<PAGE>
As filed with the Securities and Exchange Commission on August 30, 1996
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
UNITY FIRST ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
Delaware 6770 13-3899021
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification
incorporation Classification Code) Number)
or organization)
245 Fifth Avenue - Suite 1500
New York, New York 10016
(212) 696-4282
(Address, including zip code, and telephone number,
including area code,
of registrant's principal executive offices)
----------------
LAWRENCE BURSTEIN, President
UNITY FIRST ACQUISITION CORP.
245 Fifth Avenue - Suite 1502
New York, New York 10016
(212) 696-4282
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
Copies to:
IRA I. ROXLAND, Esq. DAVID ALAN MILLER, Esq.
PARKER DURYEE ROSOFF & HAFT GRAUBARD MOLLEN & MILLER
529 Fifth Avenue 600 Third Avenue
New York, New York 10017 New York, New York 10016
(212) 599-0500 (212) 818-8661
Fax: (212) 972-9487 Fax: (212) 818-8881
----------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. /X/
<PAGE>
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price aggregate offering registration
per unit(1) price(1) fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units, consisting of one share of Common
Stock, $.0001 par value, one Class A Warrant
and one Class B Warrant, each Warrant to
purchase one share of Common
Stock(2).................. 1,437,500 uts. $6.00 $ 8,625,000 $ 2,974.14
- -------------------------------------------------------------------------------------------------------------------------
Underwriter's Unit Purchase Option........... 125,000 opts. - $ 100 (3)
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Units, issuable upon exercise of the
Underwriter's Unit Purchase Option,
consisting of one share of Common Stock,
$.0001 par value, one Class A Warrant and one
Class B Warrant, each Warrant to purchase
one share of Common
Stock(4).................. 125,000 uts. $6.60 $ 825,000 $ 284.48
- -------------------------------------------------------------------------------------------------------------------------
Class A Warrants, each to purchase one share
of Common Stock(4).......... 100,000 wts. - - (3)
- -------------------------------------------------------------------------------------------------------------------------
Class B Warrants, each to purchase one Share
of Common Stock(4).......... 100,000 wts. - - (3)
- -------------------------------------------------------------------------------------------------------------------------
Common Stock, $.0001 par value, issuable upon
exercise of Class A Warrants(5).............. 1,662,500 shs. $5.50 $ 9,143,750 $ 3,153.02
- -------------------------------------------------------------------------------------------------------------------------
Common Stock, $.0001 par value, issuable upon
exercise of Class B Warrants(5)............. 1,662,500 shs. $7.50 $12,468,750 $ 4,299.57
- -------------------------------------------------------------------------------------------------------------------------
Total..................... $10,711.21
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes 187,500 Units issuable pursuant to the Underwriter's over-
allotment option.
(3) No fee pursuant to Rule 457(g).
(4) Represents outstanding Warrants which may be sold by a Warrantholder after
the consummation of a Business Combination (as defined herein).
(5) Includes shares of Common Stock reserved for issuance upon the exercise of
the Warrants included in the Units subject to the Underwriter's over-
allotment option, shares of Common Stock reserved for issuance upon the
exercise of the Warrants included in the Units reserved for issuance upon
exercise of the Underwriter's Unit Purchase Option and shares of Common
Stock reserved for issuance upon exercise of outstanding Warrants; also
includes such presently indeterminate number of additional shares of Common
Stock as may be issued pursuant to the respective anti-dilution provisions
of the Warrants and the Underwriter's Unit Purchase Option.
<PAGE>
--------------------------------
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>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
------------------
Subject to Completion
Preliminary Prospectus dated August 30, 1996
PROSPECTUS
1,250,000 UNITS
UNITY FIRST ACQUISITION CORP.
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK,
ONE CLASS A COMMON STOCK PURCHASE WARRANT
AND ONE CLASS B COMMON STOCK PURCHASE WARRANT
------------------
Unity First Acquisition Corp. ("Company") is offering hereby 1,250,000 Units
("Units"), each consisting of one share of Common Stock, par value $0.0001 per
share ("Common Stock"), one Class A Redeemable Common Stock Purchase Warrant
("Class A Warrants") and one Class B Redeemable Common Stock Purchase Warrant
("Class B Warrants" and together with the Class A Warrants, the "Warrants"). The
Common Stock and the Warrants will become separable and transferable only upon
consummation of a Business Combination (as hereinafter defined). One Class A
Warrant and one Class B Warrant each entitle the holder to purchase one share of
Common Stock at a price of $5.50 and $7.50, respectively, commencing on the
later of (i) the consummation of a Business Combination or (ii) one year from
the date of this Prospectus and ending on , 2002 [six years after the
effective date of the Registration Statement (as hereinafter defined)]. The
Class A Warrants and the Class B Warrants are redeemable, each as a class, in
whole and not in part, at the option of the Company and with the consent of the
Underwriter, at a price of $.05 per Warrant at any time after the Warrants
become exercisable upon not less than 30 days' prior written notice, provided
that the last reported bid price of the Common Stock equals or exceeds $8.50
per share, with respect to the Class A Warrants, and $10.50 per share, with
respect to the Class B Warrants, for the 20 consecutive trading days ending on
the third day prior to the notice of redemption. See "Description of
Securities."
Prior to this offering, there has been no public market for the Units, the
shares of Common Stock or the Warrants and there can be
<PAGE>
no assurance that such a market will develop after the completion of this
offering. For information regarding the factors considered in determining the
initial public offering price of the Units and the exercise price of the
Warrants, see "Underwriting." The Company anticipates that the Units will be
quoted on the OTC Bulletin Board under the symbol "UFACU" upon completion of
this offering.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND ARE NOT SUBJECT
TO THE PROTECTIONS OF THE RULES UNDER THE SECURITIES ACT OF 1933 RELATING TO
"BLANK CHECK" OFFERINGS. SEE "RISK FACTORS" ON PAGE 12.
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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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------
Per Unit.... $6.00 $0.48 $5.52
- --------------------------------------------------------------------
Total(3).... $7,500,000 $600,000 $ 6,900,000
- --------------------------------------------------------------------
- ---------
(1) Does not include a 3% non-accountable expense allowance which the Company
has agreed to pay to the Underwriter. The Company has also agreed to sell
to the Underwriter an option ("Unit Purchase Option") to purchase up to
125,000 Units and to indemnify the Underwriter against certain liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting estimated expenses payable by the Company, including the
Underwriter's non-accountable expense allowance in the amount of $225,000
($258,750 if the Underwriter's over-allotment option is exercised in
full), estimated at $450,000.
(3) The Company has granted the Underwriter a 45-day option to purchase up to
187,500 additional Units upon the same terms and conditions as set forth
above, solely to cover over-allotments, if any. If such over-allotment
option is exercised in full, the total Price to Public, Underwriting
Discounts and Proceeds to Company will be $8,625,000, $690,000 and
$7,935,000, respectively. See "Underwriting."
The Units are offered, subject to prior sale, when, as and if delivered to and
accepted by the Underwriter and subject to approval of certain legal matters by
counsel and certain other conditions. The Underwriter reserves the right to
withdraw, cancel or modify this offering and to reject any order in whole or in
part. It is expected that delivery of certificates will be made against payment
therefor on or about , 1996, at the offices of the Underwriter in
New York City.
2
<PAGE>
GKN SECURITIES
, 1996
3
<PAGE>
STATE BLUE SKY INFORMATION
The Units will only be offered and sold by the Company in the States of
Delaware, District of Columbia, Florida, Hawaii, Illinois, Maryland, New York
and West Virginia (the "Primary Distribution States"). In addition, such
securities will be immediately eligible for resale in the secondary market in
each of the Primary Distribution States and in the States of [Iowa and
Pennsylvania]. Purchasers of such securities either in this offering or in any
subsequent trading market which may develop must be residents of such states.
The Company will amend this prospectus for the purpose of disclosing additional
states, if any, in which the Company's securities will be eligible for resale in
the secondary trading market.
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS AT LEVELS
ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------
FURTHER INFORMATION
The Company intends to furnish to its stockholders annual reports
containing financial statements audited and reported upon by its independent
public accounting firm and such other reports as the Company may determine to be
appropriate or as may be required by law.
4
<PAGE>
SUMMARY
THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS URGED TO
READ THIS PROSPECTUS IN ITS ENTIRETY. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO THE EXERCISE OF THE
UNDERWRITER'S OVER-ALLOTMENT OPTION, THE UNIT PURCHASE OPTION AND THE WARRANTS.
THE COMPANY
BUSINESS OBJECTIVE
Unity First Acquisition Corp. ("Company") was formed on May 30, 1996 to
serve as a vehicle to effect a merger, exchange of capital stock, asset
acquisition or other similar business combination (a "Business Combination")
with an operating business (a "Target Business") which the Company believes has
significant growth potential. The Company intends to utilize cash (to be derived
from the proceeds of this offering), equity, debt or a combination thereof in
effecting a Business Combination. The Company's efforts in identifying a
prospective Target Business will be limited to the following industries: (i) the
manufacture of analytical and controlling equipment, chemicals and allied
products, electronic equipment and medical instrumentation; (ii) health services
(including HMOs, laboratories and nursing homes); (iii) environmental services
and products; (iv) engineering and construction; (v) wholesale and retail
distribution (including discount operations) of home furnishings, office
supplies, computers and related products, medical equipment and supplies,
apparel and accessories, automotive parts and supplies and food and beverage
products; (vi) internet and other new media products and services; and (vii)
communications and entertainment ("Target Industries").
While the Company may, under certain circumstances, seek to effect Business
Combinations with more than one Target Business, its initial Business
Combination must be with a Target Business whose fair market value is at least
equal to 80% of the net assets of the Company at the time of such acquisition.
Consequently, it is likely that the Company will have the ability to effect only
a single Business Combination.
PRIOR INVOLVEMENT OF PRINCIPALS IN "BLANK CHECK" COMPANIES
The officers and directors of the Company (other than Mr. Norman Leben)
have held similar positions in seven other "blank
5
<PAGE>
check" companies (i.e, a development stage company that has no specific business
plan or has indicated that its business plan is to engage in a merger or
acquisition with an unidentified company), each of which has consummated a
Business Combination as of the date of this Prospectus. Certain information
with respect to each such Business Combination is set forth below:
TRADING
DATE OF MARKET AND
NAME OF TARGET BUSINESS TICKER
BUSINESS COMBINATION NATURE OF BUSINESS SYMBOL
- -------------- ----------- ------------------ ------
Bloc Development March 1988 Software development NYSE
Corp.(1) (GML)
Polyvision April 1990 Manufacture and AMEX (PLI)
Corporation sale of vision projec-
tion systems,
architectural building
panels, modular
partitions and catalog
office products
T-HQ Inc. August 1991 Design and market- OTC Bulletin
ing of Nintendo and Board (TOYH)
SEGA games
SubMicron Systems August 1993 Semi-conductor capital NASDAQ-NMS
equipment manufacturer (SUBM)
Alliance November 1993 Distributor of pre- NYSE
Entertainment Corp. recorded music, (CDS)
accessories and
entertainment
related products
USCI Inc. May 1995 Centralized auto- NASDAQ-NMS
mated computer- (USCM)
based cellular
telephone activation
systems
Brazil Fast Food Corp. March 1996 Owner and operator NASDAQ
of hamburger fast food SmallCap
restaurants (BOBS)
in Brazil
- --------------------
(1) Bloc Development Corp. was acquired by Global Direct Mail Corp. in 1995.
6
<PAGE>
There can be no assurance that the Company will be able to effect a
Business Combination or that the type of business or the performance of the
Target Business, if any, will be similar to that of these other "blank check"
companies. See "Management."
OFFERING PROCEEDS HELD IN TRUST
The proceeds of this offering, after payment of underwriting discounts and
the Underwriter's non-accountable expense allowance, will be $6,675,000
($7,676,250 if the Underwriter's over-allotment option is exercised in full).
Ninety percent (90%) of such amount, or $6,007,500 ($6,908,625 if the
Underwriter's over-allotment option is exercised in full), will be placed in a
trust account (the "Trust Fund"), and invested in United States government
securities. The Trust Fund will not be released until the earlier of the
consummation of a Business Combination or the liquidation of the Company, which
may not occur until 24 months from the consummation of this offering.
Therefore, unless and until a Business Combination is consummated, the proceeds
held in the Trust Fund will not be available for use by the Company for any
expenses related to this offering or expenses which may be incurred by the
Company related to the investigation and selection of a Target Business and the
negotiation of an agreement to acquire a Target Business. Such expenses may be
paid from the net proceeds not held in the Trust Fund (approximately $667,500 or
$767,625 if the Underwriter's over-allotment option is exercised in full). See
"Use of Proceeds."
FAIR MARKET VALUE OF TARGET BUSINESS
The Company will not acquire a Target Business unless the fair market value
of such business, as determined by the Board of Directors of the Company based
upon standards generally accepted by the financial community, such as actual and
potential sales, earnings and cash flow and book value ("Fair Market Value"), is
at least 80% of the net assets of the Company at the time of such acquisition.
If the Board of Directors is not able to independently determine that the Target
Business has a sufficient Fair Market Value, the Company will obtain an opinion
from an unaffiliated, independent investment banking firm which is a member of
the National Association of Securities Dealers, Inc. ("NASD") with respect to
the satisfaction of such criteria. Since any opinion, if obtained, would merely
state that Fair Market Value meets the 80% of net assets threshold, it is not
anticipated that copies of such opinion would be distributed to stockholders of
the Company, although copies will be provided to stockholders who request it.
The Company will not be required to obtain an opinion from an investment banking
firm as to Fair Market Value if the Board of Directors determines that the
Target Business does have sufficient Fair Market Value.
7
<PAGE>
STOCKHOLDER APPROVAL OF BUSINESS COMBINATION
The Company, after signing a definitive agreement for the acquisition of a
Target Business, but prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the acquisition is such as would not ordinarily require
stockholder approval under applicable state law. All of the Company's
stockholders prior to this offering ("Initial Stockholders"), including all of
the officers and directors of the Company, have agreed to vote their respective
shares of Common Stock owned by them immediately prior to this offering in
accordance with the vote of the majority of all the other shares of Common Stock
("Public Shares") voted on any Business Combination. The holders of the Public
Shares will be referred to herein as the "Public Stockholders." The Initial
Stockholders shall be deemed to be "Public Stockholders" with respect to any
Public Shares they acquire. The Company will proceed with the Business
Combination only if the holders of at least a majority of the outstanding shares
of Common Stock vote in favor of the Business Combination and less than 20% in
interest of the Public Stockholders exercise their conversion rights described
below.
CONVERSION RIGHTS
At the time the Company seeks stockholder approval of any Business
Combination, the Company will offer each Public Stockholder the right to have
his shares of Common Stock converted to cash if such stockholder votes against
the Business Combination and the Business Combination is approved and
consummated. The per-share conversion price will be equal to the amount in the
Trust Fund (inclusive of any interest thereon) as of the record date for
determination of stockholders entitled to vote on such Business Combination,
divided by the number of Public Shares. Without taking into account interest,
if any, earned on the Trust Fund, the per-share conversion price would be $4.81,
or $1.19 less than the per-Unit offering price of $6.00. There will be no
distribution from the Trust Fund with respect to the Warrants included in the
Units. A Public Stockholder may request conversion of his shares at any time
prior to the vote taken with respect to a proposed Business Combination at a
meeting held for that purpose, but such request will not be granted unless such
stockholder votes against the Business Combination and the Business Combination
is approved and consummated. It is anticipated that the funds to be distributed
to the Public Stockholders who have their shares converted will be distributed
promptly after consummation of a Business Combination. The Initial Stockholders
will not have any conversion rights with respect to the shares of Common Stock
owned by them immediately prior to this offering. The Company will not
consummate any Business Combination if 20% or more in interest of the Public
Stockholders exercise their conversion rights.
8
<PAGE>
ESCROW OF PRINCIPALS' SECURITIES
The shares of the Company's Common Stock owned as of the date hereof by
all of the executive officers and directors of the Company and their
respective affiliates (excluding, however, their respective spouses and adult
children) and by all persons owning 5% or more of the currently outstanding
shares of Common Stock (collectively, the "Affiliated Initial Stockholders"),
representing in the aggregate approximately 49.8% of the outstanding Common
Stock as of the date hereof, will be placed in escrow with American Stock
Transfer & Trust Company, as escrow agent (the "Escrow Agent"), until the
earlier of (i) six months following the consummation of a Business
Combination or (ii) the liquidation of the Company. During such escrow
period, such persons will not be able to sell their respective shares of
Common Stock, but will retain all other rights as stockholders of the
Company, including, without limitation, the right to vote such shares of
Common Stock. In addition, the Directors' Warrants (as hereinafter defined)
will also be deposited with the Escrow Agent, to be released only upon the
consummation of a Business Combination. Upon liquidation of the Company, the
shares will be cancelled. All other Initial Stockholders ("Non-Affiliated
Initial Stockholders") have agreed not to sell their respective shares of
Common Stock until the occurrence of a Business Combination.
LIQUIDATION IF NO BUSINESS COMBINATION
In the event that the Company does not consummate a Business Combination
within 18 months from the consummation of this offering, or 24 months from
the consummation of this offering if the "Extension Criteria" described below
have been satisfied, the Company will be dissolved and will distribute to all
Public Stockholders in proportion to their respective equity interests in the
Company, an aggregate sum equal to the amount in the Trust Fund, inclusive of
any interest thereon, plus any remaining net assets of the Company. The
Initial Stockholders have waived their respective rights to participate in
any liquidation distribution with respect to the shares of Common Stock owned
by them immediately prior to this offering. If the Company were to expend
all of the net proceeds of this offering, other than the proceeds deposited
in the Trust Fund, and without taking into account interest, if any, earned
on the Trust Fund, the per-share liquidation price would be $4.81 or $1.19
less than the per-Unit offering price of $6.00. The proceeds deposited in
the Trust Fund could, however, become subject to the claims of creditors of
the Company which could be prior to the claims of stockholders of the
Company. Accordingly, there can be no assurance that the per-share
liquidation price will not be less than $4.81, plus interest. There will be
no distribution from the Trust Fund with respect to the Warrants included in
the Units. Notwithstanding the Company's commitment to liquidate if it is
unable to effect a Business Combination within 18 months from the
consummation of this offering, if the Company enters into either a letter of
intent, an agreement in principle or a definitive agreement to effectuate a
Business Combination prior to the expiration of such 18-month period, but is
unable to
9
<PAGE>
consummate such Business Combination within such 18-month period ("Extension
Criteria"), then the Company will have an additional six months in which to
consummate that Business Combination contemplated by such letter of intent or
definitive agreement, as applicable. If the Company is unable to do so by the
expiration of the 24-month period from the consummation of this offering, it
will then liquidate. Upon notice from the Company, the trustee of the Trust
Fund will commence liquidating the investments constituting the Trust Fund and
will turn over the proceeds to the transfer agent for the Common Stock for
distribution to the Public Stockholders. The Company anticipates that its
instruction to the Trustee would be given promptly after the expiration of the
applicable 18-month or 24-month period.
A Public Stockholder shall be entitled to receive funds from the Trust Fund
only in the event of a liquidation of the Company or if he seeks to convert his
shares into cash in connection with a Business Combination which he voted
against and which is actually consummated by the Company. In no other
circumstances shall a Public Stockholder have any right or interest of any kind
to or in the Trust Fund.
THE OFFERING
Securities offered 1,250,000 Units, at $6.00 per Unit, each
Unit consisting of one share of Common Stock,
one Class A Warrant to purchase one share of
Common Stock, and one Class B Warrant to
purchase one share of Common Stock. The Common
Stock and the Warrants will become separable
and transferable only upon consummation of a
Business Combination. See "Description of
Securities" and "Underwriting."
Common Stock outstanding 625,000 shares
prior to the offering
Common Stock to be
outstanding after
the offering(1) 1,875,000 shares
Warrants:
Number to be
outstanding after
the offering(2) 1,350,000 Class A Warrants
1,350,000 Class B Warrants
Exercise price The exercise price of each Class A Warrant is
$5.50 per share and the
10
<PAGE>
exercise price of each Class B Warrant is
$7.50 per share, subject to adjustment in
certain circumstances. See "Description of
Securities."
Exercise period The Warrants will become exercisable on the
later of (i) the consummation of a Business
Combination or (ii) one year from the date of
this Prospectus and will expire at 5:00 p.m.,
New York City time, on , 2002.
Redemption The Warrants are redeemable, each as a class,
in whole and not in part, at the option of the
Company and with the consent of the
Underwriter, at a price of $.05 per Warrant at
any time after the Warrants become exercisable
upon not less than 30 days' prior written
notice, provided that the reported closing bid
price of the Common Stock equals or exceeds
$8.50 per share, with respect to the Class A
Warrants, and $10.50 per share, with respect
to the Class B Warrants, for the 20
consecutive trading days ending on the third
day prior to the notice of redemption.
Proposed OTC Bulletin
Board Symbol for
Units(3) UFACU
- --------------------
(1) Does not include (i) 2,700,000 shares of Common Stock reserved for issuance
upon the exercise of (A) currently outstanding Directors' Warrants (as
hereinafter defined) and (B) the Warrants, (ii) 187,500 shares of Common
Stock included in the Units subject to the Underwriter's over-allotment
option, (iii) 375,000 shares of Common Stock reserved for issuance upon the
exercise of the Warrants included in the Units subject to the Underwriter's
over-allotment option, (iv) 125,000 shares of Common Stock included in the
Units reserved for issuance upon exercise of the Unit Purchase Options, (v)
250,000 shares of Common Stock reserved for issuance upon the exercise of
the Warrants included in the Units reserved for issuance upon exercise of
the Unit Purchase Options, or (vi) 187,500 shares of Common Stock reserved
for issuance upon exercise of options available for grant under the
Company's 1996 Stock Option Plan. See "Management - Stock Option Plan,"
"Certain Transactions," and "Underwriting."
(2) Includes 100,000 Class A Warrants and 100,000 Class B Warrants heretofore
issued to the Company's officers and directors
11
<PAGE>
(collectively, the "Directors' Warrants"). The Directors' Warrants are
identical to the Class A Warrants and the Class B Warrants, respectively,
except that the Directors' Warrants are not redeemable and cannot be
transferred or exercised until the consummation of a Business Combination.
See "Certain Transactions."
(3) The inclusion of the Units on the OTC Bulletin Board does not imply that a
public trading market will develop therefor or, if developed, that such
market will be sustained.
USE OF PROCEEDS
The Company intends to apply substantially all of the net proceeds of this
offering, which are estimated to be approximately $6,450,000 ($7,451,250 if the
Underwriter's over-allotment option is exercised in full), to acquire a Target
Business, including identifying and evaluating prospective acquisition
candidates, selecting a Target Business and structuring, negotiating and
consummating the Business Combination. The proceeds of this offering, after
payment of underwriting discounts and the Underwriter's non-accountable expense
allowance, will be $6,675,000 ($7,676,250 if the Underwriter's over-allotment
option is exercised in full). Ninety percent (90%) of such amount, or $6,007,500
($6,908,625 if the Underwriter's over-allotment option is exercised in full),
will be held in a trust account established with The Bank of New York until the
earlier of (i) the consummation of a Business Combination or (ii) the
liquidation of the Company.
That portion of the net proceeds of this offering that will not be held in
the Trust Fund, approximately $442,500 ($542,625 if the Underwriter's over-
allotment option is exercised in full), will be used for (i) the performance of
"due diligence" investigations of prospective acquisition candidates, (ii)
legal, accounting and other expenses attendant to such "due diligence"
investigations and to structuring, negotiating and consummating a Business
Combination, (iii) legal and accounting fees to be incurred in connection with
the Company's obligation to file periodic reports, proxy statements and other
informational material with the Securities and Exchange Commission and (iv) the
Company's general and administrative expenses, including $7,500 per month
payable to Unity Venture Capital Associates Ltd., an affiliate of the Company's
directors. See "Use of Proceeds", "Proposed Business" and "Certain
Transactions."
RISK FACTORS
The securities offered hereby involve a high degree of risk and are not
subject to the protection of the Rules of the
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Securities Act of 1933 relating to "blank check" offerings. See "Risk Factors."
SUMMARY FINANCIAL INFORMATION
The following data have been derived from the financial statements of the
Company and should be read in conjunction with those statements, which are
included in this Prospectus. The "As Adjusted" financial information gives
effect to the issuance of the securities in this offering as if such offering
had occurred at July 31, 1996.
July 31, 1996
-----------------------------
Actual As Adjusted(1)
---------- --------------
Balance Sheet Data:
Total assets $250,563 $6,435,063(2)
Working capital (deficit) $(14,937) $6,435,063(2)
Total liabilities $265,500 $ -
Value of Common Stock subject
to possible conversion $ - $1,201,899(3)
Stockholders' equity (deficit) $(14,937) $6,435,063(3)
- --------------------
(1) Gives effect to the sale of the Units offered hereby and the application of
the estimated net proceeds therefrom. See "Underwriting."
(2) Includes $6,007,500 being held in the Trust Fund which will be available to
the Company only upon the consummation of a Business Combination within the
time period described in this Prospectus. If a Business Combination is not
so consummated, the Company will be dissolved and the proceeds held in the
Trust Fund will be distributed to the Public Stockholders. See "Use of
Proceeds."
(3) In the event the Company consummates a Business Combination, the conversion
rights to the Public Stockholders may result in the conversion into cash of
up to approximately 19.99% of the aggregate number of Public Shares at a
per-share conversion price equal to the amount in the Trust Fund as of the
record date for the determination of stockholders entitled to vote on the
Business Combination (inclusive of any interest thereon) divided by the
number of Public Shares.
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THE COMPANY
BUSINESS OBJECTIVE
The Company was formed to serve as a vehicle to effect a merger, exchange
of capital stock, asset acquisition or other similar business combination (a
"Business Combination") with an operating business (a "Target Business"). The
business objective of the Company is to seek to effect a Business Combination
with a Target Business which the Company believes has significant growth
potential. The Company intends to utilize cash (to be derived from the proceeds
of this offering), equity, debt or a combination thereof in effecting a Business
Combination. The Company's efforts in identifying a prospective Target Business
will be limited to the following industries: (i) the manufacture of analytical
and controlling equipment, chemicals and allied products, electronic equipment
and medical instrumentation; (ii) health services (including HMOs, laboratories
and nursing homes); (iii) environmental services and products; (iv) engineering
and construction; (v) wholesale and retail distribution (including discount
operations) of home furnishings, office supplies, computes and related products,
medical equipment and supplies, apparel and accessories, automotive parts and
supplies and food and beverage products; (vi) internet and other new media
products and services; and (vii) communications and entertainment (the "Target
Industries").
To date, the Company's efforts have been limited to organizational
activities. The implementation of the Company's business plans are wholly
contingent upon the successful sale of the Units offered hereby. See "Proposed
Business."
The Company was organized under the laws of the State of Delaware on
May 30, 1996. The Company's office is located at 245 Fifth Avenue, Suite 1500,
New York, New York 10016, and its telephone number is (212) 696-4282.
RISK FACTORS
The securities offered hereby involve a high degree of risk, including, but
not necessarily limited to, the several factors described below. Each
prospective investor should carefully consider the following risk factors
inherent in and affecting the business of the Company and this offering before
making an investment decision.
RECENTLY ORGANIZED COMPANY; LIMITED RESOURCES;
NO PRESENT SOURCE OF REVENUES
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The Company, which was organized on May 30, 1996 and is in the development
stage, has not as yet attempted to seek a Business Combination. Although the
Company's President and two of its three other directors have had prior
experience relating to the identification, evaluation and acquisition of a
Target Business, the Company has no such experience and, accordingly, there is
only a limited basis upon which to evaluate the Company's prospects for
achieving its intended business objectives. To date, the Company's efforts have
been limited primarily to organizational activities and this offering. The
Company has limited resources and has had no revenues to date. In addition, the
Company will not achieve any revenues (other than interest income upon the
proceeds of this offering) until, at the earliest, the consummation of a
Business Combination. Moreover, there can be no assurance that any Target
Business, at the time of the Company's consummation of a Business Combination,
or at any time thereafter, will derive any material revenues from its operations
or operate on a profitable basis. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
MODIFIED REPORT OF AUDITORS
The report of independent public accountants on the Company's financial
statements includes an explanatory paragraph with respect to the Company
being in its development stage, which raises substantial doubt about its
ability to continue as a going concern. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements of the Company included elsewhere in this Prospectus.
POSSIBLE LIQUIDATION OF THE COMPANY; PER-SHARE LIQUIDATION PRICE LESS THAN
PUBLIC OFFERING PRICE; WARRANTS EXPIRE WORTHLESS IN EVENT OF LIQUIDATION
If the Company does not consummate a Business Combination within 18 months
from the consummation of this offering, or 24 months from the consummation of
this offering if the Extension Criteria have been satisfied, the Company will be
dissolved and will distribute to all Public Stockholders in proportion to their
respective equity interests in the Company, an aggregate sum equal to the amount
in the Trust Fund, inclusive of any interest thereon, plus any remaining net
assets of the Company. It is likely that, in the event of any such liquidation,
the per-share liquidation distribution will be less than the initial per-share
public offering price (assuming no value is attributed to the Warrants included
in the Units offered hereby) as a consequence of the expenses of this offering
and the anticipated costs which will be incurred by the Company in seeking a
Business Combination. If the Company were to expend all of the net proceeds of
this offering not
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<PAGE>
held in the Trust Fund prior to liquidation, and without taking into account
interest, if any, earned on the Trust Fund, the per-share liquidation price
would be $4.81, or $1.19 less than the per-Unit offering price of $6.00. The
proceeds deposited in the Trust Fund could, however, become subject to the
claims of creditors of the Company which could be prior to the claims of
stockholders of the Company. Accordingly, there can be no assurance that the
per-share liquidation price will not be less than $4.81, plus interest. There
will be no distribution from the Trust Fund with respect to the Warrants
included in the Units and, accordingly, the Warrants will expire worthless in
the event of a liquidation prior to the consummation of a Business Combination.
The Initial Stockholders have waived their respective rights to participate in
any liquidation distribution with respect to the shares of Common Stock owned by
them immediately prior to this offering.
A Public Stockholder shall be entitled to receive funds from the Trust Fund
only in the event of a liquidation or in the event he seeks to convert his
shares into cash in connection with a Business Combination which he voted
against and which is actually consummated by the Company. In no other
circumstances shall a Public Stockholder have any right or interest of any kind
to and in the Trust Fund.
UNSPECIFIED INDUSTRY AND TARGET
BUSINESS; UNASCERTAINABLE RISKS
To date, the Company has not selected any particular industry from the
Target Industries or any Target Business in which to concentrate its search for
a Business Combination. Accordingly, there is no current basis for prospective
investors to evaluate the possible merits or risks of the Target Business or the
particular industry in which the Company may ultimately operate. However, in
connection with seeking stockholder approval of a Business Combination, the
Company intends to furnish its stockholders with proxy solicitation materials
prepared in accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which, among other matters, will include a description of the
operations of the Target Business and audited historical financial statements
thereof. To the extent the Company effects a Business Combination with a
financially unstable company or an entity in its early stage of development or
growth (including entities without established records of sales or earnings),
the Company will become subject to numerous risks inherent in the business
operations of financially unstable and early stage or potential emerging growth
companies. In addition, to the extent that the Company effects a Business
Combination with an entity in an industry characterized by a high level of risk,
the Company will become subject to the currently unascertainable risks of that
industry. An extremely high level of risk frequently characterizes certain
industries which experience rapid growth. Although Management will endeavor
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<PAGE>
to evaluate the risks inherent in a particular Target Business or industry,
there can be no assurance that the Company will properly ascertain or assess all
such significant risk factors. See "Proposed Business - Blank Check Offering."
DETERMINATION OF FAIR MARKET VALUE
The Fair Market Value of the Target Business will be determined by the
Board of Directors of the Company, unless the Board of Directors is not able to
independently determine that the Target Business has sufficient Fair Market
Value. Therefore, the Board of Directors has significant discretion in
determining whether a Target Business is suitable for a proposed Business
Combination and, since each of the directors of the Company owns shares of the
Company's Common Stock which will be released from escrow only if a Business
Combination is successfully consummated, the Board of Directors may have a
conflict of interest in determining the Fair Market Value of a Target Business.
The Board of Directors, however, has a fiduciary duty under the laws of Delaware
to act in the best interests of all of the Company's stockholders, particularly
when faced with a conflict of interest. See "Management - Conflicts of
Interest."
UNCERTAIN STRUCTURE OF BUSINESS COMBINATION;
REDUCTION IN STOCKHOLDER EQUITY INTEREST
The structure of a Business Combination with a Target Business, which may
take the form of a merger, exchange of capital stock or asset acquisition,
cannot be presently determined since neither the Company's officers or directors
nor their respective affiliates have had any preliminary contacts, discussions
or understandings with representatives of any potential Target Business
regarding the possibility of a Business Combination. The Company may use the
funds held in the Trust Fund as part of the consideration for the Business
Combination or may issue additional Shares of Common Stock or shares of
Preferred Stock, or incur debt, or any combination thereof. In the event the
Company issues capital stock, the current equity interest of the stockholders
may be significantly reduced. See "Proposed Business - Selection of Target
Business and Structuring a Business Combination."
DISCRETIONARY USE OF PROCEEDS; ABSENCE OF CURRENT
SUBSTANTIVE DISCLOSURE RELATING TO BUSINESS COMBINATIONS
The Company's Management has broad discretion with respect to the specific
application of the net proceeds of this offering, although substantially all of
the net proceeds of this offering are intended to be generally applied toward
effecting a Business Combination, subject to the limitation concerning Target
Industries
17
<PAGE>
discussed under "The Company - Business Objectives." As of the date of this
Prospectus, the Company has not identified a prospective Target Business
and, accordingly, investors in this offering do not currently have any
substantive information available for consideration of any Business
Combination. Notwithstanding the foregoing, in connection with seeking
stockholder approval of a Business Combination, the Company intends to
furnish its stockholders with proxy solicitation materials prepared in
accordance with the Securities Exchange Act of 1934, as amended ("Exchange
Act") which will include a description of the operations of the Target
Business and audited historical financial statements thereof. Such proxy
solicitation materials will be filed with, and be subject to the review of,
the Securities and Exchange Commission ("Commission"). See "Use of Proceeds"
and "Proposed Business - Blank Check Offering."
LIMITED ABILITY TO EVALUATE TARGET BUSINESS MANAGEMENT
While the Company's ability to successfully effect a Business Combination
will be dependent upon the efforts of its officers and directors, the future
role of such persons, if any, in the Target Business cannot presently be stated
with any certainty. While it is possible that one or more of these persons will
remain associated in some capacity with the Company following a Business
Combination, it is unlikely that any of them will devote their full efforts to
the affairs of the Company subsequent thereto. Moreover, there can be no
assurance that such persons will have significant experience or knowledge
relating to the operations of the particular Target Business. Furthermore,
although the Company intends to closely scrutinize the management of a
prospective Target Business in connection with evaluating the desirability of
effecting a Business Combination, there can be no assurance that the Company's
assessment of such management will prove to be correct, especially in light of
the possible inexperience of the Company's officers and directors in evaluating
certain types of businesses. In addition, there can be no assurance that such
future management will have the necessary skills, qualifications or abilities to
manage a public company intending to embark on a program of business
development. The Company may also seek to recruit additional managers to
supplement the incumbent management of the Target Business. There can be no
assurance that the Company will have the ability to recruit such additional
managers, or that such additional managers will have the requisite skills,
knowledge or experience necessary to enhance the incumbent management. See
"Proposed Business - 'Blank Check' Offering."
INVESTOR DOES NOT RECEIVE PROTECTION OF
CERTAIN RULES PROMULGATED UNDER THE SECURITIES ACT OF 1933
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This offering is not being conducted in accordance with Rule 419,
promulgated by the Commission under the Securities Act ("Rule 419"), which
regulates securities offerings by "blank check" companies. Since the Company's
net tangible assets will be in excess of $5,000,000 upon its receipt of the
proceeds of this offering (as supported through audited financial statements),
the Company is not subject to Rule 419. Rule 419 requires that the securities
to be issued and the funds received in a blank check offering be deposited and
held in an escrow account until an acquisition meeting specified criteria is
completed. Before the acquisition can be completed and before the funds and
securities can be released, the blank check company is required to update its
registration statement with a post-effective amendment and, after the effective
date thereof, the blank check company is required to furnish investors with a
prospectus (which forms a part of the post-effective amendment to its
registration statement) containing specified information, including a discussion
of the business and the audited financial statements of the proposed acquisition
candidate. According to Rule 419, the investors must have no less than 20 and
no more than 45 days from the effective date of the post-effective amendment to
decide whether to remain an investor or require the return of their investment
funds. Any investor not making such decision within such 45-day period is
automatically entitled to receive a return of his investment funds. Unless a
sufficient number of investors elect to remain investors, all of the deposited
funds in the escrow account must be returned to all investors and none of the
securities will be issued. Rule 419 further provides that if the blank check
company does not complete an acquisition meeting the specified criteria within
18 months, all of the deposited funds must be returned to investors.
