<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON______, 1997
REGISTRATION NO-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
1997 CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 6799 (A BLANK CHECK 13-3936988
COMPANY)
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYEE
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
315 WEST 106TH STREET, 4TH FLOOR
NEW YORK, NEW YORK 10025
(212) 678-6231
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Judith Haselton, President
1997 Corp.
315 West 106th Street, 4th Floor
New York, New York 10025
(212) 678-6231
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
Joseph A. Smith, Esq.
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
(212) 351-4924
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [X]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED
REGISTERED (1) PER SHARE (1) OFFERING PRICE (1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK, $0.001 PAR VALUE 30,000 $5.00 $150,000 $45.45
- --------------------------------------------------------------------------------------------------------
TOTAL $45.45
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(b).
--------------
<PAGE>
1997 CORP.
30,000 SHARES OF COMMON STOCK AT A PRICE OF $5.00 PER SHARE
1997 Corp., a Delaware corporation (the "Company"), hereby offers 30,000
shares of Common Stock, par value $.001 per share (the "Common Stock").
Prior to this offering, there has been no public market for the shares of
Common Stock and there can be no assurance that such a market will develop for
such securities after the completion of this offering. The offering price of
the Common Stock has been arbitrarily determined by the Company and bears no
relationship to the Company's assets, book value, or other generally accepted
criteria of value. For additional information regarding the factors considered
in determining the initial public offering price of the Common Stock see "Risk
Factors."
THE COMPANY IS CONDUCTING A BLANK CHECK OFFERING SUBJECT TO THE SECURITIES
AND EXCHANGE COMMISSION'S RULE 419 OF REGULATION C UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). A MINIMUM OF 90% OF THE OFFERING PROCEEDS, AND
THE SECURITIES PURCHASED BY INVESTORS WILL BE DEPOSITED INTO AN ESCROW ACCOUNT
(THE "DEPOSITED FUNDS" AND "DEPOSITED SECURITIES," RESPECTIVELY). WHILE HELD IN
THE ESCROW ACCOUNT, THE DEPOSITED SECURITIES MAY NOT BE TRADED OR TRANSFERRED.
EXCEPT FOR AN AMOUNT UP TO 10% OF THE DEPOSITED FUNDS ($15,000), OTHERWISE
RELEASABLE UNDER THE RULE, THE DEPOSITED FUNDS AND THE DEPOSITED SECURITIES MAY
NOT BE RELEASED UNTIL AN ACQUISITION IS MADE WHICH MEETS THE CRITERIA SPECIFIED
IN RULE 419, AND A SUFFICIENT NUMBER OF INVESTORS (I.E. A MINIMUM NUMBER OF
INVESTORS REPRESENTING 80% OF THE OFFERING PROCEEDS) RECONFIRM THEIR INVESTMENT
IN ACCORDANCE WITH RULE 419 PROCEDURES. PURSUANT TO THESE PROCEDURES, A NEW
PROSPECTUS, WHICH DESCRIBES AN ACQUISITION CANDIDATE AND ITS BUSINESS AND
INCLUDES AUDITED FINANCIAL STATEMENTS, WILL BE DELIVERED TO ALL INVESTORS. THE
COMPANY MUST RETURN THE PRO RATA PORTION OF THE DEPOSITED FUNDS AND INTEREST,
IF ANY, TO ANY INVESTOR WHO DOES NOT ELECT TO REMAIN AN INVESTOR. UNLESS A
SUFFICIENT NUMBER OF INVESTORS ELECT TO REMAIN SO, ALL INVESTORS WILL BE
ENTITLED TO THE RETURN OF THEIR PRO RATA PORTION OF THE DEPOSITED PROCEEDS AND
INTEREST, IF ANY, AND NONE OF THE DEPOSITED SECURITIES WILL BE ISSUED TO
INVESTORS. IN THE EVENT AN ACQUISITION IS NOT CONSUMMATED WITHIN 18 MONTHS OF
THE EFFECTIVE DATE, THE DEPOSITED PROCEEDS AND INTEREST, IF ANY, WILL BE
RETURNED ON A PRO RATA BASIS TO ALL INVESTORS. (SEE "INVESTORS' RIGHTS AND
SUBSTANTIVE PROTECTION UNDER RULE 419.")
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE
LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
ON PAGE 7 AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $5.00 $0 $5.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total $150,000 $0 $150,000
===============================================================================
(1) The Shares will be offered by the Company on an "all or none, best
efforts" basis for 30,000 Shares. No commissions will be paid to any member of
management. See "Plan of Offering."
(2) Before deducting expenses in connection with this blank check offering
estimated at $20,000, including legal, accounting and filing fees and printing
costs. It is estimated that all of the offering proceeds will remain for the
Company's business purposes.
(3) The proceeds from the offering will be deposited into escrow with the
Escrow Agent (as defined). See "The Company -- Escrow of Offering Proceeds."
The Common Stock is being offered by the Company, subject to prior sale,
when, as and if delivered to and accepted by the Company, and subject to its
right to withdraw, cancel or modify this offering and to reject any order in
whole or in part.
---------------
1997 CORP.
315 WEST 106TH STREET
FOURTH FLOOR
NEW YORK, NEW YORK 10025
The date of this Prospectus is ______, 1997.
<PAGE>
THE COMPANY HAS REGISTERED THE SECURITIES, OR AN EXEMPTION FROM
REGISTRATION HAS BEEN OBTAINED (OR IS OTHERWISE AVAILABLE), ONLY IN THE STATES
OF COLORADO, DELAWARE, FLORIDA, HAWAII, ILLINOIS, LOUISIANA, MARYLAND, NEW
YORK, RHODE ISLAND, SOUTH CAROLINA AND THE DISTRICT OF COLUMBIA (THE "PRIMARY
DISTRIBUTION STATES") AND INITIAL SALES MAY ONLY BE MADE IN SUCH JURISDICTIONS.
MORE SPECIFICALLY, THE COMPANY HAS REGISTERED THE SECURITIES BY FILING IN
LOUISIANA, BY COORDINATION IN DELAWARE, ILLINOIS, MARYLAND, RHODE ISLAND AND
SOUTH CAROLINA AND BY NOTIFICATION IN COLORADO, FLORIDA AND NEW YORK.
EXEMPTIONS FROM REGISTRATION HAVE BEEN OBTAINED (OR ARE OTHERWISE AVAILABLE) IN
HAWAII AND THE DISTRICT OF COLUMBIA. PURCHASERS OF SECURITIES IN THIS OFFERING
MUST BE RESIDENTS OF THE PRIMARY DISTRIBUTION STATES.
THERE IS NO MINIMUM PURCHASE REQUIREMENT BY INDIVIDUAL INVESTORS OF THE
SHARES BEING OFFERED. HOWEVER, UNLESS ALL OF THE SHARES ARE SOLD WITHIN NINETY
(90) DAYS FROM THE EFFECTIVE DATE OF THIS PROSPECTUS, (180 days if extended by
the Company) ALL SUBSCRIPTION PAYMENTS WILL BE PROMPTLY RETURNED TO SUBSCRIBERS
IN FULL WITH INTEREST THEREON.
THE COMPANY WILL AMEND THE PROSPECTUS FOR THE PURPOSE OF DISCLOSING
ADDITIONAL STATES, IF ANY, IN WHICH THE COMPANY'S SECURITIES WILL HAVE BEEN
REGISTERED OR QUALIFIED. (SEE "RISK FACTOR - RESTRICTED RESALES OF THE OFFERED
SECURITIES.")
<PAGE>
THE SHARES ARE OFFERED SUBJECT TO PRIOR SALE, ACCEPTANCE OF AN OFFER TO
PURCHASE, AND TO WITHDRAWAL OR CANCELLATION WITHOUT NOTICE. THE OFFERING CANNOT
BE MODIFIED UNLESS AN AMENDED REGISTRATION STATEMENT IS FILED AND DECLARED
EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION.
ALL PAYMENTS FOR THE SECURITIES SHALL BE MADE PAYABLE TO THE ORDER OF "1997
CORP. ESCROW ACCOUNT" AND SHALL BE DEPOSITED BY NOON OF THE NEXT BUSINESS DAY
FOLLOWING RECEIPT IN AN ESCROW ACCOUNT FOR THE BENEFIT OF SUBSCRIBERS TO BE
ENTITLED "1997 CORP. ESCROW ACCOUNT" OR A SIMILAR DESIGNATION, MAINTAINED AT
CONTINENTAL STOCK TRANSFER & TRUST COMPANY AT #2 BROADWAY, 19TH FLOOR NEW YORK,
NEW YORK, 10004, AS ESCROW AGENT.
THE COMPANY INTENDS TO SUPPLY ITS SHAREHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL INFORMATION EXAMINED AND REPORTED UPON, WITH AN OPINION
EXPRESSED BY INDEPENDENT CERTIFIED ACCOUNTANTS. THE COMPANY'S FISCAL YEAR END
IS DECEMBER 31st. IN ADDITION, THE COMPANY MAY FURNISH UNAUDITED QUARTERLY OR
OTHER INTERIM REPORTS TO ITS SHAREHOLDERS AS IT DEEMS APPROPRIATE. THE COMPANY
IS SUBJECT TO THE REPORTING REQUIREMENTS OF SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND IN ACCORDANCE THEREWITH, WILL FILE REPORTS AND OTHER
INFORMATION WITH THE SECURITIES AND EXCHANGE COMMISSION. IN THE EVENT THE
COMPANY NO LONGER WOULD BE REQUIRED TO FILE REPORTS AND OTHER INFORMATION WITH
THE COMMISSION UNDER THE SECURITIES EXCHANGE ACT, THE COMPANY INTENDS
NONETHELESS TO CONTINUE TO FILE SUCH REPORTS. COPIED OF THESE REPORTS AND OTHER
INFORMATION FILED BY THE REGISTRANT CAN BE INSPECTED AND COPIED AT THE PUBLIC
REFERENCE FACILITIES MAINTAINED BY THE COMMISSION AT 450 FIFTH STREET, N.W.,
WASHINGTON, D.C. 20549, AND AT THE NEW YORK REGIONAL OFFICE OF THE SECURITIES
AND EXCHANGE COMMISSION, 7 WORLD TRADE CENTER, 13TH FLOOR, NEW YORK, NEW YORK
10048. COPIES OF SUCH MATERIAL CAN BE OBTAINED FROM THE PUBLIC REFERENCE
SECTION OF THE COMMISSION, WASHINGTON, D.C. 20549, AT PRESCRIBED RATES
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE TO
ANY PERSON IN ANY STATE, TERRITORY, OR POSSESSION OF THE UNITED STATES IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED BY THE LAWS THEREOF, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
UNTIL 90 DAYS AFTER THE EFFECTIVE 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.
<PAGE>
AS HERETOFORE INDICATED, THE SHARES OFFERED BY THIS PROSPECTUS ARE PURELY
SPECULATIVE IN NATURE. THE COMPANY MAKES NO GUARANTEES, WARRANTIES OR OTHER
REPRESENTATIONS TO THE CONTRARY.
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information
and financial statements (including the notes thereto) appearing elsewhere in
this Prospectus. Investors should consider carefully the information set forth
in this Prospectus under the heading "Risk Factors."
THE COMPANY
BUSINESS OBJECTIVES
The Company, which is a "blank check" or "blind pool" company, was formed
on March 17, 1997 to serve as a vehicle to effect a merger, exchange of capital
stock, asset acquisition or other business combination (a "Business
Combination") with an operating business (a "Target Business"). The business
objective of the Company is to effect a Business Combination with a Target
Business which the Company believes has significant growth potential. The
Company intends to utilize the net proceeds of this offering, equity
securities, debt securities, bank and other borrowing or a combination thereof
in effecting a Business Combination.
The Company will seek to acquire a Target Business without limiting itself
to a particular industry. Most likely, the Target Business will be primarily
located in the United States, although the Company reserves the right to
acquire a Target Business primarily located outside the United States. In
seeking a Target Business, the Company will consider, without limitation,
businesses which (i) offer or provide services or develop, manufacture or
distribute goods in the United States or abroad, including, without limitation,
in the following areas: health care and health products, educational services,
environmental services, consumer-related products and services (including
amusement and/or recreational services), personal care services, voice and data
information processing and transmission and related technology development or
(ii) is engaged in wholesale or retail distribution. The Company will not
acquire a Target Business unless the fair market value of such business, as
determined by the Company based upon standards generally accepted by the
financial community, including revenues, earnings, cash flow and book value
(the "Fair Market Value"), is at least 80% of the offering proceeds (the "Fair
Market Value Test"). If the Company determines that the financial statements of
a proposed Target Business do not clearly indicate that the Fair Market Value
Test has been satisfied, the Company will obtain an opinion from an investment
banking firm that is a member of the National Association of Securities
Dealers, Inc. (the "NASD") with respect to the satisfaction of such criteria.
While the Company may, under certain circumstances, seek to effect Business
Combinations with more than one Target Business, in all likelihood, as a result
of its limited resources, the Company will have the ability to effect only a
single Business Combination with a Target Business. The Company does not intend
to register as a broker-dealer, merge with or acquire a registered
broker-dealer, or otherwise become a member of the NASD. None of the Company's
officers, directors or promoters, and no other affiliate of the Company has had
any preliminary contact or discussions with any representative of any other
company regarding the possibility of an acquisition or merger between the
company and such other company. The Company and its promoters know of no person
or group of persons who are likely to purchase, beneficially own or control any
portion of the securities of this offering. There are no plans, proposals or
arrangements or understandings with respect to the sale of additional
securities to affiliates, current shareholders or others following this
offering, but prior to the location of a business opportunity. Prior to any
merger or acquisition, the Company will provide its shareholders with a
post-effective prospectus, including audited financial statements, concerning
targeted entity and its business.
BUSINESS EXPERIENCE OF PRINCIPALS
1
<PAGE>
The executive officers and the other directors of the Company have business
experience which has provided them with skills which the Company believes will
be helpful in evaluating potential Target Businesses and negotiating a Business
Combination.
RETENTION OF INVESTMENT BANKER
At some time following the completion of this offering, the Company may
engage an investment banking firm which is a member in good standing of the
NASD to assist the Company in identifying, evaluating, structuring and
negotiating potential Business Combinations.
INVESTORS RIGHTS TO RECONFIRM INVESTMENT UNDER RULE 419
DEPOSIT OF OFFERING PROCEEDS AND SECURITIES
Rule 419 requires that the net offering proceeds, after deduction for
offering expenses, and all securities to be issued, be deposited into an escrow
or trust account (the "Deposited Funds" and "Deposited Securities,"
respectively) governed by an agreement which contains certain terms and
provisions specified by the Rule. Under Rule 419, the Deposited Funds and
Deposited Securities will be released to the Company and to investors,
respectively, only after the Company has met the following three conditions.
First, the Company must execute an agreement for an acquisition(s) meeting
certain prescribed criteria. Second, the Company must successfully complete a
reconfirmation offering which includes certain prescribed terms and conditions.
Third, the acquisition(s) meeting the prescribed criteria must be consummated
(see "Prescribed Acquisition Criteria" and "Reconfirmation Offering" below).
Accordingly, the Company has entered into an escrow agreement with
Continental Stock Transfer & Trust Company (the "Escrow Agent") which provides
that:
(1) The net proceeds are to be deposited into an escrow account maintained
by the Escrow Agent. The Deposited Funds and the interest or dividends thereon,
if any, are to be held for the sole benefit of the investors and can be only
invested in bank deposits, in money market mutual funds or federal government
securities or securities for which the principal or interest is guaranteed by
the federal government.
(2) All securities issued in connection with the offering and any other
securities issued with respect to such securities, including securities issued
with respect to stock splits, stock dividends or similar rights are to be
deposited directly into the escrow account promptly upon issuance. The identity
of the investors are to be included on the stock certificates or other
documents evidencing the securities. The securities held in the escrow account
are to remain as issued and deposited and are to be held for the sole benefit
of the investors who retain the voting rights, if any, with respect to the
securities held in their names. The securities held in the escrow account may
not be transferred, disposed of nor any interest created therein other than by
will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order issued by a court in connection with divorce
proceedings.
(3) Warrants, convertible securities or other derivative securities, if
any, relating to securities held in the escrow account may be exercised or
converted in accordance with the terms provided; however, the securities
received upon exercise or conversion together with any cash or other
consideration paid in connection with the exercise or conversion, are to be
promptly deposited into the escrow account.
2
<PAGE>
PRESCRIBED ACQUISITION CRITERIA
Rule 419 requires that before the Deposited Funds and the Deposited Securities
can be released the Company must first execute an agreement(s) to acquire an
acquisition candidate(s) meeting certain specified criteria. The agreement must
provide for the acquisition of a business(es) or assets for which the fair
value of the business(es) represents at least 80% of the offering proceeds. For
purposes of this offering, the fair value of the business(es) or assets to be
acquired must be at least $120,000. Once the acquisition agreement(s) meeting
the above criteria have been executed, the Company must successfully complete
the mandated reconfirmation offering, as discussed below, and consummate the
acquisition(s).
POST-EFFECTIVE AMENDMENT
Once the agreement(s) governing the acquisition(s) of (a) business(es) meeting
the above criteria has been executed, Rule 419 requires the Company to update
the registration statement with a post-effective amendment. The post-effective
amendment must contain information about the proposed acquisition candidates(s)
and its business(es), including audited financial statements; the results of
this offering; and the use of the funds disbursed from the escrow account. The
post-effective amendment must also include the terms of the reconfirmation
offer mandated by Rule 419. The reconfirmation offer must include certain
prescribed conditions which must be satisfied before the Deposited Funds and
Deposited Securities can be released from escrow.
RECONFIRMATION OFFERING
The reconfirmation offer must commence within five business days after the
effective date of the post-effective amendment. Pursuant to Rule 419, the terms
of the reconfirmation offer must include the following conditions:
(1) The prospectus contained in the post-effective amendment will be sent
to each investor whose securities are held in the escrow account within five
business days after the effective date of the post-effective amendment;
(2) Each investor will have no fewer than 20, and no more than 45 business
days from the effective date of the post-effective amendment to notify the
Company in writing that the investor elects to remain an investor;
(3) If the Company does not receive written notification from any investor
within 45 business days following the effective date, the pro-rata portion of
the Deposited Funds (and any related interest or dividends) held in the escrow
account on such investor's behalf will be returned to the investor within five
business days by first class mail or other equally prompt means;
(4) The acquisition(s) will be consummated only if a minimum number of
investors representing 80% of the maximum offering proceeds elect to reconfirm
their investments;
(5) If a consummated acquisition(s) has not occurred within 18 months from
the date of this Prospectus, the Deposited Funds held in the escrow account
shall be returned to all investors on a pro-rata basis within five business
days by first class mail or other equally prompt means.
(6) Investors who receive their pro rata portion of the Deposited Funds
will also receive their pro rata portion of their accrued interest. Investors
who elect to remain investors will not receive any interest when their pro-rata
portion of the Deposited Funds is released to the Company.
3
<PAGE>
RELEASE OF DEPOSITED SECURITIES AND DEPOSITED FUNDS
The Deposited Funds and Deposited Securities may be released to the Company and
the investors, respectively, after the escrow agent has received a signed
representation from the Company and any other evidence acceptable by the escrow
agent that:
(1) The Company has executed an agreement for the acquisition(s) of a
business(es) for which the fair value of the business represents at least 80%
of the maximum offering proceeds and has filed the required post-effective
amendment;
(2) The post-effective amendment has been declared effective, that the
mandated reconfirmation offer having the conditions prescribed by Rule 419 has
been completed and that the Company has satisfied all of the prescribed
conditions of the reconfirmation offer.
(3) The acquisition(s) of the business(es) with the fair value of at least
80% of the maximum proceeds is (are) consummated.
THE OFFERING
This prospectus relates to a total of 30,000 Common Shares (par value $.001 per
share) at an offering price of $5.00 per Share (the "Shares").
This offering is made on an "all or none, best efforts" basis. The offering
period is 90 days which may be extended an additional 90 days.
Offering Price Per Share........................................... $5.00
Shares Offered .................................................... 30,000
Common Shares Outstanding Prior to Offering........................ 15,000
Common Shares to be Outstanding After Offering..................... 45,000
Gross Proceeds to Company.......................................... $150,000
The authorized capital stock of the Company consists of 10,000,000 shares
(par value $.001 per share) and 2,000,000 preferred shares (par value $.01 per
share).
RISK FACTORS
The securities offered hereby involve 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. Prior to this offering there has been no
public market for the Shares and there can be no assurance that such a market
will develop after release of the Deposited Securities. Such risk factors
include, among others, the following: the Company's lack of operating history
and limited resources; intense competition in selecting a Target Business and
effecting a Business Combination; and, because of the Company's limited
resources, the possibility that the Company's due diligence
4
<PAGE>
investigation of a potential Business Combination will be restricted,
especially in the case of a Target Business outside the United States.
Investors will incur immediate substantial dilution. See "Risk Factors,"
"Dilution" and "Use of Proceeds."
