Representatives and the Holders (at the
option of the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof; by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
14 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the party so served in any action, proceeding or claim.
19. ENTIRE AGREEMENT: MODIFICATION.
This Agreement (including the Underwriting Agreement and the Public
Warrant Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof. Subject to Section 15, this Agreement may not be modified
or amended except by a writing duly signed by the party against whom enforcement
of the modification or amendment is sought.
20. SEVERABILITY.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
-19-
<PAGE> 20
21. CAPTIONS.
The caption headings of the Sections of this Agreement are for
convenience of reference only and are not intended, nor should they be construed
as, a part of this Agreement and shall be given no substantive effect.
22. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Representatives and any other
registered Holder(s) of the Warrant Certificates or Warrant Securities any legal
or equitable right, remedy or claim under this Agreement; and this Agreement
shall be for the sole and exclusive benefit of the Company and the
Representatives and any other Holder(s) of the Warrant Certificates or Warrant
Securities.
23. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
24. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Representatives and their respective successors and assigns and the
Holders from time to time of the Warrant Certificate(s) or any of them.
-20-
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
ORION ACQUISITION CORP. II
By:_____________________________
William Remley, President
H.J. MEYERS & CO., INC.
By:_____________________________
Authorized Agent
NORTHEAST Securities, INC.
By:_____________________________
Stephen J. Perrone, President
-21-
<PAGE> 22
EXHIBIT A
ORION ACQUISITION CORP. II
WARRANT CERTIFICATE
THE SECURITIES ISSUABLE UPON EXERCISE OF THE WARRANT REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Act"), and may not be offered for
sale or sold except pursuant to (i) an effective registration statement under
the Act, or (ii) an opinion of counsel, if such opinion shall be reasonably
satisfactory to counsel to the issuer, that an exemption from registration under
such Act is available.
THE TRANSFER OR EXCHANGE OF THE WARRANT REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING __________ THROUGH 5:00 P.M., NEW YORK TIME
_________________.
No.WU-l _____Warrants
This Warrant Certificate certifies that _______________
________________ or registered assigns, is the registered holder of __________
warrants (the "Warrants") to purchase initially, at any time from _____________,
until 5:00 p.m., New York time on ________________ (the "Expiration Date"), up
to ________ units (the "Units"), each Unit consisting of one (1) fully paid and
nonassessable share (the "Shares"), of Common Stock, $.01 par value (the "Common
Stock"), of Orion Acquisition Corp. II, a Delaware corporation (the "Company"),
and one (1) Class A nonredeemable common stock purchase warrant (the "Class A
Warrants") of the Company at the exercise price of $11.00 per Unit (the
"Exercise Price"), upon the surrender of this Warrant Certificate and payment of
the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of __________
(the "Warrant Agreement") by and among the Company and H.J. Meyers & Co., Inc.
and Northeast Securities, Inc., as representatives of the several underwriters
(the "Representatives"). Payment of the Exercise Price shall be made by
certified or cashier's check or money order payable to the order of the Company.
No Warrant may be exercised after 5:00 P.M, New York time, on the Expiration
Date, at which time all Warrants evidenced hereby, unless exercised prior
thereto, shall thereafter be void.
<PAGE> 23
Each Class A Warrant entitles the registered holder to purchase one (1)
share of Common Stock at $9.00 per share at the times set forth in the Warrant
Agreement. Except as set forth in the Warrant Agreement and as described below,
the Class A Warrants are subject to the conditions set forth in the warrant
agreement dated ______________ between the Company and American Stock Transfer &
Trust Company.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange as provided herein,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof; and of any distribution to the holder(s) hereof; and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
_____ day of _________, 199__.
<PAGE> 24
[SEAL]
ORION ACQUISITION CORP. II
By:_______________________
William Remley,
President
ATTEST:
By:_____________________________
Richard C. Hoffman, Secretary
<PAGE> 25
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED________________
hereby sells, assigns and transfers unto _______________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ______________________
Attorney, to transfer the within Warrant Certificate on the books of Orion
Acquisition Corp. II, with full power of substitution.
Dated:_____________________
Signature____________________
(Signature must conform in all
respects to the name of holder as
specified on the face of the Warrant
Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE> 26
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase:
________ Units
and herewith tenders in payment for such securities a certified or cashier's
check or money order payable to the order of Orion Acquisition Corp. II in the
amount of $___________, all in accordance with the terms hereof. The undersigned
requests that a certificate for such securities be registered in the name of
__________________ whose address is _____________________________ and that such
Certificate be delivered to _______________________ whose address is
Dated:___________________
Signature_____________________
(Signature must conform in all
respects to the name of holder as
specified on the face of the Warrant
Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE> 27
EXHIBIT B
ORION ACQUISITION CORP. II
WARRANT CERTIFICATE
THE SECURITIES ISSUABLE UPON EXERCISE OF THE WARRANT REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Act"), and may not be offered for
sale or sold except pursuant to (i) an effective registration statement under
the Act, or (ii) an opinion of counsel, if such opinion shall be reasonably
satisfactory to counsel to the issuer, that an exemption from registration under
such Act is available.
THE TRANSFER OR EXCHANGE OF THE WARRANT REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING _____________ THROUGH 5:00 P.M., NEW YORK TIME _________.
