<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1996
REGISTRATION NO. 333-13197
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NOUVEAU INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5046 23-2932617
(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or Industrial Classification Identification No.)
organization) Code Number)
</TABLE>
212 PHILLIPS ROAD
EXTON, PENNSYLVANIA 19341
(Address of principal place of business)
GARY W. BLACK, SR.
CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
NOUVEAU INTERNATIONAL, INC.
212 PHILLIPS ROAD
EXTON, PENNSYLVANIA 19341
(610)524-8393/(610) 524-9535 (TELECOPY)
(Name, address, and telephone number of principal executive offices and agent
for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT STEVEN BROWN, ESQ. ROGER A. TOLINS, ESQ.
MICHAEL A. MEISLER, ESQ. Tolins & Lowenfels
Brock, Fensterstock, Silverstein, A Professional Corporation
McAuliffe & Wade, LLC 12 East 49th Street
One Citicorp Center New York, New York 10017
153 East 53rd Street (212) 421-1965/(212) 888-7706
New York, New York 10022 (Telecopy)
(212) 371-2000/(212) 371-5500
(Telecopy)
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX. /X/
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES PURSUANT TO RULE
462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX / /
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. / /
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. / /
------------------------
CALCULATION OF REGISTRATION FEE
See attached page.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED UNIT (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per 1,265,000 $5.00 $6,325,000 $1,916.67
share Shares (2)
110,000
Underwriter's Warrants Warrants (3) .001 110.00 0.04
Common Stock, par value $.001 per 110,000 6.25 687,500 208.34
share Shares (4)
Common Stock, par value $.001 per 1,654,225 5.00 8,271,125.00 2,508.41
share Shares (5)
TOTAL -- -- $15,283,735.00 $4,633.46 (6)
</TABLE>
(1) Calculated in accordance with Rule 457 under the Securities Act of 1933, as
amended.
(2) Includes 165,000 shares of Common Stock, par value $.001 per share (the
"Common Stock"), of the Company which the Underwriter has the option to
purchase to cover over-allotments, if any.
(3) To be acquired by the Underwriter.
(4) Issuable upon exercise of the Underwriter's Warrants.
(5) This Registration Statement also registers the resale from time to time by
the holders thereof of 704,225 shares of Common Stock issuable upon the
exercise of common stock purchase warrants issued by the Company in 1996 and
950,000 shares of Common Stock acquired by an entity in transactions exempt
from registration under the Securities Act of 1933, as amended.
(6) A filing fee of $11,343.62 was previously paid. Accordingly, no additional
filing fee is required upon the filing of this Registration Statement.
<PAGE>
EXPLANTORY NOTE
This Registration Statement covers the registration of, among other things,
(i) up to 1,265,000 shares of Common Stock, par value $.001 per share, (the
"Common Stock"), including the shares of Common Stock to cover over-allotments
of Nouveau International, Inc. (the "Company"), a Delaware corporation, for sale
by the Company in an underwritten public offering, and (ii) an additional
1,654,225 shares of Common Stock for the sale by the holders thereof (the
"Selling Stockholders") for resale from time to time by the Selling
Stockholders, subject to the contractual restrictions that the Selling
Stockholders may not sell the shares of Common Stock held by the Selling
Stockholders for a specified period after the closing of the underwritten public
offering.
The complete Prospectus relating to the underwritten offering follows
immediately after this explanatory note. Following the Prospectus for the
underwritten offering are pages of the Prospectus relating solely to the shares
of Common Stock held by the Selling Stockholders, including alternative front
and back cover pages and the sections entitled "Concurrent Public Offering,"
"Plan of Distribution," and "Selling Stockholders," to be used in lieu of
sections entitled "Concurrent Offering," and "Underwriting" in the Prospectus
relating to the underwritten offering. Certain sections of the Prospectus for
the underwritten offering will not be used in the Prospectus relating to the
shares of Common Stock held by the Selling Stockholders, such as "Use of
Proceeds."
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER OF FORM SB-2 LOCATION OR CAPTION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Front of the Registration Statement and Outside Front
Cover Page of Prospectus........................... Outside Front Cover Page
Inside Front and Outside Back Cover Pages of the
2. Inside Front and Outside Back Cover Pages of Prospectus
Prospectus.........................................
3. Summary Information and Risk Factors................. Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page; Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Principal Stockholders
8. Plan of Distribution................................. Outside Front Cover Page; Underwriting
9. Legal Proceedings.................................... Business--Legal Proceedings
10. Directors, Executive Officers, Promoters, and Control
Persons............................................ Management--Directors and Executive Officers
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Principal and Management Stockholders
12. Description of Securities............................ Outside Front Cover Page; Description of Securities
13. Interest of Named Experts and Counsel................ Legal Matters; Experts
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Part II
15. Organization......................................... Not Applicable
16. Description of Business.............................. Business
17. Management's Discussion and Analysis of Plan of Management's Discussion and Analysis of Financial
Operation.......................................... Condition and Results of Operations
18. Description of Property.............................. Business--Facilities
19. Certain Relationships and Related Transactions....... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters............................................ Dividend Policy; Description of Securities
21. Executive Compensation............................... Management--Executive Compensation
22. Financial Statements................................. Financial Statements
23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ Not Applicable
24. Indemnification of Directors and Officers............ Part II
25. Other Expenses of Issuance and Distribution.......... Part II
26. Recent Sales of Unregistered Securities.............. Part II
27. Exhibits............................................. Part II; Exhibits
28. Undertakings......................................... Part II
29. Financial Statements................................. Financial Statements
</TABLE>
<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.
<PAGE>
PROSPECTUS
1,100,000 SHARES
NOUVEAU INTERNATIONAL, INC.
COMMON STOCK
Nouveau International, Inc., a Delaware corporation (the "Company"), is
hereby offering 1,100,000 shares (the "Shares") of its common stock, par value
$.001 per share (the "Common Stock"). In addition, concurrently with this
offering, certain selling stockholders (the "Selling Stockholders") are offering
for resale up to an aggregate of 1,654,225 shares of Common Stock subject to
certain restrictions on resale described herein. See "Concurrent Sales by
Selling Stockholders."
The Common Stock is traded on the OTC Bulletin Board under the symbol
"VEND." On December 19, 1996, the closing sale price for the Common Stock was
$5.50 per share. See "Price Range of the Common Stock."
SEE "RISK FACTORS," COMMENCING ON PAGE 8, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO PUBLIC UNDERWRITING DISCOUNT(1) PROCEEDS TO COMPANY(2)
<S> <C> <C> <C>
Per Share........................ $ $ $
Total(3)......................... $ $ $
</TABLE>
(1) Does not include additional consideration to be received by Americorp
Securities, Inc. (the "Underwriter") in the form of (a) a 3% non-accountable
expense allowance and (b) warrants (the "Underwriter's Warrants") entitling
the Underwriter to purchase up to 110,000 shares of Common Stock at a price
per share equal to 125% of the public offering price per Share. In addition,
the Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting estimated expenses of $ , including the Underwriter's
non-accountable expense allowance of $ ($ in the event of the
exercise in full of the Underwriter's over-allotment option), which are
payable by the Company.
(3) The Company has granted the Underwriter an option, exercisable within 45
days from the date of this Prospectus, to purchase up to an additional
165,000 shares of Common Stock at the public offering price, less
underwriting discounts, solely to cover over-allotments, if any. If the
over-allotment option granted to the Underwriter is exercised in full, the
Price to Public, Underwriting Discount, and Proceeds to Company, will be
$ , $ , and $ , respectively. See "Underwriting."
------------------------------
The Shares are being offered by the Underwriter, subject to prior sale,
when, as, and if delivered to, and accepted by, it and subject to its right to
reject orders in whole or in part and to certain other conditions. It is
expected that delivery of certificates will be made against payment therefor at
the offices of Americorp Securities, Inc., One New York Plaza, New York, New
York 10004, on or about , 1996.
------------------------
AMERICORP SECURITIES, INC.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
[The inside of the front cover of the Prospectus contains pictures of the
Company's Pizza Chef-Registered Trademark- vending machine, Pizza
Chef-Registered Trademark- Mini-Express vending machine, and several pizza pies
with various toppings, which The Company's vending machines store, cook, and
serve.]
[The inside of the back cover of the Prospectus contains a picture of the
various sandwiches stored, cooked, and served by the Company's vending machines.
In addition, there is a caption box containing a picture of the Company's
sandwich vending machine.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE OTC BULLETIN BOARD OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED
HEREIN, THE DISCUSSION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER THE
HEADING "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. SEE "NOTE REGARDING
FORWARD-LOOKING STATEMENTS." UNLESS OTHERWISE INDICATED HEREIN, THE INFORMATION
IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO (I) THE EXERCISE OF THE
OVER-ALLOTMENT OPTION, (II) THE ISSUANCE AND/OR EXERCISE OF THE UNDERWRITER'S
WARRANTS, AND (III) THE EXERCISE OF WARRANTS OUTSTANDING ON THE DATE OF THIS
PROSPECTUS EXERCISABLE FOR AN AGGREGATE OF 704,225 SHARES OF COMMON STOCK. THE
INFORMATION IN THIS PROSPECTUS RELATING TO SHARES OF COMMON STOCK AND PER SHARE
AMOUNTS (I) GIVES RETROACTIVE EFFECT TO A 1.5204793-FOR-ONE STOCK SPLIT EFFECTED
BY THE COMPANY IN JANUARY 1996, (II) GIVES EFFECT TO THE CONTRIBUTION TO THE
COMPANY OF AN AGGREGATE OF 2,000,000 SHARES OF COMMON STOCK BY CERTAIN
STOCKHOLDERS EFFECTED ON NOVEMBER 18, 1996, (III) GIVES EFFECT TO THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION OF THE COMPANY TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF PREFERRED STOCK TO 3,000,000 EFFECTED ON NOVEMBER 22, 1996,
AND (IV) GIVES EFFECT TO THE CONVERSION OF 70 SHARES OF SERIES A 4% CUMULATIVE
CONVERTIBLE REDEEMABLE PREFERRED STOCK (THE "SERIES A PREFERRED STOCK") INTO
1,125,000 SHARES OF COMMON STOCK AND THE ISSUANCE OF AN AGGREGATE OF AN
ADDITIONAL 675,050 SHARES OF COMMON STOCK TO HOLDERS OF THE SERIES A PREFERRED
STOCK TO INDUCE THE HOLDERS THEREOF TO ENTER INTO CERTAIN CONTRACTUAL
ARRANGEMENTS WITH THE COMPANY RELATING TO RESTRICTIONS ON THE RESALE OF CERTAIN
SHARES OF COMMON STOCK OWNED THEREBY OR ISSUABLE THERETO UPON THE EXERCISE OF
OUTSTANDING WARRANTS. SEE "CERTAIN TRANSACTIONS." AS USED IN THIS PROSPECTUS,
THE TERM "COMPANY" MEANS, UNLESS THE CONTEXT OTHERWISE REQUIRES, NOUVEAU
INTERNATIONAL, INC., A DELAWARE CORPORATION, THE SUBSIDIARIES THEREOF, AND THE
PREDECESSORS OF THE FOREGOING.
THE COMPANY
The Company has developed a proprietary turnkey system (the "Food System")
for the automated vending of hot meals. The combination of technologies
developed by the Company which, when combined, comprise the Food System,
currently consists of:
(1) a patented fully-robotic coin-operated hot food vending machine capable
of storing, cooking, and serving specialty foods using proprietary
Company-developed formulations and packaging;
(2) a proprietary packaging system utilizing a patented shape and
patent-pending technology that protects a frozen food product from
freezer degradation, but allows the products stored in it to be
microwave, infrared, or impingement heated/cooked without being removed
from the box;
(3) a proprietary patent-pending formulation for dough-based products which
has distinctive features that allow the products made from this
formulation, such as pizzas and breads, to be baked, frozen, stored
frozen, and rapidly reheated by microwave, infrared, or impingement
heating/ cooking without adversely affecting the taste, consistency, or
desired features of the dough-based food product; and
(4) a microwave oven which has been modified to proprietary specifications
and allows for complete and consistent cooking throughout the food item.
In addition to the fully-robotic vending machine which both stores and cooks
food products utilizing the Company's proprietary formulations, the Company also
offers a non-robotic, food-dispensing machine. The non-robotic machine stores
food products in the Company's proprietary food packaging, but does not cook,
serve food, or take money automatically; rather, it requires the customer to
manually deliver the food product to the machine's microwave oven and pay a
cashier or attendant. The Company also has in development a semi-robotic
machine. The semi-robotic machine stores frozen food product in the Company's
packaging and takes money automatically, but requires the consumer to manually
deliver the
3
<PAGE>
food product to the microwave oven. The Company currently does not anticipate
marketing the semi-robotic machine until 1998, if at all.
The Company currently produces pizza products and sandwiches for sale
through vending machines manufactured by the Company. The Company markets its
pizza product and its pizza vending machines under the registered trademark
"Pizza Chef-Registered Trademark-". The Company markets its vending and
food-dispensing machines for $1,000 to $7,000 per unit.
The Company believes that its Food System is distinctive in the following
two respects: (i) the packaging system and dough formulation allow dough-based
products to be microwave cooked without damaging the taste and quality of such
products; and (ii) the fully-robotic vending machine operates as a turnkey
system which takes money, cooks, and serves hot food products in times as short
as 60 seconds.
In May 1996, the Company acquired the technology and certain inventory
relating to an additional fully-robotic hot food vending machine. This vending
machine, which is currently in the development stage, differs from the Company's
own machines in that it is designed for the vending of name brand frozen food
products. While the Company's machines are designed to function only with the
Company's proprietary food packaging and formulations, this machine is designed
to vend frozen food product from a variety of major food manufacturers. The
Company believes that having the ability to vend nationally-recognized, name
brand products will allow it to serve a segment of the hot-food vending market
that its current product line is not designed to address.
The Company's operating strategy is: (i) to continue to secure strategic
licensing and distribution agreements for the manufacture and distribution of
its vending and food dispensing machines on a global basis; (ii) to continue to
develop a network of licensees and distributors for the supply of food products
to owner/operators of the Company's vending and food dispensing machines in such
markets; and (iii) to establish a Company-operated food production facility to
manufacture food products to be vended through the Company's vending and
food-dispensing machines. See "Business--License Agreements" and "Business--Food
Product Line."
Notwithstanding the foregoing, investors should be aware that the Company's
future plans are subject to a number of variables outside of its control, and
there can be no assurance that the Company will be able to implement any or all
of such plans or that such plans, when and if implemented, will be successful.
To date, the Company's operations have been limited to arranging
distributorships for the Company's vending and food-dispensing machines, selling
a limited number of the fully-robotic vending machines to such distributors from
the Company's inventory for test marketing in their local markets, and selling
food products. Accordingly, the Company's future plans are subject to known and
unknown risks and uncertainties that may cause the Company's actual results in
future periods to be materially different from any future performance implied
herein.
Until January 1996, the Company was a publicly traded corporation not
engaged in any business activity and with virtually no assets. In January 1996,
the Company acquired its operating subsidiaries (the "Predecessor Company"), the
theretofore independent owner of the Food System, and the technology and
intellectual property relating thereto. At the time of such acquisition, the
Predecessor Company had recently emerged from a bankruptcy proceeding which was
necessitated by circumstances which the Company believes were largely beyond the
control of the Predecessor Company. The principal members of the Company's
management comprised management of the Predecessor Company at the time of its
filing and emergence from bankruptcy. See "Risk Factors" and
"Business--Bankruptcy Reorganization."
The Company was reincorporated under the laws of the State of Delaware on
January 16, 1996 and was originally incorporated under the laws of the State of
Florida on March 19, 1981 under the name Health Management, Inc. The principal
offices of the Company are located at 212 Phillips Road, Exton, Pennsylvania
19341 and its telephone number is (610) 524-8393.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the
Company......................... 1,100,000 shares
Offering Price.................... $ per Share
Common Stock Outstanding Prior to
this Offering................... 11,050,038 shares (1)
Common Stock Outstanding Following
This Offering................... 12,150,038 shares (1)
Risk Factors...................... The purchase of the Shares is speculative and involves
substantial risk. Prospective investors should carefully
review and consider the information set forth under
"Risk Factors."
Use of Proceeds................... Repayment of the May Private Financing (as defined
herein), repayment of payables, acquisition of bakery
equipment, facility acquisition, repayment of short-term
indebtedness, and general corporate and working capital
purposes.
OTC Bulletin Board Trading
Symbol.......................... VEND
</TABLE>
- ------------------------
(1) Excludes (i) up to 112,560 shares of Common Stock issuable upon exercise of
the warrants (the "January Warrants") issued by the Company in connection
with a private financing which closed on January 17, 1996 (the "January
Private Financing"), (ii) up to 491,665 shares of Common Stock issuable
upon exercise of the warrants (the "May Warrants," and, together with the
January Warrants, the "Warrants"), issued by the Company in connection with
a private financing which closed in May and July 1996 (the "May Private
Financing," and, together with the January Private Financing, the "Private
Financings"), (iii) up to 100,000 shares of Common Stock issuable upon
exercise of the warrants issued by the Company in connection with the
acquisition, by a third party, of the Company's facility located in West
Goshen, Pennsylvania, and the leasing of such facility to the Company (the
"Lease Warrants"), (iv) up to 165,000 shares of Common Stock issuable upon
exercise of the Underwriter's over-allotment option, and (v) up to 110,000
shares of Common Stock issuable upon exercise of the Underwriter's
Warrants. See "Underwriting."
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following selected statement of operations data for the years ended
December 31, 1995 and 1994, and the selected balance sheet data at December 31,
1995, are derived from the Financial Statements of the Company and notes thereto
included elsewhere herein audited by Richard A. Eisner & Company, LLP,
independent certified public accountants for the Company. The unaudited selected
statement of operations data for the nine months ended September 30, 1996 and
1995, and the unaudited selected balance sheet data at September 30, 1996, are
derived from the unaudited Financial Statements of the Company, which have been
prepared on a basis consistent with the audited Financial Statements of the
Company and, in the opinion of management, include all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of the
Company's financial position and results of operations. The results of
operations for any interim period are not necessarily indicative of results to
be expected for the entire year. The following data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements of the Company and notes
thereto included elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
-------------------------- ----------------------------
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995(1) 1994(1) 1996 1995(1)
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net sales.............................................. $ 245,313 $ 943,345 $ 563,382 $ 218,595
Cost of goods sold..................................... 224,282 859,287 516,031 178,857
Gross profit........................................... 21,031 84,058 47,351 39,738
Selling, general, and administrative expenses.......... 653,237 1,011,230 2,701,810 440,230
Operating (loss)....................................... (632,206) (927,172) (2,654,459) (400,492)
Gain from settlement of lawsuit........................ 5,979,459 5,979,459
Interest income........................................ 105,216 23,686 38,007 67,270
Interest expense....................................... (32,352) (213,179) (331,698) (29,931)
Loss on abandonment and sale of property............... (92,338) (3,279) (91,228)
Reorganization expense................................. (41,401) (15,000) (33,150)
Income (loss) from continuing operations............... 5,286,378 (1,134,944) $(2,948,150) $ 5,491,928
Extraordinary item
Compromise of pre-petition liabilities............... 2,307,606 112,000
Net income (loss)...................................... $7,593,984 $(1,134,944) $(2,948,150) $ 5,603,928
Income (loss) per share before extraordinary item...... $ 0.57 $ (0.12) $ (0.37) (3) $ 0.60
Extraordinary item..................................... 0.25 0.01
Net income (loss) per share............................ $ 0.82 $ (0.12) $ (0.37) (3) $ 0.61
Weighted average number of shares outstanding.......... 9,249,988 9,249,988 9,249,988 9,249,988
</TABLE>
- ------------------------
(1) The Company petitioned for bankruptcy protection in October 1994 and
operated as a debtor-in-possession through December 8, 1995.
(2) In connection with the agreement entered into with the holders of the Series
A Preferred Stock, the Company will record a dividend for financial
reporting purposes. If the contemplated dividend were recorded as of
September 30, 1996 and the Series A Preferred Stock were assumed converted
into Common Stock at such date, the net loss per share would have been
($0.62).
(3) If the Series A Preferred Stock were assumed to be converted into Common
Stock at the date of issuance of the Series A Preferred Stock (January 17,
1996), the net loss per share for the nine month period ended September 30,
1996 would have been $(0.28).
6
<PAGE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
-------------------------
AT DECEMBER 31, AS ADJUSTED
1995 ACTUAL (1)
--------------- --------- --------------
<S> <C> <C> <C>
Cash................................................................ $ 38,971 $ 118,623 $2,935,060
Working capital..................................................... 2,250,355 1,943,450 5,749,712
Total assets........................................................ 4,595,560 4,644,960 7,227,937
Dividends payable on preferred stock................................ -- 100,333 --
Pre-petition liabilities (including current portion)................ 2,577,286 259,546 259,546
Other long-term liabilities......................................... 100,000 -- --
Stockholder's equity................................................ 1,384,870 2,196,800 5,928,062
</TABLE>
- ------------------------
(1) Adjusted to reflect the receipt by the Company of the estimated net proceeds
of $4,405,000 from the sale of the Shares at an assumed public offering
price of $5.00 per Share and the application of the net proceeds therefrom.
See "Use of Proceeds" and "Capitalization."
7
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES IS HIGHLY SPECULATIVE, INVOLVES A HIGH DEGREE OF
RISK, AND SHOULD BE MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT
DECISION, SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER MATTERS REFERRED TO
HEREIN, INCLUDING THE FINANCIAL STATEMENTS AND NOTES THERETO, THE FOLLOWING RISK
FACTORS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE IMPLIED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE
IN THIS PROSPECTUS.
LOSSES FROM RECENT OPERATIONS; LIMITED OPERATING HISTORY; WORKING CAPITAL
DEFICIENCY. Although the Company had net income for the year ended December 31,
1995 and the nine months ended September 30, 1995 of $7,593,984 and $5,603,928,
respectively, the Company incurred operating losses of ($632,206) and
($400,492), respectively, for the same periods and, for the year ended December
31, 1994 and the nine months ended September 30, 1996, the Company had net
losses of ($1,134,944) and ($2,948,150), respectively. Additionally, the
Company's net income for the year ended December 31, 1995 and the nine months
ended September 30, 1995 was attributable to gains from the settlement of a
lawsuit against Rowe, Inc., a former contract manufacturer of the Company's
fully-robotic vending machine ("Rowe"), and a reduction in the Company's
liabilities pursuant to the Reorganization Plan (as hereinafter defined). See
"Business--Bankruptcy Reorganization." In addition, the Company anticipates
continuing material losses through at least December 31, 1996, and there can be
no assurance that the Company will not incur losses thereafter. As of December
31, 1994, the Company had a working capital deficiency of $4,668,013. Although
the Company had working capital of $2,250,355 and $1,943,450 as of December 31,
1995 and September 30, 1996, respectively, during such periods the Company was
dependent upon (i) loans from Gary W. Black, Sr., Chairman of the Board of
Directors and Chief Executive Officer of the Company, and others and (ii) the
Private Financings to satisfy its working capital requirements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." As of December 16, 1996, the
Company had limited cash resources. The Company, including the Predecessor
Company, has a relatively limited operating history, and its operations have
been limited to arranging distributorships for its vending and food-dispensing
machines and selling a limited number of fully-robotic vending machines from its
inventory to such distributors for test marketing in their local markets and
selling food products. Accordingly, the likelihood of the future success of the
Company must be considered in light of such limited operating history, the
recent bankruptcy of the Predecessor Company, the possibility of future
operating losses, as well as the problems, expenses, difficulties, risks, and
complications frequently encountered in connection with similarly situated
companies. In addition, the Company's future plans are subject to known and
unknown risks and uncertainties that may cause the Company's actual results in
future periods to be materially different from any future performance implied
herein. There can be no assurance that future revenues of the Company will be
significant or that the Company's operations will be profitable. See "Risk
Factors--Recent Bankruptcy," "Risk Factors-- Dependence on Contract
Manufacturers of Machines," "Risk Factors--Dependence on Contract Manufacturers
of Food Products," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
RECENT BANKRUPTCY. In October 1994, the Predecessor Company sought
protection from creditors under Chapter 11 of the United States Bankruptcy Code
of 1986 (the "Bankruptcy Code"). By order dated December 8, 1995, a Joint Plan
of Reorganization (the "Reorganization Plan") with respect to the Predecessor
Company was confirmed by the United States Bankruptcy Court for the Eastern
District of Pennsylvania and the Predecessor Company emerged from protection
under Chapter 11 of the Bankruptcy Code. Despite the belief of the Company that
a unique confluence of circumstances outside the control of the Predecessor
Company caused the Predecessor Company to seek bankruptcy protection, the
business and reputation of the Predecessor Company have undoubtedly been
damaged. See "Business--Bankruptcy Reorganization."
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DEPENDENCE ON CONTRACT MANUFACTURERS OF MACHINES. Although the Company is
currently selling a limited number of the fully-robotic vending machines from
the Company's inventory to its distributors for test marketing in their local
markets, the Company contemplates that virtually all of the production of its
vending and food-dispensing machines will be conducted by contract manufacturers
with which the Company will endeavor to establish long-term contractual
relationships. Accordingly, the Company anticipates that it will become
dependent upon such manufacturers. Currently, the Company's distributor in Korea
is party to a contract with respect to the manufacturing of such machines with
Goryo Manufacturing, Ltd., a major Korean manufacturing company. With the
exception of such contract, neither the Company nor any distributor of its
vending and food-dispensing machines is party to any contract relating to the
manufacture of such machines. The Company is, however, currently in active
negotiations with a number of such contract manufacturers. While the Company
believes that there are numerous contract manufacturers of substantial
commercial stature capable of producing the Company's vending and food-
dispensing machines, there can be no assurance that the Company will engage any
of such manufacturers on terms acceptable to the Company or at all. Any failure
of the Company to enter into one or more agreements with respect to such matters
with manufacturers prior to the exhaustion of the Company's inventory would
prevent the Company from delivering additional machines, and, in such event, the
Company and its future prospects would be materially adversely affected. See
"Business."
In addition, one of the causes of the prior bankruptcy of the Predecessor
Company was the failure of a licensee to manufacture the vending machines in
accordance with supplied specifications. Prospective investors must recognize
that, in the event the Company should secure a contract manufacturer for its
vending and food-dispensing machines, the Company will have less control over
the manufacturing of such machines and the adherence to supplied specifications
than it would if it housed and operated its entire business in its own
facilities. See "Business--Bankruptcy Reorganization."
DEPENDENCE ON CONTRACT MANUFACTURERS OF FOOD PRODUCTS. Currently, the
Company is dependent on contract manufacturers for the production of the
sandwich food products distributed, and to be distributed, through its vending
and food-dispensing machines. In the event one or more of such contract
manufacturers are unable to satisfy the Company's requirements for such
products, the Company could be materially adversely affected. While the Company
believes that there are numerous contract manufacturers of food products which
are capable of producing food products utilizing the Company's proprietary
formulations for distribution through the Company's vending and food-dispensing
machines, in the event the Company is required to change or engage additional
contract manufacturers, there can be no assurance that the Company could enter
into alternative arrangements with such other manufacturers on terms acceptable
to the Company or at all, and the resultant delay could have a material adverse
effect on the Company. Further, the agreement with one such contract
manufacturer for its pizza food products provides that such agreement may be
terminated on 90 days notice. There can be no assurance that such contract will
not be terminated. In addition, the Company is currently manufacturing a portion
of the pizza food product for distribution through its vending and
food-dispensing machines. Additionally, the Company is seeking food
manufacturers with which the Company may enter into co-pack agreements for the
manufacture and distribution of food products utilizing the Company's
proprietary food formulations. In preparation therefor, in February 1996, the
Company began leasing the facility which the Company currently utilizes to
research, develop, and manufacture a portion of the pizza product to be
distributed through the Company's vending and food-dispensing machines for test
marketing purposes and entered into an agreement to purchase such facility.
However, as a result of the Company's limited working capital, the Company was
unable to consummate such acquisition and make the necessary renovations
thereto. In December 1996, the Company acquired an option to acquire such
facility for approximately $1,610,000 plus certain costs. There can be no
assurance that the Company will continue manufacturing a portion of the pizza
food product or secure an agreement with one or more manufacturers for such food
products. In either of such events, the Company could be materially adversely
affected. See "Risk Factors--Limited Experience in Manufacturing Food Products,"
"Business--General," and "Business--Corporate Offices."
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DEPENDENCE ON DISTRIBUTORS. The distributors of the Company's vending and
food-dispensing machines are, and will be, required, among other things, to
obtain suitable locations in which to place such machines and to maintain and
service such machines satisfactorily. In the event such distributors do not
obtain a sufficient number of suitable locations or maintain or service such
machines satisfactorily, the Company could be materially adversely affected. See
"Business."
LIMITED EXPERIENCE IN MANUFACTURING FOOD PRODUCTS. In February 1996, the
Company began leasing, and, in December 1996, acquired an option to acquire, a
facility which the Company intends to utilize to research, develop, and
manufacture food products to be distributed through the Company's vending and
food dispensing machines for test marketing purposes. Although the Predecessor
Company has experience in operating a food manufacturing facility, such
experience is limited. Accordingly, the likelihood of the success of the
Company's operation of such facility must be considered in light of such limited
experience, the possibility of future operating losses, as well as the normal
risks associated with similarly situated operations. There can be no assurance
that the revenues generated by such operations will ever be significant or
profitable. See "Business--General."
UNCERTAINTY OF PROTECTION OF INTELLECTUAL PROPERTY; DEPENDENCE ON
INTELLECTUAL PROPERTY. The Company's ability to compete effectively depends,
and will depend, in large part, on its ability to maintain the proprietary
nature of its products and technologies. The Company has received a number of
patents covering the method, use, and certain system components of the Food
System. The Company has received two U.S. patents and one additional patent
application has been filed by the Company in the United States. In addition,
seven foreign patents have been issued and two additional foreign patent
applications have been filed by the Company. There can be no assurance that any
of such patent applications will be approved or that any of such patents or
patent applications, if approved, will afford the Company any meaningful
protection of its proprietary rights. Notwithstanding the foregoing, the Company
has no knowledge of any infringement of its patents by third parties.
Furthermore, there can be no assurance that others will not develop such
know-how and information independently or otherwise design around the patents
issued to the Company. Moreover, there can be no assurance that the Company's
proprietary technology will not infringe existing patents or other rights owned
or held by third parties. If the Company's products are found to infringe upon
the patents, or otherwise impermissibly to utilize, the intellectual property of
others, the Company's ability to conduct its business could be materially
adversely affected. In such event, the Company may be required to obtain
licenses from such third parties or otherwise to obtain licenses to utilize the
patents or proprietary rights of others. There can be no assurance that any
licenses required under any such patents or proprietary rights could be obtained
on terms acceptable to the Company, or at all. See "Business--Patents,
Trademarks and Proprietary Protection."
RISK ASSOCIATED WITH FOREIGN OPERATIONS; COLLECTIBILITY OF FOREIGN
RECEIVABLES. Although the Company has recently commenced focusing its efforts
on the North American market, substantially all of the Company's current sales
of vending and food-dispensing machines and the related food products are
outside of the United States. Although the Company's foreign sales are, and are
anticipated to be, denominated in U.S. dollars, the foreign activities of the
Company are, and will be, subject to the risks customarily associated with such
activities. These risks include transportation delays and interruptions, the
imposition of import and export controls and tariffs, expropriation,
naturalization, and other economic, political, and regulatory policies of
foreign governments, as well as the laws and policies of the United States
affecting foreign trade and investment. There can be no assurance that the
Company will not encounter significant difficulties in the collection of foreign
accounts receivable. Although foreign accounts receivable insurance, letters of
credit, and other methods can be employed to mediate such risk, the exposure of
the Company to problems in collecting foreign accounts receivable will increase
with an increased level of foreign business.
POTENTIAL PRODUCT LIABILITY EXPENSE. As a result of the Company's
involvement in the hot food vending industry, the Company may be exposed to
significant potential product liability claims, although it has never been the
subject of litigation with respect to such a claim. The Company maintains a
product liability
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insurance policy in the amount of $1,000,000 per occurrence and up to an
aggregate of $3,000,000 per year, which amounts the Company believes are
reasonable and customary in the industry. There can be no assurance that such
insurance will continue to be available on acceptable terms to the Company or at
all. Accordingly, in the event of a product liability claim determined adversely
to the Company, if such claim should not be covered in its entirety by such
insurance, the Company could be materially adversely affected.