USE OF PROCEEDS
The Company intends to use substantially all of the net proceeds of the
offering, together with the interest earned thereon, to attempt to effect a
Business Combination, including selecting and evaluating potential Target
Businesses and structuring, negotiating and consummating a Business Combination
(including possible payment of finder's fees or other compensation to persons
or entities which provide assistance or services to the Company). All of the
gross proceeds of the offering by the Company will be held in an escrow account
maintained by the Proceeds Escrow Agent, until the earlier of written
notification by the Company to the Proceeds Escrow Agent (i) of the Company's
completion of a transaction or series of transactions in which a specific
business has been acquired with a fair value of at least $120,000 (80% of the
gross proceeds of this offering), or (ii) to distribute the escrowed proceeds,
in connection with a liquidation of the Company, to the then holders of the
Shares sold in this offering. All proceeds held in the escrow account will be
invested, until released, in direct investments in short-term United States
government securities, including treasury bills, cash and cash equivalents.
To the extent that the Company's securities are used as consideration to
effect a Business Combination, the balance of the net proceeds of this offering
not expended will be used to finance the operations (including the possible
repayment of debt) of the Target Business. No cash compensation will be paid to
any officer or director in their capacities as such until after the
consummation of the first Business Combination. Since the role of the Company's
current directors and executive officers after a consummation of a Business
Combination is uncertain, the Company has no ability to determine what
remuneration, if any, will be paid to such persons after such consummation of a
Business Combination.
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the more
detailed financial statements appearing elsewhere in this Prospectus. Such
information should be read in conjunction with such financial statements,
including the notes thereto.
</TABLE>
<TABLE>
<CAPTION>
MARCH , 1997
--------------
ACTUAL ADJUSTED(1)
--------- -----------
<S> <C> <C>
Balance Sheet Data:
Total assets.......................................................... $20,000 $150,000
Total liabilities..................................................... 0 0
Common stock and additional paid-in-capital(1)........................ 20,000 150,000
--
Accumulated deficit during development stage.......................... 0 0
--------- -----------
Total stockholders' equity including amount subject to
redemption(2)...................................................... 20,000 150,000
</TABLE>
- --------------
(1) Gives effect to the sale of the Shares at the initial public offering
price of $5.00 per Share (after the payment of all estimated offering
expenses). See "Use of Proceeds".
(2) In the event the Company consummates a Business Combination, the
redemption rights afforded to the purchasers in this
5
<PAGE>
offering may result in the conversion into cash of up to 20% of the
aggregate number of shares held by the non-affiliated public stockholders,
amounting to 6,000 shares, at a per share redemption price equal to their
original investment plus a pro-rata share of any interest accrued in the
Escrow Account.
6
<PAGE>
THE COMPANY
BUSINESS OBJECTIVE
The Company, which is a "blank check" or "blind pool" company, was formed
in March 1997 to serve as a vehicle to effect a Business Combination with a
Target Business which the Company believes has significant growth potential.
The Company intends to utilize the net proceeds of this offering, equity
securities, debt securities, bank and other borrowings or a combination thereof
in effecting a Business Combination. The Company will seek to acquire a Target
Business without limiting itself to a particular industry. Most likely, the
Target Business will be primarily located in the United States, although the
Company reserves the right to acquire a Target Business primarily located
outside the United States. In seeking a Target Business, the Company will
consider, without limitation, businesses which (i) offer or provide services or
develop, manufacture or distribute goods in the United States or abroad,
including, without limitation, in the following areas: health care and health
products, educational services, environmental services, consumer related
products and services (including amusement and/or recreational services),
personal care services, voice and data information processing and transmission
and related technology development or (ii) is engaged in wholesale or retail
distribution. The Company will not effect a Business Combination with a Target
Business unless the Fair Market Value of such business is at least 80% of the
gross proceeds of this offering ($120,000) at the time of consummation of such
Business Combination. If the Company determines that the financial statements
of a Proposed Target Business do not clearly indicate that the Fair Market
Value Test has been satisfied, the Company will obtain an opinion from an
investment banking firm that is a member in good standing of the NASD with
respect to the satisfaction of such criteria. The Company has not had any
contact or discussions with representatives of any Target Business regarding a
consummation of a Business Combination. While the Company may, under certain
circumstances, seek to effect Business Combinations with more than one Target
Business, in all likelihood, as a result of its limited resources, the Company
will have the ability to effect only a single Business Combination. The Company
does not intend to register as a broker-dealer, merge with or acquire a
registered broker-dealer, or otherwise become a member of the NASD.
To date, the Company's efforts have been limited to organizational
activities and this offering. The implementation of the Company's business
objectives is wholly contingent upon the successful sale of the Shares offered
hereby. See "Proposed Business."
The Company was organized under the laws of the State of Delaware on March
17, 1997. The Company's office is located at 315 West 106th Street, Fourth
Floor, New York, New York 10025 and its telephone number is (212) 678-6231.
BUSINESS EXPERIENCE OF PRINCIPALS
The executive officers and the other directors of the Company have business
experience which has provided them with skills which the Company believes will
be helpful in evaluating potential Target Businesses and negotiating and
consummating a Business Combination. Prior to their involvement with the
Company, none of the directors or the executive officers of the Company has
been involved in any "blind pool" or "blank check" offerings. See "Management."
POSSIBLE RETENTION OF INVESTMENT BANKER
The Company may retain an investment banking firm to aid in identifying,
evaluating, structuring, negotiating and consummating a Business Combination.
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RISK FACTORS
The securities offered hereby involve a high degree of risk, including, but
not limited to, the several factors described below. These securities should be
purchased only by persons who can afford a loss of their entire investment.
Investors should consider carefully the following risk factors inherent in and
affecting the business of the Company and this offering in evaluating an
investment in the securities offered hereby.
NO OPERATING HISTORY; LIMITED RESOURCES; NO PRESENT SOURCE OF REVENUES
The Company, incorporated on March 17, 1997, is a development stage company
and has not, as of the date hereof, attempted to seek a Business Combination.
Although certain of the Company's directors and its executive officers have had
extensive experience relating to the identification, evaluation and acquisition
of Target Businesses, 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. None of the Company's officers,
directors, promoters or other persons engaged in management-type activities,
has been previously involved with any blank check offerings. To date, the
Company's efforts have been limited to organizational activities and this
offering. The Company has limited resources and has had no revenues to date.
In addition, the Company will not achieve any revenues (other than investment
income) until, at the earliest, the consummation of a Business Combination.
Moreover, there can be no assurance that any Target Business, at the time of
the Company's consummation of a Business Combination, or at any time
thereafter, will derive any material revenues from its operations or operate
on a profitable basis. See "Proposed Business" and "Management -- Prior Blank
Check Offerings."
"BLIND POOL" OFFERING; BROAD DISCRETION OF MANAGEMENT
Prospective investors who invest in the Company will do so without an
opportunity to evaluate the specific merits or risks of any one or more
Business Combinations. As a result, investors will be entirely dependent on the
broad discretion and judgment of management in connection with the allocation
of the proceeds of the offering and the selection of a Target Business. There
can be no assurance that determinations ultimately made by the Company will
permit the Company to achieve its business objectives. See "Use of Proceeds"
and "Proposed Business."
ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO PROSPECTIVE BUSINESS
COMBINATIONS; INVESTMENT IN THE COMPANY VERSUS INVESTMENT IN A TARGET BUSINESS
"Blind pool" and "blank check" offerings are inherently characterized by
the 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 Target Business. Accordingly,
investors will have no substantive information concerning consummation of any
specific Business Combination in considering a purchase of Shares in this
offering. The absence of disclosure can be contrasted with the disclosure which
would be necessary if the Company had already identified a Target Business as a
Business Combination candidate or if the Target Business were to effect an
offering of its securities
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directly to the public. There can be no assurance 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 a Target Business. See "Proposed Business."
SEEKING TO ACHIEVE PUBLIC TRADING MARKET THROUGH BUSINESS COMBINATION
While a prospective Target Business may deem a consummation of a Business
Combination with the Company desirable for various reasons, a Business
Combination may involve the acquisition of, merger or consolidation with, a
company which does not need substantial additional capital, but which desires
to establish a public trading market for its shares, while avoiding what it may
deem to be adverse consequences of undertaking a public offering itself,
including time delays, significant expense, loss of voting control, the time
and expense incurred to comply and compliance with various Federal and state
securities laws that regulate initial public offerings. Nonetheless, there can
be no assurance that there will be an active trading market for the Company's
securities following the completion of a Business Combination or, if a market
does develop, as to the market price for the Company's securities. See
"Proposed Business -- "Blind Pool" Offering -- Background."
UNCERTAIN STRUCTURE OF BUSINESS COMBINATION
The structure of a future transaction with a Target Business cannot be
determined at the present time and may take, for example, the form of a merger,
an exchange of stock or an asset acquisition. The Company may form one or more
subsidiary entities to effect a Business Combination and may, under certain
circumstances, distribute the securities of subsidiaries to the stockholders of
the Company. There cannot be any assurance that a market would develop for the
securities of any subsidiary distributed to stockholders or, if it did, any
assurance as to the prices at which such securities might trade. The structure
of a Business Combination or the distribution of securities to stockholders may
result in taxation of the Company, the Target Business or stockholders. See
"Proposed Business" and "Management."
UNSPECIFIED INDUSTRY AND TARGET BUSINESS; UNASCERTAINABLE RISKS
While the Company will target industries located in the United States,
while reserving the right to acquire a Target Business located elsewhere, the
Company has not selected any particular Target Business or industry in which to
concentrate its Business Combination efforts. None of the Company's directors
or its executive officer has had any contact or discussions with any entity or
representatives of any entity regarding a consummation of a Business
Combination. Accordingly, there is no basis for prospective investors to
evaluate the possible merits or risks of the Target Business or the particular
industry in which the Company may ultimately operate. To the extent that 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 revenues or income), 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 Target Business or industry, there can be no
assurance that the Company will properly ascertain or assess all such risks.
See "Proposed Business."
In addition, to date, none of the Company's officers, directors, promoters,
affiliates or associates have had any preliminary contact or discussions with,
and there are no present plans, proposals,
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arrangements or understandings with any representatives or owners of any
business or company regarding the possibility of consummating a Business
Combination with such a business or company.
PROBABLE LACK OF BUSINESS DIVERSIFICATION
As a result of the limited resources of the Company, the Company, in all
likelihood, 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 or entities
operating in multiple industries or multiple segments 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 material adverse impact upon the particular industry in which
the Company may operate subsequent to a consummation of a Business Combination.
The prospects for the Company's success may become dependent upon the
development or market acceptance of a single or limited number of products,
processes or services. Accordingly, notwithstanding the possibility of capital
investment in and management assistance to the Target Business by the Company,
there can be no assurance that the Target Business will prove to be
commercially viable. The Company has no present intention of either loaning any
of the proceeds of this offering to any Target Business or of purchasing or
acquiring a minority interest in any Target Business. Management is unaware of
any circumstances under which this policy, through management's own initiative,
may be changed. See "Use of Proceeds" and "Proposed Business."
DEPENDENCE UPON EXECUTIVE OFFICERS AND BOARD OF DIRECTORS; NO PRIOR BLIND POOL
EXPERIENCE
The ability of the Company to successfully effect a Business Combination
will be largely dependent upon the efforts of its executive officers and the
Board of Directors. Notwithstanding the significance of such persons, the
Company has not entered into employment agreements or other understandings with
any such personnel concerning compensation or obtained any "key man" life
insurance on their respective lives. The loss of the services of such key
personnel could have a material adverse effect on the Company's ability to
successfully achieve its business objectives. None of the Company's key
personnel are required to commit a substantial amount of their time to the
affairs of the Company and, accordingly, such personnel may have conflicts of
interests in allocating management time among various business activities.
However, the executive officers and the other directors of the Company will
devote such time as they deem reasonably necessary to carry out the business
and affairs of the Company, including the evaluation of potential Target
Businesses and the negotiation and consummation of a Business Combination, and,
as a result, the amount of time devoted to the business and affairs of the
Company may vary significantly depending upon, among other things, whether the
Company has identified a Target Business or is engaged in active negotiation of
a Business Combination. Although the officers and directors of the Company have
substantial experience in buying and selling businesses, they have no prior
experience in "blind pool" or "blank check" offerings. The Company will rely
upon the expertise of such persons, and the Board does not anticipate that it
will hire additional personnel. However, if additional personnel are required,
there can be no assurance that the Company will be able to retain such
necessary additional personnel. See "Proposed Business" and "Management."
CONFLICTS OF INTEREST
None of the Company's directors or executive officers are required to
commit their full time to the affairs of the Company and it is likely that such
persons will not devote a substantial amount of time to the affairs of the
Company. Such personnel will have conflicts of interest in allocating
management
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time among various business activities. As a result, the consummation of a
Business Combination may require a greater period of time than if the Company's
management devoted their full time to the Company's affairs. However, the
executive officers and other directors of the Company will devote such time as
they deem reasonably necessary to carry out the business and affairs of the
Company, including the evaluation of potential Target Businesses and the
negotiation and consummation of a Business Combination and, as a result, the
amount of time devoted to the business and affairs of the Company may vary
significantly depending upon, among other things, whether the Company has
identified a Target Business or is engaged in active negotiation and
consummation of a Business Combination. Prior to their involvement with the
Company, none of the directors or the executive officers of the Company has
been involved in any "blind pool" or "blank check" offerings. To avoid certain
conflicts of interest, the executive officers and directors of the Company, and
owners of five percent or more of the Company's Common Stock (before giving
effect to this offering ), have agreed that they will not, until the
consummation of the first Business Combination, introduce a suitable proposed
merger, acquisition or consolidation candidate to another blank check company.
For such purposes, suitable shall mean any business opportunity which, under
Delaware law, may reasonably be required to be presented to the Company.
Certain of the persons associated with the Company are and may in the future
become affiliated with entities engaged in business activities similar to those
intended to be conducted by the Company. Such persons may have conflicts of
interest in determining to which entity a particular business opportunity
should be presented. In general, officers and directors of a corporation
incorporated under the laws of the State of Delaware are required to present
certain business opportunities to such corporation. Accordingly, as a result of
multiple business affiliations, certain of the Company's directors and
executive officers may have similar legal obligations to present certain
business opportunities to multiple entities. There can be no assurance that any
conflicts will be resolved in favor of the Company. See "Management."
LIMITED ABILITY TO EVALUATE TARGET BUSINESS MANAGEMENT; POSSIBILITY THAT
MANAGEMENT WILL CHANGE
The role of the present management in the operations of a Target Business
of the Company following a Business Combination cannot be stated with
certainty. Although the Company intends to scrutinize closely the management of
a prospective Target Business in connection with its evaluation of the
desirability of effecting a Business Combination with such Target Business, and
may retain an independent investment banking firm to assist the Company in this
regard, there can be no assurance that the Company's assessment of such
management will prove to be correct, especially in light of the possible
inexperience of current key personnel of the Company in evaluating certain
types of businesses. While it is possible that certain of the Company's
directors or executive officers will remain associated in some capacities with
the Company following a consummation of a Business Combination, it is unlikely
that any of them will devote a substantial portion of their time to the affairs
of the Company subsequent thereto. Moreover, there can be no assurance that
such personnel will have significant experience or knowledge relating to the
operations of the Target Business acquired by the Company. The Company may also
seek to recruit additional personnel to supplement the incumbent management of
the Target Business. There can be no assurance that the Company will
successfully recruit additional personnel or that the additional personnel will
have the requisite skills, knowledge or experience necessary or desirable to
enhance the incumbent management. In addition, there can be no assurance that
the future management of the Company will have the necessary skills,
qualifications or abilities to manage a public company embarking on a program
of business development. See "Proposed Business" and "Management."
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION
This offering involves an immediate and substantial dilution of $1.67 per
share between the pro forma net tangible book value per share after the
offering of $3.33 and the initial public offering price of $5.00 per share
allocable to each Share. The existing stockholders of the Company acquired
their
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shares of Common Stock at prices substantially lower than the initial public
offering price and, accordingly, new investors will bear substantially all of
the risks inherent in an investment in the Company. Similarly, if and to the
extent that the net tangible book value per share of the securities of the
Target Business being acquired (when divided by the number of shares of the
Common Stock to be issued) is less per share than the Company's current net
tangible book value per share, the Company's public stockholders will suffer
further dilution, since the issuance of such shares would result in an
immediate dilution of the net tangible book value per share of the then
consolidated financial position of the Company and the business being acquired.
See "Dilution."
POSSIBLE BUSINESS COMBINATION WITH A TARGET BUSINESS OUTSIDE THE UNITED STATES
The Company may effectuate a Business Combination with a Target Business
located outside the United States. In such event, the Company may face the
additional risks of language barriers, different presentations of financial
information, different business practices, and other cultural differences and
barriers. Furthermore, due to the Company's limited resources, it may be
difficult to assess fully these additional risks. Therefore, a Business
Combination with a Target Business outside the United States may increase the
risk that the Company will not achieve its business objectives.
COMPETITION
The Company expects to encounter intense competition from other entities
having business objectives similar to those of the Company. Many of these
entities, including venture capital partnerships and corporations, other 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, technical, human and other resources than the Company and
there can be no assurance that the Company will have the ability to compete
successfully. The Company's financial resources will be limited in comparison
to those of many of its competitors. Further, such competitors will generally
not be required to seek the prior approval of their own stockholders, which may
enable them to close a Business Combination more quickly than the Company. This
inherent competitive limitation may compel the Company to select certain less
attractive Business Combination prospects. There can be no assurance that such
prospects will permit the Company to achieve its stated business objectives.
See "Proposed Business."
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly larger number of
competitors, including competitors with greater financial, marketing,
technical, human and other resources than the initial competitors in the
industry. The degree of competition characterizing the industry of any
prospective Target Business cannot presently be ascertained. There can be no
assurance that, subsequent to a consummation of a Business Combination, the
Company will have the resources to compete in the industry of the Target
Business effectively, especially to the extent that the Target Business is in a
high-growth industry. See "Proposed Business."
ADDITIONAL FINANCING REQUIREMENTS
The Company has had no revenues to date and will be entirely dependent upon
the proceeds of this offering to implement its business objectives. The Company
will not achieve any revenues (other than investment income) until, at the
earliest, the consummation of a Business Combination. Although the Company
anticipates that the net proceeds of this offering will be sufficient to effect
a Business
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Combination, inasmuch as the Company has not yet identified any prospective
Target Business candidates, the Company cannot ascertain with any degree of
certainty the capital requirements for any particular Business Combination. 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 other reasons), the Company will be required to seek
additional financing. There can be no assurance that such financing will be
available on acceptable terms, or at all. To the extent that additional
financing proves to be unavailable when needed to consummate a particular
Business Combination, the Company would, in all likelihood, be compelled to
restructure the transaction or abandon that particular Business Combination and
seek an alternative Target Business candidate, if possible. In addition, in the
event of the consummation of a Business Combination, the Company may require
additional financing to fund the operations or growth of the Target Business.
The failure by the Company to secure additional financing could have a material
adverse effect on the continued development or growth of the Target Business.
The Company does not have any arrangements with any bank or financial
institution to secure additional financing and there can be no assurance that
any such arrangement, if required or otherwise sought, would be available on
terms deemed to be commercially acceptable and in the best interests of the
Company. See "Proposed Business."
POSSIBLE USE OF DEBT FINANCING; DEBT OF A TARGET BUSINESS
There currently are no limitations on the Company's ability to borrow funds
to increase the amount of capital available to the Company to effect a Business
Combination. However, the Company's limited resources and lack of operating
history will make it difficult to borrow funds. 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 the then prevailing conditions in the
financial markets, as well as general economic conditions. There can be no
assurance that debt financing, if required or sought, would be available on
terms deemed to be commercially acceptable by 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 a Target Business, may have a material adverse effect
on the Company's financial condition and future prospects. Additionally, to the
extent that debt financing ultimately proves to be available, any borrowings
may subject the Company to various risks traditionally associated with
indebtedness, including the risks of interest rate fluctuations and
insufficiency of cash flow to pay principal and interest. Furthermore, a Target
Business may have already incurred borrowings and, therefore, already be
subject to all the risks inherent thereto. See "Use of Proceeds" and "Proposed
Business."
RECONFIRMATION RIGHTS
At the time the Company executes an agreement for a potential Business
Combination, the Company will offer to each of the non-affiliated public
stockholders of the Company the right, for a specified period of time of not
less than 20 business days and not more than 45 business days, to reconfirm his
or her investment, or else his shares of Common Stock will be redeemed at a
price equal to the purchase price of such shares plus any accrued interest on
such purchase price in the Proceeds Escrow Account ("Liquidation Value") as of
the Record Date. The Reconfirmation Offer will be described in the disclosure
documentation relating to the proposed Business Combination. In connection with
the Reconfirmation Offer, should non-affiliated public stockholders holding 20%
or less of the Common Stock elect to redeem their shares, the Company may, but
will not be required to, proceed with the proposed Business Combination and, if
the Company elects to so proceed, will redeem such shares at their Liquidation
Value as of the Record Date. In any case, if non-affiliated public stockholders
holding more than 20% of such Common Stock elect to redeem their shares, the
Company will not proceed with the proposed Business Combination and will not
redeem any shares of Common Stock. As a result of the foregoing, the Company's
ability to consummate a particular Business Combination may be
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impaired.
