PROSPECTUS
1,533,334 Shares
ALLOU HEALTH & BEAUTY CARE, INC.
Certain of the Stockholders of Allou Health & Beauty Care, Inc. are
selling 1,533,334 Shares of Class A Common Stock of the Company under this
Prospectus, of which 666,667 are issued and outstanding and 866,667 are issuable
upon the exercise of Warrants to purchase Class A Common Stock. We issued the
Warrants and 666,667 of the Shares covered by this Prospectus to the Selling
Stockholders in a private placement under a Securities Purchase Agreement in
December 1998.
The Selling Stockholders may offer its Shares of the Company on any
stock exchange, market or trading facility on which the Shares are traded or in
private transactions. These sales may be at fixed or negotiated prices.
The Selling Stockholders will receive all net proceeds from the sale of
the Shares. Accordingly, we will not receive any proceeds from the resale of the
Shares. We may receive proceeds from the exercise of the Warrants. We will use
such net proceeds for general corporate purposes. We may bear all expenses
relating to this registration except for brokerage commissions and expenses, if
any, which will be paid by the Selling Stockholders.
AMEX Stock Exchange Symbol: "ALU"
On January 12, 1999, the closing sale price of one share of our Class A
Common Stock on the AMEX Stock Exchange was $ 11 7/16.
Our executive offices are located at 50 Emjay Boulevard, Brentwood, New
York 11717 and our telephone number is (516) 273-4000.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED
UNDER THE CAPTION "INVESTMENT CONSIDERATIONS" ON PAGE 5
OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR
ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THESE SECURITIES, OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The Date of this Prospectus is January 26, 1999
<PAGE>
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WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's Website at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 to
register shares of our Class A Common Stock. This Prospectus is part of that
registration statement and, as permitted by the SEC's rules, does not contain
all the information included in the registration statement. For further
information with respect to us and our Class A Common Stock, you may refer to
the registration statement and to the exhibits and schedules filed as part of
that registration statement. You can review and copy the registration statement
and its exhibits and schedules at the public reference facilities maintained by
the SEC as described above. The registration statement, including its exhibits
and schedules, is also available on the SEC's web site.
This Prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the SEC will automatically update or supersede this information. We
incorporate by reference the documents listed below and any future filing we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
1. Annual Report on Form 10-K for the fiscal year ended March 31, 1998;
and
2. Quarterly Reports on Form 10-Q for the period ended June 30,
1998 and September 30, 1998.
You may request a copy of these filings, at no cost, by writing to us
at 50 Emjay Boulevard, Brentwood, New York 11717, Attention: David Shamilzadeh.
-----------------------
This Prospectus contains certain forward-looking statements which
involve substantial risks and uncertainties. These forward-looking statements
can generally be identified because the context of the statement includes words
such as "may," "will," "except," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. Similarly, statements that describe our
future plans, objectives and goals are also forward-looking statements. Our
factual results, performance or achievements could differ materially from those
expressed or implied in these forward-looking statements as a result of certain
factors, including those listed in "Risk Factors" and elsewhere in this
Prospectus.
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<PAGE>
We have not authorized any dealer, salesperson or any other person to
give any information or to represent anything not contained in this Prospectus.
You must not rely on any unauthorized information. This Prospectus does not
offer to sell or buy any shares in any jurisdiction where it is unlawful. The
information in this Prospectus is current as of January 26, 1999.
-------------------------
TABLE OF CONTENTS
Where You Can Find More Information About Us...............................2
Investment Considerations..................................................4
Use of Proceeds............................................................6
Dividend Policy............................................................6
Selling Stockholders ......................................................7
Description of Securities..................................................8
Plan of Distribution .....................................................10
Indemnification for Securities Act Liabilities............................11
Legal Matters.............................................................11
Experts ..................................................................11
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<PAGE>
INVESTMENT CONSIDERATIONS
Before you buy shares of our Class A Common Stock, you should be aware
that there are various risks associated with such purchase, including those
described below. You should consider carefully these risk factors, together with
all of the other information in this Prospectus before you decide to purchase
shares of our Class A Common Stock.
