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FILED PURSUANT TO RULE 424(b)(1)
File No. 333-15637
PROSPECTUS
166,332 SHARES OF COMMON STOCK
EMERGING GROWTH ACQUISITION CORPORATION I
Emerging Growth Acquisition Corporation I (the "Company") is a newly
organized corporation the objective of which is to acquire an interest in an
operating business. The 166,332 shares of Common Stock are offered by the
Company on a "best efforts, all or none" basis (the "Offering"). Pending the
payment for not less than all of the shares of Common Stock, all proceeds of
the Offering will be deposited in a non-interest bearing escrow account. See
"Plan of Distribution."
Prior to this Offering, there has been no public market for the Common
Stock and no market is expected to develop as a result of the escrow
requirements of Rule 419. See "Description of Securities--Escrow of Shares."
Pursuant to Rule 2720 of the National Association of Securities Dealers Inc.,
Conduct Rules ("Rule 2720 of the NASD"), the initial public offering price
for the Common Stock has been determined by negotiation between the Company
and Keane Securities Co., Inc. ("Keane" or the "Qualified Independent
Underwriter"), and does not necessarily bear any direct relationship to the
Company's assets, operations, book or other established criteria of value.
The Company is conducting a blank check offering subject to the Securities
and Exchange Commission's (the "Commission") Rule 419 of Regulation C. The
net offering proceeds, after deduction for underwriting commissions and
excluding other offering expenses, the majority of which will be paid from
the Company's existing resources, estimated at $131,372 and the securities to
be issued to investors must be deposited in an escrow account (the "Deposited
Funds" and "Deposited Securities," respectively). While held in the escrow
account, the securities may not be traded or transferred. Except for an
amount up to 10% of the Deposited Funds, $13,137, otherwise releasable under
the rule, the Deposited Funds and the Deposited Securities may not be
released until an acquisition meeting certain specified criteria has been
made and a sufficient number of investors reconfirm their investment in
accordance with the procedures set forth in the Rule 419. Pursuant to these
procedures, a new prospectus, which describes an acquisition candidate and
its business and includes audited financial statements, will be delivered to
all investors. The Company must return the pro rata portion of the Deposited
Funds to any investor who does not elect to remain an investor. Unless a
sufficient number of investors elect to remain investors, all investors will
be entitled to the return of a pro rata portion of the Deposited Proceeds
(and any interest earned thereon) and none of the Deposited Securities will
be issued to investors. In the event an acquisition is not consummated within
18 months of the effective date, the Deposited Proceeds will be returned on a
pro rata basis to all investors. (See "Investors Rights and Substantive
Protection Under Rule 419").
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE DILUTION. SEE "RISK FACTORS" ON PAGE 9 AND "DILUTION."
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THE COMPANY HAS MADE APPLICATION TO REGISTER THE SHARES OF COMMON STOCK
FOR SALE ONLY IN NEW YORK STATE, AND, IF APPROVED, MAY ONLY BE TRADED IN SUCH
STATE. PURCHASERS OF SUCH SECURITIES EITHER IN THIS OFFERING OR IN ANY
SUBSEQUENT TRADING MARKET WHICH MAY DEVELOP MUST BE RESIDENTS OF SUCH STATE.
THE COMPANY WILL AMEND THIS PROSPECTUS FOR THE PURPOSE OF DISCLOSING
ADDITIONAL STATES, IF ANY, IN WHICH THE COMPANY'S SECURITIES WILL HAVE BEEN
REGISTERED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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==============================================================================
Price Underwriting
to Discounts and Proceeds to
Public Commissions(1) Company
- ------------------------------------------------------------------------------
Per Share of Common Stock $.88 $0 $.88
- ------------------------------------------------------------------------------
Total (2) ............... $146,372 $0 $146,372
==============================================================================
(1) The Company is an affiliate of Capital Growth International, L.L.C. and
International Capital Growth, Ltd., NASD members. Keane is acting as a
Qualified Independent Underwriter as that term is defined in Rule 2720 of
the NASD. As such, Keane will act as manager of this Offering and will be
paid a fee of $15,000 and receive warrants to purchase 16,633 shares of
Common Stock in consideration for its services and expenses. Keane will
receive no other compensation for acting as the manager of this Offering,
and no underwriting discounts or commissions will be paid. The offering
of the shares will terminate not later than 30 days from the date of this
prospectus, unless the Company and the Qualified Independent Underwriter
agree to extend the Offering for an additional 30 day period (such date,
as extended, the "Termination Date") at which time Rule 419 could become
operational and the funds may be retained by the Company for a period of
16 months following the effective date of the Offering. The Company has
entered into an escrow agreement with Continental Stock Transfer & Trust
Company to hold any proceeds from this Offering in a non-interest bearing
escrow account subject to certain terms and conditions. If subscriptions
for all of the shares offered hereby have not been received and accepted
by the Company by the Termination Date, no shares will be sold, and all
funds held in escrow will be returned promptly to investors without
interest thereon or deduction therefrom. See "Plan of Distribution."
(2) Before deducting expenses of approximately $50,000 payable by the
Company, the majority of which will be paid out of its existing
resources.
KEANE SECURITIES CO., INC.
THE DATE OF THIS PROSPECTUS IS MAY 14, 1997
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______________________________
______________________________
FURTHER INFORMATION
The Company intends to furnish to its stockholders Annual Reports
containing financial statements audited and reported on by its independent
public accounting firm.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, 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.
THE COMPANY
BUSINESS OBJECTIVES
Emerging Growth Acquisition Corporation I (the "Company") was formed in
the State of Delaware on July 18, 1996. The Company was formed as a "blind
pool" or "blank check" company to serve as a vehicle to acquire an interest
in an operating business ("Business") which Company's management
("Management") believes offers the opportunity for the generation of earnings
and asset growth.
Industry in the United States is experiencing historic change and becoming
increasingly competitive. This competition stems not only from both domestic
and foreign companies, but also for limited resources such as management and
access to capital. The Company will seek to (i) acquire an interest in an
early stage company with significant expansion opportunities and (ii) provide
this company with consulting advice.
The merger by an operating company into a blind pool as a method of
financing offers a number of advantages to traditional financing alternatives
such as an initial public offering ("IPO"). These advantages include the
speed with which capital is raised, lower financing costs, and reduced risk
in terms of commencing but not completing a financing.
A Business will be selected for acquisition only after careful
investigation and research. The experience and expertise of Management and
its directors will be used to evaluate products, markets, industry trends,
financial requirements, competition and the entrepreneurial and management
group associated with a prospective Business. Management's experience in
investment banking, particularly corporate finance, requires the ongoing and
comprehensive evaluation of various companies, markets, industry trends and
other economic factors in order to prudently serve institutional and retail
clients in brokerage and advisory capacities, consult with companies
regarding growth opportunities and strategic planning and offer related
financial services. Such investment banking activities often require
Management to evaluate businesses in various industries for the purpose of
acting as an underwriter or placement agent for financing arrangements.
Further, nonaffiliated third parties acting as finders may introduce such
prospective businesses to the Company.
The acquisition of the Business may be effected by merger, exchange of
capital stock, stock or asset acquisition or other similar type of
reorganization ("Business Combination"), using cash (to be derived from the
proceeds of this Offering and further financings if necessary), equity, debt
or a combination thereof. To date, the Company's efforts have been limited to
organizational activities. The implementation of the Company's business plan
is dependent upon the successful consummation of this Offering. See "Proposed
Business."
CHARACTERISTICS OF AN ACQUISITION COMPANY
The Company is a newly organized "blind pool" or "blank check" company
incorporating the investor safeguards set forth below. Immediately after the
consummation of a Business Combination, these safeguards will no longer be
applicable.
OFFERING PROCEEDS HELD IN TRUST
The gross proceeds of this Offering will be $146,372. After deduction of
the fee payable to the Qualified Independent Underwriter, the proceeds,
without deduction of other expenses, the majority of which
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will be paid from the Company's existing resources, will be $131,372. Ninety
percent (90%) of such amount, or $118,235, will be placed in an interest
bearing escrow account ("Escrow Account"). The remaining $13,137 will be used
to fund a portion of the expenses of this Offering. The Escrow Account will
not be released until the earlier of (A) such time as (i) the Company has
entered into an agreement with respect to a Business Combination; (ii) the
Company has filed a post-effective amendment to its registration statement
which post-effective amendment has been declared effective; (iii) the
prospectus contained in the post-effective amendment has been sent to the
Company's stockholders; (iv) each purchaser of securities in this Offering
has been given no fewer than 20 and no more than 45 business days from the
effective date of the prospectus to elect whether to remain as an investor;
and (v) the Business Combination has been consummated; or (B) the liquidation
of the Company.
FAIR MARKET VALUE OF TARGET BUSINESS
The Company will not acquire an interest in a 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 earnings and potential therefor, 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 Company determines that the financial statements
of a proposed Business do not clearly indicate that the Business has a
sufficient Fair Market Value, the Company will obtain an opinion from an
independent investment banking firm (which is a member of the National
Association of Securities Dealers (the "NASD") with respect to the
satisfaction of such criteria. The Company currently does not anticipate that
such investment banking firm will have had any prior affiliate relationship
with the Company. The Company will not be required to obtain an opinion from
an investment banking firm as to Fair Market Value if the Company determines
that the Business does have sufficient Fair Market Value.
STOCKHOLDER APPROVAL OF BUSINESS COMBINATION
The Company, after signing a definitive agreement for the acquisition of
an interest in a 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. In the
event that 20% or more of the stockholders of the Company (excluding, for
this purpose, those persons who were stockholders prior to this Offering)
vote against the Business Combination, the Company will not consummate such
Business Combination. The Company will proceed with the Business Combination
only if 20% or more of the stockholders of the Company do not vote against
the Business Combination and a majority of all of the outstanding shares of
the Company vote in favor of the Business Combination. All of the Company's
stockholders prior to this Offering, including all of the officers and
directors of the Company ("Initial Stockholders"), have agreed to vote their
shares of Common Stock in accordance with the vote of the majority in
interest of all other stockholders of the Company ("Public Stockholders")
with respect to any Business Combination.
REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer each Public Stockholder the
right to have his shares of Common Stock redeemed if such stockholder votes
against the Business Combination and such Business Combination is approved
and consummated. The per share redemption price will be equal to the amount
in the Escrow Account as of the record date for determination of stockholders
entitled to vote on such Business Combination (inclusive of any after-tax
interest thereon) divided by the number of shares held by the Public
Stockholders. It is anticipated that the funds to be distributed to the
Public Stockholders who have their shares redeemed will be distributed
promptly after the consummation of a Business Combination. The Initial
Stockholders have waived their respective rights to participate in any
liquidation until after the Public Stockholders have received their entire
original investment in the Company. Any remaining proceeds shall be
distributed to the Initial Stockholders in proportion to their respective
equity interests in the Company.
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ESCROW OF SHARES
The shares of Common Stock offered hereby, together with the shares held
by the Initial Stockholders, will be placed in the Escrow Account with
Continental Stock Transfer & Trust Company, as escrow agent, until the
earlier of (A) such time as (i) the Company has entered into an agreement
with respect to a Business Combination; (ii) the Company has filed a
post-effective amendment to its registration statement which post-effective
amendment has been declared effective; (iii) the prospectus contained in the
post-effective amendment has been sent to the Company's stockholders; (iv)
each purchaser of securities in this Offering has been given no fewer than 20
and no more than 45 business days from the effective date of the prospectus
to elect whether to remain as an investor; and (v) the Business Combination
has been consummated; or (B) the liquidation of the Company. During such
escrow period, the stockholders will not be able to sell or otherwise
transfer their respective shares of Common Stock, except by will or the laws
of descent and distribution, or pursuant to a qualified domestic relations
order.
LIQUIDATION IF NO BUSINESS COMBINATION
In the event that the Company does not consummate a Business Combination
within 18 months from the date of this prospectus, 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 Escrow Account, inclusive of any after-tax interest
thereon. The Initial Stockholders have waived their respective rights to
participate in any liquidation distribution until after the Public
Stockholders have received their entire original investment in the Company.
Any remaining proceeds shall be distributed to the Initial Stockholders in
proportion to their respective equity interests in the Company.
A Public Stockholder shall be entitled to receive funds from the Escrow
Account only in the event of a liquidation or in the event he seeks
redemption of his shares 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 in or to the Escrow Account.
<TABLE>
<CAPTION>
The Offering
---------------------------------
<S> <C>
Securities Offered ............... 166,332 shares of Common Stock.
Common Stock Outstanding
Prior to the Offering ........... 166,332 shares
Common Stock to be
Outstanding After the Offering .. 332,664 shares
</TABLE>
USE OF PROCEEDS
The Company intends to apply substantially all of the net proceeds of this
Offering to acquire an interest in a Business, including identifying and
evaluating prospective acquisition candidates, selecting the Business and
structuring, negotiating and consummating the Business Combination. The gross
proceeds of this Offering will be $146,372. After deduction of the fee
payable to the Qualified Independent Underwriter, the proceeds, before
deduction of other expenses, will be $131,372. Ninety percent (90%) of such
amount, or $118,235, will be held in the Escrow Account. The remaining
$13,137 will be used to fund a portion of the expenses of this Offering. The
Escrow Account will not be released until the earlier of (A) such time as (i)
the Company has entered into an agreement with respect to a Business
Combination; (ii) the Company has filed a post-effective amendment to its
registration statement which has been declared effective; (iii) the
prospectus contained in the post-effective amendment has been sent to the
Company's stockholders; (iv) each purchaser of securities in this Offering
has been given no fewer than 20 and no more than 45 business days from the
effective date of the prospectus to elect whether to remain as an investor;
and (v) the Business Combination has been consummated; or (B) the liquidation
of the Company. The proceeds not held in the Escrow Account will be used (i)
to pay for business, legal and accounting due diligence expenses on
prospective Businesses; and (ii) for the general administrative expenses of
the Company, including legal and accounting fees and administrative support
expenses in connection with the Company's reporting obligations to the
Securities and Exchange Commission. See "The Company" and "Use of Proceeds."
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RISK FACTORS
The securities offered hereby involve a high degree of risk. See "Risk
Factors."
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the more
detailed financial statements appearing elsewhere in this prospectus. This
information should be read in conjunction with such financial statements,
including the notes thereto.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
July 18, 1996
(Inception)
to December 31, 1996
-----------------------
<S> <C>
Income ...................................... $ 0
Net (loss) .................................. (4,884)
Net (loss) per common share ................. (.03)
Weighted average number of shares outstanding 166,332
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data:
December 31, 1996
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Actual As Adjusted (1)
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<S> <C> <C>
Working capital $68,302 $164,674(2)
Total assets $69,802 $166,174(2)
Total liabilities $ 1,500 $ 1,500
Stockholders' equity $68,302 $164,674(3)
</TABLE>
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(1) Gives effect to the sale of the shares of Common Stock offered hereby and
receipt and initial application of the net proceeds therefrom.
(2) Includes $118,235 being held in the Escrow Account which is only
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 Escrow Account will be distributed to the
Public Stockholders. The Initial Stockholders have waived their
respective rights to participate in any liquidation distribution until
after the Public Stockholders have received their entire original
investment in the Company. Any remaining net proceeds shall be
distributed to the Initial Stockholders in proportion to their respective
equity interests in the Company. See "Investors' Rights and Substantive
Protection under Rule 419--Deposit of Offering Proceeds and Securities"
and "Characteristics of an Acquisition Company--Offering Proceeds Held in
Escrow."
(3) In the event the Company consummates a Business Combination, the
redemption rights afforded the Public Stockholders may result in the
redemption by the Company of up to 19.99% of the aggregate number of
shares held by the Public Stockholders at a per share redemption price
equal to the amount in the Escrow Account as of the record date for
determination of stockholders entitled to vote on the Business
Combination (inclusive of any after-tax interest thereon) divided by the
number of shares held by the Public Stockholders.
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THE COMPANY
The Company is a newly organized "blind pool" or "blank check" company
incorporated under the laws of the State of Delaware on July 18, 1996. The
Company's objective is to acquire an interest in an operating business. To
date, the Company's efforts have been limited to organizational activities.
The implementation of the Company's business plan is dependent upon the
successful consummation of this Offering. The Company's office is located at
the office of Capital Growth International, L.L.C. at 660 Steamboat Road,
Greenwich, Connecticut 06830 and its telephone number is (203) 861-7750.
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSIT OF OFFERING PROCEEDS AND SECURITIES
Rule 419 ("Rule 419") under the Rules and Regulations of the Securities
Act of 1933, as amended ("Securities Act") requires that any proceeds
received from investors in an offering, after deduction for any underwriting
commissions, underwriting expenses and dealer allowances, and any securities
purchased by investors in the offering, be deposited into an escrow or trust
account governed by an agreement which contains certain terms and provisions
specified by the Rule. Under Rule 419, any Deposited Funds will be released
to the Company and any Deposited Securities will be released to the investors
only after the Company has met the following three basic conditions. First,
the Company must execute one or more agreements for acquisition(s) of
business(es) and asset(s) meeting certain prescribed criteria. Second, the
Company must file a post-effective amendment to the registration statement
which includes the terms of a reconfirmation offer that must contain
conditions prescribed by the rules. The post-effective amendment must also
contain information regarding the acquisition candidate(s) and business(es),
including audited financial statements. Third, the Company must conduct the
reconfirmation offer and satisfy all of the prescribed conditions, including
the condition that a certain minimum number of investors must elect to remain
investors. After the Company submits a signed representation to the escrow
agent that the requirements of Rule 419 have been met and after consummation
of the acquisition(s), the escrow agent may release any Deposited Funds and
Deposited Securities.
Accordingly, the Company has entered into an escrow agreement with
Continental Stock Transfer & Trust Company, a federally insured depositary
institution (the "Escrow Agent") which provides that:
(1) Any net proceeds are to be deposited into the Escrow Account
maintained by the Escrow Agent promptly upon receipt. Rule 419 permits 10% of
any Deposited Funds to be released to the Company prior to the reconfirmation
offering. Any Deposited Funds and the dividends or interest thereon, if any,
are to be held for the sole benefit of the investors and can only be invested
in bank deposits, in money market mutual funds or federal government
securities or securities for which the principal or interest is guaranteed by
the federal government.
(2) All securities issued in connection with the offering and any other
securities issued with respect to such securities, including securities
issued with respect to stock splits, stock dividends or similar rights are to
be deposited directly into the Escrow Account promptly upon issuance. The
identity of the investors is to be included on the stock certificates or
other documents evidencing the Deposited Securities. The Deposited Securities
held in the Escrow Account are to remain as issued and deposited are to be
held for the sole benefit of the investors' who retain the voting rights, if
any, with respect to the Deposited Securities held in their names. The
Deposited Securities held in the Escrow Account may not be transferred,
disposed of nor any interest created therein other than by will or the laws
of descent and distribution, or pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code of 1986 or Table 1 of the
Employee Retirement Income Security Act.
(3) Any warrants, convertible securities or other derivative securities
relating to Deposited Securities held in the Escrow Account may be exercised
or converted in accordance with their terms; provided however, that the
securities received upon exercise or conversion together with any cash or
other consideration paid in connection with the exercise or conversion are to
be promptly deposited into the Escrow Account.
PRESCRIBED ACQUISITION CRITERIA
Rule 419 requires that before any Deposited Funds and Deposited Securities
can be released, the Company must first execute one or more agreements to
acquire an interest in Business(es) or assets meeting certain spe-
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cific criteria. The Agreements(s) must provide for the acquisition of an
interest in businesses or assets for which the fair value of the business
represents at least 80% of the maximum offering proceeds, including funds
received or to be received from the exercise or conversion of any derivative
securities, but excluding any underwriting commissions, underwriting expenses
and dealer allowances payable to non-affiliates. It is expected that the fair
value of any business(es) or asset(s) of value which are acquired by the
Company will satisfy the foregoing criteria. The Agreement(s) will be subject
to a condition that at least 80% in interest of the Public Stockholders must
elect to reconfirm their investment; provided that the acquisition(s) will be
consummated if that number of investors do reconfirm their investment.
POST-EFFECTIVE AMENDMENT
Once the Agreement(s) governing the acquisition(s) of an interest in one
or more Business(es) meeting the above criteria has been executed, Rule 419
requires the Company to update the registration statement with a
post-effective amendment. The post-effective amendment must contain
information about the proposed acquisition candidate(s) and business(es)
including audited financial statements, the results of this Offering and the
use of any funds to be disbursed from the Escrow Account. The post-effective
amendment must also include the terms of the reconfirmation offer mandated by
Rule 419. The reconfirmation offer must include certain prescribed conditions
which must be satisfied before any Deposited Funds and Deposited Securities
can be released from escrow.
