<PAGE> 1
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.
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(Exact name of registrant as specified in its charter)
Illinois 36-3546039
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(State of incorporation (I.R.S. Employer
or organization) Identification No.)
4800 South Central Avenue, Chicago, Illinois 60638
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(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)
<PAGE> 2
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. 1 (the "Amendment") 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 September 19,
1996, a copy of which incorporated information is attached hereto as Exhibit A.
Item 2. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- - ------- -----------------------
<S> <C>
1.1 Specimen Stock Certificate representing Common Stock (filed as Exhibit 4.1 to the Amendment and hereby
incorporated herein by reference).
1.2 Form of Warrant (filed as Exhibit 4.2 to the Amendment 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 the
Amendment and hereby incorporated herein by reference).
2.4 Warrant Agreement (filed as Exhibit 4.3 to the Amendment and hereby incorporated by reference).
2.5 Mama Tish's Italian Specialties, Inc. Stock Incentive Plan (filed as Exhibit 10.8 to the Amendment and
hereby incorporated by reference).
</TABLE>
-2-
<PAGE> 3
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: September 20, 1996 By: /s/ MEADE H. RUDASILL
--------------------------------
Meade H. Rudasill
Chief Executive Officer
-3-
<PAGE> 4
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 September 15, 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 2,000,000 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 not detachable or separately transferable until 14 business days
after 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 September 20, 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
<PAGE> 5
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
<PAGE> 6
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.
<PAGE> 7
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.
<PAGE> 8
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)
<PAGE> 9
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
<PAGE> 10
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
<PAGE> 11
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
American Securities Transfer, 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.
<PAGE> 12
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 120% 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 American
Securities Transfer & Trust Inc., located in Denver, Colorado.
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,
<PAGE> 13
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 14,048,674
shares of Common Stock outstanding. Of these shares, the 2,000,000 shares sold
by the Company in this Offering (2,300,000 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.
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
<PAGE> 14
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 exerciseable). 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.
