FORM 8-A/A
(Amendment No. 1 to Form 8-A)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
MAMA TISH'S ITALIAN SPECIALTIES, INC.
(Exact name of registrant as specified in its charter)
Illinois 36-3546039
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
4800 South Central Avenue, Chicago, Illinois 60638
(Address of principal executive offices)(Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
Securities to be registered pursuant to Section 12(g) of the Act:
Units
(Title of Class)
Common Stock, $.01 par value
(Title of Class)
Redeemable Common Stock Warrants
(Title of Class)
Item 1. Description of Registrant's Securities to be Registered.
A description of the Registrant's securities to be registered is
incorporated herein by reference to the section entitled
"Description of Securities" in Amendment No. 4 to the Registrant's
Registration Statement on Form SB-2 (the "Registration Statement"),
File No. 333-05358C, filed with the Securities and Exchange
Commission on November 1, 1996, a copy of which incorporated
information is attached hereto as Exhibit A.
Item 2. Exhibits.
Exhibit
Number Description of Document
- ------ ------------------------
1.1 Specimen Stock Certificate representing Common Stock
(filed as Exhibit 4.1 to Amendment No.1 to the
Registration Statement and hereby incorporated herein by
reference).
1.2 Form of Warrant (filed as Exhibit 4.2 to Amendment No.
1 to the Registration Statement and hereby incorporated
herein by reference).
2.1 Articles of Incorporation of the Registrant, as amended
(filed as Exhibit 3.1 to the Registration Statement and
hereby incorporated herein by reference).
2.2 Amended and Restated Bylaws of the Registrant (filed as
Exhibit 3.2 to the Registration Statement and hereby
incorporated herein by reference).
2.3 Form of Amendment to Articles of Incorporation of the
Registrant, as amended (filed as Exhibit 3.3 to
Amendment No. 1 to the Registration Statement and hereby
incorporated herein by reference).
2.4 Warrant Agreement (filed as Exhibit 4.3 to Amendment No.
1 to the Registration Statement and hereby incorporated
by reference).
2.5 Mama Tish's Italian Specialties, Inc. Stock Incentive
Plan (filed as Exhibit 10.8 to Amendment No. 1 to the
Registration Statement and hereby incorporated by
reference).
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized.
MAMA TISH'S ITALIAN SPECIALTIES, INC.
(Registrant)
Dated: October 31, 1996
By: /s/ Meade A. Rudasill
----------------------
Meade H. Rudasill
Chief Executive Officer
Exhibit A
DESCRIPTION OF SECURITIES
The Company is authorized to issue 50,000,000 shares of Common
Stock, par value $.01 per share, and 1,000,000 shares of Preferred
Stock, no par value, of which 41,309 are designated as Class D1
Preferred Stock, 32,077 are designated as Class D2 Preferred Stock,
and 22,232 are designated as Class E Preferred Stock. The Board of
Directors may issue the remaining 904,382 shares of Preferred Stock
in any class or series and may fix the designation, powers,
preferences and rights of such shares.
As of October 30, 1996, there were 12,048,674 shares of Common
Stock outstanding, 95,618 shares of Preferred Stock outstanding and
636,250 Warrants outstanding.
Units
The Company is offering 2,300,000 Units, each Unit consisting of
one share of Common Stock and a Warrant to purchase one share of
Common Stock for an exercise price of $5.00. Each Unit is being
offered for $5.00 and will be evidenced by separate certificates
for each of the Common Stock and the Warrants. The Shares of
Common Stock and the Warrants comprising the Units hereby are
immediately detachable and separately tradeable as of the date of
this Prospectus.
Common Stock
The holders of Common Stock (i) have equal ratable rights to
dividends from funds legally available thereof, when, as and if
declared by the Board of Directors of the Company, subject to the
rights of holders of Preferred Stock; (ii) are entitled to share
ratably in all of the assets of the Company available for
distribution to holders of Common Stock upon liquidation,
dissolution or winding-up of the affairs of the Company, subject to
the rights of holders of Preferred Stock; (iii) do not have
preemptive, subscription or conversion rights; and (iv) are
entitled to one vote per share on all matters submitted to a vote
of the Company's shareholders. The Common Stock does not have
cumulative voting rights or any redemption or sinking fund
provisions. All shares of Common Stock now outstanding are fully
paid and nonassessable, and, when issued, all shares of Common
Stock included in the Units and underlying the Warrants included in
this Offering will be fully paid and nonassessable.
