As filed with the Securities and Exchange Commission on February 3, 1998
Registration No. 333-40303
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------
BW ACQUISITION CORP.
(Name of Small Business Issuer in Its Charter)
Delaware 6799 (a blank check company) 13-3863260
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification
Number)
------------
333 East 56th Street, Penthouse G
New York, New York 10022
(Address of Principal Place of Business or Intended Principal Place of Business)
------------
333 East 56th Street, Penthouse G
New York, New York 10022
(212) 752-3563
(Address and Telephone Number of Principal Executive Offices)
------------
Richard J. Berman
BW Acqusition Corporation
333 East 56th Street, Penthouse G
New York, New York 10022
(212) 752-3563
(Name, Address and Telephone Number of Agent For Service)
------------
Copies to:
Jeffrey A. Baumel, Esq. James M. Jenkins, Esq.
Gibbons, Del Deo, Dolan, Griffinger & Vecchione Harter, Secrest & Emery LLP
One Riverfront Plaza 700 Midtown Tower
Newark, New Jersey 07102 Rochester, New York 14604
(973) 596-4500 (716) 232-6500
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. X
------------
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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<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. Those 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 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 FEBRUARY 3, 1998
PROSPECTUS
BW ACQUISITION CORP. [LOGO]
800,000 Units, at $10.00 per Unit, each Unit consisting of one share of Class A
Common Stock and one Redeemable Class A Warrant entitling the holder thereof
to purchase, 90 days following the consummation of a Business Combination,
one share of Class A Common Stock at a price of $9.00 150,000 Shares
of Class B Exchangeable Common Stock, at $10.00 per share, each
share entitling the holder thereof to receive, 90
days following the consummation of a Business
Combination, two Units in exchange therefor
BW Acquisition Corp., a Delaware corporation (the "Company"), hereby offers
in a Specialized Merger and Acquisition Allocated Risk Transaction(SM)
("SMA(2)RT(SM)") 800,000 Units (the "Units"), each consisting of one share of
Class A Common Stock, par value $.01 per share (the "Class A Stock"), and one
Redeemable Class A Common Stock Purchase Warrant (the "Class A Warrants"), and
150,000 shares of Class B Exchangeable Common Stock, par value $.01 per share
(the "Class B Stock"), each entitling the holder thereof to receive two Units in
exchange therefor, 90 days after the date of a Business Combination, as defined,
or any earlier date on or after the date of a Business Combination that the
Representative in its sole discretion elects. The Units and the Class B Stock,
which are being offered in the same offering, will be sold and traded
separately. The Class A Stock and the Class A Warrants will become separable and
transferable at such time as H.J. Meyers & Co., Inc. (the "Representative") may
determine, but in no event will the Representative allow separate trading of the
securities comprising the Units until the preparation of an audited balance
sheet of the Company reflecting receipt by the Company of the proceeds of this
offering and the filing by the Company with the Securities and Exchange
Commission of a Current Report on Form 8-K which includes such audited balance
sheet (the "Separation Date"). The Representative will act as representative of
the several underwriters (the "Underwriters"). Each Class A Warrant will entitle
the holder thereof to purchase one share of Class A Stock at a price per share
of $9.00, 90 days after the date of a Business Combination or any earlier date
on or after the date of a Business Combination that the Representative, in its
sole discretion, so elects. Each share of Class B Stock will entitle the holder
thereof to receive two Units in exchange therefor, 90 days following the
consummation of a Business Combination or any earlier date on or after the date
of a Business Combination that the Representative, in its sole discretion so
elects. (The Class A Stock and the Class B Stock are sometimes hereinafter
collectively referred to as the "Common Stock.") Furthermore, the Class A
Warrants are redeemable, in whole and not in part, at the option of the Company,
at a price of $.05 per Warrant at any time, upon not less than 30 days' prior
written notice to the registered holders thereof, provided that the Company has
consummated a Business Combination, as defined, and that the last sale price of
the Class A Stock, if the Class A Stock is listed for trading on an exchange or
interdealer quotation system which provides last sale prices, or, the average of
the closing bid and asked quotes for the Class A Stock, if the Class A Stock is
listed for trading on an interdealer quotation system which does not provide
last sale prices, on all 10 of the trading days ending on the day immediately
prior to the day on which the Company gives notice of redemption, has been
$11.00 or higher.
Prior to this offering, there has been no public market for the Units, the
shares of Common Stock or the Class A Warrants and there can be no assurance
that such a market will develop for any of such securities after the completion
of this offering. The offering prices of the Units and the Class B Stock and the
exercise prices and terms of the Class A Warrants have been arbitrarily
determined by the Company and the Representative, and bear no relationship to
the assets, book value, or other generally accepted criteria of value. For
additional information regarding the factors considered in determining the
initial public offering prices of the Units and the Class B Stock and the
exercise prices and the terms of the Class A Warrants, see "Risk Factors" and
"Underwriting." The Company anticipates that the Units, the Class A Stock, the
Class A Warrants and the Class B Stock will be quoted on the OTC Bulletin Board
under the symbols "BWCQU," "BWCQ," "BWCQW" and "BWCQL," respectively.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" (PAGE 15) AND "DILUTION."
THIS OFFERING WILL NOT BE CONDUCTED IN ACCORDANCE WITH RULE 419 OF
REGULATION C OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). RULE 419 OF
THE ACT WAS DESIGNED TO STRENGTHEN REGULATION OF SECURITIES OFFERINGS BY BLANK
CHECK COMPANIES WHICH CONGRESS HAS FOUND TO HAVE BEEN A COMMON VEHICLE FOR FRAUD
AND MANIPULATION IN THE PENNY STOCK MARKET. THE COMPANY IS A BLANK CHECK COMPANY
BUT IS NOT SUBJECT TO RULE 419 OF THE ACT BECAUSE THE COMPANY'S NET TANGIBLE
ASSETS AFTER ITS RECEIPT OF THE PROCEEDS OF THIS OFFERING WILL EXCEED
$5,000,000. ACCORDINGLY, INVESTORS IN THIS OFFERING WILL NOT RECEIVE THE
SUBSTANTIVE PROTECTION PROVIDED BY RULE 419 OF THE ACT. SEE "RISK FACTORS."
(PAGE 15)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
====================================================================================================================================
Price to Public Underwriting Discounts(1) Proceeds to Company (2)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit ......................................... $10.00 $.60 $9.40
- ------------------------------------------------------------------------------------------------------------------------------------
Per Class B Share ................................ $10.00 $1.00 $9.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total (4) ........................................ $9,500,000.00 $630,000.00 $8,870,000.00
====================================================================================================================================
</TABLE>
(Footnotes on next page)
The Units and the Class B Stock are being offered by the Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to its right to withdraw, cancel or modify this
offering and to reject any order in whole or in part. It is expected that
delivery of certificates will be made at the offices of H.J. Meyers & Co., Inc.,
1895 Mount Hope Avenue, Rochester, New York 14620, on or about , 1997.
H.J. MEYERS & CO., INC.
------------
The date of this Prospectus is , 1998.
<PAGE>
(Continued from Cover Page)
(1) Does not include additional compensation to the Representative in the form
of a non-accountable expense allowance of 3% of the gross proceeds of this
offering. For indemnification arrangements with the Underwriters and
additional compensation payable to the Representative, see "Underwriting."
(2) Before deducting estimated offering expenses of approximately $175,000,
including the Representatives 3% non-accountable expense allowance of
$285,000 (assuming no exercise of over-allotment option) payable by the
Company.
(3) Used as a basis for calculating the underwriting discount with respect to
the Units. A portion of the net proceeds from the sale of the Class B Stock
equal to the discounts and the Representative's non-accountable expense
allowance attributable to the sale of the Units will be deposited into
escrow with the Proceeds Escrow Agent (as defined). See "The Company --
Escrow of Offering Proceeds."
(4) The Company has granted the Underwriters a 30-day option to purchase up to
120,000 additional Units and/or 22,500 additional shares of Class B Stock
upon the same terms and conditions as set forth above, solely to cover
over-allotments, if any. If such over-allotment option is exercised in
full, the total Price to Public, Underwriting Discounts and Proceeds to
Company will be $10,925,000, $724,500, and $10,200,500, respectively. See
"Underwriting."
"SMA(2)RT(SM)" AND "SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK
TRANSACTION(SM)" ARE SERVICEMARKS OF BRIGHT LICENSING CORP. ("BRIGHT"). BRIGHT
HAS GRANTED THE COMPANY, PURSUANT TO A LICENSE AGREEMENT EXECUTED BY BRIGHT AND
THE COMPANY, A NON-EXCLUSIVE LICENSE TO USE, FOR PURPOSES OF MARKETING THIS
OFFERING, THE SMA(2)RT(SM) AND SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK
TRANSACTION(SM) SERVICEMARKS.
THE SMA(2)RT(SM) SERVICEMARK HAS BEEN LICENSED TO THE COMPANY FOR PURPOSES
OF MARKETING THIS OFFERING AND IS BEING USED AS AN ACRONYM TO DESCRIBE THE RISK
ALLOCATION FEATURE OF THIS OFFERING. USE OF THE SMA(2)RT(SM) SERVICEMARK,
HOWEVER, SHOULD IN NO WAY BE CONSTRUED BY AN INVESTOR AS AN ENDORSEMENT OF THE
MERITS OF THIS OFFERING.
INVESTORS SHOULD BE ADVISED THAT A SMA(2)RT(SM), OR SPECIALIZED MERGER AND
ACQUISITION ALLOCATED RISK TRANSACTION(SM), IS IN NO WAY RELATED OR SIMILAR TO A
SPAC(SM), OR SPECIFIED PURPOSE ACQUISITION COMPANY(SM) (WHICH ARE SERVICEMARKS
OF GKN SECURITIES CORP.), AND INVESTORS SHOULD NOT CONSTRUE A SMA(2)RT(SM) AS
BEING SIMILAR TO A SPAC(SM) OR A SPECIFIED PURPOSE ACQUISITION COMPANY(SM). NONE
OF THE OFFICERS, DIRECTORS OR CONTROLLING PERSONS OF THE COMPANY OR THE
REPRESENTATIVES ARE AFFILIATED WITH ANY OF THE OFFICERS, DIRECTORS OR
CONTROLLING PERSONS OF THE OWNERS OF THE SPAC(SM) AND SPECIFIED PURPOSE
ACQUISITION COMPANY(SM) SERVICEMARKS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, THE
COMMON STOCK OR THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
THE COMPANY HAS REGISTERED THE SECURITIES, OR AN EXEMPTION FROM
REGISTRATION HAS BEEN OBTAINED (OR IS OTHERWISE AVAILABLE), ONLY IN THE STATES
OF COLORADO, DELAWARE, FLORIDA, HAWAII, ILLINOIS, LOUISIANA, MARYLAND, NEW YORK,
RHODE ISLAND, SOUTH CAROLINA AND THE DISTRICT OF COLUMBIA (THE "PRIMARY
DISTRIBUTION STATES") AND INITIAL SALES MAY ONLY BE MADE IN SUCH JURISDICTIONS.
MORE SPECIFICALLY, THE COMPANY HAS REGISTERED THE SECURITIES BY FILING IN
COLORADO, BY COORDINATION IN DELAWARE, ILLINOIS, MARYLAND, RHODE ISLAND AND
SOUTH CAROLINA AND BY NOTIFICATION IN FLORIDA, LOUISIANA AND NEW YORK.
EXEMPTIONS FROM REGISTRATION HAVE BEEN OBTAINED (OR ARE OTHERWISE AVAILABLE) IN
HAWAII AND THE DISTRICT OF COLUMBIA. PURCHASERS OF SECURITIES IN THIS OFFERING
MUST BE RESIDENTS OF THE PRIMARY DISTRIBUTION STATES. THE SECURITIES WILL BE
IMMEDIATELY AVAILABLE FOR RESALE IN EACH OF THE PRIMARY DISTRIBUTION STATES AND
IN THE COMMONWEALTH OF PENNSYLVANIA. UNLESS AN APPLICABLE EXEMPTION IS
AVAILABLE, PURCHASERS OF SECURITIES EITHER IN THIS OFFERING OR IN ANY SUBSEQUENT
TRADING MARKET WHICH MAY DEVELOP MUST BE RESIDENTS OF SUCH JURISDICTIONS. THE
COMPANY WILL AMEND THIS PROSPECTUS FOR THE PURPOSE OF DISCLOSING ADDITIONAL
STATES, IF ANY, IN WHICH THE COMPANY'S SECURITIES WILL BE ELIGIBLE FOR RESALE IN
THE SECONDARY TRADING MARKET.
FLORIDA RESIDENTS:
FLORIDA RESIDENTS WHO PURCHASE CLASS B STOCK WILL BE UNABLE TO EXCHANGE
THIS STOCK FOR UNITS UNLESS AND UNTIL THE UNITS ISSUABLE UPON EXCHANGE OF THE
CLASS B STOCK HAVE BEEN REGISTERED FOR SALE IN FLORIDA OR ARE ESTABLISHED TO BE
EXEMPT FROM THE REQUIREMENT OF SUCH REGISTRATION. FLORIDA LAW GENERALLY
PRECLUDES THE REGISTRATION OF SECURITIES THAT ARE NOT LISTED ON A SECURITIES
EXCHANGE OR THE NASDAQ SYSTEM WHEN THE OFFERING PRICE OF SUCH SECURITIES IS
$5.00 OR LESS PER SHARE. BECAUSE THE "EXCHANGE PRICE" OF CLASS B STOCK IS NIL,
THE "OFFERING PRICE" OF THE UNITS ISSUABLE UPON EXCHANGE OF THE CLASS B STOCK
COULD BE CONSIDERED NOT GREATER THAN $5.00. FOR THIS REASON, NO PERMIT TO SELL
THE UNITS ISSUABLE UPON EXCHANGE OF THE CLASS B STOCK IN FLORIDA HAS BEEN
OBTAINED. THERE CAN BE NO ASSURANCE THAT THE UNITS ISSUABLE UPON EXCHANGE OF THE
CLASS B STOCK WILL EVER BE REGISTERED IN FLORIDA OR ESTABLISHED TO BE EXEMPT
FROM THE REQUIREMENT OF SUCH REGISTRATION.
2
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information and
financial statements (including the notes thereto) appearing elsewhere in this
Prospectus. Unless otherwise indicated, all information in this Prospectus
assumes that the over-allotment option granted to the Underwriters is not
exercised. Investors should consider carefully the information set forth in this
Prospectus under the heading "Risk Factors."
The Company
Business Objectives
The Company, which is a "blank check" company, was formed on November 28,
1995 to serve as a vehicle to effect a merger, exchange of capital stock, asset
acquisition or other business combination (a "Business Combination") with an
operating business (a "Target Business"). The business objective of the Company
is to effect a Business Combination with a Target Business which the Company
believes has significant growth potential. The Company intends to utilize the
net proceeds of this offering, equity securities, debt securities, bank
borrowings or a combination thereof in effecting a Business Combination.
The Company will seek to acquire a Target Business that is involved
primarily in the development, advancement, and use of science and technology.
The Target Business will likely be involved in an industry that includes
computers and peripheral products, software, electronic components and systems,
telecommunications, media and information services, pharmaceuticals, hospital
supply and medical devices, biotechnology, environmental services, chemicals and
synthetic materials or defense and aerospace. This may also include a Target
Business that could benefit from the commercialization of technological advances
even if they are not directly involved in research and development. Target
Businesses may include small companies developing new technologies or pursuing
scientific breakthroughs or large, better established businesses with track
records of developing and marketing such advances. Most likely, the Target
Business will be primarily located in the United States, although the Company
reserves the right to acquire a Target Business primarily located outside the
United States. The Company will not acquire a Target Business unless the fair
market value of such business, as determined by the Company based upon standards
generally accepted by the financial community, including revenues, earnings,
cash flow and book value (the "Fair Market Value"), is at least 80% of the net
assets of the Company at the time of the consummation of a Business Combination
(the "Fair Market Value Test"). If the Company determines that the financial
statements of a proposed Target Business do not clearly indicate that the Fair
Market Value Test has been satisfied, the Company will obtain an opinion from an
investment banking firm that is a member of the National Association of
Securities Dealers, Inc. (the "NASD") with respect to the satisfaction of such
criteria. The Company has not had any contact or discussions with any entity or
representatives of any entity regarding a Business Combination. While the
Company may, under certain circumstances, seek to effect Business Combinations
with more than one Target Business, in all likelihood, as a result of its
limited resources, the Company will have the ability to effect only a single
Business Combination with a Target Business. The Company does not intend to
register as a broker-dealer, merge with or acquire a registered broker-dealer,
or otherwise become a member of the NASD.
Business Experience of Principals
The executive officers and the other directors of the Company have business
experience which has provided them with skills which the Company believes will
be helpful in evaluating potential Target Businesses and negotiating a Business
Combination.
Escrow of Initial Public Offering Proceeds
Upon completion of this offering, an aggregate of approximately $8,000,000
(or $9,200,000 if the Underwriters' over-allotment option is exercised in full),
representing an amount equal to the gross proceeds from the sale of the Units,
will be placed in an escrow account maintained by Chase Manhattan Bank (the
"Proceeds Escrow Agent"), subject to release upon the earlier of (1) receipt by
the Proceeds Escrow Agent of: (i) written notice from the Company of the
Company's completion of a transaction or series of transactions in which at
least 50% of the gross proceeds from this offering are committed to a specific
line of business as a result of a Business Combination
3
<PAGE>
(including any redemption payments), (ii) a written opinion of counsel of the
Company, reasonably acceptable to the Proceeds Escrow Agent, that a Business
Combination was approved by a vote of two-thirds of the shares of Common Stock
of the Company, (with each share of Class B Stock entitled to two votes) as
described in this Prospectus, and that the holders of more than 20% of the Class
A Stock of the Company have not elected to redeem their Class A Stock, as
required by this Prospectus, and (iii) a written certification from the Company
that the fair market value (as determined by the Company, based upon standards
generally accepted by the financial community, including revenues, earnings,
cash flow, and book value) of the Target Business exceeds 80% of the net value
of the assets of the Company and that all other actions required by the Company
for the release of the escrow proceeds have been met, or (2) either (i) after 18
months of the date of effectiveness of this offering (or 24 months if the
Proceeds Escrow Agent has received notice within the initial 18 month period
that the Extension Criteria, as herein defined, have been satisfied) if the
Proceeds Escrow Agent has not received written notice from the Company of the
Company's completion of a transaction or series of transactions in which at
least 50% of the gross proceeds from this offering are committed to a specific
line of business as a result of a Business Combination, or (ii) receipt by the
Proceeds Escrow Agent of written notification to distribute the escrow proceeds
to the holders of Class A Stock purchased as part of the Units sold in this
offering or in the open market thereafter in redemption of the Class A Stock, or
(iii) receipt by the Proceeds Escrow Agent of written notification to distribute
part of the escrow proceeds to the holders of record of Class A Stock purchased
as part of the Units sold in this offering or in the open market thereafter who
elected to have their shares redeemed in accordance with the terms set forth in
this Prospectus. The Company will notify the Representative and the NASD prior
to the release of funds from the escrow account. All proceeds held in the escrow
account will be invested, until released, in short-term United States government
securities, including treasury bills, cash and cash equivalents. Except as noted
below, the proceeds to the Company from the sale of the Class B Stock will not
be placed in escrow. Rather, these proceeds will be used (i) to repay
indebtedness, (ii) to pay a $100,000 license fee to Bright pursuant to a license
agreement executed by Bright and the Company ($10,000 of which has been
previously paid from the proceeds of the Investor Notes (See "Use of
Proceeds")), (iii) to cover all the expenses incurred by the Company in this
offering, including the Underwriters' discounts and the Representative's
non-accountable expense allowance, and (iv) to fund the Company's operating
expenses, including investment banking fees and the costs of business, legal and
accounting due diligence on prospective Target Businesses, until the
consummation of a Business Combination. In addition, a portion of the net
proceeds from the sale of the Class B Stock equal to the Underwriters' discounts
and the Representative's non-accountable expense allowance with respect to the
Units, as noted in clause (iii) above, will be placed in the above mentioned
escrow account for the benefit of purchasers of Class A Stock as part of the
Units sold in this offering and in the open market thereafter. Management is
unaware of any circumstance under which this policy, through management's own
initiative, may be changed.
Stockholder Approval of Business Combinations
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the Business Combination is such as would not ordinarily
require stockholder approval under applicable state law. In connection with such
request, the Company intends to provide stockholders with disclosure
documentation in accordance with the proxy solicitation regulations under the
Securities Exchange Act of 1934, as amended (the "Proxy Rules"), including
audited financial statements, concerning a Target Business. All of the Company's
present stockholders, including all directors and the Company's executive
officers, have agreed to vote all of their respective shares of Class A Stock in
accordance with the vote of the majority of the shares voted by all other
stockholders of the Company ("non-affiliated public stockholders") with respect
to any such Business Combination. A Business Combination will not be consummated
unless approved by a vote of two-thirds of the shares of Common Stock voted by
the stockholders (in person or by proxy). Each share of Class B Stock is
entitled to two votes on all matters on which the Class A Stock is entitled to
vote, representing the two shares of Class A Stock underlying the two Units into
which each share of Class B Stock is exchangeable. In addition, the Delaware
General Corporation Law requires approval of certain mergers and consolidations
by a majority of the outstanding stock entitled to vote. Holders of Class A
Warrants who otherwise do not own any shares of Common Stock will not be
entitled to vote on any Business Combination.
4
<PAGE>
Redemption Rights
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer (the "Redemption Offer") to each of
the non-affiliated public holders of Class A Stock the right, for a specified
period of time of not less than 20 calendar days, to redeem his shares of Class
A Stock at a price equal to the Liquidation Value (as defined below) of such
shares as of the record date established for determining the stockholders
entitled to vote with respect to the approval of a Business Combination (the
"Record Date"). The Redemption Offer will be described in the disclosure
documentation relating to the proposed Business Combination. The "Liquidation
Value" for each share of Class A Stock will be determined as of the Record Date
by dividing (A) the amount of the proceeds in the escrow account (including
interest earned thereon) by (B) the number of shares of Class A Stock held by
non-affiliated public stockholders; however, in no event will the Liquidation
Value of each share of Class A Stock be less than $10.00 plus interest earned
thereon. In connection with the Redemption Offer, if non-affiliated public
stockholders holding 20% or less of the shares of Class A Stock elect to redeem
their shares, the Company may, but will not be required to, proceed with such
Business Combination and, if the Company elects to so proceed, will redeem such
shares at their Liquidation Value as of the Record Date. In any case, if
non-affiliated public stockholders holding more than 20% of the Class A Stock
elect to redeem their shares, the Company will not proceed with such potential
Business Combination and will not redeem such shares. All holders of Class A
Stock and all holders of Warrants prior to the date of this Prospectus will be
allowed to participate in a Redemption Offer only if they purchase shares of
Class A Stock in this offering or on the open market thereafter, and only as to
any shares of Class A Stock so purchased.
Escrow of Outstanding Shares
All of the shares of Class A Stock and Series A Preferred Stock (the
"Escrowed Stock") outstanding immediately prior to the date of this Prospectus
have been placed in escrow with American Stock Transfer & Trust Company (the
"Share Escrow Agent"), until the earlier of (i) the occurrence of the
consummation of the first Business Combination or (ii) 18 months from the date
of this Prospectus provided that such 18-month period will be extended by six
months to 24 months from the date of this Prospectus if, prior to the expiration
of the 18-month period, the Company has become a party to a letter of intent or
a definitive agreement to effect a Business Combination (the "Extension
Criteria"). During the escrow period, the holders of the Escrowed Stock will not
be able to sell or otherwise transfer their respective shares of Escrowed Stock
(with the exceptions described below), but will retain all other rights as
stockholders of the Company, including, without limitation, the right to vote
escrowed shares of Class A Stock, subject to their agreement to vote all of
their shares in accordance with the vote of a majority of the non-affiliated
public holders of Class A Stock with respect to a consummation of a Business
Combination or liquidation proposal, but excluding the right to request the
redemption of Escrowed Stock pursuant to a Redemption Offer. Subject to
compliance with applicable securities laws, any such holder may transfer his,
her or its Escrowed Stock to a family member or to a trust established for the
benefit of himself, herself, or a family member or to another affiliated entity
(with the consent of the Representative which will not be unreasonably withheld)
or, in the event of the holder's death, by will or operation of law, or in the
case of its dissolution or merger, provided that any such transferee must agree
as a condition to such transfer to be bound by the restrictions on transfer
applicable to the original holder and, in the case of present stockholders other
than the holders of the Placement Shares, that the transferor (except in the
case of death) or successor will continue to be deemed the beneficial owner (as
defined in Regulation 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of such transferred shares.
Each of the executive officers and the other directors of the Company has
agreed to surrender his shares of Class A Stock to the Company at the purchase
price at which such shares were acquired ($.10 per share) if he resigns prior to
the consummation of the first Business Combination.
Restrictions on Sale of Outstanding Shares
All of the shares of Class A Stock outstanding prior to the date of this
Prospectus, other than 10,000 shares of Class A Stock issued in a private
placement by the Company in October 1997 (the "Placement Shares") and the shares
of Class A Stock issuable upon the exercise of options and Units granted to the
Company's officers and directors and the exercise of warrants included in the
Units issuable upon exercise of such options, are referred to
5
<PAGE>
herein as "Founders' Shares." The Founders' Shares are subject to an agreement
with the holders of the Founders' Shares not to sell or otherwise transfer such
shares for a period of 24 months from September 25, 1997, the issuance date, but
in no event earlier than 120 days following the consummation of the first
Business Combination. However, subject to compliance with applicable securities
laws, any such holder may transfer Founders' Shares to a family member or to a
trust established for the benefit of himself, herself, or to a family member or
to another affiliated entity (with the consent of the Representative which will
not be unreasonably withheld) or in the event of the holder's death by will or
operation of law, or its dissolution or merger, provided that any such
transferee or successor must agree as a condition to such transfer to be bound
by the restrictions on transfer applicable to the original holder and that the
transferor or its principals, if the transferor is an entity (except in the case
of death) will continue to be deemed the beneficial owner (as defined in
Regulation 13d-3 promulgated under the Exchange Act) of such transferred shares.
