<PAGE> 1
As filed with the Securities and Exchange Commission on July ##, 1998.
Registration No. 333-48527
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
HEARTLAND WISCONSIN CORP.
(Name of small business issuer in its charter)
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<S> <C> <C>
WISCONSIN 6159 39-1830531
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
<TABLE>
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6635 SOUTH 13TH STREET
MILWAUKEE, WISCONSIN 53221 6635 SOUTH 13TH STREET
(414) 764-9200 C FAX (414) 764-8180 MILWAUKEE, WISCONSIN 53221
(Address and telephone number of principal (Address of principal place of business)
executive offices)
</TABLE>
FRANK P. GIUFFRE
HEARTLAND WISCONSIN CORP.
6635 SOUTH 13TH STREET
MILWAUKEE, WISCONSIN 53221
(414) 764-9200 FAX (414) 764-8180
(Name, address and telephone number of agent for service)
Copies of communications to:
ROBERT J. PHILIPP, ESQ.
KRANITZ & PHILIPP GORDON F. BARRINGTON, ESQ.
2230 EAST BRADFORD AVENUE 224 NORTH 76TH STREET
MILWAUKEE, WISCONSIN 53211 MILWAUKEE, WISCONSIN 53213
(414) 332-2118 FAX (414) 332-4480 (414) 771-9901 FAX (414) 771-8030
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] If this Form is a post-effective
amendment filed pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
============================================================================================================
Proposed Proposed
Amount maximum maximum Amount of
Title of each class of securities to be offering price aggregate registration
to be registered registered per unit offering price fee(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 400,000 shares $5.25 $2,100,000 $636.36
============================================================================================================
</TABLE>
(1) Fee was initially paid for 200,000 shares at $6.50 per share ($393.94);
additional fee paid herewith ($242.42) equals the total fee due for the
offering as amended ($636.36) less the amount previously paid.
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.
================================================================================
<PAGE> 2
PROSPECTUS
400,000 SHARES
HEARTLAND WISCONSIN CORP.
COMMON STOCK
(Minimum Purchase: 100 Shares)
All of the 400,000 shares of common stock, par value $0.0001 per share
("Common Stock"), offered hereby are being sold by Heartland Wisconsin Corp.
("Company"). Prior to this offering, there has been no public market for Common
Stock or other securities of the Company. See "Underwriting" for information
relating to the factors considered in determining the public offering price of
the Common Stock. The Company anticipates that its Common Stock will be quoted
on the National Association of Securities Dealers, Inc. OTC Bulletin Board and
in the National Daily Quotation Bureau "Pink Sheets" under the trading symbol
"HLND".
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES SUBSTANTIAL RISKS.
SEE "RISK FACTORS."
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 Underwriting Proceeds
to the Discounts and to the
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................................... $5.25 $0.42 $4.83
- --------------------------------------------------------------------------------------------------------------------
Total (3)...................................... $2,100,000 $168,000 $1,932,000
====================================================================================================================
</TABLE>
(1) Does not include a nonaccountable expense allowance payable to Liss
Financial Services ("Managing Placement Agent") in an amount equal to 2% of
the gross proceeds of the offering, or any value attributable to (i) the
warrants ("Underwriter's Warrants") entitling the Selected Placement Agents
(as herein defined) to purchase shares of Common Stock in an amount equal
to 10% of the shares sold in the offering at a price per share equal to
120% of the initial public offering price or (ii) the Managing Placement
Agent's right of first refusal to act as underwriter, placement agent or
investment banker with respect to offerings of securities, mergers and
acquisitions by or involving the Company for a period of three years from
the date hereof. The Managing Placement Agent may re-allow all or a portion
of its compensation in its discretion to broker-dealers selected by it
("Selected Placement Agents") who are members of the National Association
of Securities Dealers, Inc. ("NASD"). The Company has agreed to indemnify
the Selected Placement Agents (including the Managing Placement Agent)
against certain liabilities, including liabilities under the Securities Act
of 1933. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company, estimated
at $125,000, including the Managing Placement Agent's expense allowance
referred to in Note (1), above.
(3) The Selected Placement Agents are offering the Common Stock on a
"best-efforts" basis. There is no minimum aggregate amount required to be
sold in the offering; all funds will become immediately available for the
purposes described herein. See "Use of Proceeds". Pending disbursement to
the Company, funds received from subscribers will be held in escrow by
Grafton State Bank, Grafton, Wisconsin. The Selected Placement Agents may
offer the Common Stock for sale until (i) the entire offering is sold or
(ii) September 30, 1999, whichever first occurs; the offering may be
terminated at any time prior thereto at the discretion of the Company. See
"Underwriting."
LISS FINANCIAL SERVICES
, 1998.
<PAGE> 3
[INSERT GRAPHIC: FOUR COLOR PHOTOS OF TRUCK-MOUNTED CRANES]
THE SECURITIES DESCRIBED HEREIN ARE OFFERED BY THE PLACEMENT AGENTS, ON BEHALF
OF THE COMPANY, SUBJECT TO PRIOR SALE, WITHDRAWAL, CANCELLATION OR MODIFICATION
OF THE OFFERING BY THE COMPANY WITHOUT NOTICE. THE OFFERING CAN ONLY BE MODIFIED
BY MEANS OF AN AMENDMENT OR SUPPLEMENT TO THE PROSPECTUS. OFFERS TO PURCHASE AND
CONFIRMATIONS OF SALES ISSUED BY THE PLACEMENT AGENTS ARE SUBJECT TO (1)
ACCEPTANCE BY THE COMPANY, (2) RELEASE AND DELIVERY OF THE PROCEEDS OF THE
OFFERING TO THE COMPANY, (3) DELIVERY OF THE SECURITIES AND (4) THE RIGHT OF THE
COMPANY TO REJECT ANY AND ALL OFFERS TO PURCHASE AND TO CANCEL ANY AND ALL
CONFIRMATIONS OF SALE OF THE SECURITIES OFFERED HEREBY, AT ANY TIME PRIOR TO
RECEIPT OF FUNDS FROM THE PURCHASER. NO SUBSCRIPTION IS SUBJECT TO WITHDRAWAL,
REVOCATION OR TERMINATION BY THE PURCHASER.
2
<PAGE> 4
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH
PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
----------------------
UNTIL , 1998 (90 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
----------------------
TABLE OF CONTENTS
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Page
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Prospectus Summary............................................................................... 4
Risk Factors..................................................................................... 6
The Company...................................................................................... 11
Use of Proceeds.................................................................................. 11
Dilution......................................................................................... 12
Capitalization................................................................................... 13
Dividend Policy.................................................................................. 13
Selected Financial Data.......................................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of Operations............ 15
Business......................................................................................... 18
Certain Legal Aspects of Company Operations...................................................... 28
Management....................................................................................... 30
Certain Relationships and Related Transactions................................................... 33
Principal Stockholders........................................................................... 34
Indemnification for Securities Act Liabilities................................................... 34
Description of Securities........................................................................ 35
Common Stock Eligible for Future Sale............................................................ 38
Underwriting..................................................................................... 39
Legal Matters.................................................................................... 41
Experts.......................................................................................... 41
Additional Information........................................................................... 41
Index to Financial Statements.................................................................... 42
Exhibit A (Subscription Agreement)............................................................... A-1
</TABLE>
----------------------
The Company intends to furnish to its stockholders annual reports
containing financial statements examined by an independent public accounting
firm and quarterly reports for the first three quarters of each year containing
interim unaudited financial information.
REX(R) and REXWORKS(R) are registered trademarks of Rexworks, Inc. This
Prospectus also includes names, tradenames and trademarks of other companies.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information and the financial statements and related notes appearing
elsewhere in this Prospectus.
THE COMPANY
Heartland Wisconsin Corp. ("Company") is a Wisconsin corporation which
provides direct financing (principally in the form of sales-type Full Payout
Leases; see "Business - Description of Leases") to facilitate the acquisition of
products ("Equipment") by customers of Giuffre Bros. Cranes, Inc. ("Giuffre
Cranes") and Rexworks, Inc. ("Rexworks"), both of which are Affiliates of the
Company. The Company will also provide financing to customers of vendors other
than Giuffre Cranes and Rexworks and/or, acting as broker, arrange such
financing with third-party finance companies on a commission basis. PURCHASERS
OF THE COMMON STOCK OFFERED HEREBY WILL IN NO WAY ACQUIRE THEREBY AN INTEREST IN
GIUFFRE CRANES, REXWORKS AND/OR ANY OTHER AFFILIATE OF THE COMPANY. See
"Business."
The Company's business operations generally include the following
functions: structuring financing plans and arrangements, including negotiation
of terms relating to the Company's Leases and leases obtained with third-party
finance companies; developing credit standards; analyzing customer financial
statements; evaluating the quality of Equipment; determining the capital
structure of the Company and its leverage ratios; administering its portfolio of
Leases; reviewing and evaluating the credit status and payment history of
Lessees; administering collections; when necessary, repossessing and disposing
of Equipment; prosecuting litigation with defaulted Lessees; and managing
relations with the Company's institutional lenders and securityholders.
Full Payout Leases originated or acquired by the Company generally provide
for aggregate rental payments during the original term of the Lease which are at
least sufficient to recover the purchase price of the leased Equipment. Upon the
expiration of the original Lease term, the Equipment is typically sold to the
Lessee for a nominal amount; in the absence of a sale to the terminating Lessee,
the Equipment is re-leased or sold by the Company. Title to the Equipment is
retained by the Company prior to sale. See "Business."
All management, marketing, technical and administrative services will be
rendered for and on behalf of the Company by employees of Giuffre Cranes
pursuant to a Management Agreement. See "Management."
THE OFFERING
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Common Stock offered.................................................. 400,000 shares
Common Stock to be outstanding after the offering..................... 800,000 shares
Use of proceeds....................................................... Working capital to finance Equipment
sales and, possibly, repay indebtedness
Proposed OTC Bulletin Board/Pink Sheets trading symbol................ HLND
</TABLE>
RISK FACTORS
An investment in the Common Stock offered hereby involves certain risks,
including with respect to the Company's Equipment leasing and other financing
activities (including the timing of Lease payments to meet cash flow
requirements), its limited operating history, the availability of additional
financing; the limited liability of Management, competition, reliance on key
personnel, lack of dividends, immediate substantial dilution, considerable
amounts of Common Stock eligible for future sale, the lack of any commitment to
purchase Common Stock, its arbitrarily determined offering price and the
potential volatility of the market price of Common Stock after the offering. See
"Risk Factors."
4
<PAGE> 6
SUMMARY FINANCIAL DATA
The selected summary financial data included in the following table has
been derived from and should be read in conjunction with, and are qualified in
their entirety by, the Company's financial statements (and the notes thereto)
appearing elsewhere in this Prospectus. The unaudited financial statements of
the Company as of May 31, 1998, and for the three months ended May 31, 1998 and
1997, reflect, in the opinion of Management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
condition and results for such periods.
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<CAPTION>
Year Ended Three Months Ended
----------------------------- ----------------------
February 28, February 28, May 31, May 31,
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total revenues............................. $ 279,051 $ 737,054 $ 115,863 $ 20,361
Total expenses............................. $ 212,473 $ 734,835 $ 69,196 $ 32,468
Net income (loss).......................... $ 48,578 $ 2,219 $ 28,667 $ (12,107)
Retained earnings (deficit) beginning
of period............................... $ (22,388) $ (24,607) $ 26,190 $ (22,388)
----------- ----------- ---------- -----------
Retained earnings (deficit) end
of period............................... $ 26,190 $ (22,388) $ 54,857 $ (34,495)
=========== =========== ========== ===========
Net income (loss) per common share (1)..... $ 0.12 $ 0.01 $ 0.07 $ (0.03)
=========== =========== ========== ===========
Weighted average common
shares outstanding (1).................. 400,000 400,000 400,000 400,000
</TABLE>
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<CAPTION>
May 31, 1998
---------------------
(Unaudited)
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BALANCE SHEET DATA:
Cash and cash equivalents...................................................... $ 52,700
Total assets................................................................... $ 2,121,654
Long-term debt, less current portion (2)....................................... $ 1,491,419
Stockholders' equity........................................................... $ 329,857
</TABLE>
- -----------------
(1) As of June 22, 1998, the Company effected a 400 for 1 split of its Common
Stock and changed the stated par value of such Common Stock from $0.01 to
$0.0001 per share. See "Capitalization" and "Certain Relationships and
Related Transactions."
(2) Under certain circumstances, in the discretion of Management, up to
$300,000 of outstanding indebtedness may be repaid with offering proceeds.
See "Use of Proceeds" and Note 3 to the Financial Statements of the Company
appearing elsewhere in this Prospectus.
---------------------
WHERE INDICATED IN THIS PROSPECTUS, THE NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK SHOWN HAS BEEN ADJUSTED TO REFLECT A 400 FOR 1 SPLIT OF SUCH COMMON
STOCK EFFECTIVE JUNE 22, 1998.
5
<PAGE> 7
RISK FACTORS
The securities offered hereby are speculative in nature and involve a high
degree of risk. Prior to making an investment decision with respect to the
securities, prospective investors should carefully consider, in addition to
general investment risks and the other matters discussed in this Prospectus, the
following risk factors, which should not be considered to be all of the
potential risks to which the Common Stock and the Company will be subject.
Actual results could differ materially from those projected herein as a result
of certain of the risk factors set forth below and elsewhere in this Prospectus
and other factors.
1. Limited Operating History. The Company has a limited operating history
(since 1995) upon which an evaluation of its prospects may be made and such
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered in connection with the establishment of a new business or
product and the competitive environment in which the Company operates. There can
be no assurance that the Company will be able to successfully implement its
marketing strategy or achieve and maintain profitability over any extended
period of time. See "Business."
2. Uncertainty as to Availability of Additional Financing; Leverage. The
Company intends to provide for its current and anticipated capital needs with
existing funds, proceeds of this offering and operating revenues. No assurance
can be given that the Company will be able to generate operating revenues or
obtain financing from banks or other financial institutions in amounts
sufficient to fully meet its capital requirements. The Company believes that
proceeds of this offering will be sufficient to meet its current working capital
needs; however, no assurance can be given that the proceeds of the offering
(together with operating revenues) will be sufficient to meet anticipated future
requirements. Accordingly, unless operating revenues meet or exceed projected
levels, substantial additional funds will be required if the Company is to
operate successfully and meet its goals with respect to growth and expansion of
operations. To obtain such additional funds, the Company intends to offer
additional securities for sale and may attempt to secure financing from banks or
other financial institutions. If significant indebtedness (including related
security liens) is then outstanding, the Company's ability to obtain additional
financing will be adversely affected. If and to the extent the Company incurs
indebtedness, debt service requirements will have a negative affect on earnings.
Further, if the Company is unable to service its indebtedness, and to renew or
refinance such obligations on a continuing basis, its ability to operate
profitably will be materially threatened. No assurance can be given that all or
any part of the Common Stock offered hereby will be sold or that the Company
will be able to obtain additional funds from any source on satisfactory terms,
or at all. See "Business."
3. Risk of Default on Leases. Leases by the Company to customers of Giuffre
Cranes and Rexworks, or other parties, will be subject to the risk of default,
in which event the Company would have the added responsibility of foreclosing
and protecting its rights. In certain areas, lessors can lose priority of liens
to mechanics' liens, materialmen's liens and tax liens. It is therefore possible
in such a case that the total amount which may be recovered by the Company may
be less than the total amount due under a defaulted Lease, with resultant loss
to the Company. All Leases originated or acquired by the Company will be general
obligations of the Lessee and will, accordingly, provide for full recourse to
such Lessee in the event of default. The Company will have no recourse against
Giuffre Cranes, Rexworks or any other vendor of Equipment, unless the related
Lease contains special provision therefor; none of the Company's Leases
currently provides for any recourse against a vendor, and the Company does not
anticipate that such a provision will be contained in any Lease originated or
acquired by it in the future. If interest rates are fixed, longer term Leases
will limit the Company's ability to vary its portfolio promptly in response to
changing economic, financial and investment conditions.
4. Diversity of Portfolio; Extension of Credit. The Company's portfolio of
Leases is limited as to size and diversity, with the result that a single
default may present significant working capital and other difficulties for the
Company. Leases will be subject to the risk of default, in which event the
Company would also be required to foreclose to protect its rights. The Company
expects to provide Lease financing to firms for which it can develop sufficient
information to make an informed credit decision, and to be able to effectively
liquidate Equipment if necessary. However, any extension of credit involves some
risk of loss or default. The Company intends to avoid or minimize such risk, but
investors should understand that such risk is intrinsic to the Company's
operations.
6
<PAGE> 8
When the Company leases Equipment to a customer, it or its designee will
retain title to the leased item until it is disposed of. While the Company
intends to generally originate or acquire Full Payout Leases (under which the
Lessee will agree to pay a sum sufficient during the Lease term to fully
amortize its cost and the profit return to Company), in the event of early
termination, the Company may be required to resell or re-lease the item to
another Lessee to recover the balance of its cost. In that case, market
conditions or uncompensated damage to the item may make it impossible to fully
recover its cost. In addition, the Company runs the risk that movable property
may be moved to a location where it cannot be recovered. Many of these risks
cannot be fully protected against through insurance. In the event of default,
the Company may exercise rights of self-help to recover the Equipment, or seek
repossession in a court action, or prosecute a suit for money damages. The
Company anticipates that all or substantially all of the financing provided by
it will be to customers of Giuffre Cranes and Rexworks; however, the Company may
finance purchases by parties which are not customers of Giuffre Cranes or
Rexworks in connection with the purchase/lease of Equipment from unaffiliated
vendors and lessors. See "Risk Factors - Risk of Default on Leases." As of the
date of this Prospectus, the Company has not entered into any commitments for
the origination or the acquisition of any Leases, or for the acquisition,
financing or leasing of any Equipment, and it has no present plans, agreements
or commitments and is not currently engaged in any negotiations with respect to
any such transaction.
5. Assurance of Cash Flow and Timing of Payments; Availability of
Financing; Depletion of Reserves. The Company is required to make monthly
payments of principal and interest on its bank debt; interest on the Company's
investor notes is payable monthly, with payment of principal in full at
maturity. Based upon its experience in the equipment leasing business (including
its ability to manage the Company's Lease portfolio, to secure Leases and to
re-market leased Equipment so as to accommodate and conform to the Company's
cash flow requirements), Management believes that the proceeds of this offering,
together with borrowed funds and operating revenues, will be sufficient to meet
the debt service and other payment obligations of the Company its institutional
lenders and investor noteholders on a timely basis and otherwise to support its
operations. However, no definite assurance can be given that the timing of
receipts by the Company (from Lessees, lenders and upon the sale of Equipment)
will at all times coincide with its debt service obligations and/or be in
amounts sufficient to timely meet such obligations. Management may, in its sole
discretion, establish working capital reserves for the Company. If and to the
extent that reserves are established, such reserves may be insufficient to cover
the debt service obligations and other liabilities of the Company (including
payments of principal and interest to the Company's institutional lenders and
investor noteholders), and, once depleted, reserves will not be required to be
re-established.
6. General Economic Risks. Equipment leasing is subject to various economic
risks, such as the risk of non-payment of Leases and technological and equipment
obsolescence. The business of providing financing for Equipment purchasers also
involves a credit risk in that some Lessees may prove unable to timely and/or
fully pay the amounts due under their Leases. In the event of late payments or
default in any payment that is due, the Company will be required to undertake
collection efforts, which may include legal proceedings to obtain repossession
of the Equipment sold and/or a money judgment. If the Equipment suffers damage,
insurance may protect the Company against certain losses, but will typically not
cover loss of value from technological obsolescence or from a decline of value
resulting from deflationary economic conditions or from the effect of
competition or an unfavorable supply/demand environment. The Equipment may be
adversely affected by the economic and business factors to which the economy
generally and the market for the Company's Equipment in particular are subject,
many of which are beyond the control of the Company. Such factors may affect the
value of the Equipment for resale and for continued service if repossession is
necessary. They include technological obsolescence, increases in the supply of
equipment for lease and other changes in the industry and economy in general
that may result in a decrease in demand for the Equipment, or may lead to the
entry of new competitors. Any estimate of the future market value of the
Equipment cannot accurately take into account the status of the economy or the
industry.
7. Effect of Political Factors and Laws; Regulation of the Industry. Some
of the Company's customers and potential customers are municipal corporations or
regulated utility companies, who are impacted by various political and budgetary
constraints. Some governmental entities have restrictions which impair their
ability to enter into enforceable long term financing arrangements or leases. It
is not possible to accurately predict the impact, if any, which current or
future political events or public financing constraints may have upon the
business of the Company.
7
<PAGE> 9
8. Dependence on Key Executives. The Company is dependent to a large degree
on the services of its senior Management, particularly Scott A. Blair, its Chief
Executive Officer and President, and Frank P. Giuffre, its Chairman of the Board
and Treasurer. The Company has entered into an employment agreement with Mr.
Blair (see "Management - Employment Contracts"); however, the Company currently
has no employment agreement with Mr. Giuffre and does not maintain any insurance
coverage on either Mr. Blair or Mr. Giuffre. The loss of any of its key
executives could have a material adverse effect on the Company. The Company's
ability to manage its anticipated growth will depend on its ability to identify,
hire and retain highly skilled management personnel. Competition for such
personnel is intense. As a result, there can be no assurance that the Company
will be successful in attracting and retaining such personnel, and the failure
to attract such personnel could have a material adverse affect on the Company's
business, financial condition and results of operations. See "Management."
9. Reliance on Sister Company. The Company will continue to utilize
personnel and facilities supplied by Giuffre Cranes, its sister corporation, to
conduct the Company's business pursuant to a Management Agreement. See
"Management - Management Agreement". Under the Management Agreement, Giuffre
Cranes is obligated to provide such personnel and such use of facilities as it
may deem appropriate to conduct the business of the Company. There may be times
when there will be conflicts in the allocation of time, personnel or facilities
which can negatively impact operations and adversely affect the business of the
Company.
10. Potential Difficulty in Hiring Additional Finance and Leasing
Personnel. The Company's ability to carry out its business plan depends in part
upon its ability to hire and retain persons skilled and experienced in the
equipment financing/leasing business. Although the Company believes it will be
able to hire qualified personnel for such purposes, an inability to do so could
materially adversely affect the Company's ability to conduct its anticipated
operations. The market for qualified, experienced equipment financing/leasing
specialists has historically been, and the Company expects that it will continue
to be, intensely competitive. The inability to recruit and retain qualified
employees could materially adversely affect the Company's results of operations
and financial condition.
11. Competition. Many of the Company's competitors have significantly
greater financial, technical, product development and marketing resources than
the Company. Competitors vary in size and in the scope and breadth of the
products and services offered. Additional major finance and leasing companies
may enter the market in which the Company competes. There can be no assurance
that future competition will not have a material adverse effect on the Company's
business, financial condition and results of operations. Competitive pressures
and other factors, such as new financing/lease products and services by the
Company or its competitors, or the entry into new geographic markets, may result
in significant price erosion that could have a material adverse effect on the
Company's business, financial condition and results of operations. The
competitive factors affecting the market for the Company's products and services
include corporate and product reputation, Lease terms and conditions, marketing
and promotion, timely performance with respect to applications, review, credit
decisions and funding, quality of administrative services and customer
relations. The Company believes that it competes effectively with respect to
these factors, but there can be no assurance that it will continue to do so. The
Company's present or future competitors may be able to market products and
services comparable or superior to those offered by the Company or adapt more
quickly than the Company to increased demand or evolving customer requirements.
In order to compete successfully in the future, the Company must respond to
customer requirements and its competitors' products, services and innovations
(including without limitation financial capabilities, price structure and
marketing). Accordingly, there can be no assurance that the Company will be able
to continue to compete effectively in its market, that competition will not
intensify or that future competition will not have a material adverse effect on
the Company's business, results of operations or financial condition.
See "Business."
12. No Intention to Declare or Pay Dividends. The Company does not
currently intend to declare or pay any cash dividends on the Common Stock in the
foreseeable future and anticipates that earnings, if any, will be used to
finance the development expansion of its business. The Company anticipates that
it may obtain a credit facility, the terms of which, although not known to the
Company at this time, may prohibit the declaration and payment of dividends
without prior lender approval. Any payment of future dividends and the amounts
thereof will be dependent upon the Company's earnings, financial requirements
and other factors deemed relevant by the Company's Board of Directors, including
the Company's contractual obligations. See "Dividend Policy."
8
<PAGE> 10
13. Control by Principal Stockholders. Unless all of the shares of Common
Stock offered hereby are sold, upon completion of the offering, the existing
stockholders will own in excess of 50% of the then outstanding shares of Common
Stock, which will allow such stockholders, in the event that they act together,
to control most actions taken by the stockholders of the Company, including the
election of directors. Subject to the provisions of the Wisconsin Business
Corporations Law, such concentration of ownership could have the effect of
delaying, deterring or preventing a change in control of the Company that might
otherwise be beneficial to stockholders. The existence of such concentrated
ownership may also discourage acquisition bids for the Company and limit the
amount certain investors may be willing to pay for shares of Common Stock. There
can be no assurance that all or any portion of the Common Stock offered hereby
will be sold. See "Principal Stockholders" and "Description of Securities."
14. Limited Liability of Officers and Directors. The Wisconsin Business
Corporations Law provides that a director of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, with certain exceptions. These provisions may
discourage stockholders from bringing suit against a director for breach of
fiduciary duty and may reduce the likelihood of derivative litigation brought by
stockholders on behalf of the Company against a director. Further, under the
By-Laws of the Company and the Wisconsin Business Corporations Law, such
officers and directors may be entitled to indemnification by the Company against
liability. Accordingly, there is a possibility that Company assets could be used
to satisfy liabilities of, or claims for indemnification by, its officers and
directors. See "Management."
15. Dilution. Purchasers of the Common Stock offered hereby will incur
immediate substantial dilution in the net tangible book value per share of such
Common Stock. Assuming that all of the 400,000 shares of Common Stock offered
hereby are sold at an initial public offering price of $5.25 per share, net
tangible book value dilution to new investors will be $2.65 per share; such
dilution will be inversely proportional to the number of shares of Common Stock
sold in the offering (eg., $3.92 if only 100,000 shares are sold at $5.25 per
share). There can be no assurance that all or any portion of the Common Stock
offered hereby will be sold. See "Dilution."
16. Antitakeover Measures. The Wisconsin Business Corporations Law contains
provisions that could discourage potential acquisition proposals and might delay
or prevent a change in control of the Company. Such provisions could result in
the Company being less attractive to a potential acquiror and could result in
the shareholders receiving less for their Common Stock than otherwise might be
available in the event of a takeover attempt. See "Description of Securities -
Certain Statutory and Other Provisions."
17. No Prior Public Market; Possible Volatility of Stock Price. Prior to
this offering, there has been no public market for the Common Stock. The initial
public offering price of the Common Stock has been determined by negotiations
between the Company and the Managing Placement Agent and may not be indicative
of the market price for shares of the Common Stock after the offering. For a
description of factors considered in determining the initial public offering
price, see "Underwriting." There can be no assurance that an active trading
market for the Common Stock will develop or if developed, that such market will
be sustained. The market price for shares of the Common Stock is likely to be
volatile and may be significantly affected by such factors as quarter-to-quarter
variations in the Company's results of operations, news announcements, changes
in general market conditions for contact lenses, regulatory actions, adverse
publicity regarding the Company or the industry in general, changes in financial
estimates by securities analysts and other factors. In addition, broad market
fluctuation and general economic and political conditions may adversely affect
the market price of the Common Stock, regardless of the Company's actual
performance. There can be no assurance that the market price of the Common Stock
will not decline below the initial public offering price.
18. Potential Adverse Impact on Market Price of Common Stock Eligible for
Future Sale. If all of the shares of Common Stock offered hereby are sold, the
Company will have outstanding 800,000 shares of Common Stock. The 400,000 shares
of Common Stock sold in this offering will be freely tradeable without
restriction or further limitation under the Securities Act, except for any
shares purchased by an "affiliate" of the Company, which will be subject to the
limitations imposed on "affiliates" of the Company under Rule 144 promulgated
under the Securities Act ("Rule 144"). The remaining 400,000 outstanding shares
of Common Stock, are "restricted securities" within the meaning of Rule 144 and
may not be resold except pursuant to a registration statement
9
<PAGE> 11
effective under the Securities Act or pursuant to an exemption therefrom,
including the exemption provided by Rule 144. In addition, on the closing of the
offering, the Company will sell to the Managing Placement Agent and/or its
designees, for nominal consideration, the Underwriter's Warrants entitling the
holder(s) thereof to purchase shares of Common Stock in an aggregate number
equal to 10% of the shares sold in the offering at an initial exercise price per
share equal to 120% of the initial public offering price hereunder. The
Underwriter's Warrants will be exercisable for a period of four years commencing
one year after the effective date of this offering and will contain certain
demand and incidental registration rights relating to the underlying Common
Stock. The holders of the Underwriter's Warrants may sell shares of Common Stock
acquired by exercise of the Representative's Warrants after one year from the
date of exercise thereof without registration subject to the limitations of Rule
144. In general, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period may, subject to certain
restrictions, sell within any three-month period a number of shares which does
not exceed the greater of (i) 1% of the then outstanding shares of Common Stock;
or (ii) average weekly trading volume during the four calendar weeks preceding
the date on which notice of the proposed sale is filed with the Securities and
Exchange Commission as required by Rule 144. Rule 144 also permits the sale of
shares without volume limitation by a person who is not an affiliate of the
Company and who has satisfied a two-year holding period. The one-year holding
period with respect to 400,000 outstanding shares of Common Stock has expired.
Prior to this offering, there has been no public market for the Common Stock of
the Company, and no predictions can be made of the effect, if any, that the sale
or availability for sale of shares of additional Common Stock will have on the
trading price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could adversely affect the trading price of the Common Stock and could impair
the Company's future ability to raise capital through an offering of its equity
securities. There can be no assurance that all or any portion of the Common
Stock offered hereby will be sold.See "Common Stock Eligible for Future Sale"
and "Description of Securities."
19. No Commitment to Purchase. The Common Stock is being offered on a "best
efforts" basis, and neither the Managing Placement Agent (or any Selected
Placement Agent), nor any other person or entity, is obligated to purchase the
all or any part of the shares offered hereby. See "Underwriting."
20. Forward-Looking Statements and Associated Risks. This Prospectus
contains certain forward-looking statements including: (i) anticipated trends in
Company's financial condition and results of operations, including expected
changes in the Company's g profit, sales and marketing expense, general and
administer expense and professional expenses; (ii) the Company's business
strategy for future growth in the market, including the Company's plans
regarding anticipated hiring; and (iii) the Company's ability to distinguish
itself from its current and future competitors. When used in this Prospectus,
the words "believes," "intends," "anticipates," "expects," and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are based largely on the Company's current
expectations and are subject number of risks and uncertainties. In addition to
the other risks described elsewhere in this "Risk Factors" section, important
factors to consider in evaluating such forward-looking statements include: (i)
changes in external competitive market factors which might impact trends in the
Company's results of operations; (ii) unanticipated working capital and other
cash requirements; (iii) general changes in the industry which the Company
competes; and (iv) various other competitive factors that may prevent the
Company from competing successfully in the marketplace. In light of these risks
and uncertainties, many of which are described in greater detail elsewhere in
this "Risk Factors" section, actual results could differ materially from the
forward-looking statements contained in this Prospectus.
10
<PAGE> 12
THE COMPANY
The Company was incorporated in August, 1995 under the laws of the State of
Wisconsin. The Company's principal executive offices are located at 6635 South
13th Street, Milwaukee, Wisconsin 53221, and its telephone number is (414)
764-9200. The Company currently has two principal Affiliates (as hereinafter
defined), Giuffre Cranes and Rexworks, both of which are Delaware corporations.
See "Business."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 400,000 shares of
Common Stock offered hereby at the price of $5.25 per share, after deducting
underwriting discounts and commissions and estimated offering expenses, are
estimated to be approximately $1,815,000. The net proceeds of the offering will
be used, in approximately the proportions indicated, for the following purposes:
(1) 92.5% to provide working capital with which to finance sales (principally in
the form of sales-type Full Payout Leases) of Equipment to customers of Giuffre
Cranes, Rexworks and, potentially, other Equipment vendors and (2) 7.5% to cover
other general corporate expenses. Up to $300,000 of net offering proceeds
allocated to working capital may, in the discretion of Management, be used to
retire a portion of the Company's outstanding indebtedness; however, Management
does not expect to utilize offering proceeds to repay indebtedness unless (i) at
least 200,000 shares of Common Stock ($1,050,000) are sold in the offering and
(ii) such existing debt is able to be eliminated, or replaced on more favorable
credit terms, judged in light of the demand for Company financing, the
availability of alternative sources of funds and prevailing Lease rates in the
Company's financing markets.
As of May 31, 1998, outstanding indebtedness, a portion of which may be
repaid with net proceeds of this offering, totalled $1,718,513, represented by
promissory notes of the Company; such notes mature at various times from June
30, 1999 through November 15, 2003 and bear interest at rates ranging from 8.24%
to 10.25% per annum. $951,061 of the foregoing indebtedness is owed to banks and
secured by first security liens against leased Equipment ("Senior Debt");
$767,452 is owed to private investors, unsecured and subordinated to Senior
Debt. The proceeds of such borrowings were expended in connection with the
Company's Equipment financing and other business activities as described in this
Prospectus. See Note 3 to the Financial Statements of the Company appearing
elsewhere herein and "Business."
Net proceeds, if any, reserved for working capital and general corporate
purposes and not expended to repay indebtedness may be used by the Company in
connection with its financing of Lease receivables and/or to cover additional
sales and marketing expense. A portion of the net proceeds received by the
Company may be used for the acquisition of complementary businesses (including
lease and/or equipment inventories). Although the Company has from time to time
engaged in discussions with respect to possible acquisitions, it has no present
understandings, commitments or agreements, nor is it currently engaged in any
negotiations, with respect to any acquisition. None of the net proceeds of the
offering are specifically designated for payments to officers or directors. The
net proceeds, if any, received in connection with the exercise of the
Underwriter's Warrants will be allocated to working capital.
Pending use of the net proceeds from this offering, the Company intends to
invest the net proceeds received by it in bank certificates of deposit,
interest-bearing savings accounts, prime commercial paper, United States
Government obligations, money market funds or similar short-term investments.
Any income derived from these short-term investments is expected to be used for
working capital.
The allocations set forth above are estimates developed by Management for
the allocation of the net proceeds to be received by the Company from this
offering based upon the current state of the Company's existing and proposed
business and prevailing economic conditions. These estimates are subject to
reallocation by the Board of Directors among the applications described above or
to new applications and are further subject to future events, including changes
in general economic conditions, the Company's business plan, and the financial
markets in general. Since a significant portion of net offering proceeds will be
allocated to working capital and to general corporate purposes, Management will
have broad discretion as to the application of such proceeds.