COMPETITION. The Company currently faces, and will face, direct competition
in the hot food automated vending market, and there can be no assurance that
larger, better capitalized companies will not enter such market. The Company
may, in the future, compete with such larger companies for, among other things:
(i) the procurement of licensees; (ii) prime locations for product distribution;
and (iii) quality distributors for the Company's products. There can be no
assurance that the Company will be able to compete effectively against such
companies.
The domestic vending industry is dominated by a handful of large national
firms such as ARAMARK, Service America, and Canteen, which may have competitive
advantages in purchases from machine and product manufacturers and in placing
vending machines in attractive locations. If such large firms entered the hot
food vending machine market, they would enjoy the advantage of "owning" many
prime locations through exclusive contractual arrangements. For example, a firm
might contract with a large hospitality chain, whereby they would obtain
exclusive access to locations at the chain's facilities. In addition, the pre-
existence of a well-trained, readily available service network and other capital
intensive infrastructure requirements also tend to work in favor of larger, more
sophisticated, and better-capitalized firms. See "Business--Competition."
DILUTION. The offering price per share of Common Stock is substantially
higher than the net tangible book value per share of the Common Stock at
September 30, 1996. Purchasers of shares of Common Stock in this offering will
experience immediate and substantial dilution of $4.51 (90.2%) in the pro forma
net tangible book value per share of Common Stock, assuming an offering price of
$5.00 per Share. In addition, up to an aggregate of 704,225 shares of Common
Stock are issuable upon the exercise of the Warrants and the Lease Warrants. To
the extent the Warrants, the Lease Warrants, or other options or warrants are
exercised, there will be further dilution.
DISCLOSURES RELATING TO LOW PRICED STOCKS; POSSIBLE RESTRICTIONS ON RESALES
OF LOW PRICED STOCKS AND ON BROKER DEALER SALES; POSSIBLE ADVERSE EFFECT ON
PENNY STOCK RULES ON LIQUIDITY FOR THE COMPANY'S SECURITIES. Under certain
circumstances, the Company's securities may become subject to Rule 15g-9 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
imposes additional sales practice requirements for broker-dealers which sell
such securities to persons other than established customers and accredited
investors as defined in Regulation D under the Securities Act. For transactions
covered by this rule, a broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to sale. Consequently, in the event that such
rule should be applicable, such rule may adversely affect the ability of
broker-dealers to sell the Company's securities and may adversely affect the
ability of investors in the offering to sell any of the securities acquired
hereby in the secondary market.
The regulations of the Securities and Exchange Commission (the "Commission")
define a "penny stock" to be any equity security not registered on a national
securities exchange or for which quotation information is disseminated on
Nasdaq, that has a market price (as therein defined) of less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to a transaction in a penny stock, of a disclosure
schedule prepared by the Commission relating to the penny stock market.
Disclosure is also required to be made about commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
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recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on Nasdaq or meet certain
minimum net tangible assets or average revenue criteria. There can be no
assurance that the Company's securities will qualify for exemption from these
restrictions. Immediately following this offering, the Common Stock will be
listed on the OTC Bulletin Board and not Nasdaq. If the Company's securities
were subject to the rules on penny stocks, the market liquidity for the
Company's securities could be severely adversely affected.
SINGLE INDEPENDENT DIRECTOR. At the date of this Prospectus, only one
member of the Board of Directors can be deemed to be independent. Accordingly,
such director, David J. Roth, may be required to make determinations and serve
on committees requiring independent directors without the benefit of other
independent directors. The Company intends to increase the size of the Board of
Directors and to increase the number of independent directors as soon as
practicable following the completion of this Offering. See "Management."
DIVIDEND POLICY. The Company has never declared or paid, and is not
anticipated in the foreseeable future to declare or to pay, a dividend on the
Common Stock, and the Company expects that the Company's future earnings will be
retained for expansion or development of the Company's business. Whether the
Company will pay dividends on the Common Stock in the future will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, operations, capital requirements and surplus, the
general financial condition of the Company, restrictive covenants in loan or
other agreements to which the Company may become subject, and such other factors
as the Board of Directors of the Company may deem relevant. See "Dividend
Policy" and "Description of Securities-- Common Stock."
NEED FOR ADDITIONAL FINANCING. Based on the Company's operating plan, the
Company believes that the net proceeds of this offering, available cash, and
anticipated cash flow from operations will be sufficient to satisfy the
Company's anticipated capital requirements for at least 12 months from the date
of this Prospectus. After such time, the Company anticipates that it will
require additional debt or equity financing to meet its current plans for
expansion. In addition, the Company is obligated to pay certain amounts pursuant
to the terms of the Reorganization Plan relating to the emergence of the
Predecessor Company and its subsidiaries from bankruptcy. See
"Business--Bankruptcy Reorganization." To the extent the Company's cash flow is
insufficient to fund these obligations as well as the Company's plans for
expansion, the Company would be required to satisfy these obligations with
alternative sources of financing, if available. No assurance can be given that
the Company will be successful in obtaining additional financing on favorable
terms, or at all. If the Company is unable to obtain additional financing, its
ability to satisfy its obligations and current plans for expansion could be
materially adversely affected. The Company has financed its operations to date
primarily from sales of securities, cash flow from operations, loans from banks,
and loans from directors, officers, stockholders, and others. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
GOVERNMENT REGULATION. The manufacturing, processing, packaging, storage,
distribution, and labeling of food products, as well as the regulation of
microwave food preparation devices, including the Company's vending machines and
food-dispensing machines, are subject to regulation by various governmental
entities, including the United States Food and Drug Administration. The Company
believes that its production and distribution processes, as well as its
products, satisfy all applicable laws and regulations. Failure to comply with
such applicable laws and regulations could subject the Company to civil
remedies, including fines, injunctions, recalls, or seizures, as well as
potential criminal sanctions, which could have a material adverse effect on the
Company. See "Business--Government Regulation."
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SUBSTANTIAL PORTION OF NET PROCEEDS ALLOCATED FOR REPAYMENT OF PRIVATE
FINANCINGS. Approximately 36.3% ($1,600,000) of the estimated net proceeds from
the sale of the Shares has been allocated for the repayment of the May Private
Financing. See "Use of Proceeds."
SUBSTANTIAL PORTION OF NET PROCEEDS ALLOCATED FOR GENERAL CORPORATE AND
WORKING CAPITAL PURPOSES; BROAD DISCRETION OF MANAGEMENT. Approximately 33.4%
($1,470,000) of the estimated net proceeds from the sale of the Shares at an
assumed public offering price of $5.00 per Share has been allocated for general
corporate and working capital purposes. Such proceeds may be utilized in the
discretion of the Board of Directors. See "Use of Proceeds."
CONCURRENT SALES BY SELLING STOCKHOLDERS. The Registration Statement, of
which this Prospectus forms a part, also includes a separate prospectus relating
to the offering and resale by the Selling Stockholders of an aggregate of
604,225 shares of Common Stock issuable upon exercise of the Warrants, 100,000
shares of Common Stock issuable upon exercise of the Lease Warrants, and an
additional 950,000 shares of Common Stock held by CSB Financial, LLC. The shares
of Common Stock issuable upon the exercise of the Warrants and the Lease
Warrants may not be publicly resold or otherwise disposed of prior to one year
from the date of this Prospectus. The shares of Common Stock held by CSB
Financial, LLC may not be sold for the period of 18 months from the date of this
Prospectus. In each such case, such securities may be sold prior to such dates
with the prior written consent of the Underwriter.
Sales of such shares of Common Stock, or even the potential of such sales,
could have an adverse effect on the market price of the Common Stock. As a
result of this offering and the registration of the resale of such shares of
Common Stock, the freely tradeable Common Stock will be increased by 2,050,000
to 6,549,988 shares of Common Stock, although 950,000 of such shares of Common
Stock cannot be publicly resold or otherwise disposed of without prior written
consent of the Underwriter. If the Warrants and the Lease Warrants are exercised
in their entirety, there will then be freely tradeable an additional 2,754,225
shares of Common Stock, including the aforementioned 2,050,000 shares of Common
Stock. The Company will not receive any proceeds from the sale of securities by
the Selling Stockholders. See "Risk Factors--Shares Eligible for Future Sale"
and "Concurrent Sales by Selling Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE. Of the 11,050,038 shares of Common Stock
currently outstanding, approximately 5,600,050 shares are "restricted
securities" as that term is defined in Rule 144 under the Securities Act ("Rule
144") and may, under certain circumstances, be sold without registration under
the Securities Act. The sale, or availability for sale, of a substantial number
of shares of Common Stock in the public market subsequent to this offering
pursuant to Rule 144 or otherwise could materially adversely affect the market
price of the Common Stock and could impair the Company's ability to raise
additional capital through the sale of its equity securities or debt financing.
The availability of Rule 144 to the holders of restricted securities of the
Company would be conditioned on, among other factors, the availability of
certain public information concerning the Company. All executive officers,
directors, and five percent or greater stockholders of the Company (other than
CSB Financial, LLC), have agreed, however, not to sell or otherwise dispose of
any securities of the Company for a period of 24 months from the date of this
Prospectus without the Underwriter's prior written consent. In addition, the
Company has agreed to file an additional registration statement within 90 days
following the date of this Prospectus relating to the resale of the 1,800,050
shares of Common Stock issued to the holders of the Series A Preferred Stock in
connection with, among other things, the conversion thereof. The holders of such
shares of Common Stock have agreed that approximately 728,000 shares of such
1,800,050 shares of Common Stock shall be not be publicly sold or otherwise
disposed of until the date of the effectiveness of such additional registration
statement, that approximately 536,025 of such 1,800,050 shares of Common Stock
shall not be publicly sold or otherwise disposed of prior to the 90th day
following the date of the initial filing of such additional registration
statement, and that the remaining approximately 536,025 of such 1,800,050 shares
of Common Stock shall not be publicly sold or otherwise disposed of prior to the
180th day following the date of the initial filing of such additional
registration statement. See "Certain Transactions."
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In addition, the Registration Statement, of which this Prospectus forms a
part, also includes a separate prospectus relating to the offering and resale by
the Selling Stockholders of an aggregate of 604,225 shares of Common Stock
issuable upon exercise of the Warrants, 100,000 shares of Common Stock issuable
upon exercise of the Lease Warrants, and an additional 950,000 shares of Common
Stock held by CSB Financial, LLC. The investors in the Private Financings and
the holder of the Lease Warrants have agreed that the shares of Common Stock
issuable upon exercise of the Warrants and the Lease Warrants, respectively, may
not be publicly resold or otherwise disposed of prior to one year from the date
of this Prospectus. The shares of Common Stock held by CSB Financial, LLC may
not be sold for the period of 18 months from the date of this Prospectus. In
each such case such securities may be sold prior to such dates with the prior
written consent of the Underwriter. See "Concurrent Sales by Selling
Stockholders."
The holders of the Underwriter's Warrants, as well as the holders of the
Warrants, will have certain demand registration rights with respect to such
warrants and the securities underlying such warrants. See "Shares Eligible for
Future Sale" and "Underwriting--Underwriter's Warrants."
VOLATILITY OF MARKET PRICE. The market prices for securities of small and
growth-oriented companies have been, and may continue to be, and historically
the Common Stock has been, and may continue to be, highly volatile. Future
announcements by the Company or its competitors, including periodic
announcements of operating results, competitive products, and technological
innovations, may have a material impact upon the market price for the Common
Stock.
UNDERWRITER'S WARRANTS. The Underwriter has the right, upon exercise of the
Underwriter's Warrants, to purchase an aggregate of 110,000 shares of Common
Stock at a price equal to 125% of the public offering price per share in this
Offering. The Underwriter's Warrants are exercisable for a period of five years
following the date of this Prospectus. The Company has agreed to grant to the
Underwriter certain registration rights which may result in substantial expense
to the Company and may be a hindrance to the Company's ability to obtain future
financing, if needed. Sales of the shares of Common Stock underlying the
Underwriter's Warrants could have a depressive effect on the market price of the
Common Stock. In addition, if the Underwriter should exercise such registration
rights and effect a distribution of such securities, prior to and during such
distribution, as well as during any other distribution of the Company's
securities in which the Underwriter is participating, the Underwriter may be
unable to make a market in the Common Stock. If the Underwriter ceases making a
market in the Common Stock, the market price therefor may be materially and
adversely affected, and holders thereof may be unable to sell or otherwise
dispose of the Common Stock. See "Underwriting."
RELATIONSHIP OF UNDERWRITER TO TRADING IN THE COMMON STOCK. The Common
Stock is quoted on the OTC Bulletin Board where the Underwriter is currently one
of five market makers in the stock. The ability of the Underwriter to act as a
market maker in the Common Stock could be impaired if sanctions are imposed
against the Underwriter as a result of a private investigation hereinafter
described being conducted by the Commission involving the Underwriter. See
"Underwriting."
UNDERWRITER'S INFLUENCE ON THE MARKET. A significant portion of the Shares
offered hereby may be sold to customers of the Underwriter. Such customers
subsequently may engage in transactions for the sale or purchase of the Shares
through or with the Underwriter. Although it has no obligation to do so, the
Underwriter has indicated to the Company that it intends to make a market in
such securities. Such market making activity may be discontinued at any time.
The price and liquidity of the Common Stock may be significantly affected by the
degree, if any, of the Underwriter's participation in such market. If the
Underwriter ceases making a market, the market and market price for such
securities may be materially adversely affected and the holders thereof may find
it more difficult to publicly dispose of such securities.
LIMITATION OF LIABILITY OF DIRECTORS. The Company's Certificate of
Incorporation limits or eliminates the liability of a Director of the Company to
the Company and its stockholders for breach of fiduciary duty of care to the
fullest extent permitted by the Delaware General Corporation Law.
Notwithstanding the
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foregoing, the limitation and elimination of such liability does not apply where
there has been a breach of the duty of loyalty, failure to act in good faith,
intentional misconduct, or a knowing violation of law, the payment of a dividend
or approval of a stock repurchase which is deemed illegal, or an improper
personal benefit is obtained. In addition, the Company's Certificate of
Incorporation and By-laws, each as amended, require the Company to indemnify the
officers and directors thereof to the fullest extent permitted by Delaware law.
See "Management."
SUBSTANTIAL OPTIONS AND WARRANTS RESERVED. The Company has reserved from
the authorized, but unissued, Common Stock 604,225 shares of Common Stock
issuable upon exercise of the Warrants and 100,000 shares of Common Stock
issuable upon exercise of the Lease Warrants. The Company will also sell to the
Underwriter, in connection with this offering, for nominal consideration, the
Underwriter's Warrants to purchase 110,000 shares of Common Stock at a price per
share equal to 125% of the initial public offering price per Share, subject to
adjustment as provided therein. The existence of the Underwriter's Warrants, the
Warrants, the Lease Warrants, and other warrants or options may prove to be a
hindrance to future financings, since the holders of such warrants and options
may be expected to exercise them at a time when the Company would otherwise be
able to obtain additional equity capital on terms more favorable to the Company.
The Company has agreed that, under certain circumstances, it will register
under federal and state securities laws the shares of Common Stock issuable upon
the exercise of the Underwriter's Warrants (the "Warrant Shares"). See "Risk
Factors--Shares Eligible for Future Sale" and "Underwriting--Underwriter's
Warrants".
PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER
PROVISIONS. The Company's Certificate of Incorporation, as amended, authorizes
the Board of Directors to issue up to 3,000,000 shares of preferred stock, $.001
par value per share, none of which is currently outstanding. The preferred stock
may be issued in one or more series, the terms of which may be determined at the
time of issuance by the Board of Directors, without further action by
stockholders, and may include voting rights (including the right to vote as a
series on particular matters), preferences as to dividends and liquidation,
conversion and redemption rights, and sinking fund provisions. The Company has
no present plans for the issuance of a series of preferred stock. However, the
issuance of any additional shares of preferred stock could materially adversely
affect the rights of holders of Common Stock and, therefore, could reduce the
value of the Common Stock. In addition, specific rights granted to future
holders of preferred stock could be used to restrict the Company's ability to
merge with, or sell its assets to, a third party, thereby preserving control of
the Company by present stockholders. See "Description of Securities."
The ability of the Board of Directors to issue preferred stock could
discourage, delay, or prevent a takeover of the Company.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale by the Company
of the Shares at the assumed public offering price of $5.00 per Share, after
deducting the underwriting discount and expenses payable by the Company, are
estimated to be approximately $4,405,000 ($5,122,750 if the Underwriter's
over-allotment option is exercised in full).
The Company presently intends to use the net proceeds of this offering as
follows:
<TABLE>
<CAPTION>
% OF
USE AMOUNT NET PROCEEDS
- -------------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Repayment of May Private Financing (1)................................................ $ 1,600,000 36.3%
Repayment of Payables (2)............................................................. 600,000 13.6
Acquisition of Bakery Equipment....................................................... 75,000 1.7
Acquisition of Facility (3)........................................................... 375,000 8.5
Repayment of Short-Term Indebtedness (4).............................................. 285,000 6.5
General Corporate and Working Capital Purposes........................................ 1,470,000 33.4
------------ ------------
Totals............................................................................ $ 4,405,000 100.0%
------------ ------------
------------ ------------
</TABLE>
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the sale of the Shares based upon the Company's currently
contemplated operations, the Company's business plan, and current economic and
industry conditions and is subject to reapportionment of proceeds among the
categories listed above or to new categories in response to, among other things,
changes in its plans, regulations, industry conditions, and future revenues and
expenditures. The amount and timing of expenditures will vary depending on a
number of factors, including changes in the Company's contemplated operations or
business plan and changes in economic and industry conditions.
Based on the Company's operating plan, the Company believes that the net
proceeds of this offering, available cash, and anticipated cash flow from
operations, will be sufficient to satisfy its anticipated capital requirements
for at least the next 12 months. Such belief is based upon certain assumptions,
and there can be no assurance that such assumptions will prove to be accurate.
However, there can be no assurance that such resources will satisfy the
Company's capital requirements for such period. After such 12 month period, the
Company anticipates that it may require additional financing in order to meet
its current plans for expansion. Such financing may take the form of the
issuance of common or preferred equity securities or debt securities, or may
involve bank financing. In addition, contingencies may arise which may require
the Company to obtain additional capital. There can be no assurance that the
Company will be able to obtain such additional capital on a timely basis, on
favorable terms, or at all. In any of such events, the Company may be unable to
implement its current plans for expansion. See "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operation."
Net proceeds, if any, received by the Company from the sale of Shares
issuable upon exercise of the over-allotment option, and proceeds, if any,
received by the Company upon exercise of the Underwriter's Warrants, will be
utilized for general corporate and working capital purposes.
- ------------------------
(1) The obligations of the Company pursuant to the May Private Financing accrue
interest at the rate of 10% per annum.
(2) Includes approximately $150,000 payable by the Company in January 1997 to
certain general unsecured creditors of the Company pursuant to the terms of
the Reorganization Plan. See "Business--Bankruptcy Reorganization."
(3) Consists of pre-payments to be made by the Company for the acquisition of
the facility utilized by the Company as its bakery facility in West Goshen,
Pennsylvania pursuant to the terms of an agreement between the Company and a
third party. See "Business--General" and "Business--Corporate Offices."
(4) The referenced obligations accrue interest at the weighted average rate of
approximately 5% per annum.
16
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and the capitalization of
the Company at September 30, 1996 and the as adjusted short-term debt and
capitalization of the Company at September 30, 1996, adjusted to give effect to
the receipt by the Company of estimated net proceeds of approximately $4,405,000
from the sale of the Shares at the assumed public offering price of $5.00 per
Share and the application of the net proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED(3)(4)
------------ ----------------
<S> <C> <C>
Short-term debt:
Senior notes payable (1) $ 859,389 --
Notes payable--other 140,000 --
Pre-petition liabilities 134,773 134,773
------------ ----------------
1,134,162 134,773
------------ ----------------
------------ ----------------
Long-term debt--pre-petition liabilities 124,773 124,773
------------ ----------------
Preferred stock--$.001 par value, authorized 3,000,000 shares:
Issued and outstanding--Series A-70 shares; as adjusted--0
shares 3,358,333 --
Common stock--$.001 par value; 25,000,000 shares authorized,
9,249,988 outstanding; as adjusted 12,150,038 (2) 9,250 12,150
Paid in capital 1,240,877 9,101,643
Accumulated deficit (2,411,660) (3,185,731)
------------ ----------------
Total stockholders' equity 2,196,800 5,928,062
------------ ----------------
Total capitalization $ 2,321,573 $ 6,052,835
------------ ----------------
------------ ----------------
</TABLE>
- ------------------------
(1) Assumes that a portion of the net proceeds of this offering will be used to
repay the senior notes issued in May and July 1996.
(2) Retroactively adjusted to reflect 2,000,000 shares of common stock
contributed by certain stockholders of the Company.
(3) Does not include any shares issuable upon the exercise of outstanding stock
options or warrants.
(4) Gives effect to the conversion of 70 shares of Series A Preferred Stock (and
the accrued dividends thereon of $100,333) into 1,125,000 shares of Common
Stock and the issuance of 675,050 shares of Common Stock to the holders of
the Series A Preferred Stock to induce such holders to enter into certain
contractual arrangements with the Company relating to restrictions on the
resale of the aforementioned 1,125,000 and 675,050 shares of Common Stock
owned thereby and the shares of Common Stock issuable upon exercise of the
January Warrants. See "Risk Factors--Shares Eligible for Future Sale."
17
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted on the OTC Bulletin Board under the symbol
"VEND." The following table sets forth the high and low closing sale prices
quoted with respect to the Common Stock for the period from January 1, 1994
through December 19, 1996 as reported by the OTC Bulletin Board. At December 19,
1996, the Company had approximately 140 stockholders of record.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1994:
First Quarter............................................................. $ .25 $ .25
Second Quarter............................................................ .25 .25
Third Quarter............................................................. .25 .125
Fourth Quarter............................................................ .125 .0625
1995:
First Quarter............................................................. $ .125 $ .125
Second Quarter............................................................ .625 .125
Third Quarter............................................................. 1.00 .625
Fourth Quarter............................................................ 1.75 .25
1996:
First Quarter............................................................. $ 5.75 $ 2.50
Second Quarter............................................................ 5.75 5.00
Third Quarter............................................................. 6.50 5.00
Fourth Quarter (through December 19, 1996)................................ 6.00 5.00
</TABLE>
On December 19, 1996, the last sale price of the Common Stock as reported by
the OTC Bulletin Board was $5.50 per share.
The Underwriter is one of five market makers in the stock. See "Risk
Factors."
DIVIDEND POLICY
The Company has never declared or paid, and is not anticipated in the
foreseeable future to declare or pay, a dividend on the Common Stock, and the
Company expects that the Company's future earnings will be retained for
expansion or development of the Company's business. Whether the Company will pay
dividends on the Common Stock in the future will be at the discretion of the
Company's Board of Directors and will depend upon, among other things, future
earnings, operations, capital requirements and surplus, the general financial
condition of the Company, restrictive covenants in loan or other agreements to
which the Company may become subject, and such other factors as the Board of
Directors of the Company may deem relevant.
18
<PAGE>
SELECTED FINANCIAL DATA
The following selected statement of operations data for the years ended
December 31, 1995 and 1994, and the selected balance sheet data at December 31,
1995 are derived from the Financial Statements of the Company and notes thereto
included elsewhere herein audited by Richard A. Eisner & Company, LLP,
independent certified public accountants for the Company. The unaudited selected
statement of operations data for the nine months ended September 30, 1996 and
1995 and the unaudited selected balance sheet data at September 30, 1996, are
derived from the unaudited Financial Statements of the Company, which have been
prepared on a basis consistent with the audited Financial Statements of the
Company and, in the opinion of management, include all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of the
Company's financial position and results of operations. The results of
operations for any interim period are not necessarily indicative of results to
be expected for the entire year. The following data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements of the Company and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA:
YEAR ENDED NINE MONTHS ENDED
---------------------- ------------------------
DECEMBER DECEMBER SEPTEMBER SEPTEMBER
31, 31, 30, 30,
1995(1) 1994 (1) 1996 1995 (1)
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................ $ 245,313 $ 943,345 $ 563,382 $ 218,595
Cost of goods sold....................... 224,282 859,287 516,031 178,857
Gross profit............................. 21,031 84,058 47,351 39,738
Selling, general, and administrative
expenses............................... 653,237 1,011,230 2,701,810 440,230
Operating (loss)......................... (632,206) (927,172) (2,654,459) (400,492)
Gain from settlement of lawsuit.......... 5,979,459 5,979,459
Interest income.......................... 105,216 23,686 38,007 67,270
Interest expense......................... (32,352) (213,179) (331,698) (29,931)
Loss on abandonment and sale of
property............................... (92,338) (3,279) (91,228)
Reorganization expense................... (41,401) (15,000) (33,150)
Income (loss) from continuing
operations............................. 5,286,378 (1,134,944) (2,948,150) 5,491,928
Extraordinary item
Compromise of pre-petition
liabilities............................ 2,307,606 112,000
Net income (loss)........................ $7,593,984 $(1,134,944) ($2,948,150) $5,603,928
Income (loss) per share before
extraordinary item..................... $0.57 $(0.12) $(0.37 (3) $0.60
Extraordinary item....................... 0.25 0.01
Net income (loss) per share.............. $0.82 $(0.12) $(0.37 (3) $0.61
Weighted average number of shares
outstanding............................ 9,249,988 9,249,988 9,249,988 9,249,988
</TABLE>
- ------------------------
(1) The Company petitioned for bankruptcy protection in October 1994 and
operated as a debtor-in-possession through December 8, 1995.
(2) In connection with the agreement entered into with the holders of the Series
A Preferred Stock, the Company will record a dividend for financial
reporting purposes. If the contemplated dividend were recorded as of
September 30, 1996 and the Series A Preferred Stock were assumed converted
into Common Stock at such date, the net loss per share would have been
$(0.62).
(3) If the Series A Preferred Stock were assumed to be converted into Common
Stock at the date of issuance of the Series A Preferred Stock (January 17,
1996), the net loss per share for the nine month period ended September 30,
1996 would have been $(0.28).
19
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
AT DECEMBER 31, AT SEPTEMBER 30, 1996
-----------------------
AS ADJUSTED
1995 ACTUAL (1)
---------------- --------- ------------
<S> <C> <C> <C>
Cash........................................... $ 38,971 $ 118,623 $2,935,060
Working capital................................ 2,250,355 1,943,450 5,749,712
Total assets................................... 4,595,560 4,644,960 7,227,937
Dividends payable on preferred stock........... -- 100,333 --
Pre-petition liabilities (including current
portion)..................................... 2,577,286 259,546 259,546
Other long-term liabilities.................... 100,000 -- --
Stockholder's equity........................... 1,384,870 2,196,800 5,928,062
</TABLE>
- ------------------------
(1) Adjusted to reflect the receipt by the Company of the estimated net
proceeds of $4,405,000 from the sale of the Shares at an assumed public
offering price of $5.00 per Share and the application of the net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE IMPLIED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH ELSEWHERE IN THIS
PROSPECTUS.
GENERAL
The Company has developed a proprietary turnkey system for the automated
vending of hot meals. As a result of circumstances which the Company believes
were beyond the control of the Predecessor Company, in October 1994, the
Predecessor Company sought protection from creditors under Chapter 11 of the
Bankruptcy Code. During the pendency of such proceedings, the Predecessor
Company essentially ceased operations. The Predecessor Company emerged from
bankruptcy in December 1995. In January, May, and July, 1996, the Company
completed private placements of its securities which provided the Company with
funds to resume limited operations. To date, the Company's operations have been
limited to arranging distributorships for the Company's vending and
food-dispensing machines, selling a limited number of the fully-robotic vending
machines to such distributors from the Company's inventory for test marketing in
their local markets, and selling food products. See "Business--Bankruptcy
Reorganization."
Until January 1996, the Company, under its prior name, Health Management,
Inc., was a publicly traded corporation not engaged in any business activity and
with virtually no assets. In January 1996, the Company acquired the Predecessor
Company and since such time has continued the operations of the Predecessor
Company on a limited scale.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Net sales increased by $344,787, to $563,382 for the nine months ended
September 30, 1996, as compared to $218,595 for the nine months ended September
30, 1995. Net sales for the nine months ended September 30, 1996 consisted of
$396,950 in vending machine sales, $19,949 in machine parts sales, and $146,483
in food product sales. Such increase was primarily attributable to an increased
level of operations in general following the emergence of the Predecessor
Company from bankruptcy in December 1995. One domestic purchaser accounted for
$48,451 in food product sales. Sales to one foreign distributor totaled $160,249
for pizza and sandwich vending machines, while sales to an additional
international customer totaled $72,031 in pizza vending machines and $32,256 in
food products.
Cost of goods sold increased by $337,174, to $516,031 for the nine months
ended September 30, 1996, compared to $178,857 for the nine months ended
September 30, 1995. Cost of goods sold as a percentage of net sales increased to
91.6% for the nine months ended September 30, 1996, as compared to 81.8% for the
nine months ended September 30, 1995. The increase in cost of goods sold was
primarily attributable to the increased net sales of the Company during the nine
months ended September 30, 1996. The increase in cost of goods sold as a
percentage of net sales was primarily attributable to higher costs of vending
machine components sourced directly by the Company in small quantities.
Gross profit increased by $7,613, to $47,351 for the nine months ended
September 30, 1996, as compared to $39,738 for the nine months ended September
30, 1995. Such increase was attributable to the aforementioned increase in net
sales which more than offset the aforementioned increase in cost of goods sold
and the aforementioned increase in cost of goods sold as a percentage of net
sales.
General and administrative expenses increased by $1,837,819, to $2,213,342
for the nine months ended September 30, 1996, compared to $375,523 for the nine
months ended September 30, 1995. Such
21
<PAGE>
increase was primarily attributable to the Company's recommencement of
operations following the Predecessor Company's emergence from bankruptcy. See
"Business--Bankruptcy Reorganization."
Selling expense increased by $423,761, to $488,468 for the nine months ended
September 30, 1996, compared to $64,707 for the nine months ended September 30,
1995. Such increase was primarily attributable to the Company's recommencement
of operations following the Predecessor Company's emergence from bankruptcy. See
"Business--Bankruptcy Reorganization."
Loss from operations increased by $2,253,967, to $2,654,459, for the nine
months ended September 30, 1996, compared to $400,492 for the nine months ended
September 30, 1995. Such increase was primarily attributable to increased net
sales offset by increased cost of goods sold, general and administrative
expenses, and selling expenses.
Other income (expenses) decreased from $5,892,420 for the nine months ended
September 30, 1995, to ($293,691) for the nine months ended September 30, 1996.
Such other income (expenses) for the nine months ended September 30, 1995 was
comprised of gain from the settlement of a lawsuit in the amount of $5,979,459,
loss on abandonment and sale of property in the amount of ($91,228), interest
income in the amount of $67,270, offset by interest expense in the amount of
($29,931), and reorganization expenses totaling ($33,150). Such other income
(expenses) for the nine months ended September 30, 1996 was comprised of
interest income in the amount of $38,007, offset by interest expense in the
amount of ($331,698).
Dividends accrued on preferred stock increased from $0 on September 30, 1995
to $100,333 on September 30, 1996.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Net sales decreased by $698,032, to $245,313 for the year ended December 31,
1995, compared to $943,345 for the year ended December 31, 1994. Such decrease
was primarily attributable to lower sales of pizzas and vending machines and the
absence of license fees during the year ended December 31, 1995 resulting from
the cessation of operations by the Predecessor Company during the pendency of
its bankruptcy proceeding. Approximately 50% of net sales for the year ended
December 31, 1995 and approximately 35% of net sales for the year ended December
31, 1994 were derived from one customer, AMTRAK, and consisted of bulk sales of
pizzas. See "Risk Factors" and "Business."
Cost of goods sold decreased by $635,005, to $224,282 for the year ended
December 31, 1995, compared to $859,287 for the year ended December 31, 1994.
Cost of goods sold as a percentage of net sales remained relatively consistent
at 91.4% for the year ended December 31, 1995, as compared to 91.1% for the year
ended December 31, 1994. The decrease in cost of goods sold was primarily
attributable to the decreased net sales of the Company during the year ended
December 31, 1995.
Gross profit decreased by $63,027, to $21,031 for the year ended December
31, 1995, compared to $84,058 for the year ended December 31, 1994. Such
decrease was attributable to the aforementioned decrease in net sales offset by
the aforementioned decrease in cost of goods sold.
