-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IS2p6QD28vWpit/2BDs/F5TCQ2GbHtXNo/Z8KCCxXFZDLTRDHysWbg/6YcXLuXab VLb98MdDWMd0DVoz8xGTMA== 0000912057-97-020455.txt : 19970617 0000912057-97-020455.hdr.sgml : 19970617 ACCESSION NUMBER: 0000912057-97-020455 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19970616 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH ATLANTIC ACQUISITION CORP CENTRAL INDEX KEY: 0001004650 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 133853272 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-80647 FILM NUMBER: 97624817 BUSINESS ADDRESS: STREET 1: 375 PARK AVE STREET 2: STE 1606 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2125934747 MAIL ADDRESS: STREET 1: 375 PARK AVE STREET 2: STE 1606 CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: ORION ACQUISITION CORP I DATE OF NAME CHANGE: 19951221 SB-2/A 1 SB-2/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1997 REGISTRATION NO. 33-80647 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 8 TO FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ NORTH ATLANTIC ACQUISITION CORP. (Name of small business issuer as specified in its charter) DELAWARE 6799 (A BLANK CHECK COMPANY) 13-3853272 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employee of incorporation or organization) Classification Code Number) Identification Number)
850 THIRD AVENUE, 10TH FLOOR, NEW YORK, NEW YORK 10022 (212) 750-5822 (Address, including zip code, and telephone number, including area code, of small business issuer's principal executive offices) DAVID J. MITCHELL, NORTH ATLANTIC ACQUISITION CORP., 850 THIRD AVENUE, 10TH FLOOR, NEW YORK, NEW YORK 10022 (212) 750-5822 (Name, address, including zip code, and telephone number, including area code, of agent for service) ---------------------------------- COPIES TO: W. Raymond Felton, Esq. James M. Jenkins, Esq. Greenbaum, Rowe, Smith, Ravin, Davis & Harter, Secrest & Emery Himmel P.O. Box 5600 700 Midtown Tower Woodbridge, New Jersey 07095-0988 Rochester, New York 14604 (908) 549-5600 (716) 232-6500
---------------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. ---------------------------------- If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. / / ---------------------------------- CALCULATION OF REGISTRATION FEE
PROPOSED AMOUNT MAXIMUM TITLE OF EACH CLASS OF TO BE OFFERING PRICE SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (1) Units consisting of one share of Class A Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Class A Common Stock (2)(3)......................... 920,000 $ 10.00 Class A Common Stock, $.01 par value (4).............................................. 920,000 $ 9.00 Class B Exchangeable Common Stock, $.01 par value (5)................................. 172,500 $ 10.00 Units, issuable upon exchange of the Class B Exchangeable Common Stock, consisting of one share of Class A Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Class A Common Stock (3)(6)(9)................................. 345,000 Class A Common Stock, $.01 par value (4).............................................. 345,000 $ 9.00 Representative's Warrants to purchase Units........................................... 80,000 Units, issuable upon exercise of the Representative's Warrants, consisting of one share of Class A Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Class A Common Stock (8)................................................ 80,000 $ 11.00 Class A Common Stock, $.01 par value (4).............................................. 80,000 $ 9.00 Representative's Warrants to purchase Class B Exchangeable Common Stock............... 15,000 $ .001 Class B Exchangeable Common Stock, $.01 par value issuable upon exercise of the Representative's Warrants (8)........................................................ 15,000 $ 11.00 Units, issuable upon exchange of the Class B Exchangeable Common Stock, consisting of one share of Class A Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Class A Common Stock (8)....................................... 30,000 Class A Common Stock, $.01 par value (4).............................................. 30,000 $ 9.00 Total................................................................................. PROPOSED MAXIMUM AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF OFFERING REGISTRATION SECURITIES TO BE REGISTERED PRICE (1) FEE Units consisting of one share of Class A Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Class A Common Stock (2)(3)......................... $ 9,200,000 $ 3,172.41 Class A Common Stock, $.01 par value (4).............................................. $ 8,280,000 $ 2,855.17 Class B Exchangeable Common Stock, $.01 par value (5)................................. $ 1,725,000 $ 522.72 Units, issuable upon exchange of the Class B Exchangeable Common Stock, consisting of one share of Class A Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Class A Common Stock (3)(6)(9)................................. Class A Common Stock, $.01 par value (4).............................................. $ 3,105,000 $ 940.91 Representative's Warrants to purchase Units........................................... $ 5 (7) Units, issuable upon exercise of the Representative's Warrants, consisting of one share of Class A Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Class A Common Stock (8)................................................ $ 880,000 $ 303.45 Class A Common Stock, $.01 par value (4).............................................. $ 720,000 $ 248.28 Representative's Warrants to purchase Class B Exchangeable Common Stock............... $ 15 (7) Class B Exchangeable Common Stock, $.01 par value issuable upon exercise of the Representative's Warrants (8)........................................................ $ 165,000 $ 50.00 Units, issuable upon exchange of the Class B Exchangeable Common Stock, consisting of one share of Class A Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Class A Common Stock (8)....................................... Class A Common Stock, $.01 par value (4).............................................. $ 270,000 $ 81.81 Total................................................................................. $ 8,174.65
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(b). (2) Includes 120,000 Units which the Underwriters have the option to purchase to cover over-allotments. (3) Together with such indeterminate number of additional securities as may be issued pursuant to the anti-dilution provisions of the Class A Warrants and the Class B Exchangeable Common Stock pursuant to Rule 416(a). (4) Issuable upon exercise of the Class A Warrants. (5) Includes 22,500 shares of Class B Exchangeable Common Stock which the Underwriters have the option to purchase to cover over-allotments. (6) Issuable upon exchange of the Class B Exchangeable Common Stock. (7) No registration fee required pursuant to Rule 457(g). (8) Together with such indeterminate number of additional securities as may be issued pursuant to the anti-dilution provisions of the Representative's Warrants pursuant to Rule 416(a). (9) No registration fee required pursuant to Rule 457(i). ---------------------------------- 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, DATED JUNE 16, 1997 NORTH ATLANTIC ACQUISITION CORP. 800,000 UNITS, AT $10.00 PER UNIT, EACH UNIT CONSISTING OF ONE SHARE OF CLASS A COMMON STOCK AND ONE REDEEMABLE CLASS A WARRANT ENTITLING THE HOLDER THEREOF TO PURCHASE, UPON CONSUMMATION OF A BUSINESS COMBINATION, ONE SHARE OF CLASS A COMMON STOCK AT A PRICE OF $9.00 150,000 SHARES OF CLASS B EXCHANGEABLE COMMON STOCK, AT $10.00 PER SHARE, EACH SHARE ENTITLING THE HOLDER THEREOF TO RECEIVE, 90 DAYS FOLLOWING THE CONSUMMATION OF A BUSINESS COMBINATION, TWO UNITS IN EXCHANGE THEREFOR North Atlantic Acquisition Corp., a Delaware corporation (the "Company"), hereby offers in a Specialized Merger and Acquisition Allocated Risk Transaction-SM- ("SMA(2)RT-SM-") 800,000 Units (the "Units"), each consisting of one share of Class A Common Stock, par value $.01 per share (the "Class A Stock"), and one Redeemable Class A Common Stock Purchase Warrant (the "Class A Warrants"), and 150,000 shares of Class B Exchangeable Common Stock, par value $.01 per share (the "Class B Stock"), each entitling the holder thereof to receive two Units in exchange therefor at the time of a Business Combination, as defined. The Units and the Class B Stock, which are being offered in the same offering, will be sold and traded separately. The Class A Stock and the Class A Warrants will become separable and transferable at such time as H.J. Meyers & Co., Inc. (the "Representative") may determine, but in no event will the Representative allow separate trading of the securities comprising the Units until the preparation of an audited balance sheet of the Company reflecting receipt by the Company of the proceeds of this offering and the filing by the Company with the Securities and Exchange Commission of a Current Report on Form 8-K which includes such audited balance sheet (the "Separation Date"). The Representative will act as representative of the several underwriters (the "Underwriters"). Each Class A Warrant will entitle the holder thereof to purchase one share of Class A Stock at a price per share of $9.00, commencing upon the consummation of a Business Combination, as defined, until the fifth anniversary of the date of this Prospectus. Each share of Class B Stock will entitle the holder thereof to receive two Units in exchange therefor 90 days following the consummation of a Business Combination, subject to the Representative's right to shorten such period. (The Class A Stock and the Class B Stock are sometimes hereinafter collectively referred to as the "Common Stock.") Furthermore, the Class A Warrants are redeemable, in whole and not in part, at the option of the Company, at a price of $.05 per Warrant at any time, upon not less than 30 days' prior written notice to the registered holders thereof, provided that the Company has consummated a Business Combination, as defined, and that the last sale price of the Class A Stock, if the Class A Stock is listed for trading on an exchange or interdealer quotation system which provides last sale prices, or, the average of the closing bid and asked quotes for the Class A Stock, if the Class A Stock is listed for trading on an interdealer quotation system which does not provide last sale prices, on all 10 of the trading days ending on the day immediately prior to the day on which the Company gives notice of redemption, has been $11.00 or higher. Prior to this offering, there has been no public market for the Units, the shares of Common Stock or the Class A Warrants and there can be no assurance that such a market will develop for any of such securities after the completion of this offering. The offering prices of the Units and the Class B Stock and the exercise prices and terms of the Class A Warrants have been arbitrarily determined by the Company and the Representative, and bear no relationship to the Company's assets, book value, or other generally accepted criteria of value. For additional information regarding the factors considered in determining the initial public offering prices of the Units and the Class B Stock and the exercise prices and the terms of the Class A Warrants, see "Risk Factors" and "Underwriting." The Company anticipates that the Units, the Class A Stock, the Class A Warrants and the Class B Stock will be quoted on the OTC Bulletin Board under the symbols "NACOU," "NACO," "NACOW" and "NACOL," respectively. THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" (PAGE 15) AND "DILUTION." THIS OFFERING WILL NOT BE CONDUCTED IN ACCORDANCE WITH RULE 419 OF REGULATION C OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). RULE 419 OF THE ACT WAS DESIGNED TO STRENGTHEN REGULATION OF SECURITIES OFFERINGS BY BLANK CHECK COMPANIES WHICH CONGRESS HAS FOUND TO HAVE BEEN A COMMON VEHICLE FOR FRAUD AND MANIPULATION IN THE PENNY STOCK MARKET. THE COMPANY IS A BLANK CHECK COMPANY BUT IS NOT SUBJECT TO RULE 419 OF THE ACT BECAUSE THE COMPANY'S NET TANGIBLE ASSETS AFTER ITS RECEIPT OF THE PROCEEDS OF THIS OFFERING WILL EXCEED $5,000,000. ACCORDINGLY, INVESTORS IN THIS OFFERING WILL NOT RECEIVE THE SUBSTANTIVE PROTECTION PROVIDED BY RULE 419 OF THE ACT. SEE "RISK FACTORS." (PAGE 15) 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.
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNTS (1) COMPANY (2)(3) Per Unit.................................................... $10.00 $.600 $9.400 Per Class B Share........................................... $10.00 $1.00 $9.00 Total (4)................................................... $9,500,000 $630,000 $8,870,000
(FOOTNOTES ON NEXT PAGE) The Units and the Class B Stock are being offered by the Underwriters, subject to prior sale, when, as and if delivered to and accepted by the Underwriters, and subject to its right to withdraw, cancel or modify this offering and to reject any order in whole or in part. It is expected that delivery of certificates will be made at the offices of H.J. Meyers & Co., Inc., 1895 Mount Hope Avenue, Rochester, New York 14620, on or about June , 1997. H.J. MEYERS & CO., INC. ------------------ THE DATE OF THIS PROSPECTUS IS JUNE , 1997. - ------------------------ (1) Does not include additional compensation to the Representative in the form of a non-accountable expense allowance of 3% of the gross proceeds of this offering. For indemnification arrangements with the Underwriters and additional compensation payable to the Representative, see "Underwriting." (2) Before deducting estimated offering expenses, including the Representatives' non-accountable expense allowance of $285,000 payable by the Company. (3) Used as a basis for calculating the underwriting discounts with respect to the Units. A portion of the net proceeds from the sale of the Class B Stock equal to the discounts and the Representative's non-accountable expense allowance attributable to the sale of the Units will be deposited into escrow with the Proceeds Escrow Agent (as defined). See "The Company -- Escrow of Offering Proceeds." (4) The Company has granted the Underwriters a 30-day option to purchase up to 120,000 additional Units and/or 22,500 additional shares of Class B Stock upon the same terms and conditions as set forth above, solely to cover over-allotments, if any. If such over-allotment option is exercised in full, the total Price to Public, Underwriting Discounts and Proceeds to Company will be $10,925,000, $724,500, and $10,200,500, respectively. See "Underwriting." "SMA(2)RT-SM-" AND "SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK TRANSACTION-SM-" ARE SERVICEMARKS OF BRIGHT LICENSING CORP. ("BRIGHT"). BRIGHT HAS GRANTED THE COMPANY, PURSUANT TO A LICENSE AGREEMENT EXECUTED BY BRIGHT AND THE COMPANY, A NON-EXCLUSIVE LICENSE TO USE, FOR PURPOSES OF MARKETING THIS OFFERING, THE SMA(2)RT-SM- AND SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK TRANSACTION-SM- SERVICEMARKS. THE SMA(2)RT-SM- SERVICEMARK HAS BEEN LICENSED TO THE COMPANY FOR PURPOSES OF MARKETING THIS OFFERING AND IS BEING USED AS AN ACRONYM TO DESCRIBE THE RISK ALLOCATION FEATURE OF THIS OFFERING. USE OF THE SMA(2)RT-SM- SERVICEMARK, HOWEVER, SHOULD IN NO WAY BE CONSTRUED BY AN INVESTOR AS AN ENDORSEMENT OF THE MERITS OF THIS OFFERING. INVESTORS SHOULD BE ADVISED THAT A SMA(2)RT-SM-, OR SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK TRANSACTION-SM-, IS IN NO WAY RELATED OR SIMILAR TO A SPAC-SM-, OR SPECIFIED PURPOSE ACQUISITION COMPANY-SM- (WHICH ARE SERVICEMARKS OF GKN SECURITIES CORP.), AND INVESTORS SHOULD NOT CONSTRUE A SMA(2)RT-SM- AS BEING SIMILAR TO A SPAC-SM- OR A SPECIFIED PURPOSE ACQUISITION COMPANY-SM-. NONE OF THE OFFICERS, DIRECTORS OR CONTROLLING PERSONS OF THE COMPANY OR THE REPRESENTATIVES ARE AFFILIATED WITH ANY OF THE OFFICERS, DIRECTORS OR CONTROLLING PERSONS OF THE OWNERS OF THE SPAC-SM- AND SPECIFIED PURPOSE ACQUISITION COMPANY-SM- SERVICEMARKS. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, THE COMMON STOCK OR THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE COMPANY HAS REGISTERED THE SECURITIES, OR AN EXEMPTION FROM REGISTRATION HAS BEEN OBTAINED (OR IS OTHERWISE AVAILABLE), ONLY IN THE STATES OF COLORADO, DELAWARE, FLORIDA, HAWAII, ILLINOIS, LOUISIANA, MARYLAND, NEW YORK, RHODE ISLAND, SOUTH CAROLINA AND THE DISTRICT OF COLUMBIA (THE "PRIMARY DISTRIBUTION STATES") AND INITIAL SALES MAY ONLY BE MADE IN SUCH JURISDICTIONS. MORE SPECIFICALLY, THE COMPANY HAS REGISTERED THE SECURITIES BY FILING IN COLORADO, BY COORDINATION IN DELAWARE, ILLINOIS, MARYLAND, RHODE ISLAND AND SOUTH CAROLINA ii AND BY NOTIFICATION IN FLORIDA, LOUISIANA AND NEW YORK. EXEMPTIONS FROM REGISTRATION HAVE BEEN OBTAINED (OR ARE OTHERWISE AVAILABLE) IN HAWAII AND THE DISTRICT OF COLUMBIA. PURCHASERS OF SECURITIES IN THIS OFFERING MUST BE RESIDENTS OF THE PRIMARY DISTRIBUTION STATES. THE SECURITIES WILL BE IMMEDIATELY AVAILABLE FOR RESALE IN EACH OF THE PRIMARY DISTRIBUTION STATES AND IN THE COMMONWEALTH OF PENNSYLVANIA. UNLESS AN APPLICABLE EXEMPTION IS AVAILABLE, PURCHASERS OF SECURITIES EITHER IN THIS OFFERING OR IN ANY SUBSEQUENT TRADING MARKET WHICH MAY DEVELOP MUST BE RESIDENTS OF SUCH JURISDICTIONS. THE COMPANY WILL AMEND THIS PROSPECTUS FOR THE PURPOSE OF DISCLOSING ADDITIONAL STATES, IF ANY, IN WHICH THE COMPANY'S SECURITIES WILL BE ELIGIBLE FOR RESALE IN THE SECONDARY TRADING MARKET. FLORIDA RESIDENTS: FLORIDA RESIDENTS WHO PURCHASE CLASS B STOCK WILL BE UNABLE TO EXCHANGE THIS STOCK FOR UNITS UNLESS AND UNTIL THE UNITS ISSUABLE UPON EXCHANGE OF THE CLASS B STOCK HAVE BEEN REGISTERED FOR SALE IN FLORIDA OR ARE ESTABLISHED TO BE EXEMPT FROM THE REQUIREMENT OF SUCH REGISTRATION. FLORIDA LAW GENERALLY PRECLUDES THE REGISTRATION OF SECURITIES THAT ARE NOT LISTED ON A SECURITIES EXCHANGE OR THE NASDAQ SYSTEM WHEN THE OFFERING PRICE OF SUCH SECURITIES IS $5.00 OR LESS PER SHARE. BECAUSE THE "EXCHANGE PRICE" OF CLASS B STOCK IS NIL, THE "OFFERING PRICE" OF THE UNITS ISSUABLE UPON EXCHANGE OF THE CLASS B STOCK COULD BE CONSIDERED NOT GREATER THAN $5.00. FOR THIS REASON, NO PERMIT TO SELL THE UNITS ISSUABLE UPON EXCHANGE OF THE CLASS B STOCK IN FLORIDA HAS BEEN OBTAINED. THERE CAN BE NO ASSURANCE THAT THE UNITS ISSUABLE UPON EXCHANGE OF THE CLASS B STOCK WILL EVER BE REGISTERED IN FLORIDA OR ESTABLISHED TO BE EXEMPT FROM THE REQUIREMENT OF SUCH REGISTRATION. iii PROSPECTUS SUMMARY THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS IS NOT EXERCISED. INVESTORS SHOULD CONSIDER CAREFULLY THE INFORMATION SET FORTH IN THIS PROSPECTUS UNDER THE HEADING "RISK FACTORS." THE COMPANY BUSINESS OBJECTIVES The Company, which is a "blank check" or "blind pool" company, was formed on August 9, 1995 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other business combination (a "Business Combination") with an operating business (a "Target Business"). The business objective of the Company is to effect a Business Combination with a Target Business which the Company believes has significant growth potential. The Company intends to utilize the net proceeds of this offering, equity securities, debt securities, bank borrowings or a combination thereof in effecting a Business Combination. The Company will seek to acquire a Target Business without limiting itself to a particular industry. Most likely, the Target Business will be primarily located in the United States, although the Company reserves the right to acquire a Target Business primarily located outside the United States. In seeking a Target Business, the Company will consider, without limitation, businesses which (i) offer or provide services or develop, manufacture or distribute goods in the United States or abroad, including, without limitation, in the following areas: health care and health products, educational services, environmental services, consumer-related products and services (including amusement and/ or recreational services), personal care services, voice and data information processing and transmission and related technology development or (ii) is engaged in wholesale or retail distribution. The Company will not acquire a Target Business unless the fair market value of such business, as determined by the Company based upon standards generally accepted by the financial community, including revenues, earnings, cash flow and book value (the "Fair Market Value"), is at least 80% of the net assets of the Company at the time of the consummation of a Business Combination (the "Fair Market Value Test"). If the Company determines that the financial statements of a proposed Target Business do not clearly indicate that the Fair Market Value Test has been satisfied, the Company will obtain an opinion from an investment banking firm that is a member of the National Association of Securities Dealers, Inc. (the "NASD") with respect to the satisfaction of such criteria. The Company has not had any contact or discussions with any entity or representatives of any entity regarding a Business Combination. While the Company may, under certain circumstances, seek to effect Business Combinations with more than one Target Business, in all likelihood, as a result of its limited resources, the Company will have the ability to effect only a single Business Combination with a Target Business. The Company does not intend to register as a broker-dealer, merge with or acquire a registered broker-dealer, or otherwise become a member of the NASD. BUSINESS EXPERIENCE OF PRINCIPALS The executive officers and the other directors of the Company have business experience which has provided them with skills which the Company believes will be helpful in evaluating potential Target Businesses and negotiating a Business Combination. ESCROW OF INITIAL PUBLIC OFFERING PROCEEDS Upon completion of this offering, an aggregate of $8,000,000 (or $9,200,000 if the Underwriters' over-allotment option is exercised in full), representing an amount equal to the gross proceeds from the sale of the Units, will be placed in an escrow account maintained by Chase Manhattan Bank (the "Proceeds Escrow Agent"), subject to release upon the earlier of (1) receipt by the Proceeds Escrow Agent of: (i) written notice from the Company of the Company's completion of a transaction or series of transactions in which at least 50% of the gross proceeds from this offering are committed to a specific line of business as a result of a Business Combination (including any redemption payments), (ii) a written opinion of counsel of the Company, reasonably acceptable to the Proceeds Escrow Agent, that a Business Combination was approved by a vote of two-thirds of the shares of Common Stock of the Company, (with each share of Class B Stock entitled to two votes) as required by this Prospectus, and that the holders of more than 20% of the Class A Stock of the Company have not elected to redeem their Class A Stock, as required by this Prospectus, and (iii) a written certification from the Company that the fair market value (as determined by the Company, based upon standards generally accepted by the financial community, including revenues, earnings, cash flow, and book value) of the Target Business exceeds 80% of the net value of the assets of the Company and that all other actions required by the Company for the release of the escrow proceeds have been met, or (2) either (i) after 18 months of the date of effectiveness of this offering (or 24 months if the Proceeds Escrow Agent has received notice within the initial 18 month period that the Extension Criteria, as herein defined, have been satisfied) if the Proceeds Escrow Agent has not received written notice from the Company of the Company's completion of a transaction or series of transactions in which at least 50% of the gross proceeds from this offering are committed to a specific line of business as a result of a Business Combination, or (ii) receipt by the Proceeds Escrow Agent of written notification to distribute the escrow proceeds to the holders of Class A Stock purchased as part of the Units sold in this offering or in the open market thereafter in redemption of the Class A Stock, or (iii) receipt by the Proceeds Escrow Agent of written notification to distribute part of the escrow proceeds to the holders of record of Class A Stock purchased as part of the Units sold in this offering or in the open market thereafter who elected to have their shares redeemed in accordance with the terms set forth in this Prospectus. The Company will notify the Representative and the NASD prior to the release of funds from the escrow account. All proceeds held in the escrow account will be invested, until released, in short-term United States government securities, including treasury bills, cash and cash equivalents. Except as noted below, the proceeds to the Company from the sale of the Class B Stock will not be placed in escrow. Rather, these proceeds will be used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, to Bright pursuant to a license agreement executed by Bright and the Company, (iii) to cover all the expenses incurred by the Company in this offering, including the Underwriters' discounts and the Representative's non-accountable expense allowance, and (iv) to fund the Company's operating expenses, including investment banking fees and the costs of business, legal and accounting due diligence on prospective Target Businesses, until the consummation of a Business Combination. In addition, a portion of the net proceeds from the sale of the Class B Stock equal to the Underwriters' discounts and the Representative's non-accountable expense allowance with respect to the Units, as noted in clause (iii) above, will be placed in the above mentioned escrow account for the benefit of purchasers of Class A Stock as part of the Units sold in this offering and in the open market thereafter. Management is unaware of any circumstance under which this policy, through management's own initiative, may be changed. STOCKHOLDER APPROVAL OF BUSINESS COMBINATIONS The Company, prior to the consummation of any Business Combination, will submit such transaction to the Company's stockholders for their approval, even if the nature of the Business Combination is such as would not ordinarily require stockholder approval under applicable state law. In connection with such request, the Company intends to provide stockholders with disclosure documentation in accordance with the proxy solicitation regulations under the Securities Exchange Act of 1934, as amended (the "Proxy Rules"), including audited financial statements, concerning a Target Business. All of the Company's present stockholders, including all directors and the Company's executive officers, have agreed to vote all of their respective shares of Class A Stock in accordance with the vote of the majority of the shares voted by all other stockholders of the Company ("non-affiliated public stockholders") with respect to any such Business Combination. A Business Combination will not be 2 consummated unless approved by a vote of two-thirds of the shares of Common Stock voted by the stockholders (in person or by proxy). Each share of Class B Stock is entitled to two votes, representing the two shares of Class A Stock into which each share of Class B stock is exchangeable. In addition, the Delaware General Corporation Law requires approval of certain mergers and consolidations by a majority of the outstanding stock entitled to vote. Holders of Class A Warrants who otherwise do not own any shares of Common Stock will not be entitled to vote on any Business Combination. REDEMPTION RIGHTS At the time the Company seeks stockholder approval of any potential Business Combination, the Company will offer (the "Redemption Offer") to each of the non-affiliated public holders of Class A Stock the right, for a specified period of time of not less than 20 calendar days, to redeem his shares of Class A Stock at a price equal to the Liquidation Value (as defined below) of such shares as of the record date established for determining the stockholders entitled to vote with respect to the approval of a Business Combination (the "Record Date"). The Redemption Offer will be described in the disclosure documentation relating to the proposed Business Combination. The "Liquidation Value" for each share of Class A Stock will be determined as of the Record Date by dividing (A) the greater of (i) the Company's net worth as reflected in the Company's then current financial statements as audited by the Company's independent accountants, or (ii) the amount of the proceeds of the Company in the escrow account (including interest earned thereon) by (B) the number of shares of Class A Stock held by non-affiliated public stockholders; however, in no event will the Liquidation Value of each share of Class A Stock be less than $10.00 plus interest earned thereon. In connection with the Redemption Offer, if non-affiliated public stockholders holding 20% or less of the shares of Class A Stock elect to redeem their shares, the Company may, but will not be required to, proceed with such Business Combination and, if the Company elects to so proceed, will redeem such shares at their Liquidation Value as of the Record Date. In any case, if non-affiliated public stockholders holding more than 20% of the Class A Stock elect to redeem their shares, the Company will not proceed with such potential Business Combination and will not redeem such shares. All holders of Class A Stock and all holders of Warrants prior to the date of this Prospectus will be allowed to participate in a Redemption Offer only if they purchase shares of Class A Stock in this offering or on the open market thereafter, and only as to any shares of Class A Stock so purchased. ESCROW OF OUTSTANDING SHARES All of the shares of Class A Stock and Series A Preferred Stock (the "Escrowed Stock") outstanding immediately prior to the date of this Prospectus have been placed in escrow with Greenbaum, Rowe, Smith, Ravin, Davis & Himmel (the "Share Escrow Agent"), until the earlier of (i) the occurrence of the consummation of the first Business Combination or (ii) 18 months from the date of this Prospectus provided that such 18-month period will be extended by six months to 24 months from the date of this Prospectus if, prior to the expiration of the 18-month period, the Company has become a party to a letter of intent or a definitive agreement to effect a Business Combination (the "Extension Criteria"). During the escrow period, the holders of the Escrowed Stock will not be able to sell or otherwise transfer their respective shares of Escrowed Stock (with the exceptions described below), but will retain all other rights as stockholders of the Company, including, without limitation, the right to vote escrowed shares of Class A Stock, subject to their agreement to vote all of their shares in accordance with the vote of a majority of the non-affiliated public holders of Class A Stock with respect to a consummation of a Business Combination or liquidation proposal, but excluding the right to request the redemption of Escrowed Stock pursuant to a Redemption Offer. Subject to compliance with applicable securities laws, any such holder may transfer his, her or its Escrowed Stock to a family member or to a trust established for the benefit of himself, herself, or a family member or to another affiliated entity (with the consent of the Representative which will not be unreasonably withheld) or, in the event of the holder's death, by will or operation of law, or in the case of its dissolution or merger, provided that any such transferee must agree as a condition to such transfer to be bound by the restrictions on transfer applicable to the original holder and, in the case of present stockholders other than the holders of the Placement Shares, that the transferor (except in the case of death) or 3 successsor will continue to be deemed the beneficial owner (as defined in Regulation 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of such transferred shares. Each of the executive officers and the other directors of the Company has agreed to surrender his shares of Class A Stock to the Company at the purchase price at which such shares were acquired ($.10 per share) if he resigns prior to the consummation of the first Business Combination. RESTRICTIONS ON SALE OF OUTSTANDING SHARES All of the shares of Class A Stock outstanding prior to the date of this Prospectus other than 20,000 shares of Class A Stock issued in a private placement by the Company in November 1995 (the "Placement Shares") and the shares of Class A Stock issuable upon the exercise of options granted to the Company's officers and directors and the exercise of warrants included in the units issuable upon exercise of such options are referred to herein as "Founders' Shares". The Founders' Shares are subject to an agreement with the holders of the Founders' Shares not to sell or otherwise transfer such shares for a period of 24 months from the date the currently outstanding Founders' Shares were originally issued (August 18, 1995), but in no event earlier than 120 days following the consummation of the first Business Combination. However, subject to compliance with applicable securities laws, any such holder may transfer Founders' Shares to a family member or to a trust established for the benefit of himself, herself, or to a family member or to another affiliated entity (with the consent of the Representative which will not be unreasonably withheld) or in the event of the holder's death by will or operation of law, or its dissolution or merger, provided that any such transferee or successor must agree as a condition to such transfer to be bound by the restrictions on transfer applicable to the original holder and that the transferor or its principals, if the transferor is an entity (except in the case of death) will continue to be deemed the beneficial owner (as defined in Regulation 13d-3 promulgated under the Exchange Act) of such transferred shares. The certificates representing the Founders' Shares will bear a restrictive legend with respect to such restrictions and the Company's transfer agent will note such restrictions on the Company's transfer books and records. See "Management -- Options to Purchase Units." The Placement Shares are subject to an agreement with the holders of the Placement Shares not to sell or otherwise transfer such shares for a period ending the earlier of 24 months from the date such shares were issued (November 15, 1995) or 60 days following the consummation of the first Business Combination. The Company has outstanding 94 shares of Series A Preferred Stock which are held by CDIJ Capital Partners, L.P. ("CDIJ"), an indirect affiliate of Bright. The shares are convertible to Class A Stock on the basis of one thousand shares of Class A Stock for each share of Series A Preferred Stock for a one year period commencing upon the consummation of a Business Combination. The 94,000 shares of Class A Stock issuable upon conversion of the Company's outstanding Series A Preferred Stock will be offered by a Prospectus at the time of a Business Combination and thereafter will be freely tradable under applicable securities laws. However, the holders of such shares have agreed not to sell or otherwise transfer such shares until 60 days following the consummation of the first Business Combination and to limit the volume of such sales to the amount that is permitted by Rule 144 ("Rule 144") promulgated under the Securities Act of 1933, as amended. Subject to other conditions, Rule 144 permits sales, within any three-month period, of a number of shares that does not exceed the greater of 1% of the total number of outstanding shares of the same class or, if the shares are quoted on an exchange or on NASDAQ, the average weekly trading volume during the four calendar weeks preceding the sale. See "Risk Factors -- Shares Eligible for Future Sale." REDEMPTION OF CLASS A STOCK IF NO BUSINESS COMBINATION If the Company does not effect a Business Combination within 18 months from the date of this Prospectus, or 24 months from the date of this Prospectus if the Extension Criteria have been satisfied, the Company will submit to the holders of Class A Stock for their consideration a proposal to distribute to the then holders of Class A Stock acquired as part of the Units sold in this offering or in 4 the open market thereafter, in redemption of such shares, the amounts in the interest bearing escrow account. Following such a redemption of Class A Stock, each outstanding share of Class B Stock will be exchanged for two shares of Class A Stock. The assets of the Company (other than the escrowed assets) will be used to pay the Company's liabilities and to redeem the Company's outstanding Series A Preferred Stock at its liquidation value, $9,400. The amount per share for distribution, to the holders of Class A Stock acquired as part of the Units sold in this offering or in the open market thereafter, and exclusive of any income earned on the proceeds held in the escrow account, will be approximately equal to the initial public offering price per Unit in this offering of $10.00 per Unit (assuming no value is attributed to the Class A Warrants included in the Units offered hereby). All of the present stockholders, including the Company's executive officers and other directors and their affiliates, are required by the escrow agreement to which their stock is subject to vote their shares of Class A Stock in accordance with the vote of the majority of all non-affiliated public holders of Common Stock with respect to any redemption proposal. See "The Company -- Escrow of Outstanding Shares." Holders of Class A Warrants, however, will only be entitled to vote on any redemption proposal, and allowed to participate in any redemption distribution, if they purchase shares of Common Stock in this offering or on the open market thereafter, but only as to any shares of Common Stock so purchased. Present stockholders, including officers, directors and their affiliates, will not participate in any redemption distribution with respect to the shares of Common Stock owned by them as of the date of this Prospectus. THE OFFERING Securities offered to the public............................ 800,000 Units, at $10.00 per Unit and 150,000 shares of Class B Exchangeable Common Stock, at $10.00 per share of Class B Stock. Each Unit consists of one share of Common Stock and one Class A Warrant entitling the holder thereof to purchase one share of Common Stock at a price of $9.00 commencing 90 days after the date of a Business Combination or any earlier date on or after the date of a Business Combination that the Representative, in its sole discretion, so elects. Each share of Class B Stock will entitle the holder thereof to receive two Units in exchange therefor 90 days after the date of a Business Combination. The Units and the Class B Stock, which are being offered in the same offering, will be sold and traded separately. The securities comprising the Units will become separable and transferable at such time as the Representative may determine, but in no event will the Representative allow separate trading of the securities comprising the Units until the preparation of an audited balance sheet of the Company reflecting receipt by the Company of the proceeds of this offering and the filing by the Company with the Commission of a Current Report on Form 8-K which includes such audited balance sheet. See "Description of Securities" and "Principal Stockholders."
5 Proposed OTC Bulletin Board Symbols........................... Units -- NACOU Class A Stock -- NACO Class A Warrants -- NACOW Class B Stock -- NACOL Class A Stock outstanding prior to the offering...................... 106,000 shares. Class A Stock to be outstanding after the offering (1)............ 906,000 shares. Class B Stock outstanding prior to the Offering...................... None Class B Stock outstanding after the Offering(2)................... 150,000 shares Warrants: Number of Class A Warrants to be outstanding after the offer- ing (3)......................... 800,000 Class A Warrants. Exercise price of Class A War- rants........................... The exercise price of each Class A Warrant is $9.00 per share of Common Stock, subject to adjustment in certain circumstances. See "Description of Securities." Exercise period................. The exercise period of the Class A Warrants will commence 90 days after the consummation of a Business Combination or any earlier date on or after the date of a Business Combination that the Representative, in its sole discretion so elects, and will expire at 5:00 p.m., New York City time, on the fifth anniversary of the date of this Prospectus. Redemption...................... The Class A Warrants are redeemable by the Company, each as a class, in whole and not in part, at the option of the Company, at a price of $.05 per Class A Warrant at any time, upon not less than 30 days' prior written notice to the registered holders thereof, provided that the Company has consummated a Business Combination and that the last sale price of the Class A Stock, if the Class A Stock is listed for trading on an exchange or interdealer quotation system which provides last sale prices, or, the average of the closing bid and asked quotes for the Class A Stock, if the Class A Stock is listed for trading on an interdealer quotation system which does not provide last sale prices, on all 10 of the trading days ending on the day immediately prior to the day on which the Company gives notice of redemption, has been $11.00 or higher.
