<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1997.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FROST HANNA CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
FLORIDA 6799 65-0701248
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(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
FROST HANNA CAPITAL GROUP, INC.
327 PLAZA REAL, SUITE 319
BOCA RATON, FLORIDA 33432
TELEPHONE (561) 367-1079
(Address, including Zip Code, and telephone number, including
area code, of registrant's principal executive offices)
MARK J. HANNA
PRESIDENT
FROST HANNA CAPITAL GROUP, INC.
327 PLAZA REAL, SUITE 319
BOCA RATON, FLORIDA 33432
TELEPHONE (561) 367-1079
(Name, address, including Zip Code,
and telephone number,
including area code, of agent for service)
Please send copies of all communications to:
TEDDY D. KLINGHOFFER, ESQ. FREDERICK M. MINTZ, ESQ.
STEARNS WEAVER MILLER WEISSLER MINTZ & FRAADE, P.C.
ALHADEFF & SITTERSON, P.A. 488 MADISON AVENUE
150 WEST FLAGLER STREET NEW YORK, NEW YORK 10022
SUITE 2200 (212) 486-2500
MIAMI, FLORIDA 33130
(305) 789-3200
Approximate date of commencement of proposed sale to the public: AS
SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same Offering [ ].
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same Offering [ ].
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box [ ].
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed Maximum
Title of Each Class of Securities Amount to be Maximum Offering Aggregate Offering Amount of
to be Registered Registered Price Per Security(1) Price(1) Registration Fee
<S> <C> <C> <C> <C>
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Common Stock, $.0001 par value 1,552,500 Shares(2) $6.00 per Share $9,315,000 $2,822.72
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Representative Warrants 135,000 Warrants(3) $ .001 per Warrant $ 135 0
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Common Stock, $.0001 par value 135,000 Shares(5) $7.20 per Share $ 972,000 $ 294.55
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Total Registration Fee ..................................................................................... $3,117.27
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) Includes 202,500 Shares subject to the Underwriters' over-allotment
option.
(3) To be issued to the Representative, as set forth on the cover page of the
Prospectus comprising a portion of this Registration Statement.
(4) No fee due pursuant to Rule 457(g).
(5) Issuable upon exercise of the Representative's Warrants, together with
such indeterminate number of shares of Common Stock as may be issuable by
reason of the anti-dilution provisions contained therein.
-----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
FROST HANNA CAPITAL GROUP, INC.
CROSS-REFERENCE SHEET
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FORM SB-2
ITEM NO. ITEM CAPTION LOCATION IN PROSPECTUS
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<S> <C> <C>
1. Front of Registration Statement and Outside Front Cover Facing Page of the Registration Statement
Page of Prospectus . . . . . . . . . . . . . . . . . . and Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information and Risk Factors . . . . . . . . . Prospectus Summary; Risk Factors
4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price . . . . . . . . . . . . Underwriting
6. Dilution . . . . . . . . . . . . . . . . . . . . . . . Dilution
7. Selling Security Holders . . . . . . . . . . . . . . . Not Applicable
8. Plan of Distribution . . . . . . . . . . . . . . . . . Cover Page and Inside Cover Page to
Prospectus; Underwriting
9. Legal Proceedings . . . . . . . . . . . . . . . . . . . Legal Proceedings
10. Directors, Executive Officers, Promoters and Control Management of the Company
Persons . . . . . . . . . . . . . . . . . . . . . . . .
11. Security Ownership of Certain Beneficial Owners and Principal Shareholders
Management . . . . . . . . . . . . . . . . . . . . . .
12. Description of Securities . . . . . . . . . . . . . . . Description of Securities
13. Interests of Named Experts and Counsel . . . . . . . . Legal Matters; Experts
14. Disclosure of Commission Position on Indemnification Underwriting; Undertakings
for Securities Act Liabilities . . . . . . . . . . . .
15. Organization Within Last Five Years . . . . . . . . . . Risk Factors; Proposed Business; Certain
Transactions
16. Description of Business . . . . . . . . . . . . . . . . Prospectus Summary; Risk Factors;
Proposed Business
17. Management's Discussion and Analysis or Plan of Management's Discussion and Analysis or
Operation . . . . . . . . . . . . . . . . . . . . . . . Plan of Operations
18. Description of Property . . . . . . . . . . . . . . . . Proposed Business
19. Certain Relationships and Related Transactions . . . . Risk Factors; Proposed Business; Certain
Transactions
20. Market for Common Equity and Related Stockholder Description of Securities; Risk Factors;
Matters . . . . . . . . . . . . . . . . . . . . . . . . Prospectus Summary
21. Executive Compensation . . . . . . . . . . . . . . . . Management of the Company
22. Financial Statements . . . . . . . . . . . . . . . . . Financial Statements
</TABLE>
<PAGE> 3
FROST HANNA CAPITAL GROUP, INC.
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM SB-2
ITEM NO. ITEM CAPTION LOCATION IN PROSPECTUS
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<S> <C> <C>
23. Changes in and Disagreements with Accountants on Not Applicable
Accounting and Financial Disclosure . . . . . . . . . .
24. Indemnification of Directors and Officers . . . . . . . Indemnification of Directors and Officers
25. Other Expenses of Issuance and Distribution . . . . . . Other Expenses of Issuance and
Distribution
26. Recent Sales of Unregistered Securities . . . . . . . . Recent Sales of Unregistered Securities
27. Exhibits . . . . . . . . . . . . . . . . . . . . . . . Exhibits
28. Undertakings . . . . . . . . . . . . . . . . . . . . . Undertakings
</TABLE>
<PAGE> 4
PROSPECTUS SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 9, 1997
FROST HANNA CAPITAL GROUP, INC.
1,350,000 SHARES
Frost Hanna Capital Group, Inc. (the "Company") hereby offers (the
"Offering") 1,350,000 shares of common stock, par value $.0001 per share
("Common Stock"). Prior to this Offering, there has been no public market for
the Common Stock and there can be no assurance that any such market will develop
after this Offering or that, if developed, any such market will be sustained. It
is anticipated that the initial public offering price will be approximately
$6.00 per share. The initial public offering price has been arbitrarily
determined by negotiation between the Company and LH Ross & Company, Inc. (the
"Representative"), acting as representative of the several underwriters
identified elsewhere herein (the "Underwriters"), and does not bear any
relationship to such established valuation criteria as assets, book value or
prospective earnings. For information regarding the factors considered in
determining the initial public offering price of the Common Stock, see "Risk
Factors" and "Underwriting." The Company anticipates that trading of the Common
Stock will be conducted through what is customarily known as the "pink sheets"
and on the National Association of Securities Dealers, Inc.'s Electronic
Bulletin Board (the "Bulletin Board"). Any market for the Common Stock which may
result will likely be less well developed than if the Common Stock were traded
in NASDAQ or on an exchange. Subsequent to the closing of this Offering, the
Company shall prepare and file with the United States Securities and Exchange
Commission on Current Report Form 8-K an audited balance sheet of the Company
reflecting receipt by the Company of the proceeds of this Offering. Eighty
percent of the net proceeds of this Offering may be escrowed for an indefinite
period of time following the consummation of this Offering. In the event of
liquidation of the Company, investors may recoup only a portion of their initial
investment.
----------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" AND "DILUTION" AT PAGES 11
AND 26. THIS IS A "BLANK CHECK/BLIND POOL" OFFERING. SEE "RISK FACTORS" AT
PAGES 11 THROUGH 23.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONS NOR HAS THE COMMISSION
NOR ANY STATE SECURITIES COMMISSIONS PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
PER SHARE................................................................. $ $ $
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TOTAL(3).................................................................. $ $ $
================================================================================================================================
</TABLE>
(1) The Company has also agreed to pay to the Representative a
non-accountable expense allowance (the "Non-Accountable Expense
Allowance") equal to three percent (3%) of the public offering price
($.18 per share). These figures do not include additional compensation
to the Representative in the form of a stock purchase option to
purchase for nominal consideration, up to 135,000 shares of Common
Stock of the Company at an exercise price of 120% of the initial
public offering price per share during a four-year period commencing
one year after the date of this Prospectus. Additionally, the Company
has agreed to certain registration rights with respect to the shares
of Common Stock underlying the underwriter warrants and has agreed to
certain indemnification and contribution agreements with the
Underwriters. See "Underwriting."
(2) The proceeds to the Company set forth in the table on this cover page
of the Prospectus have been computed before deduction of costs that
will be incurred in connection with this Offering (excluding the
Underwriting Discount), including the Non-Accountable Expense
Allowance, filing, printing, legal, accounting, transfer agent and
escrow agent fees (collectively, the "Offering Costs"). The net
proceeds to the Company, after deducting the Underwriting Discount and
the Offering Costs (the "Net Proceeds"), are estimated to be
$_________, or $__________ if the over-allotment option (as described
herein) is exercised in full.
(3) The Company has granted to the Underwriters a 45-day option to purchase
up to 202,500 additional shares of Common Stock upon the same terms
and conditions as set forth above, solely to cover over-allotments, if
any (the "over-allotment option"). If the over-allotment option is
exercised in full the total Price to Public, Underwriting Discount and
Proceeds to Company will be $__________, $_________ and $__________,
respectively. See "Underwriting."
THE SHARES OF COMMON STOCK ARE BEING OFFERED BY THE UNDERWRITERS,
SUBJECT TO PRIOR SALE, WHEN, AS AND IF DELIVERED TO AND ACCEPTED BY THEM,
SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY COUNSEL FOR THE UNDERWRITERS AND
CERTAIN OTHER CONDITIONS. THE UNDERWRITERS RESERVE THE RIGHT TO WITHDRAW,
CANCEL OR MODIFY SUCH OFFER AND TO REJECT ANY ORDER IN WHOLE OR IN PART. IT IS
EXPECTED THAT DELIVERY OF CERTIFICATES WILL BE MADE AGAINST PAYMENT THEREFOR ON
OR ABOUT ________, 1997, IN NEW YORK, NEW YORK.
--------------------
LH ROSS & COMPANY, INC.
One Boca Place
2255 Glades Road, Suite 425W
Boca Raton, Florida 33431
The date of this Prospectus is _______, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE> 5
ESCROW OF 80% OF THE NET PROCEEDS DERIVED HEREBY
UPON COMPLETION OF THIS OFFERING, 80% OF THE NET PROCEEDS THEREFROM
WILL BE PLACED IN AN ESCROW ACCOUNT (THE "ESCROW FUND"), WITH FIDUCIARY TRUST
INTERNATIONAL OF THE SOUTH, AS ESCROW AGENT, SUBJECT TO RELEASE UPON THE
EARLIER OF (i) WRITTEN NOTIFICATION BY THE COMPANY OF ITS NEED FOR ALL OR
SUBSTANTIALLY ALL OF SUCH NET PROCEEDS FOR THE PURPOSE OF IMPLEMENTING A
BUSINESS COMBINATION (AS HEREINAFTER DEFINED); OR (ii) THE EXERCISE BY CERTAIN
SHAREHOLDERS OF THE REDEMPTION OFFER (AS HEREINAFTER DEFINED). THE COMPANY
INTENDS TO USE THE ESCROW FUND (INCLUDING ANY INTEREST EARNED THEREON) ONLY IN
CONNECTION WITH THE OPERATIONS OF AN ACQUIRED BUSINESS (AS HEREINAFTER DEFINED)
AND ACCORDINGLY ALL FUNDS EXPENDED BY THE COMPANY PRIOR TO THE CONSUMMATION OF
A BUSINESS COMBINATION WILL BE DERIVED FROM THE NET PROCEEDS NOT PLACED IN THE
ESCROW FUND OR OTHER SOURCES OF FUNDING NOT YET KNOWN. IN THE EVENT THE COMPANY
REQUIRES ADDITIONAL FINANCING, THERE CAN BE NO ASSURANCES THAT SUCH FINANCING
WILL BE AVAILABLE ON ACCEPTABLE TERMS, IF AT ALL. ADDITIONALLY, IN THE EVENT
THE COMPANY REQUIRES IN EXCESS OF 20% OF THE NET PROCEEDS FOR OPERATIONS,
MESSRS. FROST AND HANNA HAVE UNDERTAKEN TO WAIVE THEIR SALARIES UNTIL THE
CONSUMMATION BY THE COMPANY OF A BUSINESS COMBINATION. IN THE EVENT OF THE
EXERCISE OF THE REDEMPTION OFFER, OR LIQUIDATION OF THE COMPANY AS A RESULT OF
THE COMPANY'S FAILURE TO CONSUMMATE A BUSINESS COMBINATION, INVESTORS MAY ONLY
RECOUP A PORTION OF THEIR INVESTMENT. SEE "RISK FACTORS" AND "PROPOSED
BUSINESS."
INVESTOR FUNDS MAY BE ESCROWED FOR AN INDEFINITE PERIOD OF TIME
INVESTORS' FUNDS MAY BE ESCROWED FOR AN INDEFINITE PERIOD OF TIME
FOLLOWING THE CONSUMMATION OF THIS OFFERING. FURTHER, THERE CAN BE NO ASSURANCES
THAT THE COMPANY WILL EVER CONSUMMATE A BUSINESS COMBINATION. ALTHOUGH MESSRS.
FROST AND HANNA HAVE AGREED TO WAIVE THEIR SALARIES IN THE EVENT ALL OF THE NET
PROCEEDS OF THIS OFFERING OTHER THAN THE ESCROW FUND ARE EXPENDED AND THE
COMPANY HAS NOT CONSUMMATED A BUSINESS COMBINATION, THE COMPANY CURRENTLY HAS NO
PLANS OR ARRANGEMENTS WITH RESPECT TO THE POSSIBLE ACQUISITION OF ADDITIONAL
FINANCING WHICH MAY BE REQUIRED TO CONTINUE THE OPERATIONS OF THE COMPANY IN THE
EVENT ALL OF THE FUNDS OTHER THAN THE ESCROW FUND ARE EXPENDED AND THE COMPANY
HAS NOT CONSUMMATED A BUSINESS COMBINATION. IN THE EVENT ALL OF THE FUNDS OTHER
THAN THE ESCROW FUND ARE EXPENDED AND THE COMPANY HAS NOT CONSUMMATED A BUSINESS
COMBINATION, MESSRS. FROST, HANNA, BAXTER, ROSENBERG AND FERNANDEZ MAY CONSIDER
LOANING TO THE COMPANY FUNDS FOR OPERATIONS, OTHER THAN THE PAYMENT OF SALARIES
TO MESSRS. FROST AND HANNA. ALTHOUGH THERE ARE NO PLANS OR ARRANGEMENTS WITH
RESPECT TO SUCH LOANS, MESSRS. FROST, HANNA, BAXTER, ROSENBERG AND FERNANDEZ DO
NOT CURRENTLY ANTICIPATE SUCH LOANS, IF ANY, TO BE MADE ON TERMS OTHER THAN UPON
MARKET INTEREST RATES. THERE CAN BE NO ASSURANCES THAT MESSRS. FROST, HANNA,
BAXTER, ROSENBERG AND FERNANDEZ WILL MAKE SUCH LOANS TO THE COMPANY OR, IF MADE,
THAT SUCH LOANS WILL BE MADE ON TERMS FAVORABLE TO THE COMPANY.
OFFERING NOT CONDUCTED IN ACCORDANCE WITH CERTAIN BLANK CHECK REGULATIONS
THE COMPANY'S OFFERING IS NOT BEING CONDUCTED IN ACCORDANCE WITH RULE
419 PROMULGATED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION"). ACCORDING TO THE COMMISSION, RULE 419 WAS DESIGNED TO
"STRENGTHEN REGULATION OF SECURITIES OFFERINGS BY BLANK CHECK COMPANIES WHICH
CONGRESS HAS FOUND TO HAVE BEEN COMMON VEHICLES FOR FRAUD AND MANIPULATION IN
THE PENNY STOCK MARKET." SEE SECURITIES ACT RELEASES NO. 6891 (APRIL 17, 1991),
48 SEC DOCKET 1131, AND NO. 6932 (APRIL 13, 1992), 51 SEC DOCKET 0382. PURSUANT
TO RULE 419, A "BLANK CHECK" COMPANY IS DEFINED AS (A) A DEVELOPMENT STAGE
COMPANY THAT HAS NO SPECIFIC BUSINESS PLAN OR HAS INDICATED THAT ITS BUSINESS
PLAN IS TO ENGAGE IN A MERGER OR ACQUISITION WITH AN UNIDENTIFIED COMPANY OR
COMPANIES; AND (B) A COMPANY WHICH ISSUES A "PENNY STOCK," MEANING ANY EQUITY
SECURITIES THAT, AMONG OTHER THINGS, (I) ARE NOT QUOTED IN THE NASDAQ SYSTEM;
OR (II) IN
<PAGE> 6
THE CASE OF A COMPANY WHICH HAS BEEN IN CONTINUOUS OPERATION FOR LESS THAN
THREE YEARS, HAS NET TANGIBLE ASSETS (I.E., TOTAL ASSETS LESS INTANGIBLE ASSETS
AND LIABILITIES) OF LESS THAN $5,000,000, AS DEMONSTRATED BY THE COMPANY'S MOST
RECENT FINANCIAL STATEMENTS THAT HAVE BEEN AUDITED AND REPORTED ON BY AN
INDEPENDENT PUBLIC ACCOUNTANT. ALTHOUGH THE COMPANY IS A "BLANK CHECK" COMPANY,
IT IS NOT SUBJECT TO RULE 419 BECAUSE THE COMPANY'S NET TANGIBLE ASSETS AFTER
THIS OFFERING WILL BE GREATER THAN $5,000,000. SEE SECURITIES ACT RELEASE NO.
7024 (OCTOBER 25, 1993), 55 SEC DOCKET 722. ACCORDINGLY, INVESTORS IN THIS
OFFERING WILL NOT RECEIVE THE SUBSTANTIVE PROTECTIONS PROVIDED BY RULE 419.
THERE CAN BE NO ASSURANCES THAT THE COMMISSION, THE UNITED STATES CONGRESS OR
STATE LEGISLATURES WILL NOT ENACT LEGISLATION WHICH WILL PROHIBIT OR RESTRICT
THE SALE OF SECURITIES OF "BLANK CHECK" COMPANIES. SEE "PROPOSED BUSINESS
- --CERTAIN SECURITIES LAW CONSIDERATIONS" AND "RISK FACTORS."
ESCROW FUND NOT TO BE USED FOR SALARIES, CONSULTING FEES OR REIMBURSABLE
EXPENSES
NO FUNDS (INCLUDING ANY INTEREST EARNED THEREON) WILL BE DISBURSED
FROM THE ESCROW FUND FOR THE PAYMENT OF SALARIES, CONSULTING FEES OR
REIMBURSEMENT OF EXPENSES INCURRED ON THE COMPANY'S BEHALF BY THE COMPANY'S
OFFICERS AND DIRECTORS. OTHER THAN THE FOREGOING, THERE IS NO LIMIT ON THE
AMOUNT OF SUCH REIMBURSABLE EXPENSES, AND THERE WILL BE NO REVIEW OF THE
REASONABLENESS OF SUCH EXPENSES BY ANYONE OTHER THAN THE COMPANY'S BOARD OF
DIRECTORS, ALL OF WHOM MAY ALSO BE OFFICERS OF THE COMPANY. IN NO EVENT WILL
THE ESCROW FUND (INCLUDING ANY INTEREST EARNED THEREON) BE USED FOR ANY PURPOSE
OTHER THAN IMPLEMENTATION OF A BUSINESS COMBINATION OR FOR PURPOSES OF THE
REDEMPTION OFFER. SEE "RISK FACTORS," "USE OF PROCEEDS" AND "CERTAIN
TRANSACTIONS."
NO PRIOR CONTACT WITH OTHER FIRMS REGARDING POSSIBLE BUSINESS COMBINATIONS
NONE OF THE COMPANY'S OFFICERS, DIRECTORS, 10% SHAREHOLDERS, PERSONS
WHO DIRECTLY OR INDIRECTLY CONTROL, ARE CONTROLLED BY OR ARE UNDER COMMON
CONTROL WITH, THE COMPANY OR PERSONS WHO MAY BE DEEMED PROMOTERS OF THE COMPANY
HAVE HAD ANY PRELIMINARY CONTACT OR DISCUSSIONS WITH ANY REPRESENTATIVE OF ANY
OTHER FIRM REGARDING THE POSSIBILITY OF A BUSINESS COMBINATION BETWEEN THE
COMPANY AND SUCH OTHER FIRM.
MATERIAL PERSONS
THE OFFICERS AND DIRECTORS OF THE COMPANY ARE THE ONLY PERSONS WHO
HAVE BEEN INSTRUMENTAL IN ARRANGING THE CAPITALIZATION OF THE COMPANY TO DATE.
NONE OF THE OFFICERS OR DIRECTORS OF THE COMPANY ARE ACTING AS NOMINEES FOR ANY
PERSONS OR ARE OTHERWISE UNDER THE CONTROL OF ANY PERSON OR PERSONS. OTHER THAN
CERTAIN COMPENSATION TO BE PAID BY THE COMPANY TO EACH OF MESSRS. FROST AND
HANNA, THERE ARE NO AGREEMENTS, AGREEMENTS IN PRINCIPLE, OR UNDERSTANDINGS WITH
REGARD TO COMPENSATION TO BE PAID BY THE COMPANY TO ANY OFFICER OR DIRECTOR OF
THE COMPANY.
STATE SECURITIES REGULATION
THE COMPANY HAS MADE APPLICATION TO REGISTER OR AN EXEMPTION FROM
REGISTRATION WILL BE OBTAINED FOR THE SHARES OF COMMON STOCK ONLY IN THE STATES
OF COLORADO, DELAWARE, FLORIDA, ILLINOIS, MARYLAND, NEW YORK, OREGON, RHODE
ISLAND, SOUTH CAROLINA AND UTAH AND THE SHARES OF COMMON STOCK MAY ONLY BE
TRADED IN SUCH JURISDICTIONS. THERE CAN BE NO ASSURANCES THAT THE SHARES WILL
BE ELIGIBLE FOR SALE IN SUCH JURISDICTIONS. PURCHASERS OF THE SHARES OF COMMON
STOCK EITHER IN THIS OFFERING OR IN ANY SUBSEQUENT TRADING MARKET WHICH MAY
DEVELOP MUST BE RESIDENTS OF THE STATES OF COLORADO, DELAWARE, FLORIDA,
ILLINOIS, MARYLAND, NEW YORK, OREGON, RHODE ISLAND,
-3-
<PAGE> 7
SOUTH CAROLINA AND UTAH, UNLESS AN APPLICABLE EXEMPTION IS AVAILABLE OR A BLUE
SKY APPLICATION HAS BEEN FILED AND ACCEPTED. THE COMPANY WILL AMEND THIS
PROSPECTUS FOR THE PURPOSE OF DISCLOSING ADDITIONAL STATES, IF ANY, IN WHICH
THE SHARES OF COMMON STOCK WILL HAVE BEEN REGISTERED OR WHERE AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
OFFICER AND DIRECTOR INTRODUCTIONS TO REPRESENTATIVE
OFFICERS AND DIRECTORS OF THE COMPANY MAY INTRODUCE THE
REPRESENTATIVE TO PERSONS TO CONSIDER THIS OFFERING AND SUBSCRIBE FOR SHARES OF
COMMON STOCK EITHER THROUGH THE REPRESENTATIVE, OTHER UNDERWRITERS OR THROUGH
PARTICIPATING DEALERS. AS A RESULT OF SUCH INTRODUCTIONS, SUCH PERSONS MAY BE
LIKELY TO PURCHASE SHARES OF COMMON STOCK. IN THIS CONNECTION, OFFICERS AND
DIRECTORS OF THE COMPANY WILL NOT RECEIVE ANY COMMISSIONS OR ANY OTHER
COMPENSATION IN CONNECTION WITH THE OFFERING OF SHARES OF COMMON STOCK.
NO OFFICER OR DIRECTOR OF THE COMPANY TO PURCHASE SHARES IN THIS OFFERING
NO OFFICER OR DIRECTOR OF THE COMPANY, OR ANY BUSINESS ENTITY IN WHICH
SUCH OFFICER OR DIRECTOR IS AN OFFICER, DIRECTOR OR GREATER THAN 10%
SHAREHOLDER SHALL PURCHASE ANY OF THE SHARES OF COMMON STOCK IN THIS OFFERING.
POTENTIAL CONSIDERATIONS INVOLVING UNDERWRITERS AND AFTER-MARKET TRADING
THE REPRESENTATIVE DOES NOT HAVE ANY DISCRETIONARY POWER OVER ANY OF
ITS CUSTOMERS' ACCOUNTS IN CONNECTION WITH THIS OFFERING. HOWEVER, INASMUCH AS A
SUBSTANTIAL AMOUNT OF THE REGISTERED SECURITIES OF THE COMPANY ISSUED IN THIS
OFFERING MAY BE DISTRIBUTED TO CUSTOMERS OF THE UNDERWRITERS, AND SUBSEQUENTLY,
THESE PERSONS, AS CUSTOMERS OF THE UNDERWRITERS, MAY BE EXPECTED TO ENGAGE IN
TRANSACTIONS FOR THE SALE OR PURCHASE OF REGISTERED SECURITIES OF THE COMPANY,
SHOULD THE UNDERWRITERS DETERMINE TO MAKE A MARKET, AND SHOULD A MARKET DEVELOP
FOR THE COMPANY'S SECURITIES, THE UNDERWRITERS MAY INITIALLY BE EXPECTED TO
EXECUTE A SUBSTANTIAL PORTION OF THE TRANSACTIONS IN THE SECURITIES OF THE
COMPANY. THEREFORE, THE UNDERWRITERS MAY BE, FOR THE FORESEEABLE FUTURE, A
DOMINATING INFLUENCE, AND THEREAFTER A FACTOR OF DECREASING IMPORTANCE FOR THE
COMPANY'S SECURITIES, SHOULD A MARKET ARISE FOR THE COMPANY'S SECURITIES.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES
OF COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
INVESTORS SHOULD CAREFULLY REVIEW THE FINANCIAL STATEMENTS WHICH ARE
AN INTEGRAL PART OF THIS PROSPECTUS.
-4-
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, 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. The Company was formed to seek to effect a merger,
exchange of capital stock, asset acquisition or other similar business
combination (a "Business Combination") with an operating or development stage
business (an "Acquired Business"). The business objective of the Company is to
seek to effect a Business Combination with an Acquired Business which the
Company believes has significant growth potential. The Company will not engage
in any substantive commercial business immediately following this Offering and
for an indefinite period of time following this Offering. The Company has no
plan, proposal, agreement, understanding or arrangement to acquire or merge with
any specific business or company, and the Company has not identified any
specific business or company for investigation and evaluation. The Company
intends to utilize cash (to be derived from the proceeds of this Offering),
equity, debt or a combination thereof in effecting a Business Combination. As a
result of, among other things, management's broad discretion with respect to the
specific allocation of the Net Proceeds of this Offering, this Offering may be
characterized as a "blank check" offering. While the Company may, under certain
circumstances, seek to effect Business Combinations with more than one Acquired
Business, it will not expend less than 80% of the Net Proceeds of this Offering
(approximately $5,497,600, assuming an initial offering price of $6.00 per
share and no exercise of the over-allotment option) plus interest earned thereon
(less any amounts payable by the Company pursuant to the Redemption Offer, as
hereinafter defined) (the "Threshold Amount") upon the consummation of its first
Business Combination. Consequently, it is likely that the Company will have the
ability to effect only a single Business Combination.
To date, the Company's efforts have been limited to organizational
activities. The implementation of the Company's business plans are wholly
contingent upon the successful sale of the shares of Common Stock offered
hereby. See "Proposed Business."
Involvement of Certain Principals in Prior "Blank Check" Companies.
Certain of the officers and directors of the Company have held similar positions
in three other "blank check" companies (i.e., a development stage company that
has no specific business plan or has indicated that its business plan is to
engage in a merger or acquisition with an unidentified company), each of which
has consummated a Business Combination as of the date of this Prospectus. There
can be no assurance that the Company will ever be able to effect a Business
Combination or that the type of business or the performance of the Acquired
Business, if any, will be similar to that of these other "blank check"
companies. Further, the results of such "blank check" companies are not
indicative in any manner of the possible future results of the Company. Certain
information with respect to each such prior Business Combination that the
officers and directors of the Company have been involved, as obtained from each
such company's respective filings with the Commission, is set forth below:
<TABLE>
<CAPTION>
Date of
Initial Trading Market
Name of Public Date of Business and
Acquired Business Offering Combination Nature of Business Ticker Symbol
- ----------------------------- ----------- ---------------- ----------------------- -------------------
<S> <C> <C> <C>
Sterling Health Care Group, February 9, May 31, 1994 Providing physician NASDAQ National Market
Inc. and Sterling Healthcare, 1993 contract management (FPAM)
Inc. (currently operating services for hospital
pursuant to a subsequent emergency
merger as, "FPA Medical departments
Management Inc.")
</TABLE>
-5-
<PAGE> 9
<TABLE>
<CAPTION>
Date of
Initial Trading Market
Name of Public Date of Business and
Acquired Business Offering Combination Nature of Business Ticker Symbol
- ----------------------------- ----------- ---------------- ----------------------- -------------------
<S> <C> <C> <C> <C>
LFS Acquisition Corp. September 26, 1993 January 3, 1996 Operating children's Bulletin Board
(currently known as, apparel stores (KIDM)
"Kids Mart, Inc.")
Pan American World March 21, 1994 September 23, 1996 Airline industry AMEX (PAA)
Airways, Inc. (currently
operating as, "Pan Am
Corporation")
</TABLE>
Messrs. Richard B. Frost, Mark J. Hanna and Marshal E. Rosenberg,
executive officers and directors of the Company, were also officers and
directors of Frost Hanna Halpryn Capital Group, Inc., a Florida corporation
("Frost Hanna Halpryn") and "blank check" company whose initial public offering
of securities closed in February 1993. Frost Hanna Halpryn raised net proceeds
of approximately $6,100,000 through the issuance of 1,175,500 shares of Common
Stock at $6.00 per share in such initial public offering. Frost Hanna Halpryn
consummated a Business Combination with Sterling Healthcare Group, Inc., a
Florida corporation, and Sterling Healthcare, Inc., a Texas corporation
(collectively, "Sterling Healthcare") on May 31, 1994 in which both such
entities merged with and into a wholly-owned subsidiary of Frost Hanna Halpryn.
In connection with such merger, Frost Hanna Halpryn changed its name to
Sterling Healthcare, Inc. ("Sterling") (the "Sterling Business Combination").
The principal business activity of Sterling is providing physician contract
management services for hospital emergency departments. Upon consummation of
the Sterling Business Combination, (i) the former Sterling Healthcare
shareholders were issued Sterling common stock which constituted approximately
52% of the outstanding shares of Sterling common stock (assuming full exercise
of all outstanding options and warrants to purchase Sterling common stock) and
(ii) Messrs. Frost and Hanna resigned from their officer and director positions
of Sterling and Mr. Rosenberg resigned from his position of Vice President and
Treasurer and remained as a member of the Sterling Board of Directors until
December 1994. In October, 1996, Sterling consummated a business combination
with FPA Medical Management Inc. ("FPAM") pursuant to which, among other
things, each share of Sterling common stock was exchanged for .951 shares of
FPAM common stock. FPAM provides regional healthcare management services. FPAM
currently trades under the symbol "FPAM" in the NASDAQ National Market. The
closing price of FPAM common stock on June 30, 1997 was $23.69 per share.
Messrs. Frost, Hanna, Rosenberg and Donald H. Baxter, also an
executive officer and director of the Company, were also officers and directors
of Frost Hanna Acquisition Group, Inc., a Florida corporation ("Frost Hanna
Acquisition") and "blank check" company whose initial public offering of
securities closed in September 1993. Frost Hanna Acquisition raised net
proceeds of approximately $6,519,800 through the issuance of 1,265,000 shares
of Common Stock at $6.00 per share in such initial public offering. To minimize
any potential conflicts of interest which may have arisen as a result of the
relationship between such persons' positions with Frost Hanna Halpryn, Frost
Hanna Acquisition was prohibited from analyzing or considering any possible
Business Combination opportunities until Frost Hanna Halpryn became a party to
a letter of intent to consummate a Business Combination. Frost Hanna
Acquisition entered into a letter of intent in May 1995 with LFS Acquisition
Corp., a Delaware corporation ("LFS"), and on January 3, 1996 consummated a
Business Combination with LFS in which LFS merged with and into a wholly-owned
subsidiary of Frost Hanna Acquisition. In connection with such merger, Frost
Hanna Acquisition changed its name to Kids Mart, Inc. ("Kids Mart") (the "Kids
Mart Business Combination"). Upon consummation of the Kids Mart Business
Combination (i) the former LFS shareholders were issued Kids Mart common stock
which constituted approximately 62% of the outstanding shares of Kids Mart
common stock (assuming full exercise of all outstanding options and warrants to
purchase Kids Mart common stock) and (ii) Messrs. Frost, Hanna, Baxter and
Rosenberg resigned from their positions as officers and directors of Kids Mart.
Kids Mart operated a chain
-6-
<PAGE> 10
of infant's and children's apparel stores under the names of "Kids Mart" and
"Little Folks." On January 10, 1997, Kids Mart filed for Chapter 11 bankruptcy
protection in the United States Bankruptcy Court for the District of Delaware
(97-42(PJW) In Re LFS Acquisition Corporation, Kidsmart, Inc., Holtzman's Little
Folk Shop, Inc.). The closing price of Kids Mart common stock on June 30, 1997
was $0.01 per share.
Messrs. Frost, Hanna, Baxter and Rosenberg were also officers and
directors of Frost Hanna Mergers Group, Inc., a Florida corporation ("Frost
Hanna Mergers") and "blank check" company whose initial public offering of
securities closed in March 1994. Frost Hanna Mergers raised net proceeds of
approximately $10.1 million through the issuance of 1,955,000 shares of Common
Stock at $6.00 per share in such initial public offering. To minimize any
potential conflicts of interest which may have arisen as a result of the
relationship between such persons' positions with Frost Hanna Halpryn and Frost
Hanna Acquisition, Frost Hanna Mergers was prohibited from analyzing or
considering any possible Business Combination opportunities until Frost Hanna
Halpryn and Frost Hanna Acquisition each became parties to a letter of intent to
consummate a Business Combination. Frost Hanna Mergers entered into a letter of
intent on January 29, 1996 with Pan American World Airways, Inc., a Florida
corporation ("PAWA"), and on September 23, 1996, consummated a Business
Combination with PAWA in which PAWA merged with and into a wholly-owned
subsidiary of Frost Hanna Mergers. In connection with such merger, Frost Hanna
Mergers changed its name to Pan Am Corporation ("Pan Am") (the "Pan Am Business
Combination"). Upon consummation of the Pan Am Business Combination, (i) the
former PAWA shareholders were issued shares of Pan Am common stock which
constituted approximately 72% of the outstanding shares of Pan Am common stock
(assuming full exercise of all outstanding warrants and options to purchase
shares of Pan Am common stock) and (ii) Messrs. Frost and Hanna resigned from
their executive officer positions and remained as members of the Pan Am Board of
Directors until April 21, 1997 and Messrs. Baxter and Rosenberg resigned from
their executive officer and director positions with Pan Am. PAWA was a newly
organized corporation established to operate a new low-fare full service airline
under the "Pan Am" name, serving selected long-haul routes between major United
States cities. Pan Am initiated flight service on September 26, 1996. Pan Am
common stock began trading on the American Stock Exchange on September 24, 1996
and trades under the symbol PAA. The closing price of Pan Am common stock on
June 30, 1997 was $7.88 per share.
Escrow of Offering Proceeds. Upon completion of this Offering, 80% of
the Net Proceeds therefrom (approximately $5,497,600, assuming an initial
offering price of $6.00 per share and no exercise of the over-allotment option)
will be placed in an interest bearing escrow account (the "Escrow Fund") with
Fiduciary Trust International of the South, as escrow agent, subject to release
upon the earlier of (i) written notification by the Company of its need for all
or substantially all of the Escrow Fund for the purpose of implementing a
Business Combination; or (ii) the exercise by certain shareholders of the
Redemption Offer (as hereinafter defined). Any interest earned on the Escrow
Fund shall remain in escrow and be used by the Company either (i) following a
Business Combination in connection with the operations of an Acquired Business
or (ii) in connection with the distribution to the shareholders through the
exercise of the Redemption Offer or the liquidation of the Company. In the event
the Company requires in excess of 20% of the Net Proceeds for operations,
Messrs. Frost and Hanna have undertaken to waive their salaries prospectively
until the consummation by the Company of a Business Combination. Investors'
funds may be escrowed for an indefinite period of time following the
consummation of this Offering. Further, there can be no assurances that the
Company will ever consummate a Business Combination. In the event of the
exercise of the Redemption Offer, investors may only recoup a portion of their
investment. The Company currently has no expectation with regard to the
Company's plans in the event
-7-
<PAGE> 11
a Business Combination is not consummated by a certain date. See "--Redemption
Rights" and "Use of Proceeds" below.
Shareholder Approval of Business Combination. The Company, prior to
the consummation of any Business Combination, will submit such transaction to
the Company's shareholders for their approval. In the event, however, that the
holders of 30% (405,000 shares of Common Stock or 465,750 shares of Common
Stock if the over-allotment option is exercised) or more of the shares of
Common Stock sold hereby in this Offering which are outstanding vote against
approval of any Business Combination, the Company will not consummate such
Business Combination. The shares of Common Stock sold hereby may sometimes be
referred to as the "Public Shares" and the holders (whether current or future)
of the Public Shares are referred to as the "Public Shareholders." All of the
officers and directors of the Company, who own in the aggregate approximately
82% of the Common Stock outstanding prior to this Offering and will own
approximately 44% of the outstanding Common Stock following the Offering (41%
if the over-allotment option is exercised), 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 the Public Shares with respect to any such Business
Combination.
Redemption Rights. At the time the Company seeks shareholder approval
of any potential Business Combination, the Company will offer (the "Redemption
Offer"), to each of the Public Shareholders who vote against the proposed
Business Combination and affirmatively request redemption, for a twenty (20)
day period, to redeem all, but not a portion of, their Public Shares, at a per
share price equal to the Company's liquidation value (as described below) on
the record date for determination of shareholders entitled to vote upon the
proposal to approve such Business Combination (the "Record Date") divided by
the number of then outstanding Public Shares. The Redemption Offer will be
described in detail in the disclosure documentation relating to the proposed
Business Combination. The Company's liquidation value will be equal to the
Company's book value, as determined by the Company and audited by the Company's
independent public accountants (the "Company's Liquidation Value") (which
amount will be less than the initial public offering price per share of Common
Stock in the Offering in view of the expenses of the Offering, salaries and
expenses paid and the anticipated expenses which will be incurred in seeking a
Business Combination), calculated as of the Record Date. In no event, however,
will the Company's Liquidation Value be less than the Escrow Fund, inclusive of
any interest earned thereon. If the holders of less than 30% of the Public
Shares held by Public Shareholders elect to have their Public Shares redeemed,
the Company may, but will not be required to, proceed with such Business
Combination. If the Company elects to so proceed, it will redeem Public Shares,
based upon the Company's Liquidation Value, from those Public Shareholders who
affirmatively requested such redemption and who voted against the Business
Combination. The determination as to whether the Company proceeds with a
Business Combination ultimately rests with the Company. However, if the holders
of 30% or more of the Public Shares held by Public Shareholders vote against
approval of any potential Business Combination, the Company will not proceed
with such Business Combination and will not redeem such Public Shares. If the
Company determines not to pursue a Business Combination, even if the Public
Shareholders of less than 30% of the Public Shares vote against approval of the
potential Business Combination, no Public Shares will be redeemed.
Escrow of Principals' Shares. The shares of Common Stock owned as of
the date hereof by all of the officers and directors of the Company (an
aggregate of approximately 41% of the outstanding Common Stock immediately
subsequent to this Offering assuming the over-allotment option is exercised in
full) will be placed in escrow with American Stock Transfer & Trust Company, as
escrow agent, until the occurrence of a Business Combination. During such
escrow period, such persons will not be able to sell, or otherwise transfer,
their respective shares of Common Stock, but will retain all other rights as
shareholders of the Company, including, without limitation, the right to vote
such shares of Common Stock.
The Company was organized under the laws of the State of Florida on
February 2, 1996. The Company's office is located at 327 Plaza Real, Suite 319,
Boca Raton, Florida 33432, and its telephone number is (561) 367-1079.
-8-
<PAGE> 12
THE OFFERING
<TABLE>
<S> <C>
Common Stock being offered (1)................... 1,350,000 shares
Common Stock to be outstanding
after the Offering (1)......................... 2,907,000 shares
Proposed Bulletin Board Symbol(2)................ FHCG
</TABLE>
- ----------
(1) Assumes no exercise of the over-allotment option. Does not include
135,000 shares of Common Stock reserved for issuance upon exercise of
the Underwriter Options. See "Underwriting."
(2) The inclusion of these securities on the Bulletin Board does not imply
that an established public trading market will develop therefor or, if
developed, that such market will be sustained. See "Risk Factors--No
Assurance of Public Market; Arbitrary Determination of Offering
Price."
USE OF PROCEEDS
Upon completion of this Offering, 80% of the Net Proceeds therefrom
will be held in the Escrow Fund and shall only be used, if at all, for the
implementation of a Business Combination or for purposes of the Redemption
Offer. The portion of Net Proceeds not placed in the Escrow Fund (approximately
$1,374,400, assuming an initial offering price of $6.00 per share and no
exercise of the over-allotment option) will be used to cover costs and expenses
incurred in attempting to effect a Business Combination, including selecting and
evaluating an Acquired Business, structuring and consummating a Business
Combination and paying office build-out and rent expense and $10,000 monthly for
salary and $1,000 monthly for non-accountable expense allowance (prospectively
and retroactively for a date four months prior to the date hereof) to each of
Messrs. Frost and Hanna. As of March 31, 1997, $121,061 of the twenty percent
(20%) of the Net Proceeds not held in the Escrow Fund will immediately be used
to pay past due general expenses and officers' salaries and $20,000 will be used
to pay loans payable to officers. See "Use of Proceeds," "Proposed Business" and
"Certain Transactions."
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk and
immediate substantial dilution and should not be purchased by investors who
cannot afford the loss of their entire investment. Such risk factors include,
among others: the Offering is not being conducted in accordance with certain of
the Commission's blank check regulations, the Company was recently organized,
has no operating history, limited resources and no present source of revenues
and the Company's independent auditors have issued a qualified report. See
"Risk Factors," "Dilution" and "Use of Proceeds."