SEEKING TO ACHIEVE PUBLIC TRADING
MARKET THROUGH BUSINESS COMBINATION
While a prospective Target Business may deem a Business Combination with
the Company desirable for diverse reasons, a Business Combination may involve
the acquisition of, or merger with, a company which does not need substantial
additional capital but which desires to establish a public trading market for
its shares, while avoiding what it may deem to be adverse consequences of
undertaking a public offering itself, such as time delays, significant expense,
loss of voting control and compliance with various Federal and state securities
laws. See the risk factors herein entitled "Unspecified Industry and Target
Business; Unascertainable Risks" and "No Assurance of Public Market; Arbitrary
Determination of Offering Price."
PROBABLE LACK OF BUSINESS DIVERSIFICATION
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While the Company may, under certain circumstances, seek to effect Business
Combinations with more than one Target Business, its initial Business
Combination must be with a Target Business which satisfies the Fair Market Value
criteria at the time of such acquisition. Consequently, it is likely that the
Company will have the ability to effect only a single Business Combination.
Accordingly, the prospects for the Company's success will be entirely dependent
upon the future performance of a single business. Unlike certain entities which
have the resources to consummate several Business Combinations of entities
operating in multiple industries or multiple areas of a single industry, it is
highly likely that the Company will not have the resources to diversify its
operations or benefit from the possible spreading of risks or offsetting of
losses. The Company's probable lack of diversification may subject the Company
to numerous economic, competitive and regulatory developments, any or all of
which may have a substantial adverse impact upon the particular industry in
which the Company may operate subsequent to a Business Combination. In
addition, by consummating a Business Combination with only a single entity, the
prospects for the Company's success may become dependent upon the development or
market acceptance of a single or limited number of products, processes or
services. Consequently, there can be no assurance that the Target Business will
prove to be commercially viable. See "Proposed Business - 'Blank Check'
Offering."
DEPENDENCE UPON KEY PERSONNEL
The ability of the Company to successfully effect a Business Combination
will be largely dependent upon the efforts of Lawrence Burstein, the Company's
President. The Company has not entered into an employment agreement with Mr.
Burstein or obtained any "key man" life insurance on his life. The loss of Mr.
Burstein's services could have a material adverse effect on the Company's
ability to successfully achieve its business objectives. None of the Company's
officers and directors are required to commit their full time to the affairs of
the Company. Accordingly, conflicts of interest may arise in the allocation of
management time among various business activities. In addition, the success of
the Company may be dependent upon its ability to retain additional personnel
with specific knowledge or skills who may be necessary to assist the Company in
evaluating a potential Business Combination. There can be no assurance that the
Company will be able to retain such necessary additional personnel. See
"Proposed Business - Employees" and "Management - Conflicts of Interest."
COMPETITION
The Company expects to encounter intense competition from other entities
having a business objective similar to that of the
20
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Company. Many of these entities are well-established and have extensive
experience in connection with identifying and effecting business combinations
directly or through affiliates. Many of these competitors possess greater
financial, technical, personnel and other resources than the Company and there
can be no assurance that the Company will have the ability to compete
successfully. The Company's financial resources will be relatively limited when
contrasted with those of many of its competitors. This inherent competitive
limitation may compel the Company to select certain less attractive Business
Combination prospects. See "Proposed Business - Selection of Target Business
and Structuring a Business Combination."
CONFLICTS OF INTEREST
None of the Company's officers and directors are required to commit their
full time to the affairs of the Company; therefore, such persons may have
conflicts of interest in allocating management time among various business
activities. Certain of these persons may in the future become affiliated with
entities, including other "blank check" companies, engaged in business
activities similar to those intended to be conducted by the Company. Such
persons may have conflicts of interest in determining to which entity a
particular business opportunity should be presented. In order to reduce
potential conflicts of interest, the Company's officers and directors have
agreed that they will offer all suitable prospective Target Businesses to the
Company before any other company until the earlier of a Business Combination or
the liquidation of the Company. In general, officers and directors of a
corporation incorporated under the laws of the State of Delaware are required to
present certain business opportunities to such corporation. Accordingly, as a
result of multiple business affiliations, certain of the Company's officers and
directors may have similar legal obligations to present certain business
opportunities to multiple entities.
Conflicts of interest may also arise between the Company and Unity Venture
Capital Associates Ltd. ("Unity"). Pursuant to a general and administrative
services agreement, the Company is obligated to pay Unity a monthly fee of
$7,500 for general and administrative services, including the use of
approximately 500 square feet of office space in premises occupied by Unity.
Mr. Burstein is the President and principal shareholder of Unity. Mr. Leben, as
well as John Cattier and Barry Ridings, each a director of the Company, are also
shareholders of Unity. Dalessio, Millner & Leben ("DML"), an accounting firm of
which Mr. Leben is a partner, affords Unity the use of such space at a monthly
rental of $2,000. DML which has performed bookkeeping, tax and accounting
services for certain of the "blank check" companies of which Messrs. Burstein,
Cattier and Ridings, have been directors and shareholders from their inceptions
through the consummation of
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their respective Business Combinations, is expected to perform similar services
for the Company at an aggregate cost of approximately $12,000 per annum. DML
may also perform financial "due diligence" services for the Company in
connection with its evaluation of prospective Target Businesses for a Business
Combination. In addition, Unity has made non-interest demand loans aggregating
approximately $40,500 to the Company as of the date of this Prospectus to cover
expenses related to this offering. The Company intends to repay these loans, as
well as both those accrued general and administrative expenses owed to Unity
discussed above, out of the proceeds of this offering. See "Management -
Conflicts of Interest" and "Certain Transactions."
POSSIBLE NEED FOR ADDITIONAL FINANCING
The Company has had no revenues to date and is entirely dependent upon the
proceeds of this offering to commence operations relating to selection of a
prospective Target Business. The Company will not achieve any revenues (other
than interest income derived from investment of the net proceeds of this
offering) until, at the earliest, the consummation of a Business Combination.
Although the Company believes that the proceeds of this offering will be
sufficient to effect a Business Combination, inasmuch as the Company has not yet
identified any prospective Target Business candidates, the Company cannot
ascertain with any degree of certainty the capital requirements for any
particular transaction. In the event that the net proceeds of this offering
prove to be insufficient for purposes of effecting a Business Combination
(because of the size of the Business Combination or the depletion of the net
proceeds in search of a Target Business), the Company will be required to seek
additional financing. There can be no assurance that such financing would be
available on acceptable terms, if at all. To the extent that such additional
financing proves to be unavailable when needed to consummate a particular
Business Combination, the Company would, in all likelihood, be compelled to
restructure the transaction or abandon that particular Business Combination and
seek an alternative Target Business candidate. In addition, in the event of the
consummation of a Business Combination, the Company may require additional
financing to fund the operations or growth of the Target Business. The failure
by the Company to secure such additional financing could have a material adverse
effect on the continued development or growth of the Target Business. See
"Proposed Business - 'Blank Check' Offering - Selection of a Target Business and
Structuring of a Business Combination."
RISKS OF LEVERAGE
The Company may borrow money to consummate the Business Combination or
assume or refinance the indebtedness of the Target
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Business if the Company's management deems it to be beneficial to the Company.
There is no legal limit on the amount of leverage that the Company may incur.
Among the possible adverse effects of any such leverage are: (i) if the
Company's operating revenues after the Business Combination were insufficient to
pay debt services, there would be a risk of default and foreclosure on the
Company's assets; (ii) if a loan agreement contains covenants that require the
maintenance of certain financial ratios or reserves, and any such covenant is
breached without a waiver or renegotiation of the terms of that covenant, then
the lender could have the right to accelerate the payment of the indebtedness
even if the Company has made all principal and interest payments when due; (iii)
if the interest rate on a loan fluctuated or the loan was payable on demand, the
Company would bear the risk of variations in the interest rate or demand for
payment; and (iv) if the terms of a loan did not provide for amortization prior
to maturity of the full amount borrowed and the "balloon" payment could not be
refinanced at maturity on acceptable terms, the Company might be required to
seek additional financing and, to the extent that additional financing were not
available on acceptable terms, to liquidate its assets. See "Proposed Business
- - Selection of Target Business and Structuring in Business Combination."
AUTHORIZATION OF ADDITIONAL SECURITIES
The Company's Certificate of Incorporation authorizes the issuance of
20,000,000 shares of Common Stock. Upon completion of this offering (assuming no
exercise of the Underwriter's over-allotment option), there will be 14,862,500
authorized but unissued shares of Common Stock available for issuance (after
appropriate reservation for the issuance of shares upon full exercise of the
Warrants, the Unit Purchase Option and the Directors' Warrants and for future
grants under the Company's 1996 Stock Option Plan). The Company's Board of
Directors has the power to issue any or all of such authorized but unissued
shares without stockholder approval. However, the Underwriting Agreement
between the Company and the Underwriter (the "Underwriting Agreement") prohibits
the Company from issuing shares of Common Stock prior to a Business Combination
other than as described in this Prospectus. Although the Company has no
commitments as of the date of this Prospectus to issue any additional shares of
Common Stock, the Company will, in all likelihood, issue a substantial number of
additional shares in connection with a Business Combination. To the extent that
additional shares of Common Stock are issued, dilution to the interests of the
Public Stockholders will occur. Additionally, if a substantial number of shares
of Common Stock are issued in connection with a Business Combination, a change
in control of the Company may occur which may affect, among other things, the
Company's ability to utilize its net operating loss carryforwards, if any.
Furthermore, the issuance of a substantial number of shares of Common Stock may
adversely affect prevailing
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<PAGE>
market prices, if any, for the Common Stock and could impair the Company's
ability to raise additional capital through the sale of its equity securities.
See "Proposed Business - 'Blank Check' Offering - Selection of a Target Business
and Structuring of a Business Combination" and "Description of Securities."
The Company's Certificate of Incorporation also authorizes the issuance of
5,000 shares of "blank check" preferred stock ("Preferred Stock") with such
designation, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue Preferred Stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common Stock,
although the Underwriting Agreement prohibits the Company, prior to a Business
Combination, from issuing Preferred Stock which participates in any manner in
the proceeds of the Trust Fund, or which votes as a class with the Common Stock
on a Business Combination. The Company may issue some or all of such shares in
connection with a Business Combination. In addition, the Preferred Stock could
be utilized, under certain circumstances, as a method of discouraging, delaying
or preventing a change in control of the Company. Although the Company does not
currently intend to issue any shares of Preferred Stock, there can be no
assurance that the Company will not do so in the future. See "Proposed Business
- - 'Blank Check' Offering - Selection of a Target Business and Structuring of a
Business Combination" and "Description of Securities."
INVESTMENT COMPANY ACT CONSIDERATIONS
The regulatory scope of the Investment Company Act of 1940, as amended
("Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. The Investment Company Act may, however, also
be deemed to be applicable to a company which does not intend to be
characterized as an investment company but which, nevertheless, engages in
activities which may be deemed to be within the definitional scope of certain
provisions of the Investment Company Act. The Company believes that its
anticipated principal activities, which will involve acquiring control of an
operating company, will not subject the Company to regulation under the
Investment Company Act. Nevertheless, there can be no assurance that the
Company will not be deemed to be an investment company, especially during the
period prior to a Business Combination. In the event the Company is deemed to
be an investment company, the Company may become subject to certain restrictions
relating to the Company's activities, including restrictions on the nature of
its investments and the issuance of securities. In addition, the
24
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Investment Company Act imposes certain requirements on companies deemed to be
within its regulatory scope, including registration as an investment company,
adoption of a specific form of corporate structure and compliance with certain
burdensome reporting, recordkeeping, voting, proxy, disclosure and other rules
and regulations. In the event of characterization of the Company as an
investment company, the failure by the Company to satisfy regulatory
requirements, whether on a timely basis or at all, would, under certain
circumstances, have a material adverse effect on the Company. See "Proposed
Business - Investment Company Act Considerations."
TAX CONSIDERATIONS
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. The Company
will evaluate the possible tax consequences of any prospective Business
Combination and will endeavor to structure the Business Combination so as to
achieve the most favorable tax treatment to the Company, the Target Business and
their respective stockholders. There can be no assurance, however, that the
Internal Revenue Service (the "IRS") or appropriate state tax authorities will
ultimately assent to the Company's tax treatment of a consummated Business
Combination. To the extent the IRS or state tax authorities ultimately prevail
in recharacterizing the tax treatment of a Business Combination, there may be
adverse tax consequences to the Company, the Target Business and their
respective stockholders. See "Proposed Business - 'Blank Check' Offering -
Selection of a Target Business and Structuring of a Business Combination."
DIVIDENDS UNLIKELY
The Company has not paid any dividends on its Common Stock to date and does
not intend to pay dividends prior to the consummation of a Business Combination.
The payment of dividends after any such Business Combination, if any, will be
contingent upon the Company's revenues and earnings, if any, capital
requirements and general financial condition subsequent to consummation of a
Business Combination. The payment of any dividends subsequent to a Business
Combination will be within the discretion of the Company's then Board of
Directors. It is the present intention of the Board of Directors to retain all
earnings, if any, for use in the Company's business operations and, accordingly,
the Board does not anticipate declaring any dividends in the foreseeable future.
See "Description of Securities - Dividends."
CONTROL BY PRESENT STOCKHOLDERS
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Upon consummation of this offering, Initial Stockholders, including the
present management of the Company, will collectively own approximately 33.3% of
the then-issued and outstanding shares of Common Stock (assuming no exercise of
the Underwriter's over-allotment option). In the election of directors,
stockholders are not entitled to cumulate their votes for nominees. Accordingly,
it is likely that the Initial Stockholders will be able to elect all of the
Company's directors and otherwise direct the affairs of the Company. See
"Principal Stockholders," "Certain Transactions" and "Description of
Securities."
NO ASSURANCE OF PUBLIC MARKET;
ARBITRARY DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public trading market for the
Units, Common Stock, Class A Warrants or Class B Warrants. The initial public
offering price of the Units and the exercise prices of the Class A Warrants and
the Class B Warrants have been arbitrarily determined by negotiations between
the Company and the Underwriter, and bear no relationship to such established
valuation criteria as assets, book value or prospective earnings. There is no
assurance that a regular trading market will develop for the Units after this
offering or for the Common Stock and the Warrants subsequent to a Business
Combination, or that, if developed, that any such market will be sustained. The
Underwriter has advised the Company that it currently intends to serve as a
market maker of the Units but is not obligated to do so and any market making
may be discontinued at any time. See "Underwriting."
OTC BULLETIN BOARD
The Units will be traded in the over-the-counter market. It is anticipated
that they will be quoted on the OTC Bulletin Board, an NASD sponsored and
operated inter-dealer automated quotation system for equity securities not
included in The Nasdaq Stock Market, as well as in the NQB Pink Sheets published
by National Quotation Bureau Incorporated. The OTC Bulletin Board was
introduced as an alternative to "pink sheet" trading of over-the-counter
securities. Although the Company believes that the OTC Bulletin Board has been
recognized by the brokerage community as an acceptable alternative to the NQB
Pink Sheets, there can be no assurance that the liquidity and prices of the
Units in the secondary market will not be adversely affected. See
"Underwriting."
IMMEDIATE DILUTION; DISPARITY OF CONSIDERATION
This offering involves an immediate and substantial dilution of $2.57 per
share (approximately 43.0% of the public offering price) between the pro forma
net tangible book
26
<PAGE>
value per share after the offering of $3.43 and the public offering price of
$6.00 per share allocable to the share of Common Stock included in the Units
(assuming no value is attributed to the Warrants included in the Units). The
Initial Stockholders acquired their shares of Common Stock at a nominal price
and, accordingly, new investors will bear virtually all of the risks inherent in
an investment in the Company. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
All of the 625,000 shares of Common Stock issued and outstanding as of the
date of this Prospectus are "restricted securities," as that term is defined
under Rule 144 ("Rule 144"), promulgated by the Commission under the Securities
Act. None of such shares will be eligible for sale under Rule 144 prior to May
30, 1998. Notwithstanding such eligibility, the Affiliated Initial Stockholders
have agreed not to sell their respective shares of Common Stock prior to six
months following the consummation of a Business Combination and the Non-
Affiliated Initial Stockholders have agreed not to sell their respective shares
of Common Stock, which were acquired prior to the date of this Prospectus, prior
to the occurrence of a Business Combination.
An additional 200,000 shares of Common Stock, which have been registered
pursuant to the Registration Statement of which this Prospectus forms a part,
are issuable upon the exercise of the Directors' Warrants. The Directors'
Warrants, however, will not be transferable or exercisable until the
consummation of a Business Combination.
No prediction can be made as to the effect, if any, that sales of such
625,000 restricted shares of Common Stock and such 200,000 registered shares of
Common Stock, or the availability of such shares for sale, will have on the
market prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities. See "Certain Transactions" and "Shares Eligible for Future Sale."
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION
REQUIRED IN CONNECTION WITH EXERCISE OF WARRANTS
Beginning on the later of the consummation of a Business Combination or one
year from the date of this Prospectus, the Company will be able to issue shares
of its Common Stock upon exercise of the Warrants only if there is then a
current prospectus relating to the Common Stock issuable upon the exercise of
the Warrants under an effective registration statement filed with the
27
<PAGE>
Commission, and only if such Common Stock is qualified for sale or exempt from
qualification under applicable state securities laws of the jurisdictions in
which the various holders of Warrants reside. Although the Company has agreed
to use its best efforts to meet such requirements, there can be no assurance
that the Company will be able to do so. The Warrants may be deprived of any
value and the market for the Warrants may be limited if a then current
prospectus covering the Common Stock issuable upon the exercise of the Warrants
is not effective pursuant to an effective registration statement or if such
Common Stock is not qualified or exempt from qualification in the jurisdictions
in which the holders of the Warrants reside. See "Description of Securities."
OUTSTANDING WARRANTS
In connection with this offering, as part of the Units, the Company will be
issuing Warrants to purchase 2,500,000 shares of Common Stock (2,875,000 if the
Underwriter's over-allotment option is exercised in full). Additionally, the
Company issued Directors' Warrants to purchase 200,000 shares of Common Stock
and will issue the Unit Purchase Option entitling the Underwriter to purchase up
to 375,000 shares of Common Stock. To the extent shares of Common Stock are to
be issued by the Company to effect a Business Combination, the potential for the
issuance of substantial numbers of additional shares upon exercise of these
warrants could increase the cost to the Company of the Target Business (in terms
of number of shares required to be issued). See "Description of Securities
- -Warrants."
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
The Warrants may be redeemed by the Company, at a price of $.05 per
Warrant, at any time they are exercisable, subject to not less than 30 days
prior written notice to the holders thereof, provided that the last sale price
of the Common Stock had been at least $8.50 per share for the redemption of the
Class A Warrants and at least $10.50 per share for the redemption of the Class B
Warrants, respectively, for the 20 consecutive trading days ending on the third
day prior to the day on which notice is given. Notice of the redemption of the
Warrants could force the holders thereof to exercise the Warrants and pay the
exercise price at a time when it may be disadvantageous for them to do so to
sell the Warrants, or accept the redemption price which is likely to be
substantially less than the market value of the Warrants at the time of
redemption. See "Description of Securities - Warrants."
USE OF PROCEEDS
28
<PAGE>
The net proceeds to the Company, after offering expenses and underwriting
discounts of approximately $1,050,000 ($1,173,750 if the Underwriter's
over-allotment option is exercised in full), from the sale of the Units offered
hereby are estimated to be $6,450,000 ($7,451,250 if the Underwriter's
over-allotment option is exercised in full). The Company will use substantially
all of the net proceeds of this offering to acquire a Target Business, including
identifying and evaluating prospective acquisition candidates, selecting the
Target Business, and structuring, negotiating and consummating the Business
Combination. The Company will not acquire a Target Business unless it satisfies
the Minimum Valuation Standard at the time of such acquisition. To the extent
that securities of the Company are used in whole or in part as consideration to
effect a Business Combination, the balance of the net proceeds of this offering
not theretofore expended will be used to finance the operations of the Target
Business.
The proceeds of this offering, after payment of underwriting discounts and
the Underwriter's non-accountable expense allowance, will be $6,675,000
($7,676,250 if the Underwriter's over-allotment option is exercised in full).
Ninety percent (90%) of such amount, or $6,007,500 ($6,908,625 if the
Underwriter's over-allotment option is exercised in full), will be placed in the
Trust Fund to be maintained by , , New York,
New York , as trustee, until the earlier of (i) the consummation of a
Business Combination or (ii) the liquidation of the Company. Therefore,
unless and until a Business Combination is consummated, the proceeds held in
the Trust Fund will not be available for use by the Company for any expenses
related to this offering or expenses which may be incurred by the Company
related to the investigation and selection of a Target Business and the
negotiation of an agreement to acquire the Target Business. The trustee of
the Trust Fund is only authorized to invest the funds in certain government,
quasi-government and investment grade debt securities and to disburse the
funds as indicated above; it has no other duties or obligations.
Approximately $50,000 as of the date of this Prospectus has been advanced
by Unity on a non-interest bearing demand basis, for payment on the Company's
behalf of certain expenses of this offering. Such advances will be repaid out of
the gross proceeds of this offering.
The net proceeds not held in the Trust Fund, approximately $442,500
($542,625 if the Underwriter's over-allotment option is exercised in full), will
be used for, or in connection with (i) the performance of "due diligence"
investigations of prospective acquisition candidates, (ii) legal, accounting and
other expenses attendant to such "due diligence" investigations and to
structuring, negotiating and consummating a Business Combination, and (iii)
legal and accounting fees to be incurred in connection with the Company's
obligation to file periodic reports, proxy statements and other informational
material with the Securities and Exchange Commission. In addition, the Company
has been obligated to pay to Unity, since June 1, 1996, a monthly fee of
$7,500 for general and administrative expenses. Such general and administrative
expenses have been accrued and will be paid to Unity
29
<PAGE>
out of that portion of the net proceeds not held in the Trust Fund. See "Certain
Transactions."
Proceeds of this offering not immediately required for the purposes set
forth above will be invested in United States Government securities or other
high-quality, short-term interest-bearing investments, provided, however, that
the Company will attempt to invest the net proceeds in a manner which does not
result in the Company being deemed to be an investment company under the
Investment Company Act. The Company believes that, in the event a Business
Combination is not effected during the 18-month period from the date of the
consummation of this offering, unless extended to 24 months as discussed
elsewhere herein, and to the extent that a significant portion of the net
proceeds is not used in evaluating various prospective Target Businesses, the
interest income derived from investment of the net proceeds during such period
will be sufficient to defray continuing general and administrative expenses, as
well as costs relating to compliance with securities laws and regulations
(including associated professional fees).
A Public Stockholder shall be entitled to receive funds from the Trust Fund
only in the event of a liquidation or if he seeks to convert his shares into
cash in connection with a Business Combination which he voted against and which
is actually consummated by the Company. In no other circumstances shall a
Public Stockholder have any right or interest of any kind or in the Trust Fund.
30
<PAGE>
DILUTION
The difference between the public offering price per share of Common Stock
(assuming no value is attributed to the Warrants included in the Units) and the
pro forma net tangible book value per share of Common Stock of the Company after
this offering constitutes the dilution to investors in this offering. Net
tangible book value per share is determined by dividing the net tangible book
value of the Company (total tangible assets less total liabilities) by the
number of outstanding shares of Common Stock.
At July 31, 1996, the net tangible book value of the Company was
$(264,937), or $(.42) per share of Common Stock. After giving effect to the sale
of 1,250,000 shares of Common Stock included in the Units offered hereby and the
application of the estimated net proceeds therefrom, the pro forma net tangible
book value of the Company at July 31, 1996 would have been $6,435,063, or $3.43
per share of Common Stock, representing an immediate increase in net tangible
book value of $3.85 per share to existing stockholders and an immediate dilution
of $2.57 per share to new investors. The following table illustrates the
foregoing information with respect to dilution to new investors on a per-share
basis (assuming no value is attributed to the Warrants included in the Units):
Public offering price per share of Common Stock $6.00
Net tangible book value
before this offering $( .42)
Increase attributable
to new investors 3.85
-----
Pro forma net tangible book
value after this offering 3.43
------
Dilution to new investors $2.57
------
------
The following table sets forth, with respect to Initial Stockholders and
new investors, a comparison of the number of shares of Common Stock acquired
from the Company, the percentage ownership of such shares, the total
consideration paid, the percentage of total consideration paid and the average
price per share:
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<PAGE>
SHARES PURCHASED (1) TOTAL CONSIDERATION AVERAGE
-------------------- ------------------- PRICE
AMOUNT PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------ ---------- ------ ---------- ---------
Initial
Stockholders 625,000 33.3% $ 125 - % $ .0001
New Investors 1,250,000 66.7% $7,500,000 100.0% $6.00
--------- ----- ---------- -----
TOTAL 1,875,000 100.0% $7,500,125 100.0%
--------- ----- ---------- -----
--------- ----- ---------- -----
- --------------------
(1) The above table assumes no exercise of the Underwriter's over-allotment
option. If the Underwriter's over-allotment option is exercised in full,
the new investors will have paid $8,625,000 for 1,437,500 shares of Common
Stock, representing virtually 100.0% of the total consideration for
approximately 69.7% of the total number of shares of Common Stock then
outstanding. See "Underwriting."
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at July
31, 1996 and as adjusted to give effect to the sale of the Units being offered
hereby and the application of the estimated net proceeds therefrom:
AS
ACTUAL ADJUSTED
------ --------
Stockholders' equity:
Common Stock, subject to possible
conversion, 249,875 shares
at conversion value $ - $1,201,899
Preferred Stock, $.01 par
value, 5,000 shares authorized;
none issued - -
Common Stock, $.0001 par
value, 20,000,000 shares
authorized; 625,000 shares
issued and outstanding;
1,625,125 shares issued and
outstanding (excluding 249,875
shares subject to possible
conversion), as adjusted 63 163
Capital in excess of par value - 5,248,001
Deficit accumulated during (15,000) (15,000)
development stage ------ ---------
Total stockholders' equity $(14,937) $6,435,063
------ ---------
------ ---------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company, a development stage entity, was formed on May 30, 1996 to
serve as a vehicle to effect a merger, exchange of capital stock, asset
acquisition or other similar business combination (a "Business Combination")
with an operating business (a "Target Business") which the Company believes
has significant growth potential. The Company intends to utilize cash (to be
derived from the proceeds of this offering), equity, debt or a combination
thereof in effecting a Business Combination. The Company's efforts in
identifying a prospective Target Business will be limited to the following
industries: (i) the manufacture of analytical and controlling equipment,
chemicals and allied products, electronic equipment and medical
instrumentation; (ii) health services (including HMOs, laboratories and
nursing homes); (iii) environmental services and products; (iv) engineering
and construction; (v) wholesale and retail distribution (including discount
operations) of home furnishings, office supplies, computers and related
products, medical equipment and supplies, apparel and accessories, automotive
parts and supplies and food and beverage products; (vi) internet and other
new media products and services; and (vii) communications and entertainment.
It has neither engaged in any operations nor generated any revenues to date.
The Company's entire activity since its inception has been to prepare for its
proposed fundraising through an offering of equity securities as contemplated
by this Prospectus.
The Company's expenses of $15,000 through July 31, 1996 all relate to
general and administrative expenses provided by Unity. In addition, since May
1996, $40,500 has been advanced by Unity, on a non-interest bearing basis, for
payment on the Company's behalf of certain expenses of this offering. Such
amounts will be paid to Unity out of that portion of the net proceeds not held
in the Trust Fund.
The net proceeds to the Company, after offering expenses and
underwriting discounts of approximately $1,050,000 ($1,173,750 if the
Underwriter's over-allotment option is exercised in full), from the sale of
the Units offered hereby are estimated to be $6,450,000 ($7,451,250 if the
Underwriter's over-allotment option is exercised in full). The Company will
use substantially all of the net proceeds of this offering to acquire a
Target Business, including identifying and evaluating prospective acquisition
candidates, selecting the Target Business, and structuring, negotiating and
consummating the Business Combination. The Company will not acquire a Target
Business unless it satisfies the Fair Market Value criteria at the time of
such acquisition. To the extent that securities of the Company are used in
whole or in part as consideration to effect a Business Combination, the
balance of the net proceeds of this offering not theretofore expended will be
used to finance the operations of the Target Business.
The net proceeds not held in the Trust Fund, approximately $442,500
($542,625 if the Underwriter's over-allotment option is exercised in full),
will be used for, or in connection with (i) the performance of "due
diligence" investigations of prospective acquisition candidates, (ii) legal,
accounting and other expenses attendant to such "due diligence"
investigations and to structuring, negotiating and consummating a Business
Combination, and (iii) legal and accounting fees to be incurred in connection
with the Company's obligation to file periodic reports, proxy statements and
other informational material with the Securities and Exchange Commission. In
addition, the Company has been obligated to pay to Unity, since June 1,
1996, a monthly fee of $7,500 for general and administrative expenses. Such
general and administrative expenses have been accrued and will be paid to
Unity out of that portion of the net proceeds not held in the Trust Fund. See
"Certain Transactions."
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<PAGE>
The report of independent public accountants on the Company's financial
statements includes an explanatory paragraph with respect to the Company being
in its development stage, which raises substantial doubt about its ability to
continue as a going concern.
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<PAGE>
PROPOSED BUSINESS
INTRODUCTION
The Company was formed to serve as a vehicle for the acquisition of a
Target Business which the Company believes has significant growth potential. The
Company intends to utilize cash (derived from the proceeds of this offering),
equity, debt or a combination of these in effecting a Business Combination. The
Company's efforts in identifying a prospective Target Business will be limited
to the Target Industries. While the Company may, under certain circumstances,
seek to effect Business Combinations with more than one Target Business, the
Company will, in all likelihood, have the ability, as a result of its limited
resources, to effect only a single Business Combination. The Company may effect
a Business Combination with a Target Business which may be financially unstable
or in its early stages of development or growth.
"BLANK CHECK" OFFERING
BACKGROUND. As a result of Management's broad discretion with respect to
the specific application of the net proceeds of this offering, this offering can
be characterized as a "blank check" offering. Although substantially all of the
net proceeds of this offering are intended to be generally applied toward
effecting a Business Combination, subject to the limitation concerning Target
Industries discussed under "- Introduction", such proceeds are not otherwise
being designated for any more specific purposes. Accordingly, prospective
investors will invest in the Company without an opportunity to evaluate the
specific merits or risks of any one or more Business Combinations. A Business
Combination may involve the acquisition of, or merger with, a company which does
not need substantial additional capital but which desires to establish a public
trading market for its shares, while avoiding what it may deem to be adverse
consequences of undertaking a public offering itself, such as time delays,
significant expense, loss of voting control and compliance with various Federal
and state securities laws.
UNSPECIFIED INDUSTRY AND TARGET BUSINESS. To date, the Company has not
selected any particular industry from the Target Industries or any Target
Business in which to concentrate its search for a Business Combination.
Accordingly, there is no basis for investors in this offering to evaluate the
possible merits or risks of the Target Business or the particular industry in
which the Company may ultimately operate. To the extent the Company effects a
Business Combination with a financially unstable company or an entity in its
early stage of development or growth (including entities without established
records of sales or earnings), the Company will become subject to numerous risks
inherent in the
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<PAGE>
business and operations of financially unstable and early stage or potential
emerging growth companies. In addition, to the extent that the Company effects
a Business Combination with an entity in an industry characterized by a high
level of risk, the Company will become subject to the currently unascertainable
risks of that industry. An extremely high level of risk frequently
characterizes certain industries which experience rapid growth. In addition,
although Management will endeavor to evaluate the risks inherent in a particular
industry or Target Business, there can be no assurance that the Company will
properly ascertain or assess all significant risk factors.
PROBABLE LACK OF BUSINESS DIVERSIFICATION. While the Company may, under
certain circumstances, seek to effect Business Combinations with more than one
Target Business, its initial Business Combination must be with a Target Business
which satisfies the Minimum Valuation Standard at the time of such acquisition.
Consequently, it is likely that the Company will have the ability to effect only
a single Business Combination. Accordingly, the prospects for the Company's
success will be entirely dependent upon the future performance of a single
business. Unlike certain entities which have the resources to consummate
several Business Combinations of entities operating in multiple industries or
multiple areas of a single industry, it is highly likely that the Company will
not have the resources to diversify its operations or benefit from the possible
spreading of risks or offsetting of losses. The Company's probable lack of
diversification may subject the Company to numerous economic, competitive and
regulatory developments, any or all of which may have a substantial adverse
impact upon the particular industry in which the Company may operate subsequent
to a Business Combination. In addition, by consummating a Business Combination
with only a single entity, the prospects for the Company's success may become
dependent upon the development or market acceptance of a single or limited
number of products, processes or services. Accordingly, notwithstanding the
possibility of capital investment in and management assistance to the Target
Business by the Company, there can be no assurance that the Target Business will
prove to be commercially viable. Prior to the consummation of a Business
Combination, the Company has no intention of either loaning any of the proceeds
of this offering to any company or purchasing a minority equity interest in any
company.
OPPORTUNITY FOR STOCKHOLDER EVALUATION OR APPROVAL OF BUSINESS
COMBINATIONS. The investors in this offering will, in all likelihood, neither
receive nor otherwise have the opportunity to evaluate any financial or other
information which will be made available to the Company in connection with
selecting a potential Business Combination until after the Company has entered
into an agreement to effectuate a Business Combination. Such agreement to
effectuate a Business Combination, however, will be subject to stockholder
approval as discussed elsewhere herein. As a result,
36
<PAGE>
investors in this offering will be almost entirely dependent on the judgment of
Management in connection with the selection and ultimate consummation of a
Business Combination. In connection with seeking stockholder approval of a
Business Combination, the Company intends to furnish its stockholders with proxy
solicitation materials prepared in accordance with the Exchange Act, which,
among other matters, will include a description of the operations of the Target
Business and audited historical financial statements thereof.
Under the Delaware Business Corporation Act, various forms of Business
Combinations can be effected without stockholder approval. In addition, the form
of Business Combination will have an impact upon the availability of dissenters'
rights (i.e., the right to receive fair payment with respect to the Company's
Common Stock) to stockholders disapproving the proposed Business Combination.
Under current applicable laws, only a merger, consolidation or share exchange
may give rise to a stockholder vote and to dissenters' rights. Nevertheless,
the Company will afford to investors in this offering the right to approve any
Business Combination, irrespective of whether such approval would be required
under applicable Delaware law. In the event, however, that 20% or more in
interest of Public Stockholders vote against approval of any Business
Combination, the Company will not consummate such Business Combination. All of
the Initial Stockholders, including all of the officers and directors of the
Company, have agreed to vote their respective shares of Common Stock in
accordance with the vote of the majority in interest of all Public Stockholders
with respect to any Business Combination.
LIMITED ABILITY TO EVALUATE TARGET BUSINESS' MANAGEMENT. While the
Company's ability to successfully effect a Business Combination will be
dependent upon the efforts of its officers and directors, the future role of
such persons, if any, in the Target Business cannot presently be stated with any
certainty. While it is possible that one or more of these persons will remain
associated in some capacity with the Company following a Business Combination,
it is unlikely that any of them will devote their full efforts to the affairs of
the Company subsequent thereto. Moreover, there can be no assurance that such
persons will have significant experience or knowledge relating to the operations
of the particular Target Business. Furthermore, although the Company intends to
closely scrutinize the management of a prospective Target Business in connection
with evaluating the desirability of effecting a Business Combination, there can
be no assurance that the Company's assessment of such management will prove to
be correct, especially in light of the possible inexperience of the Company's
officers and directors in evaluating certain types of businesses. In addition,
there can be no assurance that such future management will have the necessary
skills, qualifications or abilities to manage a public company intending to
embark on a program of business development. The Company may also seek to
recruit additional managers to
37
<PAGE>
supplement the incumbent management of the Target Business. There can be no
assurance that the Company will have the ability to recruit such additional
managers, or that such additional managers will have the requisite skills,
knowledge or experience necessary to enhance the incumbent management.
SELECTION OF A TARGET BUSINESS AND STRUCTURING OF A TARGET COMBINATION.
Subject to the limitation that a Target Business be within the Target
Industries, Management of the Company will have virtually unrestricted
flexibility in identifying and selecting a prospective Target Business. In
evaluating a prospective Target Business, Management will consider, among other
factors, the following:
- financial condition and results of operation;
- growth potential;
- experience and skill of management and availability of additional
personnel;
- capital requirements;
- competitive position;
- stage of development of the products, processes or services;
- degree of current or potential market acceptance of the products,
processes or services;
- proprietary features and degree of intellectual property or other
protection of the products, processes or services;
- regulatory environment of the industry; and
- costs associated with effecting the Business Combination.
The foregoing criteria are not intended to be exhaustive; any evaluation
relating to the merits of a particular Business Combination will be based, to
the extent relevant, on the above factors as well as other considerations deemed
relevant by Management in connection with effecting a Business Combination
consistent with the Company's business objective. In connection with its
evaluation of a prospective Target Business, Management anticipates that it will
conduct an extensive due diligence review which will encompass, among other
things, meetings with incumbent management and inspection of facilities, as well
as review of financial or other information which will be made available to the
Company.