(1) Excludes a total of 2,430,666.6 shares of Class A Stock, consisting of: (i) 800,000 shares of Class A Stock reserved for issuance upon the exercise of the Class A Warrants, (ii) 300,000 shares of Class A Stock reserved for issuance upon exchange of the Class B Stock, (iii) 300,000 shares of Class A Stock reserved for issuance upon exercise of the Class A Warrants comprising a part of the Units underlying the Class B Stock, (iv) 120,000 shares of Class A Stock included in the Units subject to the Underwriters' over-allotment option, (v) 120,000 shares of Class A Stock reserved for issuance upon the exercise of the Class A Warrants included in the Units subject to the 6 Underwriters' over-allotment option, (vi) 45,000 shares of Class A Stock reserved for issuance upon exercise of the Units underlying the Class B Stock subject to the Underwriters' over-allotment option, (vii) 45,000 shares of Class A Stock reserved for issuance as part of the Class A Warrants comprising a part of the Units underlying the Class B Stock subject to the Underwriters' over-allotment option, (viii) 266,666.6 shares of Class A Stock reserved for issuance upon exercise of options to purchase Units granted to executive officers and directors of the Company, (ix) 94,000 shares of Class A Stock reserved for issuance upon conversion of the Company's outstanding Series A Preferred Stock, (x) 80,000 shares of Class A Stock included in the Units reserved for issuance upon exercise of warrants to purchase 80,000 Units, exercisable over a period of four years commencing one year from the date of this Prospectus, being sold to the Representative (the "Representative's Unit Purchase Warrants"), (xi) 80,000 shares of Class A Stock reserved for issuance upon the exercise of the Class A Warrants included in the Units reserved for issuance upon exercise of the Representative's Unit Purchase Warrants, (xii) 30,000 shares of Class A Stock included in the Units reserved for issuance upon exercise of a warrant to purchase 15,000 shares of Class B Stock, exercisable over a period of four years commencing one year from the date of this Prospectus, being sold to the Representative's (the "Representative's Class B Warrants"), (xiii) 30,000 shares of Class A Stock reserved for issuance upon exercise of Class A Warrants comprising a part of the Units underlying the Representative's Class B Warrants, (xiv) 60,000 shares of Class A Stock reserved for issuance upon exchange of the Class B Stock reserved for issuance upon the exercise of options granted to two of the Company's directors, and (xv) 60,000 shares of Class A Stock reserved for issuance upon exercise of the Class A Warrants comprising a part of the Units underlying the Class B Stock reserved for issuance upon the exercise of options granted to two of the Company's directors. See "Management," "Underwriting" and "Certain Transactions." (2) Excludes (i) 22,500 shares of Class B Stock subject to the Underwriters' over-allotment option and (ii) 15,000 shares of Class B Stock issuable upon exercise of the Representative's Class B Warrants. See "The Company--Capital Commitment," "Certain Transactions" and "Underwriting." (3) Excludes (i) 133,333.3 Class A Warrants comprising part of the Units issuable upon exercise of options granted to executive officers and directors of the Company; (ii) 120,000 Class A Warrants included in the Units subject to the Underwriters' over-allotment option, (iii) an additional 45,000 Class A Warrants comprising a part of the Units underlying the Class B Stock subject to the Underwriters' over-allotment option, (iv) 80,000 Class A Warrants included in the Units reserved for issuance upon exercise of the Representative's Unit Purchase Warrants, (v) 30,000 Class A Warrants underlying the Units underlying the Representative's Class B Warrants, and (vi) 60,000 Class A Warrants comprising a part of the Units underlying the Class B Stock reserved for issuance upon the exercise of options granted to two of the Company's directors. See "Management" and "Underwriting." THE SMA(2)RT-SM- STRUCTURE Essentially, a Specialized Merger and Acquisition Allocated Risk Transaction-SM- (SMA(2)RT-SM-) provides an investor in this offering with an opportunity to purchase Units for $10.00 each, the proceeds of which will be placed into escrow for the benefit of stockholders and will be returned if the Company does not effect a Business Combination; and/or Class B Stock (which are exchangeable into Units) for $10.00 each, the proceeds of which will not be placed in escrow, but rather will be used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, due to Bright pursuant to a license agreement executed by Bright and the Company, (iii) to cover all of the Company's expenses incurred in this offering, including the Underwriters' discounts and the Representative's non-accountable expense allowance, and (iv) to fund the Company's operating expenses, including investment banking fees and the costs of business, legal and accounting due diligence on prospective Target Businesses. Consequently, when the Class B Stock is exchanged, holders of Class B Stock would 7 pay substantially less for the Units issuable upon exchange of such Class B Stock than holders of Units and, accordingly, may realize a higher return on their investment. Holders of Class B Stock, however, risk the loss of their investment if the Company fails to effect a Business Combination, while holders of shares of Class A Stock comprising part of the Units benefit from the Company's escrow of an amount equal to the gross proceeds from the sale of the Units in this offering. RISK FACTORS The securities offered in this Specialized Merger and Acquisition Allocated Risk Transaction-SM-(SMA(2)RT-SM-) involve a high degree of risk and immediate substantial dilution and should not be purchased by investors who cannot afford the loss of their entire investment. Prior to this offering there has been no public market for the Units, the Class A Stock, the Class A Warrants or the Class B Stock and there can be no assurance that such a market will develop after completion of this offering. Such risk factors include, among others, the following: the Company's lack of operating history and limited resources; discretionary use of proceeds; no escrow security for the purchasers of the Class A Warrants and Class B Stock; intense competition in selecting a Target Business and effecting a Business Combination; and, because of the Company's limited resources, the possibility that the Company's due diligence investigation of a potential Business Combination will be restricted, especially in the case of a Target Business outside the United States. Investors will incur immediate substantial dilution. See "Risk Factors," "Dilution" and "Use of Proceeds." USE OF PROCEEDS The Company intends to use substantially all of the net proceeds of the offering, together with the interest earned thereon, to attempt to effect a Business Combination, including selecting and evaluating potential Target Businesses and structuring, negotiating and consummating a Business Combination (including possible payment of finder's fees or other compensation to persons or entities which provide assistance or services to the Company). Approximately 84% of the gross proceeds of the offering by the Company (representing an amount equal to the $8,000,000 gross proceeds from the sale of the Units as a percentage of the gross proceeds of this offering) will be held in an escrow account maintained by the Proceeds Escrow Agent, until the earlier of written notification by the Company to the Proceeds Escrow Agent (i) of the Company's completion of a transaction or series of transactions in which at least 50% of the gross proceeds from this offering is committed to a specific line of business as a result of a consummation of a Business Combination (including any redemption payments), or (ii) to distribute the escrowed proceeds, in connection with a redemption of the Company's Class A Stock, to the then holders of the Class A Stock purchased as part of the Units sold in this offering or acquired in the open market thereafter. All proceeds held in the escrow account will be invested, until released, in short-term United States government securities, including treasury bills, cash and cash equivalents. Except as noted below, the proceeds to the Company from the sale of the Class B Stock will not be placed in escrow. Rather, these proceeds will be used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, due to Bright pursuant to a license agreement executed by Bright and the Company, (iii) to cover all of the expenses incurred by the Company in this offering, including the Underwriters' discounts and the Representative's non-accountable expense allowance, and (iv) to fund the Company's operating expenses, including investment banking fees and the costs of business, legal and accounting due diligence on prospective Target Businesses, until the Company effects a Business Combination. See "Proposed Business -- Servicemark License." However, in addition, a portion of the net proceeds from the sale of the Class B Stock equal to the Underwriters' discounts and the Representative's non-accountable expense allowance with respect to the Units will be placed in the above-mentioned escrow account for the benefit of purchasers of Class A Stock as part of the Units sold in this offering and in the open market thereafter. In addition, proceeds from the sale of the Class B Stock will be used for the general administrative expenses of the Company, including legal and accounting fees and administrative support expenses in connection with the Company's reporting 8 obligations under the Exchange Act. The Company may seek to issue additional securities if it requires additional funds to meet its operating and administrative expenses. The Company has agreed with the Representative that it will not issue (other than pursuant to this offering) any securities or grant options or Warrants to purchase any securities of the Company without the consent of the Representative for a period of 18 months from the date of this Prospectus and for up to six additional months if the Extension Criteria have been satisfied. To the extent that the Company's securities are used as consideration to effect a Business Combination, the balance of the net proceeds of this offering not expended will be used to finance the operations (including the possible repayment of debt) of the Target Business. No cash compensation will be paid to any officer or director until after the consummation of the first Business Combination. Since the role of the Company's current directors and executive officers after a consummation of a Business Combination is uncertain, the Company has no ability to determine what remuneration, if any, will be paid to such persons after such consummation of a Business Combination. SUMMARY FINANCIAL INFORMATION The summary financial information set forth below is derived from the more detailed financial statements appearing elsewhere in this prospectus. Such information should be read in conjunction with such financial statements, including the notes thereto.
MARCH 31, 1997 --------------------------- ACTUAL AS ADJUSTED(1) ----------- -------------- (UNAUDITED) Balance Sheet Data: Total assets............................................................. $ 203,526 $ 8,216,363 Total liabilities........................................................ 184,857 -- Deficit accumulated during development stage............................. (34,931) (58,845) Series A preferred stock................................................. 1 1 Stockholders' equity and common stock subject to redemption.............. 18,669 8,216,363(2)
- ------------------------ (1) Gives effect to the sale of the Units at the initial public offering price of $10.00 per Unit, the sale of the Class B Stock at the initial public offering price of $10.00 per share of Class B Stock, and initial application of the estimated net proceeds (after the payment of all estimated offering expenses, including the Representative's non-accountable expense allowance) of $8,390,000 therefrom. See "Use of Proceeds." Assumes no exercise of the Underwriters' over-allotment option or the Representative's Warrants. See "Underwriting". (2) In the event the Company consummates a Business Combination, the redemption rights afforded to the non-affiliated public holders of Class A Stock may result in the conversion into cash of up to 20% of the aggregate number of shares held by the non-affiliated public stockholders, amounting to 160,000 shares, at a per share redemption price equal to (A) the greater of (i) the Company's net worth or (ii) the amount of proceeds of the Company in the escrow account (including income earned thereon) divided by (B) the number of shares held by non-affiliated public holders of Class A Stock, but not less than $10.00 per share plus interest earned thereon. 9 THE COMPANY BUSINESS OBJECTIVE The Company, which is a "blank check" or "blind pool" company, was formed in August 1995 to serve as a vehicle to effect a Business Combination with a Target Business which the Company believes has significant growth potential. The Company intends to utilize the net proceeds of this offering, equity securities, debt securities, bank borrowings or a combination thereof in effecting a Business Combination. The Company will seek to acquire a Target Business without limiting itself to a particular industry. Most likely, the Target Business will be primarily located in the United States, although the Company reserves the right to acquire a Target Business primarily located outside the United States. In seeking a Target Business, the Company will consider, without limitation, businesses which (i) offer or provide services or develop, manufacture or distribute goods in the United States or abroad, including, without limitation, in the following areas: health care and health products, educational services, environmental services, consumer related products and services (including amusement and/or recreational services), personal care services, voice and data information processing and transmission and related technology development or (ii) is engaged in wholesale or retail distribution. The Company will not effect a Business Combination with a Target Business unless the Fair Market Value of such business is at least 80% of the net assets of the Company at the time of consummation of such Business Combination. If the Company determines that the financial statements of a Proposed Target Business do not clearly indicate that the Fair Market Value Test has been satisfied, the Company will obtain an opinion from an investment banking firm that is a member in good standing of the NASD with respect to the satisfaction of such criteria. The Company has not had any contact or discussions with representatives of any Target Business regarding a consummation of a Business Combination. While the Company may, under certain circumstances, seek to effect Business Combinations with more than one Target Business, in all likelihood, as a result of its limited resources, the Company will have the ability to effect only a single Business Combination. The Company does not intend to register as a broker-dealer, merge with or acquire a registered broker-dealer, or otherwise become a member of the NASD. BUSINESS EXPERIENCE OF PRINCIPALS The executive officers and the other directors of the Company have business experience which has provided them with skills which the Company believes will be helpful in evaluating potential Target Businesses and negotiating and consummating a Business Combination. Prior to their involvement with the Company, none of the directors or the executive officers of the Company has been involved in any "blind pool" or "blank check" offerings. David J. Mitchell, the Company's Chairman and Chief Executive Officer has been previously involved with two Specified Purpose Acquisition Companies ("SPAC"). A SPAC is a company organized for the purpose of acquiring or merging with an operating business in a specified area. From December 1993 until June 1995, Mr. Mitchell served as a director and Secretary of Israel Tech Acquisition Corporation, a public company, which acquired the assets of, and changed its name to, Kellstrom Industries, Inc. in June 1995. From March 1995 until August 1995, Mr. Mitchell served as a director, Chief Financial Officer, Treasurer and Secretary of European Gateway Acquisition Corporation, a public company, which acquired Bogen Communication, Inc. and changed its name to Bogen Communications International, Inc. in August 1995. Mr. Mitchell continues to serve as a director of both Kellstrom Industries, Inc. and Bogen Communications International, Inc., both of which are operating companies whose common stock is actively traded, as of the date of this Prospectus. See "Management." ESCROW OF OFFERING PROCEEDS Upon completion of the offering by the Company, approximately 84% of the gross proceeds therefrom (representing an amount equal to the $8,000,000 gross proceeds from the sale of the Units as a percentage of the gross proceeds of this offering) will be placed in an escrow account maintained by the Proceeds Escrow Agent, subject to release upon the earlier of (1) receipt by the Proceeds Escrow Agent of: (i) written notice from the Company of the Company's completion of a transaction or series of transactions in which at least 50% of the gross proceeds from this offering are committed to a 10 specific line of business as a result of a Business Combination (including any redemption payments), (ii) a written opinion of counsel of the Company, reasonably acceptable to the Proceeds Escrow Agent, that a Business Combination was approved by a vote of two-thirds of the shares of Common Stock, with each share of Class B Stock entitled to two votes, as required by this Prospectus, and that the holders of more than 20% of the Class A Stock have not elected to redeem their Class A Stock, as required by this Prospectus, and (iii) a written confirmation from the Company, that the fair market value (as determined by the Company, based upon standards generally accepted by the financial community, including revenues, earnings, cash flow, and book value) of the Target Business exceeds 80% of the net value of the assets of the Company, and that all other actions required by the Company for the release of the escrow proceeds have been met, or (2) either (i) after 18 months of the date of effectiveness of this offering (or 24 months if the Proceeds Escrow Agent has received notice within the initial 18 month period that the Extension Criteria, as herein defined, have been satisfied) if the Proceeds Escrow Agent has not received written notice from the Company of the Company's completion of a transaction or series of transactions in which at least 50% of the gross proceeds from this offering are committed to a specific line of business as a result of a Business Combination, or (ii) receipt by the Proceeds Escrow Agent of written notification to distribute the escrow proceeds to the holders of Class A Stock purchased as part of the Units sold in this offering or in the open market thereafter, or (iii) receipt by the Proceeds Escrow Agent of written notification to distribute part of the escrow proceeds to the holders of record of Class A Stock purchased as part of the Units sold in this offering or in the open market thereafter who elected to have their shares redeemed in accordance with the terms set forth in this Prospectus. All proceeds held in the escrow account will be invested, until released, in short-term United States government securities, including treasury bills, cash and cash equivalents. Except as noted below, the proceeds to the Company from the sale of the Class B Stock will not be placed in escrow. Rather, these proceeds will be used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, due to Bright pursuant to a license agreement executed by Bright and the Company, and (iii) to cover all of the expenses incurred by the Company in this offering, including the Underwriters' discounts and the Representative's non-accountable expense allowance, (iv) to fund the Company's operating expenses, including investment banking fees and the costs of business, legal and accounting due diligence on prospective Target Businesses until the Company effects a Business Combination. In addition, a portion of the net proceeds from the sale of the Class B Stock equal to the Underwriters' discounts and the Representative's non-accountable expense allowance payable with respect to the Units, as noted in clause (iii) above, will be placed in the above-mentioned escrow account for the benefit of purchasers of Class A Stock as part of the Units sold in this offering and in the open market thereafter. As a result, if the escrowed funds are paid to the holders of Units, the payment will equal the gross purchase price for the Unit (plus any interest earned thereon), notwithstanding that the Company paid the Underwriters' discount and the Representative's non-accountable expense allowance out of such gross proceeds. To the extent that the proceeds from the sale of the Class B Stock, are less than the expenses the Company incurs seeking to effect a Business Combination, the Company would need additional financing. There can be no assurance that the Company would be able to arrange any such additional financing. Management is unaware of any circumstances under which this policy, through management's own initiative, may be changed. See "Use of Proceeds." STOCKHOLDER APPROVAL OF BUSINESS COMBINATIONS The Company, prior to the consummation of any Business Combination, will submit such transaction to the Company's stockholders for their approval, even if the nature of the Business Combination is such as would not ordinarily require stockholder approval under applicable state law. In connection with such request, the Company intends to provide stockholders with disclosure documentation in accordance with the Proxy Rules, including audited financial statements, concerning a Target Business. All of the Company's present stockholders, including all directors and its executive officers, have agreed as part of the escrow agreement to which their stock is subject to vote their respective shares of Class A Stock in accordance with the vote of the majority of the shares voted by all non-affiliated public holders of Common Stock with respect to any consummation of such Business Combination. 11 See "The Company -- Escrow of Outstanding Shares." A Business Combination will not be consummated unless approved by a vote of two-thirds of the shares of Common Stock (in person or by proxy), with each share of Class B Stock entitled to two votes. In addition, the Delaware General Corporation Law requires approval of certain mergers and consolidations by a majority of the outstanding stock entitled to vote thereon. Holders of Class A Warrants who otherwise do not own any shares of Common Stock will not be entitled to vote on any Business Combination. CLASS B STOCK OPTIONS Mr. David Mitchell and Mr. Thomas McMillen, directors of the Company, have each received options to purchase up to 15,000 shares, or up to 30,000 in the aggregate, of the Company's Class B Stock at an exercise price of $10.00 per share, or an aggregate exercise price of up to $300,000 (Class B Options"). The options will expire, if not sooner exercised, upon consummation of a Business Combination. The Company has agreed to use its best efforts to register the shares of Class A Stock underlying the options as soon as practicable after their issuance. REDEMPTION RIGHTS At the time the Company seeks stockholder approval of any potential Business Combination, the Company will offer to each of the non-affiliated public holders of Class A Stock the right, for a specified period of time of not less than 20 days, to redeem his shares of Class A Stock at a price equal to the Liquidation Value of such shares as of the Record Date. The Redemption Offer will be described in the disclosure documentation relating to the proposed Business Combination. See "Proposed Business -- 'Blind Pool' -- Offering." The Liquidation Value for each share of Class A Stock will be determined as of the Record Date by dividing (A) the greater of (i) the Company's net worth as reflected in the Company's financial statements and audited by the Company's independent accountants or (ii) the amount of the proceeds of the Company in the escrow account (including all interest earned thereon) by (B) the number of shares of Class A Stock held by non-affiliated public stockholders; however, in no event will the Liquidation Value of each share of Class A Stock be less than $10.00 plus interest earned thereon. In connection with the Redemption Offer, if non-affiliated public stockholders holding 20% or less of the shares of Class A Stock elect to redeem their shares, the Company may, but will not be required to, proceed with such Business Combination and, if the Company elects to so proceed, will redeem such shares at their Liquidation Value as of the Record Date. In any case, if non-affiliated public stockholders holding more than 20% of the Class A Stock elect to redeem their shares, the Company will not proceed with such potential Business Combination and will not redeem such shares. All holders of Class A Stock and all holders of Warrants prior to the date of this Prospectus will be allowed to participate in a Redemption Offer only if they purchase shares of Class A Stock in this offering or on the open market thereafter, and only as to any shares of Class A Stock so purchased. ESCROW OF OUTSTANDING SHARES All of the shares of Escrowed Stock outstanding immediately prior to the date of this Prospectus have been placed in escrow with the Shares Escrow Agent until the earlier of (i) the occurrence of the first Business Combination, (ii) 18 months from the date of this Prospectus provided that such 18-month period will be extended by six months to 24 months from the date of this Prospectus if the Extension Criteria has been satisfied. During the escrow period, the holders of the Escrowed Stock will not be able to sell or otherwise transfer their respective shares of the Escrowed Stock (with certain exceptions), but will retain all other rights as stockholders of the Company, including, without limitation, the right to vote escrowed shares of Class A Stock, subject to their agreement to vote their shares in accordance with a vote of a majority of the non-affiliated public stockholders with respect to a consummation of a Business Combination or liquidation proposal, but excluding the right to request the redemption of Escrowed Stock pursuant to a Redemption Offer. Subject to compliance with applicable securities laws, any such holder may transfer his, her or its Escrowed Stock to a family member or to a trust established for the benefit of himself, herself, or a family member or to another affiliated entity (with the consent of the Representative which will not be unreasonably withheld) or, in the event of the holder's death, by will or operation of law, or in the case of its dissolution or merger, provided that any such transferee must agree as a condition to such transfer to be bound by the 12 restrictions on transfer applicable to the original holder and, in the case of present stockholders other than the holders of the Placement Shares, that the transferor (except in the case of death) or successor will continue to be deemed the beneficial owner (as defined in Regulation 13d-3 promulgated under the Exchange Act of such transferred shares. Each executive officer and director has also agreed to surrender his shares to the Company at the purchase price at which such shares were acquired ($.10 per share) if he resigns prior to the occurrence of the first Business Combination. RESTRICTION ON SALE OF OUTSTANDING SHARES All of the Founders' Shares are subject to an agreement with the holders of the Founders' Shares not to sell or otherwise transfer such shares for a period of 24 months from the date the currently outstanding Founders' Shares were originally issued (August 18, 1995), but in no event earlier than 120 days following the consummation of the first Business Combination. However, subject to compliance with applicable securities laws, any such holder may transfer Founders' Shares to a family member or to a trust established for the benefit of himself, herself, or a family member or to another affiliated entity (with the consent of the Representative which will not be unreasonably withheld) or in the event of the holder's death by will or operation of law, or in the case of its dissolution or merger, provided that any such transferee or successor must agree as a condition to such transfer to be bound by the restrictions on transfer applicable to the original holder and that the transferor or its principals, if the transferor is an entity (except in the case of death) will continue to be deemed the beneficial owner (as defined in Regulation 13d-3 promulgated under the Exchange Act) of such transferred shares. The certificates representing the Founders' Shares will bear a restrictive legend with respect to such restrictions and the Company's transfer agent will note such restrictions on the Company's transfer books and records. In addition, the holders of the Placement Shares have agreed not to directly or indirectly sell, offer to sell, grant an option for the sale of, transfer, assign, pledge, hypothecate or otherwise encumber any of the Placement Shares without the prior written consent of the Company until the earlier of 24 months from the date such shares were issued (November 15, 1995) or 60 days following the consummation of the first Business Combination. The Company has outstanding 94 shares of Series A Preferred Stock which are held by CDIJ, an indirect affiliate of Bright. The shares are convertible to Class A Stock on the basis of one thousand shares of Class A Stock for each share of Series A Preferred Stock during the one year period commencing upon the consummation of a Business Combination. The 94,000 shares of Class A Stock issuable upon conversion of the Company's outstanding Series A Preferred Stock will be offered by a prospectus at the time of a Business Combination and thereafter will be freely tradable under applicable securities laws. However, CDIJ, for itself and any transferees of the Series A Preferred Stock, has agreed not to sell or otherwise transfer such shares until 60 days following the consummation of the first Business Combination and to limit the volume of such sales to the amount that is permitted by Rule 144 ("Rule 144") promulgated under the Securities Act of 1933, as amended. Subject to other conditions, Rule 144 permits sales, within any three-month period, of a number of shares that does not exceed the greater of 1% of the total number of outstanding shares of the same class or, if the shares are quoted on an exchange or on NASDAQ, the average weekly trading volume during the four calendar weeks preceding the sale. See "Risk Factors -- Shares Eligible for Future Sale." REDEMPTION OF CLASS A STOCK AFTER EIGHTEEN MONTHS IF NO BUSINESS COMBINATION If the Company does not effect a Business Combination within 18 months from the date of this Prospectus, or 24 months from the date of this Prospectus if the Extension Criteria have been satisfied, the Company will submit to the holders of Class A Stock for their consideration a proposal to distribute to the then holders of Class A Stock acquired as part of the Units sold in this offering or in the open market thereafter, in redemption of such shares, the amounts in the escrow account. Following such a redemption of Class A Stock, each outstanding share of Class B Stock will be 13 exchanged for two shares of Class A Stock. The assets of the Company (other than escrowed assets) will be used to pay the Company's liabilities and to redeem the Company's outstanding Series A Preferred Stock at its liquidation value, $9,400. The amount per share for distribution, to the holders of Class A Stock acquired as part of the Units sold in this offering or in the open market thereafter, and exclusive of any income earned on the proceeds held in the escrow account (which will be distributed to the holders of Class A Stock along with the funds in the escrow account), will be approximately equal to the initial public offering price per Unit in this offering of $10.00 per Unit (assuming no value is attributed to the Class A Warrants included in the Units offered hereby). All of the present stockholders, including the Company's executive officers and other directors and their affiliates, are required by the escrow agreement to which their stock is subject to vote their shares of Common Stock in accordance with the vote of the majority of all non-affiliated public stockholders of the Company with respect to any redemption proposal. Holders of Class A Warrants, however, will only be entitled to vote on any redemption proposal, and allowed to participate in any redemption distribution, if they purchase shares of Common Stock in this offering or on the open market thereafter, but only as to any shares of Common Stock so purchased. All of the present stockholders, including the Company's executive officers and other directors and their affiliates, have agreed to waive their rights to participate in any redemption distribution with respect to the 106,000 shares of Class A Stock owned by them as of the date hereof. See "The Company -- Escrow of Outstanding Shares." To date, the Company's efforts have been limited to organizational activities and this offering. The implementation of the Company's business objectives is wholly contingent upon the successful sale of the Units and the Class B Stock offered hereby. See "Proposed Business." Essentially, a Specialized Merger and Acquisition Allocated Risk Transaction-SM- (SMA(2)RT-SM-) provides an investor in this offering with an opportunity to purchase Units for $10.00 each, the proceeds of which will be placed into escrow for the benefit of stockholders, and shall be returned if the Company does not effect a Business Combination; and/or Class B Stock for $10.00 each, the proceeds of which will not be placed in escrow, but rather will be used to repay indebtedness, to pay a license fee to Bright, and to cover all of the Company's expenses incurred in this offering. See "Use of Proceeds." Consequently, if the Class B Stock is exchanged, holders of Class B Stock would pay substantially less for the Units issuable upon exercise of such Class B Stock than holders of Units and, accordingly, may realize a higher return on their investment. Holders of Class B Stock, however, risk the loss of their investment if the Company fails to effect a Business Combination, while holders of shares of Class A Stock comprising part of the Units benefit from the Company's escrow of an amount equal to the gross proceeds from the sale of the Units in this offering. The Company was organized under the laws of the State of Delaware on August 9, 1995. The Company's office is located at 850 Third Avenue, 10th Floor, New York, New York 10022 and its telephone number is (212) 750-5822. 14 RISK FACTORS THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING, BUT NOT LIMITED TO, THE SEVERAL FACTORS DESCRIBED BELOW. THESE SECURITIES SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD A LOSS OF THEIR ENTIRE INVESTMENT. INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS INHERENT IN AND AFFECTING THE BUSINESS OF THE COMPANY AND THIS OFFERING IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY. OFFERING NOT CONDUCTED IN ACCORDANCE WITH RULE 419 The Company's offering of Units and Class B Stock is not being conducted in accordance with Rule 419 promulgated by the Commission under the Securities Act of 1933, as amended (the "Act"), which was adopted to strengthen the regulation of securities offerings by "blank check" companies, which Congress has found to have been common vehicles for fraud and manipulation in the penny stock market. The Company is a "blank check" company not subject to Rule 419 under the Act because the Company's net tangible assets after its receipt of the proceeds of this offering will exceed $5,000,000. Accordingly, investors in the offering will not receive the substantive protection provided by Rule 419 under the Act. Rule 419 under the Act requires that the securities to be issued and the funds received in a blank check offering be deposited and held in an escrow account until a Business Combination meeting specified criteria is completed. Before a Business Combination can be completed and before the funds and securities can be released, the blank check company is required to update the registration statement with a post-effective amendment; and after the effective date thereof the Company is required to furnish investors with the prospectus produced thereby containing information, including audited financial statements, regarding the proposed Target Business and its business. According to the rule, the investors must have no fewer than 20 and no more than 45 days from the effective date of the post-effective amendment to decide to remain an investor or require the return of their investment funds. Any investor not making any decision within said 45-day period is to automatically receive a return of his investment funds. Unless a sufficient number of investors elect to remain investors, all of the deposited funds in the escrow account must be returned to all investors and none of the securities will be issued. Rule 419 under the Act further provides that if the blank check company does not complete a Business Combination meeting specified criteria within 18 months after the date of this Prospectus, all of the deposited funds in the escrow account must be returned to investors. NO OPERATING HISTORY; LIMITED RESOURCES; NO PRESENT SOURCE OF REVENUES The Company, incorporated on August 9, 1995, is a development stage company and has not, as of the date hereof, attempted to seek a Business Combination. Although certain of the Company's directors and its executive officers have had extensive experience relating to the identification, evaluation and acquisition of Target Businesses, the Company has no operating history and, accordingly, there is only a limited basis upon which to evaluate the Company's prospects for achieving its intended business objectives. None of the Company's officers, directors, promoters or other persons engaged in management-type activities has been previously involved with any blank check offerings. However, David J. Mitchell, the Company's Chairman and Chief Executive Officer, has been previously involved with two Specified Purpose Acquisition Companies ("SPAC"). A SPAC is a company organized for the purpose of acquiring or merging with an operating business in a specified area. To date, the Company's efforts have been limited to organizational activities and this offering. The Company has limited resources and has had no revenues to date. In addition, the Company will not achieve any revenues (other than investment income) until, at the earliest, the consummation of a Business Combination. Moreover, there can be no assurance that any Target Business, at the time of the Company's consummation of a Business Combination, or at any time thereafter, will derive any material revenues from its operations or operate on a profitable basis. See "Proposed Business" and "Management -- Prior Blank Check Offerings." 15 "BLIND POOL" OFFERING; BROAD DISCRETION OF MANAGEMENT Prospective investors who invest in the Company will do so without an opportunity to evaluate the specific merits or risks of any one or more Business Combinations. As a result, investors will be entirely dependent on the broad discretion and judgment of management in connection with the allocation of the proceeds of the offering and the selection of a Target Business. There can be no assurance that determinations ultimately made by the Company will permit the Company to achieve its business objectives. All of the proceeds will be used for on-going expenses and unspecified acquisitions. See "Use of Proceeds" and "Proposed Business." ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO PROSPECTIVE BUSINESS COMBINATIONS; INVESTMENT IN THE COMPANY VERSUS INVESTMENT IN A TARGET BUSINESS "Blind pool" and "blank check" offerings are inherently characterized by the absence of substantive disclosure, other than general descriptions, relating to the intended application of the net proceeds of the offering. The Company has not yet identified a prospective Target Business. Accordingly, investors will have no substantive information concerning consummation of any specific Business Combination in considering a purchase of Units and/or Class B Stock in this offering. The absence of disclosure can be contrasted with the disclosure which would be necessary if the Company had already identified a Target Business as a Business Combination candidate or if the Target Business were to effect an offering of its securities directly to the public. There can be no assurance that an investment in the securities offered hereby will not ultimately prove to be less favorable to investors in this offering than a direct investment, if such opportunity were available, in a Target Business. See "Proposed Business." SEEKING TO ACHIEVE PUBLIC TRADING MARKET THROUGH BUSINESS COMBINATION While a prospective Target Business may deem a consummation of a Business Combination with the Company desirable for various reasons, a Business Combination may involve the acquisition of, merger or consolidation with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself, including time delays, significant expense, loss of voting control and the time and expense incurred to comply with various Federal and state securities laws that regulate initial public offerings. Nonetheless, there can be no assurance that there will be an active trading market for the Company's securities following the completion of a Business Combination or, if a market does develop, as to the market price for the Company's securities. See "Proposed Business -- 'Blind Pool' Offering -- Background." UNCERTAIN STRUCTURE OF BUSINESS COMBINATION The structure of a future transaction with a Target Business cannot be determined at the present time and may take, for example, the form of a merger, an exchange of stock or an asset acquisition. The Company may form one or more subsidiary entities to effect a Business Combination and may, under certain circumstances, distribute the securities of subsidiaries to the stockholders of the Company. There cannot be any assurance that a market would develop for the securities of any subsidiary distributed to stockholders or, if it did, any assurance as to the prices at which such securities might trade. The structure of a Business Combination or the distribution of securities to stockholders may result in taxation of the Company, the Target Business or stockholders. See "Proposed Business" and "Management." UNSPECIFIED INDUSTRY AND TARGET BUSINESS; UNASCERTAINABLE RISKS While the Company will target industries located in the United States, while reserving the right to acquire a Target Business located elsewhere, the Company has not selected any particular industry or Target Business in which to concentrate its Business Combination efforts. None of the Company's directors or its executive officer has had any contact or discussions with any entity or representatives of any entity regarding a consummation of a Business Combination. Accordingly, there is no basis for prospective investors to evaluate the possible merits or risks of the Target Business or the particular industry in which the Company may ultimately operate. In connection with stockholder approval of 16 consummation of a Business Combination, the Company intends to provide stockholders with complete disclosure documentation, including audited financial statements, concerning a Target Business. Accordingly, any Target Business that is selected would need to have audited financial statements or be audited in connection with the transaction. To the extent that the Company effects a Business Combination with a financially unstable company or an entity in its early stage of development or growth (including entities without established records of revenues or income), the Company will become subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, to the extent that the Company effects a Business Combination with an entity in an industry characterized by a high level of risk, the Company will become subject to the currently unascertainable risks of that industry. An extremely high level of risk frequently characterizes certain industries which experience rapid growth. Although management will endeavor to evaluate the risks inherent in a particular Target Business or industry, there can be no assurance that the Company will properly ascertain or assess all such risks. See "Proposed Business." In addition, to date, none of the Company's officers, directors, promoters, affiliates or associates have had any preliminary contact or discussions with, and there are no present plans, proposals, arrangements or understandings with any representatives or owners of any business or company regarding the possibility of consummating a Business Combination with such a business or company. PROBABLE LACK OF BUSINESS DIVERSIFICATION As a result of the limited resources of the Company, the Company, in all likelihood, will have the ability to effect only a single Business Combination. Accordingly, the prospects for the Company's success will be entirely dependent upon the future performance of a single business. Unlike certain entities which have the resources to consummate several Business Combinations or entities operating in multiple industries or multiple segments of a single industry, it is highly likely that the Company will not have the resources to diversify its operations or benefit from the possible spreading of risks or offsetting of losses. The Company's probable lack of diversification may subject the Company to numerous economic, competitive and regulatory developments, any or all of which may have a material adverse impact upon the particular industry in which the Company may operate subsequent to a consummation of a Business Combination. The prospects for the Company's success may become dependent upon the development or market acceptance of a single or limited number of products, processes or services. Accordingly, notwithstanding the possibility of capital investment in and management assistance to the Target Business by the Company, there can be no assurance that the Target Business will prove to be commercially viable. The Company has no present intention of either loaning any of the proceeds of this offering to any Target Business or of purchasing or acquiring a minority interest in any Target Business. Management is unaware of any circumstances under which this policy, through management's own initiative, may be changed. See "Use of Proceeds" and "Proposed Business." PROCEEDS FROM SALE OF CLASS B STOCK NOT PLACED IN ESCROW; CLASS B STOCK NOT CURRENTLY EXCHANGEABLE; CLASS B STOCK EXCHANGEABLE SUBJECT TO THE COMPANY'S COMPLIANCE WITH SECURITIES LAWS Except as noted below, the proceeds to the Company from the sale of the Class B Stock will not be placed in escrow. Rather, these proceeds will be used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, to Bright pursuant to a license agreement executed by Bright and the Company, (iii) to cover all of the expenses incurred by the Company in this offering, including the Underwriters' discounts and the Representative's non-accountable expense allowance, and (iv) to fund the Company's operating expenses, including investment banking fees and fees of the Proceeds Escrow Agent and the costs of business, legal and accounting due diligence on prospective Target Businesses, until the Company effects a Business Combination. In addition, a portion of the net proceeds from the sale of the Class B Stock equal to the Underwriters' discounts and the Representative's non-accountable expense allowance with respect to the Units will be placed in the escrow account with the Proceeds Escrow Agent for the benefit of purchasers of Units in this offering and in the open market thereafter. Furthermore, the Class B Stock is not exchangeable until the Company 17 effects a Business Combination, of which there can be no assurance, provided the Company is then in compliance with all filings required under the federal and state securities laws, and holders of Class B Stock who do not own shares of Class A Stock will not be allowed to participate in any redemption distribution of the proceeds from the escrow account. Consequently, in the event the Company does not effect a Business Combination within 18 months from the date of this Prospectus, or 24 months from the date of this Prospectus if the Extension Criteria have been satisfied, and the stockholders of the Company elect to permit the Company to redeem the Class A Stock and the holders of Class B Stock will not receive any distributions. As such, an investment in the Class B Stock therefore should be viewed as a highly speculative investment and should only be made by an individual who can afford to lose his entire investment. Holders of Class B Stock would pay substantially less for the Units issuable upon exchange of such Class B Stock than holders of Units and, accordingly, may realize a higher return on their investment than holders of Units. By way of illustration, purchasers of Class B Stock in this offering will pay $5.00 per Unit, while purchasers of Units in this offering will pay $10.00 per Unit. The proceeds to the Company from the sale of the Class B Stock will not be placed in escrow for the benefit of the holders of the Class B Stock and will be used to repay indebtedness and to cover all of the Company's expenses incurred in this offering, including the Underwriters' discounts and the Representative's non-accountable expense allowance with respect to both the Units and the Class B Stock, to pay the Proceeds Escrow Agent and to pay the Company's costs of evaluating potential Business Combinations and for administrative and operating expenses. Holders of Class B Stock risk the loss of all of their investment if the Company fails to effect a Business Combination, while holders of shares of Class A Stock comprising part of the Units are protected from such loss by the Company's escrow of an amount equal to the gross proceeds from the sale of the Units in this offering. REPRESENTATIVE'S ABILITY TO MAINTAIN REQUIRED MINIMUM NET CAPITAL As a registered broker-dealer, the Representative is required under the Exchange Act and the rules promulgated thereunder to maintain minimum net capital in order to conduct its broker-dealer operations. Currently, the Representative has sufficient excess net capital to support its broker-dealer operations, including its underwriting obligations to the Company. In the event, however, that at any time the Representative should be unable to maintain its minimum net capital requirements, it will be required to cease operations as a broker-dealer. Any such cessation of operations by the Representative could have a material adverse effect on the market price and liquidity of the securities being offered hereby. DEPENDENCE UPON EXECUTIVE OFFICERS AND BOARD OF DIRECTORS; NO PRIOR BLIND POOL EXPERIENCE The ability of the Company to successfully effect a Business Combination will be largely dependent upon the efforts of its executive officers and the Board of Directors. Notwithstanding the significance of such persons, the Company has not entered into employment agreements or other understandings with any such personnel concerning compensation or obtained any "key man" life insurance on their respective lives. The loss of the services of such key personnel could have a material adverse effect on the Company's ability to successfully achieve its business objectives. None of the Company's key personnel are required to commit a substantial amount of their time to the affairs of the Company and, accordingly, such personnel may have conflicts of interests in allocating management time among various business activities. However, the executive officers and the other directors of the Company will devote such time as they deem reasonably necessary to carry out the business and affairs of the Company, including the evaluation of potential Target Businesses and the negotiation and consummation of a Business Combination, and, as a result, the amount of time devoted to the business and affairs of the Company may vary significantly depending upon, among other things, whether the Company has identified a Target Business or is engaged in active negotiation of a Business Combination. Although the officers and directors of the Company have substantial experience in buying and selling businesses, they have no prior experience in "blind pool" or "blank check" offerings. However, David J. Mitchell, the Company's Chairman and Chief Executive Officer has been previously involved with two Specified Purpose Acquisition Companies ("SPAC"). A SPAC is a company organized for the purpose of acquiring or merging with an operating business in a specific area. 18 From December 1993 until June 1995, Mr. Mitchell served as a director and Secretary of Israel Tech Acquisition Corporation, a public company, which acquired the assets of, and changed its name to, Kellstrom Industries, Inc. in June 1995. From March 1995 until August 1995, Mr. Mitchell served as a director, Chief Financial Officer, Treasurer and Secretary of European Gateway Acquisition Corporation, a public company, which acquired Bogen Communication, Inc. and changed its name to Bogen Communications International, Inc. in August 1995. Mr. Mitchell continues to serve as a director of both Kellstrom Industries, Inc. and Bogen Communications International, Inc., which are both public companies, as of the date of this Prospectus. See "Management." The Company will rely upon the expertise of such persons, and the Board does not anticipate that it will hire additional personnel. However, if additional personnel are required, there can be no assurance that the Company will be able to retain such necessary additional personnel. See "Proposed Business" and "Management." CONFLICTS OF INTEREST None of the Company's directors or executive officers are required to commit their full time to the affairs of the Company and it is likely that such persons will not devote a substantial amount of time to the affairs of the Company. Such personnel will have conflicts of interest in allocating management time among various business activities. As a result, the consummation of a Business Combination may require a greater period of time than if the Company's management devoted their full time to the Company's affairs. However, the executive officers and other directors of the Company will devote such time as they deem reasonably necessary to carry out the business and affairs of the Company, including the evaluation of potential Target Businesses and the negotiation and consummation of a Business Combination and, as a result, the amount of time devoted to the business and affairs of the Company may vary significantly depending upon, among other things, whether the Company has identified a Target Business or is engaged in active negotiation and consummation of a Business Combination. Prior to their involvement with the Company, none of the directors or the executive officers of the Company has been involved in any "blind pool" or "blank check" offerings. However, David J. Mitchell, the Company's Chairman and Chief Executive Officer has been previously involved with two Specified Purpose Acquisition Companies ("SPAC"). A SPAC is a company organized for the purpose of acquiring or merging with an operating business in a specified area. From December 1993 until June 1995, Mr. Mitchell served as a director and Secretary of Israel Tech Acquisition Corporation, a public company, which acquired the assets of, and changed its name to, Kellstrom Industries, Inc. in June 1995. From March 1995 until August 1995, Mr. Mitchell served as a director, Chief Financial Officer, Treasurer and Secretary of European Gateway Acquisition Corporation, a public company, which acquired Bogen Communication, Inc. and changed its name to Bogen Communications International, Inc. in August 1995. Mr. Mitchell continues to serve as a director of both Kellstrom Industries, Inc. and Bogen Communications International, Inc., which are both public companies, as of the date of this Prospectus. See "Management." In addition, the Company has entered into an oral agreement with an affiliate of Mr. Mitchell to lease office space and to be provided with secretarial and office services upon the closing of this offer at a cost of $2,500 per month to the Company. See "Certain Transactions." To avoid certain conflicts of interest, the executive officers and directors of the Company, and owners of