As filed with the Securities and Exchange Commission on October 14, 1997
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
CAPITAL GROWTH HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
----------
6211
(Primary Standard Industrial
Classification Code Number)
Delaware 06-1489574
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
660 Steamboat Road
Greenwich, Connecticut 06830
(203) 861-7750
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Ronald B. Koenig
Chairman of the Board of Directors,
President and Chief Executive Officer
660 Steamboat Road
Greenwich, Connecticut 06830
(203) 861-7750
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
with a copy to:
Rubi Finkelstein, Esq.
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
(212) 506-5000
----------
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. |_|
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
----------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed
Maximum Proposed
Amount To Offering Maximum Amount of
Title of Each Class of Be Price Per Aggregate Registration
Securities To Be Registered Registered Share (1) Offering Price (1) Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 Par Value.................................. 3,098,496 $2.50 $7,746,240 $2,347.34
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 Par Value, Underlying Outstanding
Redeemable Common Stock Purchase Warrants (2).................. 1,649,984 $2.50 $4,124,960 $1,249.99
- ------------------------------------------------------------------------------------------------------------------------------------
Total Registration Fee......................................... $3,597.33
====================================================================================================================================
</TABLE>
(1) Pursuant to Rule 457(c) under the Securities Act, the maximum offering
price has been calculated on the basis of the average of the bid and asked
price as of October 8, 1997 as reported on the OTC Bulletin Board.
(2) Pursuant to Rule 416, this Registration Statement also covers such
indeterminate number of shares of Common Stock as may be issuable pursuant
to the anti-dilution provisions of the Warrants.
----------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
CROSS REFERENCE SHEET
Showing Location in Prospectus of Information Required by Items in Part I of
Form SB-2
<TABLE>
<CAPTION>
Registration Statement
Item Number and Caption Caption or Location in Prospectus
- ----------------------- ---------------------------------
<S> <C> <C>
1. Front of Registration Statement
Outside Front Cover of Prospectus..................... Cover Page
2. Inside Front Cover and Outside
Back Cover Pages of Prospectus........................ Inside Front and Outside Back;
Back Cover Pages
3. Summary Information and Risk Factors..................... Prospectus Summary; Risk Factors
4. Use of Proceeds.......................................... Use of Proceeds
5. Determination of Offering Price.......................... Not Applicable
6. Dilution................................................. Not Applicable
7. Selling Security Holders................................. Selling Securityholders
8. Plan of Distribution..................................... Plan of Distribution
9. Legal Proceedings........................................ Business-Legal Proceedings
10. Directors, Executive Officers,
Promoters and Control Persons......................... Management
11. Security Ownership of Certain
Beneficial Owners and Management...................... Principal Stockholders
12. Description of Securities................................ Description of Securities
13. Interest of Named Experts and Counsel.................... Experts; Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities........ Management-Indemnification
15. Organization Within Last Five Years...................... Not Applicable
16. Description of Business.................................. Business
17. Management's Discussion and Analysis
or Plan of Operation.................................. Management's Discussion and Analysis and
Results of Operations
18. Description of Property.................................. Business-Facilities
19. Certain Relationships and Related Transactions........... Certain Transactions
20. Market for Common Equity and
Related Stockholder Matters........................... Risk Factors; Market for Common Equity;
Dividend Policy; Principal Stockholders
21. Executive Compensation................................... Management
22. Financial Statements..................................... Financial Statements
23. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.................................. Business-Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure
</TABLE>
i
<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PROSPECTUS
SUBJECT TO COMPLETION, DATED OCTOBER , 1997
4,748,480 Shares
Capital Growth Holdings, Ltd.
Common Stock
This Prospectus relates to the offer and sale from time to time by certain
security holders (collectively, the "Selling Securityholders") of Capital Growth
Holdings, Ltd., a Delaware corporation (the "Company"), of 4,748,480 shares (the
"Shares") of common stock, $.001 par value ("Common Stock"), including 1,649,984
Shares issuable upon exercise of redeemable common stock purchase warrants of
the Company (the "Warrants").
The Company will not receive any proceeds from this offering; however, the
maximum gross proceeds payable to the Company from the exercise of all of the
outstanding Warrants would be $6,599,940.00.
There is currently only a limited trading market for the Common Stock. The
Company's Common Stock is quoted on the OTC Bulletin Board under the symbol
"CGHL". On October 8, 1997, the last reported bid price of the Common Stock was
$2.50 per share. See "Market for Common Equity."
The Company is unaware of any specific plan of distribution of the Selling
Securityholders with respect to the Shares. The Company believes, however, that
the Shares will be sold from time to time on the OTC Bulletin Board by such
Selling Securityholders or by their pledgees, donees, transferees or other
successors in interest, to or through underwriters or directly to other
purchasers or through brokers or agents in one or more transactions at varying
prices determined at the time of sale. See "Plan of Distribution." The aggregate
net proceeds to the Selling Securityholders from the sale of the Shares pursuant
to this Prospectus will be the sale price of such Shares less any commissions.
The Company has agreed to pay all of the expenses in connection with the
preparation of this Prospectus and the related Registration Statement and the
qualification of the Shares under applicable state securities laws.
This offering is being made without using the services of an underwriter.
Neither International Capital Growth, Ltd. ("ICG"), a wholly-owned subsidiary of
the Company, nor Capital Growth International LLC ("CGI"), an affiliate of the
Company, each a registered broker-dealer with the Securities and Exchange
Commission (the "SEC") and a member of the National Association of Security
Dealers, Inc. (the "NASD"), will participate in this offering in any capacity.
The Selling Securityholders and any broker-dealers, agents or underwriters that
participate with the Selling Securityholders in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), in which event any commission received
by such broker-dealers, agents or underwriters and any profit on the resale of
the Shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. See "Plan of Distribution."
----------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE
A HIGH DEGREE OF RISK. ONLY THOSE PERSONS ABLE TO LOSE
THEIR ENTIRE INVESTMENT SHOULD PURCHASE THESE SECURITIES.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------
The date of this Prospectus is _________, 1997.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. Unless the context requires otherwise, all information in this
Prospectus gives retroactive effect to the reverse acquisition by the Company in
March 1997 of International Capital Growth, Ltd. ("ICG"), a Delaware corporation
and wholly-owned subsidiary of the Company. For accounting purposes, ICG is
considered the acquirer of the Company. See "The Company."
Investors should carefully consider the information set forth under the
heading "Risk Factors."
The Company
Capital Growth Holdings, Ltd. ("CGH" or the "Company") is a financial
services firm concentrating in investment and merchant banking in the United
States and Europe. The Company provides growth companies with access to needed
capital on an agency or principal basis by using unique financing approaches and
tools, while providing the opportunity for investors and the Company to
potentially earn above-average market returns. In addition, the Company intends
to (i) develop an investment banking and research oriented full service
securities brokerage firm; (ii) expand into businesses that complement the
Company's current operations; and (iii) capitalize upon the synergies that may
exist among the Company's present and future operations.
The Company's investment banking activities are conducted through its
wholly-owned subsidiary, ICG. ICG's business focus is to act as placement agent
in connection with the international private placement of securities of its
client companies through a world-wide network of sub-placement agents. In
addition, Capital Growth Europe, Limited ("CGE"), a London based, 50% owned
subsidiary of ICG, acts as a sub-placement agent for ICG in Europe and sources
European investment banking transactions.
The Company intends to develop or acquire an interest in a full service
securities brokerage firm with underwriting operations to provide investment
services to domestic and foreign institutional and individual investors and
investment banking services to company clients. As part of the Company's efforts
to develop such businesses, the Company may acquire Capital Growth International
LLC ("CGI"), an affiliate of the Company, hire personnel, and obtain the
necessary capital to commence operation. Alternatively, the Company may seek to
acquire a currently operating broker-dealer to pursue such business activities.
There can be no assurance, however, that an acquisition of either CGI or a
currently operating broker will ever occur. See "Risk Factors--Uncertainty of
Establishment of Brokerage and Underwriting Operations." The Company also plans
to offer money management services through a relationship with an independent
money manager.
<PAGE>
The Company's management believes that significant synergies would exist
between the operations of ICG and a brokerage operation. These synergies would
enable the brokerage operation to capture (i) brokerage commissions from ICG's
existing relationships with money managers worldwide who have either invested or
acted as sub-placement agents in ICG sponsored transactions and have expressed a
willingness to direct certain commission-generating business to the brokerage
operation; (ii) additional brokerage commissions from investors in ICG sponsored
transactions if such investors liquidate an investment; (iii) a number of public
offering and private placement opportunities resulting from ICG introductions;
and (iv) additional brokerage commissions by acting as sub-placement agent for
ICG sponsored transactions.
Further, in the course of its business activities, ICG is anticipated to
encounter investment opportunities that are more appropriate for a principal
investment due to the nature, size or timing of a subject company's capital
requirements. The Company, through ICG, has invested in, and is anticipated to
continue investing in, either through ICG or a separate business entity,
business opportunities on a principal basis to further capitalize on the
synergies generated through CGH's various business activities.
The Company executive offices are located at 660 Steamboat Road, Greenwich,
Connecticut 06830, and its telephone number is (203) 861-7750.
2
<PAGE>
The Offering
<TABLE>
<S> <C>
Maximum Common Stock Offered by the Selling
Securityholders Assuming Exercise of All Warrants(1)............. 4,748,480 Shares
Maximum Common Stock Outstanding after the
Offering, Assuming Exercise of All Warrants(1)(2)................ 5,048,480 Shares
Total Capital Stock Outstanding(3).................................. 19,829,496 Shares
OTC Bulletin Board Trading Symbol................................... CGHL
Use of Proceeds..................................................... The Company will not receive any proceeds
from the sale of the Shares by the Selling
Securityholders. Any proceeds received by
the Company, from time to time, upon
exercise of the Warrants will be used for
working capital and general corporate
purposes. See "Use of Proceeds."
Plan of Distribution................................................ The Company is unaware of any specific
plan of distribution of the Selling
Securityholders with respect to the Shares,
but believes that the Shares will be sold at
prevailing market prices on the OTC
Bulletin Board, without payment of any
underwriting commissions or discounts other
than ordinary transaction costs. See "Plan
of Distribution." The aggregate net
proceeds to the Selling Securityholders from
the sale of the Shares pursuant to this
Prospectus will be the sale price of such
Shares less transaction costs. The Company
is paying all of the expenses in connection
with the preparation of this Prospectus and
the related Registration Statement. See
"Plan of Distribution."
Risk Factors........................................................ The securities offered hereby involve a
substantial degree of risk and should not be
purchased by anyone who cannot afford the
loss of their entire investment. See "Risk
Factors."
</TABLE>
- --------------------
(1) Includes 1,649,984 shares of Common Stock issuable upon exercise of the
Warrants.
(2) Includes an additional 300,000 shares of Common Stock currently
outstanding.
(3) Consists of (i) 3,398,496 shares of Common Stock (including 3,098,496 shares
of Common Stock being offered hereby and an additional 300,000 shares of
Common Stock which are also currently outstanding); (ii) 11,349,666 shares
of Class B common stock, par value $.001 per share ("Class B Common Stock");
(iii) 4,001,334 shares of 5% Cumulative Convertible Series A Preferred
Stock, par value $.001 per share ("Series A Preferred Stock"); and (iv)
1,080,000 shares of 5% Cumulative Convertible Series B Preferred Stock, par
value $.001 per share ("Series B Preferred Stock"), all of which classes of
capital stock vote together as one class. The Series A Preferred Stock and
(footnotes continued on next page)
3
<PAGE>
the Series B Preferred Stock are sometimes referred to herein as the
"Designated Preferred Stock." Does not include (i) 1,649,984 shares of
Common Stock issuable upon exercise of the Warrants, (ii) up to 52,083
shares of Class B Common Stock issuable upon exercise of redeemable class B
common stock purchase warrants issued to a consultant to the Company (the
"Consulting Warrants"), (iii) 785,000 shares of Class B Common Stock
reserved for issuance upon exercise of options granted under the Company's
1997 Stock Option Plan (the "Stock Option Plan") or (iv) 715,000 shares of
Class B Common Stock reserved for issuance upon exercise of options
available for future grant under the Stock Option Plan. See "Description of
Securities" and "Management -- 1997 Stock Option Plan."
4
<PAGE>
Selected Financial Data
Set forth below are selected financial data of the Company for each of the
periods indicated. The historical financial statements of the Company as of
December 31, 1996 and for the period from February 26, 1996 (inception) through
December 31, 1996 have been audited by Richard A. Eisner & Company, LLP,
independent auditors, and such financial statements and the report thereon are
included elsewhere in this Registration Statement. The financial data for the
six months ended June 30, 1996 and 1997 were derived from the unaudited
financial statements of the Company. In the opinion of management, however, such
data reflect all adjustments (consisting only of normal recurring adjustments)
necessary to fairly present the data for such periods. Operating results for
interim periods are not necessarily indicative of the results that may be
expected for a full year. All of the information set forth below should be read
in conjunction with the Company's consolidated financial statements, including
the notes thereto, "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the other financial
information of the Company included in this Prospectus.
Statement of Operations Data:
<TABLE>
<CAPTION>
For the Six Months Ended
For the period from June 30,
February 26, 1996 (inception) --------------------------------------
through December 31, 1996 1996 1997
----------------------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Consulting fees ................................... $ 0 $ 0 $ 343,934
Private placement
fees ............................................ 0 0 1,800,268
Unrealized gains on
securities ...................................... 0 0 1,168,514
Interest income
22,033 136 53,090
------------ ------------ ------------
Total Revenue ........................................ 22,033 136 3,365,806
============ ============ ============
Operating expenses:
Equity in net loss of
unconsolidated
affiliate ....................................... 0 0 86,115
Selling expenses .................................. 0 10,256 466,100
General and
administrative .................................. 740,649 0 1,490,682
------------ ------------ ------------
Total operating
expenses .......................................... 740,649 10,256 2,042,897
============ ------------ ------------
Net income (loss) before taxes ....................... (718,616) (10,120) 1,322,909
Provision for taxes .................................. 0 0 400,000
------------ ------------ ------------
Net income (loss) ................................... (718,616) (10,120) 922,909
Less cumulative preferred
dividend ............................................ (8,530) 0 (18,261)
------------ ------------ ------------
Net income (loss) attributable to common stockholders. (727,146) (10,120) 904,648
============ ============ ============
Primary:
Net income (loss) per
common share ...................................... ($.06) 0 $0.06
============ ============ ============
Weighted average
number of shares
outstanding ....................................... 11,910,346 3,243,333 14,464,601
============ ============ ============
Fully diluted:
Net income per common
share ............................................. $ 0.05
============ ============ ============
Weighted average
number of shares
outstanding ....................................... 19,718,526
============ ============ ============
</TABLE>
5
<PAGE>
Balance Sheet Data:
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
----------------- --------------
<S> <C> <C>
Total Assets ................................................... $3,486,834 $5,763,122
Total Liabilities .............................................. $ 51,000 $ 851,038
Long-Term Debt ................................................. $ -0- $ -0-
Stockholders' Equity ........................................... $3,435,834 $4,912,084
</TABLE>
6
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
ONLY THOSE PERSONS ABLE TO LOSE THEIR ENTIRE INVESTMENT SHOULD PURCHASE THESE
SECURITIES. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT DECISION,
SHOULD CAREFULLY READ THIS OFFERING DOCUMENT AND CONSIDER, ALONG WITH OTHER
MATTERS REFERRED TO HEREIN, THE RISK FACTORS LISTED BELOW. THIS PROSPECTUS
CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT OF 1934, AS AMENDED
(THE "EXCHANGE ACT"), SEE "--FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS."
Risky Nature of the Company's Business
The Company's business is concentrated in investment banking and the
securities industry. As a result, the Company's business is affected by many
factors of a national and international nature, including economic and political
conditions, broad trends in business and finance, legislation and regulation
affecting the national and international business and financial communities,
currency values, market conditions and the level and volatility of interest
rates. These and other factors may contribute to reduced levels of new issue or
merger, acquisition, restructuring and leveraged capital activities, or the
level of participation in financing and investment transactions related to such
activities, generally resulting in lower revenues for businesses, such as the
Company's, concentrating in investment and merchant banking, principal
transactions, and in the future, securities brokerage. Profitability may be
adversely affected because fixed costs remain relatively unchanged.
Further, substantial fluctuations in volume of securities transactions and
price levels of securities can occur on a daily basis as well as over longer
periods. Reduced volume of securities, foreign exchange, futures and commodities
transactions, reduced market liquidity and reduced prices generally result in
lower revenues for businesses, such as the Company's, concentrating in
investment and merchant banking, and principal transactions. Lower price levels
of securities may result in reduced volume of transactions, and may also result
in losses from declines in the market value of securities held in trading, and
investment positions. Sudden sharp declines in market values of securities can
result in illiquid markets. Such markets, if prolonged, may lower the Company's
revenues from investment and merchant banking, and principal transactions, and
in the future, securities brokerage.
Lack of Operating History
The Company's predecessor, ICG, was founded in February, 1996 and commenced
limited operations in October, 1996. Through December, 1996, ICG was in the
development stage. Accordingly, the Company has little operating history upon
which an evaluation of the Company's performance and prospects can be made.
Further, the Company's management has limited experience in operating a
securities brokerage business with underwriting operations. As a result, in the
event of the establishment of operations as a broker or underwriter of
securities, the Company's prospects as such is highly uncertain. The Company's
prospects must be considered in light of the risks frequently encountered by a
start-up company and a newly established broker-dealer.
7
<PAGE>
Competition and Developments Affecting the Structure of the Securities Industry
All aspects of the Company's business and anticipated business are highly
competitive. The Company expects to compete in domestic and international
markets with numerous financial services companies for potential financing
transactions and investment capital.
Because the securities industry is highly capital-intensive, the Company is
continuously exploring opportunities to raise additional capital. The ability of
a company to expand its business is closely related to its capital structure and
its ability to raise additional capital. Large brokerage firms and brokerage
subsidiaries of large corporations have greater capital, financial and other
resources than the Company. They may also have the ability to raise
substantially more capital than the Company can raise on terms more favorable
than those available to the Company. In addition, several small and specialized
securities firms have been successful in raising significant amounts of capital
for their merger and acquisition activities, merchant banking investment
vehicles and for their own accounts, thereby further intensifying the level of
competition in the industry in which the Company is and plans to operate.
As a result of legislative and regulatory initiatives in the United States
to remove or relieve certain restrictions on the businesses in which commercial
banks can operate, the Company also competes with large commercial banking
institutions, certain of which are in the process of enlarging the scope of
their investment banking activities. Commercial banking organizations, in
general, are expanding their securities and investment advisory activities, as
well as other activities related to the provision of financial services. These
developments may lead to the creation of integrated financial services firms
that are able to compete more effectively than the Company in certain of its
businesses. Furthermore, competition with well-capitalized foreign firms is
intense in international capital markets and is increasing in domestic markets.
To the extent that the Company can compete for investment opportunities it may
only be able to do so on less favorable terms than those obtained by larger,
more established firms.
Risks Associated with Investments in Certain Companies
The Company, through its present and future subsidiaries, anticipates
offering to its investing clients securities of, or investing directly in,
private and public companies with capitalization of less than $250 million --
so-called micro cap companies. Investments in these companies would be
speculative and involve a high degree of risk. As a result, the Company may
experience difficulty in raising capital on behalf of, or incur losses when
making a principal investment in, such companies.
Some of these companies may be in the early stages of development with
little or no operating history, while others may be more seasoned companies that
operate at losses or which experience substantial fluctuations in operating
results. Such companies may need substantial capital to support expansion or to
achieve or maintain a competitive position. Such companies may face intense
competition, including competition from companies with greater financial
resources, more extensive research and development, manufacturing, marketing and
service capabilities, and a larger number of qualified managerial and technical
personnel. Such companies may have insufficient cash flow to service their debt
obligations, including bridge financings which may be arranged by the Company.
Moreover, ICG may take positions in, or offer to its investing clients
securities of, companies in rapidly changing high-technology fields or regulated
industries. Such companies face additional risks of product obsolescence and
rapidly changing regulatory environments which could adversely affect such
companies' prospects. As a result, no assurance can be given
8
<PAGE>
that investments arranged by the Company will not result in substantial or
complete losses to the Company or its investing clients of their entire
investment in such companies. See "--Risk Associated with Investment Banking"
and "--Risk Associated with Merchant Banking."
Risks Associated with Investment Banking
The Company, through ICG, acts as placement agent in private placements of
its company clients' securities and may commence operations as an underwriter of
securities future through a majority-owned subsidiary of CGH. See "--Uncertainty
in Establishment of Brokerage and Underwriting Operations." The Company's
ability to raise capital on behalf of such companies may be adversely affected
by the risky nature of such investments. See "--Risks Associated with
Investments in Certain Companies." The Company's ability to raise such capital
may also be adversely affected by the poor financial performance from time to
time of companies for which the Company had previously raised capital. Further,
the ability of the Company to offer securities of certain client companies in
certain states may be limited by certain state securities commissions and the
Company's subsidiaries' ability to qualify to conduct business therein. See
"--Application for State Registrations Pending."
Under applicable securities laws and court decisions relating to a
placement agent's and an underwriter's liability and limitations on
indemnification by an issuer, an investment bank acting in either such capacity
may be exposed to substantial securities liability for misstatements and
omissions of material facts in offering documents and other communications with
respect to securities offerings.
Risks to the Company's capital with respect to underwritings will include
market, credit and liquidity risks, which risks arise primarily when
underwritten securities cannot be resold, for any reason, at anticipated levels.
As the Company expands its underwriting activities, it expects to make increased
commitments of capital to marketmaking activities in securities of these
issuers. The expected additional concentration of capital in the securities of
those issuers held in inventory will increase the Company's exposure to such
risks. Moreover, underwriting commitments will constitute a charge against net
capital and the Company's ability to make underwriting commitments may be
limited by the requirement that it must at all times be in compliance with such
net capital requirements. See "--Net Capital Requirements."
Risks Associated with Securities Brokerage
The Company may, in the future, commence operations as a broker of
securities. The securities business is volatile and is directly affected by
national and international economic conditions, broad trends in business and
finance and fluctuations in volume and price levels of securities transactions,
all of which are beyond the control of the Company. Reduced trading volume
generally results in reduced transaction revenues and decreased profitability.
Severe market fluctuations in the future could have a material adverse effect on
the Company's business, financial condition and operating results.
The securities business is also subject to various other risks, including
customer default, employees' misconduct, errors and omissions and litigation.
Losses associated with these risks could have a material adverse effect on the
Company's business, financial condition and operating results.
During the last two decades, the securities brokerage industry has
undergone many fundamental changes, including the emergence of discount brokers,
the dominance of institutional investors and consolidation. Several current
trends also affect the securities
9
<PAGE>
brokerage industry, including the increased use of technology and greater
self-reliance among individual investors. There can be no assurance that these
trends or future changes in the securities brokerage industry will not have a
material adverse effect on the Company's business, financial condition and
operating results. In addition, commissions charged to customers of brokerage
services have steadily decreased over the past several years, and the Company
expects such decreases to continue. There can be no assurance that such
decreases will not have a material adverse effect on the Company' business,
financial condition and operating results.
Many aspects of the securities brokerage business involve substantial risks
of liability. In recent years, there has been an increasing incidence of
litigation involving the securities brokerage industry, including class action
suits that generally seek substantial damages and other suits seeking punitive
damages. Like other securities brokerage firms, the Company will potentially be
subject to substantial settlements and judgments.
Further, if the Company develops its securities brokerage operations
through the acquisition of an operating broker-dealer, the Company may be
subject to liability resulting from acts or omissions of such broker-dealer or
its employees that occurred prior to such acquisition under the theory of
successor liability or otherwise. Due to the nature of such potential or pending
legal actions, the Company, at the time of such acquisition, may be unaware, or
find it difficult to assess the extent of, such liability.
Risks Associated with Merchant Banking
The Company has, and anticipates to continue, through ICG or a separate
subsidiary, making direct investments in private and public companies with
capitalization of less than $250 million -- so called micro cap companies. Some
of these companies may be in the early stages of development with little or no
operating history, while others may be more seasoned companies that operate at
losses or which experience substantial fluctuations in operating results. In
either case, investments in these companies would be speculative and would
involve a high degree of risk. See "Risks Associated with Investments in Certain
Companies."
In certain cases, such a direct investment may be structured as a small
short-term debt financing that is intended to be re-paid from the proceeds of a
subsequent, larger financing. With such an investment, the Company runs the risk
that the client company may not have the resources to pay principal and/or
interest on such loan in the event of failure to consummate a proposed offering
of securities or inability to obtain subsequent financing. Additionally, such
investments may be unsecured.
Risks Associated with Money Management
The Company anticipates offering money management services to its clients
through an alliance with one or more independent money management operations.
However, there can be no assurance that any such alliances will be made, or be
made on terms favorable to the Company, in the near future, or at all.
The money management business is subject to the various risks inherent in
the financial industry. Any one or all of these factors may adversely affect the
results of operations of the money management business and individual money
managers. See "--Risky Nature of the Company's Business.
10
<PAGE>
Dependence on Public Offering Market
The Company's business is based in part upon the market for public
financings, which also affects the market for private financings. Changes in the
securities markets and general economic conditions, including economic
downturns, fluctuations in interest rates, the availability of credit, inflation
and other factors, may affect the value of investments of the Company and/or the
scope and depth of the investments available to the Company. The market for
public offerings is cyclical in nature and, accordingly, there can be no
assurance that the securities markets will, at any point in time, be receptive
to public offerings, particularly those of growth companies. Any adverse change
in the market for public offerings could have a material adverse effect on the
Company and could severely limit the Company's ability to realize its business
objectives for itself and on behalf of its investing clients. See "--Risky
Nature of the Company's Business.
Uncertainty of Establishment of Brokerage and Underwriting Operations
The Company intends to develop a securities brokerage firm with
underwriting operations. To do so, the Company may either acquire an affiliated
broker-dealer, CGI, and develop such operations through such entity or acquire a
currently operating broker-dealer.
CGI is registered as a broker-dealer with the SEC and is a member of the
NASD. CGI's restriction letter with the NASD would allow CGI to act as a broker
and underwriter of securities. The closing of an acquisition of CGI would be
subject to the retention of qualified personnel and the procurement of adequate
capital for regulatory and operational purposes by CGH. There can be no
assurance that the Company will be successful in such efforts or that securities
brokerage operations will be commenced through CGI or that the Company will
acquire CGI.
The commencement of operations as a broker or underwriter of securities
through the acquisition by the Company of a currently operating broker-dealer
would be subject to the ability of the Company to seek out and negotiate the
acquisition of such an entity on terms favorable to the Company. If such
acquisition could not be accomplished through the issuance of equity in the
Company in exchange for majority ownership interest in such entity by the
Company, such acquisition would also be subject to the Company's procurement of
adequate capital for purchase of such a broker-dealer. There can be no assurance
that the Company will be successful in any effort to acquire a broker-dealer or
raise capital for the acquisition of a broker-dealer. Accordingly, there can be
no assurance that securities brokerage operations will be commenced on behalf of
the Company through such a transaction.
Application for State Registrations Pending
In order to engage in securities brokerage or underwriting activities, the
Company may also need to apply for clearance from state securities commissions
to conduct business within such states. The Company cannot conduct revenue
producing operations within a state prior to receiving such clearance therefrom.
There can be no assurance that such clearances will be received.
ICG has applied for clearance from certain state securities commissions,
including Illinois, Pennsylvania and New Jersey, to conduct business within such
states. ICG cannot conduct revenue producing operations within a state prior to
receiving such clearance. Currently, the only states in which ICG may generate
commissions are California, Connecticut,
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<PAGE>
Florida and New York. The Company anticipates receiving additional clearances in
December 1997. There can be no assurance, however, that such clearances will be
received as anticipated.
Limited Liquidity of Portfolio Investments
The Company anticipates that a significant portion of the investment
opportunities identified by the Company will consist of securities that are
subject to restrictions on sale. Restricted securities cannot be sold publicly
unless they are registered under the Securities Act, or sold under Rule 144 or
other rules under the Securities Act that permit only limited sales under
specified conditions. Restricted securities may also be subject to contractual
restrictions on transfer with the issuer of such securities. Because it is
anticipated that the Company will identify investments in growth companies, the
ability of the Company or its clients to sell certain of its securities
purchased in private placements may be limited by, and subject to, the lack or
limited nature of a trading market for the securities and the volatility of the
stock market as a whole. Such limitations could prevent or delay any sale of the
client company's securities. Accordingly, the Company and its investing clients
may be substantially dependent upon the ability of the company clients to
implement a plan which, within a reasonable period of time, would facilitate a
trading market for the company client's securities. Restricted securities
generally sell at a price lower than similar securities that are not subject to
restrictions on sale. When restricted securities are sold to the public, the
Company, under certain circumstances, may be deemed to be an "underwriter" or a
controlling person with respect thereto for the purposes of the Securities Act,
and therefore be subject to liabilities as such under the Securities Act.
Possible Need for Additional Investments in Client Companies
Following its initial investment for its own portfolio, ICG may make
additional debt and equity investments ("Additional Investments") in its client
companies in order to increase its investment in a successful client company, to
exercise warrants, options, or convertible securities obtained in the original
financing, to preserve ICG's proportionate ownership when a subsequent financing
is planned or to protect ICG's initial investment when such client company's
performance does not meet expectations. ICG will have the discretion to make an
Additional Investment, if any, as it determines subject to the availability of
capital resources. The failure to make such Additional Investments may, in
certain circumstances, jeopardize the continued viability of a client company
and ICG's initial investment. The necessity of making Additional Investments may
limit the number of companies in which ICG has the ability to invest. There can
be no assurance that ICG will have sufficient funds to make necessary Additional
Investments or that, following an Additional Investment, ICG will not lose the
entire amount of its initial and Additional Investment. ICG has no established
criteria in deciding whether to make an Additional Investment except that the
ICG's management will exercise its business judgment and apply similar
evaluation and diligence criteria as it does with initial investments.
Regulation
The Company's businesses, and the securities industry in general, is
subject to extensive regulation in the United States at both the federal and
state level. As a matter of public policy, various regulatory bodies are charged
with safeguarding the integrity of the securities and other financial markets.
These bodies are charged with protecting the interests of customers
participating in those markets, not with protecting the interests of the
Company's stockholders. In addition, self-regulatory organizations and other
regulatory bodies in the United States such as the NASD, require strict
compliance with their rules and regulations. Failure to comply with any of these
laws, rules or regulations could result in fines, suspension or expulsion, which
could have a material adverse effect upon the Company. Additional legislation or
regulation,
12
<PAGE>
changes in existing laws and rules, or changes in the interpretation or
enforcement of existing laws and rules, may directly affect the mode of
operation and profitability of the Company.
Abroad, the Company's anticipated business is subject to regulation by
various foreign governments and regulatory bodies. Any new regulation or change
in existing regulation by such governments and bodies, including but not limited
to the imposition of exchange controls, could restrict the participation of or
increase the cost of participation by United States securities firms, including
the Company, in the relevant foreign market and restrict the flow of dividends
and other payments from and to the Company's operations in the relevant
jurisdiction. In addition, CGE is subject to U.K. law and the rules and
regulations of the Securities and Futures Authority. Failure to comply with any
of these laws, rules or regulations could result in fines, suspensions or
expulsion, which could have an adverse effect upon the Company.
Investment Company Act Considerations
The regulatory scope of the Investment Company Act of 1940, as amended
("Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. The Investment Company Act may, however, also
be deemed to be applicable to a company that does not intend to be characterized
as an investment company but which, nevertheless, engages in activities which
may be deemed to be within the definitional scope of certain provisions of the
Investment Company Act. The Company believes that its principal activities will
not subject the Company to regulation under the Investment Company Act.
Nevertheless, there can be no assurance that the Company will not be deemed to
be an investment company. In the event the Company is deemed to be an investment
company, the Company may become subject to certain restrictions relating to the
Company's activities, including restrictions on the nature of its investments
and the issuance of securities. In addition, the Investment Company Act imposes
certain requirements on companies deemed to be within its regulatory scope,
including registration as an investment company, adoption of a specific form of
corporate structure, compliance with certain burdensome reporting,
record-keeping, voting, proxy, disclosure and other rules and regulations. In
the event of characterization of the Company as an investment company, the
failure by the Company to satisfy regulatory requirements, whether on a timely
basis or at all, could have a material adverse effect on the Company.
Net Capital Requirements
The Securities and Exchange Commission, the Department of the Treasury, the
Securities and Futures Authority in the U.K. and various other securities and
commodities exchanges and other regulatory bodies in the United States and
abroad either have or are considering the imposition of rules with respect to
net capital requirements which could affect the Company or its subsidiaries. A
change in such rules, or the imposition of new rules, affecting the scope,
coverage, calculation or amount of such net capital requirements, or a
significant operating loss or any unusually large charge against net capital
could adversely affect the ability of the Company to pay dividends or to expand
or even maintain levels of business.
Control by Management
The Company's founders (including most of the Company's officers and
directors, among others (collectively, the "Control Group")), own 76.53% of the
issued and outstanding shares of voting securities of the Company. The Control
Group will continue to control the Company for an indefinite period of time.
Further, the Control Group and their affiliates may purchase
13
<PAGE>
shares in the open market, which purchases would facilitate the maintenance of
the Control Group's level of control of the Company.
Dependence on Key Personnel; Absence of Non-Competition Agreements
The Company's success will depend upon the services of its executives and
certain key personnel. Competition among financial services firms for executives
and other professional personnel is intense and subject to escalating
compensation expenses. There can be no assurance that the Company will be
successful in attracting and retaining key personnel. The loss of the services
of any one or more of such personnel or the inability of the Company to attract
such personnel could have a material adverse effect on the Company. Further, the
Company does not have employment or non-competition agreements with any officer
or director of the Company or any of its subsidiaries. There can be no
assurance, therefore, that such officers and directors will remain associated
with the Company in any particular capacity or that they will not currently, or
in the future, compete, directly or indirectly, with the Company. See
"Management."
Conflicts of Interest
Each of the Company's officers has a full-time position with CGI. None of
such officers is currently required to commit any portion of his business time
to the affairs of the Company. CGI may become a majority-owned subsidiary of the
Company and become engaged in the securities brokerage and underwriting
businesses. Until such time, such personnel will have conflicts of interest in
allocating management time among their various business activities. The officers
and directors of the Company may be involved in other positions at CGI with
activities similar to those to be undertaken by the Company and there can be no
assurance that they will offer any suitable prospective business opportunities
to the Company. Such persons may have conflicts of interest in determining to
which entity a particular business opportunity should be presented. In general,
officers and directors of a corporation are required to present certain business
opportunities to such corporation. Accordingly, as result of multiple business
affiliations, certain of the Company's officers, directors and stockholders may
have similar legal obligations to present certain business opportunities to
multiple entities. There can be no assurance that any of the foregoing conflicts
will be resolved in favor of the Company. See "Management," "Certain
Transactions."
Exercise of Warrants Will Have Dilutive Effect
The Warrants provide, during their respective terms, an opportunity for the
holder thereof to profit from a rise in the market price of the Common Stock
with resulting dilution in the ownership interest in the Company held by the
then present shareholders. Because holders of the Warrants would most likely opt
to exercise their securities and receive the underlying Common Stock at a time
when the Company may be able to obtain capital by a new offering of securities
on terms more favorable than those provided by such securities, the terms on
which the Company may be able to obtain additional capital would be affected
adversely. See "Description of Securities."
