<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 23, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CONSOLIDATION CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 5900
(STATE OR OTHER
JURISDICTIONOF INCORPORATION
OR ORGANIZATION)
(PRIMARY STANDARD APPLIED FOR
INDUSTRIALCLASSIFICATION (I.R.S. EMPLOYER
CODE NUMBER) IDENTIFICATION NO.)
1747 PENNSYLVANIA AVENUE, NW, SUITE 900
WASHINGTON, DC 20006
202/955-5490
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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JONATHAN J. LEDECKY
CHAIRMAN
CONSOLIDATION CAPITAL CORPORATION
1747 PENNSYLVANIA AVENUE, NW, SUITE 900
WASHINGTON, DC 20006
202/955-5490
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
LINDA L. GRIGGS, ESQUIRE RICHARD R. PLUMRIDGE, ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP BRIAN B. MARGOLIS, ESQUIRE
1800 M STREET, NW BROBECK, PHLEGER & HARRISON LLP
WASHINGTON, DC 20036-5869 1633 BROADWAY, 47TH FLOOR
202/467-7245 NEW YORK, NY 10019
212/581-1600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common stock, par value
$.001 per share....... 28,750,000 $20.00 $575,000,000 $174,243
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING
PURSUANT TO SAID SECTION 8(A) MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 23, 1997
[LOGO]
25,000,000 SHARES OF COMMON STOCK
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All of the shares of common stock (the "Common Stock") being offered hereby
(the "Offering") are being issued and sold by Consolidation Capital Corporation
(the "Company"). Prior to the Offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price per share will be $20.00. See "Underwriting" for a discussion of
the factors considered in determining the initial public offering price.
Application has been made to list the Common Stock on The Nasdaq National
Market under the symbol "BUYR."
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
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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.............................. $20.00 $ $
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Total (3).............................. $500,000,000 $ $
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</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended.
(2) Before deducting expenses payable by the Company estimated at $ .
(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
3,750,000 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 $ , $ and $ , respectively. See "Underwriting."
-----------
The shares of Common Stock offered by this Prospectus 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 Underwriters
on or about , 1997 against payment therefor in immediately available funds.
-----------
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
, 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."
<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 assumes no exercise of the Underwriters' over-allotment option.
Consolidation Capital Corporation is the successor to Ledecky Brothers L.L.C.
Hereinafter, except as otherwise indicated, Consolidated Capital Corporation
and Ledecky Brothers L.L.C. are referred to jointly as the "Company." As used
herein, the "Offering Price" equals $20.00, which represents the price per
share for the Common Stock set forth on the front cover page of this
Prospectus.
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.
Information contained in this Prospectus may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, 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.
THE COMPANY
Consolidation Capital Corporation was founded in February 1997 by Jonathan J.
Ledecky ("Mr. Ledecky") to build consolidated enterprises with national market
reach through the acquisition and integration of businesses in fragmented
industries. Mr. Ledecky is the Chairman, Chief Executive Officer and founder of
U.S. Office Products Company ("USOP"). While managing USOP, Mr. Ledecky
developed a strategy of "corporate democracy," which he believes facilitated
USOP's rapid consolidation of more than 190 companies in the office products
and services industry.
Since 1994, Mr. Ledecky, as Chairman and Chief Executive Officer of USOP, has
been 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.
USOP's revenues increased from $134 million on a pro forma basis for the fiscal
year ended April 30, 1994 to $2.8 billion for the fiscal year ended April 26,
1997; during the same periods, USOP's operating margin increased from 3.0% on a
pro forma basis to 5.3%, excluding non-recurring and restructuring costs; and
USOP's assets increased from $49 million on a pro forma basis as of April 30,
1994 to $1.8 billion as of April 26, 1997.
The Company will seek to leverage the experience and expertise of Mr. Ledecky
and the Company's management team to become the leading consolidator of
business and consumer products and services companies in fragmented industries.
Mr. Ledecky will serve as the Company's Chairman. In that capacity, he will
provide the Company and its executive management team with overall strategic
guidance and direction. In addition to the Company's existing Senior Vice
President, the executive management team is expected to consist of a President,
Chief Financial Officer and General Counsel each of whom is expected to have
significant acquisition experience.
The Company believes it will possess substantial competitive advantages. The
Company will 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
reserves, the Company's ability to acquire attractive companies is not likely
to be constrained by the need to access the capital markets. Furthermore, the
Company believes that its corporate democracy principles will help it attract
and acquire
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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.
The Company believes that the industries in which it will pursue
consolidation opportunities are often 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 will benefit from economies of
scale. Within such industries, the Company intends to focus on the acquisition
of business and consumer products and services companies 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.
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 a source of competitive advantage will be the
Company's ability to deploy rapidly its significant financial resources and to
use its publicly traded stock as consideration in selected acquisitions.
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 achieving cost savings through volume purchasing. The Company's corporate
democracy approach reflects both a decentralized and centralized management
philosophy. 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.
4
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THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company... 25,000,000 Shares
Common Stock to be outstanding after 29,411,765 Shares (1)(2)
the Offering.........................
Use of Proceeds....................... To fund future acquisitions and general
corporate purposes, including working
capital. See "Use of Proceeds."
Proposed Nasdaq National Market BUYR
symbol...............................