No.WW-1 _________ Warrants
This Warrant Certificate certifies that ________________ _______ or
registered assigns, is the registered holder of _________ warrants (the
"Warrants") to purchase initially, at any time from ______________, until 5:00
p.m., New York time on _________________ (the "Expiration Date"), up to ________
Redeemable Class B common stock purchase warrants (the "Class B Warrants") of
Orion Acquisition Corp. II, a Delaware corporation (the "Company"), of the
Company at the exercise price of $6.1875 per Class B Warrant (the "Exercise
Price"), upon the surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of
_____________ (the "Warrant Agreement") by and among the Company and H.J. Meyers
& Co., Inc., and Northeast Securities, Inc., as representatives of the several
underwriters (the "Representatives"). Payment of the Exercise Price shall be
made by certified or cashier's check or money order payable to the order of the
Company. No Warrant may be exercised after 5:00 P.M., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void. Each Class B Warrant entitles the
registered holder to purchase one (1) Unit of the Company at a price of $.125,
consisting of one share of Common Stock, $.01 par value ("Common Stock"), and
one non-redeemable Class A common stock
<PAGE> 28
purchase warrant ("Class A Warrant") of the Company, at the times set forth in
the Warrant Agreement. Each Class A Warrant entitles the registered holder to
purchase one (1) share of Common Stock at $9.00 per share at the times set forth
in the Warrant Agreement. Except as set forth in the Warrant Agreement and as
described below, the Class A Warrants and Class B Warrants are subject to the
conditions set forth in the Warrant Agreement dated _______________ between the
Company and American Stock Transfer & Trust Company.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange as provided herein,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof; and of any distribution to the holder(s) hereof; and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
<PAGE> 29
IN WITNESS WHEREOF, the undersigned has executed this certificate this
____ day of __________ 199__.
[SEAL]
ORION ACQUISITION CORP. II
By:_____________________
William Remley,
President
ATTEST:
By:___________________
Richard Hoffman, Secretary
<PAGE> 30
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED________________
hereby sells, assigns and transfers unto _____________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________________
Attorney, to transfer the within Warrant Certificate on the books of Orion
Acquisition Corp. II, with full power of substitution.
Dated:
Signature_____________________
(Signature must conform in all
respects to the name of holder as
specified on the face of the Warrant
Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE> 31
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase:
_____Class B Warrants
and herewith tenders in payment for such securities a certified or cashier's
check or money order payable to the order of Orion Acquisition Corp. II in the
amount of $_____ all in accordance with the terms hereof. The undersigned
requests that a certificate for such securities be registered in the name
of_____________________ whose address is _______________________ and that such
Certificate be delivered to ________________________ whose address is
________________________________________
Dated:__________________
Signature____________________
(Signature must conform in all
respects to the name of holder as
specified on the face of the Warrant
Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE> 1
EXHIBIT 10.4
ORION ACQUISITION CORP. II
WARRANT AGREEMENT
Warrant Agreement dated as of April __, 1996 by and among
Orion Acquisition Corp. II, a Delaware corporation (the "Company") and
Cranbrooke Corporation, a Delaware corporation ("Cranbrooke").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to Cranbrooke warrants
(the "Warrants") to purchase (i) up to 100,000 units (the "Units"), each Unit
consisting of one (1) share of common stock, $.01 par value, of the Company (the
"Common Stock") and one (1) Class A Common Stock Purchase Warrant (the "Class A
Warrants"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to Cranbrooke in consideration for, and as part of
Cranbrooke's compensation in connection with their rendering management
services;
NOW, THEREFORE, in consideration of the foregoing premises
which are incorporated into the terms hereof of and the payment by Cranbrooke to
the Company of $.01 for each Warrant purchased hereunder, the agreements herein
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. GRANT.
Cranbrooke and its Permitted Transferees, as hereinafter defined
("Holders") are hereby granted the right to purchase, at any time from the
consummation of a Business Combination (as defined below) until 5:00 p.m., New
York time, on the third anniversary of the consummation of a Business
Combination, up to (i) 100,000 Units, each Unit consisting of one (1) share of
Common Stock and one (1) Class A Warrant, at an initial exercise price (subject
to adjustment as provided in Article 8 hereof) of $12.50 per Unit, subject to
the terms and conditions of this Agreement.
Each Class A Warrant is exercisable to purchase one (1) share of Common
Stock at an initial exercise price of $9.00 at any time from the consummation of
a Business Combination (as defined below) until 5:00 P.M. New York time on the
fifth anniversary of the date of the final prospectus for the Company's initial
public offering, at which time the Class A Warrants, unless the exercise period
of all then outstanding Class A Warrants has been extended, shall expire. A
"Business Combination" is any merger, exchange of capital stock, asset
acquisition or other business combination effected by the Company. The Class A
Warrants issuable upon exercise of the Warrants are in all respects identical to
the Public Warrants being purchased by H.J. Meyers & Co., Inc., ("H.J. Meyers"),
and Northeast Securities, Inc. ("Northeast"), as representatives of the several
underwriters (the "Representatives") for resale to the public pursuant to the
terms and provisions of
<PAGE> 2
the Warrant Agreement dated the date hereof between the Company and American
Stock Transfer & Trust Company (the "Public Warrant Agreement"), a copy of which
is attached hereto, except that the Class A Warrants are not redeemable without
the consent of the registered Holder thereof. The shares of Common Stock
included in the Units are referred to as the "Unit Shares," the shares of Common
Stock issuable upon exercise of the Class A Warrants are referred to as the
"Warrant Shares," and the Unit Shares and the Warrant Shares are collectively
referred to as the "Shares." The Shares, the Warrants and the Class A Warrants
are collectively referred to as the "Warrant Securities."
2. WARRANT CERTIFICATES.
The warrant certificates (the "Warrant Certificates") delivered and to
be delivered pursuant to this Agreement shall be in the form set forth in
Exhibit A for Units, attached hereto and made a part hereof, with such
appropriate insertions omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. EXERCISE OF WARRANTS.