General and administrative expenses decreased by $317,448, to $618,398 for
the year ended December 31, 1995, compared to $935,846 for the year ended
December 31, 1994. Such decrease was primarily attributable to the reduction of
a substantial portion of the salaries of the Company's staff during the year
ended December 31, 1995.
Selling expense decreased by $40,545, to $34,839 for the year ended December
31, 1995, compared to $75,384 for the year ended December 31, 1994. Such
decrease was primarily attributable to the aforementioned decrease in sales
during the year ended December 31, 1995.
Other income (expenses) increased from ($207,772) for the year ended
December 31, 1994, to $5,918,584 for the year ended December 31, 1995. Other
income (expenses) for the year ended December 31, 1994 was comprised of interest
income of $23,686, interest expense of ($213,179), loss on the
22
<PAGE>
abandonment and sale of property of ($3,279), and reorganization expenses of
($15,000). Other income (expenses) for the year ended December 31, 1995 was
comprised of gain from the settlement of a lawsuit between the Predecessor
Company and Rowe of $5,979,459 (See "Business--Bankruptcy Reorganization"),
interest income of $105,216, interest expense of ($32,352), loss on the
abandonment and sale of property of ($92,338), and reorganization expense of
($41,401).
As a result of the foregoing, net income (loss) per share increased by $.94
to $.82 for the year ended December 31, 1995, as compared to ($.12) for the year
ended December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company used cash in operating activities during the nine months ended
September 30, 1996 in the amount of $1,529,760.
As of September 30, 1996, the Company had working capital of approximately
$1,943,450, compared with working capital of $137,010 on September 30, 1995.
In March 1996, July 1996, and October 1996, the Company received an
additional $200,000, $76,000 and $350,000, respectively, net, as part of the
aforementioned settlement with Rowe. See "Business-- Bankruptcy Reorganization."
During the nine months ended September 30, 1996, the Company raised net
proceeds of approximately $4,298,285 in the Private Financings. Substantially
all of these funds have been expended during the period to commence the
resumption of operations and to repay liabilities existing prior to the filing
of the Predecessor Company's petition for bankruptcy protection.
During September 1996, the Company borrowed an aggregate of $140,000 from an
unaffiliated individual to meet the Company's short term capital needs. Such
principal amount accrues interest at the prime rate of interest plus one percent
and is repayable on the earlier of the date of the closing of this offering and
September 6, 1997. A portion of the net proceeds of this offering will be used
to repay such indebtedness. See "Use of Proceeds."
During November 1996, the Company borrowed an aggregate of $140,000 from
another unaffiliated individual to meet the Company's short term capital needs.
Such principal amount does not bear interest and is repayable on the earlier of
the closing of this offering and one year from the date of such loan. See "Use
of Proceeds."
Upon the closing of this offering, the Company is required to repay the
Series A 10% Senior Notes of the Company issued in the May Private Financing for
approximately $1,600,000, including interest of approximately $100,000. See "Use
of Proceeds."
Pursuant to the Reorganization Plan, in January of each of 1997 and 1998,
the Company is required to pay to certain creditors of the Company approximately
$150,000, each payment representing 5% of the amount of the allowed unsecured
claims of such creditors in the Predecessor Company's bankruptcy proceeding. The
Reorganization Plan provides that, in the event either of such payments are not
timely made, the Company has a period of 30 days after written notice from such
unpaid creditors during which to satisfy such default. The Company intends to
utilize a portion of the net proceeds of this offering to satisfy the January
1997 payment. See "Business--Bankruptcy Reorganization."
As of December 16, 1996, the Company had limited cash resources. The Company
will require additional financing to fund its corporate operations and its food
production operation, for working capital, and to secure additional contract
manufacturing of its vending machines. No assurance can be given that the
Company will be able to obtain additional financing. In the event the Company is
not able to raise funds on a timely basis the operations of the Company could be
materially adversely affected.
23
<PAGE>
BUSINESS
GENERAL
The Company has developed a proprietary turnkey system (the "Food System")
for the automated vending of hot meals. The combination of technologies
developed by the Company which, when combined, comprise the Food System,
currently consists of:
(1) a patented fully-robotic coin-operated hot food vending machine
capable of storing, cooking, and serving specialty foods using proprietary
Company-developed formulations and packaging;
(2) a proprietary packaging system utilizing a patented shape and
patent-pending technology that protects a frozen food product from freezer
degradation, but allows the products stored in it to be microwave, infrared,
or impingement heated/cooked without being removed from the box;
(3) a proprietary patent-pending formulation for dough-based products
which has distinctive features that allow the products made from this
formulation, such as pizzas and breads, to be baked, frozen, stored frozen,
and rapidly reheated by microwave, infrared, or impingement heating/cooking
without adversely affecting the taste, consistency, or desired features of
the dough-based food product; and
(4) a microwave oven which has been modified to proprietary
specifications and allows for complete and consistent cooking throughout the
food item.
In addition to the fully-robotic vending machine which both stores and cooks
food products utilizing the Company's proprietary formulations, the Company also
offers a non-robotic, food-dispensing machine. The non-robotic machine stores
food products in the Company's proprietary food packaging, but does not cook,
serve food, or take money automatically; rather, it requires the customer to
manually deliver the food product to the machine's microwave oven and to pay a
cashier or attendant. The Company also has in development a semi-robotic
machine. The semi-robotic machine stores frozen food product in the Company's
packaging and takes money automatically, but requires the consumer to manually
deliver the food product to the microwave oven. The Company currently does not
anticipate marketing the semi-robotic machine until 1998, if at all.
The Company markets its pizza product and its pizza vending machines under
the registered trademark "Pizza Chef-Registered Trademark-". The Company markets
its vending and food-dispensing machines for $1,000 to $7,000 per unit.
The Company believes that its Food System is distinctive in the following
two respects: (i) the packaging system and dough formulation allow dough-based
products to be microwave cooked without damaging the taste and quality of such
products; and (ii) the fully-robotic vending machine operates as a turnkey
system which takes money, cooks, and serves hot food products in times as short
as 60 seconds.
In May 1996, the Company acquired the technology and certain inventory
relating to an additional fully-robotic hot food vending machine for
approximately $75,000. This vending machine, which is currently in the
development stage, differs from the Company's own machines in that it is
designed for the vending of name brand frozen food products. While the Company's
machines are designed to function only with the Company's proprietary food
packaging and formulations, this machine is designed to vend frozen food product
from a variety of major food manufacturers. The Company believes that having the
ability to vend nationally-recognized, name brand products will allow it to
serve a segment of the hot-food vending market that its current product line is
not designed to address.
The Company's operating strategy is: (i) to continue to secure strategic
licensing and distribution agreements for the manufacture and distribution of
its vending and food-dispensing machines on a global basis; (ii) to continue to
develop a network of licensees and distributors for the supply of food products
to owner/operators of the vending and food-dispensing machines in such markets;
and (iii) to establish a
24
<PAGE>
Company-operated food research, development, and manufacturing facility to
prepare food products to be vended through the Company's vending and
food-dispensing machines. See "Business--License Agreements" and "Business--Food
Product Line."
The Company licenses its technology to third-party manufacturers and to
third-party distributors outside the United States for the assembly and
distribution of the vending and food-dispensing machines. Currently, the Company
has, among other agreements, a technology license and distribution agreement
with a distributor in Korea which has, with the Company's approval, recently
sublicensed the manufacture of the fully-robotic vending machine to Goryo
Manufacturing Ltd., a major Korean manufacturing company. The Company has
entered into agreements granting master distributorships of the Company's
products in Argentina, Brazil, Chile, Paraguay, New Zealand, Singapore, and
Portugal and a memorandum of understanding in the City of Moscow.
The Company intends to license the production of its food products in the
United States and other countries as well as to produce such products in
Company-owned and operated facilities when and if sufficient demand for its food
products exists. Currently, in addition to manufacturing a portion of its own
pizza food products, the Company has a co-pack agreement with a supplier,
whereby such supplier prepares a portion of the pizza food products on behalf of
the Company using the Company's proprietary formulations. The Company has a
similar arrangement with a supplier with respect to its sandwich food products.
The food products are then sold by the Company to customers both directly and
through third-party distributors. See "Management's Discussion and Analysis of
Financial Conditions and Results of Operations--Liquidity and Capital
Resources."
In addition, the Company owns its own baking equipment and operated its own
bakeries until October 1994, when the Predecessor Company was required to
discontinue baking operations as a result of its seeking protection from
creditors under the Bankruptcy Code. In February 1996, the Company began leasing
and entered into an agreement to purchase a facility located in West Goshen,
Pennsylvania, presently leased by the Company, that was designed as a USDA
certified production facility. Such facility currently houses the Company's
baking equipment, allowing the Company to undertake its own food research,
development, and potential manufacturing operations, and to maintain consistent
quality control with regard to its food products. As a result of the Company's
limited working capital, the Company had been unable to consummate the planned
acquisition of such facility and to make the necessary renovations thereto.
Accordingly, the Company negotiated with a third party to acquire such facility
and lease such facility to the Company. The Company currently has an option,
expiring in June 1998, to purchase this facility from such third party at a
price of approximately $1,610,000 plus certain costs and has entered into a
five-year lease, which commenced in December 1996, relating to such facility.
The annual rental payable by the Company pursuant to the terms of such lease is
approximately $247,000. In addition, the Company (i) has agreed with such third
party to make certain prepayments for the purchase of the facility in the amount
of approximately $375,000 upon the closing of this offering and (ii) granted to
such third party the Lease Warrants. See "Use of Proceeds." There can be no
assurance that the Company will continue manufacturing a portion of the pizza
food product or secure an agreement with one or more manufacturers for such food
products. In either of such events, the Company could be materially adversely
affected.
Notwithstanding the foregoing, investors should be aware that the Company's
future plans are subject to a number of variables outside of its control, and
there can be no assurance that the Company will be able to implement any or all
of such plans or that such plans, when and if implemented, will be successful.
To date, the Company's operations have been limited to arranging
distributorships for the Company's vending and food-dispensing machines, selling
a limited number of the fully-robotic vending machines to such distributors from
the Company's inventory for test marketing in their local markets, and selling
food product. Accordingly, the Company's future plans are subject to known and
unknown risks and uncertainties that may cause the Company's actual results in
future periods to be materially different from any future performance implied
herein.
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<PAGE>
BANKRUPTCY REORGANIZATION
In December 1995, the Predecessor Company emerged from protection under
Chapter 11 of the Bankruptcy Code. The Company believes that a unique confluence
of circumstances, outside the control of the Predecessor Company, caused the
Predecessor Company to seek bankruptcy protection in October 1994. In 1993, the
business and reputation of the Predecessor Company were damaged due to a
fraudulent telemarketing operation owned and operated by a private label
customer reselling vending machines, using the technology of the Predecessor
Company. As part of its telemarketing operation, such customer accepted deposits
for machines and never delivered a majority of the orders for such machines to
the Predecessor Company. The Predecessor Company had no contractual relationship
with any third party other than with such customer. The Predecessor Company was
never implicated in any wrongdoing with respect to such telemarketing fraud and,
in fact, requested and cooperated with a federal investigation of such customer.
In addition, such customer's aggressive sales techniques caused order rates
to increase at a rate well beyond the Predecessor Company's manufacturing
capacity, which caused the Predecessor Company to have to rely on a third-party
manufacturer, Rowe, to produce machines for customers of this party. Rowe failed
to produce machines on a timely basis and also failed to adhere to the
specifications established by the Predecessor Company in the manufacture of the
vending machines, the result of which was problems with the refrigeration unit
and the microprocessor controller. Business was adversely affected as a result
of cancellations due to the taint of such telemarketing fraud, as well as due to
Rowe's inability to manufacture an adequate supply of machines and its delivery
of improperly manufactured machines.
By December 1992, the Predecessor Company had received approximately $4.15
million of financing and services from Teleflex, Inc. ("Teleflex"). In the wake
of the aforementioned telemarketing fraud and the problems caused by Rowe,
Teleflex, which was the Predecessor Company's principal source of financing,
withdrew its funding and foreclosed on the assets of the business, including the
proprietary technology of the business serving as collateral for the loans made
by Teleflex thereto. The foreclosure and withdrawal of funding led the
Predecessor Company to seek bankruptcy protection in October 1994.
By order entered June 7, 1995, the Bankruptcy Court approved the Settlement
Agreement between the Predecessor Company and Rowe (the "Settlement Agreement"),
which provided a resolution of the Predecessor Company's dispute with Rowe
regarding the faulty manufacture of vending machines by Rowe. The terms of the
settlement included the following: (i) cash payments by Rowe to the Predecessor
Company of $3,938,000; (ii) the return by Rowe of 450 fully-robotic vending
machines and the parts for an additional quantity of machines to the Predecessor
Company; and (iii) the withdrawal of Rowe's proof of claim in the Predecessor
Company's bankruptcy proceeding in the aggregate amount of $884,975.
The 450 fully-robotic vending machines received pursuant to the Settlement
Agreement were not fully operational when received and required reconstruction
by the Company. The reconstruction process constituted nearly all of the
Company's manufacturing operations during the nine months ended September 30,
1996.
The Reorganization Plan was approved by the Bankruptcy Court and became a
final order during December 1995.
Under the Reorganization Plan, the claims of the principal creditors of the
Predecessor Company are to be satisfied as follows:
(i) The Reorganization Plan provides for cash payments to Teleflex
totaling $3,444,708. Of this amount, in June 1995, the Predecessor Company
paid Teleflex $1.2 million and, in February 1996, the Company paid Teleflex
approximately $2.2 million. In addition, Teleflex had an allowed unsecured
claim of approximately $965,000;
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<PAGE>
(ii) National Penn Bank, which had already received payments aggregating
$175,000 out of proceeds from the settlement with Rowe, was paid $5,000 in
January 1996 to discharge its secured claim; and
(iii) Unsecured creditors will receive a total of $300,000 representing
10% of the amount of their allowed claims, 5% payable during each of January
1997 and January 1998. The Company intends to use a portion of the net
proceeds of this offering to satisfy the January 1997 payment. See
"Management's Discussion and Analysis of Financial Condition--Liquidity and
Capital Resources." The amount of unsecured debt at the time of approval of
the Reorganization Plan was approximately $3,500,000, and included the
aforementioned Teleflex unsecured debt in the amount of $965,000.
As of the date of this Prospectus, approximately $96,500 (of the
aforementioned $300,000 amount) is owed to Teleflex.
THE VENDING INDUSTRY
The U.S. vending industry generated in excess of $29 billion in sales volume
for 1995. The industry's product sales are divided into 14 different categories.
Some of the product categories include, in order of sales volume, canned cold
drinks (38% of total industry sales), candy & snacks (18% of total sales), hot
drinks (8% of sales), all-purpose foods (7% of sales), and cigarettes (6% of
sales). The vending industry's 9,800 operating entities include independent,
regional, and national organizations. The industry is characterized by small,
entrepreneurial local owner-operators; in 1995, 68% of the total number of
operators had three or fewer employees, while the percentage of organizations
employing 20 or more full-time staff was 10%. In total, it is estimated that the
industry has in place approximately 1.8 million machine site locations.
MANUFACTURING AND DISTRIBUTION
The Company plans to achieve its manufacturing goals through a system of
joint ventures and licenses of technology to manufacturers located in the
following strategic geographical areas: Europe, the Pacific Rim, and North
America. The Company's distributor in Korea has, with the Company's approval,
entered into a sublicense relating to the manufacture of the Company's vending
machine with Goryo Manufacturing Ltd., a major Korean manufacturing company. In
addition, the Company has engaged in discussions with a United States
manufacturing company relating to the manufacture of the Company's non-robotic
vending machines. There can be no assurance that the Company will enter into a
definitive agreement with such manufacturer on terms reasonable to the Company
or at all.
It is the Company's intention that distribution will be accomplished through
a system of master distributors which will have the right to distribute products
and machines on an exclusive basis in specified regions. Such master
distributors may contract with sub-distributors upon approval by the Company.
Each master distributor will be required to purchase minimum quantities of
products or lose their exclusivity.
To date, the Company's operations have been limited to arranging
distributorships for the Company's vending and food-dispensing machines and
selling a limited number of fully-robotic vending machines to such distributors
from the Company's inventory for test marketing in their local markets. Between
January 1, 1996 and September 30, 1996, the Company sold 64 fully-robotic
vending machines and seven non-robotic food dispensing machines. Accordingly,
the Company's future plans are subject to known and unknown risks and
uncertainties that may cause the Company's actual results in future periods to
be materially different from any future performance implied herein. In the event
that the Company does not enter into agreements providing for the manufacture of
the Company's vending machines and food-dispensing machines prior to the
exhaustion of the Company's inventory, the Company may be unable to deliver
additional machines for test marketing or other purposes. In such event, the
Company would be materially adversely affected.
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<PAGE>
LICENSE AND DISTRIBUTORSHIP AGREEMENTS
In October 1993, the Company signed an exclusive, five-year technology
licensing and distribution agreement for Korea with Woneel Mercantile, Ltd., a
South Korean manufacturer of consumer products. Subsequently, Woneel, with the
Company's approval, contracted with Goryo Manufacturing, Ltd. ("Goryo"), a major
Korean manufacturing company, to manufacture the Company's vending machines. The
agreement calls for Woneel to purchase all of its requirements for machines, if
any, from Goryo and to pay the Company a fixed royalty per machine.
In December 1995, the Company entered into a memorandum of understanding
with Zernostandart, a Russian corporation headquartered in Moscow, which
established Zernostandart as a master distributor for the City of Moscow. In
order to maintain its exclusive rights, Zernostandart must purchase a minimum
number of units over the next year.
In November 1995, the Company entered into an agreement with Kwang Hap Siang
(S) Pte Ltd., a Singapore corporation. In order to maintain its exclusive rights
to distribute the Company's products in Singapore, the agreement requires Kwang
Hap Siang (S) Pte Ltd. to purchase a minimum number of units over five years.
The distributor also has first rights of refusal for Malaysia and Indonesia for
a period of twelve months from the receipt of the first products in Singapore.
This agreement may be terminated by Kwang Hap Siang (S) Pte Ltd. upon 90 days
notice.
In July 1996, the Company entered into four agreements with American
Exchange S.A. ("American"), an Argentine corporation. Under the terms of these
agreements, American was granted exclusive rights to distribute the Company's
products in Argentina, Brazil, Chile, and Paraguay. In order to maintain its
exclusive rights, each agreement requires American to purchase a minimum number
of units over five years.
In July 1996, the Company entered into an agreement with Importacoes e
Vendas de Qualidade-Importacao, Exportacao, Industria e Comercio de Produtos
Alimentares, Lda ("IVQ Lda"), a Portuguese corporation. In order to maintain its
exclusive rights to distribute the Company's products in Portugal, the agreement
requires IVQ Lda to purchase a minimum number of units over five years.
In September 1996, the Company entered into an agreement with Nouveau
Distributors, Ltd., a New Zealand corporation. In order to maintain its
exclusive rights to distribute the Company's products in New Zealand, the
agreement requires Nouveau Distributors, Ltd. to purchase a minimum number of
units over five years.
MACHINE PRODUCT LINE
The Company's current product line includes machines dedicated to the hot
vending and dispensing of pizza and sandwiches. The machines are available in
two technological categories: the fully-robotic machines and non-robotic
machines.
The robotic machines are fully-automatic in all respects. They are able to
store, cook, and serve hot food, as well as take money, in a fully-automated
fashion. The Company's current fully-robotic vending machine is capable of
storing up to 200 pizzas or 100 sandwich units.
The non-robotic machines are automatic only in their ability to store food
properly. They are unable to cook, serve, or take money automatically, thus a
user will be required to deliver the frozen product manually to the machine's
microwave oven and to pay a cashier. The Company's current non-robotic vending
machine is capable of storing up to 80 pizzas or 40 sandwich units or a
combination thereof.
In addition to its current product line, the Company is developing
fully-robotic vending machines capable of cooking, storing, and serving hot
sandwiches and pizzas concurrently. The Company also has in development a
semi-robotic machine. The semi-robotic machine stores frozen food product in the
Company's packaging and takes money automatically, but requires the consumer to
manually deliver the
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food product to the microwave oven. It is anticipated that such semi-robotic
vending machines will be capable of storing pizzas, sandwiches, or pizzas and
sandwiches. The Company currently does not anticipate marketing the semi-robotic
machine until 1998, if at all.
In May 1996, the Company acquired the technology and certain inventory
relating to an additional fully-robotic hot food vending machine for $75,000.
This vending machine, which is in the developmental stage, differs from the
Company's own machines in that it is designed for the vending of name brand
frozen food products. While the Company's machines are designed to function only
with the Company's proprietary food packaging and formulations, this machine is
designed to vend frozen food product from a variety of major food manufacturers.
The Company believes that having the ability to vend nationally-recognized, name
brand products will allow it to serve a segment of the hot food vending market
that its current product line does not address.
FOOD PRODUCT LINE
The Company has developed a proprietary formulation that allows dough to be
cooked or reheated in a high-energy microwave oven without negatively impacting
its constitution. As a result, the Company has developed a complete line of
product offerings consisting of its proprietary dough formulations coupled with
natural ingredients. The offerings will fall into four primary categories: Pizza
Chef-Registered Trademark- Pizzas, Li'l Bite Sandwiches (currently produced
using non-proprietary dough formulations), Pasta Chef products, and hot pocket
pita snacks.
The Company's current line of food products is comprised of both pizza and
sandwich products. The pizza product is currently available in three different
varieties. However, it is anticipated that as the Company increases its
production levels, the Company will offer additional varieties of pizza,
including breakfast pizzas. The sandwich line currently consists of
cheeseburgers, chicken sandwiches, and barbeque pork sandwiches, each of which
are packaged as three small sandwiches per box. In addition to these offerings,
the Company also has developed other lines of food product, using their
proprietary food formulation, including hot pocket pita snacks and pasta dishes.
However, the Company intends to focus solely on the marketing of its sandwich
and pizza lines for the foreseeable future.
In August 1994, the Company established a five-year co-pack supply agreement
with a supplier, pursuant to which such supplier will produce pizzas for the
Company at an annually adjusted fixed price on an exclusive basis, thereby
providing the Company with predictable product costs. The supply agreement may
be terminated by such supplier at any time upon 90 days notice.
GOVERNMENT REGULATION
The Company is required to comply with certain rules and regulations of the
U.S. Food and Drug Administration. Compliance with such rules and regulations is
required as a result of the inclusion of a robotically operated microwave oven
in the Company's vending machines. The Company believes that it is in compliance
in all material respects with all such rules and regulations.
To be used in the United States, the Company's vending machines must also be
in compliance with the standards of Underwriters Laboratories. The Company
believes that it is in compliance in all material respects with all such rules
and regulations.
The Company's products are also subject to local foreign regulations where
such products are in use.
The Company is also in voluntary compliance with the manufacturing standards
outlined by the National Automatic Merchandising Association.
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<PAGE>
PATENTS, TRADEMARKS, AND PROPRIETARY PROTECTION
The Company holds design and utility patents on its vending machines and its
packaging system. The Company has patent-pending technology for the food
formulation for its dough based products and for its pizza box and coating. The
Company has been granted patents on the packaging system in the United States,
Japan, Israel, United Kingdom, Korea, Italy, France, and Mexico. The Company has
been granted patents on the delivery system in Israel, United Kingdom, and
Korea. The Company has applied for patents in other select foreign
jurisdictions.
The Company has registered the "Pizza Chef-Registered Trademark-" name and
logo and has applied for registration with the Patent and Trademark Office for
"Nouveau Chef". The Company is aware that a number of concerns may be using the
Pizza Chef-Registered Trademark- name in their businesses. The Company has
retained special trademark counsel to prosecute any party that is using the
Pizza Chef-Registered Trademark- name in violation of the Company's
registration.
The Company enters into confidentiality agreements with most persons and
entities who or which may have access to its technology. However, no assurance
can be given that such agreements, the patents, or any additional patents which
may be issued to the Company will prevent third parties from developing similar
or competitive technologies.
There can be no assurance that the patents will provide the Company with any
significant competitive advantages, or that challenges will not be instituted
against the validity or enforceability of its patents, or if instituted that any
such challenges will not be successful. The cost of litigation to uphold the
validity and prevent infringement can be substantial. In addition, no assurance
can be given that the Company will have sufficient resources to either institute
or defend any action, suit, or other proceeding by or against the Company with
respect to any claim of infringement of patent or other proprietary rights.
COMPETITION
The Company's distinctive systems approach combines the custom designed
food, package, and oven into a self-contained, fully-robotic vending machine.
Each machine features an on-board computer/ microprocessor, self-diagnostic
controller, storage freezer, product selector and transporter, and high-energy
directional microwave, all of which provides a system that serves the customer a
fresh, ready-to-eat hot meal in as little as 60 seconds.
The Company currently faces, and will face, direct competition in the hot
food automated vending market and, there can be no assurance that larger, better
capitalized companies will not enter such market. The Company may, in the
future, compete with such larger companies for, among other things: (i) the
procurement of licensees; (ii) prime locations for product distribution; and
(iii) quality distributors for the Company's products. There can be no assurance
that the Company will be able to compete effectively against such companies.
The Company is aware of a number of machines which mimic, and may compete
with, the Company's fully-robotic vending machine. Some of such machines are
being marketed by Hot Choice, Motion Technology, American Pizza Company, Heater
Meals, California Food & Vending, Tasty Fries, Ore-Ida, and Edgewater
Foods/Presto Pizzeria. There can be no assurance that additional entrants into
the hot food vending machine industry will not be forthcoming.
The domestic vending industry is dominated by a handful of large national
firms such as ARAMARK, Service America, and Canteen, which may have competitive
advantages in purchases from machine and product manufacturers, and in placing
vending machines in attractive locations. If such large firms entered the hot
food vending machine market, they would enjoy the advantage of "owning" many
prime locations through exclusive contractual arrangements. For example, a firm
might contract with a large hospitality chain, whereby the firm will retain
exclusive access to locations at the chain's facilities. In addition, the pre-
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existence of a well-trained, readily available service network and other capital
intensive infrastructure requirements also tend to work in favor of larger, more
sophisticated, and better-capitalized firms.
CORPORATE OFFICES
Pursuant to a sublease agreement, the Company leases approximately 15,000
square feet located at 212 Philips Road, Exton, Pennsylvania 19341, where the
Company currently maintains its corporate offices, limited warehouse, and
assembly facility. The term of the sublease agreement is three years ending in
October 1998. The current base rent under the sublease agreement is $67,792 per
annum. Other annual operating expenses under the sublease agreement are
currently $11,600 per annum.
During April 1996, the Company leased approximately 16,400 square feet in
Exton, Pennsylvania across the street from its other 15,000 square foot Exton
plant to house its research and development activities and for storage space.
The term of this lease is three years. The current annual rent under the terms
of this lease is $65,600.
In February 1996, the Company began leasing and entered into an agreement to
purchase a facility located in West Goshen, Pennsylvania, presently leased by
the Company, that was designed as a USDA certified production facility. Such
facility currently houses the Company's baking equipment, allowing the Company
to undertake its own food research, development, and potential manufacturing
operations, and to maintain consistent quality control with regard to its food
products. As a result of the Company's limited working capital, the Company had
been unable to consummate the planned acquisition of such facility and to make
the necessary renovations thereto. Accordingly, the Company negotiated with a
third party to acquire such facility and lease such facility to the Company. The
Company currently has an option, expiring in June 1998, to purchase this
facility from such third party at a price of approximately $1,610,000 plus
certain costs and has entered into a five-year lease, which commenced in
December 1996, relating to such facility. The annual rental payable by the
Company pursuant to the terms of such lease is approximately $247,000. In
addition, the Company (i) has agreed with such third party to make certain
prepayments for the purchase of the facility in the amount of approximately
$375,000 upon the closing of this offering and (ii) granted to such third party
the Lease Warrants. See "Use of Proceeds."
EMPLOYEES
On October 31, 1996, the Company, including the subsidiaries thereof, had an
aggregate of 29 full-time employees. Of such employees, seven were in
management, one was a sales and marketing representative, four were
administrative personnel, three were research and development personnel, and 14
were operations personnel. None of the Company's employees are represented by a
union. The Company believes that its relations with its employees are
satisfactory.
LEGAL PROCEEDINGS
The Company is not party to any material pending legal proceedings.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS, AND KEY CONSULTANT
The following table sets forth certain information concerning the Board of
Directors, executive officers, and a key consultant of the Company.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ------------------------------------- ----------- ------------------------------------------------------------
<S> <C> <C>
Gary W. Black, Sr. 55 Chairman of the Board of Directors and Chief Executive
Officer
Robert J. Brock, Sr. 56 President, Chief Operating Officer, and Director
Frederick W. Johnson 57 Production Manager, Secretary, and Director
David J. Roth 54 Director
Kalman Carmel 52 Consultant
</TABLE>
Each director is elected for a period of one year at the Company's annual
meeting of stockholders and serves until the next meeting and until his
successor is duly elected and qualified. Officers are elected by, and serve at
the discretion of, the Board of Directors. The Board of Directors intends to
establish Audit and Compensation Committees following the closing of this
offering. Additionally, the Company intends to increase the size of the Board of
Directors and the number of independent Directors following the closing of this
offering.
The following is a brief summary of the background of each director,
executive officer, and a key consultant of the Company.
GARY W. BLACK, SR., CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE
OFFICER. Mr. Black has served as Chairman of the Board of Directors and as
Chief Executive Officer of the Company since January 1996. Mr. Black founded the
Predecessor Company in 1989 and brings thirty years of experience in the fields
of materials engineering, actuation, and mechanism design and systems analysis
to the Company. In addition, he served as President of the Predecessor Company
at the time of the commencement of the bankruptcy proceeding relating to such
company. His background covers sub-systems design for numerous space hardware
programs, commercial and military aircraft, weapons systems, and automotive
engine combustion. Mr. Black holds numerous patents on exotic materials,
chemical formulations, weapons delivery systems, packaging, electro-mechanical
actuation devices, and, most recently, on food composition and robotic vending
equipment. Prior to founding and becoming Chief Executive Officer of the
Predecessor Company, Mr. Black held various positions in a number of aerospace
and defense product manufacturing companies, including the position of Vice
President of Teleflex. Mr. Black is the father of Gary W. Black, Jr., General
Manager of the Vending Division and Field Service Manager of the Company, and
Brett A. Black, the General Manager of the Food Division of the Company.
ROBERT J. BROCK, SR., PRESIDENT, CHIEF OPERATING OFFICER, AND DIRECTOR. Mr.
Brock, President, Chief Operating Officer and a Director of the Company since
1996, has served as Manager of Corporate Services of the Company since December
1995. He served as Vice President and Manager of Corporate Services with the
Predecessor Company since 1989, including at the time of the commencement of the
bankruptcy proceeding of the Predecessor Company. Mr. Brock also brings over
thirty years of manufacturing experience to the Company, has an extensive
background in manufacturing, particularly within the scope of military
equipment, and has held leadership positions related to plant management,
production operations, and personnel management. Mr. Brock has responsibility
for Human Resources and Operations Management, and reports to the Company's
Chief Executive Officer.
FREDERICK W. JOHNSON, PRODUCTION MANAGER, SECRETARY, AND DIRECTOR. Mr.
Johnson brings almost thirty years of experience in industrial management to the
Company. Mr. Johnson received a degree in Business Administration with a major
in Industrial Management from Drexel University in 1961. Mr. Johnson held
management positions with Handy & Harmon Tube from 1960 through 1966, Speeline
Inc.
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from 1967 through 1972, Commodore Optoelectronics from 1973 through 1978, and
Franke from 1979 through 1981. Mr. Johnson joined the Predecessor Company as
Production Manager in 1989. His responsibilities include oversight of production
of vending machines, shift management, labor relations, quality control and
production control. Mr. Johnson reports directly to the Chief Operating Officer.
He is an active member of the American Manufacturing Association.
DAVID J. ROTH, DIRECTOR. Mr. Roth has been a Director of the Company since
September 1996. From 1985 to the present, Mr. Roth has served as Chairman of
Roth Equities, Ltd., a private investment company. Additionally, Mr. Roth has
served as Chairman of D.J.L. Communications, Inc., a reseller of long distance
telephone services.