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<PAGE>
The time and costs required to select and evaluate a Target Business
(including conducting a due diligence review) and to structure and consummate
the Business Combination (including negotiating relevant agreements and
preparing requisite documents for filing pursuant to applicable securities laws
and state corporation laws) cannot presently be ascertained with any degree of
certainty. Mr. Burstein, the Company's President and principal stockholder,
intends to devote approximately 30% of his time to the affairs of the Company
and, accordingly, consummation of a Business Combination may require a greater
period of time than if such persons devoted their full time to the Company's
affairs. Any costs incurred in connection with the identification and evaluation
of a prospective Target Business with which a Business Combination is not
ultimately consummated will result in a loss to the Company and reduce the
amount of capital available to otherwise complete a Business Combination.
PRIOR INVOLVEMENT OF PRINCIPALS IN "BLANK CHECK" COMPANIES
The officers and directors of the Company (other than Mr. Norman Leben)
have held similar positions in seven other "blank check" companies, each of
which has consummated a Business Combination as of the date of this Prospectus.
Certain information with respect to each such Business Combination is set forth
below:
TRADING
DATE OF MARKET AND
NAME OF TARGET BUSINESS TICKER
BUSINESS COMBINATION NATURE OF BUSINESS SYMBOL
- ---------------- ----------- ------------------ ------
Bloc Development NYSE
Corp.(1) March 1988 Software development (GML)
Polyvision
Corporation April 1990 Manufacture and AMEX (PLI)
sale of vision projec-
tion systems,
architectural building
panels, modular
partitions and catalog
office products
T-HQ Inc. August 1991 Design and market- OTC Bulle-tin
ing of Nintendo and Board
SEGA games (TOYH)
SubMicron Systems August 1993 Semi-conductor capital NASDAQ-NMS
equipment manufacturer (SUBM)
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<PAGE>
Alliance
Entertainment Corp. November 1993 Distributor of pre- NYSE
recorded music, (CDS)
accessories and
entertainment
related products
USCI Inc. May 1995 Centralized auto- NASDAQ-NMS
mated computer- (USCM)
based cellular
telephone activation
systems
Brazil Fast Food Corp. March 1996 Owner and operator NASDAQ
of hamburger fast food SmallCap
restaurants (BOBS)
in Brazil
- ------------
(1) Bloc Development Corp. was acquired by Global Direct Mail Corp. in 1995.
SOURCES OF TARGET BUSINESSES
The Company anticipates that various Target Business candidates will be
brought to its attention from various unaffiliated sources, including securities
broker-dealers, investment bankers, venture capitalists, bankers, other members
of the financial community, and affiliated sources, including, possibly, the
Company's officers, directors and their affiliates, who may present solicited or
unsolicited proposals. While the Company does not presently anticipate engaging
the services of professional firms that specialize in business acquisitions on
any formal basis, the Company may engage such firms in the future, in which
event the Company may pay a finder's fee or other compensation. In no event,
however, will the Company pay a finder's fee or commission to officers or
directors of the Company or any entity with which they are affiliated for such
service. See "Management - Conflicts of Interest."
COMPETITION
In identifying, evaluating and selecting a Target Business, the Company
expects to encounter intense competition from other entities having a business
objective similar to that of the Company. Many of these entities are well
established and have extensive experience in connection with identifying and
effecting business combinations directly or through affiliates. Many of these
competitors possess greater technical, human and/or other resources than the
Company and the Company's financial resources will be relatively limited when
contrasted with those of many of these competitors. This inherent competitive
limitation may give others an advantage in pursuing the acquisition of certain
Target
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Businesses. Further, the Company's obligation to seek stockholder approval of a
Business Combination may delay the consummation of a transaction; and the
Company's obligation in certain circumstances to convert into cash shares of
Common Stock held by Public Stockholders may reduce the resources available to
the Company for a Business Combination or for other corporate purposes. Either
of these obligations may place the Company at a competitive disadvantage in
successfully negotiating a Business Combination. Management believes, however,
that the Company's status as a public entity and its potential access to the
United States public equity markets may give the Company a competitive advantage
over privately-held entities having a similar business objective to that of the
Company in acquiring a Target Business with significant growth potential on
favorable terms.
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly larger number of
competitors, including competitors with increasingly greater financial,
marketing, technical and other resources than the initial competitors in the
industry. The degree of competition characterizing the industry of any
prospective Target Business cannot presently be ascertained. There can be no
assurance that, subsequent to a Business Combination, the Company will have the
resources to compete effectively, especially to the extent that the Target
Business is in a high-growth industry.
FACILITIES
The Company presently occupies approximately 500 square feet of office
space in premises occupied by Unity. The cost for such space is included in a
$7,500-per-month fee charged by Unity for general and administrative services.
The Company believes, based upon rents and fees for similar services in the New
York City metropolitan area, that the fee charged by Unity is at least as
favorable as it could have obtained from an unaffiliated person. See "Certain
Transactions."
EMPLOYEES
As of the date of this Prospectus, the Company, in addition to its two
officers, has one part-time employee who is employed in an administrative
capacity.
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PERIODIC REPORTING AND AUDITED FINANCIAL STATEMENTS
The Company has registered its securities under the Exchange Act and
therefore has certain reporting obligations, including the requirement that it
file annual and quarterly reports with the Commission. In accordance with the
requirements of the Exchange Act, the Company intends to furnish to its
stockholders Annual Reports containing financial statements audited and reported
on by its independent accountants.
The Company will not acquire a Target Business if audited financial
statements cannot be obtained for such Target Business. Additionally,
management will provide the Public Stockholders with audited financial
statements (prepared in accordance with generally accepted accounting
principles) of the prospective Target Business as part of the proxy solicitation
materials sent to the Public Stockholders to assist them in assessing the Target
Business. Management believes that the requirement of having available audited
financial statements for the Target Business will not materially limit the pool
of potential Target Businesses available for acquisition.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The current directors and officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Lawrence Burstein 53 President, Treasurer and
Director
John Cattier 62 Director
Barry Ridings 43 Director
Norman Leben 36 Secretary and Director
LAWRENCE BURSTEIN has been President, Treasurer and a director of the
Company since its inception. Since March 1996, Mr. Burstein has been Chairman of
the Board and a principal shareholder of Unity. Mr. Burstein is a director of
five public companies, being, respectively, TOYH, USCM, BOBS, CAS Medical
Systems, Inc., engaged in the manufacture and marketing of blood pressure
monitors and other medical products principally for the neonatal market, and The
MNI Group Inc., engaged in the marketing of specially formulated medical foods.
Mr. Burstein received an L.L.B. from Columbia Law School.
JOHN CATTIER has been a director of the Company since its inception. Since
May 1996, Mr. Cattier has been a director and a shareholder of Unity. Mr.
Cattier has been an independent consultant since January 1985. From 1957 to
December 1984, Mr. Cattier was associated with White Weld & Co., investment
bankers, serving as a general partner, and with Credit Suisse White Weld (which
subsequently became Credit Suisse First Boston), investment bankers, in various
capacities. Mr. Cattier is a director of Pacific Assets Trust PLC, a United
Kingdom investment trust, and Chairman of the Board of Directors of Heptagon
Investments Limited, an investment company ("Heptagon"). Mr. Cattier received a
B.A. from Yale University.
BARRY RIDINGS has been a director of the Company since its inception. Since
March 1990, Mr. Ridings has been a Managing Director of Alex Brown & Sons,
investment bankers. From June 1986 to March 1990, Mr. Ridings was a Managing
Director of Drexel Burnham Lambert, investment bankers. Mr. Ridings is a
director of SubMicron Systems Corporation, a company engaged in the design,
manufacture and marketing of advanced processing systems sold primarily to
manufacturers of semiconductor chips, Transcor Waste
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Services Corp., a waste management company, Leaseway Transportation Corp., a
trucking company, Rax Restaurants Inc., a restaurant chain and Norex America
Inc., a shipping company. Mr. Ridings received an M.B.A. from Cornell
University.
NORMAN LEBEN has been Secretary and a director of the Company since its
inception. Mr. Leben is, and since 1988 has been, a partner of DML, certified
public accountants. Prior thereto and from 1985, Mr. Leben was engaged in the
acquisition, management, syndication and operation of real estate and other
emerging marketing businesses. Prior to 1985, Mr. Leben was employed by
Laventhol & Horwath. Mr. Leben received a B.B.A. from George Washington
University.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors receive no
compensation for serving on the Board of Directors other than reimbursement of
reasonable expenses incurred in attending meetings. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board. Mr.
Burstein intends to devote approximately 30% of his time to the affairs of the
Company. The Company has not entered into employment agreements with any of its
officers.
EXECUTIVE COMPENSATION
No officer has received any cash compensation from the Company since
inception for services rendered. Other than the $7,500 monthly administrative
fee, no compensation of any kind (including finders and consulting fees) will
be paid to any Initial Stockholder, or any affiliate thereof for services
rendered to the Company prior to or in connection with the Business
Combination; provided, however, that such persons shall be entitled to
receive, upon consummation of the Business Combination, commissions for
monies raised by them for the Company in connection with the Business
Combination, at rates that are no less favorable to the Company than those
which the Company would pay to unaffiliated third parties. In addition, the
Affiliated Initial Stockholders will receive reimbursement for any
out-of-pocket expenses incurred in connection with activities on behalf of
the Company. There is no limit on the amount of such reimbursable expenses
and there will be no review of the reasonableness of such expenses by anyone
other than the Board of Directors which includes two members who are officers
and who may seek reimbursement.
STOCK OPTION PLAN
The Company's 1996 Stock Option Plan ("1996 Plan") was adopted by both the
Board of Directors and a majority in interest of the stockholders of the Company
on May 30, 1996. The 1996 Plan provides for the granting of options which are
intended to qualify either as
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incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Internal Revenue Code of 1986 or as options which are not
intended to meet the requirements of such section ("Nonstatutory Stock
Options"). The total number of shares of Common Stock reserved for issuance
under the 1996 Plan is 187,500. Options to purchase shares may be granted under
the 1996 Plan to persons who, in the case of Incentive Stock Options, are
employees (including officers) of the Company, or, in the case of Nonstatutory
Stock Options, are employees (including officers) or non-employee directors of
the Company.
The 1996 Plan provides for its administration by the Board of Directors or
a committee chosen by the Board of Directors, which has discretionary authority,
subject to certain restrictions, to determine the number of shares issued
pursuant to Incentive Stock Options and Nonstatutory Stock Options and the
individuals to whom, the times at which and the exercise price for which options
will be granted.
The exercise price of all Incentive Stock Options granted under the 1996
Plan must be at least equal to the fair market value of such shares on the date
of the grant or, in the case of Incentive Stock Options granted to the holder of
more than 10% of the Company's Common Stock, at least 110% of the fair market
value of such shares on the date of the grant. The maximum exercise period for
which Incentive stock Options may be granted is ten years from the date of grant
(five years in the case of an individual owning more than 10% of the Company's
Common Stock). The aggregate fair market value (determined at the date of the
option grant) of shares with respect to which Incentive Stock Options are
exercisable for the first time by the holder of the option during any calendar
year shall not exceed $100,000.
No options may be granted under the 1996 Plan prior to the consummation of
a Business Combination.
CONFLICTS OF INTEREST
None of the Company's officers and directors are required to commit their
full time to the affairs of the Company and, accordingly, such persons may have
conflicts of interest in allocating management time among various business
activities. Certain of these persons may in the future become affiliated with
entities, including other "blank check" companies, engaged in business
activities similar to those intended to be conducted by the Company. Messrs.
Burstein, Leben and Cattier are each directors and, together with Mr. Ridings,
shareholders of Unity, which is engaged principally in making investments in
privately held companies. Mr. Burstein and each of the other directors of the
Company also serve as directors of various private companies and are engaged in
various other business activities. In the course of
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their other business activities, certain of the Company's officers and directors
may become aware of investment and business opportunities which may be
appropriate for presentation to the Company as well as the other entities with
which they are affiliated. Such persons may have conflicts of interest in
determining to which entity a particular business opportunity should be
presented. In order to reduce potential conflicts of interest, the Company's
officers and directors have agreed that they will offer all suitable prospective
Target Businesses to the Company before any other company until the earlier of a
Business Combination or the liquidation of the Company. In general, officers
and directors of a corporation incorporated under the laws of the State of
Delaware are required to present certain business opportunities to such
corporation. Under Delaware law, officers and directors generally are required
to bring business opportunities to the attention of such corporation if: such
corporation could financially undertake the opportunity; the opportunity is
within the corporation's line of business; and it would not be fair to the
corporation and its stockholders for the opportunity not to be brought to the
attention of such corporation. Accordingly, as a result of multiple business
affiliations, certain of the Company's officers and directors may have similar
legal obligations relating to presenting certain business opportunities to
multiple entities. In addition, conflicts of interest may arise in connection
with evaluations of a particular business opportunity by the Board of Directors
with respect to the foregoing criteria. There can be no assurance that any of
the foregoing conflicts will be resolved in favor of the Company. See "Proposed
Business - 'Blank Check' Offering - Selection of a Target Business and
Structuring of a Business Combination."
In order to minimize potential conflicts of interest which may arise from
multiple corporate affiliations, each of Messrs. Burstein, Leben and Cattier
have agreed in principle to present to the Company for its consideration, prior
to presentation to any other entity, any business opportunity which, under
Delaware law, may reasonably be required to be presented to the Company.
To further minimize potential conflicts of interest, the Company is
restricted from pursuing any transactions with entities affiliated with an
officer or director of the Company without the prior approval of a majority of
its disinterested directors.
In connection with any stockholder vote relating to approval of a Business
Combination, all of the Initial Stockholders, including all of the officers and
directors of the Company, have agreed to vote their respective shares of Common
Stock in accordance with the vote of the majority in interest of the Public
Stockholders. In addition, the Initial Stockholders have agreed to waive their
respective rights to participate in any liquidation distribution but only with
respect to those shares of Common Stock acquired by such persons prior to this
offering.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information as of July 31, 1996 and as
adjusted to reflect the sale of the shares of Common Stock included in the Units
offered hereby, based on information obtained from the persons named below, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known by the Company to be the owner of more than 5% of the outstanding shares
of Common Stock, (ii) each director of the Company and (iii) all officers and
directors of the Company as a group:
AMOUNT AND PERCENTAGE OF
NATURE OF OUTSTANDING SHARES
------------------------
BENEFICIAL BEFORE AFTER
OWNERSHIP(1)(2) OFFERING OFFERING
--------------- -------- --------
Lawrence Burstein 175,000(3) 28.0% 9.33%
245 Fifth Avenue
New York, NY 10016
John Cattier 140,500(3)(4) 22.48% 7.49%
Achlain Invermoriston
Invernesshire
IV3 6YN, United Kingdom
Barry Ridings 6,000 0.01% - %
16 Erwin Park
Montclair, NJ 07902
Norman Leben 40,000(3) 6.40% 2.13%
245 Fifth Avenue
New York, NY 10016
All officers and
directors as a
group (4 persons) 311,500(3)(4) 49.84% 16.61%
- ----------
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
(2) Does not include shares issuable upon exercise of the Directors' Warrants
which are beneficially owned by each of the persons named in the above
table but which are not exercisable until the consummation of a Business
Combination.
(3) Includes 25,000 shares of Common Stock owned by Unity, over which shares
Messrs. Burstein, Leben and Cattier share voting and investment power.
(4) Includes (i) 75,000 shares held by Heptagon and (ii) 1,500 shares held by
an affiliate of Heptagon. Mr. Cattier is Chairman of Heptagon's board of
directors and exercises voting and dispositive control over approximately
4.5% of Heptagon's shares of capital stock. Mr. Cattier disclaims any
voting or dispositive power over these shares. Also includes 39,000
shares owned by Cricket Services, Ltd. ("Cricket"), over which shares Mr.
Cattier exercises voting and dispositive control.
The shares of the Company's Common Stock owned as of the date hereof by all
of the officers and directors of the Company and by all persons owning more than
5% of the currently outstanding shares
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of Common Stock will be placed in escrow with American Stock Transfer & Trust
Company, as escrow agent, until the earlier of (i) six months following the
consummation of a Business Combination or (ii) the liquidation of the Company.
During such escrow period, such persons will not be able to sell their
respective shares of Common Stock, but will retain all other rights as
stockholders of the Company, including, without limitation, the right to vote
such shares of Common Stock.
Messrs. Burstein, Leben and Cattier, as well as Unity, may be deemed to be
"parents" and "promoters" of the Company, as such terms are defined under the
Federal securities laws.
CERTAIN TRANSACTIONS
In June 1996, the Company issued an aggregate of 625,000 shares of
Common Stock at a purchase price of $.0001 per share, as follows: 25,000
shares to Unity; 150,000 shares to Mr. Burstein; 15,000 shares to Mr. Leben;
an aggregate of 76,500 shares to Heptagon and its affiliate; 39,000 shares to
Cricket; 6,000 shares to Barry Ridings; and 313,500 shares to 24 other
persons.
In June 1996, the Company issued 58,334, 58,333, 58,333 and 25,000 Class A
and Class B Warrants to each of, respectively, Messrs. Burstein, Leben, Cattier
and Ridings ("collectively, the "Directors' Warrants"), in consideration for
future services to be rendered by such persons on behalf of the Company. The
Directors' Warrants and the Common Stock underlying such warrants have been
registered pursuant to the Registration Statement of which this Prospectus forms
a part. The Directors' Warrants are identical to the Warrants offered hereby
but are not redeemable by the Company and may not be transferred or exercised
until the consummation of a Business Combination.
The Company has been obligated to pay Unity, since June 1, 1996, a monthly
fee of $7,500 for general and administrative services pursuant to an agreement
which may be canceled by either party upon 30 days' prior written notice. Such
fee includes the use of approximately 500 square feet of office space in
premises occupied by Unity. An accounting firm which is an affiliate of Mr.
Leben affords Unity the use of such space at a monthly rental of $2,000.
Messrs. Burstein, Leben and Cattier are each directors and shareholders of
Unity.
Unity has made non-interest demand loans aggregating approximately $50,000
to the Company as of the date of this Prospectus to cover expenses related to
this offering. The Company intends to repay these loans, as well as those
accrued general and administrative expenses owed to Unity discussed above, out
of the proceeds of this offering not held in the Trust Fund.
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DML has performed bookkeeping, tax and accounting services for certain of
the "blank check" companies of which Messrs. Burstein, Cattier and Ridings, have
been directors and shareholders from their dates of inceptions through the
consummation of their respective Business Combinations and is expected to
perform similar services for the Company at an aggregate cost of approximately
$12,000 per annum. DML may also be paid to engage in financial "due diligence"
activities for the Company in connection with its evaluation of prospective
Target Companies for a Business Combination.
Other than the $7,500 monthly administrative fee, no compensation of any
kind (including finders and consulting fees) will be paid to any Initial
Stockholder, or any affiliate thereof for services rendered to the Company
prior to or in connection with the Business Combination; provided, however,
that such persons shall be entitled to receive, upon consummation of the
Business Combination, commissions for monies raised by them for the Company
in connection with the Business Combination, at rates that are no less
favorable to the Company than those which the Company would pay to
unaffiliated third parties.
All ongoing transactions between the Company and any of the Affiliated
Initial Stockholders or their respective affiliates, as well as any future
transactions, will be on terms believed by the Company to be no less favorable
than are available from unaffiliated third parties and will be subject to prior
approval in each instance by a majority of the members of the Company's Board of
Directors who do not have an interest in the transaction.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 20,000,000 shares of Common Stock, par
value $.0001 per share, and 5,000 shares of Preferred Stock, par value $.01 per
share. As of the date of this Prospectus, 625,000 shares of Common Stock are
outstanding, held of record by 31 persons. No shares of Preferred Stock are
currently outstanding.
UNITS
Each Unit consists of one share of Common Stock, one Class A Warrant and
one Class B Warrant, each Warrant entitling the holder to purchase one share
of Common Stock. The Common Stock and Warrants will become separable and
transferable upon consummation of a Business Combination.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voted for the election of directors can
elect all of the directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of funds
legally available therefore. In the event of liquidation,
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dissolution or winding up of the Company, the holders of Common Stock (except
for the Affiliated Initial Stockholders who have agreed to waive their rights
and the Non-Affiliated Initial Stockholders who have agreed to waive certain of
their rights to share in any distribution relating to a liquidation of the
Company due to the failure of the Company to effect a Business Combination
within 18 or 24 months, as the case may be, from the date of consummation of
this offering) are entitled to share ratably in all assets remaining available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. Holders of shares of Common Stock, as such, have no conversion,
preemptive or other subscription rights, and, except as noted below, there are
no redemption provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are, and the shares of Common Stock included in the
Units, when issued and paid for as set forth in this Prospectus, will be, fully
paid and nonassessable.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of 5,000
shares of a "blank check" preferred stock (the "Preferred Stock") with such
designation, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue Preferred Stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common Stock,
although the Underwriting Agreement prohibits the Company, prior to a Business
Combination, from issuing Preferred Stock which participates in any manner in
the proceeds of the Trust Fund, or which votes as a class with the Common Stock
on a Business Combination. The Company may issue some or all of such shares in
connection with a Business Combination. In addition, the Preferred Stock could
be utilized, under certain circumstances, as a method of discouraging, delaying
or preventing a change in control of the Company. Although the Company does not
currently intend to issue any shares of Preferred Stock, there can be no
assurance that the Company will not do so in the future.
WARRANTS
Each Class A Warrant entitles the registered holder to purchase one share
of Common Stock of the Company at a price of $5.50 per share, subject to
adjustment in certain circumstances, at any time commencing on the later of (i)
the consummation of a Business Combination or (ii) one year from the date of
this Prospectus and ending at 5:00 p.m., New York City time, on , 2002, at
which time the Class A Warrants will expire. Each Class B Warrant entitles the
registered holder to purchase one share of
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the Company's Common Stock at a price of $7.50 per share, subject to adjustment
in certain circumstances, at any time commencing on the later of (i) the
consummation of a Business Combination or (ii) one year from the date of this
Prospectus and ending at 5:00 p.m., New York City time, on , 2002, at
which time the Class B Warrants will expire.
The Company may call the Class A Warrants and the Class B Warrants for
redemption, each as a class, in whole and not in part, at the option of the
Company and with the consent of the Underwriter, at a price of $.05 per
Warrant at any time after the Warrants become exercisable upon not less than 30
days' prior written notice, provided that the reported closing bid price of the
Common Stock equals or exceeds $8.50 per share, with respect to the Class A
Warrants, and $10.50 per share, with respect to the Class B Warrants, for the
20 consecutive trading days ending on the third day prior to the notice of
redemption to warrantholders. The warrantholders shall have exercise rights
until the close of business on the date fixed for redemption.
The Warrants will be issued in registered form under a Warrant Agreement
between the Company and American Stock Transfer & Trust Company, as Warrant
Agent. Reference is made to said Warrant Agreement (which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part) for a
complete description of the terms and conditions applicable to the Warrants
(the description herein contained being qualified in its entirety by reference
to such Warrant Agreement).
The exercise price and number of shares of Common Stock issuable on
exercise of the Warrants are subject to adjustment in certain circumstances
including in the event of a stock dividend, recapitalization, reorganization,
merger or consolidation of the Company. However, the Warrants are not subject
to adjustment for issuances of Common Stock at a price below their respective
exercise prices.
The Company has the right, in its sole discretion, to decrease the exercise
price of the Warrants for a period of not less than 30 days on not less than 30
days' prior written notice to the warrantholders. In addition, the Company has
the right, in its sole discretion, to extend the expiration date of the
Warrants on five business days' prior written notice to the warrantholders.
The Warrants may be exercised upon surrender of the Warrant Certificate on
or prior to the expiration date at the offices of the Warrant Agent, with the
exercise form on the reverse side of the Warrant Certificate completed and
executed as indicated, accompanied by full payments of the exercise price (by
certified check, payable to the Company) to the Warrant Agent for the number of
Warrants being exercised. The warrantholders do not have the rights or
privileges of holders of Common Stock.
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No Warrants will be exercisable unless at the time of exercise the Company
has filed with the Commission a current prospectus covering the shares of Common
Stock issuable upon exercise of such Warrants and such shares have been
registered or qualified or deemed to be exempt under the securities laws of the
state of residence of the holder of such Warrants. The Company will use its
best efforts to have all shares so registered or qualified on or before the
exercise date and to maintain a current prospectus relating thereto until the
expiration of the Warrants, subject to the terms of the Warrant Agreement.
While it is the Company's intention to do so, there is no assurance that it will
be able to do so. See "Risk Factors - Risks Relating to the Offering -Current
Prospectus and State Blue Sky Registration Required in Connection with Exercise
of Warrants."
No fractional shares will be issued upon exercise of the Warrants.
However, if a warrantholder exercises all Warrants then owned of record by him,
the Company will pay to such warrantholder, in lieu of the issuance of any
fractional share which is otherwise issuable to such warrantholder, an amount in
cash based on the market value of the Common Stock on the last trading day prior
to the exercise date.
DIVIDENDS
The Company has not paid any dividends on its Common Stock to date and does
not intend to pay dividends prior to the consummation of a Business Combination.
The payment of dividends in the future, if any, will be contingent upon the
Company's revenues and earnings, if any, capital requirements and general
financial condition subsequent to consummation of a Business Combination. The
payment of any dividends subsequent to a Business Combination will be within the
discretion of the Company's then Board of Directors. It is the present intention
of the Board of Directors to retain all earnings, if any, for use in the
Company's business operations and, accordingly, the Board does not anticipate
declaring any dividends in the foreseeable future.
TRANSFER AGENT
The transfer agent for the Company's securities is American Stock Transfer
& Trust Company, 40 Wall Street, New York, New York 10005.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the Company will have 1,875,000
shares of Common Stock outstanding (2,062,500 shares if the Underwriter's
over-allotment option is exercised in full). Of
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these shares, the 1,250,000 shares sold in this offering (1,437,500 shares in
the event of the exercise of the over-allotment option) will be freely tradeable
without restriction or further registration under the Securities Act, except for
any shares purchased by an "affiliate" of the Company (in general, a person who
has a control relationship with the Company) which will be subject to
limitations of Rule 144. All of the remaining 625,000 shares are deemed to be
"restricted securities", as that term is defined under Rule 144, in that such
shares were issued in private transactions not involving a public offering. None
of such shares will be eligible for sale under Rule 144 prior to May 30, 1998.
Notwithstanding this, the Affiliated Initial Stockholders have agreed not to
sell their respective shares of Common Stock prior to six months following the
consummation of a Business Combination and the Non-Affiliated Initial
Stockholders have agreed not to sell their respective shares of Common Stock,
which were acquired prior to the date of this Prospectus, prior to the
occurrence of a Business Combination.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated), who has owned restricted
shares of Common Stock beneficially for at least two years is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or, if
the Common Stock is quoted on The Nasdaq Stock Market, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least the three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least three years is entitled to sell such shares under Rule 144
without regard to any of the limitations described above.
An additional 200,000 shares of Common Stock, which have been registered
pursuant to the Registration Statement of which this Prospectus forms a part,
are issuable upon the exercise of the Directors' Warrants issued to Messrs.
Burstein, Leben, Cattier and Ridings. The Directors' Warrants are identical to
the Warrants offered hereby but are not redeemable by the Company and may not
be exercised until the consummation of a Business Combination.
Prior to this offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that market sales of
restricted shares of Common Stock or the availability of such shares for sale
will have on the market prices prevailing from time to time. Nevertheless, the
possibility that substantial amounts of Common Stock may be sold in the public
market may adversely affect prevailing market prices for the Common Stock and
could impair the Company's ability to raise capital through the sale of its
equity securities.
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STATE BLUE SKY INFORMATION
The Units will only be offered and sold by the Company in the States of
Delaware, District of Columbia, Florida, Hawaii, Illinois, Maryland, New York
and West Virginia (the "Primary Distribution States"). In addition, such
securities will be immediately eligible for resale in the secondary market in
each of the Primary Distribution States and in the States of Iowa and
Pennsylvania. Purchasers of such securities either in this offering or in any
subsequent trading market which may develop must be residents of such states.
The Company will amend this prospectus for the purpose of disclosing additional
states, if any, in which the Company's securities will be eligible for resale in
the secondary trading market.
UNDERWRITING
GKN Securities Corp. has agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Company a total of 1,250,000 Units.
The Underwriting Agreement provides that the obligations of the Underwriter are
subject to approval of certain legal matters by counsel and various other
conditions precedent, and that the Underwriter is obligated to purchase all of
the Units offered by this Prospectus (other than the Units covered by the over-
allotment option described below), if any are purchased.
The Company has been advised by the Underwriter that it proposes to offer
the Units to the public at the initial offering price set forth on the cover
page of this Prospectus and to certain dealers at that price less a concession
not in excess of $ per Unit. The Underwriter may allow, and such dealers may
reallow, a concession not in excess of $ per Unit to certain other dealers.
After the initial public offering, the offering price and other selling terms
may be changed by the Underwriter.
The Company has granted to the Underwriter an option, exercisable during
the 45-day period after the date of this Prospectus, to purchase from the
Company at the offering price, less underwriting discounts and the
non-accountable expense allowance, up to an aggregate of 187,500 additional
Units for the sole purpose of covering over-allotments, if any.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriter an expense allowance on a non-accountable
basis equal to 3% of the gross proceeds derived from the sale of the Units
underwritten ($225,000 if the Underwriter's over-allotment option is not
exercised and $258,750 if the Underwriter's over-allotment option is
exercised in full), $25,000 of which has been paid to date.
54
<PAGE>
The Company has granted the Underwriter for a period of three years from
the date hereof the right to have the Underwriter's designee present at all
meetings of the Company's Board of Directors. Such designee will be entitled to
the same notices and communications sent by the Company to its directors and to
attend directors' meetings, but will not be entitled to vote thereat. The
Underwriter has not named such designee as of the date of this Prospectus.
The Company has engaged GKN, on a non-exclusive basis, as its agent for
the solicitation of the exercise of the Warrants. To the extent not
inconsistent with the guidelines of the NASD and the rules and regulations of
the Commission, the Company has agreed to pay GKN for bona fide services
rendered a commission equal to 5% of the exercise price for each Warrant
exercised more than one year after the date of this Prospectus if the
exercise was solicited by GKN. In addition to soliciting, either orally or
in writing, the exercise of the Warrants, such services may also include
disseminating information, either orally or in writing, to warrantholders
about the Company or the market for the Company's securities, and assisting
in the processing of the exercise of Warrants. No compensation will be paid
to GKN in connection with the exercise of the Warrants if the market price of
the underlying shares of Common Stock is lower than the exercise price, the
holder of the Warrants has not confirmed in writing that GKN solicited such
exercise, the Warrants are held in a discretionary account, the Warrants are
exercised in an unsolicited transaction or the arrangement to pay the
commission is not disclosed in the prospectus provided to warrantholders at
the time of exercise. In addition, unless granted an exemption by the
Commission from Rule 10b-6 under the Exchange Act, while it is soliciting
exercise of the Warrants, GKN will be prohibited from engaging in any market
making activities or solicited brokerage activities with regard to the
Company's securities unless GKN has waived its right to receive a fee for the
exercise of the Warrants.
In connection with this offering, the Company has agreed to sell to the
Underwriter, for nominal consideration, an option ("Unit Purchase Option") to
purchase up to an aggregate of 125,000 Units. The Units issuable upon
exercise of the Unit Purchase Option are identical to those offered hereby
except that the Warrants contained therein expire five years from the date
hereof. The Unit Purchase Option is exercisable initially at $6.60 per Unit
for a period of four years commencing one year from the date hereof. The Unit
Purchase Option may not be transferred, sold, assigned or hypothecated during
the one-year period following the date of this Prospectus, except to members
of the selected dealers and officers and partners of the Underwriter or the
selected dealers. The Unit Purchase Option grants to the holders thereof
certain demand and "piggy back" rights for periods of five and seven years,
respectively, from the date of this Prospectus with
55
<PAGE>
respect to the registration under the Securities Act of the securities directly
and indirectly issuable upon exercise of the Unit Purchase Option.
Prior to this offering there has been no public market for any of the
Company's securities. Accordingly, the offering price of the Units offered
hereby and the terms of the Warrants were determined by negotiation between
the Company and the Underwriter and do not necessarily bear any relation to
established valuation criteria. Factors considered in determining such prices
and terms, in addition to prevailing market conditions, included the history
of and the prospects for the industry in which the Company competes, an
assessment of the Company's Management, the prospects of the Company, its
capital structure and such other factors as were deemed relevant.
Although it is not obligated to do so, the Underwriter may introduce
the Company to potential Target Businesses or assist the Company in raising
additional capital, as needs may arise in the future. The Company is not
under any contractual obligation with the Underwriter to engage it to provide
any services for the Company after consummation of this offering, but if it
does, it may pay the Underwriter a finder's fee or other compensation.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Parker Duryee Rosoff & Haft A Professional Corporation, New York, New
York. Graubard Mollen & Miller, New York, New York, has acted as counsel for
the Underwriter in connection with this offering. A member of Parker Duryee
Rosoff & Haft beneficially owns 6,000 shares of the Company's Common Stock.
EXPERTS
The financial statements included in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report. Reference is made to said report which includes an explanatory paragraph
with regard to the Company being in its development stage, which raises
substantial doubt about its ability to continue as a going concern.
56
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C., a
Registration Statement ("Registration Statement") under the Securities Act
with respect to the Units, the Common Stock and the Warrants offered by this
Prospectus. This Prospectus does not contain all of the information set forth
in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and this offering, reference is made
to the Registration Statement, including the exhibits filed therewith, copies
of which may be obtained at prescribed rates from the Commission at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street N.W., Washington, D.C. 20549, and at the following regional
offices: 7 World Trade Center, New York, New York 10048, and Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60611.
In addition, all reports filed by the Company via the Commission's
Electronic Data Gathering and Retrieval System (EDGAR) can be obtained from
the Commission's Internet web set located at www.sec.gov. Descriptions
contained in this Prospectus as to the contents of any contract or other
document filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to
such contract or document.
57
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants . . . . . . . . . . . . F-2
Financial Statements
Balance Sheet - July 31, 1996. . . . . . . . . . . . . . . . . F-3
Statement of Operations for the period
May 30, 1996 (Date of Inception)
Through July 31, 1996 . . . . . . . . . . . . . . . . . . . F-4
Statement of Changes in Shareholders' Equity
for the period May 30, 1996
(Date of Inception) Through
July 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . F-5
Statement of Cash Flows for the period
May 30, 1996 (Date of Inception)
Through July 31, 1996 . . . . . . . . . . . . . . . . . . . F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . . .F-7 to F-14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Unity First Acquisition Corp.:
We have audited the accompanying balance sheet of Unity First Acquisition
Corp. (a Delaware corporation in the development stage) as of July 31, 1996, and
the related statements of operations, changes in shareholders' equity (deficit)
and cash flows for the period from inception (May 30, 1996) to July 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Unity First Acquisition
Corp. as of July 31, 1996, and the results of its operations and its cash flows
for the period from inception (May 30, 1996) to July 31, 1996, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying
financial statements, the Company is a development stage enterprise with no
significant operating results to date. The factors discussed in Note 1 to the
financial statements raise a substantial doubt about the ability of the Company
to continue as a going concern. Management's plans in regards to those matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New York, New York
August 16, 1996
F-2
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
BALANCE SHEET
JULY 31, 1996
- -----------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash $ 563
--------
DEFERRED REGISTRATION COSTS 250,000
--------
TOTAL ASSETS $250,563
--------
--------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accrued registration costs $225,000
Advances from affiliate 40,500
--------
TOTAL CURRENT LIABILITIES 265,500
--------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value, 5,000 shares
authorized, no shares issued -
Common stock, $.0001 par value, 20,000,000
shares authorized, 625,000 shares issued and
outstanding 63
Additional paid-in-capital -
Deficit accumulated during the development stage (15,000)
--------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (14,937)
--------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $250,563
--------
--------
See Accompanying Notes to Financial Statements
F-3
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 30, 1996
(DATE OF INCEPTION) THROUGH JULY 31, 1996
- -----------------------------------------------------------------------------
REVENUES $ -
---------
EXPENSES:
General and administrative 15,000
---------
TOTAL EXPENSES 15,000
---------
NET LOSS $ (15,000)
---------
---------
NET LOSS PER COMMON SHARE ($.02)
---------
---------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 625,000
---------
---------
See Accompanying Notes to Financial Statements
F-4
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD MAY 30, 1996
(DATE OF INCEPTION) THROUGH JULY 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Common Stock Additional Accumulated During
------------ Paid-In the Development
Shares Par Value Capital Stage Total
------ --------- ---------- ------------------- ---------
<S> <C> <C> <C> <C> <C>
Issuance of stock
to original founders
for cash, at par value 625,000 $63 $ - $ - $ 63
Net loss for the period
May 30, 1996 (date of
inception) through July
31, 1996 - - - (15,000) (15,000)
------- --------- ---------- ------------------- ----------
Balance, July 31, 1996 625,000 $63 $ - $(15,000) $(14,937)
------- --------- ---------- ------------------- ----------
------- --------- ---------- ------------------- ----------
</TABLE>
See Accompanying Notes to Financial Statements
F-5
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
STATEMENT OF CASH FLOWS
FOR THE PERIOD MAY 30, 1996
(DATE OF INCEPTION) THROUGH JULY 31, 1996
- -----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,000)
NET CASH USED IN OPERATING ACTIVITIES (15,000)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 63
Advance from affiliate 40,500
Deferred registration costs (25,000)
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,563
--------
NET INCREASE IN CASH 563
CASH, beginning of period -
--------
CASH, end of period $ 563
--------
--------
See Accompanying Notes to Financial Statements
F-6
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND OPERATIONS
Unity First Acquisition Corp. (the "Company") was incorporated in the State
of Delaware on May 30, 1996, for the purpose of raising capital which is to
be used to effect a business combination (the "Business Combination"). The
Company is currently in the development stage. All activity of the Company
to date relates to its formation and proposed fund raising. Management has
elected a July 31 fiscal year-end for the Company.