The Warrants are exercisable during the term set forth in Section 1
hereof at the Exercise Price (defined below) per Unit, set forth in Section 6
hereof payable by certified or cashier's check or money order payable in lawful
money of the United States, subject to adjustment as provided in Article 8
hereof. Upon surrender of a Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Exercise Price
(as hereinafter defined) for the Units, as the case may be, (and such other
amounts, if any, arising pursuant to Section 4 hereof) at the Company's
principal office in New York (1430 Broadway, 13th Floor, New York, NY 10018),
the registered holder of a Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the Shares so purchased
and a certificate or certificates for the Class A Warrants so purchased. The
purchase rights represented by each Warrant Certificate are exercisable at the
option of the Holder thereof; in whole or in part, (but not as to fractional
Unit Shares). The Warrants may be exercised to purchase all or part of the
Units, represented thereby. In the case of the purchase of less than all the
Units purchasable on the exercise of Warrants represented by a Warrant
Certificate, the Company shall cancel the Warrant Certificate represented
thereby upon the surrender thereof and shall execute and deliver a new Warrant
Certificate of like tenor for the balance of the Units purchasable thereunder.
Notwithstanding the foregoing, the Warrants granted hereunder shall terminate
immediately if both Richard L. Kramer and William L. Remley shall resign as an
officer and as a director of the Company at any time prior to the Closing of the
first Business Combination by the Company.
-2-
<PAGE> 3
4. ISSUANCE OF CERTIFICATES.
Upon the exercise of the Warrants and payment of the Exercise Price
therefor, the issuance of certificates for the Unit Shares or other securities,
properties or rights underlying such Warrants and the issuance of certificates
for the Warrant Shares or other securities, properties or rights underlying such
Class A Warrants shall be made forthwith (and in any event within three (3)
business days thereafter) without further charge to the Holder thereof; and such
certificates shall (subject to the provisions of Sections 5 and 7 hereof) be
issued in the name of or in such names as may be directed by, the Holders
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holders, and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Warrant
Certificates and the certificates representing the Unit Shares, the Class A
Warrants, the Warrant Shares or other securities, property or rights (if such
property or rights are represented by certificates) shall be executed on behalf
of the Company by the manual or facsimile signature of the then present Chairman
or Vice Chairman of the Board of Directors or President or Vice President of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or Assistant Secretary or
Treasurer or Assistant Treasurer of the Company. Warrant Certificates shall be
dated the date of execution by the Company upon initial issuance, division,
exchange, substitution or transfer.
5. RESTRICTION ON TRANSFER OF WARRANTS AND WARRANT SECURITIES.
a. Acquired for Investment. The Holder of a Warrant Certificate (and
its Permitted Transferees, as defined below), by its acceptance thereof
covenants and agrees that the Warrants are being acquired as an investment and
not with a view to the distribution thereof; that the Warrants may be sold,
transferred, assigned, hypothecated or otherwise disposed of; in whole or in
part, to any person (a "Permitted Transferee") and to a family member of a
Holder or to a trust established for the benefit of himself, herself, or a
family member or to another affiliated entity (with the consent of the
Representative which will not be unreasonably withheld) or, in the event of the
Holder's death, by will or operation of law, or in the case of its dissolution
or merger, provided that any such transferee or successor must agree as a
condition to such transfer to be bound by the restrictions on transfer and
succession applicable to the original Holder and that the transferor or its
principals, if the transferor is an entity (except in the case of death) will
continue to be deemed the beneficial owner (as defined in Regulation 13d-3
promulgated under
-3-
<PAGE> 4
the Exchange Act) of such transferred shares, provided such transfer,
assignment, hypothecation or other disposition is made in accordance with the
provisions of the Securities Act of 1933 (the "Act"); and provided, further,
that until _____________ (one year after the Effective Date, defined below) only
officers and directors of Cranbrooke shall be Permitted Transferees.
b. Restrictions on Transfer. The Holder of a Warrant Certificate (and
its Permitted Transferees) by its acceptance thereof further covenants and
agrees that it will not sell or otherwise transfer any Unit Shares or Warrant
Shares for a period of 120 days following the consummation of the first Business
Combination.
6. EXERCISE PRICE.
a. Initial and Adjusted Exercise Price. Except as otherwise provided in
Section 8 hereof, the initial exercise price of each Warrant to purchase Units
shall be $12.50 per Unit. The adjusted exercise price shall be the price which
shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 8 hereof.
b. Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. REGISTRATION RIGHTS.
a. Registration Under the Securities Act of 1933. Neither the Warrants
nor any of the Warrant Securities have been registered under the Act. The
Warrant certificates and the various Warrant Securities certificates shall bear
the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933 (the "Act"), and may not be offered
for sale or sold except pursuant to (i) an effective registration
statement under the Act, or (ii) an opinion of counsel, if such opinion
shall be reasonably satisfactory to counsel to the issuer, that an
exemption from registration under such Act is available.
b. Demand Registration.
(1) At any time commencing with the initial exercise date of this
Warrant (the "Effective Date"), the Holders of the Warrants
and the Warrant Securities representing at least a Majority
(as hereinafter defined) of such securities shall have the
right, exercisable by written notice to the Company, to have
the Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one (1) occasion, a
registration statement on Form S-1, SB-2 (or Post-Effective
Amendment
-4-
<PAGE> 5
on Form S-1 or SB-2) or other appropriate form) and such other
documents, including a prospectus, as may be necessary in the
opinion of both counsel for the Company and counsel for the
Holders, in order to comply with the provisions of the Act, so
as to permit a public offering and sale, for a period of nine
(9) months, of the Warrant Securities by such Holders and any
other Holders of the Warrants and/or Warrant Securities who
notify the Company within fifteen (15) business days after
receipt of the notice described in Section 7(b)(2).