Preferred Stock
As of October 30, 1996, the Company had issued and outstanding
41,309 shares of Class D1 Preferred Stock, 32,077 shares of Class
D2 Preferred Stock and 22,232 shares of Class E Preferred Stock.
In addition, the Company's Articles of Incorporation provide for an
authorized class of undesignated Preferred Stock consisting of
904,382 shares. The Preferred Stock may be issued at the direction
of the Board of Directors, without the approval of the holders of
Common Stock, in series from time to time with such designations,
relative rights, priorities, preferences, qualifications,
limitations and restrictions thereon, to the extent that such are
not fixed in the Company's Articles of Incorporation, as the Board
of Directors determines. The rights, preferences, limitations and
restrictions of different series of Preferred Stock may differ with
respect to dividend rates, amounts payable on liquidation, voting
rights, conversion rights, redemption provisions, sinking fund
provisions and other matters. The Board of Directors may authorize
the issuance of Preferred Stock which ranks senior to the Common
Stock with respect to the payment of dividends and the distribution
of assets on liquidation. In addition, the Board of Directors is
authorized to fix the limitations and restrictions, if any, upon
the payment of dividends on Common Stock to be effective while any
shares of Preferred Stock are outstanding. The Board of Directors,
without shareholder approval, can issue Preferred Stock with voting
and conversion rights which could adversely affect the voting power
of the holders of Common Stock. The issuance of Preferred Stock to
certain holders under certain circumstances may have the effect of
delaying, deferring or preventing a change in control of the
Company and may have a depressive effect on the market price of
the Common Stock.
Voting Rights
In General. Except with respect to the election of directors as
described below or as otherwise required by law, holders of Class
D1 Preferred Stock and Class D2 Preferred Stock have no voting
rights. Except with respect to the election of directors as
described below, the holders of Class E Preferred Stock will be
entitled to vote together with the holders of Common Stock on all
matters submitted to a vote by the Corporation's shareholders,
voting together as a single class, with each share of Common Stock
entitled to one vote and each share of Class E Preferred Stock
entitled to one vote for each share of Common Stock issuable upon
conversion of Class E Preferred Stock at the time the vote is taken
(as described below).
Election of Directors. The Articles of Incorporation provide that
the Company's Board of Directors shall be comprised of three to
eight directors. If there are shares of both Class D1 Preferred
Stock and Class D2 Preferred Stock outstanding, the holders of
Common Stock shall be entitled to elect two (2) directors, the
holders of Class D1 Preferred Stock shall be entitled to elect up
to three (3) directors and the holders of Class D2 Preferred Stock
shall be entitled to elect up to three (3) directors. The holders
of Class E Preferred Stock are not entitled to vote in the election
of members of the Company's Board of Directors if there are shares
of Class D1 or Class D2 Preferred Stock outstanding.
If there are shares of Class D1 Preferred Stock outstanding but no
shares of Class D2 Preferred Stock outstanding, then the holders of
Common Stock shall be entitled to elect two (2) directors and the
holders of Class D1 Preferred Stock shall be entitled to elect up
to six (6) directors. If there are shares of Class D2 Preferred
Stock outstanding but no shares of Class D1 Preferred Stock
outstanding, then the holders of Common Stock shall be entitled to
elect two (2) directors and the holders of Class D2 Preferred Stock
shall be entitled to elect up to six (6) directors.
The holders of Class D1 Preferred Stock, Class D2 Preferred Stock
and Class E Preferred Stock have agreed that if there are shares of
Class D1 Preferred Stock but no shares of Class D2 Preferred Stock
outstanding, the former holders of Class D2 Preferred Stock shall
have the right to designate up to three persons to be elected, and
the holders of Class D1 Preferred Stock will elect such persons, as
members of the Board of Directors and that if there are shares of
Class D2 Preferred Stock but no shares of Class D1 Preferred Stock
outstanding, the former holders of Class D1 Preferred Stock shall
have the right to designate up to three persons to be elected, and
the holders of Class D2 Preferred Stock will elect such persons, as
members of the Board of Directors. These parties have further
agreed that if there are neither shares of Class D1 Preferred Stock
nor shares of Class D2 Preferred Stock outstanding, but there are
shares of Class E Preferred Stock outstanding, the former holders
of Class D1 Preferred Stock shall have the right to designate up to
three persons to be elected, and the holders of Class E Preferred
Stock will elect such persons, as members of the Board of
Directors.
