<PAGE>
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-36193
CONSOLIDATION CAPITAL CORPORATION
24,000,000 SHARES OF COMMON STOCK
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All of the shares of capital stock offered hereby are being sold by
Consolidation Capital Corporation (the "Company"). Of such shares, 24,000,000
shares of the Company's common stock ("Common Stock") are being offered in an
initial public offering (the "Offering"). Prior to the Offering, there has
been no public market for the Common Stock of the Company. See "Underwriting
and Plan of Distribution" for a discussion of the factors considered in
determining the initial public offering price.
This Prospectus also relates to the sale by the Company, simultaneously with
the consummation of the Offering, of (i) 250,000 shares of Common Stock to
Jonathan J. Ledecky, the Company's Chairman and Chief Executive Officer, and
(ii) 500,000 shares of Convertible Non-Voting Common Stock to FBR Asset
Investment Corporation, Inc., an affiliate of Friedman, Billings, Ramsey &
Co., Inc., in each case at a per share price equal to the initial public
offering price set forth below. The Convertible Non-Voting Common Stock is
identical in all respects to the Common Stock, except that it is non-voting.
The Convertible Non-Voting Common Stock is non-transferable and will not be
publicly traded. On the first anniversary of the date of this Prospectus, each
share of Convertible Non-Voting Common Stock will automatically convert into
one share of Common Stock. See "Underwriting and Plan of Distribution."
The Common Stock has been approved for quotation on The Nasdaq National
Market under the symbol "BUYR," subject to official notice of issuance.
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
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<S> <C> <C> <C>
Per Share of Common Stock............. $20.00 $1.40 $18.60
- --------------------------------------------------------------------------------
Total (3)............................. $480,000,000 $33,600,000 $446,400,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Does not include additional consideration to be received by Friedman,
Billings, Ramsey & Co., Inc. as representative of the Underwriters ("FBR"
or the "Representative") in the form of warrants to purchase 1,130,000
shares of Common Stock at an exercise price per share equal to the Price
to Public, which warrant will be exercisable on or after the first
anniversary of the date of this Prospectus until the fifth anniversary of
the date of this Prospectus. The Company has also agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting and Plan of Distribution."
(2) Before deducting expenses payable by the Company estimated at $1,000,000.
(3) The Company has granted to the Underwriters an option, exercisable within
30 days of the date of this Prospectus, to purchase up to an aggregate of
3,600,000 additional shares of Common Stock at the Price to Public less
Underwriting Discounts and Commissions for the purpose of covering over-
allotments, if any. If the Underwriters exercise such option in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $552,000,000, $38,640,000 and $513,360,000,
respectively. See "Underwriting and Plan of Distribution."
----------------
The 24,000,000 shares of Common Stock offered in the Offering, and any
additional shares that may be offered pursuant to the Underwriters' over-
allotment option, are being offered by the Underwriters, subject to prior
sale, when, as and if accepted by the Underwriters and subject to the
Underwriters' right to reject orders, in whole or in part, and to certain
other conditions. It is expected that delivery of the shares to the
Underwriters will be made at the office of the Representative on or about
December 2, 1997 against payment therefor in immediately available funds.
----------------
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
November 25, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING AND
PLAN OF DISTRIBUTION."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, all share, per share and financial information set forth
herein (i) assume no exercise of the Underwriters' over-allotment option, and
(ii) give effect to a 1-for-1.918159 reverse stock split of the Common Stock to
be effective immediately prior to the effective date of the registration
statement of which this Prospectus forms a part (the "Effective Date").
Consolidation Capital Corporation is the successor to Ledecky Brothers L.L.C.
Hereinafter, except as otherwise indicated, Consolidation Capital Corporation
and Ledecky Brothers L.L.C. are referred to jointly as the "Company."
THE COMPANY
Consolidation Capital Corporation was founded in February 1997 by Jonathan J.
Ledecky to build consolidated enterprises with national market reach through
the acquisition and integration of multiple businesses in one or more
fragmented industries. Jonathan Ledecky is the Chairman and founder and, until
November 5, 1997, was the Chief Executive Officer, of U.S. Office Products
Company ("USOP"). While managing USOP, Jonathan Ledecky developed a strategy of
"corporate democracy," which he believes facilitated USOP's rapid consolidation
of more than 190 companies within seven different industry groups in the office
products and services industry. The corporate democracy approach includes (i) a
general policy of empowering local management and (ii) drawing upon the
contacts and expertise of local management by encouraging them to identify
acquisition candidates and to participate in the process of integrating newly
acquired companies into a consolidated enterprise. The Company intends to
employ a corporate democracy approach as one of its principal operating
strategies. To date, the Company has had limited operations consisting of
organizational activities and research and analysis with respect to industry
consolidations and acquisition opportunities. The Company was initially
capitalized with $59,000 (supplemented by additional capital contributions of
$67,000), has generated no revenues to date, has no significant assets as of
the date of this Prospectus and has incurred losses of $103,000 from its
founding in February 1997 through September 30, 1997.
From 1994 until November 1997, Jonathan Ledecky served as Chief Executive
Officer of USOP and, in that capacity, was responsible for in excess of $1.7
billion in acquisitions of businesses in seven different industry groups,
including office supplies, office furniture, coffee and beverage services,
computer and telecommunications networks and services, print management,
corporate travel services and educational supplies. The Company will seek to
leverage the experience and expertise of Jonathan Ledecky, its founder,
Chairman and Chief Executive Officer, and the Company's management team to
become a leading consolidator of distribution companies and service providers
in one or more fragmented industries. As of the Effective Date, the Company's
management team will consist of, in addition to Jonathan Ledecky:
Timothy C. Clayton, Executive Vice President, Chief Financial Officer and
Treasurer; F. Traynor Beck, Executive Vice President, General Counsel and
Secretary; and, David Ledecky, Executive Vice President and Chief
Administrative Officer. See "Management."
Pursuant to his employment agreement with USOP, Jonathan Ledecky serves as an
executive officer of USOP and, in that capacity, is obligated to assist in
identifying and pursuing new business and investment opportunities and
acquisitions for USOP and providing overall strategic planning and growth
analyses for USOP, among other things. Jonathan Ledecky is restricted by his
employment agreement from selling any products or services in direct
competition with USOP and from recruiting or employing current and certain
former employees of USOP, as well as persons who provide or within the prior
year provided substantial services to USOP (excluding Timothy C. Clayton and F.
Traynor Beck). See "Risk Factors--Conflicts of Interest."
3
<PAGE>
The Company will have broad discretion in identifying and selecting both the
industries which it expects to consolidate and possible acquisition candidates
within those industries. The Company has not identified a specific industry on
which it initially intends to focus and has no present plans, proposals,
arrangements or understandings with respect to the acquisition of any specific
business. The Company has no preference as a general matter as to whether to
issue shares of Common Stock or cash in making acquisitions and has the
flexibility to use either shares of its Common Stock or cash, or a combination
thereof. The form of the consideration that the Company uses for a particular
acquisition will depend upon the form of consideration that the sellers of a
business require and the most advantageous way for the Company to account for
or finance the acquisition. To the extent the Company uses Common Stock for all
or a portion of the consideration to be paid for future acquisitions,
significant dilution may be experienced by existing stockholders. See "Risk
Factors--Risks Related to Acquisition Financing; Additional Dilution;
Leverage." In addition, to the extent that the Company uses cash and cannot
account for an acquisition under the pooling-of-interests method of accounting,
the Company will have goodwill which it will amortize over the amortization
period, reducing net income. See "Risk Factors--Consideration for Operating
Companies May Exceed Asset Value; Amortization Charges."
The Company believes that it will possess substantial competitive advantages.
The Company expects to benefit from its ability to deploy rapidly its
significant financial resources and to use its publicly traded stock as
currency in selected acquisitions. Because the Company will initially have
significant cash and cash equivalents, the Company's ability to acquire
attractive companies is not likely to be constrained initially by the need to
access the capital markets. Furthermore, the Company believes that its
corporate democracy principles will help it attract and acquire companies and
will differentiate it from traditional consolidators. The Company believes that
its corporate democracy approach generates significant competitive advantages
because this approach allows managers of the acquired companies to benefit from
the economies of a large organization while simultaneously retaining local
operational control, enabling them to provide flexible and responsive service
to customers. Such an approach could, however, limit possible consolidation
efficiencies and integration efforts. In addition, although the Company's
management team has experience in acquiring and consolidating businesses, it is
unlikely to have experience managing companies in the industries that the
Company selects for consolidation. The Company, therefore, expects to rely in
part upon management of acquired companies or other individuals who are
experienced in the industries in which the Company pursues consolidation. See
"Risk Factors--Competition," "Business--Strategy" and "Management."
The Company believes that industries in which it will pursue consolidation
opportunities will often be characterized by privately-held or family-owned
businesses, whose owner/operators desire liquidity and may be unable to access
the capital markets effectively or to expand beyond a local or regional base.
The Company intends to pursue growing industries that are fragmented with no
clear market leader and that could benefit from economies of scale. Within such
industries, the Company intends to focus on the acquisition of distribution
companies and service providers having some or all of the following
characteristics: (i) stable cash flows and recurring revenue streams from long-
term customer relationships; (ii) low product obsolescence and non-reliance on
innovation or technology to drive recurring revenue streams; (iii) long-term
growth prospects for products and services offered; (iv) a strong "franchise"
or presence in the communities served by the acquisition candidate; (v) an
experienced management team comprised of recognized industry leaders; (vi) an
ability to retain, promote and motivate management teams; (vii) favorable
demographic trends within the local regions serviced; and (viii) an
underpenetrated market for products or services provided by the acquisition
candidate. See "Risk Factors--Appropriate Acquisitions May Not Be Available and
Full Investment of Net Proceeds May Be Delayed" and "Business--Strategy."
In general, the Company plans to acquire larger, established, high quality
companies, or "hubs," in high density, metropolitan areas, and additional
smaller companies, or "spokes," in secondary markets surrounding the hubs.
Where possible, the operations of the spokes will be integrated into the
operations of existing hubs, thereby enabling the Company to achieve the
economies of scale necessary to decrease operating cost and increase operating
margin. See "Risk Factors--Integration of Acquisitions."
4
<PAGE>
Upon integration of acquired companies, the Company believes that it will be
able to achieve operating efficiencies by combining administrative functions,
eliminating redundant facilities, implementing system technology improvements,
and purchasing products and services in large volumes. Each of the acquired
companies will continue to manage all functions that "touch the customer,"
including sales, marketing, customer service, credit and collections. The
Company will manage functions such as purchasing, accounting, inventory
management, human resources and finance centrally where it can leverage its
size and scale. In addition, the Company believes that it may achieve certain
synergies through strategic marketing and cross-selling by acquired companies.
The Company's principal executive offices are located at 1747 Pennsylvania
Avenue, N.W., Suite 900, Washington D.C. 20006, and its telephone number is
202-955-5490.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company... 24,000,000 Shares
Common Stock to be outstanding after
the Offering......................... 26,550,000 Shares (1)
Use of Proceeds....................... To fund future acquisitions and general
corporate purposes, including working
capital. See "Use of Proceeds."
Nasdaq National Market symbol......... BUYR
</TABLE>
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(1) Includes 250,000 shares which Jonathan Ledecky has agreed to purchase. If
the shares of Common Stock underlying options, warrants and the shares of
Convertible Non-Voting Common Stock expected to be outstanding at the time
of the consummation of the Offering and the simultaneous sale by the
Company of 250,000 shares of Common Stock to Jonathan Ledecky (the
"Concurrent Common Stock Offering") and of 500,000 shares of Convertible
Non-Voting Common Stock to FBR Asset Investment Corporation, Inc. (the
"Concurrent Non-Voting Common Stock Offering" and, together with the
Concurrent Common Stock Offering, the "Concurrent Offerings") are included
in the number of shares outstanding, the total number of shares outstanding
would be 31,690,000, consisting of (i) the 26,550,000 shares listed above,
(ii) 1,950,000 shares reserved for issuance upon the exercise of warrants
issued to Jonathan Ledecky on the Effective Date at an exercise price equal
to the initial public offering price per share, (iii) 1,500,000 shares
reserved for issuance under options granted to members of the management
team on the Effective Date at an exercise price equal to the initial public
offering price per share under the Consolidation Capital Corporation 1997
Long-Term Incentive Plan (the "Incentive Plan"), (iv) 60,000 shares
reserved for issuance under options granted on the Effective Date at an
exercise price equal to the initial public offering price per share under
the Consolidation Capital Corporation 1997 Non-Employee Directors' Stock
Plan (the "Directors' Plan"), (v) 500,000 shares to be issued upon the
conversion of the Convertible Non-Voting Common Stock, and (vi) 1,130,000
shares of Common Stock reserved for issuance upon the exercise of warrants
issued to the Representative. The total number of shares of Common Stock
reserved for issuance under the Incentive Plan, the Directors' Plan and the
Consolidation Capital Corporation 1997 Employee Stock Purchase Plan is (i)
9% of the number of shares of Common Stock outstanding from time to time
(or 2,389,500 shares at the time of the consummation of the Offering), (ii)
300,000 shares and (iii) 1,000,000 shares, respectively. (If the
Underwriters' over-allotment option is exercised in full for 3,600,000
shares of Common Stock, the total number of shares of Common Stock
outstanding or reserved for issuance under options, warrants and the shares
of Convertible Non-Voting Common Stock expected to be outstanding at the
time of the consummation of the Offering and the Concurrent Offerings would
be 35,290,000.) See "Risk Factors--Benefits to Insiders," "Management--1997
Long-Term Incentive Plan," "--1997 Non-Employee Directors' Stock Plan," "--
1997 Employee Stock Purchase Plan," "Description of Capital Stock--
Convertible Non-Voting Common Stock" and "Underwriting and Plan of
Distribution."
6
<PAGE>
THE CONCURRENT OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company... 250,000 Shares
Convertible Non-Voting Common Stock
offered by the Company............... 500,000 Shares
Use of Proceeds....................... To fund future acquisitions and general
corporate purposes, including working
capital. See "Use of Proceeds."
</TABLE>
Jonathan Ledecky has agreed to purchase 250,000 shares of Common Stock
directly from the Company in the Concurrent Common Stock Offering at a price
per share equal to the initial public offering price per share. No underwriting
discount or commission will be paid in connection with the Concurrent Common
Stock Offering. Consequently, the proceeds to the Company of such offering will
be $5.0 million.
FBR Asset Investment Corporation, Inc., an affiliate of the Representative,
has agreed to purchase 500,000 shares of Convertible Non-Voting Common Stock
from the Company in the Concurrent Non-Voting Common Stock Offering at a price
equal to the initial public offering price per share. No underwriting discount
or commission will be paid in connection with the Concurrent Non-Voting Stock
Offering. Consequently, the proceeds to the Company of such offering will be
$10.0 million.
----------------
References in this Prospectus to operating and financial data of U.S. Office
Products Company are included herein in reliance upon reports filed by that
company with the Securities and Exchange Commission. Such operating and
financial data are not intended to be indicative of the possible future
operating results or financial position of the Company.
Information contained in this Prospectus may contain forward-looking
statements, which can be identified by the use of forward-looking terminology
such as "may," "will," "expect," "intend," "plans," "anticipate," "estimate" or
"continue" or the negative thereof or other variations thereon or comparable
terminology. The matters described in "Risk Factors" and certain other factors
noted throughout this Prospectus and in any exhibits to the Registration
Statement of which this Prospectus is a part, constitute cautionary statements
identifying important factors with respect to any such forward-looking
statements, including certain risks and uncertainties, that could cause actual
results to differ materially, from those in such forward-looking statements.
While the protections of the Private Securities Litigation Reform Act of 1995
are not available, readers of this Prospectus should consider carefully these
cautionary statements in connection with the forward-looking statements made
herein.
7
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors, in addition to the other information contained in this
Prospectus, in evaluating an investment in the shares of Common Stock offered
hereby.
The risk factors set forth below and elsewhere in this Prospectus should be
read as accompanying all forward-looking statements made in this Prospectus.
These forward-looking statements can be identified by the use of forward-
looking terminology such as "may," "will," "expect," "intend," "plans,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. The Company's actual results
could differ materially from those anticipated in such forward-looking
statements, for the reasons set forth below and for other reasons. The
protections of the Private Securities Litigation Reform Act of 1995 are not
available.
NO PRESENT SOURCE OF REVENUES
The Company was founded in February 1997. To date, its activities have
consisted of organizational activities and research and analysis with respect
to acquisition and consolidation opportunities. As of September 30, 1997, the
Company had a negative tangible net worth of $292,000, total assets of
$339,000, stockholder's equity of $23,000, and accumulated losses of $103,000.
The Company was founded to build consolidated enterprises with national market
reach through the acquisition and integration of multiple businesses in one or
more fragmented industries. It will not generate any revenues from the
proceeds of this Offering other than interest income until, at the earliest,
the consummation of an acquisition of a business after which its ability to
generate revenues and earnings (if any) will be directly dependent upon the
operating results of such acquired business and any additional acquisitions
and the successful integration and consolidation of those businesses. The
Company has no present plans, proposals, arrangements or understandings with
any prospective acquisition candidates.
