<PAGE>
As filed with the Securities and Exchange Commission on May 9, 1997.
REGISTRATION NO.
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
EASTBROKERS INTERNATIONAL INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 52-1807562
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
15245 SHADY GROVE ROAD, SUITE 340, ROCKVILLE, MD 20850
(301) 527-1110
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARTIN A. SUMICHRAST
VICE CHAIRMAN OF THE BOARD AND SECRETARY
15245 SHADY GROVE ROAD, SUITE 340, ROCKVILLE, MD 20850
(301) 527-1110
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
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, other than securities offered only in connection with dividend or
interest reinvestment plans, 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
Title of each class of
securities to be Amount to be Proposed maximum Proposed maximum Amount of
registered registered offering price per unit aggregate offering price registration fee(1)
---------- ---------- ----------------------- ------------------------ -------------------
<S> <C> <C> <C> <C>
Common Stock, $.05 par 285,002 $6.625 $1,888,138.25 $572.16
value
================================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculation of the registration fee.
Pursuant to Rule 457(c), estimated on the basis of the average of the closing
bid and asked prices of the Common Stock on May 7, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION
MAY 9, 1997
EASTBROKERS INTERNATIONAL INCORPORATED
285,002 SHARES OF COMMON STOCK
($.05 PAR VALUE)
This Prospectus relates to the possible resale on a continuous basis
of up to 135,002 shares of Common Stock, $.05 par value, of Eastbrokers
International Incorporated, a Delaware corporation formerly known as Czech
Industries, Inc. ("Eastbrokers" or the "Company"), and to 150,000 shares
issuable upon exercise of warrants (the "Warrants") held by J.B. Sutton Group,
LLC. Of the 135,002 shares, 125,002 were previously issued in an April 1997
private placement and 10,000 shares were issued in August 1996 in payment of a
consulting fee to a director of the Company. The shares included in the
Registration Statement of which this Prospectus is a part are sometimes
referred to as the "Securities". The Securities may be offered from time to
time by the selling securityholders (the "Selling Securityholders"). See
"SELLING SECURITYHOLDERS." THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS
FROM THE SALE OF THE SECURITIES BY THE SELLING SECURITYHOLDERS. THE COMPANY
MAY RECEIVE PROCEEDS IN THE EVENT THE WARRANTS ARE EXERCISED AND SUCH FUNDS,
IF RECEIVED, WILL BE USED FOR GENERAL WORKING CAPITAL PURPOSES OF THE COMPANY.
SEE "USE OF PROCEEDS."
The Securities may be offered for sale from time to time on terms to
be determined at the time of sale by the Selling Securityholders. The Common
Stock of the Company is listed on the NASDAQ SmallCap Market under the symbol
"EAST". On May 7, 1997 the closing bid price for the Common Stock was $6.50.
The Company will pay certain expenses of this offering. See "USE OF PROCEEDS"
and "PLAN OF DISTRIBUTION."
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. AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN
AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" (PP.
7-11) FOR IMPORTANT INFORMATION WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
Underwriting
Price to Discounts Proceeds to
Public(1) and Commissions Selling Securityholders
--------- --------------- -----------------------
Per Share $ 6.625 (2) $ 6.625
Total $894,388.25 (2) $894,388.25
- ----------
(1) Based upon the average of the closing bid and asked prices on May 7, 1997.
Does not include the 150,000 shares issuable upon exercise of the Warrants.
(2) Not known at this time.
(cover page continues)
<PAGE>
The Selling Securityholders, directly or through agents designated
from time to time, or through dealers or underwriters also to be designated,
may sell the Securities from time to time on terms to be determined at the
time of sale. To the extent required, the specific Securities to be sold, the
purchase price, the public offering price, the name of any such agent, dealer
or underwriter, and any applicable commission or discount with respect to a
particular offer will be set forth in a Prospectus Supplement. The aggregate
proceeds to the Selling Securityholders from the Securities will be the
purchase price of such Securities sold less the aggregate agents' commissions
and underwriters' discounts, if any, and other expenses of issuance and
distribution not borne by the Company. Any such Prospectus Supplement will
also set forth any additional information regarding indemnification by the
Company of the Selling Securityholders or any underwriter, dealer or agent
against certain liabilities,including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). The Selling Securityholders and any
broker-dealers, agents or underwriters that participate with the Selling
Securityholders in the distribution of any of the Securities may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commission
received by them and any profit on the resale of the Securities purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act. The Selling Securityholders may also from time to time dispose
of Securities pursuant to available exemptions under the Securities Act,
including sales under Rule 144 to the extent permitted under such rule. See
"PLAN OF DISTRIBUTION".
The date of this Prospectus is May , 1997.
<PAGE>
NOTE ON FORWARD LOOKING STATEMENTS
Certain information set forth or incorporated by reference herein
includes "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and is subject to certain risks and
uncertainties including those identified under the caption "Risk Factors."
Readers are cautioned not to place undue reliance on these statements, which
are made as of the date hereof. The Company undertakes no obligation to
release any revisions to these forward looking statements to reflect events or
circumstances after the date hereof or to reflect unanticipated events or
developments.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
This Prospectus, which constitutes part of the Registration Statement, does
not contain all the information set forth in the Registration Statement and
the exhibits and schedule thereto, to which reference is hereby made, as
permitted by the rules and regulations of the Commission. Statements made in
this Prospectus or in any document incorporated or deemed to be incorporated
by reference herein as to the contents of any contract, agreement or other
document referred to are not necessarily complete and with respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Any interested parties may
inspect the Registration Statement, the exhibits and schedules forming a part
thereof and the reports, proxy statements and other information referred to
above, without charge, at the public reference facilities of the Securities
and Exchange Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and may obtain copies of all or any part of such documents from the
Commission upon payment of the fees prescribed by the Commission. Such
documents also are available for inspection and copying at prescribed rates at
the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048; and the Northwestern Atrium Center, 500
W. Madison, Suite 1400, Chicago, Illinois 60661-2511. Registration statements
and other documents and reports that are filed electronically through the
Electronic Data Gathering, Analysis and Retrieval System (including the
Registration Statement) are publicly available through the Commission's web
site on the Internet (http://www.sec.gov.)
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<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934 ("Exchange Act") (File No. 0-26202) are incorporated by reference into
the Registration Statement.
(a) the Annual Report on Form 10-KSB dated March 15, 1996
for the fiscal year ended December 31, 1995 (the "1995 10-KSB").
(b) the Annual Report on Form 10-KSB dated June 28, 1996, as
amended by Form 10-KSB/A No. 1 dated August 27, 1996 (the Annual
Report on Form 10-KSB as amended is hereinafter referred to as the
"1996 10-KSB"). The 1996 10-KSB includes audited financial statements
for the three month transition period ended March 31, 1996 and the
related management's discussion and analysis of financial condition
and results of operations.
(c) Quarterly Reports on Form 10-QSB dated August 14, 1996,
November 14, 1996 and February 13, 1997 which include unaudited
financial statements for the three month period ended June 30, 1996,
the six month period ended September 30, 1996, and the nine month
period ended December 31, 1996, respectively.
(d) Current Reports on Form 8-K dated (i) April 22, 1996, as
amended by Form 8-K/A No. 1 filed on May 16, 1996, (ii) May 13, 1996
and (iii) August 1, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
shall be deemed to be incorporated by reference and a part of this
Registration Statement from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. The Company hereby
undertakes to provide without charge to each person to whom a copy of this
Prospectus has been delivered, upon the request of such person, a copy of any
or all documents referred to above which have been incorporated in this
Prospectus by reference, other than exhibits to such documents. Requests for
such copies should be directed to Office of the Secretary, Eastbrokers
International Incorporated, 15245 Shady Grove Road, Suite 340, Rockville,
Maryland 20850.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including information contained under the caption "Risk Factors,"
appearing elsewhere in this Prospectus or incorporated herein by reference.
THE COMPANY
BACKGROUND
Eastbrokers International Incorporated (the "Company") was
incorporated in the State of Delaware on January 20, 1993, as the Czech Fund
in order to take advantage of the rapid growth in business opportunities
arising from the privatization of the newly-democratized Czech Republic by
merging with or acquiring Czech businesses.