</TABLE>
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(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 Company's 1997 Long-Term Incentive Plan, of which options to
purchase 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) 250,000 shares of Common Stock
reserved for issuance under the Company's 1997 Non-Employee Directors'
Stock Plan, of which options to purchase 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 Company's
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 4,411,765 shares owned by Mr. Ledecky, of which 4,411,765 shares,
2,058,824 shares and 588,235 shares are subject to contractual restrictions
on the transfer thereof for two, four and five years, respectively. Such
restrictions may lapse earlier based upon the Company's stock price
performance. See "Underwriting."
5
<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 "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, 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 Company's
actual results could differ materially from those anticipated in such forward-
looking statements.
NO PRESENT SOURCE OF REVENUES
The Company was founded in February 1997. To date, its activities have
consisted of conducting research and analysis with respect to acquisition and
consolidation opportunities. As of the date of this Prospectus, the Company
has a negative tangible net worth. The Company was founded to build
consolidated enterprises with national market reach through the acquisition
and integration of businesses in 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 acquisitions, after which its
ability to generate revenues and earnings (if any) will be directly dependent
upon the successful integration and consolidation of the businesses that it
acquires, if any. The Company has no present plans, arrangements or
understandings with any prospective acquisition candidates.
DEPENDENCE ON KEY PERSONNEL; ALLOCATION OF MANAGEMENT TIME
The Company believes that its success will depend to a significant extent
upon the experience of Jonathan J. Ledecky, its founder and Chairman, and its
management team. Although Mr. Ledecky has agreed to serve as Chairman of the
Company, the loss of his services could have a material adverse effect on the
Company's ability to successfully achieve its business objectives.
Furthermore, although Mr. Ledecky and certain of the officers of the Company
have substantial experience in acquiring and consolidating businesses, they
have no prior experience in managing companies formed for the purpose of
consolidating multiple industries. In addition, the Company likely will depend
on the senior management of any significant business it acquires in the
future. The Company does not intend to maintain key man life insurance with
respect to any of its current executives. If the Company loses the services of
one or more of these key employees, the Company's business could be adversely
affected. There can be no assurance that the Company will successfully recruit
additional personnel or that the additional personnel will have the requisite
skills, knowledge or experience necessary or desirable to enhance the
incumbent management. See "Management."
Mr. Ledecky is the Chairman and Chief Executive Officer of U.S. Office
Products Company and the non-executive Chairman of U.S.A. Floral Products,
Inc. ("USA Floral"). Consistent with his position and his contractual
arrangements with USOP, Mr. Ledecky devotes substantially all of his time and
attention to USOP's business. Mr. Ledecky's obligations to USOP will limit the
amount of time he has available to devote to activities outside of USOP,
including the business of the Company.
APPROPRIATE ACQUISITIONS MAY NOT BE AVAILABLE AND FULL INVESTMENT OF NET
PROCEEDS WILL BE DELAYED
The results of the Company's planned operations are dependent upon the
Company's ability to identify, attract and acquire attractive acquisition
candidates, which may take considerable time. No assurances can be
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given that the Company will be successful in identifying, attracting or
acquiring desirable acquisition candidates, that such candidates will be
successfully integrated into the Company or that the acquisition candidates,
once acquired, will be profitable. 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 or results of operations.
The Company intends to invest the net proceeds of this Offering in readily
marketable, interest-bearing, investment grade securities until the Company
finds appropriate acquisition candidates to acquire. Consequently, until such
time as the Company acquires acquisition candidates, the proceeds of this
Offering will yield only that rate of return earned by such interest-bearing
securities.
RISKS ASSOCIATED WITH CONSOLIDATION STRATEGY
Since the Company has not yet identified specific acquisition candidates,
investors in this Offering 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, there can be no assurance
that the Company will properly ascertain all of such risks. 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.
Although the Company intends to closely scrutinize the management of a
prospective acquisition candidate in connection with evaluating the
desirability of effecting a business combination, there can be no assurance
that the Company's assessment of management will prove to be correct. The
Company may enlist the assistance of other persons to assess the management of
acquisition candidates, but no such persons have been presently identified. In
addition, there can be no assurance that management of the acquired companies
will have the necessary skills to manage a company intending to implement an
aggressive acquisition program. The Company may also seek to recruit
additional managers to supplement the incumbent management of the acquired
companies. There can be no assurance that the Company will have the ability to
recruit additional managers with the skills necessary to enhance the
management of the acquired companies.
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 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. 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. There can also be no assurance that the Company will
replicate the success in consolidating various industries that has been
achieved by other consolidators, including USOP.
There can be no assurance that the Company will 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, there can be no assurance that the rapid pace of acquisitions will
not adversely affect the Company's efforts to integrate acquisitions and
manage those acquisitions profitably. Any or all of these factors could have a
material adverse effect on the Company's business, financial condition or
results of operations.
RISKS RELATED TO ACQUISITION FINANCING; ADDITIONAL DILUTION; LEVERAGE
The Company intends to use a significant portion of its resources for
acquisitions. The timing, size and success of the Company's acquisition
efforts and any associated capital commitments cannot be readily
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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. There can be no assurance that the Company
will be able to obtain any additional financing that it may need for its
acquisition program on terms that the Company deems acceptable.
Upon consummation of the Offering, the Company will have 29,411,765 shares
of Common Stock issued and outstanding and 250,000,000 shares of authorized
Common Stock. 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
"Dilution" and "Use of Proceeds."