CONFLICTS OF INTEREST
Jonathan Ledecky serves as both the Chairman and Chief Executive Officer of
the Company and the Chairman and an executive officer of USOP. As a director
and an executive officer of both the Company and USOP, Jonathan Ledecky owes a
duty of loyalty and a duty of care under Delaware law to both companies. These
duties obligate him to present certain business opportunities to the company
to which he owes the duties before pursuing such opportunities himself. There
is no agreement among Jonathan Ledecky, the Company and/or USOP delineating
Jonathan Ledecky's duties to each company or resolving potential conflicts
between his conflicting duties and obligations. In the absence of such an
agreement, the Company may choose to avoid consolidation opportunities and/or
industries that pose risks of conflict.
In addition, Jonathan Ledecky has entered into an amended and restated
employment agreement with USOP (the "USOP Employment Agreement") and an
employment agreement with the Company upon the Effective Date (the "CCC
Employment Agreement"). Under the USOP Employment Agreement, Jonathan Ledecky
is obligated to assist in, among other things, identifying and pursuing new
business and investment opportunities and acquisitions for USOP, developing
and providing strategic plans and growth analyses for USOP, providing
structuring, capitalization, restructuring, recapitalization and
reorganization advice to USOP and assisting in implementing such advice, and
interfacing with the investment and financial community on an as-needed basis.
While Jonathan Ledecky is not to be responsible for the day-to-day oversight
of USOP, his positions as an executive officer and Chairman of the Board of
USOP may nonetheless result in competition between USOP matters and Company
matters for his time and professional attention, and may result in or
exacerbate conflicts as to his obligations to present business opportunities
to one company or another, or to pursue such opportunities for one company or
another. The USOP Employment Agreement also contains restrictions on Jonathan
Ledecky's ability to recruit or employ current and certain former employees of
USOP,
8
<PAGE>
as well as persons who provide or within the prior year provided substantial
services to USOP or its subsidiaries as part of an entity that is or was a
vendor or other outside service provider to USOP or its subsidiaries
(excluding only Timothy Clayton and F. Traynor Beck). This restriction could
present a possible conflict between Jonathan Ledecky's actions and
recommendations to retain employees, vendors and outside service providers for
USOP and his efforts to employ suitable individuals with the Company. In
addition, the USOP Employment Agreement recites that in the course of Jonathan
Ledecky's employment with USOP he has become familiar with and aware of
certain information regarding USOP's operations that the agreement describes
as a trade secret of USOP. Were Jonathan Ledecky to be held wrongfully to have
disclosed any trade secret information to the Company or others in violation
of his obligations, he could face liability for such disclosure, and the
Company could face liability for inducing or aiding in any such alleged
violation. Finally, under the USOP Employment Agreement, Jonathan Ledecky is
not prohibited from serving as an officer, director or employee of or
consultant to the Company, provided that such actions do not otherwise breach
his obligations under the USOP Employment Agreement.
Since Jonathan Ledecky owes duties of loyalty and care and has contractual
obligations to both the Company and USOP simultaneously, he may be unable in
certain circumstances to fulfill his duties and obligations to one company
without allegedly breaching them to the other. Any alleged breach could result
in litigation by or on behalf of the offended company under any of a number of
possible legal theories, including seeking damages from Jonathan Ledecky for
the purported breach or from the other such company for tortiously interfering
with the offended company's contractual relationship with Jonathan Ledecky or
for inducing him to breach his duties to the offended company. The conduct or
response to any such litigation could consume significant management attention
and resources, and the defense, settlement or final adjudication of any such
litigation could have a material adverse effect on the Company's business,
financial condition and/or results of operations.
In addition, Jonathan Ledecky is the Non-Executive Chairman of the Board of
U.S.A. Floral Products, Inc. ("USA Floral"), the Non-Executive Chairman of the
Board of U.S. Leasing, Inc. ("US Leasing") and a prospective minority investor
in Unison Partners, Inc. ("Unison Partners"). Each of USA Floral, US Leasing
and Unison Partners is, or is seeking to become, a consolidator of businesses
in one or more industries. Jonathan Ledecky may thus have conflicts of
interest in determining to which of these entities, if any, a particular
relevant business opportunity should be presented. See "Business--Conflicts of
Interest."
BENEFITS TO INSIDERS
Prior to the Offering, Jonathan Ledecky owned all of the outstanding shares
of Common Stock of the Company. Following consummation of the Offering and the
Concurrent Common Stock Offering, Jonathan Ledecky will own beneficially
approximately 15.8% of the Company's Common Stock (assuming exercise in full
of the outstanding warrant owned by him as of the date of the Effective Date).
The aggregate market value of the shares of Common Stock beneficially owned by
Jonathan Ledecky immediately following the Offering and the Concurrent Common
Stock Offering will be approximately $90.0 million; Jonathan Ledecky's
aggregate purchase price for such shares will have been approximately $44.1
million. See "Principal Stockholders."
A portion of the net proceeds of the Offering and the Concurrent Offerings
will be used to repay indebtedness of the Company to Jonathan Ledecky
evidenced by demand notes. As of September 30, 1997, such indebtedness was
approximately $206,000. The Company expects that Jonathan Ledecky will advance
additional funds to the extent necessary to pay any additional expenses
incurred prior to consummation of the Offering. See "Use of Proceeds" and
"Certain Relationships and Related Party Transactions."
Pursuant to the CCC Employment Agreement, Jonathan Ledecky will receive a
salary of $750,000 per year, and will be entitled to receive annual bonuses.
Pursuant to their employment agreements, David Ledecky, Timothy Clayton and F.
Traynor Beck will each receive a salary of $300,000 per year and a guaranteed
annual bonus of $200,000 for the first year, and will also be entitled to
receive certain perquisites. In addition, the Company has adopted the
Consolidation Capital Corporation Section 162(m) Bonus Plan under which the
executive officers may receive, in the discretion of a Bonus Plan committee
consisting of at least two non-employee directors, cash bonus awards. See
"Management--Executive Compensation; Employment Agreements."
9
<PAGE>
Jonathan Ledecky has entered into a Warrant Agreement (the "Ledecky
Warrant") with the Company which entitles him to acquire 1,950,000 shares of
Common Stock at a purchase price per share equal to the initial public
offering price per share. The Ledecky Warrant is exercisable for a period of
ten years commencing on the Effective Date. Under the Ledecky Warrant,
Jonathan Ledecky will be entitled to certain registration rights beginning one
year after the Effective Date. See "Shares Eligible for Future Sale."
Jonathan Ledecky, David Ledecky, Timothy Clayton and F. Traynor Beck will
each be eligible to participate in the Incentive Plan, which provides for,
among other things, the award of options to purchase shares of Common Stock.
Such option awards may take the form of incentive stock options (which must be
granted at an exercise price not less than the fair market value of a share of
Common Stock on the date of grant) or non-qualified stock options (which may,
but need not, be granted at an exercise price less than the fair market value
of a share of Common Stock on the date of grant). Pursuant to their employment
agreements, David Ledecky, Timothy Clayton and F. Traynor Beck each received a
grant of options (which may be incentive stock options or non-qualified stock
options) to purchase 500,000 shares of Common Stock at an exercise price equal
to the initial public offering price per share. See "Management--1997 Long-
Term Incentive Plan."
Each non-employee director of the Company is to receive an annual retainer
fee of $25,000 and, pursuant to the Directors' Plan, automatic initial and
annual grants of stock options. Each such non-employee director received an
automatic initial grant of options to purchase 20,000 shares of Common stock
on the later of the Effective Date or the date of his initial election to the
Board of Directors, and an automatic annual grant of options to purchase 5,000
shares. Each such option will have an exercise price equal to the fair market
value of a share of Common Stock on the date of grant (in the case of initial
grants made on the Effective Date, the initial public offering price per
share). Vincent Eades, W. Russell Ramsey and M. Jude Reyes each received such
initial grants on the Effective Date. See "Management--Director Compensation."
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success will depend principally upon the
experience of Jonathan J. Ledecky, its founder, Chairman and Chief Executive
Officer. In addition, the Company believes that its success will depend to a
significant extent upon Timothy Clayton, who became the Company's Executive
Vice President, Chief Financial Officer and Treasurer on the Effective Date;
F. Traynor Beck, who became the Company's Executive Vice President, General
Counsel and Secretary on the Effective Date; and David Ledecky, who became
Executive Vice President and Chief Administrative Officer on the Effective
Date.
Although Jonathan Ledecky has substantial experience in acquiring and
consolidating businesses and Messrs. Clayton and Beck have substantial
experience with such transactions on behalf of their clients, none of them has
any prior experience in managing companies formed for the specific purpose of
consolidating one or more industries (other than Jonathan Ledecky's experience
in managing USOP) or in managing businesses in the industries which the
Company is likely to operate. As a result, the Company likely will depend on
the senior management of any significant business it acquires in the future.
Such acquired senior management may not be suitable to the Company's business
model or combined operations.
If the Company loses the services of one or more of its current executives,
the Company's business could be adversely affected. The Company may not
successfully recruit additional personnel and any additional personnel that
are recruited may not have the requisite skills, knowledge or experience
necessary or desirable to enhance the incumbent management. The Company does
not intend to maintain key man life insurance with respect to any of its
executive officers. See "Management."
ALLOCATION OF MANAGEMENT TIME
Pursuant to the CCC Employment Agreement, Jonathan Ledecky will be required
to devote the substantial majority of his business time, attention and efforts
to the business of the Company. Pursuant to the USOP Employment Agreement,
Jonathan Ledecky will be required to devote a portion of his business time,
attention and efforts to promote and further the business of USOP. In
addition, Jonathan Ledecky anticipates devoting
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time to his other directorships and professional pursuits. The competing
claims upon Jonathan Ledecky's time and energies could divert his attention
from the affairs of the Company, placing additional demands on the Company's
other management resources. Pursuant to their employment agreements with the
Company, each of the other executive officers of the Company will be required
to devote his full business time, attention and efforts to the business of the
Company. The efforts of all or any of these individuals may not be sufficient
to meet the Company's management needs.
APPROPRIATE ACQUISITIONS MAY NOT BE AVAILABLE AND FULL INVESTMENT OF NET
PROCEEDS MAY BE DELAYED
The results of the Company's planned operations are dependent upon the
Company's ability to identify, attract and acquire desirable acquisition
candidates, which may take considerable time. The Company may not be
successful in identifying, attracting or acquiring desirable acquisition
candidates, in integrating such candidates into the Company or in realizing
profits from any acquisition candidates, if acquired. The failure to complete
acquisitions or to operate the acquired companies profitably would have a
material adverse effect on the Company's business, financial condition and/or
results of operations.
Pending their possible application in acquiring businesses, the net proceeds
of the Offering and the Concurrent Offerings are to be invested in readily
marketable, interest-bearing, investment grade securities. Consequently, until
such time as the Company acquires acquisition candidates, the proceeds of the
Offering and the Concurrent Offerings will yield only that rate of return
earned by such interest-bearing securities. In addition, a portion of the net
proceeds of the Offering and the Concurrent Offerings will be used to pay
corporate overhead and administrative costs, which the Company estimates will
initially be approximately $5.0 million on an annualized basis, representing
the costs of rent, salaries and employee benefits, insurance, and other
miscellaneous expenses.
RISKS ASSOCIATED WITH CONSOLIDATION STRATEGY
To date, the Company's activities have consisted of organizational
activities, conducting research and analysis principally focused on
identifying fragmented industries that are potentially available for
consolidation and refining the Company's business strategy. In connection with
its research and analysis, the Company has had general discussions with
numerous businesses within several different industries; however, because its
research and analysis is not yet complete to its satisfaction, the Company has
not yet identified a specific industry on which it will initially focus or a
specific acquisition candidate within any industry. Accordingly, investors in
the Offering will have no basis on which to evaluate the possible merits or
risks of the acquisition candidates' operations and prospects. Although
management of the Company will endeavor to evaluate the risks inherent in any
particular acquisition candidate, the Company may not properly ascertain all
of such risks. See "Business--Strategy."
Upon consummation of the Offering, the Company's management team will
utilize the proceeds of the Offering and the Concurrent Offerings to
accelerate the research and analysis that has been performed to date to
identify and select prospective industries and acquisition candidates. Other
than the Company's determination not to seek to acquire businesses in any of
the industries in which USOP currently operates (or any acquisition candidate
for which USOP performed an acquisition analysis for the purpose of acquiring
such entity) or in the floral products and distribution industry without the
written approval of USOP or USA Floral, as the case may be, management of the
Company will have virtually unrestricted flexibility in identifying and
selecting prospective acquisition candidates and broad discretion with respect
to the specific application of the net proceeds of the Offering. Management
may not succeed in selecting acquisition candidates that will be profitable or
that can be integrated successfully. Although the Company intends to
scrutinize closely the management of a prospective acquisition candidate in
connection with evaluating the desirability of effecting a business
combination, the Company's assessment of management may not prove to be
correct. The Company may enlist the assistance of other persons to assess the
management of acquisition candidates (including, without limitation,
investment bankers, brokers, accountants and other advisers who have rendered
or may in the future render services to USOP, subject to Jonathan Ledecky's
obligations under the USOP Employment Agreement), but no
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such persons have yet been identified. See "--Conflicts of Interest,"
"Business--Conflicts of Interest" and "Certain Relationships and Related Party
Transactions."
INTEGRATION OF ACQUISITIONS
The Company's business model contemplates an aggressive and rapid
acquisition program. No assurance can be given that the Company will be able
to successfully integrate its future acquisitions without substantial costs,
delays or other problems. The costs of such acquisitions and their integration
could have an adverse effect on short-term operating results. Such costs could
include severance payments to employees of such acquired companies,
restructuring charges associated with the acquisitions and other expenses
associated with a change of control, as well as non-recurring acquisition
costs including accounting and legal fees, investment banking fees,
recognition of transaction-related obligations and various other acquisition-
related costs. Any failure by the Company to make acquisitions would have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, the Company may be unable to replicate the
success in consolidating various industries that has been achieved by other
consolidators, including USOP.
The Company may not be able to execute successfully its consolidation
strategy or anticipate all of the changing demands that successive
consolidation transactions will impose on its management personnel,
operational and management information systems and financial systems. The
integration of newly acquired companies may also lead to diversion of
management attention from other ongoing business concerns. In addition, the
rapid pace of acquisitions may adversely affect the Company's efforts to
integrate acquisitions and manage those acquisitions profitably. Moreover, it
is possible that neither management of the Company nor management of any of
the acquired companies will have the necessary skills to manage a company
intending to implement an aggressive acquisition program. The Company may seek
to recruit additional managers to supplement the incumbent management of the
acquired companies but the Company may not have the ability to recruit
additional managers with the skills necessary to enhance the management of the
acquired companies. Any or all of these factors could have a material adverse
effect on the Company's business, financial condition and/or results of
operations.
RISKS RELATED TO ACQUISITION FINANCING; ADDITIONAL DILUTION; LEVERAGE
The Company intends to use substantially all of its resources for
acquisitions and, to a much lesser extent, for general corporate expenses. The
timing, size and success of the Company's acquisition efforts and any
associated capital commitments cannot be readily predicted. The Company
currently intends to finance future acquisitions by using shares of its Common
Stock, cash, borrowed funds or a combination thereof. If the Common Stock does
not maintain a sufficient market value, or if potential acquisition candidates
are otherwise unwilling to accept Common Stock as part of the consideration
for the sale of their businesses, the Company may be required to use more of
its cash resources or more borrowed funds, in each case if available, in order
to initiate and maintain its acquisition program. If the Company does not have
sufficient cash resources, its growth could be limited unless it is able to
obtain additional capital through debt or equity financings.
Following the consummation of the Offering and the Concurrent Offerings, the
Company will have cash and cash equivalents of approximately $460.4 million
($527.4 million if the Underwriters' over-allotment option is exercised in
full). In addition, the Company has initiated negotiations to obtain a credit
facility which may be used for future acquisitions or other capital
requirements. BT Alex. Brown Incorporated ("BT") has provided the Company with
a letter, dated October 29, 1997, in which BT confirms that, upon the
Company's request, BT commits to use its best efforts to arrange and syndicate
a $100 million senior secured revolving bank credit facility which may, under
certain conditions to be mutually agreed upon, be increased up to a $500
million facility. The terms and conditions of any BT debt facility, including
the fee arrangements, are subject to mutual agreement. Use of any such
facility would likely be subject to conditions customary to facilities of this
type, including restrictions on other indebtedness, mergers, acquisitions,
dispositions and similar transactions. The Company may not succeed in
obtaining a facility of any size or in negotiating terms satisfactory to the
Company. Except for these preliminary negotiations, the Company currently has
no plan or intention to obtain additional
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capital through debt or equity financing during the next 12 months. If and
when the Company requires additional financing for its acquisition program or
for other capital requirements, the Company may be unable to obtain any such
financing on terms that the Company deems acceptable.