11
<PAGE> 13
DILUTION
The net tangible book value of the Company as of May 31, 1998, adjusted to
reflect a 400 for 1 split of the Company's outstanding Common Stock, effective
as of June 22, 1998, was approximately $265,356, or $0.66 per share of Common
Stock. Net tangible book value per share represents the amount of total tangible
assets less total liabilities, divided by the number of shares of Common Stock
then outstanding. The following table illustrates the dilution to purchasers of
Common Stock in this offering if certain arbitrarily determined numbers of
shares (ie., 100,000, 200,000, 300,000 and 400,000) are sold, after deduction of
estimated underwriting commissions and other offering expenses payable by the
Company. At the sales levels indicated, the Company's pro forma net tangible
book value at May 31, 1998 would have been $662,856, $1,135,356, $2,080,356 or
$2,038,356, respectively, or $1.33, $1.89, $2.30 or $2.60, respectively, per
share of Common Stock, representing an immediate increase in net tangible book
value of $0.67, $1.23, $1.64 or $1.94, respectively, per share to existing
stockholders and immediate dilution of $3.92, $3.36, $2.95 or $2.65,
respectively, per share to new investors.
<TABLE>
<CAPTION>
Assumed number of shares of Common Stock sold in the offering (1)
-----------------------------------------------------------------
100,000 200,000 300,000 400,000
Shares Shares Shares Shares
------- ------- ------- -------
<S> <C> <C> <C> <C>
Initial public offering
price per share............................ $ 5.25 $ 5.25 $ 5.25 $ 5.25
Net tangible book value
before the offering........................ $ 0.66 $ 0.66 $ 0.66 $ 0.66
Increase in net tangible book value
attributable to new investors.............. 0.67 1.23 1.64 1.94
------ ------ ------ -------
Pro forma net tangible book value
per share after the offering................ 1.33 1.89 2.30 2.60
-------- -------- --------- ---------
Dilution per share to new public investors....... $ 3.92 $ 3.36 $ 2.95 $ 2.65
======== ======== ========= =========
</TABLE>
- --------------
(1) The numbers of shares of Common Stock shown as sold in the above table have
been arbitrarily selected by the Company for purposes of illustration only.
There can be no assurance that all or any part of the Common Stock offered
hereby will be sold. See "Risk Factors" and "Underwriting."
The following table summarizes, on a pro forma basis (after giving effect
to a 400 for 1 split of the Company's outstanding Common Stock, effective as of
June 22, 1998 and the sale of all of the Common Stock offered hereby) as of May
31, 1998, the difference between the number of shares of Common Stock purchased
from the Company, the total consideration paid and the average price per share
paid by the existing stockholders and by new public investors purchasing shares
in this offering (at the initial public offering price of $5.25 per share and
before deduction of estimated underwriting discounts and commissions and
offering expenses payable by the Company):
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration Average
------------------------ ----------------------- Consideration
Amount Percent Amount Percent Paid Per Share
------ -------- ------ -------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 400,000 50.0% $ 260,000 11.0% $0.65
New public investors (1)......... 400,000 50.0% 2,100,000 89.0% $5.25
------- ------ ---------- -------
Total....................... 800,000 100.0% $2,360,000 100.0%
======= ====== ========== =======
</TABLE>
(1) The number of shares of Common Stock shown in the above table as sold to
new public investors (400,000) has been arbitrarily selected by the Company
for purposes of illustration only. If sales levels of 100,000 shares,
200,000 shares and 300,000 shares are assumed, the percent of total shares
sold which are purchased by new investors would be 20.0%, 33.3% and 42.9%,
respectively; and the aggregate consideration paid by new investors would
be $525,000, $1,050,000 or $1,575,000, respectively, or 50.2%, 66.9% or
75.2%, respectively, of all consideration paid for shares of Common Stock
sold in the offering. The average consideration paid per share, by both
existing stockholders and new investors, remains the same at all levels of
sales. There can be no assurance that all or any part of the Common Stock
offered hereby will be sold. See "Risk Factors" and "Underwriting."
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company as of May
31, 1998, and should be read in conjunction with the financial statements of the
Company and related notes appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
May 31, 1998
------------
<S> <C>
Long-term liabilities:
Senior notes payable - bank, less current portion (1)............................................ $ 723,967
Subordinated notes payable - investor, less current portion (1).................................. 767,452
----------
Total long-term liabilities.............................................................. 1,491,419
----------
Stockholders' equity:
Common Stock, $0.01 par value, 9,000 shares
authorized, 1,000 shares issued and
outstanding, and, as adjusted, $0.0001 par
value, 20,000,000 shares authorized,
400,000 shares issued and outstanding (2)...................................................... 40
Additional paid-in capital (3)(4)................................................................ 274,960
Retained earnings................................................................................ 54,857
----------
Total stockholders' equity............................................................... 329,857
----------
Total capitalization..................................................................... $1,821,276
==========
</TABLE>
- --------------
(1) Under certain circumstances, in the discretion of Management, up to
$300,000 of outstanding indebtedness may be repaid with offering proceeds.
See "Use of Proceeds." and Note 3 to the Financial Statements of the
Company appearing elsewhere in this Prospectus.
(2) As of June 22, 1998, the Company effected a 400 for 1 split of its
outstanding Common Stock and changed the stated par value of such Common
Stock from $0.01 to $0.0001 per share. See "Certain Relationships and
Related Transactions."
(3) In May, 1996, Frank P. Giuffre and Dominic J. Giuffre each contributed an
additional $125,000 in cash to the capital of the Company. See "Certain
Relationships and Related Transactions."
(4) For the fiscal year ended February 28, 1998, Giuffre Cranes did not assess
or receive any fees or cost reimbursements under the Management Agreement;
accordingly, the Company charged operations and credited to contributed
capital $12,000 for the estimated cost of unreimbursed administrative
expenses incurred by Giuffre Cranes on its behalf. See "Management -
Management Agreement," "Certain Relationships and Related Transactions" and
Note 4 to the Financial Statements of the Company appearing elsewhere in
this Prospectus.
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock since
its inception. Any future determination as to the declaration and payment of
dividends on the Common Stock will be made at the discretion of the Board of
Directors out of funds legally available for such purpose. The Board of
Directors currently intends to retain all earnings for use in the Company's
business for the foreseeable future. See "Risk Factors."
13
<PAGE> 15
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements of the Company, including the notes
thereto, appearing elsewhere in this Prospectus. The selected financial data
presented below as of February 28, 1998 and 1997, and for the years then ended
have been derived from the financial statements of the Company, which have been
audited by Smrecek & Co., S.C., independent certified public accountants, and
which appear elsewhere in this Prospectus. The selected financial data as of May
31, 1998, and for the three months ended May 31, 1998 and 1997, have been
derived from unaudited financial statements which, in the opinion of Management,
reflect all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the data.
<TABLE>
<CAPTION>
Year Ended Three Months Ended
--------------------------- -------------------------
February 28, February 28, May 31, May 31,
1998 1997 1998 1997
---- ---- ---- ----
STATEMENT OF INCOME DATA: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Interest income................................. $ 168,164 $ 17,048 $ 69,506 $ 17,783
Commission income from third party financing.... 93,170 _ 40,644 _
Rental equipment sales.......................... _ 506,203 _ _
Rental income................................... _ 213,803 _ _
Processing fees................................. 12,530 _ 461 2,513
Other income.................................... 5,187 _ 5,252 65
----------- ----------- ----------- -----------
Total revenues............................. 279,051 737,054 115,863 20,361
Expenses:
Cost of equipment sold.......................... _ 407,553 _ _
Interest expense................................ 109,040 94,582 39,248 21,065
Amortization of finance costs................... 27,924 86,872 8,707 4,483
Depreciation.................................... _ 139,922 _ _
Commission expense.............................. 52,054 _ 16,424 _
Administrative expense reimbursement............ 12,000 _ 3,000 3,000
Legal and accounting............................ 6,721 4,025 578 2,900
Escrow fees and bank charges.................... 3,028 1,650 15 1,000
Other........................................... 1,706 231 1,224 20
----------- ----------- ----------- -----------
Total expenses............................. 212,473 734,835 69,196 32,468
----------- ----------- ----------- -----------
Income (loss) before taxes......................... 66,578 2,219 46,667 (12,107)
Provision for income taxes......................... 18,000 _ 18,000 _
----------- ----------- ----------- -----------
Net income (loss).................................. 48,578 2,219 28,667 (12,107)
Retained earnings (deficit) beginning of period.... (22,388) (24,607) 26,190 (22,388)
----------- ----------- ----------- -----------
Retained earnings (deficit) end of period.......... $ 26,190 $ (22,388) $ 54,857 $ (34,495)
=========== =========== =========== ===========
Basic earnings (loss) per common share (1)......... $ 0.12 $ 0.01 $ 0.07 $ (0.03)
=========== =========== =========== ===========
Weighted average common shares outstanding (1)..... 400,000 400,000 400,000 400,000
</TABLE>
<TABLE>
<CAPTION>
May 31, 1998
------------
<S> <C>
BALANCE SHEET DATA: (Unaudited)
Cash and cash equivalents............................................................... $ 52,700
Total assets............................................................................ $ 2,121,654
Long-term debt, less current portion (2)................................................ $ 1,491,419
Stockholders' equity.................................................................... $ 329,857
</TABLE>
- --------------
(1) Adjusted to reflect a 400 for 1 split of the Company's outstanding Common
Stock and a change in the stated par value of such Common Stock from $0.01
to $0.0001 per share, both effective as of June 22, 1998.
(2) Under certain circumstances, in the discretion of Management, up to
$300,000 of outstanding indebtedness may be repaid with offering proceeds.
See _Use of Proceeds" and Note 3 to the Financial Statements of the Company
appearing elsewhere in this Prospectus.
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was incorporated in August 1995, primarily to provide financing
for crane sales by Giuffre Cranes, an Affiliate of the Company, which is a
national distributor of Terex track-mounted cranes. During fiscal 1998, the
Company also began arranging financing for Giuffre Cranes' customers with
third-party finance companies and received Brokerage Commission income for these
services. During fiscal 1996, the Company's conducted its initial private
placement of promissoty notes ($750,000 of 10" secured notes). The proceeds of
such offering were used by the Company to purchase 17 crane units from Giuffre
Cranes during its 1996 and 1997 fiscal years. These notes were secured by a
first security interest in crane units purchased and were nonrecourse as to
other assets of the Company. The notes were due June 30, 1997 and were repaid
early on March 20, 1997. During its 1997 fiscal year, the Company undertook two
additional private notes offerings. In its second offering, completed in August,
1996, the Company sold $177,000 of 10"% asset-backed notes. These notes were
secured by equipment or the proceeds from the sale of such equipment. The notes
permitted the Company to subordinate the noteholders security interest to Senior
Debt. In August, 1996, the Company undertook its third private notes offering.
The Company sold approximately $590,000 of 10"% capital notes. These notes are
unsecured and are general obligations of the Company. The capital notes are also
subordinated to the Company's Senior Debt.
In order to provide for the ability to grant a first security lien to
investors purchasing its notes, the Company initially purchased cranes from
Giuffre Cranes and held them in inventory, generally for short-term rental and
subsequent sale. Accordingly, during its 1996 and 1997 fiscal years, the Company
rented, leased, serviced and sold cranes. These functions were performed by
Giuffre Cranes under a Management Agreement with the Company. Giuffre Cranes did
not assess or receive any compensation for its services under this Agreement in
1996 or 1997. At the close of fiscal 1997, the Company had purchased 17 crane
units; it sold (and financed the purchase of) 8 units and held 9 units in
inventory. Thereupon, the Company discontinued the rental and service of cranes
since it was no longer required to provide a first security interest in the
cranes to purchasers of its notes, having provided for the subordination of such
notes to Senior Debt (the holders of which required, and could then be granted,
a first security interest in the equipment purchased by the Company).
Accordingly, in March, 1997, the remaining cranes in the Company's inventory
were sold back to Giuffre Cranes at net book value ($773,000).
During fiscal 1998, the Company focused on providing direct financing
(through Leases) for cranes sold by Giuffre Cranes. In addition, the Company was
able to secure bank financing (Senior Debt) for up to 60% of its Lease contracts
at interest rates ranging from 8.9% to 9.25%, lowering its effective cost of
funds. In February, 1998, the Company negotiated a new credit facility with a
bank to finance up to 60% of the value of its newly-leased equipment at a fixed
rate 2.75% over the average rate of U. S. Treasury obligations of similar
maturity, and, for the first quarter of fiscal 1999, interest rates on new
Senior Debt ranged from from 8.24% to 8.59%
Because of the Company's limited history, and the changes in the manner the
Company has conducted its operations in order to establish satisfactory credit,
the benefit of analysis of prior operations is limited. Moreover, the Company's
results of operations have not established any consistent performance trends.
Because the Company has succeeded in establishing credit and lowering its cost
of funds, Management believes that operations will be more profitable in the
future; however, no assurance can be given that such improvement will be
achieved.
RESULTS OF OPERATIONS
NET REVENUES
Revenues declined from $737,054 in fiscal 1997 to $264,022 for fiscal,
1998. The decline in revenues resulted from the change in the method of
conducting the Company's operations (from maintaining its own inventory of
cranes for sale to primarily providing financing for cranes sold by Giuffre
Cranes). Interest income, primarily from sales-type Full Payout Leases,
increased from $17,048 for fiscal 1997 to $168,164 for fiscal 1998. During
fiscal 1998, the Company also began arranging financing for customers of Giuffre
Cranes with third-party finance
15
<PAGE> 17
companies; for 1998, the Company earned $93,170 of such commission income, as
compared to none in 1997. For the first quarter of fiscal 1999, the Company
reported revenues of $115,863, as compared to $20,361 for the first quarter of
1998, reflecting increases in interest income and Brokerage Commissions.
EXPENSES
The Company's expenses decreased from $734,835 in fiscal 1997 to $212,473
for 1998. In fiscal 1998, the Company discontinued the sale of cranes for its
own account and, therefore, reported no cost of equipment sales or depreciation.
For fiscal 1997, these costs were $407,553 and $139,922, respectively. Interest
expense increased approximately 15% for fiscal 1998, reflecting a 52% increase
in outstanding borrowings; such increased expense was partially offset by a
lower cost of funds on $799,000 of Senior Debt which replaced a portion of the
10"% notes outstanding at the end of the prior year.
Amortization of finance costs decreased from $86,872 in fiscal 1997 to
$27,924 for 1998 due to lower costs incurred to sell the notes sold in the
second and third private notes offerings described above and the longer term to
maturity of the notes sold. In addition, the secured notes sold in the initial
private offering were repaid prior to maturity and, accordingly, the unamortized
balance of the offering costs related to these notes was charged to fiscal 1997
operations.
In fiscal 1998, the Company incurred commission costs of $52,054 (none in
1997) related to arranging financing both on internally-financed and third-party
contracts. Of these expenses, $37,369 related to commission expense on
third-party contracts and $14,685 related to internally-financed contracts.
Expenses for fiscal 1998 also include a charge of $12,000, the amount which
Giuffre Cranes was entitled to receive as reimbursement for expenses incurred on
behalf of Company under the Management Agreement. Because Giuffre Cranes waived
its right to be reimbursed for such expenses, the Company credited this amount
to contributed capital. No charges for administrative expenses were made to the
Company for fiscal 1997.
For the first quarter of fiscal 1999, expenses increased to $69,196, as
compared to from $32,468 for the first quarter of fiscal 1998. Interest expense
approximately doubled, reflecting increased debt obligations incurred in order
to finance Lease investments. Commission expense was $16,424 in the first
quarter of fiscal 1999, as compared to none in first quarter of fiscal 1998,
reflecting the initiation of brokerage activities (ie., the arrangement of
financing by third-party finance companies) in the second half of fiscal 1998.
PROFITABILITY
During fiscal 1997, the Company was able to achieve essentially break-even
operations and earn nominal net income of $2,219 ($0.01 per share). For fiscal
1998, the Company's income before taxes was $66,578, as compared to nominal
pretax income of $2,219 for fiscal 1997.
The improvement in 1998 operations primarily reflects the Company's success
in lowering its cost of capital, the growth in its Lease portfolio and its
ability to arrange financing with third-party financing sources. However, it
should be noted that fiscal 1997 operating results included the benefit of sales
and rentals of equipment, which functions were discontinued in fiscal 1998.
During 1997, these discontinued functions contributed profits of $172,461,
before interest and loan fee amortization costs of $181,454 principally incurred
to carry crane inventories. Accordingly, fiscal 1998 and fiscal 1997 operating
results are, to a large extent, not comparable.
The average interest rate on borrowings was 10.25% for fiscal 1997, not
including amortized finance costs. During fiscal 1998, the Company obtained bank
financing at rates ranging from 8.9% to 9.25%, resulting in a blended cost of
funds of 10.03% for the year. The Company's Leases are at rates ranging from
11.5% to 16.66%.
The Company made no provision for income taxes in fiscal 1997 and had loss
carryforwards of approximately $147,000 available at February 28, 1997 to offset
federal taxable income in future years. For 1998, the Company provided $18,000
for federal and state income tax expense, which includes the benefit of the
tax-basis net operating loss carryforward.
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For the first quarter of fiscal 1998, the Company incurred a loss before
taxes of $12,107, as compared to pretax income of $46,667 for the first quarter
of fiscal 1999. Such improvement reflects growth in the Company's Lease
portfolio, lower cost of funds due to an increase in Senior Debt at more
favorable rates, lower amortization expense with respect to finance fees and a
spread of $24,228 between the Company's commission income, as compared to its
commission expenses incurred.
Net income for the for the first quarter fiscal 1999 was $28,667 or $0.07
per share, following a loss of $12,107 ($0.03 per share) for the first quarter
of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1997, the Company sold $177,000 of notes in its second offering
and $100,000 of notes in its third offering. During fiscal 1998, the company
sold $590,452 of notes. In addition, during fiscal 1998, the Company obtained
bank financing in the amount of $798,909.
The Company's investor notes mature in 1999, whereas its bank debt is
amortizing over four to five years. The Company bad investments in sales-type
Lease contracts of $496,150 at February 28, 1997 and $1,731,692 at February 28,
1998. In fiscal 1998, the Company closed $1,541,861 in new finance contracts as
compared to $491,115 in 1997.
The Company's Leases generally range in term from 36 to 60 months. In order
to support its investment in its Leases, and make investments in additional
Leases, the Company will need to obtain additional financing. Accordingly, the
Company has undertaken to sell the Common Stock offered hereby.
At February 28, 1998 and at May 31, 1998, none of the Company's investments
in finance and Lease contracts had outstanding payments that were more than 120
days past due. The Company has never incurred a loss or write-off with respect
to its contracts, and no reserve for potentially uncollectable amounts has been
deemed necessary by Management. The Company's Leases have been outstanding for a
relatively short period of time, and there can be no assurance that the Company
will be able to maintain its past collection results in the future. During May
and June, 1998, the Company repossessed and subsequently sold two crane units.
Proceeds from such sales fully covered the Company's net investment in the
related Leases, including all accrued interest owed and costs of sale following
repossession.
For fiscal 1998, cash provided from operations was $85,301, as compared to
$127,064 in fiscal 1997, primarily due to lower non-cash expenses in 1998, due
to the elimination of depreciation on crane inventories and lower amortization
of loan fees (as described above).
For the first quarter of fiscal 1999, cash provided from operations
increased to $64,982 of positive cash flow, following a deficit of $14,267 for
the same period of fiscal 1998, due to the increase in the Company's net income,
increase in customer deposits of $19,000 and noncash provision for the income
tax liability of $18,000.
The Company made investments in Leases of $487,290 during the first quarter
of fiscal 1999, as compared to $401,542 during the first quarter of fiscal 1998.
These investments were financed through an increase in Lease payments of
$266,535 and a net increase of $152,152 in Senior Debt obligations.
YEAR 2000
The Company has made an initial evaluation and does not believe it will be
significantly impacted by year 2000 compliance problems. The Company uses
software packages recently acquired that are year 2000 compliant. The majority
of the Company's lessees are small companies which do not significantly rely
upon computer software in the conduct of their businesses.
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BUSINESS
GENERAL
The Company was formed in August, 1995, to provide direct financing
(principally in the form of sales-type leases ("Leases"); see "Business -
Description of Leases") to facilitate the acquisition of products ("Equipment")
by customers of Giuffre Cranes and Rexworks, both of which are Affiliates of the
Company. The Company will also provide such equipment financing to customers of
vendors other than Giuffre Cranes and Rexworks and/or, acting as broker, arrange
such financing with third-party finance companies on a commission basis.
The Company's business operations generally include the following
functions: structuring financing plans and arrangements, including negotiation
of terms relating to the Company's Leases and leases obtained with third-party
finance companies; developing credit standards; analyzing customer financial
statements; evaluating the quality of Equipment; determining the capital
structure of the Company and its leverage ratios; administering its portfolio of
Leases; reviewing and evaluating the credit status and payment history of
Lessees; administering the collection process; when necessary, repossessing and
disposing of Equipment; prosecuting litigation with defaulted Lessees; and
managing relations with the Company's institutional lenders and securityholders.
The Company intends to operate in the fifty states and, to a limited extent,
overseas. See "Business Foreign Lessees/Asset Location" and "Certain Legal
Aspects of Company Operations - Licensing and Other Legal Requirements."
The Company will derive its revenues predominantly from Lease payments on
Equipment owned by it. The Company will also earn commissions for arranging
financing with third-party finance companies ("Brokerage Commissions").
Investment risks relating to the Company's ability to generate sufficient
revenues to meet its debt service commitments and other operating expenses are
described under "Risk Factors."
The Board of Directors of the Company has overall responsibility for its
administration and management. However, certain business operations of the
Company will be conducted by Giuffre Cranes pursuant to a contract with the
Company ("Management Agreement"). See "Management - Management Agreement." The
Company, Giuffre Cranes and Rexworks are Affiliates. For purposes of this
Prospectus, "Affiliate" means, when used with reference to a specific person or
entity (including without limitation the Company, Giuffre Cranes and Rexworks),
(i) any person or entity that directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with the
specific person or entity, (ii) any person who is an officer or director of, or
any person or entity that is a partner in, the specified person or entity, or of
which the specific person or entity is an officer, director or partner, (iii)
any person or entity that is the beneficial owner of, or controls, 10% or more
of any class of voting securities of, the specified person or entity.
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY WILL IN NO WAY ACQUIRE
THEREBY AN INTEREST (AS A SECURITYHOLDER OR OTHERWISE) IN GIUFFRE CRANES,
REXWORKS AND/OR ANY OTHER AFFILIATE OF THE COMPANY. OBJECTIVES AND POLICIES IN
GENERAL
The primary business objectives of the Company are to: (i) preserve and
protect Company capital by leasing Equipment only to Creditworthy Lessees (see
"Business - Credit of Prospective Lessees"); (ii) originate/acquire Leases of a
diversified portfolio of Equipment and to realize proceeds from the leasing of
such Equipment sufficient to meet its debt service and other obligations, and to
fund the growth and expansion of its business, while enhancing the
marketing/sales activities of Giuffre Cranes and Rexworks; and (iii) generate
Brokerage Commissions. The achievement by the Company of its objectives,
including the generation of any specific level of revenues necessary to meet its
debt service and other obligations, cannot be assured or guaranteed. See "Risk
Factors."
The Company has established certain investment policies with respect to the
selection of Lessees, the provisions and terms of the Leases, financing and
other matters in order to achieve the Company's business objectives. These
policies will be followed in connection with the acquisition of any Equipment
and/or Leases by the Company.
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CHANGES IN INVESTMENT OBJECTIVES AND POLICIES
The Company may alter its investment, borrowing and other policies in its
discretion, provided and to the extent that the Company deems such alteration to
be necessary or appropriate to enable the Company better to meet its business
objectives.
ACQUISITION POLICIES AND PROCEDURES
The Company will act as lessor under the Leases, which will be for initial
terms generally of 3 to 5 years. The Company will acquire its Equipment for an
amount equal to the Asset Base Price. It is expected that Affiliates of the
Company may, from time to time, purchase Equipment and/or originate or acquire
Leases in their own names and with their own funds, which Equipment and/or
related Leases will ultimately be purchased by the Company. Equipment will be
acquired by the Company from its Affiliates for an amount equal to its Asset
Base Price.
"Asset Base Price" means the amount paid by the Company to the seller of
Equipment for such property, which shall be (i) the manufacturer's invoice cost
to the Company if the Equipment is acquired directly from the manufacturer, (ii)
if the Equipment is acquired from a seller that is not the manufacturer and not
an Affiliate of the Company (including without limitation Giuffre Cranes or
Rexworks), the lower of (a) the price invoiced by such seller or (b) fair market
value as determined by the Company in its best judgment, or (iii) if acquired
from an Affiliate of the Company (including without limitation Giuffre Cranes or
Rexworks), the lower of (a) list price charged by such seller to unaffiliated
purchasers plus all reasonable, necessary and actual costs accrued in
maintaining the Equipment (including without limitation the cost of storage,
carrying, warehousing, interest cost, repair, marketing, financing, and taxes
from the date of acquisition thereof) less the amount of primary term lease
rentals accrued from the date of acquisition thereof and retained by such
Affiliate from leasing the Equipment or (b) fair market value as determined by
the Company in its best judgment, including in each case described in (i), (ii)
and (iii) the amounts of all liens and encumbrances on the Equipment and all
reasonable, necessary, and actual expenses of the seller incurred in connection
with acquiring and transferring the Equipment to the Company (including but not
limited to all financing expenses, sales taxes, delivery charges and attorneys'
fees paid to or on behalf of third parties). In no event, however, shall any of
the expense items described herein be included in the Asset Base Price for any
Equipment (i) which cannot be included consistent with generally accepted
accounting principles or (ii) which is not actually acquired by the Company.
The Company will not acquire delinquent Leases from any party. The Asset Base
Price of Equipment is intended by the Company to reflect the fair market value
of such assets, as determined in arm's length negotiations between
knowledgeable market participants. See "Certain Relationships and Related
Transactions."
THE EQUIPMENT
The Company will typically acquire and lease (i) truck-mounted cranes and
transportable storage containers (sold by Giuffre Cranes) and (ii) truck-mounted
concrete mixers (sold by Rexworks). Based upon current market prices available
to the Company, the average unit price of such Equipment is in the approximate
range of $75,000 to $150,000 for cranes, $2,000 to $5,000 for storage containers
and $85,000 to $125,000 for concrete mixers; the value of an average Lease is
expected to be approximately $100,000. The purchase of Equipment may be made
directly from the manufacturer (although Equipment may initially be acquired
from the manufacturer or other seller by an Affiliate of the Company with its
own funds and subsequently purchased by the Company) either pursuant to a
purchase agreement relating to significant quantities of such Equipment or on an
ad hoc basis to meet the needs of a particular Lessee. There can be no assurance
that acceptable purchase agreements will be negotiated with Equipment
manufacturers (including Giuffre Cranes and/or Rexworks), nor can there be any
assurance as to the ultimate composition of any Company's portfolio.
No more than 10% of the Company's portfolio (as determined by Asset Base
Price) will be leased to a single Lessee or group of affiliated Lessees,
although up to 20% of the Company's portfolio (as determined by Asset Base
Price) may be leased to a single Lessee or group of affiliated Lessees if the
(i) Company determines that the leasing opportunity is in the best interest of
the Company and (ii) summarized financial statements of each such Lessee or
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group of Lessees are included in the Prospectus. In no event will 20% or more of
the Company's portfolio be leased to a single Lessee or group of affiliated
Lessees. No Equipment will be purchased by the Company for which a Lease
Commitment has not been previously obtained. A "Lease Commitment" means (i) an
executed, binding Lease agreement under which either the Company or an Affiliate
of the Company is the Lessor, which Lease agreement is assignable by such
Affiliate of the Company or the Company, or (ii) such other agreement or
commitment to lease Equipment which constitutes an enforceable obligation
against the Lessee.
The Company may acquire and lease used Equipment. Used Equipment in this
context means Equipment which was not delivered to the initial Lessee directly
by the manufacturer or distributor of such Equipment. It is intended that no
more than 5% of the Company's portfolio (as determined by Asset Base Price) will
be used Equipment.
As of the date of this Prospectus, the Company has not entered into any
commitments for the origination or the acquisition of any Leases, or for the
acquisition, financing or leasing of any Equipment.
CREDIT OF PROSPECTIVE LESSEES
The Company will undertake an evaluation of each prospective Lessee's
business and credit history. The Company will lease Equipment only to
"Creditworthy Lessees," generally defined as Lessees whose senior debt
obligations have been assigned a credit rating of "B" or better by Standard &
Poor's Corporation ("Standard & Poor's"), or the corresponding rating assigned
by another nationally recognized credit rating agency, or an Equivalent Rating.
All Lessee credit ratings will be determined as of the date the related
Equipment is purchased by the Company. There can be no assurance that even if a
Lessee satisfies the foregoing credit standards and is determined by the Company
to be a Creditworthy Lessee that such Lessee will make rental payments to the
Company as anticipated. The Company will review any Standard & Poor's rating
available to Standard & Poor's subscribers for each prospective Lessee but does
not expect to obtain a special rating from Standard & Poor's or any other credit
rating agency solely for the purpose of a particular Lease transaction.
"Equivalent Rating" means a rating established by the Company for Lessees
whose credit is unrated, which the Company believes to be substantially
equivalent (taking into account any guarantees, letters of credit or other
credit enhancements) to a Standard & Poor's B rating. In establishing this
credit rating, financial information with respect to the prospective Lessee will
be obtained, primarily financial statements and other information generally
available to the stockholders of such Lessee or made available to the Company in
connection with the Lease negotiations. The Company will also consider the
prospective Lessee's credit history. In making these evaluations, the Company
will generally consider factors such as the total revenues, net income, total
assets and liabilities, total equity, debt to net worth ratios and current
assets to current liabilities ratios of a prospective Lessee, both in terms of
recent status as well as trends over recent years.
DESCRIPTION OF LEASES
The Equipment purchased by the Company will be leased to third parties
pursuant to sales-type Full Payout Leases or Operating Leases. "Full Payout
Leases" are Leases under which the aggregate rental payments during the
original term of the Lease are at least sufficient to recover the purchase
price of the leased Equipment (generally defined as the Equipment's original
cost plus any related acquisition fees and expenses). Upon the expiration of
the original term of a Full Payout Lease, the Equipment is typically sold to the
Lessee for a nominal amount; in the absence of a sale to the terminating
Lessee, the Equipment is re-leased or sold by the Company. Title to the
Equipment is retained by the Company prior to sale. "Operating Leases" are
Leases under which the aggregate rental payments during the original term of the
Lease are not sufficient to permit the Company to recover the purchase price of
the subject Equipment, which is not sold for a nominal amount to the terminating
Lessee. The initial terms of Full Payout Leases are generally longer than the
initial terms of Operating Leases. The percentages of the Company's portfolio
which will consist of Operating Leases and Full Payout Leases, respectively,
cannot be determined at this time. It is expected that all of the Leases will
be triple net leases which require the Lessees to pay all costs of maintenance,
insurance and taxes arising from the use and operation of the Equipment. The
Lessee is generally not responsible for the cost of refurbishments or
modifications to the Equipment.
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In general, the terms of the Company's Leases will depend upon a variety of
factors, including the desirability of each type of Lease as an investment, the
relative demand among Lessees for short-term and long-term leases, the type and
use of the related Equipment, the business of the Lessee and its credit rating,
the availability and cost of financing, regulatory considerations, the
accounting treatment of the lease sought by the Lessee or the Company and other
competitive factors. Typically, Leases are not expected to be written for no
more than a 60-month initial term, and no more than 10% of Leases are expected
to have more than a 60-month initial term. The Company will seek to originate or
acquire Leases of varying terms, having consideration for the anticipated needs
of the Company for liquidity (to, among other things, meet its debt service
obligations), general market conditions and such other factors as the Company
deems relevant. The Company will determine creditworthiness as described above
(see "Business Credit of Prospective Lessees"), generally without reference to
the term of the Lease, which will be selected utilizing the criteria described
in the preceding sentence.
BORROWING POLICIES
The Company intends to incur debt to finance the purchase of a substantial
portion of its Equipment and may borrow for any other Company purpose, including
to provide funds for repairs or to obtain working capital for operational
expenses. The Company may also incur debt to improve or modify the Equipment in
order for the Equipment to be more advantageously re-leased or sold if the
Company determines that such borrowing is in the best interests of the Company.
While there is no limit on leverage as to the amount of debt which may be
incurred in connection with the acquisition of any Equipment, the Company
presently intends to limit the amount of "Senior Debt" (ie., debt secured by a
lien against the financed Equipment which holds priority over the lien of the
Company) which may be incurred in connection with the acquisition of any
Equipment to 75% of its Asset Base Price; as of May 31, 1998, Senior Debt
averaged approximately 60% of Asset Base Price. As of May 31, 1998, all of the
Company's Senior Debt was outstanding on a "full recourse" basis (ie., secured
by all assets of the Company, including assets other than those purchased with
the proceeds of the loan). The Company may attempt in the future to obtain
Senior Debt on a "nonrecourse" basis (not be secured by assets of the Company
other than the Equipment purchased with the proceeds of the loan); however, no
assurance can be given that the Company will be able to obtain such nonrecourse
terms with respect to all or any portion of its borrowing.
The Company expects to finance the majority of its acquisitions of
Equipment using funds borrowed under one or more credit facilities provided by
institutional lenders, some of whom may also be lenders to Affiliates of the
Company. It is expected that these loans ("Senior Debt") will be term loans
having a term no longer than the term of the Lease of the Equipment purchased
with the loan proceeds and bearing interest at a fixed (rather than floating)
interest rate payable at the same frequency as the rental payments on the Lease
of such Equipment. Only Equipment to be leased on a variable rental payment
schedule will be permanently financed on a floating rate basis. The Company will
not finance Equipment leased on a fixed rental payment schedule with floating
interest rate debt, nor will it finance Equipment leased on floating rental
payment schedules with fixed interest rate debt. In general, interest is
expected to be payable currently, and interest and principal will be fully
amortized over the initial term of the related Lease (i.e., without balloon
payments at loan maturity). There can be no assurance that credit will be
available to the Company in the amount desired or on terms considered reasonable
by the Company.