RECONFIRMATION OFFERING
The reconfirmation offer must commence after the effective date of the
post-effective amendment. Pursuant to Rule 419, the terms of the
reconfirmation must include the following conditions:
(1) The prospectus contained in the post-effective amendment will be sent
to each investor whose securities are held in securities are held in the
Escrow Account within 5 business days of the effective date of the post-
effective amendment.
(2) Each investor will have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to notify the
Company in writing that the investor elects to remain an investor.
(3) If the Company does not receive written notification from any investor
within 45 business days following the effective date, a pro rata portion of
any Deposited Funds (and any related interest or dividends) held in the
Escrow Account on such investor's behalf will be returned to the investor
within 5 business days by first class mail or other equally prompt means.
(4) The acquisition(s) will be consummated only if at least 80% in
interest of the Public Stockholders elect to reconfirm their investment.
(5) If one or more consummated acquisitions has not occurred by the date
18 months from the date of this prospectus any Deposited Funds held in the
Escrow Account and any after-tax interest thereon shall be returned to all
investors on a pro rata basis within 5 business days by first class mail or
other equally prompt means.
RELEASE OF DEPOSITED SECURITIES AND DEPOSITED FUNDS
Any Deposited Funds may be released to the Company and Deposited
Securities may be released to the investors, only at the same time as and
after:
(1) The Escrow Agent has received a signed representation from the Company
and any other evidence acceptable by the Escrow Agent that:
(a) The Company has executed an agreement for the acquisition(s) of an
interest in a Business(es) for which the fair market value of the Business
represents at least 80% of any offering proceeds and has filed the
required post-effective amendment;
(b) The post-effective amendment has been declared effective, that the
mandated reconfirmation offer having the conditions prescribed by Rule 419
has been completed and that the Company has satisfied all of the
prescribed conditions of the reconfirmation offer.
(2) The acquisition(s) of the Business(es) is(are) consummated.
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RISK FACTORS
The securities offered hereby involve a high degree of risk. 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; NO PRESENT SOURCE OF REVENUES
The Company, which was incorporated on July 18, 1996 and is in the
development stage, has not as yet attempted to evaluate, or had any
discussions with, any prospective acquisition candidates. Additionally, the
Company has no plans, arrangements or understandings with any prospective
acquisition candidates. To date, the Company's efforts have been limited to
organizational activities. It will not generate any revenues (other than
interest income on the proceeds of this Offering) until, at the earliest, the
consummation of a Business Combination.
POSSIBLE LIQUIDATION OF THE COMPANY
In the event that the Company does not consummate a Business Combination
within 18 months from the date of this prospectus, 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 Escrow Account, inclusive of any after-tax interest
thereon. 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 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. The Initial Stockholders have waived their respective rights to
participate in any liquidation distribution until after the Public
Stockholders have received their entire original investment in the Company.
Any remaining proceeds shall be distributed to the Initial Stockholders in
proportion to their respective equity interests in the Company.
A Public Stockholder shall be entitled to receive funds from the Escrow
Account only in the event of a liquidation or in the event he seeks
redemption of his shares 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 in or to the Escrow Account. See "Characteristics of an Acquisition
Company."
UNASCERTAINABLE RISKS OF BUSINESS; UNCERTAIN STRUCTURE OF BUSINESS
COMBINATION
Since the Company has not yet identified a prospective Business, there is
no basis for investors in this Offering to evaluate the possible merits or
risks of the Business operations. None of the Company's officers, directors,
promoters, affiliates or associates have had any preliminary contact or
discussions with and there currently are no plans, proposals, arrangements or
understandings with any representatives of the owners of any business or
company regarding the possibility of a Business Combination. To the extent
the Company consummates a Business Combination with a financially unstable
company, or a company in its early stage of development or growth, or without
established sales or earnings, the Company will become subject to all of the
risks inherent in the operation of such a Business. While the Company has not
yet identified a prospective Business, there can be no assurance that any
such prospective Business will not present such a high level risk that
conventional private or public offerings of securities or conventional bank
financings will be available to effectuate the Business Combination. Although
Management of the Company will endeavor to evaluate the risks inherent in any
particular Business, there can be no assurance that the Company will properly
ascertain all such risks. Furthermore, the structure of a Business
Combination with a Business, which may take the form of a merger, exchange of
capital stock or stock or asset acquisition, cannot be presently determined
since the Company has not had any preliminary contacts, discussions or
understandings with representatives of any prospective Business regarding the
possibility of a Business Combination. See "Proposed Business--Selection of
Business and Structuring a Business Combination."
DISCRETIONARY USE OF PROCEEDS; ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO
BUSINESS COMBINATION
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 gener-
9
<PAGE>
ally applied toward consummating a Business Combination with a Business. As
of the date of this prospectus, since the Company has not yet identified a
prospective Business, investors in this Offering do not currently have any
substantive information available for advance 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 a post-effective amendment to the registration
statement of which this prospectus is a part, which will include a
description of the operations of the Business and audited historical
financial statements thereof. Such post-effective amendment will be filed
with and subject to the review of the Securities and Exchange Commission. The
Company has no current intention to use any of the net proceeds of this
Offering to purchase shares held by the Company's Management.
LIMITED ABILITY TO EVALUATE MANAGEMENT OF TARGET BUSINESS
While the Company's ability to successfully effect a Business Combination
will be dependent upon certain of its key personnel, the future role of such
personnel in the Business cannot presently be stated with any certainty.
While it is possible that certain of the Company's key personnel will remain
associated in some capacities with the Business following a Business
Combination, such key personnel may not devote their full efforts to the
affairs of the Business. Moreover, there can be no assurance that such
personnel will have significant experience or knowledge relating to the
operations of the particular Business. Furthermore, although the Company
intends to closely scrutinize the management of a prospective 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. In addition, there can be no assurance
that such future management will have the necessary skills 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 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 necessary to enhance the incumbent
management. See "Proposed Business--Selection of Business and Structuring a
Business Combination."
DEPENDENCE UPON KEY PERSONNEL
The ability of the Company to consummate a Business Combination will be
largely dependent upon the efforts of the officers, directors and stockholders
of the Company. The Company has not entered into employment agreements with any
of such personnel or obtained any "key person" life insurance on their lives.
The loss of the services of such key personnel could have a material adverse
effect on the Company's ability to successfully achieve its business objectives.
The officers and directors of the Company will devote approximately 5% of their
average work week to the affairs of the Company, which the Company believes is
sufficient to conduct its current operations, although it is anticipated that in
the event the Company's operations require, the officers and directors will
increase such time as is necessary or advisable to carry out their respective
duties. Furthermore, none of the officers, directors or stockholders of the
Company has previously been involved in any company formed solely for the
purpose of effecting a Business Combination. See "Management."
CONFLICT OF INTEREST
None of the Company's officers or directors is required to commit his full
time to the affairs of the Company and each has a full-time position elsewhere.
The officers and directors of the Company will devote approximately 5% of their
average work week to the affairs of the Company, which the Company believes is
sufficient to conduct its current operations, although it is anticipated that in
the event the Company's operations require, the officers and directors will
increase such time as is necessary or advisable to carry out their respective
duties. Accordingly, such personnel will have conflicts of interest in
allocating management time among various business activities. The officers and
directors of the Company may be involved in other acquisition funds with
activities similar to those to be undertaken by the Company and there can be no
assurance that they will offer all suitable prospective Businesses to the
Company before any acquisition fund with which they may be affiliated. Such
persons may have conflicts of interest in determining to which entity a
particular business opportunity should be presented. In general, officers and
directors of a corporation incorporated under the laws of the State of Delaware
are required to present certain business opportunities to such corporation.
Accordingly, as a result of multiple business affiliations, certain of the
Company's officers, directors and stockholders may have similar legal
obligations to present certain business opportunities to multiple entities.
According to its corporate policy, the Company will not consummate a Business
Combination with an entity which is affiliated with an Initial Stockholder.
However, Management
10
<PAGE>
may change this policy at any time. There can be no assurance that any of the
foregoing conflicts will be resolved in favor of the Company. See
"Management--Conflicts of Interest." In addition, an Initial Stockholder or
an entity with which he is affiliated may be entitled to receive finder's or
consulting fees in the event he originates a Business Combination. It is
likely that the other party to a Business Combination will have retained an
affiliate of the Company, International Capital Growth, Ltd., as its advisor
or consultant in connection with the Business Combination.
NEED FOR ADDITIONAL FINANCING
The Company believes that the proceeds of this Offering may not be
sufficient to allow it to consummate a Business Combination. However,
inasmuch as the Company has not yet identified any prospective Business, 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, either because of the
size of the Business Combination or the depletion of the available net
proceeds in search of a Business, or because the Company becomes obligated to
redeem a significant number of shares from dissenting stockholders, 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
Business. 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 Business. Any financings involving the sale of
equity may result in future dilution to the Company's then stockholders. The
failure by the Company to secure such additional financing could have a
material adverse effect on the continued development or growth of the
Business. None of the Company's officers, directors or stockholders is
required to provide any financing to the Company in connection with a
Business Combination. See "Proposed Business--Selection of Business and
Structuring a Business Combination."
PROBABLE LACK OF BUSINESS DIVERSIFICATION
The Fair Market Value of the Company's Business will represent at least
80% of the net assets of the Company at the time of its acquisition.
Accordingly, the prospects for the Company's success may be entirely
dependent upon the future performance of the Business and the Company may not
have the resources to diversify its operations or benefit from the possible
spreading of risks or offsetting of losses.
COMPETITION
The Company expects to encounter intense competition from other entities
having business objectives similar to those of said Company. Many of these
entities, including venture capital firms, other "blind pool" or "blank
check" companies, large industrial and financial institutions, and small
business investment companies are well- established and have extensive
experience in connection with identifying and effecting Business Combinations
directly or through affiliates. Many of these competitors possess greater
financial, technical, human and other resources than the Company and there
can be no assurance that the Companies will have the ability to compete
successfully. The Company's financial resources will be extremely limited in
comparison with those of its many competitors. This inherent competitive
limitation may compel the Company to select certain less attractive Business
Combination prospects. There can be no assurance that such prospects will
permit the Company to achieve its stated business objectives.