five percent or more of the Company's Class A Stock (after giving effect to this offering, but without giving effect to the exercise, if any, of the Warrants to be issued in this offering), have agreed that they will not, until the consummation of the first Business Combination, introduce a suitable proposed merger, acquisition or consolidation candidate to another blank check company. For such purposes, suitable shall mean any business opportunity which, under Delaware law, may reasonably be required to be presented to the Company. Certain of the persons associated with the Company are and may in the future become affiliated with entities engaged in business activities similar to those intended to be conducted by the Company. Such persons may have conflicts of interest in determining to which entity a particular business opportunity should be presented. In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present certain business opportunities to such corporation. Accordingly, as a result of multiple business affiliations, certain of the Company's directors and executive officers 19 may have similar legal obligations to present certain business opportunities to multiple entities. There can be no assurance that any of the foregoing conflicts will be resolved in favor of the Company. See "Management." LIMITED ABILITY TO EVALUATE TARGET BUSINESS MANAGEMENT; POSSIBILITY THAT MANAGEMENT WILL CHANGE The role of the present management in the operations of a Target Business of the Company following a Business Combination cannot be stated with certainty. Although the Company intends to scrutinize closely the management of a prospective Target Business in connection with its evaluation of the desirability of effecting a Business Combination with such Target Business, and there can be no assurance that the Company's assessment of such management will prove to be correct, especially in light of the possible inexperience of current key personnel of the Company in evaluating certain types of businesses. While it is possible that certain of the Company's directors or executive officers will remain associated in some capacities with the Company following a consummation of a Business Combination, it is unlikely that any of them will devote a substantial portion of their time to the affairs of the Company subsequent thereto. Moreover, there can be no assurance that such personnel will have significant experience or knowledge relating to the operations of the Target Business acquired by the Company. The Company may also seek to recruit additional personnel to supplement the incumbent management of the Target Business. There can be no assurance that the Company will successfully recruit additional personnel or that the additional personnel will have the requisite skills, knowledge or experience necessary or desirable to enhance the incumbent management. In addition, there can be no assurance that the future management of the Company will have the necessary skills, qualifications or abilities to manage a public company embarking on a program of business development. See "Proposed Business" and "Management." POSSIBLE BUSINESS COMBINATION WITH A TARGET BUSINESS OUTSIDE THE UNITED STATES The Company may effectuate a Business Combination with a Target Business located outside the United States. In such event, the Company may face the additional risks of language barriers, different presentations of financial information, different business practices, lack of United States jurisdiction, and other cultural differences and barriers. Furthermore, due to the Company's limited resources, it may be difficult to assess fully these additional risks. Therefore, a Business Combination with a Target Business outside the United States may increase the risk that the Company will not achieve its business objectives. COMPETITION The Company expects to encounter intense competition from other entities having business objectives similar to those of the Company. Many of these entities, including venture capital partnerships and corporations, other blind pool companies, large industrial and financial institutions, small business investment companies and wealthy individuals, are well-established and have extensive experience in connection with identifying and effecting Business Combinations directly or through affiliates. Many of these competitors possess greater financial, technical, human and other resources than the Company and there can be no assurance that the Company will have the ability to compete successfully. The Company's financial resources will be limited in comparison to those of many of its competitors. Further, such competitors will generally not be required to seek the prior approval of their own stockholders, which may enable them to close a Business Combination more quickly than the Company. This inherent competitive limitation may compel the Company to select certain less attractive Business Combination prospects. There can be no assurance that such prospects will permit the Company to achieve its stated business objectives. See "Proposed Business." UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS In the event that the Company succeeds in effecting a Business Combination, the Company will, in all likelihood, become subject to intense competition from competitors of the Target Business. In particular, certain industries which experience rapid growth frequently attract an increasingly larger number of competitors, including competitors with greater financial, marketing, technical, human 20 and other resources than the initial competitors in the industry. The degree of competition characterizing the industry of any prospective Target Business cannot presently be ascertained. There can be no assurance that, subsequent to a consummation of a Business Combination, the Company will have the resources to compete in the industry of the Target Business effectively, especially to the extent that the Target Business is in a high-growth industry. See "Proposed Business." ADDITIONAL FINANCING REQUIREMENTS The Company has had no revenues to date and will be entirely dependent upon the proceeds of this offering to implement its business objectives. The Company will not achieve any revenues (other than investment income) until, at the earliest, the consummation of a Business Combination unless the Class B Options are exercised. See "The Company--Class B Stock Options." Although the Company anticipates that the net proceeds of this offering will be sufficient to effect a Business Combination, inasmuch as the Company has not yet identified any prospective Target Business candidates, the Company cannot ascertain with any degree of certainty the capital requirements for any particular Business Combination. In the event that the net proceeds of this offering prove to be insufficient for purposes of effecting a Business Combination (because of the size of the Business Combination or other reasons), the Company will be required to seek additional financing. There can be no assurance that such financing will be available on acceptable terms, or at all. To the extent that additional financing proves to be unavailable when needed to consummate a particular Business Combination, the Company would, in all likelihood, be compelled to restructure the transaction or abandon that particular Business Combination and seek an alternative Target Business candidate, if possible. In addition, in the event of the consummation of a Business Combination, the Company may require additional financing to fund the operations or growth of the Target Business. The failure by the Company to secure additional financing could have a material adverse effect on the continued development or growth of the Target Business. The Company does not have any arrangements with any bank or financial institution to secure additional financing and there can be no assurance that any such arrangement, if required or otherwise sought, would be available on terms deemed to be commercially acceptable and in the best interests of the Company. See "Proposed Business." POSSIBLE USE OF DEBT FINANCING; DEBT OF A TARGET BUSINESS There currently are no limitations on the Company's ability to borrow funds to increase the amount of capital available to the Company to effect a Business Combination. However, the Company's limited resources and lack of operating history will make it difficult to borrow funds. The amount and nature of any borrowings by the Company will depend on numerous considerations, including the Company's capital requirements, the Company's perceived ability to meet debt service on any such borrowings and the then prevailing conditions in the financial markets, as well as general economic conditions. There can be no assurance that debt financing, if required or sought, would be available on terms deemed to be commercially acceptable by and in the best interests of the Company. The inability of the Company to borrow funds required to effect or facilitate a Business Combination, or to provide funds for an additional infusion of capital into a Target Business, may have a material adverse effect on the Company's financial condition and future prospects. Additionally, to the extent that debt financing ultimately proves to be available, any borrowings may subject the Company to various risks traditionally associated with indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest. Furthermore, a Target Business may have already incurred borrowings and, therefore, all the risks inherent thereto. See "Use of Proceeds" and "Proposed Business." REDEMPTION RIGHTS At the time the Company seeks stockholder approval of any potential Business Combination, the Company will offer to each of the non-affiliated public holders of Class A Stock the right, for a specified period of time of not less than 20 calendar days, to redeem his shares of Class A Stock at a price equal to the Liquidation Value of such shares as of the Record Date. The Redemption Offer will be described in the disclosure documentation relating to the proposed Business Combination. In connection with the Redemption Offer, should non-affiliated public stockholders holding 20% or less of the Class A 21 Stock elect to redeem their shares, the Company may, but will not be required to, proceed with the proposed Business Combination and, if the Company elects to so proceed, will redeem such shares at their Liquidation Value as of the Record Date. In any case, if non-affiliated public stockholders holding more than 20% of such Class A Stock elect to redeem their shares, the Company will not proceed with the proposed Business Combination and will not redeem any shares of Class A Stock. As a result of the foregoing, the Company's ability to consummate a particular Business Combination may be impaired. Moreover, holders of Class A Stock prior to the date of this Prospectus and holders of Class A Warrants will only be allowed to participate in a Redemption Offer if they purchase shares of Class A Stock in this offering or on the open market thereafter, but only as to any shares of Class A Stock so purchased. REDEMPTION OF CLASS A STOCK IF NO BUSINESS COMBINATION If the Company does not effect a Business Combination within 18 months from the date of this Prospectus, or 24 months from the date of this Prospectus if the Extension Criteria have been satisfied, the Company will submit to the holders of Class A Stock for their consideration a proposal to distribute to the then holders of Class A Stock acquired as part of the Units sold in this offering or in the open market thereafter, in redemption of such shares, the amounts in the interest bearing escrow account. Following such a redemption of Class A Stock, each outstanding share of Class B Stock will be exchanged for two shares of Class A Stock. The assets of the Company (other than the escrowed assets) will be used to pay the Company's liabilities and to redeem of the Company's outstanding Series A Preferred Stock at its liquidation value, $9,400. The amount per share for distribution of liquidation of the Company to the holders of Class A Stock acquired as part of the Units sold in this offering or in the open market thereafter, and, exclusive of any income earned on the proceeds held in the escrow account, will be approximately equal to the initial public offering price per Unit in this offering ($10.00 per Unit assuming no value is attributed to the Class A Warrants included in the Units offered hereby). There can be no assurance that the Company will effect a Business Combination within 18 months from the date of this Prospectus, or within 24 months from the date of this Prospectus if the Extension Criteria have been satisfied. All of the Company's present stockholders, including the Company's executive officers and other directors and their affiliates, are required to vote their shares of Common Stock in accordance with the vote of the majority of all non-affiliated public stockholders of the Company with respect to any such redemption proposal. Holders of Class A Warrants, however, will only be entitled to vote on any redemption proposal, and allowed to participate in any redemption distribution, only if they purchase shares of Class A Stock in this offering or on the open market thereafter, and only as to any shares of Class A Stock so purchased. Present stockholders of the Company will not participate in any redemption distribution with respect to the shares of Class A Stock owned by them as of the date hereof. INVESTMENT COMPANY ACT CONSIDERATIONS The regulatory scope of the Investment Company Act of 1940, as amended (the "Investment Company Act"), which was enacted principally for the purpose of regulating vehicles for pooled investments in securities, extends generally to companies engaged primarily in the business of investing, reinvesting, owning, holding or trading in securities. The Investment Company Act may, however, also be deemed to be applicable to a company which does not intend to be characterized as an investment company but which, nevertheless, engages in activities which may be deemed to be within the definitional scope of certain provisions of the Investment Company Act. The Company believes that its anticipated principal activities, which will involve acquiring control of an operating company, will not subject the Company to regulation under the Investment Company Act. Nevertheless, there can be no assurance that the Company will not be deemed to be an investment company, particularly during the period prior to consummation of a Business Combination. If the Company is deemed to be an investment company, the Company may become subject to certain restrictions relating to the Company's activities, including restrictions on the nature of its investments and the issuance of securities. In addition, the Investment Company Act imposes certain requirements on companies deemed to be within its regulatory scope, including registration as an investment company, adoption 22 of a specific form of corporate structure and compliance with certain burdensome reporting, recordkeeping, voting, proxy, disclosure and other rules and regulations. In the event of the characterization of the Company as an investment company, the failure by the Company to satisfy such regulatory requirements, whether on a timely basis or at all, would, under certain circumstances, have a material adverse effect on the Company. DIVIDENDS UNLIKELY The Company does not expect to pay dividends prior to the consummation of a Business Combination. The payment of dividends after consummating any such Business Combination, if any, will be contingent upon the Company's revenues and earnings, if any, capital requirements and general financial condition subsequent to consummation of a Business Combination. The payment of any dividends subsequent to a Business Combination will be within the discretion of the Company's then Board of Directors. The Company presently intends to retain all earnings, if any, for use in the Company's business operations and accordingly, the Board does not anticipate declaring any dividends in the foreseeable future. See "Description of Securities -- Dividends." UNCERTAINTY OF SERVICEMARKS The servicemarks SMA(2)RT-SM- and Specialized Merger and Acquisition Allocated Risk Transaction-SM- are owned by Bright. Bright has granted the Company a non-exclusive license to use, for the sole purpose of marketing this offering, the SMA(2)RT-SM- and Specialized Merger and Acquisition Allocated Risk Transaction-SM- servicemarks. There can be no assurance that a third party owning or using a similar servicemark or trademark will not object to, or seek to prohibit, the Company's use of the SMA(2)RT-SM- or Specialized Merger and Acquisition Allocated Risk Transaction-SM-servicemarks. The Company does not believe, however, that its business will be adversely affected if it is unable to utilize either, or both, of these servicemarks. See "Proposed Business -- Servicemark License," "Management -- Directors and Officers" and "Certain Transactions." AUTHORIZATION OF ADDITIONAL SECURITIES The Company's Certificate of Incorporation authorizes the issuance of 10,250,000 shares of Common Stock, par value $.01 per share, of which 10,000,000 shares are designated Class A Stock and 250,000 shares are designated Class B Stock. Upon completion of this offering (assuming no exercise of the Underwriters' over-allotment option or any Warrants or other options, or conversion of the outstanding Series A Preferred Stock), there will be 9,094,000 authorized but unissued shares of Common Stock available for issuance. However, a total of 2,430,666.66 shares of Class A Stock are reserved for issuance, consisting of the following: 800,000 shares of Class A Stock are reserved for issuance upon the exercise of the Class A Warrants, 300,000 shares of Class A Stock are reserved for issuance upon exercise of the Units underlying the Class B Stock, 300,000 shares of Class A Stock are reserved for issuance upon exercise of the Class A Warrants comprising a part of the Units underlying the Class B Stock, 120,000 shares of Class A Stock are included in the Units subject to the Underwriters' over-allotment option, 120,000 shares of Class A Stock are reserved for issuance upon the exercise of the Class A Warrants included in the Units subject to the Underwriters' over-allotment option, 45,000 shares of Class A Stock are reserved for issuance upon exercise of the Units underlying the Class B Stock subject to the Underwriters' over-allotment option, 45,000 shares of Class A Stock are reserved for issuance upon exercise of the Class A Warrants comprising a part of the Units underlying the Class B Stock subject to the Underwriters' over-allotment option, 266,666.6 shares of Class A Stock are reserved for issuance upon exercise of options to purchase Units granted to executive officers of the Company, 94,000 shares of Class A Stock are reserved for issuance upon conversion of the Company's outstanding Series A Preferred Stock, 80,000 shares of Class A Stock are included in the Units reserved for issuance upon exercise of Representative's Unit Purchase Warrants, 80,000 shares of Class A Stock are reserved for issuance upon the exercise of the Class A Warrants included in the Units reserved for issuance upon exercise of the Representative's Unit Purchase Warrants, 30,000 shares of Class A Stock are included in the Units reserved for issuance upon exercise of the Representative's Class B Warrants, 30,000 shares of Class A Stock reserved for issuance upon exercise of Class A Warrants comprising a part of the Units underlying the Representative's Class B Warrants, 23 60,000 shares of Class A Stock reserved for issuance upon exchange of the Class B Stock reserved for issuance upon the exercise of options granted to two of the Company's directors, and 60,000 shares of Class A Stock reserved for issuance upon exercise of the Class A Warrants comprising a part of the Units underlying the Class B Stock reserved for issuance upon the exercise of options granted to two of the Company's directors. See "Management," "Underwriting" and "Certain Transactions." Although the Company's Board of Directors has the power to issue any or all of such shares without stockholder approval, the Company has agreed with the Representative that for a period of 18 months from the date of this Prospectus, and for up to six additional months if the Extension Criteria have been satisfied, it will not issue (other than pursuant to this offering) any shares of Common Stock or grant Common Stock purchase options or warrants without the consent of the Representative, except in connection with effecting a Business Combination. See "Underwriting." Although the Company has no commitments as of the date of this Prospectus to issue any shares of Common Stock other than as described in this Prospectus, the Company will, in all likelihood, issue a substantial number of additional shares in connection with or following a Business Combination. To the extent that additional shares of Common Stock are issued, the Company's stockholders would experience dilution of their respective ownership interests in the Company. Additionally, if the Company issues a substantial number of shares of Common Stock in connection with or following a Business Combination, a change in control of the Company may occur which may affect, among other things, the Company's ability to utilize net operating loss carryforwards, if any. Furthermore, the issuance of a substantial number of shares of Common Stock may adversely affect prevailing market prices, if any, for the Common Stock and could impair the Company's ability to raise additional capital through the sale of its equity securities. See "Proposed Business" and "Description of Securities." The Company's Certificate of Incorporation also authorizes the issuance of 1,000,000 shares of preferred stock (the "Preferred Stock"), with such designations, powers, preferences, rights, qualifications, limitations and restrictions of such series as the Board of Directors, subject to the laws of the State of Delaware, may determine from time to time. Accordingly, the Board of Directors is empowered, without stockholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of Common Stock and Class A Warrants. The Company has agreed with the Representative, however, that for a period of 18 months from the date of this Prospectus, and for up to six additional months if the Extension Criteria have been satisfied, it will not issue any additional shares of Preferred Stock without the consent of the Representative, except in connection with the consummation of a Business Combination. In addition, the Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although the Company does not currently intend to issue any shares of Preferred Stock, there can be no assurance that the Company will not do so in the future. As of the date of this Prospectus, the Company has outstanding 94 shares of Preferred Stock, designated as Series A Preferred Stock, which shares are non-voting and convertible to 94,000 shares of Common Stock upon consummation of the first Business Combination. See "Proposed Business" and "Description of Securities -- Series A Preferred Stock." VOTING BY PRESENT STOCKHOLDERS Upon consummation of this offering, the Company's directors and executive officers will collectively own 52,500 shares of Class A Stock and options to purchase 133,333.3 units, each unit being identical to the Units issued in this offering, representing approximately 15.2% of the issued and outstanding shares of Class A Stock (assuming no exercise of the Underwriters' over-allotment option, the Representative's Unit Purchase Warrants or the Representative's Class B Warrants or the conversion of the Series A Preferred Stock) and approximately 8.8% of the voting power of the issued and outstanding shares of Common Stock (subject to the foregoing assumptions). In the election of directors, stockholders are not entitled to cumulate their votes for nominees. Accordingly, as a practical matter, management may be able to elect all of the Company's directors and otherwise direct the affairs of the Company. See "Principal Stockholders," "Certain Transactions" and "Description of Securities." 24 OTC BULLETIN BOARD; NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICE; LACK OF PUBLIC MARKET FOR SECURITIES Prior to this offering, there has been no public trading market for the Units, the Class A Stock, the Class A Warrants or the Class B Stock. The initial public offering prices of the Units and the Class B Stock and the respective exercise prices and terms of the Class A Warrants have been arbitrarily determined by negotiations between the Company and the Representative and bear no relationship to such established valuation criteria such as assets, book value or prospective earnings. NASDAQ has recently adopted a policy whereby it will not list the securities of a "blind pool" company. The Representative is seeking approval for listing of the securities on the OTC Bulletin Board. The OTC Bulletin Board is an NASD sponsored and operated inter-dealer automated quotation system for equity securities not included in the NASDAQ system. The OTC Bulletin Board has only recently been introduced as an alternative to "pink sheet" trading of over-the-counter securities. Consequently, the liquidity and stock price of the Company's securities in the secondary market may be adversely affected. There is no assurance that a regular trading market will develop for any of the Company's securities after this offering or that, if developed, any such market will be sustained. Moreover, there can be no assurance that the Company's securities will be listed on NASDAQ or any national securities exchanges following the consummation of a Business Combination. See "Underwriting." H.J. Meyers & Co., Inc., the Representative, intends to serve as the market maker for the Company's securities. Neither the Company nor anyone acting on the Company's behalf will take affirmative steps to request or encourage any other broker-dealers to act as market makers for the Company's securities. To date, there have not been any preliminary discussions or understandings between the Company and any potential market makers, other than H.J. Meyers & Co., Inc., regarding the participation of such market makers in the future trading market, if any, for the Company's securities. Moreover, no member of management of the Company or any promoter or anyone else acting at the Company's direction will recommend, encourage or advise investors to open brokerage accounts with any broker-dealer making a market in the Company's securities and the Company does not intend to influence investors with regard to their decisions as to whether to hold or sell their securities of the Company. IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION This offering involves an immediate and substantial dilution of $3.19 per share between the pro forma net tangible book value per share after the offering of $6.81 and the initial public offering price of $10.00 per share allocable to each share of Class A Stock included in the Units (assuming no value is attributed to the Class A Warrants or Class B Stock included in the Units). The existing stockholders of the Company, including its executive officers and directors, acquired their shares of Class A Stock at prices substantially lower than the initial public offering price and, accordingly, new investors will bear substantially all of the risks inherent in an investment in the Company. Similarly, if and to the extent that the net tangible book value per share of the securities of the Target Business being acquired (when divided by the number of shares of the Common Stock to be issued) is less per share than the Company's current net tangible book value per share, the Company's public stockholders will suffer further dilution, since the issuance of such shares would result in an immediate dilution of the net tangible book value per share of the then consolidated financial position of the Company and the business being acquired. As a result, in the event the Company is unsuccessful, the investors in this offering will bear a disproportionate share of the loss of their respective investment, as compared to the stockholders of the Company prior to the date of this Prospectus. See "Dilution." NO APPRAISAL OF POTENTIAL BUSINESS COMBINATION The Company does not anticipate that it will obtain an independent appraisal or valuation of a Target Business. Thus, stockholders of the Company will need to rely primarily upon management to 25 evaluate a prospective Business Combination. However, a Business Combination will not be consummated unless it is approved by a vote of two-thirds of the Common Stock voted by the stockholders (in person or by proxy). See "The Company--Stockholder Approval of Business Combinations." POSSIBLE NEED TO SECURE NEW OFFICE SPACE The Company, pursuant to an oral agreement, utilizes and will utilize the offices of Mitchell & Co., Ltd. ("Mitchell & Co."), a company controlled by David J. Mitchell, a stockholder of the Company and the Company's Chairman and Chief Executive Officer, until the Company effects a Business Combination. The Company will pay Mitchell & Co. $2,500 per month for rent, office and secretarial services following completion of this offering. Management is unaware of any circumstances under which the Company's utilization of these offices, through management's own initiative, may be changed. In the event the Company, for whatever reason, is no longer able to avail itself of this arrangement, it may be forced to secure new office space and retain adequate secretarial assistance. There can be no assurance that the Company, if required, could secure such new office space and retain such secretarial assistance on favorable terms, if at all. Failure to maintain a business office could adversely affect the Company's operations. See "Proposed Business -- Facilities." COMPLIANCE WITH PENNY STOCK RULES The Company's securities will not initially be considered "penny stock" as defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules thereunder, since the price of each security is $5 or more. If the price per security for any of the Company 's Units, Common Stock, Class A Warrants or Class B Stock were to drop below $5, that particular security of the Company may come within the definition of a "penny stock". Unless such security is otherwise excluded from the definition of "penny stock," the penny stock rules apply with respect to that particular security. One such exemption from the definition of a "penny stock" is for securities of an issuer which has assets in excess of $5 million, as represented by audited financial statements. In the present situation, the Company will have assets in excess of $5 million and expects to have audited financial statements (in addition to those included in this Prospectus) shortly after its Registration Statement is declared effective with the Securities and Exchange Commission. Once such audited financial statements have been obtained, none of the securities of the Company will be considered "penny stock," even if their price falls below $5, so long as the requirements for the other exception from the penny stock rules are met. However, until such time as the Company has obtained audited financial statements, the selling price of each security must be $5 or more in order for such security not to be classified as a "penny stock." The penny stock rules require a broker-dealer prior to a transaction in penny stock, not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Commission that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its sales person in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that the broker-dealer, not otherwise exempt from such rules, must make a special written determination that the penny stock is suitable for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure rules have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. If any security of the Company becomes subject to the penny stock rules, it may become more difficult to sell such securities. Such requirements, if applicable, could result in reduction in the level of trading activity for that particular security of the Company and could make it more difficult for investors to sell that particular security. No assurance can be given that any security of the Company will continue not to be classified as a penny stock. SHARES ELIGIBLE FOR FUTURE SALE The 106,000 shares of Class A Stock outstanding as of the date of this Prospectus are eligible for sale under Rule 144 ("Rule 144") promulgated under the Securities Act of 1933, as amended (the "Securities Act"). Additionally, the 20,000 Placement Shares and the 94,000 shares of Class A Stock 26 issuable upon conversion of the Company's outstanding Series A Preferred Stock will be registered under the Securities Act for sale at the time of a Business Combination and will be freely tradable at that time, subject, however, to the volume limitations of Rule 144 and CDIJ's agreement not to sell or otherwise transfer such shares until 60 days after the first Business Combination in the case of such 94,000 shares. In general, under Rule 144, as currently in effect, subject to the satisfaction of certain other conditions, a person, including an affiliate of the Company (or persons whose shares are aggregated), who has owned restricted shares of Class A Stock beneficially for at least one year is entitled to sell, within any three-month period, a number of shares that does not exceed the greater of 1% of the total number of outstanding shares of the same class or, if the Class A Stock is quoted on an exchange or NASDAQ, the average weekly trading volume during the four calendar weeks preceding the sale. A person who has not been an affiliate of the Company for at least three months immediately preceding the sale and who has beneficially owned the shares of Class A Stock to be sold for at least two years is entitled to sell such shares under Rule 144 without regard to any of the limitations described above. No prediction can be made as to the effect, if any, that sales of such shares of Class A Stock or the availability of such shares for sale will have on the market prices for shares of Class A Stock or Class A Warrants prevailing from time to time. Nevertheless, the sale of substantial amounts of Class A Stock in the public market would likely adversely affect prevailing market prices for the Class A Stock and Warrants and could impair the Company's ability to raise capital through the sale of its equity securities. See "Shares Eligible for Future Sale." The shares of Class A Stock owned immediately prior to the date hereof by all of the stockholders of the Company, including the Placement Shares, will be placed in escrow. In addition, the holders of the Placement Shares have agreed not to directly or indirectly sell, offer to sell, grant an option for the sale of, transfer, assign, pledge, hypothecate or otherwise encumber any of the Placement Shares without the prior written consent of the Company until the earlier of 24 months from the date such shares were issued (November 15, 1995) or 60 days following the consummation of the first Business Combination. Furthermore, all of the holders of Founders' Shares have agreed not to, directly or indirectly, sell, offer to sell, grant an option for the sale of, transfer, assign, pledge, hypothecate or otherwise encumber any of their shares of Class A Stock or options to purchase Units (and the securities issuable upon the exercise thereof) without the prior written consent of the Company until two years from the date that the Founders' Shares were issued (August 18, 1995) but in no event earlier than 120 days following the consummation of the first Business Combination, subject to any additional terms, conditions or restrictions that may be imposed in connection with the consummation of a Business Combination. The Company has agreed with the Representative that it will not grant such consent without the consent of the Representative. See "Certain Transactions," "Shares Eligible for Future Sale," "Description of Securities" and "Underwriting." STATE BLUE SKY REGISTRATION; RESTRICTED RESALES OF THE SECURITIES The ability to register or qualify for sale the Units, the shares of Common Stock and Class A Warrants comprising the Units and the Class B Stock for both initial sale and secondary trading will be limited because a significant number of states have enacted regulations pursuant to their securities or so-called "blue sky" laws restricting or, in many instances, prohibiting, the sale of securities of "blind pool" issuers such as the Company within that state. In addition, many states, while not specifically prohibiting or restricting "blind pool" companies, would not register the securities to be offered in this offering for sale in their states. Because of these regulations, the Company has registered the securities being offered in this offering, or an exemption from registration has been obtained (or is otherwise available), only in the states of Colorado, Delaware, Florida, Georgia, Hawaii, Illinois, Louisiana, Maryland, New York, Rhode Island and South Carolina and in the District of Columbia (the "Primary Distribution States") and initial sales may only be made in such jurisdictions. More specifically, the Company has registered the securities by filing in Colorado, by coordination in Delaware, Illinois, Maryland, Rhode Island and South Carolina and by notification in Florida, Louisiana and New York. Exemptions from registration have been obtained (or are otherwise available) in Georgia, Hawaii and the District of Columbia. In addition, such securities will be immediately eligible for resale in the secondary market in each of the Primary Distribution States and, pursuant to 27 an exemption provided to any nonissuer transaction except when directly or indirectly for the benefit of an affiliate of the issuer, in the Commonwealth of Pennsylvania. Such securities will be eligible for resale in the secondary market 90 days after the date hereof in the states of Maine, Missouri, New Mexico and Rhode Island and 180 days after the date hereof in the states of Alabama, Oklahoma and South Dakota, in each case pursuant to an exemption provided to a company which has securities registered pursuant to Section 12 of the Exchange Act for the time period indicated. Because of regulations enacted to prohibit the sale of securities of "blind pool" companies as well as the unavailability of exemptions provided to companies whose securities are listed on an exchange or are eligible for inclusion in recognized securities manuals such as Standard & Poor's Corporation Records, it is not anticipated that a secondary trading market for the Company's securities will develop in any of the other 31 states until subsequent to consummation of a Business Combination, if at all. Florida residents who purchase Class B Stock will be unable to exchange these shares to Units unless and until the Units issuable upon exchange of the Class B Stock have been registered for sale in Florida or are established to be exempt from the requirement of such registration. Florida law generally precludes the registration of securities that are not listed on a securities exchange or the NASDAQ System when the offering price of such securities is $5.00 or less per share. Because the "exchange price" of Class B Stock is nil, the "offering price" of the Units issuable upon exchange of the Class B Stock could be considered not greater than $5.00. For this reason, no permit to sell the Units issuable upon exchange of the Class B Stock in Florida has been obtained. There can be no assurance that the Units issuable upon exchange of the Class B Stock will ever be registered in Florida or established to be exempt from the requirement of such registration. USE OF PROCEEDS The net proceeds to the Company, after deducting underwriting discounts and estimated expenses (including the Representative's non-accountable expense allowance) are estimated to be $8,390,000 ($9,872,750 if the Underwriters' over-allotment option is exercised in full). The net proceeds to the Company, after deducting only underwriting discounts, from the sale of the Class B Stock to the public are estimated to be $1,350,000. Approximately 84% of the gross proceeds of this offering (representing an amount equal to $8,000,000 gross proceeds from the sale of the Units) will be held in an escrow account maintained by the Proceeds Escrow Agent, until the earlier of written notification by the Company to the Proceeds Escrow Agent (i) of the Company's completion of a transaction or series of transactions in which at least 50% of the gross proceeds from this offering is committed to a specific line of business as a result of a Business Combination (including any redemption payments), or (ii) to distribute the escrowed funds, in connection with a liquidation of the Company, to the then holders of the Class A Stock purchased as part of the Units sold in this offering or in the open market thereafter. All proceeds held in the escrow account will be invested, until released, in short-term United States government securities, including treasury bills, cash and equivalents. The Company will use the net proceeds of this offering, together with the income earned thereon, principally in connection with effecting a Business Combination, including selecting and evaluating potential Target Businesses and structuring and consummating a Business Combination (including possible payment of finder's fees or other compensation to persons or entities which provide assistance or services to the Company). The Company will not effect a Business Combination with a Target Business unless the Fair Market Value of such business is greater than 80% of the net assets of the Company at the time of such consummation of a Business Combination. The Company has no present intention of either loaning any of the proceeds of this offering to any Target Business or purchasing a minority interest in any Target Business. Management is unaware of any circumstances under which this policy, through management's own initiative, may be changed. The Company does not have discretionary access to the monies in the escrow account, including income earned on such amounts, and stockholders of the Company will not receive any distribution of income (other than in connection with the liquidation of the Company) or have any ability to direct the use or distribution of such 28 income. Thus, such income will cause the amount in escrow to increase. The Company cannot use the escrowed amounts to pay the costs of evaluating potential Business Combinations. The Company will use the proceeds from the sale of the Class B Stock (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, to Bright pursuant to a license agreement executed by Bright and the Company, (iii) to cover all the expenses incurred by the Company in this offering, including the Underwriters' discounts and the Representative's non-accountable expense allowance, and (iv) to pay the costs of evaluating potential Business Combinations, including investment banking fees, the fees of the Proceeds Escrow Agent and the costs of business, legal and accounting due diligence on prospective Target Businesses. See "Proposed Business -- Servicemark License." Such funds also will be used for the general and administrative expenses of the Company, including legal and accounting fees and administrative support expenses in connection with the Company's reporting obligations to the Commission. The Company does not anticipate such fees and administrative expenses will exceed $100,000 per year. The Company's anticipated uses of the net proceeds from the sale of the Class B Stock and from the sale to two directors of the Company (assuming no exercise of the Underwriters' over-allotment option) are quantified as follows:
USE OF PROCEEDS AMOUNT PERCENTAGE - ------------------------------------------------------------------- ------------- ----------- Escrow Account (1)................................................. $ 480,000 35.6% Non-accountable Expense Allowance (2).............................. 285,000 21.1 Repayment of Indebtedness.......................................... 100,000 7.4 License Fee........................................................ 90,000 6.7 Expenses of Offering............................................... 195,000 14.4 Evaluation of Potential Business Combinations...................... 200,000 14.8 ------------- ----- $ 1,350,000 100.0% ------------- ----- ------------- -----
- ------------------------ (1) Represents the amount of the proceeds from the sale of the Class B Stock to be added to the Escrow Account to be maintained by the Proceeds Escrow Agent, which amount equals the Underwriters' discount with respect to the sale of the Units (assuming no exercise of the Underwriters' over-allotment option). See "The Company -- Escrow of Offering Proceeds." (2) Represents the non-accountable expense allowance payable to the Underwriters in an amount equal to 3% of the gross proceeds from the sale of Units and Class B Stock (assuming no exercise of the Underwriters' over-allotment option). See "Underwriting." The Company may seek to issue additional securities if it requires additional funds to meet its operating and administrative expenses. The Company has agreed with the Representative that for a period of 18 months from the date of this Prospectus and for up to six additional months if the Extension Criteria have been satisfied, it will not issue (other than pursuant to this offering) any securities or grant options or warrants to purchase any securities of the Company without the consent of the Representative. The Company anticipates that it will use a portion of the net proceeds of the offering to repay indebtedness to several lenders evidenced by a series of notes (the "Investor Notes"). The amount of this indebtedness is $100,000 plus interest computed at the rate of 8% per year from November 15, 1995. The proceeds of the borrowings under the Investor Notes were used to finance this offering, including legal, accounting, printing and other costs. The Investor Notes bear interest at 8% per year and both interest and principal are payable in full upon the closing of this offering or May 15, 1998, whichever is earlier. Following receipt of the net proceeds from the sale of the Class B Stock in this offering, the Company believes it will have sufficient available funds, assuming that a Business Combination is not consummated, to operate for at least the next 24 months. To the extent that Common Stock is used as consideration to effect a Business Combination, the net proceeds of this offering not theretofore expended will be used to finance the operations (including the possible repayment of debt) of the 29 Target Business. No cash compensation will be paid to any officer or director until after the consummation of the first Business Combination. However, the Company will pay rent for office space and a fee for secretarial services to Mitchell & Co., Ltd., an affiliate of the Company's Chairman and Chief Executive Officer of $2,500 per month commencing upon the closing of this offering. See "Proposed Business -- Facilities." Since the role of present management after a Business Combination is uncertain, the Company has no ability to determine what remuneration, if any, will be paid to such persons after a Business Combination. No portion of the gross proceeds from this offering will be paid to the Company's officers, directors, their affiliates or associates for expenses of this offering. Management is not aware of any circumstances under which the aforementioned policy may be changed. The net proceeds from the sale of Class B Stock in this offering, not immediately required for the purposes set forth above, will be invested in general debt obligations of the United States Government or other high-quality, short-term interest-bearing investments, provided, however, that the Company will attempt not to invest such net proceeds in a manner which may result in the Company being deemed to be an investment company under the Investment Company Act. The Company believes that, in the event a Business Combination is not effected in the time allowed and to the extent that a significant portion of the net proceeds from the sale of the Class B Stock in this offering is not used in evaluating various prospective Target Businesses, the interest income derived from investment of the net proceeds from the sale of the Class B Stock during such period may be sufficient to defray continuing general and administrative expenses, as well as costs relating to compliance with securities laws and regulations (including associated professional fees). To the extent that a Business Combination is not effected in the time allowed and the Company's stockholders determine not to liquidate the Company, the Company believes that such interest income, together with a small portion of the net proceeds from the sale of the Class B Stock in this offering, may be sufficient to defray continuing expenses for a period of several additional years until the Company consummates a Business Combination. If such remaining proceeds are insufficient to maintain the operations of the Company, management will attempt to secure additional financing or will again recommend the liquidation of the Company to the stockholders. Since all of the present holders of the Company's Class A Stock have agreed to waive their respective rights to participate in a liquidation distribution occurring prior to the first Business Combination, all of the assets of the Company, including any interest and income earned on the proceeds of this offering, which may be distributed upon such liquidation would be distributed to the owners of the Class A Stock other than the present stockholders and to the holders of the Company's Series A Preferred Stock. The Company will not pay ten percent (10%) or more in the aggregate of the net proceeds of this offering (through repayment of indebtedness or otherwise) to NASD members, affiliates, associated persons or related persons. 30 DILUTION The difference between the public offering price per share of Class A Stock (assuming no value is attributed to the Class A Warrants included in the Units) and the pro forma net tangible book value per share of Class A Stock of the Company after this offering constitutes the dilution to investors in this offering. Net tangible book value per share of Class A Stock is determined by dividing the net tangible book value of the Company (total tangible assets less total liabilities) by the number of outstanding shares of Class A Stock. Because the proceeds from the sale of the Class A Stock will be in escrow until the time of a Business Combination and the Class B Stock will be exchanged for Class A Stock within 90 days following a Business Combination the number of outstanding shares of Class A Stock includes the number of shares of Class A Stock (300,000) issuable upon exchange of the Class B Stock. At March 31, 1997, net tangible book value of the Company was $(159,123) or $(1.50) per share of Class A Stock. After giving effect to the sale of 800,000 shares of Class A Stock included in the Units offered hereby (and assuming no value is attributed to the Class A Warrants included in such Units) and 150,000 shares of Class B Stock offered hereby and the initial application of the estimated net proceeds therefrom, the pro forma net tangible book value of the Company at March 31, 1997, would be $8,216,363 or $6.81 per share, representing an immediate increase in net tangible book value of $8.31 per share to existing holders of Class A Stock and an immediate dilution of $3.19 per share to investors purchasing Units in this offering ("New Investors"). The following table illustrates the foregoing information with respect to dilution to New Investors on a per share basis (assuming no value is attributed to the Warrants included in the Units): Public offering price per share of Class A Stock (1)(2).................... $ 10.00 --------- Net tangible book value per share of Class A Stock before this offering.... $ (1.50) Increase attributable to this offering..................................... $ 8.31 --------- Pro forma net tangible book value per share of Class A Stock after this offering (3).............................................................. 6.81 --------- Dilution to New Investors.................................................. $ 3.19 --------- ---------
The following table sets forth, with respect to existing stockholders and investors in this offering, a comparison of the number shares of Class A Stock acquired from the Company, the percentage ownership of such shares, the total consideration paid, the percentage of total consideration paid and the average price per share:
AVERAGE SHARES PURCHASED (1) TOTAL CONSIDERATION (1) ------------------------ -------------------------- PRICE AMOUNT PERCENTAGE AMOUNT PERCENTAGE PER SHARE ----------- ----------- ------------- ----------- ----------- Existing Class A Stockholders.................... 106,000 8.8% $ 53,600 0.6% $ .51 New Investors.................................... 1,100,000 91.2 9,500,000(2) 99.4 $ 10.00 ----------- ----- ------------- ----- ----------- 1,206,000 100.0% $ 9,553,600 100.0% ----------- ----- ------------- ----- ----------- ----- ------------- -----
- ------------------------ (1) If the Underwriters' over-allotment option is exercised in full, the investors in this offering will have paid $9,200,000 for 920,000 shares of Class A Stock, representing 99.8% of the total consideration for approximately 89.7% of the total number of shares of Class A Stock then outstanding (excluding any exchange of shares of Class B Stock for this purpose). The foregoing tables also assume no exercise of the Representative's Unit Purchase Warrants, the Representative's Class B Warrants, warrants owned by the Company's directors and executive officers or the Warrants, or conversion of the Series A Preferred Stock. See "Underwriting" and "Description of Capital Stock -- Series A Preferred Stock." (2) Assumes that no value is attributable to the Class A Warrants. (3) Pro forma net tangible book value after this offering assumes the initial application of estimated net proceeds to the Company (after payment of all offering expenses, including the Representatives' non-accountable expense allowance of $285,000). See "Use of Proceeds." 31 CAPITALIZATION The following table sets forth the capitalization of the Company as of March 31, 1997, and as adjusted to give effect to the sale of the Units and the Class B Stock being offered hereby:
HISTORICAL AS ADJUSTED(1) ---------- -------------- Note Payable................................................................ $ 86,758 -- ---------- -------------- Class A Common Stock, subject to possible redemption, 160,000 shares at redemption value (3)....................................................... $ -- $ 1,600,000 Preferred Stock, $.01 par value, 100 shares authorized, None outstanding, 94 shares subscribed for; 1,000,000 shares authorized, 94 shares issued and outstanding as adjusted.................................................... 1 1 Subscription Receivable..................................................... (9,400) -- Class A Common Stock, $.01 par value, 200,000 shares authorized, 106,000 shares issued and outstanding; 10,000,000 shares authorized, 906,000 shares issued and outstanding, as adjusted (2).................................... 1,060 9,060 Class B Common Stock, $.01 par value, none authorized; 250,000 authorized, 180,000 shares issued and outstanding, as adjusted (2)..................... -- 1,500 Additional paid in capital.................................................. 61,939 6,664,647 Deficit accumulated during the development stage............................ (34,931) (58,845) ---------- -------------- Total capitalization...................................................... $ 105,427 $ 8,216,363 ---------- -------------- ---------- --------------