The Company's ability to commence operations is contingent upon obtaining
financing through a public offering (the "Proposed Offering") of the
Company's common stock (the "Common Stock"). Note 2 discusses the details
of the Proposed Offering.
The Proposed Offering can be considered a "blind pool." Blind pool
offerings are inherently characterized by an absence of substantive
disclosures relating to the use of the net proceeds of the offering.
Consequently, although substantially all of the proceeds of the Proposed
Offering are intended to be utilized to effect a Business Combination, the
proceeds are not specifically designated for this purpose. Upon completion
of this Proposed Offering, 90% of the net proceeds, after payment of
underwriting discounts and commissions and the underwriter's non-
accountable expense allowance, will be held in an interest-bearing trust
account ("Trust Account") until the earlier of (1) written notification by
the Company of its need for all or substantially all of such net proceeds
for the purpose of implementing a Business Combination, or (2) the
liquidation of the Company in the event that the Company does not effect a
Business Combination within 18 months from the consummation of the
offering. Notwithstanding the foregoing, if the Company enters into a
letter of intent, an agreement in principle or a definitive agreement to
effectuate a Business Combination prior to the expiration of such 18-month
period, the Company's Certificate of Incorporation provides that the
Company will be afforded up to an additional 6 months following the
expiration of the initial 18-month period to consummate such Business
Transaction. Moreover, since the Company has not yet identified an
acquisition target (the "Target") investors in the Proposed Offering will
have virtually no substantive information available for advance
consideration of any specified Business Combination.
F-7
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND OPERATIONS (CONT'D)
The Proposed Offering is not being conducted in accordance with Rule 419
which was adopted by the Securities and Exchange Commission (the
"Commission") to strengthen the regulation of securities offered by "blank
check" companies. A blank check company is defined as (a) a development
stage company that has no specific business plan or has indicated that its
business plan is to engage in a merger or acquisition with an unidentified
company and (b) a company which issues securities that, among other things,
(i) are not quoted in the NASDAQ system, or, (ii) in the case of a company
which has been in continuous operation for less than three years, has net
tangible assets of less than $5,000,000. Although the Company is a "blank
check" company, it does not believe that Rule 419 will be applicable to it
in view of the fact that upon its receipt of the net proceeds of this
offering, the Company's net tangible assets will exceed $5,000,000.
Accordingly, investors in this offering will not receive the substantive
protection provided by Rule 419. Additionally, there can be no assurances
that the United States Congress will not enact legislation which will
prohibit or restrict the sale of securities of "blank check" companies.
As a result of its limited resources, the Company will, in all likelihood,
have the ability to effect only a single Business Combination.
Accordingly, the prospects for the Company's success will be entirely
dependent upon the future performance of a single business.
The Company will not effect a Business Combination unless the fair market
value of the Target, as determined by the Board of Directors of the Company
in its sole discretion, based upon valuation standards generally accepted
by the financial community including, among others, book value, cash flow,
and both actual and potential earnings, is at least equal to 80% of the net
assets (assets less liabilities) of the Company at the time of such
acquisition.
Upon the completion of this offering, the Company will not satisfy the
criteria for qualifying its securities in the NASDAQ system. The Company's
securities will be traded in the over-the-counter market. It is anticipated
that they will be quoted on the OTC Bulletin Board, an NASD sponsored and
operated inter-dealer automated quotation system for equity securities not
included in The NASDAQ Stock Market, as well as in the NQB Pink Sheets
published by National Quotation Bureau Incorporated. The OTC Bulletin
Board was introduced as an alternative to "pink sheet" trading of
over-the-counter securities. Although the Company believes that the OTC
Bulletin Board has been recognized by the brokerage community as an
acceptable alternative to the NQB Pink Sheets, there can be no assurance
that the liquidity and prices of the Units in the secondary market will
not be adversely affected.
F-8
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND OPERATIONS (CONT'D)
Furthermore, there is no assurance that the Company will be able to
successfully effect a Business Combination. As discussed previously, if
the Company is unable to effect a Business Combination within 24 months of
the consummation of the Proposed Offering, the Company's Certificate of
Incorporation provides for the Company's automatic liquidation. In the
event of liquidation, the per share value of the residual assets remaining
available for distribution may be less than the initial public offer price
per share in the Proposed Offering. In no event, however, will the
Company's liquidation value be less than the amount in the Trust Account,
inclusive of any net interest income thereon.
Moreover, all of the Company's present stockholders have agreed to waive
their respective rights to participate in any such liquidation distribution
on shares owned prior to the Proposed Offering.
If the Company is unable to acquire control of an operating business or
businesses, it may be required to register as an investment company under
the Investment Company Act of 1940, as amended (the "Act"). The Company is
unable to predict what effect registration under such Act would have, but
it believes that its ability to pursue its current business plan could be
adversely affected as a result. The most significant difference with
respect to financial statement presentation and disclosure requirements for
companies registered under the Act would require the investments held by
the Company to be adjusted to market value at the balance sheet date. The
Company believes that its anticipated principal activities, which will
involve acquiring control of an operating company, will not subject the
Company to regulation under the Act.
F-9
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 2. PROPOSED PUBLIC OFFERING OF SECURITIES
The Proposed Offering calls for the Company to offer for public sale up to
1,250,000 units (the "Units") at a price of $6.00 per Unit. Each Unit
consists of one share of the Company's Common Stock, $.0001 par value, one
Class A Redeemable Warrant and one Class B Redeemable Warrant. Each Class
A Redeemable Warrant and Class B Redeemable Warrant entitles the holder to
purchase from the Company one share of Common Stock at an exercise price of
$5.50 and $7.50, respectively, commencing on the later of (i) the
consummation of a Business Combination, or (ii) one year from the effective
date of the Prospectus and ending six years after the effective date of the
Proposed Offering (the "Effective Date"). The Class A Redeemable Warrants
and Class B Redeemable Warrants will be redeemable at the option of the
Company, and with the consent of the underwriter of the Proposed Offering
(the "Underwriter") each as a class, in whole and not in part, upon 30
days' notice at any time after the Redeemable Warrants become exercisable,
only in the event that the closing bid price of the Common Stock is at
least $8.50 per share with respect to the Class A Redeemable Warrant(s),
and $10.50 with respect to the Class B Redeemable Warrants for 20
consecutive trading days immediately prior to notice of redemption, at a
price of $.05 per Class A Redeemable Warrant or Class B Redeemable Warrant.
The warrants will become separable and transferable only upon consummation
of a Business Combination.
F-10
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 2. PROPOSED PUBLIC OFFERING OF SECURITIES (CONT'D)
The Company has granted the Underwriter an option, exercisable within 45
business days from the Effective Date, to purchase up to 187,500 additional
Units at $6.00 per Unit. This option is solely for the purpose of covering
over-allotments.
In connection with the Proposed Offering, the Company will sell to the
Underwriter and its designees, for nominal consideration, Unit Purchase
Option(s) (the "Underwriter's UPO") to purchase up to 125,000 Units at an
exercise price of $6.60 per Unit. The Underwriter's UPO's will be
exercisable for a period of four years commencing one year from the
Effective Date.
The Company has granted its executive officers and directors 200,000
warrants (50% Class A Warrants and 50% Class B Warrants, collectively the
"Directors' Warrants") to purchase Common Stock at $5.50 and $7.50,
respectively, per share in consideration of future services to be rendered
on behalf of the Company. The Directors' Warrants are not exercisable
until the consummation by the Company of a Business Combination and are not
redeemable by the Company.
All of the Company's present stockholders have agreed to vote their
respective shares of Common Stock in accordance with the vote of the
majority of all nonaffiliated future stockholders of the Company with
respect to a Business Combination.
In addition, the Common Stock owned by all of the executive officers and
directors of the Company, their affiliates and by all persons owning 5% or
more of the currently outstanding shares of Common Stock has been placed in
escrow until the earlier of (i) the occurrence of a Business Combination,
or (ii) the Liquidation Date. During the escrow period, such stockholders
will not be able to sell or otherwise transfer their respective shares of
Common Stock, but retain all other rights as stockholders of the Company,
including, without limitation, the right to vote such shares of Common
Stock.
As of July 31, 1996, the Company has recorded deferred registration costs
of $250,000 relating to various expenses incurred and accrued for in
connection with the Proposed Offering. Upon consummation of the Proposed
Offering, these costs will be charged to equity. Should the Proposed
Offering prove to be unsuccessful, these deferred costs, as well as any
other additional expenses that may be incurred, will be charged to
operations.
F-11
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UTILIZATION 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.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based on the weighted
average number of common shares outstanding and common stock equivalents,
if not anti-dilutive.
NOTE 4. CAPITAL STOCK
The Company's Certificate of Incorporation authorizes the issuance of
20,000,000 shares of Common Stock. Upon completion of the Proposed
Offering (assuming no exercise of the Underwriter's over-allotment option),
there will be 14,862,500 authorized but unissued shares of Common Stock
available for issuance (after appropriate reserves for the issuance of
Common Stock in connection with the Class A Redeemable Warrants and Class B
Redeemable Warrants, the Underwriters's UPO's, the executive officers and
director Class A Warrants and Class B Warrants, and the future grants under
the Company's 1996 Stock Option Plan). The Company's Board of Directors
has the power to issue any or all of the future grants under the Company's
1996 Stock Option Plan. The Company's Board of Directors has the power to
issue any or all of the authorized but unissued Common Stock without
stockholder approval. The Company currently has no commitments to issue
any shares of Common Stock other than as described in the Proposed
Offering; however, the Company will, in all likelihood, issue a substantial
number of additional shares in connection with a Business Combination. To
the extent that additional shares of Common Stock are issued, dilution to
the interests of the Company's stockholders participating in the Proposed
Offering will occur.
The Board of Directors of the Company is empowered, without stockholder
approval, to issue up to 5,000 shares of "blank check" preferred stock (the
"Preferred Stock") with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of the Company's Common Stock.
F-12
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 5. RELATED PARTY TRANSACTIONS
The Chairman of the Board of Directors and the President of the Company are
principal shareholders, officers and directors of Unity Venture Capital
Associates Ltd. ("Unity") which owns shares in the Company. Beginning
June 1, 1996, commensurate with the Company's activities primarily related
to the Proposed Offering, the Company will be obligated to pay Unity a
monthly fee of $7,500 for general and administrative services, including
the use of office space in premises occupied by Unity. At July 31, 1996,
the Company owed $15,000 (included in advances from affiliate on the
balance sheet) to Unity for administrative services.
Through July 31, 1996, the Company has obtained advances totaling $25,500
from Unity to cover expenses related to the Proposed Offering which are
included in advances from affiliate on the balance sheet. These advances
are due on demand and are expected to be repaid out of the proceeds of the
Proposed Offering.
At July 31, 1996, a member of the Company's legal counsel owned 6,000
shares of the Company's Common Stock.
NOTE 6. STOCK OPTION PLAN
On May 30, 1996, the Company's Board of Directors approved a stock option
plan (the "Plan"). The Plan, which is subject to shareholder approval,
provides for issuance of up to 187,500 options (the "Options") to acquire
shares of the Company's Common Stock.
The Options are intended to qualify either as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986 or as options which are not intended to meet
the requirements of such section ("Nonstatutory Stock Options"). The
Options may be granted under the Plan to persons who, in the case of
Incentive Stock Options, are key employees (including officers) of the
Company, or, in the case of Nonstatutory Stock Options, are key employees
(including officers) and nonemployee directors of the Company, except that
Nonstatutory Stock Options may not be granted to a holder of more than 10%
of the total voting power of the Company.
F-13
<PAGE>
UNITY FIRST ACQUISITION CORP.
(a development stage entity)
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 6. STOCK OPTION PLAN (CONT'D)
The exercise price of all Incentive Stock Options granted under the Plan
must be at least equal to the fair market value of such shares on the date
of grant or, in the case of Incentive Stock Options granted to the holder
of 10% or more of the Company's Common Stock, at least 110% of the fair
market value of such shares on the date of grant. The exercise price of
all Nonstatutory Stock Options granted under the Plan shall be determined
by the Board of Directors of the Company at the time of grant. The maximum
exercise period for which the Options may be granted is ten years from the
date of grant (five years in the case of Incentive Stock Options granted to
an individual owning more than 10% of the Company's Common Stock). The
aggregate fair market value (determined at the date of the option grant) of
such shares with respect to which Incentive Stock Options are exercisable
for the first time by the holder of the option during any calendar year
shall not exceed $100,000.
The FASB issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123"), which will require
companies either to reflect in their financial statements or reflect as
supplemental disclosure the impact on earnings and earnings per share of
the fair value of stock based compensation using certain pricing models for
the option component of stock option plans. As of July 31, 1996, no
options have been granted under the Plan. Disclosure, as required by SFAS
123, will be made upon the issuance of options.
NOTE 7. INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under this
method, deferred income taxes are determined based on differences between
the tax bases of assets and liabilities and their financial reporting
amounts at each year end, and are measured based on enacted tax rates and
laws that will be in effect when the differences are expected to reverse.
Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
NOTE 8. CONTINGENCY
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act. The Company
has also agreed to pay to the Underwriter an expense allowance on a non-
accountable basis equal to 3% of the gross proceeds derived from the sale
of the Units underwritten (including the sale of any Units subject to the
Underwriter's over-allotment option).
F-14
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied on as having been authorized by the Company or by the Underwriter.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy the Units offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized or is unlawful. The delivery of
this Prospectus shall not, under any circumstances create any implication that
the information herein is correct as of any time subsequent to the date of the
Prospectus.
____________________
TABLE OF CONTENTS
Page
----
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management's Discussion and Analysis
of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposed Business. . . . . . . . . . . . . . . . . . . . . . . . . . .
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . .
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Securities. . . . . . . . . . . . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . . . . . . . . . . . . .
Index to Financial Statements. . . . . . . . . . . . . . . . . . . . F-1
--------------------
Until , 1996, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a Prospectus. This is in addition to the obligations of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
1,250,000 Units
UNITY FIRST ACQUISITION CORP.
____________________
PROSPECTUS
____________________
GKN SECURITIES
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. . . . . . . . . . Other Expenses of Issuance and Distribution
The following table sets forth various expenses, other than underwriting
discounts, which will be incurred in connection with the offering. Other than
the SEC registration fee, NASD filing fee and the non-accountable expense
allowance of GKN Securities Corp. (the "Underwriter"), amounts set forth below
are estimates:
SEC registration fee.............................................. $ 10,711
NASD filing fee .................................................. 3,606
Underwriter's nonaccountable
expense allowance . ........................................ 225,000*
Blue sky fees and expenses........................................ 25,000
Printing and engraving expenses................................... 75,000
Legal fees and expenses........................................... 65,000
Accounting fees and expenses...................................... 42,000
Transfer and Warrant Agent fees................................... 3,500
Miscellaneous expenses............................................ 183
---------
$450,000
---------
---------
- --------
* Assumes no exercise of the Underwriter's over-allotment option.
Item 14. Indemnification of Directors and Officers
Article SEVENTH of the Certificate of Incorporation of Unity First
Acquisition Corp. ("Registrant") provides with respect to the indemnification of
directors and officers that Registrant shall indemnify to the fullest extent
permitted by Sections 102(b)(7) and 145 of the Delaware General Corporation Law,
as amended from time to time, each person that such Sections grant Registrant
the power to indemnify. Article SEVENTH of the Certificate of Incorporation of
Registrant also provides that no director shall be liable to the corporation or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director, except with respect to (1) a breach of the director's duty of loyalty
to the corporation or its stockholders, (2) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by
<PAGE>
Section 102(b)(7) of Delaware General Corporation Law, as amended from time to
time.
Reference is made to Section 5 of the Underwriting Agreement, which
provides for indemnification of the officers and directors of Registrant
under certain circumstances.
Item 15. Recent Sales of Unregistered Securities
The following sets forth information relating to all securities of
Registrant sold by it since May 30, 1996, the date of Registrant's inception:
CONSIDE-
DATE OF NUMBER OF RATION
NAME ISSUANCE SHARES PER SHARE
- ---- -------- ---------- ---------
Lawrence Burstein May 30,1996 150,000 $.0001
Unity Venture
Capital Associates Ltd. May 30, 1996 25,000 $.0001
Cowen & Co., as
Custodian for
Stanley Hollander
IRA May 30, 1996 30,000 $.0001
Jerome Baron May 30, 1996 12,000 $.0001
Murdoch & Company May 30, 1996 30,000 $.0001
Cricket Services Ltd. May 30, 1996 39,000 $.0001
Richard Kress &
Cheryl Kress JTWROS May 30, 1996 4,500 $.0001
Stephen Verchick May 30, 1996 31,000 $.0001
Richard Braver May 30, 1996 4,500 $.0001
Dan Brecher IRA/RO May 30, 1996 10,500 $.0001
Barry Ridings May 30, 1996 6,000 $.0001
Carl L. Norton May 30, 1996 9,000 $.0001
Financiera e
Inversionista
Salles, S.A. May 30, 1996 12,000 $.0001
II-2
<PAGE>
Ian Barnett May 30, 1996 4,500 $.0001
Henry Rothman May 30, 1996 6,000 $.0001
Donald Rabinovitch May 30, 1996 5,250 $.0001
David Vozick May 30, 1996 5,250 $.0001
Tarzana Associates May 30, 1996 5,000 $.0001
Jonathan Rothschild May 30, 1996 1,500 $.0001
Equity Interest Inc. May 30, 1996 1,500 $.0001
Domaco Venture
Capital Fund May 30, 1996 1,500 $.0001
KGM Associates May 30, 1996 7,000 $.0001
Sagres Group Ltd. May 30, 1996 6,000 $.0001
Ronald Koenig May 30, 1996 30,000 $.0001
Heptagon Investments
Ltd. May 30, 1996 75,000 $.0001
Jay M. Haft May 30, 1996 10,500 $.0001
Ira Roxland May 30, 1996 6,000 $.0001
Denis Frelinghuysen May 30, 1996 3,000 $.0001
Steven Millner May 30, 1996 15,000 $.0001
Norman Leben May 30, 1996 15,000 $.0001
Heptagon Capital
Management, Inc. May 30, 1996 1,500 $.0001
Michael Karfunkel May 30, 1996 31,000 $.0001
George Karfunkel May 30, 1996 31,000 $.0001
On May 30, 1996, Registrant issued 58,334, 58,333, 58,333 and 25,000 Class
A and Class B Warrants to Lawrence Burstein, Norman Leben, John Cattier and
Barry Ridings, respectively, in consideration for future services to be rendered
by such persons on behalf of Registrant.
Exemption from registration under the Securities Act of 1933, as amended
(the "Securities Act"), is claimed for the sales of Common Stock referred to
above in reliance upon the exemption afforded by Section 4(2) of the Securities
Act for transactions not
II-3
<PAGE>
involving a public offering. Each certificate evidencing such shares of Common
Stock bears an appropriate restrictive legend and "stop transfer" orders are
maintained on Registrant's stock transfer records thereagainst. None of these
sales involved participation by an underwriter or a broker-dealer.
Item 16. Exhibits and Financial Statement Schedules
(a) The following is a list of Exhibits filed herewith as part of the
Registration Statement:
1.1 Form of Underwriting Agreement between Registrant and the Underwriter
3.1 Certificate of Incorporation of Registrant
3.2 By-laws of Registrant
4.1* Form of certificate evidencing shares of Common Stock
4.2* Form of certificate evidencing Class A Warrants
4.3* Form of certificate evidencing Class B Warrants
4.4 Form of Unit Purchase Option between Registrant and the Underwriter
4.5 Form of Warrant Agreement between Registrant and American Stock
Transfer & Trust Company, as escrow agent
5.1* Opinion of Parker Duryee Rosoff & Haft A Professional Corporation
10.1 1996 Stock Option Plan
10.2* Form of Trust Agreement by and between Registrant and [ ]
10.3 Form of Insider's Letter
10.4 Form of Escrow Agreement by and among Registrant, Lawrence Burstein,
John Cattier, Cricket Services, Ltd., Barry Ridings, Norman Leben,
Unity Venture Capital Associates Ltd. ("Unity") and American Stock
Transfer & Trust Company
II-4
<PAGE>
10.5 General and Administrative Services Agreement, dated as of May 30,
1996, by and between Registrant and Unity
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Parker Duryee Rosoff & Haft (to be included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page of Part II of this
Registration Statement)
- -----------
* To be filed by Amendment to this Registration Statement.
(b) Financial Statement Schedules. Financial statement schedules are
omitted because the conditions requiring their filing do not exist or the
information required thereby is included in the financial statements filed,
including the notes thereto.
Item 17. Undertakings
Registrant hereby undertakes:
(1) That for purposes of determining any liability under the Securities
Act, 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 Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this Registration Statement as
of the time it was declared effective.
(2) That for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(a) To include any Prospectus required by Section
II-5
<PAGE>
10(a)(3) of the Securities Act;
(b) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(4) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(5) To provide to the Representative at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered in
such names as required by the Representative to permit prompt delivery to each
purchaser.
(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of Registrant pursuant to Item 14 of this Part II to the Registration Statement,
or otherwise, Registrant 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 Registrant of expenses incurred or paid by a director, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against the public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 29th day of August, 1996.
UNITY FIRST ACQUISITION CORP.
By: /s/ LAWERENCE BURSTEIN
------------------------
Lawrence Burstein
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Lawrence Burstein and Norman Leben, and
each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities 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 or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
__________________
Pursuant to 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 indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LAWERENCE BURSTEIN President, Director,
- ---------------------- Principal Executive
Lawrence Burstein Officer August 29, 1996
Secretary, Director,
Principal Financial
/s/ NORMAN LEBEN and Accounting Officer August 29, 1996
- ----------------------
Norman Leben
- ----------------------
John Cattier Director
/s/ BARRY RIDINGS
- ---------------------- Director August 29, 1996
Barry Ridings
<PAGE>
UNITY FIRST ACQUISITION CORP.
UNDERWRITING AGREEMENT
New York, New York
___________, 1996
GKN Securities Corp.
61 Broadway
New York, New York 10006
Dear Sirs:
The undersigned, Unity First Acquisition Corp., a Delaware corporation
("Company"), hereby confirms its agreement with GKN Securities Corp.
("Underwriter") as follows:
1. PURCHASE AND SALE OF SECURITIES.
1.1 FIRM SECURITIES.
1.1.1 PURCHASE OF FIRM SECURITIES. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter and the Underwriter agrees to purchase 1,250,000 units ("Firm
Units"); at a purchase price of $5.52 per Unit. Each Firm Unit consists of one
share of the Company's common stock, par value $.0001 per share ("Common
Stock"), and one Class A Redeemable Common Stock Purchase Warrant ("Class A
Warrants") and one Class B Redeemable Common Stock Purchase Warrant ("Class B
Warrants"), referred to together as the "Warrants." The shares of Common Stock
and the Warrants included in the Firm Units will not be separately transferable
until the consummation of a Business Combination. "Business Combination" shall
have the meaning ascribed to it in the Registration Statement (as defined in
Section 2.1.1. hereof). One Class A Warrant and one Class B Warrant each
entitle the holder to exercise it to purchase one share of Common Stock for
$5.50 and $7.50, respectively, commencing on the later of (i) the consummation
by the Company of a Business Combination, or (ii) one year from the effective
date ("Effective Date") of the Registration Statement and terminating on the
six-year anniversary of the Effective Date.
1.1.2 PAYMENT AND DELIVERY. Delivery and payment for the Firm
Units shall be made at 10:00 A.M., New York time, on or before the third
business day following the Effective Date or at such earlier time as the
Underwriter shall determine, or at such other time as shall be agreed upon by
the Underwriter and the Company at the offices of Underwriter or at such other
place as shall be agreed upon by the Underwriter and the Company. The hour and
date of delivery and payment for the Firm Units are called "Closing Date."
Payment for the Firm Units shall be made on the Closing Date at the
Underwriter's election by certified or bank cashier's check(s) in New York
Clearing House funds, payable as follows: 90% of the proceeds received by the
Company for the Firm Units (after deduction of the underwriting discounts and
commissions and the Underwriter's nonaccountable expense allowance) shall be
deposited in the trust fund
<PAGE>
established by the Company for the benefit of the public stockholders as
described in the Registration Statement ("Trust Fund") pursuant to the terms of
an Investment Management Trust Agreement ("Trust Agreement") and the remaining
proceeds shall be paid to the order of the Company upon delivery to you of
certificates (in form and substance satisfactory to the Underwriter)
representing the Firm Units for the account of the Underwriter. The Firm Units
shall be registered in such name or names and in such authorized denominations
as the Underwriter may request in writing at least two full business days prior
to the Closing Date. The Company will permit the Underwriter to examine and
package the Firm Units for delivery, at least one full business day prior to the
Closing Date. The Company shall not be obligated to sell or deliver the Firm
Units except upon tender of payment by the Underwriter for all the Firm Units.
1.2 OVER-ALLOTMENT OPTION.
1.2.1 OPTION UNITS. For the purposes of covering any over-
allotments in connection with the distribution and sale of the Firm Units, the
Underwriter is hereby granted an option to purchase up to an additional 187,500
Firm Units from the Company ("Over-allotment Option"). Such additional 187,500
units are hereinafter referred to as "Option Units." The Firm Units and the
Option Units are hereinafter collectively referred to as "Units," and the Units,
the shares of Common Stock and the Warrants included in the Units and the shares
of Common Stock issuable upon exercise of the Warrants are hereinafter referred
to collectively as "Public Securities." The purchase price to be paid for the
Option Units will be the same price per Option Unit as the price per Unit set
forth in Section 1.1.1 hereof.
1.2.2 EXERCISE OF OPTION. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Underwriter as to all
(at any time) or any part (from time to time) of the Option Units within 45 days
after the Effective Date. The Underwriter will not be under any obligation to
purchase any Option Units prior to the exercise of the Over-allotment Option.
The Over-allotment Option granted hereby may be exercised by the giving of oral
notice to the Company from Underwriter, which must be confirmed by a letter or
telecopy setting forth the number of Option Units to be purchased and the date
and time for delivery of and payment for the Option Units. If such notice is
given two full business days prior to the Closing Date, the date set forth
therein for such delivery and payment will be the Closing Date. If such notice
is given thereafter, the date set forth therein for such delivery and payment
will not be earlier than five full business days after the date of the notice.
If such delivery and payment for the Option Units does not occur on the Closing
Date, the date and time of the closing for such Option Units will be as set
forth in the notice (hereinafter "Option Closing Date"). Upon exercise of the
Over-allotment Option, the Company will become obligated to convey to the
Underwriter, and, subject to the terms and conditions set forth herein, the
Underwriter will become obligated to purchase, the number of Option Units
specified in such notice.
1.2.3 PAYMENT AND DELIVERY. Payment for the Option Units will be
at the Underwriter's election by certified or bank cashier's check(s) in New
York Clearing House funds, payable to the Trust Fund and to the Company in the
same manner as set forth in Section 1.1.2 hereof at the offices of Underwriter
or at such other place as shall be agreed upon by the Underwriter and the
Company upon delivery to you of certificates representing such securities for
the account of the Underwriter. The certificates representing the Option Units
to be delivered will be in such denominations and registered in such names as
the Underwriter request not less than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be, and will be made
available to the Underwriter for inspection, checking and packaging at the
aforesaid office of the Company's transfer agent or correspondent not less than
one full business day prior to such Closing Date.
2
<PAGE>
1.3 UNDERWRITER'S PURCHASE OPTION.
1.3.1 PURCHASE OPTION. The Company hereby agrees to issue and
sell to the Underwriter (and/or its designees) on the Effective Date an option
("Underwriter's Purchase Option") for the purchase of an aggregate of 125,000
units ("Underwriter's Units") for an aggregate purchase price of $100. Each of
the Underwriter's Units is identical to the Units except that the Warrants
included in the Underwriter's Units ("Underwriter's Warrants") expire five years
from the Effective Date. The Underwriter's Purchase Option, the Underwriter's
Units, the Underwriter's Warrants and the shares of Common Stock issuable upon
exercise of the Underwriter's Warrants are hereinafter referred to collectively
as "Underwriter's Securities." The Public Securities and the Underwriter's
Securities are hereinafter referred to collectively as "Securities."
1.3.2 PAYMENT AND DELIVERY. Delivery and payment for the
Underwriter's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Underwriter, upon payment therefor, certificates for the
Underwriter's Purchase Option in the name or names and in such authorized
denominations as the Underwriter may request. The Underwriter's Purchase Option
shall be exercisable for a period of four years commencing one year from the
Effective Date at an initial exercise price per Underwriter's Unit of $6.60,
which is equal to one hundred and ten percent (110%) of the initial public
offering price of a Unit.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Underwriter as follows:
2.1 FILING OF REGISTRATION STATEMENT.
2.1.1 PURSUANT TO THE ACT. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form S-1 (File No. 33-_______), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Public Securities under the Securities Act of 1933, as
amended ("Act"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations ("Regulations") of the Commission under the Act.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated therein
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430A of the Regulations), is hereinafter called
"Registration Statement," and the form of the final prospectus dated the
Effective Date included in the Registration Statement (or, if applicable, the
form of final prospectus filed with the Commission pursuant to Rule 424 of the
Regulations), is hereinafter called "Prospectus." The Registration Statement
has been declared effective by the Commission on the date hereof.
2.1.2 PURSUANT TO THE EXCHANGE ACT. The Company has filed with
the Commission a Form 8-A (File Number 0-_______) providing for the registration
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), of the
Units, the Common Stock and the Warrants. The registration of the Units, Common
Stock and Warrants under the Exchange Act has been declared effective by the
Commission on the date hereof.
3
<PAGE>
2.2 NO STOP ORDERS, ETC. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge, threatened to institute any
proceedings with respect to such an order.
2.3 DISCLOSURES IN REGISTRATION STATEMENT.
2.3.1 SECURITIES ACT AND EXCHANGE ACT REPRESENTATION. At the time
the Registration Statement became effective and at all times subsequent thereto
up to and including the Closing Date and the Option Closing Date, if any, the
Registration Statement and the Prospectus and any amendment or supplement
thereto contained and will contain all material statements which are required to
be stated therein in accordance with the Act and the Regulations, and conformed
and will conform in all material respects to the requirements of the Act and the
Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, during such time period and on such dates,
contained or will contain any untrue statement of a material fact or omitted or
will omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, nor did they or will they contain
any untrue statement of a material fact or did they or will they omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto at the time such filing was made
complied in all material respects with the applicable provisions of the Act and
the Regulations. The representation and warranty made in this Section 2.3.1
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters by the Underwriter expressly for use in the Registration Statement
or Prospectus or any amendment thereof or supplement thereto.
2.3.2 DISCLOSURE OF AGREEMENTS. The contracts and other documents
described in the Registration Statement and the Prospectus conform to the
descriptions thereof contained therein and there are no agreements or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed with the Commission as exhibits to the Registration
Statement, which have not been so described or filed. Each contract or other
instrument (however characterized or described) to which the Company is a party
or by which its property or business is or may be bound or affected and (i)
which is referred to in the Prospectus, or (ii) is material to the Company's
business, has been duly and validly executed by the Company, is in full force
and effect in all material respects and is enforceable against the Company and,
to the Company's knowledge, the other parties thereto, in accordance with its
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (iii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought, and none of such contracts or
instruments has been assigned by the Company, and neither the Company nor, to
the best of the Company's knowledge, any other party is in default thereunder
and no event has occurred which, with the lapse of time or the giving of notice,
or both, would constitute a default thereunder. The performance by the Company
of the material provisions of such contracts or instruments will not result in a
violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court having jurisdiction over the Company
or any
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of its assets or businesses, including, without limitation, those relating to
environmental laws and regulations.
2.3.3 PRIOR SECURITIES TRANSACTIONS. No securities of the Company
have been sold by the Company or by or on behalf of, or for the benefit of, any
person or persons controlling, controlled by, or under common control with the
Company within the three years prior to the date hereof, except as disclosed in
the Registration Statement.
2.4 CHANGES AFTER DATES IN REGISTRATION STATEMENT.
2.4.1 NO MATERIAL ADVERSE CHANGE. Since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no material
adverse change in the condition, financial or otherwise, or business prospects
of the Company, (ii) there have been no material transactions entered into by
the Company, other than as contemplated pursuant to this Agreement, and (iii) no
member of the Company's management has resigned from any position with the
Company.
2.4.2 RECENT SECURITIES TRANSACTIONS, ETC. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or
(ii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock.
2.5 INDEPENDENT ACCOUNTANTS. Arthur Andersen & Co. LLP, whose report is
filed with the Commission as part of the Registration Statement, are independent
accountants as required by the Act and the Regulations.
2.6 FINANCIAL STATEMENTS. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus fairly present the financial position and the results of operations
of the Company at the dates and for the periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved; and
the supporting schedules included in the Registration Statement present fairly
the information required to be stated therein.
2.7 AUTHORIZED CAPITAL; OPTIONS; ETC. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in, or contemplated by,
the Registration Statement and the Prospectus, on the Effective Date and on the
Closing Date, there will be no options, warrants, or other rights to purchase or
otherwise acquire any authorized but unissued shares of Common Stock of the
Company or any security convertible into shares of Common Stock of the Company,
or any contracts or commitments to issue or sell shares of Common Stock or any
such options, warrants, rights or convertible securities.
2.8 VALID ISSUANCE OF SECURITIES; ETC.
2.8.1 OUTSTANDING SECURITIES. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of the
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preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The outstanding warrants to purchase
shares of Common Stock constitute the valid and binding obligations of the
Company, enforceable in accordance with their terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The authorized Common Stock and outstanding warrants to
purchase shares of Common Stock conform to all statements relating thereto
contained in the Registration Statement and the Prospectus. The offers and
sales of the outstanding Common Stock and warrants to purchase shares of Common
Stock were at all relevant times either registered under the Act and the
applicable state securities or Blue Sky Laws or, based in part on the
representations and warranties of the purchasers of such shares of Common Stock
and warrants, exempt from such registration requirements.
2.8.2 SECURITIES SOLD PURSUANT TO THIS AGREEMENT. The Securities
have been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. When issued, the
Underwriter's Purchase Option, the Underwriter's Warrants and the Warrants will
constitute valid and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of securities of the
Company called for thereby in accordance with the terms thereof and such
Underwriter's Purchase Option, the Underwriter's Warrants and the Warrants are
enforceable against the Company in accordance with their respective terms,
except (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification provision may be limited under the federal
and state securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
2.9 REGISTRATION RIGHTS OF THIRD PARTIES. Except as set forth in the
Prospectus, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
2.10 VALIDITY AND BINDING EFFECT OF AGREEMENTS. This Agreement, the
Warrant Agreement (as defined in Section 2.24 hereof), the Trust Agreement and
the Escrow Agreement (as defined in Section 2.25.2 hereof) have been duly and
validly authorized by the Company and constitute the valid and binding
agreements of the Company, enforceable against the Company in accordance with
their respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (iii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
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2.11 NO CONFLICTS, ETC. The execution, delivery, and performance by the
Company of this Agreement, the Warrant Agreement (as defined in Section 2.24
hereof), the Trust Agreement and the Escrow Agreement (as defined in
Section 2.25.2 hereof) the consummation by the Company of the transactions
herein and therein contemplated and the compliance by the Company with the terms
hereof and thereof have been duly authorized by all necessary corporate action
and do not and will not, with or without the giving of notice or the lapse of
time or both (i) result in a breach of, or conflict with any of the terms and
provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of any agreement or
instrument to which the Company is a party except pursuant to the Trust
Agreement referred to in Section 2.27 hereof; (ii) result in any violation of
the provisions of the Certificate of Incorporation or the By-Laws of the
Company; or (iii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
business.
2.12 NO DEFAULTS; VIOLATIONS. The Company is not in default in the due
performance and observance of any term or condition of any material contract or
other agreement to which the Company is a party. The Company is not in
violation of any term or provision of its Certificate of Incorporation or By-
Laws.
2.13 CORPORATE POWER; LICENSES; CONSENTS.
2.13.1 CONDUCT OF BUSINESS. The Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies which it needs as of the date hereof to conduct
its business purpose as described in the Prospectus.
2.13.2 TRANSACTIONS CONTEMPLATED HEREIN. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery, of the
Securities pursuant to this Agreement, the Warrant Agreement (as hereinafter
defined) and the Underwriter's Purchase Option, and as contemplated by the
Prospectus, except with respect to applicable federal and state securities laws.