KALMAN CARMEL, CONSULTANT. Mr. Carmel has served as a consultant of the
Company since April 15, 1996. Since prior to 1991, Mr. Carmel has been a private
investor and, through an affiliated entity, has been an independent consultant
with clients in the textile, finance, and health care industries, among others.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services in all
capacities to the Company for the fiscal year ended December 31, 1995 paid to,
or accrued for, the Chief Executive Officer and the Chief Operating Officer of
the Company.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION SALARY(1)
- ----------------------------------------------------------------------------------- ---------
<S> <C>
Gary W. Black, Sr., Chairman of the Board of Directors and Chief Executive Officer $ 41,500
Robert J. Brock, Sr., President, Chief Operating Officer, and Director $ 43,365
</TABLE>
- ------------------------
(1) Commencing in January 1996, the salary of Mr. Black was increased to
$150,000 per annum and the salary of Mr. Brock was increased to $80,000 per
annum. See "Management--Employment Agreements." Commencing September 1,
1996, each individual elected to defer 30% of his respective salary pending
the closing of this offering.
DIRECTORS' LIMITATION OF LIABILITY
The Company's Certificate of Incorporation and By-Laws include provisions to
(a) eliminate the personal liability of directors for monetary damages resulting
from breaches of their fiduciary duty (except for liability for breaches of the
duty of loyalty, acts, or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, violations under Section
174 of the Delaware General Corporation Law, or for any transaction from which
the director derived an improper personal benefit) and (b) indemnify the
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law, including circumstances under which indemnification is
otherwise discretionary. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
The Company has obtained directors' and officers' liability insurance.
At present, there is no pending litigation or proceeding involving a
director, officer, employee, or other agent of the Company as to which
indemnification is being sought, nor is the Company aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee, or other agent.
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
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EMPLOYMENT AND CONSULTING AGREEMENTS
On June 3, 1996, the Company entered into five-year employment agreements
with Gary W. Black, Sr., the Chairman of the Board of Directors and Chief
Executive Officer of the Company, Robert J. Brock, Sr., the President, Chief
Operating Officer, and a Director of the Company, Frederick W. Johnson, the
Production Manager, Secretary, and a Director of the Company, Gary W. Black,
Jr., the General Manager of the Vending Division and Field Services Manager of
the Company, and Brett A. Black, the General Manager of the Food Division of the
Company. By mutual agreement of the Company and such individuals, their
respective employment agreements with the Company were terminated effective
September 1996.
The Company has entered into a consulting agreement with KMC Capital Corp.
("KMC"), an entity affiliated with Kalman Carmel. Pursuant to the terms of the
agreement, as amended in September 1996, the monthly compensation payable to KMC
for the rendering of consulting services is currently $12,500, payable through
April 15, 1999.
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PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus, the
ownership of the Common Stock by (i) each person who is known by the Company to
own of record or beneficially more than 5% of the outstanding Common Stock, (ii)
each of the Company's directors, executive officers, and certain members of
senior management, and (iii) all directors and executive officers of the Company
as a group. Except as otherwise indicated, the stockholders listed in the table
have sole voting and investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
NUMBER OF SHARES --------------------------
NAME AND ADDRESS BENEFICIALLY PRIOR TO AFTER
OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ------------------------------------------------------------------- -------------------- ------------- -----------
<S> <C> <C> <C>
Gary W. Black, Sr.(2).............................................. 2,535,625(3) 22.9% 20.9%
Glengarry Family Investments, L.P.................................. 300,000 2.7 2.5
1220 Pine Street
Norristown, Pennsylvania 19401
Robert J. Brock, Sr.(2)............................................ 100,000 * *
Frederick W. Johnson(2)............................................ 25,000 * *
Gary W. Black, Jr.................................................. 450,000(4) 4.1 3.7
Brett A. Black..................................................... 100,000 * *
David J. Roth(6)................................................... 0 * *
CSB Financial, LLC(5)(6)........................................... 950,000 8.6 7.8
c/o Stuart B. Ratner, P.C.
111 Prospect Street
Stamford, Connecticut 06901
Attention: Stuart B. Ratner
All directors and executive officers of the Company as a group (3) % %
(three persons).................................................. 2,660,625 24.1 21.9
</TABLE>
- ------------------------
* Less than 1%.
(1) Except as otherwise indicated, all of the referenced shares of Common Stock
are owned beneficially and of record. Beneficial ownership has been
determined in accordance with Rule 13d-3 promulgated under the Exchange Act.
(2) The address of the referenced stockholder is Nouveau International, Inc.,
212 Phillips Road, Exton, Pennsylvania 19341.
(3) Includes 300,000 shares of Common Stock owned of record by Glengarry Family
Investments, L.P., a Delaware limited partnership the sole limited partner
of which is a corporation owned by the spouse of Gary W. Black, Sr.
("Glengarry"). Gary W. Black, Jr., the son of Mr. Black, is the sole general
partner of such partnership.
(4) Includes 300,000 shares of Common Stock owned of record by Glengarry, of
which Gary W. Black, Jr. is the sole general partner.
(5) Mr. Carmel, a key consultant of the Company, is a member and affiliate of
the referenced entity.
(6) David J. Roth, a Director of the Company, is a trustee of a trust owning
approximately a 2.6% interest in CSB Financial, LLC.
35
<PAGE>
CERTAIN TRANSACTIONS
In January 1996, Gary W. Black, Sr. received 6,750,000 shares of Common
Stock in connection with the acquisition of the Predecessor Company by the
Company.
In February 1996, the Company advanced Mr. Gary W. Black, Sr. $200,000. In
April 1996, $100,000 was repaid with interest at the rate of 10% per annum. The
remainder of the advance will be repaid on or before February 7, 1997 with
interest thereon at the rate of 8% per annum.
In September 1996, Gary W. Black, Sr., Glengarry, and other stockholders of
the Company agreed to contribute, pursuant to the Underwriter's request,
764,375, 750,000, and 485,625 shares of Common Stock, respectively, a total of
2,000,000 shares, to the capital of the Company. Such contribution was effected
in November 1996 and reflected retroactively in the financial statements of the
Company as of January 1, 1994.
In December 1996, the Company entered into agreements with the holders of
the Series A Preferred Stock pursuant to which the Company agreed to issue to
such holders an aggregate of 675,050 shares of Common Stock in exchange for such
holders agreeing to certain restrictions on the public resale or other
disposition of (i) the 1,125,000 shares of Common Stock issuable upon conversion
of the Series A Preferred Stock into shares of Common Stock and (ii) the
aforementioned 675,050 shares of Common Stock. Such holders agreed that
approximately 728,000 shares of such 1,800,050 shares of Common Stock shall be
not be publicly sold or otherwise disposed of until the date of the
effectiveness of an additional registration statement to be filed by the Company
to register the resale of such securities within 90 days of the date of this
Prospectus, that approximately 536,025 of such 1,800,050 shares of Common stock
shall not be publicly sold or otherwise disposed of prior to the 90th day
following the date of the initial filing of such additional registration
statement, and that the remaining approximately 536,025 of such 1,800,050 shares
of Common Stock shall not be publicly sold or otherwise disposed of prior to the
180th day following the date of the initial filing of such additional
registration statement. In addition thereto and in connection therewith, the
holders of the January Warrants agreed that the shares of Common Stock issuable
upon the exercise thereof shall not be publicly resold or otherwise disposed of
prior to the date one year from the date of this Prospectus.
With respect to employment agreements between the Company and its officers
and directors, see "Management--Employment and Consulting Agreements."
36
<PAGE>
DESCRIPTION OF SECURITIES
The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Company's Certificate of
Incorporation, as amended and supplemented, copies of which are available, free
of charge, upon request.
COMMON STOCK
The Company is authorized to issue up to 25,000,000 shares of Common Stock,
of which 11,050,038 are outstanding on the date hereof. Holders of Common Stock
are entitled to one vote for each share held of record on each matter submitted
to a vote of stockholders. There is no cumulative voting for the election of
directors. Subject to the prior rights of any series of preferred stock which
may from time to time be outstanding, if any, holders of Common Stock are
entitled to receive ratably, dividends when, as, and if declared by the Board of
Directors out of funds legally available therefor and, upon the liquidation,
dissolution, or winding up of the Company, are entitled to share ratably in all
assets remaining after payment of liabilities and payment of accrued dividends
and liquidation preferences on the preferred stock, if any. Holders of Common
Stock have no preemptive rights and have no rights to convert their Common Stock
into any other securities. The outstanding Common Stock is validly authorized
and issued, fully-paid, and nonassessable.
PREFERRED STOCK
The Company is authorized to issue up to 3,000,000 shares of preferred
stock, par value $.001 per share, of which no shares are outstanding on the date
hereof. The preferred stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the Board of Directors,
without further action by stockholders, and may include, among other things,
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion rights, redemption
rights, and sinking fund provisions. The issuance of any such preferred stock
could adversely affect the rights of the holders of Common Stock and, therefore,
reduce the value of the Common Stock. The ability of the Board of Directors to
issue preferred stock could discourage, delay, or prevent a takeover of the
Company. As to the conversion of the Series A Preferred Stock, see "Certain
Transactions."
TRANSFER AGENT, REGISTRAR, AND PAYING AGENT
The Company has appointed Registrar & Transfer Company, located at 10
Commerce Drive, Cranford, New Jersey 07016, as transfer agent and registrar for
the Common Stock.
LISTING ON THE OTC BULLETIN BOARD
The Common Stock is quoted on the OTC Bulletin Board under the symbol
"VEND." No assurance can be given that an active trading market for the Common
Stock will develop or be sustained or at what price the Common Stock will trade.
37
<PAGE>
CONCURRENT SALES BY SELLING STOCKHOLDERS
The Registration Statement, of which this Prospectus forms a part, also
includes a separate prospectus relating to the offering and resale by the
Selling Stockholders of an aggregate of 604,225 shares of Common Stock issuable
upon the exercise of the Warrants, 100,000 shares of Common Stock issuable upon
the exercise of the Lease Warrants, and an additional 950,000 shares of Common
Stock held by CSB Financial, LLC. The holders of the Warrants and the Lease
Warrants have agreed that the shares of Common Stock issuable upon exercise
thereof may not be publicly resold or otherwise disposed of prior to one year
from the date of this Prospectus without the prior written consent of the
Underwriter. The shares of Common Stock held by CSB Financial, LLC may not be
sold for the period of 18 months from the date of this Prospectus without the
written consent of the Underwriter.
Sales of such shares of Common Stock, or even the potential of such sales,
could have an adverse effect on the market price of the Common Stock. As a
result of the registration of the resale of such shares of Common Stock, the
freely tradeable Common Stock will be increased by 950,000 to 6,549,988 shares
of Common Stock. If the Warrants and the Lease Warrants are exercised in their
entirety, there will then be an additional 1,654,225 shares of Common Stock that
are freely tradeable, including the aforementioned 950,000 shares of Common
Stock.
38
<PAGE>
UNDERWRITING
GENERAL
The Underwriter has agreed, subject to the terms and conditions contained in
the Underwriting Agreement, to purchase, and the Company has agreed to sell, the
Shares offered hereby.
A copy of the Underwriting Agreement has been filed as an exhibit to the
Registration Statement, to which reference is hereby made. The Underwriting
Agreement provides that the obligations of the Underwriter are subject to
certain conditions. The Underwriter shall be obligated to purchase all of the
Shares if any are purchased.
The Underwriter has advised the Company that it proposes to offer the Shares
to the public at the public offering price set forth on the cover page of this
Prospectus and that it may allow to certain dealers who are members of the NASD,
and to certain foreign dealers, concessions of not in excess of $ per
share, of which amount a sum not in excess of $ per share may in turn be
reallowed by such dealers to other dealers who are members of the NASD and to
certain foreign dealers. After the commencement of this offering, the
concessions and the reallowances may be changed by the Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriter may be required to make in respect thereof.
The Company has agreed to pay to the Underwriter an expense allowance, on a
non-accountable basis, equal to 3% of the gross proceeds derived from the sale
of the Shares. The Company has also agreed to pay certain of the Underwriter's
expenses in connection with this offering, including expenses in connection with
qualifying the Shares offered hereby for sale under the laws of such states as
the Underwriter may designate. In addition, the Company will sell to the
Underwriter, and to its designees, at a purchase price of $.001 per warrant, the
Underwriter's Warrants to purchase an aggregate of 110,000 shares of Common
Stock exercisable at 125% of the offering price.
The officers and directors of the Company holding an aggregate of 2,660,625
shares of Common Stock have agreed not to publicly sell or otherwise dispose of
their shares of Common Stock, securities of the Company convertible into, or
exercisable or exchangeable for, shares of Common Stock, or shares of Common
Stock received upon conversion, exercise, or exchange of such securities, to the
public for a period of 24 months from the date of this Prospectus. In addition,
the Company has agreed that for a period of 24 months after the date of this
Prospectus it will not sell any shares of Common Stock, or options or warrants
to purchase Common Stock other than (i) the Underwriter's Warrants, (ii) shares
of Common Stock issued in connection with the exercise of any such warrants,
(iii) shares of Common Stock issued upon the exercise of options and warrants
outstanding on the date hereof, and (iv) shares of Common Stock issued in
connection with an acquisition by the Company. Additionally, the holders of
1,800,050 shares of Common Stock (1,125,000 shares of which were issued upon the
conversion of the Series A Preferred Stock and 675,050 of which were issued to
induce such holders to agree to certain restrictions on the resale of such
securities) have agreed that approximately 728,000 shares of such 1,800,050
shares of Common Stock shall be not be publicly sold or otherwise disposed of
until the date of the effectiveness of an additional registration statement to
be filed by the Company to register the resale of such securities within 90 days
of the date of this Prospectus, that approximately 536,025 of such 1,800,050
shares of Common stock shall not be publicly sold or otherwise disposed of prior
to the 90th day following the date of the initial filing of such additional
registration statement, and that the remaining approximately 536,025 of such
1,800,050 shares of Common Stock shall not be publicly sold or otherwise
disposed of prior to the 180th day following the date of the initial filing of
such additional registration statement. In addition thereto and in connection
therewith, the holders of the Warrants and the Lease Warrants agreed that the
shares of Common Stock issuable upon the exercise thereof shall not be publicly
resold or otherwise
39
<PAGE>
disposed of prior to the date one year from the date of this Prospectus. The
foregoing restrictions on resale may be terminated, in whole or in part, with
the prior written consent of the Underwriter.
OVER-ALLOTMENT OPTION
The Company has granted to the Underwriter an option, exercisable during the
45-day period commencing on the date of this Prospectus, to purchase at the
public offering price per share less underwriting discount, up to an aggregate
of 165,000 shares of Common Stock for the sole purpose of covering
over-allotments, if any. After the commencement of this offering, the
Underwriter may confirm sales of shares of Common Stock subject to this
over-allotment option. Purchases of shares of Common Stock upon exercise of the
over-allotment option will result in the realization of additional compensation
by the Underwriter.
UNDERWRITER'S WARRANTS
In connection with this offering, the Company has agreed to sell to the
Underwriter, at the price of $.001 per warrant, the Underwriter's Warrants to
purchase 110,000 shares of Common Stock. The Underwriter's Warrants are
exercisable for a period of four years commencing one year from the date hereof
at an exercise price per share (the "Exercise Price") equal to 125% of the
public offering price per share. The Underwriter's Warrants may not be sold,
transferred, assigned, pledged, or hypothecated for a period of 12 months from
the date of the Prospectus, except to members of the selling group and officers
and partners of the Underwriter and members of the selling group. The
Underwriter's Warrants contain anti-dilution provisions providing for adjustment
of the number of shares for which such warrants are exercisable and the Exercise
Price upon the occurrence of certain events, including stock dividends, stock
splits, recapitalizations, and sales of Common Stock below current market price
(as defined therein). The holders of the Underwriter's Warrants have no voting,
dividend, or other rights as stockholders of the Company with respect to shares
of Common Stock underlying the Underwriter's Warrants, unless the Underwriter's
Warrants have been exercised.
A new registration statement or post-effective amendment to the Registration
Statement will be required to be filed and declared effective before
distribution to the public of the Underwriter's Warrants and the Warrant Shares.
The Company has agreed to make, on one occasion during the period beginning one
year after the date hereof and ending four years thereafter, if requested by the
holders of a majority of the Underwriter's Warrants or Warrant Shares, all
necessary filings to permit a public offering of the Warrant Shares and to use
its best efforts to cause such filing to become effective under the Securities
Act and to remain effective for at least 12 months, at the Company's sole
expense. In addition, the Company has agreed to give advance notice to holders
of the Underwriter's Warrants and Warrant Shares of its intention to file a
registration statement, and in such case, holders of the Underwriter's Warrants
and the Warrant Shares shall have the right to require the Company to include
the Warrant Shares in such registration statement at the Company's expense.
During the period that the Underwriter's Warrants are exercisable, the
Underwriter and any transferee will have the opportunity to profit from a rise
in the market price of the Common Stock with a resulting dilution in the
interest of other stockholders. In addition, the terms on which the Company will
be able to obtain additional capital during the exercise period may be adversely
affected since the Underwriter is likely to exercise the Underwriter's Warrants
at a time when the Company would, in all likelihood, be able to obtain capital
by a new offering of securities on terms more favorable than those provided by
the terms of the Underwriter's Warrants.
OBSERVER OF THE BOARD
In connection with this offering, the Company has agreed that, for the
three-year period commencing on the date of the Prospectus, the Underwriter has
the right to appoint a designee as an observer at all
40
<PAGE>
meetings of the Company's Board of Directors. This designee has the right to
attend all meetings of the Board of Directors and shall be entitled to receive
reimbursement for all out-of-pocket expenses of attendance at such meetings. In
addition, such designee shall be indemnified to the same extent as the Company's
directors.
The foregoing is a summary of the principal terms of the Underwriting
Agreement and the Underwriter's Warrants, does not purport to be complete, and
is qualified in its entirety by reference to the form of Underwriting Agreement
and the form of Underwriter's Warrant, which have been filed as exhibits to the
Registration Statement.
In addition to the foregoing, the Underwriter acted as the placement agent
in connection with the Private Financings and, in connection therewith, received
commissions in the aggregate of $497,500.
SECURITIES AND EXCHANGE COMMISSION INVESTIGATION INVOLVING THE UNDERWRITER
The Underwriter is the subject of a private Commission investigation to
determine whether the Underwriter and certain individuals have violated a
section of the Exchange Act and certain rules thereunder in connection with the
purchase or sale of the securities of a specified issuer (not the Company) or
other unspecified securities, or while participating in a distribution of such
securities. The investigation is still pending. Although the Underwriter is not
aware of the commission of any violations of the federal securities laws in
these matters, no assurances can be given that the Commission will not file a
formal complaint with respect thereto. The ability of the Underwriter to make a
market in the Common Stock could be impaired if sanctions are imposed against
the Underwriter in this matter.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Brock
Fensterstock Silverstein McAuliffe & Wade LLC, New York, New York, special
securities counsel. Certain legal matters in connection with the offering will
be passed upon for the Underwriter by Tolins & Lowenfels, A Professional
Corporation, New York, New York. Brock Fensterstock Silverstein McAuliffe & Wade
LLC has rendered legal services to the Underwriter from time to time.
EXPERTS
The financial statements of Nouveau International, Inc. as at December 31,
1995, and December 31, 1994 and for the years then ended and the financial
statements of Health Management, Inc. as at December 31, 1995 and for the year
then ended have been audited by Richard A. Eisner & Company, LLP, independent
certified public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon such reports given upon the
authority of said firm as experts in accounting and auditing.
41
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports and other information with the
Commission. Such reports and other information filed by the Company with the
Commission pursuant to the informational requirements of the Exchange Act may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the
Commission's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Electronic reports and other information filed through the
Electronic Data Gathering, Analysis, and Retrieval system are publicly available
through the Commission's Web site (http:// www.sec.gov). Copies of such material
also may be obtained from the public reference section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
This Prospectus constitutes a portion of a registration statement (the
"Registration Statement") filed with the Commission under the Securities Act.
This Prospectus omits certain of the information contained in the Registration
Statement in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and related exhibits for
further information with respect to the Company. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains historical information and forward-looking
statements. Statements looking forward in time are included in this Prospectus
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Such statements involve known and unknown risks and
uncertainties that may cause the Company's actual results in future periods to
be materially different from any future performance suggested herein. Further,
the Company operates in an industry sector where securities values may be
volatile and may be influenced by economic and other factors beyond the
Company's control. In the context of the forward-looking information provided in
this Prospectus and other reports, please refer to the discussion of risk
factors detailed in, as well as other information contained in, this Prospectus
and the Company's other filings with the Commission.
42
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
HISTORICAL:
Nouveau International Inc. and Subsidiaries
Report of Independent Auditors..................................................... F-2
Consolidated Balance Sheets as at December 31, 1995, December 31, 1994 and
September 30, 1996 (Unaudited)................................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1995 and
December 31, 1994 and for the Nine Months Ended September 30, 1996 (Unaudited)
and September 30, 1995 (Unaudited)............................................... F-4
Consolidated Statements of Changes in Stockholder's Equity (Capital Deficiency) for
the Years Ended December 31, 1994 and December 31, 1995 and for the Nine Months
Ended September 30, 1996 (Unaudited)............................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and
December 31, 1994 and for the Nine Months Ended September 30, 1996 (Unaudited)
and September 30, 1995 (Unaudited)............................................... F-6
Notes to Financial Statements...................................................... F-7
Health Management Inc.
Report of Independent Auditors..................................................... F-15
Balance Sheet as at December 31, 1995.............................................. F-16
Statement of Operations for the Year Ended December 31, 1995....................... F-17
Statement of Changes in Capital Deficiency for the year ended December 31, 1995.... F-18
Statement of Cash Flows for the Year Ended December 31, 1995....................... F-19
Notes to Financial Statements...................................................... F-20
PRO FORMA :
Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 1995
(Unaudited)...................................................................... F-21
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholder
Nouveau International, Inc.
We have audited the accompanying consolidated balance sheets of Nouveau
International, Inc. and subsidiaries as at December 31, 1995 and December 31,
1994 and the related consolidated statements of operations, changes in
stockholder's equity (capital deficiency) and cash flows for the years then
ended. 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in
all material respects, the financial position of Nouveau International, Inc. and
subsidiaries at December 31, 1995 and December 31, 1994, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
As discussed in Note A, in January 1996, the Company was acquired by Health
Management, Inc. through a reverse acquisition of stock.
Richard A. Eisner & Company, LLP
New York, New York
February 7, 1996
With respect to Note 0 [2],
November 18, 1996
F-2
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1994 1996
--------- ----------- -------------
<S> <C> <C> <C>
(DEBTOR-IN-
POSSESSION) (UNAUDITED)
ASSETS
Current assets:
Cash.................................................................... $ 38,971 $ 16,932 $ 118,623
Restricted cash (Note C)................................................ 338,000
Accounts receivable..................................................... 22,083 28,979 15,587
Inventory (Notes B[3] and D)............................................ 3,174,659 621,298 3,391,526
Loans receivable, stockholder (Note E).................................. 100,000
Settlement receivable (Note F).......................................... 362,694 448,142
Deferred financing costs (Note B[5]).................................... 158,460
Prepaid expenses and other current assets............................... 32,287 32,287 34,499
--------- ----------- -------------
Total current assets.............................................. 3,968,694 699,496 4,266,837
Property and equipment, net (Notes B[4] and G)............................ 117,250 265,099 251,527
Settlement receivable (Note F)............................................ 448,142
Deferred registration costs (Note B[5])................................... 75,000
Other assets.............................................................. 61,474 38,508 51,596
--------- ----------- -------------
TOTAL............................................................. $4,595,560 $1,003,103 $ 4,644,960
--------- ----------- -------------
--------- ----------- -------------
LIABILITIES
Current liabilities:
Senior notes payable--net of discount of $615,611 (Note J).............. $ 859,389
Notes payable--other (Note K)........................................... 140,000
Current portion of prepetition liabilities (Note H)..................... $1,184,935 $5,318,371 134,773
Accounts payable, accrued expenses and other current liabilities........ 149,640 49,138 863,892
Loan payable, stockholder (Note I)...................................... 183,764
Fees payable (Note F)................................................... 200,000 225,000
Dividends payable....................................................... 100,333
--------- ----------- -------------
Total current liabilities......................................... 1,718,339 5,367,509 2,323,387
Prepetition liabilities (Note H).......................................... 1,392,351 1,844,708 124,773
Fees payable (Note F)..................................................... 100,000
--------- ----------- -------------
Total liabilities................................................. 3,210,690 7,212,217 2,448,160
--------- ----------- -------------
Commitments and contingencies (Note L)
STOCKHOLDER'S EQUITY (CAPITAL DEFICIENCY)
Preferred stock, 1,000,000 shares authorized, 70 shares of Series A 4%
cumulative convertible redeemable issued and outstanding (liquidation
value--$3,500,000) (Note M)............................................. 3,358,333
Common stock, $.001 par value, 25,000,000 shares authorized, 9,249,988
shares issued and outstanding (Note O[2])............................... 389,714 389,714 9,250
Additional paid-in capital................................................ 1,240,877
Retained earnings (deficit)............................................... 995,156 (6,598,828) (2,411,660)
--------- ----------- -------------
Total stockholder's equity (capital deficiency)................... 1,384,870 (6,209,114) 2,196,800
--------- ----------- -------------
TOTAL............................................................. $4,595,560 $1,003,103 $ 4,644,960
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
F-3
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(NOTE B[1])
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
1995 1994 1996 1995
------------ ------------- ------------- ------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Net sales (Notes N[2] and O[1])....................... $ 245,313 $ 943,345 $ 563,382 $ 218,595
Cost of goods sold.................................... 224,282 859,287 516,031 178,857
------------ ------------- ------------- ------------
Gross profit...................................... 21,031 84,058 47,351 39,738
------------ ------------- ------------- ------------
Operating expenses:
General and administrative............................ 618,398 935,846 2,213,342 375,523
Selling............................................... 34,839 75,384 488,468 64,707
------------ ------------- ------------- ------------
653,237 1,011,230 2,701,810 440,230
------------ ------------- ------------- ------------
(Loss) from operations.................................. (632,206) (927,172) (2,654,459) (400,492)
------------ ------------- ------------- ------------
Other income (expenses):
Gain from settlement of lawsuit (Note F).............. 5,979,459 5,979,459
Interest income....................................... 105,216 23,686 38,007 67,270
Interest (expense).................................... (32,352) (213,179) (331,698) (29,931)
(Loss) on abandonment and sale of property (Note G)... (92,338) (3,279) (91,228)
Reorganization expense................................ (41,401) (15,000) (33,150)
------------ ------------- ------------- ------------
5,918,584 (207,772) (293,691) 5,892,420
------------ ------------- ------------- ------------
Income (loss) before extraordinary item................. 5,286,378 (1,134,944) (2,948,150) 5,491,928
Extraordinary item:
Compromise of prepetition liabilities (Note H)........ 2,307,606 112,000
------------ ------------- ------------- ------------
NET INCOME (LOSS)....................................... $ 7,593,984 $ (1,134,944) $ (2,948,150) $ 5,603,928
------------ ------------- ------------- ------------
------------ ------------- ------------- ------------
Net income (loss) per share before extraordinary item... $.57 $(.12) $(.37) $.60
Extraordinary item...................................... .25 .01
------------ ------------- ------------- ------------
NET INCOME (LOSS) PER SHARE............................. $.82 $(.12) $(.37) $.61
------------ ------------- ------------- ------------
------------ ------------- ------------- ------------
Weighted average number of shares outstanding (Note
B[10])................................................ 9,249,988 9,249,988 9,249,988 9,249,988
------------ ------------- ------------- ------------
------------ ------------- ------------- ------------
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
F-4
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(CAPITAL DEFICIENCY)
<TABLE>
<CAPTION>
COMMON STOCK,
PREFERRED $.001 PAR VALUE,
STOCK, 25,000,000
70 SHARES SHARES TOTAL
SERIES A 4% AUTHORIZED, STOCKHOLDER'S
CUMULATIVE 9,249,988 SHARES ADDITIONAL RETAINED EQUITY
CONVERTIBLE ISSUED AND PAID-IN EARNINGS (CAPITAL
REDEEMABLE OUTSTANDING CAPITAL (DEFICIT) DEFICIENCY)
----------- ---------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
(NOTE L)
Balance--January 1, 1994................. $ 389,714 $(5,463,884) $(5,074,170)
Net (loss)............................... (1,134,944) (1,134,944)
-------- ----------- ------------
Balance--December 31, 1994............... 389,714 (6,598,828) (6,209,114)
Net income............................... 7,593,984 7,593,984
-------- ----------- ------------
Balance--December 31, 1995............... 389,714 995,156 1,384,870
Net effect of the exchange of 6,750,000 (380,464)
shares of HMI's common stock for all of
the outstanding shares of Nouveau
International, Inc.'s common stock..... $ 380,464 -0 -
Issuance of 70 shares of Series A 4% $3,000,000
cumulative convertible redeemable
preferred stock less costs of
$500,000............................... 3,000,000
Issuance of warrants to purchase 491,665
shares of common stock, in connection
with a private placement, at an
exercise price of $2.00 per share...... 860,413 860,413
Net (loss)............................... (2,948,150) (2,948,150)
Preferred stock dividends payable........ (100,333) (100,333)
Accretion for preferred stock liquidation 358,333
preference............................. (358,333) -0 -
----------- -------- ----------- ----------- ------------
BALANCE--SEPTEMBER 30, 1996 $3,358,333 $ 9,250
(UNAUDITED)............................ $ 1,240,877 $(2,411,660) $2,196,800
----------- -------- ----------- ----------- ------------
----------- -------- ----------- ----------- ------------
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
F-5
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE B[1])
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------------
<S> <C> <C> <C> <C>
1995 1994 1996 1995
----------- ------------ ------------ -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 7,593,984 $ (1,134,944) $ (2,948,150) $ 5,603,928
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Litigation settlement............................... (2,941,459) (3,241,459)
Loss on abandonment and sale of property............ 92,338 3,279 91,228
Compromise of prepetition liabilities............... (2,307,606) (112,000)
Depreciation and amortization....................... 58,276 63,987 95,379 30,892
Interest imputed on lawsuit settlement.............. (97,266) (67,270)
Bad debt expense.................................... 28,770
Amortization of debt discount....................... 244,802
Changes in operating assets and liabilities:
(Increase) decrease in restricted cash............ (338,000) 338,000
(Increase) decrease in accounts receivable........ 6,896 14,790 (22,274) 9,146
(Increase) decrease in inventory.................. 39,553 88,939 (216,867) 44,485
Decrease in settlement receivable................. 362,694
(Increase) decrease in other assets............... (22,966) 5,478 7,666 27,067
Increase (decrease) in accounts payable and
accrued fees and expenses:
Prepetition................................... (46,783) 603,434 (59,032) (46,783)
Postpetition.................................. (849,498) 49,138 639,252 (689,448)
(Decrease) in customer deposits................... (17,542)
----------- ------------ ------------ -----------
Net cash provided by (used in) operating
activities.................................... 1,187,469 (323,441) (1,529,760) 1,649,786
----------- ------------ ------------ -----------
Cash flows from investing activities:
Loans made to stockholder............................... (100,000)
Purchase of property and equipment...................... (3,765) (25,444) (172,401)
Proceeds from sale of asset............................. 1,000 1,000
----------- ------------ ------------ -----------
Net cash provided by (used in) investing
activities...................................... (2,765) (25,444) (272,401) 1,000
----------- ------------ ------------ -----------
Cash flows from financing activities:
Sale of preferred stock................................. 3,500,000
Payment of offering costs for sale of preferred stock... (500,000)
Proceeds from short-term borrowings..................... 1,615,000
Payment of offering costs for sale of senior notes...... (215,715)
Proceeds from loans made by investor.................... 90,169
Payment of secured prepetition liabilities.............. (1,346,429) (10,134) (2,258,708) (1,346,429)
Loans from (repaid to) stockholder...................... 183,764 268,616 (183,764)
Deferred registration costs............................. (75,000)
----------- ------------ ------------ -----------
Net cash provided by (used in) financing
activities.................................... (1,162,665) 348,651 1,881,813 (1,346,429)
----------- ------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH........................... 22,039 (234) 79,652 304,357
Cash--beginning of year................................... 16,932 17,166 38,971 16,932
----------- ------------ ------------ -----------
CASH--END OF PERIOD....................................... $ 38,971 $ 16,932 $ 118,623 $ 321,289
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest................ $ 29,931 $ 4,976 $ 10,668 $ 29,931
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
F-6
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
(NOTE A)--MERGER BETWEEN HEALTH MANAGEMENT, INC. AND NOUVEAU INTERNATIONAL,
INC.:
In January 1996, all of the outstanding stock of the Company was acquired by
Health Management, Inc. ("HMI") in exchange for 6,750,000 shares, representing
60% of HMI common stock. HMI was a nonoperating company, therefore, this
transaction was accounted for as a recapitalization instead of a business
combination.