Among the possible adverse effects of borrowings to consummate acquisitions
or for other capital requirements are: (i) if the Company's operating revenues
after acquisitions were to be insufficient to pay debt service, there would be
a risk of default and foreclosure on the Company's assets; (ii) if a loan
agreement contains covenants that require the maintenance of certain financial
ratios or reserves, and any such covenant were breached without a waiver or
renegotiation of the terms of that covenant, then the lender could have the
right to accelerate the payment of the indebtedness even if the Company has
made all principal and interest payments when due; (iii) if the terms of a
loan did not provide for amortization prior to maturity of the full amount
borrowed and the "balloon" payment could not be refinanced at maturity on
acceptable terms, the Company might be required to seek additional financing
and, to the extent that additional financing were not available on acceptable
terms, to liquidate its assets; and (iv) if the interest rate of a loan is
variable, the Company would be subject to interest rate fluctuations which
could increase the Company's debt service obligations. The level of
indebtedness that the Company may incur cannot be predicted and will depend
upon these factors and the relevant business characteristics of the
acquisition candidates for which such indebtedness will be undertaken.
The Company currently has 250,000,000 authorized shares of Common Stock.
Upon consummation of the Offering and the Concurrent Common Stock Offering,
the Company will have 26,550,000 shares of Common Stock outstanding
(30,150,000 shares of Common Stock if the Underwriters' over-allotment option
is exercised in full). In addition, the Company will have securities
outstanding that are convertible into or exercisable for 5,140,000 shares of
Common Stock, consisting of (i) options to purchase 1,500,000 shares of Common
Stock granted under the Company's 1997 Long-Term Incentive Plan, (ii) options
to purchase 60,000 shares of Common Stock granted under the Company's 1997
Non-Employee Directors' Stock Plan, (iii) 500,000 shares of Common Stock that
will be issuable upon the conversion of shares of Convertible Non-Voting
Common Stock to be issued in the Concurrent Non-Voting Stock Offering,
(iv) 1,130,000 shares of Common Stock to be issuable upon the exercise of
warrants issued to the Representative and (v) 1,950,000 shares of Common Stock
to be issuable upon the exercise of warrants issued to Jonathan Ledecky. The
Company will also have (i) 889,500 shares reserved for issuance pursuant to
awards available to be made under the Company's 1997 Long-Term Incentive Plan
(1,213,500 shares if the Underwriters' over-allotment option is exercised in
full), (ii) 240,000 shares reserved for issuance pursuant to options available
to be granted under the Company's 1997 Non-Employee Directors' Stock Plan and
(iii) 1,000,000 shares reserved for issuance pursuant to the Company's 1997
Employee Stock Purchase Plan. Accordingly, upon completion of the Offering and
the Concurrent Offerings, the Company will have 216,180,500 authorized but
unissued and unreserved shares of Common Stock (212,256,500 authorized but
unissued and unreserved shares if the Underwriters' over-allotment option is
exercised in full). Consequently, subject to the rules and regulations of The
Nasdaq National Market, the Company will be able to finance acquisitions by
issuing significant amounts of additional shares of Common Stock without
obtaining shareholder approval of such issuances. To the extent the Company
uses Common Stock for all or a portion of the consideration to be paid for
future acquisitions, dilution may be experienced by existing stockholders,
including the purchasers of Common Stock in the Offering. Moreover, the
issuance of additional shares of Common Stock may have a negative impact on
earnings per share and may negatively impact the market price of the Common
Stock. See "Use of Proceeds" and "Dilution."
COMPETITION
The Company may encounter intense competition from other consolidators
having a business objective similar to that of the Company. Many of these
entities are well established and have extensive experience in identifying
consolidation opportunities and effecting business combinations directly or
through affiliates. Many of these competitors possess greater financial,
personnel and other resources than the Company expects to have and there can
be no assurance that the Company will be able to compete successfully.
Competition with other
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consolidators to buy a limited number or an identifiable set of businesses
could lead to higher prices being paid for acquired companies. In addition, to
the extent that the Company determines to consolidate an industry that is
already in the early stages of consolidation, the Company may compete with
consolidators that already are operating within the industry being
consolidated. Such competitors may have competitive advantages in identifying
and attracting acquisition candidates as a result of their knowledge of the
industry, industry reputation and contacts within the industry. This inherent
competitive disadvantage to the Company may make certain consolidation
opportunities more difficult to accomplish and may compel the Company to
select certain less attractive consolidation prospects.
Moreover, the industries in which the Company may operate in the future may
be highly competitive. The Company may be unable to differentiate itself or
compete effectively in any markets in which it operates in the future.
CONSIDERATION FOR OPERATING COMPANIES MAY EXCEED ASSET VALUE; AMORTIZATION
CHARGES
The purchase prices of the Company's acquisitions will not be established by
independent appraisals, but generally through arms'-length negotiations
between the Company's management and representatives of such companies. The
consideration paid for each such company will be based primarily on the value
of such company as a going concern and not on the value of the acquired
assets. Valuations of these companies determined solely by appraisals of the
acquired assets are likely to be less than the consideration that is paid for
the companies. The future performance of such companies may not be
commensurate with the consideration paid.
The Company expects to incur significant amortization charges resulting from
consideration paid in excess of the fair value of the net assets of the
companies acquired in business combinations accounted for under the purchase
method of accounting ("goodwill"). The Company will be required to amortize
the goodwill from acquisitions accounted for under the purchase method over a
period of time, with the amount amortized in a particular period constituting
an expense that reduces the Company's net income for that period. The amount
amortized, however, will not give rise to a deduction for tax purposes. As an
example of the degree to which amortization of goodwill relates to the total
purchase prices paid for acquisitions, USOP had recorded approximately $659.0
million of goodwill and other intangibles in connection with the $1.7 billion
in acquisitions made through April 27, 1997, and incurred $14.2 million in
amortization charges for its fiscal year ended April 27, 1997. The Company's
amortization charges, however, could be substantially greater than or less
than the amount of amortization charges incurred by USOP. A reduction in net
income resulting from amortization charges may have a material and adverse
impact upon the market price of the Company's Common Stock.
INVESTMENT COMPANY ACT CONSIDERATIONS
The regulatory scope of the Investment Company Act of 1940 ("Investment
Company Act") extends generally to companies engaged primarily in the business
of investing, reinvesting, owning, holding or trading in securities. The
Investment Company Act also may apply to a company which does not intend to be
characterized as an investment company but which, nevertheless, engages in
activities that bring it within the Investment Company Act's definition of an
investment company. The Company believes that its anticipated principal
activities, which will involve acquiring control of operating companies, will
not subject the Company to registration and regulation under the Investment
Company Act. Nonetheless, since the Company will initially fall within the
Investment Company Act's definition of an investment company upon the
consummation of the Offering, it will rely on a safe harbor rule that will
exempt the Company from the Investment Company Act for a period of one year,
provided certain conditions are met. Thereafter, the Company intends to remain
exempt from investment company regulation either by not engaging in investment
company activities or by qualifying for the exemption from investment company
regulation available to any company that has no more than 45% of its total
assets invested in, and no more than 45% of its income derived from,
investment securities, as defined in the Investment Company Act.
There can be no assurance that the Company will be able to avoid
registration and regulation as an investment company. In the event the Company
is unable to avail itself of an exemption or safe harbor from the
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Investment Company Act, the Company may become subject to certain restrictions
relating to the Company's activities, as noted below, and contracts entered
into by the Company at such time that it was an unregistered investment
company may be unenforceable. The Investment Company Act imposes substantive
requirements on registered investment companies including limitations on
capital structure, restrictions on certain investments, prohibitions on
transactions with affiliates and compliance with reporting, record keeping,
voting, proxy disclosure and other rules and regulations. Registration as an
investment company could have a material adverse effect on the Company.
ADVERSE CHANGES IN GENERAL ECONOMIC CONDITIONS CAN ADVERSELY AFFECT COMPANY'S
BUSINESS
The Company's success is dependent upon the general economic conditions in
the geographic areas in which a substantial number of its operating businesses
are located. Adverse changes in national economic conditions or in regional
economic conditions in which the Company conducts substantial business likely
would have an adverse effect on the operating results of one or more of the
acquired companies and, accordingly, on the Company's business, financial
condition and/or results of operations.
RISKS RELATING TO INTERNATIONAL EXPANSION
Although it is not currently anticipated, if the Company were to expand into
international markets, it may face additional risks relating to such matters
as currency exchange rate fluctuations, new and different legal and regulatory
requirements, political and economic risks relating to the stability of
foreign governments and their trading relationships with the United States,
difficulties in staffing and managing foreign operations, differences in
financial reporting, differences in the manner in which different cultures do
business, operating difficulties and other factors. The many difficulties and
risks inherent in international operations could result in a material adverse
impact upon the Company's business, financial condition and results of
operations.
POTENTIAL REGULATORY REQUIREMENTS
The Company's acquisition strategy will likely be subject to the
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), which could adversely affect the pace of the
Company's acquisitions in an industry or its ability to consolidate an
industry to the extent the Company believes appropriate, depending upon the
industry being consolidated. Among the requirements that may be imposed in
order to obtain approval of an acquisition under the HSR Act may be a
requirement that the Company divest a portion of its then-existing operations
or those of the acquisition candidate, which may render a given acquisition
disadvantageous. In addition, acquisitions of businesses in regulated
industries would subject the Company to regulatory requirements which could
limit the Company's flexibility in growing and operating its businesses.
TAX CONSIDERATIONS
As a general rule, federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. The Company
will evaluate the possible tax consequences of any prospective business
combination and will endeavor to structure the business combination so as to
achieve the most favorable tax treatment to the Company, the acquisition
candidate and their respective stockholders. Nonetheless, the Internal Revenue
Service (the "IRS") or appropriate state tax authorities may not ultimately
agree with the Company's tax treatment of a consummated business combination.
To the extent that the IRS or state tax authorities ultimately prevail in
recharacterizing the tax treatment of a business combination, there may be
adverse tax consequences to the Company, the acquisition candidate and/or
their respective stockholders.
POTENTIAL INFLUENCE OF EXISTING STOCKHOLDER
After the consummation of the Offering and the Concurrent Offerings,
Jonathan Ledecky, the Company's founder, Chairman and Chief Executive Officer,
will own beneficially approximately 15.8% of the outstanding shares of Common
Stock. The Company's executive officers and directors, if acting together, may
be able to
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significantly influence the election of directors and matters requiring the
approval of the stockholders of the Company. This concentration of ownership
may also have the effect of delaying or preventing a change in control of the
Company. See "Principal Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering and the Concurrent Common Stock Offering,
the Company will have 26,550,000 shares of Common Stock outstanding. The
24,000,000 shares of Common Stock sold in the Offering will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), except that any shares purchased
by an "affiliate" of the Company, as that term is defined in Rule 144 ("Rule
144") promulgated under the Securities Act, may generally be sold only in
compliance with Rule 144, as described below.
All of the remaining 2,550,000 outstanding shares of Common Stock will be
owned by Jonathan Ledecky, and will be available for resale, subject to
compliance with Rule 144 and subject to a contractual restriction on transfer
for 180 days on all of the shares of Common Stock that he owns and a
contractual restriction on transfer for one year on 2,300,000 of the shares of
Common Stock that he owns.
Further, upon consummation of the Offering, 1,950,000 shares will be
reserved for issuance upon the exercise of the Ledecky Warrant issued to
Jonathan Ledecky on the Effective Date at an exercise price equal to the
initial public offering price per share, 1,560,000 shares of Common Stock will
be reserved for issuance upon the exercise of stock options granted on the
Effective Date, and an aggregate of 2,129,500 shares will be reserved for
issuance pursuant to the Incentive Plan, the Directors' Plan and the
Consolidation Capital Corporation 1997 Employee Stock Purchase Plan (an
aggregate of 2,453,500 shares reserved for issuance if the Underwriters' over-
allotment option is exercised in full). Because the number of shares reserved
for issuance upon the exercise of awards made or to be made under the
Incentive Plan is 9% of the aggregate number of shares of Common Stock
outstanding from time to time, future issuances of Common Stock, whether in
acquisitions or otherwise, will result in an increase the number of awards
available to be made. The Company intends to file a registration statement on
Form S-8 as soon as practicable after the consummation of the Offering with
respect to the shares of Common Stock issuable upon exercise of all of such
options. Such registration statement, to the extent required under the
Securities Act, will register for resale the shares of Common Stock acquired
upon exercise of such options. The Company has agreed that, at Jonathan
Ledecky's request, it will file a registration statement under the Securities
Act for an offering of the shares underlying the Ledecky Warrant during a ten-
year period beginning on the first anniversary of the Effective Date. In
addition, the Company has agreed to give Jonathan Ledecky the right to request
that the Company include the shares underlying the Ledecky Warrant on a
registration statement filed by the Company during a twelve-year period
beginning on the Effective Date.
Finally, upon completion of the Offering and the Concurrent Non-Voting Stock
Offering, 1,130,000 shares of Common Stock will be reserved for issuance upon
exercise of the warrants issued to the Representative (which will have the
right, beginning one year after the date of this Prospectus, to require the
Company to register such shares for sale under the Securities Act) and 500,000
shares will be reserved for issuance upon the conversion of shares of
Convertible Non-Voting Common Stock (which shares will be eligible for resale
beginning one year from the date of this Prospectus). Sales of substantial
amounts of Common Stock, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Common Stock and impair
the Company's ability to raise additional capital through the sale of equity
securities. Each of the Company and its existing stockholder, executive
officers and directors has generally agreed not to offer, pledge, sell,
contract to sell, or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock during the period ending 180 days after the
date of this Prospectus without the prior written consent of the
Representative. See "Shares Eligible for Future Sale" and "Underwriting and
Plan of Distribution."
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NO PRIOR MARKET FOR THE COMMON STOCK; STABILIZATION; POSSIBLE VOLATILITY OF
STOCK PRICE
Prior to the Offering, there has been no public market for the Company's
Common Stock. An active public market for the Common Stock may not develop or
be sustained after the Offering. The initial public offering price of the
Common Stock was determined by negotiation between the Company and the
Representative of the Underwriters based on the factors described under
"Underwriting and Plan of Distribution." The price at which the Common Stock
will trade in the public market after the Offering may be less than the
initial public offering price.
Certain persons participating in this Offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock,
including stabilizing bids, syndicate covering transactions or the imposition
of penalty bids. For a description of these activities, see "Underwriting and
Plan of Distribution." Any of these activities may stabilize or maintain the
market price of the Common Stock above the price which would prevail in the
absence of such activities. Neither the Company nor the Underwriters makes any
representation that the Representative will engage in such transactions or
that such transactions, if commenced, will not be discontinued without notice.
The market price of the Company's Common Stock after the Offering could also
be adversely affected by confusion or uncertainty as to the pace of the
Company's consolidations, the various industries being consolidated and the
status of the integration of businesses within the industries. In addition,
the market price of the Common Stock could be subject to significant
fluctuations in response to activities of the Company's competitors,
variations in quarterly operating results, changes in market conditions and
other events or factors. Moreover, the stock market in the past has
experienced significant price and value fluctuations, which have not
necessarily been related to corporate operating performance. The volatility of
the market could adversely affect the market price of the Common Stock and the
ability of the Company to raise equity in the public markets.
NO DIVIDENDS
The Company has not paid any dividends on its Common Stock to date. The
payment of any dividends will be within the discretion of the Company's Board
of Directors. It is the present intention of the Board of Directors to retain
all earnings, if any, for use in the Company's business operations and,
accordingly, the Board of Directors does not anticipate declaring any
dividends in the foreseeable future. See "Dividend Policy."
DILUTION TO NEW INVESTORS
Purchasers of Common Stock in the Offering and purchasers of Common Stock
and Convertible Non-Voting Common Stock in the Concurrent Offerings will
experience immediate and substantial dilution in the pro forma as adjusted net
tangible book value of their shares in the amount of $2.98 per share. See
"Dilution." If the Company issues additional Common Stock in the future,
including shares which may be issued pursuant to earn-out arrangements, option
grants, the Ledecky Warrant, the Representative's warrants and future
acquisitions, purchasers of Common Stock in the Offering may experience
further dilution in the net tangible book value per share of the Common Stock.
Since the holders of Common Stock do not have any pre-emptive right to
purchase shares of Common Stock issued by the Company in the future, their
voting power will be diluted by future issuances of shares of Common Stock by
the Company.
CERTAIN ANTITAKEOVER PROVISIONS
The Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibit the Company from engaging in
a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
"interested stockholder," unless the business combination is approved in a
prescribed manner. See "Description of Capital Stock--Certain Provisions of
Delaware Law and the Company's Restated Certificate of Incorporation."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
in the Offering, after deducting estimated underwriting discounts and other
offering expenses, all of which are payable by the Company, are estimated to
be approximately $445.4 million (approximately $512.4 million if the
Underwriters' over-allotment option is exercised in full). In addition,
Jonathan Ledecky has agreed to purchase 250,000 shares of Common Stock
directly from the Company in the Concurrent Common Stock Offering and FBR
Asset Investment Corporation, Inc. has agreed to purchase 500,000 shares of
Convertible Non-Voting Common Stock directly from the Company in the
Concurrent Non-Voting Stock Offering, in each case at the initial public
offering price. No underwriting discounts or commissions will be paid in
connection with the Concurrent Offerings. Such purchases, therefore, will
result in additional proceeds to the Company of $15.0 million.
