<PAGE> 1
As filed with the Securities and Exchange Commission on March 24, 1998.
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
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)
6635 SOUTH 13TH STREET
MILWAUKEE, WISCONSIN 53221 6635 SOUTH 13TH STREET
(414) 764-9200 FAX (414) 764-8180 MILWAUKEE, WISCONSIN 53221
(Address and telephone number of principal executive offices) (Address of principal place of business)
</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:
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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
</TABLE>
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
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 200,000 shares $6.50 (1) $1,300,000 (1) $393.94
=========================================================================================================================
</TABLE>
(1) Price of Common Stock estimated solely for the purpose of calculating the
registration fee.
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
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION AND AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 24, 1998
200,000 SHARES
HEARTLAND WISCONSIN CORP.
COMMON STOCK
All of the 200,000 shares of common stock, par value $0.01 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. It is anticipated that the initial
public offering price of the Common Stock will be in a range between $5.00 and
$6.50 per share. See "Underwriting" for information relating to the factors
considered in determining the offering price. The Company anticipates that, upon
completion of the offering, its Common Stock will be quoted by the National
Daily Quotation Service ("Pink Sheets") and on the OTC Bulletin Board under the
trading symbol " ."
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)
- -------------------------------------------------------------------------------------------------------------------------
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Per Share........................................ $ $ $
- -------------------------------------------------------------------------------------------------------------------------
Total (3)........................................ $ $ $
=========================================================================================================================
</TABLE>
(1) Does not include a nonaccountable expense allowance payable to J.E. Liss &
Company, Inc., ("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 five 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 $160,000, 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 use
for the purposes of the offering. 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) March 31, 1999, whichever first occurs; the offering may be
terminated at any time prior thereto at the discretion of the Company. See
"Underwriting."
---------------------------
J.E. LISS & COMPANY
I N C O R P O R A T E D
_________, 1998.
<PAGE> 3
[GRAPHIC]
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
Dividend Policy................................................................................. 11
Dilution........................................................................................ 12
Capitalization.................................................................................. 13
Selected Financial Data......................................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of Operations........... 15
Business........................................................................................ 18
Management...................................................................................... 25
Certain Relationships and Related Transactions.................................................. 28
Principal Stockholders.......................................................................... 29
Indemnification for Securities Act Liabilities.................................................. 29
Description of Securities....................................................................... 30
Common Stock Eligible for Future Sale........................................................... 33
Underwriting.................................................................................... 36
Legal Matters................................................................................... 36
Experts......................................................................................... 36
Additional Information.......................................................................... 36
Index to Financial Statements................................................................... 37
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. 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 financing (generally in the form of commercial loans and finance
leases) to facilitate the acquisition of products ("Equipment") marketed to
customers of Giuffre Bros. Cranes, Inc. ("Giuffre Cranes") and Rexworks, Inc.
("Rexworks"), both of which are Delaware corporations and affiliates of the
Company. The Company may also provide such financing to customers of Equipment
vendors other than Giuffre Cranes and Rexworks.
The Company's business operations generally include the following functions:
structuring financing plans and arrangements; developing credit standards;
analyzing customer financial statements; negotiating loan or other financial
arrangements with customers; evaluating the quality of proposed collateral;
determining the capital structure of the finance company (in this case the
Company) and its leverage ratios; administering the loan or lease portfolio;
collecting accounts; periodically reviewing and evaluating the credit status and
payment history of borrowers; administering the collection process; when
necessary, repossessing and disposing of collateral; working out problem loans;
prosecuting litigation with defaulted borrowers; and managing relations with the
Company's institutional lenders.
The Company may provide financing by means of a variety of secured and
unsecured loans and finance leases, but is expected primarily to provide
sales-type leases under the terms of which title to the Equipment is retained.
The Company expects to obtain its own lines of credit to provide capital with
which to effect this financing.
All management, marketing, technical and administrative services will be
rendered for and on behalf of the Company by the employees of Giuffre Cranes
pursuant to a Management Agreement. Equipment is marketed directly and through
independent dealers. Typical customers include dealers who hold Equipment for
short and long term rental and lease to others or for resale, as well as a broad
variety of contractors, utilities, governmental agencies and manufacturers in a
variety of industries. The Company, Giuffre Cranes and Rexworks each has several
significant competitors. See "Business" and "Risk Factors."
THE OFFERING
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Common Stock offered.................................................. 200,000 shares
Common Stock to be outstanding after the offering..................... 600,000 shares
Use of proceeds....................................................... Working capital to finance Equipment
sales and, possibly, repay indebtedness
Proposed Pink Sheets/OTC Bulletin Board trading symbol................
</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, potential conflicts
of interest, reliance on key personnel and related companies, 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 November 30, 1997, and for the nine months ended November 30,
1997 and 1996, 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 Nine Months Ended
----------------------------------------------------------
February 28, February 29, November 30, November 30,
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C>
Total revenues ...................... $ 737,054 $ 30,875 $ 116,168 $ 462,646
Total expenses ...................... $ 734,835 $ 55,481 $ 104,583 $ 475,778
--------- --------- --------- ---------
Net income (loss) ................... $ 2,218 $ (24,606) $ 11,585 $ (13,132)
Retained earnings (deficit) beginning
of period ........................ $ (24,606) $ -- $ (22,388) $ (24,606)
--------- --------- --------- ---------
Retained earnings (deficit) end
of period ........................ $ (22,388) $ (24,606) $ (10,803) $ (37,738)
========= ========= ========= =========
Net income (loss) per common share .. $ 2.22 $ (24.61) $ 11.58 $ (13.13)
========= ========= ========= =========
Weighted average common
shares outstanding ............... 1,000 1,000 1,000 1,000
</TABLE>
<TABLE>
<CAPTION>
November 30, 1997
-----------------
As
Actual Adjusted (1)
------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................... $ 98,502 $ 938,502
Total assets............................................................ $1,482,781 $ 2,322,781
Long-term debt, less current portion (2)................................ $1,225,790 $ 1,225,790
Stockholders' equity.................................................... $ 249,197 $ 1,089,197
</TABLE>
- ------------------
(1) Adjusted to reflect the sale of 200,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $5.00 per share
(after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company) and the application of the
estimated net proceeds (approximately $840,000) therefrom. See "Use of
Proceeds."
(2) Assumes no offering proceeds are expended to repay outstanding
indebtedness. Up to $300,000 of outstanding debt may be retired with
offering proceeds. See "Use of Proceeds."
--------------
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 MARCH 31, 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.
Prospective investors should note that this Prospectus contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual
results could differ materially from those projected in the forward-looking
statements 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
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. Diversity of Portfolio; Initial Extension of Credit. In the early stages
of the Company's operations, the Company's portfolio of loans will be limited in
amount and diversity; with the result that even one problem or default loan may
present significant working capital and other difficulties for the Company.
Loans and leases will be subject to the risk of default, in which event the
company would have the added responsibility of foreclosing and protecting its
rights. The Company expects to primarily extend credit to firms for which it can
develop sufficient information to make an informed credit decision, and to be
able to effectively liquidate collateral when necessary because of its marketing
sources for the type of Equipment being financed. However, any extensions of
credit to firms 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 plan of operations.
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 make full payout leases in 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 the Company loans funds to a customer, it expects to
normally secure the loan with a security interest in the
6
<PAGE> 8
Equipment financed, with personal guarantees by the customer's principals, or
with pledges of other collateral. However, in the event of default, the Company
may exercise rights of self-help to recover the property, 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, the Company may utilize some
funds for general working capital or for short term loans to other
purchasers/lessees (which are not customers of Giuffre Cranes or Rexworks) in
connection with the purchase/lease of Equipment from unaffiliated vendors and
lessors.
4. Risk of Default on Loans and Leases. Loans and 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. To the extent that a
borrower has an obligation to pay a loan balance in a large lump sum payment,
its ability to satisfy this obligation may be dependent upon its ability to
obtain suitable refinancing or otherwise to raise a substantial cash amount. In
certain areas, lenders 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 of its loan, with resultant loss to the Company. While, typically,
the Company expects to make loans with full recourse to the borrower, the
Company's loans in some cases, may not be general obligations of the borrower.
In such cases the Company would be required to rely for security on the value of
its interest in the underlying Equipment which may be adversely affected by
various risks. If interest rates are fixed, longer term loans and leases will
limit its ability to vary its portfolio promptly in response to changing
economic, financial and investment conditions. Many of these inherent risks may
be intensified by existing and potential economic developments and
uncertainties.
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 (including proceeds of Equipment
sales), will be sufficient to meet the 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 rental and leasing is subject to
various economic risks, such as the risk of non-payment of rentals and
technological and equipment obsolescence. The business of providing financing
for Equipment purchasers also involves a credit risk in that some borrowers may
prove unable to repay their borrowings. In the event of late payments or default
in any payment that is due, the Company will have to take collection efforts,
which may include suit to obtain repossession of the Equipment sold or for 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 tough 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. 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
future market (and hence collateral) value of the Equipment cannot accurately
take into account the status of the economy or the industry.
7
<PAGE> 9
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.
8. Dependence on Key Executives. The Company is dependent to a large degree
on the services of its senior management, particularly Frank P. Giuffre and
Dominic J. Giuffre, the Company's President/CEO and Vice President,
respectively. The Company does not have an employment agreement with, and does
not maintain any insurance coverage on, either of the Messrs. 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 management time, personnel or
facilities which can negatively impact operations affecting 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. Conflicts of Interest. Certain potential conflicts of interest are
inherent in the relationships of the Company with its officers, directors and
affiliates. Such conflicts arise where officers or directors of the Company
transact business with the Company, or where such persons own or are otherwise
materially interested in or involved with individuals or firms which compete or
transact business with the Company. Various conflicts may also arise on the
allocation of time and other resources which are shared among the Company,
Giuffre Cranes and Rexworks. The Company does not anticipate that such conflicts
will be resolved through arms-length negotiations. See "Certain Relationships
and Related Transactions - Conflicts of Interest".
12. Control by Principal Stockholders. Upon completion of the Offering, the
Existing Stockholders will own 400,000 shares of Common Stock and control at
least 66% of the aggregate voting power of the Company, which will allow such
stockholders, in the event that they act together, to control substantially all
actions taken by the stockholders of the Company, including the election of
directors. Such concentration of ownership could also have the effect of
delaying, deterring or preventing a change in control of the Company that might
otherwise he beneficial to stockholders and may also discourage acquisition bids
for the Company and limit the amount certain investors may be willing, to pay
for shares of Common Stock. See "Principal Stockholders" and "Description of
Securities."
13. 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
8
<PAGE> 10
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,
loan/lease terms and conditions (significantly including cost), 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."
14. No Intention to Declare or Pay Dividends. The Company does not currently
intend to declare or pay any cash dividends on the Common Stock 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."
15. 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."
16. 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 shares of Common Stock offered hereby are
sold at an initial public offering price of $5.00 per share, net tangible book
value dilution to new investors will be $3.28 per share. See "Dilution."
17. 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."
18. 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."
19. 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 will be 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
9
<PAGE> 11
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.
20. 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 600,000 shares of Common Stock. The 200,000 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 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. See "Common Stock Eligible for Future Sale" and "Description of
Securities."
21. 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.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 200,000 shares of
Common Stock offered hereby, after deducting underwriting discounts and
commissions and estimated offering expenses and assuming an initial public
offering price of $5.00 per share, are estimated to be approximately $840,000.
The net proceeds of the offering will be allocated to working capital and
expended principally to finance sales of Equipment to customers of Giuffre
Cranes and Rexworks; a portion of such net proceeds (not expected to exceed 7
1/2% thereof) may be expended to cover other general corporate expenses.
The Company may expend up to $300,000 of net proceeds allocated to working
capital to repay a portion of its outstanding indebtedness. As of
November 30, 1997, $1,225,790 in aggregate principal amount of such debt was
outstanding; such notes payable mature at various times from June 30, 1999
through October 5, 2002 and bear interest at rates ranging from 8.9% to 10.25%
per annum. $473,338 of the foregoing indebtedness is owed to banks and secured
by a first security lien against leased Equipment; $752,452 is owed to private
investors, unsecured and subordinated to senior bank 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 4 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 for
financing receivables and inventory and additional sales and marketing expense.
A portion of the net proceeds received by the Company may be used for the
acquisition of complementary businesses and/or products. 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 listed 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 the net proceeds will be
applied to general corporate purposes, as working capital, the Company will have
broad discretion as to the application of such net proceeds.
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.
11
<PAGE> 13
DILUTION
The net tangible book value of the Company as of November 30, 1997, adjusted
to reflect a 400 for 1 split of the Company's outstanding Common Stock,
effective as of March 31, 1998, was approximately $193,514, or $0.48 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.
After giving effect to the sale by the Company of the 200,000 shares of
Common Stock offered hereby at an assumed initial public offering price of $5.00
per share (and after deduction of estimated underwriting commissions and other
offering expenses payable by the Company), the Company's pro forma net tangible
book value at November 30, 1997 would have been $1,033,514, or $1.72 per share
of Common Stock. This represents an immediate increase in net tangible book
value of $1.24 per share to existing stockholders and an immediate dilution of
$3.28 per share to new investors.
<TABLE>
<S> <C> <C>
The following table illustrates the per share dilution:
Assumed initial public offering price per share....................................... $ 5.00
Net tangible book value before the offering......................................... $ 0.48
Increase in net tangible book value attributable to new investors................... 1.24
-------
Pro forma net tangible book value per share after the offering........................ 1.72
------
Dilution per share to new public investors............................................ $ 3.28
======
</TABLE>
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
March 31, 1998 and the sale of all of the Common Stock offered hereby) as of
November 30, 1997, 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 an assumed initial public offering price
of $5.00 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 66.7% $ 260,000 20.6% $0.65
New public investors............. 200,000 33.3% 1,000,000 79.4% $5.00
------- ----- ----------- -----
Total....................... 600,000 100.0% $ 1,260,000 100.0%
======= ===== =========== =====
</TABLE>
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
November 30, 1997, and as adjusted to reflect (i) a 400 for 1 Common Stock split
effective March 31, 1998, and (ii) the sale of 200,000 shares of Common Stock
offered hereby (at the assumed initial public offering price of $5.00 per share)
deduction of underwriting commissions and expense allowances, professional fees
and expenses, filing and listing fees, printing costs and other expenses of the
offering payable by the Company, and should be read in conjunction with the
financial statements of the Company and related notes appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
November 30, 1997
------------------------------------
Actual As Adjusted
------------- ---------------
<S> <C> <C>
Liabilities:
Senior notes payable - bank............................................ $ 473,338 $ 473,338
Notes payable.......................................................... 752,452 752,452
Accrued liabilities.................................................... 7,794 7,794
------------- -------------
Total long-term liabilities...................................... 1,233,584 1,233,584
------------- -------------
Stockholders' equity:
Common Stock, $0.01 par value, 9,000 shares authorized, 1,000 shares
issued and outstanding, and, as adjusted, 20,000,000 shares
authorized, 600,000 shares issued and outstanding (1)................ 10 6,000
Additional paid-in capital (2)......................................... 259,990 1,094,000
Retained earnings (deficit)............................................ (10,803) (10,803)
------------- -------------
Total stockholders' equity...................................... 249,197 1,089,197
------------- -------------
Total capitalization............................................ $ 1,482,781 $ 2,322,781
============= =============
</TABLE>
(1) See "Certain Relationships and Related Transactions."
(2) 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."
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<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, 1997 and February 29, 1996, 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 herein. The selected financial data as
of November 30, 1997, and for the nine months ended November 30, 1997 and 1996,
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 Nine Months Ended
---------------------------- ------------------------
February 28, February 29, November 30, November 30,
1997 1996 1997 1996
---- ---- ---- ----
STATEMENT OF INCOME DATA: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Rental equipment sales.................. $ 506,203 $ -- $ -- $ 315,021
Rental income........................... 213,803 29,585 -- 144,100
Interest income......................... 17,048 1,290 108,433 3,525
Other income............................ -- -- 7,735 --
----------- ----------- ---------- -----------
Total revenues..................... 737,054 30,875 116,168 462,646
Expenses:
Cost of equipment sold.................. 407,553 -- -- 247,216
Interest expense........................ 94,582 19,547 75,677 68,509
Amortization of finance costs........... 86,872 10,559 22,543 64,452
Depreciation............................ 139,922 23,754 -- 93,745
Legal and accounting.................... 4,025 895 3,121 25
Escrow fees and bank charges............ 1,650 702 2,222 1,600
Other................................... 231 24 1,020 231
----------- ----------- ---------- -----------
Total expenses..................... 734,835 55,481 104,583 475,778
----------- ----------- ---------- -----------
Net income (loss).......................... 2,218 (24,606) 11,585 (13,132)
Retained earnings (deficit) beginning
of period............................... (24,606) -- (22,388) (24,606)
----------- ----------- ---------- -----------
Retained earnings (deficit) end
of period............................... $ (22,388) $ (24,606) $ (10,803) $ (37,738)
=========== =========== ========== ===========
Net income (loss) per common share......... $ 2.22 $ (24.61) $ 11.58 $ (13.13)
=========== =========== ========== ===========
Weighted average common
shares outstanding...................... 1,000 1,000 1,000 1,000
</TABLE>
<TABLE>
<CAPTION>
November 30, 1997
---------------------------
Actual As Adjusted (1)
----------- ---------------
<S> <C> <C>
BALANCE SHEET DATA: (Unaudited) (Unaudited)
Cash and cash equivalents............................................... $ 98,502 $ 938,502
Total assets............................................................ $1,482,781 $ 2,322,781
Long-term debt, less current portion (2)................................ $1,225,790 $ 1,225,790
Stockholders' equity.................................................... $ 249,197 $ 1,089,197
</TABLE>
- -------------
(1) Adjusted to reflect the sale of 200,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $5.00 per share
(after deducting underwriting discounts and commissions and estimated
expenses of the offering payable by the Company) and the application of the
estimated net proceeds (approximately $840,000) therefrom. See "Use of
Proceeds."