(NOTE B)--BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
[1] THE COMPANY:
Nouveau International, Inc. and subsidiaries (the "Company") manufactures
and distributes hot food vending machines and related food products. The Company
uses certain proprietary machine and food technology in the manufacture of its
products.
On October 24, 1994, the Company (the "Debtor") filed petitions for relief
under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy
Court and subsequently submitted a plan of reorganization to the court. Under
Chapter 11, certain claims against the Debtor in existence prior to the filing
of the petitions for relief under the federal bankruptcy laws were stayed while
the Debtor continued business operations as debtor-in-possession. On December 8,
1995 the plan of reorganization (the "Plan") was confirmed.
[2] PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements of Nouveau International, Inc. include
the accounts of its wholly owned subsidiaries, Nouveau Foods International,
Inc., Nouveau Vend International, Inc., and Nouveau Equities, Inc. Intercompany
balances have been eliminated in the consolidated financial statements.
[3] INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
[4] PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets (5 to 7 years).
[5] DEFERRED FINANCING COSTS:
Deferred financing costs are being amortized over the term of the related
debt, which is one year.
[6] REVENUE RECOGNITION:
Revenue is recognized when goods are shipped.
[7] RESEARCH AND DEVELOPMENT:
Research and development costs are expensed as incurred.
F-7
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
(NOTE B)--BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES: (CONTINUED)
[8] INCOME TAXES:
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109 "Accounting for Income Taxes." SFAS No. 109 provides for income
taxes to be accounted for based on the difference between reported amounts of
assets and liabilities and their tax bases.
The confirmation of the plan of reorganization has eliminated all net
operating loss carryforwards which were available to offset future taxable
income.
[9] 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.
[10] EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share is based on the weighted average number of shares
outstanding during each period, retroactively restated for the exchange and
merger with HMI (Note A), and the contribution of 2,000,000 shares of common
stock back to the Company by certain shareholders (Note O[2]), as if these
transactions took place at the beginning of the period. The effect of warrants
and options is computed, if dilutive, using the treasury stock method.
[11] INTERIM FINANCIAL INFORMATION:
The accompanying statements as at September 30, 1996 and for the nine months
ended September 30, 1996 and September 30, 1995 are unaudited but, in the
opinion of management of the Company, reflect all adjustments (consisting only
of normal and recurring adjustments) necessary for a fair presentation. The
results of operations for the nine month period ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1996.
(NOTE C)--CASH:
As of December 31, 1995, the Company had $338,000 which was received as part
of the lawsuit settlement referred to in Note F. These funds were being held in
a restricted escrow account for payment to a secured creditor and the Company's
attorneys.
F-8
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
(NOTE D)--INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1995 1994 1996
------------ ---------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Component parts......................................................... $ 1,443,885 $ 153,560 $ 1,638,714
Work-in-process......................................................... 151,800 55,962 223,220
Finished machines....................................................... 1,578,974 411,776 1,529,592
------------ ---------- -------------
Total............................................................. $ 3,174,659 $ 621,298 $ 3,391,526
------------ ---------- -------------
------------ ---------- -------------
</TABLE>
Included in inventory at December 31, 1995 and September 30, 1996 is
approximately $900,000 of parts and substantially all of the work-in-process and
finished machines which were received from a vendor pursuant to the litigation
settlement referred to in Note F. These goods were valued at their current
replacement cost.
(NOTE E)--LOAN RECEIVABLE, STOCKHOLDER:
Loan receivable from stockholder is due February 7, 1997 with interest at 8%
per annum.
(NOTE F)--LITIGATION SETTLEMENT:
In 1995, the Company settled a lawsuit with the former supplier of its
vending machines. Under the terms of the settlement agreement, the supplier
cancelled accounts payable of $884,975 and agreed to pay the Company cash of
$3,938,000 and deliver to the Company inventory parts, work-in-process and
finished machines held by them, which were valued at $2,592,914. The Company has
received cash payments totalling $3,438,000 through September 1996. A final
installment of $500,000 which was due in June 1997, was received in October
1996.
The settlement balance receivable is shown at its net present value
discounted at an effective interest rate of 11% per annum. The bankruptcy court
ordered that a portion of the cash proceeds of the settlement be used to pay a
secured claim owed to a creditor (Note H) and attorneys' fees for services
rendered in connection with the settlement of the lawsuit. Fees payable to the
litigating attorneys amount to $225,000 at September 30, 1996.
F-9
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
(NOTE G)--PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1994 1996
---------- ---------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Machinery and equipment................................................... $ 228,428 $ 425,027 $ 268,583
Furniture and fixtures.................................................... 23,015 23,015 57,302
Transportation equipment.................................................. 10,796 7,032 13,596
Leasehold improvements.................................................... 95,159
---------- ---------- -------------
262,239 455,074 434,640
Less accumulated depreciation............................................. 144,989 189,975 183,113
---------- ---------- -------------
Total............................................................. $ 117,250 $ 265,099 $ 251,527
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
In July 1995, the Company abandoned leasehold improvements with a net book
value of $90,640.
F-10
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
(NOTE H)--PREPETITION LIABILITIES:
Prepetition liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1994 1996
------------ ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
Secured:
Former investor.................................. $ 2,244,708 $ 3,444,708
Bank............................................. 146,429
------------ ------------
2,244,708 3,591,137
------------ ------------
Priority:
Tax claims....................................... 33,293 80,076
Former stockholder............................... 48,000 $ 10,000
------------ ------------ -------------
81,293 80,076 10,000
------------ ------------ -------------
Unsecured:
Stockholders..................................... 22,636 226,356 8,638
Trade and other miscellaneous claims............. 132,131 2,300,333 144,390
Former investor.................................. 96,518 965,177 96,518
------------ ------------ -------------
251,285 3,491,866 249,546
------------ ------------ -------------
Total...................................... 2,577,286 7,163,079 259,546
Less current portion............................... 1,184,935 5,318,371 134,773
------------ ------------ -------------
Noncurrent portion................................. $ 1,392,351 $ 1,844,708 $ 124,773
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
When the Company petitioned for bankruptcy in October 1994 two claims were
owed to secured creditors. The first claim was owed to a bank who was paid in
full in June of 1995. The payment amounted to $175,000 including accrued
interest of $28,571. The remaining claim was owed to a former investor in the
Company who was paid $1,200,000 in 1995 from the proceeds of the litigation
settlement referred to in Note F and $2,244,708 from the proceeds received from
the sale of preferred stock (Note M).
The plan of reorganization did not provide for the payment of interest to
the secured creditor subsequent to the date of petition. Contractual interest on
these loans was approximately 11% per annum and if it would have continued to
accrue, it would have amounted to approximately $315,000 for the year ended
December 31, 1995, $71,000 for the period of October 24, 1994 through December
31, 1994 and $100,000 for the nine months ended September 30, 1996.
In June 1995, the Bankruptcy Court ordered the Company to pay $46,783 to the
Internal Revenue Service from the proceeds of the initial payment received from
the litigation settlement. Priority claims include remaining payroll tax
liabilities owed to a state government and unpaid rent due to a former
stockholder for leased premises which were vacated in 1995.
Upon effectiveness of the confirmation of the plan of reorganization,
unsecured claims, including those due to certain stockholders and the former
investor were settled for 10% of their prepetition amount
F-11
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
(NOTE H)--PREPETITION LIABILITIES: (CONTINUED)
and are payable in two equal installments of 5% each in January 1997 and January
1998. Cancellation of debt pursuant to the plan of reorganization resulted in an
extraordinary gain of $2,307,606 in 1995.
As of September 30, 1996, minimum payments remaining for all claims due
under the plan of reorganization are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, PRIORITY UNSECURED TOTAL
- --------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
1997..................................................... $ 10,000 $ 124,773 $ 134,773
1998..................................................... 124,773 124,773
---------- ---------- ----------
$10,000.... $ 249,546 $ 259,546
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(NOTE I)--LOANS PAYABLE--STOCKHOLDER:
These loans were repaid in January 1996 with interest at 10% per annum.
Interest expense on these loans amounted to $2,421 for the year ended December
31, 1995.
(NOTE J)--SENIOR NOTES PAYABLE:
In May 1996 and July 1996 the Company received $1,253,482 representing the
net proceeds of a private placement offering of 5 and 9/10 units, each unit
consisting of a Series A 10% Senior Note in the principal amount of $250,000 and
a warrant to purchase 83,333 shares of common stock, at an exercise price of
$2.00 per share. These notes are due on the earlier of May 23, 1997 or the
closing of a public offering of the Company's common stock, for minimum gross
proceeds of $5,000,000. The warrants expire in May 1999. The Company, based on
an investment banking opinion letter, valued the warrants at $860,413.
Therefore, the effective rate of return on the Senior Notes would be deemed to
be approximately 160%.
(NOTE K)--NOTES PAYABLE--OTHER
During the month of September 1996, the Company borrowed $140,000 from a
third party to fund its short-term needs. The resulting promissory notes are due
at the earlier of September 1997 or the closing of a public offering of the
Company's securities, the gross proceeds of which equal or exceed $5,000,000.
Interest is accruing at a rate of 9.25%. These notes are collateralized by all
of the assets of the Company.
(NOTE L)--COMMITMENTS AND CONTINGENCIES:
[1] The Company occupies premises pursuant to an operating lease which
expires in July 1998. In addition, the Company entered into a three year lease
in January 1996 for a building which it intends to use as a facility to assemble
and store pizza vending machines. The new lease expires in March 1999. These
leases are subject to escalations for the Company's pro rata share of real
estate taxes and operating
F-12
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
(NOTE L)--COMMITMENTS AND CONTINGENCIES: (CONTINUED)
expenses. Future minimum rental payments, exclusive of escalation payments for
taxes and utilities, under these leases are as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDING
DECEMBER 31,
---------------
<S> <C>
1996.............................................................................. $ 34,290
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
-------------
<S> <C>
1997.............................................................................. 142,117
1998.............................................................................. 110,437
1999.............................................................................. 18,450
----------
Total..................................................................... $ 305,294
----------
----------
</TABLE>
The Company also leases certain storage facilities on a month-to-month
basis. In 1995 rent expense amounted to $61,357 including $24,668 paid to a
former stockholder. In 1994 rent expense amounted to $34,105 which was paid to a
former stockholder.
For the nine months ended September 30, 1996, rent expense amounted to
$162,041. For the same period in 1995, rent expense amounted to $86,694
including $12,600 paid to a former stockholder.
[2] In February 1996 the Company formed Nouveau Equities, Inc. and entered
into a contract for the purchase of a building in which it intends to operate a
food research, development, and potential manufacturing plant. The purchase
price of the building was $1,650,000. The Company made a nonrefundable down
payment of $40,000 which was charged to expense in 1996. In October, 1996, the
Company issued 100,000 warrants, exerciseable at $2.00 per share and expiring in
1999 to a third party in exchange for such third party's agreement to acquire
such facility and lease it to the Company for 5 years at an annual rental of
$247,000. The Company has an 18 month option to acquire such facility for a
purchase price of $1,610,000 plus certain costs. The Company has agreed to
reimburse the third party for its expenses incurred in connection with the
acquisition of this facility.
[3] In April 1996 the Company entered into an agreement for consulting
services for $12,500 per month through April 1999. Fees under this agreement
amount to approximately $90,000 for the nine months ended September 30, 1996.
(NOTE M)--PREFERRED STOCK:
In January 1996, in a private placement offering, the Company sold 70 units,
each unit consisting of 1 share of Series A 4% cumulative redeemable preferred
stock and 1,608 common stock purchase warrants for $3,500,000. The preferred
stock is mandatorily redeemable by the Company at a price per share equal to the
original issuance price plus accrued dividends on the earlier of the date of a
public offering of its common stock for minimum gross proceeds of $5,000,000 or
January 17, 1997. In the event it is not redeemed through a public offering, the
Company has the right to convert the preferred stock into 1,125,000 shares of
common stock. If the preferred stock were converted into common stock at the
date of
F-13
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
(NOTE M)--PREFERRED STOCK: (CONTINUED)
issuance of the preferred stock (January 17, 1996), net loss per share for the
nine months ended September 30, 1996 would have been ($.28). The Company is
negotiating with the holders of the preferred stock to issue the preferred
stockholders additional shares of common stock in exchange for agreeing not to
sell the shares of Common Stock to be issued upon conversion of the preferred
stock for a period of time. Such shares, if issued, will be accounted for as a
dividend to the preferred shareholders. The preferred stock has a liquidation
value equal to the redemption value. Each common stock purchase warrant entitles
the holder to purchase one share of the Company's common stock at an exercise
price of $.50 per share. The warrants expire in January 1999.
(NOTE N)--RELATED PARTY TRANSACTIONS:
[1] In December 1994 the Company entered into a joint venture to distribute
the Company's products in Europe. The joint venture company is called Nouveau
Cordon Bleu ("NCB"). During the time in which the Company was in bankruptcy
proceedings, the parties agreed to suspend all performance requirements provided
for in the joint venture agreement. Sales to NCB since its inception amount to
approximately $137,000. All of these sales occurred during the quarter ended
March 31, 1996. The operations of NCB have been terminated and the Company will
seek direct relationships with distributors for its products.
[2] In addition, the Company sold certain vending machines to a stockholder
in 1994 for $12,000.
(NOTE O)--OTHER:
[1] In 1995 and 1994 sales to one customer amounted to $124,638 and
$329,716 which represents 50% and 35% of net sales in each of these years,
respectively. Accounts receivable due from this customer amounted to $21,873 at
December 31, 1995.
During the nine months ended September 30, 1996 sales to four customers
amounted to $470,499 representing 84% of net sales and during the nine months
ended September 30, 1995 sales to three customers amounted to $198,168
representing 91% of net sales.
[2] Effective on November 18, 1996 the Chairman of the Board of Directors
of the Company and certain other stockholders contributed 2,000,000 shares of
common stock back to the Company reducing the number of shares of common stock
outstanding to 9,249,988. The contribution of shares has been reflected
retroactively to January 1, 1994 in the accompanying financial statements.
F-14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Directors
Health Management, Inc.
We have audited the balance sheet of Health Management, Inc. (a Florida
Corporation) as at December 31, 1995 and the related statement of operations,
changes in capital deficiency and cash flows for the year then ended. 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 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 Health Management, Inc. as
of December 31, 1995 and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
Richard A. Eisner & Company, LLP
New York, New York
March 11, 1996
F-15
<PAGE>
HEALTH MANAGEMENT, INC.
BALANCE SHEET
AS AT DECEMBER 31, 1995
<TABLE>
<S> <C>
Assets........................................................................... $ -0 -
---------
---------
LIABILITIES
Accrued expenses................................................................. $ 5,000
---------
CAPITAL DEFICIENCY
Common stock--authorized 10,000,000 shares of $.001 par value;
issued and outstanding 4,500,000 shares........................................ 2,960
Additional paid-in capital....................................................... 784,705
Accumulated deficit.............................................................. (792,665)
---------
Total capital deficiency................................................... (5,000)
---------
TOTAL...................................................................... $ -0 -
---------
---------
</TABLE>
The accompanying notes are an integral part hereof.
F-16
<PAGE>
HEALTH MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Revenue.......................................................................... $ - 0 -
<S> <C>
Operating expenses:
General and administrative..................................................... (14,022)
---------
NET LOSS......................................................................... $(14,022)
---------
---------
Net loss per share............................................................... $ (.003)
---------
---------
Weighted average number of common shares outstanding............................. 4,500,000
---------
---------
</TABLE>
The accompanying notes are an integral part hereof.
F-17
<PAGE>
HEALTH MANAGEMENT, INC.
STATEMENT OF CHANGES IN CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED CAPITAL
STOCK CAPITAL DEFICIT DEFICIENCY
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Balance--January 1, 1995......................................... $ 2,960 $ 775,161 $ (778,643) $ (522)
Net loss......................................................... (14,022) (14,022)
Capital contributions............................................ 9,544 9,544
----------- ---------- ------------ ----------
BALANCE--DECEMBER 31, 1995....................................... $ 2,960 $ 784,705 $ (792,665) $ (5,000)
----------- ---------- ------------ ----------
----------- ---------- ------------ ----------
</TABLE>
The accompanying notes are an integral part hereof.
F-18
<PAGE>
HEALTH MANAGEMENT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED
DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................................ $ (14,022)
Change in accrued expenses...................................................... 4,478
---------
Net cash used in operating activities......................................... (9,544)
Cash flows from financing activities:
Capital contribution............................................................ 9,544
---------
NET CHANGE IN CASH................................................................ -0 -
Cash--beginning of year........................................................... -0 -
---------
CASH--END OF YEAR................................................................. $ -0 -
---------
---------
</TABLE>
The accompanying notes are an integral part hereof.
F-19
<PAGE>
HEALTH MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(NOTE A)--ORGANIZATION AND BUSINESS:
The Company was incorporated on March 19, 1981 and was engaged in providing
management and consulting services. The Company was inactive since mid 1993.
(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Net loss per common share is based on the weighted average number of shares
outstanding during the period after giving effect to a stock split of 1.52 for 1
on January 6, 1996.
(NOTE C)--SUBSEQUENT EVENT:
In January 1996, Health Management, Inc. ("HMI") acquired all the
outstanding common stock of Nouveau International, Inc. in exchange for shares
representing 60% of HMI common stock. Concurrent with the transaction, HMI sold
70 units in a private placement, each unit consisting of 1 share of 4%
cumulative redeemable preferred stock and 1,608 common stock purchase warrants,
for $3,500,000. HMI changed its name to Nouveau International, Inc.
The preferred stock is mandatorily redeemable at a price per share which is
equal to the original issuance price plus accrued dividends on the earlier of
the date of a public offering of its common stock for minimum gross proceeds of
$5,000,000 or January 17, 1997 which is the beginning of the 13th month
following the date of the sale of the preferred shares. If not redeemed through
the public offering, the Company may, at its option, convert the preferred stock
into 1,125,000 shares of common stock. The preferred stock has a liquidation
value equal to the redemption value.
Each common stock purchase warrant entitles the holder to purchase one share
of the new Company's common stock at an exercise price of $.50 per share. The
warrants expire in January 1999.
F-20
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
The following pro forma consolidated statement of operations gives effect to
the acquisition of Nouveau International, Inc., for 60% of the outstanding stock
of Health Management, Inc. This statement should be read in conjunction with the
financial statements of Nouveau International, Inc. and Health Management, Inc.
appearing elsewhere herein. The pro forma financial information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or what would have occurred if the merger had occurred at the beginning
of the year, nor is it indicative of the future operating results or financial
position of the Company.
<TABLE>
<CAPTION>
HISTORICAL
---------------------------
<S> <C> <C> <C> <C>
NOUVEAU HEALTH
INTERNATIONAL, MANAGEMENT, PRO FORMA
INC. INC. ADJUSTMENTS PRO FORMA
------------- ------------ ------------- -------------
Revenues:
Net sales........................................ $ 245,313 $ 245,313
Cost of goods sold............................... 224,282 224,282
------------- -------------
Gross profit................................. 21,031 21,031
------------- -------------
Operating expenses:
General and administrative....................... 618,398 $ 14,022 632,420
Selling.......................................... 34,839 34,839
------------- ------------ -------------
653,237 14,022 667,259
------------- ------------ -------------
Loss from operations............................... (632,206) (14,022) (646,228)
Gain from settlement of lawsuit.................... 5,979,459 $ (5,979,459 (1) -0 -
Interest income.................................... 105,216 105,216
Interest expense................................... (32,352) (32,352)
------------- ------------ ------------- -------------
Income (loss) before extraordinary item............ $ 5,420,117 $ (14,022) $ (5,979,459) $ (573,364)
------------- ------------ ------------- -------------
------------- ------------ ------------- -------------
Pro forma loss per share before extraordinary
item............................................. $ (.06)
-------------
Pro forma weighted average shares outstanding...... 9,249,988
-------------
-------------
</TABLE>
- ------------------------
(1) To adjust for nonrecurring gain on settlement of lawsuit.
F-21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, 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 AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATES AS OF WHICH SUCH INFORMATION IS FURNISHED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 8
Use of Proceeds................................ 16
Capitalization................................. 17
Price Range of Common Stock.................... 18
Dividend Policy................................ 18
Selected Financial Data........................ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 21
Business....................................... 24
Management..................................... 32
Principal Stockholders......................... 35
Certain Transactions........................... 36
Description of Securities...................... 37
Concurrent Sales by Selling Stockholders....... 38
Underwriting................................... 39
Legal Matters.................................. 41
Experts........................................ 41
Available Information.......................... 42
Note Regarding Forward-Looking Statements...... 42
Index to Financial Statements.................. F-1
</TABLE>
1,100,000 SHARES
NOUVEAU
INTERNATIONAL, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
AMERICORP
SECURITIES, INC.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
1,654,225 SHARES
NOUVEAU INTERNATIONAL, INC.
COMMON STOCK, $.001 PAR VALUE PER SHARE
This Prospectus relates to 1,654,225 shares of common stock, $.001 par value
per share (the "Common Stock") of Nouveau International, Inc., a Delaware
corporation (the "Company"), held by 21 holders (the "Selling Stockholders"). As
to the 1,654,225 shares of Common Stock offered hereby, (i) up to an aggregate
of 112,560 shares of Common Stock are issuable upon the exercise of certain
warrants ("Warrants") which entitle the holder thereof to purchase one share of
Common Stock at a price of $.50 per share, (ii) up to an aggregate of 491,665
shares of Common Stock are issuable upon the exercise of Warrants which entitle
the holder thereof to purchase one share of Common Stock at a price of $2.00 per
share, (iii) up to an aggregate of 100,000 shares of Common Stock are issuable
upon the exercise of Warrants which entitle the holder thereof to purchase one
share of Common Stock at a price of $2.00 per share issued by the Company in
connection with the acquisition, by a third party, of the Company's facility
located in West Goshen, Pennsylvania, and the leasing of such facility to the
Company (the "Lease Warrants"), and (iv) 950,000 shares of Common Stock are held
by one of the Selling Stockholders. The Selling Stockholders' Warrants were
issued to the Selling Stockholders in private placements by the Company
conducted in January, May, and July 1996. See "Selling Stockholders" and "Plan
of Distribution."
The Common Stock offered by the Selling Stockholders pursuant to this
Prospectus may be sold from time to time by the Selling Stockholders or by their
transferees. The distribution of the Common Stock offered hereby by the Selling
Stockholders may be effected in one or more transactions that may take place on
the over-the-counter market, including ordinary brokers' transactions, privately
negotiated transactions or through sales to one or more dealers for resale of
such securities as principals, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the Selling Stockholders.
The Selling Stockholders, and intermediaries through whom such securities
are sold, may be deemed underwriters within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered,
and any profits realized or commissions received may be deemed underwriting
compensation. The Company has agreed to indemnify the Selling Stockholders
against certain liabilities, including liabilities under the Securities Act.
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders. See "Selling Stockholders" and "Plan of
Distribution."
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering by the Company of
1,100,000 shares of Common Stock was declared effective
A-1
<PAGE>
by the Securities and Exchange Commission (the "Commission"). The Company will
receive approximately $ in net proceeds from such offering (assuming no
exercise of the Underwriter's overallotment option) after payment of
underwriting discounts and commissions and estimated expenses of such offering.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" APPEARING
ON PAGE 8.
------------------------
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.
------------------------
The date of this Prospectus is , 1996
A-2
<PAGE>
SELLING STOCKHOLDERS
An aggregate of up to 1,654,225 shares of Common Stock may be offered for
resale by the investors listed below.
The following table sets forth certain information with respect to each
Selling Stockholder for whom the Company has registered Common Stock for resale
to the public. The Company will not receive any of the proceeds from the sale of
such shares of Common Stock. There are no material relationships between any of
the Selling Stockholders and the Company or any of its predecessors or
affiliates, nor have any such material relationships existed within the past
three years, except as footnoted below. Except as described below, no Selling
Stockholder will beneficially own any Common Stock of the Company if the Selling
Stockholders' Common Stock is sold.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
COMMON STOCK OWNED NUMBER OF SHARES OF COMMON STOCK OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING COMMONS STOCK TO BE SOLD AFTER OFFERING
- ------------------------------------------ --------------------- ------------------------ ---------------------------
<S> <C> <C> <C>
Road & Show Cellular (East), Inc.......... 6,432 6,432 0
CNCA VCT Brunoy/Account BFP Paris......... 8,040 8,040 0
Kenneth J. Anderson....................... 4,824 4,824 0
Paul J. Loughlin.......................... 3,216 3,216 0
ERBA Co., Inc............................. 6,432 6,432 0
Little Hampton Investments, Ltd........... 8,040 8,040 0
Chardon Financial, Inc.................... 8,040 8,040 0
Stuart Gruber............................. 23,098.6 23,098.6 0
Alletta Orlando........................... 25,728 25,728 0
Gertrude Shear............................ 1,608 1,608 0
First Rock Trustees Ltd................... 3,216 3,216 0
Steven Yablon and Shelley Yablon.......... 4,824 4,824 0
Herman Jeffer............................. 16,080 16,080 0
Andrew Green.............................. 3,216 3,216 0
Anthony Lotito and Joy Lotito............. 6,432 6,432 0
Albert Darrell Braswell................... 166,666 166,666 0
Craig S. Boyd............................. 183,333 183,333 0
Banque SCS Aliance SA..................... 83,333 83,333 0
Egger & Co................................ 83,333 83,333 0
Melvin Paradise........................... 41,666.5 41,666.5 0
Neil A. Rosenfeld and Martin E. Rosenfeld
as Tenants in Common.................... 16,666.6 16,666.6 0
CSB Financial, LLC (1).................... 950,000 950,000 0
-
----------- -----------
Total..................................... 1,654,224.7 1,654,224.7 0
Rounded Totals............................ 1,654,225 1,654,225 0
</TABLE>
- ------------------------
(1) Kalman Carmel, a key consultant of the Company, is a member and affiliate of
the referenced entity. David J. Roth, a Director of the Company, is a
trustee of a trust owning approximately a 2.6% interest in the referenced
entity.
A-2
<PAGE>
PLAN OF DISTRIBUTION
The sale of the shares of Common Stock by the Selling Stockholders may be
effected from time to time in transactions (which may include block
transactions, by or for the account of, the Selling Stockholders) in the
over-the-counter market or in negotiated transactions, through the writing of
options on the securities, a combination of such methods of sale, or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices.
The Selling Stockholders may effect such transactions by selling their
shares of Common Stock directly to purchasers, through broker-dealers acting as
agents for the Selling Stockholders or to broker-dealers who may purchase Common
Stock as principals and thereafter sell the Common Stock from time to time in
the over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders or the purchasers for
whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
Each Selling Stockholder entitled to shares of Common Stock upon the
exercise of the Warrants has agreed that such shares of Common Stock may not be
publicly resold or otherwise disposed of prior to the date one year from the
date of this Prospectus. The shares of Common Stock held by CSB Financial, LLC
may not be sold for the period of 18 months from the date of this Prospectus. In
each such case, such securities may be sold prior to such dates with the prior
written consent of Americorp Securities, Inc.
Under applicable rules and regulations under the Securities Exchange Act of
1934 ("Exchange Act"), any person engaged in the distribution of the shares of
Common Stock offered hereby may not simultaneously engage in market making
activities with respect to any securities of the Company for a period of at
least two (and possibly nine) business days prior to the commencement of such
distribution. Accordingly, in the event that Americorp Securities, Inc., the
Underwriter of the Company's public offering, is engaged in a distribution of
the Selling Stockholders' shares of Common Stock, it will not be able to make a
market in the Company's Common Stock during the applicable restrictive period.
However, the Underwriter has not agreed to, nor is it obliged to, act as
broker-dealer in the sale of the Selling Stockholders' shares of Common Stock.
The Selling Stockholders may be required, and in the event the Underwriter is a
market maker, will likely be required, to sell such Common Stock through another
broker-dealer. In addition, each Selling Stockholder desiring to sell Common
Stock will be subject to the applicable provisions of the Exchange Act and the
rules and regulations thereunder, including without limitation, Rules 10b-6,
10b-6A, and 10b-7, which provisions may limit the timing of the purchases and
sales of the Common Stock by such Selling Stockholders.
The Selling Stockholders and broker-dealers, if any, acting in connection
with such sale, might be deemed to be underwriters within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of the securities might be deemed to be underwriting discounts and
commissions under the Securities Act.
A-3
<PAGE>
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus, a Registration Statement was declared
effective under the Securities Act with respect to an underwritten offering by
the Company of 1,100,000 shares of Common Stock by the Company and up to 165,000
additional shares of Common Stock to cover over-allotments, if any.
A-4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATES AS OF WHICH SUCH INFORMATION IS FURNISHED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 8
Use of Proceeds................................ 16
Capitalization................................. 17
Price Range of Common Stock.................... 18
Dividend Policy................................ 18
Selected Financial Data........................ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 21
Business....................................... 24
Management..................................... 32
Principal Stockholders......................... 35
Certain Transactions........................... 36
Description of Securities...................... 37
Concurrent Sales by Current Stockholders....... 38
Underwriting................................... 39
Legal Matters.................................. 41
Experts........................................ 41
Available Information.......................... 42
Note Regarding Forward-Looking Statements...... 42
Financial Statements........................... F-1
</TABLE>
1,654,225 SHARES
NOUVEAU
INTERNATIONAL, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
AMERICORP
SECURITIES, INC.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the issuance and distribution of the securities being offered hereby (items
marked with an asterisk (*) represent estimated expenses);
<TABLE>
<S> <C>
SEC Registration Fee........................................... $11,343.62
Legal Fees and Expenses........................................ 150,000.00*
Blue Sky Fees (including counsel fees)......................... 45,000.00*
NASD Filing Fees............................................... 3,789.64
Accounting Fees and Expenses................................... 75,000.00*
Transfer Agent and Registrar Fees.............................. 5,000.00*
Printing and Engraving Expenses................................ 60,000.00
Representative's Non-Accountable Expense Allowance............. 165,000.00(1)
Miscellaneous.................................................. 29,866.74*
Total.......................................................... $545,000.00*(1)
</TABLE>
- ------------------------
(1) Representative's Non-Accountable Expense Allowance and Total are estimated
to be $189,750 and $569,750 respectively, if the Underwriters'
over-allotment option is exercised in full.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware General Corporation Law, Section 102(b)(7), enables a corporation
in its original certificate of incorporation, or an amendment thereto validly
approved by stockholders, to eliminate or limit personal liability of members of
its Board of Directors for violations of a director's fiduciary duty of care.
However, the elimination or limitation shall not apply where there has been a
breach of the duty of loyalty, failure to act in good faith, intentional
misconduct or a knowing violation of a law, the payment of a dividend or
approval of a stock repurchase which is deemed illegal or an improper personal
benefit is obtained. The Company's Certificate of Incorporation includes the
following language:
"No director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however that to the extent required by the provisions of
paragraph 102(b)(7) of the General Corporation Law of the State of Delaware
or any successor statute, or any laws of the State of Delaware, this
provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under paragraph
174 of the General Corporation Law of the State of Delaware, (iv) for any
transaction from which the director derived an improper personal benefit or
(v) for any act or omission occurring prior to the date when the provision
becomes effective. If the General Corporation Law of the State of Delaware
hereafter is amended to authorize the further elimination or limitation on
personal liability provided herein, personal liability shall be limited to
the fullest extent permitted by the amended General Corporation Law of the
State of Delaware. Any repeal or modification of this Article Fifth by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of
the Corporation existing at the time of such repeal or modification."
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below in chronological order is information regarding the numbers
of shares of Common Stock sold by the Company, the number of options issued by
the Company, and the principal amount of debt instruments issued by the Company
since January 16, 1996 (inception), the consideration received by the Company
for such shares, options and debt instruments and information relating to the
section of the Securities Act of 1933, as amended (the "Securities Act"), or
rule of the Securities and Exchange Commission under which exemption from
registration was claimed. None of these securities was registered under the
Securities Act. Except as otherwise indicated, no sales of securities involved
the use of an underwriter and no commissions were paid in connection with the
sale of any securities.