The Company intends to use substantially all of the net proceeds of the
Offering and the Concurrent Offerings to engage in consolidation and operating
activities, including identifying and evaluating prospective acquisition
candidates and structuring, negotiating and consummating the acquisitions. The
Company is not currently involved in negotiations and has no current
commitments or agreements with respect to any acquisitions. The Company cannot
assure that any acquisitions will ever be consummated. A portion of the net
proceeds will be used to repay the indebtedness of the Company to Jonathan
Ledecky evidenced by demand notes having an interest rate equal to 6.75%. As
of September 30, 1997, such indebtedness was approximately $206,000. The
Company expects that Jonathan Ledecky will advance additional funds to the
extent necessary to pay any additional expenses incurred prior to consummation
of the Offering.
Pending use of the net proceeds as described above, the Company intends to
invest the net proceeds in readily marketable, interest-bearing, investment
grade securities.
DETERMINATION OF OFFERING PRICE
Prior to the Offering, there has been no public market for the shares of
Common Stock or the Convertible Non-Voting Common Stock. The initial public
offering price of the Common Stock has been determined by negotiation between
the Company and the Representative. Among the factors considered in making
such determination were the history of, and the prospects for, other
consolidators generally, an assessment of management, the Company's prospects
for future earnings, the general conditions of the economy and the securities
market and the prices of offerings by similar issuers. Nonetheless, the price
at which the shares of Common Stock will sell in the public market after the
Offering may be lower than the price at which they are sold by the
Underwriters. See "Underwriting and Plan of Distribution." The price of the
Convertible Non-Voting Common Stock was determined by negotiation between the
Company and the purchaser of such shares to be equal to the initial public
offering price per share of the Common Stock. The Convertible Non-Voting
Common Stock will be non-transferable and will not be publicly traded.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its Common
Stock or Convertible Non-Voting Common Stock in the foreseeable future because
it intends to retain its earnings, if any, to finance the expansion of its
business and for general corporate purposes. Any payment of future dividends
will be at the discretion of the Board of Directors and will depend upon,
among other factors, the Company's earnings, financial condition, capital
requirements, level of indebtedness, contractual restrictions with respect to
the payment of dividends and other considerations that the Board of Directors
deems relevant.
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CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at September 30, 1997 and (ii) the capitalization of the Company as adjusted
to give effect to the sale of 24,000,000 shares of Common Stock in the
Offering, the sale of 250,000 shares of Common Stock in the Concurrent Common
Stock Offering, and the sale of 500,000 shares of Convertible Non-Voting
Common Stock in the Concurrent Non-Voting Common Stock Offering, in each case
at the initial public offering price of $20.00 per share, and the application
of the estimated net proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1997
-------------------------
ACTUAL AS ADJUSTED
--------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Stockholder's equity:
Common stock, $.001 par value per share,
250,000,000 shares authorized, 2,300,000 shares
issued and outstanding and 26,550,000 shares
issued and outstanding (as adjusted)(1)........... $ 2 $ 27
Convertible Non-Voting Common Stock, $.001 par
value per share, 500,000 shares authorized, no
shares issued and outstanding and 500,000 shares
issued and outstanding (as adjusted).............. -- 1
Additional paid-in capital......................... 124 460,498
Accumulated deficit................................ (103) (103)
--------- ------------
Total stockholder's equity....................... 23 460,423
--------- ------------
Total capitalization........................... $ 23 $ 460,423
========= ============
</TABLE>
- --------
(1) Includes 250,000 shares which Jonathan Ledecky has agreed to purchase. If
the shares of Common Stock underlying options, warrants and the shares of
Convertible Non-Voting Common Stock expected to be outstanding at the time
of the consummation of the Offering and the Concurrent Offerings are
included in the number of shares outstanding, the total number of shares
outstanding would be 31,690,000, consisting of (i) the 24,000,000 shares
offered hereby, (ii) 2,300,000 shares outstanding immediately prior to
this Offering, (iii) the 250,000 shares referred to in the preceding
sentence, (iv) 1,950,000 shares reserved for issuance upon the exercise of
warrants issued to Jonathan Ledecky on the Effective Date at an exercise
price equal to the initial public offering price per share, (v) 1,500,000
shares to be reserved for issuance under options granted to members of the
management team on the Effective Date at an exercise price equal to the
initial public offering price per share under the Incentive Plan, (vi)
60,000 shares to be reserved for issuance under options granted on the
Effective Date at an exercise price equal to the initial public offering
price per share under the Directors' Plan, (vii) 500,000 shares to be
issued upon the conversion of the Convertible Non-Voting Common Stock, and
(viii) 1,130,000 shares of Common Stock reserved for issuance upon the
exercise of warrants issued to the Representative. The total number of
shares of Common Stock reserved for issuance under the Incentive Plan, the
Directors' Plan and the Consolidation Capital Corporation 1997 Employee
Stock Purchase Plan is (i) 9% of the number of shares of Common Stock
outstanding from time to time (or 2,389,500 shares at the time of the
consummation of the Offering), (ii) 300,000 shares and (iii) 1,000,000
shares, respectively. (If the Underwriters' over-allotment option is
exercised in full for 3,600,000 shares of Common Stock, the total number
of shares of Common Stock outstanding or reserved for issuance under
options, warrants and the shares of Convertible Non-Voting Common Stock
expected to be outstanding at the time of the consummation of the Offering
and the Concurrent Offerings would be 35,290,000.) See "Risk Factors--
Benefits to Insiders," "Management--1997 Long-Term Incentive Plan," "--
1997 Non-Employee Directors' Stock Plan," "--1997 Employee Stock Purchase
Plan," "Description of Capital Stock--Convertible Non-Voting Common Stock"
and "Underwriting and Plan of Distribution."
19
<PAGE>
DILUTION
The Company had a net tangible book value deficit at September 30, 1997, of
$292,000, or a deficit of $.13 per share of Common Stock. Net tangible book
value per share is determined by dividing the pro forma net tangible book
value of the Company (tangible assets less total liabilities) by the number of
shares of Common Stock outstanding. Adjusting for the sale by the Company of
the 24,000,000 shares of Common Stock offered hereby and the application of
the estimated net proceeds therefrom as described under "Use of Proceeds," and
after giving effect to the sale of 250,000 shares of Common Stock and 500,000
shares of Convertible Non-Voting Common Stock in the Concurrent Offerings, in
each case at an assumed initial public offering price of $20.00 per share, the
pro forma net tangible book value of the Company, as adjusted, at September
30, 1997 would have been $460,423,000, or $17.02 per share. This amount
represents an immediate dilution to new investors of $2.98 per share and an
immediate increase in pro forma as adjusted net tangible book value per share
to existing stockholders of $17.15 per share. The following table illustrates
this per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $20.00
Net tangible book value per share at September 30, 1997....... $(0.13)
Increase in net tangible book value per share resulting from
the Offering and the Concurrent Offerings.................... 17.15
------
Pro forma net tangible book value per share after the Offering
and the Concurrent Offerings................................... 17.02
------
Pro forma dilution to new investors............................. $ 2.98
======
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the
increase in pro forma net tangible book value per share resulting from the
Offering and the Concurrent Offerings, pro forma net tangible book value per
share after the Offering and the Concurrent Offerings, and pro forma dilution
to new investors would be $17.34, $17.21 and $2.79, respectively.
The following table sets forth at September 30, 1997, after giving effect to
the sale of the Common Stock in the Offering and the sale of 250,000 shares of
Common Stock and 500,000 shares of Convertible Non-Voting Common Stock in the
Concurrent Offerings in each case at an assumed initial public offering price
of $20.00 per share: (i) the number of shares of Common Stock purchased by the
existing stockholder from the Company, the total consideration and the average
price per share paid to the Company for such shares; (ii) the number of shares
of Common Stock purchased by new investors in the Offering from the Company
and the total consideration and the price per share paid by them for such
shares; and (iii) the percentage of shares purchased from the Company by the
existing stockholder and the new investors and the percentages of
consideration paid to the Company for such shares by the existing stockholder
and new investors.
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION AVERAGE
------------------------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ---------------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholder..... 2,300,000 8.5% $ 126,000 0.0% $ 0.05
Existing Stockholder
purchasing in the
Concurrent Common Stock
Offering................ 250,000 0.9% 5,000,000 1.0% $20.00
New investors (2)........ 24,500,000 90.6% 490,000,000 99.0% $20.00
------------ ------- ------------ -----
Total.................. 27,050,000 100.0% $495,126,000 100.0%
============ ======= ============ =====
</TABLE>
- --------
(1) Does not include: (i) shares of Common Stock equal to 9% of the shares of
Common Stock outstanding from time to time that are reserved for issuance
under the Incentive Plan (2,389,500 shares on the Effective Date, or
2,713,500 shares if the Underwriters' over-allotment option is exercised
in full), of which options to purchase 1,500,000 shares of Common Stock
are expected to be granted upon consummation of the Offering at an
exercise price equal to the initial public offering price per share; (ii)
300,000 shares of Common Stock reserved for issuance under the Directors'
Plan, of which options to purchase 60,000 shares of Common Stock are
expected to be granted upon consummation of the Offering at an exercise
price equal to the initial public offering price per share; and (iii)
1,000,000 shares of Common Stock reserved for issuance under the
Consolidation Capital Corporation 1997 Employee Stock Purchase Plan. See
"Management--1997 Long-Term Incentive Plan," "--1997 Non-Employee
Directors' Stock Plan" and "--1997 Employee Stock Purchase Plan."
(2) Includes proceeds to be received by the Company from the sale of 500,000
shares of Convertible Non-Voting Common Stock in the Concurrent Non-Voting
Common Stock Offering.
20
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Assets.......................... $339
Liabilities..................... 316
Stockholder's equity............ 23
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the historical
balance sheet of the Company and related notes thereto appearing elsewhere in
this Prospectus.
OVERVIEW AND RESULTS OF OPERATIONS
The Company was founded in February 1997 to consolidate business and
consumer products and services companies in one or more fragmented industries.
The Company has generated no revenues since inception. The Company has
incurred expenses of $103,000 in connection with the analysis of industry
consolidation opportunities. The net proceeds from the proposed sales of the
24,000,000 shares of Common Stock offered hereby, and from the sale of 250,000
shares of Common Stock and the 500,000 shares of Convertible Non-Voting Common
Stock in the Concurrent Offerings, which are estimated to be approximately
$460.4 million, will be utilized by the Company in its acquisition program
and, to a much lesser extent, to fund operations of the Company. While the
Company expects to embark on an active acquisition program, until such time as
acquisitions are consummated, the Company's income will represent interest on
the investment of the net proceeds of the Offering offset by salaries and
other operating costs of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Following the consummation of the Offering and the Concurrent Offerings, the
Company will have cash and cash equivalents of approximately $460.4 million
($527.4 million if the Underwriters' over-allotment option is exercised in
full). In addition, the Company has initiated negotiations to obtain a credit
facility which may be used for future acquisitions or other capital
requirements. BT Alex. Brown Incorporated has provided the Company with a
letter, dated October 29, 1997, in which BT confirms that, upon the Company's
request, BT commits to use its best efforts to arrange and syndicate a $100
million senior secured revolving bank credit facility which may, under certain
conditions to be mutually agreed upon, be increased up to a $500 million
facility. The terms and conditions of any BT debt facility, including the fee
arrangements, are subject to mutual agreement. Use of any such facility would
likely be subject to conditions customary to facilities of this type,
including restrictions on other indebtedness, mergers, acquisitions,
dispositions and similar transactions. The Company may not succeed in
obtaining a facility of any size or in negotiating terms satisfactory to the
Company. Except for these preliminary negotiations, the Company currently has
no plan or intention to obtain additional capital through debt or equity
financing in the next 12 months. If and when the Company requires additional
financing for its acquisition program or for other capital requirements, the
Company may be unable to obtain any such financing on terms that the Company
deems acceptable. The Company also expects to utilize its Common Stock as a
source of capital to provide a portion of the consideration paid to acquire
certain companies. The Company believes that the net proceeds from the
Offering, combined with the available authorized but unissued and unreserved
shares of Common Stock that may be issued in acquisitions, will be sufficient
to fund its operations and acquisition program through the end of 1998.
21
<PAGE>
BUSINESS
THE COMPANY
Consolidation Capital Corporation was founded in February 1997 by Jonathan
J. Ledecky to build consolidated enterprises with national market reach
through the acquisition and integration of multiple businesses in one or more
fragmented industries. Jonathan Ledecky is the Chairman and founder and, until
November 5, 1997, was the Chief Executive Officer, of USOP. While managing
USOP, Jonathan Ledecky developed a strategy of "corporate democracy," which he
believes facilitated USOP's rapid consolidation of more than 190 companies
within seven different industry groups in the office products and services
industry. The corporate democracy approach includes (i) a general policy of
empowering local management and (ii) drawing upon the contacts and expertise
of local management by encouraging them to identify acquisition candidates and
to participate in the process of integrating newly acquired companies into a
consolidated enterprise. The Company intends to employ a corporate democracy
approach as one of its principal operating strategies.
From 1994 until November 1997, Jonathan Ledecky served as Chief Executive
Officer of USOP and, in that capacity, was responsible for in excess of $1.7
billion in acquisitions of domestic and international businesses. The Company
will seek to leverage the experience and expertise of Jonathan Ledecky, its
founder, Chairman and Chief Executive Officer, and the Company's management
team to become a leading consolidator of distribution companies and service
providers in one or more fragmented industries. The Company will have broad
discretion in identifying and selecting both the industries which it expects
to consolidate and possible acquisition candidates within those industries.
The Company has not identified a specific industry on which it initially
intends to focus and has no present plans, proposals, arrangements or
understandings with respect to the acquisition of any specific business. The
Company believes that, through the prior experience of Jonathan Ledecky and
the Company's management team, it has an extensive referral network of
investment and commercial bankers, business leaders, attorneys, accountants
and business and financial brokers, which will further its ability to
identify, attract and acquire desirable acquisition candidates.
The Company believes that it will possess substantial competitive
advantages. The Company expects to benefit from its ability to deploy rapidly
its significant financial resources and to use its publicly traded stock as
currency in selected acquisitions. Because the Company will initially have
significant cash and cash equivalents, the Company's ability to acquire
attractive companies is not likely to be constrained initially by the need to
access the capital markets. Furthermore, the Company believes that its
corporate democracy principles will help it attract and acquire companies and
will differentiate it from traditional consolidators. The Company believes
that its corporate democracy approach generates significant competitive
advantages because this approach allows managers of the acquired companies to
benefit from the economies of a large organization while simultaneously
retaining local operational control, enabling them to provide flexible and
responsive service to customers. Such an approach could, however, limit
possible consolidation efficiencies and integration efforts. In addition,
although the Company's management team has experience in acquiring and
consolidating businesses, it is unlikely to have experience managing companies
in the industries that the Company selects for consolidation. The Company,
therefore, expects to rely in part upon management of acquired companies or
other individuals experienced in the industries in which the Company pursues
consolidation.
INDUSTRY BACKGROUND
During recent years, a number of companies have consolidated businesses
within various industries. The Company believes numerous factors exist which
create a favorable environment for industry consolidations. As businesses have
become nationwide in scope, the need and demand for a nationwide vendor
supplying uniformly high-quality products and services have increased.
Similarly, as brand consciousness among end users has increased in certain
industries, national brands have realized significant advantages in the
marketplace, such as the ability to differentiate their products and services,
allowing premium pricing and enhanced customer loyalty. In addition, larger
consolidators continue to achieve competitive advantages by creating operating
synergies through, among other things, the elimination of redundant corporate
functions and the use of information technology to decrease cost and increase
revenue. Furthermore, manufacturers have developed an increased interest in
dealing with large distributors, which has enabled manufacturers to generate
efficiency gains due to
22
<PAGE>
streamlined production, distribution and marketing operations. As the
consolidation model has been successfully implemented by consolidators, their
access to the capital markets, particularly the public equity markets, has
increased.
USOP is an example of a company formed to consolidate businesses. USOP was
formed in October 1994 by the Company's founder, Chairman and Chief Executive
Officer, Jonathan Ledecky. Under Jonathan Ledecky's leadership, USOP acquired
over 190 domestic and international businesses in seven different industry
groups, including office supplies, office furniture, coffee and beverage
services, computer and telecommunications networks and services, print
management, corporate travel services and educational supplies.
STRATEGY
The Company's goal is to become the leading consolidator of distribution
companies and service providers in one or more fragmented industries. The
Company intends to acquire established local or regional businesses and
combine and integrate them into an effective national organization. The
Company believes that its strong financial position after the Offering, the
operating and acquisition expertise of its management team and its ability to
address the needs of local management will allow it to achieve its goal of
being the "consolidator of choice" of acquisition candidates.
In order to achieve its goal, the Company will focus on: (1) identifying
acquisition candidates which meet the Company's consolidation criteria; (2)
attracting and acquiring companies through implementation of the Company's
corporate democracy approach, which the Company believes will differentiate it
from other consolidators; and (3) achieving operating efficiencies and
synergies by combining administrative functions, eliminating redundant
facilities, implementing system and technology improvements and purchasing
products and services in large volumes.