In the event that an Affiliate of the Company (including without limitation
Giuffre Cranes and Rexworks) purchases Equipment on an interim basis in its own
name and with its own funds in order to facilitate the ultimate purchase by the
Company or loans its own funds or borrows on behalf of the Company for any other
Company purpose, such Affiliate will be entitled to receive interest on the
funds expended on behalf of the Company. Interest will be paid on such funds or
other loans from the Company or its Affiliates at a rate equal to the rate
charged by
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third party financing institutions on comparable loans for the same purpose (but
not in excess of 2% above the "prime rate" from time to time announced by
Firstar Bank, Milwaukee, Wisconsin). Interest on any such temporary purchases to
be paid by the Company to its Affiliates will begin to accrue on the date of the
purchase of the Equipment by such Affiliate. Interest on loans for other Company
purposes will begin to accrue on the date the loan is funded. Any primary term
lease rental payments received or accrued by an Affiliate prior to the sale of
the Equipment to the Company will either reduce the sales price of the Equipment
to the Company or will be assigned to the Company upon its purchase of the
Equipment. The Company's Affiliates will not extend financing to the Company
with a term in excess of twelve months. An Affiliate may receive points or other
financial charges or fees (excluding interest charges) in respect of any loans
to the Company. The Company will not enter into any borrowing arrangement with
an Affiliate which calls for a prepayment charge or penalty to be paid to such
Affiliate.
Although the exact terms and conditions of Company borrowings cannot be
predicted, it is anticipated that, in the event of default by the Lessee or the
Company with respect to any Lease securing a loan obligation, the due date of
such loan would be accelerated. In that event, the lender could foreclose upon
the Equipment securing the loan unless the Company repaid the entire unpaid
balance, which the Company may not be able to do if its working capital reserves
are inadequate unless it can promptly obtain possession of and re-lease the
related Equipment and refinance the accelerated obligation. Foreclosure by a
lender may reduce Company revenues and adversely impact the ability of the
Company to timely meet its obligations. See "Risk Factors." Any loans to the
Company from its Affiliates for organization and offering expenses (anticipated
not to exceed $25,000) will be non-interest bearing and will be repaid out of
proceeds of this offering.
FOREIGN LESSEES/ASSET LOCATION
The Company anticipates that no more than 5% of the Equipment financed by
it (as determined by Asset Base Price) will be located outside of the United
States or leased to foreign corporations. This limitation will not apply,
however, to Equipment subject to Leases where the Lessee has substantial assets
located in the United States which secure these Lease obligations. No Equipment
will be located in foreign countries or leased to foreign corporations or other
entities located in foreign countries where as of the commencement of the Lease
economic or political instability poses unacceptable risks to the safety of the
Equipment or the collectibility of the Lease rental payments. All Lease
payments, regardless of Equipment location, will be denominated and payable in
United States currency.
INSURANCE
The Company will purchase and maintain, or cause to be purchased and
maintained, such insurance policies (including any self-insurance programs
undertaken by a Lessee) as the Company deems reasonably necessary to protect the
interests of the Company (to the extent that such policies are not maintained by
the Lessee for the benefit of the Company). In general, it is anticipated that
the Company will maintain, or cause to be maintained, insurance coverage against
third-party bodily injury and property damage liability in connection with Asset
ownership and operation, as well as policies insuring the Company against loss
of or damage to its Equipment.
The Company has the right to obtain insurance (including liability and
other insurance) for the Company at the Company's expense in those circumstances
which it deems appropriate. The Company may, in certain instances, also carry
business interruption insurance covering loss of income arising from Asset loss
or damage. These policies will have such limits and deductible amounts as the
Company deems advisable, based on the costs involved and the operations of the
Company.
In addition, such policies will have certain exclusions from coverage for
risks which are uninsurable or are not insurable at rates deemed reasonable by
the Company. Such exclusions may include damage or loss by war, nuclear
accidents and other similar risks. The Company may purchase and pay for such
types of insurance, including extended coverage liability and casualty and
workmen's compensation, as would be customary for any person owning comparable
property and engaged in a similar business and may name one or more of its
Affiliates as additional insured parties thereunder, provided that such addition
does not add to the cost of premiums payable by the Company.
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ENFORCEABILITY OF LEASES UPON BANKRUPTCY
If a Lease were to be the subject of a proceeding under the Federal
Bankruptcy Code, the rights of the Company as Lessor would be affected. Under
the "automatic stay" provisions of Section 362 of the Federal Bankruptcy Code, a
lessor is prevented from repossessing leased equipment which is part of a
debtor's estate in the event of the debtor's bankruptcy. Instead, the lessor is
required to petition the bankruptcy court for an order modifying the stay "for
cause," usually a showing that there is not adequate protection for the
equipment. Risks to leased equipment generally increase the longer a financially
troubled debtor remains in control of such assets.
In general, under the Federal Bankruptcy Code, a lease is considered an
executory contract which the trustee in bankruptcy may affirm or reject. If the
trustee affirms a lease it must agree to perform the lease and cure the existing
material defaults. A rejection of the lease constitutes a breach of the lease,
and the lessor is entitled to a return of the leased equipment and has a claim
for damages against the estate in bankruptcy. If a Lease is rejected, the
Company will have to locate a new Lessee to re-lease the Equipment or sell the
Equipment. Decisions to affirm or reject a lease, the cure of defaults or the
return of the Equipment may involve substantial delays.
RESERVES
The Company will maintain working capital reserves ("Reserves") in an
amount which will fluctuate from time to time depending upon the amount which
Management, in its discretion, deems necessary for the proper operation of the
Company. Working capital reserves are intended to be used for various items
including repairs, replacements, accruals required by lenders and other
appropriate items and maintained by the Company to meet Company commitments. The
amount allocated to Reserves is expected to vary depending upon the nature of
the Equipment purchased by the Company and the length of the Lease terms. If
such Reserves and other available cash flow are insufficient to cover the
Company's operating expenses and liabilities, it will be necessary for the
Company to obtain additional funds from other sources, including revenues from
Company operations, the proceeds from the sale of Equipment, loans from banks,
or loans from Company Affiliates. There can be no assurance that Reserves will
be sufficient to fund any operating costs or to satisfy any contingencies, or
that other financing will be available to the Company on terms deemed acceptable
by Management, if at all. See "Risk Factors."
BROKERAGE SERVICES
During its fiscal year ended February 28, 1998, the Company began arranging
financing for customers of Giuffre Cranes with third-party finance companies. In
such transactions, the financed equipment is not owned by the Company; title is
at all times held by a third party which bears all of the financial risk of the
lease and is entitled to receive the revenues generated thereby. The Company
acts only as a broker (to negotiate the financing terms of a transaction between
parties unaffiliated with it) and receives a commission ("Brokerage Commission")
for providing such services. For fiscal 1998, the Company received Brokerage
Commissions totalling $93,170 for its services rendered in arranging 24
financing transactions, all on behalf of Giuffre Cranes customers.
PRELIMINARY INVESTMENTS
It is not possible to determine the date when the net proceeds of this
offering, less working capital reserves, will be fully invested in Equipment
and/or Leases. Prior to that time, the Company will invest such funds in
securities issued or guaranteed by the United States government or any agency or
instrumentality thereof, certificates of deposit of United States banks having a
net worth of at least $50,000,000, bankers' acceptances, bank repurchase
agreements covering securities issued or guaranteed by the United States
government or any agency or instrumentality thereof, money market funds having a
net worth of at least $100,000,000 or similar highly liquid investments, other
than tax-exempt securities or obligations; provided that no Company funds may be
invested in any money market fund, savings and loan, bank or other financial
institution affiliated with the Company or any of its Affiliates. The Company
shall not invest in junior chattel mortgages or deeds of trust (except that the
acquisition or granting of chattel mortgages in connection with the sale of
Equipment shall not be deemed to be investing in a junior chattel mortgage or
deed of trust).
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PRIOR ACTIVITIES
The following information relates to the existing leasing business of the
Company. While no assurance can be given as to the operating results which will
be achieved by the Company in the future, Management believes that the prior
experience of the Company is representative of the results which may be
achieved.
CUSTOMERS. As of May 31, 1998, the Company had 32 Leases outstanding with
32 customers, representing an aggregate present value of approximately
$1,781,963; no single customer accounted for more than 8% of the aggregate
present value of such Leases. While the Company may lease Equipment to one or
more of its current or past customers, no assurance can be given as to the
identity of any Lessee of Equipment owned by the Company, or as to the value of
leased Equipment and/or related Leases. The Company does not consider any of its
current Lessees to be material to its business. It is not anticipated that any
one customer or group of affiliated customers will be material to the business
of the Company. See "Business - The Equipment."
LEASE RATES. The weighted average financing rates paid by Lessees on Leases
originated or acquired by the Company during the two-year period ended February
28, 1998 were in a range from 11.84% to 17.12%. The financing rates paid by
Lessees are determined pursuant to and in accordance with Statement of Financial
Accounting Standards No. 13, "Accounting for Leases," as promulgated by the
Financial Accounting Standards Board. With respect to each Lease, such rate (the
"interest rate implicit in the lease") is the rate that, when applied to (i) the
minimum lease payments (excluding that portion of such payments which represents
executory costs to be paid by the lessor, together with any profit thereon) and
(ii) the unguaranteed residual value accruing to the benefit of the lessor,
causes the aggregate present value at the beginning of the lease term to equal
the fair market value of the leased property to the lessor at the beginning of
the lease, less any investment tax credit retained by the lessor and expected to
be realized by such lessor.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES. Since its inception in 1995,
delinquencies, repossessions and net losses with respect to Leases held by the
Company have been insignificant, affecting in each case less than 1% of its
portfolio. It is anticipated that the Company will achieve similar loss,
delinquency and repossession results in the future, due to the credit
standards to be imposed upon Lessees, the useful life of the Equipment (with
corresponding retention of value) and the experience of Company Management.
THERE CAN BE NO ASSURANCE THAT THE RATES CHARGED BY THE COMPANY IN THE
FUTURE WILL BE COMPARABLE TO RATES CHARGED IN THE PAST, OR THAT DELINQUENCY,
REPOSSESSION OR NET LOSSES WILL BE COMPARABLE TO PRIOR EXPERIENCE.
GEOGRAPHIC DISTRIBUTION OF LEASES. The table below sets forth as to
geographic location the aggregate present value of Leases covering Equipment
owned by the Company, as of May 31, 1998.
<TABLE>
<CAPTION>
Equipment Aggregate Equipment Aggregate
Location Present Value Location Present Value
- ----------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C>
Alabama................................ $ 49,489 New Mexico............................. $ 69,287
Arizona................................ $ 180,827 New York............................... $ 55,976
Colorado............................... $ 60,070 Ohio................................... $ 191,254
Illinois............................... $ 154,508 Tennessee.............................. $ 62,503
Indiana................................ $ 5,499 Utah................................... $ 125,923
Kansas................................. $ 61,784 Virginia............................... $ 71,894
Massachusetts.......................... $ 233,957 Wisconsin.............................. $ 259,076
Michigan............................... $ 199,916
</TABLE>
COMPETITION
Many of the Company's competitors have significantly greater financial,
technical, product development and marketing resources than the Company.
Competitors vary in size and in the scope and breadth of the products and
24
<PAGE> 26
services offered. Additional major finance and leasing companies may enter the
market in which the Company competes. There can be no assurance that future
competition will not have a material adverse effect on the Company's business,
financial condition and results of operations. Competitive pressures and other
factors, such as new financing/lease products and services by the Company or its
competitors, or the entry into new geographic markets, may result in significant
price erosion that could have a material adverse effect on the Company's
business, financial condition and results of operations. The competitive factors
affecting the market for the Company's products and services include corporate
and product reputation, Lease terms and conditions, marketing and promotion,
timely performance with respect to applications, credit decisions and funding,
quality of administrative services and customer relations. The Company believes
that it competes effectively with respect to these factors, but there can be no
assurance that it will continue to do so. The Company's present or future
competitors may be able to market products and services comparable or superior
to those offered by the Company or adapt more quickly than the Company to
increased demand or evolving customer requirements. In order to compete
successfully in the future, the Company must respond to customer requirements
and its competitors' products, services and innovations (including without
limitation financial capabilities, price structure and marketing). Accordingly,
there can be no assurance that the Company will be able to continue to compete
effectively in its market, that competition will not intensify or that future
competition will not have a material adverse effect on the Company's business,
results of operations or financial condition. See "Risk Factors."
EMPLOYEES AND FACILITIES
As of May 31, 1998, the Company had one full-time employee, Scott A. Blair,
its Chief Executive Officer; Mr. Blair is covered by an employment agreement.
See "Management - Employment Agreements." The Company will share office
facilities with Giuffre Cranes in Milwaukee. Giuffre Cranes will manage the
day-to-day business operations of the Company pursuant to the Management
Agreement. See "Business - Giuffre Cranes - Employees and Facilities,"
"Management - Management Agreement" and "Certain Relationships and Related
Transactions".
GIUFFRE CRANES
GENERAL
Giuffre Cranes is a Delaware corporation engaged in the sale, rental and
servicing of truck-mounted cranes and transportable storage containers, to
dealers and at retail, throughout the United States through two offices in
Wisconsin and Utah. Giuffre Cranes is a principal distributor of the Model Dino
1500 truck-mounted crane manufactured by Terex Cranes; in the future, Giuffre
Cranes may also distribute comparable equipment manufactured by other companies.
PRODUCTS AND SERVICES
1. Equipment Sales. Giuffre Cranes sells truck-mounted cranes to a variety
of dealers and retail customers. The cranes marketed generally have a lifting
capacity of up to 28 tons and a useful life of approximately 15 years. The
markup typically ranges from 10% to 20% on such Equipment (eg., under $9,000 per
crane on a $78,000 purchase price). In the past, the bulk of the truck-mounted
cranes sold by Giuffre Cranes have been manufactured by Terex Cranes. Terex
maintains sales and warehousing facilities in the United States. Giuffre Cranes
has been and remains a principal American distributor of Terex truck-mounted
cranes. In the future, Giuffre Cranes may distribute truck-mounted crane
equipment manufactured by companies other than Terex Cranes. The truck-mounted
cranes sold by Giuffre Cranes are typically acquired new, directly from the
manufacturer, at standard distributor prices. Used Equipment may be purchased at
"fair market value." During its fiscal year ended February 28, 1998, Giuffre
Cranes purchased and sold approximately 230 Terex Model Dino 1500 truck-mounted
cranes.
2. Service and Parts Sales. Service and maintenance is offered in
connection with the sale or rental of Equipment through the Giuffre Cranes
service department. The Giuffre Cranes service department provides both in-house
and on-the-road repair/maintenance services. Giuffre Cranes also sells
replacement and spare parts. Service is available from Giuffre Cranes in a
multi-state area through its facilities in Milwaukee and Utah.
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<PAGE> 27
CUSTOMERS
1. Equipment Dealers. Giuffre Cranes' dealer customers are typically firms
which purchase and own Equipment for rental and lease to retail customers and
for eventual sale in both the new and used equipment markets. Some of these
firms rent and lease equipment to retail customers on a state, regional or
national basis. Equipment that is rented or leased by a dealer may be held and
again rented or leased for terms varying from a few weeks to many years.
2. Retail Customers. Giuffre Cranes' retail customers principally include
roofing contractors, advertising firms that utilize billboard and similar
outdoor advertising, and utility companies. Electric utilities include
investor-owned utility companies, rural electric cooperatives and municipal
electric utilities. Telephone utility companies include members of the Bell
System as well as independent telephone companies. Other users range across a
broad cross-section of industries, including city, county, state and federal
government agencies, such as highway and transportation departments, electricity
departments, forestry departments, and military installations and facilities;
electric, telephone, building and lighting contractors; cable television
operators and contractors; oil refineries and petro-chemical installations; and
manufacturing plants of various kinds.
MARKETING AND DISTRIBUTION
Equipment and related parts and services are marketed by Giuffre Cranes
through a multi-faceted approach which is conducted both nationally and
regionally. Cranes are marketed to approximately 50 independently owned
Equipment dealers. Each dealer who markets Giuffre Cranes' products does so on a
non-exclusive basis. Dealers may also provide service support for Equipment and
become involved with its sale. Contact is maintained with dealers via periodic
telephone and facsimile fleet availability reports, and through personal visits.
The dealers are typically independent firms, and not under contract with Giuffre
Cranes.
Giuffre Cranes conducts direct mail and telemarketing programs to market to
the customers for rental and lease services, and has employ targeted updates and
promotions. Giuffre Cranes is obligated to provide marketing and other services
to the Company, including in respect of marketing to dealers to which Giuffre
Cranes also markets its products and services. See "Management - Management
Agreement."
COMPETITION
Many of Giuffre Cranes' competitors have significantly greater financial,
technical, product development and marketing resources than the Company.
Competitors vary in size and in the scope and breadth of the products and
services offered. Additional major Equipment vendors and leasing companies may
enter the market in which Giuffre Cranes competes. There can be no assurance
that future competition will not have a material adverse effect on Giuffre
Cranes' business, financial condition and results of operations. Competitive
pressures and other factors, such as the availability of new products and
services from Giuffre Cranes or its competitors, or the entry into new
geographic markets, may result in significant price erosion that could have a
material adverse effect on the business, financial condition and results of
operations of Giuffre Cranes. The competitive factors affecting the market for
the Company's products and services include corporate and product reputation,
rental/lease terms and conditions (significantly including cost), marketing and
promotion, timely performance with respect to delivery and service and customer
relations. Giuffre Cranes' present or future competitors may be able to market
products and services comparable or superior to those offered by it or adapt
more quickly than Giuffre Cranes to increased demand or evolving customer
requirements. See "Risk Factors."
Giuffre Cranes' principal competitors are other distributors of Terex
mobile cranes and of other makes and models of crane equipment manufactured by
others which can perform comparable services. These include such firms as
American State Equipment, with headquarters in Milwaukee; Hertz Equipment
Rentals, a division of Hertz automobile rental, with headquarters in Florida;
and Manitowoc Engineering, which is both a manufacturer and distributor of
truck-mounted cranes. Management believes that it currently enjoys a
substantially greater market share for truck-mounted cranes and other directly
comparable equipment, than any of its competitors.
26
<PAGE> 28
EMPLOYEES AND FACILITIES
As of February 28, 1998, Giuffre Cranes employed approximately 30 persons,
all of whom were full-time. None of Giuffre Cranes' employees are represented by
a union or covered by a collective bargaining agreement. Giuffre Cranes believes
that its relationships with its employees to be excellent.
Giuffre Cranes owns the 22,000 square foot building which houses its
corporate headquarters and service department. The Company will utilize so much
of such facility as it may from time to time require under the terms of the
Management Agreement. See "Management - Management Agreement".
REXWORKS
INTRODUCTION
Rexworks is a Delaware corporation which designs, manufacturers and sells
truck-mounted concrete mixers, Truck mixers are concrete mixers mounted on
chassis of various manufacturers. Rexworks' products are used to build and
repair roads, bridges, airports, sewers, pipelines and other infrastructure.
Rexworks was acquired by Frank P. Giuffre and Dominic J. Giuffre in 1997.
Rexworks operates in the highly competitive heavy equipment industry in which
cost containment, product quality, and customer service are important factors of
long term success. See "Business - Rexworks - Competition."
PRODUCTS
REX" truck mixers are rotating-drum assemblies which are mounted on trucks
supplied by others. They are used to mix concrete and agitate it after it is
mixed, while conveying it to the pour-site. Rexworks manufactures rear discharge
truck mixers to meet varying highway weight laws and modes of operation in the
ready-mix concrete industry. The two main types of truck mixers offered are the
REX Premier, in 8 to 12 cubic yard sizes, and the REX Premier Booster in 10 to
12 cubic yard sizes. The Premier Booster includes a "trailing" axle at the rear
of the truck to distribute the weight over a longer wheelbase. Rexworks also
sells the REX Mark III paving mixer line for applications that demand
particularly fast charging and discharge cycles. The market for truck mounted
concrete mixers consists principally of ready mix concrete producers and paving
contractors. Based on Rexworks's internal market research, Rexworks believes it
is the second largest domestic manufacturer of truck-mounted rear discharge
mixers by dollar volume of sales.
During 1996, Rexworks formed a joint venture with Crane Carrier Company to
design, manufacture, and sell front discharge cement mixers. The first units
were offered for sale in early 1997.
Rexworks purchases a number of components, including axles, bearings and
transmissions, from outside suppliers. Although identical components are not
always available from competing suppliers, Rexworks believes that comparable
components are available from alternative suppliers, and as a result Rexworks is
not dependent upon any single supplier for any of its purchased components.
MARKETING AND DISTRIBUTION
Rexworks' products are sold principally through a network of domestic and
foreign distributors. Distributors generally represent several different
manufacturers of equipment, with minimal competition among product lines.
Rexworks sells its products to distributors, who in turn rent or sell the
equipment to end users. Rexworks supports its distributors by maintaining
regional sales offices in California, Colorado, Georgia, Michigan and Texas as
well as its corporate headquarters and manufacturing facility in Milwaukee,
Wisconsin.
Rexworks believes good relationships with its distributors are important to
its success. Several distributors have been selling REX products for more than
60 years.
27
<PAGE> 29
PATENTS AND TRADEMARKS
Rexworks holds numerous United States patents and has applications for
other patents pending. Rexworks considers its patents to be advantageous to its
business but it is not dependent on any single patent or group of patents. All
of Rexworks's equipment is sold under the trademark REX" or REXWORKS."
COMPETITION
The markets for Rexworks's products are highly competitive. In general,
Rexworks competes on the basis of quality, technological expertise, performance
features, product life, availability of parts and service, and responsiveness to
customer's special needs, rather than competing solely on the basis of low
price. Accordingly, Rexworks's products are not the lowest priced equipment
available; instead, they maintain a reputation for high quality, durability and
performance.
EMPLOYEES AND FACILITIES
As of February 28, 1998, Rexworks had 157 employees, all of whom were
full-time and employed or based at its Milwaukee facility. Employees at the
Milwaukee facility are represented by the United Steelworkers of America.
Management believes labor relations are good.
Rexworks' manufacturing facility, located in Milwaukee, Wisconsin (383,000
square feet), is owned by Rex Properties, LLC, a company owned by Frank P.
Giuffre and Dominic J. Giuffre. See "Principal Stockholders." In general, the
buildings are well maintained and well adapted for the purposes for which they
are utilized. Rexworks manufactures all of its products and performs subcontract
work at this facility.
CERTAIN LEGAL ASPECTS OF COMPANY OPERATIONS
SECURITY INTEREST IN EQUIPMENT
An essential component of the Company's leasing program is the grant of a
first security interest in Equipment acquired and leased by the Company, and/or
Leases acquired by the Company, to certain lenders who provide financing in
connection with the acquisition of such Equipment and Leases ("Senior Debt").
The Company will attempt to secure Senior Debt which is "nonrecourse" to the
Company or its Affiliates (ie., not secured by assets owned by the Company other
than the Equipment purchased with the proceeds of the loan which comprises such
Senior Debt). The security interest of Company in the Equipment subject to a
Lease is subordinate and junior in right only to the lien of holders of Senior
Debt; Management anticipates that outstanding Senior Debt will not exceed 70% of
the original acquisition value of such property. Under no circumstances will
holders of the Company's Common Stock have any primary or secondary liability
for Senior Debt. See "Description of Securities."
Under the laws of most states, liens for repairs performed on the Equipment
and liens for unpaid taxes take priority over even a perfected security interest
in such goods. The Company (with the assistance of local legal counsel to the
extent it deems necessary) will use its best efforts to ensure that each
security interest in the Equipment is perfected as required by law (and holders
of Senior Debt) and prior to all other present liens upon and security interests
in such Equipment. However, liens for repairs or taxes could arise at any time
during the term of a Lease. No notice will be given to the Company in the event
such a lien arises.
REPOSSESSION
In the event of default by Equipment Lessees, the Company, as Lessor, has
certain remedies defined in the Lease, which generally include all the remedies
of a secured party under the Uniform Commercial Code ("UCC"), except where
specifically limited by other state laws. Among the available remedies, the
secured party has the right to perform self-help repossession unless such act
would constitute a breach of the peace. Self-help is the method
28
<PAGE> 30
that the Company would anticipate utilizing in most cases, simply by retaking
possession of the leased Equipment. In the event of default by the Lessee, some
jurisdictions require that the Lessee be notified of the default and be given a
time period within which the Lessee may cure the default prior to repossession.
Generally, the right of reinstatement may be exercised on a limited number of
occasions in any one-year period. In cases where the Lessee objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained by the Lessor, and the Equipment must be
repossessed in accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the Company, as the secured party to
provide the Lessee with reasonable notice of the date, time and place of any
public sale and/or the date after which any private sale of the Equipment may be
held. The Lessee has the right to redeem the Equipment prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus, in some jurisdictions, reasonable
attorneys' fees, or, in some states, by payment of delinquent installments or
the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the Equipment generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not fully cover the indebtedness, a
deficiency judgment can be sought in those states that do not prohibit or limit
such judgments. However, the deficiency judgment would be a personal judgment
against the Lessee for the shortfall and a defaulting Lessee can be expected to
have very little capital or sources of income available following repossession.
Therefore, in many cases, it may not be useful to seek a deficiency judgment or,
if one is obtained, it may be settled at a significant discount.
Occasionally, after resale of the Equipment and payment of all expenses and
all indebtedness, there is a surplus of funds. In that case, the UCC requires
the lender to remit the surplus to any holder of a lien with respect to the
Equipment or if no such lienholder exists or there are remaining funds, the UCC
requires the lender to remit the surplus to the former owner of the Equipment.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving a Lessee from some or all of the
legal consequences of a default. In several cases, consumers have asserted that
the self-help remedies of secured parties under the UCC and related laws violate
the due process protections provided under the 14th Amendment to the
Constitution of the United States. Courts have generally upheld the notice
provisions of the UCC and related laws as reasonable or have found that the
repossession and resale by the creditor do not involve sufficient state action
to afford constitutional protection to consumers.
LICENSING AND OTHER LEGAL REQUIREMENTS
The Company believes that it currently holds all licenses necessary to
conduct its operations in any domestic or foreign jurisdiction and that it is
otherwise in compliance with all applicable statutes and regulations which
govern the conduct of its business as described herein.
OTHER
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lessor to
realize upon Equipment or enforce a deficiency judgment. For example, in a
Chapter 11, 12, or 13 proceeding under the Federal bankruptcy law, a court may
prevent a lender from repossessing equipment, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
equipment at the time of bankruptcy (as determined by the court), leaving the
part providing financing as a general unsecured creditor for the remainder of
the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
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<PAGE> 31
MANAGEMENT
DIRECTORS AND OFFICERS
The current directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
Frank P. Giuffre 53 Chairman of the Board, Vice President, Treasurer
and Director
Scott A. Blair 35 Chief Executive Officer and President
Dominic J. Giuffre 49 Vice President, Secretary and Director
Jeffrey M. Brewster 39 Director
Thomas H. Murphy 63 Director
</TABLE>
Frank P. Giuffre has been a director (Chairman of the Board) and Treasurer
of the Company since its inception in August, 1995, and a Vice President since
July, 1998. From the inception of the Company until July, 1998, Mr. Giuffre also
served as President (Chief Executive Officer). He has been President, a director
and a principal shareholder of Giuffre Bros. Cranes, Inc. from its formation in
1982 to the present.
Scott A. Blair has been Chief Executive Officer and President of the
Company since July, 1998. From the inception of the Company in August, 1995
until July, 1998, he was Executive Vice President. From 1993 to the present, he
has served as National Accounts Manager of Giuffre Bros. Cranes, Inc.
Dominic J. Giuffre has been a director, Vice president and Secretary of the
Company since its inception in August, 1995. He has been Vice President, a
director and a principal shareholder of Giuffre Bros. Cranes, Inc. from its
formation in 1982 to the present.
Jeffrey M. Brewster has been a director of the Company since October,
1997. Mr. Brewster is also a registered securities representative with Abacus
Investments, Inc., a member firm of the NASD; he has acted in such capacity
since 1994. From 1997, to the present, Mr. Brewster has been an officer of Lake
Geneva Financial Services Corp., an insurance brokerage firm. From 1990 to 1997,
Mr. Brewster was a partner of A.N. Ansay & Associates, an independent insurance
agency.
Thomas H. Murphy has been a director of the Company since October, 1997.
Since 1978, he has been an independent investment advisor. Mr. Murphy is a
registered securities representative with Liberty Investment Counsel, Ltd., a
member firm of the NASD; he has acted in such capacity since 1986.
Frank P. Giuffre and Dominic J. Giuffre are brothers.
All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Officers are elected
annually by the Board of Directors of the Company and serve at the discretion of
the Board.
See "Principal Stockholders."
30
<PAGE> 32
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the
compensation paid by the Company to the Chief Executive Officer ("Named
Executive Officer") of the Company for services rendered to the Company in all
capacities during the fiscal years ended February 28, 1998 and 1997. No
executive officer or key employee of the Company at February 28, 1998 received
compensation in excess of $100,000 for fiscal 1998, including compensation as
described in Note (1), below.
<TABLE>
<CAPTION>
Annual Compensation (1)
------------------------------- All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)
- ----------------------------------------------------------- ----- --------- -------- ---------------
<S> <C> <C> <C> <C>
Frank P. Giuffre (2)....................................... 1998 _ _ _
President (Chief Executive Officer) 1997 _ _ _
</TABLE>
(1) Indicates the approximate amount of compensation paid by Giuffre Cranes for
services rendered to the Company for the fiscal year indicated. For fiscal
1997 and 1998, all such services were rendered by employees of Giuffre
Cranes other than Frank P. Giuffre; no such employee received compensation
in excess of $100,000 for services attributable to the Company. See
Management - Management Agreement.
(2) As of July 1, 1998, Scott A. Blair succeeded Frank P. Giuffre as Chief
Executive Officer and President of the Company. See "Management - Directors
and Officers."
OPTION GRANTS IN THE LAST FISCAL YEAR. No options were granted to the Named
Executive Officer, or to any other person, for the fiscal year ended February
28, 1998.
OPTION EXERCISES IN LAST FISCAL YEAR (1998) AND AGGREGATE OPTION VALUES AT
FEBRUARY 28, 1998. The following table sets forth information concerning the
exercise of options by the Named Executive Officer during fiscal 1998, and the
values at February 28, 1998 of unexercised options held by such Named Executive
Officer.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
February 28, 1998 February 28, 1998
Shares Acquired ------------------------------- ----------------------------
Name on Exercise Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------- --------------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Frank P. Giuffre............... _ _ _ _ _
</TABLE>
DIRECTORS' COMPENSATION
Directors of the Company are not compensated for acting as directors, nor
are they reimbursed for expenses related to serving in such capacity.
EMPLOYMENT AGREEMENTS
Scott A. Blair has entered into an agreement with the Company, for an
initial term of five years, providing that he will be appointed and serve as
Chief Executive Officer and President of the Company, that he will manage the
business of the Company in accordance with plans approved by the Company's Board
of Directors and that he will have primary responsibility for the negotiation
and structuring of financing arrangements with customers of the Company. The
Agreement provides that the Company will pay to Mr. Blair compensation equal to
20% of its net profits (before deduction of any amounts paid as compensation to
other officers or directors of the Company); such amount is payable quarterly,
commencing as of July 1, 1998. The Agreement further provides that the Company
will grant to Mr. Blair options to purchase shares of Common Stock, at the rate
of 10,000 shares for each full $500,000 of Leases originated or acquired by the
Company, up to $2,000,000; such options expire five years from issuance and are
exercisable at $1.00 per share for the first increment of 10,000 options, $4.00
per share for the second 10,000 options, $5.00 per share for the third 10,000
options and $5.00 per share for the fourth increment
31
<PAGE> 33
of 10,000 options. Options granted in excess of the foregoing, if any, will be
in amounts and with exercise prices and other terms determined by the Board of
Directors of the Company in its sole discretion. Mr. Blair is entitled to
receive, at no cost, employee benefits which are the same as, or substantially
equivalent to, those provided to the other officers of the Company or the
officers of Giuffre Cranes. The Agreement further provides that the Company will
reimburse Mr. Blair for all reasonable _out-of-pocket" business expenses
incurred in connection with the performance of the duties assigned to him by the
Company.
The Agreement provides that, for one year after the termination thereof,
Mr. Blair will not, within the contiguous United States, either directly or
indirectly, own, have a proprietary interest of any kind in, be employed by, or
serve as a consultant to or in any other capacity for any firm which is in the
primary business of providing financing (lease or other) in connection with
equipment of the types generally financed/leased by the Company. Mr. Blair also
agrees to maintain the confidentiality of trade secrets and other information
concerning the Company.
MANAGEMENT AGREEMENT
Pursuant to the Management Agreement, Giuffre Cranes will for a fee
("Management Fee") perform all normal business functions, and otherwise operate
and manage the day-to-day business and affairs of the Company, under the general
supervision of the Company's directors and officers. The Management Fee is
$12,000 per annum, payable quarterly in advance. Giuffre Cranes will generally
perform the functions of a third party originator and administrator/servicer of
Leases, including without limitation marketing, originating and acquiring
Leases, collecting and posting payments, responding to inquiries from Lessees,
investigating delinquencies, reporting tax information to Lessees, arranging the
disposition of defaults and policing the leased Equipment.
In addition to the Management Fee, Giuffre Cranes is entitled to
reimbursement from the Company for (i) the Company's costs of operations (e.g.,
documentation, securities filings and other direct costs of selecting,
negotiating, monitoring, and liquidating Equipment and/or Leases (including
consultants, attorneys, accountants, appraisers, due diligence expenses, travel,
and investment banking fees and commissions or preparation of status reports));
(ii) Company accounting (e.g., maintenance of Company books and records,
bookkeeping fees, preparation of regulatory and tax reports, and costs of
computer equipment or services used by the Company); (iii) investor
communications (e.g., design, production, and mailing of all reports and
communications to investors in the Company, including those required by
regulatory agencies); (iv) legal and tax services; and (v) any other related
operational or administrative expenses necessary for the operation of the
Company and its business.
The Management Fee will compensate Giuffre Cranes (and Giuffre Cranes will
not be otherwise reimbursed by the Company) for customary and routine general
overhead expenses incurred in performing its obligations to the Company,
including without limitation (i) rent or depreciation, utilities, property
taxes, and the cost of capital equipment, unless acquired primarily for the
benefit of the Company; (ii) expenses of a general and administrative nature
that are customarily incurred by Giuffre Cranes for its own account and are not
attributable to the Company; and (iii) salaries and fringe benefits paid by
Giuffre Cranes to any of its directors, officers or other employees (see
"Management - Executive Compensation"), and holders of 5% or more of its common
stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Bylaws provide for the elimination, to the fullest extent
permissible under Wisconsin law, of the liability of its directors to the
Company for monetary damages. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief. The Company's
Bylaws provide that the Company shall indemnify its directors and officers
against certain liabilities that may arise by reason of their status or service
as directors or officers (other than liabilities arising from certain specified
misconduct), and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, including in
circumstances in which indemnification is otherwise discretionary under
Wisconsin law. As of the date of this Prospectus, there is no pending litigation
or proceeding in which indemnification would be required or permitted. The
Company is not aware of any threatened litigation or proceeding which may result
in a claim for such indemnification. See "Indemnification for Securities Act
Liabilities."