POSSIBLE LIQUIDATION OF THE COMPANY IF NO BUSINESS COMBINATION
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, the Company will distribute to the holders of
Common Stock acquired in this offering the amount of their original investment
plus a pro-rata share of all interest accrued in the Funds Escrow Account.
There can be no assurance that the Company will effect a Business
Combination within 18 months from the date of this Prospectus.
INVESTMENT COMPANY ACT CONSIDERATIONS
The regulatory scope of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. The Investment Company Act may, however, also
be deemed to be applicable to a company which does not intend to be
characterized as an investment company but which, nevertheless, engages in
activities which may be deemed to be within the definitional scope of certain
provisions of the Investment Company Act. The Company believes that its
anticipated principal activities, which will involve acquiring control of an
operating company, will not subject the Company to regulation under the
Investment Company Act. Nevertheless, there can be no assurance that the
Company will not be deemed to be an investment company, particularly during the
period prior to consummation of a Business Combination. If the Company is
deemed to be an investment company, the Company may become subject to certain
restrictions relating to the Company's activities, including restrictions on
the nature of its investments and the issuance of securities. In addition, the
Investment Company Act imposes certain requirements on companies deemed to be
within its regulatory scope, including registration as an investment company,
adoption of a specific form of corporate structure and compliance with certain
burdensome reporting, record keeping, voting, proxy, disclosure and other rules
and regulations. In the event of the characterization of the Company as an
investment company, the failure by the Company to satisfy such regulatory
requirements, whether on a timely basis or at all, would, under certain
circumstances, have a material adverse effect on the Company.
STATE BLUE SKY REGISTRATION; RESTRICTED RESALES OF THE SECURITIES
The ability to register or qualify for sale the Shares for both initial
sale and secondary trading will be limited because a significant number of
states have enacted regulations pursuant to their securities or so-called "blue
sky" laws restricting or, in many instances, prohibiting, the sale of
securities of "blind pool" issuers such as the Company within that state. In
addition, many states, while not specifically prohibiting or restricting "blind
pool" companies, would not register the securities to be offered in this
offering for sale in their states. Because of these regulations, the Company
has registered the securities being offered in this offering, or an exemption
from registration has been obtained (or is otherwise available), only in the
states of Colorado, Delaware, Florida, Hawaii, Illinois, Louisiana, Maryland,
New York, Rhode Island and South Carolina and in the District of Columbia (the
"Primary Distribution States") and initial sales may only be made in such
jurisdictions. More specifically, the Company has registered the securities by
filing in Louisiana, by coordination in Delaware, Illinois, Maryland, Rhode
Island and South Carolina and by notification in Colorado, Florida and New
York. Exemptions from registration have been obtained (or are otherwise
available) in Hawaii and the District of Columbia. No resales of the Shares
will be permitted while such shares remain in the Securities Escrow.
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DIVIDENDS UNLIKELY
The Company does not expect to pay dividends prior to the consummation of a
Business Combination. The payment of dividends after consummating 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. The Company presently intends to retain
all earnings, if any, for use in the Company's business operations and
accordingly, the Board does not anticipate declaring any dividends in the
foreseeable future. See "Description of Securities -- Dividends."
AUTHORIZATION OF ADDITIONAL SECURITIES
The Company's Certificate of Incorporation authorizes the issuance of
10,000,000 shares of Common Stock. Upon completion of this offering there will
be 9,955,000 authorized but unissued shares of Common Stock available for
issuance. 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 or following a Business Combination. To
the extent that additional shares of Common Stock are issued, the Company's
stockholders would experience dilution of their respective ownership interests
in the Company. Additionally, if the Company issues a substantial number of
shares of Common Stock in connection with or following a Business Combination,
a change in control of the Company will occur which may affect, among other
things, the Company's ability to utilize net operating loss carry forwards, if
any. Furthermore, the issuance of a substantial number of shares of Common
Stock may 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. See "Proposed Business" and
"Description of Securities."
The Company's Certificate of Incorporation also authorizes the issuance of
2,000,000 shares of preferred stock (the "Preferred Stock"), with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions and in such series as the Board of Directors, subject to the laws
of the State of Delaware, may determine from time to time. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
Common Stock. In addition, the Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company does not currently intend to issue
any shares of Preferred Stock, there can be no assurance that the Company will
not do so in the future. As of the date of this Prospectus, the Company has no
outstanding shares of Preferred Stock. See "Proposed Business" and "Description
of Securities."
OTC BULLETIN BOARD; NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF
OFFERING PRICE; LACK OF PUBLIC MARKET FOR SECURITIES
Prior to this offering, there has been no public trading market for the
Common Stock. The initial public offering prices of the Shares has been
arbitrarily determined by the Company and bear no relationship to any
established valuation criteria such as assets, book value or prospective
earnings.
COMPLIANCE WITH PENNY STOCK RULES
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The Company's securities will not initially be considered "penny stock" as
defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and the rules thereunder, since the price of each security is $5 or more. If
the price for the Company's Shares was to drop below $5, the Shares may come
within the definition of a "penny stock". Unless such security is otherwise
excluded from the definition of "penny stock," the penny stock rules apply with
respect to that particular security. One other exemption from the definition of
a "penny stock" is for securities of an issuer which has assets in excess of $5
million, as represented by audited financial statements. In the present
situation, the Company will not have assets in excess of $5 million.
The penny stock rules require a broker-dealer prior to a transaction in
penny stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
sales person in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that the broker-dealer, not otherwise exempt from
such rules, must make a special written determination that the penny stock is
suitable for the purchaser and receive the purchaser's written agreement to the
transaction. These disclosure rules have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to
the penny stock rules. If any security of the Company becomes subject to the
penny stock rules, it may become more difficult to sell such securities. Such
requirements, if applicable, could result in reduction in the level of trading
activity for that particular security of the Company and could make it more
difficult for investors to sell that particular security. No assurance can be
given that any security of the Company will continue not to be classified as a
penny stock.
SHARES ELIGIBLE FOR FUTURE SALE
None of the 15,000 shares of Common Stock outstanding as of the date of
this Prospectus are eligible for sale under Rule 144 ("Rule 144") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). However,
such shares may be registered under the Securities Act for sale at the time of
a Business Combination and will be freely tradable at that time. In general,
under Rule 144, as currently in effect, subject to the satisfaction of certain
other conditions, a person, including an affiliate of the Company (or persons
whose shares are aggregated), who has owned restricted shares of Common Stock
beneficially for at least one year is entitled to sell, 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 an exchange or 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 three months immediately preceding the sale and who
has beneficially owned the shares of Common Stock to be sold 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 such shares of Common Stock or the availability of such
shares for sale will have on the market prices for shares of Common Stock
prevailing from time to time. Nevertheless, the sale of substantial amounts of
Common Stock in the public market would likely 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 "Shares Eligible
for Future Sale."
OFFERING IS SUBJECT TO PENNY STOCK RULES AND BROKER-DEALER SALES OF COMMON
SHARES IN THE SECONDARY MARKET
The Securities and Exchange Commission (the "Commission") has adopted
regulations which define a "penny stock" to be an equity security that has a
market price (as therein defined) of less than $5.00 per share or with an
exercise price of less than $5.00
16
<PAGE>
per share, subject to certain exceptions. Although the securities offered
herein are being offered at more than $5.00 per share, the offering by virtue
of it being a "blank check" company is subject to the provisions under Rule 419
of Regulation C under the Securities Act of 1933, as amended. For any
transaction involving a penny stock, unless exempt, the rules require delivery,
prior to any transaction in a penny stock, of a disclosure schedule prepared by
the Commission relating to the penny stock market. Disclosure is also required
to be made about commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market
in penny stocks. The Company's "penny stock" securities are subject to
Securities and Exchange Commission Rule 15g-9 of the Securities Exchange Act of
1934, as amended, which imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in
excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale.
PROHIBITION PURSUANT TO RULE 15G-8 UNDER EXCHANGE ACT TO SELL OR OFFER TO
SELL SHARES IN RULE 419 ACCOUNT
Rule 419 of Regulation C under the Securities Act of 1933, as amended,
requires that the securities to be issued and the funds received in a blank
check offering be deposited and held in an escrow account until an acquisition
meeting specified criteria is completed. Pursuant to Rule 15g-8 under the
Exchange Act, it is unlawful for any person to sell or offer to sell the Shares
(or any interest in or related to the Shares) held in the Rule 419 escrow
account other than pursuant to a qualified domestic relations order issued by a
court in connection with divorce proceedings. As a result, contracts for sale
to be satisfied by delivery of the deposited shares (e.g. contracts for sale on
a when, as, and if issued basis) are prohibited. Such rule prohibits sales of
other interests based on the shares, whether or not physical delivery is
required. Therefore, investors will not be able to realize any return on their
investment for up to 18 months from the date of this prospectus. (See
"Prospectus Summary")
USE OF PROCEEDS
The net proceeds to the Company after deducting estimated expenses of
$20,000 which will be paid from existing capital, are estimated to be $150,000.
These proceeds will be held in an escrow account maintained by the Proceeds
Escrow Agent, until the earlier of written notification by the Company to the
Proceeds Escrow Agent (i) of the Company's completion of a transaction or
series of transactions in which a specific business has been acquired with a
fair value of at least $120,000, or (ii) to distribute the escrowed funds, in
connection with a liquidation of the Company, to the then holders of the Shares
sold in this offering. All proceeds held in the escrow account will be
invested, until released, in short-term United States government securities,
including treasury bills, cash and cash equivalents.
The Company will use the net proceeds of this offering, together with the
income earned thereon, principally in connection with effecting a Business
Combination, including selecting and evaluating potential Target Businesses and
structuring and consummating a Business Combination (including possible payment
of finder's fees or other compensation to persons or entities which provide
assistance or services to the Company). The Company will not effect a Business
Combination with a Target Business unless the Fair Market Value of such
business is greater than 80% of the net assets of the Company at the time of
such consummation of a Business Combination. The Company has no present
intention of either loaning any of the proceeds of this offering to any Target
Business or purchasing a
17
<PAGE>
minority interest in any Target Business. Management is unaware of any
circumstances under which this policy, through management's own initiative, may
be changed. The Company does not have discretionary access to the monies in the
escrow account, including income earned on such amounts, and stockholders of
the Company will not receive any distribution of income (other than in
connection with the liquidation of the Company) or have any ability to direct
the use or distribution of such income. Thus, such income will cause the amount
in escrow to increase. The Company cannot use the escrowed amounts to pay the
costs of evaluating potential Business Combinations. The Company's anticipated
uses of the net proceeds from the sale of the Common Stock are quantified as
follows
Use Amount Percentage
Escowed Proceeds(1) $150,000 100.00%
(1) Represents the amount of proceeds from the sale of the shares. See "The
Company -- Escrow of Offering Proceeds."
The Company may seek to issue additional securities if it requires
additional funds to meet its operating and administrative expenses. To the
extent that Common Stock is used as consideration to effect a Business
Combination, the net proceeds of this offering not theretofore expended will be
used to finance the operations (including the possible repayment of debt) of
the Target Business. No cash compensation will be paid to any officer or
director in their capacities as such until after the consummation of the first
Business Combination. Since the role of present management after a Business
Combination is uncertain, the Company has no ability to determine what
remuneration, if any, will be paid to such persons after a Business
Combination. No portion of the gross proceeds from this offering will be paid
to the Company's officers, directors, their affiliates or associates for
expenses of this offering. Management is not aware of any circumstances under
which the aforementioned policy may be changed.
The Company will not pay or incur a liability for ten percent (10%) or more
in the aggregate of the net proceeds of this offering (through repayment of
indebtedness or otherwise) to NASD members, affiliates, associated persons or
related persons.
18
<PAGE>
DILUTION
The difference between the public offering price per share of Common Stock
and the pro forma net tangible book value per share of Common Stock of the
Company after this offering constitutes the dilution to investors in this
offering. Net tangible book value per share is determined by dividing the net
tangible book value of the Company (total tangible assets less total
liabilities) by the number of outstanding shares of Common Stock.
At March 31, 1997, net tangible book value of the Company was $20,000 or
$1.33 per share of Common Stock. After giving effect to the sale of 30,000
shares of Common Stock included in the Shares offered hereby offered hereby and
the initial application of the estimated net proceeds therefrom, the pro forma
net tangible book value of the Company at March 31, 1997, would be $150,000 or
$3.33 per share, representing an immediate increase in net tangible book value
of $2.00 per share to existing stockholders and an immediate dilution of $1.67
per share to investors purchasing Shares in this offering ("New Investors").
The following table illustrates the foregoing information with respect to
dilution to New Investors on a per share basis :
<TABLE>
<CAPTION>
<S> <C> <C>
Public offering price per share of Common Stock(1)(2)................... $5.00
Net tangible book value per share of Common Stock before this
offering.............................................................. $1.33
Increase attributable to this offering.................................. $2.00
Pro forma net tangible book value per share of Common Stock after
this offering(3)...................................................... $3.33
-----
Dilution to New Investors............................................... $1.67
=====
</TABLE>
The following table sets forth, with respect to existing stockholders and
investors in this offering, a comparison of the number of shares of Common
Stock acquired from the Company, the percentage ownership of such shares, the
total consideration paid, the percentage of total consideration paid and the
average price per share:
<TABLE>
<CAPTION>
SHARES PURCHASED AVERAGE TOTAL CONSIDERATION* PRICE
AMOUNT PERCENTAGE PER SHARE
------ PERCENTAGE ---------- ---------
----------
<S> <C> <C> <C> <C>
Existing Stockholders 15,000 33 12 $1.33
New Investors....... 30,000 66 88 $5.00
------ -- -- -----
45,000 100.0% 100
====== ====== ===
</TABLE>
- --------------
* Pro forma net tangible book value after this offering assumes the initial
application of estimated net proceeds to the Company (after payment of
expenses of approximately $20,000) of $130,000. See "Use of Proceeds."
19
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of March 31, 1997, and as adjusted to give effect to the sale of the Shares
being offered hereby:
<TABLE>
<CAPTION>
AS
HISTORICAL ADJUSTED(1)
---------- -----------
--
<S> <C> <C>
Common Stock, subject to possible redemption, 30,000 shares
at redemption value(3).............................................. $150,000
Preferred Stock, $.01 par value, no shares
issued or outstanding;
0 0
--
Common stock, $0.001 par value,
15,000 shares issued and outstanding 45,000 as adjusted;
10,000,000 shares authorized,
15 45
Additional paid in capital(2)......................................... 19,985 149,955
Accumulated deficit during the development stage......................
Total capitalization................................................ $20,000 $150,000
========== ===========
</TABLE>
- --------------
(1) Adjusted to give effect to the sale of 30,000 Shares offered hereby at
the public offering price of $5.00 per Share and the receipt by the
Company of the estimated net proceeds (after the payment of all offering
expenses) of $130,000. See "Use of Proceeds."
(2) In the event the Company consummates a Business Combination, the
redemption rights afforded to the non-affiliated public stockholders may
result in the conversion into cash of up to 20% of the aggregate number
of shares held by the non-affiliated public stockholders at a per share
redemption price equal to such investors' initial purchase price plus a
pro-rata share of all interest accrued in the Proceeds Escrow Account.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is currently in the development stage and is in the process of
raising capital. All activity of the Company to date has been related to its
formation and proposed financing. The Company's ability to commence operations
is contingent upon obtaining adequate financial resources through this
offering. All of the Company's costs to date have been paid out of available
cash. The Company will use the net proceeds of this offering, together with the
income and interest earned thereon, principally in connection with effecting a
Business Combination, and structuring and consummating a Business Combination
(including possible payment of finder's fees or other compensation to persons
or entities which provide assistance or services to the Company). The Company
does not have discretionary access to the income on the monies in the escrow
account and stockholders of the Company will not receive any distribution of
the income (except in connection with a liquidation of the Company) or have any
ability to direct the use or distribution of such income. Thus, such income
will cause the amount in escrow to increase. The Company cannot use the
escrowed amounts to pay the costs of evaluating potential Business
Combinations. To the extent that Common Stock is used as consideration to
effect a Business Combination, the balance of the net proceeds of this offering
not theretofore expended will be used to finance the operations of the Target
Business. See "Use of Proceeds." No cash compensation will be paid to any
officer or director in their capacities as such until after the consummation of
the first Business Combination. Since the role of present management after a
Business Combination is uncertain, the Company has no ability to determine what
remuneration, if any, will be paid to such persons after a Business
Combination.
In the event that the Company does not effect a Business Combination within
18 months from the date of this Prospectus, the Company will distribute to the
then holders of Common Stock acquired as part of the Shares sold in this
offering the amount held in the escrow account with a pro-rata share of all
interest accrued in such account.
21
<PAGE>
PROPOSED BUSINESS
INTRODUCTION
The Company, a development stage entity, was formed in March 1997 to serve
as a vehicle for the acquisition of, or the merger or consolidation with, a
Target Business. The Company intends to utilize the proceeds of this offering,
equity securities, debt securities, bank and other borrowings or a combination
thereof in effecting a Business Combination with a Target Business which the
Company believes has significant growth potential. The Company's efforts in
identifying a prospective Target Business are expected to emphasize businesses
primarily located in the United States; however, the Company reserves the right
to acquire a Target Business located primarily elsewhere. While the Company
may, under certain circumstances, seek to effect Business Combinations with
more than one Target Business, as a result of its limited resources the Company
will, in all likelihood, have the ability to effect only a single Business
Combination. The Company may effect a Business Combination with a Target
Business which may be financially unstable or in its early stages of
development or growth.
"BLIND POOL" OFFERING
BACKGROUND. As a result of management's broad discretion with respect to
the specific application of the net proceeds of this offering, this offering
can be characterized as a "blind pool" or "blank check" offering. Although
substantially all of the net proceeds of this offering are intended to be
utilized generally to effect a Business Combination, such proceeds are not
otherwise being designated for any more specific purposes. Accordingly,
prospective investors who invest in the Company will do so without an
opportunity to evaluate the specific merits or risks of any one or more
Business Combinations. Consummation of a Business Combination may involve the
acquisition of, or merger or consolidation with, a company that does not need
substantial additional capital but which desires to establish a public trading
market for its shares, while avoiding what it may deem to be the adverse
consequences of undertaking a public offering itself, such as the time delays
and significant expenses incurred to comply with the various Federal and state
securities laws that regulate initial public offerings.
UNSPECIFIED INDUSTRY AND TARGET BUSINESS. The Company will seek to acquire
a Target Business without limiting itself to a particular industry. Most
likely, the Target Business will be primarily located in the United States,
although the Company reserves the right to acquire a Target Business primarily
located outside the United States. In seeking a Target Business, the Company
will consider, without limitation, businesses which (i) offer or provide
services or develop, manufacture or distribute goods in the United States or
abroad, including, without limitation, in the following areas: health care and
health products, educational services, environmental services, consumer-related
products and services (including amusement and/or recreational services),
personal care services, voice and data information processing and transmission
and related technology development or (ii) is engaged in wholesale or retail
distribution. The Company will not acquire a Target Business unless the Fair
Market Value Test is satisfied. If the Company determines that the financial
statements of a proposed Target Business do not clearly indicate that the Fair
Market Value Test has been satisfied, the Company will obtain an opinion from
an independent investment banking firm (which is a member of the NASD) with
respect to the satisfaction of such criteria. None of the Company's directors
or executive officers has had any preliminary contact or discussions with any
representative of any Target Business regarding consummation of a Business
Combination. Accordingly, there is no basis for investors in this offering to
evaluate the possible merits or risks of a particular industry or the Target
Business. In connection with stockholder approval of a Business Combination,
the Company intends to provide stockholders with disclosure documentation in
accordance with the Proxy Rules, including audited financial
22
<PAGE>
statements, concerning a Target Business. Accordingly, any Target Business that
is selected would need to have audited financial statements or be audited in
connection with the transaction. 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
revenue or income), 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 Target Business, there can be no assurance that the
Company will properly ascertain or assess all risks.
PROBABLE LACK OF BUSINESS DIVERSIFICATION. As a result of the limited
resources of the Company, the Company, in all likelihood, 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 that have the resources to
consummate several Business Combinations or entities operating in multiple
industries or multiple segments 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
material adverse impact upon the particular industry in which the Company may
operate subsequent to consummation of a Business Combination. The prospects for
the Company's success may become dependent upon the development or market
acceptance of a single or limited number of products, processes or services.
Accordingly, notwithstanding the possibility of capital investment in and
management assistance to the Target Business by the Company, there can be no
assurance that the Target Business will prove to be commercially viable. The
Company has no present intention of either loaning any of the proceeds of this
offering to any Target Business or of purchasing or acquiring a minority
interest in any Target Business.