2.14 D&O QUESTIONNAIRES. To the best of the Company's knowledge, all
information contained in the Questionnaire completed by each Initial Stockholder
and provided to the Underwriter as an exhibit to his Insider Letter (as defined
in Section 2.25.1) is true and correct and the Company has not become aware of
any information which would cause the information disclosed in the
questionnaires completed by each Initial Stockholder to become inaccurate and
incorrect.
2.15 LITIGATION; GOVERNMENTAL PROCEEDINGS. There is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental
proceeding pending or threatened against, or involving the Company or, to the
best of the Company's knowledge, any Initial Stockholder which has not been
disclosed in the Registration Statement or the Questionnaires.
2.16 GOOD STANDING. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation. The Company is qualified to do business and is in good standing
under the laws of each state in which it is
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currently required to be so qualified, except where the failure to qualify would
not have a material adverse effect on the Company.
2.17 [Reserved]
2.18 STOP ORDERS. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or any part
thereof.
2.19 TRANSACTIONS AFFECTING DISCLOSURE TO NASD.
2.19.1 FINDER'S FEES. Except as described in the Prospectus, there
are no claims, payments, issuances, arrangements, agreements or understandings
for services in the nature of a finder's or origination fee by the Company or
any Initial Stockholder with respect to the sale of the Securities hereunder or
any other arrangements, agreements or understandings with respect to the Company
or, to the best of the Company's knowledge, any Initial Stockholder that may
affect the Underwriter's compensation, as determined by the National Association
of Securities Dealers, Inc. ("NASD").
2.19.2 PAYMENTS WITHIN TWELVE MONTHS. The Company has not made any
direct or indirect payments (in cash, securities or otherwise) to (i) any
person, as a finder's fee, consulting fee or otherwise, in consideration of such
person raising capital for the Company or introducing to the Company persons who
raised or provided capital to the Company, (ii) to any NASD member or (iii) to
any person or entity that has any direct or indirect affiliation or association
with any NASD member, within the twelve months prior to the date on which the
Registration Statement was filed with the Commission or thereafter other than
payments to Underwriter.
2.19.3 USE OF PROCEEDS. None of the net proceeds of the offering
will be paid by the Company to any participating NASD member or any affiliate or
associate of any NASD member, except as specifically authorized herein and
except as may be paid in connection with a Business Combination as contemplated
by the Prospectus.
2.19.4 INSIDERS' NASD AFFILIATION. Based on questionnaires
distributed to such persons, except as set forth on Schedule 2.19.4, no officer,
director or any beneficial owner of the Company's unregistered securities has
any direct or indirect affiliation or association with any NASD member.
2.20 [Reserved]
2.21 [Reserved]
2.22 [Reserved]
2.23 [Reserved]
2.24 OFFICERS' CERTIFICATE. Any certificate signed by any duly authorized
officer of the Company and delivered to you or to your counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
2.25 WARRANT AGREEMENT. The Company has entered into a warrant agreement
with respect to the Warrants and the Underwriter's Warrants with American Stock
Transfer & Trust Company substantially in the form filed as an exhibit to the
Registration Statement ("Warrant
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Agreement"), providing for, among other things, the payment of a warrant
solicitation fee as contemplated by Section 3.10 hereof.
2.26 AGREEMENTS WITH INITIAL STOCKHOLDERS.
2.26.1 INSIDER LETTERS. The Company has caused to be duly executed
a legally binding and enforceable agreement (except (i) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, (ii) as enforceability of any
indemnification or noncompete provision may be limited under the federal and
state securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought) annexed as EXHIBIT 10.2 to the Registration Statement ("Insider
Letter"), pursuant to which all of the Initial Stockholders of the Company agree
to certain matters.
2.26.2 ESCROW AGREEMENT. The Company has caused the Initial
Stockholders to enter into an escrow agreement ("Escrow Agreement") with
American Stock Transfer & Trust Company ("Escrow Agent") in form and substance
satisfactory to the Underwriter, whereby the Common Stock owned by the Initial
Stockholders will be held in escrow by the Escrow Agent, until after a Business
Combination (or six months thereafter in certain instances). During such escrow
period, the Initial Stockholders shall be prohibited from selling or otherwise
transferring such shares (except to spouses and children of Initial Stockholders
and trusts established for their benefit) but will retain the right to vote such
shares. The Escrow Agreement shall not be amended, modified or otherwise
changed without the prior written consent of Underwriter.
2.27 INVESTMENT MANAGEMENT TRUST AGREEMENT. The Company has entered into
the Trust Agreement with respect to certain proceeds of the offering in form and
substance satisfactory to the Underwriter.
2.28 UNDERWRITER'S PURCHASE OPTION. The Company has executed and delivered
the Underwriter's Purchase Option substantially in the form filed as an exhibit
to the Registration Statement.
2.29 COVENANTS NOT TO COMPETE. No Initial Stockholder of the Company is
subject to any non-competition agreement with any employer or prior employer
which could materially affect his ability to be an Initial Stockholder,
employee, officer and/or director of the Company.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees as follows:
3.1 AMENDMENTS TO REGISTRATION STATEMENT. The Company will deliver to the
Underwriter, prior to filing, any amendment or supplement to the Registration
Statement or Prospectus proposed to be filed after the Effective Date and not
file any such amendment or supplement to which the Underwriter shall reasonably
object in writing.
3.2 FEDERAL SECURITIES LAWS.
3.2.1 COMPLIANCE. During the time when a Prospectus is required
to be delivered under the Act, the Company will use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Public Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a Prospectus relating to the Public Securities
is required to be delivered under
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the Act, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or counsel for the Underwriter, the Prospectus, as then
amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriter promptly and
prepare and file with the Commission, subject to Section 3.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the Act.
3.2.2 FILING OF FINAL PROSPECTUS. The Company will file the
Prospectus (in form and substance satisfactory to the Underwriter) with the
Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 EXCHANGE ACT REGISTRATION. For a period of five years from
the Effective Date, or until such earlier time upon which the Company is
required to be liquidated, the Company will use its best efforts to maintain the
registration of the Units, Common Stock and Warrants under the provisions of the
Exchange Act.
3.3 BLUE SKY FILING. The Company will endeavor in good faith, in
cooperation with the Underwriter, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Underwriter may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Underwriter agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
3.4 DELIVERY TO UNDERWRITER OF PROSPECTUSES. The Company will deliver to
the Underwriter, without charge, from time to time during the period when the
Prospectus is required to be delivered under the Act or the Exchange Act such
number of copies of each Preliminary Prospectus and the Prospectus as the
Underwriter may reasonably request and, as soon as the Registration Statement or
any amendment or supplement thereto becomes effective, deliver to you two
original executed Registration Statements, including exhibits, and all post-
effective amendments thereto and copies of all exhibits filed therewith or
incorporated therein by reference and all original executed consents of
certified experts.
3.5 EFFECTIVENESS AND EVENTS REQUIRING NOTICE TO UNDERWRITER. The Company
will use its best efforts to cause the Registration Statement to remain
effective and will notify the Underwriter immediately and confirm the notice in
writing (i) of the effectiveness of the Registration Statement and any amendment
thereto, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding for that purpose, (iii) of the
issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Public Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the mailing and delivery to the Commission for filing of
any amendment or supplement to the Registration Statement or Prospectus, (v) of
the receipt of any comments or request for any additional information from the
Commission, and (vi) of the happening of any event during the period described
in Section 3.4 hereof which, in the judgment of the Company, makes any statement
of a material fact made in the Registration Statement or the Prospectus untrue
or which requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities commission shall enter
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a stop order or suspend such qualification at any time, the Company will make
every reasonable effort to obtain promptly the lifting of such order.
3.6 REVIEW OF FINANCIAL STATEMENTS. For a period of five years from the
Effective Date, or until such earlier upon which the Company is required to be
liquidated, the Company, at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit) the Company's
financial statements for each of the first three fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
Form 10-Q quarterly report and the mailing of quarterly financial information to
stockholders.
3.7 AFFILIATED TRANSACTIONS. The Company will not consummate a Business
Combination (as defined in the Registration Statement) with any entity which is
affiliated with any Initial Stockholder.
3.8 SECONDARY MARKET TRADING AND STANDARD & POOR'S. The Company will
apply to be included in Standard and Poor's Daily News and Corporation Records
Corporate Descriptions for a period of five years from the consummation of a
Business Combination. Promptly after the consummation of the offering, the
Company shall take such steps as may be necessary to obtain a secondary market
trading exemption for the Company's securities in the State of California. The
Company shall also take such other action as may be reasonably requested by the
Underwriter to obtain a secondary market trading exemption in such other states
as may be requested by the Underwriter.
3.9 NASDAQ MAINTENANCE. The Company will use its reasonable best efforts
to have the Public Securities quoted on the Nasdaq SmallCap or National Market
and will follow the Underwriter's reasonable instructions in that regard. In
the event that the Units, Common Stock and Warrants are quoted on Nasdaq, the
Company will use its best efforts to maintain such quotation by Nasdaq of the
Units, the Common Stock and, if outstanding, the Warrants and, if the Company
satisfies the initial listing standards for inclusion on the Nasdaq National
Market ("NM"), to apply for and maintain quotations by the NM of such securities
until ______________ or such earlier time upon which the Company is required to
be liquidated.
3.10 WARRANT SOLICITATION FEES. The Company hereby engages the
Underwriter, on a non-exclusive basis, as its agent for the solicitation of the
exercise of the Warrants. The Company, at its cost, will (i) assist the
Underwriter with respect to such solicitation, if requested by the Underwriter,
and (ii) at the Underwriter's request, provide the Underwriter, and direct the
Company's transfer and warrant agent to provide to the Underwriter, at the
Company's cost, lists of the record and, to the extent known, beneficial owners
of, the Warrants. Commencing one year from the Effective Date, the Company will
pay Underwriter a commission of five percent of the exercise price of the
Warrants for each Warrant exercised, payable on the date of such exercise, on
the terms provided for in the Warrant Agreement, only if permitted under the
rules and regulations of the NASD and only if the Underwriter has provided bona-
fide services to the Company in connection with the exercise of Warrants. The
Underwriter may engage sub-agents in its solicitation efforts. The Company
agrees to disclose the arrangement to pay such solicitation fees to Underwriter
in any prospectus used by the Company in connection with the registration of the
shares of Common Stock underlying the Warrants.
3.11 [Reserved]
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3.12 REPORTS TO THE UNDERWRITER.
3.12.1 PERIODIC REPORTS, ETC. For a period of five years from the
Effective Date or until such earlier time upon which the Company is required to
be liquidated, the Company will furnish to Underwriter (Attn: Deborah Schondorf
Novick, Senior Vice President, Investment Banking) and its counsel copies of
such financial statements and other periodic and special reports as the Company
from time to time furnishes generally to holders of any class of its securities,
and promptly furnish to Underwriter (i) a copy of each periodic report the
Company shall be required to file with the Commission, (ii) a copy of every
press release and every news item and article with respect to the Company or its
affairs which was released by the Company, (iii) copies of each Form SR, (iv) a
copy of each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared
by the Company, (v) five copies of each Registration Statement, (vi) a copy of
monthly statements, if any, setting forth such information regarding the
Company's results of operations and financial position (including balance sheet,
profit and loss statements and data regarding outstanding purchase orders) as is
regularly prepared by management of the Company and (vii) such additional
documents and information with respect to the Company and the affairs of any
future subsidiaries of the Company as Underwriter may from time to time
reasonably request.
3.12.2 TRANSFER SHEETS. For a period of five years from the
Closing Date or until such earlier time upon which the Company is required to be
liquidated, the Company shall retain a transfer and warrant agent acceptable to
the Underwriter ("Transfer Agent") and will furnish to the Underwriter at the
Company's sole expense such transfer sheets of the Company's securities as the
Underwriter may request, including the daily and monthly consolidated transfer
sheets of the Transfer Agent and Depository Trust Co.
3.12.3 SECONDARY MARKET TRADING SURVEY. Until such time as the
Public Securities are listed or quoted, as the case may be, on the NYSE, the
AMEX or NM, or until such earlier time upon which the Company is required to be
liquidated, the Company shall engage Graubard Mollen & Miller, for a one-time
fee of $5,000 payable on the Closing Date referred to below, to update and
deliver to the Underwriter on a timely basis, but in any event at the beginning
of each fiscal quarter, a written report detailing those states in which the
Public Securities may be traded in non-issuer transaction under the Blue Sky
laws of the fifty States ("Secondary Market Trading Survey").
3.13 OTC REPORTS. During such time as the Public Securities are quoted on
the OTC Bulletin Board and no other automated quotation system, the Company
shall provide to the Underwriter, at its expense, such reports published by the
NASD relating to price trading of the Public Securities, as the Underwriter
shall reasonably request.
3.14 DISQUALIFICATION OF FORM S-1. For a period equal to seven years from
the date hereof, the Company will not take any action or actions which may
prevent or disqualify the Company's use of Form S-1 (or other appropriate form)
for the registration of the Warrants and the Underwriter's Warrants under the
Act.
3.15 PAYMENT OF EXPENSES.
3.15.1 GENERAL EXPENSES RELATED TO THE OFFERING. The Company
hereby agrees to pay on each of the Closing Date and the Option Closing Date, if
any, to the extent not paid at Closing Date, all expenses incident to the
performance of the obligations of the Company under this Agreement, including
but not limited to (i) the preparation, printing, filing, delivery and mailing
(including the payment of postage with respect to such mailing) of the
Registration Statement, the Prospectus and the Preliminary Prospectuses and the
printing and mailing of this Agreement, the Underwriter's Memorandum and related
documents, including the cost of all copies thereof and any
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amendments thereof or supplements thereto supplied to the Underwriter in
quantities as may be required by the Underwriter, (ii) the printing, engraving,
issuance and delivery of the Units, the shares of Common Stock and the Warrants
included in the Units and the Underwriter's Purchase Option, including any
transfer or other taxes payable thereon, (iii) the qualification of the Public
Securities under state or foreign securities or Blue Sky laws, including the
filing fees under such Blue Sky laws, the costs of printing and mailing
"Preliminary Blue Sky Memorandum," and all amendments and supplements thereto,
fees and disbursements for the Underwriter's counsel and fees and disbursements
of local counsel, if any, retained for such purpose (such fees shall be capped
at $20,000 in the aggregate (of which $10,000 has previously been paid)), and a
one-time fee of $5,000 payable to Underwriter's counsel for the preparation of
the Secondary Market Trading Survey, (iv) filing fees, costs and expenses
(including fees of $5,000 and disbursements for the Underwriter's counsel)
incurred in registering the offering with the NASD, (v) costs of placing
"tombstone" advertisements in THE WALL STREET JOURNAL, THE NEW YORK TIMES and a
third publication to be selected by the Underwriter, (vi) fees and disbursements
of the transfer and warrant agent, (vii) the preparation, binding and delivery
of six transaction "bibles", in form and style reasonably satisfactory to the
Underwriter and transaction lucite cubes or similar commemorative items in a
style and quantity as reasonably requested by the Underwriter, (viii) the
Company's expenses associated with "due diligence" meetings arranged by the
Underwriter, (ix) any listing of the Public Securities on Nasdaq, and (x) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section
3.15.1. The Underwriter may deduct from the net proceeds of the offering
payable to the Company on the Closing Date, or the Option Closing Date, if any,
the expenses set forth herein to be paid by the Company to the Underwriter
and/or to third parties.
3.15.2 NONACCOUNTABLE EXPENSES. The Company further agrees that,
in addition to the expenses payable pursuant to Section 3.15.1, it will pay to
the Underwriter a nonaccountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Public
Securities, of which $25,000 has been paid to date, and the Company will pay the
balance on the Closing Date and any additional balance on the Option Closing
Date by certified or bank cashier's check or, at the election of the
Underwriter, by deduction from the proceeds of the offering contemplated herein.
If the offering contemplated by this Agreement is not consummated for any reason
whatsoever then the Company's liability for payment to the Underwriter of the
nonaccountable expense allowance shall be equal to the sum of the Underwriter's
actual out-of-pocket expenses (including, but not limited to, counsel fees,
"road-show" and due diligence expenses). The "road-show" and due diligence
expenses incurred by the Underwriter are only payable out of the Underwriter's
non-accountable expense allowance. The Underwriter shall retain such part of
the nonaccountable expense allowance previously paid as shall equal such actual
out-of-pocket expenses and refund the balance. If the amount previously paid is
insufficient to cover such actual out-of-pocket expenses, the Company shall
remain liable for and promptly pay any other actual out-of-pocket expenses.
3.15.3 EXPENSES RELATED TO BUSINESS COMBINATION. The Company
further agrees that, in the event the Underwriter assist the Company in trying
to obtain approval of a proposed Business Combination, the Company agrees to
reimburse the Underwriter for all out-of-pocket expenses, including, but not
limited to, "road-show" expenses.
3.16 APPLICATION OF NET PROCEEDS. The Company will apply the net proceeds
from the offering received by it in a manner consistent with the application
described under the caption "USE OF PROCEEDS" in the Prospectus.
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3.17 DELIVERY OF EARNINGS STATEMENTS TO SECURITY HOLDERS. The Company will
make generally available to its security holders as soon as practicable, but not
later than the first day of the fifteenth full calendar month following the
Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.18 NOTICE TO NASD. In the event any person or entity (regardless of any
NASD affiliation or association) is engaged to assist the Company in its search
for a merger candidate or to provide any other merger and acquisition services,
the Company will provide the following to the NASD prior to the consummation of
the Business Combination: (i) complete details of all services and copies of
agreements governing such services; and (ii) justification as to why the person
or entity providing the merger and acquisition services should not be considered
an "underwriter and related person" with respect to the Company's initial public
offering, as such term is defined in Part III, Section 44 of the Rules of Fair
Practice. The Company also agrees that proper disclosure of such arrangement or
potential arrangement will be made in the proxy statement which the Company will
file for purposes of soliciting stockholder approval for the Business
Combination.
3.19 STABILIZATION. Neither the Company, nor, to its knowledge, any of its
employees, directors or stockholders (without the consent of Underwriter) has
taken or will take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in, under
the Exchange Act, or otherwise, stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Units.
3.20 INTERNAL CONTROLS. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.21 ACCOUNTANTS. For a period of five years from the Effective Date or
until such earlier time upon which the Company is required to be liquidated, the
Company shall retain Arthur Andersen & Co. LLP, any "Big 6" accounting firm, or
other independent public accountants reasonably acceptable to Underwriter.
3.22 [Reserved]
3.23 [Reserved]
3.24 FORM 8-K. The Company shall, on the date hereof, retain its
independent public accountants to audit the financial statements of the Company
as of the Closing Date ("Audited Financial Statements") reflecting the receipt
by the Company of the proceeds of the initial public offering. As soon as the
Audited Financial Statements become available, the Company shall immediately
file a Current Report on Form 8-K with the Commission, which Report shall
contain the Company's Audited Financial Statements. Additionally, the Company
shall, within 15 days of the execution of a letter of intent for a Business
Combination, file a Form 8-K reflecting the terms of such transaction and shall
as promptly as possible thereafter, file such pro forma financial statements as
may be required by the Exchange Act.
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3.25 NASD. The Company shall advise the NASD if it is aware that any 5% or
greater stockholder of the Company becomes an affiliate or associated person of
an NASD member participating in the distribution of the Company's Public
Securities.
4. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase and pay for the Units, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof and to the performance by the
Company of its obligations hereunder and to the following conditions:
4.1 REGULATORY MATTERS.
4.1.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have become effective not later than 5:00 P.M., New York time,
on the date of this Agreement or such later date and time as shall be consented
to in writing by you, and, at each of the Closing Date and the Option Closing
Date, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for the purpose shall have been
instituted or shall be pending or contemplated by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Graubard Mollen & Miller,
counsel to the Underwriter.
4.1.2 NASD CLEARANCE. By the Effective Date, the Underwriter
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriter as described in the Registration
Statement.
4.1.3 NO BLUE SKY STOP ORDERS. No order suspending the sale of
the Securities in any jurisdiction designated by you pursuant to Section 3.3
hereof shall have been issued on either on the Closing Date or the Option
Closing Date, and no proceedings for that purpose shall have been instituted or
shall be contemplated.
4.2 COMPANY COUNSEL MATTERS.
4.2.1 EFFECTIVE DATE OPINION OF COUNSEL. On the Effective Date,
the Underwriter shall have received the favorable opinion of Parker Duryee
Rosoff & Haft, counsel to the Company, dated the Effective Date, addressed to
the Underwriter and in form and substance satisfactory to Graubard Mollen &
Miller, counsel to the Underwriter, to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such qualification
or licensing, except where the failure to qualify would not have a material
adverse effect on the Company.
(ii) All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto, and are
not subject to personal liability by reason of being such holders; and none of
such securities were issued in violation of the preemptive rights of any holders
of any security of the Company or similar contractual rights granted by the
Company. The outstanding options and warrants to purchase shares of Common
Stock constitute the valid and binding obligations of the Company, enforceable
in accordance with their terms. The authorized
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capital stock and outstanding options and warrants to purchase shares of Common
Stock conform to all statements relating thereto contained in the Registration
Statement and the Prospectus. The offers and sales of the outstanding Common
Stock and options and warrants to purchase shares of Common Stock were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky Laws or exempt from such registration requirements. The
authorized and outstanding capital stock of the Company is as set forth in the
Prospectus.
(iii) The Securities have been duly authorized and, when
issued and paid for, will be validly issued, fully paid and non-assessable; the
holders thereof are not and will not be subject to personal liability by reason
of being such holders. The Securities are not and will not be subject to the
preemptive rights of any holders of any security of the Company or, to the best
of such counsel's knowledge after due inquiry, similar contractual rights
granted by the Company. All corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. When issued, the Underwriter's Purchase Option, the Underwriter's
Warrants and the Warrants will constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby and such
Warrants, the Underwriter's Purchase Option, and the Underwriter's Warrants,
when issued, in each case, are enforceable against the Company in accordance
with their respective terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (c) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The certificates representing the
Securities are in due and proper form.
(iv) To the best of such counsel's knowledge, after due inquiry,
except as set forth in the Prospectus, no holders of any securities of the
Company or of any options, warrants or securities of the Company exercisable for
or convertible or exchangeable into securities of the Company have the right to
require the Company to register any such securities of the Company under the Act
or to include any such securities in a registration statement to be filed by the
Company.
(v) This Agreement, the Warrant Agreement, the Underwriter's
Purchase Option, the Trust Agreement and the Escrow Agreement have each been
duly and validly authorized and, when executed and delivered by the Company,
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, and, to such counsel's
knowledge, the Insider Letters have each been duly and validly executed and
constitute the valid and binding obligations of the individual signatories
thereto, enforceable against the Initial Stockholder in accordance with its
respective terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification provisions may be
limited under the federal and state securities laws, and (c) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(vi) The execution, delivery and performance of this Agreement,
the Underwriter's Purchase Option, the Warrant Agreement, the Escrow Agreement,
and the Trust Agreement, the issuance and sale of the Securities, the
consummation of the transactions contemplated hereby and thereby, and compliance
by the Company with the terms and provisions hereof and thereof, do not and will
not, with or without the giving of notice or the lapse of time, or both, (a) to
the best of such counsel's knowledge, conflict with, or result in a breach of,
any of the
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terms or provisions of, or constitute a default under, or result in the creation
or modification of any lien, security interest, charge or encumbrance upon any
of the properties or assets of the Company pursuant to the terms of, any
material mortgage, deed of trust, note, indenture, loan, contract, commitment or
other material agreement or instrument, to which the Company is a party or by
which the Company or any of its properties or assets may be bound, (b) result in
any violation of the provisions of the Certificate of Incorporation or the By-
Laws of the Company, or (c) to the best of such counsel's knowledge, violate any
statute or any judgment, order or decree, rule or regulation applicable to the
Company of any court, domestic or foreign, or of any federal, state or other
regulatory authority or other governmental body having jurisdiction over the
Company, its properties or assets.
(vii) The Registration Statement, each Preliminary Prospectus
and the Prospectus and any post-effective amendments or supplements thereto
(other than the financial statements included therein, as to which no opinion
need be rendered) comply as to form in all material respects with the
requirements of the Act and Regulations. The Securities and all other
securities issued or issuable by the Company conform in all material respects to
the description thereof contained in the Registration Statement and the
Prospectus. No statute or regulation or legal or governmental proceeding
required to be described in the Prospectus is not described as required, nor are
any contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement not so described or filed as required.
(viii) Counsel has participated in conferences with officers
and other representatives of the Company, representatives of the independent
public accountants for the Company and representatives of the Underwriter at
which the contents of the Registration Statement, the Prospectus and related
matters were discussed and although such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and Prospectus (except as
otherwise set forth in this opinion), no facts have come to the attention of
such counsel which lead them to believe that either the Registration Statement
or the Prospectus or any amendment or supplement thereto, as of the date of such
opinion contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and schedules and other financial and
statistical data included in the Registration Statement or Prospectus).
(ix) The Registration Statement is effective under the Act, and,
to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and proceedings for
that purpose have been instituted or are pending or threatened under the Act or
applicable state securities laws.
(x) To the best of such counsel's knowledge, there is no action,
suit or proceeding before or by any court of governmental agency or body,
domestic or foreign, now pending, or threatened against the Company, which might
result in any material and adverse change in the condition (financial or
otherwise), business or prospects of the Company, or might materially and
adversely affect the properties or assets thereof.
4.2.2 CLOSING DATE AND OPTION CLOSING DATE OPINION OF COUNSEL. On
each of the Closing Date and the Option Closing Date, if any, the Underwriter
shall have received the favorable opinion of Parker Duryee Rosoff & Haft,
counsel to the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriter and in form and substance
reasonably satisfactory to Graubard Mollen & Miller, counsel to the Underwriter,
confirming as of
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the Closing Date and, if applicable, the Option Closing Date, the statements
made by Parker Duryee Rosoff & Haft, in their opinion delivered on the Effective
Date.
4.2.3 RELIANCE. In rendering such opinion, such counsel may rely
(i) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
Underwriter's counsel) of other counsel reasonably acceptable to Underwriter's
counsel, familiar with the applicable laws, and (ii) as to matters of fact, to
the extent they deem proper, on certificates or other written statements of
officers of the Company and officers of departments of various jurisdiction
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to Underwriter's counsel if requested. The opinion of
counsel for the Company and any opinion relied upon by such counsel for the
Company shall include a statement to the effect that it may be relied upon by
counsel for the Underwriter in its opinion delivered to the Underwriter.
4.3 COLD COMFORT LETTER. At the time this Agreement is executed, and at
each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the Underwriter and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to Graubard
Mollen & Miller, counsel for the Underwriter, from Arthur Andersen & Co., LLP
dated, respectively, as of the date of this Agreement and as of the Closing Date
and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with respect to
the Company within the meaning of the Act and the applicable Regulations;
(ii) Stating that in their opinion the financial statements of the
Company included in the Registration Statement and Prospectus comply as to form
in all material respects with the applicable accounting requirements of the Act
and the published Regulations thereunder;
(iii) Stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the board of directors, consultations with officers and other
employees of the Company responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
which would lead them to believe that (a) the unaudited financial statements of
the Company included in the Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of the Act and
the Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited financial statements of the Company included in the
Registration Statement, (b) at a date not later than five days prior to the
Effective Date, Closing Date or Option Closing Date, as the case may be, there
was any change in the capital stock or long-term debt of the Company, or any
decrease in the stockholders' equity of the Company as compared with amounts
shown in the June 30, 1996 balance sheet included in the Registration Statement,
other than as set forth in or contemplated by the Registration Statement, or, if
there was any decrease, setting forth the amount of such decrease, and (c)
during the period from June 30, 1996 to a specified date not later than five
days prior to the Effective Date, Closing Date or Option Closing Date, as the
case may be, there was any decrease in revenues, net earnings or net earnings
per share of Common Stock, in each case as compared with the corresponding
period in the preceding year and as compared with the corresponding period in
the preceding quarter,
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other than as set forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior to the
Effective Date, the amount of liabilities of the Company (including a break-down
of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other financial
information pertaining to the Company set forth in the Prospectus in each case
to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately preceding five
year period brought to the attention of the Company's management any reportable
condition related to internal structure, design or operation as defined in the
Statement on Auditing Standards No. 60 -- "Communication of Internal Control
Structure Related Matters Noted in an Audit," in the Company's internal
controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 OFFICERS' CERTIFICATES.
4.4.1 OFFICERS' CERTIFICATE. At each of the Closing Date and the
Option Closing Date, if any, the Underwriter shall have received a certificate
of the Company signed by the Chairman of the Board or the President and the
Secretary of the Company, dated the Closing Date or the Option Closing Date, as
the case may be, respectively, to the effect that the Company has performed all
covenants and complied with all conditions required by this Agreement to be
performed or complied with by the Company prior to and as of the Closing Date,
or the Option Closing Date, as the case may be, and that the conditions set
forth in Section 4.5 hereof have been satisfied as of such date and that, as of
Closing Date and the Option Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct. In addition, the Underwriter will have received such other
and further certificates of officers of the Company as the Underwriter may
reasonably request.
4.4.2 SECRETARY'S CERTIFICATE. At each of the Closing Date and
the Option Closing Date, if any, the Underwriter shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force and
effect, (ii) that the resolutions relating to the public offering contemplated
by this Agreement are in full force and effect and have not been modified, (iii)
all correspondence between the Company or its counsel and the Commission, and
(iv) as to the incumbency of the officers of the Company. The documents
referred to in such certificate shall be attached to such certificate.
4.5 NO MATERIAL CHANGES. Prior to and on each of the Closing Date and the
Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving
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a prospective material adverse change in the condition or prospects or the
business activities, financial or otherwise, of the Company from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus, (ii) no action suit or proceeding, at law or in equity, shall have
been pending or threatened against the Company or any Initial Stockholder before
or by any court or federal or state commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may materially
adversely affect the business, operations, prospects or financial condition or
income of the Company, except as set forth in the Registration Statement and
Prospectus, (iii) no stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated or threatened by the Commission,
and (iv) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all material statements which are required to
be stated therein in accordance with the Act and the Regulations and shall
conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6 DELIVERY OF AGREEMENTS. On the Effective Date, the Company shall have
delivered to the Underwriter executed copies of the Underwriter's Purchase
Option, the Escrow Agreement and the Trust Agreement.
4.7 OPINION OF COUNSEL FOR THE UNDERWRITER. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Graubard Mollen & Miller, counsel to the Underwriter, and you shall have
received from such counsel a favorable opinion, dated the Closing Date and the
Option Closing Date, if any, with respect to such of these proceedings as you
may reasonably require. On or prior to the Effective Date, the Closing Date and
the Option Closing Date, as the case may be, counsel for the Underwriter shall
have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 4.7, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
4.8 SECONDARY MARKET TRADING SURVEY. On the Effective Date, the
Underwriter shall have received the Secondary Market Trading Survey from
Graubard Mollen & Miller.
5. INDEMNIFICATION.
5.1 INDEMNIFICATION OF THE UNDERWRITER.
5.1.1 GENERAL. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriter, its directors,
officers, agents and employees and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, against any and all loss, liability,
claim, damage and expense whatsoever (including but not limited to any and all
legal or other expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, whether arising out of any action between the Underwriter and the
Company or between the Underwriter and any third party or otherwise) to which
they or any of them may become subject under the Act, the Exchange Act or any
other statute or at common law or otherwise or under the laws of foreign
countries, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in (i) any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time each may be
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amended and supplemented); (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
the Company issued or issuable upon exercise of the Underwriter's Purchase
Option; or (iii) any application or other document or written communication (in
this Section 5 collectively called "application") executed by the Company or
based upon written information furnished by the Company in any jurisdiction in
order to qualify the Securities under the securities laws thereof or filed with
the Commission, any state securities commission or agency, Nasdaq or any
securities exchange; or the omission or alleged omission therefrom of a 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,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to the
Underwriter by or on behalf of the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any application, as the case may be. The
Company agrees promptly to notify the Underwriter of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the issue and sale of the Securities
or in connection with the Registration Statement or Prospectus.
5.1.2 PROCEDURE. If any action is brought against the Underwriter
or controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, such Underwriter shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of counsel
(subject to the reasonable approval of the Underwriter) and payment of actual
expenses. The Underwriter or controlling person shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of the Underwriter or such controlling person
unless (i) the employment of such counsel at the expense of the Company shall
have been authorized in writing by the Company in connection with the defense of
such action, or (ii) the Company shall not have employed counsel to have charge
of the defense of such action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to the Company (in
which case the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
the reasonable fees and expenses of not more than one additional firm of
attorneys selected by the Underwriter and/or controlling person shall be borne
by the Company. Notwithstanding anything to the contrary contained herein, if
the Underwriter or controlling person shall assume the defense of such action as
provided above, the Company shall have the right to approve the terms of any
settlement of such action which approval shall not be unreasonably withheld.
5.2 INDEMNIFICATION OF THE COMPANY. The Underwriter agrees to indemnify
and hold harmless the Company, its directors, officers and employees and agents
who control the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act against any and all loss, liability, claim,
damage and expense described in the foregoing indemnity from the Company to the
Underwriter, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to the
transactions effected by the Underwriter in connection with this Offering made
in any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any application, in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to the Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be
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sought against the Underwriter, such Underwriter shall have the rights and
duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the Underwriter by the
provisions of Section 5.1.2.
5.3 CONTRIBUTION.
5.3.1 CONTRIBUTION RIGHTS. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto 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
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriter shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriter, as incurred, in such proportions that the Underwriter is
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3, the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Public Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which Underwriter has
otherwise been required to pay in respect of such losses, liabilities, claims,
damages and expenses. For purposes of this Section, each director, officer and
employee of an Underwriter or the Company, as applicable, and each person, if
any, who controls the Underwriter or the Company, as applicable, within the
meaning of Section 15 of the Act shall have the same rights to contribution as
the Underwriter or the Company, as applicable.
5.3.2 CONTRIBUTION PROCEDURE. Within fifteen days after receipt
by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding which was effected
by such party seeking contribution on account of any settlement of any claim,
action or proceeding effected by such party seeking contribution without the
written consent of such contributing party. The contribution provisions
contained in this Section are intended to supersede, to the extent permitted by
law, any right to contribution under the Act, the Exchange Act or otherwise
available.
6. [Reserved]
22
<PAGE>
7. ADDITIONAL COVENANTS.
7.1 ATTENDANCE AT BOARD MEETINGS. For a period of three years from the
Effective Date, the Underwriter shall be permitted to select a designee to
attend all meetings of the Board of Directors, but who will not be entitled to
vote at such meetings. The Company agrees to give the Underwriter written
notice of each such meeting and to provide to the Underwriter with an agenda and
minutes of the meeting no later than it gives such notice and provides such
items to the other directors. The Company shall reimburse the designee of the
Underwriter for its out-of-pocket expenses incurred in connection with its
attendance at the Company's Board meetings, including, but not limited to, food,
lodging, transportation and any fees paid to directors for attending such
meetings.
7.2 ADDITIONAL SHARES OR OPTIONS. The Company hereby agrees that until
the Company consummates a Business Combination (as such term is defined in the
Registration Statement), it shall not issue any shares of Common Stock or any
options or other securities convertible into Common Stock, or any shares of
Preferred Stock which participate in any manner in the Trust Fund or which vote
as a class with the Common Stock on a Business Combination.
7.3 TRUST FUND WAIVER LETTERS. The Company hereby agrees that it will
not commence its due dilligence investigation of any Target Business (as such
term is defined in the Registration Statement) or obtain the services of any
vendor unless and until the Target Business or the vendor executes a waiver
letter in the form attached hereto as Exhibit A and B, respectively.
Furthermore, each officer and director of the Company shall execute a waiver
letter in the form attached hereto as EXHIBIT C.
7.4 INSIDER LETTERS. The Company shall not take any action or omit to
take any action which would cause a breach of any of the Insider Letters
executed between each Initial Stockholder and Underwriter.
7.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company shall not take
any action or omit to take any action which would cause the Company to be in
breach or violation of its Certificate of Incorporation or By-Laws.
7.6 BLUE SKY REQUIREMENTS. The Company shall provide counsel to the
Underwriter with ten copies of all proxy information and all related material
filed with the Commission in connection with a Business Combination concurrently
with such filing with the Commission. In addition, the Company shall furnish
any other state in which its initial public offering was registered, such
information as may be requested by such state.
7.7 FINDER'S FEES AND OTHER COMPENSATION. Except as provided in the
Prospectus, the Company shall not pay any of the Initial Stockholders or their
affiliates a finder's fee or other compensation in consideration of originating
a Business Combination. In addition, the Company will not remit to any Initial
Stockholder or its affiliates any compensation at any time for services rendered
to the Company prior to or concurrently with the consummation of a Business
Combination.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Dates and such representations, warranties and agreements of the
Underwriter and Company, including the indemnity agreements contained in Section
5 hereof, shall remain operative and in full force and
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<PAGE>
effect regardless of any investigation made by or on behalf of the Underwriter,
the Company or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Units to the Underwriter until the
earlier of the expiration of any applicable statute of limitations and the
seventh anniversary of the later of the Closing Date or the Option Closing Date,
if any, at which time the representations, warranties and agreements shall
terminate and be of no further force and effect.