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<PAGE> 34
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1997, Frank P. Giuffre and Dominic J. Giuffre, both of whom
are directors and officers of the Company, each contributed an additional
$125,000 in cash to the capital of the Company. At the time of such
contribution, Frank P. Giuffre and Dominic J. Giuffre beneficially owned all of
the outstanding shares of Common Stock of the Company. See "Capitalization,"
"Management" and "Principal Stockholders."
During fiscal 1997, the Company purchased cranes from Giuffre Cranes and
its subsidiary, Giuffre West, Inc., for $675,586, effected crane sales totaling
$506,203 through Giuffre Cranes and earned rental income of $213,803 on short
term rentals also arranged by Giuffre Cranes. During fiscal 1998, all crane
sales and rental activities were discontinued by the Company upon sale of its
remaining crane inventory back to Giuffre Cranes on March 1, 1997, as described
in the following paragraph.
During fiscal 1998, the Company sold all of its remaining crane equipment
back to Giuffre Cranes for $773,000, the net book value of such equipment.
Accordingly, no gain or loss was realized on this transaction for book purposes.
Since the Company decided to discontinue direct sales and rentals of crane
equipment, and the revenue from the sale thereof completely offset its cost,
this transaction is not reflected in the revenue or expenses of the Company for
the fiscal year ended February 28, 1998. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
During fiscal 1998, the Company leased an automobile to Giuffre Cranes. The
lease is for an initial term of 60 months and has an implicit interest rate of
13% per annum. The Company recognized $4,346 in income on this lease during
fiscal 1998. The Company's net investment in the lease was $39,751 at May 31,
1998.
During fiscal 1998 and the first quarter of fiscal 1999, GIuffre Cranes
incurred administrative costs of $3,000 per quarter, or $12,000 annually, on
behalf of the Company under the Management Agreement. However, Giuffre Cranes
did not request or receive payment for these services for fiscal 1998 or for the
first quarter of fiscal 1999. Accordingly the Company reflected these costs as
charges to operations of $12,000 and $3,000 for its fiscal year ended February
28, 1998 and its fiscal quarter ended May 31, 1998, respectively, and as
contributions to paid-in capital. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Management - Management
Agreement" and Note 4 to the Financial Statements of the Company appearing
elsewhere in this Prospectus.
During fiscal 1998 and the first quarter of fiscal 1999, the Company
recognized commission income of $93,170 and $40,644, respectively, for arranging
financing with third-party finance companies on cranes sold by Giuffre Cranes.
The Company incurred commission expense in connection with such transactions of
$52,054 and $16,425 for fiscal 1998 and the first quarter of fiscal 1999,
respectively. See "Business Brokerage Services" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
During fiscal 1998, pursuant to the unanimous authorization of the holders
of all then outstanding shares of Common Stock, effective as of June 22, 1998,
the Company (i) amended its Articles of Incorporation to increase the number of
authorized shares of Common Stock to 20,000,000 and change the par value of such
Common Stock from $0.01 to $0.0001 per share and (ii) split its outstanding
Common Stock at the rate of 400 shares for every one share outstanding. As of
the June 22, 1998 effective date of the amendment of the Company's Articles of
Incorporation and split of its outstanding Common Stock, all of such outstanding
Common Stock was beneficially owned by Frank P. Giuffre and Dominic J. Giuffre,
both of whom are directors and officers of the Company. See "Management,"
"Principal Stockholders" and "Description of Securities."
The aggregate purchase price of Equipment acquired by the Company from
Giuffre Cranes (and leased in 36 transactions) was $491,115 and $1,541,861 for
fiscal 1997 and 1998, respectively, and $487,290 for the quarter ended May 31,
1998. No Equipment was purchased by the Company from Rexworks or any other
Affiliate during the foregoing periods.
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<PAGE> 35
PRINCIPAL STOCKHOLDERS
The following table sets forth as of July 15, 1998, and as adjusted to
reflect the sale of the 400,000 shares of Common Stock offered hereby, certain
information with respect to the beneficial ownership of Common Stock by (i) each
person known by the Company to beneficially own more than 5% of the Common
Stock, (ii) each director of the Company, (iii) the Company's sole Named
Executive Officer and (iv) all directors and executive officers of the Company
as a group. The Company believes that the beneficial owners of the Common Stock
listed below have sole voting and dispositive power with respect to such shares,
except as otherwise indicated.
<TABLE>
<CAPTION>
Shares beneficially Shares beneficially
owned prior to offering(1) owned after offering(1)
-------------------------- -----------------------
Stockholder Number Percent Number Percent
- -------------------------- ------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Frank P. Giuffre...................................... 200,000 50.0% 200,000 25.0%
6635 S. 13th St.
Milwaukee, WI 53221
Scott A. Blair ....................................... " " " "
6635 S. 13th St.
Milwaukee, WI 53221
Dominic J. Giuffre ................................... 200,000 50.0% 200,000 25.0%
6635 S. 13th St.
Milwaukee, WI 53221
Jeffrey M. Brewster................................... " " " "
910 N. Elm Grove Rd.
Elm Grove, WI 53122
Thomas H. Murphy...................................... " " " "
910 N. Elm Grove Rd.
Elm Grove, WI 53122
All executive officers and directors
as a group (5 persons)............................. 400,000 100.0% 400,000 50.0%
</TABLE>
- --------------
(1) Number of shares indicated has been adjusted to reflect a 400 for 1 split
of outstanding Common Stock of the Company, effective as of June 22, 1998.
See "Certain Relationships and Related Transactions."
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Bylaws of the Company and certain provisions of the Wisconsin Business
Corporations Law provide that the Company shall indemnify its directors and
officers against certain liabilities that may arise by reason of their status or
service as directors or officers (other than liabilities arising from certain
specified misconduct), and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, including in
circumstances in which indemnification is otherwise discretionary under
Wisconsin law. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended ("Securities Act"), may be permitted pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
in the successful defense of any action, suit or proceeding) is asserted by such
director or officer in connection with the securities being registered, the
Company 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 of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue. See "Description of Securities."
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<PAGE> 36
DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $0.0001 per share. As of the date of this Prospectus,
there were 400,000 shares of Common Stock outstanding, beneficially owned by two
persons.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share of Common Stock
beneficially owned on each matter submitted to a vote at a meeting of
shareholders, subject to Section 180.1150 of the Wisconsin Business Corporations
Law ("Wisconsin Corporations Act"). The Common Stock does not have cumulative
voting rights, which means that the holders of a majority of voting shares
voting for the election of Directors can elect all of the members of the Board
of Directors.
The Common Stock has no preemptive rights and no redemption or conversion
privileges.
The holders of Common Stock are entitled to receive dividends out of assets
legally available at such times and in such amounts as the Board of Directors
may, from time to time, determine, and upon liquidation and dissolution are
entitled to receive all assets available for distribution to the shareholders.
Under the Wisconsin Corporations Act, a majority vote of shares represented at a
meeting at which a quorum is present is sufficient for all actions that require
the vote of shareholders; however, certain actions require enhanced approval by
either a supermajority of two-thirds of all outstanding shares entitled to vote
and certain actions require a majority of all outstanding shares entitled to
vote. See "Description of Securities - Certain Statutory and Other Provisions."
All of the outstanding shares of the Common Stock are, and the shares to be sold
by the Company as part of the offering when legally issued and paid for will be,
fully paid and nonassessable, except for certain statutory liabilities which may
be imposed by Section 180.0622(2)(b) of the Wisconsin Corporations Act for
unpaid employee wages.
LIMITATION OF DIRECTOR LIABILITY
Section 180.0828 of the Wisconsin Corporations Act provides that officers
and directors of domestic corporations may be personally liable only for
intentional breaches of fiduciary duties, criminal acts, transactions from which
the director derived an improper personal profit and wilful misconduct. These
provisions may have the effect of reducing the likelihood of derivative
litigation against directors and may discourage or deter shareholders or
Management from bringing a lawsuit against directors for breach of their duty of
care, even though such an action, if successful, might otherwise have benefitted
the Company and its shareholders.
INDEMNIFICATION
Under the Wisconsin Corporations Act, directors and officers of the Company
are entitled to mandatory indemnification from the Company against certain
liabilities and expenses (a) to the extent such officers or directors are
successful in the defense of a proceeding and (b) in proceedings in which the
director or officer is not successful in the defense thereof, unless (in the
latter case only) it is determined that the director or officer breached or
failed to perform his or her duties to the Company and such breach or failure
constituted: (i) a wilful failure to deal fairly with the Company or its
shareholders in connection with a matter in which the director or officer had a
material conflict of interest; (ii) a violation of the criminal law unless the
director or officer had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was unlawful;
(iii) a transaction from which the director or officer derived an improper
personal profit; or (iv) wilful misconduct. The Wisconsin Corporations Act
allows a corporation to limit its obligation to indemnify officers and directors
by providing so in its articles of incorporation.
The Company's By-Laws provide for indemnification of directors and officers
to the fullest extent permitted by Wisconsin law.
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<PAGE> 37
CERTAIN STATUTORY AND OTHER PROVISIONS
The provisions of the Company's By-Laws and the Wisconsin Corporations Act
described in this section may delay or make more difficult acquisitions or
changes of control of the Company not approved by the Company's Board of
Directors. Such provisions have been implemented to enable the Company,
particularly (but not exclusively) in the initial years of its existence as a
publicly-traded company, to develop its business in a manner which will foster
its long-term growth without disruption caused by the threat of a takeover not
deemed by its Board of Directors to be in the best interests of the Company and
its shareholders. Such provisions could have the effect of discouraging third
parties from making proposals involving an acquisition or change of control of
the Company, although such proposals, if made, might be considered desirable by
a majority of the Company's shareholders. Such provisions may also have the
effect of making it more difficult for third parties to cause the replacement of
the current Management of the Company without the concurrence of the Board of
Directors.
Number of Directors; Removal; Vacancies. The By-Laws currently provide that
the number of Directors shall be five. The authorized number of Directors may be
changed by amendment of the By-Laws. The ByLaws also provide that the Company's
Board of Directors shall have the exclusive right to fill vacancies on the Board
of Directors, including vacancies created by expansion of the Board or removal
of a Director, and that any Director elected to fill a vacancy shall serve until
the next annual meeting of shareholders. The By-Laws further provide that
Directors may be removed by the shareholders only by the affirmative vote of the
holders of at least a majority of the votes then entitled to be cast in an
election of Directors. This provision, in conjunction with the provisions of the
By-Laws authorizing the Board to fill vacant Directorships, could prevent
shareholders from removing incumbent Directors and filling the resulting
vacancies with their own nominees.
Amendments to the Articles of Incorporation. The Wisconsin Corporations Act
provides authority to the Company to amend its Articles of Incorporation at any
time to add or change a provision that is required or permitted to be included
in the Articles or to delete a provision that is not required to be included in
such Articles. The Company's Board of Directors may propose one or more
amendments to the Company's Articles of Incorporation for submission to
shareholders and may condition its submission of the proposed amendment on any
basis if the Board of Directors notifies each shareholder, whether or not
entitled to vote, of the shareholders' meeting at which the proposed amendment
will be voted upon.
Constituency or Stakeholder Provision. Under Section 180.0827 of the
Wisconsin Corporations Act ("Stakeholder Law"), in discharging his or her duties
to the Company and in determining what he or she believes to be in the best
interests of the Company, a director or officer may, in addition to considering
the effects of any action on shareholders, consider the effects of the action on
employees, suppliers, customers, the communities in which the Company operates
and any other factors that the director or officer considers pertinent.
Wisconsin Antitakeover Statutes. Sections 180.1140 to 180.1144 of the
Wisconsin Corporations Act ("Business Combination Law") regulate the broad range
of "business combinations" between a "resident domestic corporation" (such as
the Company) and an "interested stockholder." The Business Combination Law
defines a "business combination" to include a merger or share exchange, or a
sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets
equal to at least 5% of the market value of the stock or assets of the
corporation or 10% of its earning power, or the issuance of stock or rights to
purchase stock with a market value equal to at least 5% of the outstanding
stock, the adoption of a plan of liquidation or dissolution and certain other
transactions involving an "interested stockholder," defined as a person who
beneficially owns 10% of the voting power of the outstanding voting stock of the
corporation or who is an affiliate or associate of the corporation and
beneficially owned 10% of the voting power of the then outstanding voting stock
within the last three years. Section 180.1141 of the Business Combination Law
prohibits a corporation from engaging in a business combination (other than a
business combination of a type specifically excluded from the coverage of the
statute) with an interested stockholder for a period of three years following
the date such person becomes an interested stockholder, unless the board of
directors approved the business combination or the acquisition of the stock that
resulted in a person becoming an interested stockholder before such acquisition.
Accordingly, the Business Combination Law's prohibition on business combinations
cannot be avoided during the three-year period by subsequent action of the board
of directors or
36
<PAGE> 38
shareholders. Business combinations after the three-year period following the
stock acquisition date are permitted only if (i) the board of directors approved
the acquisition of the stock by the interested stockholder prior to the
acquisition date, (ii) the business combination is approved by a majority of the
outstanding voting stock not beneficially owned by the interested stockholder,
or (iii) the consideration to be received by shareholders meets certain
requirements of the statute with respect to form and amount.
In addition, the Wisconsin Corporations Act provides in Sections 180.1130
to 180.1133, that business combinations involving a "significant shareholder"
(as defined below) and a "resident domestic corporation" (such as the Company)
are subject to a two-thirds supermajority vote of shareholders ("Fair Price
Provision"), in addition to any approval otherwise required. A "significant
shareholder," with respect to a resident domestic corporation, is defined as a
person who beneficially owns, directly or indirectly, 10% or more of the voting
stock of the corporation, or an affiliate of the corporation which beneficially
owned, directly or indirectly, 10% or more of the voting stock of the
corporation within the last two years. It is anticipated that after completion
of the offering, the Company will be an "issuing public corporation."
Under the Wisconsin Corporations Act, the business combinations described
above must be approved by 80% of the voting power of the corporation's stock and
at least two-thirds of the voting power of the corporation's stock not
beneficially held by the significant shareholder who is party to the relevant
transaction or any of its affiliates or associates, in each case voting together
as a single group, unless the following fair price standards have been met: (i)
the aggregate value of the per share consideration is equal to the higher of (a)
the highest price paid for any common stock of the corporation by the
significant shareholder in the transaction in which it became a significant
shareholder of within two years before the date of the business combination, (b)
the market value of the corporation's shares on the date of commencement of any
tender offer by the significant shareholder, the date on which the person became
a significant shareholder or the date of the first public announcement of the
proposed business combination, whichever is highest, or (c) the highest
liquidation or dissolution distribution to which holders of the shares would be
entitled, and (ii) either cash, or the form of consideration used by the
significant shareholder to acquire the largest number of shares, is offered.
Section 180.1134 of the Wisconsin Corporations Act ("Defensive Action
Restrictions") provides that, in addition to the vote otherwise required by law
or the articles of incorporation of an issuing public corporation, the approval
of the holders of a majority of the shares entitled to vote is required before
such corporation can take certain action while a takeover offer is being made or
after a takeover offer has been publicly announced and before it is concluded.
Under the Defensive Action Restrictions, shareholder approval is required for
the corporation to (i) acquire more than 5% of the outstanding voting shares at
a price above the market price from any individual who or organization which
owns more than 3% of the outstanding voting shares and has held such shares for
less than two years, unless a similar offer is made to acquire all voting
shares, or (ii) sell or option assets of the corporation which amount to at
least 10% of the market value of the corporation, unless the corporation has at
least three independent directors (directors who are not officers or employees)
and a majority of the independent directors vote not to have this provision
apply to the corporation.
The restrictions described in clause (i) of the preceding paragraph may
have the effect of deterring a shareholder from acquiring shares of the Common
Stock with the goal of seeking to have the Company repurchase such shares at a
premium over the market price.
Section 180.1150 of the Wisconsin Corporations Act provides that the voting
power of shares of public Wisconsin corporations such as the Company held by any
person or persons acting as a group in excess of 20% of the voting power in the
election of directors is limited to 10% of the full voting power of those
shares. This statutory voting restriction does not apply to shares acquired
directly from the Company or in certain specified transactions or shares for
which full voting power has been restored pursuant to a vote of shareholders.
Antitakeover Consequences. Certain provision of the Company's Articles of
Incorporation and By-Laws may have significant antitakeover affects, including
the inability of the shareholders to remove directors without cause, and the
ability of the remaining directors to fill vacancies.
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<PAGE> 39
The explicit grant in the Stakeholder Law of discretion to directors to
consider non-shareholder constituencies could, in the context of an "auction" of
the Company, have antitakeover effects in situations where the interests of
stakeholders of the Company, including employees, suppliers, customers and
communities in which the Company does business, conflict with the short-term
maximization of shareholder value.
The Fair Price Provision may discourage any attempt by a shareholder to
squeeze out other shareholders without offering an appropriate premium purchase
price. In addition, the Defensive Action Restrictions may have the effect of
deterring a shareholder from acquiring the Common Stock with the goal of seeking
to have the Company repurchase the Common Stock at a premium. The Wisconsin
Corporations Act statutory provisions and the Company's By-Law provisions
referenced above are intended to encourage persons seeking to acquire control of
the Company to initiate such an acquisition through arms-length negotiations
with the Company's Board of Directors, and to ensure that sufficient time for
consideration of such a proposal, and any alternatives, is available. Such
measures are also designed to discourage investors from attempting to accumulate
a significant minority position in the Company and then use the threat of a
proxy contest as a means to pressure the Company to repurchase shares of Common
Stock at a premium over the market value. To the extent that such measures make
it more difficult for, or discourage, a proxy contest or the assumption of
control by a holder of a substantial block of the Common Stock, they could
increase the likelihood that incumbent Directors will retain their positions,
and may also have the effect of discouraging a tender offer or other attempt to
obtain control of the Company, even though such attempt might be beneficial to
the Company and its shareholders.
TRANSFER AGENT AND REGISTRAR
The Company is the Transfer Agent and Registrar for the Common Stock.
COMMON STOCK ELIGIBLE FOR FUTURE SALE
Prior to the offering there has been no market for the Common Stock of the
Company. The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of the Common Stock in the public market, or the perception that such sales may
occur, could adversely affect prevailing market prices. See "Risk Factors -
Common Stock Eligible for Future Sale."
Upon completion of the offering, the Company expects to have 800,000 shares
of Common Stock outstanding. Of the shares outstanding after the offering, the
400,000 shares of Common Stock sold in the offering will be freely tradeable
without restriction under the Securities Act, except for any such shares which
may be acquired by an "affiliate" of the Company, as that term is defined in
Rule 144 promulgated under the Securities Act ("Rule 144"), which shares will
be subject to the volume limitations and other restrictions set forth in Rule
144, described below. An aggregate of 400,000 shares of Common Stock held by
the existing stockholders of the Company upon completion of the offering will
be "restricted securities" (as that phrase is defined in Rule 144) and may not
be resold in the absence of registration under the Securities Act or pursuant
to an exemption from such registration, including among others, the exemption
provided by Rule 144 under the Securities Act.
In general, under Rule 144 as currently in effect, beginning ninety days
after the date of this Prospectus, if a period of at least one year has elapsed
since the later of the date the "restricted securities" were acquired from the
Company or the date they were acquired from an affiliate, then the holder of
such restricted securities (including an affiliate) is entitled to sell in the
public market a number of shares within any three-month period that does not
exceed the greater of 1% of the then outstanding shares of the Common Stock
(approximately 8,000 shares immediately after the offering) or the average
weekly reported volume of trading of the Common Stock during the four calendar
weeks preceding such sale. Under Rule 144, the holder may only sell such shares
through "brokers' transactions" or in transactions directly with a "market
maker" (as such terms are defined in Rule 144). Sales under Rule 144 are also
subject to certain requirements regarding providing notice of such sales and the
availability of
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<PAGE> 40
current public information concerning the Company. Affiliates may sell shares
not constituting restricted shares in accordance with the foregoing volume
limitations and other requirements but without regard to the one-year holding
period. Under Rule 144(k), if a period of at least two years has elapsed between
the later of the date restricted securities were acquired from the Company or
the date they were acquired from an affiliate, as applicable, a holder of such
restricted securities who is not an affiliate at the time of the sale and has
not been an affiliate for at least three months prior to the sale would be
entitled to sell the shares in the public market without regard to the volume
limitations and other restrictions described above. Beginning 90 days after the
date of this Prospectus, approximately 400,000 shares of Common Stock will be
eligible for sale in the public market pursuant to Rule 144, subject to the
volume limitations and other restrictions described above.
Notwithstanding the foregoing, the Company's executive officers, directors
and existing stockholders who own in aggregate approximately 400,000 shares of
Common Stock have agreed that, without the prior consent of the Managing
Placement Agent, they will not (i) directly or indirectly, sell, offer to sell,
grant a option for the sale of or otherwise dispose of any shares of Common
Stock or securities or rights convertible into or exercisable or exchangeable
for Common Stock (except through gifts to persons who agree in writing to bound
by such restrictions) or (ii) make any demand for or exercise any right with
respect to the registration any Common Stock or other such securities, for a
period of 120 days after the date of this Prospectus.
UNDERWRITING
The Company has entered into an agreement with J.E. Liss & Company, Inc.
d/b/a Liss Financial Services ("Managing Placement Agent"), providing for the
offering of the Common Stock ("Managing Placement Agent Agreement"). The
principal offices of the Managing Placement Agent are located at 424 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202, and its telephone number is (414)
225-3555.
The Managing Placement Agent is not obligated to purchase any of the
securities offered hereby, but has agreed to use its best efforts, as agent for
the Company, to sell up to 400,000 shares of Common Stock. There is no minimum
aggregate amount required to be sold in the offering; all funds will become
immediately available to the Company for the purposes described herein under
"Use of Proceeds." The Company reserves the right to refuse to sell Common Stock
to any person and, in its discretion, may terminate the offering at any time.
All funds tendered for the Common Stock will be held in escrow by Grafton
State Bank, Grafton, Wisconsin ("Escrow Agent"), pursuant to an agreement among
the Company, the Managing Placement Agent and Escrow Agent ("Escrow Agreement").
Pending disbursement under the terms of the Escrow Agreement, subscription
proceeds will be deposited in a segregated account and invested in short-term
United States government securities, securities guaranteed by the United States
government, certificates of deposit or time or demand deposits in commercial
banks located in the United States.
The Company will determine, in its sole discretion, to accept or reject
purchase offers within five days following receipt thereof. Funds of an investor
whose subscription is rejected will be promptly returned directly to such person
by the Escrow Agent, without interest or deduction, pursuant to the terms of the
Escrow Agreement. The minimum purchase per investor is 100 shares of Common
Stock; however, the Company may, in its sole discretion, sell fewer shares to
any investor. No purchase offer is subject to withdrawal, revocation or
termination by the purchaser.
The Company proposes to offer the Common Stock to the public at the public
offering price set forth on cover page of this Prospectus, and will pay to the
Managing Placement Agent commissions in an amount equal to 8% of the aggregate
purchase price of the Common Stock sold. The Managing Placement Agent may
reallow all or any part of such commissions to any broker-dealer member of the
NASD who is designated by it to participate in the distribution of the offering
("Selected Placement Agent"), up to an amount equal to 8% of the aggregate
purchase price of the Common Stock sold in the offering by such Selected
Placement Agent.
39
<PAGE> 41
The Company has agreed to pay to the Managing Placement Agent a
non-accountable expense allowance equal to 2% of the aggregate purchase price of
the Common Stock sold in the offering. The Managing Placement Agent may reallow
all or any part of such expense allowance to any Selected Placement Agent, up to
an amount equal to 2% of the aggregate purchase price of the Common Stock sold
in the offering by such Selected Placement Agent.
To purchase Common Stock, a prospective investor must complete and sign a
Subscription Agreement (in the form attached to this Prospectus as Exhibit A)
and such other documents as may be required by the Company, and deliver such
documents, together with payment in an amount equal to the full purchase price
the shares of Common Stock being purchased ("Subscription Payment"). Checks must
be made payable to "Grafton State Bank, Escrow Agent." Each Subscription Payment
will be transmitted to the Escrow Agent, by 12:00 noon, on the business day next
following receipt thereof by a Selected Placement Agent.
The Managing Placement Agent has informed the Company that the Selected
Placement Agents (including the Managing Placement Agent) will not confirm sales
of Common Stock offered by this Prospectus to accounts over which they exercise
discretionary authority. The Company and its directors, officers, 10%
stockholders have agreed not to offer, sell or otherwise dispose of any shares
of Common Stock for a period of 120 days after the date of this Prospectus
without the prior written consent of the Managing Placement Agent.
In connection with this offering, the Company has agreed to sell to the
Managing Placement Agent or its designees (such designees to consist solely of
any Selected Placement Agent and the bona fide officers or partners thereof), at
a purchase price of $.01 each, warrants ("Underwriter's Warrants") to purchase
from the Company shares of Common Stock in amount equal to 10% of the number of
shares of Common Stock sold in the offering. The Underwriter's Warrants are
exercisable for a period of four years commencing one year after the date of
this Prospectus at an exercise price ("Exercise Price") of 120% of the price per
share set forth on the cover page of this Prospectus. The Underwriter's Warrants
will be restricted from sale, transfer, assignment or hypothecation for a period
of one year from the initial effective date of the registration statement of
which this Prospectus is a part, except to officers or partners of the Selected
Placement Agents (including the Managing Placement Agent). The Underwriter's
Warrants contain anti-dilution provisions for adjustment of the Exercise Price
upon the occurrence of certain events, including stock dividends, stock splits,
recapitalizations and the issuance of Common Stock for consideration less than
the Exercise Price. The holders of Underwriter's Warrants have no voting,
dividend or other rights as stockholders of the Company with respect to shares
underlying the Underwriter's Warrants, unless and until the Underwriter's
Warrants have been exercised.
A new registration statement or post-effective amendment to the
registration statement of which this Prospectus is a part will be required to be
filed and declared effective before distribution to the public of shares of
Common Stock issuable upon exercise of the Underwriter's Warrants ("Warrant
Shares"). The Company has agreed, on one occasion when requested, to make
necessary filings, at its expense, to permit a public offering of the Warrant
Shares during the period beginning one year after the date hereof and ending
four years thereafter, and to use its best efforts to cause such filing to
become effective and remain effective for a period of at least one year. In
addition, the Company has agreed, during the period commencing at the beginning
of the second year and concluding at the end of the fifth year after the initial
effective date of the registration statement of which this Prospectus is a part,
to give advance notice to holders of the Underwriter's Warrants and Warrant
Shares, of its intention to file a registration statement, and in such case,
holders of the Underwriter's Warrants and any Warrant Shares shall have the
right to require the Company to include the Warrant Shares in such registration
statement at the Company's expense and to have maintained the effectiveness of
such registration statement for a period of at least one year.
During the period during which the Underwriter's Warrants are exercisable,
the Managing Placement Agent and any transferee will have the opportunity to
profit from a rise in the market price of the Common Stock with a resulting
dilution in the interest of other stockholders. In addition, the terms on which
the Company will be able to obtain additional capital during the exercise period
may be adversely affected in that the Representative is likely to exercise the
Underwriter's Warrants at a time when the Company would, in all likelihood, be
able to obtain capital by a new offering of securities on terms more favorable
than those provided by the terms of the Underwriter's Warrants.
40
<PAGE> 42
For the three-year period commencing on the date hereof, the Company has
granted the Managing Placement Agent the right of first refusal to act as lead
manager, placement agent or investment banker with respect to any proposed
underwritten public distribution or private placement of the Company's
securities or any merger, acquisition or disposition of assets of the Company,
if the Company uses a lead manager, placement agent or investment banker or
person performing such function for a fee.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
thereof. See "Indemnification for Securities Act Liabilities."
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price has been determined by negotiations
between the Company and the Managing Placement Agent and is not necessarily
related to the Company's asset value, net worth, results of operations or other
established criteria of value. Among the factors considered in determining the
initial offering price include the history of and the prospects for the Company
and the industry in which it operates, the past and present operating results of
the Company and the trends of such results, the financial condition of the
Company, the previous experience of Management, the market price of publicly
traded stock of comparable companies in recent periods and the general condition
of the securities markets at the time of the offering.
LEGAL MATTERS
The Company is not a party to any pending material legal proceedings, nor
is any such action currently contemplated by the Company, except as incidental
to the ordinary conduct of its business. The Company possesses no information
indicating that any material claims are contemplated against it.
Certain legal matters, including the validity of the Common Stock offered
hereby, will be passed upon for the Company by Gordon F. Barrington, Esq.,
Milwaukee, Wisconsin. Certain legal matters will be passed upon for the Company
and the Managing Placement Agent by Kranitz & Philipp, Milwaukee, Wisconsin.
EXPERTS
The balance sheets of the Company at February 28, 1998 and 1997, and the
related statements of operations and statements of cash flows for the years then
ended, respectively, have been audited by Smrecek & Co., S.C., independent
certified public accountants, as set forth in their report appearing elsewhere
herein, and are included in this Prospectus in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement, including amendments thereto, relating to the
Common Stock offered hereby has been filed by the Company with the Securities
and Exchange Commission under the Securities Act of 1933, as amended. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
such Registration Statement and exhibits and schedules filed as a part thereof.
A copy of the Registration Statement may be inspected without charge at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission at 7 World Trade Center, Suite 1300, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may be obtained from the Public
Reference Section of the Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of prescribed fees, or accessed
electronically by means of the Commission's home page on the Internet World Wide
Web at http://www.sec.gov.
41
<PAGE> 43
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
Upon consummation of the offering, the Company will become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, and
in accordance therewith will file periodic reports, proxy statements and other
information with the Commission.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants................................................ F-1
Financial Statements:
Balance Sheets at February 28, 1998 and 1997, and at May 31, 1998 (unaudited).... F-2
Statements of Operations for the years ended February 28, 1998 and 1997,
and for the three months ended May 31, 1998 and 1997 (unaudited).............. F-3
Statements of Cash Flows for the years ended February 28, 1998 and 1997,
and for the three months ended May 31, 1998 and 1997 (unaudited).............. F-4
Notes to Financial Statements.................................................... F-5
</TABLE>
42
<PAGE> 44
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Heartland Wisconsin Corp.
We have audited the accompanying balance sheets of Heartland Wisconsin Corp. as
of February 28, 1998 and 1997, and the related statements of operations, and
statements of cash flows for the periods then ended, respectively. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Heartland Wisconsin Corp. as of
February 28, 1998 and 1997, and the results of their operations and cash flows
for the periods then ended in conformity with generally accepted accounting
principles.
SMRECEK & CO,. S.C.
Certified Public Accountants
Waukesha, Wisconsin
June 30, 1998
F-1
<PAGE> 45
HEARTLAND WISCONSIN CORP.
Balance Sheets
<TABLE>
<CAPTION>
May 31, February 28, February 28,
1998 1998 1997
---------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Assets:
Cash $ 51,145 $ 36,907 $ 7,665
Cash held in escrow 1,555 18,055 3,748
Finance receivables (Notes 2 & 3) 1,925,424 1,731,692 496,150
Receivable from Giuffre Bros. Cranes, Inc. (Note 4) 79,029 58,315 --
Receivable from Giuffre West, Inc. (Note 4) -- -- 116,701
Equipment (Notes 3 and 4) -- -- 866,185
Less accumulated depreciation -- -- (93,185)
-------------------------------------------
Net equipment -- -- 773,000
Deferred finance costs- net (Note 1) 64,501 50,303 31,236
-------------------------------------------
Total assets $ 2,121,654 $ 1,895,272 $ 1,428,500
===========================================
Liabilities:
Senior notes payable- bank (Note 3) $ 951,061 $ 798,909 $ --
Notes payable (Note 3) 767,452 767,452 1,027,000
Payable to Giuffre Bros. Cranes, Inc. (Note 4) -- -- 161,007
Accounts payable -- 3,600 --
Customer deposits 19,000 -- --
Accrued income taxes (Note 6) 36,000 18,000 --
Accrued liabilities 8,936 9,121 2,881
Deferred processing fees 9,348 -- --
-------------------------------------------
Total liabilities 1,791,797 1,597,082 1,190,888
Shareholders' equity:
Common stock, $ .0001 par value, 20,000,000 shares
authorized, 400,000 shares issued and outstanding 40 40 40
Paid-in-capital (Notes 4 and 7) 274,960 271,960 259,960
Retained earnings (deficit) 54,857 26,190 (22,388)
-------------------------------------------
Total shareholders' equity 329,857 298,190 237,612
-------------------------------------------
Total liabilities and shareholders' equity $ 2,121,654 $ 1,895,272 $ 1,428,500
===========================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE> 46
HEARTLAND WISCONSIN CORP.
Statements of Income and Retained Earnings (Deficit)
<TABLE>
<CAPTION>
Three Months Ended Years Ended
May 31, May 31, February 28, February 28,
1998 1997 1998 1997
--------------------------------------------------------------------
Revenues (Note 4): (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income $ 69,506 $ 17,783 $ 168,164 $ 17,048
Commission income from third party financings 40,644 - 93,170 -
Rental equipment sales - - - 506,203
Rental income - - - 213,803
Processing fees 461 2,513 12,530 -
Other income 5,252 65 5,187 -
--------------------------------------------------------------------
Total revenue 115,863 20,361 279,051 737,054
Expenses:
Cost of equipment sold (Note 4) - - - 407,553
Interest expense 39,248 21,065 109,040 94,582
Amortization of finance costs (Note 1) 8,707 4,483 27,924 86,872
Depreciation - - - 139,922
Commission expense (Note 4) 16,424 - 52,054 -
Administrative expense reimbursement (Note 4) 3,000 3,000 12,000 -
Legal and accounting 578 2,900 6,721 4,025
Escrow fees and bank charges 15 1,000 3,028 1,650
Other 1,224 20 1,706 231
--------------------------------------------------------------------
Total expenses 69,196 32,468 212,473 734,835
--------------------------------------------------------------------
Income (loss) before taxes 46,667 (12,107) 66,578 2,219
Provision for income taxes 18,000 18,000 -
--------------------------------------------------------------------
Net income (loss) 28,667 (12,107) 48,578 2,219
Retained earnings (deficit), beginning of period 26,190 (22,388) (22,388) (24,607)
--------------------------------------------------------------------
Retained earnings (deficit), end of period $ 54,857 $ (34,495) $ 26,190 $ (22,388)
====================================================================
Basic earnings (loss) per common share $ 0.07 $ (0.03) $ 0.12 $ 0.01
====================================================================
Weighted average common shares outstanding (Note 7) 400,000 400,000 400,000 400,000
====================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 47
HEARTLAND WISCONSIN CORP.
Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended Years Ended
May 31, May 31, February 28, February 28,
1998 1997 1998 1997
--------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 28,667 $ (12,107) $ 48,578 $ 2,218
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation - - - 139,922
Amortization of loan fee 8,706 4,484 27,924 86,872
Amortization of deferred processing fees (461) - - -
Gain on sale of equipment - - - (98,650)
(Increase) in accrued interest receivable (5,146) (9,002) (19,040) (4,258)
Increase in accounts payable (3,600) - - -
Provision for income taxes 18,000 - 18,000 -
Increase in customer deposits 19,000 - - -
Increase in accrued liabilities (184) 2,358 9,839 960
--------------------------------------------------------------------
Net case provided by operating activities 64,982 (14,267) 85,301 127,064
Cash flows from investing activities:
Investments in notes and direct financing leases (487,290) (401,542) (1,541,861) (491,115)
Payments received on notes and leases 298,704 32,169 325,359 10,198
Processing fees deferred 9,809 - - -
Equipment purchased (Note 4) - - - (675,586)
Net proceeds from equipment sold (Note 4) - 773,000 773,000 454,824
--------------------------------------------------------------------
Net cash used in investing activities (178,777) 403,627 (443,502) (701,679)
Cash flows from financing activities:
Net bank borrowings- senior notes (Note 3) 285,354 293,936 867,280 -
Net borrowings from investors (Note 3) - 442,702 490,452 277,000
Repayments of senior notes (133,202) (7,752) (68,370) -
Repayments of investor notes - (750,000) (750,000) -
Finance costs deferred (22,905) (44,043) (46,990) (36,162)
(Increase) decrease in proceeds held in escrow 16,500 2,248 (14,307) (3,748)
(Increase) decrease in related party balances (Note 4) (20,714) (256,701) 102,622) 83,142
Proceeds from sale of common stock
and contribution of additional paid-in-capital 3,000 3,000 12,000 250,000
--------------------------------------------------------------------
Net cash provided from financing activities 128,033 (316,610) 387,443 570,232
--------------------------------------------------------------------
Net increase (decrease) in cash 14,238 72,750 29,242 (4,384)
Cash balances at the beginning of period 36,906 7,664 7,664 12,048
--------------------------------------------------------------------
Cash balances at the end of period $ 51,144 $ 80,415 $ 36,906 $ 7,664
====================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 22,321 $ 10,686 $ 88,373 $ 93,693
Income taxes $ - $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 48
HEARTLAND WISCONSIN CORP.
Notes to Financial Statements
Note 1 - Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Heartland Wisconsin Corp. was incorporated in the State of Wisconsin in August,
1995. The Company's shareholders are also shareholders of Giuffre Bros. Cranes
Inc., which manages the operations of the Company under the terms of a
Management Agreement. Giuffre Bros. Cranes, Inc. and an affiliate, Giuffre West,
Inc. are crane distributors, who sell, service and rent truck mounted crane
units nationally.
Heartland Wisconsin Corp. provides financing primarily to customers of Giuffre
Bros. Cranes, Inc. Financing is provided primarily through direct finance or
sales type leases. During 1998, the Company began receiving commissions from
other finance companies for arranging financing on cranes sold by Giuffre Bros.
Cranes Inc. During 1997, the Company rented, leased, serviced and sold truck
mounted crane units through services provided by Giuffre Bros. Cranes Inc. and
Giuffre West, Inc. These activities were discontinued at the end of 1997 and the
Company intends to focus primarily on financing activities in the future.
Fiscal Year
The Company's fiscal year ends on the last day of February.
Use of 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.
Finance Receivables
Finance receivables that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their outstanding
unpaid balances reduced by unearned interest and any chargeoff or specific
valuation accounts and net of any deferred fees or costs on originated loans.
Loan origination fees and certain direct origination costs are recognized as
income and expense when the lease is written. Net origination fee income net of
expenses will be capitalized and recognized as an adjustment of the yield of the
related loan when such amounts become significant.
Allowance for loan losses is increased by charges to income and decreased by
chargeoffs (net of recoveries). Management's periodic evaluation of the adequacy
of the allowance is based on the Company's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying collateral
and current economic conditions.
The Company calculates its provision for credit losses based on changes in the
present value of expected future cash flows of its loans discounted at the
loan's effective interest rate in accordance with Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards No. 114.
F-5
<PAGE> 49
HEARTLAND WISCONSIN CORP.
Note 1 - Nature of Operations and Summary of Significant Accounting Policies -
(Continued)
Equipment
Equipment purchases were capitalized at cost. Depreciation was computed for
financial statement purposes on straight-line method over a five year period.
For income tax purposes, the Company used MACRS over the same period. All of the
equipment owned by the Company at March 1, 1997 was sold to Giuffre Bros.
Cranes, Inc. at its net book value.
Deferred Costs
The Company has capitalized certain legal and offering costs in connection with
the sale of its debt instruments. These costs are amortized over the life of the
related debt using the interest method. During 1997, the Company's notes payable
due June 30, 1997 were repaid on March 20, 1997. Accordingly, all remaining
deferred costs related to this debt were charged to 1997 operations.
Income Taxes
Deferred tax assets and liabilities are reflected at currently enacted income
tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating
fair values of financial instruments as disclosed herein:
Cash and cash equivalents. The carrying value of cash approximates
their fair value.
Finance receivables. Fair values of commercial receivables are
estimated using discounted cash flow analyses, using interest rates
currently being offered for leases and /or loans with similar terms to
lessees/ borrowers of similar credit quality. Fair values of impaired
loans are estimated using discounted cash flow or underlying collateral
values, where applicable.
Senior debt and subordinated debt. The fair values of the Company's
debt are estimated based on the Company's incremental borrowing rates
for similar types of borrowing arrangements.
Accrued interest. The carrying value of accrued interest approximates
their carrying values.
Income Recognition
Interest income from finance receivables is recognized using the interest
(actuarial) method. Accrual of interest income on finance receivables is
suspended when a loan or a lease is contractually delinquent for 120 days or
more. The accrual is resumed when the loan becomes contractually current and
past-due interest income is recognized at that time. In addition, a detailed
review of commercial loans will cause earlier suspension if collection is
doubtful.
F-6
<PAGE> 50
HEARTLAND WISCONSIN CORP.
Note 1 - Nature of Operations and Summary of Significant Accounting Policies -
(Continued)
Interim Financial Information
The financial information as of May 31,1998 and for the three months ended May
31, 1998 and 1997 reflect all adjustments of a normal recurring nature which
are, in the opinion of management, necessary for a fair presentation of the
Company's financial condition and results of operations.
Note 2 - Finance Receivables
The Company's leases primarily consist of direct finance or sales type leases of
truck mounted crane units sold by Giuffre Bros. Cranes, Inc. to contractors.
Most of the leases are for lease terms ranging from 36 to 60 months. The leases
generally provide the customer with an option to purchase the equipment for $1
at the end of the lease term. The Company has also provided loans secured by
crane equipment. The leases also require that the customer pay all costs of
maintenance, sales and property taxes where applicable, and any other costs of
operating the crane equipment.
No payments due on the Company's loans or leases were over 120 days past due at
February 28, 1998 and accordingly, no allowance for credit losses has been
established.
Finance receivables consisted of the following at:
<TABLE>
<CAPTION>
May 31, February 28, February 28,
1998 1998 1997
----------------------------------------------------
<S> <C> <C> <C>
Total minimum lease payments to be received $ 2,381,471 $ 2,079,360 $ 492,871
Less allowance for uncollectibles - - -
----------------------------------------------------
Net minimum lease payments receivable 2,381,471 2,079,360 492,871
Estimated residual values of leased property - - -
Less: unearned income (590,466) (482,914) (131,954)
----------------------------------------------------
1,791,005 1,596,446 360,917
Loans, secured by crane equipment 105,001 110,944 130,975
Accrued interest and sales taxes 29,418 24,272 4,258
----------------------------------------------------
$ 1,925,424 $ 1,731,662 $ 496,150
====================================================
</TABLE>
At February 28, 1998, minimum lease and loan principal payments for each of the
five succeeding fiscal years are as follows
Minimum Loan
lease principal
payments payments Total
-------------------------------------------------------
1999 $ 724,474 $ 26,829 $ 751,303
2000 402,157 27,952 430,110
2001 355,585 31,473 387,058
2002 349,698 24,720 374,418
2003 223,354 - 223,354
Thereafter 24,092 - 24,092
-------------------------------------------------------
$ 2,079,360 $ 110,974 $ 2,190,334
=======================================================
F-7
<PAGE> 51
Note 3 - Notes Payable
The Company had notes payable as follows:
<TABLE>
<CAPTION>
May 31, February 28, February 28,
1998 1998 1997
-----------------------------------------------
Senior notes payable -bank (Unaudited)
<S> <C> <C> <C>
8.9% note, due in monthly installments
of $3,730 through January 9, 1999 and $2,076
from then until November 9, 2001 $ 70,331 $ 117,474 $ -
8.9% note, due in monthly installments
of $886 with the unpaid balance due April 9,2003 41,730 43,798 -
8.9% note, due in monthly installments
of $934 through August 25, 2002 39,403 41,311 -
9.25% note, due in monthly installments
of $1,014 through May 5, 2002 40,446 42,531 -
8.9% note, due in monthly installments
of $1,153 through July 5, 2002 48,843 51,193 -
8.9% note, due in monthly installments
of $1,269 through July 5, 2002 - 56,113 -
8.9% note, due in monthly installments
of $2,064 through November 5, 2002 and thereafter
$1,056 with the unpaid balance due April 5, 2003 93,984 98,206 -
8.9% note, due in monthly installments
of $1,933 through July 10, 2003 85,287 89,157 -
8.9% note, due in monthly installments of $1,894
with the unpaid balance due January 4, 1999 61,984 66,240 -
8.9% note, due in monthly installments
of $918 through July 5, 2003 45,315 47,045 -
8.9% note, due in monthly installments
of $898 through March 2, 2003 41,969 43,800 -
8.9% note, due in monthly installments
of $983 through February 5, 2003 45,520 47,440 -
8.9% note, due in monthly installments
of $1,134 through February 25, 2003 52,410 54,600 -
8.24% note, due in monthly installments
of $1,254 through April 15, 2002 50,060 - -
8.35% note, due in monthly installments
of $859 through April 15, 2003 41,305 -
8.59% note, due in monthly installments
of $966 through November 15, 2003 50,337 - -
</TABLE>
F-8
<PAGE> 52
HEARTLAND WISCONSIN CORP.
Note 3 - Notes Payable - (Continued)
<TABLE>
<CAPTION>
May 31, February 28, February 28,
1998 1998 1997
-----------------------------------------------
(Unaudited)
<S> <C> <C> <C>
8.41% note, due in monthly installments
of $957 through May 15, 2003 $ 46,437 $ - $ -
8.41% note, due in monthly installments
of $1,076 through June 15, 2003 52,140 - -
8.34% note, due in monthly installments
of $897 through June 15, 2003 43,560 - -
-----------------------------------------------
$ 951,061 $ 798,909 $ -
===============================================
Subordinated debt payable to investors:
10.25% secured notes, due June 30,1997 $ - $ - $ 750,000
10.25% asset backed notes, due June 30, 1999 177,000 177,000 177,000
10.25% capital notes, due December 31, 1999 590,452 590,452 100,000
-----------------------------------------------
$ 767,452 $ 767,452 $ 1,027,000
===============================================
</TABLE>
The Company has financed up to 60% of certain lease contracts through borrowings
(the senior notes) with two banks. The bank notes are at fixed interest rates
during the term of the loans and are secured by a first security interest in the
leased equipment. All of the monthly payment amounts in the table above include
principal and interest.
On February 25, 1998, the Company entered into a $1,000,000 Line of Credit
Agreement with another bank. All loans, under this Agreement may only be used to
fund up to 60% of the cost of cranes or cement mixers for lease. The borrowings
bear interest at the option of the Company either at the bank's reference rate
or a fixed rate equal to 2.75% over the bank's Fixed Rate which is equal to the
weighted average of yields to maturity of U.S. Treasury obligations over a
similar term. The Company had no loans outstanding under this line at February
28, 1998.
The asset backed and capital investor notes are subordinated to the senior bank
debt. As of February 28, 1997 the Company had no senior notes debt outstanding.
All of the Company's notes require interest to be paid monthly. The Company's
secured debt was secured by equipment purchased using the proceeds from the debt
obligations sold or the proceeds from the sale of previously purchased
equipment. The capital notes due December 31, 1999 are not secured and are
general obligations of the Company.
At March 20, 1997 the Company repaid all of the investor secured notes prior to
maturity. The Company's weighted average interest rate on debt outstanding was
10.03% for 1998 and 10.25% in 1997.
F-9
<PAGE> 53
HEARTLAND WISCONSIN CORP.
Note 3 - Notes Payable - (Continued)
Maturities at February 28, 1998 were as follows:
1999 $ 254,540
2000 911,928
2001 137,294
2002 147,256
2003 103,217
Thereafter 12,126
----------
Total $1,566,361
==========
Note 4 - Related Party Transactions
The Company's shareholders are also shareholders in the Company's sister
corporations Giuffre Bros. Cranes, Inc. and Giuffre West, Inc. Under a
Management Agreement, Giuffre Bros. Cranes, Inc. provides all marketing
services, administration and related facilities required for the conduct of
Heartland's business. During 1998, Heartland had no employees or facilities of
its own. The Management Agreement permits Giuffre Bros. Cranes, Inc. to be
reimbursed for its cost of providing its services, however, during 1998, 1997 or
1996, Giuffre Bros. Cranes, Inc. did not assess or receive any management fees
from Heartland. For the year ended February 28, 1998 the Company charged
operations and credited to contributed capital $12,000 for the estimated cost of
administrative expenses incurred by Giuffre Bros. Cranes, Inc. on its behalf.
On March 1, 1997, the Company sold all of its remaining crane equipment back to
Giuffre Bros. Cranes, Inc. at net book value ($773,000). Accordingly, no gain or
loss was realized on this transaction for book purposes.
During 1998, Giuffre Bros. Cranes, Inc. leased an automobile from Heartland. The
lease has a 60 month term. At February 28,1998, Heartland had receivable from
Giuffre Bros. Cranes, Inc. minimum lease payments of $54,388. Heartland's income
on this lease during 1998 was $4,346.
The Company had the following transactions with Giuffre Bros. Cranes, Inc. and
related entities during the first quarters ended May 31,1998 and 1997 and the
years ended February 28, 1998 and 1998:
<TABLE>
<CAPTION>
May 31, May 31, February 28, February 28,
1998 1997 1998 1997
---------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Purchases of crane equipment, at cost $ - $ - $ - $ 675,586
Sales of rental equipment - - - 506,203
Rental income - - - 213,803
Administrative expenses 3,000 3,000 12,000 -
Commission income on financings arranged with
third parties on Giuffre Bros. Cranes, Inc. crane sales 40,644 - 93,170 -
Commission expense paid to Giuffre Bros. Cranes, Inc. 16,425 - 52,054 -
</TABLE>
F-10
<PAGE> 54
EXHIBIT A
400,000 SHARES
HEARTLAND WISCONSIN CORP.
COMMON STOCK
SUBSCRIPTION AGREEMENT
Heartland Wisconsin Corp.
6635 South 13th Street
Milwaukee, Wisconsin 53221
Gentlemen:
The undersigned irrevocably subscribe(s) for and agree(s) to purchase
shares of common stock, par value $0.0001 per share ("Common Stock"), of
Heartland Wisconsin Corp., to be registered in the name(s) of the undersigned at
the address appearing below. Delivered concurrently herewith is payment in full
for the Common Stock subscribed for (minimum purchase: 100 shares), at the price
of $5.25 per share (checks made payable to "Grafton State Bank, Escrow Agent").
The undersigned agree(s) that the Company has the right to reject this
subscription for any reason and that, in the vent of rejection, all funds
delivered herewith will be promptly returned, without interest or deduction.
WITHHOLDING CERTIFICATION
Each of the undersigned certifies under penalty of perjury that:
(1) The Social Security Number or other Federal Tax I.D. Number entered
below is correct.
(2) The undersigned is not subject to backup withholding
because:
(a) The IRS has not informed the undersigned that he/she/it is subject
to backup withholding.
(b) The IRS has notified the undersigned that he/she/it is no longer
subject to backup withholding.
NOTE: If this statement is not true and you are subject to backup
withholding, strike out section (2).
REGISTRATION OF SECURITIES
Common Stock is to be registered as indicated below. (Please type or print.)
_________________________________
__________________________________________
Social Security or Federal Tax I.D. Number
_________________________________
Name(s)
_________________________________
Street Address Telephone Number ( ) ________________
_________________________________
City, State, Zip Code
OWNERSHIP: [ ] Individual [ ] Marital Property
[ ] Joint Tenants with Right of Survivorship [ ] Tenants in Common
[ ] Corporation [ ] Partnership [ ] Trust [ ] IRA/Qualified Plan
[ ] Other___________________________________________________________
If Common Stock is to be registered jointly, all owners must sign. For
IRAs/Qualified Plans, the trustee must sign. Any registration in the names of
two or more co-owners will, unless otherwise specified, be as joint tenants with
rights of survivorship and not as tenants in common. Each subscriber certifies
that he/she/it has full capacity to enter into this Agreement. This subscription
is subject to acceptance by the Company and will not be accepted unless
accompanied by payment in full.
A-1
<PAGE> 55
SUBSCRIBER SIGNATURES
INDIVIDUALS (All proposed record holders must sign.)
Dated: ___________________________
________________________________ _________________________________
(Signature) (Signature)
________________________________ _________________________________
(Print or Type Name) (Print or Type Name)
CORPORATIONS, PARTNERSHIPS, TRUSTS AND IRAS/QUALIFIED PLANS (Certificate of
Signatory must be completed.)
Dated: _________________________ ______________________________________
(Print or Type Name of Entity)
By: ________________________________________
(Signature of Authorized Representative)
CERTIFICATE OF SIGNATORY
I, _________________________________________________,am the ______________
(Print or Type Name of Authorized Representative) Print or Type
__________________ of ___________________________________________ ("Entity").
Title or Position) (Print or Type Name of Subscribing Entity)
I certify that I am fully authorized and empowered by the Entity to execute
this Subscription Agreement and to purchase Common Stock, and that this
Subscription Agreement has been duly executed by me on behalf of the Entity and
constitutes a valid and binding obligation of the Entity in accordance with its
terms.
_______________________________________________________________________________
(Signature of Authorized Representative)
SALES AGENT
Name of Selected Placement Agent: ________________________________________
Name of Registered Representative: _______________________________________
ACCEPTANCE
Subscription [ ] accepted [ ] rejected as of ____________________, 199___.
HEARTLAND WISCONSIN CORP.
By: ________________________________________
(Signature of Authorized Officer)
A-2
<PAGE> 56
[Inside Back Cover -- Insert Graphic
(four color photos of truck-mounted concrete mixers)]
<PAGE> 57
HEARTLAND WISCONSIN CORP.
[Outside Back Cover]
<PAGE> 58
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 11.01 through 11.03 of the by-laws of the Registrant authorize
such corporation to indemnify its directors, officers, employees or agents to
the fullest extent permitted by Wisconsin law, as follows:
ARTICLE XI
INDEMNIFICATION
SECTION 11.01. INDEMNIFICATION. The corporation shall, to the fullest
extent authorized by ch. 180, indemnify a director or officer against
liability and reasonable expenses incurred by the director or officer
in a proceeding in which the director or officer was a party because he
or she is or was a director or officer of the corporation. These
indemnification rights shall not be deemed to exclude any other rights
to which the director or officer may otherwise be entitled. The
corporation may, to the fullest extent authorized by ch. 180,
indemnify, reimburse or advance expenses of directors or officers.
A director or officer who seeks indemnification under this Section
shall make a written request to the corporation. Indemnification under
this Section is not required to the extent limited by the articles of
incorporation under Section 12.02. Indemnification under this Section
is not required if the director or officer has previously received
indemnification or allowance of expenses from any person, including the
corporation, in connection with the same proceeding.
SECTION 11.02. LIMITED INDEMNIFICATION. The corporation's articles of
incorporation may limit its obligation to indemnify under Section
12.01. A limitation under this Section applies if the first alleged act
or omission of a director or officer for which indemnification is
sought occurred while the limitation was in effect.
SECTION 11.03. INDEMNIFICATION AND ALLOWANCE OF EXPENSES OF EMPLOYEES
AND AGENT. The corporation shall, to the fullest extent authorized by
ch. 180, indemnify an employee who is not a director or officer of the
corporation, to the extent that he or she has been successful on the
merits or otherwise in defense of a proceeding, for all reasonable
expenses incurred in the proceeding if the employee was a party because
he or she was an employee of the corporation. In addition to the
indemnification required by the preceding sentence, the corporation may
indemnify and allow reasonable expenses of an employee or agent who is
not a director or officer of the corporation to the extent provided by
the articles of incorporation or by-laws, by general or specific action
of the board of directors or by contract.
Sections 180.0850 through 180.0859 of the Wisconsin Business Corporation
Law provide for the indemnification of directors, officers and other employees
of the Registrant, as follows:
180.0850 DEFINITIONS APPLICABLE TO INDEMNIFICATION AND INSURANCE
PROVISIONS. In Section. 180.0850 to 180.0859:
(1) "Corporation" means a domestic corporation and any domestic or
foreign predecessor of a domestic corporation where the predecessor
corporation's existence ceased upon the consummation of a merger or
other transaction.
(2) "Director or officer" of a corporation means any of the
following:
(a) An individual who is or was a director or officer of the
corporation.
(b) An individual who, while a director or officer of the
corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, member of any governing or
decision-making committee, employee or agent of another corporation
or foreign corporation, partnership, joint venture, trust or other
enterprise.
II-1
<PAGE> 59
(c) An individual who, while a director or officer of the
corporation, is or was serving an employee benefit plan because his
or her duties to the corporation also impose duties on, or otherwise
involve services by, the person to the plan or to participants in or
beneficiaries of the plan.
(d) Unless the context requires otherwise, the estate or personal
representative of a director or officer.
(3) "Expenses" include fees. costs, charges. disbursements, attorney
fees and any other expenses incurred in connection with a proceeding.
(4) "Liability" includes the obligation to pay a judgment,
settlement, penalty, assessment, forfeiture or fine, including an
excise tax assessed with respect to an employee benefit plan, and
reasonable expenses.
(5) "Party" includes an individual who was or is, or who is
threatened to be made, a named defendant or respondent in a
proceeding.
(6) "Proceeding" means any threatened, pending or completed civil,
criminal, administrative or investigative action, suit, arbitration or
other proceeding, whether formal or informal, which involves foreign,
federal, state or local law and which is brought by or in the right of
the corporation or by any other person. 180.0851 MANDATORY
INDEMNIFICATION. (1) A corporation shall indemnify a director or
officer, to the extent that he or she has been successful on the
merits or otherwise in the defense of a proceeding, for all reasonable
expenses incurred in the proceeding if the director or officer was a
party because he or she is a director or officer of the corporation.
(2) (a) In cases not included under sub. (1), a corporation shall
indemnify a director or officer against liability incurred by the
director or officer in a proceeding to which the director or officer
was a party because he or she is a director or officer of the
corporation, unless liability was incurred because the director or
officer breached or failed to perform a duty that he or she owes to
the corporation and the breach or failure to perform constitutes any
of the following:
1. A wilful failure to deal fairly with the corporation or its
shareholders in connection with a matter in which the director
or officer has a material conflict of interest.
2. A violation of the criminal law, unless the director or
officer had reasonable cause to believe that his or her
conduct was lawful or no reasonable cause to believe that his
or her conduct was unlawful.
3. A transaction from which the director or officer derived an
improper personal profit.
4. Wilful misconduct.
(b) Determination of whether indemnification is required under
this subsection shall be made under Section 180.0855.
(c) The termination of a proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an equivalent plea,
does not, by itself, create a presumption that indemnification of the
director or officer is not required under this subsection.
(3) A director or officer who seeks indemnification under this
section shall make a written request to the corporation.
(4) (a) Indemnification under this section is not required to the
extent limited by the articles of incorporation under s. 180.0852.
(b) Indemnification under this section is not required if the
director or officer has previously received indemnification or
allowance of expenses from any person, including the corporation, in
connection with the same proceeding.
180.0952 CORPORATION MAY LIMIT INDEMNIFICATION. A corporation's
articles of incorporation may limit its obligation to indemnify under
s. 180.0851. Any provision of the articles of incorporation relating
to a corporation's power or obligation to indemnify that was in
existence on June 13, 1987, does not constitute a limitation on the
corporation's obligation to indemnify under s.
180.0851. A limitation under this section applies if the first alleged
act or omission of a director or officer for which indemnification is
sought occurred while the limitation was in effect. 180.0853
ALLOWANCE OF EXPENSES AS INCURRED. Upon written request by a director
or officer who is a party to a proceeding, a corporation may pay or
reimburse his or her reasonable expenses as incurred if the director
or officer provides the corporation with all of the following:
II-2
<PAGE> 60
(1) A written affirmation of his or her good faith belief that he or
she has not breached or failed to perform his or her duties to the
corporation.
(2) A written undertaking, executed personally or on his or her
behalf, to repay the allowance and, if required by the corporation, to
pay reasonable interest on the allowance to the extent that it is
ultimately determined under s. 180.0855 that indemnification under s.
180.0851(2) is not required and that indemnification is not ordered by
a court under s. 180.0854(2)(b). The undertaking under this subsection
shall be an unlimited general obligation of the director or officer
and may be accepted without reference to his or her ability to repay
the allowance. The undertaking may be secured or unsecured.
180.0854 COURT-ORDERED INDEMNIFICATION. (1) Except as provided
otherwise by written agreement between the director or officer and the
corporation, a director or officer who is a party to a proceeding may
apply for indemnification to the court conducting the proceeding or to
another court of competent jurisdiction. Application shall be made
for an initial determination by the court under s. 180.0855(5) or for
review by the court of an adverse determination under s. 180.0855(1),
(2), (3), (4) or (6). After receipt of an application, the court shall
give any notice that it considers necessary.
(2) The court shall order indemnification if it determines any of
the following:
(a) That the director or officer is entitled to indemnification
under Section 180.0851 (1) or (2). If the court also determines that
the corporation unreasonably refused the director's or officer's
request for indemnification, the court shall order the corporation to
pay the director's or officer's reasonable expenses incurred to
obtain the court-ordered indemnification.
(b) That the director or officer is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, regardless
of whether indemnification is required under s.180.0851(2). 180.0855
DETERMINATION OF RIGHT TO INDEMNIFICATION. Unless otherwise provided
by the articles of incorporation or bylaws or by written agreement
between the director or officer and the corporation, the director or
officer seeking indemnification under s. 180.0851(2) shall select one
of the following means for determining his or her right to
indemnification:
(1) By a majority vote of a quorum of the board of directors
consisting of directors who are not at the time parties to the same or
related proceedings. If a quorum of disinterested directors cannot be
obtained, by majority vote of a committee duly appointed by the board
of directors and consisting solely of 2 or more directors who are not
at the time parties to the same or related proceedings. Directors who
are parties to the same or related proceedings may participate in the
designation of members of the committee.
(2) By independent legal counsel selected by a quorum of the board of
directors or its committee in the manner prescribed in sub. (1) or, if
unable to obtain such a quorum or committee, by a majority vote of the
full board of directors, including directors who are parties to the
same or related proceedings.
(3) By a panel of 3 arbitrators consisting of one arbitrator
selected by those directors entitled under sub. (2) to select
independent legal counsel, one arbitrator selected by the director or
officer seeking indemnification and one arbitrator selected by the 2
arbitrators previously selected.
(4) By an affirmative vote of shares as provided in s.180.0725.
Shares owned by, or voted under the control of, persons who are at the
time parties to the same or related proceedings, whether as
plaintiffs or defendants or in any other capacity, may not be voted in
making the determination.
(5) By a court under s.180.0854.
(6) By any other method provided for in any additional right to
indemnification permitted under s.180.0858. 180.0856 INDEMNIFICATION
AND ALLOWANCE OF EXPENSES OF EMPLOYEES AND AGENTS. (1) A
corporation shall indemnify an employee who is not a director or
officer of the corporation, to the extent that he or she has been
successful on the merits or otherwise in defense of a proceeding, for
all expenses incurred in the proceeding if the employee was a party
because he or she was an employee of the corporation.
(2) In addition to the indemnification required by sub. (1), a
corporation may indemnify and allow reasonable expenses of an employee
or agent who is not a director or officer of the corporation to the
extent provided by the articles of incorporation or bylaws, by general
or specific action of the board of directors or by contract.
II-3
<PAGE> 61
180.0857 INSURANCE. A corporation may purchase and maintain insurance
on behalf of an individual who is an employee, agent, director or
officer of the corporation against liability asserted against or
incurred by the individual in his or her capacity as an employee,
agent, director or officer or arising from his or her status as an
employee, agent, director or officer, regardless of whether the
corporation is required or authorized to indemnify or allow expenses
to the individual against the same liability under ss. 180.0851,
180.0853, 180.0856 and 180.0858. 180.0858 ADDITIONAL RIGHTS TO
INDEMNIFICATION AND ALLOWANCE OF EXPENSES. (1) Except as provided in
sub. (2), ss. 180.0851 and 180.0853 do not preclude any additional
right to indemnification or allowance of expenses that a director or
officer may have under any of the following:
(a) The articles of incorporation or bylaws.
(b) A written agreement between the director or officer and the
corporation.
(c) A resolution of the board of directors. (d) A resolution, after
notice, by a majority vote of all of the corporation's voting shares
then issued and outstanding.
(2) Regardless of the existence of an additional right under sub.
(1), the corporation may not indemnify a director or officer, or
permit a director or officer to retain any allowance of expenses
unless it is determined by or on behalf of the corporation that
the director or officer did not breach or fail to perform a duty that
he or she owes to the corporation which constitutes conduct under
Section 180.0851(2)(a)1, 2, 3 or 4. A director or officer who is a
party to the same or related proceeding for which indemnification or
an allowance of expenses is sought may not participate in a
determination under this subsection.
(3) Sections 180.0850 to 180.0859 do not affect a corporation's
power to pay or reimburse expenses incurred by a director or officer
in any of the following circumstances:
(a) As a witness in a proceeding to which he or she is not a party.
(b) As a plaintiff or petitioner in a proceeding because he or she
is or was an employee, agent, director or officer of the corporation.
180.0859 INDEMNIFICATION AND INSURANCE AGAINST SECURITIES LAW
CLAIMS. (1) It is the public policy of this state to require or permit
indemnification, allowance of expenses and insurance for any liability
incurred in connection with a proceeding involving securities
regulation described under sub. (2) to the extent required or
permitted under ss. 180.0850 to 180.0858.
(2) Sections 180.0850 to 180.0858 apply, to the extent applicable
to any other proceeding, to any proceeding involving a federal or
state statute, rule or regulation regulating the offer, sale or
purchase of securities, securities brokers or dealers, or investment
companies or investment advisors.
The Registrant has not purchased insurance against costs which may be
incurred by it pursuant to the foregoing provisions of its Articles of
Incorporation of Incorporation and Bylaws, nor does it insure its officers and
directors against liabilities incurred by them in the discharge of their
functions as such officers and directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC registration fee.................................... $ 636.36
NASD filing fee......................................... 710.00
Brokers' expense allowance.............................. 50,000.00*
Legal fees and expenses................................. 45,000.00*
Accounting fees and expenses............................ 14,000.00*
Blue Sky fees and expenses.............................. 5,000.00*
Listing fees and expenses............................... 1,500.00*
Printing and engraving.................................. 6,000.00*
Miscellaneous........................................... 2,002.12*
-------------
Total.......................................... $ 125,000.00*
</TABLE>
- ---------------
* Estimate
II-4
<PAGE> 62
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On August 14, 1995, upon the incorporation of the Registrant, Frank P.
Giuffre and Dominic J. Giuffre, officers and directors of the Registrant, each
purchased 500 shares of its common stock for $5,000; no commissions or other
compensation were paid in connection with either transaction. Such sales were
made in reliance upon the exemption from registration under the Securities Act
of 1933, as amended, provided by Section 4(2) of such Act.
From August 30, 1995 to January 18, 1996, the Registrant offered for sale
$750,000 in aggregate principle amount of its 10.25% Secured Nonrecourse Bonds
due December 31, 1997. $750,000 in aggregate principal amount of such Bonds were
sold (and prepaid in full on March 20, 1997) in private transactions to 35
individual investors (comprised of 14 accredited and 21 nonaccredited
investors), in reliance upon the exemption from registration under the
Securities Act of 1933, as amended, provided by Section 4(2) of such Act and
Rule 506 of Regulation D thereunder. An aggregate of $67,500 in commissions and
expense allowances was paid to broker-dealers participating in the distribution
of the offering.
From May 2, 1996 to July 29, 1996, the Registrant offered for sale
$1,000,000 in aggregate principle amount of its 10.25% Asset-Backed Notes due
June 30, 1999. $177,000 in aggregate principal amount of such Notes was sold in
private transactions to 10 individual investors (comprised of 2 accredited and 8
nonaccredited investors), in reliance upon the exemption from registration under
the Securities Act of 1933, as amended, provided by Section 4(2) of such Act and
Rule 506 of Regulation D thereunder. An aggregate of $15,930 in commissions and
expense allowances was paid to broker-dealers participating in the distribution
of the offering.
From August 23, 1996 to August 29, 1997, the Registrant offered for sale
$1,000,000 in aggregate principle amount of its 10.25% General Obligation Bonds
due December 31, 1999. $575,452 in aggregate principal amount of such Notes was
sold in private transactions to 27 individual investors (comprised of 9
accredited and 18 nonaccredited investors), in reliance upon the exemption from
registration under the Securities Act of 1933, as amended, provided by Section
4(2) of such Act and Rule 506 of Regulation D thereunder. An aggregate of
$51,791 in commissions and expense allowances was paid to broker-dealers
participating in the distribution of the offering.
Each purchaser in the private offerings described above was required to
represent and warrant in writing that he/she/it possessed sufficient knowledge,
experience and financial wherewithal to understand and evaluate the risks and
merits of the related investment, and to withstand any loss resultant therefrom.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
1.1 Underwriting Agreement
3.1 Articles of Incorporation of the Registrant *
3.2 By-Laws of the Registrant *
3.3 Articles of Amendment of the Registrant
4.1 Form of Underwriter's Warrant *
5.1 Opinion of Gordon F. Barrington, Esq., as to the legality of the
Common Stock
10.1 Management Agreement
10.2 Employment Agreement between the Registrant and Scott A. Blair
23.1 Consent of Gordon F. Barrington, Esq. (included in Exhibit 5.1)
23.2 Consent of Kranitz & Philipp
23.3 Consent of Smrecek & Co., S.C.
24.1 Power of Attorney (included at (Page II - 7) *
27.1 Financial Data Schedule (included in electronic filing only)
</TABLE>
- -----------------
* Previously filed.
