As filed with the Securities and Exchange Commission on December 31, 1997
Registration No. 333-14631
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-3
TO
FORM SB-2*
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE MILLBROOK PRESS INC.
(Exact name of Registrant as specified in its charter)
Delaware 06-1390025
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
2 Old New Milford Road
Brookfield, Connecticut 06084
(203) 740-2220
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(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Mr. Jeffrey Conrad
The Millbrook Press Inc.
2 Old New Milford Road
Brookfield, Connecticut 06084
(203) 740-2220
(Name, address and telephone number of agent for service of process)
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Copies to:
Steven Wolosky, Esq.
Kenneth A. Schlesinger, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
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Approximate date of commencement of proposed sale to the public as soon
as practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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(*) The Registrant previously filed a Registration Statement on
Form SB-2 (Registration No. 333- 14631), whereby the Registrant registered among
other things the resale of 875,000 shares of Common Stock of the Registrant
underlying warrants and 170,000 shares of Common Stock underlying Common Stock
Purchase Options. This Post-Effective Amendment relates to shares of Common
Stock and converts the Form SB-2 Registration Statement to a Form S-3 and
updates certain information contained therein.
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, as amended, or until the
Registration Statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a) may determine.
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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, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. /X/
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 31, 1997
PRELIMINARY PROSPECTUS
1,045,000 Shares of Common Stock
THE MILLBROOK PRESS INC.
Common Stock ($.01 par value)
This Prospectus relates to the reoffer and resale by certain selling
shareholders (the "Selling Shareholders" or "Selling Securityholders") of an
aggregate of 1,045,000 shares (the "Selling Shareholder Shares") of the Common
Stock, $.01 par value per share (the "Common Stock"), of The Millbrook Press
Inc., a Delaware corporation (the "Company"), of which (i) 875,000 shares of
Common Stock (the "1996 Warrant Shares") are issuable by the Company upon
exercise of certain warrants (the "August 1996 Warrants") which were issued in
connection with a private placement in August 1996 and (ii) 170,000 shares of
Common Stock (the "Purchase Option Shares") are issuable by the Company upon the
exercise of certain Common Stock purchase options (the "Purchase Options")
previously issued by the Company to GKN Securities Corp., or its designees, the
underwriter of the Company's initial public offering. The Selling Shareholder
Shares are sometimes referred to herein as the "Shares". See "Principal and
Selling Stockholders," "Plan of Distribution" and "Description of Securities."
The 1996 Warrant Shares and the Purchase Option Shares will be issued
if, as and when they are exercised by the holders thereof. The Company will
receive the proceeds from the exercise of the August 1996 Warrants and the
Purchase Options, the net proceeds of which will amount to $3,607,750 if all
August 1996 Warrants and Purchase Options are exercised, after deducting the
estimated expenses of this Offering.
The Company's Common Stock is publicly traded on the Nasdaq SmallCap
Market ("Nasdaq") under the symbol ("MILB") and on the Boston Stock Exchange
under the symbol ("MILB"). On December 29, 1997, the last sales price of the
Common Stock on Nasdaq was $4.50.
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AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES
A HIGH DEGREE OF RISK AND SHOULD ONLY BE MADE BY INVESTORS
WHO CAN AFFORD THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" AND "DILUTION" ON PAGES 7 AND 13 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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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This Offering is self-underwritten; neither the Company nor any Selling
Shareholders have employed an underwriter for the resale of any of the Selling
Shareholder Shares. The Company will bear all expenses of this Offering other
than discounts, concessions or commissions on the resale of the Selling
Shareholder Shares.
The Selling Shareholders have advised the Company that the resale of
their Selling Shareholder Shares may be effected from time to time in one or
more transactions on Nasdaq or the Boston Stock Exchange, in negotiated
transactions or otherwise at market prices prevailing at the time of the sale or
at prices otherwise negotiated. The Selling Shareholders may effect such
transactions by selling the Selling Shareholder Shares to or through
broker-dealers who may receive compensation in the form of discounts,
concessions or commissions from the Selling
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Shareholders and/or the purchasers of the Selling Shareholder Shares for whom
such broker-dealers may act as agent or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). Any broker-dealer acquiring the Selling Shareholder
Shares from the Selling Shareholders may sell such securities in its normal
market making activities, through other brokers on a principal or agency basis,
in negotiated transactions, to its customers or through a combination of such
methods. See "Plan of Distribution."
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The date of this Prospectus is December 31, 1997
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Exchange Act") are incorporated in this Prospectus by
reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal
year ended July 31, 1997.
(b) The Company's Quarterly Report on Form 10-QSB for the
fiscal quarter ended October 31, 1997.
(c) The description of the Company's Common Stock contained in
the Company's Registration Statement on Form 8-A filed with the
Commission on December 10, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this Offering of the Shares of Common Stock offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents which are not specifically incorporated by reference
in such documents). Written requests for such copies should be directed to Mr.
Jeffrey Conrad, President, 2 Old New Milford Road, Brookfield, Connecticut
06084, telephone number (203) 740-2220.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited and reported upon by its independent
accounting firm, quarterly reports containing unaudited interim financial
information and such other periodic reports as the Company may determine to be
appropriate or as may be required by law.
This Prospectus includes references to trademarks of entities other
than the Company which have reserved all rights with respect to their respective
trademarks.
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<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE
CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. EACH
PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY.
The Company
The Millbrook Press Inc., a Delaware corporation (the "Company"),
headquartered in Brookfield, Connecticut, is a publisher of children's
nonfiction books, in both hardcover and paperback, for the school and library
market and the consumer market. Since its inception, the Company has published
more than 800 hardcover and 340 paperback books under its Millbrook and Copper
Beech imprints. The Company's books have been placed on numerous recommended
lists by libraries, retail bookstores, and educational organizations. Books
published under the Millbrook imprint have evolved from information-intensive
school and library books to include its current mix of highly graphic,
consumer-oriented books. Therefore, many of its books can be distributed to the
school and public library market as hardcover books while being simultaneously
distributed to the consumer market as either hardcover or paperback books.