(2) Assumes no offering proceeds are expended to repay outstanding
indebtedness. Up to $300,000 of outstanding debt may be retired with
offering proceeds. See "Use of Proceeds."
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 of Giuffre Bros. Cranes, Inc. ("Giuffre Cranes").
Giuffre Cranes is a sister corporation of the Company and is a national
distributor of Simon truck mounted cranes. Giuffre Cranes rents, leases,
services, and sells truck mounted crane units. The Company has been in business
for approximately two and one half years. Accordingly, since its inception the
Company's objectives have been to establish credit and sources of financing.
The Company's first private note offering, ($750,000 of 10.25% secured
notes), was completed at the end of its 1996 fiscal year. These notes were
secured by a first security interest in the crane units. The notes were
nonrecourse as to other assets of the Company. The proceeds from the notes were
used to purchase 17 crane units during its 1997 and 1996 fiscal years. The notes
were due June 30, 1997 and were repaid early on March 20, 1997.
During its 1997 fiscal year, the Company conducted two additional private
note offerings. In its second round financing which was closed in August, 1996,
the Company sold $177,000 of 10.25% 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 note holders security interest to
senior debt. In August, 1996, the Company undertook its third offering. The
Company sold approximately $575,000 of 10.25% Capital Notes. These notes are
unsecured and are general obligations of the Company. These Notes are
subordinated to the Company's senior bank debt.
In order to accommodate its lenders, the Company initially purchased cranes
from Giuffre Cranes. Accordingly, during its 1996 and 1997 fiscal years, the
Company rented, leased, serviced and sold cranes. These functions were actually
carried out by Giuffre Cranes under a Management Agreement with the Company.
Giuffre Cranes did not assess or receive any compensation from the Company for
its services under this agreement.
As of February 28, 1997, the Company had purchased 17 crane units, sold 8
units which were financed by the Company and held 9 units in inventory. The
remaining cranes in inventory were sold to Giuffre Cranes at cost in March,
1997.
At that point, the Company discontinued the rental and service of cranes
since it was no longer required to take title to the cranes to obtain financing.
Accordingly, during its 1998 fiscal year, the Company has focused on providing
sales-type lease financing for cranes sold by Giuffre Cranes. In addition, the
Company was able to secure bank financing for up to 60% of its lease contracts
at interest rates ranging from 8.9% to 9.25%, lowering its effective cost of
funds.
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 met its objective of establishing credit and lowering
its cost of funds, the Company believes that its operations will be more
profitable in the future, however, no assurance can be given that such
improvement will continue to be achieved.
RESULTS OF OPERATIONS
NET REVENUES
Net revenues for the year ended February 28, 1997 were $737,054 as compared
to $30,875 for the prior year. The 1996 fiscal year consisted of the Company's
initial seven months of operations. The increase in revenue for 1997 reflected
the Company's first full year of operations including equipment sales of eight
units and rental income derived from cranes held in inventory. There were no
equipment sales in 1996.
15
<PAGE> 17
Revenue for the nine months ended November 30, 1997 declined from $462,646
in 1996 to $116,168 for 1997. The decline in revenues resulted from the change
in 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 Bros. Interest income primarily from sales-type lease contracts
increased from $3,525 for the nine months ended November 30, 1996 to $108,433
for the same period in 1997.
EXPENSES
Total expenses increased from $55,481 for the year ended February 28, 1996
to $734,835 for 1997. The increase in expenses is attributable to the cost of
equipment sold of $407,553 in 1997 (none in 1996) and depreciation on cranes
held in inventory, $139,922 in 1997 ($23,754 in 1996).
Interest expense and amortization of finance costs increased from $19,547
and $10,559 in 1996 to $94,582 and $86,872 for 1997, respectively. These
expenses increased because the Company's secured notes were outstanding for the
full year in 1997. Amortization of finance cost reflects the high cost of
selling these notes versus the short maturity of the notes.
For the nine months ended November 30, 1997, the Company discontinued the
sale of cranes for its own account and, therefore, the Company had no cost of
equipment sales or depreciation. For the nine months ended November 30, 1996,
these costs were $247,216 and $93,745, respectively. Interest expense increased
approximately 10% for 1997, reflecting a 20% increase in outstanding borrowings
offset by a lower cost of funds on $473,338 of senior debt borrowings which
replaced a portion of the 10.25% notes outstanding at the end of the prior year.
Amortization of finance costs decreased from $64,452 in 1997 to $22,543 for
the nine months ended November 30, 1997 due to lower costs incurred to sell the
notes sold in the second and third round financings and the longer maturity
period of the notes.
PROFITABILITY
Operations for the Company's first year of operations resulted in a loss of
$24,606 ($24.61 per share) as the Company was not able to generate sufficient
revenue during its start-up phase to fully offset expenses and its high initial
cost of capital. During 1997, the Company was able to achieve essentially
break-even operations with nominal net income $2,218 ($2.22 per share).
For the nine months ended November 30, 1997, the Company's net income was
$11,585 versus a loss of $13,132 for the same period in 1996. The improvement in
1997 operations primarily reflects the Company's success in lowering its cost of
capital and the growth in its financing portfolio. The average interest rate on
borrowings was 10.25% in 1996, not including amortized finance costs.
During the nine months ended November 30, 1997, the Company obtained
financing from a bank at rates from 8.9% to 9.25%, resulting in a blended cost
of funds of 10.03% for the period. The Company's lease contracts are at rates
from 11.5% to 16.66%.
The Company had no provision for income taxes in any period and has loss
carryforwards of approximately $96,000 available at February 28, 1997 to offset
federal taxable income in future years.
LIQUIDITY AND CAPITAL RESOURCES
During 1996, the company raised $750,000 in proceeds from its private
placement of 10.25% secured notes to investors. In 1997, the Company sold
$177,000 of notes in its second offering and $100,000 of capital notes in its
third offering. During 1997, the Company sold $475,452 of additional capital
notes. In addition, during the nine months ended November 30, 1997, the Company
secured senior bank financing of $512,463.
16
<PAGE> 18
The Company's investor notes mature in 1999, whereas its bank debt is
amortizing over four to five years. The Company had investments in finance and
sales type lease contracts of $496,150 at February 28, 1997 and $1,317,269 at
November 30, 1997. For the nine months ended November 30, 1997, the Company
closed $1,028,195 in new finance contracts as compared to $143,287 in the prior
nine month period.
The Company's finance contracts generally range from 36 to 60 months. In
order to maintain its investment in its lease contracts and make new investments
in additional lease contracts, the Company will need to obtain additional
financing. Accordingly, the Company has undertaken to sell the Common Stock
offered hereby.
All of the Company's investments in finance and lease contracts are current
with the exception of one contract that has one payment 30 days past due. The
Company has never incurred a loss or write-off with respect to its contracts and
no reserve for potential uncollectible amounts has been deemed necessary by
management. The Company's finance contracts have been outstanding a relatively
short period and there can be no assurance that the Company will be able to
maintain its excellent collection results in the future.
Cash from operations increased from $11,629 for the 1996 fiscal year to
$127,064 for 1997. Most of the increase in 1996 was attributable to non-cash
expenses consisting of depreciation and amortization of loan fees offset by
gains on sales of equipment.
For the nine month period ended November 30, 1997, cash provided from
operations declined from $77,186 in 1996 to $30,944, primarily due to lower
non-cash expenses in 1997 due to the elimination of depreciation on crane
inventories and lower amortization of loan fees as previously discussed.
17
<PAGE> 19
BUSINESS
INTRODUCTION
A discussion of the Company's business appears below, together with
descriptions of the respective businesses of the two Company affiliates, Giuffre
Cranes and Rexworks, whose customers are expected to generate all or
substantially all of the demand for the financing products and services marketed
by the Company. The Company may also provide financing to parties other than
customers of Giuffre Cranes and Rexworks.
THE COMPANY
GENERAL
The Company is a Wisconsin corporation which provides financing (generally
in the form of commercial loans and finance leases) to facilitate the
acquisition of Equipment, principally by customers of Giuffre Cranes and
Rexworks, both of which are affiliates of the Company. The Company may also
provide such financing to parties other than Giuffre Cranes and Rexworks.
The Company's business operations generally include the following
functions: structuring financing plans and arrangements; developing credit
standards; analyzing customer financial statements; negotiating loan or other
financial arrangements with customers; evaluating the quality of proposed
collateral; determining the capital structure of the finance company (in this
case the Company) and its leverage ratios; administering the loan or lease
portfolio; collecting accounts; periodically reviewing and evaluating the credit
status and payment history of borrowers; administering the collection process;
when necessary, repossessing and disposing of collateral; working out problem
loans; prosecuting litigation with defaulted borrowers; and managing relations
with the Company's institutional lenders.
PRODUCTS AND SERVICES
1. Leases. The Company may also lease Equipment to customers. In the event
of a default in the lease payments, the Company would normally have various
rights, including the right to seek repossession of the property as well as
damages for nonpayment of the rentals. Such rights may be simpler to pursue than
a loan foreclosure, for example, although the Company will then have to dispose
of the collateral either through sale or re-leasing in order to recover the
balance of its funds. In some instances, the Company may be able to negotiate
with vendors or manufacturers of the property whereby such firms will agree to
purchase the repossessed collateral or to re-lease the Equipment to other
customers.
2. Commercial Loans. The Company intends to finance Equipment purchases by
customers of Giuffre Cranes, Rexworks and, possibly, other unaffiliated vendors
by lending the purchase price (or part thereof net of a down payment). In most
cases, the Company expects that its loans will be secured by the Equipment which
is sold by a vendor (predominantly Giuffre Cranes or Rexworks) to that customer.
The Company may require the borrower to post additional collateral, to make a
security deposit or to have its principals guarantee payment. If the borrower
defaults on a loan, the Company may repossess the Equipment and other assets
which furnished collateral for the loan (if doing so can be accomplished without
breaching the peace) or, if necessary, it may commence legal action to recover
possession of the collateral. The Company may then seek to sell the collateral
in any commercially reasonable manner, at public or private sale, and the use
the proceeds to repay the loan, including the reimbursing its reasonable
expenses of retaking and selling the collateral; subject, however, to the rights
of any senior secured lender, if the Company has accepted a junior lien position
in the collateral. The Company must give reasonable notice of the sale to the
borrower and to any other creditors who have filed financing statements covering
the collateral. Any surplus proceeds from the sale belong to the borrower (or
its other creditors), and the borrower would then typically remain liable to the
Company for any deficiency. In addition to remedies involving the collateral,
the Company may also, in the event of default, seek a judgment against the
borrower for the amount of the loan.
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<PAGE> 20
CERTAIN LEGAL ASPECTS AND RELATED CONSIDERATIONS
1. General Regulations. Certain special considerations apply to firms that
make loans to individuals for personal use which include compliance with the
requirement that the Company obtain a license from the states in which it
conducts its consumer lending business. The Company does not intend to conduct
business as a consumer lending firm; consequently, the Company does not expect
to register as a consumer finance company. There are few special laws or
regulatory agencies in Wisconsin or in other states in which the Company intends
to operate which regulate the business of Equipment leasing or loans related to
the purchase of Equipment, in contrast with the myriad of laws and regulations
which apply to banks, savings and loan associations and consumer credit lending
and financing companies. The Company does anticipate obtaining or complying with
any licenses or regulatory authority which are applicable to its operations.
2. Usury Laws. Many states prohibit the charging of interest on loans in
excess of statutory limits. If such limits are exceeded, substantial penalties
may be incurred and, in some cases, enforceability of the obligation to pay
principal and interest may be affected. The Company presently does not intend to
acquire loans subject to such usury limitations; however, such state laws may in
the future prevent the Company from acquiring loans at rates as high as the
rates which borrowers are willing to pay, thus limiting profitable investment
opportunities.
3. Bankruptcy Laws. The Company's rights in case of a default may be
affected if the borrower declares bankruptcy. In that case, the Company must
first apply to the bankruptcy court for permission to pursue any of the remedies
outlined above, which will be granted only if the court determines that the
Company's interests are not being "adequately protected" in some other way, such
as through payments by the borrower, during the pendency of the bankruptcy. This
procedure, especially if contested by the borrower, may result in additional
expense and delay, with the possibility that the collateral would decline in
value in the meantime. Discharge in bankruptcy would cancel any judgment against
the borrower, so the collateral may be the only effective source of repayment.
4. Tax Laws and Regulations. The Internal Revenue Code provides priority to
certain tax liens over the lien of a security interest.
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, loan/lease terms and conditions (significantly including
cost), 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. See "Risk Factors."
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."
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<PAGE> 21
EMPLOYEES AND FACILITIES
The Company will share office facilities with Giuffre Cranes in Milwaukee.
Giuffre Cranes personnel will provide marketing, customer relations, credit
evaluation, loan and lease administration, and general administrative services
to the Company pursuant to a Management Agreement for a fee of $1,000 per annum,
payable quarterly. 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). As described more fully below, Giuffre
Cranes generates additional revenues by initially renting Equipment to customers
for up to 6 months and then by offering such Equipment for sale to the rental
customer with a credit for past rent paid. This arrangement also facilitates
Equipment sales. If the customer does not purchase the Equipment at the end of
the six month rental, the Equipment may be offered to another customer for
rental and sale, thus producing additional rental income.
2. Equipment Rental. The concept of renting equipment prior to and in
connection with its eventual purchase, has generally been well accepted in most
of Giuffre Cranes's markets. Although the reasons for any particular customer to
rent Equipment are many and various, a frequent motive is the opportunity which
a rental arrangement affords to the customer to develop experience with the
Equipment while utilizing it on revenue-producing projects prior to committing
to a purchase.
The purchase of Equipment is often a significant capital expenditure for
the customer. In particular cases, customers may decide to rent Equipment
without purchasing, in order to meet special project and seasonal requirements,
because its own customers have only occasional needs, due to budget constraints,
or because the need for other types or models of Equipment becomes apparent. If
the customer elects not purchase the Equipment following rental, the Company
retains the rental payments and offers the crane to another customer at a slight
price reduction as a demonstrator model.
In the past, the bulk of the truck-mounted cranes sold by Giuffre Cranes
have been manufactured by Terex Cranes. Terex Cranes has sales
and warehousing facilities in the United States. Giuffre Cranes has been and
remains a principal American distributor of Terex Cranes 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. No appraisal of
such new Equipment is obtained upon such purchase. However, used Equipment may
be purchased at "fair market value" in certain cases, either with or without an
appraisal. During the past year, Giuffre Cranes has purchased, rented and sold
approximately 230 Model Dino 1500 truck-mounted cranes in the United States.
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<PAGE> 22
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.
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.
Equipment held for such use may be periodically re-furbished and continue to be
used for ten years or more.
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.
RENTAL AND LEASE ARRANGEMENTS
The Equipment rental or lease arrangements between Giuffre Cranes and its
customers are generally entered into for 6-month periods. In certain instances,
however, Equipment may be rented/leased for a longer or shorter term. Customers
are generally billed monthly (regardless of the rental/lease term), and income
is generally recognized at the time of billing. At the end of each rental/lease
term, Giuffre Cranes is responsible, at its cost, for retrieving the Equipment
if the customer does not purchase such rented/leased Equipment. Most
rented/leased Equipment is expected to be purchased by the renter/lessee;
historically, approximately 80% of Giuffre Cranes' rental/lease customers have
purchased the Equipment initially rented or leased by them. Rental and lease
arrangements typically require that the customer provide proper liability and
casualty insurance coverages, designating Giuffre Cranes as a named insured so
long as it remains the owner.
Certain provisions of the "Leases" (both rental and lease agreements)
covering Equipment owned by Giuffre Cranes are described below:
1. Net Lease. Payments on longer term leases may be in addition to, and
completely net of, all expenses of operation and maintenance of the Equipment.
However, the lessor (Giuffre Cranes) may assume some operating costs, such as
oil and/or gasoline, on short term rentals. The customer may also pay all taxes
relating to operation of the Equipment, and/or all costs and expenses incurred
in connection with the use and operation of the Equipment, in each case as
described below under "- Maintenance." However, the lessor may assume some of
these operating costs on short term rentals.