- -------------------------- (1) Adjusted to give effect to the sale of 800,000 Units and the 150,000 shares of Class B Stock offered hereby at the public offering price of $10.00 per Unit and $10.00 per share of Class B Stock, respectively, and the receipt by the Company of the estimated net proceeds (after the payment of all offering expenses, including the Representative's non-accountable expense allowance) of $8,390,000. See "Use of Proceeds." (2) Excludes a total of 2,430,666.6 shares of Class A Stock, consisting of: (i) 800,000 shares of Class A Stock reserved for issuance upon the exercise of the Class A Warrants, (ii) 300,000 shares of Class A Stock reserved for issuance upon exchange of the Class B Stock, (iii) 300,000 shares of Class A Stock reserved for issuance upon exercise of the Class A Warrants comprising a part of the Units underlying the Class B Stock, (iv) 120,000 shares of Class A Stock included in the Units subject to the Underwriters' over-allotment option, (v) 120,000 shares of Class A Stock reserved for issuance upon the exercise of the Class A Warrants included in the Units subject to the Underwriters' over-allotment option, (vi) 45,000 shares of Class A Stock reserved for issuance upon exercise of the Units underlying the Class B Stock subject to the Underwriters' over-allotment option, (vii) 45,000 shares of Class A Common Stock reserved for issuance upon exercise of the Class A Warrants comprising a part of the Units underlying the Class B Stock subject to the Underwriters' over-allotment option, (viii) 266,666.6 shares of Class A Stock reserved for issuance upon exercise of options for Units granted to executive officers of the Company, (ix) 94,000 shares of Class A Stock reserved for issuance upon conversion of the Company's outstanding Series A Preferred Stock, which shares of Class A Stock will be offered for sale by this Prospectus at the time of a Business Combination, (x) 80,000 shares of Class A Stock included in the Units reserved for issuance upon exercise of the Representative's Unit Purchase Warrants, (xi) 80,000 shares of Class A Stock reserved for issuance upon the exercise of the Class A Warrants included in the Units reserved for issuance upon exercise of the Representative's Unit Purchase Warrants, (xii) 30,000 shares of Class A Stock included in the Units reserved for issuance upon exercise of the Representative's Class B Warrants, (xiii) 30,000 shares of Class A Stock reserved for issuance upon exercise of Class A Warrants comprising a part of the Units underlying the Representative's Class B Warrants, (xiv) 60,000 shares of Class A Stock reserved for issuance upon exchange of the Class B Stock reserved for issuance upon the exercise of options granted to two of the Company's directors, and (xv) 60,000 shares of Class A Stock reserved for issuance upon exercise of the Class A Warrants comprising a part of the Units underlying the Class B Stock reserved for issuance upon the exercise of options granted to two of the Company's directors. See "Underwriting" and "Certain Transactions." (3) In the event the Company consummates a Business Combination, the redemption rights afforded to the non-affiliated public stockholders may result in the conversion into cash of up to 20% of the aggregate number of shares of Class A Stock held by the non-affiliated public stockholders at a per share redemption price equal to (A) the greater of (i) the Company's net worth or (ii) the amount of proceeds of the Company in the escrow account (including interest earned thereon) divided by (B) the number of shares of Class A Stock held by non-affiliated public stockholders. 32 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is currently in the development stage and is in the process of raising capital. All activity of the Company to date has been related to its formation and proposed financing. The Company's ability to commence operations is contingent upon obtaining adequate financial resources through this offering. All of the Company's costs to date have been paid out of available cash. The Company will use the net proceeds of this offering, together with the income and interest earned thereon, in connection with effecting a Business Combination, including selecting and evaluating potential Target Businesses and structuring and consummating a Business Combination (including possible payment of finder's fees or other compensation to persons or entities which provide assistance or services to the Company). The Company does not have discretionary access to the income on the monies in the escrow account and stockholders of the Company will not receive any distribution of the income (except in connection with a redemption of Class A Stock by the Company) or have any ability to direct the use or distribution of such income. Thus, such income will cause the amount in escrow to increase. The Company cannot use the escrowed amounts to pay the costs of evaluating potential Business Combinations and will use the proceeds from the sale of the Class B Stock (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, to Bright pursuant to a license agreement executed by Bright and the Company, (iii) to cover all the expenses incurred by the Company in this offering, including the Underwriters' discounts, the Representatives' non-accountable expense allowance with respect to both the Units and the Class B Stock, and the Proceeds Escrow Agent, and (iv) to pay the costs of evaluating potential Business Combinations, including investment banking fees and the costs of business, legal and accounting due diligence on prospective Target Businesses. In addition, such funds will be used for the general and administrative expenses of the Company, including legal and accounting fees and administrative support expenses in connection with the Company's reporting obligations to the Commission. The Company does not anticipate such fees and administrative expenses will exceed $40,000 per year. Following receipt of the net proceeds from the sale of the Class B Stock in this offering, the Company will have sufficient available funds, assuming that a Business Combination is not consummated, to operate for at least the next 24 months. To the extent that Common Stock is used as consideration to effect a Business Combination, the balance of the net proceeds of this offering not theretofore expended will be used to finance the operations of the Target Business. See "Use of Proceeds." No cash compensation will be paid to any officer or director until after the consummation of the first Business Combination. Since the role of present management after a Business Combination is uncertain, the Company has no ability to determine what remuneration, if any, will be paid to such persons after a Business Combination. The net proceeds from the sale of the Class B Stock in this offering not immediately required for the purposes set forth above will be invested in general debt obligations of the United States Government or other high-quality, short-term interest-bearing investments, provided, however, that the Company will attempt not to invest such net proceeds in a manner which may result in the Company being deemed to be an investment company under the Investment Company Act. The Company believes that, in the event a Business Combination is not effected in the time allowed and to the extent that a significant portion of the net proceeds of this offering is not used in evaluating various prospective Target Businesses, the interest income derived from investment of such net proceeds during such period may be sufficient to defray continuing general and administrative expenses, as well as costs relating to compliance with securities laws and regulations (including associated professional fees). In the event that the Company does not effect a Business Combination within 18 months from the date of this Prospectus, or 24 months from the date of this Prospectus if the Extension Criteria have been satisfied, the Company will submit to the holders of Class A Stock for their consideration a proposal to distribute to the then holders of Class A Stock acquired as part of the Units sold in this offering or in the open market thereafter, the amount held in the escrow account. The assets of the Company (other than the escrowed assets) will be used to pay the Company's liabilities and also to pay 33 a liquidation distribution of $9,400 to the holders of the Company's Series A Preferred Stock. To the extent that a Business Combination is not effected in the time allowed and the Company's stockholders determine not to permit the Company to redeem the Class A Stock, the Company believes that income from the escrow account, together with a small portion of the net proceeds from the sale of the Class B Stock in this offering, may be sufficient to defray continuing expenses for a short period of time until the Company consummates a Business Combination. However, because the Company cannot estimate the amount of the proceeds from the sale of the Class B Stock that will be used to pursue a potential Business Combination, it cannot estimate what amount of funds, if any, might be available to defray expenses or for how long, if at all, such funds might be sufficient for that purpose. Since all of the present holders of the Company's Class A Stock have agreed to waive their respective rights to participate in a redemption distribution occurring prior to the first Business Combination, all of the assets of the Company, including any income and interest earned on the proceeds of this offering, which may be distributed upon such redemption would be distributed to the owners of the Class A Stock issued as part of the Units in this offering or in the open market thereafter, after payment of a redemption distribution of $9,400 to the holders of the Series A Preferred Stock. PROPOSED BUSINESS INTRODUCTION The Company, a development stage entity, was formed in August 1995 to serve as a vehicle for the acquisition of, or the merger or consolidation with, a Target Business. The Company intends to utilize the proceeds of this offering, equity securities, debt securities, bank borrowings or a combination thereof in effecting a Business Combination with a Target Business which the Company believes has significant growth potential. The Company's efforts in identifying a prospective Target Business are expected to emphasize businesses primarily located in the United States; however, the Company reserves the right to acquire a Target Business located primarily elsewhere. While the Company may, under certain circumstances, seek to effect Business Combinations with more than one Target Business, as a result of its limited resources the Company will, in all likelihood, have the ability to effect only a single Business Combination. The Company may effect a Business Combination with a Target Business which may be financially unstable or in its early stages of development or growth. "BLIND POOL" OFFERING BACKGROUND. As a result of management's broad discretion with respect to the specific application of the net proceeds of this offering, this offering can be characterized as a "blind pool" or "blank check" offering. Although substantially all of the net proceeds of this offering are intended to be utilized generally to effect a Business Combination, such proceeds are not otherwise being designated for any more specific purposes. Accordingly, prospective investors who invest in the Company will do so without an opportunity to evaluate the specific merits or risks of any one or more Business Combinations. Consummation of a Business Combination may involve the acquisition of, or merger or consolidation with, a company that does not need substantial additional capital but which desires to establish a public trading market for its shares, while avoiding what it may deem to be the adverse consequences of undertaking a public offering itself, such as the time delays and significant expenses incurred to comply with the various Federal and state securities laws that regulate initial public offerings. UNSPECIFIED INDUSTRY AND TARGET BUSINESS. The Company will seek to acquire a Target Business without limiting itself to a particular industry. Most likely, the Target Business will be primarily located in the United States, although the Company reserves the right to acquire a Target Business primarily located outside the United States. In seeking a Target Business, the Company will consider, without limitation, businesses which (i) offer or provide services or develop, manufacture or distribute goods in the United States or abroad, including, without limitation, in the following areas: health care and health products, educational services, environmental services, consumer-related products and services (including amusement and/or recreational services), personal care services, voice and data information processing and transmission and related technology development or (ii) is engaged in 34 wholesale or retail distribution. The Company will not acquire a Target Business unless the Fair Market Value Test is satisfied. If the Company determines that the financial statements of a proposed Target Business do not clearly indicate that the Fair Market Value Test has been satisfied, the Company will obtain an opinion from an investment banking firm (which is a member of the NASD) with respect to the satisfaction of such criteria. None of the Company's directors or its executive officer has had any preliminary contact or discussions with any representative of any Target Business regarding consummation of a Business Combination. Accordingly, there is no basis for investors in this offering to evaluate the possible merits or risks of a particular industry or the Target Business. In connection with stockholder approval of a Business Combination, the Company intends to provide stockholders with complete disclosure documentation, including audited financial statements, concerning a Target Business. Accordingly, any Target Business that is selected would need to have audited financial statements or be audited in connection with the transaction. To the extent the Company effects a Business Combination with a financially unstable company or an entity in its early stage of development or growth (including entities without established records of revenue or income), the Company will become subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, to the extent that the Company effects a Business Combination with an entity in an industry characterized by a high level of risk, the Company will become subject to the currently unascertainable risks of that industry. An extremely high level of risk frequently characterizes certain industries which experience rapid growth. Although management will endeavor to evaluate the risks inherent in a particular industry or Target Business, there can be no assurance that the Company will properly ascertain or assess all risks. PROBABLE LACK OF BUSINESS DIVERSIFICATION. As a result of the limited resources of the Company, the Company, in all likelihood, will have the ability to effect only a single Business Combination. Accordingly, the prospects for the Company's success will be entirely dependent upon the future performance of a single business. Unlike certain entities that have the resources to consummate several Business Combinations or entities operating in multiple industries or multiple segments of a single industry, it is highly likely that the Company will not have the resources to diversify its operations or benefit from the possible spreading of risks or offsetting of losses. The Company's probable lack of diversification may subject the Company to numerous economic, competitive and regulatory developments, any or all of which may have a material adverse impact upon the particular industry in which the Company may operate subsequent to consummation of a Business Combination. The prospects for the Company's success may become dependent upon the development or market acceptance of a single or limited number of products, processes or services. Accordingly, notwithstanding the possibility of capital investment in and management assistance to the Target Business by the Company, there can be no assurance that the Target Business will prove to be commercially viable. The Company has no present intention of either loaning any of the proceeds of this offering to any Target Business or of purchasing or acquiring a minority interest in any Target Business. OPPORTUNITY FOR STOCKHOLDER EVALUATION OR APPROVAL OF BUSINESS COMBINATIONS. The investors in this offering will, in all likelihood, neither receive nor otherwise have the opportunity to evaluate any financial or other information which will be made available to the Company in connection with selecting a potential Target Business until after the Company has entered into a definitive agreement to effectuate a Business Combination. As a result, investors in this offering will be almost entirely dependent on the judgment of management in connection with the selection of a Target Business and the terms of any Business Combination. Under the Delaware General Corporation Law, various forms of Business Combinations can be effected without stockholder approval. In addition, the form of Business Combination will have an impact upon the availability of dissenters' rights (i.e., the right to receive fair payment with respect to the Common Stock) to stockholders disapproving of the proposed Business Combination. Under current Delaware law, only a merger or consolidation may give rise to a stockholder vote and to dissenters' rights. Nevertheless, the Company will afford holders of Common Stock the right to 35 approve the consummation of any Business Combination, whether or not such approval would be required under applicable Delaware law. In connection with such approval, the Company intends to provide stockholders with complete disclosure documentation, including audited financial statements, concerning a Target Business. The Company's present stockholders have agreed in the escrow agreement to which their stock is subject to vote their respective shares of Common Stock in accordance with the vote of the majority of the shares voted by all non-affiliated public stockholders of the Company with respect to the consummation of any Business Combination. Pursuant to the Company's certificate of incorporation, a Business Combination will not be consummated unless approved by a vote of two-thirds of the shares of Common Stock voted by non-affiliated public stockholders (in person or by proxy) with each share of Class B Stock entitled to two votes. In addition, the Delaware General Corporation Law requires approval of certain mergers and consolidations by a majority of the outstanding stock entitled to vote. Even if investors are afforded the right to approve a Business Combination under the Delaware General Corporation Law, no dissenters' rights to receive fair payment will be available for stockholders if the Company is to be the surviving corporation unless the Certificate of Incorporation of the Company is amended and as a result thereof: (i) alters or abolishes any preferential right of such stock; (ii) creates, alters or abolishes any provision or right in respect of the redemption of such shares or any sinking fund for the redemption or purchase of such shares; (iii) alters or abolishes any preemptive right of such holder to acquire shares or other securities; or (iv) excludes or limits the right of such holder to vote on any matter, except as such right may be limited by the voting rights given to new shares then being authorized of any existing or new class. LIMITED ABILITY TO EVALUATE MANAGEMENT OF A TARGET BUSINESS. The role of the present management of the Company, following a Business Combination, cannot be stated with any certainty. Although the Company intends to scrutinize closely the management of a prospective Target Business in connection with its evaluation of the desirability of effecting a Business Combination with such Target Business, there can be no assurance that the Company's assessment of such management will prove to be correct. While it is possible that certain of the Company's directors or its executive officers will remain associated in some capacities with the Company following consummation of a Business Combination, it is unlikely that any of them will devote a substantial portion of their time to the affairs of the Company subsequent thereto. Moreover, there can be no assurance that such personnel will have significant experience or knowledge relating to the operations of the particular Target Business. The Company also may seek to recruit additional personnel to supplement the incumbent management of the Target Business. There can be no assurance that the Company will have the ability to recruit additional personnel or that such additional personnel will have the requisite skills, knowledge or experience necessary or desirable to enhance the incumbent management. In addition, there can be no assurance that the future management of the Company will have the necessary skills, qualifications or abilities to manage a public company intending to embark on a program of business development. SELECTION OF A TARGET BUSINESS AND STRUCTURING OF A BUSINESS COMBINATION. Management of the Company will have substantial flexibility in identifying and selecting a prospective Target Business within the specified businesses. However, the Company's flexibility is limited to the extent that it must satisfy the Fair Market Value Test. If the Company determines that the financial statements of a proposed Target Business do not clearly indicate that the Fair Market Value Test has been satisfied, the Company will obtain an opinion from an investment banking firm that is a member of the NASD with respect to the satisfaction of such criteria. As a result, investors in this offering will be almost entirely dependent on the judgment of management in connection with the selection of a Target Business. In evaluating a prospective Target Business, management will consider, among other factors, the following: (i) costs associated with effecting the Business Combination; (ii) equity interest in and opportunity for control of the Target Business; (iii) growth potential of the Target Business; (iv) experience and skill of management and availability of additional personnel of the Target Business; (v) capital requirements of the Target Business; (vi) competitive position of the Target Business; 36 (vii) stage of development of the Target Business; (viii) degree of current or potential market acceptance of the Target Business; (ix) proprietary features and degree of intellectual property or other protection of the Target Business; (x) the financial statements of the Target Business; and (xi) the regulatory environment in which the Target Business operates. The Company will retain an independent investment banking firm which is a member in good standing of the NASD to assist the Company in identifying, evaluating, structuring and negotiating potential Business Combinations. The foregoing criteria are not intended to be exhaustive and any evaluation relating to the merits of a particular Target Business will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by management in connection with effecting a Business Combination consistent with the Company's business objectives. In connection with its evaluation of a prospective Target Business, management anticipates that it will conduct a due diligence review which will encompass, among other things, meeting with incumbent management and inspection of facilities, as well as a review of financial, legal and other information which will be made available to the Company. The time and costs required to select and evaluate a Target Business (including conducting a due diligence review) and to structure and consummate the Business Combination (including negotiating relevant agreements and preparing requisite documents for filing pursuant to applicable securities laws and state "blue sky" and corporation laws) cannot presently be ascertained with any degree of certainty. The Company's current executive officers and directors intend to devote only a small portion of their time to the affairs of the Company and, accordingly, consummation of a Business Combination may require a greater period of time than if the Company's management devoted their full time to the Company's affairs. However, each officer and director of the Company will devote such time as they deem reasonably necessary to carry out the business and affairs of the Company, including the evaluation of potential Target Businesses and the negotiation of a Business Combination and, as a result, the amount of time devoted to the business and affairs of the Company may vary significantly depending upon, among other things, whether the Company has identified a Target Business or is engaged in active negotiation of a Business Combination. Any costs incurred in connection with the identification and evaluation of a prospective Target Business with which a Business Combination is not ultimately consummated will result in a loss to the Company and reduce the amount of capital available to otherwise complete a Business Combination or for the resulting entity to utilize. The Company anticipates that various prospective Target Businesses will be brought to its attention from various non-affiliated sources, including securities broker-dealers, investment bankers, venture capitalists, bankers, other members of the financial community and affiliated sources, including, possibly, the Company's executive officer, directors and their affiliates. While the Company has not yet ascertained how, if at all, it will advertise and promote itself, it may elect to publish advertisements in financial or trade publications seeking potential business acquisitions. While the Company does not presently anticipate engaging the services of professional firms that specialize in finding business acquisitions on any formal basis (other than the independent investment banker), the Company may engage such firms in the future, in which event the Company may pay a finder's fee or other compensation. In no event, however, will the Company pay a finder's fee or commission to officers or directors of the Company or any entity with which they are affiliated for such service. Moreover, in no event shall the Company issue any of its securities to any officer, director or promoter of the Company, or any of their respective affiliates or associates, in connection with activities designed to locate a Target Business. See "Management -- Conflicts of Interest." In addition, the Company has agreed with the Representative that any finder's fee in connection with the Company's first Business Combination will require approval by the Company's Board of Directors. The Representative may act as finder in connection with a Business Combination and receive compensation for such service, the amount and form of which will be subject to negotiation at the time of introduction of the Target Business to the Company. See "Underwriting." 37 As a general rule, Federal and state tax laws and regulations have a significant impact upon the structuring of business combinations. The Company will evaluate the possible tax consequences of any prospective Business Combination and will endeavor to structure a Business Combination so as to achieve the most favorable tax treatment to the Company, the Target Business and their respective stockholders. There can be no assurance that the Internal Revenue Service or relevant state tax authorities will ultimately assent to the Company's tax treatment of a particular consummated Business Combination. To the extent the Internal Revenue Service or any relevant state tax authorities ultimately prevail in recharacterizing the tax treatment of a Business Combination, there may be adverse tax consequences to the Company, the Target Business and their respective stockholders. Tax considerations as well as other relevant factors will be evaluated in determining the precise structure of a particular Business Combination, which could be effected through various forms of a merger, consolidation or stock or asset acquisition. The Company may utilize cash derived from the net proceeds of this offering, equity securities, debt securities or bank borrowings or a combination thereof as consideration in effecting a Business Combination. Although the Company's Board of Directors will have the power to issue any or all of the authorized but unissued shares of Common Stock following the consummation of this offering, the Company has agreed with the Representative that, for a period of 18 months from the date of this Prospectus, and for up to six additional months if the Extension Criteria have been satisfied, it will not issue (other than pursuant to this offering) any securities or grant options or warrants to purchase any securities of the Company without the consent of the Representative, except in connection with effecting a Business Combination. Although the Company has no commitments as of the date of this Prospectus to issue any shares of Common Stock or options or warrants, other than as described in this Prospectus, the Company will, in all likelihood, issue a substantial number of additional shares in connection with the consummation of a Business Combination. To the extent that such additional shares are issued, dilution to the interests of the Company's stockholders will occur. Additionally, if a substantial number of shares of Common Stock are issued in connection with the consummation of a Business Combination, a change in control of the Company may occur which may affect, among other things, the Company's ability to utilize net operating loss carryforwards, if any. There currently are no limitations on the Company's ability to borrow funds to effect a Business Combination. However, the Company's limited resources and lack of operating history may make it difficult to borrow funds. The amount and nature of any borrowings by the Company will depend on numerous considerations, including the Company's capital requirements, potential lenders' evaluation of the Company's ability to meet debt service on borrowings and the then prevailing conditions in the financial markets, as well as general economic conditions. The Company does not have any arrangements with any bank or financial institution to secure additional financing and there can be no assurance that such arrangements if required or otherwise sought, would be available on terms commercially acceptable or otherwise in the best interests of the Company. The inability of the Company to borrow funds required to effect or facilitate a Business Combination, or to provide funds for an additional infusion of capital into a Target Business, may have a material adverse effect on the Company's financial condition and future prospects, including the ability to effect a Business Combination. To the extent that debt financing ultimately proves to be available, any borrowings may subject the Company to various risks traditionally associated with indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest. Furthermore, a Target Business may have already incurred debt financing and, therefore, all the risks inherent thereto. COMPETITION The Company expects to encounter intense competition from other entities having business objectives similar to that of the Company. Many of these entities are well established and have extensive experience in connection with identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater financial, technical, human and other resources than the Company and there can be no assurance that the Company will have the ability to 38 compete successfully. The Company's financial resources will be limited in comparison to those of many of its competitors. Further, such competitors will generally not be required to seek the prior approval of their own stockholders, which may enable them to close a Business Combination more quickly than the Company. This inherent competitive limitation may compel the Company to select certain less attractive Business Combination prospects. There can be no assurance that such prospects will permit the Company to satisfy its stated business objectives. UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS In the event that the Company succeeds in effecting a Business Combination, the Company will, in all likelihood, become subject to intense competition from competitors of the Target Business. In particular, certain industries which experience rapid growth frequently attract an increasingly large number of competitors including competitors with increasingly greater financial, marketing, technical, human and other resources than the initial competitors in the industry. The degree of competition characterizing the industry of any prospective Target Business cannot presently be ascertained. There can be no assurance that, subsequent to a Business Combination, the Company will have the resources to compete effectively, especially to the extent that the Target Business is in a high-growth industry. REDEMPTION OF CLASS A STOCK In the event that the Company does not effect a Business Combination within 18 months from the date of this Prospectus, or 24 months from the date of this Prospectus if the Extension Criteria have been satisfied, the Company will submit to the holders of Class A Stock for their consideration a proposal to distribute to the then holders of Class A Stock acquired as part of the Units sold in this offering or in the open market thereafter, in redemption of such shares the amounts in the interest bearing escrow account. Following such a redemption of Class A Stock, each outstanding share of Class B Stock will be exchanged for two shares of Class A Stock. The assets of the Company (other than the escrowed assets) will be used to pay the Company's liabilities and to pay a liquidation distribution of $9,400 to the Holders of the Series A Preferred Stock. The amount per share for distribution, to the holders of the Class A Stock acquired as part of the Units sold in this offering or in the open market thereafter, and exclusive of any income earned from the escrow account, will be approximately equal to the initial public offering price per Unit in this offering ($10.00 per Unit assuming no value is attributed to the Class A Warrants included in the Units offered hereby). There can be no assurance that the Company will effect a Business Combination within such period. All of the Company's present stockholders including the Company's executive officers and other directors and their affiliates are required to vote their shares of Class A Stock in accordance with the vote of the majority of all non-affiliated public stockholders of the Company with respect to any redemption proposal. Holders of Class A Warrants, however, will only be entitled to vote on any redemption proposal, and allowed to participate in any redemption distribution, if they purchase shares of Class A Stock in this offering or on the open market thereafter, but only as to any shares of Class A Stock so purchased. Present stockholders including officers, directors and their affiliates will not participate in any redemption distribution with respect to the shares of Class A Stock owned by them as of the date hereof. CERTAIN SECURITIES LAWS CONSIDERATIONS The Company has filed an application with the Commission to register the Units, the Class A Stock, the Class A Warrants and the Class B Stock under the provisions of Section 12(g) of the Exchange Act, and it will use its best efforts to continue to maintain such registration until there has been a consummation of a Business Combination or a liquidation of the Company. Such registration will require the Company to comply with periodic reporting, proxy solicitation and certain other requirements of the Exchange Act, including the requirement that it submit to the Commission, prior to its dissemination, any proxy material to be furnished to stockholders in connection with a proposed Business Combination. 39 Under the Federal securities laws, public companies must furnish stockholders certain information about significant acquisitions, which information may require audited financial statements for an acquired company with respect to one or more fiscal years, depending upon the relative size of the acquisition. Consequently, the Company will only be able to effect a Business Combination with a prospective Target Business that has available audited financial statements or has financial statements which can be audited. FACILITIES The Company, pursuant to an oral agreement, utilizes and will utilize the offices of Mitchell & Co., a corporation controlled by David J. Mitchell, a stockholder of the Company and the Company's Chairman and Chief Executive Officer, until the acquisition of a Target Business. Following completion of this offering, the Company will pay Mitchell & Co., $2,500 per month for rent, office and secretarial services. Management is unaware of any circumstances under which the Company's utilization of these offices, through management's own initiative, may be changed. SERVICEMARK LICENSE The servicemarks SMA(2)RT-SM- and Specialized Merger and Acquisition Allocated Risk Transaction-SM- are owned by Bright. Bright has granted the Company a non-exclusive license to use, for the sole purpose of marketing this offering, the SMA(2)RT-SM- and Specialized Merger and Acquisition Allocated Risk Transaction-SM- servicemarks in consideration of a royalty equal to $100,000, of which $10,000 has been paid and the balance of $90,000 is payable upon the closing of this offering. There can be no assurance that a third party owning or using a similar servicemark or trademark will not object to, or seek to prohibit, the Company's use of the SMA(2)RT-SM- or Specialized Merger and Acquisition Allocated Risk Transaction-SM- servicemarks. See "Certain Transactions." EMPLOYEES As of the date of this Prospectus, the Company has no full time employees. 40 MANAGEMENT DIRECTORS AND OFFICERS The current directors and officers of the Company are as follows:
NAME AGE POSITION - ------------------------ --- ----------------------------------------------------------------------- David J. Mitchell 35 Chairman of the Board, Chief Executive Officer, Director C. Thomas McMillen 44 Secretary, Treasurer, Director A. J. Nassar 40 Director
DAVID J. MITCHELL has been President of Mitchell & Co., Ltd., a New York-based merchant banking company founded by him, since January 1991. He has been Chairman of the Board, Chief Executive Officer and a director of the Company since October 1996. Mr. Mitchell has also been a partner of Petherton Capital Corporation, a privately owned real estate investment company, since March 1992. Prior to 1991, Mr. Mitchell was employed in various positions at several investment banking firms. Mr. Mitchell is a director of Holmes Protection Group, a NASDAQ-listed company, Kellstrom Industries, Inc., a NASDAQ-listed company, and Bogen Communications International, Inc., an American Stock Exchange Company, as well as several private companies. Mr. Mitchell also serves as a director and/or officer of various not-for-profit universities and foundations. C. THOMAS MCMILLEN has been Chairman and Chief Executive Officer of Complete Wellness Centers, Inc., a physician practice management company founded by him, since November 1994. He has been a director, Treasurer and Secretary of the Company since October 1996. Mr. McMillen has been president of McMillen & Company, Inc., a health care consulting firm, since January 1993. He served as Chief Administrative Officer of CliniCorp, Inc. from November 1993 to March 1994 where he was responsible for a turnaround effort that resulted in CliniCorp's first profit for the quarter ended November 1994. Until December 1994, Mr. McMillen was a director of Clinicorp, which filed for bankruptcy in June 1996. Mr. McMillen serves on the Board of Directors of Commodore Applied Technologies, Inc., Kellstrom, Inc., CHG, Inc. and UC Television Network Corp. Mr. McMillen served three consecutive terms in the United States House of Representatives from 1987 to 1993, representing the Fourth Congressional District of Maryland. Prior to serving in Congress, Mr. McMillen played for eleven seasons in the National Basketball Association for the New York Knicks, the Atlanta Hawks and the Washington Bullets. Mr. McMillen was awarded a Rhodes Scholarship and was a member of the United States Olympic Basketball Team in 1972. He currently serves as Co-chair of the President's Council on Physical Fitness and Sports. A.J. NASSAR has served as President, Chief Executive Officer, Treasurer and a Director of The Maxim Group, Inc. since December 1990. From 1986 to 1990, Mr. Nassar served as Vice President and Chief Operating Officer of Kenny Carpet and Linoleum, Inc., a multistore retail carpet chain in western New York. He was previously employed by Trend Carpet Mills and Queen Carpet Mills, both of which are carpet manufacturers, where he was responsible for cultivating new markets in the northeastern United States. In addition, Mr. Nassar has served as a managing partner of K.K.N. Investment, a privately held real estate development and holding company. All directors hold office until the next annual meeting of stockholders and the election and qualification of their successors. Directors receive no compensation for serving on the Board of Directors other than the reimbursement of reasonable expenses incurred in attending meetings. Officers are elected annually by the Board of Directors and serve at the discretion of the Board. The Company has not entered into employment agreements or other understandings with its directors or executive officers concerning compensation. No cash compensation will be paid to any officer or director until after the consummation of the first Business Combination. Since the role of present management after the consummation of a Business Combination is uncertain, the Company has no ability to determine what remuneration, if any, will be paid to such persons after the consummation of a Business Combination. 41 No family relationships exist among any of the named directors or the Company's officers. No arrangement or understanding exists between any such director or officer and any other person pursuant to which any director or officer was elected as a director or officer of the Company. There are no agreements or understandings for any officer or director of the Company to resign at the request of another person and none of the officers or directors of the Company are acting on behalf of, or will act at the direction of, any other person. The holder of the Company's outstanding Series A Preferred Stock is CDIJ, an indirect affiliate of Bright, a private company which owns and has licensed to the Company, for the purpose of marketing this offering, the servicemarks SMA(2)RT-SM- and Specialized Merger and Acquisition Allocated Risk Transaction-SM-. Other than as set forth in this Prospectus, no other relationships exist between and among management stockholders and non-management stockholders. Moreover, there are no arrangements, agreements or understandings between non-management stockholders and management under which non-management stockholders may directly or indirectly participate in or influence the management of the Company's affairs. The Company has no knowledge of whether or not non-management stockholders will exercise their voting right to continue to elect the current directors to the Company's board. See "Conflict of Interest." Each of the Company's officers and directors has agreed with the Company and the Representatives that he will not, at any time, purchase any of the Class B Warrants being sold in this offering. In addition, management stockholders have agreed among themselves that they may not actively negotiate or otherwise consent to the sale or purchase of any portion of their Common Stock or warrants as a condition to or in connection with a proposed merger or acquisition transaction. Management is not aware of any circumstances under which this policy, through their own initiative, may be changed. Moreover, none of the proceeds from this offering may be used, directly or indirectly, to purchase any of management's shares of Common Stock or warrants. OPTIONS TO PURCHASE UNITS The Company has granted options to purchase 50,000 Units to each of David J. Mitchell and C. Thomas McMillen in consideration for their service as directors and officers of the Company and for 33,333.3 Units to Manhattan Associates LLC, a special founder of the Company. The Units are identical to those to be sold pursuant to this offering and each consists of one share of Class A Stock and one Class A Warrant to purchase one share of Class A Stock at a price of $9.00 per share. The options are exercisable for a period of three years from the date of a Business Combination at an exercise price of $12.50 per Unit. The options are non-qualified options subject to the rules contained in Section 83 of the Internal Revenue Code. The options are fully vested; however, the options will be cancelled as to any holder who is no longer a director or executive officer prior to the first Business Combination. The shares issuable upon exercise of the options and underlying warrants may not be sold or otherwise transferred until 120 days after the first Business Combination. CLASS B STOCK OPTIONS Mr. David Mitchell and Mr. Thomas McMillen, directors of the Company, have each received options to purchase up to 15,000 shares, or up to 30,000 in the aggregate, of the Company's Class B Stock at an exercise price of $10.00 per share, or an aggregate exercise price of up to $300,000. The options will expire, if not sooner exercised, upon consummation of a Business Combination. The Company has agreed to use its best efforts to register the shares of Class A Stock underlying the options as soon as practicable after their issuance. CONFLICTS OF INTEREST None of the Company's directors or officers is required to commit his full time to the affairs of the Company and it is likely that such persons will not devote a substantial amount of time to the affairs of the Company. Such personnel will have conflicts of interest in allocating management time among various business activities. As a result, the consummation of a Business Combination may require a 42 greater period of time than if the Company's management devoted their full time to the Company's affairs. Moreover, Mr. Nassar is the sole independent director of the Company, and there are currently no committees of the Board of Directors. However, each officer and director of the Company will devote such time as he deems reasonably necessary to carry out the business and affairs of the Company, including the evaluation of potential Target Businesses and the negotiation of a Business Combination and, as a result, the amount of time devoted to the business and affairs of the Company may vary significantly depending upon, among other things, whether the Company has identified a Target Business or is engaged in active negotiation of a Business Combination. Prior to their involvement with the Company, none of the directors or officers of the Company has been involved in any "blind pool" or "blank check" offerings. To avoid certain conflicts of interest, the officers and directors of the Company and owners of five percent or more of the Company's Common Stock (after giving effect to this offering and to the exercise of warrants owned by the Company's directors and executive officers but without giving effect to the exercise, if any, of the Representative's Unit Purchase Warrants, the Representative's Class B Warrants, or the Warrants or the conversion of the Series A Preferred Stock), will be required to agree that they will not, until the completion of the first Business Combination, directly or indirectly, introduce a suitable proposed acquisition, merger or consolidation candidate to another "blind pool." For such purposes, "suitable" shall mean any business opportunity which, under Delaware law, may reasonably be required to be presented to the Company. Certain of the other persons associated with the Company are and may in the future become affiliated with other entities engaged in business activities similar to those intended to be conducted by the Company. In the course of their other business activities, they may become aware of investment and business opportunities which may be appropriate for presentation to the Company as well as the other entities with which they are affiliated. Such persons may have conflicts of interest in determining to which entity a particular business opportunity should be presented. In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present certain business opportunities to such corporation. Under Delaware law, officers and directors generally are required to bring business opportunities to the attention of such corporation if: (i) such corporation could financially undertake the opportunity; (ii) the opportunity is within the corporation's line of business; and (iii) it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of such corporation. Accordingly, as a result of multiple business affiliations, certain of the Company's key personnel may have similar legal obligations relating to presenting certain business opportunities to multiple entities. In addition, conflicts of interest may arise in connection with evaluations of a particular business opportunity by the Board of Directors with respect to the foregoing criteria. There can be no assurance that any of the foregoing conflicts will be resolved in favor of the Company. To minimize potential conflicts of interest, the Company is restricted from pursuing any transactions with entities affiliated (by stock ownership or otherwise) with an officer or director of the Company without the prior approval of a majority of the Company's disinterested directors. The directors and officers of the Company have agreed that neither they nor any entity with which they are affiliated will be entitled to receive any finder's fee in the event that they introduce the Company to a prospective Target Business with which a Business Combination is ultimately consummated. In addition, none of the directors or executive officers of the Company may actively negotiate or otherwise consent to the purchase of any portion of such person's securities in the Company as a condition to, or in connection with, a proposed Business Combination. In connection with any stockholder vote relating either to approval of a Business Combination or the redemption of the Class A Stock due to the failure of the Company to effect a Business Combination within the time allowed, all of the Company's present stockholders, including all of its officers and directors, have agreed to vote all of their respective shares of Class A Stock in accordance with the vote of the majority of the shares voted by all non-affiliated public stockholders of the Company (in person or by proxy) with respect to such Business Combination or liquidation. 43 PRIOR BLANK CHECK OFFERINGS None of the Company's officers, directors, promoters or other persons engaged in management-type activities has been previously involved with any blank check or blind pool offerings with the exception of Bright. Bright's experience is comprised of its corporate predecessor's licensing the SMA(2)RT-SM- structure and servicemarks to Initial Acquisition Corp. and Bright licensing the SMA(2)RT-SM- structure and servicemarks to Orion Acquisition Corp. II. However, David J. Mitchell, the Company's Chairman and Chief Executive Officer has been previously involved with two Specified Purpose Acquisition Companies ("SPAC"). A SPAC is a company organized for the purpose of acquiring or merging with an operating business in a specified area. From December 1993 until June 1995, Mr. Mitchell served as a director and Secretary of Israel Tech Acquisition Corporation, a public company, which acquired the assets of, and changed its name to, Kellstrom Industries, Inc. in June 1995. From March 1995 until August 1995, Mr. Mitchell served as a director, Chief Financial Officer, Treasurer and Secretary of European Gateway Acquisition Corporation, a public company, which acquired Bogen Communication, Inc. and changed its name to Bogen Communications International, Inc. in August 1995. Mr. Mitchell continues to serve as a director of both Kellstrom Industries, Inc. and Bogen Communications International, Inc., both of which are operating companies whose common stock is actively traded, as of the date of this Prospectus. CERTAIN TRANSACTIONS In August 1995, the Company issued an aggregate of 52,500 shares of Class A Stock to its directors and their affiliates for a purchase price of $.10 per share as follows: to Manhattan Associates, LLC, an affiliate of Arthur H. Goldberg, Stanley Kreitman and Marshall Manley (who were then directors of the Company), 37,500 shares and to A.J. Nassar, 15,000 shares. In November 1995, the Company issued the 20,000 Placement Shares to five accredited investors at a purchase price of $0.50 per share (before deducting offering expenses). These five investors also loaned $100,000 to the Company, which amount is to be repaid out of the proceeds of this offering. See "Use of Proceeds." As of May, 1997, the Company redeemed 25,000 shares of Class A stock held by Manhattan Associates LLC. Each of David J. Mitchell and Thomas McMillen purchased 12,500 shares of Class A Stock for a purchase price of $.10 per share or $2,500 in the aggregate from the Company. Both of such purchasers agreed to be bound by the restrictions on shares held by officers and directors of the Company, which restrictions are described elsewhere in this Prospectus. See "The Company--Escrow of Outstanding Shares and Restriction on Sale of Outstanding Shares." The Company has entered into an oral agreement with Mitchell & Co. to lease office space and to be provided with secretarial and office services commencing upon the closing of this offering. The Company will pay $2,500 per month to Mitchell & Co. for rent and such services. See "Proposed Business -- Facilities." In September 1995, Bright's predecessor granted the Company a non-exclusive license to use, for the sole purpose of marketing this offering, Bright's SMA(2)RT-SM- and Specialized Merger and Acquisition Allocated Risk Transaction-SM- servicemarks. In consideration of Bright granting the non- exclusive license to the Company, the Company is paying a total of $100,000.00 to Bright. The value to be paid by the Company was negotiated at arm's length, although no objective criteria were used to measure the value of the license. One important consideration, however, is that Bright's corporate predecessor previously licensed the SMA(2)RT-SM- name and structure to Initial Acquisition Corp. and Bright licensed the SMA(2)RT-SM- name and structure Orion Acquisition Corp. II, which successfully completed initial public offerings in May 1995 and July 1996, respectively. The Company believes that the value it is paying for the license to use the SMA(2)RT-SM- structure and servicemarks in this offering will enhance the prospects of successfully completing this offering because the investment community will be more likely to readily understand the SMA(2)RT-SM- structure by associating it with the previous SMA(2)RT-SM- transaction. 44 Mr. David Mitchell and Mr. Thomas McMillen, directors of the Company, have each received options to purchase up to 15,000 shares, or up to 30,000 in the aggregate, of the Company's Class B Stock at an exercise price of $10.00 per share, or an aggregate exercise price of up to $300,000. The options will expire, if not sooner exercised, upon consummation of a Business Combination. The Company has agreed to use its best efforts to register the shares of Class A Stock underlying the options as soon as practicable after their issuance. CDIJ, an indirect affiliate of Bright, is the holder of the Company's outstanding 94 shares of Series A Preferred Stock, which it purchased for $9,400, and 1,000 shares of Class A Stock, which it purchased for $.10 per share. CDIJ paid cash for the Class A Stock and issued a promissory note at an interest rate of 8% payable upon the earlier of one year from the date of the note or the closing of this offering for the Preferred Stock. The purchase prices for all Class A Stock and Preferred Stock sold by the Company prior to the date of this Prospectus were established by negotiations between the Board of Directors and the various investors. The Company will require that any future transactions between the Company and its officers, directors, principal stockholders and the affiliates of the foregoing persons be on terms no less favorable to the Company than could reasonably be obtained in arm's length transactions with independent third parties and that any such transactions also be approved by a majority of the Company's directors disinterested in the transaction. Management of the Company has not yet ascertained the amount of remuneration that will be payable to the Company's officers and directors following completion of a Business Combination. Mr. Mitchell and the other directors of the Company may be deemed to be "promoters" of the Company. 45 PRINCIPAL STOCKHOLDERS The following table sets forth information as of the date hereof, and as adjusted to reflect the sale of the shares of Class A Stock offered by the Company hereby, based on information obtained from the persons named below, with respect to the beneficial ownership of shares of Class A Stock by (i) each person known by the Company to be the owner of more than 5% of the outstanding shares of Class A Stock, (ii) each director, and (iii) all executive officers and directors as a group. None of such persons owns any Class B Stock; Messrs. Mitchell and McMillen hold options to purchase 15,000 shares each of Class B Stock at an exercise price of $10.00 per share. See "The Company -- Class B Stock Options."