SUMMARY FINANCIAL INFORMATION
The following data have been derived from the financial statements of
the Company and should be read in conjunction with those statements, which are
included in this Prospectus. The pro forma financial information gives effect to
the issuance of 145,000 shares of Common Stock and the redemption of 80,000
shares of Common Stock in private placement transactions completed in June 1997
for net proceeds of $32,500, and the as adjusted information gives effect to the
issuance of the securities in this Offering as if such Offering and such
issuance had occurred at March 31, 1997.
<TABLE>
<CAPTION>
March 31, 1997
---------------------------------------------
Actual Pro Forma As Adjusted (1)
----------- --------- ----------------
(unaudited)
Balance Sheet Data:
<S> <C> <C> <C>
Total Assets................................................ $ 183,175 $215,675 $6,993,275
Working capital (deficit)................................... (195,879) (163,379) 6,831,731
Total liabilities........................................... 235,461 235,461 141,061
Shareholders' equity (deficit).............................. (52,286) (19,786) 6,852,214
</TABLE>
- -----------------
(1) The as adjusted information does not give effect to the payment of
$10,000 monthly for salary and $1,000 monthly for non-accountable
expense allowance (retroactive for four months prior to the date
hereof ($88,000)) and loans payable of $10,000 to each of Messrs.
Frost and Hanna.
-9-
<PAGE> 13
THE COMPANY
The Company was formed to seek to effect a Business Combination with
an Acquired Business which the Company believes has significant growth
potential. The Company will not engage in any substantive commercial business
immediately following this Offering and for an indefinite period of time
thereafter. The Company has no plan, proposal, agreement, understanding or
arrangement to acquire or merge with any specific business or company, and the
Company has not identified any specific business or company for investigation
and evaluation. The Company intends to utilize cash (to be derived from the
proceeds of this Offering), equity, debt or a combination thereof in effecting
a Business Combination. As a result of, among other things, management's broad
discretion with respect to the specific allocation of the Net Proceeds of this
Offering, this Offering may be characterized as a "blank check" offering.
To date, the Company's efforts have been limited to organizational
activities. In April 1997, the Company attempted to consummate an initial public
offering of its Common Stock. The attempted offering was terminated prior to any
shares of Common Stock being offered or sold thereto after the Company's
underwriter (which has no affiliation with the Representative) discontinued its
operations. The implementation of the Company's business plans are wholly
contingent upon the successful sale of the shares of Common Stock offered
hereby. See "Proposed Business."
The Company was organized under the laws of the State of Florida on
February 2, 1996. The Company's office is located at 327 Plaza Real, Suite 319,
Boca Raton, Florida, 33432, and its telephone number is (561) 367-1079.
-10-
<PAGE> 14
RISK FACTORS
THE COMMON STOCK OFFERED HEREBY IS SPECULATIVE, INVOLVES IMMEDIATE
SUBSTANTIAL DILUTION AND A HIGH DEGREE OF RISK, INCLUDING, BUT NOT NECESSARILY
LIMITED TO, THE SEVERAL FACTORS DESCRIBED BELOW. EACH PROSPECTIVE INVESTOR
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS INHERENT IN AND AFFECTING
THE BUSINESS OF THE COMPANY AND THIS OFFERING BEFORE MAKING AN INVESTMENT
DECISION.
OFFERING NOT CONDUCTED IN ACCORDANCE WITH CERTAIN BLANK CHECK REGULATIONS
The Company's Offering is not being conducted in accordance with the
Commission's Rule 419, which was adopted to strengthen regulation of securities
offerings by "blank check" companies which the United States Congress has found
to have been common vehicles for fraud and manipulation in the penny stock
market. Pursuant to Rule 419, a "blank check" company is defined as (a) a
development stage company that has no specific business plan or has indicated
that its business plan is to engage in a merger or acquisition with an
unidentified company or companies; and (b) a company which issues a "penny
stock," meaning any equity securities that, among other things, (i) are not
quoted in the NASDAQ system; or (ii) in the case of a company which has been in
continuous operation for less than three years, has net tangible assets (i.e.,
total assets less intangible assets and liabilities) of less than $5,000,000,
as demonstrated by the company's most recent financial statements that have
been audited and reported on by an independent public accountant. Although the
Company is a "blank check" company, it is not subject to Rule 419 because the
Company's net tangible assets after this Offering will be greater than
$5,000,000. Accordingly, investors in this Offering will not receive the
substantive protections provided by Rule 419. There can be no assurances that
the Commission, the United States Congress or state legislatures will not enact
legislation which will prohibit or restrict the sale of securities of "blank
check" companies. See "Proposed Business -- Certain Securities Laws
Considerations."
RECENTLY ORGANIZED COMPANY; NO OPERATING HISTORY; ACCUMULATED DEFICIT; LIMITED
RESOURCES; NO PRESENT SOURCE OF REVENUES
The Company, which was incorporated on February 2, 1996, is a
development stage company and has not, as of the date hereof, attempted to seek
a Business Combination. The attempted offering was terminated prior to any
shares of Common Stock being offered or sold thereto after the Company's
underwriter (which has no affiliation with the Representative) discontinued its
operations. The Company has experienced operating losses since its inception. As
of March 31, 1997, the Company had a deficit accumulated in the development
stage of $236,398 (see Financial Statements included herein). The Company has no
operating history and, accordingly, there is only a limited basis upon which to
evaluate the Company's prospects for achieving its intended business objectives.
Other than with respect to Frost Hanna Halpryn, Frost Hanna Acquisition and
Frost Hanna Mergers, the Company's officers and directors have no prior
experience relating to the identification, evaluation and acquisition of an
Acquired Business. Investors will be relying primarily on their ability to
attempt to select an Acquired Business which will be profitable. To date, the
Company's efforts have been limited primarily to organizational activities. The
Company has limited resources and has had no revenues to date. In addition, the
Company will not achieve any revenues (other than interest income earned upon
the Net Proceeds of this Offering) until the consummation of a Business
Combination, if at all. Moreover, there can be no assurances that any Acquired
Business, at the time of the Company's consummation of a Business Combination,
or at any time thereafter, will derive any material revenues from its operations
or operate on a profitable basis. See "Proposed Business."
QUALIFIED REPORT OF INDEPENDENT AUDITORS
The Company's independent auditors' report on the Company's financial
statements includes an explanatory paragraph stating that the Company's ability
to commence operations is contingent upon obtaining adequate financial
resources through a contemplated public offering, or otherwise, which raises
substantial doubt about its ability to continue as a going concern.
Additionally, if unsuccessful, the Company may be unable to continue in its
present form. The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might result should the Company
be unable to continue as a going concern. See "Proposed Business,"
-11-
<PAGE> 15
"Management's Discussion and Analysis of Financial Condition and Results of
Operation," and the Financial Statements of the Company included elsewhere in
this Prospectus.
LIMITED UNDERWRITING HISTORY
The Representative has not previously participated in any public
offerings as an underwriter. In evaluating an investment in the Company,
prospective investors in the Common Stock offered hereby should consider the
Representative's lack of experience as an underwriter of public offerings. See
"Underwriting."
80% OF NET PROCEEDS MAY BE ESCROWED FOR AN INDEFINITE PERIOD OF TIME
Investors' funds may be escrowed for an indefinite period of time
following the consummation of this Offering. Further, there can be no assurances
that the Company will ever consummate a Business Combination. Although Messrs.
Frost and Hanna have agreed to waive their salaries in the event all of the Net
Proceeds of this Offering other than the Escrow Fund are expended and the
Company has not consummated a Business Combination, the Company currently has no
plans or arrangements with respect to the possible acquisition of additional
financing which may be required to continue the operations of the Company in the
event all of the funds other than the Escrow Fund are expended and the Company
has not consummated a Business Combination. In the event all of the funds other
than the Escrow Fund are expended and the Company has not consummated a Business
Combination, Messrs. Frost, Hanna, Baxter, Rosenberg and Fernandez may consider
loaning to the Company funds for operations, other than the payment of salaries
to Messrs. Frost and Hanna. Although there are no plans or arrangements with
respect to such loans, Messrs. Frost, Hanna, Baxter, Rosenberg and Fernandez do
not currently anticipate such loans, if any, to be made on other than market
rate terms. There can be no assurances that Messrs. Frost, Hanna, Baxter,
Rosenberg and Fernandez will make such loans to the Company or, if made, that
such loans will be made on terms favorable to the Company.
INVESTORS RISK LOSS OF NON-ESCROWED PROCEEDS
Approximately twenty percent (20%) of investors proceeds will not be
placed in the Escrow Fund. Instead, such proceeds shall be used immediately by
the Company to commence operations relating to selection of a prospective
Acquired Business. Although Messrs. Frost and Hanna have agreed to waive their
salaries in the event all of the Net Proceeds of this Offering other than the
Escrow Fund are expended and the Company has not consummated a Business
Combination, the Company currently has no plans or arrangements with respect to
the possible acquisition of additional financing which may be required to
continue the operations of the Company. In the event the Company is unable to
raise additional financing and continue operations, it may have no other
alternative than liquidation. In the event of liquidation, the Company's only
assets will be the cash in the Escrow Fund (representing only approximately 80%
of the investors' initial investment) and the investors would receive a
liquidation return of only a portion of their initial investment.
INVOLVEMENT OF CERTAIN PRINCIPALS IN PRIOR BLANK CHECK COMPANIES
INCLUDING A COMPANY WHICH SUBSEQUENTLY FILED FOR BANKRUPTCY PROTECTION
Certain of the officers and directors of the Company have held similar
positions in three other "blank check" companies. The descriptions of such
companies and their respective results have been included elsewhere herein.
Purchasers who purchase Common Stock in the Offering will not acquire any
ownership interest whatsoever in any of the other "blank check" companies to
which the officers and directors of this Company have been involved. The
inclusion of the information regarding these companies does not imply that the
Company will have similar results with respect to the time period taken to
consummate a Business Combination or the relative success or failure of the
Acquired Business following such Business Combination. Investors in this
Offering should not assume that they will experience returns, if any, comparable
to those experienced by investors in such other "blank check" companies.
Additionally, one of such companies filed for Chapter 11 bankruptcy protection
on January 10, 1997 in the United States Bankruptcy Court for the District of
Delaware. There can be no assurance as to the requirements (if any) that the
bankruptcy or any litigation relating thereto could have on the officers and
directors of the Company who held similar positions in such other blank check
company. There can be no assurance that the Company will be able to effect a
Business Combination or that the type of business or the performance of the
Acquired Business, if any, will or will not be similar to that of other "blank
check" companies to which the officers and directors of the Company have been
involved. See "Proposed Business--Involvement of Certain Principals in Prior
`Blank Check' Companies."
-12-
<PAGE> 16
DISCRETIONARY USE OF PROCEEDS; ABSENCE OF SUBSTANTIVE DISCLOSURE
RELATING TO A BLANK CHECK/BLIND POOL OFFERING
As a result of, among other things, management's broad discretion with
respect to the specific application of the Net Proceeds of this Offering, this
Offering may be characterized as a "blank check" offering. Although
substantially all of the Net Proceeds of this Offering are intended to be
generally applied toward effecting a Business Combination, such proceeds are
not otherwise being designated for any more specific purposes. Accordingly,
prospective investors will invest in the Company without an opportunity to
evaluate the specific merits or risks of any one or more Business Combinations.
"Blank check" offerings are inherently characterized by an absence of
substantive disclosure (other than general descriptions relating to the
intended application of the net proceeds of the offering). The Company has not
yet identified a prospective Acquired Business. Accordingly, investors in this
Offering will have virtually no substantive information available for advance
consideration of any specific Business Combination. The absence of disclosure
may be contrasted with the disclosure which would be necessary if the Company
had already identified an Acquired Business as a Business Combination candidate
or if the Acquired Business were to effect an offering of its securities
directly to the public. There can be no assurances that an investment in the
securities offered hereby will not ultimately prove to be less favorable to
investors in this Offering than a direct investment, if such opportunity were
available, in an Acquired Business. See "Proposed Business--`Blank Check'
Offering."
INHERENT RISKIER BUSINESS COMBINATION; SEEKING TO ACHIEVE PUBLIC TRADING MARKET
THROUGH BUSINESS COMBINATION
It is possible that in seeking to effect a Business Combination, the
Company may consider a candidate base of potential Acquired Businesses that may
have inherent riskier businesses than those which may be able to secure
financing from more traditional sources. Such candidate base may well have
sought to secure financing from banks or financial institutions, venture
capitalists, or private or institutional investors, and may have been unable to
procure such financing. Such rejection may have resulted from the analysis by
such parties that the Acquired Business does not fall within parameters
established by such persons or entities for investment or financing including,
without limitation, substantial risk of failure. Additionally, a prospective
Acquired Business may be a company which does or does not need substantial
additional capital but which desires to establish a public trading market for
its shares and is unable to do so on its own or wishes to avoid what it may
deem to be adverse consequences of undertaking a public offering itself, such
as time delays, significant expense, loss of voting control and compliance with
various federal and state securities laws enacted for the protection of
investors. See "Proposed Business--`Blank Check' Offering."
UNSPECIFIED INDUSTRY AND ACQUIRED BUSINESS; UNASCERTAINABLE RISKS
To date, the Company has not selected any particular industry or any
Acquired Business in which to concentrate its Business Combination efforts.
Accordingly, there is no current basis for prospective investors in this
Offering to evaluate the possible merits or risks of the Acquired Business or
the particular industry in which the Company may ultimately operate. However,
in connection with seeking shareholder approval of a Business Combination, the
Company (as a result of its intention to register the Common Stock under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thereby
become subject to the proxy solicitation rules contained therein) intends to
furnish its shareholders with proxy solicitation materials prepared in
accordance with the Exchange Act, which, among other matters, will include a
description of the operations of the prospective Acquired Business and audited
historical financial statements thereof. To the extent the Company effects a
Business Combination with a financially unstable company or an entity in its
early stage of development or growth (including entities without established
records of sales or earnings), the Company will become subject to numerous
risks inherent in the business operations of financially unstable and early
stage or potential emerging growth companies. In addition, to the extent that
the Company effects a Business Combination with an entity in an industry
characterized by a high level of risk, the Company will become subject to the
currently unascertainable risk of that industry. An extremely high level of
risk frequently characterizes certain industries which experience rapid growth.
Although management will endeavor to evaluate
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<PAGE> 17
the risks inherent in a particular industry or Acquired Business, there can be
no assurances that the Company will properly ascertain or assess all such
significant risk factors. Accordingly, management could identify and acquire an
Acquired Business which could fail, resulting in the loss of an investor's
entire investment in the shares of Common Stock offered hereby.
PROBABLE LACK OF BUSINESS DIVERSIFICATION
While the Company may, under certain circumstances, seek to effect
Business Combinations with more than one Acquired Business, it will not expend
less than the Threshold Amount (approximately $5,497,600, assuming an initial
offering price of $6.00 per share and no exercise of the over-allotment option)
upon its first Business Combination. Consequently, it is likely that the
Company will have the ability to effect only a single Business Combination.
Accordingly, the prospects for the Company's success will be entirely dependent
upon the future performance of a single business. Unlike certain entities which
have the resources to consummate several business combinations of entities
operating in multiple industries or multiple areas of a single industry, it is
highly likely that the Company will not have the resources to diversify its
operations or benefit from the possible spreading of risks or offsetting of
losses. In addition, by consummating a Business Combination with only a single
entity, the prospects for the Company's success may become dependent upon the
development or market acceptance of a single or limited number of products,
processes or services. Consequently, there can be no assurances that the
Acquired Business will prove to be commercially viable. See "Proposed Business
- --`Blank Check' Offering."
UNCERTAIN STRUCTURE OF BUSINESS COMBINATION; PROBABLE CHANGE IN CONTROL AND
MANAGEMENT
The structure of a Business Combination with an Acquired Business,
which may take the form of, among other structures, a merger, exchange of
capital stock or asset acquisition, cannot be presently determined since
neither the Company's officers or directors nor any of their affiliates have
had any preliminary contacts, discussions or understandings with
representatives of any potential Acquired Business regarding the possibility of
a Business Combination. The Company will most likely issue additional shares of
Common Stock as part of the consideration for the Business Combination and may
incur debt, or, engage in a Business Combination involving any combination
thereof. The successful completion of such a transaction could result in a
change in control of the Company. This could result from the issuance of a
large percentage of the Company's authorized securities or the sale by the
present shareholders of all or a portion of their stock or a combination
thereof in connection with a Business Combination. Any change in control will
most likely also result in the resignation or removal of the Company's present
officers and directors. Accordingly, investors will be relying, in some
significant respects, on the abilities of the management and directors of the
Acquired Business who are unidentifiable as of the date hereof. If there is a
change in management in connection with a Business Combination, which is likely
to occur, no assurances can be given as to the experience or qualifications of
the persons who replace present management respecting either the operation of
the Company's activities or the operation of the business, assets or property
being acquired.
DEPENDENCE UPON KEY PERSONNEL
The ability of the Company to successfully effect a Business
Combination will be largely dependent upon the efforts of its executive
officers and directors. It is anticipated that the Company's executives,
officers and directors are the only persons whose activities will be material
to the operations of the Company pending the Company's identification and
consummation of a Business Combination and such individuals are the only
persons who have been instrumental in arranging the capitalization of the
Company to date. The Company has entered into employment agreements with
Richard B. Frost, the Company's Chief Executive Officer and Chairman of the
Board of Directors and Mark J. Hanna, a Director and President of the Company,
and has obtained "key man" life insurance on the lives of both individuals in
the amount of $1,000,000 each. Although the Company anticipates that it will
maintain this "key man" life insurance, no assurances can be given that such
insurance will be maintained at reasonable rates, if at all. The loss of the
services of such key personnel before suitable replacements are obtained could
have a material adverse effect on the Company's capacity to
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<PAGE> 18
successfully achieve its business objectives. None of the Company's key
personnel are required to commit their full time to the affairs of the Company
and, accordingly, such personnel may have conflicts of interest in allocating
management time among various business activities. It is anticipated that each
of Messrs. Frost and Hanna will devote approximately 50% of their working time
to the affairs of the Company and Donald H. Baxter and Marshal E. Rosenberg, a
Director and the Company's Vice President and Treasurer and a Director and the
Company's Vice President and Secretary, respectively, will devote approximately
10% of their time to the affairs of the Company. Additionally, the success of
the Company may be dependent upon its ability to retain additional personnel
with specific knowledge or skills necessary to assist the Company in evaluating
a potential Business Combination. There can be no assurances that the Company
will be able to retain such necessary additional personnel. See "Proposed
Business--Employees" and "Management of the Company."
CONFLICTS OF INTEREST
None of the Company's key personnel are required to commit their full
time to the affairs of the Company and, accordingly, such personnel may have
conflicts of interest in allocating management time among various business
activities. Certain of these key personnel may in the future become affiliated
with entities, including other "blank check" companies, engaged in business
activities similar to those intended to be conducted by the Company. Messrs.
Frost and Hanna are each currently directors of Continucare Corporation, a
Florida corporation ("Continucare") engaged in the development and management of
mental and physical rehabilitation health care programs. Mr. Rosenberg is an
investor in numerous private enterprises, engaged in, among other things, real
estate development and retail sales, which business interests may conflict with
those of an Acquired Business. Mr. Baxter is the President of Baxter Financial
Corporation, an investment advisory firm, and the President and Chairman of the
Philadelphia Fund and Eagle Growth Shares, mutual funds registered under the
Investment Company Act of 1940. Mr. Fernandez is currently Chairman of the
Board, President and Chief Executive Officer of Continucare. Certain activities
which may be performed by such individuals in connection with their other
business affiliations may be deemed competitive with the business of the
Company.
In the course of their other business activities, including private
investment activities, Messrs. Frost, Hanna, Baxter, Rosenberg and Fernandez may
become aware of investment and business opportunities which may be appropriate
for presentation to the Company as well as the other entities with which they
are affiliated. Such persons may have conflicts of interest in determining to
which entity a particular business opportunity should be presented. In general,
officers and directors of corporations incorporated under the laws of the State
of Florida are required to present certain business opportunities to such
corporations. Accordingly, as a result of multiple business affiliations,
Messrs. Frost, Hanna, Baxter, Rosenberg and Fernandez may have similar legal
obligations relating to presenting certain business opportunities to the various
entities upon which they serve as directors. In addition, conflicts of interest
may arise in connection with evaluations of a particular business opportunity by
the Board of Directors with respect to the foregoing criteria. There can be no
assurances that any of the foregoing conflicts will be resolved in favor of the
Company. In order to minimize potential conflicts of interest which may arise
from multiple corporate affiliations, each of Messrs. Frost, Hanna, Baxter,
Rosenberg and Fernandez have agreed to present to the Company for its
consideration, prior to presentation to any other entity, any prospective
Acquired Business which is appropriate for the Company to consider and which
prospective Acquired Business participates in an industry dissimilar to any of
the industries to which such individuals have corporate affiliations. It should
be further noted, that the Company shall not consider Business Combinations with
entities owned or controlled by officers, directors, greater than 10%
shareholders of the Company or any person who directly or indirectly controls,
is controlled by or is under common control with the Company. The Company may
consider Business Combinations with entities owned or controlled by persons
other than those persons described above. See "Proposed Business--`Blank
Check' Offering" and "Selection of an Acquired Business and Structuring of a
Business Combination."
Pursuant to an agreement among each of Messrs. Frost, Hanna, Baxter,
Rosenberg and Fernandez and the Company, such persons will not (i) actively
negotiate for or otherwise consent to the disposition of any portion of their
Common Stock at a per share price different than that offered with respect to
the Public Shares as a condition to or in connection with a Business Combination
or (ii) cause any securities of the Company to be
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<PAGE> 19
sold by any officers, directors, greater than 10% shareholders or persons who
may be deemed promoters of the Company except as may otherwise be made in
permitted market transactions without affording all shareholders of the Company
a similar opportunity. Further, the Company shall not borrow funds to be used
directly or indirectly to (i) purchase any shares of the Company's Common Stock
owned by management of the Company; or (ii) make payments to the Company's
promoters, management or their affiliates or associates.
NO DISINTERESTED MEMBERS OF THE BOARD OF DIRECTORS
All members of the Company's current Board of Directors are
significant shareholders of the Company and will own, in the aggregate,
approximately 44% of the outstanding Common Stock following the Offering (41%
if the over-allotment option is exercised). Additionally, following the
Offering, the Representative will have the right to appoint one member to the
Company's Board of Directors until such time as the Company effects a Business
Combination utilizing a majority of its funds. Accordingly, there will be, at
most, only one disinterested or outside member of the Board of Directors, and
the Company may not benefit from the advice of a member of the Board of
Directors who is not also an officer or director of the Company or otherwise
not involved in the offering of shares of Common Stock. The Board of Directors
currently has no formal committees, such as a compensation committee or an
audit committee, and most likely will not form such committees until some time
after the consummation of a Business Combination.
REIMBURSEMENT OF EXPENSES TO OFFICERS AND DIRECTORS; 20% OF NET PROCEEDS
IMMEDIATELY AVAILABLE
No funds will be disbursed from the Escrow Fund for salaries payable
to Messrs. Frost and Hanna or for the reimbursement of expenses incurred by the
Company's officers and directors on behalf of the Company. Other than the
foregoing, there is no limit on the amount of such reimbursable expenses, and
there will be no review of the reasonableness of such expenses by anyone other
than the Company's Board of Directors, all the members of which are officers
unless the Representative exercises his right to appoint one member to the
Company's Board of Directors. In no event will the Escrow Fund be used for any
purpose other than implementation of a Business Combination or for purposes of
implementing the Redemption Offer. In the event the Company requires in excess
of 20% of the Net Proceeds for operations, Messrs. Frost and Hanna have
undertaken to waive their salaries and non-accountable expense allowance until
the consummation of a Business Combination. See "Use of Proceeds," "Proposed
Business--Payment of Salaries or Consulting Fees," and "Management of the
Company."
EXECUTIVE COMPENSATION; CERTAIN PROCEEDS TO BE USED TO PAY RETROACTIVE SALARY
Pursuant to employment agreements, Messrs. Frost and Hanna each receive
$10,000 monthly for salary and $1,000 monthly for non-accountable expense
allowance. Messrs. Frost and Hanna currently intend to devote approximately 50%
of their time to the affairs of the Company. The amounts due under such
employment agreements shall be payable prospectively and retroactively to a date
four months prior to the date of this Offering. Other than pursuant to the
employment agreements and except for the Representative who may designate a
member of the Board of Directors, no officers or directors will receive any
other salaries or fees, unless received by all other shareholders on a
proportionate basis. See "Management of the Company."
LIMITED ABILITY TO EVALUATE ACQUIRED BUSINESS' MANAGEMENT;
NO INDEPENDENT ANALYSIS OR AUDITS TO BE PERFORMED
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 Acquired Business cannot presently be stated with
any certainty. It is unlikely that any of the Company's key personnel will
remain associated in any operational capacity with the Company following a
Business Combination. Moreover, there can be no assurances that such personnel
will have significant experience or knowledge relating to the operations of the
particular Acquired Business. Furthermore, although the Company intends to
closely scrutinize the management of a prospective Acquired Business in
connection with evaluating the desirability of effecting a Business
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<PAGE> 20
Combination, there can be no assurances that the Company's assessment of such
management will prove to be correct, especially in light of the possible
inexperience of current key personnel of the Company in evaluating certain
types of businesses. In addition, there can be no assurances that such future
management will have the necessary skills, qualifications or abilities to
manage a public company. The Company may also seek to recruit additional
managers to supplement the incumbent management of the Acquired Business. There
can be no assurances that the Company will have the ability to recruit such
additional managers, or that such additional managers will have the requisite
skills, knowledge or experience necessary to enhance the incumbent management.
Additionally, there can be no assurances that the Company will hire an
independent company to perform any analysis or audit of a potential Acquired
Business or perform any type of background check on any of the management of
such Acquired Business. See "Proposed Business--'Blank Check' Offering."
COMPETITION
The Company expects to encounter intense competition from other
entities having a business objective similar to that of the Company. Many of
these entities, including venture capital partnerships and corporations, blind
pool companies, large industrial and financial institutions, small business
investment companies and wealthy individuals, 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, marketing, technical, personnel and other resources than the
Company and there can be no assurances that the Company will have the ability
to compete successfully. The Company's financial resources will be relatively
limited when contrasted with those of many of its competitors. This inherent
competitive limitation may compel the Company to select certain less attractive
Business Combination prospects. Further, the Company's obligation to redeem
shares of Common Stock held by certain Public Shareholders, discussed under
"Proposed Business -- Redemption Rights" and elsewhere herein, may place the
Company at a competitive disadvantage in successfully negotiating a Business
Combination. There can be no assurances that such prospects will permit the
Company to meet its stated business objective. See "Proposed Business
- --Competition."
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF ACQUIRED BUSINESS
In the event that the Company succeeds in effecting a Business
Combination, the Company will, in all likelihood, become subject to intense
competition from competitors of the Acquired Business. In particular, certain
industries which experience rapid growth frequently attract an increasingly
larger number of competitors, including competitors with increasingly greater
financial, marketing, technical and other resources than the initial
competitors in the industry. The degree of competition characterizing the
industry of any prospective Acquired Business cannot presently be ascertained.
There can be no assurances that, subsequent to a Business Combination, the
Company will have the resources to compete effectively, especially to the
extent that the Acquired Business is in a high-growth industry. See "Proposed
Business--Competition."
POSSIBLE NEED FOR ADDITIONAL FINANCING
The Company has had no revenues to date and is entirely dependent upon
the proceeds of this Offering to commence operations relating to selection of a
prospective Acquired Business. The Company will not receive any revenues (other
than interest income) until, at the earliest, the consummation of a Business
Combination. Although the Company believes that the proceeds of this Offering
will be sufficient to effect a Business Combination, inasmuch as the Company
has not yet identified any prospective Acquired Business candidates, the
Company cannot ascertain with any degree of certainty the capital requirements
for any particular transaction. In the event that the Net Proceeds of this
Offering prove to be insufficient for purposes of effecting a Business
Combination (because of the size of the Business Combination or the depletion
of 20% of the portion of the Net Proceeds available to the Company from the
search of an Acquired Business), the Company will be required to seek
additional financing. There can be no assurances that such financing would be
available on acceptable terms, if at all. In the event no Business Combination
is identified, negotiations are incomplete or no Business Combination has been
consummated, and all of the Net Proceeds other than the Escrow Fund have
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<PAGE> 21
been expended, the Company currently has no plans or arrangements with respect
to the possible acquisition of additional financing which may be required to
continue the operations of the Company. In such event, Messrs. Frost, Hanna,
Baxter and Rosenberg may consider lending to the Company funds for operations
other than the payment of salaries to Messrs. Frost and Hanna. Although there
are no plans or arrangements with respect to such loans, such individuals do
not currently anticipate such loans, if any, to be made on terms other than
upon market interest rates. 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 Acquired Business candidate.
In the event of a consummation of a Business Combination, the Company
cannot ascertain with any degree of certainty the capital requirements for any
particular Acquired Business inasmuch as the Company has not yet identified any
prospective Acquired Business candidates. To the extent the Business
Combination results in the Acquired Business requiring additional financing,
such additional financing (which, among other forms, could be derived from the
public or private offering of securities or from the acquisition of debt
through conventional bank financing), may not be available, due to, among other
things, the Acquired Business not having sufficient (i) credit or operating
history; (ii) income stream; (iii) profit level; (iv) asset base eligible to be
collateralized; or (v) market for its securities.
As no specific Business Combination or industry has been targeted, it
is not possible to predict the specific reasons why conventional private or
public financing or conventional bank financing might not become available.
There can be no assurances that, in the event of a consummation of a Business
Combination, sufficient financing to fund the operations or growth of the
Acquired Business will be available upon terms satisfactory to the Company, nor
can there be any assurances that financing would be available at all. See
"Proposed Business--'Blank Check' Offering--Selection of an Acquired
Business and Structuring of a Business Combination."
POSSIBLE USE OF DEBT FINANCING; DEBT OF AN ACQUIRED BUSINESS
There are currently no limitations relating to the Company's ability
to borrow funds to increase the amount of capital available to the Company to
effect a Business Combination or otherwise finance the operations of the
Acquired Business. The amount and nature of any borrowings by the Company will
depend on numerous considerations, including the Company's capital
requirements, the Company's perceived ability to meet debt service on any such
borrowings and then prevailing conditions in the financial markets, as well as
general economic conditions. There can be no assurances that debt financing, if
required or otherwise sought, would be available on terms deemed to be
commercially acceptable and in the best interests of the Company. The inability
of the Company to borrow funds required to effect or facilitate a Business
Combination, or to provide funds for an additional infusion of capital into an
Acquired Business, may have a material adverse effect on the Company's
financial condition and future prospects. Additionally, to the extent that debt
funding ultimately proves to be available, any borrowings may subject the
Company to various risks traditionally associated with incurring of
indebtedness, including the risks of interest rate fluctuations and
insufficiency of cash flow to pay principal and interest. Furthermore, an
Acquired Business may have already incurred debt financing and, therefore, all
the risks inherent thereto. See "Use of Proceeds" and "Proposed Business
- --'Blank Check' Offering" and "--Selection of an Acquired Business and
Structuring of a Business Combination."
AUTHORIZATION OF ADDITIONAL SECURITIES
The Company's Articles of Incorporation authorizes the issuance of
100,000,000 shares of Common Stock, par value $.0001 per share. Upon completion
of this Offering, assuming all of the shares of Common Stock offered hereby are
sold, there will be a minimum of 96,755,500 authorized but unissued shares of
Common Stock available for issuance (after appropriate reservation for the
issuance of shares upon full exercise of the over-allotment option and the
Underwriter Options). 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
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<PAGE> 22
will, in all likelihood, issue a substantial number of additional shares of
Common Stock in connection with a Business Combination. To the extent that
additional shares of Common Stock are issued, dilution to the interests of the
Company's shareholders will occur. Additionally, if a substantial number of
shares of Common Stock are issued in connection with a Business Combination, a
change in control of the Company may occur which may impact, among other
things, the utilization of net operating losses, if any. Furthermore, the
issuance of a substantial number of shares of Common Stock may cause dilution
and adversely affect prevailing market prices, if any, for the Common Stock,
and could impair the Company's ability to raise additional capital through the
sale of its equity securities. The Company has no plans, proposals,
arrangements or understandings with respect to the creation of a subsidiary
entity with a view to distribution to the Company's shareholders the securities
of the subsidiary entity. See "Proposed Business--'Blank Check' Offering;" "--
Selection of an Acquired Business and Structuring of a Business Combination"
and "Description of Securities."
INVESTMENT COMPANY ACT CONSIDERATIONS
After the Offering, substantially all of the Company's assets will be
invested in interest-bearing securities, which could subject the Company to the
registration requirements of the Investment Company Act of 1940, as amended
(the "Investment Company Act"). Registration under the Investment Company Act
would subject the Company to substantive regulations which could have a
material adverse effect on its business. The Company intends to conduct its
business in a manner designed to avoid being subject to the registration
requirements of the Investment Company Act and management believes that the
Company can avoid being subject to the registration requirements of such Act;
however, there can be no assurance that the Company can avoid becoming subject
to these registration requirements.
TAX CONSIDERATIONS
As a general rule, federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. The Company
will evaluate the possible tax consequences of any prospective Business
Combination and will endeavor to structure the Business Combination so as to
achieve the most favorable tax treatment to the Company, the Acquired Business
and their respective shareholders. There can be no assurances, however, that
the Internal Revenue Service (the "IRS") or appropriate state tax authorities
will ultimately assent to the Company's tax treatment of a consummated Business
Combination. To the extent the IRS or state tax authorities ultimately prevail
in recharacterizing the tax treatment of a Business Combination, there may be
adverse tax consequences to the Company, the Acquired Business and their
respective shareholders. See "Proposed Business--'Blank Check' Offering;"
"--Selection of an Acquired Business and Structuring of a Business
Combination."
POSSIBLE PAYMENT OF FINDER'S FEES
In the event that a person or entity assists the Company in connection
with the introduction to a prospective Acquired Business with which a Business
Combination is ultimately consummated, such person or entity may be entitled to
receive a finder's fee in consideration for such introduction. Such finder's
fees may take the form of the issuance of securities or cash. Such person may
be required to be registered as, among other things, an agent or broker-dealer
under the laws of certain jurisdictions. The executive officers and directors of
the Company have agreed that neither they nor any entity with which they are
affiliated will be entitled to receive a finder's fee in the event they
originate a Business Combination. See "Proposed Business--'Blank Check'
Offering;" "--Selection of an Acquired Business and Structuring of a Business
Combination;" "Management of the Company--Conflicts of Interest" and
"Underwriting."
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<PAGE> 23
DIVIDENDS UNLIKELY
The Company has not paid any dividends on its Common Stock to date and
does not presently intend to pay cash dividends prior to the consummation of a
Business Combination. The payment of dividends after any such Business
Combination, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and general financial condition
subsequent to consummation of a Business Combination. The payment of any
dividends subsequent to a Business Combination will be within the discretion of
the Company's then Board of Directors. It is the present intention of the Board
of Directors to retain all earnings, if any, for use in the Company's business
operations and, accordingly, the Board does not anticipate paying any cash
dividends in the foreseeable future. See "Description of
Securities--Dividends."
CONTROL BY PRESENT SHAREHOLDERS
Upon consummation of the Offering, present shareholders, including the
present management of the Company, will collectively own approximately 54% of
the then issued and outstanding shares of Common Stock (assuming no exercise of
the Underwriter Options or over-allotment option), approximately 44% of which
will be owned by the current officers and directors. In the election of
directors, shareholders are not entitled to cumulate their votes for nominees.
Accordingly, the current shareholders will essentially be able to elect all of
the Company's Directors and thereafter have a substantial impact upon the
operations of the Company. See "Principal Shareholders," "Certain
Transactions," "Proposed Business--'Blank Check' Offering" and "Description
of Securities."
NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICE
Prior to this Offering, there has been no public trading market for
the Common Stock. The initial public offering price of the shares of Common
Stock have been arbitrarily determined by negotiation between the Company and
the Representative and does not bear any relationship to such established
valuation criteria as assets, book value or prospective earnings. There can be
no assurances that a regular trading market will develop for the shares of
Common Stock after this Offering or that, if developed, any such market will be
sustained. Trading of the Common Stock will likely be conducted through what is
customarily known as the "pink sheets" and on the Bulletin Board. Any market
for the Common Stock which may result will likely be less well developed than
if the Common Stock were traded in NASDAQ or an exchange.
The Representative has advised the Company that although the
Representative anticipates it will act as a market maker of the Company's shares
of Common Stock after the closing of the Offering, there can be no assurances
that the Representative will in fact act in such capacity. As of the date
hereof, other than with the Representative, the Company has had no discussions
and there are no understandings with any firm regarding the participation of
such firm as a market maker in the shares of the Company's Common Stock. See
"Underwriting."
RISK OF LOW PRICE ("PENNY STOCK") SECURITIES
If the Company, at any time, has net tangible assets of $2,000,000 or
less, transactions in the Common Stock would be subject to certain rules
promulgated under the Exchange Act. Under such rules, broker-dealers who
recommend such securities to persons other than institutional accredited
investors (generally institutions with assets in excess of $5,000,000) must
make a special written suitability determination for the purchaser, receive the
purchaser's written agreement to a transaction prior to sale and provide the
purchaser with risk disclosure documents which identify certain risks
associated with investing in "penny stocks" and which describes the market
therefor as well as a purchaser's legal remedies. Further, the broker-dealer
must also obtain a signed and dated acknowledgment from the purchaser
demonstrating that the purchaser has actually received the required risk
disclosure document before a transaction in a "penny stock" can be consummated.
If the Common Stock becomes subject to such rules, broker-dealers may find it
difficult to effectuate customer
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<PAGE> 24
transactions and the trading activity in the Common Stock; thus, the market
price, if any, may be depressed, and an investor may find it more difficult to
dispose of the Common Stock.
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION
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. The pro forma 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. New
investors will incur an immediate and substantial dilution of approximately
$3.64 per share (i.e. the difference between the pro forma net tangible book
value per share after the Offering of $2.36 and the public offering price of
$6.00 per share) allocable to each Share (assuming no exercise of the
Underwriter Options or the over-allotment option). The existing shareholders of
the Company acquired their shares of Common Stock at a nominal price (an
average of $0.14 per share) and, accordingly, new investors will bear virtually
all of the risks inherent in an investment in the Company. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
All of the 1,557,000 shares of Common Stock issued and outstanding
prior to this Offering are "restricted securities," as that term is defined
under Rule 144 ("Rule 144"), promulgated under the Securities Act. None of such
shares will be eligible for sale under Rule 144, as currently in effect, prior
to September 13, 1997. The shares of Common Stock owned as of the date hereof by
Messrs. Frost, Hanna, Baxter, Rosenberg and Fernandez (an aggregate of
approximately 82% of the outstanding Common Stock prior to this Offering) will
be placed in escrow with American Stock Transfer & Trust Company, as escrow
agent, until the occurrence of a Business Combination. During such escrow
period, such persons will not be able to sell, or otherwise transfer, their
respective shares of Common Stock, but will retain all other rights as
shareholders of the Company, including, without limitation, the right to vote
such shares of Common Stock.
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 beneficially
owned restricted shares of Common Stock for at least one year is entitled to
sell, within any three-month period, a number of shares that does not exceed
the greater of 1% of the total number of outstanding shares of the same class
or, if the Common Stock is quoted on NASDAQ or an exchange, 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 restricted 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. No
prediction can be made as to the effect, if any, that sales of "restricted"
shares of Common Stock or the availability of such shares for sale will have on
the market prices prevailing from time to time. Nevertheless, the possibility
that substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities. See "Principal Shareholders" and "Shares Eligible for Future Sale."
REGULATIONS CONCERNING "BLANK CHECK" ISSUERS
The ability to register or qualify the shares of Common Stock for both
initial sale and secondary trading is limited because a number of states have
enacted regulations pursuant to their securities or "blue sky" laws restricting
or, in some instances, prohibiting, the sale of securities of "blank check"
issuers, such as the Company, within that state. In addition, many states,
while not specifically prohibiting or restricting "blank check" companies,
would not permit registration or qualification of the Common Stock for sale in
their states. Because of such regulations and other restrictions, the Company's
selling efforts, and any secondary market which may develop, may only be
conducted in certain States (as described below) or in those jurisdictions
where an applicable exemption is available or a blue sky application has been
filed and accepted. See "State Blue Sky
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<PAGE> 25
Registration; Restricted Resales of the Common Stock," below. In addition, the
Commission has enacted rules under the Securities Act which, among other
things, afford shareholders of "blank check" companies a right to rescind their
purchases of such securities for a limited period subsequent to the
consummation of a Business Combination. Such rules, however, are not applicable
to, among other things, offerings where the net worth of the company is greater
than $5,000,000 and consequently, it is the Company's belief that such rules
are not applicable to this Offering. There can be no assurances that the
Commission, the United States Congress, or state legislatures will not enact
legislation which will prohibit or restrict the sale of securities of "blank
check" companies.
STATE BLUE SKY REGISTRATION; RESTRICTED RESALES OF THE COMMON STOCK
The Company has made application to register or has or will seek to
obtain an exemption from registration to offer the Common Stock, and intends to
conduct its selling efforts in Colorado, Delaware, Florida, Illinois, Maryland,
New York, Oregon, Rhode Island, South Carolina and Utah. Purchasers of the
Common Stock in the Offering must be residents of such jurisdictions. In order
to prevent resale transactions in violation of states' securities laws,
shareholders may only engage in resale transactions in the states listed above
and such other jurisdictions in which an applicable exemption is available or a
blue sky application has been filed and accepted. As a matter of notice to the
holders thereof, the Common Stock certificates shall contain information with
respect to resale of the Common Stock. Further, the Company will advise its
market maker, if any, of such restriction on resale. Such restriction on resale
may limit the ability of investors to resell the shares of Common Stock
purchased in this Offering.
Several additional states may permit secondary market sales of the
shares of Common Stock (i) once or after certain financial and other
information with respect to the Company is published in a recognized securities
manual such as Standard & Poor's Corporation Records; (ii) after a certain
period has elapsed from the date hereof; or (iii) pursuant to exemptions
applicable to certain investors. However, since the Company is a "blank check"
company, it may not be able to be listed in any recognized securities manual
until after the consummation of the first Business Combination.
UNDERWRITER OPTIONS
In connection with this Offering, the Company has agreed to sell to
the Representative, at an aggregate price of $135, warrants to purchase up to
135,000 shares of Common Stock (the "Stock Purchase Option" or "Underwriter
Options"). The Underwriter Options are exercisable at a price of $7.20 per
share (120% of offering price) for a period commencing one year after, and
ending five years after, the date of this Prospectus. In addition, the holders
of the Underwriter Options will have certain registration rights with respect
to the shares of Common Stock underlying the Underwriter Options (the
"Underlying Shares"). See "Underwriting--Underwriter Options." In addition, the
sale, or even the possibility of sale, of the Underlying Shares could have an
adverse effect on the market price for the Company's securities or on the
Company's ability to obtain future public financing. If and to the extent the
Underwriter Options are exercised, shareholders may experience dilution in the
book value of their holdings. See "Dilution."