Under the Delaware General Corporation Law, various forms of Business
Combinations can be effected without stockholder approval. In addition, the
form of Business Combination will have an impact upon the availability of
dissenters' rights (i.e., the right to receive fair payment with respect to the
Common Stock) to stockholders disapproving of the proposed Business
Combination. Under current Delaware law, only a merger or consolidation may
give rise to a stockholder vote and to dissenters' rights. The Company intends
to provide stockholders with disclosure documentation in accordance with Rule
419, including audited financial statements, concerning a Target Business as a
part of the investment re-confirmation offer process. In addition, the Delaware
General Corporation Law requires approval of certain mergers and consolidations
by a majority of the outstanding stock entitled to vote. Even if investors are
afforded the right to approve a Business Combination under the Delaware General
Corporation Law, no dissenters' rights to receive fair payment will be
available for stockholders if the Company is to be the surviving corporation
unless the Certificate of Incorporation of the Company is amended and as a
result thereof: (i) alters or abolishes any preferential right of such stock;
(ii) creates, alters or abolishes any provision or right in respect of the
redemption of such shares or any sinking fund for the redemption or purchase of
such shares; (iii) alters or abolishes any preemptive right of such holder to
acquire shares or other securities; or (iv) excludes or limits the right of
such holder to vote on any matter, except as such right may be limited by the
voting rights given to new shares then being authorized of any existing or new
class.
LIMITED ABILITY TO EVALUATE MANAGEMENT OF A TARGET BUSINESS. The role of
the present management of the Company, following a Business Combination, cannot
be stated with any certainty.
23
<PAGE>
Although the Company intends to scrutinize closely the management of a
prospective Target Business in connection with its evaluation of the
desirability of effecting a Business Combination with such Target Business,
there can be no assurance that the Company's assessment of such management will
prove to be correct. While it is possible that certain of the Company's
directors or its executive officers will remain associated in some capacities
with the Company following consummation of a Business Combination, it is
unlikely that any of them will devote a substantial portion of their time to
the affairs of the Company subsequent thereto. Moreover, there can be no
assurance that such personnel will have significant experience or knowledge
relating to the operations of the particular Target Business. The Company also
may seek to recruit additional personnel to supplement the incumbent management
of the Target Business. There can be no assurance that the Company will have
the ability to recruit additional personnel or that such additional personnel
will have the requisite skills, knowledge or experience necessary or desirable
to enhance the incumbent management. In addition, there can be no assurance
that the future management of the Company will have the necessary skills,
qualifications or abilities to manage a public company intending to embark on a
program of business development.
SELECTION OF A TARGET BUSINESS AND STRUCTURING OF A BUSINESS COMBINATION.
Management of the Company will have substantial flexibility in identifying and
selecting a prospective Target Business. However, the Company's flexibility is
limited to the extent that it must satisfy the Fair Market Value Test. If the
Company determines that the financial statements of a proposed Target Business
do not clearly indicate that the Fair Market Value Test has been satisfied, the
Company will obtain an opinion from an independent investment banking firm that
is a member of the NASD with respect to the satisfaction of such criteria. As a
result, investors in this offering will be almost entirely dependent on the
judgment of management in connection with the selection of a Target Business.
In evaluating a prospective Target Business, management will consider, among
other factors, the following: (i) costs associated with effecting the Business
Combination; (ii) equity interest in and opportunity for control of the Target
Business; (iii) growth potential of the Target Business; (iv) experience and
skill of management and availability of additional personnel of the Target
Business; (v) capital requirements of the Target Business; (vi) competitive
position of the Target Business; (vii) stage of development of the Target
Business; (viii) degree of current or potential market acceptance of the Target
Business, products or services; (ix) proprietary features and degree of
intellectual property or other protection of the Target Business; (x) the
financial statements of the Target Business; and (xi) the regulatory
environment in which the Target Business operates.
The foregoing criteria are not intended to be exhaustive and any evaluation
relating to the merits of a particular Target Business will be based, to the
extent relevant, on the above factors as well as other considerations deemed
relevant by management in connection with effecting a Business Combination
consistent with the Company's business objectives. In connection with its
evaluation of a prospective Target Business, management, with the possible
assistance of an independent investment banking firm, anticipates that it will
conduct a due diligence review which will encompass, among other things,
meeting with incumbent management and inspection of facilities, as well as a
review of financial, legal and other information which will be made available
to the Company.
The time and costs required to select and evaluate a Target Business
(including conducting a due diligence review) and to structure and consummate
the Business Combination (including negotiating and documenting relevant
agreements and preparing requisite documents for filing pursuant to applicable
securities laws and state "blue sky" and corporation laws) cannot presently be
ascertained with any degree of certainty. The Company's current executive
officers and directors intend to devote only a small portion of their 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
management devoted their full time to the Company's affairs. However, each
officer and director of the Company will devote such time as they deem
reasonably necessary to carry out the business and affairs of the Company,
including
24
<PAGE>
the evaluation of potential Target Businesses and the negotiation of a Business
Combination and, as a result, the amount of time devoted to the business and
affairs of the Company may vary significantly depending upon, among other
things, whether the Company has identified a Target Business or is engaged in
active negotiation of a Business Combination. Any costs incurred in connection
with the identification and evaluation of a prospective Target Business with
which a Business Combination is not ultimately consummated will result in a
loss to the Company and reduce the amount of capital available to otherwise
complete a Business Combination or for the resulting entity to utilize.
The Company anticipates that various prospective Target Businesses will be
brought to its attention from various sources, including securities
broker-dealers, investment bankers, venture capitalists, bankers, other members
of the financial community and affiliated sources, including, possibly, the
Company's executive officer, directors and their affiliates. While the Company
has not yet ascertained how, if at all, it will advertise and promote itself,
it may elect to publish advertisements in financial or trade publications
seeking potential business acquisitions. The Company may also engage the
services of professional firms that specialize in finding business
acquisitions, in which event the Company may pay a finder's fee or other
compensation. In no event, however, will the Company pay a finder's fee or
commission to officers or directors of the Company or any entity with which
they are affiliated for such service.
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 a Business Combination so as to
achieve the most favorable tax treatment to the Company, the Target Business
and their respective stockholders. There can be no assurance that the Internal
Revenue Service or relevant state tax authorities will ultimately assent to the
Company's tax treatment of a particular consummated Business Combination. To
the extent the Internal Revenue Service or any relevant state tax authorities
ultimately prevail in recharacterizing the tax treatment of a Business
Combination, there may be adverse tax consequences to the Company, the Target
Business and their respective stockholders. Tax considerations as well as other
relevant factors will be evaluated in determining the precise structure of a
particular Business Combination, which could be effected through various forms
of a merger, consolidation or stock or asset acquisition.
The Company may utilize cash derived from the net proceeds of this
offering, equity securities, debt securities or bank or other borrowing or a
combination thereof 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 or options or warrants, other than as
described in this Prospectus, the Company will, in all likelihood, issue a
substantial number of additional shares in connection with the consummation of
a Business Combination. To the extent that such additional shares are issued,
dilution to the interests of the Company's stockholders will occur.
Additionally, if a substantial number of shares of Common Stock are issued in
connection with the consummation of a Business Combination, a change in control
of the Company may occur which may affect, among other things, the Company's
ability to utilize net operating loss carry forwards, if any.
There currently are no limitations on the Company's ability to borrow funds
to effect a Business Combination. However, the Company's limited resources and
lack of operating history may make it difficult to borrow funds. The amount and
nature of any borrowing by the Company will depend on numerous considerations,
including the Company's capital requirements, potential lenders' evaluation of
the Company's ability to meet debt service on borrowing and the then prevailing
conditions in the financial markets, as well as general economic conditions.
The Company does not have any arrangements with any bank or financial
institution to secure additional financing and there can be no assurance that
such arrangements if required or otherwise sought, would be available on terms
commercially acceptable or otherwise in the best interests of the Company. The
inability of the
25
<PAGE>
Company to borrow funds required to effect or facilitate a Business
Combination, or to provide funds for an additional infusion of capital into a
Target Business, may have a material adverse effect on the Company's financial
condition and future prospects, including the ability to effect a Business
Combination. To the extent that debt financing ultimately proves to be
available, any borrowing will subject the Company to various risks
traditionally associated with indebtedness, including the risks of interest
rate fluctuations and insufficiency of cash flow to pay principal and interest.
Furthermore, a Target Business may have already incurred debt financing and,
therefore, subject the Company to all the risks inherent thereto.
ACQUISITION RESTRICTIONS
The Company may acquire a company or business by purchasing, trading or
selling the securities of such company or business. However, the Company does
not intend to engage primarily in such activities. Specifically, the Company
intends to conduct its activities so as to avoid being classified as an
"investment company" under the Investment Company Act of 1940, and therefore
avoid application of the costly and restrictive registration and other
provisions of the Investment Company Act of 1940 and the regulations
promulgated thereunder.
Section 3(a) of the Investment Company Act excepts from the definition of
an "investment company" an entity which does not engage primarily in the
business of investing, reinvesting or trading in securities, or which does not
engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceed 40% of
the value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner which
will result in the availability of this exception from the definition of
"investment company." Consequently, the company's acquisition of a company or
business through the purchase and sale of investment securities will be
limited. Although the Company intends to act to avoid classification as an
investment company, the provisions of the Investment Company Act of 1940 are
extremely complex and it is possible that it may be classified as an
inadvertent investment company. The Company intends to vigorously resist
classification as an investment company, and to take advantage of any
exemptions or exceptions from application of the Investment Company Act of
1940, which allows an entity a one time option during any three-year period to
claim an exemption as a "transient" investment company. The necessity of
asserting any such resistance, or making any claim of exemption, could be time
consuming and costly, or even prohibitive, given the Company's limited
resources.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Company Act of 1940, which regulation has the purpose of protecting
purchasers of investment company securities. Since the Company does not intend
to register as an investment company, purchasers in the Offering will not be
afforded these protections.
The Company will be subject to certain reporting requirements under the
Securities Exchange Act of 1934 (the "Act"). In the event the Company no longer
would be required to file reports and other information with the Commission
under the Securities Exchange Act, the Company intends nonetheless to continue
to file such reports. Pursuant to Section 13 and 15(d) of the Act, in the event
significant acquisitions take place, the Company will be required to furnish
information including certified financial statements for the acquired company
covering one, two or three years depending upon the relative size of the
acquisition. Consequently, acquisition prospects that do not have or are unable
to obtain the required certified financial statements will not be appropriate
for acquisition so long as the reporting requirements of the Exchange Act are
applicable.
26
<PAGE>
Various impediments to an acquisition of a business or company or a merger
may arise such as appraisal rights afforded the shareholders of a prospective
acquisition company or merger partner may arise under the laws of the state the
prospective acquisition company is organized under. This may prove to be
deterrent to a particular combination.
Pursuant to a resolution adopted and approved by the Board of Directors,
the Company will not acquire or merge with any business or company in which the
Company's promoters, management or their affiliates or associates, directly or
indirectly, have an ownership interest. Management has agreed that this
resolution ill not be changed by management's own initiative.
RULE 419 PRESCRIBED ACQUISITION CRITERIA AND RECONFIRMATION
As previously discussed herein on the cover page of this Prospectus and
under "Prospectus Summary," this blank check offering is subject to Rule 419
under the Act. As such, among other things, any agreement to acquire an
acquisition candidate must provide for the acquisition of a business or assets
for which the fair market value of the business or assets to be acquired
represents at least 80% of the offering proceeds. For purposes of this blank
check offering, the fair market value of the business or assets to be acquired
must be at least $120,000. Once an acquisition agreement meeting the above
criteria has been executed, the Company must successfully complete a
reconfirmation offering as described herein under "Prospectus Summary -
Investor Rights to Reconfirm Investment Under Rule 419 - Prescribed Acquisition
Criteria."
This offering can be said to be a so-called "blank check" due to the fact
that the Company is a development stage company that has no specific business
plan or purpose or has indicated that its business plan or purpose is to merge
with or be acquired by an unidentified company. As mentioned previously, the
Company as formed for the purpose of providing a vehicle which could be used to
raise capital and seek business opportunities believed to hold a potential for
profit. The Company will primarily investigate the possible acquisition of
business interests by merger. consolidation, stock for stock exchange or
purchase of assets. The Company hopes to be able to effect a tax-free exchange
once a business opportunity, satisfactory to management is located. However, no
assurance can be given that an attractive business opportunity will become
available to the Company on a tax-free exchange basis, or on another basis. The
Company is under no binding commitment, arrangement, or contract to acquire any
business interests or products on terms attractive and acceptable to the
Company. It is likely that the Company's limited funds will limit its potential
acquisitions to one, or possibly two business interests or products, and as
such, it is expected that the Company's interest(s) will not be very
diversified.
COMPETITION
The Company expects to encounter intense competition from other entities
having business objectives 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, technical, human and other
resources than the Company and there can be no assurance that the Company will
have the ability to compete successfully. The Company's financial resources
will be limited in comparison to those of many of its competitors. Further,
such competitors will generally not be required to seek the prior approval of
their own stockholders, which may enable them to close a Business Combination
more quickly than the Company. This inherent competitive limitation may compel
the Company to select certain less attractive Business Combination prospects.
There can be no assurance that such prospects will permit the Company to
satisfy its stated business objectives.
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<PAGE>
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly large number of
competitors including competitors with increasingly greater financial,
marketing, technical, human and other resources than the initial competitors in
the industry. The degree of competition characterizing the industry of any
prospective Target Business cannot presently be ascertained. There can be no
assurance that, subsequent to a Business Combination, the Company will have the
resources to compete effectively, especially to the extent that the Target
Business is in a high-growth industry.
POSSIBLE LIQUIDATION OF THE COMPANY
In the event that the Company does not effect a Business Combination within
18 months from the date of this Prospectus, the Company will distribute to the
then holders of Common Stock acquired as part of the Shares sold in this
offering, the amounts in the escrow account together with a pro-rata share of
all interest accrued in such account.
CERTAIN SECURITIES LAWS CONSIDERATIONS
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, the Company will only be able to effect a
Business Combination with a prospective Target Business that has available
audited financial statements or has financial statements which can be audited.
FACILITIES
The Company, pursuant to an oral agreement, utilizes and will utilize the
offices of Judith Haselton, the Company's Chairman of the Board and President
at no cost to the Company.
EMPLOYEES
As of the date of this Prospectus, the Company employs Ms. Haselton and Mr.
Campbell on a part time basis. Such persons will serve as officers and director
without compensation at least until completion of a Business Combination.
Epstein, Becker and Green. P.C., a firm where Mr. Campbell is special counsel,
may receive fees for legal services actually rendered to the Company.
MANAGEMENT
DIRECTORS AND OFFICERS
The current directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Judith S.Haselton...................... 42 Chairman of the Board, President
Richard L. Campbell.................... 41 Secretary, Treasurer, Director
</TABLE>
28
<PAGE>
MANAGEMENT
Judith S. Haselton, Chairman of the Board, President and Director is an
independent financial consultant and private investor. From February, 1987, to
October, 1991, she was employed as an investment banker in the corporate
finance department of Smith Barney, Inc., and from June, 1983, to February,
1987, with E.F. Hutton and Company Inc. She also served from June, 1980, to
June, 1983, as a commercial banker with Bank of America NT & SA. Ms. Haselton
received her Masters in Business Administration from Columbia University
Graduate School of Business and her undergraduate degree from Manchester
College.
Richard L. Campbell, Secretary, Treasurer, and Director, is a Managing
Director of Mantis Holdings, Inc., a privately held investment holdings company
and since January 1, 1997, also is special counsel to the law firm of Epstein,
Becker & Green, P.C. Prior to the formation of Mantis in June, 1992, Mr.
Campbell was principally engaged as a corporate attorney concentrating in the
areas of corporate finance and securities, and continues to act as counsel to a
select number of companies in his capacity as special counsel to the firm of
Epstein Becker & Green, P.C.. Mr. Campbell received his undergraduate degree
from The University of Michigan, his Juris Doctorate from Wayne State
University, and his Masters in Corporation Law from New York University.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors receive no
compensation for serving on the Board of Directors other than the reimbursement
of reasonable expenses incurred in attending meetings. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board.
The Company has not entered into employment agreements or other understandings
with its directors or executive officers concerning compensation. No cash
compensation will be paid to any officer or director in their capacities as
such until after the consummation of the first Business Combination. Since the
role of present management after the consummation of a Business Combination is
uncertain, the Company has no ability to determine what remuneration, if any,
will be paid to such persons after the consummation of a Business Combination.
No family relationships exist among any of the named directors or the
Company's officers. No arrangement or understanding exists between any such
director or officer and any other person pursuant to which any director or
officer was elected as a director or officer of the Company.
There are no agreements or understandings for any officer or director of
the Company to resign at the request of another person and none of the officers
or directors of the Company are acting on behalf of, or will act at the
direction of, any other person.
CONFLICTS OF INTEREST
None of the Company's directors or officers is required to commit his
full time to the affairs of the Company and it is likely that such persons
will not devote a substantial amount of time to the affairs of the Company.
Such personnel will have conflicts of interest in allocating management
time among various business activities. As a result, the consummation of a
Business Combination may require a greater period of time than if the
Company's management devoted their full time to the Company's affairs.
However, each officer and director of the Company will devote such time as
he deems reasonably necessary to carry out the business and affairs of the
Company, including the evaluation of potential Target Businesses and the
negotiation of a Business Combination and, as a result, the amount of time
devoted to the business and affairs of the Company may vary significantly
depending upon, among other things, whether the Company has identified a
Target
29
<PAGE>
Business or is engaged in active negotiation of a Business Combination.
Prior to their involvement with the Company, none of the directors or
officers of the Company has been involved in any "blind pool" or "blank
check" offerings. There can be no assurance that any of the foregoing
conflicts will be resolved in favor of the Company.
In connection with any stockholder vote relating either to approval of
a Business Combination or the liquidation of the Company due to the failure
of the Company to effect a Business Combination within the time allowed,
all of the Company's present stockholders, including all of its officers
and directors (and any stockholders who are affiliated with its officers
and directors), have agreed to vote all of their respective shares of
Common Stock in accordance with the vote of the majority of the shares
voted by all non-affiliated public stockholders of the Company (in person
or by proxy) with respect to such Business Combination or liquidation.
PRIOR BLANK CHECK OFFERINGS
None of the Company's officers, directors, promoters or other persons
engaged in management-type activities has been previously involved with any
blank check offerings.
CERTAIN TRANSACTIONS
In March 1997, the Company issued 10,000 shares of Common Stock to
Richard L. Campbell and 5,000 shares of Common Stock to Judith Haselton.
Mr. Campbell paid $1.00 per share for his shares and Judith Haselton paid
$2.00 per share for her shares.
30
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the date hereof, and as
adjusted to reflect the sale of the shares of Common Stock offered by the
Company 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 executive officers
and directors as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
AMOUNT AND SHARES OF COMMON STOCK
NATURE OF -------------------------
BENEFICIAL BEFORE AFTER
NAME OR GROUP OWNERSHIP OFFERING OFFERING
------------- ---------- ---------- ----------
<S> <C> <C> <C>
Judith Haselton 5,000 33.33% 11%
315 West 106th Street
Fourth Floor
New York, New York 10025
Richard L. Campbell. 10,000 66.66% 22%
407 East Grand River
Brighton, Michigan 48116
All executive officers and directors as a group
(two persons)............................... 15,000 100.0% 33%
</TABLE>
- --------------
31
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock, par
value $.001 per share. As of the date of this Prospectus, 15,000 shares of
Common Stock are outstanding, held of record by 2 persons. The holders of
Common Stock are entitled to one vote for each share held of record on all
matters to be voted on by stockholders. There is no cumulative voting with
respect to the election of directors, with the result that the holders of more
than 50% of the shares voting 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 the funds legally
available therefor. Subject to the requirements of Rule 419, in the event of
the 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 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 there are no redemption provisions applicable to
the Common Stock. All of the outstanding shares of Common Stock are, and the
shares of Common Stock to be issued in this offering, when issued against
payment therefor, will be, validly authorized and issued, fully paid and
nonassessable.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
2,000,000 shares of "blank check" preferred stock, par value $.01 per share
(the "Preferred Stock"), with such designations, powers, preferences, rights,
qualifications, limitations and restrictions and in such series as the Board of
Directors, subject to the laws of the State of Delaware, may determine from
time to time. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue Preferred Stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting
power or other rights of the holders of Common Stock. The Preferred Stock could
be utilized, under certain circumstances, as a method of discouraging, delaying
or preventing a change in control of the Company. No shares of Preferred Stock
are currently outstanding. Although the Company does not currently intend to
issue any shares of Preferred Stock, there can be no assurance that the Company
will not do so in the future.
DIVIDENDS
The Company does not expect to pay dividends prior to the consummation of a
Business Combination. Future dividends, if any, will be contingent upon the
Company's revenues and earnings, if any, capital requirements and general
financial condition subsequent to the consummation of a Business Combination.
The payment of dividends subsequent to the consummation of a Business
Combination will be within the discretion of the Company's then Board of
Directors. The Company presently intends to retain all earnings, if any, for
use in the Company's business operations and accordingly, the Board does not
anticipate declaring any dividends in the foreseeable future.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
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<PAGE>
Upon the consummation of this offering the Company will have 45,000 shares
of Common Stock outstanding. All of the 15,000 presently outstanding shares are
deemed to be "restricted securities", as that term is defined under Rule 144
promulgated under the Securities Act, as such shares were issued in private
transactions not involving a public offering. None of such shares are eligible
for sale under Rule 144 until March of 1999. However, all 15,000 shares will
not likely be "restricted shares" following a Business Combination, but will
continue to be subject to the restrictions of Rule 144, unless registered.