The certificates representing the Founders' Shares will bear a restrictive
legend with respect to such restrictions and the Company's transfer agent will
note such restrictions on the Company's transfer books and records.
The Company has outstanding 134 shares of Series A Preferred Stock which
are held by Summerwind L.L.C. ("Summerwind"), an indirect affiliate of Bright.
The shares are convertible to Class A Stock on the basis of one thousand shares
of Class A Stock for each share of Series A Preferred Stock for a one year
period commencing upon the consummation of a Business Combination. The 134,000
shares of Class A Stock issuable upon conversion of the Company's outstanding
Series A Preferred Stock will be offered by a Prospectus at the time of a
Business Combination and thereafter will be freely tradable under applicable
securities laws.
Redemption of Class A Stock if No Business Combination
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit to the
holders of Class A Stock for their consideration a proposal to distribute to the
then holders of Class A Stock acquired as part of the Units sold in this
offering or in the open market thereafter, in redemption of such shares, the
amounts in the interest bearing escrow account. Following such a redemption of
Class A Stock, each outstanding share of Class B Stock will be exchanged for two
shares of Class A Stock. The assets of the Company (other than the escrowed
assets) will be used to pay the Company's liabilities and to redeem the
Company's outstanding Series A Preferred Stock at its liquidation value,
$13,400. The amount per share for distribution, to the holders of Class A Stock
acquired as part of the Units sold in this offering or in the open market
thereafter, and exclusive of any income earned on the proceeds held in the
escrow account, will be approximately equal to the initial public offering price
per Unit in this offering of $10.00 per Unit (assuming no value is attributed to
the Class A Warrants included in the Units offered hereby). All of the present
stockholders, including the Company's executive officers and other directors and
their affiliates, are required by the escrow agreement to which their stock is
subject to vote their shares of Class A Stock in accordance with the vote of the
majority of all non-affiliated public holders of Common Stock with respect to
any redemption proposal. See "The Company -- Escrow of Outstanding Shares."
Holders of Class A Warrants, however, will only be entitled to vote on any
redemption proposal, and allowed to participate in any redemption distribution,
if they purchase shares of Common Stock in this offering or on the open market
thereafter, but only as to any shares of Common Stock so purchased. Present
stockholders, including officers, directors and their affiliates, will not
participate in any redemption distribution with respect to the shares of Common
Stock owned by them as of the date of this Prospectus.
6
<PAGE>
The Offering
<TABLE>
<S> <C>
The Offering............................. 800,000 Units, at $10.00 per Unit and 150,000 shares of Class B Exchangeable Common
Stock, at $10.00 per share of Class B Stock. Each Unit consists of one share of Class
A Common Stock and one Class A Warrant entitling the holder thereof to purchase one
share of Class A Common Stock at a price of $9.00, commencing 90 days after the date
of a Business Combination or any earlier date on or after the date of a Business
Combination that the Representative, in its sole discretion, so elects. Each share of
Class B Stock will entitle the holder thereof to receive two Units in exchange
therefor, 90 days after the date of a Business Combination or any earlier date on or
after the date of a Business Combination that the Representative, in its sole
discretion, so elects. The Units and the Class B Stock, which are being offered in
the same offering, will be sold and traded separately. The securities comprising the
Units will become separable and transferable at such time as the Representative may
determine, but in no event will the Representative allow separate trading of the
securities comprising the Units until the preparation of an audited balance sheet of
the Company reflecting receipt by the Company of the proceeds of this offering and
the filing by the Company with the Commission of a Current Report on Form 8-K which
includes such audited balance sheet. See "Description of Securities" and "Principal
Stockholders."
Series A Preferred Stock................. 134 shares
Class A Stock outstanding prior
to the offering ....................... 66,500 shares.
Class A Stock to be outstanding after
the offering (1) ...................... 866,500 shares.
Class B Stock outstanding prior
to the Offering ....................... None
Class B Stock outstanding after
the Offering (2) ...................... 150,000 shares
Number of Class A Warrants to be
outstanding after the offering (3) .... 800,000 Class A Warrants.
Exercise price of Class A Warrants ...... The exercise price of each Class A Warrant is $9.00, subject to adjustment in certain
circumstances. See "Description of Securities."
Exercise period ......................... The exercise period of the Class A Warrants will commence 90 days after the consummation
of a Business Combination or any earlier date on or after the date of a Business
Combination that the Representative, in its sole discretion so elects, and will
expire at 5:00 p.m., New York City time, on the fifth anniversary of the date of this
Prospectus.
Redemption .............................. The Class A Warrants are redeemable by the Company, each as a class, in whole and not in
part, at the option of the Company, at a price of $.05 per Class A Warrant, at any
time, upon not less than 30 days' prior written notice to the registered holders
thereof, provided that the Company has consummated a Business Combination and that
the last sale price of the Class A Stock, if the Class A Stock is listed for trading
on an exchange or interdealer quotation system which provides last sale prices, or,
the average of the closing bid and asked quotes for the Class A Stock, if the Class A
Stock is listed for trading on an interdealer quotation system which does not provide
last sale prices, on all 10 of the trading days ending on the day immediately prior
to the day on which the Company gives notice of redemption, has been $11.00 or
higher.
</TABLE>
7
<PAGE>
Proposed OTC Bulletin
Board Symbols ......................... Units - BWCQU
Class A Stock - BWCQ
Class A Warrants - BWCQW
Class B Stock - BWCQL
- ---------- (1) Excludes a total of 2,254,000 shares of Class A Stock, consisting
of: (i) 800,000 shares of Class A Stock reserved for issuance upon the
exercise of the Class A Warrants, (ii) 300,000 shares of Class A Stock
reserved for issuance upon exchange of the Class B Stock, (iii) 300,000
shares of Class A Stock reserved for issuance upon exercise of the Class A
Warrants comprising a part of the Units underlying the Class B Stock, (iv)
120,000 shares of Class A Stock included in the Units subject to the
Underwriters' over-allotment option, (v) 120,000 shares of Class A Stock
reserved for issuance upon the exercise of the Class A Warrants included in
the Units subject to the Underwriters' over-allotment option, (vi) 45,000
shares of Class A Stock reserved for issuance upon exercise of the Units
underlying the Class B Stock subject to the Underwriters' over-allotment
option, (vii) 45,000 shares of Class A Stock reserved for issuance as part
of the Class A Warrants comprising a part of the Units underlying the Class
B Stock subject to the Underwriters' over-allotment option, (viii) 200,000
shares of Class A Stock reserved for issuance upon exercise of options to
purchase Units granted to executive officers and directors of the Company;
(ix) 134,000 shares of Class A Stock reserved for issuance upon conversion
of the Company's outstanding Series A Preferred Stock, (x) 80,000 shares of
Class A Stock included in the Units reserved for issuance upon exercise of
warrants to purchase 80,000 Units, exercisable over a period of four years
commencing one year from the date of this Prospectus, being sold to the
Representative (the "Representative's Unit Purchase Warrants"), (xi) 80,000
shares of Class A Stock reserved for issuance upon the exercise of the
Class A Warrants included in the Units reserved for issuance upon exercise
of the Representative's Unit Purchase Warrants, (xii) 30,000 shares of
Class A Stock included in the Units reserved for issuance upon exercise of
a warrant to purchase 15,000 shares of Class B Stock, exercisable over a
period of four years commencing one year from the date of this Prospectus,
being sold to the Representative's (the "Representative's Class B
Warrants"), (xiii) 30,000 shares of Class A Stock reserved for issuance
upon exercise of Class A Warrants comprising a part of the Units underlying
the Representative's Class B Warrants, (xiv) 60,000 shares of Class A Stock
reserved for issuance upon exchange of the Class B Stock reserved for
issuance upon the exercise of options granted to two of the Company's
directors, and (xv) 60,000 shares of Class A Stock reserved for issuance
upon exercise of the Class A Warrants comprising a part of the Units
underlying the Class B Stock reserved for issuance upon the exercise of
options granted to two of the Company's directors. See "Management,"
"Underwriting" and "Certain Transactions."
(2) Excludes (i) 22,500 shares of Class B Stock subject to the Underwriters'
over-allotment option and (ii) 15,000 shares of Class B Stock issuable upon
exercise of the Representative's Class B Warrants. See "The Company,"
"Certain Transactions" and "Underwriting."
(3) Excludes (i) 120,000 Class A Warrants included in the Units subject to the
Underwriters' over-allotment option, (ii) an additional 45,000 Class A
Warrants comprising a part of the Units underlying the Class B Stock
subject to the Underwriters' over-allotment option, (iii) 80,000 Class A
Warrants included in the Units reserved for issuance upon exercise of the
Representative's Unit Purchase Warrants, (iv) 30,000 Class A Warrants
underlying the Units underlying the Representative's Class B Stock Purchase
Warrants, (v) 60,000 Class A Warrants comprising a part of the Units
underlying the Class B Stock reserved for issuance upon the exercise of
options granted to two of the Company's directors and (vi) 100,000 Class A
Warrants comprising part of the Units issuable upon exercise of options
granted to executive officers and directors of the Company. See
"Management" and "Underwriting."
The SMA(2)RT(SM) Structure
A Specialized
Merger and Acquisition Allocated Risk TRANSACTION(SM) (SMA(2)RT(SM))
provides an investor in this offering with an opportunity to purchase Units
for $10.00 each, the proceeds of which will be placed into escrow for the
benefit of stockholders and will be returned if the Company does not effect
a Business Combination; and/or Class B Stock (which are exchangeable into
Units) for $10.00 each, the proceeds of which will not be placed in escrow,
except as noted below, but rather will be used (i) to repay indebtedness,
(ii) to pay a $100,000 license fee due to Bright pursuant to a license
agreement executed by Bright and the Company, ($10,000 of which has been
previously paid from proceeds of the Investor Notes) (iii) to cover all of
the Company's expenses incurred in this
8
<PAGE>
offering, including the Underwriters' discounts and the Representative's
non-accountableexpense allowance, and (iv) to fund the Company's operating
expenses, including investment banking fees and the costs of business, legal and
accounting due diligence on prospective Target Businesses. Consequently, when
the Class B Stock is exchanged, holders of Class B Stock would pay substantially
less for the Units issuable upon exchange of such Class B Stock than holders of
Units and, accordingly, may realize a higher return on their investment. Holders
of Class B Stock, however, risk the loss of their investment if the Company
fails to effect a Business Combination, while holders of shares of Class A Stock
comprising part of the Units benefit from the Company's escrow of an amount
equal to the gross proceeds from the sale of the Units in this offering.
Risk Factors
The securities offered in this Specialized Merger and Acquisition Allocated
Risk TRANSACTION(SM) (SMA(2)RT(SM)) involve a high degree of risk and immediate
substantial dilution and should not be purchased by investors who cannot afford
the loss of their entire investment. Prior to this offering there has been no
public market for the Units, the Class A Stock, the Class A Warrants or the
Class B Stock and there can be no assurance that such a market will develop
after completion of this offering. Such risk factors include, among others, the
following: the Company's lack of operating history and limited resources;
discretionary use of proceeds; no escrow security for the purchasers of the
Class A Warrants and Class B Stock; intense competition in selecting a Target
Business and effecting a Business Combination; and, because of the Company's
limited resources, the possibility that the Company's due diligence
investigation of a potential Business Combination will be restricted, especially
in the case of a Target Business outside the United States. Investors will incur
immediate substantial dilution. See "Risk Factors," "Dilution" and "Use of
Proceeds."
Use of Proceeds
The Company intends to use substantially all of the net proceeds of the
offering, together with the interest earned thereon, to attempt to effect a
Business Combination, including selecting and evaluating potential Target
Businesses and structuring, negotiating and consummating a Business Combination
(including possible payment of finder's fees or other compensation to persons or
entities which provide assistance or services to the Company). Approximately 84%
of the gross proceeds of the offering by the Company (representing an amount
equal to the approximately $8,000,000 gross proceeds from the sale of the Units
as a percentage of the gross proceeds of this offering) will be held in an
escrow account maintained by the Proceeds Escrow Agent, until the earlier of
written notification by the Company to the Proceeds Escrow Agent (i) of the
Company's completion of a transaction or series of transactions in which at
least 50% of the gross proceeds from this offering is committed to a specific
line of business as a result of a consummation of a Business Combination
(including any redemption payments), or (ii) to distribute the escrowed
proceeds, in connection with a redemption of the Company's Class A Stock, to the
then holders of the Class A Stock purchased as part of the Units sold in this
offering or acquired in the open market thereafter. All proceeds held in the
escrow account will be invested, until released, in short-term United States
government securities, including treasury bills, cash and cash equivalents.
Except as noted below, the proceeds to the Company from the sale of the
Class B Stock will not be placed in escrow. Rather, these proceeds will be used
(i) to repay indebtedness, (ii) to pay a $100,000 license fee due to Bright
pursuant to a license agreement executed by Bright and the Company ($10,000 of
which has been previously paid from the proceeds of the Investor Notes), (iii)
to cover all of the expenses incurred by the Company in this offering, including
the Underwriters' discounts and the Representative's non-accountable expense
allowance, and (iv) to fund the Company's operating expenses, including
investment banking fees and the costs of business, legal and accounting due
diligence on prospective Target Businesses, until the Company effects a Business
Combination. In addition, proceeds from the sale of the Class B Stock will be
used for the general administrative expenses of the Company, including legal and
accounting fees and administrative support expenses in connection with the
Company's reporting obligations under the Exchange Act. See "Proposed Business
- -- Servicemark License." However, a portion of the net proceeds from the sale of
the Class B Stock equal to the Underwriters' discounts and the Representative's
non-accountable expense allowance with respect to the Units will be placed in
the above-mentioned escrow account for the benefit of purchasers of Class A
Stock as part of the Units sold in this offering and in the open market
thereafter. The Company may seek to issue additional securities if it requires
additional funds to meet its operating and administrative expenses. The Company
has agreed with the Representative that it will not issue (other than pursuant
to this offering) any securities or grant options or Warrants to purchase any
securities of the
9
<PAGE>
Company without the consent of the Representative for a period of 18 months from
the date of this Prospectus and for up to six additional months if the Extension
Criteria have been satisfied.
To the extent that the Company's securities are used as consideration to
effect a Business Combination, the balance of the net proceeds of this offering
not expended will be used to finance the operations (including the possible
repayment of debt) of the Target Business. No cash compensation will be paid to
any officer or director until after the consummation of the first Business
Combination. Since the role of the Company's current directors and executive
officers after a consummation of a Business Combination is uncertain, the
Company has no ability to determine what remuneration, if any, will be paid to
such persons after such consummation of a Business Combination.
Summary Financial Information
The summary financial information set forth below is derived from the more
detailed financial statements appearing elsewhere in this prospectus. Such
information should be read in conjunction with such financial statements,
including the notes thereto.
<TABLE>
<CAPTION>
Actual As Adjusted (1)
--------- ---------------
October 31, 1997
-----------------------------
<S> <C> <C>
Balance Sheet Data:
Total assets .............................................. $219,850 $8,324,050
Total liabilities ......................................... 177,000 --
Deficit accumulated during development stage .............. (2,800) (45,000)
Series A preferred stock .................................. 1 1
Stockholders' equity and common stock subject to redemption 42,850 8,324,050
</TABLE>
- ----------
(1) Gives effect to the sale of the Units at the initial public offering price
of $10.00 per Unit, the sale of the Class B Stock at the initial public
offering price of $10.00 per share of Class B Stock, and initial
application of the estimated net proceeds (after the payment of all
estimated offering expenses, including the Representative's non-accountable
expense allowance and discounts) of $8,200,000 therefrom. See "Use of
Proceeds." Assumes no exercise of the Underwriters' over-allotment option
or the Representative's Warrants. See "Underwriting."
(2) In the event the Company consummates a Business Combination, the redemption
rights afforded to the non-affiliated public holders of Class A Stock may
result in the conversion into cash of up to 20% of the aggregate number of
shares held by the non-affiliated public stockholders, amounting to 160,000
shares, at a per share redemption price equal to (A) the greater of (i) the
Company's net worth or (ii) the amount of proceeds of the Company in the
escrow account (including income earned thereon) divided by (B) the number
of shares held by non-affiliated public holders of Class A Stock, but not
less than $10.00 per share plus interest earned thereon.
10
<PAGE>
THE COMPANY
Business Objective
The Company, which is a "blank check" company, was formed in November 1995
to serve as a vehicle to effect a Business Combination with a Target Business
which the Company believes has significant growth potential. The Company intends
to utilize the net proceeds of this offering, equity securities, debt
securities, bank borrowings or a combination thereof in effecting a Business
Combination. The Company will seek to acquire a Target Business that is involved
primarily in the development, advancement, and use of science and technology.
The Target Businesses will likely be involved in an industry that includes
computers and peripheral products, software, electronic components and systems,
telecommunications, media and information services, pharmaceuticals, hospital
supply and medical devices, biotechnology, environmental services, chemicals and
synthetic materials or defense and aerospace. This may also include a Target
Business that could benefit from the commercialization of technological advances
even if they are not directly involved in research and development. Target
Business may include small companies developing new technologies or pursuing
scientific breakthroughs or large, better established businesses with track
records of developing and marketing such advances. Most likely, the Target
Business will be primarily located in the United States, although the Company
reserves the right to acquire a Target Business primarily located outside the
United States. The Company will not effect a Business Combination with a Target
Business unless the Fair Market Value of such business is at least 80% of the
net assets of the Company at the time of consummation of such Business
Combination. If the Company determines that the financial statements of a
Proposed Target Business do not clearly indicate that the Fair Market Value Test
has been satisfied, the Company will obtain an opinion from an investment
banking firm that is a member in good standing of the NASD with respect to the
satisfaction of such criteria. The Company has not had any contact or
discussions with representatives of any Target Business regarding a consummation
of a Business Combination. While the Company may, under certain circumstances,
seek to effect Business Combinations with more than one Target Business, in all
likelihood, as a result of its limited resources, the Company will have the
ability to effect only a single Business Combination. The Company does not
intend to register as a broker-dealer, merge with or acquire a registered
broker-dealer, or otherwise become a member of the NASD.
Business Experience of Principals
The executive officers and the other directors of the Company have business
experience which has provided them with skills which the Company believes will
be helpful in evaluating potential Target Businesses and negotiating and
consummating a Business Combination. Prior to their involvement with the
Company, none of the directors or the executive officers of the Company has been
involved in any "blank check" offerings.
Escrow of Offering Proceeds
Upon completion of the offering by the Company, approximately 84% of the
gross proceeds therefrom (representing an amount equal to the approximately
$8,000,000 gross proceeds from the sale of the Units as a percentage of the
gross proceeds of this offering) will be placed in an escrow account maintained
by the Proceeds Escrow Agent, subject to release upon the earlier of (1) receipt
by the Proceeds Escrow Agent of: (i) written notice from the Company of the
Company's completion of a transaction or series of transactions in which at
least 50% of the gross proceeds from this offering are committed to a specific
line of business as a result of a Business Combination (including any redemption
payments), (ii) a written opinion of counsel of the Company, reasonably
acceptable to the Proceeds Escrow Agent, that a Business Combination was
approved by a vote of two-thirds of the shares of Common Stock, with each share
of Class B Stock entitled to two votes, as described in this Prospectus, and
that the holders of more than 20% of the Class A Stock have not elected to
redeem their Class A Stock, as required by this Prospectus, and (iii) a written
confirmation from the Company, that the fair market value (as determined by the
Company, based upon standards generally accepted by the financial community,
including revenues, earnings, cash flow, and book value) of the Target Business
exceeds 80% of the net value of the assets of the Company, and that all other
actions required by the Company for the release of the escrow proceeds have been
met, or (2) either (i) after 18 months of the date of effectiveness of this
offering (or 24 months if the Proceeds Escrow Agent has received notice within
the initial 18 month period that the Extension Criteria, as herein defined, have
been satisfied) if the Proceeds Escrow Agent has not received written notice
from the Company of the Company's completion of a transaction or series of
transactions in which at least 50% of the gross proceeds from this offering are
committed to a specific line of business as a result of a Business Combination,
or (ii) receipt by the Proceeds Escrow Agent of
11
<PAGE>
written notification to distribute the escrow proceeds to the holders of Class A
Stock purchased as part of the Units sold in this offering or in the open market
thereafter, or (iii) receipt by the Proceeds Escrow Agent of written
notification to distribute part of the escrow proceeds to the holders of record
of Class A Stock purchased as part of the Units sold in this offering or in the
open market thereafter who elected to have their shares redeemed in accordance
with the terms set forth in this Prospectus. All proceeds held in the escrow
account will be invested, until released, in short-term United States government
securities, including treasury bills, cash and cash equivalents. Except as noted
below, the proceeds to the Company from the sale of the Class B Stock will not
be placed in escrow. Rather, these proceeds will be used (i) to repay
indebtedness, (ii) to pay a $100,000 license fee due to Bright pursuant to a
license agreement executed by Bright and the Company, ($10,000 of which has been
previously paid from proceeds of the Investor Notes) and (iii) to cover all of
the expenses incurred by the Company in this offering, including the
Underwriters' discounts and the Representative's non-accountable expense
allowance, (iv) to fund the Company's operating expenses, including investment
banking fees and the costs of business, legal and accounting due diligence on
prospective Target Businesses until the Company effects a Business Combination.
In addition, a portion of the net proceeds from the sale of the Class B Stock
equal to the Underwriters' discounts and the Representative's non-accountable
expense allowance payable with respect to the Units, as noted in clause (iii)
above, will be placed in the above-mentioned escrow account for the benefit of
purchasers of Class A Stock as part of the Units sold in this offering and in
the open market thereafter. As a result, if the escrowed funds are paid to the
holders of Units, the payment will equal the gross purchase price for the Unit
(plus any interest earned thereon), notwithstanding that the Company paid the
Underwriters' discount and the Representative's non-accountable expense
allowance out of such gross proceeds. To the extent that the proceeds from the
sale of the Class B Stock, are less than the expenses the Company incurs seeking
to effect a Business Combination, the Company would need additional financing.
There can be no assurance that the Company would be able to arrange any such
additional financing. Management is unaware of any circumstances under which
this policy, through management's own initiative, may be changed. See "Use of
Proceeds."
Stockholder Approval of Business Combinations
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the Business Combination is such as would not ordinarily
require stockholder approval under applicable state law. In connection with such
request, the Company intends to provide stockholders with disclosure
documentation in accordance with the Proxy Rules, including audited financial
statements, concerning a Target Business. All of the Company's present
stockholders, including all directors and its executive officers, have agreed as
part of the escrow agreement to which their stock is subject to vote their
respective shares of Class A Stock in accordance with the vote of the majority
of the shares voted by all non-affiliated public holders of Common Stock with
respect to any consummation of such Business Combination. See "The Company --
Escrow of Outstanding Shares." A Business Combination will not be consummated
unless approved by a vote of two-thirds of the shares of Common Stock (in person
or by proxy), with each share of Class B Stock entitled to two votes. In
addition, the Delaware General Corporation Law requires approval of certain
mergers and consolidations by a majority of the outstanding stock entitled to
vote thereon. Holders of Class A Warrants who otherwise do not own any shares of
Common Stock will not be entitled to vote on any Business Combination.
Class B Stock Options
Richard J. Berman and Martin R. Wade, directors of the Company, have
received options to purchase an aggregate of 30,000 of the Company's Class B
Stock at an exercise price of $10.00 per share, or an aggregate exercise price
of up to $300,000 ("Class B Options"). The options will expire, if not sooner
exercised, upon consummation of a Business Combination. The Company has agreed
to use its best efforts to register the shares of Class A Stock underlying the
Units underlying the Class B Stock underlying the Class B Options as soon as
practicable after their issuance.
Redemption Rights
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer to each of the non-affiliated
public holders of Class A Stock the right, for a specified period of time of not
less than 20 calendar days, to redeem his shares of Class A Stock at a price
equal to the Liquidation Value of such shares as of the Record Date. The
Redemption Offer will be described in the disclosure documentation relating to
the proposed Business Combination. See "Proposed Business -- Blank Check --
Offering." The Liquidation Value for each share of Class A Stock will be
determined as of the Record Date by dividing the amount of the
12
<PAGE>
proceeds in the escrow account (including all interest earned thereon) by (B)
the number of shares of Class A Stock held by non-affiliated public
stockholders; however, in no event will the Liquidation Value of each share of
Class A Stock be less than $10.00 plus interest earned thereon. In connection
with the Redemption Offer, if non-affiliated public stockholders holding 20% or
less of the shares of Class A Stock elect to redeem their shares, the Company
may, but will not be required to, proceed with such Business Combination and, if
the Company elects to so proceed, will redeem such shares at their Liquidation
Value as of the Record Date. In any case, if non-affiliated public stockholders
holding more than 20% of the Class A Stock elect to redeem their shares, the
Company will not proceed with such potential Business Combination and will not
redeem such shares. All holders of Class A Stock and all holders of Warrants
prior to the date of this Prospectus will be allowed to participate in a
Redemption Offer only if they purchase shares of Class A Stock in this offering
or on the open market thereafter, and only as to any shares of Class A Stock so
purchased.
