UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PACIFIC BASIN DEVELOPMENT, CORP.
(Name of small business issuer in its charter)
New York 6770 Applied For
- --------------------------------------------------------------------------------
(State of jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or Industrial Classification Identification No.)
organization) Code Number)
142 West Broadway, Council Bluffs, IA, 51503 (712)323-9445
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(Address and telephone number of principal executive offices)
142 West Broadway, Council Bluffs, IA, 51503 (712)323-9445
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(Address of Principal place of business of intended principal place of business)
Gerald A. Adler, Two Grand Central Tower, 140 East 45th St,
New York, NY (212) 986-6850
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(Name, address, and telephone number of agent for service)
Approximate date of proposed sale to the public as soon as practicable after the
effective date of this Registration Statement and Prospectus.
By: Gerald A. Adler, Esq.
Two Grand Central Tower,
140 East 45th St, New York, NY 10019
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, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8 (a), may determine.
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Each Class of Maximum Maximum
Securities Being Amount Offering Price Offering Amount of
Registered (1) Being Registered Per Share (2) Price (2) Registration Fee
<S> <C> <C> <C> <C>
Shares of Common Stock 550,000 $0.10 $55,000 $100.00
- -----------------------------------------------------------------------------------------------------
Total 550,000 $55,000 $100.00
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(1) Excludes 450,000 shares the Company sold to (3) persons at $.001 per share on June 17, 1996.
(2) Estimated for purposes of computing the registration fee pursuant to Rule 457.
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Cross Reference Sheet Pursuant to Rule 404 (c)
Showing the Location In Prospectus of
Information Required by Items of Form SB-2
Part I. Information Required in Prospectus
----------------------------------
Item
No. Required Item Location or Caption
- --- ------------- -------------------
1. Front of Registration Statement Front of Registration
and Outside Front Cover of Statement and outside
Prospectus front cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover
Cover Pages of Prospectus Page of Prospectus and
Front cover Page of Outside
Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors High Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Prospectus Summary
Price Determination of
Offering Price; High
Risk Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Litigation
10. Directors, Executive Officers, Management
Promoters and Control Persons
11. Security Ownership of certain Principal Stockholders
Beneficial Owners and Management of Common Stock
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Opinions; Experts
14. Disclosure of Commission Position on Statement as to Idemnification
Indemnification for Securities Act
Liabilities
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(continued)
Part I Information Required in Prospectus Caption in Prospectus
15. Organization Within Last Five Years Management, Certain
Transactions
16. Description of Business Proposed Business,
Remuneration
17. Management's Discussion and Analysis or Proposed Business-
Plan of Operation Plan of Operation
18. Description of Property Proposed Business
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Stock and Related Prospectus Summary,
Stockholder Matters
Common Stock and Related
Stockholders Matters; Shares
Eigible for Future Sale
21. Executive Compensation Remuneration
22. Financial Statements Financial Statements
24. Changes in and Disagreements with Not Applicable
Accountants on Accounting and
Financial Disclosure
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PROSPECTUS
Pacific Basin Development Corp.
(A New York Corporation)
550,00 Shares of Common Stock Offered at $0.10 per Share
Pacific Basin Development Corp. (the "Company") hereby offers for sale
550,000 shares of common stock, $.001 par value per share (the "Shares) (Common
Stock") at a purchase price of $0.10 per Share (the "Offering"). The Shares
shall be sold exclusively by the Company on a "best-efforts, all or none basis"
for a period of ninety (90) days (which may be extended an additional ninety
(90) days). This offering shall be conducted directly by the Company without the
use of a professional underwriter or securities dealer. The Company's offering
is being made in compliance with Rule 419 of Regulation C, pursuant to which the
offering proceeds and the securities to be issued to purchasers will he placed
in an escrow account (the "Escrow Account") until the offering has been
reconfirmed by the Company's shareholders and a Business Combination (as
hereinafter defined) consummated in accordance with the provisions of such Rule.
Pursuant to Rule 3a5l-l(d) under the Securities Exchange Act, the securities
being offered hereto constitute "penny stock," and as such, certain sales
restrictions apply to these securities. (See "Risk Factors"). This offering is
being made on a best efforts, all or none basis on behalf of the Company by the
Company. (See "Description of Securities"). Up to 20% of the offering may be
purchased by officers, directors, current shareholders of the Company, and any
of their affiliates or associates.
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Price to the Public Proceeds to the Company
- --------------------------------------------------------------------------------
Per Share $0.10 $0.10
- --------------------------------------------------------------------------------
TOTAL (1) $55,000.00 $55,000.00
================================================================================
(1) These Shares are offered by the Company on a "best-efforts, all or none
basis.
Pursuant to the terms of an escrow agreement (the "Escrow Agreement"), upon
receipt by the Company, investors' funds will immediately be deposited in the
Escrow Account which will be maintained by American Securities Transfer Company
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(the "Escrow Agent"). All investors' checks or money orders must be made payable
to "Pacific Basin Development Corp. and American Securities Transfer Company, as
Escrow Agent." Unless all 550, 000 Shares have been sold, and $55,000 in payment
therefor has been received in the Escrow Account within 90 days from the date
hereof (the "Offering Period"), or within an additional 90 days if the Offering
Period is extended by the Company (the "Extended Offering Period"), all funds
held in the Escrow Account will be returned to investors in full, without
interest thereon or deduction therefrom.
Upon the sale of all 550,000 Shares within the Offering Period (or the
Extended Offering Period), other terms of the Escrow Agreement which have been
included therein to comply with Rule 419 (the "Rule 419 Escrow Provisions") will
govern the treatment of the Shares purchased by investors and the investors'
funds tendered in payment thereof. Pursuant to the Rule 419 Escrow Provisions,
the Common Stock certificates evidencing the Shares are to be issued in the
respective names of the investors and promptly deposited into the Escrow Account
upon issuance. The investors' funds will remain as deposited in the Escrow
Account except for up to 10% of the amount on deposit after such payments which
may be released to the Company under Rule 419 (the "Deposited Funds.")
Rule 419 permits 10% of the proceeds to be disbursed to the Company from
the Rule 419 Escrow Account prior to the consummation of a Business Combination.
The Company is entitled to 10% of the Deposited Funds of this offering, and the
Company's current management intends to request release of these funds from the
Escrow Account. The Company will receive the remainder of the Deposited Funds in
the event a Business Combination is consummated pursuant to the provisions of
Rule 419.
(2) Before deducting offering expenses which include: Blue Sky fees, legal
fees, accounting fees, printing fees, filing fees, estimated at $35,000.
THE COMPANY IS CONDUCTING A BLANK CHECK OFFERING SUBJECT TO THE
COMMISSION'S RULE 419 OF REGULATION C. THE OFFERING PROCEEDS, WHICH WILL BE
$55,000, AND THE SECURITIES PURCHASED BY INVESTORS MUST BE DEPOSITED INTO AN
ESCROW ACCOUNT (THE "DEPOSITED FUNDS" AND "DEPOSITED SECURITIES," RESPECTIVELY).
WHILE HELD IN THE ESCROW ACCOUNT, THE DEPOSITED SECURITIES MAY NOT BE TRADED OR
vi
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TRANSFERRED. EXCEPT FOR AN AMOUNT UP TO 10% OF THE DEPOSITED FUNDS, $5,500,
OTHERWISE RELEASABLE UNDER THE RULE, THE DEPOSITED FUNDS AND THE DEPOSITED
SECURITIES MAY NOT BE RELEASED UNTIL AN ACQUISITION IS MADE WHICH MEETS THE
CRITERIA SPECIFIED IN RULE 419, AND A SUFFICIENT NUMBER OF INVESTORS RECONFIRM
THEIR INVESTMENT IN ACCORDANCE WITH RULE 419's PROCEDURES. PURSUANT TO THESE
PROCEDURES, A NEW PROSPECTUS, WHICH DESCRIBES AN ACQUISITION CANDIDATE AND ITS
BUSINESS AND INCLUDES AUDITED FINANCIAL STATEMENTS, WILL BE DELIVERED TO ALL
INVESTORS. THE COMPANY MUST RETURN THE PRO RATA PORTION OF THE DEPOSITED FUNDS
TO ANY INVESTOR WHO DOES NOT ELECT TO REMAIN AS AN INVESTOR. UNLESS A SUFFICIENT
NUMBER OF INVESTORS ELECT TO REMAIN SO, ALL INVESTORS WILL BE ENTITLED TO THE
RETURN OF THEIR PRO RATA PORTION OF THE DEPOSITED FUNDS AND NONE OF THE
DEPOSITED SECURITIES WILL BE ISSUED TO INVESTORS. IN THE EVENT AN ACQUISITION IS
NOT CONSUMMATED WITHIN 18 MONTHS OF THE EFFECTIVE DATE, THE DEPOSITED FUNDS WILL
BE RETURNED ON A PRO RATA BASIS TO ALL INVESTORS. (SEE "INVESTORS" RIGHTS AND
SUBSTANTIVE PROTECTIONS UNDER RULE 419.")
AS INDICATED ABOVE, THE COMPANY'S OFFERING IS SUBJECT TO THE PROVISIONS OF
RULE 419. WHILE HELD IN THE ESCROW ACCOUNT, RULE 15g-8 UNDER THE SECURITIES
EXCHANGE ACT OF 1934 MAKES IT UNLAWFUL FOR ANY PERSON TO SELL OR OFFER TO SELL
THE DEPOSITED SECURITIES (OR ANY INTEREST IN OR RELATED TO THE DEPOSITED
SECURITIES). THUS, INVESTORS ARE PROHIBITED FROM MAKING ANY ARRANGEMENTS TO SELL
THE DEPOSITED SECURITIES UNTIL THEY ARE RELEASED FROM THE ESCROW ACCOUNT (SEE
"HIGH RISK FACTORS" AND "PROHIBITIONS AGAINST SALE OF SECURITIES BEFORE RELEASE
FROM ESCROW.")
PACIFIC BASIN DEVELOPMENT CORP.
142 West BROADWAY
Council Bluffs, Iowa 51503
The date of this Prospectus is , 1996
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THESE SECURITIES ARE HIGHLY SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK, AND
SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. SEE "HIGH RISK FACTORS" FOR SPECIAL RISKS CONCERNING THE COMPANY AND
"DILUTION" FOR INFORMATION CONCERNING DILUTION OF THE BOOK VALUE OF THE
INVESTORS' SHARES FROM THE PUBLIC OFFERING PRICE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES HAVE BEEN REGISTERED ONLY IN THE STATES OF NEW YORK AND NEBRASKA
AND MAY ONLY BE TRADED IN SUCH STATES. PURCHASERS OF SUCH SECURITIES EITHER IN
THIS OFFERING OR IN ANY SUBSEQUENT TRADING MARKET WHICH MAY DEVELOP MUST BE
RESIDENTS OF NEW YORK OR NEBRASKA. THE COMPANY WILL AMEND THIS PROSPECTUS FOR
THE PURPOSE OF DISCLOSING ADDITIONAL STATES, IF ANY, IN WHICH THE COMPANY'S
SECURITIES ARE REGISTERED. (SEE "HIGH RISK FACTORS- STATE LAW VIOLATIONS.")
PRIOR TO THIS OFFERING THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK
OF THE COMPANY. THERE IS NO ASSURANCE THAT ANY TRADING MARKET IN THESE
SECURITIES WILL EVER DEVELOP.
================================================================================
Price to Proceeds to
the Public the Company (2)
- --------------------------------------------------------------------------------
Per Share $0.10 $0.10
- --------------------------------------------------------------------------------
TOTAL (1) $55,000.00 $55,000.00
================================================================================
(1) These Shares are offered by the Company on a "best-efforts, all or none
basis".
Pursuant to the terms of the Escrow Agreement (the "Escrow Agreement"),
upon receip by the Company, investors, funds will immediately be deposited in
the Escrow Account which will be maintained by American Securities Transfer
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Company 1825 Lawrence St. Denver, CO 80202 (the "Escrow Agent"). All investors'
checks or money orders must be made payable to "Pacific Basin Development Corp.,
and American Securities Transfer Company, as Escrow Agent. Unless all 550,000
Shares have been sold, and $55,000 in payment therefor has been received in the
Escrow Account within 90 days from the date hereof (the "Offering Period"), or
within an additional 90 days if the Offering Period is extended by the Company
(the "Extended Offering Period", all funds held in the Escrow Account will be
returned to investors in full, without interest thereon or deduction therefrom.
Upon the sale of all 550,000 Shares within the Offering Period (or the
Extended Offering Period), other terms of the Escrow Agreement which have been
included therein to comply with Rule 419 (the "Rule 419 Escrow Provisions") will
govern the treatment of the Shares purchased by investors and the investors'
funds tendered in payment thereof. Pursuant to the Rule 419 Escrow Provisions,
the Common Stock certificates evidencing the Shares are to be issued in the
respective names of the investors and promptly deposited into the Escrow Account
upon issuance. The investors' funds will remain as deposited in the Escrow
Account except for up to 10% of the amount on deposit after such payments which
may be released to the Company under Rule 419 (the "Deposited Funds.")
Rule 419 permits 10% of the proceeds to be disbursed to the Company from
the Rule 419 Escrow Account prior to the consummation of a Business Combination.
The Company is entitled to 10% of the Deposited Funds of this offering, and the
Company's current management intends to request release of these funds from the
Escrow Account. The Company will receive the remainder of the Deposited Funds in
the event a Business Combination is consummated pursuant to the provisions of
Rule 419.
(2) Before deducting offering expenses which include: Blue Sky fees, legal fees,
accounting fees, printing fees, filing fees, estimated at $35,000.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") on Form
SB-2 under the Securities Act of 1933, as amended, with respect to the Shares
offered hereby. This prospectus does not contain all of the information set
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forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. The Company will be
subject to the reporting requirements of the Securities Exchange Act of 1934
(the Exchange Act), but is currently not a reporting company. The Company will
file periodic reports voluntarily in the event that its obligation to file such
reports is suspended under Section 15(d) of the Exchange Act. The reports and
other information filed by the Company may be inspected and copied at the public
reference facilities of the commission in Washington, D.C., and at some of its
regional offices, e.g., the Northeast Regional Office, 7 World Trade Center,
13th Floor, New York, New York, 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission, Washington, D.C., 20549, at
prescribed rates. Descriptions contained in this prospectus as to the contents
of any contract or other document filed as an exhibit to the Registration
Statement are not necessarily complete and each such description is qualified by
reference to such contract or document.
The Company intends to furnish to its stockholders, after the close of each
fiscal year, an annual report relating to the operations of the Company and
containing audited financial statements examined and reported upon by an
independent certified public accountants. In addition, the Company may furnish
to stockholders such other reports as may be authorized, from time to time, by
the Board of Directors. The Company's year end is December 31.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS 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 ANY OFFER TO BUY ANY
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
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UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SHALL NOT UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF; HOWEVER, ANY CHANGES THAT MAY HAVE OCCURRED ARE
NOT MATERIAL TO AN INVESTMENT DECISION. IN THE EVENT THERE HAS BEEN ANY MATERIAL
CHANGES IN THE AFFAIRS OF THE COMPANY, A POST-EFFECTIVE AMENDMENT WILL BE FILED.
THE COMPANY RESERVES THE RIGHT TO REJECT ANY ORDER, IN WHOLE OR IN PART, FOR THE
PURCHASE OF ANY OF THE SHARES OFFERED HEREBY.
Until 90 days after the date when the Deposited Funds and Deposited securities
are released from the Escrow Account, all dealers effecting transactions in the
Common Stock, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters with respect to their unsold
allotments or subscriptions.
-This space is intentionally left blank-
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TABLE OF CONTENTS
PROSPECTUS SUMMARY..........................................................1
The Company.................................................................1
The Offering................................................................2
Offering Conducted in Compliance with Rule 419..............................2
High Risk Factors...........................................................3
Determination of Offering Price.............................................3
Use of Proceeds.............................................................3
SUMMARY FINANCIAL INFORMATION...............................................5
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION
UNDER RULE 419..............................................................6
Deposit of Offering Proceeds and Securities.................................6
Prescribed Acquisition Criteria.............................................7
Post-Effective Amendment....................................................8
Reconfirmation Offering.....................................................8
Release of Deposited Securities and Deposited Funds.........................9
HIGH RISK FACTORS..........................................................10
DILUTION...................................................................23
USE OF PROCEEDS............................................................25
CAPITALIZATION.............................................................28
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................................29
PROPOSED BUSINESS..........................................................31
History and Organization...................................................31
Plan of Operation..........................................................31
Evaluation of Business Combinations........................................34
Business Combinations......................................................35
Regulation.................................................................37
Employees..................................................................38
Facilities.................................................................38
MANAGEMENT.................................................................39
Biography..................................................................39
Other Blank Check Companies................................................40
Prior Blank Check Offerings................................................40
Conflicts of interest......................................................40
Remuneration...............................................................41
Management Involvement.....................................................42
Management Control.........................................................42
STATEMENT AS TO INDEMNIFICATION............................................42
MARKET FOR THE COMPANY'S COMMON STOCK......................................43
CERTAIN TRANSACTIONS.......................................................44
PRINCIPAL STOCKHOLDERS.....................................................45
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DESCRIPTION OF SECURITIES..................................................46
Common Stock...............................................................46
Preferred Stock............................................................47
Future Financing...........................................................47
Reports to Stockholders....................................................48
Dividends..................................................................48
Transfer Agent.............................................................48
PLAN OF DISTRIBUTION.......................................................48
Method of Subscribing......................................................50
EXPIRATION DATE............................................................51
LITIGATION.................................................................51
LEGAL OPINIONS.............................................................51
EXPERTS....................................................................51
FURTHER INFORMATION........................................................51
FINANCIAL STATEMENTS
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PROSPECTUS SUMMARY
------------------
The following is a summary of certain information contained in this
prospectus and is qualified in its entirety by the more detailed information and
financial statements (including notes thereto) appearing elsewhere in the
prospectus and in the Registration Statement. Investors should carefully
consider the information set forth in this prospectus under the heading "High
Risk Factors".
The Company
- -----------
Pacific Basin Development Corp. (the "Company'), was organized under the
laws of the State of New York on June 12, 1996. The Company was organized as a
vehicle to acquire or merge with a business or company, (the "Target Business")
(a "Business Combination"). Management believes that the Company's
characteristics as an enterprise with liquid assets, nominal liabilities, and
flexibility in structuring will make the Company an attractive combination
candidate. None of the Company's officers, directors, promoters, their
affiliates or associates have had any preliminary contact or discussions and
there are no present plans, proposals, arrangements or understandings with any
representative of the owners of any business regarding the possibility of an
acquisition or merger transaction. The Company does not intend to engage in the
business of investing, reinvesting or trading in securities as its primary
business or pursue any business which would render the Company an "Investment
Company" pursuant to the Investment Company Act of 1940.
Since the organization of the Company, its activities have been limited to
the sale of initial shares in connection with its organization and its
preparation in producing a registration statement and prospectus for its initial
public offering. The Company will not engage in any substantive commercial
business following the offering. ("See "Proposed Business.")
The Company maintains its office at 142 West Broadway, Council Bluffs, Iowa
51503. The Company's phone number is 712-323-9445.
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The Offering
- ------------
Securities offered 550,000 Shares of Common Stock,
$.001 par value, being offered at
$0.10 per Share. (See "Description
of Securities".)
Common Stock outstanding 450,000 shares
prior to the offering
Common Stock to be
outstanding after 1,000,000 shares
the offering
Offering Conducted in Compliance with Rule 419
- ----------------------------------------------
The Company is a blank check company and consequently this offering is
being conducted in compliance with the Commission's Ryle 419. Investors have
certain reights and will receive the substantive protection provided by the
rule. To that end, the securities purchased by investors and the funds received
in the offering will be deposited and held in the Escrow Account until an
acquisition can be completed and before the Deposited Funds and Deposited
Securities can be released to the Company and the investors, respectively, the
Company is required to update the Registration Statement with a post-effective
amendment, and within the five days after the effective date thereof, the
Company is required to furnish investors with the prospectus produced thereby
containing the terms of a reconfirmation offer and information regarding the
proposed acquisition candidate and its business including audited financial
statements. According to Rule 419, investors must have no fewer than 20 and no
more than 45 business days from the effective date of the post-effective
amendment to decide to reconfirm their investment and remain an investor, or
alternately, require the return of their investment, minus certain deductions.
Any investor not making any decision within said 45 day period will
automatically have his investment funds returned. The rule further provides that
if the Company does not complete an acquisition meeting the specified criteria
within 18 months of the Effective Date, all of the Deposited Funds in the Escrow
Account must be returned to investors. If the offering period is extended to its
limit (6 months), the Company will have only 12 months; in which to consummate a
merger or acquisition.
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(See "Investors Rights and Substantive Protection Under Rule 419 -
Reconfirmation Offering.")
High Risk Factors
- -----------------
Investments in the securities of the Company are highly speculative,
involve a high degree of risk, and should be purchased only by persons who can
afford to lose their entire investment. See "High Risk Factors" for special
risks concerning the Company and "Dilution" for information concerning dilution
of the book value of the investors shares from the public offering. (See "High
Risk Factors" and "Dilution.")
Determination of offering Price
- -------------------------------
The offering price of $0.10 per Share for the Shares offered hereby has
been arbitrarily determined by the Company. This price bears no relation to the
Company's assets, book value, or any other customary investment criteria,
including the Company's prior operating history. Among factors considered by the
Company in determining the offering price were estimates of the Company's
business potential, the limited financial resources of the Company, the amount
of equity and control desired to be retained by the present shareholders, the
amount of dilution to public investors and the general condition of the
securities markets. (See"Determination of Offering Price" and "High Risk
Factors.")