LACK OF BUSINESS OPERATIONS
Although the Company will use efforts to attempt to locate potential
Business Combinations, there can be no assurances that any business or assets
worthy of even preliminary investigation will come to the Company's attention,
or that any significant amount of funds will be expended in actual acquisition
of assets. See "Management of the Company--Conflicts of Interest."
LOSS FROM ANALYSIS AND INVESTIGATION OF BUSINESS PROSPECTS
The Company will be required, in all probability, to expend funds in
the preliminary internal investigation or examination of assets, business or
properties, whether or not an investment occurs.
-22-
<PAGE> 26
Additionally, the Company may expend additional funds if it hires an
independent company to perform an analysis or audit of a potential Acquired
Business or perform background checks on the management of such Acquired
Business. To the extent management determines that the potential investment has
little or no value, the monies spent on internal investigations and independent
company consultation services will be a total loss. In no event will the funds
placed in the Escrow Fund, including any interest earned thereon, be used for
expenses associated with the evaluation and structuring of a contemplated
Business Combination.
CERTAIN PROVISIONS OF COMPANY'S ARTICLES OF INCORPORATION;
INDEMNIFICATION OF OFFICERS AND DIRECTORS AND ELECTION OUT OF ANTI-TAKEOVER
STATUTES
The Company's Articles of Incorporation provide, among other things,
that (i) officers and directors of the Company will be indemnified to the
fullest extent permitted under Florida law; and (ii) the Company has elected
not to be governed by Sections 607.0901 and 607.0902 of the Florida Business
Corporation Act and other laws relating thereto (the "Anti-Takeover Sections").
Because of the Company's election not to be governed by the
Anti-Takeover Sections, the Company will not be subject to the provisions of
Florida law which provide that certain transactions between the Company and an
"interested shareholder" or any affiliate of the "interested shareholder" be
approved by two-thirds of the Company's outstanding shares. An "interested
shareholder" as defined in Section 607.0901 of the Florida Business Corporation
Act is any person who is the beneficial owner of more than 10% of the
outstanding shares of the company who is entitled to vote generally in the
election of directors. In addition, because of the Company's election not to be
governed by the Anti-Takeover Sections, the Company will not have the alleged
assistance against unfriendly take-over attempts purportedly provided by that
statute.
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<PAGE> 27
USE OF PROCEEDS
The Net Proceeds to the Company from the sale of the shares of Common
Stock offered hereby, after the Offering Costs and Underwriting Discount of
approximately $1,228,000, are estimated to be $6,872,000 and $7,929,050, if
the over-allotment option is exercised in its entirety. Eighty percent (80%) of
the Net Proceeds of this Offering (approximately $5,497,600 if the
over-allotment option is not exercised), after such costs and discounts, will
be placed in the Escrow Fund which is an interest bearing escrow account, with
Fiduciary Trust International of the South, as escrow agent, subject to release
upon the earlier of (i) written notification by the Company of its need for
all, or substantially all, of such Net Proceeds for the purpose of implementing
a Business Combination; or (ii) the exercise by certain shareholders of the
Redemption Offer. See "Proposed Business -- Redemption Rights." Any interest
earned on the Escrow Fund will accrue in the Escrow Fund. In no event will the
funds placed in the Escrow Fund, including any interest earned thereon, be used
for expenses associated with the evaluation and structuring of a contemplated
Business Combination. The Escrow Agent has advised the Company that the Escrow
Agent is under no prohibitions with respect to the length of time that the
Escrow Agent may act as escrow agent in connection with the holding of the
Escrow Fund.
The Company estimates that the remaining twenty percent (20%) of such
Net Proceeds may be required to evaluate potential Acquired Businesses, to
select an Acquired Business and to structure and consummate a Business
Combination with such Acquired Business (including possible payment of finder's
fees or other compensation to persons or entities which provide assistance or
services to the Company in these regards), as well as to pay the Company's
accounting fees, legal fees, office build-out and rent, telephone, mailing,
travel related to a potential Business Combination, filing fees, occupational
license fees, escrow agent fees, transfer agent fees, consulting fees, the fees,
if any, to hire any independent appraisers in connection with a potential
Business Combination, and salary and non-accountable expense allowance for each
of Messrs. Frost and Hanna (the "General and Administrative Expenses"), until
consummation of a Business Combination. The Company believes that it can satisfy
its cash requirements until a Business Combination is consummated with 20% of
the Net Proceeds derived from this Offering, including interest earned thereon.
As of March 31, 1997, $121,061 of the remaining twenty percent (20%) of the Net
Proceeds will immediately be used to pay past due General and Administrative
Expenses and officers' salaries and $20,000 will be used to pay loans payable to
officers. Meanwhile, due to the possible indefinite period of time to consummate
a Business Combination and the nature and cost of the Company's expenses related
to the Company's search and analysis of a Business Combination, there can be no
assurances that the Company's cash requirements until a Business Combination is
consummated will be satisfied with 20% of the Net Proceeds of this Offering
(including interest income earned thereon). In the event the Company requires in
excess of 20% of the Net Proceeds for operations, Messrs. Frost and Hanna have
undertaken to waive their salaries and non-accountable expense allowance until
the consummation by the Company of a Business Combination. In the event that the
Company elects to effect more than one Business Combination, it will expend at
least the Threshold Amount on the first Business Combination. To the extent that
securities of the Company are used in whole or in part as consideration to
effect a Business Combination, the balance of the Net Proceeds of this Offering
not theretofore expended will be used to finance the operations of the Acquired
Business.
The Company has agreed to pay to each of Messrs. Frost and Hanna, upon
consummation of this Offering, $10,000 monthly for salary and $1,000 monthly for
non-accountable expense allowance (prospectively and retroactively for four
months prior to the date hereof ($88,000)). No other officers, directors or
current shareholders, except for the Representative who may designate a member
of the Board of Directors, shall be paid any consulting fees or salaries for
services delivered by such persons in connection with a Business Combination.
The Company shall reimburse its officers and directors for any accountable
reasonable expenses incurred in connection with activities on behalf of the
Company. The proceeds placed in the Escrow Fund (including any interest earned
thereon) will not be used by the Company for salaries or expenses payable to
Messrs. Frost or Hanna or to reimburse the Company's officers and directors for
expenses incurred in connection with activities on behalf of the Company. Other
than the foregoing, there is no limit on the amount of such reimbursable
expenses and there will be no review of the reasonableness of such expenses by
anyone other than the Board of Directors, all of the current members (except Mr.
Fernandez) of which are officers of the Company. In no event will the Escrow
Fund be used for any purpose other than the implementation of a Business
Combination or for purposes of the Redemption Offer.
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<PAGE> 28
Further, no Net Proceeds of this Offering shall be loaned to any of
the Company's officers, directors, greater than 10% shareholders of the Company
or any person who directly or indirectly controls, is controlled by or is under
common control with the Company. No proceeds of this Offering will be paid to
officers, directors, greater than 10% shareholders of the Company or any person
who directly or indirectly controls, is controlled by or is under common
control with the Company, in consideration for professional services rendered
by such persons prior to the consummation of a Business Combination. The Net
Proceeds of this Offering not immediately required for the purposes set forth
above will be invested in United States Government securities or other minimum
risk, short-term interest bearing investments; provided, however, that the
Company will attempt to not invest the Net Proceeds in a manner which may
result in the Company being deemed to be an investment company under the
Investment Company Act.
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<PAGE> 29
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. Pro forma 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 March 31, 1997, the net tangible book value of the Company, after
giving effect to the issuance of 145,000 shares of Common Stock and the
redemption of 80,000 shares of Common Stock in private placement transactions
completed in June 1997 for net proceeds of $32,500, was ($142,896) or ($0.09)
per share of Common Stock. After giving effect to the sale of 1,350,000 shares
of Common Stock offered hereby and the application of the estimated Net Proceeds
therefrom, the pro forma net tangible book value of the Company at March 31,
1997 would have been $6,852,214 or $2.36 per share, representing an immediate
increase in net tangible book value of $6,995,110 or $2.45 per share to existing
shareholders and an immediate dilution of $3.64 per share to new investors. As
of the date hereof, there are currently no plans, proposals, arrangements or
understandings with respect to the sale of additional securities to any persons
for the period commencing with the closing of this Offering and the Company's
identification of a Business Combination, other than the Company's issuance of
shares of Common Stock upon the exercise of the over-allotment option and the
Underwriter Options. See "Underwriting."
The following table illustrates the foregoing information with respect
to dilution to new investors on a per-share basis after the Offering.
<TABLE>
<S> <C> <C>
Public offering price per share............................... $ 6.00
Net tangible book value per
share, before this Offering.......................... (0.09)
Increase per share attributable to
payment by new investors............................. 2.45
-----
Pro forma net tangible book value per share,
after this Offering........................................... 2.36
-----
Dilution to new investors per share........................... 3.64
=====
</TABLE>
The following table sets forth as of the date of this Prospectus, with
respect to existing shareholders and new investors, a comparison of the number
of shares of Common Stock acquired from the Company, their percentage ownership
of such shares, the total consideration paid, the percentage of total
consideration paid and the average price per share:
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION PRICE PER
------------------- ------------------- ---------
AMOUNT PERCENTAGE PAID PERCENTAGE SHARE
------ ---------- ---- ---------- -----
<S> <C> <C> <C> <C> <C>
Existing Shareholders 1,557,000 54% $ 216,612 3% $ .14
New Investors 1,350,000 46% 8,100,000 97% $ 6.00
--------- ----------- ----------- --- --------
2,907,000 100% $ 8,316,672 100%
========= =========== =========== ===
</TABLE>
- ---------------
(1) The above table assumes no exercise of the over-allotment option. If
the over-allotment option is exercised in full, the new investors will
have paid $9,175,000 for 1,552,500 shares of Common Stock, representing
approximately 98% of the total consideration for approximately 49.9%
of the total number of shares of Common Stock outstanding. The above
table also assumes no exercise of the Underwriter Options. See
"Underwriting."
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<PAGE> 30
CAPITALIZATION
The following table sets forth the actual capitalization of the Company
as of March 31, 1997, the pro forma capitalization as if the issuance of 145,000
shares of Common Stock and the redemption of 80,000 shares of Common Stock in
private placement transactions completed in June 1997 for net proceeds of
$32,500 had occurred on March 31, 1997 and the capitalization as adjusted to
give effect to the sale of 1,350,000 shares of Common Stock being offered hereby
and the application of the estimated Net Proceeds therefrom:
<TABLE>
<CAPTION>
Actual Pro Forma As Adjusted(2)
<S> <C> <C> <C>
Shareholder's Equity(1)
Common Stock, $.0001 par value,
100,000,000 shares authorized:
1,492,000 shares issued actual,
1,557,000 issued pro forma, and
2,907,000 as adjusted $ 149 $ 156 $ 291
Capital in excess of par value 183,963 216,456 7,088,321
Deficit accumulated during
development stage (236,398) (236,398) (236,398)
---------- --------- -----------
Total shareholders' equity $ ( 52,286) $ (19,786) $ 6,852,214
========== ========= ===========
</TABLE>
(1) Assumes no exercise of the Underwriter Options or the over-allotment
option. See "Underwriting."
(2) The as adjusted information does not give effect to the payment of
$10,000 monthly for salary and $1,000 monthly for non-accountable
expense allowance (retroactive for four months prior to the date hereof
($88,000)) and loans payable of $10,000 to each of Messrs. Frost and
Hanna.
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<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company, a development stage entity, was formed in February 1996 to
serve as a vehicle to effect a Business Combination with an Acquired Business
which the Company believes has significant growth potential. The Company intends
to utilize cash (to be derived from the proceeds of this Offering), equity, debt
or a combination thereof in effecting a Business Combination. The Company has
neither engaged in any operations nor generated any revenues to date. Its entire
activity since its inception has been to prepare for its proposed fundraising
through an offering of equity securities as contemplated herein. The attempted
offering was terminated prior to any shares of Common Stock being offered or
sold thereto after the Company's underwriter (which has no affiliation with the
Representative) discontinued its operations.
Through March 31, 1997, the Company's expenses which are primarily
attributable to its formation and proposed fundraising are approximately
$237,824, of which $116,763 has been paid to date, with the remaining amount
contemplated to be paid out of the proceeds of the Offering.
Substantially all of the Company's working capital needs subsequent to
the Offering will be attributable to the identification of a suitable Acquired
Business, and thereafter to effectuate a Business Combination with such
Acquired Business. Such working capital needs are expected to be satisfied from
the Net Proceeds of the proposed Offering. Although no assurances can be made,
the Company believes it can satisfy its cash requirements until a Business
Combination is consummated with 20% of the Net Proceeds derived hereby. Due to
the possible indefinite period of time to consummate a Business Combination and
the nature and cost of the Company's expenses related to the Company's search
and analysis of a Business Combination, there can be no assurances that the
Company's cash requirements until a Business Combination is consummated will be
satisfied with 20% of the Net Proceeds of this Offering (including interest
income earned thereon). The Company believes, however, that the Company's cash
requirements for the next twelve months will be satisfied with 20% of the Net
Proceeds of this Offering. See "Risk Factors" and "Use of Proceeds."
The report of independent public accountants on the Company's
financial statements includes an explanatory paragraph concerning the Company's
ability to commence operations being dependent on the success of this Offering,
which raises substantial doubt about its ability to continue as a growing
concern.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains forward-looking statements. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, many of which are beyond
the Company's control. Actual results could differ from these forward-looking
statements as a result of, among other things, the factors described in "Risk
Factors." In light of these risks and uncertainties, there can be no assurance
that the forward-looking information contained in this Prospectus will in fact
occur.
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<PAGE> 32
PROPOSED BUSINESS
INTRODUCTION
The Company was formed in February 1996 to seek to effect a Business
Combination with an Acquired Business which the Company believes has
significant growth potential. The Company will not engage in any substantive
commercial business immediately following this Offering and for an indefinite
period of time following this Offering. The Company has no plan, proposal,
agreement, understanding or arrangement to acquire or merge with any specific
business or company, and the Company has not identified any specific business
or company for investigation and evaluation. The Company intends to utilize
cash (to be derived from the proceeds of this Offering), equity, debt or a
combination thereof in effecting a Business Combination. While the Company may,
under certain circumstances, seek to effect Business Combinations with more
than one Acquired Business, it will not expend less than the Threshold Amount
(approximately $5,497,600, assuming an initial offering price of $6.00 per
share and no exercise of the over-allotment option) upon its first Business
Combination. Consequently, it is likely that the Company will have the ability
to effect only a single Business Combination. The Company may effect a Business
Combination with a prospective Acquired Business which may be financially
unstable or in its early stages of development or growth.
"BLANK CHECK" OFFERING
Background. As a result of, among other things, management's broad
discretion with respect to the specific application of the Net Proceeds of this
Offering, this Offering may be characterized as a "blank check" offering.
Although substantially all of the Net Proceeds of this Offering are intended to
be generally applied toward effecting a Business Combination, such proceeds are
not otherwise being designated for any more specific purposes. Accordingly,
prospective investors will invest in the Company without an opportunity to
evaluate the specific merits or risks of any one or more Business Combinations.
A Business Combination may involve the acquisition of, or merger with, a
company which does not need substantial additional capital but which desires to
establish a public offering itself, while avoiding what it may deem to be
adverse consequences of undertaking a public offering itself, such as time
delays, significant expense, loss of voting control and compliance with various
federal and state securities laws. In the event that management identifies and
effectuates a Business Combination with an Acquired Business which proves to be
not successful for any of a myriad of reasons, some of which may not at this
time be identifiable because of the "blank check" nature of the Offering,
investors in the Company could lose their entire investment in the Company.
Unspecified Industry and Acquired Business. To date, the Company has
not selected any particular industry or any Acquired Business in which to
concentrate its Business Combination efforts. Accordingly, there is no current
basis for prospective investors in this Offering to evaluate the possible
merits or risks of the Acquired Business or the particular industry in which
the Company may ultimately operate. However, in connection with seeking
shareholder approval of a Business Combination, the Company (as a result of its
intention to register its Common Stock under the Exchange Act and thereby
become subject to the proxy solicitation rules contained therein) intends to
furnish its shareholders with proxy solicitation materials prepared in
accordance with the Exchange Act which, among other matters, will include a
description of the operations of the Acquired Business candidate and audited
historical financial statements thereof. To the extent the Company effects a
Business Combination with a financially unstable company or an entity in its
early stage of development or growth (including entities without established
records of sales or earnings), the Company will become subject to numerous
risks inherent in the business and operations of financially unstable and early
stage or potential emerging growth companies. In addition, to the extent that
the Company effects a Business Combination with an entity in an industry
characterized by a high level of risk, the Company will become subject to the
currently unascertainable risks of that industry. An extremely high level of
risk frequently characterizes certain industries which experience rapid growth.
Although management will endeavor to evaluate the risks inherent in a
particular industry or Acquired Business, there can be no assurances that the
Company will properly ascertain or assess all significant risk factors.
Additionally, a prospective Acquired Business may be a company which does not
need substantial additional capital but which desires to establish a public
trading
-29-
<PAGE> 33
market for its shares, while avoiding what it may deem to be adverse
consequences of undertaking a public offering itself, such as time delays,
significant expense, loss of voting control and compliance with various federal
and state securities laws enacted for the protection of investors. Accordingly,
management could identify and acquire an Acquired Business which could fail,
resulting in the loss of an investor's entire investment in the shares of
Common Stock offered hereby. See "Risk Factors."
Probable Lack of Business Diversification. While the Company may,
under certain circumstances, seek to effect Business Combinations with more
than one Acquired Business, it will not expend less than the Threshold Amount
(approximately $5,497,600) upon its first Business Combination. Consequently,
it is likely that the Company will have the ability to effect only a single
Business Combination. Accordingly, the prospects for the Company's success will
be entirely dependent upon the future performance of a single business. Unlike
certain entities which have the resources to consummate several business
combinations of entities operating in multiple industries or multiple areas of
a single industry, it is highly likely that the Company will not have the
resources to diversify its operations or benefit from the possible spreading of
risks or offsetting of losses. The Company's probable lack of diversification
may subject the Company to numerous economic, competitive and regulatory
developments, any or all of which may have a substantial adverse impact upon
the particular industry in which the Company may operate subsequent to a
Business Combination. In addition, by consummating a Business Combination with
only a single entity, the prospects for the Company's success may become
dependent upon the development or market acceptance of a single or limited
number of products, processes or services. Accordingly, notwithstanding the
possibility of capital investment in and management assistance to the Acquired
Business by the Company, there can be no assurances that the Acquired Business
will prove to be commercially viable. Prior to the consummation of a Business
Combination, the Company has no intention to purchase or acquire a minority
interest in any company.
Opportunity for Shareholder Evaluation or Approval of Business
Combinations. The investors in this Offering will, in all likelihood, neither
receive nor otherwise have the opportunity to evaluate any financial or other
information which will be made available to the Company in connection with
selecting a potential Business Combination until after the Company has entered
into an agreement to effectuate a Business Combination. Such agreement to
effectuate a Business Combination, however, will be subject to shareholder
approval as discussed elsewhere herein. As a result, investors in this Offering
will be almost entirely dependent on the judgment of management in connection
with the selection and ultimate consummation of a Business Combination. In
connection with seeking shareholder approval of a Business Combination, the
Company intends to furnish its shareholders with proxy solicitation materials
prepared in accordance with the Exchange Act which, among other matters, will
include a description of the operations of the Acquired Business candidate and
audited historical financial statements thereof.
Under the Florida Business Corporation Act, certain forms of Business
Combinations may be effected without shareholder approval. In addition, the
form of Business Combination may have an impact upon the availability of
dissenters' rights (i.e., the right to receive fair payment with respect to the
Company's Common Stock) to shareholders disapproving the proposed Business
Combination. The Company will afford to investors in this Offering the right to
approve any Business Combination, irrespective of whether or not such approval
would be required under applicable Florida law. IN THE EVENT, HOWEVER, THAT THE
HOLDERS OF 30% OR MORE OF THE PUBLIC SHARES HELD BY PUBLIC SHAREHOLDERS VOTE
AGAINST APPROVAL OF ANY BUSINESS COMBINATION, THE COMPANY WILL NOT CONSUMMATE
SUCH BUSINESS COMBINATION. All of the officers and directors of the Company,
who own in the aggregate approximately 82% of the Common Stock outstanding
prior to this Offering, 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 the Public Shares held by the Public Shareholders with respect to
any Business Combination. See "Redemption Rights," below.
Limited Ability to Evaluate Acquired Business' Management. While the
Company's ability to successfully effect a Business Combination will be
dependent upon certain key personnel, the future role of such personnel in the
Acquired Business cannot presently be stated with any certainty. It is unlikely
that any of the Company's key personnel will remain associated in any
operational capacity with the Company following a
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<PAGE> 34
Business Combination. Moreover, there can be no assurances that such personnel
will have any experience or knowledge relating to the operations of the
particular Acquired Business. Furthermore, although the Company intends to
closely scrutinize the management of a prospective Acquired Business in
connection with evaluating the desirability of effecting a Business
Combination, there can be no assurances that the Company's assessment of such
management will prove to be correct, especially in light of the inexperience of
current key personnel of the Company in evaluating businesses. Accordingly,
investors will be relying in some significant respects, on the ability of the
management of the Acquired Business who are unidentifiable as of the date
hereof. In addition, there can be no assurances that such future management
will have the necessary skills, qualifications or abilities to manage a public
company. The Company may also seek to recruit additional managers to supplement
the incumbent management of the Acquired Business. There can be no assurances
that the Company will have the ability to recruit such additional managers, or
that such additional managers will have the requisite skill, knowledge or
experience necessary or desirable to enhance the incumbent management.
Selection of an Acquired Business and Structuring of a Business
Combination. Management anticipates that the selection of an Acquired Business
will be complex and risky because of competition for such business
opportunities among all segments of the financial community. The nature of the
Company's search for the acquisition of an Acquired Business requires maximum
flexibility inasmuch as the Company will be required to consider various
factors and circumstances which may preclude meaningful direct comparison among
the various business enterprises, products or services investigated. Investors
should recognize that the possible lack of diversification among the Company's
acquisitions may not permit the Company to offset potential losses from one
venture against profits from another. Management of the Company will have
virtually unrestricted flexibility in identifying and selecting a prospective
Acquired Business. In addition, in evaluating a prospective Acquired Business,
management will consider, among other factors, the following:
- financial condition and results of operation of the Acquired
Business;
- growth potential and projected financial performance of the
Acquired Business and the industry in which it operates;
- equity interest in and possible management participation in
the Acquired Business;
- experience and skill of management and availability of
additional personnel of the Acquired Business;
- capital requirements of the Acquired Business;
- competitive position of the Acquired Business;
- stage of development of the product, process or service of
the Acquired Business;
- degree of current or potential market acceptance of the
product, process or service of the Acquired Business;
- possible proprietary features and possible other protection
of the product, process or service of the Acquired Business;
- regulatory environment of the industry in which the Acquired
Business operates; and
- costs associated with effecting the Business Combination.
The foregoing criteria are not intended to be exhaustive; any
evaluation relating to the merits of a particular Business Combination will be
based, to the extent relevant, on the above factors as well as other
considerations deemed relevant by management in connection with effecting a
Business Combination consistent
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<PAGE> 35
with the Company's business objective. In connection with its evaluation of a
prospective Acquired Business, management anticipates that it will conduct a
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 time and costs required to select and evaluate an Acquired Business
candidate (including conducting a due diligence review) and to structure and
consummate the Business Combination (including negotiating relevant agreements
and preparing requisite documents for filing pursuant to applicable securities
laws and state corporation laws) cannot presently be ascertained with any degree
of certainty. Messrs. Frost and Hanna currently intend to devote approximately
50% of their working time to the affairs of the Company, Messrs. Baxter and
Rosenberg intend to devote approximately 10% of their working time to the
affairs of the Company and Mr. Fernandez does not intend to devote any of his
working time to the affairs of the Company and, accordingly, consummation of a
Business Combination may require a greater period of time than if the Company's
executive officers devoted their full time to the Company's affairs. Any costs
incurred in connection with the identification and evaluation of a prospective
Acquired Business with which a Business Combination is not ultimately
consummated will result in a loss to the Company and reduce the amount of
capital available to otherwise complete a Business Combination.
The Company may utilize cash (derived from the proceeds of this
Offering), equity, debt or a combination of these as consideration in effecting
a Business Combination. 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 such additional shares are issued or other securities convertible
or exchangeable into common stock, dilution to the interest of the Company's
shareholders will occur. Additionally, if a substantial number of shares of
Common Stock are issued in connection with a Business Combination, a change in
control of the Company may occur.
If securities of the Company are issued as part of an acquisition, it
cannot be predicted whether such securities will be issued in reliance upon
exemptions from registration under applicable federal or state securities laws
or will be registered for public distribution. When registration of securities
is required, substantial cost may be incurred and time delays encountered. In
addition, the issuance of additional securities and their potential sale in any
trading market which may develop in the Company's Common Stock, of which there
is no assurances, may depress the price of the Company's Common Stock in any
market which may develop in the Company's Common Stock. Additionally, such
issuance of additional securities of the Company would result in a decrease in
the percentage ownership of the Company of purchasers of the Common Stock being
offered hereby.
The Company's operations may be limited by the Investment Company Act.
Unless the Company registers with the Commission as an investment company, it
will not, among other things, be permitted to own or propose to acquire
investment securities, exclusive of government securities and cash items, which
have a value exceeding 40% of the value of the Company's total assets on an
unconsolidated basis. It is not anticipated that the Company will have a policy
restricting the type of investments it may make. While the Company will attempt
to conduct its operations so as not to require registration under the
Investment Company Act and management believes that the Company can avoid being
subject to the registration requirements under such Act, there can be no
assurances that the Company will not be deemed to be subject to the Investment
Company Act.
There are currently no limitations relating to the Company's ability
to borrow funds to increase the amount of capital available to the Company to
effect a Business Combination or otherwise finance the operations of the
Acquired Business. The amount and nature of any borrowings by the Company will
depend on numerous considerations, including the Company's capital
requirements, the Company's perceived ability to meet debt service on such
borrowings and then prevailing conditions in the financial markets, as well as
general economic conditions. There can be no assurances that debt financing, if
required or otherwise sought, would be available on terms deemed to be
commercially acceptable and in the best interests of the Company. The inability
of the Company to borrow funds for an additional infusion of capital into an
Acquired Business may have material
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<PAGE> 36
adverse effects on the Company's financial condition and future prospects. To
the extent that debt financing ultimately proves to be available, any
borrowings may subject the Company to various risks traditionally associated
with incurring indebtedness, including the risks of interest rate fluctuations
and insufficiency of cash flow to pay principal and interest. Furthermore, an
Acquired Business may have already incurred debt financing and, therefore, all
the risks inherent thereto.
Because of the Company's small size, investors in the Company should
carefully consider the business constraints on its ability to raise additional
capital when needed. Until such time as any enterprise, product or service
which the Company acquires generates revenues sufficient to cover operating
costs, it is conceivable that the Company could find itself in a situation
where it needs additional funds in order to continue its operations. This need
could arise at a time when the Company is unable to borrow funds and when
market acceptance for the sale of additional shares of the Company's Common
Stock does not exist.
PAYMENT OF SALARIES
In connection with the consummation of a Business Combination, the
Company may become obligated to pay to certain persons consulting fees or
salaries. The Company has agreed to pay, to each of Messrs. Frost and Hanna,
upon consummation of the Offering, $10,000 monthly for salary and $1,000 monthly
for non-accountable expense allowance (prospectively and retroactively for four
months prior to the date hereof ($88,000 in the aggregate)) No other current
officers, directors or shareholders shall be paid any consulting fees or
salaries for services delivered by such persons in connection with a Business
Combination. The Company shall reimburse its officers and directors for any
accountable reasonable expenses incurred in connection with activities on behalf
of the Company. The proceeds placed in the Escrow Fund (including any interest
earned thereon) will not be used by the Company for salaries or expenses payable
to Messrs. Frost or Hanna or for consulting fees. No funds (including any
interest earned thereon) will be disbursed from the Escrow Fund for
reimbursement of expenses. Other than the foregoing, there is no limit on the
amount of such reimbursable expenses and there will be no review of the
reasonableness of such expenses by anyone other than the Board of Directors, all
of the members of which are present officers of the Company. In the event the
Company requires in excess of 20% of the Net Proceeds for operations, Messrs.
Frost and Hanna have undertaken to defer their salaries and non-accountable
expense allowance until the consummation by the Company of a Business
Combination. Subsequent to the consummation of a Business Combination, to the
extent the current officers, directors or shareholders of the Company provide
services to the Company, such persons may receive from the Company consulting
fees or salaries. The Company is not aware of any plans, proposals,
understandings or arrangements with respect to the sale of any shares of Common
Stock of the Company by any current shareholders. Further, there are no plans,
proposals, understandings or arrangements with respect to the transfer by the
Company to any of the current shareholders, any funds, securities or other
assets of the Company.
INVOLVEMENT OF CERTAIN PRINCIPALS IN PRIOR "BLANK CHECK" COMPANIES
Certain of the officers and directors of the Company have held similar
positions in three other "blank check" companies (i.e., a development stage
company that has no specific business plan or has indicated that its business
plan is to engage in a merger or acquisition with an unidentified company), each
of which has consummated a Business Combination as of the date of this
Prospectus. There can be no assurance that the Company will ever be able to
effect a Business Combination or that the type of business or the performance of
the Acquired Business, if any, will be similar to that of these other "blank
check" companies. Further, the results of such "blank check" companies are not
indicative in any manner of the possible future results of the Company. Certain
information with respect to each such prior Business Combination that the
officers and directors of the Company have been involved, as obtained from each
such company's respective filings with the Commission, is set forth below:
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<PAGE> 37
<TABLE>
<CAPTION>
Date of
Initial Trading Market
Name of Public Date of Business and
Acquired Business Offering Combination Nature of Business Ticker Symbol
----------------- -------- ---------------- ------------------ -------------
<S> <C> <C> <C> <C>
Sterling Health Care February 9, 1993 May 31, 1994 Providing physician NASDAQ National
Group, Inc. and Sterling contract management Market (FPAM)
Healthcare, Inc. services for hospital
(currently operating emergency
subsequent to a merger departments
as, "FPA Medical
Management, Inc.")
LFS Acquisition Corp. September 26, January 3, 1996 Operating children's Bulletin Board
(currently known as, 1993 apparel stores (KIDM)
"Kids Mart, Inc.")
Pan American World March 21, 1994 September 23, Airline industry AMEX (PAA)
Airways, Inc. (currently 1996
operating as, "Pan Am
Corporation")
</TABLE>
Messrs. Richard B. Frost, Mark J. Hanna and Marshal E. Rosenberg,
executive officers and directors of the Company, were also officers and
directors of Frost Hanna Halpryn a "blank check" company whose initial public
offering of securities closed in February 1993. Frost Hanna Halpryn raised net
proceeds of approximately $6,100,000 through the issuance of 1,175,500 shares
of Common Stock at $6.00 per share in such initial public offering. Frost Hanna
Halpryn consummated a Business Combination with Sterling Healthcare on May 31,
1994 in which both such entities merged with and into a wholly-owned subsidiary
of Frost Hanna Halpryn. In connection with such merger, Frost Hanna Halpryn
changed its name to "Sterling Healthcare, Inc." The principal business activity
of Sterling is providing physician contract management services for hospital
emergency departments. Upon consummation of the Sterling Business Combination,
(i) the former Sterling Healthcare shareholders were issued Sterling common
stock which constituted approximately 52% of the outstanding shares of Sterling
common stock (assuming full exercise of all outstanding options and warrants to
purchase Sterling common stock) and (ii) Messrs. Frost and Hanna resigned from
their officer and director positions of Sterling and Mr. Rosenberg resigned
from his position of Vice President and Treasurer and remained as a member of
the Sterling Board of Directors until December 1994. In October, 1996, Sterling
consummated a business combination with FPA Medical Management Inc. ("FPAM")
pursuant to which, among other things, each share of Sterling common stock was
exchanged for .951 shares of FPAM common stock. FPAM provides regional
healthcare management services. FPAM currently trades under the symbol "FPAM"
in the NASDAQ National Market. The closing price of FPAM common stock on
June 30, 1997 was $23.69 per share.
Messrs. Frost, Hanna, and Rosenberg and Mr. Donald H. Baxter, also an
executive officer and director of the Company, were also officers and directors
of Frost Hanna Acquisition, a "blank check" company whose initial public
offering of securities closed in September 1993. Frost Hanna Acquisition raised
net proceeds of approximately $6,519,800 through the issuance of 1,265,000
shares of Common Stock at $6.00 per share in such initial public offering. To
minimize any potential conflicts of interest which may have arisen as a result
of the relationship between such persons' positions with Frost Hanna Halpryn,
Frost Hanna Acquisition was prohibited from analyzing or considering any
possible Business Combination opportunities until Frost Hanna Halpryn became a
party to a letter of intent to consummate a Business Combination. Frost Hanna
Acquisition entered into a letter of intent in May 1995 with LFS and on January
3, 1996, consummated a Business Combination with LFS in which LFS merged with
and into a wholly-owned subsidiary of Frost Hanna Acquisition. In connection
with such merger, Frost Hanna Acquisition changed its name to "Kids Mart, Inc."
Upon consummation of the Kids Mart Business Combination (i) the former LFS
shareholders were issued Kids
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<PAGE> 38
Mart common stock which constituted approximately 62% of the outstanding shares
of Kids Mart common stock (assuming full exercise of all outstanding options and
warrants to purchase Kids Mart common stock) and (ii) Messrs. Frost, Hanna,
Baxter and Rosenberg resigned from their positions as officers and directors of
Kids Mart. Kids Mart operated a chain of infant's and children's apparel stores
under the names of "Kids Mart" and "Little Folks." On January 10, 1997, Kids
Mart filed for Chapter 11 bankruptcy protection in the United States Bankruptcy
Court for the District of Delaware (97-42(PJW) In Re LFS Acquisition
Corporation, Kidsmart, Inc., Holtzman's Little Folk Shop, Inc.). The closing
price of Kids Mart common stock on June 30, 1997 was $0.01 per share.
Messrs. Frost, Hanna, Baxter and Rosenberg, were also officers and
directors of Frost Hanna Mergers Group, a "blank check" company whose initial
public offering of securities closed in March 1994. Frost Hanna Mergers raised
net proceeds of approximately $10.1 million through the issuance of 1,955,000
shares of Common Stock at $6.00 per share in such initial public offering. To
minimize any potential conflicts of interest which may have arisen as a result
of the relationship between such persons' positions with Frost Hanna Halpryn and
Frost Hanna Acquisition, Frost Hanna Mergers was prohibited from analyzing or
considering any possible Business Combination opportunities until Frost Hanna
Halpryn and Frost Hanna Acquisition each became parties to a letter of intent to
consummate a Business Combination. Frost Hanna Mergers entered into a letter of
intent on January 29, 1996 with PAWA and on September 23, 1996, consummated a
Business Combination with PAWA in which PAWA merged with and into a wholly-owned
subsidiary of Frost Hanna Mergers. In connection with such merger, Frost Hanna
Mergers changed its name to "Pan Am Corporation." Upon consummation of the Pan
Am Business Combination, (i) the former PAWA shareholders were issued shares of
Pan Am common stock which constituted approximately 72% of the outstanding
shares of Pan Am common stock (assuming full exercise of all outstanding
warrants and options to purchase shares of Pan Am common stock) and (ii) Messrs.
Frost and Hanna resigned from their executive officer positions with Pan Am and
remained as members of the Pan Am Board of Directors until April 21, 1997 and
Messrs. Baxter and Rosenberg resigned from their executive officer and director
positions with Pan Am. PAWA was a newly organized corporation established to
operate a new low-fare full service airline under the "Pan Am" name, serving
selected long-haul routes between major United States cities. Pan Am initiated
flight service on September 26, 1996. Pan Am common stock began trading on the
American Stock Exchange on September 24, 1996 and trades under the symbol PAA.
The closing price of Pan Am common stock on June 30, 1997 was $7.88 per share.
Purchasers who purchase Common Stock in the Offering will not acquire
any ownership interest whatsoever in any of the other "blank check" companies
to which the officers and directors of this Company have been involved. The
inclusion of the information regarding these companies does not imply that the
Company will have similar results with respect to the time period taken to
consummate a Business Combination or the relative success or failure of the
Acquired Business following such Business Combination. Investors in this
Offering should not assume that they will experience returns, if any,
comparable to those experienced by investors in such other "blank check"
companies. There can be no assurance that the Company will be able to effect a
Business Combination or that the type of business or the performance of the
Acquired Business, if any, will be similar to that of other "blank check"
companies to which the officers and directors of the Company have been
involved.
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<PAGE> 39
SOURCES OF ACQUIRED BUSINESSES
The Company anticipates that it will make contact with business
prospects primarily through the efforts of its officers, who will meet
personally with existing management and key personnel, visit and inspect
material facilities, assets, products and services belonging to such prospects,
and undertake such further reasonable investigation as management deems
appropriate. The Company anticipates that certain Acquired Business candidates
may be brought to its attention from various unaffiliated sources, including
securities broker-dealers, investment bankers, venture capitalists, bankers,
other members of the financial community, and affiliated sources. 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. Such finder may be required to be
registered as, among other things, an agent or broker-dealer under the laws of
certain jurisdictions. In no event, however, will the Company pay a finder's
fee or commission to officers or directors of the Company or any entity with
which they are affiliated for such services except, the Representative in the
event it assists the Company during the five-year period commencing on the date
hereof in connection with the introduction of a prospective Acquired Business
with which a Business Combination is ultimately consummated. See "Management of
the Company--Conflicts of Interest."
COMPETITION
The Company expects to encounter intense competition from other
entities having a business objective similar to that of the Company. Many of
these entities are well-established and have extensive experience in connection
with identifying and effecting business combinations directly or through
affiliates. Many of these competitors possess greater financial, marketing,
technical, personnel and other resources than the Company and there can be no
assurances that the Company will have the ability to compete successfully.
Inasmuch as the Company may not have the ability to compete effectively with
its competitors in selecting a prospective Acquired Business, the Company may
be compelled to evaluate certain less attractive prospects. There can be no
assurances that such prospects will permit the Company to meet its stated
business objective. Further, the Company's obligation to seek shareholder
approval of a Business Combination may delay the consummation of a transaction;
and the Company's obligation in certain circumstances to convert into cash,
shares of Common Stock held by Public Shareholders (as a result of a Redemption
Offer) may reduce the resources available to the Company for a Business
Combination or for other corporate purposes. Either of these obligations may
place the Company at a competitive disadvantage in successfully negotiating a
Business Combination. Management believes, however, that the Company's status
as a public entity and its potential access to the United States public equity
markets may give the Company a competitive advantage over privately-held
entities having a similar business objective to that of the Company in
acquiring an Acquired Business with significant growth potential on favorable
terms. See "Risk Factors."
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF ACQUIRED BUSINESS
In the event that the Company succeeds in effecting a Business
Combination, the Company will, in all likelihood, become subject to intense
competition from competitors of the Acquired Business. In particular, certain
industries which experience rapid growth frequently attract an increasingly
larger number of competitors, including competitors with increasingly greater
financial, marketing, technical and other resources than the initial
competitors in the industry. The degree of competition characterizing the
industry of any prospective Acquired Business cannot presently be ascertained.
There can be no assurances that, subsequent to a Business Combination, the
Company will have the resources to compete effectively, especially to the
extent that the Acquired Business is in a high-growth industry.
REDEMPTION RIGHTS
At the time the Company seeks shareholder approval of any potential
Business Combination, the Company will offer each of the Public Shareholders
who vote against the proposed Business Combination and
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<PAGE> 40
affirmatively request redemption, for a specified period of time of not less
than 20 days, to redeem all, but not a portion of, their Public Shares, at a
per share price equal to the Company's liquidation value on the Record Date
divided by the number of Public Shares held by all of the Public Shareholders.
The Redemption Offer will be described in detail in the disclosure
documentation relating to the proposed Business Combination. The Company's
liquidation value will be equal to the Company's Liquidation Value (the
Company's book value, as determined by the Company and audited by the Company's
independent public accountants) (which amount will be less than the initial
public offering price per share of Common Stock in this Offering in view of the
expenses of this Offering, salaries and expenses paid and the anticipated
expenses which will be incurred in seeking a Business Combination), calculated
as of the Record Date. In no event, however, will the Company's Liquidation
Value be less than the Escrow Fund, inclusive of any net interest income
thereon. If the holders of less than 30% of the Public Shares held by the
Public Shareholders elect to have their shares of Common Stock redeemed, the
Company may, but will not be required to, proceed with such Business
Combination. If the Company elects to so proceed, it will redeem Public Shares,
based upon the Company's Liquidation Value, from those Public Shareholders who
affirmatively requested such redemption and who voted against the Business
Combination. The determination as to whether the Company proceeds with a
Business Combination ultimately rests with the Company. HOWEVER, IF THE HOLDERS
OF 30% OR MORE OF THE PUBLIC SHARES HELD BY PUBLIC SHAREHOLDERS VOTE AGAINST
APPROVAL OF ANY POTENTIAL BUSINESS COMBINATION, THE COMPANY WILL NOT PROCEED
WITH SUCH BUSINESS COMBINATION AND WILL NOT REDEEM SUCH SHARES OF COMMON STOCK.
If the Company determines not to pursue a Business Combination, even if the
holders of less than 30% of the Public Shares held by Public Shareholders vote
against approval of the potential Business Combination, no Public Shares will
be redeemed.
FACILITIES
The Company maintains its executive offices in approximately 1,445
square feet of office space located at 327 Plaza Real, Suite 319, Boca Raton,
Florida, 33432, pursuant to a three-year lease agreement with Crocker Downtown
Development Associates, at an approximate cost per month of $3,000. The Company
spent approximately $17,000 on the build-out of such office space. The Company
considers its current office space adequate for its current operations.
EMPLOYEES
As of the date of this Prospectus, the Company's employees consist of
its executive officers, of whom each of Messrs. Frost and Hanna intend to
devote approximately 50% of their working time to the affairs of the Company
and Messrs. Baxter and Rosenberg intend to devote approximately 10% of their
working time to the affairs of the Company. Additionally, the Company has hired
one employee in an administrative capacity.