Securities Eligible for Future Sale
All but 288,834 of the Company's 3,398,496 currently outstanding shares of
Common Stock are "restricted securities" as that term is defined in Rule 144
promulgated under the Securities Act. Of such 3,398,496 shares of Common Stock,
3,098,496 shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities
14
<PAGE>
Act, except for any such shares purchased by "affiliates," which will be subject
to certain resale limitations under Rule 144. Rule 144 provides, in essence,
that a person holding "restricted securities" for a period of one year may sell
only an amount every three months equal to the greater of (a) one percent of the
Company's issued and outstanding Common Stock, or (b) the average weekly volume
of sales during the four calendar weeks preceding the sale. The amount of
"restricted securities" which a person who is not an affiliate of the Company
may sell is not so limited, since non-affiliates may sell without volume
limitation their shares held for two years if there is adequate current public
information available concerning the Company. Further, the Company has
16,431,000 shares of capital stock other than Common Stock issued and
outstanding, all of which are "restricted securities." Such shares of capital
stock will automatically convert from Class B Common Stock to Common Stock on
December 31, 1998, at which time such shares of Common Stock may be sold in
compliance with Rule 144. See "Description of Securities."
Issuances of additional shares of Common Stock may cause current
shareholders of the Company to suffer significant dilution which may adversely
affect any market for the securities of the Company. See "Dilution".
Prospective investors should be aware that the possibility of sales may, in
the future, depress the price of the Common Stock in any market which may
develop and, therefore, the ability of any investor to market shares may be
dependent directly upon the number of shares that are offered and sold.
Affiliates of the Company may sell their shares during a favorable movement in
the market price of the Common Stock, if a market develops in the Common Stock,
which may have a negative effect on the price per share of the Common Stock.
Possible Adverse Effects of Authorization of Preferred Stock
The Company has 20,000,000 authorized shares of preferred stock, including
5,081,334 shares of Designated Preferred Stock currently issued and outstanding.
Shares of Designated Preferred Stock acquired by the Company by reason of
purchase, conversion or otherwise shall be retired and become authorized but
unissued shares of preferred stock which may be reissued by the Company as part
of a new series of preferred stock. The Designated Preferred Stock may be
converted by the holders thereof at any time and will automatically convert into
shares of Class B Common Stock on October 12, 1997. The preferred stock may be
issued with such designations, rights and preferences as may be determined from
time to time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval (but subject to applicable government
regulatory restrictions), to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power
or other rights of the holders of the Company's Common Stock. In the event of
issuance, the preferred stock could be utilized, under certain circumstances, as
a method of discouraging, delaying or preventing a change in control of the
Company. Although the Company has no present intention to issue any additional
shares of its preferred stock there can be no assurance that the Company will
not do so in the future. See "Description of Securities."
Listing on OTC Bulletin Board; Limited Trading Market; "Penny Stock" Regulations
May Impose Certain Restrictions
The Company's Common Stock has been quoted on the OTC Bulletin Board since
June 12, 1997. The Common Stock has only a limited trading market. There can be
no assurance that a more active trading market will develop or, if developed,
that it will be maintained. No prediction can be made as to the effect, if any,
that the sale of restricted shares of Common Stock or shares of Common Stock
issuable upon conversion of the Class B Common
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<PAGE>
Stock on December 31, 1998 or exercise of the Warrants or the availability of
such securities for sale will have on the market price of the Common Stock from
time to time, if such a market develops. As a result, an investor might find it
difficult to dispose of, or to obtain accurate quotations as to the value of,
the Common Stock.
In addition, as the Common Stock has no active trading market and the
trading price of the Common Stock is less than $5.00 per share, trading in the
Common Stock is subject to the requirements of Rule 15g-9 promulgated under the
Exchange Act. Under such rule, broker-dealers who recommend such low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchase
and receive the purchaser's written consent prior to the transaction. The Common
Stock is also subject to the Securities Enforcement Remedies and Penny Stock
Reform Act of 1990, which requires additional disclosure in connection with any
trades involving a stock defined as a penny stock (generally, according to
recent regulations adopted by the Commission, any equity security not traded on
an exchange or quoted on Nasdaq that has a market price of less than $5.00 per
share, subject to certain exceptions), including the delivery, prior to any
penny stock transaction, of a disclosure schedule explaining the penny stock
market and the risks associated therewith. Such requirements could severely
limit the market liquidity of the Common Stock and the ability of purchasers in
this offering to sell their securities in the secondary market.
Requirements of Current Prospectus and State Blue Sky Registration in Connection
with the Exercise of the Warrants
The Company will be able to issue the Shares issuable upon the exercise of
the Warrants only if (i) there is a current Prospectus relating to the
securities offered under an effective Registration Statement filed with the
Commission, and (ii) such Common Stock is then qualified for sale or exempt
therefrom under applicable state securities laws of the jurisdictions in which
the various holders of such Warrants reside. While this Prospectus relates to a
current, effective Registration Statement, there can be no assurance, that the
Company will be successful in maintaining a current Registration Statement.
After a Registration Statement becomes effective, it may require updating by the
filing of post-effective amendments.
Forward-Looking Statements and Associated Risk
This Prospectus contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
which represents the Company's expectation or beliefs, including statements
regarding, among other things, (i) the Company's growth strategy or potential,
(ii) anticipated trends in the Company's businesses, (iii) the Company's ability
to compete with its competitors and (iv) the Company's profitability and
projected financial condition. Any statements contained in this Prospectus that
are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may," "will,"
"expect," "plan," "believe," "anticipate," "intend," "estimate" or "continue,"
the negative or other variations thereof or comparable terminology are intended
to identify forward-looking statements. These statements are based upon
Management's beliefs at the time they are made as well as assumptions made by
Management based upon information available to it. The current assumptions
regarding the Company's operations, performance, development and results of its
business include (i) the accuracy of estimates of anticipated increases in the
Company's expenses due to implementation of the Company's business plan, (ii)
the successful completion of securities offerings anticipated to be consummated
through ICG, (iii) the maintenance of market conditions affecting the Company's
services, (iv) the successful implementation and maintenance of a securities
brokerage operation
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<PAGE>
and (v) appropriate regulatory approvals. Forward-looking statements are
inherently subject to various risks and uncertainties, including those described
above, as well as potential changes in economic or regulatory conditions that
are largely beyond the Company's control. Should one or more of these risks
materialize or changes occur, or should Management's assumptions prove to be
incorrect, the Company's actual results may materially vary from those
anticipated or projected.
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THE COMPANY
General
Capital Growth Holdings, Ltd. was incorporated in Colorado on June 15,
1987. The Company, formerly known as Galt Financial Corporation, and previously,
Earnco, Inc., was organized to evaluate, structure and complete a merger with,
or acquisition of, an operating business.
Acquisition of International Capital Growth, Ltd.
On March 14, 1997, the Company acquired 100% of the outstanding capital
stock of International Capital Growth, Ltd., a Delaware corporation and member
of the NASD in a reverse acquisition consummated through a share exchange
transaction (the "Share Exchange").
The Share Exchange resulted in a change in control of the Company. The
former shareholders of the Company currently own approximately 2%, and the
former stockholders of ICG currently own approximately 98%, of the outstanding
capital stock of the Company.
Prior to and in connection with the Share Exchange, the Company adopted a
stock option plan, amended its charter to, among other things, change its name
from Galt Financial Corporation to Capital Growth Holdings, Ltd. and effected a
60 for 1 reverse split of its outstanding capital stock (the "Reverse Stock
Split"). Upon effectiveness of the Reverse Stock Split, the Company had 297,094
shares of capital stock issued and outstanding. On and after March 14, 1997, in
accordance with the terms and conditions of the Share Exchange, the Company
issued 18,982,906 shares of its capital stock and 1,875,000 redeemable warrants
(the "Exchange Warrants") to the former security holders of ICG in exchange for
outstanding securities of ICG, in each case of the same type and denomination.
The 18,982,906 shares of capital stock of the Company that were issued in
connection with the Share Exchange consisted of (a) 2,551,906 shares of Common
Stock, (b) 11,349,666 shares of newly-authorized Class B Common Stock, (c)
4,001,334 shares of newly-designated Series A Preferred Stock and (d) 1,080,000
shares of newly-designated Series B Preferred Stock, all of which classes of
capital stock vote together as one class. The Class B Common Stock is junior in
priority with respect to dividends to the Common Stock and the Designated
Preferred Stock and automatically converts into Common Stock on a one-for-one
basis on December 31, 1998. The holders of the Designated Preferred Stock are
entitled to preferential cumulative dividends until conversion thereof into
Class B Common Stock, share equally with the Class B Common Stock in any
dividend declared thereon, can be converted into Class B Common Stock by the
holder on a one-for-one basis at any time and automatically convert into Class B
Common Stock on a one-for-one basis on October 12, 1997. The Exchange Warrants
consisted of 1,625,000 Warrants, each exercisable to purchase one share Common
Stock, which are being registered hereby, at $4.00 per share (subject to
adjustment) at any time until October 1999 or March 2000, as the case may be,
and 250,000 Consulting Warrants, each exercisable to purchase one share of Class
B Common Stock at $2.00 per share (subject to adjustment) at any time, subject
to an vesting schedule, until November 1999. See "Description of Securities."
In connection with the Share Exchange, the then officers and directors of
the Company resigned and certain of the officers and the directors of ICG were
elected as officers and directors of the Company. See "Management."
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<PAGE>
Private Placement
On March 27, 1997, the Company completed a private offering (the "Private
Offering") of shares of its Common Stock at $2.25 per share pursuant to
Regulation D ("Regulation D") and Regulation S ("Regulation S"), each as
promulgated under the Securities Act, to "accredited investors" as that term is
defined in Regulation D and to non-"U.S. persons" in an "offshore transaction"
as such terms are defined in Regulation S, respectively. The Company issued
549,496 shares of Common Stock in the Private Offering which yielded net
proceeds of $1,069,000. The Company also issued a total of 24,984 Warrants as
partial compensation to certain sub-placement agents in the Private Offering,
each Warrant is exercisable to purchase one share of Common Stock at $4.00 per
share (subject to adjustment) at any time prior to redemption thereof until
March 2000. The shares of Common Stock underlying the Warrants issued to such
sub-placement agents are being registered in this offering. The placement agent
in the Private Offering is an affiliate of the Company. See "Certain
Transactions."
Change in Fiscal Year End and Reincorporation
On March 25, 1997, the Company changed from a fiscal year that runs from
February 1 to January 31 to a fiscal year that runs from January 1 to December
31, commencing the year ended December 31, 1997. On June 25, 1997, the Company
effected a reincorporation from the State of Colorado to the State of Delaware
which transaction included the adoption of the Company's current Certificate of
Incorporation and By-Laws.
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USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
offered by the Selling Securityholders. Management estimates that the aggregate
expense of this offering will be approximately $80,597, all of which will be
borne by the Company.
The gross proceeds from the exercise of all of the outstanding Warrants
would be $6,599,940.00. The Company intends to use the proceeds from the
exercise of the Warrants, if any, for working capital and general corporate
purposes. Proceeds not immediately required for such purposes will be invested
principally in United States government securities, short-term certificates of
deposit, money market funds or other short-term interest-bearing investments.
MARKET FOR COMMON EQUITY
The Company's Common Stock is currently quoted on the OTC Bulletin Board
under the symbol "CGHL". There is currently no public trading market for the
Company's Class B Common Stock. The table set forth below presents the high and
low bid prices of the Common Stock for the period indicated in 1997 based on
information provided by the OTC Bulletin Board. Such over-the-counter market
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions and may not necessarily represent actual transactions. Further, for
the period from June 6, 1997 through July 8, 1997, traditional high and low
quotes could not be determined as during such time there was only one market
maker for the Common Stock. Prior to June 6, 1997, there was no trading market
for the Common Stock.
1997:
- -----
High Low
----- -----
>From June 6 (initial listing),
through June 30 .................................. $2.75 $2.25
----- -----
>From July 1,
through September 30 ............................. $2.75 $2.25
----- -----
On October 8, 1997, the last reported bid price of the Common Stock was
$2.50.
As of October 8, 1997, there were approximately 370 holders of record of
the Common Stock and seven holders of record of the Class B Common Stock.
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DIVIDEND POLICY
The Designated Preferred Stock is entitled to annual cumulative per share
dividends of 5% of the respective liquidation preferences thereof, payable
quarterly, until optional conversion thereof into Class B Common Stock at any
time or automatic conversion thereof into Class B Common Stock on October 12,
1997. No dividend may be paid on any class of capital stock of the Company
ranking junior in priority with respect to dividends to the Designated Preferred
Stock until all dividends on the Designated Preferred Stock are paid in full.
The liquidation preference of the Series A Preferred Stock and Series B
Preferred Stock are $.14 and $.21 per share, respectively.
As of March 25, 1997, the Company's Board of Directors declared an annual
cumulative dividend of $.225 per share on the Common Stock for the calendar
years 1997 and 1998, subject to (i) the payment of dividends on all classes of
capital stock with priority over the Common Stock (currently, the Designated
Preferred Stock) and (ii) restrictions under applicable law (the "Common Stock
Dividend"). The Common Stock Dividend, which began accruing as of January 1,
1997, is currently payable on a quarterly basis ending on December 31, 1998.
The Company's ability to pay dividends on its common equity is limited by
state law and the Company's ability to pay dividends on classes of capital stock
with priority over a given class of equity with respect to dividends. In
addition to restrictions set forth above, the Common Stock and the Class B
Common Stock are junior in priority to the Designated Preferred Stock with
respect to dividends. The Class B Common Stock is junior in priority to the
Common Stock with respect to dividends.
The Company does not anticipate declaring any additional dividends on any
of its classes of capital stock. Any future dividend declarations would be
subject to the restrictions set forth above, approval of the Company's Board of
Directors, contractual restrictions and applicable law.
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CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1997. The following table should be read in conjunction with the financial
statements of the Company and notes thereto included elsewhere herein.
June 30, 1997
-------------
Liabilities:
Accrued expenses and other liabilities ..................... $ 41,000
Deferred tax liability ..................................... 400,000
Dividends payable .......................................... 410,038
-----------
Total Liabilities .......................................... 851,038
Stockholders' equity:
Series A Preferred Stock - $0.001 par value,
4,001,334 shares authorized; 4,001,334
shares issued and outstanding at liquidation
value of $.14 .......................................... 560,187
Series B Preferred Stock - $.001 par value,
1,080,000 shares authorized; 1,080,000
shares issued and outstanding at liquidation ........... 226,800
value of $.21
Common Stock - $.001 par value, 25,000,000
shares authorized; 3,398,496 shares issued
and outstanding ........................................ 3,398
Class B Common Stock - $.001 par value,
25,000,000 shares authorized; 11,349,666
shares issued and outstanding .......................... 11,350
Additional Paid in Capital ................................... 4,399,694
Accumulated Deficit .......................................... (205,745)
Subscriptions Receivable ..................................... (53,600)
Treasury Stock (15,000 Shares) ............................... (30,000)
-----------
Total stockholders' equity ................................. 4,912,084
-----------
TOTAL ...................................................... $ 5,763,122
===========
22
<PAGE>
SELECTED FINANCIAL DATA
Set forth below are selected financial data of the Company for each of the
periods indicated. The historical financial statements of the Company as of
December 31, 1996 and for the period from February 26, 1996 (inception) through
December 31, 1996 have been audited by Richard A. Eisner & Company, LLP,
independent auditors, and such financial statements and the report thereon are
included elsewhere in this Registration Statement. The financial data for the
six months ended June 30, 1996 and 1997 were derived from the unaudited
financial statements of the Company. In the opinion of management, however, such
data reflect all adjustments (consisting only of normal recurring adjustments)
necessary to, however, fairly present the data for such periods. Operating
results for interim periods are not necessarily indicative of the results that
may be expected for a full year. All of the information set forth below should
be read in conjunction with the Company's consolidated financial statements,
including the notes thereto, "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the other
financial information of the Company included in this Prospectus.
Statement of Operations Data:
<TABLE>
<CAPTION>
For the Six Months Ended
For the period from June 30,
February 26, 1996 (inception) ----------------------------------
through December 31, 1996 1996 1997
----------------------------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Consulting fees ...................................... $ 0 $ 0 $ 343,934
Private placement fees ............................... 0 0 1,800,268
Unrealized gains on
securities ......................................... 0 0 1,168,514
Interest income ...................................... 22,033 136 53,090
----------- ----------- -----------
Total Revenue ........................................... 22,033 136 3,365,806
=========== =========== ===========
Operating expenses:
Equity in net loss of
unconsolidated
affiliate .......................................... 0 0 86,115
Selling expenses ..................................... 0 10,256 466,100
General and
administrative ..................................... 740,649 0 1,490,682
----------- ----------- -----------
Total operating
expenses ............................................. 740,649 10,256 2,042,897
=========== ----------- -----------
Net income (loss) before
taxes ................................................ (718,616) (10,120) 1,322,909
Provision for taxes ..................................... 0 0 400,000
----------- ----------- -----------
Net income (loss) ................................... (718,616) (10,120) 922,909
Less cumulative preferred
dividend ............................................... (8,530) 0 (18,261)
----------- ----------- -----------
Net income (loss) attributable to common stockholders.... (727,146) (10,120) 904,648
=========== =========== ===========
Primary:
Net income (loss) per
common shares ........................................ ($0.06) 0 $0.06
=========== =========== ===========
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C> <C>
Weighted average
number of shares
outstanding................ 11,910,346 3,243,333 14,464,601
=========== =========== ===========
Fully diluted:
Net income per common
share...................... $0.05
=========== =========== ===========
Weighted average
number of shares
outstanding................ 19,718,526
=========== =========== ===========
</TABLE>
Balance Sheet Data:
December 31, 1996 June 30, 1997
----------------- -----------
Total Assets ........................... $3,486,834 $5,763,122
Total Liabilities ...................... $ 51,000 $ 851,038
Long-Term Debt ......................... $ -0- $ -0-
Stockholders' Equity ................... $3,435,834 $4,912,084
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
CGH is a diversified financial services firm pursuing investment and
merchant banking, and plans to develop securities brokerage and money management
operations, in the United States and Europe. The Company has one wholly-owned
subsidiary, ICG. ICG owns a 50% interest in CGE.
ICG commenced formal operations in October 1996 when it became registered
as a broker-dealer with the SEC and obtained membership with the NASD. On March
14, 1997, ICG consummated a share exchange transaction with the Company and
became the Company's wholly-owned subsidiary. In June 1997, the Company
reincorporated into the State of Delaware and had its common stock listed on The
Nasdaq Stock Market, Inc.'s OTC Bulletin Board under the symbol "CGHL". Through
December 1996, ICG was a development stage company.
During the first six months of fiscal year 1997, the Company has generated
revenues and earnings from ICG's investment banking activities. However, the
Company anticipates that its operating expenses will increase in the event of
the commencement of securities brokerage activities. To remain profitable, the
Company must generate revenues in excess of operating expenses anticipated to be
incurred in connection with ICG's business, the potential commencement of
securities brokerage activities and the expansion of its business.
As ICG did not commence business activities until October 1996, the Company
believes that a period to period comparison of results of operations would not
be meaningful.
Results of Operations for the Period from February 26, 1996 (inception) to
December 31, 1996
Revenues
The Company generated interest income of $22,033 on funds raised in a
private placement of the Company's securities in March and October 1996.
Operating Expenses
Operating expenses for the period were $740,647, consisting principally of
professional fees, management and employee salaries and establishment of its
business as a broker-dealer.
Net Loss
As a result of the foregoing, the Company had net loss of $718,616.
Results of Operating for the Six Months ended June 30, 1997
Revenues
The Company generated $3,365,806 in revenues during the six months ended
June 30, 1997, of which $1,650,268 resulted from fees in connection with an
$11.1 million private placement consummated by ICG as placement agent for a
publicly held company in the second quarter. The Company generated $150,000 in
other private placement fees,
25
<PAGE>
$343,934 in consulting fees, unrealized gains on its securities portfolio of
$1,168,514, principally from the securities of one company, as well as interest
income of $53,090.
Operating Expenses
Operating expenses for the six months ended June 30, 1997 were $2,042,897,
consisting of selling expenses of $466,100, general and administrative expenses
of $1,490,682, approximately 45% of which consisted of management and employee
salaries, and the recognition of the equity in the net loss of the Company's
unconsolidated subsidiary Capital Growth Europe of $86,115.
Net Income
As a result of the foregoing, and after provision for taxes of $400,000,
the Company had net income of $922,909 for the six months ended June 30, 1997.
Liquidity and Capital Resources
Capital for the Company has been provided by the investments made by the
initial shareholder group and through private placements of the Company's
securities. In March 1997, the Company raised net proceeds of approximately $1.0
million in a private placement of 549,496 shares of its common stock.
To date, the Company has used its capital for merchant banking (securities
investments), working capital and for general corporate purposes. In addition,
in March 1997, the Company loaned $200,000 to an entity controlled by Messrs.
Ronald Koenig and Stanley Hollander, two of the Company's directors, officers
and principal shareholders. The loan carries interest at the rate of 6% per
annum and was approved by a majority of disinterested directors of the Company.
In March 1997, the Company acquired from a third party marketable
securities for a total cost of $450,000, which were valued on June 30, 1997 at
$1.65 million.
In the event of the commencement of securities brokerage activities, the
Company anticipates committing a significant amount of capital thereto. The
Company anticipates raising additional equity capital of up to $1.0 million in
gross proceeds for this purpose. There can be no assurance, however, that the
Company's efforts to raise additional capital will be successful. The Company
has no material capital commitments other than annual salaries to its executive
officers and employees of approximately $1,237,000 and a letter of credit in the
amount of $100,000 to secure future rent payments and leasehold improvements at
the Company's London office. The Company believes that its current cash
resources and anticipated cash flow from operations will be adequate to satisfy
its capital commitments during 1997.
On July 1, 1997, the Company paid a $.1125 per share dividend to holders of
its common stock which dividend totaled $382,332 in the aggregate. The dividend
represented payment for the six month period from January 1, 1997 through June
30, 1997 of a two year $.225 annual per share dividend (the "Common Stock
Dividend"). On September 30, 1997, the Company paid a $.05625 per share dividend
which totaled $191,165 in the aggregate, representing payment of the Common
Stock Dividend for the three month period from July 1, 1997 through September
30, 1997. The balance of the Common Stock Dividend is anticipated to be paid on
a quarterly basis at a rate of $.05625 per share from December 31, 1997 through
December 31, 1998.
26
<PAGE>
On October 12, 1997, each share of the Company's 4,001,334 shares of Series
A Preferred Stock and 1,080,000 shares of Series B Preferred Stock will convert
into one share of Class B Common Stock, at which time the 5% per share annual
dividend that has accrued thereon will cease to accrue and will be due and
payable on or before October 24, 1997 out of funds legally available therefor.
The dividend payable at such time to the holders of the Series A Preferred Stock
and Series B Preferred Stock is $5,761 and $2,769, respectively.
Variability of Results
The Company anticipates that a substantial portion of its future revenues
will originate from ICG's activities as placement agent in private financings.
When acting as placement agent, ICG is typically compensated upon the successful
closing of a financing. Agency financings typically take from 90 to 120 days to
consummate after ICG is retained as placement agent. Activities will be
undertaken and expenses incurred in one fiscal period although a fee may not be
earned until a subsequent period. As a result, the financial results of the
Company may vary dramatically from quarter to quarter. Further, the Company's
operating results will also vary as a result of the marking to market of its
portfolio of securities.
27
<PAGE>
BUSINESS
General
Capital Growth Holdings, Ltd. ("CGH" or the "Company") is a financial
services firm concentrating in investment and merchant banking in the United
States and Europe. The Company provides growth companies with access to needed
capital on an agency or principal basis by using unique financing approaches and
tools, while providing the opportunity for investors and the Company to
potentially earn above-average market returns. In addition, the Company intends
to (i) develop an investment banking and research oriented full service
securities brokerage firm; (ii) expand into businesses that complement the
Company's current operations; and (iii) capitalize upon the synergies that may
exist among the Company's present and future operations.
The Company's investment banking activities are conducted through its
wholly-owned subsidiary, ICG. ICG's business focus is to act as placement agent
in connection with the international private placement of securities of its
client companies through a world-wide network of sub-placement agents. In
addition, CGE, a London based, 50% owned subsidiary of ICG, acts as a
sub-placement agent for ICG in Europe and sources European investment banking
transactions.
The Company intends to develop or acquire an interest in a full service
securities brokerage firm with underwriting operations to provide investment
services to domestic and foreign institutional and individual investors and
investment banking services to company clients. As part of the Company's efforts
to develop such businesses, the Company may acquire CGI, an affiliate of the
Company, hire personnel, and obtain the necessary capital to commence operation.
Alternatively, the Company may seek to acquire a currently operating
broker-dealer to pursue such business activities. There can be no assurance,
however, that an acquisition of either CGI or a currently operating broker will
ever occur. See "Risk Factors--Uncertainty of Establishment of Brokerage and
Underwriting Operations." The Company also plans to offer money management
services through a relationship with an independent money manager.
The Company's management believes that significant synergies would exist
between the operations of ICG and a brokerage operation. These synergies would
enable the brokerage operation to capture (i) brokerage commissions from ICG's
existing relationships with money managers worldwide who have either invested or
acted as sub-placement agents in ICG sponsored transactions and have expressed a
willingness to direct certain commission-generating business to the brokerage
operation; (ii) additional brokerage commissions from investors in ICG sponsored
transactions if such investors liquidate an investment; (iii) a number of public
offering and private placement opportunities resulting from ICG introductions;
and (iv) additional brokerage commissions by acting as sub-placement agent for
ICG sponsored transactions.
Further, in the course of its business activities, ICG is anticipated to
encounter investment opportunities that are more appropriate for a principal
investment due to the nature, size or timing of a subject company's capital
requirements. The Company, through ICG, has invested in, and is anticipated to
continue investing in, either through ICG or a separate business entity,
business opportunities on a principal basis to further capitalize on the
synergies generated through CGH's various business activities.
28
<PAGE>
Existing and Proposed Financial Service Enterprises
U.S. Investment Banking: International Capital Growth, Ltd.
ICG was formed in February 1996 and commenced formal operations in October
1996 when it was granted registration as a broker-dealer from the SEC and
membership with the NASD. Management's goal through ICG is to provide access to
capital for its corporate clients and offer its investor clients the potential
to earn substantial returns while earning fees for its own account consisting of
both cash and equity securities. Management believes that ICG's success will
derive from combining (a) Management's expertise in identifying growth companies
with strong fundamentals, skillful management and a sustainable competitive
advantage in their respective fields; (b) a long-term relationship approach to
investment banking; (c) a global distribution network; and (d) unique financing
tools.
In June 1997, ICG, acting as placement agent, raised approximately $11.1
million in a private placement of convertible debentures for a publicly-held
company.
Management has developed substantial expertise in identifying young
companies exhibiting the necessary fundamentals required for their success. In
addition, Management has developed a unique relationship oriented approach
towards both corporate clients and investors, emphasizing communication and a
common goal. By maintaining seats on, or participating in meetings of, a client
company's board of directors and providing consulting services, Management
believes it will be able to provide guidance at a more sophisticated level than
is typically available to young companies. Management believes this approach
differs greatly from that used by traditional Wall Street firms which are
predominantly transaction oriented. As a result of this hands-on approach,
Management also believes it is well equipped to communicate client company
developments to the financial community.
A critical element in ICG's approach to its business is the strong,
personal relationships maintained between Management and the international,
independent network of sales representatives ("Sub-Placement Agents") that
distribute securities for ICG sponsored transactions. This network of
Sub-Placement Agents currently encompasses in excess of 30 agents in 7 countries
and is anticipated to be expanded by Management. As a result of these
relationships and Management's experience, ICG believes it has the potential to
effectively raise capital for its sponsored transactions.
As part of ICG's on-going program of communicating with its Sub-Placement
Agents and the financial community at large, ICG publishes research reports
under the name Everglades Research, which name is licensed to ICG from Robert
Zelinka, ICG's Director of Research. Mr. Zelinka's responsibilities include (i)
providing research under the Everglades Research name on ICG-sponsored
companies; (ii) coordinating with investment banking firms to receive additional
research coverage; (iii) coordinating with financial public relations firms; and
(iv) planning annual ICG conferences and "road shows" to increase after-market
awareness of sponsored companies. There can be no assurance that Everglades'
efforts on behalf of ICG will be successful.
European Corporate Finance: Capital Growth Europe, Limited
CGE was formed as a United Kingdom corporation in May 1996 by ICG and an
experienced group of financial professionals in London; each group holds a 50%
interest therein. CGE became licensed with the Securities Futures Authority of
the United Kingdom in November 1996, which enables CGE to carry out corporate
finance business in United Kingdom.
29
<PAGE>
CGE undertakes sales and distribution functions for ICG sponsored
transactions in the United Kingdom. Further, CGE plans to operate as an
originator of European transactions and as a corporate finance business in the
small-cap sector of the European equity markets.
In addition, it is intended that CGE will carry out corporate finance
advisory work for its clients. CGE's target client is a business with sales of
less than 500 million pounds sterling, net assets of less than 100 million
pounds sterling and/or profits of under 50 million pounds sterling.
The Company believes there are substantial synergies between ICG and CGE.
Management believes that by applying its U.S. investment banking expertise to
the United Kingdom and European financial markets, it will benefit by
diversifying its efforts and widening the regions from which its potential
investment banking transactions may be generated. Further, ICG will seek to
capitalize upon the synergies in terms of personnel and knowledge of products,
industry and markets between the United States and the United Kingdom corporate
financing activities.
Securities Brokerage and Underwriting
The Company's securities brokerage and underwriting activities are
anticipated to be conducted through a majority-owned subsidiary of CGH. The
Company plans to develop or acquire a full service securities brokerage firm to
provide investment services to domestic and foreign institutional and individual
investors and investment banking services to company clients. If developed, the
Company plans to focus its efforts initially in South Florida due to (i)
management's expertise in this geographic market and (ii) the management's
belief that the opportunity exists to provide both brokerage and investment
banking services with a higher level of quality than management believes is
currently available in the South Florida marketplace. The Company may acquire
CGI, a non-operating broker-dealer and affiliate of the Company. There can be no
assurance, however, that an acquisition of CGI will be completed on terms
favorable to the Company, or at all. The closing of such acquisition would be
subject to the retention of qualified personnel and the procurement of adequate
capital for regulatory and operational purposes. If such acquisition does not
occur, the Company may acquire a currently operating broker-dealer to pursue
such business activities. See "Risk Factors--Uncertainty of Establishment of
Brokerage and Underwriting Operations" and "Certain Transactions."
The Company also envisions conducting a broad range of investment banking,
trading and research activities through such entity. The Company anticipates its
investment banking activities to include lead or co-managed public offerings of
between $8 to $15 million, participating in syndicates for public offerings
managed by others, acting as agent for companies raising capital via private
placements of between $1 to $8 million and providing general and merger and
acquisition related consulting services. The Company plans to focus on small and
micro-capitalized growth companies with strong management teams in place.
The Company's objective is to develop a successful retail brokerage
business based on financial incentives to retain experienced brokers committed
to the firm.
The Company also intends to offer money management services through its
securities brokerage operations through a relationship with an independent money
manager. See "--Money Management: Capital Growth Asset Management."
30
<PAGE>
Merchant Banking
Management plans to form a separate entity to invest in business
opportunities on a principal basis, which, to date, has been accomplished
through ICG. In its capacity as agent, ICG anticipates encountering many
opportunities that are more appropriate for a principal investment than an
agency fund raising due to the nature, size or timing of a subject company's
capital requirements. Management believes that opportunities for principal
investments will include investments through both debt and equity securities in
both public and private companies in a variety of industries and at various
stages of development.
To the extent permitted by applicable rules and regulations, ICG may, in
certain instances, raise capital on an agency basis for companies in which such
entity has made a principal investment. Management believes that the ability to
invest on a principal basis offers a significant competitive advantage in
attracting companies that require agency financing in those cases in which the
financing structure requires an initial or "bridge" component (i.e., a
relatively small short-term debt financing which typically includes an equity
"kicker" and is re-paid from the proceeds of a subsequent, larger financing).
Thus, investing on a principal basis is a logical extension of ICG's agency
financing. Management believes the volume of ICG's agency business may increase
due to the Company's ability to offer potential corporate clients a prior
principal investment. In such event, the Company may also benefit directly from
such a principal investment in a company.
Management has also independently organized a public "blind pool" company
to be used in connection with an ICG sponsored or other reverse merger
transaction. Assuming the successful regulatory approval of the aforementioned
transaction, the merchant banking operation may organize several similar blind
pool companies. Management believes substantial value may be created by merging
a blind pool company with an active operating company. The merchant banking
operation may also acquire control of inactive public companies for such
purpose.
Money Management
The Company is seeking alternatives to develop a money management business.
Management's goals in entering this business would be to (a) diversify the
Company's revenues and earnings by earning potentially more consistent fees from
assets under management and (b) capitalize on potential synergies between money
management, investment banking and securities brokerage businesses. These
synergies include earning brokerage commissions generated by money managers for
the securities brokerage business and cross-selling to additional investors
identified through money management for its investment banking products.
The Company's intention is to enter the money management business by
forming a strategic alliance with an existing money management firm. Management
believes that such an arrangement would be advantageous to money management
firms based on the synergies that may result from such an alliance.
Competition
All aspects of the Company's business and anticipated business are highly
competitive. The Company expects to compete in domestic and international
markets with numerous financial services companies for potential financing
transactions and investment capital.
Because the securities industry is highly capital-intensive, the Company is
continuously exploring opportunities to raise additional capital. The ability of
a company to expand its
31
<PAGE>
business is closely related to its capital structure and its ability to raise
additional capital. Large brokerage firms and brokerage subsidiaries of large
corporations have greater capital, financial and other resources than the
Company. They may also have the ability to raise substantially more capital than
the Company can raise on terms more favorable than those available to the
Company. In addition, several small and specialized securities firms have been
successful in raising significant amounts of capital for their merger and
acquisition activities, merchant banking investment vehicles and for their own
accounts, thereby further intensifying the level of competition in the industry
in which the Company is and plans to operate.
As a result of legislative and regulatory initiatives in the United States
to remove or relieve certain restrictions on the businesses in which commercial
banks can operate, the Company also competes with large commercial banking
institutions, certain of which are in the process of enlarging the scope of
their investment banking activities. Commercial banking organizations, in
general, are expanding their securities and investment advisory activities, as
well as other activities related to the provision of financial services. These
developments may lead to the creation of integrated financial services firms
that are able to compete more effectively than the Company in certain of its
businesses. Furthermore, competition with well- capitalized foreign firms is
intense in international capital markets and is increasing in domestic markets.
To the extent that the Company can compete for investment opportunities it may
only be able to do so on less favorable terms than those obtained by larger,
more established firms.
Employees
As of September 30, 1997, the Company, including ICG, had a total of nine
full-time employees and one part-time employee. The Company believes its
relations with its employees is satisfactory.
Description of Properties
The Company, its subsidiaries and affiliates share or plan to share the use
of office space as described below:
1. Approximately 855 square feet at 660 Steamboat Road, Greenwich,
Connecticut 06830 for use as the principal executive offices of the
Company, ICG and CGI pursuant to a lease held by CGI expiring on
September 30, 1998 for monthly rent of $6,250.00 payable entirely by
ICG for the benefit of the Company, ICG and CGI;
2. Approximately 700 square feet at 777 South Flagler Drive, 8th Floor,
West Tower, West Palm Beach, Florida 33401 for use by the Company, ICG
and CGI pursuant to a lease held by CGI expiring on October 31, 1997
for monthly rent of $3,150 payable entirely by ICG for the benefit of
the Company, ICG and CGI;
3. Approximately 2,040 square feet at 2425 Olympic Boulevard, #660E,
Santa Monica, California 90404 for use by the Company, ICG and CGI
pursuant to a lease held by CGI expiring on November 27, 1997 for
monthly rent of $4,590 payable entirely by ICG for the benefit of the
Company, ICG and CGI; and
4. Approximately 1,200 square feet of office space at 4 Hill Street,
London, England WIX 7FU consisting of two separate offices for use by
the Company, ICG and CGI and CGE, respectively, pursuant to a
sub-lease from an entity controlled by a director of both the Company
and ICG, held by CGI and CGE
32
<PAGE>
expiring in October 2111 for monthly rent of $10,633 until October
1997, and $16,666 thereafter, which is payable by ICG and CGE, for the
benefit of the Company, ICG, CGI and CGE. See "Certain Transactions."