Use of Proceeds
- ---------------
Of the $55,000 offering proceeds deposited into the Escrow Account (the
"Deposited Funds"), 10% ($5,500) may be released to the Company prior to a
reconfirmation offering whereby investors reconfirm their investment in
accordance with procedures proscribed by Rule 419. (See "Investors' Rights and
Substantive Protection Under Rule 419-Reconfirmation Offering."). The Company is
entitled to such funds, and the Company's current management intends to request
release of these funds from the Escrow Account. The Company will receive the
remainder of the Deposited Funds in the event a Business Combination is
consummated pursuant to the provisions of Rule 419. The Deposited Funds will
remain in the non-interest-bearing Escrow Account maintained by American
Securities Transfer Company, which company is to act as Escrow Agent pursuant to
Rule 419 of Regulation C. No portion of the Deposited Funds will be expended to
acquire a Target Business. The Deposited Funds will be transferred to the Target
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Company when a Business Combination is effected. To the extent that the Common
Stock is used as consideration to effect a Business Combination, the balance of
the Deposited Funds expended will be used to finance the operation of the Target
Business. The Company has incurred a debt of $17,000 and will incurr an
additional debt of $18,000 for offering expenses. However, the debt will be paid
only out of proceeds from the succussful Business Combination. Management is not
aware of any circumstances under which this policy, through their own
initiative, may be changed. Accordingly, no portion of the proceeds are being
used to repay debt. Based on a written agreement amongst members of management,
management may not accrue compensation prior to the consummation of a Business
Combination. Management is not aware of any circumstances under which such
policy through their own initiative may be changed. Since the role of present
management after a Business Combination is uncertain, the Company has no ability
to determine what remuneration, if any, will be paid to such persons after such
Business Combination. (See "Use of Proceeds.")
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SUMMARY FINANCIAL INFORMATION
-----------------------------
The following is a summary of the Company's consolidated financial information
and is qualified in its entirety by the audited financial statements appearing
herein.
For the Period June 12, 1996 to June 30, 1996
(audited)
Statement of Income Data:
Net Sales.............................. $ 0
Net Income............................. $(259)
Net Income Per Share. ................. $ 0
Shares Outstanding...... .............. 450,000
As of
June 30, 1996 After Offering
------------- --------------
Balance Sheet Data
Working Capital............................ $ 191 $55,191
Total Assets............................... $17,450 $55,450
Long Term Debt............................. $ 0 $ 0
Total Liabilities.......................... $17,259 $35,259
Shareholders' Equity.... .................. $ 191 $20,191
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INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
- -----------------------------------------------------------
Deposit of Offering Proceeds and Securities
- -------------------------------------------
Rule 419 requires that offering proceeds after deduction for underwriting
commissions, underwriting expenses and dealer allowances, if any, and the
securities purchased by investors in this offering, be deposited into an escrow
or trust account (the "Deposited Funds" and "Deposited Securities,"
respectively) governed by an agreement which contains certain terms and
provisions specified by the Rule. Under Rule 419, the Deposited Funds and
Deposited Securities will be released to the Company and to the investors,
respectively, only after the Company has met the following three basic
conditions. First, the Company must execute an agreement(s) for an
acquisition(s) meeting certain prescribed criteria. Second, the Company must
file a post-effective amendment to the Registration Statement which includes the
terms of a reconfirmation offer that must contain conditions prescribed by the
rules. The post-effective amendment must also contain information regarding the
acquisition candidate(s) and its business(es), including audited financial
statements. Third, the Company must conduct the reconfirmation offer and satisfy
all of the prescribed conditions, including the condition that a certain minimum
number of investors must elect to remain investors. After the Company submits a
signed representation to the, escrow agent that the requirements of Rule 419
have been met and after the acquisition(s) is consummated, the escrow agent can
release the Deposited Funds and Deposited Securities.
Accordingly, the Company has entered into an escrow agreement with American
Securities Transfer Company, 1825 Lawrence St. Suite 444, Denver, CO 80802 (the
"Escrow Agent") which provides that:
(1) The proceeds are to be deposited into the Escrow Account maintained by
the Escrow Agent promptly upon receipt. Rule 419 permits 10% of the Deposited
Funds to be released to the Company prior to the reconfirmation offering. The
Deposited Funds and any dividends or interest thereon, if any, are to be held
for the sole benefit of the investors and can only be invested in bank deposits,
in money market mutual funds or federal government securities or securities for
which the principal or interest is guaranteed by the federal government.
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(2) All securities issued in connection with the offering and any other
securities issued with respect to such securities, including securities issued
with respect to stock splits, stock dividends or similar rights are to be
deposited directly into the Escrow Account promptly upon issuance. The identity
of the investors are to be included on the stock certificates or other documents
evidencing the Deposited Securities. The Deposited Securities held in the Escrow
Account are to remain as issued, and are to be held for the sole benefit of the
investors who retain the voting rights, if any, with respect, to the Deposited
Securities held in their names. The Deposited Securities held in the Escrow
Account may not be transferred, disposed of nor any interest created therein
other than by will or the laws of descent and distribution, or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986 or Table I of the Employee Retirement Income Security Act.
(3) Warrants, convertible securities or other derivative securities
relating to Deposited Securities held in the Escrow Account may be exercised or
converted in accordance with their terms; provided that, however, the securities
received upon exercise or conversion together with any cash or other
consideration paid in connection with the exercise or conversion are to be
promptly deposited into the Escrow Account.
Prescribed Acquisition Criteria
- -------------------------------
Rule 419 requires tha before the Deposited Funds and the Deposited
Securities can be released, the Company must first execute an agreement to
acquire an acquisition candidate(s) meeting certain specified criteria. The
agreement(s) must provide for the acquisition(s) of a business(es) or assets for
which the fair value of the business represents at least 80% of the maximum
offering proceeds. The Agreement(s) must include, as a condition precedent to
their consummation, a requirement that the number of investors representing 80%
of the maximum offering proceeds must elect to reconfirm their investment. For
purposes of the offering, the fair value of the business(es) or assets to be
acquired must be at least $44,000 (80% of $55,000).
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Post-Effective Amendment
- ------------------------
Once the agreement(s) governing the acquisition(s) of a business(es)
meeting the above criteria has been executed, Rule 419 requires the Company to
update the registration statement with a post-effective amendment. The
post-effective amendment must contain information about the proposed acquisition
candidate(s) and its business(es), including audited financial statements, the
results of this offering and the use of the funds disbursed from the Escrow
Account. The post-effective amendment must also include the terms of the
reconfirmation offer mandated by Rule 419. The reconfirmation offer must include
certain prescribed conditions which must be satisfied before the Deposited Funds
and Deposited Securities can be released from escrow.
Reconfirmation Offering
- -----------------------
The reconfirmation offer must commence after the effective date of the
post-effective amendment. Pursuant to Rule 419, the terms of the reconfirmation
offer must include the following conditions:
(1) The prospectus contained in the post-effective amendment will be sent
to each investor whose securities are held in the Escrow Account within 5
business days after the effective date of the post-effective amendment.
(2) Each investor will have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to notify the
Company in writing that the investor elects to remain an investor.
3) If the Company, does not receive written notification from any investor
within 45 business days following the Effective Date, the pro rata portion of
the Deposited Funds (and any related interest or dividends) held in the Escrow
Account on such investor's behalf will be returned to the investor within 5
business days by first class mail or other equally prompt means.
(4) The acquisition(s) will be consummated only if a minimum number of
investors representing 80% of the maximum offering proceeds equaling $44,000
elect to reconfirm their investment.
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(5) If a consummated acquisition (s) has not occurred by (18 months from
the date of this prospectus), the Deposited Funds held in the Escrow Account
shall be returned to all investors on a pro rata basis within 5 business days by
first class mail or other equally prompt means.
Release of Deposited Securities and Deposited Funds
- ---------------------------------------------------
The Deposited Funds and Deposited Securities may be released to the Company
and the investors, respectively, after:
(1) The Escrow Agent has received a signed representation from the Company
and any other evidence acceptable by the Escrow Agent that:
(a) "The Company has executed an agreement for the acquisition(s) of a
Target Business(es) for which the fair market value of the business represents
at least 80% of the maximum offering proceeds and has filed the required
post-effective amendment;
(b) The post-effective amendment has been declared effective, that the
mandated reconfirmation offer having the conditions prescribed by Rule 419 has
been complied and that the Company has satisfied all of the prescribed
conditions of the reconfirmation offer.
(2) The acquisition(s) of the business(es) with the fair value of at least
80% of the maximum proceeds.
This space is intentionally left blank
9
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HIGH RISK FACTORS
-----------------
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE IN NATURE AND INVOLVE AN
EXTREMELY HIGH DEGREE OF RISK AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN
AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE "DILUTION" FOR INFORMATION
CONCERNING DILUTION OF THE BOOK VALUE OF THE INVESTORS' SHARES FROM THE PUBLIC
OFFERING.
1. Anticipated Change in Control and Management. If the initial public
offering is completely sold, management and current shareholders, will own
approximately 45% of the Common Stock of the Company. Therefore, management and
current shareholders would continue to control the Comnany and be able to elect
all the directors to the board of directors. Upon the successful completion of a
Business Combination, the Company anticipates that it will have to issue to the
Target Company authorized but unissued Common Stock in the Company which when
issued will comprise a majority of the then issued and outstanding shares of
Common Stock of the Company. Therefore, the Company anticipates that upon the
consummation of a Business Combination there will be a change of control in the
Company which will most likely result in the resignation or removal of the
Company's present officers and directors. If there is a change in management, no
assurance can be given as to the experience or qualification of such persons
either in the operation of the Company's activities or in the operation of the
business, assets or property being acquired. (See "Proposed Business.")
2. New Business Development Stage. The Company was incorporated in the
State of New York on June 12, 1996, and has had no operations to date. The
Company was formed to serve as a vehicle to effect a Business Combination. There
is no assurance the Company's intended acquisition or merger activities will be
successful or result in revenue or profit to the Company. Since the Company has
not yet attempted to seek a Business Combination, and due to the Company's lack
of experience, there is only a limited basis upon which to evaluate the
Company's prospectus for achieving its intended business objectives. The Company
faces all the risks which are associated with any new business. Any investment
in this Company should be considered an extremely high risk investment. As of
the date of this prospectus, the Company has not entered into or negotiated any
arrangements for a Business Combination with a Target Business. (See "Proposed
Business.")
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3. Use of Proceeds. 90% of the net proceeds of this offering, pursuant to
Rule 419, must be held in escrow pending the consummation of a Business
Combination which transaction must occur within eighteen (18) months of the
Effective Date herein. The funds from this offering may not be sufficient in
order for the Company to find a Business Combination. Rule 419 permits 10% of
the net proceeds to be disbursed to the Company from the Rule 419 Escrow Account
prior to the consummation of a Business Combination. The Company intends to
request release of this money. In the event the Company does not request release
of these funds, the Company will receive these funds in the event a business
combination is consummated in accordance with Rule 419. (See "Use of Proceeds",
"Business" and "Investors' Rights and Substantive Protection under Rule 419.")
4. No Access to Investors' Funds while held in Escrow. The Company is
offering for sale 550,000 Shares, at $0.10 per Share. The maximum offering
period is six months.
There is no commitment by any other person to purchase all or any portion
of the Shares offered hereby, and consequently there is no assurance that all
550,000 Shares will be sold during the Offering Period. Investors have no right
to the return or the use of their funds and cannot earn interest thereon until
conclusion of the offering which may continue for a period of up to six months
after the Effective Date. Even upon the sale of the 550,000 Shares, the
investors funds (reduced to reflect payments for expense amounts, if any,
otherwise released as permitted by Rule 419) may remain in the Escrow Account,
which is non-interest bearing, and the investors will have no right to the
return of or the use of their funds for a period of 18 months from the Effective
Date.
Investors will be offered return of their pro rata portion of the funds
held in escrow only in connection with the reconfirmation offering required to
be conducted upon execution of an agreement to acquire a target business which
represents 80% of the maximum offering proceeds. If the Company is unable to
locate a Target Business meeting the above acquisition criteria, investors will
have to wait 18 months from the Effective Date before a pro rata portion of
their funds is returned without interest thereon.
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5. Failure of Sufficient Number of Investors to Reconfirm Investment. A
Business Combination with a Target Business cannot be consummated unless, in
connection with the reconfirmation offering required by Rule 419, the Company
can successfully convince a sufficient number of investors representing 80% of
the maximum offering proceeds to elect to reconfirm their investments. If, after
completion of the reconfirmation offering, a sufficient number of investors do
not reconfirm their investment, the business combination will not be
consummated. In such event, none of the Deposited Securities held in escrow will
be issued and the Deposited Funds will be returned to investors on a pro rata
basis.
Up to 20% of the Shares may be purchased by officers, directors, current
shareholders of the Company and any of their affiliates or associates. Shares
purchased by such insiders will be included in determining whether investors
representing 80% of the maximum offering proceeds elect to reconfirm their
investment. The substantive benefit of an objective 80% reconfirmation by
investors may he reduced, as it is likely that such insiders will elect to
reconfirm a proposed Business Combination.
6. Extremely Limited Capitalization. As of June 30, 1996, the Company had
assets of $17,450 and $17,259 of liabilities. There was $450 available in the
Company's treasury as of June 30, 1996. Upon the sale of all the Shares in this
offering, the Company will receive net proceeds of approximately, $55,000, all
of which must be deposited in the Escrow Account. $5,500 may be used by the
Company as capital in order to seek a Business Combination. The Company's
management intends to request release of these funds from escrow. In the event
the Company does not request release of these funds, the Company will receive
the funds in the event a Business Combination is consummated in accordance with
Rule 419. The costs of conducting the Company's business activities will be paid
by the money in the Company's treasury. Assuming suitable prospects are
identified, if ever, the Company may be unable to complete an acquisition or
merger due to a lack of sufficient funds. Therefore, the Company may require
additional financing in the future in order to consummate a Business
Combination. Such financing may consist of the issuance of debt or equity
securities. The Company can not give any assurances that such funds will be
12
<PAGE>
available, if needed, or whether they will be available on terms acceptable to
the Company. It is unlikely that the Company will need additional funds, but it
may occur if a Target Company insists the Company obtain additional capital.
Such financing will not occur without shareholder approval. The Company has
borrowed $17,000 from one of its offerciers and directors and will borrow an
additional $18,000 for the payment of the Company's offering expenses. The debt,
however, will be repaid out of proceeds of a successful Business Combination. If
the Company does not consummate an acquisition or purchase within 18 months of
the Effective Date, the Company must return all the funds, minus certain
deductions, back to the investors. (See "Use of Proceeds," Proposed Business,"
and "Investors' Rights and Substantive Protection Under Rule 419.")
7. No Transfer of Escrowed Securities. No transfer or other disposition of
the Deposited Securities shall be permitted other than by will or the laws of
descent and distribution, or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986, as amended, or Title 7 of the
Employee Retirement Income Security Act, or the rules thereunder. Pursuant to
Rule 15g-8, it is unlawful for any person to sell or offer to sell the
securities (or any interest in or related to the securities) held in the Rule
419 Escrow Account other than pursuant to a qualified domestic relations order
(i.e., divorce proceedings). Therefore, any and all contracts for sale to be
satisfied by delivery of the Deposited Securities (e.g, contracts for sale on a
when as, and if issued basis) and sales of derivative securities to be settled
by delivery of the securities are prohibited. It is further prohibited to sell
any interest in the Deposited Securities (or any derivative securities) whether
or not physical delivery is required. (See "Investors' Rights and Substantive
Protection Under Rule 419.11)
8. No Assurances of a Public Market. Pursuant to Rule 419, all securities
purchased in an offering by a blank check company, as well as securities issued
in connection with an offering to underwriters, promoters or others as
compensation or otherwise, must be placed in the Rule 419 Escrow Account. These
securities will not be released from escrow until the consummation of a merger
or acquisition as provided for in Rule 419. There is no present market for the
Common Stock of the Company and there is no likelihood of any active and liquid
public trading market developing following the release of securities from the
Rule 419 account. Thus, shareholders may find it difficult to sell their shares.
To date, neither the Company nor anyone acting on its behalf has taken any
affirmative steps to request or encourage any broker dealer to act as a market
maker for the Company's Common Stock. Further, there have been no discussions or
13
<PAGE>
understandings, preliminary or otherwise, between the Company or anyone acting
on its behalf and any maker regarding the participation of any such market maker
in the future trading market, if any, for the Company's Common Stock. Present
management of the Company has no intention of seeking a market maker for the
Company's Common Stock at any time prior to the reconfirmation offer to be
conducted prior to the consummation of a Business Combination. The officers of
the Company after the consummation of a Business Combination may employ
consultants or advisors to obtain such market makers. Management expects that
discussions in this area will ultimately be initiated by the management of the
Company in control of the entity after a Business Combination is reconfirmed by
the stockholders. There is no likelihood of any active and liquid trading market
for the Company's Common Stock developing. (See "Market for the Company's Common
Stock" and "Investors' Rights and Substantive Protection under Rule 419.")
9. Unspecified Industry and Acquired Business; Unascertained Risks. To
date, the Company has not selected any particular industry in which to
concentrate its Business Combination efforts. In relation to its competitors,
the Company is and will continue to be an insignificant participant in the
business of seeking Business Combinations. A large number of established and
well financed entities, including venture capital firms, have recently increased
their merger and acquisition activities. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than the Company and, consequently, the Company will be at a
competitive disadvantage in identifying suitable merger or acquisition
candidates and successfully consummating a proposed merger or acquisition. Also,
the Company will be competing with a large number of other small, blank check
companies. (See "Conflicts of Interest - Management's Fiduciary Duty" and
"Business.")
10. Conflict of Interest-Management's Fiduciary Duties. A conflict of
interest may arise between management's personal pecuniary benefits and
management's fiduciary duty to the shareholders of the Company. Investors should
note that the present shareholders of the Company, will own approxately 45% of
the Company after the offering is completed and would therefore have continuing
control of the Company. Michael A. Abboud, President of the Company, and
Elizabeth Kish, Secretary of the Company, collectively own 400,000 shares,
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<PAGE>
comprising 88.89% of the shares before the offering and 40% after the offering.
Thus, Management of the Company beneficially owns 450,000 shares, which comprise
100% of the Company before the offering and 45% after the offering. Further,
management's interest in their own pecuniary benefit may at some point
compromise their fiduciary duty to the Company's shareholders. No proceeds from
this offering will be used to purchase directly or indirectly any shares of the
Common Stock owned by management or any present shareholder, director or
promoter. (See "Management.")
11. Conflicts of Interest. The Company's directors and officers are or may
become, in their individual capacities, officers, directors, controlling
shareholders and/or partners of other entities engaged in a variety of
businesses. Each officer and director of the Company is engaged in business
activities outside of the Company, and the amount of time they devote to the
Company's business will only be about 15 hours each per month. There exists
potential conflicts of interest including, among other things, time, effort and
Business Combinations with such other business entities. Conflicts with other
blank check companies with which members of Management may become affiliated in
the future may arise in the pursuit of Business Combinations. To aid the
resolution of such conflicts the Company will adopt a procedure whereby a
special meeting of the Company's shareholders will be called to vote upon a
Business Combination with an affiliated entity, and shareholders who also hold
securities of such affiliated entity will be required to vote their shares of
the Company's stock in the same porportion as the Company's publicly held shares
are voted. Such procedure shall be in the form of an oral agreement between
Management and the Company.
Potential conflicts of interest may exist where there are competing
searches for combination candidates among blank check affiliates.
The Company's officers and directors are not currently involved in other
blank check companies. The Company's officers and directers may be involved as
officers and directors of other blank check companies in the future. A potential
conflict of interest may result if and when any officer of the Company becomes
an officer or director of another Company, especiaIly another blank check
company. There is presently no requirement contained in the Company's Articles
of Incorporation, Bylaws or minutes which requires that officers and directors
of the Company disclose to the Company Target Businesses which come to their
15
<PAGE>
attention. The officers and directors do, however, have a fiduciary duty of
loyalty to the Company to disclose to the Company any Target Businesses which
come to their attenticn in their capacity as an officer and/or director of the
Company or otherwise. Included in this duty would be Target businesses which the
person learns about through his involvement as an officer and director of
another Company. The Company will not purchase the assets of any Company which
is beneficially owned by any officer, director, promoter or affiliate or
associate of this Company. Management plans on examining a Target Business's
finanicial statements (including balance sheets, statements of cash flow,
stockholders' equity, etc) its assets and liabilities and its projections for
future growth. This information will also be considered by the shareholders who,
based on this information, will determine, as part of the Rule 419
reconfirmation offering, whether a merger with such a Target Business is
"beneficial" to the Company. (See "Management.")
12. Potential Related Party Business Combination. The Company may acquire a
business in which the Company's promoters, management or their affiliates own a
beneficial interest. In such event, such transaction may be considered a related
party transaction not at arms-lengh. No related party transaction is presently
contemplated. If in the event a related party transaction is contemplated some
time in the future, the Company intends to seek shareholder approval through a
vote of shareholders. However, shareholders objecting to any such related party
transaction will be able only to request the return of the pro-rata portion of
their invested funds held in escrow in connection with the reconfirmation
offering to be conducted in accordance with Rule 419 upon execution of the
acquisition agreement.
13. Possible Disadvantages of Blank Check Offering. The Company's business
may involve the acquisition of or merger with a company which does not need
substantial additional capital but which desires to establish a public trading
market for its shares. A company which seeks the Company's participation in
attempting to consolidate its operations through a merger, reorganization, asset
acquisition, or some other form of combination may desire to do so to avoid what
they may deem to be adverse consequences of themselves undertaking a public
offering. Factors considered may include time delays, significant expense, loss
of voting control and the inability or unwillingness to comply with various
16
<PAGE>
federal and state laws enacted for the protection of investors. In making an
investment in the Company, investors should recognize that they may be doing so
under terms which may ultimately be less favorable than making an investment
directly in a company with a specific business. Investors herein may not be
afforded an opportunity to specifically approve or consent to any particular
stock buy-out transaction. (See "Proposed Business.")