PERCENTAGE OF OUTSTANDING SHARES OF CLASS A AMOUNT AND STOCK NATURE OF ------------------------------ BENEFICIAL BEFORE AFTER NAME OR GROUP (1) OWNERSHIP (2) OFFERING OFFERING (3)(4) - ------------------------------------------------------------------------- ------------- ----------- ----------------- David J. Mitchell 12,500 11.8% 4.9% C. Thomas McMillen 12,500 11.8% 4.9% Manhattan Associates, LLC 12,500 11.8% 4.9% A.J. Nassar 15,000 14.1% 1.7% Jude Spak 12,000 11.3% 1.3% All executive officers and directors as a group (four persons) 52,500(5) 49.5% 15.2%
- ------------------------ (1) Each person and entity listed has an address in care of the Company. (2) Unless otherwise noted, the Company believes that each person named in the table has sole voting and investment power with respect to all shares of Class A Stock beneficially owned by him or it. (3) Includes options to purchase 50,000, 50,000 and 33,333.3 Units, each unit to be identical to the Units issued in this offering, to each of Mr. Mitchell, Mr. McMillen and Manhattan Associates, LLC, respectively. Excludes options to purchase 15,000 shares of Class B Stock held by Mr. Mitchell and Mr. McMillen. See "The Company -- Class B Stock Options" and "Management -- Options to Purchase Units." (4) Assumes no exercise of (i) the Underwriters' over-allotment option; (ii) the Representative's Unit Purchase Warrants, (iii) the Representative's Class B Warrants, (iv) the Class A Warrants included in the Units offered hereby, (iv) any other warrants owned by any of the named persons, or (v) the Class B Options and assumes no conversion of the Series A Preferred Stock. See "The Company -- Class B Stock Options", "Underwriting" and "Description of Capital Stock -- Series A Preferred Stock." (5) Excludes (i) options held by the Company's executive officers and directors to purchase up to 100,000 Units in the aggregate for $12.50 per Unit and (ii) the Class B Options. See "The Company -- Class B Stock Options", "Management -- Options to Purchase Units." The shares of Class A Stock and Series A Preferred Stock owned by the Company's present stockholders, including the directors and executive officer of the Company, excluding the Placement Shares, will be placed in escrow until the earlier of (i) the consummation of the first Business Combination, or (ii) 18 months from the date of this Prospectus, subject to extension to 24 months from the date of this Prospectus if the Extension Criteria have been satisfied. During such period, such stockholders will not be able to sell or otherwise transfer their respective shares of Class A Stock (with certain exceptions), but will retain all other rights as stockholders of the Company, including, without limitation, the right to vote such shares of Class A Stock (subject to their agreement, as discussed above, to vote their shares in accordance with the vote of a majority of the shares voted by non-affiliated public stockholders with respect to the consummation of a Business Combination or liquidation proposal) but excluding the right to request the redemption of escrowed shares pursuant to a Redemption Offer. Subject to compliance with applicable securities laws, any such holder may transfer his, her or its Class A Stock held in escrow to a member of his family or to a trust established for the benefit of himself, herself, or a family member or to another affiliated entity (with the consent of the Representative which will not be unreasonably withheld) or in the event of his or her death by will or operation of law, provided that any such transferee shall agree as a condition to such transfer to 46 be bound by the restrictions on transfer applicable to the original holder and, in the case of present stockholders, that the transferor (except in the case of death) will continue to be deemed the beneficial owner (as defined in Regulation 13d-3 promulgated under the Exchange Act). Each of the Company's officers and directors has agreed with the Company and the Representative that he will not, at any time, purchase any of the Class B Stock being sold in this offering. except the 30,000 shares reserved for issuance to two directors upon exercise of the Class B Options. See "The Company - -- Class B Stock Options." DESCRIPTION OF SECURITIES COMMON STOCK The Company will be authorized to issue 10,250,000 shares of Common Stock, par value $.01 per share, of which 10,000,000 shares are designated Class A Stock and 250,000 shares are designated Class B Stock. As of the date of this Prospectus, 106,000 shares of Class A Stock are outstanding, held of record by 16 persons. The holders of Class A Stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders. The holders of Class B Stock are entitled two votes for each share held of record on all matters to be voted on by stockholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voting for the election of directors can elect all of the directors. The holders of Common Stock are entitled to receive dividends when, as and if declared by the Board of Directors out of the funds legally available therefor. In the event of the liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to share ratably in all assets remaining available for distribution after payment of liabilities and after provision has been made for each class of stock, if any, having preference over the Common Stock. All of the present stockholders of the Company have agreed to waive their respective rights to participate in a redemption offer or liquidation distribution prior to the consummation of the first Business Combination. Each outstanding share of Class B Stock at the time of a Business Combination will be exchanged for two Units (each consisting of one share of Class A Stock and one Class A Warrant) 90 days following the consummation of the Business Combination), or any earlier date on or after the date of a Business Combination that the Representative in its sole discretion so elects. Otherwise, holders of shares of Common Stock, as such, have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to the Common Stock. All of the outstanding shares of Common Stock are, and the shares of Common Stock to be issued in this offering, when issued against payment therefor, will be, validly authorized and issued, fully paid and nonassessable. The Company has agreed with the Representatives that for a period of 18 months from the date of this Prospectus, and for up to six additional months if the Extension Criteria have been satisfied, it will not issue (other than pursuant to this offering) any shares of Common Stock or grant Common Stock purchase options or warrants without the consent of the Representatives, except in connection with effecting a Business Combination. CLASS B STOCK As of the date hereof, each share of Class B Stock will entitle the registered holder thereof to receive two Units, each comprised of one share of Class A Stock and one Class A Warrant to purchase one share of Class A Stock at a price of $.125 per Unit, subject to adjustment in certain circumstances. The Class B Stock will be initially exchangeable commencing ninety (90) days following the consummation of a Business Combination or on any earlier date on or after the date of a Business Combination that the Representative, in its sole discretion so elects, and expire at 5:00 p.m., New York City time, on the first anniversary of the date of a consummation of a Business Combination. Each share of Class B Stock will be exchanged for two shares of Class A Stock following a redemption of the Class A Stock sold in this offering in the event a Business Combination is not consummated within 18 months from the date of this Prospectus, or 24 months if the Extension Criteria are satisfied. See "The Company-Redemption of Class A Stock if No Business Combination." The Units and the Class B Stock will be sold and traded separately. Florida residents who purchase Class B Stocks will be unable to exchange these Shares to receive Units unless and until the Units issuable upon exchange of the Class B Stock have been registered for sale in Florida or are established to be exempt from the requirement of such registration. Florida law generally precludes the registration of securities that are not listed on a securities exchange or the NASDAQ System when the offering price of such securities is $5.00 or less per share. Because the "exchange price" of Class B 47 Stock is nil, the "offering price" of the Units issuable upon exchange of the Class B Stock could be considered not greater than $5.00. For this reason, no permit to sell the Units issuable upon exchange of the Class B Stock in Florida has been obtained. There can be no assurance that the Units issuable upon exchange of the Class B Stock will ever be registered in Florida or established to be exempt from the requirement of such registration. PREFERRED STOCK The Company's Certificate of Incorporation authorizes the issuance of 1,000,000 shares of "blank check" preferred stock, par value $.01 per share (the "Preferred Stock"), with such designations, powers, preferences, rights, qualifications, limitations and restrictions of such series as the Board of Directors, subject to the laws of the State of Delaware, may determine from time to time. Accordingly, the Board of Directors is empowered, without stockholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of Common Stock. The Company has agreed with the Representatives, however, that for a period of 18 months from the date of this Prospectus, and for up to six additional months if the Extension Criteria have been satisfied, it will not issue any shares of Preferred Stock without the consent of the Representatives, except in connection with a consummation of a Business Combination. In addition, the Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although the Company does not currently intend to issue any additional shares of Preferred Stock, there can be no assurance that the Company will not do so in the future. SERIES A PREFERRED STOCK As of the date of this Prospectus, the Company has outstanding 94 shares of Series A Preferred Stock, owned by CDIJ. The purchase price for such shares, $100.00 per share or $9,400 in the aggregate, is payable to the Company, with interest, upon the earlier of November 15, 1996 or the closing of this offering. The Series A Preferred Stock is non-voting, does not bear a dividend and has a liquidation value of $100.00 per share. Each share of Series A Preferred Stock will be convertible into 1000 shares of Class A Stock for a period one year following the consummation of a Business Combination. In the event that a Business Combination does not occur within 18 months of the date of this Prospectus, or 24 months if the Extension Criteria are satisfied, the Series A Preferred Stock will be redeemed by the Company for its liquidation value. The Company has agreed to register the Class A Stock issuable upon conversion of the Series A Preferred Stock at the time of a Business Combination. CLASS A WARRANTS The statements under this caption relating to the Class A Warrants are merely a summary and do not purport to be complete. However, such summary contains all information with respect to such Class A Warrants which the Company believes to be material to investors. Such summary is qualified in its entirety by express reference to the warrant agreement ("Warrant Agreement") between the Company and American Stock Transfer & Trust Company, copies of which have been filed with the Securities and Exchange Commission. Copies of the Warrant Agreement are available for inspection at the offices of the Company. As of the date hereof, each Class A Warrant will entitle the registered holder thereof to purchase one share of Class A Stock at a price of $9.00 per share, subject to adjustment in certain circumstances. The Class A Warrants will be initially exercisable commencing ninety (90) days following the consummation of a Business Combination, or any earlier date on or after the date of a business combination that the Representative in its sole discretion so elects, and expire at 5:00 p.m., New York City time, on the fifth anniversary of the date of this Prospectus. The Class A Stock and the Class A Warrants will become separable and transferable at such time as the Representative may determine, but in no event before the Separation Date. The Company may call the Class A Warrants for redemption, in whole and not in part, at the option of the Company, at a price of $.05 per Class A Warrant at any time after the consummation of a Business Combination, upon not less than 30 days' prior written notice, provided that the last sale price of the Class A Stock, if the Stock is listed for trading on an exchange or interdealer quotation system which provides last sale prices, or, the average of the closing bid and asked quotes, if the Stock is listed for trading on an interdealer quotation system which does not provide last sale prices, on all 10 of the trading days ending on the day immediately prior to the day on which the Company gives notice of redemption, has been $11.00 or higher. The holders of Class A Warrants shall have exercise rights until the close of business on the date fixed for redemption. 48 The exercise price and number of shares of Class A Stock issuable on exercise of the Class A Warrants are subject to adjustments under certain circumstances, including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation of the Company. However, the Class A Warrants are not subject to adjustment for issuances of Class A Stock at a price below their respective exercise prices. The Company has the right, in its sole discretion, to decrease the exercise price of the Class A Warrants for a period of not less than 30 days on not less than 30 days' prior written notice to the holders of Class A Warrants, subject to compliance with applicable laws such as, but not limited to, any prior notice provisions imposed by the Commission, the NASD or any exchange on which the Company's Class A Stock is then listed. In addition, the Company has the right, in its sole discretion, to extend the expiration date of the Class A Warrants on five business days' prior written notice to the holders of Class A Warrants. The Class A Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date of the Class A Warrant, at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (by certified check, payable to the Company) to the warrant agent for the number of Class A Warrants being exercised. The holders of Class A Warrants do not have the rights or privileges of holders of Class A Stock, including, without limitation, the right to vote on any matter presented to stockholders for approval. The Company is required either to maintain the effectiveness of the Registration Statement or to file a new registration statement with the Commission, with respect to the securities underlying the Class A Warrants prior to the exercise of the Class A Warrants and to deliver a prospectus as required by Section 10(a)(3) of the Securities Act with respect to such securities to the holders of all Class A Warrants prior to the exercise or redemption of such Class A Warrants (except, if in the opinion of counsel to the Company, such registration is not required under the federal securities laws or if the Company receives a letter from the staff of the Commission stating that it would not take any enforcement action if such registration is not effected). In addition, and subject to the foregoing, the Company is required to have a current Registration Statement on file with the Commission and to effect appropriate qualifications under the laws and regulations of the states in which the initial holders of the Class A Warrants reside in order to comply with applicable laws in connection with such exercise. There can be no assurance, however, that the Company will be in a position to be able to keep its Registration Statement current or to effect appropriate action under applicable state securities laws, the failure of which may result in the inability to exercise the Class A Warrants or effect a resale or other disposition of Class A Stock issued upon such exercise. No fractional shares will be issued upon exercise of the Class A Warrants. However, if a warrantholder exercises all Class A Warrants then owned of record by him, the Company will pay to such warrantholder, in lieu of the issuance of any fractional share which is otherwise issuable to such warrantholder, an amount in cash based on the market value of the Class A Stock on the last trading day prior to the exercise date. DIVIDENDS The Company does not expect to pay dividends prior to the consummation of a Business Combination. Future dividends, if any, will be contingent upon the Company's revenues and earnings, if any, capital requirements and general financial condition subsequent to the consummation of a Business Combination. The payment of dividends subsequent to the consummation of a Business Combination will be within the discretion of the Company's then Board of Directors. The Company presently intends to retain all earnings, if any, for use in the Company's business operations and accordingly, the Board does not anticipate declaring any dividends in the foreseeable future. TRANSFER AGENT, REGISTRAR AND WARRANT AGENT The transfer and registrar agent for the Units, the Class A Stock, and the Class B Stock and the transfer agent, registrar and warrant agent for the Class A Warrants is American Stock Transfer & Trust Company. 49 SHARES ELIGIBLE FOR FUTURE SALE Upon the consummation of this offering (but prior to a Business Combination), the Company will have 906,000 shares of Class A Stock outstanding (1,026,000 shares if the Underwriters' over-allotment option is exercised in full). Of these shares, the 800,000 shares sold by the Company in this offering (920,000 shares if the Underwriters' over-allotment option is exercised in full) will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by an "affiliate" of the Company (as defined in the Securities Act and the rules and regulations thereunder) which will be subject to the limitations of Rule 144 promulgated under the Securities Act. All of the remaining 106,000 shares are deemed to be "restricted securities", as that term is defined under Rule 144 promulgated under the Securities Act, as such shares were issued in private transactions not involving a public offering. None of such shares are eligible for sale under Rule 144. However, 20,000 of such shares (the Placement Shares) along with the 94,000 shares issuable upon conversion of the outstanding Series A Preferred Stock are expected to be registered under the Securities Act at the time of the Business Combination. In general, under Rule 144 as currently in effect, subject to the satisfaction of certain other conditions, a person, including an affiliate of the Company (or persons whose shares are aggregated), who has beneficially owned the restricted shares of Class A Stock to be sold for at least one year is entitled to sell, within any three-month period, a number of shares that does not exceed the greater of 1% of the total number of outstanding shares of the same class or, if the Class A Stock is quoted on an exchange or NASDAQ, the average weekly trading volume during the four calendar weeks preceding the sale. A person who has not been an affiliate of the Company for at least the three months immediately preceding the sale and who has beneficially owned the shares of Class A Stock to be sold for at least two years is entitled to sell such shares under Rule 144 without regard to any of the limitations described above. The holders of Founders' Shares have agreed not to, directly or indirectly, sell, offer to sell, grant an option for the sale of, transfer, assign, pledge, hypothecate or otherwise encumber any of their shares of Class A Stock, 85,000 shares in the aggregate, until two years from the date the outstanding Founders' Shares were issued (August 18, 1995), provided that such shares may in no event be sold or otherwise transferred until 120 days following the completion of the first Business Combination, subject to any additional terms, conditions or restrictions that may be imposed in connection with the consummation of a Business Combination. In addition, the holders of the Placement Shares have agreed not to directly or indirectly sell, offer to sell, grant an option for the sale of, transfer, assign, pledge, hypothecate or otherwise encumber any of the Placement Shares without the prior written consent of the Company until the earlier of 24 months from the date such shares were issued (November 15, 1995) or 60 days following the consummation of the first Business Combination. The Company has agreed with the Representative that it will not grant such consents without the consent of the Representative. Prior to this offering, there has been no market for the Class A Stock, the Units, the Class A Warrants or the Class B Stock and no prediction can be made as to the effect, if any, that market sales of restricted shares of Class A Stock or the availability of such shares for sale will have on the market prices prevailing from time to time. Nevertheless, the possibility that substantial amounts of Class A Stock may be sold in the public market would likely adversely affect prevailing market prices for the Class A Stock, the Units and the Class A Warrants and Class B Stock and could impair the Company's ability to raise capital through the sale of its equity securities. 50 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement among the Company and the Underwriters, the Company has agreed to sell to the Underwriters named below for whom the Representative is acting as representative, and the Underwriters have severally and not jointly agreed to purchase, the number of Units and shares of Class B Stock set forth opposite their respective names below.
NUMBER OF NUMBER OF CLASS B UNDERWRITER UNITS SHARES - ---------------------------------------------------------------------- ----------- ----------- H.J. Meyers & Co., Inc................................................
The Underwriting Agreement provides that the obligations of the several Underwriters are subject to the approval of certain legal matters by counsel to the Representatives and various other conditions. The nature of the Underwriters' obligations are such that they are committed to purchase all of the above Units and Shares of Class B Stock if any are purchased. As a registered broker-dealer, the Representative is required under the Exchange Act and the rules promulgated thereunder to maintain minimum net capital in order to conduct their broker-dealer operations. Currently, the Representative has sufficient excess net capital to support its broker-dealer operations, including its underwriting obligations to the Company. In the event, however, that at any time the Representative should be unable to maintain their minimum net capital requirements, they will have to cease operations as a broker-dealer. Any such cessation of operations by the Representative could have a material adverse effect on the market price and liquidity of the securities being offered hereby. No assurance can be given, however, that the firm will be able to maintain its required minimum net capital at all times during or following the offering described herein. The Company has been advised by the Representative that the Underwriters propose to offer the Units and the Class B Stock directly to the public at the public offering prices set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $. per Unit and $. per share of Class B Stock. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $. per Unit and $. per share of Class B Stock to certain other dealers. The Representative has informed the Company that they do not expect sales to discretionary accounts by the Underwriters to exceed 5% of the securities offered by the Company hereby. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. The Company has agreed to pay to the Representative a non-accountable expense allowance equal to three percent of the gross proceeds derived from the sale of the Units and Class B Stock underwritten (including the sale of any Units and Class B Stock subject to the Underwriters' over-allotment option), $20,000 of which has been paid to date. The Company will reimburse the Representative on a nonaccountable basis in an amount equal to 3% of the gross proceeds of this offering ($285,000 if the Underwriters' overallotment option is not exercised). The Company has agreed that no finder's or origination fees or similar compensation will be paid to any of the Company's officers, directors or 5% or greater stockholders or their respective affiliates in connection with or to effect a Business Combination. If the Company enters into any finder's fee agreement or similar agreement or arrangement with any person or entity other than the Company's officers, directors or 5% or greater stockholders or their respective affiliates in connection with or to effect the first Business Combination (other than the independent investment banker), the finder's fee or other consideration paid in connection therewith must be approved by the Company's Board of Directors. The Company has agreed, in connection with the redemption of Warrants by the Company pursuant to solicitation by the Representative, commencing one year from the date of this Prospectus, to pay to the Representative an aggregate management fee of 10% of the respective Warrant exercise 51 prices, 8% of which will be reallowed to any selected dealer who is a member of the NASD who solicited the redemption (which may also be the Representative) for each Warrant redeemed by the Company, provided, however, that the Representatives will not be entitled to receive such compensation in any Warrant redemption transaction in which (i) the market price of the Common Stock of the Company at the time of the redemption is lower than the exercise price of the Warrants in question; (ii) the Warrants are held in a discretionary account under the control of the selected dealer; (iii) disclosure of compensation arrangements is not made, in addition to the disclosure provided in this Prospectus, in documents provided to holders of the Warrants at the time of exercise; (iv) the redemption of the Warrants is unsolicited; and (v) the solicitation of redemption of the Warrants was in violation of Regulation M promulgated under the 1934 Act. In determining the management fee, the calculation will exclude 10% of the respective Warrant exercise prices, any underlying warrants, options or convertible securities. Unless granted an exemption by the Commission from Regulation M, the Representative will be prohibited from engaging in any market-making activities or solicited brokerage activities with regard to the Company's securities during the periods prescribed by Regulation M before the solicitation of the exercise of any Warrant until the later of (a) the termination of such solicitation activity, or (b) the termination by waiver or otherwise of any right the Representative may have to receive a fee for the redemption of the Warrants following such solicitations. As a result, the Representative may be unable to provide a market for the Company's securities during certain periods while the Warrants are exercisable. The Company has agreed not to solicit Warrant redemptions other than through the Representative. The holders of Founders' Shares have agreed not to, directly or indirectly, sell, offer to sell, grant an option for the sale of, transfer, assign, pledge, hypothecate or otherwise encumber any of their shares of Class A Stock, 86,000 shares in the aggregate, or any warrants to purchase Units (and the securities issuable upon the exercise thereof) without the prior written consent of the Company until two years from the date the outstanding Founders' Shares were issued, (August 18, 1995), provided that such shares may in no event be sold or otherwise transferred until 120 days following the completion of the first Business Combination, subject to any additional terms, conditions or restrictions that may be imposed in connection with the consummation of a Business Combination. An appropriate legend shall be marked on the face of stock certificates representing all such shares of Common Stock. The Company has agreed with the Representative that for a period of 18 months from the date of this Prospectus, and for up to six additional months if the Extension Criteria are satisfied, it will not issue (other than pursuant to this offering) any securities or grant options or warrants to purchase any securities of the Company without the consent of the Representative except in connection with effecting a Business Combination. The Company has granted to the Representative an option exercisable during the 30-day period commencing on the date of this Prospectus to purchase from the Company at the offering price less underwriting discounts, up to an aggregate of 120,000 additional Units and 22,500 shares of additional Class B Stock for the sole purpose of covering over-allotments, if any. To the extent that the Representative exercise such option, the Representative have the right to require each Underwriter to purchase on a firm commitment basis approximately the same percentage thereof that the number of Units and Class B Stock to be purchased by it or the Underwriters shown, in the above table bears to the total shown. The Company will be obligated, pursuant to the option, to sell such Units and Class B Stock to the Representative or the Underwriters, as the Representative directs. In connection with this offering, the Company has agreed to sell to the Representative, for nominal consideration, the Representative's Warrants. The Representative's Warrants are initially exercisable at a price of $11.00 per Unit and $11.00 per Class B Warrant for a period of four years, commencing one year from the date of this Prospectus. The Units and Class B Stock issuable upon exercise of the Representative's Warrants are the same as the Units and Class B Stock being sold in 52 this offering. The Representative's Warrants contain anti-dilution provisions providing for adjustment of the number of warrants and exercise price under certain circumstances. The Representative's Warrants grant to the holders thereof certain rights of registration of the Units and Class B Stock issuable upon exercise of the Representative's Warrants. The Company has also agreed that, for a period of two years form the closing of this Offering, if it participates in any merger, consolidation or other transaction which the Representative has brought to the Company (including an acquisition of assets or stock for which it pays, in whole or in part, with shares of the Company's Common Stock or other securities), which transaction is consummated within thirty-six months of the closing of this Offering, then it will pay for the Representative's services an amount equal to 5% of the first $2 million of value paid or value received in the transaction, 2% of any consideration above $2 million and less than $4 million and 1% of any consideration in excess of $4 million. The Company has also agreed that if, during this two-year period, someone other than the Representative brings such a merger, consolidation or other transaction to the Company, and if the Company in writing retains the Representative for consultation or other services in connection therewith, then upon consummation of the transaction the Company will pay to the Representative as a fee the appropriate amount as set forth above or as otherwise agreed to between the Company and the Representative. Prior to this offering there has been no public market for any of the Company's securities. Accordingly, the offering prices of the Units and Class B Stock and terms of the Class A Warrants underlying the Units were determined by negotiation between the Company and the Representatives. Factors considered in determining such price and terms, in addition to prevailing market conditions, include an assessment of the Company's prospects. The public offering prices of the Units and Class B Stock do not bear any relationship to assets, earnings, book value, or other criteria of value applicable to the Company and should not be considered an indication of the actual value of the Units or Class B Stock. Such prices are subject to change as a result of market conditions and other factors, and no assurance can be given that the Units or Class B Stock can be resold at their respective offering prices. The foregoing is a summary of the principal terms of the agreements described above and does not purport to be complete. Nevertheless, it includes all information concerning such agreements which the Company believes to be material. Reference is made to copies of each such agreement which are filed as exhibits to the Registration Statement. LEGAL MATTERS The legality of the securities being registered by this Registration Statement is being passed upon by Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, Woodbridge, New Jersey. Harter, Secrest & Emery, Rochester, New York has acted as counsel to the Representative in connection with this offering. EXPERTS The financial statements included in this Prospectus have been audited by BDO Seidman, LLP, independent certified public accountants, to the extent and for the period set forth in their report appearing elsewhere herein, and is included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting. ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement (the "Registration Statement") under the Securities Act with respect to the securities offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and this offering, reference is made to the Registration Statement, including the exhibits and schedules filed therewith, 53 copies of which may be obtained at prescribed rates from the Commission at its principal office at 450 Fifth Street N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: 75 Park Place, New York 10007, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400 Chicago, Illinois, 60604. Descriptions contained in this Prospectus as to the contents of any agreement or other documents filed as an exhibit to the Registration Statement are not necessarily complete and each such description is qualified by reference to such agreement or document. The Company intends to furnish to its stockholders annual reports containing financial statements audited and reported upon by its independent public accountants. 54 NORTH ATLANTIC ACQUISITION CORP. (FORMERLY ORION ACQUISITION CORP. I) (A CORPORATION IN THE DEVELOPMENT STAGE) INDEX TO FINANCIAL STATEMENTS
PAGE ------------ Report of Independent Certified Public Accountants.................................................. F-2 Financial Statements: Balance sheets as of March 31, 1997 (unaudited) and August 31, 1996................................. F-3 Financial statements for the year ended August 31, 1996 and seven months ended March 31, 1997 and 1996 (unaudited) Statements of operations........................................................................ F-4 Statements of stockholders' equity.............................................................. F-5 Statements of cash flows........................................................................ F-6 Notes to financial statements................................................................... F-7 - F-12
F-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS North Atlantic Acquisition Corp. (formerly Orion Acquisition Corp. I) New York, NY We have audited the accompanying balance sheet of North Atlantic Acquisition Corp. (formerly Orion Acquisition Corp. I) (a corporation in the development stage) as of August 31, 1996, and the related statements of operations, stockholders' equity and cash flows for the period from September 1, 1995 (inception) to August 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of North Atlantic Acquisition Corp. (formerly Orion Acquisition Corp. I) as of August 31, 1996, and the results of its operations and its cash flows for the period from September 1, 1995 (inception) to August 31, 1996, in conformity with generally accepted accounting principles. BDO Seidman, LLP New York, New York November 12, 1996 F-2 NORTH ATLANTIC ACQUISITION CORP. (FORMERLY ORION ACQUISITION CORP. I) (A CORPORATION IN THE DEVELOPMENT STAGE) BALANCE SHEETS
AUGUST 31, 1996 MARCH 31, 1997 -------------- ----------------- (UNAUDITED) Assets Current: Cash........................................................................ $ 25,734 $ 25,734 Deferred registration costs (Note 1)........................................ 177,792 177,792 -------------- ----------------- $ 203,526 $ 203,526 -------------- ----------------- -------------- ----------------- Liabilities and Stockholders' Equity Current: Accrued expenses (primarily license agreement) (Note 1)..................... $ 98,099 $ 98,099 Notes payable, net of discount (Note 5)..................................... 82,912 86,758 -------------- ----------------- Total current liabilities............................................... 181,011 184,857 -------------- ----------------- Commitments (Note 4) Stockholders' equity (Notes 1 and 5): Convertible preferred stock, $.01 par value shares -- authorized 100; outstanding none; subscribed 94; liquidation value -- $9,400............... 1 1 Subscription receivable..................................................... (9,400) (9,400) Common stock, $.01 par value shares -- authorized 200,000; outstanding 106,000.................................................................... 1,060 1,060 Additional paid-in capital.................................................. 61,939 61,939 Deficit accumulated during the development stage............................ (31,085) (34,931) -------------- ----------------- Total stockholders' equity.............................................. 22,515 18,669 -------------- ----------------- $ 203,526 $ 203,526 -------------- ----------------- -------------- -----------------
See accompanying notes to financial statements. F-3 NORTH ATLANTIC ACQUISITION CORP. (FORMERLY ORION ACQUISITION CORP. I) (A CORPORATION IN THE DEVELOPMENT STAGE) STATEMENTS OF OPERATIONS
PERIOD FROM PERIOD FROM SEPTEMBER 1, SEPTEMBER 1, 1995 SEVEN MONTHS SEVEN MONTHS 1995 (INCEPTION) ENDED ENDED (INCEPTION) TO AUGUST 31, MARCH 31, MARCH 31, TO MARCH 31, 1996 1997 1996 1997 --------------- ------------- ------------- --------------- (UNAUDITED) (UNAUDITED) General and administrative expenses and debt costs........................................... $ 31,085 $ 3,846 $ 15,860 $ 34,931 --------------- ------------- ------------- --------------- Net loss......................................... $ (31,085) $ (3,846) $ (15,860) $ (34,931) --------------- ------------- ------------- --------------- --------------- ------------- ------------- --------------- Net loss per common share........................ $ (.29) $ (.04) (.15) --------------- ------------- ------------- --------------- ------------- ------------- Weighted average common shares outstanding....... 106,000 106,000 106,000 --------------- ------------- ------------- --------------- ------------- -------------
See accompanying notes to financial statements. F-4 NORTH ATLANTIC ACQUISITION CORP. (FORMERLY ORION ACQUISITION CORP. I) (A CORPORATION IN THE DEVELOPMENT STAGE) STATEMENTS OF STOCKHOLDERS' EQUITY
DEFICIT PREFERRED STOCK ACCUMULATED ---------------------------- COMMON STOCK ADDITIONAL DURING THE SHARES SUBSCRIPTION ---------------------- PAID-IN DEVELOPMENT SUBSCRIBED AMOUNT RECEIVABLE SHARES AMOUNT CAPITAL STAGE --------------- ----------- ------------ --------- ----------- ----------- ----------- Issuance of founders' shares....................... -- $ -- $ -- 86,000 $ 860 $ 7,740 $ -- Sale of common stock.......... -- -- -- 20,000 200 44,800 -- Subscription receivable....... 94 1 (9,400) -- -- 9,399 -- Net loss...................... -- -- -- -- -- -- (31,085) -- --- ------------ --------- ----------- ----------- ----------- Balance, August 31, 1996...... 94 1 (9,400) 106,000 1,060 61,939 (31,085) -- --- ------------ --------- ----------- ----------- ----------- Net loss (unaudited).......... -- -- -- -- -- -- (3,846) -- --- ------------ --------- ----------- ----------- ----------- Balance, March 31, 1997 (unaudited).................. 94 $ 1 $ (9,400) 106,000 $ 1,060 $ 61,939 $ (34,931) -- -- --- ------------ --------- ----------- ----------- ----------- --- ------------ --------- ----------- ----------- ----------- TOTAL STOCKHOLDERS' EQUITY ------------ Issuance of founders' shares....................... $ 8,600 Sale of common stock.......... 45,000 Subscription receivable....... -- Net loss...................... (31,085) ------------ Balance, August 31, 1996...... 22,515 ------------ Net loss (unaudited).......... (3,846) ------------ Balance, March 31, 1997 (unaudited).................. $ 18,669 ------------ ------------
See accompanying notes to financial statements. F-5 NORTH ATLANTIC ACQUISITION CORP. (FORMERLY ORION ACQUISITION CORP. I) (A CORPORATION IN THE DEVELOPMENT STAGE) STATEMENTS OF CASH FLOWS
PERIOD FROM PERIOD FROM SEPTEMBER 1, SEPTEMBER 1, 1995 SEVEN MONTHS SEVEN MONTHS 1995 (INCEPTION) ENDED ENDED (INCEPTION) TO AUGUST 31, MARCH 31, MARCH 31, TO MARCH 31, 1996 1997 1996 1997 --------------- ------------ ------------ --------------- (UNAUDITED) (UNAUDITED) Cash flows from operating activities: Net loss........................................ $ (31,085) $ (3,846) $ (15,860) $ (34,931) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Amortization of deferred debt costs........... 9,800 -- 8,549 9,800 Amortization of discount on notes payable..... 17,912 3,846 -- 21,758 Changes in assets and liabilities -- accrued expenses..................................... 8,099 -- 4,780 8,099 --------------- ------------ ------------ --------------- Net cash provided by (used in) operating activities............................... 4,726 -- (2,531) 4,726 --------------- ------------ ------------ --------------- Cash flows from financing activities: Proceeds from sale of common stock.............. 53,600 -- 53,600 53,600 Deferred costs: Registration.................................. (87,792) -- (72,791) (87,792) Debt.......................................... (9,800) -- (9,800) (9,800) Proceeds from issuance of notes payable......... 65,000 -- 65,000 65,000 --------------- ------------ ------------ --------------- Net cash provided by financing activities............................... 21,008 -- 36,009 21,008 --------------- ------------ ------------ --------------- Net increase in cash.............................. 25,734 -- 33,478 25,734 Cash, beginning of period......................... -- 25,734 -- -- --------------- ------------ ------------ --------------- Cash, end of period............................... $ 25,734 $ 25,734 $ 33,478 $ 25,734 --------------- ------------ ------------ --------------- --------------- ------------ ------------ --------------- Supplemental disclosures of cash flow information: The Company received a note for subscribed preferred stock amounting to $9,400, which is a noncash financing activity. The Company has recorded a $90,000 liability relating to a license agreement (Note 1), which is a noncash financing activity.