2. Title. The leases typically expressly provide that nothing therein
conveys to the lessee any interest in or right to the Equipment other than the
right of usage and quiet enjoyment under the Leases. All Equipment bears
markings or other identification of Giuffre Cranes as the owner. Giuffre Cranes
has the right to inspect the Equipment at any time, subject to the lessee's
security procedures.
3. Initial and Extended Terms. The terms of most rentals will be six
months, but Giuffre Cranes may rent or lease Equipment for shorter or longer
terms in its discretion. Provision may be made for extension of a term, and in
some longer term leases, the customer may be granted a purchase option.
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<PAGE> 23
4. Liens and Taxes. Each lessee under rental and longer term lease
agreements is required to keep the Equipment free from liens, legal process or
encumbrances and to indemnify the lessor Company from any loss caused thereby.
All taxes, such as sales taxes, of any kind whatsoever, except for income or
franchise taxes of the lessor, are typically required to be paid by the lessee.
In any case where the lessee fails to pay any taxes payable by lessee, and the
lessor elects to pay them, the amount paid by the lessor becomes additional
rental immediately payable by the lessee.
5. Casualty Losses. The lessees bear the entire risk of loss, theft or
damage to the Equipment.
6. Default. Events of a lessee's default under the Leases include (a)
non-payment of rent, (b) breach by the lessee of any warranty under the Leases,
(c) default in the performance of any agreement under the Leases, and (d)
insolvency or bankruptcy of the lessee. Upon a default, the lessor may terminate
the Lease immediately upon giving oral or written notice to the lessee. The
Leases provide for the surrender of the Equipment on notice of default and
reserves to the Company all other legal remedies.
7. Remedies of the Lessor. The courts have imposed on lessors an obligation
to "mitigate damages" in the event of a lessee's failure to cure a default.
Under this doctrine, the lessor must exercise good judgment and follow
acceptable commercial practice in disposing of or in re-leasing leased
Equipment, and must offset such receipts against its claim. Casualty losses may
be cured by return of the Equipment to its prior condition or by replacement
with substantially similar equipment, but the obligation of the lessee to pay
rent do not abate upon the occurrence of any casualty loss.
8. Warranty. Leases typically contain a specific disclaimer of warranties
by the lessor, pursuant to which each lessee acknowledges that the lessor is not
responsible for the Equipment's function or performance and that the lessee will
look only to the manufacturer for any liability or damages arising from the
Equipment, including consequential damages, which it waives against the Company.
9. Maintenance. Lessees are responsible for maintaining the Equipment in
good operating condition and repair, to use it for the purposes its manufacturer
intended, and to return the Equipment at the end of each term in such condition,
subject only to normal wear and tear. Lessees generally pay all operating costs,
and are required to maintain insurance on the Equipment.
MARKETING AND DISTRIBUTION
Equipment and related parts and services (including lease/rental) are
marketed 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,
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<PAGE> 24
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
Cranes 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.
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 Giuffre Cranes 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(R) 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.
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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.
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(R) or REXWORKS.(R)
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 union.
No other employee groups are unionized. 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 Stoclholders." Cranes. 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.
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MANAGEMENT
DIRECTORS AND OFFICERS
The current directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Frank P. Giuffre 53 President, Treasurer and Director
Dominic J. Giuffre 49 Vice President, Secretary and Director
Jeffrey M. Brewster 38 Director
Thomas H. Murphy 63 Director
Scott A. Blair 35 Executive Vice President
</TABLE>
Frank P. Giuffre has been a director, President (Chief Executive Officer)
and Treasurer of the Company since its inception in August, 1995. Mr. Giuffre
has been President, a director and a principal shareholder of Giuffre Bros.
Cranes, Inc. from its formation in 1982 to the present.
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 a registered securities representative with Abacus Investments,
Inc., a member firm of the NASD. From October, 1997, to the present, Mr.
Brewster has been an officer of Lake Geneva Financial Services Corp., an
insurance brokerage firm. From 1990 to 1998, Mr. Brewster was a partner of A.N.
Ansay & Associates, an independent insurance agent.
Thomas H. Murphy has been a director of the Company since October, 1997.
Since 1983, he has been an independent investment advisor.
Scott A. Blair has been Executive Vice President of the Company since its
inception in August, 1995. From 1993 to the present, he has served as National
Accounts Manager of Giuffre Bros. Cranes, Inc.
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."
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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 29, 1996 and February 28, 1997. No executive officer
or key employee of the Company at February 28, 1997 received cash compensation
in excess of $100,000 in 1997.
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------
All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)(1)
--------------------------- ---- --------- -------- ------------------
<S> <C> <C> <C> <C>
Frank P. Giuffre........................................... 1997 -- -- --
President (Chief Executive Officer) 1996 -- -- --
</TABLE>
Option Grants in the Last Fiscal Year. As illustrated by the following
table, no options were granted to the Named Executive Officer for the fiscal
year ended February 28, 1997.
<TABLE>
<CAPTION>
Individual grants Potential realizable
---------------------------------------------------- value at assumed
Number of Percent of annual rates of
shares total options stock price
underlying granted to Exercise appreciation
options employees in price Expiration for option term(2)
Name granted(#) fiscal year ($/share)(1) date 5%($) 10%($)
- -------------------------- ------------ ------------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Frank P. Giuffre (1)............. -- -- -- -- -- --
</TABLE>
- ----------------
(1) Reflects future value of current-year grants assuming appreciation of 5%
and 10% per year over the option period (10 years). The actual value
realized may be greater than or less than the potential realizable values
set forth in the table.
(2) It is anticipated that no person will be granted options during fiscal 1998.
Option Exercises in Last Fiscal Year (1997) and Aggregate Option Values at
February 28, 1997. The following table sets forth certain information concerning
the exercise of options by the Named Executive Officer during fiscal 1997, and
the values at February 28, 1997 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, 1997 December 31, 1994(1)
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.
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<PAGE> 28
EMPLOYMENT AGREEMENTS
Scott A. Blair has entered into an agreement with the Company, for an
indefinite term, providing that he will be appointed and serve as Executive Vice
President of the Company, that he will manage the day-to-day relations between
the Company and its investors and that he will negotiate and structure financing
arrangements with customers of the Company. The agreement further provides that
the Company will pay to Mr. Blair commissions, at competitive industry rates, on
amounts financed by the Company, that the Company will pay to Mr. Blair
additional compensation equal to 20% of its net profits (payable quarterly,
commencing in August, 1997) and that the Company will reimburse Mr. Blair for
his expenses incurred in connection with his performance of his obligations
under the agreement.
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
$1,000 per annum, payable quarterly in arrears. The Management Fee will
compensate Giuffre Cranes for, among other services, performing the functions of
a third party originator and administrator/servicer of Leases, including without
limitation marketing and originating Leases (and assisting with credit
determinations with respect to potential lessees), 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.
Giuffre Cranes is entitled to reimbursement from the Company for (i) the
costs of operations (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 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) investor documentation; (v) legal and tax services;
and (vi) any other related operational or administrative expenses necessary for
the operation of the Partnership. 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 (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.
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. At the present time, there is no pending litigation or proceeding
involving a director, officer, employee or other agent of the Company 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> 29
CERTAIN RELATIONSHIPS
AND
RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
Giuffre Cranes owns the building which houses the Company's offices in
Milwaukee, Wisconsin. The Company provides use of so much of Giuffre Cranes's
facility as it reasonably requires for its operation during the term of the
Management Agreement. Under the terms of the Management Agreement, Giuffre
Cranes provides all marketing, service and administrative functions required to
operate the business of the Company for the Management Fee. In addition, Giuffre
Cranes will supply all required management, technical and administrative
services through its personnel. See "Management - Management Agreement."
Pursuant to the unanimous authorization of the holders of all then
outstanding shares of Common Stock, in March, 1998, the Company (i) amended its
Articles of Incorporation to increase the number of authorized shares of Common
Stock to 20,000,000 and (ii) split its outstanding Common Stock, at the rate of
400 shares for every one share outstanding, effective March 31, 1998.
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 "Capitalization."
CONFLICTS OF INTEREST
In the future, the Company may become subject to conflicts of interest in
making new rental or lease assignments of equipment managed by it for affiliates
it may form, equipment owned for its own account, and equipment which may
provide collateral for other securities which the Company issues. No such
conflicting obligations exist on the date of this Agreement. The Company does
not expect to become committed under any agreement to follow any specific
priority in the rental or leasing of equipment. In most cases, the Company
anticipates that it will determine which equipment to rent or lease based upon
the type of equipment required by the customer, the proximity of specific items
of that type of equipment to the customer site, and the time availability of the
equipment considering the termination dates of then current rental or lease
agreements. In most cases, the Company does not expect a conflict in the making
of rental or lease assignments for its equipment; however, in the event two
items of the required type are both presently available in the same geographic
area as required to fulfill a particular rental or lease customer's needs, then
the Company will exercise its best efforts in good faith to equalize the
utilization rates of the competing programs, by placing with the customer that
item of equipment for the Company, its affiliates or other programs which then
has the lower utilization rate of the two competing programs. Conflicts may also
occur in the allocation of resources, such as personnel time, between the
Company and its sister corporation. The Company anticipates that it will resolve
these conflicts through the exercise of its best efforts in good faith to make
an equitable allocation of such resources.
Because the Company intends to transact business with certain of its
officers, directors and affiliates, as well as with firms in which certain of
its officers, directors or affiliates have a material interest, potential
conflicts may arise between the respective interests of the Company and such
related persons or entities. Management believes that such transactions will be
effected on terms at least as favorable to the Company as those available from
unrelated third parties.
Kranitz & Philipp, counsel to the Company, is also counsel to the Managing
Placement Agent. The Company may be represented by other independent counsel in
all instances (including securities law matters) where its interests are deemed
to conflict with those of the Managing Placement Agent.
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PRINCIPAL STOCKHOLDERS
The following table sets forth as of February 28, 1998, and as adjusted to
reflect the sale of the 200,000 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 33.3%
6635 S. 13th St.
Milwaukee, WI 53221
Dominic J. Giuffre ................................... 200,000 50.0% 200,000 33.3%
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 66.7%
</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 March 31, 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> 31
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, par value $0.01 per share. As of the date of this Prospectus,
there were 400,000 shares of Common Stock outstanding, beneficially held 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.
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
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<PAGE> 32
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 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.
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<PAGE> 33
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 super majority 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) above 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.
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
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<PAGE> 34
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 600,000 shares
of Common Stock outstanding. Of the shares outstanding after the offering, the
200,000 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 ("Affiliate"), 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 6,000 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 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.
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<PAGE> 35
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.
("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 200,000
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 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.
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.
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<PAGE> 36
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 non-transferable except to
officers of the Representative. 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
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.
For the five-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."
35
<PAGE> 37
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
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, 1997 and February 29,
1996, and the related statements of operations and cash flows for the periods
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.
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.
36
<PAGE> 38
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants............................................................................ F-1
Financial Statements:
Balance Sheets at February 28, 1997 and February 29, 1996, and at September 30, 1995 (unaudited)............. F-2
Statements of Operations for the years ended February 28, 1997 and February 28, 1996,
and for the nine months ended November 30, 1997 and 1996 (unaudited)...................................... F-3
Statements of Cash Flows for the years ended February 28, 1997 and February 29, 1996,
and for the nine months ended November 30, 1997 and 1996 (unaudited)...................................... F-4
Notes to Financial Statements................................................................................ F-5
</TABLE>
37
<PAGE> 39
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, 1997 and February 29, 1996, 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, 1997 and February 29, 1996, 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
October 10, 1997, except for Note 1 as
to which the date is December 16, 1997
F-1
<PAGE> 40
HEARTLAND WISCONSIN CORP.
Balance Sheets
<TABLE>
<CAPTION>
November 30, February 28, February 29,
1997 1997 1996
-------------------------------------------------
(Unaudited)
Assets:
<S> <C> <C> <C>
Cash $ 95,471 $ 7,665 $ 12,048
Cash held in escrow 3,031 3,748 -
Finance Receivables (Notes 3 & 4) 1,317,269 496,150 10,976
Receivable from Giuffre Bros. Cranes, Inc. (Note 5) 11,327 - 38,836
Receivable from Giuffre West, Inc. (Note 5) - 116,701 -
Equipment (Note 5) - 866,185 617,264
Less accumulated depreciation - (93,185) (23,754)
-------------------------------------------------
Net equipment - 773,000 593,510
Deferred finance costs- net (Note 2) 55,683 31,236 81,946
-------------------------------------------------
Total assets $ 1,482,781 $ 1,428,500 $ 737,316
=================================================
Liabilities:
Senior notes payable- bank (Note 4) $ 473,338 $ - $ -
Notes payable (Note 4) 752,452 1,027,000 750,000
Payable to Giuffre Bros. Cranes, Inc. (Note 5) - 161,007 -
Accrued liabilities 7,794 2,881 1,922
-------------------------------------------------
Total liabilities 1,233,584 1,190,888 751,922
Shareholders' equity:
Common stock, $.01 par value, 9,000 shares
authorized, 1,000 shares issued and outstanding 10 10 10
Paid-in-capital 259,990 259,990 9,990
Retained earnings (deficit) (10,803) (22,388) (24,606)
-------------------------------------------------
Total shareholders' equity 249,197 237,612 (14,606)
-------------------------------------------------
Total liabilities and shareholders' equity $ 1,482,781 $ 1,428,500 $ 737,316
=================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE> 41
HEARTLAND WISCONSIN CORP.
Statements of Income and Retained Earnings (Deficit)
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
November 30, November 30, February 28, February 29,
1997 1996 1997 1996
-------------------------------------------------------------------------
(Unaudited) (Unaudited) (Note 1)
<S> <C> <C> <C> <C>
Revenues:
Rental equipment sales (Note 5) $ - $ 315,021 $ 506,203 $ -
Rental income (Note 5) - 144,100 213,803 29,585
Interest income 108,433 3,525 17,048 1,290
Other income 7,735 - - -
-------------------------------------------------------------------------
Total revenue 116,168 462,646 737,054 30,875
Expenses:
Cost of equipment sold (Note 5) - 247,216 407,553 -
Interest expense 75,677 68,509 94,582 19,547
Amortization of finance costs (Note 2) 22,543 64,452 86,872 10,559
Depreciation - 93,745 139,922 23,754
Legal and accounting 3,121 25 4,025 895
Escrow fees and bank charges 2,222 1,600 1,650 702
Other 1,020 231 231 24
------------------------------------------------------------------------
Total expenses 104,583 475,778 734,835 55,481
------------------------------------------------------------------------
Net income (loss) 11,585 (13,132) 2,218 (24,606)
Retained earnings (deficit), beginning of period (22,388) (24,606) (24,606) -
------------------------------------------------------------------------
Retained earnings (deficit), end of period $ (10,803) $ (37,738) $ (22,388) $ (24,606)
========================================================================
Net income (loss) per common share $ 11.58 $ (13.13) $ 2.22 $ (24.61)
========================================================================
Weighted average common shares outstanding 1,000 1,000 1,000 1,000
========================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 42
HEARTLAND WISCONSIN CORP.
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
November 30, November 30, February 28, February 29,
1997 1996 1997 1996
-------------------------------------------------------------------------
(Unaudited) (Unaudited) (Note 1)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 11,585 $ (13,132) $ 2,218 $ (24,606)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation - 93,745 139,922 23,754
Amortization of loan fees 22,543 64,452 86,872 10,559
Gain on sale of equipment - (67,805) (98,650) -
(Increase) in accrued interest receivable (8,097) (1,230) (4,258) -
Increase in accrued liabilities 4,913 1,156 960 1,922
----------------------------------------------------------------------
Net cash provided by operating activities 30,944 77,186 127,064 11,629
Cash flows from investing activities:
Investments in notes and direct financing leases (1,028,195) (143,287) (491,115) (10,976)
Payments received on notes and leases 215,174 3,051 10,198 -
Equipment purchased (Note 5) - (675,587) (675,586) (617,264)
Net proceeds from equipment sold 773,000 260,452 454,824 -
----------------------------------------------------------------------
Net cash used in investing activities (40,021) (555,371) (701,679) (628,240)
Cash flows from financing activities:
Net bank borrowings-senior notes (Note 4) 512,463 - - -
Net borrowings from investors (Note 4) 475,452 262,000 277,000 750,000
Repayments of senior notes (39,125) - - -
Repayments of investor notes (750,000) - - -
Loan fees incurred (46,991) (34,812) (36,162) (92,506)
Increase (decrease) in proceeds held in escrow 717 - (3,748) -
(Increase) decrease in related party balances
(Note 5) (55,633) (3,480) 83,142 (38,836)
Proceeds from sale of common stock and contribution
of additional paid-in-capital - 250,000 250,000 10,000
----------------------------------------------------------------------
Net cash provided from financing activities 96,883 473,708 570,232 628,658
----------------------------------------------------------------------
Net increase (decrease) in cash 87,806 (4,477) (4,384) 12,048
Cash balances at the beginning of period 7,665 12,048 12,048 -
----------------------------------------------------------------------
Cash balances at the end of period $ 95,471 $ 7,571 $ 7,664 $ 12,048
======================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 73,571 $ 68,509 $ 93,693 $ 17,625
Income taxes $ - $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 43
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.