II-5
<PAGE> 63
ITEM 28. UNDERTAKINGS.
The undersigned small business issuer will provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer 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 of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned small business issuer will:
(1) For determining any liability under the Securities Act, treat 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 as part of this registration statement as of the time
the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and the offering of the securities at that time as the initial bona fide
offering of those securities.
(3) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(4) For determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(5) File a post-effective amendment to remove from registration any of the
securities which remain unsold at the end of the offering.
II-6
<PAGE> 64
SIGNATURES
In accordance with 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 authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Milwaukee, State of Wisconsin on July 29, 1998
HEARTLAND WISCONSIN CORP.
By: /s/ Scott A. Blair
------------------------------------------
Scott A. Blair, Chief Executive Officer
and President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title
--------- -----
SCOTT A. BLAIR Chief Executive Officer
(Principal Executive Officer)
and President
DOMINIC J. GIUFFRE Vice President,
Secretary and Director
JEFFREY M. BREWSTER Director
THOMAS H. MURPHY Director
By: /s/ Frank P. Giuffre
-----------------------------------------------------
Frank P. Giuffre
Signing personally as Vice President, Treasurer
(Principal Financial and Accounting Officer)
and Director and as
Attorney-in-Fact for the
directors and officers whose
names appear above, on
July 29, 1998.
Part III - Signatures
<PAGE> 65
400,000 SHARES
HEARTLAND WISCONSIN CORP.
COMMON STOCK
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
------- ----------- -----------
<S> <C>
1.1 Underwriting Agreement..............................................
3.1 Articles of Incorporation of the Registrant *
3.2 Bylaws of the Registrant *
3.3 Articles of Amendment of the Registrant.............................
4.1 Form of Underwriter's Warrant *
5.1 Opinion of Gordon F. Barrington, Esq.,
as to the legality of the common stock to be registered ........
10.1 Management Agreement ...............................................
10.2 Employment Agreement between the Registrant and Scott A. Blair .....
23.1 Consent of Gordon F. Barrington, Esq. (included in Exhibit 5.1)
23.2 Consent of Kranitz & Philipp .......................................
23.3 Consent of Smrecek & Co., S.C.......................................
24.1 Power of Attorney *
27.1 Financial Data Schedule (included in electronic filing only)
</TABLE>
- ---------------
* Previously filed.
Exhibit Index
<PAGE> 1
EXHIBIT 1.1
UNDERWRITING AGREEMENT
<PAGE> 2
400,000 Shares
HEARTLAND WISCONSIN CORP.
Common Stock
MANAGING PLACEMENT AGENT AGREEMENT
August , 1998
J.E. Liss & Company, Inc.
424 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
Heartland Wisconsin Corp., a Wisconsin corporation ("Company"), hereby
confirms its agreement with you, as Managing Placement Agent, as follows:
SECTION 1. Description of the Offering. The Company proposes to offer for
sale and sell to the public 400,000 shares of its common stock, par value
$0.0001 per share ("Common Stock"), at a price of $5.25 per share ("Offering").
The minimum purchase per investor is 100 shares of Common Stock ($525), unless
otherwise agreed to in writing by the Company. The Company may refuse to sell
Common Stock to any person at any time. The Common Stock may be offered for sale
until (i) the entire Offering is sold or (ii) September 30, 1999, whichever
first occurs; provided, however, that the Offering may be terminated at any time
prior thereto at the discretion of the Company.
All funds received from subscribers for Common Stock will be held in escrow
by Grafton State Bank, Grafton, Wisconsin ("Escrow Agent"), pursuant to an
agreement among you, the Company and the Escrow Agent ("Escrow Agreement").
There is no minimum aggregate amount required to be sold in the Offering; all
funds received from accepted subscribers will become immediately available to
the Company for the purposes described in the Prospectus (as hereinafter
defined) relating to the Offering under the caption "Use of Proceeds." Pending
disbursement under the terms of the Escrow Agreement, subscription proceeds will
be deposited in a segregated account and invested in short-term United States
government securities, securities guaranteed by the United States government,
certificates of deposit or time or demand deposits in commercial banks located
in the United States.
The Company will determine, in its sole discretion, to accept or reject
subscriptions for Common Stock within five days following receipt thereof. Funds
of an investor whose subscription is rejected will be promptly returned directly
to such person by the Escrow Agent, without interest or deduction, pursuant to
the terms of the Escrow Agreement.
The Company, the Common Stock and the Offering are more fully described in
the Registration Statement and Prospectus (as hereinafter defined). All terms
used in this Agreement, unless specifically defined herein, shall have the
meanings set forth in such Registration Statement and Prospectus.
<PAGE> 3
J.E. Liss & Company, Inc.
August______, 1998
Page 2
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with you, that:
(a) The Company is duly organized and validly existing as a corporation
in good standing under the laws of the State of Wisconsin. The Company has the
full power and authority and all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental and regulatory
officials and bodies required to own its properties and conduct its business as
described in the Prospectus (as herein defined); the Company is duly qualified
to do business under the laws of (and is in good standing as such in) each
jurisdiction in which it owns or leases property, has an office, or in which
business is conducted and such qualification is required, except where the
failure to so qualify would not have a material adverse effect on the business,
assets or financial condition of the Company, and no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing, or seeking
to revoke, limit or curtail, such power and authority or qualification.
(b) The Company does not own or control, directly or indirectly, any
corporation, association, partnership or other entity other than as identified
in the Registration Statement (as herein defined).
(c) The execution, delivery and performance by the Company of this
Agreement has been duly authorized by all necessary action and will not (i)
violate any provision of the articles of incorporation or bylaws of the Company
(in each case as amended at the time of this Agreement), (ii) result in the
breach, or be in contravention, of any provision of any agreement, franchise,
license, indenture, mortgage, deed of trust or other instrument to which the
Company is a party or by which the Company or its property may be bound or
affected, or any order, law, statute, rule or regulation applicable to the
Company of any court or regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its property,
or any order of any court or governmental agency or authority entered in any
proceeding to which the Company was or is now a party or by which it is bound or
(iii) result in the creation of any lien, charge or encumbrance upon any
property of the Company. No consent, approval, authorization or other order of
any court, regulatory body, administrative agency or other governmental body is
required for the execution and delivery of this Agreement by the Company, or the
consummation by the Company of the transactions contemplated hereby, other than
under the Securities Act,, the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Securities and Exchange Commission
("Commission") thereunder (collectively, the "Exchange Act"), state securities
laws and regulations (collectively, the "Blue Sky Laws") applicable to the
public offering of the Common Stock as described in the Registration Statement
and the Prospectus (as hereinafter defined), and/or the rules of the National
Association of Securities Dealers, Inc. ("NASD"). This Agreement has been duly
executed and delivered by the Company and is a valid and binding agreement of
the Company, enforceable in accordance with its terms, except insofar as rights
to indemnity or contribution may be limited by applicable law and subject to
bankruptcy, insolvency or similar laws generally affecting the rights of
creditors and equitable principles affecting the right to obtain specific
enforcement or similar equitable relief.
(d) A registration statement on Form SB-2 (Registration File No.
333-48527) with respect to the Common Stock has been carefully prepared by the
Company in conformity with the requirements of the Securities Act and the rules
and regulations ("Rules and Regulations") of the Commission thereunder, and has
been filed with the Commission; the Company has so prepared and has filed or
proposes to file prior to the effective date of such registration statement or
subsequent to such effective date pursuant to Rule 430A under the Rules and
Regulations, an amendment or amendments to such registration statement. There
have been delivered to you and your counsel two signed copies of such
registration statement, as initially filed with the Commission and each
amendment thereto, together with two copies of each exhibit filed therewith, and
eight conformed copies of such registration statement, as initially filed with
the Commission and each amendment thereto (but without exhibits) and of each
related preliminary prospectus ("Preliminary Prospectus") and of the proposed
final form of prospectus. As used in this Agreement, the term "Registration
Statement" means such registration statement, including exhibits, financial
statements and schedules and documents incorporated therein by reference, as
finally amended and revised at the time such registration statement becomes
effective, including the information, if any, deemed to be a part thereof
pursuant to Rule 430A of the Rules and Regulations, and the term "Prospectus"
means the related prospectus in
<PAGE> 4
J.E. Liss & Company, Inc.
August______, 1998
Page 3
the form first filed on behalf of the Company with the Commission pursuant to
Rule 424(b) under the Securities Act. Any reference herein to any Registration
Statement, Preliminary Prospectus or the Prospectus shall be deemed to refer to
and include the documents and information, if any, incorporated by reference
therein. Any reference to any amendment or supplement to any Registration
Statement, Preliminary Prospectus or Prospectus shall be deemed to refer to and
include any documents filed after such date under the Exchange Act and
incorporated therein by reference.
(e) Neither the Commission nor any state securities or "blue sky"
authorities has issued any order preventing or suspending the use of any
Preliminary Prospectus, and each Preliminary Prospectus has conformed fully in
all material respects with the requirements of the Securities Act, the Rules and
Regulations and the Blue Sky Laws and, as of its date, has not included any
untrue statement of a material fact or omitted to state a fact required to be
stated therein or necessary to make the statements therein not misleading; when
the Registration Statement becomes effective, and at all times subsequent
thereto up to each Closing Date (as defined herein), the Registration Statement
and the Prospectus, and any amendments or supplements thereto, will contain all
statements that are required to be stated therein in accordance with the
Securities Act, the Rules and Regulations and the Blue Sky Laws and will in all
material respects conform to the requirements of the Securities Act, the Rules
and Regulations and the Blue Sky Laws, and neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, will include any
untrue statement of a material fact or omit to state a fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company makes no representation or warranty as to
information contained in or omitted from any Preliminary Prospectus, the
Registration Statement, the Prospectus, or any such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by you specifically for inclusion therein.
(f) There are no contracts or other documents, transactions or
relationships of or by and between the Company or any of the respective officers
or directors of the Company required to be described in the Registration
Statement or filed as exhibits to the Registration Statement by the Securities
Act or the Rules and Regulations which have not been described or filed as
required or incorporated by reference as permitted by the Securities Act and the
Rules and Regulations.
(g) The Company has authorized capital stock as set forth in the
Prospectus. All outstanding shares of capital stock of the Company have been
duly authorized, validly and legally issued and are fully paid and
nonassessable, except to the extent of liability, if any, imposed under Section
180.0622(2) of the Wisconsin Business Corporation Law for employee wages for a
period not exceeding six months in the case of any employee; such shares have
not been issued in violation of or subject to any preemptive rights provided for
by law or by the Company's articles of incorporation or bylaws. The Common Stock
conforms in all material respects to all statements with respect thereto
contained in the Prospectus, and such statements conform to the provisions set
forth in the articles of incorporation and bylaws of the Company.
(h) The shares of Common Stock sold in the Offering, upon receipt of
full payment therefor and delivery by the Company, will be duly authorized,
validly and legally issued, fully paid and nonassessable, except to the extent
of liability, if any, imposed under Section 180.0622(2) of the Wisconsin
Business Corporation Law for employee wages for a period not exceeding six
months in the case of any employee, and will not have been issued in violation
of or subject to any preemptive rights provided for by law or by the Company's
articles of incorporation or bylaws or be subject to any lien, claim,
encumbrance, security interest, preemptive rights or any other claim of any
third party.
(i) Except as described the Prospectus, there is not pending, or, to
the knowledge of the Company, threatened, any action, suit, proceeding, inquiry
or investigation to which the Company is a party, or to which the property of
the Company is subject, before or brought by any court, governmental agency or
body or arbitration tribunal, which, if determined adversely to the Company,
would result in any material adverse change in the business, financial position,
net worth, results of operations or prospects of the Company, or materially and
adversely affect its property or assets.
<PAGE> 5
J.E. Liss & Company, Inc.
August______, 1998
Page 4
(j) The financial statements and the related notes included in the
Registration Statement, in any Preliminary Prospectus or in the Prospectus
present fairly the financial position, results of operations and cash flows of
the Company at the dates and for the periods indicated and have been prepared in
accordance with generally accepted accounting principles, except as otherwise
stated therein. Smrecek & Co., S.C., who have audited certain financial
statements as set forth in their report included in the Registration Statement
and Prospectus and each Preliminary Prospectus, are independent accountants as
required by the Securities Act and the Rules and Regulations.
(k) The Company is not in violation of its articles of incorporation
and bylaws, or in default or breach under any court or administrative order or
decree, or in default with respect to any provision of any lease, loan
agreement, franchise, license, permit, agreement or other contractual obligation
to which the Company is a party or by which the Company or any of its property
is bound, and there does not exist any state of facts which constitutes an event
of default or breach under such documents or which, upon notice or lapse of time
or both, would constitute such an event of default or breach except those, if
any, described in the Prospectus or such defaults or breaches which,
individually or in the aggregate, are not, and with notice or lapse of time, or
both, would not become, material to the Company. The Company is not in violation
or breach of any law, order, rule, regulation, writ, injunction or decree of any
governmental authority or instrumentality or any court, domestic or foreign,
which violation would have a materially-adverse effect on its business as
described in the Prospectus.
(l) Neither Company nor any of its affiliates, nor any director or
officer of the foregoing, have taken and will not take, directly or indirectly,
any action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in (i) a
violation of Rule 10b-6 under the Exchange Act or (ii) the manipulation of the
price of the Common Stock facilitate the sale or resale of such securities.
(m) The Company has good and marketable title to all the property and
assets reflected as owned by it in the Prospectus, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind or nature whatsoever, except those, if
any, reflected in the Prospectus, or which are not material to the Company and
do not materially affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property; all
properties held or used by the Company under leases, licenses, franchises or
other agreements are held by it under valid, subsisting and enforceable leases,
licenses, franchises or other agreements (subject to bankruptcy, reorganization,
moratorium or similar laws affecting creditors' rights generally).
(n) Since its inception, the Company has not sustained any material
loss or interference with its business or property from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree; and subsequent
to the respective dates as of which information is given in the Registration
Statement and Prospectus, the Company has not incurred any material liabilities
or obligations, direct or contingent, or entered into any material transactions,
not in the ordinary course of business, and there has not been any material
change in the capital stock or long-term debt of the Company, or any material
adverse change, or any development involving a prospective material adverse
change, in the business, financial position, net worth, results of operations or
prospects of the Company, except in each case as described in or contemplated by
the Prospectus.
(o) The Company has filed all necessary federal, state and foreign
income and franchise tax returns and has paid all taxes shown as due thereon,
and has no knowledge of any tax deficiency which has been asserted or threatened
against the Company which would materially adversely affect its business,
operations or property.
(p) The Company keeps accurate books and records and maintains internal
accounting controls which provide reasonable assurance that (i) transactions are
executed in accordance with management's authorization, (ii) transactions are
recorded as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (iii) access to its assets is permitted
only in accordance with management's authorization and (iv) the reported
accountability for its assets is compared with existing assets at reasonable
intervals.
<PAGE> 6
J.E. Liss & Company, Inc.
August______, 1998
Page 5
(q) There are no holders of securities of the Company having rights to
registration thereof under the Securities Act or preferential rights to purchase
Common Stock or any other securities of the Company, except as disclosed in the
Registration Statement and the Prospectus.
(r) All documents delivered or to be delivered by the Company or its
representatives in connection with the issuance and sale of the Common Stock
were on the dates on which they were delivered or will be on the dates on which
they are to be delivered, in all material respects, true, complete and correct.
(s) The Company owns, or possesses the requisite licenses or other
rights to use, all trademarks, service marks, service names and trade names
necessary to conduct its business as described in or contemplated by the
Prospectus; there is no claim or action by any person pertaining to (or
proceeding pending or threatened which challenges) the rights of the Company
with respect to any trademarks, service marks, service names or trade names used
in the conduct of its business as described in or contemplated by the
Prospectus; the products, services and processes of the Company have not
infringed and do not infringe upon proprietary rights held or asserted by third
parties which infringement, if resolved adversely to the Company, could
materially affect its earnings, assets, affairs, business prospects or condition
(financial and other).
(t) The Company has not distributed and will not distribute prior to
the final Closing Date (as hereinafter defined), any offering material in
connection with the offer and sale of the Common Stock other than as permitted
by the Securities Act.
(u) The Company has not (i) had any material dealings within the twelve
months prior to the date of this Agreement with any member of the NASD, or any
person related to or associated with such member, other than discussions and
meetings relating to the Offering, except as disclosed in writing to you prior
to the date hereof; (ii) entered into a financial or management consulting
agreement except as contemplated hereunder; or (iii) engaged any intermediary
between you and the Company, and/or any of the affiliates of the Company, in
connection with the Offering, and no person has been or will be compensated in
any manner for such service.
(v) The Company and each of its directors, executive officers and 10%
shareholders shall have agreed in writing that, from the date hereof through the
final Closing Date (as hereinafter defined), and for a period of 120 days
thereafter, they will not, without your prior written consent, sell, offer or
contract to sell, or grant any option to purchase, or otherwise dispose of,
directly or indirectly, any shares of Common Stock (or any securities
convertible into or exchangeable for any shares of Common Stock) except pursuant
to this Agreement.
Any certificate signed by any officer of the Company and delivered to
you or to your counsel shall be deemed a representation and warranty of the
Company to you as to the matters covered thereby and any certificate delivered
by the Company to its counsel for purposes of enabling such counsel to render
any opinion referred to in this Agreement will also be furnished to you and to
your counsel and shall be deemed to be additional representations and warranties
to you by the Company.
SECTION 3. Representations and Warranties of the Managing Placement
Agent. You hereby represent and warrant to, and agree with, the Company as
follows:
(a) You are a corporation duly organized, validly existing under the
laws of the State of Wisconsin, with all requisite power and authority to enter
into this Agreement and to carry out your obligations hereunder.
(b) This Agreement (i) has been duly authorized, executed and delivered
by you, (ii) constitutes your legal, valid and binding obligation, and (iii)
subject to applicable bankruptcy, insolvency and other laws affecting the
enforceability of creditors' rights generally, is enforceable as to you in
accordance with its terms, specific performance hereof being limited by general
principles of equity and the enforceability of the indemnification provisions
hereof.
<PAGE> 7
J.E. Liss & Company, Inc.
August______, 1998
Page 6
(c) The execution, delivery and performance of this Agreement by you
and the consummation by you of the transactions contemplated hereby and by the
Prospectus will not conflict with or result in a breach or violation by you of
any of the terms or provisions of, or constitute a default in any material
respect under, (i) any indenture, mortgage, deed of trust, loan agreement, lease
or other agreement or instrument to which you are a party or to which you or
your property are subject, (ii) your articles of incorporation or bylaws or
(iii) any statute, judgment, decree, order, rule or regulation applicable to you
of any court or governmental agency or body having jurisdiction over you, your
affiliates or your property.
(d) You are, and at all times through the final Closing Date (as herein
defined) shall remain, duly registered pursuant to the provisions of the
Exchange Act as a broker-dealer; you are, and at all times through the final
Closing Date shall remain, a member in good standing of the NASD; you will not
reallow discounts or pay commissions or other compensation for participation in
the distribution of the Offering to any broker-dealer which is not a member of
the NASD, including foreign broker-dealers registered under the Exchange Act;
you shall act as an independent contractor, and nothing herein shall constitute
you an employee of the Company; you shall not make sales of Common Stock
discretionary accounts.
(e) In connection with the offer, offer for sale and sale of Common
Stock, you (and your representatives and agents) shall conform to and comply
with (i) the provisions of the Conduct Rules of the NASD, (ii) applicable
provisions of federal law, including without limitation the Securities Act, the
Rules and Regulations and the Exchange Act, and (iii) the Blue Sky Laws
applicable to the Offering, relating to, among other things, the period during
which and conditions under which the Common Stock may be offered, offered for
sale and sold; you shall not distribute the Prospectus or otherwise commence the
Offering without prior written confirmation from the Company or its counsel that
the Offering may be commenced under applicable securities laws, rules and
regulations.
(f) Pursuant to your appointment made in Section 4 hereof, you will use
your best efforts to procure subscribers for Common Stock will conduct the
Offering in compliance with the provisions of the Securities Act, the Rules and
Regulations, the Exchange Act, applicable Blue Sky Laws and the rules and
regulations of the NASD; accordingly, as of each Closing Date (as herein
defined), you will have:
(1) not made any untrue statement of a material fact and not
omitted to state a material fact required to be stated or necessary to
make any statement made not misleading, to the extent, if any, that
representations are made by you concerning the Offering or matters set
forth in the Prospectus other than those set forth in the Prospectus;
(2) prior to any sale of any Common Stock, reasonably believed
that an investment in the Common Stock was suitable for each
subscriber;
(3) promptly distributed any amendment or supplement to the
Prospectus provided to you pursuant to Section 5(b) of this Agreement
to persons who had previously received a Prospectus from you and who
you believed continued to be interested in Common Stock and have
included such amendment or supplement in all deliveries of the
Prospectus made after receipt of any such amendment or supplement;
(4) only used sales materials other than the Prospectus which
have been approved for use in the Offering by the Company, and
refrained from providing any such materials to any offeree unless
accompanied or preceded by the Prospectus;
(5) prior to the sale of any Common Stock, reasonably believed
that each subscriber met the investor standards and other requirements
set forth in the Prospectus and the Blue Sky Letters (as hereinafter
defined) and that an investment in the Common Stock was suitable for
such subscriber; you will have prepared and maintained, for your
benefit and the benefit of the Company, file memoranda and other
appropriate records substantiating the foregoing and shall
<PAGE> 8
J.E. Liss & Company, Inc.
August______, 1998
Page 7
retain such records for the period required under Exchange Act Rule
17a-4 or the laws of any state in which you offer the Common Stock for
sale, whichever is longer; and
(6) not made any representations on behalf of the Company other
than those contained in the Prospectus, nor shall you have acted as an
agent of the Company, or for the Company in any other capacity, except
as expressly set forth herein.
SECTION 4. Purchase Sale and Delivery of Common Stock. On the basis of
the covenants, representations, and warranties herein contained and subject to
the terms and conditions herein set forth:
(a) The Company hereby engages you as its exclusive agent to solicit
subscriptions for the Common Stock in accordance with the terms of the
Registration Statement, the Prospectus and this Agreement, and you agree to use
your best efforts to procure such subscriptions. You may, however, discharge
your responsibilities under this Agreement by acting as a Managing Placement
Agent and forming a group of securities dealers ("Selected Placement Agents"),
including you, to procure subscribers for the Common Stock. Any agreement
between you and a securities dealer pursuant to which such securities dealer
becomes a Selected Placement Agent shall require such dealer to represent and
warrant that it will conduct the Offering in the manner set forth herein. The
allocation of Common Stock among you and the Selected Placement Agents shall be
made by you.
(b) Subject to the terms and conditions set forth herein, in
consideration of your execution of this Agreement and performance of your
obligations hereunder, the Company agrees that, at each Closing (as defined
herein), you shall receive (i) selling commissions in an amount equal to 8% of
the aggregate purchase price of the Common Stock sold by you (or any Selected
Placement Agent) and (ii) a nonaccountable expense allowance equal to 2% of the
aggregate purchase price of the Common Stock sold by you (or any Selected
Placement Agent). The aggregate commissions and expense allowance payable in
connection with the sale of Common Stock will be disbursed to you, as provided
herein and in Escrow Agreement; thereupon, you shall pay to each of the other
Selected Placement Agents, if any, in such amount (which shall not exceed
commissions and expense allowance in the amounts of 8% and 2%, respectively, of
the aggregate purchase price of the Common Stock sold by such Agent), at such
times and upon such terms and conditions as shall have been agreed upon between
you and such Selected Placement Agent, that portion of the aggregate commissions
to which such Selected Placement Agent is entitled.
(c) As additional consideration for your services rendered pursuant to
this Agreement, on the final Closing Date (as hereinafter defined), the Company
will sell to you or your designees, at a price of $0.01 per warrant ("Warrant
Price"), warrants ("Underwriter's Warrants") to purchase shares of Common Stock,
under the following terms and conditions:
(1) The aggregate number of shares of Common Stock subject to
Underwriter's Warrants will be equal to 10% of the shares of
Common Stock sold by you (or any Selected Placement Agent)
pursuant to this Agreement.
(2) The Underwriter's Warrants may not be sold, hypothecated,
exercised, assigned or transferred for a period of one year after
the initial effective date of the Registration Statement, except
to partners or officers of the Selected Placement Agents
(including the Managing Placement Agent).
(3) Underwriter's Warrants shall be exercisable during the
4-year period commencing on the first anniversary of the final
Closing Date ("Warrant Exercise Term"), at any time and from time
to time, in whole or in part, during the said Warrant Exercise
Term, and shall grant to the holder the right to purchase one
share of Common Stock for each Underwriter's Warrant at a price
per share equal to 120% of the initial public offering price of
the Common Stock.
<PAGE> 9
J.E. Liss & Company, Inc.
August______, 1998
Page 8
(4) The Underwriter's Warrants shall contain such other term
and conditions as are satisfactory, in form and substance to you
and your counsel, including without limitation, adjustment and
exercise provisions.
(5) The Company agrees and undertakes, upon the expiration of
a 12-month period after the final Closing Date, and at any time
during the 4-year period thereafter, one time only, to register
under the Securities Act all or any part of the Underwriter's
Warrants and/or the shares issuable upon the exercise thereof
("Underlying Shares"), upon the written request of holders of a
majority of such Warrants and Underlying Shares, at the Company's
sole cost and expense, including "blue sky" fees for counsel and
"blue sky" filing fees to qualify the Underwriter's Warrants and
Underlying Shares for sale in those jurisdictions requested by
you, at the time determined by you.
(6) The Company agrees and undertakes, during the four-year
period described in subsection 4(c)(3), above, that if the Company
shall seek to register any of its securities under the Securities
Act, each holder of the Underwriter's Warrants shall be notified
and shall be entitled to elect to have included in such proposed
registration, without cost or expense, any or all of his
Underwriter's Warrants or Underlying Shares ("Piggy-Back Rights").
In the event of such a proposed registration, the Company shall
furnish the holders of Underwriter's Warrants with no less than 30
days written notice prior to the proposed filing of a registration
statement. Such notice shall continue to be given by the Company
to such Warrantholders for each proposed registration by the
Company until such time as all Underwriter's Warrants or
Underlying Shares have been registered. Warrantholders shall
exercise Piggy-Back Rights by giving written notice within 20 days
of the receipt of the Company's notice of intention to file a
registration statement.
(d) The Company hereby grants to you a right of first refusal for a
period of three years after the initial effective date of the Registration
Statement to act as (i) managing underwriter or offering agent for any public or
private offerings of securities by the Company or any of its subsidiaries and
(ii) the Company's agent for any merger involving the Company or any of its
subsidiaries, the acquisition by the Company or any of its subsidiaries of any
entity or the assets thereof and the acquisition of the Company or any of its
subsidiaries by another entity, provided that a third-party underwriter or agent
is engaged in connection with any transaction described in clause (i) or (ii) of
this Section 6(p) and you agree to provide such services on substantially the
same terms as are available from another qualified firm, as evidenced by bona
fide firm offer provided to you by the Company. The foregoing right shall
continue in effect during the entire 3-year period, despite the exercise of, or
the refusal to exercise, the right during the period.
(e) Each subscriber for Common Stock must (i) complete and execute a
Subscription Agreement (in the form included as Exhibit A to the Prospectus) and
any other documents which may be required by you or the Company in connection
with such subscription (collectively, "Subscription Documents") and (ii) tender
payment in full for the Common Stock subscribed for ("Subscription Payment");
checks representing Subscription Payments should be made payable to "Grafton
State Bank, Escrow Agent"; you shall deliver Subscription Payments received by
you to the Escrow Agent, at 101 Falls Road, Grafton, Wisconsin 53024, by 12:00,
noon, on the business day following such receipt by you, together with a
schedule setting forth the amount of each such Subscription Payment and the
name, mailing address and state of residence of the subscriber. Concurrently
with your delivery of each Subscription Payment to the Escrow Agent, you shall
forward to the Company executed originals of all related Subscription Documents,
retaining copies of all such Subscription Documents for your records.
(f) Within five days following receipt by it of executed Subscription
Documents, the Company shall determine to accept or reject each subscription and
shall notify you and the Escrow Agent orally (to be confirmed in writing). If
the Company elects to reject a subscription, the related Subscription Payment
shall, upon receipt by the Escrow Agent of oral notice (to be confirmed in
writing) from the Company of such rejection, promptly be returned directly to
the rejected subscriber by the Escrow Agent, without interest thereon or
deduction therefrom.
<PAGE> 10
J.E. Liss & Company, Inc.
August______, 1998
Page 9
(g) Subject to the terms hereof and of the Escrow Agreement, the first
disbursement of subscription proceeds (including disbursement of amounts due to
you hereunder) shall take place not less than 5 days nor more than 15 days
following the date upon which cleared funds representing payment in full for at
least 1,000 shares of Common Stock (or such lesser amount as may be agreed to in
writing by the parties hereto, in their discretion) have been received by the
Escrow Agent under the terms of the Escrow Agreement; such initial disbursement
is referred to herein as the "Initial Closing," and the date thereof is referred
to as the "Initial Closing Date." Following the Initial Closing, subscription
proceeds shall be disbursed from time to time as agreed among you, the Company
and the Escrow Agent; each such further disbursement of subscription proceeds is
referred to herein as an "Additional Closing," and the date thereof as an
"Additional Closing Date." The Initial Closing and Additional Closings are
sometimes referred to herein as a "Closing" or "Closings"; and the Initial
Closing Date and Additional Closing Dates are sometimes referred to herein as a
"Closing Date" or "Closing Dates."
(h) Each Closing shall take place at the offices of the Escrow Agent,
in Grafton, Wisconsin, or, at your option, at such other place as you may agree
upon in writing with the Company.
(g) After the final Closing Date, you will not be considered to have
any continuing or future duty or obligation of any kind to the Company.
SECTION 5. Covenants of the Company. The Company covenants and agrees
that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective at the earliest possible time and will advise you
promptly upon notification from the Commission of effectiveness. The Company
will advise you promptly of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose, or of any notification of the suspension of
qualification of the Common Stock for sale in any jurisdiction or the initiation
or threatening of any proceedings for that purpose, and will also advise you
promptly of any request of the Commission for amendment or supplement to the
Registration Statement (either before or after it becomes effective), to any
Preliminary Prospectus or to the Prospectus, or for additional information, and
will not file or make any amendment or supplement to the Registration Statement
(either before or after it becomes effective), to any Preliminary Prospectus or
the Prospectus of which you have not been furnished with a copy prior to such
filing or to which you reasonably object; and the Company will file promptly and
will furnish to you at or prior to the filing thereof copies of all reports and
any definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to the Exchange Act subsequent to the date
of the Prospectus, and for so long as the delivery of a prospectus is required
in connection with the offer or sale of the Common Stock. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible time. The Company will
file the Prospectus pursuant to Rule 424(b) under the Securities Act, if
required, not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement or, if
applicable, such earlier time as may be required by Rule 430A of the Commission.
(b) If at any time when a prospectus relating to the Common Stock is
required to be delivered under the Securities Act, any event occurs as a result
of which the Prospectus, including any amendments or supplements, would include
an untrue statement of a material fact, or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus, including any amendments or
supplements, to comply with the Securities Act or the Rules and Regulations, the
Company will notify you and request you to suspend (and to advise the other
Selected Placement Agents, if any, to suspend) solicitation of offers to
purchase Common Stock; and the Company will promptly prepare and file with the
Commission an amendment or supplement which will correct such statement or
omission or an amendment which will effect such compliance; and, in case any
Selected Placement Agent (including you) is required to deliver a Prospectus
nine months or more after the effective date of the Registration Statement, the
Company upon request will prepare promptly and deliver to you such prospectus or
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Securities Act and applicable provisions of the Blue Sky
Laws.
<PAGE> 11
J.E. Liss & Company, Inc.
August______, 1998
Page 10
(c) The Company will not, prior to the final Closing Date, incur any
material liability or obligation, direct or contingent, or enter into any
material transaction other than in the ordinary course of business, except as
disclosed prior thereto in the Prospectus.
(d) The Company shall promptly prepare and file with the Commission
such reports as may be required to be filed under the Securities Act, the Rules
and Regulations, the Exchange Act or the Blue Sky Laws.
(e) Not later than 3 months after the end of the period referred to
below, the Company will make generally available to you and to the Company's
security holders an earnings statement (which need not be audited) covering a
period of at least 12 months beginning with its first fiscal quarter occurring
after the effective date of the Registration Statement, which will satisfy the
provisions of the last paragraph of Section 11(a) of the Securities Act and Rule
158 promulgated thereunder.
(f) The Company shall comply in all respects with the undertakings
given by it in connection with the qualification or registration of the Common
Stock under the Securities Act or the Blue Sky Laws.
(g) During such period as a prospectus is required by law to be
delivered in connection with sales by any Selected Placement Agent, the Company
will furnish to you at its expense, copies of the Registration Statement, the
Prospectus, any Preliminary Prospectus and all amendments and supplements to any
such documents in such quantities as you may reasonably request, for the
purposes contemplated by the Securities Act and the Rules and Regulations.
(h) The Company shall promptly apply for and take such steps as may
reasonably be necessary, to obtain and maintain the quotation of its Common
Stock by the National Daily Quotation Bureau ("Pink Sheets") and on the NASD OTC
Bulletin Board.
(i) During the period of 3 years following the date of this Agreement,
as soon as practicable after the end of each fiscal year, the Company will
furnish to you two copies, and to each of the other Selected Placement Agents
one copy, of the Annual Report of the Company containing a balance sheet as of
the close of such fiscal year and corresponding statements of income, members'
equity and cash flows for the fiscal year then ended, such financial statements
to be under the report of independent public accountants. During such period,
the Company will also furnish to you, if applicable, one copy of (i) each report
filed by the Company with the Commission, or with any exchange or quotation
source pursuant to the requirements of, or any agreement with, such exchange or
quotation source, as soon as practicable after the filing thereof and (ii) each
report of the Company mailed to its shareholders, as soon as available.
(j) The Company will apply the net proceeds from the sale of the Common
Stock to be sold by it hereunder for the purposes set forth in the Prospectus.