Description of Legal Proceedings
The Company is not a party to any pending legal proceedings.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
In March 1997, in connection with the Share Exchange, which effected a
change in control of the Company, the Company's Board of Directors voted to
engage Richard A. Eisner & Company, LLP, independent auditors to ICG, to act as
the Company's independent auditors. The appointment of Richard A. Eisner &
Company, LLP corresponded with the dismissal and replacement of Angell &
Deering, which resigned effective March 25, 1997. The former accountant's
reports for the Company's fiscal years ended January 31, 1995 and 1996 did not
contain any adverse opinion or disclaimer of opinion, nor were any such reports
modified as to uncertainty, audit scope or accounting principles. There have
been no disagreements between the Company and the former accountant with regard
to any matters which would have caused such accountant to make reference to the
subject matter thereof with their report. See "The Company."
33
<PAGE>
MANAGEMENT
Directors and Executive Officers
Name Age Position(s)
- ---- --- -----------
Ronald B. Koenig(1) 63 Chairman of the Board of Directors,
President and Chief Executive Officer
Alan L. Jacobs(2) 55 Executive Vice President and Director
Stanley Hollander(3) 59 Senior Vice President and Director
Michael S. Jacobs 32 Senior Vice President, Secretary and
Treasurer
Jay J. Matulich(4) 43 Senior Vice President
Emanuel Arbib 29 Director
John D. Booth 39 Director
N. Bulent Gultekin 50 Director
- ----------
(1) Ronald B. Koenig is also a Director of Emerging Growth Acquisition
Corporation I, a publicly-held company.
(2) Alan L. Jacobs is also a Director of Boca Raton Capital Corporation and
Emerging Growth Acquisition Corporation I, each a publicly-held company.
(3) Stanley Hollander is also a Director of Capital Media Group, Ltd. and
Emerging Growth Acquisition Corporation I, each a publicly-held company.
(4) Jay J. Matulich is also a Director of BioSafe International, Inc., a
publicly-held company.
Each officer and director listed above holds the same respective
position(s) with ICG, except that Alan L. Jacobs is also Senior Managing
Director of ICG, and Stanley Hollander and Jay J. Matulich are Vice Presidents
of ICG. Stanley Hollander is also a Director of ICG.
Each director of the Company listed in the above table holds office until
the next annual meeting of shareholders and until their respective successors
have been elected and qualified. Each officer of the Company listed in the table
above has served the Company in the respective capacities listed above since
March 14, 1997 and continues to serve at the discretion of the Company's Board
of Directors.
Ronald B. Koenig. Mr. Koenig has been Chairman of the Board of Directors,
President and Chief Executive Officer of International Capital Growth, Ltd.
since March 1996. He has served as Chairman of the Board, Chief Executive
Officer and a Director of Emerging Growth Acquisition Corporation I, a
publicly-held corporation, since July 1996. Mr. Koenig has been Chairman, from
October 1994 to July 1995, and co-founder of U.S. Sachem Financial Consultants,
L.P. and, since July 1995, of its successor Capital Growth International LLC.
From 1989 to 1993, Mr. Koenig was a Senior Managing Director and department head
of corporate finance at Gruntal & Co., Incorporated. From 1974 to 1985, Mr.
Koenig was a Managing Director, and from 1985 to 1989, Chairman of the Board, of
Ladenburg Thalmann & Co., Inc. From 1972 to 1974, he served as Vice President,
Institutional Sales at Jas. H. Oliphant & Co., an institutional research
boutique. From 1968 to 1972, he held a position in sales with Leif Werle & Co.,
an NYSE specialist firm. Mr. Koenig was educated at the University of
Pennsylvania (The Wharton School) and holds a B.S. in economics. Mr. Koenig
34
<PAGE>
presently serves on The Wharton School Undergraduate Executive Board and is on
the business advisory board to Sterling National Bank & Trust Company of New
York.
Alan L. Jacobs. Mr. Jacobs has served as Executive Vice President and a Director
of the Company since March 1997. Since March 1996, Mr. Jacobs has served as
Senior Managing Director, Executive Vice President and a Director of
International Capital Growth, Ltd. and, since January 1995, of Capital Growth
International LLC. He has served as Chief Operating Officer and a Director of
Emerging Growth Acquisition Corporation I, a publicly-held corporation, since
July 1996. From February 1995 to present and from July 1993 to September 1994,
Mr. Jacobs has served as a Director of Boca Raton Capital Corporation, a
publicly-held Florida corporation ("BRCC"). He was Chairman of the Board of
Directors of BRCC from November 1993 to September 1994 and has served as Chief
Executive Officer of BRCC since November 1993. From January 1992 to December
1995, Mr. Jacobs served as Associate Director of Investment Banking at
Josephthal Lyon & Ross Incorporated. From May 1985 to December 1991, Mr. Jacobs
served as Managing Director of Investment Banking with Ladenburg Thalmann & Co.,
Inc., an investment banking firm. Mr. Jacobs earned an A.B. in liberal arts in
1963 from Franklin & Marshall College and a J.D. from Columbia Law School in
1966.
Stanley Hollander. Mr. Hollander has served as Senior Vice President and a
Director of the Company since March 1997 and Vice President and a Director of
International Capital Growth, Ltd. since March 1996. He has served as President
and a Director of Emerging Growth Acquisition Corporation I, a publicly-held
corporation, since July 1996. Since 1993, Mr. Hollander has served as President,
Chief Executive Officer and co-founder of U.S. Sachem Financial Consultants,
L.P. and, since July, 1995, its successor Capital Growth International LLC. From
December 1995 to present, Mr. Hollander has been a Director of Capital Media
Group, Ltd., a publicly-held company. From 1989 to 1993 he served as a Managing
Director and joint head of corporate finance at Gruntal & Co., Incorporated.
From 1985 to 1989 he served as a Managing Director of Investment Banking at
Ladenburg Thalmann & Co., Inc. From 1979 to 1985 he was co-owner and Vice
President of Zemex Electronics-Stanlee, distributors of consumer electronics.
From 1959 to 1979, Mr. Hollander was president of All Brand Appliances
Brandmart, distributors of consumer electronics. Mr. Hollander was educated at
the University of Alabama.
Michael S. Jacobs. Mr. Jacobs has served as Senior Vice President, Secretary and
Treasurer of the Company since March 1997 and of International Capital Growth,
Ltd. since March 1996. He has served as Chief Financial Officer and Treasurer of
Emerging Growth Acquisition Corporation I, a publicly-held corporation, since
July 1996. Since February 1995, Mr. Jacobs has been a Senior Vice President of
U.S. Sachem Financial Consultants, L.P. and, since July 1995, its successor
Capital Growth International LLC. From 1993 to 1995 he was a Vice President of
Investment Banking at Josephthal Lyon & Ross Incorporated, and from 1990 to
1993, Mr. Jacobs was an associate in corporate finance at Gruntal & Co.,
Incorporated. From 1989 to 1990, Mr. Jacobs was a financial analyst at Ladenburg
Thalmann & Co., Inc. Educated at New York University's Stern School of Business
and Emory University, he holds an M.B.A. in finance and a B.B.A. degree.
Jay J. Matulich. Mr. Matulich has served as Senior Vice President of the Company
since March 1997 and Vice President of International Capital Growth, Ltd. since
March 1996. He has served as Secretary of Emerging Growth Acquisition
Corporation I, a publicly-held corporation, since July 1996. Since October 1994,
Mr. Matulich has been a Senior Vice President of U.S. Sachem Financial
Consultants, L.P. and, since July 1995, of its successor Capital Growth
International LLC. Since April 1995, Mr. Matulich has served as a Director
35
<PAGE>
of BioSafe International, Inc., a publicly-held company. From May 1990 to
October 1994, Mr. Matulich was a Vice President of Gruntal & Co., Incorporated.
From 1989 to May 1990, Mr. Matulich served as an associate in the Shansby Group,
a San Francisco-based leveraged buy-out firm. From 1986 to 1989, Mr. Matulich
was a Senior Manager at Arthur Young & Co., accountants in the merger and
acquisitions group. Educated at Brigham Young University, Mr. Matulich has a
B.A. degree.
Emanuel M. Arbib. Mr. Arbib has been a Director of the Company since March 1997
and of International Capital Growth, Ltd. since March 1996. Since January 1996,
Mr. Arbib has been Managing Director of BioSafe Europe PLC. Since 1991, he has
been Managing Director of Capital Management Limited. In 1991, Mr. Arbib founded
Global Investment Advisors Limited, a London-based fixed income advisory firm.
From 1990 to 1991 he was head of the Italian Marketing Desk at Prudential Bache
Securities (U.K.). Educated at Bocconi University in Milan and the American
University in Rome, he holds a Laureate in Economics and A.B.A. degree.
John D. Booth. Mr. Booth has been a Director of the Company since March 1997 and
of International Capital Growth, Ltd. since March 1996. He has been Chairman of
Maintel Europe Limited and Luther Pendragon Limited since 1996 and 1991,
respectively. From 1993 to 1996, Mr. Booth was Managing Director at Bankers
Trust International. From 1988 to 1993, he was Senior Vice President at
Prudential Bache Securities. From 1986 to 1988, Mr. Booth was a partner at E.F.
Hutton International Associates. From 1980 to 1983, he was Vice President at
Merrill Lynch, Pierce, Fenner & Smith Incorporated. From 1980 to 1983, Mr. Booth
was an Account Executive at J. Walter Thompson Company. Educated at Oxford
University, he holds an M.A. and a B.A. in modern languages.
N. Bulent Gultekin. Mr. Gultekin has been a Director of the Company since March
1997 and of International Capital Growth, Ltd. since March 1996. Since 1981, Mr.
Gultekin has been an Associate Professor of Finance at The Wharton School of the
University of Pennsylvania. From 1993 to 1994, he served as the Governor of the
Central Bank of the Republic of Turkey. From 1989 to 1991, Mr. Gultekin served
as Chief Advisor to Prime Minister Mesut Yilmaz of the Republic of Turkey. From
1990 to 1992, Mr. Gultekin was a director of The Bell Atlantic Mutual Funds. Mr.
Gultekin earned a BSC in 1965 and an MBA in 1973 from Turkish universities and a
Ph.D. in finance and statistics in 1976 from The Wharton School of the
University of Pennsylvania.
Compensation of Directors
The directors of the Company and ICG are reimbursed for their expenses in
connection with their activities as directors and members of committees of such
entities. Mr. N. Bulent Gultekin will be paid a fee of $2,500 for his
participation in each meeting of the Company's Board of Directors.
Executive Compensation
None of the Company's officers or directors received any salary or wages or
other compensation from the Company during the last three completed fiscal
years. During the fiscal year ended January 31, 1997, the Company had no active
retirement, stock option or other plans or arrangements pursuant to which cash
or non-cash compensation was paid to its officers or directors. As of March 14,
1997, in connection with the Share Exchange, the Company put into effect the
Capital Growth Holdings, Ltd. 1997 Stock Option Plan pursuant to which the
Company granted options to purchase 635,000 shares of Class B Common Stock to
certain
36
<PAGE>
directors and employees of ICG in exchange for previously granted options of the
same tenor to purchase an equal number of shares of common stock of ICG.
The following table sets forth the compensation of the chief executive
officer of ICG for services in all capacities to ICG for the period from
February 26, 1996 (inception) through January 31, 1997, the Company's fiscal
year-end. ICG's chief executive officer was the highest compensated employees of
ICG during such period.
SUMMARY COMPENSATION TABLE
Name and Principal
Position with ICG Fiscal Year(1) Salary
- --------------------------------------------------------------------------
Ronald B. Koenig 1997 $67,307
President,
Chief Executive
Officer and Director
- ----------
(1) Covers the period from ICG's inception (February 26, 1996) through January
31, 1997, the Company's fiscal year end for such period.
Termination of Employment and Change of Control Arrangement
There are no compensatory plans or arrangements pursuant to which any
executive officer will be paid compensation as a result of his termination or
change of employment with, or control of, the Company or ICG.
Indemnification
The Company's Certificate of Incorporation provides for indemnification
rights of officers, directors, and others and limits the personal liability of
directors for monetary damages to the extent permitted by Delaware Law. Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the
"Securities Act") may be permitted for directors, officers and controlling
persons of the Company, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. See
"Description of Securities-Delaware Law and Certain Charter Provisions."
1997 Stock Option Plan
General
The Company has established the Company's 1997 Stock Option Plan (the
"Stock Option Plan"), which the Company believes is desirable to attract and
retain executive officers, other key employees and directors and to further the
growth and profitability of the Company. Under the Stock Option Plan, options to
purchase an aggregate of not more than 1,500,000 shares of Class B Common Stock
may be granted from time to time to key employees (including officers),
consultants and directors of the Company. The Company may not grant options
covering more
37
<PAGE>
than 500,000 shares to any one participant during any fiscal year. Options shall
be designated as Incentive Stock Options ("ISOs") or Nonqualified Stock Options
("NQSOs").
The Stock Option Plan is administered by a committee consisting of John D.
Booth and Emanuel M. Arbib, two disinterested, outside directors of the Company.
The committee is generally empowered to interpret the Stock Option Plan; to
prescribe rules and regulations relating thereto; to determine the terms of the
option agreements; to amend the option agreements with the consent of the
optionee; to determine the key employees and directors to whom options are to be
granted; and to determine the number of shares subject to each option and the
exercise price thereof. The per share exercise price of options granted under
the Stock Option Plan will be not less than 100% (110% for ISOs if the optionee
owns more than 10% of the Class B Common Stock) of the fair market value per
share of Class B Common Stock on the date the options are granted.
Options will be exercisable for a term that will not be greater than ten
years from the date of grant (five years from the date of grant of an ISO if the
optionee owns more than 10% of the Class B Common Stock). In the event of the
termination of such relationship between the option holder and the Company for
cause (as defined in the Stock Option Plan), all options granted to that option
holder terminate immediately. Options may be exercised during the option
holder's lifetime only by the option holder, his or her guardian or legal
representative.
Options granted pursuant to the Stock Option Plan which are ISOs are
intended to enjoy the attendant tax benefits provided under Sections 421 and 422
of the Code. Accordingly, the Stock Option Plan provides that the aggregate fair
market value (determined at the time an ISO is granted) of the Class B Common
Stock subject to ISOs exercisable for the first time by an option holder during
any calendar year (under all plans of the Company) may not exceed $100,000.
The Board may modify, suspend or terminate the Stock Option Plan; provided,
however, that certain material modifications affecting the Stock Option Plan
must be approved by the stockholders, and any change in the Stock Option Plan
that may adversely affect an option holder's rights under an option previously
granted under the Stock Option Plan requires the consent of the option holder.
Existing Stock Options
Under the Stock Option Plan, the Company has granted ISOs to Jay J.
Matulich, Michael S. Jacobs, Robert Zelinka, N. Bulent Gultekin, and Richard
Lane, employees and/or directors of the Company, to purchase 250,000, 250,000,
100,000, 25,000 and 10,000 shares of Class B Common Stock, respectively. All of
such ISOs vest at the rate of one-third of the total number of options granted
at the end of each of the first three anniversaries of the original date of
grant and are exercisable at an exercise price of $2.00 per share for a period
of ten years from the original date of grant. The Company has also granted ISOs
to Ms. Kimberly A. Goguen, a consultant to the Company, under the Stock Option
Plan to purchase 150,000 shares of Class B Common Stock, exercisable at an
exercise price of $2.25 per share under the same terms as those set forth above.
401(k) Plan
ICG maintains a 401(k) Plan (the "401(k) Plan") through a national mutual
fund company that is available to all employees. An employee may contribute on a
pre-tax basis up to 15%
38
<PAGE>
of the employee's total annual wages from ICG, subject to annual limitations
prescribed by the Internal Revenue Code. Employee contributions are fully vested
and non-forfeitable at all times.
ICG makes matching contributions to the 401(k) Plan on behalf of its
employees, subject to funding availability. ICG uses a matching formula under
which it contributes $.50 for each $1.00 contributed by employees. Fifty percent
of the matching contributions vest immediately while the remaining fifty percent
vest one year after the contribution. Once vested, the matching contributions
are non-forfeitable at all times.
CERTAIN TRANSACTIONS
On March 26, 1997, the Company loaned $200,000 to an entity controlled by
Messrs. Ronald B. Koenig and Stanley Hollander, two of the Company's Directors.
The Note, which was due on March 26, 1998 and carried interest at the rate of 6%
per annum. Such Note, when issued, was approved by a majority of the independent
members of the Board of Directors of the Company.
On March 27, 1997, the Company completed a private offering (the "Private
Offering") of its Common Stock at $2.25 per share pursuant to Regulation D and
Regulation S, each as promulgated under the Securities Act. The Private
Offering, which yielded gross proceeds to the Company of $1,236,366, was offered
and sold through Capital Growth International LLC ("CGI"), as placement agent,
which was paid $74,181.96 in commissions in connection therewith, $39,074.76 of
which was used to compensate certain sub-placement agents. CGI is an affiliate
of the Company and ICG. Several of the officers and directors of the Company and
ICG are also officers and directors of CGI. Additionally, the beneficial holders
of 100% of the membership interests in CGI beneficially hold 56.53% of the
outstanding capital stock of the Company, which holds 100% of the outstanding
capital stock of ICG. Messrs. Ronald B. Koenig, Chairman of the Board of
Directors, President and Chief Executive Officer of the Company and ICG, and
Stanley Hollander, Senior Vice President and a Director of the Company and Vice
President and a Director of ICG, each own a 50% interest in Sachem Financial
Consultants, L.P., which holds a 60% membership interest in CGI. Messrs. Koenig
and Hollander beneficially own 16.70% and 16.83% of the outstanding capital
stock of the Company, respectively. Mr. Emanuel Arbib, a Director of the Company
and ICG, may be deemed to beneficially own a 30% membership interest in CGI and
16.83% of the outstanding capital stock of the Company. Tigris Holdings, Ltd.
holds a 10% membership interest in CGI and owns 6.05% of the outstanding capital
stock of the Company.
The Company, ICG and CGI share the use of approximately 855 square feet of
office space at 660 Steamboat Road, Greenwich, Connecticut 06830. The lease on
such property, which expires on September 30, 1998, is held by CGI. Rent for use
of such property, which is $6,250.00 per month, is paid by ICG at no cost to
CGI.
The Company, ICG and CGI share the use of approximately 700 square feet of
office space at 777 South Flagler Drive, 8th Floor, West Tower, West Palm Beach,
Florida 33401. The lease on such property, which expires on October 31, 1997, is
held by CGI. Rent for use of such property, which is $3,150 per month, is paid
by ICG at no cost to CGI.
The Company, ICG and CGI share the use of approximately 2,040 square feet
of office space at 2425 Olympic Boulevard, #660E, Santa Monica, California
90404. The lease on such property, which expires on November 27, 1997, is held
by CGI. Rent for use of such property, which is $4,590 per month, is paid by ICG
at no cost to CGI.
39
<PAGE>
The Company, ICG, CGI and CGE occupy a total of 1200 square feet of office
space at 4 Hill Street, London, England WIX 7FU; the Company, ICG and CGI have
use of approximately 600 square feet and CGE has use of approximately 600 square
feet. The sublease on such property, which expires in October 2111, is held by
CGI and CGE. ICG, for its own account and on behalf of the Company and CGI, pays
monthly rent of $2,300 until October 1997, and $8,333 thereafter. CGE pays
monthly rent of $8,333. The lease on the premises is held by an entity that may
be deemed to be beneficially owned by ICG and/or Emanuel Arbib, a Director of
the Company and ICG.
It is currently contemplated by management of the Company, ICG and CGI that
CGI will assign all rights and obligations in connection with two Financial
Advisory and Consulting Agreements (the "Consulting Agreements") each of which
are between CGI and a separate publicly-held company. The Consulting Agreements,
which were entered into in connection with CGI's investment banking business,
are anticipated to be assigned to ICG for nominal consideration. One Consulting
Agreement, which expires on July 30, 1998, currently provides for monthly
payments to CGI of $2,500 and compensation rights in favor of CGI if certain
business transactions introduced by CGI to such public company are consummated.
The other Consulting Agreement currently grants to CGI a right of first refusal,
exercisable until April 26, 1998, to offer securities of such public company and
provides for certain compensation rights in favor of CGI if certain business
transactions introduced by CGI to such public company are consummated.
40
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's capital stock as of October 8, 1997, by
(i) any person who is known to the Company to be the beneficial owner of more
than five percent of the capital stock of the Company; (ii) each director of the
Company; (iii) the Company's chief executive officer during the last completed
fiscal year; (iv) each executive officer of the Company; and (v) all current
directors and executive officers of the Company as a group. Except as noted
below, each person has sole voting and investment power with respect to all
shares of capital stock of the Company listed as owned by such person.
<TABLE>
<CAPTION>
Amount and
Name and Address of Nature of Percent of
Beneficial Owner(1) Beneficial Ownership Class(2)
- ----------------------------------------- -------------------- -------------------
<S> <C> <C>
Rush & Co. 3,586,334(3)(4)(5) 18.09%
Swiss American Securities
100 Wall Street
4th Floor
New York, NY 10005
Emanuel Arbib 3,336,334(4) 16.83%
Stanley Hollander 3,336,333(6) 16.83%
Hollander Family 3,336,333(6) 16.83%
Partnership LP
Ronald B. Koenig 3,311,333 16.70%
Alan L. Jacobs 2,925,000 14.75%
Tigris Holdings, Ltd. 1,200,000(7) 6.05%
6-7 St. John's Lane
London EC1M 4BH England
John D. Booth 250,000(5) 1.26%
Earnest Mathis 82,218(8) .41%
26 West Dry Creek Circle
Suite 600
Littleton, CO 80120
N. Bulent Gultekin 25,000(9) .13%
All current directors and executive 15,176,000(10) 76.53%
officers as a group
</TABLE>
- ----------
(1) Each beneficial owner for which an address is not listed has an address c/o
Capital Growth Holdings, Ltd., 660 Steamboat Road, Greenwich, CT 06830.
(2) Based on a total of 19,829,496 shares of capital stock outstanding, all of
which vote together as one class.
(3) Consists of 3,336,334 shares of Series A Preferred Stock, 25,000 shares of
Common Stock, 200,000 shares of Class B Common Stock and 25,000 Warrants.
(4) Rush & Co. holds 3,336,334 shares of Series A Preferred Stock for the
benefit of Capital Growth Holdings, Limited, a Turks & Caicos Islands
corporation. Fifty percent of Capital Growth Holdings, Limited is owned by
entities which may be deemed to be in the control
41
<PAGE>
of Emanuel Arbib, a director of the Company. As such, Mr. Arbib may be
deemed to be the beneficial owner of the shares of Common Stock
beneficially owned by Capital Growth Holdings, Limited. Other than such
holdings, Mr. Arbib owns no capital stock of the Company.
(5) Rush & Co. holds 200,000 shares of Class B Common Stock, 25,000 shares of
Common Stock and 25,000 Warrants for the benefit of John D. Booth, a
director of the Company. Other than such holdings, Mr. Booth owns no
capital stock of the Company.
(6) Stanley Hollander, Senior Vice President and Director of the Company, may
be deemed to be the beneficial owner of the shares of the Company held by
Hollander Family Partnership LP. Other than such holdings, Mr. Hollander
owns no capital stock of the Company.
(7) Consists of 1,080,000 shares of Series B Preferred Stock and 120,000 shares
of Common Stock.
(8) Includes 81,250 shares of Common Stock owned by entities that may be deemed
to be in the control of Mr. Mathis. As such, Mr. Mathis may be deemed to be
the beneficial owner of such shares. Other than such holdings, Mr. Mathis
owns 968 shares of Common Stock.
(9) Consists of stock options exercisable to purchase 25,000 shares of Class B
Common Stock.
(10) Consists of 3,336,334 shares of Series A Preferred Stock, 25,000 shares of
Common Stock, 11,264,666 shares of Class B Common Stock, 25,000 Warrants
and stock options exercisable to purchase 525,000 shares of Class B Common
Stock.
Changes in Control
A change in control of the Company took place on March 14, 1997. See "The
Company." There are currently no arrangements that would result in a change in
control of the Company.
42
<PAGE>
SELLING SECURITYHOLDERS
The shares of Common Stock offered hereby are owned by the Selling
Securityholders. The following table sets forth certain information with respect
to the ownership of the Common Stock by each Selling Securityholder as of
October 8, 1997.
Shares Beneficially
Owned Before and
After Offering(1)
--------------------
Name and Address Shares
of Beneficial Owner Shares(2) Percent(3) Offered(4)
- ------------------- --------- ---------- ----------
Rosebud Capital Growth Fund Ltd.
c/o Dawn E. Davies
Charlotte House
Charlotte Street
P.O. Box N9204
Nassau, Bahamas 900,000 24.67% 900,000
Banca del Gottardo
Attn: Mr. Diego Lucchini
Viale Stefano Franscini 8
6901 Lugano, Switzerland 404,000 11.39% 404,000
Edgeport Nominees Limited
c/o Ian Goldbart
44 Worship Street
London EL2A 2JT
England 340,000 9.53% 340,000
Republic National Bank of New York
2 Place du Lac
1211 Geneva 3
Switzerland 300,000 8.45% 300,000
Fairnoon Management Ltd.
11 Queen Street
London WIX 7PD
England 250,000 7.10% 250,000
Giant Trading Inc.
Passage Max Meuron 1
Case Postale 1461
2001 Neuchatel
Switzerland 200,000 5.89% 200,000
Gems Opportunity Fund
c/o MeesPierson Fund Services
(Dublin) Ltd.
4th Floor, Russell House
Stokes Place, St. Stephens Green
Dublin 2, Ireland 200,000 5.72% 200,000
43
<PAGE>
Shares Beneficially
Owned Before and
After Offering(1)
--------------------
Name and Address Shares
of Beneficial Owner Shares(2) Percent(3) Offered(4)
- ------------------- --------- ---------- ----------
Napier Brown Holdings Ltd.
International House
1 St. Katherine's Way
London, E1 9UN 200,000 5.72% 200,000
Cameo Trust Corporation Limited
Cameo House
18 Hope Street
Douglas, Isle of Man
British Isles
1M1 1AQ 188,000 5.39% 188,000
Josef A. Bauer
820 Park Avenue
New York, NY 10021 150,000 4.32% 150,000
P. G. Ridgwell
c/o Napier Brown Holdings Ltd.
International House
1 St. Katherine's Way
London, E1 9UN 150,000 4.32% 150,000
Tigris Holdings Ltd.
Eagle Court
6-7 St. John's Lane
London EC1M 4BH
England 120,000 3.53% 120,000
Bocap AS
Attn: Mr. Ove Hoegh
Perkveien 55
Box 2416 Solli
0201 Oslo, Norway 89,222 2.63% 89,222
Susan Greenberg
1185 Corsica Drive
Los Angeles, CA 90272 74,444 2.17% 74,444
Neil Micklethwaite
26 Spencer Road
London SW18 2LS
UK 66,000 1.94% 66,000
Corner Bank Ltd.
Attn: Landi Vittoria
Via Canova 16
6901 Lugano Switzerland 61,111 1.80% 61,111
44
<PAGE>
Shares Beneficially
Owned Before and
After Offering(1)
--------------------
Name and Address Shares
of Beneficial Owner Shares(2) Percent(3) Offered(4)
- ------------------- --------- ---------- ----------
Vital Miljo AS
Bjarne Odegaard
Radhusgt 7B
0151 Oslo
Norway 55,931 1.63% 55,931
Harvey R. Brice
Superior Ink Printing Co., Inc.
70 Bethune Street
New York, NY 10014 50,000 1.46% 50,000
Luciano R. Nicasio
111 Highland Avenue
Rowayton, CT 06853 50,000 1.46% 50,000
Saracen International Incorporated
c/o Walter Prime
50 Shirley Street
P.O. Box N-341
Nassau, The Bahamas 50,000 1.46% 50,000
Cogefin (Bermuda) Limited
Bermuda Commercial Bank Building
44 Church Street
Hamilton HM12
Bermuda 50,000 1.47% 50,000
Anthony Hopenhajm
Trianon
16 West 46th Street
New York, NY 10036 50,000 1.46% 50,000
Rush & Company
Attn: John D.S. Booth
92 Fentiman Road
London SW8 1LA
England 50,000 1.46% 50,000
Gary Barnett
621 South Saltair Avenue
Los Angeles, CA 90049 50,000 1.46% 50,000
Auric Investments Limited
24 St. George's Street
Douglas
Isle of Man
1M1 1AH 50,000 1.46% 50,000
45
<PAGE>
Shares Beneficially
Owned Before and
After Offering(1)
--------------------
Name and Address Shares
of Beneficial Owner Shares(2) Percent(3) Offered(4)
- ------------------- --------- ---------- ----------
Pyramid Partners, LP
c/o Steven Blatt
Tanner, Mainstain & Hoffer
10866 Wilshire Blvd., 10th Floor
Los Angeles, CA 90024-0478 35,000 1.02% 35,000
Madeliene Curtiss
Datchet House
London Road
Datchet
Windsor
Berks
UK 30,000 * 30,000
Robert Zelinka
7612 Marbella Terrace
Boca Raton, FL 33433 29,125 * 29,125
Merit Partners
Attn: Jeffry Schoenbaum
402 S. Westshore Blvd
Tampa, FL 33609 25,000 * 25,000
Bostar AS
Attn: Mr. Ove Hoegh
Parkveien 55
P.O.B. 2416, Solli
N-0201, Oslo 25,000 * 25,000
Allan M. Rudnick IRA R/O
1800 Avenue of the Stars, 2nd Floor
Los Angeles, CA 90067 25,000 * 25,000
Michael Ralby
D.E. Frey & Co., Inc.
2999 NE 191st Street
PH8
Aventura, FL 33180 25,000 * 25,000
Shelby Developments Limited
c/o Line Management Services
Limited
57-63 Line Wall Road
Gibraltar 25,000 * 25,000
Robert S. London
212 Aurora Drive
Montecito, CA 93108 25,000 * 25,000
46
<PAGE>
Shares Beneficially
Owned Before and
After Offering(1)
--------------------
Name and Address Shares
of Beneficial Owner Shares(2) Percent(3) Offered(4)
- ------------------- --------- ---------- ----------
Mamimu Ltd.
c/o Aaron Grunfeld, Esq.
10390 Santa Monica Boulevard
4th Floor
Los Angeles, CA 90025 25,000 * 25,000
Joseph Matulich and Lillian Matulich
as Co-Trustees of Matulich Living
Trust dtd 7/19/90
675 Harrow Drive
San Mateo, CA 94402 25,000 * 25,000
Raphael & Bella Wizman JTWROS
40 Kings Park Road
Commack, NY 11725 24,444 * 24,444
CM Investment Nominees Ltd.
9 Devonshire Square
London EC2M 4YL
UK 20,000 * 20,000
The Rogoff Family Trust
1700 Banks Road
Margate, FL 33063 18,333 * 18,333
Eliezer J. Wizman & Karen A
Wizman JTWROS
12 Shelton Court
Commack, NY 11725 15,000 * 15,000
Asher Plaut and Evelyn Plaut
JTWROS
127 Fields Avenue
Staten Island, NY 10314 12,500 * 12,500
Craig A. Blumberg
209 East 56th Street, #9A
New York, NY 10022 12,500 * 12,500
Edward Haymes
7108 Queenferry Circle
Boca Raton, FL 33496 12,222 * 12,222
Orrin S. and Jeffrie K. Stern
TBE
6329 NW 23rd Way
Boca Raton, FL 33496 12,222 * 12,222
47
<PAGE>
Shares Beneficially
Owned Before and
After Offering(1)
--------------------
Name and Address Shares
of Beneficial Owner Shares(2) Percent(3) Offered(4)
- ------------------- --------- ---------- ----------
John J. Heckler & Lenore F. Heckler
JTWROS
PO Box 3257
Telluride, CO 81435 12,222 * 12,222
Thomas A. & Ellen Weiss JTWROS
17381 Springtree Lane
Boca Raton, FL 33487 12,222 * 12,222
Richard M. & Gail L. Weiss
JTWROS
9050 SW 69th Court
Miami, FL 33156 12,222 * 12,222
Sid Paterson
1385 York Ave. Apt. 34H
New York, NY 10021 12,222 * 12,222
Badger AS
Attn: Peter Barrington Kirk
Overbergun 22B
1315 Nesoya Norway 12,222 * 12,222
Wartels International Corp.
Attn: Mrs. Denise Webster
12 Chemin De La Garance
1208 Geneva
Switzerland 12,222 * 12,222
Anne P. & Harry Newman, Jr
JTWROS
5530 The Toledo
Long Beach, CA 90803 12,222 * 12,222
Harper, Allen C. & Carol E
JTWROS
5841 SW 116th Street
Coral Gables, FL 33156 12,222 * 12,222
Harry O. Hefter
3227 Greenleaf Ave
Wilmette, IL 60041 12,000 * 12,000
The Marvin J. Richman Family Trust,
dtd 3/22/85
149-1/2 South Camden Drive
Beverly Hills, CA 90212 10,000 * 10,000
48
<PAGE>
Shares Beneficially
Owned Before and
After Offering(1)
--------------------
Name and Address Shares
of Beneficial Owner Shares(2) Percent(3) Offered(4)
- ------------------- --------- ---------- ----------
Alan W. Rubin
922 South Barrington Ave. #102
Los Angeles, CA 90049 10,000 * 10,000
Societe Financiere Privee SA
Attn: Mr. Christophe Pele
3, rue Maurice
Casa Postale 3668
1211 Geneve 3 10,000 * 10,000
Eurocapital, Ltd.
c/o GFI Servizi Finanziari SA
Via Balestra 27
Lugano, Switzerland
6900 9,287 * 9,287
Paul J. Coughlin III
687 River Rd
Cos Cob, CT 06807 7,500 * 7,500
Daniel & Tova S. Plant JTWROS
275 Leroy Ave
Cedarhurst, NY 11516 6,111 * 6,111
Ruth Zelinka
200 E. 57th Street
New York, NY 10022 6,111 * 6,111
Sverre O. Lie
Department of Pediatrics
University Hospital
0027 Oslo, Norway 4,000 * 4,000
Brill Securities, Inc.
152 W. 57th Street
New York, NY 10019 3,813 * 3,813
Pellet Investments
5063 Toole Avenue
Missoula, MT 59802 1,828 * 1,828
- ----------
* Less than 1%
(1) Unless otherwise indicated, each shareholder has sole voting and investment
power with respect to the Common Stock indicated as beneficially owned
thereby.
(2) These share amounts include up to an aggregate of 1,649,984 shares which
may be issued to certain Selling Securityholders upon the exercise of the
Warrants.
49
<PAGE>
(3) In accordance with Rule 13d-2 of the Exchange Act, shares that are not
outstanding, but that are issuable pursuant to the exercise of outstanding
Warrants, all of which are exercisable within 60 days of the date of this
Prospectus, have been deemed to be outstanding for the purpose of computing
the percentage of outstanding shares owned by the individual having such
right, but have not been deemed outstanding for the purpose of computing
the percentage for any other person. See "Description of Securities."
(4) With respect to the Selling Securityholders, it has been assumed that all
their shares so offered will be sold.
50
<PAGE>
DESCRIPTION OF SECURITIES
Capital Stock of Capital Growth Holdings, Ltd.
CGH has 145,000,000 shares of authorized capital stock, consisting of
100,000,000 shares of common stock, par value $.001 per share ("Common Stock"),
25,000,000 shares of Class B common stock, par value $.001 per share ("Class B
Common Stock") and 20,000,000 shares of preferred stock, par value $.001 per
share ("Preferred Stock").