9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
9.1 EFFECTIVE DATE. This Agreement shall become effective on the
Effective Date at the time the Registration Statement is declared effective by
the Commission.
9.2 TERMINATION. You shall have the right to terminate this Agreement at
any time prior to any Closing Date, (i) if any domestic or international event
or act or occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, the Boston Stock Exchange or in the over-the-counter market shall have
been suspended, or minimum or maximum prices for trading shall have been fixed,
or maximum ranges for prices for securities shall have been fixed, or maximum
ranges for prices for securities shall have been required on the over-the-
counter market by the NASD or by order of the Commission or any other government
authority having jurisdiction, or (iii) if the United States shall have become
involved in a war or major hostilities, or (iv) if a banking moratorium has been
declared by a New York State or federal authority, or (v) if a moratorium on
foreign exchange trading has been declared which materially adversely impacts
the United States securities market, or (vi) if the Company shall have sustained
a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage
or other calamity or malicious act which, whether or not such loss shall have
been insured, will, in your opinion, make it inadvisable to proceed with the
delivery of the Securities, or (vii) if Lawrence Burstein shall no longer serve
the Company in his present capacity, or (viii) if any of the Company's
representations, warranties or covenants hereunder are breached, or (ix) if
Underwriter shall have become aware after the date hereof of such a material
adverse change in the conditions or prospects of the Company, or such adverse
material change in general market conditions as in the Underwriter's judgment
would make it impracticable to proceed with the offering, sale and/or delivery
of the Securities or to enforce contracts made by the Underwriter for the sale
of the Securities.
9.3 EXPENSES. In the event that this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.15 hereof.
9.4 INDEMNIFICATION. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by, such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
10. MISCELLANEOUS.
10.1 NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed and shall be deemed given when so delivered or
telecopied and confirmed or if mailed, two days after such mailing:
24
<PAGE>
If to the Underwriter:
GKN Securities Corp.
61 Broadway, 12th Floor
New York, New York 10006
Attn: David M. Nussbaum, Chairman
Copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attn: David Alan Miller, Esq.
If to the Company:
Unity First Acquisition Corp.
245 Fifth Avenue, Suite 1500
New York, New York 10016
Attn: Lawrence Burstein, President
Copy to:
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
Attn: Ira I. Roxland, Esq.
10.2 HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
10.3 AMENDMENT. This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
10.4 ENTIRE AGREEMENT. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof, and supersede all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
10.5 BINDING EFFECT. This Agreement shall inure solely to the benefit of
and shall be binding upon the Underwriter, the Company and the controlling
persons, directors and officers referred to in Section 5 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.
10.6 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to conflict of laws. The Company hereby agrees that any action,
proceeding or claim against it arising out of, relating in any way to this
Agreement shall be brought and enforced in the courts of the State of New York
of the United States of America for the Southern District of New York, and
irrevocably submits to
25
<PAGE>
such jurisdiction, which jurisdiction shall be exclusive. The Company hereby
waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum. Any such process or summons to be served upon
the Company may be served by transmitting a copy thereof by registered or
certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 10 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the Company in any action,
proceeding or claim. The Company agrees that the prevailing party(ies) in any
such action shall be entitled to recover from the other party(ies) all of its
reasonable attorneys' fees and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor.
10.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
10.8 WAIVER, ETC. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this
Agreement shall be effective unless set forth in a written instrument executed
by the party or parties against whom or which enforcement of such waiver is
sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
UNITY FIRST ACQUISITION CORP.
By:
-------------------------------
Lawrence Burstein
President
Accepted on the date first
above written.
GKN SECURITIES CORP.
By:
--------------------------------------
Deborah L. Schondorf
Senior Vice President
26
<PAGE>
EXHIBIT A TO UNDERWRITING AGREEMENT
Unity First Acquisition Corp.
245 Fifth Avenue, Suite 1502
New York, New York 10016
Attn: Lawrence Burstein
President
Gentlemen:
Reference is made to the Final Prospectus of Unity First Acquisition
Corp. ("Unity"), dated _____________, 1996 ("Prospectus"). Capitalized terms
used and not otherwise defined herein shall have the meanings assigned to them
in Prospectus.
We have read the Prospectus and understand that Unity has established
the Trust Fund, initially in an amount of $___________ for the benefit of the
Public Stockholders and that Unity may disburse monies from the Trust Fund only
(i) to the Public Stockholders in the event of the redemption of their shares or
the liquidation of Unity or (ii) to Unity after it consummates a Business
Combination.
For and in consideration of Unity agreeing to evaluate the undersigned
for purposes of consummating a Business Combination with it, the undersigned
hereby agrees that it does not have any right, title, interest or claim of any
kind in or to any monies in the Trust Fund ("Claim") and hereby waives any Claim
it may have in the future as a result of, or arising out of, any negotiations,
contracts or agreements with Unity and will not seek recourse against the Trust
Fund for any reason whatsoever.
---------------------------------------
Print Name of Target Business
---------------------------------------
Authorized Signature of Target Business
<PAGE>
EXHIBIT B TO UNDERWRITING AGREEMENT
Unity First Acquisition Corp.
245 Fifth Avenue, Suite 1502
New York, New York 10016
Attn: Lawrence Burstein
President
Gentlemen:
Reference is made to the Final Prospectus of Unity First Acquisition
Corp. ("Unity"), dated __________, 1996 ("Prospectus"). Capitalized terms used
and not otherwise defined herein shall have the meanings assigned to them in
Prospectus.
We have read the Prospectus and understand that Unity has established
the Trust Fund, initially in an amount of $__________ for the benefit of the
Public Stockholders and that Unity may disburse monies from the Trust Fund only
(i) to the Public Stockholders in the event of the redemption of their shares or
the liquidation of Unity or (ii) to Unity after it consummates a Business
Combination.
For and in consideration of Unity engaging the services of the
undersigned, the undersigned hereby agrees that it does not have any right,
title, interest or claim of any kind in or to any monies in the Trust Fund
("Claim") and hereby waives any Claim it may have in the future as a result of,
or arising out of, any contracts or agreements with Unity and will not seek
recourse against the Trust Fund for any reason whatsoever.
----------------------------------
Print Name of Vendor
----------------------------------
Authorized Signature of Vendor
<PAGE>
EXHIBIT C TO UNDERWRITING AGREEMENT
Unity First Acquisition Corp.
245 Fifth Avenue, Suite 1502
New York, New York 10016
Attn: Lawrence Burstein
President
Gentlemen:
The undersigned officer or director of Unity First Acquisition Corp.
("Unity") hereby acknowledges that Unity has established the Trust Fund,
initially in an amount of $________ for the benefit of the Public Stockholders
and that Unity may disburse monies from the Trust Fund only (i) to the Public
Stockholders in the event of the redemption of their shares or the liquidation
of Unity or (ii) to Unity after it consummates a Business Combination.
The undersigned hereby agrees that it does not have any right, title,
interest or claim of any kind in or to any monies in the Trust Fund ("Claim")
and hereby waives any Claim it may have in the future as a result of, or arising
out of, any contracts or agreements with Unity and will not seek recourse
against the Trust Fund for any reason whatsoever.
Notwithstanding the foregoing, such waiver shall not apply to any
shares acquired by the undersigned in the public market.
__________________________________
Print Name of Officer/Director
__________________________________
Authorized Signature of Officer/Director
<PAGE>
CERTIFICATE OF INCORPORATION
OF
UNITY FIRST ACQUISITION CORP.
The undersigned, being of legal age, in order to form a corporation under
and pursuant to the laws of the State of Delaware, do hereby set forth as
follows:
FIRST: The name of the corporation is
UNITY FIRST ACQUISITION CORP.
SECOND: The address of the initial registered and principal office of
this corporation is this state is c/o United Corporate Services, Inc., 15 East
North Street, in the City of Dover, County of Kent, State of Delaware 19901 and
the name of the registered agent at said address is United Corporate Services,
Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the corporation laws of
the State of Delaware.
FOURTH: a) The corporation shall be authorized to issue the following
shares:
CLASS NUMBER OF SHARES PAR VALUE
Common 20,000,000 .0001
Preferred 5,000 . 01
b) The designations and the powers, preferences and rights, and
the qualifications or restrictions thereof are as follows:
<PAGE>
The Preferred shares shall be issued from time to time in one or more
series, with such distinctive serial designations as shall be stated and
expressed in the resolution or resolutions providing for the issue of such
shares from time to time adopted by the Board of Directors; and in such
resolution or resolutions providing for the issue of shares of each
particular series, the Board of Directors is expressly authorized to fix
the annual rate or rates of dividends for the particular series; the
dividend payment dates for the particular series and the date from which
dividends on all shares of such series issued prior to the record date for
the first dividend payment date shall be cumulative; the redemption price
or prices for the particular series; the voting powers for the particular
series; the rights, if any, of holders of the shares of the particular
series to convert the same into shares of any other series or class or
other securities of the corporation, with any provisions for the subsequent
adjustment of such conversion rights; and to classify or reclassify any
unissued preferred shares by fixing or altering from time to time any of
the foregoing rights, privileges and qualifications.
All the Preferred shares of any one series shall be identical with
each other in all respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon
shall be cumulative; and all Preferred shares shall be of equal rank,
regardless of series, and shall be identical in all respects except as to
the particulars fixed by the Board as hereinabove provided or as fixed
herein.
FIFTH: The name and address of the incorporator are as follows:
NAME ADDRESS
Ira Roxland 529 Fifth Avenue
New York, New York 10017
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and for further
definition, limitation and
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<PAGE>
regulation of the powers of the corporation and of its directors and
stockholders:
(1) The number of directors of the corporation shall be such as from
time to time shall be fixed by, or in the manner provided in the by-laws.
Election of directors need not be by ballot unless the by-laws so provide.
(2) The Board of Directors shall have power without the assent or
vote of the stockholders:
(a) To make, alter, amend, change, add to or repeal the by-laws
of the corporation; to fix and vary the amount to be reserved for any
proper purpose; to authorize and cause to be executed mortgages and
liens upon all or any part of the property of the corporation; to
determine the use and disposition of any surplus or net profits; and
to fix the times for the declaration and payment of dividends.
(b) To determine from time to time whether, and to what times
and places and under what conditions the accounts and books of the
corporation (other than the stock ledger) or any of them, shall be
open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act
for approval or ratification at any annual meeting of the stockholders or
at any meeting of the stockholders called for the purpose of considering
any such act or contract, and any contract or act that shall be approved or
be ratified by the vote of the holders of a majority of the stock of the
corporation which is represented in person or by proxy at such meeting and
entitled to vote thereat (provided that a lawful quorum of stockholders be
there represented in person or by proxy) shall be as valid and as binding
upon the corporation and upon all the stockholders as though it had been
approved or ratified by every stockholder of the corporation, whether or
not the contract or act would otherwise be open to legal attack because of
directors' interest, or for any other reason.
(4) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the corporation; subject, nevertheless, to the
provisions of the
3
<PAGE>
statutes of Delaware, of this certificate, and to any by-laws from time to
time made by the stockholders; provided, however, that no by-laws so made
shall invalidate any prior act of the directors which would have been valid
if such by-law had not been made.
SEVENTH: No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time. The corporation shall indemnify to the fullest
extent permitted by Sections 102(b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the corporation the power to indemnify.
EIGHTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or
4
<PAGE>
of any receiver or receivers appointed for this corporation under the provisions
of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
this corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths (3/4) in
value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this corporation as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
this corporation, as the case may be, and also on this corporation.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of perjury
this 28th day of May, 1996.
/s/ Ira I. Roxland
------------------------------------
Ira I. Roxland, Incorporator
5
<PAGE>
BY-LAWS
UNITY FIRST ACQUISITION CORP.
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETING. A meeting of stockholders shall be held
annually for the election of directors and the transaction of such other
business as is related to the purpose or purposes set forth in the notice of
meeting on such date as may be fixed by the Board of Directors, or if no date is
so fixed on the third Tuesday in December in each and every year, unless such
day shall fall on a legal holiday, in which case such meeting shall be held on
the next succeeding business day, at such time and at such place as may be fixed
by the Board of Directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose may be called by the Board of Directors, the Chairman of the Board,
the President or the Secretary, and shall be called by the Chairman of the
Board, the President or the Secretary at the written request of the holders of
record of a majority of the outstanding shares of the Corporation entitled to
vote at such meeting. Special meetings shall be held at such time as may be
fixed in the call and stated in the notices of meeting or waiver thereof. At
any special meeting only such business may be transacted as is related to the
purpose or purposes for which the meeting is convened.
SECTION 3. PLACE OF MEETINGS. Meetings of stockholders shall be held
at such place, within or without the State of Delaware or the United States of
America, as may be fixed in the call and stated in the notice of meeting or
waiver thereof.
SECTION 4. NOTICE OF MEETINGS: ADJOURNED MEETINGS. Notice of each
meeting of stockholders shall be given in writing and shall state the place,
date and hour of the meeting. The purpose or purposes for which the meeting is
called shall be stated in the notices of each special meeting and of each annual
meeting at which any business other than the election of directors is to be
transacted.
A copy of the notice of any meeting shall be given, personally or by mail,
not less then ten (10) nor more than sixty (60) days before the date of the
meeting, to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed given when deposited in the United States mail, with
postage thereon prepaid, directed to the stockholder at his address as it
appears on the record of stockholders.
<PAGE>
When a meeting is adjourned for less than thirty (30) days in any one
adjournment, it shall not be necessary to give any notice of the adjourned
meeting if the time and place to which the meeting is adjourned are announced at
the meeting at which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted on the original date
of the meeting. When a meeting is adjourned for thirty (30) days or more, notice
of the adjourned meeting shall be given as in the case of an original meeting.
SECTION 5. WAIVER OF NOTICE. The transactions of any meeting of
stockholders, however called and with whatever notice, if any, are as valid as
though had at a meeting duly held after regular call and notice, if: (a) all the
stockholders entitled to vote are present in person or by proxy and no objection
to holding the meeting is made by anyone so present, and if, either before or
after the meeting, each of the persons entitled to vote, not present in person
or by proxy, signed a written waiver of notice, or a consent to the holding of
the meeting, or an approval of the action taken as shown by the minutes thereof.
Whenever notice is required to be given to any stockholder, a written
waiver thereof signed by such stockholder, whether before or after the time
thereon stated, shall be deemed equivalent to such notice. Attendance of a
person at a meeting of stockholders shall constitute a waiver of notice of such
meeting, except when such stockholder attends for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of any meeting of stockholders need be
specified in any written waiver of notice thereof.
SECTION 6. QUALIFICATION OF VOTERS. Except as may be otherwise
provided in the Certificate of Incorporation, every stockholder of record shall
be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders for every share standing in his name on the record of stockholders.
SECTION 7. QUORUM. At any meeting of the stockholders the presence, in
person or by proxy, of the holders of a majority of the shares entitled to vote
thereat shall constitute a quorum for the transaction of any business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any stockholders.
The stockholders present may adjourn the meeting despite the absence of a
quorum.
SECTION 8. PROXIES. Every stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent without
2
<PAGE>
a meeting may authorize another person or persons to act for him by proxy.
Every proxy must be executed by the stockholder or his attorney-in-fact.
No proxy shall be valid after the expiration of three (3) years from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the stockholder executing it, except as otherwise provided
therein and as permitted by law. Except as otherwise provided in the proxy, any
proxy holder may appoint in writing a substitute to act in his place.
SECTION 9. VOTING. Except as otherwise required by law, directors
shall be elected by a plurality of the votes cast at a meeting of stockholders
by the holders of shares entitled to vote in the election.
Whenever any corporate action, other than the election of directors, is to
be taken by vote of the stockholders at a meeting, it shall, except as otherwise
required by law or the Certificate of Incorporation, be authorized by a majority
of the votes cast thereat, in person or by proxy.
SECTION 10. ACTION WITHOUT A MEETING. Whenever stockholders are
required or permitted to take any action at a meeting or by vote, such action
may be taken without a meeting, without prior notice and without a vote, by
consent in writing setting forth the action so taken, signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
SECTION 11. RECORD DATE. The Board of Directors is authorized to fix a
day not more than sixty (60) days nor less than ten (10) days prior to the day
of holding any meeting of stockholders as the day as of which stockholders
entitled to notice of and to vote at such meeting shall be determined; and only
stockholders of record on such day shall be entitled to notice or to vote at
such meeting.
SECTION 12. INSPECTORS OF ELECTION. The Chairman of any meeting of the
stockholders may appoint one or more Inspectors of Election and of Stockholders'
Votes. Any Inspector so appointed to act at any meeting of the stockholders,
before entering upon the discharge of his or her duties, shall be sworn
faithfully to execute the duties of an Inspector at such meeting with strict
impartiality, and according to the best of his or her ability.
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ARTICLE II
BOARD OF DIRECTORS
SECTION 1. POWER OF BOARD AND QUALIFICATION OF DIRECTORS. The business
and affairs of the Corporation shall be managed by the Board of Directors.
SECTION 2. NUMBER OF DIRECTORS. The number of directors constituting
the entire Board of Directors shall be such number not less than three (3) nor
more than fifteen (15) as may be fixed from time to time by resolution adopted
by the stockholders or by the Board.
SECTION 3. ELECTION AND TERM OF DIRECTORS. At each annual meeting of
stockholders, directors shall be elected to serve until the next annual meeting.
SECTION 4. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the Board of Directors, the Chairman of the
Board, the President or the Secretary of the Corporation. Such resignation
shall take effect at the time specified therein; and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 5. REMOVAL OF DIRECTORS. Any or all of the directors may be
removed with or without cause by vote of the stockholders.
SECTION 6. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by stockholders without cause may be filled by vote of a majority
of the directors then in office, although less than a quorum exists, or may be
filled by the stockholders. Vacancies occurring as a result of the removal of
directors by stockholders, without cause, shall be filled by the stockholders. A
director elected to fill a vacancy or a newly created directorship shall be
elected to hold office until the next annual meeting of stockholders.
SECTION 7. EXECUTIVE AND OTHER COMMITTEE OF DIRECTORS. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees,
each consisting of one or more directors, and each of which, to the extent
provided in the resolution, shall have all the authority of the Board to the
full extent authorized by law and including the power and authority to declare a
dividend or to authorize the issuance of stock.
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The Board of Directors may designate one or more directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee.
SECTION 8. COMPENSATION OF DIRECTORS. The Board of Directors shall
have authority to fix the compensation of directors for services in any
capacity, or to allow a fixed sum plus expenses, if any, for attendance at
meetings of the Board or of committees designated thereby.
SECTION 9. INTEREST OF DIRECTOR IN A TRANSACTION. (a) No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board or committee thereof
which authorized the contract or transaction, or solely because his or their
votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee, in good faith,
authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than as quorum; or
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved, in good faith, by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of Directors,
a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorized the contract or transaction.
ARTICLE III
MEETINGS OF THE BOARD
SECTION 1. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and
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places, within or without the State of Delaware, or the United States of
America, as may from time to time be fixed by the Board.
SECTION 2. SPECIAL MEETINGS; NOTICE; WAIVER. Special meetings of the
Board of Directors may be held at any time, place, within or without the State
of Delaware or the United States of America, upon the call of the Chairman of
the Board, the President or the Secretary, by oral, telegraphic or written
notice, duly given to or sent or mailed to each director not less than two (2)
days before such meeting. Special meetings shall be called by the Chairman of
the Board, the President or the Secretary on the written request of any two
directors.
Notice of a special meeting need not be given to any director who submits a
signed waiver or notice whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to him.
A notice, or waiver of notice, need not specify the purpose of any special
meeting of the Board of Directors.
SECTION 3. QUORUM; ACTION BY THE BOARD; ADJOURNMENT. At all meetings
of the Board of Directors, a majority of the whole Board shall constitute a
quorum for the transaction of business, except that when the number of directors
constituting the whole Board shall be an even number, one-half of that number
shall constitute a quorum.
The vote of a majority of the directors present at the time of the vote, if
a quorum is present at such time, shall be the act of the Board, except as may
be otherwise specifically provided by law or by the Certificate of Incorporation
or by these By-Laws.
A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place.
SECTION 4. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the Board, or any committee thereof, may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes or proceedings of the Board or committee, whether done before or after
the action so taken.
SECTION 5. ACTION TAKEN BY CONFERENCE TELEPHONE. Members of the Board
of Directors or any committee thereof may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
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ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The Board of Directors shall elect a President,
one or more Vice Presidents, a Secretary and a Treasurer of the Corporation and
from time to time may elect or appoint such other officers as it may determine.
Any two or more offices may be held by the same person.
Securities of other corporations held by the corporation may be voted by
any officer designated by the Board and, in the absence of any such designation,
by the President, any Vice President, the Secretary, or the Treasurer.
The Board may require any officer to give security for the faithful
performance of his duties.
SECTION 2. PRESIDENT. The President shall be the chief executive and
chief operating officer of the Corporation with all the rights and powers
incident to that position.
SECTION 3. VICE PRESIDENT. The Vice Presidents shall perform such
duties as may be prescribed or assigned to them by the Board of Directors, the
Chairman of the Board or President. In the absence of the President the
first-elected Vice President shall perform the duties of the President. In the
event of the refusal or incapacity of the President to function as such, the
first-elected Vice President shall perform the duties of the President until
such time as the Board of Directors elects a new President. In the event of the
absence, refusal or incapacity of the first-elected Vice President, the other
Vice Presidents, in order of their rank, shall so perform the duties of the
President; and the order of rank of such other Vice Presidents shall be
determined by the designated rank of their offices or, in the absence of such
designation, by seniority in the office of Vice President; provided that said
order or rank may be established otherwise by action of the Board of Directors.
SECTION 4. TREASURER. The Treasurer shall perform all the duties
customary to that office, and shall have the care and custody of the funds and
securities of the Corporation. He shall at all reasonable times exhibit his
books and accounts to any director upon application, and shall give such bond or
bonds for the faithful performance of his duties with such surety or sureties as
the Board of Directors from time to time may determine.
SECTION 5. SECRETARY. The Secretary shall act as secretary of and
shall keep the minutes of the Board of Directors and of the stockholders, have
the custody of the seal of the
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Corporation and perform all of the other duties usual to that office.
SECTION 6. ASSISTANT TREASURER AND ASSISTANT SECRETARY. Any Assistant
Treasurer or Assistant Secretary shall perform such duties as may be prescribed
or assigned to him by the Board of Directors, the Chairman of the Board, or the
President. An Assistant Treasurer shall give such bond or bonds for the
faithful performance of his duties with such surety or sureties as the Board of
Directors from time to time may determine.
SECTION 7. TERM OF OFFICE: REMOVAL. Each officer shall hold office
for such term as may be prescribed by the Board. Any officer may be removed at
any time by the Board with or without cause. The removal of an officer without
cause shall be without prejudice to his contract rights, if any. The election
or appointment of an officer shall not, of itself, create contract rights.
SECTION 8. COMPENSATION. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors.
ARTICLE V
SHARE CERTIFICATES
SECTION 1. FORM OF SHARE CERTIFICATES. The shares of the Corporation
shall be represented by certificates, in such form as the Board of Directors may
from time to time prescribe, signed by the Chairman of the Board, the President,
or a Vice President, and by the Secretary, an Assistant Secretary, the Treasurer
or an Assistant Treasurer, and shall be sealed with the seal of the Corporation
or a facsimile thereof. The signatures of the officers upon a certificate may
be facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the Corporation or its employees. In case
any such officer who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer at the date of issue.
SECTION 2. LOST CERTIFICATES. In case of the loss, theft, mutilation
or destruction of a stock certificate, a duplicate certificate will be issued by
the Corporation upon notification thereof and receipt of such proper indemnity
or assurances as the Board of Directors may require.
SECTION 3. TRANSFER OF SHARES. Transfers of shares of stock shall be
made upon the books of the Corporation by the registered holder in person or by
duly authorized attorney, upon
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surrender of the certificate or certificates for such shares properly endorsed.
SECTION 4. REGISTERED STOCKHOLDERS. Except as otherwise provided by
law, the Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends or
other distributions and to vote as such owner, and to hold such person liable
for calls and assessments, and shall not be bound to recognize any equitable or
legal claim to or interest in such shares on the part of any other person.
ARTICLE VI
INDEMNIFICATION
SECTION 1. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. Any person
made a party to an action by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he, his testator or intestate,
is or was a Director or officer of the Corporation shall be indemnified by the
Corporation against the reasonable expenses, including attorneys fees, actually
and necessarily incurred by him in connection with the defense of such action or
in connection with an appeal therein, to the fullest extent permitted by the
General Corporation Law or any successor thereto.
SECTION 2. ACTION OR PROCEEDING OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. Any person made or threatened to be made a party to an action or
proceeding other than one by or in the right of the Corporation to procure a
judgment in its favor, whether civil or criminal, including an action by or in
the right of any other corporation of any type or kind, domestic or foreign,
which any Director or officer of the Corporation served in any capacity at the
request of the Corporation, by reason of the fact that he, his testator or
intestate, was a Director or officer of the Corporation, or served such other
corporation in any capacity, shall be indemnified by the Corporation against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such Director or officer acted in good
faith for a purpose which he reasonably believed to be in the best interests of
the Corporation and, in criminal actions or proceedings, in which he had no
reasonable cause to believe that his conduct was unlawful. The termination of
any such civil or criminal action or proceeding by judgment, settlement,
conviction or upon a plea of NOLO CONTENDERE, or its equivalent, shall not in
itself create a presumption that any such Director or officer did not act in
good faith for a purpose which he reasonably believed to be in the best
interests of the
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Corporation or that he had reasonable cause to believe that his conduct was
unlawful.
SECTION 3. OPINION OF THE COUNSEL. In taking any action or making any
determination pursuant to this Article, the Board of Directors and each
Director, officer or employee, whether or not interested in any such action or
determination, may rely upon an opinion of counsel selected by the Board.
SECTION 4. OTHER INDEMNIFICATION; LIMITATION. The Corporation's
obligations under this Article shall not be exclusive or in limitation of but
shall be in addition to any other rights to which any such person may be
entitled under any other provision of these By-Laws, or by contract, or as a
matter of law, or otherwise. All of the provisions of this Article VI of the
By-Laws shall be valid only to the extent permitted by the Certificate of
Incorporation and the laws of the State of Delaware.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 1. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation and shall be in such form as the Board of
Directors may from time to time determine.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
the twelve month period prescribed by the Board of Directors.
SECTION 3. CHECKS AND NOTES. All checks and demands for money and
notes or other instrument evidencing indebtedness or obligations of the
Corporation shall be signed by such officer or officers or other person or
persons as shall be authorized from time to time by the Board of Directors.
ARTICLE VIII
AMENDMENTS
SECTION 1. POWER TO AMEND. By-Laws of the Corporation may be adopted,
amended or repealed by the Board of Directors, subject to amendment or repeal by
the stockholders entitled to vote thereon.
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THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES
THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT AS HEREIN
PROVIDED.
NOT EXERCISABLE PRIOR TO ___________, 1997. VOID AFTER 5:00 P.M. EASTERN TIME,
___________, 2002.
UNIT PURCHASE OPTION
FOR THE PURCHASE OF
125,000 UNITS
OF
UNITY FIRST ACQUISITION CORP.
1. PURCHASE OPTION.
THIS CERTIFIES THAT, in consideration of $.0008 per option duly paid
by or on behalf of ____________________ ("Holder"), as registered owner of this
Purchase Option, to Unity First Acquisition Corp. ("Company"), Holder is
entitled, at any time or from time to time at or after ________, 1997
("Commencement Date"), and at or before 5:00 p.m., Eastern Time, ________, 2002
("Expiration Date"), but not thereafter, to subscribe for, purchase and receive,
in whole or in part, up to One Hundred Twenty-Five Thousand (125,000) units
("Units") of the Company, each Unit consisting of one share of common stock of
the Company, $.0001 par value per share ("Common Stock"), and one Class A
redeemable common stock purchase warrant and Class B redeemable common stock
purchase warrant (collectively, "Warrants") expiring five years from the
effective date ("Effective Date") of the registration statement ("Registration
Statement") pursuant to which Units are offered for sale to the public
("Offering"). Each Warrant is the same as the warrants included in the Units
being registered for sale to the public by way of the Registration Statement
("Public Warrants"), except that it expires five years from the Effective Date.
If the Expiration Date is a day on which banking institutions are authorized by
law to close, then this Purchase Option may be exercised on the next succeeding
day which is not such a day in accordance with the terms herein. During the
period ending on the Expiration Date, the Company agrees not to take any action
that would terminate the Purchase Option. This Purchase Option is initially
exercisable at $6.60 per Unit so purchased; provided, however, that upon the
occurrence of any of the events specified in Section 6 hereof, the rights
granted by this Purchase Option, including the exercise price per Unit and the
number of Units (and shares of Common Stock and Warrants) to be received upon
such exercise, shall be adjusted as therein specified. The term "Exercise
Price" shall mean the initial exercise price or the adjusted exercise price,
depending on the context.
<PAGE>
2. EXERCISE.
2.1 EXERCISE FORM. In order to exercise this Purchase Option, the
exercise form attached hereto must be duly executed and completed and delivered
to the Company, together with this Purchase Option and payment of the Exercise
Price for the Units being purchased payable in cash. If the subscription rights
represented hereby shall not be exercised at or before 5:00 p.m., Eastern time,
on the Expiration Date this Purchase Option shall become and be void without
further force or effect, and all rights represented hereby shall cease and
expire.
2.2 LEGEND. Each certificate for the securities purchased under this
Purchase Option shall bear a legend as follows unless such securities have been
registered under the Act:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 ("Act") or applicable
state law. The securities may not be offered for sale, sold or
otherwise transferred except pursuant to an effective registration
statement under the Act, or pursuant to an exemption from registration
under the Act and applicable state law."
2.3 CASHLESS EXERCISE.
2.3.1 DETERMINATION OF AMOUNT. In lieu of the payment of the
Exercise Price in the manner required by Section 2.1, the Holder shall have the
right (but not the obligation) to pay the Exercise Price for the Securities
being purchased with this Purchase Option upon exercise by the surrender to the
Company of any exercisable but unexercised portion of this Purchase Option
having a "Value" (as defined below), at the close of trading on the last trading
day immediately preceding the exercise of this Purchase Option, equal to the
Exercise Price multiplied by the number of Units being purchased upon exercise
("Cashless Exercise Right"). The sum of (a) the number of Units being purchased
upon exercise of the non-surrendered portion of this Purchase Option pursuant to
this Cashless Exercise Right and (b) the number of Units underlying the portion
of this Purchase Option being surrendered, shall not in any event be greater
than the total number of Units purchasable upon the complete exercise of this
Purchase Option if the Exercise Price were paid in cash. The "Value" of the
portion of the Purchase Option being surrendered shall equal the remainder
derived from subtracting (a) the Exercise Price multiplied by the number of
Units underlying the portion of this Purchase Option being surrendered from
(b) the Market Price of the Units multiplied by the number of Units underlying
the portion of this Purchase Option being surrendered. As used herein, the term
"Market Price" at any date shall be deemed to be the last reported sale price of
the Units on such date, or, in case no such reported sale takes place on such
day, the average of the last reported sale prices for the immediately preceding
three trading days, in either case as officially reported by the principal
securities exchange on which the Units are listed or admitted to trading, or, if
the Units are not listed or admitted to trading on any national securities
exchange or if any such exchange on which the Units are listed is not its
principal trading market, the last reported sale price as furnished by the NASD
through the Nasdaq National Market or SmallCap Market, or, if applicable, the
OTC Bulletin Board, or if the Units are not listed or admitted to trading on any
of the foregoing, as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it;
provided, however, that if the Units are no longer quoted on the principal
trading market that the Common Stock is traded on, the Market Price of the Units
shall be equal to the last reported sale price of the Common Stock added to the
last reported sale price of the Public Warrants, as quoted on the principal
trading market for such securities determined as described above.
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2.3.2 MECHANICS OF CASHLESS EXERCISE. The Cashless Exercise Right
may be exercised by the Holder on any business day on or after the Commencement
Date and not later than the Expiration Date by delivering the Purchase Option
with a duly executed exercise form attached hereto with the cashless exercise
section completed to the Company, exercising the Cashless Exercise Right and
specifying the total number of Units the Holder will purchase pursuant to such
Cashless Exercise Right.
3. TRANSFER.
3.1 GENERAL RESTRICTIONS. The registered Holder of this Purchase Option,
by its acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Purchase Option prior to the Commencement Date to anyone other
than (i) an officer or director of GKN Securities Corp. ("GKN") or Selected
Dealer in connection with the Offering, or (ii) any such Selected Dealer. On
and after the Commencement Date, transfers to others may be made subject to
compliance with or exemptions from applicable securities laws. In order to make
any permitted assignment, the Holder must deliver to the Company the assignment
form attached hereto duly executed and completed, together with the Purchase
Option and payment of all transfer taxes, if any, payable in connection
therewith. The Company shall immediately transfer this Purchase Option on the
books of the Company and shall execute and deliver a new Purchase Option or
Purchase Options of like tenor to the appropriate assignee(s) expressly
evidencing the right to purchase the number of Units purchasable hereunder or
such portion of such number as shall be contemplated by any such assignment.
3.2 RESTRICTIONS IMPOSED BY THE ACT. The securities evidenced by this
Purchase Option shall not be transferred unless and until (i) the Company has
received the opinion of counsel for the Holder that the securities may be sold
pursuant to an exemption from registration under the Securities Act of 1933, as
amended ("Act"), the availability of which is established to the reasonable
satisfaction of the Company, or (ii) a registration statement or a post-
effective amendment to the Registration Statement relating to such securities
has been filed by the Company and declared effective by the Securities and
Exchange Commission.
4. NEW PURCHASE OPTIONS TO BE ISSUED.
4.1 PARTIAL EXERCISE OR TRANSFER. Subject to the restrictions in Section
3 hereof, this Purchase Option may be exercised or assigned in whole or in part.
In the event of the exercise or assignment hereof in part only, upon surrender
of this Purchase Option for cancellation, together with the duly executed
exercise or assignment form and funds sufficient to pay any transfer tax, the
Company shall cause to be delivered to the Holder without charge a new Purchase
Option of like tenor to this Purchase Option in the name of the Holder
evidencing the right of the Holder to purchase the number of Units purchasable
hereunder as to which this Purchase Option has not been exercised or assigned.
4.2 LOST CERTIFICATE. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Purchase Option and of reasonably satisfactory indemnification, the Company
shall execute and deliver a new Purchase Option of like tenor and date. Any
such new Purchase Option executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute an additional contractual obligation
on the part of the Company.
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5. REGISTRATION RIGHTS.
5.1 DEMAND REGISTRATION.
5.1.1 GRANT OF RIGHT. The Company, upon written demand ("Initial
Demand Notice") of the Holder(s) of at least 51% of the Purchase Options and/or
the underlying Units and/or the underlying securities ("Majority Holders"),
agrees to register on one occasion, all or any portion of the Purchase Options
requested by the Majority Holders in the Initial Demand Notice and all of the
securities underlying such Purchase Options, including the Common Stock, the
Warrants and the Common Stock underlying the Warrants (collectively, the
"Registrable Securities"). On such occasion, the Company will file a
registration statement or a post-effective amendment to the Registration
Statement covering the Registrable Securities within sixty days after receipt of
the Initial Demand Notice and use its best efforts to have such registration
statement or post-effective amendment declared effective as soon as possible
thereafter. Should this registration or the effectiveness thereof be delayed by
the Company, the exercisability of the Purchase Options shall be extended for a
period of time equal to the delay in registering the Registrable Securities;
provided, however, that such extension date shall not extend beyond five years
from the Effective Date. Moreover, if the Company willfully fails to comply
with the provisions of this Section 5.1.1, the Company shall, in addition to any
other equitable or other relief available to the Holder(s), be liable for any
and all incidental, special and consequential damages sustained by the
Holder(s). The demand for registration may be made at any time during a period
of four years beginning one year from the Effective Date. The Company covenants
and agrees to give written notice of its receipt of any Initial Demand Notice by
any Holder(s) to all other registered Holders of the Purchase Options and/or the
Registerable Securities within ten days from the date of the receipt of any such
Initial Demand Notice.
5.1.2 TERMS. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holders shall pay
any and all underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the sale of the
Registrable Securities. The Company agrees to use its reasonable best efforts
to qualify or register the Registrable Securities in such States as are
reasonably requested by the Majority Holder(s); provided, however, that in no
event shall the Company be required to register the Registrable Securities in a
State in which such registration would cause (i) the Company to be obligated to
qualify to do business in such State, or would subject the Company to taxation
as a foreign corporation doing business in such jurisdiction or (ii) the
principal stockholders of the Company to be obligated to escrow their shares of
capital stock of the Company. The Company shall cause any registration
statement or post-effective amendment filed pursuant to the demand rights
granted under Section 5.1.1 to remain effective for a period of nine consecutive
months from the effective date of such registration statement or post-effective
amendment.
5.2 "PIGGY-BACK" REGISTRATION.
5.2.1 GRANT OF RIGHT. In addition to the demand right of
registration, the Holders of the Purchase Options shall have the right for a
period of six years commencing one year from the Effective Date, to include the
Registrable Securities as part of any other registration of securities filed by
the Company (other than in connection with a transaction contemplated by Rule
145(a) promulgated under the Act or pursuant to Form S-8).