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 the restricted shares of Common Stock to be sold 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 an exchange or 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 the
shares of Common Stock to be sold 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 would likely adversely affect prevailing market prices for the Common
Stock and could impair the Company's ability to raise capital through the sale
of its equity securities.
PLAN OF OFFERING - ESCROW OF FUNDS
The Company hereby offers the right to subscribe at $5.00 per Share on an
"all or none, best efforts" basis for a total of 30,000 Shares. The directors
of the Company intend to contact individuals with whom they have had previous
business relationships and solicit the sale of the Shares. No commission or any
other form of remuneration in connection with the sale of the Shares will be
paid.
There is no requirement for any minimum number of shares to be purchased by
an individual purchaser. Pursuant to Rule 419, the Company is required to
promptly deposit into escrow the net offering proceeds, after deduction for
offering expenses. The deposited funds may not be released until an acquisition
meeting certain specified criteria has been made and a sufficient number of
investors reconfirm their investment in accordance with the procedures set
forth in Rule 419. See "Prospectus Summary - Investor Rights to Reconfirm Under
Rule 419."
There are no plans, proposals, arrangements or understandings with respect
to the sale of additional securities to affiliates, current shareholders or
other following the registered distribution, but prior to the location of a
business opportunity.
METHOD OF SUBSCRIBING
Persons may subscribe by filling in and signing the subscription agreement
and delivering it to the Company, prior to ____________ _, 1997, unless
extended for an additional 90 days at the discretion of the Board of Directors
of the Company. The subscription price of $5.00 per Share must be paid in cash
or by check, bank draft or postal express money order payable in United States
dollars to the order of "1997 Corp.-Escrow Account ." Certificates for Shares
of Common Stock subscribed for will be issued as soon as practicable after
subscriptions have been accepted and promptly deposited into
33
<PAGE>
escrow upon issuance in accordance with Rule 419. Subscriptions may not be
withdrawn only made, except in accordance with applicable law (in this regard,
see "Prospectus Summary - Investor Rights to Reconfirm Under Rule 419") and
subscriptions for fractional share amounts will not be accepted.
In the event there are only a few subscribers to the offering it is likely
that no market maker will be obtained and no public market will ever develop.
Thus subscribers run the risk that they may never be able to sell their Shares.
There have not been any preliminary discussions or understandings between
the Company and any market maker regarding the participation of any such market
maker in the future trading market, if any, for the Company's securities.
Subsequent to an acquisition, it is contemplated that either the President of
the Company or a principal of the target company will solicit potential market
makers. There can be assurances that any broker will ever agree to make a
market in the Company's securities.
EXPIRATION DATE
The subscription offer will expire at 3:00 P.M. New York time, 90 days
(which may be extended for an additional __ days at the Company's option) from
the date of this prospectus, or at the Company's election on an earlier date
after the acceptance of subscriptions for a total of 30,000 Shares ("Expiration
Date").
RIGHT TO REJECT
The Company reserves the right to reject any subscription in its sole
discretion for any reason whatsoever and to withdraw this offering at any time
prior to acceptance by the Company of the subscriptions received.
In many States, no exemption may exist for the sale of the Company's
securities nor for secondary trading. Anyone who purchases Shares may be unable
to resell the securities offered herein except in states in which the
securities have been "Blue-Skyed" or for which an exemption is available. Many
states do not permit securities of blank check companies to trade in those
states. A number of states that do permit such trading impose conditions such
as the escrow of offering proceeds, and also provide purchasers the right to
rescind the stock purchase. Purchasers of Shares will not have the protection
afforded by states which restrict sales of securities in blank check companies.
The Company only intends to register the Shares for sale in states which do not
impose such restrictions.
SEC RULES
The Company's securities are subject to Securities and Exchange Commission
Rule 15g-9 of the Securities Exchange Act of 1934, as amended, which imposes
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse). For transactions covered by the rule, the
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to the
sale. Consequently, the rule may affect the ability of broker/dealers to sell
the Company's securities and also may affect the ability of purchasers in this
offering to sell their shares in the secondary market.
The Securities and Exchange Commission (the "Commission") has adopted
regulations which define a "penny stock" to be an equity security that has a
market price (as therein defined) of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
34
<PAGE>
Although the securities offered herein are being offered at more than $5.00 per
share, the offering by virtue of it being a "blank check" company is subject to
the provisions under Rule 419 of Regulation C under the Securities Act of 1933,
as amended. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to
both the broker-dealer and the registered representative and current quotation
for the securities. Finally, monthly statements are required to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
LEGAL MATTERS
The legality of the securities being registered by the Registration
Statement of which this Prospectus is a part is being passed upon by Epstein,
Becker & Green, P.C., New York, New York. Richard L. Campbell, Secretary,
Director and a shareholder of the Company, is special counsel to Epstein,
Becker & Green, P.C.
EXPERTS
The financial statements included in this Prospectus have been audited by
Feldman Radin & Co., P.C., independent certified public accountants, to the
extent and for the period set forth in their report appearing elsewhere herein,
and is included in reliance upon such report given upon the authority of said
firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") under the
Securities Act with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and this offering, reference is made to the Registration Statement,
including the exhibits and schedules filed therewith, copies of which may be
obtained at prescribed rates from the Commission at its principal office at 450
Fifth Street N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: 75 Park Place, New York 10007, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400 Chicago, Illinois, 60604.
Descriptions contained in this Prospectus as to the contents of any agreement
or other documents filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to
such agreement or document.
The Company intends to furnish to its stockholders annual reports
containing financial statements audited and reported upon by its independent
public accountants.
35
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT
BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF ANY OFFER
TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR ANY SUCH
PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER, SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
---------------
TABLE OF CONTENTS
PAGE
Prospectus Summary........................................................ 1
The Company............................................................... 6
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 16
Dilution.................................................................. 18
Capitalization............................................................ 19
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 20
Proposed Business......................................................... 21
Management................................................................ 28
Certain Transactions...................................................... 29
Principal Stockholders.................................................... 30
Description of Securities................................................. 31
Shares Eligible for Future Sale........................................... 31
Plan of Offering.......................................................... 32
Legal Matters............................................................. 33
Experts................................................................... 34
Additional Information.................................................... 34
Index to Financial Statements............................................. F-1
---------------
UNTIL 90 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 OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
36
<PAGE>
- -------------------------------------------------------------------------------
1997 CORP.
30,000 SHARES
---------------
PROSPECTUS
---------------
APRIL ___, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
37
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
1997 Corp. (the "Company") is incorporated in Delaware. Under Section 145
of the General Corporation Law of the State of Delaware, a Delaware corporation
has the power, under specified circumstances, to indemnify its directors,
officers, employees and agents in connection with actions, suits or proceedings
brought against them by a third party or in the right of the corporation, by
reason of the fact that they were or are such directors, officers, employees or
agents, against expenses incurred in any action, suit or proceeding. Article
Tenth of the Certificate of Incorporation and Article III of the Bylaws of the
Company provide for indemnification of directors and officers to the fullest
extent permitted by the General Corporation Law of the State of Delaware.
Reference is made to the Certificate of Incorporation of the Company, filed as
Exhibit 3.1 hereto.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 (relating to liability for unauthorized acquisitions or
redemptions of, or dividends on, capital stock) of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. Article Ninth of the Company's
Certificate of Incorporation contains such a provision.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with this
Registration Statement. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
Filing Fee -- Securities and Exchange Commission.............. $45.00
Fees and Expenses of Accountants.............................. 2,500.00
Fees and Expenses of Counsel.................................. 7,500.00
Printing and Engraving Expenses............................... 2,500.00
Blue Sky Fees and Expenses.................................... 5,000.00
Transfer and Warrant Agent fees............................... 1,000.00
Miscellaneous Expenses........................................ 1,455.00
Total.................................................... $20,000.00
==========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In March 1997, the Company sold 5,000 shares to Judith Haselton, and 10,000
shares to Richard L. Campbell for aggregate consideration of $20,000, which was
paid in full at the time. The Company
i
<PAGE>
issued all such securities in reliance upon the exemption from the registration
requirements of the Securities Act contained in Section 4(2) thereof.
ITEM 27. EXHIBITS.
3.1 -- Certificate of Incorporation.
3.2 -- Bylaws of the Company.
5 -- Opinion of Epstein Becker & Green, P.C. [to be filed by
amendment]
10.1 -- Form of Escrow Agreement for proceeds from sale of Shares.
10.2 -- Form of Escrow Agreement for outstanding Common Stock.
23.1 -- Consent of Feldman Radin & Co., P.C.
23.2 -- Consent of Counsel. (Included in Exhibit 5).
27 -- Financial Data Schedule
28 -- Subscription Agreement for Common Stock.
===============================================================================
ITEM 28. UNDERTAKINGS.
The undersigned small business issuer hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of an offering.
(d) The undersigned small business issuer hereby undertakes to provide
to the underwriters at the closing specified in the underwriting
agreements, certificates in such denominations and registered in such names
as required by the underwriters to permit prompt delivery to each
purchaser.
ii
<PAGE>
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of 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 Act and will be governed by the final
adjudication of such issue.
(f) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(ii) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing this Amendment to Form SB-2 and has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 3rd day of April, 1997.
1997 CORP.
By: /s/ Richard L. Campbell
---------------------------
RICHARD L. CAMPBELL
SECRETARY
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Judith Haselton Chairman of the Board, President April 3, 1997
- -----------------------------
JUDITH HASELTON
Secretary, Treasurer, Director April 3, 1997
/s/ Richard L. Campbell
- -----------------------------
RICHARD L. CAMPBELL
</TABLE>
iii
<PAGE>
[Index to Financial Statements To Come]
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Stockholder of
1997 Corp.
(A Development Stage Enterprise)
New York, New York
We have audited the accompanying balance sheet of 1997 Corp. (a development
stage enterprise) as of March 31, 1997. This financial statement is 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 1997 Corp. (a development
stage enterprise) at March 31, 1997 in conformity with generally accepted
accounting principles.
Feldman Radin & Co., P.C.,
New York, New York
March 31, 1997
F-2
<PAGE>
1997 CORP.
----------
(A Development Stage Enterprise)
--------------------------------
BALANCE SHEET
-------------
MARCH 31, 1997
--------------
ASSET
-----
Cash $ 20,000
=========
STOCKHOLDERS' EQUITY
--------------------
Preferred stock, $.01 par value, authorized 2,000,000 shares,
none issued or outstanding $ -
Common stock, $.001 par value, authorized 10,000,000 shares
issued and outstanding 15,000 shares 15
Paid in capital 19,985
---------
$ 20,000
=========
See notes to financial statements
F-3
<PAGE>
1997 CORP.
----------
(A Development Stage Enterprise)
--------------------------------
NOTES TO FINANCIAL STATEMENT
----------------------------
MARCH 31, 1997
--------------
1. FORMATION OF COMPANY
--------------------
1997 Corp. (a development stage enterprise) (the "Company"), was
incorporated in the state of Delaware on March 17, 1997. It intends to
serve as a vehicle to effect a Business Combination with a Target Business
(not yet identified) which the company believes will have significant
growth potential. The Company intends to utilize the net proceeds of this
offering, equity securities, debt securities, bank and other borrowing or a
combination thereof in effecting a Business combination.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
a. The financial statements are prepared on an accrual basis.
b. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make significant
estimates and assumptions that effect the reporting amount of assets
and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reported period.
Actual results could differ from those estimates.
F-4
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
1997 CORP.
The undersigned, being the incorporator of 1997 Corp.(the "Corporation")
hereby certifies as follows:
FIRST: The name of the Corporation is 1997 Corp.
SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of
New Castle, Delaware 19801. The registered agent in charge thereof is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares that this Corporation shall have
authority to issue is (i) 10,000,000 shares of Common Stock, $.001 par value
per share ("Common Stock"), and (ii) 2,000,000 shares of Preferred Stock, $.01
par value per share ("Preferred Stock").
There shall be no preemptive rights with respect to the Corporation's
shares of stock. The following is a further statement of the designations and
the powers, preferences and rights, and the relative participating, optional or
other special rights, and the qualifications, limitations and restrictions
granted to or imposed upon the respective classes of shares of capital stock of
the Corporation or the holders thereof.
COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of
Directors upon any issuance of the Preferred Stock of any series.
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<PAGE>
2. Voting. The holders of Common Stock are entitled to one vote for each
share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights or restrictions of
any then outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders after payment of creditors and subject to any preferential rights
of any then outstanding Preferred Stock.
PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided herein or by law. Different series
of Preferred Stock shall not be construed to constitute different classes of
shares for the purposes of voting by classes unless expressly provided for
herein or by law.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing
for the issuance of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, conversion rights, redemption privileges
and liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the General
Corporation Law of the State of Delaware. Without limiting the generality of
the foregoing, the resolutions providing for issuance of any series of
Preferred Stock may provide that such series shall be superior or rank equally
or be junior to the Preferred Stock of any other
2
<PAGE>
series to the extent permitted by law.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The number of directors which shall constitute the entire Board of
Directors shall be as set forth in the by-laws of the Corporation. The board of
directors is expressly authorized to adopt, amend or repeal the by-laws of the
Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which said application has been made, be
binding on all the creditors or class of creditors, and/or on all of the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
NINTH: No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General
3
<PAGE>
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the director derived an improper personal benefit.
TENTH: The Corporation shall indemnify its officers, directors, agents and
such other parties to the full extent permitted by Delaware law.
ELEVENTH: (i) Any vacancies in the Board of Directors for any reason and
any newly created directorships resulting by reason of any increase in the
number of directors may be filled only by the Board of Directors (unless there
are no remaining directors), acting by a majority of the remaining directors
then in office, although less than a quorum, and any directors so chosen shall
hold office until the next election of directors and until their successors are
elected and qualified.
(ii) Any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause and only by the affirmative vote of the
holders of at least 75% of the voting power of all of the shares of capital
stock of the Corporation then entitled to vote generally in the election of
directors, voting together as a single class.
TWELFTH: Special meetings of stockholders of the Corporation may be called
only by (i) the Board of Directors pursuant to a resolution adopted by a
majority of the entire Board of Directors, either upon motion of a director or
upon written request by the holders of at least 50% of the voting power of all
the shares of capital stock of the Corporation then entitled to vote generally
in the election of directors, voting together as a single class, or (ii) the
President of the Corporation.
THIRTEENTH: In addition to any requirements of the General Corporation Law
of Delaware (and notwithstanding the fact that a lesser percentage may be
specified by the General Corporation Law of Delaware), the affirmative vote of
the holders of at least 75% of the voting power of all of the shares of capital
stock of the Corporation then entitled to vote generally in the election of
directors, voting together as a single class, shall be required for the
stockholders of the Corporation to amend, alter, change, adopt or repeal
Articles Eleventh, Twelfth or Thirteenth hereof.
FOURTEENTH: The name of the incorporator is Richard L. Campbell, whose
address is 250 Park Avenue, 12th Floor, New York, New York 10177.
4
<PAGE>
IN WITNESS WHEREOF, I hereunto set my hand this 12th day of March, 1997 and
I affirm that the foregoing certificate is my act and deed and that the facts
stated therein are true.
---------------------------------
Richard L. Campbell, Incorporator
<PAGE>
EXHIBIT 3.2
BY-LAWS OF
1997 CORP.
(A Delaware Corporation)
ARTICLE I
Offices
SECTION l. Registered Office. The registered office of the Corporation
within the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. Other Offices. The Corporation may also have any office or
offices other than said registered office at such place or places, either
within or without the State of Delaware, as the Board of Directors shall from
time to time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION l. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at any such place,
either within or without the State of Delaware, as shall be designated from
time to time by the Board of Directors and stated in the notice of meeting or
in a duly executed waiver thereof.
SECTION 2. Annual Meeting. The annual meeting of stockholders,
commencing with the year l998, shall be held at l0:00 A.M. on the second
Tuesday of June, in each year if not a legal holiday, and if a legal holiday,
then on the next succeeding day not a legal holiday, at l0:00 A.M., or at such
other date and time as shall be designated from time to time by the Board of
Directors and stated in the notice of meeting or in a duly executed waiver
thereof. At such annual meeting, the stockholders shall elect, by a plurality
vote, a Board of Directors and transact such other business as may properly be
brought before the meeting.
SECTION 3. Special Meetings. Special meetings of stockholders, unless
otherwise prescribed by statute or as provided in the Certificate of
Incorporation, as amended from time to time,
1
<PAGE>
may be called at any time by the Board of Directors or the Chairman of the
Board, if one shall have been elected, or the Chief Executive Officer.
SECTION 4. Notice of Meetings. Except as otherwise expressly required
by statute, written notice of each annual and special meeting of stockholders
stating the date, place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
given to each stockholder of record entitled to vote thereat not less than ten
nor more than sixty days before the date of the meeting. Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice. Notice shall be given personally or by mail and, if by mail, shall
be sent in a postage prepaid envelope, addressed to the stockholder at his
address as it appears on the records of the Corporation. Notice by mail shall
be deemed given three (3) days after the same shall be deposited in the United
States mail, postage prepaid. Notice of any meeting shall not be required to be
given to any person who attends such meeting, except when such person attends
the meeting in person or by proxy for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened, or who, either before or after the
meeting, shall submit a signed written waiver of notice, in person or by proxy.
Neither the business to be transacted at, nor the purpose of, an annual or
special meeting of stockholders need be specified in any written waiver of
notice.
SECTION 5. List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, showing the
address of and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at
least ten days prior to the meeting, either at a place within the city, town or
village where the meeting is to be held, which place shall be specified in the
notice of meeting, or, if not specified, at the place where the meeting is to
be held. The list shall be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
SECTION 6. Quorum, Adjournments. The holders of a majority of the
voting power of the issued and outstanding stock of the Corporation entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum for the transaction
2
<PAGE>
of business at all meetings of stockholders, except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, such quorum shall
not be present or represented by proxy at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented by proxy. At such adjourned meeting at which a quorum shall be
present or represented by proxy, any business may be transacted which might
have been transacted at the meeting as originally called. If the adjournment is
for more than thirty days, or, if after adjournment a new record date is set, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
SECTION 7. Organization. At each meeting of stockholders, the Chairman
of the Board, if one shall have been elected, or, in his absence or if one
shall not have been elected, the President shall act as chairman of the
meeting. The Secretary or, in his absence or inability to act, the person whom
the chairman of the meeting shall appoint secretary of the meeting shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 8. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation, each stockholder of the Corporation shall be
entitled at each meeting of stockholders to one vote for each share of capital
stock of the Corporation standing in his name on the record of stockholders of
the Corporation:
(a) on the date fixed pursuant to the provisions of Section 7 of
Article V of these By-Laws as the record date for the determination of the
stockholders who shall be entitled to notice of and to vote at such
meeting; or
(b) if no such record date shall have been so fixed, then at the close
of business on the day next preceding the day on which notice thereof shall
be given, or, if notice is waived, at the close of business on the date
next preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for him by a proxy
3
<PAGE>
signed by such stockholder or his attorney-in-fact, but no proxy shall be voted
after three years from its date, unless the proxy provides for a longer period.
Any such proxy shall be delivered to the secretary of the meeting at or prior
to the time designated in the order of business for so delivering such proxies.
When a quorum is present at any meeting, the vote of the holders of a majority
of the voting power of the issued and outstanding stock of the Corporation
entitled to vote thereon, present in person or represented by proxy, shall
decide any question brought before such meeting, unless the question is one
upon which by express provision of statute or of the Certificate of
Incorporation or of these By-Laws, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
In the case of election of directors, the nominees for director receiving the
largest number of votes shall be elected, notwithstanding that such number of
votes may be less than an absolute majority. Unless required by statute, or
determined by the chairman of the meeting to be advisable, the vote on any
question need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there by such proxy, and
shall state the number of shares voted.
SECTION l0. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine
all challenges and questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents, determine the results, and
do such acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the chairman of the meeting, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as an inspector of an election
of directors. Inspectors need not be stockholders.
SECTION ll. Action by Consent. Whenever the vote of
4
<PAGE>
stockholders at a meeting thereof is required or permitted to be taken for or
in connection with any corporate action, by any provision of statute or of the
Certificate of Incorporation or of these By-Laws, the meeting and vote of
stockholders may be dispensed with, and the action taken without such meeting
and vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares of stock of the Corporation entitled to vote
thereon were present and voted.
ARTICLE III
Board of Directors
SECTION l. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. The Board
of Directors may exercise all such authority and powers of the Corporation and
do all such lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
SECTION 2. Number, Qualifications, Election and Term of Office. The
number of directors constituting the initial Board of Directors shall be not
less than one (1) nor more than ten (10). Thereafter, the number of directors
may be fixed, from time to time, by the affirmative vote of a majority of the
entire Board of Directors or by action of the stockholders of the Corporation.
Any decrease in the number of directors shall be effective at the time of the
next succeeding annual meeting of stockholders unless there shall be vacancies
in the Board of Directors, in which case such decrease may become effective at
any time prior to the next succeeding annual meeting to the extent of the
number of such vacancies. Directors need not be stockholders. Except as
otherwise provided by statute or these By-Laws, the directors (other than
members of the initial Board of Directors) shall be elected at the annual
meeting of stockholders. Each director shall hold office until his successor
shall have been elected and qualified, or until his death, or until he shall
have resigned, or have been removed, as hereinafter provided in these By-Laws.