Heartland Wisconsin Corp. rents, leases, services and sells truck mounted units.
The Company also provides financing to its customers and customers of Giuffre
Bros. Cranes, Inc. Financing is provided through secured loans and finance
leases. In the future, the Company expects its operations to consist primarily
of financing activities.
FISCAL YEAR
The Company's fiscal year ends on the last day of February. Operations for 1996
reflect the results of operations for seven months from inception in August,
1995 to February 29, 1996.
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 principal balances reduced by any chargeoff or specific valuation
accounts and net of any deferred fees or costs on originated loans, or
unamortized premiums or discounts on purchased loans.
Loan origination fees and certain direct origination costs are capitalized and
recognized as an adjustment of the yield of the related loan.
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> 44
HEARTLAND WISCONSIN CORP.
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EQUIPMENT
Equipment purchases were capitalized at cost. Depreciation is computed for
financial statement purposes on straight-line method over a five year period.
For income tax purposes, the Company uses MACRS over the same period. All of the
equipment at March 1, 1997 was sold to Giuffre Bos. Cranes, Inc. at cost.
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.
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.
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 is contractually delinquent for ninety 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.
INTERIM FINANCIAL INFORMATION
The financial information as of November 30, 1997 and for the nine months ended
November 30, 1997 and 1996 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 - CHANGES IN ACCOUNTING PRINCIPLES
In view of the change in emphasis of the Company's operations more toward
financing, the Company elected to change its method of financial statement
presentation to an unclassified balance sheet which conforms accounting policies
preferable for finance companies. The presentation of the prior year financial
statements has been restated to conform with that of the current period.
During 1997, the Company began amortizing deferred costs associated with
obtaining debt financing over the life of the outstanding debt on the interest
method. In 1996, these costs were treated as organization costs to be amortized
over a five year period. The new method, if applied to 1996, would not have
materially affected previously reported results of operations.
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.
F-6
<PAGE> 45
HEARTLAND WISCONSIN CORP.
NOTE 3 - FINANCE RECEIVABLES
Finance receivables consisted of the following:
<TABLE>
<CAPTION>
November 30, 1997 February 28,1997
----------------- ----------------
(Unaudited)
<S> <C> <C>
Loans, secured by crane equipment, $ 114.685 $ 130,975
Crane equipment leases - net 1,190,229 360,917
Accrued interest 12,355 4,258
-------------- -------------
$ 1,317,269 $ 496,150
============== =============
</TABLE>
All of the Company's loans and leases are current and accordingly, no allowance
for credit losses has been established. The Company's equipment leases are
direct financing leases or sales type leases. The lease terms range from 36 to
60 months and generally provide for the option of the lessee to acquire the
leased assets for $1 at the end of the lease term. At February 28, 1997,
contractual maturities of finance receivables was as follows:
<TABLE>
<CAPTION>
Loans Leases Total
----- ------ -----
<S> <C> <C> <C>
1998 $ 22,021 $ 67,870 $ 89,891
1999 24,810 77,658 102,468
2000 27,952 77,782 105,734
2001 31,473 57,559 89,032
2002 24,720 61,833 86,552
2003 - 18,214 18,214
---------- ----------- -----------
$ 130,976 $ 360,916 $ 491,891
========== =========== ===========
</TABLE>
F-7
<PAGE> 46
HEARTLAND WISCONSIN CORP.
NOTE 4 - NOTES PAYABLE
<TABLE>
<CAPTION>
The Company had notes payable as follows: November 30 February 28 February 29
1997 1997 1996
----------- ------------ -----------
(Unaudited)
<S> <C> <C> <C>
Senior notes payable-bank:
8.9% note, due in monthly
installments of $2,117 including
principal and interest through
October 5, 2002 $ 101,939 $ - $ -
8.9% note, due in monthly installments
of $934 including principal and
interest through July 25, 2002 43,146 - -
8.9% note, due in monthly installments
of $1,269 including principal and interest
through July 5, 2002 58,607 - -
8.9% note, due in monthly installments
of $1,153 including principal and interest
through July 5, 2002 53,454 - -
8.9% note, due in monthly installments
of $1,005 including principal and interest
through June 9, 2002 45,787 - -
9.25% note, due in monthly installments of $1,014
including principal and interest through
March 5, 2002 44,537 - -
8.9% note, due in monthly installments of
$3,730 including principal and interest
through January 9, 2001 125,868 - -
---------- ---------- ---------
$ 473,338 $ - $ -
========== ========== =========
Investors:
10.25% secured notes
due June 30, 1997 $ - $ 750,000 $ 750,000
10.25% asset backed notes due
due June 30, 1999 177,000 177,000
10.25% capital notes due
December 31, 1999 575,452 100,000 -
---------- ---------- ---------
$ 752,452 $1,027,000 $ 750,000
========== ========== =========
</TABLE>
F-8
<PAGE> 47
HEARTLAND WISCONSIN CORP.
NOTE 4 - NOTES PAYABLE - CONTINUED
The Company has financed up to 60% of certain lease contracts through borrowings
(the senior notes) with a bank. The bank notes are at fixed interest rates
during the term of the loan and are secured by a first security interest in the
leased equipment.
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 is 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.
Maturities at February 28, 1997 were as follows:
1998 $ 750,000
1999 -
2000 277,000
------------
Total $ 1,027,000
============
NOTE 5 - 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 1997, Heartland had no employees or facilities of its own. The
Management Agreement permits Giuffre Bros. Cranes, Inc. to assess Heartland a
management fee for its services, however, during 1997 or 1996, Giuffre Bros.
Cranes, Inc. did not assess or receive any management fees from Heartland.
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 for book purposes.
The Company had the following transactions with Giuffre Bros. Cranes, Inc. and
related entities during 1997 and 1996, respectively:
<TABLE>
<CAPTION>
February 28 February 29
1997 1996
---- ----
<S> <C> <C>
Purchases of crane equipment, at cost $ 675,586 $ 617,264
Sales of rental equipment 506,203 -
Rental income 213,803 29,585
</TABLE>
F-9
<PAGE> 48
HEARTLAND WISCONSIN CORP.
NOTE 6 - INCOME TAXES
The Company had nominal operating income in 1997 and incurred a net operating
loss in 1996. Accordingly, no provision for income taxes was made for either
year.
At February 28, 1997, the Company had net operating loss carryforwards of
approximately $96,000 available to offset federal taxable income in future
years.
F-10
<PAGE> 49
EXHIBIT A
200,000 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 $0.01 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, at the price of $ 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 event 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.)
<TABLE>
<S> <C>
- ----------------------------------
- ---------------------------------- ----------------------------------------------------------
Social Security or Federal Tax I.D. Number
- ----------------------------------
Name(s)
- ----------------------------------
Street Address Telephone Number ( )
----------------------------------
- ----------------------------------
City, State, Zip Code
</TABLE>
<TABLE>
<S><C>
OWNERSHIP: [ ] Individual [ ] Marital Property [ ] Joint Tenants with Right of Survivorship
[ ] Tenants in Common [ ] Corporation [ ] Partnership [ ] Trust [ ]IRA/Qualified Plan
[ ] Other ________________
</TABLE>
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> 50
SUBSCRIBER SIGNATURES
INDIVIDUALS (All proposed record holders must sign.)
Dated:
----------------------
<TABLE>
<S><C>
- ------------------------------- --------------------------------------
(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)
</TABLE>
CERTIFICATE OF SIGNATORY
<TABLE>
<S><C>
I, , am the
--------------------------------------------------- -----------------------------------------------
(Print or Type Name of Authorized Representative) (Print or Type Title or Position)
of ("Entity").
------------------------------------------------------
(Print or Type Name of Subscribing Entity)
</TABLE>
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 , 1998.
HEARTLAND WISCONSIN CORP.
By:
-----------------------------------------
(Signature of Authorized Officer)
A-2
<PAGE> 51
[Inside back cover -- graphic]
<PAGE> 52
HEARTLAND WISCONSIN CORP.
<PAGE> 53
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> 54
(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 s. 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> 55
(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> 56
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 s. 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................................................................ $ 393.94
NASD filing fee..................................................................... 630.00
Brokers' expense allowance.......................................................... 20,000.00 *
Legal fees and expenses............................................................. 40,000.00 *
Accounting fees and expenses........................................................ 10,000.00 *
Blue Sky fees and expenses.......................................................... 2,500.00 *
Listing fees and expenses........................................................... 1,500.00 *
Printing and engraving.............................................................. 4,500.00 *
Miscellaneous....................................................................... 476.06 *
------------
Total...................................................................... $ 80,000.00 *
</TABLE>
- ------------------
* Estimate
II - 4
<PAGE> 57
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.
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
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
</TABLE>
- --------------------------------------
* To be filed by amendment.
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.
II - 5
<PAGE> 58
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> 59
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 March 20, 1998.
HEARTLAND WISCONSIN CORP.
By: /s/ Frank P. Giuffre
-----------------------------------
Frank P. Giuffre, President
POWER OF ATTORNEY
Each person whose signature appears below on this Registration
Statement hereby constitutes and appoints Frank P. Giuffre and Dominic J.
Giuffre, and each of them, with full power to act without the other, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities (until revoked in writing) to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary fully to all
intents and purposes as he or she might or could do in person thereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their, his or her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Frank P. Giuffre President, Treasurer March 20, 1998
- --------------------------------------- (Principal Executive, Financial
Frank P. Giuffre and Accounting Officer)
and Director
/s/ Dominic J. Giuffre Vice President, Secretary March 20, 1998
- -------------------------------------- and Director
Dominic J. Giuffre
/s/ Jeffrey M. Brewster Director March 20, 1998
- --------------------------------------
Jeffrey M. Brewster
/s/ Thomas H. Murphy Director March 20, 1998
- --------------------------------------
Thomas H. Murphy
</TABLE>
II - 7
<PAGE> 60
200,000 SHARES
HEARTLAND WISCONSIN CORP.
COMMON STOCK
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
------ ----------- -----------
<S> <C> <C>
1.1 Underwriting Agreement..................................................
3.1 Articles of Incorporation of the Registrant.............................
3.2 Bylaws 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 (included at Page II-7)...............................
27.1 Financial Data Schedule.................................................
</TABLE>
- ---------------------
* To be filed by amendment.
Exhibit Index
<PAGE> 1
EXHIBIT 1.1
UNDERWRITING AGREEMENT
<PAGE> 2
200,000 SHARES
HEARTLAND WISCONSIN CORP.
COMMON STOCK
MANAGING PLACEMENT AGENT AGREEMENT
March , 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 200,000 shares of its common stock, par value $0.01
per share ("Common Stock"), at a price anticipated to be in the range of $5.00
to $6.50 per share ("Offering"). The minimum purchase per investor is 100 shares
of Common Stock ($500), 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
March 31,1999, whichever first occurs; provided, however, that the Offering
may be terminated at any time 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.
March , 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- )
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.
March , 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.
March , 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 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. Coopers & Lybrand, LLP, 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.
March , 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.
March , 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.
March , 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 consitions:
(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 final Closing Date, except to partners and/or officers of J.E.
Liss & Company, Inc.
(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.
March , 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 five years after the final Closing Date 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 5-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.
March , 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.
March , 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 Service ("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.
March , 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.
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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, (vi) all travel, lodging and reasonable
living expenses incurred by the Company and the Selected Placement Agent in
connection with marketing, dealer and other meetings and all expenses for
advertising, publicity and selling or promotional materials used in connection
therewith and (vii) the costs and charges of its transfer agent and registrar.
(b) 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 the NASD Corporate Financing Rule); 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 $5,000.
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.
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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.
March , 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.
March , 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.
March , 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.
March , 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.
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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.
March , 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.
March , 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.
March , 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.
March , 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,
Tomorrow's Morning, Inc.
By:________________________________________
Frank P. Giuffre, 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 3.1
ARTICLES OF INCORPORATION OF THE REGISTRANT
<PAGE> 2
Form 2
Secretary of State
WISCONSIN
11/90 ARTICLES OF INCORPORATION
STOCK (FOR PROFIT)
Executed by the undersigned for the purpose
of forming a Wisconsin for-profit
corporation under Chapter 180 of
the Wisconsin Statutes repealed and
recreated by 1989 Wis. Act 303:
Article 1.
Name of Corporation: HEARTLAND WISCONSIN CORP.
Article 2. (See FEE information on reverse)
THE CORPORATION SHALL BE AUTHORIZED TO ISSUE 9,000 SHARES, $.01 PAR
VALUE COMMON STOCK.
Article 3.
The street address of the
initial registered office is: 6635 S. 13TH STREET
(The complete address, including OAK CREEK, WI 53154
street and number,
if assigned, and the ZIP
code must be stated.)
Article 4.
The name of the initial registered
agent at the above registered office
is: FRANK GIUFFRE
Article 5. Other provisions (OPTIONAL):
Article 6. Executed on AUGUST 4, 1995.
Name and complete address of each incorporator:
1. RICHARD A. KRANITZ
KRANITZ & PHILIPP
1238 12TH AVE.
GRAFTON, WI 53024
/s/ RICHARD A. KRANITZ
---------------------------------
(Incorporator Signature)
This document was drafted by ATTORNEY RICHARD A. KRANITZ
<PAGE> 1
EXHIBIT 3.2
BYLAWS OF THE REGISTRANT
<PAGE> 2
BYLAWS
OF
HEARTLAND WISCONSIN CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 IDENTIFICATION.................................... 1
Section 1.01 Name.............................................. 1
Section 1.02 Principal and Business Offices.................... 1
Section 1.03 Registered Agent and Office....................... 1
Section 1.04 Place of Keeping Corporate Records................ 1
ARTICLE 2 SHAREHOLDERS...................................... 1
Section 2.01 Annual Meeting.................................... 1
Section 2.02 Special Meetings.................................. 1
Section 2.03 Place of Meeting.................................. 1
Section 2.04 Notice of Meetings................................ 1
Section 2.05 Waiver of Notice.................................. 2
Section 2.06 Fixing of Record Date............................. 2
Section 2.07 Voting List....................................... 2
Section 2.08 Quorum and Voting Requirements.................... 2
Section 2.09 Order of Business at Meetings..................... 3
Section 2.10 Proxies........................................... 3
Section 2.11 Voting of Shares.................................. 4
Section 2.12 Voting of Shares by Certain Holders............... 4
(a) Other Corporations........................... 4
(b) Legal Representatives and Fiduciaries........ 4
(c) Pledgees..................................... 4
(d) Minors....................................... 4
(e) Incompetents and Spendthrifts................ 4
(f) Joint Tenants................................ 4
Section 2.13 Action Without a Meeting.......................... 4
ARTICLE 3 BOARD OF DIRECTORS................................ 5
Section 3.01 General Powers.................................... 5
Section 3.02 Election.......................................... 5
Section 3.03 Number, Tenure, and Qualifications................ 5
Section 3.04 Regular Meetings.................................. 5
Section 3.05 Special Meetings.................................. 5
Section 3.06 Meetings by Electronic Means
of Communication............................... 5
(a) Conduct of Meetings.......................... 5
(b) Verification of Directors'
Identity.................................. 6
Section 3.07 Notice of Meetings; Waiver of Notice.............. 6
Section 3.08 Quorum Requirement................................ 6
Section 3.09 Voting Requirement................................ 6
Section 3.10 Conduct........................................... 6
Section 3.11 Vacancies......................................... 7
Section 3.12 Compensation and Expenses......................... 7
Section 3.13 Directors' Assent................................. 7
Section 3.14 Committees........................................ 7
Section 3.15 Action Without a Meeting.......................... 7
</TABLE>
<PAGE> 3
<TABLE>
<Caption
PAGE
<S> <C> <C>
ARTICLE 4 OFFICERS.......................................... 8
Section 4.01 Number and Titles................................. 8
Section 4.02 Appointment, Tenure, and
Compensation................................... 8
Section 4.03 Additional Officers, Agents, etc.................. 8
Section 4.04 Removal........................................... 8
Section 4.05 Resignations...................................... 8
Section 4.06 Vacancies......................................... 8
Section 4.07 Powers, Authority, and Duties..................... 8
Section 4.08 The Chairperson of the Board...................... 8
Section 4.09 The President..................................... 8
Section 4.10 The Vice-Presidents............................... 9
Section 4.11 The Secretary..................................... 9
Section 4.12 The Assistant Secretaries......................... 10
Section 4.13 The Treasurer..................................... 10
Section 4.14 The Assistant Treasurers.......................... 10
ARTICLE 5 CONTRACTS, LOANS, CHECKS,
AND DEPOSITS................................... 10
Section 5.01 Contracts......................................... 10
Section 5.02 Loans............................................. 11
Section 5.03 Checks, Drafts, etc............................... 11
Section 5.04 Deposits.......................................... 11
ARTICLE 6 VOTING OF SECURITIES OWNED
BY THE CORPORATION............................. 11
Section 6.01 Authority to Vote................................. 11
Section 6.02 Proxy Authorization............................... 11
ARTICLE 7 CONTRACTS BETWEEN THE CORPORATION
AND RELATED PERSONS............................ 11
ARTICLE 8 CERTIFICATES FOR SHARES AND
THEIR TRANSFER................................. 12
Section 8.01 Certificates for Shares........................... 12
Section 8.02 Shares Without Certificates....................... 12
Section 8.03 Facsimile Signatures.............................. 12
Section 8.04 Signature by Former Officer....................... 12
Section 8.05 Consideration for Shares.......................... 12
Section 8.06 Transfer of Shares................................ 12
Section 8.07 Restrictions on Transfer.......................... 13
Section 8.08 Lost, Destroyed, or Stolen
Certificates................................... 13
ARTICLE 9 INSPECTION OF RECORDS BY
SHAREHOLDERS................................... 13
Section 9.01 Inspection of Bylaws.............................. 13
Section 9.02 Inspection of Other Records....................... 13
ARTICLE 10 DISTRIBUTIONS AND SHARE ACQUISITIONS.............. 13
ARTICLE 11 INDEMNIFICATION................................... 13
ARTICLE 12 AMENDMENTS........................................ 14
Section 12.01 By Shareholders................................... 14
Section 12.02 By Directors...................................... 14
ARTICLE 13 SEAL.............................................. 14
</TABLE>
-ii-
<PAGE> 4
ARTICLE 1
IDENTIFICATION
SECTION 1.01. NAME. The corporation's name is Heartland Wisconsin Corp.