The Company may borrow money to consummate the acquisitions or assume or
refinance the indebtedness of acquired companies if the Company's management
deems it to be beneficial to the Company. Among the possible adverse effects
of borrowings are: (i) if the Company's operating revenues after the
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.
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. 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 limitation 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.
CONSIDERATION FOR OPERATING COMPANIES MAY EXCEED ASSET VALUE
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
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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. No assurance can be given that the future
performance of such companies will be commensurate with the consideration
paid. Moreover, 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.
CONFLICTS OF INTEREST
Mr. Ledecky is the Chairman and Chief Executive Officer of USOP and the non-
executive Chairman of USA Floral. Certain of the officers and directors are,
and in the future may become, affiliated with entities engaged in business
activities in the industries in which the Company may become involved. Such
persons may have conflicts of interest in determining to which entity a
particular business opportunity should be presented. As a result of Mr.
Ledecky's affiliation with USOP and USA Floral, the Company is restricted from
acquiring businesses in certain industries. See "Business--Strategy."
In general, officers and directors of a corporation incorporated under the
laws of the State of Delaware are required to present certain business
opportunities to such corporation. Accordingly, as a result of multiple
business affiliations, certain of the Company's officers and directors may
have similar legal obligations to present certain business opportunities to
multiple entities. There can be no assurance that any of the foregoing
conflicts will be resolved in favor of the Company.
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 percent of its
total assets invested in, and no more than 45 percent 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 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.
HOLDING COMPANY RISKS
The Company is expected to be a holding company. As a holding company
without significant income from operations, the Company will be dependent upon
the income from its operating subsidiaries to meet its operating expenses. If
its operating subsidiaries are unable to pay dividends or otherwise distribute
amounts to the Company sufficient to cover its operating expenses, the Company
may be subject to liquidity problems, even if, on a consolidated basis, its
operating subsidiaries are profitable.
9
<PAGE>
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 the
economic conditions of the regions 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 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 relationship 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.
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, 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.
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. There can be no assurance,
however, that the Internal Revenue Service (the "IRS") or appropriate state
tax authorities will ultimately assent to the Company's tax treatment of a
consummated business combination. To the extent the IRS or state tax
authorities ultimately prevail in recharacterizing the tax treatment of a
business combination, there may be adverse tax consequences to the Company,
the acquisition candidate and their respective stockholders.
POTENTIAL INFLUENCE OF EXISTING STOCKHOLDER
After the consummation of the Offering, Mr. Ledecky, the Company's founder
and Chairman, will own beneficially 15% of the outstanding shares of Common
Stock and the Company's executive officers and directors will own beneficially
an aggregate of approximately % of the outstanding shares of Common Stock.
The Company's executive officers and directors, if acting together, may be
able to control 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, the Company will have 29,411,765 shares of
Common Stock outstanding. The 25,000,000 shares sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), unless acquired by
an "affiliate" of the Company, as that term is defined in Rule 144 ("Rule
144") promulgated under the Securities Act; shares held by affiliates will be
subject to resale limitations of Rule 144 described below. Of the remaining
outstanding shares of Common Stock, 4,411,765 will be available for resale at
various dates beginning 180 days after the date of this Prospectus,
10
<PAGE>
upon expiration of applicable lock-up agreements described below and subject
to compliance with Rule 144. In addition, the 4,411,765 shares of Common Stock
owned by Mr. Ledecky will be subject to contractual restrictions on transfer
for periods ranging from at least 180 days to five years. Specifically,
subject to the provisions described below, Mr. Ledecky may not offer, pledge,
sell, contract to sell, or otherwise transfer or dispose of, directly or
indirectly ("Transfer") (i) any of the 4,411,765 shares of Common Stock owned
by him during the period ending two years after the date of this Prospectus,
(ii) 2,058,824 shares of Common Stock owned by him during the period ending
four years after the date of this Prospectus and (iii) 588,235 shares of
Common Stock owned by him during the period ending five years after the date
of this Prospectus. Notwithstanding the preceding sentence, beginning 180 days
after the date of this Prospectus, the restrictions on Transfer will lapse (i)
as to 50% of the shares still subject to such restrictions if the closing
price of a share of Common Stock is equal to or exceeds 150% of the Offering
Price for a period of at least 20 consecutive trading days and (ii) as to 100%
of the shares still subject to such restrictions if the closing price of a
share of Common Stock is equal to or exceeds 200% of the Offering Price for a
period of at least 20 consecutive trading days. Further, upon consummation of
the Offering, shares of Common Stock will be issuable upon the exercise of
stock options to be granted on the effective date of the registration
statement of which this Prospectus forms a part. 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. Sales of substantial amounts of
Common Stock, or the perception that such sales could occur, could adversely
affect prevailing market price of the Common Stock and impair the Company's
ability to raise additional capital through the sale of equity securities. See
"Shares Eligible for Future Sale." 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 Friedman, Billings, Ramsey & Co., Inc., as the
representative of the Underwriters. See "Underwriting."
NO PRIOR MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Company's
Common Stock. There can be no assurance that an active public market for the
Common Stock will develop or be sustained after the Offering. The initial
public offering price of the Common Stock will be determined by negotiation
between the Company and the representative of the Underwriters based on the
factors described under "Underwriting." 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.