See accompanying notes to financial statements. F-6 NORTH ATLANTIC ACQUISITION CORP. (FORMERLY ORION ACQUISITION CORP. I) (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DEFERRED REGISTRATION COSTS North Atlantic Acquisition Corp. (formerly Orion Acquisition Corp. I) (the "Company") has deferred registration costs (primarily professional fees and a license fee) relating to a public offering (the "Proposed Offering"). In November 1995, the Company entered into a license agreement with Bright Licensing Corp. for the right to use certain servicemarks for the sole purpose of marketing such offering at a cost of $100,000. The deferred registration costs will be charged to equity upon completion of the Proposed Offering. Should the Proposed Offering prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be charged to operations. DEFERRED DEBT COSTS Net unamortized costs incurred in connection with the notes payable (Note 5(a)) of $9,800 were amortized over six months (the estimated term of the debt) using the straight-line method. Amortization expense is $9,800 for the period from September 1, 1995 (inception) to August 31, 1996. INCOME TAXES The Company follows the Financial Accounting Standards Board ("FASB") Statement No. 109. This statement requires that deferred income taxes be recorded following the liability method of accounting and be adjusted periodically when income tax rates change. As of August 31, 1996, the Company has a net operating loss carryforward of approximately $31,000 which results in a deferred tax asset of approximately $12,000, which has been offset by a valuation allowance. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. ORGANIZATION AND BUSINESS OPERATIONS The Company was incorporated in Delaware on August 9, 1995 to acquire an operating business. Operations did not occur until September; accordingly, financal statements have been presented commencing on September 1, 1995. At March 31, 1997, the Company had not yet commenced any formal business operations and all activity to date relates to the Company's formation and proposed fund raising. The Company's ability to commence operations is contingent upon obtaining adequate financial resources through the Proposed Offering, which is discussed in detail in Note 3. The Company's management has broad discretion with respect to the specific application of the net proceeds of this offering, although substantially all of the net proceeds of this offering are intended to be generally applied toward consummating a business combination with an operating business ("Business Combination"). Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination. Upon the closing of the Proposed Offering, an aggregate of $8,000,000 of the net proceeds will be held in an escrow account which will be invested until released in short-term United States Government Securities, including treasury bills and cash and cash equivalents ("Proceeds Escrow Account"), subject to release at the earlier of (i) consummation of its first Business Combination or (ii) distribution of the Class A stock (see below). Therefore, the remaining proceeds F-7 NORTH ATLANTIC ACQUISITION CORP. (FORMERLY ORION ACQUISITION CORP. I) (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO FINANCIAL STATEMENTS 2. ORGANIZATION AND BUSINESS OPERATIONS (CONTINUED) from the offering will be used to pay for business, legal and accounting, due diligence on prospective acquisitions, costs relating to the public offering and continuing general and administrative expenses in addition to other expenses. The Company, prior to the consummation of any Business Combination, will submit such transaction to the Company's stockholders for their approval, even if the nature of the acquisition is such as would not ordinarily require stockholder approval under applicable state law. All of the Company's present stockholders, including all directors and the Company's executive officer, have agreed to vote their respective shares of Class A Stock in accordance with the vote of the majority of the shares voted by all other stockholders of the Company ("nonaffiliated public stockholders") with respect to any such Business Combination. A Business Combination will not be consummated unless approved by a vote of two-thirds of the shares of common stock owned by nonaffiliated public stockholders. At the time the Company seeks stockholder approval of any potential Business Combination, the Company will offer ("Redemption Offer") each of the nonaffiliated public Class A stockholders of the Company the right, for a specified period of time not less than 20 calendar days, to redeem his shares of Class A Stock. The per share redemption price will be determined by dividing the greater of (i) the Company's net worth or (ii) the amount of assets of the Company in the escrow account (including all interest earned thereon) by the number of shares of Class A Stock held by such nonaffiliated public stockholders. In connection with the Redemption Offer, if nonaffiliated public stockholders holding less than 20% of the Class A Stock elect to redeem their shares, the Company may, but will not be required to, proceed with such Business Combination and, if the Company elects to so proceed, will redeem such shares by dividing (a) the greater of (i) the Company's net worth as reflected in the Company's financial statements or (ii) the amount of the proceeds of the Company in the escrow account by (b) the number of shares of Class A Stock held by nonaffiliated public stockholders ("Liquidation Value"). In any case, if nonaffiliated public stockholders holding 20% or more of the Class A Stock elect to redeem their shares, the Company will not proceed with such potential Business Combination and will not redeem such shares. All shares of the escrowed stock outstanding immediately prior to the date of the Proposed Offering will be placed in escrow until the earlier of (i) the occurrence of the first Business Combination, (ii) 18-months from the effective date of the offering or (iii) 24 months from the effective date of the offering if prior to the expiration of such 18 month period the Company has become a party to a letter of intent or a definitive agreement to effect a Business Combination, in which case such period shall be extended six months. During the escrow period, the holders of escrowed shares of common stock will not be able to sell or otherwise transfer their respective shares of common stock (with certain exceptions), but will retain all other rights as stockholders of the Company, including, without limitation, the right to vote escrowed shares of Class A Stock, subject to their agreement to vote their shares in accordance with a vote of a majority of the shares voted by nonaffiliated public stockholders with respect to a Business Combination or liquidation proposal. If the Company does not effect a Business Combination within 18 months from the effective date or 24 months from the effective date if the extension criteria have been satisfied, the Company will submit for stockholder consideration a proposal to distribute to the then holders of Class A Stock (issued in the Proposed Offering or acquired in the open market thereafter) in redemption of such shares, the amounts in the escrow account. Following such redemption of Class A Stock, each outstanding share of Class B Stock will be exchanged for two shares of Class A Stock. F-8 NORTH ATLANTIC ACQUISITION CORP. (FORMERLY ORION ACQUISITION CORP. I) (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO FINANCIAL STATEMENTS 2. ORGANIZATION AND BUSINESS OPERATIONS (CONTINUED) In the event of liquidation, it is likely that the per share value of the residual assets remaining available for distribution to the holders of common stock purchased in the Proposed Offering (including escrow account assets) will approximately equal the initial public offering price per Unit in the Proposed Offering. 3. PROPOSED PUBLIC OFFERING The Proposed Offering calls for the Company to offer for public sale up to 800,000 units ("Units"). Each Unit consists of one share of the Company's common stock and one Class A redeemable common stock purchase warrant ("Class A Warrant"). The Proposed Offering also calls for the Company to offer for public sale up to 150,000 Class B exchangeable common stock at $10.00 per share of Class B Stock ("Class B Stock"). Each Class A Warrant entitles the holder to purchase from the Company one share of common stock at an exercise price of $9.00; each Class B Stock entitles the holder to receive two Units in exchange 90 days after the date of a Business Combination. The Class A Warrants are redeemable, each as a class, in whole and not in part, at a price of $.05 per warrant upon 30 days' notice at any time provided that the Company's stockholders have approved a Business Combination and the last sale price of the common stock, if the common stock is listed for trading on all 10 of the trading days prior to the day on which the Company gives notice of redemption, has been $11.00 or higher. The Company hopes to raise approximately $8,390,000 from the Proposed Offering, which is net of underwriter discounts and related expenses. The Units and the Class B Stock, which are being offered in the same offering, will be sold and traded separately. Concurrent with the Proposed Offering, the Company intends to amend and restate its certificate of incorporation to increase its authorized common stock and preferred stock to 10,250,000 and 1,000,000 shares, respectively. 4. COMMITMENTS The Company presently occupies office space provided by a stockholder. Such stockholder has agreed that, until the acquisition of a target business by the Company, it will make such office space, as well as certain office and secretarial service, available to the Company, as may be required by the Company from time to time at no charge. Upon completion of the Proposed Offering, the monthly payment will be $2,500. Such stockholder will be reimbursed by the Company for the costs of such office and services. 5. STOCKHOLDERS' EQUITY (A) PRIVATE PLACEMENT In November 1995, the Company completed a private offering to a limited group of investors which consisted, in aggregate, of $100,000 in unsecured promissory notes bearing interest at 8% per annum. The notes are payable upon the earlier of May 1998 or the completion of an initial public offering. In addition, the Company also issued to the private placement investors 20,000 shares of common stock for $10,000. The notes have been discounted $35,000 for financial reporting purposes as a result of additional fair value attributed to the common stock issued to the Private Placement shareholders. The effective rate on the notes is approximately 45%. Interest expense charged to operations for the period September 1, 1995 (inception) to August 31, 1996 was approximately $18,000. F-9 NORTH ATLANTIC ACQUISITION CORP. (FORMERLY ORION ACQUISITION CORP. I) (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO FINANCIAL STATEMENTS 5. STOCKHOLDERS' EQUITY (CONTINUED) (B) PREFERRED STOCK The Company is authorized to issue 100 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. The Company has outstanding 94 shares of Series A preferred stock, owned by CDIJ Capital Partners, L.P. an indirect affiliate of Bright Licensing Corp. (Note 1). The purchase price for such shares, $100.00 per share or $9,400 in the aggregate, is payable to the Company, without interest, upon the earlier of November 15, 1996 or the closing of the Proposed Offering. The Series A preferred stock is nonvoting, does not bear a dividend and has a liquidation value of $100.00 per share. Each share of Series A preferred stock will be convertible into 1,000 shares of common stock for a period one year following the consummation of a Business Combination. In the event that a Business Combination does not occur within 18 months from the effective date, or 24 months from the effective date if the extension criteria are satisfied, the Series A preferred stock will be redeemed by the Company for its liquidation value. (C) OPTIONS The Company granted options to purchase 100,000 Units to the founders, in consideration for their service as directors, and officers of the Company. The options are exercisable for a period of three years from the date of a Business Combination at an exercise price of $12.50 per Unit. The options are fully vested. The shares issuable upon exercise of the options and underlying warrants may not be sold or otherwise transferred until 120 days after the first Business Combination. (D) In October 1996, the Company cancelled the 100,000 options (Note 5(c)) and granted additional options to purchase 133,333.3 units to the Company's two new directors and to a founder. The options are exercisable for a period of three (3) years from the date of a Business Combination at an exercise price of $12.50 per Unit. (E) The Company has granted options to purchase 30,000 shares of the Company's Class B Stock to two directors at an exercise price of $10.00 per share. The options will expire, if not sooner exercised, upon consummation of a Business Combination. F-10 - ------------------------------------------- ------------------------------------------- - ------------------------------------------- ------------------------------------------- NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF ANY OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR ANY SUCH PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS. -------------------------- TABLE OF CONTENTS
PAGE ----- Prospectus Summary............................. 1 The Company.................................... 10 Risk Factors................................... 15 Use of Proceeds................................ 28 Dilution....................................... 31 Capitalization................................. 32 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 33 Proposed Business.............................. 34 Management..................................... 41 Certain Transactions........................... 44 Principal Stockholders......................... 45 Description of Securities...................... 46 Shares Eligible for Future Sale................ 49 Underwriting................................... 50 Legal Matters.................................. 52 Experts........................................ 52 Additional Information......................... 52 Index to Financial Statements.................. F-1
------------------------ UNTIL 90 DAYS AFTER THE RELEASE OF THE REGISTERED SECURITIES FROM THE ESCROW ACCOUNT, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. NORTH ATLANTIC ACQUISITION CORP. 800,000 UNITS, EACH UNIT CONSISTING OF ONE SHARE OF CLASS A COMMON STOCK AND ONE CLASS A COMMON STOCK PURCHASE WARRANT (THE CLASS A WARRANT ENTITLING THE HOLDERS TO PURCHASE AN AGGREGATE OF 800,000 SHARES OF COMMON STOCK) 150,000 CLASS B EXCHANGEABLE COMMON STOCK (EXCHANGEABLE TO 300,000 UNITS) --------------------- PROSPECTUS ------------------------ H.J. MEYERS & CO., INC. JUNE , 1997 - ------------------------------------------- ------------------------------------------- - ------------------------------------------- ------------------------------------------- PART II. INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS. North Atlantic Corp. (the "Company") is incorporated in Delaware. Under Section 145 of the General Corporation Law of the State of Delaware, a Delaware corporation has the power, under specified circumstances, to indemnify its directors, officers, employees and agents in connection with actions, suits or proceedings brought against them by a third party or in the right of the corporation, by reason of the fact that they were or are such directors, officers, employees or agents, against expenses incurred in any action, suit or proceeding. Article IX of the Certificate of Incorporation and Article III of the Bylaws of the Company provide for indemnification of directors and officers to the fullest extent permitted by the General Corporation Law of the State of Delaware. Reference is made to the Certificate of Incorporation of the Company, filed as Exhibit 3.1 hereto. Section 102(b)(7) of the General Corporation Law of the State of Delaware provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 (relating to liability for unauthorized acquisitions or redemptions of, or dividends on, capital stock) of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. Article Ninth of the Company's Certificate of Incorporation contains such a provision. The Underwriting Agreement filed herewith as Exhibit 1.1 contains provisions by which each Underwriter severally agrees to indemnify the Company, any person controlling the Company within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, each director of the Company, and each officer of the Company who signs this Registration Statement with respect to information relating to such Underwriter furnished in writing by or on behalf of such Underwriter expressly for use in the Registration Statement. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the expenses in connection with this Registration Statement. All of such expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission and the National Association of Securities Dealers, Inc. Filing Fee -- Securities and Exchange Commission.............. $ 9,291.78 Filing Fee -- National Association of Securities Dealers, Inc.......................................................... 3,003.48 Fees and Expenses of Accountants.............................. 12,500.00 Fees and Expenses of Counsel.................................. 75,000.00 Printing and Engraving Expenses............................... 50,000.00 Blue Sky Fees and Expenses.................................... 30,000.00 Transfer and Warrant Agent fees............................... 3,500.00 Miscellaneous Expenses........................................ 11,704.74 ----------- Total..................................................... $195,000.00 ----------- -----------
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES. In August 1995, the Company sold to CDIJ, an indirect affiliate of Bright, 1,000 shares of Common Stock for $100, which was paid in full at that time, and 94 shares of Series A Preferred Stock for $9,400, payable upon the closing of this offering, in a transaction in which no commissions were paid. In August 1995, the Company sold an aggregate of 85,000 shares of Common Stock, par value $.01 per share ("Common Stock"), to its then directors, officers and certain other persons at a price of II-1 $.10 per share for aggregate consideration of $8,500. In November 1995, the Company sold 20,000 shares of Class A Stock at a price of $0.50 per share or $10,000 in the aggregate and $100,000 in promissory notes (the "Placement Securities") to five investors, all of whom represented to the Company that they were "accredited investors" as such term is defined in Regulation D promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Securities Act"). H.J. Meyers and Northeast Securities acted as placement agents for 60% and 40% of such offering, respectively. The persons who acquired the Placement Securities are Jude Spak, Burtt R. Ehrlich, Elizabeth Lane, William Orfanos and George Orfanos. To the Company's knowledge, none of these investors, nor any of their affiliates, was, at the time of their investment in the Company, or currently is, affiliated or associated with any of H.J. Meyers, Northeast, or any other broker-dealer, except that Mr. Ehrlich is an affiliate of Emax Securities. The Company issued all such securities in reliance upon the exemption from the registration requirements of the Securities Act contained in Section 4(2) thereof. ITEM 27. EXHIBITS.
1.1 -- Underwriting Agreement. 3.1 -- Certificate of Incorporation of the Company, as amended, and Form of Amendment to the Certificate of Incorporation of the Company. *3.2 -- Form of Bylaws of the Company. 4.1 -- Form of Class A Common Stock Certificate. 4.2 -- Form of Warrant Agency Agreement between the Company and American Stock Transfer & Trust Company. 4.3 -- Form of Class A Common Stock Purchase Warrant. 4.4 -- Form of Class B Stock Certificate. 4.5 -- Form of Representative's Warrant Agreement. 4.6 -- Form of Representative's Warrant (included in Exhibit 4.5). 4.7 -- Form of Unit Certificate. *5 -- Opinion of Greenbaum, Rowe, Smith, Ravin, Davis, & Himmel. *10.1 -- Escrow Agreement for proceeds from sale of Units. *10.2 -- Form of Escrow Agreement for outstanding Common Stock. 10.3 -- Amended and Restated License Agreement, dated May 9, 1997, between Bright and the Company. *10.4 -- Form of Management Unit Option Plan. 10.5 -- Form of Class B Stock Option Agreement. 23.1 -- Consent of BDO Seidman, LLP *23.2 -- Consent of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel (Included in Exhibit 5). *24 -- Power of Attorney; Page II-5.
- ------------------------ * Previously Filed. ITEM 28. UNDERTAKINGS. The undersigned small business issuer hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; II-2 (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any 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; (b) The undersigned small business issuer hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer 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 small business issuer 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. (d) The undersigned small business issuer hereby undertakes that: (i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the small business issuer pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (ii) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus 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-3 SIGNATURES In accordance with 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 of filing on Form SB-2 and authorized this Amendment No. 8 to its Registration Statement to be signed on its behalf by the undersigned, in the City of New York, State of New York, on the 16th day of June, 1997. NORTH ATLANTIC ACQUISITION CORP. By: /s/ DAVID J. MITCHELL ----------------------------------- David J. Mitchell CHAIRMAN, CHIEF EXECUTIVE OFFICER
SIGNATURE TITLE DATE - ------------------------------------------------ -------------------------------------------- ----------------- /s/ DAVID J. MITCHELL -------------------------------------- Chairman of the Board, Chief David J. Mitchell Executive Officer June 16, 1997 (ATTORNEY-IN-FACT) (Principal Executive Officer) * Secretary, Treasurer, Director -------------------------------------- (Principal Financial and June 16, 1997 Thomas McMillen Accounting Officer) * -------------------------------------- Director June 16, 1997 A.J. Nassar
*By: /s/ DAVID J. MITCHELL --------------------------------- David J. Mitchell (ATTORNEY-IN-FACT) II-4 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE - --------- --------------------------------------------------------------------------------------- --------- 1.1 -- Underwriting Agreement. 3.1 -- Certificate of Incorporation of the Company, as amended, and Form of Amendment to the Certificate of Incorporation of the Company. *3.2 -- Form of Bylaws of the Company. 4.1 -- Form of Class A Common Stock Certificate. 4.2 -- Form of Warrant Agency Agreement between the Company and American Stock Transfer & Trust Company. 4.3 -- Form of Class A Common Stock Purchase Warrant. 4.4 -- Form of Class B Stock Certificate. 4.5 -- Form of Representative's Warrant Agreement. 4.6 -- Form of Representative's Warrant (included in Exhibit 4.5). 4.7 -- Form of Unit Certificate. *5 -- Opinion of Greenbaum, Rowe, Smith, Ravin, Davis, & Himmel. *10.1 -- Escrow Agreement for proceeds from sale of Units. *10.2 -- Form of Escrow Agreement for outstanding Common Stock. 10.3 -- Amended and Restated License Agreement, dated May 9, 1997, between Bright and the Company. *10.4 -- Form of Management Unit Option Plan. 10.5 -- Form of Class B Stock Option Agreement. 23.1 -- Consent of BDO Seidman, LLP *23.2 -- Consent of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel (Included in Exhibit 5). *24 -- Power of Attorney; Page II-5.
- ------------------------ * Previously Filed. EX-1.1 2 EXH 1.1:UNDERWRITING AGREE Exhibit 1.1 NORTH ATLANTIC ACQUISITION CORP. 800,000 Units Each Unit Consisting of One Share of Class A Common Stock and One Redeemable Class A Common Stock Purchase Warrant and 180,000 Shares of Class B Exchangeable Common Stock ____________ UNDERWRITING AGREEMENT ____________ [EFFECTIVE DATE] H.J. Meyers & Co., Inc. 1895 Mount Hope Avenue Rochester, NY 14620 Attn: Mr. Michael Bresner As representative of the several Underwriters Ladies and Gentlemen: NORTH ATLANTIC ACQUISITION CORP., a Delaware corporation (the "Company"), proposes to issue and sell to the one or more underwriters named in Schedule I hereto (the "Underwriters"), including H.J. Meyers & Co., Inc. (H.J. Meyers) (the "Representative" or "you"), the representative of the several Underwriters, pursuant to this Underwriting Agreement (this "Agreement"): (1) an aggregate of 800,000 Units (the "Units"), each consisting of one share of Class A Common Stock, $.01 par value, of the Company (the "Class A Stock"), and one Class A Common Stock Purchase Warrant (the "Warrants"), each exercisable to purchase one share of Class A Stock at any time 90 days after the date of a business combination (the "Business Combination"), or any earlier date on or after the date of a Business Combination that H.J. Meyers in its sole discretion so elects, and ending on the fifth anniversary of the effective date of the Registration Statement (the "Effective Date"); and (2) an aggregate of 180,000 Shares of Class B Exchangeable Common Stock (the "Class B Stock"), each entitling the holder thereof to receive two Units in exchange therefor 90 days after the date of a Business Combination or any earlier date on or after the date of a Business Combination that H.J. Meyers in its sole discretion so elects. The Warrant exercise price, subject to adjustment as described in the agreement providing for the Warrants (the "Warrant Agreement"), shall be $9.00 per share. In addition, the Company proposes to grant to the Underwriters the Over-Allotment Option, referred to and defined in Section 2(c), to purchase all or any part of an aggregate of 120,000 additional Units and 22,500 shares of Class B Stock, and to issue to you the Representative's Warrant, referred to and defined in Section 12, to purchase certain further additional Units and shares of Class B Stock. The 800,000 shares of Class A Stock comprising the Units, together with the 120,000 additional shares of Class A Stock comprising the Units that are the subject of the Over-Allotment Option, are herein collectively called the "Class A Shares." The 180,000 shares of Class B Stock, together with the 22,500 shares of Class B Stock that are the subject of the Over-Allotment Option, are herein collectively called the "Class B Shares." The Units, the Class A Shares, the Class B Shares, the Warrants (including the additional Warrants comprising the Units that are the subject of the Over-Allotment Option and the Warrants issuable upon exercise of the Representative's Warrant), the Class A Shares issuable upon exercise of the Warrants and the Class A Shares issuable upon exercise of the Representative's Warrant, are herein collectively called the "Securities." The term "Representative's Counsel" shall mean the firm of Harter, Secrest & Emery, counsel to the Representative, and the term "Company Counsel" shall mean the firm of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, counsel to the Company. Unless the context otherwise requires, all references herein to a "Section" shall mean the appropriate Section of this Agreement. You have advised the Company that the Underwriters desire to purchase the Units and the Class B Shares as herein provided, and that you have been authorized to execute this Agreement as representative of the Underwriters. The Company confirms the agreements made by it with respect to the purchase of the Units and the Class B Shares by the Underwriters, as follows: 1. REPRESENTATIONS AND WARRANTIES. -2- REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to, and agrees with, each Underwriter that: (A) REGISTRATION STATEMENT; PROSPECTUS. A registration statement (File No. 33-80647) on Form SB-2 relating to the public offering of the Securities (the "Offering"), including a preliminary form of prospectus, copies of which have heretofore been delivered to you, has been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations of the Securities and Exchange Commission (the "Commission") promulgated thereunder (the "Rules and Regulations"), and has been filed with the Commission under the Act. As used herein, the term "Preliminary Prospectus" shall mean each prospectus filed pursuant to Rule 430 or Rule 424(a) of the Rules and Regulations. The Preliminary Prospectus bore the legend required by Item 501 of Regulation S-K under the Act and the Rules and Regulations. Such registration statement (including all financial statements, schedules and exhibits) as amended at the time it becomes effective and the final prospectus included therein are herein respectively called the "Registration Statement" and the "Prospectus," except that (i) if the prospectus first filed by the Company pursuant to Rule 424(b) or Rule 430A of the Rules and Regulations shall differ from such final prospectus as then amended, then the term "Prospectus" shall instead mean the prospectus first filed pursuant to said Rule 424(b) or Rule 430A, and (ii) if such registration statement is amended or such prospectus is amended or supplemented after the effective date of such registration statement and prior to the Option Closing Date (as defined in Section 2(c)), then (unless the context necessarily requires otherwise) the term "Registration Statement" shall include such registration statement as so amended, and the term "Prospectus" shall include such prospectus as so amended or supplemented, as the case may be. (B) CONTENTS OF REGISTRATION STATEMENT. On the Effective Date, and at all times subsequent thereto for so long as the delivery of a prospectus is required in connection with the offering or sale of any of the Securities, (i) the Registration Statement and the Prospectus shall in all respects conform to the requirements of the Act and the Rules and Regulations, and (ii) neither the Registration Statement nor the Prospectus shall include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make statements therein not misleading; provided, however, that the Company makes no representations, warranties or agreements as to information contained in or omitted from the Registration Statement or Prospectus in reliance upon, and in conformity with, written information furnished to the Company by or on behalf of the Underwriters specifically for use in the preparation thereof. It is understood that the statements set forth in the Prospectus with respect to stabilization, the material set forth under the caption "UNDERWRITING," and the identity of counsel to the Representative under the caption "LEGAL MATTERS," constitute the only information furnished in writing by or on behalf of the Underwriters for inclusion in the Registration Statement and Prospectus, as the case may be. -3- (C) ORGANIZATION, STANDING, ETC. The Company and each subsidiary of the Company (a "Subsidiary") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware with full power and corporate authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified or licensed to do business as a foreign corporation and is in good standing in each other jurisdiction in which the nature of its business or the character or location of its properties requires such qualification, except where failure to so qualify will not materially affect the business, properties or financial condition of the Company or such Subsidiary, as the case may be. (D) CAPITALIZATION. The authorized, issued and outstanding capital stock of the Company as of the date of the Prospectus is as set forth in the Prospectus under the caption "CAPITALIZATION". The Class A Shares and Class B Shares issued and outstanding on the Effective Date have been duly authorized, validly issued and are fully paid and non-assessable. No options, warrants or other rights to purchase, agreements or other obligations to issue, or agreements or other rights to convert any obligation into, any shares of capital stock of the Company or any Subsidiary have been granted or entered into by the Company or such Subsidiary, except as expressly described in the Prospectus. The Securities conform to all statements relating thereto contained in the Registration Statement or the Prospectus. (E) SECURITIES. The Securities and the Representative's Warrant have been duly authorized and, when issued and delivered against payment therefor pursuant to this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights of any security holder of the Company. Neither the filing of the Registration Statement nor the offering or sale of any of the Securities or the Representative's Warrant as contemplated by this Agreement gives rise to any rights, other than those which have been waived or satisfied, for or relating to the registration of any securities of the Company, except as described in the Registration Statement. (F) AUTHORITY, ETC. This Agreement, the Warrant Agreement, the Representative's Warrant, and the Stock Escrow Agreement, and the Financial Consulting Agreement (each as hereinafter defined), have been duly and validly authorized, executed and delivered by the Company and, assuming due execution of this Agreement and such other agreements by the other party or parties hereto and thereto, constitute valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms. The Company has full right, power and lawful authority to authorize, issue and sell the Securities and the Representative's Warrant on the terms and conditions set forth herein. All consents, approvals, authorizations and orders of any court or governmental authority which are required in connection with the authorization, execution and delivery of such agreements, the authorization, issue and sale of the Securities and the Representative's Warrant, and the consummation of the transactions contemplated hereby have been obtained. -4- (G) NO CONFLICT. Except as described in the Prospectus, neither the Company nor any Subsidiary is in violation, breach or default of or under, and consummation of the transactions hereby contemplated and fulfillment of the terms of this Agreement will not conflict with or result in a breach of, any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance pursuant to the terms of, any contract, indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or such Subsidiary is a party or by which the Company or such Subsidiary may be bound or to which any of the property or assets of the Company or such Subsidiary are subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or the By-laws of the Company or any Subsidiary, or any statute, order, rule or regulation applicable to the Company or any Subsidiary of any court or governmental authority. (H) ASSETS. Subject to the qualifications stated in the Prospectus: (i) the Company and each Subsidiary, as the case may be, has good and marketable title to all properties and assets described in the Prospectus as owned by it, including without limitation intellectual property, free and clear of all liens, charges, encumbrances or restrictions, except such as are not materially significant or important in relation to its business; (ii) all of the material leases and subleases under which the Company or any Subsidiary is the lessor or sublessor of properties or assets or under which the Company or any Subsidiary holds properties or assets as lessee or sublessee, as described in the Prospectus, are in full force and effect and, except as described in the Prospectus, neither the Company nor any Subsidiary is in default in any material respect with respect to any of the terms or provisions of any of such leases or subleases, and no claim has been asserted by any party adverse to the rights of the Company or such Subsidiary as lessor, sublessor, lessee or sublessee under any such lease or sublease, or affecting or questioning the right of the Company or such Subsidiary to continued possession of the leased or subleased premises or assets under any such lease or sublease, except as described or referred to in the Prospectus; and (iii) the Company and each Subsidiary, as the case may be, owns or leases all such properties, described in the Prospectus, as are necessary to its operations as now conducted and, except as otherwise stated in the Prospectus, as proposed to be conducted as set forth in the Prospectus. (I) INDEPENDENT ACCOUNTANTS. BDO Seidman, LLP, who have given their report on certain financial statements filed or to be filed with the Commission as a part of the Registration Statement, and which are included in the Prospectus, are with respect to the Company, independent public accountants as required by the Act and the Rules and Regulations. (J) FINANCIAL STATEMENTS. The financial statements and schedules, together with related notes, set forth in the Registration Statement and the Prospectus present fairly the financial position, results of operations and cash flows of the Company and the Predecessor on the basis stated in the Registration Statement, at the respective dates and for the respective periods to which they apply. Such financial statements, schedules and related -5- notes have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the entire period involved, except to the extent disclosed therein. The financial information for each of the periods presented in the Registration Statement and the Prospectus present a true and complete statement of the financial position of the Company and the Predecessor at the dates indicated and the results of their operations for the periods then ended. The Summary Financial Information and Selected Financial Data included in the Registration Statement and the Prospectus present fairly the information shown therein and have been prepared on a basis consistent with that of the audited financial statements included in the Registration Statement and the Prospectus. (K) NO MATERIAL CHANGE. Except as otherwise set forth in the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, neither the Company nor any Subsidiary has: (i) incurred any liability or obligation, direct or contingent, or entered into any transaction, which is material to its business; (ii) effected or experienced any change in its capital stock; (iii) issued any options, warrants or other rights to acquire its capital stock; (iv) declared, paid or made any dividend or distribution of any kind on its capital stock; or (v) effected or experienced any material adverse change, or development involving a prospective material adverse change, in its business, property, operations, condition (financial or otherwise) or earnings. (L) LITIGATION. Except as set forth in the Prospectus, there is not now pending nor, to the best knowledge of the Company, threatened, any action, suit or proceeding (including any related to environmental matters or discrimination on the basis of age, sex, religion or race), whether or not in the ordinary course of business, to which the Company or any Subsidiary is a party or its business or property is subject, before or by any court or governmental authority, which might result in any material adverse change in the business, property, operations, condition (financial or otherwise) or earnings of the Company or such Subsidiary; and no labor disputes involving the employees of the Company or any Subsidiary exist which might be expected to affect materially adversely the business, property, operations, condition (financial or otherwise) or earnings of the Company or such Subsidiary. (M) NO UNLAWFUL PROSPECTUSES. The Company has not distributed any prospectus or other offering material in connection with the Offering contemplated herein, other than any Preliminary Prospectus, the Prospectus or other material permitted by the Act and the Rules and Regulations. (N) TAXES. Except as disclosed in the Prospectus, the Company and each Subsidiary has filed all necessary federal, state, local and foreign income and franchise tax returns and has paid all taxes shown as due thereon; and there is no tax deficiency which has been or, to the best knowledge of the Company, might be asserted against the Company or any Subsidiary. -6- (O) LICENSES, ETC. The Company and each Subsidiary has in effect all necessary licenses, permits and other governmental authorizations currently required for the conduct of its business or the ownership of its property, as described in the Prospectus, and is in all material respects in compliance therewith. The Company owns or possesses adequate rights to use all material patents, patent applications, trademarks, mark registrations, copyrights and licenses disclosed in the Prospectus and/or which are necessary for the conduct of such business, and except as disclosed in the Prospectus has not received any notice of conflict with the asserted rights of others in respect thereof. To the best knowledge of the Company, none of the activities or business of the Company or any Subsidiary is in violation of, or would cause the Company or such Subsidiary to violate, any law, rule, regulation or order of the United States, any state, county or locality, the violation of which would have a material adverse effect upon the business, property, operations, condition (financial or otherwise) or earnings of the Company or such Subsidiary. (P) NO PROHIBITED PAYMENTS. Neither the Company nor any Subsidiary nor the Predecessor have, directly or indirectly at any time: (i) made any contribution to any candidate for political office, or failed to disclose fully any such contribution in violation of law; or (ii) made any payment to any federal, state, local or foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments or contributions required or allowed by applicable law. The Company's internal accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended. (Q) TRANSFER TAXES. On the Closing Dates (as defined in Section 2(d)), all transfer and other taxes (including franchise, capital stock and other tax, other than income taxes, imposed by any jurisdiction), if any, which are required to be paid in connection with the sale and transfer of the Units and Class B Shares to the Underwriters hereunder shall have been fully paid or provided for by the Company, and all laws imposing such taxes shall have been fully complied with. (R) EXHIBITS. All contracts and other documents of the Company or any Subsidiary which are, under the Rules and Regulations, required to be filed as exhibits to the Registration Statement have been so filed. (S) SUBSIDIARIES. Except as described in the Prospectus, the Company has no Subsidiaries. All of the capital stock of each Subsidiary is owned by the Company. (T) SHAREHOLDER AGREEMENTS, REGISTRATION RIGHTS. Except as described in the Prospectus, no security holder of the Company has any rights with respect to the purchase, sale or registration of any Securities, and all registration rights with respect to the Offering have been effectively waived. -7- (U) INVESTMENT COMPANY STATUS. The Company is in compliance or has secured a suitable exemption from the Investment Company Act of 1940. (V) SECURITIES ACT RULE 419. The Company is exempt from the provisions of Rule 419 of the Securities Act. 2. PURCHASE, DELIVERY AND SALE OF UNITS. (A) PURCHASE PRICE FOR UNITS. The Units and Class B Shares shall be sold to and purchased by the Underwriters hereunder at the purchase price of $9.40 per Unit (that being the public offering price of $10.00 per Unit less an underwriting discount of 6 percent) and $9.00 per share of Class B Stock (that being the public offering price of $10.00 per share of Class B Stock less an underwriting discount of 10 percent) (respectively the "Purchase Price"). (B) FIRM UNITS. (i) Subject to the terms and conditions of this Agreement, and on the basis of the representations, warranties and agreements herein contained the Company agrees to issue and sell to the Underwriters, severally and not jointly, and each of the Underwriters agrees, severally and not jointly, to buy from the Company at the Purchase Price, the number of Units and Class B Shares set forth opposite such Underwriter's name in Schedule I hereto (collectively the "Firm Units"). (ii) Delivery of the Firm Units against payment therefor shall take place at the offices of H.J. Meyers, 1895 Mt. Hope Avenue, Rochester, New York 14620 (the "Representative's Offices") (or at such other place as may be designated by agreement between you and the Company) at 10:00 a.m., New York time, on [CLOSING DATE], or at such later time and date, not later than ten banking days after the Effective Date, as you may designate (such time and date of payment and delivery for the Firm Units being herein called the "First Closing Date"). Time shall be of the essence and delivery of the Firm Units at the time and place specified in this Section 2(b)(ii) is a further condition to the obligations of the Underwriters hereunder. (C) OPTION UNITS. (i) In addition, subject to the terms and conditions of this Agreement, and on the basis of the representations, warranties and agreements herein contained, the Company hereby grants to the Underwriters an option (the "Over-Allotment Option") to purchase from the Company all or any part of an aggregate of an additional 120,000 Units and 22,500 Class B Shares at the Purchase Price (collectively the "Option Units"). In the event that the Over-Allotment Option is exercised by the Underwriters in whole or in part, -8- each Underwriter shall purchase Option Units in the same proportion as the number of Firm Units purchased by it bore to the total number of Firm Units, unless you and the other Underwriters shall otherwise agree. (ii) The Over-Allotment Option may be exercised by the Underwriters, in whole or in part, within 30 days after the Effective Date, upon notice by you to the Company advising it of the number of Option Units as to which the Over-Allotment Option is being exercised, the names and denominations in which the certificates for the Class A Shares, Class B Shares and the Warrants comprising such Option Units are to be registered, and the time and date when such certificates are to be delivered. Such time and date shall be determined by you but shall not be less than four nor more than ten banking days after exercise of the Over-Allotment Option, nor in any event prior to the First Closing Date (such time and date being herein called the "Option Closing Date"). Delivery of the Option Units against payment therefor shall take place at the Representative's Offices. Time shall be of the essence and delivery at the time and place specified in this Section 2(c)(ii) is a further condition to the obligations of the Underwriters hereunder. (iii) The Over-Allotment Option may be exercised only to cover over-allotments in the sale by the Underwriters of Firm Units. (D) DELIVERY OF CERTIFICATES; PAYMENT. (i) The Company shall make the certificates for the Class A Shares, Class B Shares and the Warrants comprising the Units to be purchased hereunder available to you for checking at least one banking day prior to the First Closing Date or the Option Closing Date (each, a "Closing Date"), as the case may be. The certificates shall be in such names and denominations as you may request at least two banking days prior to the relevant Closing Date. Time shall be of the essence and the availability of the certificates at the time and place specified in this Section 2(d)(i) is a further condition to the obligations of the Underwriters hereunder. (ii) On the First Closing Date, the Company shall deliver to you for the several accounts of the Underwriters definitive engraved certificates in negotiable form representing all of the Class A Shares, Class B Shares and the Warrants comprising the Firm Units to be sold by the Company, against payment of the Purchase Price therefor by you for the several accounts of the Underwriters, by certified or bank cashier's checks payable in next day funds to the order of the Company. (iii) In addition, if and to the extent that the Underwriters exercise the Over-Allotment Option, then on the Option Closing Date, the Company shall deliver to you for the several accounts of the Underwriters definitive engraved certificates in negotiable form representing the Units, Class A Shares, Class B Shares and the Warrants comprising the Option Units to be sold by the Company, against payment of the Purchase Price therefor -9- by you for the several accounts of the Underwriters, by certified or bank cashier's checks payable in next day funds to the order of the Company. (iv) It is understood that the Underwriters propose to offer the Units and the Class B Shares to be purchased hereunder to the public, upon the terms and conditions set forth in the Registration Statement, after the Registration Statement becomes effective. 