AUTHORIZATION OF ADDITIONAL SECURITIES
The Company's Certificate of Incorporation authorizes the issuance of
10,000,000 shares of Common Stock. Upon completion of this Offering, there
will be 9,667,336 authorized but unissued shares of Common Stock available
for issuance. The Company's Board of Directors has the power to issue any or
all of such shares without stockholder approval. Although the Company has no
commitments as of the date of this prospectus to issue any shares of Common
Stock other than as described in this prospectus, the Company will, in all
likelihood, issue a substantial number of additional shares in connection
with a Business Combination. To the extent that
11
<PAGE>
additional shares of Common Stock are issued, dilution to the interests of
the Company's stockholders will occur. The Company's Certificate of
Incorporation also authorizes the issuance of 1,000,000 shares of preferred
stock ("Preferred Stock") with such designations, rights and preferences as
may be determined from time to time by the Board of Directors. 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. 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 has no commitments as of the date of this prospectus to issue any
shares of Preferred Stock, there can be no assurance that the Company will
not do so in the future. See "Description of Securities."
CONTROL BY MANAGEMENT
Upon consummation of this Offering, the Initial Stockholders (including
all of the Company's officers and directors) will collectively own 50% of the
then issued and outstanding shares of Common Stock for which they paid $.44
per share. It is unlikely that there will be an annual meeting of
stockholders to elect new directors prior to the consummation of a Business
Combination, in which case all of the current directors will continue in
office until their successors are duly elected and qualified. The Initial
Stockholders, because of their ownership position in the Company, will
continue to control the Company at least until the consummation of a Business
Combination. In addition, affiliates and/or relatives of the Initial
Stockholders are not prohibited from purchasing shares of Common Stock in
this Offering and if they do, no assurance can be given that the Initial
Stockholders will not influence the vote of such affiliates in connection
with a Business Combination. The Company has been informed that no affiliate
or relative of any of the Initial Stockholders intends to purchase shares of
Common Stock in this Offering.
IMMEDIATE DILUTION; DISPARITY OF CONSIDERATION
This Offering involves an immediate dilution of $.38 per share between the
pro forma net tangible book value per share after the Offering of $.50 and
the initial public offering price of $.88 per share. The Initial Stockholders
acquired their shares of Common Stock at a discount to the IPO price and,
accordingly, new investors will bear significant risks inherent in an
investment in the Company. See "Dilution."
INVESTMENT COMPANY ACT CONSIDERATIONS
The regulatory scope of the Investment Company Act of 1940 ("Investment
Company Act"), which was enacted principally for the purpose of regulating
vehicles for pooled investments in securities, extends generally to companies
engaged primarily in the business of investing, reinvesting, owning, holding
or trading in securities. The Investment Company Act may, however, also be
deemed to be applicable to a company which does not intend to be
characterized as an investment company but which, nevertheless, engages in
activities which may be deemed to be within the definitional scope of certain
provisions of the Investment Company Act. The Company believes that its
anticipated principal activities, which will involve acquiring control of an
operating company, will not subject the Company to regulation under the
Investment Company Act. Nevertheless, there can be no assurance that the
Company will not be deemed to be an investment company, particularly during
the period prior to 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 Investment Company Act imposes certain requirements on companies deemed
to be within its regulatory scope, including registration as an investment
company, adoption of a specific form of corporate structure and compliance
with certain burdensome reporting, record-keeping, voting, proxy, disclosure
and other rules and regulations. In the event of 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.
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 Business
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<PAGE>
Combination will be contingent upon the Company's revenues and earnings, if
any, capital requirements and general financial condition. 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 of Directors does not
anticipate declaring any dividends in the foreseeable future. See
"Description of Securities-- Dividends."
PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICE
Prior to this Offering, there has been no public market for the Common
Stock and no market is expected to develop as it shall be unlawful for any
investor to sell or offer to sell any security that is held in escrow
pursuant to Rule 419. When the escrow terminates, there can be no assurance
that a market for the Common Stock will develop or be sustained 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 from time to time. The Company has no current
plans, proposals, arrangements or understandings with any person with regard
to the development of a trading market in any of the Company's securities. As
a result, an investment in the shares of Common Stock offered hereby may be
totally illiquid and investors may not be able to liquidate their investment
readily or at all when they desire to sell. The initial offering price of the
shares of Common Stock offered hereby has been arbitrarily determined by
negotiation between the Company and the Qualified Independent Underwriter and
bears no relation to any established valuation criteria. See "Plan of
Distribution."
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, the Company will have 332,664
shares of Common Stock outstanding. Subject to the escrow requirements of
Rule 419 (See "Description of Securities--Escrow of Shares") 166,332 shares
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 promulgated under
the Securities Act. All of the remaining 166,332 shares are deemed to be
"restricted securities", as that term is defined under Rule 144 promulgated
under the Securities Act, 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 July 1997. See "Description of
Securities--Shares Eligible for Future Sale."
COMPLIANCE WITH STATE BLUE SKY LAWS
The ability to qualify the shares of Common Stock offered hereby for both
initial sale and secondary trading may be limited because a number of states
have enacted regulations pursuant to their securities or so-called "blue sky"
laws restricting or, in some cases, prohibiting the sale of securities of
"blind pool" issuers such as the Company within that state. Among the states
which have enacted regulations prohibiting the sale of securities of "blind
pool" issuers such as the Company in both primary and secondary markets are
California, New Jersey and Virginia. Because of these regulations, the
Company only intends to offer the shares of Common Stock in the State of New
York. Purchasers of the shares of Common Stock in this Offering or in any
subsequent trading market which may develop must be residents of the State of
New York and may only trade such securities in the State of New York. The
Company intends to take efforts to insure that no state laws are violated
through the further sale of its securities including the placement of a
restrictive legend on the face of the certificates representing the shares of
Common Stock offered hereby.
LOW PRICED STOCK DISCLOSURE REQUIREMENTS
The shares of Common Stock offered hereby are considered low priced
securities under rules promulgated under the Exchange Act of 1934, as
amended. Under these rules, broker-dealers participating in transactions in
low priced securities must first deliver a risk disclosure document which
describes the risks associated with such stocks, the broker-dealer's duties,
the customer's rights and remedies, and certain market and other information,
and make a suitability determination approving the customer for low priced
stock transactions based on the customer's financial situation, investment
experience and objectives. Broker-dealers must also disclose these restric-
13
<PAGE>
tions in writing and provide monthly account statements to the customer, and
obtain specific written consent of the customer. With these restrictions, the
likely effect of designation as a low priced stock is to decrease the
willingness of broker-dealers to make a market for the stock, to decrease the
liquidity of the stock and increase the transaction cost of sales and
purchases of such stocks compared to other securities.
PENNY STOCK REGULATION
Broker-dealer practices in connection with transactions in "penny stocks"
are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stock generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system, provided that current
price and volume information with respect to transactions in such securities
is provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the risks in the penny stock
market. The broker-dealer also must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements
showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules generally require that prior to a
transaction in a penny stock the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the
penny stock rules. If the Company's Common Stock becomes subject to the penny
stock rules investors in the offering may find it more difficult to sell
their shares.
ESCROW OF INVESTORS' FUNDS
Under the terms of this Offering, the Company is offering the shares of
Common Stock on a "best efforts, all or none basis." As such, the shares of
Common Stock will be offered until all of the securities are sold or the
offering period ends, whichever first occurs, unless the Offering is
terminated earlier by the Company. Therefore, no commitment exists by anyone
to purchase all or any part of the shares of Common Stock offered hereby.
Consequently, there is no assurance that all of the shares of Common Stock
offered hereby will be sold, and subscribers' funds may be escrowed for so
long as 70 days (the 30 day Offering period plus an additional 30 day
extension period and 10 business days to permit clearance of funds in escrow)
and then returned promptly without interest thereon, in the event all of the
shares of Common Stock offered hereby are not sold prior to the Termination
Date. Investors, therefore will not have the use of any funds paid for the
purchase of the shares of Common Stock during the Offering period. In the
event the Company is unable to sell all of the shares of Common Stock offered
hereby within the Offering period, the Offering will be withdrawn. See "Plan
of Distribution."
14
<PAGE>
USE OF PROCEEDS
The gross proceeds of this Offering are estimated to be $146,372. After
deduction of the fee payable to the Qualified Independent Underwriter, the
proceeds, before deduction of other expenses, will be $131,372. None of the
net proceeds (other than 10% of the net proceeds not deposited in the Escrow
Account) are currently intended to be used to pay fees, salaries or offering
expenses to any officer or director of the Company or their affiliates or
associates. Although based on corporate policy, this policy may be changed by
Management at any time. The Company will use substantially all of the net
proceeds of this Offering to acquire an interest in a Business, including
identifying and evaluating prospective acquisition candidates, selecting the
Business, and structuring, negotiating and consummating the Business
Combination including possible payment of finder's and/or consultant's fees
or other compensation to persons or entities which provide assistance or
services to the Company. None of the Company's officers, directors or
promoters and no other affiliate of the Company has had any preliminary
contact or discussion with any representative of any other company regarding
the possibility of a Business Transaction. The Company will not acquire a
Business unless the Fair Market Value of such business is greater than 80% of
the net assets (assets less liabilities) of the Company at the time of such
acquisition.
Ninety percent (90%) of the net proceeds, or $118,235, will be held in the
Escrow Account. The remaining $13,137 will be used to fund a portion of the
expenses of this Offering. The Escrow Account will not be released until the
earlier of (A) such time as (i) the Company has entered into an agreement
with respect to a Business Combination; (ii) the Company has filed a
post-effective amendment to its registration statement which post-effective
amendment has been declared effective; (iii) the prospectus contained in the
post-effective amendment has been sent to the Company's stockholders; (iv)
each purchaser of securities in this Offering has been given no fewer than 20
and no more than 45 business days from the effective date of the prospectus,
to elect whether to remain an investor; and (v) the Business Combination is
consummated; or (B) the liquidation of the Company. If a Business Combination
is consummated, any amount in the Escrow Account not paid as consideration to
the sellers of the Business may be used to finance the operations of the
Business or to effect other acquisitions, such determination to be made by
the then Board of Directors of the Company. If a Business Combination is not
consummated, since all of the Initial Stockholders have waived their
respective rights to participate in the required liquidation distribution
until after the Public Stockholders have received their entire original
investment in the Company, all of the assets of the Company which may be
distributed upon such liquidation may be distributed to the Public
Stockholders. The Escrow Agent is only authorized to invest the funds in
certain government securities and to disburse the funds from the account upon
receipt of instructions from the Company; it has no other duties or
obligations.