The consumer market in children's books consists of books purchased by
consumers through the traditional bookstores including national chains such as
Barnes & Noble, Borders and Waldenbooks, educational chain stores such as Zainy
Brainy, Learningsmith, and Noodle Knoodle and mass merchandisers including
K-Mart, Target, and the Warehouse Clubs; as well as the non-traditional
distribution channels such as direct sales, catalogs, direct mail, book clubs,
book fairs, non-book retail stores, and on a smaller scale, certain museums,
national parks, historical sites, and theme parks, gift shops and toy stores.
The Company's address is 2 Old New Milford Road, Brookfield,
Connecticut 06084 and its telephone number is (203) 740-2220.
Recent Developments
On December 5, 1997 the Company closed an Asset Purchase Agreement
whereby the Company purchased certain assets of Twenty-First Century Books, a
division of Henry Holt & Co., Inc. ("Holt"). The purchase was effective as of
December 1, 1997. Under this agreement, the Company paid Holt $2,300,000 for the
assets, which included inventory, pre-production costs, royalty advances, fixed
assets and imprints of Twenty-First Century's Books. The purchase price is
subject to downward adjustments based on a joint audit of the purchased assets
by the Company and Holt. Accordingly, the Company paid Holt $2,000,000 at
closing and the remaining $300,000 is being held in escrow pending completion of
the joint audit. The Company financed the acquisition through a loan of
$2,300,000 under its line of credit with People's Bank.
The Offering
Securities Offered by the Company....... 0 Shares.
Securities Offered for resale
by the Selling Shareholders............. 875,000 August 1996 Warrant Shares
and 170,000 Purchase Option Shares.
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Common Stock Outstanding................ 3,455,000(1) shares of Common Stock
before the exercise of the August
1996 Warrants and the Purchase
Options, and 4,500,000 shares of
Common Stock assuming the exercise of
the August 1996 Warrants and the
Purchase Options.
Boston Stock Exchange and
Nasdaq Symbol........................... Common Stock: MILB
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(1) Does not include (i) 675,000 shares of Common Stock reserved for
issuance upon exercise of stock options which may be granted under the Company's
non-qualified 1994 Stock Option Plan ("1994 Plan"), of which options to purchase
438,500 shares of Common Stock have been granted; (ii) 875,000 shares of Common
Stock reserved for issuance upon the exercise of the August 1996 Warrants; and
(iii) 170,000 shares of Common Stock reserved for issuance upon the exercise of
the Purchase Options.
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Use of Proceeds
The Company could receive up to $3,607,750 in proceeds from the
exercise of the August 1996 Warrants and the Purchase Options. The Company
intends to apply the net proceeds of this Offering for working capital and
general corporate purposes, including product development, a reduction of the
Company's outstanding indebtedness under its line of credit or for the
acquisiton of fully developed products or businesses complementary to the
Company's operations (although the Company is not currently negotiating to
acquire any business and has no commitments, understandings or arrangements with
respect to any such acquisition) and the enhancement of marketing capabilities.
See "Use of Proceeds."
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Risk Factors
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS
WELL AS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
HISTORY OF LOSSES; ACCUMULATED LOSSES. While the Company had net income
of $251,000 in the three months ended October 31, 1997, the Company has incurred
significant losses in prior periods. For the fiscal years ended July 31, 1996
and July 31, 1997, the Company had net losses of $463,000 and $858,000
respectively. At October 31, 1997, the Company had an accumulated loss of
$4,042,000. The ability of the Company to achieve profitability in the future
or, if achieved, to sustain profitability, will depend in part upon the
successful and timely introduction of new products, the successful marketing of
its existing products and the Company s ability to collect trade receivables in
a timely manner. There can be no assurance that the Company will be able to
sustain net sales in the future or achieve profitability irrespective of the
level of net sales.
NEED FOR MARKET ACCEPTANCE OF PRODUCTS. The nature of the publishing
industry is that net sales derived from more successful books will be used to
cover the costs or development and production of less successful books. While
the Company experienced an approximately 27% increase in net sales from the
fiscal year ended July 31, 1996, to the fiscal year ended July 31, 1997 and a
21% increase in net sales from the three months ended October 31, 1996 to the
three months ended October 31, 1997, there can be no assurance that this growth
will continue. The Company's continued success depends on the timely
introduction of successful new books and sequels or updates to existing books to
replace declining net sales from older books. Although the Company intends to
make substantial investments in product development each year and is continually
seeking new product opportunities, there can be no assurance that any of the
Company's new books will achieve market acceptance or that, if accepted, such
acceptance will be sustained for a period long enough to recoup costs or realize
profits. If market acceptance is not sustained, the Company may be required to
write-down unsold excess inventory and/or accept substantial product returns to
maintain access to its distribution channels.
DEPENDENCE ON KEY ACCOUNTS. Approximately 61% of the Company's sales in
the school and public library market in the fiscal year ended July 31, 1997 (or
38% of the Company's net sales) were from wholesale accounts. One such wholesale
account, Baker & Taylor, accounted for approximately 31% of total wholesale
sales attributable to the Company's school and public library business in the
fiscal year ended July 31, 1997 (or 12% of the Company's net sales).
Approximately 69% of the Company's sales in the consumer market in the fiscal
year ended July 31, 1997 (or 27% of the Company's net sales) were from wholesale
accounts. One such wholesale account, Ingram Book Company ("Ingram"), accounted
for approximately 22% of total wholesale sales attributable to the Company's
consumer business in the fiscal year ended July 31, 1997 (or 6% of the Company's
net sales). The Company expects to continue to depend on a relatively small
number of wholesalers for a significant percentage of its sales, particularly
since a relatively small number of wholesalers in the publishing industry
account for a significant portion of wholesale sales. The Company has no
contracts with any of such wholesalers and significant reductions in sales to
any one or more of the Company's largest wholesalers would have a material
adverse effect on the Company's results of operations.