(2) The Company covenants and agrees to give written notice of any
registration request under this Section 7(b) by any Holder(s)
to all other registered Holders of the Warrants and the
Warrant Securities within ten (10) days from the date of the
receipt of any such registration request.
(3) For purposes of this Agreement, the term "Majority" in
reference to the Holders of the Warrant Securities, shall mean
in excess of fifty percent (50%) of the then outstanding
Warrant Securities.
c. Piggyback Registration. If at any time within the period and
expiring six (6) years after the Effective Date, the Company should file a
registration statement with the Commission under the Act (other than in
connection with a merger or pursuant to Form S- 8) it will give written notice
by registered mail, at least thirty (30) days prior to the filing of each such
registration statement, to Cranbrooke and to all other Holders of the Warrant
Securities of its intention to do so. If Cranbrooke or other Holders of the
Warrant Securities notify the Company within twenty (20) days after receipt of
any such notice of its or their desire to include any Warrant Securities in such
proposed registration statement, the Company shall afford Cranbrooke and such
Holders of the Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement. Notwithstanding the
provisions of this Section 7(c), the Company shall have the right at any time
after it shall have given written notice pursuant to this Section 7(c)
(irrespective of whether a written request for inclusion of any such securities
shall have been made) to elect not to file any such proposed registration
statement, or to withdraw the same after the filing but prior to the effective
date thereof.
If the underwriter of an offering to which the above piggyback rights
apply objects to such rights, such objection shall preclude such inclusion.
However, in such event, the Company will, within six (6) months of completion of
such underwriting, file at its sole expense, a registration statement relating
to such excluded Warrant Securities, which shall be in addition to any
registration statement required to be filed pursuant to Section 7(b), unless
such Holders had refused an opportunity provided with the consent of the
underwriter, to be included in the registration statement on
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<PAGE> 6
the condition that they agree not to offer the securities for sale without the
prior written consent of the underwriter for a period not exceeding 60 days from
the effective date of such registration statement.
If the underwriter in such underwritten offering shall advise the
Company that it declines to include a portion or all of the Warrant Securities
requested by Cranbrooke and the Holders to be included in the registration
statement, then (A) registration of all of the Warrant Securities shall be
excluded from such registration statement on the condition that all securities
to be registered by other selling security holders, if any, are also excluded
and (B) registration of a portion of such Warrant Securities allocated among
Cranbrooke and the Holders and any other selling security holders in proportion
to the respective numbers of securities to be registered by Cranbrooke and each
such Holder and other selling security holder. In such event the Company shall
give Cranbrooke and the Holders prompt notice of the number of Warrant
Securities excluded.
d. Covenants of the Company With Respect to Registration. In connection
with any registrations under Sections 7(b) and 7(c) hereof; the Company
covenants and agrees as follows:
(1) The Company shall use its best efforts to file a registration
statement within forty-five (45) days of receipt of any demand
therefor; provided, however, that the Company shall not be
required to produce audited or unaudited financial statements
for any period prior to the date such financial statements are
required to be filed in a report on Form 10-K or Form 10-Q (or
Form 10- KSB or Form 10-QSB), as the case may be. The Company
shall use its best efforts to have any registration statements
declared effective at the earliest possible time, and shall
furnish each Holder desiring to sell Shares such number of
prospectuses as shall reasonably be requested.
(2) The Company shall pay all costs (excluding fees and expenses
of Holder(s)' counsel and any underwriting discounts or
selling fees, expenses or commissions), fees and expenses in
connection with any registration statement filed pursuant to
Sections 7(b) and 7(C) hereof including, without limitation,
the Company's legal and accounting fees, printing expenses,
blue sky fees and expenses. If the Company shall fail to
comply with the provisions of Section 7(d) (1), the Company
shall, in addition to any other equitable or other relief
available to the Holder(s), be liable for any or all
incidental, special and consequential damages and damages due
to loss of profit sustained by the Holder(s) requesting
registration of their Shares.
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<PAGE> 7
(3) The Company will take all necessary action which may be
required to qualify or register the Shares included in a
registration statement for offering and sale under the
securities or blue sky laws of such states as reasonably are
requested by the Holder(s), provided that the Company shall
not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to
do business under the laws of any such jurisdiction.
(4) The Company shall indemnify the Holder(s) of the Shares to be
sold pursuant to any registration statement and each person,
if any, who controls such Holders within the meaning of
Section 15 of the Act or Section 20(a) of the Securities
Exchange Act of 1934 (the "Exchange Act"), against all losses,
claims, damages, expenses or liability (including all expenses
reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become
subject under the Act, the Exchange Act or otherwise, arising
from such registration statement, but only to the same extent
and with the same effect as the provisions pursuant to which
the Company has agreed to indemnify the Representatives
contained in Section 8 of the Underwriting Agreement, and the
Holder(s) shall indemnify the Company to the same extent and
with the same effect as the provisions pursuant to which the
Representatives have agreed to indemnify the Company contained
in Section ___ of the Underwriting Agreement.
(5) The Holder(s) of the Shares to be sold pursuant to a
registration statement, and their successors and assigns,
shall severally, and not jointly, indemnify the Company, its
officers and directors and each persons, if any, who controls
the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all losses, claims,
damages, expenses or liability (including all expenses
reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject
under the Act, the Exchange Act or otherwise, arising from
information furnished by or on behalf of such Holders, or
their successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same
effect as the provisions contained in Section ___ of the
Underwriting Agreement pursuant to which the Representatives
have agreed to indemnify the Company.