(k) The Company will not make any offer, sale, transfer, issuance or
other disposition of any of its securities within 120 days following the final
Closing Date, and will obtain the undertaking of each executive officer (as
defined under the Securities Act), director and holder of 10% or more of the
aggregate equity ownership of the Company immediately prior to such date not to
make any such offer, sale or other disposition within such period, otherwise
than hereunder or with your written consent or pursuant to bona fide gifts,
provided, in the last case, that each donee agrees in writing with you to be
bound by the same restrictions on the offer, sale and disposition of securities
as are expressed in this Section 5(k).
(l) The Company shall at all times reserve and keep available such
number of authorized shares of Common Stock as are sufficient to permit the
exercise of all Underwriter's Warrants; all shares of Common Stock issued upon
the exercise of Underwriter's Warrants, upon receipt of full payment therefor
and delivery to the purchaser, will be duly authorized, validly and legally
issued, fully paid and nonassessable, except to the extent of liability, if any,
imposed under Section 180.0622(2) of the Wisconsin Business Corporation Law for
employee wages
<PAGE> 12
J.E. Liss & Company, Inc.
August______, 1998
Page 11
for a period not exceeding six months in the case of any employee, and such
Common Stock will not have been issued in violation of or subject to any
preemptive rights provided for by law or by the Company's corporate charter or
bylaws or be subject to any lien, claim, encumbrance, security interest,
preemptive rights or any other claim of any third party.
(m) Prior to the final Closing Date, the Company will not issue,
directly or indirectly, without your prior written consent, a press release or
other communication or hold any press conference with respect to the Company,
its activities or the Offering.
(n) The Company will, promptly upon your request, prepare and file with
the Commission any amendments or supplements to the Registration Statement or
Prospectus, and take any other action, which, in your opinion or the opinion of
your counsel, may be reasonably necessary or advisable in connection with the
distribution of the Common Stock, and will use its best efforts to cause the
same to become effective as promptly as practicable.
SECTION 6. Covenants of the Managing Placement Agent. You will use your
best efforts to procure subscribers for Common Stock and will conduct the
Offering in compliance with the provisions of the Securities Act, the Rules and
Regulations, the Exchange Act, applicable Blue Sky Laws and the rules and
regulations of the NASD; accordingly, as of each Closing Date (as herein
defined), you will have (i) not made any untrue statement of a material fact and
not omitted to state a material fact required to be stated or necessary to make
any statement made not misleading, to the extent any representations are made by
you concerning the Offering or matters set forth in the Prospectus other than
those which are set forth in the Prospectus, and (ii) prior to any sale of
Common Stock, reasonably believed that an investment in the Common Stock was
suitable for the subscriber.
SECTION 7. State Qualifications. The Company further represents and
warrants to, and agrees with, you as follows:
(a) The Company will take all necessary action to either qualify or
register the Common Stock for sale or exempt such securities from such
qualification or registration in such states as you and the Company shall agree
upon in writing.
(b) The Company or its counsel will provide you or your counsel with
copies, at the time they are filed, of all correspondence, applications, forms,
and other documents filed with each jurisdiction where the Common Stock is to be
registered or qualified or offered in an exempt transaction.
(c) Upon receipt of notification by the Company of the qualification,
registration, or exemption of the Common Stock by an applicable jurisdiction,
the Company or its counsel will promptly notify you or your counsel in writing
of such action, which writing shall summarize the conditions and other
requirements imposed by such jurisdiction in granting such qualification,
registration or exemption, including offeree qualification or suitability and
broker-dealer and agent registration requirements applicable to the conduct of
the Offering (collectively, the "Blue Sky Letters"); you shall not offer or sell
the Common Stock in any jurisdiction until receipt of such Blue Sky Letters from
the Company or its counsel.
(d) In each jurisdiction where the Common Stock has been registered or
qualified or are offered or sold in an exempt transaction as provided above, the
Company will make and file such statements, documents, materials, and reports as
are or may be required to be made or filed.
(e) The Company will promptly provide to you for delivery to all
offerees and purchasers of Common Stock any additional information, documents or
instruments which you, the Company and/or your respective counsel deem necessary
to comply with the rules, regulations, and judicial and administrative
interpretations respecting compliance with such exemptions or qualifications and
registrations in those jurisdictions where the Common Stock is to be offered or
sold.
<PAGE> 13
J.E. Liss & Company, Inc.
August______, 1998
Page 12
SECTION 8. Payment of Expenses.
(a) Whether or not the transactions contemplated hereunder are
consummated or this Agreement becomes effective or is terminated for any reason,
except as set forth below (and in addition to the nonaccountable expense
allowance provided for in Section 4(b) of this Agreement), the Company will pay
or cause to be paid all costs and expenses incurred in connection with the
Offering, including without limitation (i) the Commission's registration fee,
(ii) the expenses of printing and distributing this Agreement, the Selected
Dealer Agreements, the Registration Statement, each Preliminary Prospectus, the
Prospectus (and any amendments or supplements thereto) and the Blue Sky
Memorandum (and any supplements thereto), (iii) fees and expenses of accountants
and counsel for the Company, (iv) expenses of qualification of the Common Stock
under state "blue sky" and securities laws, including the fees and disbursements
of counsel to the Managing Placement Agent in connection therewith, (v) filing
fees paid or incurred by the Managing Placement Agent in connection with filings
with the NASD and (vi) the costs and charges of its transfer agent and
registrar.
(b) The Company and each Selected Placement Agent (including the
Managing Placement Agent) will bear its own travel, lodging and living expenses
incurred in connection with marketing, dealer and other meetings and the cost of
all advertising, publicity and selling or promotional materials used in
connection therewith.
(c) Notwithstanding any other provision hereof to the contrary, whether
or not this Agreement is terminated pursuant to Section 12 hereof or otherwise,
the Company will pay or reimburse the Managing Placement Agent for the actual
itemized out-of-pocket expenses incurred by it in connection with investigating,
preparing to market and marketing of the Common Stock, including fees and
expenses of its counsel (in accordance with the provisions of NASD Conduct Rule
2710); provided, however, that, without the consent of the Company, such
reimbursement for legal fees shall not exceed in the aggregate $25,000, and
reimbursement for other out-of-pocket expenses shall not exceed in the aggregate
$7,500.
SECTION 9. Conditions of the Obligations of the Managing Placement
Agent. Your obligations hereunder shall be subject to the condition that all of
the representations and warranties of the Company herein as of the date hereof
and as of each Closing Date are true and correct in all material respects and to
the accuracy of the statements of the officers of the Company made pursuant
hereto, to the performance by the Company of its obligations hereunder, and to
the following conditions:
(a) The Registration Statement shall have become effective not later
than 1 P.M., Milwaukee, Wisconsin time, on the business day following the date
hereof, unless otherwise effective prior hereto pursuant to Rule 430A of the
Rules and Regulations or otherwise. The Prospectus shall have been filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations, if
required, within the applicable time period prescribed for such filing by the
Rules and Regulations and in accordance with Section 5(a) of this Agreement.
Prior to each Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been instituted or shall be pending or, to the
knowledge of the Company or you, shall be contemplated by the Commission or any
"blue sky" authority, and any request of the Commission or any Blue Sky
authority of any jurisdiction for additional information (to be included in the
Registration Statement or Prospectus or otherwise) shall have been complied with
to your reasonable satisfaction.
(b) The Common Stock shall have been qualified or registered for sale
under the Blue Sky Laws of such states as shall have been agreed upon between
you and the Company, pursuant to and as provided in Section 7 of this Agreement.
(c) The legality and sufficiency of the authorization, issuance and
sale of the Common Stock pursuant to the Registration Statement, the validity
and form of the certificates representing the Common Stock, the execution and
delivery of this Agreement, and all proceedings and other legal matters incident
thereto, and the form of the Registration Statement (except financial
statements, if any, and other financial data included in such Registration
Statement) shall have been approved by your counsel.
<PAGE> 14
J.E. Liss & Company, Inc.
August______, 1998
Page 13
(d) You shall not have advised the Company that the Registration
Statement or Prospectus, or any amendment or supplement thereto, contains an
untrue statement of fact, or omits to state a fact which is material and is
required to be stated therein or necessary to make the statements therein not
misleading, unless, in the opinion of your counsel, any such untrue statement or
omission is not material.
(e) Since the dates as of which information is given in the
Registration Statement:
(1) the Company shall not have sustained any material loss or
interference with its business from any labor dispute, fire,
explosion, flood or other calamity (whether or not insured), or
from any court or governmental action, order or decree; and
(2) there shall not have been any change in the equity ownership,
short-term debt or long-term debt of the Company or a change, or a
development involving a prospective change, in or affecting the
ability of the Company to conduct its business (whether by reason
of any court, legislative, other governmental action, order,
decree, or otherwise), or in the general affairs, management,
financial position, members' equity or results of operations of
the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as set forth
in or contemplated by the Registration Statement and Prospectus,
the effect of which on the Company, in any such case described in
clause (1) or (2) of this Section 9(e), is, in your judgment
(exercising your sole discretion), so material and adverse as to
make it impracticable or inadvisable to proceed with the
distribution of the Offering or the delivery of the Common Stock
as contemplated by the Registration Statement and the Prospectus.
(f) There shall have been furnished to you on the Initial Closing Date
and the final Closing Date the written opinion of Gordon F. Barrington, Esq.,
counsel to the Company, addressed to you and dated as of such Closing Date, to
the effect that, as of each Closing which has then occurred:
(1) the Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of
Wisconsin and possesses full power and authority to own its
property and conduct its business as described in the Prospectus;
(2) the Company is duly qualified to do business under the laws of
(and is in good standing as such in) each jurisdiction in which it
owns or leases property, has an office, or in which business is
conducted and such qualification is required, except where the
failure to so qualify would not have a material adverse effect on
the conduct of its business, its assets or its financial
condition;
(3) the Registration Statement has become effective under the
Securities Act and, to the best of the knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has
been instituted or is pending before, or threatened by, the
Commission or any "blue sky" or securities authority; such counsel
has no reason to believe that either the Registration Statement or
the Prospectus, or any document incorporated by reference therein,
contains any untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make
the statements therein not misleading (except for the financial
statements and other financial data included therein, as to which
such counsel need express no opinion); to the best knowledge of
such counsel, all descriptions in the Registration Statement and
the Prospectus of statutes, regulations and governmental
proceedings are accurate and fairly present the information
disclosed in all material respects, and such counsel does not know
of any legal, governmental or regulatory proceedings, pending or
threatened, required to be described in the Prospectus, nor of
<PAGE> 15
J.E. Liss & Company, Inc.
August______, 1998
Page 14
any contracts or documents of a character required to be described
in or filed as exhibits to the Registration Statement, which are
not so described or filed;
(4) the Company has full power and authority to enter into and
perform this Agreement; this Agreement, and the performance of the
obligations of the Company hereunder, have been duly authorized by
all necessary action and this Agreement has been duly executed and
delivered by and on behalf of the Company, and is a legal, valid
and binding agreement of the Company, enforceable in accordance
with its terms, except that rights to indemnity or contribution
may be limited by applicable law and enforceability of the
agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights generally; and no approval, authorization or consent of any
court, board, agency or instrumentality of the United States or of
any state or other jurisdiction is necessary in connection with
the execution and delivery of this Agreement, or in connection
with the issue or sale of the Common Stock by the Company pursuant
to this Agreement (other than under the Securities Act, applicable
Blue Sky Laws and the rules of the NASD) or the consummation by
the Company of any transaction contemplated by this Agreement;
(5) the shares of Common Stock to be sold in the Offering have
been duly authorized and, when issued and delivered by the
Company, against full payment therefor, will be legally and
validly issued, fully paid and nonassessable, except to the extent
of liability, if any, imposed under Section 180.0622(2) of the
Wisconsin Business Corporation Law for employee wages for a period
not exceeding six months in the case of any employee; to the best
knowledge of such counsel, such securities will not have been
issued subject to any lien, claim, encumbrance, security interest
or any other claim of any third party, except as described in the
Prospectus; and the Common Stock conforms as to legal matters in
all material respects to the description thereof set forth
contained in the Prospectus;
(6) to the best knowledge of such counsel, the execution and
performance of this Agreement will not contravene any of the
provisions of, or result in a default under, any agreement,
franchise, license, indenture, mortgage, deed of trust or other
instrument to which the Company is a party, or by which the
Company or its property is bound; or violate any of the provisions
of the articles of incorporation or bylaws of the Company (in each
case, as amended at the date of such opinion), or to the best
knowledge of such counsel, violate any statute, order, rule or
regulation of any regulatory or governmental body having
jurisdiction over the Company;
(7) to the best knowledge of such counsel, except as described in
the Prospectus, there is not pending or threatened any action,
suit, proceeding, inquiry or investigation to which the Company is
a party, or to which the property of the Company is subject,
before or brought by any court, governmental agency or body or
arbitration tribunal, which, if determined adversely to the
Company, would result in any material adverse change in the
business, financial position, net worth, results of operations or
prospects of the Company, or materially and adversely affect its
properties or assets;
(8) to the best knowledge of such counsel, the Company owns or
possesses the requisite licenses or other rights to use, all
trademarks, service marks, service names and trade names necessary
to conduct its business as described in or contemplated by the
Prospectus; to the best knowledge of such counsel, there is no
claim or action by any person pertaining to (or proceeding pending
or threatened which challenges) the rights of the Company with
respect to any trademarks, service marks, service names or trade
<PAGE> 16
J.E. Liss & Company, Inc.
August______, 1998
Page 15
names used in the conduct of its business as described in or
contemplated by the Prospectus; to the best knowledge of such
counsel, the products, services and processes of the Company have
not infringed and do not infringe upon proprietary rights held or
asserted by third parties which infringement, if resolved
adversely to the Company, could materially affect its earnings,
assets, affairs, business prospects or condition (financial and
other);
(9) to the best knowledge of such counsel, the Company has good
and marketable title to all the property and assets reflected as
owned by it in the Prospectus, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind or nature whatsoever
except those, if any, reflected in the Prospectus or which are not
material to the Company and do not materially affect the value of
such property and do not materially interfere with the use made or
proposed to be made of such property; to the best knowledge of
such counsel, all property held or used by the Company under
leases, licenses, franchises or other agreements are held by it
under valid, subsisting and enforceable leases, licenses,
franchises or other agreements, subject to bankruptcy, insolvency
or similar laws generally affecting the rights of creditors and
equitable principles affecting the right to obtain specific
enforcement or similar equitable relief;
(10) to the best knowledge of such counsel, there are no holders
of securities of the Company having rights to the registration of
such securities, and there are no options, warrants or other
rights to acquire any equity interest in the Company, or any
security convertible such equity interest, except as disclosed in
the Prospectus;
(11) the statements in the Registration Statement and Prospectus,
insofar as they are descriptions of specific contracts, agreements
or other documents, and the statements appearing in the Prospectus
under the caption "Description of Securities," insofar as they
refer to statements of law or legal conclusions, are accurate and
present fairly the information required to be shown;
(12) to the best knowledge of such counsel, the Company is not in
violation of its articles of incorporation or bylaws, or other
organizational or charter documents or in default (nor has an
event occurred which, with notice, lapse of time or both, would
constitute such a default) in the performance of any obligation,
agreement or condition contained in any bond, indenture, mortgage,
deed of trust, note, bank loan or credit agreement or any other
agreement or instrument to which the Company is a party or by
which the Company or any of its property may be bound or affected,
and to the best knowledge of such counsel, the Company is not in
violation of any franchise, license, permit, judgment, decree,
order, statute, rule or regulation, where such violation or
default could have a material adverse effect on the respective
business, property or operations of the Company;
(13) to the best knowledge of such counsel, there are no legal,
governmental or regulatory proceedings, pending or threatened,
required to be described in the Prospectus, which are not so
described;
(g) There shall have been furnished to you on the Initial Closing Date
and the final Closing Date the written opinion of the law firm of Kranitz &
Philipp, special securities counsel to the Company, addressed to you and dated
as of such Closing Date, to the effect that, as of each Closing which has then
occurred:
(1) the Registration Statement and Prospectus, and each amendment
or supplement thereto (except for the financial statements and
other financial data therein, as to which
<PAGE> 17
J.E. Liss & Company, Inc.
August______, 1998
Page 16
such counsel need express no opinion), as of their respective
effective or issue dates, comply as to form in all material
respects with the requirements of the Securities Act and the Rules
and Regulations and any required filing of the Prospectus and any
supplements thereto pursuant to Rule 424(b) of the Rules and
Regulations have been made in the manner and within the time
period required by such Rules and Regulations; and
(2) to the best knowledge of such counsel, there are no contracts
or other documents required to be summarized or described in the
Registration Statement or to be filed as exhibits thereto which
are not so summarized, described or filed, nor does such counsel
know of any regulations required to be described or referred to in
the Registration Statement or Prospectus which are not described
or referred to in the Registration Statement or Prospectus.
(h) If you shall so request in writing, you shall have received, on the
Initial Closing Date, a survey prepared by Kranitz & Philipp, addressed to you
and dated as of such Closing Date, relating to "blue sky" laws of such
jurisdictions upon which you and the Company agree in writing ("Blue Sky
Survey"); the Blue Sky Survey will advise that the appropriate "blue sky"
action, if any, was taken in each of such jurisdictions so as to permit such
offers and sales as indicated in such Survey; the Blue Sky Survey may be based
upon an examination of the statutes and regulations, if any, of such
jurisdictions as reported in standard compilations and upon interpretive advice
obtained from representatives of certain securities commissions.
(i) If you so request in writing, there shall have been furnished to
you, on each Closing Date an opinion of Kranitz & Philipp, addressed to you and
dated as of each such Closing Date, with respect to the Common Stock, the
Registration Statement and the Prospectus, and other related matters as you may
reasonably require, and the Company shall have furnished to such counsel such
documents and shall have exhibited to them such papers and records as they
request for the purpose of enabling them to pass upon such matters.
(j) There shall have been furnished to you, on the Initial Closing Date
and the final Closing Date, a certificate of the principal executive officer and
the principal financial officer of the Company, dated as of such Closing Date,
to the effect that:
(1) the representations and warranties of the Company which are
set forth in Section 2 hereof are true and correct as of the date
of this Agreement and as of each Closing Date, as if again made on
and as of such Closing Date, and the Company has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such date;
(2) to the best of their knowledge, the Commission has not issued
an order preventing or suspending the use of the Prospectus or any
Preliminary Prospectus filed as part of the Registration Statement
or any amendment thereto, no stop order suspending the
effectiveness of the Registration Statement or enjoining the use
of the Prospectus has been issued, and no proceedings for that
purpose have been instituted or are pending or contemplated under
the Securities Act;
(3) each of the respective signers of the certificate has
carefully examined the Registration Statement and the Prospectus
and, in his opinion and to the best of his knowledge, information
and belief, the Registration Statement and the Prospectus and any
amendments or supplements thereto contain all statements required
to be stated therein, and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto includes
any untrue statement of material fact or omits to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading, and, since the effective
date of the Registration Statement, there has occurred
<PAGE> 18
J.E. Liss & Company, Inc.
August______, 1998
Page 17
no event required to be set forth in an amended or supplemented
prospectus which has not been so set forth: and
(4) since the effective date of the Registration Statement, there
has not been any material adverse change or, to their knowledge, a
development involving a prospective material adverse change in the
business, properties, financial condition or earnings of the
Company, whether or not arising from transactions in the ordinary
course of business, except as disclosed in said Registration
Statement theretofore amended including the proposed amendment
thereto delivered to you prior to or contemporaneously with the
execution of this Agreement or (but only if you expressly consent
thereto in writing) delivered to you thereafter; since such date
and except as so disclosed, or in the ordinary course of business,
the Company has not incurred any liability or obligation, direct
or indirect, or entered into any material transaction; since such
date and except as so disclosed there has not been any material
change in the equity ownership of the Company or its short-term
debt or long-term debt; since such date and except as so
disclosed, the Company has not incurred any material contingent
obligations, and no material litigation is pending or, to their
knowledge, threatened against the Company; and, since such date
and except as so disclosed, the Company has not sustained a
material loss or interference with its business from any labor
dispute, fire, explosion, flood or other calamity (whether or not
insured) or from any court or governmental action, order or
decree.
The delivery of the certificate provided for in this Section 9(k) shall
be and constitute a representation and warranty of the Company as to the facts
required in the immediately foregoing clauses (1), (2), (3) and (4) of this
Section 9(j) to be set forth in said certificate.
(k) There shall have been furnished to you, on or before the initial
Closing Date, written agreements signed by the Company, its directors, its
executive officers and each holder of 10% or more of its equity securities to
the effect that such persons will not make any offer, sale or other disposition
of any equity interest in the Company for a period of 120 days after the final
Closing Date, except with the prior written consent of the Managing Placement
Agent or pursuant to bona fide gifts, provided, in the last case, that each
donee agrees in writing with you to be bound by the same restrictions on the
offer, sale or disposition of equity interests in the Company as are set forth
in the agreements described in this Section 9(k).
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and your counsel. The Company shall promptly furnish you with such
manually signed or conformed copies of such opinions, certificates, letters and
other documents as you may reasonably request from time to time. With respect to
any Closing, by written instrument delivered to the Company, you may from time
to time, in your sole discretion, waive any of the requirements imposed upon the
Company pursuant to this Section, including without limitation the requirement
that any opinion, certificate, survey or other document be delivered to you at
any Closing or as of any Closing Date; any such waiver by you with respect to a
Closing shall not in any way be construed as such waiver with respect to any
other Closing. If any condition to your obligations hereunder to be satisfied
prior to or a Closing Date is not so satisfied, this Agreement at your election
will terminate upon notification to the Company without liability on the part of
any Selected Placement Agent (including you) or the Company, except for the
expenses or fees to be paid or reimbursed by the Company pursuant to Sections 4
and 8 hereof and except to the extent provided in Section 10 hereof.
SECTION 10. Indemnification.
(a) The Company agrees to indemnify and hold harmless you, each of your
officers, directors, employees and agents, and each person, if any, who controls
you within the meaning of the Securities Act or the Exchange Act against any
losses, claims, damages or liabilities, joint or several, to which you or each
such officer, director, employee, agent or controlling person may become subject
under the Securities Act, the Exchange Act, Blue Sky
<PAGE> 19
J.E. Liss & Company, Inc.
August______, 1998
Page 18
Laws or other federal or state laws or regulations, at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Company), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
or incorporated in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or in any application filed
under any Blue Sky Law or other document executed by the Company specifically
for that purpose or based upon written information furnished by the Company and
filed in any state or other jurisdiction in order to qualify any or all of the
Common Stock under the securities laws thereof (any such document, application
or information being hereinafter referred to as a "Blue Sky Application") or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; the Company agrees to reimburse you and each
such other indemnified person for any legal or other expenses incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that:
(1) any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto or in any Blue Sky Application in reliance upon
and in conformity with written information furnished to the
Company by you specifically for use therein (but in no event shall
the assistance in the drafting of all or any portion of the
Registration Statement, any Preliminary Prospectus, the
Prospectus, such amendment or supplement or such other document of
the type referred to in the preceding paragraph by you or your
counsel constitute such information); or (2) if such statement or
omission was contained or made in a Preliminary Prospectus and
corrected in the Prospectus and (i) any such loss, claim, damage
or liability suffered or incurred by you (or any person who
controls you) resulted from an action, claim or suit by any person
who purchased Common Stock from you in the Offering, and (ii) you
failed to deliver or provide a copy of the Prospectus to such
person at or prior to the confirmation of the sale of such Common
Stock in any case where such delivery is required by the
Securities Act unless such failure was due to failure by the
Company to provide copies of the Prospectus to you as required by
this Agreement.
The indemnification obligations of the Company as provided above (i)
extend upon the same terms and conditions to, and shall inure to the benefit of,
each Selected Placement Agent and each of its respective officers, directors and
each person, if any, who controls such Selected Placement Agent within the
meaning of the Securities Act or the Exchange Act and (ii) are in addition to
any liabilities the Company may otherwise have under other agreements, under
common law or otherwise.
(b) You will indemnify and hold harmless the Company, each of the
directors, officers, employees and agents of the Company, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or any such director, officer, employee, agent or controlling person may
become subject under the Securities Act, the Exchange Act, Blue Sky Laws or
other federal or state laws or regulations, at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
your written consent, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, or in any Blue Sky Application, or arise out of or are based upon the
omission or 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 such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application, in reliance
<PAGE> 20
J.E. Liss & Company, Inc.
August______, 1998
Page 19
upon and in conformity with any written information furnished to the Company by
you specifically for use therein (but in no event shall the assistance in the
drafting of all or any portion of the Registration Statement, any Preliminary
Prospectus, the Prospectus, such amendment or supplement or such other document
of the type referred above by you or your counsel constitute such information).
You agree to reimburse the Company and each such other indemnified person for
any legal or other expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action.
Your indemnification obligations as provided above (i) extend upon the
same terms and conditions to, and shall inure to the benefit of, the Company and
each of its respective officers, directors and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act and
(ii) are in addition to any liabilities which you may otherwise have under other
agreements, under common law or otherwise.
(c) Promptly after receipt by an indemnified party under this Section
10 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against an indemnifying party under
this Section 10, notify the indemnifying party in writing of the commencement
thereof, but the omission to so notify the indemnifying party will not relieve
an indemnifying party from any liability which it or he may have to any
indemnified party otherwise than under this Section 10. In case any such action
is brought against any indemnified party, and such indemnified party notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and to the extent that it may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it or he
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election to assume the defense of such action
and upon approval by the indemnified party of counsel to the indemnifying party,
the indemnifying party will not be liable to such indemnified party under this
Section 10 for any legal expenses subsequently incurred by such indemnified
party as a result of or in connection with the defense of such action, unless:
(1) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance
with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, in the
event that you and one or more of your directors, officers or
controlling persons are the indemnified parties);
(2) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of
commencement of the action; or
(3) the indemnifying party has authorized the employment of
counsel at the expense of the indemnifying party.
(d) In order to provide for just and equitable contribution under the
Securities Act or the Exchange Act in any case in which (1) any person who would
be entitled to indemnification pursuant to this Section 10 if enforceable
according to its terms makes a claim for indemnification pursuant to this
Section 10, 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
this Section 10 provide for indemnification in such case, or (2) contribution
under the Securities Act or the Exchange Act may otherwise be required, you
shall contribute to the aggregate losses, claims, damages or liabilities
incurred (which shall, for all purposes of this Agreement, include, but not be
limited to, all costs of defense and investigation and all attorneys' fees) in
either such case (after
<PAGE> 21
J.E. Liss & Company, Inc.
August______, 1998
Page 20
contribution from others) an amount equal to the product determined by
multiplying the total amount of such losses, claims, damages or liabilities by a
fraction, the numerator of which equals the fees paid to you under Section 4
plus the amount paid to you under Section 8, and the denominator of which is
equal to the aggregate proceeds of the sale of Common Stock in the Offering
(before deduction of commissions or expenses), and the Company shall responsible
for the balance of such losses, claims, damages or liabilities; provided, that
with respect to the rescission of the sale of any Common Stock, your liability
shall not exceed the compensation earned by you under this Agreement with
respect to the rescinded sale. If the foregoing allocation is not permitted by
law, there shall be considered, in determining the amount of contribution to
which the respective parties are entitled, the relative benefits received by
each party from the sale of Common Stock (taking into account the portion of the
proceeds of the Offering realized by each), the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or omission, and
any other equitable considerations appropriate in the circumstances. The Company
and you agree that it would not be equitable if the amount of such contribution
were determined by pro rata or pro capita allocation. Neither you nor any person
controlling you shall be obligated to make contribution hereunder which in the
aggregate exceeds the total purchase price of Common Stock sold to subscribers
procured by you, less the aggregate amount of any damages which you and your
controlling persons have otherwise been required to pay in respect of the same
or any substantially similar claim. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11 of the Securities Act) shall
be entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. The foregoing contribution agreement shall in no way affect
the contribution liabilities of any persons having liability under Section 11 of
the Securities Act other than those identified in this Section 10 as being
entitled to indemnification. Any of the officers, directors or controlling
persons of a Selected Placement Agent (including you) and any officers,
directors or controlling persons of the Company shall be entitled to
contribution to the same extent as you or the Company.
SECTION 11. Effective Date. This Agreement shall become effective
immediately upon execution as to Sections 4, 8 and 10 and, as to all other
provisions, at 9 A.M., Milwaukee, Wisconsin time, on the day following the date
upon which the Registration Statement becomes effective, unless such a day is a
Saturday, Sunday or holiday (in which event this Agreement shall become
effective at such hour on the business day next succeeding such Saturday, Sunday
or holiday); notwithstanding the foregoing, this Agreement shall nevertheless
become effective at such earlier time after the Registration Statement becomes
effective as you may determine on and by notice to the Company and the Company
(which notice may be oral, to be confirmed promptly in writing).
SECTION 12. Termination. Without limiting the right to terminate
this Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you or
by you by notice to the Company at any time prior to the time this Agreement
shall become effective as to all its provisions, and any such termination shall
be without liability on the part of the Company or you (except for the fees or
expenses to be paid or reimbursed by the Company pursuant to Sections 4 and 8
hereof or paid by the Company pursuant to Section 10 hereof).
(b) This Agreement may also be terminated by you prior to the final
Closing Date if, in your judgment and discretion, the offer, offer for sale,
sale and delivery of the Common Stock is rendered impracticable or inadvisable
because:
(1) additional material governmental restrictions or limitations,
not in force on the date hereof, shall have been imposed upon
trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange,
the American Stock Exchange or over-the-counter, or trading in
securities generally shall have been suspended or limited on
either such exchange or over-the-counter or a general banking
moratorium shall have been established by federal or New York
authorities;
<PAGE> 22
J.E. Liss & Company, Inc.
August______, 1998
Page 21
(2) an outbreak or escalation of hostilities or other national or
international calamity or any substantial change in political,
financial or economic conditions shall have occurred or shall have
accelerated to such extent as, in your judgment, to have a
material adverse effect on the general securities market or make
it impractical or inadvisable to proceed with the Offering;
(3) any event shall have occurred or shall exist which makes
untrue or incorrect in any material respect any statement or
information contained in the Registration Statement or which is
not reflected in the Registration Statement but should be
reflected therein in order to make the statements or information
contained therein not misleading in any material respect;
(4) the Company shall have 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 governmental
action or decree;
(5) the passage by the Congress of the United States or any state
legislative body of any act or measure, or the adoption or any
proposed adoption of any orders, rules, legislation or regulations
by any governmental body, any authoritative accounting institute
or board or any governmental executive which is reasonably
believed likely by the representative to have a material impact on
the business, financial condition or financial statements of the
Company, taken as a whole, or the market for the Common Stock; or
(6) any material adverse change having occurred since the
respective dates as of which information is given in the
Registration Statement and the Prospectus in the condition
(financial or otherwise) of the Company, taken as a whole, or in
the earnings, affairs or business prospects of the Company, taken
as a whole, whether or not arising in the ordinary course of
business.
Any termination pursuant to this Section 12(b) shall be without
liability on the part of any Selected Placement Agent (including you) to the
Company, or on the part of the Company to any Selected Placement Agent
(including you), except for expenses or fees to be paid or reimbursed by the
Company pursuant to Section 4 and 8 hereof and except as to indemnification as
provided in Section 10 hereof.
SECTION 13. Parties.
(a) This Agreement shall inure to the benefit of and be binding upon
you, the Company, and the respective successors and assigns of each.
(b) No purchaser of Common Stock from you shall be construed as a
successor or assign by reason merely of such purchase.
(c) Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person or corporation, other than the parties
hereto and their respective successors and assigns and the controlling persons,
officers and directors and counsel referred to in this Agreement, any legal or
equitable right, remedy or claim under or in respect to this Agreement or any
provision herein contained.
SECTION 14. Representations and Indemnities to Survive Delivery.
(a) All representations, warranties, covenants and agreements of the
Company and the Managing Placement Agent contained herein or in certificates of
officers delivered pursuant hereto, and the indemnity agreement contained in
Section 10 hereof, shall survive the delivery and execution of this Agreement
and the final Closing Date
<PAGE> 23
J.E. Liss & Company, Inc.
August______, 1998
Page 22
and shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of you or any person controlling you, any
Selected Placement Agent or any controlling person thereof, the Company or any
of its officers, directors, or controlling persons.
(b) The indemnification provisions of Section 10 hereof are in addition
to any and all remedies or rights which either of the parties hereto may have,
including the right to sue and recover damages for any breach of any
representation, warranty or covenant made or given by either of the parties
hereto to any other party.
SECTION 15. Notices. All communications hereunder will be in writing
and will be mailed, delivered, telegraphed or telecopied and confirmed as
follows:
If to the Managing Placement Agent: J.E. Liss & Company, Inc.
424 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
If to the Company: Heartland Wisconsin Corp.
6635 South 13th Street
Milwaukee, Wisconsin 53221
SECTION 16. Integration. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matters hereof
and supersedes all prior agreements and understandings among the parties both
written and oral.
SECTION 17. Partial Unenforceability. If any Section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other Section, paragraph or provision hereof.
SECTION 18. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return the enclosed duplicate hereof, whereupon it
will become a binding agreement between us in accordance with its terms.
Very truly yours,
Heartland Wisconsin Corp.
By:___________________________________
Scott A. Blair, President
Accepted and agreed to as of the day and year first above written.
J.E. Liss & Company, Inc.
By:_____________________________________
Jerome E. Liss, President
<PAGE> 1
EXHIBIT 3.3
ARTICLES OF AMENDMENT OF THE REGISTRANT
<PAGE> 2
DFI/CCS/Corp
Form 4
WISCONSIN
7/96
ARTICLES OF AMENDMENT
Stock (for profit)
A. Name of Corporation: Heartland Wisconsin Corp.
(prior to any change effected by this amendment)
Text of Amendment (Refer to the existing articles of incorporation and
instruction A. Determine those items to be changed and set forth below
the number identifying the paragraph being changed and how the amended
paragraph is to read.)
RESOLVED, THAT, the articles of incorporation be amended as
follows:
Article 2 is amended to read as follows: The corporation shall he
authorized to issue 20,000,000.00 shares of $0.0001 par value common
stock.
B. Amendment(s) adopted on June 19, 1998
------------------------------------
(date)
Indicate the method of adoption by checking the appropriate choice
below:
( ) In accordance with sec. 180.1002, Wis. Stats. (By the Board
of Directors)
OR
( X ) In accordance with sec. 180.1003, Wis. Stats. (By the Board
of Directors and Shareholders)
OR
( ) In accordance with sec. 180.1005, Wis. Stats. (By
Incorporators or Board of Directors, before issuance of
shares)
C. Executed on behalf of the corporation on June 19, 1998
-------------------------
(date)
/s/ Frank P. Giuffre
-------------------------
(signature)
Frank P. Giuffre
-------------------------
(printed name)
President
-------------------------
(officer's title)
D. This document was drafted by Gordon F. Barrington
-------------------------
(name of individual required by law)
FILING FEE - $40.00 OR MORE
SEE REVERSE for Instructions, Filing Fees and Procedures
Printed on Recycled Paper
<PAGE> 1
EXHIBIT 5.1
OPINION OF GORDON F. BARRINGTON, ESQ.