SECTION 3. Place of Meetings. Meetings of the Board of Directors shall
be held at such place or places, within or without the State of Delaware, as
the Board of Directors may from time to time determine or as shall be specified
in the notice of any such meeting.
5
<PAGE>
SECTION 4. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
other time or place (within or without the State of Delaware) as shall be
specified in a notice thereof given as hereinafter provided in Section 7 of
this Article III.
SECTION 5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time and place as the Board of Directors may
fix. If any day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which would otherwise
be held on that day shall be held at the same hour on the next succeeding
business day. Notice of regular meetings of the Board of Directors need not be
given except as otherwise required by statute or these By-Laws.
SECTION 6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if one shall have been
elected, or by two or more directors of the Corporation or by the Chief
Executive Officer.
SECTION 7. Notice of Meetings. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 7, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be mailed, postage
prepaid, to each director, addressed to him at his residence or usual place of
business, by first class mail, at least two days before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
telegraph, cable, telex, telecopier or other similar means, or be delivered to
him personally or be given to him by telephone or other similar means, at least
twenty-four hours before the time at which such meeting is to be held. Notice
of any such meeting need not be given to any director who shall attend such
meeting, except when he shall attend for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 8. Quorum and Manner of Action. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors,
6
<PAGE>
and, except as otherwise expressly required by statute or the Certificate of
Incorporation or these By-Laws, the act of a majority of the directors present
at any meeting at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum at any meeting of the Board of Directors,
a majority of the directors present thereat may adjourn such meeting to another
time and place. Notice of the time and place of any such adjourned meeting
shall be given to all of the directors unless such time and place were
announced at the meeting at which the adjournment was taken, in which case such
notice shall only be given to the directors who were not present thereat. At
any adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
called. The directors shall act only as a Board and the individual directors
shall have no power as such.
SECTION 9. Organization. At each meeting of the Board of Directors,
the Chairman of the Board, if one shall have been elected, or, in the absence
of the Chairman of the Board or if one shall not have been elected, the
President (or, in his absence, another director chosen by a majority of the
directors present) shall act as chairman of the meeting and preside thereat.
The Secretary or, in his absence, any person appointed by the chairman shall
act as secretary of the meeting and keep the minutes thereof.
SECTION l0. Resignations. Any director of the Corporation may resign
at any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein, immediately
upon its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION ll. Vacancies. Any vacancy in the Board of Directors, whether
arising from death, resignation, removal (with or without cause), an increase
in the number of directors or any other cause, shall be filled by the vote of a
majority of the directors then in office, though less than a quorum, or by the
sole remaining director, and only if there are no remaining directors, by the
stockholders at the next annual meeting thereof or at a special meeting
thereof. Each director so elected shall hold office until his successor shall
have been elected and qualified.
SECTION l2. Removal of Directors. Any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 75% of the voting power of
all of the shares of
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capital stock of the Corporation then entitled to vote generally in the
election of directors, voting together as a single class.
SECTION l3. Compensation. The Board of Directors shall have authority
to fix the compensation, including fees and reimbursement of expenses, of
directors for services to the Corporation in their capacity as directors or
otherwise.
SECTION l4. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors 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. In
addition, in the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Except to the extent restricted by statute or the Certificate of
Incorporation, each such committee, to the extent provided in the resolution
creating it, shall have and may exercise all the powers and authority of the
Board of Directors and may authorize the seal of the Corporation to be affixed
to all papers which require it. Each such committee shall serve at the pleasure
of the Board of Directors and have such name as may be determined from time to
time by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors.
SECTION l5. Action by Consent. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all
members of the Board of Directors or such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Directors or such committee, as the
case may be.
SECTION l6. Telephonic Meeting. Unless restricted by the Certificate
of Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means
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of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting.
SECTION 17. Contracts and Transactions Involving Directors. No
contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the Board
of Directors or committee thereof which authorizes the contract or transaction,
or solely because his, her or their votes are counted for such purpose, if: (1)
the material facts as to his or her relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board or committee in good faith authorize the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(2) the material facts as to his or her relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders and the
transaction is specifically approved in good faith by vote of the stockholders;
or (3) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IV
Officers
SECTION l. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors and shall include the Chief
Executive Officer, the President, one or more Executive, Senior, or other
Vice-Presidents, the Secretary and the Treasurer (who may be designated as
Chief Financial Officer). If the Board of Directors wish, they may also elect
as an officer of the Corporation a Chairman of the Board and may elect other
officers (including one or more Assistant Treasurers and one or more Assistant
Secretaries) as may be necessary or desirable for the business of the
Corporation. Any two or more offices may be held by the same person, and no
officer except the Chairman of the
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Board need be a director. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified, or until his death, or
until he shall have resigned or have been removed, as hereinafter provided in
these By-Laws.
SECTION 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein, immediately
upon receipt. Unless otherwise specified therein, the acceptance of any such
resignation shall not be necessary to make it effective.
SECTION 3. Removal. Any officer of the Corporation may be removed,
either with or without cause, at any time, by the Board of Directors at any
meeting thereof. Such removal shall be without prejudice to a person's contract
rights, if any, but the election as an officer of the corporation shall not of
itself create contract rights.
SECTION 4. Chairman of the Board. The Chairman of the Board, if one
shall have been elected, shall be a member of the Board, an officer of the
Corporation and, if present, shall preside at each meeting of the Board of
Directors or the stockholders. He shall advise and counsel with the Chief
Executive Officer and/or President, and in either of their absence with other
executives of the Corporation, and shall perform such other duties as may from
time to time be assigned to him by the Board of Directors.
SECTION 5. The Chief Executive Officer. The Chief Executive Officer
shall perform such duties as from time to time may be assigned to him by the
Board of Directors of the Corporation. He shall, in the absence of the Chairman
of the Board or if a Chairman of the Board shall not have been elected, preside
at each meeting of the Board of Directors or the stockholders. He shall perform
all duties incident to the office of the Chief Executive Officer.
SECTION 6. The President. Unless otherwise provided by the Board of
Directors of the Corporation, the President shall be the chief operating
officer of the Corporation. He shall, in the absence of the Chairman of the
Board and the Chief Executive Officer, or if a Chairman of the Board shall not
have been elected and there shall at that time not be a Chief Executive
Officer, preside at each meeting of the Board of Directors or the stockholders.
He shall perform all duties incident to the office of President and chief
operating officer and such other duties as
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may from time to time be assigned to him by the Board of Directors.
SECTION 7. Vice-Presidents. Each Executive, Senior, or other
Vice-President shall perform all such duties as from time to time may be
assigned to him by the Board of Directors, the Chief Executive Officer, or the
President. At the request of the President or in his absence or in the event of
his inability or refusal to act, the Vice-President, or if there shall be more
than one, the Vice-Presidents in the order determined by the Board of Directors
(or if there be no such determination, then the Vice-Presidents in the order of
their election), shall perform the duties of the President, and, when so
acting, shall have the powers of and be subject to the restrictions placed upon
the President in respect of the performance of such duties.
SECTION 8. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated by the Board of
Directors or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of Directors
may require, an account of the financial condition of the Corporation; and
(g) in general, perform all duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the
Board of Directors.
SECTION 9. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of
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the Board of Directors, the committees of the Board of Directors and the
stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the
Board of Directors.
SECTION 10. The Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the
event of his inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as from time to
time may be assigned by the Board of Directors.
SECTION 11. The Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the Secretary or in the event of
his inability or refusal to act, perform the duties and exercise the powers of
the Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 12. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board of Directors may confer for the time being the
powers or duties, or any of them, of such officer upon any other officer or
upon any directors.
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SECTION l3. Officers' Bonds or Other Security. If required by the
Board of Directors, any officer of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety as the Board of Directors may require.
SECTION l4. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to
time by the Board of Directors. An officer of the Corporation shall not be
prevented from receiving compensation by reason of the fact that he is also a
director of the Corporation.
SECTION 15. Loans to officers and employees; Guaranty of Obligations
of Officers and Employees. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or any subsidiary, including any officer or employee who is a
director of the Corporation or any subsidiary, whenever, in the judgment of the
Board of Directors, such loan, guaranty or other assistance may reasonably be
expected to benefit the Corporation. The loan, guaranty or other assistance may
be with or without interest, and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the Corporation.
ARTICLE V
Stock Certificates and Their Transfer
SECTION l. Stock Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board or the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation. If the Corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restriction of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, or a
statement that the Corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
optional or other special rights of each
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class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
SECTION 2. Facsimile Signatures. Any of or all the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
SECTION 3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct sufficient to indemnify it
against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 4. Transfers of Stock. 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 records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of transfer if, when the
certificates are presented to the Corporation for transfer, both the transferor
and the transferee request the Corporation to do so.
SECTION 5. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
SECTION 6. Regulations. The Board of Directors may make such
additional rules and regulations, not inconsistent with these By-Laws, as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of stock of
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the Corporation.
SECTION 7. Fixing the Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders 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 8. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its records as the
owner of shares of stock to receive dividends and to vote as such owner, shall
be entitled to hold liable for calls and assessments a person registered on its
records as the owner of shares of stock, and shall not be bound to recognize
any equitable or other claim to or interest in such share or shares of stock 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 Delaware.
ARTICLE VI
Indemnification of Directors and Officers
SECTION l. General. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the
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Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 2. Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for gross negligence or willful misconduct in
the performance of his duty to the Corporation unless and only to the extent
that the Court of Chancery of the State of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
SECTION 3. Indemnification in Certain Cases. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Sections l and 2 of this Article VI, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
SECTION 4. Advances for Expenses. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such
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action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall be ultimately
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article VI.
SECTION 5. Rights Not Exclusive. The indemnification provided by this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 6. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article VI.
SECTION 7. Definition of Corporation. For the purposes of this Article
VI, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
shall stand in the same position under the provisions of this Article VI with
respect to the resulting or surviving corporation as he would if he had served
the resulting or surviving corporation in the same capacity.
SECTION 8. Definitions. For purposes of this Article VI, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an
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employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this Article VI.
ARTICLE VII
General Provisions
SECTION l. Dividends. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of stock of
the Corporation, unless otherwise provided by statute or the Certificate of
Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may
modify or abolish any such reserves in the manner in which it was created.
SECTION 3. Seal. The seal of the Corporation shall be in such form as
shall be approved by the Board of Directors.
SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
SECTION 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 6. Execution of Contracts, Deeds, Etc. The Board of Directors
may authorize any officer or officers, agent or
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agents, in the name and on behalf of the Corporation, to enter into or execute
and deliver any and all deeds, bonds, mortgages, contracts and other
obligations or instruments, and such authority may be general or confined to
specific instances.
SECTION 7. Voting of Stock in Other Corporations. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board or
the President or the Secretary, from time to time, may (or may appoint one or
more attorneys or agents to) cast the votes which the Corporation may be
entitled to cast as a shareholder or otherwise in any other corporation, any of
whose shares or securities may be held by the Corporation, at meetings of the
holders of the shares or other securities of such other corporation. In the
event one or more attorneys or agents are appointed, the Chairman of the Board
or the President or the Secretary may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent. The
Chairman of the Board or the President or the Secretary may, or may instruct
the attorneys or agents appointed to, execute or cause to be executed in the
name and on behalf of the Corporation and under its seal or otherwise, such
written proxies, consents, waivers or other instruments as may be necessary or
proper in the circumstances.
ARTICLE VIII
Amendments
These By-Laws may be amended or repealed or new by-laws adopted (a) by
action of the stockholders entitled to vote thereon at any annual or special
meeting of stockholders or (b) unless the Certificate of Incorporation provides
that only the shareholders may amend the by-laws, by action of the Board of
Directors at a regular or special meeting thereof. Any by-law made by the Board
of Directors may be amended or repealed by action of the stockholders at any
annual or special meeting of stockholders.
ARTICLE IX
Emergency By-Laws
SECTION 9.1. Emergency By-Laws. The emergency By-Laws provided in this
Section 9.1 shall be operative during any emergency in the conduct of the
business of the corporation resulting form an attack on the United States or on
a locality in which the corporation conducts its business or customarily holds
meeting of its Board of Directors or its stockholders, or during
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any nuclear or atomic disaster, or during the existence of any catastrophe, or
other similar emergency condition, as a result of which a quorum of the Board
of Directors or a standing committee thereof cannot readily be convened for
action notwithstanding any different provision in the preceding By-Laws or in
the Certificate of Incorporation or in the law. To the extent not inconsistent
with the provisions of this Section, the By-Laws of the Corporation shall
remain in effect during any emergency and upon its termination the Emergency
By-Laws shall cease to be operative. Any amendments of these Emergency By-Laws
may make any further or different provision that may be practical and necessary
for the circumstances of the emergency.
During any such emergency: (A) A meeting of the Board of Directors or
a committee thereof may be called by any officer or director of the
Corporation. Notice of the time and place or the meeting shall be given by the
person calling the meeting to such of the directors as it may be feasible to
reach by any available means of communication. Such notice shall be given at
such time in advance of the meeting as circumstances permit in the judgment of
the person calling the meeting; (B) The director or directors in attendance at
the meeting shall constitute a quorum; (C) The officers or other persons
designated on a list approved by the Board of Directors before the emergency,
all in such order of priority and subject to such conditions and for such
period of time (not longer than reasonably necessary after the termination of
the emergency) as may be provided in the resolution approving the list, shall,
to the extent required to provide a quorum at any meeting of the Board of
Directors, be deemed directors for such meeting; (D) The Board of Directors,
either before or during any such emergency, may provide, and from time to time
modify, lines of succession in the event that during such emergency any or all
officers or agents of the corporation shall for any reason be rendered
incapable of discharging their duties; (E) The Board of Directors, either
before or during any such emergency, may, effective in the emergency, change
the head office or designate several alternative head offices or regional
offices. To the extent required to constitute a quorum at any meeting of the
Board of Directors during such an emergency, the officers of the corporation
who are present shall be deemed, in order of rank and within the same rank in
order of seniority, directors for such meeting.
No officer, director or employee acting in accordance with any
Emergency By-Laws shall be liable except for willful misconduct.
These Emergency By-Laws shall be subject to repeal or change by
further action of the Board of Directors or by action of
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the stockholders.
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EXHIBIT 10.1
ESCROW AGREEMENT
(FUNDS)
This ESCROW AGREEMENT is made as of this __th day of March, 1997 by
and between 1997 Corp. with a place of business at 315 West 106th Street,
Fourth Floor, New York, New York 10025 (the "Company"), and Continental Stock
Transfer & Trust Company with a principal place of business at 2 Broadway, 19th
Floor, New York, New York 10004, in its capacity as escrow agent only (the
"Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company intends to consummate the initial public offering
(the "Offering") of up to an aggregate of 30,000 shares of the Company's common
stock, par value $.001 per share (the "Common Stock") as more fully described
in the Company's Registration Statement on Form SB-2 under the Securities Act
of 1933, as amended (File No. ________), as declared effective by the
Securities and Exchange Commission on _______, 1997 (the "Registration
Statement");
WHEREAS, in accordance with the terms of the offering as set forth in
the Registration Statement, the gross proceeds from the sale of the Shares are
required to be placed directly in an escrow account; and
WHEREAS, the Company wishes to appoint the Escrow Agent as the escrow
agent for such account, on the terms and conditions set forth below in order to
comply with the requirements of Rule 419 of Regulation C of the Rules and
Regulations established by the Securities and Exchange Commission;
NOW, THEREFORE, in consideration of the mutual promises and
obligations set forth below, and for other valuable consideration the
sufficiency and receipt of which are hereby acknowledged, the parties hereto
hereby agree as follows:
I. Appointment of Escrow Agent and Creation of Account. The Company hereby
appoints the Escrow Agent as escrow agent hereunder and directs it to hold
those assets described in Exhibit A attached hereto, together with any
additional assets
<PAGE>
which may be deposited with the Escrow Agent from time to time to be held
pursuant to this Agreement and all income earned from investment of the assets
described in Exhibit A and any additions thereto (collectively, the "Escrow
Assets") , in a separate account in the name of "1997 Corp. - Escrow Account"
(the "Escrow Account"). The Escrow Account shall be invested, administered and
distributed in accordance with the terms set forth below. Contemporaneously
with the closing of the Offering, the Company shall deposit with the Escrow
Agent those assets listed on Exhibit A.
1. Initial Funding of Escrow Account. The Escrow Account shall be
initially funded with the proceeds from the sale of Shares by the Company. All
funds from the initial sale of Shares by the Company shall be deposited
directly in the Escrow Account by wire transfer, check or money order.
2. Investment of Escrow Assets. The Escrow Assets shall be invested in
accordance with the instructions set forth in Exhibit C attached hereto. Such
instructions may be modified only by a written certificate executed by an
authorized officer of the Company and delivered to the Escrow Agent; however,
this Escrow Agreement may not be altered by the Board of Directors of the
Company in terms of the investment instructions, except as may be required by
the Board of Directors to fulfill their fiduciary obligations. Escrow Agent
shall make monthly accounting of such investments, the income received
therefrom, and the then existing balance of the Escrow Account to the Company.
3. Distribution from Escrow Account. The Escrow Agent shall make
distributions from the Escrow Account in accordance with the requirements set
forth in Exhibit D attached hereto. Such instructions may be modified only by a
written certificate executed by authorized officers of the Company, and
delivered to the Escrow Agent. In addition, this Escrow Agreement may not be
altered by the Board of Directors of the Company in terms of its distribution
instructions, except as may be required by the Board of Directors to fulfill
their fiduciary obligations. The Escrow Agent is authorized to make
distributions in reliance on the instructions it receives. Written notice of
each disbursement from the Escrow Agent shall be provided to the Company within
ten (10) days of each such disbursement. Upon the final distribution of all of
the Escrow Assets, this Agreement shall terminate and the Escrow Agent shall
have no further obligations or liabilities hereunder.
4. Compensation of Escrow Agent. The Escrow Agent shall receive fees
determined in accordance with, and payable as specified in, the Schedule of
Fees attached hereto as Exhibit E (the "Fee Schedule"). The Escrow Agent shall
have no duties or
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liabilities under this Agreement unless and until full payment of the fee set
forth in Exhibit E. The Escrow Agent shall be reimbursed by the Company for all
expenses, disbursements and advances incurred or made by the Escrow Agent in
preparation, administration and enforcement of this Agreement, including, but
not limited to, reasonable legal fees and expenses. The Company shall be liable
for all payments due to the Escrow Agent under this Agreement.
5. Responsibilities and Rights of the Escrow Agent. To induce the
Escrow Agent to act hereunder, it is further agreed by the undersigned that:
(a) The Escrow Agent undertakes to perform only such duties as are
expressly set forth herein. Without limiting the generality of the foregoing,
the Escrow Agent shall have no duty or responsibility as regards any: (i)
security as to which a default in the payment of principal or interest has
occurred, to give notice of default, make demand for payment or take any other
action with respect to such default; and (ii) loss occasioned by delay in the
actual receipt of notice of any payment, redemption or other transaction
regarding any item in the Escrow Assets as to which it is authorized to take
action hereunder. The Escrow Agent may consult with counsel and shall be fully
protected with respect to any action taken in good faith in accordance with
such advice. The Escrow Agent shall have no liability or responsibility for any
misstatement in, or omission from, the Prospectus.
(b) The Escrow Agent shall not be under any duty to give the
Escrowed Assets held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any funds held
hereunder except as directed pursuant to this Escrow Agreement. In the event
that there is a change in the investment instructions resulting in uninvested
funds, such uninvested funds held hereunder shall not earn or accrue interest.
(c) The Escrow Agent does not make any representation or warranty
with regard to the creation or perfection, hereunder or otherwise, of a
security interest in the Escrow Assets or regarding the negotiability or
transferability of, or existence of other interests in the Escrow Assets. The
Escrow Agent shall have no responsibility at any time to ascertain whether or
not any security interest exists in the Escrow Assets or any part thereof or to
file any financing statement under the Uniform Commercial Code of any state
with respect to the Escrow Assets or any part thereof.
(d) The Escrow Agent is hereby authorized to comply with any
judicial order or legal process which stays,
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enjoins, directs or otherwise affects the transfer or delivery of the Escrow
Assets or any party hereto and shall incur no liability for any delay or loss
which may occur as a result of such compliance.
(e) The Escrow Agent shall have no duty or responsibility with
regard to any loss resulting from the investment, reinvestment, sale or
liquidation of the Escrow Assets in accordance with the terms of this
Agreement. The Escrow Agent need not maintain any insurance with respect to the
Escrow Assets.
(f) The Escrow Agent shall in no event be liable in connection with
its investment or reinvestment of any cash held by it hereunder in good faith,
in accordance with the terms hereof, including, without limitation, any
liability for any delays (not resulting from its gross negligence or willful
misconduct) in the investment or reinvestment of the Escrowed Assets, or any
loss of interest incident to any such delays.