Some of the information in this Prospectus may contain forward-looking
statements. Such statements can be identified by the use of forward-looking
words such as "may," "will," "except," "anticipate," "intend," "estimate,"
"continue," "believe," or other similar words. These statements discuss future
expectations, contain projections of our future results of operations or
financial condition or state other "forward-looking" information. When
considering such statements, you should keep in mind the risk factors and other
cautionary statements in this Prospectus. The risk factors noted in this section
and other factors noted in this Prospectus could cause our actual results to
differ materially from those contained in any forward-looking statements.
THE EXERCISE OF OUTSTANDING OPTIONS AND THE WARRANTS ISSUED IN THE DECEMBER 1998
PRIVATE PLACEMENT WILL DILUTE THE NET TANGIBLE VALUE OF YOUR SHARES
The net tangible value of your Shares will be diluted upon the exercise
of outstanding options and the issuance of Class A Common Stock upon exercise of
the Warrants we have issued in connection with the December 1998 Securities
Purchase Agreement. Specifically, the Warrants issued in connection with the
December 1998 Securities Purchase Agreement are exercisable into Class A Common
Stock at discounts from future market prices of the Class A Common Stock. Such
discounts could result in substantial dilution to existing holders of Class A
Common Stock. The sale of such Class A Common Stock acquired at a discount could
have a negative impact on the trading price of the Class A Common Stock and
could increase the volatility in the trading price of the Class A Common Stock.
At the date of this Prospectus, we have reserved an aggregate of
866,667 shares of Class A Common Stock for issuance upon exercise of the
Warrants which are exercisable at an exercise price of $.01 per share through
December 2002. The number of shares issuable upon exercise of the Warrants may
be adjusted depending upon the average of the twenty lowest closing bid prices
of the Class A Common Stock during the thirty trading days prior to the
applicable vesting date of the Warrant of the Class A Common Stock. The number
of shares offered hereby assumes that the average of the twenty lowest closing
bid prices in the thirty trading days prior to such vesting dates will equal
$4.50.
During the terms of the Warrants, we must give the holders the
opportunity to profit from a rise in the market price of the Class A Common
Stock. The existence of the Warrants may adversely affect the terms on which we
may obtain additional equity financing. Moreover, the holders are likely to
exercise their rights to acquire Class A Common Stock at a time when we would
otherwise be able to obtain capital with more favorable terms than we could
obtain through the exercise of such securities.
WE HAVE SIGNIFICANT DEBT
In order to finance our operations, we have incurred significant
indebtedness. Of the Company's total indebtedness of $165,663,223 outstanding at
September 30, 1998, $142,655,100 was outstanding under a working capital line of
credit with several banks. This line of credit is secured by substantially all
of the assets of the Company and its subsidiaries, which are co-borrowers under
the line of credit. The line of credit restricts our ability from incurring
additional indebtedness, pledging assets and declaring dividends or making
distributions to stockholders without the consent of the banks. In the event we
violate any loan covenants or we default on our obligations, the banks could
elect to declare our indebtedness immediately due and payable and foreclose on
our assets. As of the date of this Prospectus, we are in compliance with all of
the terms of our financing agreements.
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<PAGE>
OUR BUSINESS IS SEASONAL
Our fragrance business has historically been seasonal, reflecting
traditional retail seasonality patterns, with significantly higher sales
representing approximately 33% of annual sales revenue, occurring in the third
fiscal quarter of each year. Significantly higher sales result from increased
purchases of fragrances as gifts during the holiday season. Additionally,
Internet usage and Internet growth may be expected to decline during the summer,
when people spend fewer hours inside. As a result, sales from our fragrance
business may be lower during the summer months than during other seasons.
