<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1997
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LIFTKING INDUSTRIES INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
ONTARIO, CANADA 3531 N/A
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
7135 ISLINGTON AVENUE
WOODBRIDGE, ONTARIO L4L 1V9
(905) 851-3988
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL
EXECUTIVE OFFICES AND PRINCIPAL PLACE OF BUSINESS)
LOUIS ALDROVANDI
PRESIDENT
7135 ISLINGTON AVENUE
WOODBRIDGE, ONTARIO L4L 1V9
(905) 851-3988
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
STEVEN F. WASSERMAN, ESQ. GREGORY SICHENZIA, ESQ.
BERNSTEIN & WASSERMAN, LLP SINGER ZAMANSKY, LLP
950 THIRD AVENUE 40 EXCHANGE PLACE
NEW YORK, NY 10022 NEW YORK, NY 10005
(212) 826-0730 (212) 809-8550
(212) 371-4730 (FAX) (212) 344-0394 (FAX)
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as reasonably
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, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
(cover continued on next page)
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE>
<PAGE>
(cover continued from previous page)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SECURITY(2) OFFERING PRICE FEE
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
Common Stock, no par value......................... 1,437,500(3) $4.00 $ 5,750,000 $ 1,742.25
Class A Redeemable Common Stock Purchase
Warrants(4)...................................... 1,725,000(3) 0.15 258,750 78.40
Common Stock, no par value, underlying the Class A
Warrants(5)...................................... 1,725,000(3) 4.50 7,762,500 2,352.04
Underwriter' Purchase Option(6).................... 275,000 0.0001 27.50 1.00
Common Stock, no par value, underlying
Underwriter's Purchase Option.................... 125,000 4.80 600,000 181.80
Class A Redeemable Common Stock Warrants,
underlying Underwriter's Purchase Option......... 150,000 0.18 27,000 8.18
Common Stock, no par value, underlying Class A
Warrants in Underwriter's Purchase Option(7)..... 150,000 4.50 675,000 204.53
- -------------------------------------------------------------------------------------------------------------------------
Total.................................... -- -- $ 15,073,277 $ 4,568.20
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act of 1933 (the 'Act'), this
Registration Statement covers such additional indeterminate number of shares
of Common Stock and Class A Redeemable Common Stock Purchase Warrants (the
'Warrants') as may be issued by reason of adjustments in the number of
shares of Common Stock and Warrants pursuant to anti-dilution provisions
contained in the Warrants and Underwriter's Purchase Option. Because such
additional shares of Common Stock and Warrants will, if issued, be issued
for no additional consideration, no registration fee is required.
(2) Estimated solely for purposes of calculating registration fee.
(3) Includes 187,500 Shares of Common Stock and 225,000 Class A Warrants subject
to the Underwriter's over-allotment option (the 'Over-Allotment Option').
(4) The Class A Warrants are exercisable over a four (4) year period commencing
one (1) year following the effective date of this Offering into one (1)
share of Common Stock per Class A Warrant at an exercise price of $4.50 per
share.
(5) The number of shares of Common Stock specified is the number which may be
acquired by the holders of the Warrants upon exercise of the Class A
Redeemable Common Stock Purchase Warrants ('Class A Warrants') at the
maximum exercise price thereof.
(6) The Underwriter's Purchase Option entitles the Underwriter to purchase
125,000 Shares of Common Stock and 150,000 Class A Warrants at 120% of the
offering prices (the 'Underwriter's Purchase Option').
(7) Issuable upon exercise of the Class A Warrants included in the Underwriter's
Purchase Option.
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC.
CROSS REFERENCE SHEET
(SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS 1 THROUGH 23, PART I, OF FORM SB-2)
<TABLE>
<CAPTION>
ITEM IN FORM SB-2 PROSPECTUS CAPTION
----------------------------------------------------------------------- ------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front Cover of
Prospectus........................................................... Facing Page of Registration
Statement; Outside Front Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus................ Inside Front Cover Page of
Prospectus; Outside Back Cover
Page of Prospectus
3. Summary Information and Risk Factors................................... Prospectus Summary; Risk Factors
4. Use of Proceeds........................................................ Use of Proceeds
5. Determination of Offering Price........................................ Outside Front Cover Page of
Prospectus; Underwriting; Risk
Factors
6. Dilution............................................................... Dilution; Risk Factors
7. Selling Securityholders................................................ Not Applicable
8. Plan of Distribution................................................... Outside Front Cover Page of
Prospectus; Risk Factors;
Underwriting
9. Legal Proceedings...................................................... Business -- Litigation
10. Directors, Executive Officers, Promoters and Control Persons........... Management
11. Security Ownership of Certain Beneficial Owners and Management......... Principal Stockholders
12. Description of Securities.............................................. Description of Securities;
Underwriting
13. Interest of Named Experts and Counsel.................................. Experts; Legal Matters
14. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities.......................................................... Underwriting; Certain Transactions
15. Organization Within Last 5 Years....................................... Not Applicable
16. Description of Business................................................ Business; Risk Factors
17. Management's Discussion and Analysis or Plan of Operation.............. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
18. Description of Property................................................ Business -- Facilities
19. Certain Relationships and Related Transactions......................... Certain Relationships and Related
Transactions
20. Market for Common Equity and Related Stockholder Matters............... Outside Front Cover Page of
Prospectus; Prospectus Summary;
Description of Securities;
Underwriting
21. Executive Compensation................................................. Management -- Executive Compensation
22. Financial Statements................................................... Selected Financial Data; Financial
Statements
23. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures................................................ Not Applicable
</TABLE>
<PAGE>
<PAGE>
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 1997
PROSPECTUS
LIFTKING INDUSTRIES INC.
1,250,000 SHARES OF COMMON STOCK
AND 1,500,000 WARRANTS TO PURCHASE COMMON STOCK
LiftKing Industries Inc., a corporation incorporated under the laws of the
Province of Ontario, Canada ('LiftKing' or the 'Company') hereby offers
1,250,000 shares of Common Stock, no par value (the 'Common Stock' or 'Shares'),
and 1,500,000 redeemable Class A Warrants to purchase Common Stock (individually
a 'Warrant', collectively the 'Warrants'). The Common Stock and Warrants
(collectively referred to herein as the 'Securities') will be separately
tradeable immediately upon issuance and may be purchased separately in varying
amounts.
(Cover continued on following page)
------------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION OF THE BOOK VALUE OF THE COMMON STOCK
OFFERED HEREBY AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS
OF THEIR ENTIRE INVESTMENT. SEE 'DILUTION' AND 'RISK FACTORS', WHICH BEGIN ON
PAGE 7.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=======================================================================================================================
UNDERWRITING
DISCOUNT AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................................... $4.00 $.40 $3.60
- -----------------------------------------------------------------------------------------------------------------------
Per Warrant.................................................. $.15 $.015 $.135
- -----------------------------------------------------------------------------------------------------------------------
Total(3)................................................ $5,225,000 $522,500 $4,702,500
=======================================================================================================================
</TABLE>
(1) Does not reflect additional compensation to be received by the Underwriter
in the form of: (i) a non-accountable expense allowance equal to 3% of the
gross proceeds of the Offering in the amount of $156,750 ($180,262 if the
Over-Allotment Option (defined below) is exercised in full), and (ii) an
option to purchase 125,000 shares of Common Stock and 150,000 Warrants at
not less than 120% of the initial public offering prices (the 'Underwriter's
Purchase Option'). The Company and the Underwriter have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the 'Act'). See 'Underwriting.'
(2) Before deducting expenses of the Offering payable by the Company (including
the Underwriter's non-accountable expense allowance) estimated at $475,000
($498,512 if the Over-Allotment Option is exercised in full).
(3) The Company has granted the Underwriter an option exercisable within 45 days
of the date of this Prospectus ('Over-Allotment Option') to purchase up to
187,500 additional Shares and 225,000 additional Warrants on the same terms
as set forth above solely to cover over-allotments, if any. If the
Over-Allotment Option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$6,008,750, $600,875, and $5,407,875, respectively. See 'Underwriting.'
------------------------
The Securities are being offered hereby by the Underwriter on a firm
commitment basis, when, as and if delivered to and accepted by the Underwriter,
and subject to their right to reject orders in whole or in part, to the approval
of certain legal matters by counsel and to certain other conditions. It is
expected that the delivery of the certificates representing the Securities will
be made against payment therefor at the offices of the Underwriter on or about
, 1997.
------------------------
MONROE PARKER SECURITIES, INC.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
(cover continued)
The Class A Warrants shall be exercisable commencing one (1) year after the
date hereof (the 'Effective Date'). Each Warrant entitles the holder to purchase
one (1) share of Common Stock at a price of $4.50 per share, subject to
adjustment, during the four (4) year period commencing one (1) year from the
Effective Date. The Warrants are redeemable by the Company for $.10 per Warrant,
at any time after , 1998, upon thirty (30) days' prior written
notice, if the average closing price or bid price of the Common Stock, as
reported by the principal exchange on which the Common Stock is traded, Nasdaq
or the National Quotation Bureau Incorporated, as the case may be, equals or
exceeds 250% of the then exercise price of the Warrants, for the ten (10)
consecutive trading days ending three (3) days prior to the date of the notice
of redemption. Upon thirty (30) days' written notice to all holders of the
Warrants, the Company shall have the right to reduce the exercise price and/or
extend the term of the Warrants. See 'Description of Securities.' Although the
Company has no current plans to reduce the exercise price and/or extend the term
of the Warrants, it may consider taking such action depending upon the Company's
financial condition, its financial needs and based upon general market
conditions.
The Company has applied for inclusion of the Common Stock and the Warrants
on The Nasdaq SmallCap Market System ('Nasdaq'), the Pacific Stock Exchange (the
'Pacific Exchange'), and the Boston Stock Exchange ('Boston Exchange') although
there can be no assurance that an active trading market will develop even if the
securities are accepted for quotation. Additionally, even if an active trading
market develops, the Company is still required to maintain certain minimum
criteria established by Nasdaq, the Pacific Exchange, and the Boston Exchange of
which there can be no assurance.
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. It is currently anticipated that the initial public
offering price will be $4.00 per share of Common Stock and $.15 per Warrant. The
price of the Common Stock and the Warrants, as well as the exercise price of the
Warrants, have been determined by negotiations between the Company and Monroe
Parker Securities, Inc., the underwriter of this Offering (the 'Underwriter'),
and do not necessarily bear any relationship to the Company's assets, book
value, net worth or results of operations or any other established criteria of
value. The Underwriter may enter into arrangements with one or more
broker-dealers to act as co-underwriters of this Offering. For additional
information regarding the factors considered in determining the initial public
offering price of the Shares and Warrants and the exercise price of the
Warrants, see 'Risk Factors -- No Prior Public Market; Potential Limited Trading
Market; Possible Volatility of Stock Price,' 'Description of Securities' and
'Underwriting.'
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
'UNDERWRITING'.
A SIGNIFICANT AMOUNT OF THE SECURITIES TO BE SOLD IN THIS OFFERING MAY BE
SOLD TO CUSTOMERS OF THE UNDERWRITER WHICH MAY AFFECT THE MARKET FOR AND
LIQUIDITY OF THE COMPANY'S SECURITIES IN THE EVENT THAT ADDITIONAL
BROKER-DEALERS DO NOT MAKE A MARKET IN THE COMPANY'S SECURITIES, OF WHICH THERE
CAN NO ASSURANCE. SUCH CUSTOMERS SUBSEQUENTLY MAY ENGAGE IN TRANSACTIONS FOR THE
SALE OR PURCHASE OF THE SECURITIES THROUGH AND/OR WITH THE UNDERWRITER.
ALTHOUGH IT HAS NO OBLIGATION TO DO SO, THE UNDERWRITER MAY FROM TIME TO
TIME ACT AS A MARKET MAKER AND OTHERWISE EFFECT TRANSACTIONS IN THE COMPANY'S
SECURITIES. THE UNDERWRITER, IF IT PARTICIPATES IN THE MARKET, MAY BECOME A
DOMINATING INFLUENCE IN THE MARKET FOR SECURITIES. HOWEVER, THERE IS NO
ASSURANCE THAT THE UNDERWRITER WILL OR WILL NOT CONTINUE TO BE A DOMINATING
INFLUENCE. THE PRICES AND LIQUIDITY OF THE SECURITIES OFFERED HEREUNDER MAY BE
SIGNIFICANTLY AFFECTED BY THE DEGREE, IF ANY, OF THE UNDERWRITER'S PARTICIPATION
IN SUCH MARKET. SEE 'RISK FACTORS -- RESTRICTIONS ON MARKET MAKING ACTIVITIES
DURING WARRANT SOLICITATION MAY AFFECT LIQUIDITY OF SECURITIES.' THE UNDERWRITER
MAY DISCONTINUE SUCH ACTIVITIES AT ANY TIME OR FROM TIME TO TIME.
THIS PROSPECTUS HAS NOT BEEN FILED WITH THE SECURITIES COMMISSIONS OF ANY
CANADIAN PROVINCES NOR HAS ANY CANADIAN REGULATORY AUTHORITY PASSED UPON THE
MERITS OF THE DOCUMENT. THE SECURITIES DESCRIBED HEREIN ARE NOT OFFERED FOR SALE
IN CANADA.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information (including financial
statements and notes thereto) contained in this Prospectus and is qualified in
its entirety by the more detailed information appearing elsewhere herein. In
addition, unless otherwise indicated to the contrary, all information appearing
herein does not give effect to (a) 1,500,000 shares of Common Stock issuable
upon exercise of the Warrants; (b) 187,500 shares of Common Stock issuable upon
exercise of the Over-Allotment Option; (c) 225,000 shares of Common Stock
issuable upon exercise of the Warrants included in the Over-Allotment Option;
(d) 125,000 shares of Common Stock and 150,000 Warrants issuable upon exercise
of the Underwriter's Purchase Option;(e) 150,000 shares of Common Stock issuable
upon exercise of the Warrants included in the Underwriter's Purchase Option; and
(f) shares of Common Stock issuable under the Company's stock option plans. See
'Description of Securities,' 'Underwriting,' and 'Management -- Stock Option
Plans and Agreements.' Each prospective investor is urged to read this
Prospectus in its entirety.
THE COMPANY
LiftKing Industries Inc. ('LiftKing' or the 'Company') is a manufacturer of
heavy duty material handling equipment, rough-terrain material handlers, heavy
pallet transporters, transporters of liquid steel and liquid steel residuals
('Slag Pot Carriers'), and International Standard Organization ('ISO') container
handlers, as well as related service parts. The Company's products are marketed
under the LiftKing tradename and are distinguished by their complete line of
four-wheel drive all-terrain material handlers, Slag Pot Carriers for the steel
mill industry, versatility of product applications, and reliability of service
and longevity. Products include conventional fork lifts for the construction
industry, general purpose vehicles for the steel and lumber industry,
specialized material handling equipment for the military, large load and large
container material handlers, along with a full range of heavy steel transporters
and Slag Pot Carriers. LiftKing's manufacturing centers upon high-strength
specialty steel, which is unique both in their shape and engineering design, and
provide added strength with minimal weight. As such, LiftKing products typically
command premium prices. LiftKing vehicles are designed and built to exacting
standards, specifications and designs. The Company is capable of manufacturing
and delivering material handling equipment for virtually any application. For
the year ended July 31, 1996, total sales of new units was $20,092,782 and net
profit before taxes and extraordinary items was $2,305,270.
LiftKing's highly versatile products are used in a wide variety of
applications by commercial and residential building contractors, as well as by
other construction, military, industrial, municipal and agricultural end-users.
All-terrain four-wheel material handlers are especially useful in rough
terrain environments and congested job sites and mill locations, where their
maneuverability and ability to raise, extend and lower payloads provide
significant advantages over more traditional material handling equipment, such
as cranes, straight-mast forklifts and elevators. LiftKing rough-terrain
variable reach material handlers are typically used by residential,
non-residential, military and non-military institutions, and building
contractors for lifting, transporting and placing a wide variety of materials at
their point of use or storage. The Company's various models of material handlers
have a lift capacity of 6,000 pounds to 75,000 pounds and can position payloads
up to 42 feet above the ground or up to 30 feet in front of the machine's
chassis. The versatility of these units allows users to lower overall costs by
substituting a single material handler for one or more other types of material
handling equipment, as well as for certain labor intensive material handling
tasks. The Company believes it manufactures one of the broadest product lines of
varied material handling equipment, for the North American market.
In 1993 the Company identified a niche in the steel mill industry.
Traditionally, molten steel was moved in steel mills by overhead cranes. The
steel industry has since been required to adapt to changing market conditions
requiring the mills to cut costs, produce larger quantities of steel and in turn
producing greater quantities of steel residuals (slag). Accordingly the
traditional crane method of moving slag to a dumping site was no longer
practical.
3
<PAGE>
<PAGE>
The Company's Slag Pot Carriers have the following features: (i) large
tires to enable the unit to move more quickly, (ii) hydraulic liquids in the
unit are fire retardant, (iii) the tires of the units are filled with fire
retardant material, and (iv) the driver's cab is self contained with an
extensive fire suppression system which may be activated within and without the
cab assembly. Additionally, the Company's Slag Pot Carriers have extensive fire
walls protecting the driver from the slag pot, with automatic louvers which
close to further protect the driver from spillage and spray during dumping. The
Company's Slag Pot Carriers have a pot capacity ranging from 300 to 1,000 cubic
feet of slag, and are priced ranging from $350,000 to $750,000.
The Company's elevating heavy pallet carriers ('Pallet Carriers') are
custom designed high capacity transport vehicles. The Company's pallet carriers
can transport a wide variety of materials such as scrap buckets, ladles, and
slag pots. LiftKing's Pallet Carriers can transport up to 700 tons of material
per pallet. Pallets are also used in the steel mill industry to transport,
coiled and finished steel products, steel booms and steel coils.
The Company's Pallet Carriers are designed to operate in extreme steel mill
conditions, similar to the Company's Slag Pot Carriers. The Company's Pallet
Carriers have the following features: (i) large tires to enable the unit to move
more quickly, (ii) hydraulic liquids in the unit are fire retardant, (iii) the
tires of the units are filled with fire retardant material, and (iv) the
driver's cab is self contained with an extensive fire suppression system which
may be activated within and without the cab assembly. Additionally, the
Company's Pallet Carriers can be manufactured with extensive fire walls
protecting the driver from the material being carried by the pallet. The
Company's Pallet Carriers have a transporting capacity of 700 tons of material
per pallet, and are priced ranging from $350,000 to $750,000.
The Company's military use material handlers transport heavy and light load
military equipment, supply equipment, and containers in a wide variety of
applications and environmental conditions. By incorporating specialized design
and manufacturing processes, the Company's military use equipment handlers are
able to operate in up to five feet of salt or fresh water. In situations where
docking facilities are not available for military and supply vessels, these
units provide the flexibility to maneuver offshore, load materials from offshore
platforms and ships, and transport them to the shore. These units are specially
designed and manufactured for combat conditions.
LiftKing sells and distributes most of its products commercially through
approximately 94 independent equipment dealers located in the United States and
Canada. Internationally, LiftKing markets and distributes its products through a
variety of arrangements with dealers and distributors in 10 countries, including
the United States, Canada, Mexico, Algeria, Chile, England, Indonesia, China,
Korea, and Colombia. To facilitate the sale of its products, LiftKing offers its
independent equipment dealers financing assistance in connection with the
purchase of the Company's products. Such assistance consists of limited, back-up
financing guarantees which benefit dealers by providing them the opportunity to
obtain attractive financing terms on the Company's products, which in turn
allows dealers to stock more units for sale or rental.
The Company continues to introduce new material handlers and low profile
designs which provide an exceptional combination of maneuverability, versatility
and stability. This new product development has allowed the Company to increase
its sales in the rapidly growing rough-terrain variable reach material handler
market.
The Company's executive offices are located at 7135 Islington Avenue,
Woodbridge, Ontario, Canada L4L 1V9. Its telephone number is (905) 851-3988. See
'Risk Factors' for a discussion of certain factors that should be considered in
evaluation of the Company and its business.
4
<PAGE>
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered........................... 1,250,000 shares of Common Stock and 1,500,000 Warrants to
purchase Common Stock at an exercise price of $4.50 per share.
The Common Stock and Warrants are offered and tradeable
separately and the Warrants are redeemable, and are exercisable
for four years commencing one year from the date of this
Prospectus. See 'Description of Securities'.
Offering Prices.............................. $4.00 per Share and $.15 per Warrant
Shares Outstanding Prior to Offering......... 4,400,000 Shares.
Shares Outstanding After Offering............ 5,650,000 Shares
Use of Proceeds.............................. The net proceeds of this Offering will be used for sales and
marketing, increased inventory of raw materials and finished
products, the establishment of a floor plan incentive for
existing dealer base, research and development, and for working
capital purposes.
Proposed Nasdaq SmallCap Market Symbols(1)... Common Stock -- LIFT Warrant -- LIFTW
Proposed Pacific Stock Exchange Symbols(1)... Common Stock -- LIFT
Warrant -- LIFTW
Proposed Boston Stock Exchange Symbols(1).... Common Stock -- LIFT
Warrant -- LIFTW
Risk Factors................................. An investment in the securities offered hereby involves a high
degree of risk and immediate substantial dilution of the book
value of the Common Stock and should be considered only by
persons who can afford the loss of their entire investment. See
'Dilution' and 'Risk Factors.'
</TABLE>
- ------------
(1) Although the Company intends to apply for inclusion of the Common Stock and
Warrants on The Nasdaq SmallCap Market, the Pacific Stock Exchange and the
Boston Stock Exchange, there can be no assurance that the Company's
securities will be included for quotation, or if so included that the
Company will be able to continue to meet the requirements for continued
quotation, or that a public trading market will develop or that if such
market develops, it will be sustained.
5
<PAGE>
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the more
detailed combined financial statements and notes thereto appearing elsewhere in
this Prospectus. The Companies maintain their books and records in Canadian
Dollars, but have reconciled such financial data to United States dollars (see
'Exchange Rate Data') and have prepared their combined financial statements
contained in this Prospectus in accordance with generally accepted accounting
and auditing standards in the United States. See 'Report of Independent
Auditors' and 'Combined Financial Statements'. All information should be read in
conjunction with the combined financial statements of the companies and the
notes contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TEN MONTHS ENDED
MAY 31, YEAR ENDED JULY 31,
-------------------------- -----------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Results:
Revenues........................ $17,608,177 $17,814,993 $20,092,782 20,252,059 $11,818,047
Net income...................... 1,265,776 1,373,502 1,435,244 625,396 336,970
Earnings per share before
extraordinary items........... 0.30 0.37 0.38 0.24 0.08
Extraordinary items per share... (0.01) (0.06) (0.05) (0.10) 0.00
Earnings per share after
extraordinary items........... 0.29 0.31 0.33 0.14 0.08
Weighted average number of
common shares outstanding..... 4,400,000 4,400,000 4,400,000 4,400,000 4,400,000
</TABLE>
<TABLE>
<CAPTION>
AS AT JULY 31,
-------------------------------------
1996 1995 1994
AS AT MAY 31, ---------- ----------- ----------
---------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
(UNAUDITED) (1)&(2) (3)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital........... $ 2,050,189 $ 2,046,367 $ 6,273,867 $5,409,191 $ 3,296,032 $2,308,795
Total assets.............. 10,137,038 8,983,380 13,210,880 9,098,296 13,906,032 6,382,909
Long-term debt............ 827,648 15,589 15,589 5,215,970 3,962,357 2,643,420
Total liabilities......... 8,281,596 6,553,042 6,553,042 8,252,595 13,753,644 5,556,154
Stockholders' equity...... 1,855,442 2,430,338 6,657,838 845,701 152,388 826,755
</TABLE>
- ------------
(1) The information in this table has been restated to reflect the pro-forma
financial position of Liftking Industries Inc., giving effect to
reorganization transactions completed in anticipation of the public
offering. See 'Capitalization' and the notes to the financial statements.
(2) Adjusted to give effect to the following:
(i) Exclude the Balance Sheet of Liftking Incorporated as of May 31, 1997
to reflect the exclusion of that currently inactive company from the
entities comprising the Liftking Industries Inc. group of companies.
(ii) Reflects the reduction of Common Stock and retained earnings resulting
from the subsequent purchase for cancellation of a portion of the
issued and outstanding shares of Liftmaster Limited and 463291 Ontario
Limited at their approximate fair market value.
(3) Reflects the issuance of the 1,250,000 Shares and 1,500,000 Warrants offered
hereby and the application of the net proceeds therefrom.
6
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RISK FACTORS
An investment in the securities offered hereby is speculative and involves
a high degree of risk and substantial dilution and should only be purchased by
investors who can afford to lose their entire investment. Prospective
purchasers, prior to making an investment, should carefully consider the
following risks and speculative factors, as well as other information set forth
elsewhere in this Prospectus, associated with this Offering, including the
information contained in the Financial Statements herein.
1. NO PRIOR PUBLIC MARKET; POTENTIAL LIMITED TRADING MARKET; POSSIBLE
VOLATILITY OF STOCK PRICE. Prior to this Offering, there has been no public
market for the Securities and there can be no assurance that an active trading
market in the Securities will develop or be maintained. In the absence of such a
market, an investor may find it more difficult to sell the Securities offered
hereby. The initial public offering price of the Common Stock and Warrants and
the exercise price of the Warrants were determined by negotiation between the
Company and the Underwriter, and may not be indicative of the market price for
such securities in the future, and does not necessarily bear any relationship to
the Company's assets, book value, net worth or results of operations of the
Company or any other established criteria of value. In addition, the stock
market in recent years has experienced extreme price and volume fluctuations
that have particularly affected the market prices of many smaller companies. The
trading price of the Securities is expected to be subject to significant
fluctuations in response to variations in quarterly operating results, changes
in analysts' earnings estimates, announcements of innovations by the Company or
its competitors, general conditions in the materials handling and equipment
moving industry and other factors. These fluctuations, as well as general
economic and market conditions, may have a material adverse effect on the market
price of the Company's Securities. See 'Underwriting -- Determination of Public
Offering Price,' 'Description of Securities' and 'Financial Statements.'
2. CONTROL BY MANAGEMENT. Upon completion of this Offering, officers and
directors of the Company will beneficially own, in the aggregate, and will have
the right to vote approximately 65.69% of the then issued and outstanding Common
Stock of the Company (approximately 63.59% if the Over-Allotment Option is
exercised in full). The Chairman and President of the Company will own
approximately 63% of the issued and outstanding Common Stock after the Offering.
Accordingly, such holders will be in a position to elect all of the directors
and thereby control the Company. See 'Principal Stockholders'.
3. BROAD DISCRETION IN APPLICATION OF PROCEEDS. Approximately $1,877,500 or
44% of the net proceeds of this Offering, have been allocated to working capital
of the Company, which funds will be utilized for general corporate purposes
including accounts payable and payroll. The allocation of proceeds described in
the 'Use of Proceeds' section represents the Company's best estimate of its
allocation based upon the current state of its business, operations and plans,
current business conditions and the Company's evaluation of its industry. Future
events, including problems, delays, expenses and complications which may be
encountered, changes in economic or competitive conditions and the results of
the Company's sales and marketing activities may make shifts in the allocation
of funds necessary or desirable. Management of the Company will have broad
discretion in the application of such proceeds. See 'Use of Proceeds.'
4. RELIANCE ON COMPONENT MANUFACTURERS. The Company is dependent on outside
suppliers for all of the subcomponent parts and raw materials necessary to
manufacture the Company's products. A shortage, delay in delivery, or lack of
availability of a given part or raw material could lead to manufacturing delays,
which could reduce sales until the problem is remedied. The Company is not
dependent upon any single supplier. The Company purchases some custom parts. The
failure of a vendor of one of these customized components could cause a lengthy
delay in production, resulting in a loss of revenues.
5. DEPENDENCE ON LARGE CUSTOMERS. Sales to the Company's major customer in
fiscal 1996 totaled $10,581,047 (52.7% of all sales). Sales to the Company's
major customer in fiscal 1995 totaled $12,557,578 (62% of all sales). During
fiscal 1994, sales to the Company's major customer totaled $4,879,245 (41.3% of
all sales).
7
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The dependence on major customers subjects the Company to significant
financial risks in the operation of its business should a major customer
terminate, for any reason, its business relationship with the Company. In such
event the financial condition of the Company may be adversely affected and the
Company may be required to obtain additional financing, of which there can be no
assurance. The Company has taken into account the decreasing military budget of
the United States. Currently less than 60% of the Company's revenues are derived
from the military and are expected to diminish as a percentage of sales.
6. DEFENSE INDUSTRY DOWNSIZING -- HISTORICAL DEPENDENCE ON GOVERNMENT
CONTRACTS. Recent world events have resulted in a decreased demand for defense
related products causing a general downsizing of the United States defense
industry. While the Company has changed its strategy for growth by a conversion
to primarily commercial business, there can be no assurance that it will be
completely successful in this objective.
7. LACK OF PRICE STABILITY. The Company's sales to the United States
military have historically occurred in a relatively stable price environment.
Pressure in defense spending may adversely affect prices and profit margins in
that market. While the Company believes that its emphasis on the commercial
market will help it to better manage such a change in the defense market, there
can be no assurance that it will be completely successful in this objective.
8. CYCLICALITY. The markets for the Company's products have historically
been cyclical. Because a majority of the Company's products are used in the
construction, steel and lumber industries, its sales, and therefore its results
of operations, are significantly dependent upon the general state of the
economy, regional economic conditions, interest rates and other factors
affecting residential and commercial building activities. During periods of
expansion in the economy, the Company generally has benefited from increased
demand for its products. Conversely, during recessionary times, the Company has
been adversely affected by declines in demand for such products. In addition,
sales to the equipment rental industry may be more cyclical than sales for
construction equipment generally. While the Company believes that increased
sales of its products to military, agricultural and industrial end-users may
mitigate to some extent the effects of cyclicality in the construction industry,
there can be no assurance that growth in the markets for the Company's products
will occur or that such growth will result in increased demand for the Company's
products. See 'Management's Discussion and Analysis of Results of Operations and
Financial Condition.' and 'Business.'
9. PRODUCT RECALL. From time to time, the Company discovers defects in
product design for existing products which require it to take steps to correct
or retrofit at the Company's expense, previously sold products.
10. DEPENDENCE ON CERTAIN SUPPLIERS. Certain of the components included in
the Company's products are obtained from a single supplier or a limited number
of suppliers. Disruption or termination of supplier relationships could have an
adverse effect on the Company's operations. The Company believes that
alternative sources could be obtained, if necessary, but the inability to obtain
sufficient quantities of the components or the need to develop alternative
sources, if and as required in the future, could result in delays or reductions
in product shipments, or higher purchasing costs, which in turn could have an
adverse effect on the Company's results of operations and customer
relationships. In an effort to mitigate these risks, the Company, based upon
sales trends and known future requirements, inventories certain parts and
components which are required in assembly of the Company's end products. See
'Business -- Manufacturing and Raw Materials.'
11. IMPACT OF CHANGING STEEL PRICES. A principal raw material used by the
Company in its manufacturing operation is steel. The steel industry as a whole
is cyclical, and steel prices are volatile due to numerous factors which are
beyond the control of the Company. This volatility can significantly affect the
Company's raw materials costs. Competitive conditions determine the extent to
which steel price increases can be passed on to the Company's customers.
Historically, the Company has been able to pass on increases in steel prices to
the Company's customers. If the Company is unable to pass some or all of the
future steel price increases on to its customers, the Company's financial
performance could be adversely affected.
8
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12. ENVIRONMENTAL COMPLIANCE. Like many manufacturing companies, the
Company is subject to various environmental laws, including, but not limited to,
those governing air emissions, water discharges, and the storage, handling,
disposal and remediation of petroleum and hazardous substances. The Company has
in the past and likely will in the future incur expenditures in order to ensure
compliance with such environmental laws. If environmental laws become more
stringent, the Company's environmental capital expenditures and costs for
environmental compliance may increase in the future. In addition, due to the
possibility of unanticipated factual or regulatory developments, the amount and
timing of future environmental expenditures could vary substantially from those
currently anticipated.
13. RISK OF CLAIMS FOR PRODUCT LIABILITY. Due to the nature of its
products, the Company may be subject to significant claims of product liability.
The Company currently maintains product liability insurance with an annual
aggregate limit of $4,000,000 (Canadian). There can be no assurance that
proceeds available under the Company's insurance policy would be adequate to
cover potential product liability claims. A successful claim against the Company
in excess of the Company's insurance coverage could have a material adverse
affect on the financial results of the Company. However, if claims arise as a
result in defects in any of the raw material components of the Company's units,
the Company would have the right to seek indemnification from the suppliers of
the raw material components. To date, the Company's product liability costs for
any claim have not exceeded its insurance amount.
14. DILUTION. This Offering involves immediate substantial dilution to
investors of $2.82 per share (or approximately 70.5% of the per-Share Offering
price of $4.00), representing the difference between the pro forma net tangible
book value per Share immediately after the completion of this Offering and the
Offering price per Share. See 'Dilution.'
15. DEPENDENCE UPON MANAGEMENT AND TECHNICAL PERSONNEL. The success of the
Company is highly dependent upon the continued services of Louis Aldrovandi, the
Company's President and Chief Executive Officer and Mark Aldrovandi, the
Company's Vice President and General Manager. The Company has entered into 5
year employment agreements with each of Louis Aldrovandi and Mark Aldrovandi.
The Company is in the process of obtaining key man insurance on the lives of
Louis and Mark Aldrovandi in the individual amounts of $1,000,000. There can be
no assurances that the Company will be able to replace Louis or Mark Aldrovandi
in the event either of their services become unavailable or that the proceeds of
such insurance would be adequate to compensate the Company for the loss of
either of their services. See 'Management.'
Due to the specialized nature of the Company's business, the Company is
highly dependent on the continued service of, and on its ability to attract and
retain, qualified technical, engineering and marketing personnel, particularly
highly skilled engineers involved in the development of new products and
processes and test technicians involved in the manufacture and enhancement of
existing products. The loss of such persons, as well as the failure to recruit
additional key technical personnel in a timely manner, would have a material
adverse effect on the Company's business, financial condition and results of
operations.
16. PROPRIETARY TECHNOLOGY; RISK OF THIRD PARTY CLAIMS OF INFRINGEMENT. The
Company's ability to compete successfully and achieve future revenue growth will
depend, in part, on its ability to protect its proprietary technology and
operate without infringing upon the rights of others. LiftKing Incorporated
Inc., an affiliate of the Company, is currently a party to pending lawsuit for
patent infringement. Such litigation or claims could result in substantial
costs, and diversion of resources and could have a material adverse effect on
the Company's business, financial condition, and results of operations. The
failure of the Company to protect its proprietary technology could have a
material adverse effect on its business, financial condition and results of
operations. See 'Business -- Legal Proceedings.'
17. TECHNOLOGICAL CHANGE. Certain of the Company's products are subject to
changing technology which could place the Company at a competitive disadvantage
relative to alternative products introduced by competitors. There can be no
assurance that the Company will be able to achieve the technological advances or
introduce new products that may be necessary to remain competitive.
18. DEPENDENCE ON PRINCIPAL FACILITY. The Company's operations are
conducted principally at one facility. Although the Company has not experienced
any material disruption of operations at its key facility in Woodbridge,
Ontario, Canada, in the event that operations were disrupted as a result of
9
<PAGE>
<PAGE>
equipment failures, natural disasters, work stoppages or other reasons, the
Company's business and results of operations could be adversely affected. The
Company maintains property damage insurance which it believes to be adequate to
provide for reconstruction of its facilities and equipment, as well as business
interruption insurance to mitigate losses resulting from any production shutdown
caused by an insured loss. However, no assurance can be given that such
insurance will be adequate to cover losses that may occur.
19. COMPETITION. In the material handling industry, the market for the
Company's products is highly competitive and relatively fragmented, with a large
number of competitors. Many of the Company's competitors in the material
handling industry are larger than the Company and have greater financial,
marketing and technical resources. In addition, the Company may encounter
competition from new market entrants. There can be no assurance that competitors
will not take actions, including developing new products, which could adversely
affect the Company's sales and operating results.
20. NO DIVIDENDS. The Company has not paid any dividends on its Common
Stock since its inception and does not intend to pay dividends on its Common
Stock in the foreseeable future. Any earnings which the Company may realize in
the foreseeable future will be retained to finance the growth of the Company.
See 'Dividend Policy.'
21. NASDAQ LISTING AND CONTINUED LISTING REQUIREMENTS. Under the recently
adapted rules of the National Association of Securities Dealers, Inc ('NASD'),
in order to qualify for initial quotation of securities on The Nasdaq SmallCap
Market, a company, among other things, must have at least $4,000,000 in net
tangible assets, 1,000,000 shares in the public float, $5,000,000 in market
value of public float, and a minimum bid price of $4.00 per share. Although the
Company may upon the completion of this Offering qualify for initial quotation
of its securities on The Nasdaq SmallCap Market, for continued listing on The
Nasdaq SmallCap Market, a company, among other things, must have $2,000,000 in
net tangible assets, 500,000 shares in the public float, $1,000,000 in market
value of public float and a minimum bid price of $1.00 per share. If the Company
is unable to satisfy the requirements for quotation on The Nasdaq SmallCap
Market, trading, if any, in the Common Stock and Warrants offered hereby (other
than trading on the Pacific Exchange) would be conducted in the over-the-counter
market in what are commonly referred to as the 'pink sheets' or on the NASD OTC
Electronic Bulletin Board. As a result, an investor may find it more difficult
to dispose of, or to obtain accurate quotations as to the price of, the
securities offered hereby. The above-described rules may materially adversely
affect the liquidity of the market for the Company's securities. See
'Underwriting.'
22. PENNY STOCK REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON
MARKETABILITY OF SECURITIES. The Securities and Exchange Commission (the
'Commission') has adopted regulations which generally define a 'penny stock' to
be any equity security that has a market price (as defined) of less than $5.00
per share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Since it is intended that the shares of Common Stock and Warrants
offered hereby will be authorized for quotation on The Nasdaq SmallCap Market,
the Pacific Exchange and the Boston Stock Exchange, such securities will
initially be exempt from the definition of 'penny stock'. If the shares of
Common Stock and Warrants offered hereby are removed from listing by The Nasdaq
SmallCap Market, the Pacific Stock Exchange and the Boston Stock Exchange at any
time following the Effective Date, the Company's Common Stock and Warrants may
become subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the Commission relating to the penny stock
market. The broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the
10
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'penny stock' rules may restrict the ability of broker-dealers to sell the
Company's securities and may affect the ability of purchasers in this Offering
to sell the Company's securities in the secondary market and the price at which
such purchasers can sell any such securities.
23. CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. The Company will be able to issue shares of its Common Stock upon
exercise of the Warrants only if there is then a current prospectus relating to
such Common Stock and only if such Common Stock is qualified for sale or exempt
from qualification under applicable state securities laws of the jurisdictions
in which the various holders of the Warrants reside. The Company has undertaken
and intends to file and keep current a prospectus which will permit the purchase
and sale of the Common Stock underlying the Warrants, but there can be no
assurance that the Company will be able to do so. Although the Company intends
to seek to qualify for sale the shares of Common Stock underlying the Warrants
in those states in which the securities are to be offered, no assurance can be
given that such qualification will occur. The Warrants may be deprived of any
value and the market for the Warrants may be limited if a current prospectus
covering the Common Stock issuable upon the exercise of the Warrants is not kept
effective or if such Common Stock is not qualified or exempt from qualification
in the jurisdictions in which the holders of the Warrants then reside. See
'Underwriting.'
24. POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants may be
redeemed by the Company at any time commencing (i) twelve (12) months from the
date of this Prospectus at a redemption price of $.10 per Warrant, with the
consent of the Underwriter, or (ii) eighteen (18) months from the date of this
Prospectus without the consent of the Underwriter, upon not less than 30 days
prior written notice if the average closing price or bid price of the Common
Stock as reported by the principal exchange on which the Common Stock is traded,
the Nasdaq SmallCap Market or the National Quotation Bureau, Incorporated, as
the case may be, equals or exceeds 250% of the then exercise price of the
Warrants on the ten (10) consecutive trading days ending three (3) days prior to
the date on which notice of redemption is given. Notice of redemption of the
Warrants could force the holders to exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for them to do so, to sell the
Warrants at the current market price when they might otherwise wish to hold the
Warrants, or to accept the redemption price which would be substantially less
than the market value of the Warrants at the time of redemption. See
'Description of Securities -- Warrants.'
25. RESTRICTIONS ON MARKET MAKING ACTIVITIES DURING WARRANT SOLICITATION
MAY AFFECT LIQUIDITY OF SECURITIES. Although they have no legal obligation to do
so, the Underwriter from time to time may act as market makers and may otherwise
effect and influence transactions in the Company's securities. However, there is
no assurance that the Underwriter will continue to effect and influence
transactions in the Company's securities. The prices and liquidity of the
Company's securities may be significantly affected by the degree, if any, of the
Underwriter's participation in the market. The Underwriter may voluntarily
discontinue such participation at any time. Further, the market for, and
liquidity of, the Company's securities may be adversely effected by the fact
that a significant amount of the securities may be sold to customers of the
Underwriter.
To the extent that the Underwriter solicits the exercise of the Warrants,
the Underwriter may be prohibited pursuant to the requirements of Regulation M
under the Exchange Act from engaging in market making activities during such
solicitation and for a period of up to five days preceding such solicitation. As
a result, the Underwriters may be unable to continue to provide a market for the
Company's securities during certain periods while the Warrants are exercisable.
The Underwriter is not obligated to act as a marketmaker. See 'Underwriting.'
26. ADDITIONAL AUTHORIZED SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE MAY
ADVERSELY AFFECT THE MARKET. The Company is authorized to issue 50,000,000 of
shares of its Common Stock, no par value. If all of the 1,250,000 Shares offered
hereby are sold, there will be a total of 5,650,000 shares of Common Stock
issued and outstanding. However, the total number of shares of Common Stock
issued and outstanding does not include the exercise of up to 1,500,000 Warrants
to purchase up to 1,500,000 shares of Common Stock, 187,500 Shares included in
the Over-Allotment Option, 225,000 Warrants to purchase up to 225,000 shares of
Common Stock included in the Over-Allotment Option, the option granted to the
Representative to purchase up to 125,000 Shares and 150,000 Warrants to purchase
150,000 shares of Common Stock in connection with this offering, and 750,000
shares of Common Stock
11
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<PAGE>
issuable upon exercise of options that may be granted pursuant to the Incentive
Option Plan (none of which have been granted). As a result, any issuance of
additional shares of Common Stock may cause current shareholders of the Company
to suffer significant dilution which may adversely affect the market. The
Company has no present plans to issue any shares of Common Stock. The Company
has agreed with the Underwriter that it will not issue any of its capital stock
for a period of thirty six months from the Effective Date without the prior
written consent of the Underwriter.
27. SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET.
Immediately prior to the Effective Date, the Company will have 4,400,000 shares
of its Common Stock issued and outstanding all of which are 'restricted
securities.' All of such Shares may be sold pursuant to Rule 144 as described
below commencing August 1998. The directors of the Company have agreed not to
sell, assign or transfer the securities of the Company owned by them for a
period of thirty six (36) months from the date of this Prospectus without the
prior consent of the Underwriter.
Rule 144 provides, in essence, that a person holding 'restricted
securities' for a period of one year may sell only an amount every three months
equal to the greater of (a) one percent of the Company's issued and outstanding
shares, or (b) the average weekly volume of sales during the four calendar weeks
preceding the sale. The amount of 'restricted securities' which a person who is
not an affiliate of the Company may sell is not so limited, since non-affiliates
may sell without volume limitation their shares held for two years if there is
adequate current public information available concerning the Company. In such an
event, 'restricted securities' would be eligible for sale to the public at an
earlier date. The sale in the public market of such shares of Common Stock may
adversely affect prevailing market prices of the Common Stock.
12
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ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS
The Company and its officers, directors, and auditors are residents of
Canada and substantially all of the assets of the Company and of such persons
are or may be located outside the United States. As a result, it may be
difficult for investors to effect service of process within the United States
upon the Company or such persons, or to enforce against them judgments obtained
in United States courts predicated upon the civil liability provisions of the
Securities Act. The Company has appointed Bernstein & Wasserman, LLP as its
agent of process in any action against the Company in any federal court or court
of the State of New York arising out of the offering made hereby by the Company
or in connection with any purchase of sale herewith. The Company believes that a
judgment of a United States court predicated solely upon civil liability under
the Securities Act would probably be enforceable in Canada if the United States
court in which the judgment was obtained had a basis for jurisdiction in the
matter that was recognized by a Canadian court for such purposes. However, there
is substantial doubt whether an action could be brought in Canada in the first
instance on the basis of liability predicated solely upon such laws. If
investors have questions with regard to these issues, they should seek the
advice of their individual counsel. The Company has also been informed that,
pursuant to the Currency Act (Canada), a judgment by a court in any Province of
Canada may only be awarded in Canadian currency. Pursuant to the provisions of
the Courts of Justice Act (Ontario), however, a court in the Province of Ontario
shall give effect to the manner of conversion to Canadian currency of an amount
in a foreign currency, where such manner of conversion is provided for in an
obligation enforceable in Ontario.
CURRENCY PRESENTATION
The Company maintains its books of account in Canadian dollars. For the
convenience of the reader, and except as otherwise indicated, all of the dollar
amounts stated in this Prospectus have been translated into United States
dollars (U.S.$) at the currency conversion rate in effect at the applicable date
presented.
EXCHANGE RATE OF THE CANADIAN DOLLAR
The Company maintains its books of account in Canadian dollars. Since June
1, 1970, the Government of Canada has permitted a floating exchange rate to
determine the value of the Canadian dollar against the U.S. dollar. The annual
range of spot rates for the Canadian dollar for the five years ended November
30, 1996, was as follows (expressed in U.S. dollars):
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------
1992 1993 1994 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
High U.S.$................................................... .8848 .8055 .7733 .7512 .7472
Low U.S.$.................................................... .8032 .7463 .7174 .7105 .7274
</TABLE>
On , 1997, the noon spot rate as reported by Bank of
Canada was U.S.$1.00 -- Can. .