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<PAGE> 41
MANAGEMENT OF THE COMPANY
EXECUTIVE OFFICERS AND DIRECTORS
The current executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Richard B. Frost 48 Chief Executive Officer,
Chairman of the Board of Directors
Mark J. Hanna 49 President, Director
Donald H. Baxter 53 Vice President, Secretary, Director
Marshal E. Rosenberg, Ph.D. 60 Vice-President, Treasurer, Director
Charles Fernandez 35 Director
</TABLE>
- ---------------
Richard B. Frost has been the Chief Executive Officer and Chairman of
the Board of Directors of the Company since its inception. Mr. Frost was the
Chief Executive Officer and Chairman of the Board of Directors of Frost Hanna
Mergers from October 1993 until the Pan Am Business Combination in September
1996. Mr. Frost remained a member of the Pan Am Board of Directors until April
21, 1997. Mr. Frost was the Chief Executive Officer and Chairman of the Board of
Directors of Frost Hanna Acquisition from April 1993 until the Kids Mart
Business Combination in January 1996, at which time Mr. Frost resigned from such
positions. From June 1992 to May 1994, Mr. Frost held similar positions at Frost
Hanna Halpryn until the Sterling Business Combination. From February 1992
through May 1992, Mr. Frost was Regional Director of GKN Securities Corp., a
broker-dealer ("GKN"), where his responsibilities included the recruitment and
training of GKN brokerage personnel located or to be located in Florida. From
May, 1982 through February, 1992, Mr. Frost was a Vice President and Branch
Manager of Dean Witter Reynolds, a broker-dealer, where his responsibilities
included the management and day-to-day operations of the West Boca Raton and
Lighthouse Point, Florida, branch offices of such brokerage firm. Mr. Frost is
currently a member of the Board of Directors of Continucare, a Florida
corporation engaged in the development and management of mental and physical
rehabilitation health care programs.
Mark J. Hanna has been the President and a member of the Board of
Directors of the Company since its inception. Mr. Hanna was the President and a
member of the Board of Directors of Frost Hanna Mergers from October 1993 until
the Pan Am Business Combination in September 1996. Mr. Hanna remained a member
of the Pan Am Board of Directors until April 21, 1997. Mr. Hanna was the
President and a member of the Board of Directors of Frost Hanna Acquisition from
April 1993 until January 1996, whereupon Mr. Hanna resigned from such positions
following the Kids Mart Business Combination. Mr. Hanna held similar positions
at Frost Hanna Halpryn from June 1992 until the Sterling Business Combination in
May 1994. From February, 1992 through May, 1992, Mr. Hanna was a registered
representative with GKN. From January, 1992 through February, 1992, Mr. Hanna
was a registered representative with Barron Chase Securities, Inc. From
September 1990, through January, 1992, Mr. Hanna was a registered representative
with Prudential Bache Securities, Inc. From August, 1982 through June, 1985, Mr.
Hanna was First Vice President, Investments, at the Fort Lauderdale office of
Drexel Burnham Lambert Incorporated. From July, 1985 through September, 1990,
Mr. Hanna was Chief Executive Officer and principal shareholder of GGH
Consulting, Inc., a firm engaged in providing financial consulting services.
From September, 1985 through December, 1988, Mr. Hanna was a director of
Biocontrol, Technology, Inc. (f/k/a Coratomic, Inc.), a public company engaged
at that time in the manufacture and sale of cardiac pacemakers and heart valves
("Biocontrol"). From September, 1986 through March, 1987, Mr. Hanna was the
Chief Operating Officer of Biocontrol. Mr. Hanna is currently a member of the
Board of Directors of Continucare.
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<PAGE> 42
Donald H. Baxter has been Vice-President, Secretary and a member of
the Board of Directors of the Company since its inception. Mr. Baxter was the
Vice-President, Secretary and a member of the Board of Directors of Frost Hanna
Mergers from October 1993 until the Pan Am Business Combination in September
1996. Mr. Baxter was the Vice President, Secretary and a member of the Board of
Directors of Frost Hanna Acquisition from April 1993 until the Kids Mart
Business Combination in January 1996. During the past five years, Mr. Baxter
has been the President of Baxter Financial Corporation, an investment advisory
firm, and President and Chairman of the Board of Directors of the Philadelphia
Fund and Eagle Growth, mutual funds which are registered under the Investment
Company Act of 1940.
Marshal E. Rosenberg, Ph.D. has been a member of the Board of
Directors of the Company since its inception. Mr. Rosenberg was the Vice
President, Treasurer and a member of the Board of Directors of Frost Hanna
Mergers from October 1993 until the Pan Am Business Combination in September
1996. Mr. Rosenberg was the Vice President, Secretary and a member of the Board
of Directors of Frost Hanna Acquisition from April 1993 until the Kids Mart
Business Combination in January 1996. Mr. Rosenberg was a director of Frost
Hanna Halpryn from June 1992 until shortly following the Sterling Business
Combination when he resigned in December 1994. During the past five years, Mr.
Rosenberg has been the President, Chairman and sole shareholder of The Marshal
E. Rosenberg Organization, Inc., Coral Gables, Florida, a firm engaged in the
sale of life, health and disability insurance. Mr. Rosenberg is an investor in
numerous private enterprises, engaged in, among other things, real estate
development and retail sales. He served as a member of the Board of Directors
and member of the Executive Committee of the former Intercontinental Bank,
Miami, Florida. In addition, Mr. Rosenberg is a member of the faculty at the
University of Miami School of Business.
Charles M. Fernandez, serves as Chairman of the Board, President and
Chief Executive Officer of Continucare, a leading developer and manager of
outpatient behavioral and physical rehabilitation programs and facilities. Mr.
Fernandez co-founded Continucare in February 1996, recognizing the future growth
potential in the outpatient healthcare services industry. Under his leadership,
Continucare now manages 33 healthcare services centers and provides a continuum
of healthcare services in five states: Florida, Tennessee, Texas, Illinois and
Missouri. Continucare recently announced an agreement with Bally Total Fitness
to provide comprehensive outpatient rehabilitation services at more than 100
Bally's fitness centers nationwide, and also made its first physician practice
acquisition: Norman Gaylis M.D., Inc., a rheumatology practice subsidiary of
Sheridan Healthcare, Inc. Prior to co-founding Continucare, Mr. Fernandez served
as Executive Vice President and Director of Heftel Broadcasting Corporation
(Nasdaq National Market: HBCCA), a Spanish language radio broadcasting company
in the United States which owns 17 radio stations in markets including Los
Angeles, New York, Miami, Chicago and Dallas/Fort Worth. He has also served as
an officer of Bally Entertainment Corporation. He received a Bachelor of
Business Administration from Florida International University.
EXECUTIVE COMPENSATION
The Company was incorporated in February 1996. Pursuant to employment
agreements, Messrs. Frost and Hanna each receive $10,000 monthly for salary and
$1,000 monthly for non-accountable expense allowance. Messrs. Frost's and
Hanna's salaries have been paid through October, 1996. However, each has agreed
to waive all unpaid salary and expense allowance through the date which is four
months prior to the date hereof. Further, all officers and directors of the
Company shall receive accountable reimbursement for any reasonable business
expenses incurred in connection with activities on behalf of the Company. The
proceeds placed in the Escrow Fund (including any interest earned thereon) shall
not be used by the Company to pay salaries to Messrs. Frost or Hanna or to
reimburse the Company's officers and directors for expenses incurred by such
persons on behalf of the Company. No funds (including any interest earned
thereon) will be disbursed from the Escrow Fund for reimbursement of expenses.
Other than the foregoing, there is no limit on the amount of such reimbursable
expenses, and there will be no review of the reasonableness of such expenses by
anyone other than the Board of Directors, all of the members of which are
officers. In the event the Company requires in excess of 20% of the Net Proceeds
for operations, Messrs. Frost and Hanna have undertaken to defer their salaries
and non-accountable expense allowance until the consummation of a Business
Combination. None of the Company's current executive officers or directors or
their respective affiliates will receive any consulting or finder's fees in
connection with a Business Combination. Further, other than pursuant to the
employment agreements, none of such persons will receive any other payments or
assets, tangible or intangible, unless received by all other shareholders on a
proportionate basis. See "Use of Proceeds" and "Certain Transactions."
REIMBURSEMENT OF EXPENSES
No funds (including any interest earned thereon) will be disbursed
from the Escrow Fund for the reimbursement of expenses incurred by the
Company's officers and directors on behalf of the Company. Other than the
foregoing, there is no limit on the amount of such reimbursable expenses, and
there will be no review of the reasonableness of such expenses by anyone other
than the Company's Board of Directors, all of the members of which are
presently officers of the Company. See "Use of Proceeds" and "Certain
Transactions."
KEY MAN INSURANCE
The Company has obtained $1,000,000 "key man" policies insuring each
of the lives of Messrs. Frost and Hanna. There can be no assurances that such
"key man" insurance will be maintained at reasonable rates,
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<PAGE> 43
if at all. Nevertheless, the Representative has required the Company to maintain
life insurance on the lives of Messrs. Frost and Hanna for a period of three
years or until an earlier Business Combination is effected. The loss,
incapacity or unavailability of any of Messrs. Frost and Hanna at the present
time or in the foreseeable future, before a qualified replacement was obtained,
could have a material adverse effect on the Company's operations. See "Risk
Factors" and "Certain Transactions." This adverse effect would be enhanced if a
death of either Messrs. Frost or Hanna occurs at a time when no life insurance
on such person's life was being maintained.
CONFLICTS OF INTEREST
None of the Company's key personnel are required to commit their full
time to the affairs of the Company and, accordingly, such personnel may have
conflicts of interest in allocating management time among various business
activities. Certain of these key personnel may in the future become affiliated
with entities, including other "blank check" companies, engaged in business
activities similar to those intended to be conducted by the Company. Messrs.
Frost and Hanna are each currently directors of Continucare. Mr. Rosenberg is an
investor in numerous private enterprises, engaged in, among other things, real
estate development and retail sales, which business interests may conflict with
those of an Acquired Business. Mr. Baxter is the President of Baxter Financial
Corporation, an investment advisory firm, and the President and Chairman of the
Philadelphia Fund and Eagle Growth Shares, mutual funds registered under the
Investment Company Act of 1940. Mr. Fernandez is currently the Chairman of the
Board, President and Chief Executive Officer of Continucare. Certain activities
which may be performed by such individuals in connection with their other
business affiliations may be deemed competitive with the business of the
Company.
In the course of their other business activities, including private
investment activities, Messrs. Frost, Hanna, Baxter, Rosenberg and Fernandez may
become aware of investment and business opportunities which may be appropriate
for presentation to the Company as well as the other entities with which they
are affiliated. Such persons may have conflicts of interest in determining to
which entity a particular business opportunity should be presented. In general,
officers and directors of corporations are required to present certain business
opportunities to such corporations. Accordingly, as a result of multiple
business affiliations, Messrs. Frost, Hanna, Baxter, Rosenberg and Fernandez may
have similar legal obligations relating to presenting certain business
opportunities to multiple entities. In addition, conflicts of interest may arise
in connection with evaluations of a particular business opportunity by the Board
of Directors with respect to the foregoing criteria. There can be no assurances
that any of the foregoing conflicts will be resolved in favor of the Company. In
order to minimize potential conflicts of interest which may arise from multiple
corporate affiliations, each of Messrs. Frost, Hanna, Baxter, Rosenberg and
Fernandez have agreed to present to the Company for its consideration, prior to
presentation to any other entity, any prospective Acquired Business which is
appropriate for the Company to consider and which prospective Acquired Business
participates in an industry dissimilar to any of the industries to which such
individuals have corporate affiliations. It should be further noted, that the
Company shall not consider Business Combinations with entities owned or
controlled by officers, directors, greater than 10% shareholders of the Company
or any person who directly or indirectly controls, is controlled by or is under
common control with the Company. The Company may consider Business Combinations
with entities owned or controlled by persons other than those persons described
above. There can be no assurances that any of the foregoing conflicts will be
resolved in favor of the Company. See "Proposed Business--'Blank Check'
Offering" and "-- Selection of an Acquired Business and Structuring of a
Business Combination."
Pursuant to an agreement among each of Messrs. Frost, Hanna, Baxter,
Rosenberg and Fernandez and the Company, such persons will not actively
negotiate for or otherwise consent to the disposition of any portion of their
Common Stock as a condition to or in connection with a Business Combination.
Further, the Company shall not borrow funds to be used directly or indirectly to
(i) purchase any shares of the Company's Common Stock owned by management of the
Company; or (ii) make payments to the Company's promoters, management or their
affiliates or associates.
In connection with a Business Combination, the Company shall not cause
any securities of the Company to be sold by any officers, directors, greater
than 10% shareholders or persons who may be deemed promoters
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<PAGE> 44
of the Company except as may otherwise be made in permitted market transactions
without affording all shareholders of the Company a similar opportunity.
All members of the Company's current Board of Directors are
significant shareholders of the Company and will own, in the aggregate,
approximately 44% of the outstanding Common Stock following the Offering (41%
if the over-allotment option is exercised). Additionally, following the
Offering, the Representative will have the right to appoint one member to the
Company's Board of Directors until a Business Combination is effectuated
utilizing at least a majority of the proceeds of the Offering.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of the date hereof and
as adjusted to reflect the sale of the Common Stock offered hereby, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by the
Company to be the owner of more than 5% of the outstanding shares of Common
Stock; (ii) each director; and (iii) all officers and directors as a group:
<TABLE>
<CAPTION>
Approximate Percentage
Amount and of Outstanding Common Stock
Nature of ---------------------------
Beneficial Before After
Ownership (1) Offering Offering (2)
------------- -------- ------------
<S> <C> <C> <C>
Richard B. Frost 362,000 23% 12%
327 Plaza Real
Suite 319
Boca Raton, FL 33432
Mark J. Hanna 362,000 23% 12%
327 Plaza Real
Suite 319
Boca Raton, FL 33432
Marshal E. Rosenberg, Ph.D.(3) 300,000 19% 10%
2333 Ponce de Leon Blvd.
Suite 314
Coral Gables, FL 33134
Donald H. Baxter 100,000 6% 3%
327 Plaza Real
Suite 319
Boca Raton, FL 33432
Charles Fernandez 150,000 10% 5%
100 S.E. 2nd St.
NationsBank Tower
Miami, FL 33131-2100
All Officers and Directors 1,274,000 82% 44%
as a Group (5 persons)
</TABLE>
- ---------------------
(1) Unless otherwise noted, all persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned by them. No persons named in the table are acting
as nominees for any persons or are otherwise under the control of any
person or group of persons.
(2) Assumes no exercise of the (i) over-allotment option; or (ii)
Underwriter Options. See "Underwriting."
(3) Does not include 35,000 shares of Common Stock owned by Donald
Rosenberg, Mr. Rosenberg's brother, of which Mr. Rosenberg disclaims
beneficial ownership.
-41-
<PAGE> 45
The shares of the Company's Common Stock owned as of the date hereof
by all of the executive officers and directors of the Company will be placed in
escrow with American Stock Transfer & Trust Company, as escrow agent, until the
occurrence of a Business Combination. During such escrow period, such executive
officers and directors will not be able to sell, or otherwise transfer, their
respective shares of Common Stock, but will retain all other rights as
shareholders of the Company, including, without limitation, the right to vote
such shares of Common Stock.
Messrs. Frost, Hanna, Baxter, Rosenberg and Fernandez may be deemed to
be "promoters" and "parents" of the Company, as such terms are defined under the
federal securities laws.
CERTAIN TRANSACTIONS
As of the date of this Prospectus, the Company has issued an aggregate
of 1,557,000 shares of Common Stock as follows: 362,000 shares to Richard B.
Frost, the Company's Chief Executive Officer and Chairman of the Board of
Directors; 362,000 shares to Mark J. Hanna, the Company's President and a member
of the Board of Directors; 300,000 shares to Marshal E. Rosenberg, Ph.D., the
Company's Vice President, Treasurer and a member of the Board of Directors;
100,000 shares to Donald H. Baxter, the Company's Vice President, Secretary and
a member of the Board of Directors; 150,000 shares to Charles Fernandez, a
member of the Board of Directors, for an aggregate purchase price of $75,112.40;
and 283,000 shares to eleven other persons for an aggregate purchase price of
$141,500 or $.50 per share.
The Company has obtained $1,000,000 "key man" policies insuring each of
the lives of Messrs. Frost and Hanna. Such policies were purchased by the
Company from The Marshal E. Rosenberg Organization, Inc. (the "Rosenberg
Organization"), a firm in which Mr. Rosenberg is an officer, director and sole
shareholder. In connection with the purchase by the Company of such policies,
the Rosenberg Organization received payments of approximately $4,200 through
March 31, 1997. No further commissions are contemplated to be earned in
connection with the purchase of such key man life insurance policies.
The Company shall not make any loans to any officers or directors
following this Offering. Further, the Company shall not borrow funds for the
purpose of making payments to the Company's officers, directors, promoters,
management or their affiliates or associates.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 100,000,000 shares of Common Stock,
par value $.0001 per share. Prior to this Offering, 1,557,000 shares of Common
Stock were outstanding, held of record by 17 persons.
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 shareholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted for the election of
directors can elect all of the directors. The holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of
Directors out of funds legally available therefor. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining available for distribution to
them after payment of liabilities and after provision has been made for each
class of stock, if any, having preference over the Common Stock. Holders of
shares of Common Stock, as such, have no conversion, preemptive or other
subscription rights, and, except as noted herein, there are no redemption
provisions applicable to the Common Stock. All of the outstanding shares of
Common Stock are, and the shares
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<PAGE> 46
of Common Stock offered hereunder, when issued and paid for as set forth in
this Prospectus, will be, fully paid and nonassessable.
DIVIDENDS
The Company has not paid any dividends on its Common Stock to date and
does not presently intend to pay cash dividends prior to the consummation of a
Business Combination. The payment of cash dividends in the future, if any, will
be contingent upon the Company's revenues and earnings, if any, capital
requirements and general financial condition subsequent to consummation of a
Business Combination. The payment of any dividends subsequent to a Business
Combination will be within the discretion of the Company's then Board of
Directors. It is the present intention of the Board of Directors to retain all
earnings, if any, for use in the Company's business operations and,
accordingly, the Board does not anticipate paying any cash dividends in the
foreseeable future.
UNDERWRITER WARRANTS
In connection with this Offering, the Company has agreed to sell to
the Representative, at an aggregate price of $135, warrants to purchase up to
135,000 shares of Common Stock (the "Stock Purchase Option" or "Underwriter
Options"). The Underwriter Options are exercisable at a price of $7.20 per
share (120% of offering price) for a period commencing one year, and ending
five years, after the date of this Prospectus. In addition, the holders of the
Underwriter Options will have certain registration rights with respect to the
shares of Common Stock underlying the Underwriter Options.
SECURITIES EXCHANGE ACT OF 1934
The Company has agreed, contemporaneous with the sale of the shares of
Common Stock, that it will file an application with the Commission to register
its Common Stock under the provisions of Section 12(g) of the Exchange Act, and
that it will use it best efforts to continue to maintain such registration for
a minimum of five years from the date of this Prospectus. Such registration
will require the Company to comply with periodic reporting, proxy solicitations
and certain other requirements of the Exchange Act. If the Company seeks
shareholder approval of a Business Combination at such time as the Company's
securities are registered pursuant to Section 12(g) of the Exchange Act, the
Company's proxy solicitation materials required to be transmitted to
shareholders may be subject to prior review by the Securities and Exchange
Commission. Under the federal securities laws, public companies must furnish
certain information about significant acquisitions, which information may
require audited financial statements of an acquired company with respect to one
or more fiscal years, depending upon the relative size of the acquisition.
Consequently, if a prospective Acquired Business did not have available and was
unable to reasonably obtain the requisite audited financial statements, the
Company could, in the event of consummation of a Business Combination with such
company, be precluded from (i) any public financing of its own securities for a
period of as long as three years, as such financial statements would be
required to undertake registration of such securities for sale to the public;
and (ii) registration of its securities under the Exchange Act. Consequently,
it is unlikely that the Company would seek to consummate a Business Combination
with such an Acquired Business. See "Risk Factors."
CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION
The Company's Articles of Incorporation provide, among other things,
that (i) officers and directors of the Company will be indemnified to the
fullest extent permitted under Florida law; and (ii) the Company has elected
not to be governed by the Anti-Takeover Sections, namely Sections 607.0901 and
607.0902 of the Florida Business Corporation Act and other laws relating
thereto.
Because of the Company's election not to be governed by the
Anti-Takeover Sections, the Company will not be subject to the provisions of
Florida law which provide that certain transactions between the Company and an
"interested shareholder" or any affiliate of the "interested shareholder" be
approved by two-thirds of the
-43-
<PAGE> 47
Company's outstanding shares. An "interested shareholder" as defined in Section
607.0901 of the Florida Business Corporation Act is any person who is the
beneficial owner of more than 10% of the outstanding shares of the company who
is entitled to vote generally in the election of directors. In addition,
because of the Company's election not to be governed by the Anti-Takeover
Sections, the Company will not have the alleged assistance against unfriendly
take-over attempts purportedly provided by that statute.
TRANSFER AGENT
The transfer agent for the Company's Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, (without giving effect to the
exercise of the over-allotment option or the Underwriter Options), the Company
will have 2,907,000 shares of Common Stock outstanding. Of these shares, the
1,350,000 shares sold in this Offering 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 by the Commission under the Securities Act. All of the
remaining 1,557,000 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, as currently in
effect, prior to September 13, 1997. In addition, the shares of Common Stock
owned as of the date hereof by Messrs. Frost, Hanna, Baxter, Rosenberg and
Fernandez (an aggregate of approximately 82% of the outstanding Common Stock
prior to this Offering) will be placed in escrow with American Stock Transfer &
Trust Company, as escrow agent, until the occurrence of a Business Combination.
During such escrow period, such persons will not be able to sell, or otherwise
transfer, their respective shares of Common Stock, but will retain all other
rights as shareholders of the Company, including, without limitation, the right
to vote such shares of Common Stock.
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 beneficially
owned restricted shares of Common Stock for at least one year is entitled to
sell, within any three-month period, a number of shares that does not exceed
the greater of 1% of the total number of outstanding shares of the same class
or, if the Common Stock is not quoted on NASDAQ, 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 restricted 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 prediction can be made as to the effect, if any, that market sales of
restricted shares of Common Stock or the availability of such shares for sale
will have on the market prices prevailing from time to time. Nevertheless, the
possibility that substantial amounts of Common Stock may be sold in the public
market may adversely affect the price for the sale of the Company's equity
securities in any trading market which may develop.
-44-
<PAGE> 48
UNDERWRITING
The Underwriters named below, represented by LH Ross & Company, Inc.,
have severally agreed, subject to the terms and conditions of the Underwriting
Agreement, to purchase from the Company, and the Company has agreed to sell, the
number of shares of Common Stock indicated below opposite their respective names
at the initial public offering price less the underwriting discount set forth on
the cover page of this Prospectus.
Underwriter Number of Shares
LH Ross & Company, Inc....................
Total.............................
The Underwriter's initially propose to offer the Common Stock offered
hereby to the public at the public offering price set forth on the cover of
this Prospectus, and the Underwriters may allow certain dealers, who are members
of the National Association of Securities Dealers, Inc. ("NASD"), concessions
of not in excess of $___ per share of Common Stock.
The Underwriters are committed on a "firm commitment" basis to purchase
all 1,350,000 of Common Stock offered hereby, if any, are purchased. The
Underwriters will not sell the shares of Common Stock to any accounts for which
they exercise discretionary authority.
The Company has granted an option to the Underwriters, exercisable
during the 45 day period after the date of this Prospectus, to purchase up to
an aggregate of 202,500 additional shares of Common Stock at the public
offering price, less the underwriting discounts and commissions. The
Underwriters may purchase such shares of Common Stock only to cover
over-allotments made in connection with the sale of the shares of Common Stock
offered hereby.
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Underwriters against certain liabilities in
connection with the Registration Statement, including liabilities under the
Securities Act.
The Company has agreed to pay the Underwriters a non-accountable
expense allowance of 3% of the aggregate offering price of the shares of Common
Stock offered hereby (including any shares purchased pursuant to the
Underwriters' over-allotment option), of which $40,000 has been paid to date.
The Company has also agreed to sell to the Underwriters or their
designees, the Underwriters' Options to purchase 135,000 shares of Common Stock
at a price of $.001 per option. The Underwriters' Options will be exercisable
for a period of four years, commencing one year after the date this Offering is
consummated. The exercise price of the Underwriters' Options is equal to 120%
of the initial public offering price per share of Common Stock.
The Company has agreed that it will, on any one occasion during the
four-year period commencing one year from the date hereof, register the
Underwriters' Options and the underlying securities, at the Company's expense,
at the request of holders of a majority of the shares of Common Stock issuable
upon exercise of the shares of Common Stock underlying the Underwriters'
Options. The Company has also agreed, during the six year period commencing one
year from the date hereof, to certain "piggy-back" registration rights for
holders of the Underwriters' Options and the underlying securities.
For the life of the Underwriters' Options, the holders are given, at
nominal cost, the opportunity to profit upon exercise from a rise in the market
price for the Common Stock of the Company without assuming the risk of
ownership, with a resulting dilution in the interest of other security holders
upon exercise of such options. As long as the Underwriters' Options remain
outstanding and unexercised, the terms under which the Company could obtain
additional capital may be adversely affected. Moreover, the holders of the
Underwriters' Options might be expected to exercise them at a time when the
Company would, in all likelihood, be able to obtain needed capital by a new
offering of its securities on terms more favorable than those provided by the
Underwriters' Options. Additionally, if the Underwriters should exercise their
registration rights to effect a distribution of the Underwriters' Options or
underlying securities, the Underwriters, prior to and during such distribution,
may be unable to make a market in the Company's securities. If the Underwriters
must cease
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<PAGE> 49
making a market in the Company's securities, the market and market price for
the securities may be adversely affected and holders of the securities may be
unable to sell the securities.
The Company has also agreed pursuant to the Underwriting Agreement that
for a period of time from the date hereof until such time as the Company
consummates a Business Combination, the Company shall use its best efforts to
cause one individual selected by the Representative to be elected to the Board
of Directors of the Company, provided that such person is reasonably acceptable
to the Company. Alternatively, the Representative shall be entitled to designate
a senior advisor to the Company who shall be invited to and be entitled to
attend, all meetings of the Board of Directors.
The foregoing does not purport to be a complete statement of the terms
and conditions of the Underwriting Agreement and related documents, copies of
which are on file at the offices of the Underwriters, the Company and the
Commission.
The public offering price of the Common Stock has been determined by
arms' length negotiation between the Company and the Representative and is not
necessarily related to the Company's value, net worth, or any other established
criteria of value. Officers and directors of the Company may introduce the
Representative to persons to consider this Offering either through the
Representative, other Underwriters or through participating broker-dealers. In
this connection, officers and directors will not receive any commissions or any
other compensation.
The Representative was incorporated on November 3, 1994. Since its
incorporation, the Representative has not participated in any initial public
offerings of equity securities as an underwriter, lead manager or co-manager.
Prospective purchasers of Common Stock should consider the lack of experience of
the Representative in evaluating an investment in the Company.
See also, "Risk Factors--Limited Underwriting History."
LEGAL PROCEEDINGS
The Company is not a party to, nor is it aware of, any threatened
litigation of a material nature.
LEGAL MATTERS
Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., 150 West
Flagler Street, Miami, Florida, 33130, has rendered an opinion (which is filed
as an exhibit to the Registration Statement of which this Prospectus is a part)
to the effect that the shares of Common Stock, when issued and paid for as
described herein, will constitute legally issued securities of the Company,
fully paid and non-assessable. Mintz & Fraade, P.C., 488 Madison Avenue, New
York, New York, 10022, has acted as counsel to the Underwriters in connection
with this Offering.
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<PAGE> 50
EXPERTS
The financial statements included in this Prospectus have been audited
by Arthur Andersen LLP, independent certified public accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said report. Reference is made
to said report which includes an explanatory paragraph that describes that the
Company's ability to commence operations is contingent upon obtaining adequate
financial resources through a contemplated public offering, or otherwise, which
raises substantial doubt about the Company's ability to continue as a going
concern. Further, the financial statements do not include any adjustments
relating to the recoverability of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on
Form SB-2 (the "Registration Statement") under the Securities Act with respect
to the shares of Common Stock. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to the Company or such Common Stock,
reference is made to such Registration Statement and the exhibits and schedules
thereto, certain portions of which are omitted from this Prospectus as
permitted by the rules and regulations of the Commission. Statements contained
in this Prospectus regarding the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
Upon completion of the Offering, the Company will be subject to the
informational requirements of the Exchange Act, and, in accordance therewith,
will file reports and other information with the Commission. Such reports and
other information, as well as the Registration Statement and the exhibits and
schedules thereto, may be inspected, without charge, at the public reference
facility maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such information is also available
on the internet at http:\\www.sec.gov.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements examined and reported upon, with an
opinion expressed by independent certified public accountants, and quarterly
reports containing unaudited financial information for the first three quarters
of each year.
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<PAGE> 51
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Frost Hanna Capital Group, Inc.:
We have audited the accompanying balance sheet of Frost Hanna Capital Group,
Inc. (a Florida corporation in the development stage) as of December 31, 1996
and the related statements of operations, stockholders' equity and cash flows
for the period from inception (February 2, 1996) to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Frost Hanna Capital Group, Inc.
as of December 31, 1996, and the results of its operations and its cash flows
for the period from inception (February 2, 1996) to December 31, 1996, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's ability to commence operations is contingent
upon obtaining adequate financial resources through a contemplated public
offering, or otherwise, which raises substantial doubt about its ability to
continue as a going concern. If unsuccessful, the Company may be unable to
continue in its present form. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
ARTHUR ANDERSEN LLP
Miami, Florida,
March 14, 1997.
F-1
<PAGE> 52
FROST HANNA CAPITAL GROUP, INC.
-------------------------------
(A Development Stage Corporation)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ -----------
ASSETS (Unaudited)
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 91,818 $ 13,222
Prepaid expenses and deposits - 26,360
---------- ----------
Total current assets 91,818 39,582
PROPERTY AND EQUIPMENT, net
of accumulated depreciation of $212 and $667,
as of December 31, 1996 and March 31, 1997, respectively 2,968 20,483
DEFERRED REGISTRATION COSTS 129,785 123,110
---------- ----------
Total assets $ 224,571 $ 183,175
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accrued expenses $ 14,118 $ 33,061
Accrued registration costs 94,785 94,400
Accrued officers' salaries 44,000 88,000
Loans payable to officers - 20,000
---------- ----------
Total current liabilities 152,903 235,461
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.0001 par value, 100,000,000 shares
authorized, 1,492,000 shares issued and outstanding 149 149
Additional paid-in capital 183,963 183,963
Deficit accumulated during development stage (112,444) (236,398)
---------- ----------
Total stockholders' equity deficit 71,668 (52,286)
---------- ----------
Total liabilities and stockholders' equity deficit $ 224,571 $ 183,175
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of
these balance sheets.
F-2
<PAGE> 53
FROST HANNA CAPITAL GROUP, INC.
-------------------------------
(A Development Stage Corporation)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the Period For the For the Period
From Inception Three Months From Inception
(February 2, 1996) Ended (February 2, 1996)
To December 31, 1996 March 31, 1997 To March 31, 1997
-------------------- -------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUES $ - $ - $ -
------------ ----------- -----------
EXPENSES:
Officers' salaries 77,000 44,000 121,000
General and administrative 36,309 80,515 116,824
------------ ----------- -----------
Total operating expenses 113,309 124,515 237,824
INTEREST INCOME 865 561 1,426
------------ ----------- -----------
Net loss $ (112,444) $ (123,954) $ (236,398)
============ =========== ===========
NET LOSS PER COMMON SHARE $ (0.08) $ (0.08) $ (0.16)
============ ========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 1,492,000 1,492,000 1,492,000
============ =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
F-3
<PAGE> 54
FROST HANNA CAPITAL GROUP, INC.
-------------------------------
(A Development Stage Corporation)
STATEMENT OF STOCKHOLDERS' EQUITY
---------------------------------
FOR THE PERIOD FROM INCEPTION (FEBRUARY 2, 1996)
------------------------------------------------
TO DECEMBER 31, 1996
--------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
--------------------------- Paid-In Development
Shares Amount Capital Stage Total
----------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Sale of common stock to promoters 1,124,000 $ 112 $ - $ - $ 112
Sale of common stock 368,000 37 183,963 - 184,000
Net loss for the period from inception
(February 2, 1996) to December 31, 1996 - - - (112,444) (112,444)
----------- -------- ---------- -------- ---------
BALANCE, December 31, 1996 1,492,000 149 183,963 (112,444) 71,668
Net loss for the three months ended
March 31, 1997 (unaudited) - - - (123,954) 123,954)
----------- -------- ---------- -------- ---------
BALANCE, March 31, 1997 (unaudited) 1,492,000 $ 149 $ 183,963 $ (236,398) $ (52,286)
=========== ======== ========== ========== =========
</TABLE>
The accompanying notes to financial statements are an integral part of
this statement.
F-4
<PAGE> 55
FROST HANNA CAPITAL GROUP, INC.
-------------------------------
(A Development Stage Corporation)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
For the Period For the For the Period
From Inception Three Months From Inception
(February 2, 1996) Ended (February 2, 1996)
To December 31, 1996 March 31, 1997 to March 31, 1997
-------------------- -------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(112,444) $(123,954) $(236,398)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation 212 455 667
Write-off of deferred registration costs -- 35,000 35,000
Change in certain assets and liabilities-
Increase in prepaid expenses and deposits -- (26,360) (26,360)
Increase in accrued expenses 14,118 18,943 33,061
Increase in accrued officers' salaries 44,000 44,000 88,000
--------- --------- ---------
Net cash used in operating activities (54,114) (51,916) (106,030)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,180) (17,970) (21,150)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 184,112 -- 184,112
Proceeds from officer loans -- 20,000 20,000
Payment of deferred registration costs (35,000) (28,710) (63,710)
--------- --------- ---------
Net cash provided by (used in) financing activities 149,112 (8,710) 140,402
--------- --------- ---------
Net increase (decrease) in cash 91,818 (78,596) 13,222
CASH AND CASH EQUIVALENTS, beginning of period -- 91,818 --
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 91,818 $ 13,222 $ 13,222
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Accrued deferred registration cost $ 94,785 $ 24,400 $ 94,400
========= ========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
F-5
<PAGE> 56
FROST HANNA CAPITAL GROUP, INC.
-------------------------------
(A Development Stage Corporation)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) GENERAL:
Frost Hanna Capital Group, Inc. (the "Company") was formed on February 2, 1996
to seek to effect a merger, exchange of capital stock, asset acquisition or
similar business combination (a "Business Combination") with an operating or
development stage business (an "Acquired Business"). The Company is currently in
the development stage and is in the process of raising capital. All efforts of
the Company to date have been limited to organizational activities.
The Company's ability to commence operations is contingent upon obtaining
adequate financial resources through a contemplated public offering (the
"Proposed Offering") or otherwise (see Note 3).
The Proposed Offering may be considered a "blank check" offering. Blank check
offerings are characterized by an absence of substantive disclosures related to
the use of the net proceeds of the offering. Although substantially all of the
net proceeds of the Proposed Offering are intended to be utilized to effect a
Business Combination, the net proceeds are not being designated for any more
specific purpose. Moreover, since the Company has not yet identified an
acquisition target, investors in the Proposed Offering will have virtually no
substantive information available for advance consideration of any Business
Combination. (See "Risk Factors" in the forepart of the SB-2 Registration
Statement for additional information.)
Upon completion of the Proposed Offering, 80% of the net proceeds therefrom will
be placed in an interest bearing escrow account (the "Escrow Fund"), subject to
release upon the earlier of (i) written notification by the Company of its need
for all or substantially all of the Escrow Fund for the purpose of implementing
a Business Combination, or (ii) the exercise by certain shareholders of the
Redemption Offer (as hereinafter defined). Any interest earned on the Escrow
Fund shall remain in escrow and be used by the Company either (i) following a
Business Combination in connection with the operations of an Acquired Business
or (ii) in connection with the distribution to the shareholders through the
exercise of the Redemption Offer or the liquidation of the Company. In the event
the Company requires in excess of 20% of the Net Proceeds for operations,
Messrs. Richard B. Frost, Chief Executive Officer and Chairman of the Board of
Directors; and Mark J. Hanna, President and Director, have undertaken to waive
their salaries prospectively until the consummation by the Company of a Business
Combination. Investors' funds may be escrowed for an indefinite period of time
following the consummation of the Proposed Offering. Further, there can be no
assurances that the Company will ever consummate a Business Combination. In the
event of the exercise of the Redemption Offer, investors may only recoup a
portion of their investment. The Company currently has no expectation with
regard to the Company's plans in the event a Business Combination is not
consummated by a certain date.
F-6
<PAGE> 57
The Company, prior to the consummation of any Business Combination, will submit
such transaction to the Company's shareholders for their approval. In the event,
however, that the holders of 30% or more of the shares of the Company's common
stock sold in the Proposed Offering which are outstanding vote against approval
of any Business Combination, the Company will not consummate such Business
Combination. The shares of common stock to be sold in the Proposed Offering may
sometimes be referred to as the "Public Shares" and the holders (whether current
or future) of the Public Shares are referred to as "Public Shareholders". All of
the officers and directors of the Company, who own in the aggregate
approximately 82% of the common stock outstanding as of the date hereof, have
agreed to vote their respective shares of common stock in accordance with the
vote of the majority of the Public Shares with respect to any such Business
Combination.
At the time the Company seeks shareholder approval of any potential Business
Combination, the Company will offer (the "Redemption Offer") to each of the
Public Shareholders who vote against the proposed Business Combination and
affirmatively request redemption, for a twenty (20) day period, to redeem all,
but not a portion of, their Public Shares, at a per share price equal to the
Company's liquidation value on the record date for determination of shareholders
entitled to vote upon the proposal to approve such Business Combination (the
"Record Date") divided by the number of Public Shares. The Company's liquidation
value will be equal to the Company's book value, as determined by the Company,
calculated as of the Record Date. In no event, however, will the Company's
liquidation value be less than the Escrow Fund, inclusive of any net interest
income thereon. If the holders of less than 30% of the Public Shares held by
Public Shareholders elect to have their shares redeemed, the Company may, but
will not be required to, proceed with such Business Combination. If the Company
elects to so proceed, it will redeem Public Shares, based upon the Company's
liquidation value, from those Public Shareholders who affirmatively requested
such redemption and who voted against the Business Combination. However, if the
holders of 30% or more of the Public Shares held by Public Shareholders vote
against approval of any potential Business Combination, the Company will not
proceed with such Business Combination and will not redeem such Public Shares.
If the Company determines not to pursue a Business Combination, even if the
Public Shareholders of less than 30% of the Public Shares vote against approval
of the potential Business Combination, no Public Shares will be redeemed.
As a result of its limited resources, the Company will, in all likelihood, have
the ability to effect only a single Business Combination. Accordingly, the
prospects for the Company's success will be entirely dependent upon the future
performance of a single business.
The Company is in the development stage, has had no revenues to date and is
entirely dependent upon the proceeds of the Proposed Offering to commence
operations relating to selection of a prospective Acquired Business. The Company
will not receive any revenues, other than interest income, until, at the
earliest, the consummation of a Business Combination. In the event that the
proceeds of the Proposed Offering prove to be insufficient for purposes of
effecting a Business Combination, the Company will be required to seek
additional financing. In the event no Business Combination is identified,
negotiations are incomplete or no Business Combination has been consummated, and
all of the proceeds of the Proposed Offering other than the Escrow Fund have
been expended, the Company currently has no plans or arrangements with respect
to the possible acquisition of additional financing which may be required to
continue the operations of the Company.
Furthermore, there is no assurance that the Company will be able to successfully
effect a Business Combination.
F-7
<PAGE> 58
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Financial Statements-
In management's opinion, the accompanying unaudited interim financial statements
of the Company contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position of the Company
as of March 31, 1997, and the results of operations and cash flows for the three
months ended March 31, 1997. The results of operations and cash flows for the
three months ended March 31, 1997 are not necessarily indicative of the results
of operations or cash flows which may be reported for the remainder of 1997.
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-QSB. Pursuant to such rules and regulations, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted.
Accounting Estimates-
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents-
The Company considers all investments with an original maturity of three months
or less as of the date of purchase to be cash equivalents.
Property and Equipment-
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated useful
lives of the assets ranging from 3 to 5 years.
Income Taxes-
The Company is in a loss position for both financial reporting and tax purposes.
The Company adopted Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes", which requires, among other things, recognition
of future tax benefits measured at enacted rates attributable to deductible
temporary differences between financial statement and income tax bases of assets
and liabilities and to tax net operating loss carryforwards to the extent that
realization of said benefits is more likely than not. The only item giving rise
to such a deferred tax asset or liability is the loss carryforward as a result
of the operating loss incurred for the period from inception (February 2, 1996)
to March 31, 1997. However, due to the uncertainty of the Company's ability to
generate income in the future, the deferred tax asset has been fully reserved.
F-8
<PAGE> 59
Earnings per Common Share-
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common shares issued at prices below the public offering price during the twelve
month period prior to a proposed public offering are included in the calculation
of earnings per share as if they were outstanding for all periods presented even
though their effects are antidilutive. Primary and fully diluted earnings per
share are the same.
(3) PROPOSED PUBLIC OFFERING OF SECURITIES (Unaudited):
The Proposed Offering calls for the Company to offer for public sale 1,350,000
shares of the Company's common stock, $.0001 par value at an estimated price
of $6 per share.
In connection with the Proposed Offering, the Company entered into an agreement
with an underwriter dated June 10, 1997 (the "Underwriting Agreement"). The
Company agreed to sell to the underwriter (the "Underwriter"), at an aggregate
price of $135, warrants (the "Underwriter Options") to purchase up to 135,000
shares of the Company's common stock. The Underwriter Options are exercisable at
a price of 120% of the initial public offering price per share for a period
commencing one year after, and ending five years after the effective date of the
prospectus.
The Company has granted to the Underwriter a 45-day option to purchase up to
202,500 additional shares of common stock of the Company at an estimated price
of $6 per share, solely to cover over-allotments, if any (the "Over-Allotment
Option").
(4) DEFERRED REGISTRATION COSTS:
As of December 31, 1996, and March 31, 1997, the Company has recorded deferred
registration costs of $129,785 and $123,110 (unaudited), respectively, relating
to estimated accounting, legal, underwriting and printing and engraving expenses
incurred to date in connection with the Proposed Offering. Upon consummation of
the Proposed Offering, these costs will be charged to equity. Should the
Proposed Offering prove to be unsuccessful, these costs, as well as any
additional expenses incurred, will be charged to operations.