AS TO
THE LEGALITY OF THE COMMON STOCK
<PAGE> 2
[GORDON F. BARRINGTON LETTERHEAD]
July 28, 1998
Heartland Wisconsin Corp.
6635 South 13th Street
Milwaukee, Wisconsin 53221
Ladies and Gentlemen:
I have acted as counsel Heartland Wisconsin Corp., a Wisconsin
corporation ("Company"), in connection with (i) the organization of the Company
under the Wisconsin Business Corporations Law and (ii) the proposed public
offering by the Company of 400,000 shares of its common stock, par value $0.0001
per share ("Common Stock"). In connection with such proposed public offering of
Common Stock, the Company has filed with the United States Securities and
Exchange Commission a registration statement ("Registration Statement") on Form
SB-2 (File No. 333-48527), relating to the registration of the Common Stock
under the Securities Act of 1933, as amended ("Securities Act"). Unless
otherwise defined herein, capitalized terms used in this opinion shall have the
meanings set forth in the Accord identified in the following paragraph.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord ("Accord") of the American Bar
Association Section on Business Law (1991). As a consequence, it is subject to a
number of qualifications, exceptions, definitions, limitations on coverage and
other limitations, all as more particularly described in the Accord, and this
Opinion Letter should be read in conjunction therewith. The law covered by the
opinions expressed herein is limited to the federal laws of the United States
and the laws of the State of Wisconsin.
In preparing this Opinion Letter, I have examined the Registration
Statement, including the Articles of Incorporation of the Company and the
underwriting agreement ("Managing Placement Agent Agreement"), between the
Company and J.E. Liss & Company, Inc., the underwriter of the proposed offering,
in each case as filed as exhibits to the Registration Statement. I have also
examined originals or photostatic, certified or conformed copies of all such
agreements, documents, instruments, corporate records, certificates of public
officials, public records and certificates of officers of the Company as I have
deemed necessary or appropriate in the circumstances. In addition to the
assumptions set forth in Section 4 of the Accord, I have relied upon factual
representations made to us by the Company (including the representations set
forth in the Managing Placement Agent Agreement).
<PAGE> 3
Heartland Wisconsin Corp.
July 28, 1998
Page 2
Based upon such examination and review, I am of the opinion that the
shares of Common Stock proposed to be sold by the Company as provided in the
Registration Statement have been duly authorized for issuance and, subject to
the Registration Statement becoming effective under the Securities Act and to
compliance with applicable state securities laws, such shares of Common Stock,
when sold and delivered in accordance with the provisions of the Managing
Placement Agent Agreement and as described in the Registration Statement, will
be legally and validly issued, fully paid and non-assessable, except to the
extent of liability, if any, imposed under Section 180.0622(2) of the Wisconsin
Business Corporations Law for employee wages for a period not exceeding six
months in the case of any employee.
I consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ GORDON F. BARRINGTON
GORDON F. BARRINGTON
<PAGE> 1
EXHIBIT 10.1
MANAGEMENT AGREEMENT
BETWEEN
THE REGISTRANT AND GIUFFRE BROS. CRANES, INC.
<PAGE> 2
MANAGEMENT AGREEMENT
AGREEMENT made as of the 1st day of July, 1998, by and between Heartland
Wisconsin Corp., a Wisconsin corporation ("Company"), and Giuffre Bros. Cranes,
Inc., a Delaware corporation ("Giuffre Cranes").
WITNESSETH:
WHEREAS, the Company is engaged in the business of providing financing,
principally in the form of leases ("Leases"), to facilitate the acquisition of
products ("Equipment") marketed to customers of Giuffre Cranes and its
affiliates, as well as to unaffiliated purchasers of Equipment ("Business");
WHEREAS, Giuffre Cranes is experienced in the financing of Equipment; and
WHEREAS, the Company is desirous of availing itself of the benefits and
advantages of the experience of Giuffre Cranes without, however, affecting the
rights and duties of its Board of Directors.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties hereto, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is mutually agreed by the
parties hereto as follows:
1. Employment. The Company does hereby engage Giuffre Cranes, and Giuffre
Cranes does hereby agree to be employed by the Company, upon the terms and
conditions hereinafter set forth.
2. Obligations Giuffre Cranes. Giuffre Cranes shall, for the best interests
of the Company in all respects, diligently and to the best of its ability:
(a) Within the limits of the budgets which will be allocated for the
purpose by the Company, exercise general supervision over the Business to
the end that it shall be operated and maintained in a proper, efficient and
businesslike manner;
(b) Supervise and coordinate the management and operation of the
Business;
(c) Within the limits of the budgets which will be allocated for the
purpose by the Company, and in accordance with the policies as established
by the Board of Directors of the Company, supervise and manage the
operation of the Business, and keep true and accurate books and records
showing all income and expense in connection with the operation of the
Business, which books and records shall at all times be open and accessible
to the Board of Directors of the Company, or to any of the Board's duly
authorized representatives;
(d) Generally perform such other duties as it may deem necessary or
desirable within the limits established by the Board of Directors of the
Company, in order to effectuate the efficient and economical operation of
the Business;
(e) Provide to the Company monthly income statements (accrual basis)
and at such times as the Company shall reasonably direct, provide
statements prepared by certified public accountants selected by the Company
(the cost of which shall be considered an operating expense of the
Business) showing in reasonable detail the receipts, expenditures and
general operations of the Business
It is agreed that the services to be provided by Giuffre Cranes under this
Agreement shall not be required unless requested by the Company and that, in any
event, such services shall include only those services which Giuffre Cranes is
normally equipped and qualified to perform in the usual course of its business;
and that Giuffre Cranes shall not be obligated to continue to provide any such
service which it considers to be impractical or uneconomic from the viewpoint of
its business as a whole. In the event that the Company may request Giuffre
Cranes to perform any special or unusual services in addition to those referred
to herein, arrangements therefor shall be made by separate agreement of the
parties.
<PAGE> 3
3. Rights of Giuffre Cranes. It is mutually agreed that Giuffre Cranes
shall have sole discretion as to the assigning of such of its employees as it
may designate to perform any services which Giuffre Cranes may undertake to
perform for the Company hereunder. It is further agreed that Giuffre Cranes may
supply similar management services to other companies, whether in the financing
business or not, and that Giuffre Cranes may do business under this Agreement on
behalf of the Company with any corporation, company, partnership or association
in which Giuffre Cranes, its directors, officers, other employees or
stockholders may be interested, financially or otherwise.
4. Compensation.
(a) Amount of Compensation. For the services to be rendered by Giuffre
Cranes hereunder, the Company shall pay to Giuffre Cranes $12,000 per year
("Management Fee"), such amount to be payable in four equal installments on
the first day of March, June, September and December of each year. The
Management Fee will reimburse Giuffre Cranes for customary and routine
general overhead expenses incurred in performing its obligations to the
Company, including, without limitation (i) rent or depreciation, utilities,
property taxes, and the cost of capital equipment unless acquired primarily
for the benefit of the Company; (ii) expenses of a general and
administrative nature that are customarily incurred by Giuffre Cranes for
its own account and are not attributable to the Company; and (iii) salaries
and fringe benefits incurred by or allocated to any Controlling Person of
Giuffre Cranes. For purposes of this Agreement, "Controlling Person" is any
person, whatever his or her title, who performs functions for Giuffre
Cranes similar to those of the chairman or member of the Board of
Directors; executive management, such as the president, executive vice
president or senior vice president, corporate secretary, or treasurer; or
who holds a 5% or more equity interest in Giuffre Cranes or a person having
the power to direct or cause the direction of Giuffre Cranes, whether
through the ownership of voting securities, by contract, or otherwise.
(b) Adjustment in Compensation. It is understood and agreed that the
Management Fee specified above shall be subject to adjustment by mutual
consent of the parties at any time and that this Agreement may be amended
in writing accordingly.
(c) Compensation for Nonemployees of Giuffre Cranes. It is further
understood and agreed that the Management Fee payable to Giuffre Cranes
hereunder shall represent compensation for services performed only by
regular employees of Giuffre Cranes. Fees charged by independent advisors,
consultants and any other persons not regularly employed by Giuffre Cranes
who may be retained by the Company or by Giuffre Cranes on behalf of the
Company shall be paid by the Company.
5. Expenses. The Company shall reimburse Giuffre Cranes for (i) the costs
of operations of the Company and the Business (e.g., documentation, securities
filings, other direct costs of selecting, negotiating, monitoring, and
liquidating Equipment and/or Leases (including consultants, attorneys,
accountants, appraisers, due diligence expenses, travel, and investment banking
fees and commissions)); (ii) Company accounting (e.g., maintenance of Company
books and records, bookkeeping fees, preparation of regulatory and tax reports,
and costs of computer equipment or services used by the Company); (iii) investor
communications (e.g., design, production, and mailing of all reports and
communications to investors in the Company, including those required by
regulatory agencies); (iv) investor documentation; (v) legal and tax services;
and (vi) any other related operational or administrative expenses necessary for
the operation of the Company and the Business. Giuffre Cranes will not be
reimbursed by the Company for customary and routine general overhead expenses
incurred in performing its obligations to the Company, including, without
limitation those expenses described in Paragraph 3(a) hereof. The reimbursement
of expenses pursuant to this Paragraph shall made promptly, upon demand, subject
to the presentation by Giuffre Cranes and approval by the Company of valid
receipts and other appropriate documentation for such expenses.
7. Term; Termination.
(a) The employment of Giuffre Cranes hereunder shall commence on the
date of this Agreement, and shall continue through February 28, 2000. This
Agreement shall be automatically extended for additional two-year periods
thereafter unless notice of termination be given in writing, by either
party, at least 90 days prior to the termination date of the original or
any renewal period, given as provided in this Agreement.
2
<PAGE> 4
(b) This Agreement may be terminated by either party hereto, with or
without "cause" (for any reason or no reason at all), at any time, by
giving 90 days prior written notice of termination to the other (which
notice shall be given as provided in this Agreement); such termination
shall be effective on the 90th day following delivery of such notice. If
the employment of Giuffre Cranes under this Agreement is so terminated, the
Company shall make one or more cash payments to Giuffre Cranes in an
aggregate amount equal to (i) a pro rata portion of the compensation earned
for the fiscal year in which termination occurs prorated to the date of
termination, plus (ii) any unreimbursed expenses accruing to the date of
termination.
8. Confidential Information. Giuffre Cranes agrees that it will not at any
time during the term of this Agreement, or thereafter, divulge to any person,
firm, association, or corporation any information received by it during the
course of its employment hereunder with regard to the financial or other
confidential affairs of Company and all such information shall not be revealed
to anyone, in any manner, without the express written consent of the Board of
Directors of Company, except disclosures made in the course of the ordinary
conduct of the Business.
9. Employee Benefits. All compensations and other remunerations, expense
allowance, vacations, sick leave and absence, insurance matters and any other
employment matters with reference to personnel provided Company by Giuffre
Cranes shall be contracted for by separate, distinct and independent agreements
by Company, and all such compensation, remunerations, expense allowances,
vacations, sick leave and absence, insurance matters and any other employment
matters shall be exclusive of the terms of this Agreement. All personnel
provided to the Company by Giuffre Cranes pursuant hereto are employees of
Giuffre Cranes, and nothing herein contained shall be interpreted to the
contrary.
10. Miscellaneous.
(a) Transfer and Assignment. This Agreement shall not be assigned or
transferred by Giuffre Cranes without the prior written consent of the
Company. This Agreement shall be binding upon and inure to the benefit of
all of the parties hereto and their respective successors and assigns.
(b) Severability; Governing Law. Nothing contained herein shall be
construed to require the commission of any act contrary to law. Should
there be any conflict between any provisions hereof and any present or
future statute, law, ordinance, regulation, or other pronouncement having
the force of law, the latter shall prevail, but the provision of this
Agreement affected thereby shall be curtailed and limited only to the
extent necessary to bring it within the requirements of the law, and the
remaining provisions of this Agreement shall remain in full force and
effect. This Agreement is made under and shall be construed pursuant to the
internal laws of the State of Wisconsin.
(c) Counterparts. This Agreement may be executed in several
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the
parties did not sign the original or the same counterparts.
(d) Modification. This Agreement may be modified, amended, superseded,
or cancelled, and any of the terms, covenants, representations, warranties
or conditions hereof may be waived, only by a written instrument executed
by the party or parties to be bound by any such modification, amendment,
supersession, cancellation, or waiver.
(e) Entire Agreement. This Agreement constitutes the entire agreement
and understanding of the parties with respect to the subject matter hereof
and supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. No representation, promise,
inducement, statement or intention has been made by any party hereto that
is not embodied herein, and no party shall be bound by or liable for any
alleged representation, promise, inducement, or statement not so set forth
herein.
(f) Waiver. The waiver by either of the parties, express or implied, of
any right under this Agreement or any failure to perform under this
Agreement by the other party, shall not constitute or be deemed as a waiver
of any other right under this Agreement or of any other failure to perform
under this Agreement by the other party, whether of a similar or dissimilar
nature.
<PAGE> 5
(g) Notices. Any notice under this Agreement must be in writing, may be
telecopied, sent by express courier, or hand-delivered, or may be served by
depositing the same in the United States mail, addressed to the party to be
notified, postage-prepaid and registered or certified with a return receipt
requested. The addresses of the parties for the receipt of notice shall be
as follows:
If to the Company: Heartland Wisconsin Corp.
6635 South 13th Street
Milwaukee, Wisconsin 53221
Attention: Scott A. Blair
If to Giuffre Cranes: Giuffre Bros. Cranes, Inc.
6635 South 13th Street
Milwaukee, Wisconsin 53221
Attention: Frank P. Giuffre
Each party may change its address for notice by giving notice thereof in
the manner provided above.
(h) Arbitration. If at any time any controversy shall arise under this
Agreement which might be the subject of any action at law or of a suit in
equity, the same shall be submitted to the decision of three arbitrators,
one to be named by the Company, one by Giuffre Cranes and the third by the
two so named, and the award of the arbitrators or of a majority of them
being made and reported to any court having jurisdiction, 90 days from the
date of submission, the judgment thereon shall be final. In this and in all
other respects such arbitration shall be had in accordance with the
provisions of the laws of the State of Wisconsin. All matters of
controversy or dispute shall within 30 days after the same arise be
submitted to arbitration in the manner herein provided.
IN WITNESS WHEREOF, the Company and Giuffre Cranes have caused this
Agreement to be executed in their corporate names by their corporate officers,
having been thereunto duly authorized by their respective Boards of Directors,
as of the day and year first above written.
HEARTLAND WISCONSIN CORP.
By:________________________________________
Scott A. Blair, Chief Executive Officer
and President
GIUFFRE BROS. CRANES, INC.
By:________________________________________
Frank P. Giuffre, President
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
BETWEEN
THE REGISTRANT AND SCOTT A. BLAIR
<PAGE> 2
HEARTLAND WISCONSIN CORP.
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of the 1st day of
July, 1998, by and between Heartland Wisconsin Corp, a Wisconsin corporation
("Company"), and Scott A. Blair, an individual ("Blair"). W I T N E S S E T H:
WHEREAS, the Company desires to be assured of the association and services of
Blair for and on behalf of the Company; and
WHEREAS, Blair is willing and desires to be employed by the Company, and
the Company is willing to employ Blair, upon the terms, covenants and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto do
hereby agree as follows:
1. Employment. The Company hereby employs Blair as Chief Executive Officer
and President, subject to the supervision and direction of the Company's Board
of Directors.
2. Term. The term of this Agreement shall be for a period of five years
commencing on the date hereof, unless earlier terminated pursuant to Section 11
hereof; provided, however, that Blair's obligations described in Sections 8 and
9 hereof shall continue in effect after such termination.
3. Compensation; Reimbursement.
(a) Percentage of Net Income. The Company shall pay to Blair, in cash,
an amount equal to 20% of the net income of the Company (based financial
statements of the Company audited by independent certified public
accountants selected by the Company), determined without deduction of any
amounts paid or given as compensation to the other officers and directors
of the Company, for each fiscal year of the Company, beginning with the
fiscal year ending February 28, 1999; such amount shall be (i) due and
payable within 30 days following the last day of each fiscal quarter
(subject to adjustment for any subsequent fiscal quarter as necessary to
reflect the net income reported on the Company's audited financial
statements for such fiscal year) and (ii) prorated for each fiscal year
during which this Agreement is in effect for less than the full fiscal
year, including the year ending February 28, 1999.
(b) Incentive Options. The Company shall grant to Blair options,
exercisable for a period of five years, to purchase common stock of the
Company in an amount equal to 10,000 shares for each full $500,000 of
Leases which are originated or acquired by the Company at any time,
commencing as of March 1, 1998, determined as the aggregate present value
of Leases as of the date of inception or acquisition by the Company
("Initial Present Value"), at a prices ranging from $1.00 per share to
$5.00 per share, in accordance with the following schedule:
Options covering 10,000 shares, exercisable at $1.00 per
share, upon the Company's achieving the first full $500,000 of
Initial Present Value, and
Options covering 10,000 shares, exercisable at $4.00 per
share, upon the Company's achieving the second full $500,000
of Initial Present Value, and
<PAGE> 3
Options covering 10,000 shares, exercisable at $5.00 per
share, upon the Company's achieving the third full $500,000 of
Initial Present Value, and
Options covering 10,000 shares, exercisable at $5.00 per
share, upon the Company's achieving the fourth full $500,000
of Initial Present Value.
It is further understood and agreed that additional options, covering
such number of shares, if any, as may from time to time be determined in
its sole discretion by the Board of Directors of the Company and
exercisable at a price per share also determined by the Board in its sole
discretion, may be granted to Blair upon the Company's achieving any amount
of Initial Present Value in excess of $2,000,000.
(c) Additional Benefits. For the term of this Agreement (or as
otherwise required by applicable laws and regulations), in addition to any
compensation paid or payable pursuant to subsections 3(a) and/or (b), Blair
shall be entitled to all other benefits of employment provided to the other
officers of the Company or its affiliate, Giuffre Bros. Cranes, Inc., a
Delaware corporation ("Giuffre Cranes"), including without limitation
participation in all group insurance plans, pension or profit-sharing plans
(including 401(k) plans) and incentive compensation plans (including option
plans). If such benefits are provided otherwise than under plans sponsored
by Giuffre Cranes, the benefits provided to Blair by the Company pursuant
to this subsection 3(c) shall be substantially equivalent in all respects
to benefits provided to the officers and/or directors of Giuffre Cranes;
such benefits will be provided at no cost to Blair.
(d) Reimbursement. Blair shall be reimbursed by the Company for all
reasonable "out-of-pocket" business expenses (including without limitation
expenses for business travel and business entertainment) incurred in
connection with the performance of his duties under this Agreement (i) so
long as such expenses constitute business deductions from taxable income
for the Company and are excludable from taxable income to the Blair under
the governing laws and regulations of the Internal Revenue Code (provided,
however, that Blair shall be entitled to full reimbursement in any case
where the Internal Revenue Service may, under Section 274(n) of the
Internal Revenue Code, disallow to the Company 20% of meals and
entertainment expenses); and (ii) to the extent such expenses do not exceed
the amounts allocable for such expenses in budgets that are approved from
time to time by the Company. The reimbursement of Blair's business expenses
pursuant to this Agreement shall be upon monthly presentation to and
approval by the Company of valid receipts and other appropriate
documentation for such expenses.
4. Scope of Duties.
(a) Assignment of Duties. Blair shall have such duties as may be
assigned to him from time to time by the Company's Board of Directors
commensurate with his experience and responsibilities in the position for
which he is employed pursuant to Section 1 hereof; such duties shall be
exercised subject to the control and supervision of the Board.
(b) General Specification of Duties. Blair's duties shall include, but
not be limited to, the following duties and performance goals:
(1) Blair will act as the chief executive of the Company and
perform all duties, functions and responsibilities generally associated
with the Chief Executive Officer and President of an organization such
as the Company.
(2) Blair will cause the Company to be operated in compliance with
all legal requirements.
(3) Blair will establish procedures for implementing the policies
established by the Board of Directors of the Company.
(4) Blair will have primary responsibility for the negotiation and
structuring of financing transactions (lease and other) entered into by
the Company and will execute on behalf of the Company, in his capacity
as Chief Executive Officer and/or President, all documents requested by
the Board.
-2-
<PAGE> 4
(5) Blair will employ, pay, supervise and discharge all employees
of the Company, and determine all matters with regard to such
personnel, including without limitation, compensation, bonuses and
fringe benefits, all in accordance with the Annual Plan (as defined in
Section 5 of this Agreement.
(6) Blair will seek to insure cooperation by the Company with
Giuffre Cranes and the other affiliates of the Company.
(7) Blair will operate the Company in conformance with the Annual
Plan approved by the Board of Directors of the Company, as such may be
amended from time to time with the concurrence of the Board.
(8) Blair will cause to be prepared, as directed by the Board of
Directors of the Company, financial statements, tax returns and other
similar items with respect to the operation of the Company.
The foregoing are not intended as a complete itemization of the duties
which Blair will perform and undertake on behalf of the Company in
satisfaction of his employment obligations under this Agreement.
5. Annual Plan.
(a) Delivery and Content of Annual Plan. Blair shall submit to the
Board of Directors of the Company for its approval, not later than sixty
(60) days before the beginning of each fiscal year of the Company, an
annual business plan for the Company ("Annual Plan"). The Annual Plan shall
be revised by Blair and submitted to the Board for its review (and approval
in the case of material changes from the approved Annual Plan) from time to
time during each year to reflect changes in the Annual Plan due to
operations or otherwise. Each Annual Plan shall include the following
information:
(1) an annual forecast of income and expenses for the Company;
(2) a cash flow budget, estimate of profit, and source and use of
cash statements for the operation of the Company; and
(3) a payroll and staffing plan and budget for the operation of
the Company; and
(b) Compliance with Annual Plan. During each fiscal year of the
Company, Blair, in the performance of his obligations under this Agreement,
shall comply or cause compliance with the applicable Annual Plan and shall
not (except for emergency expenditures or special circumstances requiring
an unanticipated expenditure) deviate materially from any budget category
set forth in the Annual Plan, incur any material additional expense or
change materially the manner of operation of the Company, without the
approval of the Board of Directors of the Company.
6. Blair's Devotion of Time. Blair hereby agrees to devote sufficient time,
abilities and energy to the faithful performance of the duties assigned to him
and to the promotion and forwarding of the business affairs of the Company, and
not to divert any business opportunities from the Company to himself or to any
other person or business entity.
7. Conflicting Activities.
(a) Blair shall not, during the term of this Agreement, be engaged in
any other business activity without the prior consent of the Board of
Directors of the Company; provided, however, that this restriction shall
not be construed as preventing Blair from investing his personal assets in
passive investments in business entities which are not in competition with
the Company or its affiliates, or from pursuing business opportunities as
permitted by subsection 7(b) hereof.
-3-
<PAGE> 5
(b) Blair hereby agrees to promote and develop all business
opportunities that come to his attention relating to current or anticipated
future business of the Company, in a manner consistent with the best
interests of the Company and with his duties under this Agreement. Should
Blair discover a business opportunity that does not relate to the current
or anticipated future business of the Company, he shall first offer such
opportunity to the Company. Should the Board of Directors of the Company
not exercise its right to pursue this business opportunity within a
reasonable period of time, not to exceed 60 days, then Blair may develop
the business opportunity for himself; provided, however, that such
development may in no way conflict or interfere with the duties owed by
Blair to the Company under this Agreement. Further, Blair may develop such
business opportunities only on his own time, and may not use any service,
personnel, equipment, supplies, facility, or trade secrets of the Company
in their development.
(c) As used herein, the term "business opportunity" shall not include
business opportunities involving investment in publicly traded stocks,
bonds or other securities, or other investments of a personal nature.
8. Covenant Not to Compete. In consideration for his employment hereunder,
during the term of this Agreement, and for one (1) year after the termination of
this Agreement, Blair shall not, within the contiguous United States, either
directly or indirectly, own, have a proprietary interest of any kind in, be
employed by, or serve as a consultant to or in any other capacity for any firm
which is in the primary business of providing financing (lease or other) to
individuals, groups or businesses, in connection with equipment of the types
generally financed/leased by the Company and/or its affiliates, including
without limitation truck-mounted cranes, truck-mounted concrete mixers and
transportable storage containers. Notwithstanding the foregoing, Blair may
invest in the securities of any corporation whose shares are listed on a
national securities exchange or quoted on the National Association of Securities
Dealers Automated Quotation (NASDAQ) system.
9. Confidentiality of Trade Secrets and Other Materials.
(a) Trade Secrets. Other than in the performance of his duties
hereunder, Blair agrees not to disclose, either during the term of his
employment by the Company or at any time thereafter, to any person, firm or
corporation, any information concerning the business affairs, the trade
secrets or the customer lists or similar information of the Company. Any
technique, method, process or technology used by the Company shall be
considered a "trade secret" for the purposes of this Agreement.
(b) Ownership of Trade Secrets; Assignment of Rights. Blair hereby
agrees that all know-how, documents, reports, plans, proposals, marketing
and sales plans, client lists, client files and materials made by him or by
the Company are the property of the Company and shall not be used by him in
any way adverse to the Company's interests. Blair shall not deliver,
reproduce or in any way allow such documents or things to be delivered or
used by any third party without specific direction or consent of the Board
of Directors of the Company. Blair hereby assigns to the Company any rights
which he may have in any such trade secret or proprietary information,
which assignment shall be effective without further action by any party
unless otherwise agreed in writing by the Board of Directors of the
Company.
10. Injunctive Relief. The Company and Blair hereby acknowledge and agree
that any default under Sections 8 or Section 9 of this Agreement will cause
damage to the Company in an amount difficult to ascertain. Accordingly, in
addition to any other relief to which the Company may be entitled, the Company
shall be entitled to such injunctive relief as may be ordered by any court of
competent jurisdiction including, but not limited to, an injunction restraining
any violation of Section 8 or Section 9 hereof and without the proof of actual
damages.
11. Termination.
(a) Bases for Termination.
(1) Blair's employment hereunder may be terminated at any time by
mutual agreement of the parties.
-4-
<PAGE> 6
(2) This Agreement shall automatically terminate on the last day
of the month in which Blair dies or becomes permanently incapacitated.
"Permanent incapacity" as used herein shall mean mental or physical
incapacity, or both, reasonably determined by the Company's Board of
Directors, based upon a certification of such incapacity by, in the
discretion of the Company's Board of Directors, either Blair's
regularly attending physician or a duly licensed physician selected by
the Company's Board of Directors, rendering Blair unable to perform
substantially all of his duties hereunder and which appears reasonably
certain to continue for at least six consecutive months without
substantial improvement. For purposes of this Agreement, Blair shall be
deemed to have "become permanently incapacitated" on and as of the date
that the Company's Board of Directors has determined that Blair is
permanently incapacitated and so notifies Blair in writing of such
determination.
(3) Blair's employment by the Company may be terminated by either
party hereto, with or without "cause" (for any reason or no reason at
all), at any time, by giving 60 days' prior written notice of
termination to the other; such termination shall be effective on the
60th day following delivery of such notice. If Blair's employment under
this Agreement is so terminated, the Company shall make one or more
cash payments to Blair in an aggregate amount equal to (i) a pro rata
portion of the percentage of net income and other compensation
(including without limitation any options issuable to Blair pursuant to
subsection 3(b) hereof), if any, earned for the fiscal year in which
termination occurs prorated to the date of termination, plus (ii) any
unreimbursed expenses accruing to the date of termination.
(4) Amounts described in clause (i) of subsection 11(a)(3) hereof
shall be determined quarterly and shall be due and payable within
thirty 30 days following the end of each fiscal quarter of the Company
until fully paid. Following any termination pursuant to and in
accordace with Section 11(a)(1) or Section 11(a)(3) of this Agreement,
the Company shall not be obligated to compensate Blair, or his estate
or representatives, except as provided herein, nor shall it be required
to provide the benefits to Blair which are provided for and described
in Section 3(c) of this Agreement (except as and to the extent provided
by applicable laws and regulations).
(b) Dismissal from Premises. At the Company's option, Blair shall
immediately leave the Company's premises on the date that termination
hereunder is effective.
12. Miscellaneous.
(a) Waiver. The waiver by either of the parties, express or implied, of
any right under this Agreement or any failure to perform under this
Agreement by the other party, shall not constitute or be deemed as a waiver
of any other right under this Agreement or of any other failure to perform
under this Agreement by the other party, whether of a similar or dissimilar
nature.
(b) Transfer and Assignment. This Agreement is personal as to Blair and
shall not be assigned or transferred by Blair without the prior written
consent of the Company. This Agreement shall be binding upon and inure to
the benefit of all of the parties hereto and their respective permitted
heirs, personal representatives, successors and assigns.
(c) Severability; Governing Law. Nothing contained herein shall be
construed to require the commission of any act contrary to law. Should
there be any conflict between any provisions hereof and any present or
future statute, law, ordinance, regulation, or other pronouncement having
the force of law, the latter shall prevail, but the provision of this
Agreement affected thereby shall be curtailed and limited only to the
extent necessary to bring it within the requirements of the law, and the
remaining provisions of this Agreement shall remain in full force and
effect. This Agreement is made under and shall be construed pursuant to the
internal laws of the State of Wisconsin.
-5-
<PAGE> 7
(d) Counterparts. This Agreement may be executed in several
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the
parties did not sign the original or the same counterparts.
(e) Entire Agreement. This Agreement constitutes the entire agreement
and understanding of the parties with respect to the subject matter hereof
and supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. No representation, promise,
inducement, statement or intention has been made by any party hereto that
is not embodied herein, and no party shall be bound by or liable for any
alleged representation, promise, inducement, or statement not so set forth
herein.
(f) Modification. This Agreement may be modified, amended, superseded,
or cancelled, and any of the terms, covenants, representations, warranties
or conditions hereof may be waived, only by a written instrument executed
by the party or parties to be bound by any such modification, amendment,
supersession, cancellation, or waiver.
(g) Attorneys' Fees and Costs. In the event of any dispute arising out
of the subject matter of this Agreement, the prevailing party shall
recover, in addition to any other damages assessed, its attorneys' fees and
court costs incurred in litigating or otherwise settling or resolving such
dispute whether or not an action is brought or prosecuted to judgment. In
construing this Agreement, none of the parties hereto shall have any term
or provision construed against such party solely by reason of such party
having drafted the same.
(h) Headings. The section and other headings contained herein are for
reference purposes only and shall not in any way affect the meaning and
interpretation of this Agreement.
(i) Cumulative Remedies. Each and all of the several rights and
remedies provided for in this Agreement, or by law or in equity, shall be
cumulative, and no one of such rights and/or remedies shall be exclusive of
any other right or remedy, and the exercise of any one of such rights or
remedies shall not be deemed a waiver of, or an election to exercise, any
other such right or remedy.
(j) Survival. Any provision of this Agreement which imposes an
obligation after termination or expiration of this Agreement shall survive
the termination or expiration of this Agreement and be binding on Blair and
the Company.
(k) Notices. Any notice under this Agreement must be in writing, may be
telecopied, sent by express courier, or hand-delivered, or may be served by
depositing the same in the United States mail, addressed to the party to be
notified, postage-prepaid and registered or certified with a return receipt
requested. The addresses of the parties for the receipt of notice shall be
as follows:
If to the Company: Heartland Wisconsin Corp.
6635 South 13th Street
Milwaukee, Wisconsin 53221
Attention: Frank P. Giuffre
If to Blair: Scott A. Blair
8170 South Willow Drive
Oak Creek, Wisconsin 53154
Each notice given by registered or certified mail shall be deemed
delivered and effective on the date of delivery as shown on the return
receipt, and each notice delivered in any other manner shall be deemed to
be effective as of the time of actual delivery thereof. Each party may
change its address for notice by giving notice thereof in the manner
provided above.
-6-
<PAGE> 8
(l) Right of Set-Off. Upon termination or expiration of this Agreement,
the Company shall have the right to set-off against the amounts due Blair
hereunder the amount of any outstanding loan or advance from the Company to
Blair.
(m) Effective Date. This Agreement shall become effective, when signed
by the Company and Blair, as of the date first above written.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed as of the day and year first above written.
HEARTLAND WISCONSIN CORP.
By:_______________________________________________
Frank P. Giuffre, Chairman of the Board
and Vice President
_______________________________________________
Scott A. Blair
-7-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF GORDON F. BARRINGTON, ESQ.
(Included in Exhibit 5.1)
<PAGE> 1
EXHIBIT 23.2
CONSENT OF KRANITZ & PHILIPP
<PAGE> 2
CONSENT OF KRANITZ & PHILIPP,
SPECIAL SECURITIES COUNSEL TO THE REGISTRANT
We consent to the reference to us under the caption "Legal Matters" in
the registration statement of Heartland Wisconsin Corp. on Form SB-2 (File No.
333-48527).
/s/ KRANITZ & PHILIPP
KRANITZ & PHILIPP
Milwaukee, Wisconsin
July 28, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF SMRECEK & CO., S.C.
<PAGE> 2
CONSENT OF SMRECEK & COMPANY, S.C.,
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in the registration statement on Form SB-2
of Heartland Wisconsin Corp. (File No. 333-48527) of our report, dated June 30,
1998, on the balance sheets of Heartland Wisconsin Corp. as of February 28, 1998
and 1997, and the related statements of operations, and statements of cash flows
for the years then ended, respectively. We also consent to the references to our
Firm under the captions "Selected Financial Information" and "Experts" in the
prospectus.
/s/ SMRECEK & CO., S.C.
SMRECEK & CO., S.C.
Waukesha, Wisconsin
July 28, 1998
<TABLE> <S> <C>
<ARTICLE> CT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF INCOME AND RETAINED EARNINGS (DEFICIT) AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN
PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM SB-2 OF REGISTRANT (FILE NO. 333-48527).
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> FEB-28-1999 FEB-28-1998
<PERIOD-START> MAR-01-1998 MAR-01-1997
<PERIOD-END> MAY-31-1998 FEB-28-1998
<TOTAL-ASSETS> 2,121,654 1,895,272
0 0
0 0
<COMMON> 40 40
<OTHER-SE> 274,960 271,960
<TOTAL-LIABILITY-AND-EQUITY> 2,121,654 1,895,272
<TOTAL-REVENUES> 115,863 279,051
<INCOME-TAX> 18,000 18,000
<INCOME-CONTINUING> 46,667 66,578
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 28,667 48,578
<EPS-PRIMARY> 0.07 0.12
<EPS-DILUTED> 0.07 0.12
</TABLE>