(6) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior
to the initial filing of any registration statement or
the effectiveness thereof.
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<PAGE> 8
(7) If the manner of distribution proposed by the holders of the
Warrant Securities is an underwriting, the Company shall
furnish to each Holder participating in the offering and to
each underwriter, a signed counterpart, addressed to such
Holder or underwriter of (i) an opinion of counsel to the
Company, dated the effective date of such registration
statement (and if such registration includes an underwritten
public offering, an opinion dated the date of the closing
under the underwriting agreement), and (ii) a "cold comfort"
letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public
offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public
accountants who have issued a report on the Company's
financial statements included in such registration statement,
in each case covering substantially the same matters with
respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants'
letters, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters, delivered to
underwriters in underwritten public offerings of securities.
(8) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within
the first full four fiscal quarters following the effective
date, make "generally available to its security holders"
(within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section
11(a) of the Act.
(9) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence
described below and any managing underwriter, copies of all
correspondence between the Commission and the Company, its
counsel or auditors with respect to the registration statement
and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration
statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such
Investigation shall include access to books, records and
properties and opportunities to discuss the business of the
Company with its officers and independent auditors, all to
such reasonable extent and at such reasonable
times and as often as any such Holder shall reasonably
request.
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<PAGE> 9
(10) In connection with an offering for which the Holders have
demand rights, the Company shall enter into an underwriting
agreement with the managing underwriter selected for such
underwriting by Holders holding a Majority of the Shares
requested to be included in such underwriting. In connection
with an offering for which the Holders have piggyback rights,
the Company shall have the sole right to select the managing
underwriter. Such underwriting agreement shall be satisfactory
in form and substance to the Company, a Majority of such
Holders and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and
such other terms as are customarily contained in agreements of
that type used by the managing underwriter. The Holders shall
be parties to any underwriting agreement relating to an
underwritten sale of their Shares and may, at their option,
require that any or all the representations, warranties and
covenants of the Company to or for the benefit of such
underwriters shall also be made to and for the benefit of such
Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such
Holders' ownership and their intended methods of distribution.
e. Further Registrations. The Company will cooperate with the Holder(s)
of Warrant Securities in preparing and signing one additional registration
statement, in addition to the registration statements discussed above, required
in order to sell or transfer the Shares and will supply all information required
therefor, but such additional registration statement expenses or offering
statement expenses will be prorated between the Company and the Holders of the
Warrant Securities according to the aggregate sales price of the securities
being issued. The provisions of Section 7(d) other than subsection (2) shall
apply to any such registration statement.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES: REDEMPTION.
a. (i) Except as hereinafter provided, in the event the Company shall,
at any time or from time to time after the date hereof; issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the Purchase Price for the Warrants (whether or not the same shall be issued and
outstanding) in effect immediately prior to such Change of Shares shall be
changed to a price (including any applicable fraction of a cent to the nearest
cent) determined by dividing (i) the sum of (a) the total number of
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<PAGE> 10
shares of Common Stock outstanding immediately prior to such Change of Shares,
multiplied by the Purchase Price in effect immediately prior to such Change of
Shares, and (b) the consideration, if any, received by the Company upon such
issuance, subdivision or combination by (ii) the total number of shares of
Common Stock outstanding immediately after such Change of Shares; provided,
however, that in no event shall the Purchase Price be adjusted pursuant to this
computation to an amount in excess of the Purchase Price in effect immediately
prior to such computation, except in the case of a combination of outstanding
shares of Common Stock.
For the purposes of any adjustment to be made in accordance with this
Section 8(a) the following provisions shall be applicable:
(1) Shares or equivalents of Common Stock issuable by way of
dividend or other distribution on any stock of the Company
shall be deemed to have been issued immediately after the
opening of business on the day following the record date for
the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have
been issued without consideration.
(2) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of
Common Stock shall be deemed to involve the issuance of such
shares of Common Stock for a consideration other than cash
immediately prior to the close of business on the date fixed
for the determination of security holders entitled to receive
such shares, and the value of the consideration allocable to
such shares of Common Stock shall be determined in good faith
by the Board of Directors of the Company on the basis of a
record of values of similar property or services.
(3) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum
number of shares issuable (subject to readjustment upon the
actual issuance thereof) upon the exercise of options, rights
or warrants and upon the conversion or exchange of convertible
or exchangeable securities.
b. Upon each adjustment of the Purchase Price pursuant to this Section
8, the number of shares of Common Stock (but not the number of Class A Warrants
that may be obtained upon such exercise) purchasable upon the exercise of each
Warrant shall be the number derived by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment by the Purchase
Price in effect prior to such adjustment and dividing the product so obtained by
the applicable adjusted Purchase Price.
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<PAGE> 11
c. In case of any reclassification or change of outstanding shares of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a Subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or other capital stock issuable upon exercise of the Warrants
(other than a change in par value, or from par value to no par value, or from no
par value to par value or as a result of subdivision or combination) or in case
of any sale or conveyance to another corporation of the property of the Company
as an entirety or substantially as an entirety, then, as a condition of such
reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be, shall
make lawful and adequate provision whereby the registered Holder of each Warrant
then outstanding shall have the right thereafter to receive on exercise of such
Warrant the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification change, consolidation, merger, sale or conveyance
and shall forthwith file at the Corporate Office of the Warrant Agent a
statement signed by its President or a Vice President and by its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary evidencing such
provision. Such provisions shall include provision for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for in
Section 8a. The above provisions of this Section 8c. shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
d. Irrespective of any adjustments or changes in the Purchase Price or
the number of shares of Common Stock purchasable upon exercise of the Warrants,
the Warrant Certificates theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrant Certificates, continue to
express the Purchase Price per share and the number of shares purchasable
thereunder as the Purchase Price per share and the number of shares purchasable
thereunder were expressed in the Warrant Certificates when the same were
originally issued.