Escrow of Outstanding Shares
All of the shares of Escrowed Stock outstanding immediately prior to the
date of this Prospectus have been placed in escrow with the Shares Escrow Agent
until the earlier of (i) the occurrence of the first Business Combination, or
(ii) 18 months from the date of this Prospectus provided that such 18-month
period will be extended by six months to 24 months from the date of this
Prospectus if the Extension Criteria has been satisfied. During the escrow
period, the holders of the Escrowed Stock will not be able to sell or otherwise
transfer their respective shares of the Escrowed Stock (with certain
exceptions), but will retain all other rights as stockholders of the Company,
including, without limitation, the right to vote escrowed shares of Class A
Stock, subject to their agreement to vote their shares in accordance with a vote
of a majority of the non-affiliated public stockholders with respect to a
consummation of a Business Combination or liquidation proposal, but excluding
the right to request the redemption of Escrowed Stock pursuant to a Redemption
Offer. Subject to compliance with applicable securities laws, any such holder
may transfer his, her or its Escrowed Stock to a family member or to a trust
established for the benefit of himself, herself, or a family member or to
another affiliated entity (with the consent of the Representative which will not
be unreasonably withheld) or, in the event of the holder's death, by will or
operation of law, or in the case of its dissolution or merger, provided that any
such transferee must agree as a condition to such transfer to be bound by the
restrictions on transfer applicable to the original holder and, in the case of
present stockholders other than the holders of the Placement Shares, that the
transferor (except in the case of death) or successor will continue to be deemed
the beneficial owner (as defined in Regulation 13d-3 promulgated under the
Exchange Act of such transferred shares.
Each executive officer and director has also agreed to surrender his shares
of Class A Stock to the Company at the purchase price at which such shares were
acquired ($.10 per share) if he resigns prior to the occurrence of the first
Business Combination.
Restriction on Sale of Outstanding Shares
All of the Founders' Shares are subject to an agreement with the holders of
the Founders' Shares not to sell or otherwise transfer such shares for a period
of 24 months from September 25, 1997, the issuance date, but in no event earlier
than 120 days following the consummation of the first Business Combination.
However, subject to compliance with applicable securities laws, any such holder
may transfer Founders' Shares to a family member or to a trust established for
the benefit of himself, herself, or a family member or to another affiliated
entity (with the consent of the Representative which will not be unreasonably
withheld) or in the event of the holder's death by will or operation of law, or
in the case of its dissolution or merger, provided that any such transferee or
successor must agree as a condition to such transfer to be bound by the
restrictions on transfer applicable to the original holder and that the
transferor or its principals, if the transferor is an entity (except in the case
of death) will continue to be deemed the beneficial owner (as defined in
Regulation 13d-3 promulgated under the Exchange Act) of such transferred shares.
The certificates representing the Founders' Shares will bear a restrictive
legend with respect to such restrictions and the Company's transfer agent will
note such restrictions on the Company's transfer books and records.
The Company has outstanding 134 shares of Series A Preferred Stock which
are held by Summerwind. These shares are convertible to Class A Stock on the
basis of one thousand shares of Class A Stock for each share of Series A
Preferred Stock during the one year period commencing upon the consummation of a
Business Combination. The 134,000 shares of Class A Stock issuable upon
conversion of the Company's outstanding Series A Preferred Stock will be offered
by a prospectus at the time of a Business Combination and thereafter will be
freely tradable under applicable securities laws.
13
<PAGE>
Redemption of Class A Stock after Eighteen Months if No Business Combination
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit to the
holders of Class A Stock for their consideration a proposal to distribute to the
then holders of Class A Stock acquired as part of the Units sold in this
offering or in the open market thereafter, in redemption of such shares, the
amounts in the escrow account. Following such a redemption of Class A Stock,
each outstanding share of Class B Stock will be exchanged for two shares of
Class A Stock. The assets of the Company (other than escrowed assets) will be
used to pay the Company's liabilities and to redeem the Company's outstanding
Series A Preferred Stock at its liquidation value, $13,400. The amount per share
for distribution to the holders of Class A Stock acquired as part of the Units
sold in this offering or in the open market thereafter, and exclusive of any
income earned on the proceeds held in the escrow account (which will be
distributed to the holders of Class A Stock along with the funds in the escrow
account), will be approximately equal to the initial public offering price per
Unit in this offering of $10.00 per Unit (assuming no value is attributed to the
Class A Warrants included in the Units offered hereby). All of the present
stockholders, including the Company's executive officers and other directors and
their affiliates, are required by the escrow agreement to which their stock is
subject to vote their shares of Common Stock in accordance with the vote of the
majority of all non-affiliated public stockholders of the Company with respect
to any redemption proposal. Holders of Class A Warrants, however, will only be
entitled to vote on any redemption proposal, and allowed to participate in any
redemption distribution, if they purchase shares of Common Stock in this
offering or on the open market thereafter, but only as to any shares of Common
Stock so purchased. All of the present stockholders, including the Company's
executive officers and other directors and their affiliates, have agreed to
waive their rights to participate in any redemption distribution with respect to
the 66,500 shares of Class A Stock owned by them as of the date hereof.
See "The Company -- Escrow of Outstanding Shares."
To date, the Company's efforts have been limited to organizational
activities and this offering. The implementation of the Company's business
objectives is wholly contingent upon the successful sale of the Units and the
Class B Stock offered hereby. See "Proposed Business."
A Specialized Merger and Acquisition Allocated Risk TRANSACTION(SM)
(SMA(2)RT(SM)) provides an investor in this offering with an opportunity to
purchase Units for $10.00 each, the proceeds of which will be placed into escrow
for the benefit of stockholders, and shall be returned if the Company does not
effect a Business Combination; and/or Class B Stock for $10.00 each, the
proceeds of which will not be placed in escrow, except as noted above, but
rather will be used to repay indebtedness, to pay a license fee to Bright, and
to cover all of the Company's expenses incurred in this offering. See "Use of
Proceeds." Consequently, if the Class B Stock is exchanged, holders of Class B
Stock would pay substantially less for the Units issuable upon exercise of such
Class B Stock than holders of Units and, accordingly, may realize a higher
return on their investment. Holders of Class B Stock, however, risk the loss of
their investment if the Company fails to effect a Business Combination, while
holders of shares of Class A Stock comprising part of the Units benefit from the
Company's escrow of an amount equal to the gross proceeds from the sale of the
Units in this offering.
The Company was organized under the laws of the State of Delaware on
November 28, 1995. The Company's office is located at 333 East 56th Street,
Penthouse G, New York, New York 10022 and its telephone number is (212)
752-3563.
14
<PAGE>
RISK FACTORS
The securities offered hereby involve a high degree of risk, including, but
not limited to, the several factors described below. These securities should be
purchased only by persons who can afford a loss of their entire investment.
Investors should consider carefully the following risk factors inherent in and
affecting the business of the Company and this offering in evaluating an
investment in the securities offered hereby.
Blank Check Offering Not Conducted in Accordance with Rule 419
The Company's offering of Units and Class B Stock is not being conducted in
accordance with Rule 419 promulgated by the Commission under the Securities Act
of 1933, as amended (the "Act"), which was adopted to strengthen the regulation
of securities offerings by "blank check" companies, which Congress has found to
have been common vehicles for fraud and manipulation in the penny stock market.
The Company is a "blank check" company not subject to Rule 419 under the Act
because the Company's net tangible assets after its receipt of the proceeds of
this offering will exceed $5,000,000. Accordingly, investors in the offering
will not receive the substantive protection provided by Rule 419 under the Act.
Rule 419 under the Act requires that the securities to be issued and the funds
received in a blank check offering be deposited and held in an escrow account
until a Business Combination meeting specified criteria is completed. Before a
Business Combination can be completed and before the funds and securities can be
released, the blank check company is required to update the registration
statement with a post-effective amendment; and after the effective date thereof
the Company is required to furnish investors with the prospectus produced
thereby containing information, including audited financial statements,
regarding the proposed Target Business and its business. According to the rule,
the investors must have no fewer than 20 and no more than 45 days from the
effective date of the post-effective amendment to decide to remain an investor
or require the return of their investment funds. Any investor not making any
decision within said 45-day period is to automatically receive a return of his
investment funds. Unless a sufficient number of investors elect to remain
investors, all of the deposited funds in the escrow account must be returned to
all investors and none of the securities will be issued. Rule 419 under the Act
further provides that if the blank check company does not complete a Business
Combination meeting specified criteria within 18 months after the date of this
Prospectus, all of the deposited funds in the escrow account must be returned to
investors. THE AFOREMENTIONED PROTECTIONS OF RULE 419 ARE NOT PRESENT IN THIS
OFFERING.
No Operating History; Limited Resources; No Present Source of Revenues
The Company, incorporated in November 1995, is a development stage company
and has not, as of the date hereof, attempted to seek a Business Combination.
Although certain of the Company's directors and its executive officers have had
extensive experience relating to the identification, evaluation and acquisition
of businesses, the Company has no operating history and, accordingly, there is
only a limited basis upon which to evaluate the Company's prospects for
achieving its intended business objectives. None of the Company's officers,
directors, promoters or other persons engaged in management-type activities has
been previously involved with any blank check offerings. To date, the Company's
efforts have been limited to organizational activities and this offering. The
Company has limited resources and has had no revenues to date. In addition, the
Company will not achieve any revenues (other than investment income) until, at
the earliest, the consummation of a Business Combination. Moreover, there can be
no assurance that any Target Business, at the time of the Company's consummation
of a Business Combination, or at any time thereafter, will derive any material
revenues from its operations or operate on a profitable basis. See "Proposed
Business" and "Management -- Prior Blank Check Offerings."
"Blind Pool" Offering; Broad Discretion of Management
Prospective investors who invest in the Company will do so without an
opportunity to evaluate the specific merits or risks of any one or more Business
Combinations. As a result, investors will be entirely dependent on the broad
discretion and judgment of management in connection with the allocation of the
proceeds of the offering and the selection of a Target Business. There can be no
assurance that determinations ultimately made by the Company will permit the
Company to achieve its business objectives. All of the proceeds will be used for
on-going expenses and unspecified acquisitions. See "Use of Proceeds" and
"Proposed Business."
15
<PAGE>
Absence of Substantive Disclosure Relating to Prospective Business Combinations;
Investment in the Company Versus Investment in a Target Business
"Blind pool" and "blank check" offerings are inherently characterized by
the absence of substantive disclosure, other than general descriptions, relating
to the intended application of the net proceeds of the offering. The Company has
not yet identified a prospective Target Business. Accordingly, investors will
have no substantive information concerning consummation of any specific Business
Combination in considering a purchase of Units and/or Class B Stock in this
offering. The absence of disclosure can be contrasted with the disclosure which
would be necessary if the Company had already identified a Target Business as a
Business Combination candidate or if the Target Business were to effect an
offering of its securities directly to the public. There can be no assurance
that an investment in the securities offered hereby will not ultimately prove to
be less favorable to investors in this offering than a direct investment, if
such opportunity were available, in a Target Business. See "Proposed Business."
Seeking to Achieve Public Trading Market through Business Combination
While a prospective Target Business may deem a consummation of a Business
Combination with the Company desirable for various reasons, a Business
Combination may involve the acquisition of, merger or consolidation with, a
company which does not need substantial additional capital, but which desires to
establish a public trading market for its shares, while avoiding what it may
deem to be adverse consequences of undertaking a public offering itself,
including time delays, significant expense, loss of voting control and the time
and expense incurred to comply with various Federal and state securities laws
that regulate initial public offerings. Nonetheless, there can be no assurance
that there will be an active trading market for the Company's securities
following the completion of a Business Combination or, if a market does develop,
as to the market price for the Company's securities. See "Proposed Business" --
"Blind Pool" "Offering Background."
Uncertain Structure of Business Combination
The structure of a future transaction with a Target Business cannot be
determined at the present time and may take, for example, the form of a merger,
an exchange of stock or an asset acquisition. The Company may form one or more
subsidiary entities to effect a Business Combination and may, under certain
circumstances, distribute the securities of subsidiaries to the stockholders of
the Company. There cannot be any assurance that a market would develop for the
securities of any subsidiary distributed to stockholders or, if it did, any
assurance as to the prices at which such securities might trade. The structure
of a Business Combination or the distribution of securities to stockholders may
result in taxation of the Company, the Target Business or stockholders. See
"Proposed Business" and "Management."
Risks Applicable to the Technology Industries
An investment in companies in the technology industries entails special
considerations and risks. These industries are highly competitive and are
characterized by rapidly changing technologies. The introduction of products
embodying new technology and the emergence of new industry standards can render
existing products obsolete and unmarketable. Should the Target Business acquired
by the Company be unable, for technological or other reasons, to develop
products that are technologically competitive, responsive to customer needs and
competitively priced, its business will be adversely affected. Some of the
Target Business's competitors and potential competitors may have greater
research, development, financial or other resources or more extensive business
experience than the Target Business. Companies in the technology industries may
be dependent on the strength of copyrights, patents, trade secret laws,
non-disclosure agreements and technical measures to establish and protect their
proprietary interests in their products. No assurance can be given that the
Target Business adequately protects its technology, that any of these
protections will not be challenged, invalidated or circumvented or that the
rights granted will provide significant benefits to the Target Business.
Unspecified Target Business; Unascertainable Risks
None of the Company's directors or its executive officer has had any
contact or discussions with any entity or representatives of any entity
regarding a consummation of a Business Combination. Accordingly, there is no
basis for prospective investors to evaluate the possible merits or risks of the
Target Business or the particular sector of the technology industries in which
the Company may ultimately operate. In connection with stockholder approval of
consummation of a Business Combination, the Company intends to provide
stockholders with complete disclosure
16
<PAGE>
documentation, including audited financial statements, concerning a Target
Business. Accordingly, any Target Business that is selected would need to have
audited financial statements or be audited in connection with the transaction.
To the extent that the Company effects a Business Combination with a financially
unstable company or an entity in its early stage of development or growth
(including entities without established records of revenues or income), the
Company will become subject to numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
companies. Although management will endeavor to evaluate the risks inherent in a
particular Target Business or industry, there can be no assurance that the
Company will properly ascertain or assess all such risks. See "Proposed
Business."
In addition, to date, none of the Company's officers, directors, promoters,
affiliates or associates have had any preliminary contact or discussions with,
and there are no present plans, proposals, arrangements or understandings with
any representatives or owners of any business or company regarding the
possibility of consummating a Business Combination with such a business or
company.
Probable Lack of Business Diversification
As a result of the limited resources of the Company, the Company, in all
likelihood, will have the ability to effect only a single Business Combination.
Accordingly, the prospects for the Company's success will be entirely dependent
upon the future performance of a single business. Unlike certain entities which
have the resources to consummate several Business Combinations or entities
operating in multiple industries or multiple segments of a single industry, it
is highly likely that the Company will not have the resources to diversify its
operations or benefit from the possible spreading of risks or offsetting of
losses. The Company's probable lack of diversification may subject the Company
to numerous economic, competitive and regulatory developments, any or all of
which may have a material adverse impact upon the particular industry in which
the Company may operate subsequent to a consummation of a Business Combination.
The prospects for the Company's success may become dependent upon the
development or market acceptance of a single or limited number of products,
processes or services. Accordingly, notwithstanding the possibility of capital
investment in and management assistance to the Target Business by the Company,
there can be no assurance that the Target Business will prove to be commercially
viable. The Company has no present intention of either loaning any of the
proceeds of this offering to any Target Business or of purchasing or acquiring a
minority interest in any Target Business. Management is unaware of any
circumstances under which this policy, through management's own initiative, may
be changed. See "Use of Proceeds" and "Proposed Business."
Proceeds from Sale of Class B Stock Not Placed in Escrow; Class B Stock Not
Currently Exchangeable; Class B Stock Exchangeable Subject to the Company's
Compliance with Securities Laws
Except as noted below, the proceeds to the Company from the sale of the
Class B Stock will not be placed in escrow. Rather, these proceeds will be used
(i) to repay indebtedness, (ii) to pay a $100,000 license fee to Bright pursuant
to a license agreement executed by Bright and the Company, (iii) to cover all of
the expenses incurred by the Company in this offering, including the
Underwriters' discounts and the Representative's non-accountable expense
allowance, and (iv) to fund the Company's operating expenses, including
investment banking fees and fees of the Proceeds Escrow Agent and the costs of
business, legal and accounting due diligence on prospective Target Businesses,
until the Company effects a Business Combination. However, a portion of the net
proceeds from the sale of the Class B Stock equal to the Underwriters' discounts
and the Representative's non-accountable expense allowance with respect to the
Units will be placed in the escrow account with the Proceeds Escrow Agent for
the benefit of purchasers of Units in this offering and in the open market
thereafter. The Class B Stock is not exchangeable until the Company effects a
Business Combination, of which there can be no assurance, provided the Company
is then in compliance with all filings required under the federal and state
securities laws, and holders of Class B Stock who do not own shares of Class A
Stock will not be allowed to participate in any redemption distribution of the
proceeds from the escrow account. Consequently, in the event the Company does
not effect a Business Combination within 18 months from the date of this
Prospectus, or 24 months from the date of this Prospectus if the Extension
Criteria have been satisfied, and the stockholders of the Company elect to
permit the Company to redeem the Class A Stock, then the holders of Class B
Stock will not receive any distributions. As such, an investment in the Class B
Stock therefore should be viewed as a highly speculative investment and should
only be made by an individual who can afford to lose his entire investment.
Holders of Class B Stock would pay substantially less for the Units issuable
upon exchange of such Class B Stock than purchasers of Units and, accordingly,
may realize a higher return on their investment than holders of Units. By way of
illustration, purchasers of Class B Stock in this offering will pay $5.00 per
Unit, while purchasers of Units in this offering will pay $10.00 per Unit.
Except as
17
<PAGE>
noted above, the proceeds to the Company from the sale of the Class B Stock will
not be placed in escrow and will be used to repay indebtedness and to cover all
of the Company's expenses incurred in this offering, including the Underwriters'
discounts and the Representative's non-accountable expense allowance with
respect to both the Units and the Class B Stock, to pay the Proceeds Escrow
Agent and to pay the Company's costs of evaluating potential Business
Combinations and for administrative and operating expenses. Holders of Class B
Stock risk the loss of all of their investment if the Company fails to effect a
Business Combination, while holders of shares of Class A Stock comprising part
of the Units are protected from such loss by the Company's escrow of an amount
equal to the gross proceeds from the sale of the Units in this offering.
Dependence upon Executive Officers and Board of Directors; No Prior Blind Pool
Experience
The ability of the Company to successfully effect a Business Combination
will be largely dependent upon the efforts of its executive officers and the
Board of Directors. Notwithstanding the significance of such persons, the
Company has not entered into employment agreements or other understandings with
any such personnel concerning compensation or obtained any "key man" life
insurance on their respective lives. The loss of the services of such key
personnel could have a material adverse effect on the Company's ability to
successfully achieve its business objectives. None of the Company's key
personnel are required to commit a substantial amount of their time to the
affairs of the Company and, accordingly, such personnel may have conflicts of
interests in allocating management time among various business activities.
However, the executive officers and the other directors of the Company will
devote such time as they deem reasonably necessary to carry out the business and
affairs of the Company, including the evaluation of potential Target Businesses
and the negotiation and consummation of a Business Combination, and, as a
result, the amount of time devoted to the business and affairs of the Company
may vary significantly depending upon, among other things, whether the Company
has identified a Target Business or is engaged in active negotiation of a
Business Combination. Although the officers and directors of the Company have
substantial experience in buying and selling businesses, they have no prior
experience in "blind pool" or "blank check" offerings.
The Company will rely upon the expertise of such persons, and the Board
does not anticipate that it will hire additional personnel. However, if
additional personnel are required, there can be no assurance that the Company
will be able to retain such necessary additional personnel. See "Proposed
Business" and "Management."
Conflicts of Interest; Absence of Independent Directors
None of the Company's directors or executive officers are required to
commit their full time to the affairs of the Company and it is likely that such
persons will not devote a substantial amount of time to the affairs of the
Company. Such personnel will have conflicts of interest in allocating management
time among various business activities. As a result, the consummation of a
Business Combination may require a greater period of time than if the Company's
management devoted their full time to the Company's affairs. However, the
executive officers and other directors of the Company will devote such time as
they deem reasonably necessary to carry out the business and affairs of the
Company, including the evaluation of potential Target Businesses and the
negotiation and consummation of a Business Combination and, as a result, the
amount of time devoted to the business and affairs of the Company may vary
significantly depending upon, among other things, whether the Company has
identified a Target Business or is engaged in active negotiation and
consummation of a Business Combination. Prior to their involvement with the
Company, none of the directors or the executive officers of the Company has been
involved in any "blind pool" or "blank check" offerings. To avoid certain
conflicts of interest, the executive officers and directors of the Company, and
owners of five percent or more of the Company's Class A Stock (after giving
effect to this offering, but without giving effect to the exercise, if any, of
the Warrants to be issued in this offering), have agreed that they will not,
until the consummation of the first Business Combination, introduce a suitable
proposed merger, acquisition or consolidation candidate to another blank check
company. For such purposes, suitable shall mean any business opportunity which,
under Delaware law, may reasonably be required to be presented to the Company.
Certain of the persons associated with the Company are and may in the future
become affiliated with entities engaged in business activities similar to those
intended to be conducted by the Company. Such persons may have conflicts of
interest in determining to which entity a particular business opportunity should
be presented. In general, officers and directors of a corporation incorporated
under the laws of the State of Delaware are required to present certain business
opportunities to such corporation. Accordingly, as a result of multiple business
affiliations, certain of the Company's directors and executive officers may have
similar legal obligations to present certain
18
<PAGE>
business opportunities to multiple entities. There can be no assurance that any
of the foregoing conflicts will be resolved in favor of the Company. See
"Management."
Limited Ability to Evaluate Target Business Management; Possibility That
Management Will Change
The role of the present management in the operations of a Target Business
of the Company following a Business Combination cannot be stated with certainty.
Although the Company intends to scrutinize closely the management of a
prospective Target Business in connection with its evaluation of the
desirability of effecting a Business Combination with such Target Business, and
there can be no assurance that the Company's assessment of such management will
prove to be correct, especially in light of the possible inexperience of current
key personnel of the Company in evaluating certain types of businesses. While it
is possible that certain of the Company's directors or executive officers will
remain associated in some capacities with the Company following a consummation
of a Business Combination, it is unlikely that any of them will devote a
substantial portion of their time to the affairs of the Company subsequent
thereto. Moreover, there can be no assurance that such personnel will have
significant experience or knowledge relating to the operations of the Target
Business acquired by the Company. The Company may also seek to recruit
additional personnel to supplement the incumbent management of the Target
Business. There can be no assurance that the Company will successfully recruit
additional personnel or that the additional personnel will have the requisite
skills, knowledge or experience necessary or desirable to enhance the incumbent
management. In addition, there can be no assurance that the future management of
the Company will have the necessary skills, qualifications or abilities to
manage a public company embarking on a program of business development. See
"Proposed Business" and "Management."
Possible Business Combination With a Target Business Outside the United States
The Company may effectuate a Business Combination with a Target Business
located outside the United States. In such event, the Company may face the
additional risks of language barriers, different presentations of financial
information, different business practices, lack of United States jurisdiction,
and other cultural differences and barriers. Furthermore, due to the Company's
limited resources, it may be difficult to assess fully these additional risks.
Therefore, a Business Combination with a Target Business outside the United
States may increase the risk that the Company will not achieve its business
objectives.
Competition
The Company expects to encounter intense competition from other entities
having business objectives similar to those of the Company. Many of these
entities, including venture capital partnerships and corporations, other blind
pool companies, large industrial and financial institutions, small business
investment companies and wealthy individuals, are well-established and have
extensive experience in connection with identifying and effecting Business
Combinations directly or through affiliates. Many of these competitors possess
greater financial, technical, human and other resources than the Company and
there can be no assurance that the Company will have the ability to compete
successfully. The Company's financial resources will be limited in comparison to
those of many of its competitors. Further, such competitors will generally not
be required to seek the prior approval of their own stockholders, which may
enable them to close a Business Combination more quickly than the Company. This
inherent competitive limitation may compel the Company to select certain less
attractive Business Combination prospects. There can be no assurance that such
prospects will permit the Company to achieve its stated business objectives. See
"Proposed Business."
Uncertainty of Competitive Environment of Target Business
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly larger number of
competitors, including competitors with greater financial, marketing, technical,
human and other resources than the initial competitors in the industry. The
degree of competition characterizing the industry of any prospective Target
Business cannot presently be ascertained. There can be no assurance that,
subsequent to a consummation of a Business Combination, the Company will have
the resources to compete in the industry of the Target Business effectively,
especially to the extent that the Target Business is in a high-growth industry.
See "Proposed Business."
19
<PAGE>
Additional Financing Requirements
The Company has had no revenues to date and will be entirely dependent upon
the proceeds of this offering to implement its business objectives. The Company
will not achieve any revenues (other than investment income) until, at the
earliest, the consummation of a Business Combination unless the Class B Options
are exercised. See "The Company--Class B Stock Options." Although the Company
anticipates that the net proceeds of this offering will be sufficient to effect
a Business Combination, inasmuch as the Company has not yet identified any
prospective Target Business candidates, the Company cannot ascertain with any
degree of certainty the capital requirements for any particular Business
Combination. In the event that the net proceeds of this offering prove to be
insufficient for purposes of effecting a Business Combination (because of the
size of the Business Combination or other reasons), the Company will be required
to seek additional financing. There can be no assurance that such financing will
be available on acceptable terms, or at all. To the extent that additional
financing proves to be unavailable when needed to consummate a particular
Business Combination, the Company would, in all likelihood, be compelled to
restructure the transaction or abandon that particular Business Combination and
seek an alternative Target Business candidate, if possible. In addition, in the
event of the consummation of a Business Combination, the Company may require
additional financing to fund the operations or growth of the Target Business.