The market price of the Company's Common Stock after the Offering could 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 will experience immediate and
substantial dilution in the pro forma as adjusted net tangible book value of
their shares in the amount of $4.22 per share. See "Dilution." If
11
<PAGE>
the Company issues additional Common Stock in the future, including shares
which may be issued pursuant to earn-out arrangements, option grants 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.
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 Certificate of Incorporation."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, after deducting estimated underwriting discounts and other
offering expenses, all of which are payable by the Company, are estimated to
be approximately $464 million (approximately $534 million if the Underwriters'
over-allotment option is exercised in full), assuming an initial public
offering price of $20.00 per share. The Company intends to use substantially
all of the net proceeds of the Offering 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 be consummated.
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.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its 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.
12
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at September 19, 1997 and (ii) the capitalization of the Company as adjusted
to give effect to the sale of 25,000,000 shares of Common Stock offered hereby
at an assumed 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 19, 1997
--------------------------
ACTUAL AS ADJUSTED (1)(2)
------ ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Stockholder's equity:
Common stock, $.001 par value per share,
250,000,000 shares authorized, 4,411,765 shares
issued and outstanding and 29,411,765 shares
issued and outstanding (as adjusted).............. $ 4 $ 29
Additional paid-in capital......................... 122 464,097
Accumulated deficit................................ (103) (103)
----- --------
Total stockholder's equity....................... 23 464,023
----- --------
Total capitalization........................... $ 23 $464,023
===== ========
</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 Company's 1997 Long-Term Incentive Plan, of which options to
purchase 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) 250,000 shares of Common Stock
reserved for issuance under the Company's 1997 Non-Employee Directors'
Stock Plan, of which options to purchase 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 Company's
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 4,411,765 shares owned by Mr. Ledecky, of which 4,411,765 shares,
2,058,824 shares and 588,235 shares are subject to contractual
restrictions on the transfer thereof for two, four and five years,
respectively. Such restrictions may lapse earlier based upon the Company's
stock price performance. See "Underwriting."
13
<PAGE>
DILUTION
The Company had a net tangible book value at September 19, 1997, of $23,000,
or $.01 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 25,000,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $20.00 per share, and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds," the pro forma net tangible
book value of the Company, as adjusted, at September 19, 1997 would have been
$464,023,000, or $15.78 per share. This amount represents an immediate
dilution to new investors of $4.22 per share and an immediate increase in pro
forma as adjusted net tangible book value per share to existing stockholders
of $15.77 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 19, 1997........ $ .01
Increase in net tangible book value per share resulting from
the Offering.................................................. 15.77
------
Pro forma net tangible book value per share after the Offering... 15.78
------
Pro forma dilution to new investors.............................. $ 4.22
======
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the
increase in pro forma net tangible book value per share attributable to the
Offering, pro forma net tangible book value per share after the Offering, and
pro forma dilution to new investors would be $16.09, $16.10 and $3.90,
respectively.
The following table sets forth at September 19, 1997, after giving effect to
the sale of the Common Stock offered by the Company in the Offering: (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 TOTAL CONSIDERATION AVERAGE
------------------ -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholder
(1).................... 4,411,765 15.0% $ 126,000 .03% $ .03
New investors........... 25,000,000 85.0% 500,000,000 99.97% $20.00
---------- ----- ------------ ------
Total................. 29,411,765 100.0% $500,126,000 100.00%
========== ===== ============ ======
</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 Company's 1997 Long-Term Incentive Plan, of which options to
purchase 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) 250,000 shares of Common Stock
reserved for issuance under the Company's 1997 Non-Employee Directors'
Stock Plan, of which options to purchase 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 Company's
1997 Employee Stock Purchase Plan. See "Management--1997 Long-Term
Incentive Plan," "--1997 Non-Employee Directors' Stock Plan" and "--1997
Employee Stock Purchase Plan."
14
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 19, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Assets.......................... $246
Liabilities..................... 223
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 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 sale of the 25,000,000 shares of
Common Stock offered hereby, which are estimated to be approximately $464
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 Offering, the Company will have cash of approximately $464
million. In addition, the Company is currently negotiating a bank credit
facility which, if and when obtained, will provide additional capital for use
in the acquisition program. 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, the anticipated availability of financing under the credit facility
and the availability of equity will be sufficient to fund its operations and
acquisition program through 1998.
15
<PAGE>
BUSINESS
THE COMPANY
The Company was founded in February 1997 by Jonathan J. Ledecky to
consolidate business and consumer products and services companies in
fragmented industries. Mr. Ledecky is the Chairman, Chief Executive Officer
and founder of U.S. Office Products Company and the non-executive Chairman and
co-founder of USA Floral. While managing USOP, Mr. 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.
Since 1994, Mr. Ledecky, as Chairman and Chief Executive Officer of USOP,
has been responsible for in excess of $1.7 billion in acquisitions of domestic
and international businesses. The Company will seek to leverage the
significant experience and expertise of Mr. Ledecky and the Company's
management team to build consolidated enterprises with national market reach
through the acquisition and integration of privately-held or family-owned
businesses in fragmented industries. Mr. Ledecky will serve as the Company's
Chairman. The Company plans to hire additional senior management. The Company
believes that, through the prior experience of the Chairman and management, 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 also believes that, following the Offering, its strong financial
position and substantial liquidity, when combined with the consolidation
experience of its Chairman and management team, will create significant
competitive advantages for the Company that will enable it to capitalize on
attractive consolidation opportunities. The Company will 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 reserves, the Company's ability
to acquire attractive companies is not likely to be constrained by the need to
access the capital markets. Furthermore, the Company believes that its
corporate democracy principles will help it attract and acquire companies
which, when combined with the Company's strong financial position, will
differentiate it from traditional consolidators.