e. After each adjustment of the Purchase Price pursuant to this Section
8, the Company will promptly prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Company setting forth: (i) the Purchase Price as so
adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of
each Warrant, after such adjustment, and (iii) a brief statement
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<PAGE> 12
of the facts accounting for such adjustment. The Company will promptly file such
certificate with the Warrant Agent and cause a brief summary thereof to be sent
by ordinary first class mail to each registered Holder at his last address as it
shall appear on the registry books of the Warrant Agent. No failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity thereof except as to the holder to whom the Company failed to mail such
notice, or except as to the holder whose notice was defective. The affidavit of
an officer of the Warrant Agent or the Secretary or an Assistant Secretary of
the Company that such notice has been mailed shall, in the absence of fraud, be
prima facie evidence of the facts stated therein.
f. No adjustment of the Purchase Price shall be made as a result of or
in connection with the issuance or sale of shares of Common Stock pursuant to
options, warrants, stock purchase agreements and convertible or exchangeable
securities outstanding or in effect on the date hereof or granted upon the
consummation of and in connection with the first Business Combination (as
defined in the Registration Statement). In addition, registered Holders shall
not be entitled to cash dividends paid by the Company prior to the exercise of
any Warrant or Warrants held by them.
g. Definition of Common Stock. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Certificate of Incorporation of the Company as it may be amended as of
the date hereof; or (ii) any other class of stock resulting from successive
changes or reclassification of such Common Stock consisting solely of changes in
par value, or from par value to no par value, or from no par value to par value.
In the event that the Company shall, after the date hereof, issue securities
with greater or superior voting rights than those of the shares of Common Stock
outstanding as of the date hereof; the Holder, at its option, may receive upon
exercise of any Warrant either shares of Common Stock or a like number of such
securities with greater or superior voting rights.
h. Reclassification. Merger or Consolidation. The Company will not
merge, reorganize or take any other action which would terminate Cranbrooke's
Warrants without first making adequate provision for Cranbrooke's Warrants. In
case of any reclassification or change of the outstanding shares of Common Stock
(other than a change in par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in case of any
consolidation of the Company with, or merger of the Company with, or merger of
the Company into, another corporation (other than a consolidation or merger in
which the Company is the continuing corporation and which does not result in any
reclassification or change of the outstanding Common Stock except a change as a
result of a subdivision or combination of such shares or a change in par value,
as aforesaid), or in the case of a sale or conveyance to another corporation or
other entity of the property of the Company as an entirety, the Holder of each
Warrant
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<PAGE> 13
then outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Warrant) to purchase, upon exercise of such Warrant, the kind
and number of shares of stock and other securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance as if
the Holder were the owner of the shares of Common Stock underlying such Warrants
and the Class A Warrants immediately prior to any such events at a price equal
to the product of (x) the number of shares issuable upon exercise of the
Warrants and the Class A Warrants and (y) the Exercise Prices in effect
immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance, as if such Holder had exercised the
Warrants and the Class A Warrants. In the event of a consolidation, merger, sale
or conveyance of property, the corporation formed by such consolidation or
merger, or acquiring such property, shall execute and deliver to the Holders a
supplemental warrant agreement to such effect. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustment to those provided in Section 8. The provisions of this Section 8(h)
shall similarly apply to successive consolidations or mergers.
i. No Adjustment of Exercise Prices in Certain Cases. No adjustment of
the Exercise Prices shall be made upon the issuance or sale of (i) the Warrants,
the Class A Warrants or the Shares; (ii) the shares of Common Stock and the
Public Warrants pursuant to the Public Offering; (iii) the shares of Common
Stock issuable upon the exercise of the Public Warrants, or the options,
warrants, stock purchase agreements and convertible or exchangeable securities
outstanding or in effect on the date hereof as described in the prospectus
relating to the Public Offering; or (iv) Common Stock upon the exercise of the
Class A Warrants.
j. Dividends and Other Distributions. In the event that the Company
shall at any time prior to the exercise of all the Warrants declare a dividend
(other than a dividend consisting solely of shares of Common Stock) or otherwise
distribute to its stockholders any assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock), whether issued by
the Company or by another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof; to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this Section 8 (j).
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<PAGE> 14
k. Adjustment of Class A Warrant Exercise Price and Shares Issuable on
Exercise of Class A Warrants. With respect to any of the Class A Warrants
underlying the Warrants, whether or not the Class A Warrants have been exercised
and whether or not the Class A Warrants are issued and outstanding, the Class A
Warrant exercise price and the number of shares of Common Stock underlying such
Class A Warrants shall be automatically adjusted in accordance with Section 8 of
the Public Warrant Agreement upon the occurrence of any of the events described
therein. Thereafter, the underlying Class A Warrants shall be exercisable at
such adjusted exercise price and for such adjusted number of underlying shares
of Common Stock.
l. Subscription Rights for Shares of Common Stock of Other Securities.