14. Lack of Market Research or Identification of Acquisition, or Merger
Candidate. The Company has neither conducted nor have others made available to
it results of market research concerning the feasibility of a Business
Combination with a Target Business. Therefore, management has no assurances that
market demand exists for an acquisition or merger as contemplated by the
Company. Management has not identified any particular industry or specific
business within an industry for evaluation by the Company. There is no assurance
the Company will be able to form a Business Combination with a Target Business
on terms favorable to the Company. (See "Proposed Business.")
15. Success Dependent on Management. The Company's officers and directors
have only limited experience in the business activities in which the Company
intends to engage. Management believes it has sufficient experience to implement
the Company's plan, although there is no assurance that additional managerial
assistance will not be required. Success of the Company depends on the active
participation of its officers. These officers have not entered into employment
agreements with the Company and they are not expected to do so in the
foreseeable future. The Company has not obtained key man life insurance on any
of its officers or directors. (See "Proposed Business", "Management" and "Use Of
Proceeds.")
16. No Current Contemplated Business Combinations. As of the date of this
prospectus, none of the Company's officers, directors, promoters, their
affiliates or associates have had any preliminary contact or discussions and
there are no present plans, proposals, arrangements or understandings with any
representatives of the owners of any business (Target Business) regarding the
possibility of a Business Combination.
17. Lack of Diversification. In the event the Company is successful in
identifying and evaluating a suitable Business Combination, the Company will in
all likelihood, be required to issue its Common Stock in an acquisition or
17
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merger transaction. Inasmuch as the Company's capitalization is limited and the
issuance of additional Common Stock will result in a dilution of interest for
present and prospective shareholders, it is unlikely the Company will be capable
of negotiating more than one acquisition or merger. Consequently, the Company's
lack of diversification may subject the Company to economic fluctuation within a
particular industry in which a Target Company conducts business. (See "Proposed
Business.")
18. Regulation. Although the Company will be subject to regulation under
the Securities Act of 1933 and the Securities Exchange Act of 1934, Management
believes the Company will not be subject to regulation under the Investment
Company Act of 1940. The regulatory scope of the investment Company Act of 1940,
as amended (the "Investment Company Act"), was enacted principally for the
purpose of regulatory vehicles for pooled investments in securities, extends
generally to Companies primarily in the business of investing, reinvesting,
owning, holding or trading securities. The Investment Company Act may, however,
also be deemed to be applicable to a Company which does not intend to be
characterized as an Investment Company but which, nevertheless, engages in
activities which may be deemed to be within the definition of the scope of
certain provisions of the Investment Company Act. The Company believes that its
principle activities will not subject it to regulation under the Investment
Company Act. Nevertheless, there can be no assurances that the Company will not
be deemed to be an Investment Company. The funds may be invested primarily in
certificates of deposit, interest bearing savings accounts or government
securities. In the event the Company is deemed to he an Investment Company the
Company may be subject to certain restrictions relating to the Company's
activities, including restrictions on the nature of its investments and the
issuance of securities. The Company has obtained no formal determination from
the Securities and Exchange Commission as to the status of the Company under the
Investment Company Act of 1940.
19. Taxation. In the course of any acquisition or merger the company may
undertake, a substantial amount of attention will be focused upon federal and
state tax consequences to both the Company and the "target" company. Presently,
under the provisions of federal and various state tax laws, a qualified
18
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reorganization between business entities will generally result in tax-free
treatment to the parties to the reorganization. While the Company expects to
undertake any merger or acquisition so as to minimize federal and state tax
consequences to both the Company and the "target" company, there is no assurance
that such Business Combination will meet the statutory requirements of a
reorganization or that the parties will obtain the intended tax-free treatment
upon a transfer of stock or assets. A non-qualifying reorganization could result
in the imposition of both federal and state taxes which may have a substantial
adverse effect on the Company. (See "Business-Regulation and Taxation.")
20. No Dividends. The Company was only recently organized, has no earnings,
and has paid no dividends to date. Since the Company was formed as a blank check
company with its only intended business being the search for an appropriate
Business Combination, the Company does not anticipate having any earnings until
such time that a Business Combination is effected. However, there are no
assurances that upon the consummation of a Business Combination, the Company
will have earnings or issue dividends. Therefore, it is not expected that cash
dividends will be paid, if at all, to stockholders until after a Business
Combination is effected. (See "Dividends.")
21. Restricted Resale of the Securities. The 450,000 shares of the
Company's Common Stock presently issued and outstanding as of the date hereof
are "restricted securities" as that term is defined under the Securities Act of
1933 (the "Securities Act"), as amended, and in the future may be sold in
compliance with Rule 144 of the Securities Act, or pursuant to a Registration
Statement filed under the Securities Act. Rule 144 provides, in essence, that a
person holding restricted securities for a period of two (2) years may sell
those securities in unsolicited brokerage transactions or in transactions with a
market maker, in an amount equal to one (1%) percent of the Company's
outstanding Common Stock every three (3) months. Sales of unrestricted shares by
affiliates of the Company are also subject to the same limitation upon the
number of shares that may be sold in any three (3) month period. If all the
Shares being offered hereto are sold, the holders of the restricted securites
may each sell shares during any three (3) month period after July 12, 1998. Such
sales may not exceed the greater of (i) one percent of the outstanding
securities of the same class or (ii) the average weekly trading volume in such
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securities for a specified four-week period if the securities are traded on a
national securities exchange or are traded through the National Association of
Securities Dealers automated quotations system. Additionally, Rule 144 requires
that an issuer of securities make available adequate current public information
with respect to the issuer. Such information is deemed available if the issuer
satisfies the reporting requirements of sections 13 or 15(d) of the Securities
and Exchange Act of 1934 and of Rule 15c2-11 thereunder. Rule 144(k) also
permits the termination of certain restrictions on sales of restricted
securities by persons who were not affiliates of the Company at the time of the
sale and have not been affiliates in the preceding three (3) months. Such
persons must satisfy a three (3) year holding period. There is no limitation on
such sales and there is no requirement regarding adequate current public
information. Investors should be aware that sales under Rule 144 or 144(k), or
pursuant to a Registration Statement filed under the Act, may have a depressive
effect on the market price of the Company's securities in any market which may
develop for such shares.
22. Arbitrary Determination of Offering Price. The initial offering price
of $0.10 per share has been arbitrarily determined by the Company, and bears no
relationship whatsoever to the Company's assets, earnings, book value or any
other objective standard of value. Among the factors considered by the Company
were the lack of operating history of the Company, the proceeds to be raised by
the offering, the amount of capital to be contributed by the public in
proportion to the amount of stock to be retained by present stockholders, the
relative requirements of the Company, and the current market conditions in the
over-the-counter market.
23. Control by Present Management and Shareholders. Assuming the sale of
all the Shares offered, the Shares of Common Stock purchased by the public will
represent approximately 55% of the Company's outstanding Common Stock after the
completion of this offering. Therefore, the present stockholders, and its
management, will own an 45% interest in the corporation and will ccntinue to be
able to elect all of the Company's directors, appoint its officers, and control
the Compary's affairs and operations. The Company's Articles of Incorporaticn do
not provide for cumulative voting. There are no arrangements, agreements or
understandings between non-management shareholders and management under which
20
<PAGE>
non-management shareholders may directly or indirectly participate in or
influence the management of the Company's affairs or to exercise their voting
rights to continue to elect the current directors. Non-management shareholders
will exercise their voting rights to continue to elect the current directors to
the Company's board. (See "Principal Stockholders", "Dilution" and "Description
of Securities").
24. Immdeiate Substantial Dilution. As of June 30, 1996 the net tangible
book value of the Company's Common Stock was approximately $nil per share,
substantially less than the $0.10 per share to be paid by the public investors.
In the event all the Shares are sold, public investors will sustain an immediate
dilution of approximately $.08 per share in the book value of public investors'
holdings. (See "Dilution.")
25. Purchase of Shares. The Company's officers, directors, current
shareholders and any of their affiliates or associates may purchase a portion of
the Shares offered in this offering. The aggregate number of Shares which may be
purchased by such persons shall not exceed 20% of the number of Shares sold in
this offering. Such purchases may be made in order to close the "all or nothing"
offering. Shares purchased by the Company's officers, directors and principal
shareholders will be acquired for investment purposes and not with a view
towards distribution.
26. State Law Violations. The Company will use its best efforts to ensure
that sales of Shares will only occur in those states in which such sales would
not be a violation of any of said states laws. The Company will notify the
Transfer Agent to aid in such compliance. The Company's securities may be sold
in New York State and the State of Nebraska only, and may be resold by investors
in New York and the State of Nebraska only.
27. Business Combination Through A Leveraged Transaction. The Company is
not prohibited from consummating a Business Combination through a leveraged
transaction. However, investors should be aware that such a transaction could
result in the Company's assets being mortgaged and possibly foreclosed. The use
of leverage to consummate a Business Combination may reduce the ability of the
Company to incur additional debt, make other acquisitions or declare dividends.
Such leverage may also subject the Company's operations to strict financial
controls and significant interest expense.
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28. Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from such rules the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. If the Company's Common Stock becomes subject to the Penny Stock
rules, investors in this offering may find it more difficult to sell their
shares.
22
<PAGE>
DILUTLON
The net tangible book value of the Company as of June 30, 1996 was $191. Net
tangible book value is the net tangible assets of the Company (total assets less
total liabilities and intangible assets) (See "Financial Statements.") As of
June 30, 1996 there were 450,000 shares of the Company's Common Stock
outstanding. (See "Certain Transactions").
Dilution represents the difference between the public offering price and the net
tangible book value per share immediately after the completion of the public
offering. The following table illustrates this dilution:
Public offering price per share $0.10
Net tangible book value per share before offering $0.00
Increase per share attributable to shares offered hereby $0.02
Net tangible book value per share after offering $0.02
-----
Dilution to public investors $0.08
Number of shares before offering 450,000
Money received for shares before offering $ 450,000
Net tangible book value per share before offering $ 0.00
- --------------------------------------------------------------------------------
Total Number of shares after offering 1,000,000
Total Mount of money received for shares $ 55,000
Net tangible book value per share afer offering $ 0.02
- --------------------------------------------------------------------------------
Net tangible book value per share after offering $ 0.01
Net tangible book value shares before offering $ 0.00
Increased per share attributed to shars offered hereby $ 0.02
- --------------------------------------------------------------------------------
Public offering price per share $ 0.10
Net tangible book value per share after offering $ 0.02
Dilution to Public Investors $ 0.08
- --------------------------------------------------------------------------------
23
<PAGE>
As of the date of this prospectus, the following table sets forth the percentage
of equity to be purchased by public investors in this offering compared to the
percentage of equity to be owned by the present stockholders, and the
comparative amounts paid for the shares by the public investors as compared to
the total consideration paid by the present stockholders of the Company. (See
"Certain Transactions" and footnotes to "Financial Statements.")
<TABLE>
<CAPTION>
Aprox. percent Approx.
Public Shares total shares Total percent total
Stockholders purchased outstanding (1) consideration consideration
- ------------ --------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
New Investors 550,000 55% $ 55,000 99.19%
Existing
shareholders(1) 450,000 45% $450,000 .81%
</TABLE>
(1) 450,000 Shares of Common Stock were sold prior to this offering at $.001per
Share. These Shares are being registered. (See "Certain Transactions")
24
<PAGE>
USE OF PROCEEDS
---------------
The gross proceeds of this offering will be $55,000. Pursuant to Rule
15c2-4 under the Securities Exchange Act of 1934 (the "Exchange Act"), all of
these proceeds must be held in escrow until all of the Shares are sold. Pursuant
to Rule 419 under the Securities Act, after all of the Shares are sold, 10% of
the Deposited Funds ($5,500) may be released from escrow to the Company. The
Company intends to request release of this 10%. In the event that the Company
does not request release of these funds, the Company will receive these funds in
the event a Business Combination is consummated in accordance with Rule 419.
Upon the consummation of a Business Combination and the reconfirmation thereof,
which reconfirmation offering must precede such consummation, pursuant to Rule
419, $55,000 (plus any interest or dividends received, but less any portion
disbursed to the Company pursuant to Rule 419 (b) (2) (C) (vi) and any amount
returned to investors who did not reconfirm their investment pursuant to Rule
419) will be released to the Company.
Approximate
Approximate amount percentage total
------------------ ----------------
Escrowed funds pending
Business Combination (1)(2)
$49,500 90%
(1) Does not include the estimated $35,000 of pre paid offering expenses which
were paid by an officer, Director and shareholder of the Company. The expenses
of the offering will be paid from proceeds of a successful Business Combination.
The proceeds from this offering will not be used to pay any part of the debt
from the pre paid expenses.
(2) The Company expects to request release of 10% of the Deposited Funds
($5,500) pursuant to Rule 419.
While the Company presently anticipates that it will be able to locate and
consummate a Business Combination, which adheres to the criteria discussed under
"Investors' Rights and Substantive Protection Under Rule 419", if the Company
25
<PAGE>
determines that a Business Combination requires additional funds, it may seek
such additional financing through loans, issuance of additional securities or
through other financing arrangements. No such financial arrangements presently
exist, and no assurances can be given that such additional financing will be
available or, if available, whether such additional financing will be on terms
acceptable to the Company. Persons purchasing Shares in this offering will not,
unless required by law, participate in the determination of whether to obtain
additional financing or as to the terms of such financing. Because of the
Company's limited resources, it is likely that the Company will become involved
in only one Business Combination.
The Company will not pay to any present officer, director, their affiliate
or associate any portion of the proceeds from this offering (nor will it issue
any securities), as payment of any expenses, labor or services, commissions,
solicitation fees or finders' fees, consultants fee or as payment of any kind
(except as noted herein) in connection with the finding of a Business
Combination or for the sale of any Shares offered herein. This includes the
proceeds available upon their release from escrow pursuant to Rule 419. This
policy is based upon a written agreement among management. Management is unaware
of any circumstances under which such policy through their own initiative may be
changed.
The Company does not intend to advertise or promote the Company. Instead,
the Company's management will, actively search for potential Target Businesses.
In the event management decides to advertise (in the form of an ad in a legal
publication) to attract a Target Busiress, the cost of such advertising will be
assumed by management.
Upon the consummation of a Business Combination, the company anticipates
that there will be a change in the Company's management, which management may
decide to change the policies as to the use of proceeds as stated herein. The
Company's present management anticipates that the Deposited Funds will be used
by the post-merger management at its sole discretion. No compensation will be
paid or due or owing to any officer or director until after a Business
Combination is consummated. Such policy is based upon written agreement among
management. Management is unaware of any circumstances under which such policy
through their own initiative may be changed. The Company is not presently
considering any outside individual for a consulting position; however, the
Company cannot rule out the need for outside consultants in the future. No
decisions have been made as to payment of these consultants.
26
<PAGE>
Present management of the Company will not make any loans from the $5,500
available from the Deposited Funds of this offering, nor will present management
borrow funds and use either the Company's working capital or Deposited Funds as
security for such. This policy is based upon a written agreement among
management. Management is unaware of any circumstances under which such policy
through their own initiative may be changed. Once the Deposited Funds are
released from escrow the then existing management may loan the proceeds or
borrow funds and use the proceeds as security for such loan, on terms it deems
appropriate.
The proceeds received in this offering will be put into the Escrow Account
pending consummation of a Business Combination and reconfirmation by investors.
Such Deposited Funds will be in an insured depository institution account in
either a certificate of deposit, interest bearing savings account or in short
term government securities as placed by American Securities Transfer Comapny.
27
<PAGE>
CAPITALIZATION
--------------
The following table sets forth the capitalization of the Ccmpany as of June 30,
1996 and as adjusted to give effect to the sale of 550,000 Shares offered by the
Company.
June 30 1996
Actual As adjusted
------ -----------
Long-term debt $ 0 $ 0
Stockholders' equity:
Common stock, $.001 par value;
authorized 50,000,000 shares,
issued and outstanding 450,000
shares at June 30, 1996 $ 450 $ 1,000
Additional paid-in capital (1) $ 0 $19,450
Deficit accumulated during
the development period $(259) $ (259)
Total stockholders equity $ 191 $20,191
Total capitalization $ 191 $20,191
(1) Net of $35,000 of costs incurred in connection with the proposed Offering of
Securities.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company is currently in the development stage and is in the process of
raising capital. All activity of the Company to date has been related to its
formation and proposed financing. The Company's ability to commence operations
is contingent upon obtaining adequate financial resources through this offering.
All of the Company's costs to date have been paid through a loan by one of the
Company's officers and directors. The Company will use the net proceeds of this
offering, together with the income and interest earned thereon, principally in
connection with effecting a Business Combination, including selecting and
evaluating potential Target Businesses and structuring and consummating a
Business Combination. The Company does not have discretionary access to the
income on the monies in the escrow account and stockholders of the Company will
not receive any distribution of the income (except in connection with a
liquidation of the Company) or have any ability to direct the use or
distribution of such income. Thus, such income will cause the amount in escrow
to increase. The Company cannot use the escrowed amounts to pay the costs of
evaluating potential Business Combinations and will use the proceeds from the
sale of the Common Stock to pay the costs of evaluating potential Business
Combinations, including investment banking fees and the costs of business, legal
and accounting due diligence on prospective Target Businesses. In addition, such
funds will be used for the general and administrative expenses of the Company,
including legal and accounting fees and administrative support expenses in
connection with the Company's reporting obligations to the Commission. The
Company does not anticipate such fees and administrative expenses will exceed
$2,500 per year. Following receipt of the net proceeds from the sale of the
Common Stock in this offering, the Company will have sufficient available funds,
assuming that a Business Combination is not consummated, to operate for at least
the next 12 months. To the extent that Common Stock is used as consideration to
effect a Business Combination, the balance of the net proceeds of this offering
not theretofore expended will be used to finance the operations of the Target
Business. No cash compensation will be paid to any officer or director until
after the consummation of the first Business Combination. Since the role of
present management after a Business Combination is uncertain, the Company has no
ability to determine what remuneration, if any, will be paid to such persons
after a Business Combination.
29
<PAGE>
The net proceeds from the sale of the Common Stock in this offering not
immediately required for the purposes set forth above will be invested in
general debt obligations of the United States Government or other high-quality,
short-term interest-bearing investments, provided, however, that the Company
will attempt not to invest such net proceeds in a manner which may result in the
Company being deemed to be an investment company under the Investment Company
Act. The Company believes that, in the event a Business Combination is not
effected in the time allowed and to the extent that a significant portion of the
net proceeds of this offering is not used in evaluating various prospective
Target Businesses, the interest income derived from investment of such net
proceeds during such period may be sufficient to defray continuing general and
administrative expenses, as well as costs relating to compliance with securities
laws and regulations (including associated professional fees).
In the event that the Company does not effect a Business Combination within 18
months from the date of this Prospectus, the Company will submit for stockholder
consideration a proposal to liquidate the Company and distribute to the then
holders of Common Stock acquired as part of the Common Stock sold in this
offering or in the open market thereafter, the amount held in the escrow
account. Thereafter, all remaining assets available for distribution will be
distributed to all holders of the Common Stock after payment of liabilities.
30
<PAGE>
PROPOSED BUSINESS
-----------------
History and Organization
- ------------------------
The Company was organized under the laws of the State of New York on June
12, 1996. Since inception, the primary activity of the Company has been directed
to organizational efforts and obtaining initial financing. The Company was
formed as a vehicle to pursue a Business Combination. The Company has not
engaged in any preliminary efforts intended to identify possible Business
Combination and has neither conducted negotiations concerning, nor entered into
a letter of intent concerning any such Target Business.
The Company's initial public offering will be comprised of 550,000 shares
of Common Stock at a purchase price of $0.10 per Share.
The Company is filing this registration statement in order to effect a
public offering for its securities. (See "Description of Securities.")
Plan of Operation
- -----------------
The Company was organized for the purposes of creating a corporate vehicle
to seek, investigate and, if such investigation warrants, engaging in Business
Combinations presented to it by persons or firms who or which desire to employ
the Company's funds in their business or to seek the perceived advantages of a
publicly-held corporation. The Company's principal business objective will be to
seek long-term growh potential in a Business Combination venture rather than to
seek immediate, short-term earnings. The Company will not restrict its search to
any specific business, industry or geographical location, and the Company,
therefore, may engage in a Business Combination.
The Company does not currently engage in any business activities which
provide any cash flow. The costs of identifying, investigating, and analyzing
Business Combinations will be paid with money in the Company's treasury. Persons
purchasing shares in this offering and other shareholders will most likely not
have the opportunity to participate in any of these decisions. The Company's
31
<PAGE>
proposed business is sometimes referred to as a 'blank check" company because
investors will entrust their investment monies to the Company's management
before they have a chance to analyze any ultimate use to which their money may
be put. Although substantially all of the Deposited Funds of this offering are
intended to be utilized generally to effect a Business Combination, such
proceeds are not otherwise being designated for any specific purposes. Pursuant
to Rule 419, prospective investors who invest in the Company will have an
opportunity to evaluate the specific merits, or risks of only the Business
Combination management decides to enter into. Cost overruns will be borne
equally by all current shareholders of the Company. Such cost overruns will not
be charged to the Company, but will be funded through current shareholders'
voluntary contribution of capital. This is based on an oral agreement between
current sharetolders and the Company.