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
consolidating companies 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 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 companies. USOP was
formed in October 1994 by the Company's Chairman, Mr. Ledecky. Under Mr.
Ledecky's leadership, USOP has 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. USOP's revenues have increased from $134
million on a pro forma basis for the fiscal year ended April 30, 1994 to $2.8
billion for the fiscal year ended
16
<PAGE>
April 26, 1997; during the same periods, USOP's operating margin increased
from 3.0% on a pro forma basis to 5.3%, excluding non-recurring and
restructuring costs; and USOP's assets increased from $49 million on a pro
forma basis as of April 30, 1994 to $1.8 billion as of April 26, 1997.
STRATEGY
The Company's goal is to become the leading consolidator of business and
consumer products and services companies in 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
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."
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 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, achieving cost savings
through volume purchasing and engaging in cross-functional selling.
Identify and Pursue Strategic Consolidation Opportunities. The Company
intends to capitalize upon consolidation opportunities in business and
consumer products and services 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 Mr. Ledecky and its management team, it will be well positioned
to identify suitable industries for consolidation and to identify acquisition
candidates within those industries to form 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 a source of competitive advantage will be
the Company's ability to deploy rapidly its significant financial resources
and 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 business and
consumer products and services companies 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. The Company believes that even if consolidation in an
industry has begun, there may still exist opportunities to create niche
businesses with national reach.
Some of the industries 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
17
<PAGE>
products; mail order and client marketing; moving services; optical services;
real estate 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 is restricted from acquiring businesses in any of the
industries in which USOP is currently involved, in which USA Floral expects to
be involved and certain other industries. Specifically, these proscribed
industries are office supplies, office furniture, coffee and beverage
services, computer and telecommunications networks and services, print
management, corporate travel services, educational supplies, flowers and
floral products, records management, janitorial and sanitation supplies, and
promotional products.
Differentiate Through Corporate Democracy. The Company believes that its
implementation of corporate democracy, which Mr. Ledecky has employed
successfully at USOP, will give the Company a competitive advantage over rival
consolidators in attracting, buying and integrating acquired companies. In
addition, the corporate democracy approach reflects both a decentralized and
centralized management philosophy. 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 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 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
18
<PAGE>
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, top-quality company in a targeted geographic area into which the
facilities and operations of local, top-quality 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 invested materially 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 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 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.
19
<PAGE>
SIGNIFICANT FINANCIAL RESOURCES
The Company believes that, following the Offering, its strong financial
position and substantial liquidity, when combined with the consolidation
experience of its Chairman and management team, will create significant
competitive advantages for the Company that will enable it to achieve its goal
of being the consolidator of choice. The Company will 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.
COMPETITION
The Company expects to encounter competition from other entities having
business objectives similar to those of the Company. Many of these entities,
including venture capital partnerships and corporations, other acquisition
companies and funds, large industrial and financial institutions, small
business investment companies and wealthy individuals are well established and
have extensive experience in connection with identifying and effecting
business combinations directly or through affiliates. Many of these
competitors possess greater financial, human and other resources than the
Company and there can be no assurance that the Company will have the ability
to compete successfully.
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 19, 1997, the
Company employed one person.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
20
<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
[ ] [ ] President
[ ] [ ] Chief Financial Officer
David Ledecky 36 Senior Vice President, Secretary,
Treasurer and Director Nominee
[ ] [ ] General Counsel
[ ] [ ] Director
[ ] [ ] Director
[ ] [ ] Director
[ ] [ ] Director
[ ] [ ] Director
</TABLE>
Jonathan J. Ledecky founded the Company in February 1997 and serves as its
Chairman. Mr. Ledecky founded USOP, a company engaged in providing office and
educational products and business services, in October 1994 and has served
since then as its Chairman of the Board and Chief Executive Officer. Since its
inception, USOP has acquired over 190 companies. Mr. Ledecky has also served
as the Non-Executive Chairman of the Board of USA Floral since April 1997.
Prior to founding USOP, Mr. 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., Mr.
Ledecky was responsible for providing corporate advisory services for
Steelcase's network of office products distributors. In addition, Mr. 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., Mr.
Ledecky was a partner at Adler and Company and a Senior Vice President at
Allied Capital Corporation, an investment management company. Mr. Ledecky
serves as a director of MLC Holdings, Inc. Mr. Ledecky is a graduate of
Harvard College and Harvard Business School. Mr. Ledecky is the brother of
David Ledecky.
David Ledecky has served as Senior Vice President, Secretary and Treasurer
of the Company since September 1997. Prior thereto, he operated Ledecky
Brothers L.L.C., the Company's predecessor since its inception in February
1997. In that capacity, he has researched and analyzed industry consolidation
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 and a member of the Bar of New
York, California and the District of Columbia. He is a graduate of Harvard
College and Yale Law School. David Ledecky is the brother of Jonathan J.
Ledecky.
The Company expects that additional persons will be selected to serve as
executive officers and directors of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors intends to establish 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.
21
<PAGE>
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 1997 Long-Term Incentive Plan, including selecting the officers and
salaried employees to whom awards will be granted.