During January 1996, the Company issued 6,750,000 shares of Common Stock in
a reincorporation merger with Health Management, Inc., a Florida corporation. On
January 17, 1996, the Company issued an aggregate of 70 units, each unit
consisting of one share of Series A 4% Cumulative Preferred Stock and warrants
exercisable for an aggregate of 1,608 shares of Common Stock to accredited
investors for $50,000 per unit. On January 17, 1997, the Company converted the
outstanding Series A 4% Cumulative Preferred Stock into 1,125,000 shares of
Common Stock pursuant to the terms of such series of Preferred Stock. In
connection therewith and in order to induce the holders of such preferred stock
to agree to certain restrictions on transfer of the shares of Common Stock
issuable on such conversion, the Company issued to such holders in the aggregate
an additional 675,050 shares of Common Stock. The holders of such Common Stock
have agreed not to publicly sell or otherwise dispose of such shares of Common
Stock for a period of one year from the date of this Prospectus.
During May and July 1996, the Company sold an aggregate of 5.9 units, each
unit consisting of $250,000 principal amount of Series A 10% Senior Notes and
83,333 common stock purchase warrants to accredited investors for $250,000 per
unit.
During October 1996, the Company issued warrants to acquire 100,000 shares
of Common Stock to an accredited investor in connection with the acquisition and
leasing to the Company of the facility which the Company presently utilizes as
its baking facility.
Each of the foregoing transactions was exempt from registration under the
Securities Act by virtue of the provisions of Rule 506 under the Securities Act
and/or Section 4(2) and/or Section 3(b) of the Securities Act. Each purchaser of
the securities described above has represented that he/she/it understands that
the securities acquired may not be sold or otherwise transferred absent
registration under the Securities Act or the availability of an exemption from
the registration requirements of the Securities Act, and each certificate
evidencing the securities owned by each purchaser bears upon issuance a legend
to that effect.
II-2
<PAGE>
ITEM 16. EXHIBITS
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1** Certificate of Incorporation, as amended
3.2** Bylaws
3.3* Form of Certificate of Amendment to Certificate of Incorporation
4.1 Form of Representative's Warrant
5.1* Opinion of Brock Fensterstock Silverstein McAuliffe & Wade LLC
10.0** Agreement and Plan of Merger By and Among Health Management, Inc. and Nouveau International,
Inc., dated January 18, 1996
10.1** Form of Master Distributorship Agreement
11 Nouveau International, Inc. and Subsidiaries Computation of Per Share Data
21.0(d)** Subsidiaries of the Registrant
23.1 Consent of Richard A. Eisner & Company, LLP
23.2* Consent of Brock Fensterstock Silverstein McAuliffe & Wade LLC (contained in the Opinion filed
as Exhibit 5.1).
24.1*** Power of Attorney (set forth on the signature page hereof)
27.0(d)** Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
** Incorporated by reference from registrant's current report on Form
10-KSB/A-1, filed July 1, 1996.
*** Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement;
(iii) to include any additional or changed material information on
the plan of distribution;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be treated as a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
(c) The Registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act as part of this registration statement as of
the time the Commission declared it effective.
(2) For the purpose of determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of prospectus
as a new registration statement relating to the securities offered therein,
and the offering of such securities at that time as the initial bona fide
offering thereof.
(d) The Registrant hereby undertakes that it 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, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Exton,
Pennsylvania on December 23, 1996.
NOUVEAU INTERNATIONAL, INC.
By: /s/ GARY W. BLACK, SR.
-----------------------------------------
Gary W. Black, Sr.
CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board of
Directors and Chief
/s/ GARY W. BLACK, SR. Executive Officer
- ------------------------------ (Principal Executive, December 23, 1996
Gary W. Black, Sr. Financial, and
Accounting Officer)
*
- ------------------------------ Director December 23, 1996
David J. Roth
*
- ------------------------------ Production Manager, December 23, 1996
Frederick W. Johnson Secretary, and Director
*
- ------------------------------ President, Chief Operating December 23, 1996
Robert J. Brock Officer, and Director
* By: /s/ Gary W. Black,
Sr.
- ----------------------------
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
Exhibit 1.1
NOUVEAU INTERNATIONAL, INC.
1,100,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
December , 1996
Americorp Securities, Inc.
One New York Plaza
New York, New York 10004
Gentlemen:
Nouveau International, Inc., a Delaware corporation (the "Company") has
authorized 3,000,000 shares of Preferred Stock, $.001 par value ("Preferred
Stock") and 25,000,000 shares of Common Stock, $.001 par value ("Common Stock")
and has the number of outstanding shares of Common Stock as set forth under the
heading "Capitalization" in the Prospectus, as hereinafter defined, adjusted
only for conversion of 70 shares of Series A Preferred Stock into 1,800,050
shares of Common Stock prior to the date hereof as described therein and any
subsequent exercises of outstanding stock options and warrants. The Company
proposes to issue and sell to you as underwriter (the "Underwriter"), 1,100,000
of its authorized and unissued shares (the "Firm Shares") of Common Stock
containing such terms and conditions as are contained in the form of Common
Stock certificate which is filed as an exhibit to the registration statement
hereinafter mentioned.
In addition, the Company proposes to grant to you the right to purchase up
to 165,000 additional shares of Common Stock (the "Optional Shares"), for the
sole purpose of covering over-allotments in the sale of the Firm Shares. Unless
the context otherwise indicates, the Firm Shares and the Optional Shares are
sometimes referred to herein collectively as the "Shares." The Shares are more
fully described in the registration statement, which the Company has furnished
to you, acting as underwriter (the "Underwriter"). This is to confirm our
agreement with respect to the purchase of the Shares.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with the Underwriter that:
(a) A registration statement on Form SB-2 (File No. 333-13197), for the
registration of the Shares has been prepared by the Company in conformity with
the applicable provisions of the Securities Act of 1933, as amended (the "Act"),
and the applicable rules, regulations,
<PAGE>
releases and instructions (the "Rules under the Act") of the Securities and
Exchange Commission (the "Commission"), and has been filed with the Commission;
and one or more amendments to said registration statement, copies of which have
heretofore been delivered to the Underwriter, has or have been filed by the
Company; and the Company may file on or prior to the effective date an
additional amendment to the registration statement. Included in the
registration statement are 110,000 underwriter's warrants ("Underwriter's
Warrants") and an underlying 110,000 shares of Common Stock (the "Warrant
Shares") to be sold by the Company. As used in this Agreement, the term
"Registration Statement" refers to and means the registration statement, and all
amendments thereto, including the prospectus, documents incorporated by
reference therein, exhibits and financial statements, at the time it becomes
effective; and the term "Prospectus" refers to and means the prospectus included
in the Registration Statement at the time it becomes effective (including
documents incorporated by reference therein), except that, if the prospectus
first filed by the Company pursuant to Rule 424(b) of the Rules under the Act
shall differ from the prospectus included in the Registration Statement, the
term Prospectus shall mean the prospectus filed pursuant to Rule 424(b)
(including documents incorporated by reference therein). The Company will not
file at any time any amendment or supplement to the Registration Statement or
the Prospectus without previous advice to the Underwriter, nor if the same shall
be reasonably objectionable in form or substance to the Underwriter or its
counsel.
(b) The Commission has not issued any order preventing or suspending the
use of any preliminary prospectus (the "Preliminary Prospectus") with respect to
the Shares and each Preliminary Prospectus conformed in all material respects
with the requirements of the Act and the Rules under the Act and has not
included any untrue statement therein of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that the foregoing shall not apply to statements
in, or omissions from, any written information furnished to the Company by the
Underwriter specifically for use in the preparation thereof.
(c) When the Registration Statement shall become effective and at all times
subsequent thereto, up to and including the Closing Date or the Option Closing
Date, as hereinafter defined, and when any post-effective amendment thereof
shall become effective, the Registration Statement and the Prospectus (and any
post-effective amendment thereof or the Registration Statement as supplemented)
will comply in all material respects with the applicable provisions of the Act
and the Rules under the Act with respect thereto and the Registration Statement
and the Prospectus and any further amendments or supplements thereto will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules under the Act and neither the Registration Statement
nor the Prospectus will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading in light of the circumstances in
which made; and when the Prospectus is filed with the Commission pursuant to
Rule 424(b) of the Rules under the Act and at all times subsequent thereto, up
to and including the Closing Date and the Option Closing Date, the Prospectus
(and the Prospectus as amended or supplemented, if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) will comply in
all material respects with the provisions of the Act and the Rules under the Act
and will not
2
<PAGE>
contain any untrue statement of a material fact and will not omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading in light of the circumstances in which made;
provided, however, that the Company makes no representations or warranties as to
the information contained in or omitted from the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto in reliance upon and
in conformity with information furnished in writing to the Company by the
Underwriter and the only such information is the last paragraph of the cover
page of the Prospectus and the information in the Prospectus under the caption
"Underwriting."
(d) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company has no significant subsidiary or subsidiaries and does not control,
directly or indirectly, any significant corporation, partnership, joint venture,
association or other business organization, except for Nouveau Foods
International, Inc., Nouveau Vend International, Inc., Nouveau Equities, Inc.
and Nouveau International (PA), Inc. The foregoing companies are referred to
herein singly as a "Subsidiary" and collectively as the "Subsidiaries" except
where the context otherwise requires. Each Subsidiary has been organized and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation or formation. Each of the Company and each of its
Subsidiaries is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which the character or location of its or any of their
properties (owned, leased or licensed) or the nature of its or any of their
businesses makes such qualification necessary except where the failure to be so
qualified would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole. The Company owns all of the outstanding shares
of capital stock of each of its Subsidiaries free and clear of all liens,
claims, security interests, restrictions, stockholders' agreements, voting
trusts, and any other encumbrances; and all such shares of capital stock have
been duly authorized and are duly and validly issued, fully paid and
nonassessable. Each of the Company and each of the Subsidiaries has full power
and authority (corporate and other) to own or lease its properties and conduct
its business, present and proposed, as described in the Registration Statement
and Prospectus. Each of the Company and each of the Subsidiaries holds all
material licenses, certificates and permits from governmental authorities (both
domestic and foreign) necessary for the conduct of its or their businesses as
described in the Prospectus and owns, or possesses adequate rights to use all
material rights necessary for the conduct of its or their businesses and has not
received any written notice of conflict with the asserted rights of others in
respect thereof and does not know of any material proceeding pending or
threatened seeking to cancel, terminate, or limit such licenses, certificates or
permits.
(e) The financial statements and schedules (including the related notes)
included in the Registration Statement and the Prospectus present fairly the
financial position, results of operations, stockholders' equity and changes in
financial position of the Company and the Subsidiaries as of the respective
dates and for the respective periods indicated, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
3
<PAGE>
(f) The accountants who have examined and reported on the audited
financial statements filed with the Commission as parts of the Registration
Statement and the Prospectus are independent public accountants as required by
the Act and the Rules under the Act.
(g) Except as may be reflected in or contemplated by the Registration
Statement or the Prospectus and except for changes resulting from the normal
operation of the Company's and its Subsidiaries' businesses, subsequent to the
dates as of which information is given in the Registration Statement and the
Prospectus (i) there has not been any material adverse change in the financial
condition, in the results of operations or the general affairs of the Company
and its Subsidiaries taken as a whole; (ii) there has not been any material
transaction entered into by the Company or any of the Subsidiaries, other than
transactions in the ordinary course of business; (iii) neither the Company nor
any Subsidiary has incurred any material obligations, contingent or otherwise;
(iv) there has not been any change in the capital stock or long or short term
debt (except current payments) of the Company or the Subsidiaries; (v) there has
not been any issuance of options, warrants, convertible securities or other
rights to purchase the capital stock of the Company or any Subsidiary, and (vi)
there has not been any material adverse change or any development involving a
prospective material adverse change in the condition (financial or other),
business, key personnel, properties, prospective results of operations or net
worth of the Company and the Subsidiaries taken as a whole.
(h) Neither the Company nor any of its Subsidiaries is in violation of its
articles of incorporation or by-laws nor, except as disclosed in the
Registration Statement or Prospectus, in violation of any franchise, license,
permit, judgment, decree, order, statute, rule or regulation, which violation is
material to the Company and the Subsidiaries, taken as a whole, or in material
default in the performance or observance of any obligation, agreement or
condition contained in any note or other evidence of indebtedness or in any
mortgage, indenture or loan agreement or any other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which it or any of
their properties may be bound or affected in any respect which, in any such
case, is material to the Company and the Subsidiaries taken as a whole. The
Company has full right, power and authority to enter into and perform this
Agreement and to issue, sell and deliver the Shares and the Underwriters'
Warrants to be issued and sold by it as provided in this Agreement. The
execution and delivery of this Agreement, the fulfillment of the terms set forth
herein and the consummation of the transactions contemplated herein will not
conflict with or constitute a breach of, or a default under, the articles of
incorporation or by-laws of the Company or any of its Subsidiaries or any
material agreement, or any material indenture or other material instrument by
which the Company or any of its Subsidiaries or any of their properties may be
bound, or any applicable material franchise, license, permit, judgment, decree,
orders, statute, rule or regulation. Except as required by the Act, the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and applicable
state securities laws, no consent, approval, authorization or order of any
governmental agency or governmental authority (domestic or foreign) is required
in connection with the consummation of the transactions contemplated by this
Agreement on the part of the Company or any Subsidiary where the failure to
obtain such consent, approval or authorization would have a material adverse
effect on the Company and its Subsidiaries taken as a whole.
4
<PAGE>
(i) Each contract to which the Company or any Subsidiary is a party and to
which reference is made in the Registration Statement and Prospectus has been
duly and validly executed by the Company or such Subsidiary, is in full force
and effect in accordance with its terms and none of such contracts has been
assigned by the Company or such Subsidiary, and the Company knows of no present
situation or condition or fact which would prevent compliance with the terms of
such contracts, as amended to date. Neither the Company nor any Subsidiary has
any intention of exercising any right which it may have to cancel any of its
rights or obligations under any of such contracts and has no knowledge that any
other party to any of such contracts has any intention not to render full
performance under such contracts except as contemplated by the Registration
Statement.
(j) Each of the Company and each of its Subsidiaries has filed all
Federal, state and foreign tax returns which are required to be filed by it or
validly filed extensions thereof, and has paid all taxes shown due on such
returns and all assessments received by it to the extent such taxes have become
due. All taxes with respect to which the Company and each of its Subsidiaries
is obligated have been paid or adequate accruals have been set up to cover any
such unpaid taxes which are not yet due. Nether the Company nor any Subsidiary
received any notice or claim indicating any deficiency in the payment of or
failure to pay any taxes.
(k) Each of the Company and each of its Subsidiaries has good and
marketable title, free and clear of all liens, encumbrances and defects, except
liens for current taxes not due and payable, to all of its properties and assets
which are stated to be owned by it in the Registration Statement and the
Prospectus, subject only to such liens and exceptions as are not material and
liens and encumbrances disclosed in the Prospectus. The properties, including
any equipment, stated to be leased by the Company or any Subsidiary in the
Registration Statement and the Prospectus are held under valid, subsisting and
enforceable leases with only such exceptions which collectively are not material
and do not have a material adverse effect on the present or prospective business
of, or the use of such property by the Company or any Subsidiary.
(l) The Company has an authorized outstanding capitalization as set forth
or contemplated in the Prospectus and based on sale of the Firm Shares will
have, on the Closing Date, the adjusted capitalization as set forth or
contemplated in such Prospectus under the caption "Capitalization"; all of the
outstanding shares of Common Stock of the Company have been validly authorized
and issued and are fully paid and non-assessable and none of such outstanding
shares of Common Stock or outstanding warrants or options to purchase shares of
Common Stock were issued in violation of the pre-emptive rights of any
stockholder of the Company; the Shares and the Underwriter's Warrants have been
duly authorized and, the Warrant Shares, when issued and paid for upon exercise
of the Underwriter's Warrants in accordance with their terms, will be validly
issued, fully paid and non-assessable, will pass valid title to the holders
thereof, free and clear of any lien, encumbrance or claim and all corporate
action required to be taken for the authorization, issuance and sale of the
Shares and the Underwriter's Warrants has been validly and sufficiently taken;
the holders of the outstanding shares of Common Stock and the holders of the
Shares and the Warrant Shares are not and will not be subject to any liability
as shareholders. Except as set forth in the Registration Statement or in the
Prospectus, on the
5
<PAGE>
effective date of the Registration Statement, the Closing Date and the Option
Closing Date there will be no pre-emptive or other rights to subscribe for or
purchase any shares of Preferred Stock, Common Stock, Underwriter's Warrants, or
Warrant Shares, or any options, warrants, agreements or similar rights calling
for the issuance by the Company of any of its securities.
(m) The Common Stock, Underwriter's Warrants, and the Warrant Shares
conform to the description thereof in the Prospectus and such description
conforms with the rights set forth in the instruments defining the same.
(n) Except as described in the Prospectus, there is no action, suit or
proceeding before any court or governmental agency, authority or body (domestic
or foreign) pending, or, to the knowledge of the Company, threatened, which
might result in judgments against the Company or any Subsidiary not adequately
covered by insurance and which collectively might result in any material adverse
change in the condition (financial or otherwise), business or prospects of the
Company and the Subsidiaries taken as a whole or materially affect their
properties or assets.
(o) The delivery upon payment for the Underwriter's Warrants to be sold by
the Company as set forth in Paragraph 11 of this Agreement will pass good and
marketable title thereto free and clear of any and all liens, encumbrances,
charges and claims whatsoever to the Underwriter, and its designees; and the
Company will have, on the effective date of the Registration Statement and at
the time of delivery of the Underwriter's Warrants, full legal right and power
and all authorization and approval required by law to sell, transfer and deliver
the Underwriter's Warrants in the manner provided hereunder.
(p) The Company does not know of any outstanding claim for services in the
nature of a finder's fee or origination fee with respect to the sale of the
Shares hereunder resulting from its acts for which the Underwriter or the
Company may be responsible.
(q) There are no contracts or other documents which are required by the
Act to be filed as exhibits to the Registration Statement which have not been so
filed; and the exhibits which have been filed are complete and correct copies of
the documents of which they purport to be copies, and all agreements referred to
in the Registration Statement or filed as exhibits to the Registration Statement
to which the Company or any Subsidiary is a party or by which it is or may be
bound or to which any of its assets, properties or businesses is or may be
subject have been duly and validly authorized, executed and delivered by the
Company and constitute the legal, valid and binding agreements of the Company in
accordance with their respective terms and no default by the Company or to the
knowledge of the Company of any other party to said agreements or, any event
which with the giving of notice or passage of time would constitute a default,
has occurred under any such agreement.
(r) Each of the Company and each of the Subsidiaries makes and keeps
accurate books and records reflecting its assets and maintains internal
accounting controls which provide reasonable assurance that (i) transactions are
executed in accordance with management's authorization, (ii) transactions are
recorded as necessary to permit preparation of the Company's
6
<PAGE>
and the Subsidiary's financial statements and to maintain accountability for the
assets of the Company and each Subsidiary, (iii) access to the assets of the
Company and each Subsidiary is permitted only in accordance with management's
authorization, and (iv) the recorded accountability of the assets of the Company
and each Subsidiary is compared with existing assets at reasonable intervals.
(s) The Company has the full right, power and authority to enter into this
Agreement and this Agreement has been duly and validly authorized, executed and
delivered by the Company and is a validly binding agreement enforceable in
accordance with its terms.
(t) Neither the Company, nor any Subsidiary, nor any Company predecessor
entity has at any time during the past five years; (i) made any unlawful
contributions to any candidate for political office, or failed to disclose fully
any contribution in violation of law, or (ii) made any payment to any state,
Federal or foreign government officer or official, or other person charged with
similar public or quasi-public duties (other than payments required or permitted
by applicable law).
(u) Except as set forth in the Prospectus, neither the Company nor any
Subsidiary maintains any "employee benefit plan" as defined in Section 3(3) of
the Employment Retirement Income Security Act of 1974, as amended, ("ERISA") and
to the best of the Company's knowledge and belief, after diligent investigation
and inquiry (A) there is no material liability of the Company or any Subsidiary
as a result thereof and (B) no "accumulated funding deficiency" (as defined in
Section 302 of ERISA) whether or not waived, exists with respect to any such
plan.
(v) The Company and its Subsidiaries have their properties adequately
insured.
(w) Except as set forth in the Prospectus, there are no actions, suits or
proceedings pending before or by any court or governmental agency, authority or
body, or any arbitrator, which is reasonably likely to result in any material
adverse change in the condition (financial or other), business prospects, net
worth or results of operations of the Company and the Subsidiaries, taken as a
whole and, to the best of the Company's knowledge, no such action, suit or
proceeding is contemplated or threatened.
(x) The Company has not taken and will not take, directly or indirectly,
any action designed to cause or result in, or which has constituted, the
stabilization or manipulation of the price of the Common Stock or any other
outstanding security to facilitate the sale or resale of the Shares, the
Underwriter's Warrants or any underlying security, provided; however, that
nothing herein shall be construed as extending to any action of the Underwriter
or Selected Dealers.
(y) Except as set forth in the Prospectus, the Company and each Subsidiary
has all government approvals, grants or licenses (domestic and foreign)
necessary for the conduct of its business as described in the Prospectus and is
in compliance with all regulations relating to the same.
7
<PAGE>
2. PURCHASE AND SALE OF THE SHARES. (a) The Company agrees to issue and
sell to the Underwriter, and subject to the terms and conditions set forth
herein and, in reliance upon the representations and warranties herein set
forth, the Underwriter agrees to purchase from the Company, the Firm Shares at a
purchase price of $_.__ per Firm Share.
(b) The Company further agrees that on the Closing Date, as hereinafter
defined, it will sell to the Underwriter and to such other persons designated by
it, the Underwriter's Warrants more particularly described in Paragraph 11 of
this Agreement.
3. DELIVERY AND PAYMENT. Delivery and payment for the Firm Shares shall
be made at the offices of Americorp Securities, Inc. or at the offices of its
Clearing Agent, in New York, New York on such date and at such time (such date
and time being herein sometimes referred to as the "Closing Date"), as the
Underwriter may specify in writing, but such date shall not be later than three
(3) business days after the date on which the Registration Statement becomes
effective; provided, however, that if counsel for the Company or for the
Underwriter deems it necessary that either a further amendment to the
Registration Statement or supplement to the Prospectus be filed prior to the
Closing Date, the Closing Date shall be on a date to be thereafter fixed by the
Underwriter on notice to the Company, such date to be not earlier than the third
business day, nor later than the tenth business day, after the effective date of
such amendment or the date of filing with respect to such supplemented
Prospectus. The Closing Date and the place of delivery may be changed by
written agreement between the Company and the Underwriter. Delivery of the Firm
Shares shall be made to the Underwriter against payment by the Underwriter of
the purchase price for the Firm Shares to or upon the order of the Company by
certified or official bank check or checks payable in New York Clearing House
funds or by wire transfer of funds to the Company's designated account.
The certificates for the Firm Shares to be delivered by the Company will be
in definitive, fully registered form, will bear no restrictive legends and will
be in such denominations and registered in such names as the Underwriter shall
request not less than two full business days prior to the Closing Date, and the
certificates for the Firm Shares purchased hereunder will be made available to
the Underwriter or its clearing agent for inspection, checking and packaging not
later than one full business day prior to the Closing Date.
4. OPTION TO PURCHASE OPTIONAL SHARES. (a) For the purposes of covering
any over-allotments in connection with the distribution and sale of the Firm
Shares as contemplated by the Prospectus, you are hereby granted an option to
purchase all or any part of the Optional Shares from the Company. The purchase
price to be paid for the Optional Shares shall be the same price per Optional
Share as the price per Firm Share set forth in Paragraph 2 hereof. The option
granted hereby may be exercised as to all or any part of the Optional Shares at
any time, and from time to time, within 45 days after the date of the
Prospectus. You shall be under no obligation to purchase any or all of the
Optional Shares unless and to the extent such option is exercised.
8
<PAGE>
(b) The option granted hereby may be exercised by you by giving
telegraphic notice to the Company setting forth the number of Optional Shares to
be purchased and the date and time for delivery of any payment for the Optional
Shares and stating that the Optional Shares referred to therein are to be used
for the purpose of covering over-allotments in connection with the distribution
and sale of the Firm Shares. If such notice is given prior to the Closing Date,
the date set forth therein for such delivery and payment may, at your option be
either the Closing Date or two full business days after such notice, whichever
occurs later. If such notice is given on or after the Closing Date, the date
set forth therein for such delivery and payment shall not be earlier than five
business days after the date of such notice. In either event, the date so set
forth shall not be more than ten full business days after the date of such
notice. The date and time set forth in such notice is herein sometimes referred
to as the "Option Closing Date." Upon exercise of the option, the Company shall
become obligated to deliver to you, and subject to the terms and conditions set
forth in Paragraph 4 (d) hereof, you shall become obligated to purchase the
respective number of Optional Shares set forth in the notice of exercise.
Payment for the Optional Shares shall be made to the Company by certified
or official bank check or checks payable in New York Clearing House funds, at
your offices, or at the offices of your clearing agent in New York City as set
forth in a notice delivered to the Company, or by wire transfer to an account
designated by the Company, against delivery of the Optional Shares to you. The
certificates representing the Optional Shares to be delivered will be in such
denominations and registered in such names as you shall request not less than
two full business days prior to the Option Closing Date, and will be made
available to you or your clearing agent for inspection, checking and packaging
at your aforesaid office, or at the offices of your clearing agent in New York
City not less than one full business day prior to the Option Closing Date.
(d) Your obligation to purchase and pay for any of the Optional Shares is
subject to the accuracy in all material respects of (as of the date hereof and
the applicable Option Closing Date) and compliance by the Company with the
representations and warranties herein, to the accuracy of the statements of the
officers of the Company made pursuant to the provisions hereof, to the
performance in all material respects by the Company of its obligations
hereunder, to the satisfaction by the Company of the conditions as of the
Closing Date and of the Option Closing Date set forth in Paragraph 7 hereof, and
to the delivery to you of opinions, certificates and letters dated the Option
Closing Date substantially the same in scope and substance to those specified in
subparagraphs (e), (f) and (g) of Paragraph 7 hereof, but with each reference to
"Firm Shares," and "Closing Date" to be, respectively, to the Optional Shares
and the Option Closing Date.
5. OFFERING BY UNDERWRITER. (a) After the Registration Statement becomes
effective you will offer the Shares for sale to the public upon the terms set
forth in the Prospectus.
(b) You are authorized to change the public offering price and concessions
and discounts to dealers, provided that no such change requiring an amendment to
the Prospectus will
9
<PAGE>
be made unless the Prospectus shall first have been amended and such amendment
declared effective.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendments thereto to become effective and will advise the
Underwriter immediately and, if requested by the Underwriter, will confirm such
advice in writing (i) when the Registration Statement has become effective and
when any post-effective amendment thereto becomes effective, or when any
supplement to the Prospectus or any amended Prospectus has been filed, (ii) of
any request by the Commission for any amendments or supplements to the
Registration Statement or the Prospectus or for any additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or the institution or threat of
any proceedings for that purpose, (iv) of the happening of any event which in
the judgment of the Company makes any material statement in the Registration
Statement or the Prospectus untrue or which requires any changes to be made in
the Registration Statement or the Prospectus in order to make any material
statements therein not misleading, and (v) of the suspension of the
qualification of the Firm Shares for offering or sale in any jurisdiction, or
the institution or threatening of any proceeding for that purpose. The Company
will use its best efforts (i) to prevent the issuance of any such stop order or
of any order preventing or suspending the use of the Registration Statement or
Prospectus and (ii) if issued, to obtain the lifting or removal of such order as
soon as possible.
(b) The Company will not at any time, whether before, on, or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to a Preliminary Prospectus or to the
Prospectus of which the Underwriter shall not previously have been advised and
furnished with copies, or to which the Underwriter shall have reasonably
objected in writing or which is not in compliance with the Act and the Rules
under the Act.
(c) The Company will deliver to the Underwriter, without charge, a
reasonable number of copies of the Registration Statement, including all
financial statements and exhibits (four of which shall be signed) and include
all exhibits filed therewith and any amendments or supplements thereto. Two
conformed copies of the Registration Statement, including all financial
statements and exhibits filed therewith shall also be delivered to the
Underwriter.
(d) Prior to the effective date of the Registration Statement, the Company
will have delivered to the Underwriter, without charge, in such quantities as
the Underwriter may have requested, copies of each form of Preliminary
Prospectus. The Company consents to the use of each form of Preliminary
Prospectus by the Underwriter, and by dealers prior to the effective date of the
Registration Statement in conformity with the Act and State Blue Sky Laws.
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(e) The Company will deliver to the Underwriter and each Selected Dealer,
without charge, immediately after the effective date of the Registration
Statement and thereafter from time to time as many copies as they may reasonably
request of the Prospectus and of any amended or supplemented Prospectus.
(f) If during such period of time as in the opinion of the Underwriter or
its counsel a prospectus relating to this financing is required to be delivered
under the Act, due to the occurrence of any event as a result of which the
Prospectus as then amended or supplemented would include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or if it shall be necessary during any time after the
effective date of the Registration Statement to amend or supplement the
Prospectus to comply with the Act or the Rules under the Act, the Company will
forthwith notify the Underwriter and its counsel thereof and prepare and file
with the Commission and furnish and deliver to the Underwriter and to others
whose names and addresses are designated by the Underwriter, all at the cost of
the Company, reasonable quantities of the amended or supplemented Prospectus
which as so amended or supplemented will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
Prospectus as amended or supplemented not misleading in the light of the
circumstances when it is delivered to a purchaser or prospective purchaser, and
which will comply in all respects with the Act and the Rules under the Act, and
cause any amendment of the Registration Statement containing an amended
Prospectus to be made effective as soon as possible.
(g) For a period of five years from the effective date of the Registration
Statement, the Company will deliver to the Underwriter (i) after each fiscal
year, the Company's Form 10-K with respect to such year at the time such Form
10-K is filed with the Commission and, if no Form 10-K is required to be filed,
such financial data with respect to such year as would be required to be filed
by the Company with the Commission pursuant to the instructions to Form 10-K
under the Exchange Act, prepared in accordance with generally accepted
accounting principles and practices as at the end of such fiscal year and for
the twelve months then ended, and covered by a report of independent certified
public accountants; (ii) after each of the first three fiscal quarters of the
Company, the Company's Form 10-Q with respect to such quarter at the time such
form 10-Q is filed with the Commission and, if no Form 10-Q is required to be
filed, such financial data with respect to such quarter as would be required to
be filed by the Company with the Commission pursuant to the instructions to Form
10-Q under the Exchange Act, all in reasonable detail and certified by the
Company's principal financial or accounting officer; (iii) copies of its annual
report and any other reports or communications (financial or other) of the
Company at the time it is mailed to its stockholders or filed with the
Commission; (iv) two copies of every press release and every material news item
and article in respect of the Company and its affairs at the time it is released
by the Company; (v) copies of transfer reports from its transfer agent; and (vi)
such additional documents and information with respect to the Company and its
affairs as the Underwriter may from time to time reasonably request.
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(h) The Company will make generally available to its stockholders, in the
manner specified in Rule 158(b) under the Act, and deliver to the Underwriter as
soon as practicable, but in no event later than 45 days after the end of its
first fiscal quarter ending 12 months after the effective date of the
Registration Statement, a consolidated earnings statement (which need not be
audited) meeting the requirements of said Rule 158(b) covering a period of at
least twelve months beginning not earlier than the effective date of the
Registration Statement.
(i) The Company will use the net proceeds to be received by it from the
sale of the Firm Shares in the manner and for the purposes set forth in the
Prospectus.
(j) The Company will deliver to the Underwriter true and correct copies of
the Company's articles of incorporation and all amendments thereto, such copies
to be certified by the secretary of the Company; true and correct copies of the
By-Laws of the Company and of the minutes of all meetings of the directors and
stockholders of the Company held prior to the Closing Date; and true and correct
copies of all material contracts to which the Company is a party.
(k) Prior to the public offering of the Firm Shares the Company will
cooperate with the Underwriter and its counsel in connection with the
registration or qualification of the Firm Shares, Optional Shares, the
Underwriter's Warrants, and the Warrant Shares for offering and sale by the
Underwriter and dealers under the securities or Blue Sky laws of such states as
the Underwriter may designate and will file such consents to service of process
or other documents as may be necessary in order to effect such registration or
qualification. The Company shall bear the expenses incurred in filing for
qualification and in qualifying the Firm Shares, Optional Shares, the
Underwriter's Warrants, and the Warrant Shares under the securities or Blue Sky
laws of such states, including the fees and charges of the various states, the
cost of printed preliminary, supplementary and final memoranda or surveys with
respect thereto, and the reasonable fees and expenses of the Underwriter's
counsel incurred in connection therewith. The Company shall not be required
however, to qualify as a foreign corporation or sign a general consent to
service of process in any jurisdiction where it is not now subject. In each
jurisdiction where any of its securities shall have been qualified, the Company
will file such reports and statements with respect thereto as may be required by
the applicable governmental or administrative body.