Common Stock
Each holder of Common Stock is entitled to one vote for each share held of
record on all matters to be voted on by stockholders. The holders of Common
Stock vote in one class with the holders of Class B Common Stock and Designated
Preferred Stock. There is no cumulative voting with respect to the election of
directors, with the result that the holders of more than 50% of the shares voted
for the election of directors can elect all of the directors. Subject to the
preferences applicable to the outstanding Designated Preferred Stock and any
preferences that may be applicable to any future issuances of preferred stock,
the holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor. In
the event of liquidation, dissolution or winding up of the Company, the holders
of Common Stock along with the holders of Class B Common Stock are entitled to
share ratably in all assets remaining available for distribution to them after
payment of liabilities and after provision has been made for each class of stock
having preference over Common Stock and Class B Common Stock (currently
including the Designated Preferred Stock). Holders of shares of Common Stock, as
such, have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are fully paid and nonassessable. The approval of holders
of a majority of the outstanding shares of Common Stock is required to vary the
rights of the Common Stock.
Class B Common Stock
Each holder of the Class B Common Stock is entitled to one vote for each
share held of record on all matters to be voted on by stockholders. The holders
of the Class B Common Stock vote in one class with the holders of Common Stock
and the Designated Preferred Stock. There is no cumulative voting with respect
to the election of directors, with the result that the holders of more than 50%
of the shares voted for the election of directors can elect all of the
directors. Subject to the preferences applicable to the outstanding Designated
Preferred Stock, Common Stock and any preferences that may be applicable to any
future issuances of preferred stock, the holders of Class B Common Stock are
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor, subject to a $.15 per share limitation
on dividends in 1997 and a $.20 per share limitation in 1998. In the event of
liquidation, dissolution or winding up of the Company, the holders of Class B
Common Stock along with the holders of the Common Stock are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities and after provision has been made for each class of stock having
preference over the Class B Common Stock and Common Stock (currently including
the Designated Preferred Stock). Holders of shares of Class B Common Stock, as
such, have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to the Class B Common Stock, except that
each share of Class B Common Stock will automatically convert into one share of
Common Stock (subject to adjustment under certain circumstances) on December 31,
1998. All of the outstanding shares of Class B Common Stock are fully paid and
nonassessable. The approval of holders of a
51
<PAGE>
majority of the outstanding shares of Class B Common Stock is required to vary
the rights of the Class B Common Stock.
Preferred Stock
The Preferred Stock may be issued in series from time to time with such
designation, rights, preferences and limitations as the Board of Directors may
declare 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 shares of Preferred Stock might be issued which would grant dividend
preferences and liquidation preferences to preferred stockholders over common
stockholders in addition to those already in existence with respect to the
Designated Preferred Stock. Unless the nature of a particular transaction and
applicable statute require such approval, the Board of Directors has the
authority to issue shares of Preferred Stock without stockholder approval. The
issuance of Preferred Stock may have the effect of delaying or preventing a
change in control without any further action by stockholders.
Series A and Series B Preferred Stock
The Board of Directors has designated and the Company has issued and
outstanding 4,001,334 shares of 5% Cumulative Convertible Series A Preferred
Stock (the "Series A Preferred Stock") and 1,080,000 shares of 5% Cumulative
Convertible Series B Preferred Stock (the "Series B Preferred Stock"), each
$.001 par value per share. The Series A Preferred Stock and Series B Preferred
Stock are sometimes referred to herein as the "Designated Preferred Stock."
The holders of the Designated Preferred Stock are entitled to receive
dividends prior to any other class of stock payable in cash, on a quarterly
basis, at the rate of 5% of the respective liquidation preference of the Series
A Preferred Stock and Series B Preferred Stock, which dividends have accrued
since October 12, 1996. The Series A Preferred Stock has a liquidation
preference of $.14 per share, plus any declared but unpaid dividends. The Series
B Preferred Stock has a liquidation preference of $.21 per share, plus any
declared but unpaid dividends. The holders of the Designated Preferred Stock are
also entitled to share ratably with the holders of the Class B Common Stock in
any dividend declared on the Class B Common Stock.
Each share of the Designated Preferred Stock is convertible, at the option
of the holder, at any time into one share of Class B Common Stock (subject to
adjustment for stock splits, combinations, reclassifications). Once converted,
the holders of the Designated Preferred Stock are entitled to all rights and
privileges applicable to a holder of Class B Common Stock.
Unless earlier converted, each outstanding share of Designated Preferred
Stock shall be automatically converted into one share of Class B Common Stock
(subject to adjustment for stock splits, combinations, reclassifications)
without any action by the holders thereof on October 12, 1997. Shares of
Designated Preferred Stock acquired by the Company by reason of purchase,
conversion or otherwise shall be retired and become authorized but unissued
shares of preferred stock, which may be reissued by the Company as part of a new
series of preferred stock.
Each holder of Designated Preferred Stock held of record is entitled to the
number of votes equal to the number of shares of Class B Common Stock into which
such holder's shares
52
<PAGE>
of Designated Preferred Stock could be converted at the time of the record date
of the vote. The registered holders of the Designated Preferred Stock are
entitled to vote with each other, and the Class B Common Stock, as a single
class on all matters submitted to the holders of such stock and shall be
entitled to notice of any stockholders' meeting.
Redeemable Warrants
The Company currently has 1,649,984 Redeemable Warrants issued and
outstanding. The following is a brief summary of certain provisions of the
Redeemable Warrants.
Each Redeemable Warrant entitles the registered holder to purchase one
share of Common Stock at an initial exercise price of $4.00 per share (subject
to adjustment for stock splits, combinations and reclassifications) at any time
prior to redemption from October 3, 1996, October 15, 1996, March 20, 1997, and
March 27, 1997 until October 3, 1999, October 15, 1999, March 20, 2000 and March
27, 2000, respectively, as the case may be. Redeemable Warrants may be redeemed
by the Company at $.05 per Redeemable Warrant on 30 days' notice, provided that
(i) certain securities are registered under the Securities Act and applicable
state blue sky laws, (ii) a current Prospectus is then available for the sale of
such securities, and (iii) the closing bid price for the Common Stock as
reported by Nasdaq, the OTC Bulletin Board, or such other market on which the
Common Stock is then traded equals or exceeds $6.00 for any 20 trading days
within a period of 30 consecutive trading days ending on the fifth trading day
prior to the date of the notice of redemption.
The Redeemable Warrants are not exercisable or redeemable unless, at the
time of the exercise or redemption, the Company has a current Prospectus
covering the shares of Common Stock issuable upon the exercise of such warrants,
or such shares have been registered, qualified or deemed to be exempt under the
securities laws of the state of residence of the exercising holder of such
warrants. Moreover, if the shares of Common Stock underlying the Redeemable
Warrant are not registered or qualified for sale in the state in which a warrant
holder resides, such holder might not be permitted to exercise the Redeemable
Warrants.
If the Company has a current Prospectus covering the shares of Common Stock
issuable upon exercise of the Redeemable Warrants, or such shares have been
registered, qualified or deemed exempt under Federal and applicable State
securities laws, each Redeemable Warrant may be exercised by surrendering the
warrant certificate, with the subscription form attached to the warrant
certificate properly completed and executed, together with payment of the
exercise price to the warrant agent. The Redeemable Warrants may be exercised in
whole or from time to time in part. If less than all of the Redeemable Warrants
evidenced by a warrant certificate are exercised, a new warrant certificate will
be issued for the remaining number of Redeemable Warrants.
The Redeemable Warrants do not confer upon the holders thereof any voting,
dividend or other rights as shareholders of the Company.
Consulting Warrants
The Company issued redeemable warrants to purchase up to 250,000 shares of
Class B Common Stock (the "Consulting Warrants") in exchange for consulting
services to be rendered on behalf of the Company. The Consulting Warrants vested
on a pro rata basis based upon the period of time that such consulting services
were provided to the Company.
53
<PAGE>
In accordance with such vesting schedule, the Consulting Warrants entitle
the registered holder to purchase up to 52,083 shares of Class B Common Stock at
an initial exercise price of $2.00 per share (subject to adjustment for stock
splits, combinations and reclassifications) at any time prior to redemption from
the date of issuance until November 3, 1999. The Consulting Warrants may be
redeemed by the Company at $.05 per Redeemable Warrant on 30 days' notice,
provided that (a) the shares of Common Stock underlying the Class B Common Stock
underlying the Consulting Warrants are registered under the Securities Act and
applicable state blue sky laws, (b) a current Prospectus is then available for
the sale of the Common Stock, and (c) the closing bid price for the Common Stock
as reported by Nasdaq, the OTC Bulletin Board, or such other market on which the
Common Stock is then traded equals or exceeds $6.00 for any 20 trading days
within a period of 30 consecutive trading days ending on the fifth trading day
prior to the date of the notice of redemption.
Delaware Law and Certain Charter Provisions
Under Delaware law, directors and officers of a Delaware corporation can
generally be held liable for certain types of negligence and other acts and
omissions in connection with the performance of their duties to the corporation
and its stockholders. As permitted by the Delaware General Corporation law (the
"Delaware GCL"), however, the Certificate of Incorporation contains a provision
eliminating the liability of the Company's directors and officers for monetary
damages for breaches of their duty of care to the Company and the stockholders,
except as described below.
Such provision does not eliminate liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for acts
of omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) for unlawful payments of dividends or unlawful
stock purchases or redemptions as provided in Section 174 of the Delaware GCL;
or (iv) for any transaction from which the director derives an improper personal
benefit. Such provision does not eliminate the duty of care, but only eliminates
liability for monetary damages for breaches of such duty under various
circumstances. Accordingly, such provision has no effect on the availability of
equitable remedies, such as an injunction or rescission, based upon a breach of
the duty of care. Equitable remedies may not, however, be wholly effective to
remedy the injury caused by any such breach.
The Certificate of Incorporation provides that the Company shall indemnify
its directors and officers to the fullest extent permitted by Delaware law and
advance expenses to such directors and officers to defend any action for which
rights of indemnification are provided. In addition, the Certificate of
Incorporation permits the Company to grant such rights to its employees and
agents. The Company believes that these provisions will assist the Company in
attracting and retaining qualified individuals to serve as directors, officers
and employees.
The Company is subject to the provisions of Section 203 of the Delaware
GCL, an anti-takeover law. In general, Section 203 prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is, or the transaction in which the person became an
interested stockholder was, approved in a prescribed manner or certain other
exceptions apply. For purposes of Section 203, a "business combination" is
defined broadly to include a merger, asset sale or other transaction resulting
in a financial benefit to the interested stockholder, and subject to certain
exceptions, an "interested stockholder" is a person who, together with
affiliates and associated, owns (or within three years prior, did own) 15% or
more of the corporation's voting stock.
54
<PAGE>
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is American
Securities Transfer & Trust, Inc., Lakewood, Colorado.
55
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus covers the sale of Shares by the Selling Securityholders.
Any distribution of any such securities by the Selling Securityholders, or by
their pledgees, donees, transferees or other successors in interest may be
effected from time to time in one or more of the following transactions: (a) to
underwriters who will acquire securities for their own account and resell them
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale (any
public offering price and any discount or concessions allowed or reallowed or
paid to dealers may change from time to time); (b) through brokers, acting as
principal or agent, in transactions (which may involve block transactions) on
the OTC Bulletin Board or on one or more exchanges on which the securities are
then listed, in special offerings, exchange distributions pursuant to the rules
of the applicable exchanges or in the over-the-counter market, or otherwise, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices; (c) directly
or through brokers or agents in private sales at negotiated prices; or (d) by
any other legally available means. Neither ICG, a wholly-owned subsidiary of the
Company, nor CGI, an affiliate of the Company, each a registered broker-dealer
with the SEC and a member of the NASD, will participate in this offering in any
capacity.
The Company will not receive any proceeds from the sale of the Shares
offered hereby. The aggregate proceeds to the Selling Securityholders from the
securities offered hereby will be the offering price less applicable commissions
or discounts, if any. There is no assurance that the Selling Securityholders
will sell any of the securities offered hereby.
The Selling Securityholders and such underwriters, brokers, dealers or
agents, upon effecting a sale of securities, may be considered "underwriters" as
that term is defined in the Securities Act. Sales effected through agents,
brokers or dealers will ordinarily involve payment of customary brokerage
commissions although some brokers or dealers may purchase such securities as
agents for others or as principals for their own account. The Selling
Securityholders will pay any sales commissions or other sellers' compensation
applicable to such transactions. A portion of any proceeds of sales and
discounts, commissions or other sellers' compensation may be deemed to be
underwriting compensation for purposes of the Securities Act.
Pursuant to applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the securities offered hereby may not
simultaneously engage in market making activities for the Common Stock for a
period of five business days prior to the commencement of such distribution. In
addition, each Selling Securityholder and any other person who participates in a
distribution of the securities will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M,
which provisions may limit the timing of purchases and may affect the
marketability of the securities and the ability of any person to engage in
market making activities for the Common Stock.
At the time a particular offering of securities is made, to the extent
required, a Prospectus supplement will be distributed which will set forth the
number of securities being offered and the terms of the offering, including the
purchase price or the public offering price, the name or names of any
underwriters, dealers or agents, the purchase price paid by any underwriters for
securities purchased from the Selling Securityholders, any discounts,
commissions and other items constituting compensation from the Selling
Securityholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the securities will be sold in such jurisdictions, if required, only
through registered or licensed brokers or
56
<PAGE>
dealers. In addition, in certain states the securities may not be sold unless
the securities have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and the conditions of
such exemption have been satisfied.
The Company has agreed that it will bear all costs, expenses and fees in
connection with the registration or qualification of the Shares under federal
and state securities laws. The Company and each Selling Securityholder have
agreed to indemnify each other and certain other persons against certain
liabilities in connection with the offering of the securities, including
liabilities arising under the Securities Act.
SHARES ELIGIBLE FOR FUTURE SALE
The Company has 3,398,496 shares of Common Stock outstanding. Of these
shares, the 3,098,496 shares sold in this offering will be freely tradeable
without restriction or further registration under the Securities Act, except for
any shares purchased by an "affiliate" of the Company (as defined in the
Securities Act and the rules and regulations thereunder) which will be subject
to the resale limitations of Rule 144 promulgated under the Securities Act. Of
the remaining 300,000 shares, 11,166 are deemed to be "restricted securities,"
as that term is defined under Rule 144 promulgated under the Securities Act, as
such shares were issued in private transactions not involving a public offering.
Of these, a total of 8,260 shares will become available for sale 90 days after
the date of this Prospectus, subject to the provisions of Rule 144 under the
Securities Act. Further, the Company has 16,431,000 shares of capital stock
other than Common Stock issued and outstanding, all of which would be
"restricted securities." Such shares of capital stock will automatically convert
from Class B Common Stock to Common Stock on December 31, 1998, at which time
such shares of Common Stock may be sold in compliance with Rule 144.
In general, under Rule 144, as currently in effect, beginning 90 days after
the effective date of the Registration Statement of which this Prospectus is a
part, a stockholder (or stockholders whose shares are aggregated), including an
affiliate of the Company, who beneficially has owned his or her restricted
securities (as that term is defined in Rule 144) for at least one year from the
later of the date such securities were acquired from the Company or (if
applicable) the date they were acquired from an affiliate, is entitled to sell,
within any three-month period, a number of such shares that does not exceed the
greater of one percent of the then outstanding shares of Common Stock
(approximately 33,985 shares immediately after this offering) or the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, affiliates of the
Company must comply with the restrictions and requirements of Rule 144, other
than the one-year holding period requirement, in order to sell shares of Common
Stock which are not restricted securities. Under Rule 144(k), if a period of at
least two years has elapsed between the later of the date restricted securities
were acquired from the Company and the date they were acquired from an affiliate
of the Company, a stockholder who is not an affiliate of the Company at the time
of sale and has not been an affiliate at any time during the 90 days prior to
the sale would be entitled to sell the shares immediately without compliance
with the foregoing requirements under Rule 144, other than the requirements as
to the availability of current public information about the Company.
Prior to this offering, there has been only a limited public market for the
Common Stock. The Company can make no predictions as to the effect, if any, that
sales of shares of Common Stock or the availability of shares for sale will have
on the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could
57
<PAGE>
adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital through the sale of its equity securities.
LEGAL MATTERS
Certain legal matters with respect to the shares of Common Stock offered
hereby will be passed upon for the Company by Orrick, Herrington & Sutcliffe
LLP, New York, New York.
EXPERTS
The financial statements of Capital Growth Holdings, Ltd. as of December
31, 1996 and for the period February 26, 1996 (inception) through December 31,
1996 appearing in this Prospectus and Registration Statement have been audited
by Richard A. Eisner & Company, LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and this offering, reference is made to the Registration
Statement and the exhibits and schedules filed as a part thereof. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected, without charge, at the Public Reference Section of the Commission at
450 Fifth Street N.W., Washington, D.C., and at the regional offices of the
Commission located at 7 World Trade Center, 13th Floor, New York, New York, and
500 West Madison Street, Suite 1400, Chicago, Illinois. Copies of all or any
portion of the Registration Statement can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of the prescribed fees. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http:\\www.sec.gov. 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 make available to its stockholders annual reports
containing financial statements audited by an independent certified public
accounting firm. In addition, the Company intends to make available to its
stockholders quarterly reports containing unaudited financial information for
each of the first three fiscal quarters of each year.
58
<PAGE>
Capital Growth Holdings, Ltd.
INDEX TO FINANCIAL STATEMENTS
[Combined Financial Statements of the Operating Companies]
Report of Independent Auditors .......................................... F-2
Balance Sheet as of December 31, 1996 ................................... F-3
Statement of Operations for the period
February 26, 1996 (inception) to December 31, 1996 ................... F-4
Statement of Changes in Stockholders' Equity for the period
February 26, 1996 (inception) to December 31, 1996 ................... F-5
Statement of Cash flows for the period
February 26, 1996 (inception) to December 31, 1996 ................... F-6
Notes to Financial Statements ........................................... F-7
Condensed Consolidated Balance Sheet At June 30, 1997 (Unaudited) ....... F-14
Condensed Consolidated Statement of Operations for the six months
ended June 30, 1997 and June 30, 1996 (Unaudited) .................... F-16
Consolidated Statement of Cash Flows for the six months
ended June 30, 1997 and June 30, 1996 (Unaudited) .................... F-17
Notes to Financial Statements (Unaudited) ............................... F-18
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Capital Growth Holdings, Ltd.
Greenwich, Connecticut
We have audited the accompanying balance sheet of Capital Growth Holdings,
Ltd. (a development stage company) as at December 31, 1996, and the related
statements of operations, changes in stockholders' equity and cash flows for the
period February 26, 1996 (inception) to December 31, 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 enumerated above present fairly,
in all material respects, the financial position of Capital Growth Holdings,
Ltd. at December 31, 1996, and the results of its operations and its cash flows
for the period February 26, 1996 (inception) to December 31, 1996 in conformity
with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
February 22, 1997
With respect to Notes A and B
March 14, 1997
With respect to Notes D[3] and L
March 27, 1997
F-2
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(a development stage company)
BALANCE SHEET
DECEMBER 31, 1996
(Notes A and B)
<TABLE>
<CAPTION>
A S S E T S
<S> <C> <C>
Cash .................................................................................. $3,060,255
Customer list (Note C[3]) ............................................................ 120,000
Investments in debt and equity securities (at
estimated fair value) (Note C[4]) .................................................. 120,464
Investments in and advances to unconsolidated affiliate
(Note C[5]) ........................................................................ 186,115
-----------
T O T A L ................................................................... $3,486,834
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accrued expenses and other liabilities ............................................. $51,000
Commitments (Note J)
Stockholders' equity (Notes D, E and F):
Common stock - no par value; 100,000,000
shares authorized; 2,846,094 shares
issued and outstanding .............................................. $3,088,260
Class B common stock - no par value;
25,000,000 shares authorized; 11,349,666
shares issued and outstanding ....................................... 334,803
Series A convertible preferred stock,
stated at liquidation preference -
(no par value); 4,001,334 shares
authorized, issued and outstanding .................................. 560,187
Series B convertible preferred stock,
stated at liquidation preference -
(no par value); 1,080,000 shares
authorized, issued and outstanding .................................. 226,800
-----------
4,210,050
Deficit accumulated during the development
stage ............................................................... (718,616)
Subscription receivable ............................................... (55,600)
-----------
Total stockholders' equity .................................................. 3,435,834
-----------
T O T A L ................................................................... $3,486,834
===========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-3
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(a development stage company)
STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 26, 1996 (INCEPTION)
TO DECEMBER 31, 1996
Interest income ................................................. $22,033
General and administrative expense .............................. (740,649)
------------
Net loss ........................................................ (718,616)
Less cumulative preferred dividend .............................. (8,530)
------------
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS .................... $(727,146)
============
Net loss attributable to common stock per share (Note C[2]) ..... $(.06)
============
Weighted average number of shares outstanding (Note C[2]) ....... 11,910,346
============
The accompanying notes to financial statements
are an integral part hereof.
F-4
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FEBRUARY 26, 1996 (INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
Class B Series A Series B
Shares Common Common Convertible Convertible
Outstanding Stock Stock Preferred Preferred
----------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance - February 26, 1996 .................... 297,094
Issuance of common stock ....................... 2,549,000 $3,088,260
Issuance of Class B common stock ............... 11,289,666 $214,803
Issuance of Class B common stock in a noncash
transaction for $2.00 per share equivalent .. 60,000 120,000
Issuance of convertible preferred Series A
stock ....................................... 4,001,334 $560,187
Issuance of convertible preferred Series B
stock ....................................... 1,080,000 $226,800
Subscription receivable ........................
Net loss .......................................
------------ ------------ ------------ ------------
BALANCE - DECEMBER 31, 1996 ................... $3,088,260 $334,803 $560,187 $226,800
============ ============ ============ ============
<CAPTION>
Deficit
Accumulated
During the
Development Subscription
Stage Receivable Total
------------ ------------ ------
<S> <C> <C> <C>
Balance - February 26, 1996 .................... $ - 0 -
Issuance of common stock ....................... 3,088,260
Issuance of Class B common stock ............... 214,803
Issuance of Class B common stock in a noncash
transaction for $2.00 per share equivalent .. 120,000
Issuance of convertible preferred Series A
stock ....................................... 560,187
Issuance of convertible preferred Series B
stock ....................................... 226,800
Subscription receivable ........................ $(55,600) (55,600)
Net loss ....................................... $(718,616) (718,616)
------------ ------------ ------------
BALANCE - DECEMBER 31, 1996 ................... $(718,616) $(55,600) $3,435,834
============ ============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-5
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(a development stage company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FEBRUARY 26, 1996 (INCEPTION)
TO DECEMBER 31, 1996
Cash flows from operating activities:
Net loss .................................................... $ (718,616)
Adjustment to reconcile net loss to net cash
used in operating activities:
Change in operating liabilities:
Increase in accrued expenses and other
liabilities ......................................... 51,000
-----------
Net cash used in operating activities ............... (667,616)
-----------
Cash flows from investing activities:
Investment in and advances to unconsolidated affiliate ...... (186,115)
Investments in debt and equity securities ................... (120,464)
------------
Net cash used in investing activities ............... (306,579)
-----------
Cash flows from financing activities:
Proceeds from the issuance of common and preferred stock .... 4,034,450
-----------
NET INCREASE IN CASH ........................................... 3,060,255
Cash - February 26, 1996 ....................................... - 0 -
-----------
CASH - DECEMBER 31, 1996 ....................................... $ 3,060,255
===========
Noncash transaction:
Acquisition of customer list for common stock ............... $ 120,000
===========
The accompanying notes to financial statements
are an integral part hereof.
F-6
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(NOTE A) - The Corporation:
Capital Growth Holdings, Ltd. (the "Company" or "CGH"), formerly Galt
Financial Corporation, was incorporated in the State of Colorado on June 15,
1987. On March 14, 1997, CGH, an inactive company, acquired 100% of the
outstanding capital stock of International Capital Growth, Ltd. ("ICG") (a
company formed in February 1996), a Delaware corporation and member of the
National Association of Securities Dealers, Inc. The acquisition was consummated
through an exchange of shares that resulted in a change in control of CGH (see
Note B for further discussion). The transaction has been treated as a
recapitalization. In connection therewith, ICG's historic capital accounts were
retroactively adjusted to reflect the equivalent number of shares issued by CGH
in the transaction while ICG's historical deficit accumulated during the
development stage is carried forward. The operations reflect those of ICG from
inception. Through December 31, 1996 the Company has been in the development
stage and has conducted no revenue producing activities. The Company is
developing a diversified financial service firm to pursue business opportunities
in the United States and the United Kingdom.
(NOTE B) - Acquisition:
As discussed in Note A, the Company acquired 100% of the outstanding
capital stock of ICG in a reverse acquisition consummated through a share
exchange transaction (the "Share Exchange"). In accordance with the Share
Exchange, the Company issued 18,980,000 shares of its capital stock and
1,625,000 redeemable warrants to the shareholders of ICG in exchange for the
outstanding common and convertible preferred shares and warrants of ICG. In
addition, warrants to obtain 250,000 shares of Class B common stock issued by
ICG to a consultant were exchanged.
The 18,980,000 shares of capital stock of the Company that were issued in
the Share Exchange consisted of (a) 2,549,000 shares of common stock, (b)
11,349,666 shares of Class B common stock, (c) 4,001,334 shares of 5% Cumulative
Convertible Series A Preferred Stock and (d) 1,080,000 shares of 5% Cumulative
Convertible Series B Preferred Stock. The warrants consist of 1,625,000
redeemable warrants, each exercisable to purchase one share common stock at
$4.00 per share (subject to adjustment) at any time until October 1999 and
(continued)
F-7
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(NOTE B) - Acquisition: (continued)
250,000 redeemable warrants, each exercisable to purchase one share of Class B
common stock at $2.00 per share (subject to adjustment) at any time, subject to
an exercise schedule, until November 1999. The issuance of warrants exercisable
at $2.00 per share will result in a charge to operations based on their fair
value over the number of months that such consulting services are provided.
(NOTE C) - Summary of Significant Accounting Policies:
[1] 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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
[2] Net loss per common share:
Net loss per common share is based on the weighted average number of common
shares outstanding during the year. Common stock equivalents representing
options and warrants and convertible securities have not been included as they
would be antidilutive. Net loss attributable to common stock was adjusted to
reflect cumulative dividends on preferred shares outstanding.
[3] Customer list:
Customer lists are stated at cost and are being amortized over three years.
[4] Investment in debt and equity securities:
Investment in debt and equity securities are carried at cost which
approximates fair value.
[5] Investment in and advances to unconsolidated affiliate:
Investment in and advances to an unconsolidated affiliate are recorded
using the equity method of accounting.
(continued)
F-8
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(NOTE C) - Summary of Significant Accounting Policies: (continued)
[6] Recently issued accounting pronouncements:
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share".
This new standard requires dual presentation of basic and diluted earnings per
share ("EPS") on the face of the statement of income and requires reconciliation
of the numerators and the denominators of the basic and diluted EPS
calculations. This statement will be effective for the Company's 1997 year end.
The Company has not yet quantified what effect the adoption of SFAS 128 will
have on its loss/earnings per share of common stock.
(NOTE D) - Stockholders' Equity:
[1] Preferred stock:
The authorized preferred stock of the Company consists of 20,000,000
shares, $.001 par value. The preferred stock may be issued in one or more series
at the discretion of the Board of Directors. In establishing a series, the Board
of Directors shall fix the number of shares in such series, and the preferences,
rights and restrictions thereof.
On March 14, 1997, the Board of Directors designated 4,365,000 shares of
preferred stock as 5% Cumulative Series A Preferred Stock and 1,200,000 shares
of preferred stock as 5% Cumulative Convertible Series B Preferred Stock.
The holders of Series A and B preferred stock are entitled to preferential
cumulative dividends beginning October 12, 1996 equal to 5% of the liquidation
preference per annum and share equally with the Class B common stock in any
dividends declared thereon. The shares are convertible at the option of the
holder and automatically convert into Class B common stock on a one-for-one
basis on October 12, 1997. The Series A and B have a liquidation preference of
$.14 and $.21 per share, respectively.
Supplemental loss per share would have been calculated as $.05 per common
share if the convertible preferred stock was treated as common stock at date of
issuance.
(continued)
F-9
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(NOTE D) - Stockholders' Equity: (continued)
[2] Class B common stock:
Each Class B common stock is entitled to one vote per share. The Class B
common stock is junior in priority with respect to dividends to the common stock
and the Series A and B preferred stock and automatically converts into common
stock on a one-for-one basis on December 31, 1998.
[3] Dividend:
In March 1997, the Board of Directors declared an annual dividend of $.225
per share of common stock, accruing as of January 1, 1997 payable commencing
June 30, 1997 and on a quarterly basis thereafter. The dividend will be paid
after payment of any dividends due on all classes of stock with priority over
common stock (currently Series A and B preferred stock), subject to any
operating restrictions. In addition, the Board of Directors determined that any
dividend declared on Class B common stock will be subject to a $.15 and $.20 per
share limitation on annual dividends in 1997 and 1998, respectively.
[4] Subscription receivable:
Subscription receivable represents amounts to be collected by the Company
from a Series A convertible preferred stockholder.
(NOTE E) - Warrants:
In October 1996 the Company raised $3,250,000 through the sale of units in
a private placement. Each unit was sold for $25,000 and consisted of 12,500
shares of common stock and 12,500 redeemable warrants. As a result, the Company
has 1,625,000 redeemable warrants issued and outstanding.
Each redeemable warrant entitles the registered holder to purchase one
share of common stock at an initial exercise price of $4.00 per share (subject
to adjustment for stock splits, combinations and reclassifications) at any time
prior to redemption from October 3, 1996 and October 15, 1996 until October 3,
1999 and October 15, 1999, respectively.
(continued)
F-10
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(NOTE E) - Warrants: (continued)
Additionally, the Company has agreed to issue 250,000 redeemable common
stock purchase warrants in exchange for consulting services to be rendered on
behalf of the Company. The consulting warrants vest at the rate of 125,000 per
annum on a pro rata basis based upon the number of months that such consulting
services are provided to the Company. Each consulting warrant entitles the
registered holder to purchase one share of common stock at an initial exercise
price of $2.00 per share at any time prior to redemption from the date of
issuance until 36 months thereafter.
(NOTE F) - Stock Option Plan:
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options. The alternative
fair value accounting provided for under Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation,"
requires the use of an option valuation model. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
The Company's 1996 Incentive Stock Option Plan has authorized the grant of
options to management personnel for up to 1,500,000 shares of the Company's
common stock. All options granted have 10 year terms and carry certain vesting
requirements.
Pro forma information regarding net loss is required by SFAS 123, and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that statement. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions for 1996 interest rates of 6.2%,
dividend yields of 0%, volatility factors of the expected market price of the
Company's common stock of .1 and .35; and a weighted-average expected life of
the option of 10 years.
(continued)
F-11
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(NOTE F) - Stock Option Plan: (continued)
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock option. The pro forma net
loss for 1996 is $(1,332,416) or $.11 loss per share. A summary of the Company's
stock option activity and related information for the period February 26, 1996
through December 31, 1996 is as follows:
Weighted-Average
Options Exercise Price
------- --------------
Outstanding - beginning of
period ............................... -- --
Granted ................................. 660,000 $2.00
Outstanding and exercisable -
end of year .......................... 660,000 2.00
Weighted-average fair value
of options granted during
the year ............................. 0.92
(NOTE G) - Related Party Transactions:
The Company is under common ownership with Capital Growth International,
L.L.C. ("CGI") and CGI is utilizing space at the Company's offices without the
allocation of rent. Rent expense for the period from February 26, 1996 through
December 31, 1996 was approximately $51,000.
(continued)
F-12
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(NOTE H) - Net Capital Requirements:
The Company is subject to the Securities and Exchange Commission Uniform
Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net
capital and requires that the ratio of aggregate indebtedness to net capital,
both as defined, shall not exceed 15 to 1 (8 to 1 for the first 12 months of
operations). At December 31, 1996 the Company had net capital of $3,009,255
which was $2,959,255 in excess of its required net capital.
(NOTE I) - Exemption From Rule 15c3-3:
The Company is exempt from the reserve requirement of the Securities and
Exchange Commission's Rule 15c3-3 pursuant to Section 15c3-3(k)(2)(ii).
(NOTE J) - Commitments:
The Company has issued a letter of credit in the amount of $100,000 to
secure future rent payments and leasehold improvements at the Company's London
office.
(NOTE K) - Provision for Taxes:
At December 31, 1996 the Corporation has a net operating loss carryover of
approximately $700,000 available to apply against future taxable income. These
carryovers expire in 2011 and result, for financial reporting purposes, in
noncurrent benefits to the Corporation of approximately $287,000 at December 31,
1996, representing the effect of their potential use in reducing future taxable
income. Because of the uncertainty of the realization of such benefits in future
years, the Corporation has fully reserved against such benefits and has not
recognized them at any dollar value in the accompanying financial statements.
(NOTE L) - Subsequent Event:
On March 27, 1997, the Company completed a private offering of its common
stock at $2.25 per share. The Company issued a total of 549,496 shares of common
stock which yielded net proceeds of approximately $1,069,000. A placement fee of
$74,182 was paid to CGI. In connection therewith, the Company agreed to issue
warrants to purchase 24,985 shares of common stock as partial compensation to
certain nonaffiliated sub-placement agents. Each warrant is exercisable to
purchase one share of common stock at $4.00 per share (subject to adjustment)
through March 2000.
F-13
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
A S S E T S
June 30, 1997
-------------
Cash .................................................... $2,717,527
Investment in Marketable Securities ..................... 1,702,201
Loan to Affiliate ....................................... 200,000
Investments in Illiquid Securities ......................... 703,166
Fixed Assets, Net .......................................... 209,284
Customer List .............................................. 100,000
Other assets ............................................... 130,944
----------
TOTAL ASSETS .......................................... $5,763,122
==========
See Notes to unaudited Financial statements
F-14
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, 1997
-------------
(unaudited)
Liabilities:
Accrued expenses and other liabilities .................... $ 41,000
Deferred tax liability .................................... 400,000
Dividends payable ......................................... 410,038
-----------
Total Liabilities ......................................... 851,038
-----------
Stockholders' equity:
Series A Convertible Preferred Stock - $.001 par value,
4,001,334 shares authorized; 4,001,334 shares issued and
outstanding at liquidation value of $.14 .................. 560,187
Series B Convertible Preferred Stock - $.001 par value,
1,080,000 shares authorized; 1,080,000 and 1,200,000 shares
issued and outstanding at June 30, 1997 at liquidation value
of $.21 ................................................... 226,800
Common Stock - $.001 par value, 25,000,000 shares
authorized; 3,398,496 shares issued and outstanding ....... 3,398
Class B Common Stock - $.001 par value, 25,000,000 shares
authorized; 11,349,666 shares issued and outstanding ...... 11,350
Additional Paid in Capital ..................................... 4,399,694
Accumulated Deficit ............................................ (205,745)
Subscriptions Receivable ....................................... (53,600)
Treasury Stock (15,000 Shares) ................................. (30,000)
----------
Total stockholders' equity ................................ 4,912,084
----------
T O T A L ................................................. $5,763,122
==========
See Notes to unaudited Financial Statements
F-15
<PAGE>
Capital Growth Holdings, Ltd.