POTENTIAL ADVERSE IMPACT OF RETURNS. The practice in the publishing
industry is to permit customers, including wholesalers and retailers, to return
merchandise. The Company gives credit for books that are returned and
establishes reserves as a deduction from gross sales for returns. Historically,
returns have been approximately 9% of the Company's gross sales to school and
public library wholesalers. For the fiscal year ended July 31, 1997, consumer
sales returns were approximately 24% of gross consumer sales. The rate of return
can have a significant impact on quarterly results since certain wholesalers
have in the past returned a large quantity of products at one time irrespective
of marketplace demand for such products, rather than spreading out the returns
during the course of the year. In both the school and public library and
consumer markets, the Company now offers a preferential discount for
non-returnability, an option being taken by an increasing number of customers.
Although the Company believes its reserves have been adequate to date, there can
be no assurance that returns by customers in the future will not exceed these
historical levels or that the actual returns will not exceed the amount of
reserves in the future. In the event that the amount of reserves proves to be
inadequate, the Company's results of operation and financial condition will be
adversely affected.
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SEASONAL BUSINESS; QUARTERLY FLUCTUATIONS. A substantial portion of the
Company's business is highly seasonal, causing significant variations in
operating results from quarter to quarter. In the fiscal year ended July 31
1997, 64% of total net sales were derived from the school and public library
market. In the school and public library market, net sales typically tend to be
lowest in the second calendar quarter and highest in the third calendar quarter,
as schools purchase heavily in anticipation of opening in September. In the
fiscal year ended July 31 1997, 36% of total net sales came from the consumer
market. The consumer market also tends to be highly seasonal and, given the
importance of holiday gift sales, a large proportion of net sales can occur in
the third calendar quarter in anticipation of the holiday gift season. The
Company can exercise very little control over the timing of customer orders,
particularly those of wholesalers; thus orders anticipated in the second
calendar quarter, for example, may fall into the third calendar quarter, thereby
affecting both quarters' results. In addition, even when customer orders are
placed, such orders generally are cancelable at any time without penalty. Due to
the long product development cycle of books (nine to 18 months), the Company
generally must enter into product development commitments prior to having firm
orders. In any quarter where sales fall below the Company's expectations, the
Company's financial results will be negatively impacted because expenses based
on those expectations have already been incurred in advance of actual receipt of
orders. As a result, there can be no assurance that the Company can maintain
sufficient flexibility with respect to its working capital needs and its ability
to manufacture products to be able to minimize the adverse effects of an
unanticipated shortfall in or increase in demand for its products. Failure to
predict accurately and respond to consumer demand may cause the Company to
produce excess inventory which could result in write-offs. Conversely, if a
product achieves greater success than anticipated, the Company may not have
sufficient inventory to meet customer demand, thereby losing sales.
COMPETITION. Children's book publishing in the school and public
library market and in the consumer market is fragmented and highly competitive.
There are many publishers in the school and public library market who publish
materials similar to the Company's product offerings. The Company also competes
with a large number of other publishers for retail shelf space in large
bookstore chains. A number of these competitors have considerably greater
financial and marketing resources than the Company, including Childrens Press,
Dorling Kindersley Publishing Inc., Franklin Watts Inc., Gareth Stevens Inc.,
Lerner Publications Co. and Troll Communications in the school and public
library market and Barron's Educational Series Inc., Candlewick Press, Dorling
Kindersleg Inc., Larousse Kingfisher Chambers Inc., Random House Inc. and
Usborne Publishing Ltd in the consumer market. In addition to competition among
like types of publishing programs, the overall competition for limited
educational budgets is intense when other producers of materials used in
classrooms and libraries are included, especially producers and distributors of
electronic hardware and software. Increased competition may result in the loss
of school and public library accounts, loss of shelf space for the Company's
books at retail stores and significant price competition, any of which could
adversely affect the Company's operating results.
DEPENDENCE ON GOVERNMENT FUNDING. The majority of the school and public
library funding is dependent on government funding from federal, state and local
authorities. Budget deficits affecting these three levels of government have
limited the availability of funding for school libraries and educational
programs. The school library market is especially affected by budget cutbacks as
library expenditures and needs are typically considered less important than the
expenditures and needs of the classroom. Continued restraints in the future on
federal, state and local support for educational funding could have an adverse
effect on the Company's financial condition and results of operations.
DEPENDENCE ON QUALIFIED PERSONNEL; DEPENDENCE ON MANAGEMENT. The
ability to attract and retain highly competent executives, professionals, sales
personnel and other employees is critical to the ongoing success of the Company.
A stable and skilled work force is essential to establishing and maintaining
relationships with authors, illustrators, vendors and customers, and such
relationships are critical to the Company's long-term growth. The Company has
not experienced any difficulties in attracting and retaining qualified
personnel, although there can be no assurance that it will not encounter such
problems in the future. In particular, the Company's operations are dependent on
the efforts of Jeffrey Conrad (the Chief Executive Officer and President) and
Jean E. Reynolds (Senior Vice President-Publisher). The Company has employment
agreements with Mr. Conrad and Ms. Reynolds which expire in October 1999 and
September 1999, respectively. The Company has obtained a "key person" insurance
policy on the life of Mr. Conrad in the amount of $1,000,000, under which the
Company is the beneficiary. The
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loss of the services of any one of the above named persons could have a material
adverse effect on the Company.
DEPENDENCE ON CO-PUBLISHING RIGHTS/RELATIONSHIPS. The Company sells
books developed by its own editorial staff and authors, books fully developed by
other publishers and purchased by Millbrook, as well as books co-developed by
Millbrook and other publishers as a way of spreading production costs and risks.
Such multiple sourcing utilizes a broad band of creative talent to generate book
concepts through finished books. Approximately 14% of the Company's net sales in
the fiscal year ended July 31, 1997, were derived from products sourced from
outside publishers and packagers. Competition for these arrangements is
substantial and the Company competes directly with larger companies having
greater financial and marketing resources. Although the Company has been
successful in developing such relationships in the past, there can be no
assurance that it will continue to enjoy such success in the future.
DEPENDENCE ON AUTHORS, ILLUSTRATORS. The ability to attract successful
and highly qualified authors and illustrators is critical to the ongoing success
of the Company. Competition for this type of resource is intense and authors and
illustrators have many options in terms of publisher affiliation. The Company
has been successful in developing long-term relationships with a number of
excellent authors and illustrators in the past, but there can be no assurance
that the Company can continue to retain superior-quality authors and
illustrators in the future.