In the event that the Company or an affiliate of the Company shall at any time
after the date hereof and prior to the exercise of all the Warrants, issue any
rights to subscribe for shares of Common Stock or any other securities of the
Company or of such affiliate to all the stockholders of the Company, the Holders
of the unexercised Warrants shall be entitled to receive, in addition to the
Unit Shares and Class A Warrants or other securities receivable upon the
exercise of the Warrants, such rights at the time such rights are distributed to
the other stockholders of the Company.
m. Redemption of Constituent Warrants. Notwithstanding anything to the
contrary contained in the Public Warrant Agreement or elsewhere, the Constituent
Warrants underlying the Warrants cannot, under any circumstances, be redeemed by
the Company without the prior written consent of the Holders of the Warrants and
shall remain exercisable upon the same terms and provisions of the Public
Warrant Agreement (other than the exercise period, which shall be as set forth
in Section 1 hereof) irrespective of whether the Company has called the
Redeemable Warrants for redemption.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Units in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
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<PAGE> 15
10. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates representing
fractions of Shares or of Constituent Warrants upon the exercise of the
Warrants, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests, provided, however, that if a Holder exercises all Warrants
or Constituent Warrants (as the case may be) held of record by such Holder the
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of Unit Shares, Warrant Shares, Class A Warrants or other
securities, properties or rights.
11. RESERVATION AND LISTING OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants and the Constituent Warrants and the conversion of
preferred stock, if any, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise on
conversion thereof. The Company covenants and agrees that, upon exercise of the
Warrants and payment of the Exercise Price therefor, all the Unit Shares and
other securities issuable upon such exercise shall be duly and validly issued,
fully paid, nonassessable and not subject to the preemptive rights of any
stockholder. The Company further covenants and agrees that upon exercise of the
Class A Warrants underlying the Warrants and payment of the respective Common
Stock Warrant exercise price therefor, all the Warrant Shares and other
securities issuable upon such exercises shall be duly and validly issued, fully
paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the Warrants and the Class A Warrants shall be
outstanding, the Company shall use its best efforts to cause the Common Stock to
be listed (subject to official notice of issuance) on all securities exchanges
on which the Public Units, the Common Stock and the Class A Warrants issued to
the public in connection herewith may then be listed or quoted.
12. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Agreement shall be construed as conferring
upon the Holders the right to vote or to consent or to receive notice as a
stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Company. If, however, at any time prior to the expiration of
the Warrants or their exercise, any of the following events shall occur:
a. the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings (other than
distributions from the escrow account maintained by Chemical Bank, N.A., and
described in the
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<PAGE> 16
Company's Registration Statement on Form SB-2, and filed with the Securities and
Exchange Commission on April 5, 1996 as amended), as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
b. the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
c. a dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation or merger) or a sale of all or substantially
all of its property, assets and business as an entirety shall be proposed; then,
in any one or more of said events, the Company shall give written notice to the
registered Holder of such event at least fifteen (15) days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. COMMON STOCK WARRANTS.
The form of the certificates representing the Class A Warrants and the
form of election to purchase shares of Common Stock upon the exercise of the
Class A Warrants and the form of assignment printed on the reverse thereof shall
be substantially as set forth in Exhibit A to the Public Warrant Agreement,
except that the exercise periods shall be as set forth in Section 1 hereof. Each
Class A Warrant issuable upon exercise of the Warrants shall evidence the
Holder's right to purchase one (1) fully paid and non-assessable share of Common
Stock at an initial exercise price of $9.00. The exercise price of the Class A
Warrants and the number of the shares of Common Stock issuable upon the exercise
of the Class A Warrants are subject to adjustment, whether or not the Warrants
have been exercised and the Class A Warrants have been issued, in the manner and
upon the occurrence of the events set forth in Section 8 of the Public Warrant
Agreement, which is hereby incorporated herein by reference and made a part
hereof as if set forth in its entirety herein. Subject to the provisions of this
Agreement and upon issuance of the Class A Warrants underlying the Warrants,
each registered Holder of such Common Stock Warrant shall have the right to
purchase from the Company (and the Company shall issue to such registered
Holders) up to the number of fully paid
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<PAGE> 17
and non-assessable shares of Common Stock (subject to adjustment as provided
herein and in the Public Warrant Agreement), free and clear of all preemptive
rights of stockholders, provided that such registered Holder complies with the
terms governing the exercise of the Redeemable Warrants set forth in the Public
Warrant Agreement, and pays the applicable exercise price, determined in
accordance with the terms of the Public Warrant Agreement. Upon exercise of the
Class A Warrants, the Company shall forthwith issue to the registered Holder of
any such Common Stock Warrant in his name or in such name as may be directed by
him, certificates for the number of shares of Common Stock and Class A Warrants
so purchased. Except as otherwise provided herein and in Sections 1, 6(a) and
8(i), the Class A Warrants underlying the Warrants shall be governed in all
respects by the terms of the Public Warrant Agreement. The Class A Warrants
shall be transferable in the manner provided in the Public Warrant Agreement,
and upon any such transfer, a new Common Stock Warrant Certificate shall be
issued promptly to the transferee. The Company covenants to, and agrees with,
the Holder(s) that without the prior written consent of the Holder(s), this
Agreement will not be modified, amended, canceled, altered or superseded, and
that the Company will send to each Holder, irrespective of whether or not the
Warrants have been exercised, any and all notices required by this Agreement to
be sent to holders of Class A Warrants.
14. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered,
by certified mail, return receipt requested:
a. If to the registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
b. If to the Company to the address set forth in Section 3 hereof or to
such other address as the Company may designate by notice to the Holders.
15. SUPPLEMENTS AND AMENDMENTS.
The Company may from time to time supplement or amend this Agreement
without the approval of any Holders of Warrant Certificates in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
may deem necessary or desirable and which shall not adversely affect the
interests of the Holders of Warrant Certificates.
16. SUCCESSORS
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<PAGE> 18
All the covenants and provisions of this Agreement shall be binding
upon and inure to the benefit of the Company, the Holders and their respective
successors and assigns hereunder.