The proceeds not held in the Escrow Account, together with the Company's
existing resources, will be used (i) for other expenses of this Offering
(approximately $50,000); (ii) to pay for business, legal and accounting due
diligence expenses on prospective Businesses; and (iii) for the general and
administrative expenses of the Company, including legal and accounting fees
and administrative support expenses in connection with the Company's
reporting obligations to the Securities and Exchange Commission. The Company
believes that such proceeds together with the Company's current resources and
advances to be made, as needed, by the Initial Stockholders, will allow the
Company to operate for at least the next 18 months, assuming that a Business
Combination is not consummated during that time. However, there currently are
no agreements or discussions regarding the further financing of the Company
by the Initial Stockholders. No compensation will be paid to any officer,
director, stockholder or affiliate of the Company until after the
consummation of a Business Combination. Since the role, if any, of present
management after a Business Combination is uncertain, the Company has no
ability to determine what remuneration, if any, will be paid to such persons
after a Business Combination. The Company has no present intention to use any
of the net proceeds of this Offering to make loans. The Company has no
current plans, proposals, arrangements or understandings with respect to the
sale or issuance of additional securities of the Company after completion of
the Offering but prior to the consummation of a Business Combination.
A Public Stockholder shall be entitled to receive funds from the Escrow
Account only in the event of a liquidation or in the event he seeks
redemption of his shares 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 in or to the Escrow Account.
15
<PAGE>
DILUTION
The difference between the public offering price per share of Common Stock
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 December
31, 1996, the net tangible book value of the Company was $68,302, or $.41 per
share of Common Stock. After giving effect to the sale of 166,332 shares of
Common Stock offered hereby (less estimated expenses of this Offering), the
pro forma net tangible book value of the Company at December 31, 1996, would
have been $164,674 or $.50 per share, representing an immediate increase in
net tangible book value of approximately $.09 per share to the Initial
Stockholders and an immediate dilution of $.38 per share to the Public
Stockholders.
The following table illustrates the dilution to the Public Stockholders on
a per share basis, rounded to the nearest hundredth:
<TABLE>
<CAPTION>
<S> <C> <C>
Public offering price .................... $.88
Net tangible book value before this
Offering .......................... $.41
Increase attributable to Public
Stockholders ...................... .09
------
Pro forma net tangible book value after
this Offering .......................... .50
------
Dilution to Public Stockholders .......... $.38
======
</TABLE>
The following table sets forth, with respect to the Initial Stockholders
and the Public Stockholders, a comparison of the number and percentage of
shares of Common Stock acquired from the Company, the amount and percentage
of consideration paid and the average price per share:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------------- -------------------------- Average Price
Number Percentage Amount Percentage Per Share
--------- ------------ ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Initial Stockholders 166,332 50% $ 73,186 33.3% $.44
Public Stockholders 166,332 50% 146,372 66.7% $.88
--------- ------------ ---------- ------------
332,664 100% 219,558 100%
========= ============ ========== ============
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is a newly organized "blind pool" or "blank check" company,
the objective of which is to acquire an interest in an operating business. To
date, the Company's efforts have been limited to organizational activities.
Substantially all of the Company's working capital needs subsequent to
this Offering will be attributable to the identification, evaluation and
selection of a suitable Business and, thereafter, to structure, negotiate and
consummate a Business Combination with such Business. Such working capital
needs are expected to be satisfied from the Company's current resources, the
proceeds of this Offering not deposited in the Escrow Account, and advances,
as needed, from the Initial Stockholders.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1996 and as adjusted to give effect to the sale of the shares of
Common Stock offered hereby.
<TABLE>
<CAPTION>
December 31, 1996
--------------------------
Actual As Adjusted
--------- -------------
<S> <C> <C>
Long-Term Debt ................................................... $ -0- $ -0-
Stockholders' Equity:
Preferred Stock, $.001 par value, 1,000,000 shares authorized;
none issued or outstanding .................................. -- --
Common Stock, $.001 par value, 10,000,000 shares authorized;
166,332 shares issued and outstanding; 332,664 shares issued
and outstanding, as adjusted ................................ 166 332
Additional Paid-In Capital ..................................... 73,020 169,226
Accumulated Deficit ............................................ (4,884) (4,884)
Total Stockholders' Equity .................................. $68,302 $164,342
--------- -------------
Total Capitalization ........................................ $68,302 $164,342
========= =============
</TABLE>
In the event the Company consummates a Business Combination, the
redemption right afforded to the Public Stockholders may result in the
redemption by the Company of up to 19.99% of the aggregate number of shares
held by the Public Stockholders at a per share redemption price equal to the
amount in the Escrow Account as of the record date for the determination of
stockholders entitled to vote on the Business Combina- tion (inclusive of any
after-tax interest thereon) divided by the number of shares held by the
Public Stockholders.
CHARACTERISTICS OF AN ACQUISITION COMPANY
The Company is a newly organized "blind pool" or "blank check" company
incorporating the following selected investor safeguards. Immediately after
the consummation of a Business Combination, these safeguards will no longer
be applicable.
OFFERING PROCEEDS HELD IN ESCROW
The gross proceeds of this Offering will be $146,372. After deduction of
the fee payable to the Qualified Independent Underwriter, the proceeds,
before deduction of other expenses, will be $131,372. Ninety percent (90%) of
such amount, or $118,235, will be placed in the Escrow Account. The remaining
$13,137 will be used to fund a portion of the expenses of this Offering. The
Escrow Account will not be released until the earlier of (A) such time as (i)
the Company has entered into an agreement with respect to a Business
Combination; (ii) the Company has filed a post-effective amendment to its
registration statement which post-effective amendment has been declared
effective; (iii) the prospectus contained in the post-effective amendment has
been sent to the Company's stockholders; (iv) each purchaser of securities in
this Offering has been given no fewer than 20 and no more than 45 business
days from the effective date of the prospectus to elect whether to remain an
investor; and (v) the Business Combination is consummated; or (B) the
liquidation of the Company.
FAIR MARKET VALUE OF TARGET BUSINESS
The Company will not acquire a 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
earnings and potential therefor, cash flow and book value is at least 80% of
the net assets of the Company at the time of such acquisition. If the Company
determines that the financial statements of a proposed Business do not
clearly indicate that the Business has a sufficient Fair Market Value, the
Company will obtain an opinion from an independent investment banking firm
(which is a member of the NASD) with respect to the satisfaction of such
criteria. The Company currently does not anticipate that such investment
banking firm will have had any prior affiliate relationship with the Company.
The Company will not be required to obtain an opinion from an investment
banking firm as to Fair Market Value if the Company determines that the
Business does have sufficient Fair Market Value.
17
<PAGE>
STOCKHOLDER APPROVAL OF BUSINESS COMBINATION
The Company, after signing a definitive agreement for the acquisition of a
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. In the event that 20% or
more in interest of the stockholders of the Company (excluding, for this
purpose, those persons who were stockholders prior to this Offering) vote
against the Business Combination, the Company will not consummate such
Business Combination. The Company will proceed with the Business Combination
only if 20% or more in interest of the stockholders of the Company do not
vote against the Business Combination and a majority of all of the
outstanding shares of the Company voted in favor of the Business Combination.
All of the Company's stockholders prior to this Offering, including all of
the Initial Stockholders, have agreed to vote their shares of Common Stock in
accordance with the vote of the majority in interest of all Public
Stockholders with respect to any Business Combination.
REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer each Public Stockholder the
right to have his shares of Common Stock redeemed if such stockholder votes
against the Business Combination and the Business Combination is approved and
consummated ("Redeeming Stockholders"). The per share redemption price will
be equal to the amount in the Escrow Account as of the record date for
determination of stockholders entitled to vote on such Business Combination
(inclusive of any after-tax interest thereon), divided by the number of
shares held by the Public Stockholders ("Redemption Price"). Concurrently
with the consummation of the Business Combination, the Trustee, as directed
by the Company, will distribute to the Company's transfer agent an amount
equal to the Redemption Price multiplied by the number of shares owned by the
Redeeming Stockholders. As soon as practicable thereafter, the transfer agent
will then distribute such amount to the Redeeming Stockholders as their
respective interests may appear. The Initial Stockholders have waived their
respective rights to participate in any liquidation until after the Public
Stockholders have received their entire original investment in the Company.
Any remaining net proceeds shall be distributed to the Initial Stockholders
in proportion to their respective equity interests in the Company.
ESCROW OF SHARES
The shares of Common Stock will be placed in the Escrow Account with
Continental Stock Transfer & Trust Company, as escrow agent, until the
earlier of (A) such time as (i) the Company has entered into an agreement
with respect to a Business Combination; (ii) the Company has filed a
post-effective amendment to its registration statement which post-effective
amendment has been declared effective; (iii) the prospectus contained in the
post-effective amendment has been sent to the Company's stockholders; (iv)
each purchaser of securities in this Offering has been given no fewer than 20
and no more than 45 business days from the effective date of the prospectus
to elect whether to remain an investor; and (v) the Business Combination is
consummated; or (B) the liquidation of the Company. During such escrow
period, the Public Stockholders will not be able to sell or otherwise
transfer their respective shares of Common Stock except by will or the laws
of descent and distribution or pursuant to a qualified domestic relations
order.
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, 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 Escrow Account, inclusive of any after-tax interest
thereon. The Initial Stockholders have waived their respective rights to
participate in any liquidation distribution until after the Public
Stockholders have received their entire original investment in the Company.
Any remaining net proceeds shall be distributed to the Initial Stockholders
in proportion to their respective equity interests in the Company.
A Public Stockholder shall be entitled to receive funds from the Escrow
Account only in the event of a liquidation or in the event he seeks
redemption of his shares 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 in or to the Escrow Account.
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<PAGE>
PROPOSED BUSINESS
The Company is a newly organized "blind pool" or "blank check" company,
the objective is to acquire an interest in an operating business.
GENERAL
The Company's success will be dependent upon the success of acquiring an
interest in an operating business. It is anticipated that the net proceeds of
this Offering will be substantially utilized in the acquisition of a Business
within 18 months after the date of this prospectus. However, Management
anticipates that although the Company's current resources, the proceeds of
this Offering and advances, as needed, from the Initial Stockholders will be
sufficient to meet the Company's financial requirements during such period,
additional financing will be required to implement the target company's
business plan. Such funding may be in the form of the issuance of debt or
equity securities of the Company, or bank loans or lines of credit. If
additional equity is issued, dilution could result to the Company's then
stockholders. See "Risk Factors--Need for Additional Financing."