(g) Except as otherwise expressly provided herein, the Escrow Agent
is authorized to execute instructions and take other actions pursuant to this
Agreement in accordance with its customary processing practices for similar
customers and, in accordance with such practices the Escrow Agent may retain
agents, including its own subsidiaries or affiliates, to perform certain of
such functions. The Escrow Agent shall have no liability under this Agreement
for any loss or expense other than those occasioned by the Escrow Agent's gross
negligence or willful misconduct and in any event its liability shall be
limited to direct damages and shall not include any special or consequential
damages. All collection and receipt of funds or securities and all payment and
delivery of funds or securities under this Agreement shall be made by the
Escrow Agent as agent, at the risk of the other parties hereto with respect to
their actions or omissions and those of any person other than the Escrow Agent.
In no event shall the Escrow Agent be responsible or liable for any loss due to
force beyond its control, including, but not limited to, acts of God, flood,
fire, nuclear fusion, fission or radiation, war (declared or undeclared),
terrorism, insurrection, revolution, riot, strikes or work stoppages for any
reason, embargo, government action, including any laws, ordinances, regulations
or the like which restrict or prohibit the providing of the services
contemplated by this Agreement, inability to obtain equipment or communications
facilities, or the failure of equipment or interruption of communications
facilities, and other causes whether or not of the same class or kind as
specifically named above. In the event that the Escrow Agent is unable
substantially to perform for any of the reasons described in the immediately
preceding sentence,
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<PAGE>
it shall so notify the other parties hereto as soon as reasonably practicable
following its actual knowledge of the same.
(h) This Escrow Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this agreement against the
Escrow Agent. Notwithstanding any provisions of this Agreement to the contrary,
the Escrow Agent shall not be bound by, or have any responsibility with respect
to, any other agreement or contract among the Company and the Representatives
(whether or not the Escrow Agent has knowledge thereof).
(i) It is understood and agreed that should any dispute arise with
respect to the payment and/or ownership or right of possession of the Escrow
Assets, or should the Escrow Agent in good faith be in doubt as to what action
it should take hereunder, the Escrow Agent is authorized and directed to retain
in its possession, without liability to anyone, all or any part of the Escrow
Assets until such dispute shall have been settled either by mutual agreement by
the parties concerned or by the final order, decree or judgment of any court or
other tribunal of competent jurisdiction in the United States of America and
time for appeal has expired and no appeal has been perfected, but the Escrow
Agent shall be under no duty whatsoever to institute or defend any such
proceedings. Any such court order shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to the Escrow Agent to the effect
that said court order is final and nonappealable.
(j) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Without limiting the foregoing, in the event of any alteration
of investment or distribution instructions, the Escrow Agent shall have no
responsibility to determine whether the requested alteration was required by
the Board of Directors of the Company to fulfill its fiduciary obligations. The
Escrow Agent may act in reliance upon any instrument or signature believed by
it to be genuine and may assume that any person purporting to give receipt or
advice or make any statement or execute any document in connection with the
provisions hereof has been duly authorized to do so.
(k) The Company shall hold the Escrow Agent and its agents harmless
from, and indemnify and reimburse the Escrow Agent and its agents for all
claims, liability, loss and expense (including reasonable out-of-pocket and
incidental expenses and legal fees), incurred by the Escrow Agent or them in
connection
5
<PAGE>
with the Escrow Agent or their acting under this Agreement, provided that the
Escrow Agent or they, as the case may be, have not acted with gross negligence
or willful misconduct with respect to the events resulting in such claims,
liability, loss, and expense.
(l) The Company acknowledges and agree that, except as otherwise
provided in this Section 6(l), the Escrow Agent shall not be responsible for
taking any steps, including without limitation, the filing of forms or reports,
or withholding of any amounts in connection with any tax obligations of the
Company or any other party in connection with the Escrow Assets; provided,
however, that the Escrow Agent shall be entitled to take any action such as
withholding, that it deems appropriate to ensure compliance with its
obligations under any applicable tax laws. In no event shall the Escrow Agent
be required to distribute funds from the Escrow Account to either the
shareholders or the Company unless the appropriate Internal Revenue Service
Form W-8 or Form W-9 are received. Notwithstand ing the foregoing, the Escrow
Agent shall supply any information or documents as may be reasonably requested
by the Company in connection with the Company's preparation of its tax returns
for the Escrow Account. Upon any distribution of Escrow Assets in accordance
with the instructions set forth in Exhibit D attached hereto, the Escrow Agent
shall prepare and deliver to each person receiving a distribution a completed
Form 1099, and shall supply any necessary information as may reasonably be
requested in writing by such persons.
(m) The Escrow Agent does not have any interest in the Escrow
Assets deposited hereunder but is serving as escrow holder only and having only
possession thereof. The Company shall pay or reimburse the Escrow Agent upon
request for any transfer taxes or other taxes relating to the Escrow Assets
incurred in connection herewith and shall indemnify and hold harmless the
Escrow Agent from any amounts that it is obligated to pay in the way of such
taxes. This paragraph shall survive notwithstanding any termination of this
Escrow Agreement or the resignation of the Escrow Agent.
(n) The Escrow Agent makes no representation as to the validity,
value, genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(o) The Escrow Agent shall not be called upon to advise any party
as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
6
<PAGE>
(p) No printed or other matter in any language (including without
limitation prospectuses, notices, reports and promotional material) which
mentions the Bank's name or the rights, powers, or duties of the Escrow Agent
shall be issued by the other parties hereto or on such parties, behalf unless
the Escrow Agent shall first have given its specific written consent thereto.
Notwithstanding the foregoing sentence, the Escrow Agent hereby specifically
consents to the use of its name as Escrow Agent as necessary to effectuate the
Company's public offering and a business combination of the Company.
(q) The Company authorizes the Escrow Agent, for any securities
held hereunder, to use the services of any United States central securities
depository it deems appropriate, including, but not limited to, the Depositary
Trust Company and the Federal Reserve Book Entry System.
6. Instructions: Fund Transfers.
(a) The Escrow Agent is authorized to rely and act upon all
instructions given or purported to be given by one or more officers, employees
or agents of the Company (i) authorized by or in accordance with a corporate
resolution delivered to the Escrow Agent or (ii) described as authorized in a
certificate delivered to the Escrow Agent by the appropriate Secretary or
Assistant Secretary or similar officer (each such officer, employee or agent or
combination of officers, employees and agents authorized pursuant to clause (i)
or described pursuant to clause (ii) of this Section 6(a) is hereinafter
referred to as an "Authorized Officer"). (The term "instructions" includes,
without limitation, instructions to sell, assign, transfer, deliver, purchase
or receive for the Escrow Account any and all stocks, bonds and other
securities or to transfer all or any portion of the Escrow Assets.) The Escrow
Agent may also rely and act upon instructions when bearing or purporting to
bear the signature or facsimile signature of any of the individuals designated
by an Authorized Officer regardless of by whom or by what means the actual or
purported facsimile signature or signatures thereon may have been affixed
thereto if such facsimile signature or signatures resemble the facsimile
specimen or specimens from time to time furnished to the Escrow Agent by any of
such Authorized Officers, Secretary or an Assistant Secretary or similar
officer). In addition, and subject to subsection 6(b) hereof, the Escrow Agent
may rely and act upon instructions received by telephone, telex, TXW facsimile
transmission, bank wire or other teleprocess acceptable to it which the Escrow
Agent believes in good faith to have been given by an Authorized Officer or
which are transmitted with proper testing or authentication pursuant to terms
and conditions which the Escrow Agent may specify. The Escrow Agent shall incur
no liability to the Company or otherwise for having acted in
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<PAGE>
accordance with instructions on which it is authorized to rely pursuant to the
provisions hereof. Any instructions delivered to the Escrow Agent by telephone
shall promptly thereafter be confirmed in writing by an Authorized Officer but
the Escrow Agent shall incur no liability for a failure to send such
confirmation in writing, the failure of any such written confirmation to
conform to the telephone instruction which it received, the failure of any such
written confirmation to be signed or properly signed, or its failure to produce
such confirmation at any subsequent time. The Escrow Agent shall incur no
liability for refraining from acting upon any instructions which for any reason
it, in good faith, is unable to verify to its own satisfaction. Unless
otherwise expressly provided, all authorizations and instructions shall
continue in full force and effect until canceled or superseded by subsequent
authorizations or instructions received by the Escrow Agent's safekeeping
account administrator. The Escrow Agent's authorization to rely and act upon
instructions pursuant to this paragraph shall be in addition to, and shall not
limit, any other authorization which the Company may give to it hereunder.
(b) With respect to written or telephonic instructions or
instructions sent by facsimile transmission to transfer funds from the Escrow
Account in accordance herewith (such instructions hereinafter referred to as
"Transfer Instructions"), the security procedure agreed upon for verifying the
authenticity of Transfer Instructions is a callback by the Escrow Agent to any
of the persons designated below, whether or not any such person has issued such
Transfer Instruction. (It is recommended that the persons designated below not
be persons who generally issue Transfer Instructions; whenever possible, the
Escrow Agent will endeavor to call someone other than the issuer of the
Transfer Instructions).
With respect to Transfer Instructions given by the Company pursuant to
its authority under this Agreement:
Name/Title Telephone No.
Judith Haselton, President (212) 678-6231
Richard L. Campbell, Secretary (212) 351-4922
Alternatively, at the Escrow Agent's option, the callback may be made
to any person designated in the certified resolutions or other certificates or
documentation furnished to it by a party in connection with the Escrow Account
as authorized to issue Transfer Instructions or otherwise transact business
with respect to the Escrow Account for that party. The Company shall implement
any other authentication method or procedure or security device required by the
Escrow Agent at any time or from time to time.
8
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7. Stockholder Redemption. In the event a stockholder exercises his or
her redemption right upon the Business Combination of the Company, the funds to
repay said stockholder shall be distributed directly from the Escrow Account.
As soon as practicable after the Company receives notice from a stockholder
that the stockholder is exercising its redemption rights, the Company shall
instruct the Escrow Agent to transfer, and (so long as the Escrow Agent has
received an Internal Revenue Service Form W-8 or Form W-9) the Escrow Agent
shall so transfer, the funds owed to the stockholder; such instructions to
include the amount to be transferred and delivery instructions. These
instructions shall comply with Section 6 of this Escrow Agreement.
8. Resignation or Removal of Escrow Agent.
(a) The Escrow Agent may resign at any time by giving written
notice to the Company. The Company may remove the Escrow Agent upon written
notice to the Escrow Agent. Such resignation or removal shall take effect upon
delivery of the Escrow Assets to a successor escrow agent designated in writing
by the Company, and the Escrow Agent shall thereupon be discharged from all
obligations under this Agreement, and shall have no further duties or
responsibilities in connection herewith. The obligations of the Company to the
Escrow Agent and the rights of the Escrow Agent under Sections 5, 6(c), and
6(h) hereof shall survive termination of this Agreement or the resignation or
removal of the Escrow Agent.
(b) In the event that the Escrow Agent submits a notice of
resignation, its only duty, until a successor Escrow Agent shall have been
appointed and shall have accepted such appointment, shall be to safekeep the
Escrow Assets, and hold, invest and dispose of the Escrow Assets in accordance
with this Agreement, until receipt of a designation of successor Escrow Agent
or a joint written disposition instrument by the other parties hereto or a
Final Order of a court of competent jurisdiction, but without regard to any
notices, requests, instructions, demands or the like received by it from the
other parties hereto after such notice shall have been given, unless the same
is a direction that the Escrow Assets be paid or delivered in its entirety out
of the Escrow Account. The Escrow Agent, upon submission of its resignation in
accordance with this subparagraph (b) may deposit the Escrow Assets with a
court of competent jurisdiction if the Escrow Agent deems such action
advisable. The resignation of the Escrow Agent will take effect on the earlier
of (a) the appointment of a successor (including a court of competent
jurisdiction) or (b) the day which is 30 days after the date of delivery of its
written notice of resignation to the other parties hereto. If, at the time the
Escrow Agent has not received a designation of a successor Escrow Agent, the
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Escrow Agent's sole responsibility after that time shall be to safe-keep the
Escrow Assets until receipt of a designation of a successor Escrow Agent or a
joint written disposition instrument by the other parties hereto or a final
order of a court of competent jurisdiction.
9. Notices. Unless expressly provided herein to the contrary, notices
hereunder shall be in writing, and delivered by telecopier, overnight express
mail, first-class postage prepaid, delivered personally or by receipted courier
service. All such notices which are mailed shall be deemed delivered upon
receipt if the addressee is the Escrow Agent, but shall be deemed delivered
upon mailing if otherwise, all such notices shall be addressed as follows (or
to such other address as any party hereto may from time to time designate by
notice duly given in accordance with this paragraph):
(a) If to the Company, to:
1997 Corp.
315 West 106th Street
Fourth Floor
New York, New York 10025
Attention: Judith Haselton, President
If to the Escrow Agent, to:
Continental Stock Transfer & Trust Co.
2 Broadway 19th floor
New York, New York 10004
Attn: Steve Nelson
10. Miscellaneous.
(a) Choice of Law and Jurisdiction. This Agreement shall be
governed by and construed in accordance with the law of the State of New York
applicable to agreements made and to be performed in New York. The parties to
this Agreement hereby agree that jurisdiction over such parties and over the
subject matter of any action or proceeding arising under this Agreement may be
exercised by a competent Court of the State of New York sitting in New York
City or by a United States Court sitting in the Southern District of New York,
exclusively. The parties agree that delivery or mailing of any process or other
papers in the manner provided herein, or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.
(b) Benefits and Assignment. Nothing in this Agreement, expressed
or implied, shall give or be construed to give any person, firm or corporation,
other than the parties
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hereto and their successors and assigns, any legal claim under any covenant,
condition or provision hereof; all the covenants, conditions, and provisions
contained in this Agreement being for the sole benefit of the parties hereto
and their successors and assigns. No party may assign any of its rights or
obligations under this Agreement without (i) the written consent of all the
other parties, which consent may be withheld in the sole discretion of the
party whose consent is sought and (ii) the written agreement of the transferee
that it will be bound by the provisions of this Agreement.
(c) Counterparts. This Agreement may be executed in several
counterparts, each one of which shall constitute an original, and all
collectively shall constitute but one instrument.
(d) Amendment and Waiver. This Agreement may be modified only by a
written amendment signed by all the parties hereto, and no waiver of any
provision hereof shall be effective unless expressed in a writing signed by the
party to be charged.
(e) Headings. The headings of the sections hereof are included for
convenience of reference only and do not form part of this Agreement.
(f) Entire Agreement. This Agreement contains the complete
agreement of the parties with respect to its subject matter and supersedes and
replaces any previously made proposals, representations, warranties or
agreements with respect thereto by any of the parties hereto.
(g) Separability. Any provisions of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or enforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11. Additional Documentation. This Agreement shall not become
effective (and the Escrow Agent shall have not responsibility hereunder except
to return the Escrow Assets to the Company) until the Escrow Agent shall have
received from the Company the following:
(i) Certified resolutions of its board of directors authorizing the
making and performance of this Agreement; and
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(ii) A certificate as to the names and specimen signatures of its
officers or representatives authorized to sign the Agreement and
notices, instructions and other communications hereunder.
12
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
1997 CORP.
By:
---------------------------
Name: Judith Haselton
Title: President
Agreed and accepted:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
as Escrow Agent
By:
-------------------------------
Name:
Title:
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EXHIBIT A to ESCROW AGREEMENT
ESCROW ASSETS
-------------
One Hundred Fifty Thousand Dollars U.S. ($150,000)
14
<PAGE>
EXHIBIT B TO ESCROW AGREEMENT
INTENTIONALLY OMITTED
15
<PAGE>
EXHIBIT C TO ESCROW AGREEMENT
INVESTMENT INSTRUCTIONS
-----------------------
The Escrow Agent shall invest the Escrow Assets in bank deposits, a
registered investment company that holds itself out as a "money market fund"
meeting the conditions of paragraphs (c)(2), (c)(3) and (c)(4) of Rule 2a-7
under the Investment Company Act or short-term United States government
securities, including treasury bills, cash and cash equivalents.
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EXHIBIT D TO ESCROW AGREEMENT
DISBURSEMENT INSTRUCTION
1. Release of Escrow Assets to the Company. The Escrow Agent shall release the
Escrow Assets to the Company upon receipt by the Escrow Agent of:
(i) Written notice from the Company that the Company has completed a
transaction or series of trans actions in which the Company has
entered into a specific line of business, and a written
certification that the fair market value (as determined by the
Company, based upon standards generally accepted by the
financial community, including revenues, earnings, cash flow,
and book value) of the target exceeds eighty percent of the
offering proceeds described in Exhibit A, as required by the
Registration Statement; and
(ii) More than twenty percent of the shareholders of the Company have
not elected to redeem their Common Stock, as required by the
Registration Statement; and
(iii) All other actions required to be performed by the Company for
the release of the Escrow Assets have been met.
2. Distribution of Escrow Assets as to Stockholders. The Escrow Agent shall
disburse the Escrow Assets to the purchasers of record of the Company's
Common Stock in the Offering if:
(a) The Company has not met the conditions for release of the Escrow
Assets to the Company within 18 months from the effective date of the
Registration Statement; or
(b) The Company delivers written notice to the Escrow Agent that part of
the Escrow Assets should be distributed to those holders of record of
the Company's Common Stock sold in the Offering electing to have their
shares redeemed in accordance with the terms set forth in the
Registration Statement, as set forth in such notice.
3. Method of Release of Escrow Assets to the Company. Upon the occurrence of
receipt by the Escrow Agent of the written notice required paragraph 1
above, the Escrow Agent shall wire transfer the Escrow Assets to the
Company in accordance
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with the wire transfer instructions of the Company set forth in such
notice.
4. Method of Distribution of Escrow Assets to Stockholders. Upon the
occurrence of either of the events specified in Section 2(a) or 2(b) above,
the Escrow Agent shall distribute the Escrow Assets to the holders of
record of the Company Common Stock sold in the Offering by mail in
accordance with and to the address specified in the books and records of
the Company. The written notice required by Section 2 (a) or 2(b), as the
case may be, shall include the name and address of each such holder,
together with the percentage of the Escrow Assets to be distributed
thereto.
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EXHIBIT E TO ESCROW AGREEMENT
FEE SCHEDULE
------------
One Thousand ($1,000.00)Dollars Escrow Agent fee to CONTINENTAL STOCK TRANSFER
& TRUST COMPANY to be paid at Closing.
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EXHIBIT 10.2
ESCROW AGREEMENT
(STOCK)
This ESCROW AGREEMENT is made as of this __th day of March, 1997 by
and between 1997 Corp. with a place of business at 315 West 106th Street,
Fourth Floor, New York, New York 10025 (the "Company"), and Continental Stock
Transfer & Trust Company with a principal place of business at 2 Broadway, 19th
Floor, New York, New York 10004, in its capacity as escrow agent only (the
"Escrow Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company intends to consummate the initial public offering
(the "Offering") of an aggregate of 30,000 shares (the "Shares") of the
Company's common stock, par value $.001 per share (the "Common Stock") as more
fully described in the Company's Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended (File No. ________), as declared effective
by the Securities and Exchange Commission on _______, 1997 (the "Registration
Statement");
WHEREAS, in accordance with the terms of the offering as set forth in
the Registration Statement, the Shares are required to be placed directly in an
escrow account; and
WHEREAS, the Company wishes to appoint the Escrow Agent as the escrow
agent for such account, on the terms and conditions set forth below in order to
comply with the requirements of Rule 419 of Regulation C of the Rules and
Regulations established by the Securities and Exchange Commission;
NOW, THEREFORE, in consideration of the mutual promises and
obligations set forth below, and for other valuable consideration the
sufficiency and receipt of which are hereby acknowledged, the parties hereto
hereby agree as follows:
I. Appointment of Escrow Agent and Creation of Account. The Company hereby
appoints the Escrow Agent as escrow agent hereunder and directs it to hold
those assets described in Exhibit A attached hereto, together with any
additional assets which may be deposited with the Escrow Agent from time to
time to be held pursuant to this Agreement and any additions thereto
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(collectively, the "Escrow Assets"), in a separate account in the name of "1997
Corp. - Stock Escrow Account" (the "Escrow Account"). The Escrow Account shall
be administered and distributed in accordance with the terms set forth below.
Contemporaneously with the closing of the Offering, the Company shall deposit
with the Escrow Agent those assets listed on Exhibit A.
1. Initial Deposit into Escrow Account. Certificates representing all
Shares sold by the Company shall be deposited directly in the Escrow Account by
the Company.
2. Distribution from Escrow Account. The Escrow Agent shall make
distributions from the Escrow Account in accordance with the requirements set
forth in Exhibit D attached hereto. Such instructions may be modified only by a
written certificate executed by authorized officers of the Company, and
delivered to the Escrow Agent. In addition, this Escrow Agreement may not be
altered by the Board of Directors of the Company in terms of its distribution
instructions, except as may be required by the Board of Directors to fulfill
their fiduciary obligations. The Escrow Agent is authorized to make
distributions in reliance on the instructions it receives. Written notice of
each distribution from the Escrow Agent shall be provided to the Company within
ten (10) days of each such distribution. Upon the final distribution of all of
the Escrow Assets, this Agreement shall terminate and the Escrow Agent shall
have no further obligations or liabilities hereunder.