WE ARE DEPENDENT UPON KEY MEMBERS OF OUR MANAGEMENT
Our business is greatly dependent upon the efforts of Mr. Victor
Jacobs, our Chairman of the Board and Chief Executive Officer, Mr. Herman
Jacobs, our President and Chief Operating Officer, Mr. David Shamilzadeh, our
Senior Vice President and Chief Financial Officer, Mr. Jack Jacobs, our Vice
President of Purchasing and Secretary and Mr. Ramon Montes, our Executive Vice
President of Sales. The loss of services of any of such individuals or other key
personnel could adversely affect the conduct of our business. We have obtained
"key man" life insurance on the lives of such persons for its benefit in the
amount of $1,000,000. Our success will also be dependent upon our ability to
attract and retain experienced management, marketing and industry personnel,
particularly those with knowledge of the Internet and online commerce. We face
considerable competition from other companies in our industries, as well as
other companies that market products via the Internet or online commerce. We
cannot assure you that we can attract and retain such personnel and our
inability to do so could have a material adverse effect on our business.
OUR CLASS B COMMON STOCK REPRESENTS A MAJORITY OF OUR VOTING POWER AND KEY
MEMBERS OF MANAGEMENT OWN ALL OF THE CLASS B STOCK
Messrs. Victor Jacobs, Herman Jacobs and Jack Jacobs collectively own
1,200,000 shares of our Class B Common Stock, which has five votes per share
(compared to the Class A Common Stock, which has one vote per share) which, in
the aggregate represents 18.4% of our outstanding capital stock and
approximately 53% of the total voting power. Accordingly, such persons are able
to control us and generally direct our affairs, including electing a majority of
our directors and causing an increase in our authorized capital causing our
dissolution, merger or sale of substantially all of our assets. The
disproportionate vote afforded the Class B Common Stock could also serve to
impede or prevent a change of control of us. As a result, potential acquires
will be discouraged from seeking to acquire control of us through the purchase
of Common Stock, which could have a depressive effect on the price of our
securities. See "Principal Shareholders" and "Description of Securities."
OUR PREFERRED STOCK MAY HAVE THE EFFECT OF PREVENTING OR DELAYING A
CHANGE OF CONTROL
Our Certificate of Incorporation authorizes the issuance of 1,000,000
shares of "blank check" preferred stock 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 shareholder 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
our Class A 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 us. Although we have no present intention to
issue any shares of our preferred stock, we cannot assure you that we will not
do so in the future. In addition, certain provisions of the Delaware General
Corporation Law prevent certain stockholders from engaging in certain business
combinations with us, subject to certain exceptions. See "Description of
Securities."
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<PAGE>
YEAR 2000 ISSUES
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the our
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on a recent assessment, we determined that the costs to modify or
replace portions of our software so that our computer systems will properly
utilize dates beyond December 31, 1999 will not be material. We believe that we
can mitigate the Year 2000 Issue with modifications to existing software and
conversions to new software. However, if we fail to make such modifications and
conversions, or if we do not make them on a timely basis, the Year 2000 Issue
could have a material impact on our operations.
We have contacted all of our significant suppliers and large customers
to determine the possible effect on our operations of their inability or failure
to remediate their own Year 2000 Issue. Our estimate of the costs to remediate
our Year 2000 issue is based on presently available information. However, we
cannot guarantee that the systems of other companies on which our systems rely
will be timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with our systems, would not have material
adverse effect on our operations. We have no exposure to contingencies related
to the Year 2000 Issue for the products we have sold.
SHARES THAT ARE ELIGIBLE FOR SALE IN THE FUTURE
Sales of a substantial number of shares of our Class A Common Stock in
the public market following this offering could adversely affect the market
price of the Class A Common Stock. Of the 6,179,714 shares of Class A Common
Stock that will be outstanding or registered for resale upon the completion of
this offering, all will be freely tradeable without restriction or further
registration under the Securities Act.
OUR STOCK PRICE MAY BE VOLATILE
The trading price of our Class A Common Stock may be volatile. Such
trading price could be subject to wide fluctuations in response to our
announcements of business developments or those by our competitors, quarterly
variations in operating results, and other events or factors, including our
prospects and expectations by investors and securities analysts. In addition,
stock markets have experienced extreme price volatility in recent years. Such
broad market fluctuations may adversely affect the price of our Class A Common
Stock.
USE OF PROCEEDS
The Selling Stockholders are selling all of the Shares covered by this
Prospectus for their own account. Accordingly, we will not receive any proceeds
from the resale of the Shares. We will receive minimal proceeds from the
exercise of the Warrants. We will use such net proceeds for general corporate
purposes. We will bear all expenses relating to this registration except for
brokerage or underwriting commissions and expenses, if any, which will be paid
by the Selling Stockholders.
DIVIDEND POLICY
We have never declared or paid cash dividends on our Class A Common
Stock. We currently anticipate that we will retain all available funds for use
in the operation of our business. As such, we do not anticipate paying any cash
dividends on our Class A Common Stock in the foreseeable future.
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<PAGE>
SELLING STOCKHOLDERS
We issued the Shares of Class A Common Stock covered by this Prospectus
to the Selling Stockholders under the terms of a Securities Purchase Agreement
dated as of December 14, 1998 between the Selling Shareholders and us. Under the
terms of the December 1998 Securities Purchase Agreement, we issued 666,667
shares of our Class A Common Stock to the Selling Stockholders.
The following table lists certain information regarding the Selling
Stockholders' ownership of Shares of our Class A Common Stock as of January 11,
1999, and as adjusted to reflect the sale of the Shares. Information concerning
the Selling Stockholders may change from time to time.
<TABLE>
<CAPTION> Shares of Class A Common Stock
Owned
after Offering (1)
--------------------------------------
Shares of Class
A Common
Stock Owned Shares
Prior to Registered
Offering (2) Hereby (3) Number (4) Percent
----------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Strong River Investments, Inc. 166,667 383,334 -0- -0-
Sovereign Partners, L.P. 200,000 460,000 -0- -0-
Dominion Capital Fund Ltd. 150,000 345,000 -0- -0-
Canadian Advantage Limited Partnership 38,889 89,445 -0- -0-
Westover Investments L.P. 33,333 76,666 -0- -0-
Montrose Investments, Ltd. 77,778 178,889 -0- -0-
Total 666,667 1,533,334 -0- -0-
======= ========= === ===
</TABLE>
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(1) Assumes that all of the shares of Class A Common Stock offerred hereby
are sold.
(2) Does not include Shares issuable upon exercise of the Warrant issued
to each Selling Stockholder. Because the Warrants are not currently
exercisable and the number of shares of Class A Common Stock issuable
upon exercise of the Warrants is dependent in part upon the market
price of the Common Stock prior to each vesting date under the
Warrants, the actual number of shares of Class A Common Stock that will
be issued in respect of such exercise cannot be determined at this
time.
(3) Includes Shares issuable upon exercise of the Warrant issued to each
Selling Stockholder. Because the number of shares of Class A Common
Stock issuable upon exercise of the Warrants is dependent in part upon
the market price (i.e., the average of the twenty lowest closing bid
prices of the Class A Common Stock during the thirty trading days prior
to each vesting date under the Warrants) (the "Market Price"), the
actual number of shares of Class A Common Stock that will be issued in
respect of such exercise and, consequently, offered for sale under this
Registration Statement, cannot be determined at this time. In order to
provide a cushion for any fluctuations in the market price of the Class
A Common Stock, the Company has contractually agreed to include herein
the number of Shares owned by such Selling Stockholder plus such number
of shares of Class A Common Stock as would be issuable upon exercise in
full of the Warrants assuming the Market Price at each vesting date
were $4.50.
(4) Pursuant to the December 1998 Securities Purchase Agreement, during the
period commencing on the closing of the sale of the Class A Common
Stock to the Selling Stockholders and ending on the day immediately
prior to the first vesting date of the Warrants, each Selling
Stockholder has agreed to sell Shares only to the extent the proceeds
of such sales do not exceed 33 1/3% of the aggregate purchase price
paid by such Selling Stockholder on the closing date of the December
1998 private placement. During the period commencing on the first
vesting date of the Warrants and ending on the day immediately prior to
the second vesting date of the Warrants, each Selling Stockholder has
agreed to sell Shares only to the extent the proceeds of such sales do
not exceed 66 2/3% of the purchase price paid by such Selling
Stockholder on the December 1998 private placement closing date (minus
any proceeds received by such Selling Stockholder from sales of Shares
during the first period described in the previous sentence). Such
limitations do not apply to any sales of Shares made on or after the
second vesting date or for Shares sold at a price per share equal to or
exceeding $11.25.
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<PAGE>
DESCRIPTION OF SECURITIES
General
The Company is authorized to issue 15,000,000 shares of Class A Common
Stock, of which 5,313,047 were issued and outstanding on January 8, 1999 and
2,200,000 shares of Class B Common Stock, of which 1,200,000 are issued and
outstanding. The Company is also authorized to issue 1,000,000 shares of
Preferred Stock, $.001 par value ("Preferred Stock"). No shares of Preferred
Stock are currently outstanding.
Common Stock
The Holders of shares of Class A Common Stock and Class B Common Stock
have no preemptive rights and the shares are not subject to redemption. The
outstanding shares of Class B Common Stock and Class A Common Stock are duly and
validly issued and fully paid and non-assessable.
Holders of Class A Common Stock and Class B Common Stock are not
entitled to cumulative voting. Holders of Class B Common Stock are entitled to
five votes per share on every matter on which common stockholders of the Company
are entitled to vote. Holders of Class A Common Stock are entitled to one vote
per share on every matter on which common stockholders of the Company are
entitled to vote. Therefore, the holders of the Class B Common Stock
representing a majority of voting rights may elect all of the directors of the
Company and authorize certain corporate transactions without the concurrence of
the public stockholders.
Holders of Class B Common Stock may, at any time, convert their shares
into Class A Common Stock on a share for share basis. Each share of Class B
Common Stock shall automatically be converted into one share of Class A Common
Stock upon its sale or transfer (including its transfer upon the death of the
holder hereof) unless such sale or transfer is to one or more other holders of
Class B Common Stock, certain family members of the holders of Class B Common
Stock or certain trusts for their benefit.
Except for the aforementioned voting and conversion rights, the Class A
Common Stock and Class B Common Stock are identical in all respects.
The Company has reserved for issuance such number of shares of Class A
Common Stock as may be issuable upon exercise of the Warrants. Such shares, when
issued, will be duly and validly issued and fully paid and non-assessable.
Preferred Stock
The Company is authorized to issue 1,000,000 million shares of
Preferred Stock, in one or more classes or series as determined from time to
time by the Board of Directors.
In authorizing any class or series of Preferred Stock within the
limitations and restrictions contained in the Company's Certificate of
Incorporation, as amended, and without further action by the Company's
stockholders, the Board of Directors has the authority to issue shares of
Preferred Stock and to fix the number of shares and the relative rights,
conversion rights, voting rights and the terms of redemption, liquidation
preferences and any other preferences, special rights and qualifications of any
such series. Accordingly, the Board of Directors will be empowered, without
stockholder approval, to issue Preferred Stock with rights which could adversely
affect the voting power or other rights of the holders of the 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.