Condensed Consolidated
Statements of Operations
(Unaudited)
For the Six Months Ended
June 30, 1997 June 30, 1996
------------- -------------
Revenues:
Consulting fees $ 343,934 0
Private placement fees 1,800,268 0
Unrealized gains on securities 1,168,514 0
Interest Income 53,090 136
----------- -----------
Total revenue 3,365,806 136
=========== ===========
Operating expenses
Equity in net loss of
unconsolidated affiliate 86,115 0
Selling Expenses 466,100 10,256
General and administrative 1,490,682 0
----------- -----------
Total operating expenses 2,042,897 10,256
----------- -----------
Net income (loss) before taxes 1,322,909 (10,120)
Provision for taxes 400,000 0
----------- -----------
Net income (loss) $ 922,909 (10,120)
Less cumulative preferred dividend (18,261)
-----------
Net income (loss) attributable
to common stockholders 904,648 (10,120)
=========== ===========
Primary:
Net income per common share $ 0.06 $ 0.00
=========== ===========
Weighted average number of
shares outstanding 14,464,601 3,243,333
=========== ===========
Fully diluted:
Net income per common share $ 0.05
===========
Weighted average number of
shares outstanding 19,718,526
===========
See Notes to unaudited Financial Statements
F-16
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD
Consolidated Statement of Cash Flows
------------------------------------
(UNAUDITED)
Six Months Ended June 30,
1997 1996
---- ----
Cash flows from operating activities:
Net income (loss) 922,909 (10,120)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Amortization and Depreciation Expense 31,394
Equity in loss of unconsolidated affiliate 86,115
Valuation of Warrant for consulting 35,417
Deferred Tax Expense 400,000
Changes in operating assets and liabilities:
Other Assets (30,943)
Accrued expenses & other liabilities (10,000)
---------- ----------
Net cash provided by (used in)
operating activities 1,434,892 (10,120)
---------- ----------
Cash flows from investing activities:
Investment in Marketable Securities (1,702,202)
Investment in Illiquid Securities (583,166)
Investment in Fixed Assets (220,200)
Loan to Affiliate (200,000)
----------
Net cash (used in)
investing activities (2,705,568) 0
---------- ----------
Cash flows from financing activities:
Net proceeds from sales
of common stock 957,948 175,950
Purchase of Treasury Stock (30,000)
---------- ----------
Net cash provided by
financing activities 927,948 175,950
---------- ----------
Net Increase or (Decrease) in Cash (342,728) 165,830
Cash at Beginning of Period 3,060,255 0
---------- ----------
Cash at end of period 2,717,527 165,830
========== ==========
See Notes to unaudited Financial Statements
F-17
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
(1) Financial Statement Presentation
The unaudited financial statements of Capital Growth Holdings, Ltd. (the
"Company" or "CGH") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC) and, in the
opinion of management, reflect all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the results of operations
for the interim periods presented. Certain information and footnote
disclosures normally included in financial statements, prepared in
accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations. However,
management believes that the disclosures are adequate to make the
information presented not misleading. The results for the interim periods
are not necessarily indicative of the results for the full fiscal year.
During the first quarter of 1997 the Company ceased being a development
stage company.
(2) Principals of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, International Capital Growth, Ltd. ("ICG")
In connection, all significant intercompany transactions and balances have
been eliminated.
(3) Valuation of Securities
Securities owned and securities sold not yet purchased, which are listed on
a national securities exchange, are valued at their last reported sales
price. Securities which trade over-the-counter are valued at the "bid"
price if held long by the Company and at the "asked" price if sold short by
the Company. Securities which do not have a ready market are valued by the
Company at cost which approximates fair value.
In circumstances where the Company owns securities, and the Company
believes the disposition of such securities would adversely affect the
market price of the securities due to the volume traded, the Company will
discount the market value accordingly. Unrealized gains and losses on all
securities are reflected in the statement of operations.
In addition, the company earns fees in the form of securities. These
securities are valued at market on the date they are earned. Thereafter,
any increase or decrease in said value is reflected in unrealized
gains/losses on securities.
F-18
<PAGE>
(4) 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. Actual results could differ from those estimates.
(5) Acquisition of International Capital Growth, Ltd.
On March 14, 1997, CGH, an inactive company, acquired 100% of the
outstanding capital stock of International Capital Growth, Ltd. ("ICG"), a
Delaware corporation and member of the National Association of Securities
Dealers, Inc (the "NASD"). The acquisition consummated through a share
exchange transaction (the "Share Exchange").
The Share Exchange resulted in a change in control of the Company. The
former shareholders of the Company currently own approximately 2%, and the
former stockholders of ICG currently own approximately 98% of the
outstanding capital stock of the Company. The transaction has been treated
as a recapitalization. In connection therewith, ICG's historic capital
accounts were retroactively adjusted to reflect the equivalent number of
shares issued by CGH in the transaction while ICG's historical deficit
accumulated during the development stage is carried forward.
The 18,900,000 shares of capital stock of the Company that were issued in
the Share Exchange consisted of (a) 2,549,000 shares of common stock
("Common Stock"), (b) 11,349,666 shares of newly authorized class B common
stock ("Class B Common Stock"), (c) 4,001,334 shares of newly-designated 5%
Cumulative Convertible Series A Preferred Stock ("Series A Preferred
Stock") and (d) 1,080,000 shares of newly-designated 5% Cumulative
Convertible Series B Preferred Stock ("Series B Preferred Stock"), all of
which classes of capital stock vote together as one class. The Class B
Common Stock is junior in priority with respect to dividends to the Common
Stock and the Designated Preferred Stock and automatically converts into
Common Stock on a one-for-one basis on December 31, 1998. The holders of
the Series A Preferred Stock and Series B Preferred Stock (collectively,
the "Designated Preferred Stock") are entitled to preferential cumulative
dividends until conversion thereof into Class B Common Stock, share equally
with the Class B Common Stock in any dividend declared thereon, can be
converted into Class B Common Stock by the holder on a one-for-one basis at
any time, and automatically convert into Class B Common Stock on a
one-for-one basis on October 12, 1997.
(6) Subscriptions Receivable
Subscriptions receivable represent amounts to be collected by the Company
from a Series A Preferred stockholder.
(7) Preferred Stock
The preferred stock is convertible into common stock at a one to one ratio
and carries the same voting rights. The Series A Preferred Stock and Series
B Preferred Stock carry a .14 and .21 per share liquidation value,
respectively. The outstanding Preferred Stock carries a
F-19
<PAGE>
cumulative dividend of 5% of the liquidation preference per annum. Unless
earlier converted, each outstanding share of outstanding Preferred Stock
shall be automatically converted into one share of common stock without any
action by the holders thereof on October 12, 1997.
(8) Warrants
In October 1996 the Company raised $3,250,000 through the sale of units in
a private placement. Each unit was sold for $25,000 and consisted of 12,500
shares of common stock and 12,500 redeemable warrants. As a result, the
Company has 1,625,000 redeemable warrants issued and outstanding.
Each redeemable warrant entitles the registered holder to purchase one
share of common stock at an initial exercise price of $4.00 per share
(subject to adjustment for stock splits, combinations and
reclassifications) at any time prior to redemption from October 3, 1996 and
October 15, 1996 until October 3, 1999 and October 15, 1999, respectively.
In addition, the Company issued 24,985 redeemable warrants to sub-placement
agents in connection with the Company's March private placement. Each
warrant initially is exercisable at a price of $4.00 per share at any time
prior to redemption from March 20, 1997 and March 27, 1997 until March 20,
2000 and March 27, 2000, respectively.
Additionally, the Company has 250,000 redeemable warrants outstanding, each
exercisable to purchase one share of Class B common stock at $2.00 per
share (subject to adjustment) at any time, subject to an exercise schedule,
until November 1999. The issuance of warrants are subject to vesting
requirements and are exercisable at $2.00 per share and will result in a
charge to operations based on their fair value over the number of months
that such consulting services are provided.
(9) Stock Option Plan
The Company's 1997 Stock Option Plan has authorized the grant of options to
management personnel for up to 1,500,000 shares of the Company's common
stock. All options granted have 10 year terms and carry certain vesting
requirements.
A summary of the Company's stock option activity and related information
for the period December 31, 1996 through June 30, 1997 is as follows:
Weighted-Average
Options Exercise Price
------- --------------
Outstanding - beginning of
period ............................... 660,000 $2.00
Granted ................................ 150,000 2.25
Exercised .............................. 0 0
Forfeited .............................. 25,000 2.00
Outstanding - end of period ............ 785,000 2.05
F-20
<PAGE>
Exercisable - end of period............. 785,000 2.05
(10) Related Party Transactions
The Company is affiliated with Capital Growth International LLC ("CGI") and
CGI is utilizing space at the Company's offices without the allocation of
rent.
In March 1997, the Company loaned $200,000 to an entity controlled by
Messrs. Ronald B. Koenig and Stanley Hollander, two of the Company's
Directors. The transaction was approved by the independent members of the
Board of Directors.
(11) Net Capital Requirements
ICG is subject to the Securities and Exchange Commission Uniform Net
Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net
capital and requires that the ratio of aggregate indebtedness to net
capital, both as defined, shall not exceed 15 to 1. (8 to 1 for the first
12 months of operations). At June 30, 1997 the Company had net capital of
$2,041,848 which was $1,986,723 in excess of its required net capital.
(12) Commitments
The Company has issued a letter of credit in the amount of $100,000 to
secure future rent payments and leasehold improvements at the Company's
London office.
(13) Recently Issued Accounting Pronouncements:
The Financial Accounting Standards Board has recently issued Statements of
Financial Accounting Standards No. 129, "Disclosure of Information about
Capital Structure," No. 130, "Reporting Comprehensive Income," and No. 131,
"Disclosures about Segments of an Enterprise and Related Information." The
above pronouncements will not have a significant effect on the information
presented in the financial statements.
(14) Private Placement
On March 27, 1997, the Company completed a private offering of its common
stock at $2.25 per share. The Company issued a total of 549,496 shares of
common stock which yielded net proceeds of approximately $1,069,000. A
placement fee of $74,182 was paid to CGI. In connection therewith, the
Company agreed to issue warrants to purchase 24,985 shares of common stock
as partial compensation to certain nonaffiliated sub-placement agents. Each
warrant is exercisable to purchase one share at $4.00 per share (subject to
adjustment) through March 2000.
(15) Dividend
As of March 25, 1997, the Company's Board of Directors declared an annual
cumulative dividend of $.225 per share on the Common Stock for the calendar
years 1997 and 1998, subject to (i) the payment of dividends on all classes
of capital stock with priority over the Common Stock (currently, the
Designated Preferred Stock) and (ii) restrictions under applicable law (the
"Common Stock Dividend"). The Common Stock Dividend, which began accruing
as of January 1, 1997, is currently payable on a quarterly basis ending on
December 31, 1998.
F-21
<PAGE>
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offer made hereby. If given or made, such information or
representation must not be relied upon as having been authorized by the Company.
This Prospectus does not constitute an offer of any securities other than the
securities to which it relates or an offer to any person in any jurisdiction in
which such an offer would be unlawful. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the facts herein set forth since
the date hereof.
----------
TABLE OF CONTENTS
Page
----
Prospectus Summary ...................................................... 1
Risk Factors ............................................................ 7
The Company ............................................................. 18
Use of Proceeds ......................................................... 20
Market for Common Equity ................................................ 20
Dividend Policy ......................................................... 21
Capitalization .......................................................... 22
Selected Financial Data ................................................. 23
Management's Discussion and Analysis
and Results of Operations ............................................ 25
Business ................................................................ 28
Management .............................................................. 34
Certain Transactions .................................................... 39
Principal Stockholders .................................................. 41
Selling Securityholders ................................................. 43
Description of Securities ............................................... 51
Plan of Distribution .................................................... 56
Shares Eligible for Future Sale ......................................... 57
Legal Matters ........................................................... 58
Experts ................................................................. 58
Additional Information .................................................. 58
Index to Financial Statements ........................................... F-1
================================================================================
================================================================================
4,748,480 Shares
Capital Growth Holdings, Ltd.
Common Stock
----------
PROSPECTUS
----------
______________, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. - Indemnification of Directors and Officers
The Company's Certificate of Incorporation provides for the Company to
indemnify all persons permitted by Delaware General Corporation Law to the
maximum extent permitted thereby. In addition, the Company's Certificate of
Incorporation limits the liability of directors to the maximum extent permitted
by Delaware law. These provisions of the Certificate of Incorporation are
contained in Articles TEN and THIRTEEN, which read as follows:
TENTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided, however, that the foregoing shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
THIRTEENTH: Except as may otherwise be specifically provided in this
Certificate of Incorporation, no provision of this Certificate of Incorporation
is intended by the Corporation to be construed as limiting, prohibiting, denying
or abrogating any of the general or specific powers or rights conferred under
the General Corporation Law upon the Corporation, upon its stockholders,
bondholders and security holders, and upon its directors, officers and other
corporate personnel, including, in particular, the power of the Corporation to
furnish indemnification to directors and officers in the capacities defined and
prescribed by the General Corporation Law and the defined and prescribed rights
of said persons to indemnification as the same are conferred under the General
Corporation Law. The Corporation shall, to the fullest extent permitted by the
laws of the State of Delaware, including, but not limited to Section 145 of the
General Corporation Law of the State of Delaware, as the same may be amended and
supplemented, indemnify any and all directors and officers of the Corporation
and may, in the discretion of the Board of Directors, indemnify any and all
other persons whom it shall have power to indemnify under said Section or
otherwise under Delaware law, from and against any and all of the expenses,
liabilities or other matters referred to or covered by said Section. The
indemnification provisions contained in the Delaware General Corporation Law
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any ByLaw, agreement, resolution of stockholders or
disinterested directors, or otherwise, and shall continue as to a person who has
ceased to be a director, officer, employee or agent, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall inure to the benefit of the heirs, executors and
administrators of such person.
In addition, the Company has taken out a professional indemnity policy with
a limit of liability of $5,000,000. The policy is a claims made and reported
policy. Subject to certain exclusions and qualifications, the policy protects
directors, officers, and employees from a claim made for an actual or alleged
error, omission, negligent act, libel or slander in rendering professional
services.
Item 25. - Other Expenses of Issuance and Distribution
The Company estimates that expenses in connection with the offering described in
this Registration Statement will be as follows:
II-1
<PAGE>
Securities and Exchange Commission registration fee .............. $ 3,597
Printing expenses ................................................ $10,000
Accounting fees and expenses ..................................... $25,000
Legal fees and expenses .......................................... $35,000
Fees and expenses (including legal fees) for
qualifications under state securities laws ....................... $ 5,000
Miscellaneous .................................................... $ 2,000
Total ............................................................ $80,597
All amounts except the Securities and Exchange Commission registration fee and
the NASD filing fee are estimated.
Item 26. - Recent Sales of Unregistered Securities
During the past three years, the following shares were sold by the Company
without registration under the Securities Act:
(a) On March 14, 1997, the Company acquired 100% of the outstanding
capital stock of International Capital Growth, Ltd., a Delaware corporation
and member of the NASD in a reverse acquisition consummated through a share
exchange transaction (the "Share Exchange") pursuant to Regulation D
("Regulation D") and Regulation S ("Regulation S"), each as promulgated
under the Securities Act, to "accredited investors" as that term is defined
in Regulation D and to non-"U.S. persons" in an "offshore transaction" as
such terms are defined in Regulation S, respectively. In accordance with
the terms and conditions of the Share Exchange, the Company issued
18,982,906 shares of its capital stock and 1,875,000 redeemable warrants
(the "Exchange Warrants") to the former security holders of ICG, who are
"accredited investors" as that term is defined in Regulation D, or
non-"U.S. persons" participating in an "offshore transaction" as such terms
are defined in Regulation S, in exchange for outstanding securities of ICG,
in each case of the same type, term and denomination. The 18,982,906 shares
of capital stock of the Company that were issued in the Share Exchange
consisted of (i) 2,551,906 shares of Common Stock, par value $.001 per
share, (ii) 11,349,666 shares of newly- authorized Class B Common Stock,
par value $.001 per share, (iii) 4,001,334 shares of newly- designated 5%
Cumulative Convertible Series A Preferred Stock, par value $.001 per share,
and (iv) 1,080,000 shares of newly-designated 5% Cumulative Convertible
Series B Preferred Stock, par value $.001 per share. The Exchange Warrants
consist of 1,625,000 redeemable shares common stock purchase warrants, each
exercisable to purchase one share Common Stock, which shares of Common
Stock are being registered hereby, at $4.00 per share (subject to
adjustment under certain circumstances) at any time until October 1999 or
March 2000, as the case may be, and 250,000 redeemable Class B common stock
purchase warrants, each exercisable to purchase one share of Class B Common
Stock at $2.00 per share (subject to adjustment under certain
circumstances) at any time, subject to an vesting schedule, until November
1999.
(b) On March 27, 1997, the Company completed a private offering (the
"March Private Offering") of shares of its Common Stock at $2.25 per share,
pursuant to Regulation D and Regulation S, to "accredited investors" as
that term is defined in Regulation D and to non- "U.S. persons" in an
"offshore transaction" as such terms are defined in Regulation S,
respectively. The Company issued 549,496 shares of Common Stock in the
March Private Offering, which yielded aggregate gross proceeds of
$1,236,366. The Company also issued a total of 24,984 Warrants as partial
compensation to certain sub-placement agents in the March Private Offering.
Each Warrant is exercisable to purchase one share of Common Stock at $4.00
per share (subject to adjustment) at any time prior to redemption thereof
until March 2000. The placement agent in the March Private Offering is an
affiliate of the Company.
II-2
<PAGE>
Item 27. - Exhibits
(a) The following is a list of Exhibits filed herewith as part of the
Registration Statement:
Exhibit
No. Description
--- -----------
2.1 Agreement Concerning the Exchange of Securities of International Capital
Growth, Ltd. for Securities of Galt Financial Corporation dated January
7, 1997, is hereby incorporated by reference to Exhibit 2.1 as included
in the Company's Form 8-K dated March 14, 1997
2.2 Agreement and Plan of Merger by and between Capital Growth Holdings,
Ltd., a Colorado corporation, and Capital Growth Holdings, Ltd., a
Delaware corporation, dated June 10, 1997, is hereby incorporated by
reference to Exhibit 2 as included in the Company's Form 8-K dated June
25, 1997
3.1 Certificate of Incorporation of the Company, as amended, is hereby
incorporated by reference to Exhibit 3(i) as included in the Company's
Form 8-K dated June 25, 1997
3.2 By-Laws of the Company are hereby incorporated by reference to Exhibit
3(ii) as included in the Company's Form 8-K dated June 25, 1997
4.1* Form of Common Stock certificate
4.2 Form of Redeemable Common Stock Purchase Warrant
4.3 Form of Redeemable Class B Common Stock Purchase Warrant
5.1* Opinion of Orrick, Herrington & Sutcliffe LLP
10.1 1997 Stock Option Plan is hereby incorporated by reference to Exhibit 10
as included in Company's Form 8-K dated March 14, 1997
10.3 Lease Agreement, as amended, regarding 660 Steamboat Road, Greenwich, CT
dated December, 1995
10.4* Lease Agreement, as amended, regarding 2425 Olympic Boulevard, Santa
Monica, CA dated November 30, 1994
10.5* Lease Agreement regarding 4 Hill Street, London, England
11 Statement re: Computation of Per Share Earnings
16.1 Letter, dated March 25, 1997, of Angell & Deering, is hereby incorporated
by reference to Exhibit No. 16 as included in the Company's Form 8-K
dated March 14, 1997.
21.1 Subsidiaries of the Company
23.1 Consent of Richard A. Eisner & Company, LLP
23.2 Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page II-5 of Part II of this
Registration Statement)
27.1 Financial Data Schedule
- ----------
* To be filed by amendment.
II-3
<PAGE>
Item 28. - Undertakings
The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the Prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of Prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, treat the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of Prospectus as a new
Registration Statement for the securities offered in the Registration Statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form SB-2 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 14th day of October 1997.
Capital Growth Holdings, Ltd.
By: /s/ Ronald B. Koenig
----------------------------
Ronald B. Koenig
President, Chief Executive
Officer and Director
(Principal Executive Officer)
Each person whose signature appears below constitutes and appoints Michael
S. Jacobs and Ronald B. Koenig and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
in each of them, for him and in his name, place and stead, and in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement on Form SB-2 of Capital Growth Holdings, Ltd.,
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to all intents and purposes as he might or could
do in person hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Ronald B. Koenig President, Chief
- -------------------------- Executive Officer and
Ronald B. Koenig Director (Principal October 14, 1997
Executive Officer)
/s/ Michael S. Jacobs Senior Vice President, October 14, 1997
- -------------------------- Secretary and Treasurer
Michael S. Jacobs (Principal Financial and
Accounting Officer)
/s/ Stanley Hollander Director October 14, 1997
- --------------------------
Stanley Hollander
/s/ Alan L. Jacobs Director October 14, 1997
- --------------------------
Alan L. Jacobs
/s/ John D. Booth Director October 14, 1997
- --------------------------
John D. Booth
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
2.1 Agreement Concerning the Exchange of Securities of International Capital
Growth, Ltd. for Securities of Galt Financial Corporation dated January
7, 1997, is hereby incorporated by reference to Exhibit 2.1 as included
in the Company's Form 8-K dated March 14, 1997
2.2 Agreement and Plan of Merger by and between Capital Growth Holdings,
Ltd., a Colorado corporation, and Capital Growth Holdings, Ltd., a
Delaware corporation, dated June 10, 1997, is hereby incorporated by
reference to Exhibit 2 as included in the Company's Form 8-K dated June
25, 1997
3.1 Certificate of Incorporation of the Company, as amended, is hereby
incorporated by reference to Exhibit 3(i) as included in the Company's
Form 8-K dated June 25, 1997
3.2 By-Laws of the Company are hereby incorporated by reference to Exhibit
3(ii) as included in the Company's Form 8-K dated June 25, 1997
4.1* Form of Common Stock certificate
4.2 Form of Redeemable Common Stock Purchase Warrant
4.3 Form of Redeemable Class B Common Stock Purchase Warrant
5.1* Opinion of Orrick, Herrington & Sutcliffe LLP
10.1 1997 Stock Option Plan is hereby incorporated by reference to Exhibit 10
as included in Company's Form 8-K dated March 14, 1997
10.3 Lease Agreement, as amended, regarding 660 Steamboat Road, Greenwich, CT
dated December, 1995
10.4* Lease Agreement, as amended, regarding 2425 Olympic Boulevard, Santa
Monica, CA dated November 30, 1994
10.5* Lease Agreement regarding 4 Hill Street, London, England
11 Statement re: Computation of Per Share Earnings
16.1 Letter, dated March 25, 1997, of Angell & Deering, is hereby incorporated
by reference to Exhibit No. 16 as included in the Company's Form 8-K
dated March 14, 1997.
21.1 Subsidiaries of the Company
23.1 Consent of Richard A. Eisner & Company, LLP
23.2 Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page II-5 of Part II of this
Registration Statement)
27.1 Financial Data Schedule
- ----------
* To be filed by amendment.
EXHIBIT 4.2
[FORM OF WARRANT]
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR
TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH
HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii)
PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY UPON A
HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE
COMPANY, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE
PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS
WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR STATE SECURITIES LAW.
______________, 199___
CAPITAL GROWTH HOLDINGS, LTD.
REDEEMABLE COMMON STOCK PURCHASE WARRANT
The Transferability of this Warrant is
Restricted as Provided in Section 3 hereof.
Warrants
For good and valuable consideration, the receipt and
sufficiency of which _____________ is hereby acknowledged by CAPITAL GROWTH
HOLDINGS, LTD., a Colorado corporation (the "Company"), is hereby granted the
right to purchase, subject to redemption hereof in accordance with Section 7
hereof, at the initial exercise price of four dollars ($4.00) per share (subject
to adjustment as set forth herein), ( ) shares of common stock of the Company
(the "Shares"). Each Redeemable Common Stock Purchase Warrant (each, a
"Warrant") may be exercised from the date hereof until October __, 1999
[Expiration Date: Three years from the original issue date].
Each Warrant initially is exercisable at a price of four
dollars ($4.00) per Share payable in cash or by certified or official bank check
in New York Clearing House funds, subject
<PAGE>
to adjustments as provided in Section 6 hereof. Upon surrender of this Warrant,
with the annexed Subscription Form duly executed, together with payment of the
Purchase Price (as defined in Section 5.2 hereof) for the Shares purchased at
the offices of the Company, the registered holder of this Warrant (the "Holder")
shall be entitled to receive a certificate or certificates for the Shares so
purchased.
1. Exercise of Warrant.
The purchase rights represented by this Warrant are
exercisable at the option of the Holder, in whole or in part (but not as to
fractional Shares underlying this Warrant), during any period in which this
Warrant may be exercised as set forth above. In the case of the purchase of less
than all the Shares purchasable under this Warrant, the Company shall cancel
this Warrant upon the surrender hereof and shall execute and deliver a new
Warrant of like tenor for the balance of the Shares purchasable hereunder.
2. Issuance of Certificates.
Upon the exercise of this Warrant and payment in full for the
Shares, the issuance of certificates for Shares underlying this Warrant shall be
made forthwith (and in any event within five (5) business days thereafter)
without charge to the Holder, including, without limitation, any tax which may
be payable in respect of the issuance thereof, and such certificates shall
(subject to the provisions of Section 3 hereof) be issued in the name of, or in
such names as may be directed by, the Holder; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The certificates representing the Shares underlying this
Warrant shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman or Co-Chairman of the Board of
Directors, President or Vice President and Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer of the Company.
3. Restriction on Transfer.
Neither this Warrant nor any Share issuable upon exercise
hereof has been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and none of such securities may be offered, sold, pledged,
hypothecated, assigned or transferred except (i) pursuant to a registration
statement under the Securities Act which has become effective and is current
with respect to such securities, or, (ii) pursuant to a specific exemption from
registration under the Securities Act but only upon a Holder hereof first having
obtained the written opinion
<PAGE>
of counsel to the Company, or other counsel reasonably acceptable to the
Company, that the proposed disposition is consistent with all applicable
provisions of the Securities Act as well as any applicable "Blue Sky" or similar
state securities law. Upon exercise, in part or in whole, of this Warrant, each
certificate issued representing the Shares underlying this Warrant shall bear a
legend to the effect of the legend on the first page of this Warrant.
4. Registration Under the Securities Act of 1933, As Amended.
4.1 Piggyback Registration.
(a) If, for a period of five (5) years from the date of
issuance hereof, the Company proposes to register any of its securities under
the Securities Act (other than in connection with a merger, acquisition or
exchange offer on Form S-4 or pursuant to Form S-8 or successor forms) and the
Shares cannot be sold under Rule 144 of the Securities Act, then the Company
shall give written notice by registered or certified mail, at least thirty (30)
days prior to the filing of each such registration statement, to the Holder of
its intention to do so. Upon the written request of any Holder given within ten
(10) days after receipt of any such notice of his or her desire to include any
Shares in such proposed registration statement, the Company shall afford the
Holder the opportunity to have any such Shares registered under such
registration statement.
(b) In connection with any offering involving an underwriting
of shares of the Company's capital stock, the Company shall not be required
under Section 4.3(a) to include any Shares in such underwriting unless such
Holder accepts the terms of the underwriting as agreed upon between the Company
and the underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
their sole discretion will not materially adversely affect the offering by the
Company. If the total amount of the securities, including the Shares, requested
by stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion will materially adversely affect the offering, then the Company shall
be required to include in the offering only that number of such securities,
including the Shares, which the underwriters determine in their sole discretion
will not materially adversely the offering (the securities so included to be
apportioned pro rata among the Holders according to the total amount of Shares
entitled to be included therein owned by each Holder or in such other
proportions as shall mutually be agreed to by the Holders).
(c) Notwithstanding the provisions of this Section 4.1, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 4.1 (irrespective of whether a written request
for inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
<PAGE>
4.2 Covenants with Respect to Registration. In connection with
any registration under Section 4.1 hereof, the Company covenants and agrees as
follows:
(a) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any underwriting or selling commissions or
other charges of any broker-dealer acting on behalf of Holder(s)), fees and
expenses in connection with all registration statements filed pursuant to
Section 4.1 hereof including, without limitation, the Company's legal and
accounting fees, printing expenses and blue sky fees and expenses.
(b) The Company will take all necessary action which may be
required in qualifying or registering the securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as reasonably are requested by the Holder(s), provided that the Company
shall not be obligated to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
(c) The Company shall indemnify the Holder(s), each of their
directors and officers and each person, if any, who controls such Holder(s)
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Securities and Exchange Act of 1934 (the "Exchange Act"), against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Securities Act, the Exchange Act or any
other statute, common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the
Shares under the securities laws thereof or filed with the Securities and
Exchange Commission, any state securities commission or agency, the National
Association of Securities Dealers, Inc., The Nasdaq Stock Market or any
securities exchange, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements contained
therein not misleading, unless such statement or omission was made in reliance
upon and in strict conformity with written information furnished to the Company
by the Holder(s) expressly for use in such registration statement, any amendment
or supplement thereto or any application, as the case may be. If any action is
brought against the Holder(s) or any controlling person of the Holder(s) in
respect of which indemnity may be sought against the Company pursuant to this
Section 4.2(c), the Holder(s) or such controlling person shall, within thirty
(30) days after the receipt of a summons or complaint, notify the Company in
writing of the institution of such action and the Company shall assume the
defense of such action, including the employment and payment of reasonable fees
and expenses of counsel (which counsel shall be reasonably satisfactory to the
Holder(s) or such controlling person), but the failure to give such notice shall
not affect such indemnified person's right to indemnification hereunder except
to the extent that the Company's defense of such action was materially adversely
affected thereby. The
<PAGE>
Holder(s) or such controlling person shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of the Holder(s) or such controlling person unless the employment
of such counsel shall have been authorized in writing by the Company in
connection with the defense of such action, or the Company shall not have
employed counsel to have charge of the defense of such action or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the fees and expenses of not more than one
additional firm of attorneys for all of the Holder(s) and/or such controlling
person shall be borne by the Company. Except as expressly provided in the
previous sentence, in the event that the Company shall have assumed the defense
of any such action or claim, the Company shall not thereafter be liable to the
Holder(s) or such controlling person in investigating, preparing or defending
any such action or claim. The Company agrees to notify promptly the Holder(s) of
the commencement of any litigation or proceedings against the Company or any of
its officers, directors or controlling persons in connection with the resale of
any of the Shares in connection with such registration statement. The Company
further agrees that upon demand by an indemnified person, at any time or from
time to time, it will promptly reimburse such indemnified person for any loss,
claim, damage, liability, cost or expense actually and reasonably paid by the
indemnified person as to which the Company has indemnified such person pursuant
hereto. Notwithstanding the foregoing provisions of this Section 4.2(c), any
such payment or reimbursement by the Company of fees, expenses or disbursements
incurred by an indemnified person in any proceeding in which a final
<PAGE>
judgment by a court of competent jurisdiction (after all appeals or the
expiration of time to appeal) is entered against any Holder or such indemnified
person as a direct result of any Holder or such person's gross negligence or
willful misfeasance will be promptly repaid to the Company.
(d) The Holder(s), and their successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act, against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Securities Act, the Exchange Act or any other
statute, common law or otherwise, arising from written information furnished by
or on behalf of such Holder(s), or their successors or assigns, expressly for
use in such registration statement. The Holder(s) further agree(s) that upon
demand by an indemnified person, at any time or from time to time, they will
promptly reimburse such indemnified person for any loss, claim, damage,
liability, cost or expense actually and reasonably paid by the indemnified
person as to which the Holder(s) have indemnified such person pursuant hereto.
Notwithstanding the foregoing provisions of this Section 4.2(d), any such
payment or reimbursement by the Holder(s) of fees, expenses or disbursements
incurred by an indemnified person in any proceeding in which a final judgment by
a court of competent jurisdiction (after all appeals or the expiration of time
to appeal) is entered against the Company or such indemnified person as a direct
result of the company or such person's gross negligence or willful misfeasance
will be promptly repaid to the Holder(s).
(e) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to convert, exchange or exercise any securities
convertible, exchangeable or exercisable for Common Stock prior to the initial
filing of any registration statement or the effectiveness thereof.
5. Price.
5.1 Initial and Adjusted Purchase Price. The initial purchase
price shall be four dollars ($4.00) per Share. The adjusted purchase price shall
be the price which shall result from time to time from any and all adjustments
of the initial purchase price in accordance with the provisions of Section 6
hereof.
5.2 Purchase Price. The term "Purchase Price" herein shall
mean the initial purchase price or the adjusted purchase price, depending upon
the context.
6. Adjustment of Purchase Price and Threshold Price.
6.1 If the Company at any time or from time to time while this
Warrant is issued and outstanding shall declare or pay, without consideration,
any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire Common Stock),
or if the outstanding shares of Common Stock shall be combined or consolidated,
by reclassification or otherwise, into a lesser number of shares of Common
Stock, then the Purchase Price and Threshold Price in effect immediately before
such event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. If the Company shall
declare or pay, without consideration, any dividend on the Common Stock payable
in any right to acquire Common Stock for no consideration, then the Company
shall be deemed to have made a dividend payable in Common Stock in an amount of
shares equal to the maximum number of shares issuable upon exercise of such
rights to acquire Common Stock.
6.2 If the Shares issuable upon exercise hereof shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
Section 6.1), the Purchase Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the
<PAGE>
Shares shall be convertible into, in lieu of the number of shares of Common
Stock which the Holder would otherwise have been entitled to receive, a number
of shares of such other class or classes of stock equivalent to the number of
Shares that would have been subject to receipt by the Holder upon exercise
hereof immediately before that change. The Threshold Price shall likewise be
adjusted in accordance with this Section 6.2.
6.3 Upon the occurrence of each adjustment or readjustment of
any Purchase Price pursuant to this Section 6, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to the Holder a notice setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.
7. Redemption of the Warrants.
7.1 The Company may, on 30 days' prior written notice redeem
all the Warrants at five cents ($.05) per Warrant, provided, however, that
before any such call for redemption of Warrants can take place, (i) the Shares
are registered under the Securities Act and applicable "Blue Sky" laws, (ii) a
current prospectus is then available for the resale of the Shares and (iii) the
closing bid price of the Common Stock as reported by Nasdaq, the OTC Bulletin
Board, or such other market on which the Common Stock is then traded, equals or
exceeds $6.00 per share (the "Threshold Price") for any 20 trading days within a
period of 30 consecutive trading days ending on the fifth trading day prior to
the date of the notice of redemption contemplated by Sections 7.2 and 7.3 below
is given (subject to adjustment in the event of any stock splits or other
similar events as provided herein).
7.2 In case the Company shall exercise its right to redeem all
of the Warrants, it shall give or cause to be given notice to the Registered
Holders of the Warrants, by mailing to such Registered Holders a notice of
redemption, first class, postage prepaid, at their last address as shall appear
on the records of the Company. Any notice mailed in the manner provided herein
shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice.
7.3 The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, which shall in no event be less than
thirty (30) days after the date of mailing of such notice, (iii) the place where
the Warrant Certificate shall be delivered and the redemption price shall be
paid, and (iv) that the right to exercise the Warrant shall terminate at 5:00
p.m. (New York time) on the business day immediately preceding the date fixed
for redemption. The date fixed for the redemption of the Warrants shall be the
Redemption Date. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of the proceedings for such redemption
except as to a holder (a) to whom notice was not mailed or (b) whose notice was
defective. An affidavit of the Secretary or Assistant Secretary of
<PAGE>
the Company that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
7.4 Any right to exercise a Warrant shall terminate at 5:00
p.m. (New York time) on the business day immediately preceding the Redemption
Date. The redemption price payable to the Registered Holders shall be mailed to
such persons at their addresses of record.
8. Merger or Consolidation.
In case of any consolidation of the Company with, or merger of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger which does not result in any reclassification or
change of the outstanding common stock of the Company), the corporation formed
by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the Holder shall have the right
thereafter (until the expiration of such Warrant) to receive, upon exercise of
his Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger by a holder of the number
of shares of common stock of the Company for which his Warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 6. The above provisions of this
Section 8 shall similarly apply to successive consolidations or mergers.
9. Exchange and Replacement of Warrant.
This Warrant is exchangeable without expense, upon the
surrender hereof by the registered Holder at the principal executive office of
the Company for a new Warrant of like tenor and date representing in the
aggregate the right to purchase the same number of Shares as are purchasable
hereunder in such denominations as shall be designated by the Holder hereof at
the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant.
10. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Shares on the exercise of this Warrant, nor shall it
be required to issue scrip or pay cash in lieu
<PAGE>
of fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated.