The Company may seek a Business Combination in the form of firms which have
recently commenced operations, are developing companies in need of additional
funds for expansion into new prcducts or markets, are seeking to develop a new
product or service, or are established businesses which may be experiencing
financial or operating difficulties and are in need of additional capital. A
Business Combinaticn may involve the acquisition of, or merger with, a Company
which does not need substantial additional capital but which desires to
establish a public trading market for its shares, while avoiding what it may
deem to be adverse consequences of undertaking a public offering itself, such as
time delays significant expense, loss of voting control and compliance with
various Federal and State securities laws.
The Company will not acquire a Target Business unless the fair value of the
Target Business represents 80% of the maximum offering proceeds (the "Fair
Market Value Test.") To determine the fair market value of a Target Business,
the Company's management will examine the audited financial statements
(including balance sheets and statements of cash flow and stockholders' equity)
of any candidate, focusing attention on a potential Target Business's assets,
liabilities, sales and net worth. In addition, management of the Company will
participate in a personal inspection of any potential Target Business. If the
Company determires that the financial statements of a proposed Target Business
does not clearly indicate that the Fair Market Value Test has been satisfied,
the Company will obtain an opinion from an investment banking firm (which is a
member o National Association of Securities Dealers, Inc, (The "NASD") with
respect to the satisfaction of such criteria. (See "Investors' Rights and
Substantive Protection Under Rule 419.")
32
<PAGE>
Based upon management's experience with and knowledge of blank check
companies, the probable desire on the part of the owners of Target Businesses to
assume voting control over the Company (to avoid tax consequences or to have
complete authority to manage the business) will almost assure that the Company
will combine with just one Target Business. Management also anticipates that
upon consummation of a Business Conbination, there will be a change in control
in the Company which will most likely result in the resignation or removal of
the Compary's present officers and directors.
None of the Company's officers or directors have had any preliminary
contact or discussiors with any representative of any other entity regarding a
Business Combination. Accordingly, any Target Business that is elected may be a
financially unstable Company or an entity in its early stage of development or
growth (including entities without established records of sales or earnings),
the Company will become subjected to numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
companies. In addition, the Company may affect a Business Combination with an
entity in an industry characterized by a high level of risk, and although
management will endeavor to evaluate the risks inherent in a particular industry
or Target Business, there can be no assurance that the Company will properly
ascertain or asess all significant risks. (See "High Risk Factors.")
Management anticipates that it may be able to effect only one potential
Business Combination, due primarily to the Company's limited financing. This
lack of diversification should be considered a substantial risk in investing in
the Company because it will not permit the Company to offset potential losses
from one venture against gains from another.
The Company anticipates that the selection of a Business Combination will
be complex and extremely risky. Because of general economic conditions, repid
technological advances being made in some industries, and shortages of available
capital, management believes that there are numerous firms seeking even the
33
<PAGE>
limited additional capital which the Company will have and/or the benefits of a
publicly traded corporation. Such perceived benefits of a publicly traded
corporation may include facilitating or improving the terms on which additional
equity financing may be sought, providing liquidity for the principals of a
business, creating a means for providing incentive stock options or similar
benefits to key employees, providing liquidity (subject to restrictions of
applicable statutes), for all shareholders, and other factors. Potentially
available Business Combinations may occur in many different industries and at
various stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex.
Evaluation of Business Combinations
- -----------------------------------
The analysis of Business Combinations will be undertaken by or under the
supervision of the officers and directors of the Company, none of whom is a
professional business analyst. (See "Management.") Management intends to
concentrate on identifying preliminary prospective Business Combinations which
may be brought to its attention through present associations. In analyzing
prospective Business Combinations, management will consider such matters as the
available technical, financial, and managerial resources; working capital and
other financial requirements; history of operation, if any; prospects for the
future; nature of present and expected competition; the quality and experience
of management services which may be available and the depth of that management;
the potential for further research, development, or exploration; specific risk
factors not now foreseeable but which then may be anticipated to impact the
proposed activities of the Company; the potential for growth or expansion; the
potential for profit; the preceived public recognition or acceptance or
products, services, or trades; name identification; and other relevant factors.
Officers and directors of the Company will meet personally with management and
key personnel of the firm sponsoring the business opportunity as part of ther
investigation. To the extent possible, the Comapny intends to utilize written
reports and personal investigation to evaluate the above factors.
Since the Company will be subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, it will be required to furnish certain information about
significant acquisitions, including audited financial statements for the
34
<PAGE>
Comany(s) acquired, covering one, two or three years depending upon the relative
size of the acquisition. Consequently, acquisition prospects that do not have or
are unable to obtain the required audited statements may not be appropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable. In the event the Comapny's obligation to file periodic reports is
suspended under Section 15(d), the Company intends on voluntarily filing such
reports.
It may be anticipated that any Business Combination will present certain
risks. Many of these risks cannot be adequately identified prior to selection,
and investors herein must therefore, depend on the ability of management to
identify and evaluate such risks. In the case of some of the potential
combinations available to the Company, it may be anticipated that the promoters
thereof have been unable to develop a going concern or that such business is in
the development stage in that it has not generated significant revenue from its
principal business activity prior to the Company's merger or acquisition, and
there is a risk, even after the consummation of such Business Combinations and
the related expenditure of the Comapny's funds, that the combined enterprises
will still be unable to become a going concern or advance beyond the development
stage. Many of the Combinations may involve new and untested products,
processes, or market strategies which may not succeed. Such risks will be
assumed by the Company and, therefore, its shareholders.
Business Combinations
- ---------------------
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture, or licensing agreement with another corporation or entity. It may also
purchase stock or assets of an existing business.
Investors should note that any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's then-shareholders, including purchasers in this
offering. On the consummation of a Business Combination, the Target Business
will have significantly more assets than the Company; therefore, management
plans to offer a controlling interest in the Company to the Target Business.
While the actual terms of a transaction to which the Comapny may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it disirable to avoid the creation of a taxable event and
therby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the internal revenue code of 1986, as amended (the
"Code"). In order to obtain tax-free treatment under the Code, it may be
necessary for the owners of the acquired business to own 80% or more of the
voting stock of the surviving entity. In such event, the shareholders of the
Company including investors in this offering, would retain less than 20% of the
issued and outstanding shares of the surviving entity, which would be likely to
result in significant dilution in the equity of such shareholders. Management of
the Company may choose to avail the Company of these provisions. Investors in
this offering will retain 55%% of the 20%, of the combined entity after a
tax-free reorganization. In addition, a majority of all of the Comany's
directors and officers may, as part of the terms of the acquisition transaction,
resign as directors and officers. (See "High Risk Factors" and "Dilution.")
Management will not actively negotiate or otherwise consent to the purchase
of any portion of their Common Stock as a condition to or in connection with a
proposed Business Combination unless such a purchase is requested by a Target
Company as a condition to a merger or acquisition. The officers and directors of
the Company who own Common Stock have agreed to comply with this provision which
is based on a written agreement among management. Management is unaware of any
circumstances under which such policy through their own initiative may be
changed. (See "Management").
It is anticipated that any securities issued in any such reorganization
would be issued in reliance on exemptions from registration under applicable
federal and state securities laws. In some circumstatces, however, as a
negotiated element of this transaction, the Company may agree to register such
securities either at the time the transaction is consummated, under certain
conditions, or at specified times thereafter. The issuance of substantial
additional securities and their potential sale into any trading market which may
develop in the Company's Common Stock may have a depressive effect on such
market.
35
<PAGE>
As a part of the Company's investigation, officers and directors of the
Company will meet personally with management and key personnel, visit and
inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel
and take other reasonable investagative measures, to the extent of the Company's
limited financial resources and management expertise.
The mechanics of the Business Combination will depend on the nature of the
Target Business, the respective needs and desires of the Company and other
parties, the management of the Target Business opportunity, and the relative
negotiating strength of the Company and such other management.
If at any time prior to the completion of this offering the Company enters
negotiations with a possible merger candidate and such a transaction becomes
probable, then this offering will be suspended so that an amendment can be filed
which will include financial statements (including balance steets and statements
of cash flow and stockholders' equity) of the proposed target.
The Company will not purchase the assets of any company which is
beneficially owned by any officer, director, promoter or affiliate or associate
of the Company. Furthermore, the Company intends to adopt a procedure whereby a
special meeting of the Company's shareholders will be called to vote upon a
Business Combination with an affiliated entity, and shareholders who also hold
securities of such affiliated entity will be required to vote their shares of
the Company's stock in the same proportion as the Company's publicly held shares
are voted. The Company's officers and directors have not approached and have not
been approached by any person or entity with regard to any proposed business
ventures with respect to the Company. The Company will evaluate all possible
Business Combinations brought to it. If at any time a Business Combination is
brought to the Company by any of the Company's promoters, management, or their
affiliates or associates, disclosure as to this fact will be included in the
post-effective amendment, thereby allowing the public investors the opportunity
to fully evaluate the Business Combination.
The Company has adopted a policy that it will not pay a finder's fee to any
member of management for locating a merger or acquisition candidate. No member
of management intends to or may seek and negotiate for the payment of finder's
36
<PAGE>
fees. In the event there is a finder's fee, it will be paid at the direction of
the successor management after a change in management control resulting from a
Business Combination. The Company's pclicy regarding finder's fees is based on a
written agreement among management. Management is unaware of any circumstances
under which such policy through their own initiative may be changed.
The Company will remain an insignificant entity among the firms which
engage in Business Combinations. There are many established venture capital and
financial concerns which have significantly greater financial and personnel
resources and technical expertise than the Company. In view of the Company's
combined limited financial resources and limited management availability, the
Company will continue to be at a significant competitive disadvantage compared
to the Company's competitors. Also, the Company will be competing with a large
number of other small, blank check public companies located throughout the
United States.
The Compary does not intend to advertise or promote the Company. Instead,
the Company's management will actively search for potential Target Businesses.
In the event management decides to advertise (in the form of an ad in a legal
publication) to attract a Target Business, the cost of such advertising will be
assumed by management.
Regulation
- ----------
The Investment Company Act defines an "Investment Company" as an issuer
which is or holds itself out as being engaged primarily in the business of
investing, reinvesting or trading of securities. While the Comapny does not
intend to engage in such activities, the Compnay could become subject to
regulations under the Investment Company Act in the event the Company obtains or
continues to hold a minority interest in a number of enterprises. The Company
could be expected to incur significant registration and compliance costs if
required to register under the Investment Company Act. Accordingly, management
will continue to review the Company's activities from time to time with a view
toward reducing the likelihood the Company could be classified as an "Investment
Company."
37
<PAGE>
Employees
- ---------
The Company has no employees. Each officer and director of the Company is
engaged in business activities outside of the Company, and the amount of time
they will devote to the Company's business will only be between five (5) and
twenty (20) hours per person per week. Upon completion of the public offering,
it is anticipated that the President and the other officers and directors of the
Company will devote the time necessary each month to the affairs of the Company
until a successful business opportunity has been acquired.
Facilities
- ----------
The Company is presently using the office of Michael A. Abboud at 142 West
Broadway, Council Bluffs, Iowa, an officer and director, at no cost as the
Company's office. Such arrangement is expected to continue after completion of
this offering only until a Business Combination is consummated, although there
is currently no such agreement between the Company and Mr. Abboud. The Company
at present owns no equipment, and does not intend to own any upon completion of
this offering.
38
<PAGE>
MANAGEMENT
----------
The officers and directors of the Company, and further information
concerning them are as follows:
Name (1) Age Position (2)
-------- --- ------------
Michael A. Abboud 62 President, Director
142 West Broadway
Council Bluffs, Iowa 51503
Todd Abboud 28 Treasurer, Director
6105 S. 151st Ave
Omaha, Nebraska 68137 (3)
Elizabeth Kish 53 Secretary, Director
3110 S. 122nd Ave
Omaha, Nebraska 68144
(1) May be deemed "Promoters" of the Company, as that term is defined under the
Securities Act of 1933.
(2) All members of management have served in their respective positions since
the Company was organized.
(3) Mr. Todd Abboud is Mr Michael Abboud's cousin.
BIOGRAPHY
- ---------
Michael A. Abboud, 62, is President and director of the Company. Mr Michael
Abboud attended the University of Nebraska-Omaha from 1957 to 1960 and the
United States Army Depot Support School. From 1993 to the present, Mr. Abboud
owns and operates Broadway Enterprise with annual gross sales of over
$6,000,000. From 1979 to 1993, Mr Abboud owned and managed several
restaurant/lounge operations. From 1968 to 1979, Mr. Abboud owned and managed
Bell Janitorial and Commercial Janitorial which were companies supplying
cleaning services to office buildings. From 1962 to 1967, Mr. Abboud worked in
Real Estate sales.
Todd Abbould, 28, is Treasurer and director of the Company. July 1995 to
present, Mr Abboud is Vice President of Sales at M.D. Electronics. From 1988 to
39
<PAGE>
1995, Mr. Abboud was in the U.S. Army. He toured in Dersert Storm where he was
responsible for a 112 man team. From 87 to 88, Mr. Abboud was V.P. Sales and
Marketing for Interceptor, Inc.
Elizabeth Kish, 53, is Secretary and a director of the Company. Ms. Kish has a
B.A. Degree and M.S. Degree. From 1988 to the present, Ms. Kish is a Secondary
School Administrator for Marian High School in Omaha, Nebraska. From 1977 to
1988, Ms. Kish was a Teacher and Administrator for Christ the King Elementary
School, in Omaha, nebraska. From 1969 to 1970, Ms. Kish was a Teacher at St.
John's Junior High School in Detroit, Michigan. From 1965 to 1969, Ms. Kish was
a Teacher at St Pius X Elementary School, in Omaha, Nebraska.
Other Blank Check Companies
- ---------------------------
Competing searches for combination candidates among blank check affiliates
may present conflicts of interest. Management intends to present each Business
Combination candidate to the shareholders for their approval. There are
currrently no other blank check affiliates seeking combination candidates. The
Company's offering and other contemplated offerings (if any) by other blank
check companies do not constitute a single plan of financing.
Prior Blank Check Offerings
- ---------------------------
None of the Company's officers, directors, promoters or other persons
engaged in management type activities has been previously involved with any
blank check or blind pool offering.
Conflicts of Interest
- ---------------------
No member of management is currently affiliated or associated with any
blank check company. Management does not intend to promote blank check entities
other than the Company. However, managenent may become involved with other blank
check companies in the future. A potential conflict of interest may occur in the
event of such involvement. (See "HIGH RISK FACTORS-Conflicts of Interest.")
Management intends to present each Business Combination candidate to the
shareholders for their approval.
40
<PAGE>
Remuneration
- ------------
No officer or director of the Company has received any cash remuneration
since the Company's inception, and none is to receive or accrue any remuneration
or reimbursements of expenses from the Company upon completion of this offering.
No remuneration of any nature has been paid for or on account of services
rendered by a director in such capacity. None of the officers and directors
intends to devote more than 20 hours a month of his time to the Company's
affairs.
The legal fee to be paid to Gerald A. Adler, counsel for the corporation,
is Twenty-four thousand dollars ($24,000), $7,000 of which has been paid to Mr.
Adler prior to this offering.
41
<PAGE>
Management Involvement
- ----------------------
All of management has been involved in the Company's affairs. The Company
has conducted no business as of yet, and aside from the search for shareholders
associated with the Company's formation, management has done no work with or for
the Company. All of management will speak to business associates and
acquaintances and will search the New York Times, the Wall Street Journal and
other business publications for Target Businesses. After the closing of this
offering, all of management intends to search for, consider and negotiate with a
Target Business. Management has not divided these duties among its members. No
member of management has any distinct influence over the others in connection
with their participation in the Company's affairs.
Management Control
- ------------------
Management may not divest themselves of ownership and control of the
Company prior to the consummation of an acquisition or merger transaction. This
policy is based on an unwritten agreement among management. Management is not
aware of any circumstances under which such policy through their own initiative,
may be changed.
STATEMENT AS TO INDEMNIFICATION
-------------------------------
Sections 721 through 726 of the New York Business Corporation Law for
Domestic and Foreign Corporations provides for indemnification of the officers,
directors, employees and agents of registrants by the Company. Pursuant to this
section, the Company may indemnify any director, officer, employee or agent of
the Company who has been made a party to an action, suit or proceeding by reason
of the fact that such person is or was an officer, director or employee or agent
of the Company, against expenses, judgements, fines and amounts paid in
settlement actually and reasonably incurred in such action, suit or proceeding.
The general effect of Sections 721 through 726 of the New York Business
Corporation Law for Domestic and Foreign Corporations is to indemnify officers,
directors, employees and agents of a company who are acting on behalf of or for
that company, against costs incurred in suits or actions brought against such
42
<PAGE>
persons as a result of his/her relation to the Company and/or his/her actions on
behalf of the company. Complete disclosure of this statute is provided in Part
II hereof. This information can be examined as described in "Further
Information," herein.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against the public policy as expressed in the Securities Act and is therefore,
unenforceable.
MARKET FOR THE COMPANY'S COMMON STOCK
-------------------------------------
Prior to the date hereof, there has been no trading market for the
Company's Common Stock. Pursuant to the requirements of Rule 15g-8 of the
Exchange Act, a trading market will not develop prior to or after the
effectiveness of this prospectus or while the Common Stock under this offering
is maintained in escrow. The Common Stock under this offering will remain in
escrow until the Company's consummation of a Business Combination pursuant to
the requirements of Rule 419. There are currently three (3) holders of the
Company's outstanding Common Stock. Current shareholders will, own approximately
45% of the outstanding shares upon completion of the offering and, as a result,
there is no likelihood of an active public trading market, as that term is
commonly understood, developing for the shares. There can be no assurance that a
trading market will develop upon the consummation of a Business Combination and
the subsequent release of the Common Stock and other escrowed shares from
escrow. To date, neither the Company nor anyone acting on its behalf has taken
any affirmative steps to retain or encourage any broker dealer to act as a
market maker for the Company's Common Stock. Further, there have been no
discussions or understandings, preliminary or otherwise between the Company or
anyone acting on its behalf and any market maker regarding the participation of
any such market maker in the future trading market, if any, for the Company's
Common Stock. (See "HIGH RISK FACTORS-No Assurance of a Public Market" and "HIGH
RISK FACTORS-Control by Present Management and Shareholders.")
43
<PAGE>
Present management does not anticipate that any such negotiations,
discussions or understandings shall take place prior to the execution of an
acquisition agreement. Management expects that discussions in this area will
ultimately be initiated by the party or parties controlling the entity or assets
which the Company may acquire. Such party or parties may employ consultants or
advisors to obtain such market maker but present management of the Company has
no intention of doing so at the present time.
There are no outstanding options or warrants to purchase, or securities
convertible into, common equity of the Company. The 450,000 shares of the
Company's Common Stock currently outstanding are "restricted securities" as that
term is defined in the Securities Act of 1933. Pursuant, to Rule 144 of the
Securities Act, if all the Shares being offered hereto are sold, the holders of
the restricted securites may each sell shares during any three (3) month period
after July 12, 1998. Such sales may not exceed the greater of (i) one percent of
the outstanding securities of the same class or (ii) the average weekly trading
volume in such securities for a specified four-week period if the securities are
traded on a national securities exchange or are traded through the National
Association of Securities Dealers automated quotations system. The Company is
offering 550,000 shares of its Common Stock at $0.10 per Share. Dilution to the
public investors after the public offering shall be $0.08 per share. (see
"DILUTION.")
Gerald Adler's legal fees will total $24,000, $7,000 of which has been paid
by the Company for legal services rendered. The $7,000 paid to Mr. Adler is part
of a loan to the Company from one of its officers, directors and shareholder.
CERTAIN TRANSACTION
-------------------
The Company was incorporated in the State of New York on June 12, 1996. On
June 17, 1996 the Company issued 450,000 shares to three (3) shareholders at
$.001 per share, for a total of $450.00. The current breakdown of share
ownership by shareholder may be found in the section on Principal Stockholders.
44
<PAGE>
PRINCIPAL STOCKHOLDERS
----------------------
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date of this prospectus, and
as adjusted to reflect the sale of the shares offered hereby, by (i) each person
who is known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock; (ii) each of the Company's officers and directors; and
(iii) all directors and officers of the Company as a group.
<TABLE>
<CAPTION>
Name/Address Shares of Common Percent of Class Percent of Class
Beneficial Stock Beneficially Owned Before Owned Before
Owner(1) Owned Offering Offering
-------- ------------------- ---------------- -----------------
<S> <C> <C> <C>
Michael A.Abboud (2) 350,000 77.78% 35%
142 West Broadway
Council Bluffs, Iowa 51503
Todd Abboud (2) 50,000 11.11% 5%
6105 S. 151st Av
Omaha, Nebraska 68137
Elizabeth Kish (2) 50,000 11.11% 5%
3110 S. 122nd Ave
Omaha, Nebraska 68144
Total Officers and 450,000 100% 45%
Directors (3 persons)
Total 100% 45%
</TABLE>
(1) May be deemed "Promoters" of the Company, as that term is defined under
the Securities Act of 1933.
(2) Elizabeth Kish is Secretary and a director of the Company, Mr. Michael
A. Abboud is President and a director of the Company and Mr. Todd Abboud is
Treasurer and a director of the Company.
45
<PAGE>
None of the current shareholders have received or will receive any extra or
special benefits that were not shared equally (pro-rata) by all holders of
shares of the Company's stock.
DESCRIPTION OF SECURITIES
-------------------------
Common Stock
- ------------
The Company is authorized to issue fifty million (50,000,000) shares of
Common Stock, $.001 par value per share, of which 450,000 shares were issued and
outstanding as of the date of this prospectus. Each outstanding share of Common
Stock is entitled to one vote, either in person or by proxy, on all matters that
may be voted upon by the owners thereof a meetings of the stockholders.