In July 1993, the Company had a small initial public offering,
following which it purchased a controlling interest in Fortuna Hotel, a.s., a
Czech corporation owning a hotel located in Prague, and was renamed Czech
Industries, Inc. The Company also entered into an agreement to acquire a
controlling interest in Moravacentrum, a collection of eight department stores
in Brno. This acquisition was consummated using a portion of the $15 million
gross proceeds from a secondary public offering in June 1995.
Later in 1995, however, the Company shifted its focus in response to
changes in the marketplace. As major institutional investors began to
appreciate the investment opportunities available in the Czech Republic, most
of such opportunities were seized by a limited number of major institutions
which now control much of the Czech economy. This development made it very
difficult for smaller players such as the Company to effectively take
advantage of available opportunities.
In 1996, the Company received what it considered an attractive offer
for its interest in Moravacentrum. The Company accepted this offer to sell
Moravacentrum, determining that the sale proceeds could be better applied
towards other acquisitions which would provide better prospects for return on
investment.
Having considered a variety of investments, the Company decided on
the acquisition of Eastbrokers Beteiligungs AG, an Austrian brokerage company
with offices throughout Central and Eastern Europe. This transaction enhanced
the Company's prospects by both providing the Company with a vehicle for its
existing acquisition strategy while extending its opportunities beyond the
Czech Republic to the entirety of Central and Eastern Europe. The acquisition
was
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<PAGE>
completed on August 1, 1996. Following the acquisition, the Company's name was
changed to Eastbrokers International Incorporated.
CURRENT OPERATIONS
The Company, through its Vienna-based subsidiary, Eastbrokers
Beteiligungs AG ("Eastbrokers Vienna"), provides financial services in Eastern
and Central Europe. The principal strategic objective of the Company has been
to establish controlling ownership of independent broker-dealers and to create
a network that provides access to emerging market investment opportunities in
Eastern and Central Europe. The Company intends to market these investment
opportunities to Western European institutional and commercial investors.
Eastbrokers Vienna's primary business is to provide its customers
with stock brokering and investment banking services. Eastbrokers Vienna
conducts business through its head office in Vienna, Austria and in regional
offices located in (a) Prague, Czech Republic (b) Budapest, Hungary, (c)
Bratislava, Slovakia, (d) Almaty, Kazakhstan, (e) Istanbul, Turkey, (f)
Moscow, Russia, (g) Bucharest, Romania, (h) Sofia, Bulgaria, (i) Ljubljana,
Slovenia, (j) Zagreb, Croatia, and (k) Warsaw, Poland. Eastbrokers Vienna is a
member of the Vienna Stock Exchange, the Budapest Stock Exchange, the
Bratislava Stock Exchange, the Zagreb Stock Exchange, the Ljubljana Stock
Exchange, the Bucharest Stock Exchange, the Central Asian Stock Exchange, the
Warsaw Stock Exchange and a shareholder and member of the Prague Stock
Exchange. Eastbrokers Vienna also owns 53 percent of WMP Borsenmakler AG
("WMP"), a publicly-held Austrian investment banking and brokerage firm.
Eastbrokers Vienna's brokerage, trading and market making business
accounts for approximately 20% of all revenues. Eastbrokers Vienna conducts
its sales activities as principal and agent on behalf of its clients.
Eastbrokers Vienna primarily distributes and trades Eastern and Central
European equity securities and to a lesser degree, debt securities.
Eastbrokers Vienna, through WMP, actively makes a market for the securities of
more than 400 companies on the Vienna Stock Exchange.
Eastbrokers Vienna is also a leading Eastern and Central European
investment banking firm which provides advice to, and raises capital for
Eastern and Central European companies. Eastbrokers Vienna provides advisory
services on key strategic matters such as mergers, acquisitions,
privatization, joint ventures as well as long range financial planning.
Eastbrokers Vienna seeks to raise much of its capital in Western Europe
through institutional and commercial investors.
Additionally, through its recently acquired subsidiary in the United
States, Eastbrokers North America ("Eastbrokers NA"), the Company intends to
provide added value, performance-driven research, trading, asset management
and corporate finance services in the emerging
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<PAGE>
markets of Central and Eastern Europe to North American institutional
investors (buyside and sellside) and high net worth individuals. The U.S.
based broker dealer is expected to complement the existing European based
units. Eastbrokers NA intends to focus on seeking out North American companies
whose primary focus is Central and Eastern Europe. Differentiation of the
services provided will be emphasized in an effort to enable Eastbrokers NA to
fulfill its objective of assisting existing foreign units by accessing and
transacting with North American capital markets, which represent a source of
emerging market capital, through quality research and by establishing
relationships that would evolve naturally into other financial related
products and services. The Company has not previously operated a broker dealer
in the United States and there can be no assurance that Eastbrokers NA can be
successfully established or operated.
The principal executive offices of the Company are located 15245 Shady Grove
Road, Suite 340, Rockville, Maryland 20850 and its telephone number is (301)
527-1110.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE
CONSIDERED IN EVALUATING THE COMPANY AND ITS BUSINESS.
THE OFFERING
Securities Offered............... 285,002 Shares. See "Selling
Securityholders"
Use of Net Proceeds.............. The Company will not receive any of the
proceeds from the sale of the Securities by
the Selling Securityholders. Any proceeds
received by the Company from the exercise
of the Warrants will be used for working
capital purposes. See "Use of Proceeds"
Nasdaq Symbol - Common Stock..... EAST
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<PAGE>
RISK FACTORS
Investment in the Securities involves a substantial degree of risk and should
be regarded as speculative. As a result, the purchase of the Securities should
be considered only by persons who can reasonably afford a loss of their entire
investment. Prospective investors should carefully consider, in addition to
matters set forth elsewhere in this Prospectus, the following factors relating
to the business of the Company and this Offering. Prospective investors should
carefully review all risk factors. Such information is presented as of the
date hereof and is subject to change, completion or amendment without notice.
FORWARD-LOOKING STATEMENTS
Certain information set forth in this Prospectus includes
"Forward-Looking Statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and is subject to certain risks and
uncertainties, including other risk factors set forth under this caption.
Readers are cautioned not to place undue reliance on these statements, which
speak only as of the date hereof. The Company undertakes no obligation to
release publicly any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect unanticipated
events or developments.
OPERATING LOSSES AND FINANCIAL CONDITION
Since its formation, the Company has suffered substantial cash flow
deficits and operating losses. Net loss for the nine months ended December 31,
1996 was $1,750,956. As of such date, the Company had cash and cash
equivalents of $5,011,917 and net working capital of $10,157,699. There can be
no assurance that the Company's future operations will be profitable or that
it will have available funds adequate to fund its operations. Should the
operations of the Company be profitable, it is likely that the Company would
retain much or all of its earnings to finance future growth and expansion.
REQUIREMENTS FOR ADDITIONAL CAPITAL
The Company may need to raise additional funds to provide working
capital or in order for the Company to respond to unforeseen needs or to take
advantage of unanticipated opportunities. Over the longer term, it is likely
that the Company will require substantial additional monies to continue to
fund the Company's working capital needs. There can be no assurance that any
such funds will be available at the time or times needed, or available on
terms acceptable to the Company. If adequate funds are not available, or are
not available on acceptable terms, the Company may not be able to take
advantage of market opportunities, to develop new services or products or
otherwise respond to competitive pressures. Such inability could have a
material adverse effect on the Company's business, financial condition and
results of operations.
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<PAGE>
NEW SUBSIDIARY WITH LIMITED OPERATING HISTORY AND NO ASSURANCE OF FUTURE
PROFITABILITY
The Company has invested approximately $1 million of its available
cash in connection with the acquisition and development of Eastbrokers NA, the
Company's newly acquired broker dealer subsidiary. This broker dealer has had
a limited operating history and has not conducted significant operations since
its acquisition by the Company. There can be no assurance that the Company
will be able to successfully operate this subsidiary.
ABSENCE OF DIVIDENDS
The Company has not paid any cash dividends on the Common Stock and
does not expect to do so in the foreseeable future.