13
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,250,000 shares and
1,500,000 Warrants offered hereby are estimated to be $4,227,500 (after
deducting approximately $522,500 in underwriting discounts, and other expenses
of this Offering estimated to be $475,000, which includes the Underwriter's
non-accountable expense allowance of $156,750) (but not considering any exercise
of the Over-Allotment Option, or the Underwriter's Purchase Option, the proceeds
of which would be added to working capital). The Company, based upon all
currently available information, intends to utilize such proceeds approximately
as follows:
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS AMOUNT NET PROCEEDS
- ---------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Sales and marketing(1).......................................... $ 300,000 7.1%
Hire additional sales, operations and administrative
personnel(2).................................................. 300,000 7.1
Equipment and leaseholds(3)..................................... 750,000 17.7
Research and development(4)..................................... 1,000,000 23.7
Working capital(5).............................................. 1,877,500 44.4
----------- ------
$4,227,500 100.0%
----------- ------
----------- ------
</TABLE>
- ------------
(1) The net proceeds allocated to sales and marketing efforts are expected to be
applied towards the promotion of the Company's products in export markets,
including the United States and Mexico, over the next 12 months, and
establishing a floor plan incentive for existing dealer base. The proceeds
are also intended to be applied to travel, trade shows, promotional
materials and the expansion of the distribution network.
(2) The Company anticipates hiring additional sales, operations and
administrative employees and has allocated these net proceeds to fund
certain incremental costs over the next 12 months.
(3) The net proceeds allocated to equipment and leaseholds are in addition to
sustaining capital reinvestments and for the expansion and improvement of
the Company's production capacity over the next 12 months.
(4) The net proceeds allocated to research and development are intended for the
development of new and modified products for existing and identified
potential new export markets over the next 12 months.
(5) The net proceeds allocated to working capital includes funds for increased
inventory of raw materials and finished products, and general corporate
purposes including possible strategic acquisitions, although the Company has
not identified any definite acquisition candidate.
------------------------
The amounts set forth above are estimates. Should a reapportionment or
redirection of funds be determined to be in the best interests of the Company,
the actual amount expended to finance any category of expenses may be increased
or decreased by the Company's Board of Directors, at its discretion.
The Company believes that the proceeds of this Offering will enable the
Company to increase its annual revenues through the expansion of its business
and development of new product lines. As a result, the Company believes that the
net proceeds of this Offering, together with revenues generated from operations,
will be sufficient to conduct the Company's operations for at least twelve (12)
months. The terms of the underwriting agreement between the Company and the
Underwriter restrict the Company from entering into any acquisition or merger of
the Company or obtaining additional capital financing, without the prior
approval of the Underwriter, for the issuance of additional equity securities
for a period of three (3) years, in either public or private offerings, which
approval may not be unreasonably withheld. The underwriting agreement does not
prevent the Company from seeking bank financing although there can be no
assurance that such financing will be available on commercially reasonable
terms.
14
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<PAGE>
To the extent that the Company's expenditures are less than projected
and/or the proceeds of this Offering increase as a result of the exercise by the
Underwriter of its Over-Allotment Option, the resulting balances will be
retained and used for general working capital purposes. Conversely, to the
extent that such expenditures require the utilization of funds in excess of the
amounts anticipated, additional financing may be sought from other sources, such
as debt financing from financial institutions, although there can be no
assurance that such additional financing, if available, will be on terms
acceptable to the Company. The net proceeds of this Offering that are not
expended immediately may be deposited in interest bearing accounts, or invested
in government obligations or certificates of deposit.
15
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<PAGE>
DILUTION
As of May 31, 1997, the net tangible book value of the Company was
$2,430,338 or $0.55 per share. 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.
Assuming the sale of the Securities offered hereby of 1,250,000 shares of Common
Stock and 1,500,000 Warrants (at an assumed initial public offering price of
$4.00 per share and $0.15 per Warrant) (less underwriting discounts and
commissions and estimated expenses of this Offering) the net tangible book value
of the Company at May 31, 1997 would have been $6,657,838 or $1.18 per share,
representing an immediate increase in net tangible book value of $0.63 per share
to the existing stockholders and an immediate dilution of $2.82 per share
(70.5%) to new investors.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
<TABLE>
<S> <C> <C>
Initial public offering price per share....................................... $4.00
Net tangible book value retained per share before Offering.................... 0.55
Increase per share attributable to new investors.............................. 0.63
----
As adjusted net tangible book value after Offering............................ 1.18
-----
Dilution to new investors..................................................... $2.82
-----
-----
</TABLE>
The following table sets forth, at May 31, 1997, with respect to the
Company's existing stockholders, and new investors, a comparison of the number
of shares of Common Stock acquired from the Company, the amount and percentage
of total consideration paid and the average price per share of Common Stock (at
an assumed initial public offering price of $4.00 per share).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ 4,400,000 77.88% $2,430,338 32.7% $0.55
New investors........................ 1,250,000 22.12 5,000,000 67.3 4.00
--------- ------- ---------- -------
Total...................... 5,650,000 100% $7,430,338 100%
--------- ------- ---------- -------
--------- ------- ---------- -------
</TABLE>
16
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of May
31, 1997 on an as adjusted basis to give effect to the sale of 1,250,000 shares
of Common Stock and 1,500,000 Warrants offered by the Company (at an assumed
public offering prices of $4.00 per share and $0.15 per Warrant) in this
Offering, and the application of the estimated net proceeds to the Company from
this Offering. This table should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MAY 31, 1997
-----------------------------------------------
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
----------- ------------ --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Long-term debt................................................... $ 827,848 $ 15,589 $ 15,589
----------- ------------ --------------
Stockholders' equity:
Common Stock, no par value:
Issued and outstanding -- 4,400,000 (1a), 4,400,000 (1b)
and 5,650,000 shares, respectively..................... 310 150 4,227,650
Foreign currency translation adjustment..................... (86,611) (86,611) (86,611)
Retained earnings........................................... 1,941,744 2,516,799 2,516,799
----------- ------------ --------------
Total shareholders' equity........................ 1,855,443 2,430,338 6,657,838
----------- ------------ --------------
Total capitalization.............................. $ 2,683,091 $2,445,927 $6,673,427
----------- ------------ --------------
----------- ------------ --------------
</TABLE>
- ------------
(1) (a) Represents the exchange of the 287 Shares in the existing companies
(excluding LiftKing Incorporated) for the 4,400,000 Shares in the listed
Company. Does not include (750,000) shares of Common Stock provided for
issuance under the company's Stock Option Plan.
(b) Exclusion of LiftKing Incorporated on a pro-forma basis and the purchase
and cancellation of transferred shares by Liftmaster Limited and 463291
Ontario Limited will not change the total number of shares received by
the existing stockholders.
(2) Adjusted to give the following effects:
(i) Exclusion of the Balance Sheet of LiftKing incorporated as of May 31,
1997 to reflect the exclusion of that currently inactive company from
the entities comprising the LiftKing Industries Inc. group of
companies.
(ii) Reflects the reduction of Common Stock and retained earnings resulting
from the subsequent purchase for cancellation of a portion of the
issued and outstanding shares of Liftmaster Limited and 463291 Ontario
Limited at their approximate fair market values.
(3) Gives effect to the sale of the Units offered hereby and the receipt of
$4,227,500 of net proceeds therefrom.
DIVIDEND POLICY
Holders of the Company's Common Stock are entitled to dividends when, as
and if declared by the Board of Directors out of funds legally available
therefore. The Company has not in the past and does not currently anticipate the
declaration or payment of any dividends in the foreseeable future. The Company
intends to retain earnings, if any, to finance the development and expansion of
its business. Future dividend policy will be subject to the discretion of the
Board of Directors and will be contingent upon future earnings, if any, the
Company's financial condition, capital requirements, general business conditions
and other factors. Therefore, there can be no assurance that any dividends of
any kind will ever be paid.
17
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<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the more
detailed combined financial statements and notes thereto appearing elsewhere in
this Prospectus. The Companies maintain their books and records in Canadian
Dollars, but have reconciled such financial data to United States dollars (see
'Exchange Rate Data') and have prepared their combined financial statements
contained in this Prospectus in accordance with generally accepted accounting
and auditing standards in the United States. See 'Report of Independent
Auditors' and 'Combined Financial Statements'. All information should be read in
conjunction with the combined financial statements of the companies and the
notes contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TEN MONTHS ENDED
MAY 31, YEAR ENDED JULY 31,
-------------------------- -----------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Results:
Revenues........................ $17,608,177 $17,814,993 $20,092,782 20,252,059 $11,818,047
Net income...................... 1,265,776 1,373,502 1,435,244 625,396 336,970
Earnings per share before
extraordinary items........... 0.30 0.37 0.38 0.24 0.08
Extraordinary items per share... (0.01) (0.06) (0.05) (0.10) 0.00
Earnings per share after
extraordinary items........... 0.29 0.31 0.33 0.14 0.08
Weighted average number of
common shares outstanding..... 4,400,000 4,400,000 4,400,000 4,400,000 4,400,000
</TABLE>
<TABLE>
<CAPTION>
AS AT MAY 31, AS AT JULY 31,
--------------------------------------- -------------------------------------
ACTUAL PRO FORMA AS ADJUSTED 1996 1995 1994
----------- ----------- ----------- ---------- ----------- ----------
(UNAUDITED) (1)&(2) (3)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital........... $ 2,050,189 $ 2,046,367 $ 6,273,867 $5,409,191 $ 3,296,032 $2,308,795
Total assets.............. 10,137,038 8,983,380 13,210,880 9,098,296 13,906,032 6,382,909
Long-term debt............ 827,648 15,589 15,589 5,215,970 3,962,357 2,643,420
Total liabilities......... 8,281,596 6,553,042 6,553,042 8,252,595 13,753,644 5,556,154
Stockholders' equity...... 1,855,442 2,430,338 6,657,838 845,701 152,388 826,755
</TABLE>
- ------------
(1) The information in this table has been restated to reflect the pro-forma
financial position of Liftking Industries Inc., giving effect to
reorganization transactions completed in anticipation of the public
offering. See 'Capitalization' and the notes to the financial statements.
(2) Adjusted to give effect to the following:
(i) Exclude the Balance Sheet of Liftking Incorporated as of May 31, 1997
to reflect the exclusion of that currently inactive company from the
entities comprising the Liftking Industries Inc. group of companies.
(ii) Reflects the reduction of Common Stock and retained earnings resulting
from the subsequent purchase for cancellation of a portion of the
issued and outstanding shares of Liftmaster Limited and 463291 Ontario
Limited at their approximate fair market value.
(3) Reflects the issuance of the 1,250,000 Shares and 1,500,000 Warrants offered
hereby and the application of the net proceeds therefrom.
18
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This management's discussion and analysis for LiftKing and all of its
businesses is supplemental to the combined financial statements and related
notes for the years ended July 31, 1996, 1995 and 1994 and for the ten month
interim periods ended May 31, 1997 and 1996 contained in this Prospectus. The
financial statements were prepared in accordance with generally accepted
accounting principles (GAAP) in the United States and all amounts herein are
expressed in U.S. dollars, unless otherwise noted.
OVERVIEW
LiftKing's traditional customer base during the 1980's was from the
construction industry. As the recession took effect in Canada from the late
1980's through the early 1990's, this market contracted considerably and sales
were negatively affected.
In order to turn around the Company's fortunes, management embarked on an
intense and costly research and development ('R&D') phase, beginning at the end
of the 1980's, geared to diversifying the Company's product offering and
reducing risk to business cycles.
The initial R&D focus was with respect to larger, more specialized
materials handlers suitable for use by the military in various climates and
terrain. These efforts succeeded in rebuilding revenues to earlier levels. In
1995, the penetration into the military market increased further, with
additional product lines being generated by the R&D effort. On a very limited
basis, the Company began to develop and market heavy pallet transporters and
liquid steel and slag carriers used in the production of steel. Although the
market is limited and specialized, the per unit revenue is very high. Given the
high development cost and up front investment in inventory required, the Company
has moved carefully into this market. As a result of the new product lines, the
Company's revenues reached record levels in 1995 and profits began to grow more
rapidly.
In 1996, overall revenues were substantially the same as in 1995, but
operating income more than doubled. The increased profits were attributable to
the increased sales of higher profit margin products whose development costs
were incurred and expensed in previous periods. 1996 also saw an improvement in
the mix of the Company's sales, with a reduced dependency on a particular market
segment.
In 1997, the Company has experienced a resurgence in demand from the
construction industry. This demand has helped to offset a continuing decline in
the military market. As a result, revenues remain on a par with 1996 and 1995.
Despite the lack of revenue growth, profitability remains strong.
For 1998, the Company is optimistic that it will continue to capitalize on
strong demand from the construction and steel industries. In addition to
continuing development of product for the steel industry, the Company is under
contract to develop a 400 ton transporter for the shipbuilding industry. Older
product lines are being modernized to remain industry leaders in engineering and
performance. Management believes that after a period of budget cuts, the
military has pent-up demand that should result in more sales orders from this
segment than has been obtained in the recent period.
RESULTS OF OPERATIONS
TEN MONTHS ENDED MAY 31, 1997 COMPARED TO TEN MONTHS ENDED MAY 31, 1996
Revenues for the ten months ended May 31, 1997 were $17,608,177, a 1.2%
decrease from prior year revenues of $17,814,993. The decrease reflects the
increase in sales to the construction industry being more than offset by
reductions in sales to the military.
Gross profit for the ten months ended May 31, 1997 were 21.5% of revenues,
a significant 1.1% point improvement as compared to the 20.4% margin achieved in
the comparative 1996 period. This increase was achieved due to improved
production efficiency and the fact that a larger portion of sales were of
products for which the related development costs had been incurred in the prior
years.
19
<PAGE>
<PAGE>
Selling expenses increased $18,000 from 1996 to 1997, reflecting increased
travel expenses. Administrative expenses for the ten months ended May 31
increased by $303,000 from 1996 to 1997. Approximately $300,000 of this increase
is due to increased compensation declared to the senior management of the
companies in recognition of the profit levels achieved year to date and in the
prior fiscal year.
Income from operations decreased by approximately $159,778 to $2,417,746
for the ten months ended May 31, 1997 versus $2,577,524 in the comparative 1996
period. Excluding the additional $300,000 management compensation noted above,
income from operations would have increased by approximately $140,000.
Interest expense for the period increased by approximately $73,000 from
1996, reflecting higher average interest bearing loan balances owing to the
affiliated company during the ten months ended May 31, 1997 versus the
comparative period.
In the current period there were no losses in LiftKing Incorporated
relating to its mortgage portfolio as compared to a loss in the comparative
period of approximately $244,000. The ongoing litigation costs in that company
were approximately $53,000 versus $92,000 in the comparative period. These items
are reported as extraordinary items, net of related tax effects (see discussion
below regarding July 31, 1996, 1995 and 1994 fiscal years).
Income before income taxes for the ten month period ended May 31, 1997 was
$1,917,842, an increase of $50,564 from the $1,867,278 in the comparative
period. However, an increase in the Company's effective income tax rate from
26.4% in 1996 to approximately 34% in 1997 more than offset this increase.
Income taxes (including the portion attributable to extraordinary items) for the
ten months ended May 31, 1997 were $652,066, an increase of $158,290 over the
comparative period. The increase in the tax rate is due to the fact that the
benefits of certain tax losses and other incentive deductions that had
accumulated over several years, were fully utilized by the Company in 1996. The
effective tax rate for the current period is based on the Company's current
statutory rate.
Net earnings decreased by $107,726 to $1,265,776 or $0.29 per share for the
ten months ended May 31, 1997 versus $1,373,502 or $0.31 per share in the
comparative 1996 period.
FISCAL YEAR ENDED JULY 31, 1996 COMPARED TO FISCAL YEARS ENDED JULY 31, 1995 AND
1994
Revenues for the year ended July 31, 1996 were $20,092,781, a 0.8% decrease
from prior year revenues of $20,252,060, which were, in turn, a 71.4% increase
over 1994 revenues of $11,818,047. The increase from 1994 to 1995 reflected 70%
growth in sales to the military of several products designed specifically for
that market, as well as an over 400% increase in sales in the commercial and
construction sectors. In 1996, sales to the military declined 18.5% from the
previous year; however increases in all other product lines mostly offset this
decrease in sales dollars.
Gross profit for the years ended July 31, 1996, 1995 and 1995 were
$3,968,786, $3,288,305 and $1,675,782, respectively. The $1,612,523 increase
from 1994 to 1995 is attributable to the 71.4% sales increase, as well as a 2%
point improvement in the gross profit margin. The improvement reflects the
improved absorption of manufacturing overhead and research and development costs
included in the cost of sales. In 1996, despite the slight decline in overall
sales, gross profit increased an additional $680,481. This increase was achieved
due to improved production efficiency and the fact that a larger portion of
sales were of products for which the related development costs had been incurred
in the prior years.
Selling expenses for the years ended July 31, 1996, 1995 and 1994 were
$287,421, $263,423 and $248,710, respectively. The year to year increases in
each case are due to the increasing level of travel expenditures incurred to
cover expanding export markets.
Administrative expenses for the years ended July 31, 1996, 1995 and 1994
were $774,654, $1,282,154 and $640,285, respectively. The increase from 1994 to
1995 reflects a $508,000 management bonus declared in 1995 versus none in 1994
or 1996, as well as general increases in administrative staff and office
expenses to support the 71.4% increased level of sales. Excluding the impact of
the bonus, the 1996 administrative expenses are consistent with the prior year.
20
<PAGE>
<PAGE>
Excluding the 1995 bonus of $508,000, the comparative income from
operations was $2,747,300, $2,142,416 and $673,397 for the years ended July 31,
1996, 1995 and 1994, respectively. The profit increase in 1995 versus 1994 is
due to the year to year sales and related gross profit increase. 1996 profits
increased over 1995 due to the higher profit per unit sales in 1996 versus 1995.
Interest expense for the period increased from $230,072 in 1994 to $358,012
in 1995 and $442,030 in 1996. The increases are a result of the increase in
interest bearing loans from an affiliated company over that period.
In reporting periods prior to those presented here, LiftKing Incorporated
had invested surplus funds in a portfolio of mortgages and notes receivable. As
property values dropped in Canada, these assets became impaired and write-downs
were recorded for the estimated losses. As the losses pertain to non-operating
assets and given the fact the Company has not invested material amounts in such
assets for a number of years, the losses have been classified as extraordinary.
Such losses, before related tax effects, were $243,921, $152,813 and $37,133 in
1996, 1995 and 1994, respectively. In future, it is management's intention that
it will focus on the Company's core businesses only and will not utilize any
retained earnings in future for the purposes of investing in assets unrelated to
operations.
LiftKing Incorporated is defendant in a lawsuit with respect to a patent
infringement claim. This is the only such claim against the combined group of
companies and the magnitude of the costs associated with the claim is material.
LiftKing Incorporated has obtained judgement in its favor in this case, however,
the claimant continues to appeal. As a result of the isolated nature and
magnitude of this claim, the Company has classified the costs associated with
the claim as an extraordinary items. Such costs, before related tax effects,
were $110,132, $362,976 and $0 in 1996, 1995 and 1994, respectively.
Income before income taxes for the years ended July 31, 1996, 1995 and 1994
was $1,951,216, $760,614 and $406,192, respectively. As the profits of the
Company increased, an increasing proportion of the profits became subject to a
higher marginal tax rate. As a result, the overall effective tax rate climbed
from 17.0% in 1994 to 17.8% in 1995 and then 26.4% in 1996. The 1996 tax rate
would have been higher had it not been for the fact that the benefits of certain
tax losses and other incentive deductions that had accumulated over several
years, were fully utilized by the Company in 1996.
Net earnings for the year ended July 31, 1996 was $1,435,244 or $0.33 per
share. This is a 129% increase over the 1995 net earnings of $625,397 or $0.14
per share. The 1995 results were an 86% improvement over the 1994 fiscal year
net earnings, which amounted to $336,969 or $0.08 per share.
LIQUIDITY AND CASH RESOURCES
The Company currently maintains a $5,000,000 Canadian (approximately
$3,600,000 U.S.) operating line of credit with its bank. For each period
reported below, the amount borrowed by the Company was comfortably within this
limit and was in compliance with all banking covenants.
TEN MONTHS ENDED MAY 31, 1997 COMPARED TO TEN MONTHS ENDED MAY 31, 1996
Cash flows provided from operations were $4,150,571 for the ten months
ended May 31, 1997, whereas for the comparative 1996 period, there was an
outflow of $1,273,621 due to operating activities. The increase in operating
cash flow from 1996 to 1997 is due to two factors: 1) In 1997, the investment in
inventory from the previous July 31 year end had declined by $2,355,000, whereas
in the comparative period in 1996, the investment in inventory had increased by
958,000; this equates to a $3,313,000 positive swing in cash flow from for year
to date May 31, 1997 as compared to the May 31, 1996 period end, and 2) while
accounts payable decreased by $2,080,000 in the ten months ended May 31, 1996,
they increased by $433,000 in the ten months ended May 31, 1997; this equates to
a $2,513,000 positive swing in cash flow.
Investing activities used cash resources of $94,000 in the ten months ended
May 31, 1997 versus $232,000 in the comparative 1996 period. The difference
reflects the fact that in 1997, the Company collected approximately $50,000 of
mortgages and notes receivable versus mortgage loan advances of $22,000 in 1996,
and the fact that in 1996, the Company paid $210,000 to acquire capital assets
in 1996
21
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<PAGE>
versus only $145,000 in 1997 year to date. The capital asset additions in these
periods were primarily sustaining capital reinvestments.
Financing activities used cash of $612,514 for the ten months ended May 31,
1997 versus providing cash of $604,571 in the comparative 1996 period. All such
activities were with respect to related parties and, as such, reflect the net
increase or decrease in funding to the Company provided by such parties in a
given year.
The Company's net cash flows from all sources were an inflow of $3,407,693
in the ten months ended May 31, 1997 versus a net cash outflow of $902,847 in
the 1996 comparative period. The fluctuations in annual cash flow are not due to
profit fluctuations; rather they reflect the timing of contractually determined
elements such as customer deposits, investments in inventory, delivery dates,
and final payment of balances due by the customer.
FISCAL YEAR ENDED JULY 31, 1996 COMPARED TO FISCAL YEARS ENDED JULY 31, 1995 AND
1994
Cash flows from operations were a net outflow of $1,628,510 in 1996 versus
positive inflows of $2,898,572 and $1,363,519 in 1995 and 1994, respectively.
The increase from 1994 to 1995 was attributable to the over $2,000,000 increase
in accounts payable more than offsetting other working capital changes. The
decrease in operating cash flow from 1995 to 1996 is due to two factors: 1) a
relatively large portion of the 1996 revenues had been paid for in advance by
customers in the 1995 fiscal year, and 2) in 1996, the Company paid down its
accounts payable to levels that ensure favorable terms from suppliers.
Investing activities resulted in a net use of cash of $240,301 in 1996,
primarily for acquisition of capital assets. In 1995, investing activities
resulted in a cash inflow of $97,270; this amount was comprised of the
collection of $154,120 of mortgages and notes receivable and proceeds from sale
of certain capital assets for $82,120, offset by the cash used to acquire
$138,970 of new capital assets. In 1994, investing activities resulted in a cash
outflow of $126,968; this amount was comprised of the collection of $51,312 of
mortgages and notes receivable offset by the cash used to acquire $184,281 of
new capital assets. Capital assets additions during the three years ended July
31, 1996, 1995 and 1994 were primarily sustaining capital reinvestments.
Financing activities provided cash flow of $563,673 in 1996, while such
activities resulted in cash outflows of $45,320 and $229,650 in 1995 and 1994,
respectively. All such activities were with respect to related parties and, as
such, reflect the net increase or decrease in funding to the Company provided by
such parties in a given year.
The Company's net cash flows from all sources were an outflow of $1,310,195
in 1996 versus inflows of $2,962,222 and $977,854 in 1995 and 1994,
respectively. The fluctuations in annual cash flow are not due to profit
fluctuations; rather they reflect the timing of contractually determined
elements such as customer deposits, investments in inventory, delivery dates,
and final payment of balances due by the customer.
BUSINESS
OVERVIEW
LiftKing Industries Inc. ('LiftKing' or the 'Company') is a manufacturer of
heavy duty material handling equipment, rough-terrain material handlers, heavy
pallet transporters, transporters of liquid steel and liquid steel residuals
('Slag Pot Carriers'), and International Standard Organization ('ISO') container
handlers, as well as related service parts. The Company's products are marketed
under the LiftKing tradename and are distinguished by their complete line of
four-wheel drive all-terrain material handlers, Slag Pot Carriers for the steel
mill industry, versatility of product applications, and reliability of service
and longevity. Products include conventional fork lifts for the construction
industry, general purpose vehicles for the steel and lumber industry,
specialized material handling equipment for the military, large load and large
container material handlers, along with a full range of heavy steel transporters
and Slag Pot Carriers. LiftKing's manufacturing centers upon high-strength
specialty steel, which is unique both in their shape and engineering design, and
provide added strength with minimal
22
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<PAGE>
weight. As such, LiftKing products typically command premium prices. LiftKing
vehicles are designed and built to exacting standards, specifications and
designs. The Company is capable of manufacturing and delivering material
handling equipment for virtually any application. For the year ended July 31,
1996, total sales of new units was $20,092,782 and net profit before taxes
and extraordinary items was $2,305,270.
LiftKing's highly versatile products are used in a wide variety of
applications by commercial and residential building contractors, as well as by
other construction, military, industrial, municipal and agricultural end-users.
All-terrain four-wheel material handlers are especially useful in rough
terrain environments and congested job sites and mill locations, where their
maneuverability and ability to raise, extend and lower payloads provide
significant advantages over more traditional material handling equipment, such
as cranes, straight-mast forklifts and elevators. LiftKing rough-terrain
variable reach material handlers are typically used by residential,
non-residential, military and non-military institutions, and building
contractors for lifting, transporting and placing a wide variety of materials at
their point of use or storage. The Company's various models of material handlers
have a lift capacity of 6,000 pounds to 75,000 pounds and can position payloads
up to 42 feet above the ground or up to 30 feet in front of the machine's
chassis. The versatility of these units allows users to lower overall costs by
substituting a single material handler for one or more other types of material
handling equipment, as well as for certain labor intensive material handling
tasks. The Company believes it manufactures one of the broadest product lines of
varied material handling equipment, for the North American market.
In 1993 the Company identified a niche in the steel mill industry.
Traditionally, molten steel was moved in steel mills by overhead cranes. The
steel industry has since been required to adapt to changing market conditions
requiring the mills to cut costs, produce larger quantities of steel and in turn
producing greater quantities of steel residuals (slag). Accordingly the
traditional crane method of moving slag to a dumping site was no longer
practical.
The Company's Slag Pot Carriers have the following features: (i) large
tires to enable the unit to move more quickly, (ii) hydraulic liquids in the
unit are fire retardant, (iii) the tires of the units are filled with fire
retardant material, and (iv) the driver's cab is self contained with an
extensive fire suppression system which may be activated within and without the
cab assembly. Additionally, the Company's Slag Pot Carriers have extensive fire
walls protecting the driver from the slag pot, with automatic louvers which
close to further protect the driver from spillage and spray during dumping. The
Company's Slag Pot Carriers have a pot capacity ranging from 300 to 1,000 cubic
feet of slag, and are priced ranging from $350,000 to $750,000.
The Company's elevating heavy pallet carriers ('Pallet Carriers') are
custom designed high capacity transport vehicles. The Company's pallet carriers
can transport a wide variety of materials such as scrap buckets, ladles, and
slag pots. LiftKing's Pallet Carriers can transport up to 700 tons of material
per pallet. Pallets are also used in the steel mill industry to transport,
coiled and finished steel products, steel booms and steel coils.
The Company's Pallet Carriers are designed to operate in extreme steel mill
conditions, similar to the Company's Slag Pot Carriers. The Company's Pallet
Carriers have the following features: (i) large tires to enable the unit to move
more quickly, (ii) hydraulic liquids in the unit are fire retardant, (iii) the
tires of the units are filled with fire retardant material, and (iv) the
driver's cab is self contained with an extensive fire suppression system which
may be activated within and without the cab assembly. Additionally, the
Company's Pallet Carriers can be manufactured with extensive fire walls
protecting the driver from the material being carried by the pallet. The
Company's Pallet Carriers have a transporting capacity of 700 tons of material
per pallet, and are priced ranging from $350,000 to $750,000.
LiftKing sells and distributes most of its products commercially through
approximately 94 independent equipment dealers located in the United States and
Canada. Internationally, LiftKing markets and distributes its products through a
variety of arrangements with dealers and distributors in 10 countries, including
the United States, Canada, Mexico, Algeria, Chile, England, Indonesia, China,
Korea, and Colombia. To facilitate the sale of its products, LiftKing offers its
independent equipment dealers financing assistance in connection with the
purchase of the Company's products. Such assistance
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consists of limited, back-up financing guarantees which benefit dealers by
providing them the opportunity to obtain attractive financing terms on the
Company's products, which in turn allows dealers to stock more units for sale or
rental.
The Company continues to introduce new material handlers and low profile
designs which provide an exceptional combination of maneuverability, versatility
and stability. This new product development has allowed the Company to increase
its sales in the rapidly growing rough-terrain variable reach material handler
market.
LiftKing competes principally in selected segments of the material handling
and construction equipment markets which utilize engines ranging from 80 to 450
horsepower. With limited exceptions, competitors with significant market shares
in these segments typically are not large full-line construction equipment
manufacturers.
BUSINESS STRATEGY
The Company's strategy is to grow primarily by focusing on sales of its
heavy duty material handling equipment, rough-terrain material handlers, heavy
pallet transporters, Slag Pot Carriers, and ISO container handlers (i) which
utilize engines ranging from 80 to 450 horsepower, (ii) which are not typically
dominated by full-line construction equipment manufacturers, (iii) which are
growing faster than the construction equipment industry generally, and (iv)
which typically utilize local independent dealers for distribution rather than
regional distributorship primarily dedicated to products made by a single
manufacturer.
Key elements of the Company's business strategy include:
PROVIDING SUPERIOR PRODUCTS. The Company focuses on developing
innovative, high performance products with low life-cycle cost. By
introducing unique product features and enhancements, such as four-wheel
drive and four-wheel steering, all-terrain capabilities, hydraulic versus
manual fork positioning, automatic frame leveling, availability of service
parts in North America, the Company believes that it increases demand for
the Company's products. In addition, during the first fiscal quarter of
1998, the Company expects to introduce the first model of a new range of
material handlers designed to be used for expanded applications in North
America, such as specialized units for the steel mill industry and poultry
industry, to be competitive with products currently used in international
markets. These innovations, along with the Company's focus on product
quality and low life-cycle cost, are important to the acceptance of the
Company's products. Additionally, to ensure maximum compliance to customer
specifications, LiftKing operates its own testing facility. Through a
thorough series of specialized tests designed to simulate field
applications, LiftKing vehicles demonstrates their required capabilities
before being delivered to the customer. Special test sites are also used
when unique procedures are needed to affectively simulate unique operating
conditions such as simulations of the shock waves created by the impact and
explosion of a missile into ship, proximity explosions, the effect of
parachute dropping the equipment from low-flying military aircraft, long
term operation in up to five (5) feet of sea water ('Water Fording'),
vertical and lateral operation on slopes of up to forty five degrees, and
air transportability. LiftKing is continuously developing new material
handling equipment. A licensing agreement with the German material handling
and heavy transporter KAMAG, has allowed LiftKing to substantially
complement its capabilities by offering a full range of specialized large
load handling equipment and Slag Pot Carriers.
PURSUING A MULTIPLE BRAND DISTRIBUTION STRATEGY. The Company intends
to pursue a multiple brand strategy, maintaining essentially distinct North
American distribution channels for its brand name products. The Company
believes that this strategy provides more complete geographic coverage of
the market place and gives the Company the ability to selectively expand
the number of dealers carrying its products. LiftKing's multiple brand
distribution strategy is designed to appeal to customer's differing price,
performance and support needs.
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GENERAL PURPOSE MATERIAL HANDLERS
The Company's material handlers are manufactured as either rough terrain or
standard operation vehicles used to transport, lift and position materials
between ground locations, between vehicles and to elevations up to four stories
in height. This equipment is typically utilized in North America by residential
and non-residential building contractors to handle a wide range of building
materials and components, including bricks, concrete blocks, open-wall panels,
roof trusses, lumber, drywall sheets, structural steel and roofing materials. In
addition, by using one or more of the various Company-approved attachments, the
Company's general purpose material handlers can also be used in nontraditional,
specialized applications, such as steel building construction or pole and post
hole drilling. Available attachments include forks and carriages, grapples,
buckets, augers, concrete hoppers and truss booms. End-users for the Company's
general use material handlers currently include the construction, military,
agricultural, landscaping and industrial markets.
The Company currently manufactures over 30 models of general purpose
material handlers, (not including material handlers designed specifically for
the steel mill industry), marketed under the LiftKing brand name. These models
have rated load capacities ranging from 5,000 to 70,000 pounds and possess the
capacity to place loads up to 42 feet above the ground. Suggested list prices
for these products range from approximately $25,000 to approximately $350,000
per unit.
Material handlers are more versatile than other material handling equipment
such as cranes, straight mast forklifts and elevators. Material handlers can
unload, carry and place materials up to four stories high in rough terrain work
environments, eliminating the need for multiple pieces of more specialized
equipment and reducing the labor required to handle materials at work-sites. The
numerous applications provided by available attachments and used in conjunction
with the Company's general purpose material handlers allows customers to
decrease aggregate equipment costs and increase utilization of their material
handling equipment.
Material handlers enable users to increase labor productivity and improve
asset utilization, compared to other methods using alternative equipment or
direct labor. Productivity enhancements include a reduction in the number of
indirect personnel required for material handling support to load, transport and
place building materials and to operate certain other types of construction
equipment. In addition, telescopic material handlers provide significant support
on construction sites, agricultural sites, and industrial sites for labor-saving
advanced material handling techniques, such as efficient movement of palletized
loads and use of pre-fabricated building components. The versatility and variety
of attachments available for material handlers results in higher utilization of
the equipment and permits end users to increase inventory turnover at work sites
more rapidly by taking loads directly off ships, aircraft, railroad cars, and
delivery trucks and placing them where they will be used.
Historically, the primary market for general purpose material handlers has
been the construction and agricultural markets. In recent years, however,
applications for various product lines have emerged in other markets. For
example, since 1988, general purpose material handlers have been used by the
military for munitions handling and, more recently, general logistics purposes.
Material handlers have also experienced increased acceptance in the industrial
and agricultural markets where they are used, among other applications, to
transport and position bulk materials.
The Company's various models of material handlers have unique
characteristics, which have contributed to strong competitive positions in the
market. LiftKing brand products enjoy a reputation for their ease of operation,
durability and high resale value. The Company believes the combination of its
well-known LiftKing brand name, and its ability to offer a broad product line,
provide LiftKing with competitive advantages in the general purpose material
handler market.
MILITARY APPLICATIONS
LiftKing has also developed material handling equipment with a wide range
of military applications, for the United States military. These applications
include varying load capacity, four-wheel drive rough terrain capabilities,
diesel powered lift trucks, vehicles with large load and container handling
capabilities and specialized vehicles designed for shipboard naval service, to
meet a wide range of military applications. Such military applications include,
but are not limited to, aircraft carrier use,
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helicopter carrier use, Water Fording capabilities up to five (5) feet, and
sustained combat environment operations in an all-terrain environment. LiftKing
has been able to successfully integrate many special features into its designs
and provide maximum benefits to its military customers by incorporating
versatility. LiftKing vehicles are reliable and durable and feature two or four
wheel steering and four wheel drive, with tight turning radius for maximum
maneuverability. LiftKing' military vehicles are also designed for air
transportability. Through innovations such as the removable counter weight
(patent pending), most vehicles can be prepared for air transport aboard C-130
type military aircrafts in under thirty minutes using conventional tools and
minimal personnel. Specialized working attachments can also be provided for
added versatility. LiftKing also specially prepares vehicles for long term
storage. This process includes preventive measures to ensure corrosion-free
storage, prevent seizure of key engine and operating components, cover and coat
the cylinders and brake drums, and place specialized engine fluids into the
units to ensure no internal corrosion takes place.
The Company's military use material handlers transport heavy and light load
military equipment, supply equipment, and containers in a wide variety of
applications and environmental conditions. By incorporating specialized design
and manufacturing processes, the Company's military use equipment handlers are
able to operate in up to five feet of salt or fresh water. In situations where
docking facilities are not available for military and supply vessels, these
units provide the flexibility to maneuver offshore, load materials from offshore
platforms and ships, and transport them to the shore. These units are specially
designed and manufactured for combat conditions.
The Company also manufacturers a line of military use equipment handlers
designed for operation on aircraft and helicopter carriers. These units are
specially designed and manufactured to resist the shockwaves of missile impacts
during combat conditions and to remain stable on ships in rough sea conditions.
These units provide four wheel automatic braking systems, a low center of
gravity, and frame leveling technology of up to ten degrees from center.
All LiftKing military use equipment handlers are designed and manufactured
to operate in extreme weather and sea conditions, and are able to operate in
extreme temperature variations ranging from -23 degrees Fahrenheit to 120
degrees Fahrenheit for prolonged periods of time.
STEEL INDUSTRY
SLAG POT CARRIERS
In 1993 the Company identified a niche in the steel mill industry.
Traditionally, molten steel was moved in steel mills by overhead cranes. The
steel industry has since been required to adapt to changing market conditions
requiring the mills to cut costs, produce larger quantities of steel and in turn
producing greater quantities of steel residuals (slag). Accordingly, the
traditional crane method of moving slag to a dumping site was no longer
practical.
A Slag Pot Carrier can transport between 200 and 300 tons of slag, whereas
crane capacity was limited to approximately 25 tons. Additionally, cranes dumped
the slag pot on a 90 degree angle, leaving a substantial amount of molten
material still in the pot, left to cool and harden. This hardening would ruin
the pot, so the mills would be forced to drop the pots to the ground in an
effort to loosen the hardened slag. This process would often crack a pot and
render it useless. With the average slag pot costing $100,000, this became an
expensive and labor intensive process.
The Company identified the need for better transport equipment, and
realizing that the North American market was dominated by only one manufacturer,
the Company began manufacturing Slag Pot Carriers in conjunction with technology
and expertise acquired in its licensing agreement with KAMAG.
The Company's Slag Pot Carriers have the following features: (i) large
tires to enable the unit to move more quickly, (ii) hydraulic liquids in the
unit are fire retardant, (iii) the tires of the units are filled with fire
retardant material, and (iv) the driver's cab is self contained with an
extensive fire suppression system which may be activated within and without the
cab assembly. Additionally, the Company's Slag Pot Carriers have extensive fire
walls protecting the driver from the slag pot, with automatic louvers which
close to further protect the driver from spillage and spray during dumping.
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The Company's Slag Pot Carriers have a pot capacity ranging from 300 to
1,000 cubic feet of slag, and are priced ranging from $350,000 to $750,000.
HEAVY PALLET TRANSPORTERS
The Company's elevating heavy pallet carriers ('Pallet Carriers') are
custom designed high capacity transport vehicles. The Company's pallet carriers
can transport a wide variety of materials such as scrap buckets, ladles, and
slag pots. Pallets are also used in the steel mill industry to transport coiled
and finished steel products.
The Company's Pallet Carriers are designed to operate in extreme steel mill
conditions, similar to the Company's Slag Pot Carriers. The Company's Pallet
Carriers have the following features: (i) large tires to enable the unit to move
more quickly, (ii) hydraulic liquids in the unit are fire retardant, (iii) the
tires of the units are filled with fire retardant material, and (iv) the
driver's cab is self contained with an extensive fire suppression system which
may be activated within and without the cab assembly. Additionally, the
Company's Pallet Carriers can be manufactured with extensive fire walls
protecting the driver from the material being carried by the pallet.
The Company's Pallet Carriers have a transporting capacity of 700 tons of
material per pallet, and are priced ranging from $350,000 to $750,000.
OTHER
The Company manufactures and markets a limited range of masonry buggies and
articulated forklifts and loaders, all of which are used primarily in the
masonry industry, and markets a complete line of straight-mast forklifts,
ranging from 5,000 to 70,000 pound load capacities and lifting capabilities of
up to 42 feet from ground level. The Company also provides product service
support to its distribution networks, and produces and sells through its
distributors a wide range of service parts to maintain the operational
performance of its end products throughout their useful lives. The sale of
service parts provides approximately 10% of the Company's gross revenues, and as
such sales are historically less sensitive to industry cycles and typically
generate higher gross margins than sales of original equipment. The Company
seeks to provide a high level of parts availability and timely shipments of
orders to maintain the production availability of its products on customer job
sites.
GROWTH STRATEGY
The Company's growth strategy is to design and produce high quality
material handlers and moving equipment for niche markets while simultaneously
reducing manufacturing costs and increasing production capacity. From 1994 to
1996, the Company introduced in excess of 12 new products, and its sales
increased from $11,818,047 million to $20,092,782 million. The key components of
the Company's strategy are:
DEVELOP UNIQUE PRODUCTS. The Company remains committed to devoting
significant resources toward engineering and producing unique heavy moving
equipment and material handlers. The Company's product development
engineers are currently designing additional new transporters and material
handlers which LiftKing plans to market, in the near future.
TARGET NICHE MARKETS. The Company is working to continue its leading
position in its traditional niche market of heavy duty material handler
equipment and rough-terrain material handlers. In the material handler
market, the Company focuses on the segment which demands a reliable premium
product that offers a high level of versatility and maneuverability. In
1993 the Company identified a niche in the steel mill industry for the
production of Slag Pot Carriers. In the Slag Pot Carrier industry, the
Company has little competition, principally from one North American
manufacturer and one German manufacturer. The Company believes it is well-
positioned to compete in these dynamically growing markets.
IMPROVE MANUFACTURING PROCESSES. An important element of LiftKing's
growth strategy is to expand profit margins through improved manufacturing
processes. In 1989, the Company commenced a multi-year program designed to
expand plant capacity by implementing larger crane
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capacity, create larger assembly bays areas for the production of larger
units and reduce production costs by increasing labor efficiency, equipment
productivity and improving quality. The Company invested in excess of $2
million for capital improvements pursuant to this program. The Company
currently plans to continue to invest in capital improvements under this
program on a need basis. The recent capital improvements have included
robotic welding systems, fabrication equipment and direct
computer-controlled manufacturing equipment, a 'shot blasting'/paint booth,
creation of unit testing facilities, ISO quality control certification,
upgraded computer design equipment, and upgraded computerized accounting
and inventory control and requisition systems. In addition, the Company has
implemented aggressive quality programs in the areas of warranty reduction
and quality assurance. LiftKing believes its investments in automation and
technology, material control, and quality programs have improved and will
continue to improve its manufacturing processes and benefit profit margins
in the future.
INCREASE DISTRIBUTOR SUPPORT. The Company believes that it has a
strong distribution network and this network is a core strength for its
future growth. The Company plans to further enhance its distribution
network by continuing to produce unique new products, provide marketing and
sales support through its regional sales managers, and provide technical
and service support through its service managers. The Company continually
seeks to expand its local and regional dealer networks.
EXPAND SERVICE PARTS BUSINESS. Management has focused on expanding the
Company's service parts business to increase revenues and profits by taking
advantage of the growth in the working population of LiftKing heavy movers
and material handlers.
INTERNATIONAL BUSINESS OPPORTUNITIES. Although substantially all of
the Company's business has been focused in North America, the Company
believes its increased product development efforts should enable the
Company to take advantage of international opportunities, including
infrastructure development in emerging markets in Europe, Asia, the Middle
East, and South America.
DEVELOP PRODUCTS IN ACCORDANCE WITH SPECIFIC CONSUMER REQUIREMENTS.
The Company works closely with its customers throughout the design process
in refining and developing material handlers to suit the individual
customer's requirements. The Company uses the latest equipment and computer
aided design and modeling in the development of its products. The
integration of the Company's design and production is a factor in the
Company's ability to provide its customers with high reliability,
individualized equipment performing specific tasks and individualized
equipment able to perform under conditions specified by the customer.
MANUFACTURING AND RAW MATERIALS
The Company fabricates, welds, machines and assembles the chassis,
telescopic booms, cylinders, attachments and many component parts for its heavy
and light duty movers and material handlers. The goals of the Company's
manufacturing operation are quality, efficiency, productivity, cost control and
on-time delivery. The Company strives to develop its manufacturing capacity,
productivity and quality through automation and technology, material control and
quality programs.
QUALITY PROGRAMS. The Company has implemented comprehensive quality
programs, including the following:
Quality feedback/warranty reduction. LiftKing reviews critical quality
issues on an ongoing basis and initiates corrective actions. A warranty
system captures early warning reports from field service managers as well
as details of warranty claims which provide additional input to the quality
feedback program.
Supplier quality assurance. The Company monitors supplier quality
through a system which records and tracks reports on defective material
allowing the Company to execute corrective action measures.
LiftKing's commitment to automation and technology, material control and
quality programs have improved the capacity, productivity and quality of the
Company's manufacturing operations.
The Company intends to pursue opportunities to reduce costs of purchased
components through consolidation of vendor sources, improvements in
manufacturing methods and integration of operations.
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The Company also believes that opportunities exist to achieve manufacturing
economics in the production of material handlers by combining the production of
certain key components.
The principal raw materials and components used in the manufacturing of the
Company's products are steel, engines, transmissions, axles, hydraulic
cylinders, wheels and tires and cabs. The Company procures its raw materials and
components from multiple vendors, although in the case of particular models it
typically purchases certain components from a single vendor. Although
alternative suppliers are available for all raw materials and components, the
Company could experience delays in obtaining components meeting the requisite
specifications from alternative suppliers in the event a principal supplier was
unable to supply a particular component. The Company seeks to manage the risk of
unavailability of key components and raw materials by dealing primarily with
North American suppliers with substantial, financially responsible vendors and
by managing closely its material requirements as well as its vendor
relationships. To date, the Company has not experienced a material delay in
obtaining a satisfactory supply of key components from vendors.
PRODUCT DEVELOPMENT, ENGINEERING AND DESIGN
LiftKing believes that its engineering and design capabilities are among
the Company's major strengths. The engineering and design functions are closely
integrated with the Company's manufacturing and marketing activities. This
allows the Company to integrate new production technology with specific needs of
customers, resulting in expanded market opportunities and increased
profitability for the Company.
LiftKing has made significant investments in its engineering systems, which
currently includes a computer-aided design (CAD) system with finite element
analysis (FEA) and three-dimensional solids design capabilities. This system has
greatly enhanced LiftKing's design capabilities and has significantly reduced
the time required for engineering and design functions.
MARKETING & DISTRIBUTION
The Company primarily markets and distributes its products through a
network of independent distributors and rental companies who, in turn, sell or
rent the products to end-users. Additionally the Company makes direct sales
through its own marketing staff to certain major accounts as well as to
customers located within and without the United States. The Company plans to
continue to enhance its distribution network by producing unique new products
and by providing technical and service support.