The failure by the Company to secure additional financing could have a material
adverse effect on the continued development or growth of the Target Business.
The Company does not have any arrangements with any bank or financial
institution to secure additional financing and there can be no assurance that
any such arrangement, if required or otherwise sought, would be available on
terms deemed to be commercially acceptable and in the best interests of the
Company. See "Proposed Business."
Possible Use of Debt Financing; Debt of a Target Business
There currently are no limitations on the Company's ability to borrow funds
to increase the amount of capital available to the Company to effect a Business
Combination. However, the Company's limited resources and lack of operating
history will make it difficult to borrow funds. The amount and nature of any
borrowings by the Company will depend on numerous considerations, including the
Company's capital requirements, the Company's perceived ability to meet debt
service on any such borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. There can be no
assurance that debt financing, if required or sought, would be available on
terms deemed to be commercially acceptable by and in the best interests of the
Company. The inability of the Company to borrow funds required to effect or
facilitate a Business Combination, or to provide funds for an additional
infusion of capital into a Target Business, may have a material adverse effect
on the Company's financial condition and future prospects. Additionally, to the
extent that debt financing ultimately proves to be available, any borrowings may
subject the Company to various risks traditionally associated with indebtedness,
including the risks of interest rate fluctuations and insufficiency of cash flow
to pay principal and interest. Furthermore, a Target Business may have already
incurred borrowings and, therefore, all the risks inherent thereto. See "Use of
Proceeds" and "Proposed Business."
Redemption Rights
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer to each of the non-affiliated
public holders of Class A Stock the right, for a specified period of time of not
less than 20 calendar days, to redeem his shares of Class A Stock at a price
equal to the Liquidation Value of such shares as of the Record Date. The
Redemption Offer will be described in the disclosure documentation relating to
the proposed Business Combination. In connection with the Redemption Offer,
should non-affiliated public stockholders holding 20% or less of the Class A
Stock elect to redeem their shares, the Company may, but will not be required
to, proceed with the proposed Business Combination and, if the Company elects to
so proceed, will redeem such shares at their Liquidation Value as of the Record
Date. In any case, if non-affiliated public stockholders holding more than 20%
of such Class A Stock elect to redeem their shares, the Company will not proceed
with the proposed Business Combination and will not redeem any shares of Class A
Stock. As a result of the foregoing, the Company's ability to consummate a
particular Business Combination may be impaired. Moreover, holders of Class A
Stock prior to the date of this Prospectus and holders of Class A Warrants will
only be allowed to participate in a Redemption Offer if they purchase shares of
Class A Stock in this offering or on the open market thereafter, but only as to
any shares of Class A Stock so purchased.
20
<PAGE>
Redemption of Class A Stock if No Business Combination
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit to the
holders of Class A Stock for their consideration a proposal to distribute to the
then holders of Class A Stock acquired as part of the Units sold in this
offering or in the open market thereafter, in redemption of such shares, the
amounts in the interest bearing escrow account. Following such a redemption of
Class A Stock, each outstanding share of Class B Stock will be exchanged for two
shares of Class A Stock. The assets of the Company (other than the escrowed
assets) will be used to pay the Company's liabilities and to redeem of the
Company's outstanding Series A Preferred Stock at its liquidation value,
$13,400. The amount per share for distribution of liquidation of the Company to
the holders of Class A Stock acquired as part of the Units sold in this offering
or in the open market thereafter, and, exclusive of any income earned on the
proceeds held in the escrow account, will be approximately equal to the initial
public offering price per Unit in this offering ($10.00 per Unit assuming no
value is attributed to the Class A Warrants included in the Units offered
hereby).
There can be no assurance that the Company will effect a Business
Combination within 18 months from the date of this Prospectus, or within 24
months from the date of this Prospectus if the Extension Criteria have been
satisfied. All of the Company's present stockholders, including the Company's
executive officers and other directors and their affiliates, are required to
vote their shares of Common Stock in accordance with the vote of the majority of
all non-affiliated public stockholders of the Company with respect to any such
redemption proposal. Holders of Class A Warrants, however, will only be entitled
to vote on any redemption proposal, and allowed to participate in any redemption
distribution, only if they purchase shares of Class A Stock in this offering or
on the open market thereafter, and only as to any shares of Class A Stock so
purchased. Present stockholders of the Company will not participate in any
redemption distribution with respect to the shares of Class A Stock owned by
them as of the date hereof.
Investment Company Act Considerations
The regulatory scope of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. The Investment Company Act may, however, also
be deemed to be applicable to a company which does not intend to be
characterized as an investment company but which, nevertheless, engages in
activities which may be deemed to be within the definitional scope of certain
provisions of the Investment Company Act. The Company believes that its
anticipated principal activities, which will involve acquiring control of an
operating company, will not subject the Company to regulation under the
Investment Company Act. Nevertheless, there can be no assurance that the Company
will not be deemed to be an investment company, particularly during the period
prior to consummation of a Business Combination. If the Company is deemed to be
an investment company, the Company may become subject to certain restrictions
relating to the Company's activities, including restrictions on the nature of
its investments and the issuance of securities. In addition, the Investment
Company Act imposes certain requirements on companies deemed to be within its
regulatory scope, including registration as an investment company, adoption of a
specific form of corporate structure and compliance with certain burdensome
reporting, recordkeeping, voting, proxy, disclosure and other rules and
regulations. In the event of the characterization of the Company as an
investment company, the failure by the Company to satisfy such regulatory
requirements, whether on a timely basis or at all, would, under certain
circumstances, have a material adverse effect on the Company.
Dividends Unlikely
The Company does not expect to pay dividends prior to the consummation of a
Business Combination. The payment of dividends after consummating any such
Business Combination, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and general financial condition
subsequent to consummation of a Business Combination. The payment of any
dividends subsequent to a Business Combination will be within the discretion of
the Company's then Board of Directors. The Company presently intends to retain
all earnings, if any, for use in the Company's business operations and
accordingly, the Board does not anticipate declaring any dividends in the
foreseeable future. See "Description of Securities -- Dividends."
21
<PAGE>
Uncertainty of Servicemarks
The servicemarks SMA(2)RT(SM) and Specialized Merger and Acquisition
Allocated Risk TRANSACTION(SM) are owned by Bright. Bright has granted the
Company a non-exclusive license to use, for the sole purpose of marketing this
offering, the SMA(2)RT(SM) and Specialized Merger and Acquisition Allocated Risk
TRANSACTION(SM) servicemarks. There can be no assurance that a third party
owning or using a similar servicemark or trademark will not object to, or seek
to prohibit, the Company's use of the SMA(2)RT(SM) or Specialized Merger and
Acquisition Allocated Risk TRANSACTION(SM) servicemarks. The Company does not
believe, however, that its business will be adversely affected if it is unable
to utilize either, or both, of these servicemarks. See "Proposed Business --
Servicemark License," "Management -- Directors and Officers" and "Certain
Transactions."
Authorization of Additional Securities
The Company's Amended and Restated Certificate of Incorporation authorizes
the issuance of 11,000,000 shares of stock, of which 10,000,000 shall be shares
of Common Stock, par value $.01 per share and 1,000,000 shall be shares of
Preferred Stock, par value $.01 per share. Upon completion of this offering
(assuming no exercise of the Underwriters' over-allotment option or any Warrants
or other options, or conversion of the outstanding Series A Preferred Stock),
there will be 9,133,500 authorized but unissued shares of Common Stock available
for issuance, of which a total of 2,254,000 shares of Class A Stock are reserved
for issuance. Although the Company's Board of Directors has the power to issue
any or all of such shares without stockholder approval, the Company has agreed
with the Representative that for a period of 18 months from the date of this
Prospectus, and for up to six additional months if the Extension Criteria have
been satisfied, it will not issue (other than pursuant to this offering) any
shares of Common Stock or grant Common Stock purchase options or warrants
without the consent of the Representative, except in connection with effecting a
Business Combination. See "Underwriting." Although the Company has no
commitments as of the date of this Prospectus to issue any shares of Common
Stock other than as described in this Prospectus, the Company will, in all
likelihood, issue a substantial number of additional shares in connection with
or following a Business Combination. To the extent that additional shares of
Common Stock are issued, the Company's stockholders would experience dilution of
their respective ownership interests in the Company. Additionally, if the
Company issues a substantial number of shares of Common Stock in connection with
or following a Business Combination, a change in control of the Company may
occur which may affect, among other things, the Company's ability to utilize net
operating loss carryforwards, if any. Furthermore, the issuance of a substantial
number of shares of Common Stock may adversely affect prevailing market prices,
if any, for the Common Stock and could impair the Company's ability to raise
additional capital through the sale of its equity securities.
In addition, the Board of Directors is empowered, without stockholder
approval, to issue Preferred Stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of Common Stock and Class A Warrants. The Company has
agreed with the Representative, however, that for a period of 18 months from the
date of this Prospectus, and for up to six additional months if the Extension
Criteria have been satisfied, it will not issue any additional shares of
Preferred Stock without the consent of the Representative, except in connection
with the consummation of a Business Combination. In addition, the Preferred
Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company does not currently intend to issue any shares of Preferred
Stock, there can be no assurance that the Company will not do so in the future.
As of the date of this Prospectus, the Company has outstanding 134 shares of
Preferred Stock, designated as Series A Preferred Stock, which shares are
non-voting and convertible to 134,000 shares of Common Stock upon consummation
of the first Business Combination. See "Proposed Business" and "Description of
Securities."
Possible Management Control of Director Elections
Upon consummation of this offering, the Company's directors and executive
officers will collectively own 40,000 shares of Class A Stock and options to
purchase 100,000 units, each unit being identical to the Units issued in this
offering, representing approximately 14.5% of the issued and outstanding shares
of Class A Stock (assuming no exercise of the Representatives' over-allotment
option or the conversion of the Series A Preferred Stock). In the election of
directors, stockholders are not entitled to cumulate their votes for nominees.
Accordingly, as a practical matter, management may be able to elect all of the
Company's directors and otherwise direct the affairs of the Company. See
"Principal Stockholders," "Certain Transactions" and "Description of
Securities."
22
<PAGE>
OTC Bulletin Board; No Assurance of Public Market; Arbitrary Determination of
Offering Price; Lack of Public Market for Securities
Prior to this offering, there has been no public trading market for the
Units, the Class A Stock, the Class A Warrants or the Class B Stock. The initial
public offering prices of the Units and the Class B Stock and the respective
exercise prices and terms of the Class A Warrants have been arbitrarily
determined by negotiations between the Company and the Representative and bear
no relationship to such established valuation criteria such as assets, book
value or prospective earnings.
Nasdaq has a policy whereby it will not list the securities of a "blind
pool" company. The Representative is seeking approval for listing of the
securities on the OTC Bulletin Board. The OTC Bulletin Board is an NASD
sponsored and operated inter-dealer automated quotation system for equity
securities not included in the NASDAQ system. The OTC Bulletin Board has been
introduced as an alternative to "pink sheet" trading of over-the-counter
securities. Consequently, the liquidity and stock price of the Company's
securities in the secondary market may be adversely affected. There is no
assurance that a regular trading market will develop for any of the Company's
securities after this offering or that, if developed, any such market will be
sustained. Moreover, there can be no assurance that the Company's securities
will be listed on Nasdaq or any national securities exchanges following the
consummation of a Business Combination. See "Underwriting."
H.J. Meyers & Co., Inc., the Representative, intends to serve as the market
maker for the Company's securities. Neither the Company nor anyone acting on the
Company's behalf will take affirmative steps to request or encourage any other
broker-dealers to act as market makers for the Company's securities. To date,
there have not been any preliminary discussions or understandings between the
Company and any potential market makers, other than H.J. Meyers & Co., Inc.,
regarding the participation of such market makers in the future trading market,
if any, for the Company's securities.
Moreover, no member of management of the Company or any promoter or anyone
else acting at the Company's direction will recommend, encourage or advise
investors to open brokerage accounts with any broker-dealer making a market in
the Company's securities and the Company does not intend to influence investors
with regard to their decisions as to whether to hold or sell their securities of
the Company.
Immediate Substantial Dilution; Disparity of Consideration
This offering involves an immediate and substantial dilution of $2.86 or
28.6% per share between the pro forma net tangible book value per share after
the offering of $7.14 and the initial public offering price of $10.00 per share
allocable to each share of Class A Stock included in the Units (assuming no
value is attributed to the Class A Warrants included in the Units). The existing
stockholders of the Company, including its executive officers and directors,
acquired their shares of Class A Stock at prices substantially lower than the
initial public offering price and, accordingly, new investors will bear
substantially all of the risks inherent in an investment in the Company.
Similarly, if and to the extent that the net tangible book value per share of
the securities of the Target Business being acquired (when divided by the number
of shares of the Common Stock to be issued) is less per share than the Company's
current net tangible book value per share, the Company's public stockholders
will suffer further dilution, since the issuance of such shares would result in
an immediate dilution of the net tangible book value per share of the then
consolidated financial position of the Company and the business being acquired.
As a result, in the event the Company is unsuccessful, the investors in this
offering will bear a disproportionate share of the loss of their respective
investment, as compared to the stockholders of the Company prior to the date of
this Prospectus. See "Dilution."
No Appraisal of Potential Business Combination
The Company does not anticipate that it will obtain an independent
appraisal or valuation of a Target Business. Thus, stockholders of the Company
will need to rely primarily upon management to evaluate a prospective Business
Combination. However, a Business Combination will not be consummated unless it
is approved by a vote of two-thirds of the Common Stock voted by the
stockholders (in person or by proxy). See "The Company -- Stockholder Approval
of Business Combinations."
23
<PAGE>
Compliance With Penny Stock Rules
The Company's securities will not initially be considered "penny stock" as
defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and the rules thereunder, since the price of each security is $5 or more. If the
price per security for any of the Company's Units, Common Stock, Class A
Warrants or Class B Stock were to drop below $5, that particular security of the
Company may come within the definition of a "penny stock". Unless such security
is otherwise excluded from the definition of "penny stock," the penny stock
rules apply with respect to that particular security. One such exemption from
the definition of a "penny stock" is for securities of an issuer which has
assets in excess of $5 million, as represented by audited financial statements.
In the present situation, the Company will have assets in excess of $5 million
and expects to have audited financial statements (in addition to those included
in this Prospectus) shortly after its Registration Statement is declared
effective with the Securities and Exchange Commission. Once such audited
financial statements have been obtained, none of the securities of the Company
will be considered "penny stock," even if their price falls below $5, so long as
the requirements for the other exception from the penny stock rules are met.
However, until such time as the Company has obtained audited financial
statements, the selling price of each security must be $5 or more in order for
such security not to be classified as a "penny stock."
The penny stock rules require a broker-dealer prior to a transaction in
penny stock, not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
sales person in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that the broker-dealer, not otherwise exempt from
such rules, must make a special written determination that the penny stock is
suitable for the purchaser and receive the purchaser's written agreement to the
transaction. These disclosure rules have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If any security of the Company becomes subject to the penny
stock rules, it may become more difficult to sell such securities. Such
requirements, if applicable, could result in reduction in the level of trading
activity for that particular security of the Company and could make it more
difficult for investors to sell that particular security. No assurance can be
given that any security of the Company will continue not to be classified as a
penny stock.
Shares Eligible for Future Sale
The 66,500 shares of Class A Stock outstanding as of the date of this
Prospectus are eligible for sale under Rule 144 ("Rule 144") promulgated under
the Securities Act of 1933, as amended (the "Securities Act"). Additionally, the
10,000 Placement Shares and the 134,000 shares of Class A Stock issuable upon
conversion of the Company's outstanding Series A Preferred Stock will be
registered under the Securities Act for sale at the time of a Business
Combination and will be freely tradable at that time. In general, under Rule
144, as currently in effect, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company (or persons whose
shares are aggregated), who has owned restricted shares of Class A Stock
beneficially for at least one year is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the total
number of outstanding shares of the same class or, if the Class A Stock is
quoted on an exchange or Nasdaq, the average weekly trading volume during the
four calendar weeks preceding the sale. A person who has not been an affiliate
of the Company for at least three months immediately preceding the sale and who
has beneficially owned the shares of Class A Stock to be sold for at least one
year is entitled to sell such shares under Rule 144 without regard to any of the
limitations described above. No prediction can be made as to the effect, if any,
that sales of such shares of Class A Stock or the availability of such shares
for sale will have on the market prices for shares of Class A Stock or Class A
Warrants prevailing from time to time. Nevertheless, the sale of substantial
amounts of Class A Stock in the public market would likely adversely affect
prevailing market prices for the Class A Stock and Warrants and could impair the
Company's ability to raise capital through the sale of its equity securities.
See "Shares Eligible for Future Sale." The shares of Class A Stock owned
immediately prior to the date hereof by all of the stockholders of the Company,
including the Placement Shares, will be placed in escrow. In addition, the
holders of the Placement Shares have agreed not to directly or indirectly sell,
offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of the Placement Shares without the prior
written consent of the Company until the earlier of 24 months from September 25,
1997, the issuance date, or 60 days following the consummation of the first
Business Combination. Furthermore, all of the holders of Founders' Shares have
agreed not to, directly or indirectly, sell, offer to sell, grant an option for
the sale of, transfer, assign, pledge, hypothecate or
24
<PAGE>
otherwise encumber any of their shares of Class A Stock (and the securities
issuable upon the exercise thereof) without the prior written consent of the
Company until two years from September 25, 1997, the issuance date, but in no
event earlier than 120 days following the consummation of the first Business
Combination, subject to any additional terms, conditions or restrictions that
may be imposed in connection with the consummation of a Business Combination.
The Company has agreed with the Representative that it will not grant such
consent without the consent of the Representative. See "Certain Transactions,"
"Shares Eligible for Future Sale," "Description of Securities" and
"Underwriting."
State Blue Sky Registration; Restricted Resales of the Securities
The ability to register or qualify for sale the Units, the shares of Common
Stock and Class A Warrants comprising the Units and the Class B Stock for both
initial sale and secondary trading will be limited because a significant number
of states have enacted regulations pursuant to their securities or so-called
"blue sky" laws restricting or, in many instances, prohibiting, the sale of
securities of "blind pool" issuers such as the Company within that state. In
addition, many states, while not specifically prohibiting or restricting "blind
pool" companies, would not register the securities to be offered in this
offering for sale in their states. Because of these regulations, the Company has
registered the securities being offered in this offering, or an exemption from
registration has been obtained (or is otherwise available), only in the states
of Colorado, Delaware, Florida, Hawaii, Illinois, Louisiana, Maryland, New York,
Rhode Island and South Carolina and in the District of Columbia (the "Primary
Distribution States") and initial sales may only be made in such jurisdictions.
More specifically, the Company has registered the securities by filing in
Colorado, by coordination in Delaware, Illinois, Maryland, Rhode Island and
South Carolina and by notification in Florida, Louisiana and New York.
Exemptions from registration have been obtained (or are otherwise available) in
Georgia, Hawaii and the District of Columbia. In addition, such securities will
be immediately eligible for resale in the secondary market in each of the
Primary Distribution States and, pursuant to an exemption provided to any
nonissuer transaction except when directly or indirectly for the benefit of an
affiliate of the issuer, in the Commonwealth of Pennsylvania. Such securities
will be eligible for resale in the secondary market 90 days after the date
hereof in the states of Maine, Missouri, New Mexico and Rhode Island and 180
days after the date hereof in the states of Alabama, Oklahoma and South Dakota,
in each case pursuant to an exemption provided to a company which has securities
registered pursuant to Section 12 of the Exchange Act for the time period
indicated. Because of regulations enacted to prohibit the sale of securities of
"blind pool" companies as well as the unavailability of exemptions provided to
companies whose securities are listed on an exchange or are eligible for
inclusion in recognized securities manuals such as Standard & Poor's Corporation
Records, it is not anticipated that a secondary trading market for the Company's
securities will develop in any of the other 31 states until subsequent to
consummation of a Business Combination, if at all.
Florida residents who purchase Class B Stock will be unable to exchange
these shares to Units unless and until the Units issuable upon exchange of the
Class B Stock have been registered for sale in Florida or are established to be
exempt from the requirement of such registration. Florida law generally
precludes the registration of securities that are not listed on a securities
exchange or Nasdaq when the offering price of such securities is $5.00 or less
per share. Because the "exchange price" of Class B Stock is nil, the "offering
price" of the Units issuable upon exchange of the Class B Stock could be
considered not greater than $5.00. For this reason, no permit to sell the Units
issuable upon exchange of the Class B Stock in Florida has been obtained. There
can be no assurance that the Units issuable upon exchange of the Class B Stock
will ever be registered in Florida or established to be exempt from the
requirement of such registration.
Settled NASD Investigation of Underwriter. On July 16, 1996, the National
Association of Securities Dealers, Inc. issued a Notice of Acceptance, Waiver
and Consent (the "AWC") whereby the Underwriter was censured and ordered to pay
fines and restitution to retail customers in the amount of $250,000 and
approximately $1.025 million, respectively. The AWC was issued in connection
with claims by the NASD that the Underwriter charged excessive markups and
markdowns in connection with the trading of four securities originally
underwritten by the Underwriter. The activities in question occurred between
December 1990 and October 1993. The Underwriter has informed the Company that
the fines and refunds will not have a material adverse effect on the
Underwriter's operations and that the Underwriter has effected remedial measures
to help ensure that the subject conduct does not recur. See "Underwriting."
25
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company, after deducting underwriting discounts and
estimated expenses (including the Representative's non-accountable expense
allowance) are estimated to be $8,400,000 ($9,800,000 if the Underwriters'
over-allotment option is exercised in full). The net proceeds to the Company,
after deducting only underwriting discounts, from the sale of the Class B Stock
to the public are estimated to be $1,350,000. Approximately 84% of the gross
proceeds of this offering (representing an amount equal to $8,000,000 gross
proceeds from the sale of the Units) will be held in an escrow account
maintained by the Proceeds Escrow Agent, until the earlier of written
notification by the Company to the Proceeds Escrow Agent (i) of the Company's
completion of a transaction or series of transactions in which at least 50% of
the gross proceeds from this offering is committed to a specific line of
business as a result of a Business Combination (including any redemption
payments), or (ii) to distribute the escrowed funds, in connection with a
liquidation of the Company, to the then holders of the Class A Stock purchased
as part of the Units sold in this offering or in the open market thereafter. All
proceeds held in the escrow account will be invested, until released, in
short-term United States government securities, including treasury bills, cash
and equivalents.
The Company will use the net proceeds of this offering, together with the
income earned thereon, principally in connection with effecting a Business
Combination, including selecting and evaluating potential Target Businesses and
structuring and consummating a Business Combination (including possible payment
of finder's fees or other compensation to persons or entities which provide
assistance or services to the Company). The Company will not effect a Business
Combination with a Target Business unless the Fair Market Value of such business
is greater than 80% of the net assets of the Company at the time of such
consummation of a Business Combination. The Company has no present intention of
either loaning any of the proceeds of this offering to any Target Business or
purchasing a minority interest in any Target Business. Management is unaware of
any circumstances under which this policy, through management's own initiative,
may be changed. The Company does not have discretionary access to the monies in
the escrow account, including income earned on such amounts, and stockholders of
the Company will not receive any distribution of income (other than in
connection with the liquidation of the Company) or have any ability to direct
the use or distribution of such income. Thus, such income will cause the amount
in escrow to increase. The Company cannot use the escrowed amounts to pay the
costs of evaluating potential Business Combinations. Except as noted above, the
Company will use the proceeds from the sale of the Class B Stock (i) to repay
indebtedness, (ii) to pay a $100,000 license fee to Bright pursuant to a license
agreement executed by Bright and the Company ($10,000 of which has been
previously paid from the proceeds of the Investor Notes), (iii) to cover all the
expenses incurred by the Company in this offering, including the Underwriters'
discounts and the Representative's non-accountable expense allowance, and (iv)
to pay the costs of evaluating potential Business Combinations, including
investment banking fees, the fees of the Proceeds Escrow Agent and the costs of
business, legal and accounting due diligence on prospective Target Businesses.
See "Proposed Business -- Servicemark License." Such funds also will be used for
the general and administrative expenses of the Company, including legal and
accounting fees and administrative support expenses in connection with the
Company's reporting obligations to the Commission. The Company does not
anticipate such fees and administrative expenses will exceed $100,000 per year.
The Company's anticipated uses of the net proceeds, after deducting
underwriter's discount, from the sale of the Units and the Class B Stock
(assuming no exercise of the Underwriters' over-allotment option) are quantified
as follows:
<TABLE>
<CAPTION>
Percentage of
Class B Stock
Use of Class B Stock Proceeds Amount Proceeds
------------------------ --------- -------------
<S> <C> <C>
Escrow Account (1) ........................................... $ 480,000 35.6%
Non-accountable Expense Allowance (2) ........................ 285,000 21.1
Repayment of Indebtedness .................................... 100,000 7.4
License Fee .................................................. 100,000 7.4
Expenses of Offering ......................................... 175,000 12.9
Evaluation of Potential Business Combinations
and Other Expenses.......................................... 210,000 15.6
---------- -----
$1,350,000 100.0%
========== =====
</TABLE>
<TABLE>
<CAPTION>
Percentage of
Unit
Use of Unit Proceeds Amount Proceeds
---------------------- --------- -------------
<S> <C> <C>
Escrow ....................................................... $7,520,000 100%
</TABLE>
26
<PAGE>
- ----------
(1) Represents the amount of the proceeds from the sale of the Class B Stock to
be added to the Escrow Account to be maintained by the Proceeds Escrow
Agent, which amount equals the Underwriters' discount with respect to the
sale of the Units (assuming no exercise of the Underwriters' over-allotment
option). See "The Company -- Escrow of Offering Proceeds."