SOCIAL, POLITICAL AND ECONOMIC RISKS AFFECTING FOREIGN OPERATIONS AND EFFECTS
OF FOREIGN CURRENCY FLUCTUATIONS
The Company has operations based in 12 foreign countries. The Company
is exposed to the risk of changes in social, political and economic conditions
inherent in foreign operations, including changes in the laws and policies
that govern foreign investment in countries where it has operations as well
as, to a lesser extent, changes in United States laws and regulations relating
to foreign trade and investment. In addition, the Company's results of
operations and the value of its foreign assets are affected by fluctuations in
foreign currency exchange rates, which may favorably or adversely affect
reported earnings and, accordingly, the comparability of period-to-period
results of operations. For 1996 and 1995, all of the Company's net revenues
were outside the United States. In many cases, the Company is not able to
enter into forward foreign exchange contracts to hedge certain cash flows
denominated in foreign currency and generally does not use derivative
instruments to manage currency fluctuations. There can be no assurance as to
the future effect of changes in social, political and economic conditions on
the Company's business or financial condition.
ENFORCEABILITY OF CIVIL LIABILITIES
A substantial portion of the Company's assets are located outside the
United States. It may be difficult for investors to enforce outside of the
United States judgments against the Company obtained in the United States in
any actions, including actions predicated upon the civil liability provisions
of the securities laws of the United States. In addition, certain of the
officers and directors of the Company are not citizens or residents of the
United States and all or a substantial portion of the assets of such persons
are or may be located outside the United States. As a result, it may be
difficult for investors to effect service of process within the United States
against such persons or to enforce judgments obtained in the United States,
including judgments predicated upon the civil liability provisions of the
securities laws of the United States.
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<PAGE>
DEPENDENCE ON MANAGEMENT AND LIMITATIONS ON CERTAIN EXPERIENCE
The Company's business is principally dependent on certain key
management personnel for the operation of its business. In particular, Peter
Schmid and Martin A. Sumichrast have played significant roles in the
promotion, development and management of the Company. If the employment by the
Company of either of these persons terminates, or they are unable to perform
their duties, the Company may be substantially affected. The Company maintains
key man life insurance relating to Mr. Sumichrast but not relating to Mr.
Schmid.
SUBSTANTIAL COMPETITION
The Company encounters substantial competition from both foreign and
domestic businesses in Central and Eastern Europe. A large number of
established and well-financed entities, including multinational businesses and
investment banking firms, have recently and substantially increased their
business activities in Central and Eastern Europe. Nearly all of such entities
have substantially greater financial resources, technical expertise and
managerial capabilities than the Company and, consequently, the Company may be
at a substantial competitive disadvantage in the conduct of its business in
Central and Eastern Europe.
MARKET MAKER'S INFLUENCE ON THE MARKET MAY HAVE ADVERSE CONSEQUENCES
A significant number of securities may be sold, in the ordinary
course of business, to customers of the J.B. Sutton Group, LLC ("Sutton")
which is acting as a market maker for the common stock. Such customers
subsequently may engage in transactions for the sale or purchase of such
securities through or with Sutton. Although it has no legal obligation to do
so, Sutton from time to time in the future, may make a market in and otherwise
effect transactions in the Company's securities. To the extent Sutton acts as
market maker in the securities, it may be a dominating influence in that
market. The price and liquidity of such securities may be affected by the
degree, if any, of Sutton's participation in the market, inasmuch as a
significant amount of such securities may be sold to customers of Sutton. Such
customers subsequently may engage in transactions for the sale or purchase of
such securities through or with Sutton. Such market making activities, if
commenced, may be discontinued at any time or from time to time by Sutton
without obligation or prior notice. If a dominating influence at such time,
Sutton's discontinuance may adversely affect the price and liquidity of the
securities.
"PENNY STOCK" REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON MARKETABILITY OF
SECURITIES
The Securities and Exchange Commission ("Commission") has adopted
regulations which generally define "penny stock" to be any equity security
that has a market price (as defined) less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exceptions. The
Company's Common Stock is currently listed on the Nasdaq SmallCap Market and,
as a result, such securities are currently exempt from the definition of
"penny stock." If the Common Stock is removed from listing on Nasdaq at any
time, the Company's securities may
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<PAGE>
become subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally, those persons with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction involving
a penny stock, unless exempt, the rules require the delivery, prior to the
transaction, of a risk disclosure document mandated by the Commission relating
to the penny stock market. The broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Finally,
monthly statements must be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in penny
stocks. Consequently, the "penny stock" rules may restrict the ability of
broker-dealers to sell the Company's securities and may affect the ability of
purchasers to sell the Company's securities in the secondary market.
PROPOSED CHANGES TO NASDAQ LISTING REQUIREMENTS
On November 6, 1996, the Board of Directors of Nasdaq approved
proposed changes to the entry standards and maintenance standards necessary to
qualify for listing on both the Nasdaq National Market (the "National Market")
and the Nasdaq SmallCap Market. Following a 30-day comment period, the Nasdaq
Board of Directors has considered comments, made modifications of the proposed
changes and filed the rule changes with the Securities and Exchange Commission
for final approval. Among the proposed changes to the Nasdaq SmallCap Market
listing and maintenance criteria are the following: eliminating the
alternative test to the $1 minimum bid price; extending the corporate
governance standards currently required by the National Market to the SmallCap
issuers; increasing the quantitative standards; and implementing a requirement
that auditors of Nasdaq-listed companies be subject to peer review. If the
proposed or other changes to the listing and maintenance criteria are approved
by the Securities and Exchange Commission, there can be no assurance that the
Company will be able to fulfill such criteria.
DELISTING OF SECURITIES TO ADVERSELY AFFECT MARKET
In the event that the Common Stock were to no longer meet applicable
Nasdaq requirements and were delisted from Nasdaq, the Company would attempt
to have its securities traded in the over-the-counter market via the
Electronic Bulletin Board or the "pink sheets." In such event, holders of the
Company's securities would likely encounter greater difficulty in disposing of
these securities and/or in obtaining accurate quotations as to the prices of
the Company's securities.
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<PAGE>
CONCENTRATION OF STOCK OWNERSHIP
The present directors, executive officers, principal stockholders and
their respective affiliates beneficially own approximately 54.46% of the
outstanding capital stock. As a result, these shareholders will be able to
exercise significant influence over all matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions. Such concentration of ownership may also have the
effect of delaying or preventing a change in control of the Company.
SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET
Approximately 1,560,000 of the Company's currently outstanding shares
of Common Stock are "restricted securities" and may be sold upon compliance
with Rule 144, adopted under the Securities Act of 1933, as amended. Rule 144,
as amended, 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 shares, 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. Assuming that there is no exercise of any issued and outstanding
warrants or options, the Company had, as of March 31, 1997, 2,878,000 shares
of its Common Stock issued and outstanding, of which 1,560,000 are "restricted
securities" and 1,318,000 are publicly traded shares. Therefore, during each
three month period, a holder of restricted securities who has held them for at
least the one year period may sell under Rule 144 the greater of up to 28,780
shares or the average weekly volume of sales during the four calendar weeks
preceding the sale. Nonaffiliated persons who hold for the two year period
described above may sell unlimited shares once their holding period is met.
Prospective investors should be aware that the possibility of sales
may, in the future, have a depressive effect on the price of the Company's
Common Stock in any market which may develop and, therefore, the ability of
any investor to market his 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 Company's Common
Stock which may have a depressive effect on its price per share.
BUSINESS
BACKGROUND
Eastbrokers International Incorporated (the "Company") was
incorporated in the State of Delaware on January 20, 1993, as the Czech Fund
in order to take advantage of the rapid growth in business opportunities
arising from the privatization of the newly-democratized Czech Republic by
merging with or acquiring Czech businesses.
- 11 -
<PAGE>
In July 1993, the Company had a small initial public offering,
following which it purchased a controlling interest in Fortuna Hotel, a.s., a
Czech corporation owning a hotel located in Prague, and was renamed Czech
Industries, Inc. The Company also entered into an agreement to acquire a
controlling interest in Moravacentrum, a collection of eight department stores
in Brno. This acquisition was consummated using a portion of the $15 million
gross proceeds from a secondary public offering in June 1995.
Later in 1995, however, the Company shifted its focus in response to
changes in the marketplace. As major institutional investors began to
appreciate the investment opportunities available in the Czech Republic, most
of such opportunities were seized by a limited number of major institutions
which now control much of the Czech economy. This development made it very
difficult for smaller players such as the Company to effectively take
advantage of available opportunities.
In 1996, the Company received what it considered an attractive offer
for its interest in Moravacentrum. The Company accepted this offer to sell
Moravacentrum, determining that the sale proceeds could be better applied
towards other acquisitions which would provide better prospects for return on
investment.
Having considered a variety of investments, the Company decided on
the acquisition of Eastbrokers Beteiligungs AG, an Austrian brokerage company
with offices throughout Central and Eastern Europe. This transaction enhanced
the Company's prospects by both providing the Company with a vehicle for its
existing acquisition strategy while extending its opportunities beyond the
Czech Republic to the entirety of Central and Eastern Europe. The acquisition
was completed on August 1, 1996. Following the acquisition, the Company's name
was changed to Eastbrokers International Incorporated.
CURRENT OPERATIONS
The Company, through its Vienna-based subsidiary, Eastbrokers
Beteiligungs AG ("Eastbrokers Vienna"), provides financial services in Eastern
and Central Europe. The principal strategic objective of the Company has been
to establish controlling ownership of independent broker-dealers and to create
a network that provides access to emerging market investment opportunities in
Eastern and Central Europe. The Company intends to market these investment
opportunities to Western European institutional and commercial investors.
Eastbrokers Vienna's primary business is to provide its customers
with stock brokering and investment banking services. Eastbrokers Vienna
conducts business through its head office in Vienna, Austria and in regional
offices located in (a) Prague, Czech Republic (b) Budapest, Hungary, (c)
Bratislava, Slovakia, (d) Almaty, Kazakhstan, (e) Istanbul, Turkey, (f)
Moscow, Russia, (g) Bucharest, Romania, (h) Sofia, Bulgaria, (i) Ljubljana,
Slovenia, (j) Zagreb, Croatia, and (k) Warsaw, Poland. Eastbrokers Vienna is a
member of the Vienna Stock Exchange, the Budapest Stock Exchange, the
Bratislava Stock Exchange, the Zagreb Stock Exchange, the
- 12 -
<PAGE>
Ljubljana Stock Exchange, the Bucharest Stock Exchange, the Central Asian
Stock Exchange, the Warsaw Stock Exchange and a shareholder and member of the
Prague Stock Exchange. Eastbrokers Vienna also owns 53 percent of WMP
Borsenmakler AG ("WMP"), a publicly-held Austrian investment banking and
brokerage firm.
Eastbrokers Vienna's brokerage, trading and market making business
accounts for approximately 20% of all revenues. Eastbrokers Vienna conducts
its sales activities as principal and agent on behalf of its clients.
Eastbrokers Vienna primarily distributes and trades Eastern and Central
European equity securities and to a lesser degree, debt securities.
Eastbrokers Vienna, through WMP, actively makes a market for the securities of
more than 400 companies on the Vienna Stock Exchange.
Eastbrokers Vienna is also a leading Eastern and Central European
investment banking firm which provides advice to, and raises capital for
Eastern and Central European companies. Eastbrokers Vienna provides advisory
services on key strategic matters such as mergers, acquisitions,
privatization, joint ventures as well as long range financial planning.
Eastbrokers Vienna seeks to raise much of its capital in Western Europe
through institutional and commercial investors.
Additionally, through its recently acquired subsidiary in the United
States, Eastbrokers North America ("Eastbrokers NA"), the Company intends to
provide added value, performance-driven research, trading, asset management
and corporate finance services in the emerging markets of Central and Eastern
Europe to North American institutional investors (buyside and sellside) and
high net worth individuals. The U.S. based broker dealer is expected to
complement the existing European based units. Eastbrokers NA intends to focus
on seeking out North American companies whose primary focus is Central and
Eastern Europe. Differentiation of the services provided will be emphasized in
an effort to enable Eastbrokers NA to fulfill its objective of assisting
existing foreign units by accessing and transacting with North American
capital markets, which represent a source of emerging market capital, through
quality research and by establishing relationships that would evolve naturally
into other financial related products and services. The Company has not
previously operated a broker dealer in the United States and there can be no
assurance that Eastbrokers NA can be successfully established or operated.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of any
Securities by the Selling Securityholders.
In the event that Sutton exercises all of the Warrants, the Company
will receive $600,000.00 in proceeds and such funds will be used for general
working capital purposes. There can be no assurance that any of the Warrants
will be exercised.
- 13 -
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth certain information with respect to
the Selling Securityholders as of May 1, 1997. The Securities to which this
Prospectus relates may be sold from time to time in whole or in part by the
Selling Securityholders as described in and subject to the restrictions set
forth in the "PLAN OF DISTRIBUTION".
<TABLE>
<CAPTION>
Shares of
Shares of Shares that Common
Common stock may be offered Stock % of Class
owned prior to pursuant to owned after owned after
Selling Securityholders this offering this Prospectus offering(1) offering(2)
----------------------- ------------- --------------- ----------- -----------
<S> <C> <C> <C>
Calvin S. Caldwell 33,334 33,334 -0- N/A
20 Rolling Hills Drive
Huntington, NY 11746
Frank Huang 8,334 8,334 -0- N/A
69 South Moger Avenue
Mt. Kisco, NY 10549
Jay Raubvogel 83,334 83,334 -0- N/A
5 Brook Lane
Brookville, NY 11545
Randall F. Greene(3) 10,000 10,000 -0- N/A
P.O. Box 18938
Tampa, FL 33679
</TABLE>
- ----------
(1) Assuming all shares being offered pursuant to this Prospectus are
sold.
(2) If 1% or more. Percentages are based upon there being 2,878,000
shares of Common Stock issued and outstanding as of March 31, 1997.
(3) Randall F. Greene has been a director of the Company since January
1994. The Company has entered into a consulting agreement with Mr.
Greene dated March 27, 1997 and a letter from Randall F. Greene dated
April 29, 1997, amending the agreement (collectively the "Consulting
Agreement"). The Consulting Agreement is for a term of six (6)
months, beginning on April 1, 1997 and terminating on September 30,
1997, and provides for compensation of $4,000 per month. In addition,
under the Agreement Mr. Greene has been granted under the Company's
1996 Stock Option Plan: (1) options to purchase 7,750 shares of the
Company's common stock at $6.50 per share, which options become
exercisable on October 1, 1997 and (2) 12,500 shares as a restricted
stock award. Mr. Greene has agreed to resign from the Board of
Directors upon the satisfaction of certain conditions set forth in
the Consulting Agreement.
- 14 -
<PAGE>
During the last three years, none of the Selling Securityholders has
held any position or office with the Company, nor have any of the Selling
Securityholders had any material relationship with the Company other than
their status as holders of the Company's stock, except as noted above.
This Prospectus also relates to 150,000 shares of Common Stock
issuable upon exercise of the Warrants held by J.B. Sutton Group, LLC
("Sutton"). Each Warrant entitles Sutton to purchase one share of Common Stock
at a price of $4.00 per share during the three year period beginning January
1, 1999 and ending December 31, 2001. The Warrants were issued to Sutton
pursuant to a Consulting Agreement under which Sutton agreed to provide the
Company with certain business and financial advisory and consulting services.
In addition, Sutton is acting as a market maker for the Common Stock
and from time to time in the future, may make a market in and otherwise effect
transactions in the Company's securities.
PLAN OF DISTRIBUTION
Any and all of the Securities listed under "Selling Securityholders"
may be sold from time to time to purchasers directly by the Selling
Securityholders. Alternatively, the Selling Securityholders may from time to
time sell the Securities through brokers, underwriters, dealers or agents, who
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Securityholders and/or the purchasers of
Securities for whom they may act as agent. The Selling Securityholders and any
such underwriters, dealers or agents that participate in the distribution of
the Securities may be deemed to be underwriters, and any profit on the sale of
Securities by them and any discounts, commissions or concessions received by
any such underwriters, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act of 1933, as amended (the
"Securities Act"). The Selling Securityholders may also from time to time
dispose of Securities pursuant to available exemptions under the Securities
Act, including sales under Rule 144 to the extent permitted under such rule.
The Securities may be sold at varying prices determined at the time of sale or
negotiated prices. Such prices will be determined by the Selling
Securityholders, or by agreement between the Selling Securityholders and
underwriters or dealers. The Securities issued in the April 1997 private
placement are being issued pursuant to registration rights granted in
connection with such placement. The 10,000 shares issued in August 1996 in
payment of a consulting fee are being registered at the request of the Selling
Securityholder. The remaining securities are being registered pursuant to
certain "piggy-back" registration rights of the holders of these shares.
- 15 -
<PAGE>
The Warrants are exercisable for the three year period beginning on
January 1, 1999 and ending on December 31, 2001. Each Warrant entitles the
holder to purchase one share of the Company's Common Stock at a price of $4.00
per share.
At the time a particular sale of Securities is made, to the extent
required, a Prospectus Supplement will be prepared and distributed by the
Company based on information provided by the Selling Securityholders of the
Securities, which will set forth the number of dealers or agents, any
discounts, commissions or concessions allowed or paid to dealers, including
the proposed selling price to the public.
In order to comply with certain states' securities laws, if
applicable, the Securities will be sold in certain jurisdictions only through
registered or licensed brokers or 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 such sale is made in compliance with the
exemption.
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock,
$0.05 par value per share, of which 2,878,000 shares were issued and
outstanding as of March 31, 1997. Upon the exercise of warrants contemplated
under this Prospectus, there will be 3,028,000 shares issued and outstanding.
Holders of Common Stock are entitled to receive, as, when and if
declared by the Board of Directors, from time to time, such dividends and
other distributions in cash, stock or property of the Company out of assets or
funds of the Company legally available therefor, subject to the rights of
holders of preferred stock having a dividend preference over the Common Stock.
The Company has not paid any dividends on its Common Stock to date. The
Company anticipates that for the foreseeable future it will follow a policy of
retaining earnings, if any, in order to finance the expansion and development
of its business. Payment of dividends will depend upon the earnings, capital
requirements and the operating and financial condition of the Company, among
other factors.
In the event of the liquidation, dissolution or winding up of the
Company, stockholders will be entitled to share ratably in the assets
remaining after creditors and holders of preferred stock having a liquidation
preference over the Common Stock have been paid in full.
Each share of Common Stock entitles the holder thereof to one (1)
vote on all matters submitted to stockholders. There are no preemptive,
conversion, redemption or cumulative voting rights applicable to the Common
Stock. The outstanding shares of the Common Stock are fully paid and
non-assessable.
- 16 -
<PAGE>
The transfer agent and registrar for the Company's Common Stock is
American Stock Transfer & Trust Company, 40 Wall Street, New York, New York,
10005, telephone number
(212) 936-5100.
LEGAL MATTERS
The legality of the Securities will be passed upon for the Company by
Gould & Wilkie, One Chase Manhattan Plaza, New York, New York 10005.
EXPERTS
The Company's Consolidated Financial Statements as of March 31, 1996
and for the three months then ended and the Company's Consolidated Financial
Statement as of and for the year ended December 31, 1995 incorporated by
reference in this Prospectus and the Registration Statement have been
incorporated herein in reliance on the report of Pannell Kerr Forster, P.C.,
independent certified public accountants, given on the authority of such firm
as experts in accounting and auditing.
- 17 -
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of the registration of the Common Stock
concerned herein which are payable by the Registrant are as follows:
SEC Registration Fee $ 600.00
Nasdaq Listing and Filing Fee
Legal Fees and Expenses
Accounting Fees and Expenses
Blue Sky Fees and Expenses
Miscellaneous -----------
Total
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and By-Laws contain
provisions which reduce the potential personal liability of directors for
certain monetary damages and provide for indemnity of directors and other
persons.
The provisions affecting personal liability do not abrogate a
director's fiduciary duty to the Company and its shareholders, but eliminate
personal liability for monetary damages for breach of that duty. The
provisions do not, however, eliminate or limit the liability of a director for
failing to act in good faith, for engaging in intentional misconduct or
knowingly violating a law, for authorizing the illegal payment of a dividend
or repurchase of stock, for obtaining an improper personal benefit, for
breaching a director's duty of loyalty (which is generally described as the
duty not to engage in any transaction which involves a conflict between the
interests of the Company and those of the director) or for violations of the
federal securities laws. The provisions also limit liability resulting from
grossly negligent decisions including grossly negligent business decisions
relating to attempts to change control of the Company.
The provisions regarding indemnification provide, in essence, that
the Company will indemnify its directors against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any action, suit or proceeding arising
out of the director's status as a director of the Company, including actions
brought by or on behalf of the Company (shareholder derivative actions). In
the opinion of the Securities and Exchange Commission, indemnification for
liabilities arising under the Securities Act of 1933 is contrary to public
policy and, therefore, is unenforceable.
The Company also maintains directors and officers liability insurance
for the benefit of its officers and directors.
-II-1-
<PAGE>
ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Certificate of Incorporation, as amended, incorporated by
reference to Registrant's Form 10-QSB for the nine month
period ended December 31, 1996.
3.2 By-Laws of the Registrant, incorporated by reference to
Registrant's Form 10-QSB for the three month period ended
March 31, 1995.
3.3 Amendment to the By-Laws of the Registrant, incorporated by
reference to Registrant's Form 10-QSB for the three month
period ended June 30, 1996.
4.1 Warrant Certificate between the Registrant and J.B. Sutton
Group, LLC, dated March 27, 1997.
5.0 Form of Opinion of Gould & Wilkie
23.1 Consent of Pannell Kerr Forster, P.C.
23.2 Consent of Gould & Wilkie (see Exhibit 5.0)
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement to include material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference into the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
-II-2-
<PAGE>
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 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.
-II-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Rockville, State of Maryland on May
8, 1997.
EASTBROKERS INTERNATIONAL
INCORPORATED
By: /s/ Peter Schmid
-----------------------------
Peter Schmid
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Peter Schmid Chairman, President, Chief May 8, 1997
- ------------------------------ Executive Officer and
Peter Schmid Director (Principal Executive
Officer)
/s/ Martin A. Sumichrast Vice-Chairman of the Board, May 8, 1997
- ------------------------------ Secretary and Director
Martin A. Sumichrast
/s/ Kevin D. McNeil Vice President, Treasurer May 8, 1997
- ------------------------------ and Chief Financial Officer
Kevin D. McNeil (Principal Financial and
Accounting Officer)
/s/ Michael Sumichrast Director May 8, 1997
- ------------------------------
Michael Sumichrast, Ph.D.
/s/ Petr Bednarik Director May 8, 1997
- ------------------------------
Petr Bednarik
<PAGE>
/s/ Randall F. Greene Director May 8, 1997
- ------------------------------
Randall F. Greene
/s/ Wolfgang Kossner Director May 8, 1997
- ------------------------------
Wolfgang Kossner
-II-5-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Certificate of Incorporation, as amended, incorporated by
reference to Registrant's Form 10-QSB for the nine month
period ended December 31, 1996.
3.2 By-Laws of the Registrant, incorporated by reference to
Registrant's Form 10-QSB for the three month period ended
March 31, 1995.
3.3 Amendment to the By-Laws of the Registrant, incorporated by
reference to Registrant's Form 10-QSB for the three month
period ended June 30, 1996.
4.1 Warrant Certificate between the Registrant and J.B. Sutton
Group, LLC, dated March 27, 1997.
5.0 Form of Opinion of Gould & Wilkie
23.1 Consent of Pannell Kerr Forster, P.C.
23.2 Consent of Gould & Wilkie (see Exhibit 5.0)
-II-6-
<PAGE>
EXHIBIT 4.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS
OR AN EXEMPTION FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS
WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH EXHIBIT I REFERRED TO
HEREIN.
EXERCISABLE ON AND AFTER 9:00 A.M., EASTERN STANDARD TIME,
JANUARY 1, 1999
UNTIL ON OR BEFORE 5:30 P.M., EASTERN STANDARD TIME,
DECEMBER 31, 2001
NO. W-1 WARRANT TO PURCHASE 150,000
SHARES OF COMMON STOCK
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE certifies that J.B. Sutton Group, LLC, a
limited liability company, is the registered holder (the "Holder") of 150,000
Warrants (the "Warrants") to purchase, at any time from 9:00 a.m., Eastern
Standard time, on January 1, 1999 until 5:30 p.m., Eastern Standard time, on
December 31, 2001 (the "Expiration Date"), in increments according to Exhibit
I hereto, up to 150,000 fully paid and nonassessable shares of common stock,
$.05 par value ("Common Stock"), of Eastbrokers International Incorporated, a
Delaware corporation (the "Company"), at the initial exercise price, subject
to adjustment in certain events (the "Exercise Price"), of $4.00 per share of
Common Stock upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office of the Company located at 15245 Shady Grove Road,
Suite 340, Rockville, Maryland 20850, or any successor office, but subject to
the conditions set forth herein and in Exhibit I hereto. Payment of the
Exercise Price shall be made in accordance with the provisions of Exhibit I.
No Warrant may be exercised after 5:30 p.m., Eastern Standard time,
on the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void. If the Expiration Date
shall in the State of Maryland or in such other jurisdiction in which the
principal executive offices of the Company are located at the time, be a
holiday or a day on which banks are authorized to close, the Expiration Date
shall mean 5:30 p.m., Eastern Standard Time, the next following day which, in
the State of Maryland or such other jurisdiction, is not a holiday or a day on
which banks are authorized to close.
The Warrants evidenced by this Warrant Certificate are subject to the
provisions of Exhibit I hereto, which Exhibit I is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for
a description of the rights, limitation of rights,
<PAGE>
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
Exhibit I hereto provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair the
rights of the holder as set forth in Exhibit I.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company located at 15245 Shady Grove Road,
Suite 340, Rockville, Maryland 20850, or any successor office, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in Exhibit I, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
All terms used in this Warrant Certificate which are defined in
Exhibit I hereto shall have the meanings assigned to them in such exhibit.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed under its corporate seal.
Dated: March 27, 1997 EASTBROKERS INTERNATIONAL
INCORPORATED
[Corporate Seal] By: /s/ Martin A. Sumichrast
--------------------------
-2-
<PAGE>
FORM OF ELECTION TO PURCHASE
THE UNDERSIGNED hereby irrevocably elects to exercise the right, represented
by this Warrant Certificate, to purchase ____________ shares of Common Stock
and herewith tenders payment for such securities all in accordance with the
terms of the Warrant Certificate and related Exhibit I. The undersigned
requests that a certificate for such securities be registered in the name of
____________________________ whose address is __________________ and that such
Certificate be delivered to ____________________________ whose address
is_________________________________.
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 Holder)
--------------------------------------------
Signature Guarantee
-3-
<PAGE>
EXHIBIT I
Section 1. Exercise of Warrant. The Warrants shall not be exercisable
prior to January 1, 1999 (the "First Exercise Date"). Notwithstanding the
foregoing, the Warrants shall become fully exercisable immediately:
(a) if there occurs any transaction (which shall included a
series of transactions occurring within 60 days or occurring pursuant
to a plan), that has the result that stockholders of Eastbrokers
International Incorporated, a Delaware corporation (the "Company"),
immediately before such transaction cease to own at least 51 percent
of the voting stock of the Company or of any entity that results from
the participation of the Company in a reorganization,
recapitalization, consolidation, merger, share exchange liquidation
or any other form of corporate transaction;
(b) if the stockholders of the Company shall approve a plan
of merger, consolidation, share exchange, reorganization,
recapitalization, liquidation or dissolution in which the Company
does not survive, unless (i) the approved merger, consolidation,
share exchange reorganization, recapitalization, liquidation or
dissolution is subsequently abandoned, or (ii) the entity surviving
or resulting from such transaction (x) is controlled by substantially
the same persons as was the Company, (y) assumes all obligations of
the Company under the Warrants, and (z) has a financial condition and
operations substantially equivalent or superior to those the Company
immediately prior to the transaction; or
(c) if the stockholders of the Company shall approve a plan
for the sale, lease, exchange or other disposition of all or
substantially all the property and assets of the Company (unless such
plan is subsequently abandoned).
The Warrants are exercisable at an Exercise Price (as defined in
Section 3.2 hereof) per share of common stock, $.05 par value per share (the
"Common Stock"), of the Company set forth in Section 3 hereof (subject to
adjustment as provided in Section 5 hereof) payable by certified or official
bank check. Payment of the Exercise Price may also be made by delivering a
properly executed Form of Election to the Company together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale proceeds to pay the Exercise Price. Upon surrender of a Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price for the shares of the Common Stock
purchased to the Company's principal offices in Maryland (presently located at
15245 Shady Grove Road, Suite 340, Rockville, Maryland 20850), the registered
Holder of a Warrant Certificate shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock underlying the Warrants). In the case of the purchase of less
than all the shares of Common Stock purchasable under any Warrant Certificate
(the "Warrant Shares") the Company shall cancel said Warrant Certificate upon
the surrender thereof and shall execute and deliver a new Warrant Certificate
of like tenor for the balance of the shares of Common Stock purchasable
thereunder.
Section 2. Issuance of Certificates. Upon the exercise of the
Warrants, the issuance of certificates for shares of Common Stock shall be
made forthwith (and in any event within ten (10) business days thereafter)
without charge to the Holder thereof including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable
<PAGE>
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 and the requirements of all applicable
securities laws have been met.
The certificates representing the Warrant Shares shall be executed on
behalf of the Company by the manual or facsimile signature of the then present
Chairman or Vice Chairman of the Board of Directors or the President and also
by the Secretary of the Company under its corporate seal reproduced thereon.
Section 3. Exercise Price.
3.1 Initial and Adjusted Exercise Price. Except as otherwise provided
in Section 5 hereof, the exercise price of each Warrant shall be $4.00 per
share of Common Stock. The adjusted exercise price shall be the price which
shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 5 hereof.
3.2 Exercise Price. The term "Exercise Price" as used herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
Section 4. Restrictions on Transfer: Registration Rights.
4.1 Representations. The Holder of the Warrants represents, warrants
and agrees to the following:
(a) The Holder understands that neither the Warrants nor the Warrant
Shares have been registered under applicable state and federal securities
laws, and that such Warrants or Warrant Shares cannot be resold or transferred
unless they are so registered, or unless such transfer qualifies for an
exemption from such registration;
(b) The Holder is acquiring the Warrants for investment purposes
only, and not with a view towards resale or distribution;
(c) The Holder understands that all certificates which represent the
Warrants issued to it will bear a legend which incorporates these
restrictions;
(d) The Holder is familiar with the business and financial condition
of the Company, has been provided access and an opportunity to review all
filings with the Securities and Exchange Commission ("Commission"), material
agreements, books and records of the Company and has been afforded an
opportunity to question the executive officers of the Company with respect to
the foregoing; and
(e) The Holder is an "accredited investor" within the meaning of the
Securities Act.
4.2 Transferability of Warrants. The Warrants are not transferrable
and may be exercised only by the Holder.
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<PAGE>
4.3 Securities Act of 1933 Legend. The Warrant and the
Warrant Shares have not been registered under the Securities Act. Upon
exercise of the Warrants, in part or in whole, the certificates representing
the Warrant Shares shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS
WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
4.4 Required Registration.
(a) Piggyback Registration. If the Company shall, prior to
the Expiration Date, determine to register any of its securities for its own
account or the account of a security holder or holders exercising their
respective demand registration rights (other than pursuant to this Section),
excluding a registration relating solely to a Rule 145 transaction, or a
registration on any registration form that does not permit secondary sales,
the Company will:
(i) promptly give to each Holder written notice
thereof, and
(ii) use its best efforts to include in such
registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting involved
therein, all the Warrant Shares specified in a written
request or requests, made by any Holder and received by the
Company within twenty (20) days after the written notice
from the Company described in clause (i) above is mailed or
hand delivered by the Company. Such written request may
specify all or a part of a Holder's Warrant Shares.
The Holder agrees to sell their Warrant Shares on the same terms as
the sale of other shares of Common Stock in the offering and agree to execute
such documents as shall be reasonably requested by the Company or its counsel
in connection with such offering.
If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holder as a part of the written notice given pursuant to this
Section. In such event, the right of any Holder to registration pursuant to
this Section shall be conditioned upon such Holder's participation in such
underwriting to the extent provided herein and such Holder's written agreement
not to sell or otherwise dispose of the Warrant Shares in the underwriting to
the extent provided herein and such Holder's written agreement not to sell or
otherwise dispose of the Warrant Shares for such period of time as may be
required by the underwriter or underwriters. Any Holder proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders of securities of the Company with registration
rights to participate therein distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected by the Company.
Notwithstanding the other provisions of this Section 4.4(a), the Company shall
not be required to include any of Holder's Warrant Shares in an underwriting
if, in the opinion of the underwriters, such inclusion will jeopardize the
success of the offering.
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<PAGE>
(b) Demand Registration. In the event that the Holder has
not been offered at any time during 1999 the opportunity pursuant to Section
4.4(a) to have its shares included in a registration statement filed under the
Securities Act, the Holder shall have the one time right to demand by written
notice to the Company that the Company prepare and file under the Securities
Act a registration statement with the Securities and Exchange Commission (the
"Commission") within 60 days following its receipt of such notice and will use
its best efforts to have such registration statement declared effective as
soon as possible and to keep such registration statement effective for a
period of at least 120 days.
The Company shall be entitled to postpone the filing
of any registration statement pursuant to this Section 4.4(b) otherwise
required to be prepared and filed by it if (i) the Company is engaged in a
material acquisition, reorganization, or divestiture, (ii) the Company is
currently engaged in a self-tender or exchange offer and the filing of a
registration statement would cause a violation of Rule 10b-6 under the
Securities Exchange Act of 1934, (iii) the Company is engaged in an
underwritten offering and the managing underwriter has advised the Company in
writing that such a registration statement would have a material adverse
effect on the consummation of such offering or (iv) the Company is subject to
an underwriter's lock-up as a result of an underwritten public offering and
such underwriter has refused in writing the Company's request to waive such
lock-up. In the event of such postponement, the Company shall be required to
file the registration statement pursuant to this Section 4.4(b), within sixty
(60) days of the consummation of the event requiring such postponement.
(c) Miscellaneous. The Holder acknowledges that it has been
advised that it may be required under the rules, regulations or policies of
the Commission to exercise the Warrants prior to the registration statement
relating to the Warrant Shares being declared effective under the Securities
Act.
(d) Expenses of Registration. All registration expenses
incurred in connection with any registration, qualification, or compliance
pursuant to this Section (including filing fees, printing expenses, blue sky
fees, and fees and expenses of the Company's counsel and accountants) shall be
borne by the Company. All expenses incurred by the Holders for their own
counsel or accountants and all selling expenses relating to securities so
registered (including underwriter discounts and commissions) shall be borne by
holders of securities so registered on their behalf.
(e) Indemnification
(i) The Company will indemnify each Holder, each of
its officers, directors and partners, legal counsel, and accountants and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration. qualification, or
compliance has been effected pursuant to this Section, and each underwriter,
if any, and each person who controls within the meaning of Section 15 of the
Securities Act any underwriter, against all expenses, claims, losses, damages
and liabilities (or actions, proceedings, or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any prospectus, offering circular, or other
document (including any related registration statement, notification, or the
like), incident to any such registration, qualification, or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule
or regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, each of its
officers, directors, partners, legal counsel, and
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<PAGE>
accountants and each person controlling such Holder, each such underwriter,
and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability, or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability, or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company
by such Holder or underwriter and stated to be specifically for use therein.
It is agreed that the indemnity agreement contained in this Section shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent has not been unreasonably withheld).
(ii) Each Holder will, if Warrant Shares held by him
are included in the securities as to which such registration, qualification,
or compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if
any, of the Company's securities covered by such registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and other
shareholders, and each of their officers, directors, and partners, and each
person controlling such Holder or other shareholders, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement prospectus, offering
circular, or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
Holders, other shareholders, directors, officers, partners, legal counsel, and
accountants, persons, underwriters, or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability, or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holder hereunder shall not
apply to amounts paid in settlement of any such claims, losses, damages, or
liabilities (or actions in respect thereof) if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld), and provided that in no event shall any indemnify under this
Section exceed the gross proceeds from the offering received by such Holder.
Section 5. Adjustments to Exercise Price and Number of Shares.
5.1 Subdivision and Combination. In case the Company shall at any
time: (i) subdivide the outstanding shares of Common Stock into a larger
number of shares, (ii) combine the outstanding shares of Common Stock into a
larger number of shares, (iii) declare a dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, or (iv) issue by
reclassification of its Common Stock any shares of its capital stock, the
Exercise Price in effect immediately after the record date for such dividend
or distribution on the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price determined
by multiplying the Exercise Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such dividend, distribution, subdivision,
combination or reclassification, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after such dividend,
distribution, subdivision combination or reclassification. Such adjustment
shall be made successively whenever any event specified above shall occur.
-5-
<PAGE>
5.2 Adjustment in Number of Warrant Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 5, the number of
Warrant Shares issuable upon the exercise of each Warrant shall be adjusted to
the nearest full share by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of the Warrants immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
5.3 Definition of Common Stock. For the purposes of this Agreement,
the term "Common Stock" shall mean: (i) the class of stock designated as
Common Stock in the Memorandum of Association of the Company as may be amended
as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par
value to par value.
5.4 Merger or Consolidation. (a) In case the Company after the date
hereof: (i) shall consolidate with or merge into any other person and shall
not be the continuing or surviving corporation of such consolidation or
merger, or (ii) shall permit any other person to consolidate with or merge
into the Company and the Company shall be the continuing or surviving person
but, in connection with such consolidation or merger, the Common Stock shall
be changed into or exchanged for stock or other securities or any other person
or cash or any other property, or (iii) shall transfer all or substantially
all of its properties or assets to any other person, or (iv) shall effect a
capital reorganization or reclassification of the Common Stock (other than a
capital reorganization or reclassification resulting in the issue of
additional shares of Common Stock for which adjustment in the Exercise Price
is provided in this Section 5), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided herein, the Holder of the Warrants, upon the
exercise thereof immediately after the consummation of such transaction (to
the extent such Warrants are then exercisable), shall be entitled to receive
(at the aggregate Exercise Price in effect a the time of such consummation for
all Common Stock issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock, the highest amount of securities,
cash or other property to which such Holder would actually have been entitled
as a shareholder upon such exercise immediately prior to such consummation if
such Holder had exercised the rights represented by the Warrants immediately
prior thereto, subject to adjustments (subsequent to such consummation) as
nearly equivalent as possible to the adjustments provided for in this Section
5.
5.5 Assumption of Obligations. Notwithstanding anything contained in
the Warrants to the contrary, the Company will not effect any of the
transactions described in clauses (i) through (iv) of Section 5.4 unless,
prior to the consummation thereof, each person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of the Warrants as provided herein shall assume, by written
instrument delivered to the Holder of the Warrants, (a) the obligations of the
Company under the Warrants (including this Exhibit I) (and if the Company
shall survive the consummation of such transaction, such assumption shall be
in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Exhibit I and the Warrants) and (b) the
obligation to deliver to such Holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Section 5,
such Holder may be entitled to receive, and such person shall have similarly
delivered to such Holder an opinion of counsel for such person stating that
the Warrants (including Exhibit I) shall thereafter continue in full force and
effect and the terms hereof (including, without limitation, all of the
provisions of this Section 5) shall be applicable to the stock, securities,
cash or property which such person may be required to deliver upon any
exercise of the Warrants or the exercise of any rights pursuant hereto.
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<PAGE>
5.6 Dividends and Other Distribution. If, at any time or from time to
time after the date of this Warrant, the Company shall issue or distribute to
the holders of shares of Common Stock, evidence of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Section 5.1, and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of
other dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such non-excluded event being herein
called a "Special Dividend"), the Exercise Price shall be adjusted by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the then current market price of he Common Stock (defined as
the average for the thirty consecutive business days immediately prior to the
record date of the daily closing prices as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
Stock Market's National Market, or if not then listed on the NASDAQ National
Market, the average of the highest reported bid and lowest reported asked
prices as reported by the NASDAQ, or if not then publicly traded, as the fair
market price as determined by the Company's Board of Directors less the fair
market value (as determined by the Company's Board of Directors) of the
evidences of indebtedness, cash, securities or property, or other assets
issued or distributed in such Special Dividend applicable to one share of
Common Stock and the denominator of which shall be such then current market
price per share of Common Stock. An adjustment made pursuant to this Section
5.6 shall become effective immediately after the record date of any such
Special Dividend.
5.7 Other Dilutive Events. In cash any event shall occur as to which
the other provisions of this Section 5 are similar, but not strictly
applicable but as to which the failure to make any adjustment would not fairly
protect the purchase rights represented by the Warrants (including this
Exhibit I) in accordance with the essential intent and principles hereof then,
in each such case, the Holders collectively may appoint a firm of independent
public accountants of recognized national standing acceptable to the Company,
which shall give their opinion a to the adjustment, if any, on a basis
consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by the Warrants
(including this Exhibit I). Upon receipt of such opinion the Company will
promptly mail a copy thereof to the Holders and shall make the adjustments
described therein. The fees and expenses of such independent public
accountants shall be borne by the Company. The issuance by the company of
shares of capital stock, including, without limitation, shares of Common
Stock, for consideration less that the Exercise Price, or the issuance of
convertible securities or derivative securities, convertible into shares of
capital stock at a conversion price or exercise price less than the Exercise
Price shall not be deemed an event that requires an adjustment under this
Section 5.7.