If there are neither shares of Class D1 Preferred Stock nor shares
of Class D2 Preferred Stock outstanding, but there are shares of
Class E Preferred Stock outstanding, then the holders of Common
Stock shall be entitled to elect two (2) directors, and the holders
of Class E Preferred Stock shall be entitled to elect up to six (6)
directors.
If, at any time after the date of this Prospectus, however, the
number of shares of Common Stock beneficially owned by Andrew Zahn,
Melvyn Zahn and their respective families decreases by twenty-five
percent (25%) or more from the number of shares of Common Stock
beneficially owned by them on such effective date, the holders of
Class D1 shall no longer have the right to designate any persons
for election as members of the Board of Directors.
Proxy. Pursuant to the Second Amended and Restated Shareholders
Agreement, Fergal Mulchrone, Scott Jaffe, Rod Robertson and Kenneth
Serota have agreed to grant Andrew Zahn a proxy to vote all shares
owned by such parties in such manner as Mr. Zahn may determine in
his sole discretion. In addition, each participant in the
Company's 1996 Stock Incentive Plan has agreed to grant Andrew Zahn
a proxy to vote all shares received upon exercise of an option
granted under such plan. For so long as shares of Class D2 or
Class E are outstanding, Andrew Zahn has agreed not to vote his
Common Stock, or any other Common Stock pursuant to a proxy granted
to Andrew Zahn, without first obtaining the approval of the holders
of a majority of the outstanding Class D2 and Class E Preferred
Stock, which approval cannot be unreasonably withheld.
Dividends
Class D1 Preferred Stock and Class D2 Preferred Stock is senior to
the Common Stock, Class E Preferred Stock and all other Preferred
Stock that the Company may issue with respect to dividends.
Dividends on Class D1 Preferred Stock and Class D2 Preferred Stock
are cumulative and accrue on a daily basis (i) during the three-
year period commencing on the date of issuance, at a rate equal to
the prime rate less 2% per annum, and (ii) thereafter, at a rate
equal to the Prime Rate plus 2% per annum, multiplied by the Class
D1 Liquidation Value and the Class D2 Liquidation Value (each as
defined below), respectively, plus all accrued and unpaid dividends
thereon. Dividends are payable if declared by the Company's Board
of Directors on January 1, April 1, July 1 and October 1 of each
year. If dividends are not paid on such dates, they will
accumulate and remain accumulated dividends until paid.
No dividends accrue on the Class E Preferred Stock until February
1, 2000. Beginning February 1, 2000, dividends on Class E
Preferred Stock will accrue on a daily basis at a rate equal to the
Prime Rate plus 2% per annum, multiplied by the Class E Liquidation
Value (as defined below) plus all accrued and unpaid dividends.
Dividends on the Class E Preferred Stock will be cumulative and
will be payable if declared by the Company's Board of Directors on
January 1, April 1, July 1 and October 1. If dividends are not
paid on such dates, they will accumulate and remain accumulated
dividends until paid.
Liquidation
Upon the dissolution, winding up or liquidation of the Company,
each holder of Class D1 Preferred Stock is entitled to receive
$250.00 per share in cash (the "Class D1 Liquidation Value"), plus
all accrued and unpaid dividends, before any payments are made to
holders of Common Stock, Class E Preferred Stock or any other
preferred stock other than Class D2 Preferred Stock. Upon the
dissolution, winding up or liquidation of the Company, each holder
of Class D2 Preferred Stock is entitled to receive $250.00 per
share in cash (the "Class D2 Liquidation Value"), plus all accrued
and unpaid dividends, before any payments are made to holders of
Common Stock, Class E Preferred Stock or any other preferred stock
other than Class D1 Preferred Stock. In the event that there are
insufficient funds to pay such amounts to all holders of Class D1
Preferred Stock and Class D2 Preferred Stock, available funds shall
be allocated and distributed among all such holders ratably in
proportion to the full amount to which they would otherwise be
entitled.