(5) COMMON STOCK:
The Company's Articles of Incorporation authorize the issuance of 100,000,000
shares of common stock. Upon completion of the Proposed Offering, there will be
a minimum of 96,755,500 authorized but unissued shares of common stock available
for issuance (after appropriate reserves for the issuance of common stock upon
full exercise of the Over-Allotment Option and the Underwriter Options). The
Company's Board of Directors has the power to issue any or all of the authorized
but unissued common stock without stockholder approval. The Company currently
has no commitments to issue any shares of common stock other than as described
in the Proposed Offering; however, the Company will, in all likelihood, issue a
substantial number of additional shares in connection with a Business
Combination. To the extent that additional shares of common stock are issued,
dilution of the interests of the Company's shareholders participating in the
Proposed Offering may occur.
F-9
<PAGE> 60
(6) RELATED-PARTY TRANSACTIONS:
The Company has obtained $1,000,000 "key man" term policies insuring each of the
lives of Messrs. Frost and Hanna. In connection with the purchase of such
policies, The Marshal E. Rosenberg Organization, Inc., a firm affiliated with
Dr. Rosenberg, a Vice President, Treasurer and Director of the Company received
a payment of approximately $2,700 in 1996 and $1,488 (unaudited) for the three
months ended March 31, 1997.
In March 1997, Messrs. Frost and Hanna each made unsecured, noninterest bearing
loans of $10,000 to the Company for operating expenses. These loans are expected
to be repaid from the proceeds of the Proposed Offering.
(7) COMMITMENTS AND CONTINGENCIES:
The Company entered into employment agreements with Messrs. Frost and Hanna
commencing on September 15, 1996 and requiring monthly salaries of $10,000 each
plus monthly nonaccountable expense allowances of $1,000 each. Messrs. Frost's
and Hanna's salaries have been paid through October 1996. However, each has
agreed to waive all unpaid salary and expense allowance through the date four
months prior to the closing date of the Proposed Offering.
The Company shall reimburse its officers and directors for any accountable
reasonable expenses incurred in connection with activities on behalf of the
Company. There is no limit on the amount of such reimbursable expenses, and
there will be no review of the reasonableness of such expenses by anyone other
than the Board of Directors, all of the members of which are officers.
Commencing on January 15, 1997, the Company moved its executive offices to a new
location pursuant to a three-year lease agreement at an approximate cost per
month of $3,000.
(8) SUBSEQUENT EVENT (Unaudited):
In May 1997, the directors of the Company made unsecured, noninterest bearing
loans of $55,000 to the Company for operating expenses. These loans are expected
to be repaid from the proceeds of the Proposed Offering.
In June 1997, the Company entered into subscription agreements to issue 145,000
shares of common stock for proceeds of $72,500 in a private placement
transaction. Also in June 1997, the Company redeemed 80,000 shares of common
stock originally sold in a private placement transaction in December 1996 for
$40,000.
F-10
<PAGE> 61
================================================================================
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 Offering covered by this Prospectus.
If given or made, such information and representations
must not be relied upon as having been authorized by the
Company or the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of an offer
to buy the Common Stock in any jurisdiction where, or to
any person to whom, it is unlawful to make such an offer
or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances,
create any implication that there has not been any change
in the affairs of the Company or the information set
forth in this Prospectus since the date hereof.
------------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary . . . . . . . . . . . . . . . . . 5
The Company . . . . . . . . . . . . . . . . . . . . . 10
Risk Factors . . . . . . . . . . . . . . . . . . . . 11
Use of Proceeds . . . . . . . . . . . . . . . . . . . 24
Dilution . . . . . . . . . . . . . . . . . . . . . . 26
Capitalization . . . . . . . . . . . . . . . . . . . 27
Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . 28
Proposed Business . . . . . . . . . . . . . . . . . . 29
Management of the Company . . . . . . . . . . . . . . 38
Principal Shareholders . . . . . . . . . . . . . . . 41
Certain Transactions . . . . . . . . . . . . . . . . 42
Description of Securities . . . . . . . . . . . . . . 43
Shares Eligible for Future Sale . . . . . . . . . . . 44
Underwriting . . . . . . . . . . . . . . . . . . . . 45
Legal Proceedings . . . . . . . . . . . . . . . . . . 46
Legal Matters . . . . . . . . . . . . . . . . . . . . 47
Experts . . . . . . . . . . . . . . . . . . . . . . 47
Additional Information . . . . . . . . . . . . . . . 47
Financial Statements . . . . . . . . . . . . . . . . F-1
------------------------
Until __________, 1997 (25 days after the date of
this Prospectus), all dealers effecting transactions in the
registered securities, whether or not participating in this
distribution, may be required to deliver a Prospectus. This
is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to
their unsold allotments or subscriptions.
================================================================================
1,350,000 SHARES
FROST HANNA CAPITAL GROUP, INC.
COMMON STOCK
------------
PROSPECTUS
------------
LH ROSS & COMPANY, INC.
_______, 1997
================================================================================
<PAGE> 62
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0831 of the Florida Business Corporation Act (the "Florida
Act") provides that a director is not personally liable for monetary damages to
the corporation or any person for any statement, vote, decision or failure to
act regarding corporate management or policy, by a director, unless: (a) the
director breached or failed to perform his duties as a director; and (b) the
director's breach of, or failure to perform, those duties constitutes: (i) a
violation of criminal law unless the director had reasonable cause to believe
his conduct was lawful or had no reasonable cause to believe his conduct was
unlawful; (ii) a transaction from which the director derived an improper
personal benefit, either directly or indirectly; (iii) a circumstance under
which the director is liable for an improper distribution; (iv) in a proceeding
by, or in the right of the corporation to procure a judgment in its favor or by
or in the right of a shareholder, conscious disregard for the best interests of
the corporation, or willful misconduct; or (v) in a proceeding by or in the
right of someone other than the corporation or a shareholder, recklessness or
an act or omission which was committed in bad faith or with malicious purpose
or in a manner exhibiting wanton and willful disregard of human rights, safety
or property.
Section 607.0850 of the Florida Act provides that a corporation shall
have the power to indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the corporation), by reason of
the fact that he is or was a director, officer or employee or agent of the
corporation against liability incurred in connection with such proceeding if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Section 607.0850 also provides that a corporation shall have the
power to indemnify any person, who was or is a party to any proceeding by, or
in the right of, the corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, against expenses and amounts paid in settlement not exceeding, in
the judgment of the board of directors, the estimated expense of litigating the
proceeding to conclusion, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof.
Under Section 607.0850, indemnification is authorized if such person acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation, except that no indemnification may be
made in respect of any claim, issue, or matter as to which such person is
adjudged to be liable unless, and only to the extent that, the court in which
such proceeding was brought, or any other court of competent jurisdiction,
shall determine upon application that, despite the adjudication of liability,
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court deems
proper. To the extent that a director, officer, employee or agent has been
successful on the merits or otherwise in defense of any of the foregoing
proceedings, or in defense of any claim, issue or matter therein Section
607.0850 provides that, he shall be indemnified against expenses actually and
reasonably incurred by him in connection therewith. Under Section 607.0850,
any indemnification, unless pursuant to a determination by a court, shall be
made by the corporation only as authorized in the specific case upon a
determination that the indemnification of the director, officer, employee or
agent is
II-1
<PAGE> 63
proper under the circumstances because he has met the applicable standard of
conduct. Notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary determination by the corporation in a
specific case, Section 607.0850 permits a director, officer, employee or agent
of the corporation who is or was a party to a proceeding to apply for
indemnification to the appropriate court and such court may order
indemnification if it determines that such person is entitled to
indemnification under the applicable standard.
Section 607.0850 also provides that a corporation has the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of Section 607.0850.
The Registrant's articles of incorporation provide that it shall
indemnify its officers and directors and former officers and directors to the
full extent permitted by law.
The Underwriting Agreement, filed as Exhibit 1.1 to this Registration
Statement, provides for indemnification by the Underwriter of the Registrant's
directors, officers and controlling persons against certain liabilities that
may be incurred in connection with the offering, including liabilities under
the Securities Act of 1933, as amended.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a list of the estimated expenses (other than
underwriting discounts and commissions and the Representative's non-
accountable expense allowance) to be paid by the Registrant in connection with
the issuance and distribution of the securities being registered herein.
<TABLE>
<S> <C>
SEC Registration Fee . . . . . . . . . . . . . . . . . . . . . . $3,117.27
NASD Filing Fee . . . . . . . . . . . . . . . . . . . . . . . . 1,500.00
NASDAQ National Market Quotation Fee . . . . . . . . . . . . . . 5,000.00
Legal Fees and Expenses* . . . . . . . . . . . . . . . . . . . . 75,000.00
Registrar and Transfer Agent Fees and Expenses* . . . . . . . . . 5,000.00
Accounting Fees and Expenses* . . . . . . . . . . . . . . . . . . 35,000.00
Printing and Engraving Expenses* . . . . . . . . . . . . . . . . 15,000.00
Blue Sky Qualification Fees and Expenses . . . . . . . . . . . . 10,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 25,382.73
-----------
Total * . . . . . . . . . . . . . . . . . . . . $175,000.00
===========
</TABLE>
__________________
* Estimated
II-2
<PAGE> 64
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following sets forth information relating to all securities of the
Registrant sold by it since February 2, 1996, the date of the Registrant's
inception:
<TABLE>
<CAPTION>
DATE OF CONSIDERATION
NAME ISSUANCE SHARES PER SHARE
-------------------------------------- ------------------- --------------- -----------------
<S> <C> <C> <C>
Plaza Street Corporation, Ltd. October 6, 1996 80,000 $.50
Baxter, Donald H. September 13, 1996 100,000 $.0001
Fernandez, Charles October 6, 1996 20,000 $.50
Fernandez, Charles June 25, 1997 130,000 $.50
Frost, Joel October 6, 1996 4,000 $.50
Frost-Nevada, Limited Partnership October 6, 1996 100,000 $.50
Frost, Richard September 13, 1996 362,000 $.0001
Funk, Teresa October 6, 1996 2,000 $.50
Grout, Dianna October 6, 1996 1,500 $.50
Hanna, Mark J. September 13, 1996 362,000 $.0001
Jomaric Inc. October 6, 1996 5,000 $.50
Lu, Emily October 6, 1996 9,000 $.50
NAFA Equities October 6, 1996 5,000 $.50
Orchard Investments Inc. October 6, 1996 10,000 $.50
Rosenberg, Ph.D., Marshall E. September 13, 1996 300,000 $.0001
Rosenberg, Donald October 6, 1996 20,000 $.50
Rosenberg, Donald June 25, 1997 15,000 $.50
Topper, Linda October 6, 1996 1,500 $.50
Wolf, Marie October 6, 1996 30,000 $.50
</TABLE>
Exemption from registration under the Securities Act of 1933, as
amended (the "Act"), is claimed for the sales of Common Stock referred to above
in reliance upon the exemption afforded by Section 4(2) and 3(b) of the Act for
transactions not involving a public offering. Each certificate evidencing such
shares of Common Stock bears an appropriate restrictive legend and "stop
transfer" orders are maintained on Registrant's stock transfer records
thereagainst. None of these sales involved participation by an underwriter or
a broker-dealer.
ITEM 27. EXHIBITS
The following is a list of Exhibits filed herewith as part of the
Registration Statement:
Exhibits Description
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Form of Common Stock Certificate
II-3
<PAGE> 65
Exhibits Description
4.2 Form of Warrant Agreement between Frost Hanna Capital Group,
Inc. and the Representatives (including the form of
Representatives' Warrant Certificate)
5.1 Form of Opinion of Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A.
10.1 Form of Escrow Agreement by and between the Registrant and
Fiduciary Trust International of the South
10.2 Form of Escrow Agreement by and among Registrant, Richard B.
Frost, Mark J. Hanna, Marshal E. Rosenberg, Ph.D., Donald H.
Baxter, Charles Fernandez and American Stock Transfer & Trust
Company
10.3 Form of Letter Agreement concerning conflicts of interests,
finder's fees, negotiation for sale of management shares and
relating to the vote by certain present shareholders of
Registrant on a Business Combination
10.4 Form of Employment Agreement dated as of September 13, 1996,
by and between Registrant and Richard B. Frost
10.5 Form of Employment Agreement dated as of September 13, 1996,
by and between Registrant and Mark J. Hanna
10.6 Form of Letter Agreement relating to redemption rights and
other issues by the present shareholders of Registrant
23.1 Consent of Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A. (included with Exhibit 5.1 to this
Registration Statement)
23.2 Consent of Arthur Andersen LLP
24.1 Power of Attorney (included with signature page)
- ------------------
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid
II-4
<PAGE> 66
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such name as required by the Underwriters to
permit prompt delivery to each purchaser.
II-5
<PAGE> 67
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorizes this Registration
Statement to be signed on its behalf by the undersigned in the city of Boca
Raton, State of Florida, on July 9, 1997.
FROST HANNA CAPITAL GROUP, INC.
By: /s/ Mark J. Hanna
-------------------------------
Mark J. Hanna, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard B. Frost and Mark J. Hanna and
each of them acting alone, his true and lawful attorneys-in-fact and agents,
each with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration Statement,
or any registration statement relating to this offering to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Richard B. Frost Chief Executive Officer, July 9, 1997
- ------------------------------------------ Chairman of the Board
Richard B. Frost
/s/ Mark J. Hanna President, Director July 9, 1997
- ------------------------------------------
Mark J. Hanna
/s/ Marshal E. Rosenberg, Ph.D. Vice President, Treasurer July 9, 1997
- ------------------------------------------ Principal Financial Officer, Director
Marshal E. Rosenberg, Ph.D.
/s/ Donald H. Baxter Vice President, Secretary, July 9, 1997
- ------------------------------------------ Director
Donald H. Baxter
/s/ Charles Fernandez Director July 9, 1997
- ------------------------------------------
Charles Fernandez
</TABLE>
<PAGE> 1
Exhibit 1.1
1,350,000 Shares of Common Stock
of
FROST HANNA CAPITAL GROUP, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
, 1997
LH Ross & Company, Inc.
One Boca Place
2255 Glades Road, Suite 425W
Boca Raton, Florida 33431
Ladies and Gentlemen:
Frost Hanna Capital Group, Inc., a Florida corporation (the
"Company"), confirms its agreement with LH Ross & Company ("LH Ross" or the
"Underwriter"), with respect to the sale by the Company and the purchase by the
Underwriter, of 1,350,000 shares (the "Shares") of the Company's common stock,
par value $.0001 per share ("Common Stock") and with respect to the grant by the
Company to the Underwriter, of the option described in Section 2(b) hereof to
purchase all or any part of 202,500 additional Shares for the purpose of
covering over-allotments, if any. The aforesaid 1,350,000 Shares (the "Firm
Securities") and together with all or any part of the 202,500 additional Shares
subject to the overallotment option described in Section 2(b) hereof (the
"Overallotment Securities") are hereinafter collectively referred to as the
"Securities." The Company also proposes to issue and sell to the Underwriter, an
option (the "Underwriter's Purchase Option") pursuant to the Underwriter's
Purchase Option Agreement (the "Underwriter's Purchase Option Agreement") for
the purchase of an aggregate of 135,000 additional Shares (the "Underwriter's
Option Shares"). The Securities, the Underwriter's Purchase Option Agreement and
Underwriter's Option Shares are more fully described in the Registration
Statement (as defined in Subsection 1(a) hereof) and the Prospectus (as defined
in Subsection 1(a) hereof) referred to below. Unless the context otherwise
requires, all references to the "Company" shall include all presently existing
subsidiaries and any entities acquired by the Company on or prior to the Closing
Date (defined in Subsection 2(c) hereof). All representations, warranties and
opinions of counsel required hereunder shall cover any such subsidiaries and
acquired entities.
<PAGE> 2
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriter as of the date
hereof, and as of the Closing Date and any Overallotment Closing Date (as
defined in Subsection 2(c) hereof), if any, as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form SB-2 (No. 333- ) including any related preliminary
prospectus (each a "Preliminary Prospectus"), for the registration of the
Securities under the Securities Act of 1933, as amended (the "Act"), which
registration statement and any amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act and the rules and
regulations of the Commission under the Act. Following execution of this
Agreement, the Company will promptly file (i) if the Registration Statement has
been declared effective by the Commission, (A) a Term Sheet (as defined in the
Rules and Regulations (as hereinafter defined)) pursuant to Rule 434 under the
Act or (B) a Prospectus under Rules 430A and/or 424(b) under the Act, in either
case in form satisfactory to the Underwriter or (ii) in the event the
registration statement has not been declared effective, a further amendment to
said registration statement in the form heretofore delivered to the Underwriter
and will not, before the registration statement becomes effective, file any
other amendment thereto unless the Underwriter shall have consented thereto
after having been furnished with a copy thereof. Except as the context may
otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations)(as hereinafter defined), is hereinafter called the "Registration
Statement" and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations, is hereinafter
called the "Prospectus." For purposes hereof, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or Prospectus or any part thereof and no proceedings
for a stop order have been instituted or are pending or, to the best knowledge
of the Company, threatened. Each of the Preliminary Prospectus, the Registration
Statement and the Prospectus at the time of filing thereof conformed in all
material respects with the requirements of the Act and the Rules and
Regulations, and neither the Preliminary Prospectus, the Registration Statement
nor the Prospectus at the time of filing thereof contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriter by or on behalf of the Underwriter
expressly for use in such Preliminary Prospectus, Registration Statement or
Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Overallotment
Closing Date (as hereinafter defined) and
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<PAGE> 3
during such longer period as the Prospectus may be required to be delivered in
connection with sales by the Underwriter or a dealer, the Registration Statement
and the Prospectus will contain all material statements which are required to be
stated therein in compliance with the Act and the Rules and Regulations, and
will in all material respects conform to the requirements of the Act and the
Rules and Regulations; neither the Registration Statement, nor any amendment
thereto, at the time the Registration Statement or such amendment is declared
effective under the Act, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and the Prospectus at the time the Registration
Statement becomes effective, at the Closing Date and at any Overallotment
Closing Date, will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty does not apply to statements made
or statements omitted in reliance upon and in conformity with information
supplied to the Company in writing by or on behalf of the Underwriter expressly
for use in the Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(d) The Company has been duly organized and is now, and at the
Closing Date and any Overallotment Closing Date will be, validly existing as a
corporation in good standing under the laws of the State of Florida. The Company
does not own, directly or indirectly, an interest in any corporation,
partnership, trust, joint venture or other business entity; provided, that the
foregoing shall not be applicable to the investment of the net proceeds from the
sale of the Securities in short-term, low-risk investments as set forth under
"Use of Proceeds" in the Prospectus except to the extent that any failure of the
Company to comply with the foregoing does not have a material adverse effect on
the Company. The Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which its ownership or
leasing of its properties or the character of its operations require such
qualification to do business, except where the failure to so qualify would not
have a material adverse effect on the Company. The Company has all requisite
power and authority (corporate and other), and has obtained any and all
necessary applications, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations except where the failure to comply would not have a
material adverse effect upon the Company; and the Company has not received any
notice of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operation of the Company.
The disclosures, if any, in the Registration Statement concerning the effects of
federal, state, local, and foreign laws, rules and regulations on the Company's
business as currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact necessary to
3
<PAGE> 4
make the statements contained therein not misleading in light of the
circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption "Capitalization"
and will have the adjusted capitalization set forth therein on the Closing Date
and the Overallotment Closing Date, if any, based upon the assumptions set forth
therein, and the Company is not a party to or bound by any instrument, agreement
or other arrangement providing for the Company to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement and as
otherwise described in the Prospectus. The Shares, the Underwriter's Purchase
Option and the Underwriter's Option Shares and all other securities issued or
issuable by the Company conform or, when issued and paid for, will conform in
all respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company, or similar
contractual rights granted by the Company to subscribe for or purchase
securities. The Securities, the Underwriter's Purchase Option and the
Underwriter's Option Shares to be issued and sold by the Company hereunder, and
upon payment therefor, are not and will not be subject to any preemptive or
other similar rights of any stockholder to subscribe for or purchase securities,
have been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof and thereof, will be validly issued, fully paid and
non-assessable and will conform in all material respects to the descriptions
thereof contained in the Prospectus; the holders thereof will not be subject to
any liability solely as such holders; all corporate action required to be taken
for the authorization, issuance and sale of the Securities, the Underwriter's
Purchase Option and the Underwriter's Option Shares has been duly and validly
taken; and the certificates, if any, representing the Securities and the
Underwriter's Option Shares will be in due and proper form. Upon the issuance
and delivery pursuant to the terms hereof of the Securities to be sold to the
Underwriter by the Company hereunder, the Underwriter will acquire good and
marketable title to such Securities free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind whatsoever.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved;
except as otherwise described in the Prospectus. There has been no material
adverse change or development involving a prospective change in the condition,
financial or otherwise, or in the earnings, business affairs, position,
prospects, value, operation, properties, business, or results of operation of
the Company, whether or not arising in the ordinary course of business, since
the dates of the financial statements included in the Registration Statement and
the Prospectus and the outstanding debt, the property, both tangible and
4
<PAGE> 5
intangible, and the business of the Company, conform in all material respects to
the descriptions thereof contained in the Registration Statement and in the
Prospectus.
(g) Arthur Andersen, LLP, whose report is filed with the
Commission as a part of the Registration Statement, is an independent certified
public accountant with respect to the Company as required by the Act and the
Rules and Regulations.
(h) The Company (i) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to, withholding
taxes and taxes payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986 (the "Code"), (ii) has furnished all tax and information returns it
is required to furnish pursuant to the Code, and has established adequate
reserves for such taxes which are not due and payable, and (iii) does not have
knowledge of any tax deficiency or claims outstanding, proposed or assessed
against it.
(i) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts which it reasonably believes to be
adequate for its business, including, but not limited to, personal injury and
product liability insurance covering all personal and real property owned or
leased by the Company against fire, theft, damage and all risks customarily
issued against.
(j) Except as disclosed in the Prospectus, there is no action,
suit, proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
business of the Company which: (i) questions the validity of the capital stock
of the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement; (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all respects); or (iii) might materially affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operations of the Company.
(k) The Company has full legal right, power and authority to
enter into this Agreement and the Underwriter's Purchase Option Agreement and to
consummate the transactions provided for in such agreements; and this Agreement
and the Underwriter's Purchase Option Agreement have each been duly authorized,
executed and delivered by the Company. Each of this Agreement and the
Underwriter's Purchase Option Agreement constitutes a legally valid and binding
agreement of the Company, subject to due authorization, execution and delivery
by the Underwriter or the Underwriter, enforceable against the Company in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law). Neither the Company's execution nor delivery of this Agreement, or the
Underwriter's Purchase Option Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein and
therein, nor the conduct
5
<PAGE> 6
of its business as described in the Registration Statement, the Prospectus, and
any amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any material lien, charge, claim, encumbrance,
pledge, security interest defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of the Company
pursuant to the terms of: (i) the Articles of Incorporation or Bylaws of the
Company; (ii) any license, contract, indenture, mortgage, deed of trust, voting
trust agreement, stockholders agreement, note, loan or credit agreement or any
other agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of its properties or assets (tangible or
intangible) is or may be subject; or (iii) any statute, judgment, decree, order,
rule or regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the Company or
any of its activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, the performance of this Agreement
and the transactions contemplated hereby, except such as have been or may be
obtained under the Act or the Bylaws and rules of the NASD or may be required
under state securities or Blue Sky laws in connection with (i) the Underwriter's
purchase and distribution of the Firm Securities and Overallotment Securities to
be sold by the Company hereunder; or (ii) the issuance and delivery of the
Underwriter's Purchase Option or the Underwriter's Option Shares.
(m) All executed agreements or copies of executed agreements
(whether electronically scanned or otherwise) filed as exhibits to the
Registration Statement to which the Company is a party or by which the Company
may be bound or to which any of its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company, and constitute legally valid and binding agreements of the Company,
enforceable against it in accordance with their respective terms, except to the
extent there is no material adverse effect upon the Company. The descriptions
contained in the Registration Statement of contracts and other documents are
accurate in all material respects and fairly present the information required to
be shown with respect thereto by the Rules and Regulations and there are no
material contracts or other documents which are required by the Act or the Rules
and Regulations to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not described or filed as
required, and the exhibits which have been filed are materially or substantially
complete and correct copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not:
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money in any material amount; (ii) entered into any
transaction other than in the ordinary course of business; (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock, material
6
<PAGE> 7
changes in debt (long or short term) or liabilities other than in the ordinary
course of business; or (v) made any material changes in or affecting the general
affairs, management, financial operations, stockholders equity or results of
operations of the Company.
(o) No default exists in the due performance and observance of
any material term, covenant or condition of any license, contract, indenture,
mortgage, installment sales agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which any of
the Company may be bound or to which any of its property or assets (tangible or
intangible) of the Company is subject or affected except where such default does
not, and will not, have a material adverse effect upon the Company.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance in all
material respects with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours.
(q) Since its inception, the Company has not incurred any
liability arising under or as a result of the application of the provisions of
the Act.
(r) Except as disclosed in the Prospectus, the Company does not
presently maintain, sponsor or contribute to, and never has maintained,
sponsored or contributed to, any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan " or a "multiemployer
plan" as such terms are defined in Sections 3(2), 3(1) and 3(37) respectively of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"). Except as disclosed in the Prospectus, the Company does not
maintain or contribute, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA.
(s) The Company is not in violation in any material respect of
any domestic or foreign laws, ordinances or governmental rules or regulations to
which it is subject.
(t) No holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
or to require the Company to file a registration statement under the Act.
(u) Neither the Company, nor, to the Company's best knowledge
after due inquiry, any of its employees, directors, stockholders or affiliates
(within the meaning of the Rules and Regulations) has taken, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or otherwise.
7
<PAGE> 8
(v) Except as described in the Prospectus, to the best of the
Company's knowledge after due inquiry, none of the patents, patent applications,
trademarks, service marks, trade names and copyrights, or licenses and rights to
the foregoing presently owned or held by the Company is in dispute or are in any
conflict with the right of any other person or entity within the Company's
current area of operations nor has the Company received notice of any of the
foregoing. To the best of the Company's knowledge, the Company: (i) owns or has
the right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing; and (ii) except as set forth in the Prospectus, is not obligated
or under any liability whatsoever to make any payments by way of royalties, fees
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(w) To the best of its knowledge, the Company owns and has the
unrestricted right to use all material trade secrets, trade-marks, trade names,
know-how (including all other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), inventions, designs,
processes, works of authorship, computer programs and technical data and
information (collectively herein "Intellectual Property") required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company, free and clear of and
without violating any right, lien, or claim of others, including without
limitation, former employers of its employees; provided, however, that the
possibility exists that other persons or entities, completely independently of
the Company, or employees or agents, could have developed trade secrets or items
of technical information similar or identical to those of the Company.
(x) The Company has taken reasonable security measures to protect
the secrecy, confidentiality and value of all the Intellectual Property material
to its operations.
(y) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property owned
or leased by it free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects, or other restrictions or equities of any
kind whatsoever, other than liens for taxes or assessments not yet due and
payable.
(z) The Company has obtained duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers and
directors and any person or entity owning 2% or more of the Company's securities
has agreed not to, directly or indirectly, offer to sell, sell, grant any option
for the sale of, assign, transfer, pledge, hypothecate or otherwise encumber any
of their shares of Common Stock or other securities of the Company (either
pursuant to Rule 144 of the Rules and Regulations or otherwise) or dispose of
any beneficial interest therein for a period of not less than 13 months
following the effective date of the Registration Statement or such earlier time
8
<PAGE> 9
that a business combination is effected involving the issuance of at least a
majority of the proceeds of the Offering, without the prior written consent of
the Underwriter. The Company will cause the Transfer Agent, as defined below, to
make an appropriate legend on the face of stock certificates representing all of
such shares of Common Stock and other securities of the Company.
(aa) The Company has not incurred any liability and there are no
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities or any other
arrangements, agreements, understandings, payments or issuances with respect to
the Company or any of its officers, directors, employees or affiliates that may
adversely affect the Underwriter's compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
(bb) Neither the Company nor any of its respective officers,
employees, agents or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which: (a) might subject the Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company;
and (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(cc) Except as set forth in the Prospectus, no officer, director
or stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any such
person or entity or the Company, has or has had, either directly or indirectly,
(i) an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, except with respect to the beneficial ownership of not more
than 1% of the outstanding shares of capital stock of any publicly-held entity;
or (ii) a beneficial interest in any contract or agreement to which the Company
is a party or by which it may be bound or affected. Except as set forth in the
Prospectus under "Certain Transactions", there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company, and
any officer, director, or principal stockholder of the Company, or any affiliate
or associate of any such person or entity.
(dd) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriter's counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
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<PAGE> 10
(ee) The Company has entered into employment agreements with
Richard B. Frost and Mark J. Hanna as materially described in the Prospectus.
The Company has obtained a key-man life insurance policy in the amount of not
less than $1,000,000 on the life of each of Messrs. Frost and Hanna, which
policy is owned by the Company and names the Company as the sole beneficiary
thereunder.
(ff) No securities of the Company have been sold by the Company
since its inception, except as disclosed in Part II of the Registration
Statement.
(gg) The minute books of the Company have been made available to
Underwriter's Counsel and contain a complete summary of all meetings and actions
of the Board of Directors and Stockholders of the Company since its inception.
(hh) Except as disclosed in writing to the Underwriter, no
officer, or director or, to the Company's knowledge, stockholder of the Company
has any affiliation or association with any member of the NASD.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND AGREEMENT
TO ISSUE UNDERWRITER'S PURCHASE OPTION.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to, the Underwriter, and the Underwriter
agrees to purchase from the Company at the price per Security set forth below,
the Firm Securities.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements, herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase up to an additional 202,500 Shares. The option granted
hereby will expire 45 days after the date of this Agreement, and may be
exercised in whole or in part at any time (but not more than once) only for the
purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Firm Securities upon notice by the Underwriter
to the Company setting forth the number of Overallotment Securities as to which
the Underwriter is then exercising the option and the time and date of payment
and delivery for such Overallotment Securities. Any such time and date of
delivery shall be determined by the Underwriter, but shall not be later than
seven full business days after the exercise of said option, nor in any event
prior to the Closing Date, as defined in paragraph (c) below, unless otherwise
agreed to between the Underwriter and the Company. Nothing herein contained
shall obligate the Underwriter to make any over-allotments. No Overallotment
Securities shall be delivered unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of the
Underwriter, LH Ross & Company, Inc., One Boca
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<PAGE> 11
Place, 2255 Glades Road, Suite 425W, Boca Raton, Florida 33431 or at such other
place as shall be designated by the Underwriter. Such delivery and payment shall
be made at 10:00 a.m. (New York City time) on _________, 199_ or at such other
time and date as shall be designated by the Underwriter but not less than three
(3) nor more than five (5) business days after the effective date of the
Registration Statement (such time and date of payment and delivery being
hereafter called "Closing Date"). In addition, in the event that any or all of
the Overallotment Securities are purchased by the Underwriter, payment of the
purchase price for, and delivery of certificates for such Overallotment
Securities shall be made at the above-mentioned office or at such other place
and at such time (such time and date of payment and delivery being hereinafter
called "Overallotment Closing Date") as shall be agreed upon by the Underwriter
and the Company on each Overallotment Closing Date as specified in the notice
from the Underwriter to the Company. Delivery of the certificates for the Firm
Securities and the Overallotment Securities, if any, shall be made to the
Underwriter against payment by the Underwriter of the purchase price for the
Firm Securities and the Overallotment Securities, if any, to the order of the
Company as the case may be by certified check in New York Clearing House funds,
certificates for the Firm Securities and the Overallotment Securities, if any,
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Underwriter may request in writing at least two (2) business days prior to
Closing Date or the relevant Overallotment Closing Date, as the case may be. The
certificates for the Firm Securities and the Overallotment Securities, if any,
shall be made available to the Underwriter at the above-mentioned office or such
other place as the Underwriter may designate for inspection, checking and
packaging no later than 9:30 a.m. on the last business day prior to Closing Date
or the relevant Overallotment Closing Date, as the case may be.
The purchase price of the Securities to be paid by the Underwriter, to
the Company for the Securities purchased under Clauses (a) and (b) above will be
$5.40 per Share (which price is net of the Underwriter's discount and
commissions). The Company shall not be obligated to sell any Securities
hereunder unless all Firm Securities to be sold by the Company are purchased
hereunder. The Company agrees to issue and sell the Securities to the
Underwriter in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriter, the Underwriter's Purchase Option at a purchase price of $135.00
which Underwriter's Purchase Option shall entitle the holders thereof to
purchase an aggregate of 135,000 Shares. The Underwriter's Purchase Option shall
be exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at an initial exercise price equal
to one hundred twenty percent (120%) of the initial public offering price of the
Shares. The Underwriter's Purchase Option Agreement and form of Purchase Option
Certificate shall be substantially in the form filed as an Exhibit to the
Registration Statement. Payment for the Underwriter's Purchase Option shall be
made on the Closing Date. The Company has reserved and shall continue to reserve
a sufficient number of Shares for issuance upon exercise of the Underwriter's
Purchase Option .
3. PUBLIC OFFERING OF THE SECURITIES. As soon after the Registration
Statement becomes effective and as the Underwriter deem advisable, but in no
event more than five (5) business days after such effective date, the
Underwriter shall make a public offering of the Securities (other than to
residents of or in any jurisdiction in which qualification of the Securities is
required and has not
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<PAGE> 12
become effective) at the price and upon the other terms set forth in the
Prospectus and otherwise in compliance with the Rules and Regulations. The
Underwriter may allow such concessions and discounts upon sales to other dealers
as set forth in the Prospectus. The Underwriter may from time to time increase
or decrease the public offering price after distribution of the Securities has
been completed to such extent as the Underwriter, in their sole discretion,
deems advisable.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriter as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act: (i) before termination of the offering of the Securities
by the Underwriter which the Underwriter shall not previously have been advised
and furnished with a copy; or (ii) to which the Underwriter shall have objected;
or (iii) which is not in compliance with the Act, the Exchange Act or the Rules
and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will, during the period when the Prospectus is required to
be delivered under the Act or the Exchange Act, advise the Underwriter and
confirm by notice in writing: (i) when the Registration Statement, as amended,
becomes effective, if the provisions of Rule 430A promulgated under the Act will
be relied upon, when the Prospectus has been filed in accordance with said Rule
430A and when any post-effective amendment to the Registration Statement becomes
effective; (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening of any proceeding, suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use of
the Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution or proceeding for that purpose; (iii) of the
issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose; (iv) of the receipt of any comments regarding the Registration
Statement or the Company from the Commission; and (v) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information. If the Commission or
any state securities commission or regulatory authority shall enter a stop order
or suspend such qualification at any time, the Company will make every
reasonable effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Underwriter pursuant to
Rule 424(b)(4)) not later than the Commission's close of business on the earlier
of (i) the second business day following the execution and delivery of this
Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
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<PAGE> 13
(d) The Company will give the Underwriter notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriter in connection with the offering of the Securities which differs from
the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
will furnish the Underwriter with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such prospectus to which the Underwriter or Mintz &
Fraade, P.C. ("Underwriter's Counsel"), shall reasonably and in good faith
object.
(e) The Company shall cooperate in good faith with the
Underwriter, and Underwriter's Counsel, at or prior to the time the Registration
Statement becomes effective, in endeavoring to qualify the Securities for
offering and sale under the securities laws of such jurisdictions as the
Underwriter may reasonably designate, and shall cooperate with the Underwriter
and Underwriter's Counsel in the making of such applications, and filing such
documents and shall furnish such information as may be required for such
purpose; PROVIDED, HOWEVER, the Company shall not be required to qualify as a
foreign corporation or file a general consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Underwriter agree that such action is not at the
time necessary or advisable, use all reasonable efforts to file and make such
statements or reports at such times as are or may reasonably be required by the
laws of such jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriter's Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriter promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
reasonably satisfactory to Underwriter's Counsel, and the Company will furnish
to the Underwriter a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period commencing on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations,
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<PAGE> 14
and to the Underwriter, an earnings statement which will be in such form and
detail required by, and will otherwise comply with, the provisions of Section
11(a) of the Act and Rule 158(a) of the Rules and Regulations, which statement
need not be audited unless required by the Act, covering a period of at least 12
consecutive months after the effective date of the Registration Statement.
(h) During a period of five (5) years after the date hereof and
provided that the Company is required to file reports with the Commission under
Section 12 of the Exchange Act, the Company will furnish to its stockholders, as
soon as practicable, annual reports (including financial statements audited by
independent public accountants), and will deliver to the Underwriter:
(i) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission, the NASD or
any securities exchange;
(iii) every press release and every material news item or
article of interest to the financial community in respect of the Company and any
future subsidiaries or their affairs which was released or prepared by the
Company;
(iv) any additional information of a public nature
concerning the Company and any future subsidiaries or their respective
businesses which the Underwriter may reasonably request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4
received or filed by the Company from time to time.
During such four-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) For as long as the Company is required to file reports with
the Commission under Section 12 of the Exchange Act, the Company will maintain a
Transfer Agent and, if necessary under the same jurisdiction of incorporation as
the Company, as well as a Registrar (which may be the same entity as the
Transfer Agent) for its Common Stock.
(j) The Company will furnish to the Underwriter or pursuant to
the Underwriter's direction, without charge, at such place as the Underwriter
may designate, copies of each Preliminary Prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto (two of which copies
will be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriter may reasonably
request.
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<PAGE> 15
(k) Neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the provisions, set forth under the
caption "Use of Proceeds" in the Prospectus. No portion of the net proceeds will
be used directly or indirectly to acquire any securities issued by the Company.
(m) The Company shall timely file all such reports, forms or
other documents as may be required from time to time, under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(n) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each
Overallotment Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited consolidated interim
financial statements of the Company (which in no event shall be as of a date
more than forty-five (45) days prior to the date of the Registration Statement)
which have been read by the Company's independent public accountants, as stated
in their letters to be furnished pursuant to SECTION 6(k) hereof.
(o) For a period of five (5) years from the Closing Date, the
Company shall furnish to the Underwriter at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Securities upon the
Underwriter's request; (ii) a list of holders of Securities upon the
Underwriter's request; (iii) a list of, if any, the securities positions of
participants in the Depository Trust Company upon the Underwriter's request.
(p) Until the Company completes an acquisition that results in it
expending the majority of its funds, the Company shall use its best efforts to
cause one (1) individual selected by the Underwriter to be elected to the Board
of Directors of the Company (the "Board"), if requested by the Underwriter and
provided such individual is reasonably acceptable to and approved by the
Company. Alternatively, the Underwriter shall be entitled to appoint an
individual who shall be permitted to attend all meetings of the Board and to
receive all notices and other correspondence and communications sent by the
Company to members of the Board, and copies of all minutes thereof. The Company
shall reimburse the Underwriter's designee for his or her out-of-pocket expenses
reasonably incurred and authorized in advance by the Company in connection with
his or her attendance of the Board meetings. To the extent permitted by law, the
Company agrees to indemnify and hold the designee (as a director or observer)
and the Underwriter harmless against any and all claims, actions, awards and
judgements arising out of his or her service as a director or an observer. If
the Company shall maintain a liability insurance policy affording coverage for
the actions of its officers and directors, it shall include such designee and
the Underwriter as an insured under such policy.
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<PAGE> 16
(q) For a period equal to the lesser of (i) five (5) years from
the date hereof, or (ii) the sale to the public of the Underwriter's Option
Shares, the Company will not take any action or actions that may prevent or
disqualify the Company's use of Forms SB-1 or, if applicable, S-1 and S-3 (or
other appropriate form) for the registration under the Act of the Underwriter's
Option Shares.
(r) For a period of five (5) years from the date hereof, use its
best efforts at its cost and expense to maintain the listing of the Securities
on the Nasdaq Electronic Bulletin Board, SmallCap or National Market System.
(s) (i) As soon as practicable, but in no event more than 5
business days after the effective date of the Registration Statement, file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Securities.
(t) Following the Effective Date of the Registration Statement
and for a period of two (2) years thereafter, the Company shall, at its sole
cost and expense, prepare and file such blue sky trading applications with such
jurisdictions as the Underwriter may reasonably request after consultation with
the Company, and on the Underwriter's request, furnish the Underwriter with a
secondary trading survey prepared by securities counsel to the Company.
(u) The Company shall not amend or alter any term of any written
employment agreement between the Company and any executive officer, during the
term of such written employment agreement, in a manner more favorable to such
employee, without the express written consent of the Underwriter.
(v) Until the completion of the distribution of the Securities,
the Company shall not without the prior written consent of the Underwriter,
which consent shall not be unreasonably withheld, issue, directly or indirectly,
any press release or other communication or hold any press conference with
respect to the Company or its activities or the offering contemplated hereby,
other than trade releases issued in the ordinary course of the Company's
business consistent with past practices with respect to the Company's
operations.
(w) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of five (5) years
from the Closing Date.
(x) For a period of the shorter of 24 months commencing on the
Closing Date or until such time as the Company has consummated a Business
Combination, except with the written consent of the Underwriter, which consent
shall not be unreasonably withheld, the Company will not issue or sell, directly
or indirectly, any shares of its capital stock, or sell or grant options, or
warrants or rights to purchase any shares of its capital stock, except pursuant
to (i) this Agreement, (ii) the Underwriter's Purchase Option, and (iii) the
exercise of warrants and options of the Company heretofore issued and described
in the Prospectus; except that, during such period, the Company may issue
securities without the Underwriter's consent in connection with an acquisition,
merger or similar transaction as described in the Prospectus. Except as
discussed in the Prospectus, prior to the Closing
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<PAGE> 17
Date, the Company will not issue any options or warrants without the prior
written consent of the Underwriter.
(y) Until a Business Combination is consummated, as described in
the Prospectus, the Company will not file any registration statement relating to
the offer or sale of any of the Company's securities, including any registration
statement on Form S-8, during the 24 months following the Closing Date without
the Underwriter's prior written consent.
(z) Subsequent to the dates as of which information is given in
the Registration Statement and Prospectus and prior to the Closing Dates, except
as disclosed in or contemplated by the Registration Statement and Prospectus,
(i) the Company will not have incurred any liabilities or obligations, direct or
contingent, or entered into any material transactions other than in the ordinary
course of business; (ii) there shall not have been any change in the capital
stock, funded debt (other than regular repayments of principal and interest on
existing indebtedness) or other securities of the Company, any material adverse
change in the condition (financial or other), business, operations, income, net
worth or properties, including any material loss or damage to the properties of
the Company (whether or not such loss is insured against), which could
materially adversely affect the condition (financial or other), business,
operations, income, net worth or properties of the Company; and (iii) the
Company shall not pay or declare any dividend or other distribution on its
Common Stock or its other securities or redeem or repurchase any of its Common
Stock or other securities.