The holders of Common Stock (i) have equal ratable rights to dividends from
funds legally available therefor, when, as and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redenption or sinking
fund provisions applicable thereto; and (iv) are entitled to one non-cumulative
vote per share on all matters on which stockholders may vote at all meetings of
stockholders.
All shares of Commmon Stock which are the subject of this offering, when
issued, will be fully paid for and non-assessable, with no personal liability
attachirg to the ownership thereof. The holders of shares of Common Stock of the
Company do not have cumulative voting rights, which means that the holders of
more than 50% of such outstanding shares voting for the election of directors
can elect all of the directors of the Company if they so choose and, in such
event, the holders of the remaining shares will not be able to elect any of the
Company's directors. At the completion of this offering, the present officers
and directors and present shareholders will beneficially own % of the then
outstanding shares. Accordingly, after completion of this offering, the present
shareholders of the Company will be in a position to control all of the affairs
of the Company.
46
<PAGE>
Preferred Stock
- ---------------
The Company is authorized to issue ten million (10,000,000) shares of
Preferred Stock, $.001 par value per share, of which no shares have been issued
and outstanding or subscribed for as of the date hereof.
In general, any of the Company's Preferred Stock may be issued in series
from time to time with such designation, rights, preferences and limitations as
the Board of Directors of the Company may determine by resolution. The rights,
preferences and limitations of separate series of Preferred Stock may differ
with respect to such matters as may be determined by the Board of Directors,
including without limitation, the rate of dividends, method and nature of
payment of dividends, terms of redemption, amounts payable on liquidation,
sinking fund provisions (if any), conversion rights (if any), and voting rights.
The potential exists therefore, that additional preferred stock might be issued
which would grant additional dividend preferences and liquidation preferences to
preferred shareholders. As of the date of this Prospectus, no shares of the
Preferred Stock have been issued. Unless the nature of a particular transaction
and applicable statutes require such approval, the Board of Directors has the
authority to issue these shares without shareholder approval. The issuance of
Preferred Stock may have the effect of delaying or preventing change in control
of the Company without any further action by shareholders.
Future Financing
- ----------------
In the event the proceeds of this offering are not sufficient to enable the
Company to successfully find a Business Combination the Company may seek
additional financing. At this time the Company believes that the proceeds of
this offering will be sufficient for such purpose and therefore does not expect
to issue any additional securities before the consummation of a Business
Combination. However, the Company may issue additional securities, incur debt or
procure other types of financing if needed. The Company has not entered into any
agreements, plans or propasals for such financing and as of the present has no
plans to do so. The company will not use the Deposited Funds as collateral or
security for any loan or debt incurred. Further, the Deposited Funds will not be
used to pay back any loan or debts incurred by the Company. If the Company does
require additional financing, there is no quarantee that such financing will be
available to the Company or if available that such financing will be on terms
acceptable to the Company. (See "Use of Proceeds.")
47
<PAGE>
Reports to Stockholders
- -----------------------
The Company intends to furnish its stockholders with annual reports
containing audited financial statements as soon as practicable at the end of
each fiscal year. The Company's fiscal year ends on December 31st.
Dividends
- ---------
The Company was only recently organized, has no earnings, and has paid no
divldends to date. Since the Company was formed as a blank check company with
its only intended business being the search for an appropriate Business
Combination, the Company does not anticipate having any earnings until such time
that a Business Combination is reconfirmed by the stockholders. However, there
are no assurances that upon the consummation of a Business Combination, the
Company will have earnings or issue dividends. Therefore, it is not expected
that cash dividends will be paid to stockholders until after a Business
Combination is reconfirmed.
Transfer Agent
- --------------
The Company has appointed American Securities Transfer Company as the
Transfer Agent for the Company.
PLAN OF DISTRIBUTION
--------------------
The Company hereby offers the right to subscribe for 550,000 Shares at
$0.10 per Share.
The Company proposes to offer the Shares directly to the public on a "best
efforts, all or none basis", and no compensation is to be paid to any person in
connection with the offer and sale of the Shares.
48
<PAGE>
The Company's officers and directors shall distribute prospectuses related
to this Offering. The Company estimates approximately 100 to 200 prospectuses
shall be distributed in such a manner. Management intends to distribute
prospectus to acquaintances, friends and business associates.
The offering shall be conducted by the Company's management. Although the
Company's officers and directors are "associated persons" of the Compnay as that
term is defined in Rule 3a4-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), they are deemed not to be brokers for the
following reasons: (1) the officers and directors are not subject to a statutory
disqualifications as that term is defined in Section 3(a)(39) of the Exchange
Act at the time of his/her participation in the sale of the Company's
securities; (2) they will not be compensated in connection with their
participation in the sale of the Company's securities by the payment of
commission or other remuneration based either directly or indirectly on
transactions in securities; (3) none of them are an associated person of a
broker or dealers at the time of his/her participation in the sale of the
Company's securities; and (4) each associated person shall restrict his/her
participation to the following activities:
(a) preparing any written communication or delivering such
communication through the mails or other means that does not involve oral
solicitation by the associated person of a potential purchaser;
(b) responding to inquiries of a potential purchasers in a
communication initiated by the purchasers, provided, however, that the content
of such responses are limited to information contained in a Registration
Statement filed under the Securities Act of 1933, as amended or other offering
document; or
(c) performing ministerial and clerical work involved in effecting any
transaction.
As of the date of this Prospectus, no broker has been retained by the
Company in connection with the sale of securities being offered hereby. In the
event a broker who may be deemed an Underwriter is retained by the Company, an
amendment to the Company's Registration Statement will be filed with the
Securities and Exchange Commission.
49
<PAGE>
Neither the Company nor anyone acting on its behalf including the Company's
shareholders, officers, directors, promoters, affiliates or associates will
approach a market maker or take any steps to request or encourage a market in
these securities either prior or subsequent to an acquisition of any business
opportunity. There have been no preliminary discussions or understandings
between the Company (or anyone acting on its behalf) and any market maker
regarding the participation of any such market maker in the future trading
market (if any) for the Company's securities, nor does the Company have any
plans to engage in such discussions. The Company does not intend to use
consultants to obtain market makers. No member of management, promoter or anyone
acting at their direction will recommend, encourage or advise investors to open
brokerage accounts with any broker-dealer that is obtained to make a market
subsequent to the acquisition of any business opportunity. The Company's
investors shall make their own decisions regarding whether to hold or sell their
Shares. The Company shall not exercise any influence over investors decisions.
Method of Subscribing
- ---------------------
Persons may subscribe by filling in and signing the subscription agreement
and delivering it prior to the expiration date (as defined below), to the
Company. The subscription price of $0.10 per Share must be paid in cash or by
check, bank draft or postal express money order payable in United States dollars
to the order of the Company. This offering is being made on a "best efforts, all
or none basis." Thus, unless all 550,000 shares are sold, none will be sold.
The Company's officers, directors, current shareholders and any of their
affiliates or associates may purchase a portion of the Shares offered in this
offering. The aggregate number of Shares which may be purchased by such persons
shall not exceed 20% of the number of Shares sold in this offering. Such
purchases may be made in order to close the "all or nothing" offering. Shares
purchased by the Company's officers, directors and principal shareholders will
be acquired for investment purposes and not with a view towards distribution.
50
<PAGE>
EXPIRATION DATE
---------------
This offering will expire 90 days from the date of this prospectus, (or 18O
days from the date of this prospectus if extended by the Company).
LITIGATION
----------
The Company is not presently a party to any litigation, nor to the
knowledge of management is any litigation threatened against the Company which
may materially affect the Company.
LEGAL MATTERS
-------------
The legality of the securities being registered by this registration
Statemnet is being passed upon by Loselle Greenawalt Kaplan Blair and Adler.
EXPERTS
-------
The financial statements included in this prospectus have been examined by
Rotenberg & Company, LLP, an independent certified public accountanting firm, as
stated in their opinion given upon the authority of that firm as an expert in
accounting and auditing.
FURTHER INFORMATION
-------------------
The Company has filed with the Securities and Exchange Commission (the
"Commission") , a Registration Statement on Form SB-2 with respect to the
securities offered by this prospectus. This prospectus omits certain
informatinon contained in the Registration Statement as permitted by the Rules
and Regulations of the Commission. Reports and other information filed by the
Company may be inspected and copied at the public reference facilities of the
Commission in Washington, D.C. and at the Northeast Regional office of the
Commission at 7 World Trade Center, 13th Floor, New York, New York. Copies of
such material can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at a prescribed rate. Statements contained in
this prospectus as to the contents of any contract or other documents referred
to are not complete and where such contract or other document is an Exhibit to
the Registration Statement, each such statement is deemed qualified and
amplified in all respects by the provisions of the exhibit.
51
<PAGE>
PACIFIC BASIN DEVELOPMENT CORP.
(A NEW YORK CORPORATION)
COUNCIL BLUFFS, IOWA
FINANCIAL REPORTS
AT
JUNE 30, 1996
<PAGE>
PACIFIC BASIN DEVELOPMENT CORP.
(A New York Corporation)
Council Bluffs, Iowa
TABLE OF CONTENTS
-----------------
Independent Auditor's Report 1
Balance Sheet at June 30, 1996 2
Statement of Changes in Stockholders' Equity for the Period
June 12, 1996 (Date of Inception) to June 30, 1996 3
Statement of Income for the Period June 12, 1996 (Date of Inception)
to June 30, 1996 4
Statement of Cash Flows for the Period June 12, 1996 (Date of Inception)
to June 30, 1996 5
Notes to Financial Statements 6
<PAGE>
[GRAPHIC OF ACCOUNTANT'S LETTERHEAD LOGO OMITTED]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
and Stockholders
Pacific Basin Development Corp.
Council Bluffs, Iowa
We have audited the accompanying balance sheet of Pacific Basin Development
Corp. (A New York Corporation) as of June 30, 1996, and the related statements
of income, changes in stockholders' equity, and cash flows for the period June
12, 1996 (date of inception) to June 30, 1996. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pacific Basin Development
Corp. as of June 30, 1996 and the results of its operations and its cash flows
for the short period then ended, in conformity with generally accepted
accounting principles.
/S/ ROTENBERG & COMPANY, LLP
- -----------------------------
Rochester, New York
July 3, 1996
<PAGE>
PACIFIC BASIN DEVELOPMENT CORP.
(A New York Corporation)
Council Bluffs, Iowa
BALANCE SHEET AT JUNE 30, 1996
------------------------------
ASSETS
------
Cash and Cash Equivalents $ 450
Accounts Receivable ---
Marketable Securities ---
Inventory ---
Deferred Expenses 17,000
--------
Total Assets $ 17,450
========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities
- -----------
Promissory Note Payable - Stockholder $ 17,000
Accounts Payable ---
Accrued Expense 84
Customer Deposits and Advances ---
New York Franchise Taxes Payable and Accrued 175
--------
Total Liabilities $ 17,259
--------
Stockholders' Equity
Common Stock: $.001 Par; 50,000,000 Shares Authorized,
450,000 Shares Issued and Outstanding 450
Preferred Stock: $.001 Par; 10,000,000 Shares Authorized,
No Shares Issued and Outstanding ---
Additional Paid In Capital ---
Deficit Accumulated During Development Stage (259)
--------
Total Stockholders' Equity $ 191
--------
Total Liabilities and Stockholders' Equity $ 17,450
========
The accompanying notes are an integral part of this financial statement and
should be read in conjunction therewith.
-2-
<PAGE>
<TABLE>
<CAPTION>
PACIFIC BASIN DEVELOPMENT CORP.
(A New York Corporation)
Council Bluffs, Iowa
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD
JUNE 12, 1996 (DATE OF INCEPTION) TO JUNE 30, 1996
Deficit
Accumulated
Additional During
Number Par Common Paid In Development Stockholders'
of Shares Value Stock Capital Stage Equity
--------- ----- ----- ------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance - June 12, 1996 --- $ --- $ --- $ --- $ --- $ ---
Common Stock Issued on June 20, 1996 450,000 .001 450 --- --- 450
Net Loss for the Period
June 12, 1996 to June 30, 1996 --- --- --- --- (259) (259)
Balance - June 30, 1996 450,000 $ .001 $ 450 $ --- $ (259) $ 191
======= ====== ====== ====== ======= ======
The accompanying notes are an integral part of this financial statement and should be read in conjunction therewith.
-3-
</TABLE>
<PAGE>
PACIFIC BASIN DEVELOPMENT CORP.
(A New York Corporation)
Council Bluffs, Iowa
STATEMENT OF INCOME FOR THE PERIOD
JUNE 12, 1996 (DATE OF INCEPTION) TO JUNE 30, 1996
Revenues $ ---
Expenses
Interest Expense $ 84
New York State Franchise Tax 175
-------
Total Expenses $ 259
-------
Net Loss for the Period $ (259)
=======
The accompanying notes are an integral part of this financial statement and
should be read in conjunction therewith.
-4-
<PAGE>
PACIFIC BASIN DEVELOPMENT CORP.
(A New York Corporation)
Council Bluffs, Iowa
STATEMENT OF CASH FLOWS FOR THE PERIOD
JUNE 12, 1996 (DATE OF INCEPTION) TO JUNE 30, 1996
Cash Flows from Operating Activities
- ------------------------------------
Net Loss for the Period $ (259)
Non-Cash Adjustments:
Amortization ---
Changes in Operating Assets and Liabilities:
Accrued Expenses 84
Income Taxes Payable 175
----------
Net Cash Flows from Operating Activities $ ---
----------
Cash Flows from Investing Activities $ ---
- ------------------------------------ ----------
Cash Flows from Financing Activities
- ------------------------------------
Issuance of Common Stock $ 450
----------
Net Increase in Cash and Cash Equivalent $ 450
Cash and Cash Equivalents - Beginning of Period ---
----------
Cash and Cash Equivalents - End of Period $ 450
==========
NON-CASH INVESTING AND FINANCING ACTIVITIES
Organization Costs Incurred $ 17,000
=========
Note Payable - Stockholder $ (17,000)
=========
The accompanying notes are an integral part of this financial statement and
should be read in conjunction therewith.
-5-
<PAGE>
PACIFIC BASIN DEVELOPMENT CORP.
(A New York Corporation)
Council Bluffs, Iowa
NOTES TO FINANCIAL STATEMENTS
Note A - Summary of Significant Accounting Policies
- ---------------------------------------------------
Method of Accounting
--------------------
The corporation maintains its books and prepares its financial
statements on the accrual basis of accounting.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original maturities
of three months or less.
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 expense
during the reporting period. Actual results can differ from those
estimates.
Note B - Scope of Business
- --------------------------
The corporation was formed on June 12, 1996 under the laws of the
State of New York. The company was organized as a vehicle to acquire or
merge with an operating business or company. Management believes that
the company's characteristics as an enterprise with liquid assets,
nominal liabilities, and flexibility in structuring will make the
company an attractive combination candidate.
Since organization of the company, its activities have been limited to
the sale of initial shares in connection with its organization and its
preparation in producing a registration statement and prospectus for its
initial public offering.
Note C - Deferred Expenses
- --------------------------
Deferred charges represent management, consulting, legal, accounting,
and filing fees, incurred up to the balance sheet date in the formation
of the corporation.
Note D - New York State Franchise Taxes Payable and Accrued
- -----------------------------------------------------------
All corporations formed under New York State law, whether active or
inactive, are subject to annual minimum New York State franchise taxes
and filing fees. The corporation has provided for these costs for the
period June 12, 1996 to June 30, 1996.
Note E - Promissory Note Payable - Stockholder
- ----------------------------------------------
Promissory note bearing interest at 10% per annum, or the federal
funds rate, whichever is higher, principal and interest due and payable
in full by May 1, 1997.
-6-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers (State of New York Business
Corporation Law)
- --------------------------------------------------------------------------------
Section 721. Nonexclusivity of statutory provisions for indemnification of
directors and officers.
- --------------------------------------------------------------------------------
The indemnification and advancement of expenses granted pursuant to, or
provided by, this article shall not be deemed exclusive of any other rights to
which a director or officer seeking indemnification or advancement of expenses
may be entitled, whether contained in the certificate of incorporation or the
by-laws or, when authorized by such certificate of incorporation or by-laws (i)
a resolution of shareholders, (ii) a resolution of directors, or (iii) an
agreement providing for such indemnification, provided that no indemnification
may be made to or on behalf of any director or officer if a judgment or other
final adjudication adverse to the director or officer establishes that his acts
where committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated, or that he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled. Nothing contained in this article shall affect any rights
to indemnification to which corporate personnel other than directors and
officers may be entitled by contract or otherwise under law.
Section 722. Authorization for indemnification of directors and officers.
- -------------------------------------------------------------------------
(a) A corporation may indemnify and person made, or theratened to be made,
a party to an action or proceeding (other than one by or in the right of the
corporation to procure a judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
corportation, or served such other corporation, partnership, joint venture,
<PAGE>
trust, employee benefit plan or other enterprise in any capacity, against
judgements, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therin, if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful.
(b) The termination of any such civil or crimanal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which he reasonably believed
to be in, or in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the corporation or that he had reaonable
cause to believe that his conduct was unlawful.
(c) A corporation may indemnify any person made, or threatened to be made,
a party to an action by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he, his testator or intestate, is or was
a director or officer of the corporaton, or is or was serving at the request of
the corporation as a director or officer of any other corporation of any type or
kind, domestic or foreign, of any partnership, joint venture, trust, employee
benefit plan or other enterprise, against amounts paid in settlement and
reasonable expenses, including attorney's fees, actually and necessarily
incurred by him in connection wiht the defense or settlement of such action, or
in connection with an appeal therin, if such director or officer acted, in good
faith, for a purpose which he reasonably believed t be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the corporation, except that no indemnification under this paragraph shall be
made in respect of (1) a threatened action, or a pending action which is settled
or otherwise disposed of, or (2) any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation, unless and only
to the extent that the court in which the action was brought, or, if no action
was brought, any court of competent jurisdiction, dertermines upon application
that, in view of all the cricumstances of the case, the person is fairly and
reasonably entitled to indemnity for such portion of the settlement amount and
expenses as the court deems proper.
2
<PAGE>
(d) For the purpose of this section, a corporation shall be deemed to have
requested a person to serve an employee benefit plan where the performance by
such person of his duties to the corporation also imposes duties on, or
otherwise involves services by, such person to the plan or participants or
beneficiaries of the plan; excise taxes assessed on a person with respect to an
employee benefit plan pursuant to applicable law shall be considered fines; and
action taken or omitted by a person with respect to an employee benefit plan in
the performance of such person's duties for a purpose reasonable believed by
such person to be in the interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is not opposed to the best
interests of the corporation.
Section 723. Payment of indemnification other than by court award.
- ------------------------------------------------------------------
(a) A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in section 722 shall be entitled to indemnification as authorized in such
section.
(b) except as provided in paragraph (a), any indemnification under section
722 or otherwise permitted by section 721, unless ordered by a court under
section 724 (Indemnification of directors and officers by a court), shall be
made by the corporation, only if authorized in the specific case:
(1) By the board acting by a quorum consisting of directors who are not
parties to such action or proceeding upon a finding that the firector or officer
has met the standard of conduct set forth in section 722 or established pursuant
to section 721, as the case may be, or,
(2) If a quorum under subparagraph (1) is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs;
(A) By the board upon the opinion in writing of independent legal counsel
that indemnification is proper in the circumstances because the applicable
standard of conduct set forth in such sections has been met by such director or
officer, or,
(B) By the shareholders upon a finding that the director or officer has met
the applicable standard of conduct set forth in such sections.
(C) Expenses incurred in defending a civil or criminal action or proceeding
may be paid by the corporation in advance of the final disposition of such
action or proceeding upon receipt of an indertaking by or on behalf of such
director or officer to repay such amount as, and to the extent, required by
paragraph (a) of section 725.
3
<PAGE>
Section 724. Indemnification of directors and officers by a court.
- ------------ -----------------------------------------------------
(a) Not withstanding the failure of a corporation to provide
indemnification, and despite any contrary resolution of the board or of the
shareholders in the specific case under section 723 (Payment of indemnification
other than by court award), indemnification shall be awarded by a court to the
extent authorized under secton 722 (Authorization for indemnification of
directors and officers), and paragraph (a) of section 723. Applicaton therefor
may be made, in every case, either:
(1) In the civil action or proceeding in which the expenses were incurred
or other amounts were paid, or
(2) To the supreme court in a separate proceeding, in which case the
application shall set forth the disposition of any previous application made to
any court for the same or similar relief and also reasonable cause for the
failure to make application for such relief in the action or proceeding in which
the expenses werer incurred or other amounts were paid.
(b) The application shall be made in such manner and form as may be
required by the applicable rules of court or, in the absence thereof, by
directon of a court to which it is made. Such application shall be upon notice
to the corporation. The court may also direct that notice be given at the
expense of the corporation to the shareholders and such other persons as it may
designate in such manner as it may require.
(c) Where indemnification is sought by judicial action, the court may allow
a person such reasonable expenses, including attorney's fees, during the
pendency of the litigation as are necessary in connection with his defense
therein, if the court shall find that the defendant has by his pleadings or
during the course of the litigation raised genuine issues of fact or law.
Section 725. Other provisions affecting indemnification of directors and
officers.
- --------------------------------------------------------------------------------
(a) All expenses incurred in defending a civil or criminal action or
proceeding which are advanced by the corporation under paragraph (c) of section
4
<PAGE>
723 (payment of indemnification other than by court award) or allowed by a court
under paragraph (c) of section 724 (Indemnification of directors and officers by
a court) shall be repaid in case the person receiving such advancement or
allowance is ultimately found, under the procedure set forth in this article,
not to be entitled to indemnification or, where indemnification is granted, to
the extent the expenses so advanced by the corporation or allowed by the court
exceed the indeminification to which he is entitled.