11. Reservation of Securities.
The Company shall at all times reserve and keep available out
of its authorized common stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of Shares as shall be issuable upon the
exercise hereof. The Company covenants and agrees that, upon exercise of this
Warrant and payment of the Purchase Price therefor, all Shares issuable upon
such exercise shall be duly and validly issued, fully paid and nonassessable.
12. Notices to Warrant Holders.
Nothing contained in this Warrant shall be construed as
conferring upon the Holder hereof the right to vote or to consent or to receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever as
a stockholder of the Company.
13. Notices.
All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered
personally, telegraphed or sent by certified, registered, or express mail,
postage prepaid, and shall be deemed given when so delivered personally,
telegraphed or, if mailed, five days after the date of deposit in the United
States mails, as follows:
(a) If to the Company, to:
Capital Growth Holdings, Ltd.
660 Steamboat Road
Greenwich, CT 06830
Attention: Michael S. Jacobs
(b) If to the Holder, to the address of such Holder as shown
on the books of the Company.
14. Successors.
All the covenants, agreements, representations and warranties
contained in this Warrant shall bind the parties hereto and their respective
heirs, executors, administrators, distributees, successors and assigns.
<PAGE>
15. Headings.
The headings in this Warrant are inserted for purposes of
convenience only and shall have no substantive effect.
16. Law Governing.
This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of New York, without giving effect
to conflicts of law, rules or principles.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed in its corporate name by, and such signature to be attested to by, a duly
authorized officer on the date first above written.
CAPITAL GROWTH HOLDINGS, LTD.
By: _____________________________________
Ronald B. Koenig
President and Chief Executive Officer
Attest:
__________________________
Michael S. Jacobs
Secretary
<PAGE>
[SUBSCRIPTION FORM]
(To be Executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the
right to purchase Shares represented by this Warrant in accordance to the
conditions hereof and herewith makes payment of the Purchase Price of such
Shares in full.
--------------------------------------
Signature
--------------------------------------
Address
---------------------------------------
Social Security Number or Taxpayer's
Identification Number
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ________________hereby
sells, assigns and transfers unto
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _________________ Signature:____________________________
(Signature must conform
in all respects to name
of holder as specified on
the face of the Warrant
Certificate.)
______________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
EXHIBIT 4.3
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR
TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH
HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii)
PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY UPON A
HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE
COMPANY, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE
PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS
WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR STATE SECURITIES LAW.
March 14, 1997
CAPITAL GROWTH HOLDINGS, LTD.
REDEEMABLE CLASS B COMMON STOCK PURCHASE WARRANT
The Transferability of this Warrant is
Restricted as Provided in Section 3 hereof.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by CAPITAL GROWTH HOLDINGS, LTD., a
Delaware corporation (the "Company"), Kornfeld Associates International Inc. is
hereby granted the right to purchase, subject to redemption hereof in accordance
with Section 7 hereof, at the initial exercise price of two dollars ($2.00) per
share (subject to adjustment as set forth herein), TWO HUNDRED AND
FIFTY-THOUSAND (250,000) shares (the "Shares") of class B common stock ("Class B
Common Stock") of the Company. This Warrant, may be exercised, subject to the
exercise schedule set forth in Section 1 hereof, at any time from the date
hereof until 5:00 p.m. (New York time, on November 3, 1999 (the "Expiration
Time").
This Warrant initially is exercisable at a price of two
dollars ($2.00) per Share payable in cash or by certified or official bank check
in New York Clearing House funds, subject to adjustments as provided in Section
6 hereof. Upon surrender of this Warrant, with the annexed Subscription Form
duly executed, together with payment of the Purchase Price (as
<PAGE>
defined in Section 5.2 hereof) for the Shares purchased at the offices of the
Company, the registered holder of this Warrant (the "Holder") shall be entitled
to receive a certificate or certificates for the Shares so purchased.
1. Exercise of Warrant; Exercise Schedule.
The purchase rights represented by this Warrant are
exercisable at the option of the Holder, in whole or in part (but not as to
fractional Shares underlying this Warrant) prior to the Expiration Time, subject
to the following exercise schedule: For every completed month of service
provided by Kornfeld Associates International Inc. ("KAI") to International
Capital Growth, Ltd. ("ICG") pursuant to that certain Consulting Agreement dated
as of November 4, 1996, as amended by that certain amendment thereto dated
January 20, 1997 and as may be further amended (together, the "Consulting
Agreement"), the Holder shall be entitled to exercise this Warrant to purchase
an additional ten thousand four hundred and seventeen (10,417) Shares, except
that for the month ended November 3, 1998, the Holder shall be entitled to
exercise this Warrant to purchase only an additional ten thousand four hundred
and nine (10,409) Shares. Thus, after twenty-four months of service provided by
KAI to ICG under the Consulting Agreement, the Holder shall be entitled to
exercise this Warrant to purchase a total of 250,000 Shares. In the case of the
purchase of less than all the Shares purchasable under this Warrant, the Company
shall cancel this Warrant upon the surrender hereof and shall execute and
deliver a new Warrant of like tenor for the balance of the Shares purchasable
hereunder as provided by the schedule in this Section 1. In the event of the
death of Stephen Kornfeld, Chairman of KAI, this Warrant may be exercised by the
Holder to purchase the balance of Shares purchasable hereunder without regard to
the exercise schedule set forth in this Section 1.
2. Issuance of Certificates.
Upon the exercise of this Warrant and payment in full for the
Shares, the issuance of certificates for Shares underlying this Warrant shall be
made forthwith (and in any event within five (5) business days thereafter)
without charge to the Holder, including, without limitation, any tax which may
be payable in respect of the issuance thereof, and such certificates shall
(subject to the provisions of Section 3 hereof) be issued in the name of, or in
such names as may be directed by, the Holder; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The certificates representing the Shares underlying this
Warrant shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman or Co-Chairman of the Board of
Directors, President or Vice President and Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer of the Company.
<PAGE>
3. Restriction on Transfer.
Neither this Warrant nor any Share issuable upon exercise
hereof has been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and none of such securities may be offered, sold, pledged,
hypothecated, assigned or transferred except (i) pursuant to a registration
statement under the Securities Act which has become effective and is current
with respect to such securities, or, (ii) pursuant to a specific exemption from
registration under the Securities Act but only upon a Holder hereof first having
obtained the written opinion of counsel to the Company, or other counsel
reasonably acceptable to the Company, that the proposed disposition is
consistent with all applicable provisions of the Securities Act as well as any
applicable "Blue Sky" or similar state securities law. Upon exercise, in part or
in whole, of this Warrant, each certificate issued representing the Shares
underlying this Warrant shall bear a legend to the effect of the legend on the
first page of this Warrant.
4. Registration Under the Securities Act of 1933, As Amended.
4.1 Piggyback Registration.
(a) If, for a period of five (5) years from the date of
issuance hereof, the Company proposes to register any of its securities under
the Securities Act (other than in connection with a merger, acquisition or
exchange offer on Form S-4 or pursuant to Form S-8 or successor forms) and the
shares of common stock of the Company into which the Shares will be converted on
December 31, 1998 (the "Registration Rights Common Stock") in accordance with
the Company's Articles of Incorporation, cannot be publicly sold without
registration under the Securities Act pursuant to Rule 144 promulgated
thereunder, then the Company shall give written notice by registered or
certified mail, at least thirty (30) days prior to the filing of each such
registration statement, to the Holder(s) of its intention to do so. Upon the
written request of any Holder given within ten (10) days after receipt of any
such notice of his or her desire to include any Registration Rights Common Stock
in such proposed registration statement, the Company shall afford the Holder the
opportunity to have any such Registration Rights Common Stock included in such
registration statement.
(b) In connection with any offering involving an underwriting
of Securities of the Company, the Company shall not be required under Section
4.3(a) to include any Registration Rights Common Stock in such underwriting
unless such Holder accepts the terms of the underwriting as agreed upon between
the Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not materially adversely affect the
offering. If the total amount of the securities, including the Registration
Rights Common Stock, requested by stockholders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters determine in their sole discretion will materially adversely affect
the offering, then the Company shall be required to include in the offering only
that number of such securities, including the Registration Rights Common Stock,
which the
<PAGE>
underwriters determine in their sole discretion will not materially adversely
the offering.
(c) Notwithstanding the provisions of this Section 4.1, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 4.1 (irrespective of whether a written request
for inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
4.2 Covenants with Respect to Registration. In connection with
any registration under Section 4.1 hereof, the Company covenants and agrees as
follows:
(a) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any underwriting or selling commissions or
other charges of any broker-dealer acting on behalf of Holder(s)), fees and
expenses in connection with all registration statements filed pursuant to
Section 4.1 hereof including, without limitation, the Company's legal and
accounting fees, printing expenses and blue sky fees and expenses.
(b) The Company will take all necessary action which may be
required in qualifying or registering the securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as reasonably are requested by the Holder(s), provided that the Company
shall not be obligated to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
(c) The Company shall indemnify the Holder(s), each of their
directors and officers and each person, if any, who controls such Holder(s)
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Securities and Exchange Act of 1934 (the "Exchange Act"), against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Securities Act, the Exchange Act or any
other statute, common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the
Registration Rights Common Stock under the securities laws thereof or filed with
the Securities and Exchange Commission, any state securities commission or
agency, the National Association of Securities Dealers, Inc., The Nasdaq Stock
Market or any securities exchange, or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements contained therein not misleading, unless such statement or omission
was made in reliance upon and in strict conformity with written information
furnished to the Company by the Holder(s) expressly for use in such registration
statement, any amendment or supplement thereto or any application, as the case
may be. If any action is brought against the Holder(s) or any controlling person
of the Holder(s) in respect of which indemnity may be sought against the Company
pursuant to this Section 4.2(c), the Holder(s) or such controlling person shall,
within thirty (30) days after the receipt of a summons or complaint, notify the
Company in
<PAGE>
writing of the institution of such action and the Company shall assume the
defense of such action, including the employment and payment of reasonable fees
and expenses of counsel (which counsel shall be reasonably satisfactory to the
Holder(s) or such controlling person), but the failure to give such notice shall
not affect such indemnified person's right to indemnification hereunder except
to the extent that the Company's defense of such action was materially adversely
affected thereby. The Holder(s) or such controlling person shall have the right
to employ its or their own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of the Holder(s) or such controlling
person unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action, or the
Company shall not have employed counsel to have charge of the defense of such
action or such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to the Company (in which case the Company shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the fees and expenses of
not more than one additional firm of attorneys for all of the Holder(s) and/or
such controlling person shall be borne by the Company. Except as expressly
provided in the previous sentence, in the event that the Company shall have
assumed the defense of any such action or claim, the Company shall not
thereafter be liable to the Holder(s) or such controlling person in
investigating, preparing or defending any such action or claim. The Company
agrees to notify promptly the Holder(s) of the commencement of any litigation or
proceedings against the Company or any of its officers, directors or controlling
persons in connection with the resale of any of the Registration Rights Common
Stock in connection with such registration statement. The Company further agrees
that upon demand by an indemnified person, at any time or from time to time, it
will promptly reimburse such indemnified person for any loss, claim, damage,
liability, cost or expense actually and reasonably paid by the indemnified
person as to which the Company has indemnified such person pursuant hereto.
Notwithstanding the foregoing provisions of this Section 4.2(c), any such
payment or reimbursement by the Company of fees, expenses or disbursements
incurred by an indemnified person in any proceeding in which a final judgment by
a court of competent jurisdiction (after all appeals or the expiration of time
to appeal) is entered against any Holder or such indemnified person as a direct
result of any Holder or such person's gross negligence or willful misfeasance
will be promptly repaid to the Company.
(d) The Holder(s), and their successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act, against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Securities Act, the Exchange Act or any other
statute, common law or otherwise, arising from written information furnished by
or on behalf of such Holder(s), or their successors or assigns, expressly for
use in such registration statement. The Holder(s) further agree(s) that upon
demand by an indemnified person, at any time or from time to time, they will
promptly reimburse such indemnified person for any loss, claim, damage,
liability, cost or expense actually and reasonably paid by the indemnified
person as to which the
<PAGE>
Holder(s) have indemnified such person pursuant hereto. Notwithstanding the
foregoing provisions of this Section 4.2(d), any such payment or reimbursement
by the Holder(s) of fees, expenses or disbursements incurred by an indemnified
person in any proceeding in which a final judgment by a court of competent
jurisdiction (after all appeals or the expiration of time to appeal) is entered
against the Company or such indemnified person as a direct result of the Company
or such person's gross negligence or willful misfeasance will be promptly repaid
to the Holder(s).
(e) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to convert, exchange or exercise any securities
convertible, exchangeable or exercisable for Common Stock prior to the initial
filing of any registration statement or the effectiveness thereof.
5. Price.
5.1 Initial and Adjusted Purchase Price. The initial purchase
price shall be two dollars ($2.00) per Share. The adjusted purchase price shall
be the price which shall result from time to time from any and all adjustments
of the initial purchase price in accordance with the provisions of Section 6
hereof.
5.2 Purchase Price. The term "Purchase Price" herein shall
mean the initial purchase price or the adjusted purchase price, depending upon
the context.
6. Adjustment of Purchase Price and Threshold Price.
6.1 If the Company at any time or from time to time while this
Warrant is issued and outstanding shall declare or pay, without consideration,
any dividend on the Class B Common Stock or the common stock of the Company
(either, the "Common Stock") payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire Common Stock),
or if the outstanding shares of Common Stock shall be combined or consolidated,
by reclassification or otherwise, into a lesser number of shares of Common
Stock, then the Purchase Price and Threshold Price (as defined in Section 7.1
hereof) in effect immediately before such event shall, concurrently with the
effectiveness of such event, be proportionately decreased or increased, as
appropriate. If the Company shall declare or pay, without consideration, any
dividend on the Common Stock payable in any right to acquire Common Stock for no
consideration, then the Company shall be deemed to have made a dividend payable
in Common Stock in an amount of shares equal to the maximum number of shares
issuable upon exercise of such rights to acquire Common Stock.
6.2 If the Shares issuable upon exercise hereof shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital
<PAGE>
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for in Section 6.1), the Purchase Price then in
effect shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted so that the Shares shall be
convertible into, in lieu of the number of shares of Common Stock which the
Holder would otherwise have been entitled to receive, a number of shares of such
other class or classes of stock equivalent to the number of Shares that would
have been subject to receipt by the Holder upon exercise hereof immediately
before that change. The Threshold Price shall likewise be adjusted in accordance
with this Section 6.2.
6.3 Upon the occurrence of each adjustment or readjustment of
any Purchase Price pursuant to this Section 6, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to the Holder a notice setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.
7. Redemption of the Warrants.
7.1 The Company may, on 30 days' prior written notice redeem
all the Warrants at five cents ($.05) per Warrant, provided, however, that
before any such call for redemption of Warrants can take place, (i) the
Registration Rights Common Stock are registered under the Securities Act and
applicable "Blue Sky" laws, (ii) a current prospectus is then available for the
resale of the Registration Rights Common Stock and (iii) the closing bid price
of such class of Common Stock as reported by Nasdaq, the OTC Bulletin Board, or
such other market on which the Common Stock is then traded, equals or exceeds
$6.00 per share (the "Threshold Price") for any 20 trading days within a period
of 30 consecutive trading days ending on the fifth trading day prior to the date
of the notice of redemption contemplated by Sections 7.2 and 7.3 below is given
(subject to adjustment in the event of any stock splits or other similar events
as provided herein).
7.2 In case the Company shall exercise its right to redeem all
of the Warrants, it shall give or cause to be given notice to the Registered
Holders of the Warrants, by mailing to such Registered Holders a notice of
redemption, first class, postage prepaid, at their last address as shall appear
on the records of the Company. Any notice mailed in the manner provided herein
shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice.
7.3 The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, which shall in no event be less than
thirty (30) days after the date of mailing of such notice, (iii) the place where
the Warrant Certificate shall be delivered and the redemption price shall be
paid, and (iv) that the right to exercise the Warrant shall terminate at 5:00
p.m. (New York time) on the business day immediately preceding the date fixed
for redemption. The date fixed for the redemption of the Warrants shall be the
Redemption Date. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the
<PAGE>
validity of the proceedings for such redemption except as to a holder (a) to
whom notice was not mailed or (b) whose notice was defective. An affidavit of
the Secretary or Assistant Secretary of the Company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
7.4 Any right to exercise a Warrant shall terminate at 5:00
p.m. (New York time) on the business day immediately preceding the Redemption
Date. The redemption price payable to the Registered Holders shall be mailed to
such persons at their addresses of record.
8. Merger or Consolidation.
In case of any consolidation of the Company with, or merger of
the Company with, or merger of the Company into, or exchange of any outstanding
securities of the Company for securities of, another corporation (other than a
consolidation, merger or share exchange which does not result in any
reclassification or change of the outstanding common stock of the Company), the
corporation formed by such consolidation, merger or share exchange shall execute
and deliver to the Holder a supplemental warrant agreement providing that the
Holder shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of his Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation or merger
by a holder of the number of shares of common stock of the Company for which his
Warrant might have been exercised immediately prior to such consolidation,
merger, sale or transfer. Such supplemental warrant agreement shall provide for
adjustments which shall be identical to the adjustments provided in Section 6.
The above provisions of this Section 8 shall similarly apply to successive
consolidations or mergers.
9. Exchange and Replacement of Warrant.
This Warrant is exchangeable without expense, upon the
surrender hereof by the registered Holder at the principal executive office of
the Company for a new Warrant of like tenor and date representing in the
aggregate the right to purchase the same number of Shares as are purchasable
hereunder in such denominations as shall be designated by the Holder hereof at
the time of such surrender.
<PAGE>
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant.
10. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Shares on the exercise of this Warrant, nor shall it
be required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated.
11. Reservation of Securities.
The Company shall at all times reserve and keep available out
of its authorized common stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of Shares as shall be issuable upon the
exercise hereof. The Company covenants and agrees that, upon exercise of this
Warrant and payment of the Purchase Price therefor, all Shares issuable upon
such exercise shall be duly and validly issued, fully paid and nonassessable.
12. Notices to Warrant Holders.
Nothing contained in this Warrant shall be construed as
conferring upon the Holder hereof the right to vote or to consent or to receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever as
a stockholder of the Company.
13. Notices.
All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered
personally, telegraphed or sent by certified, registered, or express mail,
postage prepaid, and shall be deemed given when so delivered personally,
telegraphed or, if mailed, five days after the date of deposit in the United
States mails, as follows:
(a) If to the Company, to:
Capital Growth Holdings, Ltd.
660 Steamboat Road
Greenwich, CT 06830
Attention: Michael S. Jacobs
<PAGE>
(b) If to the Holder, to the address of such Holder as shown
on the books of the Company.
14. Successors.
All the covenants, agreements, representations and warranties
contained in this Warrant shall bind the parties hereto and their respective
heirs, executors, administrators, distributees, successors and assigns.
15. Headings.
The headings in this Warrant are inserted for purposes of
convenience only and shall have no substantive effect.
16. Law Governing.
This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of New York, without giving effect
to conflicts of law, rules or principles.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed in its corporate name by, and such signature to be attested to by, a duly
authorized officer on the date first above written.
CAPITAL GROWTH HOLDINGS, LTD.
By: _______________________________
Earnest Mathis
President
Attest:
- ------------------------------------
Kenneth J. Wolf
Secretary
<PAGE>
[SUBSCRIPTION FORM]
(To be Executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the
right to purchase Shares represented by this Warrant in accordance to the
conditions hereof and herewith makes payment of the Purchase Price of such
Shares in full.
--------------------------------------
Signature
--------------------------------------
Address
---------------------------------------
Social Security Number or Taxpayer's
Identification Number
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ___________________ hereby
sells, assigns and transfers unto
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full
power of substitution.
Dated: ___________________ Signature: ___________________________
(Signature must conform
in all respects to name
of holder as specified on
the face of the Warrant
Certificate.)
--------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
[Logo: Steamboat Road Associates]
LEASE AGREEMENT
BY AND BETWEEN
STEAMBOAT ROAD ASSOCIATES, LANDLORD
AND
CAPITAL GROWTH INTERNATIONAL, L.L.C., TENANT
Dated: December, 1995
- ------------------------------------------------
666 Steamboat Road
Greenwich, CT 06830
203-661-4747
Fax 203-661-9412
<PAGE>
STEAMBOAT ROAD ASSOCIATES
INDEX
ARTICLE 1 RENT 1
ARTICLE 2 USE OF PREMISES 1
ARTICLE 3 LANDLORD'S WORK 1
ARTICLE 4 WORKING HOURS 1
ARTICLE 5 ELEVATOR 1
ARTICLE 6 HEATING AND AIR CONDITIONING 2
ARTICLE 7 ELECTRICAL SERVICE 2
ARTICLE 8 REPAIRS 2
ARTICLE 9 PARKING 3
ARTICLE 10 FIXTURES AND ALTERATIONS 3
ARTICLE 11 COMPLIANCE WITH STATUTES, REGULATIONS 4
ARTICLE 12 CONDITION UPON EXPIRATION 5
ARTICLE 13 COVENANT OF QUIET ENJOYMENT 5
ARTICLE 14 RULES AND REGULATIONS 5
ARTICLE 15 ASSIGNMENT AND SUBLETTING 6
ARTICLE 16 LANDLORD'S ACCESS 6
ARTICLE 17 SUBORDINATION 6
ARTICLE 18 NO LIABILITY ON LANDLORD 8
ARTICLE 19 DAMAGE BY FIRE OR OTHER CAUSE 8
ARTICLE 20 CONDEMNATION 9
ARTICLE 21 COMPLIANCE WITH CERTIFICATE OF OCCUPANCY 10
ARTICLE 22 BANKRUPTCY 10
<PAGE>
ARTICLE 23 DEFAULTS 10
ARTICLE 24 LANDLORD'S RIGHT TO RE-ENTER PREMISES 11
ARTICLE 25 LANDLORD'S REMEDIES 12
ARTICLE 26 CANCELLATION OF LEASE; WAIVER OF DEFAULTS 13
ARTICLE 27 TRIAL BY JURY 14
ARTICLE 28 NOTICES 14
ARTICLE 29 SECURITY DEPOSIT 14
ARTICLE 30 INABILITY TO PERFORM 15
ARTICLE 31 NO REPRESENTATION BY LANDLORD 15
ARTICLE 32 TENANT'S USE 15
ARTICLE 33 ADJUSTMENT OF RENT FOR CHANGES IN REAL ESTATE TAXES 16
ARTICLE 34 ADJUSTMENT OF RENT FOR CHANGES IN LANDLORD'S COSTS 17
ARTICLE 35 OBLIGATION OF LANDLORD 18
ARTICLE 36 SUCCESSORS AND ASSIGNS 18
ARTICLE 37 LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS 18
ARTICLE 38 LATE CHARGES 19
ARTICLE 39 BROKER 19
ARTICLE 40 EXCULPATION 19
ARTICLE 41 CAPTIONS 19
EXHIBIT A PLAN OF LEASED PREMISES
RULES AND REGULATIONS
<PAGE>
AGREEMENT OF LEASE made as of this 7th day of December, 1995, between
STEAMBOAT ROAD ASSOCIATES, a Connecticut partnership, having a office at 666
Steamboat Road, Greenwich, Connecticut 06830, hereinafter referred to as
"Landlord", and Capital Growth International, L.L.C., hereinafter referred to
as "Tenant".
WITNESSETH: Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord the space (hereinafter referred to as the "Leased Premises")
outlined in red on the floor plan attached hereto as Exhibit A, on the 2nd
floor in the building known as Steamboat Road Associates, 666 Steamboat Road,
Greenwich, Connecticut (hereinafter referred to as the "Building") for a term
of 2 yrs 3 months to commence on or about January 1, 1996 and terminating March
31, 1998 on (the term of this lease and any renewals or modifications thereof
are hereinafter referred to as the "Term", unless terminated prior thereto in
the manner hereinafter provided, which Tenant agrees to pay in lawful money of
the United States of America in equal monthly installments in advance, on the
first day of each calendar month during said Term at the office of Landlord may
designate without any set-off or deduction whatsoever, provided that Tenant
shall pay the first month's rent in advance on the execution thereof. The
parties agree that the Leased Premises shown on Exhibit A, Suite A constitutes
3% of the gross rentable area of the Building of 28,500 square feet. The
parties hereto for themselves, their heirs, distributees, executors,
administrators, legal representatives and assigns hereby covenant and agree as
follows:
1. Rent: - Tenant shall pay the rent and additional rent as above and as
hereinafter provided.
Annually Monthly
----------- ----------
January 1, 1996 to December 31, 1996 $66,000.00 $5,500.00
January 1, 1997 to December 31, 1997 $70,000.00 $5,833.33
January, 1, 1998 to March 31, 1998 $75,000.00 $6,250.00
2. Use of Premises - Tenant shall use and occupy the Leased Premises for
general office purposes only.
3. Landlord's Work - Landlord will at his sole cost repaint the space.
Landlord will demise the space as shown on Exhibit A.
4. Working Hours - The Tenant shall enjoy access to the Leased Premises on
weekdays from 8:00 a.m. to 6:00 p.m. and on Saturdays from 8:00 to 1:00 p.m.,
excluding federal, state and local holidays (which periods are hereinafter
referred to as "Working Hours"), and for a period to include one hour prior to
the commencement of Working Hours each morning and for one and one-half (1-1/2)
hours after Working Hours. During these periods before and after Working Hours
all hallways and public areas shall be lit to a lighting density of
approximately one-half (1/2) of normal, with the HVAC system to be operating on
a night setting function. Access at all other hours shall be permitted to
Tenant, provided, however, that Tenant shall be responsible for all utility
charges incurred if excessive with respect to such use outside of the Working
Hours and at other times described in the first sentence of this Article 4. The
Tenant has 24 hour access to the building.
5. Elevator - Landlord shall have the elevator facility available for
Tenant's use at all times when Tenant has access to the Building.
1
<PAGE>
6. Heating and Air-Conditioning - Landlord shall, through the
air-conditioning system of the Building, furnish to the Leased Premises, during
Working Hours, throughout the year, ventilation, heating and air-conditioning.
Tenant agrees to keep and cause to be kept closed all the windows and the
building doors in the Leased Premises at all times, and Tenant agrees at all
times to cooperate fully with Landlord and to abide by all regulations and
requirements which Landlord may reasonably prescribe for the proper functioning
and protection of the HVAC system. Landlord shall not be responsible for any
failure or inadequacy of the HVAC system resulting from Tenant's failure to
comply with the foregoing provisions.
7. Electrical Service - Landlord shall furnish to Tenant, at the times and
during the hours set forth in Article 4 during which Tenant has access to the
Building through the transmission facilities initially installed by it in the
Building, alternating electrical current to be used by Tenant in, or in
connection with, the Leased Premises for the operation of the lighting fixtures
and electrical convenience outlets initially installed in the Leased Premises.
Tenant's use of electrical current shall not exceed the capacity of existing
feeders to the Building or the risers or wiring installation and Tenant may not
use any electrical equipment which, in Landlord's sole opinion, reasonably
exercised, will overload such installations, interfere with the use thereof by
other tenants of the Building or be for other than ordinary office purposes. In
no event shall the electrical service furnished by Landlord be utilized for
computer room installation or for any equipment requiring greater than a 15
ampere line, without the express written consent of Landlord. If Landlord
should so consent, any such equipment shall be separately sub-metered and the
cost therefor, including installation, shall be borne by Tenant.
8. Repairs-
(a) Landlord, at its expense, will make all structural repairs to the
Building and the Leased Premises (excluding interior painting and decorating)
and to all public areas and facilities in the Building used in common by all
tenants. Those repairs necessitated by the negligence, improper care or use of
Leased Premises by Tenant, its employees, licensees or invitees shall be made by
Landlord at the cost and expense of Tenant.
(b) Tenant shall take good care of the Leased Premises and, subject to
the provisions of subparagraph (a), shall make, as and when needed, as a result
of misuse or neglect by Tenant or Tenant's servants, employees, agents, invitees
or licensees, all repairs in and about the Leased Premises necessary to preserve
them in good order and condition, which repairs shall be in quality and class
equal to the original work. However, Landlord may repair at the expense of
Tenant, all damage or injury to the Leased Premises or to the Building or to its
fixtures, appurtenances or equipment, caused by Tenant or Tenant's servants,
employees, agents, invitees or licensees, or caused by moving property of Tenant
in or out of the Building, or by installation or removal of furniture or other
property, or resulting from any cause due to the carelessness, negligence or
improper conduct of Tenant or Tenant's servants, employees, agents, invitees, or
licensees. There shall be no allowance to Tenant for a diminution of rental
value and no liability on the part of the Landlord by reason of inconvenience,
annoyance or injury to business arising from Landlord, Tenant or others making
repairs, alterations, additions or improvements in or to any portion of the
Building or Leased Premises, or in or to fixtures, appurtenances or equipment
thereof.
2
<PAGE>
(c) Tenant shall not place a load upon any floor of the Leased
Premises exceeding the floor load per square foot area which it was designed to
carry and which is allowed by law. Landlord reserves the right to prescribe the
weight and position of all safes, business machines and mechanical equipment.
Such installations shall be placed and maintained by Tenant, at Tenant's
expense, in settings sufficient in Landlord's judgment, to absorb and prevent
vibration, noise and annoyance. The emplacement of all heavy equipment will be
done only by licensed riggers or movers who are either bonded or show proof of
financial responsibility with respect to any damage done to the Building during
the move.
9. Parking - The Landlord shall provide and identify for the use of
Tenant, reserved parking space adjacent to the Building at the rate of one
parking space for each five hundred (500) gross rentable square feet comprising
the Leased Premises representing the whole number when calculated. Parking
space provided and identified by Landlord for "visitor" parking shall only be
used by authorized parties visiting Tenant and for a period not to exceed two
(2) hours at one time. Any parties abusing this limitation shall be towed at
Tenant's expense. Tenant has 2 spaces in total.
10. Fixtures and Alterations -
(a) All fixtures, equipment, improvements and appurtenances attached
to or built into the Leased Premises prior to or during the Term, whether by
Landlord at its expense or at the expense of Tenant, or by Tenant, shall not be
removed by Tenant at the end of the Term, unless otherwise expressly requested
by Landlord. All telephone cables, electrical, plumbing, heating and sprinkling
systems, fixtures and outlets, vaults, paneling, molding, shelving, appliances,
radiator enclosures, cork, rubber, carpeting, linoleum and composition floors,
ventilation, silencing, air-conditioning and cooling equipment shall be deemed
to be included in such fixtures, equipment, improvements and appurtenances.
Where not built into the Leased Premises and if furnished and installed by or at
the expense of Tenant, all removable electric fixtures, furniture, trade
fixtures and business equipment shall not be deemed to be included in such
fixtures and may be removed by Tenant upon condition that such removal does not
materially damage the Building and that the cost of repairing any damage to the
Leased Premises or the Building arising from such removal shall be paid by
Tenant. Any such removable electric fixtures, carpets, furniture, trade fixtures
or business equipment toward which Landlord shall have granted any allowance or
credit to Tenant shall not be deemed to have been furnished and installed in the
Leased Premises by or at the expense of Tenant. Any personal property of Tenant
or any subtenant or occupant which shall remain in the Building after the
expiration or termination of the Term and the removal of Tenant from the Leased
Premises shall be deemed to have been abandoned by Tenant, and either may be
retained by Landlord as its property or may be disposed of in such manner as
Landlord may see fit; provided, however, that notwithstanding the foregoing,
Tenant will, upon request of Landlord, promptly remove from the Building any
such personal property or fixtures at its own cost and expense. All the outside
walls of the Leased Premises including corridor walls and the outside entrance
doors to the Leased Premises, any balconies, terraces or roofs adjacent to the
Leased Premises, and any space in the Leased Premises used for shafts, stocks,
pipes conduits, ducts or other building facilities, and the use thereof, as well
as access thereto in and through the Leased Premises for the purpose of
operation, maintenance, decoration and repair, are expressly reserved to
Landlord, and Landlord does not convey any rights to Tenant therein.
Notwithstanding the foregoing, Tenant shall have and enjoy full right of access
to the Leased
3
<PAGE>
Premises through the public entrances, public corridors and public areas within
the Building.
(b) During the Term, Tenant shall make no alterations, decorations,
installations, additions or improvements in or to the Leased Premises without
Landlord's prior written consent, and, then, only by contractors or mechanics
approved by Landlord. All such work, alterations, decorations, installations,
additions or improvements shall be done at Tenant's sole cost and expense and at
such times and in such manner as Landlord shall approve. Tenant agrees to obtain
and deliver to Landlord written and unconditional waivers of mechanic's liens
upon the real property on which the Leased Premises is located, for all work,
labor and services to be performed and materials to be furnished in connection
with such work, signed by all contractors, subcontractors, materialmen and
laborers to become involved in such work. Notwithstanding the foregoing, if any
mechanic's lien is filed against the Leased Premises, or the Building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, the same shall be discharged by Tenant within ten days
thereafter, at Tenant's expense, by filing necessary bonds or otherwise.
(c) All installations or work done by Tenant shall at all times comply
with: (i) laws, rules, order and regulations or governmental authorities having
jurisdiction thereof; and (ii) Rules and Regulations of Landlord; and (iii)
plans and specifications meeting Building standards prepared by and at the
expense of Tenant theretofore submitted to Landlord for its prior written
approval. No installations or work shall be undertaken, started or begun by
Tenant, its agents, servants or employees, until Landlord has approved such
plans and specifications and no amendments or additions to such plans and
specifications shall be made without the prior written consent of Landlord.
Prior to commencement by Tenant of any such approved work, Tenant shall make
payment to Landlord of an amount which, in Landlord's sole judgment, reasonably
exercised, shall be sufficient to restore the Leased Premises to its original
condition appertaining on the Commencement Date. Such payment shall be
nonrefundable and shall be deemed earned when paid. If such work is not
completed in accordance with such approved plans and specifications, Landlord
shall have the right to have such work corrected at the Tenant's expense
together with a charge equal to 25% of the cost of such work for Landlord's
handling costs and overhead.
(d) Tenant shall not, either directly or indirectly, use any
contractors, labor or materials if the use thereof would or will create any
difficulty with other contractors or labor engaged by Tenant or Landlord or
others in the construction, maintenance or operation of the Building or any part
thereof.
(e) Tenant, at its sole cost and expense, shall purchase and install
all lighting tubes, lamps, bulbs and ballasts used in the Leased Premises, all
of a type to be designated by Landlord.
(f) Landlord will not adversely modify the Tenant entrance.
11. Compliance with Statutes Regulations - Tenant at its sole cost and
expense shall promptly comply with all laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions and
boards. Nothing herein shall require Tenant to make structural repairs or
alterations unless Tenant has by its manner of use of the Leased Premises or
method of operation therein, violated any such laws, ordinances, orders, rules,
4
<PAGE>
regulations or requirements with respect thereto. Tenant shall not do or permit
any act or thing to be done in or to the Leased Premises which is contrary to
law, or which will invalidate or be in conflict with public liability, fire or
other policies of insurance at any time carried by or for the benefit of
Landlord with respect to the Leased Premises or the Building of which the
Leased Premises form a part, or which shall or might subject Landlord to any
liability or responsibility to any person or for property damage, nor shall
Tenant keep anything in the Leased Premises except as now or hereafter
permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance
Rating Organization or other authority having jurisdiction, and then only in
such manner and such quantity so as not to increase the rate for fire insurance
applicable to the Building, nor use the Leased Premises in a wrongful manner
which will increase the insurance rate for the Building or any property located
therein over that in effect prior to the commencement of Tenant's occupancy.