3. COVENANTS. COVENANTS OF THE COMPANY. The Company covenants and agrees with each Underwriter that: (A) REGISTRATION. (i) The Company shall use its best efforts to cause the Registration Statement to become effective and, upon notification from the Commission that the Registration Statement has become effective, shall so advise you and shall not at any time, whether before or after the Effective Date, file any amendment to the Registration Statement or any amendment or supplement to the Prospectus of which you shall not previously have been advised and furnished with a copy, or to which you or Representative's Counsel shall have objected in writing, or which is not in compliance with the Act and the Rules and Regulations. At any time prior to the later of (A) the completion by the Underwriters of the distribution of the Units and Class B Shares contemplated hereby (but in no event more than nine months after the Effective Date), and (B) 25 days after the Effective Date, the Company shall prepare and file with the Commission, promptly upon your request, any amendments to the Registration Statement or any amendments or supplements to the Prospectus which, in your reasonable opinion, may be necessary or advisable in connection with the distribution of the Units and Class B Shares. (ii) Promptly after you or the Company shall have been advised thereof, you shall advise the Company or the Company shall advise you, as the case may be, and confirm such advice in writing, of (A) the receipt of any comments of the Commission, (B) the effectiveness of any post-effective amendment to the Registration Statement, (C) the filing of any supplement to the Prospectus or any amended Prospectus, (D) any request made by the Commission for amendment of the Registration Statement or amendment or supplementing of the Prospectus, or for additional information with respect thereto, or (E) the issuance by the Commission or any state or regulatory body of any stop order or other order denying or suspending the effectiveness of the Registration Statement, or preventing or suspending the use of any Preliminary Prospectus, or suspending the qualification of the Securities for offering in any jurisdiction, or otherwise preventing or impairing the Offering, or the institution or threat of any proceeding for any of such purposes. The Company and -10- you shall not acquiesce in such order or proceeding, and shall instead actively defend such order or proceeding, unless the Company and you agree in writing to such acquiescence. (iii) The Company has caused to be delivered to you copies of each Preliminary Prospectus, and the Company has consented and hereby consents to the use of such copies for the purposes permitted by the Act. The Company authorizes the Underwriters and selected dealers to use the Prospectus in connection with the sale of the Units and Class B Shares for such period as in the opinion of Representative's Counsel the use thereof is required to comply with the applicable provisions of the Act and the Rules and Regulations. In case of the happening, at any time within such period as a prospectus is required under the Act to be delivered in connection with sales by an underwriter or dealer, of any event of which the Company has knowledge and which materially affects the Company or the Securities, or which in the opinion of Company Counsel or of Representative's Counsel should be set forth in an amendment to the Registration Statement or an amendment or supplement to the Prospectus in order to make the statements made therein not then misleading, in light of the circumstances existing at the time the Prospectus is required to be delivered to a purchaser of the Units or Class B Shares, or in case it shall be necessary to amend or supplement the Prospectus to comply with the Act or the Rules and Regulations, the Company shall notify you promptly and forthwith prepare and furnish to the Underwriters copies of such amended Prospectus or of such supplement to be attached to the Prospectus, in such quantities as you may reasonably request, in order that the Prospectus, as so amended or supplemented, shall not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements in the Prospectus, in the light of the circumstances under which they are made, not misleading. The preparation and furnishing of each such amendment to the Registration Statement, amended Prospectus or supplement to be attached to the Prospectus shall be without expense to the Underwriters, except that in the case that the Underwriters are required, in connection with the sale of the Units or Class B Shares, to deliver a prospectus nine months or more after the Effective Date, the Company shall upon your request and at the expense of the Underwriters, amend the Registration Statement and amend or supplement the Prospectus, or file a new registration statement on Form SB-2 (if applicable) or Form S-1, if necessary, and furnish the Underwriters with reasonable quantities of prospectuses complying with section 10(a)(3) of the Act. (iv) The Company shall comply with the Act, the Rules and Regulations, and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder in connection with the offering and issuance of the Securities. -11- (B) BLUE SKY. The Company shall, at its own expense, use its best efforts to qualify or register the Securities for sale under the securities or "blue sky" laws of such jurisdictions as you may designate, and shall make such applications and furnish such information to Representative's Counsel as may be required for that purpose, and shall comply with such laws; provided, however, that the Company shall not be required to qualify as a foreign corporation or a dealer in securities or to execute a general consent to service of process in any jurisdiction in any action other than one arising out of the offering or sale of the Units. The Company shall bear all of the expense of such qualifications and registrations, including without limitation the legal fees and disbursements of Representative's Counsel, which fees, exclusive of disbursements, shall not exceed $35,000 (unless otherwise agreed). After each Closing Date the Company shall, at its own expense, from time to time prepare and file such statements and reports as may be required to continue each such qualification in effect for so long a period as you may reasonably request. (C) EXCHANGE ACT REGISTRATION. The Company shall, at its own expense, prepare and file with the Commission a registration statement (on Form 8-A or Form 10) under section 12(g) of the Exchange Act concurrently with the completion of the Offering or promptly thereafter, but in no event later than 45 days from the Effective Date, and shall use its best efforts to cause such registration statement to be declared effective and maintained in effect for at least five years from the Effective Date. (D) PROSPECTUS COPIES. The Company shall deliver to you on or before the First Closing Date two signed copies of the Registration Statement including all financial statements, schedules and exhibits filed therewith, and of all amendments thereto. The Company shall deliver to or on the order of the Underwriters, from time to time until the Effective Date, as many copies of any Preliminary Prospectus filed with the Commission prior to the Effective Date as the Underwriters may reasonably request. The Company shall deliver to the Underwriters on the Effective Date, and thereafter for so long as a prospectus is required to be delivered under the Act, from time to time, as many copies of the Prospectus, in final form, or as thereafter amended or supplemented, as the Underwriters may from time to time reasonably request. (E) AMENDMENTS AND SUPPLEMENTS. The Company shall, promptly upon your request, prepare and file with the Commission any amendments to the Registration Statement, and any amendments or supplements to the Preliminary Prospectus or the Prospectus, and take any other action which in the reasonable opinion of Representative's Counsel may be reasonably necessary or advisable in connection with the distribution of the Units and Class B Shares, and shall use its best efforts to cause the same to become effective as promptly as possible. (F) CERTAIN MARKET PRACTICES. The Company has not taken, and shall not take, directly or indirectly, any action designed, or which might reasonably be expected, to -12- cause or result in, or which has constituted, the stabilization or manipulation of the price of the Securities to facilitate the sale or resale thereof. (G) CERTAIN REPRESENTATIONS. Neither the Company nor any representative of the Company has made or shall make any written or oral representation in connection with the Offering and sale of the Securities or the Representative's Warrant which is not contained in the Prospectus, which is otherwise inconsistent with or in contravention of any thing contained in the Prospectus, or which shall constitute a violation of the Act, the Rules and Regulations, the Exchange Act or the rules and regulations promulgated under the Exchange Act. (H) CONTINUING REGISTRATION OF WARRANTS AND UNDERLYING COMMON STOCK. For so long as any Warrant is outstanding, the Company shall, at its own expense: (i) use its best efforts to cause post-effective amendments to the Registration Statement, or new registration statements (which may be on Forms SB-2, S-2 or S-3, as the case may be) relating to the Warrants and the Class A Shares underlying the Warrants to become effective in compliance with the Act and without any lapse of time between the effectiveness of the Registration Statement and of any such post-effective amendment or new registration statement; (ii) cause a copy of each Prospectus, as then amended, to be delivered to each holder of record of a Warrant; (iii) furnish to the Underwriters and dealers as many copies of each such Prospectus as the Underwriters or dealers may reasonably request; and (iv) maintain the "blue sky" qualification or registration of the Warrants and the Class A Shares underlying the Warrants, or have a currently available exemption therefrom, in each jurisdiction in which the Securities were so qualified or registered for purposes of the Offering. In addition, for so long as any Warrant is outstanding, the Company shall promptly notify you of any material change in the business, financial condition or prospects of the Company. (I) USE OF PROCEEDS. The Company shall apply the net proceeds from the sale of the Units substantially for the purposes set forth in the Prospectus under the caption "USE OF PROCEEDS," and shall file such reports with the Commission with respect to the sale of the Units and the application of the proceeds therefrom as may be required pursuant to Rule 463 of the Rules and Regulations. (J) TWELVE MONTHS' EARNINGS STATEMENT. The Company shall make generally available to its security holders and deliver to you as soon as it is practicable so to do, but in no event later than 90 days after the end of twelve months after the close of its current fiscal quarter, an earnings statement (which need not be audited) covering a period of at least twelve consecutive months beginning after the Effective Date, which shall satisfy the requirements of section 11(a) of the Act. (K) NASDAQ, EXCHANGE LISTINGS, ETC. Within 10 days after the Effective Date, the Company shall also use its best efforts to list itself in Moody's OTC Industrial Manual or Standard & Poor's Corporation Records and to cause such listing to be maintained -13- for two years. After the Business Combination, the Company shall immediately make all filings required to seek approval for the quotation of the Securities on The Nasdaq Stock Market ("NASDAQ"), the NASDAQ-NNM or the New York Stock Exchange ("NYSE"), and shall use its best efforts to effect and maintain such approval for at least two years. (L) BOARD OF DIRECTORS. The Company shall maintain a Board of Directors comprised of a size and structure as the Company and Underwriters jointly agree until completion of the Business Combination. (M) PERIODIC REPORTS. For so long as the Company is a reporting company under section 12(g) or section 15(d) of the Exchange Act, the Company shall, at its own expense, furnish to its shareholders an annual report (including financial statements audited by certified public accountants) in reasonable detail. In addition, during the period ending five years from the date hereof, the Company shall, at its own expense, furnish to you: (i) within 90 days of the end of each fiscal year, a balance sheet of the Company and its Subsidiaries as at the end of such fiscal year, together with statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries as at the end of such fiscal year, all in reasonable detail and accompanied by a copy of the certificate or report thereon of certified public accountants; (ii) as soon as they are available, a copy of all reports (financial or otherwise) distributed to security holders; (iii) as soon as they are available, a copy of all non-confidential reports and financial statements furnished to or filed with the Commission; and (iv) such other information as you may from time to time reasonably request. The financial statements referred to herein shall be on a consolidated basis to the extent the accounts of the Company and its Subsidiaries are consolidated in reports furnished to its shareholders generally. In addition, during the period ending one year from the date hereof, the company shall, at its own expense, furnish you monthly with Depository Trust Company stock transfer sheets. (N) CERTAIN OPTIONS. For a period of 90 days following the First Closing Date, the Company shall not, without your prior written consent, grant any options, warrants or other rights to purchase Class A Shares at a price less than the initial public Offering price of the Class A Shares comprising the Units. (O) WARRANT SOLICITATION. Upon the exercise of any Warrants on or after the first anniversary of the Effective Date, the Company shall pay you a commission of 10 percent of the aggregate exercise price of such Warrants, 8 percent of which may be reallowed by you to the dealer who solicited the exercise (which may also be you), if: (i) the market price of the Class A Shares is greater than the exercise price of the Warrant on the date of exercise; (ii) the exercise of the Warrant was solicited by a member of the National Association of Securities Dealers, Inc. ("NASD"); (iii) the Warrant is not held in a discretionary account; (iv) the disclosure of the compensation arrangements has been made in documents provided to customers, both as part of the Offering and at the time of exercise; and (v) the solicitation of the Warrant was not in violation of Rule 10b-6 promulgated under -14- the Exchange Act. The Company agrees not to solicit the exercise of any Warrant other than through you, and shall not authorize any other dealer to engage in such solicitation without your prior written consent. No commission shall be paid to you on any Warrant exercised prior to the first anniversary of the Effective Date, or on any Warrant exercised at any time without solicitation by you. (P) AVAILABLE SHARES. The Company shall reserve and at all times keep available that maximum number of its authorized but unissued Securities which are issuable upon exercise of the Warrants, the Representative's Warrant, and the Warrants issuable upon exercise of the Representative's Warrant, in each case taking into account the anti-dilution provisions thereof. (Q) INVESTMENT BANKING ADVISOR. The Company shall engage an investment banking firm to advise the Company concerning potential business combinations. (R) STOCK ESCROW AGREEMENT. On or before the Effective Date, the Company shall, and shall cause all of its current shareholders to, execute and deliver to you an agreement with American Stock Transfer & Trust Company (or other escrow agent mutually acceptable to the Company and you), in the form previously delivered to the Company by you, regarding the escrow of all Class A Shares and Series A Preferred Stock owned by such shareholders (the "Stock Escrow Agreement"). (S) PUBLIC RELATIONS. Prior to the Effective Date the Company shall have retained a public relations firm acceptable to you, and shall continue to retain such firm, or an alternate firm acceptable to you, for a period of two years. (T) BOUND VOLUMES. Within 90 days from the First Closing Date, the Company shall deliver to you, at the Company's expense, three bound volumes in form and content acceptable to you, containing the Registration Statement and all exhibits filed therewith and all amendments thereto, and all other agreements, correspondence, filings, certificates and other documents filed and/or delivered in connection with the Offering. 4. CONDITIONS TO UNDERWRITERS' OBLIGATIONS. The obligations of the several Underwriters to purchase and pay for the Units which they have agreed to purchase hereunder are subject to the accuracy (as of the date hereof and as of each Closing Date) of and compliance with the representations and warranties of the Company contained herein, the performance by the Company of all of their obligations hereunder, the execution, delivery and performance by each of the parties thereto of all of their obligations under the Stock Escrow Agreement, and the following further conditions: (A) EFFECTIVE REGISTRATION STATEMENT; NO STOP ORDER. The Registration Statement shall have become effective and you shall have received notice thereof not later than 6:00 p.m., New York time, on the date of this Agreement, or at such later time or on -15- such later date as to which you may agree in writing. In addition, on each Closing Date (i) no stop order denying or suspending the effectiveness of the Registration Statement shall be in effect, and no proceedings for that or any similar purpose shall have been instituted or shall be pending or, to your knowledge or to the knowledge of the Company, shall be contemplated by the Commission, and (ii) all requests on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of Representative's Counsel. (B) OPINION OF COMPANY COUNSEL. On the First Closing Date, you shall have received the opinion, dated as of the First Closing Date, of Company Counsel, in form and substance satisfactory to Representative's Counsel, to the effect that: (i) the Company and each Subsidiary has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with full power and corporate authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified or licensed to do business as a foreign corporation and is in good standing in each other jurisdiction in which the nature of its business or the character or location of its properties requires such qualification, except where failure so to qualify will not materially affect the business, properties or financial condition of the Company or such Subsidiary; (ii) to the best knowledge of such counsel, (A) the Company and each Subsidiary has obtained, or is in the process of obtaining, all necessary licenses, permits and other governmental authorizations currently required for the conduct of its business or the ownership of its property, as described in the Prospectus, (B) such obtained licenses, permits and other governmental authorizations are in full force and effect, and (C) the Company and each Subsidiary is, in all material respects, in compliance therewith; (iii) (A) the authorized capitalization of the Company as of the date of the Prospectus was as is set forth in the Prospectus under the caption "CAPITALIZATION;" (B) all of the Class A Shares and Class B Shares now outstanding have been duly authorized and validly issued, are fully paid and non-assessable, conform to the description thereof contained in the Prospectus, have not been issued in violation of the preemptive rights of any shareholder and, except as described in the Prospectus, are not subject to any restrictions upon the voting or transfer thereof; (C) all of the Class A Shares and all of the Warrants comprising the Units have been duly authorized and, when paid for as provided herein, shall be validly issued, fully paid and non-assessable, shall not have been issued in violation of the preemptive rights of any shareholder, and no personal liability shall attach to the ownership thereof; (D) the shareholders of the Company do not have any preemptive rights or -16- other rights to subscribe for or purchase, and there are no restrictions upon the voting or transfer of, any of the Securities; (E) the Class A Shares and the Warrants comprising the Units, the Warrant Agreement and the Representative's Warrant conform to the respective descriptions thereof contained in the Prospectus; (F) all prior sales of the Company's securities have been made in compliance with, or under an exemption from, the Act and applicable state securities laws; (G) a sufficient number of Class A Shares has been reserved, for all times when any of the Warrants (including the Warrants issuable upon exercise of the Representative's Warrant) are outstanding, for issuance upon exercise of all of the Warrants; and (H) to the best knowledge of such counsel, neither the filing of the Registration Statement nor the offering or sale of the Units or Class B Shares as contemplated by this Agreement gives rise to any registration rights or other rights, other than those which have been effectively waived or satisfied, for or relating to the registration of any securities of the Company; (iv) the certificates evidencing the Units, the Class A Shares, Class B Shares and the Warrants are each in valid and proper legal form; and the Warrants are exercisable for Class A Shares in accordance with the terms of the Warrants and at the prices therein provided for; (xviii) this Agreement, the Warrant Agreement, the Representative's Warrant, and the Stock Escrow Agreement have been duly and validly authorized, executed and delivered by the Company and (assuming due execution and delivery thereof by the Representative and/or American Stock Transfer & Trust Company, as the case may be) all of such agreements are, or when duly executed shall be, the valid and legally binding obligations of the Company, enforceable in accordance with their respective terms (except as enforceability may be limited by bankruptcy, insolvency or other laws affecting the rights of creditors generally); provided, however, that no opinion need be expressed as to the enforceability of the indemnity provisions contained in Section 6 or the contribution provisions contained in Section 7; (vi) to the best knowledge of such counsel, (A) there is no pending, threatened or contemplated legal or governmental proceeding affecting the Company or any Subsidiary which could materially and adversely affect the business, property, operations, condition (financial or otherwise) or earnings of the Company or such Subsidiary, or which questions the validity of the Offering, the Securities, this Agreement, the Warrant Agreement, the Representative's Warrant, or the Stock Escrow Agreement or of any action taken or to be taken by the Company pursuant thereto; and (B) there is no legal or governmental proceeding or regulation required to be described or -17- referred to in the Registration Statement which is not so described or referred to; (vii) to the best knowledge of such counsel, (A) the Company is not in violation of or default under this Agreement, the Warrant Agreement, the Representative's Warrant, the Stock Escrow Agreement, or the Financial Consulting Agreement; and (B) the execution and delivery hereof and thereof and the incurrence of the obligations herein and therein set forth and the consummation of the transactions herein or therein contemplated shall not result in a violation of, or constitute a default under, the Certificate of Incorporation or By-laws of the Company, or any material obligation, agreement, covenant or condition contained in any bond, debenture, note or other evidence of indebtedness, or in any material contract, indenture, mortgage, loan agreement, lease, joint venture or other agreement or instrument to which the Company is a party or by which its assets are bound, or any material order, rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court; (viii) the Registration Statement has become effective under the Act, and to the best knowledge of such counsel, no stop order denying or suspending the effectiveness of the Registration Statement is in effect, and no proceedings for that or any similar purpose have been instituted or are pending before or threatened by the Commission; (ix) the Registration Statement and the Prospectus (except for the financial statements, notes thereto and other financial information and statistical data contained therein, as to which no opinion need be rendered), comply as to form in all material respects with the Act and the Rules and Regulations; (x) all descriptions contained in the Registration Statement or the Prospectus of contracts and other documents are accurate and fairly present the information required to be described, and such counsel is familiar with all contracts and other documents referred to in the Registration Statement and the Prospectus or filed as exhibits to the Registration Statement and, to the best knowledge of such counsel, no contract or document of a character required to be summarized or described therein or to be filed as an exhibit thereto is not so summarized, described or filed; (xi) the descriptions contained in the Registration Statement and the Prospectus which purport to summarize the provisions of statutes, rules and regulations are accurate summaries in all respects, and such descriptions fairly present in all respects the information shown, and the descriptions contained in the Registration Statement and the Prospectus that concern matters -18- of law or legal conclusions have been reviewed by such counsel and are correct; (xii) the Stock Escrow Agreement has been duly and validly executed and delivered by each party thereto (other than American Stock Transfer & Trust Company); and (xiii) except for registration under the Act and registration or qualification of the Securities under applicable state or foreign securities or blue sky laws, no authorization, approval, consent or license of any governmental or regulatory authority or agency is necessary in connection with: (A) the authorization, issuance, sale, transfer or delivery of the Securities by the Company; (B) the execution, delivery and performance of this Agreement by the Company or the taking of any action contemplated herein; (C) the issuance of the Representative's Warrant or the Securities issuable upon exercise thereof; or (D) the execution, delivery and performance of this Agreement by the Company or the taking of any action contemplated herein. Such opinion shall also state that such counsel has participated in the preparation of the Registration Statement and the Prospectus, and nothing has come to the attention of such counsel to cause such counsel to have reason to believe that the Registration Statement at the time it became effective contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (except, in the case of both the Registration Statement and the Prospectus, for the financial statements, notes thereto and other financial information and statistical data contained therein, as to which no need be. Such opinion shall also cover such matters incident to the transactions contemplated hereby as you or Representative's Counsel shall reasonably request. In rendering such opinion, Company Counsel may rely as to matters of fact upon certificates of officers of the Company, and of public officials, and may rely as to all matters of law other than the law of the United States or the State of Delaware upon opinions of counsel satisfactory to you, in which case the opinion shall state that they have no reason to believe that you and they are not entitled so to rely. (C) CORPORATE PROCEEDINGS. All corporate proceedings and other legal matters relating to this Agreement, the Registration Statement, the Prospectus and other related matters shall be reasonably satisfactory to or approved by Representative's Counsel, and you shall have received from such counsel a signed opinion, dated as of the First Closing Date, with respect to the validity of the issuance of the Units, the form of the Registration Statement and Prospectus (other than the financial statements and other financial or statistical data contained therein), the execution of this Agreement and other related matters as you may -19- reasonably require. The Company shall have furnished to Representative's Counsel such documents as they may reasonably request for the purpose of enabling them to render such opinion. (D) COMFORT LETTER. Prior to the Effective Date, and again on and as of the First Closing Date, you shall have received a letter from BDO Seidman, LLP, certified public accountants for the Company, substantially in the form approved by you. (E) BRING DOWN. At each of the Closing Dates, (i) the representations and warranties of the Company contained in this Agreement shall be true and correct with the same effect as if made on and as of such Closing Date, and the Company shall have performed all of their obligations hereunder and satisfied all the conditions on their parts to be satisfied at or prior to such Closing Date; (ii) the Registration Statement and the Prospectus shall contain all statements which are required to be stated therein in accordance with the Act and the Rules and Regulations, and shall in all material respects conform to the requirements of the Act and the Rules and Regulations, and neither the Registration Statement nor the Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; (iii) there shall have been, since the respective dates as of which information is given, no material adverse change in the business, property, operations, condition (financial or otherwise), earnings, capital stock, long-term or short-term debt or general affairs of the Company from that set forth in the Registration Statement and the Prospectus, except changes which the Registration Statement and Prospectus indicate might occur after the Effective Date, and the Company shall not have incurred any material liabilities nor entered into any material agreement other than as referred to in the Registration Statement and Prospectus; and (iv) except as set forth in the Prospectus, no action, suit or proceeding shall be pending or threatened against the Company which would be required to be disclosed in the Registration Statement, and no proceedings shall be pending or threatened against the Company before or by any commission, board or administrative agency in the United States or elsewhere, wherein an unfavorable decision, ruling or finding would materially adversely affect the business, property, operations, condition (financial or otherwise), earnings or general affairs of the Company. In addition, you shall have received, at the First Closing Date, a certificate signed by the principal executive officer and by the principal financial officer of the Company, dated as of the First Closing Date, evidencing compliance with the provisions of this Section 4(e). (F) TRANSFER AND WARRANT AGENT. On or before the Effective Date, the Company shall have appointed American Stock Transfer & Trust Company (or other agent mutually acceptable to the Company and you), as its transfer agent and warrant agent to transfer all of the Class A Shares, Class B Shares and Warrants issued in the Offering, as well as to transfer other shares of the Common Stock outstanding from time to time. -20- (G) CERTAIN FURTHER MATTERS. On each Closing Date, Representative's Counsel shall have been furnished with all such other documents and certificates as they may reasonably request for the purpose of enabling them to render their legal opinion to the Underwriter and in order to evidence the accuracy and completeness of any of the representations, warranties or statements, the performance of any of the covenants, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company on or prior to each of the Closing Dates in connection with the authorization, issuance and sale of the Securities as herein contemplated shall be reasonably satisfactory in form and substance to you and to Representative's Counsel. (H) ADDITIONAL CONDITIONS. Upon exercise of the Over-Allotment Option, the Underwriters' obligations to purchase and pay for the Option Units shall be subject (as of the date hereof and as of the Option Closing Date) to the following additional conditions: (i) The Registration Statement shall remain effective at the Option Closing Date, no stop order denying or suspending the effectiveness thereof shall have been issued, and no proceedings for that or any similar purpose shall have been instituted or shall be pending or, to your knowledge or the knowledge of the Company, shall be contemplated by the Commission, and all reasonable requests on the part of the Commission for additional information shall have been complied with to the satisfaction of Representative's Counsel. (ii) On the Option Closing Date there shall have been delivered to you the signed opinion of Company Counsel, dated as of the Option Closing Date, in form and substance satisfactory to Representative's Counsel, which opinion shall be substantially the same in scope and substance as the opinion furnished to you on the First Closing Date pursuant to Section 4(b), except that such opinion, where appropriate, shall cover the Option Units rather than the Firm Units. If the First Closing Date is the same as the Option Closing Date, such opinions may be combined. (iii) All proceedings taken at or prior to the Option Closing Date in connection with the sale and issuance of the Option Units shall be satisfactory in form and substance to you, and you and Representative's Counsel shall have been furnished with all such documents, certificates and opinions as you may request in connection with this transaction in order to evidence the accuracy and completeness of any of the representations, warranties or statements of the Company or its compliance with any of the covenants or conditions contained herein. (iv) On the Option Closing Date there shall have been delivered to you a letter in form and substance satisfactory to you from BDO Seidman, LLP, dated the Option Closing Date and addressed to you, confirming the information in their letter referred to in Section 4(d) as of the date thereof and stating that, without any additional investigation required, nothing has come to their attention during the period from the ending date of their review referred to in such letter to a date not more than five banking days prior to the Option -21- Closing Date which would require any change in such letter if it were required to be dated the Option Closing Date. (v) On the Option Closing Date there shall have been delivered to you a certificate signed by the principal executive officer and by the principal financial or accounting officer of the Company, dated the Option Closing Date, in form and substance satisfactory to Representative's Counsel, substantially the same in scope and substance as the certificate furnished to you on the First Closing Date pursuant to Section 4(e). (I) CANCELLATION. If any of the conditions provided by this Section 4 shall not have been completely fulfilled as of the date indicated, then this Agreement and all obligations of the Underwriters hereunder may be cancelled at, or at any time prior to, either Closing Date by your notifying the Company of such cancellation in writing or by telegram at or prior to the applicable Closing Date. Any such cancellation shall be without liability of the Underwriters to the Company, except as otherwise provided herein. 5. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the Company to sell and deliver the Units and Class B Shares are subject to the following conditions: (A) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement shall have become effective not later than 6:00 p.m. New York time, on the date of this Agreement, or at such later time or on such later date as the Company and you may agree in writing. (B) NO STOP ORDER. On the applicable Closing Date, no stop order denying or suspending the effectiveness of the Registration Statement shall have been issued under the Act or any proceedings therefor initiated or threatened by the Commission. (C) PAYMENT FOR UNITS. On the applicable Closing Date, you shall have made payment, for the several accounts of the Underwriters, of the aggregate Purchase Price for the Units then being purchased, by certified or bank cashier's checks payable in next day funds to the order of the Company. If the conditions to the obligations of the Company provided by this Section 5 have been fulfilled on the First Closing Date but are not fulfilled after the First Closing Date and prior to the Option Closing Date, then only the obligation of the Company to sell and deliver the Option Units upon exercise of the Over-Allotment Option shall be affected. 6. INDEMNIFICATION. -22- (A) INDEMNIFICATION BY THE COMPANY. As used in this Agreement, the term "Liabilities" shall mean any and all losses, claims, damages and liabilities, and actions and proceedings in respect thereof (including without limitation all reasonable costs of defense and investigation and all attorneys' fees) including without limitation those asserted by any party to this Agreement against any other party to this Agreement. The Company hereby indemnifies and holds harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act, from and against all Liabilities, joint or several, to which such Underwriter or such controlling person may become subject, under the Act or otherwise, insofar as such Liabilities arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in (A) the Registration Statement or any amendment thereto, or the Prospectus or any Preliminary Prospectus, or any amendment or supplement thereto, or (B) any "blue sky" application or other document executed by the Company specifically for that purpose, or based upon written information furnished by the Company, filed in any state or other jurisdiction in order to qualify any or all of the Securities under the securities laws thereof (any such application, document or information being herein called a "Blue Sky Application"); or (ii) the omission or alleged omission to state in the Registration Statement or any amendment thereto, or the Prospectus or any Preliminary Prospectus, or any amendment or supplement thereto, or in any Blue Sky Application, a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company shall not be liable in any such case to the extent, but only to the extent, that any such Liabilities arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company through you by or on behalf of any Underwriter specifically for use in the preparation of the Registration Statement or any such amendment thereto, or the Prospectus or any such Preliminary Prospectus, or any such amendment or supplement thereto, or any such Blue Sky Application. The foregoing indemnity shall be in addition to any other liability which the Company may otherwise have. (B) INDEMNIFICATION BY UNDERWRITERS. Each Underwriter, severally and not jointly, hereby indemnifies and holds harmless the Company, each of its directors, each nominee (if any) for director named in the Prospectus, each of its officers who have signed the Registration Statement, and each person, if any, who controls the Company within the meaning of the Act, from and against all Liabilities to which the Company or any such director, nominee, officer or controlling person may become subject under the Act or otherwise, insofar as such Liabilities arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement or any amendment thereto, or the Prospectus or any Preliminary Prospectus, or any amendment or supplement thereto, or (ii) the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such Liabilities arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement or any amendment thereto, or the Prospectus or any -23- Preliminary Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company through you, by or on behalf of such Underwriter, specifically for use in the preparation thereof. In no event shall any Underwriter be liable or responsible for any amount in excess of the compensation received by such Underwriter, in the form of underwriting discounts or otherwise, pursuant to this Agreement or any other agreement contemplated hereby. The foregoing indemnity shall be in addition to any other liability which any Underwriter may otherwise have. (C) PROCEDURE. Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify in writing the indemnifying party of the commencement thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 6. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, subject to the provisions hereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 6 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. The indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party; provided, however, that if the indemnified party is any Underwriter or a person who controls any Underwriter within the meaning of the Act, the fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party, or (ii) the named parties to any such action (including any impleaded parties) include both such Underwriter or such controlling person and the indemnifying party and, in your judgment, it is advisable for such Underwriter or controlling person to be represented by separate counsel (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such Underwriter or such controlling person, it being understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys). No settlement of any action against an indemnified party shall be made without the consent of the indemnified party, which shall not be unreasonably withheld in light of all factors of importance to such indemnified party. -24- 7. CONTRIBUTION. In order to provide for just and equitable contribution under the Act in any case in which (a) any indemnified party makes claims for indemnification pursuant to Section 6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that the express provisions of Section 6 provide for indemnification in such case, or (b) contribution under the Act may be required on the part of any indemnified party, then such indemnified party and each indemnifying party (if more than one) shall contribute to the aggregate Liabilities to which it may be subject, in either such case (after contribution from others) in such proportions that the Underwriters are responsible in the aggregate for that portion of such Liabilities represented by the percentage that the underwriting discount per Unit appearing on the cover page of the Prospectus bears to the public Offering price per Unit appearing thereon, and the Company shall be responsible for the remaining portion; provided, however, that if such allocation is not permitted by applicable law, then the relative fault of the Company and the Underwriters in connection with the statements or omissions which resulted in such Liabilities and other relevant equitable considerations shall also be considered. The relative fault shall be determined by reference to, among other things, whether in the case of an untrue statement of a material fact or the omission to state a material fact, such statement or omission relates to information supplied by the Company or the Underwriters, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriters agree that it would not be just and equitable if the respective obligations of the Company and the Underwriters to contribute pursuant to this Section 7 were to be determined by PRO RATA or PER CAPITA allocation of the aggregate Liabilities (even if the Underwriters were to be treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the first sentence of this Section 7. In addition, the contribution of any Underwriter shall not be in excess of its proportionate share of the portion of such Liabilities for which such Underwriter is responsible. No person guilty of a fraudulent misrepresentation (within the meaning of section 11(f) of the Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. As used in this Section 7, the term "Company" shall include any officer, director or person who controls the Company within the meaning of section 15 of the Act. The Underwriters' obligations under this Section 7 to contribute are several in proportion to their respective underwriting obligations and not joint. If the full amount of the contribution specified in this Section 7 is not permitted by law, then each indemnified party and each person who controls an indemnified party shall be entitled to contribution from each indemnifying party to the full extent permitted by law. The foregoing contribution agreement shall in no way affect the contribution liabilities of any persons having liability under section 11 of the Act other than the Company and the Underwriters. No contribution shall be requested with regard to the settlement of any matter from any party who did not consent to the settlement; provided, however, that such consent shall not be unreasonably withheld in light of all factors of importance to such party. -25- 8. COSTS AND EXPENSES. (A) CERTAIN COSTS AND EXPENSES. Whether or not this Agreement becomes effective or the sale of the Units to the Underwriters is consummated, the Company shall pay all costs and expenses incident to the issuance, offering, sale and delivery of the Units and the performance of its obligations under this Agreement, including without limitation: (i) all fees and expenses of the Company's legal counsel and accountants; (ii) all costs and expenses incident to the preparation, printing, filing and distribution of the Registration Statement (including the financial statements contained therein and all exhibits and amendments thereto), each Preliminary Prospectus and the Prospectus, each as amended or supplemented, this Agreement and the other agreements and documents referred to herein, each in such quantities as you shall deem necessary; (iii) all fees of NASD required in connection with the filing required by NASD to be made by the Representative with respect to the Offering; (iv) all expenses, including fees (but not in excess of the amount set forth in Section 3(b)) and disbursements of Representative's Counsel in connection with the qualification of the Securities under the "blue sky" laws which you shall designate; (v) all costs and expenses of printing the respective certificates representing the Shares and the Warrants; (vi) the expense of placing one or more "tombstone" advertisements or promotional materials as directed by you (provided, however, that the aggregate amount thereof shall not exceed $10,000); (vii) all costs and expenses of the Company and its employees (but not of the Representative or its employees) associated with due diligence meetings and presentations; (viii) all costs and expenses associated with the preparation of a seven to ten minute professional video presentation concerning the Company, its products and its management for broker due diligence purposes; (ix) any and all taxes (including without limitation any transfer, franchise, capital stock or other tax imposed by any jurisdiction) on sales of the Units to the Underwriters hereunder; and (x) all costs and expenses incident to the furnishing of any amended Prospectus or any supplement to be attached to the Prospectus as required by Sections 3(a) and 3(d), except as otherwise provided by said Sections. (B) REPRESENTATIVE'S EXPENSE ALLOWANCE. In addition to the expenses described in Section 8(a), the Company shall on the First Closing Date pay to you the balance of a non-accountable expense allowance (which shall include fees of Representative's Counsel exclusive of the fees referred to in Section 3(b)) of $294,000 (that being an amount equal to 3 percent of the gross proceeds received upon sale of the Firm Units), of which $20,000 has been paid to you prior to the date hereof. In the event that the Over-Allotment Option is exercised, then the Company shall on the Option Closing Date pay to you an additional amount equal to 3 percent of the gross proceeds received upon sale of any of the Option Units. In the event that the transactions contemplated hereby fail to be consummated for any reason, then you shall return to the Company that portion of the $20,000 heretofore paid by the Company to the extent that it has not been utilized by you in connection with the Offering for accountable out-of-pocket expenses; provided, however, that if such failure is due to a breach by the Company of any covenant, representation or warranty contained herein or because any other condition to the Underwriters' obligations hereunder required to -26- be fulfilled by the Company is not fulfilled, then the Company shall be liable for your accountable out-of-pocket expenses to the full extent thereof (with credit given to the $20,000 paid). (C) NO FINDERS. No person is entitled either directly or indirectly to compensation from the Company, the Underwriters or any other person for services as a finder in connection with the Offering, and the Company hereby indemnify and hold harmless the Underwriters, and the Underwriters hereby indemnify and hold harmless the Company from and against all Liabilities, joint or several, to which the indemnified party may become subject insofar as such Liabilities arise out of or are based upon the claim of any person (other than an employee of the party claiming indemnity) or entity that he or it is entitled to a finder's fee in connection with the Offering by reason of such person's or entity's influence or prior contact with the indemnifying party. 9. SUBSTITUTION OF UNDERWRITERS. (A) SUBSTITUTION. If any Underwriter defaults in its obligation to purchase the numbers of Units which it has agreed to purchase under this Agreement, you shall be obligated to purchase all of the Units not purchased by the defaulting Underwriter unless such purchase shall cause you to be in violation of the net capital requirements of Rule 15c3-1 of the Exchange Act, in which case you, and any other Underwriters satisfactory to you who so agree, shall have the right, but shall not be obligated, to purchase (in such proportions as may be agreed upon among them) all of the Units. If you or the other Underwriters satisfactory to you do not elect to purchase the Units which the defaulting Underwriter or Underwriters agreed but failed to purchase, then this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company, except for (i) the payment by the Company of expenses as provided by Section 8(a), (ii) the payment by the Company of accountable expenses as provided by Section 8(b), and (iii) the indemnity and contribution agreements of the Company and the Underwriters provided by Sections 6 and 7. (B) FURTHER MATTERS. Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have for damages caused by its default. If the other Underwriters satisfactory to you are obligated or agree to purchase the Units of a defaulting Underwriter, either you or the Company may postpone the First Closing Date for up to seven banking days in order to effect any changes that may be necessary in the Registration Statement, any Preliminary Prospectus or the Prospectus or in any other document or agreement, and to file promptly any amendments to the Registration Statement, or any amendments or supplements to any Preliminary Prospectus or the Prospectus, which in your opinion may thereby be made necessary. -27- 10. EFFECTIVE DATE. The Agreement shall become effective upon its execution, except that you may, at your option, delay its effectiveness until 10:00 a.m., New York time, on the first full business day following the Effective Date, or at such earlier time after the Effective Date as you in your discretion shall first commence the initial public Offering by the Underwriters of any of the Units. The time of the initial public Offering shall mean the time of release by you of the first newspaper advertisement with respect to the Units, or the time when the Units are first generally offered by you to dealers by letter or telegram, whichever shall first occur. This Agreement may be terminated by you at any time before it becomes effective as provided above, except that the provisions of Sections 6, 7, 8, 13, 14, 15 and 16 shall remain in effect notwithstanding such termination. 11. TERMINATION. (A) GROUNDS FOR TERMINATION. This Agreement, except for Sections 6, 7, 8, 13, 14, 15 and 16, may be terminated at any time prior to the First Closing Date, and the Over-Allotment Option, if exercised, may be cancelled at any time prior to the Option Closing Date, by you if in your sole judgment it is impracticable to offer for sale or to enforce contracts made by the Underwriters for the resale of the Units agreed to be purchased hereunder, by reason of: (i) the Company having sustained a material loss, whether or not insured, by reason of fire, earthquake, flood, accident or other calamity, or from any labor dispute or court or government action, order or decree; (ii) trading in securities on the New York Stock Exchange or the American Stock Exchange having been suspended or limited; (iii) material governmental restrictions having been imposed on trading in securities generally which are not in force and effect on the date hereof; (iv) a banking moratorium having been declared by federal or New York State authorities; (v) an outbreak or significant escalation of major international hostilities or other national or international calamity having occurred; (vi) the passage by the Congress of the United States or by any state legislature, of any act or measure, or the adoption of any order, rule or regulation by any governmental body or any authoritative accounting institute or board, or any governmental executive, which is reasonably believed by you likely to have a material adverse effect on the business, property, operations, condition (financial or otherwise) or earnings of the Company; (vii) any material adverse change in the financial or securities markets beyond normal fluctuations in the United States having occurred since the date of this Agreement; or (viii) any material adverse change having occurred since the respective dates for which information is given in the Registration Statement and Prospectus, in the business, property, operations, condition (financial or otherwise), earnings or business prospects of the Company, whether or not arising in the ordinary course of business. (B) NOTIFICATION. If you elect to prevent this Agreement from becoming effective or to terminate this Agreement as provided by this Section 11 or by Section 10, the Company shall be promptly notified by you, by telephone or telegram, confirmed by letter. -28- 12. REPRESENTATIVE'S WARRANT. On the First Closing Date, the Company shall issue and sell to you, for a total purchase price of $5.00, and upon the terms and conditions set forth in the form of Representative's Warrant filed as an exhibit to the Registration Statement, a warrant entitling you to purchase 80,000 Units and 15,000 Class B Shares (the "Representative's Warrant"). In the event of conflict in the terms of this Agreement and the Representative's Warrant, the terms and conditions of the Representative's Warrant shall control. 13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. The respective indemnities, agreements, representations, warranties, covenants and other statements of the Company and the Underwriters set forth in or made pursuant to this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of any other party, and shall survive delivery of and payment for the Units and the termination of this Agreement. The Company hereby indemnifies and holds harmless the Underwriters from and against all Liabilities, joint or several, to which the Underwriters may become subject insofar as such Liabilities arise out of or are based upon the breach or failure of any representation, warranty or covenant of the Company contained in this Agreement. 14. NOTICES. All communications hereunder shall be in writing and, except as otherwise expressly provided herein, if sent to you, shall be mailed, delivered or telegraphed and confirmed to you at H.J. Meyers & Co., Inc., 1895 Mt. Hope Avenue, Rochester, New York 14620, with a copy sent to James M. Jenkins, Esq., Harter, Secrest & Emery, 700 Midtown Tower, Rochester, New York 14604; or if sent to the Company, shall be mailed, delivered, or telegraphed and confirmed to it at North Atlantic Acquisition Corp., 850 Third Avenue, 10th Floor, New York, New York 10022, with a copy sent to W. Raymond Felton, Esq., Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, P.O. Box 5600, Woodbridge, New Jersey 07095-0988. 15. PARTIES IN INTEREST. This Agreement is made solely for the benefit of the Underwriters, the Company and, to the extent expressed, any person controlling the Company or an Underwriter, as the case may be, and the directors of the Company, nominees for directors of the Company (if any) named in the Prospectus, officers of the Company who have signed the Registration Statement, and their respective executors, administrators, successors and assigns; and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include any purchaser, as such, from an Underwriter of the Units. -29- 16. APPLICABLE LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely within such State. 