(2) Represents the non-accountable expense allowance payable to the
Underwriters in an amount equal to 3% of the gross proceeds from the sale
of Units and Class B Stock (assuming no exercise of the Underwriters'
over-allotment option). See "Underwriting."
The Company may seek to issue additional securities if it requires
additional funds to meet its operating and administrative expenses. The Company
has agreed with the Representative that for a period of 18 months from the date
of this Prospectus and for up to six additional months if the Extension Criteria
have been satisfied, it will not issue (other than pursuant to this offering)
any securities or grant options or warrants to purchase any securities of the
Company without the consent of the Representative.
The Company anticipates that it will use a portion of the net proceeds of
the offering to repay indebtedness to several lenders evidenced by a series of
notes (the "Investor Notes"). The amount of this indebtedness is $100,000 plus
interest computed at the rate of 8% per year from November 15, 1997. The
proceeds of the borrowings under the Investor Notes were used to finance this
offering, including legal, accounting, printing, a portion of the licensing fee
to Bright and other costs. The Investor Notes bear interest at 8% per year and
both interest and principal are payable in full upon the closing of this
offering or May 15, 1999, whichever is earlier.
Following receipt of the net proceeds from the sale of the Class B Stock in
this offering, the Company believes it will have sufficient available funds,
assuming that a Business Combination is not consummated, to operate for at least
the next 24 months. To the extent that Common Stock is used as consideration to
effect a Business Combination, the net proceeds of this offering not theretofore
expended will be used to finance the operations (including the possible
repayment of debt) of the Target Business. No cash compensation will be paid to
any officer or director until after the consummation of the first Business
Combination. Since the role of present management after a Business Combination
is uncertain, the Company has no ability to determine what remuneration, if any,
will be paid to such persons after a Business Combination. No portion of the
gross proceeds from this offering will be paid to the Company's officers,
directors, their affiliates or associates for expenses of this offering.
Management is not aware of any circumstances under which the aforementioned
policy may be changed.
The net proceeds from the sale of Class B Stock in this offering, not
immediately required for the purposes set forth above, will be invested in
general debt obligations of the United States Government or other high-quality,
short-term interest-bearing investments, provided, however, that the Company
will attempt not to invest such net proceeds in a manner which may result in the
Company being deemed to be an investment company under the Investment Company
Act. The Company believes that, in the event a Business Combination is not
effected in the time allowed and to the extent that a significant portion of the
net proceeds from the sale of the Class B Stock in this offering is not used in
evaluating various prospective Target Businesses, the interest income derived
from investment of the net proceeds from the sale of the Class B Stock during
such period may be sufficient to defray continuing general and administrative
expenses, as well as costs relating to compliance with securities laws and
regulations (including associated professional fees). To the extent that a
Business Combination is not effected in the time allowed and the Company's
stockholders determine not to liquidate the Company, the Company believes that
such interest income, together with a small portion of the net proceeds from the
sale of the Class B Stock in this offering, may be sufficient to defray
continuing expenses for a period of several additional years until the Company
consummates a Business Combination. If such remaining proceeds are insufficient
to maintain the operations of the Company, management will attempt to secure
additional financing or will again recommend the liquidation of the Company to
the stockholders. Since all of the present holders of the Company's Class A
Stock have agreed to waive their respective rights to participate in a
liquidation distribution occurring prior to the first Business Combination, all
of the assets of the Company, including any interest and income earned on the
proceeds of this offering, which may be distributed upon such liquidation would
be distributed to the owners of the Class A Stock other than the present
stockholders and to the holders of the Company's Series A Preferred Stock.
The Company will not pay ten percent (10%) or more in the aggregate of the
net proceeds of this offering (through repayment of indebtedness or otherwise)
to NASD members, affiliates, associated persons or related persons.
27
<PAGE>
DILUTION
The difference between the public offering price per share of Class A Stock
(assuming no value is attributed to the Class A Warrants included in the Units)
and the pro forma net tangible book value per share of Class A Stock of the
Company after this offering constitutes the dilution to investors in this
offering. Net tangible book value per share of Class A Stock is determined by
dividing the net tangible book value of the Company (total tangible assets less
total liabilities) by the number of outstanding shares of Class A Stock. Because
the proceeds from the sale of the Class A Stock will be in escrow until the time
of a Business Combination and the Class B Stock will be exchanged for Class A
Stock within 90 days following a Business Combination the number of outstanding
shares of Class A Stock includes the number of shares of Class A Stock (300,000)
issuable upon exchange of the Class B Stock.
At October 31, 1997, net tangible book value of the Company was $(66,350)
or $(1.00) per share of Class A Stock. After giving effect to the sale of
800,000 shares of Class A Stock included in the Units offered hereby (and
assuming no value is attributed to the Class A Warrants included in such Units)
and 150,000 shares of Class B Stock offered hereby and the initial application
of the estimated net proceeds therefrom, the pro forma net tangible book value
of the Company at October 31, 1997, would be $8,324,050 or $7.14 per share,
representing an immediate increase in net tangible book value of $8.14 per share
(or 81.4%) to existing holders of Class A Stock and an immediate dilution of
$2.86 per share (or 28.6%) to investors purchasing Units in this offering ("New
Investors"). The following table illustrates the foregoing information with
respect to dilution to New Investors on a per share basis (assuming no value is
attributed to the Warrants included in the Units):
<TABLE>
<S> <C> <C>
Public offering price per share of Class A Stock (1)(2) ....... $10.00
Net tangible book value per share of Class A Stock before
this offering............................................... $(1.00)
Increase attributable to this offering ........................ $(8.14)
------
Pro forma net tangible book value per share of
Class A Stock after this offering (3)........................ 7.14
------
Dilution to New Investors ..................................... $ 2.86
======
</TABLE>
The following table sets forth, with respect to existing stockholders and
investors in this offering, a comparison of the number shares of Class A Stock
acquired from the Company, the percentage ownership of such shares, the total
consideration paid, the percentage of total consideration paid and the average
price per share:
<TABLE>
<CAPTION>
Price
Amount Percentage Amount Percentage Per Share
-------- ---------- -------- ---------- ---------
Average
Shares Purchased (1) Total Consideration (1)
-------------------- -----------------------
<S> <C> <C> <C> <C> <C>
Existing Class A Stockholders .............. 66,500 7.7% $ 45,650 .6% .69
New Investors .............................. 800,000 92.3% 8,000,000(2) 99.4% 10.00
-------- ----- ---------- -----
866,500 100.0% $8,045,650 100.0%
======== ===== ========== =====
</TABLE>
- ----------
(1) If the Underwriters' over-allotment option is exercised in full, the
investors in this offering will have paid $9,200,000 for 920,000 shares of
Class A Stock, representing 100% of the total consideration for
approximately 100% of the total number of shares of Class A Stock then
outstanding (excluding any exchange of shares of Class B Stock for this
purpose). The foregoing tables also assumes no exercise of the
Representative's Unit Purchase Warrants, the Representative's Class B
Warrants, warrants or options owned by the Company's directors and
executive officers, or conversion of the Series A Preferred Stock. See
"Underwriting" and "Description of Capital Stock Series A Preferred Stock."
(2) Assumes that no value is attributable to the Class A Warrants.
(3) Pro forma net tangible book value after this offering assumes the initial
application of estimated net proceeds to the Company (after payment of all
offering expenses, including the Representatives' non-accountable expense
allowance of $285,000). See "Use of Proceeds."
28
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
October 31, 1997, and as adjusted to give effect to the sale of the Units and
the Class B Stock being offered hereby:
<TABLE>
<CAPTION>
Historical As Adjusted (1)
---------- --------------
<S> <C> <C>
Note Payable ................................................ $ 67,000 --
Class A Common Stock, subject to possible
redemption, 160,000 shares at redemption value (3) ........ -- 1,600,000
Preferred Stock, $.01 par value, 1,000,000 shares authorized,
None outstanding, 200 shares designated as "Series A
Convertible Preferred Stock", 134 shares issued and
outstanding as adjusted ................................... 1 1
Subscription Receivable ..................................... (13,400) --
Class A Common Stock, $.01 par value, 9,750,000 shares
authorized, 66,500 shares issued and outstanding;
866,500 shares issued and outstanding after offering,
as adjusted (2) ........................................... 665 8,665
Class B Common Stock, $.01 par value, shares authorized
250,000, outstanding none; ................................ -- --
Additional paid in capital .................................. 58,384 6,760,384
Deficit accumulated during the development stage ............ (2,800) (45,000)
----------- -----------
Total capitalization .................................... $ 109,850 $ 8,324,050
=========== ===========
- ----------
</TABLE>
(1) Adjusted to give effect to the sale of 800,000 Units and the 150,000 shares
of Class B Stock offered hereby at the public offering price of $10.00 per
Unit and $10.00 per share of Class B Stock, respectively, and the receipt
by the Company of the estimated net proceeds (after the payment of all
offering expenses, including the Representative's non-accountable expense
allowance) of $8,200,000. See "Use of Proceeds."
(2) Excludes a total of 2,254,000 shares of Class A Stock, consisting of: (i)
800,000 shares of Class A Stock reserved for issuance upon the exercise of
the Class A Warrants, (ii) 300,000 shares of Class A Stock reserved for
issuance upon exchange of the Class B Stock, (iii) 300,000 shares of Class
A Stock reserved for issuance upon exercise of the Class A Warrants
comprising a part of the Units underlying the Class B Stock, (iv) 120,000
shares of Class A Stock included in the Units subject to the Underwriters'
over-allotment option, (v) 120,000 shares of Class A Stock reserved for
issuance upon the exercise of the Class A Warrants included in the Units
subject to the Underwriters' over-allotment option, (vi) 45,000 shares of
Class A Stock reserved for issuance upon exercise of the Units underlying
the Class B Stock subject to the Underwriters' over-allotment option, (vii)
45,000 shares of Class A Common Stock reserved for issuance upon exercise
of the Class A Warrants comprising a part of the Units underlying the Class
B Stock subject to the Underwriters' over-allotment option, (viii) 200,000
shares of Class A Stock reserved for issuance upon exercise of options to
purchase Units granted to executive officers and directors of the Company;
(ix) 134,000 shares of Class A Stock reserved for issuance upon conversion
of the Company's outstanding Series A Preferred Stock, which shares of
Class A Stock will be offered for sale by this Prospectus at the time of a
Business Combination, (x) 80,000 shares of Class A Stock included in the
Units reserved for issuance upon exercise of the Representative's Unit
Purchase Warrants, (xi) 80,000 shares of Class A Stock reserved for
issuance upon the exercise of the Class A Warrants included in the Units
reserved for issuance upon exercise of the Representative's Unit Purchase
Warrants, (xii) 30,000 shares of Class A Stock are included in the Units
reserved for issuance upon exercise of the Representative's Class B
Warrants, (xiii) 30,000 shares of Class A Stock reserved for issuance upon
exercise of Class A Warrants comprising a part of the Units underlying the
Representative's Class B Warrants, (xiv) 60,000 shares of Class A Stock
reserved for issuance upon exchange of the Class B Stock reserved for
issuance upon the exercise of options granted to two of the Company's
directors, and (xv) 60,000 shares of Class A Stock reserved for issuance
upon exercise of the Class A Warrants comprising a part of the Units
underlying the Class B Stock reserved for issuance upon the exercise of
options granted to two of the Company's directors. See "Management,"
"Underwriting" and "Certain Transactions."
(3) In the event the Company consummates a Business Combination, the redemption
rights afforded to the non-affiliated public stockholders may result in the
conversion into cash of up to 20% of the aggregate number of shares of
Class A Stock held by the non-affiliated public stockholders at a per share
redemption price equal to (A) the greater of (i) the Company's net worth or
(ii) the amount of proceeds of the Company in the escrow account (including
interest earned thereon) divided by (B) the number of shares of Class A
Stock held by non-affiliated public stockholders.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is currently in the development stage and is in the process of
raising capital. All activity of the Company to date has been related to its
formation and proposed financing. The Company's ability to commence operations
is contingent upon obtaining adequate financial resources through this offering.
All of the Company's costs to date have been paid out of available cash. The
Company will use the net proceeds of this offering, together with the income and
interest earned thereon, in connection with effecting a Business Combination,
including selecting and evaluating potential Target Businesses and structuring
and consummating a Business Combination (including possible payment of finder's
fees or other compensation to persons or entities which provide assistance or
services to the Company). The Company does not have discretionary access to the
income on the monies in the escrow account and stockholders of the Company will
not receive any distribution of the income (except in connection with a
redemption of Class A Stock by the Company) or have any ability to direct the
use or distribution of such income. Thus, such income will cause the amount in
escrow to increase. The Company cannot use the escrowed amounts to pay the costs
of evaluating potential Business Combinations and will use the proceeds from the
sale of the Class B Stock (i) to repay indebtedness, (ii) to pay a $100,000
license fee to Bright pursuant to a license agreement executed by Bright and the
Company, (iii) to cover all the expenses incurred by the Company in this
offering, including the Underwriters' discounts, the Representatives'
non-accountable expense allowance with respect to both the Units and the Class B
Stock, and the Proceeds Escrow Agent, and (iv) to pay the costs of evaluating
potential Business Combinations, including investment banking fees and the costs
of business, legal and accounting due diligence on prospective Target
Businesses. In addition, such funds will be used for the general and
administrative expenses of the Company, including legal and accounting fees and
administrative support expenses in connection with the Company's reporting
obligations to the Commission. The Company does not anticipate such fees and
administrative expenses will exceed $100,000 per year. Following receipt of the
net proceeds from the sale of the Class B Stock in this offering, the Company
will have sufficient available funds, assuming that a Business Combination is
not consummated, to operate for at least the next 24 months. To the extent that
Common Stock is used as consideration to effect a Business Combination, the
balance of the net proceeds of this offering not theretofore expended will be
used to finance the operations of the Target Business. See "Use of Proceeds." No
cash compensation will be paid to any officer or director until after the
consummation of the first Business Combination. Since the role of present
management after a Business Combination is uncertain, the Company has no ability
to determine what remuneration, if any, will be paid to such persons after a
Business Combination.
The net proceeds from the sale of the Class B Stock in this offering not
immediately required for the purposes set forth above will be invested in
general debt obligations of the United States Government or other high-quality,
short-term interest-bearing investments, provided, however, that the Company
will attempt not to invest such net proceeds in a manner which may result in the
Company being deemed to be an investment company under the Investment Company
Act. The Company believes that, in the event a Business Combination is not
effected in the time allowed and to the extent that a significant portion of the
net proceeds of this offering is not used in evaluating various prospective
Target Businesses, the interest income derived from investment of such net
proceeds during such period may be sufficient to defray continuing general and
administrative expenses, as well as costs relating to compliance with securities
laws and regulations (including associated professional fees).
In the event that the Company does not effect a Business Combination within
18 months from the date of this Prospectus, or 24 months from the date of this
Prospectus if the Extension Criteria have been satisfied, the Company will
submit to the holders of Class A Stock for their consideration a proposal to
distribute to the then holders of Class A Stock acquired as part of the Units
sold in this offering or in the open market thereafter, the amount held in the
escrow account. The assets of the Company (other than the escrowed assets) will
be used to pay the Company's liabilities and also to pay a liquidation
distribution of $13,400 to the holders of the Company's Series A Preferred
Stock. To the extent that a Business Combination is not effected in the time
allowed and the Company's stockholders determine not to permit the Company to
redeem the Class A Stock, the Company believes that income from the escrow
account, together with a small portion of the net proceeds from the sale of the
Class B Stock in this offering, may be sufficient to defray continuing expenses
for a short period of time until the Company consummates a Business Combination.
However, because the Company cannot estimate the amount of the proceeds from the
sale of the Class B Stock that will be used to pursue a potential Business
Combination, it cannot estimate what amount of funds, if any, might be available
to defray expenses or for how long, if at all, such funds might be sufficient
for that purpose. Since all of the present holders of the Company's Class A
Stock have agreed to waive their respective rights to participate in a
redemption distribution occurring prior to the first Business Combination, all
of the assets
30
<PAGE>
of the Company, including any income and interest earned on the proceeds of this
offering, which may be distributed upon such redemption would be distributed to
the owners of the Class A Stock issued as part of the Units in this offering or
in the open market thereafter, after payment of a redemption distribution of
$13,400 to the holders of the Series A Preferred Stock.
PROPOSED BUSINESS
Introduction
The Company, a development stage entity, was formed in November 1995 to
serve as a vehicle for the acquisition of, or the merger or consolidation with,
a Target Business. The Company intends to utilize the proceeds of this offering,
equity securities, debt securities, bank borrowings or a combination thereof in
effecting a Business Combination with a Target Business which the Company
believes has significant growth potential. The Company's efforts in identifying
a prospective Target Business are expected to emphasize businesses primarily
located in the United States; however, the Company reserves the right to acquire
a Target Business located primarily elsewhere. While the Company may, under
certain circumstances, seek to effect Business Combinations with more than one
Target Business, as a result of its limited resources the Company will, in all
likelihood, have the ability to effect only a single Business Combination. The
Company may effect a Business Combination with a Target Business which may be
financially unstable or in its early stages of development or growth.
"Blank Check" Offering
Background. As a result of management's broad discretion with respect to
the specific application of the net proceeds of this offering, this offering can
be characterized as a "blank check" offering. Although substantially all of the
net proceeds of this offering are intended to be utilized generally to effect a
Business Combination, such proceeds are not otherwise being designated for any
more specific purposes. Accordingly, prospective investors who invest in the
Company will do so without an opportunity to evaluate the specific merits or
risks of any one or more Business Combinations. Consummation of a Business
Combination may involve the acquisition of, or merger or consolidation with, a
company that does not need substantial additional capital but which desires to
establish a public trading market for its shares, while avoiding what it may
deem to be the adverse consequences of undertaking a public offering itself,
such as the time delays and significant expenses incurred to comply with the
various Federal and state securities laws that regulate initial public
offerings.
Unspecified Industry and Target Business. The Company will seek to acquire
a Target Business that is involved primarily in the development, advancement,
and use of science and technology. The Target Businesses will likely be involved
in an industry that includes computers and peripheral products, software,
electronic components and systems, telecommunications, media and information
services, pharmaceuticals, hospital supply and medical devices, biotechnology,
environmental services, chemicals and synthetic materials or defense and
aerospace. This may also include a Target Business that could benefit from the
commercialization of technological advances even if they are not directly
involved in research and development. Target Business may include small
companies developing new technologies or pursuing scientific breakthroughs or
large, better established businesses with track records of developing and
marketing such advances. Most likely, the Target Business will be primarily
located in the United States, although the Company reserves the right to acquire
a Target Business primarily located outside the United States. The Company will
not acquire a Target Business unless the Fair Market Value Test is satisfied. If
the Company determines that the financial statements of a proposed Target
Business do not clearly indicate that the Fair Market Value Test has been
satisfied, the Company will obtain an opinion from an investment banking firm
(which is a member of the NASD) with respect to the satisfaction of such
criteria. None of the Company's directors or its executive officer has had any
preliminary contact or discussions with any representative of any Target
Business regarding consummation of a Business Combination. Accordingly, there is
no basis for investors in this offering to evaluate the possible merits or risks
of a particular Target Business. In connection with stockholder approval of a
Business Combination, the Company intends to provide stockholders with complete
disclosure documentation, including audited financial statements, concerning a
Target Business. Accordingly, any Target Business that is selected would need to
have audited financial statements or be audited in connection with the
transaction. To the extent the Company effects a Business Combination with a
financially unstable company or an entity in its early stage of development or
growth (including entities without established records of revenue or income),
the Company will become subject to numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
companies. In addition, to the extent that the Company effects a Business
Combination
31
<PAGE>
with an entity in an industry characterized by a high level of risk, the Company
will become subject to the currently unascertainable risks of that industry. An
extremely high level of risk frequently characterizes certain industries which
experience rapid growth. Although management will endeavor to evaluate the risks
inherent in a particular industry or Target Business, there can be no assurance
that the Company will properly ascertain or assess all risks.
Probable Lack of Business Diversification. As a result of the limited
resources of the Company, the Company, in all likelihood, will have the ability
to effect only a single Business Combination. Accordingly, the prospects for the
Company's success will be entirely dependent upon the future performance of a
single business. Unlike certain entities that have the resources to consummate
several Business Combinations or entities operating in multiple industries or
multiple segments of a single industry, it is highly likely that the Company
will not have the resources to diversify its operations or benefit from the
possible spreading of risks or offsetting of losses. The Company's probable lack
of diversification may subject the Company to numerous economic, competitive and
regulatory developments, any or all of which may have a material adverse impact
upon the particular industry in which the Company may operate subsequent to
consummation of a Business Combination. The prospects for the Company's success
may become dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Accordingly, notwithstanding
the possibility of capital investment in and management assistance to the Target
Business by the Company, there can be no assurance that the Target Business will
prove to be commercially viable. The Company has no present intention of either
loaning any of the proceeds of this offering to any Target Business or of
purchasing or acquiring a minority interest in any Target Business.
No Independent Appraisal of Potential Acquisition Candidates. The Company
does not anticipate that it will obtain an independent appraisal or valuation of
a Target Business. Thus, stockholders of the Company will need to rely primarily
upon management to evaluate a prospective Business Combination. However, a
Business Combination will not be consummated unless it is approved by a vote of
two-thirds of the Common Stock voted by the stockholders (in person or by
proxy). See "The Company -- Stockholder Approval of Business Combinations."
Opportunity for Stockholder Evaluation or Approval of Business
Combinations. The investors in this offering will, in all likelihood, neither
receive nor otherwise have the opportunity to evaluate any financial or other
information which will be made available to the Company in connection with
selecting a potential Target Business until after the Company has entered into a
definitive agreement to effectuate a Business Combination. As a result,
investors in this offering will be almost entirely dependent on the judgment of
management in connection with the selection of a Target Business and the terms
of any Business Combination.
Under the Delaware General Corporation Law, various forms of Business
Combinations can be effected without stockholder approval. In addition, the form
of Business Combination will have an impact upon the availability of dissenters'
rights (i.e., the right to receive fair payment with respect to the Common
Stock) to stockholders disapproving of the proposed Business Combination. Under
current Delaware law, only a merger or consolidation may give rise to a
stockholder vote and to dissenters' rights. Nevertheless, the Company will
afford holders of Common Stock the right to approve the consummation of any
Business Combination, whether or not such approval would be required under
applicable Delaware law. In connection with such approval, the Company intends
to provide stockholders with complete disclosure documentation, including
audited financial statements, concerning a Target Business. The Company's
present stockholders have agreed in the escrow agreement to which their stock is
subject to vote their respective shares of Common Stock in accordance with the
vote of the majority of the shares voted by all non-affiliated public
stockholders of the Company with respect to the consummation of any Business
Combination. Pursuant to the Company's certificate of incorporation, a Business
Combination will not be consummated unless approved by a vote of two-thirds of
the shares of Common Stock voted by non-affiliated public stockholders (in
person or by proxy) with each share of Class B Stock entitled to two votes. In
addition, the Delaware General Corporation Law requires approval of certain
mergers and consolidations by a majority of the outstanding stock entitled to
vote.
Even if investors are afforded the right to approve a Business Combination
under the Delaware General Corporation Law, no dissenters' rights to receive
fair payment will be available for stockholders if the Company is to be the
surviving corporation unless the Certificate of Incorporation of the Company is
amended and as a result thereof: (i) alters or abolishes any preferential right
of such stock; (ii) creates, alters or abolishes any provision or right in
respect of the redemption of such shares or any sinking fund for the redemption
or purchase of such shares; (iii) alters or abolishes any preemptive right of
such holder to acquire shares or other securities; or (iv) excludes or limits
the right of such holder to vote on any matter, except as such right may be
limited by the voting rights given to new shares then being authorized of any
existing or new class.
32
<PAGE>
Limited Ability to Evaluate Management of a Target Business. The role of
the present management of the Company, following a Business Combination, cannot
be stated with any certainty. Although the Company intends to scrutinize closely
the management of a prospective Target Business in connection with its
evaluation of the desirability of effecting a Business Combination with such
Target Business, there can be no assurance that the Company's assessment of such
management will prove to be correct. While it is possible that certain of the
Company's directors or its executive officers will remain associated in some
capacities with the Company following consummation of a Business Combination, it
is unlikely that any of them will devote a substantial portion of their time to
the affairs of the Company subsequent thereto. Moreover, there can be no
assurance that such personnel will have significant experience or knowledge
relating to the operations of the particular Target Business. The Company also
may seek to recruit additional personnel to supplement the incumbent management
of the Target Business. There can be no assurance that the Company will have the
ability to recruit additional personnel or that such additional personnel will
have the requisite skills, knowledge or experience necessary or desirable to
enhance the incumbent management. In addition, there can be no assurance that
the future management of the Company will have the necessary skills,
qualifications or abilities to manage a public company intending to embark on a
program of business development.
Selection of a Target Business and Structuring of a Business Combination.
Management of the Company will have substantial flexibility in identifying and
selecting a prospective Target Business within the specified businesses.
However, the Company's flexibility is limited to the extent that it must satisfy
the Fair Market Value Test. If the Company determines that the financial
statements of a proposed Target Business do not clearly indicate that the Fair
Market Value Test has been satisfied, the Company will obtain an opinion from an
investment banking firm that is a member of the NASD with respect to the
satisfaction of such criteria. As a result, investors in this offering will be
almost entirely dependent on the judgment of management in connection with the
selection of a Target Business. In evaluating a prospective Target Business,
management will consider, among other factors, the following: (i) costs
associated with effecting the Business Combination; (ii) equity interest in and
opportunity for control of the Target Business; (iii) growth potential of the
Target Business; (iv) experience and skill of management and availability of
additional personnel of the Target Business; (v) capital requirements of the
Target Business; (vi) competitive position of the Target Business; (vii) stage
of development of the Target Business; (viii) degree of current or potential
market acceptance of the Target Business; (ix) proprietary features and degree
of intellectual property or other protection of the Target Business; (x) the
financial statements of the Target Business; and (xi) the regulatory environment
in which the Target Business operates. The Company will retain an independent
investment banking firm which is a member in good standing of the NASD to assist
the Company in identifying, evaluating, structuring and negotiating potential
Business Combinations.
The foregoing criteria are not intended to be exhaustive and any evaluation
relating to the merits of a particular Target Business will be based, to the
extent relevant, on the above factors as well as other considerations deemed
relevant by management in connection with effecting a Business Combination
consistent with the Company's business objectives. In connection with its
evaluation of a prospective Target Business, management anticipates that it will
conduct a due diligence review which will encompass, among other things, meeting
with incumbent management and inspection of facilities, as well as a review of
financial, legal and other information which will be made available to the
Company.
The time and costs required to select and evaluate a Target Business
(including conducting a due diligence review) and to structure and consummate
the Business Combination (including negotiating relevant agreements and
preparing requisite documents for filing pursuant to applicable securities laws
and state "blue sky" and corporation laws) cannot presently be ascertained with
any degree of certainty. The Company's current executive officers and directors
intend to devote only a small portion of their time to the affairs of the
Company and, accordingly, consummation of a Business Combination may require a
greater period of time than if the Company's management devoted their full time
to the Company's affairs. However, each officer and director of the Company will
devote such time as they deem reasonably necessary to carry out the business and
affairs of the Company, including the evaluation of potential Target Businesses
and the negotiation of a Business Combination and, as a result, the amount of
time devoted to the business and affairs of the Company may vary significantly
depending upon, among other things, whether the Company has identified a Target
Business or is engaged in active negotiation of a Business Combination. Any
costs incurred in connection with the identification and evaluation of a
prospective Target Business with which a Business Combination is not ultimately
consummated will result in a loss to the Company and reduce the amount of
capital available to otherwise complete a Business Combination or for the
resulting entity to utilize.
33
<PAGE>
The Company anticipates that various prospective Target Businesses will be
brought to its attention from various non-affiliated sources, including
securities broker-dealers, investment bankers, venture capitalists, bankers,
other members of the financial community and affiliated sources, including,
possibly, the Company's executive officer, directors and their affiliates. While
the Company has not yet ascertained how, if at all, it will advertise and
promote itself, it may elect to publish advertisements in financial or trade
publications seeking potential business acquisitions. While the Company does not
presently anticipate engaging the services of professional firms that specialize
in finding business acquisitions on any formal basis (other than the independent
investment banker), the Company may engage such firms in the future, in which
event the Company may pay a finder's fee or other compensation. In no event,
however, will the Company pay a finder's fee or commission to officers or
directors of the Company or any entity with which they are affiliated for such
service. Moreover, in no event shall the Company issue any of its securities to
any officer, director or promoter of the Company, or any of their respective
affiliates or associates, in connection with activities designed to locate a
Target Business. See "Management -- Conflicts of Interest." In addition, the
Company has agreed with the Representative that any finder's fee in connection
with the Company's first Business Combination will require approval by the
Company's Board of Directors. The Representative may act as finder in connection
with a Business Combination and receive compensation for such service, the
amount and form of which will be subject to negotiation at the time of
introduction of the Target Business to the Company. See "Underwriting."
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. The Company
will evaluate the possible tax consequences of any prospective Business
Combination and will endeavor to structure a Business Combination so as to
achieve the most favorable tax treatment to the Company, the Target Business and
their respective stockholders. There can be no assurance that the Internal
Revenue Service or relevant state tax authorities will ultimately assent to the
Company's tax treatment of a particular consummated Business Combination. To the
extent the Internal Revenue Service or any relevant state tax authorities
ultimately prevail in recharacterizing the tax treatment of a Business
Combination, there may be adverse tax consequences to the Company, the Target
Business and their respective stockholders. Tax considerations as well as other
relevant factors will be evaluated in determining the precise structure of a
particular Business Combination, which could be effected through various forms
of a merger, consolidation or stock or asset acquisition.
The Company may utilize cash derived from the net proceeds of this
offering, equity securities, debt securities or bank borrowings or a combination
thereof as consideration in effecting a Business Combination. Although the
Company's Board of Directors will have the power to issue any or all of the
authorized but unissued shares of Common Stock following the consummation of
this offering, the Company has agreed with the Representative that, for a period
of 18 months from the date of this Prospectus, and for up to six additional
months if the Extension Criteria have been satisfied, it will not issue (other
than pursuant to this offering) any securities or grant options or warrants to
purchase any securities of the Company without the consent of the
Representative, except in connection with effecting a Business Combination.
Although the Company has no commitments as of the date of this Prospectus to
issue any shares of Common Stock or options or warrants, other than as described
in this Prospectus, the Company will, in all likelihood, issue a substantial
number of additional shares in connection with the consummation of a Business
Combination. To the extent that such additional shares are issued, dilution to
the interests of the Company's stockholders will occur. Additionally, if a
substantial number of shares of Common Stock are issued in connection with the
consummation of a Business Combination, a change in control of the Company may
occur which may affect, among other things, the Company's ability to utilize net
operating loss carryforwards, if any.
There currently are no limitations on the Company's ability to borrow funds
to effect a Business Combination. However, the Company's limited resources and
lack of operating history may make it difficult to borrow funds. The amount and
nature of any borrowings by the Company will depend on numerous considerations,
including the Company's capital requirements, potential lenders' evaluation of
the Company's ability to meet debt service on borrowings and the then prevailing
conditions in the financial markets, as well as general economic conditions. The
Company does not have any arrangements with any bank or financial institution to
secure additional financing and there can be no assurance that such arrangements
if required or otherwise sought, would be available on terms commercially
acceptable or otherwise in the best interests of the Company. The inability of
the Company to borrow funds required to effect or facilitate a Business
Combination, or to provide funds for an additional infusion of capital into a
Target Business, may have a material adverse effect on the Company's financial
condition and future prospects, including the ability to effect a Business
Combination. To the extent that debt financing ultimately proves to be
available, any borrowings may subject the Company to various risks traditionally
associated with indebtedness, including the risks of interest rate fluctuations
and insufficiency of cash flow to pay principal and
34
<PAGE>
interest. Furthermore, a Target Business may have already incurred debt
financing and, therefore, all the risks inherent thereto.
Competition
The Company expects to encounter intense competition from other entities
having business objectives similar to that of the Company. Many of these
entities are well established and have extensive experience in connection with
identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater financial, technical, human and other
resources than the Company and there can be no assurance that the Company will
have the ability to compete successfully. The Company's financial resources will
be limited in comparison to those of many of its competitors. Further, such
competitors will generally not be required to seek the prior approval of their
own stockholders, which may enable them to close a Business Combination more
quickly than the Company. This inherent competitive limitation may compel the
Company to select certain less attractive Business Combination prospects. There
can be no assurance that such prospects will permit the Company to satisfy its
stated business objectives.
Uncertainty of Competitive Environment of Target Business
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly large number of
competitors including competitors with increasingly greater financial,
marketing, technical, human and other resources than the initial competitors in
the industry. The degree of competition characterizing the industry of any
prospective Target Business cannot presently be ascertained. There can be no
assurance that, subsequent to a Business Combination, the Company will have the
resources to compete effectively, especially to the extent that the Target
Business is in a high-growth industry.
Redemption of Class A Stock
In the event that the Company does not effect a Business Combination within
18 months from the date of this Prospectus, or 24 months from the date of this
Prospectus if the Extension Criteria have been satisfied, the Company will
submit to the holders of Class A Stock for their consideration a proposal to
distribute to the then holders of Class A Stock acquired as part of the Units
sold in this offering or in the open market thereafter, in redemption of such
shares the amounts in the interest bearing escrow account. Following such a
redemption of Class A Stock, each outstanding share of Class B Stock will be
exchanged for two shares of Class A Stock. The assets of the Company (other than
the escrowed assets) will be used to pay the Company's liabilities and to pay a
liquidation distribution of $13,400 to the holders of the Series A Preferred
Stock. The amount per share for distribution, to the holders of the Class A
Stock acquired as part of the Units sold in this offering or in the open market
thereafter, and exclusive of any income earned from the escrow account, will be
approximately equal to the initial public offering price per Unit in this
offering ($10.00 per Unit assuming no value is attributed to the Class A
Warrants included in the Units offered hereby). There can be no assurance that
the Company will effect a Business Combination within such period. All of the
Company's present stockholders including the Company's executive officers and
other directors and their affiliates are required to vote their shares of Class
A Stock in accordance with the vote of the majority of all non-affiliated public
stockholders of the Company with respect to any redemption proposal. Holders of
Class A Warrants, however, will only be entitled to vote on any redemption
proposal, and allowed to participate in any redemption distribution, if they
purchase shares of Class A Stock in this offering or on the open market
thereafter, but only as to any shares of Class A Stock so purchased. Present
stockholders including officers, directors and their affiliates will not
participate in any redemption distribution with respect to the shares of Class A
Stock owned by them as of the date hereof.
Certain Securities Laws Considerations
The Company has filed an application with the Commission to register the
Units, the Class A Stock, the Class A Warrants and the Class B Stock under the
provisions of Section 12(g) of the Exchange Act, and it will use its best
efforts to continue to maintain such registration until there has been a
consummation of a Business Combination or a liquidation of the Company. Such
registration will require the Company to comply with periodic reporting, proxy
solicitation and certain other requirements of the Exchange Act, including the
requirement that it submit to
35
<PAGE>
the Commission, prior to its dissemination, any proxy material to be furnished
to stockholders in connection with a proposed Business Combination.
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, the Company will only be able to effect a
Business Combination with a prospective Target Business that has available
audited financial statements or has financial statements which can be audited.
Facilities
The Company's offices are located at 333 East 56th Street, Penthouse G, New
York, New York 10022. The Company, pursuant to an oral agreement, utilize an
office at the residence of Richard J. Berman, a stockholder of the Company and
the Company's Chairman and Chief Executive Officer, until the acquisition of a
Target Business. Following completion of this offering, the Company will pay Mr.
Berman $1,000 per month for rent, office and secretarial services. Management is
unaware of any circumstances under which the Company's utilization of these
offices, through management's own initiative, may be changed.
Servicemark License
The servicemarks SMA(2)RT(SM) and Specialized Merger and Acquisition
Allocated Risk TRANSACTION(SM) are owned by Bright. Bright has granted the
Company a non-exclusive license to use, for the sole purpose of marketing this
offering, the SMA(2)RT(SM) and Specialized Merger and Acquisition Allocated Risk
TRANSACTION(SM) servicemarks in consideration of a royalty equal to $100,000.
There can be no assurance that a third party owning or using a similar
servicemark or trademark will not object to, or seek to prohibit, the Company's
use of the SMA(2)RT(SM) or Specialized Merger and Acquisition Allocated Risk
TRANSACTION(SM) servicemarks. See "Certain Transactions."
Employees
As of the date of this Prospectus, the Company has no full time employees.
36
<PAGE>
MANAGEMENT
Directors and Officers
The current directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
----- ---- -------
<S> <C> <C>
Richard J. Berman .................... 55 Chairman of the Board, Chief Executive Officer,
President, Director
Martin R. Wade ....................... 48 Secretary, Treasurer, Director
Marc De Logeres ...................... 71 Director
</TABLE>
Richard J. Berman is an experienced independent investor and financial
advisor who has been involved as a principal, advisor and consultant in
connection with the acquisition and divestiture of a variety of companies over
the last five years. He is currently, and has been since 1983, the Chief
Executive Officer of the American Acquisition Company, a merchant banking firm
which acts as a principal in venture capital and real estate transactions as
well as an advisor to companies involved in mergers and acquisition
transactions. From 1984 to 1989, Mr. Berman served as the Chairman of the Board
of Prestolite Battery Company of Canada, the largest producer of batteries in
Canada which merged with Exide Corp. in 1993. Mr. Berman is currently a
principal in several real estate development companies, primarily involved in
developing commercial office buildings in New York City and serves as a Director
and is a co-owner of Achievement Tech, Inc., a software company in Dallas, Texas
and as a Director and Officer of Bank Lease Consultants, Inc., an automobile
finance, publishing and consulting company in California. Mr. Berman's
consulting activities have included providing advice with respect to leveraged
buyouts, acquisitions, divestitures with companies such as Union Carbide,
Eastman Kodak, Schering-Plough and The New York Times. From 1975 to 1982, Mr.
Berman was a Senior Vice President at Bankers Trust Company and acted as head of
the Mergers and Acquisition Department and Leveraged Buyout Department.
Martin R. Wade is currently the Managing Director of Mergers and
Acquisitions of Prudential Securities, Inc. located in New York City. Prior
thereto, he served as Managing Director, Corporate Finance at Solomon Brothers
from 1995 to 1998. From September 1991 to December 1995, Mr. Wade served as the
National Director of Investment Banking for Price Waterhouse. He has supervised
the processing of divestitures in numerous industries, including among others,
the financial services and real estate industries. Mr. Wade has focused his
entire career on mergers and acquisition activities, specializing in sale-side
and buy-side mandates. He has provided advisory services on the acquisition and
sale of corporations in numerous industries aggregating, in value several
billion dollars, and has represented such companies as Magic Chief, Nike, Maytag
and Anchor Glass. Prior to joining Price Waterhouse, Mr. Wade was employed by a
number of Wall Street Investment banking firms in various senior executives
capacities.
Marc De Logeres has over thirty years of experience in Europe, the United
States and Canada in strategic development and restructuring of industrial and
financial companies. Mr. De Logeres has extensive experience in project
structuring and finance and mergers and acquisitions as a banker and as an
industrialist. He served as the Chairman of the Board of Michelin Tires PLC in
the United Kingdom, and currently serves, and has served since 1992 as a
Director of the France Growth Fund, a $100 million closed end fund that invests
in French securities and is listed on the New York Stock Exchange. Mr. De
Logeres also served as the Chief Executive Officer, President and subsequently
chairman of the Board of Michelin Tire Company in the United States and Michelin
Tire Company LTD in Canada. Mr. De Logeres was also a director of Nova Scotia
Power Inc., the sole supplier and distributor of electricity in the Providence
of Nova Scotia, Canada and is currently co-chairman of Ecotyre Technologies,
Inc., a tire remanufacturer in New York State.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors receive no
compensation for serving on the Board of Directors other than the reimbursement
of reasonable expenses incurred in attending meetings. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board. The
Company has not entered into employment agreements or other understandings with
its directors or executive officers concerning compensation. No cash
compensation will be paid to any officer or director until after the
consummation of the first Business Combination. Since the role of present
management after the consummation of a Business Combination is uncertain, the
Company has no ability to determine what remuneration, if any, will be paid to
such persons after the consummation of a Business Combination.
37
<PAGE>
No family relationships exist among any of the named directors or the
Company's officers. No arrangement or understanding exists between any such
director or officer and any other person pursuant to which any director or
officer was elected as a director or officer of the Company.
There are no agreements or understandings for any officer or director of
the Company to resign at the request of another person and none of the officers
or directors of the Company are acting on behalf of, or will act at the
direction of, any other person.
The holder of the Company's outstanding Series A Preferred Stock is
Summerwind, an indirect affiliate of Bright, a private company which owns and
has licensed to the Company, for the purpose of marketing this offering, the
servicemarks SMA(2)RT(SM) and Specialized Merger and Acquisition Allocated Risk
TRANSACTION(SM).
Other than as set forth in this Prospectus, no other relationships exist
between and among management stockholders and non-management stockholders.
Moreover, there are no arrangements, agreements or understandings between
non-management stockholders and management under which non-management
stockholders may directly or indirectly participate in or influence the
management of the Company's affairs. The Company has no knowledge of whether or
not non-management stockholders will exercise their voting right to continue to
elect the current directors to the Company's board. See "Conflict of Interest."
Each of the Company's officers and directors has agreed with the Company
and the Representatives that he will not, at any time, purchase any of the Class
B Stock being sold in this offering. In addition, management stockholders have
agreed among themselves that they may not actively negotiate or otherwise
consent to the sale or purchase of any portion of their Common Stock or warrants
as a condition to or in connection with a proposed merger or acquisition
transaction. Management is not aware of any circumstances under which this
policy, through their own initiative, may be changed. Moreover, none of the
proceeds from this offering may be used, directly or indirectly, to purchase any
of management's shares of Common Stock or warrants.
Options to Purchase Units
The Company has granted options to purchase 75,000 Units and 25,000,
respectively, to Richard J. Berman and Martin R. Wade in consideration for their
service as directors and officers of the Company. The Units are identical to
those to be sold pursuant to this offering and each consists of one share of
Class A Stock and one Class A Warrant to purchase one share of Class A Stock at
a price of $9.00 per share. The options are exercisable for a period of three
years from the date of a Business Combination at an exercise price of $12.50 per
Unit. The options are non-qualified options subject to the rules contained in
Section 83 of the Internal Revenue Code. The Options are fully vested; however,
the options will be cancelled as to any holder who is no longer a director or
executive officer prior to the first Business Combination. The shares issuable
upon exercise of the options and underlying warrants may not be sold or
otherwise transferred until 120 days after the first Business Combination.
Class B Stock Options
Messrs. Berman and Wade, directors of the Company, have received options to
purchase 25,000 shares and 5,000 shares, respectively, of the Company's Class B
Stock at an exercise price of $10.00 per share, or an aggregate exercise price
of up to $300,000. The options will expire, if not sooner exercised, upon
consummation of a Business Combination. The Company has agreed to use its best
efforts to register the shares of Class A Stock underlying the options as soon
as practicable after their issuance.
Conflicts of Interest
None of the Company's directors or officers is required to commit his full
time to the affairs of the Company and it is likely that such persons will not
devote a substantial amount of time to the affairs of the Company. Such
personnel will have conflicts of interest in allocating management time among
various business activities. As a result, the consummation of a Business
Combination may require a greater period of time than if the Company's
management devoted their full time to the Company's affairs. There are currently
no committees of the Board of Directors. However, each officer and director of
the Company will devote such time as he deems reasonably necessary to carry out
the business and affairs of the Company, including the evaluation of potential
Target Businesses and the negotiation of a Business Combination and, as a
result, the amount of time devoted to the business and affairs of the Company
may vary significantly depending upon, among other things, whether the Company
has
38
<PAGE>
identified a Target Business or is engaged in active negotiation of a Business
Combination. Prior to their involvement with the Company, none of the directors
or officers of the Company has been involved in any "blind pool" or "blank
check" offerings. To avoid certain conflicts of interest, the officers and
directors of the Company and owners of five percent or more of the Company's
Common Stock (after giving effect to this offering and to the exercise of
warrants owned by the Company's directors and executive officers but without
giving effect to the exercise, if any, of the Representative's Unit Purchase
Warrants, the Representative's Class B Stock Purchase Warrants, or the Warrants
or the conversion of the Series A Preferred Stock), will be required to agree
that they will not, until the completion of the first Business Combination,
directly or indirectly, introduce a suitable proposed acquisition, merger or
consolidation candidate to another "blind pool." For such purposes, "suitable"
shall mean any business opportunity which, under Delaware law, may reasonably be
required to be presented to the Company. Certain of the other persons associated
with the Company are and may in the future become affiliated with other entities
engaged in business activities similar to those intended to be conducted by the
Company. In the course of their other business activities, they may become aware
of investment and business opportunities which may be appropriate for
presentation to the Company as well as the other entities with which they are
affiliated. Such persons may have conflicts of interest in determining to which
entity a particular business opportunity should be presented. In general,
officers and directors of a corporation incorporated under the laws of the State
of Delaware are required to present certain business opportunities to such
corporation. Under Delaware law, officers and directors generally are required
to bring business opportunities to the attention of such corporation if: (i)
such corporation could financially undertake the opportunity; (ii) the
opportunity is within the corporation's line of business; and (iii) it would not
be fair to the corporation and its stockholders for the opportunity not to be
brought to the attention of such corporation. Accordingly, as a result of
multiple business affiliations, certain of the Company's key personnel may have
similar legal obligations relating to presenting certain business opportunities
to multiple entities. In addition, conflicts of interest may arise in connection
with evaluations of a particular business opportunity by the Board of Directors
with respect to the foregoing criteria. There can be no assurance that any of
the foregoing conflicts will be resolved in favor of the Company.
To minimize potential conflicts of interest, the Company is restricted from
pursuing any transactions with entities affiliated (by stock ownership or
otherwise) with an officer or director of the Company without the prior approval
of a majority of the Company's disinterested directors.
The directors and officers of the Company have agreed that neither they nor
any entity with which they are affiliated will be entitled to receive any
finder's fee in the event that they introduce the Company to a prospective
Target Business with which a Business Combination is ultimately consummated. In
addition, none of the directors or executive officers of the Company may
actively negotiate or otherwise consent to the purchase of any portion of such
person's securities in the Company as a condition to, or in connection with, a
proposed Business Combination.
In connection with any stockholder vote relating either to approval of a
Business Combination or the redemption of the Class A Stock due to the failure
of the Company to effect a Business Combination within the time allowed, all of
the Company's present stockholders, including all of its officers and directors,
have agreed to vote all of their respective shares of Class A Stock in
accordance with the vote of the majority of the shares voted by all
non-affiliated public stockholders of the Company (in person or by proxy) with
respect to such Business Combination or liquidation.
Prior Blank Check Offerings
None of the Company's officers, directors, promoters or other persons
engaged in management-type activities has been previously involved with any
blank check offerings. Bright, the licensor of the SMA(2)RT(SM) structure and
servicemark has had experience comprised of its corporate predecessor's
licensing the SMA(2)RT(SM) structure and servicemarks to Initial Acquisition
Corp. and Bright licensing the SMA(2)RT(SM) structure and servicemarks to Orion
Acquisition Corp. II and North American Acquisition Corp., which successfully
completed initial public offerings in May 1995, July 1996 and September 1997,
respectively.
39
<PAGE>
CERTAIN TRANSACTIONS
In August 15, 1996, upon the initial capitalization of the Company, the
Company issued an aggregate of 40,000 shares of Class A Stock to its directors
for a purchase price of $.10 per share as follows: to Richard Berman, 25,000
shares, Martin Wade, 10,000 shares, Marc De Logeres, 5,000 shares. In October
1997, in order to provide for initial operating capital for the Company, the
Company issued the 10,000 Placement Shares to three accredited investors at a
purchase price of $0.50 per share (before deducting offering expenses). These
three investors also loaned $100,000 to the Company, which amount is to be
repaid out of the proceeds of this offering. See "Use of Proceeds."
On October 29, 1997, Bright granted the Company a non-exclusive license to
use, for the sole purpose of marketing this offering, Bright's SMA(2)RT(SM) and
Specialized Merger and Acquisition Allocated Risk TRANSACTION(SM) servicemarks.
In consideration of Bright granting the non-exclusive license to the Company,
the Company is paying a total of $100,000 to Bright ($10,000 of which has been
previously paid from the proceeds of the Investors Notes). The value to be paid
by the Company was negotiated at arm's length, although no objective criteria
were used to measure the value of the license. One important consideration,
however, is that Bright's corporate predecessor previously licensed the
SMA(2)RTSM name and structure to Initial Acquisition Corp. and Bright licensed
the SMA(2)RT(SM) name and structure to Orion Acquisition Corp. II and North
American Acquisition Corp., which successfully completed initial public
offerings in May 1995, July 1996 and September 1997, respectively. The Company
believes that the value it is paying for the license to use the SMA(2)RT(SM)
structure and servicemarks in this offering will enhance the prospects of
successfully completing this offering because the investment community will be
more likely to readily understand the SMA(2)RT(SM) structure by associating it
with the previous SMA(2)RT(SM) transaction.
Messrs. Berman and Wade, directors of the Company, have received options to
purchase up to 25,000 shares and 5,000 shares, respectively, of the Company's
Class B Stock at an exercise price of $10.00 per share, or an aggregate exercise
price of up to $300,000. The options will expire, if not sooner exercised, upon
consummation of a Business Combination. The Company has agreed to use its best
efforts to register the shares of Class A Stock underlying the options as soon
as practicable after their issuance.
The Company has granted options to purchase 75,000 Units and 25,000,
respectively, to Richard J. Berman and Martin R. Wade in consideration for their
service as directors and officers of the Company. The Units are identical to
those to be sold pursuant to this offering and each consists of one share of
Class A Stock and one Class A Warrant to purchase one share of Class A Stock at
a price of $9.00 per share. The options are exercisable for a period of three
years from the date of a Business Combination at an exercise price of $12.50 per
Unit. The options are non-qualified options subject to the rules contained in
Section 83 of the Internal Revenue Code. The Options are fully vested; however,
the options will be cancelled as to any holder who is no longer a director or
executive officer prior to the first Business Combination. The shares issuable
upon exercise of the options and underlying warrants may not be sold or
otherwise transferred until 120 days after the first Business Combination.
Summerwind, an indirect affiliate of Bright, is the holder of the Company's
outstanding 134 shares of Series A Preferred Stock, which it purchased for
$13,400, and 1,000 shares of Class A Stock, which it purchased for $.10 per
share. Summerwind paid cash for the Class A Stock and issued a promissory note
at an interest rate of 8% payable upon the earlier of one year from the date of
the note or the closing of this offering for the Preferred Stock. Summerwind's
sole business enterprise is investing in securities.
The purchase prices for all Class A Stock and Series A Preferred Stock sold
by the Company prior to the date of this Prospectus were established by
negotiations between the Board of Directors and the various investors.