SELECTION OF BUSINESS AND STRUCTURING A BUSINESS COMBINATION
The activities of the Company will be overseen by its Board of Directors,
all of whom are also executive officers. The Company also expects to rely
upon the expertise of its founding stockholders who are not directors. The
company believes that the technical skills and expertise of its Initial
Stockholders, their collective access to acquisition opportunities and ideas,
their industry and academic contacts and their proven management abilities
will enable the Company to identify and effect an acquisition. See
"Management."
The Company anticipates that acquisition candidates will be brought to its
attention from the Initial Stockholders and their affiliates, as well as from
various unaffiliated sources, including securities broker-dealers, investment
bankers, bankers and other members of the financial community. 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. Should the Company wish to engage a
professional consulting firm, the Company will base its selection upon the
following criteria: (i) length and breadth of experience in the process of
financial analysis; (ii) familiarity with the industry in which the proposed
business operates; (iii) ability to assess the worth of management; and (iv)
technological background if the proposed business is dependent upon
technology. The Company may pay a finder's fee or commission to an Initial
Stockholder or an affiliated entity for such service. In addition, it is
likely that the other party to a Business Combination will have retained an
affiliate of the Company, International Capital Growth, Ltd., as its adviser
or consultant in connection with the Business Combination. See
"Management--Conflicts of Interest."
The objective of the Company is to acquire an interest in an operating
Business. The Business to be acquired must have a Fair Market Value equal to
at least 80% of the net assets of the Company at the time of acquisition, as
determined by the Board of Directors of the Company. Subject to this
limitation, Management of the Company will have virtually unrestricted
flexibility in identifying and selecting an acquisition candidate. The
Business may, among other things, be either a single corporation, several
corporations enjoying a parent- subsidiary or "sister" company relationship,
or a division of a large corporation.
The Company's goal will be to seek to acquire a Business with significant
long term earnings growth potential and a strong management team. It is
anticipated that the Company will acquire a Business which is an emerging
growth company and either (i) in the development stage, and not currently
generating revenues or earnings, or (ii) generating a modest amount of
revenues and/or earnings but where significant upside still exists.
In evaluating a prospective target business, Management will consider the
following material factors:
o growth potential;
o experience and skill of management and availability of additional
personnel;
o industry prospects;
o capital requirements;
o financial condition and results of operations of the business;
o stage of development of business products or services;
o degree of current or potential market acceptance of the products,
processes or services;
19
<PAGE>
o proprietary features and degree of intellectual property or other
protection of the products, processes or services; and
o costs associated with consummating the business combination.
It is anticipated that an acquisition will be of an interest in an ongoing
business which either (i) does not need additional capital and solely seeks
the benefits of public ownership; or (ii) needs additional capital to
implement its business plan. As individual acquisitions have not been
identified, it is difficult to identify the amount of capital which a company
may require. However, the range is anticipated to be between $1.0 million and
$15.0 million.
The investors in this Offering will, in all likelihood, neither receive
nor otherwise have the opportunity to evaluate any financials or other
information which will be made available to the Company in connection with
selecting potential acquisition of an interest in a Business until after the
Company has selected such Business. As a result, investors in this Offering
will be almost entirely dependent on the judgment of Management in connection
with the selection of a potential acquisition of an interest of a Business.
See "Risk Factors-- Discretionary Use of Proceeds; Absence of Substantive
Disclosure Relating to Business Combination."
The Company, prior to the consummation of any merger or acquisition of
interests of a Business will submit such proposed transaction to its
stockholders for their approval where the Company is required to do so under
Delaware General Corporation Law. The proposed transaction will also be
submitted to all of the Company's present stockholders, including the
Company's current officers and directors, which have agreed as of the date of
this prospectus 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 any such proposal for the acquisition of an interest
of a Business. The Company will provide its stockholders with complete
disclosure documentation concerning a target company and its business. The
information provided to the Company's stockholders will include, among other
items, a brief description of the target company's business, a summary of the
terms of the transaction, reasons for engaging in the transaction, the
accounting treatment of the transaction, audited financial statements for the
Company and the target company and pro forma financial information giving
effect to the transaction. See "Risk Factors--Discretionary Use of Proceeds;
Absence of Substantive Disclosure Relating to Business Combination."
In connection with its evaluation of a prospective 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. The Company will not acquire a
Business if audited financial statements cannot be obtained for such
Business. Additionally, Management will provide the Public Stockholders with
audited financial statements of the prospective Business as part of the
post-effective amendment sent to the Public Stockholders to assist them in
assessing the Business. The time and costs required to identify, evaluate and
select a Business (including conducting a due diligence review) and to
structure and consummate the Business Combination (including preparing
requisite documents for filing pursuant to applicable securities laws) cannot
presently be ascertained with any degree of certainty. Any costs incurred in
connection with the identification and evaluation of a prospective 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 consummate a Business Combination.
COMPETITION
In identifying, evaluating and selecting a 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 Combination 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 it
competitors. This inherent competitive limitation may compel the Company to
select certain less attractive
20
<PAGE>
Business Combination prospects. Further, the Company's obligation to redeem
shares of Common Stock held by Public Stockholders in certain circumstances
may place the Company at a competitive disadvantage in successfully
negotiating a Business Combination. See "Risk Factors--Competition."
FACILITIES
Capital Growth International, L.L.C., an affiliate of the Company, has
agreed that, until the acquisition of an interest in a Business, it will make
a small amount of office space, as well as certain office and secretarial
services, available to the Company, as may be required by the Company from
time to time, at no cost to the Company.
EMPLOYEES
As of the date of this prospectus, the Company has no salaried employees.
21
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
----------------- ----- -------------------------------------------------------------
<S> <C> <C>
Ronald B. Koenig 62 Chairman of the Board and Chief Executive Officer and Director
Stanley Hollander 58 President and Director
Alan L. Jacobs 54 Chief Operating Officer and Director
Michael S. Jacobs 31 Chief Financial Officer and Treasurer
Jay J. Matulich 41 Secretary
</TABLE>
All Directors and Officers have held their respective positions since July
1996. Directors and officers are elected annually and serve for one year or
until their successors are duly elected and qualified. It is anticipated that
the officers will each devote as much time to the Company as is necessary or
advisable to carry out their duties. During the early stages of the Company's
operations, Management will undertake the responsibilities of researching
industries, forecasting trends and evaluating and selecting prospective
Businesses which may be potential acquisition candidates. After the
acquisition of an interest in a Business, Management may provide professional
advisory services, particularly in corporate finance, consult on certain
matters and oversee the Business' operations and management. The Company may
also, after it acquires interests in several Business, employ additional
management personnel and/or consultants with specific skills and experience
related to the Company's Business who are expected to spend all or nearly all
of their time with the Company compensate such persons in accordance with
their respective positions and responsibilities. As of the date of this
prospectus, there are no contracts, agreements or understandings between any
prospective employee, consultant or other person or entity and any companies
that are searching for "blind pool" or "blank check" companies with which to
merge.
RONALD B. KOENIG
Since March 1997, Mr. Koenig has been chairman of the board, president and
C.E.O. of Capital Growth Holdings, Ltd. Since March 1996, Mr. Koenig has been
chairman of the board, president and C.E.O. of International Capital Growth,
Ltd. Since 1993, Mr. Koenig has been chairman and co-founder of U.S. Sachem
and now its successor Capital Growth International, L.L.C. From 1989 to 1993,
Mr. Koenig was a senior managing director and department head of corporate
finance at Gruntal and Co., Incorporated. From 1974 to 1985, Mr. Koenig was a
managing director and from 1985 to 1989 chairman of the board of Ladenberg
Thalman and Co., Inc. From 1972 to 1974, he served as vice president,
institutional sales at Jas. H. Oliphant and Co. From 1968 to 1972, he was at
Leif Werle and Co., an NYSE specialist firm. Mr. Koenig was educated at the
University of Pennsylvania (Wharton School) and holds a B.S. in economics.
Mr. Koenig presently serves on the Wharton School Undergraduate Executive
Board and is on the business advisory board to the Sterling National Bank of
New York.
STANLEY HOLLANDER
Since March 1997, Mr. Hollander has been senior vice president and a
director of Capital Growth Holdings, Ltd. Since March 1996, Mr. Hollander has
been senior managing director and a director of International Capital Growth,
Ltd. Since 1993, Mr. Hollander has been president, C.E.O. and co-founder of
Sachem and since 1996 its successor Capital Growth International, L.L.C. From
1989 to 1993 he served as a managing director and joint head of corporate
finance at Gruntal and Co., Inc. From 1985 to 1989 he was a managing director
of investment banking at Ladenberg Thalman and Co., Inc. From 1979 to 1985 he
was co-owner and vice president of Zemex Electronics-Stanlee, distributors of
consumer electronics. From 1959 to 1979, Mr, Hollander was president of All
Brand Appliances Brandsmart, distributors of consumer electronics. Mr.
Hollander was educated at the University of Alabama. Mr. Hollander is
currently a director of Specialized Health Products Inc., a publicly traded
company.
22
<PAGE>
ALAN L. JACOBS
Since March 1997, Mr. Jacobs has been executive vice president and a
director of Capital Growth Holdings, Ltd. Since March 1996, Mr. Jacobs has
been executive vice president and a director of International Capital Growth,
Ltd. Since February 1995, Mr. Jacobs has been senior managing director of
Capital Growth International, L.L.C. From 1992 to 1995, Mr. Jacobs was senior
vice president and associate director of investment banking at Josephthal
Lyon and Ross Incorporated. From 1985 to 1991, Mr. Jacobs was a managing
director of investment banking at Ladenberg Thalman and Co., Inc. From 1982
to 1984, he was director of investment banking at Schaenen Jacobs Etheredge
and Co., Inc. From 1966 to 1982, Mr Jacobs practiced corporate and securities
law in New York and Boston. Mr. Jacobs was educated at Franklin and Marshall
College and Columbia Law School and holds A.B. and J.D. degrees. Mr. Jacobs
is chief executive officer and a director of Boca Raton Capital Corporation,
a publicly traded company.
MICHAEL S. JACOBS
Since March 1997, Mr. Jacobs has been senior vice president, secretary and
treasurer of Capital Growth Holdings, Ltd. Since March 1996, Mr. Jacobs has
been a senior vice president, secretary and treasurer of International
Capital Growth, Ltd. Since February 1995, Mr. Jacobs has been a senior vice
president of Sachem and since 1996 its successor Capital Growth
International, L.L.C. From 1993 to 1995 he was a vice president of investment
banking at Josephthal Lyon and Ross, Incorporated, New York and from 1990 to
1993, Mr. Jacobs was an associate in corporate finance at Gruntal and Co.