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, non-employee directors will receive grants of non-
qualified stock options under the 1997 Non-Employee Directors' Stock Plan. See
"--1997 Non-Employee Directors' Stock Plan."
EXECUTIVE COMPENSATION
The Company has paid David Ledecky an annualized salary of $125,000 since
the Company was founded in February 1997.
1997 LONG-TERM INCENTIVE PLAN
The Company intends to adopt a 1997 Long-Term Incentive Plan (the "Incentive
Plan"). 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 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 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 will 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 750,000 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.
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).
22
<PAGE>
Upon the effective date of the registration statement of which this
Prospectus forms a part, the Company intends to grant certain options under
the Incentive Plan, including options to purchase 250,000 shares to David
Ledecky, 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 date of grant.
1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN
The Company intends to adopt a 1997 Non-Employee Directors' Stock Plan (the
"Directors' Plan"), which provides for the automatic grant to each non-
employee director of an option ("Initial Grant") to purchase 50,000 shares on
the effective date of the registration statement of which this Prospectus
forms a part. A total of 250,000 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.
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 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 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 EMPLOYEE STOCK PURCHASE PLAN
The Company intends to adopt a 1997 Employee Stock Purchase Plan (the
"Purchase Plan"). The Purchase Plan will permit 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 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.
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.
23
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED 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.
Mr. Ledecky has advanced to the Company $206,000 to pay certain fees in
connection with the registration of the Common Stock under the Securities Act.
The Company will repay Mr. Ledecky's loans to the Company using the proceeds
of the Offering. In addition, Mr. Ledecky has contributed $126,000 in equity
to the Company since its inception.
Jonathan J. Ledecky, the Company's Chairman and founder, is the brother of
David Ledecky, the Company's Senior Vice President and a director nominee of
the Company.
24
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of September 19, 1997, and as adjusted to
reflect the sale of the Common Stock being offered hereby, 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 --------------------
SHARES OF BEFORE THE AFTER THE
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK OFFERING OFFERING
------------------------------------ ------------ ---------- ---------
<S> <C> <C> <C>
Jonathan J. Ledecky(1)....................... 4,411,765 100% 15%
David Ledecky................................ 0 0% 0%
[ ].................................... -- -- --
[ ].................................... -- -- --
[ ].................................... -- -- --
[ ].................................... -- -- --
[ ].................................... -- -- --
[ ].................................... -- -- --
[ ].................................... -- -- --
[ ].................................... -- -- --
All directors, persons named to become
directors, and executive officers, as a
group ( persons)...........................
</TABLE>
- --------
(1) The shares of Common Stock owned by Mr. Ledecky will be subject to
contractual restrictions on transfer for periods ranging from two to five
years. Such restrictions may lapse earlier based upon the Company's stock
price performance. See "Underwriting."
25
<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. Upon completion of this Offering,
the Company will have outstanding 29,411,765 shares of Common Stock
(33,161,765 if the Underwriters' over-allotment option is exercised in full).
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 Certificate of
Incorporation and 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. 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.
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S 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 Certificate of Incorporation provides that no director of the
Company will 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 law; (iii) for any wilful or negligent
payment of an unlawful dividend, stock purchase or redemption; or (iv) for any
transaction from which the director derived an improper personal benefit.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is .
26
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 29,411,765 shares of
Common Stock outstanding. The 25,000,000 shares sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act, unless acquired by an "affiliate" of the Company, as that term
is defined in Rule 144; shares held by affiliates will be subject to resale
limitations of Rule 144 described below. Of the remaining outstanding shares
of Common Stock, will be available for resale at various dates beginning
180 days after the date of this Prospectus, upon expiration of applicable
lock-up agreements described below and subject to compliance with Rule 144 as
the holding provisions of Rule 144 are satisfied, and the 4,411,765 shares
owned by Mr. Ledecky will be subject to contractual restrictions on transfer
which are described in "Underwriting." Further, upon consummation of the
Offering, an aggregate of that number of shares equal to 9% of the number of
shares of Common Stock outstanding from time to time will be reserved for
issuance pursuant to provisions of the Company's 1997 Long Term Incentive Plan
and 250,000 shares of Common Stock will be reserved for issuance pursuant to
provisions of the 1997 Non-Employee Directors' Stock Plan. 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 under such plans.
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 294,117 shares immediately
after completion of the Offering); 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.
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, directly or indirectly, of 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 consent of Friedman, Billings, Ramsey & Co., Inc.
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.
27
<PAGE>
UNDERWRITING
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 (the
"Underwriters") and each of the Underwriters, for whom Friedman, Billings,
Ramsey & Co., Inc., is acting as representative (the "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>
Friedman, Billings, Ramsey & Co., Inc.........................
----------
Total....................................................... 25,000,000
==========
</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 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 $ per share of Common Stock. The Underwriters may
allow and such dealers may reallow a concession not to exceed $ per share of
Common Stock to certain other dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms
may be changed by the Underwriters.
The Company has granted to the Underwriters the 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 3,750,000 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 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.
At the request of the Company, the Underwriters have reserved up to
shares of Common Stock offered hereby for sale at the initial public offering
price to certain employees of the Company and to certain other persons. The
number of shares available for sale to the general public will be reduced to
the extent that such persons purchase such reserved shares. Any reserved
shares not so purchased will be offered by the Underwriters to the general
public on the same basis as the other shares of Common Stock offered hereby.