(the "corporation").
SECTION 1.02. PRINCIPAL AND BUSINESS OFFICES. The corporation may have
such principal and other business offices, either within or outside the state of
Wisconsin, as the board of directors may designate or as the corporation's
business may require from time to time.
SECTION 1.03. REGISTERED AGENT AND OFFICE. The corporation's registered
agent may be changed from time to time by or under the authority of the board of
directors. The address of the corporation's registered office may be changed
from time to time by or under the authority of the board of directors, or by the
registered agent. The business office of the corporation's registered agent
shall be identical to the registered office. The corporation's registered office
may be, but need not be, identical with the corporation's principal office in
the state of Wisconsin.
SECTION 1.04. PLACE OF KEEPING CORPORATE RECORDS. The records and
documents required by law to be kept by the corporation permanently shall be
kept at the corporation's principal office.
ARTICLE 2
SHAREHOLDERS
SECTION 2.01. ANNUAL MEETING. The annual shareholders' meeting shall be
held on the first Tuesday in June each year at 10:00 o'clock a.m., beginning
with the year 1996, or at such other date and time within 30 days before or
after this date as may be fixed by or under the authority of the board of
directors, for the purpose of electing directors and transacting such other
business as may come before the meeting. If the day fixed for the annual meeting
is a legal holiday in Wisconsin, the meeting shall be held on the next
succeeding business day.
SECTION 2.02. SPECIAL MEETINGS. Special shareholders' meetings may be
called (1) by the president, (2) by the board of directors or such other
officer(s) as the board of directors may authorize from time to time, or (3) by
the president or secretary upon the written request of the holders of record of
at least 10% of all the votes entitled to be cast upon the matter(s) set forth
as the purpose of the meeting in the written request. Upon delivery to the
president or secretary of a written request pursuant to (3), above, stating the
purpose(s) of the requested meeting, dated and signed by the person(s) entitled
to request such a meeting, it shall be the duty of the officer to whom the
request is delivered to give, within 30 days of such delivery, notice of the
meeting to shareholders. Notice of any special meetings shall be given in the
manner provided in Section 2.04 hereof. Only business within the purpose
described in the special meeting notice shall be conducted at a special
shareholders' meeting.
SECTION 2.03. PLACE OF MEETING. The board of directors may designate
any place, either within or outside the state of Wisconsin, as the place of
meeting for any annual or special shareholders' meeting or any adjourned
meeting. If no designation is made by the board of directors, the place of
meeting shall be the corporation's principal office.
SECTION 2.04. NOTICE OF MEETINGS. The corporation shall notify each
shareholder who is entitled to vote at the meeting, and any other shareholder
entitled to notice under ch. 180, of the date, time, and place of each annual or
special shareholders' meeting. In the case of special meetings, the notice shall
also state the meeting's purpose. Unless otherwise required by ch. 180, the
meeting notice shall be given not less than 10 days nor more than 60 days before
the meeting date. Notice may be given orally or communicated in person, by
telephone, telegraph, teletype, facsimile, other form of wire or wireless
communication, private carrier, or in any other manner provided by ch. 180.
Written notice, if mailed, is effective when mailed; and such notice may be
addressed to the shareholder's address shown in the corporation's current record
of shareholders. Written notice provided in any other manner is effective when
received. Oral notice is effective when communicated.
1
<PAGE> 5
SECTION 2.05. WAIVER OF NOTICE. A shareholder may waive notice of any
shareholders' meeting, before or after the date and time stated in the notice.
The waiver must be in writing, contain the same information that would have been
required in the notice (except that the time and place of the meeting need not
be stated), be signed by the shareholder, and be delivered to the corporation
for inclusion in the corporate records. A shareholder's attendance at a meeting,
in person or by proxy, waives objection to lack of notice or defective notice,
unless the shareholder at the beginning of the meeting or promptly upon arrival
objects to holding the meeting or transacting business at the meeting.
SECTION 2.06. FIXING OF RECORD DATE. For the purpose of determining
shareholders of any voting group entitled to notice of or to vote at any
shareholders' meeting, shareholders entitled to demand a special meeting under
Section 2.02 of these bylaws, or shareholders entitled to receive payment of any
distribution or dividend, or in order to make a determination of shareholders
for any other proper purpose, the board of directors may fix a future date as
the record date. The record date shall not be more than 70 days before the date
on which the particular action requiring this determination of shareholders is
to be taken. If no record date is so fixed by the board, the record date shall
be as follows:
1. With respect to an annual shareholders' meeting or any special
shareholders' meeting called by the board or any person
specifically authorized by the board or these bylaws to call a
meeting, at the close of business on the day before the first
notice is delivered to shareholders
2. With respect to a special shareholders' meeting demanded by
the shareholders, on the date the first shareholder signs the
demand
3. With respect to actions taken in writing without a meeting
(pursuant to Section 2.13 of these bylaws), on the date the
first shareholder signs a consent
4. With respect to determining shareholders entitled to a share
dividend, on the date the board authorizes the share dividend
5. With respect to determining shareholders entitled to a
distribution (other than a distribution involving a repurchase
or reacquisition of shares), on the date the board authorizes
the distribution
6. With respect to any other matter for which such a
determination is required, as provided by law
When a determination of the shareholders entitled to vote at any shareholders'
meeting has been made as provided in this section, the determination shall apply
to any adjournment of the meeting unless the board of directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.
SECTION 2.07. VOTING LIST. After fixing a record date for a meeting,
the corporation shall prepare a list of the names of all of its shareholders who
are entitled to notice of a shareholders' meeting. The list shall be arranged by
class or series of shares, if any, and show the address of and number of shares
held by each shareholder. The corporation shall make the shareholders' list
available for inspection by any shareholder, beginning two business days after
notice is given of the meeting for which the list was prepared and continuing to
the meeting date, at the corporation's principal office or at the place
identified in the meeting notice in the city where the meeting will be held. A
shareholder or his or her agent or attorney may, on written demand, inspect, and
subject to any restrictions set forth in ch. 180, copy the list, during regular
business hours and at his or her expense, during the period that it is available
for inspection. The corporation shall make the shareholders' list available at
the meeting, and any shareholder or his or her agent or attorney may inspect the
list at any time during the meeting or any adjournment.
SECTION 2.08. QUORUM AND VOTING REQUIREMENTS. Shares entitled to vote
as a separate voting group may take action on a matter at a meeting only if a
quorum of those shares exists with respect to that matter. Except as
2
<PAGE> 6
otherwise provided by the articles of incorporation, these bylaws, or any
provision of ch. 180, a majority of the votes entitled to be cast on the matter
by the voting group shall constitute a quorum of that voting group for action on
that matter. If a quorum exists, action on a matter (other than the election of
directors under Section 3.02 of the bylaws) by a voting group is approved if the
votes cast within the voting group favoring the action exceed the votes cast
within the voting group opposing the action, unless the articles of
incorporation, these bylaws, or any provision of ch. 180 requires a greater
number of affirmative votes. Once a share is represented for any purpose at a
meeting, other than for the purpose of objecting to holding the meeting or
transacting business at the meeting, it is considered present for purposes of
determining whether a quorum exists, for the remainder of the meeting and for
any adjournment of that meeting, unless a new record date is or must be set for
that adjourned meeting. At the adjourned meeting at which a quorum is
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
SECTION 2.09. ORDER OF BUSINESS AT MEETINGS. The order of business at
any shareholders' meeting shall be as follows:
1. Roll call
2. Appointment of inspectors of election, if requested
3. Proof of proper notice of meeting or receipt of waiver of
notice
If a quorum is present, the meeting shall continue with the
following items of business:
4. Approval of minutes of preceding meeting, unless dispensed
with by unanimous consent
5. Board of directors' report, if any
6. Officers' reports, if any
7. Committee reports, if any
8. Election of directors, if necessary
9. Unfinished business, if any
10. New business, if any
The order of business at any meeting may, however, be changed
by the vote of those persons in attendance, in accordance with Section 2.08 of
these bylaws. The chairperson of the meeting may designate a corporate officer
or any other person in attendance to keep and prepare minutes of the meeting.
SECTION 2.10. PROXIES. At all shareholders' meetings, a shareholder
entitled to vote may vote in person or by proxy appointed in writing by the
shareholder or by his or her duly authorized attorney-in-fact. A proxy
appointment shall become effective when received by the secretary or other
officer or agent of the corporation authorized to tabulate votes.
Unless otherwise provided in the appointment form, a proxy appointment
may be revoked at any time before it is voted, either by written notice filed
with the secretary or other officer or agent of the corporation authorized to
tabulate votes, or by oral notice given by the shareholder during the meeting.
The presence of a shareholder who has filed his or her proxy appointment shall
not of itself constitute a revocation. A proxy appointment shall be valid for 11
months from the date of its execution, unless otherwise provided in the
appointment form. The board of directors shall have the power and authority to
make rules establishing presumptions as to the validity and sufficiency of proxy
appointments.
3
<PAGE> 7
SECTION 2.11. VOTING OF SHARES. Each outstanding share shall be
entitled to one vote upon each matter submitted to a vote at a shareholders'
meeting, except as otherwise required by the articles of incorporation or by ch.
180.
SECTION 2.12. VOTING OF SHARES BY CERTAIN HOLDERS.
(A) OTHER CORPORATIONS. Shares standing in another
corporation's name may be voted either in person or by proxy, by the other
corporation's president or any other officer appointed by the president. A proxy
appointment executed by any principal officer of the other corporation or such
an officer's assistant shall be conclusive evidence of the signer's authority to
act, in the absence of express notice to this corporation, given in writing to
this corporation's secretary, or other officer or agent of this corporation
authorized to tabulate votes, of the designation of some other person by the
other corporation's board of directors or bylaws.
(B) LEGAL REPRESENTATIVES AND FIDUCIARIES. Shares held by a
personal representative, administrator, executor, guardian, conservator, trustee
in bankruptcy, receiver, or assignee for creditors, in a fiduciary capacity, may
be voted by the fiduciary, either in person or by proxy, without transferring
the shares into his or her name, provided that there is filed with the
secretary, before or at the time of the meeting, proper evidence of the
fiduciary's incumbency and the number of shares held. Shares standing in a
fiduciary's name may be voted by him or her, either in person or by proxy. A
proxy appointment executed by a fiduciary shall be conclusive evidence of the
fiduciary's authority to give the proxy appointment, in the absence of express
notice to the corporation, given in writing to the secretary or other officer or
agent of the corporation authorized to tabulate votes, that this manner of
voting is expressly prohibited or otherwise directed by the document creating
the fiduciary relationship.
(C) PLEDGEES. A shareholder whose shares are pledged shall be
entitled to vote the shares until they have been transferred into the pledgee's
name, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
(D) MINORS. Shares held by a minor may be voted by the minor
in person or by proxy appointment, and no such vote shall be subject to
disaffirmance or avoidance unless before the vote the secretary or other officer
or agent of the corporation authorized to tabulate votes has received written
notice or has actual knowledge that the shareholder is a minor.
(E) INCOMPETENTS AND SPENDTHRIFTS. Shares held by an
incompetent or spendthrift may be voted by the incompetent or spendthrift in
person or by proxy appointment, and no such vote shall be subject to
disaffirmance or avoidance unless before the vote the secretary or other officer
or agent of the corporation authorized to tabulate votes has actual knowledge
that the shareholder has been adjudicated an incompetent or spendthrift or
actual knowledge that judicial proceedings for appointment of a guardian have
been filed.
(F) JOINT TENANTS. Shares registered in the names of two or
more individuals who are named in the registration as joint tenants may be voted
in person or by proxy signed by one or more of the joint tenants if either (1)
no other joint tenant or his or her legal representative is present and claims
the right to participate in the voting of the shares or before the vote files
with the secretary or other officer or agent of the corporation authorized to
tabulate votes a contrary written voting authorization or direction or written
denial of authority of the joint tenant present or signing the proxy appointment
proposed to be voted, or (2) all other joint tenants are deceased and the
secretary or other officer or agent of the corporation authorized to tabulate
votes has no actual knowledge that the survivor has been adjudicated not to be
the successor to the interests of those deceased.
SECTION 2.13. ACTION WITHOUT A MEETING. Any action required or
permitted by the articles of incorporation, these bylaws, or any provision of
ch. 180 to be taken at a shareholders' meeting may be taken without a meeting by
the consent of those shareholders who would have the voting power to cast at a
meeting not less than the minimum number (or, in the case of voting by voting
groups, the minimum numbers) of votes that would be necessary to authorize or
take the action at a meeting at which all shares entitled to vote were present
and
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voted. Action may not, however, be taken under this section with respect to an
election of directors for which shareholders may vote cumulatively. The consent
of the shareholders shall be effective when one or more written consents
describing the action taken, signed by the number of shareholders sufficient to
take the action, are delivered to the corporation for inclusion in the corporate
records, unless some other effective date is specified in the consent. Within 10
days after action taken by the consent of shareholders pursuant to this bylaw
becomes effective, the corporation shall give notice of the action to
shareholders who would have been entitled to vote on the action if a meeting
were held but whose shares were not represented on the written consent or
consents. If the action to be taken requires that notice be given to nonvoting
shareholders, the corporation shall give the nonvoting shareholders written
notice of the proposed action at least 10 days before the action is taken, which
notice shall comply with the provisions of ch. 180 and shall contain or be
accompanied by the same material that would have been required to be sent to
nonvoting shareholders in a notice of meeting at which the proposed action would
have been submitted to the shareholders.
ARTICLE 3
BOARD OF DIRECTORS
SECTION 3.01. GENERAL POWERS. The corporation's powers shall be
exercised by or under the authority of, and its business and affairs shall be
managed under the direction of, its board of directors, subject to any
limitation set forth in the articles of incorporation.
SECTION 3.02. ELECTION. Directors shall be elected by the shareholders
at each annual shareholders' meeting. Each director is elected by a plurality of
the votes cast by the shares entitled to vote in the election at a meeting at
which a quorum is present.
SECTION 3.03. NUMBER, TENURE, AND QUALIFICATIONS. The number of
directors of the corporation shall be five. Each director shall hold office
until the next annual shareholders' meeting and until his or her successor shall
have been elected by the shareholders or until his or her prior death,
resignation, or removal. A director may be removed from office by a vote of the
shareholders taken at any shareholders' meeting called for that purpose,
provided that a quorum is present. A director may resign at any time by
delivering his or her written resignation that complies with the provisions of
ch. 180 to the board of directors, the chairperson of the board of directors, or
the corporation. Directors need not be residents of the state of Wisconsin or
shareholders of the corporation.
SECTION 3.04. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without other notice than this bylaw immediately after
the annual shareholders' meeting. The place of the regular board of directors'
meeting shall be the same as the place of the shareholders' meeting that
precedes it, or such other suitable place as may be announced at the
shareholders' meeting. The board of directors may provide, by resolution, the
time and place, either within or outside the state of Wisconsin, for the holding
of additional regular meetings.
SECTION 3.05. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the chairperson of the board, if
any, or by the president, secretary, or any two directors. The person or persons
authorized to call special board of directors' meetings may fix any place,
either within or outside the state of Wisconsin, as the place for holding any
special board meeting called by them, and if no other place is fixed, the
meeting place shall be the corporation's principal office in the state of
Wisconsin, but any meeting may be adjourned to reconvene at any place designated
by vote of a majority of the directors in attendance at the meeting.
SECTION 3.06. MEETINGS BY ELECTRONIC MEANS OF COMMUNICATION.
(A) CONDUCT OF MEETINGS. To the extent provided in these
bylaws, the board of directors, or any committee of the board, may, in addition
to conducting meetings in which each director participates in person, and
notwithstanding any place set forth in the notice of the meeting or these
bylaws, conduct any regular or special meeting by the use of any electronic
means of communication, provided (1) all participating directors may
simultaneously hear each other during the meeting, or (2) all communication
during the meeting is immediately transmitted to each participating director,
and each participating director is able to immediately send messages to
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all other participating directors. Before the commencement of any business at a
meeting at which any directors do not participate in person, all participating
directors shall be informed that a meeting is taking place at which official
business may be transacted.