The Company believes that its ongoing distributor support and training
programs help enhance the competitiveness and increase the strength of its
distribution network. The Company supports the sales, service and rental
activities of its distributors with product advertising, sales literature,
product training and major trade show participation. The Company can also
provide its distributors with product financing through agreements with third
party financing companies.
PRODUCT LIABILITY AND PRODUCT RECALL
Product liability claims may be asserted against the Company from time to
time for various injuries alleged to have resulted from defects in the
manufacture and/or design of the Company's products. The Company does not
believe that the resolution of such potential claims, either individually or in
the aggregate, would have a material adverse effect on the Company's results of
operations or financial condition. Product liability claims are covered by the
Company's comprehensive general liability insurance policies, subject to certain
deductible amounts. To date, the Company has not experienced any product
liability claims related to injuries incurred due to products defects. However,
there can be no assurance that resolution of product liability claims in the
future will not have a material adverse effect on the Company.
From time to time, the Company discovers defects in product design for
existing products which require it to take steps to correct or retrofit, at the
Company's expense, previously sold products.
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WARRANTY AND SERVICE
LiftKing products are warranted for design, workmanship and material
quality. Warranty lengths vary depending on competitive standards within
individual markets. In general, warranties tend to be for one year and cover all
parts and labor for non-maintenance repairs, provided the repair was not
necessitated by operator abuse. Optional extended warranties, for one to two
years beyond the base period, are available for purchase. Warranty work is
performed only by authorized LiftKing distributors, unless otherwise authorized
by the Company. Distributors submit claims for warranty reimbursement to the
Company and are credited for the cost of repairs so long as the repairs meet
LiftKing's prescribed standards. Warranty expense is accrued at the time of sale
based on historical experience.
TRADEMARKS AND PATENTS
The Company owns and maintains a trademark registration for its principal
trademark titled 'LiftKing'. Registration for the trademark is owned and
maintained in other countries where a significant volume of its products are
sold and registration is considered necessary to protect the Company's
proprietary rights.
The Company applied for a patent for its counter weight hoisting mechanism
(Application No. 08/761497). The Company intends to maintain patents in the
United States and elsewhere where the Company believes such patents are
necessary to maintain the Company's interest in its inventions.
COMPETITION
The markets for the company's products are highly competitive. The
principal competitive factors include distribution, price design features,
performance, product reliability and the availability of financing.
In the market for material handlers, the Company is a large North American
manufacturer, with an estimated share of 1996 shipments of material handlers of
approximately 5%, and its principal competitors include Omni Quip, Gradall
Industries, Inc. and JCB International Co., Ltd. Other competitors in the North
American market include Gehl Company, Pettibone Corporation, Traverse Lift,
Ingersoll-Rand Company, Manitou S.A. and Caterpillar Inc. Competitors in this
market outside the United States include JCB International Co., Ltd., Manitou
S.A., Merlo S.P.A., the Matbro division of Powerscreen International PLC,
Sanderson, FDI/Sambron and Caterpillar Inc. Major competitors in the steel
industry include Kress Corporation, and KAMAG. In the container handler
industry, the Company's major competitors are Caterpillar, Taylor, and PPM.
Many of the Company's competitors are larger than the Company and possess
significantly greater financial, marketing and technical resources. There can be
no assurance that the Company will not experience significant competition in the
future from large global construction equipment manufacturers and other
competitors or that existing competitors will not take actions which could
adversely affect the Company's operating results.
ENVIRONMENTAL AND SAFETY REGULATION
LiftKing is subject to various Canadian and American laws and regulations
that impose limitations on the discharge of pollution into the environment and
establish standards for the treatment, storage and disposal of toxic and
hazardous wastes. The Company believes it is in material compliance with all
applicable environmental laws and regulations. The Company does not expect any
material impact on future recurring operating costs of compliance with currently
enacted environmental regulations.
Under Canadian law, a current owner or operator of real property may be
held liable for the costs of cleaning up certain hazardous materials on the
property. Similarly, persons who have arranged for the disposal of hazardous
materials on properties owned by third parties may be held liable for cleanup
costs for such properties. In each case liability may be imposed without regard
to whether the person knew of or took reasonable acts to prevent the
contamination. Liability under such laws is often joint and several, that is,
any single liable person may be required to bear the entire costs of the
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environmental cleanup. That person, however, may usually seek contribution from
other responsible persons, if there are any; and it is typical for groups of
responsible parties to apportion liability among themselves.
The Company regularly conducts an environmental assessment consistent with
recognized standards of due diligence on properties it occupies. To date, these
assessments have not identified contamination in respect of occupied properties
that would be reasonably likely to result in a material adverse effect on the
Company's business, results of operations or financial condition. As a general
rule, the Company intends to use such assessments as part of the evaluation of
proposed acquisitions. However, there can be no assurance that environmental
assessments have identified, or will in the future identify, all material
liabilities relating to the Company's premises and businesses, that any
indemnification agreements that can be negotiated will cover all potential
liabilities, or that changes in cleanup requirements or subsequent events at the
Company's premises or at off-site locations will not result in significant costs
to the Company.
FACILITIES
The Company operates from a facility in Woodbridge, Ontario, Canada. The
facility is owned by Aldrovandi Equipment Limited, a Company wholly owned by the
Company's Chief Executive Officer. See 'Certain Relationships and Related
Transactions'. The lease term was renewed and the renewal period commenced on
August 1, 1997. The annual rent for the facility is $288,000. The facility
contains approximately 110,000 square feet and is located on a seven (7) acre
site. The facility accommodates the Company's corporate offices, manufacturing,
operations, and warehouse. The Company believes all of such facilities are
adequate for its current needs; however, there can be no assurance that the
Company will be able to obtain appropriate facilities on terms acceptable to the
Company in the future.
EMPLOYEES
As of August 14, 1997, LiftKing employed 107 people, of which 8 people were
engaged in a managerial capacity, 25 people were salaried and receive an annual
rate of compensation, and 77 people receive hourly wages.
LEGAL PROCEEDINGS
There are no material legal proceedings pending, or to the Company's
knowledge threatened, against the Company other than as set forth below.
The Company's affiliate, LiftKing Incorporated, is the subject of a patent
infringement lawsuit, brought by a competitor of the Company. The lawsuit was
filed in the United States Federal District Court. LiftKing Incorporated was
adjudged to have not violated United States Patent law nor did it infringe upon
the plaintiff's patent. This matter is currently under appeal.
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MANAGEMENT
The names and ages of the Directors, executive officers and key personnel
of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD WITH THE COMPANY
- --------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Louis Aldrovandi............................. 72 Chairman of the Board, Chief Executive Officer and
President
Mark Aldrovandi.............................. 38 Vice President, General Manager and Director
</TABLE>
Brief biographies of the Directors, executive officers, and key personnel
of the Company are set forth below. All Directors hold office until their
resignation, retirement, removal, disqualification, death or until their
successors have been elected and qualified. Vacancies in the existing Board of
Directors are filled by majority vote of the remaining Directors. Officers of
the Company serve at the will of the board of Directors.
Louis Aldrovandi, has been the President and Chief Executive Officer of the
Company since its inception in 1969. From 1961 to 1968, Mr. Aldrovandi was a
construction foreman and manager for Perini Construction on various industrial
projects including hydro-electric power plants. Prior to 1961, Mr. Aldrovandi
has worked in the construction industry and heavy equipment industry in various
capacities. Mr. Aldrovandi also maintains a technical school degree in
electro-mechanics. Mark Aldrovandi is the son of Louis Aldrovandi.
Mark Aldrovandi, has been Vice President and General Manager of the Company
since January 1980. Mr. Aldrovandi is involved in all aspects of the Company's
operations. Mr. Aldrovandi has a business degree from Ryerson Institute,
Ontario, Canada. Mr. Aldrovandi has testified as an expert witness in product
liability actions concerning forklift design. Louis Aldrovandi is the father
of Mark Aldrovandi.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company to the officers and directors of the Company who received compensation
in excess of $100,000 for the years ended December 31, 1994, 1995, and 1996.
<TABLE>
<CAPTION>
OTHER
NAME YEAR SALARY BONUS COMPENSATION
- ---------------------------------------------------------------------- ---- -------- ----- ------------
<S> <C> <C> <C> <C>
Louis Aldrovandi, President and Chief Executive Officer............... 1996 $115,000 $ 0 $ 15,000(1)
1995 363,000 0 15,000(1)
1994 29,000 0 15,000(1)
Mark Aldrovandi, Vice President and
General Manager..................................................... 1996 37,000 0 10,000(1)
1995 138,000 0 10,000(1)
1994 29,000 0 10,000(1)
</TABLE>
- ------------
(1) Represents payment for health insurance and automobile lease payments on
behalf of such individual.
EMPLOYMENT AGREEMENTS
The Company has entered into a five year employment agreement commencing
September, 1997 with each of Louis Aldrovandi (Chairman, Chief Executive
Officer, and President), and Mark Aldrovandi (Vice President and General
Manager). The employment agreements provide for annual base salaries of $300,000
(Canadian) and $150,000 (Canadian) with respect to Louis Aldrovandi and Mark
Aldrovandi, respectively. The employment agreements provide for discretionary
bonuses to be determined in the sole discretion of the Board of Directors and
contain covenants not to compete with the Company for a two year period
following termination of employment. Reference is hereby made to the employment
agreements which have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part.
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STOCK OPTION PLANS AND AGREEMENTS
Incentive Option Plan -- In September 1997, the Directors of the Company
adopted and the stockholders of the Company approved the adoption of the
Company's 1997 Incentive Stock Option Plan (' Incentive Option Plan'). The
purpose of the Incentive Option Plan is to enable the Company to encourage key
employees and Directors to contribute to the success of the Company by granting
such employees and Directors incentive stock options ('ISOs').
The Incentive Option Plan will be administered by the Board of Directors or
a committee appointed by the Board of Directors (the 'Committee') which will
determine, in its discretion, among other things, the recipients of grants,
whether a grant will consist of ISOs or a combination thereof, and the number of
shares to be subject to such options.
The Incentive Option Plan provides for the granting of ISOs to purchase
Common Stock at an exercise price to be determined by the Board of Directors or
the Committee not less than the fair market value of the Common Stock on the
date the option is granted.
The total number of shares with respect to which options may be granted
under the Incentive Option Plan is 750,000. ISOs may not be granted to an
individual to the extent that in the calendar year in which such ISOs first
become exercisable the shares subject to such ISOs have a fair market value on
the date of grant in excess of $100,000. No option may be granted under the
Incentive Option Plan after September 2007 and no option may be outstanding for
more than ten years after its grant. Additionally, no option can be granted for
more than five (5) years to a stockholder owning 10% or more of the Company's
outstanding Common Stock and such options must have an exercise price of not
less than 110% of the fair market value on the date of grant.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock,
or in a combination of both. The Company may lend to the holder of an option
funds sufficient to pay the exercise price, subject to certain limitations.
The Incentive Option Plan may be terminated or amended at any time by the
Board of Directors, except that, without stockholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the
Incentive Option Plan, change the class of persons eligible to receive options
under the Incentive Option Plan or materially increase the benefits of
participants.
To date, no options have been granted under the Incentive Option Plan.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding shares of
Common Stock beneficially owned as of the date of this Prospectus by (i) each
person, known by the Company to be the beneficial owner of five percent (5%) or
more of the outstanding shares of Common Stock, (ii) each of the Company's
directors and (iii) all of the Company's officers and directors as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF OWNERSHIP
NUMBER OF ------------------------------
SHARES OF PRIOR TO
NAME OF BENEFICIAL OWNER* COMMON STOCK THE OFFERING AFTER OFFERING
- --------------------------------------------------------- ------------ ------------ --------------
<S> <C> <C> <C>
Louis Aldrovandi......................................... 3,578,643 81.33% 63.33%
Mark Aldrovandi(1)....................................... 133,367 3.03 2.36
All Officers and Directors as a group (2 persons)........ 3,712,010 84.36 65.69
</TABLE>
- ------------
* Unless otherwise indicated, the address of all persons listed in this section
is c/o LiftKing Industries Inc., 7135 Islington Avenue, Woodbridge, Ontario,
Canada L4L 1V9.
(1) Mark and Grace Aldrovandi (the daughter of Louis Aldrovandi) and their
children, are the beneficiaries of the Aldrovandi Family Trust, which owns
170,626 shares of the Company's Common Stock. The trustees of the Aldrovandi
Family Trust are Saul Muskat, Frank Borgatti, and Lino Aldrovandi, the
brother of Louis Aldrovandi the Company's President, Chief Executive Officer
and Chairman.
CERTAIN TRANSACTIONS
LiftKing Industries Inc. was incorporated on April 25, 1989. The Company is
a corporation organized under the laws of the Province of Ontario, Canada. The
Company's sole shareholder was Dima Products Manufacturing, Inc. ('Dima') a
corporation organized under the laws of the Province of Ontario, Canada, which
in turn was wholly owned by Louis Aldrovandi, the Company's President and Chief
Executive Officer. In August 1997, the Company merged with and into Dima. Under
Canadian law, the surviving entity accepted the name LiftKing Industries Inc. In
accordance with the merger, LiftKing Industries Inc. issued 4,053,643 Common
Shares of the Company's Common Stock to the sole shareholder, Louis Aldrovandi,
in exchange for the shares previously issued to Mr. Aldrovandi by Dima.
In August 1997, the Company purchased all of the outstanding shares of
capital stock of Liftmaster Limited ('Liftmaster'), a corporation organized
under the laws of the Province of Ontario, Canada on November 10, 1976, from its
shareholders Grace and Mark Aldrovandi, a Director of the Company. Also in
August 1997, the Company purchased all of the outstanding shares of capital
stock of 463291 Ontario Limited ('463291'), a corporation organized under the
laws of the Province of Ontario, Canada on December 4, 1980, from its sole
shareholder The Aldrovandi Family Trust. In exchange for the shares of
Liftmaster and 463291, the Company issued 42,364 shares of its Common Stock to
Grace Aldrovandi, 133,367 shares of its Common Stock to Mark Aldrovandi and
170,626 shares of its Common Stock to the Aldrovandi Family Trust. The
beneficiaries of the Trust are Mark and Grace Aldrovandi and their children.
On August 1, 1997 the Company entered into a lease agreement with
Aldrovandi Equipment, Limited, a company wholly owned by the Company's Chief
Executive Officer and President. The lease provides for a term of five (5) years
commencing August 1, 1997, and continuing until July 31, 2002. The leased
property encompasses approximately 110,000 square feet, which comprises three
(3) separate structures of 61,636 square feet, 32,873 square feet, and 10,400
square feet, respectively, of enclosed manufacturing, storage, and office space.
The aggregate monthly rental payment for the three (3) structures is $24,000.
On June 16, 1997 The Company repaid $4,500,000 of Indebtedness to
Sandchelle Investments, Inc. ('Sandchelle'), a Company wholly-owned by Louis
Aldrovandi, the Company's President, Chief Executive Office and Chairman. The
outstanding balance on the loan to the Company from Sandchelle as of September
4, 1997 is $4,500.
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Transactions between the Company and its officers, directors, employees and
affiliates will be on terms no less favorable to the Company than can be
obtained from unaffiliated parties. Any such transactions will be subject to the
approval of a majority of the disinterested members of the Board of Directors.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 50,000,000 shares of Common Stock, of
which 4,400,000 Shares were issued and outstanding as of the date of this
Prospectus. After giving effect to this Offering 5,650,000 shares of Common
Stock and 1,500,000 Warrants will be issued and outstanding.
COMMON STOCK
Holders of shares of Common Stock of the Company are entitled to share
equally on a per share basis in such dividends as may be declared by the Board
of Directors out of funds legally available therefor. There are presently no
plans to pay dividends with respect to the shares of Common Stock. See 'Dividend
Policy.' Upon liquidation, dissolution or winding up of the Company, after
payment of creditors and the holders of any senior securities of the Company,
including Preferred Stock, if any, the assets of the Company will be divided pro
rata on a per share basis among the holders of the shares of Common Stock. The
Common Stock is not subject to any liability for further assessments. There are
no conversion or redemption privileges nor any sinking fund provisions with
respect to the Common Stock and the Common Stock is not subject to call. The
holders of Common Stock do not have any pre-emptive or other subscription
rights.
Holders of shares of Common Stock are entitled to cast one vote for each
share held at all stockholders' meetings including the Annual Meeting, for all
purposes, including the election of directors. The Common Stock does not have
cumulative voting rights.
All of the issued and outstanding shares of Common Stock are and the shares
of Common Stock offered hereby when issued against the consideration set forth
in this Prospectus, will be, fully paid, validly issued and non-assessable.
WARRANTS
Each Warrant will entitle the registered holder to purchase one share of
the Company's Common Stock at an exercise price of $4.50 per share during the
four year period commencing one year from the date of this Prospectus. No
fractional shares of Common Stock will be issued in connection with the exercise
of Warrants. Upon exercise, the Company will pay the holder the value of any
such fractional shares in cash, based upon the market value of the Common Stock
at such time.
Unless extended by the Company at its discretion, the Warrants will expire
at 5:00 p.m., New York time, on the fifth anniversary of the date of this
Prospectus. In the event a holder of Warrants fails to exercise the Warrants
prior to their expiration, the Warrants will expire and the holder thereof will
have no further rights with respect to the Warrants.
The Company may redeem the Warrants at a price of $.10 per Warrant,
commencing twelve (12) months from the date of this Prospectus with the consent
of the Underwriter, and eighteen (18) months from the date of this Prospectus
without the consent of the Underwriter, upon not less than 30 days prior written
notice to the Warrantholders, and the average closing price or bid price of the
Common Stock as reported by the principal exchange on which the Common Stock is
traded, the Nasdaq SmallCap Market or the National Quotation Bureau,
Incorporated, as the case may be, equals or exceeds 250% of the then exercise
price of the Warrants for the ten (10) consecutive trading days ending within
three (3) days prior to the date on which notice of redemption is given.
No Warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of Common Stock issuable upon exercise of
such Warrants under an effective registration statement filed with the
Commission and such shares have been qualified for sale or are exempt from
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qualification under the securities laws of the state or residence of the holder
of such Warrants. Although the Company intends to have all shares so qualified
for sale in those states where the Securities are being offered and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
subject to the terms of the Warrant Agreement there can be no assurance that it
will be able to do so.
A holder of Warrants will not have any rights, privileges or liabilities as
a shareholder of the Company prior to exercise of the Warrants. The Company is
required to keep available a sufficient number of authorized shares of Common
Stock to permit exercise of the Warrants.
The exercise price of the Warrants and the number of shares issuable upon
exercise of the Warrants will be subject to adjustment to protect against
dilution in the event of stock dividends, stock splits, combinations,
subdivisions and reclassifications. No assurance can be given that the market
price of the Company's Common Stock will exceed the exercise price of the
Warrants at any time during the exercise period.
In connection with this Offering, the Company will issue to Monroe Parker
Securities, Inc., an Underwriter's Purchase Option to purchase 125,000 shares of
Common Stock ('Underwriter's Common Stock') and Warrants to purchase an
additional 150,000 shares of Common Stock ('Underwriter's Warrants'). The
Underwriter's Common Stock and Underwriter's Warrants are being registered under
the Registration Statement to which this Prospectus is a part.
COMMISSION POLICY
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and other agents of the Company, the Company
has been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
TRANSFER AGENT & REGISTRAR
The transfer agent and registrar for the Company's securities is American
Stock Transfer & Trust Company (the 'Transfer Agent').
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following describes the principal United States Federal income tax
consequences of the purchase, ownership and disposition of the Common Shares and
the Warrants and upon the exercise, redemption or expiration of the Redeemable
Warrants by a Warrant holder, that is a citizen or resident of the United States
or a U.S. domestic corporation or that otherwise will be subject to U.S. Federal
income tax (a 'U.S. Holder'). This summary is based on the U.S. Internal Revenue
Code of 1986, as amended (the 'Code'), administrative pronouncements, judicial
decisions and existing and proposed Treasury Regulations, changes to any of
which subsequent to the date of this Prospectus may affect the tax consequences
described herein. This summary discusses only the principal U.S. Federal income
tax consequences to those beneficial owners holding the securities as capital
assets within the meaning of Section 1221 of the Code and does not address the
tax treatment of a beneficial owner that owns 10% or more of the Common Shares.
It is for general guidance only and does not address the consequences applicable
to certain specialized classes of taxpayers such as certain financial
institutions, insurance companies, dealers in securities or foreign currencies,
or U.S. persons whose functional currency (as defined in Section 985 of the
Code) is not the U.S. dollar. Persons considering the purchase of Securities
should consult their tax advisors with regard to the application of the United
States and other income tax laws to their particular situations. In particular,
a U.S. Holder should consult his tax advisor with regard to the application of
the U.S. Federal income tax laws to his situation.
COMMON SHARES
A U.S. Holder generally will realize, to the extent of the Company's
current and accumulated earnings and profits, foreign source ordinary income on
the receipt of cash dividends, if any, on the Common Shares equal to the U.S.
dollar value of such dividends determined by reference to the
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exchange rate in effect on the day they are received by the U.S. Holder (with
the value of such dividends composed before any reduction for any Canadian
withholding tax). U.S. Holders should consult their own tax advisors regarding
the treatment of foreign currency gain or loss, if any, on any dividends
received which are converted into U.S. dollars on a date subsequent to receipt.
Subject to the requirements and limitations imposed by the Code, a U.S. Holder
may elect to claim the Canadian tax withheld or paid with respect to dividends
on the Common Shares as a foreign tax credit against the U.S. Federal income tax
liability of such holder. Dividends on the Common Shares generally will
constitute 'passive income' or, in the case of certain U.S. Holders, 'financial
services income' for U.S. foreign tax credit purposes. U.S. Holders who do not
elect to claim any foreign tax credits may claim deduction for Canadian income
tax withheld. Dividends paid on the Common Shares will not be eligible for the
dividends received deduction available in certain cases to U.S. corporations.
Upon a sale or exchange of a Common Share, a U.S. Holder will recognize gain or
loss equal to the difference between the amount realized on such sale or
exchange and the tax basis of such Common Share. Any such gain or loss will be
capital gain or loss, and will be long-term capital gain or loss if at the time
of the sale or exchange the Common Share has been held for more than one year.
REDEEMABLE WARRANTS
No gain or loss will be recognized by the holder of a Redeemable Warrant
upon the exercise of the Redeemable Warrant. The cost basis of the Common Shares
acquired upon such exercise will be the cost basis of the Redeemable Warrant
plus any additional amount paid upon the exercise of the Redeemable Warrant.
Gain or loss will be recognized upon the subsequent sale or exchange of the
Common Shares acquired by the exercise of the Redeemable Warrant, measured by
the difference between the amount realized upon sale or exchange and the cost
basis of the Common Shares so acquired. If a Redeemable Warrant is not
exercised, but is sold or exchanged (whether pursuant to redemption or
otherwise), gain or loss will be recognized upon such event measured by the
difference between the amount realized by the holder of the Redeemable Warrant
as a result of the sale, exchange or redemption and the cost basis of the
Redeemable Warrant.
If a Redeemable Warrant is not exercised and is allowed to expire, the
Redeemable Warrant will be deemed to be sold or exchanged on the date of
expiration. In such event, the holder of the Redeemable Warrant will recognize a
loss to the extent of the cost basis of the Redeemable Warrant.
Generally, any gain or loss recognized as a result of the foregoing will be
a capital gain or loss and will either be long-term or short-term depending upon
the period of time the Common Shares sold or exchanged or the Redeemable Warrant
sold, exchanged, redeemed, or allowed to expire, as the case may be, was held. A
holding period of more than one year results in long term capital gain or loss
treatment. If a Redeemable Warrant is exercised, the holding period of the
Common Shares so acquired will not include the period during which the
Redeemable Warrant was held.
This summary is of a general nature only and is not intended to be, and
should not be construed to be, legal or tax advice to any prospective investor
and no representation with respect to the tax consequences to any particular
investor is made.
INVESTMENT CANADA ACT
The Investment Canada Act is a Federal Canadian statute which regulates the
acquisition of control of existing Canadian businesses and the establishment of
new Canadian businesses by an entity that is a 'non-Canadian' as that term is
defined in the Investment Canada Act.
The Company believes that it is not currently a 'non-Canadian' for purposes
of the Investment Canada Act. If the Company were to become a 'non-Canadian' in
the future, acquisitions of control of Canadian businesses by the Company would
become subject to the Investment Canada Act. Generally, the direct acquisition
by a 'non-Canadian' of an existing Canadian business with gross assets of
$5,000,000 or more is reviewable under the investment Canada Act, with a
threshold of $168 million for 1996 for 'NAFTA investors,' as defined under the
Investment Canada Act.
Indirect acquisitions of existing Canadian businesses (with gross assets
over certain threshold levels) as well as acquisitions of businesses relating to
Canada's cultural heritage or national identity
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(regardless of the value of assets involved) may also be reviewable under the
Investment Canada Act. In addition, acquisitions of control of existing
investments to establish new, unrelated businesses are not generally reviewable
but do require that a notice of the investment be given under the Investment
Canada Act. An investment is a new business that is related to the
non-Canadian's existing business in Canada is not notifiable under the
Investment Canada Act unless such investment relates to Canada's cultural
heritage or national identity.
Investments which are reviewable under the Investment Canada Act are
reviewed by the Minister, designated as being responsible for the administration
of the Investment Canada Act. Reviewable investments may not be implemented
prior to the Minister determining that the investment is likely to be of 'net
benefit to Canada' based on the criteria set out in the Investment Canada Act.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
by and between the Company and the Underwriter (the 'Underwriting Agreement'),
the Underwriter has agreed to purchase from the Company, and the Company has
agreed to sell to the Underwriter, an aggregate of 1,250,000 shares of Common
Stock and 1,500,000 Warrants, at the initial public offering prices less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of certificates representing the shares of Common
Stock and Warrants are subject to certain conditions precedent, and that the
Underwriter will purchase all of the shares of Common Stock and Warrants shown
above if any of such shares of Common Stock or Warrants are purchased.
The Underwriter has advised the Company that it proposes initially to offer
the shares of Common Stock and Warrants directly to the public at the initial
public offering prices set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share and $ per Warrant. After the initial public offering, the public
offering price and concession may be changed.
The Company has granted to the Underwriter an option, exercisable during
the 45-day period after the date of this Prospectus, to purchase up to an
aggregate of 187,500 additional shares of Common Stock and 225,000 Warrants at
the initial public offering prices less the underwriting discounts and
commissions set forth on the cover page of this Prospectus. The Underwriter may
exercise this option only to cover over-allotments, if any, made in connection
with the sale of Common Stock and Warrants offered hereby.
The Company has agreed to pay to the Underwriter a non-accountable expense
allowance equal to 3% of the gross proceeds of this offering, including any
Common Stock and Warrants purchased pursuant to the Underwriter's over-allotment
option, no portion of which has been paid to date.
The Company has granted to the Underwriter the right to appoint one person
to serve on its Board of Directors or to function as an observer at meetings of
the Board, subject to the Company's approval, for a period of three years from
the date of this Prospectus. The Underwriter has not yet identified a
representative to be appointed to the Board of Directors or to serve as an
observer.
The Company and the Underwriter have agreed to indemnify each other
against, or to contribute to losses arising out of, certain civil liabilities in
connection with this offering, including liabilities under the Securities Act.
The Company has agreed not to sell, issue, or grant any options (other than
pursuant to a qualified employee stock option plan) or otherwise dispose of any
security without the Underwriter's consent for three (3) years after the date of
this Prospectus.
All of the Company's officers, directors and stockholders have agreed not
to offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or rights to acquire shares of Common Stock without the prior written
consent of the Underwriter for a period of three years after the date of this
Prospectus, and have also agreed not to sell for an additional twelve (12) month
period if the Company has not achieved after tax net earnings of $3,000,000 for
the fiscal year ended July 31, 1999.
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The Company has agreed to sell to the Underwriter, for an aggregate price
of $10, the right to purchase up to an aggregate of 125,000 shares of Common
Stock and 150,000 Warrants (the 'Underwriter's Purchase Options'). The
Underwriter's Purchase Options will be exercisable for a four-year period
commencing one year after the date of the Prospectus, at an exercise price equal
to 120% of the initial public offering prices of the Common Stock and Warrants
being offered hereby. The Warrants underlying the Underwriter's Options have the
same terms and conditions as the Warrants to be sold to the public in this
offering, except that they are subject to redemption by the Company at any time
after the Underwriter's Options have been exercised and the underlying Warrants
are outstanding. The Underwriter's Options may not be sold, assigned,
transferred, pledged or hypothecated for a period of five years from the date of
the Prospectus except to the Underwriter or its officers.
The Company has agreed to file, during the four-year period beginning one
year from the date of the Prospectus, on one or more separate occasion (on only
one occasion at the cost of the Underwriter), at the request of the holders of a
majority of the Underwriter's Options, and to use its best efforts to cause to
become effective, a post-effective amendment to the Registration Statement or a
new registration statement under the Securities Act, as required to permit the
public sale of the shares of Common Stock and Warrants issued or issuable upon
exercise of the Underwriter's Purchase Options. In addition, the Company has
agreed to give advance notice to holders of the Underwriter's Purchase Options
of its intention to file certain registration statements commencing one year and
ending five years after the date of the Prospectus, and in such case, holders of
such Underwriter's Purchase Options or underlying shares of Common Stock and
Warrants shall have the right to require the Company to include all or part of
such shares of Common Stock and Warrants underlying such Underwriter's Purchase
Options in such registration statement at the Company's expense.
For the life of the Underwriter's Purchase Options, the holders thereof are
given the opportunity to profit from a rise in the market price of the shares of
Common Stock and Warrants, which may result in a dilution of the interests of
other stockholders. As a result, the Company may find it more difficult to raise
additional equity capital if it should be needed for the business of the Company
while the Underwriter's Options are outstanding. The holders of the
Underwriter's Purchase Options might be expected to exercise them at a time when
the Company would, in all likelihood, be able to obtain additional equity
capital on terms more favorable to the Company than those provided by the
Underwriter's Purchase Options. Any profit realized on the sale of the shares of
Common Stock issuable upon the exercise of the Underwriter's Purchase Options
may be deemed additional underwriting compensation.
The underwriting agreement provides for the Underwriter to receive a
finder's fee, ranging from 5% of the first $3,000,000 down to 1% of the excess
over $10,000,000 of the consideration involved in any capital business
transaction (including mergers and acquisitions) consummated by the Company in
which the Underwriter introduced the other party to the Company during the
five-year period following the completion of the offering.
Upon the exercise of the Warrants, the Company will pay the Underwriter a
fee of 4% of the aggregate exercise price if (i) the market price of its Common
Stock on the date the Warrant is exercised is greater than the then exercise
price of the Warrants; (ii) the exercise of the Warrant was solicited by a
member of NASD and the customer states in writing that the transaction was
solicited and designates in writing the broker-dealer to receive compensation
for the exercise; (iii) the Warrant is not held in a discretionary account; (iv)
disclosure of compensation arrangements was made both at the time of the
Offering and at the time of exercise of the Warrants; and (v) the solicitation
of exercise of the Warrant was not in violation of Regulation M promulgated
under the Exchange Act.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities and Exchange Act of 1934, as amended. Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specific
maximum. Syndicate covering transactions involve purchase of the Company's
securities in the open market after the distribution has been completed in order
to cover syndicate short positions. Penalty bids permit the Underwriter to
reclaim a selling concession from syndicate member when the securities
originally sold by such syndicate
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member are purchased in a syndicate covering transaction to cover syndicate
short positions. Such stabling transactions, syndicate covering transactions and
penalty bids may cause the price of the securities to be higher than they would
otherwise be in the absence of such transactions.
The foregoing includes a summary of all of the material terms of the
Underwriting Agreement and does not purport to be complete. Reference is made to
the copy of the Underwriting Agreement that is on file as an exhibit to the
Registration Statement of which this Prospectus is a part.
The Underwriter has informed the Company that no sales will be made to any
account over which the Underwriter exercises discretionary authority.
DETERMINATION OF PUBLIC OFFERING PRICE
Prior to this Offering, there has been no public market for the Securities.
The initial public offering prices for the Securities has been determined by
negotiations between the Company and the Underwriter Among the factors
considered in the negotiations were the market price of the Company's Common
Stock, an analysis of the areas of activity in which the Company is engaged, the
present state of the Company's business, the Company's financial condition, the
Company's prospects, an assessment of management, and the general condition of
the securities market at the time of this Offering. The public offering prices
of the Securities does not necessarily bear any relationship to assets,
earnings, book value or other criteria of value applicable to the Company.
The Company anticipates that the Common Stock and Warrants will be listed
for quotation on The Nasdaq SmallCap Market under the symbols 'LIFT' and
'LIFTW,' respectively, on the Pacific Stock Exchange under the symbols 'LIFT'
and 'LIFTW,' respectively, and on the Boston Stock Exchange under the symbols
'LIFT' and 'LIFTW,' respectively, but there can be no assurances that an active
trading market will develop, even if the securities are accepted for quotation.
The Underwriter intends to make a market in all of the publicly-traded
securities of the Company.
LEGAL MATTERS
Certain legal matters regarding the federal securities laws of the United
States will be passed upon for the Company by Bernstein & Wasserman, LLP, 950
Third Avenue, New York, NY 10022. Bernstein & Wasserman, LLP, has served, and
continues to serve, as counsel to the Underwriter in matters unrelated to this
Offering. Certain legal matters will be passed upon for the Underwriter by
Singer Zamansky, LLP, 40 Exchange Place, New York, NY 10005. The validity of the
securities being offered hereby and certain legal matters regarding Canadian law
will be passed upon for the Company by Farano Green, Suite 1100, 22 St. Clair
Avenue East, Toronto, Ontario, Canada M4T 2Z6.
EXPERTS
Certain of the financial statements of the Company included in this
Prospectus and elsewhere in the Registration Statement, to the extent and for
the periods indicated in their reports, have been examined by Schwartz Levitsky
Feldman, independent chartered accountants, which appear elsewhere herein and in
the Registration Statement.
ADDITIONAL INFORMATION
The Company does not presently file reports and other information with the
Securities and Exchange Commission (the 'Commission'). However, following
completion of this Offering, the Company intends to furnish its stockholders
with annual reports containing audited financial statements examined and
reported upon by its independent public accounting firm and such interim
reports, in each case as it may determine to furnish or as may be required by
law. After the effective date of this Offering, the Company will be subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the 'Exchange Act') and in accordance therewith will file reports, proxy
statements and other information with the Commission.
Reports and other information filed by the Company can be inspected and
copied at the public reference facilities maintained at the Commission at Room
1024, 450 Fifth Street, N.W., Washington,
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DC 20549. Copies of such material can be obtained upon written request addressed
to the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a web site on the
Internet (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission through the Electronic Data Gathering, Analysis and Retrieval
System ('EDGAR'). The Company has filed, through EDGAR, with the Commission a
registration statement on Form SB-2 (herein together with all amendments and
exhibits referred to as the 'Registration Statement') under the Act of which
this Prospectus forms a part. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which have
been omitted in accordance with the rules and regulations of the Commission. For
further information reference is made to the Registration Statement.
41
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC.
GROUP OF COMPANIES
FINANCIAL STATEMENT INDEX
<TABLE>
<CAPTION>
PAGE
-------------
<S> <C>
Review Engagement Report........................................................................... F-2
Interim Combined Balance Sheets, as of May 31, 1997 and 1996 (unaudited)........................... F-3
Interim Combined Statements of Income, for the Ten Months Ended May 31, 1997 and 1996
(unaudited)...................................................................................... F-4
Interim Combined Statements of Cash Flows, for the Ten Months Ended May 31, 1997 and 1996
(unaudited)...................................................................................... F-5
Interim Combined Statements of Stockholders' Equity, for the Ten Months Ended May 31, 1997 and 1996
(unaudited)...................................................................................... F-6
Notes to Interim Combined Financial Statements..................................................... F-7 - F-15
Auditors' Report................................................................................... F-16
Combined Balance Sheets, as of July 31, 1996, 1995 and 1994........................................ F-17
Combined Statements of Income, as of July 31, 1996, 1995 and 1994.................................. F-18
Combined Statements of Cash Flows, as of July 31, 1996, 1995 and 1994.............................. F-19
Combined Statements of Stockholders' Equity, as of July 31, 1996, 1995 and 1994.................... F-20
Notes to Combined Financial Statements............................................................. F-21 - F-28
</TABLE>
F-1
<PAGE>
<PAGE>
REVIEW ENGAGEMENT REPORT
To the Board of Directors and Stockholders of
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES (Note 1)
We have reviewed the interim combined balance sheets of LiftKing Industries
Inc. Group of Companies (note 1) (incorporated in Canada) as at May 31, 1997 and
1996 and the interim combined statements of income, cash flows and changes in
stockholders' equity for the ten months ended May 31, 1997 and 1996. Our review
was made in accordance with generally accepted standards for review engagements
in the United States of America and accordingly consisted primarily of enquiry,
analytical procedures and discussion related to information supplied to us by
the companies.
A review does not constitute an audit and consequently we do not express an
audit opinion on these financial statements.
Based on our reviews, nothing has come to our attention that causes us to
believe that these combined financial statements are not, in all material
respects, in accordance with generally accepted accounting principles in the
United States of America.
Toronto, Ontario
August 15, 1997
Chartered Accountants
F-2
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
INTERIM COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF MAY 31,
-------------------------
1997 1996
----------- ----------
(AMOUNTS EXPRESSED
IN US DOLLARS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash............................................................................ $ 3,957,233 $ 956,887
Accounts receivable............................................................. 2,945,348 2,143,940
Investment tax credits receivable............................................... 336,909 415,982
Inventory (note 2).............................................................. 2,192,079 4,938,426
Prepaid expenses and sundry assets.............................................. 72,567 64,834
----------- ----------
Total current assets....................................................... 9,504,136 8,520,069
Mortgages and notes receivable (note 3).............................................. 153,306 209,163
Capital assets (note 4).............................................................. 479,596 471,217
----------- ----------
Total assets............................................................... $10,137,038 $9,200,449
----------- ----------
LIABILITIES
Current liabilities
Accounts payable................................................................ $ 2,114,832 $1,875,507
Customer deposits............................................................... 698,339 1,156,029
Deferred income taxes........................................................... 97,691 70,134
Income taxes payable............................................................ 533,760 33,310
Current portion of loan payable to affiliated company (note 5).................. 4,009,326 --
----------- ----------
Total current liabilities.................................................. 7,453,948 3,134,980
Loan payable to affiliated company (note 5).......................................... 808,069 5,258,947
Loans payable to related parties..................................................... 19,579 19,715
----------- ----------
Total liabilities.......................................................... $ 8,281,596 $8,413,642
----------- ----------
STOCKHOLDERS' EQUITY
Capital stock (notes 6, 14 and 15)................................................... $ 310 $ 310
Retained earnings.................................................................... 1,941,744 856,999
Cumulative translation adjustments................................................... (86,612) (70,502)
----------- ----------
Total stockholders' equity................................................. 1,855,442 786,807
----------- ----------
Total liabilities and stockholders' equity................................. $10,137,038 $9,200,449
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
INTERIM COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE TEN MONTHS ENDED
MAY 31,
--------------------------
1997 1996
----------- -----------
(AMOUNTS EXPRESSED
IN US DOLLARS)
(UNAUDITED)
<S> <C> <C>
Revenue............................................................................ $17,608,177 $17,814,993
Cost of sales...................................................................... 13,819,052 14,175,210
----------- -----------
Gross profit....................................................................... 3,789,125 3,639,783
----------- -----------
Operating expenses:
Selling....................................................................... 273,868 255,731
Administrative................................................................ 985,761 682,903
Amortization.................................................................. 111,750 123,625
----------- -----------
Total operating expenses................................................. 1,371,379 1,062,259
----------- -----------
Operating income................................................................... 2,417,746 2,577,524
Interest expense................................................................... 447,010 374,276
----------- -----------
Income before income taxes and extraordinary items................................. 1,970,736 2,203,248
Income taxes (note 7)......................................................... 670,066 583,776
----------- -----------
Income before extraordinary items.................................................. 1,300,670 1,619,472
Extraordinary items (note 8).................................................. 34,894 245,970
----------- -----------
Net income......................................................................... $ 1,265,776 $ 1,373,502
----------- -----------
----------- -----------
Net income before extraordinary items per weighted average common share............ $0.30 $0.37
Extraordinary items per weighted average common share.............................. $(0.01) $(0.06)
Net income per weighted average common share....................................... $0.29 $0.31
Weighted average number of common shares outstanding (note 14)..................... 4,400,000 4,400,000
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
INTERIM COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE TEN MONTHS ENDED
MAY 31,
-------------------------
1997 1996
---------- -----------
(AMOUNTS EXPRESSED
IN US DOLLARS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income...................................................................... $1,265,776 $ 1,373,502
---------- -----------
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
Amortization............................................................... 111,750 123,625
Loss on write off of mortgages and notes receivable........................ -- 244,119
Decrease/(increase) in accounts receivable................................. (288,507) 4,014,956
Decrease/(increase) in inventory........................................... 2,355,306 (958,277)
Decrease/(increase) in prepaid expenses.................................... 86,022 4,412
Increase/(decrease) in accounts payable.................................... 432,667 (2,079,793)
Increase/(decrease) in customer deposits................................... (550,844) (4,634,691)
Increase/(decrease) in income taxes payable................................ 524,000 26,807
Increase/(decrease) in deferred income taxes............................... 14,402 30,862
---------- -----------
Total adjustments..................................................... 2,884,793 (2,647,124)
---------- -----------
Net cash (used in)/provided by operating activities.................................. 4,150,569 (1,273,622)
---------- -----------
Cash flows from investing activities:
Mortgages and notes receivable repaid (advanced)................................ 51,312 (22,110)
Additions to capital assets..................................................... (144,910) (209,972)
---------- -----------
Net cash used in investing activities...................................... (93,598) (232,082)
---------- -----------
Cash flows from financing activities:
Issuance of special shares...................................................... -- 735
Redemption of special shares.................................................... -- (734,808)
Dividends paid.................................................................. (243,366) (735)
Advances from (repayments to) affiliated company................................ (369,148) 1,400,562
Repayment to related parties.................................................... -- (61,184)
---------- -----------
Net cash (used in)/provided by financing activities........................ (612,514) 604,570
---------- -----------
Effect of foreign currency exchange rate changes..................................... (36,764) (1,714)
---------- -----------
Net increase (decrease) in cash and cash equivalents................................. 3,407,693 (902,848)
Cash:
Beginning of period............................................................. 549,540 1,859,735
---------- -----------
End of period................................................................... 3,957,233 956,887
---------- -----------
Income tax (refunds received)........................................................ (109,809) (136,705)
---------- -----------
Interest paid........................................................................ $ 109,226 $ 336,169
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
INTERIM COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE TEN MONTHS ENDED MAY 31
---------------------------------------------------
COMMON STOCK CUMULATIVE
NUMBER OF RETAINED TRANSLATION
SHARES AMOUNT EARNINGS ADJUSTMENTS
------------ ------ ---------- -----------
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance as of July 31, 1995................................ 387 $310 $ 218,305 $ (66,225)
Foreign currency translation.......................... -- -- -- (4,277)
Dividends paid (note 6)............................... -- -- (735) --
Excess of redemption proceeds over stated capital of
special shares (note 6)............................. -- -- (734,073) --
Net income for the period............................. -- -- 1,373,502 --
--- ------ ---------- -----------
Balance as of May 31, 1996................................. 387 310 856,999 (70,502)
--- ------ ---------- -----------
Balance as of July 31, 1996................................ 387 310 919,334 (73,944)
Foreign currency translation.......................... -- -- -- (12,668)
Dividends paid........................................ -- -- (243,366) --
Net income for the period............................. -- -- 1,265,776 --
--- ------ ---------- -----------
Balance as of May 31, 1997................................. 387 $310 $1,941,744 $ (86,612)
--- ------ ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION
These financial statements of LiftKing Industries Inc. Group of Companies
combine the accounts of the following companies as at their respective ten
months period ended:
<TABLE>
<S> <C>
LiftKing Industries Inc. ....................................... May 31, 1996 and 1997
LiftKing Incorporated........................................... May 31, 1996 and 1997
Liftmaster Limited.............................................. April 30, 1996 and 1997
463291 Ontario Limited.......................................... May 31, 1996 and 1997
</TABLE>
All material inter-company accounts and transactions have been eliminated
on combination.
B) PRINCIPAL ACTIVITIES
The LiftKing Industries Inc. Group of Companies is principally engaged in
the production of heavy transportation, construction and military equipment in
Canada and its distributions in Canada, the United States of America and Mexico.
Each of the companies within the Group was incorporated in Canada on the
following dates:
<TABLE>
<S> <C>
LiftKing Industries Inc. ............................................ April 25, 1989
LiftKing Incorporated................................................ May 24, 1988
Liftmaster Limited................................................... November 10, 1976
463291 Ontario Limited............................................... December 4, 1980
</TABLE>
C) CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, amounts due from and to
banks, and any other highly liquid investments purchased with a maturity of
three months or less. The carrying amount approximates fair value because of the
short maturity of those instruments.
D) OTHER FINANCIAL INSTRUMENTS
The carrying amount of the companies' accounts receivables and payables
approximates fair value because of the short maturity of these instruments.
E) INVENTORY
Raw material is valued at the lower of cost and net realizable value. Cost
is determined on the first-in, first-out basis. Finished goods and
work-in-process have been valued at the lower of cost (which includes raw
materials, direct labor and a portion of factory overhead) and net realizable
value.
F) CAPITAL ASSETS
Capital assets are recorded at cost and are amortized on the basis over
their estimated useful lives at the undernoted rates and methods:
<TABLE>
<S> <C> <C>
Plant equipment............................................... 20% Declining balance
Automotive equipment.......................................... 30% Declining balance
Office equipment.............................................. 20% Declining balance
Computer hardware............................................. 30% Declining balance
Computer software............................................. 100% Declining balance
Leasehold improvements........................................ 20% Straight-line
</TABLE>
F-7
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
Amortization for assets acquired during the period are recorded at one-half
of the indicated rates, which approximates when they were put into use.
G) INCOME TAXES
The companies account for income tax under the provisions of Statement of
Financial Accounting Standards No. 109, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred
income taxes are provided using the liability method. Under the liability
method, deferred income taxes are recognized for all significant temporary
differences between the tax and financial statement bases of assets and
liabilities.
H) DEFERRED INCOME TAXES
Deferred income taxes represent the tax benefits derived from timing
differences between amortization of capital assets charged to operations and
amounts deducted from taxable income.
I) GOVERNMENT ASSISTANCE AND INVESTMENT TAX CREDITS
Government assistance and investment tax credits are recorded on the
accrual basis and are accounted for as a reduction of the related current or
capital expenditures.