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 of the Underwriters.
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. There can, however, be no assurance that the
price at which the shares of Common Stock will sell in the public market after
the Offering will not 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 rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for or purchase the Common Stock. As an exception to these
rules, 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.
28
<PAGE>
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.
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.
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, directly or indirectly, of 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 consent of the Representative.
Pursuant to the Underwriting Agreement, the 4,411,765 shares of Common Stock
owned by Mr. Ledecky will be subject to restrictions on transfer for periods
ranging from at least 180 days to five years. Specifically, subject to the
provisions described below, Jonathan Ledecky may not offer, pledge, sell,
contract to sell, or otherwise transfer or dispose of, directly or indirectly
("Transfer") (i) any of the 4,411,765 shares of Common Stock owned by him
during the period ending two years after the date of this Prospectus, (ii)
2,058,824 shares of Common Stock owned by him during the period ending four
years after the date of this Prospectus and(iii) 588,235 shares of Common
Stock owned by him during the period ending five years after the date of this
Prospectus. Notwithstanding the preceding sentence, beginning 180 days after
the date of this Prospectus, the restrictions on Transfer will lapse (i) as to
50% of the shares still subject to such restrictions if the closing price of a
share of Common Stock is equal to or exceeds 150% of the Offering Price for a
period of at least 20 consecutive trading days and (ii) as to 100% of the
shares still subject to such restrictions if the closing price of a share of
Common Stock is equal to or exceeds 200% of the Offering Price for a period of
at least 20 consecutive trading days.
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.
From time to time, each of the Underwriters and their respective affiliates
may provide investment banking services to the Company.
29
<PAGE>
LEGAL MATTERS
The validity of the shares of 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.
EXPERTS
The balance sheet of Consolidation Capital Corporation as of September 19,
1997 and of Ledecky Brothers L.L.C. as of June 30, 1997 included in this
Prospectus have 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.
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.
30
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................................... F-2
Balance Sheet as of June 30, 1997 and September 19, 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
(successor) and Ledecky Brothers, L.L.C. (predecessor) at September 19, 1997
and June 30, 1997, respectively, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Companies' 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 statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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
September 19, 1997
F-2
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------- ------------------
JUNE 30, 1997 SEPTEMBER 19, 1997
------------- ------------------
<S> <C> <C>
ASSETS
Cash.......................................... $ 7 $ 238
Computer equipment............................ 8 8
---- -----
Total assets.................................. $ 15 $246
==== =====
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued liabilities......................... $ 10 $ 17
Payable to stockholder...................... 206
---- -----
Total liabilities......................... 10 223
---- -----
Stockholder's equity:
Common stock, $.001 par, 250,000,000 shares
authorized, 4,411,765 shares issued and
outstanding................................ 4
Additional paid-in capital.................. 122
LLC Capital Account......................... 59
Accumulated deficit......................... (54) (103)
---- -----
Total stockholder's equity................ 5 23
---- -----
Total liabilities and stockholder's
equity................................... $ 15 $ 246
==== =====
</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 in connection with the reorganization and
change of name of Ledecky Brothers, L.L.C., ("LLC"), a limited liability
corporation, to Consolidation Capital Corporation. Each of LLC and the Company
adopted a year-end of December 31.
In September 1997, the sole owner of LLC contributed 100% of his ownership
interest in LLC to the Company in exchange for 4,411,765 shares of common
stock of the Company which represents all of its issued and outstanding common
stock. This change in the legal structure was implemented to facilitate the
public offering. 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. 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 of these organizations 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--STOCKHOLDERS' EQUITY
Common Stock
On September 19, 1997, the sole stockholder of LLC exchanged his interest in
LLC for 4,411,765 shares of Consolidation Capital Corporation which represents
100% of the outstanding shares of the Company. The stockholder has made
contributions to LLC from time to time to fund expenses in the aggregate
amount of $126. These contributions have been reflected as additional paid-in
capital as of September 19, 1997.
1997 Long-Term Incentive Plan
The Company's Board of Directors intends to adopt and the Company's
stockholder intends to approve 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.
1997 Non-Employee Directors' Stock Plan
The Company's Board of Directors intends to adopt and the Company's
stockholder intends to approve 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 50,000 shares on the effective
date of the registration statement of which this Prospectus forms a part. A
maximum of 250,000 shares of Common Stock may be issued under the Directors'
Plan.
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
F-4
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
NOTES TO BALANCE SHEET--(CONTINUED)
(DOLLARS IN THOUSANDS)
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 intends to adopt a 1997 Employee Stock Purchase Plan (the
"Purchase Plan"). The Purchase Plan will permit 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.
NOTE 3--PAYABLE TO STOCKHOLDER
Mr. Ledecky, the sole stockholder, has advanced to the Company $206 to pay
certain fees in connection with the registration of the Common Stock being
offered hereby. The Company will repay such stockholder payable using the
proceeds from the Common Stock offering.