Identify and Pursue Strategic Consolidation Opportunities. The Company
intends to capitalize upon consolidation opportunities in distribution and
service industries by acquiring companies with established sales presences
and/or local brand names. The Company believes that the industries in which it
will pursue consolidation opportunities are fragmented and often characterized
by privately-held or family-owned businesses, whose owner/operators desire
liquidity and may be unable to gain the scale necessary to access the capital
markets effectively or to expand beyond a local or regional base. The Company
believes that, based on the experience of Jonathan Ledecky and the Company's
management team, it will be well positioned to identify suitable industries
for consolidation and to identify acquisition candidates within those
industries to create consolidated enterprises.
In general, the Company plans to acquire larger, established high quality
companies, or "hubs," in high density, metropolitan areas, and additional
smaller companies, or "spokes," in secondary markets surrounding the hubs.
Where possible, the operations of the spokes will be integrated into the
operations of existing hubs, thereby enabling the Company to achieve the
economies of scale necessary to decrease operating cost and increase operating
margin. The Company believes that another competitive advantage will be the
Company's ability to deploy rapidly its significant financial resources and/or
to use its publicly traded stock as consideration in selected acquisitions.
The Company intends to pursue growing industries that are fragmented with no
clear market leader and that will benefit from economies of scale. Within such
industries, the Company intends to focus on the acquisition of distribution
companies and service providers having some or all of the following
characteristics: (i) stable cash flows and recurring revenue streams from
long-term customer relationships; (ii) low product obsolescence and non-
reliance on innovation or technology to drive recurring revenue streams; (iii)
long-term growth prospects for products and services offered; (iv) a strong
"franchise" or presence in the communities served by the acquisition
candidate; (v) an experienced management team comprised of recognized industry
leaders; (vi) an ability to retain, promote and motivate management teams;
(vii) favorable demographic trends within the local regions serviced; and
(viii) an underpenetrated market for products or services provided by the
acquisition
23
<PAGE>
candidate. The Company believes that even if consolidation in an industry has
begun, there may still exist opportunities to create niche businesses with
national reach. The Company has not yet identified any specific acquisition
candidates and has no present plans, proposals, arrangements or understandings
with respect to the acquisition of specific businesses.
Some of the industries that meet the industry criteria set forth above and
that may be considered by the Company include the following: aviation services
(fixed base operators, aircraft maintenance, charter/fleet services, equipment
and parts services); accounting practices; architectural services; auto glass
dealerships; auto towing; community newspapers; consumer product distribution;
educational services (vocational schools); fire protection supplies and
service; food services; health care services; home improvement services;
information technology staffing; insurance brokerage; lighting products; mail
order and client marketing; moving services; optical services; rental
equipment distributors; safety equipment distributors; temporary services;
trade show and exhibition management services; veterinary services; and water
treatment equipment services and supplies. The Company has determined,
however, not to seek to acquire businesses in any of the industries in which
USOP currently operates (or any acquisition candidate for which USOP performed
an acquisition analysis for the purpose of acquiring such entity) or in the
floral products and distribution industry without the written approval of USOP
or USA Floral, as the case may be.
Differentiate Through Corporate Democracy. The Company believes that its
implementation of corporate democracy, which Jonathan Ledecky has employed
successfully at USOP, will give the Company a competitive advantage over rival
consolidators in attracting, buying and integrating acquired companies. The
Company's business model entails both a decentralized management philosophy
and a centralized operating approach. Each of the acquired companies will
continue to manage all functions that "touch the customer," including sales,
marketing, customer service, credit and collections. The Company will manage
functions such as purchasing, accounting, inventory management, human
resources and finance centrally where it can leverage its size and scale.
Principles of corporate democracy that will be used by the Company include:
. Control by Owner/Operator. The corporate democracy approach to
consolidation is designed to allow the owners and operators who have
built an acquired company to retain operational control of the business
while the Company centralizes certain administrative functions to
provide benefits from operating efficiencies and synergies resulting
from the consolidation of the acquired company into a larger enterprise.
This is in contrast to the traditional consolidation approach used by
other consolidators in which the owner/operators and their employees are
often relieved of management responsibility as a result of a complete
centralization of management in the consolidated enterprise.
. ""Think National, Act Local" Management. The Company plans to provide
strategic oversight and guidance with respect to acquisitions,
financing, marketing and operations. At the same time, managers of
acquired companies will be responsible for the day-to-day operations of
each of the acquired companies. As part of its "Think National, Act
Local" management strategy, the Company intends to foster a culture of
cooperation and teamwork that emphasizes dissemination of "best
practices" among its local or acquired management teams. The Company
believes that this decentralized management philosophy results in better
customer service by allowing local management the flexibility to
implement policies and make decisions based upon the needs and desires
of local customers and the context of local market conditions. The
decentralized sales and customer contact also facilitates the retention
of historical customers of the acquired companies.
. Local Business Identity, Management and Sales Organization. The
corporate democracy approach to consolidation permits the Company to
capitalize on the strength of the owner/operator's connection to his
locality, region or community by maintaining the original name of the
acquired company in the given geographic location. This contrasts with
other consolidation approaches which often eliminate the local name of
the acquired company and replace it with a single or "national" business
name. The Company believes that many customers purchase products and
services based upon long-term commercial relationships. The Company
believes that corporate democracy best preserves the business-customer
relationships by, in most circumstances, retaining the management, sales
organizations, and
24
<PAGE>
brand name identity of acquired companies and minimizing operational
changes that adversely affect the customer.
. Use of Stock as Currency and Incentive Compensation. The Company intends
to structure many of its acquisitions using the Company's stock as
currency. This use of stock as acquisition currency, coupled with the
retention of experienced owner/operators and established sales
organizations, creates a high percentage of employee ownership and
strong incentives for good performance. The Company believes that this
stock ownership plan, in conjunction with the implementation of
incentive compensation programs geared to specific performance goals,
will help to align the objectives of the acquired companies' managers
and employees with those of the Company's stockholders.
Achieve Operating Efficiencies. The Company believes that it will be able to
achieve certain operating efficiencies and synergies among its acquired
companies. Such operating efficiencies include:
. Combining Administrative Functions. The Company will seek to institute a
Company-wide management information system and to combine at the
corporate level certain administrative functions, such as financial
reporting and finance, insurance, employee benefits and legal support.
. Using Hub and Spoke System to Eliminate Redundant Facilities and
Service. The hub and spoke strategy involves the acquisition of a
larger, established, high-quality company in a targeted geographic area
into which the facilities and operations of local, smaller acquired
companies, or "spokes", are folded, allowing the elimination of
redundant facilities and reducing overhead. Although the success of the
hub and spoke strategy may vary depending on the industry being
consolidated, the Company believes that there exists a real opportunity
to use this strategy to reduce the number of facilities and the
corporate overhead of acquired companies. This hub and spoke strategy
also enables the integration of certain operational activities, such as
inventory management, purchasing, shipping, accounting and human
resources, among acquired companies located in a geographic area,
thereby permitting the elimination of duplicative facilities and costs.
. Implementing System and Technology Improvements. The Company believes it
will be able to increase the operating margin of combined acquired
companies by using operating and technology systems to improve and
enhance the operations of the combined acquired companies, which may
include computerized inventory management and order processing systems,
computerized quotation and job costing systems and computerized
logistics and distribution systems. The Company believes that many of
the acquired companies have not made material investments in such
operating and technology systems because, as independent entities, they
lack the necessary scale to justify the investment. The Company believes
that the implementation of such systems may significantly increase the
speed and accuracy of order processing and fulfillment at acquired
companies, while increasing inventory turns and providing measurement
and analysis tools that facilitate efficient operation.
. Using Volume Purchasing. The Company believes that, with respect to
certain of the distribution industries that may be consolidated by the
Company, it may achieve operating efficiencies through volume purchasing
and may benefit from favorable prices and rebates accruing as the result
of high volume purchases. The Company may also negotiate improved
arrangements with wholesalers and manufacturers to reduce inventory
levels of certain acquired companies, thereby allowing more efficient
operations by decreasing inventory holding costs and increasing
operating margins. The Company may also seek to leverage the size and
scale of certain consolidated enterprises to negotiate attractive volume
purchasing or leasing programs for goods and services such as delivery
vehicles, long distance voice and data services, overnight delivery
services, real estate services, banking and financial services, and
insurance.
. Implementing Strategic Marketing and Cross-Functional Selling. The
Company believes that, with respect to certain industries that may be
consolidated by the Company, it may achieve certain efficiencies through
strategic marketing plans to be shared by acquired companies as well as
cross-functional selling to customers of each of the acquired companies.
These synergies of strategic
25
<PAGE>
marketing and cross-functional selling may allow additional services to
be provided or goods to be sold to existing customers of the acquired
companies, resulting in additional revenues for the Company. These
synergies may also provide a broader geographic sales and service reach
for each of the acquired companies, increasing the customer base of the
acquired companies.
SIGNIFICANT FINANCIAL RESOURCES
The Company believes that, following the Offering and the Concurrent
Offerings, its strong financial position and substantial liquidity, when
combined with the consolidation experience of its management team, will create
significant competitive advantages for the Company that will enable it to
achieve its goal of being the "consolidator of choice" of acquisition
candidates. The Company expects to benefit from its ability to deploy rapidly
its significant financial resources and to use its publicly traded stock as
currency in selected acquisitions. Furthermore, because the Company will
initially have significant cash reserves, the Company's ability to acquire
attractive companies is not likely to be constrained by the need to access the
capital markets.
CONFLICTS OF INTEREST
Jonathan Ledecky serves as both the Chairman and Chief Executive Officer of
the Company and the Chairman and an executive officer of USOP. As a director
and an executive officer of both the Company and USOP, Jonathan Ledecky owes a
duty of loyalty and a duty of care under Delaware law to both companies. These
duties obligate him to present certain business opportunities to the company
to which he owes the duties before pursuing such opportunities himself. There
is no agreement among Jonathan Ledecky, the Company and/or USOP delineating
Jonathan Ledecky's duties to each company or resolving potential conflicts
between his conflicting duties and obligations. In the absence of such an
agreement, the Company may choose to avoid consolidation opportunities and/or
industries that pose risks of conflict.
In addition, Jonathan Ledecky has entered into the USOP Employment Agreement
and the CCC Employment Agreement. Under the USOP Employment Agreement,
Jonathan Ledecky is obligated to assist in, among other things, identifying
and pursuing new business and investment opportunities and acquisitions for
USOP, developing and providing strategic plans and growth analyses for USOP,
providing structuring, capitalization, restructuring, recapitalization and
reorganization advice to USOP and assisting in implementing such advice, and
interfacing with the investment and financial community on an as-needed basis.
While Jonathan Ledecky is not to be responsible for the day-to-day oversight
of USOP, his positions as an executive officer and Chairman of the Board of
USOP may nonetheless result in competition between USOP matters and Company
matters for his time and professional attention, and may result in or
exacerbate conflicts as to his obligations to present business opportunities
to one company or another, or to pursue such opportunities for one company or
another. The USOP Employment Agreement also contains restrictions on Jonathan
Ledecky's ability to recruit or employ current and certain former employees of
USOP, as well as persons who provide or within the prior year provided
substantial services to USOP or its subsidiaries as part of an entity that is
or was a vendor or other outside service provider to USOP or its subsidiaries
(excluding only Timothy Clayton and F. Traynor Beck). This restriction could
present a possible conflict between Jonathan Ledecky's actions and
recommendations to retain employees, vendors and outside service providers for
USOP and his efforts to employ suitable individuals with the Company. In
addition, the USOP Employment Agreement recites that in the course of Jonathan
Ledecky's employment with USOP he has become familiar with and aware of
certain information regarding USOP's operations that the agreement describes
as a trade secret of USOP. Were Jonathan Ledecky to be held wrongfully to have
disclosed any trade secret information to the Company or others in violation
of his obligations, he could face liability for such disclosure, and the
Company could face liability for inducing or aiding in any such alleged
violation. Finally, under the USOP Employment Agreement, Jonathan Ledecky is
not prohibited from serving as an officer, director or employee of or
consultant to the Company, provided that such actions do not otherwise breach
his obligations under the USOP Employment Agreement.
Since Jonathan Ledecky owes duties of loyalty and care and has contractual
obligations to both the Company and USOP simultaneously, he may be unable in
certain circumstances to fulfill his duties and
26
<PAGE>
obligations to one company without allegedly breaching them to the other. Any
alleged breach could result in litigation by or on behalf of the offended
company under any of a number of possible legal theories, including seeking
damages from Jonathan Ledecky for the purported breach or from the other such
company for tortiously interfering with the offended company's contractual
relationship with Jonathan Ledecky or for inducing him to breach his duties to
the offended company. The conduct or response to any such litigation could
consume significant management attention and resources, and the defense,
settlement or final adjudication of any such litigation could have a material
adverse effect on the Company's business, financial condition and/or results
of operations.
In addition, Jonathan Ledecky is the Non-Executive Chairman of the Board of
USA Floral, the Non-Executive Chairman of the Board of US Leasing, and a
prospective minority investor in Unison Partners. Each of USA Floral, US
Leasing and Unison Partners is, or is seeking to become, a consolidator of
businesses in one or more industries. Jonathan Ledecky may thus have conflicts
of interest in determining to which of these entities, if any, a particular
relevant business opportunity should be presented.
COMPETITION
The Company may encounter intense competition from other consolidators
having a business objective similar to that of the Company. Many of these
entities are well established and have extensive experience in identifying and
effecting business combinations directly or through affiliates. Many of these
competitors possess greater financial, personnel and other resources than the
Company expects to have and there can be no assurance that the Company will
have the ability to compete successfully. Competition with other consolidators
to buy a limited number or an identifiable set of businesses could lead to
higher prices being paid for acquired companies. In addition, to the extent
that the Company determines to consolidate an industry that is already in the
early stages of consolidation, the Company may compete with consolidators that
already are operating within the industry being consolidated. Such competitors
may have competitive advantages in identifying and attracting acquisition
candidates as a result of their knowledge of the industry and contacts within
the industry. This inherent competitive disadvantage to the Company may make
certain consolidation opportunities more difficult to accomplish and may
compel the Company to select certain less attractive consolidation prospects.
In addition, the industries in which the Company may operate in the future
may be highly competitive. There can be no assurances that the Company's
efforts to differentiate itself will prove to be successful or that the
Company ultimately will be able to compete effectively in the markets in which
it operates in the future.
FACILITIES AND EMPLOYEES
The Company's corporate offices are located in leased space at 1747
Pennsylvania Avenue, N.W., Suite 900, Washington, D.C. 20006. The telephone
number of its principal executive offices is 202/955-5490. To accommodate its
planned growth, the Company intends to seek a larger headquarters facility in
the Washington area, which it intends to lease. As of September 30, 1997, the
Company employed one person. Upon the consummation of the Offering it is
expected that the Company will employ four executive officers and a limited
number of other personnel.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
27
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning each of the
executive officers and directors of the Company following the consummation of
this Offering:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Jonathan J. Ledecky 39 Chairman and Chief Executive Officer
Timothy C. Clayton 43 Executive Vice President, Chief Financial
Officer and Treasurer
F. Traynor Beck 42 Executive Vice President, General Counsel
and Secretary
David Ledecky 36 Executive Vice President and Chief
Administrative Officer; Director
Vincent W. Eades 38 Director
W. Russell Ramsey 37 Director
M. Jude Reyes 42 Director
</TABLE>
Jonathan J. Ledecky founded the Company in February 1997 and serves as its
Chairman and Chief Executive Officer. Jonathan Ledecky founded U.S. Office
Products Company, a company engaged in providing office and educational
products and business services, in October 1994 and has served as its Chairman
of the Board and, until November 5, 1997, its Chief Executive Officer. Since
its inception, USOP has acquired over 190 companies. Jonathan Ledecky has also
served as the Non-Executive Chairman of the Board of USA Floral since April
1997 and as the Non-Executive Chairman of the Board of US Leasing since
October 1997. Prior to founding USOP, Jonathan Ledecky served from 1989 to
1991 as the President of The Legacy Fund, Inc., and from 1991 to September
1994 as President and Chief Executive Officer of Legacy Dealer Capital Fund,
Inc., a wholly owned subsidiary of Steelcase Inc. ("Steelcase"), the nation's
largest manufacturer of office furniture products. While at Legacy Dealer
Capital Fund, Inc., Jonathan Ledecky was responsible for providing corporate
advisory services for Steelcase's network of office products distributors. In
addition, Jonathan Ledecky has served as a director of, or corporate adviser
and consultant to, several office products companies. Prior to his tenure at
The Legacy Fund, Inc., Jonathan Ledecky was a partner at Adler and Company and
a Senior Vice President at publicly-traded Allied Capital Corporation, an
investment management company. Jonathan Ledecky serves as a director of
publicly-traded MLC Holdings, Inc. Jonathan Ledecky is a graduate of Harvard
College and Harvard Business School. Jonathan Ledecky is the brother of David
Ledecky.
Timothy C. Clayton became Executive Vice President, Chief Financial Officer
and Treasurer of the Company on the Effective Date. Between August 1976 and
October 1997, Mr. Clayton was associated with Price Waterhouse LLP, most
recently as a Partner since July 1988. In his capacity as Partner, Mr. Clayton
focused his practice on, among others, distribution, technology, financial
services, business services and manufacturing industries, and was responsible
for providing audit and business advisory services to clients active in
consolidating a variety of industries. Mr. Clayton is a graduate of Michigan
State University.