Upon the dissolution, winding up or liquidation of the Company,
after payments have been made to the holders of Class D1 Preferred
Stock and Class D2 Preferred Stock, each holder of Class E
Preferred Stock is entitled to receive $224.90 per share in cash
(the "Class E Liquidation Value"), plus all accrued and unpaid
dividends, before any payments are made to holders of Common Stock.
In the event that there are insufficient funds to pay such amounts
to all holders of Class E, available funds shall be allocated and
distributed among all such holders ratably in proportion to the
full amount to which they would otherwise be entitled.
Redemption
The Company may redeem, at its option, at any time and from time to
time, all or part of the then outstanding shares of Class D1
Preferred Stock and Class D2 Preferred Stock at a price per share
of Class D1 Preferred Stock and Class D2 Preferred Stock equal to
the Class D1 Liquidation Value and the Class D2 Liquidation Value,
respectively; provided, however, that the Corporation shall first
pay to each holder of Class D1 Preferred Stock and Class D2
Preferred Stock all accrued and unpaid dividends. After such
payment of dividends, sixty percent (60%) of the funds available
for redemption shall be applied to the redemption of Class D1
Preferred Stock and forty percent (40%) to the redemption of Class
D2 Preferred Stock, in each case ratably among the holders of Class
D1 Preferred Stock and Class D2 Preferred Stock based upon the
aggregate Class D1 Liquidation Value and Class D2 Liquidation
Value, respectively, of the shares held by each such holder.
At any time after all shares of Class D1 Preferred Stock and Class
D2 Preferred Stock have been redeemed, the Company may, by written
notice to all holders of Class E Preferred Stock, offer to redeem
all of the shares of Class E Preferred Stock then outstanding at a
price per share of Class E Preferred Stock equal to the Class E
Liquidation Value plus all accrued and unpaid dividends thereon.
Within thirty (30) days of receipt of such notice by the holders of
Class E Preferred Stock, each such holder may notify the Company of
such holder's election to convert the number of shares of Class E
Preferred Stock then held by such holder and to be redeemed by the
Company into the number of shares of Common Stock applicable as of
the effective date of the contemplated redemption. Such election
may be revoked in the event that the Company does not redeem the
shares of Class E Preferred Stock to be converted.
Conversion
At any time and from time to time, any holder of shares of Class E
Preferred Stock may convert all or any portion of the Class E
shares held by such holder into a number of shares of Common Stock
computed by (i) multiplying the number of shares of Class E
Preferred Stock to be converted by the sum of the Class E
Liquidation Value and any accrued and unpaid dividends thereon and
(ii) dividing the resulting product by the Conversion Price then in
effect. The initial Conversion Price shall be $1.022277 and the
Conversion Price is subject to adjustment from time to time for
Common Stock dividends, Common Stock splits, combinations of Common
Stock, reorganizations, certain rights offerings, and the issuance
of additional Common Stock (or options or rights to acquire Common
Stock or securities convertible or exchangeable into Common Stock)
for consideration per share which is less than the Conversion Price
then in effect except for shares of Common Stock to be issued upon
exercise of the Employee Option or options granted pursuant to the
1996 Stock Incentive Plan. The initial Conversion Price is equal
to the conversion price originally established for converting all
of the Class B Preferred Stock, having a liquidation value of
$5,000,000, into 30% of the outstanding Common Stock of the
Company. The Class B Preferred Stock was exchanged for the Class
E Preferred Stock in contemplation of this Offering. See "Certain
Transactions."
Certain Covenants
The Exchange Agreement among the Company, William Blair Venture
Partners III Limited Partnership, Cardinal Ventures L.L.C., Primus
Capital Fund III Limited Partnership, National City Capital
Corporation, Melvyn Zahn, Andrew Zahn and Judith Zahn contains
certain material covenants. So long as at least 25% of the Class
D2 or Class E Preferred Stock remains outstanding, the Company may
not, without the consent of the holders of the Class D2 Preferred
Stock and the Class E Preferred Stock, (i) acquire any interest in
any company or business or enter into any joint venture involving
an aggregate consideration exceeding $500,000 in any one
transaction or exceeding $1,000,000 in any fiscal year; (ii) make
any capital expenditures exceeding $2,000,000 during any fiscal
year; or (iii) enter into any leases or other rental agreements
under which the amount of the aggregate lease payments for all such
agreements exceeds $800,000.