(b) No indemnification, advancement or allowance shall be made under this
article in any circumstance where it appears:
(1) That the indemnification would be inconsistent with the law of the
jurisdiction of incorporation of a foreign corporation which prohibits or
otherwise limits such indemnification;
(2) That the indemnification would be inconsistent with a provision of the
certificate of incorporaton, a by-law, a resolution of the board or of the
shareholders, an agreement or other proper corporate action, in effect at the
time of the accrual of the alleged cause of action asserted in the threatened or
pending action or proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(3) If there has been a settlement approved by the court, that the
indemnification would be inconsistent with any condition with respect to
indemnification expressly imposed by the court in approving the settlement.
(c) If any expenses or other amounts are paid by way of indemnification,
otherwise than by court order of action by the shareholders, the corporation
shall, not later than the next annual meeting of shareholders unless such
meeting is held within three months from the date of such payment, and, in any
event, within fifteen months from the date of such payment, mail to its
shareholders of record at the time entitled to vote for the election of
directors a statement specifying the persons paid, the amounts paid, and the
nature and status at the time of such payment of the litigation or threatened
litigation.
(d) If any action with respect to indemnification of directors and officers
is taken by way of amendment of the by-laws, resolution of directors, or by
agreement, then the corporation shall, not later than the next annual meeting of
5
<PAGE>
shareholders, unless such meeting is held within three months from the date of
such action, and, in any event, within fifteen months from the date of such
action, mail to its shareholders of record at the time entitled to vote for the
election of directors a statement specifying the action taken.
(e) Any notification required to be made pursuant to the foregoing
paragraph (c) or (d) of this section by any domestic mutual insurer shall be
satisfied by compliance with the corresponding provisions of section one
thousand two hundred sixteen of the insurance law.
(f) The provisions of this article relating to indemnification of directors
and officers and insurance therefor shall apply to domestic corporations and
foreign corporations doing business in this state, except as provided in section
1320 (Exemption from certain provisions).
Section 726. Insurance for indemnification of directors and officers.
- ---------------------------------------------------------------------
(a) Subject to paragraph (b), a corporation shall have power to purchase
and maintain insurance:
(1) To indemnify the corporation for any obligation which it incurs as a
result of the indemnification of directors and officers under the provisions of
this article, and
(2) To indemnify directors and officers in instances in which they may be
indemnified by the corporation under the provisions of this article, and
(3) To indemnify directors and officers in instances in which they may not
otherwise be indemnified by the corporation under the provisions of this article
provided the contract of insurance covering such directors and officers
provides, in a manner acceptable to the superintendent of insurance, for a
retention amount and for co-insurance.
(b) No insurance under paragraph (a) may provide for any payment, other
than cost of defense, to or on behalf of any director or officer:
(1) if a judgment or other final adjudication adverse to the insured
director or officer establishes that his acts of active and deliberate
dishonesty were material to the cause of action so adjudicated, or that he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled, or
6
<PAGE>
(2) in relation to any risk the insurance of which is prohibited under the
insurance law of this state.
(c) Insurance under any or all subparagraphs of paragraph (a) may be
included in a single contract or supplement thereto. Retrospective rated
contracts are prohibited.
(d) The corporation shall, within the time and to the persons provided in
paragraph (c) of section 725 (Other provisions affecting indemnification of
directors or officers), mail a statement in respect of any insurance it has
purchased or renewed under this section, specifying the insurance carrier, date
of the contract, cost of the insurance, corporate positions insured, and a
statement explaining all sums, not previously reported in a statement to
shareholders, paid under any indemnification insurance contract.
(e) This section is the public policy of this state to spread the risk of
corporate management, notwithstanding any other general or special law of this
state or of any other jurisdiction including the federal government.
7
<PAGE>
Item 25. Expenses of Issuance and Distribution
-------------------------------------
The other expenses payable by the registrant in connection with the
issuance and distribution of the securities being registered are estimated as
follows:
Escrow Fee $ 1,500
Securities and Exchange Commission Registration Fee $ 100
Legal Fees $24,000
Accounting Fees $ 2,000
Printing and Engraving $ 2,000
Blue Sky Qualification Fees and Expenses $ 2,500
Miscellaneous $ 1,700
Transfer Agent Fee $ 1,200
-------
Total $35,000
<PAGE>
Item 26. Recent Sales of Unregistered Securities
----------------------------------------
The Company issued 450,000 shares of Common Stock on June 17,1996 to its
initial shtckholders for $450.00
Name/Address Consideration Shares of Common Stock
Beneficial Owner (1) Purchased (2) Price Paid
- -------------------------- ---------------------- ----------
Michael Abboud 350,000 $350,000
111605 Westwood Lane
Omaha, Nebraska 68144
Todd Abboud 50,000 $ 50,000
6106 S. 161st Ave
Omaha, Nebraska 68137
Elizabeth Kish 50,000 $ 50,000
3110 S. 122 Ave
Omaha, Nebraska 68144-6005
(1) May be deemed "Promoters" of the Company, as that term is defined under
the Securities Act of 1933.
(2) These Shares were sold under the exemption of Section 4(2) of the
Securities Act of 1933.
Neither the Company nor any person acting on its behalf offered or sold the
secruities by means of any form of general solicitation or general advertising.
Each purchaser represented in writing that he/she acquired the securities
for his own account. A legend was placed on the certificates stating that the
securities have not been registered under the Act and setting forth the
restrictions on their transferability and sale. Each purchaser signed a written
agreement that the securities will not be sold without registration under the
Act or exemption therefrom.
<PAGE>
EXHIBITS
Item 27
3.1 Certificate of Incorporation.
3.2 By-Laws.
4.1 Specimen Certificate of Common Stock.
4.6 Form of Escrow Agreement.
5.0 Opinion of Counsel.
24.0 Accountant's Consent to Use Opinion.
24.1 Counsel's Consent to Use Opinion.
99.0 Agreement Among Management.
<PAGE>
Item 28. UNDERTAKINGS
------------
The registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effictive amendmane to this registration statement:
(i) To include any prospectus required by section 10(a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
Effective Date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement, or any
material change to such information in the registration statement, including
(but not limited to) any addition or deletion of managing underwriter;
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be treated as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering therof.
(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.
(4) To deposit into the Escrow Account at the closing, certificates in such
denominations and registered in such names as required by the Company to permit
prompt delivery to each purchaser upon release of such securities from the
Escrow Account in accordance with Rule 419 of Regulation C under the Securities
Act. Pursuant to Rule 419, these certificates shall be deposited into an escrow
account, not to be released until a business combination is consummated.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
1
<PAGE>
registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
-This Space is Intentionally Left Blank-
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Council
Bluffs, State of Iowa on August 5, 1996.
(Registrant) Pacific Basin Development, Corp.
By: /S/ MICHAEL A. ABBOUD
- ----------------------------------
Michael A. Abboud, President/
Chief Financial Officer/Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
By: /S/ MICHAEL A. ABBOUD
- -----------------------------------
(Title) President/Chief Financial
Officer/Director
(Date) August 1, 1996
- ------------------------------------
By: /S/ TODD ABBOUD
- ------------------------------------
(Title) Treasurer/Director
(Date) August 1, 1996
- ------------------------------------
By: /S/ ELIZABETH KISH
- ------------------------------------
(Title) Secretary/Director
(Date) August 2, 1996
CERTIFICATE OF INCORPORATION
OF
PACIFIC BASIN DEVELOPMENT CORP.
Under Section of 402 of the Business Corporation Law
THE UNDERSIGNED, a natural person over the age of eighteen years, desiring to
form a corporation pursuant to Section 402 of the Business Corporation Law of
the State of New York, hereby certifies
FIRST: The name of the Corporation is:
PACIFIC BASIN DEVELOPMENT CORP.
SECOND: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized pursuant to the Business
Corporation Law of the State of New York. The corporation is not to engage in
any act or activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or approval first
being obtained.
For the accomplishment of the aforesaid purposes and in furtherance thereof, the
Corporation shall have, and may exercise, all of the powers conferred by the
Business Corporation Law upon corporations formed thereunder, subject to any
limitations contained in Article 2 of said law in accordance with the provisions
of any other statute of the State of New York.
THIRD: The aggregate number of shares which this Corporation shall have the
authority to issue is Sixty Million (60,000,000) shares, as follows:
a. Common Stock. Of the total authorized capital stock the Corporation shall
have the authority to issue Fifty Million (50,000,000) shares of a par value of
one tenth ($.001) cent each, which shares shall be designated "Common Stock".
b. Preferred Stock. Of the total authorized capital stock the Corporation shall
have the authority to issue Ten Million (10,000,000) shares of a par value of
one tenth ($.001) cent each, which shares shall be designated "Preferred Stock".
A. Shares of Preferred Stock may be issued from time to time in one or more
series, each such series to have distinctive serial designations, as shall
hereafter be determined in the resolution or resolutions providing for the
issuance of such Preferred Stock from time to time adopted by the Board of
Directors pursuant by authority so to do which is hereby vested in the Board of
Directors, which resolutions shall be filed with the Secretary of State of the
State of New York as required by law.
1
<PAGE>
B. Each series of Preferred Stock
(i) may have such number of shares;
(ii) may have such voting powers, full or limited, or may be without voting
powers;
(iii) may be subject to redemption at such time or times and at such prices;
(iv) may be entitles to receive dividends (which may be cumulative or non
cumulative) at such rate or rates, on such conditions, from such date or dates,
and at such times, payable in preference to, or in such relation to the
dividends payable on any other class or classes or series of stock;
(v) may have such rights upon the dissolution of, or upon any distribution of
the assets of the corporation.;
(vi) may be convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or classes of
stock of the Corporation at such price or prices or at such rates of exchange,
and with such adjustments;
(vii) may be entitled to the benefit of a sinking fund or purchases fund to be
applied to the purchase or redemption of shares of such series in such amount or
amounts'
(viii) may be entitles to the benefit of conditions and restrictions upon the
creation of indebtedness of this Corporation or any subsidiary, upon the
issuance of any additional stock (including additional shares of such series),
and upon the payment of dividends or the redemption or other acquisition by this
Corporation or any subsidiary of any outstanding stock of this Corporation; and
(xi) may have such other relative, participating, optional or other rights,
qualifications, all as shall be stated in said resolution or resolutions,
providing for the issuance of such Preferred Stock. Except where otherwise set
forth in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of any series of Preferred stock, the number of
shares comprising such series may be increased or decreased (but not below the
number of shares then outstanding) from time to time by like action of the Board
of Directors.
C. Shares of any series of Preferred Stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by the
Corporation, or which, if convertible or exchangeable, have been converted into
or exchanged for shares of stock of any other class or classes shall have the
status of authorized and unissued shares of Preferred Stock and may be reissued
as a part of the series of which they were, subject to the conditions or
restriction on issuance set forth in the providing for the issuance of any
series of Preferred Stock and subject to any filing required by law.
2
<PAGE>
FOURTH: The principal office of the corporation is to be located in the County
of New York, State of New York.
FIFTH: The Secretary of State is designated as agent of the Corporation upon
whom process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the Corporation
served upon him is:
Loselle Greenawalt Kaplan Blair & Adler
140 East 45th Street
New York, New York 10017
SIXTH: The Corporation shall, to the fullest extent permitted by Article 7 of
the Business Corporation Law of the State of New York, as the same may be
amended and supplemented, indemnify said Article from and against any and all
expenses, liabilities, or other matters referred to in or covered by said
Article, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which any such person may be entitled under any
By-Law, resolution of shareholders, resolution of directors, agreement, or
otherwise, as permitted by said Article, as to action in any capacity in which
he served at the request of the corporation.
SEVENTH: The personal liability of the directors of the corporation is
eliminated to the fullest extent permitted by the provisions of paragraph (b) of
Section 402 of the Business Corporation Law of the State of New York, as the
same may be amended and supplemented.
EIGHTH: Any actions required or permitted to be taken at stockholders meetings
may be taken without prior notice and without a meeting where consent in writing
is given to the action taken by stockholders representing a majority of the
shares entitled to vote as if such proposed actions had been presented to a duly
convened stockholders meeting, providing however, that after such action is
taken, written notice of such action taken by use of such consent procedure must
be given in writing to those stockholders who have not furnished consents.
3
<PAGE>
IN WITNESS WHEREOF, this certificate has been subscribed this 12th day of May,
1996 by the undersigned who affirms that the statements made herein are true
under the penalties of perjury.
/S/ MICHAEL A. ABBOUD
- -------------------------------
Michael A. Abboud, Incorporator
142 West Broadway
Council Bluffs, IA 51503
BYLAWS
OF
PACIFIC BASIN DEVELOPMENT CORP.
ARTICLE I
---------
Offices
1. Business Offices. The principal office of the Corporation shall be
located at 142 W. Broadway, Council Bluffs, Iowa, and the Corporation may have
one or more offices at such place or places within or without the State of Iowa
as the Board of Directors may from time to time determine or as the business of
the Corporation may require.
2. Registered Office. The registered office of the Corporation shall be as
set forth in the Articles of Incorporation, unless changed as provided by the
New York Corporation Code.
ARTICLE II
----------
Stockholders' Meetings
1. Annual Meetings. The annual meetings of stockholders for the election of
directors to succeed those whose terms expire and for the transaction of such
other business as may come before the meeting shall be held within six (6)
months after the close of the fiscal year of the Corporation, for the purposes
of electing directors, and transacting such other business as may properly come
before the meeting.
2. Special Meetings. Special meetings of stockholders for any purpose or
purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called at any time by the President or by the Board of
Directors and shall be called by the President or Secretary upon the request
(which shall state the purpose or purposes therefor) of a majority of the Board
of Directors or of the holders of not less than ten per cent (10%) of the number
of shares of outstanding stock of the Corporation entitled to vote at the
meeting. Business transacted at any special meeting of stockholders shall be
limited to the purpose or purposes stated in the notice.
3. Place of Meetings. Meetings of stockholders shall be held at such place
or places as may be designated from time to time by the Board of Directors.
<PAGE>
4. Notice of Meetings. Except as otherwise provided by statute, notice of
each meeting of stockholders, whether annual or special, shall be given not less
than ten (10) nor more than sixty (60) days prior thereto to each shareholder
entitled to vote there at by delivering written or printed notice thereof to
such shareholder personally or by depositing the same in the United States mail,
postage prepaid, directed to the shareholder at his address as it appears on the
stock transfer books of the Corporation; provided, however, that if the
authorized shares of the Corporation are proposed to be increased, at least
thirty (30) days notice in like manner shall be given. The notice of all
meetings shall state the place, day and hour thereof. The notice of a special
meeting shall, in addition, state the purposes thereof.
(b) Notice of any meeting need not be given to any person who may become a
stockholder of record after the mailing of such notice and prior to the meeting,
or to any stockholder who attends such meeting, in person or by proxy, or signed
waiver of notice either before or after such meeting. Notice of any adjourned
meeting of stockholders need not be given, unless otherwise required by statute.
5. Voting List. At least ten (10) days before every meeting of
stockholders, a complete list of the shareholder entitled to vote there at or
any adjournment thereof, arranged in alphabetical order, showing the address of
each shareholder and the number of shares registered in the name of each, shall
be prepared by the officer or agent of the Corporation who has charge of the
stock transfer books of the Corporation. Such list shall be open at the
principal office of the Corporation to the inspection of any shareholder during
usual business hours for a period of at least ten (10) days prior to such
meeting. Such list shall also be produced and kept at the time and place of the
meeting during the whole time thereof and subject to the inspection of any
shareholder who may be present.
6. Organization. The President or Vice President shall call meetings of
stockholders to order and act as chairman of such meetings. In the absence of
said officers, any shareholder entitled to vote thereat, or any proxy of any
such shareholder, may call the meetings to order and a chairman shall be elected
by a majority of the stockholders entitled to vote thereat. In the absence of
the Secretary and Assistant Secretary of the Corporation, any person appointed
by the chairman shall act as secretary of such meetings.
7. Agenda and Procedure. The Board of Directors shall have the
responsibility of establishing an agenda for each meeting of stockholders,
subject to the rights of stockholders to raise matters for consideration which
may otherwise properly be brought before the meeting although not included
within the agenda. The chairman shall be charged with the orderly conduct of all
2
<PAGE>
meetings of stockholders; provided, however, that in the event of any difference
in opinion with respect to the proper course of action which cannot be resolved
by reference to statute, the Articles of Incorporation or these Bylaws, Robert's
Rule of Order (as last revised) shall govern the disposition of the matter.
8. Quorum. (a) Except as otherwise provided herein, or by statute, or in
the Certificate of Incorporation (such certificate and any amendments thereof
being hereinafter collectively referred to as the "Certificate of
Incorporation"), at all meetings of stockholders of the Corporation, the
presence at the meetings of stockholders of the Corporation, presence at the
commencement of such meetings in person or by proxy of stockholders holding of
record a majority of the total number of shares of the Corporation then issued
and outstanding and entitled to vote, shall be necessary and sufficient to
constitute a quorum for the transaction of any business. The withdrawal of any
stockholder after the commencement of a meeting shall have no effect on the
existence of a quorum, after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
stockholders, the stockholders, by a majority of the votes cast by the holders
of shares entitled to vote thereat, may adjourn the meeting.
9. Adjournment. When a meeting is for any reason adjourned to another time
or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting any business may be transacted which might have been
transacted at the original meeting.
10. Voting. (a) Each shareholder shall at every meeting of stockholders, or
with respect to corporate action which may be taken without a meeting, be
entitled to one vote for each share of stock having voting power held of record
by such shareholder on the record date designated therefor pursuant to section 3
of Article XI of these Bylaws (or the record date established pursuant to
statute in the absence of such designation); provided that the cumulative system
of voting for the election of directors or for any other purpose shall not be
allowed.
(b) Each shareholder so entitled to vote at a meeting of stockholders, or
to express consent or dissent to corporate action in writing without a meeting,
may vote or express such consent or dissent in person or may authorize another
person or persons to vote or act for him by proxy executed in writing by such
shareholder (or by his duly authorized attorney in fact) and delivered to the
secretary of the meeting (or if there is no meeting to the Secretary of the
Corporation); provided that no such proxy shall be voted or acted upon after
eleven (11) months from the date of its execution, unless such proxy expressly
provides for a longer period.
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(c) When a quorum is present at any meeting of stockholders, the vote of
the holders of a majority of the shares of stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of a
statute, or the Articles of Incorporation, or these Bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision on such question.
11. Inspectors. The chairman of the meeting may at any time appoint two (2)
or more inspectors to serve at a meeting of the stockholders. Such inspectors
shall decide upon the qualifications of voters, including the validity of
proxies, accept and count the votes for and against the questions presented,
report the results of such votes, and subscribe and deliver to the secretary of
the meeting a certificate stating the number of shares of stock issued and
outstanding and entitled to vote thereon and the number of shares voted for and
against the questions presented. The inspectors need not be stockholders of the
Corporation, and any director or officer of the Corporation may be an inspector
on any question other than a vote for or against his election to any position
with the Corporation or on any other question in which he may be directly
interested.
ARTICLE III
-----------
Board of Directors
1. Election and Tenure. The business and affairs of the Corporation shall
be managed by a Board of Directors who shall be elected at the annual meetings
of stockholders by plurality vote. Each director shall be elected to serve and
to hold office until the next succeeding annual meeting and until his successor
shall be elected and shall qualify, or until his earlier death, resignation or
removal.
2. Number and Qualification. The Board of Directors shall consist of not
less than one nor more than nine members, unless and until otherwise determined
by vote of a majority of the entire Board of Directors. The number of Directors
shall not be less than three (3), unless all of the outstanding shares of stock
are owned beneficially and of record by less than three (3) stockholders, in
which event the number of directors shall not be less than the number of
stockholders or the minimum permitted by statute.
3. Organization Meetings. As soon as practicable after each annual election
of directors, the Board of Directors shall meet for the purpose of organization,
selection of a Chairman of the Board, election of officers and the transaction
of any other business.
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4. Regular Meetings. Regular meetings of the Board of Directors shall be
held at such time or times as may be determined by the Board of Directors and
specified in the notice of such meeting.
5. Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board or the President and shall be called by the
President or Secretary on the written request of any two (2) directors.
6. Place of Meetings. Any meeting of the Board of Directors may be held at
such place or places as shall from time to time be determined by the Board of
Directors or fixed by the Chairman of the Board and as shall be designated in
the notice of the meeting.
7. Notice of Meetings. Notice of each meeting of directors, whether
organizational, regular or special, shall be given to each director. If such
notice is given either (a) by delivering written or printed notice of a director
personally or (b) by telephone personally to such director, it shall be so given
at least two (2) days prior to the meeting. If such notice is given either (a)
by depositing a written or printed notice in the United States mail, postage
prepaid, or (b) by transmitting a cable or telegram, in all cases directed to
such director at his residence or place of business, it shall be so given at
least four (4) days prior to the meeting. The notice of all meetings shall state
the place, date and hour thereof, but need not,unless otherwise required by
statute, state the purpose or purposes thereof.
8. Election. Except as may otherwise be provided herein or in the
Certificate of Incorporation by way of cumulative voting rights the members of
the Board of Directors of the Corporation, who need not be stockholders, shall
be elected by a majority of the votes cast at a meeting of stockholders, by the
holders of shares of stock present in person or by proxy, entitled to vote in
the election.
9. Quorum. A majority of the number of directors fixed by paragraph 2 of
this Article III shall constitute a quorum at all meetings of the Board of
Directors, and the vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors. In the
absence of a quorum at any such meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice,other than
announcement at the meeting, until a quorum shall be present.