(l) During the period from the Closing Date to the Date the exercise
rights represented by the Underwriter's Warrants either have been fully
exercised or have lapsed, the Company will at all times have authorized and
reserved a sufficient number of shares of its underlying Common Stock to provide
for the exercise of the Underwriter's Warrants.
(m) The Company will pay and bear, whether or not the transactions
contemplated hereunder are consummated or this Agreement is prevented from
becoming effective, or is terminated, all costs and expenses incident to the
performance of its obligations under this Agreement, including all expenses
incident to the authorization of the Shares and their issuance and delivery to
the Underwriter, the authorization of the Underwriter's Warrants and their sale
to the Underwriter, any original issue taxes in connection therewith, all
transfer taxes, if any,
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incident to the initial sale of the Shares to the Underwriter and to the initial
sale of the Shares by the Underwriter to the public and to Selected Dealers, the
fees and expenses of the Company's counsel and accountants (but excluding fees
and expenses of Counsel to the Underwriter, except where such Counsel shall have
acted as "blue sky" Counsel to the Company), the costs and expenses incident to
the issuance, sale and delivery of the Shares, the Underwriter's Warrants and
the underlying shares, the costs and expenses incident to the preparation,
printing and filing under the Act of the Registration Statement (including
financial statements), any Preliminary Prospectus and the Prospectus and any
amendments or supplements thereto; the printing and distribution of this
Agreement, the Selected Dealer Agreement, the Blue Sky survey, the Underwriter's
Warrant Agreement, the certificates for the Shares and the Underwriter's
Warrants, the filing fees of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. and any state regulatory
agencies, the cost of preparing and filing all exhibits to the Registration
Statement and the cost of furnishing to the Underwriter copies of the
Registration Statement and Prospectus.
(n) The Company will pay to the Underwriter a non-accountable expense
allowance equal to $_.__ per share for each Share (Firm Share and Optional
Share) sold to the Underwriter pursuant to this Agreement. The expense
allowance is to be paid out of the proceeds of the sale of the Shares and may be
deducted by the Underwriter on the Closing Date, and the Option Closing Date
from the amount due to the Company.
(o) Prior to the Closing Date, the Company will cooperate with the
Underwriter in such investigation as the Underwriter may make or cause to be
made of the properties, business and operations of the Company in connection
with the purchase and public offering of the Shares and will make available to
the Underwriter in connection therewith such information as the Underwriter may
request in connection with the business or properties of the Company.
(p) The Company has appointed Registrar and Transfer Company as Transfer
Agent for the Common Stock. Such appointment may be changed only if the
proposed new appointee is reasonably acceptable to the Underwriter.
(q) Except as set forth in the Prospectus, during a period of 180 days
from the effective date of the Registration Statement, the Company will not
without the Underwriter's prior written consent, issue, sell or otherwise
dispose of, directly or indirectly, any Common Stock, Preferred Stock (or any
securities convertible into or exercisable to purchase Common Stock or Preferred
Stock) other than the Shares and Underwriter's Warrants and underlying shares
being sold by the Company hereunder or securities issued pursuant to outstanding
options or warrants, without the Underwriter's prior written consent.
(r) The Company will deliver to the Underwriter on the Closing Date, the
agreement of the persons set forth on Schedule I to this agreement not to sell
securities of the Company for the period set forth on Schedule I hereto.
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(s) The Company will comply with the Act, Rules under the Act and the
Exchange Act and the rules and regulations of the Commission promulgated under
the Exchange Act so as to permit the continuance of sales of, and dealings in,
the Stock, Underwriter's Warrants and underlying securities under the Act and
under the Exchange Act.
(t) The Company will use its best efforts to cause the Common Stock to be
admitted for separate listing on NASDAQ and to maintain the listing on NASDAQ
during the period the respective securities are outstanding or for a period of
five years, whichever first occurs.
(u) The Company will deliver to the Underwriter and its counsel named on
the cover page of the Registration Statement bound volumes of copies of all
documents and appropriate correspondence filed or received from the Commission
and all closing documents.
(v) The Company agrees, that for a period of three years following the
Closing it will engage a single designee selected by the Underwriter as an
advisor to its Board of Directors and such advisor shall be entitled to the same
notice as members of the Board of Directors or any committee of the Board of
Directors of the Company of any meetings thereof, and to attend all meetings of
such Board of Directors and/or committees and shall be reimbursed for all
reasonable costs in attending such meetings including, but not limited to, food,
lodging and transportation. Such advisor shall also be entitled to receive all
memoranda, reports and other documents distributed to members of the Board or
such committees subject to the execution by the advisor of reasonable
non-disclosure agreements, and to be indemnified to the same extent as the
Company's directors.
7. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase and pay for the Shares is subject to the continuing
accuracy of and compliance with the representations and warranties on the part
of the Company contained herein as of the date hereof and as of the Closing
Date, to the performance by the Company of its obligations and covenants
hereunder, to the absence from any certificates, opinions, written statements or
letters furnished to the Underwriter or to its counsel of any misstatement or
omission that is material to the purchase of the Shares by the Underwriter and
to the following additional conditions:
(a) The Registration Statement shall have become effective not later than
9:30 P.M., New York time, on the day after the date of this Agreement, or such
later date or time as shall have been consented to by the Underwriter; no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending, threatened or contemplated by the Commission; and any request for
additional information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with, and no amendments or supplements to the Registration Statement or
Prospectus shall have been filed to which the Underwriter and its counsel have
not given their consent.
(b) All corporate action taken and all legal opinions and proceedings
relating to the Shares, the Underwriter's Warrants and the Warrant Shares, the
Registration Statement and the
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<PAGE>
Prospectus and all other matters incident thereto and to the transactions to
which this Agreement relate shall be reasonably satisfactory to Underwriter's
counsel and they shall have been furnished with such certificates, documents and
information as they may request in this connection.
(c) The Company shall have performed each of the agreements herein
contained and required to be performed by it at or prior to the Closing Date and
the Option Closing Date.
(d) On the Closing Date and Option Closing Date (i) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules under the Act and shall in all material respects
conform to the requirements of the Act and the Rules under the Act and neither
the Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) since the respective dates as of which
information is given in the Registration Statement and the Prospectus there
shall have been no material adverse changes in the business, property or
financial condition of the Company and its Subsidiaries from that set forth in
the Registration Statement and the Prospectus other than changes occurring in
the ordinary course of business, and there shall have been no material
transaction, contract or agreement entered into by the Company or any Subsidiary
which is not referred to in the Registration Statement and the Prospectus, (iii)
no action, suit or proceeding at law or in equity shall be pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary which
would be required to be set forth in the Registration Statement and the
Prospectus other than as set forth therein, and no proceedings shall be pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary before or by any Federal, state or other (including foreign)
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding would have a material adverse effect upon the business,
property, financial condition or income of the Company and the Subsidiaries
taken as a whole except as disclosed in the Prospectus and (iv) neither the
Company nor any Subsidiary shall have declared or made any payments of dividends
or made any acquisitions of capital stock or made any other distribution on
outstanding shares of capital stock other than as set forth in the Registration
Statement (except for distributions made to the Company by a Subsidiary).
(e) The Underwriter shall receive on, and as of the Closing Date and the
Option Closing Date, the favorable opinion of Brock, Fensterstock, Silverstein,
McAuliffe & Wade, LLC, counsel for the Company, to the Underwriter in form and
substance satisfactory to counsel to the Underwriter, to the effect that:
(i) the Company is a corporation in good standing, duly organized and
validly existing under the laws of the state of its incorporation, and is
authorized by its Certificate of incorporation and by-laws to own its
properties and to conduct its business, as set forth in the Prospectus;
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<PAGE>
(ii) to the best of such counsel's knowledge, the sole subsidiaries of
the Company are Nouveau Foods International, Inc., Nouveau Vend
International, Inc., Nouveau Equities, Inc. and Nouveau International (PA),
Inc., all of the outstanding capital stock of which are wholly owned by the
Company, and each such Subsidiary is a corporation in good standing, duly
organized and validly existing under the laws of the state of its
incorporation, and is authorized by its Certificate of Incorporation and
by-laws to own its properties and to conduct its business as set forth in
the Prospectus;
(iii) to the best of such counsel's knowledge, the Company and each of
its Subsidiaries is duly qualified to transact the business in which it is
engaged and is in good standing in each jurisdiction in which its ownership
or lease of property requires such qualification or registration, except in
those jurisdictions where the failure to be so qualified would not, taken
in the aggregate, have a material adverse effect on the business, financial
condition or results of the Company and the Subsidiaries taken as a whole;
(iv) the Company has an authorized capitalization as set forth in the
Registration Statement; all of the outstanding shares of Common Stock of
the Company have been duly and validly authorized and issued and all of the
outstanding shares of Common Stock are fully paid and non-assessable. The
outstanding shares of Common Stock are not, and the Shares and the
Underwriter's Warrants (including the Warrant Shares) to be sold by the
Company hereunder are not subject to the preemptive right of any
shareholder of the Company. The Shares to be sold by the Company have been
validly authorized and, when issued and delivered by the Company pursuant
to this Agreement against payment of the consideration set forth herein,
will be fully paid and non-assessable; the Underwriter's Warrants to be
sold by the Company have been validly authorized and issued and represent
the valid and binding obligations of the Company enforceable in accordance
with their terms, subject as to enforcement of remedies to the discretion
of a court with respect to the granting of equitable relief and to
applicable bankruptcy, insolvency, moratorium and other laws now or
hereafter in effect affecting the rights of creditors generally; and the
Warrant Shares underlying the Underwriter's Warrants have been validly
authorized and reserved for issuance and when issued upon exercise of the
Underwriter's Warrants will be validly issued and will be fully paid and
non-assessable;
(v) The Common Stock and Warrants (including Underwriter's Warrants)
of the Company conform as to legal matters to the description thereof
contained in the Prospectus and such description conforms to the rights set
forth in the instruments defining the same, and the certificates for the
Shares and Underwriter's Warrants delivered at the Closing are in due and
proper form;
(vi) this Agreement has been duly and validly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company enforceable in accordance with its terms, subject as to enforcement
of remedies, to the discretion of a court with respect to the application
of equitable principles and to applicable bankruptcy, insolvency,
moratorium and other laws now or hereafter in effect affecting the rights
of
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creditors generally and except that such counsel need not express an
opinion with respect to the indemnification and contribution provisions set
forth in Paragraphs 8 and 9 of this Agreement; the Company has the legal
power to sell and deliver the Shares and Underwriter's Warrants pursuant to
the provisions of this Agreement; the execution, performance and delivery
of this Agreement and the consummation of the transactions contemplated in
this Agreement to be performed by the Company do not conflict with, result
in a breach of, or constitute a default under the Company's certificate of
incorporation, by-laws, and, to the best of such counsel's knowledge, do
not constitute a breach or default under any material indenture, mortgage,
deed of trust, voting trust agreement, note agreement or other agreement
or instrument to which the Company or any Subsidiary is a party or, to the
best of such counsel's knowledge, any statute, order, rule or regulation of
any court, regulatory body, administrative agency or governmental body
having jurisdiction over the Company other than "blue sky" or state
securities laws as to which counsel need not express an opinion;
(vii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the performance by the Company
of the transactions contemplated in this Agreement to be performed by it
except for such consents, approvals, authorizations or orders as need be
obtained under the Act and such as may be required under the securities
laws of any jurisdiction in connection with the purchase and distribution
of the Shares by the Underwriter;
(viii) the Registration Statement has become effective under the Act,
and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened; and to the best of such counsel's knowledge, the Registration
Statement, the Prospectus and each amendment thereof or supplement thereto
(except for the financial statements and notes thereto and other financial
and statistical information included therein as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Act and the Rules under the Act;
(ix) (A) such statutes, contracts and documents as are summarized in
the Registration Statement fairly present the information required to be
shown with respect thereto (other than in the financial statements and
notes thereto and other financial and statistical information included
therein as to which such counsel need express no opinion); and (B) such
counsel does not know of (x) any contracts or documents required to be
summarized or disclosed in the Registration Statement (with the same
exception as in subclause (A)); or required to be filed as exhibits to the
Registration Statement which have not been so summarized, disclosed or
filed, or (y) any legal or governmental proceedings pending or, to the best
of such counsel's knowledge, threatened against or involving the properties
or the business of the Company or the Subsidiaries of a character required
to be disclosed in the Registration Statement and the Prospectus which have
not been so disclosed.
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Such opinion shall also include a statement of such counsel that nothing
has come to their attention to cause them to believe that (except for (i) the
financial statements, and (ii) matters set forth under the caption
"Underwriting" as to which such counsel need not express any belief) the
Registration Statement and the Prospectus included therein at the time the
Registration Statement became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus, as amended or supplemented, if applicable, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
In rendering the foregoing opinion, such counsel may rely, as to any
matters of fact upon which such opinion is predicated, on certificates and
written statements of state officials and certificates and written statements of
officers and representatives of the Company and other responsible persons, in
each case to the extent deemed appropriate by such counsel. Copies of all such
certificates shall be furnished to counsel for the Underwriter on the Closing
Date. Such counsel may also rely, as to matters involving the laws of any
jurisdictions other than the States of Delaware or New York or the United States
of America, upon opinions of local counsel whom they believe to be reliable and
who are satisfactory to Underwriter's Counsel. The opinion of such counsel for
the Company shall state that the opinion of any such other counsel (whose
opinion shall be annexed to Company counsel's opinion) is in form satisfactory
to such counsel and, in their opinion, the Underwriter is justified in relying
thereon.
(f) At the time this Agreement is executed and at the Closing Date and the
Option Closing Date, Richard A. Eisner & Company, LLP shall have furnished to
the Underwriter letters dated respectively as of the date of this Agreement and
as of the Closing Date and Option Closing Date in form and substance
satisfactory to the Underwriter, confirming that they are independent public
accountants within the meaning of the Act and the Rules under the Act, and
stating in effect that:
(i) in their opinion, the audited consolidated financial statements
and related financial statement schedules examined by them included or
incorporated by reference in the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the Rules under the Act;
(ii) on the basis of a reading of and a review of as set forth above
of the latest available interim consolidated financial statements of the
Company subsequent to the date of their audit, inspection of the minute
books of the Company since the date of audit and consultations with and
inquiries of officers or other persons responsible for financial and
accounting matters of the Company as to transactions and events since
September 30, 1996 nothing has come to their attention which would cause
them to believe that during the period from September 30, 1996 to a
specified date not more than three business days prior to the date of this
Agreement and each of the Closing Date and Option Closing Date,
respectively, there has been any change in the capital stock or
consolidated long term debt of the Company, or decreases in consolidated
net current assets or net assets
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compared with the amounts shown in the September 30, 1996 audited
consolidated balance sheet included in the Registration Statement, except
in all instances as set forth in or contemplated by the Registration
Statement; and
(iii) in addition to their examinations referred to in their report
included in the Prospectus and the procedures, consultations and inquiries
referred to above, they have carried out certain specified procedures, not
constituting an audit, with respect to certain dollar amounts, numbers of
shares and percentages, which are derived from the accounting records of
the Company and are subject to the internal controls of the Company's
accounting system, and which appear in the Prospectus under the captions
"Prospectus Summary," "Summary Financial Information," "Risk Factors," "Use
of Proceeds," "Capitalization," "Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business," "Management - Executive Compensation," "Principal
Stockholders," "Certain Transactions" and "Concurrent Sales by Selling
Stockholders," and they have compared such dollar amounts, number of
shares, and percentages with such accounting records, and have found them
to be in agreement therewith;
(g) The Underwriter shall have received on the Closing Date and Option
Closing Date certificates, dated as of the Closing Date and the Option Closing
Date signed by the Chairman of the Board and the President of the Company
certifying that:
(i) No stop order suspending the effectiveness of the Registration
Statement is in effect and no proceedings for such purpose are pending or
are, to their knowledge, threatened by the Commission;
(ii) They do not know of any litigation instituted or threatened
against the Company or any Subsidiary of a character required to be
disclosed in the Registration Statement which is not disclosed therein;
they do not know of any contracts which are required to be summarized in
the Prospectus which are not so summarized; and they do not know of any
material contracts required to be filed as exhibits to the Registration
Statement which are not so filed;
(iii) Neither the Registration Statement nor the Prospectus as amended
or supplemented, if amended or supplemented, contains an untrue statement
of any material fact required to be stated therein or necessary to make the
statements therein not misleading; and, since the effective date of the
Registration Statement, to the best of their knowledge, there has occurred
no event required to be set forth in an amended or supplemented Prospectus
which has not been so set forth;
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition of the Company or any Subsidiary,
financial or otherwise, or in the results of its operations, except as
reflected in or contemplated by the Registration
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Statement and the Prospectus, and except as so reflected or contemplated
since such date there has not been any material transaction entered into by
the Company or any Subsidiary;
(v) Neither the Company nor any Subsidiary is delinquent in the filing
of any federal, state and municipal or other jurisdiction (domestic or
foreign) tax return or in the payment of any federal, state or municipal or
other jurisdiction (domestic or foreign) taxes; they know of no proposed
redetermination or re-assessment of taxes, adverse to the Company and its
Subsidiaries; and the Company and each of its Subsidiaries has paid or
provided by adequate reserves for all known tax liabilities;
(vi) They know of no material obligation or liability of the Company
or any of its Subsidiaries, contingent or otherwise, not disclosed in the
Registration Statement and Prospectus;
(vii) This Agreement, the consummation of the transactions herein
contemplated, and the fulfillment of the terms hereof, will not result in a
material breach by the Company or any Subsidiary of any terms of, or
constitute a material default under, the Company's Certificate of
Incorporation or By-Laws, or any material indenture, mortgage, lease, deed
of trust, bank loan or credit agreement or any other agreement or
undertaking of the Company or any Subsidiary;
(viii) The financial statements and schedules filed with and as part
of the Registration Statement present fairly the financial position of the
Company and its Subsidiaries as of the dates thereof, all in conformity
with generally accepted principles of accounting applied on a consistent
basis throughout the periods involved;
(ix) Except as otherwise set forth in the Registration Statement and
the Prospectus, all material licenses, approvals or permits from Federal,
state, local and/or foreign governmental agencies having jurisdiction over
the Company and its Subsidiaries required for the conduct or any material
aspect of the business or operations of the Company and its Subsidiaries
have been obtained and are outstanding and there are no proceedings pending
or to their knowledge, threatened, to seek to compel, terminate or limit
such licenses, approvals or permits;
(x) Neither the Company nor any Subsidiary has sustained an insured or
uninsured loss on account of fire, flood, accident or other calamity;
(xi) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as may otherwise
be referred to therein, neither the Company nor any Subsidiary has prior to
the Closing Date, either (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money, (ii)
entered into any material transaction other than in the ordinary course of
20
<PAGE>
business, or (iii) declared, paid or made any dividend or distribution of
any kind on its capital stock;
(xii) All representations and warranties set forth in this Agreement
are true and correct as of the date hereof and the Company has complied
with all of its agreements herein contained to be performed on its part on
or before the Closing Date; and
(xiii) No order suspending the sale of the Shares prior to the Closing
Date in any jurisdiction designated to the Company pursuant to Paragraph
6(k) hereof has been issued on or prior to the Closing Date and no
proceedings for that purpose have been instituted or, to the knowledge of
such officers, shall have been or shall be threatened.
(h) The Company shall have performed each of the agreements herein
contained and required to be performed by it at or prior to the Closing Date.
The Company shall have furnished to the Underwriter such other and further
certificates, documents, and opinions as the Underwriter may reasonably request
(including certificates of officers) as to the accuracy, at and as of the
Closing Date and the Option Closing Date, of the representations and warranties
of the Company herein, as to the performance by the Company of its obligations
hereunder, and as to other conditions concurrent and precedent to the
Underwriter's obligations hereunder.
Any certificate signed by an officer of the Company and delivered to the
Underwriter or its counsel will also be deemed a representation and warranty by
the Company to the Underwriter as to the statements made therein.
If any of the conditions specified in this Paragraph 7 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to the Underwriter or to its
counsel pursuant to this Paragraph 7 shall not be in all material respects
reasonably satisfactory in form, and substance to the Underwriter and to its
counsel, this Agreement and all obligations of the Underwriter hereunder may be
cancelled at, or at any time prior to, the consummation of the Closing by the
Underwriter. Notice of such cancellation shall be given to the Company in
writing, or by telegraph confirmed in writing.
8. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless
the Underwriter, its officers, directors, employees and agents and each person,
if any who controls the Underwriter within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act (the "Exchange Act"), against any all loss,
liability, claim, damage and expense whatsoever (including but not limited to
attorneys' fees and any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) caused by any untrue or alleged untrue
statement of a material fact contained (i) in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time amended or
supplemented) or (ii) in any application or other document or communication (in
this Paragraph 8 collectively called "application") executed by or on behalf
21
<PAGE>
of the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the Shares or the
Underwriter's Warrants or the underlying securities thereof under the securities
laws thereof or filed with the Commission or any securities exchange; or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof or in any communication to the Commission, any
jurisdiction or any securities exchange, as the case may be.
If any action is commenced against the Underwriter or any of its officers,
directors, employees, agents or controlling persons (an indemnified party) in
respect of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, such indemnified party or parties shall promptly notify the
indemnifying party in writing of the commencement of such action and the
indemnifying party shall assume the defense of such action, including the
employment of counsel (satisfactory to such indemnified party or parties) and
payment of expenses. Such indemnified party or parties shall have the right to
employ its or their own counsel in any such case but the fees and expenses of
such counsel shall be borne by such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action or the
indemnifying party shall not have employed counsel to take charge of the defense
of such indemnified party or parties or such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to the indemnifying
party (in which case the indemnifying party shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties), in
any of which events such fees and expenses shall be borne by the indemnifying
party. Anything in this paragraph to the contrary notwithstanding, the Company
shall not be liable for any settlement of any such claim or action effected
without its written consent. The Company agrees promptly to notify the
Underwriter of the commencement of any litigation or proceeding against the
Company or any of its officers or directors in connection with the sale of the
Shares or in connection with such Registration Statement or Prospectus. With
respect to any untrue statement or alleged untrue statement made in, or omission
or alleged omission from, any Preliminary Prospectus, the indemnity agreement
contained in this Paragraph 8 (a) with respect to such Preliminary Prospectus
shall not inure to the benefit of the Underwriter from whom the person asserting
the claim with respect to which such indemnification is sought hereunder
purchased Shares if the Prospectus (or the Prospectus as amended or supplemented
if the Company shall have made any amendments thereof or supplements thereto
which shall have been furnished to such underwriter prior to the time of the
confirmation of such sale) does not contain such statement, alleged statement,
omission or alleged omission and a copy of such Prospectus shall not have been
sent or given to such person at or prior to the written confirmation of such
sale to such person.
(b) The Underwriter agrees to indemnify and hold harmless the Company,
each of the directors of the Company, each of the officers of the Company who
shall have signed the
22
<PAGE>
Registration Statement and each other person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to the
Underwriter, but only with respect to statements or omissions if any, made, in
any preliminary prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or in any application in reliance upon and in
conformity with, written information furnished to the Company with respect to
the Underwriter by or on behalf of such Underwriter expressly for use in any
preliminary prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or in any application, as the case may be. The
statements set forth in the last paragraph of the cover page and under the
caption "Underwriting" in the Prospectus constitute the only information
furnished in writing by or on behalf of the Underwriter expressly for use in any
preliminary prospectus, the Registration Statement or the Prospectus, as the
case may be. In case any action shall be brought against the Company, or any
other person so indemnified based on any preliminary prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereof or
any application, and in respect of which indemnity may be sought against the
Underwriter, such Underwriter shall have the rights and duties given to the
Company, and the Company, and each other person so indemnified shall have the
rights and duties given to the Underwriter by the provisions of subsection (a)
above.
9. CONTRIBUTION. (a) In order to provide for just and equitable
contribution under the Act in any case in which (i) a party to this Agreement,
its officers, directors, employees and agents and each person who controls the
party within the meaning of the Act or the Exchange Act makes claim for
indemnification pursuant to Paragraph 8 hereof but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not -be enforced in such case notwithstanding the
fact that Paragraph 8 provides for indemnification in such case or (ii)
contribution under the Act may be required on the part of the Underwriter or any
such controlling person in circumstances for which indemnification is provided
under Paragraph 8, then, in each such case, the Company and the Underwriter
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after contribution from others) in such proportion so
that the Underwriter is responsible for an aggregate of 13% (being the
percentage of the initial public offering price of the Shares represented by
such Underwriter's commission and discount) and the Company is responsible for
the remaining portion; provided, however, that, in any such case, no person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(b) Promptly after receipt by any party to this Agreement of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof; but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution under the Act. In case any such action, suit or proceeding is
brought against any party, and such party notifies a contributing party of the
commencement thereof, the contributing party will be
23
<PAGE>
entitled to participate in the defense thereof with the notifying party and any
other contributing party similarly notified.
10. TERMINATION. (a) This Agreement shall become effective at 9:30 A.M.,
New York time, on the first full business day following the day on which the
Registration statement becomes effective or at the time of the initial public
offering by the Underwriter of, the Shares, whichever is earlier. The time of
the initial public offering, for the purpose of this Paragraph 10, shall mean
the time, after the Registration Statement becomes effective, of the release by
the Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Shares or the time, after the
Registration Statement becomes effective, when the Shares are first released by
the Underwriter for offering by the Underwriter or Selected Dealers by letter or
telegram, whichever shall first occur. The Underwriter, or the Company may
prevent this Agreement from becoming effective by giving the notice indicated
below in this Paragraph 10 before the time this Agreement becomes effective.
(b) In addition to the provisions of Paragraph 7 and 10 hereof, this
Agreement shall be subject to termination in the absolute discretion of the
Underwriter, by notice given to the Company prior to the Closing Date and the
Option Closing Date, if prior to such time, (i) the Company or any Subsidiary
sustains a material loss, whether or not insured, by reason of fire, flood,
accident or other calamity, which, in the opinion of the Underwriter,
substantially affects the value of the property of, or materially interferes
with the operation of the business of the Company and the Subsidiaries, taken as
a whole, (ii)trading in securities on the New York Stock Exchange, Inc. or the
American Stock Exchange, Inc. has been suspended or limited or minimum prices
have been established on either such exchange other than normal limitations,
(iii) a banking moratorium shall have been declared, either by Federal or state
authorities, (iv) any new enactment, publication decree, other promulgation, or
other restriction of or imposed by any federal, state, regulatory or self
regulatory body or order of any court or any other governmental authority
whether United States or foreign which in the judgment of the Underwriter
materially adversely affects the business or operations of the Company and the
Subsidiaries taken as a whole, or materially adversely affects the distribution
of the Shares shall have become effective, (v) trading in any securities of the
Company shall have been suspended or halted by any national securities exchange
or the Commission, (vi) the market value of securities in general or political
financial or economic conditions shall have so materially changed as, in the
judgment of the Underwriter, shall render it impracticable to offer for sale or
to enforce contracts made by the Underwriter for the resale of the Shares agreed
to be purchased hereunder, (vii) in the reasonable opinion of the Underwriter,
there exists materially adverse market conditions in the over-the-counter market
as in the judgment of the Underwriter, makes it unadvisable to proceed with the
delivery of the Shares or (viii) in the sole discretion of the Underwriter, any
material adverse change has occurred since the dates as of which information is
given in the Registration Statement or Prospectus, in the earnings, business,
condition of the Company or any Subsidiary (financial or otherwise) net worth,
results of operations, key personnel or assets of the Company or any Subsidiary,
whether or not arising in the ordinary course of business; provided, however,
that the provisions of Paragraphs 6(m), 8 and 9 hereof shall survive such
termination. However, in the event that the offering is terminated hereunder,
for any reason in the willful control of the
24
<PAGE>
Company, the Company shall be responsible for the payment to the Underwriter, of
its actual accountable out-of-pocket expenses in lieu of the non-accountable
expense allowance in Section 6(n) hereof.
(c) If the Underwriter elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Paragraph 10, the
Company shall be notified promptly by the Underwriter by telephone or telegram,
confirmed by letter. If the Company elects to prevent this Agreement from
becoming effective the Underwriter shall be notified promptly by the Company by
telephone or telegram, confirmed by letter.
11. UNDERWRITER'S WARRANTS. The Company agrees to sell to the
Underwriter, its officers and/or any underwriter or its officers, and partners
which participate in the public distribution of the Shares at the Closing Date,
an aggregate of 165,000 Underwriter's Warrants at a price of $.0001 per
Underwriter's Warrant. Each Underwriter's Warrant shall represent the right to
purchase one Warrant Share during the four year period commencing one year from
the effective date of the Registration Statement and ending five years after the
effective date, at $_.__ per Warrant Share.
The Underwriter's Warrants shall be evidenced by certificates in the form
and contain the terms and conditions as set forth in the exhibit to the
Registration Statement. The Underwriter's Warrant certificates shall be
delivered in such denominations and in such names as may be requested by the
Underwriter or in the absence of such request, then in denominations of 10,000
or greater Share certificates, registered in the name of the Underwriter. In
addition, the Company agrees to reserve against the exercise of the
Underwriters' Warrants the number of shares of its authorized but unissued
shares of Common Stock equal to the number of shares purchasable upon the
exercise of the Underwriter's Warrants. The certificates representing the
Underwriter's Warrants shall contain typical anti-dilution provisions. The
Underwriter's Warrants will not be redeemable by the Company.
12. FINDERS. (a) The Company knows of no claims for services in the nature
of a finder's fee or origination fee with respect to this financing resulting
from the respective acts of its officers, directors or employees, or any other
party acting in its behalf, for which the Underwriter may be responsible, and
the Company, agrees to indemnify and hold the Underwriter free and harmless from
any claims for any services of such nature arising from any act of the Company
or its officers, directors, employees, or any such other person acting in its
behalf, and will reimburse the Underwriter for any counsel fees, legal or other
expenses reasonably incurred by the Underwriter in investigating or defending
against any such claim.
(b) The Underwriter knows of no claims for services in the nature of a
finder's fee or origination fee with respect to this financing resulting from
the respective acts of its officers, directors, or employees, or any other party
acting in its behalf for which the Company may be responsible, and the
Underwriter agrees to indemnify and hold the Company free and harmless from any
claims for any services of such nature arising from any act of such Underwriter
or its officers, directors or employees, or any such other person acting in its
behalf and will reimburse
25
<PAGE>
the Company for any legal or other expenses reasonably incurred by the Company
in investigating or defending against any such claim.
13. REPRESENTATIONS, ETC. TO SURVIVE DELIVERY. The respective
representations, warranties, agreements, covenants, indemnities and statements
of, and on behalf of, the Company and its officers, and the Underwriter,
respectively, set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf of
the Underwriter, and will survive delivery of and payment for the Shares. Any
successor to the Underwriter shall be entitled to the indemnity, contribution
and reimbursement agreements contained in this Agreement.
14. BENEFIT. This Agreement has been and is made solely for the benefit
of and shall be binding upon the Underwriter, the Company and, to the extent
expressed, any person controlling the Company, the Underwriter and the officers
and directors of the Company and the Underwriter, and their respective legal
representatives, successors and assigns, all as and to the extent provided
herein, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "legal representatives, successors and assigns"
shall not include any purchaser of any of the Shares from the Underwriter merely
because of such purchase, and except further that in the event that any of the
persons who shall have purchased any of the Underwriter's Warrants hereof which
are registered in the Registration Statement shall be alleged to be or held to
be, an Underwriter, as that term is defined in the Act, with respect to any part
of any of the securities registered in the Registration Statement; then and in
such event the warranties, indemnities and agreement of the Company contained in
this Agreement shall also be for the benefit of any person or persons, if any,
who control such persons within the meaning of Section 15 of the Act.
15. NEW YORK LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflict of laws.
16. NOTICES. All communications hereunder shall be in writing and, if to
the Underwriter, will be mailed, delivered, telegraphed or telexed to Americorp
Securities, Inc., One New York Plaza. New York, New York 10004, Attention: Annie
Thomas, Senior Vice President; or if sent to the Company will be mailed,
delivered, telegraphed or telexed to Nouveau International, Inc., 212 Phillips
Road, Exton, Pennsylvania 19341, Attention: Robert J. Brock, Sr., President.
Copies of such notice should also be sent to counsel to such parties named in
the Prospectus.
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<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement, among the
Company and the several Underwriters.