Tenant shall pay all costs, expenses, fines, penalties or damages, which may be
imposed upon Landlord by reason of Tenant's failure to comply with the
provisions of this Article and if by reason of such failure the fire insurance
rate shall, at the beginning of this Lease or at any time thereafter, be higher
than it otherwise would be, then Tenant shall reimburse Landlord, as additional
rent hereunder, for that portion of all fire insurance premiums thereafter paid
by Landlord which shall have been charged because of such failure by Tenant,
and shall make reimbursement upon the first day of the month following such
outlay by Landlord. In any action or proceeding wherein Landlord and Tenant are
parties, a schedule or "make-up" of rate for the Building or Leased Premises
issued by the Fire Insurance Exchange, or other body making fire insurance
rates applicable to the Building or Leased Premises shall be conclusive
evidence of the facts therein stated and of the several items and charges in
the fire insurance rate then applicable to the Building or Leased Premises.
12. Condition Upon Expiration - Upon the expiration or other termination of
the Term of this Lease, Tenant shall quit and surrender to Landlord the Leased
Premises broom-clean, in good order and in its original condition, ordinary
wear, damage by fire, the elements and obsolescence excepted, and Tenant shall
remove all of its property and fixtures designated in writing by the Landlord.
Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of the Term of this Lease. If the last day of
the Term of this Lease or any renewal hereof falls on Sunday or a holiday, this
Lease shall expire at noon on the business day immediately preceding.
13. Covenant of Quiet Enjoyment - Landlord covenants and agrees with Tenant
that upon Tenant paying the rent and additional rent and observing and
performing all the terms, covenants and conditions hereof on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the Leased
Premises, subject, nevertheless, to the terms, covenants and conditions of this
Lease including, but not limited to, Article 17 hereof.
14. Rules and Regulations - Tenant and Tenant's servants, employees,
agents, visitors and licensees shall faithfully comply with the Rules and
Regulations attached to this Lease and with such further reasonable Rules and
Regulations as Landlord at any time may make and communicate in writing to
Tenant, which, in Landlord's judgment, shall be necessary for the reputation,
safety, care of appearance of the Building, or the preservation of good order
therein, or the operation or maintenance of the Building and its equipment, or
the more useful occupancy of the comfort of the Tenants or others in the
Building. Landlord shall not be obligated to enforce the Rules and Regulations
or terms, covenants or conditions in any other lease as against any other tenant
and Landlord shall not be liable to Tenant for the violation of
5
<PAGE>
any of said Rules and Regulations, or the breach of any covenant or condition
in any lease by any other tenant in the Building.
15. Assignment and Subletting - Tenant covenants not to assign, sell
mortgage, pledge or in any matter encumber this Lease or any interest therein,
or sublet the Leased Premises or any part or parts thereof, or grant any
concession or license or otherwise permit occupancy of all or any part thereof
by anyone with, through or under it.
16. Landlord's Access -
(a) Tenant shall permit Landlord to erect, use and Maintain pipes,
ducts and conduits in and through the Leased Premises, provided the same are
installed and concealed behind the walls, floor or ceiling of the Leased
Premises, or are otherwise concealed. Landlord or Landlord's agents shall have
the right to enter and pass through the Leased Premises at all reasonable times
to examine the same, and to show them to mortgagees, ground lessors, prospective
purchasers or lessees or mortgagees of the Building, and to make such repairs,
improvements or additions as Landlord may deem necessary or desirable. Landlord
shall be allowed to take all material into, upon and through said Leased
Premises that may be required therefor without the same constituting an eviction
of Tenant, in whole or in part, and the rent reserved shall in no wise abate
while said repairs, improvements or additions are being made, by reason of loss
or interruption of business of Tenant or otherwise. Landlord shall make all
repairs, improvements or additions promptly and without undue delay and, upon
completion thereof, shall forthwith remove all materials, tools and other items
that have been brought to the Leased Premises for the purpose of such repairs,
improvements or additions. If during the last (3) months of the Term, Tenant
shall have removed all or substantially all of Tenant's Property therefrom,
Landlord may immediately enter and alter, renovate and redecorate the Leased
Premises without elimination or abatement or rent, or incurring liability to
Tenant for any compensation, and such acts shall have no effect upon this Lease.
If Tenant shall not be personally present to open and permit an entry into the
Leased Premises at any time when, for any reason, an entry therein shall be
necessary or permissible, and an authorized official of Tenant is not available,
Landlord or Landlord's agents may enter the same by a master key, or may
forcibly enter the same, without rendering Landlord or such agent liable
therefor (if during such entry Landlord or Landlord's agents shall accord
reasonable care to Tenant's property), and without in any manner affecting the
obligations and covenants of this Lease.
(b) Landlord shall have the right at any time, without the same
constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement or location or entrances
or passageways, doors and doorways, and corridors, elevators, stairs, toilets or
other public parts of the Building, provided, however, that Landlord shall make
no change in the arrangement or location of entrances or passageways or other
public parts of the Building which will materially adversely affect Tenant's
entrance, use, and enjoyment of the Leased Premises. Landlord shall also have
the right, at any time, to place appropriate signs and lettering on any or all
entrances to the Building, and to change the name, number or designation by
which the Building is commonly known.
17. Subordination -
(a) This Lease is subject and subordinated in all respects to any
ground or
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underlying lease that now exists or may hereafter be placed on the Building
and/or the land on which it is situated or any part thereof and to all
mortgages and to the terms, provisions and conditions thereof which may now or
hereafter be placed on or affect such leases or the real property of which the
Leased Premises forms a part, or any part or parts of such real property,
and/or Landlord's interest to estate therein, and to each advance made or
hereafter to be made under any such mortgages, and to all renewals,
modifications, consolidations, replacements and extensions thereof and all
substitutions therefor. This subparagraph shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall execute and deliver promptly any certificate that
Landlord or any mortgagee or the lessor under any ground or underlying lease or
their respective successors in interest may request. Tenant hereby constitutes
and appoints Landlord or any mortgagee or the lessor under any ground or
underlying lease or their respective successors in interest the Tenant's
attorney-in-fact to execute and deliver any such certificate or certificates
for and on behalf of Tenant.
(b) Without limitation of any other provisions of this Lease, in the
event that any mortgagee or its assigns shall succeed to the interest of
Landlord, or of any successor of the Landlord or, shall have become lessee under
a new ground or underlying lease, then, at the option of such mortgagee, this
Lease shall nevertheless continue in full force and effect and Tenant shall and
does hereby agree to attorn to such mortgagee or its assigns and to recognize
such mortgagee or its respective assigns as its Landlord. Tenant hereby
constitutes and appoints Landlord, or such mortgagee or their respective
assigns, the Tenant's attorney-in-fact to execute and deliver any such agreement
of attornment for and on behalf of Tenant.
(c) Provided Tenant attorns as above provided in subparagraph (b) of
this Article, Landlord will use its best efforts to secure from any such
mortgagee or lessor of any underlying lease an agreement to the effect that
Tenant's occupancy will not be disturbed during the Term hereof as long as
Tenant has paid the rent and performed and observed all of the other conditions
or covenants in this Lease on Tenant's part to be observed and performed. Tenant
shall covenant and agree in such agreement that the holder of any such mortgage
or lessor or anyone claiming by, through or under said holder or lessor, shall
not be: (i) liable for any act or omission of any prior landlord (including
Landlord); or (ii) subject to any offset or defenses which Tenant might have
against any prior landlord (including Landlord); or (iii) bound by any payment
of rent or other charges which Tenant might have paid for more than the current
month to any prior landlord (including Landlord); or (iv) bound by any
modification of the Lease made without consent of any such ground lessor or
underlying lessor or mortgagee, as the case may be.
(d) Tenant shall, at any time and from time to time, upon not less
than five days' prior notice by Landlord, execute, acknowledge and deliver to
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect (or if there have been modifications, that the same is in
full force and effect as modified and stating the modifications), and the dates
to which the rent, additional rent and other charges have been paid in advance,
if any, stating whether or not, to the best knowledge of the signer of such
certificate, Landlord is in default in performance of any covenant, agreement,
term, provision or condition contained in this Lease and, if so, specifying each
such default of which the signer may have knowledge, it being intended that any
such statement delivered pursuant hereto may be relied upon by any prospective
purchaser or lessee of said real property or any interest or estate therein, any
mortgage or prospective mortgagee thereof or any prospective assignee of any
mortgage
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therof.
18. No Liability on Landlord--
(a) Landlord or its agents shall not be liable for any damage to
property of Tenant, or of others, entrusted to employees of the Building, nor
for the loss or damage to any property of Tenant by theft or otherwise. Landlord
or its agents shall not be liable for injury or damage to persons or property
resulting from fire, explosion, falling plaster, steam, gas, electrical
disturbance, water, rain or snow or leaks from any part of the Building or from
the pipes, appliances or plumbing works or from the roof, street or sub-surface
or from any other place or by dampness or by any other cause whatsoever; nor
shall Landlord or its agents be liable for any such damage caused by other
tenants or persons in the Building or caused by operations in construction of
any private, public or quasi-public work; nor shall Landlord be liable for any
latent defect in the Leased Premises or in the Building. If at any time any
windows of the Leased Premises are temporarily closed or darkened incident to or
for the purpose of repairs, replacements, maintenance or cleaning in, on, to or
about the Building or any part or parts thereof, Landlord shall not be liable
for any damage Tenant may sustain thereby, and Tenant shall not be entitled to
any compensation therefor nor abatement of rent nor shall the same release
Tenant from its obligations hereunder nor constitute an eviction. Tenant shall
reimburse and compensate Landlord as additional rent for all expenditures made
by, or damages or fines sustained or incurred by, Landlord due to
non-performance or non-compliance with or breach or failure to observe any term,
covenant or condition of this Lease upon Tenant's part to be kept, observed,
performed or complied with. Tenant agrees that its sole remedies in cases where
Landlord's reasonableness in exercising its judgment or withholding its consent
or approval is applicable and at issue shall be those in the nature of an action
for an injunction or specific performance; the rights to money damages or other
remedies being hereby specifically waived. Tenant shall give immediate notice to
Landlord in case of fire or accidents in the Leased Premises or in the building
or of defects therein or in any fixtures or equipment.
(b) Tenant shall indemnify and save Landlord harmless against and from
any and all claims by or on behalf of any person, firm or corporation arising
from the conduct or management of, or from any work or thing whatsoever done
(other than by Landlord or its contractors) on the property of which the Leased
Premises is a part, during the Term of this Lease and during the period of time,
if any, prior to the specific Commencement Date that Tenant may have been given
and taken access to the Leased Premises for the purpose of making installations,
and will further indemnify and save Landlord harmless against and from any and
all claims arising from any omission or negligence of Tenant or any of its
agents, contractors, servants, employees, licensees or invitees, and against and
from all costs, expenses and liabilities, incurred in connection with any such
claim or claims or action or proceeding brought thereon; and, in case any action
or proceeding be brought against Landlord by reason of any such claim, Tenant
upon notice of Landlord, agrees that Tenant, at Tenant's expense will resist or
defend such action or proceeding and will employ counsel therefor reasonably
satisfactory to Landlord.
19. Damage by Fire or Other Cause--If the Leased Premises or the Building
in which they are located are damaged, in whole or in part, by fire or other
casualty without the fault or neglect of Tenant or Tenant's servants,
employees, agent or licensees, the Landlord, unless it
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shall otherwise elect as hereinafter provided, shall repair the same after
written notice from Tenant to Landlord of the damage. If the Leased Premises,
or any part thereof, are damaged by fire or other casualty to such an extent as
to be rendered untenantable but are, nevertheless, repaired by the Landlord,
then the rent shall be abated to an extent corresponding with the time during
which and the extent to which the said Leased Premises may have been
untenantable. Unless Landlord shall otherwise elect as hereinafter provided,
Landlord shall make repairs and restorations provided for in this Article with
all reasonable expedition subject to delays due to adjustment of insurance
claims, labor troubles and causes beyond Landlord's control. Notwithstanding
the foregoing, if the fire or damage to the Leased Premises be caused by
carelessness or negligence or improper conduct on the part of the Tenant, or
the servants, employees, agents or licensees of the Tenant, without prejudice
to any rights and remedies of Landlord and without prejudice to the rights or
subrogation of Landlord's insurer, the Tenant shall be liable for the rent
during the unexpired portion of the demised term, without abatement, unless the
Landlord elects to terminate this Lease as hereinafter provided. If the
Landlord, in its sole discretion, shall decide, within a reasonable time after
the occurrence of any such fire, or other casualty (even though the Leased
Premises may not have been affected by such fire or other casualty), not to
restore or not to rebuild the Building and/or the Leased Premises, then, upon
written notice given by the Landlord to the Tenant, this Lease shall terminate
on a date to be specified in such notice as if that date had been originally
fixed as the expiration date of the Term herein demised, and the rent shall be
adjusted as of the time of the occurrence of any such fire or other casualty.
If the damage or destruction is due to the fault or neglect of Tenant, the
debris shall be removed by and at the expense of Tenant. Tenant shall give
immediate notice to Landlord in case of fire or in the event of accidents to or
defects in any fixtures or equipment of the Building.
20. Condemnation -
(a) In the event that the whole of the Leased Premises shall be
lawfully condemned or taken in any manner for any public or quasi-public use, or
in the event that the Building is conveyed in lieu of condemnation, this Lease
and the Term and estate hereby granted shall forthwith cease and terminate as of
the date of vesting of title. In the event that only a part of the Leased
Premises shall be so condemned, taken or conveyed then, effective as of the date
of vesting of title, the rent hereunder shall be abated in an amount thereof
apportioned according to the area of the Leased Premises so condemned or taken.
In the event that only a part of the Building shall be so condemned, taken or
conveyed then (a) Landlord (whether or not the Leased Premises be affected) may,
at its option, terminate this Lease and the Term and estate hereby granted as of
the date of such vesting of title by notifying Tenant in writing of such
termination with sixty (60) days following the date on which Landlord shall have
received notice of vesting of title; and (b) if, such condemnation, taking or
conveyance shall be of a substantial part of the Leased Premises or of a
substantial part of the means of access thereto, Tenant shall have the right, by
delivery of notice in writing to Landlord within sixty (60) days following the
date on which Tenant shall have received notice of vesting of title, to
terminate this Lease and the Term and estate hereby granted as of the date of
vesting of title; or (c) if neither Landlord nor Tenant elects to terminate this
Lease as aforesaid, this Lease shall be and remain unaffected by such
condemnation or taking except that the rent shall be abated to the extent, if
any, hereinbefore provided, Landlord will, at its expense, but only to the
extent of an equitable proportion of the award or other compensation for the
portion of the Building condemned, taken or conveyed, restore the remaining
portion of the Leased
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Premises as nearly as practicable to the same condition as it was in prior to
such condemnation, taking or conveyance.
(b) In the event of their termination in any of the cases hereinabove
provided, this Lease and the Term and estate hereby granted shall expire as of
the date of such termination with the same effect as if that were the date
hereinbefore set for the expiration of the Term of this Lease, and the rent
hereunder shall be apportioned as of such date.
(c) In the event of any condemnation, taking or conveyance hereinabove
mentioned of all or part of the Building, Landlord shall be entitled to receive
all compensation awarded including any award made for the value of the estate
vested by this Lease in Tenant, and Tenant hereby expressly assigns to Landlord
any and all part thereof, and Tenant shall be entitled to receive no part of
such award.
(d) It is expressly understood and agreed that the provisions of this
Article shall not be applicable to any condemnation or taking for governmental
occupancy for a limited period.
(e) Upon tenant vacating the premises, Landlord may re-enter the space
as if the lease has been terminated and may begin demolition or construction
work. However, the commencement of any such work does not relieve any tenant
obligations under the terms of this lease.
21. Compliance with Certificate of Occupancy--Tenant will not any time use
or occupy the Leased Premises in violation of any temporary or permanent
certificate of occupancy issued for the Building or portion thereof of which
the Leased Premises form a part. This Lease is subject to the express
limitation that the Leased Premises shall not be occupied on a regular basis by
more than one person for each full 330 gross rentable square feet comprising
the Leased Premises representing the whole number when calculated.
22. Bankruptcy--If at the Commencement Date or if at any time during the
term hereby demised there shall be filed against Tenant in any court pursuant
to any statute either of the United States or of any State a petition in
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee of all or a portion of Tenant's property, and within thirty
(30) days thereafter Tenant fails to secure a discharge thereof, or if Tenant
makes an assignment for the benefit of creditors or petitions for or enters
into an arrangement or composition with creditors, or takes advantage of any
statute related to bankruptcy, this Lease, at the option of Landlord, may be
cancelled and terminated, in which event neither Tenant nor any person claiming
through or under Tenant by virtue of any statute or of an order of any court
shall be entitled to possession or to remain in possession of the Demised
Premises but shall forthwith quit and surrender the premises, and Landlord, in
addition to the other rights and remedies Landlord has by virtue of any other
provision herein or elsewhere in this Lease contained or by virtue of any
statute or rule of law, may retain as liquidated damages any rent, security,
deposit or monies received by it from Tenant or others on behalf of Tenant and
Tenant shall remain liable for damages as provided in Article 25(a) hereof.
23. Defaults--This Lease and the Term and estate hereby granted are
subject to the express limitation that (i) whenever Tenant shall default in the
payment of any installment of rent,
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additional rent or any other charge payable by Tenant to Landlord or any day
upon which the same is due, and such default shall continue for five (5)
calendar days after written notice thereof shall be given by Landlord to
Tenant; or (ii) whenever Tenant shall do or permit anything to be done, whether
by action or inaction, contrary to any covenant or agreement on the part of
Tenant herein contained or contrary to any of the terms, provisions or
conditions of this Lease on the part of Tenant to be kept or performed, or
shall fail in the keeping or performance of any of the covenants, agreements,
terms, provisions or conditions contained in this Lease, which on the part or
behalf of Tenant are to be kept or performed, and if such situation shall
continue and shall not be remedied by Tenant within fifteen (15) days after
Landlord shall have given to Tenant a written notice specifying the same, or,
in the case of a happening or default which for causes beyond Tenant's control
cannot with due diligence be cured within a period of fifteen (15) days, if
Tenant shall not duly institute and thereafter diligently prosecute to
completion all steps necessary to remedy the same, or shall not remedy the same
within a reasonable time; or (iii) whenever Tenant shall desert or abandon the
Leased Premises or the same shall become vacant (whether the keys be
surrendered or nor and whether the rent be paid or not), then, in any of said
cases, Landlord may end the Term of this Lease by giving Tenant written notice
of its election to do so, and upon the service of such notice, this Lease and
the term and estate hereby granted (whether or not the Term shall theretofore
have commenced) shall expire and terminate with the same effect as if that day
were the date hereinbefore set for the expiration of the Term of this Lease but
Tenant shall remain liable for damages as provided in Article 25(a) hereof.
24. Landlord's Right to Re-Enter Premises--
(a) If Tenant shall default in the payment of any installment of rent,
additional rent or any charge payable by Tenant to Landlord on any date upon
which the same is due and if such default shall continue for five (5) calendar
days after written notice as aforesaid, or if this Lease shall expire as in
Article 23 hereof, Landlord or Landlord's agents and servants may immediately or
at any time thereafter re-enter into or upon the Leased Premises, or any part
thereof, either by summary dispossess proceedings or by any suitable action or
proceeding at law, or by force or otherwise, without being liable to indictment,
prosecution or damages therefor, and may repossess the same, and may remove any
persons and property therefrom, to the end that Landlord may have, hold and
enjoy the Leased Premises again as and of its first estate and interest therein.
The word "re-enter" is not restricted to its technical legal meaning. In the
event of any termination of this Lease under the provisions of Article 23
hereof, of in the event that Landlord shall re-enter the Leased Premises under
the provisions of this Article or in the event of the termination of this Lease,
or of re-entry, by or under any summary dispossess or other proceeding or action
or any provision of law by reason of deafult hereunder on the part of Tenant,
Tenant shall thereupon pay to Landlord the rent, additional rent, adjustments of
rent and any other charge payable by Tenant to Landlord up to the time of such
termination of this Lease, or of such recovery of possession of the Leased
Premises by Landlord, as the case may be, and shall also pay to Landlord damages
as provided in Article 25(a) hereof.
(b) In the event of a breach or threatened breach on the part of
Tenant with respect to any of the covenants, agreements, terms, provisions or
conditions on the part of or on behalf of Tenant to be kept or performed,
Landlord shall also have the right of injunction.
(c) The specified remedies to which Landlord may resort hereunder are
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cumulative and are not intended to be exclusive of any other remedies of means
or redress to which Landlord may lawfully be entitled to at any time, and
Landlord may invoke any remedy allowed at law or in equity as if specific
remedies were not herein provided for.
(d) In the event of any termination of this Lease under the provisions
of Article 23 hereof, or in the event that Landlord shall re-enter the Leased
Premises under the provisions of this Article, or in the event of the
termination of this Lease, or of re-entry, by or under any summary dispossess or
other proceeding or action or any provision of law by reason of default
hereunder on the part of Tenant, Landlord shall be entitled to retain all
monies, if any, paid by Tenant to Landlord, whether as advance rent, security or
otherwise, but such monies shall be credited by Landlord against any fixed rent,
additional rent or other charges due from Tenant at the time of such termination
or re-entry or, at Landlord's option against any damages payable by Tenant under
Article 25(a) hereof or pursuant to law.
25. Landlord's Remedies--
(a) It is covenant and agreed by Tenant that, in the event of any
termination of this Lease under the provisions of Article 23 hereof, or in the
event that Landlord shall re-enter the Leased Premises under the provisions of
Article 24 hereof, or in the event of the termination of this Lease, or of
re-entry, by or under any summary dispossess or other proceeding or action or
any provision of law by reason of default hereunder on the part of Tenant,
Tenant will pay to Landlord as damages, at the election of Landlord, either:
1. a sum of which, at the time of such termination of this Lease
or at the time of any such re-entry by Landlord, as the case may be, represents
the then value of the excess, if any, of: (i) the aggregate of the rent for the
period commencing with such earlier termination of the Lease or the date or any
such re-entry, as the case may be, and ending with the date hereinbefore set for
the expiration of the full term hereby granted had this Lease not so terminated
or had Landlord no so re-entered the Leased Premises; or (ii) the aggregate
rental value of the premises for the same period; or
2. The rent which would have been payable by Tenant had this
Lease not so terminated, or had Landlord not so re-entered the Leased Premises,
payable upon the due dates therefor specified herein following such termination
or such re-entry and until the date hereinbefore set for the expiration of the
full Term hereby granted; provided, however, that if Landlord shall re-let the
Leased Premises during said period, Landlord shall credit Tenant with the net
rents received by Landlord from such re-letting, such net rents to be determined
by first deduction from the gross rents as and when received by Landlord from
such reletting the expenses incurred or paid by Landlord in terminating this
Lease of re-entering the Leased Premises and of securing possession thereof, as
well as the expenses of re-letting, including altering and preparing the Leased
Premises for new tenants, brokers' commissions, attorney's fees and
disbursements; and all other similar and dissimilar expenses properly chargeable
against the Leased Premises and the rental therefrom; it being understood that
any such re-letting may be for a period equal to or shorter or longer than the
remaining term of this Lease; provided, however, that in no event shall Tenant
be entitled to receive any excess of such net rents over the sums payable by
Tenant to Landlord hereunder and provided, further, that in no event shall
Tenant be entitled in any suit for the collection of damages pursuant to this
subparagraph to a credit in respect of any net rents from a re-letting except to
the extent that
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such net rents are actually received by Landlord prior to the commencement of
such suit. If the Leased Premises or any part thereof should be re-let in
combination with other space, then proper apportionment on a square foot area
basis shall be made of the rent received from such re-letting and of the
expenses of re-letting.
3. Landlord may retain the security deposit required by Article
29 hereof and any interest accrued thereon as liquidated damages for Tenant's
default.
Suit or suits for the recovery of such damages, or any installments thereof,
may be brought by Landlord from time to time at its election and nothing
contained herein shall be deemed to require Landlord to postpone suit until the
date when the Term of this Lease would have expired if it had not been
terminated under the provisions of Article 23 hereof or under any provision of
law, or had Landlord not re-entered the premises. Nothing herein contained
shall be construed as limiting or precluding the recovery by Landlord against
Tenant of any sums or damages to which, in addition to the damages particularly
provided above, Landlord may lawfully be entitled by reason of any default
hereunder on the part of Tenant.
(b) Tenant, for itself on behalf of any and all persons claiming
through or under Tenant, and including creditors of all kinds, does hereby waive
and surrender all right and privilege which they or any of them might have under
or by reason of any present or future law to redeem the Leased Premises or to
have a continuance of this Lease for the Term hereby leased after being
dispossessed or ejected by process of law or under the Terms of this Lease or
after the termination of this Lease as herein provided.
(c) If Tenant shall default in the performance of any covenant on
Tenant's part to be performed as in this Lease contained, Landlord may
immediately, or at any time thereafter, without further notice, perform the same
for the account of Tenant. If Landlord at any time is compelled to pay or elects
to pay any sum of money, by reason of the failure of Tenant to comply with any
provision hereof, or, if Landlord is compelled to or does incur any expense
(including reasonable attorney's fees and disbursements) instituting,
prosecution or defending any action or proceeding instituted by reason of any
default of Tenant hereunder, the sum or sums so paid by Landlord, with all
interest, costs and damages, shall be deemed to be additional rent hereunder and
shall be due from Tenant to Landlord, after being billed therefor, on the first
day of the month following the incurring of such respective expenses, or, at
Landlord's option, on the first day of any subsequent month.
26. Cancellation of Lease: Waiver of Defaults--If there be any agreement
between Landlord and Tenant providing for the cancellation of this Lease upon
certain conditions or contingencies, or an agreement for the renewal hereof at
the expiration of the Term, the right to such renewal or the execution of a
renewal agreement between Landlord and Tenant prior to the expiration of such
Term shall not be considered an extension thereof or a vested right in Tenant
to such further Term, so as to prevent Landlord from cancelling this Lease and
any such extension thereof during the remainder of the Term hereby granted;
such privilege to cancel, if and when so exercised by Landlord, shall cancel
and terminate this Lease and any such renewal or extension previously entered
into between said Landlord and Tenant of the right of Tenant to any such
renewal or extension; any right herein contained on the part of Landlord to
cancel this Lease shall continue during any extension or renewal hereof; any
option on the part of Tenant herein contained for an extension or renewal
hereof shall not be deemed to give Tenant
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any option for a further extension beyond the first renewal or extended term.
No act or thing done by Landlord or Landlord's agents during the Term hereby
leased shall be deemed an acceptance of a surrender of said Leased Premises
and, no agreement to accept such surrender shall be valid unless in writing
signed by Landlord. No employee of Landlord or of Landlord's agents shall have
any power to accept the keys of said Leased Premises prior to the termination
of this Lease; the delivery of keys to any employee of Landlord or of
Landlord's agents shall not operate as a termination of the Lease or a
surrender of the Leased Premises. In the event of Tenant at any time desiring
to have Landlord underlet the Leased Premises for Tenant's account, Landlord or
Landlord's agents are authorized to receive said keys for such purposes without
releasing Tenant from any of the obligations under this Lease, and Tenant
hereby relieves Landlord of any liability for loss of or damage to any of
Tenant's effects in connection with such underletting. The failure of Landlord
to seek redress for violation of, or to insist upon the strict performance of,
any covenant or condition of this Lease, or any of the Rules and Regulations
annexed hereto and made a part hereof, or hereafter adopted by Landlord shall
not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of any original violation. The
receipt by Landlord of rent with knowledge of the breach of any covenant of
this Lease shall not be deemed a waiver of such breach. The failure of Landlord
to enforce any of the Rules and Regulations annexed hereto and made a part
hereof, or hereafter adopted, against Tenant or any other tenant in the
Building shall not be deemed a waiver of any such Rules and Regulations. No
provision of this Lease shall be deemed to have been waived by Landlord, unless
such waiver be in writing signed by Landlord. No payment by Tenant or receipt
by Landlord of a lesser amount than the monthly rent and additional rent herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent or additional rent be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
additional rent or pursue any other remedy in this Lease provided. This Lease
and the exhibits made a part hereof contain the entire agreement between the
parties and supersede any and all previous correspondence and agreements
between the parties hereto, and any executory agreement hereafter made shall be
ineffective to change, modification, discharge or effect an abandonment of it
in whole or in part unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge or
abandonment is sought.
27. Trial by Jury--It is mutually agreed by and between Landlord and
Tenant that the respective parties shall and do hereby waive trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any
matters whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use of occupancy of the Leased
Premises and any emergency statutory or other statutory remedy. It is further
agreed that, in the event Landlord commences any summary proceeding for
non-payment of rent, Tenant will not interpose any counterclaim of whatever
nature or description in any such proceeding.
28. Notices--Except as otherwise in this Lease provided, any notice, bill
or statement by either party to the other may be given or sent if either
delivered personally or sent by telephone facsimile, registered or certified
mail, addressed to Landlord, at its address set forth above, and to Tenant at
the Leased Premises (or at Tenant's present address as above set forth, if
mailed prior to Tenant's occupancy of the Leased Premises), or if any address
for
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notices shall have been duly changed as hereinafter provided, if, mailed as
aforesaid to the party at such changed address. Either party may at any time
change the address for notices, bills or statements by delivering or mailing,
as aforesaid, a notice stating the change and setting forth the changed
address.
29. Security Deposit--Tenant has deposited with Landlord six months'
average rent in the amount of $35,166.66 security for the faithful performance
and observance by Tenant of the terms, provisions and conditions of this Lease.
It is agreed that, in the event Tenant defaults in respect to any of the terms,
provisions and conditions of this Lease, Landlord may use, apply or retain the
whole or any part of the security so deposited to the extent required for the
payment of any sum as to which Tenant is in default. In addition, Landlord may
retain the interest secured on said security deposit, if any, for the calendar
quarter in which any such default occurs, if Landlord shall so use, apply or
retain all or any part of the security or the interest accrued thereon, if any,
Tenant shall, on demand, immediately deposit with Landlord a sum equal to the
amount so used, applied or retained as security aforesaid so that Landlord
shall retain the full amount of security hereunder throughout the Term of this
Lease. If Tenant shall fail to make such deposit, Landlord shall have the same
rights and remedies for non-payment of rent beyond the applicable grace period.
In the event that Tenant shall fully and faithfully comply with all of the
terms, provisions, covenants and conditions of this Lease, the security and
interest earned thereon shall be returned to Tenant ten (10) days after
expiration of the Term of the Lease and delivery of entire possession of the
Leased Premises to Landlord for Landlord's inspection. In the event of a sale
or lease of the Building, Landlord shall have the right to transfer the
security to the vendee or lessee and Landlord shall thereupon be released by
Tenant from all liability for the return of such security without further
documentation relating thereto. Security deposit shall be held in Dreyfus
Liquid Asset Worldwide Dollar Money Market account.
30. Inability to Perform--This Lease and the obligation of Tenant to pay
rent hereunder and perform all of the other covenants and agreements hereunder
on the part of Tenant to be performed shall in no way be affected, impaired or
excused nor shall Landlord have any liability because Landlord is unable to
fulfill any of its obligations under this Lease or is delayed in supplying any
service expressed or implied to be supplied or is unable to make, or is delayed
in making any repairs, additions, alterations or decorations or is unable to
supply or is delayed in supplying any equipment or fixtures if Landlord is
prevented or delayed from so doing by reason of strike or labor troubles or any
other cause beyond Landlord's reasonable control including, but not limited to,
governmental preemption in connection with a National Emergency or by reason of
any rule, order or regulation of any department or subdivision thereof of any
government agency or by reason of the conditions of supply and demand which
have been or are affected by war, hostilities or other emergency; provided,
however, that in each such instance of inability of Landlord to perform,
Landlord shall exercise reasonable diligence to eliminate the cause for such
inability to perform. Landlord reserves the right to suspend or curtail service
of the air-conditioning, plumbing, electrical or elevator facilities when
necessary by reason of repairs or alterations in the judgment of the Landlord
necessary to be made without any liability therefor.
31. No Representation by Landlord--Landlord or Landlord's agents have made
no representations or promises with respect to the Building, the adjacent
parking area, or Leased Premises except as herein expressly set forth. Tenant
agrees to accept the Leased Premises
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"as is", except for work to be performed by Landlord, if any. The taking
possession of the Leased Premises by Tenant shall be conclusive evidence that
the Leased Premises and the Building are in good and satisfactory condition at
the time such possession was taken.
32. Tenant's Use
(a) Tenant shall not use or permit the use of the Leased Premises or
any part thereof in any way which would violate any of the other covenants,
agreements, terms, provisions and conditions of this Lease or for any unlawful
purposes or in any unlawful manner. Tenant shall not suffer or permit the Leased
Premises or any part thereof to be used in any manner or anything to be done
therein or suffer or permit anything to be brought into or kept in the Leased
Premises which, in the judgment of the Landlord, shall in any way impair or tend
to impair the appearance or reputation of the Building, impair or interfere with
or tend to impair or interfere with the use of any of the other areas of the
Building by, or occasion discomfort, inconvenience or annoyance to, any of the
other tenants of the Building. Tenant shall not install any electrical or other
equipment of any kind which, in the judgment of Landlord, might cause any such
impairment, interference, discomfort, inconvenience, annoyance or which shall
exceed or aggregate consumption of 5 watts per square foot of rentable area.
(b) If, in connection with financing for the Building, a banking,
insurance or other recognized institutional lender shall request modifications
in this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such modifications
do not increase the financial obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created.
33. Adjustment of Rent for Changes in Real Estate Taxes
(a) For the purposes of this section the term "taxes" shall include
all real estate taxes, assessments, water and sewer rents and other governmental
impositions and charges of every kind and nature whatsoever, extraordinary as
well as ordinary, foreseen and unforeseen and each and every installment
thereof, which shall or may during the Term, be levied, assessed, imposed, and
become due and payable, or liens upon, or arise in connection with the use,
occupancy or possession of, or become due or payable out of or for, the Building
or any part thereof, and the land upon which it is situated including all
improvements thereon. Such term shall not include any charge, such as a water
meter charge and the sewer rent based thereon, which is measured by the
consumption by the actual user of the time or service for which the charge is
made. Whether or not Landlord shall take the benefit of the provisions of any
statute or ordinance permitting any assessment for public betterments or
improvements to be paid over a period of time, Landlord shall, nevertheless be
deemed to have taken such benefit so that the term "taxes" shall include only
the current annual installment of any such assessment and the interest, if any,
on unpaid installments. A tax bill or copy thereof submitted by Landlord to
Tenant shall be conclusive evidence of the amount of a tax or installment
thereof.
(b) Tenant agrees to pay to Landlord, when billed therefor, an amount
(hereinafter referred to as "Tax Rent") equal to its proportionate share of all
taxes in excess of taxable payable by the Landlord to the Town of Greenwich,
Connecticut, based upon taxes due and payable for the period from January 1,
1996 to December 31, 1996, whether the increased
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taxes result from an increase in the tax rate or an increase in the assessed
valuation. Tenant's proportionate share shall be determined by multiplying the
said excess taxes for the year in question by the percentage determined by
dividing the gross rentable area of the Building into the gross rentable area of
the Leased Premises, which percentage is set forth at the beginning of this
Lease.
(c) On the first day of each month during the Term commencing January
1, 1996, Tenant shall pay to Landlord, in advance, as additional rent,
one-twelfth (1/12) of Tax Rent payable by Tenant during each lease year in which
the month in question falls. If, on the first day of the month in question, the
amount of any tax payable during the then current lease year shall not have been
determined by the taxing authority, then the Tax Rent then payable shall be
based on the amount of the corresponding tax for the immediately preceding lease
year, subject to immediate adjustment when the amount of such tax shall be
determined and payment of such adjustment upon billing by the Landlord.
(d) Nothing herein contained shall be construed to include as a tax
which shall be the basis of Tax Rent any inheritance, estate, succession,
transfer, gift, franchise, corporation, income or profit tax or capital levy
that is or may be imposed upon Landlord; provided, however, that, if at any time
during the Term the methods of taxation prevailing at the Commencement Date
shall be altered so that in lieu of or as substitute for the whole or any part
of the taxes now levied, assessed or imposed on real estate as such there shall
be levied, assessed or imposed (i) a tax on the rents received from such real
estate, or (ii) a license fee measured by the rents receivable by Landlord from
the Building or any portion thereof, or (iii) a tax or license fee imposed upon
Landlord which is otherwise measured by or based in whole or in part upon the
Building or any portion thereof, than the same shall be included in the
computation of Tax Rent hereunder.