From 1989 to 1990, Mr. Jacobs was a financial analyst at Ladenberg Thalman
and Co., Inc. Educated at New York University's Stern School of Business and
Emory University he holds an M.B.A. in finance and a B.B.A. degree.
JAY J. MATULICH
Since March 1997, Mr. Matulich has been senior vice president of Capital
Growth Holdings, Ltd. Since March 1996, Mr. Matulich has been a senior vice
president of International Capital Growth, Ltd. Since October 1994, Mr.
Matulich has been a senior vice president of Sachem and since 1996 its
successor Capital Growth International, L.L.C. From May 1990 to October 1994,
Mr. Matulich was a vice president of Gruntal and Co., Inc. From 1989 to May
1990, Mr. Matulich served as an associate in the Shansby Group, a San
Francisco based leveraged buy-out firm. From 1986 to 1989, Mr. Matulich was a
senior manager at Arthur Young and Co., accountants in the merger and
acquisitions group. Educated at Brigham Young University, Mr. Matulich has a
B.A. degree. Mr. Matulich is a director of both BioSafe Int., Inc. and
Specialized Health Products Inc., which are publicly traded companies.
EXECUTIVE COMPENSATION
Prior to the consummation of a Business Combination, if any, none of the
Company's officers, directors and stockholders will receive any compensation.
However, certain of the Company's officers, directors or stockholders or
their respective affiliates may receive consulting or finder's fees in
connection with introducing the Company to, or evaluating, or providing
additional financing for, a Business.
CONFLICTS OF INTEREST
None of the Company's officers or directors is required to commit his full
time to the affairs of the Company and each has a full-time position elsewhere.
The officers and directors of the Company will devote approximately 5% of their
average work week to the affairs of the Company, which the Company believes is
sufficient to conduct its current operations, although it is anticipated that in
the event the Company's operations require, the officers and directors will
increase such time as is necessary or advisable to carry out their respective
duties. Accordingly, such personnel will have conflicts of interest in
allocating management time among various business activities. The officers and
directors of the Company may be involved with other acquisition funds with
activities similar to those to be undertaken by the Company and there can be no
assurance that they will offer all suitable prospective Businesses to the
Company before any other acquisition fund. 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,
directors and stockholders may have similar legal obligations to present certain
business opportunities to multiple entities. There can be no assurance that any
of the foregoing conflicts will be resolved in favor of the Company.
23
<PAGE>
To minimize potential conflicts of interest, according to its corporate
policy, the Company will not consummate a Business Combination with an entity
which is affiliated with any Initial Stockholder. However, Management may
change this policy at any time. In addition, an Initial Stockholder or an
entity with which he is affiliated may be entitled to receive finder's or
consulting fees in the event that he or it originates a Business Combination.
It is likely that the other party to a Business Combination will have
retained an affiliate of the Company, International Capital Growth, Ltd., as
its adviser or consultant.
To further minimize potential conflicts of interest which may arise from
multiple corporate affiliations, each of the officers and directors 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.
Furthermore, in connection with any stockholder vote relating to approval
of a Business Combination, all of the Initial Stockholders have agreed to
vote their respective shares of Common Stock in accordance with the vote of
the majority in interest of the Public Stockholders, and have agreed to waive
any redemption rights they might have in connection with such a vote. In
addition, the Initial Stockholders have waived their respective rights to
participate in any liquidation distribution until after the Public
Stockholders have received their entire original investment in the Company.
Any remaining net proceeds shall be distributed to the Initial Stockholders
in proportion to their respective equity interests in the Company.
The Company is an affiliate of Capital Growth International, L.L.C. and
International Capital Growth, Ltd. Capital Growth International, LLC is the
successor by merger to U.S. Sachem Financial Consultants, L.P. ("Sachem").
Sachem was formed in 1993 and was licensed as a broker-dealer in November 1994.
The business objective of Sachem and CGI was to act as placement agent in
private placements for emerging growth companies. CGI was formed as a successor
to Sachem primarily to benefit from the legal and tax advantages of conducting a
business as a limited liability company and also to allow its members to operate
their business under a name other than "Sachem," which was generally not
pronounceable by many of Sachem's non-English speaking clients and the term
"consultants," which did not accurately reflect the Company's primary business.
CGI has applied to amend its restriction letter such that it can conduct retail
brokerage operations as well as firm commitment underwritings. To this end, CGI
has executed a clearing arrangement with Schroder Wertheim & Co. Upon receipt of
the amended restriction letter, CGI's business focus will be almost exclusively
retail brokerage and, on occasion, firm commitment underwritings. CGI is
beneficially owned by Sachem Financial Consultants, Ltd (60%), which is
beneficially owned by Messrs. Ronald B. Koenig, the Company's Chairman of the
Board and Chief Executive Officer (50%) and Stanley L. Hollander, the Company's
President and a director, (50%), Navenby Investments, LLC (30%), which
beneficially owns 18.8% of the outstanding shares of Common Stock of the
Company, and Tigris, Holdings, Ltd. (10%).
International Capital Growth, Ltd. was formed in February 1996 by the
members and management of CGI and was licensed as a broker-dealer in October
1996. The primary purpose for forming ICG was to expand the ownership base of
CGI and to provide a more approporiate business structure to raise capital and
expand its operations. ICG's business purpose is acting as placement agent in
private placements. Further, ICG has and will on occasion make principal
investments in operating companies. ICG is wholly owned by Capital Growth
Holdings, Ltd., which is beneficially owned by approximately 400 persons,
including certain officers and directors of CGI, ICG and the Company.
24
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 1997, and as adjusted
to reflect the sale of the shares of Common Stock offered hereby by (i) each
stockholder known by the Company to be the beneficial owner of more than 5%
of the outstanding Common Stock, (ii) each director of the Company and (iii)
all directors and officers as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed below,
based on information furnished by such owners, have sole investment and
voting power with respect to such shares, subject to community property laws
where applicable. Such shares of Common Stock will be deposited into escrow
upon consummation of this Offering. See "Description of Securities--Escrow of
Shares."
<TABLE>
<CAPTION>
Percentage Beneficially
Owned
------------------------
Number of Before After
Principal Stockholders (1) Shares Offering Offering
-------------------------- ----------- ---------- ----------
<S> <C> <C> <C>
Ronald B. Koenig ................................. 39,541 23.8% 11.9%
Stanley Hollander ................................ 39,541 23.8 11.9
Navenby Investments, Inc. (2)...................... 31,225 18.8 9.4
Alan L. Jacobs ................................... 26,025 15.6 7.8
Helix Investments Inc. ........................... 10,000 6.0 3.0
Michael S. Jacobs ................................ 10,000 6.0 3.0
Jay J. Matulich .................................. 10,000 6.0 3.0
All Officers and Directors as a Group (5 persons) 125,107 75.2 37.6
</TABLE>
- ------
(1) Each stockholder's address is c/o the Company, 660 Steamboat Road,
Greenwich, Connecticut 06830.
(2) Navenby Investments, Inc. ("Navenby") is a holding company for the benefit
of Messrs. Emanuel Arbib and Gianni Bulgari, which holds 30% of the
membership interest of Capital Growth International, LLC, an affiliate of
the Company.
CERTAIN TRANSACTIONS
In July 1996, the Company issued an aggregate of 166,332 shares of Common
Stock to the Initial Stockholders for an aggregate purchase price of $73,186.
Capital Growth International, L.L.C., an affiliate of the Company, has
agreed that until the acquisition of the Business, it will make a small
amount of office space, as well as certain office and secretarial services
available to the Company, as may be required by the Company from time to
time, at no cost to the Company.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 10,000,000 shares of Common Stock, par
value $.001 per share, and 1,000,000 shares of Preferred Stock, par value
$.001 per share. As of the date of this prospectus, 166,332 shares of Common
Stock are outstanding, held of record by seven persons. No shares of
Preferred Stock are currently outstanding.
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 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 (except for the Initial Stockholders who have agreed to waive
their rights to share in any distribution relating to a liquidation of the
Company due to the failure of the Company to consummate a Business
Combination within 18 months from the date of this prospectus) 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
25
<PAGE>
described under "Characteristics of an Acquisition Company--Redemption
Rights," 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 shares of Common Stock, when issued and paid for as set
forth in this prospectus, will be, fully paid and nonassessable.
ESCROW OF SHARES
The shares of Common Stock offered hereby, and the shares of Common Stock
held by the Initial Stockholders, will be placed in escrow with Continental
Stock Transfer & Trust Company, as escrow agent, until the earlier of (A)
such time as (i) the Company has entered into an agreement with respect to a
Business Combination; (ii) the Company has filed a post-effective amendment
to its registration statement which post-effective amendment has been
declared effective; (iii) the prospectus contained in the post-effective
amendment has been sent to the Company's stockholders; (iv) each purchaser of
securities in this Offering has been given no fewer than 20 and no more than
45 business days from the effective date of the prospectus to elect whether
to remain as an investor; and (v) the Business Combination has been
consummated; or (B) the liquidation of the Company. During such escrow
period, the stockholders will not be able to sell or otherwise transfer their
respective shares of Common Stock, except by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of Preferred Stock with such designations, 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. 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 has no commitments as of the date of this
prospectus to issue any shares of Preferred Stock. there can be no assurance
that the Company will not do so in the future.
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 after any such Business Combination
will be contingent upon the Company's revenues and earnings, if any, capital
requirements and general financial condition. 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 and registrar for the Common Stock is Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, the Company will have 332,664
shares of Common Stock outstanding. Subject to the escrow requirements of
Rule 419 (See "Description of Securities--Escrow of Shares") 166,332 shares
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 promulgated under
the Securities Act. All of the remaining 166,332 shares are deemed to be
"restricted securities", as that term is defined under Rule 144 promulgated
under the Securities Act, 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 July 1997.
26
<PAGE>
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 one year is
entitled to sell in brokerage transactions, within any three-month period, a
number of shares equal to the greater of 1% of the total number of
outstanding shares of the same class or 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 two years is entitled to sell such shares under Rule 144 without
regard to any of the limitations described above.