3. Compensation of Escrow Agent. The Escrow Agent shall receive fees
determined in accordance with, and payable as specified in, the Schedule of
Fees attached hereto as Exhibit E (the "Fee Schedule"). The Escrow Agent shall
have no duties or liabilities under this Agreement unless and until full
payment of the fee set forth in Exhibit E. The Escrow Agent shall be reimbursed
by the Company for all expenses, disbursements and advances incurred or made by
the Escrow Agent in preparation, administration and enforcement of this
Agreement, including, but not limited to, reasonable legal fees and expenses.
The Company shall be liable for all payments due to the Escrow Agent under this
Agreement.
4. Responsibilities and Rights of the Escrow Agent. To induce the
Escrow Agent to act hereunder, it is further agreed by the undersigned that:
(a) The Escrow Agent undertakes to perform only such duties as are
expressly set forth herein. Without limiting the generality of the foregoing,
the Escrow Agent shall have no duty or responsibility as regards any loss
occasioned by delay in the actual receipt of notice of any payment, redemption
or other
2
<PAGE>
transaction regarding any item in the Escrow Assets as to which it is
authorized to take action hereunder. The Escrow Agent may consult with counsel
and shall be fully protected with respect to any action taken in good faith in
accordance with such advice. The Escrow Agent shall have no liability or
responsibility for any misstatement in, or omission from, the Prospectus.
(b) The Escrow Agent shall not be under any duty to give the
Escrowed Assets held by it hereunder any greater degree of care than it gives
its own similar property except as directed pursuant to this Escrow Agreement.
(c) The Escrow Agent does not make any representation or warranty
with regard to the creation or perfection, hereunder or otherwise, of a
security interest in the Escrow Assets or regarding the negotiability or
transferability of, or existence of other interests in the Escrow Assets. The
Escrow Agent shall have no responsibility at any time to ascertain whether or
not any security interest exists in the Escrow Assets or any part thereof or to
file any financing statement under the Uniform Commercial Code of any state
with respect to the Escrow Assets or any part thereof.
(d) The Escrow Agent is hereby authorized to comply with any
judicial order or legal process which stays, enjoins, directs or otherwise
affects the transfer or delivery of the Escrow Assets or any party hereto and
shall incur no liability for any delay or loss which may occur as a result of
such compliance.
(e) The Escrow Agent need not maintain any insurance with respect
to the Escrow Assets.
(f) Except as otherwise expressly provided herein, the Escrow Agent
is authorized to execute instructions and take other actions pursuant to this
Agreement in accordance with its customary processing practices for similar
customers and, in accordance with such practices the Escrow Agent may retain
agents, including its own subsidiaries or affiliates, to perform certain of
such functions. The Escrow Agent shall have no liability under this Agreement
for any loss or expense other than those occasioned by the Escrow Agent's gross
negligence or willful misconduct and in any event its liability shall be
limited to direct damages and shall not include any special or consequential
damages. All collection and receipt of securities and all delivery of
securities under this Agreement shall be made by the Escrow Agent as agent, at
the risk of the other parties hereto with respect to their actions or omissions
and those of any person other than the Escrow Agent. In no event shall the
Escrow Agent be responsible or liable for any loss due to force beyond its
control, including, but not limited to, acts of God,
3
<PAGE>
flood, fire, nuclear fusion, fission or radiation, war (declared or
undeclared), terrorism, insurrection, revolution, riot, strikes or work
stoppages for any reason, embargo, government action, including any laws,
ordinances, regulations or the like which restrict or prohibit the providing of
the services contemplated by this Agreement, inability to obtain equipment or
communications facilities, or the failure of equipment or interruption of
communications facilities, and other causes whether or not of the same class or
kind as specifically named above. In the event that the Escrow Agent is unable
substantially to perform for any of the reasons described in the immediately
preceding sentence, it shall so notify the other parties hereto as soon as
reasonably practicable following its actual knowledge of the same.
(g) This Escrow Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this agreement against the
Escrow Agent. Notwithstanding any provisions of this Agreement to the contrary,
the Escrow Agent shall not be bound by, or have any responsibility with respect
to, any other agreement or contract among the Company and the Representatives
(whether or not the Escrow Agent has knowledge thereof).
(h) It is understood and agreed that should any dispute arise with
respect to the payment and/or ownership or right of possession of the Escrow
Assets, or should the Escrow Agent in good faith be in doubt as to what action
it should take hereunder, the Escrow Agent is authorized and directed to retain
in its possession, without liability to anyone, all or any part of the Escrow
Assets until such dispute shall have been settled either by mutual agreement by
the parties concerned or by the final order, decree or judgment of any court or
other tribunal of competent jurisdiction in the United States of America and
time for appeal has expired and no appeal has been perfected, but the Escrow
Agent shall be under no duty whatsoever to institute or defend any such
proceedings. Any such court order shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to the Escrow Agent to the effect
that said court order is final and nonappealable.
(i) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Without limiting the foregoing, in the event of any alteration
of distribution instructions, the Escrow Agent shall have no responsibility to
determine whether the requested alteration was required by the Board of
Directors of the Company
4
<PAGE>
to fulfill its fiduciary obligations. The Escrow Agent may act in reliance upon
any instrument or signature believed by it to be genuine and may assume that
any person purporting to give receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
(j) The Company shall hold the Escrow Agent and its agents harmless
from, and indemnify and reimburse the Escrow Agent and its agents for all
claims, liability, loss and expense (including reasonable out-of-pocket and
incidental expenses and legal fees), incurred by the Escrow Agent or them in
connection with the Escrow Agent or their acting under this Agreement, provided
that the Escrow Agent or they, as the case may be, have not acted with gross
negligence or willful misconduct with respect to the events resulting in such
claims, liability, loss, and expense.
(k) The Company acknowledges and agree that, except as otherwise
provided in this Section 6(k), the Escrow Agent shall not be responsible for
taking any steps, including without limitation, the filing of forms or reports,
or withholding of any amounts in connection with any tax obligations of the
Company or any other party in connection with the Escrow Assets; provided,
however, that the Escrow Agent shall be entitled to take any action such as
withholding, that it deems appropriate to ensure compliance with its
obligations under any applicable tax laws.
(l) The Escrow Agent does not have any interest in the Escrow
Assets deposited hereunder but is serving as escrow holder only and having only
possession thereof. The Company shall pay or reimburse the Escrow Agent upon
request for any transfer taxes or other taxes relating to the Escrow Assets
incurred in connection herewith and shall indemnify and hold harmless the
Escrow Agent from any amounts that it is obligated to pay in the way of such
taxes. This paragraph shall survive notwithstanding any termination of this
Escrow Agreement or the resignation of the Escrow Agent.
(m) The Escrow Agent makes no representation as to the validity,
value, genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(n) The Escrow Agent shall not be called upon to advise any party
as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
5
<PAGE>
(o) No printed or other matter in any language (including without
limitation prospectuses, notices, reports and promotional material) which
mentions the Escrow Agent's name or the rights, powers, or duties of the Escrow
Agent shall be issued by the other parties hereto or on such parties, behalf
unless the Escrow Agent shall first have given its specific written consent
thereto. Notwithstanding the foregoing sentence, the Escrow Agent hereby
specifically consents to the use of its name as Escrow Agent as necessary to
effectuate the Company's public offering and a business combination of the
Company.
5. Instructions: Fund Transfers.
(a) The Escrow Agent is authorized to rely and act upon all
instructions given or purported to be given by one or more officers, employees
or agents of the Company (i) authorized by or in accordance with a corporate
resolution delivered to the Escrow Agent or (ii) described as authorized in a
certificate delivered to the Escrow Agent by the appropriate Secretary or
Assistant Secretary or similar officer (each such officer, employee or agent or
combination of officers, employees and agents authorized pursuant to clause (i)
or described pursuant to clause (ii) of this Section 5(a) is hereinafter
referred to as an "Authorized Officer"). (The term "instructions" includes,
without limitation, instructions to sell, assign, transfer, deliver, purchase
or receive for the Escrow Account any and all stocks, bonds and other
securities or to transfer all or any portion of the Escrow Assets.) The Escrow
Agent may also rely and act upon instructions when bearing or purporting to
bear the signature or facsimile signature of any of the individuals designated
by an Authorized Officer regardless of by whom or by what means the actual or
purported facsimile signature or signatures thereon may have been affixed
thereto if such facsimile signature or signatures resemble the facsimile
specimen or specimens from time to time furnished to the Escrow Agent by any of
such Authorized Officers, Secretary or an Assistant Secretary or similar
officer). In addition, and subject to subsection 7(b) hereof, the Escrow Agent
may rely and act upon instructions received by telephone, telex, TXW facsimile
transmission, bank wire or other teleprocess acceptable to it which the Escrow
Agent believes in good faith to have been given by an Authorized Officer or
which are transmitted with proper testing or authentication pursuant to terms
and conditions which the Escrow Agent may specify. The Escrow Agent shall incur
no liability to the Company or otherwise for having acted in accordance with
instructions on which it is authorized to rely pursuant to the provisions
hereof. Any instructions delivered to the Escrow Agent by telephone shall
promptly thereafter be confirmed in writing by an Authorized Officer but the
Escrow Agent shall incur no liability for a failure to send such confirmation
in writing, the failure of any such written
6
<PAGE>
confirmation to conform to the telephone instruction which it received, the
failure of any such written confirmation to be signed or properly signed, or
its failure to produce such confirmation at any subsequent time. The Escrow
Agent shall incur no liability for refraining from acting upon any instructions
which for any reason it, in good faith, is unable to verify to its own
satisfaction. Unless otherwise expressly provided, all authorizations and
instructions shall continue in full force and effect until canceled or
superseded by subsequent authorizations or instructions received by the Escrow
Agent's safekeeping account administrator. The Escrow Agent's authorization to
rely and act upon instructions pursuant to this paragraph shall be in addition
to, and shall not limit, any other authorization which the Company may give to
it hereunder.
(b) With respect to written or telephonic instructions or
instructions sent by facsimile transmission to transfer securities from the
Escrow Account in accordance herewith (such instructions hereinafter referred
to as "Transfer Instructions"), the security procedure agreed upon for
verifying the authenticity of Transfer Instructions is a callback by the Escrow
Agent to any of the persons designated below, whether or not any such person
has issued such Transfer Instruction. (It is recommended that the persons
designated below not be persons who generally issue Transfer Instructions;
whenever possible, the Escrow Agent will endeavor to call someone other than
the issuer of the Transfer Instructions).
With respect to Transfer Instructions given by the Company pursuant to
its authority under this Agreement:
Name/Title Telephone No.
Judith Haselton, President (212) 678-6231
Richard L. Campbell, Secretary (212) 351-4922
Alternatively, at the Escrow Agent's option, the callback may be made
to any person designated in the certified resolutions or other certificates or
documentation furnished to it by a party in connection with the Escrow Account
as authorized to issue Transfer Instructions or otherwise transact business
with respect to the Escrow Account for that party. The Company shall implement
any other authentication method or procedure or security device required by the
Escrow Agent at any time or from time to time.
6. Stockholder Redemption. In the event a stockholder exercises his or
her redemption right upon the Business Combination of the Company, following
the return of the funds to said stockholder from the Funds Escrow created of
even date herewith between the Company and the Escrow Agent, the
7
<PAGE>
Shares which are the subject of the redemption shall be cancelled.
7. Resignation or Removal of Escrow Agent.
(a) The Escrow Agent may resign at any time by giving written
notice to the Company. The Company may remove the Escrow Agent upon written
notice to the Escrow Agent. Such resignation or removal shall take effect upon
delivery of the Escrow Assets to a successor escrow agent designated in writing
by the Company, and the Escrow Agent shall thereupon be discharged from all
obligations under this Agreement, and shall have no further duties or
responsibilities in connection herewith. The obligations of the Company to the
Escrow Agent and the rights of the Escrow Agent under Sections 5, 6(c), and
6(h) hereof shall survive termination of this Agreement or the resignation or
removal of the Escrow Agent.
(b) In the event that the Escrow Agent submits a notice of
resignation, its only duty, until a successor Escrow Agent shall have been
appointed and shall have accepted such appointment, shall be to safekeep the
Escrow Assets, and hold, invest and dispose of the Escrow Assets in accordance
with this Agreement, until receipt of a designation of successor Escrow Agent
or a joint written disposition instrument by the other parties hereto or a
Final Order of a court of competent jurisdiction, but without regard to any
notices, requests, instructions, demands or the like received by it from the
other parties hereto after such notice shall have been given, unless the same
is a direction that the Escrow Assets be paid or delivered in its entirety out
of the Escrow Account. The Escrow Agent, upon submission of its resignation in
accordance with this subparagraph (b) may deposit the Escrow Assets with a
court of competent jurisdiction if the Escrow Agent deems such action
advisable. The resignation of the Escrow Agent will take effect on the earlier
of (a) the appointment of a successor (including a court of competent
jurisdiction) or (b) the day which is 30 days after the date of delivery of its
written notice of resignation to the other parties hereto. If, at the time the
Escrow Agent has not received a designation of a successor Escrow Agent, the
Escrow Agent's sole responsibility after that time shall be to safe-keep the
Escrow Assets until receipt of a designation of a successor Escrow Agent or a
joint written disposition instrument by the other parties hereto or a final
order of a court of competent jurisdiction.
8. Notices. Unless expressly provided herein to the contrary, notices
hereunder shall be in writing, and delivered by telecopier, overnight express
mail, first-class postage prepaid, delivered personally or by receipted courier
service. All such notices which are mailed shall be deemed delivered upon
receipt
8
<PAGE>
if the addressee is the Escrow Agent, but shall be deemed delivered upon
mailing if otherwise, all such notices shall be addressed as follows (or to
such other address as any party hereto may from time to time designate by
notice duly given in accordance with this paragraph):
(a) If to the Company, to:
1997 Corp.
315 West 106th Street
Fourth Floor
New York, New York 10025
Attention: Judith Haselton, President
If to the Escrow Agent, to:
Continental Stock Transfer & Trust Co.
2 Broadway 19th floor
New York, New York 10004
Attn: Steve Nelson
9. Miscellaneous.
(a) Choice of Law and Jurisdiction. This Agreement shall be
governed by and construed in accordance with the law of the State of New York
applicable to agreements made and to be performed in New York. The parties to
this Agreement hereby agree that jurisdiction over such parties and over the
subject matter of any action or proceeding arising under this Agreement may be
exercised by a competent Court of the State of New York sitting in New York
City or by a United States Court sitting in the Southern District of New York,
exclusively. The parties agree that delivery or mailing of any process or other
papers in the manner provided herein, or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.
(b) Benefits and Assignment. Nothing in this Agreement, expressed
or implied, shall give or be construed to give any person, firm or corporation,
other than the parties hereto and their successors and assigns, any legal claim
under any covenant, condition or provision hereof; all the covenants,
conditions, and provisions contained in this Agreement being for the sole
benefit of the parties hereto and their successors and assigns. No party may
assign any of its rights or obligations under this Agreement without (i) the
written consent of all the other parties, which consent may be withheld in the
sole discretion of the party whose consent is sought and (ii) the written
agreement of the transferee that it will be bound by the provisions of this
Agreement.
9
<PAGE>
(c) Counterparts. This Agreement may be executed in several
counterparts, each one of which shall constitute an original, and all
collectively shall constitute but one instrument.
(d) Amendment and Waiver. This Agreement may be modified only by a
written amendment signed by all the parties hereto, and no waiver of any
provision hereof shall be effective unless expressed in a writing signed by the
party to be charged.
(e) Headings. The headings of the sections hereof are included for
convenience of reference only and do not form part of this Agreement.
(f) Entire Agreement. This Agreement contains the complete
agreement of the parties with respect to its subject matter and supersedes and
replaces any previously made proposals, representations, warranties or
agreements with respect thereto by any of the parties hereto.
(g) Separability. Any provisions of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or enforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10. Additional Documentation. This Agreement shall not become
effective (and the Escrow Agent shall have not responsibility hereunder except
to return the Escrow Assets to the Company) until the Escrow Agent shall have
received from the Company the following:
(i) Certified resolutions of its board of directors authorizing the
making and performance of this Agreement; and
(ii) A certificate as to the names and specimen signatures of its
officers or representatives authorized to sign the Agreement and
notices, instructions and other communications hereunder.
10
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
1997 CORP.
By:
--------------------------------
Name: Judith Haselton
Title: President
Agreed and accepted:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
as Escrow Agent
By:
-------------------------------
Name:
Title:
11
<PAGE>
EXHIBIT A to ESCROW AGREEMENT
ESCROW ASSETS
Up to Thirty Thousand (30,000) Shares of Common Stock of the Company
12
<PAGE>
EXHIBIT B TO ESCROW AGREEMENT
INTENTIONALLY OMITTED
13
<PAGE>
EXHIBIT C TO ESCROW AGREEMENT
INVESTMENT INSTRUCTIONS
-----------------------
Intentionally Left Blank
14
<PAGE>
EXHIBIT D TO ESCROW AGREEMENT
DISBURSEMENT INSTRUCTION
1. Release of Escrow Assets to the Company. The Escrow Agent shall release the
Escrow Assets to the Shareholders upon receipt by the Escrow Agent of:
(i) Written notice from the Company that the Company has completed a
transaction or series of trans actions in which the Company has
entered into a specific line of business, and a written
certification that the fair market value(as determined by the
Company, based upon standards generally accepted by the
financial community, including revenues, earnings, cash flow,
and book value) of the target exceeds eighty percent of the
offering proceeds of $150,000, as required by the Registration
Statement; and
(ii) More than twenty percent of the shareholders of the Company have
not elected to redeem their Common Stock, as required by the
Registration Statement; and
(iii) All other actions required to be performed by the Company for
the release of the Escrow Assets have been met.
2. Distribution of Escrow Assets back to the Company. The Escrow Agent shall
disburse the Escrow Assets back to the Company if:
(a) The Company has not met the conditions for release of the Escrow
Assets to the shareholders within 18 months from the Effective Date of
the Registration Statement; or
(b) The Company delivers written notice to the Escrow Agent that part of
the Escrow Assets should be cancelled and returned to the Company as a
result of less than 20% of the Company's holders of Common Stock sold
in the Offering electing to have their shares redeemed in accordance
with the terms set forth in the Registration Statement as set forth in
such notice.
15
<PAGE>
3. Method of Release of Escrow Assets to the Company. Upon the occurrence of
receipt by the Escrow Agent of the written notice required paragraph 1
above, the Escrow Agent shall deliver in customary fashion the Escrow
Assets to the shareholders in accordance with the shareholder list held by
the Escrow Agent.
4. Method of Distribution of Escrow Assets to Stockholders. Upon the
occurrence of either of the events specified in Section 2(a) or 2(b) above,
the Escrow Agent shall distribute the Escrow Assets to the Company and/or
the holders of record of the Company Common Stock sold in the offering by
mail in accordance with and to the address specified in the books and
records of the Company. The written notice required by Section 2 (a) or
2(b), as the case may be, shall include the name and address of each such
holder, together with the percentage of the Escrow Assets to be distributed
thereto.
16
<PAGE>
EXHIBIT E TO ESCROW AGREEMENT
FEE SCHEDULE
One Thousand ($1,000.00)Dollars Escrow Agent fee to CONTINENTAL STOCK TRANSFER
& TRUST COMPANY to be paid at Closing.
17
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
1997 Corp.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 31, 1997, relating to the
financial statements of 1997 Corp., which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
New York, New York
April 7, 1997
Feldman Radin & Co., P.C.,
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 20,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 15
<OTHER-SE> 19,985
<TOTAL-LIABILITY-AND-EQUITY> 20,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 00.00
<EPS-DILUTED> 00.00
</TABLE>
<PAGE>
EXHIBIT 28
SUBSCRIPTION AGREEMENT
----------------------
Judith Haselton, President
1997 Corp.
315 West 106th Street
Fourth Floor
New York, New York 10025
Dear Sir or Madam:
The undersigned hereby acknowledges receipt of the Prospectus of
1997 Corp., Inc. (the "Company"). The undersigned is over 18
years of age.
The undersigned subscriber represents and warrants that the Shares purchased
are for his/her own account and not for redistribution on behalf of the
Company.
I hereby subscribe for the following number of Shares.
A. Number of Shares subscribed for
- -----------------------------
B. Price per Share $5.00
C. Total subscription price (Line A x Line
B)_______________________
Enclosed is my check, bank draft or postal or express money order for the full
subscription price stated on Line C above, which has been made payable to "1997
Corp.- Escrow Account."
It is understood that this Subscription is subject to allotment. The Company
reserves the right to reject all or any portion of this subscription in its
sole discretion for any reason whatsoever by refunding all monies paid thereon
without interest. The cashing of any check, bank draft or postal or express
money order will not be deemed to be an acceptance in whole or in part of any
subscription. In the event less than 30,000 Shares are sold within the time
allotted for such sale, then the funds deposited will be promptly refunded in
full without interest to the subscriber by the Company.
Name in which Stock Very truly yours,
Certificate should be
issued, if other than
---------------------------
mine alone: Signature
- ------------------------------
- -----------------------------
Print Name
<PAGE>
---------------------------
- ------------------------------
- -----------------------------
Social Security Number Address
Taxpayer ID Number:
