As filed with the Securities and Exchange Commission on September 30, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AK HOLDING CORPORATION
(Name of small business issuer in its charter)
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FLORIDA 6211 65-0782449
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Classification Identification
incorporation or Code Number) Number)
organization)
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400 FIFTH AVENUE SOUTH
NAPLES, FLORIDA 34102
(941) 435-3888
(Address and telephone number
of principal executive offices)
------------------------
W. JONATHAN WRIDE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
400 FIFTH AVENUE SOUTH
NAPLES, FLORIDA 34102
(941) 435-3888
(Name, address and telephone number
of agent for service)
------------------------
Copies to:
ROBERT C. SCHWARTZ, ESQ. RICHARD A. DENMON, ESQ.
SMITH, GAMBRELL & RUSSELL, LLP CARLTON, FIELDS, WARD, EMMANUEL,
SUITE 3100, PROMENADE II SMITH & CUTLER, P.A.
1230 PEACHTREE STREET, N.E. ONE HARBOUR PLACE
ATLANTA, GEORGIA 30309-3592 777 S. HARBOUR ISLAND BLVD.
(404) 815-3500 TAMPA, FLORIDA 33602
(813) 223-7000
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
TITLE OF EACH PROPOSED PROPOSED
CLASS OF MAXIMUM MAXIMUM
SECURITIES TO AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
BE REGISTERED BE REGISTERED PER SHARE(1)(2) OFFERING PRICE(2) REGISTRATION FEE
- --------------- ---------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Class A 1,500,000 shares $10.00 $15,000,000 $4,425.00
Common Shares,
$.01 par value
<FN>
(1) Estimated solely for the purpose of calculating the fee pursuant to Rule
457(a) under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 416, this Registration Statement also covers such
indeterminate number of additional Class A Common Shares as may be issued
because of future stock dividends, stock distributions, stock splits or
similar capital adjustments.
</FN>
</TABLE>
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 SECTION 8(a), MAY
DETERMINE.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1998
PROSPECTUS MINIMUM OFFERING: 500,000 SHARES
MAXIMUM OFFERING: 1,500,000 SHARES
AK HOLDING CORPORATION
(A FINANCIAL HOLDING COMPANY)
CLASS A COMMON SHARES
AK Holding Corporation, a Florida corporation and a proposed financial
holding company (the "Company"), hereby offers for sale a minimum of 500,000
("Minimum Offering") and a maximum of 1,500,000 ("Maximum Offering") of its
Class A Common Shares, $.01 par value per share ("Class A Common Shares"), at a
purchase price of $10.00 per share (the "Offering"). Unless waived by Ashtin
Kelly & Co. Incorporated (the "Underwriter" or "Ashtin Kelly & Co."), the
minimum subscription is 100 shares ($1,000) and the maximum subscription is
75,000 shares ($750,000). The Class A Common Shares will be offered on a "best
efforts" basis and once a subscription to purchase shares has been submitted, it
cannot be withdrawn by the subscriber. Subscription proceeds will be deposited
into an interest bearing escrow account with NationsBank, N.A. ("Escrow Agent").
If the Minimum Offering has not been subscribed and paid for on or before
__________, unless extended by the Underwriter to a date no later than
__________ (the "Initial Termination Date"), the Offering will terminate and all
subscription proceeds will be promptly refunded to the subscriber together with
interest earned thereon. If the Minimum Offering is subscribed and paid for on
or before the Initial Termination Date, then the cash proceeds together with the
interest earned thereon will be released from escrow and the Offering, unless
earlier terminated by the Company, shall continue until the earlier of: (i) the
sale of the Maximum Offering, or (ii) __________, unless extended by the
Underwriter to a date no later than __________ (the "Final Termination Date").
If a subscription is rejected or if it is not accepted on or before the Final
Termination Date, then such subscription proceeds will be returned promptly to
such subscriber without interest or reduction. See "Underwriting."
Prior to the Offering, there has been no public market for the Class A
Common Shares and there can be no assurance that any such market will develop in
the future. The initial public offering price has been determined by negotiation
between the Company, the Underwriter, and First London Securities Corporation,
who will serve as a qualified independent underwriter as required by the Rules
of the National Association of Securities Dealers, Inc. ("QIU"). See
"Underwriting." The Company expects that upon completion of the Offering
quotations for the Class A Common Shares will be reported on the OTC Bulletin
Board under the symbol "AKHC."
AN INVESTMENT IN THE CLASS A COMMON SHARES OFFERED BY THIS PROSPECTUS
INVOLVES A HIGH DEGREE OF RISK. INVESTORS SHOULD NOT INVEST ANY FUNDS IN THE
OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" BEGINNING ON PAGE 9.
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 UNDERWRITING
TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) THE COMPANY(2)
----------- -------------- --------------
<S> <C> <C> <C>
Per Share......................... $10.00 $ 0.70 $9.30
Total Minimum(3).................. $ 5,000,000 $ 350,000 $ 4,650,000
Total Maximum..................... $15,000,000 $ 1,050,000 $13,950,000
<FN>
(1) The Company has agreed to indemnify the Underwriter and the QIU against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
(2) Before deducting offering expenses payable by the Company that are estimated
at $____________.
(3) Directors, officers, and affiliates of the Company may purchase, for
investment purposes, Class A Common Shares offered hereby on the same terms
and conditions as other investors. Any shares purchased by these persons
will be included in determining whether the Minimum Offering has been
obtained. See "Underwriting."
</FN>
</TABLE>
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The Class A Common Shares are offered on a best efforts basis by the
Underwriter, subject to prior sale, when, as and if delivered to and accepted by
the Underwriter and subject to the approval of certain legal matters by counsel
and certain other conditions. The Underwriter reserves the right to withdraw,
cancel or modify the Offering without notice and to reject orders in whole or in
part.
ASHTIN KELLY & CO.
INCORPORATED
The date of this Prospectus is ____________, 1998.
<PAGE>
[MAP OF STATE OF FLORIDA WITH STARS MARKING THE
"IDENTIFIED MARKETS" AS DEFINED IN THIS PROSPECTUS]
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS
AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
GENERAL
AK Holding Corporation (the "Company") was organized on September 4, 1997
to create a financial holding company to initially focus on several of the
largest and fastest growing markets in Florida. The Company intends to acquire
either a registered broker-dealer or an investment advisor firm in the Florida
market as soon as practicable upon completion of the Offering. The Company will
require that all acquisition candidates be registered with the Securities and
Exchange Commission (the "SEC" or the "Commission"), the National Association of
Securities Dealers, Inc. (the "NASD") and the Securities Investor Protection
Corporation (the "SIPC") and be in good standing with their respective
regulatory agencies. The Company expects that its acquisition candidates will
have an established retail distribution force comprised of between two to
twenty-five securities professionals and will have demonstrated that they are
profitable. Management believes that such firms can be acquired for attractive
multiples of book value and, once associated with a larger institution, will
enable the Company to generate larger revenues in many areas, including
investment banking, retail brokerage and asset management. The Company has
identified the markets of Naples/Collier County, Ft. Lauderdale/Broward County,
Tampa/Hillsborough County, Jacksonville, and the Palm Beaches (collectively, the
"Identified Markets") as potential markets for acquisitions. However, there can
be no assurance that the Company will acquire a firm in any of the Identified
Markets or that such candidates will possess all of the attributes described
above. Further, the Company may, as opportunities arise, seek to acquire an
entity not located within any of the Identified Markets, whether in Florida or
elsewhere. The Company does not have any current understandings, arrangements or
agreements, whether written or oral, with respect to any transactions, and is
not presently negotiating or holding discussions with any party with respect to
such a transaction. The Company will not approach, negotiate with or discuss a
potential transaction with an acquisition candidate prior to the Final
Termination Date. See "Business --Strategy of the Company -- Market Expansion
and Growth" and "-- Products and Services."
The Company expects that together with its operating subsidiaries it will
become a full-service financial services firm with emphasis placed on investment
banking, retail brokerage, and asset management. Management's investment banking
strategy is to target specific service/industry sectors where it can develop
in-depth knowledge and a client following. The Company expects its primary
sector of industry concentration to be the financial sector which includes
community banks, savings and loan institutions, broker-dealers, investment
advisory firms and insurance companies, with a special emphasis on underwriting
equity offerings by community and de novo banks. Management believes that if the
Company is able to establish relationships with community-oriented banks by
assisting them in their public offerings, the Company will be able to develop a
full service investment banking relationship with these banks. As a result, the
Company will be in a position to provide these banks with any additional
financing needs, retail brokerage services and financial advisory services,
including mergers and acquisitions.
Management of the Company believes that the significant consolidation in
the brokerage industry in Florida has disrupted customer relationships as the
larger regional financial institutions have increasingly focused their attention
on larger corporate customers and implemented standardized products and
services. Generally, these products and services are offered through less
personalized delivery systems which Management believes has created a need for
higher quality service to small and medium-sized businesses. In addition,
consolidation in the brokerage industry has dislocated experienced and talented
management and registered representative personnel due to the elimination of
redundant functions and the need to achieve cost savings. Based on its
experience, Management believes the
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consolidation in Florida has created a unique opportunity for the Company to
attract and retain its targeted banking customers, experienced management
personnel, and registered representatives within the Identified Markets.
Over the past 15 years, capital markets have evolved in depth and
complexity, thereby radically altering the needs of both the companies accessing
those markets and investors. According to Securities Data Company, in 1982, 122
initial public offerings were underwritten in the United States for a total of
$1.3 billion and total public equity issued equaled $10.6 billion. In 1992, the
value of new issues in the United States more than doubled the level achieved in
any previous year reaching $39.9 billion, while the total public equity and
high-yield debt raised equaled $90.5 billion and $51.6 billion, respectively. In
1997, 636 initial public offerings were completed in the United States, totaling
$44.2 billion, total public equity issued equaled $120.1 billion, and high-yield
debt issued totaled $61.2 billion. A significant portion of this growth has come
from emerging industries that previously had limited access to the capital
markets, including community banks. However, in recent months the U.S. markets
have experienced extreme volatility and a reduction in the amount of new issues
and underwritten offerings. Despite the recent volatility in the U.S. markets,
Management believes that due to the nature of public equity offerings for
community and de novo banks, the market for these offerings are not as affected
by general market conditions. The Company believes that the significant increase
in such issuers and the accompanying significant inflow of cash into mutual
funds and other managed funds has led to greater demand by both issuers and
investors for focused, industry-specific advisory and capital management
products and services.
The Company will have a community-oriented investment banking approach that
emphasizes responsive and personalized service to its clients. Management's
client development strategy includes attracting and servicing small and
medium-sized businesses, particularly community banks which are in need of
financial services. Management expects that upon the Company's entry into a new
market area, it will undertake a marketing campaign utilizing an officer calling
program that informs local businesses of the Company's ability to raise capital
and community-based promotions to build its client base, thus allowing the
corporate client further community recognition and involvement. In addition,
Management will be compensated based on its success in achieving such investment
banking goals and asset generation. See "Business -- Strategy of the Company."
Management intends to develop specific policies and training programs for
its employees and to internally promote its employees rather than seeking
outside managers. The Company believes this will keep employee turnover at a
minimum and enhance the Company's growth and efficiency. The Company believes
that the combination of its acquisitions, internal corporate culture and its
management will enable it to become a prominent provider of investment banking,
retail brokerage and asset management services in Florida.
STRATEGY OF THE COMPANY
The objective of the Company and its Management is to create a notable and
recognizable financial services firm, focused on providing high value to clients
by delivering specialized boutique products and services matched directly to
their needs. Management believes that such a company can attract those clients
who prefer to conduct business with a regionally managed institution that
demonstrates an active interest in their business and personal affairs.
By assembling an experienced staff and implementing a team approach
expected to provide a superior level of service, Management believes it will be
able to acquire the broker-dealer firms necessary to implement and distribute
its planned underwriting activities. Management will place an emphasis on
acquiring small broker-dealer firms throughout the Identified Markets. Once
acquired, the Company intends to make a strong effort to target small and
medium-sized companies in need of capital, primarily focusing on de novo banks
who are interested in raising equity capital through the public market via the
sale of equity securities. In addition to offering traditional retail brokerage
services, the Company expects to offer research and market making in the stock
of these companies. This personal touch is expected to be appealing to clients
who have been receiving investment banking services in the depersonalized
environment of the Company's larger competitors. See "Business -- Strategy of
the Company."
4
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The major elements of this strategy are to:
/bullet/ ACQUIRE RETAIL BROKERAGE, ASSET MANAGEMENT, AND INVESTMENT BANKING
OFFICES IN THE IDENTIFIED MARKETS;
/bullet/ PROVIDE HIGH VALUE, SPECIALIZED PRODUCTS, INCLUDING RETAIL
BROKERAGE, INVESTMENT BANKING AND ASSET MANAGEMENT SERVICES TO BOTH
CORPORATE AND INDIVIDUAL CLIENTS;
/bullet/ TARGET FINANCIAL INSTITUTIONS, ESPECIALLY COMMUNITY AND DE NOVO
BANKS, TO ASSIST THEM IN RAISING CAPITAL VIA THE PUBLIC MARKETS;
/bullet/ OFFER MARKET MAKING AND RESEARCH TO CORPORATE CLIENTS; AND
/bullet/ MAINTAIN CENTRALIZED SUPPORT FUNCTIONS, INCLUDING BACK OFFICE
OPERATIONS, COMPLIANCE, UNDERWRITING, SYNDICATION, ADMINISTRATION,
HUMAN RESOURCES AND TRAINING, TO MAXIMIZE OPERATING EFFICIENCIES AND
FACILITATE RESPONSIVENESS TO CLIENTS.
MARKET AREA
The Company anticipates that the primary market area for its services will
be the major metropolitan areas in Florida, including the Identified Markets.
Although the Company has not identified a particular acquisition candidate,
Management believes that the Identified Markets contain firms which are
attractive to achieving the Company's objectives. The Company's headquarters
will be located in Naples, Florida, which is situated on the southwest coast of
Florida. Although the Company's current location is in downtown Naples, the
Company has entered into a lease to move to a newly constructed building in
north Naples. The Company expects to move into this facility in May 1999. Both
locations are conveniently located to the majority of residents of western
Collier County, with whom the Company intends to establish retail brokerage
relationships.
Florida is the fourth most populated state in the country with a current
population of approximately 14.7 million. From 1990 to 1996, Florida ranked
third of the ten most populated states in terms of percentage population growth.
Florida's economy has broadened from a base of tourism, agriculture and
retirement living to become increasingly dependent on industrial and commercial
trade. Financial institutions in Florida have experienced substantial growth in
recent years in the amount of total bank deposits. As of June 30, 1997, these
bank deposits totaled approximately $200 billion. Management believes that the
major metropolitan areas in Florida have benefited the most from this economic
and population expansion, and thus has selected the Identified Markets as the
focus of its expansion strategy.
Although the Identified Markets are not the exclusive cities in which the
Company is contemplating acquisitions, Management believes the demographic
characteristics of the Identified Markets are suitable for developing and
supporting those business relationships which the Company hopes to establish.
All of the Identified Markets have experienced population growth and increases
in wealth which will be necessary to support the Company's retail brokerage
services to be offered to individual clients.
The Company is headquartered in southwest Florida at 400 Fifth Avenue
South, Naples, Florida 34102, and its telephone number is 941-435-3888.
5
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Offered by the Company......... Minimum 500,000 Class A Common Shares
Maximum 1,500,000 Class A Common Shares
Common Shares to be Outstanding
After the Offering .................. 604,286 Class A Common Shares(1) (Minimum)
1,604,286 Class A Common Shares(1) (Maximum)
323,076 Class B Common Shares(2)
Terms of Offering......................... The Company is offering a minimum of 500,000 Class
A Common Shares ("Minimum Offering") and a
maximum of 1,500,000 Class A Common Shares
("Maximum Offering"), at a purchase price of $10.00
per share. Unless waived by the Underwriter, the
minimum subscription is 100 shares per investor
($1,000) and the maximum subscription is 75,000 shares
($750,000). The Class A Common Shares will be
offered by the Underwriter on a "best efforts" basis.
Escrow Arrangements....................... All subscription payments from investors will be
deposited into an interest bearing escrow account with
NationsBank, N.A. (the "Escrow Agent"). Once
submitted, subscriptions may not be withdrawn by
subscribers. If the Company rejects any subscription for
which the Escrow Agent has already collected funds, the
Escrow Agent will, upon written instructions from the
Company, promptly issue a refund check to the
subscriber. If the Minimum Offering has not been
subscribed and paid for on or before ________, unless
extended by the Underwriter to a date no later than
______ (the "Initial Termination Date"), all subscription
payments will be refunded in full together with interest
earned thereon while held in escrow. If the Minimum
Offering is subscribed and paid for on or before the
Initial Termination Date, the subscription proceeds held
in escrow and all interest earned thereon will be
disbursed to the Company. Prior to release of the
subscription proceeds from escrow, such funds may be
invested only in bank accounts, including savings
accounts and bank money market accounts, or in short-
term securities issued or guaranteed by the United States
government. After reaching the Minimum Offering,
unless earlier terminated by the Underwriter, the
Offering may continue until the earlier of: (i) the sale of
the Maximum Offering, or (ii) ____________, unless
extended by the Underwriter to a date no later than
_______ (the "Final Termination Date"). Directors,
officers, and affiliates of the Company may purchase,
for investment purposes only, the Class A Common
Shares offered hereby on the same terms and conditions
as other investors, and Class A Common Shares so
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<PAGE>
purchased will be included in determining whether the Minimum
Offering has been reached.
Use of Proceeds by the Company............ The net proceeds to be received by the Company from
the sale of the Class A Common Shares offered hereby
are estimated to be approximately $4,400,000 if the
Minimum Offering is sold and $13,700,000 if the
Maximum Offering is sold.
The Company intends to use the net proceeds from this Offering
to acquire registered broker-dealers and investment advisor
firms, increase its net capital to participate in corporate
finance transactions, establish market-making and research
efforts, expand sales and marketing efforts, hire sales and
corporate finance personnel to staff additional brokerage
offices, build-out its office space, and provide general
corporate working capital. See "Use of Proceeds."
Conflicts of Interest..................... As an affiliate of the Company, the role of Ashtin Kelly
& Co. as Underwriter may involve certain conflicts of
interest. Pursuant to the Conduct Rules of the NASD,
the Class A Common Shares are being offered at a price
no higher than that recommended by the QIU.
Proposed OTC Bulletin Board Symbol........ "AKHC"
<FN>
- -------------------
(1) Excludes 100,000 Class A Common Shares subject to options to be issued
under the Company's 1998 Stock Option Plan following completion of the
Offering. An aggregate of 1,000,000 shares have been reserved for issuance
under the plan.
(2) Class A Common Shares are entitled to one vote per share and Class B Common
Shares are entitled to ten votes per share on all matters submitted to a
vote of the Company's shareholders. The Class A Common Shares and the Class
B Common Shares will vote together as a group and not as separate classes,
except to the extent required by the Articles of Incorporation or by law.
</FN>
</TABLE>
RISK FACTORS
An investment in the Class A Common Shares offered hereby involves a high
degree of risk and should be considered only by persons who can afford to
sustain the total loss of their investment. See "Risk Factors" beginning on page
9.
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SUMMARY FINANCIAL DATA
ACTUAL AS ADJUSTED(1)
-------- -----------------------------------
MINIMUM MAXIMUM
BALANCE SHEET DATA: OFFERING OFFERING
---------- -----------
Cash......................... $308,841 $4,640,786 $13,940,786
Total assets................. $381,468 $4,713,413 $14,013,413
Total liabilities............ $ 60,980 $ 0 $ 0
Shareholders' equity......... $320,488 $4,713,413 $14,013,413
- -------------------
(1) Adjusted to reflect the application of the estimated net proceeds from the
sale of the Class A Common Shares offered hereby. See "Use of Proceeds."
8
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE CLASS A COMMON SHARES OFFERED HEREBY IS SPECULATIVE,
INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN
AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. THE FOLLOWING CONSTITUTES SOME OF
THE POTENTIAL RISKS OF AN INVESTMENT IN THE CLASS A COMMON SHARES AND SHOULD BE
CAREFULLY CONSIDERED BY PROSPECTIVE INVESTORS PRIOR TO PURCHASING CLASS A COMMON
SHARES. THE ORDER OF THE FOLLOWING IS NOT INTENDED TO BE INDICATIVE OF THE
RELATIVE IMPORTANCE OF ANY DESCRIBED RISK NOR IS THE FOLLOWING INTENDED TO BE
INCLUSIVE OF ALL RISKS OF AN INVESTMENT IN THE CLASS A COMMON SHARES. CERTAIN
STATEMENTS INCLUDED IN THIS PROSPECTUS CONCERNING THE COMPANY'S FUTURE FINANCIAL
CONDITION AND PERFORMANCE ARE FORWARD-LOOKING STATEMENTS, AND THE FACTORS
DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS, COULD
CAUSE ACTUAL RESULTS AND DEVELOPMENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED
IN OR IMPLIED BY SUCH STATEMENTS.
NO OPERATING HISTORY OF THE COMPANY
The Company was incorporated on September 4, 1997 and is a development
stage company which has not yet engaged in any operating activities.
Accordingly, the Company has no history of operations and there is only a
limited basis upon which to evaluate the Company's prospects for achieving its
business objectives. The Company's prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by companies in the
early stages of development. To address these risks, the Company must, among
other things, make certain acquisitions, build its customer base, respond to
competitive developments, attract, retain and motivate qualified management and
employees and upgrade its technologies, products and services. There can be no
assurance that the Company will be successful in addressing such risks. As a
result of the substantial start-up expenditures that must be incurred by the
Company in connection with its organization, acquisition of certain
broker-dealer firms and investment advisor firms and expansion into new markets,
the Company may incur operating losses during its initial years of operations
and there can be no assurance when or if the Company will attain profitability.
DEPENDENCE ON MANAGEMENT
The success of the Company is highly dependent upon the ability of
management to locate and identify acquisition candidates and to successfully
negotiate their acquisition. Accordingly, the development and growth of the
Company is, and for the foreseeable future will be, dependent upon the services
of W. Jonathan Wride, the President and Chief Executive Officer of the Company,
as well as other senior officers and managers retained by the Company. The loss
of any of these individuals could have a material adverse effect on the
Company's business, future prospects, financial condition or results of
operations. The Company does not maintain key person life insurance with respect
to any of its officers. The future success of the Company also depends on its
ability to identify, attract and retain qualified senior management officers and
other employees in each of the Identified Markets. Moreover, the Company's
management team has been recently assembled. Accordingly, it has not been proven
that such persons will be able to work together effectively.
The Company presently maintains an employment agreement with Mr. Wride.
Further, it will attempt to attract employees by providing incentives, such as
bonus plans and the ability to purchase the Company's Class A Common Shares
which would vest over a number of years of employment. These incentives,
however, may be insufficient in light of the increasing competition for
experienced professionals in the securities industry, particularly if the value
of the Company's stock declines or fails to appreciate sufficiently to be a
competitive source of a portion of professional compensation. See "Management."
RISKS OF UNSPECIFIED ACQUISITIONS
The structure of a future acquisition of a broker-dealer or investment
advisor firm 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. The
structure of a business combination may result in taxation of the Company, the
acquired institution or shareholders. There can be no assurance that the Company
will locate or identify suitable acquisition candidates in any of the Identified
Markets, or if identified, that such candidates will be interested in a
transaction, or that an acquisition will be successfully negotiated and
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<PAGE>
consummated. To the extent consummated, there can be no assurance that the
Company will be able to successfully integrate such candidates into the
Company's operations.
None of the Company's directors or executive officers has had any contact
or discussions with any entity or representatives of any entity regarding a
proposed business combination, and will not approach, negotiate, or discuss a
potential transaction prior to the Final Termination Date. Accordingly, there is
no basis for prospective investors to evaluate the possible merits or risks of a
target candidate. Although Management will endeavor to evaluate the risks
inherent in a particular target, there can be no assurance that the Company will
properly ascertain or assess all such risks. In addition, acquisitions involve a
number of special risks, such as the diversion of Management's attention,
difficulty in the retention of personnel, unanticipated problems or legal
liabilities, and tax and accounting issues, some or all of which would have a
materially adverse impact on the Company.
BEST EFFORTS NATURE OF OFFERING; UNDERWRITER HAS NO COMMITMENT TO PURCHASE
SHARES
The Underwriter shall use its best efforts to sell the Class A Common
Shares; however, there is no commitment by the Underwriter or any other person
to purchase the Class A Common Shares. Consequently, the Company can give no
assurance that any of the Class A Common Shares will be sold. Although the
Offering will not close unless the Minimum Offering is achieved, the Company's
ability to implement its business strategy and expand its operations will be
diminished to the extent less than the Maximum Offering is sold. In the event
that the Company receives only the Minimum Offering (or substantially less than
the Maximum Offering), it will be limited in the number of acquisition
candidates that it can acquire and will not be able to achieve the same degree
of diversification as it could if it had obtained the Maximum Offering, and the
impact on the Company's profitability from a marginal acquisition investment may
be greater. If only the Minimum Offering is sold, it is possible that the entire
proceeeds available for acquisitions will be invested in a single acquisition
candidate. See "Use of Proceeds" and "Underwriting."
GENERAL RISKS OF SECURITIES BUSINESS
The securities business is, by its nature, subject to numerous and
substantial risks, particularly in volatile or illiquid markets, and in markets
influenced by sustained periods of low or negative economic growth, including
the risk of losses resulting from the underwriting or ownership of securities,
trading, principal activities, counter party failure to meet commitments,
customer fraud, employee errors, misconduct and fraud (including unauthorized
transactions by traders), failures in connection with the processing of
securities transactions, litigation, the risks of reduced revenues in periods of
reduced demand for public offerings or reduced activity in the secondary markets
and the risk of reduced spreads on the trading of securities.
REDUCED REVENUES DUE TO MARKET, ECONOMIC AND POLITICAL CONDITIONS
The Company's revenues are likely to be lower during periods of declining
prices or inactivity in the market for securities of companies in the sectors on
which the Company is focused. The Company's business is expected to be
particularly dependent on the market for equity offerings by companies in the
financial services industry. These markets have historically experienced
significant volatility not only in the number and size of equity offerings, but
also in the after-market trading volume and prices of their securities.
The growth in the Company's revenues will to a large extent result from the
significantly increased number and size of underwritten transactions by
companies in the Company's targeted industries and by the related increase in
after-market trading for such companies. Underwriting activities in the
Company's targeted industries may decline for a number of reasons. For example,
underwriting activity may decrease during periods of market uncertainty
occasioned by concerns over inflation, rising interest rates, and related
issues, such as legislative and regulatory changes, currency values, flows of
funds into and out of mutual and pension funds, and availability of short-term
and long-term funding and capital. Underwriting and brokerage activity can also
be materially adversely affected for a company or industry segment by
disappointments in quarterly performance relative to analysts' expectations or
by changes in long-term prospects.
Declines in the volume of securities transactions and in market liquidity
generally result in lower revenues from trading activities and commissions.
Lower price levels of securities may also result in a reduced volume of
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underwriting transactions, and could cause a reduction in revenue from
corporate finance fees, as well as losses from declines in the market value of
securities held in trading, investment and underwriting positions, reduced asset
management fees and withdrawals of funds under management. Sudden sharp declines
in market values of securities can result in illiquid markets and the failure of
issuers and counterparties to perform their obligations, as well as increases in
claims and litigation. In such markets, the Company may incur reduced revenues
or losses in its retail brokerage and market-making activities.
POSSIBILITY OF LOSSES ASSOCIATED WITH UNDERWRITING ACTIVITIES
Participation in underwritings involves both economic and regulatory risks.
An underwriter may incur losses if it is unable to resell the securities it is
committed to purchase or if it is forced to liquidate its commitment at less
than the agreed purchase price. In addition, the trend, for competitive and
other reasons, toward larger commitments on the part of lead underwriters means
that, from time to time, an underwriter may retain significant position
concentrations in individual securities. Increased competition has eroded and is
expected to continue to erode underwriting spreads. Another result of increased
competition is that revenues from individual underwriting transactions have been
increasingly allocated among a greater number of co-managers, which has resulted
in reduced revenues for certain transactions.
ROLE OF TARGET MANAGEMENT; POSSIBILITY THAT MANAGEMENT WILL CHANGE
The role of the present management in the operations of an acquired
institution following a business combination cannot be stated with certainty.
Although the Company intends to scrutinize closely the management of a
prospective target institution in connection with its evaluation of the
desirability of effecting a business combination with such target institution,
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 consummation of
a business combination, the amount of time that any of them will devote to the
affairs of the acquired institution remains uncertain. Moreover, there can be no
assurance that such personnel will have significant experience or knowledge
relating to the operations of the target institution acquired by the Company.
The Company may also seek to recruit additional personnel to supplement the
incumbent management of the target institution. 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 "Management."
MANAGEMENT OF GROWTH
Over the next several years, the Company anticipates that it will
experience significant growth in its business activities and the number of its
employees. This growth will require and will continue to require increased
investment in management personnel, financial and management systems, controls
and facilities, which, in the absence of continued revenue growth, would cause
the Company's operating margins to decline. In addition, as is common in the
securities industry, the Company will be highly dependent on the effective and
reliable operation of its communications and information systems. The Company
believes that its anticipated future growth will require implementation of new
and enhanced communications and information systems and training of its
personnel to operate such systems. In addition, the scope of procedures for
assuring compliance with applicable regulations and NASD rules may change as the
size and complexity of the Company's business changes. As the Company grows, the
Company will implement and continue to implement additional formal compliance
procedures to reflect such growth. Any difficulty or significant delay in the
implementation or operation of existing or new systems, compliance procedures or
the training of personnel could adversely affect the Company's results of
operations or financial condition.
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SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's revenues and operating results may fluctuate from quarter to
quarter and from year to year due to a combination of factors, including the
number of underwriting and merger and acquisition transactions completed by the
Company's clients, access to public markets for companies in which the Company
has invested as a principal, the valuations of the Company's principal
investments and the investments of funds managed by the Company, the level of
institutional and retail brokerage transactions, the timing of recording of
asset management fees and special allocations of income, variations in
expenditures for personnel, litigation expenses, and expenses of establishing
new business units. The Company's revenues from an underwriting transaction will
be recorded only when the underwritten security commences trading, and revenues
from merger and acquisition transactions are recorded only when retainer fees
are received or the transaction closes. Accordingly, the timing of the Company's
recognition of revenue from a significant transaction may materially affect the
Company's quarterly operating results. Despite the variability of professional
incentive compensation, the Company could experience losses if demand for
investment banking and corporate financing transactions decline more quickly
than the Company's ability to change its cost structure. Due to the foregoing
and other factors, there can be no assurance that the Company will be able to
sustain profitability on a quarterly or annual basis. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMPETITION FOR RETAINING AND RECRUITING PERSONNEL
The Company's business will be dependent on the highly skilled, and often
highly specialized, individuals that it employs. Retention of research,
investment banking, sales and trading, management and administrative
professionals is particularly important to the Company's prospects. The
Company's strategy is to establish relationships with the Company's prospective
corporate clients in advance of any transaction, and to maintain such
relationships over the long term by providing advisory services to corporate
clients in equity and merger and acquisition transactions. Such after market
support relationships will depend in part upon the individual employees who
represent the Company in its dealings with such clients. In addition, research
professionals contribute significantly to the Company's ability to secure a role
in managing public offerings and in executing trades in the secondary market.
From time to time, other companies in the securities industry have experienced
losses of research, investment banking and sales and trading professionals,
including recent losses of research analysts. The level of competition for key
personnel has increased recently, particularly due to the market entry efforts
of certain non-brokerage financial services companies, commercial banks and
other investment banks targeting or increasing their efforts in some of the same
industries that the Company will serve. Although the Company intends to keep the
level of turnover of its professional employees to a minimum, there can be no
assurance that losses of key personnel due to such competition or otherwise will
not occur in the future. The loss of an investment banking, research or sales
and trading professional, particularly a senior professional with a broad range
of contacts in an industry, could materially and adversely affect the Company's
operating results and financial condition.
The Company anticipates that it will employ a growing number of securities
professionals, particularly if current markets remain favorable to investment
banking transactions. Competition for employees with the qualifications desired
by the Company is intense, especially with respect to research and investment
banking professionals with expertise in industries in which underwriting or
advisory activity is robust. Competition for the recruiting and retention of
employees is likely to cause an increase in the Company's compensation costs in
the future. There can be no assurance that the Company will be able to recruit a
sufficient number of new employees with the desired qualifications in a timely
manner. The failure to recruit new employees could materially and adversely
affect the Company's operating results and financial condition.
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SIGNIFICANT COMPETITION
The Company will engage in the highly competitive securities brokerage and
financial services businesses. It will compete primarily with major regional
firms and smaller "niche" players, and indirectly with large Wall Street
securities firms, securities subsidiaries of major commercial bank holding
companies, retail brokerage firms, investment banking firms, investment
advisors. The Company's industry focus also subjects it to direct competition
from a number of specialty securities firms and smaller investment banking
boutiques that specialize in providing services to those industry sectors.
Competition from commercial banks has increased because of recent
acquisitions of securities firms by commercial banks, as well as internal
expansion by commercial banks into the securities business. In addition, the
Company expects competition from domestic and international banks to increase as
a result of recent and anticipated legislative and regulatory initiatives in the
United States to remove or relieve certain restrictions on commercial banks.
Such competition could adversely affect the Company's operating results, as well
as its ability to attract and retain highly skilled individuals.
Many other companies have greater personnel and financial resources than
the Company. Larger competitors are able to advertise their products and
services on a national or regional basis and may have a greater number and
variety of distribution outlets for their products, including retail
distribution. Discount brokerage firms market their services through aggressive
pricing and promotional efforts. In addition, some competitors have a much
longer history of investment banking activities than the Company and, therefore,
may possess a relative advantage with regard to access to deal flow and capital.
Recent rapid advancements in computing and communications technology are
substantially changing the means by which financial services are delivered.
These changes are providing consumers with more direct access to a wide variety
of distribution outlets for their products, including retail distribution.
Discount brokerage firms market their services through aggressive pricing and
promotional efforts. In addition, some competitors have a much longer history of
investment banking activities than the Company and, therefore, may possess a
relative advantage with regard to access to deal flow and capital. Further,
these changes are providing consumers with more direct access to a wide variety
of financial and investment services including market information and on-line
trading and account information. Advancements in technology also create demand
for more sophisticated levels of client service. Provision of these services may
entail considerable cost without an offsetting source of revenue. See "Business
- -- Competition."
GOVERNMENTAL REGULATION
The securities business is subject to extensive regulation under federal
and state laws in the United States. The Company will be regulated by several
regulatory bodies including the SEC, the NASD, the SIPC and various other
federal and state governmental agencies. These regulatory agencies are designed
to ensure the integrity of the financial markets and to protect customers and
other parties who deal with the Company and are not designed to protect the
Company's shareholders. Compliance with many of the regulations applicable to
the Company involves a number of risks, particularly in areas where applicable
regulations may be subject to interpretation. In the event of non-compliance
with an applicable regulation, governmental regulators and the NASD may
institute administrative or judicial proceedings that may result in censure,
fine, civil penalties (including treble damages in the case of insider trading
violations), issuance of cease-and-desist orders, deregistration or suspension
of the non-compliant broker-dealer or investment adviser, suspension or
disqualification of the broker-dealer's officers or employees or other adverse
consequences. The imposition of any such penalties or orders on the Company
could have a material adverse effect on the Company's operating results and
financial condition.
The regulatory environment in which the Company will operate is subject to
change. The Company may be adversely affected as a result of new or revised
legislation or regulations imposed by the SEC, the NASD or other United States
or foreign governmental regulatory authorities. The Company also may be
adversely affected by changes in the interpretation or enforcement of existing
laws and rules by these governmental authorities and the NASD. Additional
regulation, changes in existing laws and rules, or changes in interpretations or
enforcement of existing laws and rules often affect directly the method of
operation and profitability of securities firms. The Company cannot predict what
effect any such changes might have. Furthermore, the Company's businesses may be
materially affected not only
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by regulations applicable to it as a financial market intermediary, but also by
regulations of general application. For example, the volume of the Company's
underwriting, merger and acquisition and principal investment businesses in a
given time period could be affected by, among other things, existing and
proposed tax legislation, antitrust policy and other governmental regulations
and policies (including the interest rate policies of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"), and changes in
interpretation or enforcement of existing laws and rules that affect the
business and financial communities. The level of business and financing activity
in each of the industries on which the Company focuses can be affected not only
by such legislation or regulations of general applicability, but also by
industry-specific legislation or regulations.
One of the most important regulations with which the Company's
broker-dealer subsidiaries must continually comply is the SEC Rule 15c3-1 (the
"Net Capital Rule"), which will require the broker-dealer subsidiaries of the
Company to maintain a minimum amount of net capital, as defined under such
regulations. A significant operating loss or any charge against the net capital
of any of the Company's brokerage subsidiaries could materially adversely affect
its ability to operate, expand or, depending upon the magnitude of the loss or
charge, maintain its present level of business. These rules could also restrict
the ability of the Company to withdraw capital from its subsidiaries, even in
circumstances where a particular subsidiary has more than the minimum amount of
required capital, which, in turn, could limit the ability of the Company to
implement its strategies. See "Business--Government Regulation."
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
in which the net proceeds are not employed in the Company's anticipated business
operations. If the Company is deemed to be an investment company, the Company
may become subject to certain restrictions relating to the Company's activities,
including restrictions on the nature of its investments and the issuance of
securities. In addition, the Investment Company Act imposes certain requirements
on companies deemed to be within its regulatory scope, including registration as
an investment company, adoption of a specific form of corporate structure and
compliance with certain burdensome reporting, record-keeping, voting, proxy,
disclosure and other rules and regulations. In the event of the characterization
of the Company as an investment company, the failure by the Company to satisfy
such regulatory requirements, whether on a timely basis or at all, would, under
certain circumstances, have a material adverse effect on the Company's results
of operations and financial condition.
POSSIBILITY OF LOSSES ASSOCIATED WITH PRINCIPAL TRADING ACTIVITIES
The Company intends to engage in securities trading and market-making
activities. These activities will be primarily conducted by the Company as
principal and will subject the Company's capital to significant risks, including
market, credit, leverage, counter party and liquidity risks. These activities
often involve the purchase, sale or short sale of securities as principal in
markets that may be characterized by relative illiquidity or that may be
particularly susceptible to rapid fluctuations, in liquidity and price. The
Company may from time to time have large position concentrations in securities
of, or commitments to, a single issuer, or issuers engaged in a specific
industry, particularly as a result of the Company's underwriting activities. The
Company intends to concentrate its trading positions in a more limited number of
industry sectors and companies than some other broker-dealers, which might
result in higher trading losses than would occur if the Company's positions and
activities were less concentrated. See "Business -- Products and Services."
Much of the Company's market-making business is expected to involve
securities traded on NASDAQ and the OTC Bulletin Board. NASDAQ recently began
trading securities in sixteenths of a dollar (rather than in eighths). This
change and further changes in this regard may adversely affect the Company's
revenues from brokerage activities.
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LITIGATION AND POTENTIAL SECURITIES LAWS LIABILITY
Many aspects of the Company's business involve substantial risks of
liability. An underwriter is exposed to substantial liability under federal and
state securities laws, other federal and state laws and court decisions,
including decisions with respect to underwriters' liability and limitations on
indemnification of underwriters by issuers. For example, a firm that acts as an
underwriter may be held liable for material misstatements or omissions of fact
in a prospectus used in connection with the securities being offered or for
statements made by its securities, analysts or other personnel. While the
Company has never been subject to litigation based upon a material misstatement
or omission of fact in a prospectus, in recent years there has been an
increasing incidence of litigation involving the securities industry, including
class actions that seek substantial damages. The Company is also subject to the
risk of litigation from its other business activities, including litigation that
may be without merit. As the Company intends to actively defend any such
litigation, significant legal expenses could be incurred. An adverse resolution
of any future lawsuits against the Company could materially adversely affect the
Company's operating results and financial condition. See "Business--Legal
Proceedings."
DEPENDENCE ON CASH INFLOWS TO MUTUAL FUNDS
A slowdown or reversal of cash inflows to mutual funds and other pooled
investment vehicles could lead to lower underwriting and brokerage revenues for
the Company because mutual funds purchase a significant portion of the
securities offered in public offerings and traded in the secondary markets. The
recent demand for new equity offerings has been driven in part by institutional
investors, particularly large mutual funds, seeking to invest cash received from
the public. The public may withdraw additional cash from mutual funds as a
result of a decline in the market generally or as a result of a decline in
mutual fund net asset values. To the extent that a decline in cash inflows into
mutual funds or a decline in net asset values of these funds reduces demand by
fund managers for initial public or secondary offerings, the Company's business
and results of operations could be materially adversely affected. Moreover, a
slowdown in investment activity by mutual funds may have an adverse effect on
the securities markets generally.
YEAR 2000
The significance of the year 2000 issues for the Company will be dependent
on the nature of the technology systems used by entities acquired by the
Company. The Company's business will be highly dependent on communications and
information systems, including certain systems expected to be provided by its
clearing broker. Any failure or interruption of the Company's systems, systems
of the Company's clearing broker or third party trading systems, could cause
delays or other problems in the Company's securities trading activities, which
could have a material adverse effect on the Company's operating results. Such
failures and interruptions may result from the inability of certain computing
systems (including those of the Company, its clearing broker, and other third
party vendors) to recognize the year 2000. There can be no assurance that the
year 2000 issue can be resolved prior to the upcoming change in the century.
Although the Company may incur substantial costs, particularly costs resulting
from charges by its third party service providers, in correcting year 2000
issues, such costs are not sufficiently certain to estimate at this time. In
addition, the Company expects that its principal disaster recovery system will
be provided by its clearing broker. There can be no assurance that the Company
or its clearing broker will not suffer any systems failure or interruption,
including those caused by an earthquake, fire, other natural disaster, power or
telecommunications failure, act of God, act of war or otherwise, or that the
Company's or its clearing broker's back-up procedures and capabilities in the
event of any such failure or interruption will be adequate. See "Business --
Year 2000."
DEPENDENCE UPON AVAILABILITY OF CAPITAL AND FUNDING
The Company's business will be dependent upon the availability of adequate
funding and regulatory capital under applicable regulatory requirements. The
Company has funded its organizational costs and expenses through approximately
$383,000 received from equity purchases and loans from investors to the Company.
The Company believes that the net proceeds of the Offering will satisfy the
Company's cash requirements for the twelve month period following the Offering.
To the extent that the Maximum Offering is not sold, the size of the offerings
that the Company can underwrite may be reduced. In the event that the net
proceeds of the Offering prove to be insufficient for purposes of effecting a
particular business combination (because of the size of the business combination
or other reasons), the
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Company may 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 transactions or abandon that
particular business combination and seek an alternative target institution
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 institution. The failure by the Company to
secure additional financing could have a material adverse effect on the
continued development or growth of the target institution. 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. While the
proceeds of the Offering, at least in the short term, can be expected to
alleviate in part the Company's funding and capital needs, there can be no
assurance that any, or sufficient, funding or regulatory capital will continue
to be available to the Company in the future on terms that are acceptable to it.
VOTING RIGHTS OF CLASS A AND CLASS B COMMON SHARES
The voting rights of the Class A Common Shares are limited by the Company's
Second Amended and Restated Articles of Incorporation (the "Articles of
Incorporation"). On all matters with respect to which the Company's shareholders
have a right to vote, including the election of directors, each share of Class A
Common Shares is entitled to one vote, while each share of Class B Common Shares
is entitled to ten votes. Except as otherwise required by law or expressly
provided in the Articles of Incorporation, the Class A Common Shares and Class B
Common Shares vote together as a single class. Class B Common Shares can be
converted into Class A Common Shares on a share-for-share basis at the election
of the holder and will be converted to Class A Common Shares automatically upon
transfer by W. Jonathan Wride or Rita G. Sandell, except for transfers to
immediate family members, the trustees of certain trusts and entities controlled
by such holders of the Class B Common Shares (collectively, the "Permitted
Transferees"). Except as otherwise provided in the Articles of Incorporation, no
shares of the Class B Common Shares may be converted into Class A Common Shares
until September 24, 2001. The Articles of Incorporation prohibit the Company
from issuing additional Class B Common Shares to any person or entity except W.
Jonathan Wride, Rita G. Sandell or a Permitted Transferee. See "Description of
Capital Stock."
VOTING CONTROL BY PRINCIPAL SHAREHOLDERS
After this Offering, Mr. Wride and Rita G. Sandell, a director of the
Company, will own beneficially 78,846 Class A Common Shares and all 323,076
Class B Common Shares outstanding, together representing approximately 85.7% of
the total voting power of the Class A and Class B Common Shares if the Minimum
Offering is sold (or 68.1% assuming the sale of the Maximum Offering). As a
result of such concentration of ownership, Mr. Wride and Ms. Sandell will be
able to effectively control the policies and affairs of the Company and
corporate actions requiring shareholder approval, including the election of the
members of the Board of Directors. This concentration of ownership could have
the effect of delaying, deferring or preventing a change of control of the
Company, including any business combination with an unaffiliated party, and
could also affect the price that investors might be willing to pay in the future
for Class A Common Shares. See "Description of Capital Stock."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of the Class A Common Shares offered hereunder will experience
an immediate and substantial dilution in the net tangible book value of the
Common Shares from the initial public offering price. Without taking into
account any changes in net tangible book value after September 24, 1998, other
than to give effect to the sale by the Company of the Minimum Offering, and
after deducting the underwriting discounts and commissions and the estimated
offering expenses, the net tangible book value of the Company at September 24,
1998 would have been approximately $4.7 million, or $5.08 per share ($14.0
million, or $7.27 per share, assuming the sale of the Maximum Offering). This
represents an immediate increase in net tangible book value of $4.33 per share
(or $6.52 per share, assuming the sale of the Maximum Offering) to the existing
shareholders and an immediate net tangible book value dilution of $4.92 per
share, or 49.2% ($2.73 or 27.3% assuming the sale of the Maximum Offering) to
purchasers in the Offering. Dilution represents the difference between the
public offering price and the net tangible book value per share after the
Offering. See "Dilution."
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BROAD DISCRETION IN USE OF PROCEEDS
Although the Company intends to use the net proceeds of this Offering for,
among other things, potential acquisitions, net capital, sales and marketing
efforts, hiring of securities professionals, and for general working capital
purposes, the use of the funds for such purposes have not yet been specifically
allocated. Accordingly, Management will have absolute discretion as to the
actual application of such proceeds. There can be no assurance that Management
will make such application effectively or in a manner that will not result in a
material adverse effect on the Company's financial condition or results of
operations. See "Use of Proceeds".
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation contain provisions requiring
supermajority shareholder approval to effect certain extraordinary corporate
transactions, with Interested Persons (which are defined in the Articles of
Incorporation as, with certain exceptions, those persons who own greater than
10% of the shares of the Company's stock eligible to vote on a matter submitted
to a vote of the shareholders of the Company), unless that transaction is
approved by a majority of the disinterested members of the Company's Board of
Directors (the "Board of Directors" or the "Board"). This approval is in
addition to any other required approval of the Board of Directors or
shareholders. The Company's Amended and Restated By-Laws (the "By-Laws") also
contain provisions which (i) authorize the Board to determine the precise number
of members of the Board and authorize either the Board or the shareholders to
fill vacancies on the Board, (ii) provide that any special meetings of
shareholders of the Company may be called by (a) the Chief Executive Officer or
the presiding officer of the Board, if any, or (b) upon written request of at
least three directors or holders of at least 10% of all shares entitled to vote,
(iii) authorize any action required or permitted to be taken by the Company's
shareholders to be effected by consent in writing and (iv) establish certain
advance notice procedures for nomination of candidates for election as directors
and for shareholder proposals to be considered at an annual or special meeting
of shareholders. The issuance of preferred shares by the Company could also have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a controlling interest in the Company
and could adversely affect the voting power or other rights of shareholders of
the Class A and Class B Common Shares. These provisions may have the effect of
impeding the acquisition of control of the Company by means of a tender offer, a
proxy fight, open-market purchases or otherwise, without approval of such
acquisition by the Board of Directors. Certain of these provisions also may make
it more difficult to remove the Company's current Board of Directors and
management. See "Description of Capital Stock -- Certain Anti-Takeover,
Indemnification and Limited Liability Provisions."
NO ASSURANCE OF DIVIDENDS
It is anticipated that the Company will retain its earnings for growth of
the Company and no dividends will be paid on the Class A Common Shares for the
immediately foreseeable future. No assurance can be given that future earnings
of the Company, will be sufficient to permit the legal payment of dividends to
the Company's shareholders at any time in the future. Even if the Company may
legally declare dividends, the amount and timing of such dividends will be at
the discretion of the Company's Board of Directors. The Board may in its sole
discretion decide not to declare dividends. For a more detailed discussion of
other regulatory limitations on the payment of cash dividends by the Company.
See "Dividend Policy."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation and By-laws provide for the
indemnification of its officers and directors and insulate its officers and
directors from liability for certain breaches of the duty of care. It is
possible that the indemnification obligations imposed under these provisions
could result in a charge against the Company's earnings and thereby affect the
availability of funds for payment of dividends to the Company's shareholders.
The Company's By-laws contain similar provisions. See "Description of Common
Shares -- Certain Anti-Takeover, Indemnification and Limited Liability
Provisions."
POTENTIAL CONFLICTS; NEED FOR QUALIFIED INDEPENDENT UNDERWRITER
17
<PAGE>
Ashtin Kelly & Co., of which Mr. Wride also serves as the President and
Chief Executive Officer, will underwrite the Offering on a best efforts basis.
As an affiliate of the Company, Ashtin Kelly & Co.'s role as Underwriter may
involve certain conflicts of interest. Pursuant to the Conduct Rules of the
NASD, the Class A Common Shares are being offered at a price no higher than that
recommended by First London Securities Corporation, which is acting as qualified
independent underwriter (the "QIU"). Although the QIU has participated in the
preparation of the Registration Statement of which this Prospectus forms a part
and is required to exercise the usual standards of "due diligence" with respect
thereto, there can be no assurance that certain conflicts will not arise with
respect to this Offering, or if conflicts do arise, that they will be resolved
in a manner favorable to investors. Further, following the Offering, additional
conflicts between the Company and the Underwriter may arise in the competition
for business, the allocation of management's time, and the recruitment and
retention of personnel. There can be no assurance that such conflicts will be
resolved in a manner favorable to the Company's shareholders. See
"Underwriting."
NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; LIMITED TRADING MARKET
EXPECTED
Prior to the Offering, there has been no public market for the Class A
Common Shares and there can be no assurance that any such market will develop in
the future. The initial public offering price of $10.00 per share was determined
by negotiations between the Company, the QIU and the Underwriter. The initial
public offering price is not based upon earnings or any history of operations
and should not be construed as indicative of the present or anticipated future
value of the Class A Common Shares. Further, the initial public offering price
does not bear any relationship to the Company's assets, book value, net worth,
or other recognized criteria of value. Accordingly, there can be no assurance
that the market price at closing will equal or exceed the initial public
offering price. See "Underwriting."
The Company expects that the quotations for the Class A Common Shares will
be reported on the OTC Bulletin Board under the symbol "AKHC." The Company has
been advised that, upon completion of the Offering, ____________________ intends
to act as a market maker in the Class A Common Shares, subject to applicable
laws and regulatory requirements. Making a market in securities involves
maintaining bid and ask quotations and being able, as principal, to effect
transactions in reasonable quantities at those quoted prices, subject to various
securities laws and other regulatory requirements. The development of a public
trading market depends, however, upon the existence of willing buyers and
sellers, the presence of which is not within the control of the Company or any
market maker, factors such as the limited size of this offering, the lack of
earnings history for the Company and the absence of a reasonable expectation of
dividends within the near future mean that there can be no assurance of the
development in the foreseeable future of an active and liquid market for the
Class A Common Shares. Even if a market develops, there can be no assurance that
a market will continue, or that shareholders will be able to sell their shares
at or above the offering price of $10.00 per share. Furthermore,
____________________ has no obligation to make a market in the Class A Common
Shares and, if commenced, may cease market making activities at any time. The
potential size of a secondary market for the Class A Common Shares might, at
least initially, be limited to some extent by the requirement of a $1,000
minimum investment imposed in connection with this offering. The minimum
investment requirement may act to restrict the number of shareholders and make
subsequent trading of small numbers of shares less likely. Purchasers of Class A
Common Shares should carefully consider the potentially illiquid and long-term
nature of their investment in the shares being offered hereby.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 604,286 Class A
Common Shares outstanding if the Minimum Offering is sold and 1,604,286 Class A
Common Shares outstanding if the Maximum Offering is sold. In addition, the
Company will have 323,076 Class B Common Shares outstanding upon completion of
the Offering. Of these shares, the Class A Common Shares sold in the Offering
will be eligible for sale in the open market without restriction (except for any
such shares purchased by affiliates of the Company). The remaining 104,286 Class
A Common Shares and the 323,076 Class B Common Shares will be "restricted
securities" as that term is defined in Rule 144 ("Rule 144") promulgated under
the Securities Act of 1933, as amended (the "Securities Act"). Additional Class
A Common Shares, including 100,000 shares issuable upon exercise of options to
be granted under the Company's 1998 Stock Option Plan to Mr. Wride, of which
25,000 will be immediately exercisable, and those shares issuable upon the
conversion of Class B Common Shares, will also become eligible for sale in the
public market pursuant to Rule 144 from time to time.
18
<PAGE>
The Company's directors and executive officers who currently beneficially
own in the aggregate 78,846 Class A Common Shares have agreed, however, not to
sell any of their Class A Common Shares for a period of 180 days from the Final
Termination Date without the prior written consent of the Underwriter.
Following this Offering, sales and potential sales of substantial amounts
of the Company's Class A Common Shares in the public market pursuant to Rule 144
or otherwise could adversely affect the prevailing market prices for the Class A
Common Shares and impair the Company's ability to raise additional capital
through the sale of equity securities. See "Description of Capital Stock,"
"Shares Eligible for Future Sale" and "Underwriting."
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain "forward-looking" statements within the
meaning of the Private Securities Litigation Reform Act of 1995, such as
statements relating to the financial condition and prospects, Year 2000
readiness, plans for future business development activities, capital spending
and financing sources, capital structure, the efforts of regulation and
competition and the business of the Company. Where used in this Prospectus, the
words "anticipate," "believe," "estimate," "expect," "intend," and similar words
and expressions, as they relate to the Company or the management of the Company,
identify forward-looking statements. Such forward-looking statements reflect the
current view of the Company and upon current expectations, estimates, and
projections about the Company and its industry, management's beliefs with
respect thereto, and certain assumptions made by management. These
forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties, and other factors which could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements as a result of various factors. Potential risks and
uncertainties include, but are not limited to: (i) competitive pressure in the
investment banking, broker dealer, and financial services industries increasing
significantly; (ii) costs or difficulties related to the integration of
businesses acquired in the future being greater than originally expected; (iii)
changes in political conditions or changes occurring in the legislative or
regulatory environment; (iv) general economic conditions, either nationally or
regionally, becoming less favorable than expected resulting in, among other
things, a decreased demand for initial public offerings or for securities of its
clientele or their industry, such as de novo banking institutions; (v) changes
occurring in business conditions and inflation; (vi) difficulties and
complications arising from acquisitions and integration of acquired businesses
or assets; (vii) changes in technology; (viii) changes in monetary and tax
policies; (ix) changes occurring in the securities markets; and (x) other risks
and uncertainties detailed from time to time in the filings of the Company with
the Commission.
19
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Class A
Common Shares offered hereby are estimated to be between approximately
$4,400,000 if the Minimum Offering is sold and $13,700,000 if the Maximum
Offering is sold. The Company intends to apply the net proceeds as set forth in
the table below:
<TABLE>
<CAPTION>
MINIMUM OFFERING MAXIMUM OFFERING
------------------------------- -------------------------------
PERCENT OF PERCENT OF
USE OF PROCEEDS NET PROCEEDS NET PROCEEDS NET PROCEEDS NET PROCEEDS
- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Acquire existing broker-dealers, investment
advisors and other financial services
companies to increase sales force and
distribution capabilities ................... $1,350,000 30.7% $6,100,000 44.5%
Expand net capital to participate in corporate
finance transactions and to initiate market
making ...................................... 2,300,000 52.3% 4,200,000 30.7%
Building development .......................... 250,000 5.7% 250,000 1.8%
Expand sales and marketing efforts ............ 150,000 3.4% 800,000 5.9%
Hire corporate finance and sales personnel to
staff additional brokerage offices .......... 150,000 3.4% 850,000 6.2%
Working capital and general corporate
purposes .................................... 200,000 4.5% 1,500,000 10.9%
---------- ------ ----------- ------
Totals ........................................ $4,400,000 100.0% $13,700,000 100.0%
========== ====== =========== ======
</TABLE>
The Company will enter the acquisition market and expects to use a portion
of the net proceeds from this Offering for such purposes. The extent to which
the Company will seek to implement the above objectives will be determined by
the total amount of proceeds raised from the Offering. The Company anticipates
that the greater the amount of proceeds received, the greater the amount will be
devoted to acquisitions. If the Minimum Offering is sold, the Company intends to
devote a substantial amount of the net proceeds to increase net capital as
needed to participate in corporate and finance transactions, establish
market-making and research, and the remainder to sales and marketing. The
Company does not have any current understandings, arrangements or agreements,
whether written or oral, with respect to any transactions, and is not presently
negotiating or holding discussions with any party with respect to such a
transaction. The Company will not approach, negotiate or discuss a potential
transaction with an acquisition candidate prior to the Final Termination Date.
The proposed allocation of net proceeds of this Offering represents the
Company's best estimates based upon current plans and certain assumptions
regarding industry and general economic conditions and the Company's future
revenue and expenditures. If any of these factors changes, the Company may find
it necessary or advisable to reallocate some of the proceeds within the
above-described categories or to use portions thereof for other purposes or may
be required to seek additional financing. There can be no assurance that
additional financing will be available to the Company on acceptable terms, or at
all. Any failure to obtain additional financing, if required, could have an
adverse effect on the Company, including possibly requiring the Company to
curtail its operations. Since a portion of the net proceeds will be applied to
general corporate purposes and working capital, the Company will have broad
discretion as to the application of such net proceeds.
Prior to the sale of the Minimum Offering, all subscription proceeds will
be deposited into an interest bearing escrow account with the Escrow Agent. If
the Company rejects any subscription for which the Escrow Agent has already
collected funds, the Escrow Agent will, upon written instructions from the
Company, issue a refund check to the subscriber. The Escrow Agent will place the
subscription proceeds in interest-bearing accounts. If the Minimum Offering has
not been subscribed and paid for on or before the Initial Termination Date, all
subscription payments will
20
<PAGE>
be refunded in full together with any interest earned thereon while held in
escrow. If the Minimum Offering is subscribed and paid for on or before the
Initial Termination Date, the subscription funds held in escrow, along with
interest earned on such funds, will be disbursed to the Company. Prior to the
release from escrow of the subscription proceeds, such funds may be invested
only in bank accounts, including savings accounts and bank money market
accounts, or in short-term securities issued by the United States government.
After reaching the Minimum Offering, unless earlier terminated by the
Underwriter, the Offering may continue until the Final Termination Date. If the
Offering continues, the Escrow Agent will continue to receive deposits and will
disburse the funds to the Company from time to time. Directors, officers, and
affiliates of the Company may purchase, for investment purposes only, the Class
A Common Shares offered hereby on the same terms and conditions as other
investors, and Class A Common Shares so purchased will be included in
determining whether the Minimum Offering has been reached.
Until subscription proceeds are invested, following their release from
escrow, the subscription funds may be temporarily invested in short-term, highly
liquid investments with appropriate safety of principal, including certificates
of deposit, short-term securities or money market funds which invest in
short-term funds directly or indirectly issued or guaranteed by the United
States or its government agencies, U.S. Treasury bonds, notes, bills and
federally insured time and demand deposits in state or national banks.
DILUTION
The difference between the public offering price per share of Class A
Common Shares and the pro forma net tangible book value per share of Class A
Common Shares after this Offering constitutes dilution to purchasers of the
Class A Common Shares. Pro forma net tangible book value per share is determined
by dividing the pro forma net tangible book value (total tangible assets less
total liabilities) by the number of outstanding Class A and Class B Common
Shares.
The net tangible book value of the Company at September 24, 1998 was
$320,488, or $0.75 per share of Class A and Class B Common Shares. After giving
effect to the sale of the Minimum Offering at the public offering price of
$10.00 per share (after deducting underwriting discounts, commissions and
estimated offering expenses) the pro forma net tangible book value at that date
would have been $4,713,413 or $5.08 per share of Class A and Class B Common
Shares. After giving effect to the sale of the Maximum Offering at the public
offering price of $10.00 per share (after deducting underwriting discounts,
commissions and estimated offering expenses) the pro forma net tangible book
value at that date would have been $14,013,413 or $7.27 per share of Class A and
Class B Common Shares. Assuming the sale of the Minimum Offering, this
represents an immediate increase in pro forma net tangible book value of $4.33
per share to existing shareholders ($6.52 for the Maximum Offering) and an
immediate dilution of $4.92 per share to investors purchasing Class A Common
Shares in the Offering ($2.73 for the Maximum Offering).
The following table illustrates the per share dilution effect at September
24, 1998:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
OFFERING OFFERING
-------- --------
<S> <C> <C>
Public offering price per share(1)..................................... $ 10.00 $ 10.00
Net tangible book value before this Offering........................... 0.75 0.75
Increase in net tangible book value attributable to new investors...... 4.33 6.52
-------- --------
Net tangible book value after this Offering(2)......................... 5.08 7.27
-------- --------
Immediate dilution to new investors(3)................................. $ 4.92 $ 2.73
======== ========
<FN>
- -------------------
(1) Does not take into account underwriting discounts and commissions and
offering expenses.
(2) Net tangible book value per share is determined by dividing the number of
Class A and Class B Common Shares outstanding into the net tangible book
value of the Company.
(3) Does not give effect to dilution which may result from issuance of 100,000
additional Class A Common Shares upon the exercise of options to be granted
to Mr. Wride, of which 25,000 will be immediately exercisable.
</FN>
</TABLE>
21
<PAGE>
The following table summarizes the number and percentage of Class A and
Class B Common Shares purchased from the Company, the amount and percentage of
consideration paid and the average price per share paid by existing
shareholders; and by the purchasers of the Class A Common Shares, at the public
offering price of $10.00 per share and the sale of the Minimum Offering and at
the sale of the Maximum Offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------------- -----------------------------
AVERAGE PRICE
NUMBER PERCENT PER SHARE AMOUNT PERCENT
--------- ------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C>
MINIMUM OFFERING
Existing shareholders............. 427,362 46.1% $ 0.77 $ 331,150 6.2%
New investors..................... 500,000 53.9% $ 10.00 $ 5,000,000 93.8%
--------- ------ ------- ------------ ------
Total......................... 927,362 100.0% $ 5.75 $ 5,331,150 100.0%
========= ====== ======= ============ ======
MAXIMUM OFFERING
Existing shareholders............. 427,362 22.2% $ 0.77 $ 331,150 2.2%
New investors..................... 1,500,000 77.8% 10.00 $ 15,000,000 97.8%
--------- ------ ------- ------------ ------
Total......................... 1,927,362 100.0% $ 7.95 $ 15,331,150 100.0%
========= ====== ======= ============ ======
</TABLE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 24, 1998, and as adjusted to reflect the sale of the Minimum Offering
and the Maximum Offering of the Class A Common Shares offered hereby. The
following table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and with the
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus. See "Use of Proceeds."
<TABLE>
<CAPTION>
AT SEPTEMBER 24, 1998
---------------------------------------------------
AS ADJUSTED
--------------------------------
ACTUAL MINIMUM MAXIMUM
-------- ---------- -----------
<S> <C> <C> <C>
Long-term and short-term debt ............................... $ 60,980 $ 0 $ 0
======== ========== ===========
Shareholders' equity:
Preferred Shares; no stated par; 5,000,000 shares authorized;
no shares issued or outstanding .......................... 0 0 0
Class A Common Shares; $.01 par value, 30,000,000 shares
authorized; 104,286 issued and outstanding (604,286 and
1,604,286 shares as adjusted) ............................ 1,043 6,043 16,043
Class B Common Shares, without par value, 5,000,000 shares
authorized; 323,076 shares issued and outstanding as of
September 24, 1998 and as adjusted ....................... 0 0 0
Additional paid-in capital .................................. 330,107 4,718,032 14,008,032
Accumulated deficit (1) ..................................... (10,662) (10,662) (10,662)
-------- ---------- -----------
Total shareholders' equity .................................. $320,488 $4,713,413 $14,013,413
-------- ---------- -----------
Total Capitalization......................................... $383,399 $4,724,075 $14,024,075
======== ========== ===========
<FN>
- -------------------
(1) The accumulated deficit at September 24, 1998 is comprised primarily of
pre-operating expenses related principally to legal and professional fees
incurred in the regulatory application process, creation of the holding
company, office occupancy costs and supplies. Additional professional fees
will also be incurred in connection with the Offering and other corporate
matters.
</FN>
</TABLE>
22
<PAGE>
DIVIDEND POLICY
The Company initially expects that Company and subsidiary earnings, if any,
will be retained to finance the growth of the Company and its acquisitions and
that no cash dividends will be paid for the foreseeable future. Future dividend
policy will be determined periodically by the Board of Directors based on
conditions then existing, including the Company's earnings and financial
condition, capital requirements, and other factors deemed relevant by the Board
of Directors. If and when dividends are declared, the Company will probably be
largely dependent upon dividends paid by its subsidiaries for funds to pay
dividends on the Class A Common Shares. It is also possible, however, that the
Company will in the future pay dividends generated from investment income and
other activities of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The Company is currently in the development stage and will remain in that
stage until the Company has completed the Offering and commenced operations. The
Company's ability to commence operations is contingent upon obtaining adequate
financial resources through the Offering. The Company has funded its start-up
and organizational costs through $331,000 from equity purchases and $52,000 from
loans by investors to the Company. Under the terms of these loans, the investors
will be repaid in full out of the net proceeds allocated to working capital to
be received in the Offering. The Company will use the net proceeds of this
Offering, together with the income and interest earned thereon, to effect an
acquisition of a registered broker-dealer or investment advisor firm. In
connection with such acquisition, the net proceeds will be used to select and
evaluate potential target firms and to structure and consummate an acquisition
(including possible payment of finder's fees or other compensation to persons or
entities which provide assistance or services to the Company). The Company
believes that the net proceeds of the offering will be sufficient to satisfy the
Company's cash requirements for at least the first 12 month period following the
acquisition of its subsidiaries. Accordingly, the Company does not anticipate
that it will be necessary to raise additional funds for the operation of the
Company and its subsidiaries over the next twelve months. However, certain
acquisitions, depending on the size and the nature of the entity to be acquired,
may exceed available net proceeds and could require the Company to seek
additional financing. For additional information regarding material expenditures
during such period, see "Use of Proceeds." For additional information regarding
the plan of operations for the Company and its subsidiaries, see "Business" and
"Management."
Since September 24, 1998, the date of the Company's most recent audited
financial statements, the Company has continued to incur pre-operating expenses.
At September 24, 1998, the Company's accumulated deficit was $10,662. The
additional expenses incurred by the Company related principally to legal and
professional fees incurred in the regulatory application process and in
connection with this offering, salaries and supplies.
BUSINESS
GENERAL
The Company was organized on September 4, 1997 to create a financial
holding company to initially focus on several of the largest and fastest growing
markets in Florida. The Company intends to acquire either a registered
broker-dealer or an investment advisor firm in the Florida market as soon as
practicable upon completion of the Offering. The Company will require that all
acquisition candidates be registered with the SEC, NASD, and SIPC and be in good
standing with their respective regulatory agencies. The Company expects that its
acquisition candidates will have an established retail distribution force
comprised of between two to twenty-five securities professionals and will have
demonstrated that they are profitable. Management believes that such firms can
be acquired for attractive multiples of book value and, once associated with a
larger institution, will enable the Company to generate larger revenues in many
areas, including investment banking, retail brokerage and asset management. The
Company has identified the markets of Naples, Ft. Lauderdale/Broward County,
Tampa/Hillsborough County, Jacksonville, and the Palm Beaches (collectively, the
"Identified Markets") as potential markets for acquisitions. However, there can
be no assurance that the Company will acquire a firm in any of the Identified
Markets or that such candidates will possess all of the attributes described
above. Further, the Company may, as opportunities arise, seek to acquire an
entity not located within any of the Identified Markets, whether in Florida or
elsewhere. The Company does not have any current understanding, arrangements, or
agreements, whether written or oral, with respect to such a transaction. The
Company will not approach, negotiate with, or discuss a potential transaction
with an acquisition candidate prior to the Final Termination Date. See "Business
- -- Strategy of the Company -- Market Expansion" and "-- Products and Services."
23
<PAGE>
The Company expects that together with its operating subsidiaries it will
become a full-service financial services firm with emphasis placed on investment
banking, retail brokerage, and asset management. Management's investment banking
strategy is to target specific service/industry sectors where it can develop
in-depth knowledge and a client following. The Company expects its primary
sector of industry concentration to be the financial sector which includes
community banks, savings and loan institutions, broker-dealers, investment
advisory firms and insurance companies, with a special emphasis on underwriting
equity offerings by community and de novo banks . Management believes that if
the Company is able to establish a relationship with community-oriented banks by
assisting them in their public offerings, the Company will be able to establish
a full service investment banking relationship with these banks. As a result,
the Company will be in a position to provide these banks with any additional
financing needs, retail brokerage services and financial advisory services, with
respect to mergers and acquisitions.
Management of the Company believes that the significant consolidation in
the brokerage industry in Florida has disrupted customer relationships as the
larger regional financial institutions have increasingly focused their attention
on larger corporate customers and implemented standardized products and
services. Generally, these products and services are offered through less
personalized delivery systems which Management believes has created a need for
higher quality service to small and medium-sized businesses. In addition,
consolidation in the brokerage industry has dislocated experienced and talented
management and registered representative personnel due to the elimination of
redundant functions and the need to achieve cost savings. Based on their
experience, Management believes the consolidation in Florida has created a
unique opportunity for the Company to attract and retain its targeted banking
customers, experienced management personnel and registered representatives
within the Identified Markets.
The Company will have a community-oriented investment banking approach that
emphasizes responsive and personalized service to its clients. Management's
client development strategy includes attracting and servicing small and
medium-sized businesses, particularly community banks which are in need of
financial services. Management expects that upon the Company's entry into a new
market area, it will undertake a marketing campaign utilizing an officer calling
program that informs local businesses of the Company's ability to raise capital
and community-based promotions to build its client base, thus allowing the
corporate client further community recognition and involvement. In addition,
Management will be compensated based on investment banking goals and asset
generation. See "Business -- Strategy of the Company."
Management intends to develop specific policies and training programs for
its employees and to internally promote its employees rather than seeking
outside managers. The Company believes this will keep employee turnover at a
minimum and enhance the Company's growth and efficiency. The Company believes
that the combination of its acquisitions, internal corporate culture and its
Management will enable it to become a prominent provider of investment banking,
retail brokerage and asset management services in Florida.
There can be no assurances that the Company's objectives will be realized.
See "Risk Factors-- Management of Growth," "-- Significant Competition" and "--
Reduced Revenues due to Economic, Political and Market Conditions."
INDUSTRY BACKGROUND
Over the past 15 years, capital markets have evolved in depth and
complexity, thereby radically altering the needs of both the companies accessing
those markets and investors. According to Securities Data Company, in 1982, 122
initial public offerings were underwritten in the United States for a total of
$1.3 billion and total public equity issued equaled $10.6 billion. In 1992, the
value of new issues in the United States more than doubled the level achieved in
any previous year reaching $39.9 billion, while the total public equity and
high-yield debt raised equaled $90.5 billion and $51.6 billion, respectively. In
1997, 636 initial public offerings were completed in the United States, totaling
$44.2 billion, total public equity issued equaled $120.1 billion, and high-yield
debt issued totaled $61.2 billion. A significant portion of this growth has come
from emerging industries that previously had limited access to the capital
markets, including community banks. However, in recent months the U.S. markets
have experienced extreme volatility and a reduction in the amount of new issues
and underwritten offerings. Management believes that due to the nature of public
offering offerings for community and de novo banks, the market for these
offerings are not as affected by general market conditions. The Company believes
that this significant increase in such issuers and the accompanying significant
inflow
24
<PAGE>
of cash into mutual funds and other managed funds has led to greater demand by
both issuers and investors for focused, industry-specific advisory and capital
management products and services.
INDUSTRY AND ECONOMIC OUTLOOK
Over the past few years, the U.S. economy, the largest in the world and an
important influence on overall world economic activity, has been undergoing one
of the longest periods of post-war economic expansion. As of June 1998, the
current U.S. expansion had lasted 87 months compared to a post-war average
period of expansion of 46 months.
Recognizing that the favorable macroeconomic environment will be subject to
periodic reversals, Management believes that significant long-term growth and
profit opportunities exist for financial intermediaries in the United States.
These opportunities derive from several long-term trends that have had, and
Management believes should continue to have, a profound impact on the U.S.
markets and financial services activity. These trends include the following:
/bullet/ DEREGULATION. Financial market deregulation has resulted in the
creation of new and broader sources of credit, which have reduced
the variability and the cyclicality in the supply of credit.
This, in turn, has in the past reduced volatility in economic
activity, leading to longer economic expansions with increased
investment spending, thereby resulting in higher levels of
capital raising;
/bullet/ FOCUS ON SHAREHOLDER VALUE. Increasing focus on shareholder value
has fueled an increase in restructuring and strategic
initiatives, thereby yielding additional financial advisory and
capital-raising opportunities;
/bullet/ CONSOLIDATION. Moderate growth, limited pricing flexibility and
the need for economies of scale have substantially increased
consolidation opportunities in certain industries, and record
levels of profit have provided companies with the resources to
pursue strategic combinations, thereby creating substantial
demand for mergers and acquisitions advisory services and
subsequent capital raising;
/bullet/ DEMOGRAPHICS. Changing demographics in the United States have
increased the pool of savings available for private investment
and the need for increased funding of pension plans due to the
aging of the population, creating substantial demand for
investment products and services; and
/bullet/ FINANCIAL PRODUCT INNOVATION. Technology and financial expertise
have led to the development of new financial products better
tailored to the risk/reward requirements of investors, thereby
increasing trading flows and proprietary investment
opportunities.
The Company believes these long-term trends should continue to affect
growth in the financial services industry positively. However, as evidenced by
the recent volatility of U.S. markets and global markets, there can be no
assurance that such favorable trends will continue.
HISTORY OF THE COMPANY
The concept for the Company was developed in 1997 by W. Jonathan Wride, the
President and Chief Executive Officer of the Company. Mr. Wride evaluated
potential acquisitions and believed that broker-dealers with limited capital and
market presence could be acquired for attractive multiples and could benefit
from being associated with a larger organization with greater financial
resources.
Management of the Company believes that there is a need for a
community-oriented regional investment banking firm. This belief was prompted by
the growth of community banks, one industry sector which the Company intends to
target. As the number of bank acquisitions has increased, there has
correspondingly been increased activity in the establishment of de novo
community banks. As these proposed banks attempt to raise capital through the
public market, the Company believes that it is important to have a
community-oriented investment banking firm which can necessitate the sale of the
common stock of these banks locally as this, in turn, may increase the
likelihood of shareholders becoming depositors of the proposed bank. For
additional information regarding the Company's plans with respect to community
and de novo banks, see " --Strategy of the Company--Bank Strategy."
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STRATEGY OF THE COMPANY
GENERAL
The objective of the Company and its Management is to create a notable and
recognizable financial services firm, focused on providing high value to clients
by delivering specialized boutique products and services matched directly to
their needs. Management believes that such a company can attract those clients
who prefer to conduct business with a regionally managed institution that
demonstrates an active interest in their business and personal affairs.
By assembling an experienced staff and implementing a team approach
expected to provide a superior level of service, Management believes it will be
able to acquire the broker-dealer firms necessary to implement and distribute
its planned underwriting activities. Management will place an emphasis on
acquiring small investment banking firms throughout the Identified Markets. Once
acquired, the Company intends to make a strong effort to target small and
medium-sized companies in need of capital, primarily focusing on community and
de novo banks who are interested in raising equity capital through the public
market via the sale of equity securities. In addition to offering traditional
retail brokerage services, the Company expects to offer research and market
making in the stock of these companies. This personal touch is expected to be
appealing to clients who have been receiving investment banking services in the
depersonalized environment of the Company's larger competitors. See "Business --
Strategy of the Company."
The major elements of this strategy are to:
/bullet/ ACQUIRE RETAIL BROKERAGE, ASSET MANAGEMENT AND INVESTMENT BANKING
OFFICES IN THE IDENTIFIED MARKETS;
/bullet/ PROVIDE HIGH VALUE, SPECIALIZED PRODUCTS, INCLUDING RETAIL
BROKERAGE, INVESTMENT BANKING AND ASSET MANAGEMENT SERVICES TO
BOTH CORPORATE AND INDIVIDUAL CLIENTS;
/bullet/ TARGET FINANCIAL INSTITUTIONS, ESPECIALLY COMMUNITY AND DE NOVO
BANKS, TO ASSIST THEM IN RAISING CAPITAL VIA THE PUBLIC MARKETS;
/bullet/ OFFER MARKET MAKING AND RESEARCH TO CORPORATE CLIENTS; AND
/bullet/ MAINTAIN CENTRALIZED SUPPORT FUNCTIONS, INCLUDING BACK OFFICE
OPERATIONS, COMPLIANCE, UNDERWRITING, SYNDICATION,
ADMINISTRATION, HUMAN RESOURCES AND TRAINING, TO MAXIMIZE
OPERATING EFFICIENCIES AND FACILITATE RESPONSIVENESS TO CLIENTS.
MODEL "LOCAL BROKERAGE/INVESTMENT BANKING OFFICE"
In order to achieve its expansion strategy, the Company initially intends
to acquire retail brokerage/investment banking offices within certain of the
Identified Markets. It is anticipated that each acquired entity will be held
initially as separate subsidiaries of the Company. These subsidiaries are
expected to be combined in the future into one subsidiary of the Company and the
Company will expand through the branching of the acquired broker-dealers. Each
community investment banking office will legally be a branch of the acquired
broker-dealer, and thus will be subject to the supervision, policies and
procedures of the broker-dealer.
The Company will use a community investment banking approach that
emphasizes responsive and personalized service to its clients. Management's
strategy includes attracting and servicing strong local companies in need of
financial services. Management expects that upon the Company's entry into a new
market area, it will undertake a marketing campaign utilizing an officer calling
program that informs local businesses of the company's ability to raise capital
and community-based promotions to build its client base, thus allowing the
corporate client further community recognition and involvement. In addition,
management will be compensated based on corporate finance goals and asset
generation.
The main office of the Company will be divided into the following
departments: Executive Management, Operations, Compliance, Principal Trading
Accounts, Syndicate and Investment Banking. It is anticipated that the
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individual branches or brokerage offices in the Identified Markets will have: a
Manager, an Operations assistant, a sales and support staff. The number of
support staff necessary will be dependent on the number of registered
representatives and the volume of business generated by the particular location.
Each office will be staffed with enough administrative assistants to assist the
officers effectively in their duties and to enable them to market products and
services actively outside the office.
Prior to expanding into a new market area, management will attempt to
identify an acquisition candidate or an individual that has the ability to
develop a network within in an Identified Market. The Company believes that a
management team that is familiar with the needs of the community can provide a
higher quality of personalized service to its clients. The local management team
will have a limited amount of decision making authority, as all matters will be
required to go through the Company's centralized compliance department to ensure
complete adherence to the rules and regulations of the appropriate regulatory
bodies.
The Company will encourage both the local management team and local sales
personnel to be active in the civic, charitable and social organizations located
in the local communities. It is anticipated that members of the local management
teams will hold leadership positions in a number of community organizations, and
continue to volunteer for other positions in the future.
Management expects to offer bonuses for registered representatives to
attract them to the Company from other firms. These bonuses will be calculated
upon the representatives' trailing twelve month sales revenues and the
representative's transfer of clients and assets to the Company. All
representatives will be presented with goals and objectives to be achieved on an
annual basis.
COMPANY GROWTH AND EXPANSION
The Company believes that many independent broker-dealers, brokerage firms
and corporate finance businesses have been limited by their capital position.
With the availability of additional capital at the holding company level, the
Company believes that the acquired broker-dealers will have a greater ability to
expand their businesses. The Company intends to use the proceeds of the Offering
for, among other things, to establish its research capabilities, focusing
primarily on community and de novo banking institutions, to hire additional
brokers and to market specialized products to retail and institutional clients.
In addition to the corporate finance strategy discussed above, the Company
believes that with its increased size, financial strength and combined efforts
of all acquired firms, the Company will have the ability to aggressively seek
larger allocations in corporate underwriting syndicates managed by other
investment banking firms. The Company intends to hire a research analyst and
provide research primarily on selected banks and believes the additional capital
will enable it to substantially increase the number of companies that it can
cover by its research.
The Company plans to acquire firms with solid reputations in their selected
markets. As a result of these acquisitions, the Company intends to acquire
production, assets under management, and registered representatives. The Company
anticipates that the firms it acquires will range from two to twenty-five person
operations. Due to the restrictive nature of the investment banking business,
Management believes that many of these companies have been limited by their
financial position, and thus have maintained their concentration only in select
areas. Management believes through its initial consultations with potential
acquisition targets, firms can be acquired for attractive multiples in the
market place. Once associated with a larger institution with greater product
diversification, management believes revenues and valuation could rise
significantly. These acquisitions can create revenues in many areas, such as
retail commissioned business, fee based management and increased investment
banking revenues as additional offices increase the firm's distribution network,
thus allowing the Company the ability to increase the size of offerings it
underwrites.
MARKET GROWTH AND EXPANSION
The Company intends to expand into the largest and fastest growing
communities in Florida. The Company anticipates that the primary market area for
its services will be the metropolitan areas in Florida, which include the
Identified Markets. The Company's headquarters is located in Naples, Florida,
which is situated on the southwest coast of Florida. Although the Company's
current location is in downtown Naples, the Company has entered into a lease to
move into a newly constructed building in north Naples. The Company anticipates
moving its offices to the north
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Naples facility in May 1999. Both of these locations are conveniently located to
a majority of the residents of western Collier County, with whom the Company
intends to establish retail brokerage relationships.
Certain demographic information with respect to each of the Identified
Markets is discussed below. The demographic information has been provided by
Demographics On-Call, a demographic data source provider.
FLORIDA MARKET. Florida is the fourth most populated state in the country
with a current population of approximately 14.7 million. From 1990 to 1996,
Florida ranked third of the ten most populated states in terms of percentage
population growth. Florida's economy has broadened from a base of tourism,
agriculture and retirement living to become increasingly dependent on industrial
and commercial trade. Financial institutions in Florida have experienced
substantial growth in recent years in the amount of total bank deposits. As of
June 30, 1997, these bank deposits totaled approximately $200 billion.
Management believes that the major metropolitan areas in Florida have benefited
the most from this economic and population expansion, and thus has selected the
Identified Markets as the focus of its expansion strategy.
NAPLES MARKET. The Company's headquarters and centralized office operations
will be located in Naples, Florida. Naples is the largest city in Collier
County, Florida. The Naples market area includes the city of Naples and Collier
County (the "Naples Market"). Between 1980 and 1990, the population of Collier
County almost doubled. The estimated year-round population of Collier County in
1997 was 202,903 and, by the year 2015, it is projected that the population will
be 315,900. The population of Collier County rises by approximately one-third
during the winter season (November - April) each year because of tourism and the
return of seasonal residents. Collier County's economic base is built primarily
on services, retail trade, agriculture, government and construction. According
to 1995 statistics, the median family income in Collier County was $48,800 and
the average household effective buying income was $55,928, the highest of any
county in the state of Florida. In 1995, the median age in Collier County was
42.5 years.
TAMPA MARKET. The Tampa market area includes the city of Tampa and
Hillsborough County (the "Tampa Market"). Hillsborough County's population,
which includes the city of Tampa, increased from approximately 834,000 in 1990
to approximately 905,000 in 1997, representing an increase of approximately 8.5%
over that period. The population is expected to increase further to
approximately 954,000 over the next five years. In 1997, the median age in Tampa
was 35.4 years, and the median household income $35,993. In 1997, the average
unemployment rate for Hillsborough County was 3.3%, as compared to the national
unemployment rate of 4.9% for the same period.
JACKSONVILLE MARKET. The Jacksonville market area includes the cities of
Jacksonville, Orange Park, St. Augustine and surrounding counties, including
Clay, Duval and St. Johns Counties (the "Jacksonville Market"). The Jacksonville
Market's population increased from approximately 863,000 in 1990 to
approximately 969,000 in 1997, representing an increase of approximately 12.3%
over that period. The population is expected to increase to approximately 1.1
million over the next five years. In 1997, the median age in Jacksonville was
34.5 years, and the median household income was $36,413. In 1997, the average
unemployment rates for Clay, Duval and St. Johns Counties were 3.0%, 3.7% and
3.0%, respectively, as compared to the national unemployment rate of 4.9% for
the same period.
FT. LAUDERDALE MARKET. The Ft. Lauderdale market area includes the cities
of Ft. Lauderdale, Hollywood and Pompano Beach, as well as Broward County (the
"Ft. Lauderdale Market"). The Ft. Lauderdale Market's population increased from
approximately 1.3 million in 1990 to approximately 1.5 million in 1997,
representing an increase of approximately 16.3% over that period. The population
is expected to increase further to approximately 1.6
million over the next five years. In 1997, the median age in Ft. Lauderdale was
39.9 years, and the median household income was $34,960. In 1997, the average
unemployment rate for Broward County was 4.9%, which was the same as the
national unemployment rate for the same period.
PALM BEACH MARKET. The Palm Beach market area includes the cities of Palm
Beach, West Palm Beach, Jupiter and Stuart, as well as Palm Beach and Martin
Counties (the "Palm Beach Market"). The Palm Beach Market's population increased
from approximately 964,000 in 1990 to approximately 1.1 million in 1997,
representing an increase of approximately 16.3% over that period. The population
is expected to increase to approximately 1.2 million over the next five years.
In 1997, the median age in Palm Beach was 42 years, and the median household
income was $41,964.
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In 1997, the average unemployment rates for Palm Beach and Martin Counties were
6.3% and 6.9%, respectively, as compared to the national unemployment rate of
4.9% for the same period.
CUSTOMERS
Management believes that the recent consolidation within the securities and
banking industries within the Identified Markets provides a community-oriented
financial services firm the opportunity to build a successful client base.
Management further believes that many of the larger financial institutions do
not emphasize a high level of personalized service to the smaller commercial or
individual retail clients. The Company intends to focus its marketing efforts on
attracting small and medium sized businesses and professionals which includes,
among others, community banks, attorneys, accountants, physicians, retirees and
other service-oriented businesses.
Management believes that it will generate a substantial amount of clients
from the community banking sector in connection with their public offerings.
Community and de novo banks are typically established by leaders in their
respective communities, and thus they are able to develop a substantial
following and interest in the local community. The clients gained from the
public offerings undertaken on behalf of such institutions will then be
cross-sold and offered other products and services. Such products and services
will include retail brokerage services and asset management services.
BANK STRATEGY
To compete effectively in the investment banking and retail brokerage
market, the Company intends to implement its "Bank Strategy," pursuant to which
the Company will market its financial services, primarily investment banking
services to established and organizing banking institutions. As part of its Bank
Strategy, the Company will seek to make markets in the stocks of those banks
which the Company has assisted in their public offering. The Company believes
that the community banking market is under served and its strategy will permit
the Company to develop a market niche for its corporate finance business as a
"specialist" in the community banking arena.
The Company intends to identify and evaluate banking institutions that are
seeking to raise capital through equity financing. Upon identifying such
institutions, the Company will seek to establish an investment banking
relationship with that institution. Management currently anticipates that its
typical client will be a bank in organization a community bank that plans to
trade in the public markets by raising capital in an initial public offering.
While the size of any particular offering may vary depending on market
conditions and other factors, the Company anticipates that most offerings would
involve banks which are trying to raise between $5 million and $15 million in
equity capital. The Company will seek to manage or co-manage in a substantial
portion of these underwritings in which it participates.
The Company's ability to implement its Bank Strategy in the context of
corporate underwritings will be dependent upon its ability to identify potential
clients fitting the community bank profile and convincing such potential clients
that the Company is the right investment banking firm for their needs. There can
be no assurance that the Company will be successful in this regard. The Company
has not conducted any independent research to test the marketability of the Bank
Strategy, nor has the Company engaged in any significant marketing of the
strategy. Therefore, while the Company believes the concept to be viable, the
level of market acceptance is largely unknown. The Company intends to devote a
substantial amount of its resources and the proceeds of this offering to the
execution of the Bank Strategy. See "Use of Proceeds."
PRODUCTS AND SERVICES
INVESTMENT BANKING
The Company anticipates that investment banking activities will be a major
part of the Company's business plan. The Company plans to continue and build
upon the operations of the firms it acquires in this area. Emphasis will be
placed on the financial sector and regional companies that are located in close
proximity to the Company's offices. Management believes that there is
opportunity in the area of initial and secondary public offerings for these
financial institutions which include savings and loan institutions, community
banks, broker-dealers and insurance companies.
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The Company believes that the amount of current acquisitions currently being
undertaken in the financial sector creates opportunities for smaller
community-minded firms to be established.
The Company also expects to enter the corporate finance market as an
underwriter and as a selling group member. It is anticipated that the majority
of the Company's participation in these offerings will be as a co-manager or
selling group member. The Company plans to be a firm commitment company, which
will enable it to underwrite certain corporate finance transactions on a firm
commitment basis. The Company will also actively form selling groups of
independent broker-dealers throughout the country. Management believes that a
major concern of independent broker-dealers is their inability to provide their
customers with the resources to undertake initial public offerings and/or
secondary offerings. Management feels that it can form a large group of
interested parties which will allow the Company to underwrite larger offerings
and/or increase its allocation in co-managed offerings through its selling group
members. See "Bank Strategy."
Further, the Company expects that a portion of its investment banking
business will be devoted to the financial advisory services, including the
issuance of fairness opinions in connection with the mergers and acquisitions
activity of the Company's clients.
RETAIL BROKERAGE SERVICES
The Company, through its subsidiaries, will provide retail brokerage
services to institutional and individual clients. Commissions will be charged to
these clients for executing buy and sell orders for securities on national and
regional exchanges and in the over-the-counter market. The Company expects that
its primary source of revenue for its retail brokerage business will be
commissions generated from its retail brokerage services. The Company further
expects that its institutional clients will include investment managers and
corporate retirement plans. The Company anticipates having floor broker
relationships on the New York, American and Chicago Stock Exchanges and will
execute buy and sell orders in the over-the-counter markets.
ASSET MANAGEMENT
Through the Company's subsidiaries, the Company will offer asset management
services to its clients. Clients will be charged a fee based on the amount of
their assets which are managed by the firm. The Company will apply for mutual
fund designation, which will allow it to create the "Financial Services Fund."
The assets in this fund will be managed by the Company's registered investment
advisor. Order executions for the registered investment advisors will be
executed through the Company's broker-dealers.
Portfolio managers of the Company will afford clients several options in
the positioning and handling of their assets. Clients' assets may be managed
internally by in-house portfolio managers, externally by third party managers or
through mutual allocation programs.
PRINCIPAL TRADING AND MARKET RESEARCH
Through the Company's acquisitions, the Company anticipates that it will
become a market-maker and provide research in common stocks in selected
industries. These activities will be primarily conducted by the Company as a
principal. These activities are expected to involve the purchase, sale or short
sale of securities as principal in markets maintained on behalf of the
investment banking clients. The Company may from time to time have large
position concentrations in securities of, or commitments to, a single issuer, or
issuers engaged in a specific industry, particularly as a result of the
Company's underwriting activities. The Company intends to concentrate its
trading positions in a more limited number of industry sectors and companies
than some other broker-dealers, which might result in higher trading losses than
would occur if the Company's positions and activities were less concentrated.
These services will allow the firm to attract larger public offerings and will
afford the firm the title of Full Service Investment Banking Firm.
CLEARING AGENT AND CUSTOMER CREDIT
The Company will utilize the services of clearing agents on a fully
disclosed basis (the "Clearing Agent"). The Clearing Agent will process all
securities transactions and monitor the accounts of the Company's customers. It
is
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anticipated that the customer accounts will be protected through the Securities
Investor Protection Corporation (the "SIPC") for up to $500,000 of which
coverage for cash balances will be limited to $100,000. Many clearing firms
carry additional insurance coverage.
The services of the Clearing Agent will include billing, credit control,
receipt and custody and delivery of securities. The Clearing Agent provides the
operational support necessary to process, record and maintain securities
transactions for the Company's brokerage and distribution activities. The total
cost of the Clearing Agent's services to the Company is estimated to be less
than the cost the Company would incur in providing these services itself.
The Clearing Agent typically lends funds to the Company's customers through
the use of margin credit. These loans are made to customers on a secured basis,
with the Clearing Agent maintaining collateral in the form of salable
securities, cash or cash equivalents. Under the terms of a typical clearing
agreement, the Company would indemnify the Clearing Agent for any loss on such
credit arrangements.
GOVERNMENT REGULATION
The Company's business, and the securities business generally, are subject
to extensive and frequently changing federal and state laws and substantial
regulation under such laws by the SEC and various state agencies and
self-regulatory organizations, such as the NASD. As a matter of public policy,
regulatory bodies in the United States are charged with safeguarding the
integrity of the securities and other financial markets and with protecting the
interests of customers participating in those markets, not with protecting the
interests of the Company's shareholders or creditors. The Company and/or its
subsidiaries will be registered as a broker-dealer with the SEC and a member
firm of the NASD. Much of the regulation of broker-dealers has been delegated to
self-regulatory organizations, principally the NASD, which has been designated
by the SEC as the Company's primary regulator. The NASD adopts rules (which are
subject to approval by the Commission) that govern its members and conducts
periodic examinations of member firms' operations. Securities firms are also
subject to regulation by state securities administrators in those states in
which they conduct business.
Broker-dealers are subject to regulations which cover all aspects of the
securities business, including sales methods and supervision, trading practices
among broker-dealers, use and safekeeping of customers' funds and securities,
capital structure of securities firms, record keeping and the conduct of
directors, officers and employees. Additional legislation, changes in rules
promulgated by the SEC and self-regulatory organizations, or changes in the
interpretation or enforcement of existing laws and rules, may directly affect
the mode of operation and profitability of broker-dealers.
The SEC, self-regulatory organizations and state securities commissions may
conduct administrative proceedings which can result in censure, fine, the
issuance of cease-and-desist orders or the suspension or expulsion of a
broker-dealer, its officers or employees. The principal purpose of regulation
and discipline of broker-dealers is the protection of customers and the
integrity of the securities markets and not the protection of the Company's
shareholders.
The Company's mutual fund distribution business will be subject to
extensive regulation as to its duties, affiliations, conduct and limitations on
fees under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
and the regulations of the NASD. As discussed above, the Company expects to
become an NASD member. The NASD has prescribed rules (Rule
2830 of the NASD Conduct Rules) with respect to maximum commissions, charges and
fees related to investment in any open-end investment company registered under
the Investment Company Act.
NET CAPITAL REQUIREMENTS
As a registered broker-dealer and a member firm of the NASD, the Company
and its subsidiaries will be subject to the Net Capital Rule of the SEC. The Net
Capital Rule, which specifies minimum net capital requirements for registered
brokers and dealers, is designed to measure the general financial integrity and
liquidity of a broker-dealer and requires that at least a minimum part of its
assets be kept in relatively liquid form. Net capital is essentially defined as
net worth (assets minus liabilities), plus qualifying subordinated borrowings
and less certain mandatory deductions that result from excluding assets not
readily convertible into cash and from valuing certain other assets, such as a
firm's
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positions in securities, conservatively. Among these deductions are adjustments
in the market value of securities to reflect the possibility of a market decline
prior to disposition. The Company will elect to compute its net capital under
the standard aggregate indebtedness method permitted by the Net Capital Rule,
which requires that the ratio of aggregate indebtedness to net capital, both as
defined, shall not exceed a 15-to-1 ratio.
The SEC and various self-regulatory organizations impose rules that require
notification when net capital falls below certain predefined criteria, dictate
the ratio of subordinated debt to equity in the regulatory capital composition
of a broker-dealer and constrain the ability of a broker-dealer to expand its
business under certain circumstances. Additional, the Net Capital Rule imposes
certain requirements that may have the effect of prohibiting a broker-dealer
from distributing or withdrawing capital and requiring prior notice to the SEC
for certain withdrawals of capital.
Compliance with net capital requirements of these and other regulators
could limit those operations of the Company's subsidiaries that require the
intensive use of capital, such as underwriting and trading activities and the
financing of customer account balances, and also could restrict the Company's
ability to withdraw capital from its regulated subsidiaries, which in turn could
limit the Company's ability to repay debt or pay dividends on the Class A Common
Shares.
COMPETITION
The Company's brokerage and financial services business will compete
primarily with major regional firms and smaller "niche" players, and indirectly
with larger Wall Street firms, securities subsidiaries of major commercial bank
holding companies, retail brokerage firms, investment banking firms, and
investment advisors. Financial services companies encounter intense competition
in all aspects of the securities business and compete directly with other
securities firms, a significant number of which have greater capital and other
resources. In recent years, there has been a significant consolidation and
convergence among participants in the financial services industry. In
particular, a number of large commercial banks, insurance companies and other
broad-based financial services firms have acquired or established broker-dealer
affiliates. These firms have the ability to offer a wide range of products, from
loans, deposit-taking and insurance to brokerage, investment management and
investment banking services, which may enhance their competitive position. They
also have the ability to support investment banking and securities products with
commercial banking, insurance and other financial services revenues in an effort
to gain market share, which could result in pricing pressure in the Company's
business. The Company believes that other factors affecting competition in the
securities industry include the quality and abilities of professional personnel,
including their ability to effectuate a firm's commitments, and the quality,
range and relative prices of services and products offered.
Although the Company may expand the financial services it can render to its
customers, it does not plan to offer as broad a range of financial services as
national stock exchange member firms, commercial banks, insurance companies and
others.
YEAR 2000
The significance of the year 2000 issues for the Company will be dependent
on the nature of the technology systems used by entities acquired by the
Company. The Company's business will be highly dependent on communications and
information systems, including certain systems provided by its clearing broker.
Any failure or interruption of the Company's systems, the systems of entities
that it may acquire, and systems of the Company's clearing broker or third party
trading systems, could cause delays or other problems in the Company's
securities trading activities, which could have a material adverse effect on the
Company's operating results. Such failures and interruptions may result from the
inability of certain computing systems (including those of the Company, its
clearing broker, and other third party vendors) to recognize the year 2000.
There can be no assurance that the year 2000 issue can be resolved prior to the
upcoming change in the century. Although the Company may incur substantial
costs, particularly costs resulting from charges by its third party service
providers, in correcting year 2000 issues, such costs are not sufficiently
certain to estimate at this time. In addition, the Company expects that its
principal disaster recovery system will be provided by its clearing broker.
There can be no assurance that the Company or its clearing broker will not
suffer any systems failure or interruption, including those caused by an
earthquake, fire, other natural disaster, power or telecommunications failure,
act of God, act of war or otherwise, or that the Company's or its clearing
broker's back-up procedures and capabilities in the event of any such failure or
interruption will be adequate. As the year 2000
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approaches, an issue has emerged regarding how existing application software
programs and operating systems can accommodate information that employs dates
after December 31, 1999.
PROPERTY
The Company's offices are located at 400 Fifth Avenue South, Naples,
Florida 34102. The Company has committed to lease the top floor of a building to
be constructed in north Naples, from which the Company will headquarter its
operations. It is anticipated that this building will be completed in May 1999.
The lease has a term of ten years with two options to renew the lease for two
additional terms of five years each at market rates. The lease will commence
upon the earlier of (i) the receipt by lessor of its Certificate of Occupancy
for the building; or (ii) the date the Company opens for business. The annual
lease payment will be $114,000 with rent to be increased annually at the greater
of the percentage increase in the consumer price index or 3%.
PERSONNEL
The Company presently employs four persons and will hire additional persons
as necessary to support its growth. The Company will promote an
employee-friendly corporate culture. Other firms have encouraged this and
results have been favorable. The Company will look to train and internally
promote its employees. Management believes that using policies designed to
create an enjoyable work environment will keep employee turnover low.
LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding. Management
believes there is no litigation threatened in which the Company faces potential
loss or exposure or which will materially affect stockholders' equity or the
Company's business or financial condition upon completion of this offering.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME POSITIONS
- ---- ---------
<S> <C>
W. Jonathan Wride..................................... President, Chief Executive Officer and Chairman
of the Board
Anthony W. Monico..................................... Executive Vice President, Director
Nora Ambrose.......................................... Vice President, Treasurer, Director
Douglas W. Given...................................... Vice President, Director
William F. Ng......................................... Director
Rita G. Sandell....................................... Director
</TABLE>
All directors of the Company hold office until the earlier of the next
annual meeting of the Company's shareholders and until their successors have
been elected and qualified, or their death, resignation, or removal. Officers
are elected annually by the Company's Board of Directors to hold office until
the earlier of their resignation, removal or death.
Set forth below is a description of the business experience during the past
five years or more, and other biographical information, for the directors and
executive officers of the Company.
W. JONATHAN WRIDE, age 28, has served as President, Chief Executive Officer
and Chairman of the Board of Directors of the Company since its inception. Prior
to founding the Company, Mr. Wride served as a registered representative for
Smith Barney and Merrill Lynch from 1993 to 1995. Mr. Wride also has served as
President and Chief Executive Officer of Collier Private Investments, Inc., a
privately held corporation and parent company of Ashtin Kelly & Co., since 1995.
Mr. Wride is a General Securities Principal and since 1997 has served as
President and Chief Executive Officer of Ashtin Kelly & Co., a registered
broker-dealer with the NASD, SEC, MSRB and SIPC.
ANTHONY W. MONICO, age 60, has served as a director of the Company since
September 1998. Since 1996, Mr. Monico has served as Executive Vice President of
Ashtin Kelly & Co., Incorporated. Prior to his service with Ashtin Kelly & Co.,
Mr. Monico served as an equity research analyst for Stellar Management, Inc.
from 1993 to 1996. From 1977 to 1990, Mr. Monico was a senior banking officer
with Citicorp in New York in the merger and acquisition section and from 1955 to
1977 served as a marketing official with Chase Manhattan Bank.
NORA AMBROSE, age 31, has served as a director of the Company since
September 1998. Since December 1995, Ms. Ambrose has served as a Financial &
Operations Principal and Vice President of Operations with Ashtin Kelly & Co.
Prior to her service with Ashtin Kelly & Co., Ms. Ambrose served as a registered
assistant with Merrill Lynch from 1990 to 1995.
DOUGLAS W. GIVEN, age 59, has served as Vice President of Syndicate with
Ashtin Kelly & Co., since January 1997. Prior to his service with Ashtin Kelly &
Co., Mr. Given served as Vice President with Shearson Lehman in Naples, Florida
from 1989 to 1992 and with Old Naples Securities, a securities brokerage firm in
Naples, Florida from 1992 to 1996. From 1996 to 1997, Mr. Given worked with R.M.
Stark & Co., a securities brokerage firm. Mr. Given has over 28 years of
securities industry experience.
WILLIAM F. NG, age 49, has served as a director of the Company since
September 1998. Since 1986, Mr. Ng has been a financial consultant and writer,
advising his clients on trading strategies. Mr. Ng worked with Financial Options
Consultants in Chicago, Illinois from 1986 to 1993, and in 1994 founded his own
consulting firm, William F. Ng & Associates in Chicago. Since 1996, Mr. Ng has
served as Director of Research at Global Financial Group in Minneapolis,
Minnesota, a regional brokerage firm. Mr. Ng has authored several books on
trading and investing and taught courses in Finance at the University of
Chicago, Northwestern University and DePaul University.
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<PAGE>
RITA G. SANDELL, age 54, co-founded the Company and has served as a
director of the Company since September 1998. Ms. Sandell also serves as a
director of Collier Private Investments, Inc., a financial holding company for a
registered investment advisory firm and broker dealer firm. Ms. Sandell is also
the owner of Central State Steel & Supply Co., a company which sells highway
maintenance supplies and equipment to government municipalities in Ohio.
There are no family relationships between any of the executive officers and
directors of the Company.
BOARD OF DIRECTORS
The number of directors of the Company is currently fixed at six. The
By-Laws provide that the Board of Directors shall contain at least one member,
with the precise number to be determined from time to time by the Board of
Directors. In the case of the removal of a director from office, the resulting
vacancy on the Board of Directors shall be filled by the vote of at least
seventy-five percent (75%) of the outstanding shares of Common Shares. Any other
vacancy on the Board of Directors may be filled by a majority vote of the
remaining directors then in office or by action of the shareholders. Any
director may be removed, with or without cause, at any regular or special
meeting of shareholders called for that purpose.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has designated an Audit Committee of the Board of
Directors consisting of two directors, Anthony W. Monico and Nora Ambrose. The
functions served by the Audit Committee will be to review the scope of
accounting audits, review with the independent auditors the corporate accounting
practices and policies and recommend to whom reports should be submitted within
the Company, review the final report of the independent auditors, review with
internal and independent auditors overall accounting and financial controls, and
be available to the independent auditors during the year for consultation
purposes.
The Board of Directors also has designated a Compensation Committee of the
Board of Directors consisting of two directors, Nora Ambrose and Rita G.
Sandell. The functions served by the Compensation Committee will be to review
the performance of senior management, recommend appropriate compensation levels
and approve the issuance of stock options pursuant to the Company's 1998 Stock
Option Plan.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive any compensation based on their
attendance at Board of Directors meetings. Members of the Board of Directors,
however, are reimbursed for out-of-pocket expenses incurred in connection with
attendance at Board meetings.
EXECUTIVE COMPENSATION
For the fiscal year ended December 31, 1997, the Company was in the
development stage with Mr. Wride serving as President and Chief Executive
Officer.
Although Mr. Wride has served as President and Chief Executive Officer of
the Company since inception, he has not yet received any compensation. In
September 1998, Mr. Wride entered into an employment agreement with the Company,
the terms of which are disclosed below. Accordingly, no compensation was paid to
any employee for the fiscal year ended December 31, 1997.
EMPLOYMENT AGREEMENT
In September 1998, the Company and Mr. Wride entered into an employment
agreement (the "Employment Agreement") which provides that Mr. Wride will serve
as President and Chief Executive Officer of the Company for three years. In
addition, it is expected that Mr. Wride will hold a significant position and
will become significantly involved in the operations of future companies
acquired by the Company, although the exact nature of the extent of Mr. Wride's
involvement is not known at this time.
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<PAGE>
The Employment Agreement provides that Mr. Wride will serve as the
President and Chief Executive Officer of the Company for a three-year term
commencing on the date that the Minimum Offering is obtained and provides for a
minimum annual base salary of $150,000 during the term of Mr. Wride's
employment. Under the terms of the Employment Agreement and pursuant to the
Company's 1998 Stock Option Plan, at the first meeting of the Board of Directors
following the Final Termination Date completion of the Offering, Mr. Wride will
be granted an option covering 100,000 Class A Common Shares which will vest in
accordance with the following schedule: (i) 25,000 will vest immediately upon
the date of the grant; and (ii) 25,000 will vest on each of the first, second
and third anniversaries of the date of the grant. These options will be
exercisable at the initial public offering price of the Class A Common Shares
sold in the Offering and will be exercisable for a period of ten years.
After the Final Termination Date, in the event of a "change in control" of
the Company (as defined in the Employment Agreement), Mr. Wride will be entitled
to give written notice to the Company of termination of the Employment Agreement
and to receive a cash payment equal to approximately 300% times the compensation
received by Mr. Wride in the one-year period immediately preceding the change in
control.
The Employment Agreement may be terminated by the Board of Directors
without notice and without further obligation than for monies already paid, if
Mr. Wride is terminated for Cause (as that term is defined in the Employment
Agreement). Likewise, Mr. Wride may upon thirty days' written notice to the
Company terminate the Employment Agreement without Cause. In the event of
termination by Mr. Wride, the Company will have no further obligation than for
monies paid and the Company shall be entitled to enforcement of the non-compete
and non-solicitation provisions. After the closing of the Offering, in the event
of Mr. Wride's death, the Company will pay to Mr. Wride's designated beneficiary
an amount equal to Mr. Wride's base salary through the end of the month in which
Mr. Wride's death occurred. The Employment Agreement further obligates Mr. Wride
to protect the confidentiality of the Company's information following
termination of his employment.
STOCK OPTION PLAN
In September 1998, the Board of Directors of the Company adopted the AK
Holding Corporation 1998 Stock Option Plan (the "1998 Plan") to promote the
Company's growth and financial success. The 1998 Plan was unanimously approved
by the shareholders of the Company on September 17, 1998. Options may be granted
under the 1998 Plan to the Company's directors, officers and employees, as well
as certain consultants and advisors. The 1998 Plan contemplates the grant of
non-qualified stock options and incentive stock options as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). The 1998 Plan
is not qualified under Section 401(a) of the Code and is not subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
The 1998 Plan provides for option grants to purchase up to an aggregate of
1,000,000 shares of Common Shares, subject to adjustment under certain
circumstances (the "Option Shares"). The aggregate fair market value (determined
at the time the option is granted) of the Class A Common Shares with respect to
which incentive stock options are exercisable for the first time by an optionee
during a calendar year may not exceed $100,000. This limitation dos not apply to
non-qualified stock options.
The 1998 Plan will expire upon the earlier to occur of: (i) the date on
which all Option Shares have been issued upon exercise of options under the 1998
Plan; or (ii) the tenth anniversary of the 1998 Plan's effective date. The 1998
Plan will be administered by the Board of Directors or by a Stock Option
Committee appointed by the Board and consisting of at least two non-employee
Board members. The exercise price of options granted under the 1998 Plan will be
determined by the Board of Directors, but will in no event be less than 100% of
the Market Price (as defined in the 1998 Plan) of one share of Class A Common
Shares on the option grant date (110% in the case of a Ten Percent Owner, as
defined in the 1998 Plan); provided, however, that non-qualified stock options
may be granted at an exercise price of no less than 75% of the Market Price of
the Class A Common Shares on the date of grant. Vested options under the 1998
Plan may be exercised in whole or in part, but in no event later than ten (10)
years from the grant date (five years in the case of an incentive stock option
granted to a Ten Percent Owner). If the optionee of an incentive stock option
during his or her lifetime ceases to be an officer, director, or employee of the
Company or any subsidiary of the Company for any reason other than his or her
death or total disability, any option or unexercised portion thereof which is
exercisable on the date the optionee ceases employment will expire three months
following the date the optionee ceases to be an officer, director or employee of
the Company or of a subsidiary of the Company, but in no event after the term
provided in the optionee's option agreement. If an optionee dies or becomes
totally disabled while he or she
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<PAGE>
is an officer, director or employee of the Company or of a subsidiary of the
Company, the option may be exercised by a legatee or legatees of the optionee
under his or her last will or by his or her personal representative or
representatives at any time within one year following his or her death or total
disability, but in no event after the term provided in his or her option
agreement. The foregoing limitations with respect to termination of employment
or death do not apply to optionees of non-qualified stock options. Options
granted under the 1998 Plan will only be assignable or transferable by the
optionee by will or the laws of decent and distribution. During the optionee's
lifetime, options are only exercisable by him or her. The Board of Directors may
at any time terminate, modify or amend the 1998 Plan in any respect, except that
without shareholder approval the Board of Directors may not (i) increase the
number of Option Shares, (ii) extend the period during which options may be
granted or exercised, (iii) change the class of 1998 Plan participants, or (iv)
otherwise materially modify the requirements as to eligibility for participation
in the 1998 Plan. In no event will the termination, modification or amendment of
the 1998 Plan, without the written consent of the optionee, affect his or her
rights under an option or right previously granted to him or her.
CERTAIN TRANSACTIONS
In September 1998, Mr. Wride loaned $52,000 to the Company, the proceeds of
which were used for the payment of certain organizational expenses of the
Company. The loan bears interest at an annual rate of 10% and a loan funding fee
of 8% based on the face amount of the loan. The loan matures on June 30, 1999.
The loan will be repaid out of the net proceeds allocated to working capital to
be received in the Offering.
In August and September 1998, the Company loaned an aggregate of $275,000
to Collier Private Investments, Inc., the parent holding company of the
Underwriter of which Mr. Wride serves as the President and Chief Executive
Officer. The September loan has been repaid and the outstanding balance on the
August loan is $13,079 which is payable at a rate of 10% per annum.
Mr. Wride is the President and Chief Executive Officer of the Underwriter.
In addition, Mr. Monico, Ms. Ambrose and Mr. Given, all of whom are directors
and executive officers of the Company, also serve as officers of the
Underwriter. As a result of their position with the Underwriter, these directors
and executive officers will indirectly benefit from the underwriting discounts
and commissions to be paid to the Underwriter in connection with the Offering.
See "Underwriting."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of shares of the Company's Class A and Class B Common Shares as of
September 30, 1998, and upon completion of the Offering, by (i) each person,
including any "group" as that term is used in Section 13(d)(3) of the Exchange
Act, who is known by the Company to own beneficially 5% or more of its
outstanding shares of Class A Common Shares or Class B Common Shares prior to
the Offering, (ii) each director, and (iii) all directors and executive officers
of the Company as a group. Except as otherwise indicated each shareholder has
sole voting and investment power with respect to the indicated shares.
37
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING(1) AFTER THE OFFERING(1)
-------------------------------- ----------------------------------------
PERCENT
CLASS A CLASS B OF TOTAL CLASS A CLASS B PERCENT OF
COMMON COMMON VOTING COMMON COMMON TOTAL VOTING
NAME OF BENEFICIAL OWNER SHARES SHARES POWER SHARES SHARES POWER
- ------------------------ -------- -------- -------- -------- -------- --------------------
MINIMUM MAXIMUM
------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
DIRECTORS AND CERTAIN
EXECUTIVE OFFICERS:
W. Jonathan Wride ......... 26,846 161,076 49.1% 51,846(2) 161,076 43.1% 34.2%
Rita G. Sandell ........... 27,000 162,000 49.4% 27,000(3) 162,000 42.9% 34.1%
Anthony W. Monico ......... 0 0 0 0 0 0 0
Nora Ambrose .............. 0 0 0 0 0 0 0
Douglas W. Given .......... 0 0 0 0 0 0 0
William F. Ng ............. 0 0 0 0 0 0 0
All directors and executive
officers as a group
(6 persons) ............ 53,846 323,076 98.5% 78,846(4) 323,076 85.7% 68.1%
OTHER BENEFICIAL HOLDERS:
Andrew Smith(5) ........... 46,154 -- 1.4% 46,154(5) 0 1.2% *
<FN>
- --------------------------------------------
* Less than 1% of total voting power
(1) Pursuant to the rules of the Commission, the determinations of "beneficial
ownership" of the Class A Common Shares are based upon Rule 13d-3 under
the Exchange Act, which provides that shares will be deemed to be
"beneficially owned" where a person has, either solely or in conjunction
with others, the power to vote or to direct the voting of shares and/or
the power to dispose, or to direct the disposition of, shares or where a
person has the right to acquire any such power within 60 days after the
date such "beneficial ownership" is determined. Class A Common Shares that
a beneficial owner has the right to acquire within 60 days pursuant to the
exercise of stock options are deemed to be outstanding for the purpose of
computing the percentage ownership of such owner but are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Includes 25,000 shares issuable upon the exercise of immediately
exercisable options to be granted at the first meeting of the Board of
Directors subsequent to the Final Termination Date. Mr. Wride's business
address is c/o AK Holding Corporation, 400 Fifth Avenue South, Naples,
Florida 34102.
(3) Ms. Sandell's business address is c/o AK Holding Corporation, 400 Fifth
Avenue South, Naples, Florida 34102.
(4) Includes 25,000 shares issuable upon the exercise of immediately
exercisable options to be granted at the first meeting of the Board of
Directors subsequent to the Final Termination Date.
(5) Mr. Smith's business address is 501 Goodlette Road South, Suite C-210,
Naples, Florida 34102.
</FN>
</TABLE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company presently consists of
30,000,000 Class A Common Shares, par value $.01 per share, 5,000,000 Class B
Common Shares , no par value per share, and 5,000,000 shares of Preferred
Shares, par value not stated (the "Preferred Shares"). As of the date hereof,
104,246 Class A Common Shares are issued and outstanding and held by four
shareholders of record. As of the date hereof, 323,076 Class B Common Shares are
issued and outstanding held by two shareholders of record. As of the closing
date, all Common Shares issued and outstanding, including those sold in this
Offering, will be fully paid and nonassessable. There are currently no shares of
the Preferred Shares outstanding.
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<PAGE>
CLASS A AND CLASS B COMMON SHARES
VOTING. Class A Common Shares are entitled to one vote per share and Class
B Common Shares are entitled to ten votes per share. All actions submitted to a
vote of shareholders are voted on by holders of Class A and Class B Common
Shares voting together as a single class, except as otherwise set forth below or
provided by law. No cumulative voting will be available in the election of
directors.
CONVERSION. Class A Common Shares has no conversion rights. A holder of
Class B Common Shares may convert Class B Common Shares into Class A Common
Shares, in whole or in part, on the basis of one share of Class A Common Shares
for each share of Class B Common Shares. Except as otherwise provided in the
Articles of Incorporation, no Class B Common Shares may be converted into Class
A Common Shares until September 24, 2001. If at any time any Class B Common
Shares are transferred of record or beneficially to any person or entity other
than W. Jonathan Wride, Rita G. Sandell or a Permitted Transferee, such shares
shall automatically be converted into an equal number of Class A Common Shares.
DIVIDENDS. Holders of Class A Common Shares are entitled to receive cash
dividends on at least an equal per share basis as holders of Class B Common
Shares if and when such dividends are declared by the Board of Directors of the
Company from funds legally available therefor. In the case of any dividend paid
in stock, holders of Class A Common Shares are entitled to receive the same
percentage dividend (payable in Class A Common Shares) as the holders of Class B
Common Shares receive (payable in Class B Common Shares).
LIQUIDATION. Holders of Class A and Class B Common Shares share with each
other on a ratable basis as a single class in the net assets of the Company
available for distribution in respect of Class A and Class B Common Shares in
the event of dissolution, liquidation or winding-up.
LIMITATION ON ISSUANCES OF ADDITIONAL SHARES OF CLASS. The Articles of
Incorporation prohibit the Company from issuing additional Class B Common Shares
to any person or entity other than W. Jonathan Wride, Rita G. Sandell or a
Permitted Transferee.
LIMITATION ON CHANGES TO RELATIVE RIGHTS OF SHAREHOLDERS. The Articles of
Incorporation limit the Company's authority to alter or change the relative
rights, preferences, restrictions, dividend rights, voting powers and other
powers given to the holders of the Class A and Class B Common Shares pursuant to
the Articles of Incorporation. Any such alteration or change may be made only
with the approval of 662/3% of the votes entitled to be voted by the holders of
each class of stock to be adversely affected thereby, voting separately as a
class. In the event that the Board of Directors declares a dividend or
distribution payable in the Common Shares and there are an insufficient number
of authorized Class B Common Shares available for such stock dividend or
distribution, the holders of Class B Common Shares may vote to increase the
authorized number of Class B Common Shares to the number sufficient to permit
the issuance of the stock dividend or distribution, without submitting such vote
for approval by shareholders of the Class A Common Shares.
PREEMPTIVE RIGHTS. Class A and Class B Common Shares do not have any
redemption provisions and holders thereof are not entitled to any preemptive
rights.
OTHER TERMS. The Class A Common Shares may not be subdivided, consolidated,
reclassified or otherwise changed unless contemporaneously therewith the Class B
Common Shares are subdivided, consolidated, reclassified or otherwise changed in
the same proportion and in the same manner. Likewise, Class B Common Shares may
not be subdivided, consolidated, reclassified or otherwise changed unless
contemporaneously therewith the Class A Common Shares are subdivided,
consolidated, reclassified or otherwise changed in the same proportion and in
the same manner.
The rights, preferences and privileges of holders of both classes of Common
Shares are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred shares which the Company may
designate and issue in the future.
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<PAGE>
PREFERRED SHARES
The Articles of Incorporation authorize the Board of Directors without
further shareholder approval to fix or alter the rights, preferences, privileges
and restrictions of any wholly unissued series of Preferred Shares, including
the dividend rights, original issue price, conversion rights, voting rights,
terms of redemption, liquidation preferences and sinking fund terms thereof, and
the number of shares constituting any such series and the designation thereof
and to increase or decrease the number of shares of such series subsequent to
the issuance of shares of such series (but not below the number of shares then
outstanding). The Board of Directors, without shareholder approval, can issue
Preferred Shares with the voting and conversion rights described above, which
could adversely affect the voting power of the shareholders of Class A Common
Shares.
CERTAIN ANTI-TAKEOVER, INDEMNIFICATION AND LIMITED LIABILITY PROVISIONS
The Company's Board of Directors may authorize the issuance of additional
Class A Common Shares or Preferred Shares without further action by the
Company's shareholders, unless such action is required in a particular instance
by applicable laws or regulation. The authority to issue additional Class A
Common Shares or Preferred Shares provides the Company with the flexibility
necessary to meet its future needs without the delay resulting from seeking
shareholder approval. The unissued Class A Common Shares or Preferred Shares may
be issued from time to time for any corporate purposes, including without
limitation, stock splits, stock dividends, employee benefit and compensation
plans, acquisitions and public and private sales for cash as a means of raising
capital. Such shares could be used to dilute the stock ownership of persons
seeking to obtain control of the Company. In addition, the sale of a substantial
number of Class A Common Shares or Preferred Shares to persons who have an
understanding with the Company concerning the voting of such shares, or the
distribution or dividend of Class A Common Shares or Preferred Shares (or right
to receive such shares) to the Company's shareholders, may have the effect of
discouraging or otherwise increasing the cost of unsolicited attempts to acquire
control of the Company. Further, because the Company's Board has the power to
determine the voting, conversion or other rights of the Preferred Shares, the
issuance of a series of Preferred Shares to persons friendly to management could
effectively discourage or preclude consummation of a change in control
transaction or have the effect of maintaining the position of the Company's
incumbent management. The Company does not currently have any plans or
commitments to use its authority to effect any such issuance, but reserves the
right to take any action that the Board of Directors deems to be in the best
interests of the Company and its shareholders.
The Company's Articles of Incorporation contain provisions requiring
supermajority shareholder approval to effect certain extraordinary corporate
transactions which are not approved by the Board of Directors. The Articles of
Incorporation require the affirmative vote or consent of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the shares of each class of Common
Shares entitled to vote on any matter submitted to a vote of the shareholders of
the Company to approve any merger, consolidation, disposition of all or a
substantial part of the assets of the Company or a subsidiary of the Company,
exchange of securities requiring stockholder approval or liquidation of the
Company ("Covered Transaction"), if any person (other than Mr. Wride or Ms.
Sandell) who together with his affiliates and associates owns beneficially five
percent or more of any voting stock of the Company ("Interested Person") is a
party to the transaction, unless a majority of the disinterested members of the
Board of Directors has approved the transaction. In addition, the Articles of
Incorporation require the separate approval by the holders of a majority of the
shares of each class of stock of the Company entitled to vote on matters
submitted to vote of the shareholders which are not beneficially owned, directly
or indirectly, by an Interested Person, of any merger, consolidation,
disposition of all or a substantial part of the assets of the Company or a
subsidiary of the Company, or exchange of securities requiring shareholder
approval ("Business Combination"), if an Interested Person is a party to such
transaction; provided, that such approval is not required if (a) the
consideration to be received by the holders of the stock of the Company meets
certain minimal levels determined by a formula under the Articles of
Incorporation (generally the highest price paid by the Interested Person for any
shares which he has acquired), (b) there has been no reduction in the average
dividend rate from that which was obtained prior to the time the Interested
Person became such, and (c) the consideration to be received by shareholders who
are not Interested Persons shall be paid in cash or in the same form as the
Interested Person previously paid for shares of such class of stock. These
Articles of the Company's Articles of Incorporation, as well as the Article
establishing a classified Board of Directors, may be amended, altered, or
repealed only by the affirmative vote or consent of the holders of at least 75%
of the shares of each class of stock of the Company entitled
40
<PAGE>
to vote on a matter submitted to a vote of the shareholders of the Company. The
effect of these provisions is to make it more difficult for a person, entity or
group to effect a change in control of the Company through the acquisition of a
large block of the Company's voting stock.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Directors, officers, or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in such Act and is therefore unenforceable.
As provided under Florida law, the Company's Articles of Incorporation
provide that a director shall not be personally liable to the Company or its
shareholders for monetary damages for breach of duty of care or any other duty
owed to the Company as a director if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Company and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful; except that such provision shall not eliminate or limit
the liability of a director (i) for a violation of the criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, (ii) for any transaction
from which the director derived an improper personal benefit, (iii) for unlawful
distributions to shareholders of the Company in violation of Section 607.06401
of the FBCA, or (iv) for willful misconduct or a conscious disregard for the
best interests of the Company in a proceeding by or in the right of the Company
to procure judgment in its favor or in a proceeding by or in the right of a
shareholder.
Article VI of the Company's By-Laws provides that the Company shall
indemnify a director, officer, employee or agent who has been successful on the
merits or otherwise in the defense of any action, suit or proceeding to which he
was a party or in defense of any claim, issue or matter therein because he is or
was a director, officer, employee or agent of the Company, against reasonable
expenses incurred by him in connection with such defense.
The Company's By-Laws also provide that the Company is required to
indemnify any director, officer, employee or agent made a party to a proceeding
because he is or was a director, employee or agent against liability incurred in
the proceeding if he acted in a manner he believed in good faith or to be in or
not opposed to the best interests of the Company and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Determination concerning whether or not the applicable standard of
conduct has been met can be made by (a) a disinterested majority of the Board of
Directors, (b) a majority of a committee of disinterested directors, (c)
independent legal counsel, or (d) an affirmative vote of a majority of shares
held by disinterested stockholders. No indemnification may be made to or on
behalf of a director, officer, employee or agent (i) in connection with a
proceeding by or in the right of the Company in which such person was adjudged
liable to the Company unless the court in which the action, suit or proceeding
was brought, upon application, determines indemnification is fair and
reasonable.
The Company may, if authorized by its shareholders by a majority of votes
which would be entitled to be cast in a vote to amend the Company's Articles of
Incorporation, indemnify or obligate itself to indemnify a director, officer,
employee or agent made a party to a proceeding, including a proceeding brought
by or in the right of the Company.
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Co. will be the Transfer Agent and
Registrar for the Class A Common Shares.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company expects to have 604,286
shares of its Class A Common Shares outstanding if the Minimum Offering is sold
and 1,604,286 shares of the Class A Common Shares outstanding if the Maximum
Offering is sold. In addition, the Company will have 323,076 Class B Common
Shares outstanding upon completion of this Offering. The 500,000 minimum and
1,500,000 maximum shares of the Company's Class A Common Shares sold in the
Offering have been registered with the SEC under the Securities Act, and may
generally be resold without registration under the Securities Act unless they
were acquired by directors, executive officers, or other affiliates of the
Company (collectively, "Affiliates"). The remaining 104,286 Class A Common
Shares and 323,076 Class B Common
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<PAGE>
Shares will be "restricted securities" as that term is defined in Rule 144.
Generally, restricted securities may not be sold until one year has elapsed from
their issuance. Restricted securities held for one year and securities held by
Affiliates of the Company may generally be sold pursuant to the SEC's Rule 144.
In general, under Rule 144 as currently in effect, an affiliate (as defined
in Rule 144) of the Company may sell Class A Common Shares within any
three-month period in an amount limited to the greater of 1% of the outstanding
shares of the Company's Class A Common Shares (approximately 16,000 shares
immediately after the completion of this offering if the Maximum Offering is
sold) or the average weekly trading volume in the Company's Class A Common
Shares during the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain manner-of-sale provisions, notice requirements and
the availability of current public information about the Company.
The Company and the directors and officers of the Company who currently
beneficially hold an aggregate of approximately 78,846 Class A Common Shares,
have agreed, or will agree, that they will not issue, offer for sale, sell,
grant any options for the sale of or otherwise dispose of any Class A Common
Shares or any rights to purchase Class A Common Shares, in the open market or
otherwise, without the prior written consent of the Underwriter for a period of
180 days from the Final Termination Date. Prior to this Offering, there has been
no public trading market for the Class A Common Shares, and no predictions can
be made as to the effect, if any, that sales of shares or the availability of
shares for sale will have on the prevailing market price of the Class A Common
Shares after completion of this offering. Nevertheless, sales of substantial
amounts of Class A Common Shares in the public market could have an adverse
effect on prevailing market prices.
UNDERWRITING
Under the terms and conditions of an underwriting agreement ("Underwriting
Agreement") by and between the Company and the Underwriter, the Underwriter has
been appointed and has agreed to act as agent for the Company to offer for sale
on a "best efforts" basis a minimum of 500,000 and a maximum of 1,500,000 Class
A Common Shares. The Class A Common Shares will be offered to the public through
the Underwriter and dealers as may be selected by the Underwriter at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus. The Underwriter has made no firm commitment to
purchase any or all of the Class A Common Shares. It has agreed to use its best
efforts to find purchasers of the Class A Common Shares for the Minimum Offering
prior to the Initial Termination Date (__________, unless extended by the
Underwriter to a date no later than _______). If the Minimum Offering is sold
prior to the Initial Termination Date, the Underwriter will continue to use its
best efforts to find purchasers for up to the Maximum Offering prior to the
Final Termination Date (_________, unless extended by the Underwriter to a date
no later than __________). The minimum subscription is 100 Class A Common Shares
and the maximum subscription is 75,000 Class A Common Shares. The Underwriter
may allocate among or reject any subscription in whole or in part.
The Class A Common Shares will be offered directly to retail purchasers at
the public offering price set forth on the cover page of this Prospectus.
Contingent upon the sale of the Minimum Offering, the Underwriter will be paid a
management fee of $0.28 per share sold and the Underwriter and any other
broker-dealer participating in the selling group will be paid a commission not
in excess of $0.42 per share sold. In addition, the Underwriter will be
reimbursed for their legal fees and out-of-pocket expenses.
All subscription proceeds received by the Underwriter or other
broker-dealers with respect to the Class A Common Shares offered hereby will be
immediately transmitted to and deposited in an interest-bearing escrow account
with NationsBank, N.A. as the Escrow Agent pursuant to the terms of an Escrow
Agreement. All checks must be made payable to "NationsBank, N.A., Escrow Agent
for AK Holding Corporation." If the Minimum Offering is not sold and paid for
prior to the Initial Termination Date, all funds will be promptly refunded to
subscribers together with interest earned thereon while held in escrow. If the
Minimum Offering is sold on or prior to the Initial Termination Date, a closing
will be held in the offices of the Underwriter at which time subscription funds
and any interest earned thereon will be disbursed to the Company and subscribers
will become shareholders of the Company.
42
<PAGE>
Subject to certain limitations, the Company and the Underwriter have agreed
to indemnify each other against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments that the Company or the
Underwriter may be required to make in respect thereof.
Pursuant to the terms of the Underwriting Agreement, all of the Company's
existing shareholders will be required to enter into an agreement with the
Underwriter not to sell any securities of the Company held by them until 180
days following the Final Termination Date.
The foregoing is a summary of the principal terms of the Underwriting
Agreement and does not purport to be complete. Reference is made to a copy of
the Underwriting Agreement which is on file as an exhibit to the Registration
Statement of which this Prospectus is a part.
Prior to the Offering, there has been no public trading market for the
Class A Common Shares. The offering price of $10.00 per share was determined by
negotiations between the Company, the Underwriter and the QIU under applicable
NASD Rules. This price is not based upon earnings or any history of operations
and should not be construed as indicative of the present or anticipated future
value of the Class A Common Shares. Several factors were considered in
determining the initial offering price of the Class A Common Shares, among them
the size of the offering, the desire that the security being offered be
attractive to individuals, and the experience of the Underwriter and the QIU in
dealing with initial public offerings for financial institutions.
Pursuant to the Conduct Rules of the NASD, when a member of the NASD, such
as Ashtin Kelly & Co., participates in the public distribution of its own or an
affiliate's securities, the public offering price can be no higher than
recommended by the QIU. In accordance with the requirement, the QIU, has agreed
to recommend an initial public offering price for the Class A Common Shares. As
part of its compliance with Rule 2720 of the NASD's Conduct Rules, the QIU has
participated in the preparation of the Registration Statement of which the
Prospectus forms a part and has performed "due diligence" with respect thereto.
For acting as a qualified independent underwriter, the QIU will receive a flat
fee of $50,000. In addition, the QIU will be reimbursed its legal fees and for
its out-of-pocket expenses. Pursuant to the QIU agreement, the Company has
agreed to indemnify the QIU (and their controlling persons) with respect to
certain liabilities, including liabilities under the Securities Act.
The Underwriter has confirmed to the Company that it does not intend to
confirm any sales to any account over which it exercises discretionary
authority.
LEGAL MATTERS
The legality of the Class A Common Shares being offered hereby will be
passed upon for the Company by Smith, Gambrell & Russell, LLP, Atlanta, Georgia.
Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Tampa, Florida, is acting
as counsel for the Underwriter in connection with certain legal matters relating
to the Class A Common Shares offered hereby.
EXPERTS
The financial statements of the Company included in this Prospectus have
been audited by Hill, Barth & King, Inc., independent public accountants, as
indicated in their report with respect thereto. Such financial statements have
been included herein and in the Registration Statement in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form SB-2 (the
"Registration Statement") with the Commission under the Securities Act with
respect to the Class A Common Shares offered hereby. This Prospectus, which is
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. For further information pertaining to the Class A
Common Shares offered hereby and to the Company, reference is made to the
Registration Statement, including the Exhibits filed as a part thereof, copies
43
<PAGE>
of which may be inspected, without charge, at the Public Reference Section of
the Commission maintained by the Commission at its principal office located at
Judiciary Plaza, 450 Fifth Street, NW, Washington DC 20549, and at the following
Commission's regional offices: New York Regional Office, Seven World Trade
Center, Suite 1300, New York, New York, 10048; and Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of all or any portion of the Registration Statement
may be obtained from the Public Reference Section of the Commission, at its
Washington, D.C. address upon payment of prescribed fees. In addition, the
Company is required to file electronic versions of these documents with the
Commission through the Commission's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete and are
summaries of such documents. All material elements of the contracts and
documents referenced herein are disclosed in the Prospectus. With respect to
each such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by independent public accountants and
with quarterly reports containing unaudited financial information for each of
the first three quarters of each fiscal year.
44
<PAGE>
FINANCIAL STATEMENTS
AK HOLDING CORPORATION
(A Development Stage Company)
September 24, 1998
- - - /bullets/- - -
C O N T E N T S
P A G E
Independent Auditors' Report - - - - - - - - - - - - - - F-2
Balance Sheet - - - - - - - - - - - - - - - - - - - - - F-3
Statement of Operations - - - - - - - - - - - - - - - - F-4
Statement of Changes in Shareholders' Equity - - - - - - F-5
Statement of Cash Flows - - - - - - - - - - - - - - - - F-6
Notes to Financial Statements - - - - - - - - - - - - - F-7-8
- - - /bullets/ - - -
F-1
<PAGE>
Board of Directors
AK Holding Corporation
Naples, Florida
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of AK Holding Corporation
(the Company) as of September 24, 1998 and the related statements of operations,
shareholders' equity and cash flows for the period from September 4, 1997 (date
of inception) to September 24, 1998. 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 AK Holding
Corporation as of September 24, 1998, and the results of its operations and its
cash flows for the period from September 4, 1997 (date of inception) to
September 24, 1998 in conformity with generally accepted accounting principles.
HILL, BARTH & KING, INC.
Certified Public Accountants
Naples, Florida
September 28, 1998
F-2
<PAGE>
AK HOLDING CORPORATION
(A Development Stage Company)
BALANCE SHEET
September 24, 1998
A S S E T S
Cash $ 308,841
----------
TOTAL CASH 308,841
----------
Note receivable - NOTE B 13,079
Deferred offering costs 33,048
Prepaid expenses 9,500
Other assets 17,000
----------
$ 381,468
==========
LIABILITIES AND SHAREHOLDERS EQUITY
Liabilities:
Loan payable $ 52,249
Accrued expenses and other liabilities 8,731
----------
TOTAL LIABILITIES 60,980
----------
Shareholders' Equity:
Preferred stock, no stated par,
5,000,000 shares authorized; no shares
issued and outstanding 0
Class A common stock, par value $.01 per share,
30,000,000 shares authorized; 104,286 shares
issued and outstanding 1,043
Class B common stock, no stated par,
5,000,000 shares authorized; 323,076 shares
issued and outstanding 0
Additional paid-in capital 330,107
Deficit accumulated during the development stage (10,662)
----------
TOTAL SHAREHOLDERS' EQUITY 320,488
----------
$ 381,468
==========
See accompanying notes to financial statements
F-3
<PAGE>
AK HOLDING CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
Period from September 4, 1997 (date of inception) to September 24, 1998
INCOME
Interest income $ 478
EXPENSES
Interest expense and loan fees 10,139
Other expenses 1,001
---------
TOTAL EXPENSES 11,140
---------
NET LOSS $ (10,662)
=========
See accompanying notes to financial statements
F-4
<PAGE>
AK HOLDING CORPORATION
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
Period from September 4, 1997 (date of inception) to September 24, 1998
DEFICIT
ACCUMULATED
CLASS A ADDITIONAL DURING THE
COMMON PAID-IN DEVELOPMENT
STOCK CAPITAL STAGE TOTAL
--------- ---------- ----------- ---------
Balance
September 4, 1997 $ 0 $ 0 $ 0 $ 0
Proceeds from
issuance of
common stock 1,043 330,107 0 331,150
Net loss 0 0 (10,662) (10,662)
--------- --------- --------- ---------
Balance
September 24, 1998 $ 1,043 $ 330,107 $ (10,662) $ 320,488
========= ========= ========= =========
See accompanying notes to financial statements
F-5
<PAGE>
AK HOLDING CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Period from September 4, 1997 (date of inception) to September 24, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (10,662)
Adjustments to reconcile net loss to net cash
used in operating activities:
Increase in prepaid expenses (9,500)
Increase in other assets (50,048)
Increase in accrued expenses and other liabilities 8,731
---------
NET CASH USED IN OPERATING ACTIVITIES (61,479)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Amount loaned to another entity (20,000)
Payments received on loan to another entity 6,921
---------
NET CASH USED IN INVESTING ACTIVITIES (13,079)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on short-term notes 52,249
Proceeds from issuance of common stock 331,150
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 383,399
---------
NET INCREASE IN CASH 308,841
CASH
Beginning of period 0
---------
End of period $ 308,841
=========
See accompanying notes to financial statements
F-6
<PAGE>
AK HOLDING CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 24, 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
AK Holding Corporation (the "Company") was incorporated under the laws
of the State of Florida on September 4, 1997. The Company's activities to date
have been limited to the organization of the Company, as well as preparation for
a best efforts common stock offering (the "Offering"), in which the company
expects to raise a minimum of $5,000,000 and up to a maximum of $15,000,000. A
substantial portion of the proceeds of the Offering will be used by the Company
to purchase independently owned and operated brokerage companies in the business
of engaging in the operation of investments and dealing in securities.
Nature of Business:
The Company through the purchase of related subsidiaries intends to
offer, sell, assign, lease and deal with investments and securities in any name
and nature, including the investment and securities of others, primarily within
the Florida area.
Use of 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.
Deferred Offering Costs:
Deferred offering costs consist of legal and accounting fees as well as
securities filing fees related to the initial public stock offering and will be
offset against the offering proceeds when received.
Stock voting rights:
Each Class A Common Share is entitled to one vote per share and each
Class B Common Share is entitled to ten votes per share with respect to each
matter submitted to a vote of the Company's shareholders. Each Class A Common
Share and each Class B Common Share has the right to vote on all matters
submitted to a vote of the Company's shareholders, but not as separate classes,
except to the extent required by law or otherwise provided in the Articles of
Incorporation.
F-7
<PAGE>
AK HOLDING CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 24, 1998
NOTE B - NOTE RECEIVABLE
In August 1998, the Company loaned $20,000 to a corporation which is
partially owned by the president of the company. The unsecured note receivable
bears interest at an annual rate of 10% and matures on May 31, 1999.
NOTE C - LOAN PAYABLE
The Company arranged a loan from one of the directors, who is also the
President and Chief Executive Officer of the Company, to pay organizational and
pre-opening expenses for the Company. The foregoing loan and interest costs will
be repaid from the offering proceeds. The loan bears interest at an annual rate
of 10%, a loan funding fee of 8% based on the face amount of the loan and
matures on June 30, 1999.
NOTE D - COMMITMENTS AND CONTINGENCIES
The Company has committed to lease the top floor of a proposed building
to house its main office location. The lease has a term of ten years with two
options to renew the lease for a further term of five years each at the current
market rate; to begin on the earlier of thirty days after Lessor receives its
Certificate of Occupancy for the building or the date the lessee opens for
business. The aggregate annual lease payment is $114,000 plus applicable sales
tax; with annual rent increased by the greater of CPI or 3% on the anniversary
date of the lease.
NOTE E - STOCK OPTIONS
The Board of Directors of the Company has reserved 1,000,000 shares of
Class A Common Stock for issuance under the companys' 1998 Stock Option Plan.
The Board has designated 100,000 of these shares for options to be granted to
the President of the Company upon execution of his employment agreement. The
shares will be exercisable, at the initial public offering price and in
increments of 25% of the number of shares subject to the option on each
anniversary of the date until all shares subject to the option have become
exercisable, with 25% of the shares becoming exercisable on the date of grant.
F-8
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY
SECURITY OTHER THAN THE CLASS A COMMON SHARES OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES
OTHER THAN THE CLASS A COMMON SHARES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION TO ANY PERSON IN ANY JURISDICTION OR UNDER ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THE INFORMATION HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
--------------------------------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 9
Forward-Looking Statements................................................ 19
Use of Proceeds........................................................... 20
Dilution.................................................................. 21
Capitalization............................................................ 22
Dividend Policy........................................................... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................................. 23
Business.................................................................. 23
Management................................................................ 34
Certain Transactions...................................................... 37
Security Ownership of Certain Beneficial
Owners and Management.................................................. 37
Description of Capital Stock.............................................. 38
Shares Eligible for Future Sale........................................... 41
Underwriting.............................................................. 42
Legal Matters............................................................. 43
Experts................................................................... 43
Additional Information.................................................... 43
Index to Financial Statements............................................. F-1
Until __________, (90 days from the date of this Prospectus) all dealers
effecting transactions in the Class A Common Shares, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligation of dealers to deliver
a Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
500,000 SHARES (MINIMUM)
1,500,000 SHARES (MAXIMUM)
AK HOLDING CORPORATION
Class A Common Shares
----------------------
PROSPECTUS
----------------------
ASHTIN KELLY & CO.
INCORPORATED
____________, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850(1) of the Florida Business Corporation Act ("FBCA")
permits a Florida corporation to indemnify any person who may be a party to any
third party proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, against liability
incurred in connection with such proceeding (including any appeal thereof) if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Section 607.0850(2) of the FBCA permits a Florida corporation to indemnify
any person who may be a party to a derivative action if such person acted in any
of the capacities set forth in the preceding paragraph, against expenses and
amounts paid in settlement not exceeding, in the judgement of the board of
directors, the estimated expenses of litigating the proceeding to conclusion,
actually and reasonably incurred in connection with the defense or settlement of
such proceeding (including appeals), provided that the person acted under the
standards set forth in the preceding paragraph. However, no indemnification
shall be made for any claim, issue or matter for which such person is found to
be liable unless, and only to the extent that, the court. determines that,
despite the adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnification for
such expenses which the court deems proper.
Section 607.0850(4) of the FCBA provides that any indemnification made
under the above provisions, unless pursuant to a court determination, may be
made only after a determination that the person to be indemnified has met the
standard of conduct described above. This determination is to be made by a
majority vote of a quorum consisting of the disinterested directors of the board
of directors, by duly selected independent legal counsel, or by a majority vote
of the disinterested shareholders. The board of directors also may designate a
special committee of disinterested directors to make this determination.
Section 607.0850(3), however, provides that a Florida corporation must
indemnify any director, or officer, employee or agent of a corporation who has
been successful in the defense of any proceeding referred to in Section
607.0850(1) or (2), or in the defense of any claim, issue or matter therein,
against expenses actually and reasonably incurred by him in connection
therewith.
Expenses incurred by a director or officer in defending a civil or criminal
proceeding may be paid by the corporation in advance of the final disposition
thereof upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it is ultimately determined that such director
or officer is not entitled to indemnification under Section 607.0850. Expenses
incurred by other employees or agents in such a proceeding may be paid in
advance of final disposition thereof upon such terms or conditions that the
board of directors deems appropriate.
The FBCA further provides that the indemnification and advancement of
payment provisions contained therein are not exclusive and it specifically
empowers a corporation to make any other further indemnification or advancement
of expenses under any bylaw, Agreement, vote of shareholders or disinterested
actions taken in other capacities while holding an office. However, a
corporation cannot indemnify or advance expenses if a judgment or other final
adjudication establishes that the actions of the director or officer were
material to the adjudicated cause of action and the director or officer (a)
violated criminal law, unless the director or officer had reasonable cause to
believe his conduct was unlawful, (b) derived an improper personal benefit from
a transaction, (c)was or is a director in a circumstance where the liability
under Section 607.0834 (relating to unlawful distributions) applies, or (d)
engages in willful misconduct or conscious disregard for the best interests of
the corporation in a proceeding by or in right of the corporation to procure a
judgment in its favor or in a proceeding by or in right of a shareholder.
Article XI of the Company's Articles of Incorporation provide that the
Company shall indemnify any director or officer or any former director or
officer against any liability arising from any action or suit to the full extent
permitted by Florida law as referenced above.
II-1
<PAGE>
Article VI of the Company's By-Laws provides that the Company shall
indemnify a director, officer, employee or agent who has been successful on the
merits or otherwise in the defense of any action, suit or proceeding to which he
was a party or in defense of any claim, issue or matter therein because he is or
was a director, officer, employee or agent of the Company, against reasonable
expenses incurred by him in connection with such defense.
The Company's By-Laws also provide that the Company is required to
indemnify any director, officer, employee or agent made a party to a proceeding
because he is or was a director, employee or agent against liability incurred in
the proceeding if he acted in a manner he believed in good faith or to be in or
not opposed to the best interests of the Company and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Determination concerning whether or not the applicable standard of
conduct has been met can be made by (a) a disinterested majority of the Board of
Directors, (b) a majority of a committee of disinterested directors, (c)
independent legal counsel, or (d) an affirmative vote of a majority of shares
held by disinterested stockholders. No indemnification may be made to or on
behalf of a director, officer, employee or agent (i) in connection with a
proceeding by or in the right of the Company in which such person was adjudged
liable to the Company unless the court in which the action, suit or proceeding
was brought, upon application, determines indemnification is fair and
reasonable.
The Company may, if authorized by its stockholders by a majority of votes
which would be entitled to be cast in a vote to amend the Company's Articles of
Incorporation, indemnify or obligate itself to indemnify a director, officer,
employee or agent made a party to a proceeding, including a proceeding brought
by or in the right of the Company.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered, other than the underwriting discounts and commissions. All of the
amounts shown are estimated except for the registration fees of the Commission
and the NASD.
SEC Registration Fee..................................... $ 4,425
Qualified Independent Underwriter Fee and Expenses....... *
Blue Sky Fees and Expenses.............................. *
Printing and Engraving Expenses.......................... *
Legal Fees and Expenses.................................. *
Transfer Agent and Registrar Fees........................ *
NASD Filing Fees......................................... 2,000
Accounting Fees and Expenses............................. *
Miscellaneous............................................ *
----------
Total...................................... $ *
==========
- ----------
*To be filed by amendment.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On March 2, 1998, the Company issued 53,846 Common Shares ("Founder
Shares") to certain founding officers and directors of the Company instrumental
in the organization of the Company for a purchase price of $.02 per share. In
addition, in April 1998, the Company sold 46,154 shares of Common Shares to a
certain accredited investor for a purchase price of $6.50 per share and on
September 3, 1998, the Company sold 4,286 Common Shares to a certain accredited
investor for a purchase price of $7.00 per share. On September 24, 1998, the
Founder Shares were converted into 53,846 Class A Common Shares and 323,076
Class B Shares, and all non-Founder Shares were converted into Class A Common
Shares on a one-for-one basis. These shares were issued in reliance upon an
exemption from the registration requirements of the Securities Act, pursuant to
Section 4(2) of the Securities Act.
II-2
<PAGE>
<TABLE>
<CAPTION>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<S> <C>
1.1* - Form of Underwriting Agreement between the Company and Ashtin Kelly & Co.,
Incorporated
1.2* - Form of Qualified Independent Underwriter Agreement between the Company and
First London Securities Corporation
1.3* - Form of Escrow Agreement between the Company and NationsBank, N.A.
1.4* - Form of Subscription Agreement
3.1 - Second Amended and Restated Articles of Incorporation of the Company
3.2 - Amended and Restated By-laws of the Company
4.1 - See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and the By-
laws of the Company defining the rights of holders of the Company's Class A
Common Shares
4.2* - Form of Class A Common Share Certificate
5.1* - Opinion of Smith, Gambrell & Russell, LLP
10.1* - Employment Agreement dated as of September 30, 1998 between the Company and
W. Jonathan Wride
10.2 - 1998 Stock Option Plan
10.3* - Lease Agreement by and between the Company and Gulf Coast Development
23.1* - Consent of Smith, Gambrell & Russell, LLP (contained in their opinion at Exhibit 5.1)
23.2 - Consent of Hill, Barth & King, Inc.
24.1 - Power of Attorney (included in original signature page to this Registration Statement)
27.1 - Financial Data Schedule (for SEC use only)
<FN>
- ---------------------
* To be filed by amendment.
</FN>
</TABLE>
ITEM 28. UNDERTAKINGS.
(a) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement
to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
II-3
<PAGE>
(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") 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 Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(c) The small business issuer will provide to the underwriter at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all the requirements of filing on Form SB-2 and has authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Naples, State of Florida, on the 29th day of September, 1998.
AK HOLDING CORPORATION
By: /s/ W. JONATHAN WRIDE
---------------------------------------
W. Jonathan Wride
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints W. Jonathan Wride and Rita G. Sandell and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him, in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises as fully and to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ W. JONATHAN WRIDE
- ----------------------- President, Chief Executive Officer September 29, 1998
W. Jonathan Wride Chairman of the Board and Director
(Principal Executive Officer)
/s/ ANTHONY W. MONICO
- ------------------------ Executive Vice President and Director September 29, 1998
Anthony W. Monico
/s/ NORA AMBROSE
- ------------------------ Vice President, Treasurer and Director September 29, 1998
Nora Ambrose (Principal Financial and Account Officer)
/s/ DOUGLAS W. GIVEN
- ------------------------ Vice President and Director September 29, 1998
Douglas W. Given
/s/ WILLIAM F. NG
- ------------------------ Director September 29, 1998
William F. Ng
/s/ RITA G. SANDELL
- ------------------------ Director September 29, 1998
Rita G. Sandell
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement between the Company and Ashtin Kelly & Co.,
Incorporated
1.2* Form of Qualified Independent Underwriter Agreement between the Company and
First London Securities Corporation
1.3* Form of Escrow Agreement between the Company and NationsBank, N.A.
1.4* Form of Subscription Agreement
3.1 Second Amended and Restated Articles of Incorporation of the Company
3.2 Amended and Restated By-laws of the Company
4.1 See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and the By-
laws of the Company defining the rights of holders of the Company's Class A
Common Shares
4.2* Form of Class A Common Share Certificate
5.1* Opinion of Smith, Gambrell & Russell, LLP
10.1* Employment Agreement dated as of September 30, 1998 between the Company and
W. Jonathan Wride
10.2 1998 Stock Option Plan
10.3* Lease Agreement by and between the Company and Gulf Coast Development
23.1* Consent of Smith, Gambrell & Russell, LLP (contained in their opinion at Exhibit 5.1)
23.2 Consent of Hill, Barth & King, Inc.
24.1 Power of Attorney (included in original signature page to this Registration Statement)
27.1 Financial Data Schedule (for SEC use only)
* To be filed by amendment
</TABLE>
EXHIBIT 3.1
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
AK HOLDING CORPORATION
Pursuant to Sections 607.1002, 607.1003 and 607.1007 of the Florida
Business Corporation Act, AK Holding Corporation (the "Corporation") hereby
adopts the following Second Amended and Restated Articles of Incorporation:
I.
The name of the Corporation shall be AK Holding Corporation.
II.
This Corporation shall have perpetual existence.
III.
The Corporation is organized for the following purposes:
A. To engage in the operation of investments and dealer in securities
and/or to act as a holding corporation for such subsidiaries.
B. To sell, assign, lease, and deal with investments and securities in any
name and nature, including the investments and securities of others, whether
individuals, partnerships, or corporations, and to do so for compensation.
C. To engage in such business to the same extent as natural persons might
or could do, to purchase or otherwise acquire, and to hold, own, maintain, work,
develop, sell, lease, exchange, hire, convey, mortgage, or otherwise dispose of
and deal in lands and leaseholds, and any interest, estate, and rights in real
property, and any personal or mixed property, and any franchises, rights,
licenses, or privileges necessary, convenient, or appropriate for any of the
purposes herein expressed.
D. To engage in any other activity allowed by law.
IV.
A. The aggregate number of shares of capital stock the Corporation shall
have the authority to issue shall be forty million (40,000,000) shares,
consisting of the following securities:
(1) thirty million (30,000,000) common shares, $.01 par value,
designated as Class A Common Shares;
<PAGE>
(2) five million (5,000,000) common shares, without par value,
designated as Class B Common Shares; and
(3) five million (5,000,000) preferred shares (the "Preferred Shares").
Effective upon the filing of these Second Amended and Restated Articles of
Incorporation with the Secretary of State of the State of Florida (the
"Effective Time"), each Common Share of the Corporation issued and outstanding
immediately prior to the Effective Time, other than those 50,440 Common Shares
represented by Certificate Nos. 4 and 5 in the amounts of 4,286 and 46,154
shares, respectively (the "Minority Shares"), shall be automatically converted
without further action into one (1) fully paid and non-assessable Class A Common
Share of the Corporation and six (6) fully paid and non-assessable Class B
Common Shares of the Corporation. With respect to the Minority Shares, each
share of the Minority Shares shall be automatically converted without further
action into one (1) fully paid and non-assessable Class A Common Share of the
Corporation.
B. Except to the extent otherwise provided below, the holders of the Class
A Common Shares (the "Class A Holders") and the holders of the Class B Common
Shares (the "Class B Holders") shall have the same powers, designations,
preferences and participation rights and privileges. The Class A Holders and the
Class B Holders shall share with each other on a ratable basis as a single class
in the net assets of the Corporation upon dissolution, subject to any
preferences that may be established for the Preferred Shares. The Class A
Holders and the Class B Holders shall have the following specific powers,
designations, preferences, and relative participating rights and privileges:
(1) Each Class A Common Share shall be entitled to one (1) vote per
share and each Class B Common Share shall be entitled to ten (10) votes with
respect to each matter submitted to a vote of the shareholders of the
Corporation.
(2) Each Class A Common Share and each Class B Common Share shall have
the right to vote, but not as separate classes except to the extent required by
law or as otherwise provided in subsection B(3) below, upon all matters
submitted to a vote of the shareholders of the Corporation. The presence in
person or by proxy of a majority of all votes entitled to be cast on the matter
by the Class A Common Shares and the Class B Common Shares taken as a whole,
shall constitute a quorum for action on that matter.
(3) In addition to any other vote required by law, the Corporation may
not alter or change, by increase, diminution, or otherwise, the relative rights,
preferences, privileges, restrictions, dividend rights, voting power or other
powers given to the Class A Common Shares and the Class B Common Shares pursuant
to this Article IV other than by the affirmative vote of not less than sixty-six
and two-thirds percent (66 2/3%) of all the votes entitled to be cast by each
class of Common Shares to be adversely affected thereby voting as a separate
class, except that the Corporation may increase the total number of authorized
Class A Common Shares that may be issued by the Corporation by the affirmative
vote of a majority of all the votes entitled to be cast by the Class A Common
Shares and the Class B Common Shares voting together, without regard to class.
In the event that the Board of Directors declares a dividend or distribution
payable in the Common Shares of the Corporation and there are an insufficient
number of authorized Class B Common Shares available to distribute in accordance
with Paragraph (4)(b) below, then the Class B Common Shares may vote on an
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<PAGE>
amendment to these Articles of Incorporation increasing the number of authorized
shares of such class to the number sufficient to permit the issuance of the
stock dividend or distribution, without submitting such vote for approval of the
Class A Common Shares.
(4) The Class A Holders and the Class B Holders shall be entitled to
receive such dividends and other distributions in cash, stock, or property of
the Corporation as may be declared thereon by the Board of Directors from time
to time out of assets or funds of the Corporation legally available therefor;
provided, however, that:
(a) No cash dividend may be declared and paid on either the Class A
Common Shares or the Class B Common Shares unless a dividend of an equal amount
of cash per share has been declared and paid on the other class of Common
Shares; and
(b) In the case of dividends or other distributions payable in shares
of the Corporation, including a distribution pursuant to any share split or
division, which occurs after the initial issuance of Class B Common Shares by
the Corporation, only Class A Common Shares shall be distributed with respect to
Class A Common Shares and only Class B Common Shares, in an amount per share
equal to the amount per share distributed with respect to the Class A Common
Shares, shall be distributed with respect to Class B Common Shares.
(c) In the case of any combination, reclassification, or
recapitalization of the Class A Common Shares, the Class B Common Shares shall
also be combined, reclassified, or recapitalized so that the number of Class B
Common Shares outstanding immediately following such combination,
reclassification, or recapitalization shall bear the same relationship to the
number of Class B Common Shares outstanding immediately prior to such
combination, reclassification or recapitalization as the number of Class A
Common Shares outstanding immediately following such combination,
reclassification or recapitalization bears to the number of Class A Common
Shares outstanding immediately prior to such combination, reclassification or
recapitalization.
(d) In the case of any combination, reclassification, or
recapitalization of the Class B Common Shares, the Class A Common Shares shall
also be combined, reclassified, or recapitalized so that the number of Class A
Common Shares outstanding immediately following such combination,
reclassification, or recapitalization shall bear the same relationship to the
number of Class A Common Shares outstanding immediately prior to such
combination, reclassification or recapitalization as the number of Class B
Common Shares outstanding immediately following such combination,
reclassification or recapitalization bears to the number of Class B Common
Shares outstanding immediately prior to such combination, reclassification or
recapitalization
(e) Class A Common Shares outstanding at any time shall not be reverse
split or combined, whether by reclassification, recapitalization or otherwise,
so as to decrease the number of shares thereof issued and outstanding unless at
the same time the Class B Common Shares are reverse split or combined so that
the number of Class B Common Shares outstanding immediately following such
reclassification or recapitalization shall bear the same relationship to the
number of Class B Common Shares outstanding immediately prior to such
reclassification or recapitalization as the number of Class A Common Shares
outstanding immediately following such reclassification or
3
<PAGE>
recapitalization bears to the number of Class A Common Shares outstanding
immediately prior to such reclassification or recapitalization.
(f) Class B Common Shares outstanding at any time shall not be reverse
split or combined, whether by reclassification, recapitalization or otherwise,
so as to decrease the number of shares thereof issued and outstanding unless at
the same time the Class A Common Shares are reverse split or combined so that
the number of Class A Common Shares outstanding immediately following such
reclassification or recapitalization shall bear the same relationship to the
number of Class A Common Shares outstanding immediately prior to such
reclassification or recapitalization as the number of Class B Common Shares
outstanding immediately following such reclassification or recapitalization
bears to the number of Class B Common Shares outstanding immediately prior to
such reclassification or recapitalization.
(5) Any outstanding Class B Common Shares shall be convertible into fully
paid and nonassessable Class A Common Shares at the option of the holder thereof
on a one-share-for-one- share basis; provided, however, that, except as
otherwise provided in these Articles of Incorporation, no Class B Common Shares
shall be converted into Class A Common Shares prior to the third anniversary of
the Effective Time. In order for a shareholder to effect any such conversion,
such shareholder must furnish the Corporation with a written notice of the
request for conversion, which notice shall be addressed to the principal office
of the Corporation or to the Corporation's designated transfer agent, shall
state the number of Class B Common Shares to be converted into Class A Common
Shares, shall state the name of the person(s) in whose name(s) the Class A
Common Shares are to be registered and shall be accompanied by a certificate or
certificates representing such shares, properly endorsed and ready for transfer.
A conversion shall be deemed to be made (and the holder of such shares shall be
deemed to be the holder of record of an equal number of Class A Common Shares)
at the close of business on the date when the Corporation or transfer agent has
received the prescribed written notice and required certificate or certificates,
properly endorsed and ready for transfer. The Corporation hereby reserves and
shall at all times reserve and keep available out of its authorized and unissued
Class A Common Shares, for the purposes of effecting conversion such number of
duly authorized Class A Common Shares as shall from time to time be sufficient
to effect the conversion of all outstanding Class B Common Shares.
C. (1) The Corporation shall not issue, either from its authorized,
unissued shares or from its treasury, and a Class B Holder shall not transfer
record or beneficial ownership of, and the Corporation shall not register the
transfer of, whether by sale, assignment, gift, bequest, appointment or
otherwise, any Class B Common Shares except to W. Jonathan Wride, Rita G.
Sandell or a Permitted Transferee (as hereinafter defined). Subsequent issuances
or transfers of Class B Common Shares and dividends and distributions payable in
Class B Common Shares, including any distribution pursuant to a stock split or
division, shall be subject to the rights and limitations set forth in this
Article IV. Any transfer of record or beneficial ownership of Class B Common
Shares to a person or entity other than W. Jonathan Wride, Rita G. Sandell or a
Permitted Transferee shall result in the conversion of such Class B Common
Shares into Class A Common Shares as provided in subsection C(4) below. A
"Permitted Transferee" shall mean, with respect to each person or entity from
time to time shown as the record holder of Class B Common Shares:
4
<PAGE>
(a) A member of any such holder's immediate family which immediate
family consists of the spouse, parents, lineal descendants (including adopted
children and stepchildren), the spouse of any lineal descendant, and brothers
and sisters of such holders;
(b) The trustee of a trust (including a voting trust) exclusively for
the benefit of such holder and/or one or more of his Permitted Transferees
described in subsection C(1) other than this clause (b), provided that such
trust may grant a general or special power of appointment to any person subject
to the limitation that no Class B Common Shares shall be transferred to any
person or entity that is not a Permitted Transferee; or
(c) A corporation if all of the outstanding capital stock of such
corporation which is entitled to vote for the election of directors is owned by,
or a partnership if all of the partners of such partnership are and all of the
beneficial interests in the partnership are owned by, the Class B Holder or his
or her Permitted Transferees determined pursuant to this subsection C(1);
provided that, if by reason of any change in ownership of such share or
partnership interest, such corporation or partnership would no longer qualify as
a Permitted Transferee under this clause (c), all of the Class B Common Shares
held by such corporation or partnership shall, immediately and without further
act, be converted into Class A Common Shares as provided in subsection C(4)
below.
(2) Notwithstanding the foregoing, any Class B Holder may pledge such
holder's Class B Common Shares to a pledgee pursuant to a bona fide pledge of
such shares as collateral for security for indebtedness due to the pledgee,
provided that such shares shall not be transferred to or registered in the name
of pledgee and shall remain subject to the provisions of this Article IV(C). In
the event of foreclosure or other similar action by the pledgee, such pledged
Class B Common Shares may only be transferred to W. Jonathan Wride, Rita G.
Sandell or a Permitted Transferee of the pledgor or converted into Class A
Common Shares as provided in subsection C(4) below, as the pledgee may elect.
The conversion into Class A Common Shares pursuant to this subsection C(2) may
be made at any time and will not be subject to the time limitations specified in
subsection B(5) hereof.
(3) For purposes of this Article IV(C), each reference to a corporation
shall include any successor corporation resulting from merger or consolidation.
(4) Upon any transfer of Class B Common Shares of record or beneficially to
any person or entity other than W. Jonathan Wride, Rita G. Sandell or a
Permitted Transferee, notwithstanding subsection B(5), all of the Class B Common
Shares so transferred shall convert into an equal number of Class A Common
Shares, effective as of the date on which the certificates representing such
Class B Common Shares being transferred are presented for transfer on the books
of the Corporation. The Corporation may, in connection with preparing or
verifying a list of shareholders entitled to vote at any meeting of shareholders
or as a condition to the transfer or registration of Class B Common Shares on
the books of the Corporation, require the furnishing of such affidavits or other
proof as it may deem necessary to confirm that conversion of any Class B Common
Shares to Class A Common Shares is not required under these Articles of
Incorporation prior to any such vote, transfer or registration.
(5) The Class B Common Shares shall be registered only in the name of W.
Jonathan Wride, Rita G. Sandell or a Permitted Transferee as the registered or
beneficial owner thereof and
5
<PAGE>
not in a "street" or "nominee" name. For purposes of this Article IV(C), a
"beneficial owner" shall mean a person who can, or any entity which possesses
the power to, either singly or jointly, direct the voting or disposition of such
shares. The Corporation shall note on the certificates representing Class B
Common Shares that there are restrictions on the transfer and the registration
of the transfer of such shares imposed by these Articles of Incorporation.
D. The Board of Directors of the Corporation is authorized, subject to
limitations prescribed by law and this Article IV, to provide for the issuance
of Preferred Shares in classes or series, and to fix the designations, powers,
preferences, and the rights of such classes or series and any qualifications,
limitations, or restrictions thereof, as shall be hereafter stated and expressed
in the Articles of Amendment to these Articles of Incorporation adopted by the
Board of Directors providing for the issuance of Preferred Shares from time to
time.
V.
No shareholders shall have the preferential or preemptive right to
subscribe for or to purchase any shares of any class, any rights, warrants, or
options with respect thereto, or any obligation convertible into or exchangeable
for any such shares or other securities whether out of unissued shares or other
securities or out of shares or other securities acquired by the Corporation
after the issue thereof, regardless of the consideration therefor.
VI.
The principal place of business and mailing address of this Corporation is
400 Fifth Avenue South, Naples, Florida 34102.
VII.
The registered agent of the Corporation is W. Jonathan Wride. The street
address of the Corporation's registered office is 400 Fifth Avenue South,
Naples, Florida 34102.
VIII.
The Florida Control-Share Acquisition sections of the Florida Business
Corporation Act (607.0901 through 607.0903) shall not be applicable to this
Corporation.
IX.
In addition to any approval of the Board of Directors or any shareholder
vote or consent required by the laws of the State of Florida or any other
provision of these Articles of Incorporation or otherwise, the affirmative vote
or consent of not less than sixty-six and two-thirds percent (66 2/3%) of all
the votes entitled to be cast by each class of Common Shares shall be required
to authorize, adopt or approve a Covered Transaction; however, the provisions of
this Article IX shall not apply to any Covered Transaction referred to in this
Article IX with any Interested Person if the Covered Transaction is approved by
a majority of the Disinterested Directors of the Corporation, in which
6
<PAGE>
event the affirmative vote of not less than a majority of all votes entitled to
be cast by each class of Common Shares shall be required.
For the purpose of this Article IX:
1. "Affiliate" and "associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, as in effect on the date hereof.
2. A person shall be the "beneficial owner" and "beneficially owns"
stock of the Corporation (other than the shares of the Corporation's stock held
in its treasury) (a) which such person and its affiliates and associates
beneficially own, directly or indirectly, whether of record or not, (b) which
such person or any of its affiliates or associates has the right to acquire,
pursuant to any agreement upon the exercise of conversion rights, warrants or
options, or otherwise, (c) which such person or any of its affiliates or
associates has the right to sell or vote pursuant to any agreement, or (d) which
are beneficially owned, directly or indirectly, by any other person with which
such first mentioned person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of securities of the Corporation.
3. "Covered Transaction" is:
(a) any merger or consolidation of the Corporation or any subsidiary
of the Corporation with or into (i) any Interested Person
(regardless of the identity of the surviving corporation) or
(ii) any other person which is, or after such merger or
consolidation would be, an Affiliate of the Interested Person;
(b) any sale, lease or other disposition of all or any substantial
part (assets having an aggregate fair market value of
twenty-five percent (25%) of the total assets of the
Corporation) of the assets of the Corporation or any subsidiary
of the Corporation to any Interested Person for cash, real or
personal property, including securities, or any combination
thereof;
(c) any issuance or delivery of securities of the Corporation or a
subsidiary of the Corporation (which the beneficial owner shall
have the right to vote, or to vote upon exercise, conversion or
by contract) to an Interested Person in consideration for or in
exchange of any securities or other property (including cash);
or
(d) the liquidation of the Corporation.
4. "Disinterested Director" means any member of the Board of Directors of
the Corporation (the "Board") who is not affiliated with the Interested Person
and who was a member of the Board prior to the time that the Interested Person
became an Interested Person, and any successor of a Disinterested Director who
is unaffiliated with the Interested Person and is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then on the
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<PAGE>
Board, and any person elected to fill a newly created directorship who is
unaffiliated with, and not a nominee of, the Interested Person, and who is
recommended by a majority of the Disinterested Directors then on the Board.
5. "Interested Person" is any person (or an Affiliate of such person within
two years of the date in question) which, as of the record date for the
determination of shareholders entitled to notice of any Covered Transaction and
to vote thereon or consent thereto, or as of the date of any such vote or
consent, or immediately prior to the consummation of any Covered Transaction,
beneficially owns, directly or indirectly, ten percent (10%), or more of the
shares of the Corporation eligible to vote on a matter submitted to a vote of
the shareholders of the Corporation; provided, however, that the term
"Interested Person" shall not include W. Jonathan Wride or Rita G. Sandell
(whether individually or together).
6. "Person" is any individual, partnership, corporation or other entity.
7. "Subsidiary of the Corporation" is any corporation of which fifty
percent (50%) or more of any class of stock is beneficially owned, directly or
indirectly, by the Corporation.
No amendment to these Articles of Incorporation shall amend, alter, change
or repeal any of the provisions of this Article IX, unless such amendment, in
addition to receiving any shareholder vote or consent required by the laws of
the State of Florida in effect at the time, shall receive the affirmative vote
or consent of the holders of seventy-five percent (75%) of all the votes
entitled to be cast by each class of Common Shares of the Corporation on a
matter submitted to a vote of the shareholders of the Corporation. X.
X.
A. In addition to any approval of the Board of Directors or any shareholder
vote or consent required by the laws of the State of Florida or any other
provision of these Articles of Incorporation or otherwise, there shall be
required for the approval, adoption or authorization of a Business Combination
with an Interested Person the affirmative vote or consent of the holders of a
majority of the shares of each class of stock of the Corporation eligible to
vote on a matter to be submitted to a vote of the shareholders of the
Corporation considered separately for the purposes of this Article X, which are
not beneficially owned, directly or indirectly, by such Interested Person;
provided, however, that said majority voting requirements shall not be
applicable if either (i) the Business Combination is approved by a majority of
Disinterested Directors or (ii) all of the conditions specified in subparagraphs
(1), (2) and (3) below are met:
1. The consideration to be received per share for each class of stock in
such Business Combination by holders of the stock of the Corporation is payable
in cash or Acceptable Securities, or a combination of both, and such
consideration has a fair market value per share with respect to each class of
the Corporation's stock of not less than either:
(a) the highest price (including the highest per share brokerage
commissions, transfer tax and soliciting dealers fees) paid by said Interested
Person in acquiring any of the Corporation's stock of that class; or
8
<PAGE>
(b) a price per share obtained by multiplying the aggregate earnings
per share of stock of the Corporation (appropriately adjusted for any
subdivision of shares, stock dividend or combination of shares during the
period) for the four full consecutive fiscal quarters immediately preceding the
record date for solicitation of votes or consents on such Business Combination
by the figure obtained by dividing the highest per share price (including the
highest per share brokerage commissions, transfer tax and soliciting dealers
fees) paid by such Interested Person in acquiring any of the Corporation's stock
by the aggregate earnings per share of the Corporation for the four full
consecutive fiscal quarters immediately preceding the time when the Interested
Person shall have become the beneficial owner of ten percent (10%) or more of
the outstanding shares of the Corporation eligible to vote on a matter to be
submitted to a vote of the shareholders of the Corporation.
If any securities were issued by an Interested Person in exchange for stock
of the Corporation prior to the proposed Business Combination, the fair market
value of said securities at the time of issue shall be used in determining the
per share price paid for said stock.
2. After the Interested Person has become an Interested Person and prior to
the consummation of such Business Combination, there shall have been no
reduction in the rate of dividends payable on the Corporation's stock which
would result in a quarterly dividend rate per share which is less than the
average quarterly dividend rate per share for the four full consecutive fiscal
quarters immediately preceding the time when the Interested Person shall have
become the beneficial owner of said ten percent (10%) or more of the shares of
the Corporation, unless such reduction in the rate of dividends has been
approved by a majority of the Disinterested Directors. For the purposes of this
paragraph, "quarterly dividend rate per share" for any quarterly dividend shall
be equal to the percentage said quarterly dividend per share bears to the
earnings per share for the four full fiscal quarters immediately preceding the
declaration of said quarterly dividend.
3. The consideration to be received by shareholders who are not Interested
Persons shall be in cash or in the same form as the Interested Person has
previously paid for shares of such class of stock; if the Interested Person has
paid for shares of any class of any stock with varying forms of consideration,
the form of consideration for such class of stock shall be either cash or the
form used to acquire the largest number of shares of such class of stock
previously acquired by it.
B. For the purposes of this Article X:
1. "Acceptable Securities" shall mean (a) securities of the same class or
series, with the same rights, powers and benefits and of the same denomination,
term and interest, or dividend, if any, as the securities issued and delivered
by the Interested Person in exchange for the majority of the stock of the
corporation acquired by the Interested Person, or (b) the class of common shares
of the Interested Person which is beneficially owned by most persons.
2. "Affiliate" and "associate" shall have the respective meanings given
those terms in Rule l2b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, as in effect on the date hereof.
9
<PAGE>
3. A person shall be the "beneficial owner" and "beneficially own" shares
of stock of the Corporation (other than shares of the Corporation's stock held
in its treasury) (a) which such person and its affiliates or associates
beneficially own, directly or indirectly, whether of record or not, (b) which
such person or any of its affiliates or associates has the right to acquire,
pursuant to any agreement upon the exercise of conversion rights, warrants, or
options, or otherwise, (c) which such person or any of its affiliates or
associates has the right to sell or vote pursuant to any agreement, or (d) which
are beneficially owned, directly or indirectly, by any other person with which
such first mentioned person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purposes of acquiring, holding,
voting or disposing of securities of the Corporation.
4. "Business Combination" is:
(a) any merger or consolidation of the Corporation or any subsidiary of
the Corporation with or into (i) any Interested Person (regardless of the
identity of the surviving corporation) or (ii) any other person, which is, or
after such merger or consolidation would be, an Affiliate of the Interested
Person;
(b) any sale, lease or other disposition of all or any substantial part
(assets having a fair market value of twenty-five percent (25%) of the total
assets of the Corporation) of the assets of the Corporation or any subsidiary of
the Corporation to any Interested Person for cash, real or personal property,
including securities, or any combination thereof; or
(c) any issuance or delivery of securities of the Corporation or a
subsidiary of the Corporation (which the beneficial owner shall have the right
to vote, or to vote upon exercise, conversion or by contract) to an Interested
Person in consideration of or in exchange for any securities or other property
(including cash).
5. "Disinterested Director" means any member of the Board of Directors of
the Corporation (the "Board") who is not affiliated with the Interested Person
and who was a member of the Board prior to the time that the Interested Person
became an Interested Person, and any successor of a Disinterested Director who
is unaffiliated with the Interested Person and is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then on the
Board, and any person elected to fill a newly created directorship who is
unaffiliated with, and not a nominee of, the Interested Person, and who is
recommended by a majority of the Disinterested Directors then on the Board.
6. "Interested Person" is any person which, as of the record date for the
determination of shareholders entitled to notice of any Business Combination and
to vote thereon or consent thereto, or as of the date of any such vote or
consent, immediately prior to the consummation of any Business Combination,
beneficially owns, directly or indirectly, ten percent (10%) or more of the
shares of the Corporation eligible to vote on a matter submitted to a vote of
the shareholders of the Corporation; provided, however, that the term
"Interested Person" shall not include W. Jonathan Wride or Rita G. Sandell
(whether individually or together).
7. "Person" is an individual, partnership, corporation or other entity.
10
<PAGE>
8. "Subsidiary of the Corporation" is any corporation of which fifty
percent (50%) or more of any class of stock is beneficially owned, directly or
indirectly, by the Corporation.
C. No amendment to these Articles of Incorporation shall amend, alter,
change or repeal any of the provisions of this Article X, unless such amendment,
in addition to receiving any shareholder vote or consent required by the laws of
the State of Florida in effect at the time, shall receive the affirmative vote
or consent of the holders of seventy-five percent (75%) of all the votes
entitled to bd cast by each class of Common Shares of the Corporation on a
matter submitted to a vote of the shareholders of the Corporation.
XI.
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of duty of care
or other duty as a director if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided, however, that to
the extent required by applicable law, this Article shall not eliminate or limit
the liability of a director (i) for a violation of the criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, (ii) for any transaction
from which the director derived an improper personal benefit, (iii) for unlawful
distributions to shareholders of the Corporation in violation of Section
607.06401 of the Florida Business Corporation Act, as in effect on the date
hereof, or (iv) for willful misconduct or a conscious disregard for the best
interests of the Corporation in a proceeding by or in the right of the
Corporation to procure judgment in its favor or in a proceeding by or in the
right of a shareholder. If applicable law is amended to authorize corporate
action further eliminating or limiting the liability of directors, then the
liability of each director of the Corporation shall be eliminated or limited to
the fullest extent permitted by applicable law, as amended. Neither the
amendment or repeal of this Article, nor the adoption of any provision of these
Articles of Incorporation inconsistent with this Article, shall eliminate or
reduce the effect of this Article in respect of any acts or omissions occurring
prior to such amendment, repeal or adoption of an inconsistent provision.
XII.
The name and address of the incorporator to these Articles of Incorporation
was W. Jonathan Wride, 400 Fifth Avenue South, Naples, Florida 34102.
XIII.
The By-Laws of the Corporation may be adopted, altered, amended, or
repealed by the shareholders or by the Board of Directors. Action by the
shareholders with respect to the By-Laws shall be taken by an affirmative vote
of sixty-six and two-thirds percent (66 2/3%) of all the votes eligible to be
cast by each class of stock of the Corporation on a matter submitted to a vote
of the shareholders of the Corporation, and action by the Board of Directors
with respect to the By-Laws shall be taken by an affirmative vote of a majority
of all directors then holding office.
11
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Second Amended and
Restated Articles of Incorporation to be executed by W. Jonathan Wride,
President and Chief Executive Officer of the Corporation, on this 23rd day of
September, 1998.
By: /s/ W. JONATHAN WRIDE
----------------------------------------
W. Jonathan Wride
President and Chief Executive Officer
12
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
AK HOLDING CORPORATION
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
AK HOLDING CORPORATION
TABLE OF CONTENTS
PAGE
----
ARTICLE I. - DEFINITIONS ..........................................-1-
ARTICLE II. - GENERAL PROVISIONS REGARDING NOTICES..................-2-
Section 1. NOTICES...........................................-2-
Section 2. WAIVER OF NOTICE..................................-2-
ARTICLE III. - SHAREHOLDERS' MEETINGS...............................-4-
Section 1. PLACE OF MEETING..................................-4-
Section 2. ANNUAL MEETING....................................-4-
Section 3. SPECIAL MEETINGS..................................-4-
Section 4. NOTICE TO SHAREHOLDERS............................-4-
Section 5. FIXING OF RECORD DATE.............................-5-
Section 6. QUORUM AND VOTING REQUIREMENTS....................-6-
Section 7. PROXIES...........................................-7-
Section 8. ACTION OF SHAREHOLDERS WITHOUT A MEETING..........-7-
ARTICLE IV. - DIRECTORS.............................................-7-
Section 1. GENERAL POWERS....................................-7-
Section 2. NUMBER, TENURE, QUALIFICATIONS....................-8-
Section 3. VACANCIES, HOW FILLED.............................-8-
Section 4. PLACE OF MEETING..................................-8-
Section 5. COMPENSATION......................................-8-
Section 6. REGULAR MEETINGS..................................-8-
Section 7. SPECIAL MEETINGS..................................-8-
Section 8. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER....-9-
Section 9. QUORUM............................................-9-
Section 10. MANNER OF ACTING.................................-9-
Section 11. COMMITTEES.......................................-9-
Section 12. ACTION WITHOUT FORMAL MEETING...................-10-
Section 13. CONFERENCE CALL MEETINGS........................-10-
ARTICLE V. - OFFICERS..............................................-10-
Section 1. GENERALLY........................................-10-
Section 2. COMPENSATION.....................................-11-
(i)
<PAGE>
PAGE
----
Section 3. VACANCIES........................................-11-
Section 4. CHAIRMAN OF THE BOARD............................-11-
Section 5. CHIEF EXECUTIVE OFFICER..........................-11-
Section 6. SECRETARY........................................-12-
Section 7. THE CHIEF FINANCIAL OFFICER......................-12-
Section 8. DEPUTY OFFICERS..................................-12-
Section 9. ASSISTANT OFFICERS................................-13-
ARTICLE VI. - INDEMNIFICATION......................................-13-
Section 1. ACTION BY PERSONS OTHER THAN THE CORPORATION.....-13-
Section 2. ACTIONS BY OR IN THE NAME OF THE CORPORATION.....-13-
Section 3. SUCCESSFUL DEFENSE...............................-14-
Section 4. AUTHORIZATION OF INDEMNIFICATION.................-14-
Section 5. REASONABLENESS OF EXPENSES.......................-14-
Section 6. PREPAYMENT OF EXPENSES...........................-15-
Section 7. NON-EXCLUSIVE RIGHT..............................-15-
Section 8. SUCCESSORS.......................................-15-
Section 9. JUDICIAL DETERMINATION...........................-16-
Section 10. INSURANCE.......................................-16-
Section 11. INFORMATION TO SHAREHOLDERS.....................-16-
ARTICLE VII. - FISCAL YEAR.........................................-17-
ARTICLE VIII. - ANNUAL STATEMENTS..................................-17-
ARTICLE IX. - CAPITAL STOCK........................................-17-
Section 1. FORM.............................................-17-
Section 2. TRANSFER.........................................-18-
Section 3. RIGHTS OF HOLDER.................................-18-
Section 4. LOST OR DESTROYED CERTIFICATES...................-18-
ARTICLE X. - SEAL..................................................-18-
ARTICLE XI. - REGISTERED OFFICE AND REGISTERED AGENT...............-19-
ARTICLE XII. - AMENDMENTS .........................................-19-
Section 1. AMENDMENTS GENERALLY.............................-19-
Section 2. BY-LAW INCREASING QUORUM OR VOTING REQUIREMENTS..-19-
(ii)
<PAGE>
BY-LAWS
OF
AK HOLDING CORPORATION
ARTICLE I.
DEFINITIONS
As used in these By-Laws, the terms set forth below shall have the meanings
indicated, as follows: "Act" shall mean the Florida Business Corporation Act, as
amended from time to time.
"Articles of Incorporation" means the Articles of Incorporation of the
Corporation, as amended from time to time.
"Board" shall mean the Board of Directors of the Corporation.
"Chairman of the Board" shall mean the Chairman of the Board of Directors,
or such other officer as shall be designated by the Board as having the duties
of the Chairman of the Board, as described in Section 4 of Article V of these
By-Laws.
"Chief Executive Officer" shall mean the President of the Corporation, or
such other officer as shall be designated by the Board as having the duties of
the Chief Executive Officer, as described in Section 5 of Article V of these
By-Laws.
"Corporation" shall mean AK Holding Corporation, a Florida corporation.
"Secretary" shall mean the Secretary of the Corporation, or such other
officer as shall be designated by the Board as having the duties of the
corporate Secretary as described in Section 6 of Article V of these By-Laws.
"Secretary of State" shall mean the Secretary of State of Florida.
"Voting group" shall have the meaning set forth in subsection (a) of
Section 6 of Article III of these By-Laws.
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<PAGE>
ARTICLE II.
GENERAL PROVISIONS REGARDING NOTICES
Section 1. NOTICES. Except as otherwise provided in the Articles of
Incorporation or these By-Laws, or as otherwise required by applicable law:
(a) Any notice required by these By-Laws or by law shall be in writing
unless oral notice is reasonable under the circumstances.
(b) Notice may be communicated in person; by telephone, telegraph,
teletype, or other form of electronic communication; or by mail.
(c) Written notice by the Corporation to any shareholder is effective when
deposited in the mail, if mailed with first-class postage prepaid and correctly
addressed to the shareholder's address shown in the Corporation's current stock
transfer books; provided that it may utilize a class of mail other than first
class if the notice of the meeting is mailed, with adequate postage prepaid, not
less than 30 days before the date of the meeting.
(d) Written notice to the Corporation may be addressed to its registered
agent at its registered office or to the Corporation or its Secretary at its
principal office shown in its most recent annual registration with the Secretary
of State.
(e) Except as provided in subsection (c) of this Section 1, written notice,
if in a comprehensible form, is effective at the earliest of the following:
(1) When received;
(2) Five days after its deposit in the mail, as evidenced by the postmark,
if mailed with first-class postage prepaid and correctly addressed; or
(3) On the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by
or on behalf of the addressee.
(f) Oral notice is effective when communicated if communicated directly to
the person to be notified in a comprehensible manner.
(g) In calculating time periods for notice under these By-Laws, when a
period of time measured in days, weeks, months, years, or other measurement of
time is prescribed for the exercise of any privilege or the discharge of any
duty, the first day shall not be counted but the last day shall be counted.
Section 2. WAIVER OF NOTICE. Except as otherwise provided or required by
the Articles of Incorporation, these By-Laws or applicable law:
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<PAGE>
(a) A shareholder may waive any notice required to be given to such
shareholder, before or after the date and time stated in the notice. The waiver
must be in writing, be signed by the shareholder entitled to the notice, and be
delivered to the Corporation for inclusion in the minutes or filing with the
Corporation's corporate records.
(b) A shareholder's attendance at a meeting:
(1) Waives objection to lack of notice or defective notice of the meeting,
unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting; and
(2) Waives objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to considering the matter when
it is presented.
(c) Neither the business transacted nor the purpose of the meeting need be
specified in the waiver, except that any waiver by a shareholder of the notice
of a meeting of shareholders with respect to an amendment of the Articles of
Incorporation, a plan of merger or share exchange, a sale of assets or any other
action which would entitle the shareholder to exercise statutory dissenter's
rights under the Act and obtain payment for his shares shall not be effective
unless:
(1) Prior to the execution of the waiver, the shareholder shall have been
furnished the same material that under the Act would have been required to be
sent to the shareholder in a notice of the meeting, including notice of any
applicable dissenters' rights as provided in the Act; or
(2) The waiver expressly waives the right to receive the material required
to be furnished.
(d) A director may waive any notice required to be given to such director
by the Act, the Articles of Incorporation, or these By-Laws before or after the
date and time stated in the notice. Except as provided by subsection (e) of this
Section 2, the waiver must be in writing, signed by the director entitled to the
notice, and delivered to the Corporation for inclusion in the minutes or filing
with the Corporation's corporate records.
(e) A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
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<PAGE>
ARTICLE III.
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETING. The Board may designate any place within or
outside the State of Florida as the place of meeting for any annual or special
shareholders' meeting. A waiver of notice signed by all shareholders entitled to
vote at a meeting may designate any place within or outside the State of Florida
as the place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the Corporation.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders shall be
held on the fourth Friday in July of each year, if not a legal holiday (and if
such is a legal holiday, then on the next following business day not a legal
holiday), at such time and place as the Board shall determine, at which time the
shareholders shall elect a Board and transact such other business as may be
properly brought before the meeting. Notwithstanding the foregoing, the Board
may cause the annual meeting of shareholders to be held on such other date in
any year as the Board shall determine to be in the best interests of the
Corporation, and any business transacted at that meeting shall have the same
validity as if transacted on the date designated herein. If the annual meeting
is not held within any 13-month period, the circuit court of the circuit in
which the principal office of the Corporation is located may, on application of
any shareholder, summarily order a meeting to be held.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, except to the extent otherwise prescribed by statute or the
Articles of Incorporation, may be called by the Chief Executive Officer, or by
the presiding officer of the Board, if any. The Chief Executive Officer or the
Secretary shall call a special meeting when: (1) requested in writing by any
three or more of the directors; or (2) requested in writing by shareholders
owning not less than ten percent (10%) of all shares entitled to vote. Any such
written request shall be signed and dated and shall state the purpose or
purposes of the proposed meeting. A meeting requested by the shareholders shall
be called for at a date not less than fourteen (14) or more than sixty (60) days
after the request is made unless the shareholders requesting the meeting
designate a later date.
Section 4. NOTICE TO SHAREHOLDERS.
(a) Except as otherwise specifically provided in this Section 4,
requirements with respect to the giving of notice and waiver of notice shall be
governed by the provisions of Article II of these By-Laws.
(b) The Corporation shall give notice to each shareholder entitled to vote
thereat of the date, time and place of each annual and special shareholders'
meeting not less than ten (10) nor more than sixty (60) days before the meeting
date.
-4-
<PAGE>
(c) Unless otherwise required by the Act with respect to meetings at which
specified actions will be considered (including but not limited to mergers,
certain share exchanges, certain asset sales by the Corporation, and dissolution
of the Corporation), notice of an annual meeting need not contain a description
of the purpose or purposes for which the meeting is called.
(d) Notice of a special meeting must include a description of the purpose
or purposes for which the meeting is called.
(e) Unless a new record date is set (or is required by law or by the terms
of these ByLaws to be set) therefor, notice of the date, time and place of any
adjourned meeting need not be given otherwise than by the announcement at the
meeting before adjournment. If a new record date for the adjourned meeting is or
must be fixed, however, notice of the adjourned meeting must be given in
accordance with these By-Laws as if such adjourned meeting were a newly-called
meeting.
(f) If any corporate action proposed to be considered at a meeting of
shareholders would or might give rise to statutory dissenters' rights under the
Act, the notice of such meeting shall state that the meeting is to include
consideration of such proposed corporate action, and that the consummation of
such action will or might give rise to such dissenters' rights, and shall
include the description of such statutory dissenters' rights required by the
Act.
Section 5. FIXING OF RECORD DATE.
(a) For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders, or shareholders entitled to demand a
special meeting of shareholders, or shareholders entitled to take any other
action, the Board may fix in advance (but not retroactively from the date the
Board takes such action) a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) days prior
to the meeting or action requiring such determination of shareholders. If no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, the close of business on the last
business day before the first notice of such meeting is delivered to
shareholders shall be the record date. If no record date is fixed for
determining shareholders entitled to take action without a meeting, the date the
first shareholder signs the consent shall be the record date for such purpose.
If no record date is fixed for determining shareholders entitled to demand a
special meeting, or to take other action, the date of receipt of notice by the
Corporation of demand for such meeting, or the date on which such other action
is to be taken by the shareholders, shall be the record date for such purpose.
(b) A separate record date may be established for each voting group
entitled to vote separately on a matter at a meeting.
(c) A determination of shareholders entitled to notice of or to vote at a
shareholders meeting is effective for any adjournment of the meeting unless the
meeting is adjourned to a date
-5-
<PAGE>
more than 120 days after the date fixed for the original meeting, in which
event, a new record date shall be set.
(d) For the purpose of determining shareholders entitled to a distribution
by the Corporation (other than one involving a purchase, redemption or other
acquisition of the Corporation's shares), the record date shall be the date
fixed for such purpose by the Board, or if the Board does not fix such a date,
the date on which the Board authorizes such distribution.
Section 6. QUORUM AND VOTING REQUIREMENTS.
(a) Except as otherwise provided by the Articles of Incorporation or the
Act:
(i) A "voting group" with respect to any given matter means all shares of
one or more class or series which, under the Articles of Incorporation
or the Act, are entitled to vote and be counted together collectively
on that matter, and unless specified otherwise in the Articles of
Incorporation, the Act or these By-Laws, all shares entitled to vote
on a given matter shall be deemed to be a single voting group for
purposes of that matter.
(ii) Each outstanding share, regardless of class, is entitled to one vote
on each matter voted on at a shareholders' meeting.
(iii) A majority of the votes entitled to be cast on the matter by a voting
group constitutes a quorum of that voting group for action on that
matter.
(iv) The presence of a quorum of each voting group entitled to vote thereon
shall be the requisite for transaction of business on a given matter.
(v) Action on a matter other than election of directors is approved by a
voting group if a quorum of such voting group exists and the number of
votes cast within such voting group in favor of such action exceeds
the number of votes cast within such voting group against such action.
(vi) Except as otherwise provided in these By-Laws, all shares entitled to
vote for election of directors shall vote thereon as a single voting
group, and directors shall be elected by a plurality of votes cast by
shares entitled to vote in the election in a meeting at which a quorum
of such voting group is present.
(b) Once a share is represented for any purpose other than solely to object
to holding a meeting or transacting business at the meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is, or is required by law
or these By-Laws to be, set for that adjourned meeting.
-6-
<PAGE>
(c) If a quorum for transaction of business shall not be present at a
meeting of shareholders, the shareholders entitled to vote thereat, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time, until the requisite amount of voting stock shall be present. No notice
other than announcements at the meeting before adjournment shall be required of
the new date, time or place of the adjourned meeting, unless a new record date
for such adjourned meeting is, or is required by law or these By-Laws to be,
fixed. At such adjourned meeting (for which no new record date is, or is
required to be, set) at which a quorum shall be present in person or by proxy,
any business may be transacted that might have been transacted at the meeting
originally called.
Section 7. PROXIES. At every meeting of the shareholders, any shareholder
having the right to vote shall be entitled to vote in person or by proxy, but no
proxy shall be: (i) effective unless given in writing and signed, either
personally by the shareholder or his attorney-in-fact; (ii) effective until
received by the Secretary or other officer or agent authorized to tabulate
votes; or (iii) valid after eleven months from its date, unless said proxy
expressly provides for a longer period.
Section 8. ACTION OF SHAREHOLDERS WITHOUT A MEETING. Unless otherwise
provided in the Articles of Incorporation, any action required or permitted to
be taken at any annual or special meeting of shareholders of the Corporation,
may be taken without a meeting, without prior notice, and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock of each voting group entitled to vote thereon
having not less than the minimum number of votes with respect to each voting
group that would be necessary to authorize or take such action at a meeting at
which all voting groups and shares entitled to vote thereon were present and
voted.
Within 10 days after obtaining such authorization by written consent,
notice must be given to those shareholders who have not consented in writing or
who are not entitled to vote on the action. The notice shall fairly summarize
the material features of the authorized action and, if the action be such for
which dissenters rights are provided under Florida law, the notice shall contain
a clear statement of the right of shareholders dissenting therefrom to be paid
the fair value of their shares upon compliance with further provisions of
Florida law regarding the rights of dissenting shareholders. ARTICLE IV.
DIRECTORS
Section 1. GENERAL POWERS. Except as may be otherwise provided by any legal
agreement among shareholders, the property and business of the Corporation shall
be managed by its Board of Directors. In addition to the powers and authority
expressly conferred by these By-Laws, the Board of Directors may exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by law, or by any legal agreement among shareholders, or by the Articles of
Incorporation or by these By-Laws, directed or required to be exercised or done
by the shareholders.
-7-
<PAGE>
Section 2. NUMBER, TENURE, QUALIFICATIONS. The Board of Directors shall
consist of not fewer than one (1) member, the precise number to be determined
from time to time by affirmative vote of a majority of the entire Board of
Directors. Unless otherwise provided in the Articles of Incorporation, the
Directors shall be elected at the annual meeting of shareholders, to hold office
until the next succeeding annual meeting of shareholders held after his election
and until his successor has been duly elected and has qualified, or until his
earlier resignation, removal from office, or death. Directors shall be natural
persons who are eighteen (18) years of age or older, but need not be
shareholders or residents of Florida unless the Articles of Incorporation
require otherwise.
Section 3. VACANCIES, HOW FILLED. If any vacancy shall occur in the
membership of the Board by reason of newly created directorships or resulting
from the resignation, disqualification, retirement or death of a director, the
remaining directors shall continue to act, and such vacancies may be filled by
the affirmative vote of the majority of the directors then in office, though
less than a quorum, and if not therefore filled by action of the directors, may
be filled by the shareholders at any meeting held during the existence of such
vacancy. If any vacancy shall occur among the directors by reason of the removal
from office of a director, such vacancy shall be filled by the vote of
seventy-five percent (75%) of the outstanding shares of each class of stock
entitled to vote in elections of directors. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office.
Section 4. PLACE OF MEETING. The Board may hold its meetings at such place
or places within or without the State of Florida as it may from time to time
determine.
Section 5. COMPENSATION. Directors may be allowed such compensation for
attendance at regular or special meetings of the Board and of any special or
standing committees thereof as may be from time to time determined by resolution
of the Board.
Section 6. REGULAR MEETINGS. A regular annual meeting of the Board shall be
held, without other notice than this By-Law, immediately after the annual
meeting of shareholders. The Board may provide, by resolution, the time and
place within or without the State of Florida, for the holding of additional
regular meetings without other notice than such resolution.
Section 7. SPECIAL MEETINGS. Special meetings of the Board may be called by
the Chief Executive Officer or the presiding officer of the Board, if different
from the Chief Executive Officer, on not less than five (5) days' notice to each
director by mail, telegram, cablegram or other form of wire or wireless
communication, or personal delivery or other form of communication authorized
under the circumstances by the Act, and shall be called by the Chief Executive
Officer or the Secretary in like manner and on like notice on the written
request of any two (2) or more members of the Board. Such notice shall state the
time, date and place of such meeting, but need not describe the purpose of the
meeting. Any such special meeting shall be held at such time and place as shall
be stated in the notice of the meeting.
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<PAGE>
Section 8. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER. Except as
otherwise expressly provided in this Article IV, matters relating to notice to
directors and waiver of notice by directors shall be governed by the provisions
of Article II of these By-Laws.
Section 9. QUORUM. At all meetings of the Board, unless otherwise provided
in the Articles of Incorporation or other provisions of these By-Laws, the
presence of a majority of the Directors shall constitute a quorum for the
transaction of business. In the absence of a quorum a majority of the Directors
present at any meeting may adjourn from time to time until a quorum is obtained.
Notice of the time and place of any adjourned meeting need only be given by
announcement at the meeting at which adjournment is taken.
Section 10. MANNER OF ACTING. Except as expressly otherwise provided by the
Articles of Incorporation or other provisions of these By-Laws, if a quorum is
present when a vote is taken, the affirmative vote of a majority of directors
present is the act of the Board. A director who is present at a meeting when
corporate action is taken is deemed to have assented to the action unless:
(1) He objects at the beginning of the meeting (or promptly upon his
arrival) to holding it or transacting business at the meeting; or
(2) His dissent or abstention from the action taken is entered in the
minutes of the meeting and his reason(s) for abstention is submitted in
writing to the Board.
Section 11. COMMITTEES.
(a) Except as otherwise provided by the Articles of Incorporation, the
Board may create an Executive Committee and one or more committees and appoint
members of the Board to serve on them. Each committee may have two or more
members, who serve at the pleasure of the Board.
(b) The provisions of these By-Laws and of the Act which govern meetings,
action without meetings, notice and waiver of notice, and quorum and voting
requirements of the Board, shall apply as well to committees created under this
Section 11 and their members.
(c) To the extent specified by the Articles of Incorporation, these By-Laws
and the resolution of the Board creating such committee, each committee may
exercise the authority of the Board, provided that a committee may not:
(1) Approve, or propose to shareholders for approval, action required by
the Act to be approved by shareholders;
(2) Fill vacancies on the Board or on any of its committees;
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(3) Authorize or approve the reacquisition of shares unless pursuant to a
general formula or method specified by the Board of Directors;
(4) Adopt, amend, or repeal by-laws; or
(5) Authorize or approve the issuance or sale or contract for the sale of
shares, or determine the designation and relative rights, preferences,
and limitations of a voting group except that the Board of Directors
may authorize a committee (or a senior executive officer of the
Corporation) to do so within limits specifically prescribed by the
Board of Directors.
Section 12. ACTION WITHOUT FORMAL MEETING. Except as expressly otherwise
provided in the Articles of Incorporation, any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if written consent thereto (which may take the form of one or
more counterparts) is signed by all members of the Board or of such committee,
as the case may be, and such written consent is filed with the minutes of the
proceedings of the Board or committee. A consent executed in accordance herewith
has the effect of a meeting vote and may be described as such in any document.
Section 13. CONFERENCE CALL MEETINGS. Members of the Board, or any
committee of the Board, may participate in a meeting of the Board or committee
by means of conference, telephone or similar communications equipment by means
of which all persons participating in the meeting can simultaneously hear each
other during the meeting, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
ARTICLE V.
OFFICERS
Section 1. GENERALLY. The Board shall from time to time elect or appoint
such officers as it shall deem necessary or appropriate to the management and
operation of the Corporation, which officers shall hold their offices for such
terms as shall be determined by the Board and shall exercise such powers and
perform such duties as are specified in these By-Laws or in a resolution of the
Board. Except as specifically otherwise provided in resolutions of the Board,
the following requirements shall apply to election or appointment of officers:
(a) The Corporation shall have, at a minimum, the following officers, which
offices shall bear the titles designated therefor by resolution of the Board,
but in the absence of such designation shall bear the titles set forth below:
OFFICE TITLE
------ -----
Chairman of the Board Chairman
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Chief Executive Officer President
Chief Financial Officer Treasurer
Secretary Secretary
(b) All officers of the Corporation shall serve at the pleasure of the
Board, and in the absence of specification otherwise in a resolution of the
Board, each officer shall be elected to serve until the next succeeding annual
meeting of the Board and the election and qualification of his successor,
subject to his earlier death, resignation or removal.
(c) Any person may hold two or more offices simultaneously, and no officer
need be a shareholder of the Corporation.
(d) If so provided by resolution of the Board, any officer may be delegated
the authority to appoint one or more officers or assistant officers, which
appointed officers or assistant officers shall have the duties and powers
specified in the resolution of the Board.
Section 2. COMPENSATION. The salaries of the officers of the Corporation
shall be fixed by the Board, except that the Board may delegate to any officer
or officers the power to fix the compensation of any other officer.
Section 3. VACANCIES. A vacancy in any office, because of resignation,
removal or death may be filled by the Board for the unexpired portion of the
term, or if so provided by resolution of the Board, by an officer of the
Corporation to whom has been delegated the authority to appoint the holder of
such vacated office.
Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors
shall, when present, preside at all meetings of the shareholders and the Board,
either annual or special. The Chairman shall assist the Board in the formulation
of policies to be pursued by the executive management of the Corporation, and he
shall study and make reports and recommendations with respect to major problems,
policies, and activities of the Corporation, and it shall be his responsibility
to see that the policy established by the Board is carried into effect by the
executive officers. The Chairman may sign and deliver on behalf of the
Corporation any deed, mortgages, bonds, contracts, powers of attorney, or other
instruments which the Board have authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board or by these By-Laws to some other officer or agent of the Corporation or
shall be required by law to be otherwise signed or executed, and he shall
perform such other duties as may be prescribed by the Board from time to time.
Section 5. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
such title or titles designated by the Board and shall be the principal
executive officer of the Corporation. Subject to the control of the Board, the
Chief Executive Officer shall in general manage, supervise and control all of
the business and affairs of the Corporation. He shall, when
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present, preside at all meetings of all of the stockholders. He may sign,
individually or in conjunction with any other proper officer of the Corporation
thereunto authorized by the Board, certificates for shares of the Corporation,
any deeds, mortgages, bonds, policies of insurance, contracts, investment
certificates, or other instruments which the Board has authorized to be
executed, except in cases where the execution thereof shall be expressly
delegated by the Board or by the By-Laws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of the Chief
Executive Officer of the Corporation and such other duties as may be prescribed
by the Board from time to time.
Section 6. SECRETARY. The Secretary may be designated by any such title as
determined by resolution of the Board, and shall: (a) attend and keep the
Minutes of the shareholders' meetings and of the Board's meetings in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these ByLaws or as otherwise required by law
or the provisions of the Articles of Incorporation; (c) be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the Corporation is affixed to all documents, the execution of which on behalf of
the Corporation under its seal is duly authorized; (d) maintain, or cause an
agent designated by the Board to maintain, a record of the Corporation's
shareholders in a form that permits the preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares, showing
the number and class of shares held by each; (e) have general charge of the
stock transfer books of the Corporation or responsibility for supervision, on
behalf of the Corporation, of any agent to which stock transfer responsibility
has been delegated by the Board; (f) have responsibility for the custody,
maintenance and preservation of those corporate records which the Corporation is
required by the Act or otherwise to create, maintain or preserve; (g) in general
perform all duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Board.
Section 7. THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer, unless
otherwise determined by the Board, shall: (a) have charge and custody of and be
responsible for all funds and securities of the Corporation; receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all such monies in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the Board;
and (b) in general perform all the duties incident to the office of Chief
Financial Officer and such other duties as from time to time may be assigned by
the Board.
Section 8. DEPUTY OFFICERS. The Board may create one or more deputy
officers whose duties shall be, among any other designated thereto by the Board,
to perform the duties of the officer to which such office has been deputized in
the event of the unavailability, death or inability or refusal of such officer
to act. Deputy officers may hold such titles as designated therefor by the
Board; however, any office designated with the prefix "Vice" or "Deputy" shall
be, unless otherwise specified by resolution of the Board, automatically a
deputy officer to the office with the title of which the prefix term is
conjoined. Deputy officers shall have such other duties as prescribed by the
Board from time to time.
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Section 9. ASSISTANT OFFICERS. The Board may appoint one or more officers
who shall be assistants to principal officers of the Corporation, or their
deputies, and who shall have such duties as shall be delegated to such assistant
officers by the Board or such principal officers, including the authority to
perform such functions of those principal officers in the place of and with full
authority of such principal officers as shall be designated by the Board or (if
so authorized) by such principal officers. The Board may by resolution authorize
appointment of assistant officers by those principal officers to which such
appointed officers will serve as assistants.
ARTICLE VI.
INDEMNIFICATION
Section 1. ACTION BY PERSONS OTHER THAN THE CORPORATION. Under the
circumstances prescribed in Sections 3 and 4 of this Article, the Corporation
shall indemnify any person who was or is a party to any, threatened, pending or
completed action, suit or other type of proceeding, whether civil, criminal,
administrative or investigative, and whether formal or informal (other than an
action by or in the right of the Corporation) by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees), judgments, fines,
penalties and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding, including any appeal
thereof, if he acted in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the Corporation and, with
respect to criminal action or proceeding, he had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, or with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. ACTIONS BY OR IN THE NAME OF THE CORPORATION. Under the
circumstances prescribed in Sections 3 and 4 of this Article, the Corporation
shall indemnify and hold harmless any person who was or is a party to any,
threatened, pending or completed action, suit or other type of proceeding,
whether civil, criminal, administrative or investigative, and whether formal or
informal, by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorney's
fees) and amounts paid in settlement not exceeding, in the judgment of the Board
of Directors, the estimated expense of litigating the action, suit or proceeding
to conclusion, actually and reasonably incurred in connection with the defense
or
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settlement of such action, suit or proceeding, including any appeal thereof.
Such indemnification shall be authorized if such person acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation; except that no indemnification shall be made in respect to
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation, unless and only to the extent that, the court in
which such action, suit or proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 3. SUCCESSFUL DEFENSE. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 1
and 2 of this Article, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
Section 4. AUTHORIZATION OF INDEMNIFICATION. Except as provided in Section
3 of this Article and except as may be ordered by a court, any indemnification
under Sections 1 and 2 of this Article shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 1 and 2. Such
determination shall be made:
(a) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or
proceeding;
(b) if such a quorum is not obtainable, or, even if obtainable, by
majority vote of a committee duly designated by the Board of Directors (in
which directors who are a party may participate) consisting solely of two
or more directors not at the time parties to the action, suit or
proceeding;
(c) by independent legal counsel (i) selected by the Board of
Directors prescribed in paragraph (a) of this Section or the committee
prescribed in paragraph (b) of this Section; or (ii) if a quorum of the
directors cannot be obtained for paragraph (a) of this Section and the
committee cannot be designated under paragraph (b) of this Section,
selected by a majority vote of the full Board of Directors (in which
directors who are a party may participate); or
(d) by the shareholders by a majority vote of a quorum consisting of
shareholders who were not parties to such action, suit or proceeding or, if
no such quorum is obtainable, by a majority vote of shareholders who were
not parties to such action, suit or proceeding.
Section 5. REASONABLENESS OF EXPENSES. Evaluation of the reasonableness of
expenses and authorization of indemnification shall be made in the same manner
as the
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determination that indemnification is permissible. However, if the determination
of permissibility is made by independent legal counsel, persons specified by
Section 4(c) shall evaluate the reasonableness of expenses and may authorize
indemnification.
Section 6. PREPAYMENT OF EXPENSES. Expenses incurred by a director or
officer in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article.
Expenses incurred by other employees and agents may be paid in advance upon such
terms or conditions that the Board of Directors deems appropriate.
Section 7. NON-EXCLUSIVE RIGHT. The indemnification and advancement of
expenses provided by this Article are not exclusive, and the Corporation may
make any other or further indemnification or advancement of expenses of any of
its directors, officers, employees or agents, under any Bylaw, agreement, vote
of shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office. However, indemnification or advancement of expenses shall not be made to
or on behalf of any director, officer, employee or agent if a judgment or other
final adjudication establishes that his actions, or omissions to act, were
material to the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director, officer,
employee or agent had reasonable cause to believe his conduct was lawful or
had no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee or
agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of Florida Business Corporation Act ss. 607.0834 are
applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the Corporation in a proceeding by or in the right of the
Corporation to procure a judgment in its favor or in a proceeding by or in
the right of a shareholder.
(e) Recklessness or an act or omission which was committed in bad
faith or with malicious purpose or in a manner exhibiting wanton and
willful disregard of human rights, safety or property in a proceeding by or
in the right of someone other than the Corporation or a shareholder.
Section 8. SUCCESSORS. Unless otherwise provided when authorized or
ratified, indemnification and advancement of expenses as provided in this
Article shall continue as to a
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person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person.
Section 9. JUDICIAL DETERMINATION. Unless the Articles of Incorporation
provide otherwise, notwithstanding the failure of the Corporation to provide
indemnification, and despite any contrary determination of the Board or of the
shareholders in the specific case, a director, officer, employee or agent of the
Corporation who is or was a party to a proceeding may apply for indemnification
or advancement of expenses, or both, to the court conducting the proceeding, to
the circuit court, or to another court of competent jurisdiction. On receipt of
an application, the court, after giving any notice that it considers necessary,
may order indemnification and advancement of expenses, including expenses
incurred in seeking court-ordered indemnification or advancement of expenses, if
it determines that:
(a) The director, officer, employee or agent is entitled to
mandatory indemnification under Section 3, in which case the court shall
also order the Corporation to pay the director reasonable expenses incurred
in obtaining court-ordered indemnification or advancement of expenses;
(b) The director, officer, employee or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the
exercise by the Corporation of its power pursuant to Section 7; or
(c) The director, officer, employee or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or both,
in view of all the relevant circumstances, regardless of whether such
person met the standard of conduct set forth in Section 1, Section 2 or
Section 7.
Section 10. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article.
Section 11. INFORMATION TO SHAREHOLDERS. If any expenses or other amounts
are paid by way of indemnification, otherwise than by court order or action by
the shareholders or by an insurance carrier pursuant to insurance maintained by
the Corporation, the Corporation shall report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders
meeting, or prior to such meeting if the indemnification or advance occurs after
the giving of such notice but prior to the time such meeting is held, which
report shall include a statement specifying the persons paid, the amount paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation.
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ARTICLE VII.
FISCAL YEAR
The fiscal year of the Corporation shall be established by the Board or, in
the absence of Board action establishing such fiscal year, by the Chief
Executive Officer.
ARTICLE VIII.
ANNUAL STATEMENTS
No later than 120 days after the close of each fiscal year, the Corporation
shall furnish its shareholders the following financial statements:
(a) A balance sheet as of the end of the fiscal year;
(b) An income statement for that year; and
(c) A statement of cash flows for that year.
In addition, upon written request, the Corporation shall mail promptly to
any shareholder of record a copy of the most recent such balance sheet, income
statement and statement of cash flows.
ARTICLE IX.
CAPITAL STOCK
Section 1. FORM.
(a) Except as otherwise provided for in paragraph (b) of this Section 1,
the interest of each shareholder shall be evidenced by a certificate
representing shares of stock of the Corporation, which shall be in such form as
the Board may from time to time adopt and shall be numbered and shall be entered
in the books of the Corporation as they are issued. Each certificate shall
exhibit the holder's name, the number of shares and class of shares and series,
if any, represented thereby, the name of the Corporation, a statement that the
Corporation is organized under the laws of the State of Florida, the par value
of each share or a statement that the shares are without par value and a summary
of the designations, relative rights, preferences, and limitations applicable to
each class and the variations in rights, preferences, and limitations determined
for each series (and the authority of the Board of Directors to determine
variations for future series) or a statement that the Corporation will furnish
the shareholder a full statement of this information on request and without
charge. Each certificate shall be signed by one or more officers of the
Corporation specified by resolution of the Board, but in the absence of such
specifications, shall be valid if executed by the Chief Executive Officer or any
Deputy or
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Assistant thereto, and such execution is countersigned by the Secretary, or any
Deputy or Assistant thereto. Each stock certificate may but need not be sealed
with the seal of the Corporation.
(b) If authorized by resolution of the Board, the Corporation may issue
some or all of the shares of any or all of its classes or series without
certificates. The issuance of such shares shall not affect shares already
represented by certificates until they are surrendered to the Corporation.
Within a reasonable time after the issuance or transfer of any shares not
represented by certificates, the Corporation shall send to the holder of such
shares a written statement setting forth, with respect to such shares (i) the
name of the Corporation as issuer and the Corporation's state of incorporation,
(ii) the name of the person to whom such shares are issued, (iii) the number of
shares and class of shares and series, if any, and (iv) the terms of any
restrictions on transfer which, were such shares represented by a stock
certificate would be required to be noted on such certificate, by law, by the
Articles of Incorporation or these By-Laws, or by any legal agreement among the
shareholders of the Corporation.
Section 2. TRANSFER. Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate, or, in the case of
shares not represented by certificates, the person named in the Corporation's
stock transfer records as the owner of such shares, or, in either case, by
attorney lawfully constituted in writing. In addition, with respect to shares
represented by certificates, transfers shall be made only upon surrender of the
certificate therefor, or in the case of a certificate alleged to have been lost,
stolen or destroyed, upon compliance with the provisions of Section 4, Article
IX of these By-Laws.
Section 3. RIGHTS OF HOLDER. The Corporation shall be entitled to treat the
holder of record of any share of the Corporation as the person entitled to vote
such share (to the extent such share is entitled to vote), to receive any
distribution with respect to such share, and for all other purposes and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
Section 4. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board may require and shall if the
Board so requires, give the Corporation a bond of indemnity in the form and
amount and with one or more sureties satisfactory to the Board, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
ARTICLE X.
SEAL
The corporate seal shall be in such form as shall be specified in the
minutes of the organizational meeting of the Corporation, or as the Board may
from time to time determine.
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ARTICLE XI.
REGISTERED OFFICE AND REGISTERED AGENT
The address of the registered office of the corporation is 400 Fifth Avenue
South, Naples, Florida 34102 and the name of the registered agent is W. Jonathan
Wride. The corporation may amend this Article XI at any time to change its
registered office or registered agent, without further action of its officers or
directors, by filing with the Secretary of State a notice of such change, in
accordance with Section 607.0502 of the Act, or any successor statute.
The corporation may have other offices at such places within or without the
State of Florida as the Board may from time to time designate or the business of
the Corporation may require or make desirable.
ARTICLE XII.
AMENDMENTS
Section 1. AMENDMENTS GENERALLY.
(a) Except as otherwise provided in the Articles of Incorporation or by
applicable law, the By-Laws of the Corporation may be altered or amended and new
By-Laws may be adopted by the shareholders or by the Board of Directors at any
regular or special meeting of the Board of Directors; provided, however, that,
if such action is to be taken at a meeting of the shareholders, notice of the
general nature of the proposed change in the By-Laws shall have been given in
the notice of a meeting. Except as otherwise provided in this Article XII,
action by the shareholders with respect to By-Laws shall be taken by an
affirmative vote of sixty-six and two-thirds percent (66 2/3%) of all the votes
eligible to be cast by each class of stock of the Corporation on a matter
submitted to a vote of the shareholders of the Corporation, and action by the
directors with respect to By-Laws shall be taken by an affirmative vote of a
majority of all directors then holding office.
Section 2. BY-LAW INCREASING QUORUM OR VOTING REQUIREMENTS.
(a) Any By-Law which sets a greater quorum or voting requirement for
shareholders (or voting groups of shareholders) than the minimum required by the
Act may not be adopted, amended or repealed by the Board.
(b) Except as otherwise provided in the Articles of Incorporation, a By-Law
that fixes a greater quorum or voting requirement for the Board than the minimum
required by the Act:
(1) May be amended or repealed only by the shareholders if originally
adopted by the shareholders;
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(2) May be amended or repealed either by the directors or the shareholders
if originally adopted by the Board of Directors.
(c) A By-Law adopted or amended by the shareholders that fixes a greater
quorum or voting requirement for the Board may be amended or repealed only by a
specified vote of either the shareholders or the Board, if such By-Law provision
so provides.
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EXHIBIT 10.2
AK HOLDING CORPORATION
1998 STOCK OPTION PLAN
EFFECTIVE AS OF SEPTEMBER 1, 1998
1. PURPOSE
The primary purpose of the AK Holding Corporation 1998 Stock Option Plan
(the "Plan") is to encourage and enable eligible directors, officers and key
employees of AK Holding Corporation (the "Company") and its subsidiaries
to acquire proprietary interests in the Company through the ownership of Common
Stock of the Company. The Company believes that directors, officers and key
employees who participate in the Plan will have a closer identification with the
Company by virtue of their ability as shareholders to participate in the
Company's growth and earnings. The Plan also is designed to provide motivation
for participating directors, officers and key employees to remain in the employ
of and to give greater effort on behalf of the Company. It is the intention of
the Company that the Plan provide for the award of "incentive stock options"
qualified under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and the regulations promulgated thereunder, as well as the award of
non-qualified stock options. Accordingly, the provisions of the Plan related to
incentive stock options shall be construed so as to extend and limit
participation in a manner consistent with the requirements of Section 422 of the
Code.
2. DEFINITIONS
The following words or terms shall have the following meanings:
(a) "Agreement" shall mean a stock option agreement between the Company and
an Eligible Employee or Eligible Participant pursuant to the terms of this Plan.
(b) "Board of Directors" shall mean the Board of Directors of the Company.
(c) "Committee" shall mean the committee appointed by the Board of
Directors to administer the Plan, if any, as set forth in Section 5 of the Plan.
(d) "Company" shall mean AK Holding Corporation, a Florida corporation.
(e) "Eligible Employee(s)" shall mean key employees regularly employed by
the Company or a Subsidiary (including officers, whether or not they are
directors) as the Board of Directors or the Committee shall select from time to
time.
(f) "Eligible Participant(s)" shall mean directors, officers, key employees
of the Company and its Subsidiaries, consultants, advisors and other persons who
may not otherwise be eligible to receive Qualified Incentive Options pursuant to
Section 8 of the Plan.
<PAGE>
(g) "Market Price" shall mean the closing price of the Company's Common
Stock on the date in question, as quoted by the Nasdaq National Market or the
Nasdaq SmallCap Market (or other nationally recognized quotation service). If
the Company's Common Stock is not traded on the Nasdaq Stock Market but is
registered on a national securities exchange, "Market Price" shall mean the
closing sales price of the Company's Common Stock on such national securities
exchange. If the Company's shares of Common Stock are not traded on a national
securities exchange or through any other nationally recognized quotation
service, then "Market Price" shall mean the fair market value of the Company's
Common Stock as determined by the Board of Directors or the Committee, acting in
good faith, under any method consistent with the Code, or Treasury Regulations
thereunder, as the Board of Directors or the Committee shall in its discretion
select and apply at the time of the grant of the option concerned. Subject to
the foregoing, the Board of Directors or the Committee, in fixing the market
price, shall have full authority and discretion and be fully protected in doing
so.
(h) "Optionee" shall mean an Eligible Employee or Eligible Participant
having a right to purchase Common Stock under an Agreement.
(i) "Option(s)" shall mean the right or rights granted to Eligible
Employees or Eligible Participants to purchase Common Stock under the Plan.
(j) "Plan" shall mean this AK Holding Corporation 1998 Stock Option Plan.
(k) "Shares," "Stock," or "Common Stock" shall mean shares of the $.01 par
value common stock of the Company.
(l) "Subsidiary" or "Subsidiaries" shall mean any corporation(s), if the
Company owns or controls, directly or indirectly, more than a majority of the
voting stock of such corporation(s).
(m) "Ten Percent Owner" shall mean an individual who, at the time an Option
is granted, owns directly or indirectly more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or a Subsidiary.
3. EFFECTIVE DATE
The effective date of the Plan (the "Effective Date") shall be the date the
Plan is adopted by the Board of Directors, or the date the Plan is approved by
the shareholders of the Company, whichever is earliest. The Plan must be
approved by the affirmative vote of not less than a majority of the shares
present and voting at a meeting at which a quorum is present, which shareholder
vote must be taken within twelve (12) months after the date the Plan is adopted
by the Board of Directors. Such shareholder vote shall not alter the Effective
Date of the Plan. In the event shareholder approval of the adoption of the Plan
is not obtained within the aforesaid twelve (12) month period, then any Options
granted in the intervening period shall be void.
2
<PAGE>
4. SHARES RESERVED FOR PLAN
The shares of the Company's Common Stock to be sold to Eligible Employees
and Eligible Participants under the Plan may at the election of the Board of
Directors be either treasury shares or Shares originally issued for such
purpose. The maximum number of Shares which shall be reserved and made available
for sale under the Plan shall be one million (1,000,000); provided, however,
that such Shares shall be subject to the adjustments provided in Section 8(h).
Any Shares subject to an Option which for any reason expires or is terminated
unexercised may again be subject to an Option under the Plan.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors or the Committee.
The Committee shall be comprised of not less than two (2) members appointed by
the Board of Directors of the Company from among its members, each of whom
qualifies as a "Non-Employee Director" as such term is defined in Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor regulation.
Within the limitations described herein, the Board of Directors of the
Company or the Committee shall administer the Plan, select the Eligible
Employees and Eligible Participants to whom Options will be granted, determine
the number of shares to be optioned to each Eligible Employee and Eligible
Participant and interpret, construe and implement the provisions of the Plan.
The Board of Directors or the Committee shall also determine the price to be
paid for the Shares upon exercise of each Option, the period within which each
Option may be exercised, and the terms and conditions of each Option granted
pursuant to the Plan. The Board of Directors and Committee members shall be
reimbursed for out-of-pocket expenses reasonably incurred in the administration
of the Plan.
If the Plan is administered by the Board of Directors, a majority of the
members of the Board of Directors shall constitute a quorum, and the act of a
majority of the members of the Board of Directors present at any meeting at
which a quorum is present, or acts approved in writing by all members of the
Board of Directors shall be the acts of the Board of Directors. If the Plan is
administered by the Committee, a majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all of the
members of the Committee shall be the acts of the Committee.
6. ELIGIBILITY
Options granted pursuant to Section 8 shall be granted only to Eligible
Employees. Options granted pursuant to Section 9 may be granted to Eligible
Employees and to Eligible Participants.
3
<PAGE>
7. DURATION OF THE PLAN
The Plan shall remain in effect until all Shares subject to or which may
become subject to the Plan shall have been purchased pursuant to Options granted
under the Plan; provided that Options under the Plan must be granted within ten
(10) years from the Effective Date. The Plan shall expire on the tenth
anniversary of the Effective Date.
8. QUALIFIED INCENTIVE OPTIONS
It is intended that Options granted under this Section 8 shall be qualified
incentive stock options under the provisions of Section 422 of the Code and the
regulations thereunder or corresponding provisions of subsequent revenue laws
and regulations in effect at the time such Options are granted. Such Options
shall be evidenced by stock option agreements in such form and not inconsistent
with this Plan as the Committee or the Board of Directors shall approve from
time to time, which Agreements shall contain in substance the following terms
and conditions:
(a) Price. The purchase price for shares purchased upon exercise will be
equal to 100% of the Market Price on the day the Option is granted; provided
that the purchase price of stock deliverable upon the exercise of a qualified
incentive stock option granted to a Ten Percent Owner under this Section 8 shall
be not less than one hundred ten percent (110%) of the Market Price on the day
the Option is granted, as determined by the Board of Directors or the Committee,
but in no case less than the par value of such stock.
(b) Number of Shares. The Agreement shall specify the number of Shares
which the Optionee may purchase under such Option, as determined by the Board of
Directors or the Committee.
(c) Exercise of Options. The shares subject to the Option may be purchased
in whole or in part by the Optionee in accordance with the terms of the
Agreement from time to time after shareholder approval of the Plan, as
determined by the Board of Directors or the Committee, but in no event later
than ten (10) years from the date of grant of the Option. Notwithstanding the
foregoing, Shares subject to an Option which is a qualified incentive stock
option granted to a Ten Percent Owner under this Section 8 may be purchased from
time to time but in no event later than five (5) years from the date of grant of
the Option.
(d) Medium and Time of Payment. Stock purchased pursuant to an Agreement
shall be paid for in full at the time of purchase. Payment of the purchase price
shall be in cash or, in lieu of payment of all or part of the purchase price in
cash, the Optionee may surrender to the Company shares of the common stock of
the Company valued at the Market Price on the date of exercise of the Option in
accordance with the terms of the Agreement. Upon receipt of payment, the Company
shall, without transfer or issue tax, deliver to the Optionee (or other person
entitled to exercise the Option) a certificate or certificates for such Shares.
4
<PAGE>
(e) Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to any Shares covered by an Option until the date of
issuance of the stock certificate to the Optionee for such Shares. Except as
otherwise expressly provided in the Plan, no adjustments shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued.
(f) Nonassignability of Option. No Option shall be assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the lifetime of the Optionee, the Option shall be
exercisable only by him or her.
(g) Effect of Termination of Employment or Death. In the event that an
Optionee during his or her lifetime ceases to be an employee of the Company or
of any Subsidiary of the Company for any reason (including retirement) other
than death or permanent and total disability, any Option or unexercised portion
thereof which was otherwise exercisable on the date of termination of employment
shall expire unless exercised within a period of three (3) months from the date
on which the Optionee ceased to be an employee, but in no event after the term
provided in the Optionee's Agreement. In the event that an Optionee ceases to be
an employee of the Company or of any Subsidiary of the Company for any reason
(including retirement) other than death or permanent and total disability prior
to the time that an Option or portion thereof becomes exercisable, such Option
or portion thereof which is not then exercisable shall terminate and be null and
void. Whether authorized leave of absence for military or government service
shall constitute termination of employment for the purpose of this Plan shall be
determined by the Board of Directors or the Committee, which determination shall
be final and conclusive.
In the event that an Optionee during his or her lifetime ceases to be an
employee of the Company or any Subsidiary of the Company by reason of death or
permanent and total disability, any Option or unexercised portion thereof which
was otherwise exercisable on the date such Optionee ceased employment shall
expire unless exercised within a period of one (1) year from the date on which
the Optionee ceased to be an employee, but in no event after the term provided
in the Optionee's Agreement. In the event that an Optionee during his or her
lifetime ceases to be an employee of the Company or any Subsidiary of the
Company by reason of death or permanent and total disability, any Option or
portion thereof which was not exercisable on the date such Optionee ceased
employment may, in the discretion of the Board of Directors or the Committee, be
accelerated and become immediately exercisable for a period of one (1) year from
the date on which the Optionee ceased to be an employee, but in no event shall
the exercise period extend past the term provided in the Optionee's Agreement.
"Permanent and total disability" as used in this Plan shall be as defined
in Section 22(e)(3) of the Code.
In the event of the death of an Optionee, the Option shall be exercisable
by his or her personal representatives, heirs or legatees, as provided herein.
5
<PAGE>
(h) Recapitalization. In the event that dividends are payable in Common
Stock of the Company or in the event there are splits, subdivisions or
combinations of shares of Common Stock of the Company, the number of Shares
available under the Plan shall be increased or decreased proportionately, as the
case may be, and the number and Option exercise price of Shares deliverable upon
the exercise thereafter of any Option theretofore granted shall be increased or
decreased proportionately, as the case may be, as determined to be proper and
appropriate by the Board of Directors or the Committee.
(i) Reorganization. In case the Company is merged or consolidated with
another corporation and the Company is not the surviving corporation, or in case
the property or stock of the Company is acquired by another corporation, or in
case of a separation, reorganization, recapitalization or liquidation of the
Company, the Board of Directors of the Company, or the Board of Directors of any
corporation assuming the obligations of the Company hereunder, shall either (i)
make appropriate provision for the protection of any outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company, or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to the shares of Common Stock of the Company, provided only
that the excess of the aggregate fair market value of the Shares subject to
option immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the Shares
subject to option immediately before such substitution over the purchase price
thereof, or (ii) upon written notice to the Optionee provide that the Option
(including, in the discretion of the Board of Directors, any portion of such
Option which is not then exercisable) must be exercised within sixty (60) days
of the date of such notice or it will be terminated. If any adjustment under
this Section 8(i) would create a fractional share of Stock or a right to acquire
a fractional share, such shall be disregarded and the number of shares of Stock
available under the Plan and the number of Shares covered under any Options
previously granted pursuant to the Plan shall be the next lower number of shares
of Stock, rounding all fractions downward. An adjustment made under this Section
8(i) by the Board of Directors shall be conclusive and binding on all affected
persons.
Except as otherwise expressly provided in this Plan, the Optionee shall
have no rights by reason of any subdivision or consolidation of shares of stock
of any class, or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class, or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation; and any issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or prices of shares of Common Stock subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(j) Annual Limitation. The aggregate fair market value (determined at the
time the Option is granted) of the shares with respect to which incentive stock
options are exercisable for the first
6
<PAGE>
time by an Optionee during any calendar year (under all incentive stock option
plans of the Company and its Subsidiaries) shall not exceed $100,000. Any excess
over such amount shall be deemed to be related to and part of a non-qualified
stock option granted pursuant to Section 9.
(k) General Restriction. Each Option shall be subject to the requirement
that if at any time the Board of Directors shall determine, in its reasonable
discretion, that the listing, registration or qualification of the Shares
subject to such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the issue or purchase of Shares thereunder, such Option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors. Alternatively, such
Options shall be issued and exercisable only upon such terms and conditions and
with such restrictions as shall be necessary or appropriate to effect exemption
from such listing, registration, or other qualification requirement.
9. NON-QUALIFIED OPTIONS
The Board of Directors or the Committee may grant to Eligible Employees or
Eligible Participants Options under the Plan which are not qualified incentive
stock options under the provisions of Section 422 of the Code. Such
non-qualified options shall be evidenced by Agreements in such form and not
inconsistent with this Plan as the Board of Directors or the Committee shall
approve from time to time, which Agreements shall contain in substance the same
terms and conditions as set forth in Section 8 hereof with respect to qualified
incentive stock options; provided, however, that:
(i) the limitations set forth in Sections 8(a) and 8(c) with respect to Ten
Percent Owners shall not be applicable to non-qualified options granted to any
Ten Percent Owner;
(ii) the limitations set forth in Section 8(g) with respect to
termination of employment or death shall not be applicable to non-qualified
option grants, and any such limitations shall be determined on a case by case
basis by the Board of Directors or the Committee at the time of the
non-qualified option grant;
(iii) the limitation set forth in Section 8(j) with respect to the
annual limitation of incentive stock options shall not be applicable to
non-qualified option grants; and
(iv) non-qualified options may be granted at a purchase price equal to
not less than 75% of the Market Price on the day the Option is granted.
7
<PAGE>
10. AMENDMENT OF THE PLAN
The Plan may at any time or from time to time be terminated, modified or
amended by the affirmative vote of not less than a majority of the shares
present and voting thereon by the Company's shareholders at a meeting of the
shareholders at which a quorum is present. The Board of Directors may at any
time and from time to time modify or amend the Plan in any respect, except that
without shareholder approval the Board of Directors may not (1) increase the
maximum number of Shares for which Options may be granted under the Plan (other
than increases due to changes in capitalization as referred to in Section 8(h)
hereof), or (2) change the class of persons eligible for qualified incentive
options. The termination or any modification or amendment of the Plan shall not,
without the written consent of an Optionee, affect his or her rights under an
Option or right previously granted to him or her. With the written consent of
the Optionee affected, the Board of Directors or the Committee may amend
outstanding option agreements in a manner not inconsistent with the Plan.
Without employee consent, the Board of Directors may at any time and from time
to time modify or amend outstanding option agreements in such respects as it
shall deem necessary in order that incentive options granted hereunder shall
comply with the appropriate provisions of the Code and regulations thereunder
which are in effect from time to time respecting "Qualified Incentive Options."
The Company's Board of Directors may also suspend the granting of Options
pursuant to the Plan at any time and may terminate the Plan at any time;
provided, however, no such suspension or termination shall modify or amend any
Option granted before such suspension or termination unless (1) the affected
participant consents in writing to such modification or amendment or (2) there
is a dissolution or liquidation of the Company.
11. BINDING EFFECT
All decisions of the Board of Directors or the Committee involving the
implementation, administration or operation of the Plan or any offering under
the Plan shall be binding on the Company and on all persons eligible or who
become eligible to participate in the Plan.
12. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock pursuant
to Options exercised hereunder will be used for general corporate purposes.
8
EXHIBIT 23.2
CONSENT OF HILL, BARTH & KING, INC., INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form SB-2 and related Prospectus of AK Holding
Corporation for the registration of 1,500,000 shares of its common stock and to
the incorporation therein of our report dated September 28, 1998 relating to the
financial statements of AK Holding Corporation as of September 24, 1998 and for
the period from September 4, 1997 (date of inception) to September 24, 1998.
HILL, BARTH & KING, INC.
Certified Public Accountants
Naples, Florida
September 29, 1998
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE AUDITED FINANCIAL
STATEMENTS DATED SEPTEMBER 24, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> SEP-04-1997
<PERIOD-END> SEP-24-1998
<CASH> 308,841
<RECEIVABLES> 13,079
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 0
<TOTAL-ASSETS> 381,468
<SHORT-TERM> 52,249
<PAYABLES> 8,731
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
0
0
<COMMON> 1,043
<OTHER-SE> 330,107
<TOTAL-LIABILITY-AND-EQUITY> 381,468
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 0
<COMMISSIONS> 0
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 10,139
<COMPENSATION> 0
<INCOME-PRETAX> (10,662)
<INCOME-PRE-EXTRAORDINARY> (10,662)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,662)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