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10. Organization, Agenda and Procedure. The Chairman of the Board or in his
absence any director chosen by a majority of the directors present shall act as
chairman of the meetings of the Board of Directors. In the absence of the
Secretary and Assistant Secretary, any person appointed by the chairman shall
act as secretary of such meetings. The agenda of and procedure for such meetings
shall be as determined by the Board of Directors.
11. Resignation. Any director of the Corporation may resign at any time by
giving written notice of his resignation to the Board of Directors, to the
Chairman of the Board, the President, any Vice President or the Secretary of the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
12. Removal. Except as otherwise provided in the Articles of Incorporation
or in these Bylaws, any director may be removed, either with or without cause,
at any time, by the affirmative vote of the holders of a majority of the issued
and outstanding shares of stock entitled to vote for the election of directors
of the Corporation given at a special meeting of the stockholders called and
held for such purpose. The vacancy in the Board of Directors caused by any such
removal may be filled by such stockholders at such meeting or, if the
stockholders at such meeting shall fail to fill such vacancy, by the Board of
Directors as provided in paragraph 12 of this Article III.
13. Vacancies. Except as provided in paragraph 11 of this Article III, any
vacancy occurring for any reason in the Board of Directors may be filled by the
affirmative vote of a majority of the directors then in office, though less than
a quorum of the Board of Directors. Any directorship to be filled by the
affirmative vote of a majority of the directors then in office or by an election
at an annual meeting or at a special meeting of stockholders called for that
purpose. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office and shall hold office until the expiration of
such term and until his successor shall be elected and shall qualify or until
his earlier death, resignation or removal. A director chosen to fill a position
resulting from an increase in the number of directors shall hold office until
the next annual meeting of stockholders and until his successor shall be elected
and shall qualify, or until his earlier death, resignation or removal.
14. Executive Committee. The Board of Directors, by resolution adopted by a
majority of the number of directors fixed by paragraph 2 of this Article III,
may designate two (2) or more directors to constitute an executive committee,
which committee, to the extent provided in such resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
Corporation.
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15. Compensation of Directors. Each director may be allowed such amount per
annum or such fixed sum for attendance at each meeting of the Board of Directors
or any meeting of an executive committee, or both, as may be from time to time
fixed by resolution of the Board of Directors, together with reimbursement for
the reasonable and necessary expenses incurred by such director in connection
with the performance of his duties. Nothing herein contained shall be construed
to preclude any director from serving the Corporation or any of its subsidiaries
in any other capacity and receiving proper compensation therefor.
16. Duties and Powers. The Board of Directors shall be responsible for the
control and management of the affairs, property and interests of the Corporation
and may exercise all powers of the Corporation, except as are in the Certificate
of Incorporation or by statute expressly conferred upon or reserved to the
stockholders.
ARTICLE IV
----------
Waiver of Notice and Action by Consent
1. Waiver of Notice. Whenever any notice whatever is required to be given
under the provisions of a statute or of the Articles of Incorporation, or by
these Bylaws, a waiver thereof either in writing signed by the person entitled
to said notice (or such person's agent or attorney in fact thereunto authorized)
or by telegraph, cable or any other available method, whether before, at or
after the time stated therein, or the appearance of such person or persons at
such meeting in person or by proxy (except for the sole purpose of challenging
the propriety of the meeting), shall be deemed equivalent to such notice.
2. Action Without a Meeting. Any action required or which may be taken at a
meeting of the directors, stockholders or members of any executive committee of
the Corporation, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the directors,
stockholders, or members of the executive committee, as the case may be,
entitled to vote with respect to the subject matter thereof.
ARTICLE V
---------
Officers
1. Election and Tenure. The Board of Directors annually shall elect a
President, a Secretary, and a Treasurer. The Board of Directors may also elect
or appoint such Vice Presidents, other officers and assistant officers as may be
determined by the Board of Directors. The Board of Directors may delegate to any
such officer the power to appoint or remove subordinate officers, agents, or
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employees. Any two or more offices may be held by the same person, except the
offices of President and Secretary. Each officers so elected or appointed shall
continue in office until his successor shall be elected or appointed and shall
qualify, or until his earlier death, resignation or removal.
2. Resignation, Removal And Vacancies. Any officer may resign at any time
by giving written notice thereof to the Board of Directors or to the President.
Such resignation shall take effect on the date specified therein and no
acceptance of the same shall be necessary to render the same effective. Any
officer may at any time be removed the the affirmative vote of a majority of the
number of directors specified in section 2 of Article III of these Bylaws, or by
an executive committee thereunto duly authorized. If any office becomes vacant
for any reason, the vacancy may be filled by the Board of Directors. An Officer
appointed to fill a vacancy shall be appointed for the unexpired term of his
predecessor in office an shall continue in office until his successor shall be
elected or appointed and shall qualify, or until his earlier death, resignation
or removal.
3. President. The President shall be the chief executive officer of the
Corporation. He shall preside at all meetings of the stockholders and shall have
general and active management of the business of the Corporation. He shall see
that all orders and resolutions of the Board of Directors are carried into
effect and in general shall perform all duties as may from time to time be
assigned to him by the Board of Directors.
4. Vice President. The Vice President shall perform such duties and possess
such powers as from time to time may be assigned to them by the Board of
Directors or by the President. In the absence of the President or in the event
of his in ability or refusal to act, the vice president (or in the event there
be more than one vice president, the vice presidents in the order designated, or
in the absence of any designation, then in the order of their election or
appointment) shall perform the duties of the President and when so performing
shall have all the powers of and be subject to all the restrictions upon the
President.
5. Secretary. The Secretary shall perform such duties and shall have such
powers as may from time to time be assigned to him by the Board of Directors or
the President. In addition, the Secretary shall perform such duties and have
such powers as are incident to the officer of Secretary, including without
limitation the duty and power to give notice of all meetings of stockholders and
the Board of Directors, to attend such meetings and keep a record of the
proceedings, and to be custodian of corporate records and the corporate seal and
to affix and attest to the same on documents, the execution of which on behalf
of the Corporation is authorized by these Bylaws or by the action of the Board
of Directors.
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6. Treasurer. The Treasurer shall perform such duties and shall have such
powers as may from time to time be assigned to him by the Board of Directors or
the President. In addition, the Treasurer shall perform such duties and have
such powers as are incident to the office of Treasurer, including without
limitation the duty and power to keep and be responsible for all funds and
securities of the Corporation, to deposit funds of the Corporation in
depositories selected in accordance with these Bylaws, disburse such funds as
ordered by the Board of Directors, making proper accounts thereof, and shall
render as required by the Board of Directors statements of all such transactions
as Treasurer and of the financial condition of the Corporation.
7. Assistant Secretaries. The Assistant Secretaries shall perform such
duties and possess such powers as from time to time shall be assigned to them by
the Board of Directors, the President, or the Secretary. In the absence,
inability or refusal to act of the Secretary, the Assistant Secretaries in the
order determined by the Board of Directors shall perform the duties and exercise
the powers of the Secretary.
8. Assistant Treasurers. The Assistant Treasurers shall perform such duties
and possess such powers as from time to time shall be assigned to them by the
Board of Directors, the President, or the Treasurer. In the absence, inability
or refusal to act of the Treasurer, the Assistant Treasurers in the order
determined by the Board of Directors shall perform the duties and exercise the
powers of the Treasurer.
9. Bond of Officers. The Board of Directors may require any officer to give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for such terms and conditions as the
Board of Directors may specify, including without limitation for the faithful
performance of his duties and for the restoration to the Corporation of all
property in his possession or under his belonging to the Corporation.
10. Salaries. Officers of the Corporation shall be entitled to such
salaries, emoluments, compensation or reimbursement as shall be fixed or allowed
from time to time by the Board of Directors.
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ARTICLE VI
----------
Indemnification
1. Third Party Actions. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
2. Derivative Actions. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust, or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, except that no indemnification shall be made
in respect of any claim, issue, or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability and in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
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3. Extent of Indemnifications. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in sections 1
and 2 of this Article VI, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
4. Determination. Any indemnification under sections 1 and 2 of this
Article VI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
officer, director and employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in sections 1 and 2 of
this Article VI. Such determination shall be made (a) by the Board of Directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suitor proceeding, or (b) if such a quorum is not obtainable, or,
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (c) by the affirmative vote
of the holders of a majority of the shares of stock entitled to vote and
represented at a meeting called for such purpose.
5. Payment in Advance. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding as authorized by the Board
of Directors as provided in Section 4 of this Article VI upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article VI.
6. Insurance. The Board of Directors may exercise the Corporation's power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability hereunder or
otherwise.
7. Other Coverage. The indemnification provided by this Article VI shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under the Articles of Incorporation, these
Bylaws, agreement, vote of stockholders or disinterested directors, the Colorado
Corporation Code, or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs and personal representatives of such a
person.
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ARTICLE VII
-----------
Execution of Instruments; Loans; Checks and Endorsements;
Deposits; Proxies
1. Execution of Instruments. The President or any Vice President shall have
power to execute and deliver on behalf and in the name of the Corporation any
instrument requiring the signature of an officer of the Corporation, except as
otherwise provided in these Bylaws or where the execution and delivery thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation. Unless authorized so to do by these Bylaws or by the
Board of Directors, no officer, agent or employee shall have any power or
authority to bind the Corporation in any way, to pledge its credit or to render
it liable pecuniarily for any purpose or in any amount.
2. Loans. No loan shall be contracted on behalf of the Corporation, and no
evidence of indebtedness shall be issued, endorsed or accepted in its name,
unless authorized by the Board of Directors or a standing committee designated
by the Board of Directors so to act. Such authority may be general or confined
to specific instances. When so authorized, the officer or officers thereunto
authorized may effect loans at any time for the Corporation from any bank or
other entity and for such loans may execute and deliver promissory notes or
other evidences of indebtedness of the Corporation, and when authorized as
aforesaid, as security for the payment of any and all loans (and any obligations
incident thereto) of the Corporation, may mortgage, pledge, or otherwise
encumber any real or personal property, or any interest therein, at any time
owned or held by the Corporation, and to that end may execute and deliver such
instruments as may be necessary or proper in the premises.
3. Checks and Endorsements. All checks, drafts or other orders for the
payment of money, obligations, notes or other evidences of indebtedness, bills
of lading, warehouse receipts, trade acceptances, and other such instruments
shall be signed or endorsed by such officers or agents of the Corporation as
shall from time to time be determined by resolution of the Board of Directors,
which resolution may provide for the use of facsimile signatures.
4. Deposits. All funds of the Corporation not otherwise employed shall be
deposited from time to time to the Corporation's credit in such banks or other
depositories as shall from time to time be determined by resolution of the Board
of Directors, which resolution may specify the officers or agents of the
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Corporation who shall have the power, and the manner in which such power shall
be exercised, to make such deposits and to endorse, assign and deliver for
collection and deposit checks, drafts and other orders for the payment of money
payable to the Corporation or its order.
5. Proxies. Unless otherwise provided by resolution adopted by the Board of
Directors, the President or any Vice President may from time to time appoint one
or more agents or attorneys in fact of the Corporation, in the name and on
behalf of the Corporation, to cast the votes which the Corporation maybe
entitled to cast as the holder of stock or other securities in any other
Corporation, association or other entity any of whose stock or other securities
may be held by the Corporation, at meetings of the holders of the stock or other
securities of such other Corporation, association or other entity, or to consent
in writing, in the name of the Corporation as such holder, to any action by such
other Corporation, association or other entity, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed in the name and on behalf of
the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
ARTICLE VIII
------------
Shares of Stock
1. Certificates of Stock. Every holder of stock of the Corporation shall be
entitled to have a certificate certifying the number of shares owned by him in
the Corporation and designating the class of stock to which such shares belong,
which shall otherwise be in such form as is required by law and as the Board of
Directors shall prescribe. Each such certificate shall be signed by the
President or a Vice President and the Treasurer or any Assistant Treasurer or
the Secretary or any Assistant Secretary of the Corporation; provided, however,
that where such certificate is signed or countersigned by a transfer agent or
registrar (other than the Corporation or any employee of the Corporation) the
signatures of such officers of the Corporation may be in facsimile form. In case
any officer of the Corporation who shall have signed, or whose facsimile
signature shall have been placed on, any certificate shall cease for any reason
to be such officer before such certificate shall have been issued or delivered
by the Corporation, such certificate may nevertheless be issued and delivered by
the Corporation as though the person who signed such certificate, or whose
facsimile signature shall have been placed thereon, had not ceased to be such
officer of the Corporation.
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2. Record. A record shall be kept of the name of each person or other
entity holding the stock represented by each certificate for shares of the
Corporation issued, the number of shares represented by each such certificate,
and the date thereof, and, in the case of cancellation, the date of
cancellation. The person or other entity in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof, and thus a
holder of record of such shares of stock, for all purposes as regards the
Corporation.
3. Transfer of Stock. Transfers of shares of the stock of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof, or by his attorney thereunto authorized, and on the surrender of the
certificate or certificates for such shares properly endorsed.
4. Transfer Agents and Registrars; Regulations. The Board of Directors may
appoint one or more transfer agents or registrars with respect to shares of the
stock of the Corporation. The Board of Directors may make rules and regulations
as it may deem expedient, not inconsistent with these Bylaws, concerning the
issue, transfer and registration of certificates for shares of the stock of the
Corporation.
5. Lost, Destroyed or Mutilated Certificates. The holder of any certificate
representing shares of stock of the Corporation shall immediately notify the
Corporation of any loss or destruction of the certificate representing the same.
The Corporation may issue a new certificate in the place of any certificate
previously issued by it, alleged to have been lost or destroyed. On production
of such evidence of loss or destruction as the Board of Directors in its
discretion may require, the owner of the lost or destroyed certificate, or his
legal representatives, to give the Corporation a bond in such sum as the Board
may direct, and with such surety or sureties as may be satisfactory to the Board
to indemnify the Corporation against any claims, loss, liability or damage it
may suffer on account of the issuance of the new certificate. A new certificate
may be issued without requiring any such evidence or bond when, in the judgment
of the Board of Directors, it is proper to do so.
ARTICLE IX
----------
Corporate Seal
1. Corporate Seal. The corporate seal shall be in such form, as shall be
approved by resolution of the Board of Directors. Said seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced. The impression of the seal may be made and attested by either
the Secretary or an Assistant Secretary for the authentication of contracts or
other papers requiring the seal.
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ARTICLE X
---------
Fiscal Year
1. Fiscal Year. The fiscal year of the Corporation shall be such year as
shall be established by the Board of Directors.
ARTICLE XI
----------
Corporate Books and Records
1. Corporate Books. The books and records of the Corporation may be kept
within or without the State of Colorado at such place or places as may be from
time to time designated by the Board of Directors.
2. Addresses of Stockholders. Each shareholder shall furnish to the
Secretary of the Corporation or the Corporation's transfer agent an address to
which notices from the Corporation, including notices of meetings, may be
directed and if any shareholder shall fail so to designate such an address, it
shall be sufficient for any such notice to be directed to such shareholder at
his address last known to the Secretary of transfer agent.
3. Record Date. In lieu of closing the stock ledger of the Corporation, the
Board of Directors may fix, in advance, a date not exceeding sixty (60) days,
nor less than ten (10) days, as the record date for the determination of
stockholders entitled to receive notice of, or to vote at, any meeting of
stockholders, or to consent to any proposal without a meeting, or for the
purposes of determining stockholders entitled to received payment of any
dividends or allotment of any rights, or for the purpose of any other action. If
no record date is fixed, the record date for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if no notice is given, the day preceding the day on which the meeting is
held; the record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the resolution of the directors
relating thereto is adopted. When a determination of stockholders of record
entitled to notice of or to vote at any meeting of stockholders has been made as
provided for herein, such determination shall apply to any adjournment thereof,
unless the directors fix a new record date for the adjourned meeting.
4. Audits of Books and Accounts. The Corporation's books and accounts shall
be audited at such times and by such auditors as shall be specified and
designated by resolution of the Board of Directors.
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ARTICLE XII
-----------
Emergency Bylaws
1. Emergency Bylaws. The Board of Directors may adopt emergency Bylaws in
accordance with and pursuant to the provisions therefor from time to time set
forth in the Colorado Corporation Code.
ARTICLE XIII
------------
Amendments
1. Amendments. All Bylaws of the Corporation shall be subject to
alteration, amendment or repeal, and new bylaws may be added, by the affirmative
vote of a majority of a quorum of the members of the Board of Directors at any
regular or special meeting.
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PACIFIC BASIN DEVELOPMENT, CORP.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK
AUTHORIZED CAPITAL STOCK: 50,000,000 SHARES, $.001 PAR VALUE
This Certifies That............................................................
is the registered holder of....................................................
shares transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ...... day of .............., A.D., 19......
- ------------------------------ -----------------------------
SECRETARY/TREASURER [Corporate Seal} PRESIDENT
<PAGE>
For Value Received,..................................hereby sell, assign and
transfer unto .............................................Shares represented by
the within Certificate, and do hereby irrevocably constitute and appoint
.....................................Attorney to transfer the said Shares on the
books of the within named Corporation with full power of substitution in the
premises.
Dated..................., 19............
In presence of
.........................................
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
ESCROW AGREEMENT (PUBLIC OFFERING)
AGREEMENT made this 1st day of August, 1996 by and among the Issuer whose
name and address appears on the Information Sheet (as defined herein) attached
to this Agreement, and American Securities Transfer Company, 1825 Lawrence
Street, Suite 444, Denver, CO 80203.
W I T N E S S E T H
WHEREAS, the Issuer has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement (the "Registration Statement")
covering a proposed public offering of its securities (collectively, the
"Securities", and individually, a "Share") as described on the Information
Sheet; and
WHEREAS, the Issuer proposes to offer the Securities, as agent for the
Issuer, for sale to the public on a "best efforts, all or none basis" at the
price per Share all as set forth on the Information Sheet; and
WHEREAS, the Issuer proposes to establish an escrow account with the Escrow
Agent in connection with such public offering and the Escrow Agent is willing to
establish such escrow account on the terms and subject to the conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Information Sheet. Each capitalized term not otherwise defined in this
Agreement shall have the meaning set forth for such term on the Information
Sheet which is attached to this Agreement and is incorporated by reference
herein and made a part hereof (the "Information Sheet").
2. Establishment of Escrow Account.
2.1 The parties hereto shall establish a non-interest bearing escrow
account at the office of the Escrow Agent, and bearing the designation, set
forth on the Information Sheet (the "Escrow Account").
2.2 On or before the date of the initial deposit in the Escrow Account
pursuant to this Agreement, the Issuer shall notify the Escrow Agent in writing
of the Effective Date of the Registration Statement (the "Effective Date") and
the Escrow Agent shall not be required to accept any amount for deposit in the
Escrow Account prior to its receipt of such notification.
<PAGE>
2.3. The Offering Period, which shall be deemed to commence on the
Effective Date, shall consist of the number of calendar days or business days
set forth on the Information Sheer. The Offering Period shall be extended by an
Extension Period only if the Escrow Agent shall have received written notice
thereof at least five (5) business days prior to the expiration of the Offering
Period. The Extension Period, which shall be deemed to commence on the next
calendar day following the expiration of expiration of the Offering Period,
shall consist of the number of the calendar days or business days set forth on
the Information Sheet. The last day of the offering Period, or the last day of
the Extension Period (if the Escrow Agent has received written notice thereof as
hereinabove provided), is referred to herein as the "Termination Date." After
the Termination Date, the Issuer shall not deposit, and the Escrow Agent shall
not accept, any additional amounts representing payments by prospective
purchasers.
3. Deposits in the Escrow Account.
3.1. Upon receipt, the Issuer shall promptly deposit all monies received
from investors to the Escrow Agent. All of these deposited proceeds (the
"Deposited Proceeds") shall be in the form of checks or money orders. All checks
or money orders deposited into the Escrow Account shall be made payable to
"Pacific Basin Development, Corp. and American Securities Transfer Company, as
Escrow Agent" Any check or money order payable other than to the Escrow Agent as
required hereby shall be returned to the prospective purchaser, or if the Escrow
Agent has insufficient information to do so, then to the Issuer (together with
any subscription Information, as defined below, or other documents delivered
herewith) by noon of the next business day following receipt of such check by
the Escrow Agent, and such check shall be deemed not to have been delivered to
the Escrow Agent pursuant to the terms of this agreement. The Deposited Proceeds
and interest or dividends thereon, if any, shall be held for the sole benefit of
the purchasers of the securities.
3.2. The deposited Proceeds shall be invested in either;
(a) an obligation that constitutes a "deposit" as that term is defined
in Section (3)(1) of the Federal Deposit Insurance Act;
(b) securities of any open-end investment company registered under the
Investment Company Act of 1940 that holds itself out as a money market fund
meeting the conditions of paragraphs (c)(2), (c)(3), and (c)(4) of Rule 2a-7
under the Investment Company Act; or
(c) securities that are direct obligations of, or obligations
guaranteed as to principal or interest by, the United States.
2
<PAGE>
3.3. Simultaneously with each deposit into the Escrow Account, the Issuer
shall inform the Escrow Agent by confirmation slip or other writing of the name
and address of the prospective purchaser, the number of Securities subscribed
for by such purchaser, and the aggregate dollar amount of such subscription
(collectively, the "Subscription Information").
3.4 The Escrow Agent shall not be required to accept for deposit into the
Escrow Account checks which are not accompanied by the appropriate subscription
Information. Checks and money orders representing payments by prospective
purchasers shall not be deemed deposited in the Escrow Account until the Escrow
Agent has received in writing the Subscription Information required with respect
to such payments.
3.5. The Escrow Agent shall not be required to accept any amounts
representing payments by prospective purchasers, whether by check or money
order, except during the Escrow Agent's regular banking hours. Any check, money
order or cash not received prior to 1:00 p.m. shall be deposited the following
business day.