(B) VERIFICATION OF DIRECTORS' IDENTITY. The identity of each
director participating in a board of directors' meeting conducted pursuant to
Section 3.06(a) of these bylaws (other than a meeting in which each director
participates in person) must be verified by the secretary before directors vote
on (1) a plan of merger or share exchange; (2) a sale, lease, exchange, or other
disposition of substantial property or assets of the corporation; (3) a
dissolution or the revocation of voluntary dissolution proceedings; or (4) a
filing for bankruptcy. The secretary shall verify each participating director's
identity by requesting the director to give the password that shall have been
provided specifically to the director in the meeting notice. For purposes of
this section, a disposal of property or assets of the corporation is
"substantial" if it involves a disposition of 10% or more of the fair market
value of the corporation's assets.
SECTION 3.07. NOTICE OF MEETINGS; WAIVER OF NOTICE. Notice of each
board of directors' meeting, except meetings pursuant to Section 3.04 of these
bylaws, shall be delivered to each director at his or her business address or at
such other address as the director shall have designated in writing and filed
with the secretary. Notice may be given orally or communicated in person, by
telephone, telegraph, teletype, facsimile, other form of wire or wireless
communication, private carrier, or in any other manner provided by ch. 180.
Notice shall be given not less than 48 hours before the meeting being noticed,
or 72 hours before the meeting being noticed if the notice is given by mail or
private carrier. Written notice shall be deemed given at the earlier of the time
it is received or at the time it is deposited with postage prepaid in the United
States mail or delivered to the private carrier. Oral notice is effective when
communicated. A director may waive notice required under this section or by law
at any time, whether before or after the time of the meeting. The waiver must be
in writing, signed by the director, and retained in the corporate record book.
The director's attendance at or participation in a meeting shall constitute a
waiver of notice of the meeting, unless the director at the beginning of the
meeting or promptly upon his or her arrival objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting. Neither the business to be transacted at nor the
purpose of any regular or special board of directors' meeting need be specified
in the notice or waiver of notice of the meeting.
SECTION 3.08. QUORUM REQUIREMENT. Except as otherwise provided by ch.
180, the articles of incorporation, or these bylaws, a majority of the number of
directors as required in Section 3.03 of these bylaws shall constitute a quorum
for the transaction of business at any board of directors' meeting. A majority
of the number of directors appointed to serve on a committee as authorized in
Section 3.14 of these bylaws shall constitute a quorum for the transaction of
business at any committee meeting. These provisions shall not, however, apply to
the determination of a quorum for actions taken pursuant to Article 7 of these
bylaws or actions taken under emergency bylaws or any other provisions of these
bylaws that fix different quorum requirements.
SECTION 3.09. VOTING REQUIREMENT. The affirmative vote of the majority
of the directors present at a meeting at which a quorum is present shall be the
act of the board of directors or a committee of the board of directors.
This provision shall not, however, apply to any action taken by the
board of directors acting pursuant to Section 3.14, Article 7, or Article 11 of
these bylaws, or in the event the affirmative vote of a greater number of
directors is required by ch. 180, the articles of incorporation, or any other
provision of these bylaws.
SECTION 3.10. CONDUCT OF MEETINGS. The chairperson of the board of
directors, and in his or her absence, the president, and in the absence of both
of them, a vice-president in the order provided under Section 4.10 of these
bylaws, and in their absence, any director chosen by the directors present,
shall call board of directors' meetings to order and shall act as chairperson of
the meeting. The corporation's secretary shall act as secretary of all board of
directors' meetings, but in the secretary's absence, the presiding officer may
appoint any assistant secretary, director, or other person present to act as
secretary of the meeting. The chairperson of the meeting shall determine if
minutes of the meeting are to be prepared, and if minutes are to be prepared,
shall assign a person to do so.
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SECTION 3.11. VACANCIES. Any vacancy occurring on the board of
directors, including a vacancy created by an increase in the number of
directors, may be filled by the shareholders. During such time as the
shareholders fail or are unable to fill such vacancies, then and until the
shareholders act the vacancy may be filled (1) by the board of directors, or (2)
if the directors remaining in office constitute fewer than a quorum of the
board, by the affirmative vote of a majority of all directors remaining in
office.
SECTION 3.12. COMPENSATION AND EXPENSES. The board of directors,
irrespective of any personal interest of any of its members, may (1) establish
reasonable compensation of all directors for services to the corporation as
directors or may delegate this authority to an appropriate committee, (2)
provide for, or delegate authority to an appropriate committee to provide for,
reasonable pensions, disability or death benefits, and other benefits or
payments to directors and to their estates, families, dependents, or
beneficiaries for prior services rendered to the corporation by the directors,
and (3) provide for reimbursement of reasonable expenses incurred in the
performance of the directors' duties, including the expense of traveling to and
from board meetings.
SECTION 3.13. DIRECTORS' ASSENT. A director of the corporation who is
present and is announced as present at a meeting of the board of directors or of
a committee of the board of which he or she is a member, at which meeting action
on any corporate matter is taken, shall be deemed to have assented to the action
taken unless (1) the director objects at the beginning of the meeting (or
promptly upon his or her arrival) to holding the meeting or transacting business
at the meeting; or (2) minutes of the meeting are prepared, and the director's
dissent to or abstention from the action taken is entered in those minutes; or
(3) the director delivers written notice that complies with the provisions of
ch. 180 of his or her dissent or abstention to the presiding officer of the
meeting before the meeting's adjournment or to the corporation immediately after
the adjournment. The right of dissent or abstention is not available to a
director who votes in favor of the action taken.
SECTION 3.14. COMMITTEES. The board of directors may create and appoint
members to one or more committees, by a resolution approved by the greater of
the following: (1) a majority of the directors in office when the action is
taken, or (2) the number of directors required to take action under Section 3.09
of these bylaws. Each committee shall consist of two or more directors and
shall, unless otherwise provided by the board of directors, serve at the
pleasure of the board of directors. To the extent provided in the resolution as
initially adopted and as thereafter supplemented or amended by further
resolution adopted by a like vote, each committee shall have and may exercise,
when the board of directors is not in session, the powers of the board of
directors in the management of the corporation's business and affairs, except
that a committee may not (1) authorize distributions; (2) approve or propose to
shareholders action requiring shareholder approval; (3) appoint the principal
officers; (4) amend articles of incorporation, or amend, adopt, or repeal
bylaws; (5) approve a plan of merger not requiring shareholder approval; (6)
authorize or approve reacquisition of shares except by a formula or method
approved or prescribed by the board of directors; (7) authorize or approve the
issuance or sale or contract for sale of shares or determine the designation and
relative rights, preferences, and limitations of a class or series of shares,
except that the board of directors may authorize a committee or a senior
executive officer of the corporation to do so within limits prescribed by the
board of directors; or (8) fill vacancies on the board of directors or on
committees created pursuant to this section, unless the board of directors, by
resolution, provides that committee vacancies may be filled by a majority of the
remaining committee members. The board of directors may elect one or more of its
members as alternate members of any such committee who may take the place of any
absent member or members at any meeting of the committee, upon the request of
the president or of the chairperson of the meeting. Each committee shall fix its
own rules governing the conduct of its activities and shall make such report of
its activities to the board of directors as the board may request.
SECTION 3.15. ACTION WITHOUT A MEETING. Any action required or
permitted by the articles of incorporation, these bylaws, or any provision of
ch. 180 to be taken by the board of directors at a board meeting may be taken
without a meeting if one or more written consents, setting forth the action so
taken, shall be signed by all of the directors entitled to vote on the subject
matter of the action and retained in the corporate records. Action taken
pursuant to written consent shall be effective when the last director signs the
consent or upon such other effective date as is specified in the consent.
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ARTICLE 4
OFFICERS
SECTION 4.01. NUMBER AND TITLES. The corporation's principal officers
shall be a president, one or more vice-presidents periodically determined by the
board of directors, a secretary, and a treasurer, each of whom shall be
appointed by the board. There may, in addition, be a chairperson or
co-chairperson of the board, whenever the board shall see fit to cause such
office or offices to be filled. If there is more than one vice-president, the
board may establish designations for the vice-presidencies to identify their
functions or their order. The same natural person may simultaneously hold more
than one office.
SECTION 4.02. APPOINTMENT, TENURE, AND COMPENSATION. The officers shall
be appointed by the board of directors, or to the extent authorized in these
bylaws, by another duly appointed officer. Each officer shall hold office until
his or her successor shall have been duly appointed or until the officer's prior
death, resignation, or removal. The board of directors or a duly authorized
committee thereof shall fix the compensation of each officer.
SECTION 4.03. ADDITIONAL OFFICERS, AGENTS, ETC. In addition to the
officers referred to in Section 4.01 of these bylaws, the corporation may have
such other officers, assistants to officers, acting officers, and agents as the
board of directors may deem necessary and may appoint. Each such person shall
act under his or her appointment for such period, have such authority, and
perform such duties as may be provided in these bylaws, or as the board may from
time to time determine. The board of directors may delegate to any officer the
power to appoint any subordinate officers, assistants to officers, acting
officers, or agents. In the absence of any officer, or for any other reason the
board of directors may deem sufficient, the board may delegate, for such time as
the board may determine, any or all of an officer's powers and duties to any
other officer or to any director.
SECTION 4.04. REMOVAL. The board of directors may remove any officer or
agent, but the removal shall be without prejudice to the contract rights, if
any, of the person so removed. Appointment shall not of itself create contract
rights. An officer may remove, with or without cause, any officer or assistant
officer who was appointed by that officer.
SECTION 4.05. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the corporation, the board of directors, the president,
or the secretary. Any such resignation shall take effect when the notice of
resignation is delivered, unless the notice specifies a later effective date and
the corporation accepts the later effective date. Unless otherwise specified in
the notice of resignation, the acceptance of the resignation shall not be
necessary to make it effective.
SECTION 4.06. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or other reason shall be filled in the
manner prescribed for regular appointments to the office.
SECTION 4.07. POWERS, AUTHORITY, AND DUTIES. Officers of the
corporation shall have the powers and authority conferred and the duties
prescribed by the board of directors or the officer who appointed them in
addition to and to the extent not inconsistent with those specified in other
sections of this Article 4.
SECTION 4.08. THE CHAIRPERSON OF THE BOARD. The chairperson of the
board of directors, if and while there is an incumbent of the office, shall
preside at all shareholders' and directors' meetings at which he or she is
present. The chairperson of the board shall have and exercise general
supervision over the conduct of the corporation's affairs and over its other
officers, subject, however, to the board's control. The chairperson of the board
of directors shall from time to time report to the board all matters within his
or her knowledge that the corporation's interests may require to be brought to
the board's notice.
SECTION 4.09. THE PRESIDENT. If and while there is no incumbent in the
office of the chairperson of the board of directors, and during the chair's
absence or disability, the president shall have the duties and authority
specified in Section 4.08 of these bylaws. The president shall be the
corporation's chief executive officer and, subject to the board of directors'
control, shall:
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1. superintend and manage the corporation's business;
2. coordinate and supervise the work of its other officers
(except the chairperson of the board);
3. employ, direct, fix the compensation of, discipline, and
discharge its employees;
4. employ agents, professional advisors, and consultants;
5. perform all functions of a general manager of the
corporation's business;
6. have authority to sign, execute, and deliver in the
corporation's name all instruments either when specifically
authorized by the board of directors or when required or
deemed necessary or advisable by the president in the ordinary
conduct of the corporation's normal business, except in cases
where the signing and execution of the instruments shall be
expressly delegated by these bylaws or by the board to some
other officer(s) or agent(s) of the corporation or shall be
required by law or otherwise to be signed or executed by some
other officer or agent; and
7. in general, perform all duties incident to the office of the
president and such other duties as from time to time may be
assigned to him or her by the board of directors.
SECTION 4.10. THE VICE-PRESIDENTS. In the president's absence, or in
the event of his or her death or inability or refusal to act, or if for any
reason it shall be impractical for the president to act personally, the
vice-president (or if there is more than one vice-president, the vice-presidents
in the order designated by the board of directors, or in the absence of any
designation, in the order of their appointment) shall perform the duties of the
president, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the president. Each vice-president shall perform such
other duties and have such authority as from time to time may be delegated or
assigned to him or her by the president or by the board of directors. The
execution of any instrument of the corporation by any vice-president shall be
conclusive evidence, as to third parties, of his or her authority to act in the
president's place.
SECTION 4.11. THE SECRETARY. The secretary shall:
1. keep any minutes of the shareholders and of the board of
directors and its committees in one or more books provided
for that purpose;
2. see that all notices are duly given in accordance with these
bylaws or as required by law;
3. be custodian of the corporation's corporate records and see
that the books, reports, statements, certificates, and all
other documents and records required by law are properly kept
and filed;
4. have charge, directly or through such transfer agent or agents
and registrar or registrars as the board of directors may
appoint, of the issue, transfer, and registration of
certificates for shares in the corporation and of the records
thereof, such records to be kept in such manner as to show at
any time the number of shares in the corporation issued and
outstanding, the manner in which and time when such shares
were paid for, the names and addresses of the shareholders of
record, the numbers and classes of shares held by each, and
the time when each became a shareholder;
5. exhibit at reasonable times upon the request of any director
the records of the issue, transfer, and registration of the
corporation's share certificates, at the place where those
records are kept, and have these records available at each
shareholders' meeting; and
6. in general, perform all duties incident to the office of
secretary and such other duties as from time to time may be
assigned to him or her by the board of directors or the
president.
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SECTION 4.12. THE ASSISTANT SECRETARIES. The assistant secretaries
shall perform such duties as from time to time may be assigned to them
individually or collectively by the board of directors, the president, or the
secretary. In the event of the secretary's absence or disability, one or more of
the assistant secretaries may perform such duties of the secretary as the
secretary, the president, or the board of directors may designate.
SECTION 4.13. THE TREASURER. The treasurer shall:
1. have charge and custody of, and be responsible for, all of the
corporation's funds and securities; receive and give receipts
for monies due and payable to the corporation from any source
whatsoever; deposit all such monies in the corporation's name
in such banks, financial institutions, trust companies, or
other depositories as shall be selected in accordance with the
provisions of Section 5.04 of these bylaws; cause such funds
to be disbursed by checks or drafts on the corporation's
authorized depositories, signed as the board of directors may
require; and be responsible for the accuracy of the amounts
of, and cause to be preserved proper vouchers for, all monies
disbursed;
2. have the right to require from time to time reports or
statements giving such information as he or she may desire
with respect to any and all of the corporation's financial
transactions from the officers, employees, or agents
transacting the same;
3. keep or cause to be kept, at the corporation's principal
office or such other office or offices as the board of
directors shall from time to time designate, correct records
of the corporation's funds, business, and transactions, and
exhibit those records to any director of the corporation upon
request at that office;
4. deliver to the board of directors, the chairperson of the
board, or the president whenever requested an account of the
corporation's financial condition and of all his or her
transactions as treasurer, and as soon as possible after the
close of each fiscal year, make or cause to be made and submit
to the board a like report for that fiscal year;
5. at each annual shareholders' meeting or the meeting held in
lieu thereof, furnish copies of the corporation's most current
financial statement to the shareholders and answer questions
that may be raised regarding the statement; and
6. in general, perform all duties incident to the office of
treasurer and such other duties as from time to time may be
assigned to him or her by the board of directors or the
president.
If required by the board of directors, the treasurer shall
furnish a bond for the faithful discharge of his or her duties in such sum and
with such surety or sureties as the board shall determine.
SECTION 4.14. THE ASSISTANT TREASURERS. The assistant treasurers shall
perform such duties as from time to time may be assigned to them, individually
or collectively, by the board of directors, the president, or the treasurer. In
the event of the treasurer's absence or disability, one or more of the assistant
treasurers may perform such duties of the treasurer as the treasurer, the
president, or the board of directors may designate.
ARTICLE 5
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
SECTION 5.01. CONTRACTS. The board of directors may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
or deliver any instrument in the corporation's name and on its behalf. The
authorization may be general or confined to specific instruments. When an
instrument is so executed, no other party to the instrument or any third party
shall be required to make any inquiry into the authority of the signing officer
or officers, or agent or agents.
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SECTION 5.02. LOANS. No indebtedness for borrowed money shall be
contracted on the corporation's behalf and no evidences of such indebtedness
shall be issued in its name unless authorized by or under the authority of a
resolution of the board of directors. The authorization may be general or
confined to specific instances.
SECTION 5.03. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders
for the payment of money, or notes or other evidences of indebtedness issued in
the corporation's name, shall be signed by such officer or officers, or agent or
agents of the corporation and in such manner as shall from time to time be
determined by or under the authority of a resolution of the board of directors.
SECTION 5.04. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the corporation's credit in
such banks, trust companies, or other depositories as may be selected by or
under the authority of a resolution of the board of directors.