J) FOREIGN CURRENCY TRANSLATION
The companies maintain their books and records in Canadian dollars. Foreign
currency transactions are translated using the temporal method. Under this
method, all monetary items are translated into Canadian funds at the rate of
exchange prevailing at balance sheet date. Non-monetary items are translated at
historical rates. Income and expenses are translated at the rate in effect on
the transaction dates. Transaction gains and losses are included in the
determination of earnings for the period.
The translation of the financial statements from Canadian dollars into
United States dollars is performed for the convenience of the reader. Balance
sheet accounts are translated using closing exchange rates in effect at the
balance sheet date and income and expenses accounts are translated using an
average exchange rate prevailing during each reporting period. No representation
is made that the Canadian dollar amounts could have been or could be, converted
into United States dollars at the rates on the respective dates and or at any
other certain rates. Adjustments resulting from the translation are included in
the cumulative translation adjustments in stockholders' equity.
K) SALES
Sales represent the invoiced value of goods supplied to customers. Sales
are recognized upon delivery of goods and passage of title to customers except
for sales made under contracts. Sales made under contracts are recognized on the
percentage of completion basis with the stage of completion determined
proportionately to cost incurred to date over the estimated total cost of each
contract. Projected losses, if any, are recognized immediately for accounting
purposes.
L) DEVELOPMENT COSTS
The development costs are expensed as incurred.
F-8
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
M) NET INCOME PER WEIGHTED AVERAGE COMMON SHARE
Net income per common share and net income before extraordinary items per
common share are computed by dividing net income and net income before
extraordinary items for the period by the weighted average number of common
shares outstanding taking into account the subsequent reorganization as
disclosed in note 14.
N) USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
O) ACCOUNTING CHANGES
On August 1, 1996, the companies adopted the provisions of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. SFAS No. 121 requires that long-lived assets to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 is effective for financial statements for fiscal years
beginning after December 15, 1995. Adoption of SFAS No. 121 did not have a
material impact on the companies' results of operations.
In December 1995, SFAS No. 123, Accounting for Stock-Based Compensation,
was issued. It introduces the use of a fair value-based method of accounting for
stock-based compensation. It encourages, but does not require, companies to
recognize compensation expense for stock-based compensation to employees based
on the new fair value accounting rules. Companies that choose not to adopt the
new rules will continue to apply the existing accounting rules contained in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. However, SFAS No. 123 requires companies that choose not to adopt the
new fair value accounting rules to disclose pro forma net income and earnings
per share under the new method. SFAS No. 123 is effective for financial
statements for fiscal years beginning after December 15, 1995. The companies
have adopted the disclosure provisions of SFAS No. 123 (see note 15).
2. INVENTORY
Inventory comprised the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw materials..................................................... $ 177,273 $1,298,048
Work-in-progress.................................................. 847,591 2,541,623
Finished goods.................................................... 1,167,215 1,108,755
---------- ----------
$2,192,079 $4,938,426
---------- ----------
---------- ----------
</TABLE>
F-9
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
3. MORTGAGES AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
The mortgages receivable have been written down to net realizable value as
determined by management and are secured by land and buildings and bear
interest at rates between 10% and 15% per annum. The mortgages are overdue,
however, management intends to renew certain mortgages and foreclose on the
security underlying the other mortgages....................................... $112,457 $138,808
Promissory note receivable, secured by leased equipment, bearing interest at 8%
per annum and repayable on demand. Repayment is not expected prior to June 1,
1998.......................................................................... 4,573 33,827
Promissory note receivable, secured by a general security agreement, guarantee
and postponement of claim, bearing interest at 9% per annum and due April 1,
1999.......................................................................... 36,276 36,528
-------- --------
$153,306 $209,163
-------- --------
-------- --------
</TABLE>
LiftKing Incorporated is presently involved in litigation proceedings for
the recovery of two mortgages receivable that are in default. Management is of
the opinion that these proceedings will result in the partial recovery of
amounts owed to the company. The carrying value of these mortgages as at May 31,
1997 is $NIL ($NIL as at May 31, 1996) which is net of a provision for doubtful
recovery in the amount of $531,249 ($532,537 as at May 31, 1996).
With respect to certain other mortgages written-off during 1993, the
companies recovered $18,370 in 1996.
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Plant equipment............................................................. $ 558,958 $ 533,666
Automotive equipment........................................................ 236,738 128,165
Office equipment............................................................ 86,871 87,475
Computer hardware........................................................... 221,262 184,840
Computer software........................................................... 184,243 208,764
Leasehold improvements...................................................... 209,620 211,075
---------- ----------
Cost................................................................... 1,497,692 1,353,985
---------- ----------
Less: Accumulated amortization
Plant equipment........................................................ 404,967 375,584
Automotive equipment................................................... 126,739 116,605
Office equipment....................................................... 51,028 47,763
Computer hardware...................................................... 153,135 131,321
Computer software...................................................... 174,783 116,615
Leasehold improvements................................................. 107,444 94,880
---------- ----------
1,018,096 882,768
---------- ----------
Net......................................................................... $ 479,596 $ 471,217
---------- ----------
</TABLE>
5. LOAN PAYABLE TO AFFILIATED COMPANY
The loan payable to affiliated company bears interest at Canadian prime
plus 3% per annum and is secured by a general security agreement and promissory
note. The security ranks second to and the
F-10
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
repayment of the loan is postponed in favor of the companies' bank. Interest for
the period on the loan amounted to $366,026 ($324,669 in 1996).
The current portion of the loan payable to affiliated company was repaid in
June, 1997.
6. CAPITAL STOCK
a) LiftKing Industries Inc.
<TABLE>
<S> <C>
Authorized.................................................................................
An unlimited number of the following classes of shares.....................................
Class A Preference shares, 9% non-cumulative, voting, redeemable at fair market value......
Class B Preference shares, 9% non-cumulative, voting, retractable at fair market value.....
Common shares..............................................................................
Issued.....................................................................................
</TABLE>
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
1 Common Share.................................................................. $1 $1
---- ----
</TABLE>
b) LiftKing Incorporated
<TABLE>
<S> <C>
Authorized.................................................................................
An unlimited number of the following classes of shares.....................................
Special shares, 10% non-cumulative, non-voting, non-participating, redeemable and
retractable at $726 per share............................................................
Common shares..............................................................................
Issued.....................................................................................
</TABLE>
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
100 Common Shares............................................................... $80 $80
---- ----
</TABLE>
On October 31, 1995, LiftKing Incorporated declared a stock dividend of 10
special shares for each common shares issued and outstanding for a total of
1,000 special shares, with a stated and paid-up capital of $735 in aggregate.
These shares were redeemed in 1996 at an aggregate redemption price of $734,808.
c) Liftmaster Ltd.
<TABLE>
<S> <C>
Capital Stock..............................................................................
Authorized.................................................................................
An unlimited number of the following classes of shares.....................................
Special shares, 10% non-cumulative, non-voting, redeemable and retractable at $73 per
share....................................................................................
Common shares..............................................................................
Issued.....................................................................................
</TABLE>
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
190 Common Shares............................................................. $152 $152
---- ----
</TABLE>
F-11
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
d) 463291 Ontario Limited
<TABLE>
<S> <C>
Capital Stock..............................................................................
Authorized.................................................................................
400,000 Preference shares, 8% non-cumulative, non-participating, non-voting, redeemable at
$7 each..................................................................................
100,000 Common shares......................................................................
Issued.....................................................................................
</TABLE>
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
96 Common Shares.............................................................. $ 77 $ 77
---- ----
</TABLE>
e) Issued -- Combined
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
387 Common Shares............................................................. $310 $310
---- ----
</TABLE>
7. INCOME TAXES
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
a) Current............................................................................ $655,664 $552,914
Deferred........................................................................... 14,402 30,862
-------- --------
670,066 583,776
-------- --------
b) Current income tax consists of:
Amount calculated at basic Federal and Provincial rates....................... 684,000 546,000
Increase (decrease) resulting from:
Ontario super allowance deduction........................................ (31,000) (46,000)
Timing differences....................................................... (14,402) (30,862)
Application of losses carried forward from prior years................... -- (5,000)
Portion of adjustments allocated to extraordinary items.................. 18,000 90,000
Other differences........................................................ (934) (1,224)
-------- --------
Current income taxes.......................................................... $655,664 $552,914
-------- --------
-------- --------
</TABLE>
c) LiftKing Incorporated has paid corporation minimum tax (CMT) for Ontario
in prior years in the amount of $12,650. CMT can be applied to reduce
future provincial income taxes. The potential tax beneficial relating to
the CMT paid had not been recognized in the company's accounts and
expires in 2005.
8. EXTRAORDINARY ITEMS
Extraordinary items include the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
a) Losses suffered on mortgages and notes principal and interest receivable
being non-realizable............................................................. $ -- $244,119
b) Litigation costs and provision of settlement pertaining to lawsuits referred
to in note 12(a)................................................................. 52,894 91,851
-------- --------
52,894 335,970
c) Related income tax recoveries...................................................... (18,000) (90,000)
-------- --------
$ 34,894 $245,970
-------- --------
-------- --------
</TABLE>
F-12
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
9. RELATED PARTY TRANSACTIONS
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Rent paid to an affiliated company........................................................ $255,505 $396,810
Interest on loan payable to an affiliated company......................................... 366,026 324,669
Management fees expense to an affiliated company.......................................... -- 24,494
Amount owing to related parties included in accounts payable.............................. 541,709 --
</TABLE>
10. SALES TO MAJOR CUSTOMERS
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Sales to a major customer........................................................ $ 6,640,102 $ 9,696,983
----------- -----------
% of total sales................................................................. 37.7% 54.4%
----------- -----------
Amounts included in accounts..................................................... 484,451 69,716
Amounts included in customer deposits............................................ 685,759 --
The breakdown of sales by geographic area is as follows:
United States of America.................................................... 12,770,940 11,531,134
Canada...................................................................... 4,337,407 5,575,749
Mexico...................................................................... 499,830 --
Other....................................................................... -- 708,110
----------- -----------
$17,608,177 $17,814,993
----------- -----------
----------- -----------
</TABLE>
11. OPERATING LINE CREDIT
The companies have available a line of credit to a maximum of $3,655,000
($5,000,000 Canadian), which bears interest at Canadian prime plus 0.25% per
annum and is secured by a general assignment of book debts, assignments of
inventory, fire insurance, life insurance, a general security agreement, fixed
charges on property owned by an affiliated company, postponement of claims
signed by various related parties, an assignment of mortgages and notes
receivable, and guarantees and postponements of claims by various affiliated
companies.
12. CONTINGENCIES
a) LiftKing Incorporated is the defendant in a lawsuit instituted by a
competitor claiming damages from a patent infringement in the amount of $870,000
plus expenses. The company has initiated a counter suit for defamation and for
anti-trust. Management has recorded a provision in the amount of $290,000, in
1996, as an estimate of possible settlement amount and expenses related thereto.
The provision is considered to be adequate for the current year. Any further
cost or recoveries resulting from the eventual settlement of this matter will be
recorded in the period in which the settlement occurs.
b) Included in investment tax credits receivable are amounts claimed by
LiftKing Incorporated for its 1994 and 1995 fiscal years that were denied upon
initial assessment by Revenue Canada. The company has filed objections to these
assessments and management believes that the disallowed amounts, totaling
approximately $193,000, will be reassessed in the company's favour. Any
shortfall on eventual settlement of these claims will be recorded in the period
in which the settlement occurs.
F-13
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
13. COMMITMENTS
The aggregate minimum rentals, exclusive of other occupancy charges, for
the lease on the companies' premises are approximately as follows:
<TABLE>
<S> <C>
1998.................................................................. $ 286,000
1999.................................................................. 288,000
2000.................................................................. 288,000
2001.................................................................. 288,000
2002.................................................................. 288,000
2003.................................................................. 48,000
----------
$1,486,000
----------
----------
</TABLE>
14. SUBSEQUENT REORGANIZATION
a) Subsequent to May 31, 1997, the shareholders of Liftmaster Limited
('Liftmaster') and 463291 Ontario Limited ('463291') entered into transactions
whereby a portion of their shares were transferred to a newly incorporated
holding company. Following these transfers, Liftmaster and 463291 purchased such
transferred shares for cancellation at their approximate fair market values of
$331,000 and $228,000, respectively. The stated capital for the shares in
question totals $80. The excess of the purchase consideration over the stated
capital, amounting to approximately $558,920, will be accounted for as a
reduction of retained earnings in the subsequent period.
b) Subsequent to May 31, 1997, LiftKing Industries Inc. ('LII') was
amalgamated with its parent holding company, Dima Products Manufacturing Inc.
('Dima'). Dima had no assets or liabilities other than its ownership interest in
LII. The amalgamated entity will continue as LII. As part of the amalgamation
transaction, the company issued 4,053,643 common shares of the amalgamated
entity to the sole shareholder in exchange for the shares previously issued by
Dima.
c) Subsequent to the above transaction, LII purchased the remaining shares
in Liftmaster and 463291 at their approximate fair market values of $474,000 and
$461,000, respectively. The purchase was completed via the issuance of 346,357
common shares of LII. As the transaction was between related parties, the
acquisition will be accounted for as a pooling of interests.
d) As a result of the above transactions, the number of issued and
outstanding common shares of LII amounted to 4,400,000. Accordingly, the
earnings per share data are presented on a pro-forma basis, giving effect to the
above-noted reorganization.
15. STOCK OPTION PLANS
INCENTIVE OPTION PLAN. In September 1997, the Directors of LiftKing
Industries Inc. ('the Company') adopted and the stockholders of the Company
approved the adoption of the Company's 1997 Incentive Stock Option Plan
('Incentive Option Plan'). The purpose of the Incentive Option Plan is to enable
the Company to encourage key employees and Directors to contribute to the
success of the Company by granting such employees and Directors incentive stock
options ('ISO's').
The Incentive Option Plan will be administered by the Board of Directors or
a committee appointed by the Board of Directors (the 'Committee') which will
determine, in its discretion, among other things, the recipients of grants,
whether a grant will consist of ISO's or a combination thereof, and the number
of shares to be subject to such options.
The Incentive Option Plan provides for the granting of ISO's to purchase
Common Stock at an exercise price to be determined by the Board of Directors or
the Committee not less than the fair market value of the Common Stock on the
date the option is granted.
F-14
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
The total number of shares with respect to which options may be granted
under the Incentive Option Plan is 750,000. ISO's may not be granted to an
individual to the extent that the shares subject to such ISO's have a fair
market value on the date of grant in excess of $100,000. No option may be
granted under the Incentive Option Plan after September 2007 and no option may
be outstanding for more than ten years after its grant. Additionally, no option
can be granted for more than five (5) years to a stockholder owning 10% or more
of the Company's outstanding Common Stock and such options must have an exercise
price of not less than 110% of the fair market value on the date of grant.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock,
or in a combination of both. The Company may lend to the holder of an option
funds sufficient to pay the exercise price, subject to certain limitations.
The Incentive Option Plan may be terminated or amended at any time by the
Board of Directors, except that, without stockholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the
Incentive Option Plan, change the class of persons eligible to receive options
under the Incentive Option Plan or materially increase the benefits of
participants.
To date, no options have been granted under the Incentive Option Plan.
F-15
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES (Note 1)
We have audited the accompanying combined balance sheets of LiftKing
Industries Inc. Group of Companies (note 1) (incorporated in Canada) as at July
31, 1996 and 1995 and the related combined statements of income, cash flows and
changes in stockholders' equity for the years ended July 31, 1996, 1995 and
1994. These combined financial statements are the responsibility of the
management of LiftKing Industries Inc. Group of Companies. Our responsibility is
to express an opinion on these combined financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform an audit to obtain reasonable assurance 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 audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of LiftKing Industries
Inc. Group of Companies as at July 31, 1996 and 1995 and the results of their
operations and their cash flows for the years ended July 31, 1996, 1995 and
1994, in conformity with generally accepted accounting principles in the United
States of America.
Toronto, Ontario
October 4, 1996
Chartered Accountants
Except for note 13 which is
August 15, 1997
F-16
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF JULY 31,
---------------------------------
1996 1995
---- ----
(AMOUNTS EXPRESSED IN US DOLLARS)
<S> <C>
ASSETS
Current assets
Cash................................................................... $ 549,540 $ 1,859,735
Accounts receivable.................................................... 2,666,758 6,159,574
Investment tax credits receivable...................................... 536,260 997,347
Inventory (note 2)..................................................... 4,535,136 4,001,173
Prepaid expenses and sundry assets..................................... 158,122 69,490
----------- -----------
Total current assets.............................................. 8,445,816 13,087,319
Mortgages and notes receivable (note 3)..................................... 204,628 431,561
Capital assets (note 4)..................................................... 447,852 387,153
----------- -----------
Total assets...................................................... $ 9,098,296 $13,906,033
----------- -----------
----------- -----------
LIABILITIES
Current liabilities
Accounts payable....................................................... $ 1,691,006 $ 3,958,625
Customer deposits...................................................... 1,246,804 5,786,376
Deferred income taxes.................................................. 83,655 39,604
Income taxes payable................................................... 15,160 6,684
----------- -----------
Total current liabilities......................................... 3,036,625 9,791,289
Loan payable to affiliated company (note 5)................................. 5,196,339 3,881,498
Loans payable to related parties............................................ 19,631 80,858
----------- -----------
Total liabilities................................................. $ 8,252,595 $13,753,645
----------- -----------
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock (notes 6 and 13).............................................. $ 310 $ 310
Retained earnings........................................................... 919,334 218,304
Cumulative translation adjustments.......................................... (73,943) (66,226)
----------- -----------
Total stockholders' equity........................................ 845,701 152,388
----------- -----------
Total liabilities and stockholders' equity........................ $ 9,098,296 $13,906,033
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
(AMOUNTS EXPRESSED IN US DOLLARS)
<S> <C> <C> <C>
Revenue............................................................. $20,092,782 $20,252,059 $11,818,047
Cost of sales.................................................. 16,123,996 16,963,755 10,142,264
----------- ----------- -----------
Gross profit........................................................ 3,968,786 3,288,304 1,675,783
----------- ----------- -----------
Operating expenses
Selling........................................................ 287,421 263,243 248,710
Administrative................................................. 774,655 1,282,156 640,285
Amortization................................................... 159,410 108,491 113,390
----------- ----------- -----------
Total operating expenses.................................. 1,221,486 1,653,890 1,002,385
----------- ----------- -----------
Operating income.................................................... 2,747,300 1,634,414 673,398
Interest expense.................................................... 442,030 358,012 230,072
----------- ----------- -----------
Income before income taxes and extraordinary items.................. 2,305,270 1,276,402 443,326
Income taxes (note 7)............................................... 620,972 215,217 75,223
----------- ----------- -----------
Net income before extraordinary items............................... 1,684,298 1,061,185 368,103
Extraordinary items (note 8)........................................ 249,054 435,789 31,133
----------- ----------- -----------
Net income.......................................................... $ 1,435,244 $ 625,396 $ 336,970
----------- ----------- -----------
----------- ----------- -----------
Net income before extraordinary items per weighted average common
share............................................................. $0.38 $0.24 $0.08
----- ----- -----
----- ----- -----
Extraordinary items per weighted average common share............... $(0.05) $(0.10) $(0.00)
------ ------ ------
------ ------ ------
Net income per weighted average common share........................ $0.33 $0.14 $0.08
----- ----- -----
----- ----- -----
Weighted average number of common shares outstanding (note 13)...... 4,400,000 4,400,000 4,400,000
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31
----------------------------------------
1996 1995 1994
----------- ----------- ----------
(AMOUNTS EXPRESSED IN US DOLLARS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................................... $ 1,435,244 $ 625,396 $ 336,970
----------- ----------- ----------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Amortization................................................ 159,410 108,491 113,390
Loss on write off of mortgages and notes receivable......... 243,921 152,813 --
Decrease/(increase) in accounts receivable.................. 3,474,734 (4,554,528) 1,186,385
Increase in investment tax credits.......................... 457,185 (548,849) (14,279)
Decrease/(increase) in inventory............................ (571,844) 362,518 (207,933)
Decrease/(increase) in prepaid expenses..................... (90,030) (7,278) (14,212)
Increase/(decrease) in accounts payable and accrued
expenses.................................................. (2,256,209) 2,289,796 (40,549)
Increase/(decrease) in customer deposits.................... (4,534,319) 4,257,719 123,043
Increase in income taxes payable/recoverable................ 8,610 142,077 (143,060)
Increase in deferred income taxes........................... 44,787 70,417 23,765
----------- ----------- ----------
Total adjustments........................................... (3,063,755) 2,273,176 1,026,550
----------- ----------- ----------
Net cash (used in)/provided by operating activities.... (1,628,511) 2,898,572 1,363,520
----------- ----------- ----------
Cash flows from investing activities:
Proceeds on disposal of capital assets........................... -- 82,120 --
Net change in mortgages and notes receivable..................... (18,421) 154,120 57,313
Additions to capital assets...................................... (221,880) (138,970) (184,281)
----------- ----------- ----------
Net cash (used in)/provided by investing activities.... (240,301) 97,270 (126,968)
----------- ----------- ----------
Cash flows from financing activities:
Issuance of special shares....................................... 735 726 --
Redemption of special shares..................................... (734,214) (1,306,715) --
Dividends paid................................................... (735) (726) --
Advances from affiliated company................................. 1,359,021 1,397,270 46,393
Repayment to related parties..................................... (61,134) (135,875) (276,043)
----------- ----------- ----------
Net cash (used in)/provided by financing activities.... 563,673 (45,320) (229,650)
----------- ----------- ----------
Effect of foreign currency exchange rate changes...................... (5,056) 11,700 (29,048)
----------- ----------- ----------
Net increase (decrease) in cash....................................... (1,310,195) 2,962,222 977,854
Cash
Beginning of year................................................ 1,859,735 (1,102,487) (2,080,341)
----------- ----------- ----------
End of year...................................................... 549,540 1,859,735 (1,102,487)
----------- ----------- ----------
----------- ----------- ----------
Income taxes paid (refunds received).................................. (170,150) 62,748 407,273
----------- ----------- ----------
----------- ----------- ----------
Interest paid......................................................... $ 503,018 $ 447,689 $ 48,026
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31
--------------------------------------------------
COMMON
STOCK CUMULATIVE
NUMBER RETAINED TRANSLATION
OF SHARES AMOUNT EARNINGS ADJUSTMENTS
---------- ------ ----------- -----------
(AMOUNTS EXPRESSED IN US DOLLARS)
<S> <C> <C> <C> <C>
Balance as of July 31, 1993.................................... 286 $232 $ 562,653 $ (47,992)
Issuance of common stock.................................. 100 77 -- --
Foreign currency translation.............................. -- -- -- --
Net income for the year................................... -- -- -- --
--- ------ ----------- -----------
Balance as of July 31, 1994.................................... 386 309 899,623 (73,176)
Issuance of common stock.................................. 1 1 -- --
Foreign currency translation.............................. -- -- -- 6,950
Dividends paid (note 6)................................... -- -- (726) --
Excess of redemption proceeds over stated capital of
special shares (note 6)................................. -- -- (1,305,989) --
Net income for the year................................... -- -- 625,989 --
--- ------ ----------- -----------
Balance as of July 31, 1995.................................... 387 310 218,304 (66,226)
Foreign currency translation.............................. -- -- -- (7,717)
Dividends paid (note 6)................................... -- -- (735) --
Excess of redemption proceeds over stated capital of
special shares (note 6)................................. -- -- (733,479) --
Net income for the year................................... -- -- 1,435,244 --
--- ------ ----------- -----------
Balance as of July 31, 1996.................................... 387 $310 $ 919,334 $ (73,943)
--- ------ ----------- -----------
--- ------ ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION
These financial statements of LiftKing Industries Inc. Group of Companies
combine the accounts of the following companies as at their respective year
ends:
<TABLE>
<S> <C>
LiftKing Industries Inc. ............................. July 31, 1994, 1995 and 1996
LiftKing Incorporated................................. July 31, 1994, 1995 and 1996
Liftmaster Limited.................................... April 30, 1994, 1995 and 1996
463291 Ontario Limited................................ October 31, 1994, 1995 and 1996
</TABLE>
All material inter-company accounts and transactions have been eliminated
on combination.
B) PRINCIPAL ACTIVITIES
The LiftKing Industries Inc. Group of Companies is principally engaged in
the production of heavy transportation, construction and military equipment in
Canada and its distributions in Canada, the United States of America and Mexico.
Each of the companies within the Group was incorporated in Canada on the
following dates:
<TABLE>
<S> <C>
LiftKing Industries Inc. ............................................. April 25, 1989
LiftKing Incorporated................................................. May 24, 1988
Liftmaster Limited.................................................... November 10, 1976
463291 Ontario Limited................................................ December 4, 1980
</TABLE>
C) CASH AND CASH EQUIVALENTS (BANK INDEBTEDNESS)
Cash and cash equivalents (bank indebtedness) includes cash on hand,
amounts due from and to banks, and any other highly liquid investments purchased
with a maturity of three months or less. The carrying amount approximates fair
value because of the short maturity of those instruments.
D) OTHER FINANCIAL INSTRUMENTS
The carrying amount of the companies' accounts receivables and payables
approximates fair value because of the short maturity of these instruments.
E) INVENTORY
Raw material is valued at the lower of cost and net realizable value. Cost
is determined on the first-in, first-out basis. Finished goods and
work-in-process have been valued at the lower of cost (which includes raw
materials, direct labor and a portion of factory overhead) and net realizable
value.
F ) CAPITAL ASSETS
Capital Assets are recorded at cost and are amortized on the basis over
their estimated useful lives at the undernoted rates and methods:
<TABLE>
<S> <C>
Plant equipment......................................... 20% Declining Balance
Automotive equipment.................................... 30% Declining Balance
Office equipment........................................ 20% Declining Balance
Computer hardware....................................... 30% Declining Balance
Computer software....................................... 100% Declining Balance
Leasehold improvements.................................. 20% Straight-line
</TABLE>
F-21
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
Amortization for assets acquired during the year are recorded at one-half
of the indicated rates, which approximates when they were put into use.
G) INCOME TAXES
The companies account for income tax under the provisions of Statement of
Financial Accounting Standards No. 109, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred
income taxes are provided using the liability method. Under the liability
method, deferred income taxes are recognized for all significant temporary
differences between the tax and financial statement bases of assets and
liabilities.
H) DEFERRED INCOME TAXES
Deferred income taxes represent the tax benefits derived from timing
differences between amortization of capital assets charged to operations and
amounts deducted from taxable income.
I) GOVERNMENT ASSISTANCE AND INVESTMENT TAX CREDITS
Government assistance and investment tax credits are recorded on the
accrual basis and are accounted for as a reduction of the related current or
capital expenditures.
J) FOREIGN CURRENCY TRANSLATION
The companies maintain their books and records in Canadian dollars. Foreign
currency transactions are translated using the temporal method. Under this
method, all monetary items are translated into Canadian funds at the rate of
exchange prevailing at balance sheet date. Non-monetary items are translated at
historical rates. Income and expenses are translated at the rate in effect on
the transaction dates. Transaction gains and losses are included in the
determination of earnings for the year.
The translation of the financial statements from Canadian dollars into
United States dollars is performed for the convenience of the reader. Balance
sheet accounts are translated using closing exchange rates in effect at the
balance sheet date and income and expenses accounts are translated using an
average exchange rate prevailing during each reporting period. No representation
is made that the Canadian dollar amounts could have been or could be, converted
into United States dollars at the rates on the respective dates and or at any
other certain rates. Adjustments resulting from the translation are included in
the cumulative translation adjustments in stockholders' equity.
K) SALES
Sales represent the invoiced value of goods supplied to customers. Sales
are recognized upon delivery of goods and passage of title to customers except
for sales made under contracts. Sales made under contracts are recognized on the
percentage of completion basis with the stage of completion determined
proportionately to cost incurred to date over the estimated total cost of each
contract. Projected losses, if any, are recognized immediately for accounting
purposes.
F-22
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
L) DEVELOPMENT COSTS
The development costs were expensed as incurred.
M) NET INCOME PER WEIGHTED AVERAGE COMMON SHARE
Net income per common share and net income before extraordinary items per
common share are computed by dividing net income and net income before
extraordinary items for the year by the weighted average number of common shares
outstanding taking into account the subsequent reorganization as disclosed in
note 13.
N) USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. INVENTORY
Inventory comprised the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials..................................................... $ 123,852 $ 527,984
Work-in-process................................................... 2,169,213 2,813,530
Finished goods.................................................... 2,242,071 659,659
---------- ----------
$4,535,136 $4,001,173
---------- ----------
---------- ----------
</TABLE>
3. MORTGAGES AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
The mortgages receivable have been written down to net realizable
value as determined by management and are secured by land and
buildings and bear interest at rates between 10% and 15% per annum.
The mortgages are overdue, however, management intends to renew
certain mortgages and foreclose on the security underlying the other
mortgages........................................................... $134,574 $397,603
Promissory note receivable, secured by leased repayable on demand.
Repayment is not expected prior to August 1, 1997................... 33,682 33,958
Promissory note receivable, secured by a general security agreement,
guarantee and postponement of claim, bearing interest at 9% per
annum and due April 1, 1999......................................... 36,372 --
-------- --------
$204,628 $431,561
-------- --------
-------- --------
</TABLE>
LiftKing Incorporated is presently involved in litigation proceedings for
the recovery of two mortgages receivable that are in default. Management is of
the opinion that these proceedings will result in the partial recovery of
amounts owed to the company. The carrying value of these mortgages as at July
31, 1996 is $Nil ($243,653 as at July 31, 1995) which is net of a provision for
doubtful recovery in the amount of $532,641 ($293,363 as at July 31, 1995).
With respect to certain other mortgages written-off during 1993, the
companies recovered $18,355 in 1996.
F-23
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Plant equipment............................................................. $ 531,375 $ 532,807
Automotive equipment........................................................ 137,799 128,663
Office equipment............................................................ 87,098 75,722
Computer hardware........................................................... 208,971 175,374
Computer software........................................................... 113,818 71,490
Leasehold improvements...................................................... 210,169 165,619
---------- ----------
Cost................................................................... 1,289,230 1,149,675
---------- ----------
Less: Accumulated amortization
Plant equipment........................................................ 379,041 346,436
Automotive equipment................................................... 118,400 113,190
Office equipment....................................................... 49,361 41,767
Computer hardware...................................................... 134,179 110,792
Computer software...................................................... 56,908 71,490
Leasehold improvements................................................. 103,489 78,847
---------- ----------
841,378 762,522
---------- ----------
Net......................................................................... $ 447,852 $ 387,153
---------- ----------
---------- ----------
</TABLE>
5. LOAN PAYABLE TO AFFILIATED COMPANY
The loan payable to an affiliated company bears interest at prime plus 3%
per annum and is secured by a general security agreement and promissory note.
The security ranks second to an the repayment of the loan is postponed in favor
of the companies' bank. Interest in 1996 on the loan amounted to $410,707
($264,730 in 1995).
6. CAPITAL STOCK
a) LiftKing Industries Inc.
<TABLE>
<S> <C>
Authorized........................................................................
An unlimited number of the following classes of shares............................
Class A Preference shares, 9% non-cumulative, voting, redeemable at fair market
value...........................................................................
Class B Preference shares, 9% non-cumulative, voting, retractable at fair market
value...........................................................................
Common shares.....................................................................
Issued............................................................................
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
1 Common Share.................................................................. $1 $1
---- ----
---- ----
</TABLE>
F-24
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
b) LiftKing Incorporated
<TABLE>
<S> <C>
Authorized........................................................................
An unlimited number of the following classes of shares............................
Special shares, 10% non-cumulative, non-voting, non-participating, redeemable and
retractable at $727 per share...................................................
Common shares.....................................................................
Issued............................................................................
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
100 Common Shares............................................................. $ 80 $ 80
---- ----
---- ----
</TABLE>
On March 16, 1995, LiftKing Incorporated declared a stock dividend of 18
special shares for each common share issued and outstanding for a total of 1,800
special shares, with a stated and paid-up capital of $726 in aggregate. These
shares were redeemed in 1995 at an aggregate redemption price of $1,306,715.
On October 31, 1995, LiftKing Incorporated declared a stock dividend of 10
special shares for each common shares issued and outstanding for a total of
1,000 special shares, with a stated and paid-up capital of $735 in aggregate.
These shares were redeemed in 1996 at an aggregate redemption price of $734,214.
c) Liftmaster Ltd.
<TABLE>
<S> <C>
Capital Stock.....................................................................
Authorized........................................................................
An unlimited number of the following classes of shares............................
Special shares, 10% non-cumulative, non-voting, redeemable and retractable at $73
per share.......................................................................
Common shares.....................................................................
Issued............................................................................
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
190 Common Shares............................................................. $152 $152
---- ----
---- ----
</TABLE>
d) 463291 Ontario Limited
<TABLE>
<S> <C>
Capital Stock.....................................................................
Authorized
400,000 Preference shares, 8% non-cumulative, non-participating, non-voting,
redeemable at $7 each.......................................................
100,000 Common shares........................................................
Issued............................................................................
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
96 Common Shares.............................................................. $ 77 $ 77
---- ----
---- ----
</TABLE>
e) Issued -- Combined
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
387 Common Shares............................................................. $310 $310
---- ----
---- ----
</TABLE>
F-25
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
7. INCOME TAXES
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
(a) Current..................................................... $576,185 $144,800 $ 98,988
Deferred (drawn-down)....................................... 44,787 70,417 (23,765)
-------- -------- --------
$620,972 $215,217 $ 75,223
-------- -------- --------
-------- -------- --------
(b) Current income taxes consists of:
Amount calculated as basic Federal and Provincial rates... $578,000 $165,000 $105,000
Increase (decrease) resulting from:
Ontario super allowance deduction...................... (55,000) (22,000) --
Timing differences..................................... (44,787) (70,417) 23,765
Application of losses carried forward from prior
years................................................ (6,000) -- (25,000)
Portion of adjustments allocated to extraordinary
items................................................ 105,000 80,000 6,000
Other differences...................................... (1,028) (7,783) (10,777)
-------- -------- --------
Current income taxes................................... $576,185 $144,800 $ 98,988
-------- -------- --------
-------- -------- --------
</TABLE>
(c) LiftKing Incorporated has paid corporation minimum tax (CMT) for Ontario
in prior years in the amount of $12,670. CMT can be applied to reduce
future provincial income taxes. The potential tax benefit relating to the
CMT paid has not been recognized in the Company's accounts and expires
in 2005.
8. EXTRAORDINARY ITEMS
Extraordinary items included the following:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- -------
<S> <C> <C> <C>
(a) Losses suffered on mortgages and notes principal and interest
receivable being non-realizable............................ $ 243,921 $152,813 $37,133
--------- -------- -------
(b) Litigation costs and provision for settlement pertaining to
lawsuit referred to in note 12(a).......................... 110,132 362,976 --
--------- -------- -------
354,054 515,789 37,133
(c) Related income tax recoveries................................ (105,000) (80,000) (6,000)
--------- -------- -------
$ 249,054 $435,789 $31,133
--------- -------- -------
--------- -------- -------
</TABLE>
9. RELATED PARTY TRANSACTIONS
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Rent paid to an affiliated company...................... $475,788 $257,692 $ 235,775
Interest on loan payable to affiliated company.......... 410,707 264,730 30,202
Management fees expense (income) to (from) an affiliated
company............................................... 29,369 (69,737) (109,577)
Amount owing to related parties included in accounts
payable............................................... $ -- $513,249 $ --
</TABLE>
F-26
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
10. SALES TO MAJOR CUSTOMERS
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Sales to a major customer.............................. $10,581,047 $12,557,578 $ 4,879,245
----------- ----------- -----------
% of total sales....................................... 52.7% 62.0% 41.3%
----------- ----------- -----------
Amounts included in accounts receivable................ 581,170 4,379,206 --
Amounts included in customer deposits.................. -- 4,469,055 1,459,144
The breakdown of sales by geographic area is as
follows:
United States of America.......................... 12,550,166 14,939,762 10,437,223
Canada............................................ 5,562,659 4,421,889 1,380,824
Mexico............................................ 1,272,417 890,408 --
Other............................................. 707,540 -- --
----------- ----------- -----------
$20,092,782 $20,252,059 $11,818,047
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
11. OPERATING LINE CREDIT
The companies have available a line of credit to a maximum of $3,637,000
($5,000,000 Canadian), which bears interest at prime plus 0.25% per annum and is
secured by a general assignment of book debts, assignments of inventory, fire
insurance, life insurance, a general security agreement, fixed charges on
property owned by an affiliated company, postponement of claims signed by
various related parties, an assignment of mortgages and notes receivable, and
guarantees and postponements of claims by various affiliated companies.
12. CONTINGENCIES
(a) LiftKing Incorporated is the defendant in a lawsuit instituted by a
competitor claiming damages from a patent infringement in the amount of $870,000
plus expenses. The company has initiated a counter suit for defamation and for
anti-trust. Management has recorded a provision in the amount of $290,000 in
1995, as an estimate of possible settlement amount and expenses related thereto.
The provision is considered to be adequate for 1996. Any further cost or
recoveries resulting from the eventual settlement of this matter will be
recorded in the period in which the settlement occurs.
(b) LiftKing Incorporated has signed letters of credit in favour one of its
suppliers for $327,000.
(c) Included in investment tax credits receivable are amounts claimed by
LiftKing Incorporated for its 1994 and 1995 fiscal years that were denied upon
initial assessment by Revenue Canada. The company has filed objections to these
assessments and management believes that the disallowed amounts, totaling
approximately $193,000, will be reassessed in the company's favour. Any
shortfall on eventual settlement of these claims will be recorded in the period
in which the settlement occurs.
13. SUBSEQUENT REORGANIZATION
(a) Subsequent to May 31, 1997, the shareholders of Liftmaster Limited
('Liftmaster') and 463291 Ontario Limited ('463291') entered into transactions
whereby a portion of their shares were transferred to a newly incorporated
holding company. Following these transfers, Liftmaster and 463291 purchased such
transferred shares for cancellation at their approximate fair market values of
$331,000 and $228,000, respectively. The stated capital for the shares in
question totals $80. The excess of the purchase consideration over the stated
capital, amounting to approximately $558,920, will be accounted for as a
reduction of retained earnings in the subsequent period.
F-27
<PAGE>
<PAGE>
LIFTKING INDUSTRIES INC. GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(b) Subsequent to May 31, 1997, LiftKing Industries Inc. ('LII') was
amalgamated with its parent holding company, Dima Products Manufacturing Inc.
('Dima'). Dima had no assets or liabilities other than its ownership interest in
LII. The amalgamated entity will continue as LII. As part of the amalgamation
transaction, the company issued 4,053,643 common shares of the amalgamated
entity to the sole shareholder in exchange for the shares previously issued by
Dima.
(c) Subsequent to the above transaction, LII purchased the remaining shares
in Liftmaster and 463291 at their approximate fair market values of $474,000 and
$461,000, respectively. The purchase was completed via the issuance of 346,357
common shares of LII. As the transaction was between related parties, the
acquisition will be accounted for as a pooling of interests.
(d) As a result of the above transactions, the number of issued and
outstanding common shares of LII amounted to 4,400,000. Accordingly, the
earnings per share data are presented on a pro-forma basis, giving effect to the
above-noted reorganization.
F-28
<PAGE>
<PAGE>
__________________________________ __________________________________
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER WOULD BE UNLAWFUL.
------------------------
THIS OFFERING IS NOT BEING MADE IN CANADA AND IS NOT BEING MADE TO RESIDENTS OF
CANADA.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................................................................................................... 3
The Company............................................................................................................ 3
The Offering........................................................................................................... 5
Summary Financial Information.......................................................................................... 6
Risk Factors........................................................................................................... 7
Use of Proceeds........................................................................................................ 14
Dilution............................................................................................................... 16
Capitalization......................................................................................................... 17
Dividend Policy........................................................................................................ 17
Summary Financial Information.......................................................................................... 18
Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 19
Business............................................................................................................... 22
Management............................................................................................................. 32
Principal Stockholders................................................................................................. 34
Certain Transactions................................................................................................... 34
Description of Securities.............................................................................................. 35
Certain United States Federal Income Tax Considerations................................................................ 36
Investment Canada Act.................................................................................................. 37
Underwriting........................................................................................................... 38
Legal Matters.......................................................................................................... 40
Experts................................................................................................................ 40
Additional Information................................................................................................. 40
Financial Statements................................................................................................... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
1,250,000 SHARES OF COMMON STOCK
AND
1,500,000 REDEEMABLE COMMON
STOCK PURCHASE WARRANTS
LIFTKING INDUSTRIES INC.
---------------------
PROSPECTUS
---------------------
MONROE PARKER
SECURITIES, INC.
, 1997
__________________________________ __________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In connection with the Offering, the Underwriter agreed to indemnify the
Company, its directors, and each person who controls it within the meaning of
Section 15 of the Act with respect to any statement in or omission from the
registration statement or the Prospectus or any amendment or supplement thereto
if such statement or omission was made in reliance upon information furnished in
writing to the Company by the Underwriter specifically for or in connection with
the preparation of the registration statement, the prospectus, or any such
amendment or supplement thereto.
Under the terms of the Company's Certificate of Incorporation, no director
shall be personally liable to the corporation or its shareholders for monetary
damages for breach fiduciary duty as a director, except that this provision
shall not eliminate or limit the liability of any director; (i) for any breach
of the director's duty of loyalty to the corporation or its shareholders; (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law; or (iii) for any transaction from which the
director derived an improper personal benefit. This provision shall also not
eliminate or limit the liability of a director for any act or omission occurring
prior to the date when such provision becomes effective.
Under the terms of the Company's By-Laws, each person who was or is made a
party or is threatened to be made a party or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a 'proceeding'), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators.
The Company does not currently have any liability insurance coverage for
its officers and directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this Offering are as follows:
<TABLE>
<S> <C>
SEC filing fee................................................................. $ 4,568.20
The Nasdaq SmallCap Market filing fee.......................................... 10,000.00
Boston Exchange filing fee..................................................... 7,500.00
Pacif Exchange filing fee...................................................... 7,500.00
NASD filing fee................................................................ 2,007.33
Accounting fees and expenses*.................................................. 55,000.00
Legal fees and expenses*....................................................... 125,000.00
Blue Sky fees and expenses*.................................................... 45,000.00
Printing and engraving*........................................................ 50,000.00
Transfer Agent's and Registrar's fees*......................................... 2,500.00
Miscellaneous expenses*........................................................ 9,174.47
-----------
Total..................................................................... $318,250.00
-----------
-----------
</TABLE>
- ------------
* Estimated
II-1
<PAGE>
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following information sets forth all securities of the Company sold by
it since inception, which securities were not registered under the Securities
Act of 1933, as amended:
LiftKing Industries Inc. was incorporated on April 25, 1989. The
Company is a corporation organized under the laws of the Province of
Ontario, Canada. The Company's sole shareholder was Dima Products
Manufacturing, Inc. ('Dima') a corporation organized under the laws of the
Province of Ontario, Canada, which in turn was wholly owned by Louis
Aldrovandi, the Company's President and Chief Executive Officer. In August
1997, the Company merged with and into Dima, with Dima being the surviving
entity. Under Canadian law, the surviving entity accepted the name of the
terminating entity, LiftKing Industries Inc. In accordance with the merger,
LiftKing Industries Inc. issued 4,053,643 Common Shares of the Company's
Common Stock to the sole shareholder, Louis Aldrovandi, in exchange for the
shares previously issued to Mr. Aldrovandi by Dima.
In August 1997, the Company purchased all of the outstanding shares of
capital stock of Liftmaster Limited ('Liftmaster'), a corporation organized
under the laws of the Province of Ontario, Canada on November 10, 1976,
from its shareholders Grace and Mark Aldrovandi, a Director of the Company.
Also in August 1997, the Company purchased all of the outstanding shares of
capital stock of 463291 Ontario Limited ('463291'), a corporation organized
under the laws of the Province of Ontario, Canada on December 4, 1980, from
its sole shareholder the Aldrovandi Family Trust. In exchange for the
shares of Liftmaster and 463291, the Company issued 42,364 shares of its
Common Stock to Grace Aldrovandi, 133,367 shares of its Common Stock to
Mark Aldrovandi and 170,626 shares of its Common Stock to the Aldrovandi
Family Trust.
The Company has relied on Section 4(2) of the Securities Act of 1933,
as amended, for its private placement exemption, such that the sales of the
securities were transactions by an issuer not involving any public
offering.
ITEM 27. EXHIBITS.
<TABLE>
<C> <S>
1.1 -- Form of Underwriting Agreement.
1.2 -- Form of Selected Dealers Agreement.
3.1 -- Certificate of Incorporation of the Company.
3.2 -- By-Laws of the Company.
4.1 -- Specimen Certificate for shares of Common Stock.*
4.2 -- Specimen Certificate for Warrants.*
4.3 -- Form of Underwriter's Purchase Option
4.4 -- Form of Warrant Agreement
5.1 -- Opinion of Farano Green, counsel to the Company.*
10.1 -- 1997 Incentive Stock Option Plan*
10.2 -- Lease Agreement for premises located at 7135 Islington Avenue, Woodbridge, Ontario Canada L4L 1V9.*
10.3 -- Employment Agreement between the Company and Louis Aldrovandi.*
10.4 -- Employment Agreement between the Company and Mark Aldrovandi.*
21 -- List of Subsidiaries.*
23.1 -- Consent of Bernstein & Wasserman, LLP.*
23.2 -- Consent of Farano Green (to be included in Exhibit 5.01)*
23.3 -- Consent of Schwartz Levitsky Feldman.
</TABLE>
- ------------
* To be filed by amendment.
II-2
<PAGE>
<PAGE>
ITEM 28. UNDERTAKINGS.
(A) RULE 415 OFFERING
The undersigned Registrant will:
1. File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Act, treat each such
post-effective amendment as a new registration statement of the securities
offered, and the Offering of such securities at that time shall be deemed
to be the initial bona fide offering.
3. File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the Offering.
(B) EQUITY OFFERINGS OF NONREPORTING SMALL BUSINESS ISSUERS
The undersigned Registrant will provide to the Underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriter to permit prompt
delivery to each purchaser.
(C) INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or controlling persons of the Registrant
pursuant to the provisions referred to in Item 24 of this Registration Statement
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.
(D) RULE 430A
The undersigned Registrant will:
1. For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in the form of a
prospectus filed by the small business issuer under Rule 424(b)(1) or (4)
or 497(h) under the Act as part of this Registration Statement as of the
time the Commission declared it effective.
2. For any liability under the Act, treat each post-effective
amendment that contains a form of prospectus as a new registration
statement for the securities offered in the Registration Statement, and
that the Offering of the securities at that time as the initial bona fide
Offering of those securities.