Registration Rights
Common Stock Issuable Upon Conversion of Class E Preferred Stock.
At any time on and after the earlier of (i) the first anniversary
following a qualified public offering (as defined in the
Stockholders Agreement) or (ii) February 28, 1999, the holders of
one-third of the Common Stock issued upon conversion of Class E
Preferred Stock (the "Class E Holders") may, subject to certain
conditions and limitations, demand that the Company effect the
registration of all or part of such shares, whether or not the
Company proposes to register its own Common Stock. The Class E
Holders may request, and the Company is obligated to pay all of the
expenses of, two registrations on Form S-1 or S-2 or a similar
long-form registration. The Class E Holders may request, and the
Company is obligated to pay all of the expenses of, an unlimited
number of non-underwritten registrations on Form S-3 or a similar
short-form registration ("Short-Form Registrations"), provided that
the aggregate offering value of the common stock to be registered
in such Short-Form Registration is equal to at least $1,000,000.
In addition, the Class E Holders may request one underwritten
Short-Form Registration, provided that (1) the aggregate offering
value of the Common Stock to be registered in such Short-Form
Registration is reasonably expected to equal at least $3,500,000
and (2) the Class E Holders have requested to register all of their
Common Stock.
In addition, in the event that the Company proposes to register any
of its securities under the Securities Act, the Class E Holders or
certain permitted transferees are entitled to notice of such
registration and to include shares of Common Stock therein, subject
to certain conditions and limitations. The Company is obligated to
pay all of the expenses of such registrations.
The Class E Holders have agreed not to effect any public sale or
distribution of equity securities of the Company (or any securities
convertible into or exchangeable or exercisable for such
securities) during the seven days prior to and the 180 day period
beginning on the effective date of certain underwritten
registrations, unless the underwriters managing the registered
public offering otherwise agree. The Company has agreed to
indemnify the Class E Holders against all losses, claims, damages,
liabilities and expenses caused by an untrue or alleged untrue
statement of material fact contained in any registration statement,
prospectus or preliminary prospects or any amendment thereof or
supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make
the statements therein not misleading, except to the extent they
are caused by or contained in any information furnished in writing
to the Company by such holder expressly for use therein or by such
holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of
copies of the same.
Other Common Stock. In the event that the Company proposes to
register any of its securities under the Securities Act, after the
date of this Prospectus, certain holders of Common Stock, including
members of the Zahn family, who collectively own 10,962,424 shares
of Common Stock as of the date of this Prospectus, or certain
permitted transferees are entitled to notice of such registration
and to include shares of Common Stock therein, subject to certain
conditions and limitations. These holders have agreed not to
effect any public sale or distribution of equity securities of the
Company (or any securities convertible into or exchangeable or
exercisable for such securities) during the seven days prior to and
the 180 day period beginning on the effective date of certain
underwritten registrations, unless the underwriters managing the
registered public offering otherwise agree. The Company has agreed
to indemnify such persons against all losses, claims, damages,
liabilities and expenses caused by an untrue or alleged untrue
statement of material fact contained in any registration statement,
prospectus or preliminary prospects or any amendment thereof or
supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make
the statements therein not misleading, except to the extent they
are caused by or contained in any information furnished in writing
to the Company by such holder expressly for use therein or by such
holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of
copies of the same.
Certain shareholders who purchased shares of Common Stock from
Andrew Zahn and who were granted registration rights by the Company
(the "Investors") have exercised their right to request that the
Company include all of such shares of Common Stock in this
registration statement. Each of the Investors has agreed not to
effect any public sale or distribution of equity securities of the
Company (or any securities convertible into or exchangeable or
exercisable for such securities) until the earlier of (i) twelve
months from the date of this Prospectus or (ii) October 31, 1997.