(aa) Except as disclosed in or contemplated by the Registration
Statement and Prospectus (including any Business Combination contemplated
therein), the Company, for a period of 18 months following the Closing Date,
shall not redeem any of its securities, and shall not pay any dividends or make
any other cash distribution in respect of its securities in excess of the amount
of the Company's current or retained earnings derived after the Closing Date
without obtaining the Underwriter's prior written consent, which consent shall
not be unreasonably withheld. The Underwriter shall either approve or disapprove
such contemplated redemption of securities or dividend payment or distribution
within seven (7) business days from the date the Underwriter receives written
notice of the Company's proposal with respect thereto; a failure of the
Underwriter to respond within the seven (7) business day period shall be deemed
approval of the transaction.
(bb) The Company maintains and will continue to maintain a system
of internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(cc) Until the Company expends the majority of its funds as
described in the Prospectus, the Company shall maintain a key-man life insurance
policy in the amount of not less than
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<PAGE> 18
$1,000,000 on the lives of each of Messrs. Frost and Hanna, which policies are
owned by the Company and name the Company as the sole beneficiary thereunder.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on each of the Closing Date
and the Overallotment Closing Date (to the extent not paid at the Closing Date)
all its expenses and fees (other than fees of Underwriter's Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation: (i) the fees and
expenses of accountants and counsel for the Company; (ii) all costs and expenses
incurred in connection with the preparation, duplication, mailing, printing and
filing of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing and delivery of this Agreement,
the Selected Dealer Agreements, Agreement Between Underwriter, and related
documents, including the cost of all copies thereof and of the Preliminary
Prospectuses and of the Prospectus and any amendments thereof or supplements
thereto supplied to the Underwriter in quantities as hereinabove stated; (iii)
the printing, engraving, issuance and delivery of the Securities and
Underwriter's Option Shares including any transfer or other taxes payable
thereon; (iv) disbursements and fees of Underwriter's Counsel in connection with
the qualification of the Securities under state or foreign securities or "Blue
Sky" laws and determination of the status of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal
Investments Survey," if any, which Underwriter's Counsel fees (exclusive of
filing fees and disbursements) shall equal $________, none of which has
previously been paid; (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with one information meeting held in
New York, New York, one tombstone advertisement (not to exceed $15,000 without
Company consent), bound volumes and prospectus memorabilia; (vi) fees and
expenses of the transfer agent; (vii) the fees payable to the NASD; and (viii)
the fees and expenses incurred in connection with the listing of the Securities
on the Nasdaq OTC Bulletin Board. All fees and expenses payable to the
Underwriter hereunder shall be payable at the Closing Date or Overallotment
Closing Date, as applicable; provided, however, the company shall pay such fees
and costs in advance of the Closing Date if requested by the Underwriter. The
Underwriter shall be responsible for all of its own costs of counsel.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of SECTION 6, SECTION 10(a) or SECTION 11, the
Company shall reimburse and indemnify the Underwriter for up to $100,000
out-of-pocket actual expenses reasonably incurred in connection with the
transactions contemplated hereby including the fees and disbursements of counsel
for the Underwriter of which the Underwriter acknowledges $40,000 has been paid
prior to the date hereof.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this SECTION 5, it will pay to the
Underwriter a non-accountable expense allowance equal to three percent (3%) of
the gross proceeds received by the Company from the sale of the Firm Securities,
$40,000 of which has been paid to date to the Underwriter. The Company will pay
the remainder of the non-accountable expense allowance on the Closing Date by
certified or bank
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<PAGE> 19
cashier's check or, at the election of the Underwriter, by deduction from the
proceeds of the offering contemplated herein. In the event the Underwriter elect
to exercise the over-allotment option described in Section 2(b) hereof, the
Company further agrees to pay to the Underwriter on the Overallotment Closing
Date (by certified or bank cashier's check or, at the Underwriter's election, by
deduction from the proceeds of the offering) a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds received by the Company from
the sale of the Overallotment Securities.
6. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter hereunder shall be subject to the continuing accuracy in all
materials respects of the representations and warranties of the Company herein
as of the Closing Date and each Overallotment Closing Date, if any, as if they
had been made on and as of the Closing Date or each Overallotment Closing Date,
as the case may be; the accuracy on and as of the Closing Date or Overallotment
Closing Date, if any, of the statements of officers of the Company made pursuant
to the provisions hereof; and the performance by the Company on and as of the
Closing Date and each Overallotment Closing Date, if any, of each of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Underwriter, and, at
Closing Date and each Overallotment Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated to the knowledge of the Company by the Commission and
any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Underwriter's Counsel. If
the Company has elected to rely upon Rule 430A of the Rules and Regulations, the
price of the Securities and any price-related information previously omitted
from the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) of the
Rules and Regulations within the prescribed time period, and prior to Closing
Date the Company shall have provided evidence satisfactory to the Underwriter of
such timely filing, or a post-effective amendment providing such information
shall have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Underwriter's opinion, and the opinion of its counsel is
material or omits to state a fact which, in the Underwriter's opinion, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading, or that the Prospectus, or any supplement
thereto, contains an untrue statement of fact which, in the Underwriter's
reasonable opinion, or the opinion of its counsel is material, or omits to state
a fact which, in the Underwriter's reasonable opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
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(c) At the Closing Date and the Overallotment Closing Date, the
Underwriter shall have received the favorable opinion of Stearns Weaver Miller
Weissler Alhadeff & Sitterson, P.A., counsel to the Company, dated the Closing
Date, or Overallotment Closing Date, as the case may be, addressed to the
Underwriter and in form and substance satisfactory to Underwriter's Counsel, to
the effect that:
(i) The Company: (A) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Florida with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; (B) the Company is duly licensed or qualified as a
foreign corporation in all jurisdictions in which by reason of maintaining an
office in such jurisdiction or by owning or leasing real property in such
jurisdiction it is required to be so licensed or qualified except where failure
to be so qualified or licensed would have no material adverse effect upon the
Company; and (C) to the best of counsel's knowledge, the Company has not
received any notice of proceedings relating to the revocation or modification of
any such license or qualification which revocation or modification would have a
material adverse effect upon the Company.
(ii) The Registration Statement, each Preliminary Prospectus
that has been circulated and the Prospectus and any post-effective amendments or
supplements thereto (other than the financial statements, schedules and other
financial and statistical data included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the requirements of
the Act and Regulations and the conditions for use of a registration statement
on Form SB-2 have been satisfied by the Company.
(iii) To the best of such counsel's knowledge, except as
described in the Prospectus, the Company does not own an interest of a character
required to be disclosed in the Registration Statement in any corporation,
partnership, joint venture, trust or other business entity;
(iv) To the best of such counsel's knowledge, the Company
has a duly authorized, issued and outstanding capitalization as set forth in the
Prospectus as of the date indicated therein, under the caption "Capitalization".
The Shares, Underwriter's Purchase Option and the Underwriter's Option Shares
conform or upon issuance will conform in all material respects to all statements
with respect thereto contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been duly authorized
and validly issued and all shares of capital stock are fully paid and
non-assessable; and none of such securities were issued in violation of any
statutory tax, or to our knowledge, any other preemptive rights of any holder of
any security of the Company. The Securities to be sold by the Company hereunder,
the Underwriter's Purchase Option to be sold by the Company under the
Underwriter's Purchase Option Agreement and Underwriter's Option Shares have
been duly authorized and, when issued, paid for and delivered in accordance with
the terms hereof, will be validly issued, fully paid and non-assessable and
conform or upon issuance will conform in all material respects to the
description thereof contained in the Prospectus; are not, subject to any
statutory, or to our knowledge, any other preemptive or other similar rights of
any stockholder of the Company; and that the certificates representing the
Shares, Underwriter's Purchase Option and Underwriter's Option Shares are in due
and proper legal form.
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<PAGE> 21
Upon delivery of the Shares to the Underwriter against payment therefor as
provided for in this Agreement, the Underwriter (assuming they are bona fide
purchasers within the meaning of the Uniform Commercial Code) will acquire good
title to the Shares, free and clear of all liens, encumbrances, equities,
security interests and claims.
(v) The Registration Statement has been declared effective
under the Act, and, if applicable, filing of all pricing information has been
timely made in the appropriate form under Rule 430A, and, to the best of such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and to the best of such counsel's
knowledge, no proceedings for that purpose have been instituted or are pending
or threatened or contemplated under the Act;
(vi) To the best of such counsel's knowledge, (A) there are
no material contracts or other documents required to be described in the
Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
and the Prospectus and filed as exhibits thereto, and (B) the descriptions in
the Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be shown by Form SB-2
and the Rules and Regulations;
(vii) This Agreement and the Underwriter's Purchase Option
Agreement have each been duly and validly authorized, executed and delivered by
the Company, and assuming that each is a valid and binding agreement of the
Underwriter, as the case may be, constitutes a legally valid and binding
agreement of the Company, enforceable as against the Company in accordance with
their respective terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors rights and
the application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable law
or pursuant to public policy). Notwithstanding any provision contained herein to
the contrary, we express no opinion as to: (i) the enforceability of any
provision which would in effect limit any person's right to compete; (ii) any
provision that restricts or enlarges the survival of representations, warranties
or other agreements; (iii) the enforceability of choice of law or venue
provisions; (iv) restrictions on access to legal or equitable redress; (v)
enforceability of arbitration provisions; and (vi) the limitation of granting of
specified types of damages.
(viii) Neither the execution or delivery by the Company of
this Agreement or the Underwriter's Purchase Option Agreement nor its
performance hereunder or thereunder, nor its consummation of the transactions
contemplated herein or therein, nor the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto, nor the issuance of the Securities pursuant to this Agreement, to our
knowledge, conflicts with or will conflict with or results or will result in any
material breach or violation of any of the terms or provisions of, or
constitutes or will constitute a material default under, or result in the
creation imposition of any material lien, charge, claim, encumbrance, pledge,
security interest, defect or other
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<PAGE> 22
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company except to the extent such event will not
have a material adverse effect upon the Company pursuant to the terms of, (A)
the Articles of Incorporation or Bylaws of the Company, (B) to the best
knowledge of such counsel, any indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any other
agreement or instrument that is material to the Company to which the Company is
a party or by which it is bound or to which its properties or assets (tangible
or intangible) are subject, or any indebtedness, or (C) to the best knowledge of
such counsel, and except to the extent it would not have a material adverse
effect on the Company, any statute, judgment, decree, order, rule or regulation
applicable to the Company or any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body, having jurisdiction
over the Company or any of its respective activities or properties.
(ix) No consent, approval, authorization or order, and no
filing with, any court, regulatory body, government agency or other body (other
than such as may be required under state securities laws, as to which no opinion
need be rendered) is required in connection with the issuance by the Company of
the Securities pursuant to the Prospectus and the Registration Statement, the
performance of this Agreement and the Underwriter's Purchase Option Agreement by
the Company, and the taking of any action by the Company contemplated hereby or
thereby, which has not been obtained;
(x) Except as described in the Prospectus, to the best
knowledge of such counsel, the Company is not in breach of, or in default under,
any material term or provision of any indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets (tangible or intangible) of the
Company is subject or affected; and the Company is not in violation of any
material term or provision of its Articles of Incorporation or Bylaws or, to the
best knowledge of such counsel, in violation of any material franchise, license,
permit, or in violation of any judgment, decree, order, statute, rule or
regulation material to the Company business;
(xi) The statements in the Prospectus under the captions
"THE COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES ELIGIBLE FOR FUTURE
SALE" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects;
(xii) the Securities are eligible for quotation in the
Nasdaq Bulletin Board System.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, the independent public accountants for the Company and the Underwriter,
at which the contents of the Registration Statement, the Prospectus
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<PAGE> 23
and related matters were discussed and, although such counsel is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus and made no independent investigation or verification thereof, on the
basis of the foregoing, no facts have come to the attention of such counsel
which lead them to believe that either the Registration Statement or any
amendment thereto at the time such Registration Statement or amendment became
effective or the Prospectus as of the date of such opinion contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no opinion with respect to the financial
statements and schedules and other financial and statistical data included in
the Registration Statement or Prospectus or with respect to statements or
omissions made therein in reliance upon information furnished in writing to the
Company on behalf of any Underwriter expressly for use in the Registration
Statement or the Prospectus).
In rendering such opinion, such counsel may rely, (A) as to matters
involving the application of laws other than the laws of the United States, the
corporate laws of Delaware and Florida and jurisdictions in which they are
admitted, to the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriter's Counsel) of other counsel reasonably
acceptable to Underwriter's Counsel, familiar with the applicable laws of such
other jurisdictions, and (B) as to matters of fact, to the extent they deem
proper, on certificates and written statements of responsible officers of the
Company and certificates or other written statements of officers of departments
of various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company; provided, that copies of any such
statements or certificates shall be delivered to Underwriter's Counsel if
requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Underwriter and they are justified in relying thereon.
(d) At each Overallotment Closing Date, if any, the Underwriter
shall have received the favorable opinion of counsel to the Company, each dated
the Overallotment Closing Date, addressed to the Underwriter and in form and
substance satisfactory to Underwriter's Counsel confirming as of the
Overallotment Closing Date the statements made by such firm, in their opinion,
delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Overallotment
Closing Date, Underwriter's Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require and request for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this SECTION 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
(f) Prior to the Closing Date and each Overallotment Closing
Date, if any: (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects or the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth
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<PAGE> 24
in the Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which is materially
adverse to the Company; (iii) the Company shall not be in material default under
any provision of any instrument relating to any outstanding indebtedness for
money borrowed, except as described in the Prospectus; (iv) no material amount
of the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (v) no action, suit or
proceeding, at law or in equity, shall have been pending or to its knowledge
threatened against the Company, or affecting any of its properties or businesses
before or by any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus; and (vi) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
(g) At the Closing Date and each Overallotment Closing Date, if
any, the Underwriter shall have received a certificate of the Company signed by
the principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Overallotment Closing Date, as
the case may be, to the effect that:
(i) The representations and warranties of the Company in
this Agreement are, in all material respects, true and correct, as if made on
and as of the Closing Date or the Overallotment Closing Date, as the case may
be, and the Company has complied in all material respects with all agreements
and covenants and materially satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to such Closing
Date or Overallotment Closing Date, as the case may be;
(ii) To his knowledge, after due inquiry, no stop order
suspending the effectiveness of the Registration Statement has been issued, and
no proceedings for that purpose have been instituted or are pending or, to the
best of each of such person's knowledge, are contemplated or threatened under
the Act;
(iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and neither the
Preliminary Prospectus nor any supplement thereto included any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading except to the extent
any such material fact may be corrected in the Final Prospectus; and
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<PAGE> 25
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and except
as otherwise contemplated therein: (A) the Company has not incurred up to and
including the Closing Date or the Overallotment Closing Date, as the case may
be, other than in the ordinary course of its business, any material liabilities
or obligations, direct or contingent; (B) the Company has not paid or declared
any dividends or other distributions on its capital stock; (C) the Company has
not entered into any material transactions not in the ordinary course of
business; (D) there has not been any change in the capital stock or any increase
in long-term debt or any increase in the short-term borrowings (other than any
increase in the short-term borrowings in the ordinary course of business) of the
Company; (E) the Company has not sustained any material loss or damage to its
property or assets, whether or not insured; (F) there is no litigation which is
pending or threatened against the Company which is required to be set forth in
an amended or supplemented Prospectus which has not been set forth;
(v) Neither the Company nor any of its officers or
affiliates shall have taken, and the Company, its officers and affiliates will
not take, directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in the stabilization or manipulation
of the price of the Company's securities to facilitate the sale or resale of the
Shares.
References to the Registration Statement and the Prospectus in this
Isubsection (h) are to such documents as amended and supplemented at the date
of such certificate.
(h) By the Closing Date, the Underwriter shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriter, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriter shall
have received a letter, dated such date, addressed to the Underwriter in form
and substance satisfactory in all respects (including the non-material nature of
the changes or decreases, if any, referred to in clause (iii) below) to the
Underwriter, from Arthur Andersen, LLP:
(i) confirming that they are independent public accountants
with respect to the Company within the meaning of the Act and the applicable
Rules and Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations thereunder;
(iii) stating that, on the basis of a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention that would lead them to believe that at a specified date
not more than five (5) days prior to the effective date of the Registration
Statement, there has been any change in the capital stock or
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<PAGE> 26
long-term debt of the Company, or any decrease in the stockholders' equity or
net current assets or net assets of the Company as compared with amounts shown
in the financial statements included in the Registration Statement, other than
as set forth in or contemplated by the Registration Statement, or, if there was
any change or decrease, setting forth the amount of such change or decrease, and
(C) during the period from December 31, 1996 to a specified date not more than
five (5) days prior to the effective date of the Registration Statement, there
was any decrease in net revenues, net earnings or increase in net earnings per
common share of the Company, in each case as compared with the corresponding
period in the preceding year, other than as set forth in or contemplated by the
Registration Statement, or, if there was any such decrease, setting forth the
amount of such decrease;
(iv) setting forth, at a date not later than five (5) days
prior to the effective date of the Registration Statement, the amount of
liabilities of the Company (including a breakdown of commercial paper and notes
payable to banks);
(v) stating that they have compared specific dollar amounts,
numbers of Securities, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) stating that they have not during the immediately
preceding five (5) year period brought to the attention of the Company's
management any "weakness", as defined in Statement of Auditing Standard No. 60
"Communication of Internal Control Structure Related Matters Noted in an Audit,
" in the Company's internal controls;
(vii) stating that they have in addition carried out certain
specified procedures, not constituting an audit, with respect to certain pro
forma financial information which is included in the Registration Statement and
the Prospectus and that nothing has come to their attention as a result of such
procedures that caused them to believe such unaudited pro forma financial
information does not comply in form in all material respects with the applicable
accounting requirements of Rule ll-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of that information; and
(viii) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may reasonably request.
(j) At the Closing Date and each Overallotment Closing Date, the
Underwriter shall have received from Arthur Andersen LLP, a letter, dated as of
the Closing Date, or Overallotment Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to SUBSECTION (i) of this Section, except that the specified date referred to
shall
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<PAGE> 27
be a date not more than five days prior to Closing Date and, if the Company has
elected to rely on Rule 430A of the Rules and Regulations, to the further effect
that they have carried out procedures as specified in clause (iii) of subsection
(i) of this Section with respect to certain amounts, percentages and financial
information as specified by the Underwriter and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (iii).
(k) On each of Closing Date and Overallotment Closing Date, if
any, there shall have been duly tendered to the Underwriter for their accounts
the appropriate number of Securities against payment therefore.
(l) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to subsection (e) of SECTION
4 hereof shall have been issued on either the Closing Date or the Overallotment
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or to its knowledge or that of the Company shall be contemplated.
(m) The Company shall enter into the following agreements on
terms reasonably satisfactory to the Underwriter:
(i) Escrow Agreement for Common Shares owned by Messrs.
Frost, Hanna, Rosenberg, Baxter and Fernandez;
(ii) Escrow Agreement for the proceeds of this Offering;
(iii) Agreement for the voting, negotiating and sale of
Common Stock of management of the Company, finder's fees and conflicts of
interest; and
(iv) Agreement waiving redemption rights for management of
the Company.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Overallotment Closing
Date, as the case may be, is not so fulfilled, the Underwriter may terminate
this Agreement or, if the Underwriter so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter ("controlling
person") within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions in respect thereof), whatsoever
(including but not limited to any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which such Underwriter or such controlling person may become subject under the
Act,
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the Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained (i) in any Preliminary
Prospectus (except that the indemnification contained in this paragraph with
respect to any preliminary prospectus shall not inure to the benefit of the
Underwriter or to the benefit of any person controlling the Underwriter on
account of any loss, claim, damage, liability or expense arising from the sale
of the Firm Securities by the Underwriter to any person if a copy of the
Prospectus, as amended or supplemented, shall not have been delivered or sent to
such person within the time required by the Act, and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus, as
amended and supplemented, and such correction would have eliminated the loss,
claim, damage, liability or expense), the Registration Statement or the
Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included Securities of the Company issued or issuable
upon exercise of the Underwriter's Purchase Option; or (iii) in any application
or other document or written communication (in this SECTION 7 collectively
called "application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Securities
under the securities laws thereof or filed with the Commission, any state
securities commission or agency, Nasdaq Stock Market, Inc. or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless in any case above such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) The Underwriter agrees, to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement, and each other person, if any, who controls the Company
within the meaning of the Act to the same extent as the foregoing indemnity from
the Company to the Underwriter but only with respect to statements or omissions,
if any, made in any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto in any post-effective
amendment, new registration statement or prospectus, or in any application made
in reliance upon, and in strict conformity with, written information furnished
to the Company with respect to the Underwriter by such Underwriter expressly for
use in such Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment thereof or supplement thereto or in any post-effective amendment,
new registration statement or prospectus, or in any such application, directly
related to the transactions effected by the Underwriter in connection with this
Offering; provided that such written information or omissions only pertain to
disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto, in any post-effective
amendment, new registration
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statement or prospectus or in any such application, provided, further, that the
liability of each Underwriter to the Company shall be limited to the product of
the Underwriter's discount or commission for the Shares multiplied by the number
of Shares sold by such Underwriter hereunder. The Company acknowledges that the
statements with respect to the public offering of the Firm Securities set forth
under the heading "Underwriting" and the stabilization legend and the last
paragraph of the cover page in the Prospectus have been furnished by the
Underwriter expressly for use therein and any information furnished by or on
behalf of the Underwriter filed in any jurisdiction in order to qualify the
Securities under State Securities laws or filed with the Commission, the NASD or
any securities exchange constitute the only information furnished in writing by
or on behalf of the Underwriter for inclusion in the Prospectus and the
Underwriter hereby confirm that such statements and information are true and
correct and shall be on each Closing Date and Overallotment Closing Date.
(c) Promptly after receipt by an indemnified party under this
SECTION 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this SECTION 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, the indemnifying party may assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing the indemnified party or parties shall have the
right to employ its or their own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnifying party or
parties shall have reasonably concluded that there may be defenses available to
it or them that are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided however, that
such consent was not unreasonably withheld.
29
<PAGE> 30
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
the contributing party and the Underwriter are the indemnified party the
relative benefits received by the Company on the one hand, and the Underwriter,
on the other, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (before deducting expenses) bear to
the total underwriting discounts and commissions received by the Underwriter
hereunder, in each case as set forth in the table on the Cover Page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to above in this subdivision (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), the Underwriter shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this SECTION 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected
30
<PAGE> 31
by such omission. The contribution agreement set forth above shall be in
addition to any liabilities which any indemnifying party may have at common law
or otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Overallotment Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the indemnity
agreements contained in Section 7 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Underwriter, the Company, or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the Underwriter.
9. EFFECTIVE DATE.
This Agreement shall become effective at 9:30 a.m., New York City
time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Underwriter, in their discretion, shall release the Securities for the sale to
the public, provided, however that the provisions of Sections 5, 7 and 10 of
this Agreement shall at all times be effective. For purposes of this Section 9,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Underwriter of telegrams to
securities dealers releasing such Securities for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. TERMINATION.
(a) The Underwriter shall have the right to terminate this
Agreement: (i) if any calamitous domestic or international event or act or
occurrence has materially disrupted, or in the Underwriter's opinion will in the
immediate future materially disrupt general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities; or (iv) if a banking moratorium has been declared by a New
York State or federal authority; or (v) if a moratorium in foreign exchange
trading has been declared; or if the Company shall have sustained a material
loss, whether or not insured, by reason of fire, flood, accident or other
calamity; or (vii) if there shall have been such material adverse change in the
conditions or prospects of the Company, involving a change not contemplated by
the Registration Statement, or (viii) if there shall have been such material
adverse general market conditions as in the Underwriter's reasonable judgment
would make it inadvisable to proceed with the offering, sale or delivery of the
Securities.
31
<PAGE> 32
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Section 10 hereof), and whether or
not this Agreement is otherwise carried out, the provisions of SECTION 5 shall
not be in any way affected by such election or termination or failure to carry
out the terms of this Agreement or any part hereof.
11. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date or any Overallotment Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Overallotment Closing Date, the
Underwriter may at the Underwriter's option, by notice from the Underwriter to
the Company, terminate the Underwriter's obligations to purchase Securities from
the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to SECTION 5 and SECTION 7 hereof. No
action taken pursuant to this Section shall relieve the Company from liability,
if any, in respect of such default.
12. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at LH Ross & Company, One Boca Place, 2255 Glades Road, Suite 425W,
Boca Raton, Florida 33431, Attention: Attn: Frank R. Michelin, with a copy to
Mintz & Fraade, P.C., 488 Madison Avenue, New York, New York 10022, Attention:
Alan P. Fraade, Esq. Notices to the Company shall be directed to the Company at
7700 West Camino Real, Suite 222, Boca Raton, Florida 33431, Attention: Richard
B. Frost, with a copy to Stearns Weaver Miller Weissler Alhadeff & Sitterson,
P.A., 150 West Flagler Street, Miami, Florida 33130, Attention: Teddy D.
Klinghoffer, Esq.
13. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal representatives, assigns, and their respective heirs and legal
representatives and no other person shall have or be construed to have any legal
or equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained. No purchaser of Securities from
the Underwriter shall be deemed to be a successor by reason merely of such
purchase.
14. CONSTRUCTION. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
32
<PAGE> 33
16. WAIVER. The waiver by either party of the breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach.
17. ASSIGNMENT. Except as otherwise provided within this Agreement,
neither party hereto may transfer or assign this Agreement without prior written
consent of the other party.
18. TITLES AND CAPTIONS. All article, section and paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the context nor affect the interpretation of this Agreement.
19. PRONOUNS AND PLURALS. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the Person or Persons may require.
20. ENTIRE AGREEMENT. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
33
<PAGE> 34
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
FROST HANNA CAPITAL GROUP, INC.
By:
----------------------------
Name: Richard B. Frost
Title: Chairman of the Board
Confirmed and accepted as of the date first above written.
LH ROSS & COMPANY, INC.
as Representative of the Several Underwriters
By:
----------------------------------
Name: Franklyn R. Michelin
Title: President and Sole Director
34
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
FROST HANNA INVESTMENTS GROUP, INC.
ARTICLE I - NAME
The name of this corporation is Frost Hanna Investments Group,
Inc. (the "Corporation").
ARTICLE II - PURPOSE
The Corporation is organized for the purpose of transacting
any and all lawful business for which corporations may be organized under the
laws of the United States and the laws of the State of Florida.
ARTICLE III - CAPITAL STOCK
The Corporation is authorized to issue 100,000,000 shares of
common stock, par value $.0001 per share. The Board of Directors may authorize
the issuance of such stock to such persons upon such terms and for such
consideration in cash, property or services as the Board of Directors may
determine and as may be allowed by law. The just valuation of such property or
services shall be fixed by the Board of Directors. All such stock when issued
shall be fully paid and exempt from assessment.
ARTICLE IV - REGISTERED
OFFICE AND AGENT
The name of the registered agent of the Corporation and the
street address of the registered office of this Corporation is:
CT Corporation System
1200 South Pine Island Road
Plantation, Florida 33324
ARTICLE V - CORPORATE MAILING ADDRESS
The principal office and mailing address of the Corporation
is:
7700 W. Camino Real
Suite 222
Boca Raton, Florida 33431
<PAGE> 2
ARTICLE VI - INCORPORATOR
The name and address of the incorporator of the Corporation is as
follows:
Name Address
---- -------
Tera S. Fewell 660 East Jefferson Street
Tallahassee, FL 32301
ARTICLE VII - POWERS
The Corporation shall have all of the corporate powers enumerated
under Florida law.
ARTICLE VIII - COMMENCEMENT
The Corporation shall commence on February 2, 1996.
ARTICLE IX - DIRECTOR - CONFLICTS OF INTEREST
No contract or other transaction between the Corporation and one or
more of its directors, or between the Corporation and any other corporation,
firm, association or other entity in which one or more of the directors are
directors or officers, or are financially interested, shall be either void or
voidable because of such relationship or interest or because such director or
directors are present at the meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction or
because his or her votes are counted for such purpose, if:
(a) The fact of such relationship or interest is disclosed or
known to the Board of Directors, or a duly empowered committee thereof, which
authorizes, approves or ratifies the contract or transaction by a vote or
consent sufficient for such purpose without counting the vote or votes of such
interested director or directors; or
(b) The fact of such relationship or interest is disclosed or
known to the shareholders entitled to vote and they authorize, approve or
ratify such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable as to the
Corporation at the time it is authorized by the Board, committee or the
shareholders.
-2-
<PAGE> 3
A director of the Corporation may transact business, borrow, lend, or
otherwise deal or contract with the Corporation to the full extent and subject
only to the limitations and provisions of the laws of the State of Florida and
the laws of the United States.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
ARTICLE X - NO ANTI-TAKEOVER LAW GOVERNANCE
The Corporation shall not be governed by Sections 607.0901 or 607.0902
of the Florida Business Corporation Act or any laws related thereto.
ARTICLE XI - INDEMNIFICATION
The Corporation shall indemnify and shall advance expenses on behalf
of its officers and directors to the fullest extent permitted by law in
existence either now or hereafter.
ARTICLE XII - FISCAL YEAR
The fiscal year of this Corporation shall be the calendar year, unless
otherwise established by the Board of Directors.
ARTICLE XIII - DURATION
The duration of the Corporation is perpetual, unless sooner liquidated
or dissolved in accordance with law.
The undersigned has executed these Articles of Incorporation this 2nd
day of February, 1996.
/s/ Tera S. Fewell
----------------------------
Tera S. Fewell, Incorporator
-3-
<PAGE> 4
ACCEPTANCE OF REGISTERED AGENT
Having been named to accept service of process for FROST HANNA
INVESTMENTS GROUP, INC. at the place designated in the Articles of
Incorporation, CT CORPORATION SYSTEMS agrees to act in this capacity, and
agrees to comply with the provisions of Section 607.0505, Fla. Stat. (1991),
relative to keeping open such office until such time as he shall notify the
Corporation of his resignation.
Dated this 2nd day of February, 1996.
________________________________________
CT Corporation Systems
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<PAGE> 5
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
FROST HANNA INVESTMENTS GROUP, INC.
Pursuant to the provisions of Sections 607.1003 of the Florida
Business Corporation Act, the Articles of Incorporation of FROST HANNA
INVESTMENTS GROUP, INC., a Florida corporation (the "Corporation"), are hereby
amended as follows:
1. Article I shall be deleted in its entirety and amended to read
as follows:
"ARTICLE I - Name
The name of this Corporation is "FROST HANNA CAPITAL GROUP,
INC."
2. The foregoing amendment was duly adopted and approved by all
of the shareholders and all of the directors of the Corporation by unanimous
written consent in lieu of meeting on September 13, 1996. The number of votes
cast for the amendment was sufficient for approval.
Dated: September 30, 1996 FROST HANNA INVESTMENTS
GROUP, INC.
By: /s/ Mark J. Hanna
-------------------------------------
Mark J. Hanna, President
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
FROST HANNA CAPITAL GROUP, INC.
A FLORIDA CORPORATION
<PAGE> 2
BYLAWS
OF
FROST HANNA CAPITAL GROUP, INC.
A FLORIDA CORPORATION
ARTICLE I
OFFICES
Section 1. The location of the registered office of the
corporation shall be as stated in the Articles of Incorporation, which location
may be changed from time to time by the board of directors.
Section 2. The corporation may also have offices or branches
at such other places, both within and without the State of Florida, as the
board of directors may from time to time determine or as the business of the
corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. All meetings of the shareholders shall be held at
the registered office of the corporation, or at such other place either within
or without the State of Florida as shall be designated from time to time by the
board of directors and stated in the notice of the meeting.
Section 2. Annual meetings of shareholders shall be during
the third month of each fiscal year of the corporation, at such date as
determined by the board of directors, or at such other date as the board of
directors deems appropriate, and at such time and place as designated in the
notice of the meeting. At the annual meeting, the shareholders shall elect a
board of directors and transact such other business as may properly be brought
before the meeting. If the annual meeting is not held on the date designated
therefor, the board of directors shall cause the meeting to be held as soon
thereafter as convenient.
Section 3. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the Articles
of Incorporation, may be called by the chairman of the board or president, and
shall be called by the chairman of the board or president at the request in
writing of a majority of the board of directors or at the request in writing of
the holders of not less than 10% of all the shares entitled to vote at a
meeting. Such request shall state the purpose or purposes of the proposed
meeting.
<PAGE> 3
Section 4. The officer or agent who has charge of the stock
transfer book for shares of the corporation shall make and certify a complete
list of the shareholders entitled to vote at a shareholders' meeting, or any
adjournment thereof. Such list shall be arranged alphabetically and by voting
group and shall show the address of each shareholder and the number of shares
registered in the name of each shareholder. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof,
and may be inspected by any shareholder who is present.
Section 5. Except as may be provided by statute, written
notice of an annual or special meeting of shareholders stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be delivered, either personally or by first-class mail, not less
than 10 nor more than 60 days before the date of the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation with postage thereon prepaid.
Section 6. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise expressly required by statute or by
the Articles of Incorporation. All shareholders present in person or
represented by proxy at such meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum. If, however, such quorum shall not be initially present at
any meeting of shareholders, a majority of the shareholders entitled to vote
thereat shall nevertheless have power to adjourn the meeting from time to time
and to another place, without notice other than announcement at the meeting,
until a quorum shall be present or represented. At such adjourned meeting, at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally called. If after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each shareholder of record entitled
to vote at the meeting. Once a share is represented for any purpose at a
meeting, it is deemed presented for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be set for that adjourned meeting.
Section 7. When an action other than the election of
directors is to be taken by vote of the shareholders, it shall be authorized if
the votes cast favoring the action exceed the votes cast against the action,
except as otherwise expressly required by the statutes or of the Articles of
Incorporation, in which case
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<PAGE> 4
such express provision shall govern and control the decision of such question.
"Shares represented at the meeting" shall be determined as of the time the
existence of the quorum is determined. Except as otherwise expressly required
by the Articles of Incorporation, directors shall be elected by a plurality of
the votes cast at an election.
Section 8. Except as otherwise provided by law, each
shareholder shall at every meeting of the shareholders be entitled to one vote
in person or by proxy for each share of the capital stock having voting power
held by such shareholder except as otherwise expressly required in the Articles
of Incorporation. A vote may be cast either orally or in writing. Each proxy
shall be in writing and signed by the shareholder or his authorized agent or
representative. A proxy is not valid after the expiration of 11 months after
its date unless the person executing it specifies therein the length of time
for which it is to continue in force. Unless prohibited by law, a proxy
otherwise validly granted by telegram shall be deemed to have been signed by
the granting shareholder. All questions regarding the qualification of voters,
the validity of proxies and the acceptance or rejection of votes shall be
decided by the presiding officer of the meeting.
Section 9. Attendance of a person at a meeting of
shareholders in person or by proxy constitutes a waiver of notice of the
meeting except where the shareholder, at the beginning of the meeting, objects
to holding the meeting or transacting business at the meeting.
Section 10. Unless otherwise provided by the Articles of
Incorporation, any action required to be taken at any annual or special meeting
of the shareholders, or any other action which may be taken at any annual or
special meeting of the shareholders may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, shall be signed by holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Within 10 days after obtaining such authorization by written
consent, notice shall be given to those shareholders who have not consented in
writing. The notice shall fairly summarize the material features of the
authorized action and, if the action is of a type for which dissenters' rights
are provided for by statute, the notice shall contain a clear statement of the
right of shareholders dissenting therefrom to be paid the fair value of their
shares upon compliance with further provisions of such statute regarding the
rights of dissenting shareholders.
-3-
<PAGE> 5
ARTICLE III
DIRECTORS
Section 1. The business and affairs of the corporation shall
be managed by or under the direction of its board of directors which may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
Bylaws directed or required to be exercised or done by the shareholders.
Section 2. The number of directors which shall constitute the
whole board shall be not less than one nor more than seven. The number of
directors shall be determined from time to time by resolution of the board of
directors. In the absence of an express determination by the board, the number
of directors, until changed by the board, shall be that number of directors
elected at the most recently held annual meeting of shareholders or, if no such
meeting has been held, the number elected by the incorporator in the initially
filed Articles of Incorporation. The directors shall be elected at the annual
meeting of the shareholders, except as provided in Section 3 of this article,
and each director elected shall hold office until his successor is duly elected
and qualified or until his death, resignation or removal. Directors need not
be shareholders or officers of the corporation.
Section 3. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by the affirmative vote of a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, or by the shareholders,
and the directors so chosen shall hold office until the next annual election of
directors by the shareholders and until their successors are duly elected and
qualified or until their death, resignation or removal. Any director may be
removed, with or without cause, by the shareholders at a meeting of the
shareholders called expressly for that purpose.
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Florida. Unless otherwise restricted by the Articles of Incorporation, members
of the board of directors, or any committee designated by the board, may
participate in a meeting of the board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting.
Section 5. Regular meetings of the board of directors may be
held at such time and at such place as shall from time to time be determined by
the board of directors or by the chairman of
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<PAGE> 6
the board or president. Any notice given of a regular meeting need not specify
the business to be transacted or the purpose of the meeting.
Section 6. Special meetings of the board may be called by the
chairman of the board or president on four days' notice to each director by
mail or 24 hours' notice either personally or by telephone, telegram or
facsimile transmission; special meetings shall be called by the chairman of the
board or president in like manner and on like notice on the written request of
two directors. The notice need not specify the business to be transacted or
the purpose of the special meetings. The notice shall specify the place of the
special meeting.
Section 7. At all meetings of the board, a majority of the
number of directors then serving shall constitute a quorum for the transaction
of business. At all meetings of a committee of the board a majority of the
directors then members of the committee in office shall constitute a quorum for
the transaction of business. The act of a majority of the members present at
any meeting at which there is a quorum shall be the act of the board of
directors or the committee, unless the vote of a larger number is specifically
required by statute, by the Articles of Incorporation, or by these Bylaws. If
a quorum shall not be present at any meeting of the board of directors or a
committee, the members present thereat may adjourn the meeting from time to
time and to another place without notice other than announcement at the
meeting, until a quorum shall be present.
Section 8. Unless otherwise provided by the Articles of
Incorporation, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if, before or after the action, all members of the board or committee
consent thereto in writing. The written consents shall be filed with the
minutes of proceedings of the board or committee. Such consents shall have the
same effect as a vote of the board or committee for all purposes.
Section 9. A majority of the full board of directors may, by
resolution, designate one or more committees, each committee to consist of one
or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the board, shall have
and may exercise the powers of the board of directors in the management of the
business and affairs of the corporation; provided, however, such a committee
shall not have the power or authority to:
(a) approve or recommend to shareholders actions
or proposals required by statute to be approved by the shareholders,
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<PAGE> 7
(b) fill vacancies on the board of directors or
any committee thereof,
(c) adopt, amend or repeal the Bylaws of the
corporation,
(d) authorize or approve the reacquisition of
shares unless pursuant to a general formula or method specified by the board of
directors, or
(e) authorize or approve the issuance or sale or
contract for the sale of shares, or determine the designation and relative
rights, preferences and limitations of a voting group, except that the board of
directors may authorize a committee (or a senior executive officer of the
corporation) to do so within limits specifically prescribed by the board of
directors.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the board of directors. A
committee, and each member thereof, shall serve at the pleasure of the board.
Section 10. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
Section 11. By resolution of the board of directors and
irrespective of any personal interest of any director, the board may establish
reasonable compensation of directors for services to the corporation as
directors, officers or members of a committee. No such payment shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 12. A director may resign by written notice to the
corporation. The resignation is effective upon its delivery to the corporation
or a subsequent time as set forth in the notice of resignation.
Section 13. Attendance of a director at a meeting constitutes
a waiver of notice of the meeting except where a director states, at the
beginning of the meeting or promptly upon arrival at the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the Articles of Incorporation or of these Bylaws,
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written notice is required to be given to any director, committee member or
shareholder, such notice may be (but is not required to be) given in writing by
mail (registered, certified or other first class mail) addressed to such
director, shareholder or committee member at his address as it appears on the
records of the corporation, with postage thereon prepaid. Such notice shall be
deemed to be given at the time when the same shall be deposited in a post
office or official depository under the exclusive care and custody of the
United States postal service.
Section 2. Whenever any notice is required to be given under
the provision of the statutes or of the Articles of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the shareholders, directors or a
committee, need be specified in any written waiver of notice.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors at its first meeting after each annual meeting of
shareholders. There shall be a president, a secretary and a treasurer. The
board of directors may also create and fill the offices of chairman of the
board and vice-chairman of the board, and may choose one or more
vice-presidents, one or more assistant secretaries, and one or more assistant
treasurers. Any number of offices may be held by the same person, but the
board by resolution may require that at least two persons shall be officers for
purposes of compliance with Article VI, Section 1, hereof.
Section 2. The board of directors may from time to time
appoint such other officers and agents as it shall deem necessary who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board.
Section 3. The salaries of all officers of the corporation
shall be fixed by the board of directors.
Section 4. The officers of the corporation shall hold office
at the pleasure of the board of directors. Any officer elected or appointed by
the board of directors may be removed at any time by the board of directors
with or without cause whenever, in its judgment, the best interests of the
corporation will be served thereby. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise shall be filled by the
board of directors. An officer may resign by written
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notice to the corporation. The resignation is effective upon its delivery to
the corporation or at a subsequent time specified in the notice of resignation.
Section 5. Unless otherwise provided by resolution of the
board of directors, the president shall be the chief executive officer of the
corporation, shall, in the absence or non-election of a chairman or vice
chairman of the board of directors, preside at all meetings of the shareholders
and the board of directors (if he shall be a member of the board), shall have
general and active management of the business and affairs of the corporation
and shall see that all orders and resolutions of the board of directors are
carried into effect. He shall execute on behalf of the corporation, and may
affix or cause the corporate seal (if adopted by the board of directors) to be
affixed to, all instruments requiring such execution except to the extent the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation, and he shall have
the authority to vote any shares of stock owned by the corporation.
Section 6. The vice-presidents shall act under the direction
of the president and in the absence or disability of the president shall
perform the duties and exercise the powers of the president. They shall
perform such other duties and have such other powers as the president or the
board of directors may from time to time prescribe. The board of directors may
designate one or more executive vice-presidents or may otherwise specify the
order of seniority of the vice-presidents. The duties and powers of the
president shall descend to the vice-presidents in such specified order of
seniority.
Section 7. The secretary shall act under the direction of the
president. Subject to the direction of the president he shall attend all
meetings of the board of directors and all meetings of the shareholders and
record the proceedings. He shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the shareholders and special meetings of the board of directors,
and shall perform such other duties as may be prescribed by the president or
the board of directors. He shall keep in safe custody the seal of the
corporation, if a corporate seal is adopted by the board of directors. When
authorized by the president or the board of directors, he shall cause the seal
of the corporation to be affixed to any instrument requiring it. He shall be
responsible for maintaining the stock transfer book and minute book of the
corporation and shall be responsible for their updating.