17. TERMINATION.
This Agreement shall terminate at the close of business on ___________.
Notwithstanding the foregoing, the indemnification provisions of Section 7 shall
survive such termination until the close of business on the later of the
expiration of any applicable statute of limitations or _______________.
18. GOVERNING LAW: SUBMISSION TO JURISDICTION.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State without
giving effect to the rules of said State governing the conflicts of laws, except
that matters concerning the validity of the issuance of securities shall be
determined and construed in accordance with the laws of Delaware. The Company,
the Representatives and the Holders hereby agree that any action, proceeding or
claim against it arising out of, or relating in any way to, this Agreement shall
be brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and irrevocably submits
to such jurisdiction, which jurisdiction shall be exclusive. The Company, the
Representatives and the Holders hereby irrevocably waive any objection to such
exclusive jurisdiction or inconvenient forum. Any such process or summons to be
served upon any of the Company, the Representatives and the Holders (at the
option of the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof; by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
14 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the party so served in any action, proceeding or claim.
19. ENTIRE AGREEMENT: MODIFICATION.
This Agreement (including the Public Warrant Agreement to the extent
portions thereof are referred to herein) contains the entire understanding
between the parties hereto with respect to the subject matter hereof. Subject to
Section 15, this Agreement may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
20. SEVERABILITY.
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<PAGE> 19
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
21. CAPTIONS.
The caption headings of the Sections of this Agreement are for
convenience of reference only and are not intended, nor should they be construed
as, a part of this Agreement and shall be given no substantive effect.
22. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and any registered Holder(s) of the Warrant
Certificates or Warrant Securities any legal or equitable right, remedy or claim
under this Agreement; and this Agreement shall be for the sole and exclusive
benefit of the Company and any Holder(s) of the Warrant Certificates or Warrant
Securities.
23. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
24. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
Company and the Holders from time to time of the Warrant Certificate(s) or any
of them.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
ORION ACQUISITION CORP. II
By:__________________________
William Remley, President
CRANBROOKE CORPORATION
By:__________________________
William Remley, President
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<PAGE> 21
EXHIBIT A
ORION ACQUISITION CORP. II
WARRANT CERTIFICATE
THE SECURITIES ISSUABLE UPON EXERCISE OF THE WARRANT REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Act"), and may not be offered for
sale or sold except pursuant to (i) an effective registration statement under
the Act, or (ii) an opinion of counsel, if such opinion shall be reasonably
satisfactory to counsel to the issuer, that an exemption from registration under
such Act is available.
THE TRANSFER OR EXCHANGE OF THE WARRANT REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING __________ THROUGH 5:00 P.M., NEW YORK TIME_____________.
No.WU-l _____Warrants
This Warrant Certificate certifies that Cranbrooke Corporation, or
registered assigns, is the registered Holder of warrants (the "Warrants") to
purchase initially, at any time from _____________, until 5:00 p.m., New York
time on third anniversary of (the "Expiration Date"), up to 100,000 units (the
"Units"), each Unit consisting of one (1) fully paid and nonassessable share
(the "Shares"), of Common Stock, $.01 par value (the "Common Stock"), of Orion
Acquisition Corp. II, a Delaware corporation (the "Company"), and one (1) Class
A nonredeemable common stock purchase warrant (the "Class A Warrants") of the
Company at the exercise price of $12.50 per Unit (the "Exercise Price"), upon
the surrender of this Warrant Certificate and payment of the Exercise Price at
an office or agency of the Company, but subject to the conditions set forth
herein and in the warrant agreement dated as of __________ (the "Warrant
Agreement") by and among the Company and H.J. Meyers & Co., Inc. and Northeast
Securities, Inc., as representatives of the several underwriters (the
"Representatives"). Payment of the Exercise Price shall be made by certified or
cashier's check or money order payable to the order of the Company. No Warrant
may be exercised after 5:00 P.M, New York time, on the Expiration Date, at which
time all Warrants evidenced hereby, unless exercised prior thereto, shall
thereafter be void.
<PAGE> 22
Each Class A Warrant entitles the registered Holder to purchase one (1)
share of Common Stock at $9.00 per share at the times set forth in the Warrant
Agreement. Except as set forth in the Warrant Agreement and as described below,
the Class A Warrants are subject to the conditions set forth in the Warrant
Agreement dated ______________ between the Company and American Stock Transfer &
Trust Company.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered Holders or
registered Holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange as provided herein,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered Holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof; and of any distribution to the holder(s) hereof; and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
_____ day of _________, 199__.
<PAGE> 23
[SEAL]
ORION ACQUISITION CORP. II
By:_______________________
William Remley,
President
ATTEST:
By:____________________________
Richard Hoffman, Secretary
<PAGE> 24
FORM OF ASSIGNMENT
(To be executed by the registered Holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED________________
hereby sells, assigns and transfers unto _______________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ______________________
Attorney, to transfer the within Warrant Certificate on the books of Orion
Acquisition Corp. II, with full power of substitution.
Dated:_____________________
Signature________________________
(Signature must conform in all
respects to the name of holder as
specified on the face of the Warrant
Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE> 25
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase:
________ Units
and herewith tenders in payment for such securities a certified or cashier's
check or money order payable to the order of Orion Acquisition Corp. II in the
amount of $___________, all in accordance with the terms hereof. The undersigned
requests that a certificate for such securities be registered in the name of
__________________ whose address is _____________________________ and that such
Certificate be delivered to _______________________ whose address is
Dated:___________________
Signature_________________________
(Signature must conform in all
respects to the name of holder as
specified on the face of the Warrant
Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