5.8 Notice of Adjustment Events. Whenever the Company contemplates
the occurrence of an event which would give rise to adjustments under this
Section 5, the Company shall mail to each Holder, at least thirty (30) days
prior to the record date with resect to such event or, if no record date shall
be established, at least thirty (30) days prior to such event, a notice
specifying: (i) the nature of the contemplated event, (ii) the date of which
any such record is to be taken for the purpose of such event, (iii) the date
on which such event is expected to become effective and (iv) the time, if any
is to be fixed, when the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable in connection with such event.
5.9 Notice of Adjustments. Whenever the Exercise Price or the kind of
securities or property issuable upon exercise of the Warrants, or both, shall
be adjusted pursuant to this
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<PAGE>
Section 5, the Company shall make a certificate signed by its President or a
Vice President and by its Chief Financial Officer, Secretary or Assistant
Secretary, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method of which such adjustment
was calculated (including a description of the basis on which the Company made
any determination hereunder), and the Exercise Price and the kind of
securities or property issuable upon exercise of the Warrants after giving
effect to such adjustment, and shall cause copies of such certificate to be
mailed (by first class mail postage prepaid) to each Holder promptly after
each adjustment.
5.10 Preservation of Rights. The Company will not, by amendment of
its Memorandum of Association or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrants (including this Exhibit I) or
the rights represented thereby, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holders of
the Warrants against dilution or other impairment.
5.11 When No Adjustment Required. No adjustment in the Exercise Price
shall be required unless such adjustment would require an increase or decrease
of at least $0.05 per share of Common Stock; provided, however, that any
adjustments which by reason of this Section 5.11 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
provided further, however, that adjustments shall be required and made in
accordance with the provisions of this Section 5 (other than this Section
5.11) not later than such time as may be required in order to preserve the
tax-free nature of a distribution to the Holders of the Warrants. All
calculations under this Section 5 shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be. Anything in this Section 5 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Exercise Price, in addition to those required by this
Section 5, as it in its discretion shall deem to be advisable in order than
any stock dividend, subdivision of shares or distribution of rights to
purchase stock or securities convertible or exchangeable for stock hereafter
made by the Company to its shareholders shall not be taxable.
Section 6. Exchange and Replacement of Warrant
Certificates.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office
of the Company, for a new Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of Warrant
Shares in such denominations as shall be designated by the Holder thereof 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 any Warrant Certificate, 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 the
Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
Section 7. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants, nor shall it be required to issue
scrip or pay cash in lieu of fractional interests, it being
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<PAGE>
the intent of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of shares of Common
Stock.
Section 8. Reservation of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor, all shares of Common Stock shall
be duly and validly issued, fully paid, nonassessable and not subject to the
preemptive rights of any shareholder.
Section 9. Income Tax Implications. Based upon current law, Holder
will be subject to income tax upon exercise of the Warrants. Upon a subsequent
disposition of such Warrant Shares, Holder will be subject to further
taxation. The Company or its subsidiaries, as appropriate, shall have the
right to deduct from all amounts paid in cash, any federal, state or local
taxes as required by law to be withheld from such payments, and in the case of
issuances of Warrant Shares, the Holder may be required to pay the Company or
its subsidiary, as appropriate, the amount of any such taxes which the Company
or its subsidiary is required to withhold with respect to such Warrant Shares.
The foregoing is a brief summary of the Holder's tax consequences with respect
to the Warrants and is not intended to be a complete statement of such
consequences. Holder agrees to seek advice from his professional tax advisor
prior to exercise of the Warrants or sale of the underlying Warrant Shares.
Section 10. Notices to Warrant Holders. Nothing contained in this
Exhibit I shall be construed as conferring upon the Holders the right to vote
or to consent or to receive notice as a shareholder in respect of any meetings
of shareholders for the election of directors or any other matter, or as
having any rights whatsoever as a shareholder of the Company. If, however, at
any time prior to the expiration of the Warrants and their exercise, any of
the following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution payable; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company
or securities convertible into or exchangeable for shares of
capital stock of the Company, or any option, right or
warrant to subscribe therefor; or
(c) a voluntary or involuntary dissolution, liquidation or
winding-up of the Company (other than in connection with a
consolidation or merger) or any capital reorganization,
recapitalization or reclassification or a sale of all or
substantially all of its property, assets and business as an
entirety shall be proposed;
then, in any one or more of said events, the Company will mail to each Holder
of a Warrant a notice specifying (i) the date or expected date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right,
and (ii) the date or expected date on which any such reorganization,
reclassification, recapitalization, consolidation, merger, sale, dissolution,
liquidation or winding-up is to take place and the time, if any such time is
to be fixed, as of which the holders securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, sale, dissolution, liquidation or winding-up. Such notice shall be
mailed at least thirty (30) days prior to the date therein specified.
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Section 11. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given or made at the
time delivered by hand if personally delivered; five calendar days after
mailing if sent by registered or certified mail; when receipt is confirmed, if
telecopied; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
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EXHIBIT 5.0
[Form of Legal Opinion]
May __, 1997
Eastbrokers International Incorporated
15245 Shady Grove Road
Suite 340
Rockville, Maryland 20850
Re: EASTBROKERS INTERNATIONAL INCORPORATED
REGISTRATION STATEMENT ON FORM S-3
--------------------------------------
Ladies and Gentlemen:
We are counsel to Eastbrokers International Incorporated, a
Delaware corporation (the "Company"), and have represented the Company in
connection with the Registration Statement on Form S-3 (the "Registration
Statement") being filed by the Company with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the offer and sale of 285,002 shares of common stock of the
Company, par value $.05 per share (the "Shares"). These Shares consist of
125,000 shares previously issued in an April 1997 private placement, 10,000
shares issued in August 1996 in payment of a consulting fee to a director of
the Company, and 150,000 shares issuable on exercise of warrants to purchase
upon to 150,000 shares of Common Stock.
We have acted as counsel for the Company in connection with
the transactions which are the subject matter of the Registration Statement
and are familiar with the various corporate proceedings related thereto. In
rendering this opinion, we have examined a copy of the Registration Statement,
such corporate records of the Company and such other instruments, documents
and certificates as we have deemed necessary as a basis for our opinion. For
purposes of this opinion, we have assumed (i) the accuracy and completeness of
all information supplied by the Company, its officers, directors, or agents,
(ii) that the transactions set forth in the Registration Statement are
consummated as set forth therein, (iii) that the Commission shall have issued
an order under the Securities Act of 1933, as amended, declaring the
Registration Statement effective, and (iv) that all requisite authorizations,
approvals, consents or exemptions under the securities laws of the various
states and other jurisdictions of the United States of America shall have been
obtained.
Based on the foregoing, we are of the opinion that (i) the
Warrant Shares to be sold in accordance with the Registration Statement are
duly authorized and upon issuance, delivery and sale thereof, for the
consideration specified in the Registration Statement, will be legally issued,
fully paid and non-assessable, and (ii) the remaining Shares have been duly
authorized and validly issued and are fully paid and non-assessable.
<PAGE>
Eastbrokers International - 2 - May __, 1997
Incorporated
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and as a part of, or an exhibit to, any
document which may be filed with respect to the proposed transactions under
the securities laws of the various states and other jurisdictions of the
United States of America. We also consent to be named in the Registration
Statement and in the Prospectus which constitutes a legal part thereof as the
counsel that will pass upon certain legal matters for the Company in
connection with the sale of the Company's securities.
Very truly yours,
Enclosures
<PAGE>
EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Form S-3
Registration Statement of our report dated May 15, 1996 on our audit of the
financial statements of Czech Industries, Inc., the company now known as
Eastbrokers International Incorporated (the "Company"), for the three month
period ended March 31, 1996, included in the Company's Annual Report on Form
10-KSB dated June 28, 1996, as amended by Form 10-KSB/A No. 1 dated August 27,
1996 and of our report dated February 23, 1996 on our audit of the financial
statements for the fiscal year ended December 31, 1995, included in the
Company's Annual Report on Form 10-KSB dated March 15, 1996.
PANNELL KERR FORSTER, P.C.
Alexandria, Virginia
May 8, 1997