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<PAGE>
Warrants
Each Warrant issued pursuant to the December 1998 Securities Purchase
Agreement entitles the holder to purchase a certain number of shares of Class A
Common Stock depending upon the average of the lowest twenty closing bid prices
of the Class A Common Stock during the thirty trading days prior to the
applicable vesting date of the Warrant. The Warrants are exercisable for $.01
per share and are exercisable until December 15, 2002. The Warrants are not
redeemable by the Company at any time. Each holder of a Warrant has agreed to
restrict its ability to exercise such Warrant to the extent that such exercise
would result in such holder owning in excess of 4.999% of the then issued and
outstanding shares of Class A Common Stock (including Shares issuable upon
exercise of the Warrants), provided, however,that the holders have the right to
waive such restriction upon not less than 75 days notice to the Company.
The exercise price and number of shares of Class A Common Stock or
other securities issuable on exercise of the Warrants are subject to adjustment
in certain circumstances, including in the event of a stock dividend,
recapitalization, reorganization, merger or consolidation of the Company.
Reference is made to the Warrant (which has been filed as an exhibit to this
Registration Statement) for a complete description of the terms and conditions
therein (the description herein contained being qualified in its entirety by
reference thereto).
Delaware Law Antitakeover Provision
The Company is subject to the provisions of Section 203 of the DGCL. In
general, this statute 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
becomes an interested stockholder, unless the business combination is approved
in a prescribed manner. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or within the prior three years did own)
15% or more of the corporation's voting stock. Such provisions could render the
Company more difficult for such person to obtain control of the Company without
the approval of the Board of Directors.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Class A Common Stock is
Continental Stock Transfer and Trust Company.
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<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Class A Common Stock on any stock exchange, market or trading facility on
which the Shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of
the following methods when selling Shares:
o ordinary brokerage transactions and transactions in which the broker-
dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-
dealer for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell Shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver Shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged Shares.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the Shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents 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.
The Company is required to pay all fees and expenses incident to the
registration of the Shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under Securities Act.
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<PAGE>
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the DGCL provides, in general, that a corporation
incorporated under the laws of the State of Delaware, such as our company, may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than a
derivative action by or in the right of the corporation) by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. In the case of a
derivative action, a Delaware corporation may indemnify any such person against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or any other court in which such action was brought determines such
person is fairly and reasonably entitled to indemnity for such expenses.
Our Certificate of Incorporation provides that directors shall not be
personally liable for monetary damages to us or our stockholders for breach of
fiduciary duty as a director, except for liability resulting from a breach of
the director's duty of loyalty to our stockholders, intentional misconduct or
wilful violation of law, actions or inactions not in good faith, an unlawful
stock purchase or payment of a dividend under Delaware law, or transactions from
which the director derives improper personal benefit. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission. Our Certificate of Incorporation also
authorizes us to indemnify our officers, directors and other agents, by bylaws,
agreements or otherwise, to the fullest extent permitted under Delaware law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
LEGAL MATTERS
Parker Chapin Flattau & Klimpl, LLP, New York, New York will pass upon
the validity of the securities offered hereby.
EXPERTS
The consolidated financial statements as of March 31, 1998 and 1997 and
for each of the two years in the period ended March 31, 1998 incorporated by
reference in this Prospectus have been so incorporated in reliance on the report
of Mayer Rispler & Company, P.C., independent certified public accountants,
given on the authority of said firm as experts in auditing and accounting.
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We have not authorized any dealer,
salesperson or any other person to give
any information or to represent anything
not contained in this Prospectus. You
must not rely on any unauthorized
information. This Prospectus does not
offer to sell or buy any shares in any
jurisdiction where it is unlawful. The
information in this Prospectus is 1,533,334 SHARES OF
current as of January 26, 1999. CLASS A COMMON STOCK
TABLE OF CONTENTS
Page PROSPECTUS
Where You Can Find More
Information About Us.........2
Investment Consideration .............4
Use of Proceeds.......................6
Dividend Policy.......................6
Selling Stockholders .................7 January 26, 1999
Description of Securities.............8
Plan of Distribution ................10
Indemnification for Securities
Act Liabilities.............11
Legal Matters........................11
Experts .............................11
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