Section 8. The assistant secretaries shall act under the
direction of the president. In the order of their seniority in office, unless
otherwise determined by the president or the board of directors, they shall, in
the absence or disability of the
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secretary, perform the duties and exercise the powers of the secretary. They
shall perform such other duties and have such other powers as the president or
the board of directors may from time to time prescribe.
Section 9. The treasurer shall act under the direction of the
president. Subject to the direction of the president he shall have custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the president or the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation. He may affix or cause to be affixed the seal of the corporation
to documents so requiring the seal, if a corporate seal is adopted by the board
of directors.
Section 10. The assistant treasurers in the order of their
seniority of office, unless otherwise determined by the president or the board
of directors shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer. They shall perform such other
duties and have such other powers as the president or the board of directors
may from time to time prescribe.
Section 11. To the extent the powers and duties of the several
officers are not provided from time to time by resolution or other directive of
the board of directors or by the president (with respect to other officers),
the officers shall have all powers and shall discharge the duties customarily
and usually held and performed by like officers of the corporations similar in
organization and business purposes to this corporation.
ARTICLE VI
CERTIFICATES OF STOCK
AND SHAREHOLDERS OF RECORD
Section 1. The shares of stock of the corporation shall be
represented by certificates signed by, or in the name of the corporation by,
the president or a vice-president and by the secretary or an assistant
secretary of the corporation. Each holder of stock in the corporation shall be
entitled to have such a certificate certifying the number of shares owned by
him in the corporation.
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Section 2. Any of or all the signatures on the certificate
may be a facsimile if the certificate is countersigned by a transfer agent or
registered by a registrar other than the corporation itself or its employee.
In case any officer who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer at the date of issue. The seal of the corporation or a
facsimile thereof may, but need not, be affixed to the certificates of stock.
Section 3. The board of directors may direct a new
certificate for shares to be issued in place of any certificate theretofore
issued by the corporation alleged to have been lost or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost or destroyed. When authorizing such issue of a new
certificate, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate, or his legal representative, to give the corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost or destroyed.
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its stock transfer book for shares of the corporation.
Section 5. In order that the corporation may determine the
shareholders entitled to notice of, or to vote at, any meeting of shareholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or for the purpose of any other
action, the board of directors may fix, in advance, a date as a record date,
which shall not be more than 70 nor less than 10 days before the date of such
meeting, nor more than 70 days prior to any other action. The stock transfer
books of the corporation shall not be closed.
If no record date is fixed:
(a) The record date for determining the
shareholders of record entitled to notice of, or to vote at, a meeting of
shareholders shall be at the close of business on the day on which notice is
given, or, if no notice is given, at the close of business on the day next
preceding the day on which the meeting is held; and
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(b) the record date for determining shareholders
for any other purpose shall be at the close of business on the day on which the
board of directors adopts the resolution relating thereto.
A determination of shareholders of record entitled to notice
or to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered upon its stock transfer book for shares
of the corporation as the owner of shares for all purposes, including voting
and dividends, and shall not be bound to recognize any equitable or other claim
to interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Florida.
ARTICLE VII
INDEMNIFICATION
Section 1. The corporation, to the fullest extent authorized
or permitted by the provisions at 607.0850 Fl.Stat. (other than 607.0850(7)),
Florida Business Corporation Act, as amended (or any amendment or successor
provision thereof or any other statutory provision authorizing or permitting
such indemnification or advancement of expenses which is adopted after the date
this Article VII is adopted), shall indemnify against liability, and advance
expenses to, any person, and his heirs, executors, administrators and legal
representatives, who is or was a party to any proceeding by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation or is or was serving as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise at
the request of the corporation. Officers and directors who are so entitled to
be indemnified shall be paid their expenses in advance of a final disposition
of the proceeding to the maximum extent authorized or permitted by the
provisions of 607.0850(6) Fl.Stat. or any amended or successor section.
Section 2. Article VII, Section 1 of these Bylaws shall not
be construed to mean that indemnification and advancement of expenses by the
corporation pursuant to 607.0850(7) Fl.Stat. is not permitted. The corporation
may indemnify and advance expenses to any person pursuant to Section
607.0850(7) Fl.Stat., or any amended or successor section, to the extent and in
the manner desired by the corporation and permitted by law.
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Section 3. Terms used in this Article VII shall have the
meanings ascribed to them in 607.0850(11) Fl.Stat. or any amended or successor
section.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. All checks, drafts or demands for money and notes
of the corporation shall be signed by such officer or officers or such other
person or persons as the board of directors may from time to time designate.
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
other depositories as the board of directors may from time to time designate.
Section 2. The fiscal year of the corporation shall be fixed
from time to time by resolution of the board of directors, but shall end on
December 31st of each year if not otherwise fixed by the board.
Section 3. The board of directors may adopt a corporate seal
for the corporation. The corporate seal shall have inscribed thereon the name
of the corporation and the words "Corporate Seal, Florida." The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. Except as otherwise provided by law, the failure to
affix the seal of the corporation to a document shall not affect the validity
thereof.
Section 4. The corporation shall keep within or without the
State of Florida books and records of account and minutes of the proceedings of
its shareholders, board of directors and executive committee, if any. The
corporation shall keep at its registered office or at the office of its
transfer agent within or without the State of Florida a stock transfer book for
shares of the corporation containing the names and addresses of all
shareholders, the number, class and series of shares held by each and the dates
when they respectively became holders of record thereof. Any of such stock
transfer book, books, records or minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
Section 5. These Bylaws shall govern the internal affairs of
the corporation, but only to the extent they are consistent with law and the
Articles of Incorporation. Nothing contained in the Bylaws shall, however,
prevent the imposition by contract of greater voting, notice or other
requirements than those set forth in these Bylaws.
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ARTICLE IX
AMENDMENTS
Section 1. The Bylaws may be amended or repealed, or new
Bylaws may be adopted, by action of either the shareholders or the board of
directors. The shareholders may from time to time specify particular
provisions of the Bylaws which may not be altered or repealed by the board of
directors.
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EXHIBIT 4.1
FROST HANNA CAPITAL GROUP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
COMMON STOCK CUSIP 359250 10 7
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS IS TO CERTIFY that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.0001 PAR VALUE, OF
Frost Hanna Capital Group, Inc. (hereinafter called the "Corporation"),
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney, upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to all of the provisions of the Articles of Incorporation
and the By-Laws of the Corporation, to all of which the holder of this
certificate by acceptance hereof assents. This certificate and the shares
represented hereby may only be transferred between parties resident in either
Colorado, Delaware, the District of Columbia, Florida, Georgia, Illinois,
Maryland, New York, Oregon, Rhode Island, South Carolina, Utah or such other
jurisdiction in which an applicable exemption is available or a blue sky
application has been filed and accepted.
This certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrant.
WITNESS the signatures of its duly authorized officers.
Dated:
FROST HANNA CAPITAL GROUP, INC. CORPORATE SEAL
Secretary President
<PAGE> 1
Exhibit 4.2
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FROST HANNA CAPITAL GROUP, INC.
AND
LH ROSS & COMPANY, INC.
UNDERWRITER'S WARRANT AGREEMENT FOR SHARES
DATED AS OF , 1997
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<PAGE> 2
UNDERWRITER'S WARRANT AGREEMENT dated as of April 16, 1997 between
FROST HANNA CAPITAL GROUP, INC., a Florida corporation (the "Company") and LH
ROSS & COMPANY, INC., a Representative of the several Underwriters, a New York
corporation (hereinafter referred to variously as the "Holder" or the
"Underwriter").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue to the Underwriter warrants
("Underwriter's Warrants") to purchase up to an aggregate of 135,000 fully paid
non-assessable shares (the "Shares") of the Company's common stock, $.0001 par
value (the "Common Stock") at an exercise price of $7.20 per share (120% of the
public offering price); and
WHEREAS, the Underwriter has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Underwriter and the Company, to underwrite the Company's proposed public
offering of 1,350,000 shares of Common Stock at a public offering price of $6.00
per Share (the "Public Offering"); and
WHEREAS, the Underwriter's Warrants to be issued pursuant to this
Agreement will be issued on the Closing Date (as such term is defined in the
Underwriting Agreement) by the Company to the Underwriter in consideration for,
and as part of the compensation in connection with the Public Offering;
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NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of an aggregate of One Hundred Thirty-Five ($135.00)
Dollars, the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
l. GRANT. The Holder is hereby granted the right to purchase, at any
time from __________, 1998 until 5:30 P.M., New York time, on __________, 2002,
up to an aggregate of 135,000 Shares at an initial exercise price (subject to
adjustment as provided in SECTION 8 hereof) of $7.20 per Share (the "Exercise
Price"), subject to the terms and conditions of this Agreement. Except as set
forth herein, the Shares issuable upon exercise of the Underwriter's Warrants
are in all respects identical to the shares of Common Stock being purchased by
the Underwriter for resale to the public pursuant to the terms and provisions of
the Underwriting Agreement.
2. UNDERWRITER'S WARRANT CERTIFICATES. The Underwriter's warrant
certificates (the "Underwriter's Warrant Certificates") delivered and to be
delivered pursuant to this Agreement shall be in the form set forth in Exhibit
A, attached hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions, and other variations as required or permitted by this
Agreement.
3. EXERCISE OF UNDERWRITER'S WARRANTS.
ss. 3.1 EXERCISE. The Underwriter's Warrants initially are exercisable
at an aggregate initial exercise price (subject to adjustment as provided in
SECTION 8 hereof) per share, as set forth in SECTION 6 hereof payable by
certified or official bank check in New
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York Clearing House funds, subject to adjustment as provided in SECTION 8
hereof. Upon surrender at the Company's principal offices in Florida (currently
located at 327 Plaza Real, Boca Raton, Florida 33432), of an Underwriter's
Warrant Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Shares purchased, the registered holder of an Underwriter's Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the Shares so purchased. The purchase rights represented by
each Underwriter's Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of Common
Stock underlying the Underwriter's Warrants). In the case of the purchase of
less than all the Shares purchasable under any Underwriter's Warrant
Certificate, the Company shall cancel the Underwriter's Warrant Certificate upon
the surrender thereof and shall execute and deliver a new Underwriter's Warrant
Certificate of like tenor for the balance of the Shares purchasable thereunder.
ss. 3.2 CASHLESS EXERCISE. At any time during the Warrant Exercise
Term, the Holder may, at its option, exchange the Warrants represented by such
Holder's Warrant certificate, in whole or in part (a "Warrant Exchange), into
the number of fully paid and non-assessable Shares determined in accordance with
this Section 3.2, by surrendering such Warrant certificate at the principal
office of the Company or at the office of its transfer agent, accompanied by a
notice stating such Holder's intent to effect such exchange, the number of
Shares to be exchanged and the date on which the Holder requests that such
Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall
take
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place on the date specified in the Notice of Exchange, or, if later, the date
the Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the Shares issuable upon such Warrant Exchange and, if
applicable, a new Warrant of like tenor evidencing the balance of the Shares
remaining subject to the Holder's Warrant certificate, shall be issued as of the
Exchange Date and delivered to the Holder within three (3) days following the
Exchange Date. In connection with any Warrant Exchange, the Holder's Warrant
certificate shall represent the right to subscribe for and acquire (i) the
number of Shares (rounded to the next highest integer) equal to (A) the number
of Shares specified by the Holder in its Notice of Exchange (the "Total Share
Number") less (B) the number of Shares equal to the quotient obtained by
dividing (i) the product of the Total Share Number and the existing Exercise
Price (as hereinafter defined) per Share by (ii) the Market Price (as defined in
Section 3.3 hereof) of a share of Common Stock.
ss.3.3 MARKET PRICE. For the purpose of this Agreement, the phrase
"Market Price" at any date shall be deemed to be the (i) last reported sale
price on the last trading day or, in case no such reported sale takes place on
such day, the average last reported sale price for the last three (3) trading
days, in either case as officially reported by the principal securities exchange
on which the Common Stock is listed or admitted to trading, or, (ii) if the
Common Stock is not listed or admitted to trading on any national securities
exchange but is listed or quoted upon the Nasdaq National Market or SmallCap
Market (referred to hereinafter as "NASDAQ"), the closing bid price on the last
trading day, or, in case no such reported bid takes place on such day, the
average closing bid price for the last three (3) trading days, as furnished by
NASDAQ or similar organization if NASDAQ is no longer
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reporting such information, or (iii) if the Common Stock is not listed upon a
principal exchange or quoted on NASDAQ, but quotes for the Common Stock are
available in the OTC Bulletin Board or "pink sheets" the closing bid price on
the last trading day, or, in case no such bid takes place on such day, the
average closing bid price for the last three (3) trading days as furnished on
the OTC Bulletin Board or (iv) in the event the Common Stock is not traded upon
a principal exchange and not listed on NASDAQ and quotes are not available on
the OTC Bulletin Board, as determined in good faith by resolution of the Board
of Directors of the Company, based on the best information available to it.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Underwriter's
Warrants, the issuance of certificates for the Shares or other securities,
properties or rights underlying such Underwriter's Warrants, shall be made
forthwith (and in any event within five (5) business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall (subject
to the provisions of SECTIONS 5 and 7 hereof) be issued in the name of, or in
such names as may be directed by, the Holder thereof; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Underwriter and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
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<PAGE> 7
The Underwriter's Warrant Certificates and the certificates
representing the Shares issuable upon exercise of the Underwriter's Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the then Chairman or Vice Chairman of the Board of Directors or President or
Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the then present Secretary
or Assistant Secretary of the Company. The Underwriter's Warrant Certificates
shall be dated the date of the execution by the Company upon initial issuance,
division, exchange, substitution or transfer. The certificates representing the
Shares issuable upon exercise of the Underwriter's Warrant shall be identical in
form to those issued in connection with the Public Offering.
5. RESTRICTION ON TRANSFER OF UNDERWRITER'S WARRANTS. The Holder of a
Underwriter's Warrant Certificate, by its acceptance thereof, covenants and
agrees that the Underwriter's Warrants are not being acquired with a view to the
distribution thereof; and that the Underwriter's Warrants may not be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, for a period of one (1) year from the date hereof, except to officers of
the Underwriter or members of the Selling Group.
6. EXERCISE PRICE.
ss.6.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise
provided in SECTION 8 hereof, the initial exercise price of each Underwriter's
Warrant shall be $7.20 per Share. The exercise price shall be adjusted from time
to time in accordance with the provisions of SECTION 8 hereof.
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<PAGE> 8
ss.6.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean the
initial exercise prices or the adjusted exercise price, depending upon the
context of the Underwriter's Warrants.
7. REGISTRATION RIGHTS.
ss.7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Underwriter's
Warrants and the Shares issuable upon exercise of the Underwriter's Warrants,
have been registered (the "Registration Statement") under the Securities Act of
1933, as amended (the "Act").
ss.7.2 PIGGYBACK REGISTRATION. If, at any time commencing after
_________, 1998 (one (1) year from the Effective Date), through and including
__________, 2002 (five (5) years from the Effective Date), the Company proposes
to register any of its securities under the Act (other than in connection with a
merger or pursuant to Form S-8 or similar form) it will give written notice by
registered or certified mail, at least thirty (30) days prior to the filing of
each such registration statement, to the Underwriter and to all other Holders of
the Underwriter's Warrants and Shares underlying the Underwriter's Warrants, of
its intention to do so. If any of the Underwriter or other Holders of the
Underwriter's Warrants and/or the Shares underlying the Underwriter's Warrants,
notify the Company within twenty (20) days after receipt of any such notice of
its or their desire to include any such securities in such proposed registration
statement, the Company shall afford each of the Underwriter and such Holders of
the Underwriter's Warrants and/or Shares underlying the Underwriter's Warrants,
the opportunity to have any of such securities registered under such
registration statement; provided, however, that in the event the underwriters
advise the Company that in their opinion the number of securities requested to
be included in
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<PAGE> 9
such registration pursuant to this Agreement and pursuant to any other rights
granted by the Company to holders of its securities exceeds the number of
securities that can be sold in the offering without adversely affecting the
offering price of the Company's securities, the Company may first include in
such registration all securities the Company proposes to sell (without including
the holders of other rights granted by the Company), and each Holder shall
accept a pro rata reduction in the number of shares to be included in such
registration statement.
Notwithstanding the provisions of this SECTION 7.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this SECTION 7.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
ss.7.3 DEMAND REGISTRATION.
(a) At any time commencing after __________, 1998 (one (1) year from
the Effective Date) through and including __________, 2002 (five (5) years from
the effective date), the Holders of the Underwriter's Warrants and Shares
underlying the Underwriter's Warrants, representing a "Majority" of the shares
of Common Stock issuable upon the exercise of the Underwriter's Warrants
(assuming the exercise of all of the Underwriter's Warrants) shall have the
right (which right is in addition to the registration rights under SECTION 7.2
hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Commission, at on one occasion, a registration
statement and such other documents, including a prospectus, as may be necessary
in the opinion of both counsel for the
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Company and counsel for the Underwriter and Holders, in order to comply with the
provisions of the Act, so as to permit a public offering and sale of their
respective Underwriter's Warrants and Shares for nine (9) consecutive months by
such Holders and any other Holders of the Underwriter's Warrants and the Shares
who shall notify the Company within ten (10) days after receiving notice from
the Company of such request. Such registration and all costs incident thereof
shall be at the expense of the Company, as provided in Section 7.4(b).
(b) The Company covenants and agrees to give written notice of any
registration request under this SECTION 7.3 by any Holder or Holders to all
other registered Holders of the Underwriter's Warrants and Shares within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under SECTION 7.2 and
subsection (a) of this SECTION 7.3, at any time within the time period specified
in Section 7.4(a) hereof, through and including , 2002 (five (5) years from the
Effective Date), any Holder of the Underwriter's Warrants and/or Shares,
representing a "Majority" (as hereinafter defined) of the shares of Common Stock
issuable upon the exercise of the Underwriter's Warrants (assuming the exercise
of all of the Underwriter's Warrants) shall have the right, exercisable by
written request to the Company, to have the Company prepare and file, on one
occasion, with the Commission a registration statement so as to permit a public
offering and sale for nine (9) consecutive months by any such Holder of its
shares, provided, however, that the provisions of SECTION 7.4(b) hereof shall
not apply to any such
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registration request and registration and all costs incident thereto shall be at
the expense of the Holder or Holders making such request.
(d) The Company and the Holders agree that the Holders of Underwriters
Warrants and Shares (the "Securities") will suffer damages if the Company fails
to fulfill its obligations under this Section 7.3 and that ascertaining the
extent of such damages with precision would not be feasible. Accordingly, the
Company agrees to pay liquidated damages with respect to the Securities held by
each Holder ("Liquidated Damages"), if:
(i) any Registration Statement required to be filed pursuant to
this Section 7.3 is not filed with the SEC on or prior to the date specified in
Section 7.4(a) for such filing in this Agreement;
(ii) any such Registration Statement has not been declared
effective by the SEC on or prior to the earliest possible time but in no event
later than 90 days after such filing (the "Effectiveness Target Date"); or
(iii) any Registration Statement required to be filed pursuant to
this Section 7.3 is filed and declared effective but shall thereafter cease
to be effective or fail to be usable for its intended purpose without being
succeeded immediately by a post effective amendment to such Registration
Statement that cures such failures and that is itself immediately declared
effective; (each such event in clauses (i) through (iii) above being referred to
herein as a "Registration Default"). The additional interest comprising
Liquidated Damages shall be an amount equal to (A) with respect to the first
90-day period immediately following the occurrence of a Registration Default,
10% of the number of Securities held by such Holder
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(pro-rated weekly), PLUS (B) an additional 10% of the number of Securities held
by such Holder with respect to each 30-day period after the first 90 day period,
until all Registration Defaults have been cured, up to 100% of the number of
Securities held by such Holder. The Company shall notify the Holders within one
Business Day after each and every date on which a Registration Default occurs.
All accrued and unpaid Liquidated Damages shall be paid immediately by the
Company on the expiration of each 90-day and 30-day period by mailing
certificates for such securities to Holders of record of the Securities at such
address as is set forth on the stock record books of the Company. Each
obligation to pay Liquidated Damages shall be deemed to accrue beginning on the
day of the applicable Registration Default (other than as set forth above).
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease until the next Registration Default, if any.
ss.7.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under SECTION 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within forty-five (45) days of receipt of any demand therefor in
accordance with Section 7.3(a), shall use its best efforts to have any
registration statement declared effective at the earliest possible time, and
shall furnish each Holder desiring to sell the Shares underlying the
Underwriter's Warrants such number of prospectuses as shall reasonably be
requested. Notwithstanding the foregoing sentence, the Company shall be entitled
to
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postpone the filing of any registration statement otherwise required to be
prepared and filed by it pursuant to this Section 7.4(a) if the Company is
publicly committed to a self-tender or exchange offer and the filing of a
registration statement would cause a violation of Regulation M under the
Securities Exchange Act of 1934 as amended (the "Exchange Act"). In the event of
such postponement, the Company shall be required to file the registration
statement pursuant to this Section 7.4(a) upon the earlier of (i) the
consummation or termination, as applicable, of the event requiring such
postponement or (ii) 90 days after the receipt of the initial demand for such
registration. Additionally, notwithstanding anything to the contrary contained
herein, during any period that a registration statement filed pursuant to
Section 7.3 hereof is effective, the Company shall have the right to prohibit
the sale of any shares thereunder upon notice to the Holder(s) (A) if in the
opinion of counsel for the Company, the Company would thereby be required to
disclose information not otherwise then required by law to be publicly disclosed
where it is significant to the operations or well being of the Company that such
information remain undisclosed, provided that the Company shall use its best
efforts to minimize the period of time in which it shall prohibit the sale of
any of such shares pursuant to this clause (A), (B) for periods of up to 30 days
if the Company reasonably believes that such sale might reasonably be expected
to have an adverse effect on any significant proposal or plan of the Company to
engage in an acquisition of assets or any merger, consolidation, tender offer,
financing, corporate reorganization or similar transaction; (C) during the
period starting with the date 10 days prior to the Company's estimate of the
date of filing of, and ending on a date 90 days after
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the effective date of, a Company initiated registration in which the Holders are
entitled to and may in fact participate in accordance with Section 7.2 hereof,
but in no event longer than 180 days; or (D) upon the happening of any event, as
a result of which the prospectus under the registration statement includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing (in which case, the Company shall
within a reasonable period provide the Holder with revised or supplemental
prospectuses and the Holders shall promptly take action to cease making any
offers of such shares until receipt and distribution of such revised or
supplemental prospectuses.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s) counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
SECTIONS 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, and blue sky fees and expenses.
The Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to SECTION 7.3(c).
(c) The Company will take all necessary action which may be required in
qualifying or registering the Underwriter's Warrants and Shares underlying the
Underwriter's Warrants included in a registration statement for offering and
sale under the securities or blue sky laws of such states as reasonably are
requested by the Holder(s), provided that the Company shall not be obligated to
execute or file any general consent to service of
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process or to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Underwriter's
Warrants and Shares to be sold pursuant to any registration statement and each
person, if any, who controls such Holders within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise, arising
from such registration statement but only to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to indemnify
the Underwriter contained in SECTION 7 of the Underwriting Agreement.
(e) The Holder(s) of the Underwriter's Warrants and Shares underlying
the Underwriter's Warrants to be sold pursuant to a registration statement, and
their successors and assigns, shall severally, and not jointly, indemnify the
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of SECTION 15 of the Act or SECTION 20(a) of the
Exchange Act, against all loss, claim, damage or expense or liability (including
all expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject under the Act,
the Exchange Act or otherwise, arising from information furnished by or on
behalf of such Holders, or their successors or assigns, for specific inclusion
in such registration statement to the same extent and with the same effect as
the
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provisions contained in SECTION 7 of the Underwriting Agreement pursuant to
which the Underwriter has agreed to indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as requiring
the Holder(s) to exercise their Underwriter's Warrants prior to the initial
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other
than the Shares underlying the Underwriter's Warrants and Underwriter's Warrants
to be included in any registration statement filed pursuant to SECTION 7.3
hereof, or permit any other registration statement (other than in connection
with a merger or on Form S-8) to become effective within 120 days of a
registration statement filed pursuant to SECTION 7.3 hereof, without the prior
written consent of the Holders of the Underwriter's Warrants and Shares
underlying the Underwriter's Warrants representing a majority of the shares of
Common Stock issuable upon the exercise of such Underwriter's Warrants.
(h) If the Shares underlying the Shares underlying the Underwriter's
warrants are to be sold in an underwritten public offering, the Company shall
use its best efforts to furnish to each Holder participating in the offering and
to each such underwriter, a signed counterpart, addressed to such underwriter,
of (i) an opinion of counsel to the Company dated the date of the closing under
the underwriting agreement, and (ii) a "cold comfort" letter dated the date of
the closing under the underwriting agreement signed by the independent public
accountants who have issued a report on the Company's financial statements
included in such registration statement, in each case covering substantially the
same matters with respect to such registration statement (and the prospectus
included
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therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months thereafter,
have made "generally available to its security holders" (within the meaning of
Rule 158 under the Act) an earnings statement (which need not be audited)
complying with SECTION 11(a) of the Act and covering a period of at least 12
consecutive months beginning after the effective date of the registration
statement.
(j) The Company shall deliver promptly to each Holder participating in
the offering requesting the correspondence and memoranda described below, and
the managing underwriters, copies of all correspondence between the Commission
and the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to the registration
statement and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
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(k) The Company shall enter into an underwriting agreement with the
managing underwriter(s) selected for such underwriting, if any, by Holders
holding a Majority of the Underwriter's Warrants and Shares underlying the
Underwriter's Warrants requested to be included in such underwriting. Such
underwriting agreement shall be satisfactory in form and substance to the
Company, each Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the managing
underwriter(s).
The Holders shall be parties to any underwriting agreement relating to
an underwritten sale of their Underwriter's Warrants and the Shares underlying
the Underwriter's Warrants and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such underwriter(s) shall also be made to and for the benefit of such
Holders. Such Holders shall not be required to make any representations or
warranties to or agreements with the Company or the underwriter(s) except as
they may relate to such Holders, their intended methods of distribution, and
except for matters related to disclosures with respect to such Holders,
contained or required to be contained, in such registration statement under the
Act and the rules and regulations thereunder.
(1) For purposes of this Agreement, the term "Majority" in reference to
the Holders of Underwriter's Warrants and Shares, shall mean in excess of fifty
percent (50%) of the then outstanding Shares, assuming the full exercise of all
Underwriter's Warrants that (i) are not held by the Company, an affiliate,
officer, creditor, employee or agent thereof or
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any of their respective affiliates, members of their families, persons acting as
nominees or in conjunction therewith or (ii) have not been resold to the public
pursuant to Rule 144 under the Act or a registration statement filed with the
Commission under the Act.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
ss.8.1 SUBDIVISION AND COMBINATION. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price of the Underwriter's Warrants shall forthwith be proportionately decreased
in the case of subdivision or increased in the case of combination.
ss.8.2 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the
Exercise Price of the Underwriter's Warrants, pursuant to the provisions of this
SECTION 8, the number of shares issuable upon the exercise of the Underwriter's
Warrants, shall be adjusted to the nearest full amount by multiplying a number
equal to the exercise price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable upon exercise of the Underwriter's
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Prices.
ss.8.3 DEFINITION OF COMMON STOCK. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as amended as of the date
hereof, or (ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock, consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value. In
the event that the Company shall after the date hereof issue common securities
with greater or superior voting rights than the shares of
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Common Stock outstanding as of the date hereof, the Holder, at its option, may
receive upon exercise of any Underwriter's Warrant, either shares of Common
Stock or a like number of such securities with greater or superior voting
rights.
ss.8.4 MERGER OR CONSOLIDATION. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the Holder shall have
the right thereafter (until the expiration of such warrant) to receive, upon
exercise of such warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger, by a
holder of the number of shares of Common Stock of the Company for which such
warrant might have been exercised immediately prior to such consolidation,
merger, sale or transfer. Such supplemental warrant agreement shall provide for
adjustments which shall be identical to the adjustments provided in SECTION 8.
The above provision of this subsection shall similarly apply to successive
consolidations or mergers.
ss.8.5 NO ADJUSTMENT OF EXERCISES PRICE IN CERTAIN CASES. No
adjustment of the Exercise Price of the Underwriter's Warrants shall be made:
(a) Upon the issuance or sale of the Underwriter's Warrants or
Shares issuable upon the exercise of the Underwriter's Warrants or the
exercise of options and warrants outstanding on the date hereof and
described in the prospectus relating to the Public Offering; or
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(b) If the amount of such adjustment shall be less than two
cents ($.02) per share of Common Stock, provided, however, that in
such case any adjustment that would otherwise be required then to be
made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any
adjustment so carried forward, shall amount to at least two cents
($.02) per share of Common Stock.
9. EXCHANGE AND REPLACEMENT OF UNDERWRITER'S WARRANT CERTIFICATES.
Each Underwriter's Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Underwriter's Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of Shares as
provided in the original Underwriter's Warrants in such denominations as shall
be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Underwriter's Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Underwriter's Warrants, if mutilated, the Company will make and deliver a
new Underwriter's Warrant Certificate of like tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Underwriter's Warrants, nor shall it be required to
issue scrip or pay cash in lieu of
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fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated by rounding any fraction up to the nearest whole
number of shares of Common Stock or other securities, properties or rights.
11. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Underwriter's
Warrants, such number of shares of Common Stock or other securities, properties
or rights as shall be issuable upon the exercise thereof. The Company covenants
and agrees that, upon exercise of the Underwriter's Warrants and payment of the
Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. As
long as the Underwriter's Warrants shall be outstanding, the Company shall use
its best efforts to cause all shares of Common Stock issuable upon the exercise
of the Underwriter's Warrants to be listed (subject to official notice of
issuance) on all securities exchanges on which the Common Stock issued to the
public in connection herewith may then be listed and/or quoted on NASDAQ.
12. NOTICES TO UNDERWRITER'S WARRANT HOLDERS. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Underwriter's Warrants and their exercise, any of
the following events shall occur:
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(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital stock
of the Company, or any option, right or warrant to subscribe therefor;
or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property assets and business as an
entirety shall be proposed;
then, in any one or more of such events the Company shall give written notice to
the Holders of such event at least fifteen (15) days prior to the date fixed as
a record date or the date of closing the transfer books for the determination of
the stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
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13. NOTICES.
All notices requests, consents and other communications hereunder shall
be in writing and shall be deemed to have been duly made when delivered, or
mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Underwriter's Warrants,
to the address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in SECTION 3
hereof or to such other address as the Company may designate by notice
to the Holders.
14. SUPPLEMENTS AND AMENDMENTS. The Company and the Underwriter may
from time to time supplement or amend this Agreement without the approval of any
holders of Underwriter's Warrant Certificates (other than the Underwriter) in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Underwriter may deem necessary or desirable and which
the Company and the Underwriter deem shall not adversely affect the interests of
the Holders of Underwriter's Warrant Certificates.
15. SUCCESSORS. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
16. TERMINATION. This Agreement shall terminate at the close of
business on __________, 2002. Notwithstanding the foregoing, the indemnification
provisions of SECTION 7 shall survive such termination until the close of
business on __________, 2012.
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17. GOVERNING LAW: SUBMISSION TO JURISDICTION. This Agreement and each
Underwriter's Warrant Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of such State without giving effect to
the rules of said State governing the conflicts of laws.
The Company, the Underwriter and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Underwriter and the Holders hereby irrevocably waive
any objection to such exclusive jurisdiction or inconvenient forum. Any such
process or summons to be served upon any of the Company, the Underwriter and the
Holders (at the option of the party bringing such action, proceeding or claim)
may be served by transmitting a copy thereof, by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address set
forth in SECTION 13 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the party so served in any action, proceeding or
claim. The Company, the Underwriter and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
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18. ENTIRE AGREEMENT: MODIFICATION. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and, except as provided in Section 14 hereof, may not be
modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
19. SEVERABILITY. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. BENEFITS OR THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered Holder(s) of the Underwriter's Warrant
Certificates or Shares underlying the Underwriter's Warrants any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company and the Underwriter and any
other Holder(s) of the Underwriter's Warrant Certificates or Shares.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL] FROST HANNA CAPITAL GROUP, INC.
By
-----------------------------
Name:
Title:
Attest:
- ------------------
Secretary
LH ROSS & COMPANY, INC.
By
-----------------------------
Name:
Title:
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EXHIBIT A
[FORM OF UNDERWRITER'S WARRANT CERTIFICATE]
THE UNDERWRITER'S WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE UNDERWRITER'S WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE UNDERWRITER'S WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, _________, 2002
No. W-1 135,000 Underwriter's Warrants
Underwriter's Warrant Certificate
This Underwriter's Warrant Certificate certifies that LH Ross &
Company, Inc., or registered assigns, is the registered holder of 135,000
Underwriter's Warrants to purchase initially, at any time from __________, 1998
[one year from the consummation of the offering] until 5:30 p.m. New York time
on __________, 2002 [five years from the consummation of the offering]
("Expiration Date"), up to 135,000 fully-paid and non-assessable shares of
Common Stock, par value $.0001 per share (the "Warrants") of Frost Hanna Capital
Group, Inc., a Florida corporation (the "Company"), at an initial exercise
price, subject to adjustment in certain events (the "Exercise Price"), of $7.20
per Share upon surrender of this Underwriter's Warrant Certificate and payment
of the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of __________,
1997 between the Company and LH Ross & Company, Inc. (the "Underwriter's Warrant
Agreement"). Payment of the Exercise Price shall be made by certified or
official bank check in New York Clearing House funds payable to the order of the
Company.
<PAGE> 29
No Underwriter's Warrant may be exercised after 5:30 p.m., New York
time, on the Expiration Date, at which time all Underwriter's Warrants evidenced
hereby, unless exercised prior thereto, shall thereafter be void.
The Underwriter's Warrants evidenced by this Underwriter's Warrant
Certificate are part of a duly authorized issue of warrants pursuant to the
Underwriter's Warrant Agreement, which Underwriter's Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Underwriter's Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence
of certain events the exercise price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Underwriter's
Warrant Certificate evidencing the adjustment in the exercise price and the
number and/or type of securities issuable upon the exercise of the Underwriter's
Warrants; provided, however, that the failure of the Company to issue such new
Underwriter's Warrant Certificates shall not in any way change, alter or
otherwise impair, the rights of the holder as set forth in the Underwriter's
Warrant Agreement.
Upon due presentment for registration of transfer of this Underwriter's
Warrant Certificate at an office or agency of the Company, a new Underwriter's
Warrant Certificate or Underwriter's Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Underwriter's Warrants shall be
issued to the transferee(s) in exchange for this Underwriter's Warrant
Certificate, subject to the limitations provided herein and in the Underwriter's
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Underwriter's Warrants
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Underwriter's Warrant Certificate representing such number of
unexercised Underwriter's Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Underwriter's Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Underwriter's Warrant Certificate which are
defined in the Underwriter's Warrant Agreement shall have the meanings assigned
to them in the Underwriter's Warrant Agreement.
2
<PAGE> 30
IN WITNESS WHEREOF, the Company has caused this Underwriter's Warrant
Certificate to be duly executed under its corporate seal.
Dated as of __________, 1997
FROST HANNA CAPITAL GROUP, INC.
[SEAL] By
-----------------------------
Name:
Title:
Attest:
- --------------------
Secretary
3
<PAGE> 31
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Underwriter's Warrant Certificate, to purchase _____ shares
of Common Stock and herewith tenders in payment for such securities a certified
or official bank check payable in New York Clearing House Funds to the order of
Frost Hanna Capital Group, Inc. in the amount of $_____, all in accordance with
the terms hereof. The undersigned requests that a certificate for such
securities be registered in the name of _____________________ whose address is
___________________________ and that such Certificate be delivered to
________________________ whose address is ___________________________.
Dated:
Signature
--------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Underwriter's Warrant Certificate.)
-------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE> 1
EXHIBIT 5.1
FORM OF LEGAL OPINION
July __, 1997
Mr. Richard B. Frost
Chief Executive Officer and
Chairman of Board of Directors
Frost Hanna Capital Group, Inc.
327 Plaza Real, Suite 319
Boca Raton, Florida 33432
Re: Frost Hanna Capital Group, Inc.
Offering of Shares of Common Stock
Dear Mr. Frost:
As counsel to Frost Hanna Capital Group, Inc. (the "Corporation"), we
have examined the Articles of Incorporation and Bylaws of the Corporation as
well as such other documents and proceedings as we have considered necessary for
the purposes of this opinion. We have also examined and are familiar with the
proceedings taken by the Corporation to authorize the issuance of 1,552,500
shares of Common Stock of the Corporation, par value $.0001 per share (the
"Common Stock"). In addition, we have examined a copy of the Prospectus dated
July ___, 1997 (the "Prospectus") included in the Corporation's Registration
Statement on Form SB-2, File No. 333-_____ (the "Registration Statement"), which
is incorporated by reference into the Registration Statement.
In rendering this opinion, we have assumed, without independent
investigation: (i) the authenticity of all documents submitted to us as
originals; (ii) the conformity to original documents of all documents submitted
to us as certified or photostatic copies; and (iii) the genuineness of all
signatures. In addition, as to questions of fact material to the opinions
expressed herein, we have relied upon such certificates of public officials,
corporate agents and officers of the Corporation and such other certificates as
we deemed relevant.
Based upon the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that following the issuance and
delivery of the Common Stock against payment of adequate consideration
therefore in accordance with the terms of such Prospectus, the Common Stock
will be validly issued, fully paid and non-assessable.
<PAGE> 2
Mr. Richard B. Frost
July ___, 1997
Page 2
This opinion is intended solely for the Corporation's use in
connection with the registration of the shares and may not be relied upon for
any other purpose or by any other person. This opinion may not be quoted in
whole or in part or otherwise referred to or furnished to any other person
except in response to a valid subpoena. This opinion is limited to the matters
expressly stated herein, and no opinion is implied or may be inferred beyond
the matters expressly stated herein. This opinion is rendered as of the date
hereof and we assume no obligation to update or supplement such opinion to
reflect any facts or circumstances that may hereafter come to our attention or
any changes in facts or law that may hereafter occur. We hereby consent to the
inclusion of this opinion letter as an exhibit to the Registration Statement.
Very truly yours,
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
<PAGE> 1
EXHIBIT 10.1
ESCROW AGREEMENT dated as
of the ___ day of
____________, 1997 (the
"Agreement") by and between
FROST HANNA CAPITAL GROUP,
INC., a Florida corporation
(the "Company"), and
FIDUCIARY TRUST
INTERNATIONAL OF THE SOUTH
(the "Escrow Agent").
ESCROW AGREEMENT
The Company has entered into an Underwriting Agreement dated
_____________, 1997 (the "Underwriting Agreement") with LH ROSS & COMPANY, INC.,
as representative to the underwriters named therein and the underwriters named
therein (the "Underwriter") wherein the Company has agreed to sell through
licensed dealers 1,350,000 shares of Common Stock, par value $.0001 per share
(the "Shares"),with an over-allotment option covering up to 202,500 shares, as
more fully described in the Company's definitive Prospectus dated _____________,
1997 (the "Prospectus") comprising part of the Company's Registration Statement
on Form SB-2 under the Securities Act of 1933, as amended (File No. 333-
_____), declared effective on _______ __, 1997 (the "Registration Statement").
The Company desires that the Escrow Agent accept eighty percent (80%)
of the Net Proceeds (as defined in the Prospectus) to be derived by the Company
from the sale of the Shares (the "Offering Proceeds"), to be held in escrow and
disbursed as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Appointment of Escrow Agent. The Company hereby appoints the Escrow
Agent to act in accordance with and subject to the terms of this Agreement, and
the Escrow Agent hereby accepts such appointment and agrees to act in accordance
with and subject to such terms.
2. Establishment of Escrow Account. The Escrow Agent shall open an
interest bearing escrow account (the "Escrow Account") for the deposit of the
Offering Proceeds, subject to the terms and conditions of this Agreement.
3. Deposit of Offering Proceeds. Upon the closing of the sale of the
Shares as contemplated by the Underwriting Agreement, the Company shall deliver
to the Escrow Agent a certified or bank check in the amount of the Offering
Proceeds drawn to the order of the Escrow Agent or, alternatively, drawn to the
order of the Company but endorsed by the Company for collection by the Escrow
Agent and credit to the Escrow Account.
<PAGE> 2
4. Disbursement of the Escrow Account. Upon the earlier of (i) written
notification by the Company to the Escrow Agent of its need for all, or
substantially all, of the Offering Proceeds for the purpose of implementing, or
facilitating the implementation of, a Business Combination (as such term is
defined in the Prospectus); or (ii) the exercise by certain shareholders of the
Redemption Offer (as such term is defined in the Prospectus); or (iii) written
notification from the Company to the Escrow Agent to deliver the Offering
Proceeds to another escrow agent in accordance with Paragraph 5.7, then, in such
event, the Escrow Agent shall disburse the Escrow Account (inclusive of any
interest thereon) to the Company or its designees, whereupon the Escrow Agent
shall be released from further liability hereunder. In no event may the funds in
the Escrow Account, including any interest earned thereon, be used for expenses
associated with the evaluation and structuring of a contemplated Business
Combination.
5. Escrow Agent.
5.1 The Escrow Agent may act in reliance upon any writing or
instrument or signature which it, in good faith, believes to be genuine; may
assume the validity and accuracy of any statements or assertions contained in
such writing or instrument; and may assume that any person purporting to give
any writing, notice, advice or instruction in connection with the provisions
hereof has been duly authorized to do so. The Escrow Agent shall not be liable
in any manner for the sufficiency or correctness as to form, manner of
execution, or validity of any written instructions delivered to it; nor as to
the identity, authority, or rights of any person executing the same. The duties
of the Escrow Agent shall be limited to the safekeeping of the Escrow Account
and to disbursements of same in accordance with the provisions hereof. The
Escrow Agent undertakes to perform only such duties as are expressly set forth
herein, and no implied duties or obligations of the Escrow Agent shall be
implied by virtue of this Agreement.
5.2 The Escrow Agent may consult with counsel of its own
choice and shall have full and complete authorization and protection for any
action taken or suffered by it hereunder in good faith and in accordance with
the opinion of such counsel. The Escrow Agent shall not be liable for any
mistakes of fact or error of judgment, or for any acts or omissions of any kind
unless caused by its willful misconduct or gross negligence.