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5.2.2 TERMS. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holders shall pay
any and all underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the sale of the
Registrable Securities. In the event of such a proposed registration, the
Company shall furnish the then Holders of outstanding Registrable Securities
with not less than fifteen days written notice prior to the proposed date of
filing of such registration statement. Such notice to the Holders shall
continue to be given for each applicable registration statement filed (during
the period in which the Purchase Option is exercisable) by the Company until
such time as all of the Registrable Securities have been registered and sold.
The holders of the Registrable Securities shall exercise the "piggy-back" rights
provided for herein by giving written notice, within ten days of the receipt of
the Company's notice of its intention to file a registration statement. The
Company shall cause any registration statement filed pursuant to the above
"piggyback" rights to remain effective for at least nine months from the date
that the Holders of the Registrable Securities are first given the opportunity
to sell all of such securities.
5.3 GENERAL TERMS.
5.3.1 INDEMNIFICATION. The Company shall indemnify the Holder(s)
of the Registrable Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls such Holders within the meaning
of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of
1934, as amended ("Exchange Act"), against all loss, claim, damage, expense or
liability (including all reasonable attorneys' fees and other expenses
reasonably incurred in investigating, preparing or defending against litigation,
commenced or threatened, or any claim whatsoever whether arising out of any
action between the Underwriter and the Company or between the Underwriter and
any third party or otherwise) to which any of them may become subject under the
Act, the Exchange Act or otherwise, arising from such registration statement but
only to the same extent and with the same effect as the provisions pursuant to
which the Company has agreed to indemnify the Underwriter contained in Section 5
of the Underwriting Agreement. The Holder(s) of the Registrable Securities to
be sold pursuant to such registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, its officers
and directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
all loss, claim, damage, expense or liability (including all reasonable
attorneys' fees and other expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, in
writing, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in Section 5 of the
Underwriting Agreement pursuant to which the Underwriter has agreed to indemnify
the Company.
5.3.2 EXERCISE OF WARRANTS. Nothing contained in this Purchase
Option shall be construed as requiring the Holder(s) to exercise their Purchase
Options or Warrants prior to or after the initial filing of any registration
statement or the effectiveness thereof.
5.3.3 EXCLUSIVITY. The Company shall not permit the inclusion of
any securities other than the Registrable Securities to be included in any
registration statement filed pursuant to Section 5.1 hereof without the prior
written consent of the Majority Holders of the Registrable Securities.
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5.3.4 DOCUMENTS DELIVERED TO HOLDERS. The Company shall furnish
GKN, as representative of the Holders participating in any of the foregoing
offerings, a signed counterpart, addressed to the participating Holders, of (i)
an opinion of counsel to the Company, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under any underwriting
agreement related thereto), and (ii) a "cold comfort" letter dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriter in underwritten public offerings of securities. The Company shall
also deliver promptly to GKN, as representative of the Holders participating in
the offering, the correspondence and memoranda described below and copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the registration statement and permit GKN, as representative of the
Holders, to do such investigation, upon reasonable advance notice, with respect
to information contained in or omitted from the registration statement as it
deems reasonably necessary to comply with applicable securities laws or rules of
the National Association of Securities Dealers, Inc. ("NASD"). Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as GKN, as representative of the Holders, shall reasonably request.
The Company shall not be required to disclose any confidential information or
other records to GKN, as representative of the Holders, or to any other person,
until and unless such persons shall have entered into reasonable confidentiality
agreements (in form and substance reasonably satisfactory to the Company, with
the Company with respect thereto.
5.3.5 UNDERWRITING AGREEMENT. The Company shall enter into an
underwriting agreement with the managing underwriter, if any, selected by any
Holders whose Registrable Securities are being registered pursuant to this
Section 5, which managing underwriter shall be reasonably acceptable to the
Company. Such agreement shall be reasonably satisfactory in form and substance
to the Company, each Holder and such underwriter, and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the managing
underwriter. The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Registrable Securities and may, at
their option, require that any or all the representations, warranties and
covenants of the Company to or for the benefit of such underwriter shall also be
made to and for the benefit of such Holders. Such Holders shall not be required
to make any representations or warranties to or agreements with the Company or
the underwriter except as they may relate to such Holders and their intended
methods of distribution. Such Holders, however, shall agree to such covenants
and indemnification and contribution obligations for selling stockholders as are
customarily contained in agreements of that type used by the managing
underwriter. Further, such Holders shall execute appropriate custody agreements
and otherwise cooperate fully in the preparation of the registration statement
and other documents relating to any offering in which they include securities
pursuant to this Section 5. Each Holder shall also furnish to the Company such
information regarding itself, the Registrable Securities held by it, and the
intended method of
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disposition of such securities as shall be reasonably required to effect the
registration of the Registrable Securities.
5.3.6 RULE 144 SALE. Notwithstanding anything contained in this
Section 5 to the contrary, the Company shall have no obligation pursuant to
Sections 5.1 or 5.2 for the registration of Registrable Securities held by any
Holder (i) where such Holder would then be entitled to sell under Rule 144
within any three-month period (or such other period prescribed under Rule 144 as
may be provided by amendment thereof) all of the Registrable Securities then
held by such Holder, and (ii) where the number of Registrable Securities held by
such Holder is within the volume limitations under paragraph (e) of Rule 144
(calculated as if such Holder were an affiliate within the meaning of Rule 144).
5.3.7 SUPPLEMENTAL PROSPECTUS. Each Holder agrees, that upon
receipt of any notice from the Company of the happening of any event as a result
of which the prospectus included in the Registration Statement, as then in
effect, includes an 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 in light of the circumstances then existing, such Holder
will immediately discontinue disposition of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities until such
Holder's receipt of the copies of a supplemental or amended prospectus, and, if
so desired by the Company, such Holder shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
such destruction) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
6. ADJUSTMENTS.
6.1 ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES. The Exercise
Price and the number of Units underlying the Purchase Option shall be subject to
adjustment from time to time as hereinafter set forth:
6.1.1 STOCK DIVIDENDS - SPLIT-UPS. If after the date hereof, and
subject to the provisions of Section 6.4 below, the number of outstanding shares
of Common Stock is increased by a stock dividend payable in shares of Common
Stock or by a split-up of shares of Common Stock or other similar event, then,
on the effective day thereof, the number of securities issuable on exercise of
each Unit shall be increased in proportion to such increase in outstanding
shares.
6.1.2 AGGREGATION OF SHARES. If after the date hereof, and
subject to the provisions of Section 6.4, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, on the effective date
thereof, the number of securities issuable on exercise of each Unit shall be
decreased in proportion to such decrease in outstanding shares.
6.1.3 ADJUSTMENTS IN EXERCISE PRICE. Whenever the number of Units
purchasable upon the exercise of this Purchase Option is adjusted, as provided
in this Section 6.1, the Exercise Price shall be adjusted (to the nearest cent)
by multiplying such Exercise Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of Units purchasable
upon the exercise of this Purchase Option immediately prior to such adjustment,
and (y) the denominator of which shall be the number of Units so purchasable
immediately thereafter.
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6.1.4 REORGANIZATIONS, ETC. If after the date hereof, any capital
reorganization or reclassification of the Common Stock of the Company, or
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation or other similar
event shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, or sale, lawful and fair provision
shall be made whereby the Holders shall thereafter have the right to purchase
and receive, upon the basis and upon the terms and conditions specified in the
Unit Purchase Option and in lieu of the securities of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented thereby, such shares of stock, securities, or assets as may be
issued or payable with respect to or in exchange for the number of securities
equal to the number of securities immediately theretofore purchasable and
receivable upon the exercise of the rights represented by the Unit Purchase
Option, had such reorganization, reclassification, consolidation, merger, or
sale not taken place and in such event, appropriate provision shall be made with
respect to the rights and interests of the Holders to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Exercise Price and of the number of securities purchasable upon the exercise
of the Unit Purchase Option) shall thereafter be applicable, as nearly as may
be, to any share of stock, securities, or assets thereafter deliverable upon the
exercise hereof. The Company shall not effect any such consolidation, merger,
or sale unless, prior to the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger, or the
corporation purchasing such assets, shall assume, by written instrument executed
and delivered to the Holders its obligation to deliver such shares of stock,
securities, or assets which, in accordance with the foregoing provisions, such
Holders may be entitled to purchase.
6.1.5 CHANGES IN FORM OF PURCHASE OPTION. This form of Purchase
Option need not be changed because of any change pursuant to this Section, and
Purchase Options issued after such change may state the same Exercise Price and
the same number of Units as are stated in the Purchase Options initially issued
pursuant to this Agreement. The acceptance by any Holder of the issuance of new
Purchase Options reflecting a required or permissive change shall not be deemed
to waive any rights to an adjustment occurring after the Commencement Date or
the computation thereof.
6.2 [Intentionally Omitted]
6.3 SUBSTITUTE PURCHASE OPTION. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental Purchase Option providing that the holder of each
Purchase Option then outstanding or to be outstanding shall have the right
thereafter (until the stated expiration of such Purchase Option) to receive,
upon exercise of such Purchase Option, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation or merger,
by a holder of the number of shares of Common Stock of the Company for which
such Purchase Option might have been exercised immediately prior to such
consolidation, merger, sale or transfer. Such supplemental Purchase Option shall
provide for adjustments which shall be identical to the adjustments provided in
Section 6. The above provision of this Section shall similarly apply to
successive consolidations or mergers.
6.4 ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
or Warrants upon the exercise of
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the Purchase Option, nor shall it be required to issue scrip or pay cash in lieu
of any fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of Warrants, shares of Common Stock or other securities,
properties or rights.
7. RESERVATION AND LISTING. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of the Purchase Options or the Warrants, such number
of shares of Common Stock or other securities, properties or rights as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Purchase Options and payment of the Exercise Price therefor, all
shares of Common Stock and other securities issuable upon such exercise shall be
duly and validly issued, fully paid and non-assessable and not subject to
preemptive rights of any stockholder. The Company further covenants and agrees
that upon exercise of the Warrants underlying the Purchase Options and payment
of the respective Warrant exercise price therefor, all shares of Common Stock
and other securities issuable upon such exercises shall be duly and validly
issued, fully paid and non-assessable and not subject to preemptive rights of
any stockholder. As long as the Purchase Options shall be outstanding, the
Company shall use its best efforts to cause all (i) shares of Common Stock
issuable upon exercise of the Purchase Options and the Warrants, and (ii) the
Warrants underlying the Purchase Options to be listed (subject to official
notice of issuance) on all securities exchanges (or, if applicable on the Nasdaq
National Market or SmallCap Market) on which the Common Stock or the Public
Warrants issued to the public in connection herewith may then be listed and/or
quoted.
8. CERTAIN NOTICE REQUIREMENTS.
8.1 HOLDER'S RIGHT TO RECEIVE NOTICE. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Purchase Options and their exercise, any of the
events described in Section 8.2 shall occur, then, in one or more of said
events, the Company shall give written notice of such event at least fifteen
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution, conversion or exchange of securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of the
closing of the transfer books, as the case may be.
8.2 EVENTS REQUIRING NOTICE. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if 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 retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) the Company shall
offer to all the holders of its Common Stock any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant to subscribe
therefor, or (iii) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business shall be proposed.
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<PAGE>
8.3 NOTICE OF CHANGE IN EXERCISE PRICE. The Company shall, promptly after
an event requiring a change in the Exercise Price pursuant to Section 6 hereof,
send notice to the Holders of such event and change ("Price Notice"). The Price
Notice shall describe the event causing the change and the method of calculating
same and shall be certified as being true and accurate by the Company's
President and Chief Financial Officer.
8.4 TRANSMITTAL OF NOTICES. All notices, requests, consents and other
communications under this Purchase Option shall be in writing and shall be
deemed to have been duly made when hand delivered, or mailed by express mail or
overnight courier service: (i) if to the registered Holder of the Purchase
Option, to the address of such Holder as shown on the books of the Company, or
(ii) if to the Company, to following address or to such other address as the
Company may designate by notice to the Holders:
Unity First Acquisition Corp.
245 Fifth Avenue, Suite 1502
New York, New York 10016
Attn: Lawrence Burstein, President
9. MISCELLANEOUS.
9.1 AMENDMENTS. The Company and GKN may from time to time supplement or
amend this Purchase Option without the approval of any of the Holders in order
to cure any ambiguity, to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and GKN may deem necessary or desirable and which the Company
and GKN deem shall not adversely affect the interest of the Holders. All other
modifications or amendments shall require the written consent of and be signed
by the party against whom enforcement of the modification or amendment is
sought.
9.2 HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Purchase Option.
10. ENTIRE AGREEMENT. This Purchase Option (together with the other agreements
and documents being delivered pursuant to or in connection with this Purchase
Option) constitutes the entire agreement of the parties hereto with respect to
the subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
10.1 BINDING EFFECT. This Purchase Option shall inure solely to the
benefit of and shall be binding upon, the Holder and the Company and their
permitted assignees, respective successors, legal representative and assigns,
and no other person shall have or be construed to have any legal or equitable
right, remedy or claim under or in respect of or by virtue of this Purchase
Option or any provisions herein contained.
10.2 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Purchase Option shall
be governed by and construed and enforced in accordance with the laws of the
State of New York, without giving effect to conflict of laws. The Company
hereby agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Purchase Option shall be brought and enforced in the
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courts of the State of New York or of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any process or summons to be served upon the Company may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
8 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the Company in any action, proceeding or claim. The Company and
the Holder agree that the prevailing party(ies) in any such action shall be
entitled to recover form the other party(ies) all of its reasonable attorneys'
fees and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
10.3 WAIVER, ETC. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Purchase Option shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Purchase Option or any provision hereof or the right of the
Company or any Holder to thereafter enforce each and every provision of this
Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of
any of the provisions of this Purchase Option shall be effective unless set
forth in a written instrument executed by the party or parties against whom or
which enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver of
any other or subsequent breach, non-compliance or non-fulfillment.
10.4 EXECUTION IN COUNTERPARTS. This Purchase Option may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
IN WITNESS WHEREOF, the Company has caused this Purchase Option to be
signed by its duly authorized officer as of the _____th day of ________, 1996.
UNITY FIRST ACQUISITION CORP.
By: ____________________________
Lawrence Burstein
President
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Form to be used to exercise Purchase Option:
Unity First Acquisition Corp.
245 Fifth Avenue, Suite 1502
New York, New York 10016
Attn: Lawrence Burstein, President
Date:_________________, 199_
The undersigned hereby elects irrevocably to exercise the within
Purchase Option and to purchase ____ Units of Unity First Acquisition Corp. and
hereby makes payment of $____________ (at the rate of $_________ per Unit) in
payment of the Exercise Price pursuant thereto. Please issue the Common Stock
and Warrants as to which this Purchase Option is exercised in accordance with
the instructions given below.
OR
The undersigned hereby elects irrevocably to convert _________ of the
Units purchasable under the within Purchase Option into _________ shares of
Common Stock and ________ Warrants of Unity First Acquisition Corp. (based on a
"Market Price" of $___________). Please issue the Common Stock and Warrants in
accordance with the instructions given below.
______________________________
Signature
______________________________
Print Name
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name _____________________________________________________________
(Print in Block Letters)
Address __________________________________________________________
NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
<PAGE>
Form to be used to assign Purchase Option:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the
within Purchase Option):
FOR VALUE RECEIVED,______________________________________________
does hereby sell, assign and transfer unto ____________________________________
the right to purchase __________ Units of Unity First Acquisition Corp.
("Company") evidenced by the within Purchase Option and does hereby authorize
the Company to transfer such right on the books of the Company.
Dated: ___________________, 199_
______________________________
Signature
______________________________
Print Name
NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
<PAGE>
WARRANT AGREEMENT
Agreement made as of ___________, 1996, between Unity First Acquisition
Corp., a Delaware corporation, with offices at 245 Fifth Avenue, Suite 1500, New
York, New York 10016 ("Company"), and American Stock Transfer & Trust Company, a
New York corporation, with offices at 40 Wall Street, New York, New York 10005
(herein called "Warrant Agent").
WHEREAS, the Company has determined to issue and deliver up to (i)
1,437,500 Class A Redeemable Common Stock Purchase Warrants ("Class A Warrants")
and 1,437,500 Class B Redeemable Warrants ("Class B Warrants," together with the
Class A Warrants, the "Redeemable Warrants"), (ii) 100,000 non-redeemable
Class A warrants and 100,000 non-redeemable Class B warrants to the officers and
directors ("Directors' Warrants") and (iii) 125,000 redeemable Class A warrants
and 125,000 redeemable Class B warrants issued to GKN Securities Corp.
("Underwriter") or its designees ("Underwriter's Warrants," together with the
Redeemable Warrants and the Directors' Warrants, "Warrants") evidencing the
right of the holders thereof to purchase an aggregate of 3,325,000 shares of
common stock of the Company, $.0001 par value per share ("Common Stock"), which
Warrants are to be issued and delivered as part of units ("Units") as described
in the Company's Registration Statement on Form S-1, No. 333-__________,
declared effective __________, 1996 ("Registration Statement"); and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange, redemption and exercise of the
Warrants; and
WHEREAS, the Company desires to provide for the form and provisions of the
Warrants, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the Company, the
Warrant Agent, and the holders of the Warrants; and
WHEREAS, all acts and things have been done and performed which are
necessary to make the Warrants, when executed on behalf of the Company and
countersigned by or on behalf of the Warrant Agent, as provided herein, the
valid, binding and legal obligations of the Company, and to authorize the
execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties hereto agree as follows:
<PAGE>
1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the Warrant
Agent to act as agent for the Company for the Warrants, and the Warrant Agent
hereby accepts such appointment and agrees to perform the same in accordance
with the terms and conditions set forth in this Agreement.
2. WARRANTS.
2.1. FORM OF WARRANT. Each Class A Warrant and Class B Warrant,
respectively, shall be issued in registered form only, shall be in substantially
the forms of Exhibit A and Exhibit B hereto, shall be signed by, or bear the
facsimile signature of, the Chairman of the Board or President and Secretary or
Assistant Secretary of the Company and shall bear a facsimile of the Company's
seal. In the event the person whose facsimile signature has been placed upon any
Warrant shall have ceased to serve in the capacity in which such person signed
the Warrant before such Warrant is issued, it may be issued with the same effect
as if he had not ceased to be such at the date of issuance. No Warrant may be
exercised until it has been countersigned by the Warrant Agent as provided in
Section 2.3 hereof.
2.2. EFFECT OF COUNTERSIGNATURE. Unless and until countersigned by the
Warrant Agent pursuant to this Agreement, a Warrant shall be invalid and of no
effect.
2.3. EVENTS FOR COUNTERSIGNATURE. The Warrant Agent shall countersign a
Warrant only upon the occurrence of either of the following events:
(i) if the Warrant is to be issued in exchange or substitution for
one or more previously countersigned Warrants, as hereinafter provided, or
(ii) if the Company instructs the Warrant Agent to do so.
2.4. REGISTRATION.
2.4.1. WARRANT REGISTER. The Warrant Agent shall maintain books
("Warrant Register"), for the registration of original issuance and the
registration of transfer of the Warrants. Upon the initial issuance of the
Warrants, the Warrant Agent shall issue and register the Warrants in the names
of the respective holders thereof in such denominations and otherwise in
accordance with instructions delivered to the Warrant Agent by the Company.
2.4.2. REGISTERED HOLDER. Prior to due presentment for
registration of transfer of any Warrant, the Company and the Warrant Agent may
deem and treat the person in whose name such
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Warrant shall be registered upon the Warrant Register ("registered holder"), as
the absolute owner of such Warrant and of each Warrant represented thereby
(notwithstanding any notation of ownership or other writing on the Warrant
Certificate made by anyone other than the Company or the Warrant Agent), for the
purpose of any exercise thereof, and for all other purposes, and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
2.5. DETACHABILITY OF WARRANTS. The securities comprising the Units will
not be separately transferable until the consummation of a Business Combination.
"Business Combination" shall have the meaning ascribed to it in the Registration
Statement (as defined in Section 2.1.1. hereof).
3. TERMS AND EXERCISE OF REDEEMABLE WARRANTS
3.1. WARRANT PRICE. Each Class A Warrant and Class B Warrant shall, when
countersigned by the Warrant Agent, entitle the registered holder thereof,
subject to the provisions of such Warrant and of this Warrant Agreement, to
purchase from the Company the number of shares of Common Stock stated therein,
at the price of $5.50 and $7.50 per whole share, respectively, subject to the
adjustments provided in Section 4 hereof. The term "Warrant Price" as used in
this Warrant Agreement refers to the price per share at which Common Stock may
be purchased at the time a Warrant is exercised.
3.2. DURATION OF WARRANTS. A Warrant may be exercised only during the
period ("Exercise Period") commencing on the later of the consummation by the
Company of a Business Combination (as defined in the Company's Registration
Statement) or _________, 1997, and terminating on the earlier to occur of (i)
_________, 2002 or (ii) the date fixed for redemption of such Warrant as
provided in Section 6 of this Agreement. Each Warrant not exercised on or
before the Expiration Date shall become void, and all rights thereunder and all
rights in respect thereof under this Agreement shall cease at the close of
business on the Expiration Date. The Company in its sole discretion may extend
the duration of the Warrants by delaying the Expiration Date.
3.3. EXERCISE OF WARRANTS.
3.3.1. PAYMENT. A Warrant, when countersigned by the Warrant
Agent, may be exercised by the registered holder thereof by surrendering it, at
the office of the Warrant Agent, or at the office of its successor as Warrant
Agent, in the Borough of Manhattan, City and State of New York, with the
subscription form, as set forth in the Warrant and in substantially the forms of
Exhibit A and
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Exhibit B hereto, duly executed, and by paying in full, in lawful money of the
United States, in cash, good certified check or good bank draft payable to the
order of the Company, the Warrant Price for each full share of Common Stock as
to which the Warrant is exercised and any and all applicable taxes due in
connection with the exercise of the Warrant, the exchange of the Warrant for the
Common Stock, and the issuance of the Common Stock.
3.3.2. ISSUANCE OF CERTIFICATES. As soon as practicable after the
exercise of any Warrant, the Company shall issue to the registered holder of
such Warrant a certificate or certificates for the number of full shares of
Common Stock to which he is entitled, registered in such name or names as may be
directed by him, and if such Warrant shall not have been exercised in full, a
new countersigned Warrant for the number of shares as to which such Warrant
shall not have been exercised. Notwithstanding the foregoing, the Company shall
not be obligated to deliver any securities pursuant to the exercise of a Warrant
unless a registration statement under the Securities Act of 1933 with respect to
the securities is then currently effective. Warrants may not be exercised by,
or securities issued to, any registered holder in any state in which such
exercise would be unlawful.
3.3.3. VALID ISSUANCE. All shares of Common Stock issued upon the
proper exercise of a Warrant in conformity with this Agreement shall be validly
issued.
3.3.4. DATE OF ISSUANCE. Each person in whose name any such
certificate for shares of Common Stock is issued shall for all purposes be
deemed to have become the holder of record of such shares on the date on which
the Warrant was surrendered and payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
3.3.5. WARRANT SOLICITATION FEE.
(a) The Company has engaged the Underwriter as the exclusive
agent for the solicitation of the exercise of the Warrants. The Company has
also agreed to (i) assist the Underwriter with respect to such solicitation, if
requested by the Underwriter, and (ii) at the Underwriter's request, provide the
Underwriter and direct the Company's transfer and warrant agent to deliver to
the Underwriter, at the Company's cost, lists of the record and, to the extent
known, beneficial owners of, the Company's Warrants. Accordingly, the Company
hereby instructs the Warrant Agent to cooperate
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<PAGE>
with the Underwriter in every respect in connection with the Underwriter's
solicitation activities, including but not limited to providing to the
Underwriter, at the Company's cost, a list of record and beneficial holders of
the Warrants.
(b) If, upon the exercise of any Warrant (i) the market price of
the Company's Common Stock is greater than the then Warrant Price, (ii) the
exercise of the Warrant was solicited by the Underwriter, and (iii) the Warrant
was not held in a discretionary account, then the Warrant Agent, simultaneously
with the distribution of proceeds to the Company received upon exercise of the
Warrant(s) so exercised, shall, on behalf of the Company, pay from the proceeds
received upon exercise of the Warrant(s), a fee of 5% of the Warrant Price to
the Underwriter. The Underwriter and the Company may at any time during
business hours, examine the records of the Warrant Agent, including its ledger
of original Warrants certificates returned to the Warrant Agent upon exercise of
Warrants.
(c) The provisions of this Section 3.3.5. may not be modified,
amended or deleted without the prior written consent of the Underwriter.
3.3.6. DIRECTORS' WARRANTS. In connection with certain services to
be performed for the Company, the Company issued, in June 1996, 100,000 Class A
warrants and 100,000 Class B warrants which are identical to the Class A
Warrants and the Class B Warrants covered by this Agreement except that they are
non-redeemable and cannot be transferred or exercised until the consummation of
a Business Combination (as such term is defined in the Registration Statement).
Notwithstanding anything else to the contrary herein, the Directors' Warrants
may only be exercised after the consummation by the Company of a Business
Combination.
4. ADJUSTMENTS.
4.1. STOCK DIVIDENDS - SPLIT-UPS. If after the date hereof, and subject to
the provisions of Section 4.5 below, the number of outstanding shares of Common
Stock is increased by a stock dividend payable in shares of Common Stock or by a
split-up of shares of Common Stock or other similar event, then, on the
effective day thereof, such stock dividend or split-up, the number of shares
issuable on exercise of each Warrant shall be increased in proportion to such
increase in outstanding shares and the then applicable Warrant Price shall be
correspondingly decreased.
4.2. AGGREGATION OF SHARES. If after the date hereof, and subject to the
provisions of Section 4.5, the number of outstanding shares of Common Stock is
decreased by a consolidation, combination
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or reclassification of shares of Common Stock or other similar event, then,
after the effective date of such consolidation, combination or reclassification,
the number of shares issuable on exercise of each Warrant shall be decreased in
proportion to such decrease in outstanding shares and the then applicable
Warrant Price shall be correspondingly increased.
4.3. REORGANIZATION, ETC. If after the date hereof any capital
reorganization or reclassification of the Common Stock of the Company, or
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation or other similar
event shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, or sale, lawful and fair provision
shall be made whereby the Warrant holders shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in the Warrants and in lieu of the shares of Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented thereby, such shares of stock, securities, or assets as may
be issued or payable with respect to or in exchange for the number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented by the Warrants, had such reorganization,
reclassification, consolidation, merger, or sale not taken place and in such
event appropriate provision shall be made with respect to the rights and
interests of the Warrant holders to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Warrant Price
and of the number of shares purchasable upon the exercise of the Warrants) shall
thereafter be applicable, as nearly as may be in relation to any share of stock,
securities, or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger, or sale unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing such
assets, shall assume by written instrument executed and delivered to the Warrant
Agent the obligation to deliver to the Warrant holders such shares of stock,
securities, or assets as, in accordance with the foregoing provisions, such
holders may be entitled to purchase.
4.4. NOTICES OF CHANGES IN WARRANT. Upon every adjustment of the Warrant
Price or the number of shares issuable on exercise of a Warrant, the Company
shall give written notice thereof to the Warrant Agent, which notice shall state
the Warrant Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares purchasable at such price upon the exercise of a
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Upon the occurrence of any event
specified in Sections 4.1., 4.2., or 4.3., then, in
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any such event, the Company shall give written notice in the manner set forth
above of the record date for such dividend, distribution, or subscription
rights, or the effective date of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding up or issuance.
Such notice shall also specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution, or subscription
rights, or shall be entitled to exchange their Common Stock for stock,
securities, or other assets deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, winding
up or issuance. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of such event.
4.5. NO FRACTIONAL SHARES. Notwithstanding any provision contained in this
Warrant Agreement to the contrary, the Company shall not issue fractional shares
upon exercise of Warrants. If, by reason of any adjustment made pursuant to
this Section 4, the holder of any Warrant would be entitled, upon the exercise
of such Warrant, to receive a fractional interest in a share, the Company shall,
upon such exercise, purchase such fractional interest, determined as follows:
(i) If the Common Stock is listed on a National Securities Exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq National Market or Nasdaq SmallCap Market or the OTC
Bulletin Board, the current value shall be the last reported sale price of the
Common Stock on such exchange on the last business day prior to the date of
exercise of this Warrant or if no such sale is made on such day, the average of
the closing bid and asked prices for such day on such exchange; or
(ii) If the Common Stock is not listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last reported bid
and asked prices reported by the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of this Warrant; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current value shall not be an amount determined in such reasonable manner as may
be prescribed by the Board of Directors of the Company.
4.6. FORM OF WARRANT. The form of Warrant need not be changed because of
any adjustment pursuant to this Section 4, and Warrants issued after such
adjustment may state the same Warrant Price and the same number of shares as is
stated in the Warrants initially issued pursuant to this Agreement. However,
the Company may at any time in its sole discretion make any change in the form
of Warrant that the Company may deem appropriate and that does not affect the
substance thereof, and any Warrant thereafter issued or countersigned, whether
in exchange or substitution for an outstanding Warrant or otherwise, may be in
the form as so changed.
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5. TRANSFER AND EXCHANGE OF WARRANTS.
5.1. REGISTRATION OF TRANSFER. The Warrant Agent shall register the
transfer, from time to time, of any outstanding Warrant upon the Warrant
Register, upon surrender of such Warrant for transfer, properly endorsed with
signatures properly guaranteed and accompanied by appropriate instructions for
transfer. Upon any such transfer, a new Warrant representing an equal aggregate
number of Warrants shall be issued and the old Warrant shall be cancelled by the
Warrant Agent. The Warrant so cancelled shall be delivered by the Warrant Agent
to the Company from time to time upon request.
5.2. PROCEDURE FOR SURRENDER OF WARRANTS. Warrants may be surrendered to
the Warrant Agent, together with a written request for exchange or transfer, and
thereupon the Warrant Agent shall issue in exchange therefor one or more new
Warrants as requested by the registered holder of the Warrants so surrendered,
representing an equal aggregate number of Warrants; provided, however, that in
the event that a Warrant surrendered for transfer bears a restrictive legend,
the Warrant Agent shall not cancel such Warrant and issue new Warrants in
exchange therefor until the Warrant Agent has received an opinion of counsel for
the Company stating that such transfer may be made and indicating whether the
new Warrants must also bear a restrictive legend.
5.3. FRACTIONAL WARRANTS. The Warrant Agent shall not be required to
effect any registration of transfer or exchange which will result in the
issuance of a warrant certificate for a fraction of a warrant.
5.4. SERVICE CHARGES. No service charge shall be made for any exchange or
registration of transfer of Warrants.
5.5. WARRANT EXECUTION AND COUNTERSIGNATURE. The Warrant Agent is hereby
authorized to countersign and to deliver, in accordance with the terms of this
Agreement, the Warrants required to be issued pursuant to the provisions hereof,
and the Company, whenever required by the Warrant Agent, will supply the Warrant
Agent with Warrants duly executed on behalf of the Company for such purpose.
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6. REDEMPTION.
6.1. REDEMPTION. Subject to Section 3.3.6 hereof, each of the Class A
Warrants and Class B Warrants may be redeemed, at the option of the Company, as
a whole and not in part, after they become exercisable and prior to their
expiration, at the office of the Warrant Agent, upon the notice referred to in
Section 6.2., at the price of $.05 per Warrant ("Redemption Price"), provided
that the reported high bid price of the Common Stock if the Common Stock is
quoted on the OTC Bulletin Board (or the last sales price of the Common Stock is
quoted on the National Association of Securities Dealers Quotation System or
principally quoted on a securities exchange) has been at least $8.50 with
respect to the Class A Warrants and $10.50 with respect to the Class B Warrants
on each of the twenty (20) consecutive trading days ending on the third business
day prior to the date on which notice of redemption is given. Notwithstanding
the foregoing, the Company may not call the Redeemable Warrants for redemption
without the Underwriter's prior written consent. The provisions of this Section
6.1 may not be modified, amended or deleted without the prior written consent of
the Underwriter.
6.2. DATE FIXED FOR, AND NOTICE OF, REDEMPTION. In the event the Company
shall elect to redeem all or any part of the Redeemable Warrants, the Company
shall fix a date for the redemption. Notice of redemption shall be mailed by
first class mail, postage prepaid, by the Company not less than 30 days from the
date fixed for redemption to the registered holders of the Warrants to be
redeemed at their last address as they shall appear on the registration books.
Any notice mailed in the manner herein provided shall be conclusively presumed
to have been duly given whether or not the registered holder received such
notice.
6.3. EXERCISE AFTER NOTICE OF REDEMPTION. The Redeemable Warrants may be
exercised in accordance with Section 3 of this Agreement at any time after
notice of redemption shall have been given by the Company pursuant to
Section 6.2. hereof and prior to the time and date fixed for redemption. On and
after the redemption date, the record holder of the Redeemable Warrants shall
have no further rights except to receive, upon surrender of the Redeemable
Warrants, the redemption price.
7. OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANTS.
7.1. NO RIGHTS AS STOCKHOLDER. A Warrant does not entitle the registered
holder thereof to any of the rights of a stockholder of the Company, including,
without limitation, the right to receive
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<PAGE>
dividends, or other distributions, exercise any preemptive rights to vote or to
consent or to receive notice as stockholders in respect of the meetings of
stockholders or the election of directors of the Company or any other matter.
7.2. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANTS. If any Warrant is
lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on
such terms as to indemnity or otherwise as they may in their discretion impose
(which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination, tenor, and date as the
Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant shall
constitute a substitute contractual obligation of the Company, whether or not
the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time
enforceable by anyone.
7.3. RESERVATION OF COMMON STOCK. The Company shall at all times reserve
and keep available a number of its authorized but unissued shares of Common
Stock that will be sufficient to permit the exercise in full of all outstanding
Warrants issued pursuant to this Agreement.
7.4. REGISTRATION STATEMENT. The Company has filed with the Securities and
Exchange Commission the Registration Statement for the registration, under the
Securities Act of 1933, of, among others, the Warrants and the Common Stock
issuable upon exercise of the Warrants.
7.5. REGISTRATION OF COMMON STOCK. The Company agrees that prior to the
commencement of the Exercise Period, it shall file with the Securities and
Exchange Commission a post-effective amendment to the Registration Statement, or
a new registration statement, for the registration, under the Securities Act of
1933, of the Common Stock issuable upon exercise of the Warrants. In either
case, the Company will use its best efforts to cause the same to become
effective and to maintain the effectiveness of such registration statement until
the expiration of the Warrants in accordance with the provisions of this
Agreement. In connection with the filing of such registration statement, the
Company shall disclose in such amendment or new registration statement the
warrant solicitation fee payable to the Underwriter.
8. CONCERNING THE WARRANT AGENT AND OTHER MATTERS.
8.1. PAYMENT OF TAXES. The Company will from time to time promptly pay all
taxes and charges that may be imposed upon the Company or the Warrant Agent in
respect of the issuance or
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delivery of shares of Common Stock upon the exercise of Warrants, but the
Company shall not be obligated to pay any transfer taxes in respect of the
Warrants or such shares.
8.2. RESIGNATION, CONSOLIDATION, OR MERGER OF WARRANT AGENT.
8.2.1. APPOINTMENT OF SUCCESSOR WARRANT AGENT. The Warrant Agent,
or any successor to it hereafter appointed, may resign its duties and be
discharged from all further duties and liabilities hereunder after giving sixty
(60) days' notice in writing to the Company. If the office of the Warrant Agent
becomes vacant by resignation or incapacity to act or otherwise, the Company
shall appoint in writing a successor Warrant Agent in place of the Warrant
Agent. If the Company shall fail to make such appointment within a period of 30
days after it has been notified in writing of such resignation or incapacity by
the Warrant Agent or by the holder of the Warrant (who shall, with such notice,
submit his Warrant for inspection by the Company), then the holder of any
Warrant may apply to the Supreme Court of the State of New York for the County
of New York for the appointment of a successor Warrant Agent. Any successor
Warrant Agent, whether appointed by the Company or by such court, shall be a
corporation organized and existing or qualified to do business under the laws of
the State of New York, in good standing and having its principal office in the
Borough of Manhattan, City and State of New York, and authorized under such laws
to exercise corporate trust powers and subject to supervision or examination by
federal or state authority. After appointment, any successor Warrant Agent
shall be vested with all the authority, powers, rights, immunities, duties, and
obligations of its predecessor Warrant Agent with like effect as if originally
named as Warrant Agent hereunder, without any further act or deed; but if for
any reason it becomes necessary or appropriate, the predecessor Warrant Agent
shall execute and deliver, at the expense of the Company, an instrument
transferring to such successor Warrant Agent all the authority, powers, and
rights of such predecessor Warrant Agent hereunder; and upon request of any
successor Warrant Agent the Company shall make, execute, acknowledge, and
deliver any and all instruments in writing for more fully and effectually
vesting in and confirming to such successor Warrant Agent all such authority,
powers, rights, immunities, duties, and obligations.