The Company is obligated to pay all the expenses (other than
underwriting discounts, transfer taxes and the fees and expenses of
counsel for the Investors) for this registration. The Company has
agreed to indemnify each Investor, the affiliates, officers,
directors and partners of each Investor, any underwriter for an
Investor and any person who controls an Investor (collectively, the
"Investor Indemnitees") against losses, claims, damages or
liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact
contained in a registration statement including any preliminary
prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (iii) any
violation or alleged violation by the Company of the Securities
Act, the Exchange Act or any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act
or any state securities laws, except to the extent that such loss,
claim, damage, liability or action arises out of, or is based upon
a violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with
such registration by any such Investor Indemnitee.
Purchasers in Private Placement. The purchasers in the Private
Placement (the "Private Placement Holders") have exercised their
right to request that the Company include all of the Units
purchased in the Private Placement in this registration statement.
Each of the Private Placement Holders has agreed not to effect any
public sale or distribution of equity securities of the Company (or
any securities convertible into or exchangeable or exercisable for
such securities) until the earlier of (i) twelve months from the
date of this Prospectus or (ii) October 31, 1997. The Company is
obligated to pay all the expenses (other than underwriting
discounts, transfer taxes and the fees and expenses of counsel for
a Private Placement Holder) for this registration. The Company has
agreed to indemnify each Private Placement Holder, the affiliates,
officers, directors and partners of each Private Placement Holder,
any underwriter for a Private Placement Holder and any person who
controls a Private Placement Holder (collectively, the
"Indemnitees") against losses, claims, damages or liabilities
(joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained
in a registration statement including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements
thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act or
any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities
laws, except to the extent that such loss, claim, damage, liability
or action arises out of, or is based upon a violation which occurs
in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by
any such Indemnitee.
Underwriter's Option. The Company has agreed that the holders of
the Underwriter's Option may demand that the Company register the
Underwriter's Option or the Common Stock issuable thereunder
whether or not the Company proposes to register any of its
securities. The holders of the Underwriter's Option may request,
and the Company is obligated to pay all of the expenses (except
selling commissions and fees and expenses of counsel for the
holders of the Underwriter's Option) of, one such demand
registration. In addition, in the event that the Company proposes
to register any of its securities under the Securities Act, the
holders of the Underwriter's Option are entitled to notice of such
registration and to include the Underwriter's Option or Common
Stock issuable thereunder in such registration, subject to certain
conditions. The Company is obligated to pay all of the expenses of
such a registration.
Warrants
Each Warrant will be issued pursuant to a Warrant Agreement between
the Company and OTC Corporate Transfer Service Co., as Warrant
Agent. The following statements are subject to the detailed
provisions of the Warrant Agreement and are qualified in their
entirety by reference to the Warrant Agreement, a copy of which has
been filed as an Exhibit to the Registration Statement of which
this Prospectus is a part.
During the two-year period commencing one year after the date of
this Prospectus, each Warrant will entitle the registered holder to
purchase one share of Common Stock at an exercise price of $5.00
per share. Warrants may be exercised by surrendering the Warrants
to the Warrant Agent and paying the exercise price. No fractional
shares of Common Stock will be issued in connection with the
exercise of Warrants. Upon exercise, the Company will pay to the
holder the value of any such fractional shares based upon the
market value of the Common Stock at such time. The Company is
required to keep available a sufficient number of authorized shares
of Common Stock for issuance to permit exercise of the Warrants.
The Company may redeem the Warrants at a price of $.10 per Warrant
at any time after the first anniversary of the date hereof and
prior to their expiration by giving not less than 30 days written
notice mailed to the record holders if the average closing bid
price of the Common Stock has been at least $8.00 for a period of
30 consecutive trading days ending prior to the date on which the
notice of redemption is given. Warrants may be exercised anytime
after one year from the date of this Prospectus until the close of
business on the date fixed for redemption or the expiration date.
The Warrants will expire at 5:00 p.m., New York time, on the third
anniversary of the date of this Prospectus. In the event a holder
of Warrants fails to exercise the Warrants prior to their
expiration, the Warrants will expire and the holder thereof will
have no further rights with respect thereto. A holder of Warrants
as such will not have any rights, privileges or liabilities as a
shareholder of the Company. In the event of the liquidation,
dissolution or winding up of the Company, holders of the Warrants
as such are not entitled to participate in the distribution of the
Company's assets.