3.6. Interest or dividends earned on the Deposited Proceeds, if any, shall
be held in the escrow Account until the Deposited Proceeds are released in
accordance with the provisions of section 4 of the Escrow Agreement. If the
Deposited Proceeds are released to a purchaser of the securities, the purchaser
shall receive interest or dividends earned, if any, on such Deposited Proceeds
up to the date of release. If the Deposited Proceeds held in the Escrow Account
are released to the Company, and interest or dividends earned on such funds up
to the date of release may be released to the Company.
3.7. The Issuer shall deposit the Securities directly into the Escrow
Account promptly upon issuance (the "Deposited Securities"). The identity of the
purchaser of the Securities shall be included on the Common Stock and Warrant
certificates.
3.8. The Deposited Securities shall be held for the sole benefit of the
purchasers. No transfer or other disposition of Securities held in the Escrow
Account or any interest related to such Securities shall be permitted other than
by will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code of 1986, as
amended, or Title I of the Employee Retirement Income Security Act, or the rules
thereunder.
3
<PAGE>
3.9. The Escrow Agent shall refund any portion of the Deposited Proceeds
prior to disbursement of the Deposited Proceeds in accordance with Section 4
hereof upon instructions in writing signed by the Issuer.
4. Disbursement from the Escrow Account.
4.1. The Deposited Proceeds may be released to the Company and the
Securities delivered to the purchaser or other registered holder only at the
same time as or after:
(a) the Escrow Agent has received a signed representation from the
Company, together with an opinion of counsel that the following events have
already occurred and the following requirements have already been met:
(1) Upon execution of an agreement(s) for the acquisition(s) of a
business(es) or assets that will constitute the business (or a line of business)
of the Company and for which the fair value of the business(es) or net assets to
be acquired represents at least 80 percent of the maximum offering proceeds,
including proceeds received or to be received upon the exercise or conversion of
the Securities offered, but excluding amounts payable to non-affiliates for
underwriting commissions, underwriting expenses, and dealer allowances, if any,
the Company filed a post-effective amendment that:
(i) Discloses the information specified by the SB-2 registration statement
form and Industry Guides, including financial statements of the Company and the
company or business with which it plans to merge or acquire (the "Target
Company"), and pro forma financial information required by the SB-2 and
applicable rules and regulations:
(ii) Discloses the results of the initial offering, including but not
limited to:
(A) The gross offering proceeds received to date, specifying the
amounts paid for underwriter commissions, underwriting expenses and dealer
allowances, if any, amounts disbursed to the Company, and amounts remaining in
the Escrow Account; and
4
<PAGE>
(B) The specific amount, use and application of funds disbursed to the
Company do date, including, but not limited to, amounts paid to officers,
directors, promoters, controlling shareholders or affiliates, either directly or
indirectly specifying the amounts and purposes of such payments; and
(iii) Discloses the terms of the offering as described pursuant to Section
4 of this Escrow Agreement.
(2) The terms of the offering provided, and the Company
satisfied, the following conditions:
(i) Within five business days after the effective date of the
post-effective amendment(s), the Company shall send by first class mail or other
equally prompt means, to each purchaser of securities held in escrow, a copy of
the prospectus contained in the post-effective amendment and any amendment or
supplement thereto:
(ii) Each purchaser shall have no fewer than 20 business days and no more
than 45 business days from the effective date of the post-effective amendment to
notify the Company in writing that the purchaser elects to remain an investor.
If the Company has not received such written notification by the 45th business
day following the effective date of the post-effective amendment, funds and
interest or dividends, if any, held in the Escrow Account shall be sent by first
class mail or other equally prompt means to the purchaser within five business
days:
(iii) The acquisition(s) meeting the criteria set forth in paragraph (a)
(1) of this Section 4 will be consummated if a sufficient number of purchasers
confirm their investments; and
(iv) If a consummated acquisition(s) meeting the requirements of this
section has not occurred by a date 18 months after the Effective Date, the
Deposited Funds shall be returned by first class mail or equally prompt means to
the purchaser with five business days following that date.
(b) Funds held in the Escrow Account may be released to the Company and
securities may be delivered to the purchaser or other registered holder
identified on the deposited securities only at the same time as or after
consummation of an acquisition(s) meeting the requirements set forth in Section
4.1(a) (1) (iii) of this Escrow Agreement.
4.2 In the event that at the close of regular banking hours on the
Termination Date less than all of the Shares have been sold, the Escrow Agent
5
<PAGE>
shall promptly refund to each prospective purchaser the amount of payment
received from such purchaser held in Escrow without interest thereon or
deduction therefrom, and the Escrow Agent shall notify the Issuer of its
distribution of the Deposited Proceeds.
4.3 In the event that at any time up to the close of banking hours on the
Termination Date all of the Shares have been sold, the Escrow Agent shall notify
the Issuer of such fact in writing within a reasonable time thereafter. The
Escrow Agent shall hold the Deposited Proceeds until the events described in
Section 4.1 of this Escrow Agreement take place.
4.4 Upon disbursement of the Deposited Proceeds pursuant to the terms of
this Section 4, the Escrow Agent shall be relieved of all further obligations
and released from all liability under this Agreement. It is expressly agreed and
understood that in no event shall the aggregate amount of payments made by the
Escrow Agent exceed the amount of the Deposited Proceeds.
5. Rights, Duties and Responsibilities of Escrow Agent.
It is understood and agreed that the duties of the Escrow Agent are purely
ministerial in nature, and that:
5.1 The Escrow Agent shall not be responsible for the performance by the
Issuer of its obligations under this Agreement.
5.2 The Escrow Agent shall not be required to accept from the Issuer any
Subscription Information pertaining to prospective purchasers unless such
Subscription Information is accompanied by checks or money orders representing
the payment of money, nor shall the Escrow Agent be required to keep records of
any information with respect to payments deposited by the Issuer except as to
the amount of such payments; however, the Escrow Agent shall notify the Issuer
within a reasonable time of any discrepancy between the amount delivered to the
Escrow Agent therewith. Such amount need not be accepted for deposit in the
Escrow Account until such discrepancy has been resolved.
5.3 The escrow Agent shall be under no duty or responsibility to enforce
collection of any check delivered to it hereunder, The Escrow Agent, within a
reasonable time, shall return to the Issuer any check received which is
dishonored, together with the Subscription Information, if any, which
accompanied such check.
6
<PAGE>
5.4 The Escrow Agent shall be entitled to rely upon the accuracy, act in
reliance upon the contents, and assume the genuineness of any notice,
instruction, certificate, signature instrument or other document which is given
to the Escrow Agent pursuant to this Agreement without the necessity of the
Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall not
be obligated to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or instructions or to
execute any such certificate, instrument or other document. The Escrow Agent
must, however, determine for itself whether the conditions permitting to the
release of the funds in the Escrow Account have been met.
5.5 In the event that the Escrow Agent shall be uncertain as to its duties
or rights hereunder or shall receive instructions with respect to the Escrow
Account or the Deposited Proceeds which, in its sole determination, are in
conflict either with other instructions received by it or with any provision of
this Agreement, the Escrow Agent, at its sole option, may deposit the Deposited
Proceeds (and any other amounts that thereafter become part of the Deposited
Proceeds) with the registry of a court of competent jurisdiction in a proceeding
to which all parties in interest are joined. Upon the deposit by the Escrow
Agent of the Deposited Proceeds with the registry of any court, the Escrow Agent
shall be relieved of all further obligations and released from all liability
hereunder.
5.6 The Escrow Agent shall not be liable for any action taken or omitted
hereunder, or for the misconduct of any employee, agent or attorney appointed by
it, except in the case of willful misconduct. The Escrow Agent shall be entitled
to consult with counsel of its own choosing and shall not be liable for any
action taken, suffered or omitted by it in accordance with the advice of such
counsel.
5.7 The Escrow Agent shall have no responsibility at any time to ascertain
whether or not any security interest exists in the Deposited Proceeds or any
part thereof or to file any financing statement under the Uniform Commercial
Code with respect to the Deposited Proceeds or any part thereof.
5.8 The Escrow Agent shall determine whether or not the Offering has been
successful, and if it determines that less than all of the securities being
offered have been sold, thus, rendering the Offering unsuccessful, the Escrow
Agent shall return the proceeds of the Offering to the investors on a pro-rata
basis.
7
<PAGE>
6. Amendment; Resignation. This Agreement may be altered or amended only
with the written consent of the Issuer and the Escrow Agent. The Escrow Agent
may resign for any reason upon seven (7) business days written notice to the
Issuer. Should the Escrow Agent resign as herein provided, it shall not be
required to accept any deposit, make any disbursement or otherwise dispose of
the Deposited Proceeds, but its only duty shall be to hold the Deposited
Proceeds for a period of not more than ten (10) business days following the
effective date of such resignation, at which time (a) if a successor escrow
agent shall have been appointed and written notice hereof (including the name
and address of such successor escrow agent) shall have been given to the
resigning Escrow Agent by the Issuer and such successor escrow agent, the
resigning Escrow Agent shall pay over to the successor escrow agent the
Deposited Proceeds, less any portion thereof previously paid out in accordance
with this Agreement, or (b) if the resigning Escrow Agent shall not have
received written notice signed by the Issuer and a successor escrow agent, then
the resigning Escrow Agent shall promptly refund the amount in the Deposited
Proceeds to each prospective purchaser without interest thereon or deduction
therefrom, and the resigning Escrow Agent shall notify the Issuer in writing of
its liquidation and distribution of the Deposited Proceeds; whereupon, in either
case, the Escrow Agent shall be relieved of all further obligations and released
from all liability under this Agreement. Without limiting the provisions of
Section 8 hereof, the resigning Escrow Agent shall be entitled to be reimbursed
by the Issuer for any expenses incurred in connection with its resignation,
transfer of the Deposited Proceeds to a successor Escrow Agent or distribution
of the Deposited Proceeds pursuant to this Section 6.
7. Representations and Warranties. The Issuer hereby represents and
warrants to the Escrow Agent that:
7.1 No party other than the parties hereto and the prospective purchasers
have, or shall have any lien, claim or security interest in the Deposited
Proceeds or any part thereof.
7.2 No financing statement under the Uniform Commercial Code is on file in
any jurisdiction claiming a security interest in or describing (whether
specifically or generally) the Deposited Proceeds or any part thereof.
7.3 The Subscription Information submitted with each deposit shall, at the
time of submission and at the time of the disbursement of the Deposited
Proceeds, be deemed a representation and warranty that such deposit represents a
bona fide sale to the purchaser described therein of the amount of Securities
set forth in such Subscription Information.
8
<PAGE>
7.4 All of the information contained in the Information Sheet, is, as of
the date hereof and will be, at the time of any disbursement of the Deposited
Proceeds, true and correct.
8. Fees and Expenses. The Escrow Agent shall be entitled to the Escrow
Agent Fee set forth in the Information Sheet, payable upon execution of this
Agreement. In addition, the Issuer agrees to reimburse the Escrow Agent for any
reasonable expenses incurred in connection with this Agreement, including, but
not limited to, reasonable counsel fees, but not including the review of this
Agreement.
9. Indemnification and Contribution.
9.1 The Issuer (referred to as the "Indemnitor") agrees to indemnify the
Escrow Agent and its officers, directors, employees, agents and shareholders
(jointly and severally the "Indemnitees") against, and hold them harmless of and
from, any and all loss, liability, cost damage and expense, including, without
limitation, reasonable counsel fees, which the Indemnitees may suffer or incur
by reason of any action, claim or proceeding brought against the Indemnitees
arising out of or relating in any way to this Agreement or any transaction to
which this Agreement relates, unless such action, claim or proceeding is the
result of the willful misconduct of the Indemnitees.
9.2 If the indemnification provided for in this Section 9 is applicable,
but for any reasons held to be unavailable, the Indemnitor shall contribute such
amounts as are just and equitable to pay, or to reimburse the Indemnitees for,
the aggregate of any and all losses, liabilities, costs, damages and expenses,
including counsel fees, actually incurred by the Indemnitees as a result of or
in connection with, and any amount paid in settlement of any action, claim or
proceeding arising out of or relating in any way to any transactions or
omissions of the Indemnitor.
9.3 Any Indemnitee which proposes to assert the right to be indemnified
under this Section 9, promptly after receipt of notice of commencement of any
action, suit or proceeding against such Indemnitee in respect of which a claim
is to be made against the Indemnitor under this Section 9, will notify the
Indemnitor of the commencement of such action, suit or proceeding, enclosing a
copy of all papers served, but the omission so to notify the Indemnitor of any
9
<PAGE>
such action, suit or proceeding shall not relieve the Indemnitor from any
liability which they may have to any Indemnitee otherwise than under this
Section 9. In case any such action, suit or proceeding shall be brought against
any indemnitee and it shall notify the Indemnitor of the commencement thereof,
the Indemnitor shall be entitled to participate in and, to the extent that they
shall wish, to assume the defense thereof, with counsel satisfactory to such
Indemnitee. The Indemnitee shall have the right to employ its counsel in any
such action, but the fees and expenses of such counsel shall be at the expense
of such Indemnitee unless (i) the employment of counsel by such Indemnitee has
been authorized by the Indemnitor, (ii) the Indemnitee shall have concluded
reasonably that there may be a conflict of interest among the Indemnitor and the
Indemnitee in the conduct of the defense of such action (in which case the
Indemnitor shall not have the right to direct the defense of such action on
behalf of the Indemnitee) or (iii) the Indemnitor in fact shall not have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of counsel shall be borne by the Indemnitor.
9.4 The Indemnitor agrees to provide the Indemnitees with copies of all
registration statements pre- and post-effective amendments to such registration
statements including exhibits, whether filed with the SEC prior to or subsequent
to the disbursement of the Deposited Proceeds.
9.5 The provisions of this Section 9 shall survive any termination of this
Agreement, whether by disbursement of the Deposited Proceeds, resignation of the
Escrow Agent or otherwise.
10. Governing Law and Assignment. This Agreement shall be construed in
accordance with and governed by the laws of the State of Colorado and shall be
binding upon the parties hereto and their respective successors and assign;
provided, however, that any assignment or transfer by any party of its rights
under this Agreement or with respect to the Deposited Proceeds shall be void as
against the Escrow Agent unless;
(a) written notice thereof shall be given to the Escrow Agent; and
(b) the Escrow Agent shall have consented in writing to such assignment or
transfer.
11. Notices. All notices required to be given in connection with this
Agreement shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by the Express Mail
service offered by the United States Post Office, and addressed, if to the
Issuer, at its address set forth in the Information Sheet, and if to the Escrow
Agent, American Securities Transfer Company.
10
<PAGE>
12. Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be upaid or
unenforceable, the remaining provisions of this Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
13. Closing. The closing shall take place within 90 days of the Effective
Date unless an additional 90 days is approved by the Company, but in no instance
later than 180 days after the Effective Date.
14. Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular, or plural as the context may
require.
15. Captions. All captions are for convenience only and shall not limit or
define the term thereof.
16. Execution in Several Counterparts. This Agreement may be executed in
several counterparts or by separate instruments and all of such counterparts and
instruments shall constitute one agreement, binding on all of the parties
herein.
17. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings (written or oral) of the
parties in connection herewith.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
THE ISSUER: Pacific Basin Development Corp.
By: /S/ MICHAEL A. ABBOUD
----------------------------
Michael A. Abboud
ESCROW AGENT: American Securities Transfer Company
By:
- -----------------------------------------
12
August 3, 1996
Securities and Exchange commission
7 World Trade Center
13th Floor
New York, New York 10048
Re: Pacific Basin Development Corp.
To Whom It May Concern:
Pacific Basin Development Corp., (the "Company") is a corporation duly
incorporated and validly existing and in good standing under the laws of the
State of New York. The Company has full corporate powers to own its property and
conduct its business, as such business is described in the prospectus. The
Company is qualified to do business as a foreign corporation in good standing in
every jurisdiction in which the ownership of property and the conduct of
business requires such qualification.
This opinion is given in connection with the registration with the
Securities and Exchange Commission of Five Hundred Fifty Thousand (550,000)
Shares of Common Stock at a price of $0.10 per Share, for sale in the Company's
proposed public offering.
I have acted as counsel to the Company in connection with the preparation
of the Registration Statement on form SB-2, pursuant to which such Shares are
being registered and, in so acting, I have examined the originals and copies of
the corporate instruments, certificates and other documents of the Company and
interviewed representatives of the Company to the extent I deemed it necessary
in order to form the basis for the opinion hereafter set forth. In such
examination I have assumed the genuineness of all signatures and authenticity of
all documents submitted to me as certified or photostatic copies. As to all
questions of fact material to this opinion which have not been independently
established, I have relied upon statements or certificates of officers or
representatives of the Company.
All of the 550,000 shares being registered are now authorized but unissued
shares.
<PAGE>
Based upon the foregoing, I am of the opinion that the 550,000 Shares of
Common Stock of the Company being registered for sale by the Company, when
issued and sold pursuant to this Registration Statement will be legally issued,
fully paid and non-assessable and there will be no personal liability to the
owners thereof.
The undersigned hereby consents to the use of this opinion in connection
with such Registration Statement and its inclusion as an exhibit accompanying
such Registration Statement.
Very truly yours,
Gerald A. Adler
[GRAPHIC OF LETTERHEAD OMITTED]
INDEPENDENT AUDITOR'S CONSENT
July 31, 1996
To the Board of Dirctors of
Pacific Basin Development Corp.
142 West Broadway
Council Bluffs, IA 51503
We consent to the use of our report dated July 3, 1996 on Pacific Basin
Development Corp. in connection with the SB-2 Registration Statement and
Prospectus as filed with the Securities and Exchange Commission. We also consent
to the use of our name under the caption Experts" in the above-mentioned
Registration Statement.
/S/ ROTENBERG & COMPANY, LLP
Rochester, New York
To the Board of Directors of
Pacific Basin Development Corp.
142 West Broadway
Council Bluffs, IA 51503
Re: Pacific Basin Development Corp.
I, Gerald A. Adler do hereby consent to the use of my opinion dated August
3, 1996, to Pacific Basin Development Corp. to be used and filed in connection
with the SB-2 Registration Statement and Prospectus as filed with the Securities
Commission.
Gerald A. Adler
Attorney for Pacific Basin Development Corp.
Dated: August 3, 1996
New York, New York
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 450
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,450
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,450
<CURRENT-LIABILITIES> 17,259
<BONDS> 0
0
0
<COMMON> 450
<OTHER-SE> (259)
<TOTAL-LIABILITY-AND-EQUITY> 17,450
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> 0
<INCOME-TAX> 175
<INCOME-CONTINUING> (259)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (259)
<EPS-PRIMARY> 0
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</TABLE>
PACIFIC BASIN DEVELOPMENT CORP.
AGREEMENT AMONG MANAGEMENT
This agreement made the 1st day of August, 1996, by and between Pacific
Basin Development Corp., a New York corporation located at 142 West Broadway,
Council Bluffs, Iowa 51503 (the "Company") and Michael Abboud, President of the
Company and Elizabeth Kish, Secretary of the Company and Todd Abboud, Treasurer
of the Company, all of whom together comprise the management of the Company (the
"Management") (the "Agreement"); and
WHEREAS, Michael Abboud is the President of the Company; and
WHEREAS, Elizabeth Kish is the Secretary of the Company; and
WHEREAS, Todd Abboud is the Treasurer of the Company; and
WHEREAS, the Company is located at 142 West Broadway, Council Bluffs, Iowa
51503; and
WHEREAS, there are no other members of the Company's Management; and
WHEREAS, the Company is a "blank check" company, actively searching for a
merger candidate (a "Target Company") with which to form a business combination
("Business Combination"); and
WHEREAS, the Company intends to offer 550,000 Shares of Common Stock, $.001
par value (the "Shares") (the "Offering") at a purchase price of $0.10 per
Share;
NOW, therefore, subject to the terms and conditions set forth herein and
pursuant to the Offering, Management agrees to the following:
AGREED, that the Company will not pay to any present officer, director,
their affiliate or associate any portion of the proceeds from this offering, nor
will the Company issue any securities as payment of any expenses, labor or
services, commission, solicitation fees or finder's fees consultants fees or as
payment of any kind (except as noted in its SB-2 Registration Statement for its
initial public offering (the "Registration Statement) in connection with the
finding of a business combination or for the sale of any shares offered in the
Registration Statement. This includes the proceeds available upon their release
from escrow pursuant to Rule 419; and it is further
<PAGE>
AGREED, that no compensation will be paid or due or owing to any officer or
director until after a business combination is consummated; and it is further
AGREED, that present management of the Company will not make any loans of
the $5,500 available from the deposited proceeds of the initial public offering,
nor will management borrow funds and use either the Company's working capital or
deposited funds as such; and it is further
AGREED, that management will not actively negotiate or otherwise consent to
the purchase of any portion of their common stock as a condition to or in
connection with a proposed business combination unless such a purchase is
requested by a target company as a condition to a merger or acquisition, and it
is further
AGREED, that the Company will not pay a finder's fee to any member of
management for locating a merger or acquisition candidate, and that no member of
management intends to or may seek and negotiate for the payment of finder's
fees, and that in the event there is a finder's fee, it will be paid at the
direction of the successor management after a change in management control
resulting from a business combination.
<PAGE>
IN WITNESS WHEREOF, we have set our hands and seals on this 1st day of
August, 1996.
/S/ MICHAEL A. ABBOUD
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Pacific Basin Development Corp.
By: /S/ MICHAEL A. ABBOUD
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Michael Abboud
President
/S/ MICHAEL A. ABBOUD
--------------------------------------
Michael Abboud
President
/S/ ELIZABETH KISH
--------------------------------------
Elizabeth Kish
Secretary
/S/ TODD ABBOUD
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Todd Abboud
Treasurer