8.2.2. NOTICE OF SUCCESSOR WARRANT AGENT. In the event a successor
Warrant Agent shall be appointed, the Company shall give notice thereof to the
predecessor Warrant Agent and the transfer agent for the Common Stock not later
than the effective date of any such appointment.
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8.2.3. MERGER OR CONSOLIDATION OF WARRANT AGENT. Any corporation
into which the Warrant Agent may be merged or with which it may be consolidated
or any corporation resulting from any merger or consolidation to which the
Warrant Agent shall be a party shall be the successor Warrant Agent under this
Agreement without any further act.
8.3. FEES AND EXPENSES OF WARRANT AGENT.
8.3.1. REMUNERATION. The Company agrees to pay the Warrant Agent
reasonable remuneration for its services as such Warrant Agent hereunder and
will reimburse the Warrant Agent upon demand for all expenditures that the
Warrant Agent may reasonably incur in the execution of its duties hereunder.
8.3.2. FURTHER ASSURANCES. The Company and the Warrant Agent agree
to perform, execute, acknowledge, and deliver or cause to be performed,
executed, acknowledged, and delivered all such further and other acts,
instruments, and assurances as may reasonably be required by the Warrant Agent
or the Company for the carrying out or performing of the provisions of this
Agreement.
8.4. LIABILITY OF WARRANT AGENT.
8.4.1. RELIANCE ON COMPANY STATEMENT. Whenever in the performance
of its duties under this Warrant Agreement, the Warrant Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a statement signed by the
President of the Company and delivered to the Warrant Agent. The Warrant Agent
may rely upon such statement for any action taken or suffered in good faith by
it pursuant to the provisions of this Agreement.
8.4.2. INDEMNITY. The Warrant Agent shall be liable hereunder only
for its own negligence or willful misconduct or any actions taken in bad faith.
The Company agrees to indemnify the Warrant Agent and save it harmless against
any and all liabilities, including judgments, costs and reasonable counsel fees,
for anything done or omitted by the Warrant Agent in the execution of this
Agreement except as a result of the Warrant Agent's negligence, willful
misconduct, or bad faith.
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8.4.3. EXCLUSIONS. The Warrant Agent shall have no responsibility
with respect to the validity of this Agreement or with respect to the validity
or execution of any Warrant (except its countersignature thereof); nor shall it
be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Warrant; nor shall it be responsible to
make any adjustments required under the provisions of Section 4. hereof or
responsible for the manner, method, or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment;
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Agreement or any Warrant or as to whether any shares
of Common Stock will when issued be valid and fully paid and nonassessable.
8.5. ACCEPTANCE OF AGENCY. The Warrant Agent hereby accepts the agency
established by this Agreement and agrees to perform the same upon the terms and
conditions herein set forth and among other things, shall account promptly to
the Company with respect to Warrants exercised and concurrently account for, and
pay to the Company, all moneys received by the Warrant Agent for the purchase of
shares of the Company's Common Stock through the exercise of Warrants.
9. MISCELLANEOUS PROVISIONS.
9.1. SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns.
9.2. NOTICES. Any notice, statement or demand authorized by this Warrant
Agreement to be given or made by the Warrant Agent or by the holder of any
Warrant to or by the Company shall be sufficiently given or made if sent by
certified mail, or private courier service, postage prepaid, addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:
Unity First Acquisition Corp.
245 Fifth Avenue, Suite 1500
New York, New York 10016
Attn: Lawrence Burstein, President
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with a copy to:
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
Attn: Ira I. Roxland, Esq.
- and -
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attn: David Alan Miller, Esq.
Any notice, statement or demand authorized by this Agreement to be given or made
by the holder of any Warrant or by the Company to or on the Warrant Agent shall
be sufficiently given or made if sent by certified mail or private courier
service, postage prepaid, addressed (until another address is filed in writing
by the Warrant Agent with the Company), as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10006
Attn: Compliance Department
9.3. APPLICABLE LAW. The validity, interpretation, and performance of this
Agreement and of the Warrants shall be governed in all respects by the laws of
the State of New York, without giving effect to conflict of laws. Each of the
Company and the Warrant Agent hereby agrees that any action, proceeding or claim
against it arising out of, relating in any way to this Agreement shall be
brought and enforced in the courts of the State of New York of the United States
of America for the Southern District of New York, and irrevocably submits to
such jurisdiction, which jurisdiction shall be exclusive. Each of the Company
and the Warrant Agent hereby waives any objection to such exclusive jurisdiction
and that such courts represent an inconvenient forum. Any such process or
summons to be served upon the Company or the Warrant Agent may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
9.2 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon each of the Company and the Warrant Agent in any action,
proceeding or claim. Each of the Company and the Warrant Agent agrees that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
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9.4. PERSONS HAVING RIGHTS UNDER THIS AGREEMENT. Nothing in this Agreement
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 parties hereto and the registered holders of the
Warrants and, for the purposes of Sections 3.3.5 and 6.1 hereof, the
Underwriter, any right, remedy, or claim under or by reason of this Warrant
Agreement or of any covenant, condition, stipulation, promise, or agreement
hereof. All covenants, conditions, stipulations, promises, and agreements
contained in this Warrant Agreement shall be for the sole and exclusive benefit
of the parties hereto and their successors and assigns and of the registered
holders of the Warrants. The parties hereto agree that the Underwriter is
intended to be a third-party beneficiary with respect to Sections 3.3.5 and 6.1,
with all legal rights and remedies available to it as fully as if it were a
party hereto.
9.5. EXAMINATION OF THE WARRANT AGREEMENT. A copy of this Agreement shall
be available at all reasonable times at the office of the Warrant Agent in the
Borough of Manhattan, City and State of New York, for inspection by the
registered holder of any Warrant. The Warrant Agent may require any such holder
to submit his Warrant for inspection by it.
9.6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
9.7. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and are not part of this Warrant Agreement and shall not affect the
interpretation thereof.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto under their respective corporate seals as of the day and year first above
written.
Attest: UNITY FIRST ACQUISITION CORP.
By:
- ---------------------- ---------------------------
Lawrence Burstein
President
Corporate Seal AMERICAN STOCK TRANSFER &
Attest: TRUST COMPANY
By:
- ----------------------- --------------------------
George Karfunkel
Executive Vice President
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UNITY FIRST ACQUISITION CORP.
1996 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Unity First Acquisition Corp. 1996 Stock
Option Plan (the "Plan") is to encourage key employees of Unity First
Acquisition Corp. (the "Company") and of any present or future parent or
subsidiary of the Company (collectively, "Related Corporations") and other
individuals who render services to the Company or a Related Corporation, by
providing opportunities to participate in the ownership of the Company and its
future growth through (a) the grant of options which qualify as "incentive stock
options" ("ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"); and (b) the grant of options which do not qualify as ISOs
("Non-Qualified Options"). Both ISOs and Non-Qualified Options are referred to
hereafter individually as an "Option" and collectively as "Options." As used
herein, the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation," respectively, as those terms are defined in Section
424 of the Code.
2. ADMINISTRATION OF THE PLAN.
(a) BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered
by the Board of Directors of the Company (the "Board") or by a committee
appointed by the Board (the "Committee"); provided that the Plan shall be
administered: (i) to the extent required by applicable regulations under Section
162(m) of the Code, by two or more "outside directors" (as defined in applicable
regulations thereunder) and (ii) to the extent required by Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, or any
successor provision ("Rule 16b-3"), by a disinte-rested administrator or
administrators within the meaning of Rule 16b-3. All references in this Plan to
the "Committee" shall mean the Board if no Committee has been appointed. Subject
to ratification of the grant or authorization of each Option by the Board (if so
required by applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine to whom (from among the
class of employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and entities eligible
under paragraph 3 to receive Non-Qualified Options) Non-Qualified Options may be
granted; (ii) determine the time or times at which Options shall be granted;
(iii) determine the purchase price of shares subject to each Option, which
prices shall not be less than the minimum price specified in paragraph 6; (iv)
determine whether each Option granted shall be an ISO or a Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or times when each
<PAGE>
Option shall become exercisable and the duration of the exercise period; (vi)
extend the period during which outstanding Options may be exercised; (vii)
determine whether restrictions are to be imposed on shares subject to Options
and the nature of such restrictions, if any, and (viii) interpret the Plan and
prescribe and rescind rules and regulations relating to it. If the Committee
determines to issue a Non-Qualified Option, it shall take whatever actions it
deems necessary, under Section 422 of the Code and the regulations promulgated
thereunder, to ensure that such Option is not treated as an ISO. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Option granted under it shall be final unless otherwise determined by
the Board. The Committee may from time to time adopt such rules and regulations
for carrying out the Plan as it may deem advisable. No member of the Board or
the Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it.
(b) COMMITTEE ACTIONS. The Committee may select one of its members as
its chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts of a
majority of the members of the Committee at a meeting at which a quorum is
present, or acts reduced to or approved in writing by all the members of the
Committee (if consistent with applicable state law), shall be the valid acts of
the Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(c) GRANT OF OPTIONS TO BOARD MEMBERS. Subject to the provisions of
the first sentence of paragraph 2(a) above, if applicable, Options may be
granted to members of the Board. All grants of Options to members of the Board
shall in all other respects be made in accordance with the provisions of this
Plan applicable to other eligible persons. Consistent with the provisions of the
first sentence of Paragraph 2(a) above, members of the Board who either (i) are
eligible to receive grants of Options pursuant to the Plan or (ii) have been
granted Options may vote on any matters affecting the administration of the Plan
or the grant of any Options pursuant to the Plan, except that no such member
shall act upon the granting to himself or herself of Options, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board during which action is taken with respect to the granting to such
member of Options.
(d) EXCULPATION. No member of the Board shall be personally liable
for monetary damages for any action taken or any failure to take any action in
connection with the administration of
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the Plan or the granting of Options under the Plan, provided that this
subparagraph 3(c) shall apply to (i) any breach of such member's duty of loyalty
to the Company or its stockholders, (ii) acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law, (iii) acts or
omissions that would result in liability under Section 174 of the General
Corporation Law of the State of Delaware, as amended, and (iv) any transaction
from which the member derived an improper personal benefit.
(e) INDEMNIFICATION. Service on the Committee shall constitute
service as a member of the Board. Each member of the Committee shall be
entitled without further act on his or her part to indemnity from the Company to
the fullest extent provided by applicable law and the Company's Certificate of
Incorporation and/or By-laws in connection with or arising out of any action,
suit or proceeding with respect to the administration of the Plan or the
granting of Options thereunder in which he or she may be involved by reason of
his or her being or having been a member of the Committee, whether or not he or
she continues to be a member of the Committee at the time of the action, suit or
proceeding.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options may be granted
to any employee, officer or director (whether or not also an employee) or
consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an Option. The granting of any Option to any individual or entity shall
neither entitle that individual or entity to, nor disqualify such individual or
entity from, participation in any other grant of Options.
4. STOCK. The stock subject to Options shall be authorized but
unissued shares of Common Stock of the Company, par value $.0001 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 187,500, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part, the shares of Common Stock subject to such Option shall again be
available for grants of Options under the Plan.
5. GRANTING OF OPTIONS. Options may be granted under the Plan at any
time on or after May 30, 1996 and prior to May 30, 2006. The date of grant of an
Option under the Plan will be the date specified by the Committee at the time it
grants the Option; provided, however, that such date shall not be prior to the
date on
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which the Committee acts to approve the grant. Options granted under the Plan
are intended to qualify as performance based compensation to the extent required
under proposed Treasury Regulation Section 1.162-27.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
(a) PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per share
specified in the agreement relating to each Non-Qualified Option granted under
the Plan shall in no event be less than the minimum legal consideration required
therefor under the laws of any jurisdiction in which the Company or its
successors in interest may be organized. Non-Qualified Options granted under the
Plan, with an exercise price less than the fair market value per share of Common
Stock on the date of grant, are intended to qualify as performancebased
compensation under Section 162(m) of the Code and any applicable regulations
thereunder. Any such Non-Qualified Options granted under the Plan shall be
exercisable only upon the attainment of a preestablished, objective performance
goal established by the Committee.
(b) PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less than the
fair market value per share of Common Stock on the date of such grant. In the
case of an ISO to be granted to an employee owning stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date of grant.
For purposes of determining stock ownership under this paragraph, the rules of
Section 424(d) of the Code shall apply.
(c) $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee
may be granted Options treated as ISOs only to the extent that, in the aggregate
under this Plan and all incentive stock option plans of the Company and any
Related Corporation, ISOs do not become exercisable for the first time by such
employee during any calendar year with respect to stock having a fair market
value (determined at the time the ISOs were granted) in excess of $1 00,000. The
Company intends to designate any Options granted in excess of such limitation as
Non-Qualified Options.
(d) DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the date of grant or, if the prices or
quotes discussed in this sentence are unavailable for such date, the last
business day for which such prices or quotes are available prior to the date of
grant and shall mean (i) the average (on that date) of the high and
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low prices of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq National Market, if the Common Stock is
not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the Nasdaq National Market. If the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market value"
shall mean the fair value of the Common Stock as determined by the Committee
after taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the Common Stock
in private transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(b). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
(a) VESTING. The Option shall either be fully exercisable on the
date of grant or shall become exercisable thereafter in such installments as the
Committee may specify.
(b) FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable, it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
(c) PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
(d) ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option
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<PAGE>
becomes exercisable; provided that the Committee shall not, without the consent
of an optionee, accelerate the permitted exercise date of any installment of any
Option granted to any employee as an ISO (and not previously converted into a
Non-Qualified Option pursuant to paragraph 16) if such acceleration would
violate the annual vesting limitation contained in Section 422(d) of the Code,
as described in paragraph 6(c).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability or as
otherwise specified in paragraph 10, no further installments of his or her ISOs
shall become exercisable, and his or her ISOs shall terminate on the earlier of
(a) ninety (90) days after the date of termination of his or her employment, or
(b) their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any BONA FIDE leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A BONA FIDE leave of absence with the written approval of
the Committee shall not be considered an interruption of employment under this
paragraph 9, provided that such written approval contractually obligates the
Company or any Related Corporation to continue the employment of the optionee
after the approved period of absence. ISOs granted under the Plan shall not be
affected by any change of employment within or among the Company and Related
Corporations, so long as the optionee continues to be an employee of the Company
or any Related Corporation. Nothing in the Plan shall be deemed to give any
grantee of any Option the right to be retained in employment or other service by
the Company or any Related Corporation for any period of time.
10. DEATH; DISABILITY; BREACH.
(a) DEATH. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his or her death, any ISO owned by
such optionee may be exercised, to the extent otherwise exercisable on the date
of death, by the estate, personal representative or beneficiary who has acquired
the ISO by will or by the laws of descent and distribution, until the earlier of
(i) the specified expiration date of the ISO or (ii) one (1) year from the date
of the optionee's death.
(b) DISABILITY. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her
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disability, such optionee shall have the right to exercise any ISO held by him
or her on the date of termination of employment, for the number of shares for
which he or she could have exercised it on that date, until the earlier of (i)
the specified expiration date of the ISO or (ii) one (1) year from the date of
the termination of the optionee's employment. For the purposes of the Plan, the
term "disability" shall mean "permanent and total disability" as defined in
Section 22(e)(3) of the Code or any successor statute.
(c) BREACH. If an ISO optionee ceases to be employed by the Company
and all Related Corporation by reason of a finding by the Committee, after full
consideration of the facts presented on behalf of both the Company and the
Optionee, that the ISO optionee has breached his or her employment or service
contract with the Company or any Related Corporation, or has been engaged in
disloyalty to the Company or any Related Corporation, then, in such event, in
addition to immediate termination of the Option, the ISO optionee shall
automatically forfeit all shares for which the Company has not yet delivered
share certificates upon refund by the Company of the exercise price of such
Option. Notwithstanding anything herein to the contrary, the Company may
withhold delivery of share certificates pending the resolution of any inquiry
that could lead to a finding resulting in a forfeiture.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
grantee except by will, by the laws of descent and distribution or, in the case
of Non-Qualified Options only, pursuant to a valid domestic relations order.
Except as set forth in the previous sentence, during the lifetime of a grantee
each Option shall be exercisable only by such grantee.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
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<PAGE>
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or substantially all
of the Company's assets or otherwise (an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, either (i)
make appropriate provision for the continuation of such Options by substituting
on an equitable basis for the shares then subject to such Options either (A) the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (B) shares of stock of the surviving
corporation or (C) such other securities as the Successor Board deems
appropriate, the fair market value of which shall approximate the fair market
value of the shares of Common Stock subject to such Options immediately
preceding the Acquisition; or (ii) upon written notice to the optionees, provide
that all Options must be exercised, to the extent then exercisable, within a
specified number of days of the date of such notice, at the end of which period
the Options shall terminate; or (iii) terminate all Options in exchange for a
cash payment equal to the excess of the fair market value of the shares subject
to such Options (to the extent then exercisable) over the exercise price
thereof.
(c) RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph (c) above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise the securities he or she would
have received if he or she had exercised such Option prior to such
recapitalization or reorganization.
(d) MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to ISOs
shall be made only after the Committee, after
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<PAGE>
consulting with counsel for the Company, determines whether such adjustments
would constitute a "modification" of such ISOs (as that term is defined in
Section 424 of the Code) or would cause any adverse tax consequences for the
holders of such ISOs. If the Committee determines that such adjustments made
with respect to ISOs would constitute a modification of such ISOs or would cause
adverse tax consequences to the holders, it may refrain from making such
adjustments.
(e) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
(f) ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(g) FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
(h) ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs (a), (b) or (c) above, the class and aggregate number of shares
set forth in paragraph 4 hereof that are subject to Options which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code,
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<PAGE>
(d) at the discretion of the Committee and consistent with applicable law,
through the delivery of an assignment to the Company of a sufficient amount of
the proceeds from the sale of the Common Stock acquired upon exercise of the
Option and an authorization to the broker or selling agent to pay that amount to
the Company, which sale shall be at the participant's direction at the time of
exercise, or (e) at the discretion of the Committee, by any combination of (a),
(b), (c) and (d) above. If the Committee exercises its discretion to permit
payment of the exercise price of an ISO by means of the methods set forth in
clauses (b), (c), (d) or (e) of the preceding sentence, such discretion shall be
exercised in writing at the time of the grant of the ISO in question. The holder
of an Option shall not have the rights of a shareholder with respect to the
shares covered by such Option until the date of issuance of a stock certificate
to such holder for such shares. Except as expressly provided above in paragraph
13 with respect to changes in capitalization and stock dividends, no adjustment
shall be made for dividends or similar rights for which the record date is
before the date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on May
30, 1996, subject, with respect to the validation of ISOs granted under the
Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained on or prior to May 30, 1997, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on May 30, 2006 (except as to Options outstanding on that
date). Subject to the provisions of paragraph 5 above, Options may be granted
under the Plan prior to the date of stockholder approval of the Plan. The Board
may terminate or amend the Plan in any respect at any time, except that, without
the approval of the stockholders obtained within 12 months before or after the
Board adopts a resolution authorizing any of the following actions: (a) the
total number of shares that may be issued under the Plan may not be increased
(except by adjustment pursuant to paragraph 13); (b) the benefits accruing to
participants under the Plan may not be materially increased; (c) the
requirements as to eligibility for participation in the Plan may not be
materially modified; (d) the provisions of paragraph 3 regarding eligibility for
grants of ISOs may not be modified; (e) the provisions of paragraph 6(b)
regarding the exercise price at which shares may be offered pursuant to ISOs may
not be modified (except by adjustment pursuant to paragraph 13); (f) the
expiration date of the Plan may not be extended; and (g) the Board may not take
any action which would cause the Plan to fail to comply with Rule 16b-3. Except
as otherwise provided in this paragraph 15, in no event may action of the Board
or stockholders alter or impair the rights of a grantee, without such grantee's
consent, under any Option previously granted to such
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grantee.
16. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
17. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
18. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non-
Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the grant of an Award, (iii) the
making of a Purchase of Common Stock for less than its fair market value, or
(iv) the vesting or transferability of restricted stock or securities acquired
by exercising an Option, on the grantee's making satisfactory arrangement for
such withholding. Such arrangement may include payment by the grantee in cash or
by check of the amount of the withholding taxes or, at the discretion of the
Committee, by the grantee's delivery of previously held shares of Common Stock
or the withholding from the shares of Common Stock otherwise deliverable upon
exercise of a Option shares having an aggregate fair market value equal to the
amount of such withholding taxes.
19. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example,
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the Company may be required to send tax information statements to employees and
former employees that exercise ISOs under the Plan, and the Company may be
required to file tax information returns reporting the income received by
grantees of Options in connection with the Plan.
20. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of Delaware.
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ESCROW AGREEMENT dated as of the day of
, 1996 (the "Agreement") by and among UNITY
FIRST ACQUISITION CORP., a Delaware corporation
(the "Company"), LAWRENCE BURSTEIN, NORMAN LEBEN,
JOHN CATTIER, CRICKET SERVICES, LTD.,
BARRY RIDINGS and UNITY VENTURE CAPITAL ASSOCIATES
LTD. (collectively, the "Company Principals") and
AMERICAN STOCK TRANSFER & TRUST COMPANY, a
New York limited purpose trust company
(the "Escrow Agent").
-----------------------------
The Company has entered into an Underwriting Agreement dated ,
1996 (the "Underwriting Agreement") with GKN Securities Corp. (the
"Underwriter"), pursuant to which, among other matters, the Underwriter has
agreed to purchase from the Company up to an aggregate of 1,437,500 units,
including 187,500 units subject to the Underwriters' over-allotment option (the
"Units"), each Unit to consist of (i) one (1) share of the Company's Common
Stock, par value $.0001 per share, (ii) one (1) Class A Redeemable Common Stock
Purchase Warrant and (iii) one (1) Class B Redeemable Common Stock Purchase
Warrant, all as more fully described in the Company's definitive Prospectus
dated , 1996 comprising part of the Company's Registration Statement on
Form S-1 under the Securities Act of 1933, as amended (File No. 33- ),
declared effective on , 1996 (the "Prospectus").
The Company Principals have agreed as a condition of the consummation of
the sale of the Units to deposit their shares of Common Stock of the Company, as
set forth opposite their respective names in Exhibit A attached hereto
(collectively the "Escrow Shares"), in escrow as hereinafter provided.
The Company and the Company Principals desire that the Escrow Agent accept
the Escrow Shares, in escrow, to be held and disbursed as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. APPOINTMENT OF ESCROW AGENT. The Company and the Company Principals
hereby appoint the Escrow Agent to act in accordance with and subject to the
terms of this Agreement, and the Escrow Agent hereby accepts such appointment
and agrees to act in accordance with and subject to such terms.
<PAGE>
2. DEPOSIT OF ESCROW SHARES. On or before the Closing Date of the sale
of the Units (as defined in the Underwriting Agreement), each of the Company
Principals shall deliver to the Escrow Agent certificates, either endorsed in
blank or accompanied by stock powers endorsed in blank, in either instance with
signatures guaranteed by a commercial bank or a member of the New York Stock
Exchange, Inc. representing his respective Escrow Shares, to be held and
disbursed subject to the terms and condi- tions of this Agreement.
3. DISBURSEMENT OF THE ESCROW ACCOUNT. Upon the earlier of (i) written
notification from the Company to the Escrow Agent of the occurrence of a
Business Combination (as such term is defined in the Prospectus) or (ii) the
liquidation of the Company, the Escrow Agent shall disburse the Escrow Shares
to the Company Principals in accordance with their respective interests therein
as set forth upon the aforementioned Exhibit A, whereupon the Escrow Agent shall
be released form further liability hereunder.
4. RIGHTS OF COMPANY PRINCIPALS IN ESCROW SHARES. The Company Principals
shall retain all of their rights as stockholders of the Company during such
period as the Escrow Shares shall be retained by the Escrow Agent pursuant to
this Agreement including, without limitation, the right to vote such shares and
to receive cash dividends payable thereon, if any. No sale, transfer or other
disposition may be made of any or all of such shares, except by gift to a member
of Company Principal's immediate family; by transfer to a trust, IRA or 401(k)
plan, as defined under ERISA, whereby the beneficiary is the Company Principal
or a member of Company Principal's immediate family; by virtue of the laws of
descent and distribution upon death of any Company Principal; or pursuant to a
qualified domestic relations order; PROVIDED, HOWEVER, that such permissive
transfers may be implemented only upon the respective transferees' written
agreement to be likewise bound by the terms and conditions of this Agreement.
5. CONCERNING THE ESCROW AGENT.
5.1 The Escrow Agent shall not be liable for any action taken or
omitted by it, or any action suffered by it to be taken or omitted, in good
faith and in the exercise of its own best judgment, and may rely conclusively
and shall be protected in acting upon any order, notice, demand, certificate,
opinion or advice of counsel (including counsel chosen by the Escrow Agent),
statement, instrument, report or other paper or document (not only as to its due
execution and the validity and effectiveness of its provisions, but also as to
the truth and acceptability of any information therein contained) which is
believed by the Escrow Agent to be genuine and to be signed or presented by the
proper
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person or persons. The Escrow Agent shall not be bound by any notice or demand,
or any waiver, modification, termination or rescission of this Agreement unless
evidenced by a writing delivered to the Escrow Agent signed by the proper party
or parties and, if the duties or rights of the Escrow Agent are affected, unless
it shall have given its prior written consent thereto.
5.2 The Escrow Agent shall not be responsible for the sufficiency or
accuracy, the form of, or the execution, validity, value or genuineness of, any
document or property received, held or delivered by it hereunder, or of any
signature or endorsement thereon, or for any lack of endorsement thereon, or for
any description therein, nor shall the Escrow Agent be responsible or liable in
any respect on account of the identity, authority or rights of the persons
executing or delivering or purporting to execute or deliver any document or
property paid or delivered by the Escrow Agent pursuant to the provisions
hereof. The Escrow Agent shall not be liable for any loss which may be incurred
by reason of any investment of any monies or properties which it holds
hereunder.
5.3 The Escrow Agent shall have the right to assume in the absence of
written notice to the contrary from the proper person or persons that a fact or
an event by reason of which an action would or might be taken by the Escrow
Agent does not exist or has not occurred, without incurring liability for any
action taken or omitted, in good faith and in the exercise of its own best
judgment, in reliance upon such assumption.
5.4 The Escrow Agent shall be indemnified and held harmless by the
Company and the Company Principals, jointly and severally, from and against any
expenses, including counsel fees and disbursements, or loss suffered by the
Escrow Agent in connection with any action, suit or other proceeding involving
any claim, or in connection with any claim or demand, which in any way directly
or indirectly, arises out of or relates to this Agreement, the services of the
Escrow Agent hereunder, the monies or other property held by it hereunder or any
such expense or loss. Promptly after the receipt by the Escrow Agent of notice
of any demand or claim or the commencement of any action, suit or proceeding,
the Escrow Agent shall, if a claim in respect thereof shall be made against the
other parties hereto, notify such parties thereof in writing; but the failure by
the Escrow Agent to give such notice shall not relieve any party from any
liability which such party may have to the Escrow Agent hereunder. In the event
of the receipt of such notice, the Escrow Agent, in its sole discre- tion, may
commence an action in the nature of interpleader in an appropriate court to
determine ownership or disposition of the Escrow Shares or it may deposit the
Escrow Shares with the clerk of any appropriate court or it may retain the
Escrow Shares pending receipt of a final, non-appealable order of a court having
jurisdiction over all of the parties hereto directing to whom and
3
<PAGE>
under what circumstances the Escrow Shares are to be disbursed and delivered.
5.5 Notwithstanding any obligation to make payments and deliveries
hereunder, the Escrow Agent may retain and hold for such time as it deems
necessary such amount of monies or property as it shall from time to time in its
sole discretion deem sufficient to indemnify itself for any loss or expense or
for any amounts due it. For the purposes hereof, the term "expense or loss"
shall include all amounts paid or payable to satisfy any claim, demand or
liability, or in settlement of any claim, demand, action, suit or proceeding
settled with the express written consent of the Escrow Agent, and all costs and
expenses, including but not limited to, counsel fees and disbursements paid or
incurred in investigating or defending any such claim, demand, action, suit or
proceeding.
5.6 The Escrow Agent shall be entitled to reasonable compensation
from the Company for all services rendered by it hereunder. The Escrow Agent
shall also be entitled to reimburse- ment from the Company for all expenses paid
or incurred by it in the administration of its duties hereunder including, but
not limited to, all counsel, advisors' and agents' fees and disburse- ments and
all taxes or other governmental charges.
5.7 From time to time on and after the date hereof, the Company and
the Company Principals shall deliver or cause to be delivered to the Escrow
Agent such further documents and instru- ments and shall do or cause to be done
such further acts as the Escrow Agent shall reasonably request (it being
understood that the Escrow Agent shall have no obligation to make such request)
to carry out more effectively the provisions and purposes of this Agreement, to
evidence compliance herewith or to assure itself that it is protected in acting
hereunder.
5.8 The Escrow Agent may resign at any time and be discharged from
its duties as escrow agent hereunder by its giving the other parties hereto at
least thirty (30) days prior written notice thereof. As soon as practicable
after its resignation, the Escrow Agent shall turn over to a successor escrow
agent appointed by the other parties hereto, jointly, all monies and property
held hereunder (less such amount as the Escrow Agent is entitled to retain
pursuant to Paragraph 5.5) upon presentation of the document appointing the new
escrow agent and its acceptance thereof. If no new agent is so appointed within
the sixty (60) day period follow-ing the giving of such notice of resignation,
the Escrow Agent may deposit the Escrow Shares with any court it deems
appropriate.
5.9 The Escrow Agent shall resign and be discharged from its duties
as escrow agent hereunder if so requested in writing at anytime by the other
parties hereto, jointly, provided, however, that such resignation shall become
effective only upon acceptance of appointment by a successor escrow agent as
provided in paragraph
4
<PAGE>
5.8.
5.10 Notwithstanding anything herein to the contrary, the Escrow Agent
shall not be relieved from liability hereunder for its own gross negligence or
its own willful misconduct.
6. MISCELLANEOUS.
6.1 This Agreement shall for all purposes be deemed to be made under
and shall be construed in accordance with the laws of the State of New York.
6.2 This Agreement contains the entire agreement of the parties
hereto with respect to the subject matter hereof and, except as expressly
provided herein, may not be changed or modified except by an instrument in
writing signed by the party to the charged.
6.3 The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
thereof.
6.4 This Agreement shall be binding upon and inure to the benefit of
the respective parties hereto and their legal representatives, successors and
assigns.
6.5 Any notice or other communication required or which may be given
hereunder shall be in writing and either be delivered personally or be mailed,
certified or registered mail, return receipt requested, postage prepaid, and
shall be deemed given when so delivered personally or, if mailed, two (2) days
after the date of mailing, as follows:
If to the Company, to:
Unity First Acquisition Corp.
245 Fifth Avenue, Suite 1500
New York, New York 10016
Attn: Lawrence Burstein, President
with a copy to:
Parker Duryee Rosoff & Haft
A Professional Corporation
529 Fifth Avenue
New York, New York 10017
Attn: Ira I. Roxland, Esq.
5
<PAGE>
If to the Company Principals, to each as follows:
(i) Lawrence Burstein
245 Fifth Avenue, Suite 1500
New York, New York 10016
(ii) Norman Leben
245 Fifth Avenue, Suite 1500
New York, New York 10016
(iii) John Cattier
Achlain Invermoriston
Invernesshire
IV3 6YN, United Kingdom
(iv) Barry Ridings
16 Erwin Park
Montclair, New Jersey 07402
(v) Unity Venture Capital Associates Ltd.
245 Fifth Avenue, Suite 1500
New York, New York 10016
and if to the Escrow Agent, to:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: President
The parties may change the persons and addresses to which the notices or other
communications are to be sent by giving written notice to any such change in the
manner provided herein for giving notice.
WITNESS the execution of this Agreement as of the date first above
written.
UNITY FIRST ACQUISITION CORP.
By:
-------------------------------------
Lawrence Burstein, President
---------------------------------------
Lawrence Burstein
6
<PAGE>
----------------------------------------
Norman Leben
----------------------------------------
John Cattier
CRICKET SERVICES, LTD.
By:
--------------------------------------
John Cattier, President
----------------------------------------
Barry Ridings
UNITY VENTURE CAPITAL ASSOCIATES LTD.
By:
-------------------------------------
Lawrence Burstein, President
AMERICAN STOCK TRANSFER & TRUST
COMPANY, as Escrow Agent
By:
-------------------------------------
7
<PAGE>
EXHIBIT A
NUMBER OF SHARES
NAME OF COMMON STOCK
Lawrence Burstein 150,000
Norman Leben 15,000
John Cattier 39,000(1)
Cricket Services, Ltd. 39,000
Barry Ridings 6,000
Unity Venture Capital Associates Ltd. 25,000
- --------------
(1) Represents shares owned of record by
Cricket Services, Ltd.
<PAGE>
Name: _____________________
_______________, 1996
Unity First Acquisition Corp.
245 Fifth Avenue, Suite 1500
New York, New York 10016
GKN Securities Corp.
61 Broadway, 12th Floor
New York, New York 10006
Re: Initial Public Offering
-----------------------
Gentlemen:
The undersigned stockholder, officer and/or director of Unity First
Acquisition corp. ("Unity"), in consideration of GKN Securities Corp. ("GKN")
entering into a letter of intent ("Letter of Intent") to underwrite an initial
public offering of Unity, hereby agrees as follows (certain capitalized terms
used herein are defined in paragraph 10 hereof):
1. If Unity solicits approval of its stockholders of a Business
Combination, the undersigned will vote all of the shares of Common Stock of
Unity owned by him in accordance with the majority of the votes cast by the
Public Stockholders.
2. In the event that Unity fails to consummate a Business
Combination within 18 months from the effective date ("Effective Date") of the
registration statement relating to the IPO (or 24 months under the circumstances
described in the prospectus relating to the IPO), the undersigned will use its
best efforts to cause Unity to liquidate. The undersigned waives any and all
rights he may have to receive any distribution of cash, property or other assets
as a result of such liquidation.
3. The undersigned hereby agrees that it does not have any right,
title, interest or claim of any kind in or to any monies in the Trust Fund
("Claim") and hereby waives any Claim it may have in the future as a result of,
or arising out of, any contracts or agreements with Unity and will not seek
recourse against the Trust Fund for any reason whatsoever.
4. In order to minimize potential conflicts of interest which may
arise from multiple affiliations, the undersigned agrees to present to Unity for
its consideration, prior to presentation to any other person or company, any
suitable opportunity to acquire an operating business in the Target Industry.
5. The undersigned will not submit to Unity for consideration, or
vote for the approval of, any Business Combination which involves a company
which is affiliated with the undersigned.
<PAGE>
Entertainment/Media Acquisition
Corporation
GKN Securities Corp.
_____________, 1996
Page 2
6. The undersigned will not be entitled to receive and will not
accept a finder's fee or any other compensation in the event the undersigned
originates a Business Combination.
7. The undersigned will escrow his shares of Common Stock of Unity
for the three-year period commencing on the Effective Date. The escrow agent
shall be American Stock Transfer & Trust Co.
8. The undersigned will not be entitled to receive and will not
accept any compensation for services rendered to Unity prior to the consummation
of the Business Combination; provided that, commencing on the Effective Date,
Unity Venture Capital Associated Ltd. ("UVCA") shall be allowed to charge Unity
$7,500 per month, to compensate it for Unity's use of UVCA's offices, utilities
and personnel. The undersigned shall also be entitled to reimbursement from
Unity for their out-of-pocket expenses incurred in connection with seeking and
consummating a Business Combination.
9. I have full right and power, without violating any agreement by
which I am bound, to enter into this letter agreement and to serve as a Director
of Unity.
10. As used herein, (i) a "Business Combination" shall mean an
acquisition by merger, exchange of capital stock, asset or stock acquisition,
reorganization or otherwise, of an operating business in the Target Industry;
(ii) "Insiders" shall mean all officers, directors and stockholders of Unity
immediately prior to the IPO; (iii) "Public Stockholders" shall mean all common
stockholders of Unity other than the Insiders; and (iv) "Target Industry" shall
mean the entertainment and/or media industry.
------------------------------------
Print Name of Insider
------------------------------------
Signature
<PAGE>
May 30, 1996
Unity First Acquisition Corp.
245 Fifth Avenue, Suite 1500
New York, New York 10016
Gentlemen:
This letter, when signed by you where indicated below, will confirm our
agreement whereby Unity Venture Capital Associates Ltd. ("Capital") shall
furnish Unity First Acquisition Corp. ("Unity") with secretarial and other
administrative services, together with approximately 500 square feet of office
space situated at 245 Fifth Avenue, New York, New York 10016, Suite 1500. In
exchange therefor, Unity shall pay Capital the sum of $7,500 per month. Either
party hereto may cancel this agreement upon 30 days' prior written notice to
such effect.
Very truly yours,
UNITY VENTURE CAPITAL ASSOCIATES LTD.
By:/s/ Lawrence Burstein
----------------------------------
Lawrence Burstein, President
Agreed to and Accepted by:
UNITY FIRST ACQUISITION CORP.
By:/s/ Norman Leben
--------------------------
Norman Leben, Secretary
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New York, New York
August 26, 1996