II-3
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant, certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in
Woodbridge, Ontario, Canada on September 5, 1997.
LIFTKING INDUSTRIES INC.
By: /s/ LOUIS ALDROVANDI
..................................
LOUIS ALDROVANDI
CHIEF EXECUTIVE OFFICER,
PRESIDENT AND CHAIRMAN
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendments thereto has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
/S/ LOUIS ALDROVANDI Chief Executive Officer, September 5, 1997
......................................... President and Chairman
(LOUIS ALDROVANDI)
/S/ MARK ALDROVANDI Vice President, September 5, 1997
......................................... General Manager and Director
(MARK ALDROVANDI)
</TABLE>
II-4
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
------ ----------------------- -------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
1.2 -- Form of Selected Dealers Agreement.
3.1 -- Certificate of Incorporation of the Company.
3.2 -- By-Laws of the Company.
4.1 -- Specimen Certificate for shares of Common Stock.*
4.2 -- Specimen Certificate for Warrants.*
4.3 -- Form of Underwriter's Purchase Option
4.4 -- Form of Warrant Agreement
5.1 -- Opinion of Farano Green, counsel to the Company.*
10.1 -- 1997 Incentive Stock Option Plan*
10.2 -- Lease Agreement for premises located at 7135 Islington Avenue, Woodbridge,
Ontario Canada L4L 1V9.*
10.3 -- Employment Agreement between the Company and Louis Aldrovandi.*
10.4 -- Employment Agreement between the Company and Mark Aldrovandi.*
21 -- List of Subsidiaries.*
23.1 -- Consent of Bernstein & Wasserman, LLP.*
23.2 -- Consent of Farano Green (to be included in Exhibit 5.01)*
23.3 -- Consent of Schwartz Levitsky Feldman.
</TABLE>
- ------------
* To be filed by amendment.
<PAGE>
<PAGE>
1,250,000 Shares of Common Stock
and
1,500,000 Class A Redeemable Common Stock Purchase Warrants
LIFTKING INDUSTRIES, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
____ __, 1997
Monroe Parker Securities, Inc.
2500 Westchester Avenue
Purchase, New York 10577
LiftKing Industries, Inc., a Canadian corporation (the "Company"), proposes
to issue and sell to you (the "Underwriter"), an aggregate of 1,250,000 shares
of Common Stock and 1,500,000 Class A Redeemable Common Stock Purchase Warrant
("Warrant"). The Common Stock and Warrants may be collectively referred to
hereinafter as the "Securities." Each Warrant entitles the registered holder
thereof to purchase one (1) share of Common Stock at an exercise price of $____
for a period of three (3) years, commencing _____ __, 1998 (one (1) year from
the Effective Date) through _______ __, 2001. The Warrants are subject to
redemption by the Company upon not less than thirty (30) days' notice at any
time after ________ __, 1998 (twelve (12) months from the Effective Date) with
the consent of the Underwriter, and eighteen (18) months after the Effective
date without the consent of the Underwriter, at $.10 per warrant, if the closing
sale price per share of Common Stock has equaled or exceeded 250% of the then
exercise price of the Warrants on all 10 of the trading days ending on the third
day prior to the written notice of redemption. In addition, the Company proposes
to grant to the Underwriter the option referred to in Section 2(b) to purchase
all or any part of an aggregate of 187,500 additional shares of Common Stock and
225,000 additional Warrants.
Unless the context otherwise requires, the aggregate of 1,250,000 shares of
Common Stock and 1,500,000 Warrants to be sold by the Company are herein called
the "Securities." The Common Stock to be outstanding are also called the
"Shares."
You have advised the Company that you desire to purchase the Securities.
The Company confirms the agreements made by it with respect to the purchase of
the Securities by the Underwriter as follows:
<PAGE>
<PAGE>
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with you that:
(a) A registration statement filed pursuant to Rule 429 (File No.
333-_______) and relating back to a Registration Statement (File No. 333-_____)
on Form SB-2 relating to the public offering of the Securities, including a form
of prospectus subject to completion, copies of which have heretofore been
delivered to you, has been prepared in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission under the Act
and one or more amendments to such registration statement may have been so
filed. After the execution of this Agreement, the Company will file with the
Commission either (i) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act, a
prospectus in the form most recently included in an amendment to such
registration statement (or, if no such amendment shall have been filed in such
registration statement), with such changes or insertions as are required by Rule
430A under the Act or permitted by Rule 424(b) under the Act and as have been
provided to and approved by you prior to the execution of this Agreement, or
(ii) if such registration statement, as it may have been amended, has not been
declared by the Commission to be effective under the Act, an amendment to such
registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by you prior to the execution of
this Agreement. As used in this Agreement, the term "Registration Statement"
means such registration statement, as amended at the time when it was or is
declared effective, including all financial schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule 430A under the Act
and included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); and the term
"Prospectus" means the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Act, or, if no prospectus is required to be filed pursuant
to said Rule 424(b), such term means the prospectus included in the Registration
Statement; except that if such registration statement or prospectus is amended
or such prospectus is supplemented, after the effective date of such
registration statement and prior to the Option Closing Date (as hereinafter
defined), the terms "Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term "Prospectus"
shall include the prospectus as so supplemented, or both, as the case may be.
(b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus. At the time the Registration Statement
becomes effective and at all times subsequent thereto up to and on the First
Closing Date (as hereinafter defined) or the Option Closing Date, as the case
may be, (i) the Registration Statement and Prospectus will in all respects
conform to the requirements of the Act and the Rules and Regulations; and (ii)
neither the Registration Statement nor the Prospectus will include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make statements therein
2
<PAGE>
<PAGE>
not misleading; provided, however, that the Company makes no representations,
warranties or agreements as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus with respect to stabilization, under the
heading "Underwriting" and the identity of counsel to the Underwriter under the
heading "Legal Matters" constitute for purposes of this Section and Section 6(b)
the only information furnished in writing by or on behalf of the Underwriter for
inclusion in the Registration Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation with full corporate power and authority to own its properties and
conduct its business as described in the Prospectus and is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
other jurisdiction in which the nature of its business or the character or
location of its properties requires such qualification, except where the failure
to so qualify will not materially adversely affect the Company's business,
properties or financial condition.
(d) The authorized, issued and outstanding capital stock of the Company,
including the predecessors of the Company, is as set forth the Company's
financial statements contained in the Registration Statement; the shares of
issued and outstanding capital stock of the Company set forth therein have been
duly authorized, validly issued and are fully paid and nonassessable; except as
set forth in the Prospectus, no options, warrants, or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company have
been granted or entered into by the Company; and the capital stock conforms to
all statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Securities and the shares of Common Stock, when paid for, issued
and delivered pursuant to this Agreement, will have been duly authorized, issued
and delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms, except as enforceability may
be limited by bankruptcy, insolvency or other laws affecting the right of
creditors generally or by general equitable principles, and entitled to the
rights and preferences provided by the Certificate of Incorporation, which will
be in the form filed as an exhibit to the Registration Statement. The terms of
the Common Stock conform to the description thereof in the Registration
Statement and Prospectus.
The Warrants, when paid for, issued and delivered pursuant to this
Agreement, will have been duly authorized, issued and delivered and will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the right of creditors generally
or by general equitable principles, and entitled to the benefits provided by the
warrant agreement pursuant to which such Warrants are to be issued (the "Warrant
Agreement"), which will be substantially in the form filed as an exhibit to the
Registration Statement. The shares of Common Stock issuable
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upon exercise of the Warrants have been reserved for issuance upon the exercise
of the Warrants and when issued in accordance with the terms of the Warrants and
Warrant Agreement, will be duly and validly authorized validly issued, fully
paid and non-assessable and free of preemptive rights. The Warrant Agreement has
been duly authorized and, when executed and delivered pursuant to this
Agreement, assuming due authorization, execution and delivery by the transfer
agent, will have been duly executed and delivered and will constitute the valid
and legally binding obligation of the Company enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
other laws affecting the rights of creditors generally or by general equitable
principles. The Warrants and Warrant Agreement conform to the respective
descriptions thereof in the Registration Statement and Prospectus.
The Purchase Option (as defined in the Registration Statement), when
paid for, issued and delivered pursuant to this Agreement will constitute valid
and legally binding obligations of the Company enforceable in accordance with
their terms and entitled to the benefits provided by the Purchase Option, except
as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally or by general equitable principles.
The Securities issuable upon exercise of the Purchase Option (and the shares of
Common Stock issuable upon exercise of the Warrants) when issued and paid for in
accordance with this Agreement, the Purchase Option and the Warrant Agreement,
will be duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights.
(f) This Agreement has been duly and validly authorized, executed and
delivered by the Company. The Company has full power and authority to authorize,
issue and sell the Securities to be sold by it hereunder on the terms and
conditions set forth herein, and no consent, approval, authorization or other
order of any governmental authority is required in connection with such
authorization, execution and delivery or in connection with the authorization,
issuance and sale of the Securities or the Purchase Option, except such as may
be required under the Act or state securities laws.
(g) Except as described in the Prospectus, or which would not have a
material adverse effect on the condition (financial or otherwise), business
prospects, net worth or properties of the Company (a "Material Adverse Effect"),
the Company is not in violation, breach or default of or under, and consummation
of the transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach or violation of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company, pursuant to the terms of any material
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets of the Company is subject, nor will
such action result in any violation of the provisions of the certificate of
incorporation or the by-laws of the Company, as amended, or any statute or any
order, rule or regulation applicable to the Company of any court or of any
regulatory authority or other governmental body having jurisdiction over the
Company.
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(h) Subject to the qualifications stated in the Prospectus, the Company
has good and marketable title to all properties and assets described in the
Prospectus as owned by it, free and clear of all liens, charges, encumbrances or
restrictions, except such as are not materially significant or important in
relation to its business; all of the material leases and subleases under which
the Company is the lessor or sublessor of properties or assets or under which
the Company holds properties or assets as lessee or sublessee as described in
the Prospectus are in full force and effect, and, except as described in the
Prospectus, the Company is not in default in any material respect with respect
to any of the terms or provisions of any of such leases or subleases, and, to
the best knowledge of the Company, no claim has been asserted by anyone adverse
to rights of the Company as lessor, sublessor, lessee or sublessee under any of
the leases or subleases mentioned above, or affecting or questioning the right
of the Company to continued possession of the leased or subleased premises or
assets under any such lease or sublease except as described or referred to in
the Prospectus; and the Company owns or leases all such properties described in
the Prospectus as are necessary to its operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted as set forth
in the Prospectus.
(i) Schwartz Levitsky Feldman, which has given its report on certain
financial statements filed with the Commission as a part of the Registration
Statement, is with respect to the Company, independent public accountants as
required by the Act and the Rules and Regulations.
(j) The financial statements, and schedules together with related notes,
set forth in the Prospectus or the Registration Statement present fairly the
financial position and results of operations and changes in cash flow position
of the Company on the basis stated in the Registration Statement, at the
respective dates and for the respective periods to which they apply. Said
statements and schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a basis which is consistent
during the periods involved except as disclosed in the Prospectus and
Registration Statement.
(k) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus and except as otherwise disclosed
or contemplated therein, the Company has not incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of business, or
entered into any transaction not in the ordinary course of business, which would
have a Material Adverse Effect, and there has not been any change in the capital
stock of, or any incurrence of short-term or long-term debt by, the Company or
any issuance of options, warrants or other rights to purchase the capital stock
of the Company or any material adverse change or any development involving, so
far as the Company can now reasonably foresee a prospective adverse change in
the condition (financial or otherwise), net worth, results of operations,
business, key personnel or properties of it which would have a Material Adverse
Effect.
(l) Except as set forth in the Prospectus, there is not now pending or,
to the knowledge of the Company, threatened, any action, suit or proceeding to
which the Company is a party before or by any court or governmental agency or
body, which might result in any material adverse change in the financial
condition, business prospects, net worth, or properties of the
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Company, nor are there any actions, suits or proceedings related to
environmental matters or related to discrimination on the basis of age, sex,
religion or race; and no labor disputes involving the employees of the Company
exist or to the knowledge of the Company, are threatened which might be expected
to have a Material Adverse Effect.
(m) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state and foreign income and franchise tax returns required
to be filed as of the date hereof and have paid all taxes shown as due thereon;
and there is no tax deficiency which has been, or to the knowledge of the party,
may be asserted against the Company.
(n) Except as disclosed in the Registration Statement or Prospectus, the
Company has sufficient licenses, permits and other governmental authorizations
currently necessary for the conduct of its business or the ownership of its
properties as described in the Prospectus and is in all material respects
complying therewith and owns or possesses adequate rights to use all material
patents, patent applications, trademarks, service marks, trade-names, trademark
registrations, service mark registrations, copyrights and licenses necessary for
the conduct of such business and has not received any notice of conflict with
the asserted rights of others in respect thereof. To the best knowledge of the
Company, none of the activities or business of the Company are in violation of,
or cause the Company to violate, any law, rule, regulation or order of the
United States, any state, county or locality, or of any agency or body of the
United States or of any state, county or locality, the violation of which would
have a Material Adverse Effect.
(o) The Company has not, directly or indirectly, at any time (i) made
any contributions to any candidate for political office, or failed to disclose
fully any such contribution in violation of law or (ii) made any payment to any
state, federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
in all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(p) On the Closing Dates (hereinafter defined) all transfer or other
taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Securities to the Underwriter
hereunder will have been fully paid or provided for by the Company and all laws
imposing such taxes will have been complied with in all material respects.
(q) All contracts and other documents of the Company which are, under
the Rules and Regulations, required to be filed as exhibits to the Registration
Statement have been so filed.
(r) Except as disclosed in the Registration Statement, the Company has
no Subsidiaries.
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(s) Except as disclosed in the Registration Statement, the Company has
not entered into any agreement pursuant to which any person is entitled either
directly or indirectly to compensation from the Company for services as a finder
in connection with the proposed public offering.
(t) Except as previously disclosed in writing by the Company to the
Underwriter or as disclosed in the Registration Statement, no officer, director
or stockholder of the Company has any National Association of Securities
Dealers, Inc. (the "NASD") affiliation.
(u) No other firm, corporation or person has any rights to underwrite an
offering of any of the Company's securities.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement, and upon the
basis of the representations, warranties, and agreements herein contained, the
Company agrees to issue and sell to the Underwriter and the Underwriter agrees
to buy from the Company at the place and time hereinafter specified, 1,250,000
shares of Common Stock at $4.00 per share and 1,500,000 Warrants at $.15 per
Warrant (the "First Securities").
Delivery of the First Securities against payment therefor shall take
place at the offices of Singer Zamansky LLP, 40 Exchange Place, New York, New
York 10005 (or at such other place as may be designated by agreement between the
Underwriter and the Company) at 10:00 a.m., New York time, on ________, 1997, or
at such later time and date as the Underwriter may designate in writing to the
Company at least two business days prior to such purchase, such time and date of
payment and delivery for the First Securities being herein called the "First
Closing Date."
(b) In addition, subject to the terms and conditions of this Agreement,
and upon the basis of the representations, warranties and agreements herein
contained, the Company hereby grants an option to the Underwriter (the
"Over-Allotment Option") to purchase all or any part of an aggregate of an
additional 187,500 shares of Common Stock and 225,000 Warrants to cover over
allotments at the same price as the Underwriter shall pay for the First
Securities being sold pursuant to the provisions of subsection (a) of this
Section 2 (such additional Securities being referred to herein as the "Option
Securities"). This option may be exercised within 45 days after the effective
date of the Registration Statement upon written notice by the Underwriter to the
Company advising as to the amount of Option Securities as to which the option is
being exercised, the names and denominations in which the certificates for such
Option Securities are to be registered and the time and date when such
certificates are to be delivered. Such time and date shall be determined by the
Underwriter but shall not be earlier than four nor later than ten full business
days after the exercise of said option (but in no event more than 55 days after
the Effective Date), nor in any event prior to the First Closing Date, and such
time and date is referred to herein as the "Option Closing Date." Delivery of
the Option Securities against payment therefor shall take place at the offices
of Singer Zamansky LLP, 40 Exchange Place, New York, NY 10005 (or at such other
place as may be
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designated by agreement between the Underwriter and the Company). The option
granted hereunder may be exercised only to cover over-allotments in the sale by
the Underwriter of First Securities referred to in subsection (a) above. No
Option Securities shall be delivered unless all First Securities shall have been
delivered to the Underwriter as provided herein.
(c) The Company will make the certificates for the Securities to be
purchased by the Underwriter hereunder available to you for checking at least
two full business days prior to the First Closing Date or the Option Closing
Date (which are collectively referred to herein as the "Closing Dates"). The
certificates shall be in such names and denominations as you may request, at
least three full business days prior to the Closing Dates. Delivery of the
certificates at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered by the Company to you
for the account of the Underwriter against payment of the respective purchase
prices by the Underwriter, by wire transfer or certified or bank cashier's
checks in New York Clearing House funds, payable to the order of the Company.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Securities pursuant
to the provisions of subsection (b) above, payment for such Securities shall be
made to or upon the order of the Company by wire transfer or certified or bank
cashier's checks payable in New York Clearing House funds at the offices of
Singer Zamansky LLP, 40 Exchange Place, New York, N.Y. 10005, at the time and
date of delivery of such Securities as required by the provisions of subsection
(b) above, against receipt of the certificates for such Securities by you for
your account registered in such names and in such denominations as you may
reasonably request.
It is understood that the Underwriter proposes to offer the Securities
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement becomes
effective.
3. Covenants of the Company. The Company covenants and agrees with the
Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective. If required, the Company will file the Prospectus
and any amendment or supplement thereto with the Commission in the manner and
within the time period required by Rule 424(b) under the Act. Upon notification
from the Commission that the Registration Statement has become effective, the
Company will so advise you and will not at any time, whether before or after the
effective date, file any amendment to the Registration Statement or supplement
to the Prospectus of which you shall not previously have been advised and
furnished with a copy or to which you or your counsel shall have reasonably
objected in writing or which is not in compliance with the Act and the Rules and
Regulations. At any time prior to the later of (A) the completion by the
Underwriter of the distribution of the Securities contemplated hereby (but in no
event more than nine
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months after the date on which the Registration Statement shall have become or
been declared effective) and (B) 25 days after the date on which the
Registration Statement shall have become or been declared effective, the Company
will prepare and file with the Commission, promptly upon your request, any
amendments or supplements to the Registration Statement or Prospectus which, in
the opinion of counsel to the Company and the Underwriter, may be reasonably
necessary or advisable in connection with the distribution of the Securities.
As soon as the Company is advised thereof, the Company will advise you,
and provide you copies of any written advice, of the receipt of any comments of
the Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or any
amended Prospectus, of any request made by the Commission for an amendment of
the Registration Statement or for supplementing of the Prospectus or for
additional information with respect thereto, of the issuance by the Commission
or any state or regulatory body of any stop order or other order or threat
thereof suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such purposes,
and will use its best efforts to prevent the issuance of any such order, and, if
issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each Preliminary
Prospectus, and the Company has consented and hereby consents to the use of such
copies for the purposes permitted by the Act. The Company authorizes the
Underwriter and dealers to use the Prospectus in connection with the sale of the
Securities for such period as in the opinion of counsel to the Underwriter and
the Company the use thereof is required to comply with the applicable provisions
of the Act and the Rules and Regulations. In case of the happening, at any time
within such period as a Prospectus is required under the Act to be delivered in
connection with sales by the Underwriter or dealer of any event of which the
Company has knowledge and which materially affects the Company or the securities
of the Company, or which in the opinion of counsel for the Company and counsel
for the Underwriter should be set forth in an amendment of the Registration
Statement or a supplement to the Prospectus in order to make the statements
therein not then misleading, in light of the circumstances existing at the time
the Prospectus is required to be delivered to a purchaser of the Securities or
in case it shall be necessary to amend or supplement the Prospectus to comply
with law or with the Rules and Regulations, the Company will notify you promptly
and forthwith prepare and furnish to you copies of such amended Prospectus or of
such supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material facts necessary in order to make the statements in the Prospectus, in
the light of the circumstances under which they are made, not misleading. The
preparation and furnishing of any such amendment or supplement to the
Registration Statement or amended Prospectus or supplement to be attached to the
Prospectus shall be without expense to the Underwriter, except that in case the
Underwriter is required, in connection with the sale of the Securities to
deliver a Prospectus nine months or more after the effective date of the
Registration Statement, the Company will upon request of and at the expense of
the Underwriter, amend or
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supplement the Registration Statement and Prospectus and furnish the Underwriter
with reasonable quantities of prospectuses complying with Section 10(a)(3) of
the Act.
The Company will comply with the Act, the Rules and Regulations and the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will furnish such information as may be required and to
otherwise cooperate and use its best efforts to qualify or register the
Securities for sale under the securities or "Blue-Sky" laws of such
jurisdictions as you may designate and will make such applications and furnish
such information as may be required for that purpose and to comply with such
laws, provided the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent of service
of process in any jurisdiction in any action other than one arising out of the
offering or sale of the Securities. The Company will, from time to time, prepare
and file such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the counsel to the Company and
the Underwriter deem reasonably necessary.
(c) If the sale of the Securities provided for herein is not consummated
as a result of the Company not performing its obligations hereunder in all
material respects, the Company shall pay all costs and expenses incurred by it
which are incident to the performance of the Company's obligations hereunder,
including but not limited to, all of the expenses itemized in Section 8,
including the accountable expenses of the Underwriter, (including the reasonable
fees and expenses of counsel to the Underwriter).
(d) The Company will use its best efforts to (i) cause a registration
statement under the Exchange Act to be declared effective concurrently with the
completion of this offering and will notify you in writing immediately upon the
effectiveness of such registration statement, and (ii) to obtain and keep
current a listing in the Standard & Poor's or Moody's OTC Industrial Manual.
(e) For so long as the Company is a reporting company under either
Section 12(g) or 15(d) of the Exchange Act, the Company, at its expense, will
furnish to its stockholders an annual report (including financial statements
audited by independent public accountants), in reasonable detail and at its
expense, will furnish to you during the period ending five (5) years from the
date hereof, (i) as soon as practicable after the end of each fiscal year, but
no earlier than the filing of such information with the Commission a balance
sheet of the Company as at the end of such fiscal year, together with statements
of income, surplus and cash flow of the Company for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report thereon
of independent accountants; (ii) as soon as practicable after the end of each of
the first three fiscal quarters of each fiscal year, but no earlier than the
filing of such information with the Commission, consolidated summary financial
information of the Company for such quarter in reasonable detail; (iii) as soon
as they are publicly available, a copy of all reports (financial or other)
mailed to security holders; (iv) as soon as they are available, a copy of all
non-confidential reports and financial statements
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furnished to or filed with the Commission or any securities exchange or
automated quotation system on which any class of securities of the Company is
listed; and (v) such other information as you may from time to time reasonably
request.
(f) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) The Company will deliver to you at or before the First Closing Date
two signed copies of the Registration Statement including all financial
statements and exhibits filed therewith, and of all amendments thereto, and will
deliver to the Underwriter such number of conformed copies of the Registration
Statement, including such financial statements but without exhibits, and of all
amendments thereto, as the Underwriter may reasonably request. The Company will
deliver to or upon your order, from time to time until the effective date of the
Registration Statement, as many copies of any Preliminary Prospectus filed with
the Commission prior to the effective date of the Registration Statement as you
may reasonably request. The Company will deliver to the Underwriter on the
effective date of the Registration Statement and thereafter for so long as a
Prospectus is required to be delivered under the Act, from time to time, as many
copies of the Prospectus, in final form, or as thereafter amended or
supplemented, as the Underwriter may from time to time reasonably request.
(h) The Company will make generally available to its security holders
and to the registered holders of its Warrants and deliver to you as soon as it
is practicable to do so but in no event later than 90 days after the end of
twelve months after its current fiscal quarter, an earnings statement (which
need not be audited) covering a period of at least twelve consecutive months
beginning after the effective date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the
Securities substantially for the purposes set forth under "Use of Proceeds" in
the Prospectus and, except as set forth therein, shall not use any proceeds to
pay any (i) debt for borrowed funds, or (ii) debt or obligation owed to any
insider outside of salary in the ordinary course of business.
(j) The Company will promptly prepare and file with the Commission any
amendments or supplements to the Registration Statement, Preliminary Prospectus
or Prospectus and take any other action, which in the opinion of counsel to the
Underwriter and counsel to the Company, may be reasonably necessary or advisable
in connection with the distribution of the Securities, and will use its best
efforts to cause the same to become effective as promptly as possible.
(k) The Company will reserve and keep available the maximum number of
its authorized but unissued securities which are issuable upon exercise of the
Purchase Option outstanding from time to time.
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(l) (1) For a period of twenty four (24) months from the First Closing
Date, no officer, director or shareholder of any securities prior to the
offering (collectively, "Insiders") will, directly or indirectly, offer, sell
(including any short sale), grant any option for the sale of, acquire any option
to dispose of, or otherwise dispose of any shares of Common Stock without the
prior written consent of the Underwriter, other than as set forth in the
Registration Statement. In addition, the Insiders must also agree to an
additional twelve (12) month lockup if the Company has not had after-tax net
earnings of $3,000,000 for the fiscal year ended July 31, 1999. In order to
enforce this covenant, the Company shall impose stop-transfer instructions with
respect to the securities owned by every shareholder prior to the offering until
the end of such period (subject to any exceptions to such limitation on
transferability set forth in the Registration Statement). If necessary to comply
with any applicable Blue-Sky Law, the shares held by such shareholders will be
escrowed with counsel for the Company or otherwise as required.
(2) Except for the issuance of shares of capital stock by the Company in
connection with a dividend, recapitalization, reorganization or similar
transactions or as result of the exercise of warrants or options to purchase up
to 750,000 shares of Common Stock pursuant to an incentive and non-qualified
stock option plan disclosed in or issued or granted pursuant to plans disclosed
in the Registration Statement, the Company shall not, for a period of thirty six
(36) months following the First Closing Date, directly or indirectly, offer,
sell, issue or transfer any shares of its capital stock, or any security
exchangeable or exercisable for, or convertible into, shares of the capital
stock or (including stock options) register any of its capital stock (under any
form of registration statement including Form S-8), without the prior written
consent of the Underwriter upon at least 30 days' notice. Options granted
pursuant to plans must be exercisable at the fair market value on the date of
grant. Notwithstanding the foregoing provisions, the Company may issue
securities during said thirty six (36) month period in connection with
acquisitions by the Company which would have a positive effect on the Company's
income statement based upon generally accepted accounting principles.
(m) Upon completion of this offering, the Company will make all filings
required, including registration under the Exchange Act, to obtain the listing
of the Securities, Common Stock and the Warrants in the Nasdaq SmallCap system,
and will use its best efforts to effect and maintain such listing for at least
five years from the date of this Agreement.
(n) Except for the transactions contemplated by this Agreement and as
disclosed in the Prospectus, the Company represents that it has not taken and
agrees that it will not take, directly or indirectly, any action designed to or
which has constituted or which might reasonably be expected to cause or result
in the stabilization or manipulation of the price of any of the Securities.
(o) On the First Closing Date and simultaneously with the delivery of
the Securities, the Company shall execute and deliver to you the Purchase
Option. The Purchase Option will be substantially in the form filed as an
Exhibit to the Registration Statement.
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(p) On the First Closing Date, the Company will have in force key person
life insurance on the life of Mr. Aldrovandi in an amount of not less than
$1,000,000, payable to the Company, and will use its best efforts to maintain
such insurance during the three year period commencing with the First Closing
Date.
(q) So long as any Warrants are outstanding and the exercise price of
the Warrants is less than the market price of the Common Stock, the Company
shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant and to furnish to the Underwriter as many
copies of each such Prospectus as such Underwriter or dealer may reasonably
request. The Company shall not call for redemption of any of the Warrants unless
a registration statement covering the securities underlying the Warrants has
been declared effective by the Commission and remains current at least until the
date fixed for redemption.
(r) For a period of five (5) years following the Effective Date, the
Company will maintain registration with the Commission pursuant to Section 12(g)
of the Exchange Act and will provide to the Underwriter copies of all filings
made with the Commission pursuant to the Exchange Act. In the event that the
Company fails to maintain registration with the Commission pursuant to Section
12(g) during such five year period, the Company will provide reasonable access
to an independent accountant designated by the Underwriter, to all books,
records and other documents or statements that reflect the Company's financial
status at least once each quarter, at the Company's expense.
(s) The Company agrees to pay the Underwriter a warrant solicitation fee
of 4% of the exercise price of any of the Warrants exercised beginning one (1)
year after the Effective Date (not including warrants exercised by the
Underwriter) if (a) the market price of the Company's Common Stock on the date
the Warrant is exercised is greater than the exercise price of the Warrant, (b)
the exercise of the Warrant was solicited by the Underwriter and the holder of
the warrant designates the Underwriter in writing as having solicited such
Warrant, (c) the Warrant is not held in a discretionary account, (d) disclosure
of the compensation arrangement is made upon the sale and exercise of the
Warrants, (e) soliciting the exercise is not in violation of Rule 10b-6 under
the Securities Exchange Act of 1934, and (f) solicitation of the exercise is in
compliance with the NASD Notice to Members 81-38 (September 22, 1981).
(t) For a period of two years from the Effective Date, at the request of
the Underwriter, the Company shall provide promptly, at the expense of the
Company, copies of the Company's monthly transfer sheets furnished to it by its
transfer agent and copies of the securities position listings provided to it by
the Depository Trust Company.
(u) The Company hereby agrees that:
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(i) The Company will pay a finder's fee to the Underwriter, equal to
five percent (5%) of the first $3,000,000 of the consideration involved in any
transaction, 4% of the next $3,000,000 of consideration involved in the
transaction, 3% of the next $2,000,000, 2% of the next $2,000,000 and 1% of the
excess, if any, for future consummated transactions, if any, introduced by the
Underwriter (including mergers, acquisitions, joint ventures, and any other
business for the Company introduced by the Underwriter) consummated by the
Company (an "Introduced Consummated Transaction"), in which the Underwriter
introduced the other party to the Company during a period ending five years
following the First Closing Date; and
(ii) Any finder's fee due hereunder will be paid in cash or other
consideration that is acceptable to the Underwriter, at the closing of the
particular Introduced Consummated Transaction for which the finder's fee is due.
(v) For a period of twenty four (24) months from the Effective Date, the
Company will engage the Underwriter or a representative of the Underwriter as
its financial consultant, in consideration of the payment by the Company to the
Underwriter of a consulting fee equal to one percent (1%) of the gross proceeds
of the Offering which is to be paid in full at the first closing.
(w) For a period of two (2) years following the Effective Date the
Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit) the Company's financial statements
for each of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information, the filing of the Company's 10-Q quarterly
report and the mailing of quarterly financial information to stockholders,
provided that the Company shall not be required to file a report of such
accountants relating to such review with the Commission. The Company will retain
its present legal counsel and independent certified public accountants for at
least one year from the Closing Date.
(x) For the two (2) year period commencing on the First Closing Date,
the Company shall recommend and use its best efforts to elect a designee of the
Underwriter as a member of the Company's Board of Directors. Such designee shall
serve on the Compensation Committee of the Board of Directors so long as such
designee would qualify as disinterested for the purpose of Section 162(m) of the
Internal Revenue Code of 1986, as amended. Alternatively, the Underwriter may
appoint an advisor who will be able to attend all meetings of the Board of
Directors. However, the Board of Directors shall have the right to require such
advisor to execute a confidentiality agreement satisfactory to the Company. The
Underwriter shall also have the right to written notice no later than notice to
other directors of each meeting and to obtain copies of the minutes, if
requested, from all Board of Directors meetings for two (2) years following the
Effective Date of the Registration Statement, whether or not a nominee of the
Underwriter attends or participates in any such Board meeting. To the extent
permitted by law, the Company will indemnify the Underwriter and its designee
for the actions of such designee as a director of the Company. The Company will
use its best efforts to obtain liability insurance not to exceed $50,000 per
year in premiums to cover acts of officers and directors, including said
designee. The Company agrees to reimburse the Underwriter immediately upon the
Underwriter's request therefor of any
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reasonable travel and lodging expenses directly incurred by the Underwriter in
connection with its designee or representative attending Company Board meetings
on the same basis for other Board members.
(y) For a period of thirty (30) days from and after the Effective Date,
the Company will not issue a press release or engage in any publicity other than
promotion by the Company of its products and services and other press releases
in the ordinary course of its business, without the Underwriter's prior written
consent, unless required by law.
(z) The Company agrees that it will use dual check signers, one of such
check signers will be acceptable to the Underwriter.
(aa) The Company agrees that if requested by the Underwriter, the
Company will hire a Chief Operating Officer, such Chief Operating Officer to be
acceptable to the Underwriter, at market compensation rates for the Company's
geographic area.
4. Conditions of Underwriter's Obligation. The obligations of the
Underwriter to purchase and pay for the Securities which it has agreed to
purchase hereunder, are subject to the accuracy (as of the date hereof, and as
of the Closing Dates) of and compliance with the representations and warranties
of the Company herein, to the performance by the Company of its obligations
hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and you shall
have received notice thereof not later than 10:00 A.M., New York time, on the
day following the date of this Agreement, or at such later time or on such later
date as to which you may agree in writing; on or prior to the Closing Dates no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that or a similar purpose shall have been
instituted or shall be pending or, to your knowledge or to the knowledge of the
Company, shall be contemplated by the Commission; any request on the part of the
Commission for additional information shall have been complied with to the
satisfaction of the Commission; and no stop order shall be in effect denying or
suspending effectiveness of such qualification nor shall any stop order
proceedings with respect thereto be instituted or pending or threatened. If
required, the Prospectus shall have been filed with the Commission in the manner
and within the time period required by Rule 424(b) under the Act.
(b) At the First Closing Date, you shall have received the opinion,
dated as of the First Closing Date, of Bernstein & Wasserman, LLP, counsel for
the Company, in form and substance satisfactory to counsel for the Underwriter,
to the effect that:
(i) The Registration Statement was declared effective under the Act
on ______ __, 1997; to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued, and no proceedings
for that purpose have been
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instituted or are pending, threatened or contemplated under the Act or
applicable state securities laws;
(ii) The Registration Statement and the Prospectus, as of the
Effective Date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which we express no opinion),
comply as to form in all material respects with the requirements of the Act and
Regulations and the conditions for use of a registration statement on Form SB-2
have been satisfied by the Company;
(iii) The description in the Registration Statement and the
Prospectus of statutes, regulations, contracts and other documents have been
reviewed by us, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed, and to the
best of our knowledge, there are no material statutes or regulations, or, to the
best of our knowledge, material contracts or documents, of a character required
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement, which are not so described or filed
as required.
To the best of their knowledge, none of the material
provisions of the contracts or instruments described above violates any existing
applicable law, rule or regulation or judgment, order or decree known to us of
any United States governmental agency or court having jurisdiction over the
Company or any of its assets or businesses;
(vi) To the best of their knowledge, except as set forth in the
Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act;
(v) They have participated in reviews and discussions in connection
with the preparation of the Registration Statement and the Prospectus. Although
they are not passing upon and do not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement, no facts came to their attention which lead them to believe that (A)
the Registration Statement (except as to the financial statements and other
financial data contained therein, as to which they express no opinion), on the
Effective Date, contained any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which they express no opinion) contains any untrue
statement or a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(c) At the Closing Date, you shall have received the opinion of Grubner,
Krauss, special Canadian counsel to the Company with respect to Canadian law,
dated as of such Closing Date, addressed to the Underwriters and in form and
substance satisfactory to counsel to the Underwriters, to the effect that:
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(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Province of Ontario, Canada, with
full corporate power and authority, and all licenses, permits, certifications,
registrations, approvals, consents and franchises to own or lease and operate
its properties and to conduct its business as described in the Registration
Statement. The Company is duly qualified to do business as a foreign corporation
and is in good standing in all jurisdictions wherein such qualification is
necessary and failure so to qualify could have a material adverse effect on the
financial condition, results of operations, business or properties of the
Company;
(ii) The Company has full corporate power and authority to execute,
deliver and perform the Underwriting Agreement, the Consulting Agreement, the
Warrant Agreement and the Underwriters' Warrants and to consummate the
transactions contemplated thereby. The execution, delivery and performance of
the Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and
the Underwriters' Warrants by the Company, the consummation by the Company of
the transactions therein contemplated and the compliance by the Company with the
terms of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreements and the Underwriters' Warrants have been duly authorized by all
necessary corporate action, and each of the Underwriting Agreement, the
Consulting Agreement, the Warrant Agreement and the Underwriters' Warrant has
been duly executed and delivered by the Company. Each of the Underwriting
Agreement, the Consulting Agreement, the Warrant Agreements and the
Underwriters' Warrants is a valid and binding obligation of the Company,
enforceable in accordance with their respective terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors generally and the
discretion of courts in granting equitable remedies and except that
enforceability of the indemnification provisions and the contribution provisions
set forth in the Underwriting Agreement may be limited by the federal securities
laws or public policy underlying such laws;
(iii) The execution, delivery and performance of the Underwriting
Agreement, the Consulting Agreement, the Warrant Agreement and the Underwriters'
Warrants by the Company, the consummation by the Company of the transactions
therein contemplated and the compliance by the Company with the terms of the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and the
Underwriters' Warrants do not, and will not, with or without the giving of
notice or the lapse of time, or both, (A) result in a violation of the Articles
of Incorporation, as the same may be amended, or by-laws of the Company; (B) to
the best of our knowledge, result in a breach of, or conflict with, any terms or
provisions of or constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to, any indenture, mortgage, note, contract, commitment or
other material agreement or instrument to which the Company is a party or by
which the Company or any of its properties or assets are or may be bound or
affected, except where any of the foregoing would not result in a material
adverse effect upon the Company's business or operations; (C) to the best of
their knowledge, violate any existing applicable law, rule or regulation or
judgment, order or decree
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known to them of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business; or (D) to
the best of their knowledge, have any effect on any permit, certification,
registration, approval, consent, license or franchise necessary for the Company
to own or lease and operate its properties and to conduct its business or the
ability of the Company to make use thereof;
(iv) No authorization, approval, consent or license of any Canadian
governmental or regulatory body, agency or instrumentality is required in
connection with the conduct of the business of the Company as described in the
Prospectus;
(v) The Company has obtained, or is in the process of obtaining, all
licenses, permits and other governmental authorizations necessary to conduct its
business as described in the Prospectus, and such licenses, permits and other
governmental authorizations obtained are in full force and effect, and the
Company is in all material respects complying therewith;
(vi) To the best of their knowledge, no authorization, approval,
consent, order, registration, license or permit of any court or governmental
agency or body (other than under the Act, the Regulations and applicable state
securities or Blue Sky laws) is required for the valid authorization, issuance,
sale and delivery of the Securities, the Additional Securities, the Common
Stock, the Warrants, the Warrant Shares, or the Underwriters' Warrants, and the
consummation by the Company of the transactions contemplated by the Underwriting
Agreement, the Consulting Agreement, the Warrant Agreement or the Underwriters'
Warrants;
(vii) The outstanding Common Stock and Warrants have been duly
authorized and validly issued. The outstanding Common stock is fully paid an
nonassessable. To the best of their knowledge, none of the outstanding Common
Stock has been issued in violation of the preemptive rights of any shareholder
of the Company. None of the holders of the outstanding Common Stock is subject
to personal liability solely by reason of being such a holder. The authorized
Common Stock conforms to the description thereof contained in the Registration
Statement and Prospectus.
(viii) The issuance and sale of the Securities, the Additional
Securities, the Common Stock, the Warrants, the Warrant Shares and the
Underwriters' Warrants have been duly authorized and when issued will be validly
issued, fully paid and nonassessable, and the holders thereof will not be
subject to personal liability solely by reason of being such holders. Neither
the Securities, the Additional Securities, nor the Common Stock are subject to
preemptive rights of any stockholder of the Company. The certificates
representing the Securities are in proper legal form;
(ix) The issuance and sale of the Warrant Shares and the
Underwriters' Warrants have been duly authorized and, when paid for, issued and
delivered pursuant to the terms of the Underwriters' Agreement or the
Underwriters' Warrants, as the case may be, the
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Warrants, the Warrant Shares and the Underwriters' Warrants will constitute the
valid and binding obligations of the Company, enforceable in accordance with
their terms, to issue and sell the Warrants, the Warrant Shares and/or
Underwriters' Warrants. All corporate action required to be taken for the
authorization, issuance and sale of the securities has been duly, validly and
sufficiently taken. The Common Stock and the Warrants have been duly authorized
by the Company to be offered in the form of the Securities. The Warrants, the
Warrant Shares and the Underwriters' Warrants conform to the descriptions
thereof contained in the Registration Statement and Prospectus;
(x) The Underwriters have acquired good title to the Securities,
free and clear of all liens, encumbrances, equities, security interests and
claims;
(xi) Assuming that the Underwriters exercise the over-allotment
option to purchase the Additional Securities and make payments therefor in
accordance with the terms of the Underwriting Agreement, upon delivery of the
Additional Securities to the Underwriters thereunder, the Underwriters will
acquire good title to the Additional Securities, free and clear of any liens,
encumbrances, equities, security interests and claims;
(xii) To the best of their knowledge, there are no claims, actions,
suits, proceedings, arbitrations, investigations or inquiries before any
governmental agency, court or tribunal, foreign or domestic, or before any
private arbitration tribunal, pending or threatened against the Company or
involving its properties or business, other than as described in the Prospectus,
such description being accurate, and other than litigation incident to the kind
of business conducted by the Company which, individually and in the aggregate,
is not material, and, except as otherwise disclosed in the Prospectus and the
Registration Statement, the Company has complied with all federal and state
laws, statutes and regulations concerning its business;
(xiii) Such counsel is familiar with all contracts or other
agreements entered into by the Company with other Canadian companies, entities,
banking institutions or individuals referred to in the Registration Statement
and Prospectus, including the employment agreement with Louis Aldrovandi, its
President (collectively, the "Canadian Agreements"), and all such Canadian
Agreements are valid, binding and enforceable under Canadian law, and to the
knowledge of such counsel, the Company is not in default under any of the
Canadian Agreements;
(xiv) The description in the Registration Statement and the
Prospectus of statutes, regulations, contracts and other documents have been
reviewed by them, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed, and to the
best of our knowledge, there are no material statutes or regulations, or, to the
best of our knowledge, material contracts or documents, of a character required
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement, which are not so described or filed
as required.
(xv) The Company is not in violation of or in default under its
Articles of Incorporation or by-laws, or to the knowledge of such counsel, in
the performance or
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observance of any material obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of indebtedness or in
any contract, indenture, mortgage, loan agreement or instrument to which the
Company is a party or by which it or any of its properties may be bound, or in
violation of any material order, rule, regulation, writ, injunction or decree of
any government or governmental instrumentality or court; and
(xvi) They have participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus. Although they are not passing upon and do not assume responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement, no facts came to their attention which lead them to
believe that (A) the Registration Statement (except as to the financial
statements and other financial data contained therein, as to which they express
no opinion), on the Effective Date, contained any untrue statement of a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, or
that (B) the Prospectus (except as to the financial statements and other
financial data contained therein, as to which we express no opinion) contains
any untrue statement or a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) On or prior to the Closing Date, counsel for the Underwriters shall
have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review the matters
referred to in subparagraphs (e) and (f) of this Paragraph 9, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(e) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus and other related matters
shall be satisfactory to or approved by Singer Zamansky, LLP, counsel to the
Underwriter.
(f) You shall have received a letter prior to the Effective Date and
again on and as of the First Closing Date from Schwartz Levitsky Feldman,
independent public accountants for the Company, substantially in the form
reasonably acceptable to you, providing you with such "cold comfort" as you may
reasonably require.
(g) At the Closing Date, (i) the representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects with the same effect as if made on and as of the Closing Date taking
into account for the Option Closing Date the effect of the transactions
contemplated hereby and the Company shall have performed all of its obligations
hereunder and satisfied all the conditions on its part to be satisfied at or
prior to such Closing Date; (ii) the Registration Statement and the Prospectus
and any amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto
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shall contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; (iii) there shall have been, since the respective dates
as of which information is given, no material adverse change, or to the Company
knowledge, any development involving a prospective material adverse change, in
the business, properties, condition (financial or otherwise), results of
operations, capital stock, long-term or short-term debt or general affairs of
the Company from that set forth in the Registration Statement and the
Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the effective date of the Registration Statement, and
the Company shall not have incurred any material liabilities or entered into any
material agreement not in the ordinary course of business other than as referred
to in the Registration Statement and Prospectus; (iv) except as set forth in the
Prospectus, no action, suit or proceeding at law or in equity shall be pending
or threatened against the Company which would be required to be set forth in the
Registration Statement, and no proceedings shall be pending or threatened
against the Company before or by any commission, board or administrative agency
in the United States or elsewhere, wherein an unfavorable decision, ruling or
finding would materially and adversely affect the business, property, condition
(financial or otherwise), results of operations or general affairs of the
Company, and (v) you shall have received, at the First Closing Date, a
certificate signed by each of the President and the principal operating officer
of the Company, dated as of the First Closing Date, evidencing compliance with
the provisions of this subsection (g).
(i) Upon exercise of the Over-Allotment Option provided for in Section
2(b) hereof, the obligations of the Underwriter to purchase and pay for the
Option Securities referred to therein will be subject (as of the date hereof and
as of the Option Closing Date) to the following additional conditions:
(j) The Registration Statement shall remain effective at the Option
Closing Date, and no stop order suspending the effectiveness thereof shall have
been issued and no proceedings for that purpose shall have been instituted or
shall be pending, or, to your knowledge or the knowledge of the Company, shall
be contemplated by the Commission, and any reasonable request on the part of the
Commission for additional information shall have been complied with to the
satisfaction of the Commission.
(k) At the Option Closing Date there shall have been delivered to you
the signed opinion of Bernstein & Wasserman, LLP, counsel to the Company, dated
as of the Option Closing Date, in form and substance reasonably satisfactory to
Singer Zamansky, LLP, counsel to the Underwriter, which opinion shall be
substantially the same in scope and substance as the opinion furnished to you at
the First Closing Date pursuant to Sections 4(b) hereof, except that such
opinion, where appropriate, shall cover the Option Securities.
(l) At the Option Closing Date there shall have been delivered to you
the signed opinion of Grubner, Krauss, Canadian counsel to the Company, dated as
of the Option Closing Date, in form and substance reasonably satisfactory to
Singer Zamansky, LLP, counsel to the Underwriter, which opinion shall be
substantially the same in scope and substance as the opinion furnished to you
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at the First Closing Date pursuant to Sections 4(c) hereof, except that such
opinion, where appropriate, shall cover the Option Securities.
(m) At the Option Closing Date there shall have be delivered to you a
certificate of the President and the principal operating officer of the Company,
dated the Option Closing Date, in form and substance reasonably satisfactory to
Singer Zamansky, LLP, counsel to the Underwriter, substantially the same in
scope and substance as the certificate furnished to you at the First Closing
Date pursuant to Section 4(g) hereof.
(n) At the Option Closing Date there shall have been delivered to you a
letter in form and substance satisfactory to you from Schwartz Levitsky Feldman,
dated the Option Closing Date and addressed to the Underwriter confirming the
information in their letter referred to in Section 4(f) hereof and stating that
nothing has come to their attention during the period from the ending date of
their review referred to in said letter to a date not more than five business
days prior to the Option Closing Date, which would require any change in said
letter if it were required to be dated the Option Closing Date.
(o) All proceedings taken at or prior to the Option Closing Date in
connection with the sale and issuance of the Option Securities shall be
reasonably satisfactory in form and substance to you, and you and Singer
Zamansky, LLP, counsel to the Underwriter, shall have been furnished with all
such documents, certificates, and opinions as you may reasonably request in
connection with this transaction in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company or its compliance with any of the covenants or conditions contained
herein.
(p) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing Date,
for members of the NASD to execute transactions (as principal or agent) in the
Securities and no proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the Underwriter or the
Company, shall be contemplated by the Commission or the NASD. The Company and
the Underwriter represent that at the date hereof each has no knowledge that any
such action is in fact contemplated against it by the Commission or the NASD.
(q) If any of the conditions herein provided for in this Section shall
not have been fulfilled in all material respects as of the date indicated, this
Agreement and all obligations of the Underwriter under this Agreement may be
canceled at, or at any time prior to, each Closing Date by the Underwriter
notifying the Company of such cancellation in writing or by telegram at or prior
to the applicable Closing Date. Any such cancellation shall be without liability
of the Underwriter to the Company.
5. Conditions of the Obligations of the Company, The obligation of the
Company to sell and deliver the Securities is subject to the following
conditions:
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(a) The Registration Statement shall have become effective not later
than 10:00 A.M. New York time, on the day following the date of this Agreement,
or on such later date as the Company and the Underwriter may agree in writing.
(b) At the Closing Dates, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for in this
Section have been fulfilled on the First Closing Date but are not fulfilled
after the First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Securities on exercise of the
Over-Allotment Option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) The Company agrees (i) to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against
any losses, claims, damages or liabilities, joint or several (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees), to which
such Underwriter or such controlling person may become subject, under the Act or
otherwise, and (ii) to reimburse, as incurred, the Underwriter and such
controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages or liabilities; insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
relating to (i) and (ii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (B) any blue sky application or other document executed by
the Company specifically for that purpose containing written information
specifically furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Securities under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based upon
the omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, Prospectus, or any amendment or supplement thereto, or
in any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be required to indemnify the Underwriter and any
controlling person or be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Underwriter specifically for use
in the preparation of the Registration Statement or any such amendment or
supplement thereof or any such Blue Sky Application or any such preliminary
Prospectus or the Prospectus or any such amendment or supplement thereto,
provided, further that the indemnity with respect to any Preliminary Prospectus
shall not be applicable on account of any
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losses, claims, damages, liabilities or litigation arising from the sale of
Securities to any person if a copy of the Prospectus was not delivered to such
person at or prior to the written confirmation of the sale to such person. This
indemnity will be in addition to any liability which the Company may otherwise
have.
(b) The Underwriter will indemnify and hold harmless the Company, each
of its directors, each nominee (if any) for director named in the Prospectus,
each of its officers who have signed the Registration Statement and each person,
if any, who controls the Company within the meaning of the Act, against any
losses, claims, damages or liabilities (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and reasonable attorneys' fees) to which the Company or any such
director, nominee, officer or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
specifically for use in the preparation thereof and for any violation by the
Underwriter in the sale of such Securities of any applicable state or federal
law or any rule, regulation or instruction thereunder relating to violations
based on unauthorized statements by Underwriter or its representative; provided
that such violation is not based upon any violation of such law, rule or
regulation or instruction by the party claiming indemnification or inaccurate or
misleading information furnished by the Company or its representatives,
including information furnished to the Underwriter as contemplated herein. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
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The indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that the reasonable fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in writing
by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the indemnified party and the
indemnifying party and in the reasonable judgment of the counsel to the
indemnified party, it is advisable for the indemnified party to be represented
by separate counsel (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys for the indemnified party, which firm
shall be designated in writing by the indemnified party). No settlement of any
action against an indemnified party shall be made without the consent of the
indemnified party, which shall not be unreasonably withheld in light of all
factors of importance to such indemnified party. If it is ultimately determined
that indemnification is not permitted, then an indemnified party will return all
monies advanced to the indemnifying party.
7. Contribution.
In order to provide for just and equitable contribution under the Act in
any case in which the indemnification provided in Section 6 hereof is requested
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case, notwithstanding the fact that the express provisions of
Section 6 provide for indemnification in such case, then the Company and each
person who controls the Company, in the aggregate, and the Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees) (after contribution from others) in such proportions
that the Underwriter is responsible in the aggregate for that portion of such
losses, claims, damages or liabilities represented by the percentage that the
underwriting discount for each of the Securities appearing on the cover page of
the Prospectus bears to the public offering price appearing thereon and the
Company shall be responsible for the remaining portion; provided, however, that
if such allocation is not permitted by applicable law then allocated in such
proportion as is appropriate to reflect relative benefits but also the relative
fault of the Company and the Underwriter and controlling persons, in the
aggregate, in connection with the statements or omissions which resulted in such
damages and other relevant equitable considerations shall also be considered.
The relative fault shall be determined by reference to, among other things,
whether in the case of an untrue statement of a material fact or the omission to
state a material fact, such statement or omission relates to information
supplied by the Company or the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
25
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<PAGE>
such untrue statement or omission. The Company and the Underwriter agree that it
would not be just and equitable if the respective obligations of the Company and
the Underwriter to contribute pursuant to this Section 7 were to be determined
by pro rata or per capita allocation of the aggregate damages or by any other
method of allocation that does not take account of the equitable considerations
referred to in this Section 7. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this paragraph, the word "Company" includes any
officer, director, or person who controls the Company within the meaning of
Section 15 of the Act. If the full amount of the contribution specified in this
paragraph is not permitted by law, then the Underwriter and each person who
controls the Underwriter shall be entitled to contribution from the Company, its
officers, directors and controlling persons, and the Company, its officers,
directors and controlling persons shall be entitled to contribution from the
Underwriter to the full extent permitted by law. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any persons
having liability under Section 11 of the Act other than the Company and the
Underwriter. No contribution shall be requested with regard to the settlement of
any matter from any party who did not consent to the settlement; provided,
however, that such consent shall not be unreasonably withheld in light of all
factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the sale of the
Securities to the Underwriter is consummated, the Company will pay all costs and
expenses incident to the performance of this Agreement by the Company including,
but not limited to, the fees and expenses of counsel to the Company and of the
Company's accountants; the costs and expenses incident to the preparation,
printing, filing and distribution under the Act of the Registration Statement
(including the financial statements therein and all amendments and exhibits
thereto), Preliminary Prospectus and the Prospectus, as amended or supplemented,
the fee of the NASD in connection with the filing required by the NASD relating
to the offering of the Securities contemplated hereby; all expenses, including
reasonable fees not to exceed $35,000 and disbursements of counsel to the
Underwriter, in connection with the qualification of the Securities under the
state securities or blue sky laws which the Underwriter shall designate; the
cost of printing and furnishing to the Underwriter copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, and the
Blue Sky Memorandum, any fees relating to the listing of the Securities, Common
Stock and Warrants on Nasdaq or any other securities exchange, the cost of
printing the certificates representing the Securities; fees for bound volumes
and prospectus memorabilia and the fees of the transfer agent and warrant agent.
The Company shall pay any and all taxes (including any transfer, franchise,
capital stock or other tax imposed by any jurisdiction) on sales to the
Underwriter hereunder. The Company will also pay all costs and expenses incident
to the furnishing of any amended Prospectus or of any supplement to be attached
to the Prospectus as called for in Section 3(a) of this Agreement except as
otherwise set forth in said Section.
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<PAGE>
(b) In addition to the foregoing expenses, the Company shall at the
First Closing Date pay to the Underwriter a non-accountable expense allowance of
$156,750. In the event the overallotment option is exercised, the Company shall
pay to the Underwriter at the Option Closing Date an additional amount in the
aggregate equal to 3% of the gross proceeds received upon exercise of the
overallotment option. In the event the transactions contemplated hereby are not
consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant, representation
or warranty contained herein or because any other condition to the Underwriter's
obligations hereunder required to be fulfilled by the Company is not fulfilled)
the Company shall not be liable for any expenses of the Underwriter, including
the Underwriter's legal fees. In the event the transactions contemplated hereby
are not consummated by reason of the Company being unable to perform its
obligations hereunder in all material respects, the Company shall be liable for
the actual accountable out-of-pocket expenses of the Underwriter, including
reasonable legal fees.
(c) Except as disclosed in the Registration Statement, no person is
entitled either directly or indirectly to compensation from the Company, from
the Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify and hold
harmless the Underwriter, against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all reasonable
attorneys' fees), to which the Underwriter or person may become subject insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a
finder's fee in connection with the proposed offering by reason of such person's
or entity's influence or prior contact with the indemnifying party.
9. Effective Date.
The Agreement shall become effective upon its execution except that you
may, at your option, delay its effectiveness until 11:00 A.M., New York time on
the first full business day following the effective date of the Registration
Statement, or at such earlier time on such business day after the effective date
of the Registration Statement as you in your discretion shall first commence the
public offering of the Securities. The time of the initial public offering shall
mean the time of release by you of the first newspaper advertisement with
respect to the Securities, or the time when the Securities are first generally
offered by you to dealers by letter or telegram, whichever shall first occur.
This Agreement may be terminated by you at any time before it becomes effective
as provided above, except that Sections 3(c), 6, 7, 8, 12, 13, 14 and 15 shall
remain in effect notwithstanding such termination.
10. Termination.
(a) After this Agreement becomes effective, this Agreement, except for
Sections 3(c), 6, 7, 8, 12, 13, 14 and 15 hereof, may be terminated at any time
prior to the First Closing Date, by you if in your judgment (i) trading in
securities on the New York Stock Exchange or the American Stock Exchange having
been suspended or limited, (ii) material governmental restrictions have been
imposed on trading in securities generally (not in force and effect on the date
hereof), (iii) a banking moratorium has been declared by federal or New York
state authorities, (iv) an outbreak
27
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<PAGE>
of major international hostilities involving the United States or other
substantial national or international calamity has occurred, (v) a pending or
threatened legal or governmental proceeding or action relating generally to the
Company's business, or a notification has been received by the Company of the
threat of any such proceeding or action, which would materially adversely affect
the Company; (vi) the passage by the Congress of the United States or by any
state legislative body of similar impact, of any act or measure, or the adoption
of any orders, rules or regulations by any governmental body or any
authoritative accounting institute or board, or any governmental executive,
which is reasonably believed likely by the Underwriter to have a material
adverse impact on the business, financial condition or financial statements of
the Company; or (vii) any material adverse change having occurred, since the
respective dates of which information is given in the Registration Statement and
Prospectus, in the earnings, business prospects or general condition of the
Company, financial or otherwise, whether or not arising in the ordinary course
of business.
(b) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 10, the Company shall be
promptly notified by you, by telephone or telegram, confirmed by letter.
11. Purchase Option.
At or before the First Closing Date, the Company will sell the
Underwriter or its designees for a consideration of $10, and upon the terms and
conditions set forth in the form of Purchase Option annexed as an exhibit to the
Registration Statement, a Purchase Option to purchase an aggregate of 125,000
shares of Common Stock and 150,000 Warrants. In the event of conflict in the
terms of this Agreement and the Purchase Option with respect to language
relating to the Purchase Option, the language of the Purchase Option shall
control.
12. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the Company that it is
registered as a broker-dealer in all jurisdictions in which it is offering the
Securities and that it will comply with all applicable state or federal laws
relating to the sale of the Securities, including but not limited to, violations
based on unauthorized statements by the Underwriter or its representatives.
13. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements, representations, warranties and
other statements of the Company and the Underwriter and the undertakings set
forth in or made pursuant to this Agreement will remain in full force and effect
until three years from the date of this Agreement, regardless of any
investigation made by or on behalf of the Underwriter, the Company or any of its
officers or directors or any controlling person and will survive delivery of and
payment of the Securities and the termination of this Agreement.
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<PAGE>
14. Notice.
Any communications specifically required hereunder to be in writing, if
sent to the Representative, will be mailed, delivered or telecopied and
confirmed to them at Monroe Parker Securities, Inc., 2500 Westchester Avenue,
Purchase, New York 10577, with a copy sent to Singer Zamansky LLP, 40 Exchange
Place, New York, New York 10005, Attention: Gregory Sichenzia, or if sent to the
Company, will be mailed, delivered or telecopied and confirmed to it at 7135
Islington Avenue, Woodbridge, Ontario, Canada L4L 1V9, with a copy sent to
Bernstein & Wasserman, LLP, 950 Third Avenue, New York, NY 10022. Notice shall
be deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication.
15. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of the
Underwriter, the Company, any person controlling the Company or the Underwriter,
and directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from the Underwriter of the Securities.
16. Applicable Law.
This Agreement will be governed by, and construed in accordance with, of
the laws of the State of New York applicable to agreements made and to be
entirely performed within New York.
17. Counterparts.
This agreement may be executed in one or more counterparts each of which
shall be deemed to constitute an original and shall become effective when one or
more counterparts have been signed by each of the parties hereto and delivered
to the other parties (including by fax, followed by original copies by overnight
mail).
18. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement of the parties hereto
and supersedes all prior written or oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may not
be amended except in writing, signed by the Underwriter and the Company.
29
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
LIFTKING INDUSTRIES, INC.
By:
---------------------------------
Name: Louis Aldrovandi
Title: President
The foregoing Underwriting Agreement is hereby confirmed and accepted as
of the date first above written.
MONROE PARKER SECURITIES, INC.
By:
---------------------------------
Name: Stephen J. Drescher
Title: Director Corporate Finance
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A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. NO
OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE
CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND ANY
SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY
KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE
DATE.
LIFTKING INDUSTRIES, INC.
1,250,000 SHARES OF COMMON STOCK
AND
1,500,000 REDEEMABLE CLASS A COMMON STOCK
PURCHASE WARRANTS
SELECTED DEALERS AGREEMENT
_______ __, 1997
Dear Sirs:
1. Monroe Parker Securities, Inc. (the "Underwriter"), has agreed to
offer on a firm commitment basis, subject to the terms and conditions and
execution of the Underwriting Agreement, 1,250,000 shares of common stock (the
"Common Stock") of LiftKing Industries, Inc. (the "Company") and 1,500,000
Redeemable Class A Common Stock Purchase Warrants ("Warrant") (hereinafter,
collectively referred to as the "Securities"; including any shares of Common
Stock and Warrants offered pursuant to an over-allotment option, the "Firm
Securities"). Each Warrant is exercisable to purchase one (1) share of Common
Stock. The Firm Securities are more particularly described in the enclosed
Preliminary Prospectus, additional copies of which, as well as the Prospectus
(after effective date), will be supplied in reasonable quantities upon request.
2. The Underwriter is soliciting offers to buy the Securities, upon the
terms and conditions hereof, from Selected Dealers, who are to act as
principals, including you, who are (i) registered with the Securities and
Exchange Commission ("the Commission") as broker-dealers under the Securities
Exchange Act of 1934, as amended ("the 1934 Act"), and members in good standing
with the National Association of Securities Dealers, Inc. ("the NASD"), or (ii)
dealers or institutions with their principal place of business located outside
the United States, its territories and possessions and not registered under the
1934 Act who agree to make no sales within the United States, its territories
and possessions or to persons who are nationals thereof or residents therein
and, in making sales, to comply with the NASD's interpretation with respect to
free-riding and
<PAGE>
<PAGE>
withholding. The Common Stock is to be offered to the public at a price of $4.00
per share and the Warrants are to be offered to the public at a price of $.15
per Warrant. Selected Dealers will be allowed a concession of not less than __%
of the aggregate offering price. You will be notified of the precise amount of
such concession prior to the effective date of the Registration Statement. The
offer is solicited subject to the issuance and delivery of the Securities and
their acceptance by the Underwriter, to the approval of legal matters by counsel
and to the terms and conditions as herein set forth.
3. Your offer to purchase may be revoked in whole or in part without
obligation or commitment of any kind by you any time prior to acceptance and no
offer may be accepted by us and no sale can be made until after the registration
statement covering the Securities has become effective with the Commission.
Subject to the foregoing, upon execution by you of the Offer to Purchase below
and the return of same to us, you shall be deemed to have offered to purchase
the number of Securities set forth in your offer on the basis set forth in
paragraph 2 above. Any oral notice by us of acceptance of your offer shall be
immediately followed by written or telegraphic confirmation preceded or
accompanied by a copy of the Prospectus. If a contractual commitment arises
hereunder, all the terms of this Selected Dealers Agreement shall be applicable.
We may also make available to you an allotment to purchase Securities, but such
allotment shall be subject to modification or termination upon notice from us
any time prior to an exchange of confirmations reflecting completed
transactions. All references hereafter in this Agreement to the purchase and
sale of the Securities assume and are applicable only if contractual commitments
to purchase are completed in accordance with the foregoing.
4. You agree that in re-offering the Securities, if your offer is
accepted after the Effective Date, you will make a bona fide public distribution
of same. You will advise us upon request of the Securities purchased by you
remaining unsold, and we shall have the right to repurchase such Securities upon
demand at the public offering price less the concession as set forth in
paragraph 2 above. Any of the Securities purchased by you pursuant to this
Agreement are to be re-offered by you to the public at the public offering
price, subject to the terms hereof and shall not be offered or sold by you below
the public offering price before the termination of this Agreement.
5. Payment for Securities which you purchase hereunder shall be made by
you on such date as we may determine by certified or bank cashier's check
payable in New York Clearing house funds to Monroe Parker Securities, Inc.
Certificates for the Securities shall be delivered as soon as practicable at the
offices of Monroe Parker Securities, Inc., 2500 Westchester Avenue, Purchase,
New York 10577. Unless specifically authorized by us, payment by you may not be
deferred until delivery of certificates to you.
6. A registration statement covering the offering has been filed with
the Commission in respect to the Securities. You will be promptly advised when
the registration statement becomes effective. Each Selected Dealer in selling
the Securities pursuant hereto agrees (which agreement shall also be for the
benefit of the Company) that it will comply with the applicable requirements of
the Securities Act of 1933 and of the 1934 Act and any applicable rules and
regulations issued
2
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under said Acts. No person is authorized by the Company or by the Underwriter to
give any information or to make any representations other than those contained
in the Prospectus in connection with the sale of the Securities. Nothing
contained herein shall render the Selected Dealers a member of the underwriting
group or partners with the Underwriter or with one another.
7. You will be informed by us as to the states in which we have been
advised by counsel the Securities have been qualified for sale or are exempt
under the respective securities or blue sky laws of such states, but we have not
assumed and will not assume any obligation or responsibility as to the right of
any Selected Dealer to sell Securities in any state.
8. The Underwriter shall have full authority to take such action as we
may deem advisable in respect of all matters pertaining to the offering or
arising thereunder. The Underwriter shall not be under any liability to you,
except such as may be incurred under the Securities Act of 1933 and the rules
and regulations thereunder, except for lack of good faith and except for
obligations assumed by us in this Agreement, and no obligation on our part shall
be implied or inferred herefrom.
9. Selected Dealers will be governed by the conditions herein set forth
until this Agreement is terminated. This Agreement will terminate when the
offering is completed. Nothing herein contained shall be deemed a commitment on
our part to sell you any Securities; such contractual commitment can only be
made in accordance with the provisions of paragraph 3 hereof.
10. You represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD") and registered as a
broker-dealer or are not eligible for membership under Section I of the By-Laws
of the Association who agree to make no sales within the United States, its
territories or possessions or to persons who are nationals thereof or residents
therein and, in making sales, to comply with the NASD's interpretation with
respect to free-riding and withholding. Your attention is called to the
following: (a) Rules 2730, 2740, 2420 and 2750 of the NASD Conduct Rules and the
interpretations of said Sections promulgated by the Board of Governors of the
NASD including the interpretation with respect to "Free-Riding and Withholding";
(b) Section 10(b) of the 1934 Act and Regulation M and Rule and 10b-10 of the
general rules and regulations promulgated under said Act; (c) Securities Act
Release #3907; (d) Securities Act Release #4150; and (e) Securities Act Release
#4968 requiring the distribution of a Preliminary Prospectus to all persons
reasonably expected to be purchasers of Securities from you at least 48 hours
prior to the time you expect to mail confirmations. You, if a member of the
Association, by signing this Agreement, acknowledge that you are familiar with
the cited law, rules and releases, and agree that you will not directly and/or
indirectly violate any provisions of applicable law in connection with your
participation in the distribution of the Securities.
11. In addition to compliance with the provisions of paragraph 10
hereof, you will not, until advised by us in writing or by wire that the entire
offering has been distributed and closed, bid for or purchase Securities or its
component securities in the open market or otherwise make a market in such
securities or otherwise attempt to induce others to purchase such securities in
the open
3
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<PAGE>
market. Nothing contained in this paragraph 11 shall, however, preclude you from
acting as agent in the execution of unsolicited orders of customers in
transactions effectuated for them through a market maker.
12. You understand that the Underwriter may in connection with the
offering engage in stabilizing transactions. If the Underwriter contracts for or
purchases in the open market in connection with such stabilization any
Securities sold to you hereunder and not effectively placed by you, the
Underwriter may charge you the Selected Dealer's concession originally allowed
you on the Securities so purchased, and you agree to pay such amount to us on
demand.
13. By submitting an Offer to Purchase you confirm that your net
capital is such that you may, in accordance with Rule 15c3-1 adopted under the
1934 Act, agree to purchase the number of Securities you may become obligated to
purchase under the provisions of this Agreement.
14. You agree that (i) you shall not recommend to a customer the
purchase of Firm Securities unless you shall have reasonable grounds to believe
that the recommendation is suitable for such customer on the basis of
information furnished by such customer concerning the customer's investment
objectives, financial situation and needs, and any other information known to
you, (ii) in connection with all such determinations, you shall maintain in your
files the basis for such determination, and (iii) you shall not execute any
transaction in Firm Securities in a discretionary account without the prior
specific written approval of the customer.
15. You represent that neither you nor any of your affiliates or
associates owns any Common Stock of the Company.
16. All communications from you should be directed to us at the office
of Monroe Parker Securities, Inc., 2500 Westchester Avenue, Purchase, New York
10577. All communications from us to you shall be directed to the address to
which this letter is mailed.
Very truly yours,
MONROE PARKER SECURITIES, INC.
By: _______________________
Name:
Title:
ACCEPTED AND AGREED TO AS OF THE ______
DAY OF ____________, 1997
[Name of Dealer]
By: ____________________________
Its
4
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TO: Monroe Parker Securities, Inc.
2500 Westchester Avenue
Purchase, New York 10577
We hereby subscribe for _________________ Securities of LiftKing
Industries, Inc. in accordance with the terms and conditions stated in the
foregoing letter. We hereby acknowledge receipt of the Prospectus referred to in
the first paragraph thereof relating to said Securities. We further state
that in purchasing said Securities we have relied upon said Prospectus and upon
no other statement whatsoever, whether written or oral. We confirm that
we are a dealer actually engaged in the investment banking or securities
business and that we are either (i) a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") or (ii) a dealer with
its principal place of business located outside the United States, its
territories and its possessions and not registered as a broker or dealer under
the Securities Exchange Act of 1934, as amended, who hereby agrees not to
make any sales within the United States, its territories or its possessions or
to persons who are nationals thereof or residents therein. We hereby agree
to comply with the provisions of Rule 2740 of the NASD Conduct Rules,
and if we are a foreign dealer and not a member of the NASD, we also agree
to comply with the NASD's interpretation with respect to free-riding
and withholding, to comply, as though we were a member of the NASD,
with the provisions of Rules 2730 and 2750 of the NASD Conduct Rules.
Name of
Dealer: _________________________________
By: ___________________
Address: ___________________
___________________
Dated:________________, 1997
<PAGE>
<PAGE>
For Ministry Use Only
A l'usage exclusit du ministere
Ontario Corporation Number
Numero de la societe en Ontario
1251018
[logo]
Ministry of Consumer and Commercial Relations
CERTIFICATE
This is to certify that these articles are effective on
August 14
Ministere de la Consommation et du Commerce
CERTIFICAT
Ceci certifie que les presents statuts entrent en vigueur le
Aout, 1997
Signature illegible
Director/Directeur
Business Corporations Act/Loi sur les societes per actions
Form 4 Business Corporations Act
Formule 4 Loi sur les societes par actions
ARTICLES OF AMALGAMATION
STATUTS DE FUSION
1. The name of the amalgamated corporation is:
Denomination sociale de la societe issue de la fusion:
LIFTKING INDUSTRIES INC.
2. The address of the registered office is: Addresse du siege social:
7135 Islington Avenue, First Floor
________________________________________________________________________
(Street & Number, or R.R. Number & if Multi-Office Building give Room No.)
(Rue et numero, ou numero de la R.R. et, s'il s'agit d'un edifice a bureaux,
numero de bureau)
Woodbridge, Ontario L4L1V9
________________________________________________________________________
(Name of Municipality or Post Office) (Postal Code)
(Nom de la municipalite ou du bureau de poste) (Code postal)
3. Number (or minimum and maximum number) Nombre (ou nombres minimal et
of directors is: maximal) d'administrateurs:
a minimum of one and a maximum of ten
<TABLE>
<S> <C> <C>
4. The director(s) is/are: Administrateur(s): Resident
Canadian
State
First name, initials and surname Residence address, giving Street & No. or R.R. No., Yes or No
Prenom, initiales et nom de famille municipality and postal code Resident canadien
Adresse personnelle, Y compris la rue et le numero, le Oui/Non
numero de la R.R., le nom de le municipalite et le code
postal
________________________________________________________________________
Louis Aldrovandi 38 Arkona Drive Yes
Agincourt, Ontario
M1T 1X3
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
5. (A) The amalgamation agreement has been duly (A) Les actionnaires de chaque societe qui fusionne
adopted by the shareholders of each of the ont dument adopte la convention de fusion
amalgamating corporations as required by conformement au paragraphe 176(4) de la Loi sur
subsection 176 (4) of the Business [X] les societes par action a la date mentionnee
Corporations Act on the date set out below. ci-dessous.
_________________
Check Cocher
A or B A ou B
_________________
(B) The amalgamation has been approved by the (B) Les administrateurs de chaque societe qui
directors of each amalgamating corporation by [ ] fusionne ont approuve la fusion par voie de
a resolution as required by section 177 of the resolution conformement a l'article 177 de la Loi
Business Corporations Act on the date set out sur les societes par actions a la date mentionnee
below. oi-dessous.
The articles of amalgamation in substance Les statuts de fusion reprennent essentiellement
contain the provisions of the articles of les dispositions des statuts constitutifs de
incorporation of
________________________________________________________________________
and are more particularly set out in these et sont enonces textuellement aux presents statuts.
articles.
</TABLE>
<TABLE>
<S> <C> <C>
Names of amalgamating Ontario Corporation Number Date of Adoption/Approval
corporations Numero de la societe en Date d'adoption ou d'approbation
Denomination sociale des Ontario
societes qui fusionnent
________________________________________________________________________
DIMA PRODUCT
MANUFACTURING INC. 763003 August 14, 1997
LIFTKING INDUSTRIES
INC. 833978 August 14, 1997
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
6. Restrictions, if any, on business the corporation may Limites, s'il y a lieu, imposees aux activites commerciales
carry on or on powers the corporation may exercise. ou aux pouvoirs de la societe.
None
7. The classes and any maximum number of shares that Categories et nombre maximal, s'il y a lieu, d'actions que
the corporation is authorized to issue: la societe est autorisee a emettre:
</TABLE>
The capital of the Corporation shall consist of an unlimited number of
voting Class "A" Preference Shares (the "Class "A" Preference Shares"); an
unlimited number of non-voting Class "B" Preference Shares (the "Class "B"
Preference Shares") and an unlimited number of Common Shares (the
"Common Shares").
<PAGE>
<PAGE>
<TABLE>
4.
<S> <C>
8. Rights, privileges, restrictions and Droits, privileges, restrictions et
conditions (if any) attaching to each conditions, s'il y a lieu, rattaches a
class of shares and directors authority chaque categorie d'actions et pouvoirs
with respect to any class of shares des administrateurs relatifs a
which is to be issued in series: chaque categorie d'actions qul peut etre emise en serie:
</TABLE>
Class "A" Preference Shares
- ---------------------------
a) References herein to the Redemption Price Per Share in respect of each
Class "A" Preference Share shall mean a fixed amount determined by dividing the
stated capital account of the Class "A" Preference Shares by the number of such
shares in the capital stock of the Corporation then issued and outstanding.
b) The holders of the Class "A" Preference Shares, in priority to the Class
"B" Preference Shares, and Common Shares and any other shares ranking junior to
the Class "A" Preference Shares, shall be entitled to receive and the
Corporation shall pay thereon, as and when declared by the board of directors of
the Corporation in their discretion out of the monies of the Corporation
properly applicable to the payment of dividends, to such preferential,
non-cumulative dividends at a rate of up to 70% of the lending rate charged by
the branch in the Province of Ontario of the Corporation's bankers for the time
being to its most favoured commercial customers on Canadian dollar loans (the
"Prime Rate") determined as at the date of the dividend declaration and
calculated on the Redemption Price Per Share. If within four (4) months after
the expiration of any fiscal year of directors in its discretion shall not
declare the said fixed, preferential, non-cumulative dividend or any part
thereof on the Class "A" Preference Shares for such fiscal year, then the rights
of the holders of the Class "A" Preference Shares to such dividend, or to any
undeclared part thereof for such fiscal year, shall be forever extinguished. The
holders of the Class "A" Preference Shares shall not be entitled to any dividend
other than or in excess of the preferential, non-cumulative dividend at the said
rate hereinbefore provided for, or to participate in any other or additional
earnings or profits of the Corporation.
<PAGE>
<PAGE>
4A
c) Except with the consent in writing of the holders of all the Class "A"
Preference Shares outstanding, no dividends shall at any time be declared or
paid upon or set aside for payment on any Class "B" Preference Shares, or Common
Shares or on any shares of any other class ranking junior to the Class "A"
Preference Shares, for any fiscal year unless and until the fixed, preferential
non-cumulative dividend for such fiscal year on all the Class "A" Preference
Shares outstanding has been declared and paid or a sum set aside for payment
thereof.
d) The Corporation may, subject to The Business Corporations Act, upon
giving notice as hereinafter provided, redeem at any time the whole or from time
to time any part of the then outstanding Class "A" Preference Shares without the
consent of the holders thereof on payment for each share to be redeemed of the
Redemption Price Per Share, together with an amount equal to all dividends
declared thereon and remaining unpaid (the "Redemption Price"). In any case of
redemption of Class "A" Preference Shares, the Corporation shall, at least
twenty (20) days before the date specified for redemption, mail to each person
who, at the date of mailing, is a registered holder of Class "A" Preference
Shares to be redeemed a notice in writing of the intention of the Corporation to
redeem such Class "A" Preference Shares; such notice shall be mailed in a
prepaid letter addressed to each such shareholder at his address as it appears
on the books of the Corporation or, in the event of the address of any such
shareholder not so appearing, then to the last known address of such
shareholder; provided however, that accidental failure to give any such notice
to one or more of such holders shall not affect the validity of such redemption.
Such notice shall set out the Redemption Price and the date on which redemption
is to take place and, if part only of the shares held by the person to whom such
notice is addressed is to be redeemed, the number thereof so to be redeemed. On
or after the date so specified for redemption, the Corporation
<PAGE>
<PAGE>
4B
shall pay or cause to be paid to or to the order of the registered holders of
the Class "A" Preference Shares to be redeemed the Redemption Price thereof on
presentation and surrender at the head office of the Corporation, or any other
place designated in such notice, of the certificates representing the Class "A"
Preference Shares called for redemption; such Class "A" Preference Shares shall
thereupon be redeemed. If a part only of the Class "A" Preference Shares
represented by any certificate be redeemed, a new certificate for the balance
shall be issued at the expense of the Corporation. From and after the date
specified in any such notice, the Class "A" Preference Shares called for
redemption shall cease to be entitled to dividends and the holders thereof shall
not be entitled to exercise any of the rights of shareholders in respect thereof
unless payment of the Redemption Price shall not be made upon presentation of
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected. The Corporation shall have the
right, at any time after the mailing of notice of its intention to redeem any
Class "A" Preference Shares as aforesaid, to deposit the Redemption Price of the
Class "A" Preference Shares so called for redemption, or of such of the said
shares as are represented by certificates which have not at the date of such
deposit been surrendered by the holders thereof in connection with such
redemption, to a special account in any chartered bank or any trust company in
Canada named in such notice to be paid without interest to or to the order of
the respective holders of such Class "A" Preference Shares called for redemption
upon presentation and surrender to such bank or trust company of the
certificates representing the same, and upon such deposit being made or upon the
date specified for redemption in such notice, whichever is the later, the Class
"A" Preference Shares in respect whereof such deposit shall have been made shall
be redeemed and the rights of the holders thereof after such deposit or such
redemption date, as
<PAGE>
<PAGE>
4C
the case may be, shall be limited to receiving without interest their
proportionate part of the total Redemption Price so deposited against
presentation and surrender of the said certificates held by them respectively.
e) The Corporation may, subject to The Business Corporations Act, at any
time and from time to time purchase (if obtainable) for cancellation the whole
or any portion of the Class "A" Preference Shares outstanding from time to time
by invitation for tenders addressed to all the holders of record of the Class
"A" Preference Shares outstanding, or (with the consent of all the holders of
Class "A" Preference Shares) by private contract at the lowest price to prices
at which, in the opinion of the directors, such shares are obtainable but not
exceeding for each share to be purchased for cancellation the Redemption Price
Per Share plus costs of purchase and an amount equal to all dividends declared
thereon and remaining unpaid. Where, in response to any invitation for tenders,
two or more shareholders submit tenders at the same price and such tenders are
accepted by the Corporation as to part only of the shares offered in each such
tender in proportion as nearly as may be to the total number of shares offered
in each such tender (disregarding fractions).
f) The holders of the Class "A" Preference Shares shall be entitled to
receive notice of and to attend and vote at all meetings of Shareholders of the
Corporation and each Class "A" Preference Share shall confer the right of one
(1) vote in person or by proxy at all meetings of the shareholders of the
Corporation.
g) In the event of the liquidation, dissolution or winding up of the
Corporation or other distribution of assets of the Corporation among
shareholders for the purpose of winding up its affairs, the holders of the Class
"A" Prefer-
<PAGE>
<PAGE>
4D
ence Shares shall be entitled to receive out of the assets and property of the
Corporation, before any amount is paid or any property or assets of the
Corporation distributed to the holders of any Class "B" Preference Shares, or
Common Shares, or shares of any other class ranking junior to the Class "A"
Preference Shares, for each share an amount equal to the Redemption Price Per
Share thereon together with all declared and unpaid preferential, non-cumulative
dividends thereon; after payment to the holders of the Class "A" Preference
Shares of the amounts so payable to them as above provided, they shall not be
entitled to share in any further distribution of the property or assets of the
Corporation. If the assets and property of the Corporation, including surplus
are not sufficient to pay the Redemption Price Per Share together with all
declared and unpaid preferential, non-cumulative dividends, thereon; after
payment to the holders of the Class "A" Preference Shares of the amounts so
payable to them as above provided, they shall not be entitled to share in any
further distribution of the property or assets of the Corporation. If the assets
and property of the Corporation, including surplus are not sufficient to pay the
Redemption Price Per Share together with all declared and unpaid preferential,
non-cumulative dividends, then all of the said assets or the proceeds thereof
shall be distributed pro rata among the holders of the Class "A" Preference
Shares.
Class "B" Preference Shares
- ---------------------------
a) References to the Redemption Price Per Share in respect of the Class "B"
Preference Shares shall mean a fixed amount determined by dividing the stated
capital account of the Class "B" Preference Shares by the number of such shares
in the capital stock of the Corporation then issued and outstanding.
b) The holders of the Class "B" Preference Shares, in priority to the
Common Shares and any other shares ranking junior to the Class "B" Preference
Shares, shall be entitled
<PAGE>
<PAGE>
4E
to receive and the Corporation shall pay thereon, as and when declared by the
board of directors of the Corporation in their discretion out of the monies of
the Corporation properly applicable to the payment of dividends, to such
preferential, non-cumulative dividends per share at a rate up to 70% of the
Prime Rate determined as at the date of the dividend declaration and calculated
on the Redemption Price Per Share. If within four (4) months after the
expiration of any fiscal year of the Corporation the board of directors in its
discretion shall not declare the said fixed, preferential, non-cumulative
dividend or any part thereof on the Class "B" Preference Shares for such fiscal
year, then the rights of the holders of the Class "B" Preference Shares to such
dividend or to any undeclared part thereof for such fiscal year shall be forever
extinguished. The holders of the Class "B" Preference Shares shall not be
entitled to any dividends other than or in excess of the preferential,
non-cumulative dividends hereinbefore provided for or to participate in any
other or additional earnings or profits of the Corporation.
c) Except with the consent in writing of the holders of all the Class
"B" Preference Shares outstanding, no dividends shall at any time be declared or
paid upon or set aside for payment on any Common Shares or on any shares of any
other class ranking junior to the Class "B" Preference Shares, for any fiscal
year unless and until the fixed, preferential, non-cumulative dividend for such
fiscal year on all the Class "B" Preference Shares outstanding has been declared
and paid or a sum set aside for payment thereof.
d) The Corporation may, subject to the Business Corporations Act,
provided, redeem at any time the whole or from time to time any part of the then
outstanding Class "B" Preference Shares without the consent of the holders
thereof on payment for each share to be redeemed of the Redemption Price Per
Share, together with an amount equal to all divi-
<PAGE>
<PAGE>
4F
dends declared thereon and remaining unpaid (the "Redemption Price"). In any
case of redemption of Class "B" Preference Shares, the Corporation shall, at
least twenty (20) days before the date specified for redemption, mail to each
person who, at the date of mailing, is a registered holder of Class "B"
Preference Shares to be redeemed a notice in writing of the intention of the
Corporation to redeem such Class "B" Preference Shares; such notice shall be
mailed in a prepaid letter addressed to each such shareholder at his address as
it appears on the books of the Corporation or, in the event of the address of
any such shareholder not so appearing then to the last known address of such
shareholder; provided however, that accidental failure to give any such notice
to one or more of such holders shall not affect the validity of such redemption.
Such notice shall set out the Redemption Price and the date on which redemption
is to take place and, if part only of the shares held by the person to whom such
notice is addressed is to be redeemed, the number thereof so to be redeemed. On
or after the date so specified for redemption, the Corporation shall pay or
cause to be paid to or to the order of the registered holders of the Class "B"
Preference Shares to be redeemed the Redemption Price thereof on presentation
and surrender at the head office of the Corporation, or any other place
designated in such notice, of the certificates representing the Class "B"
Preference Shares called for redemption; such Class "B" Preference Shares shall
thereupon be redeemed. If a part only of the Class "B" Preference Shares
represented by any certificate be redeemed, a new certificate for the balance
shall be issued at the expense of the Corporation. From and after the date
specified in any such notice, the Class "B" Preference Shares called for
redemption shall cease to be entitled to dividends and the holders thereof shall
not be entitled to exercise any of the rights of shareholders in respect thereof
unless payment of the Redemption Price shall not be made upon presentation of
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall
<PAGE>
<PAGE>
4G
remain unaffected. The Corporation shall have the right, at any time after the
mailing of notice of its intention to redeem any Class "B" Preference Shares as
aforesaid, to deposit the Redemption Price of the Class "B" Preference Shares
so called for redemption, or of such of the said shares as are represented by
certificates which have not at the date of such deposit been surrendered by the
holders thereof in connection with such redemption, to a special account in any
chartered bank or any trust company in Canada named in such notice to be paid
without interest to or to the order of the respective holders of such Class "B"
Preference Shares called for redemption upon presentation and surrender to such
bank or trust company of the certificates representing the same, and upon such
deposit being made or upon the date specified for redemption in such notice,
whichever is the later, the Class "B" Preference Shares in respect whereof such
deposit shall have been made shall be redeemed and the rights of the holders
thereof after such deposit or such redemption date, as the case may be, shall be
limited to receiving without interest their proportionate part of the total
Redemption Price so deposited against presentation and surrender of the said
certificates held by them respectively.
e) The Corporation may, subject to The Business Corporations Act, at any
time and from time to time purchase (if obtainable) for cancellation the whole
or any portion of the Class "B" Preference Shares outstanding from time to time
by invitation for tenders addressed to all the holders of record of the Class
"B" Preference Shares outstanding, or (with the consent of all the holders of
Class "B" Preference Shares) by private contract at the lowest price or prices
at which, in the opinion of the Directors, such shares are obtainable but not
exceeding for each share to be purchased for cancellation the Redemption Price
Per Share plus costs of purchase and an amount equal to all dividends declared
<PAGE>
<PAGE>
4H
thereon and remaining unpaid. Where, in response to any invitation for tenders,
two or more shareholders submit tenders at the same price and such tenders are
accepted by the Corporation as to part only of the shares offered, the
Corporation shall accept part of the shares offered in each such tender in
proportion as nearly as may be to the total number of shares offered in each
such tender (disregarding fractions).
f) The holders of the Class "B" Preference Shares shall not be entitled
(except as otherwise specifically provided in The Business Corporations Act), to
receive notice or to attend any meeting of the shareholders of the Corporation
and shall not be entitled to vote at any such meeting.
g) In the event of the liquidation, dissolution or winding up of the
Corporation or other distribution of assets of the Corporation among
shareholders for the purpose of winding up its affairs, the holders of the Class
"B" Preference Shares shall be entitled to receive out of the assets and
property of the Corporation, before any amount is paid or any property or assets
of the Corporation distributed to the holders of any Common Shares or shares of
any other class ranking junior to the Class "B" Preference Shares, for each
share an amount equal to the Redemption Price Per Share together with all
declared and unpaid preferential, non-cumulative dividends thereof; after
payment to the holders of the Class "B" Preference Shares of the amounts so
payable to them as above provided, they shall not be entitled to share in any
further distribution of the property or assets of the Corporation. If the assets
and property of the Corporation including surplus are not sufficient to pay the
Redemption Price Per Share together with all declared and unpaid preferential,
non-cumulative dividends, then all of the said assets or the proceeds hereof
shall be distributed pro rata among the holders of the Class "B" Preference
Shares.
<PAGE>
<PAGE>
4I
Class "A" Preference Shares, Class "B" Preference Shares
a) The foregoing provisions, the provisions of this paragraph and the
provisions of subparagraph (b) hereof may be repealed, altered, modified or
amended by articles of amendment but only with the approval of the holders of
the Class "A" Preference Shares or Class "B" Preference Shares as the case may
be, given as hereinafter specified in addition to any other approval required by
The Business Corporations Act.
b) The approval of the holders of the Class "A" Preference Shares or Class
"B" Preference Shares, as the case may be, as to any and all matters referred to
herein may be given by special resolution passed at a meeting of holders of
Class "A" or Class "B" Preference Shares as the case may be, duly called and
held upon at least ten (10) days' notice at which the holders of at least a
majority of the outstanding Class "A" Preference Shares or Class "B" Preference
Shares, as the case may be, are present or represented by proxy and carried by
the affirmative votes of the holders of not less than two-thirds of the Class
"A" Preference Shares or Class "B" Preference Shares represented and voted at
such meeting cast on a poll (each class voting separately at any combined
meeting). On every poll taken at every such meeting every holder of Class "A"
Preference Shares or Class "B" Preference Shares shall be entitled to one (1)
vote in respect of each Class "A" Preference Share or Class "B" Preference
Share, as the case may be, held.
Common Shares
The Common Shares shall carry and be subject to the following rights,
privileges, restrictions and conditions:
a) To receive notice of and attend all meetings of shareholders of the
Corporation, except class meetings of other classes of shareholders, and each
Common Share shall
<PAGE>
<PAGE>
4J
confer the right to one (1) vote in person or by proxy at all such meetings of
shareholders of the Corporation;
b) Subject to the rights, privileges, restrictions and conditions attaching
to any other class of shares of the Corporation, to receive any dividend
declared by the Corporation in respect of the Common Shares; and
c) Subject to the rights, privileges, restrictions and conditions attaching
to any other class of shares of the Corporation, the holders of the Common
Shares shall be entitled to receive the remaining property of the Corporation
upon the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary.
<PAGE>
<PAGE>
<TABLE>
<S> <C>
9. The issue, transfer or ownership L'emission, le transfert ou la propriete
of shares is restricted and the d'actions est/n'est pas restraint.
restrictions (if any) are as follows: Les restrictions, s'il y a lieu, sont les suivantes:
</TABLE>
Subject to any unanimous shareholders agreement existing from time to time, and
any amendments thereto, the right to transfer any share or shares of the
Corporation shall be restricted in that no shareholder shall be entitled to
transfer any share or shares of the Corporation without either:
a) the previous express sanction of the holders of more than 50% of the Common
Shares of the Corporation for the time being outstanding expressed by a
resolution passed at a meeting of shareholders or by an instrument or
instruments in writing signed by the holders of more than 50% of such
shares; or
b) the previous express sanction of the directors of the Corporation expressed
by a resolution passed by the votes of a majority of the directors of the
Corporation at a meeting of the board of directors or by an instrument or
instruments in writing signed by a majority of the directors.
10. Other provisions, if any, are: Autres dispositions, s'il y a lieu:
1. The Corporation shall have a lien on the shares registered in the name of
the shareholder or his legal representative for a debt of that shareholder
to the Corporation.
2. The number of shareholders of the Corporation, exclusive of persons who are
in its employment and exclusive of persons who, having been formerly in the
employment of the Corporation, were, while in that employment, and have
continued after the termination of that employment to be, shareholders of
the Corporation, is limited to not more than fifty, two or more persons who
are the joint registered owners of one or more shares being counted as one
shareholder.
3. Any invitation to the public to subscribe for securities of the Corporation
is prohibited.
<TABLE>
<S> <C>
11. The statements required by subsection Les declarations exigees aux termes
178(2) of the Business Corporations du paragraphe 178(2) de la Loi sur les
Act are attached as Schedule "A". societes par actions constituent l'annexe "A".
12. A copy of the amalgamation agreement or Une copie de la convention de fusion ou les
directors resolutions (as the case resolutions des administrateurs
may be) is/are attached as Schedule "B". (selon le cas) constitue(nt) l'annexe "B".
</TABLE>
<PAGE>
<PAGE>
These articles are signed in duplicate.
Les presents statuts sont signes en double exemplaire.
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Names of the amalgamating corporations Denomination sociale des societes qui fusionnent,
and signatures and descriptions of office signature et fonction de leurs
of their proper officers. dirigeants regullerement designes.
</TABLE>
DIMA PRODUCT MANUFACTURING INC. LIFTKING INDUSTRIES INC.
Per: Per:
[Signature] [Signature]
- ------------------------------------ -------------------------------------
President President
<PAGE>
<PAGE>
SCHEDULE "A"
OFFICER'S STATEMENT
I, LOUIS ALDROVANDI, of the Municipality of Metropolitan Toronto, in the
Province of Ontario, state as follows:
1. I am the President of DIMA PRODUCT MANUFACTURING INC. (the "Corporation") and
as such have personal knowledge of the matters hereinafter stated.
2. The Corporation desires to amalgamate with LIFTKING INDUSTRIES INC. and
continue as one corporation under the name of LIFTKING INDUSTRIES, INC.
3. There are reasonable grounds for believing that:
a. each of the amalgamating corporations is and the amalgamated corporation
will be able to pay its liabilities as they become due; and
b. the realizable value of the amalgamated corporation's assets will not be
less than the aggregate of its liabilities and stated capital of all
classes.
4. There are reasonable grounds for believing that no creditor will be
prejudiced by the amalgamation.
5. No creditor has notified the Corporation that he objects to the amalgamation.
6. For the reasons set out in paragraphs 4 and 5 above it is unnecessary for the
Corporation to comply with the notice provisions contained in paragraph
178(2)(d) of the Business Corporations Act (Ontario).
DATED the 14th day of August, 1997.
LOUIS ALDROVANDI
_________________________________________
Louis Aldrovandi
<PAGE>
<PAGE>
SCHEDULE "B"
AMALGAMATION AGREEMENT
THIS AGREEMENT made the 14th day of August, 1997.
B E T W E E N:
DIMA PRODUCT MANUFACTURING INC., a corporation incorporated under
the laws of the Province of Ontario,
("Dima")
- and -
LIFTKING INDUSTRIES INC., a corporation incorporated under the
laws of the Province of Ontario,
("Liftking")
RECITALS:
A. Dima and Liftking were each incorporated under the Business Corporations
Act (Ontario) or predecessors of that legislation;
B. the Amalgamating Corporations have each made full disclosure to the other
of all their respective assets and liabilities;
C. the authorized capital of Dima is an unlimited number of Class "A"
Preferred Shares, Class "B" Preference Shares and Common Shares, of which
10 Common Shares are issued and outstanding;
D. the authorized capital of Liftking is an unlimited number of Class A
special shares, Class B special shares, Class C special shares and common
shares, of which 1 common share issued and outstanding;
E. the Amalgamating Corporations acting under the authority contained in the
Act have agreed to amalgamate on the terms and conditions hereinafter set
out;
<PAGE>
<PAGE>
-2-
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are mutually acknowledged,
the parties covenant and agree as follows:
1. In this Agreement:
(a) "Amalgamated Corporation" means the corporation continuing from the
amalgamation of the Amalgamating Corporations;
(b) "Amalgamating Corporations" means Dima and Liftking, the parties to
this Agreement;
(c) "Amalgamation" means the amalgamation of the Amalgamating
Corporations;
(d) "Amalgamation Agreement" or "Agreement" means this amalgamation
agreement; and
(e) "Act" means the Business Corporations Act (Ontario), as now enacted or
as the same may be re-enacted, amended or replaced.
2. Each of the Amalgamating Corporations agree to amalgamate under the
provisions of the Act effective immediately on the commencement of August 14,
1997, and to continue as one corporation on the terms and conditions set out in
this Agreement.
3. The name of the Amalgamated Corporation shall be LIFTKING INDUSTRIES INC.
4. The registered office of the Amalgamated Corporation shall be in the Regional
Municipality of York, in the Province of Ontario and, until otherwise determined
in accordance with the Act, shall be located at 7135 Islington Avenue, First
Floor, Woodbridge, Ontario L4L 1V9.
5. The authorized capital of the Amalgamated Corporation shall consist of an
unlimited number of Class "A" Preference Shares, Class "B" Preference Shares and
Common Shares.
6. The rights, privileges, restrictions and conditions attaching to the Class
"A" Preference Shares shall be as follows:
<PAGE>
<PAGE>
-3-
(a) References herein to the Redemption Price Per Share in respect of each
Class "A" Preference Share shall mean a fixed amount determined by dividing the
stated capital account of the Class "A" Preference Shares by the number of such
shares in the capital stock of the Corporation then issued and outstanding.
(b) The holders of the Class "A" Preference Shares, in priority to the
Class "B" Preference Shares, and Common Shares and any other shares ranking
junior to the Class "A" Preference Shares, shall be entitled to receive and the
Corporation shall pay thereon, as and when declared by the board of directors of
the Corporation in their discretion out of the monies of the Corporation
properly applicable to the payment of dividends, to such preferential,
non-cumulative dividends at a rate of up to 70% of the lending rate charged by
the branch in the Province of Ontario of the Corporation's bankers for the time
being to its most favoured commercial customers on Canadian dollar loans (the
"Prime Rate") determined as at the date of the dividend declaration and
calculated on the Redemption Price Per Share. If within four (4) months after
the expiration of any fiscal year of directors in its discretion shall not
declare the said fixed, preferential, non-cumulative dividend or any part
thereof on the Class "A" Preference Shares for such fiscal year, then the rights
of the holders of the Class "A" Preference Shares to such dividend, or to any
undeclared part thereof for such fiscal year, shall be forever extinguished. The
holders of the Class "A" Preference Shares shall not be entitled to any dividend
other than or in excess of the preferential, non-cumulative dividend at the said
rate hereinbefore provided for, or to participate in any other or additional
earnings or profits of the Corporation.
<PAGE>
<PAGE>
-4-
c) Except with the consent in writing of the holders of all the Class
'A' Preference Shares outstanding, no dividends shall at any time be
declared or paid upon or set aside for payment on any Class 'B' Preference
Shares, or Common Shares or on any shares of any other class ranking junior
to the Class 'A' Preference Shares, for any fiscal year unless and until
the fixed, preferential non-cumulative dividend for such fiscal year on all
the Class 'A' Preference Shares outstanding has been declared and paid or a
sum set aside for payment thereof.
d) the Corporation may, subject to The Business Corporations Act, upon
giving notice as hereinafter provided, redeem at any time the whole or from
time to time any part of the then outstanding Class 'A' Preference Shares
without the consent of the holders thereof on payment for each share to be
redeemed of the Redemption Price Per Share, together with an amount equal
to all dividends declared thereon and remaining unpaid (the 'Redemption
Price'). In any case of redemption of Class 'A' Preference Shares, the
Corporation shall, at least twenty (20) days before the the specified for
redemption mail to each person who, at the date of mailing, is a registered
holder of Class 'A' Preference Shares to be redeemed a notice in writing of
the intention of the Corporation to redeem such Class 'A' Preference
Shares; such notice shall be mailed in a prepaid letter addressed to each
such shareholder at his address as it appears on the books of the
Corporation or, in the event of the address of any such shareholder not so
appearing, then to the last known address of such shareholder; provided
however, that accidental failure to give any such notice to one or more of
such holders shall not affect the validity of such redemption. Such notice
shall set out the Redemption Price and the date on which redemption is to
take place and, if part only of the shares held by the person to whom such
notice is addressed is to be redeemed, the number thereof so to be
redeemed. On or after the date so specified for redemption, the Corporation
<PAGE>
<PAGE>
-5-
shall pay or cause to be paid to or to the order of the registered holders
of the Class 'A' Preference Shares to be redeemed the Redemption Price
thereof on presentation and surrender at the head office of the
Corporation, or any other place designated in such notice, of the
certificates representing the Class 'A' Preference Shares called for
redemption; such Class 'A' Preference Shares shall thereupon be redeemed.
If a part only of the Class 'A' Preference Shares represented by any
certificate be redeemed, a new certificate for the balance shall be issued
at the expense of the Corporation. From and after the date specified in any
such notice, the Class 'A' Preference Shares called for redemption shall
cease to be entitled to dividends and the holders thereof shall not be
entitled to exercise any of the rights of shareholders in respect thereof
unless payment of the Redemption Price shall not be made upon
presentation of certificates in accordance with the have foregoing
provisions, in which case the rights of the holders shall remain
unaffected. The Corporation shall have the right, at any time after the
mailing of notice of its intention to redeem any Class 'A' Preference
Shares as aforesaid, to deposit the Redemption Price of the Class 'A'
Preference Shares so called for redemption, or of such of the said shares
as are represented by certificates which ave not at the date of such
deposit been surrendered by the holders thereof in connection with such
redemption, to a special account in any chartered bank or any trust company
in Canada named in such notice to be paid without interest to or to the
order of the respective holders of such Class 'A' Preference Shares called
for redemption upon presentation and surrender to such bank or trust
company of the certificates representing the same, and upon such deposit
being made or upon the date specified for redemption in such notice,
whichever is the later, the Class 'A' Preference Shares in respect whereof
such deposit shall have been made shall be redeemed and the rights of the
holders thereof after such deposit or such redemption date, as
<PAGE>
<PAGE>
-6-
the case may be, limited to receiving without interest their proportionate
part of the total Redemption Price so deposited against presentation and
surrender of the said certificates held by them respectively.
e) The Corporation may, subject to The Business Corporations Act, at
any time and from time to time purchase (if obtainable) for cancellation
the whole or any portion of the Class 'A' Preference Shares outstanding
from time to time by invitation for tenders addressed to all the holders of
record of the Class 'A' Preference Shares outstanding, or (with the consent
of all the holders of Class 'A' Preference Shares) by private contract at
the lowest price to prices at which, in the opinion of the directors, such
shares are obtainable but not exceeding for each share to be
purchased for cancellation the Redemption Price Per Share plus costs of
purchase and an amount equal to all dividends declared thereon and
remaining unpaid. Where, in response to any invitation for tenders, two or
more shareholders submit tenders at the same price and such tenders are
accepted by the Corporation as to part only of the shares offered in each
such tender in proportion as nearly as may be to the total number of shares
offered in each such tender (disregarding fractions).
f) The holders of the Class 'A' Preference Shares shall be entitled to
receive notice of and to attend and vote at all meetings of Shareholders of
the Corporation and each Class 'A' Preference Share shall confer the right
of one (1) vote in person or by proxy at all meetings of the shareholders
of the Corporation.
g) In the event of the liquidation, dissolution or winding up of the
Corporation or other distribution of assets of the Corporation among
shareholders for the purpose of winding up its affairs, the holders of the
Class 'A' Prefer-
<PAGE>
<PAGE>
-7-
ence Shares shall be entitled to receive out of the assets
and property of the Corporation, before any amount is paid or any property
or assets of the Corporation distributed to the holders of any Class 'B'
Preference Shares, or Common Shares, or shares of any other class ranking
junior to the Class 'A' Preference Shares, for each share an amount equal
to the Redemption Price Per Share thereon together with all declared and
unpaid preferential, non-cumulative dividends thereon; after payment to the
holders of the Class 'A' Preference Shares of the amounts so payable to
them as above provided, they shall not be entitled to share in any further
distribution of the property or assets of the Corporation. If the assets
and property of the Corporation, including surplus are not sufficient to
pay the Redemption Price Per Share together with all declared and unpaid
preferential, non-cumulative dividends, thereon; after payment to the
holders of the Class 'A' Preference Shares of the amounts so payable to
them as above provided, they shall not be entitled to share in any further
distribution of the property or assets of the Corporation. If the assets
and property of the Corporation, including surplus are not sufficient to
pay the Redemption Price Per Share together with all declared and unpaid
preferential, non-cumulative dividends, then all of the said assets or the
proceeds thereof shall be distributed pro rata among the holders of the
Class 'A' Preference Shares.
7. the rights, privileges, restrictions and conditions attaching to the Class
'B' Preference Shares shall be as follows:
a) References to the Redemption Price Per Share in respect of the
Class 'B' Preference Shares shall mean a fixed amount determined by
dividing the stated capital account of the Class 'B' Preference Shares by
the number of such shares in the capital stock of the Corporation then
issued and outstanding.
b) The holders o of the Class 'B' Preference Shares, in priority to
the Common Shares and any other shares ranking junior to the Class 'B'
Preference Shares, shall be entitled
<PAGE>
<PAGE>
-8-
to receive and the Corporation shall pay thereon, as and when declared by the
board of directors of the Corporation in their discretion out of the monies of
the Corporation properly applicable to the payment of dividends, to such
preferential, non-cumulative dividends per share at a rate up to 70% of the
Prime Rate determined as at the date of the dividend declaration and calculated
on the Redemption Price Per Share. If within four (4) months after the
expiration of any fiscal year of the Corporation the board of directors in its
discretion shall not declare the said fixed, preferential, non-cumulative
dividend or any part thereof on the Class "B" Preference Shares for such fiscal
year, then the rights of the holders of the Class "B" Preference Shares to such
dividend or to any undeclared part thereof for such fiscal year shall be forever
extinguished. The holders of the Class "B" Preference Shares shall not be
entitled to any dividends other than or in excess of the preferential,
non-cumulative dividends hereinbefore provided for or to participate in any
other or additional earnings or profits of the Corporation.
c) Except with the consent in writing of the holders of all the Class "B"
Preference Shares outstanding, no dividends shall at any time be declared or
paid upon or set aside for payment on any Common Shares or on any shares of any
other class ranking junior to the Class "B" Preference Shares, for any fiscal
year unless and until the fixed, preferential, non-cumulative dividend for such
fiscal year on all the Class "B" Preference Shares outstanding has been declared
and paid or a sum set aside for payment thereof.
d) The Corporation may, subject to the Business Corporations Act,
provided, redeem at any time the whole or from time to time any part of the then
outstanding Class "B" Preference Shares without the consent of the holders
thereof on payment for each share to be redeemed of the Redemption Price Per
Share, together with an amount equal to all divi-
<PAGE>
<PAGE>
-9-
dends declared thereon and remaining unpaid (the "Redemption Price"). In any
case of redemption of Class "B" Preference Shares, the Corporation shall, at
least twenty (20) days before the date specified for redemption, mail to each
person who, at the date of mailing, is a registered holder of Class "B"
Preference Shares to be redeemed a notice in writing of the intention of the
Corporation to redeem such Class "B" Preference Shares; such notice shall be
mailed in a prepaid letter addressed to each such shareholder at his address as
it appears on the books of the Corporation or, in the event of the address of
any such shareholder not so appearing then to the last known address of such
shareholder; provided however, that accidental failure to give any such notice
to one or more such holders shall not affect the validity of such redemption.
Such notice shall set out the Redemption Price and the date on which redemption
is to take place and, if part only of the shares held by the person to whom such
notice is addressed is to be redeemed, the number thereof so to be redeemed. On
or after the date so specified for redemption, the Corporation shall pay or
cause to be paid to or to the order of the registered holders of the Class "B"
Preference Shares to be redeemed the Redemption Price thereof on presentation
and surrender at the head office of the Corporation, or any other place
designated in such notice, of the certificates representing the Class "B"
Preference Shares called for redemption; such Class "B" Preference Shares shall
thereupon be redeemed. If a part only of the Class "B" Preference Shares
represented by any certificate be redeemed, a new certificate for the balance
shall be issued at the expense of the Corporation. From and after the date
specified in any such notice, the Class "B" Preference Shares called for
redemption shall cease to be entitled to dividends and the holders thereof shall
not be entitled to exercise any of the rights of shareholders in respect thereof
unless payment of the Redemption Price shall not be made upon presentation of
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall
<PAGE>
<PAGE>
-10-
remain unaffected. The Corporation shall have the right, at any time after the
mailing of notice of its intention to redeem any Class "B" Preference Shares as
aforesaid, to deposit the Redemption Price of the Class "B" Preference Shares so
called for redemption, or of such of the said shares as are represented by
certificates which have not at the date of such deposit been surrendered by the
holders thereof in connection with such redemption, to a special account in any
chartered bank or any trust company in Canada named in such notice to be paid
without interest to or to the order of the respective holders of such Class "B"
Preference Shares called for redemption upon presentation and surrender to such
bank or trust company of the certificates representing the same, and upon such
deposit being made or upon the date specified for redemption in such notice,
whichever is the later, the Class "B" Preference Shares in respect whereof such
deposit shall have been made shall be redeemed and the rights of the holders
thereof after such deposit or such redemption date, as the case may be, shall be
limited to receiving without interest their proportionate part of the total
Redemption Price so deposited against presentation and surrender of the said
certificates held by them respectively.
e) The Corporation may, subject to The Business Corporations Act, at any
time and from time to time purchase (if obtainable) for cancellation the whole
or any portion of the Class "B" Preference Shares outstanding from time to time
by invitation for tenders addressed to all the holders of record of the Class
"B" Preference Shares outstanding, or (with the consent of all the holders of
Class "B" Preference Shares) by private contract at the lowest price or prices
at which, in the opinion of the Directors, such shares are obtainable but not
exceeding for each share to be purchased for cancellation the Redemption Price
Per Share plus costs of purchase and an amount equal to all dividends declared
<PAGE>
<PAGE>
-11-
thereon and remaining unpaid. Where, in response to any invitation for tenders,
two or more shareholders submit tenders at the same price and such tenders are
accepted by the Corporation as to part only of the shares offered, the
Corporation shall accept part of the shares offered in each such tender in
proportion as nearly as may be to the total number of shares offered in each
such tender (disregarding fractions).
f) The holders of the Class "B" Preference Shares shall not be entitled
(except as otherwise specifically provided in The Business Corporations Act), to
receive notice or to attend any meeting of the shareholders of the Corporation
and shall not be entitled to vote at any such meeting.
g) In the event of the liquidation, dissolution or winding up of the
Corporation or other distribution of assets of the Corporation among
shareholders for the purpose of winding up its affairs, the holders of the Class
"B" Preference Shares shall be entitled to receive out of the assets and
property of the Corporation, before any amount is paid or any property or assets
of the Corporation distributed to the holders of any Common Shares or shares of
any other class ranking junior to the Class "B" Preference Shares, for each
share an amount equal to the Redemption Price Per Share together with all
declared and unpaid preferential, non-cumulative dividends thereon; after
payment to the holders of the Class "B" Preference Shares of the amounts so
payable to them as above provided, they shall not be entitled to share in any
further distribution of the property or assets of the Corporation. If the assets
and property of the Corporation including surplus are not sufficient to pay the
Redemption Price Per Share together with all declared and unpaid preferential,
non-cumulative dividends, then all of the said assets or the proceeds hereof
shall be distributed pro rata among the holders of the Class "B" Preference
Shares.
<PAGE>
<PAGE>
- 12 -
8. Class "A" Preference Shares, Class "B" Preference Shares
a) The foregoing provisions, the provisions of this paragraph and the
provisions of subparagraph (b) hereof may be repealed, altered, modified or
amended by articles of amendment but only with the approval of the holders of
the Class "A" Preference Shares or Class "B" Preference Shares as the case may
be, given as hereinafter specified in addition to any other approval required by
The Business Corporations Act.
b) The approval of the holders of the Class "A" Preference Shares or Class
"B" Preference Shares, as the case may be, as to any and all matters referred to
herein may be given by special resolution passed at a meeting of holders of
Class "A" or Class "B" Preference Shares as the case may be, duly called and
held upon at least ten (10) days' notice at which the holders of at least a
majority of the outstanding Class "A" Preference Shares or Class "B" Preference
Shares, as the case may be, are present or represented by proxy and carried by
the affirmative votes of the holders of not less than two-thirds of the Class
"A" Preference Shares or Class "B" Preference Shares represented and voted at
such meeting cast on a poll (each class voting separately at any combined
meeting). On every poll taken at every such meeting every holder of Class "A"
Preference Shares or Class "B" Preference Shares shall be entitled to one (1)
vote in respect of each Class "A" Preference Share or Class "B" Preference
Share, as the case may be, held.
<PAGE>
<PAGE>
- 13 -
9. The rights, privileges, restrictions and conditions attaching to the Common
Shares shall be as follows:
a) To receive notice of and attend all meetings of shareholders of the
Corporation, except class meetings of other classes of shareholders, and each
Common Share shall confer the right to one (1) vote in person or by proxy at all
such meetings of shareholders of the Corporation;
b) Subject to the rights, privileges, restrictions and conditions attaching
to any other class of shares of the Corporation, to receive any dividend
declared by the Corporation in respect of the Common Shares; and
c) Subject to the rights, privileges, restrictions and conditions attaching
to any other class of shares of the Corporation, the holders of the Common
Shares shall be entitled to receive the remaining property of the Corporation
upon the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary.
<PAGE>
<PAGE>
- 14 -
10. The issued and outstanding shares in the Amalgamating Corporation shall be
converted into issued and outstanding shares of the Amalgamated Corporation
as follows:
(a) The 10 common shares in the capital of Dima shall be converted into
4,053,643 common shares in the capital of the Amalgamated Corporation;
(b) The 1 common share in the capital of Liftking shall be cancelled
without any repayment of capital in respect thereof and shall not be
converted into shares of the Amalgamated Corporation;
provided that the issued capital of the Amalgamated Corporation shall be equal
to the aggregate of the issued capitals of the Amalgamating Corporations
immediately before the amalgamation becoming effective, subject to the decrease
provided for in clause 19(b) above.
11. On the Articles of Amalgamation in respect of the Amalgamation becoming
effective, the shareholders of the Amalgamating Corporations shall, when
requested by the Amalgamated Corporation, surrender the certificates
representing the shares held by them in the Amalgamating Corporations and shall,
subject to the provisions of the Act, be entitled in return to receive
certificates for shares of the Amalgamated Corporation on the basis aforesaid.
12. The board of directors of the Amalgamated Corporation, unless otherwise
changed in accordance with the Act, shall consist of a minimum number of one
director and a maximum of ten directors. The first director of the Amalgamated
Corporation shall be the person whose names and addresses are set out below, who
shall hold office until the first annual meeting of the Amalgamated Corporation,
or until his successor is elected or appointed:
Resident Canadian
Name Residence Address (state yes/no)
---- ----------------- -----------------
Louis Aldrovandi 38 Arkona Drive Yes
Agincourt, Ontario
M1T 1X3
The said first director shall hold office until the first annual meeting of the
Amalgamated Corporation, or until his successor is elected or appointed. The
subsequent directors shall be elected each year thereafter at either a general
meeting or the annual meeting of the shareholders by a majority of the votes
cast at such meeting. The management and supervision of the business and affairs
of the Amalgamated Corporation shall be under the control of the board of
directors from time to time, subject to the provisions of the Act.
13. The by-laws of the Amalgamated Corporation shall be those of Dima.
<PAGE>
<PAGE>
-15-
14. There shall be no restrictions on restrictions on the business that the
Amalgamated Corporation may carry on nor on the powers that the Amalgamated
Corporation may exercise.
15. The issue, transfer or ownership of shares is restricted and the
restrictions are as follows:
Subject to any unanimous shareholders agreement existing from time to time,
and any amendments thereto, the right to transfer any share or shares of the
Corporation shall be restricted in that no shareholde shall be entitled to
transfer any share or shares of the Corporation without either:
a) the previous express sanction of the holders of more than 50% of the
Common Shares of the Corporation for the time being outstanding
expressed by a resolution passed at a meeting of shareholders or by an
instrument or instruments in writing signed by the holders of more than
50% of such shares; or
b) the previous express sanction of the directors of the Corporation
expressed by a resolution passed by the votes of a majority of the
directors of the Corporation at a meeting of the board of directors or
by an instrument or instruments in writing signed by a majority of the
directors.
16. The following provisions shall also apply to the Amalgamated Corporations
a) The Corporation shall have a lien on the shares registered in the name
of the shareholder or his legal representative for a debt of that
shareholder to the Corporation.
b) The number of shareholders of the Corporation, exclusive of persons who
are in its employment and exclusive of persons who, having been formerly
in the employment of the Corporation, were, while in that employment,
and have continued after the termination of that employment to be,
shareholders of the Corporation, is limited to not more than fifty, two
or more persons who are the joint registered owners of one or more
shares being counted as one shareholder.
c) Any invitation to the public to subscribe for securities of the
Corporation is prohibited.
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<PAGE>
-16-
17. The Amalgamating Corporations may, by resolution of their respective boards
of directors, consent to any alteration or modification of this Agreement with
which the shareholders of such corporations may agree.
18. On each of the Amalgamating Corporations approving this Agreement by special
resolution, the parties shall jointly file articles of amalgamation in
accordance with the Act for the purpose of bringing the Amalgamation into
effect.
IN WITNESS OF WHICH the parties have executed this Agreement.
DIMA PRODUCT MANUFACTURING INC.
Per:
[SIGNATURE]
-----------------------------------------
President
LIFTKING INDUSTRIES INC.
Per:
[SIGNATURE]
-----------------------------------------
President
<PAGE>
<PAGE>
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la societe en Ontario
1251018
- --------------------------------------------------------------------------------
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
<TABLE>
<S> <C> <C>
Form 3 1. The name of the corporation is: Denomination sociale de la societe:
Business
Corporations LIFTKING INDUSTRIES INC.
Act
Formule 3 2. The name of the corporation is changed Nouvelle denomination sociale de
Loi sur les to (if applicable): la societe (s'il y a lieu):
societes par
actions
3. Date of incorporation/amalgamation: Date de la constitution ou de la
fusion:
1997 August 14th
- --------------------------------------------------------------------------------
(Year, Month, Day)
(annee, mois, jour)
4. The articles of the corporation are Les status de la societe sont
amended as follows: modifies de la facon suivante.
1. To limit the number of common shares that the Corporation is authorized to
issue to 50,000,000.
2. To cancel all of the authorized and unissued Class 'A' Preference Shares and
Class 'B' Preference Shares in the capital of the Corporation.
3. To declare that after giving effect to the foregoing, the authorized capital
of the Corporation shall consist of 50,000,000 common shares.
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<S> <C> <C>
5. The amendment has been duly La modification a ete dument autorisee
authorized as required by Sections 168 conformement aux articles 168 et 170
& 170 (as applicable) of the Business (selon le cas) de la Loir sur les
Corporations Act. societes par actions.
6. The resolution authorizing the Les actionnaires ou les administrateurs
amendment was approved by the (selon le cas) de la societe ont
shareholders/directors (as applicable) approuve la resolution autorisant la
of the corporation on modification le
1997 August 22nd
- -------------------------------------------------------------------------------------------------------------
(Year, Month, Day)
(annee, mois, jour)
These articles are signed in duplicate. Les presents status sont signes en double
exemplaire.
</TABLE>
LIFTKING INDUSTRIES INC.
--------------------------------------------
(Name of Corporation)
(Denomination sociale de la societe)
By:/Par: [SIGNATURE] President
-------------------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
<PAGE>
<PAGE>
BY-LAW NO. 2
A by-law relating generally to
the transaction of the business
and affairs of
LIFTKING INDUSTRIES INC.
(the "CORPORATION")
INTERPRETATION
1.01 Definitions -- In this by-law, unless the context otherwise requires:
(a) "Act" means the Business Corporations Act, R.S.O. 1990, c. B. 16, as
amended from time to time or any act that may in future be substituted
for it;
(b) "articles" includes the original or restated articles of incorporation,
articles of amendment, articles of amalgamation, articles of
continuance, articles of reorganization, articles of arrangement and
articles of revival;
(c) "board" means the board of directors of the Corporation;
(d) "contracts, documents or instruments in writing" includes deeds,
mortgages, charges, conveyances, powers of attorney, transfers and
assignments of property of all kinds, including specifically but
without limitation, transfers and assignments of shares, warrants,
bonds, debentures or other securities and all paper writings;
(e) "meeting of shareholders" includes an annual meeting of shareholders
and a special meeting of shareholders.
1.02 Words and phrases defined in the Act and used in this by-law shall,
unless the context otherwise requires, have the same meaning as in the Act.
1.03 In this by-law words importing the singular number only shall include
the plural and vice versa; words importing the masculine gender shall include
the feminine and neuter genders; words importing persons shall include an
individual, partnership, association, body corporate, executor, administrator,
legal representative, trust, and any number or aggregate of persons.
1.04 Interpretation Not Affected by Headings - The insertion of headings in
this by-law are for convenience of reference only and shall not affect its
construction or interpretation.
<PAGE>
<PAGE>
- 2 -
DIRECTORS
2.01 Notice of Meetings -- Notice of meetings of the board shall be given to
each director not less than 48 hours (excluding Saturdays, Sundays and statutory
holidays) before the time when the meeting is to be held. Each newly elected
board may without notice hold its first meeting for the purposes of organization
and the appointment of officers immediately following the meeting of
shareholders at which such board was elected.
2.02 Place of Meetings -- Meetings of the board may be held at any place
within or outside Ontario and in any financial year of the Corporation it shall
not be necessary for a majority of the meetings of the board to be held at a
place within Canada.
2.03 Votes to Govern -- At all meetings of the board every question shall be
decided by a majority of the votes cast on the question; and in case of an
equality of votes the chairman of the meeting shall not be entitled to a second
or casting vote.
2.04 Interest of Directors and Officers Generally in Contract -- No director
or officer shall be disqualified by his office from contracting with the
Corporation nor shall any contract or arrangement entered into by or on behalf
of the Corporation with any director or officer or in which any director or
officer is in any way interested be liable to be voided nor shall any director
or officer so contracting or being so interested be liable to account to the
Corporation for any profit realized by any such contract or arrangement by
reason of such director or officer holding that office or of the fiduciary
relationship thereby established unless the director or officer shall have
failed to comply with the provisions of the Act.
SHAREHOLDERS' MEETINGS
3.01 Quorum at Shareholders' Meetings -- At any meeting of shareholders, a
quorum shall be the holders of a majority of the shares entitled to vote at the
meeting, present in person or represented by proxy.
3.02 Casting Vote - In the case of an equality of votes at any meeting of
shareholders the chairman of the meeting shall not be entitled to a second or
casting vote.
OFFICERS
4.01 Appointment of Officers -- The directors shall annually or as often as
may be required appoint a President and a Secretary and if deemed advisable may
annually or as often as may be required appoint a Chairman of the Board, one or
more Vice-Presidents, a Treasurer and one or more Assistant-Secretaries and/or
one or more Assistant-Treasurers. Two or more such offices may be held by the
same person. The directors may from time to time appoint
<PAGE>
<PAGE>
- 3 -
such over officers as they shall deem necessary, who shall have such authority
and shall perform such functions and duties as may from time to time be
prescribed by the board.
4.02 Removal of Officers -- All officers shall be subject to removal by the
board at any time, with or without cause.
4.03 Chairman of the Board -- The Chairman of the Board (if any) shall, when
present, preside at all meetings of the board of directors.
4.04 President -- The President shall, when present, preside at all meetings
of the board of directors in the absence of the Chairman of the Board and at all
meetings of shareholders and shall be responsible for the management of the
business and affairs of the Corporation.
4.05 Vice-President -- The Vice-President (if any), or, if more than one,
the Vice-Presidents, shall assist the President in the performance of his or her
duties and, in order of seniority as determined by the board of directors, may
perform and exercise the powers of the President during the absence or inability
to act of the President. If a Vice-President exercises any such duty or power,
the absence or inability of the President shall be presumed with reference
thereto.
4.06 Secretary -- The Secretary shall give, or cause to be given, all
notices required to be given to shareholders, directors, auditors and members of
committees of the board of directors and of the shareholders and shall enter or
cause to be entered in books kept for that purpose minutes of all proceedings at
such meetings; and shall be the custodian of the stamp or mechanical device
generally used for affixing the corporate seal of the Corporation.
4.07 Treasurer -- The Treasurer (if any) shall keep or cause to be kept full
and accurate books of account in which shall be recorded all receipts and
disbursements of the Corporation and, under the direction of the board of
directors, shall control the deposit of money, the safekeeping of securities and
the disbursement of the funds of the Corporation; and shall render to the board
of directors at the meetings thereof, or whenever required, an account of all
transactions as Treasurer and of the financial position of the Corporation.
4.08 Assistant Secretary and Assistant Treasurer -- The Assistant Secretary
and the Assistant Treasurer (if any) shall assist the Secretary and the
Treasurer, respectively, in the performance of their duties and shall perform
all the duties of the Secretary and the Treasurer, respectively, in the absence
or inability to act of the Secretary or the Treasurer, as the case may be.
4.09 Additional Duties -- From time to time the board may vary, add to or
limit the powers and duties of any officer or officers of the Corporation, but,
subject to section 183 of
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the Act, shall not delegate to any officer any of the powers set forth in
subsection 127(3) of the Act.
INDEMNIFICATION
5.01 Indemnification of Directors and Officers -- The Corporation shall
indemnify a director or officer of the Corporation, a former director or officer
of the Corporation or a person who acts or acted at the Corporation's request as
a director or officer of a body corporate of which the Corporation is or was a
shareholder or creditor, and his or her heirs and legal personal representatives
to the extent permitted by the Act.
5.02 Indemnity of Others -- Except as otherwise required by the Act, and
subject to section 5.01, the Corporation may from time to time indemnify and
save harmless 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, she or it
is or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, agent of or
participant in another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including legal fees), judgments, fines and any
amount actually and reasonably incurred in connection with such action, suit or
proceeding if such person acted honestly and in good faith with a view to the
best interests of the Corporation, and, with respect to any criminal or
administrative action or proceeding that is enforced by a monetary penalty, had
reasonable grounds for believing that his, her or its conduct was lawful. The
termination of any action, suit or proceeding by judgment, order, settlement, or
conviction, shall not, of itself, create a presumption that the person did not
act honestly and in good faith with a view to the best interests of the
Corporation, and, with respect to any criminal or administrative action or
proceeding that is enforced by a monetary penalty, had no reasonable ground for
believing that his, her or its conduct was lawful.
5.03 Right of Indemnity Not Exclusive -- The provisions for indemnification
contained in the by-laws of the Corporation shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under any
by-law, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in an 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 and legal personal representatives of such a person.
5.04 No Liability of Directors or Officers for Certain Acts etc. -- To the
extent permitted by law, no director or officer for the time being of the
Corporation shall be liable for the acts, receipts, neglects or defaults of any
other director, officer, employee or agent, or for joining in any receipt or act
for conformity or for any loss, damage or expense
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happening to the Corporation through the insufficiency or deficiency of title to
any property acquired by the Corporation, or for or on behalf of the Corporation
or for the insufficiency or deficiency of any security in or upon which any of
the moneys of or belonging to the Corporation shall be placed out or invested,
or for any loss or damage arising from the bankruptcy, insolvency or tortious
act of any person with whom or which any moneys, securities or effects shall be
lodged or deposited or for any loss, conversion, misapplication or
misappropriation of or any damage resulting from any dealings with any moneys,
securities or other assets belonging to the Corporation or for any other loss,
damage or misfortune whatever which may happen in the execution of the duties of
his or her respective office or trust or in relation thereto unless the same
shall happen by or through his or her failure to act honestly and in good faith
with a view to the best interest of the Corporation and in connection therewith
to exercise the care, diligence and skill that a reasonably prudent person would
exercise in comparable circumstances. If any director or officer of the
Corporation shall be employed by or shall perform services for the Corporation
otherwise than as a director or officer or shall be a member of a firm or a
shareholder, director or officer of a body corporate which is employed by or
performs services for the Corporation, the fact of his or her being a director
or officer of the Corporation shall not disentitle such director or officer or
such firm or body corporate, as the case may be, from receiving proper
remuneration for such services.
DIVIDENDS
6.01 Dividend Cheques -- A dividend payable in cash may be paid by cheque
drawn on the Corporation's bankers or one of them to the order of each
registered holder of shares of the class or series in respect of which it has
been declared and mailed by ordinary mail, postage prepaid, to such registered
holder at the address appearing on the register of shareholders, unless such
holder otherwise directs. In the case of joint holders the cheque shall, unless
such joint holders otherwise direct, be made payable to the order of all of such
joint holders and mailed to them at the address appearing on the register of
shareholders in respect of such joint holding, or to the first address so
appearing if there are more than one. The mailing of a cheque in this manner,
unless it is not paid on due presentation, shall satisfy and discharge the
liability for the dividend to the extent of the sum represented by the cheque,
plus the amount of any tax which the Corporation is required to and does
withhold.
6.02 Non-Receipt of Cheques -- If a dividend cheque is not received by the
person to whom it is sent, the Corporation shall issue to such person a
replacement cheque for a like amount upon such terms as to indemnity and
evidence of non-receipt and of title as the board may from time to time
prescribe, whether generally or in any particular case.
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BANKING ARRANGEMENTS, CONTRACTS, ETC.
7.01 Banking Arrangements -- The banking business of the Corporation, or any
part thereof, shall be transacted with such banks, trust companies or other
financial institutions as the board may designate, appoint or authorize from
time to time by resolution and all such banking business, or any part thereof,
shall be transacted on the Corporation's behalf by such one or more officers
and/or other persons as the board may designate, direct or authorize from time
to time by resolution and to the extent therein provided.
7.02 Execution of Instruments -- Contracts, documents or instruments in
writing requiring execution by the Corporation may be signed by the President
and all contracts, documents or instruments in writing so signed shall be
binding upon the Corporation without any further authorization or formality. The
board is authorized from time to time by resolution to appoint any officer or
any other person on behalf of the Corporation to sign and deliver either
contracts, documents or instruments in writing generally or to sign either
manually or by facsimile signature and deliver specific contracts, documents or
instruments in writing.
NOTICES
8.01 Notice to Joint Shareholders -- If two or more persons are registered
as joint holders of any share, notice to one of such persons shall be sufficient
notice to all of them. Any notice shall be addressed to all such joint holders
and the address to be used by the Corporation shall be the address appearing on
the register of shareholders in respect of such joint holding, or the first
address so appearing if there are more than one.
8.02 Omissions and Errors -- The accidental omission to give any notice to
any shareholder, director, officer, auditor or member of any committee of the
board or the non-receipt of any notice by any such person or any error in any
notice not affecting the substance thereof shall not invalidate such notice or
any action taken at any meeting held pursuant to such notice or otherwise
founded thereon.
MISCELLANEOUS
9.01 Invalidity of any Provisions of this By-law -- The invalidity or
unenforceability of any provision of this by-law shall not affect the validity
or enforceability of the remaining provisions of this by-law.
REPEAL
10.01 Repeal -- By-law No. 1 of the Corporation is repealed as of the coming
into force of this by-law provided that such repeal shall not affect the
previous operation of any by-law
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so repealed or affect the validity of any act done or right, privilege,
obligation or liability acquired or incurred under or the validity of any
contract or agreement made pursuant to any such by-law prior to its repeal. All
officers and persons acting under any by-law so repealed shall continue to act
as if appointed by the board under the provisions of this by-law or the Act
until their successors are appointed.
MADE the 14th day of August, 1997.
Louis Aldrovandi Louis Aldrovandi
- ---------------------------------- -----------------------------------
President Louis Aldrovandi Secretary Louis Aldrovandi
RESOLVED that the foregoing By-law No. 2 is made a by-law of the Corporation.
The undersigned, being the sole director of LIFTKING INDUSTRIES INC., signs the
foregoing resolution.
DATED the 14th day of August, 1997.
Louis Aldrovandi
-----------------------------------
Louis Aldrovandi
RESOLVED that the foregoing By-law No. 2 is confirmed.
The undersigned, being the sole shareholder of LIFTKING INDUSTRIES INC., signs
the foregoing resolution.
DATED the 14th day of August, 1997.
Louis Aldrovandi
-----------------------------------
Louis Aldrovandi
<PAGE>
<PAGE>
BY-LAW NO. 3
A by-law respecting the borrowing
of money, the issuing of debt
obligations and the securing of
liabilities by
LIFTKING INDUSTRIES INC.
(the "CORPORATION")
BE IT ENACTED as a by-law of the Corporation as follows:
The directors of the Corporation may, without authorization of the shareholders,
from time to time:
(a) borrow money on the credit of the Corporation;
(b) issue, reissue, sell or pledge debt obligations of the Corporation;
(c) subject to the Business Corporations Act (Ontario), give a guarantee
on behalf of the Corporation to secure performance of an obligation of
any person;
(d) mortgage, hypothecate, pledge or otherwise create a security interest
in all or any property of the Corporation, owned or subsequently
acquired, to secure any obligation of the Corporation; and
(e) delegate any or all of the powers conferred on the directors under
this by-law to a director, a committee of directors or an officer of
the Corporation to such extent and in such manner as the directors
shall by resolution determine.
MADE the 14th day of August, 1997.
Louis Aldrovandi Louis Aldrovandi
- ---------------------------------- -----------------------------------
President Louis Aldrovandi Secretary Louis Aldrovandi
<PAGE>
<PAGE>
-2-
RESOLVED that the foregoing By-law No. 3 is made a by-law of the Corporation.
The undersigned, being the sole director of LIFTKING INDUSTRIES INC., signs the
foregoing resolution.
DATED the 14th day of August, 1997.
Louis Aldrovandi
-----------------------------------
Louis Aldrovandi
RESOLVED that the foregoing By-law No. 3 is confirmed.
The undersigned, being the sole shareholder of LIFTKING INDUSTRIES INC., signs
the foregoing resolution.
DATED the 14th day of August, 1997.
Louis Aldrovandi
-----------------------------------
Louis Aldrovandi
<PAGE>
<PAGE>
Option to Purchase
125,000 Shares of Common Stock
and
150,000 Class A Redeemable Common Stock Purchase Warrants
LIFTKING INDUSTRIES, INC.
PURCHASE OPTION
Dated: _____ __, 1997
THIS CERTIFIES that Monroe Parker Securities, Inc., 2500 Westchester
Avenue, Purchase, NY 10577 (hereinafter sometimes referred to as the "Holder"),
is entitled to purchase from LIFTKING INDUSTRIES, INC. (hereinafter referred to
as the "Company"), at the prices and during the periods as hereinafter
specified, up to 125,000 shares of Common Stock ("Common Stock"), and 150,000
Class A Redeemable Common Stock Purchase Warrants ("Warrants"). Each Warrant
entitles the registered holder thereof to purchase one (1) share of Common Stock
at an exercise price of $_____ per share. The Warrants are exercisable for a
three year period, commencing ______ __, 1998 (one (1) year from the Effective
Date). Hereinafter, shares of Common Stock and Warrants shall be referred to as
an "Option Securities" or "Securities."
The Securities have been registered under a Registration Statement on Form
SB-2 (File No. 333-_______) declared effective by the Securities and Exchange
Commission on _____ __, 1997 (the "Registration Statement"). This Option (the
"Option") to purchase the Securities was originally issued pursuant to an
Underwriting Agreement between the Company and Monroe Parker Securities, Inc. as
underwriter (the "Underwriter"), in connection with a public offering of
1,250,000 shares of Common Stock and 1,500,000 Warrants (collectively, the
"Public Securities") through the Underwriter, in consideration of $10 received
for the Option.
Except as specifically otherwise provided herein, the Common Stock and the
Warrants issued pursuant to this Option shall bear the same terms and conditions
as described under the caption "Description of Securities" in the Registration
Statement, and the Warrants shall be governed by the terms of the Warrant
Agreement dated as of _____ __, 1997, executed in connection with such public
offering (the "Warrant Agreement"), except that the holder shall have
registration rights under the Securities Act of 1933, as amended (the "Act"),
for the Option, the Common Stock and the Warrants included in the Option, and
the shares of Common Stock underlying the Warrants, as more fully described in
paragraph 6 of this Option. In the event of any reduction of the exercise price
of the Warrants included in the Public Securities, the same changes to the
Warrants included in the Option and the components thereof shall be
simultaneously effected.
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<PAGE>
1. The rights represented by this Option shall be exercised at the prices,
subject to adjustment in accordance with paragraph 8 of this Option, and during
the periods as follows:
(a) Between ______ __, 1998 (one (1) year from the Effective Date) and
____ __, 2001, inclusive, the Holder shall have the option to purchase shares of
Common Stock and Warrants hereunder at a price of $______ per share and $0.__
per Warrant, respectively, subject to adjustment pursuant to paragraph 8 hereof
(the "Exercise Price").
(b) After _____ __, 2001, the Holder shall have no right to purchase any
shares of Common Stock hereunder.
2. The rights represented by this Option may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Option (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to the Company
of the Exercise Price then in effect for the number of Option Securities
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any; and (iii) delivery to the Company of a duly executed
agreement signed by the person(s) designated in the purchase form to the effect
that such person(s) agree(s) to be bound by the provisions of paragraph 6 and
subparagraphs (b), (c) and (d) of paragraph 7 hereof. This Option shall be
deemed to have been exercised, in whole or in part to the extent specified,
immediately prior to the close of business on the date this Option is
surrendered and payment is made in accordance with the foregoing provisions of
this paragraph 2, and the person or persons in whose name or names the
certificates for shares of Common Stock and Warrants shall be issuable upon such
exercise shall become the holder or holders of record of such Common Stock and
Warrants at that time and date. The Common Stock and Warrants and the
certificates for the Common Stock and Warrants so purchased shall be delivered
to the Holder within a reasonable time, not exceeding ten (10) days, after the
rights represented by this Option shall have been so exercised.
3. This Option shall not be transferred, sold, assigned, or hypothecated
for a period of one (1) year from the Effective Date, except that it may be
transferred to successors of the Holder, and may be assigned in whole or in part
to any person who is an officer of the Holder or selling group member of the
offering during such period. Any transfer after one (1) year must be accompanied
with an immediate exercise of the Option. Any such assignment shall be effected
by the Holder (i) executing the form of assignment at the end hereof and (ii)
surrendering this Option for cancellation at the office or agency of the Company
referred to in paragraph 2 hereof, accompanied by a certificate (signed by an
officer of the Holder if the Holder is a corporation), stating that each
transferee is a permitted transferee under this paragraph 3 hereof; whereupon
the Company shall issue, in the name or names specified by the Holder (including
the Holder) a new Option or Options of like tenor and representing in the
aggregate rights to purchase the same number of Option Securities as are
purchasable hereunder.
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4. The Company covenants and agrees that all shares of Common Stock which
may be issued as part of the Option Securities purchased hereunder and the
Common Stock which may be issued upon exercise of the Warrants will, upon
issuance, be duly and validly issued, fully paid and nonassessable. The Company
further covenants and agrees that during the periods within which this Option
may be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
this Option and that it will have authorized and reserved a sufficient number of
shares of Common Stock for issuance upon exercise of the Warrants included in
the Option Securities.
5. This Option shall not entitle the Holder to any voting, dividend, or
other rights as a stockholder of the Company.
6. (a) During the period set forth in paragraph l(a) hereof, the Company
shall advise the Holder or its transferee, whether the Holder holds the Option
or has exercised the Option and holds Option Securities or any of the securities
underlying the Option Securities, by written notice at least 20 days prior to
the filing of any post-effective amendment to the Registration Statement or of
any new registration statement or post-effective amendment thereto under the Act
covering any securities of the Company, for its own account or for the account
of others (other than a registration statement on Form S-4 or S-8 or any
successor forms thereto), and will for a period of five years from the effective
date of the Registration Statement, upon the request of the Holder within 10
days of the receipt of the Company's notice, include in any such post-effective
amendment or registration statement, such information as may be required to
permit a public offering of the Option, all or any of the Common Stock or
Warrants, or the Common Stock issuable upon the exercise of the Warrants (the
"Registrable Securities"). The Company shall supply prospectuses and such other
documents as the Holder may request in order to facilitate the public sale or
other disposition of the Registrable Securities, use its best efforts to
register and qualify any of the Registrable Securities for sale in such states
as such Holder designates provided that the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or execute a general
consent to service of process in any jurisdiction in any action and do any and
all other acts and things which may be reasonably necessary or desirable to
enable such Holders to consummate the public sale or other disposition of the
Registrable Securities, and furnish indemnification in the manner provided in
paragraph 7 hereof. The Holder shall furnish information and indemnification as
set forth in paragraph 7 except that the maximum amount which may be recovered
from the Holder shall be limited to the amount of proceeds received by the
Holder from the sale of the Registrable Securities. The Company shall use its
best efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the holders of Registrable Securities requested
to be included in the registration to include such securities in such
underwritten offering on the same terms and conditions as any similar securities
of the Company included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering advises the holders of Registrable
Securities that the total amount of securities which they intend to include in
such offering is such as to materially and adversely affect the success of such
offering, then the amount of securities to be offered for the accounts of
holders of Registrable Securities shall be eliminated, reduced, or limited to
the extent necessary to reduce the total amount of securities to be included in
such offering to the amount, if
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<PAGE>
any, recommended by such managing underwriter or underwriters (any such
reduction or limitation in the total amount of Registrable Securities to be
included in such offering to be borne by the holders of Registrable Securities
proposed to be included therein pro rata). The Holder will pay its own legal
fees and expenses and any underwriting discounts and commissions on the
securities sold by such Holder and shall not be responsible for any other
expenses of such registration.
(b) If any 50% holder (as defined below) shall give notice to the
Company at any time during the period set forth in paragraph l(a) hereof to the
effect that such holder desires to register under the Act this Option or any of
the underlying securities contained in the Option Securities underlying the
Option under such circumstances that a public distribution (within the meaning
of the Act) of any such securities will be involved then the Company will
promptly, but no later than 60 days after receipt of such notice, file a
post-effective amendment to the current Registration Statement or a new
registration statement pursuant to the Act, to the end that the Option and/or
any of the Securities underlying the Option Securities may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use its
best efforts to cause such registration to become and remain effective for a
period of 120 days (including the taking of such steps as are reasonably
necessary to obtain the removal of any stop order); provided that such holder
shall furnish the Company with appropriate information in connection therewith
as the Company may reasonably request in writing. The 50% holder (which for
purposes hereof shall mean any direct or indirect transferee of such holder)
may, at its option, request the filing of a post-effective amendment to the
current Registration Statement or a new registration statement under the Act
with respect to the Registrable Securities on only one occasion during the term
of this Option. The Holder may at its option request the registration of the
Option and/or any of the securities underlying the Option in a registration
statement made by the Company as contemplated by Section 6(a) or in connection
with a request made pursuant to this Section 6(b) prior to acquisition of the
Securities issuable upon exercise of the Option and even though the Holder has
not given notice of exercise of the Option. The 50% holder may, at its option,
request such post-effective amendment or new registration statement during the
described period with respect to the Option or separately as to the Common Stock
and/or Warrants included in the Option and/or the Common Stock issuable upon the
exercise of the Warrants, and such registration rights may be exercised by the
50% holder prior to or subsequent to the exercise of the Option. Within ten
business days after receiving any such notice pursuant to this subsection (b) of
paragraph 6, the Company shall give notice to the other holders of the Options,
advising that the Company is proceeding with such post-effective amendment or
registration statement and offering to include therein the securities underlying
the Options of the other holders. Each holder electing to include its
Registrable Securities in any such offering shall provide written notice to the
Company within twenty (20) days after receipt of notice from the Company. The
failure to provide such notice to the Company shall be deemed conclusive
evidence of such holder's election not to include its Registrable Securities in
such offering. Each holder electing to include its Registrable Securities shall
furnish the Company with such appropriate information (relating to the
intentions of such holders) in connection therewith as the Company shall
reasonably request in writing. All costs and expenses of only one such
post-effective amendment or new registration statement shall be borne by the
Company, except that the holders shall bear the
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fees of their own counsel and any underwriting discounts or commissions
applicable to any of the securities sold by them.
The Company shall be entitled to postpone the filing of any
registration statement pursuant to this Section 6(b) otherwise required to be
prepared and filed by it if (i) the Company is engaged in a material
acquisition, reorganization, or divestiture, (ii) the Company is currently
engaged in a self-tender or exchange offer and the filing of a registration
statement would cause a violation of Rule 10b-6 under the Securities Exchange
Act of 1934, (iii) the Company is engaged in an underwritten offering and the
managing underwriter has advised the Company in writing that such a registration
statement would have a material adverse effect on the consummation of such
offering or (iv) the Company is subject to an underwriter's lock-up as a result
of an underwritten public offering and such underwriter has refused in writing,
the Company's request to waive such lock-up. In the event of such postponement,
the Company shall be required to file the registration statement pursuant to
this Section 6(b), within 60 days of the consummation of the event requiring
such postponement.
The Company will use its best efforts to maintain such registration
statement or post-effective amendment current under the Act for a period of at
least six months (and for up to an additional three months if requested by the
Holder) from the effective date thereof. The Company shall supply prospectuses,
and such other documents as the Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities,
use its best efforts to register and qualify any of the Registrable Securities
for sale in such states as such holder designates, provided that the Company
shall not be required to qualify as a foreign corporation or a dealer in
securities or execute a general consent to service of process in any
jurisdiction in any action and furnish indemnification in the manner provided in
paragraph 7 hereof.
(c) The term "50% holder" as used in this paragraph 6 shall mean the
holder of at least 50% of the Common Stock and the Warrants underlying the
Option (considered in the aggregate) and shall include any owner or combination
of owners of such securities, which ownership shall be calculated by determining
the number of shares of Common Stock held by such owner or owners as well as the
number of shares then issuable upon exercise of the Warrants.
7. (a) Whenever pursuant to paragraph 6 a registration statement relating
to the Option or any shares or warrants issued or issuable upon the exercise of
any Options, is filed under the Act, amended or supplemented, the Company will
indemnify and hold harmless each holder of the securities covered by such
registration statement, amendment, or supplement (such holder being hereinafter
called the "Distributing Holder"), and each person, if any, who controls (within
the meaning of the Act) the Distributing Holder, and each underwriter (within
the meaning of the Act) of such securities and each person, if any, who controls
(within the meaning of the Act) any such underwriter, against any losses,
claims, damages, or liabilities, joint or several, to which the Distributing
Holder, any such controlling person or any such underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any
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<PAGE>
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Distributing Holder
and each such controlling person and underwriter for any legal or other expenses
reasonably incurred by the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder or any other Distributing Holder, for use in the
preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, each person,
if any, who controls the Company (within the meaning of the Act) against any
losses, claims, damages, or liabilities, joint and several, to which the Company
or any such director, officer, or controlling person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or supplement, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in said registration statement, said preliminary prospectus,
said final prospectus, or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Distributing Holder for
use in the preparation thereof; and will reimburse the Company or any such
director, officer, or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this paragraph
7 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Paragraph 7.
(d) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its
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<PAGE>
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this paragraph 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof.
8. The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of this Option shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action, and the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such action. Notwithstanding anything to the contrary contained in the
Warrant Agreement, in the event an adjustment to the Exercise Price is effected
pursuant to this Subsection (a) (and a corresponding adjustment to the number of
Option Securities is made pursuant to Subsection (d) below), the exercise price
of the Warrants shall be adjusted so that it shall equal the price determined by
multiplying the exercise price of the Warrants by a fraction, the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after giving effect to such action and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
In such event, there shall be no adjustment to the number of shares of Common
Stock or other securities issuable upon exercise of the Warrants. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall fix a record date for the issuance of
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than the current market price of the Common Stock (as
defined in Subsection (e) below) on the record date mentioned below, the
Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the number of shares then comprising an Option
Securities by the product of the Exercise Price in effect immediately prior to
the date of such issuance multiplied by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding on the record
date mentioned below and the number of additional shares of Common Stock which
the aggregate offering price of the total number of shares of Common Stock so
offered (or the aggregate conversion price of the convertible securities so
offered) would purchase at such current market price per share of the Common
Stock, and the denominator of which shall be the sum of the number of shares of
Common Stock outstanding on such record date and the number of additional shares
of Common Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). Such adjustment shall
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be made successively whenever such rights or warrants are issued and shall
become effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities convertible into Common
Stock are not delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which would then be in
effect had the adjustments made upon the issuance of such rights or warrants
been made upon the basis of delivery of only the number of shares of Common
Stock (or securities convertible into Common Stock) actually delivered.
(c) In case the Company shall hereafter distribute to the holders of its
Common Stock evidences of its indebtedness or assets (excluding cash dividends
or distributions and-dividends or distributions referred to in Subsection (a)
above) or subscription rights or warrants (excluding those referred to in
Subsection (b) above), then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the number of shares then
comprising an Option Securities by the product of the Exercise Price in effect
immediately prior thereto multiplied by a fraction, the numerator of which shall
be the total number of shares of Common Stock outstanding multiplied by the
current market price per share of Common Stock (as defined in Subsection (e)
below), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of such
rights or warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such current market price per
share of Common Stock. Such adjustment shall be made successively whenever such
a record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(d) Whenever the Exercise Price payable upon exercise of this Option is
adjusted pursuant to Subsections (a), (b) or (c) above, the number of Option
Securities purchasable upon exercise of this Option shall simultaneously be
adjusted by multiplying the number of Option Securities initially issuable upon
exercise of this Option by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(e) For the purpose of any computation under Subsections (b) or (c)
above, the current market price per share of Common Stock at any date shall be
deemed to be the average of the daily closing prices for 10 consecutive business
days before such date. The closing price for each day shall be the last sale
price regular way or, in case no such reported sale takes place on such day, the
average of the last reported bid and asked prices regular way, in either case on
the principal national securities exchange on which the Common Stock is admitted
to trading or listed, or if not listed or admitted to trading on such exchange,
the average of the highest reported bid and lowest reported asked prices as
reported by NASDAQ, or other similar organization if NASDAQ is no longer
reporting such information, or if not so available, the fair market price as
determined by the Board of Directors.
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(f) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least fifteen cents
($0.05) in such price; provided, however, that any adjustments which by reason
of this Subsection (i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section 8 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
Section 8 to the contrary notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the Exercise Price, in addition
to those required by this Section 8, as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Common Stock, or any subdivision, reclassification or combination of Common
Stock, hereafter made by the Company shall not result in any Federal Income tax
liability to the holders of Common Stock or securities convertible into Common
Stock (including Warrants issuable upon exercise of this Option).
(g) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly, but no later than 10 days after any request for such an
adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Option Securities issuable upon exercise of this
Option and, if requested, information describing the transactions giving rise to
such adjustments, to be mailed to the Holder, at the address set forth herein,
and shall cause a certified copy thereof to be mailed to its transfer agent, if
any. The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(h) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder thereafter shall become entitled to
receive any shares of the Company, other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of this Option shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in Subsections (a) to (g), inclusive above.
(i) No adjustments shall be made in connection with future public
offerings.
9. This Agreement shall be governed by and in accordance with the laws of
the State of New York.
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IN WITNESS WHEREOF, LiftKing Industries, Inc. has caused this Option to be
signed by its duly authorized officers under its corporate seal, and this Option
to be dated as of the date first above written.
LIFTKING TECHNOLOGIES, INC.
By:
------------------------------
Louis Aldrovandi
President
(Corporate Seal)
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PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder,
________ Shares of Common Stock, of LiftKing Technologies, Inc. and _______
Warrants and herewith makes payment of $______________ therefor, and requests
that the Warrants and certificates for shares of Common Stock be issued in the
name(s) of, and delivered to ______________________whose address(es) is (are)
__________________________________________.
Dated:
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TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and transfers
unto _________________________________ the right to purchase in the numbers set
forth below represented by the foregoing Option to the extent of _____ shares of
Common Stock and ____ Warrants, and appoints _________________________________
attorney to transfer such rights on the books of LiftKing Industries, Inc., with
full power of substitution in the premises.
Dated:
By:
----------------------------------
Address:
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In the presence of:
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WARRANT AGREEMENT
AGREEMENT, dated as of this __th day of _____, 1997, by and between
LIFTKING INDUSTRIES, INC., a Canadian corporation ("Company"), and CONTINENTAL
STOCK TRANSFER & TRUST COMPANY, as Warrant Agent (the "Warrant Agent").
WITNESSETH:
WHEREAS, in connection with a public offering of up to 1,437,500 shares
of Common Stock (the "Common Stock"), and 1,725,000 Redeemable Class A Common
Stock Purchase Warrants (the "Warrants") pursuant to an underwriting agreement
(the "Underwriting Agreement") dated _______, 1997 between the Company and
Monroe Parker Securities, Inc. ("Monroe"), and the issuance to Monroe or its
designees of an option to purchase an additional 125,000 shares of Common Stock
and 150,000 Warrants (the "Purchase Option"), the Company will issue up to
1,875,000 Warrants;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the common stock of the Company of which
at the date hereof consists of ___________ authorized shares, and shall also
include any capital stock of any class of the Company thereafter authorized
which shall not be limited to a fixed sum or percentage in respect to the rights
of the holders thereof to participate in dividends and in the distribution of
assets upon the voluntary liquidation, dissolution, or winding up of the
Company; provided, however, that the shares issuable upon exercise of the
Warrants shall include (i) only shares of such class designated in the Company's
Certificate of Incorporation as Common Stock on the date of the original issue
of the Warrants or (ii), in the case of any reclassification, change,
consolidation, merger, sale, or conveyance of the character referred to in
Section 9(c) hereof, the stock, securities, or property provided for in such
section or (iii), in the case of any reclassification or change in the
outstanding shares of Common Stock issuable upon exercise of the Warrants as a
result of a subdivision, such shares of Common Stock as so reclassified or
changed.
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(b) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business shall be
administered, which office is located at the date hereof at 2 Broadway, New
York, New York 10004.
(c) "Exercise Date" shall mean, as to any Warrant, the date on which the
Warrant Agent shall have received both (a) the Warrant Certificate representing
such Warrant, with the exercise form thereon duly executed by the Registered
Holder thereof or his attorney duly authorized in writing, and (b) payment in
cash, or by official bank or certified check made payable to the Company, of an
amount in lawful money of the United States of America equal to the applicable
Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean _____ __, 1998 (one (1)
year from the Effective Date).
(e) "Purchase Price" shall mean the purchase price per share to be paid
upon exercise of each Warrant in accordance with the terms hereof, which price
shall be $4.80 per share, subject to adjustment from time to time pursuant to
the provisions of Section 9 hereof, and subject to the Company's right, in its
sole discretion, to reduce the Purchase Price upon notice to all warrantholders.
(f) "Redemption Price" shall mean the price at which the Company may, at
its option, redeem the Warrants, in accordance with the terms hereof, which
price shall be $0.10 per Warrant.
(g) "Registered Holder" shall mean as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Warrant
Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean Continental Stock Transfer & Trust
Company, as the Company's transfer agent, or its authorized successor, as such.
(i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on
_____ __, 2001 or the Redemption Date as defined in Section 8, whichever is
earlier; provided that if such date shall in the State of New York be a holiday
or a day on which banks are authorized or required to close, then 5:00 P.M. (New
York time) on the next following day which in the State of New York is not a
holiday or a day on which banks are authorized or required to close. Upon notice
to all Warrantholders the Company shall have the right to extend the warrant
expiration date.
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2. Warrants and Issuance of Warrant Certificates.
(a) A Warrant initially shall entitle the Registered Holder of the
Warrant representing such Warrant to purchase one share of Common Stock upon the
exercise thereof, in accordance with the terms hereof, subject to modification
and adjustment as provided in Section 9.
(b) Upon execution of this Agreement, Warrant Certificates representing
the number of Warrants sold pursuant to the Underwriting Agreement shall be
executed by the Company and delivered to the Warrant Agent. Upon written order
of the Company signed by its President or Chairman or a Vice President and by
its Secretary or an Assistant Secretary, the Warrant Certificates shall be
countersigned, issued, and delivered by the Warrant Agent.
(c) From time to time, up to the Warrant Expiration Date, the Transfer
Agent shall countersign and deliver stock certificates in required whole number
denominations representing up to an aggregate of 1,875,000 shares of Common
Stock, subject to adjustment as described herein, upon the exercise of Warrants
in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the Warrant
Agent shall countersign and deliver Warrant Certificates in required whole
number denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except (i) those initially issued hereunder, (ii)
those issued on or after the Initial Warrant Exercise Date, upon the exercise of
fewer than all Warrants represented by any Warrant Certificate, to evidence any
unexercised warrants held by the exercising Registered Holder, (iii) those
issued upon any transfer or exchange pursuant to Section 6; (iv) those issued in
replacement of lost, stolen, destroyed, or mutilated Warrant Certificates
pursuant to Section 7; (v) those issued pursuant to the Purchase Option; and
(vi) those issued at the option of the Company, in such form as may be approved
by the its Board of Directors, to reflect any adjustment or change in the
Purchase Price, the number of shares of Common Stock purchasable upon exercise
of the Warrants or the Redemption Price therefor made pursuant to Section 9
hereof.
(e) Pursuant to the terms of the Purchase Option, Monroe may purchase up
to 125,000 shares of Common Stock and 150,000 Warrants. The Purchase Option
shall not be transferred, sold, assigned or hypothecated for a period of one (1)
year from the Effective Date, except that it may be transferred to persons who
are officers and partners of Monroe or selling group members in the offering.
3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A (the provisions of which are hereby incorporated herein) and
may have such letters, numbers, or other marks of identification or designation
and such legends, summaries, or endorsements printed, lithographed, or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with
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any law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Warrants may be listed, or to
conform to usage or to the requirements of Section 2(b). The Warrant
Certificates shall be dated the date of issuance thereof (whether upon initial
issuance, transfer, exchange, or in lieu of mutilated, lost, stolen, or
destroyed Warrant Certificates) and issued in registered form. Warrant
Certificates shall be numbered serially with the letter W.
(b) Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President, or any Vice President and by its Secretary
or an Assistant Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the Company's
seal. Warrant Certificates shall be manually countersigned by the Warrant Agent
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Warrant Certificates
shall cease to be an officer of the Company or to hold the particular office
referenced in the Warrant Certificate before the date of issuance of the Warrant
Certificates or before countersignature by the Warrant Agent and issue and
delivery thereof, such Warrant Certificates may nevertheless be countersigned by
the Warrant Agent, issued and delivered with the same force and effect as though
the person who signed such Warrant Certificates had not ceased to be an officer
of the Company or to hold such office. After countersignature by the Warrant
Agent, Warrant Certificates shall be delivered by the Warrant Agent to the
Registered Holder without further action by the Company, except as otherwise
provided by Section 4 hereof.
4. Exercise. Each Warrant may be exercised by the Registered Holder thereof
at any time on or after the Initial Exercise Date, but not after the Warrant
Expiration Date, upon the terms and subject to the conditions set forth herein
and in the applicable Warrant Certificate. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the Exercise Date
and the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder of those securities upon the
exercise of the Warrant as of the close of business on the Exercise Date. As
soon as practicable on or after the Exercise Date the Warrant Agent shall
deposit the proceeds received from the exercise of a Warrant and shall notify
the Company in writing of the exercise of the Warrants. Promptly following, and
in any event within five days after the date of such notice from the Warrant
Agent, the Warrant Agent, on behalf of the Company, shall cause to be issued and
delivered by the Transfer Agent, to the person or persons entitled to receive
the same, a certificate or certificates for the securities deliverable upon such
exercise (plus a certificate for any remaining unexercised Warrants of the
Registered Holder), unless prior to the date of issuance of such certificates
the Company shall instruct the Warrant Agent to refrain from causing such
issuance of certificates pending clearance of checks received in payment of the
Purchase Price pursuant to such Warrants. Upon the exercise of any Warrant and
clearance of the funds received, the Warrant Agent shall promptly remit the
payment received for the Warrant (the "Warrant Proceeds") to the Company or as
the Company may direct in writing.
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5. Reservation of Shares; Listing; Payment of Taxes, etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Warrants, such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of the
Warrants shall, at the time of delivery, be duly and validly issued, fully paid,
nonassessable, and free from all taxes, liens, and charges with respect to the
issue thereof, (other than those which the Company shall promptly pay or
discharge) and that upon issuance such shares shall be listed on each national
securities exchange or eligible for inclusion in each automated quotation
system, if any, on which the other shares of outstanding Common Stock of the
Company are then listed or eligible for inclusion.
(b) The Company covenants that if any securities to be reserved for the
purpose of exercise of Warrants hereunder require registration with, or approval
of, any governmental authority under any federal securities law before such
securities may be validly issued or delivered upon such exercise, then the
Company will, to the extent the Purchase Price is less than the Market Price (as
hereinafter defined), in good faith and as expeditiously as reasonably possible,
endeavor to secure such registration or approval and will use its reasonable
efforts to obtain appropriate approvals or registrations under state "Blue-Sky"
securities laws. With respect to any such securities, however, Warrants may not
be exercised by, or shares of Common Stock issued to, any Registered Holder in
any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp, or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance, or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition
the Company's Transfer Agent from time to time for certificates representing
shares of Common Stock issuable upon exercise of the Warrants, and the Company
will authorize the Transfer Agent to comply with all such proper requisitions.
The Company will file with the Warrant Agent a statement setting forth the name
and address of the Transfer Agent of the Company for shares of Common Stock
issuable upon exercise of the Warrants.
6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant Certificates
representing an equal aggregate number of Warrants of the same class or may be
transferred in whole or in part. Warrant Certificates to be exchanged shall be
surrendered to the Warrant Agent at its
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Corporate Office, and upon satisfaction of the terms and provisions hereof, the
Company shall execute and the Warrant Agent shall countersign, issue, and
deliver in exchange therefor the Warrant Certificate or Certificates which the
Registered Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which, subject
to such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with its regular practice.
Upon due presentment for registration or transfer of any Warrant Certificate at
such office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for registration
or transfer, or for exchange or exercise, the subscription form on the reverse
thereof shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the Company
and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any
exchange or registration or transfer of Warrant Certificates. In addition, the
Company may require payment by such holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange in
case of mutilated Warrant Certificates shall be promptly canceled by the Warrant
Agent and thereafter retained by the Warrant Agent until termination of this
Agreement or resignation as Warrant Agent, or disposed of or destroyed, at the
direction of the Company.
(f) Prior to due presentment for registration or transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary. The Warrants which are being publicly offered with shares of
Common Stock pursuant to the Underwriting Agreement will be immediately
detachable from the Common Stock and transferable separately therefrom.
7. Loss or Mutilation. Upon receipt by the Company and the Warrant Agent of
evidence satisfactory to them of the ownership of and loss, theft, destruction,
or mutilation of any Warrant Certificate and (in case of loss, theft, or
destruction) of indemnity satisfactory to them, and (in the case of mutilation)
upon surrender and cancellation thereof, the Company shall execute and the
Warrant Agent shall (in the absence of notice to the Company and/or Warrant
Agent that the Warrant Certificate has been acquired by a bona fide purchaser)
countersign and deliver to the Registered
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Holder in lieu thereof a new Warrant Certificate of like tenor representing an
equal aggregate number of Warrants. Applicants for a substitute Warrant
Certificate shall comply with such other reasonable regulations and pay such
other reasonable charges as the Warrant Agent may prescribe.
8. Redemption.
(a) Subject to the provisions of paragraph 2(e) hereof, on not less than
thirty (30) days notice given at any time after six (6) months after the Initial
Warrant Exercise Date, or earlier with the consent of Monroe, the Warrants may
be redeemed, at the option of the Company, at a redemption price of $0.10 per
Warrant, provided the Market Price of the Common Stock receivable upon exercise
of the Warrant shall equal or exceed 250% of the then exercise price of the
Warrants per share (the "Target Price"), subject to adjustment as set forth in
Section 8(f) below. Market Price for the purpose of this Section 8 shall mean
the closing sale price for all ten (10) consecutive trading days, ending on the
third day prior to the date of the notice of redemption, which notice shall be
mailed no later than five days thereafter. The closing price for each day shall
be the last sale price regular way or, in case no such reported sale takes place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest reported
asked prices as reported by NASDAQ, or other similar organization if NASDAQ is
no longer reporting such information, or if not so available, the fair market
price as determined by the Board of Directors.
(b) If the conditions set forth in Section 8(a) are met, and the Company
desires to exercise its right to redeem the Warrants, it shall mail a notice of
redemption to each of the Registered Holders of the Warrants to be redeemed,
first class, postage prepaid, not later than the thirtieth day before the date
fixed for redemption, at their last address as shall appear on the records
maintained pursuant to Section 6(b). Any notice mailed in the manner provided
herein shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice.
(c) The notice of redemption shall specify (i) the redemption price,
(ii) the date fixed for redemption, (iii) the place where the Warrant
Certificates shall be delivered and the redemption price paid, and (iv) that the
right to exercise the Warrant shall terminate at 5:00 P.M. (New York time) on
the business day immediately preceding the date fixed for redemption. The date
fixed for the redemption of the Warrant shall be the Redemption Date. No failure
to mail such notice nor any defect therein or in the mailing thereof shall
affect the validity of the proceedings for such redemption except as to a
Registered Holder (a) to whom notice was not mailed or (b) whose notice was
defective. An affidavit of the Warrant Agent or of the Secretary or an Assistant
Secretary of the Company that notice of redemption has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New
York time) on the business day immediately preceding the Redemption Date. On and
after the Redemption
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Date, Holders of the Warrants shall have no further rights except to receive,
upon surrender of the Warrant, the Redemption Price.
(e) From and after the Redemption Date specified for, the Company shall,
at the place specified in the notice of redemption, upon presentation and
surrender to the Company by or on behalf of the Registered Holder thereof of one
or more Warrant Certificates evidencing Warrants to be redeemed, deliver or
cause to be delivered to or upon the written order of such Holder a sum in cash
equal to the redemption price of each such Warrant. From and after the
Redemption Date and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
Certificates, except the right to receive payment of the redemption price, shall
cease.
(f) If the shares of the Company's Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, the Target
Price shall be proportionally adjusted by the ratio which the total number of
shares of Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock to be outstanding immediately after such
event.
9. Adjustment of Exercise Price and Number of Shares of Common Stock or
Warrants.
(a) Subject to the exceptions referred to in Section 9(g) below, in the
event the Company shall, at any time or from time to time after the date hereof,
sell any shares of Common Stock for a consideration per share less than the
Market Price of the Common Stock (as defined in Section 8) on the date of the
sale or issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision,
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as provided in subsection
9(f)(G) below) for the issuance of such additional shares would purchase at such
current market price per share of Common Stock, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares. Such adjustment shall be made
successively whenever such an issuance is made.
Upon each adjustment of the Purchase Price pursuant to this Section 9,
the total number of shares of Common Stock purchasable upon the exercise of each
Warrant shall (subject to the provisions contained in Section 9(b) hereof) be
such number of shares (calculated to the nearest tenth) purchasable at the
Purchase Price in effect immediately prior to such adjustment multiplied by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately
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prior to such adjustment and the denominator of which shall be the Purchase
Price in effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each Warrant held of record prior to such adjustment of the number of Warrants
shall become that number of Warrants (calculated to the nearest tenth)
determined by multiplying the number one by a fraction, the numerator of which
shall be the Purchase Price in effect immediately prior to such adjustment and
the denominator of which shall be the Purchase Price in effect immediately after
such adjustment. Upon each adjustment of the number of Warrants pursuant to this
Section 9, the Company shall, as promptly as practicable, cause to be
distributed to each Registered Holder of Warrant Certificates on the date of
such adjustment Warrant Certificates evidencing, subject to Section 10 hereof,
the number of additional Warrants to which such Holder shall be entitled as a
result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon surrender
thereof, if required by the Company) new Warrant Certificates evidencing the
number of Warrants to which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization, or other
change of outstanding shares of Common Stock, or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification, capital reorganization, or other
change of outstanding shares of Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback, mortgage, or other
financing transaction), the Company shall cause effective provision to be made
so that each holder of a warrant then outstanding shall have the right
thereafter, by exercising such Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization, or other change, consolidation,
merger, sale, or conveyance by a holder of the number of shares of Common Stock
that might have been purchased upon exercise of such Warrant immediately prior
to such reclassification, capital reorganization, or other change,
consolidation, merger, sale, or conveyance. Any such provision shall include
provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 9. The Company shall
not effect any such consolidation, merger, or sale unless prior to or
simultaneously with the consummation thereof the successor (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing assets or other appropriate corporation or entity shall assume, by
written instrument executed and delivered to the Warrant Agent, the obligation
to deliver to the holder of each Warrant such shares of stock, securities, or
assets as, in accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations under this Agreement. The
foregoing provisions shall similarly apply to successive reclassification,
capital reorganizations,
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and other changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales, or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price or
the number of shares of Common Stock purchasable upon exercise of the Warrants,
the Warrant Certificates theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrant Certificates pursuant to
Section 2(d) hereof, continue to express the Purchase Price per share, the
number of shares purchasable thereunder, and the Redemption Price therefor as
the Purchase Price per share, and the number of shares purchasable and the
Redemption Price therefor were expressed in the Warrant Certificates when the
same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this Section
9, the Company will promptly prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Company setting forth: (i) the Purchase Price as so
adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of
each Warrant after such adjustment, and, if the Company shall have elected to
adjust the number of Warrants, the number of Warrants to which the registered
holder of each Warrant shall then be entitled, and the adjustment in Redemption
Price resulting therefrom, and (iii) a brief statement of the facts accounting
for such adjustment. The Company will promptly file such certificate with the
Warrant Agent and cause a brief summary thereof to be sent by ordinary first
class mail to Monroe and to each registered holder of Warrants at his last
address as it shall appear on the registry books of the Warrant Agent. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity thereof except as to the holder to whom the Company
failed to mail such notice, or except as to the holder whose notice was
defective. The affidavit of an officer of the Warrant Agent or the Secretary or
an Assistant Secretary of the Company that such notice has been mailed shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
(f) For purposes of Section 9(a) and 9(b) hereof, the following
provisions (i) to (vii) shall also be applicable:
(i) The number of shares of Common Stock outstanding at any given
time shall include shares of Common Stock owned or held by or for the account of
the Company and the sale or issuance of such treasury shares or the distribution
of any such treasury shares shall not be considered a Change of Shares for
purposes of said sections.
(ii) No adjustment of the Purchase Price shall be made unless such
adjustment would require an increase or decrease of at least $.05 in such price;
provided that any adjustments which by reason of this subsection (ii) are not
required to be made shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which, together with any
adjustment(s) so carried forward, shall require an increase or decrease of at
least $.05 in the Purchase Price then in effect hereunder.
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(iii) In case of (1) the sale by the Company for cash of any rights
or warrants to subscribe for or purchase, or any options for the purchase of,
Common Stock or any securities convertible into or exchangeable for Common Stock
without the payment of any further consideration other than cash, if any (such
convertible or exchangeable securities being herein called "Convertible
Securities"), or (2) the issuance by the Company, without the receipt by the
Company of any consideration therefor, of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or Convertible
Securities, in each case, if (and only if) the consideration payable to the
Company upon the exercise of such rights, warrants, or options shall consist of
cash, whether or not such rights, warrants, or options, or the right to convert
or exchange such Convertible Securities, are immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise of such
rights, warrants, or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum aggregate
consideration payable to the Company upon the exercise of such rights, warrants,
or options, plus the consideration received by the Company for the issuance or
sale of such rights, warrants, or options, plus, in the case of such Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
other than such Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock issuable upon
the exercise of such rights, warrants, or options or upon the conversion or
exchange of such Convertible Securities issuable upon the exercise of such
rights, warrants, or options) is less than the fair market value of the Common
Stock on the date of the issuance or sale of such rights, warrants, or options,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such rights, warrants, or options or upon the conversion or exchange
of such Convertible Securities (as of the date of the issuance or sale of such
rights, warrants, or options) shall be deemed to be outstanding shares of Common
Stock for purposes of Sections 9(a) and 9(b) hereof and shall be deemed to have
been sold for cash in an amount equal to such price per share.
(iv) In case of the sale by the Company for cash of any Convertible
Securities, whether or not the right of conversion or exchange thereunder is
immediately exercisable, and the price per share for which Common Stock is
issuable upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount of consideration received by the
Company for the sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by (y) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities) is less than the fair market value or
the Common Stock on the date of the sale of such Convertible Securities, then
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of such Convertible Securities (as of the date of the sale of such
Convertible Securities) shall be deemed to be outstanding shares of Common Stock
for purposes of Sections 9(a) and 9(b) hereof and shall be deemed to have been
sold for cash in an amount equal to such price per share.
(v) In case the Company shall modify the rights of conversion,
exchange, or exercise of any of the securities referred to in subsection (iii)
above or any other securities of the Company convertible, exchangeable, or
exercisable for shares of Common Stock, for any reason
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other than an event that would require adjustment to prevent dilution, so that
the consideration per share received by the Company after such modification is
less than the market price on the date prior to such modification, the Purchase
Price to be in effect after such modification shall be determined by multiplying
the Purchase Price in effect immediately prior to such event by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding
multiplied by the market price on the date prior to the modification plus the
number of shares of Common Stock which the aggregate consideration receivable by
the Company for the securities affected by the modification would purchase at
the market price and of which the denominator shall be the number of shares of
Common Stock outstanding on such date plus the number of shares of Common Stock
to be issued upon conversion, exchange, or exercise of the modified securities
at the modified rate. Such adjustment shall become effective as of the date upon
which such modification shall take effect.
(vi) On the expiration of any such right, warrant, or option or the
termination of any such right to convert or exchange any such Convertible
Securities, the Purchase Price then in effect hereunder shall forthwith be
readjusted to such Purchase Price as would have obtained (a) had the adjustments
made upon the issuance or sale of such rights, warrants, options, or Convertible
Securities been made upon the basis of the issuance of only the number of shares
of Common Stock theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights, warrants, or options or
upon the conversion or exchange of such Convertible Securities and (b) had
adjustments been made on the basis of the Purchase Price as adjusted under
clause (a) for all transactions (which would have affected such adjusted
Purchase Price) made after the issuance or sale of such rights, warrants,
options, or Convertible Securities.
(vii) In case of the sale for cash of any shares of Common Stock,
any Convertible Securities, any rights or warrants to subscribe for or purchase,
or any options for the purchase of, Common Stock or Convertible Securities, the
consideration received by the Company therefor shall be deemed to be the gross
sales price therefor without deducting therefrom any expense paid or incurred by
the Company or any underwriting discounts or commissions or concessions paid or
allowed by the Company in connection therewith.
(g) No adjustment to the Purchase Price of the Warrants or to the number
of shares of Common Stock purchasable upon the exercise of each Warrant will be
made, however,
(i) upon the sale or exercise of the Warrants, including without
limitation the sale or exercise of any of the Warrants comprising the Purchase
Option; or
(ii) upon the sale of any shares of Common Stock in the Company's
initial public offering, including, without limitation, shares sold upon the
exercise of any over-allotment option granted to the Underwriters in connection
with such offering; or
(iii) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, whether or not such rights, warrants, or
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options were outstanding on the date of the original sale of the Warrants or
were thereafter issued or sold other than issuances of preferred stock in
connection with acquisitions by the Company; or
(iv) upon the issuance or sale of Common Stock upon conversion or
exchange of any Convertible Securities, whether or not any adjustment in the
Purchase Price was made or required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible Securities were
outstanding on the date of the original sale of the Warrants or were thereafter
issued or sold; or
(h) Intentionally Omitted.
(i) Any determination as to whether an adjustment in the Purchase Price
in effect hereunder is required pursuant to Section 9, or as to the amount of
any such adjustment, if required, shall be binding upon the holders of the
Warrants and the Company if made in good faith by the Board of Directors of the
Company.
(j) If and whenever the Company shall grant to the holders of Common
Stock, as such, rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant, or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding, the
rights, warrants, or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants, or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Common Stock
then issuable upon exercise (assuming, for purposes of this section 9(j), that
exercise of warrants is permissible during periods prior to the Initial Warrant
Exercise Date) of his Warrants. Such grant by the Company to the holders of the
Warrants shall be in lieu of any adjustment which otherwise might be called for
pursuant to this Section 9.
10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 9 hereof, the Company
nevertheless shall not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share called for upon any
exercise hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the current market value of such fractional share,
determined as follows:
(i) If the Common Stock is listed on a National Securities Exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on the NASDAQ Quotation System, the current value shall be the last
reported sale price of the Common Stock on such exchange on the last business
day prior to the date of exercise of this Warrant or if no such sale
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is made on such day, the average of the closing bid and asked prices for such
day on such exchange; or
(ii) If the Common Stock is not listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last reported bid
and asked prices reported by the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of this Warrant; or
(iii) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
11. Warrant Holders Not Deemed Stockholders. No holder of Warrants shall,
as such, be entitled to vote or to receive dividends or be deemed the holder of
Common Stock that may at any time be issuable upon exercise of such Warrants for
any purpose whatsoever, nor shall anything contained herein be construed to
confer upon the holder of Warrants, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issue or
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, or conveyance or otherwise), or to receive notice
of meetings, or to receive dividends or subscription rights, until such Holder
shall have exercised such Warrants and been issued shares of Common Stock in
accordance with the provisions hereof.
12. Rights of Action. All rights of action with respect to this Agreement
are vested in the respective Registered Holders of the Warrants, and any
Registered Holder of a Warrant, without consent of the Warrant Agent or of the
holder of any other Warrant, may, in his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.
13. Agreement of Warrant Holders. Every holder of a Warrant, by his
acceptance thereof, consents and agrees with the Company, the Warrant Agent and
every other holder of a warrant that:
(a) The warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the holder and as the
absolute, true, and lawful owner
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of the Warrants represented thereby for all purposes, and neither the Company
nor the Warrant Agent shall be affected by any notice or knowledge to the
contrary, except as otherwise expressly provided in Section 7 hereof.
14. Cancellation of Warrant Certificates. If the Company shall purchase or
acquire any Warrant or Warrants, the Warrant Certificate or Warrant Certificates
evidencing the same shall thereupon be delivered to the Warrant Agent and
canceled by it and retired. The Warrant Agent shall also cancel Common Stock
following exercise of any or all of the Warrants represented thereby or
delivered to it for transfer, split up, combination, or exchange.
15. Concerning the Warrant Agent. The Warrant Agent acts hereunder as agent
and in a ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder be
deemed to make any representations as to the validity, value, or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same. It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered, or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order, or demand
of the Company shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order, or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to
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indemnify the Warrant Agent and save it harmless against any and all losses,
expenses, and liabilities, including judgments, costs, and counsel fees, for
anything done or omitted by the Warrant Agent in the execution of its duties and
powers hereunder except losses, expenses, and liabilities arising as a result of
the Warrant Agent's negligence or wilful misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or wilful misconduct), after giving 60
days' prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company shall appoint a new
warrant agent in writing. If the Company shall fail to make such appointment
within a period of 30 days after it has been notified in writing of such
resignation by the resigning Warrant Agent, then the Registered Holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a bank or trust company having a
capital and surplus, as shown by its last published report to its stockholders,
of not less than $10,000,000 or a stock transfer company. After acceptance in
writing of such appointment by the new warrant agent is received by the Company,
such new warrant agent shall be vested with the same powers, rights, duties, and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act, or deed; but if for any reason
it shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act, or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the resigning warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any consolidation
to which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
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16. Modification of Agreement. The Warrant Agent and the Company may by
supplemental agreement make any changes or corrections in this Agreement (i)
that they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or manifest mistake or error herein
contained; or (ii) that they may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Warrant Certificates; provided,
however, that this Agreement shall not otherwise be modified, supplemented, or
altered in any respect except with the consent in writing of the Registered
Holders of Warrant Certificates representing not less than 50% of the Warrants
then outstanding; and provided, further, that no change in the number or nature
of the securities purchasable upon the exercise of any Warrant, or the Purchase
Price therefor, or the acceleration of the Warrant Expiration Date, shall be
made without the consent in writing of the Registered Holder of the Warrant
Certificate representing such Warrant, other than such changes as are
specifically prescribed by this Agreement as originally executed or are made in
compliance with applicable law.
17. Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first class registered or certified mail, postage prepaid as
follows: if to the Registered Holder of a Warrant Certificate, at the address of
such holder as shown on the registry books maintained by the Warrant Agent; if
to the Company, 7135 Islington Avenue, Woodbridge, Ontario, Canada L4L 1V9,
Attention: Louis Aldrovandi, President, with a copy sent to Bernstein &
Wasserman, LLP, 950 Third Avenue, New York, NY 10022, Attention: Steven
Wasserman, Esq. or at such other address as may have been furnished to the
Warrant Agent in writing by the Company; and if to the Warrant Agent, at its
Corporate office.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
principles of conflict of laws.
19. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Company and, the Warrant Agent and their respective successors
and assigns, and the holders from time to time of Warrant Certificates. Nothing
in this Agreement is intended or shall be construed to confer upon any other
person any right, remedy, or claim, in equity or at law, or to impose upon any
other person any duty, liability, or obligation.
20. Termination. This Agreement shall terminate at the close of business on
the Warrant Expiration Date of all the Warrants or such earlier date upon which
all Warrants have been exercised, except that the Warrant Agent shall account to
the Company for cash held by it and the provisions of Section 15 hereof shall
survive such termination.
21. Counterparts. This Agreement may be executed in several counterparts,
which taken together shall constitute a single document.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
LIFTKING INDUSTRIES, INC.
By:
------------------------------
Louis Aldrovandi
Its: President
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By:
------------------------------
Its: Authorized Officer
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EXHIBIT A
[Form of Face of Warrant Certificate]
No. W Warrants
VOID AFTER _____ __, 2001
REDEEMABLE CLASS A COMMON STOCK PURCHASE WARRANT
LIFTKING INDUSTRIES, INC.
THIS CERTIFIES THAT FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Class A Common Stock Purchase Warrants ("Warrants") specified above.
Each Warrant initially entitles the Registered Holder to purchase, subject to
the terms and conditions set forth in this Certificate and the Warrant Agreement
(as hereinafter defined), one fully paid and nonassessable share of Common Stock
("Common Stock"), of LiftKing Industries, Inc., a Canadian corporation (the
"Company"), at any time between the Initial Warrant Exercise Date and the
Expiration Date (as hereinafter defined), upon the presentation and surrender of
this Warrant Certificate with the Subscription Form on the reverse hereof duly
executed, at the corporate office of Continental Stock Transfer & Trust Company
as Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment
of $____ (the "Purchase Price") in lawful money of the United States of America
in cash or by official bank or certified check made payable to LiftKing
Industries, Inc.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement") dated _____ __, 1997,
by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modifications or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Initial Warrant Exercise Date" shall mean ____ __, 1998.
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The term "Expiration Date" shall mean 5:00 p.m. (New York time) on
_____ __, 2001, or such earlier date as the Warrants shall be redeemed. If such
date shall in the State of New York be a holiday or a day on which the banks are
authorized to close, then the Expiration Date shall mean 5:00 p.m. (New York
time) the next following day which in the State of New York is not a holiday or
a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. This Warrant shall not be exercisable by a Registered Holder in any
state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any transfer fee in addition
to any tax or other governmental charge imposed in connection therewith, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
This Warrant may be redeemed at the option of the Company, at a redemption
price of $.10 per Warrant at any time after _____ __, 1998 or earlier with the
consent of Monroe Parker Securities, Inc., provided the Market Price (as defined
in the Warrant Agreement) for the securities issuable upon exercise of such
Warrant shall exceed 250% of the then exercise price of the Warrants on all ten
(10) of the trading days ending on the third day prior to the day on which
notice is given. Notice of redemption shall be given not later than the
thirtieth day before the date fixed for redemption, all as provided in the
Warrant Agreement. On and after the date fixed for redemption, the Registered
Holder shall have no rights with respect to this Warrant except to receive the
$.10 per Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
2
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
LIFTKING INDUSTRIES, INC.
By:
--------------------------------
Louis Aldrovandi
Its: President
Date:
---------------------------
[Seal]
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By:
-----------------------------
Its: Authorized Officer
3
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[Form of Reverse of Warrant Certificate]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder in Order to Exercise Warrants
THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably elects to exercise
_____ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
-----------------------------------------------------------
(please insert social security or other identifying number)
and be delivered to
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below:
--------------------------------------------
--------------------------------------------
--------------------------------------------
(Address)
---------------------------------
(Date)
---------------------------------
(Taxpayer Identification Number)
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If this Warrant has been solicited by a member of the National Association of
Securities Dealers, Inc., the name of such firm is:__________:
SIGNATURE GUARANTEED
ASSIGNMENT
To Be Executed by the Registered Holder in Order to Assign Warrants
FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto
-----------------------------------------------------------
(please insert social security or other identifying number)
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
(please print or type name and address)
of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints _________________________________ Attorney to transfer
this Warrant Certificate on the books of the Company, with full power of
substitution in the premises.
---------------------------------
(Date)
SIGNATURE GUARANTEED
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK OR
TRUST COMPANY, SAVINGS ASSOCIATION, CREDIT UNION OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
2
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[LETTERHEAD OF SCHWARTZ LEVITSKY FELDMAN]
CONSENT OF CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated October 4, 1996 and August 15, 1997 in the Registration
Statement (Form SB-2) and related Prospectus of LiftKing Industries Inc. for the
registration of 1,250,000 shares of its common stock and 1,500,000 redeemable
common stock pruchase warrants.
Toronto, Ontario SCHWARTZ LEVITSKY FELDMAN
September 8, 1997 CHARTERED ACCOUNTANTS
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