DEPENDENCE ON THIRD PARTY MANUFACTURERS; ABILITY TO OFFSET
MANUFACTURING COSTS. The Company's books are printed and bound by third-party
manufacturers who pass on certain costs, including paper costs, to the Company.
The Company requires substantial amounts of high-quality paper to manufacture
its products, and in periods of short supply, competition for paper can be
substantial, increasing the cost of manufacturing. To cover such costs, the
Company has been successful in raising prices of its books in the past, but
there can be no assurance that the Company will be able to raise prices in the
future. Management believes that current arrangements for the manufacture of the
Company's books are satisfactory for the Company's anticipated requirements.
Nevertheless, there can be no assurance that in the future these third parties'
manufacturing capacities will be sufficient to satisfy the Company's
requirements, that interruptions or delays in manufacturing will not adversely
affect the Company's operations, or that alternative manufacturing sources will
be available to the Company on commercially reasonable terms or at all. In
particular, due to the short-run nature of the Company's manufacturing needs,
the Company, is restricted to a select list of specialty book manufacturers.
During fiscal year 1997, Worzalla Publishing, Inc. ("Worzalla") and Aladdin
provided approximately 80% of the Company's printing and bindings needs. The
Company has no contract with Worzalla and while the Company believes that other
specialty book manufacturers would be available, if necessary, the inability of
the Company to obtain printing for its books at favorable prices, or at all,
could have a material adverse effect on the Company's results of operations.
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BROAD DISCRETION IN APPLICATION OF PROCEEDS. All of the net proceeds of
the Offering have been allocated to working capital and general corporate
purposes. The Company will have broad discretion regarding how and when such
proceeds will be applied and will use a portion of such proceeds to pay
salaries, including salaries of its executive officers. See "Use of Proceeds."
DEPENDENCE ON CREDIT FACILITY. The Company entered into the Loan and
Security Agreement in December 1995 which was subsequently amended on June 17,
1997. Under the amended terms of the Loan and Security Agreement, the Company
has available a $4,000,000 revolving line of credit and People's Bank has taken
a first- priority security interest in substantially all of the Company's
assets, which assets serve as collateral for the Loan and Security Agreement. In
the event that the Company is in default under the Loan and Security Agreement
in the future or is unable to repay or refinance such loan upon maturity,
People's Bank could foreclose its lien which would have a material adverse
effect on the Company. As of October 31, 1997, the Company had $331,000
outstanding under the Loan and Security Agreement. Subsequent to October 31,
1997, the Company borrowed an additional $2,300,000 from People's Bank to
finance the acquisition of Twenty-First Century Books. See "The Company --
Recent Developments."
MANAGEMENT OF GROWTH. The Company has experienced significant growth in
recent years, and this growth has placed significant demands on the Company's
management, operational and financial resources. There can be no assurance that
management will be effective in attracting and retaining additional qualified
personnel, expanding the Company's physical facilities, integrating acquired
businesses or otherwise managing growth. If the Company is unable to manage
growth effectively, the Company's business, financial condition and operating
results could be materially adversely affected.
CONTROL BY CURRENT STOCKHOLDERS, DIRECTORS AND OFFICERS. The Company's
current principal stockholders, directors and officers, and certain of their
affiliates, will beneficially own approximately 37.2% of the outstanding Common
Stock after this Offering and will have significant influence over the outcome
of all matters submitted to the stockholders for approval, including the
election of directors of the Company, thereby enabling such current principal
stockholders, directors and officers, and their affiliates to control all major
decisions of the Company. Furthermore, such concentration of ownership may have
the effect of preventing a change in control of the Company. See "Description of
Securities."
POTENTIALLY LIMITED TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE.
The Common Stock is listed on Nasdaq. Under recently implemented Nasdaq rules,
in order for the Company to remain eligible for listing on Nasdaq, (i) the
Company's Common Stock must have a minimum bid price of $1.00, (ii) the Company
must have the minimum tangible net assets of $2,000,000 or a market
capitalization of $35,000,000 or net income of $500,000 in two of the three
prior years, (iii) the Company must have a public float of at least 500,000
shares with a market value of at least $1,000,000 and the Common Stock must have
at least two market makers and be held of record by at least 300 stockholders.
While the Company currently satisfies the Nasdaq listing and maintenance
standards, the failure to meet the maintenance criteria in the future may result
in the Common Stock no longer being eligible for quotation on Nasdaq and
trading, if any, of the Common Stock would thereafter be conducted on the
non-Nasdaq over-the-counter market. Trading, if any, of the Common Stock would
thereafter be conducted on the OTC Bulletin Board. As a result of such
ineligibility for quotations, an investor may find it more difficult to dispose
of, or to obtain accurate quotations as to the market value of the Common Stock.
Furthermore, the regulations of the Commission promulgated under the Exchange
Act require additional disclosure relating to the market for penny stocks.
Commission regulations generally define a penny stock to be an equity security
that has a market price of less than $5.00 per share, subject to certain
exceptions. A disclosure schedule explaining the penny stock market and the
risks associated therewith is required to be delivered to a purchaser and
various sales practice requirements are imposed on broker-dealers who sell penny
stocks to persons other than established customers and accredited investors
(generally institutions). In addition, the broker-dealer must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. If the Company's securities become subject to the
regulations applicable to penny stocks, the market liquidity for the Company's
securities could be severely affected. In such an event, the regulations on
penny stocks could limit the
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<PAGE>
ability of broker-dealers to sell the Company's securities and thus the ability
of purchasers of the Company's securities to sell their securities in the
secondary market.
NO DIVIDENDS. The Company has never paid cash dividends on its Common
Stock. The Company intends to retain any future earnings to finance its growth.
Accordingly, any potential investor who anticipates the need for current
dividends from an investment in the Common Stock should not purchase any of the
Common Stock offered hereby. In addition, the Loan and Security Agreement limits
the Company's ability to pay dividends without the lender's consent.