F. Traynor Beck became Executive Vice President, General Counsel and
Secretary of the Company on the Effective Date. Since 1988, Mr. Beck has been
associated with Morgan, Lewis and Bockius LLP, most recently as a partner
since October 1994. Mr. Beck's practice focuses on mergers, acquisitions and
general corporate matters, including consolidation transactions. Mr. Beck is a
graduate of the University of Pennsylvania, Oxford University and Stanford Law
School.
David Ledecky became Executive Vice President and Chief Administrative
Officer on the Effective Date, and served as Senior Vice President, Secretary
and Treasurer of the Company since September 1997. Prior
28
<PAGE>
thereto, he operated Ledecky Brothers L.L.C., the Company's predecessor, as
its Vice President and sole employee since its inception in February 1997. In
that capacity, he researched and analyzed industry consolidation and
acquisition opportunities. From 1992 to 1996, David Ledecky was an attorney at
the Washington, D.C. law firm of Comey, Boyd & Luskin. Prior to 1992, he was
an attorney with the law firm of Shearman & Sterling, and a Vice President of
The Legacy Fund, Inc. in Washington, D.C. He is a former consultant to the
computer and telecommunications industries. He is a graduate of Harvard
College and Yale Law School. David Ledecky is the brother of Jonathan Ledecky.
Vincent W. Eades became a director of the Company on the Effective Date, Mr.
Eades has served as the Senior Vice President of Sales and Marketing for
Starbucks Coffee Co. Inc. since May 1995. Mr. Eades was employed by Hallmark
Cards Inc., most recently as a General Manager from November 1985 through
April 1995. Additionally, he serves as a director of USA Floral.
W. Russell Ramsey became a director of the Company on the Effective Date.
Mr. Ramsey is President, co-founder and a director of Friedman, Billings,
Ramsey Group, Inc. ("FBR Group"), a holding company engaged in brokerage,
investment banking, corporate finance and asset management activities in the
Washington, D.C. area. He has continuously served as President of FBR Group
and its predecessors since co-founding FBR Group in 1989. FBR, the
Representative in this Offering, is a wholly owned indirect subsidiary of FBR
Group. FBR was ranked fourth in terms of lead managed U.S. IPO dollar volume
for 1997 year to date as of October 17, 1997, according to CommScan EquiDesk.
FBR has 230 full-time employees and operates offices in the Washington, D.C.
area, Boston, London, and Irvine. During 1989, Mr. Ramsey served as a Vice
President at Johnston, Lemon & Co., Inc., a Washington, D.C. brokerage firm.
Mr. Ramsey holds a B.A. from The George Washington University. Mr. Ramsey is a
director designee of FBR pursuant to an agreement between the Company and FBR.
M. Jude Reyes became a director of the Company on the Effective Date. Mr.
Reyes has served as Chairman and President of Premium Distributors of
Virginia, L.L.C., a beverage distributor, since 1992. Between 1989 and 1992,
Mr. Reyes served as President and Chairman of Harbor Distributing Company in
Los Angeles, California. He also is a director and investor in three other
beverage distributors and two wholesale food service distributors. Mr. Reyes
is a director designee of FBR pursuant to an agreement between the Company and
FBR.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established an Audit Committee and a
Compensation Committee.
The responsibilities of the Audit Committee will include recommending to the
Board of Directors the independent public accountants to be selected to
conduct the annual audit of the books and records of the Company, reviewing
the proposed scope of such audit and approving the audit fees to be paid,
reviewing accounting and financial controls of the Company with the
independent public accountants and the Company's financial and accounting
staff and reviewing and approving transactions between the Company and its
directors, officers and affiliates. Messrs. Eades, Ramsey and Reyes are the
members of the Audit Committee.
The Compensation Committee will provide a general review of the Company's
compensation plans to ensure that they meet corporate objectives. The
responsibilities of the Compensation Committee will also include administering
the Incentive Plan and Bonus Plan, including selecting the officers and
salaried employees to whom awards will be granted. Messrs. Eades and Reyes,
independent directors of the Company, are the members of the Compensation
Committee.
DIRECTOR COMPENSATION
Directors who are not receiving compensation as officers, employees or
consultants of the Company will be entitled to receive an annual retainer fee
of $25,000. In addition, pursuant to the Company's 1997 Non-Employee
Directors' Stock Plan, each non-employee director will receive an automatic
initial grant of options to purchase
29
<PAGE>
20,000 shares of Common Stock on the later of the Effective Date or the date
of this initial election to the Board of Directors, and an automatic annual
grant of options to purchase 5,000 shares. Each such option will have an
exercise price equal to the fair market value of a share of Common Stock on
the date of grant (in the case of initial grants made on the Effective Date,
the exercise price will be equal to the initial public offering price per
share). See "--1997 Non-Employee Directors' Stock Plan."
EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS
The Company has paid David Ledecky an annualized salary of $125,000 since
the Company was founded in February 1997.
The Company entered into an employment agreement with Jonathan Ledecky
effective upon the Effective Date. The agreement has a one-year term and will
be automatically renewable for one-year terms thereafter unless either party
gives notice of non-renewal at least 90 days prior to the end of the term.
Pursuant to the terms of the agreement, Jonathan Ledecky is obligated to
devote the substantial majority of his business time, attention and efforts to
his duties thereunder, except when necessary to fulfill his fiduciary
obligations to USOP and the provisions of his employment agreement with USOP,
as well as his fiduciary obligations to USA Floral, US Leasing and Unison
Partners, a private company of which he intends to be a minority investor. The
agreement provides for an annual salary of $750,000 and a discretionary bonus
in an amount up to 100% of the employee's base salary. If the agreement is
terminated by the Company other than for Cause (as defined), Jonathan Ledecky
is entitled to receive an amount equal to twice his base salary and one times
the bonus he received in the prior year. The agreement prohibits Jonathan
Ledecky from competing with the Company during the term of his employment and
for a period of one year thereafter. The agreement also provides for certain
specified executive perquisites.
The Company entered into employment agreements with each of F. Traynor Beck,
Timothy Clayton and David Ledecky effective on the Effective Date, the terms
of which are substantially identical. Each of the agreements has a two-year
term and is automatically renewable for one-year terms thereafter, unless
either party gives notice of non-renewal at least six months prior to the end
of the term. Pursuant to the terms of the agreements, each of F. Traynor Beck,
Timothy Clayton and David Ledecky is obligated to devote his full business
time, attention and efforts to his duties thereunder. Each of the agreements
provides for an annual salary of $300,000, a guaranteed bonus of $200,000 for
the first year of the term and a discretionary bonus in an amount of up to
100% of the employee's base salary each year thereafter. On the Effective
Date, each of these executive officers were granted options to purchase
500,000 shares of Common Stock at an exercise price equal to the initial
public offering price per share, which options will vest ratably on the first,
second, third and fourth anniversaries of the date of grant, unless
accelerated under certain conditions. If the agreement is terminated by the
Company other than for Cause (as defined), the executive officer will be
entitled to receive amounts equal to twice his base salary and one times the
bonus he received in the prior year. The agreements prohibit the executive
officer from competing with the Company during the term of his employment and
for a period of one year thereafter. The agreements also provide for certain
specified executive benefits and perquisites, including, in the case of
Timothy Clayton, the purchase of an annuity contract to be placed in a
deferred compensation plan that will provide him with an annual payout of
$100,000 for each year of his life between age 55 and age 75.
1997 LONG-TERM INCENTIVE PLAN
The Company has adopted, and the sole stockholder has approved, the
Consolidation Capital Corporation 1997 Long-Term Incentive Plan (the
"Incentive Plan") prior to the Effective Date. The maximum number of shares of
Common Stock that may be subject to outstanding awards may not be greater than
that number of shares equal to 9% of the number of shares of Common Stock
outstanding from time to time. Awards may be settled in cash, shares, other
awards or other property, as determined by the Compensation Committee. The
number of shares reserved or deliverable under the Incentive Plan and the
annual per-participant limit on the number of shares as to or with reference
to which awards may be granted are subject to adjustment in the event of stock
splits, stock dividends and other extraordinary corporate events. The
Incentive Plan may be amended by
30
<PAGE>
the Board without the consent of the stockholders of the Company, except that
any amendment, although effective when made, will be subject to stockholder
approval if required by any federal or state law or regulation or by the rules
of any stock exchange or automated quotation system on which the Common Stock
may then be listed or quoted.
The purpose of the Incentive Plan is to provide executive officers
(including directors who also serve as executive officers), key employees,
consultants and other service providers with additional incentives by enabling
such persons to increase their ownership interests in the Company. Individual
awards under the Incentive Plan may take the form of one or more of: (i)
either incentive stock options ("ISOs") or non-qualified stock options; (ii)
stock appreciation rights ("SARs"); (iii) restricted or deferred stock; (iv)
dividend equivalents; (v) bonus shares and awards in lieu of Company
obligations to pay cash compensation; and (vi) other awards the value of which
is based in whole or in part upon the value of the Common Stock. Upon a change
of control of the Company (as defined in the Incentive Plan), certain
conditions and restrictions relating to an award with respect to the
exercisability or settlement of such award may be accelerated.
The Compensation Committee will administer the Incentive Plan and generally
select the individuals who will receive awards and the terms and conditions of
those awards (including exercise prices, vesting and forfeiture conditions,
performance conditions and periods during which awards will remain
outstanding). The Incentive Plan also provides that no participant may be
granted in any calendar year awards relating to more than 1,000,000 shares and
limits payments under cash-settled awards in any calendar year to an amount
equal to the fair market value of that number of shares.
Pursuant to the Incentive Plan, non-qualified stock options may, but need
not, be granted at an exercise price less than the fair market value of a
share of Common Stock on the date of grant. If the Company grants non-
qualified stock options at an exercise price less than such grant date fair
market value, then the Company will be required to recognize compensation
expense in an amount equal to the difference between the exercise price and
such fair market value.
The Company generally will be entitled to a tax deduction equal to the
amount of compensation realized by a participant through awards under the
Incentive Plan, except that (i) no deduction is permitted in connection with
ISOs if the participant holds the shares acquired upon exercise for the
required holding periods, and (ii) deductions for some awards could be limited
under the $1 million deductibility cap of Section 162(m) of the Internal
Revenue Code. This limitation, however, should not apply to awards granted
under a plan during a grace period of up to three years following the
Offering, and should not apply to certain options, SARs and performance-based
awards granted thereafter if the Company complies with certain requirements
under Section 162(m).
Upon the Effective Date, the Company granted certain options under the
Incentive Plan, including options to purchase 500,000 shares to each of
Timothy Clayton, F. Traynor Beck and David Ledecky, at an exercise price equal
to the initial public offering price per share. The options vest 25% each on
the first four anniversaries of the date of grant and expire on the tenth
anniversary of the date of grant.
1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN
The Company has adopted, and the sole stockholder has approved, the
Consolidation Capital Corporation 1997 Non-Employee Directors' Stock Plan (the
"Directors' Plan") prior to the Effective Date, which provides for the
automatic grant to each non-employee director of an option ("Initial Grant")
to purchase 20,000 shares on the later of effective date of the registration
statement of which this Prospectus forms a part or the date that such person
commences services as a director. Thereafter, each non-employee director is
entitled to receive, on the day after each annual meeting of the Company's
stockholders, an option to purchase 5,000 shares of Common Stock. A total of
300,000 shares are reserved for issuance under the Directors' Plan. The number
of shares reserved, as well as the number to be subject to automatically
granted options, will be adjusted in the event of stock splits, stock
dividends and other extraordinary corporate events.
31
<PAGE>
Options granted under the Directors' Plan will have an exercise price per
share equal to the fair market value of a share at the date of grant (in the
case of Initial Grants upon the effective date of the registration statement
of which this Prospectus forms a part, the initial public offering price per
share). Options will expire at the earlier of (i) 10 years from the date of
grant and (ii) one year after the date the director ceases to serve as a
director of the Company for any reason, provided, however, that with respect
to clause (ii), the option will be exercisable during such one-year period
only to the extent it was exercisable on the date of such cessation. Options
will generally vest and become exercisable in two equal installments. The
first installment will become exercisable on the date that is six months from
the date the option is granted and the second installment will be exercisable
on the date that is one year from the date the option is granted. In the event
of a change in control of the Company unless otherwise determined by the
Board, prior to normal vesting, all options not already exercisable will
become fully vested and exercisable under the Directors' Plan. A non-employee
director's death would also cause immediate vesting of his or her non-vested
options. In addition, the Directors' Plan permits non-employee directors to
elect to receive, in lieu of cash directors' fees, nonforfeitable shares or
nonforfeitable credits representing "deferred shares" which will be settled at
future dates, as elected by the director. The number of shares or "deferred
shares" received will be equal to the number of shares which, at the date the
fees would otherwise be payable, will have an aggregate fair market value
equal to the amount of such fees. Each "deferred share" will be settled by
delivery of a share of Common Stock at such time as may have been elected by
the director prior to the deferral.
1997 SECTION 162(M) BONUS PLAN
The Company has adopted, and the sole stockholder has approved, the
Company's Section 162(m) Bonus Plan (the "Bonus Plan"). Section 162(m) of the
Internal Revenue Code generally disallows a public company's tax deduction in
excess of $1 million for compensation to its chief executive officer and the
four other most highly compensated executive officers, subject to several
exceptions, including an exception for compensation paid under a stockholder-
approved plan that is "performance-based" within the meaning of Section
162(m). The Bonus Plan provides a means for the payment of performance-based
bonuses to certain key executive officers of the Company while preserving the
Company's tax deduction with respect to the payment thereof. The Company
believes that, as a matter of general policy, the Company's incentive
compensation plans should be structured to facilitate compliance with Section
162(m), but that the Company should reserve the right to establish separate
annual and other incentive compensation arrangements for otherwise covered
executive officers that may not comply with Section 162(m) if it determines,
in its sole discretion, that to do so would be in the best interests of the
Company and its stockholders.
The Bonus Plan will be administered by the Compensation Committee, which
will consist of at least two non-employee directors, each of whom is intended
to qualify as an "outside director" within the meaning of Section 162(m) of
the Internal Revenue Code. The Compensation Committee has broad administrative
authority to, among other things, designate participants, establish
performance goals and performance periods, determine the effect of participant
termination of employment and "change of control" transactions (as defined in
the Bonus Plan, which is the same definition as that set forth in the
Incentive Plan) prior to payment of an award, pay the bonus in stock under the
Incentive Plan and generally interpret and administer the Bonus Plan. The
Compensation Committee has not, to date, designated any participant's or
established any performance goals under the Bonus Plan.
Participants in the Bonus Plan for any given performance period may include
any key employee of the Company (including any subsidiary, operating unit or
division) who is also an executive officer of the Company, and who is
designated as a participant for such period by the Compensation Committee. The
participants in the Bonus Plan for any given period will be designated by the
Compensation Committee, in its sole discretion, within the earlier of the of
each performance period or the date on which 25% of such performance period
has been completed (such period, the "Applicable Period"). This determination
may vary from period to period, and will be based primarily on the
Compensation Committee's judgment as to which executive officers are likely to
be named in the Company's proxy statement as the chief executive officer or
one of the other four most highly compensated executive officers of the
Company as of the end of such performance period, and which are reasonably
expected to have compensation in excess of $1 million.
32
<PAGE>
Within the Applicable Period, the Compensation Committee will specify the
applicable performance criteria and targets to be used under the Bonus Plan
for such performance period, which may vary from participant to participant,
and will be based on one or more of the following Company, subsidiary,
operating unit or division financial performance measures: pre-tax or after-
tax net income, operating income, gross revenue, profit margin, stock price,
cash flows, or strategic business criteria consisting of one or more
objectives based upon meeting specified revenue, market penetration,
geographic business expansion goals, cost targets, and goals relating to
acquisitions or divestitures. These performance measures or goals may be (i)
expressed on an absolute or relative basis, (ii) based on internal targets,
(iii) based on comparison(s) with prior performance, (iv) based on
comparison(s) to capital, stockholders' equity, shares outstanding, assets or
net assets, and/or (v) based on comparison(s) to the performance of other
companies. For example, an income-based performance measure could be expressed
in a number of ways, such as net earnings per share, or return on equity, or
with reference to meeting or exceeding a specific target, or with reference to
growth above a specified level, such as prior year's performance or peer group
performance. The Bonus Plan provides that the achievement of such goals must
be substantially uncertain at the time they are established, and are subject
to the Compensation Committee's right to reduce the amount of any award
payable as a result of such performance as discussed below.
The target bonus opportunity for each participant may be expressed as a
dollar-denominated amount or as a percentage share of a bonus pool to be
created under the Bonus Plan, provided that, if a pool approach is used, the
total bonus opportunities represented by the shares designated for the
participants may not exceed 100% of the pool, and the Compensation Committee
has the sole discretion to reduce (but not increase) the actual bonus awarded
under the Plan. The actual bonus awarded to any given participant at the end
of a given performance period will be based on the extent to which the
applicable financial performance goals for such performance period are
achieved as determined by the Compensation Committee. The maximum bonus
payable under the Plan to any one individual in any one calendar year is $3
million. Bonuses earned under the Bonus Plan may be payable in cash, or if
permitted under the Incentive Plan, in Common Stock or other equity based
awards.