The exercise price of the Warrants and the number of shares
issuable upon exercise of the Warrants will be subject to
adjustment to protect against dilution in the event of stock
dividends, stock splits, combinations, subdivisions and
reclassifications. No assurance can be given that the market price
of the Common Stock will exceed the exercise price of the Warrants
at any time during the exercise period.
Purchasers of the Warrants will have the right to exercise the
Warrants to purchase shares of Common Stock only if a current
registration statement relating to such shares is then in effect
and only if the shares are qualified for sale under the securities
laws of the jurisdictions in which the various holders of the
Warrants reside. The Company has undertaken to maintain the
effectiveness of the Registration Statement of which this
Prospectus is a part or to file and maintain the effectiveness of
another registration statement so as to permit the purchase of the
Common Stock underlying the Warrants, but there can be no assurance
that the Company will be able to do so. The Warrants may be
deprived of any value if this Registration Statement or another
registration statement covering the shares issuable upon the
exercise thereof is not kept effective or if such Common Stock is
not qualified or exempt from qualification in the jurisdictions in
which the holders of the Warrants reside.
For the life of the Warrants, a holder thereof is given the
opportunity to profit from a rise in the market price of the Common
Stock. In addition, the Company may find it more difficult to raise
equity capital if it should be needed for the business of the
Company while the Warrants are outstanding. At any time when the
holders of Warrants might be expected to exercise them, the Company
would, in all likelihood, be able to obtain additional equity
capital on terms more favorable than those provided in the
Warrants.
Underwriter's Option
The Company has also agreed to issue to the Underwriter an option
to purchase an aggregate of 200,000 Units (the "Underwriter's
Option") at an exercise price equal to 165% of the initial public
offering price per Unit. The Underwriter's Option is exercisable
for a period of four years, beginning one year from the effective
date of this Offering. See "Underwriting." The Underwriter's
Option contains provisions providing for adjustment of the exercise
price and the number and type of securities issuable upon the
exercise thereof upon the occurrence of certain events, including
in the event of any stock dividend, stock split, stock combination
or similar transaction. Holders of the Underwriter's Option have
been granted certain registration rights under the Securities Act
with respect to the securities issuable upon exercise of the
Underwriter's Option. The Underwriter's Option is not redeemable
by the Company. See "Underwriting and "Description of Securities -
Registration Rights."
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is OTC
Corporate Transfer Service Co., located in New York, New York.
Certain Transfer Restrictions
Pursuant to the Second Amended and Restated Shareholders Agreement,
Fergal Mulchrone, Scott Jaffe, Kenneth Serota and Rod Robertson may
not sell, assign, transfer, pledge, hypothecate, encumber or in any
other manner dispose of shares of the Company's Common Stock except
(i) to certain permitted transferees or (ii) subject to a right of
first refusal by the Company and, if the Company does not exercise
the right in full, by Andrew Zahn. In addition, in the event of
any filing by or against any of these parties of a petition for
relief under bankruptcy, insolvency or similar laws, the Company
and Andrew Zahn shall have the option to purchase all, but not less
than all, of the shares of Common Stock owned by such persons.
Shares Eligible for Future Sale
Prior to this Offering, there has been no public market for the
Units, the Common Stock or the Warrants. Future sales of
substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices.
Upon completion of this Offering, the Company will have 14,348,674
shares of Common Stock outstanding. Of these shares, the 2,300,000
shares sold by the Company in this Offering (2,645,000 shares if
the Underwriter exercises the Over-Allotment Option in full) and
the 1,086,250 shares sold by the Selling Securityholders will be
freely tradable without restriction under the Securities Act,
except for any such shares which may be acquired by an "affiliate"
of the Company as that term is defined in Rule 144 (an
"Affiliate"). The 10,962,424 remaining shares constitute
"restricted securities" within the meaning of Rule 144, and will
only be eligible for sale in the open market commencing on the
second anniversary of the later of the date such shares were
acquired from the Company or an Affiliate, subject to the
contractual lockup provisions and applicable requirements of
Rule 144 described below. However, of such restricted securities,
10,962,424 shares are subject to registration rights which may
entitle the holder thereof to register such shares for resale under
the Securities Act and to sell such shares, after the lockup
period, without regard for the restrictions of Rule 144.