The Company will require that any future transactions between the Company
and its officers, directors, principal stockholders and the affiliates of the
foregoing persons be on terms no less favorable to the Company than could
reasonably be obtained in arm's length transactions with independent third
parties and that any such transactions also be approved by a majority of the
Company's directors disinterested in the transaction. Management of the Company
has not yet ascertained the amount of remuneration that will be payable to the
Company's officers and directors following completion of a Business Combination.
The Company has entered into an oral agreement with Richard J. Berman to
lease office space and to be provided with secretarial and office services
commencing upon the closing of this offering. The Company will pay $1,000 per
month to Mr. Berman for rent and such services. See "Proposed Business --
Facilities."
The directors of the Company may be deemed to be "promoters" of the
Company.
40
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the date hereof, and as
adjusted to reflect the sale of the shares of Class A Stock offered by the
Company hereby, based on information obtained from the persons named below, with
respect to the beneficial ownership of shares of Class A Stock by (i) each
person known by the Company to be the owner of more than 5% of the outstanding
shares of Class A Stock, (ii) each director, and (iii) all executive officers
and directors as a group. None of such persons owns any Class B Stock. However
Messrs. Berman and Wade hold options to purchase 25,000 and 5,000 shares of
Class B Stock, respectively, at an exercise price of $10.00 per share. See "The
Company -- Class B Stock Options."
<TABLE>
<CAPTION>
Percentage of
Outstanding Shares of
Class A Stock
-----------------------------
Amount and
Nature of
Beneficial Before After
Name or Group (1) Ownership (2)(3) Offering Offering (3)(4)
----------------- ---------------- -------- ---------------
<S> <C> <C> <C>
Richard J. Berman .............................................. 100,000 70.67 10.62
Martin R. Wade ................................................. 35,000 38.25 3.93
Marc de Logeres ................................................ 5,000 7.52 .58
All executive officers and directors ........................... 140,000 84.08 14.49
as a group (three persons)
</TABLE>
- ----------
(1) Each person listed has an address in care of the Company.
(2) Unless otherwise noted, the Company believes that each person named in the
table has sole voting and investment power with respect to all shares of
Class A Stock beneficially owned by him or it.
(3) Includes options to purchase 75,000 and 25,000 Units, each unit to be
identical to the Units issued in this offering, to each of Mr. Berman and
Mr. Wade, respectively. Excludes options to purchase 25,000 and 5,000
shares of Class B Stock held by each of Mr. Berman and Mr. Wade,
respectively. See "The Company -- Class B Stock Options" and "Management --
Options to Purchase Units."
(4) Assumes no exercise of (i) the Underwriters' over-allotment option; (ii)
the Representative's Unit Purchase Warrants, (iii) the Representative's
Class B Stock Purchase Warrants, (iv) the Class A Warrants included in the
Units offered hereby or (iv) the Class B Options and assumes no conversion
of the Series A Preferred Stock. See "The Company -- Class B Stock
Options", "Underwriting" and "Description of Capital Stock -- Series A
Preferred Stock."
The shares of Class A Stock and Series A Preferred Stock owned by the
Company's present stockholders, including the directors and executive officer of
the Company, excluding the Placement Shares, will be placed in escrow until the
earlier of (i) the consummation of the first Business Combination, or (ii) 18
months from the date of this Prospectus, subject to extension to 24 months from
the date of this Prospectus if the Extension Criteria have been satisfied.
During such period, such stockholders will not be able to sell or otherwise
transfer their respective shares of Class A Stock (with certain exceptions), but
will retain all other rights as stockholders of the Company, including, without
limitation, the right to vote such shares of Class A Stock (subject to their
agreement, as discussed above, to vote their shares in accordance with the vote
of a majority of the shares voted by non-affiliated public stockholders with
respect to the consummation of a Business Combination or liquidation proposal)
but excluding the right to request the redemption of escrowed shares pursuant to
a Redemption Offer. Subject to compliance with applicable securities laws, any
such holder may transfer his, her or its Class A Stock held in escrow to a
member of his family or to a trust established for the benefit of himself,
herself, or a family member or to another affiliated entity (with the consent of
the Representative which will not be unreasonably withheld) or in the event of
his or her death by will or operation of law, provided that any such transferee
shall agree as a condition to such transfer to be bound by the restrictions on
transfer applicable to the original holder and, in the case of present
stockholders, that the transferor (except in the case of death) will continue to
be deemed the beneficial owner (as defined in Regulation 13d-3 promulgated under
the Exchange Act).
41
<PAGE>
Each of the Company's officers and directors has agreed with the Company
and the Representative that he will not, at any time, purchase any of the Class
B Stock being sold in this offering, except the 30,000 shares reserved for
issuance to two directors upon exercise of the Class B Options. See "The
Company" -- Class B Stock Options."
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 11,000,000 shares of stock, of which
10,000,000 shares shall be shares of Common Stock, par value $.01 per share and
1,000,000 shall be shares of Preferred Stock, par value $.01 per share. Two
hundred (200) shares of the Preferred Stock shall be designated as "Series A
Convertible Preferred Stock." As of the date of this Prospectus, 66,500 shares
of Class A Stock are outstanding, held of record by 13 persons. The holders of
Class A Stock are entitled to one vote for each share held of record on all
matters to be voted on by stockholders. The holders of Class B Stock are
entitled two votes for each share held of record on all matters to be voted on
by stockholders. There is no cumulative voting with respect to the election of
directors, with the result that the holders of more than 50% of the shares
voting for the election of directors can elect all of the directors. The holders
of Common Stock are entitled to receive dividends when, as and if declared by
the Board of Directors out of the funds legally available therefor. In the event
of the liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in all assets remaining available for
distribution after payment of liabilities and after provision has been made for
each class of stock, if any, having preference over the Common Stock. All of the
present stockholders of the Company have agreed to waive their respective rights
to participate in a redemption offer or liquidation distribution prior to the
consummation of the first Business Combination. Each outstanding share of Class
B Stock at the time of a Business Combination will be exchanged for two Units
(each consisting of one share of Class A Stock and one Class A Warrant) 90 days
following the consummation of the Business Combination), or any earlier date on
or after the date of a Business Combination that the Representative in its sole
discretion so elects. Otherwise, holders of shares of Common Stock, as such,
have no conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are, and the shares of Common Stock to be issued in this
offering, when issued against payment therefor, will be, validly authorized and
issued, fully paid and nonassessable. The Company has agreed with the
Representatives that for a period of 18 months from the date of this Prospectus,
and for up to six additional months if the Extension Criteria have been
satisfied, it will not issue (other than pursuant to this offering) any shares
of Common Stock or grant Common Stock purchase options or warrants without the
consent of the Representatives, except in connection with effecting a Business
Combination.
Class B Stock
As of the date hereof, each share of Class B Stock will entitle the
registered holder thereof to receive two Units, each comprised of one share of
Class A Stock and one Class A Warrant to purchase one share of Class A Stock.
The Class B Stock will be initially exchangeable commencing 90 days following
the consummation of a Business Combination or on any earlier date on or after
the date of a Business Combination that the Representative, in its sole
discretion so elects, and expire at 5:00 p.m., New York City time, on the first
anniversary of the date of a consummation of a Business Combination. Each share
of Class B Stock will be exchanged for two shares of Class A Stock following a
redemption of the Class A Stock sold in this offering in the event a Business
Combination is not consummated within 18 months from the date of this
Prospectus, or 24 months if the Extension Criteria are satisfied. See "The
Company -- Redemption of Class A Stock if No Business Combination."
The Units and the Class B Stock will be sold and traded separately. Florida
residents who purchase Class B Stock will be unable to exchange these Shares to
receive Units unless and until the Units issuable upon exchange of the Class B
Stock have been registered for sale in Florida or are established to be exempt
from the requirement of such registration. Florida law generally precludes the
registration of securities that are not listed on a securities exchange or the
Nasdaq when the offering price of such securities is $5.00 or less per share.
Because the "exchange price" of Class B Stock is nil, the "offering price" of
the Units issuable upon exchange of the Class B Stock could be considered not
greater than $5.00. For this reason, no permit to sell the Units issuable upon
exchange of the Class B Stock in Florida has been obtained. There can be no
assurance that the Units issuable upon exchange of the Class B Stock will ever
be registered in Florida or established to be exempt from the requirement of
such registration.
42
<PAGE>
Preferred Stock
The Company's Amended and Restated Certificate of Incorporation authorizes
the issuance of 1,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock"), with such designations, powers, preferences, rights,
qualifications, limitations and restrictions of such series as the Board of
Directors, subject to the laws of the State of Delaware, may determine from time
to time. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue Preferred Stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of Common Stock. The Company has agreed with the
Representatives, however, that for a period of 18 months from the date of this
Prospectus, and for up to six additional months if the Extension Criteria have
been satisfied, it will not issue any shares of Preferred Stock without the
consent of the Representatives, except in connection with a consummation of a
Business Combination. In addition, the Preferred Stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. Although the Company does not currently intend
to issue any additional shares of Preferred Stock, there can be no assurance
that the Company will not do so in the future.
Series A Preferred Stock
As of the date of this Prospectus, the Company has outstanding 134 shares
of Series A Preferred Stock, owned by Summerwind. The purchase price for such
shares, $100.00 per share or $13,400 in the aggregate, is payable to the
Company, with interest, upon the earlier of November 15, 1998 or the closing of
this offering. The Series A Preferred Stock is non-voting, does not bear a
dividend and has a liquidation value of $100.00 per share. Each share of Series
A Preferred Stock will be convertible into 1000 shares of Class A Stock for a
period of one year following the consummation of a Business Combination. In the
event that a Business Combination does not occur within 18 months of the date of
this Prospectus, or 24 months if the Extension Criteria are satisfied, the
Series A Preferred Stock will be redeemed by the Company for its liquidation
value. The Company has agreed to register the Class A Stock issuable upon
conversion of the Series A Preferred Stock at the time of a Business
Combination.
Class A Warrants
The statements under this caption relating to the Class A Warrants are
merely a summary and do not purport to be complete. However, such summary
contains all information with respect to such Class A Warrants which the Company
believes to be material to investors. Such summary is qualified in its entirety
by express reference to the warrant agreement ("Warrant Agreement") between the
Company and American Stock Transfer & Trust Company, copies of which have been
filed with the Securities and Exchange Commission. Copies of the Warrant
Agreement are available for inspection at the offices of the Company.
As of the date hereof, each Class A Warrant will entitle the registered
holder thereof to purchase one share of Class A Stock at a price of $9.00 per
share, subject to adjustment in certain circumstances. The Class A Warrants will
be initially exercisable commencing 90 days following the consummation of a
Business Combination, or any earlier date on or after the date of a business
combination that the Representative in its sole discretion so elects, and expire
at 5:00 p.m., New York City time, on the fifth anniversary of the date of this
Prospectus.
The Class A Warrants will become transferable at such time as the
Representative may determine, but in no event before the Separation Date. The
Company may call the Class A Warrants for redemption, in whole and not in part,
at the option of the Company, at a price of $.05 per Class A Warrant at any time
after the consummation of a Business Combination, upon not less than 30 days'
prior written notice, provided that the last sale price of the Class A Stock, if
the Stock is listed for trading on an exchange or interdealer quotation system
which provides last sale prices, or, the average of the closing bid and asked
quotes, if the Stock is listed for trading on an interdealer quotation system
which does not provide last sale prices, on all 10 of the trading days ending on
the day immediately prior to the day on which the Company gives notice of
redemption, has been $11.00 or higher. The holders of Class A Warrants shall
have exercise rights until the close of business on the date fixed for
redemption.
The exercise price and number of shares of Class A Stock issuable on
exercise of the Class A Warrants are subject to adjustments under certain
circumstances, including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation of the Company. However, the Class A
Warrants are not subject to adjustment for issuances of Class A Stock at a price
below their respective exercise prices.
43
<PAGE>
The Company has the right, in its sole discretion, to decrease the exercise
price of the Class A Warrants for a period of not less than 30 days on not less
than 30 days' prior written notice to the holders of Class A Warrants, subject
to compliance with applicable laws such as, but not limited to, any prior notice
provisions imposed by the Commission, the NASD or any exchange on which the
Company's Class A Stock is then listed. In addition, the Company has the right,
in its sole discretion, to extend the expiration date of the Class A Warrants on
five business days' prior written notice to the holders of Class A Warrants.
The Class A Warrants may be exercised upon surrender of the warrant
certificate on or prior to the expiration date of the Class A Warrant, at the
offices of the warrant agent, with the exercise form on the reverse side of the
warrant certificate completed and executed as indicated, accompanied by full
payment of the exercise price (by certified check, payable to the Company) to
the warrant agent for the number of Class A Warrants being exercised. The
holders of Class A Warrants do not have the rights or privileges of holders of
Class A Stock, including, without limitation, the right to vote on any matter
presented to stockholders for approval.
The Company is required either to maintain the effectiveness of the
Registration Statement or to file a new registration statement with the
Commission, with respect to the securities underlying the Class A Warrants prior
to the exercise of the Class A Warrants and to deliver a prospectus as required
by Section 10(a)(3) of the Securities Act with respect to such securities to the
holders of all Class A Warrants prior to the exercise or redemption of such
Class A Warrants (except, if in the opinion of counsel to the Company, such
registration is not required under the federal securities laws or if the Company
receives a letter from the staff of the Commission stating that it would not
take any enforcement action if such registration is not effected). In addition,
and subject to the foregoing, the Company is required to have a current
Registration Statement on file with the Commission and to effect appropriate
qualifications under the laws and regulations of the states in which the initial
holders of the Class A Warrants reside in order to comply with applicable laws
in connection with such exercise. There can be no assurance, however, that the
Company will be in a position to be able to keep its Registration Statement
current or to effect appropriate action under applicable state securities laws,
the failure of which may result in the inability to exercise the Class A
Warrants or effect a resale or other disposition of Class A Stock issued upon
such exercise.
No fractional shares will be issued upon exercise of the Class A Warrants.
However, if a warrantholder exercises all Class A Warrants then owned of record
by him, the Company will pay to such warrantholder, in lieu of the issuance of
any fractional share which is otherwise issuable to such warrantholder, an
amount in cash based on the market value of the Class A Stock on the last
trading day prior to the exercise date.
Dividends
The Company does not expect to pay dividends prior to the consummation of a
Business Combination. Future dividends, if any, will be contingent upon the
Company's revenues and earnings, if any, capital requirements and general
financial condition subsequent to the consummation of a Business Combination.
The payment of dividends subsequent to the consummation of a Business
Combination will be within the discretion of the Company's then Board of
Directors. The Company presently intends to retain all earnings, if any, for use
in the Company's business operations and accordingly, the Board does not
anticipate declaring any dividends in the foreseeable future.
Transfer Agent, Registrar and Warrant Agent
The transfer and registrar agent for the Units, the Class A Stock, and the
Class B Stock and the transfer agent, registrar and warrant agent for the Class
A Warrants is American Stock Transfer & Trust Company.
44
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering (but prior to a Business
Combination), the Company will have 866,500 shares of Class A Stock outstanding
(986,500 shares if the Underwriters' over-allotment option is exercised in
full). Of these shares, the 800,000 shares sold by the Company in this offering
(920,000 shares if the Underwriters' over-allotment option is exercised in full)
will be freely tradable without restriction or further registration under the
Securities Act, except for any shares purchased by an "affiliate" of the Company
(as defined in the Securities Act and the rules and regulations thereunder)
which will be subject to the limitations of Rule 144 promulgated under the
Securities Act. All of the remaining 66,500 shares are deemed to be "restricted
securities", as that term is defined under Rule 144 promulgated under the
Securities Act, as such shares were issued in private transactions not involving
a public offering. None of such shares are eligible for sale under Rule 144.
However, 10,000 of such shares (the Placement Shares) along with the 134,000
shares issuable upon conversion of the outstanding Series A Preferred Stock are
expected to be registered under the Securities Act at the time of the Business
Combination.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated), who has beneficially owned
the restricted shares of Class A Stock to be sold for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the Class A Stock is quoted on an exchange or Nasdaq, the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least the three
months immediately preceding the sale and who has beneficially owned the shares
of Class A Stock to be sold for at least two years is entitled to sell such
shares under Rule 144 without regard to any of the limitations described above.
The holders of Founders' Shares have agreed not to, directly or indirectly,
sell, offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of their shares of Class A Stock, 66,500
shares in the aggregate, until two years from September 25, 1997, the issuance
date, provided that such shares may in no event be sold or otherwise transferred
until 120 days following the completion of the first Business Combination,
subject to any additional terms, conditions or restrictions that may be imposed
in connection with the consummation of a Business Combination. In addition, the
holders of the Placement Shares have agreed not to directly or indirectly sell,
offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of the Placement Shares without the prior
written consent of the Company until the earlier of 24 months from the date such
shares were issued (November 15, 1997) or 60 days following the consummation of
the first Business Combination. The Company has agreed with the Representative
that it will not grant such consents without the consent of the Representative.
Prior to this offering, there has been no market for the Class A Stock, the
Units, the Class A Warrants or the Class B Stock and no prediction can be made
as to the effect, if any, that market sales of restricted shares of Class A
Stock or the availability of such shares for sale will have on the market prices
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of Class A Stock may be sold in the public market would likely adversely
affect prevailing market prices for the Class A Stock, the Units and the Class A
Warrants and Class B Stock and could impair the Company's ability to raise
capital through the sale of its equity securities.
45
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company and the Underwriters, the Company has agreed to sell to the Underwriters
named below for whom the Representative is acting as representative, and the
Underwriters have severally and not jointly agreed to purchase, the number of
Units and shares of Class B Stock set forth opposite their respective names
below.
<TABLE>
<CAPTION>
Number of
Class B
Underwriter Number of Units Shares
----------- --------------- ---------
<S> <C> <C>
H.J. Meyers & Co., Inc ........................................
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel to
the Representatives and various other conditions. The nature of the
Underwriters' obligations are such that they are committed to purchase all of
the above Units and Shares of Class B Stock if any are purchased.
As a registered broker-dealer, the Representative is required under the
Exchange Act and the rules promulgated thereunder to maintain minimum net
capital in order to conduct their broker-dealer operations. Currently, the
Representative has sufficient excess net capital to support its broker-dealer
operations, including its underwriting obligations to the Company. In the event,
however, that at any time the Representative should be unable to maintain their
minimum net capital requirements, they will have to cease operations as a
broker-dealer. Any such cessation of operations by the Representative could have
a material adverse effect on the market price and liquidity of the securities
being offered hereby. No assurance can be given, however, that the firm will be
able to maintain its required minimum net capital at all times during or
following the offering described herein.
The Company has been advised by the Representative that the Underwriters
propose to offer the Units and the Class B Stock directly to the public at the
public offering prices set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $.30 per Unit
and $.50 per share of Class B Stock. The Representative has informed the Company
that they do not expect sales to discretionary accounts by the Underwriters to
exceed 5% of the securities offered by the Company hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
agreed to pay to the Representative a non-accountable expense allowance equal to
3% of the gross proceeds derived from the sale of the Units and Class B Stock
underwritten ($285,000 if the Underwriters' overallotment option is not
exercised) including the sale of any Units and Class B Stock subject to the
Underwriters' over-allotment option.
The Company has agreed that no finder's or origination fees or similar
compensation will be paid to any of the Company's officers, directors or 5% or
greater stockholders or their respective affiliates in connection with or to
effect a Business Combination. If the Company enters into any finder's fee
agreement or similar agreement or arrangement with any person or entity other
than the Company's officers, directors or 5% or greater stockholders or their
respective affiliates in connection with or to effect the first Business
Combination (other than the independent investment banker), the finder's fee or
other consideration paid in connection therewith must be approved by the
Company's Board of Directors.
The Company has agreed, in connection with the redemption of or any
solicitation by the underwriter of exercise of the Warrants by the Company
pursuant to solicitation by the Representative, commencing one year from the
date of this Prospectus, to pay to the Representative an aggregate management
fee of 10% of the respective Warrant exercise prices, 8% of which will be
reallowed to any selected dealer who is a member of the NASD (which member will
comply with Rule 2710(C)(6)(B)(vi)(d) of the NASD Conduct Rules) who solicited
the redemption (which may also be the Representative) for each Warrant redeemed
by the Company, provided, however, that the Representatives will not be entitled
to receive such compensation in any Warrant redemption transaction in which (i)
the market price of the Common Stock of the Company at the time of the
redemption is lower than the exercise price of the Warrants in question; (ii)
the Warrants are held in a discretionary account under the control of the
selected dealer; (iii) disclosure of compensation arrangements is not made, in
addition to the disclosure provided in this Prospectus, in documents provided to
holders of the Warrants at the time of exercise; (iv) the redemption of the
Warrants is unsolicited; and (v) the solicitation of redemption of the Warrants
was in violation of Regulation M promulgated under the 1934 Act. In determining
the management fee, the calculation will exclude 10% of the
46
<PAGE>
respective Warrant exercise prices, any underlying warrants, options or
convertible securities. Unless granted an exemption by the Commission from
Regulation M, the Representative will be prohibited from engaging in any
market-making activities or solicited brokerage activities with regard to the
Company's securities during the periods prescribed by Regulation M before the
solicitation of the exercise of any Warrant until the later of (a) the
termination of such solicitation activity, or (b) the termination by waiver or
otherwise of any right the Representative may have to receive a fee for the
redemption of the Warrants following such solicitations. As a result, the
Representative may be unable to provide a market for the Company's securities
during certain periods while the Warrants are exercisable. The Company has
agreed not to solicit Warrant redemptions other than through the Representative.
The holders of Founders' Shares have agreed not to, directly or indirectly,
sell, offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of their shares of Class A Stock, 66,500
shares in the aggregate, or any warrants to purchase Units (and the securities
issuable upon the exercise thereof) without the prior written consent of the
Company until two years from September 25, 1997, the issuance date, provided
that such shares may in no event be sold or otherwise transferred until 120 days
following the completion of the first Business Combination, subject to any
additional terms, conditions or restrictions that may be imposed in connection
with the consummation of a Business Combination. An appropriate legend shall be
marked on the face of stock certificates representing all such shares of Common
Stock.
The Company has agreed with the Representative that for a period of 18
months from the date of this Prospectus, and for up to six additional months if
the Extension Criteria are satisfied, it will not issue (other than pursuant to
this offering) any securities or grant options or warrants to purchase any
securities of the Company without the consent of the Representative except in
connection with effecting a Business Combination.
The Company has granted to the Representative an option exercisable during
the 30-day period commencing on the date of this Prospectus to purchase from the
Company at the offering price less underwriting discounts, up to an aggregate of
120,000 additional Units and 22,500 shares of additional Class B Stock for the
sole purpose of covering over-allotments, if any. To the extent that the
Representative exercises such option, the Representative have the right to
require each Underwriter to purchase on a firm commitment basis approximately
the same percentage thereof that the number of Units and Class B Stock to be
purchased by it or the Underwriters shown, in the above table bears to the total
shown. The Company will be obligated, pursuant to the option, to sell such Units
and Class B Stock to the Representative or the Underwriters, as the
Representative directs.
In connection with this offering, the Company has agreed to sell to the
Representative, for nominal consideration, the Representative's Warrants. The
Representative's Warrants are initially exercisable at a price of $11.00 per
Unit and $11.00 per share of Class B Stock for a period of four years,
commencing one year from the date of this Prospectus. The Units and Class B
Stock issuable upon exercise of the Representative's Warrants are the same as
the Units and Class B Stock being sold in this offering. The Representative's
Warrants contain anti-dilution provisions providing for adjustment of the number
of warrants and exercise price under certain circumstances. The Representative's
Warrants grant to the holders thereof certain rights of registration of the
Units and Class B Stock issuable upon exercise of the Representative's Warrants.
The Company has also agreed that, for a period of two years from the
closing of this Offering, if it participates in any merger, consolidation or
other transaction which the Representative has brought to the Company (including
an acquisition of assets or stock for which it pays, in whole or in part, with
shares of the Company's Common Stock or other securities), which transaction is
consummated within 36 months of the closing of this Offering, then it will pay
for the Representative's services an amount equal to 5% of the first $2 million
of value paid or value received in the transaction, 2% of any consideration
above $2 million and less than $4 million, and 1% of any consideration in excess
of $4 million. The Company has also agreed that if, during this two-year period,
someone other than the Representative brings such a merger, consolidation or
other transaction to the Company, and if the Company in writing retains the
Representative for consultation or other services in connection therewith, then
upon consummation of the transaction the Company will pay to the Representative
as a fee the appropriate amount as set forth above or as otherwise agreed to
between the Company and the Representative.
Prior to this offering there has been no public market for any of the
Company's securities. Accordingly, the offering prices of the Units and Class B
Stock and terms of the Class A Warrants underlying the Units were determined by
negotiation between the Company and the Representatives. Factors considered in
determining such price and terms, in addition to prevailing market conditions,
include an assessment of the Company's prospects. The public offering prices of
the Units and Class B Stock do not bear any relationship to assets, earnings,
book value, or other
47
<PAGE>
criteria of value applicable to the Company and should not be considered an
indication of the actual value of the Units or Class B Stock. Such prices are
subject to change as a result of market conditions and other factors, and no
assurance can be given that the Units or Class B Stock can be resold at their
respective offering prices.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Nevertheless, it includes
all information concerning such agreements which the Company believes to be
material. Reference is made to copies of each such agreement which are filed as
exhibits to the Registration Statement.