The Board may at any time amend or terminate the Bonus Plan, provided that
(i) without a participant's written consent, no such amendment or termination
will adversely affect the annual bonus rights (if any) of any already
designated participant for a given performance period once the participant
designations and performance goals for such performance period have been
announced, (ii) the Board will be authorized to make any amendments necessary
to comply with applicable regulatory requirements (including, without
limitation, Section 162(m)), and (iii) the Board will submit any Bonus Plan
amendments for the approval of the stockholders of the Company if and to the
extent such approval is required under Section 162(m) of the Internal Revenue
Code.
1997 EMPLOYEE STOCK PURCHASE PLAN
The Company has adopted, and the sole stockholder has approved, the
Consolidation Capital Corporation 1997 Employee Stock Purchase Plan (the
"Purchase Plan"). The Purchase Plan will permit eligible employees of the
Company and its subsidiaries (generally all employees whose customary
employment is for more than 20 hours per week and who were employed on the
date on which the offering first commenced or have completed one year of
service) to purchase shares of Common Stock at a discount. Employees who elect
to participate will have amounts withheld through payroll deductions during
purchase periods. At the end of each purchase period, accumulated payroll
deductions will be used to purchase stock at a price equal to 85% of the
market price at the beginning of the period or the end of the period,
whichever is lower. Stock purchased under the Purchase Plan will be subject to
a one-year holding period. The Company has reserved 1,000,000 shares of Common
Stock for issuance under the Purchase Plan.
The Purchase Plan will remain in effect until terminated by the Board or
until no shares of Common Stock are available for issuance under the Purchase
Plan. The Purchase Plan may be amended by the Board without the consent of the
stockholders of the Company, except that any amendment, although effective
when made, will be subject to stockholder approval if required by any federal
or state law or regulation or by the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted.
33
<PAGE>
OTHER PLANS
The Company intends to adopt a "401(k)" plan shortly after consummation of
the Offering. This plan will allow eligible employees of the Company and its
subsidiaries to contribute to the plan on a pre-tax basis. The Company will
likely make matching contributions related to employee contributions, and may
also make year-end discretionary contributions based on the performance of the
Company. It is anticipated that discretionary contributions will be invested
in shares of Common Stock, and that employees may direct the investment of
their own contributions and matching contributions made on their behalf among
several investment options, including shares of Common Stock.
34
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Set forth below is a description of certain transactions and relationships
between the Company and certain persons who are or will become officers,
directors and principal stockholders of the Company.
Jonathan Ledecky, the Company's Chairman, Chief Executive Officer and
founder, is the brother of David Ledecky, Executive Vice President and Chief
Administrative Officer of the Company and a director of the Company.
As of September 30, 1997, Jonathan Ledecky has advanced to the Company
$206,000 evidenced by demand notes, having an annual interest rate equal to
6.75%, to pay the expenses incurred in connection with the Offering and
Concurrent Offerings and will advance additional funds to the extent necessary
to pay any additional expenses incurred prior to consummation of the Offering.
The Company will repay Jonathan Ledecky's loans to the Company using the
proceeds of the Offering. In addition, Jonathan Ledecky has contributed
$126,000 in equity to the Company since its inception.
W. Russell Ramsey, a director of the Company, is President and a principal
stockholder of FBR. FBR rendered investment banking services to the Company in
connection with the Offering.
Timothy C. Clayton, Executive Vice President, Chief Financial Officer and
Treasurer of the Company, was, through October, 1997, a Partner at Price
Waterhouse LLP, the Company's independent accountants.
F. Traynor Beck, Executive Vice President, General Counsel and Secretary of
the Company, was a partner at Morgan, Lewis & Bockius LLP, the Company's legal
counsel in connection with the Offering and the Concurrent Offerings prior to
the Effective Date. Mr. Beck resigned from his position with Morgan, Lewis &
Bockius LLP upon the Effective Date.
For information with respect to certain conflicts of interest, see
"Business--Conflicts of Interest."
35
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of October 31, 1997, and as adjusted to
reflect the sale of the Common Stock being offered hereby and the sale of
250,000 shares of Common Stock in the Concurrent Common Stock Offering and the
Ledecky Warrant, by: (i) each person (or group of affiliated persons) known by
the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock; (ii) each director of the Company and each person
nominated to become a director; and (iii) all of the Company's directors,
persons named to become directors and executive officers as a group. Each
stockholder possesses sole voting and investment power with respect to the
shares listed, unless otherwise noted.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK OWNED
--------------------
NUMBER OF NUMBER OF
NAME AND ADDRESS OF SHARES OF SHARES PURCHASED AND BEFORE THE AFTER THE
BENEFICIAL OWNER COMMON STOCK UNDERLYING WARRANT OFFERINGS OFFERINGS
- ------------------- ------------ -------------------- ---------- ---------
<S> <C> <C> <C> <C>
Jonathan J. Ledecky..... 2,300,000(1) 2,200,000(2) 100% 15.8%
c/o Consolidation
Capital Corporation
1747 Pennsylvania
Avenue, N.W., Suite 900
Washington, DC 20006
David Ledecky........... 0 -- 0 0
F. Traynor Beck......... 0 -- 0 0
Timothy C. Clayton...... 0 -- 0 0
Vincent W. Eades........ 0 -- 0 0
W. Russell Ramsey....... 0 -- 0 0
M. Jude Reyes........... 0 -- 0 0
All directors, persons
named to become
directors and executive
officers and officer
designees, as a group
(7 persons)............ 2,300,000 2,200,000 100% 15.8%
</TABLE>
- --------
(1) The shares of Common Stock owned by Jonathan Ledecky immediately prior to
the Offering will be subject to a contractual restriction on transfer for
one year following the Offering. See "Underwriting and Plan of
Distribution."
(2) Constitutes 250,000 shares to be purchased in the Concurrent Common Stock
Offering and 1,950,000 underlying the Ledecky Warrant. The Company has
agreed that, at Jonathan Ledecky's request, it will file a registration
statement under the Securities Act for an offering of the shares
underlying the Ledecky Warrant during a ten-year period beginning on the
Effective Date. In addition, the Company has agreed to give Jonathan
Ledecky the right to request that the Company include the shares
underlying the Ledecky Warrant on a registration statement filed by the
Company during a twelve-year period beginning on the Effective Date.
FBR Asset Investment Corporation, Inc. has agreed to purchase 500,000
shares, or 100% of the authorized shares of the Convertible Non-Voting Common
Stock. Mr. Ramsey, President and a director of FBR Group, of which FBR is an
indirect wholly-owned subsidiary, could be deemed to own beneficially the
Convertible Non-Voting Common Stock. Mr. Ramsey disclaims beneficial ownership
of such shares. Mr. Ramsey's address is c/o FBR Group, 1001 North 19th Street,
Arlington, VA 22209.
36
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 250,000,000 shares
of Common Stock, par value $.001 per share, and 500,000 of Convertible Non-
Voting Common Stock, par value $.001 per share. Upon completion of this
Offering and the Concurrent Offerings, the Company will have outstanding
26,550,000 shares of Common Stock (30,150,000 if the Underwriters' over-
allotment option is exercised in full) and 500,000 shares of Convertible Non-
Voting Common Stock. The following summary description of the capital stock of
the Company does not purport to be complete and is subject to the detailed
provisions of, and qualified in its entirety by reference to, the Company's
Restated Certificate of Incorporation and Amended and Restated Bylaws, copies
of which have been filed as exhibits to the registration statement of which
this Prospectus forms a part, and to the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL").
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Cumulative
voting is not permitted under the Company's Restated Certificate of
Incorporation. Holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available. See "Dividend Policy." In the event of a liquidation, dissolution
or winding up of the Company, holders of the Common Stock are entitled to
share ratably in the distribution of all assets remaining after payment of
liabilities, subject to the rights of any holders of preferred stock of the
Company. The holders of Common Stock have no preemptive rights to subscribe
for additional shares of the Company and no right to convert their Common
Stock into any other securities. In addition, there are no redemption or
sinking fund provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are, and the shares of Common Stock offered hereby will
be, fully paid and nonassessable.
CONVERTIBLE NON-VOTING COMMON STOCK
The holders of Convertible Non-Voting Common Stock have the same rights and
privileges as the holders of Common Stock, except that holders of Convertible
Non-Voting Common Stock have no voting rights. The Convertible Non-Voting
Common Stock is non-transferable and will not be publicly traded. Further,
each share of Convertible Non-Voting Common Stock will automatically be
converted into one share of Common Stock on the first anniversary of the date
of this Prospectus.
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION
The Company is subject to the provisions of Section 203 of the DGCL. Section
203 prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes a merger, asset sale or
other transaction resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three
years prior to the proposed business combination has owned 15% or more of the
corporation's voting stock.
The Company's Restated Certificate of Incorporation provides that a director
shall not be liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of loss, (iii) under Section 174 of DGCL or
(iv) for any transaction from which the director derived any improper personal
benefit. The effect of this provision is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of
fiduciary duty of care as a director except in the situation described in
clauses (i) through (iv) above. If the DGCL is subsequently amended to
authorize the further elimination or limitation of the liability of a
director, then the liability of a director of the Company shall be eliminated
or limited to the fullest extent permitted by the DGCL, as so amended.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
37
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering and the Concurrent Common Stock Offering,
the Company will have 26,550,000 shares of Common Stock outstanding. The
24,000,000 shares of Common Stock sold in the Offering will be freely
tradeable without restriction or further registration under the Securities
Act, except that any shares purchased by an "affiliate" of the Company, as
that term is defined in Rule 144, may generally be sold only in compliance
with Rule 144, as described below.
All of the remaining 2,550,000 outstanding shares of Common Stock are owned
by Jonathan Ledecky, and will be available for resale, subject to compliance
with Rule 144 and subject to a contractual restriction on transfer for 180
days after the date of this Prospectus on all of the shares of Common Stock
that he owns and a contractual restriction on transfer for one year after the
date of this Prospectus on 2,300,000 of the shares of Common Stock that he
owns.
Further, 1,950,000 shares are reserved for issuance upon the exercise of the
Ledecky Warrant, 1,560,000 shares of Common Stock are reserved for issuance
upon the exercise of stock options granted on the Effective Date, and an
aggregate of 2,129,500 shares are reserved for issuance pursuant to the
Company's Incentive Plan, Directors' Plan and Purchase Plan (an aggregate of
2,453,500 shares reserved for issuance if the Underwriters' over-allotment
option is exercised in full). Because the number of shares reserved for
issuance upon the exercise of awards made or to be made under the Incentive
Plan is 9% of the aggregate number of shares of Common Stock outstanding from
time to time, future issuances of Common Stock, whether in acquisitions or
otherwise, will result in an increase in the number of awards available to be
made. The Company intends to file a registration statement on Form S-8 as soon
as practicable after the consummation of the Offering with respect to the
shares of Common Stock issuable upon exercise of all such options. Such
registration statement, to the extent required under the Securities Act, will
register for resale the shares of Common Stock acquired upon exercise of such
options. The Company has agreed that, at Jonathan Ledecky's request, it will
file a registration statement under the Securities Act for an offering of the
shares underlying the Ledecky Warrant during a ten-year period beginning on
the Effective Date. In addition, the Company has agreed to give Jonathan
Ledecky the right to request that the Company include the shares underlying
the Ledecky Warrant on a registration statement filed by the Company during a
twelve-year period beginning on the Effective Date.
Finally, 1,130,000 shares of Common Stock are reserved for issuance upon
exercise of the warrants issued to the Representative (which will have the
right beginning one year after the date of this Prospectus, to require the
Company to register for sale such shares under the Securities Act) and 500,000
shares are reserved for issuance upon the conversion of shares of Convertible
Non-Voting Common Stock (which shares will be eligible for resale beginning
one year from the date of this Prospectus). Sales of substantial amounts of
Common Stock, or the perception that such sales could occur, could adversely
affect the prevailing market price of the Common Stock and impair the
Company's ability to raise additional capital through the sale of equity
securities. Each of the Company and its existing stockholder, executive
officers and directors has generally agreed not to offer, pledge, sell,
contract to sell, or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock during the period ending 180 days after the
date of this Prospectus without the prior written consent of the
Representative.
38
<PAGE>
In general, under Rule 144 as currently in effect, a stockholder who has
beneficially owned for at least one year shares privately acquired directly or
indirectly from the Company or from an affiliate of the Company, and persons
who are affiliates of the Company who have acquired the shares in registered
transactions, will be entitled to sell within any three-month period a number
of shares that does not exceed the greater of: (i) one percent of the
outstanding shares of Common Stock (approximately 265,500 shares immediately
after completion of the Offering and Concurrent Offerings); or (ii) the
average weekly trading volume in the Common Stock during the four calendar
weeks preceding such sale. Sales under Rule 144 are also subject to certain
requirements relating to the manner and notice of sale and the availability of
current public information about the Company.
Prior to this Offering, there has been no market for the Common Stock. No
predictions can be made with respect to the effect, if any, that public sales
of shares of the Common Stock or the availability of shares for sale will have
on the market price of the Common Stock after the completion of the Offering.
Sales of substantial amounts of Common Stock in the public market following
the Offering, or the perception that such sales may occur, could adversely
affect the market price of the Common Stock or the ability of the Company to
raise capital through sales of its equity securities.
39
<PAGE>
UNDERWRITING AND PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below and
each of the Underwriters, for whom Friedman, Billings, Ramsey & Co., Inc., is
acting as Representative, has severally agreed to purchase, the number of
shares of Common Stock offered hereby set forth below opposite its name:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C> <C>
Friedman, Billings, Ramsey & Co., Inc................................... 18,480,000
BancAmerica Robertson Stephens.......................................... 240,000
Bear, Stearns & Co. Inc................................................. 240,000
BT Alex. Brown Incorporated............................................. 240,000
CIBC Oppenheimer Corp................................................... 240,000
Cowen & Company......................................................... 240,000
Credit Suisse First Boston Corporation.................................. 240,000
Lazard Freres & Co. LLC................................................. 240,000
J.P. Morgan Securities Inc.............................................. 240,000
Morgan Stanley & Co. Incorporated....................................... 240,000
NationsBanc Montgomery Securities, Inc. ................................ 240,000
PaineWebber Incorporated................................................ 240,000
Prudential Securities Incorporated...................................... 240,000
Smith Barney Inc........................................................ 240,000
Advest, Inc............................................................. 120,000
Blaylock & Partners, L.P................................................ 120,000
Brean Murray, Foster Securities Inc..................................... 120,000
Dominick & Dominick, Incorporated....................................... 120,000
Equitable Securities Corporation........................................ 120,000
EVEREN Securities, Inc. ................................................ 120,000
Fahnestock & Co. Inc.................................................... 120,000
Forum Capital Markets L.P............................................... 120,000
Jefferies & Company..................................................... 120,000
Edward D. Jones & Co.................................................... 120,000
Legg Mason Wood Walker, Incorporated.................................... 120,000
McDonald & Company Securities, Inc...................................... 120,000
The Ohio Company........................................................ 120,000
Pennsylvania Merchant Group Ltd......................................... 120,000
Ragen Mackenzie Incorporated............................................ 120,000
Sanders Morris Mundy Inc. .............................................. 120,000
Sands Brothers & Co., Ltd............................................... 120,000
Stephens Inc. .......................................................... 120,000
Tucker Anthony Incorporated............................................. 120,000
C.E. Unterberg, Towbin Co............................................... 120,000
----------
Total................................................................... 24,000,000
==========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to purchase all the shares of Common Stock offered
hereby if any are purchased.
The Underwriters propose initially to offer the shares of Common Stock
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and to certain dealers at such offering price
less a concession not to exceed $.84 per share of Common Stock. The
Underwriters may allow and such dealers may reallow a concession not to exceed
$.10 per share of Common Stock to certain other dealers. After the initial
public offering of shares of Common Stock has been completed, the offering
price and other selling terms may be changed by the Underwriters.
40
<PAGE>
The Company has granted to the Underwriters an over-allotment option, which
is an option exercisable during a 30-day period after the date hereof to
purchase, at the initial offering price less underwriting discounts and
commissions, up to an additional 3,600,000 shares of Common Stock for the sole
purpose of covering over-allotments, if any. To the extent that the
Underwriters exercise the over-allotment option, each Underwriter will be
committed, subject to certain conditions, to purchase a number of the
additional shares of Common Stock proportionate to such Underwriter's initial
commitment.