ARTICLE 6
VOTING OF SECURITIES OWNED BY THE CORPORATION
SECTION 6.01. AUTHORITY TO VOTE. Any shares or other securities issued
by any other corporation and owned or controlled by the corporation may be voted
at any meeting of the issuing corporation's security holders by the president of
this corporation if he or she be present, or in his or her absence by any
vice-president of the corporation who may be present.
SECTION 6.02. PROXY AUTHORIZATION. Whenever, in the judgment of the
president, or in his or her absence, of any vice-president, it is desirable for
the corporation to execute a proxy appointment or written consent with respect
to any shares or other securities issued by any other corporation and owned by
the corporation, the proxy appointment or consent shall be executed in the
corporation's name by the president or one of the vice-presidents of the
corporation, without necessity of any authorization by the board of directors,
countersignature, or attestation by another officer. Any person or persons
designated in this manner as the corporation's proxy or proxies shall have full
right, power, and authority to vote the shares or other securities issued by the
other corporation and owned by the corporation in the same manner as the shares
or other securities might be voted by the corporation.
ARTICLE 7
CONTRACTS BETWEEN THE CORPORATION AND RELATED PERSONS
Any contract or other transaction between the corporation and one or
more of its directors, or between the corporation and any entity of which one or
more of its directors are members or employees or in which one or more of its
directors are interested, or between the corporation and any corporation or
association of which one or more of its directors are shareholders, members,
directors, officers, or employees or in which one or more of its directors are
interested, shall not be voidable by the corporation solely because of the
director's interest, whether direct or indirect, in the transaction if:
1. the material facts of the transaction and the director's
interest were disclosed or known to the board of directors or
a committee of the board of directors, and a majority of
disinterested members of the board of directors or committee
authorized, approved, or specifically ratified the
transaction; or
2. the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled
to vote, and a majority of the shares held by disinterested
shareholders authorized, approved, or specifically ratified
the transaction; or
3. the transaction was fair to the corporation.
For purposes of this Article 7, a majority of directors having
no direct or indirect interest in the transaction shall constitute a quorum of
the board or a committee of the board acting on the matter, and a majority
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of the shares entitled to vote on the matter, whether or not present, and other
than those owned by or under the control of a director having a direct or
indirect interest in the transaction, shall constitute a quorum of the
shareholders for the purpose of acting on the matter.
ARTICLE 8
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 8.01. CERTIFICATES FOR SHARES. Certificates representing shares
in the corporation shall, at a minimum, state on their face all of the
following: (1) the name of the issuing corporation and that it is organized
under the laws of the state of Wisconsin; (2) the name of the person to whom
issued; and (3) the number and class of shares and the designation of the
series, if any, that the certificate represents. The share certificates shall be
signed by the president or any vice-president and by the secretary or any
assistant secretary or any other officer or officers designated by the board of
directors. If the corporation is authorized to issue different classes of shares
or different series within a class, the certificate may contain a summary of the
designations, relative rights, preferences, and limitations applicable to each
class, and the variations in rights, preferences, and limitations determined for
each series and the authority of the board of directors to determine variations
for future series. If the certificate does not include the above summary on the
front or back of the certificate, it must contain a conspicuous statement that
the corporation will furnish the shareholder with the above-described summary
information in writing, upon request and without charge. A record shall be kept
of the name of the owner or owners of the shares represented by each
certificate, the number of shares represented by each certificate, the date of
each certificate, and in case of cancellation, the date of cancellation. Every
certificate surrendered to the corporation for exchange or transfer shall be
cancelled, and no new certificate or certificates shall be issued in exchange
for any existing certificates until the existing certificates shall have been so
cancelled, except in cases provided for in Section 8.08 of these bylaws.
SECTION 8.02. SHARES WITHOUT CERTIFICATES. The board of directors may
authorize the issuance of any shares of any of its classes or series without
certificates. The authorization does not affect shares already represented by
certificates until the certificates are surrendered to the corporation. Within a
reasonable time after the issuance or transfer of shares without certificates,
the corporation shall send the shareholder a written statement that includes (1)
all of the information required on share certificates and (2) any transfer
restrictions applicable to the shares.
SECTION 8.03. FACSIMILE SIGNATURES. The share certificates may be
signed manually or by facsimile.
SECTION 8.04. SIGNATURE BY FORMER OFFICER. If an officer who has signed
or whose facsimile signature has been placed upon any share certificate shall
have ceased to be an officer before the certificate is issued, the corporation
may issue the certificate with the same effect as if he or she were an officer
at the date of its issue.
SECTION 8.05. CONSIDERATION FOR SHARES. The corporation's shares may be
issued for such consideration as shall be fixed from time to time by the board
of directors. The consideration to be paid for shares may be paid in cash,
promissory notes, tangible or intangible property, or services performed or
contracts for services to be performed for the corporation. When the corporation
receives payment of the consideration for which shares are to be issued, the
shares shall be deemed fully paid and nonassessable by the corporation. Before
the corporation issues shares, the board of directors shall determine that the
consideration received or to be received for the shares is adequate. The board
of directors' determination is conclusive as to the adequacy of consideration
for the issuance of shares relative to whether the shares are validly issued,
fully paid, and nonassessable.
SECTION 8.06. TRANSFER OF SHARES. Transfers of shares in the
corporation shall be made on the corporation's books only by the registered
shareholder, by his or her legal guardian, executor, or administrator, or by his
or her attorney authorized by a power of attorney duly executed and filed with
the corporation's secretary or with a transfer agent appointed by the board of
directors, and on surrender of the certificate or certificates for the shares.
Where a share certificate is presented to the corporation with a request to
register for transfer, the corporation shall not be liable to the owner or any
other person suffering a loss as a result of the registration of
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transfer if (1) there were on or with the certificate the necessary
endorsements, and (2) the corporation had no duty to inquire into adverse claims
or has discharged the duty. The corporation may require reasonable assurance
that the endorsements are genuine and effective in compliance with such other
regulations as may be prescribed by or under the board of directors' authority.
The person in whose name shares stand on the corporation's books shall, to the
full extent permitted by law, be deemed the owner of the shares for all
purposes.
SECTION 8.07. RESTRICTIONS ON TRANSFER. Restrictions on transfer of the
corporation's shares shall be noted conspicuously on the front or back of the
share certificate or contained in the information statement required by Section
8.02 of these bylaws for shares without certificates. A transfer restriction is
valid and enforceable against the holder or a transferee of the holder only if
the transfer restriction is authorized by law, and the existence of the
restriction is noted on the certificate or is contained in the information
statement, as set forth above. Unless so noted, a transfer restriction is not
enforceable against a person who does not know of the transfer restriction.
SECTION 8.08. LOST, DESTROYED, OR STOLEN CERTIFICATES. If an owner
claims that his or her share certificate has been lost, destroyed, or wrongfully
taken, a new certificate shall be issued in place of the original certificate if
the owner (1) so requests before the corporation has notice that the shares have
been acquired by a bona fide purchaser; (2) files with the corporation a
sufficient indemnity bond if required by the board of directors; and (3)
satisfies such other reasonable requirements as may be prescribed by or under
the authority of the board of directors.
ARTICLE 9
INSPECTION OF RECORDS BY SHAREHOLDERS
SECTION 9.01. INSPECTION OF BYLAWS. Any shareholder is entitled to
inspect and copy the corporation's bylaws during regular business hours at the
corporation's principal office. The shareholder must give written notice in
accordance with the provisions of ch. 180 at least five business days before the
date of inspection.
SECTION 9.02. INSPECTION OF OTHER RECORDS. Any shareholder who holds at
least five percent of the corporation's outstanding shares or who has been a
shareholder for at least six months shall have the right to inspect and copy
during regular business hours at a reasonable location specified by the
corporation any or all of the following records: (1) excerpts from any minutes
or records the corporation is required to keep as permanent records; (2) the
corporation's accounting records; or (3) the record of shareholders or, at the
corporation's discretion, a list of the corporation's shareholders compiled no
earlier than the date of the shareholder's demand. The shareholder's demand for
inspection must be made in good faith and for a proper purpose and by delivery
of written notice, given in accordance with the provisions of ch. 180 at least
five business days before the date of inspection, stating the purpose of the
inspection and the records directly related to that purpose desired to be
inspected.
ARTICLE 10
DISTRIBUTIONS AND SHARE ACQUISITIONS
The board of directors may make distributions to its shareholders or
purchase or acquire any of its shares provided (1) after the distribution,
purchase, or acquisition the corporation will be able to pay its obligations as
they become due in the usual course of its business, and (2) the distribution,
purchase, or acquisition will not cause the corporation's assets to be less than
its total liabilities plus the amount necessary to satisfy, upon distribution,
the preferential rights of shareholders whose rights are superior to those
receiving the distribution.
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
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<PAGE> 17
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.
ARTICLE 12
AMENDMENTS
SECTION 12.01. BY SHAREHOLDERS. The shareholders may amend or repeal
these bylaws or adopt new bylaws at any annual or special shareholders' meeting.
SECTION 12.02. BY DIRECTORS. The board of directors may amend or repeal
these bylaws or adopt new bylaws; but no bylaw adopted or amended by the
shareholders shall be amended or repealed by the board if the bylaw so adopted
so provides.
ARTICLE 13
SEAL
The corporation shall not have a corporate seal, and all formal
corporate documents shall carry the designation No Seal along with the signature
of the corporation's officer or officers.
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EXHIBIT 4.1
FORM OF UNDERWRITER'S WARRANT
<PAGE> 1
EXHIBIT 4.1
FORM OF UNDERWRITER'S WARRANT
<PAGE> 2
These securities may not be publicly offered or sold unless at the time of such
offer or sale, the person making such offer or sale delivers a prospectus
meeting the requirements of Section 10 of the Securities Act of 1933 forming a
part of a registration statement, or post-effective amendment thereto, which is
effective under said Act, or unless in the opinion of counsel to the Company,
such offer and sale is exempt from the provisions of Section 5 of said Act.
WARRANT
For the Purchase of Common Stock, Par Value $0.01 per Share
of
HEARTLAND WISCONSIN CORP.
(Incorporated Under the Laws of the State of Wisconsin)
Void after 5:00 P.M., Milwaukee time, on ,
No.______ Warrant to Purchase
______________Share
THIS IS TO CERTIFY, that, for value received, J.E. Liss & Company, Inc.
("Underwriter"), or registered assigns, is entitled, subject to the terms and
conditions hereinafter set forth, on or after , and at any time prior to 5:00
P.M., Milwaukee Time, on , , but not thereafter, to purchase the number of
shares set forth above ("Shares") of common stock, without par value ("Common
Stock"), of Heartland Wisconsin Corp., a Wisconsin corporation ("Company"), from
the Company upon payment to the Company of $ per share ("Purchase Price") if
and to the extent this Warrant is exercised, in whole or in part, during the
period this Warrant remains in force, subject in all cases to adjustment as
provided in Article II hereof, and to receive a certificate or certificates
representing the Shares so purchased, upon presentation and surrender to the
Company of this Warrant, with the form of subscription attached hereto duly
executed, and accompanied by payment of the Purchase Price of each Share
purchased. This Warrant is one of a class of warrants ("Warrants") initially
exercisable for the purchase an aggregate of 25,000 shares of Common Stock of
the Company.
ARTICLE I
TERMS OF THE WARRANT
Section 1.01. Subject to the provisions of Sections 1.05 and 3.01
hereof, this Warrant may be exercised at any time and from time to time after
9:00 A.M., Milwaukee time, on , ("Exercise Commencement Date"), but no later
than 5:00 P.M., Milwaukee time, on , ("Expiration Time"). If this Warrant is
not exercised on or before the Expirat ion Time it shall become void, and all
rights hereunder shall thereupon cease.
Section 1.02. (1) The holder of this Warrant ("Holder") may exercise
this Warrant, in whole or in part, upon surrender of this Warrant with the form
of subscription attached hereto duly executed, to the Company at its office in
Milwaukee, Wisconsin, together with the full Purchase Price for each Share to be
purchased pursuant hereto in lawful money of the United States, or by certified
check, bank draft or postal or express money order payable in United States
dollars to the order of the Company, and upon compliance with and subject to the
conditions set forth herein.
(2) Upon receipt of this Warrant with the form of subscription duly
executed and accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is then being exercised, the Company shall cause
to be issued certificates for the total number of whole Shares for which this
Warrant is being exercised in such denominations as are required for delivery to
the Holder, and the Company shall thereupon deliver such certificates to the
Holder or its permitted nominee.
(3) In case the Holder shall exercise this Warrant with respect to less
than all of the Shares that may be purchased under this Warrant, the Company
shall execute a new Warrant for the balance of the Shares that may be purchased
upon exercise of this Warrant and deliver such new Warrant to the Holder.
<PAGE> 3
(4) The Company covenants and agrees that it will pay when due and
payable any and all taxes which may be payable in respect of the issue of this
Warrant, or the issue of any Shares upon the exercise of this Warrant. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance or delivery of this Warrant or
of the Shares in a name other than that of the Holder at the time of surrender,
and until the payment of such tax the Company shall not be required to issue
such Shares.
Section 1.03. This Warrant may be split-up, combined or exchanged for
another Warrant or Warrants of like tenor to purchase a like aggregate number of
Shares. If the Holder desires to split-up, combine or exchange this Warrant, the
Holder shall make such request in writing delivered to the Company at its
corporate office and shall surrender this Warrant and any other Warrants to be
so split-up, combined or exchanged at said office. Upon any such surrender for a
split-up, combination or exchange, the Company shall execute and deliver to the
person entitled thereto a Warrant or Warrants, as the case may be, as so
requested. The Company shall not be required to effect any split-up, combination
or exchange which will result in the issuance of a Warrant entitling the Holder
to purchase upon exercise a fraction of a Share. The Company may require the
Holder to pay a sum sufficient to cover any tax or governmental charge that may
be imposed in connection with any split-up, combination or exchange of Warrants.
Section 1.04. Prior to due presentment for registration of transfer of
this Warrant, the Company may deem and treat the Holder as the absolute owner of
this Warrant (notwithstanding any notation of ownership or other writing hereon)
for the purpose of any exercise hereof and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
Section 1.05. For one (1) year following the date hereof, this Warrant
may not be sold, hypothecated, exercised, assigned or transferred, except to
individuals who are officers of the Underwriter or any successor to its business
or pursuant to the laws of descent and distribution, and thereafter and until
its expiration shall be assignable and transferable in accordance with the
Securities Act of 1933 and applicable state securities laws.
Section 1.06. Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Company at its principal office with the form
of assignment attached hereto duly executed and funds sufficient to pay any
transfer tax. In such event, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment and this Warrant shall promptly be cancelled. This Warrant may be
divided or combined with other Warrants which carry the same rights upon
presentation thereof at the corporate office of the Company together with a
written notice signed by the Holder, specifying the names and denominations in
which such new Warrants are to be issued.
Section 1.07. Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent or to receive notice
as a stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Company. If, however, at any time prior to the expiration of
this Warrant and prior to its exercise, any of the following shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) there shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially all of
the assets of the Company, or a consolidation or merger of the Company with
another entity; or
(d) there shall be proposed a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
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<PAGE> 4
then, in any one or more of said cases, the Company shall cause to be mailed to
the Holder, at the earliest practicable time (and, in any event, not less than
thirty (30) days before any record date or other date set for definitive
action), written notice of the date on which the books of the Company shall
close or a record shall be taken to determine the stockholders entitled to such
dividend, distribution, convertible or exchangeable securities or subscription
rights, or entitled to vote on such reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be. Such notice shall also set forth such facts as shall indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Purchase Price and the kind and amount of the Common Stock and other
securities and property deliverable upon exercise of this Warrant. Such notice
shall also specify the date as of which the holders of the Common Stock of
record shall participate in said distribution or subscription rights or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, sale, consolidation,
merger, dissolution, liquidation or winding up, as the case may be (on which
date, in the event of voluntary or involuntary dissolution, liquidation or
winding up of the Company, the right to exercise this Warrant shall terminate).
Without limiting the obligation of the Company to provide notice to the holder
of actions hereunder, it is agreed that failure of the Company to give notice
shall not invalidate such action of the Company.
Section 1.08. If this Warrant is lost, stolen, mutilated or destroyed,
the Company shall, on such reasonable terms as to indemnity or otherwise as it
may impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as, and
in substitution for, this Warrant, which shall thereupon become void. Any such
new Warrant shall constitute an additional contractual obligation of the
Company.
Section 1.09. (1) The Company covenants and agrees that at all times it
shall reserve and keep available for the exercise hereof sufficient authorized
Shares to permit the exercise in full of this Warrant.
(2) Prior to the issuance of any Shares upon exercise of this Warrant,
the Company shall secure the listing of such Shares upon any securities exchange
or automated quotation system upon which the shares of the Company's Common
Stock are listed for trading.
(3) The Company covenants that all Shares when issued upon the exercise
of this Warrant will be validly issued, fully paid, non-assessable and free of
preemptive rights.