(e) If, after Tenant shall have made a payment pursuant to paragraph
(b) of this Article, Landlord shall receive a refund of any portion of the taxes
on which such payment shall have been based, Landlord shall pay to Tenant that
proportion of the net refund, after deducting all expenses (including reasonable
attorneys' and appraisers' fees) incurred in obtaining such refund which the
portion of the tax in question paid by Tenant bears to the entire amount of such
tax. Tenant shall not institute any proceedings with respect to the assessed
valuation of the land or Building or any part thereof for the purpose of
securing a tax reduction.
(f) Tenant at all times shall be responsible for and shall pay, before
delinquency, all taxes levied or assessed by any governmental authority on any
leasehold interest, any investment of Tenant in the Leased Premises, or any
personal property of any kind owned, installed or used by Tenant or on Tenant's
right to occupy the Leased Premises.
34. Adjustment of Rent for Changes in Landlord's Costs
(a) As used in this Lease, the term "Operating Costs" shall include
the total costs and expenses incurred or borne by Landlord in operating and
maintaining the Building and the land upon which it is situated and the deck,
seawall, including, but not limited to, the cost and expense of the following:
heating, ventilation and air-conditioning; gardening; insurance for public
liability, property damage and fire insurance with such extended coverage and
vandalism endorsements as Landlord may from time to time deem necessary;
repairs; painting and
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decorating; lighting; maintaining and snow plowing the parking area; sanitary
control; electricity; gas; water rates and sewer rents; removal of rubbish,
garbage and other refuse; the cost of any capital improvements to the Building
and/or any machinery or equipment installed in the Building which is made or
becomes operational, as the case may be, after Tenant's base year for Operating
Cost Rent, and which has the effect of reducing the expenses which would
otherwise be included in the Operating Cost Rent to the extent of the lesser of
(i) such cost, amortized over the useful life of the improvement, machinery
and/or equipment (as reasonably estimated by Landlord), or (ii) the amount of
such reduction in Operating Costs; security; machinery, equipment and supplies;
replacement of paving, curbs and walkways; cleaning and maintenance of the
Building and the Leased Premises; professional fees; cost of personnel to
implement all of the aforementioned (including workers' compensation insurance
covering such personnel); and all such charges shall be made in full in the
year in which incurred by Landlord.
(b) Tenant agrees to pay to Landlord, when billed therefor, an amount
(hereinafter referred to as "Operating Cost Rent") equal to its proportionate
share of increases in Operating Costs in excess of the Operating Costs for the
calendar year 1996. Tenant's proportionate share shall be determined by
multiplying the said increased Operating Costs for the year in question by the
percentage determined by dividing the gross rentable area of the Building into
the gross rentable area of the Leased Premises, which percentage is set forth at
the beginning of this Lease. Such bill shall be accompanied by a statement from
Landlord, setting forth the total Operating Costs for the year in question.
(c) On the first day of each month during the Term, commencing with
the first day of January of the second calendar year of the Term, Tenant shall
pay to Landlord, in advance as additional rent, an estimated installment payment
on account of Operating Cost Rent equal to one-twelfth (1/12) of the Operating
Cost Rent payable by Tenant during the immediately preceding calendar year,
subject to adjustment at the end of each calendar year.
35. Obligation of Landlord--the term "Landlord" as used in this Lease
means only the owner, or the mortgagee in possession, for the time being of the
land and Building (or the owner of a Lease of the Building or of the land and
Building), so that in the event of any sale or sales or said land and Building
or of said Lease, or in the event of lease of the Building, or of the land and
Building, the said Landlord shall be and hereby is entirely freed and relieved
of all covenants and obligations of Landlord hereunder, and it shall be deemed
and construed as a covenant running with the land without further agreement
between the parties or their successors in interest, or between the parties and
the purchaser, at any such sale, or the said lesses of the Building, or of the
land and Building, that the purchaser of the Building assumes and agrees to
carry out any and all covenants and obligations of the Landlord hereunder.
36. Successors and Assigns--The covenants, conditions and agreements
contained in this Lease shall bind and inure to the benefit of Landlord and
Tenant and their respective heirs, distributees, executors, administrators,
successors, and, except as otherwise provided in this Lease, their respective
assigns.
37. Landlord's Right to Perform Tenant's Obligations--In any case in which
Tenant shall be obligated under any provisions of this Lease to pay Landlord
any loss, cost, damage, liability or expense suffered or incurred by Landlord,
Landlord shall allow to Tenant, as an offset against the amount thereof the net
proceeds of any insurance collected for or on account
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of such loss, cost, damage, liability or expense, provided that the allowance
of such offset does not invalidate or prejudice the policy or policies under
which such proceeds were payable.
The Parties hereto shall each endeavor to procure an appropriate clause
in, or endorsement on, any fire or extended coverage insurance covering the
Leased Premises and the Building of which the Leased Premises is a part and
personal property, fixtures and equipment located thereon or therein, pursuant
to which the insurance companies waive subrogation or consent to a waiver of
right of recovery, and having obtained such clauses or endorsements of waiver
of subrogation or consent to a waiver of right of recovery, each party hereby
agrees that it will not make any claim against or seek to recover from the
other for any loss or damage to its property or the property of others
resulting from fire or other hazards covered by such discharge, exoneration and
covenant not to sue herein contained shall be limited by the terms and
provisions of the waiver of subrogation clauses or endorsements, or clauses or
endorsements consenting to a waiver of right of recovery, and shall be
co-extensive therewith. If either party may obtain such clause or endorsement
only upon the payment of an additional premium, such party shall promptly so
advise the other party and shall be under no obligation to obtain such clause
or endorsement unless such other party pays the additional premium. Tenant must
procure liability and property insurance equal to $1 million combined coverage
and submit such evidence of coverage to Landlord prior to occupancy.
38. Late Charges--Anything in this Lease to the contrary notwithstanding,
and without limiting any other remedy of Landlord contained in this Lease,
Tenant shall pay a "late charge" of eight percent (8%) of any installment of
rent or additional rent not paid on the due date thereof to cover the extra
expenses involved in handling delinquent payments. Such late charge shall be
charged for each month or portion thereof that such installment is not paid.
39. Broker--The Tenant represents that James Desmond Commercial Realty,
James Desmond, is the only broker that brought about or had any connection with
the procuring, executing and delivery of this Lease and Tenant holds harmless
and indemnifies Landlord against the claims of any other persons or entities
with whom Tenant dealt in connection with bringing about the transactions
contemplated by this Lease. Landlord will pay James Desmond Commercial Realty
commission after Tenant has taken occupancy.
40. Exculpation--Notwithstanding anything to the contrary provided for in
this Lease, it is expressly understood and agreed by and between the parties
hereto, such agreement being a primary consideration for the execution of this
Lease by Landlord, on behalf of themselves and on behalf of each and every
person, firm or corporation claiming by or through them, that absolutely no
personal liability of any kind whatsoever shall be asserted or be enforceable
against the Landlord, its successors, assigns or any mortgagee in possession
(for the purposes of this Article, collectively referred to as "Landlord"), or
any individual acting on behalf of the Landlord; and that the Tenant with
respect to any matter whatsoever, including, specifically, any matters arising
out of this Lease or the obligations of the parties hereto, shall look solely
and exclusively to the assets and equity of the Landlord in the Building for
satisfaction of any claims it might have against Landlord. This exculpation of
personal liability of the Landlord, and any individual acting on behalf of the
Landlord, shall be absolute and without exceptions whatsoever.
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41. Captions--The captions of Articles in this Lease are inserted only as
a matter of convenience and for reference; they in no way define, limit or
describe the scope of this Lease or the intent of any provisions hereof.
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and
sealed this Lease as of the day and year first above written.
STEAMBOAT ROAD ASSOCIATES
/s/ illegible By /s/ Stephen H. Berni
- ------------------------------------- -----------------------------------
Witness: Stephen H. Berni
Partner
- ------------------------------------- -------------------------------------
Witness: TENANT
Capital Growth International, L.L.C.
- ------------------------------------- By ----------------------------------
Witness: Ron Koenig Date
- ------------------------------------- By ----------------------------------
Witness: Michael S. Jacobs Date
STATE OF CONNECTICUT )
:
COUNTY OF FAIRFIELD )
On this the day of before me, the undersigned officer,
personally appeared Stephen H. Berni, who acknowledged himself to be a General
Partner of STEAMBOAT ROAD ASSOCIATES and that he, as such General Partner,
being duly authorized so to do, executed the foregoing instrument for the
purposes therein contained by signing the name of the Company by himself as
General Partner.
In witness whereof, I hereunto set my hand.
-------------------------------------
Notary Public
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41. Captions--The captions of Articles in this Lease are inserted only as
a matter of convenience and for reference; they in no way define, limit or
describe the scope of this Lease or the intent of any provisions hereof.
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and
sealed this Lease as of the day and year first above written.
STEAMBOAT ROAD ASSOCIATES
By /s/ Stephen H. Berni
- -------------------------------------- ----------------------------------
Witness: Stephen H. Berni
Partner
- ------------------------------------- -------------------------------------
Witness: TENANT
Capital Growth International, L.L.C.
By /s/ Ron Koenig 12-13-95
- ------------------------------------- ----------------------------------
Witness: Ron Koenig Date
By /s/ Michael S. Jacobs
- ------------------------------------- ----------------------------------
Witness: Michael S. Jacobs Date
STATE OF CONNECTICUT )
:
COUNTY OF FAIRFIELD )
On this the day of before me, the undersigned officer,
personally appeared Stephen H. Berni, who acknowledged himself to be a General
Partner of STEAMBOAT ROAD ASSOCIATES and that he, as such General Partner,
being duly authorized so to do, executed the foregoing instrument for the
purposes therein contained by signing the name of the Company by himself as
General Partner.
In witness whereof, I hereunto set my hand.
-------------------------------------
Notary Public
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STATE OF CONNECTICUT )
:
COUNTY OF FAIRFIELD )
On this the day of before me, the undersigned officer,
personally appeared who acknowledged himself to be a General
Partner of and that he, as such General Partner, being duly
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of the Company by himself as General Partner.
In witness whereof, I hereunto set my hand.
-------------------------------------
Notary Public
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[Floor Plan for Suite A]
Waterfront [down arrow]
For more info contact:
Owners Stephen or Stuart Berni
800-237-6458 [bullet] 203-661-4747 [bullet] fax 661-4825
<PAGE>
Cleaning Schedule
SECTION I--Regular Cleaning--nightly and as needed
1. Empty and dust, wipe or wash all ashtrays.
2. Empty all wastepaper baskets and receptacles nightly and dust, wipe or
wash them as needed.
3. Sweep and dust mop all uncarpeted floors nightly, and wet mop clean as
needed.
4. Vacuum all rugs and carpeted areas nightly.
5. Wash clean all water fountain tops nightly.
6. Dust desk tops, table tops, telephones, furniture and fixtures nightly.
7. Dust all vinyl, plastic or leather type synthetic covered chairs
nightly, and wipe clean as needed.
8. Lock front and side entrance doors nightly after completion of cleaning.
9. Tilt all vertical blinds on Friday night to keep the sun out, and
preserve a uniform appearance of the Building.
SECTION II--Periodic Cleaning--done as specified
1. Vacuum entire carpeted areas, if any weekly.
2. Dust and clean door louvers and other ventilating louvers monthly.
3. Clean all windows, inside and outside, spring and fall.
4. Clean normal amount of interior and partition glass spring and fall.
5. Scrub and refinish V.A. tile floor every three months.
6. Remove fingerprints, smudges, scuff marks, etc., from vertical surfaces
(as high as the average person can reach) quarterly.
7. High dust pictures, frames, charts, graphs and similar wall hangings or
surfaces not reached in nightly cleaning, the exterior of lighting
fixtures, overhead pipes and sprinklers, quarterly.
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SECTION III--Lavatory Cleaning
1. Scrub, rinse and dry floors nightly. Wipe mirrors, powder shelves, bright
work (including flushmeters, piping, and toilet seat hinges), nightly.
Clean enameled surfaces, wash basins, urinals and bowls, nightly. Treat
urinals with a scale solvent weekly.
2. Wash both sides of all toilet seats with soap water nightly.
3. Wash tile walls near urinals with disinfectant nightly.
4. Fill toilet tissue dispensers as needed.
5. Fill all soap, towel and sanitary napkin dispensers as needed, supplies to
be furnished by Landlord at a reasonable charge to Tenant.
6. Empty and wash and clean all waste cans and other receptacles, nightly.
7. Wash down lavatory walls and stalls from trim to floor once a month.
8. Wash all partitions, tiles floors and enameled surfaces as needed.
9. Dust all lighting fixtures, quarterly.
10. Provide sanitary dispensing unit in ladies' room.
<PAGE>
Rules and Regulations
Made a Part of this Lease
in Accordance with Article 14
1. The sidewalks, entrances, driveways, passages and stairway shall not be
obstructed or encumbered by any Tenant or used for any purpose other than for
ingress to and egress from the Leased Premises and for delivery of merchandise
and equipment in a prompt and efficient manner using elevators and passageways
designated for such delivery by Landlord. Tenant shall not permit in any said
areas employees or invitees to congregate in said areas. No door mat of any
kind shall be placed or left outside in any hall or entry door of the demised
premises.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and
no sweepings, rubbish, rags, acid or other substances shall be deposited
therein, and the expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by Tenants who, or whose clerks, agents,
employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the Building; and no Tenant shall sweep or throw or permit to be
thrown from the Leased Premises any dirt or other substance into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the Building, and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the Leased Premises, or permit or suffer
the Leased Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Building by reason of
noise, odors and/or vibrations or interfere in any way with other Tenants or
those having business therein, nor shall any animals or birds be brought or be
kept in or about the Building. Smoking or carrying lighted cigars, pipes or
cigarettes in the elevator, corridors, bathrooms and other common areas of the
Building is prohibited.
4. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
Leased Premises or the Building or on the inside of the Leased Premises if the
same is visible from the outside of the Leased Premises, except that the name
of the Tenant may appear at the entrance sign of the Leased Premises. In the
event of the violation of the foregoing by any Tenant, Landlord may remove same
without any liability, and may charge the expense incurred by such removal to
Tenant or Tenants violating this rule. Interior signs and directory tablet
shall be inscribed, painted or affixed for each Tenant by Landlord at the
expense of such Tenant, and shall be in the building standard size, color and
type style.
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Page Two of Six
5. No Tenant shall mark, paint, drill into, or in any way deface any part
of the Leased Premises or the Building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Landlord, and as Landlord may direct. The Tenant shall remove their
telephone wires and cables at their expense at the request of the Landlord,
prior to the lease termination. No Tenant shall lay linoleum, or other similar
floor covering so that the same shall come indirect contact with the floor of
the Leased Premises, and if linoleum or other similar floor covering is desired
to be used an interlining of builders deadening felt shall be first affixed to
the floor, by a paste or other material, soluble in water, the use of cement or
other similar adhesive material being expressly prohibited, except as otherwise
expressly permitted in this Lease.
6. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of this
Tenant, restore to Landlord all keys to exterior doors, interior doors of
offices and toilet rooms either furnished to or otherwise procured by such
Tenant in the extent of the loss of any keys, so furnished, such Tenant shall
pay to Landlord the cost thereof. Additional locks or bolts of any kind which
shall not be operable by the Grand Master Key for the Building shall not be
placed upon any of the doors or windows by any Tenant, nor shall any changes be
made in locks or the mechanism thereof which shall make such locks inoperable
by the Grand Master Key. Tenant shall have the right to install additional
security systems for the Demised Premises, which systems will be coordinated
with those operated by Landlord and its managing agent. The security systems
will remain intact and in working order at the termination of the lease unless
the Landlord directs Tenant to remove it. The keys must be stamped "Do Not
Duplicate" and additional keys will be provided by Landlord to Tenant at
Tenant's expense.
7. Freight, furniture, business equipment, merchandise and bulky matter
shall be delivered to and removed from the Leased Premises only through the
Steamboat Road entrance corridor and only during hours, in a manner approved by
Landlord and upon at least three (3) days' prior written request. Landlord
reserves the right to inspect all freight to be brought into the Building and
to exclude from the Building all freight which violates any of these Rules and
Regulations or the Lease of which there Rules and Regulations are a part. Any
Tenant moving in or out of the Building shall give at least two (2) weeks'
prior written notice to Landlord and shall be required to perform such move
after Working Hours in accordance with the Rules and Regulations for moving in
and out of the 666 Building. Any services performed by the Building
Superintendent shall be paid for by such Tenant at overtime rates.
<PAGE>
Page Three of Six
8. No Tenant shall obtain for use upon the Leased Premises ice, drinking
water, towel and other similar services, or accept barbering or bootblacking
services in the Leased Premises, except from persons authorized by Landlord,
and at hours and under regulations fixed by Landlord. Canvassing, soliciting
and peddling in the Building is prohibited and each Tenant shall cooperate to
prevent the same and report such activity to the Building Superintendent
immediately. All drinking water containers shall be stored within Tenant's
demised area and not within common areas. (i.e. stairways or electrical
closets.)
9. No Tenant shall solicit for employment purposes or employ any employees
or other personnel of any other Tenants or Subtenants of the Building known as
646 or 666 Steamboat Road, Greenwich, Connecticut.
10. No electrical kitchen appliances other than currently in place or
approved by Landlord, including without limitation, hot plates, or broilers
shall be kept or operated in the Leased Premises. Tenant shall not cause or
permit any odors of cooking or other processes or any unusual or create a
public or private nuisance. No cooking shall be done in the demised Premises
except as is expressly permitted in the Lease.
11. Landlord shall have the right to prohibit any advertising which tends
to impair the reputation of the Building or its desirability as a building for
offices. Tenant shall refrain from or discontinue such advertising. Advertising
featuring the Building or referring to the Building by name is expressly
prohibited.
12. Tenants shall not bring or permit to be brought or kept in or on the
Leased Premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of any unusual or other
objectionable odors to permeate in or emanate from the Leased Premises.
13. No curtains, blinds, shades, or screens shall be attached to or hung
in, or used in connection with, any window or door of the Leased Premises
without the prior written consent of the Landlord. Such awnings, projections,
curtains, blinds, shades, screens or other fixtures must be of a similar
quality type, design and color, and attached in the manner approved by the
Landlord in writing in advance.
14. Landlord or Landlord's agent reserves the right to exclude from the
building during hours other than Business Hours (as defined in the working
Lease) all persons who do not present a pass to the Building signed by
Landlord. All persons entering and/or leaving the Building during hours other
than business Hours may be required to sign a register. Landlord will furnish
passes to persons for whom any Tenant requests same in writing.
<PAGE>
Page Four of Six
15. No Tenant shall join with any other Tenant, Subtenant or other
occupant of the Building in any action, proceeding, claim or demand against
Landlord.
16. In order not to cause interference with the Building's heating,
ventilating and airconditioning system, Tenant shall not open any of the
windows in the Building, except in case of an emergency, nor shall Tenant
adjust or tamper with any of the master thermostatic controls for said system.
In order to keep unnecessary energy consumption to a minimum, Tenant shall use
the Building standard window blinds to the maximum extent possible to prevent
overheating from direct sunlight from entering the premises.
17. No Tenant shall share or permit all or any portion of its Leased
Premises to be used by or share with any other Tenant of the Building or any
other party.
18. Tenant shall not occupy or permit any portion of the Leased Premises
to be occupied as an office for a public stenographer or public typist, or for
the warehousing, manufacture or sale to the general public of beer, wine,
liquor, narcotics or dope, or as a barber, beauty or manicure shop, or as an
employment bureau. Tenant shall not use the Leased Premises or any part
thereof, or permit the Leased Premises or any part thereof to be used for
manufacturing, or sale at auction of merchandise, goods or property of any
kind.
19. The Leased Premises shall not be used for lodging or for any illegal
purpose.
20. Moving in and out of the premises by Tenant is to be under the
Landlord's Rules, Regulations & Procedures.
21. Tenant/Contractor Construction Rules & Regulations must be adhered to
by Tenant.
22. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Building shall not covered or obstructed by Tenant, nor shall any files,
bottles, parcel, or other articles be placed on the window sills.
23. No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, nor placed in the halls, corridors or
vestibules outside the Demised Premises.
<PAGE>
Page Five of Six
24. No noise, including, but not limited to, music or the playing or
musical instruments, recordings, radio, or television which, in the judgment of
Landlord, might disturb other Tenants in the Building, shall be made or
permitted by and Tenant, employee, or their agents, etc., that disturbs the
quiet enjoyment of any other Tenants in the Building.
25. All removals, or the carrying in or out of any safes, freights,
furnitures, packages, boxes, crates or any other object or matter of any
description must take place during non-working hours or at such hours and in
such elevator as Landlord or its agent may determine. A request for use of the
elevator, corridor, lobby, etc., may be made 48 hours in advance in writing.
Every effort will be made by the Landlord to accommodate such deliveries,
providing the Landlord's opinion it does not interfere or inconvenience the
other Tenants in the Building. Landlord reserves the right to inspect all
objects and matter to be brought into the Building and to exclude from the
Building all objects and matter which violates any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
Landlord may require from any person leaving the Building with any package or
object or matter, a pass from the Tenant from whose premises the package or
object or matter is being removed. The establishment and enforcement of such
requirement shall not impose any responsibility on Landlord for the protection
of any Tenant against the removal of property from the premises of such Tenant.
Landlord shall, in no way, be liable to Tenant for damages or loss arising from
the admission, exclusion or ejection of any person to or from the Demised
Premises or the Building under the provisions of this rule.
26. There shall not be used in any space or in the public space or in the
public halls of the Building, either by any Tenant or by jobbers or any others,
in the moving or delivery or receipt of safes, freight, furniture, packages,
boxes, crates, paper, office material, or any other matter or thing, and hand
trucks except those equipped with rubber tires, side guards and such other
safeguards to passenger elevator, lobby and corridors.
27. Tenant shall not obtain, purchase or accept for use in the Demised
Premises cleaning, floor polishing or other similar services from any persons
not authorized by Landlord in writing to furnish such services. The charges for
such services by person authorized by Landlord are borne solely by the Tenant.
Such services shall be furnished only at such hours, in such places, within the
Demised Premises, and under such regulations as may be fixed by Landlord.
Tenants shall not purchase or contract for waxing, rug shampooing, venetian
blind washing, furniture polishing, lamp servicing, cleaning or electric
fixtures, removal of garbage or towel service in the Demised Premises except
from companies or person approved by the Landlord.
<PAGE>
Page Six of Six
28. All entrance doors in the Demised Premises shall be left locked by
Tenant when the Demised Premises are not in use. Entrance doors shall not be
left open at any time. Landlord or its agents or contractors will turn off
lights upon completion of cleaning services.
29.The requirements of Tenants will be attended to only upon written
request at the office of the Building. Employees of Landlord shall not perform
any work or do anything outside of their regular duties, unless under
instruction form Landlord or Landlord's agent.
30. Landlord in its reasonable judgment, reserves the right to rescind,
alter or waive any rule or regulations at any time prescribed for the Building
when, in its reasonable judgment, it deems it necessary or desirable for the
reputation, safety, care or appearance of the Building, or the preservation of
good order therein, or the operation or maintenance of the Building, or the
equipment; thereof, for the comfort of the Tenants in the Building.
31. Regarding Tenant Parking--NO overnight parking is permitted unless
arrangements are made in advance and the car keys left with the Building
Superintendent, with permission to move the car if necessary. In no event is
overnight parking permitted on weekends.
Received By: _________________
<PAGE>
Rules, Regulations and Procedures
From Landlord to Tenant Regarding
Work Conducted in 666 Steamboat Road Building
for Tenant Alterations
Instructions to Contractors
1. The following directions and instructions, of the Landlord and/or his
managing agent will be followed at all times.
2. It shall be Tenant's contractor's responsibility to schedule the
performance of this work and notify the Landlord's Building Manager of his
proposed schedule, so that the contractors material deliveries and rubbish
removal may be coordinated.
3. The Tenant's contractor shall notify Landlord's Building Manager at least
(4) four weeks prior to his proposed starting date to perform Tenant Work
and at that time will discuss the arrangements and requirements of his
schedule. At this contract time, Landlord's Building Manager must be
advised of the following items to determine reservation time schedule:
a. Material delivery, schedule--dates--times
b. Number of vehicles
c. Elevator Service and hoist reservation time
d. Docking arrangements and reservation time
e. Insurance requirements
f. Names and telephone numbers of contacts and coordinators
g. General instructions--rules and regulations
4. No materials will be moved in or out of the building from 8:00 am to 6:00
pm, Monday through Friday unless coordinated and approved by the Building
Superintendent.
5. The contractors must submit, not later than one (1) day prior to the
delivery, a written schedule which indicates the date and time the delivery
of material.
6. All routes over finished floors, carpets, etc., will be protected with a
minimum 3/8" plywood runway, which is to be picked up immediately after
delivery.
7. Appropriate warning signs are to be posted in all public corridors and
lobbies used.
8. Temporary staging of furniture and equipment in public/common areas is not
permitted.
9. Contractors must work with other contractors that may be working in the
building coordinating use of common areas, including access and egress by
scheduling in advance with Building Manager.
<PAGE>
Page Two of Three
10. All areas worked in are to be broom cleaned at the close of each day. The
elevator is not to be used by workers or for the transporting of materials.
A metal saddle plate may be used for special occasions and only approved by
the Landlord or Landlords agent in advance, providing it does not mar the
floors or rugs. All windows, blinds, vents must be cleaned at the
completion of the construction.
11. Workmen should use the toilet facilities provided.
12. Elevator pads will be installed by the Contractor and the 2,000 pound load
limit is NOT to be exceeded. The elevator will be available after working
hours only and under the supervision of the Building Superintendent. All
areas traveled are to be broom cleaned at the close of each day. Elevator
to be vacuumed and debris carried from the car, not swept across the door
opening.
13. No more than one (1) delivery truck will be allowed in the Steamboat Road
parking lot at one time. Workers will only park where instructed.
14. Only rubber wheeled dollies and carts, in good operating conditions, may be
used. Excess oil and grease must be removed from wheels to prevent staining
flooring, rugs, etc.
15. Reasonable care must be taken at all times to avoid any personal injury or
property damage.
16. All packing flammable dangerous/hazardous materials must be removed at the
end of each day, and NOT left to accumulate overnight (fire hazard). This
material must be removed from the site and not deposited in the refuse
hopper.
17. The Building Superintendent must be present during the non-working hours to
insure that no damage to the property is incurred. Payment will be made to
the Landlord by the Tenant on an hourly basis at time-and-a-half hourly
rate unless a Supervisor from the Tenant of Tenant's contractor is present
and Tenant then assumes the total responsibility for any and all
damages/security to the entire 666 Steamboat Road building.
18. The contractor must utilize labor that will work in harmony with other
labor in the building. In addition, Landlord's office should receive, not
later than one (1) week minimum coverages.
19. The work is to be completed as not to disturb the existing tenants.
<PAGE>
Page Three of Three
20. Installation of phone equipment, wire, switches, must meet all codes. No
wires may be run in plenium ceiling unless they are Teflon and may not run
thru any fire dampers. All wiring, phone hardware must be removed prior to
Lease termination of Tenant at their sole cost and expense. Any damage to
the ceiling or partitions must be repaired at the expense of the Tenant. No
wires, conduits are permitted to be exposed.
21. Tenants/contractors will submit the architectural/engineering plans for
partitions, plumbing, electrical, HVAC, etc. with a completed building
permit application form. Landlord will sign the building application permit
form. Tenant will pay the application fees. It is understood that
Landlord's signature does not signify approval or disapproval of Landlord's
acceptance of the plans and work designated. Furthermore, Landlord does not
waive any right in requiring the Tenant to restore the premises to their
original configuration by signing the building permit application.
Furthermore, Landlord's signature does not indicate that he has approved
the plans for compliance with building standard specifications or local and
state code requirements. It is the sole responsibility of the architect to
specify and the contractor to meet all code requirements. Tenant will
supply Landlord in advance of any construction a set of plans of the
construction work, a set of as-built plans, as well as the original copy of
the interim approvals, as granted, and the certificate of occupancy for the
completed work. Tenant will submit signed lien waivers at the completion of
the project from all contractors and sub-contractors. Performance Bonds may
be required depending upon the contractor selected by the Tenant.
Worker's Compensation Insurance -- Statutory Limit
Comprehensive Public Liability:
Property Damage Coverage -- Minimum $50,000.00
Bodily Injury or Death:
One person -- Minimum $250,000.00
More than one person -- Minimum $500,000.00
All certificates are to stipulate that 10 day's prior notice of
cancellation will be given to the Tenant and to:
Steamboat Road Associates
666 Steamboat Road
Greenwich, Connecticut 06830
<PAGE>
Rules, Regulations & Procedures From Landlord To Tenant Regarding
Moving In and Moving Out of Building
Instructions to Moving Contractors
1. The directions of the Landlord and/or his managing agent will be followed
at all times.
2. No furniture and/or materials will be moved in or out of the building from
8:00 a.m. to 6:00 p.m., Monday through Friday.
3. The moving contractor must submit, IN PERSON, not later than two weeks
prior to the move, a written schedule which indicates the date and time the
move will commence and also the same for the completion of the move.
4. All routes over finished floors will be protected with a minimum 3/8"
plywood runway, which is to be picked up at the close of work each day.
5. Appropriate warning signs are to be posted in all public corridors and
lobbies used.
6. Temporary staging of furniture and equipment in public areas is not
permitted.
7. All areas traveled and vacated are to be broom cleaned and vacuumed at the
close of each day. Elevator is to be swept and debris carried from the car,
NOT across the door opening. A 1/4" metal saddle plate may be used,
providing it does not mar the floors or rugs.
8. Workmen should use the toilet facilities provided.
9. Elevator pads will be installed by the Superintendent and the 2,000 pound
load limit is NOT to be exceeded.
10. No more than two trailers will be allowed in the parking lot at one time.
11. Only rubber wheeled dollies and carts, in good operating condition, may be
used. Excess oil and grease must be removed from wheels to prevent staining
flooring, rugs, etc.
12. Reasonable care must be taken at all times to avoid any personal injury or
property damage.
13. All packing and crating materials must be removed at the end of each day,
and NOT left to accumulate over night (fire hazard). This material must be
removed from the site and not deposited in the refuse hopper.
<PAGE>
Page Two of Two
14. The building Superintendent must be present during the moving process to
insure that no damage to the property is incurred and he will be paid by
the Tenant on an hourly basis at his time-and-a-half hourly rate.
15. All keys will be returned to the Superintendent at the completion of the
move, with a statement signed by an officer of the Tenant that in fact all
lobby and Tenant space keys have been returned.
16. The moving contractor must utilize labor that will work in harmony with
other labor in the building. In addition, Landlord's office should receive,
not later than two weeks prior to move, insurance certificates evidencing
the following minimum coverages:
Worker's Compensation Insurance -- Statutory Limit
Comprehensive Public Liability:
Property Damage Coverage -- Minimum $50,000.00
Bodily Injury or Death:
One person -- Minimum $250,000.00
More than one person -- Minimum $500,000.00
All certificates are to stipulate that 10 day's prior notice of
cancellation will be given to the Tenant and to:
THE BERNI COMPANY
666 Steamboat Road
Greenwich, Connecticut 06830
<PAGE>
[Logo: Steamboat Road Associates]
FIRST AMENDMENT TO LEASE
Agreement made as of the 27th day of May, 1997 by and between Steamboat
Road Associates, a Connecticut partnership with an office at 660 Steamboat
Road, Greenwich, Connecticut (hereinafter "Landlord") and Capital Growth
International, L.L.C. with an office at 660 Steamboat Road, Greenwich,
Connecticut (hereinafter "Tenant").
WITNESSETH
Whereas, the parties have previously entered into a certain agreement of
Lease dated December 7, 1995 (hereinafter the "Lease"); and
Whereas, the parties intend to amend the Lease.
Now, therefore, in consideration of the mutual convenants contained
herein, the parties hereby agree, as follows:
The third paragraph of the Lease in Article 1 is amended in its entirety
and the following is substituted in lieu thereof:
1. Rent: - Tenant shall pay the rent and additional rent as above and as
hereinafter provided:
Annually Monthly
----------- ----------
January 1, 1996 to December 31, 1996 $66,000.00 $5,500.00
January 1, 1997 to December 31, 1997 $70,000.00 $5,833.33
January 1, 1998 to March 31, 1998 $75,000.00 $6,250.00
April 1, 1998 to September 30, 1998 $75,000.00 $6,250.00
In all other respects the Lease is unaffected by this Amendment and
retains in full force and effect.
In witness whereof, the parties have hereunto set their hands and seals as
of the date first written above.
Signed, Sealed and Delivered
in the Presence of:
STEAMBOAT ROAD ASSOC.
/s/ Kimberly Smith 5/27/97 By: /s/ Stephen M. Berni 5/27/97
- -------------------------- ---------------------------------
Stephen M. Berni
Its Partner
CAPITAL GROWTH
INTERNATIONAL, L.L.C.
/s/ Monique MacLauer By: /s/ Ron Koenig 7/8/97
- -------------------------- ---------------------------------
Ron Koenig Date
/s/ Monique MacLauer By: /s/ Michael Jacob 7/1/97
- -------------------------- ---------------------------------
660 Steamboat Road
Greenwich, CT 06830
203-661-4747
Fax 201-661-9412
EXHIBIT 11
Capital Growth Holdings, Ltd.
Computation of Net Income Per Common Share
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Primary:
Net Income $ 922,909 $ (10,120)
Less cumulative preferred dividend (18,261) 0
---------- ---------
NET INCOME USED FOR E.P.S.
COMPUTATION 904,648 (10,120)
========== =========
Weighted average number of
common shares outstanding 14,377,609 3,243,333
Shares issuable upon exercise of stock
options and warrants, net of shares
assumed to be repurchased (1) 86,992 0
---------- ---------
Shares used for computation 14,464,601 3,243,333
========== =========
Net income per common share $ .06 $ .00
========== =========
Fully Diluted:
NET INCOME USED FOR E.P.S.
COMPUTATION 922,909
----------
Weighted Average number of
common shares outstanding 14,377,609
Shares issuable upon exercise of stock
options and warrants, net shares
assumed to be repurchased (1) 259,583
Convertible Series A & B Preferred Shares 5,081,334
----------
Shares used for computation 19,718,526
==========
Net Income per Common Share $ .05
==========
</TABLE>
Notes and Assumptions:
(1) The company has outstanding warrants and options with exercise prices below
the current value of its common stock which is deemed to be $3.00. The
Company has utilized the treasury stock method for computing the weighted
average shares outstanding.
Subsidiaries of the Company
Jurisdiction of
Name Incorporation
- ---- ---------------
(1) International Capital Growth, Ltd. Delaware
(2) Capital Growth Europe Limited United Kingdom
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Registration Statement on Form SB-2 of our
report dated February 22, 1997 (with respect to Notes A and B March 14, 1997 and
Notes D[3] and L March 27, 1997) on our audit of the financial statements of
Capital Growth Holdings, Ltd. (the "Company") a Delaware corporation, as of
December 31, 1996 and for the period February 26, 1996 (inception) through
December 31, 1996. We also consent to the reference to our firm under the
captions "Selected Financial Data" and "Experts".
Richard A. Eisner & Company, LLP
New York, New York
October 9, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000832324
<NAME> CAPITAL GROWTH
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-26-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,060,255
<SECURITIES> 306,579
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,486,834
<CURRENT-LIABILITIES> 51,000
<BONDS> 0
0
786,987
<COMMON> 3,423,063
<OTHER-SE> 774,216
<TOTAL-LIABILITY-AND-EQUITY> 3,486,834
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 740,649
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (718,616)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