Prior to this Offering, there has been no market for the Common Stock and
no market is expected to develop as a result of the escrow requirements of
Rule 419. When the escrow terminates, there can be no assurance that a market
will develop or be sustained, 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 then 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.
PLAN OF DISTRIBUTION
The Company is offering the shares of Common Stock for sale. The shares of
Common Stock will be sold on a "best efforts, all or none basis."
Subscriptions to purchase all of the shares of Common Stock offered hereby,
if any, must be received within a period of 30 days from the date of this
prospectus unless the Company and Qualified Independent Underwriter agree to
extend the Offering for an additional 30 day period at which time Rule 419
could become operational and the funds may be retained by the Company for a
period of 16 months following the effective date of the Offering. The Company
may allocate among or reject any subscriptions, in whole or in part.
Keane is acting as Qualified Independent Underwriter and will manage the
Offering. Except for the compensation payable to Keane as described below, no
underwriting discounts or commissions will be paid.
Those subscribing to purchase shares of Common Stock must complete a
subscription agreement, a form of which is included as an appendix to this
prospectus. All funds received by the Company with respect to the shares of
Common Stock that may be sold will, promptly following receipt by the
Company, be deposited in an Escrow Account with Continental Stock & Transfer
Company pursuant to the terms of the Escrow Agreement. In the event that
subscriptions for all of the shares of Common Stock offered hereby are not
received within the permitted time period, all funds will be promptly
refunded to the subscribers, in full, without interest and deduction
therefrom. Certificates for the shares of Common Stock will be issued to
purchasers only if the proceeds from the sale of all of the shares of Common
Stock are released from escrow. However, such certificates will be
non-transferable and will be placed in an escrow account pursuant to Rule
419. See "Description of Securities-- Escrow of Shares." The funds in escrow
will be held for the benefit of subscribers until released to the Company.
Until certificates for the shares of Common Stock are delivered to the Escrow
Agent for the benefit of the purchasers thereof, such purchasers will be
deemed subscribers only and not stockholders.
DETERMINATION OF OFFERING PRICE
Since the Company is an affiliate of Capital Growth International, L.L.C.
and International Capital Growth, Ltd., both NASD members, the Offering is
being made in conformity with certain applicable provisions of Rule 2720 of
the NASD. Accordingly, the initial public offering price of the shares of
Common Stock may not be higher than as recommended by an independent
investment banking firm which qualifies as a "qualified independent
underwriter" and "which shall also participate in the preparation of the
registration statement and prospectus . . . and which shall exercise the
usual standards of due diligence." Keane is acting as a "qualified
independent underwriter," will manage the Offering and will be paid a fee of
$15,000 and receive warrants to purchase 16,633 shares of Common Stock at an
exercise price per share equal to 120% of the initial public offering price
per share in consideration for its services and expenses.
The price of the shares of Common Stock offered hereby has been determined
by negotiation between the Company and the Qualified Independent Underwriter
while taking into consideration anticipated book values and
27
<PAGE>
use of proceeds and without any relation to the Company's assets, historical
operating income or trading price (there being no operating income or trading
market for the Company's securities before this Offering) or other generally
accepted criteria of value. Consideration has also been given to valuations
made in offering of other companies with a similar business plan.
Pursuant to Rule 2720 of the NASD, Keane, a member of the NASD, is
required, in acting as a "qualified independent underwriter," to undertake to
the NASD the legal responsibilities and liabilities of an underwriter under
the Securities Act, specifically including those inherent in Section 11
thereof. The Company will indemnify Keane against such liabilities, if any,
to the extent permitted by law.
The offering price set forth on the cover page of this Prospectus should
not be considered an indication of the actual value of the Common Stock of
the Company. After completion of this Offering, such price will vary as a
result of market conditions and other factors.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby has been passed
upon for the Company by Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue,
New York, New York. Zuckerman, Gore & Brandeis, 900 Third Avenue, New York,
New York, has acted as counsel to the Qualified Independent Underwriter.
EXPERTS
The financial statements included in this prospectus have been audited by
Arnold G. Greene, an independent certified public accountant as indicated in
his 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.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a registration statement on Form SB-2
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted from this
Prospectus in accordance with the Commission's rules and regulations. For
further information, reference should be made to the Registration Statement
and to the exhibits filed thereto. For further information with respect to
the Company and the Common Stock, reference is made to the Registration
Statement and the exhibits and schedules thereto which may be inspected
without charge or copied at the public reference facilities of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Commission's Public Reference Section at prescribed rates.
Registration statements transmitted through the Commission's Electronic Data
Gathering, Analysis and Retrieval System are also publicly available through
the Commission's Internet site on the World Wide Web (http://www.sec.gov).
Descriptions contained in this Prospectus as to the contents of any contract
or other documents filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to
such contract or document.
28
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Accountant's Report ......................................................... F-2
Primary financial statements:
Balance Sheet ..................................................... F-3
Statement of Operations ........................................... F-4
Statement of Cash Flows ........................................... F-5
Statement of Stockholders Equity .................................. F-6
Notes to Financial Statements ..................................... F-7
</TABLE>
F-1
<PAGE>
ARNOLD G. GREENE
CERTIFIED PUBLIC ACCOUNTANT
866 UNITED NATIONS PLAZA
NEW YORK, N.Y. 10017
------
(212) 751-6910
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of
EMERGING GROWTH ACQUISITION CORPORATION I
I have audited the accompanying balance sheet of Emerging Growth Acquisition
Corporation I as of December 31, 1996 and the related statements of
operations and cash flows for the period July 18, 1996 (date of inception)
through December 31, 1996. These financial statements are the responsibility
of the Company's management. My responsibility is to express an opinion on
these financial statements based on my audit.
I conducted my 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 also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. I believe that my
audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of Emerging Growth Acquisition
Corporation I as of December 31, 1996, and the results of its operations and
its cash flows for the period July 18, 1996 (date of inception) to December
31, 1996 in conformity with generally accepted accounting principles.
/s/ Arnold G. Greene
March 27, 1997
F-2
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
BALANCE SHEET
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash in bank ....................................... $66,811
Prepaid Expenses ................................... 2,991
---------
Total assets ............................. $69,802
=========
</TABLE>
LIABILITIES AND STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Current liabilities:
Accrued expenses ................................... $ 1,500
--------
Total liabilities ........................ 1,500
Stockholders equity:
Common stock, par value $.001
authorized 10,000,000 shares;
outstanding 166,332 shares. ................... $ 166
Additional paid-in-capital ................................... 73,020
Retained earnings (Deficit) .................................. (4,884)
---------
Total stockholders equity ................ 68,302
--------
Total liabilities and stockholders equity .................... $69,802
========
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 18, 1996 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Income ........................................................................ $ -0-
General and administrative expenses:
Professional fees ................................................... $ 4,045
Filing fees ......................................................... 713
Bank Charges ........................................................ 126
--------
Total expenses ............................................ 4,884
Income (loss) ................................................................. (4,884)
========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
STATEMENT OF CASH FLOWS
FOR THE PERIOD JULY 18, 1996 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1996
- -----------------------------------------------------------------------------
Resources provided:
<TABLE>
<CAPTION>
<S> <C> <C>
Issuance of common stock ............................... $73,186
Increase in accrued expenses ........................... 1,500
----------
Total resources provided ..................... 74,686
Resources applied:
Net loss ............................................... $4,884
Increase in prepaid expenses ........................... 2,991 (7,875)
---------- ----------
Increase ......................................................... 66,811
Cash-beginning of year ........................................... -0-
----------
Cash-December 31, 1996 ........................................... $66,811
==========
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
STATEMENT OF STOCKHOLDERS EQUITY
FOR THE PERIOD JULY 18, 1996 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional Deficit
Common Paid-In for the
Stock Capital Period TOTAL
-------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
Issuance of 166,332 shares of Common Stock $166 $73,020 $73,186
Net Loss (4,884) (4,884)
-------- ------------ ---------- ---------
$166 $73,020 ($ 4,884) $68,302
======== ============ ========== =========
</TABLE>
F-6
<PAGE>
EMERGING GROWTH ACQUISITION CORPORATION I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
1. Summary of significant accounting policies:
Organization -- The company was organized under the laws of the
State of Delaware on July 18, 1996. The company was formed to serve
as a vehicle to acquire an interest in an operating business which
offers the opportunity for earnings and growth.
Income taxes -- Income taxes are based on the net income of the
company.
2. Capital stock -- The company is authorized to issue 10,000,000 shares
of Common Stock par value $.001. In August 1996, the corporation
received $73,186 in exchange for issuing 166,332 shares of its common
stock.
The company is also authorized to issue 1,000,000 shares of preferred
stock, par value $.001. No shares of preferred stock are currently
outstanding.
3. Other transactions -- An affiliate of the company, Capital Growth
International, LLC, has agreed to provide a small amount of office
space at no charge until the acquisition of the business.
F-7
<PAGE>
==============================================================================
No dealer, salesperson or any other individual has been authorized to give
any information or to make any representations not contained in this
prospectus in connection with the offer made by this prospectus, and, if
given or made, such information or representations must not be relied on as
having been authorized by the Company or any of the Underwriters. This
prospectus does not constitute an offer to sell or solicitation of an offer
to buy by anyone in any jurisdiction in any jurisdiction in which such offer
or solicitation is not authorized, or in which the person making such offer
or solicitation is not qualified to do so, or to any person to whom it
unlawful to make such offer or solicitation. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
or that the information herein is correct as of any time subsequent to its
date.
------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Prospectus Summary ............................. 3
The Company .................................... 7
Investors' Rights and Substantive Protection
Under Rule 419 ................................ 7
Risk Factors ................................... 9
Use of Proceeds ................................ 15
Dilution ....................................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .................................... 16
Capitalization ................................. 17
Characteristics of an Acquisition Company ...... 17
Proposed Business .............................. 19
Management ..................................... 22
Principal Stockholders ......................... 25
Certain Transactions ........................... 25
Description of Securities ...................... 25
Plan of Distribution ........................... 27
Legal Matters .................................. 28
Experts ........................................ 28
Additional Information ......................... 28
Index to Financial Statements .................. F-1
</TABLE>
------
Until 90 days after the release of funds and securities from the Rule 419
Escrow Account, all dealers effecting transactions in the Common Stock,
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.
===============================================================================
<PAGE>
===============================================================================
166,332 SHARES OF COMMON STOCK
EMERGING GROWTH
ACQUISITION
CORPORATION I
------
PROSPECTUS
------
MAY 14, 1997
===============================================================================