Very truly yours,
NOUVEAU INTERNATIONAL, INC.
(the "Company")
By________________________________
Robert J. Brock, Sr., President
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written by
AMERICORP SECURITIES, INC.
AMERICORP SECURITIES, INC.
(the "Underwriter")
By:_________________________
Annie Thomas
Senior Vice President
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<PAGE>
SCHEDULE I
NAME DATE "LOCK-UP" EXPIRES
<PAGE>
Exhibit 4.1
UNDERWRITER'S WARRANTS
THE SECURITIES REPRESENTED HEREBY AND ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. HOWEVER,
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE
AMENDMENT TO SUCH REGISTRATION STATEMENT, (ii) A SEPARATE
REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN
THIS WARRANT IS NOT EXERCISABLE PRIOR TO DECEMBER ,1997
VOID AFTER 5:00 P.M. NEW YORK CITY LOCAL TIME, DECEMBER , 2001
NOUVEAU INTERNATIONAL, INC.
Warrants for the Purchase
of
110,000 Shares of Common Stock, Par Value $.001 Per Share
No. IPO-
THIS CERTIFIES that, for receipt in hand of $110.00 and other value
received, AMERICORP SECURITIES, INC. (the "Holder") is entitled to subscribe
for, and purchase from, NOUVEAU INTERNATIONAL, INC., a Delaware corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time after 12:00 A.M., New York City local time December __, 1997 until
5:00 P.M. New York City local time on December __, 2001 (the "Exercise Period"),
up to an aggregate of 110,000 shares of common stock, par value $.001 per share
(the "Common Stock"). This Warrant is initially exercisable at $_.__ per share;
provided, however, that upon the occurrence of any of the events specified in
Section 5 hereof, the rights granted by this Warrant, including the exercise
price and the number of shares of Common Stock to be received upon such
exercise, shall be adjusted as therein specified. The term "Exercise Price"
shall mean, depending on the context, the initial exercise price (as set forth
above) or the adjusted exercise price per share.
This Warrant is the Underwriter's Warrant or one of the Underwriter's
Warrants (collectively, including any Underwriter's Warrant issued upon the
exercise or transfer of any such Underwriter's Warrants in whole or in part, the
"Warrants") issued pursuant to the
<PAGE>
Underwriting Agreement, dated December __, 1996 (the "Underwriting Agreement"),
between the Company and Americorp Securities, Inc. as the underwriter (the
"Underwriter"). As used herein, the term "this Warrant" shall mean and include
this Warrant and any Warrant or Warrants hereafter issued as a consequence of
the exercise or transfer of this Warrant in whole or in part. This Warrant may
not be sold, transferred, assigned, or hypothecated until December __, 1997,
except that it may be transferred, in whole or in part, to (i) one or more
officers or partners of the Holder (or the officers or partners of any such
partner); (ii) any other underwriting firm or member of the selling group which
participated in the public offering of shares of Common Stock which commenced on
December __, 1996 (or the officers or partners of any such firm); (iii) a
successor to the Holder, or the officers or partners of such successor; (iv) a
purchaser of substantially all of the assets of the Holder; or (v) by operation
of law. The term the "Holder" as used herein shall include any transferee to
whom this Warrant has been transferred in accordance with the above.
Each share of Common Stock issuable upon the exercise hereof shall be
hereinafter referred to as a "Warrant Share."
1. This Warrant may be exercised during the Exercise Period, either in
whole or in part by the surrender of this Warrant (with the election at the end
hereof duly executed) to the Company at its office at 212 Phillips Road, Exton,
Pennsylvania 19341, or at such other place as is designated in writing by the
Company, together with a certified or bank cashier's check payable to the order
of the Company in an amount equal to the product of the Exercise Price and the
number of Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Shares, the
Holder shall be deemed to be the holder of record of the Shares, notwithstanding
that the transfer books of the Company shall then be closed or certificates
representing the Warrant Shares with respect to which this Warrant was exercised
shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise of this Warrant, the Company shall issue
and deliver to the Holder a certificate or certificates representing the Warrant
Shares issuable upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a Warrant
evidencing the right of the Holder to purchase the balance of the aggregate
number of Warrant Shares purchasable hereunder as to which this Warrant has not
been exercised or assigned.
3. Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a warrant register (the
"Warrant Register") as they are issued. The Company shall be entitled to treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes, and shall not be bound to recognize any equitable
or other claim to, or interest in, such Warrant on the part of any other person,
and shall not be liable for any registration of transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or
2
<PAGE>
transfer, or with the knowledge of such facts that its participation therein
amounts to bad faith. This Warrant shall be transferable on the books of the
Company only upon delivery thereof duly endorsed by the Holder or by his duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment, or authority to transfer. In all cases of transfer by
an attorney, executor, administrator, guardian, or other legal representative,
duly authenticated evidence of his, her, or its authority shall be produced.
Upon any registration of transfer, the Company shall deliver a new Warrant or
Warrants to the person entitled thereto. This Warrant may be exchanged, at the
option of the Holder thereof, for another Warrant, or other Warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Warrant Shares (or portions thereof), upon
surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person if, in the opinion of counsel to the
Company, such transfer does not comply with the provisions of the Securities Act
of 1933, as amended (the "Act"), and the rules and regulations thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the Warrants, such number of shares of Common Stock as shall,
from time to time, be sufficient therefor. The Company represents that all
shares of Common Stock issuable upon exercise of this Warrant are duly
authorized and, upon receipt by the Company of the full payment for such Warrant
Shares, will be validly issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof and will not be issued in
violation of any preemptive or similar rights of stockholders.
5. (a) The Exercise Price for the Warrants in effect from time to time,
and the
number of shares of Common Stock issuable upon exercise of the Warrants, shall
be subject to adjustment as follows:
(i) In the event that the Company shall at any time after the date hereof
(A) declare a dividend on the outstanding Common Stock payable in shares of its
capital stock, (B) subdivide the outstanding Common Stock, (C) combine the
outstanding Common Stock into a smaller number of shares, or (D) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Exercise
Price per Warrant Share in effect at the time of the record date for the
determination of stockholders entitled to receive such dividend or distribution
or of the effective date of such subdivision, combination, or reclassification
shall be adjusted so that it shall equal the price determined by multiplying
such Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action, and the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action. Such adjustment shall be made successively
whenever any event listed above shall occur and shall become effective at the
close of business on such record date or at the close of business on the date
immediately preceding such effective date, as applicable.
3
<PAGE>
(ii) In the event that the Company shall fix a record date for the
determination of stockholders entitled to receive issuance of rights or warrants
to be issued to all holders of Common Stock entitling such stockholders to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than the then Current Market Price (as defined below) per
share of Common Stock on such record date, the Exercise Price in effect at the
time of such record date shall be adjusted so that the same shall equal the
price determined by multiplying such Exercise Price in effect immediately prior
to such record date by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered) would purchase at
such Current Market Price per share of the Common Stock, and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding on
such record date and the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so offered
are convertible). Such adjustment shall be made successively whenever such
rights or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants; and, to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not delivered) after
the expiration of such rights or warrants, the Exercise Price shall be
readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.
(iii) In the event the Company shall fix a record date for the
determination of stockholders entitled to receive (including any such
distribution made to the stockholders of the Company in connection with a
consolidation or merger in which the Company is the continuing corporation in a
distribution to all holders of Common Stock) evidences of its indebtedness,
cash, or assets (other than distributions and dividends payable in shares of
Common Stock), or rights, options, or warrants to subscribe for or purchase
shares of Common Stock, or securities convertible into, or exchangeable for,
shares of Common Stock (excluding those referred to in paragraph (ii) above) in
a distribution to all holders of Common Stock, then, in each case, the Exercise
Price in effect at the time of such record date shall be adjusted by multiplying
the Exercise Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price per share of
Common Stock on such record date, less the fair market value (as determined in
good faith by the board of directors of the Company, whose determination shall
be conclusive absent manifest error) of the portion of the evidences of
indebtedness or assets so to be distributed, or of such rights, options, or
warrants, or convertible or exchangeable securities, or the amount of such cash,
applicable to one share of Common Stock, and the denominator of which shall be
such Current Market Price per share of Common Stock on such record date. Such
adjustment shall be made successively whenever any event listed above shall
occur and become effective at the close of business on such record date.
4
<PAGE>
(iv) In case the Company shall issue shares of Common Stock for a
consideration per share (the "Offering Price") less than the Current Market
Price per share of Common Stock on the date the Company fixes the offering price
of such additional shares, the Exercise Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying such
Exercise Price by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the issuance
of such additional shares and the number of shares of Common Stock which the
aggregate consideration received (determined as provided in Subsection (i)
below) for the issuance of such additional shares would purchase at such Current
Market Price per share of Common Stock, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. Such adjustment shall be made successively whenever
such an issuance is made. Notwithstanding anything herein to the contrary, no
adjustment pursuant to this paragraph (a)(iv) of Section 5 shall take place as a
result of this issuance of shares of Common Stock pursuant to an employee,
officer, or director securities ownership or compensation plan duly adopted by
the Board of Directors of the Company, including, but not limited to, any
employee stock option plan duly adopted by the Board of Directors of the
Company.
(v) In case the Company shall issue any securities convertible into, or
exchangeable for, Common Stock (excluding securities issued in transactions
described in Subsections (ii) and (iii) above) for a consideration per share of
Common Stock (the "Conversion Price") initially deliverable upon conversion or
exchange of such securities (determined as provided in Subsection (i) below)
less than the Current Market Price per share of Common Stock in effect
immediately prior to the issuance of such securities, the Exercise Price in
effect immediately prior to the date of such issuance shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying such Exercise Price by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such securities and the number of shares of Common Stock which
the aggregate consideration received (determined as provided in Subsection (i)
below) for such securities would purchase at such Current Market Price per share
of Common Stock, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance and the
maximum number of shares of Common Stock deliverable upon conversion of, or in
exchange for, such securities at the initial conversion or exchange price or
rate. Such adjustment shall be made successively whenever such an issuance is
made. Notwithstanding anything herein to the contrary, no adjustment pursuant
to this paragraph (a)(v) of Section 5 shall take place as a result of the
issuance of securities convertible into, or exchangeable for, shares of Common
Stock pursuant to an employee. officer, or director securities ownership or
compensation plan duly adopted by the Board of Directors of the Company,
including, but not limited to, any employee stock option plan duly adopted by
the Board of Directors of the Company.
(b) The Current Market Price per share of Common Stock on any date shall
be deemed to be the average of the daily closing prices for the 30 consecutive
trading days immediately preceding the date in question. The closing price for
each day shall be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the closing bid price
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regular way, in either case on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if the Common Stock
is not listed or admitted to trading on any national securities exchange, the
highest reported bid price for the Common Stock as furnished by the National
Association of Securities Dealers, Inc. through the Nasdaq SmallCap Market or a
similar organization if the Common Stock is not listed on the Nasdaq SmallCap
Market (such as the OTC Bulletin Board). If, on any such date, the Common
Stock is not listed or admitted to trading on any national securities exchange
and is not quoted on the Nasdaq SmallCap Market or any similar organization, the
Current Market Price shall be deemed to be the fair value of a share of Common
Stock on such date, as determined in good faith by the Board of Directors of the
Company, absent manifest error.
(c) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
(d) In any case in which this Section 5 shall require that an adjustment
in the number of Warrant Shares be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised this Warrant after such
record date, the Warrant Shares, if any, issuable upon such exercise over and
above the number of Warrant Shares issuable upon such exercise on the basis of
the number of shares of Common Stock outstanding or in effect prior to such
adjustment; provided, however, that the Company shall deliver to the Holder a
due bill or other appropriate instrument evidencing the Holder's right to
receive such additional shares of Common Stock upon the occurrence of the event
requiring such adjustment.
(e) Whenever there shall be an adjustment as provided in this Section 5,
the Company shall within 15 days thereafter cause written notice thereof to be
sent by registered or certified mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the number of Warrant
Shares issuable and the Exercise Price thereof after such adjustment and setting
forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(f) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share of capital stock would be issuable on the
exercise of this Warrant (or specified portions thereof), the Company shall
purchase such fraction for an amount in cash equal to the same fraction of the
Current Market Price of such share of Common Stock on the date of exercise of
this Warrant.
(g) No adjustment in the Exercise Price per Warrant Share shall be
required if such adjustment is less than $.05; provided, however, that any
adjustments which by reason of this Section 5 are not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
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(h) Whenever the Exercise Price payable upon exercise of this Warrant is
adjusted Pursuant to Subsections (a)(i), (a)(ii), (a)(iii), (a)(iv), or (a)(v)
above, the number of Warrant Shares issuable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of Warrant Shares
theretofore issuable upon exercise of this Warrant by the Exercise Price in
effect on December __, 1996 and dividing the product so obtained by the Exercise
Price, as adjusted.
(i) For purposes of any computation respecting consideration received
pursuant to Subsections (a)(iv) and (a)(v) above, the following shall apply:
(i) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that
in no case shall any deduction be made for any commissions,
discounts, or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the
Board of Directors of the Company (irrespective of the
accounting treatment thereof), the determination of which
shall be a conclusive absent manifest error; and
(iii) in the case of the issuance of securities convertible into,
or exchangeable for, shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of
such securities plus the additional minimum consideration,
if any, to be received by the Company upon the conversion or
exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (i) and
(ii) of this Subsection (i)).
(j) Notwithstanding anything herein to the contrary, if any adjustment
under this Section 5 of the Exercise Price or the number of shares of Common
Stock or other securities issuable upon exercise of this Warrant shall be
determined by the National Association of Securities Dealers, Inc. (the "NASD")
to violate either or both of Section 44(c)(6)(B)(vi)(7) or Section
44(c)(6)(B)(vi)(8) of Article III of the Rules of Fair Practice of the NASD or
new subsections Rule 2710(c)(6)(B)(vii)(g) and (h) of the NASD Conduct Rules
(NASD Notices to Members 93-51 and 93-84), and such determination shall not be
subject to further appeal or review, the violative provisions or provisions
shall be deemed to be amended to the minimum extent necessary to cause each such
provision to comply with the applicable violated paragraph of Section 44 of the
NASD Rules of Fair Practice and/or such new subsections of the NASD Conduct
Rules.
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6. (a) In case of any capital reorganization, other than in the cases
referred to in Section 5(a) hereof, or the consolidation or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the continuing corporation and which does not result in
any reclassification of the outstanding shares of Common Stock or the conversion
of such outstanding shares of Common Stock into shares of other stock or other
securities or property), or in the case of any sale, lease, or conveyance to
another corporation of the property and assets of any nature of the Company as
an entirety or substantially as an entirety (such actions being hereinafter
collectively referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of this Warrant (in lieu of the number of Warrant
Shares theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the respective number of Warrant
Shares which would otherwise have been deliverable upon the exercise of this
Warrant would have been entitled upon such Reorganization if this Warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of the Holder so that
the provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of this Warrant. Any such adjustment shall be made by, and set
forth in, a supplemental agreement between the Company, or any successor
thereto, and the Holder, with respect to this Warrant, and shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment. The
Company shall not effect any such Reorganization unless, upon or prior to the
consummation thereof, the successor corporation, or, if the Company shall be the
surviving corporation in any such Reorganization and is not the issuer of the
shares of stock or other securities or property to be delivered to holders of
shares of the Common Stock outstanding at the effective time thereof, then such
issuer, shall assume by written instrument the obligation to deliver to the
Holder such shares of stock, securities, cash, or other property as such holder
shall be entitled to purchase in accordance with the foregoing provisions. In
the event of sale, lease, or conveyance or other transfer of all or
substantially all of the assets of the Company as part of a plan for liquidation
of the Company, all rights to exercise this Warrant shall terminate 30 days
after the Company gives written notice to the Holder and each registered holder
of a Warrant that such sale or conveyance or other transfer has been
consummated.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value
or from a specified par value to no par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder or holders of this
Warrant shall have the right thereafter to receive upon exercise of this Warrant
solely the kind and amount of shares of stock and other securities, property,
cash, or any combination thereof
8
<PAGE>
receivable upon such reclassification, change, consolidation, or merger by a
holder of the number of Warrant Shares for which this Warrant might have been
exercised immediately prior to such reclassification, change, consolidation, or
merger. Thereafter, appropriate provision shall be made for adjustments which
shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common Stock
in shares of Common Stock or make any other distribution (other than regularly
scheduled cash dividends which are not in a greater amount per share than the
most recent such cash dividend) to all holders of Common Stock; or
(b) to issue any rights, warrants, or other securities to all holders of
Common Stock entitling them to purchase any additional shares of Common Stock or
any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock or any consolidation, merger, sale, lease, or conveyance of
property, as described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the Company;
or
(e) to take any other action which would cause an adjustment to the
Exercise Price per Warrant Share;
then, and in any one or more of such cases, the Company shall give written
notice thereof by registered or certified mail, postage prepaid, to the Holder
at the Holder's address as it shall appear in the Warrant Register, mailed at
least 15 days prior to (i) the date as of which the holders of record of shares
of Common Stock to be entitled to receive any such dividend, distribution,
rights, warrants, or other securities are to be determined, (ii) the date on
which any such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price per Warrant Share.
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<PAGE>
8. The issuance of any shares or other securities upon the exercise of
this Warrant and the delivery of certificates or other instruments representing
such shares or other securities shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
9. (a) If, at any time during the five-year period commencing on
December __, 1997, the Company shall file a registration statement (other than
on Form S-4, Form S-8 or any successor form) with the Securities and Exchange
Commission (the "Commission") while any Registrable Securities (as hereinafter
defined) are outstanding, the Company shall give all the then holders of any
Registrable Securities (the "Eligible Holders") at least 45 days prior written
notice of the filing of such registration statement. If requested by any
Eligible Holder in writing within 30 days after receipt of any such notice, the
Company shall, at the Company's sole expense (other than the fees and
disbursements of counsel for the Eligible Holders and the underwriting
discounts, if any, payable in respect of the Registrable Securities sold by any
Eligible Holder), register or qualify all or, at each Eligible Holder's option,
any portion of the Registrable Securities of any Eligible Holders who shall have
made such request, concurrently with the registration of such other securities,
all to the extent requisite to permit the public offering and sale of the
Registrable Securities, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable. Notwithstanding the foregoing, if the
managing underwriter of any such offering shall advise the Company in writing
that, in its opinion, the distribution of all or a portion of the Registrable
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account then any
Eligible Holder who shall have requested registration of his, her, or its
Registrable Securities shall delay the offering and sale of such Registrable
Securities (or the portions thereof so designated by such managing underwriter)
for such period, not to exceed 90 days (the "Delay Period"), as the managing
underwriter shall request, provided that no such delay shall be required as to
any Registrable Securities if any securities of the Company are included in such
registration statement and eligible for sale during the Delay Period for the
account of any person other than the Company and any Eligible Holder unless the
securities included in such registration statement and eligible for sale during
the Delay Period for such other person shall have been reduced pro rata to the
reduction of the Registrable Securities which were requested to be included and
eligible for sale during the Delay Period in such registration. As used herein,
"Registrable Securities" shall mean the Warrants and the Warrant Shares which,
in each case, have not been previously sold pursuant to a registration statement
or Rule 144 promulgated under the Act.
(b) If, on any one occasion during the four-year period commencing on
December __, 1997, the Company shall receive a written request from Eligible
Holders who in the aggregate
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<PAGE>
own (or upon exercise of all Warrants or Warrants then outstanding would own) a
majority of the total number of shares of Common Stock then included (or upon
such exercises would be included) in the Registrable Securities (the "Majority
Holders"), to register the sale of all or part of such Registrable Securities,
the Company shall, as promptly as practicable, prepare and file with the
Commission a registration statement sufficient to permit the public offering and
sale of the Registrable Securities and will use its best efforts through its
officers, directors, auditors, and counsel to cause such registration statement
to become effective as promptly as practicable; provided, that the Company shall
only be obligated to file one such registration statement pursuant to this
Section 9(b). All expenses incurred in connection with such registration (other
than the fees and disbursements of counsel for the Eligible Holders and
underwriting discounts, if any, payable in respect of the Registrable Securities
sold by the Eligible Holders) shall be borne by the Company. Within five
business days after receiving any request contemplated by this Section 9(b), the
Company shall give written notice to all the other Eligible Holders, advising
each of them that the Company is proceeding with such registration and offering
to include therein all or any portion of any such other Eligible Holder's
Registrable Securities, provided that the Company receives a written request to
do so from such Eligible Holder within 30 days after receipt by him, her, or it
of the Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 9, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Holder or such holders
may reasonably request; provided, however, that the Company shall not be
required by reason of this Section 9(c) to register or qualify the Registrable
Securities in any jurisdiction where, as a result thereof, the Company would be
subject to service of general process or to taxation as a foreign corporation
doing business in such jurisdiction to which the Company is not then subject.
(d) The Company shall keep effective any registration or qualification
contemplated by this Section 9 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Eligible Holders to complete the offer and sale
of the Registrable Securities covered thereby. The Company shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of nine months from the date on which the Eligible Holders are first
free to sell such Registrable Securities; provided, however, that, if the
Company is required to keep any such registration or qualification in effect
with respect to securities other than the Registrable Securities beyond such
period, the Company shall keep such registration or qualification in effect as
it relates to the Registrable Securities for so long as such registration or
qualification remains or is required to remain in effect in respect of such
other securities.
(e) In the event of a registration pursuant to the provisions of this
Section 9, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and
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<PAGE>
each supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents, as any Eligible Holder may
reasonably request to facilitate the disposition of the Registrable Securities
included in such registration.
(f) In the event of a registration pursuant to the provisions of this
Section 9, the Company shall furnish each Eligible Holder of any Registrable
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Eligible Holders) to the effect that (i) the registration statement has
become effective under the Act and no order suspending the effectiveness of the
registration statement, or preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus or any amendment or
supplement thereto, has been issued, nor, to the knowledge of such counsel, has
the Commission or any securities or blue sky authority of any jurisdiction
instituted or threatened to institute any proceedings with respect to such an
order, (ii) the registration statement and each prospectus forming a part
thereof (including each preliminary prospectus), and any amendment or supplement
thereto, complies as to form with the Act and the rules and regulations
thereunder, and (iii) such counsel has no knowledge of any material misstatement
or omission in such registration statement or any prospectus, as amended or
supplemented. Such opinion shall also state the jurisdictions in which the
Registrable Securities have been registered or qualified for sale pursuant to
the provisions of Section 9(c).
(g) In the event of a registration pursuant to the provision of this
Section 9, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses, and customary closing
conditions, including, without limitation, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Registrable
Securities.
(h) The Company agrees that until all the Registrable Securities have been
sold under a registration statement or pursuant to Rule 144 under the Act, it
shall keep current in filing all reports, statements, and other materials
required to be filed with the Commission to permit holders of the Registrable
Securities to sell such securities under Rule 144 under the Act.
10. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents, and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 10, without
limitation, attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), as and when incurred, arising out of, based upon,
or in connection with, (i) any untrue statement or alleged untrue statement of a
material fact contained in (A) any registration statement, preliminary
prospectus. or final prospectus (as from time to
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<PAGE>
time amended and supplemented), or any amendment or supplement thereto, relating
to the offer and sale of any of the Registrable Securities, or (B) any
application or other document or communication (in this Section 10, referred to
collectively as an "application") executed by, or on behalf of, the Company or
based upon written information furnished by, or on behalf of, the Company filed
in any jurisdiction in order to register or qualify any of the Registrable
Securities under the securities or "blue sky" laws thereof or filed with the
Commission or any securities exchange; or any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, written information furnished to the
Company with respect to such Eligible Holder by, or on behalf of, such person
expressly for inclusion in any registration statement, preliminary prospectus or
final prospectus, or any amendment or supplement thereto, or in any application,
as the case may be, or (ii) any breach of any representation, warranty,
covenant, or agreement of the Company contained in this Warrant. The foregoing
agreement to indemnify shall be in addition to any liability the Company may
otherwise have, including liabilities arising under this Warrant.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 10(a)) and the
Company shall promptly assume the defense of such action, including, without
limitation, the employment of counsel reasonably satisfactory to such
indemnified party or parties) and payment of expenses. Such indemnified party
or parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shah have
been authorized in writing by the Company in connection with the defense of such
action or the Company shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or the named parties to such action include both the indemnified
and the indemnifying parties and such indemnified party or parties shall have
reasonably concluded that there may be one or more legal defenses available to
it or them or to other indemnified parties which are different from, or in
addition to, those available to the Company, which, for reasons of conflict of
interest or otherwise, counsel to the Company is not in a position to assert, in
any of which events such reasonable fees and expenses shall be borne by the
Company and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this Section
10 to the contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written consent,
which consent shall not be unreasonably withheld. The Company shall not,
without the prior written consent of each indemnified party that is not released
as described in this sentence, settle or compromise any action, or permit a
default or consent to the entry of judgment in, or otherwise seek to terminate,
any pending or threatened action, in respect of which indemnity may be sought
hereunder (whether or not any indemnified party is a party thereto), unless such
settlement, compromise, consent, or termination includes an
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unconditional release of each indemnified party from all liability in respect of
such action. The Company agrees promptly to notify the Eligible Holders of the
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the sale of any Registrable Securities
or any preliminary prospectus, prospectus, registration statement, or amendment
or supplement thereto, or any application relating to any sale of any
Registrable Securities.
(b) Each Eligible Holder severally agrees to indemnify and hold harmless
the Company, each director of the Company, each officer of the Company who shall
have signed any registration statement covering Registrable Securities held by
such Eligible Holder, each other person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and
its or their respective counsel, to the same extent as the foregoing indemnity
from the Company to the Eligible Holders in Section 10(a), but only with respect
to statements or omissions, if any, made in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application, in
reliance upon, and in conformity with, written information furnished to the
Company with respect to any Eligible Holder by, or on behalf of, such Eligible
Holder expressly for inclusion in any such registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, as the case may be. If any action shall be brought against the
Company or any other person so indemnified based on any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or any application, and in respect of which indemnity may be
sought against any Eligible Holder pursuant to this Section 10(b), such Eligible
Holder shall have the rights and duties given to the Company, and the Company
and each other person so indemnified shall have the rights and duties given to
the indemnified parties, by the provisions of Section 10(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 10(a) or 10(b)
hereof (subject to the limitations thereof), but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Warrant expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act, or otherwise, then the
Company (including for this purpose any contribution made by, or on behalf of,
any director of the Company, any officer of the Company who signed any such
registration statement any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the Registrable
Securities included in such registration in the aggregate (including for this
purpose any contribution by, or on behalf of, an indemnified party), as a second
entity, shall contribute to the losses, liabilities, claims, damages, and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
such Eligible Holders in connection with the facts which resulted in such
losses, liabilities, claims, damages, and expenses. The relative fault, in the
case of an untrue statement, alleged untrue statement, omission, or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission, or alleged omission relates to information supplied
by the
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Company or by such Eligible Holders. and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement, alleged statement, omission, or alleged omission. The Company and
the Eligible Holders agree that it would be unjust and inequitable if the
respective obligations of the Company and the Eligible Holders for contribution
were determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages, and expenses (even if the Eligible Holders and the
other indemnified parties were treated as one entity for such purpose) or by any
other method of allocation that does not reflect the equitable considerations
referred to in this Section 10(c). In no case shall any Eligible Holder be
responsible for a portion of the contribution obligation imposed on all Eligible
Holders in excess of its pro rata share based on the number of shares of Common
Stock owned (or which would be owned upon exercise of all Registrable
Securities) by it and included in such registration as compared to the number of
shares of Common Stock owned (or which would be owned upon exercise of all
Registrable Securities) by all Eligible Holders and included in such
registration. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. For purposes of
this Section 10(c), each person, if any, who controls any Eligible Holder within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and
each officer, director, partner, employee, agent, and counsel of each such
Eligible Holder or control person shall have the same rights to contribution as
such Eligible Holder or control person and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed any such
registration statement, each director of the Company, and its or their
respective counsel shall have the same rights to contribution as the Company,
subject in each case to the provisions of this Section 10(c). Anything in this
Section 10(c) to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 10(c) is intended to supersede any
right to contribution under the Act, the Exchange Act, or otherwise.
11. Unless registered pursuant to the provisions of Section 9 hereof, the
Warrant Shares issued on exercise of the Warrants shall be subject to a stop
transfer order and the certificate or certificates representing the Warrant
Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO A REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. HOWEVER, SUCH
SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i)
A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENT,
(ii) A SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR
(iii) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
15
<PAGE>
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon receipt by is the Company of reasonably
satisfactory indemnification, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
14. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
15. The Holder and the Company irrevocably consent to the jurisdiction of
the courts of the State of New York and of any federal court located in such
State in connection with any action or proceeding arising out of, or relating
to, this Warrant, any document or instrument delivered pursuant to, in
connection with, or simultaneously with, this Warrant, or a breach of this
Warrant or any such document or instrument. In any such action or proceeding,
the Holder or the Company, as applicable, waives personal service of any
summons, complaint, or other process and agrees that service thereof may be made
in accordance with Section 12 of the Underwriting Agreement. Within 30 days
after such service, or such other time as may be mutually agreed upon in writing
by the attorneys for the parties to such action or proceeding, the Company shall
appear to answer such summons, complaint, or other process. Should the Company
so served fail to appear or answer within such 30-day period or such extended
period, as the case may be, the Company shall be deemed in default and judgment
may be entered against the Company for the amount as demanded in any summons,
complaint, or other process so served.
Dated: December , 1996
NOUVEAU INTERNATIONAL, INC.
By:______________________________
Robert J. Brock, Sr.
President
[Seal]
_________________________
Secretary
16
<PAGE>
ELECTION TO EXERCISE
To: Nouveau International, Inc.
212 Phillips Road
Exton, Pennsylvania 19341
The undersigned hereby exercises his, her, or its rights to purchase shares
of Common Stock, par value $.001 per share ("the Common Stock"), of Nouveau
International, Inc., a Delaware corporation (the "Company"), covered by the
within Warrant and tenders payment herewith in the amount of $________________
in accordance with the terms thereof, and requests that certificates for the
securities constituting such shares of Common Stock be issued in the name of and
delivered to:
(Print Name, Address, and Social Security
or Tax Identification Number)
and, if such number of shares of Common Stock shall not constitute all such
shares of Common
Stock covered by the within Warrant, that a new Warrant for the balance of the
shares of Common Stock covered by the within Warrant shall be registered in the
name of, and delivered to, the undersigned at the address stated below.
Dated:______________________ Name________________________________
(Print)
Address:
__________________________________
(Signature)
17
<PAGE>
EXHIBIT 11
NOVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE DATA
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------------- ----------------------------
1995 1994 1996 1995
------------ -------------- -------------- ------------
<S> <C> <C> <C> <C>
Income (loss) before extraordinary item............... $ 5,286,378 $ (1,134,944) $ (2,948,150) $ 5,491,928
Adjustment for preferred stock dividends and accretion
for preferred stock liquidiation preference.......... (458,666)
------------ -------------- -------------- ------------
Income (loss) before extraordinary item, as
adjusted............................................. $ 5,286,378 $ (1,134,944) $ (3,406,816) $ 5,491,928
Extraordinary item--compromise of pre-petition
liabilities.......................................... 2,307,606 112,000
------------ -------------- -------------- ------------
Net income (loss) available to common shareholders.... $ 7,593,984 $ (1,134,944) $ (3,406,816) $ 5,603,928
------------ -------------- -------------- ------------
------------ -------------- -------------- ------------
Weighted average number of common shares
outstanding.......................................... 9,248,988 9,248,988 9,248,988 9,248,988
------------ -------------- -------------- ------------
------------ -------------- -------------- ------------
Net income (loss) per share before extraordinary
item................................................. $ 0.57 $ (0.12) $ (0.37) $ 0.60
Extraordinary item.................................... $ 0.25 $ 0.00 $ 0.00 $ 0.01
------------ -------------- -------------- ------------
NET INCOME (LOSS) PER SHARE........................... $ 0.82 $ (0.12) $ (0.37) $ 0.61
------------ -------------- -------------- ------------
------------ -------------- -------------- ------------
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Registration Statement on Form SB-2 of
our reports dated February 7, 1996 (with respect to Note O[2], November 18,
1996) and March 11, 1996 on our audits of the financial statements of Nouveau
International, Inc. and subsidiaries and Health Management, Inc., respectively.
We also consent to the reference to our firm under the captions "Summary
Financial Information," "Selected Financial Data" and "Experts".
Richard A. Eisner & Co., LLP
New York, New York
December 18, 1996