FUTURE SALES OF COMMON STOCK. Sales of the Company's Common Stock in
the public market after this Offering by existing stockholders could adversely
affect the market price of the Common Stock.
ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER PROVISIONS. Pursuant to its
Certificate of Incorporation, as amended, the Company has an authorized class of
1,000,000 shares of preferred stock which may be issued by the Board of
Directors on such terms and with such rights, preferences and designations as
the Board may determine without any vote of the stockholders. Issuance of such
preferred stock, depending upon the rights, preferences and designations
thereof, may have the effect of delaying, deterring or preventing a change in
control of the Company, could result in the dilution of the voting power of the
Common Stock purchased in this Offering. In addition, certain "anti-takeover"
provisions of the Delaware General Corporation Law, among other things, may
restrict the ability of the stockholders to expect a merger or business
combination or to obtain control of the Company. See "Description of
Securities-Preferred Stock."
LIMITED LIABILITY FOR DIRECTORS. The Company's Certificate of
Incorporation provides that a director of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, with certain exceptions under Delaware law. This
may discourage stockholders from bringing suit against a director for breach of
fiduciary duty and may reduce the likelihood of derivative litigation brought by
stockholders on behalf of the Company against a director. In addition, the
Company's By-laws provide for mandatory indemnification of directors and
officers.
FORWARD LOOKING STATEMENTS. This Prospectus contains certain
forward-looking statements, which are intended to be covered by the safe harbors
created by the Private Securities Litigation Reform Act of 1995. Investors are
cautioned that all the forward-looking statements involve risks and uncertainty,
including without limitation, all of the risk factors specified above. Although
the Company believes that the assumptions, underlying the forward- looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements included in this press release will prove to be accurate. In light of
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
-11-
<PAGE>
USE OF PROCEEDS
The Company could receive up to $3,607,750 in proceeds from the
exercise of the August 1996 Warrants and the Purchase Options. The Company
intends to apply the net proceeds of this Offering for working capital and
general corporate purposes, including product development, a reduction of the
Company's outstanding indebtedness under its line of credit or for the
acquisiton of fully developed products or businesses complementary to the
Company's operations (although the Company is not currently negotiating to
acquire anybusiness and has no commitments, understandings or arrangements with
respect to any such acquisition) and the enhancement of marketing capabilities.
The Company will not receive any proceeds from the re-sale of any of the Selling
Shareholder Shares.
-12-
<PAGE>
DILUTION
As of October 31, 1997, the unaudited net tangible book value of the
Company was $10,513,000, or approximately $3.04 per share based on 3,455,000
shares of Common Stock outstanding. Net tangible book value per share represents
the tangible assets of the Company less all liabilities, divided by the number
of shares outstanding. Dilution represents the difference between the price per
share of Common Stock paid by the holders of the August 1996 Warrants and the
Purchase Options exercising all such securities pursuant to this Offering and
the pro forma net tangible book value per share of Common Stock after this
Offering. After giving effect to the exercise of the August 1996 Warrants and
the Purchase Options, the adjusted net tangible book value of the Company at
October 31, 1997, would have been $14,121,000 or $3.14 per share. This
represents an immediate increase in pro forma net tangible book value of $.10
per share to existing shareholders and an immediate dilution of $2.935 per share
to holders of the Purchase Options exercising their Purchase Options at $6.075
per share. The holders of the August 1996 Warrants will have no immediate
dilution upon the exercise of the August 1996 Warrants since the exercise price
of the August 1996 Warrants is $3.00 per share. The following table illustrates
this dilution on a per share basis:
<TABLE>
<CAPTION>
August 1996 Purchase
Warrants Options
-------- -------
<S> <C> <C>
Exercise Price ................................................. $3.00 $6.075
Net tangible book value per share before Offering............... $3.04 $3.04
Net tangible book value immediately after the exercise of the
August 1996 Warrants and the Purchase Options................... $3.14 $3.14(1)
Dilution of pro forma net tangible book value to purchasers
of Common Stock underlying the August 1996 Warrants and
the Purchase Options................................................ (2) $2.935
=== ======
</TABLE>
(1) Assumes that all of the August 1996 Warrants have been exercised.
(2) There is no immediate dilution upon the exercise of the August 1996 Warrants
since the exercise price of the August 1996 Warrants is $3.00 per share.
-13-
<PAGE>
COMMON STOCK SELLING SHAREHOLDERS
The following table sets forth (i) the number of shares of Common Stock
owned by each Selling Shareholder at December 1, 1997; (ii) the number of shares
being offered for resale hereby by each Selling Shareholder; and (iii) the
number and percentage of shares of Common Stock to be held by each Selling
Shareholder after the completion of this Offering. Except as otherwise indicated
in the Footnotes to such table, none of such Selling Shareholders has been an
officer, director or employee of the Company for the past three years.