The Company, its officers and directors and certain stockholders of
the Company have agreed that they will not directly or indirectly,
offer, sell, offer to sell, grant any option to purchase or
otherwise sell or dispose (or approve any offer, sale, offer of
sale, grant of any options to purchase or sale or disposition) of
any shares of Common Stock or other capital stock of the Company,
or any securities convertible into, or exercisable or exchangeable
for, any shares of Common Stock or other capital stock of the
Company without the prior written consent of the Underwriter, for
a period of 12 months from the date of the Prospectus. In
addition, the Selling Securityholders have agreed that they will
not directly or indirectly, issue, offer to sell, grant an option
for the sale of, assign, transfer, pledge, hypothecate, or
otherwise encumber or dispose of any such shares until the earlier
of (i) 12 months from the date of this Prospectus or (ii)
October 30, 1997. The Underwriter has agreed to not release any of
these shares or warrants held by the Selling Securityholders from
the terms of such lock-up agreements.
In general, under Rule 144 as currently in effect, beginning 90
days after the effective date of the Registration Statement of
which this Prospectus is a part, a stockholder, including an
"affiliate" of the Company, as that term is defined in Rule 144 (an
"Affiliate"), who has beneficially owned his or her restricted
securities (as that term is defined in Rule 144) for at least two
years from the later of the date such securities were acquired from
the Company or (if applicable) the date they were acquired from an
Affiliate, is entitled to sell, within any three-month period, a
number of such shares that does not exceed the greater of one
percent of the then outstanding shares of Common Stock
(approximately 140,500 shares immediately after this Offering) or
the average weekly trading volume in the Common Stock during the
four calendar weeks preceding the date on which notice of such sale
was filed under Rule 144, provided certain requirements concerning
availability of public information, manner of sale and notice of
sale are satisfied. Affiliates may sell shares not constituting
restricted securities in accordance with the foregoing volume
limitations and other requirements but without regard to the two
year holding period. In addition, under Rule 144(k), if a period
of at least three years has elapsed between the later of the date
restricted securities were acquired from the Company and the date
they were acquired from an Affiliate of the Company, a stockholder
who is not an Affiliate of the Company at the time of sale and has
not been an Affiliate for at least three months prior to the sale
would be entitled to sell the shares immediately without regard to
the volume limitations and other conditions under Rule 144
described above.
The Company has granted options to purchase a total of 970,000
shares under the Company's 1996 Stock Incentive Plan prior to the
date of this Prospectus (90,000 of which are currently
exercisable). An additional 1,530,000 shares are available for
future option grants under the Company's 1996 Stock Incentive Plan.
See "Management - Stock Incentive Plan." The Company intends to
file a registration statement under the Securities Act shortly
after the effective date of the Registration Statement covering
certain shares of Common Stock reserved for issuance under the 1996
Stock Incentive Plan. These options holders have agreed that they
will not directly or indirectly offer, sell, contract to sell,
grant any option to purchase or otherwise dispose of, without the
prior written consent of the Underwriter, any shares of Common
Stock or any other equity security of the Company, or any
securities convertible into or exercisable or exchangeable for, or
warrants, options or rights to purchase or acquire, Common Stock or
any other equity security of the Company, or enter into any
agreement to do any of the foregoing, for a period of twelve months
from the date of this Prospectus. Upon the expiration of such
twelve month period, approximately 383,000 shares of Common Stock
issuable under the 1996 Stock Incentive Plan and the 605,748 shares
of Common Stock issuable under the Employee Option will be
immediately eligible for resale in the public market subject to
certain volume limitations set forth in the 1996 Stock Incentive
Plan and otherwise applicable to affiliates. The Underwriter may,
in its sole discretion, and at any time without notice, release all
or any portion of the shares subject to the lock-up agreements.
The Securities and Exchange Commission has recently proposed
reducing the initial Rule 144 holding period to one year and the
Rule 144(k) holding period to two years. There can be no assurance
as to when or whether such rule changes will be enacted. If
enacted, such modification will have a material effect on the time
when certain shares of the Common Stock become eligible for resale.