ARTICLE II
ADJUSTMENT OF PURCHASE PRICE AND
NUMBER OF SHARES PURCHASABLE UPON EXERCISE
Section 2.01. In case the Company shall, while this Warrant remains
unexercised, in whole or in part, and in force, effect a recapitalization of
such character that the Shares purchasable hereunder shall be changed into or
become exchangeable for a larger or smaller number of shares, then, after the
date of record for effecting such recapitalization, the number of Shares of
Common Stock which the Holder hereof shall be entitled to purchase hereunder
shall be increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of Common Stock by reason such
recapitalization, and of the Purchase Price, per share, whether or not in effect
immediately prior to the time of such recapitalization, of such recapitalized
Common Stock shall in the case of an increase in the number of such Shares be
proportionately reduced, and in the case of a decrease in the number of such
Shares shall be proportionately increased. For the purposes of this Section
2.01, a stock dividend, stock split-up or reverse split shall be considered as a
recapitalization and as an exchange for a larger or smaller number of shares, as
the case may be.
Section 2.02. In case of any consolidation of the Company with, or
merger of the Company into, any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the Company other than
in connection with a plan of complete liquidation of the Company, then, as a
condition of such consolidation, merger or sale or conveyance, adequate
provision shall be made whereby the Holder shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of Shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such shares of stock or securities as may be issued in connection with such
consolidation, merger
3
<PAGE> 5
or sale or conveyance, with respect to or in exchange for the number of
outstanding shares of Common Stock equal to the number of shares of Common Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such consolidation, merger or sale or conveyance,
not taken place, and in any such case appropriate provision shall be made with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof shall be applicable as nearly as may be in relation
to any shares of stock or securities thereafter deliverable upon the exercise
hereof.
Section 2.03. Subject to the provisions of Section 2.04, below, in case
the Company shall, while this Warrant remains unexercised, in whole or in part,
and in force, declare to make any distribution of its assets to holders of
Common Stock as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining stockholders entitled
to such distribution, but prior to the date of distribution, the Holder shall be
entitled upon exercise of this Warrant and purchase of any or all of the Shares
of Common Stock subject hereto, to receive the amount of such assets (or, at the
option of the Company, a sum equal to the value thereof at the time of such
distribution to holders of Common Stock as such value is determined by the Board
of Directors of the Company in good faith) which would have been payable to the
Holder had he been the holder of such Shares of Common Stock on the record date
for the determination of stockholders entitled to such distribution.
Section 2.04. Except as otherwise provided in Section 2.02, above, in
the case of any sale or conveyance of all or substantially all of the assets of
the Company in connection with a plan of complete liquidation of the Company, in
the case of the dissolution, liquidation or winding-up of the Company, all
rights under this Warrant shall terminate on a date fixed by the Company, such
date so fixed to be not earlier than the date of the commencement of the
proceedings for such dissolution, liquidation or winding-up and not later than
thirty (30) days after such commencement date. Notice of such termination of
purchase rights shall be given to the Holder at least thirty (30) days prior to
such termination date.
Section 2.05. Any adjustment pursuant to the provisions of this Article
II shall be made on the basis of the number of Shares of Common Stock which the
Holder would have been entitled to acquire by exercise of this Warrant
immediately prior to the event giving rise to such adjustment and, as to the
Purchase Price per share in effect immediately prior to such adjustment.
Whenever any such adjustment is required to be made, the Company shall forthwith
determine the new number of Shares of Common Stock which the Holder hereof shall
be entitled to purchase hereunder and/or such new Purchase Price per share and
shall prepare, retain on file and transmit to the Holder within ten (10) days
after such preparation a statement describing in reasonable detail the method
used in calculating such adjustment.
Section 2.06. Anything contained herein to the contrary
notwithstanding, the Company shall not be required to issue any fraction of a
Share in connection with the exercise of this Warrant, and in any case where the
Holder would, except for the provisions of this Section 2.06, be entitled under
the terms of this Warrant to receive a fraction of a Share upon such exercise,
the Company shall upon the exercise and receipt of the Purchase Price, issue the
largest number of whole Shares purchasable upon exercise of this Warrant. The
Company shall not be required to make any cash or other adjustment in respect of
such fraction of a Share to which the Holder would otherwise be entitled. The
Holder, by the acceptance of this Warrant, expressly waives the Holder's right
to receive a certificate for any fraction of a Share upon exercise hereof.
Section 2.07. The form of Warrant need not be changed or modified
because of any change pursuant to this Article II in the Purchase Price or in
the number of Shares purchasable upon the exercise of a Warrant, and Common
Stock Purchase Warrants issued after such change may state the same Purchase
Price and the same number of shares of Common Stock as are stated in the
Warrants as initially issued.
ARTICLE III
REGISTRATION UNDER THE SECURITIES ACT OF 1933
Section 3.01. This Warrant and the Shares of Common Stock issuable upon
exercise of this Warrant have been registered under the Securities Act of 1933,
as amended ("Act"), on Form SB-2, SEC File No. 333-4792-LA ("Registration
Statement"). Upon exercise, in part or in whole, of this Warrant, the Shares
shall bear the following legend:
4
<PAGE> 6
The shares represented by this certificate have been
registered under the Securities Act of 1933, as amended,
solely for sale to the holder of a warrant to purchase, which
holder may be deemed to be an underwriter of such shares
within the provisions and for purposes only of the Securities
Act of 1933, as amended. The issuer of these shares will agree
to a transfer hereof only if (1) an amended or supplemented
prospectus setting forth the terms of the offer has been filed
as part of a post-effective amendment to the Registration
Statement under which these shares are registered or as part
of a new registration statement, if then required, and such
post-effective amendment or new registration statement has
become effective under the Securities Act of 1933, as amended,
or (2) counsel to the issuer is satisfied that no such
post-effective amendment or new registration statement is
required.
The Company agrees that it shall be satisfied that no post-effective
amendment or new registration is required for the public sale of the Shares if
it shall be presented with a letter from the staff of the Securities and
Exchange Commission ("Commission") stating in effect that, based upon stated
facts which the Company shall have no reason to believe are not true in any
material respect, the staff will not recommend any action to the Commission if
such Shares are offered and sold without delivery of a prospectus, and that,
therefore, no post-effective amendment to the Registration Statement under which
such shares are registered or new registration statement is required to be
filed.
Section 3.02. If, at any time during the period commencing one (1) year
from the date hereof and expiring five (5) years after the date hereof, the
Company proposes to register any of its securities under the Act, it will give
written notice, at least thirty (30) days prior to the filing of each such
registration statement, to the Holder and to all other holders of the Warrants
and/or the Shares of its intention to do so. If the Holder or other holders of
the Warrants and/or Shares notify the Company within twenty (20) days after
receipt of any such notice of its or their desire to include their Warrants or
Shares in such proposed registration statement, the Company shall afford the
Holder and/or such holders of the Warrants and/or Shares the opportunity to have
their Warrants or Shares registered under such registration statement.
Notwithstanding the provisions of this Section 3.02, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 3.02 (irrespective of whether a written request for inclusion of
Warrants or Shares shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
Section 3.03. (a) At any time during the period commencing one (1) year
from the date of this Warrant, and expiring five (5) years from the date hereof,
a majority of the Warrants and/or the Shares shall have the right (which right
is in addition to the registration rights under Section 3.02 hereof), as long as
current audited financial statements of the Company are available, to request,
one (1) time only, that the Company, upon written notice to it, prepare and file
with the Commission a post-effective amendment to the Registration Statement or
a new registration statement, if then required, and such other documents,
including an amended or supplemented prospectus, as may be necessary in the
opinion of both counsel for the Company and counsel for the Holder, in order to
comply with the provisions of the Act, so as to permit a public offering and
sale for nine (9) consecutive months of the Warrants and/or the Shares by such
Holders and any other holders notifying the Company within five (5) days after
receiving notice from the Company of such request.
(b) In addition to the registration rights under Section 3.02 and
subsection (a) of this Section 3.03 and as long as current audited financial
statements of the Company are available, any holder(s) of the Warrants and/or
the Shares shall have the right, as long as current audited financial statements
are available, to request that the Company during the period commencing one (1)
year from the date hereof and ending five (5) years from the date hereof,
prepare and file with the Commission a post-effective amendment to the
Registration Statement or a new registration statement, if then required, so as
to permit a public offering and sale for nine (9) consecutive months of its or
his Shares; provided, however, that the provisions of Section 3.04(b) hereof
shall not apply to such registration request and registration and all costs
incident thereto shall be at the expense of the Holder and other holders making
such request.
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<PAGE> 7
(c) The Company covenants and agrees to give written notice of any
registration request under this Section 3.03 by any holder or holders to all
other registered holders of the Warrants and Shares within ten (10) days from
the date of the receipt of any such registration request.
Section 3.04. In connection with any registration under Section 3.02 or
3.03 hereof, the Company covenants and agrees as follows:
(a) The Company shall use its best efforts to have any post-effective
amendment or new registration statement declared effective at the earliest
possible time, and shall furnish such number of prospectuses as shall reasonably
be requested.
(b) The Company shall pay all costs, fees and expenses in connection
with all post-effective amendments or new registration statements under Section
3.02 and Section 3.03(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses, except
that the Company shall not pay for any of the following costs, fees or expenses:
(i) underwriting discounts and commissions allocable to the Shares, (ii) state
transfer taxes, (iii) brokerage commissions and (iv) fees and expenses of
counsel and accountants for the holders of the Warrants and/or Shares. The
Company shall not be required to bear the incremental cost of any registration
arising from the exercise of the demand registration rights provided in Section
3.03(a) hereof which together with (i) the underwriting discounts, managing
underwriter's fee and expense reimbursement paid or incurred in connection with
the offering of securities pursuant to the Registration Statement and (ii) an
amount equal to 20% of the initial public offering price of the securities
offered pursuant to the Registration Statement multiplied by the Warrants
covered hereby, exceed 15% of the aggregate proceeds to be now and hereinafter
derived from the sale of the securities registered pursuant to the Registration
Statement.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Warrants and/or the Shares included in a
post-effective amendment or new registration statement for offering and sale
under the securities or blue sky laws of such states as are requested by the
holders of such Warrants and/or Shares, provided that the Company shall not be
obligated to execute or file any general consent to service or process or to
qualify as a foreign corporation to do business under the laws of any such
jurisdiction.
(d) The Holder shall be entitled to pay the Purchase Price for the
Shares purchasable upon the exercise of this Warrant out of the proceeds of any
concurrent sale of the Shares purchasable upon its exercise.
Section 3.05. (a) The Company shall indemnify and hold harmless each
person registering securities pursuant to this Article III ("Seller") and each
underwriter, within the meaning of the Act, who may purchase from or sell for
any Seller any of the Warrants or Shares from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any post-effective amendment or new
registration statement or any supplemented prospectus under the Act included
therein required to be filed or furnished by reason of Section 3.04, above, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished or required to be furnished in
writing to the Company by such Seller or underwriter expressly for use therein,
which indemnification shall include each person, if any, who controls any such
Seller or underwriter within the meaning of such Act; provided, however, that
the indemnity agreement by the Company set forth in this Section 3.05 with
respect to any prospectus which shall be subsequently amended prior to the
written confirmation of the sale of any Warrants or Shares shall not inure to
the benefit of any Seller or underwriter from whom the person asserting any such
losses, claims, damages or liabilities purchased such Warrants or Shares which
are the subject thereof (or to the benefit of any person controlling such Seller
or underwriter), if such Seller or underwriter failed to send or give a copy of
the prospectus as amended to such person at or prior to the written confirmation
of the sale of such Warrants or Shares to such person and if such amended
prospectus did not contain any untrue statement or alleged untrue statement or
omission or alleged omission giving rise to such cause, claim, damage or
liability.
(b) Each Seller which avails itself of the procedures under Article III
shall indemnify and secure the agreement of any underwriter which the Seller
employs to indemnify the Company, its directors, each officer signing the
related post-effective amendment or registration statement and each person, if
any, who controls the
6
<PAGE> 8
Company within the meaning of the Act from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any post-effective amendment or
registration statement or any prospectus required to be filed or furnished by
reason of Section 3.04 or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or alleged untrue statement or
omission or alleged omission based upon information furnished in writing to the
Company by any such Seller or underwriter expressly for use therein.
Section 3.06. The agreements in this Article III shall continue in
effect regardless of the exercise and surrender of this Warrant.
ARTICLE IV
OTHER MATTERS
Section 4.01. The Company will from time to time promptly pay, subject
to the provisions of subparagraph (4) of Section 1.02 hereof, all taxes and
charges that may be imposed upon the Company in respect of the issuance or
delivery of this Warrant or the Shares purchasable upon the exercise of this
Warrant.
Section 4.02. All the covenants and provisions of this Warrant by or
for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder. The covenants and provisions of this Warrant
shall be waived or amended only by the written agreement of the Company and the
Holder.
Section 4.03. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of Wisconsin.
Section 4.04. Notices or demands pursuant to this Warrant to be given
or made by the Holder to or on the Company shall be sufficiently given or made
if sent by certified or registered mail, return receipt requested, postage
prepaid, and addressed, until another address is designated in writing by the
Company, as follows:
Heartland Wisconsin Corp.
6635 South 13th Street
Milwaukee, Wisconsin 53221
Notices to the Holder provided for in this Warrant shall be deemed
given or made by the Company if sent by certified or registered mail, return
receipt requested, postage prepaid, and addressed to the Holder at his last
known address as it shall appear on the books of the Company.
Section 4.05. Nothing in this Warrant expressed and nothing that may be
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or corporation other than the Company and
the Holder any right, remedy or claim under promise or agreement hereof, and all
covenants, conditions, stipulations, promises and agreements contained in this
Warrant shall be for the sole and exclusive benefit of the Company and its
successors and of the Holder, its successors and, if permitted, its assignees.
Section 4.06. The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
as of the________day of _________, 199_______.
HEARTLAND WISCONSIN CORP.
Attest:
_____________________________ By:________________________________
Secretary President
7
<PAGE> 9
HEARTLAND WISCONSIN CORP.
ASSIGNMENT
(To be executed by the registered holder to effect a transfer of
the foregoing Warrant)
FOR VALUE RECEIVED,____________________________________________________
hereby sells, assigns and transfers unto________________________________________
the within Warrant and all of the rights represented thereby, and does
hereby irrevocably constitute and appoint___________________________ ,
Attorney, to transfer said Warrant on the books of the Company, with full
power of substitution.
Dated:
__________________________________
(Signature of Holder)
Signature guaranteed:
_____________________
8
<PAGE> 10
HEARTLAND WISCONSIN CORP.
SUBSCRIPTION FORM
(To be executed by the registered holder to
exercise the right to purchase Common Stock evidenced by
the foregoing Warrant)
Heartland Wisconsin Corp.
6635 South 13th Street
Milwaukee, Wisconsin 53221
The undersigned hereby irrevocably subscribes for the purchase of
shares of your Common Stock pursuant to and in accordance with the terms and
conditions of this Warrant, and herewith makes payment, covering such shares of
Common Stock which should be delivered to the undersigned at the address stated
below, and, if said number of shares shall not be all of the shares purchasable
hereunder, that a new Warrant of like tenor for the balance of the remaining
shares purchasable hereunder be delivered to the undersigned at the address
stated below.
The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such shares of Common Stock unless either
(a) a registration statement, or post-effective amendment thereto, covering such
shares of Common Stock has been filed by Tomorrow's Morning, Inc. ("Company")
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended ("Act"), and such sale, transfer or other disposition is
accompanied by a prospectus meeting the requirements of Section 10 of the Act
forming a part of such registration statement, or post-effective amendment
thereto, which is in effect under the Act covering the shares of Common Stock to
be so sold, transferred or otherwise disposed of, and such offer, sale transfer
or other disposition is registered or qualified under applicable state
securities laws, or (b) counsel to the Company satisfactory to the undersigned
has rendered an opinion in writing and addressed to the Company that such
proposed offer, sale, transfer or other disposition of the shares of Common
Stock is exempt from the provisions of Section 5 of the Act and applicable state
securities laws in view of the circumstances of such proposed offer, sale,
transfer or other disposition; (2) the Company may notify the transfer agent for
its Common Stock that the certificates for the Common Stock acquired by the
undersigned are not to be transferred unless the transfer agent receives advice
from the Company that one or both of the conditions referred to in (1)(a) and
(1)(b), above, have been satisfied; and (3) the Company may affix the legend set
forth in Section 3.01 of this Warrant to the certificates for shares of Common
Stock hereby subscribed for, if such legend is applicable.
Dated:
__________________________________
(Signature of Holder)
__________________________________
__________________________________
(Address of Holder)
Signature guaranteed:
____________________________________
9
<TABLE> <S> <C>
<ARTICLE> CT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> FEB-28-1998 FEB-28-1997
<PERIOD-START> MAR-01-1997 MAR-01-1996
<PERIOD-END> NOV-30-1997 FEB-28-1997
<TOTAL-ASSETS> 1,482,781 1,428,500
0 0
0 0
<COMMON> 10 10
<OTHER-SE> 259,990 259,990
<TOTAL-LIABILITY-AND-EQUITY> 1,482,781 1,428,500
<TOTAL-REVENUES> 116,168 737,054
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 11,585 2,218
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,585 2,218
<EPS-PRIMARY> 2.22 11.58
<EPS-DILUTED> 2.22 11.58
</TABLE>