<TABLE>
<CAPTION>
Number of Shares of Common Shares of Common Stock
Stock Beneficially Owned Prior to Shares to be Beneficially Owned
Name Offering (1) Sold in Offering After Offering
---- ------------ ---------------- ---------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Leon Abramson and Lorraine Abramson 12,500 * 12,500 0 0
Richard Ackerman 12,500 * 12,500 0 0
David Alexander 12,500 * 12,500 0 0
Alsa, Inc. 25,000 * 25,000 0 0
Applewood Associates LP(2) 396,213 11.1 125,000 271,213 6.0%
Neil Bellett 12,500 * 12,500 0 0
Robert Bender 12,500 * 12,500 0 0
Daniel Berger and Carolyn Berger 12,500 * 12,500 0 0
Kenneth D. Cole 12,500 * 12,500 0 0
Damerel Trading S.A. 25,000 * 25,000 0 0
Drew Effron 12,500 * 12,500 0 0
Chris Engel 12,500 * 12,500 0 0
Richard Etra and Kenneth Etra 12,500 * 12,500 0 0
Steven Etra 31,000 * 31,250 0 0
Andrew Feiner 12,500 * 12,500 0 0
Gordon M. Freeman 100,000 2.8 100,000 0 0
Ernest Gottdiener 12,500 * 12,500 0 0
Paula Graff 12,500 * 12,500 0 0
Peter Hunt 12,500 * 12,500 0 0
Daniel A. Kaplan 12,500 * 12,500 0 0
Richard C. Kaufman and Elaine J. 12,500 * 12,500 0 0
Lenart
Norman Kurtz 12,500 * 12,500 0 0
Mariwood Investments 12,500 * 12,500 0 0
Anthony Peyser 12,500 * 12,500 0 0
RJB Partners, L.P. 12,500 * 12,500 0 0
Steven Rosen 6,250 * 6,250 0 0
Rebecca Rubenstein 25,000 * 25,000 0 0
Alan J. Rubin 12,500 * 12,500 0 0
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Common Shares of Common Stock
Stock Beneficially Owned Prior to Shares to be Beneficially Owned
Name Offering (1) Sold in Offering After Offering
---- ------------ ---------------- ---------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Jeffrey Rubinstein 25,000 * 25,000 0 0
Chana Sasha Foundation 16,667 * 16,667 0 0
Curtis Schenker 12,500 * 12,500 0 0
Alan and Nancy Shapiro 12,500 * 12,500 0 0
Carl E. Siegel 12,500 * 12,500 0 0
Gregory Trubowitsch 6,250 * 6,250 0 0
21st Century Communications Foreign 1,068,678 30.0 11,500(6) 943,678 21.0
Partners, L.P.(3)
21st Century Communications T-E 1,068,678 30.0 28,500(7) 943,678 21.0
Partners, L.P.(4)
21st Century Communications, L.P.(5) 1,068,678 30.0 85,000(8) 943,678 21.0
Charles Warshaw 6,250 * 6,250 0 0
Aaron Wolfson 16,667 * 16,666 0 0
Abraham Wolfson 16,667 * 16,667 0 0
William Wolfson 25,000 * 25,000 0 0
GKN Securities Corp. 89,265(9) 2.5 89,265 0 0
Roger Gladstone 24,345(9) * 24,345 0 0
Robert Gladstone 24,345(9) * 24,345 0 0
David M. Nussbaum 24,345(9) * 24,345 0 0
Kirlin Securities, Inc. 7,700 * 7,700 0 0
</TABLE>
- ------------------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with
respect to securities. Shares of the Company's Common Stock subject to
options, warrants and convertible preferred stock currently exercisable
or convertible, or exercisable or convertible within sixty (60) days,
are deemed outstanding for computing the percentage of the person
holding such options or warrants but are not deemed outstanding for
computing the percentage of any other person.
(2) Represents 271,213 shares of Common Stock and 125,000 shares of Common
Stock issuable upon the exercise of presently exercisable August 1996
Warrants. The general partners of Applewood Associates, L.P. are Irwin
Lieber, Barry Rubenstein, Barry Fingerhut and Applewood Capital Corp.
(3) Represents (i) 86,142 shares of Common Stock owned by 21st Century
Communications Foreign Partners, L.P. ("21st Foreign"), (ii) 639,840
shares of Common Stock and 217,696 shares of Common Stock owned by 21st
Century Communications Partners, L.P. ("21st Partners") and 21st
Century Communications T-E Partners, L.P. ("21st T-E"), respectively of
which 21st Foreign disclaims beneficial ownership, (iii) 11,500 shares
of Common Stock issuable upon the exercise of presently exercisable
August 1996 Warrants held by 21st Foreign and (iv) 28,500 and 85,000
shares of Common Stock issuable upon the exercise of presently
exercisable August 1996 Warrants held by 21st T-E and 21st Partners,
respectively. The general partners of 21st Foreign are Sandler
Investment Partners, L.P., a New York limited partnership ("Sandler
General Partner") and InfoMedia. The general partner of the Sandler
General Partner is Sandler Capital Management, a New York general
partnership ("SCM"). The general partners of SCM and corporations that
are affiliates of Harvey Sandler, Barry Lewis, John Kornreich, Michael
Marocco and Andrew Sandler. Infomedia's shareholders are Irwin Lieber,
Barry Fingerhut and Barry Rubenstein.
-15-
<PAGE>
(4) Represents (i) 217,696 shares of Common Stock owned by 21st T-E, (ii)
639,840 shares of Common Stock and 86,142 shares of Common Stock owned
by 21st Partners and 21st Foreign, respectively, of which 21st T-E
disclaims beneficial ownership, (iii) 28,500 shares of Common Stock
issuable upon the exercise of presently exercisable August 1996
Warrants held by 21st T-E and (iv) 11,500 and 85,000 shares of Common
Stock issuable upon the exercise of presently exercisable August 1996
Warrants held by 21st Foreign and 21st Partners, respectively, of which
21st T-E disclaims beneficial ownership, The general partners of 21st
Partners are the Sandler General Partner and InfoMedia. The general
partner of the Sandler General Partner is SCM. The general partners of
SCM are corporations that are affiliates of one or more of Harvey
Sandler, Barry Lewis, John Kornreich, Michael Marocco and Andrew
Sandler. Infomedia's shareholders are Irwin Lieber, Barry Fingerhut and
Barry Rubenstein.
(5) Represents (i) 639,840 shares of Common Stock owned by 21st Partners,
(ii) 217,696 shares of Common Stock and 86,142 shares of Common Stock
owned by 21st T-E and 21st Foreign, respectively, of which 21st
Partners disclaims beneficial ownership (iii) 85,000 shares of Common
Stock issuable upon the exercise of presently exercisable August 1996
Warrants held by 21st Partners and (iv) 11,500 and 28,500 shares of
Common Stock issuable upon the exercise of presently exercisable August
1996 Warrants held by 21st Foreign and 21st T-E respectively, of which
21st Partners disclaims beneficial ownership. The general partners of
21st Partners are the Sandler General Partner is SCM. The general
partners of SCM are corporations that are affiliates of one or more of
Harvey Sandler. InfoMedia's shareholders are Irwin Lieber, Barry
Fingerhut and Barry Rubenstein.
(6) Does not include 1996 Warrant Shares to be sold by 21st T-E or 21st
Partners.