On July 16, 1996, the NASD issued a Notice of Acceptance, Waiver and
Consent (the "AWC") whereby the Underwriter was censured and ordered to pay
fines and restitution to retail customers in the amount of $250,000 and
approximately $1.025 million, respectively. The AWC was issued in connection
with claims by the NASD that the Underwriter charged excessive markups and
markdowns in connection with the trading of four securities originally
underwritten by the Underwriter. The activities in question occurred between
December 1990 and October 1993. The Underwriter has informed the Company that
the fines and refunds will not have a material adverse effect on the
Underwriter's operations and that the Underwriter has effected remedial measures
to help ensure that the subject conduct does not recur.
LEGAL MATTERS
The legality of the securities being registered by this Registration
Statement is being passed upon by Gibbons, Del Deo, Dolan, Griffinger &
Vecchione, a Professional Corporation, Newark, New Jersey. Harter, Secrest &
Emery LLP, Rochester, New York, has acted as counsel to the Representative in
connection with this offering.
EXPERTS
The financial statements included in this Prospectus have been audited by
BDO Seidman, LLP, independent certified public accountants, to the extent and
for the period set forth in their report appearing elsewhere herein, and is
included in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") under the
Securities Act with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and this
offering, reference is made to the Registration Statement, including the
exhibits and schedules filed therewith, copies of which may be obtained at
prescribed rates from the Commission at its principal office at 450 Fifth Street
N.W., Washington, D.C. 20549, or at the Regional Offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400 Chicago, Illinois, 60604.
Descriptions contained in this Prospectus as to the contents of any agreement or
other documents filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to such
agreement or document.
The Company intends to furnish to its stockholders annual reports
containing financial statements audited and reported upon by its independent
public accountants.
Prior to the date of this Prospectus, the Company was not subject to the
information requirements of the Exchange Act. Upon the effectiveness of the
Registration Statement, the Company will be subject to certain of the
informational requirements of the Exchange Act and, in accordance therewith,
will file periodic reports and other information with the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of the reports and
information so filed can be obtained from the Public Reference Section of the
Commission upon payment of certain fees prescribed by the Commission.
The Commission maintains a Web site that contains reports, proxy statements
and other information regarding registrants that file electronically with the
Commission. The address of the Commission's Web site is http://www.sec.gov.
48
<PAGE>
BW ACQUISITION CORP.
(a corporation in the development stage)
------------
CONTENTS
Page
----
Report of independent certified public accountants ............ F-2
Financial statements:
Balance sheet ............................................... F-3
Statement of operations ..................................... F-4
Statement of stockholders' equity ........................... F-5
Statement of cash flows ..................................... F-6
Notes to financial statements ............................... F-7 - F-9
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BW Acquisition Corp.
(a corporation in the development stage)
New York, New York
We have audited the accompanying balance sheet of BW Acquisition Corp. (a
corporation in the development stage) as of October 31, 1997, and the related
statements of operations, stockholders' equity and cash flows for the period
from September 1, 1997 (inception) to October 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BW Acquisition Corp. as of
October 31, 1997, and the results of its operations and its cash flows for the
period from September 1, 1997 (inception) to October 31, 1997, in conformity
with generally accepted accounting principles.
BDO SEIDMAN, LLP
New York, New York
November 6, 1997
F-2
<PAGE>
BW ACQUISITION CORP.
(a corporation in the development stage)
BALANCE SHEET
October 31, 1997
<TABLE>
<S> <C>
Assets
Current:
Cash ..................................................................... $ 110,650
Deferred registration costs (Note 1) ..................................... 100,000
Deferred debt costs (Note 1) ............................................. 9,200
---------
$ 219,850
=========
Liabilities and Stockholders' Equity
Current:
Accrued expenses (primarily license agreement) (Note 1) .................. $ 110,000
Notes payable, net of discount (Note 5) .................................. 67,000
---------
Total current liabilities .......................................... 177,000
---------
Commitments (Note 4)
Stockholders' equity (Note 5):
Convertible preferred stock, $.01 par value - shares authorized 1,000,000;
outstanding none; subscribed 134; liquidation value - $13,400 .......... 1
Subscription receivable .................................................. (13,400)
Class A common stock, $.01 par value - shares authorized 9,750,000;
outstanding 66,500 ..................................................... 665
Class B common stock, $.01 par value - shares authorized 250,000;
outstanding none ....................................................... --
Additional paid-in capital ............................................... 58,384
Deficit accumulated during the development stage ......................... (2,800)
---------
Total stockholders' equity ......................................... 42,850
---------
$ 219,850
=========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
BW ACQUISITION CORP.
(a corporation in the development stage)
STATEMENT OF OPERATIONS
Period from September 1, 1997 (inception) to October 31, 1997
Debt costs ................................................... $ (2,800)
--------
Net loss ..................................................... $ (2,800)
========
Net loss per common share .................................... $ (.04)
========
Weighted average common shares outstanding ................... 66,500
========
See accompanying notes to financial statements.
F-4
<PAGE>
BW ACQUISITION CORP.
(a corporation in the development stage)
STATEMENT OF STOCKHOLDERS'
EQUITY Period from September 1, 1997 (inception)
to October 31, 1997
<TABLE>
<CAPTION>
Class A
----------------- Deficit
Preferred stock Common stock accumulated Total
---------------------- ----------------- Additional during the stock-
Shares Subscription paid-in development holders'
subscribed Amount receivable Shares Amount capital stage equity
------------ --------- ----------- ------- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of founders' shares .. -- $ -- $ -- 56,500 $ 565 $ 5,085 $ -- $ 5,650
Sale of common stock .......... -- -- -- 10,000 100 39,900 -- 40,000
Subscription receivable ....... 134 1 (13,400) -- -- 13,399 -- --
Net loss ...................... -- -- -- -- -- -- (2,800) (2,800)
----- ----- --------- ------ ----- ------- ------- -------
Balance, October 31, 1997 ..... 134 $ 1 $ (13,400) 66,500 $ 665 $ 58,384 $ (2,800) $ 42,850
===== ===== ========= ====== ===== ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
BW ACQUISITION CORP.
(a corporation in the development stage)
STATEMENT OF CASH FLOWS
Period from September 1, 1997 (inception) to October 31, 1997
Cash flows from operating activities:
Net loss .................................................... $ (2,800)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization of deferred debt costs ..................... 800
Amortization of discount on notes payable ............... 2,000
---------
Net cash provided by operating activities ........... --
---------
Cash flows from financing activities:
Proceeds from sale of common stock .......................... 45,650
Proceeds from issuance of notes payable ..................... 65,000
---------
Net cash provided by financing activities ........... 110,650
---------
Net increase in cash .......................................... 110,650
Cash, beginning of period ..................................... --
---------
Cash, end of period ........................................... $ 110,650
=========
Supplemental disclosures of cash flow information:
The Company received a note for subscribed preferred stock amounting to
$13,400, which is a noncash financing activity. The Company has recorded a
$100,000 liability relating to a license agreement (Note 1), which is a
noncash financing activity.
See accompanying notes to financial statements.
F-6
<PAGE>
BW ACQUISITION CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Deferred Registration Costs
BW Acquisition Corp. (the "Company") has deferred registration costs
(primarily professional fees and a license fee) relating to a public offering
(the "Proposed Offering"). On October 29, 1997, the Company entered into a
license agreement with Bright Licensing Corp. for the right to use certain
servicemarks for the sole purpose of marketing such offering at a cost of
$100,000. The deferred registration costs will be charged to equity upon
completion of the Proposed Offering. Should the Proposed Offering prove to be
unsuccessful, these deferred costs, as well as additional expenses to be
incurred, will be charged to operations.
Deferred Debt Costs
Net unamortized costs incurred in connection with the notes payable (Note
5(a)) of $9,200 are being amortized over six months (the estimated term of the
debt) using the straight-line method. Amortization expense is $800 for the
period from September 1, 1997 (inception) to October 31, 1997.
Income Taxes
The Company follows the Financial Accounting Standards Board ("FASB")
Statement No. 109. This statement requires that deferred income taxes be
recorded following the liability method of accounting and be adjusted
periodically when income tax rates change.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Organization and Business Operations
The Company was incorporated in Delaware in November 1995 to acquire an
operating business. Operations did not occur until September 1997; accordingly,
financial statements have been presented commencing on September 1, 1997. At
November 6, 1997, the Company had not yet commenced any formal business
operations and all activity to date relates to the Company's formation and
proposed fund raising.
The Company's ability to commence operations is contingent upon obtaining
adequate financial resources through the Proposed Offering, which is discussed
in detail in Note 3. The Company's management has broad discretion with respect
to the specific application of the net proceeds of this offering, although
substantially all of the net proceeds of this offering are intended to be
generally applied toward consummating a business combination with an operating
business ("Business Combination"). Furthermore, there is no assurance that the
Company will be able to successfully effect a Business Combination. Upon the
closing of the Proposed Offering, an aggregate of $8,000,000 of the net proceeds
will be held in an escrow account which will be invested until released in
short-term United States Government Securities, including treasury bills and
cash and cash equivalents ("Proceeds Escrow Account"), subject to release at the
earlier of (i) consummation of its first Business Combination or (ii)
distribution of the Class A stock (see below). Therefore, the remaining proceeds
from the offering will be used to pay for business, legal and accounting, due
diligence on prospective acquisitions, costs relating to the public offering and
continuing general and administrative expenses in addition to other expenses.
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the acquisition is such as would not ordinarily require
stockholder approval under applicable state law. All of the Company's present
stockholders, including all directors and the Company's executive officer, have
agreed to vote their respective shares of Class A Stock in accordance with the
vote of the majority of the shares voted by all other stockholders of the
Company ("nonaffiliated public stockholders") with respect to any such Business
Combination. A Business Combination will not be
F-7
<PAGE>
BW ACQUISITION CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS (Continued)
2. Organization and Business Operations (continued)
consummated unless approved by a vote of two-thirds of the shares of common
stock owned by nonaffiliated public stockholders.
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer ("Redemption Offer") to each of the
nonaffiliated public Class A stockholders of the Company the right, for a
specified period of time not less than 20 calendar days, to redeem his shares of
Class A Stock. The per share redemption price will be determined by dividing the
greater of (i) the Company's net worth or (ii) the amount of assets of the
Company in the escrow account (including all interest earned thereon) by the
number of shares of Class A Stock held by such nonaffiliated public
stockholders. In connection with the Redemption Offer, if nonaffiliated public
stockholders holding less than 20% of the Class A Stock elect to redeem their
shares, the Company may, but will not be required to, proceed with such Business
Combination and, if the Company elects to so proceed, will redeem such shares by
dividing (a) the greater of (i) the Company's net worth as reflected in the
Company's financial statements or (ii) the amount of the proceeds of the Company
in the escrow account by (b) the number of shares of Class A Stock held by
nonaffiliated public stockholders ("Liquidation Value"). In any case, if
nonaffiliated public stockholders holding 20% or more of the Class A Stock elect
to redeem their shares, the Company will not proceed with such potential
Business Combination and will not redeem such shares. All shares of the escrowed
stock outstanding immediately prior to the date of the Proposed Offering will be
placed in escrow until the earlier of (i) the occurrence of the first Business
Combination, (ii) 18 months from the effective date of the offering or (iii) 24
months from the effective date of the offering if prior to the expiration of
such 18 month period the Company has become a party to a letter of intent or a
definitive agreement to effect a Business Combination, in which case such period
shall be extended six months. During the escrow period, the holders of escrowed
shares of common stock will not be able to sell or otherwise transfer their
respective shares of common stock (with certain exceptions), but will retain all
other rights as stockholders of the Company, including, without limitation, the
right to vote escrowed shares of Class A Stock, subject to their agreement to
vote their shares in accordance with a vote of a majority of the shares voted by
nonaffiliated public stockholders with respect to a Business Combination or
liquidation proposal. If the Company does not effect a Business Combination
within 18 months from the effective date or 24 months from the effective date if
the extension criteria have been satisfied, the Company will submit for
stockholder consideration a proposal to distribute to the then holders of Class
A Stock (issued in the Proposed Offering or acquired in the open market
thereafter) in redemption of such shares, the amounts in the escrow account.
Following such redemption of Class A Stock, each outstanding share of Class B
Stock will be exchanged for two shares of Class A Stock. In the event of
liquidation, it is likely that the per share value of the residual assets
remaining available for distribution to the holders of Class A stock purchased
in the Proposed Offering (including escrow account assets) will approximately
equal the initial public offering price per unit in the Proposed Offering.
3. Proposed Public Offering
The Proposed Offering calls for the Company to offer for public sale up to
800,000 units ("Units") at $10.00 per unit. Each Unit consists of one share of
the Company's Class A common stock and one Class A redeemable common stock
purchase warrant ("Class A Warrant"). The Proposed Offering also calls for the
Company to offer for public sale up to 150,000 Class B exchangeable common stock
at $10.00 per share of Class B Stock ("Class B Stock"). Each Class A Warrant
entitles the holder to purchase from the Company one share of common stock at an
exercise price of $9.00; each share of Class B Stock entitles the holder to
receive two Units in exchange 90 days after the date of a Business Combination.
The Class A Warrants are redeemable, each as a class, in whole and not in part,
at a price of $.05 per warrant upon 30 days' notice at any time provided that
the Company's stockholders have approved a Business Combination and the last
sale price of the common stock, if the common stock is listed for trading on all
10 of the trading days prior to the day on which the Company gives notice of
redemption, has been $11.00 or higher. The Company hopes to raise approximately
$8,200,000 from the Proposed Offering, which is net of underwriter discounts and
related expenses.
F-8
<PAGE>
BW ACQUISITION CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS (Continued)
3. Proposed Public Offering (continued)
The Units and the Class B Stock, which are being offered in the same
offering, will be sold and traded separately. Concurrent with the Proposed
Offering, the Company amended and restated its certificate of incorporation to
increase its authorized common stock to 10,000,000, of which 9,750,000 shares
are designated Class A Stock and 250,000 shares are designated Class B Stock.
The Company also increased its Authorized Preferred Stock to 1,000,000 shares.
4. Commitments
The Company presently occupies office space provided by a stockholder. Such
stockholder has agreed that, until the acquisition of a target business by the
Company, it will make such office space, as well as certain office and
secretarial service, available to the Company, as may be required by the Company
from time to time. For the period September 1, 1997 [inception] to October 31,
1997, no such services were provided. Upon completion of the Proposed Offering,
the monthly payment will be $1,000. Such stockholder will be reimbursed by the
Company for the costs of such office and services.
5. Stockholders' Equity
(a) Private Placement
In October 1997, the Company completed a private offering to a limited
group of investors which consisted, in aggregate, of $100,000 in unsecured
promissory notes bearing interest at 8% per annum. The notes are payable upon
the earlier of May 1999 or the completion of an initial public offering. In
addition, the Company also issued to the private placement investors 10,000
shares of common stock for $5,000. The Class A Common Stock issued to the
private placement investors does not have redemption rights as discussed in Note
2. The notes have been discounted $35,000 for financial reporting purposes as a
result of additional fair value attributed to the common stock issued to the
Private Placement shareholders. The effective rate on the notes is approximately
45%.
Interest expense charged to operations for the period September 1, 1997
(inception) to October 31, 1997 was approximately $2,000.
(b) Preferred Stock
The Company is authorized to issue 1,000,000 shares of "blank check"
preferred stock with such designations, voting and other rights and preferences
as may be determined from time to time by the Board of Directors.
In August 1996, the Company issued 134 shares of Series A preferred stock
to Summerwind L.L.C., an indirect affiliate of Bright Licensing Corp. (Note 1).
The purchase price for such shares, $100.00 per share or $13,400 in the
aggregate, is payable to the Company, with interest, at 8% upon the earlier of
November 15, 1998 or the closing of the Proposed Offering. The Series A
preferred stock is nonvoting, does not bear a dividend and has a liquidation
value of $100.00 per share. Each share of Series A Preferred Stock will be
convertible into 1,000 shares of Class A Stock for a period one year following
the consummation of a Business Combination. In the event that a Business
Combination does not occur within 18 months from the effective date, or 24
months from the effective date if the extension criteria are satisfied, the
Series A Preferred Stock will be redeemed by the Company for its liquidation
value.
(c) Options
The Company granted options to purchase 100,000 units to two directors, in
consideration for their service as directors, and officers of the Company. The
options are exercisable for a period of three years from the date of a Business
Combination at an exercise price of $12.50 per unit. The options are fully
vested. The shares issuable upon exercise of the options and underlying warrants
may not be sold or otherwise transferred until 120 days after the first Business
Combination.
The Company has granted options to purchase an aggregate of 30,000 shares
of the Company's Class B Stock to two directors at an exercise price of $10.00
per share. The options will expire, if not sooner exercised, upon consummation
of a Business Combination.
F-9
<PAGE>
================================================================================
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations may not
be relied on as having been authorized by the Company or by any of the
Underwriters. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create an implication that there has
been no change in the affairs of the Company since the date hereof. This
Prospectus does not constitute an offer to sell, or solicitation of any offer to
buy, by any person in any jurisdiction in which it is unlawful for any such
person to make such offer or solicitation. Neither the delivery of this
Prospectus nor any offer, solicitation or sale made hereunder, shall under any
circumstances create any implication that the information herein is correct as
of any time subsequent to the date of the Prospectus.
------------
TABLE OF CONTENTS
Page
----
Prospectus Summary ..................................................... 3
The Company ............................................................ 11
Risk Factors ........................................................... 15
Use of Proceeds ........................................................ 26
Dilution ............................................................... 28
Capitalization ......................................................... 29
Management's Discussion and Analysis of
Financial Condition and
Results of Operations ................................................ 30
Proposed Business ...................................................... 31
Management ............................................................. 37
Certain Transactions ................................................... 40
Principal Stockholders ................................................. 41
Description of Securities .............................................. 42
Shares Eligible for Future Sale ........................................ 45
Underwriting ........................................................... 46
Legal Matters .......................................................... 48
Experts ................................................................ 48
Additional Information ................................................. 48
Index to Financial Statements .......................................... F-1
------------
Until 90 days after the release of the registered securities from the
Escrow Account, all dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligations of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
================================================================================
BW Acquisition Corp.
800,000 Units Each Unit
Consisting of One Share of
Common Stock and
One Redeemable Class A Warrant
Entitling the Holder Thereof to
Purchase One Class of
Class A Common Stock
150,000 Shares of Class B
Exchangeable Common Stock
Entitling Holder to Receive
Two Units in Exchange Therefor
--------------------
PROSPECTUS
--------------------
H.J. MEYERS & CO., INC.
____________, 1998
================================================================================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 24. Indemnification of Directors and Officers.
BW Acquistion Corp. (the "Company") is incorporated in Delaware. Under
Section 145 of the General Corporation Law of the State of Delaware, a Delaware
corporation has the power, under specified circumstances, to indemnify its
directors, officers, employees and agents in connection with actions, suits or
proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any action, suit or
proceeding. Article IX of the Amended and Restated Certificate of Incorporation
of the Company provide for indemnification of directors and officers to the
fullest extent permitted by the General Corporation Law of the State of
Delaware. Reference is made to the Amended and Restated Certificate of
Incorporation of the Company, filed as Exhibit 3.1 hereto.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (relating to liability for unauthorized acquisitions or redemptions
of, or dividends on, capital stock) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. Article Ninth of the Company's Certificate of
Incorporation contains such a provision.
The Underwriting Agreement filed herewith as Exhibit 1.1 contains
provisions by which each Underwriter severally agrees to indemnify the Company,
any person controlling the Company within the meaning of Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934,
each director of the Company, and each officer of the Company who signs this
Registration Statement with respect to information relating to such Underwriter
furnished in writing by or on behalf of such Underwriter expressly for use in
the Registration Statement.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with this
Registration Statement. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
Securities and Exchange Commission Registration Fee .......... $ 7,377.00
NASAD Filing Fee ............................................. $ 1,450.00
Fees and Expenses of Counsel and Accountants ................. $ 75,000.00
Printing and Engraving Expenses .............................. $ 20,000.00
Blue Sky Fees and Expenses ................................... $ 1,385.00
Transfer Agent fees .......................................... $ 5,000.00
Miscellaneous Expenses ....................................... $ 64,788.00
-----------
TOTAL .............................................. $175,000.00
===========
Item 26. Recent Sales of Unregistered Securities.
In August 1996, the Company sold to Summerwind 1,000 shares of Common Stock
for $100, which was paid in full at the time and 134 shares of Series A
Preferred Stock for $ .01 per share, payable upon the closing of this offering,
in a transaction in which no commissions were paid. In August 1996, the Company
sold an aggregate of 40,000 shares of Common Stock, par value $.01 per share
("Common Stock"), to its then directors, officers (and to an entity affiliated
with certain of its then directors and officers) and, in September 1997, to the
following other persons at a price of $.10 per share pursuant to an exemption
from registration under Rule 504 of the Securities Act of 1933 (the "Securities
Act"):
II-1
<PAGE>
Name Shares
-------- -------
Bright Capital Ltd............................................... 1,000
Georgine Thomas.................................................. 1,000
Christopher Calapai.............................................. 1,000
Robert Lehman.................................................... 3,000
Josephine Perry.................................................. 2,500
Richard J. Berman................................................ 25,000
Martin R. Wade................................................... 10,000
Marc De Logeres.................................................. 5,000
Donald Codignotto................................................ 2,500
James Scibelli................................................... 2,500
Kimberly Murphy.................................................. 3,000
------
56,500
In October, 1997 the Company sold 10,000 shares of Common Stock at a price of
$0.50 per share or $5,000 in the aggregate and $100,000 in promissory notes (the
"Placement Securities") to three investors, all of whom represented to the
Company that they were "accredited investors" and not affiliates of the
Underwriter as such term is defined in Rule 505 of Regulation D promulgated by
the Securities and Exchange Commission pursuant to the Securities Act. The
investors were the following individuals:
Name Shares
------ -------
James Scibelli..................................................... 2,500
Kerry Fleming...................................................... 2,500
Steven Scheck...................................................... 5,000
------
10,000
H. J. Meyers & Co., Inc. acted as placement agents for 100% of such offering,
respectively. To the Company's knowledge, none of these investors, nor any of
their affiliates, was, at the time of their investment in the Company, or
currently is, affiliated or associated with any of H. J. Meyers & Co., Inc., or
any other broker-dealer.
Item 27. Exhibits.
Exhibit
Number Description
------ -----------
1.1* Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of the Company.
3.2* Bylaws of the Company.
4.1** Class A Common Stock Certificate.
4.2* Form of Warrant Agency Agreement between the Company and American
Stock Transfer & Trust Company.
4.3* Form of Class A Common Stock Purchase Warrant.
4.4** Form of Class B Stock Certificate.
4.5* Form of Representative's Warrant Agreement.
4.6* Form of Representative's Warrant (included in Exhibit 4.5).
4.7* Form of Unit Certificate.
5.1** Opinion of Gibbons, Del Deo, Dolan, Griffinger & Vecchione.
10.1* Form of Escrow Agreement for proceeds from sale of Units.
10.2 Form of Escrow Agreement for outstanding Common Stock.
10.3* Form of Amended and Restated License Agreement, dated October
29, 1997 between Bright and the Company.
10.4 Form of Class B Stock Option Agreement.
23.1 Consent of BDO Seidman, LLP
23.2** Consent of Gibbons, Del Deo, Dolan, Griffinger & Vecchione
(Included in Exhibit 5).
24 Power of Attorney; Page II-4.
- ----------
* Previously filed.
** To be filed by Amendment.
II-2
<PAGE>
Item 28. Undertakings.
The undersigned small business issuer hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(b) The undersigned small business issuer hereby undertakes to provide to
the underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer 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
small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The undersigned small business issuer hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the small business issuer pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this amendment to the
Registration Statement to be signed on its behalf by the undersigned, in the
City of New York, State of New York, on the 3rd day of February, 1998.
BW ACQUISITION CORP.
By: /s/ Richard J. Berman
------------------------------------
Richard J. Berman
President and Chief Executive Officer
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ------ ----
<S> <C> <C>
/s/ Richard J. Berman Chairman of the Board, Chief February 3, 1998
- ---------------------------- Executive Officer
Richard J. Berman (Principal Executive Officer)
* Secretary, Treasurer, Director February 3, 1998
- ---------------------------- (Principal Financial and
Martin R. Wade Accounting Officer)
* Director February 3, 1998
- ----------------------------
Marc De Logeres
* /s/ Richard J. Berman
- ---------------------------- February 3, 1998
Richard J. Berman
Attorney in Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
----------- ----------- ----
<S> <C> <C>
1.1* -Underwriting Agreement ...........................................................
3.1* -Amended and Restated Certificate of Incorporation of the Company .................
3.2* -Form of Bylaws of the Company ....................................................
4.1** -Form of Class A Common Stock Certificate .........................................
4.2* -Form of Warrant Agency Agreement between the Company and American
Stock Transfer & Trust Company .................................................
4.3* -Form of Class A Common Stock Purchase Warrant ....................................
4.4** -Form of Class B Stock Certificate ................................................
4.5* -Form of Representative's Warrant Agreement .......................................
4.6* -Form of Representative's Warrant (included in Exhibit 4.5) .......................
4.7* -Form of Unit Certificate .........................................................
5.1** -Opinion of Gibbons, Del Deo, Dolan, Griffinger & Vecchione .......................
10.1* -Form of Escrow Agreement for proceeds from sale of Units .........................
10.2** -Form of Escrow Agreement for outstanding Common Stock ............................
10.3* -Form of Amended and Restated License Agreement, dated October 29, 1997
between Bright and the Company .................................................
10.4** -Form of Class B Stock Option Agreement ...........................................
23.1** -Consent of BDO Seidman, LLP ......................................................
23.2** -Consent of Gibbons, Del Deo, Dolan, Griffinger & Vecchione (Included in
Exhibit 5) .....................................................................
24 -Power of Attorney; Page II-4 .....................................................
</TABLE>
- ----------
* Previously filed.
** To be filed by Amendment.