The Company issued to the Representative warrants ("Warrants") to purchase
1,130,000 shares of Common Stock. The exercise price per share of the Warrants
is equal to the initial offering price set forth on the cover page of the
Prospectus. The Warrants are exercisable during the four year period
commencing one year from the date of this Prospectus (the "Warrant Exercise
Term"). During the Warrant Exercise Term, the holders of the Warrants are
given the opportunity to profit from a rise in the market price of the Common
Stock. To the extent the Warrants are exercised, dilution to the interests of
the Company's stockholders will occur. Further, the terms upon which the
Company will be able to obtain additional equity capital may be adversely
affected since the holder of the Warrants can be expected to exercise them at
a time when the Company would, in all likelihood, be able to obtain any needed
capital on terms more favorable to the Company than those provided in the
Warrants. Any profit realized by the Representative on the sale of the
Warrants and any securities issuable thereunder may be deemed additional
underwriting compensation. The Company has agreed that, at the request of the
holders of a majority of the Warrants (and on no more than one occasion), the
Company will file a registration statement under the Securities Act for an
offering of the shares of Common Stock underlying the Warrants during the
four-year period beginning on the first anniversary of the date of this
Prospectus, and the Company has agreed to use its best efforts to cause such
registration statement to be declared effective under the Securities Act at
the Company's expense. In addition, the Company has agreed to give advance
notice to holders of the Warrants of its intention to file a registration
statement during the six-year period beginning on the first anniversary date
of this Prospectus, and in each case, holders of the Warrants will have the
right to require the Company to include the Warrants in such registration
statement at the Company's expense (subject to certain limitations).
The Company has agreed to indemnify the several Underwriters against certain
civil liabilities under the Securities Act, or to contribute to payments the
Underwriters may be required to make in respect thereof.
Prior to the Offering, there has been no public market for the shares of
Common Stock. The initial public offering price has been determined by
negotiation between the Company and the Representative. Among the factors
considered in making such determination were the history of, and the prospects
for, other consolidators generally, an assessment of management, the Company's
prospects for future earnings, the general conditions of the economy and the
securities market and the prices of offerings by similar issuers. The price at
which the shares of Common Stock will sell in the public market after the
Offering may be lower than the price at which they are sold by the
Underwriters.
The Representative has informed the Company that the Underwriters do not
intend to confirm sales of the shares offered hereby to any accounts over
which they exercise discretionary authority.
Until the distribution of the Common Stock is completed, the Underwriters
and certain selling group members may be limited in their ability to bid for
or purchase the Common Stock. Pursuant to Regulation M promulgated under the
Securities Exchange Act of 1934, as amended, however, the Representative is
permitted to engage in certain transactions that stabilize the price of the
Common Stock. Such transactions consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representative
may reduce that short position by purchasing shares of Common Stock in the
open market. The Representative may also elect to reduce any short position by
exercising all or part of the over-allotment option described above.
The Representative may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Representative purchases Common
Stock in the open market to reduce the Underwriters' short position or to
stabilize the price of the Common Stock, it may reclaim the amount of the
selling concession from the Underwriters and selling group members who sold
that Common Stock as part of the Offering.
41
<PAGE>
In general, purchases of securities for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Representative will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
The Company and its existing stockholder, executive officers and directors
has generally agreed not to directly or indirectly (i) offer, pledge, sell,
offer to sell, contract to sell, grant any option to purchase or otherwise
sell, dispose of, loan or grant any rights with respect to (or announce any
offer, pledge, sale, offer of sale, contract of sale, grant of an option to
purchase or other sale, disposition of, loan or grant of any rights with
respect to) ("Transfer") any shares of Common Stock, any options or warrants
to purchase any shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, shares of Common Stock or (ii) enter into any
swap or any other agreement or any transaction that transfer, in whole or
part, directly or indirectly, the economic consequence of ownership of the
Common Stock ("Swap"), whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise for the period ending 180 days from the
date of this Prospectus, subject to certain exceptions. In addition, Jonathan
Ledecky may not Transfer or Swap the 2,300,000 shares of Common Stock owned by
him prior to the Offering during the period beginning 181 days after the date
of this Prospectus and ending one year after the date of this Prospectus.
Pursuant to the Underwriting Agreement, the Company has agreed that it will
nominate and use its best efforts to elect up to two designees of the
Representative to serve on the Company's Board of Directors. Initially, such
designees are expected to be M. Jude Reyes and W. Russell Ramsey.
From time to time, each of the Underwriters and their respective affiliates
may provide investment banking services to the Company.
The Company has agreed to sell 250,000 shares of Common Stock directly to
Jonathan Ledecky at the initial public offering price set forth on the cover
page of this Prospectus. In addition, the Company has agreed to sell 500,000
shares of Convertible Non-Voting Common Stock to FBR Asset Investment
Corporation, Inc., an affiliate of the Representative at the initial public
offering price set forth on the cover page of this Prospectus. No underwriting
discount or commission will be paid in connection with the Concurrent
Offerings. Pursuant to the Company's Restated Certificate of Incorporation,
FBR Asset Investment Corporation, Inc., may not offer, pledge, sell, contract
to sell, or otherwise transfer or dispose, directly or indirectly, of any
shares of Convertible Non-Voting Common Stock or enter any swap or any other
agreement or transactions that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Non-Voting Common
Stock, during the period ending one year after the date of this Prospectus.
The Convertible Non-Voting Common Stock will not be publicly traded.
LEGAL MATTERS
The validity of the shares of Common Stock and Convertible Non-Voting Common
Stock offered hereby will be passed upon for the Company by Morgan, Lewis &
Bockius LLP, Washington, D.C. Certain legal matters will be passed upon for
the Underwriters by Brobeck, Phleger & Harrison LLP, New York, New York.
F. Traynor Beck, who became Executive Vice President, General Counsel and
Secretary of the Company, was a partner at Morgan, Lewis & Bockius LLP, the
Company's legal counsel in connection with the Offering and the Concurrent
Offerings. Mr. Beck resigned from his position with Morgan, Lewis & Bockius
LLP on the Effective Date.
EXPERTS
The balance sheet of Consolidation Capital Corporation as of September 30,
1997 included in this Prospectus has been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
42
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (the "Registration
Statement") under the Securities Act and the rules and regulations promulgated
thereunder, with respect to the Common Stock offered hereby. This Prospectus
omits certain information contained in the Registration Statement, and
reference is made to the Registration Statement, and the exhibits and
schedules thereto, for further information with respect to the Company and the
Common Stock offered hereby. Statements contained in this Prospectus as to the
contents of any contract, agreement or other document filed as an exhibit to
the Registration Statement are not necessarily complete, and in each instance,
reference is made to the exhibit for a more complete description of the matter
involved, each such statement being qualified in its entirety by such
reference. The Registration Statement may be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission maintained at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such materials may be obtained from the Public Reference
Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, registration
statements and certain other filings made with the Commission through its
Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system are
publicly available through the Commission's site on the Internet's World Wide
Web, located at http://www.sec.gov. The Registration Statement, including all
exhibits thereto and amendments thereof, has been filed with the Commission
through EDGAR.
The Company intends to furnish to its stockholders annual reports containing
audited financial statements and an opinion thereon expressed by its
independent auditors, and quarterly reports containing unaudited interim
financial information for the first three quarters of each year.
43
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................................... F-2
Balance Sheet as of September 30, 1997 ..................................... F-3
Notes to Balance Sheet...................................................... F-4
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Consolidation Capital Corporation
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of Consolidation Capital Corporation
at September 30, 1997, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Company's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this statement in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
November 17, 1997
except as to the first paragraph of
Note 2, which is as of November 25, 1997
F-2
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
<S> <C>
ASSETS
Cash........................................................ $ 16
Deferred stock issuance costs............................... 315
Computer equipment.......................................... 8
-----
Total assets............................................ $339
=====
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued liabilities....................................... $ 110
Payable to stockholder.................................... 206
-----
Total liabilities....................................... 316
-----
Stockholder's equity:
Common stock, $.001 par, 250,000,000 shares authorized,
2,300,000 shares issued and outstanding.................. 2
Additional paid-in capital................................ 124
Accumulated deficit....................................... (103)
-----
Total stockholder's equity.............................. 23
-----
Total liabilities and stockholder's equity.............. $ 339
=====
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
NOTES TO BALANCE SHEET
(DOLLARS IN THOUSANDS)
NOTE 1--BUSINESS AND ORGANIZATION
Consolidation Capital Corporation, a Delaware corporation (the "Company"),
was incorporated in September 1997. Ledecky Brothers L.L.C., ("LLC"), a
limited liability corporation, merged with and into the Company in September
1997 (the "Merger"). The sole member of LLC received, in connection with the
Merger, 2,300,000 shares of Common Stock of the Company which represents all
of its issued and outstanding Common Stock, in exchange for 100% of his
ownership interest in the LLC. The Merger was implemented to facilitate a
public offering of securities. On September 23, 1997, the Company filed a
registration statement on Form S-1 for the purpose of the public offering of
Common Stock. Each of LLC and the Company adopted a year-end of December 31.
LLC, the predecessor company, was created in February 1997 to pursue
industry consolidation activities and research. Neither the Company nor LLC
had any operations which generated revenue. The only activities included the
payment of a salary and miscellaneous operating expenses incurred in
connection with the analysis of industry consolidation opportunities. The
Company has also incurred and deferred certain stock issuance costs.
Accordingly, statements of operations and cash flows and earnings per share
information for this period would not provide meaningful information and have
been omitted. Because both of the organizations were under control of the one
sole owner, the Merger has been accounted for on a historical cost basis.
LLC was a nontaxable entity and the tax benefits flowed through to the
member. Accordingly, no future tax benefits attributable to the accumulated
losses of LLC will be available to the Company.
NOTE 2--STOCKHOLDER'S EQUITY
Common Stock
On November 25, 1997, the Company effected a 1-for-1.918159 reverse stock
split of the Company's Common Stock. Accordingly, all share data reflected in
this financial statement have been retroactively restated.
On September 19, 1997, the sole member of LLC received 2,300,000 shares of
Common Stock of the Company in connection with the Merger in exchange for his
100% ownership interest in LLC. The sole member made contributions to LLC from
time to time to fund expenses in the aggregate amount of $126. These
contributions were included in common stock and additional paid-in capital at
September 30, 1997.
Common Stock Warrants
Conditioned upon the execution of the underwriting agreement in connection
with the public offering of Common Stock, the Company's Board of Directors has
authorized the delivery to Friedman, Billings, Ramsey & Co. Inc. ("FBR"), as
representative of the underwriters, warrants to purchase 1,130,000 shares of
Common Stock at an exercise price per share equal to the initial public
offering price per share. These warrants will be exercisable on or after the
first anniversary and until the fifth anniversary of the initial public
offering.
Additionally, 1,950,000 shares of the Company's Common Stock have been
reserved for issuance upon the exercise of a warrant to be issued to Jonathan
Ledecky at the time of the initial public offering. This warrant will be
exercisable immediately following issuance for a period of ten years at an
exercise price equal to the initial public offering price.
Convertible Non-Voting Common Stock
In November 1997, the Company's Board of Directors authorized 500,000 shares
of Convertible Non-Voting Common Stock (par value of $.001 per share).
Conditioned upon the execution of the underwriting agreement in connection
with the public offering of Common Stock, it is anticipated that an affiliate
of FBR will purchase all of the authorized shares of Convertible Non-Voting
Common Stock from the Company at a price equal to the initial public offering
price per share. After one year, the shares of Convertible Non-Voting Common
Stock will automatically convert into an equivalent number of shares of Common
Stock.
F-4
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
NOTES TO BALANCE SHEET--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 2--STOCKHOLDER'S EQUITY (CONTINUED)
1997 Long-Term Incentive Plan
The Company's Board of Directors has adopted, and the Company's stockholder
has approved, the Company's 1997 Long-Term Incentive Plan (the "Incentive
Plan"). The terms of the option awards will be established by the Compensation
Committee of the Company's Board of Directors. The Company intends to file a
registration statement on Form S-8 under the Securities Act of 1933 as soon as
practicable after the consummation of the offering with respect to the shares
of Common Stock issuable pursuant to such plans. The maximum number of shares
that may be issued under the Incentive Plan is equal to 9% of the number of
shares of Common Stock outstanding from time to time.
Options to purchase 1,500,000 shares of Common Stock under the Incentive
Plan are expected to be granted at the time of the public offering at an
exercise price equal to the initial public offering price per share. The
options to be granted are expected to vest 25% each on the first four
anniversaries of the date of grant and are expected to expire on the tenth
anniversary of the grant date. In the event of a change in control of the
Company prior to normal vesting, all options not already exercisable will
become fully vested and exercisable.
1997 Non-Employee Directors' Stock Plan
The Company's Board of Directors has adopted, and the Company's stockholder
has approved, the 1997 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which provides for the automatic grant to each nonemployee director of
an option to purchase 20,000 shares on the later of the effective date of the
registration statement for the initial public offering of the Company's Common
Stock or the date that such person commences services as a director.
Thereafter, each non-employee director will be entitled to receive, on the day
after each annual meeting of the Company's stockholders, an option to purchase
5,000 shares of Common Stock. A maximum of 300,000 shares of Common Stock may
be issued under the Directors' Plan. Options to purchase 60,000 shares of
Common Stock under the Directors' Plan are expected to be granted at the time
of the public offering at an exercise price equal to the initial public
offering price per share.
Options granted under the Directors' Plan will have an exercise price per
share equal to the fair market value of a share at the date of grant. Options
will expire at the earlier of 10 years from the date of grant or 90 days after
termination of service as a director. Options will vest and become exercisable
ratably as to 50% of the shares underlying the Option on the first and second
anniversaries of the date of grant, subject to acceleration by the Board. In
the event of a change in control of the Company prior to normal vesting, all
options not already exercisable will become fully vested and exercisable.
1997 Employee Stock Purchase Plan
The Company has adopted, and the Company's stockholder has approved, the
1997 Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan
permits eligible employees of the Company and its subsidiaries (generally all
full-time employees who have completed one year of service) to purchase shares
of Common Stock at a discount. Employees who elect to participate will have
amounts withheld through payroll deduction during purchase periods. At the end
of each purchase period, accumulated payroll deductions will be used to
purchase stock at a price equal to 85% of the market price at the beginning of
the period or the end of the period, whichever is lower. Stock purchased under
the Purchase Plan will be subject to a one-year holding period. The Company
has reserved 1,000,000 shares of Common Stock for issuance under the Purchase
Plan.
F-5
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
NOTES TO BALANCE SHEET--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 3--DEFERRED STOCK ISSUANCE COSTS
At September 30, 1997, the Company had incurred approximately $315 of costs
in connection with the contemplated public offering of Common Stock, comprised
as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.................... $174
NASD fee............................................................... 31
Printing expenses...................................................... 10
Accounting fees........................................................ 25
Legal fees............................................................. 75
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$315
====
</TABLE>
These costs have been deferred and reflected as an asset in the accompanying
September 30, 1997 balance sheet. After receipt of the proceeds from the
public offering, the stock issuance costs will be reclassified to additional
paid-in capital in the Company's balance sheet as a reduction to the gross
proceeds from the offering. At September 30, 1997, $205 of the stock issuance
costs had been paid. The remainder of these costs have been included in
accrued liabilities and are expected to be paid using the proceeds from the
Common Stock offering.
NOTE 4--PAYABLE TO STOCKHOLDER
Jonathan Ledecky, the sole stockholder, has advanced to the Company $206 to
pay certain fees in connection with the registration of the Common Stock. Such
demand notes bear interest at 6.75% annually. The Company intends to repay
such stockholder payable and related accrued interest using the proceeds from
the Common Stock offering.
NOTE 5--STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting-
for-Stock-Based Compensation," allows entities to choose between a fair value
based method of accounting for employee stock options or similar equity
instruments and the intrinsic, value-based method of accounting prescribed by
Accounting Principles Board Opinion No. 25 ("APB No. 25"). Entities electing
to apply the accounting in APB No. 25 must make pro forma disclosures of net
income and earnings per share as if the fair value method of accounting has
been applied. The Company will provide pro forma disclosure of net income and
earnings per share, as applicable, in the notes to future financial
statements.
NOTE 6--NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings Per Share." For the Company, SFAS No. 128 will be effective
for the year ending December 31, 1997. SFAS No. 128 simplifies the standards
required under current accounting rules for computing earnings per share and
replaces the presentation of primary earnings per share and fully diluted
earnings per share with a presentation of basic earnings per share ("basic
EPS") and diluted earnings per share ("diluted EPS"). Basic EPS excludes
dilution and is determined by dividing income available to common stockholders
by the weighted average number of common shares outstanding during the period.
Diluted EPS reflects the potential dilution that could occur if securities and
other contracts to issue common stock were exercised or converted into common
stock. Diluted EPS is computed similarly to fully diluted earnings per share
under current accounting rules.
F-6
<PAGE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH
THE OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COM-
PANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 18
Determination of Offering Price.......................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 22
Management............................................................... 28
Certain Relationships and Related Party Transactions..................... 35
Principal Stockholders................................................... 36
Description of Capital Stock............................................. 37
Shares Eligible for Future Sale.......................................... 38
Underwriting and Plan of Distribution.................................... 40
Legal Matters............................................................ 42
Experts.................................................................. 42
Additional Information................................................... 43
Index to Financial Statements............................................ F-1
</TABLE>
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UNTIL DECEMBER 20, 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
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24,000,000 SHARES
CONSOLIDATION
CAPITAL
CORPORATION
COMMON STOCK
----------------
PROSPECTUS
----------------
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
NOVEMBER 25, 1997
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