(7) Does not include 1996 Warrant Shares to be sold by 21st Foreign or 21st
Partners.
(8) Does not include 1996 Warrant Shares to be sold by 21st T-E or 21st
Foreign.
(9) Excludes Purchase Option Shares held by GKN Securities Corp. Messrs.
Nussbaum and Gladsone are directors and officers of GKN Securities
Corp. and they each disclaim beneficial ownership of all Purchase
Option Shares held by GKN Securities Corp.
-16-
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company is 13,000,000 shares,
consisting of 12,000,000 shares of Common Stock, $.01 par value per share and
1,000,000 shares of preferred stock, $.01 par value per share ("Preferred
Stock"). As of October 31, 1997, there were 3,455,000 shares of Common Stock
outstanding. Upon the completion of this Offering there will be 4,500,000 shares
of Common Stock outstanding. No shares of Preferred Stock are outstanding at the
date hereof.
Common Stock
The holders of shares 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 can elect all of the
directors then being elected. 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 therefor. In the event of liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets remaining available for distribution 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 redemption, preemptive or other subscription rights, and there
are no conversion provisions applicable to the Common Stock. All of the
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby, when issued and paid for as set forth in this Prospectus, will be, fully
paid and nonassessable.
Preferred Stock
The Company's authorized shares of Preferred Stock may be issued in one
or more series, and the Board of Directors is authorized, without further action
by the stockholders, to designate the rights, preferences, limitations and
restrictions of and upon shares of each series, including dividend, voting,
redemption and conversion rights. The Board of Directors also may designate par
value, preferences in liquidation and the number of shares constituting any
series. The Company believes that the availability of Preferred Stock issuable
in series will provide increased flexibility for structuring possible future
financings and acquisitions, if any, and in meeting other corporate needs. It is
not possible to state the actual effect of the authorization and issuance of any
series of Preferred Stock upon the rights of holders of Common Stock until the
Board of Directors determines the specific terms, rights and preferences of a
series of Preferred Stock. However, such effects might include, among other
things, restricting dividends on the Common Stock, diluting the voting power of
the Common Stock, , or impairing liquidation rights of such shares without
further action by holders of the Common Stock. In addition, under various
circumstances, the issuance of Preferred Stock may have the effect of
facilitating, as well as impeding or discouraging, a merger, tender offer, proxy
contest, the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management. Issuance of Preferred Stock
could also adversely effect the market price of the Common Stock. The Company
has no present plan to issue any additional shares of Preferred Stock.
PLAN OF DISTRIBUTION
This Offering is self-underwritten; the Company has not employed an
underwriter for the resale of the Selling Shareholder Shares and will bear all
expenses of this Offering.
1996 Warrant Shares and the Purchase Option Shares
The 1996 Warrant Shares and the Purchase Option Shares may be reoffered
and resold for the account of the Selling Shareholders from time to time on
NASDAQ or the Boston Stock Exchange, or in negotiated transactions, at fixed
prices which may be changed or at negotiated prices. The Selling Shareholders
may effect such transactions by selling shares to or through broker-dealers, and
all such broker-dealers may receive compensation in the form of discounts,
concessions, or commissions from the Selling Shareholders and/or the purchasers
of shares for whom such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation as to a particular broker-dealer might be
in excess of customary commissions).
-17-
<PAGE>
Any broker-dealer acquiring shares from the Selling Shareholders may
sell the shares either directly, in its normal market-making activities, through
or to other brokers on a principal or agency basis or to its customers. Any such
sales may be at prices then prevailing in the over-the-counter market or at
prices related to such prevailing market prices or at negotiated prices to its
customers or a combination of such methods. The Selling Shareholders and any
broker-dealers that act in connection with the sale of the Common Stock
hereunder might be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act; any commissions received by them and any profit on
the resale of shares as principal might be deemed to be underwriting discounts
and commissions under the Securities Act. Any such commissions, as well as other
expenses incurred by the Selling Shareholders and applicable transfer taxes, are
payable by the Selling Shareholders.
Exercise of Options, Resale of the Selling Stockholder Shares by the Holders
Thereof
The August 1996 Warrants and the Purchase Options may be exercised,
when exercisable, at the discretion of the holder thereof, by the delivery to
the Company at its principal executive offices at 2 Old New Milford Road,
Brookfield, Connecticut 06084. Payment must be made in the form of cash or check
payable to the order of the Company.
LEGAL MATTERS
The legality of the shares of Common Stock reoffered hereby has been
passed upon for the Company and the Selling Shareholders by Olshan Grundman
Frome & Rosenzweig LLP, New York, New York.
EXPERTS
The financial statements of The Millbrook Press Inc. as of July 31,
1997 and July 31, 1996, and for each of the years in the two year period ended
July 31, 1997; have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by the Delaware General Corporation Law ("DGCL"), the
Company's Certificate of Incorporation, as amended, limits the personal
liability of a director or officer to the Company for monetary damages for
breach of fiduciary duty of care as a director. Liability is not eliminated for
(i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payment of
dividends or stock purchases or redemptions pursuant to Section 174 of the DGCL,
or (iv) any transaction from which the director derived an improper personal
benefit.
The Company has also entered into indemnification agreements with each
of its directors and executive officers. The indemnification agreements provide
that the directors and executive officers will be indemnified to the fullest
extent permitted by applicable law against all expenses (including attorneys'
fees), judgments, fines and amounts reasonably paid or incurred by them for
settlement in any threatened, pending or completed action, suit or proceeding,
including any derivative action, on account of their services as a director or
officer of the Company or of any subsidiary of the Company or of any other
company or enterprise in which they are serving at the request of the Company.
No indemnification will be provided under the indemnification agreements,
however, to any director or executive officer in certain limited circumstances,
including on account of knowingly fraudulent, deliberately dishonest or willful
misconduct. To the extent the provisions of the indemnification agreements
exceed the indemnification permitted by applicable law, such provisions may be
unenforceable or may be limited to the extent they are found by a court of
competent jurisdiction to be contrary to public policy.