5.3 The Escrow Agent shall be indemnified and held harmless by
the Company from and against any reasonable expenses, including counsel fees and
disbursements, or loss suffered by the Escrow Agent in connection with any third
party action, suit or other proceeding involving any claim, or in connection
with any claim or demand, which in any way directly or indirectly arises out of
or relates to this Agreement, the services of the Escrow Agent hereunder, the
monies or other property held by it hereunder or any
-2-
<PAGE> 3
such expense or loss. Promptly after the receipt by the Escrow Agent of notice
of any demand or claim or the commencement of any action, suit or proceeding,
the Escrow Agent shall, if a claim in respect thereof shall be made against the
other parties hereto, notify such parties thereof in writing; but the failure by
the Escrow Agent to give such notice shall not relieve any party from any
liability which such party may have to the Escrow Agent hereunder. In the event
of the receipt of such notice, the Escrow Agent, in its sole discretion, may
commence an action in the nature of interpleader in an appropriate court to
determine ownership or disposition of the Escrow Account or it may deposit the
Escrow Account with the clerk of any appropriate court or it may retain the
Escrow Account pending receipt of a final, non-appealable order of a court
having jurisdiction over all of the parties hereto directing to whom and under
what circumstances the Escrow Account is to be disbursed and delivered.
5.4 During the term hereof, the Escrow Agent shall maintain
the Offering Proceeds in an interest bearing account and any interest earned on
the Escrow Account shall remain in escrow and shall be for the benefit of the
Company and shall be used by the Company either (i) following a Business
Combination in connection with the operation of an Acquired Business (as such
term is defined in the Prospectus) or (ii) in connection with the distribution
to the shareholders through the exercise of the Redemption Offer or the
liquidation of the Company.
5.5 The Escrow Agent shall be entitled to reasonable
compensation from the Company for all services rendered by it hereunder, not to
exceed $________________.
5.6 From time to time on and after the date hereof, the
Company shall deliver or cause to be delivered to the Escrow Agent such further
documents and instruments and shall do or cause to be done such further acts as
the Escrow Agent shall reasonably request (it being understood that the Escrow
Agent shall have no obligation to make such request) to carry out more
effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected in acting
hereunder.
5.7 The Escrow Agent may resign at any time and be discharged
from its duties as Escrow Agent hereunder by its giving the other parties hereto
at least thirty (30) days prior written notice thereof. As soon as practicable
after its resignation, the Escrow Agent shall turn over to a successor escrow
agent appointed by the other parties hereto, jointly, all monies and property
held hereunder upon presentation of the document appointing the new escrow agent
and its acceptance thereof. If no new escrow agent is so appointed within the
sixty (60) day period following the giving of such notice of resignation, the
Escrow Agent may deposit the Escrow Account with any court it deems appropriate.
-3-
<PAGE> 4
5.8 The Escrow Agent shall resign and be discharged from its
duties as Escrow Agent hereunder if so requested in writing at anytime by the
Company, provided, however, that such resignation shall become effective only
upon acceptance of appointment by a successor escrow agent as provided in
paragraph 5.7.
5.9 Notwithstanding anything herein to the contrary, the
Escrow Agent shall not be relieved from liability hereunder for its own gross
negligence or its own willful misconduct.
6. Miscellaneous.
6.1 This Agreement shall for all purposes be deemed to be made
under and shall be construed in accordance with the laws of the State of
Florida. This Agreement shall be subject to the exclusive jurisdiction of the
courts of Dade County, Florida. The parties to this Agreement agree that any
breach of any term or condition of this Agreement shall be deemed to be a breach
occurring in the State of Florida by virtue of a failure to perform an act
required to be performed in the State of Florida and irrevocably and expressly
agree to submit to the jurisdiction of the courts of the State of Florida for
the purpose of resolving any disputes among the parties relating to this
Agreement or the transactions contemplated hereby. The parties irrevocably
waive, to the fullest extent permitted by law, any objection which they may now
or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement, or any judgment entered by any
court in respect hereof brought in the State of Florida, and further irrevocably
waive any claim that any suit, action or proceeding brought in Dade County,
Florida has been brought in an inconvenient forum.
6.2 This Agreement contains the entire agreement of the
parties hereto with respect to the subject matter hereof and, except as
expressly provided herein, may not be changed or modified except by an
instrument in writing signed by the party to be charged.
6.3 The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
thereof.
6.4 This Agreement shall be binding upon and inure to the
benefit of the respective parties hereto and their legal representatives,
successors and assigns.
6.5 Any notice or other communication required or which may be
given hereunder shall be in writing and either be delivered personally or be
mailed, certified or registered mail, return receipt requested, postage prepaid,
and shall be deemed given when so delivered personally or, if mailed, two (2)
days after the date of mailing, as follows:
-4-
<PAGE> 5
If to the Company, to:
Frost Hanna Capital Group, Inc.
327 Plaza Real, Suite 319
Boca Raton, Florida 33432
Attention: Mark J. Hanna, President
With a copy to:
Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A.
150 West Flagler Street, Suite 2200
Miami, Florida 33130
Attention: Richard E. Schatz, Esq.
and if to the Escrow Agent, to:
Fiduciary Trust International
of the South
100 S.E. 2nd Street, Suite 2300
Miami, Florida 33131
Attention: Mario Rivera, Chief Financial Officer
The parties may change the persons and addresses to which the notices or other
communications are to be sent by giving written notice of any such change in the
manner provided herein for giving notice.
6.6 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.7 Nothing contained in this Agreement is intended or shall
be construed to give any person, corporation or other entity, other than the
parties hereto and their respective successors and permitted assigns, any legal,
equitable right, remedy or claim under or in respect to this Agreement or any
provision herein contained, this Agreement being intended to be and being for
the sole and exclusive benefit of the parties hereto and their respective
successors and permitted assigns.
-5-
<PAGE> 6
WITNESS the execution of this Agreement as of the date first above
written.
FROST HANNA CAPITAL GROUP, INC.
By:
------------------------------
Mark J. Hanna, President
Attest:
----------------------------------------
Donald H. Baxter, Secretary
This Escrow Agreement is accepted as of the ___ day of ___________, 1997.
FIDUCIARY TRUST INTERNATIONAL
OF THE SOUTH
By:
----------------------------
Authorized Representative
<PAGE> 1
EXHIBIT 10.2
ESCROW AGREEMENT dated as of the ___ day of
__________, 1997 (The "Agreement") by and
among FROST HANNA CAPITAL GROUP, INC., a
Florida corporation (the "Company"), RICHARD
B. FROST, MARK J. HANNA, MARSHAL E.
ROSENBERG, Ph.D., DONALD H. BAXTER and
CHARLES FERNANDEZ (collectively, the
"Company Principals") and AMERICAN STOCK
TRANSFER & TRUST COMPANY, a New York
limited purpose trust company (the "Escrow
Agent")
ESCROW AGREEMENT
The Company has entered into an Underwriting Agreement dated
____________, 1997 (the "Underwriting Agreement") with LH ROSS & COMPANY, INC.,
as representative to the underwriters named therein and the underwriters named
therein (the "Underwriter") whereby the Underwriter has agreed to sell through
licensed dealers 1,350,000 shares of Common Stock, par value $.0001 per share
(the "Shares"), with an over-allotment option covering up to 202,500 shares, as
more fully described in the Company's definitive Prospectus dated ____________,
1997 (the "Prospectus") comprising part of the Company's Registration Statement
on Form SB-2 under the Securities Act of 1933, as amended (File No.
333-______), declared effective on _______ __, 1997 (the "Registration
Statement").
The Company Principals have agreed, as a condition of the consummation
of the sale of the Shares, to deposit their shares of Common Stock of the
Company, as set forth opposite their respective names in Exhibit A attached
hereto (collectively, the Escrow Shares"), in escrow as hereinafter provided.
The Company and the Company Principals desire that the Escrow Agent
accept the Escrow Shares, in escrow, to be held and disbursed as hereinafter
provided.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Appointment of Escrow Agent. The Company and the Company Principals
hereby appoint the Escrow Agent to act in accordance with and subject to the
terms of this Agreement, and the Escrow Agent hereby accepts such appointment
and agrees to act in accordance with and subject to such terms.
2. Deposit of Escrow Shares. On or before the closing date of the sale
of the Shares, each of the Company Principals shall deliver to the Escrow Agent
certificates, either endorsed in blank or accompanied by stock powers endorsed
in blank, in either instance with signatures guaranteed by a commercial bank or
a
<PAGE> 2
member of the New York Stock Exchange, Inc. representing his respective Escrow
Shares, to be held and disbursed subject to the terms and conditions of this
Agreement.
3. Disbursement of the Escrow Account. Upon written notification from
the Company to the Escrow Agent of consummation of the Company's first Business
Combination (as such term is defined in the Prospectus), the Escrow Agent shall
disburse the Escrow Shares to the Company Principals in accordance with their
respective interests therein as set forth upon the aforementioned Exhibit A,
whereupon the Escrow Agent shall be released from further liability hereunder.
4. Rights of Company Principals in Escrow Shares. The Company
Principals shall retain all of their rights as shareholders of the Company
during such period as the Escrow Shares shall be retained by the Escrow Agent
pursuant to this Agreement including, without limitation, the right to vote such
shares and to receive cash dividends payable thereon, if any. No sale, transfer
or other disposition may be made of any or all of such shares.
5. Escrow Agent.
5.1 The Escrow Agent may act in reliance upon any writing or
instrument or signature which it, in good faith, believes to be genuine; may
assume the validity and accuracy of any statements or assertions contained in
such writing or instrument; and may assume that any person purporting to give
any writing, notice, advice or instruction in connection with the provisions
hereof has been duly authorized to do so. The Escrow Agent shall not be liable
in any manner for the sufficiency or correctness as to form, manner of
execution, or validity of any written instructions delivered to it; nor as to
the identity, authority, or rights of any person executing the same. The duties
of the Escrow Agent shall be limited to the safekeeping of the Escrow Shares and
to disbursements of same in accordance with the provisions hereof. The Escrow
Agent undertakes to perform only such duties as are expressly set forth herein,
and no implied duties or obligations of the Escrow Agent shall be implied by
virtue of this Agreement.
5.2 The Escrow Agent may consult with counsel of its own
choice and shall have full and complete authorization and protection for any
action taken or suffered by it hereunder in good faith and in accordance with
the opinion of such counsel. The Escrow Agent shall not be liable for any
mistakes of fact or error of judgment, or for any acts or omissions of any kind
unless caused by its willful misconduct or gross negligence.
5.3 The Escrow Agent shall be indemnified and held harmless by
the Company and the Company Principals, jointly and severally, from and against
any reasonable expenses, including counsel fees and disbursements, or loss
suffered by the Escrow
-2-
<PAGE> 3
Agent in connection with any third party action, suit or other proceeding
involving any claim, or in connection with any claim or demand, which in any way
directly or indirectly, arises out of or relates to this Agreement, the services
of the Escrow Agent hereunder, the monies or other property held by it hereunder
or any such expenses or loss. Promptly after the receipt by the Escrow Agent of
notice of any demand or claim or the commencement of any action, suit or
proceeding, the Escrow Agent shall, if a claim in respect thereof shall be made
against the other parties hereto, notify such parties thereof, in writing; but
the failure by the Escrow Agent to give such notice shall not relieve any party
from any liability which such party may have to the Escrow Agent hereunder. In
the event of the receipt of such notice, the Escrow Agent, in its sole
discretion, may commence an action in the nature of interpleader in an
appropriate court to determine ownership or disposition of the Escrow Shares or
it may deposit the Escrow Shares with the clerk of any appropriate court or it
may retain the Escrow Shares pending receipt of a final, non-appealable order of
a court having jurisdiction over all of the parties hereto directing to whom and
under what circumstances the Escrow Shares are to be disbursed and delivered.
5.4 The Escrow Agent shall be entitled to reasonable
compensation from the Company for all services rendered by it hereunder, not to
exceed $_____________. The Escrow Agent shall also be entitled to reimbursement
from the Company for all reasonable expenses paid or incurred by it in the
administration of its duties hereunder including, but not limited to, all
counsel, advisors' and agents' fees and disbursement and all taxes or other
governmental charges.
5.5 From time to time on and after the date hereof, the
Company and the Company Principals shall deliver or cause to be delivered to the
Escrow Agent such further documents and instruments and shall do or cause to be
done such further acts as the Escrow Agent shall reasonably request (it being
understood that the Escrow Agent shall have no obligations to make such request)
to carry out more effectively the provisions and purposes of this Agreement, to
evidence compliance herewith or to assure itself that it is protected in acting
hereunder.
5.6 The Escrow Agent may resign at any time and be discharged
from its duties as Escrow Agent hereunder by its giving the other parties hereto
at least thirty (30) days prior written notice thereof. As soon as practicable
after its resignation, the Escrow Agent shall turn over to a successor escrow
agent appointed by the other parties hereto, jointly, all monies and property
held hereunder upon presentation of the document appointing the new escrow agent
and its acceptance thereof. If no new Escrow Agent is appointed within the six
(6) day period following the giving of such notices of resignation, the Escrow
Agent may deposit the Escrow Shares with any court it deems appropriate.
-3-
<PAGE> 4
5.7 The Escrow Agent shall resign and be discharged from its
duties as Escrow Agent hereunder if so requested in writing at any time by the
other parties hereof, jointly, provided, however, that such resignation shall
become effective only upon acceptance of appointment by a successor escrow agent
as provided in paragraph 5.6.
5.8 Notwithstanding anything herein to the contrary, the
Escrow Agent shall not be relieved from liability hereunder for its own gross
negligence or its own willful misconduct.
6. Miscellaneous.
6.1 This Agreement shall for all purposes be deemed to be made
under and shall be construed in accordance with the laws of the State of
Florida. This Agreement shall be subject to the exclusive jurisdiction of the
courts of Dade County, Florida. The parties to this Agreement agree that any
breach of any term or condition of this Agreement shall be deemed to be a breach
occurring in the State of Florida by virtue of a failure to perform an act
required to be performed in the State of Florida and irrevocably and expressly
agree to submit to the jurisdiction of the courts of the State of Florida for
the purpose of resolving any disputes among the parties relating to this
Agreement or the transactions contemplated hereby. The parties irrevocably
waive, to the fullest extent permitted by law, any objection which they may now
or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement, or any judgment entered by any
court in respect hereof brought in the State of Florida, and further irrevocably
waive any claim that any suit, action or proceeding brought in Dade County,
Florida has been brought in an inconvenient forum.
6.2 This Agreement contains the entire agreement of the
parties hereto with respect to the subject matter hereof and, except as
expressly provided herein, may not be changed or modified except by an
instrument in writing signed by the party to the charged.
6.3 The headings contained in this Agreement are for reference
purposes only and shall not effect in any way the meaning or interpretation
thereof.
6.4 This Agreement shall be binding upon and inure to the
benefit of the respective parties hereto and their legal representatives,
successors and assigns.
6.5 Any notice or other communication required or which may be
given hereunder shall be in writing and either be delivered personally or be
mailed, certified or registered mail, return receipt requested, postage prepaid,
and shall be deemed given when
-4-
<PAGE> 5
so delivered personally or if mailed, two (2) days after the date
of mailing, as follows:
If to the Company, to:
Frost Hanna Capital Group, Inc.
327 Plaza Real, Suite 319
Boca Raton, Florida 33432
Attn: Donald H. Baxter, Secretary
With a copy to:
Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A.
150 West Flagler Street, Suite 2200
Miami, Florida 33130
Attention: Richard E. Schatz, Esq.
If to the Company Principals, to each as follows:
(i) Richard B. Frost
327 Plaza Real, Suite 319
Boca Raton, Florida 33432
(ii) Mark J. Hanna
327 Plaza Real, Suite 319
Boca Raton, Florida 33432
(iii) Marshal E. Rosenberg, Ph.D.
2333 Ponce de Leon Boulevard
Suite 314
Coral Gables, Florida 33134
(iv) Donald H. Baxter
327 Plaza Real, Suite 319
Boca Raton, Florida 33432
(v) Charles Fernandez
100 S.E. 2nd Street
NationsBank Tower
Miami, FL 33131-2100
and if to Escrow Agent, to:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: President
The parties may change the persons and addresses to which the notices or other
communications are to be sent by giving written notice of any such change in the
manner provided herein for giving notice.
6.6 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
-5-
<PAGE> 6
6.7 Nothing contained in this Agreement is intended or shall
be construed to give any person, corporation or other entity, other than the
parties hereto and their respective successors and permitted assigns, any legal,
equitable right, remedy or claim under or in respect to this Agreement or any
provision herein contained, this Agreement being intended to be and being for
the sole and exclusive benefit of the parties hereto and their respective
successors and permitted assigns.
WITNESS the execution of this Agreement as of the date first above
written.
FROST HANNA CAPITAL GROUP, INC.
By:
------------------------------
Mark J. Hanna, President
Attest:
--------------------------
Donald H. Baxter
---------------------------
Richard B. Frost
---------------------------
Mark J. Hanna
---------------------------
Marshall E. Rosenberg, Ph.D.
---------------------------
Donald H. Baxter
---------------------------
Charles Fernandez
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By:
---------------------------
Authorized Representative
-6-
<PAGE> 7
EXHIBIT A
<TABLE>
<CAPTION>
Number of Shares
Name of Common Stock
---- ---------------
<S> <C>
Richard B. Frost 362,000
Mark J. Hanna 362,000
Marshal B. Rosenberg, Ph.D 300,000
Donald H. Baxter 100,000
Charles Fernandez 120,000
</TABLE>
-7-
<PAGE> 1
EXHIBIT 10.3
FROST HANNA CAPITAL GROUP, INC.
327 Plaza Real, Suite 319
Boca Raton, Florida 33432
_______________, 1997
Richard B. Frost Marshal E. Rosenberg, Ph.D.
327 Plaza Real, Suite 319 2333 Ponce de Leon Boulevard
Boca Raton, Florida 33432 Suite 314
Coral Gables, Florida 33134
Donald H. Baxter Mark J. Hanna
327 Plaza Real, Suite 319 327 Plaza Real, Suite 319
Boca Raton, Florida 33432 Boca Raton, Florida 33432
Charles Fernandez
100 S.E. 2nd Street
NationsBank Tower
Miami, FL 33131-2100
Re: VOTING, NEGOTIATION FOR SALE OF MANAGEMENT SHARES
FINDER'S FEES AND CONFLICTS OF INTEREST
Gentlemen:
Frost Hanna Capital Group, Inc., a Florida corporation (the "Company"),
has filed with the United States Securities and Exchange Commission (the "SEC")
a Registration Statement on Form SB-2 (File No. 333-______) (the "Registration
Statement"), covering, among other securities, 1,350,000 shares of Common Stock,
par value $.0001 per share, of the Company (the "Shares"). The Company currently
has 1,557,000 shares issued and outstanding held by 19 shareholders (the
"Existing Shareholders"). The purchasers of the Shares are herein referred to as
the "Public Shareholders."
As a condition precedent to the execution of the Underwriting Agreement
to be entered into in connection with the above-referenced Registration
Statement, all officers and directors of the Company, whom are each also
Existing Shareholders, are required to execute a copy of this letter.
A. Voting.
In connection with a future shareholder vote relating to the
approval of any Business Combination (as defined in the Registration Statement),
each of the undersigned hereby agree with respect to the shares of Common Stock
now held by each of them, or their successors and assigns, to vote their
respective shares of Common Stock of the Company in accordance with the majority
of Shares held by the Public Shareholders and any additional shareholders, who
are not affiliates of the Company, with respect to such Business Combination.
<PAGE> 2
_____________, 1997
Page 2
B. Negotiation for Sale of Management's Shares.
Each of the undersigned hereby agree that they shall not
actively negotiate for or otherwise consent to the disposition of any portion of
their Common Stock as a condition to or in connection with a Business
Combination or cause the Company to borrow funds to be used directly or
indirectly to (i) purchase any shares of the Company's Common Stock owned by any
of the undersigned or (ii) make payments to the Company's promoters, management
or their affiliates or associates.
C. Finder's Fee.
Each of the undersigned hereby agree that neither they nor any
entity with which they are affiliated will be entitled to receive a finder's fee
in the event they originate a Business Combination.
D. Conflicts of Interest.
Each of the undersigned hereby agree to present to the Company
for its consideration, prior to presentation to any other entity, any
prospective Acquired Business (as defined in the Registration Statement) which
is appropriate for the Company to consider and which prospective Acquired
Business participates in an industry dissimilar to any of the industries to
which the undersigned individuals have corporate affiliations.
If the foregoing is acceptable to the undersigned, please countersign
this letter in the space provided below, whereupon it shall become a binding
agreement between the undersigned and the Company as of the date first above
written. By your signature below you acknowledge that the Public Shareholders
are intentional beneficiaries of this Agreement and that in addition to the
foregoing sentence, this Agreement may be enforced by such Public Shareholders
and this Agreement cannot be amended, waived, or modified without the favorable
vote of the holders of a majority of the Shares held by the Public Shareholders
and any additional shareholders, who are not affiliates of the Company. This
<PAGE> 3
_____________, 1997
Page 3
Agreement may be signed in counterparts and shall be binding upon all successors
and assigns and the holders further acknowledge that their shares of Common
Stock shall be so legended.
Very truly yours,
FROST HANNA CAPITAL GROUP, INC.
By:
------------------------------------
Richard B. Frost,
Chief Executive Officer and
Chairman of Board of Directors
ACCEPTED AND AGREED
this ___ day of __________, 1997:
- ----------------------- ---------------------------
Richard B. Frost Marshal E. Rosenberg, Ph.D.
- ----------------------- ---------------------------
Mark J. Hanna Donald H. Baxter
- -----------------------
Charles Fernandez
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
AGREEMENT, dated this_____ day of September, 1996, by and
between Frost Hanna Capital Group, Inc. ("Employer"), and
Richard B. Frost ("Employee").
RECITALS:
A. Employer desires to employ Employee as Chief Executive
Officer.
B. Employee wishes to be employed by Employer upon the terms
and conditions herein contained.
NOW, THEREFORE, in consideration of the covenants herein
contained, the parties hereto hereby agree as follows:
1. Recitals. The above stated recitals are true and correct.
2. Employment. Employer shall employ Employee as Chief
Executive Officer, with responsibility for the performance of such reasonable
duties, commensurate with Employee's status as Chief Executive Officer, as may
be from time to time assigned to him by the Board of Directors of Employer and
subject to the terms and conditions herein contained. Employee hereby agrees
that during the period of his employment hereunder, he shall devote
approximately 50% of his business time, attention and skills to the business and
affairs of Employer. During the period of his employment, Employee shall be
subject to all the lawful policies, rules, and regulations applicable to
executives of Employer and shall comply with all reasonable directions and
instructions of the Board of Directors of Employer. Employee shall also serve
without additional compensation as a director of Employer and if elected as
<PAGE> 2
an officer or director of any subsidiaries and/or divisions of Employer, if any,
if so elected or appointed, but if he is not so elected or appointed, his
compensation hereunder shall in no way be affected.
3. Compensation. Subject to Employer's use of more than 20% of
the Net Proceeds (as defined in Employer's Prospectus), from its initial public
offering of securities (the "Offering"), Employer shall pay to Employee, and
Employee shall accept, for all services which may be rendered by him pursuant to
this Agreement, a salary at the rate of $120,000 per annum payable in equal
installments not less frequently than monthly; provided, however, that all
amounts to be paid by Employer to Employee hereunder that remain unpaid shall be
payable retroactively to the date such amounts were due and payable and such
amounts shall be accrued until the date of the closing of the Offering (the
"Accrued Amount"). Contemporaneous with the closing of the Offering, Employer
shall pay to Employee the Accrued Amount. In the event Employer requires in
excess of 20% of the Net Proceeds (as defined in Employer's Prospectus) derived
from the Offering for operations, Employee hereby waives his right to receive
any compensation referenced hereunder until the consummation by Employer of a
Business Combination (as defined in Employer's Prospectus).
4. Term of Employment. The employment by Employer of Employee
pursuant hereto shall commence on the date hereof and terminate on the third
anniversary hereof. The term of this Agreement will automatically be extended
for additional one-year periods commencing with the third anniversary hereof;
provided,
-2-
<PAGE> 3
however, if either party gives the other written notice of its intention not to
extend this Agreement not less than 30 days before the date of renewal, this
Agreement shall be terminated. Notwithstanding the foregoing provisions of this
Section 4, the term stated herein will be subject to the provisions of Section 5
of this Agreement.
5. Premature Termination. Anything in this Agreement contained
to the contrary notwithstanding: (i) Employee's employment hereunder shall
terminate forthwith upon the death of Employee; (ii) Employee's employment
hereunder shall terminate, at the option of Employer, in the event that
Employee, within the sole discretion of Employer, becomes disabled, either
mentally or physically, as to be unable to substantially perform his duties
hereunder for a period of 90 days during any period of 6 consecutive months;
(iii) Employee's employment hereunder may be terminated by either party in the
event of a material failure on the part of the other party to perform his or its
obligations hereunder, which failure is not remedied within 10 days after notice
thereof is furnished by the party desiring to terminate this Agreement; (iv)
Employee's employment hereunder shall terminate, at the option of Employer, in
the event Employee commits an act involving moral turpitude or dishonesty,
whether or not in connection with Employee's employment hereunder (including,
without limitation, the commission by Employee of a felony as evidenced by his
conviction thereof or a plea of nolo contendere thereof); and (v) Employee's
employment hereunder shall terminate forthwith upon the
-3-
<PAGE> 4
consummation of a Business Combination (as defined in Employer's
Prospectus).
In the event of the termination of Employee's employment
hereunder pursuant to the provisions of clauses (ii), (iii) or (iv) of this
Section 5, not less than 10 days' written notice of such termination shall be
given by the terminating party to the other party, which notice shall specify
the basis for and the effective date of termination. The existence of a
disability of Employee pursuant to clause (ii) of this Section 5 shall be
determined by the Board of Directors in consultation with a reputable, licensed
physician selected by Employer, and Employee shall cooperate in all reasonable
respects to enable an examination to be made by such physician.
6. Payment Upon Premature Termination. In the event that
Employee's employment hereunder is terminated pursuant to the provisions of
clauses (i), (ii), (iv) or (v) of Section 5 of this Agreement, or by Employer
properly pursuant to the provisions of clause (iii) of Section 5 of this
Agreement, Employee shall be paid his compensation pursuant to Section 3 of this
Agreement up to the effective date of termination, as payment in full of all
amounts due and owing by Employer to Employee pursuant to this Agreement. In the
event that Employee's employment hereunder is properly terminated by Employee
pursuant to the provisions of clause (iii) of Section 5 of this Agreement,
Employee shall continue to be paid his compensation pursuant to Section 3 of
this Agreement for one full year or for the full unexpired term of this
Agreement, whichever is shorter, in the same manner and fashion, and at the
-4-
<PAGE> 5
same time, as he would have been paid had his employment hereunder continued for
the stated term of this Agreement as payment in full of all amounts due and
owing by Employer to Employee pursuant to this Agreement.
7. Location of Employee's Activities. Employee's principal
place of business in the performance of his duties shall be in the South Florida
area. Notwithstanding the preceding sentence, Employee shall engage in such
travel and spend such time in other places as may be necessary and appropriate
in furtherance of his duties hereunder.
8. Expenses. Employer shall provide Employee with a
non-accountable expense allowance of $1,000 per month (the "Non-Accountable
Amount"); provided, however, that the Non-Accountable Amount shall be payable
retroactively to the date such amounts were due and payable and such
Non-Accountable Amount shall be accrued until the date of the closing of the
Offering. Contemporaneous with the closing of the Offering, Employer shall pay
to Employee the accrued Non-Accountable Amount. In addition, during the term
hereof, upon submission of proper documentation in accordance with the
guidelines established by Employer's Board of Directors, Employer shall
reimburse Employee reasonable business expenses actually and necessarily paid or
incurred by Employee on behalf of Employer in connection with the performance of
services hereunder (the "Reimbursed Expenses"). The Reimbursed Expenses will not
be disbursed from the Escrow Fund (as defined in Employer's Prospectus). In the
event Employer requires in excess of 20% of the Net Proceeds (as defined in
Employer's Prospectus) derived from
-5-
<PAGE> 6
the Offering, Employee hereby waives his right to receive the Non-Accountable
Amount until the consummation by Employer of a Business Combination (as defined
in Employer's Prospectus).
9. Key Man Insurance. Employee agrees that Employer shall
obtain a $1,000,000 "key man" life insurance policy on Employee's life, at
Employer's sole expense and with Employer as the sole beneficiary thereof.
Employee shall (i) cooperate fully with Employer in obtaining such life
insurance, (ii) sign any necessary consents, applications and other related
forms or documents, and (iii) take any required medical examinations.
10. Miscellaneous Provisions.
10.1 Execution in Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same document.
10.2 Notices. All notices, requests, demands
and other communications hereunder shall be in writing and shall be deemed duly
given when delivered by hand or mailed by registered or certified mail, postage
prepaid, return receipt requested, as follows:
If to Employer, to:
Frost Hanna Capital Group, Inc.
7700 West Camino Real, Suite 222
Boca Raton, FL 33431
If to Employee, to:
Richard B. Frost
6727 Giralda Circle
Boca Raton, FL 33433
-6-
<PAGE> 7
or to such other address as either party hereto shall have designated by like
notice to the other party hereto.
10.3 Amendment. This Agreement may only be
supplemented, abandoned, discharged or amended by a written instrument executed
by each of the parties hereto.
10.4 Entire Agreement. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties hereto, oral and written, with respect to the subject matter hereof.
10.5 Applicable Law. This Agreement shall be
governed by the laws of the State of Florida applicable to contracts made and to
be wholly performed therein.
10.6 No Third Party Beneficiary. Nothing
expressed or implied in this Agreement is intended, or shall be construed, to
confer upon or give any person or entity other than the parties hereto and their
respective heirs, personal representatives, legal representatives, successors
and permitted assigns, any rights or remedies under or by reason of this
Agreement.
10.7 Headings. The headings contained herein
are for the sole purpose of convenience of reference, and shall not in any way
limit or affect the meaning or interpretation of any of the terms or provisions
of the Agreement.
10.8 Binding Effect; Benefits. Employee may not
delegate his duties or assign his rights hereunder. This Agreement shall inure
to the benefit of, and be binding upon, the parties
-7-
<PAGE> 8
hereto and their respective heirs, legal representatives, successors and
permitted assigns.
10.9 Waiver, etc. The failure of either of the
parties hereto at any time to enforce any of the provisions of this Agreement
shall not be deemed or construed to be a waiver of any such provision, nor in
any way affect the validity of this Agreement or any provision hereof or the
right of either of the parties hereto thereafter to enforce each and every
provision of this Agreement. No waiver of any breach of any of the provisions of
this Agreement shall be effective unless set forth in a written instrument
executed by the party against whom or which enforcement of such waiver is
sought; and no waiver of any such breach shall be construed or deemed to be a
waiver of any other or subsequent breach.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto as of the date first above written.
FROST HANNA CAPITAL GROUP, INC.
By:
----------------------------------
Mark J. Hanna, President
----------------------------------
Richard B. Frost
-8-
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
AGREEMENT, dated this_____ day of September, 1996, by and
between Frost Hanna Capital Group, Inc. ("Employer"), and Mark J.
Hanna ("Employee").
RECITALS:
A. Employer desires to employ Employee as President.
B. Employee wishes to be employed by Employer upon the terms
and conditions herein contained.
NOW, THEREFORE, in consideration of the covenants herein
contained, the parties hereto hereby agree as follows:
1. Recitals. The above stated recitals are true and correct.
2. Employment. Employer shall employ Employee as President,
with responsibility for the performance of such reasonable duties, commensurate
with Employee's status as President, as may be from time to time assigned to him
by the Board of Directors of Employer and subject to the terms and conditions
herein contained. Employee hereby agrees that during the period of his
employment hereunder, he shall devote approximately 50% of his business time,
attention and skills to the business and affairs of Employer. During the period
of his employment, Employee shall be subject to all the lawful policies, rules,
and regulations applicable to executives of Employer and shall comply with all
reasonable directions and instructions of the Board of Directors of Employer.
Employee shall also serve without additional compensation as a director of
Employer and if elected as an officer or director of any subsidiaries and/or
divisions of Employer, if
<PAGE> 2
any, if so elected or appointed, but if he is not so elected or appointed, his
compensation hereunder shall in no way be affected.
3. Compensation. Subject to Employer's use of more than 20% of
the Net Proceeds (as defined in Employer's Prospectus), from its initial public
offering of securities (the "Offering"), Employer shall pay to Employee, and
Employee shall accept, for all services which may be rendered by him pursuant to
this Agreement, a salary at the rate of $120,000 per annum payable in equal
installments not less frequently than monthly; provided, however, that all
amounts to be paid by Employer to Employee hereunder that remain unpaid shall be
payable retroactively to the date such amounts were due and payable and such
amounts shall be accrued until the date of the closing of the Offering (the
"Accrued Amount"). Contemporaneous with the closing of the Offering, Employer
shall pay to Employee the Accrued Amount. In the event Employer requires in
excess of 20% of the Net Proceeds (as defined in Employer's Prospectus) derived
from the Offering for operations, Employee hereby waives his right to receive
any compensation referenced hereunder until the consummation by Employer of a
Business Combination (as defined in Employer's Prospectus).
4. Term of Employment. The employment by Employer of Employee
pursuant hereto shall commence on the date hereof and terminate on the third
anniversary hereof. The term of this Agreement will automatically be extended
for additional one-year periods commencing with the third anniversary hereof;
provided, however, if either party gives the other written notice of its
intention not to extend this Agreement not less than 30 days before
-2-
<PAGE> 3
the date of renewal, this Agreement shall be terminated. Notwithstanding the
foregoing provisions of this Section 4, the term stated herein will be subject
to the provisions of Section 5 of this Agreement.
5. Premature Termination. Anything in this Agreement contained
to the contrary notwithstanding: (i) Employee's employment hereunder shall
terminate forthwith upon the death of Employee; (ii) Employee's employment
hereunder shall terminate, at the option of Employer, in the event that
Employee, within the sole discretion of Employer, becomes disabled, either
mentally or physically, as to be unable to substantially perform his duties
hereunder for a period of 90 days during any period of 6 consecutive months;
(iii) Employee's employment hereunder may be terminated by either party in the
event of a material failure on the part of the other party to perform his or its
obligations hereunder, which failure is not remedied within 10 days after notice
thereof is furnished by the party desiring to terminate this Agreement; (iv)
Employee's employment hereunder shall terminate, at the option of Employer, in
the event Employee commits an act involving moral turpitude or dishonesty,
whether or not in connection with Employee's employment hereunder (including,
without limitation, the commission by Employee of a felony as evidenced by his
conviction thereof or a plea of nolo contendere thereof); and (v) Employee's
employment hereunder shall terminate forthwith upon the consummation of a
Business Combination (as defined in Employer's Prospectus).
-3-
<PAGE> 4
In the event of the termination of Employee's employment
hereunder pursuant to the provisions of clauses (ii), (iii) or (iv) of this
Section 5, not less than 10 days' written notice of such termination shall be
given by the terminating party to the other party, which notice shall specify
the basis for and the effective date of termination. The existence of a
disability of Employee pursuant to clause (ii) of this Section 5 shall be
determined by the Board of Directors in consultation with a reputable, licensed
physician selected by Employer, and Employee shall cooperate in all reasonable
respects to enable an examination to be made by such physician.
6. Payment Upon Premature Termination. In the event that
Employee's employment hereunder is terminated pursuant to the provisions of
clauses (i), (ii), (iv) or (v) of Section 5 of this Agreement, or by Employer
properly pursuant to the provisions of clause (iii) of Section 5 of this
Agreement, Employee shall be paid his compensation pursuant to Section 3 of this
Agreement up to the effective date of termination, as payment in full of all
amounts due and owing by Employer to Employee pursuant to this Agreement. In the
event that Employee's employment hereunder is properly terminated by Employee
pursuant to the provisions of clause (iii) of Section 5 of this Agreement,
Employee shall continue to be paid his compensation pursuant to Section 3 of
this Agreement for one full year or for the full unexpired term of this
Agreement, whichever is shorter, in the same manner and fashion, and at the same
time, as he would have been paid had his employment hereunder continued for the
stated term of this Agreement as payment in full
-4-
<PAGE> 5
of all amounts due and owing by Employer to Employee pursuant to this Agreement.
7. Location of Employee's Activities. Employee's principal
place of business in the performance of his duties shall be in the South Florida
area. Notwithstanding the preceding sentence, Employee shall engage in such
travel and spend such time in other places as may be necessary and appropriate
in furtherance of his duties hereunder.
8. Expenses. Employer shall provide Employee with a
non-accountable expense allowance of $1,000 per month (the "Non-Accountable
Amount"); provided, however, that the Non-Accountable Amount shall be payable
retroactively to the date such amounts were due and payable and such
Non-Accountable Amount shall be accrued until the date of the closing of the
Offering. Contemporaneous with the closing of the Offering, Employer shall pay
to Employee the accrued Non-Accountable Amount. In addition, during the term
hereof, upon submission of proper documentation in accordance with the
guidelines established by Employer's Board of Directors, Employer shall
reimburse Employee reasonable business expenses actually and necessarily paid or
incurred by Employee on behalf of Employer in connection with the performance of
services hereunder (the "Reimbursed Expenses"). The Reimbursed Expenses will not
be disbursed from the Escrow Fund (as defined in Employer's Prospectus). In the
event Employer requires in excess of 20% of the Net Proceeds (as defined in
Employer's Prospectus) derived from the Offering, Employee hereby waives his
right to receive the Non-
-5-
<PAGE> 6
Accountable Amount until the consummation by Employer of a Business Combination
(as defined in Employer's Prospectus).
9. Key Man Insurance. Employee agrees that Employer shall
obtain a $1,000,000 "key man" life insurance policy on Employee's life, at
Employer's sole expense and with Employer as the sole beneficiary thereof.
Employee shall (i) cooperate fully with Employer in obtaining such life
insurance, (ii) sign any necessary consents, applications and other related
forms or documents, and (iii) take any required medical examinations.
10. Miscellaneous Provisions.
10.1 Execution in Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same document.
10.2 Notices. All notices, requests, demands
and other communications hereunder shall be in writing and shall be deemed duly
given when delivered by hand or mailed by registered or certified mail, postage
prepaid, return receipt requested, as follows:
If to Employer, to:
Frost Hanna Capital Group, Inc.
7700 West Camino Real, Suite 222
Boca Raton, FL 33431
If to Employee, to:
Mark J. Hanna
3800 South Ocean Drive, #612A
Hollywood, FL 33019
or to such other address as either party hereto shall have designated by like
notice to the other party hereto.
-6-
<PAGE> 7
10.3 Amendment. This Agreement may only be
supplemented, abandoned, discharged or amended by a written instrument executed
by each of the parties hereto.
10.4 Entire Agreement. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings
of the parties hereto, oral and written, with respect to the subject matter
hereof.
10.5 Applicable Law. This Agreement shall be
governed by the laws of the State of Florida applicable to contracts made and to
be wholly performed therein.
10.6 No Third Party Beneficiary. Nothing
expressed or implied in this Agreement is intended, or shall be construed, to
confer upon or give any person or entity other than the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.
10.7 Headings. The headings contained herein
are for the sole purpose of convenience of reference, and shall not in any way
limit or affect the meaning or interpretation of any of the terms or provisions
of the Agreement.
10.8 Binding Effect; Benefits. Employee may not
delegate his duties or assign his rights hereunder. This Agreement shall inure
to the benefit of, and be binding upon, the parties hereto and their respective
heirs, legal representatives, successors and permitted assigns.
-7-
<PAGE> 8
10.9 Waiver, etc. The failure of either of the
parties hereto at any time to enforce any of the provisions of this Agreement
shall not be deemed or construed to be a waiver of any such provision, nor in
any way affect the validity of this Agreement or any provision hereof or the
right of either of the parties hereto thereafter to enforce each and every
provision of this Agreement. No waiver of any breach of any of the provisions of
this Agreement shall be effective unless set forth in a written instrument
executed by the party against whom or which enforcement of such waiver is
sought; and no waiver of any such breach shall be construed or deemed to be a
waiver of any other or subsequent breach.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto as of the date first above written.
FROST HANNA CAPITAL GROUP, INC.
By:
------------------------------------
Richard B. Frost,
Chief Executive Officer
------------------------------------
Mark J. Hanna
-8-
<PAGE> 1
EXHIBIT 10.6
FROST HANNA CAPITAL GROUP, INC.
327 Plaza Real, Suite 319
Boca Raton, Florida 33432
_____________, 1997
[Existing Shareholder]
- -----------------
- -----------------
- -----------------
Re: REDEMPTION RIGHT
Dear Sir:
Frost Hanna Capital Group, Inc., a Florida corporation (the "Company"),
has filed with the United States Securities and Exchange Commission (the "SEC")
a Registration Statement on Form SB-2 (File No. 333-_____) (the "Registration
Statement"), covering, among other securities, 1,350,000 shares of Common Stock,
par value $.0001 per share, of the Company (the "Shares"). The Company currently
has 1,557,000 shares issued and outstanding held by nineteen shareholders (the
"Existing Shareholders"). The purchasers of the Shares are herein referred to as
the "Public Shareholders."
In connection with the Underwriting Agreement entered into in
connection with the above-referenced Registration Statement, the Existing
Shareholders of the Company are required to execute a copy of this letter.
In connection with a future shareholder vote relating to a Business
Combination (as defined in the Registration Statement), the Company shall offer
only to the Public Shareholders the right to redeem their Shares at a price
equal to the Company's book value (as determined by the Company and audited by
the Company's independent public accountants) on the record date for
determination of shareholders entitled to vote upon the proposal to approve such
Business Combination divided by the number of Shares held by such Public
Shareholders (the "Redemption"). The undersigned by its signature below hereby
agrees, with respect to the shares of Common Stock owned by the undersigned as
of the date hereof to waive any and all rights held by the undersigned, as a
holder of Common Stock of the Company, to participate in the Redemption.
If the foregoing is acceptable, please countersign this letter in the
space provided below, whereupon it shall become a binding agreement between you
and the Company as of the date first above written. By your signature below you
acknowledge that the Public Shareholders are intentional beneficiaries of this
Agreement and that in addition to the foregoing sentence, this Agreement may be
enforced by such Public Shareholders and this Agreement cannot be amended,
waived, or modified without the favorable vote of the
<PAGE> 2
______________, 1997
Page 2
holders of a majority of the Public Shareholders and any additional
shareholders, who are not affiliates of the Company or any Existing Shareholder.
This Agreement may be signed in counterparts and shall be binding upon all
successors and assigns and the holders further acknowledge that their shares of
Common Stock shall be so legended.
Very truly yours,
FROST HANNA CAPITAL GROUP, INC.
By:
----------------------------------
Richard B. Frost,
Chief Executive Officer and
Chairman of Board of Directors
ACCEPTED AND AGREED
this ___ day of ________, 1997:
- ---------------------------
[Existing Shareholder]
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of
our report (and to all references to our Firm) included in or made a part of
this registration statement.
ARTHUR ANDERSEN LLP
Miami, Florida,
July 8, 1997.