NOTE 4--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 5--NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"). 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-5
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Dilution................................................................. 14
Selected Financial Data.................................................. 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 15
Business................................................................. 16
Management............................................................... 21
Certain Relationships and Related Transactions........................... 24
Principal Stockholders................................................... 25
Description of Capital Stock............................................. 26
Shares Eligible for Future Sale.......................................... 27
Underwriting............................................................. 28
Legal Matters............................................................ 30
Experts.................................................................. 30
Additional Information................................................... 30
Index to Financial Statements............................................ F-1
</TABLE>
----------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICI-
PATING 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
25,000,000 SHARES
CONSOLIDATION
CAPITAL
CORPORATION
[LOGO]
COMMON STOCK
----------------
PROSPECTUS
----------------
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth fees payable to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc., and other
estimated expenses expected to be incurred in connection with issuance and
distribution of securities being registered. All such fees and expenses shall
be paid by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.............. $ 174,243
NASD Fee......................................................... 30,500
Nasdaq National Market Listing Fee............................... *
Printing and Engraving Expenses.................................. *
Accounting Fees and Expenses..................................... *
Legal Fees and Expenses.......................................... *
Directors and Officers Insurance................................. *
Transfer Agent Fees and Expenses................................. *
Miscellaneous.................................................... *
----------
Total.......................................................... $1,000,000
==========
</TABLE>
- --------
* To be supplied by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of
directors to the corporation or its stockholders for monetary damages for
breaches of fiduciary duty, except for liability (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any
transaction from which the director derived an improper personal benefit.
Article 10 of the registrant's Certificate of Incorporation provides that the
personal liability of directors of the registrant is eliminated as provided by
extent permitted by Section 102(b)(7) of the DGCL.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of being a director or officer of the
corporation if it is determined that the director or officer acted in
accordance with the applicable standard of conduct set forth in such statutory
provision. Article 7 of the registrant's Bylaws provides that the registrant
will indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding by
reason of the fact that he is or was a director, officer, employee or agent of
the registrant, or is or was serving at the request of the registrant as a
director, officer, employee or agent of another entity, against certain
liabilities, costs and expenses. Article 7 further permits the registrant to
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the registrant, or is or was serving at the request of
the registrant as a director, officer, employee or agent of another entity,
against any liability asserted against such person and incurred by such person
in any such capacity or arising out of his status as such, whether or not the
registrant would have the power to indemnify such person against such
liability under the DGCL.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In February 1997, Jonathan J. Ledecky, the Company's Chairman, founded the
Company's predecessor, Ledecky Brothers L.L.C. On September 19, 1997, Mr.
Ledecky exchanged his 100% interest in Ledecky Brothers L.L.C. for 4,411,765
shares of the Company's Common Stock, or 100% of the outstanding shares. The
issuances of securities by Ledecky Brothers L.L.C. and the Company to Mr.
Ledecky were made in reliance upon the exemption from registration under the
Securities Act of 1933, as amended, in Section 4(2).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are or will be filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.01 Form of Underwriting Agreement.*
3.01 Certificate of Incorporation of Consolidation Capital Corporation.*
3.02 Bylaws of Consolidation Capital Corporation.*
Opinion of Morgan, Lewis & Bockius LLP as to the legality of the
5.01 securities being registered.*
10.01 Consolidation Capital Corporation 1997 Long-Term Incentive Plan.*
Consolidation Capital Corporation 1997 Non-Employee Directors' Stock
10.02 Plan.*
10.03 Consolidation Capital Corporation 1997 Employee Stock Purchase Plan.*
23.01 Consent of Price Waterhouse LLP.
23.02 Consent of Morgan, Lewis & Bockius LLP (included in opinion filed as
Exhibit 5.1).*
23.03 Consent of David Ledecky (Director Nominee).
Power of Attorney (included on signature page of this registration
24.01 statement).
27.01 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment
(b) Financial statement schedules have been omitted because they are
inapplicable, are not required under applicable provisions of Regulation S-X,
or the information that would otherwise be included in such schedules is
contained in the registrant's financial statements or accompanying notes.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-2
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WASHINGTON, DISTRICT OF
COLUMBIA, ON SEPTEMBER 23, 1997.
Consolidation Capital Corporation
/s/ David Ledecky
By: _________________________________
DAVID LEDECKY
SENIOR VICE PRESIDENT
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Jonathan J. Ledecky and David Ledecky his true
and lawful attorneys-in-fact, with full powers, each acting alone, of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign any and all amendments (including post-
effective amendments) to this Registration Statement, or any Registration
Statement relating to this offering to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact
and agent full power and authority to do and perform each and every act in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them or their or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ David Ledecky Senior Vice ___September 23,
_____________________________________ President, Treasurer 1997
DAVID LEDECKY and Secretary
(principal executive
officer, principal
financial officer
and principal
accounting officer)
/s/ Jonathan J. Ledecky Chairman ___September 23,
_____________________________________ 1997
JONATHAN J. LEDECKY
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated September 19, 1997,
relating to the financial statement of Ledecky Brothers LLC and Consolidation
Capital Corporation, which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
September 19, 1997
<PAGE>
Exhibit 23.03
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I, David Ledecky, hereby consent to the use, in the Registration Statement
on Form S-1 of Consolidation Capital Corporation, a Delaware corporation (the
"Company"), to which this consent is filed as an exhibit included therein, of my
name as a person about to become a Director of the Company.
/s/ David Ledecky
---------------------------------
David Ledecky
September 23, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Consolidation Capital Corporations financial statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> FEB-27-1997
<PERIOD-END> SEP-19-1997
<CASH> 238
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8
<DEPRECIATION> 0
<TOTAL-ASSETS> 246
<CURRENT-LIABILITIES> 223
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 19
<TOTAL-LIABILITY-AND-EQUITY> 246
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