-18-
<PAGE>
No dealer, salesman or any other person is authorized to give any information or
to make any representations in connection with this offering not contained in
this Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer to sell or solicitation of any offer to buy any
security other than the Securities offered by this Prospectus or an offer by any
person in any jurisdiction where such an offer or solicitation is not authorized
or is unlawful. The delivery of this Prospectus shall not, under any
circumstances, create any implication that information herein is correct as of
any time subsequent to its date.
TABLE OF CONTENTS
PAGE
Incorporation of Certain Documents
By Reference.............................................................3
Prospectus Summary.........................................................4
Risk Factors...............................................................7
Use of Proceeds...........................................................12
Dilution..................................................................13
Common Stock Selling Shareholders.........................................14
Description of Securities.................................................17
Plan of Distribution......................................................17
Legal Matters.............................................................18
Experts...................................................................18
Indemnification of Officers and Directors.................................18
1,045,000 Shares of Common Stock
THE MILLBROOK PRESS INC.
PROSPECTUS
December __, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses to be
borne by the Company in connection with the offering described in the
Registration Statement, other than underwriting commissions and discounts.
Registration Fee...................................... $1,108.40(1)
Legal Fees and Expenses............................... 15,000.00
Accounting Fees and Expenses.......................... 10,000.00
Blue Sky Fees and Expenses............................ 1,000.00
Miscellaneous Expenses................................ 12,841.60
---------
Total........................................ $50,000.00(2)
=============
- --------------------
(1) Previously paid in October 1996 with the filing of a Registration
Statement on Form SB-2 (Registration No. 333-14631)
(2) In connection with the filing of a Registration Statement on Form SB-2
(Registration No, 333-14631), the Company incurred expenses of
approximately $867,000. The amounts reflected consist of additional
expenses relating to the filing of this Post-Effective Amendment No. 1
on Form S-3 to Form SB-2.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Except as hereinafter set forth, there is no statute, charter
provision, by-law, contract or other arrangement under which any controlling
person, director or officer of The Millbrook Press Inc. ("Company") is insured
or indemnified in any manner against liability which he may incur in his
capacity as such.
The Certificate of Incorporation, as amended ("Certificate of
Incorporation"), of the Company provides that the Company shall indemnify to the
fullest extent permitted by Delaware law any person whom it may indemnify
thereunder, including directors, officers, employees and agents of the Company.
The pertinent section of Delaware law is set forth below in full. Such
indemnification (other than as ordered by a court) shall be made by the Company
only upon a determination that indemnification is proper in the circumstances
because the individual met the applicable standard of conduct. Advances for such
indemnification may be made pending such determination. Such determination shall
be made by a majority vote of a quorum consisting of disinterested directors, or
by independent legal counsel or by the stockholders. In addition, the
Certificate of Incorporation provides for the elimination, to the extent
permitted by Delaware law, of personal liability of directors to the Company and
its stockholders for monetary damages for breach of fiduciary duty as directors.
The Company obtained a directors and officers insurance and company
reimbursement policy in the amount of $1,000,000. The policy insures directors
and officers against unindemnified loss arising from certain wrongful acts in
their capacities and would reimburse the Company for such loss for which the
Company has lawfully indemnified the directors and officers.
II-1
<PAGE>
See the second and third paragraphs of Item 28 below for information
regarding the position of the Securities and Exchange Commission with respect to
the effect of any indemnification for liabilities arising under the Securities
Act of 1933, as amended ("Securities Act").
Section 145 of the General Corporation Law provides as follows:
(a) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than action by or in the right
of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation unless
and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections
(a) and (b) of this section, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made (1) by the board of directors by a majority
vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable,
or, even if obtainable a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses incurred by an officer or director in defending a
civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount
II-2
<PAGE>
if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such
expenses incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent
with respect to any employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the corporation" as
referred to in this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
The Company has also agreed to indemnify each director and executive
officer pursuant to an Indemnification Agreement with each such director and
executive officer from and against any and all expenses, losses, claims, damages
and liability incurred by such director or executive officer for or as a result
of action taken or not taken while such director or executive officer was acting
in his capacity as a director, officer, employee or agent of the Company.
ITEM 16. EXHIBITS
EXHIBIT NO.
- -----------
*4.1 Form of Common Stock Certificate.
II-3
<PAGE>
*4.2 Form of Underwriter's Common Stock Purchase Option granted to GKN
Securities Corp.
*4.3 Form of Bridge Warrant.
*5.1 Opinion of Olshan Grundman Frome & Rosenzweig LLP
23.1 Consent of KPMG Peat Marwick LLP
*23.2 Consent of Olshan Grundman Frome & Rosenzweig LLP
24 Power of Attorney (included in Part II, page II-9).
- ------------
* Previously filed as an Exhibit to the Company's Registration Statement
on Form SB-2 (No. 333-14631)
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of an action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to 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 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.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to
be part of this Registration Statement as of the time it was declared effective.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing this Registration Statement on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Connecticut on the 29th day of December, 1997.
THE MILLBROOK PRESS INC.
By: /S/ JEFFREY CONRAD
------------------------------------
Name: Jeffrey Conrad
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Satish Dua and Jeffrey Conrad, and each
one of them individually, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to this registration statement
and to file the same with the 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 or she 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 or her 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 below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/S/ JEFFREY CONRAD President and Chief Executive Officer December 29, 1997
- ---------------------- (Principal Executive Officer)
Jeffrey Conrad
/S/ SATISH DUA Chief Financial Officer (Principal Financial December 29, 1997
- ---------------------- Officer and Principal Accounting Officer)
Satish Dua
/S/ HOWARD GRAHAM Chairman of the Board December 29, 1997
- ----------------------
Howard Graham
/S/ FRANK J. FARRELL Director December 29, 1997
- ----------------------
Frank J. Farrell
/S/ BARRY FINGERHUT Director December 29, 1997
- ----------------------
Barry Fingerhut
/S/ BARRY RUBENSTEIN Director December 29, 1997
- ----------------------
Barry Rubenstein
/S/ HANNAH STONE Director December 29, 1997
- ----------------------
Hannah Stone
</TABLE>
II-5
The Board of Directors
The Millbrook Press Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
December 30, 1997