17. COUNTERPARTS. This Agreement may be executed in two or more counterpart copies, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return this Agreement, whereupon it will become a binding agreement between the Company and the Underwriters in accordance with its terms. Yours very truly, NORTH ATLANTIC ACQUISITION CORP. _________________________________ David J. Mitchell Chairman of the Board and Chief Executive Officer The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. H.J. MEYERS & CO., INC. AS REPRESENTATIVE OF THE SEVERAL UNDERWRITERS NAMED IN SCHEDULE I HERETO By:______________________________ Its -30- SCHEDULE I UNDERWRITING AGREEMENT DATED [EFFECTIVE DATE] NUMBER OF CLASS B NUMBER OF UNITS SHARES TO BE UNDERWRITER TO BE PURCHASED PURCHASED H.J. Meyers & Co., Inc. 800,000 180,000 TOTAL _________ _________ 800,000 180,000 -31- EX-3.1 3 EXH 3.1:CERTIFICATE OF INCORPORATION Exhibit 3.1 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF ORION ACQUISITION CORP. I TO: Secretary of State State of Delaware Pursuant to the provisions of Section 242 of the General Corporation Law of the State of Delaware, the undersigned corporation executes the following Certificate of Amendment to its Certificate of Incorporation: 1. The name of the corporation is Orion Acquisition Corp. I. 2. The following amendments to the Certificate of Incorporation was approved by the directors and thereafter duly adopted by the stockholders of the corporation on the day of June, 1997. FIRST: RESOLVED, that Article 1 of the Certificate of Incorporation be and is hereby amended to read as follows: The name of the Corporation is North Atlantic Acquisition Corp. SECOND: RESOLVED, that Article 4 of the Certificate of Incorporation be and is hereby amended to read as follows: 4. The total number of shares of all classes of stock which the Company shall have the authority to issue is 11,250,000, of which 10,250,000 shall be shares of Common Stock, par value $.01 per shares and 1,000,000 shall be shares of Preferred Stock, par value $.01 per share. The relative rights, preferences and limitations of the shares of capital stock shall be as follows: COMMON STOCK. The Company's Common Stock shall be divided into two classes, designated as Class A and Class B Exchangeable. Of the 10,250,000 shares of Common Stock, 10,000,000 shall be designated as Class A Stock and 250,000 shall be designated as Class B Exchangeable Stock. A. CLASS A. The holders of the Class A Stock shall have the following rights: VOTING. Each share of Class A shall be entitled to one vote per share with respect to the election of directors and any other matter submitted to shareholders. REDEMPTION. In the event that a Business Combination defined as a merger, exchange or purchase of capital stock, asset acquisition or other business combination with an operating business, but not be limited to any particular location or industry ("Business Combination") is not consummated within 18 months of the effective date of the prospectus offering the Class A Stock for sale to the public, (or 24 months from the effective date of such prospectus if, prior to the expiration of the 18-month period, the Company has become a party to a letter of intent or a definitive agreement to effect a Business Combination ("Extension Criteria")), the Company shall submit a proposal for a vote by the holders of Class A Stock, pursuant to which the holders of Class A Stock will have the option to receive an amount in redemption of the shares, equal to the amounts in the interest bearing escrow account which will be approximately equal to the initial purchase offering price per Unit of $10.00 per share. B. CLASS B. The holders of the Class B Exchangeable Stock shall have the following rights: VOTING. Each share of Class B Exchangeable Stock shall be entitled to two votes per share in the election of directors and on any other matter presented to the shareholders, except that the holders of Class B Stock shall not be entitled to vote with respect to the redemption of Class A Stock described above. EXCHANGE PRIVILEGE. (a) The Class B Exchangeable Stock is exchangeable into two Units, each consisting of one share of the Class A Stock and one Class A Purchase Warrant entitling the holder to purchase one share of Class A Common Stock at a purchase price of $9.00 per share, subject to adjustment, 90 days after the close of business on the first business day after the completion of a Business Combination, or any earlier date on or after the date of a Business Combination that H.J. Meyers & Co., Inc., as underwriter in the public offering of the Common Stock of the Company, in its sole discretion so elects. This conversion privilege shall expire at 5:00 p.m., New York City time, ont he first anniversary of the date of the close of business of a Business Combination. (b) Following any redemption of Class A Stock in the event that a Business Combination is not consummated within 18 months from the effective date of the prospectus offering the Class A Stock for sale in the public market (or 24 months if the Extension Criteria is satisfied), each share of Class B Exchangeable Stock shall be automatically exchanged for two shares of Class A Stock without any action by the holders of Class B Stock. The shares of Class A Stock received in such exchange will not be eligible for the redemption described above. (c) Upon the exchange of Class B Stock for Class A Stock, whether pursuant to the consummation of a Business Combination or the redemption of the Class A Stock, there will be only one class of Common Stock of the Company. At such time the Company shall file an amendment to its Certificate of Incorporation evidencing the one class of Common Stock, however, failure to file such certificate shall have no effect on the existence of only one class of Common Stock pursuant to this provision of the Certificate of Incorporation. C. DIVIDENDS. The holders of Class A and Class B Exchangeable Stock shall be entitled to receive dividends when, as and if declared by the Board of Directors out of the funds legally available therefor. PREFERRED STOCK. One hundred (100) shares of the Preferred Stock shall be designated as "Series A Convertible Preferred Stock" and shall not be entitled to vote with respect to the election of directors or on any other matter submitted to stockholders, unless required by law or upon conversion to common stock, as provided below. CONVERSION PRIVILEGE. The Preferred Stock is convertible into shares of the common stock of the Company at any time after the close of business on the first business day after the completion of a Business Combination defined as a merger, exchange or purchase of capital stock, asset acquisition or other business combination with an operating business, but not be limited to any particular location or industry. REDEMPTION PRIVILEGE. The Preferred Stock is redeemable at the option of the holder(s) thereof upon notice from the Company to the holder(s) thereof that the Company has not and will not complete a Business Combination, and for a period of thirty (30) days following the date of such notice. The redemption price shall be the price originally paid to the Company for such Preferred Stock, as established by the Company's Board of Directors. In the event of a liquidation or dissolution of the Company, the rights of the holders of the Company's Common Stock are subordinate to the rights of the holders of the Preferred Stock hereunder. 3. The number of shares outstanding at the time of the adoption of the amendment was 106,000. The total number of shares entitled to vote thereon was 106,000. 4. The number of shares voting for and against such amendment is as follows: Number of Shares Number of Shares Voting for Amendment Voting Against Amendment -------------------- ------------------------ 106,000 0 5. This Certificate of Amendment shall be effective as of the date of filing. Dated this _________ day of June, 1997. ORION ACQUISITION CORP. I BY:_____________________________ David J. Mitchell, Chief Executive Officer EX-4.1 4 EXH 4.1:FORM OF CLASS A COMMON STOCK CERT Exhibit 4.1 Exhibit 4.4 a NORTH ATLANTIC ACQUISITION CORP. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER, UPON REQUEST AND WITHOUT SEE REVERSE SIDE FOR CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES CERTAIN DEFINITIONS AND LIMITATIONS OF THE SHARES OF EACH CLASS AUTHORIZED TO BE ISSUED. CUSIP
This is to Certify that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS B COMMON STOCK, PAR VALUE $0.01, OF NORTH ATLANTIC ACQUISITION CORP. a corporation incorporated under the laws of the State of Delaware. The shares evidenced by this certificate are transferable only on the stock transfer books of NORTH ATLANTIC ACQUISITION CORP. by the holder hereof, in person or by attorney, upon surrender of this certificate properly endorsed. IN WITNESS WHEREOF NORTH ATLANTIC ACQUISITION CORP. has caused this certificate to be executed by the signatures of its duly authorized officers and has caused its facsimile seal to be hereunto affixed. Dated: [1995 DELAWARE NORTH ATLANTIC ACQUISITION CORP. CORPORATE SEAL] Secretary Chairman of the Board and Chief Executive Officer Countersigned and Registered: AMERICAN STOCK TRANSFER & TRUST COMPANY By Transfer Agent and Registrar Authorized Officer NORTH ATLANTIC ACQUISITION CORP. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - .......... Custodian ........... (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors JT TEN - as joint tenants with right Act .......................... of survivorship and not as (State) tenants in common
Additional abbreviations may also be used though not in the above list. For value received, _________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE __________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE. ________________________________________________________________________________ ________________________________________________________________________________ _________________________________________________________________________ Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint ________________________________________________________________________ Attorney to transfer the said Shares on the books of the within named corporation with full power of substitution in the premises. Dated: ___________________ In the presence of __________________________________________________ Signature __________________________________________________ Signature NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER. EX-4.2 5 EXH 4.2:FORM OF WARRANT AGENCY AGREE Exhibit 4.2 Warrant Agency Agreement Agreement, dated this ____ day of _________________, 1997, between NORTH ATLANTIC ACQUISITION CORP., a Delaware corporation (the "Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, a New York corporation, as Warrant Agent (the "Warrant Agent"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, in connection with (i) the offering to the public of 800,000 Units (the "Units"), each unit consisting of one share of the Company's Class A Common Stock, $.01 par value (the "Class A Stock"), one Class A Common Stock Purchase Warrant (the "Class A Warrants" or "Warrants") and 180,000 shares of the Class B Exchangeable Common Stock, $.01 par value (the "Class B Stock"), each Class A Warrant entitling the registered holder thereof to purchase one (1) share of Common Stock and each Class B Warrant entitling the registered holder thereof to purchase one (1) Unit; (ii) the over allotment option granted to the underwriter to purchase up to an additional 120,000 Units and 22,500 shares of Class B Stock (the "Over allotment Options"); and (iii) the sale to H.J. Meyers & Co., Inc. (the "Representative") and their representatives, successors and assigns of warrants (the "Representative's Warrants") to purchase 80,000 Units and 15,000 shares of Class B Stock, the Company will issue up to 1,500,000 Class A Warrants (subject to increase as provided in the Representative's Warrant Agreement) and up to 250,000 shares of Class B Stock; and WHEREAS, the Company desires to provide for the issuance of certificates representing the Warrants; and WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer and exchange of certificates representing the Warrants and the exercise of the Warrants. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth and for the purpose of defining the terms and provisions of the Warrants and the certificates representing the Warrants and the respective rights and obligations thereunder of the Company, the Representatives, the holders of certificates representing the Warrants and the Warrant Agent, the parties hereto agree as follows: DEFINITIONS. As used herein, the following terms shall have the following meanings, unless the context shall otherwise require: (a) "Common Stock" shall mean stock of the Company of any class, whether now or hereafter authorized, which has the right to participate in the voting and in the distribution of earnings and assets of the Company without limit as to amount or percentage. (b) "Corporate Office" shall mean the office of the Warrant Agent (or its successor) at which at any particular time its principal business in New York, shall be administered, which office is located on the date hereof at 40 Wall Street, 46th Floor, New York, NY 10005. (c) "Exercise Date" shall mean, subject to the provisions of Section 4(b) hereof as to any Warrant, the date on which the Warrant Agent shall have received both (i) the Warrant Certificate representing such Warrant, with the exercise form thereon duly executed by the Registered Holder hereof or his attorney duly authorized in writing, and (ii) payment in cash or by check made payable to the Warrant Agent for the account of the Company, of the amount in lawful money of the United States of America equal to the applicable Purchase Price. (d) "Initial Warrant Exercise Date" shall mean the date the Company consummates a merger, exchange of capital, asset acquisition or other business combination (a "Business Combination") with an operating business. (e) "Initial Warrant Redemption Date" shall mean the date that the Company consummates a Business Combination. (f) "Applicable Purchase Price" shall mean, subject to modification and adjustment as provided in Section 7, $9.00 for the Class A Warrants, and further subject to the Company's right, in its sole discretion, to decrease the Applicable Purchase Price for a period of not less than 30 days on not less than 30 days' prior written notice to the Registered Holders. (g) "Registered Holder" shall mean the person in whose name any certificate representing the Warrants shall be registered on the books maintained by the Warrant Agent pursuant to Section 6. (h) "Registration Statement" shall mean the Registration on Form SB-2 filed by the Company with the Securities and Exchange Commission (the "SEC") on December 20, 1995, as subsequently amended and declared effective by the SEC with respect to the offering of the Units, the Common Stock and Warrants. (i) "Subsidiary" or "Subsidiaries" shall mean any corporation or corporations, as the case may be, of which stock having ordinary power to elect a majority of the Board of Directors of such corporation (regardless of whether or not at the time stock of any other class or classes of such corporation shall have or may have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned by the Company or by one or more Subsidiaries, or by the Company and one or more Subsidiaries. -2- (j) "Transfer Agent" shall mean American Stock Transfer & Trust Company or its authorized successor. (k) "Underwriting Agreement" shall mean the Underwriting Agreement, dated [EFFECTIVE DATE], 1997, between the Company and the Representative, as representative of the several underwriters listed therein, relating to the purchase by the several Underwriters for resale to the public up to 920,000 Units and 202,500 shares of Class B Stock. (l) "Representative's Warrant Agreement" shall mean the agreement, dated as of [CLOSING DATE], 1997, between the Company and the Representatives relating to and governing the terms and provisions of the Representative's Warrants. (m) "Warrant Certificate" shall mean a certificate representing each of the Class A Warrants substantially in the form annexed hereto as Exhibit A. (n) "Warrant Expiration Date" shall mean, unless the Warrants are redeemed as provided in Section 8 hereof prior to such date, 5:00 p.m. (New York time) on [EFFECTIVE DATE], 2002, or, if such date shall in the State of New York be a holiday or a day on which banks are authorized to close, then 9:00 a.m. (New York time) on the next following day which in the State of New York is not a holiday or a day on which banks are authorized to close, subject to the Company's right, prior to the Warrant Expiration Date, in its sole discretion, to extend such Warrant Expiration Date on five business days prior written notice to the Registered Holders. (o) "Warrant Agent" shall mean American Stock Transfer & Trust Company or its authorized successor. SECTION 1 WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES. (a) Each Class A Warrant shall initially entitle the Registered Holder of the Warrant Certificate representing such Warrant to purchase at the Applicable Purchase Price therefor from the Initial Warrant Exercise Date until the Warrant Expiration Date one share of Common Stock upon the exercise thereof, subject to modification and adjustment as provided in Section 7. (b) Upon execution of this Agreement, Warrant Certificates representing 800,000 Class A Warrants to purchase up to an aggregate of 1,120,000 shares of Common Stock (subject to modification and adjustment as provided in Section 7) shall be executed by the Company and delivered to the Warrant Agent. (c) Upon exercise of the Over-allotment Option, in whole or in part, Warrant Certificates representing up to 120,000 Class A Warrants to an aggregate of 168,000 shares -3- of Common Stock (subject to modification and adjustment as provided in Section 7) shall be executed by the Company and delivered to the Warrant Agent. (d) Upon exercise of the Representative's Warrants as provided therein, Warrant Certificates representing up to 80,000 Class A Warrants to purchase up to an aggregate of 112,000 of Common Stock (subject to modification and adjustment as provided in Section 7 hereof and in the Representative's Warrant Agreement) shall be countersigned, issued and delivered by the Warrant Agent upon written order of the Company signed by its President or a Vice President and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary. (e) From time to time, up to the applicable Warrant Expiration Date, as the case may be, the Warrant Agent shall countersign and deliver Warrant Certificates in required denominations of one or whole number multiples thereof to the person entitled thereto in connection with any transfer or exchange permitted under this Agreement. Except as provided in Section 6 hereof, no Warrant Certificates shall be issued except: (i) Warrant Certificates initially issued hereunder; (ii) Warrant Certificates issued upon any transfer or exchange of Warrants; (iii) Warrant Certificates issued in replacement of lost, stolen, destroyed or mutilated Warrant Certificates pursuant to Section 6; (iv) Warrant Certificates issued pursuant to the Representative's Warrant Agreement (including Warrants in excess of the Representative's Warrants issued as a result of the anti dilution provisions contained in the Representative's Warrant Agreement); and (v) at the option of the Company, Warrant Certificates in such form as may be approved by its Board of Directors, to reflect any adjustment or change in the Applicable Purchase Price, the number of shares of Common Stock purchasable upon exercise of the Warrants or the Redemption Price therefor made pursuant to Section 7 hereof. SECTION 2 FORM AND EXECUTION OF WARRANT CERTIFICATES. (a) The Warrant Certificates shall be substantially in the form annexed hereto as Exhibit A (the provisions of which are hereby incorporated herein) and may have such letters, numbers or other marks of identification or designation and such legends, summaries or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Warrants may be listed, or to conform to usage. The Warrant Certificates shall be dated the date of issuance thereof (whether upon initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen or destroyed Warrant Certificates). (b) Warrant Certificates shall be executed on behalf of the Company by its President or any Vice President and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary, by manual signatures or by facsimile signatures printed thereon, and -4- shall have imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer of the Company before the date of issuance of the Warrant Certificates or before countersignature by the Warrant Agent and issue and delivery thereof, such Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent, issued and delivered with the same force and effect as though the person who signed such Warrant Certificates had not ceased to be such officer of the Company. SECTION 3 EXERCISE. (a) Warrants in denominations of one or whole number multiples thereof may be exercised commencing at any time on or after the Initial Warrant Exercise Date, but not after the applicable Warrant Expiration Date, upon the terms and subject to the conditions set forth herein (including the provisions set forth in Sections 4 and 8 hereof and in the applicable Warrant Certificate). A Warrant shall be deemed to have been exercised immediately prior to the close of business on the Exercise Date, provided that the Warrant Certificate representing such Warrant, with the exercise form thereon duly executed by the Registered Holder thereof or his attorney duly authorized in writing, together with payment in cash or by check made payable to the Warrant Agent for the account of the Company, of an amount in lawful money of the United States of America equal to the Applicable Purchase Price has been received in good funds by the Warrant Agent. The person entitled to receive the securities deliverable upon such exercise shall be treated for all purposes as the holder of such securities as of the close of business on the Exercise Date. If Warrants in denominations other than one or whole number multiples thereof shall be exercised at one time by the same Registered Holder, the number of full shares of Common Stock which shall be issuable upon exercise thereof shall be computed on the basis of the aggregate number of full shares of Common Stock issuable upon such exercise. As soon as practicable on or after the Exercise Date and in any event within three business days after such date, if any Warrants have been exercised, the Warrant Agent on behalf of the Company shall cause to be issued to the person or persons entitled to receive the same a Common Stock certificate or certificates for the shares of Common Stock and Class A Warrants Certificates, if applicable, deliverable upon such exercise, and the Warrant Agent shall deliver the same to the person or persons entitled thereto. Upon the exercise of any Warrants, the Warrant Agent shall promptly notify the Company in writing of such fact and of the number of securities delivered upon such exercise and, subject to subsection (b) below, shall cause all payments of an amount in cash or by check made payable to the order of the Company, equal to the Applicable Purchase Price, to be deposited promptly in the Company's bank account. (b) At any time upon the exercise of any Warrants after the date hereof, the Warrant Agent shall, on a daily basis, within two business days after such exercise, notify the Representatives or their successors or assigns of the exercise of any such Warrants and shall commencing one (1) year from the date hereof, on a weekly basis (subject to collection of -5- funds constituting the tendered Applicable Purchase Price, but in no event later than five business days after the last day of the calendar week in which such funds were tendered), remit to the Representatives an amount equal to 10% of the Exercise Price for each Warrant being then exercised which was solicited by the Representatives or one of the underwriters participating in this offering, unless the Representatives shall have notified the Warrant Agent that the payment of such amount with respect to such Warrant is violative of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the rules and regulations of the National Association of Securities Dealers, Inc. ("NASD") or applicable state securities or "blue sky" laws, or the Warrants are those underlying the Representative's Warrants, in which event, the Warrant Agent shall have to pay such amount to the Company; provided, that the Warrant Agent shall not be obligated to pay any amounts pursuant to this Section 3(b) during any week that such amounts payable are less than $ 1,000 and the Warrant Agent's obligation to make such payments shall be suspended until the amount payable aggregates $ 1,000, and provided further, that, in any event, any such payment (regardless of amount) shall be made not less frequently than monthly. (c) The Company shall not be obligated to issue any fractional share interests or fractional warrant interests upon the exercise of any Warrant or Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of fractional interests. Any fraction equal to or greater than one-half shall be rounded up to the next full share or Warrant, as the case may be, any fraction less than one-half shall be eliminated. SECTION 4 RESERVATION OF SHARES: LISTING: PAYMENT OF TAXES: ETC. (a) The Company covenants that it will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issue upon exercise of Warrants, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of the Warrants shall, at the time of delivery thereof, be duly and validly issued and fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof, and that upon issuance such shares shall be listed on each securities exchange, if any, on which the other shares of outstanding Common Stock of the Company are then listed. (b) The Company covenants that if any securities to be reserved for the purpose of exercise of Warrants hereunder require registration with, or approval of, any governmental authority under any federal securities law before such securities may be validly issued or delivered upon such exercise, then the Company will file a registration statement under the federal securities laws or a post effective amendment, use its best efforts to cause the same to become effective, keep such registration statement current while any of the Warrants are outstanding and deliver a prospectus which complies with Section 10(a)(3) of the Securities Act of 1933, as amended (the "Act"), to the Registered Holder exercising the Warrant -6- (except, if in the opinion of counsel to the Company, such registration is not required under the federal securities law or if the Company receives a letter from the staff of the Securities and Exchange Commission (the "Commission") stating that it would not take any enforcement action if such registration is not effected). The Company will use best efforts to obtain appropriate approvals or registrations under state "blue sky" securities laws. With respect to any such securities, however, Warrants may not be exercised by, or shares of Common Stock issued to, any Registered Holder in any state in which such exercise would be unlawful. (c) The Company shall pay all documentary, stamp or similar taxes and other governmental charges that may be imposed with respect to the issuance of Warrants, or the issuance or delivery of any shares of Common Stock upon exercise of the Warrants; provided, however, that if shares of Common Stock are to be delivered in a name other than the name of the Registered Holder of the Warrant Certificate representing any Warrant being exercised, then no such delivery shall be made unless the person requesting the same has paid to the Warrant Agent the amount of transfer taxes or charges incident thereto, if any. (d) The Warrant Agent is hereby irrevocably authorized as the Transfer Agent to requisition from time to time certificates representing shares of Common Stock or other securities required upon exercise of the Warrants, and the Company will comply with all such requisitions. SECTION 5 EXCHANGE AND REGISTRATION OF TRANSFER. (a) Warrant Certificates may be exchanged for other Warrant Certificates representing an equal aggregate number of Warrants or may be transferred in whole or in part. Warrant Certificates to be so exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and the Company shall execute and the Warrant's Agent shall countersign, issue and deliver in exchange therefor the Warrant Certificate or Certificates which the Registered Holder making the exchange shall be entitled to receive. (b) The Warrant Agent shall keep, at such office, books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates and the transfer thereof Upon due presentment for registration of transfer of any Warrant Certificate at such office, the Company shall execute and the Warrant Agent shall issue and deliver to the transferee or transferees a new Warrant Certificate or Certificates representing an equal aggregate number of Warrants. (c) With respect to any Warrant Certificates presented for registration of transfer, or for exchange or exercise, the subscription or exercise form, as the case may be, on the reverse thereof shall be duly endorsed or be accompanied by a written instrument or instruments of transfer and subscription, in form satisfactory to the Company and the -7- Warrant Agent, duly executed by the Registered Holder thereof or his attorney duly authorized in writing. (d) No service charge shall be made for any exchange or registration of transfer of Warrant Certificates. However, the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. (e) All Warrant Certificates surrendered for exercise or for exchange shall be promptly canceled by the Warrant Agent. (f) Prior to due presentment for registration or transfer thereof, the Company and the Warrant Agent may deem and treat the Registered Holder of any Warrant Certificate as the absolute owner thereof of each Warrant represented thereby (notwithstanding any notations of ownership or writing thereon made by anyone other than the Company or the Warrant Agent) for all purposes and shall not be affected by any notice to the contrary. SECTION 6 LOSS OR MUTILATION. Upon receipt by the Company and the Warrant Agent of evidence satisfactory to them of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate and (in the case of loss, theft or destruction) of indemnity satisfactory to them, and (in case of mutilation) upon surrender and cancellation thereof, the Company shall execute and the Warrant Agent shall countersign and deliver in lieu thereof a new Warrant Certificate representing an equal aggregate number of Warrants. Applicants for a substitute Warrant Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Warrant Agent may prescribe. SECTION 7 ADJUSTMENT OF APPLICABLE PURCHASE PRICE AND NUMBER OF SHARES OF COMMON STOCK DELIVERABLE. (a) (i) Except as hereinafter provided, in the event the Company shall, at any time or from time to time after the date hereof, issue any shares of Common Stock as a stock dividend to the holders of Common Stock, or subdivide or combine the outstanding shares of Common Stock into a greater or lesser number of shares (any such issuance, subdivision or combination being herein called a "Change of Shares"), then, and thereafter upon each further Change of Shares, the Applicable Purchase Price for the Warrants (whether or not the same shall be issued and outstanding) in effect immediately prior to such Change of Shares shall be changed, as to each class of Warrants, to a price (including any applicable fraction of a cent to the nearest cent) determined by dividing (i) the sum of (a) the total number of shares of Common Stock outstanding immediately prior to such Change of Shares, multiplied by the Applicable Purchase Price in effect immediately prior to such Change of Shares, and (b) the consideration, if any, received by the Company upon such issuance, subdivision or combination by (ii) the total number of shares of Common Stock outstanding immediately -8- after such Change of Shares; provided, however, that in no event shall the Applicable Purchase Price be adjusted pursuant to this computation to an amount in excess of the Applicable Purchase Price in effect immediately prior to such computation, except in the case of a combination of outstanding shares of Common Stock. For the purposes of any adjustment to be made in accordance with this Section 7(a) the following provisions shall be applicable: (A) Shares or equivalents of Common Stock issuable by way of dividend or other distribution on any stock of the Company shall be deemed to have been issued immediately after the opening of business on the day following the record date for the determination of shareholders entitled to receive such dividend or other distribution and shall be deemed to have been issued without consideration. (B) The reclassification of securities of the Company other than shares of Common Stock into securities including shares of Common Stock shall be deemed to involve the issuance of such shares of Common Stock for a consideration other than cash immediately prior to the close of business on the date fixed for the determination of security holders entitled to receive such shares, and the value of the consideration allocable to such shares of Common Stock shall be determined in good faith by the Board of Directors of the Company on the basis of a record of values of similar property or services. (C) The number of shares of Common Stock at any one time outstanding shall be deemed to include the aggregate maximum number of shares issuable (subject to readjustment upon the actual issuance thereof) upon the exercise of options, rights or warrants and upon the conversion or exchange of convertible or exchangeable securities. (b) Upon each adjustment of the Applicable Purchase Price pursuant to this Section 7, the number of shares of Common Stock purchasable upon the exercise of each Warrant shall be the number derived by multiplying the number of shares of Common Stock purchasable immediately prior to such adjustment by the Applicable Purchase Price in effect prior to such adjustment and dividing the product so obtained by the applicable adjusted Purchase Price. (c) In case of any reclassification or change of outstanding shares of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a Subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification or change of the then outstanding shares of Common Stock or other capital stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of subdivision or combination)) or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, then, as a condition of such reclassification, change, -9- consolidation, merger, sale or conveyance, the Company, or such successor or purchasing corporation, as the case may be, shall make lawful and adequate provision whereby the Registered Holder of each Warrant then outstanding shall have the right thereafter to receive on exercise of such Warrant the kind and amount of securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of securities issuable upon exercise of such Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance and shall forthwith file at the Corporate Office of the Warrant Agent a statement signed by its President or a Vice President and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary evidencing such provision. Such provisions shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 7(a) and (b). The above provisions of this Section 7(c) shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. (d) Irrespective of any adjustments or changes in the Applicable Purchase Price or the number of shares of Common Stock purchasable upon exercise of the Warrants, the Warrant Certificates theretofore and thereafter issued shall, unless the Company shall exercise its option to issue new Warrant Certificates pursuant to Section l(f) hereof, continue to express the Applicable Purchase Price per share and the number of shares purchasable thereunder as the Applicable Purchase Price per share and the number of shares purchasable thereunder were expressed in the Warrant Certificates when the same were originally issued. (e) After each adjustment of the Applicable Purchase Price pursuant to this Section 7, the Company will promptly prepare a certificate signed by the President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company setting forth: (i) the Applicable Purchase Price as so adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of each Warrant, after such adjustment, and (iii) a brief statement of the facts accounting for such adjustment. The Company will promptly file such certificate with the Warrant Agent and cause a brief summary thereof to be sent by ordinary first class mail to each Registered Holder at his last address as it shall appear on the registry books of the Warrant Agent. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity thereof except as to the holder to whom the Company failed to mail such notice, or except as to the holder whose notice was defective. The affidavit of an officer of the Warrant Agent or the Secretary or an Assistant Secretary of the Company that such notice has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. (f) No adjustment of the Applicable Purchase Price shall be made as a result of or in connection with (A) the issuance or sale of shares of Common Stock pursuant to options, warrants, stock purchase agreements and convertible or exchangeable securities outstanding or in effect on the date hereof or granted upon the consummation of and in connection with the first Business Combination (as defined in the Registration Statement), or (B) the issuance or sale of shares of Common Stock for cash. -10- (g) No adjustment of the Applicable Purchase Price shall be made if the amount of said adjustment shall be less than $ .10, provided, however, that in such case, any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time of and together with the next subsequent adjustment that shall amount, together with any adjustment so carried forward, to at least $.10. In addition, Registered Holders shall not be entitled to cash dividends paid by the Company prior to the exercise of any Warrant or Warrants held by them. SECTION 8 REDEMPTION. (a) Commencing on the Initial Warrant Redemption Date, the Company may, on 30 days prior written notice redeem all the Warrants at $.05 per Warrant, provided that the last sale price of Common Stock, if the Common Stock is listed for trading on an exchange or inter-dealer quotation system which provides last sale prices, or, the average of the closing bid and asked quotes, if the Common Stock is listed for trading on an inter-dealer quotation system which does not provide last sale prices, on all 10 of the trading days ending on the day immediately prior to the day on which the Company gives notice of redemption, has been $11.00 or higher (subject to proportionate adjustment for stock splits and reverse stock splits of such Common Stock from and after the date of this Agreement). Notwithstanding the foregoing, the Warrants underlying the Representative's Warrants are not subject to redemption. (b) In case the Company shall exercise its right to redeem all of the Warrants, it shall give or cause to be given notice to the Registered Holders of the Warrants, by mailing to such Registered Holders a notice of redemption, first class, postage prepaid, at their last address as shall appear on the records of the Warrant Agent. Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Registered Holder receives such notice. Not less than five business days prior to the mailing to the Registered Holders of the Warrants of the notice of redemption, the Company shall deliver or cause to be delivered to the Representatives a notice telephonically and confirmed in writing together with a list of the Registered Holders (including their respective addresses and number of Warrants beneficially owned) to whom such notice of redemption has been or will be given. (c) The notice of redemption shall specify (i) the redemption price, (ii) the date fixed for redemption, which shall in no event be less that thirty (30) days after the date of mailing of such notice, (iii) the place where the Warrant Certificate shall be delivered and the redemption price shall be paid, (iv) that the Representatives are the Company's exclusive warrant solicitation agents and shall receive the commission contemplated by Section 3(b) hereof, and (v) that the right to exercise the Warrant shall terminate at 5:00 p.m. (New York time) on the business day immediately preceding the date fixed for redemption. The date fixed for the redemption of the Warrants shall be the Redemption Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the -11- proceedings for such redemption except as to a holder (a) to whom notice was not mailed or (b) whose notice was defective. An affidavit of the Warrant Agent or the Secretary or Assistant Secretary of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. (d) Any right to exercise a Warrant shall terminate at 5:00 p.m. (New York time) on the business day immediately preceding the Redemption Date. The redemption price payable to the Registered Holders shall be mailed to such persons at their addresses of record. (e) The Company shall indemnify the underwriters and each person, if any, who controls the underwriters within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against all loss, claim, damage, expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from the registration statement or prospectus referred to in Section 4(b) hereof to the same extent and with the same effect (including the provisions regarding contribution) as the provisions pursuant to which the Company has agreed to indemnify the underwriters contained in Section I of the Underwriting Agreement. (f) Five business days prior to the Redemption Date, the Company shall furnish to the Representatives (i) an opinion of counsel to the Company, dated such date and addressed to the Representatives, and (ii) a "cold comfort" letter dated such date addressed to the Representatives, signed by the independent public accountants who have issued a report on the Company's financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to underwriters in underwritten public offerings of securities, including, without limitation, those matters covered in Sections 5(d) and (i) of the Underwriting Agreement. (g) The Company shall as soon as practicable after the Redemption Date, and in any event within 15 months thereafter, make "generally available to its security holders" (within the meaning of Rule 158 under the Act) an earnings statement (which need not be audited) complying with Section 11(a) of the Act and covering a period of at least 12 consecutive months beginning after the Redemption Date. (h) The Company shall deliver within five business days prior to the Redemption Date copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to such registration statement and permit the Representatives to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of the NASD. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and -12- independent auditors, all to such reasonable extent and at such reasonable times and as often as the Representatives shall reasonably request. SECTION 9 CONCERNING THE WARRANT AGENT. (a) The Warrant Agent acts hereunder as agent and in a ministerial capacity for the Company and the underwriters, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not, by issuing and delivering Warrant Certificates or by any other act hereunder, be deemed to make any representations as to the validity or value or authorization of the Warrant Certificates or the Warrants represented thereby or of any securities or other property delivered upon exercise of any Warrant or whether any stock issued upon exercise of any Warrant is fully paid and non-assessable. (b) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of Warrant Certificates to make or cause to be made any adjustment of the Applicable Purchase Price provided in this Agreement, or to determine whether any fact exists which may require any such adjustment, or with respect to the nature or extent of any such adjustment, when made, or with respect to the method employed in making the same. It shall not (i) be liable for any recital or statement of fact contained herein or for any action taken, suffered or omitted by it in reliance on any Warrant Certificate or other document or instrument believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties, (ii) be responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement or in any Warrant Certificate, or (iii) be liable for any act or omission in connection with this Agreement except for its own gross negligence or willful misconduct. (c) The Warrant Agent may at any time consult with counsel satisfactory to it (who may be counsel for the Company) and shall incur no liability or responsibility for any action taken, suffered or omitted by it in good faith in accordance with the opinion or advice of such counsel. (d) Any notice, statement, instruction, request, direction, order or demand of the Company shall be sufficiently evidenced by an instrument signed by the President or any Vice President (unless other evidence in respect thereof is herein specifically prescribed). The Warrant Agent shall not be liable for any action taken, suffered or omitted by it in accordance with such notice, statement, instruction, request, direction order or demand. (e) The Company agrees to pay the Warrant Agent reasonable compensation for its services hereunder and to reimburse it for its reasonable expenses hereunder; the Company further agrees to indemnify the Warrant Agent and save it harmless against any and all losses, expenses and liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of its duties and powers -13- hereunder except losses, expenses and liabilities arising as a result of the Warrant Agent's gross negligence or willful misconduct. (f) The Warrant Agent may resign its duties and be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Warrant Agent's own gross negligence or willful misconduct), after giving 30 days' prior written notice to the Company. At least 15 days prior to the date such resignation is to become effective, the Warrant Agent shall cause a copy of such notice of resignation to be mailed to the Registered Holder of each Warrant Certificate at the Company's expense. Upon such resignation the Company shall appoint in writing a new warrant agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation by the resigning Warrant Agent, then the Registered Holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a new warrant agent. Any new warrant agent, whether appointed by the Company or by such a court, shall be a bank or trust company having a capital and surplus, as shown by its last published report to its stockholders, of not less than $10,000,000 or a stock transfer company doing business in New York City. After acceptance in writing of such appointment by the new warrant agent is received by the Company, such new warrant agent shall be vested with the same powers, rights, duties and responsibilities as if it has been originally named herein as the warrant agent, without any further assurance, conveyance, act or deed; but if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyable, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the resigning Warrant Agent. Not later than the effective date of any such appointment the Company shall file notice thereof with the resigning Warrant Agent and shall forthwith cause a copy of such notice to be mailed to the Registered Holder of each Warrant Certificate. (g) Any corporation into which the Warrant Agent or any new warrant agent may be converted or merged, any corporation resulting from any consolidation to which the Warrant Agent or any new warrant agent shall be a party shall be a successor warrant agent under this Agreement without any further act, provided that such corporation is eligible for appointment as successor to the Warrant Agent under the provisions of the preceding paragraph. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed to the Company and to the Registered Holders of each Warrant Certificate. (h) The Warrant Agent, its subsidiaries and affiliates, and any of its or their officers or directors, may buy and hold or sell Warrants or other securities of the Company and otherwise deal with the Company in the same manner and to the same extent and with like effect as though it were not Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Warrant Agent shall retain for a period of two years from the date of exercise any Warrant Certificate received by it upon such exercise. -14- SECTION 10 MODIFICATION OF AGREEMENT. The Warrant Agent and the Company may by supplement a agreement make any changes or corrections in this Agreement (i) that they shall deem appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error herein contained; or (ii) that they may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrant Certificates; provided, however, that this Agreement shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Registered Holders representing not less than 66-2/3% of the Warrants then outstanding; provided, further, that no change in the number or nature of the securities purchasable upon the exercise of any Warrant, or the Applicable Purchase Price, therefor, shall be made without the consent in writing of the Registered Holder of the Warrant Certificate, other than such changes as are specifically prescribed by this Agreement as originally executed. In addition, this Agreement may not be modified, amended or supplemented without the prior written consent of the Representatives, other than to cure any ambiguity or to correct any provision which is inconsistent with any other provision of this Agreement or to make any such change that is necessary or desirable and which shall not adversely affect the interests of the underwriters and except as may be required by law. SECTION 11 NOTICES. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been made when delivered or mailed certified mail, return receipt requested, or delivered to a recognized overnight delivery service if to the Registered Holder of a Warrant Certificate, at the address of such holder as shown on the registry books maintained by the Warrant Agent; if to the Company at North Atlantic Acquisition Corp. I, 850 Third Avenue, New York, NY 10022, Attention: President, or at such other address as may have been furnished to the Warrant Agent in writing by the Company; and if to the Warrant Agent, at its Corporate Office. Copies of any notice delivered pursuant to this Agreement shall be delivered to H.J. Meyers & Co., Inc., 1895 Mount Hope Avenue, Rochester, NY 14620, Attention: Michael Bresner, or at such other address as may have been furnished to the Company and the Warrant Agent in writing. SECTION 12 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to conflicts of laws. -15- SECTION 13 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company, the Warrant Agent and their respective successors and assigns and the holders from time to time of Warrant Certificates or any of them. Except as hereinafter stated, nothing in this Agreement is intended or shall be construed to confer upon any other person any right, remedy or claim or to impose upon any other person any duty, liability or obligation. The underwriters, acting through either Representative, are, and shall at all times irrevocably be deemed to be, third-party beneficiaries of this Agreement, with full power, authority and standing to enforce the rights granted to them hereunder. SECTION 14 COUNTERPARTS. This Agreement may be executed in several counterparts, which taken together shall constitute a single document. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the first date first above written. [CORPORATE SEAL] AMERICAN STOCK TRANSFER & TRUST COMPANY As Warrant Agent By: _______________________________ NORTH ATLANTIC ACQUISITION CORP. ___________________________________ David J. Mitchell Chairman of the Board and Chief Executive Officer -16- EX-4.3 6 EXH 4.3:FORM OF CLASS A PURCHASE WARRANT Exhibit 4.3 NORTH ATLANTIC ACQUISITION CORP. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE NO. WA- CLASS A WARRANTS This Warrant Certificate certifies that CUSIP or registered assigns, is the registered holder of the number of Class A Redeemable Unit Purchase Warrants (the "Warrants") set forth above to purchase initially, at any time from the closing date of the first Business Combination (as defined in the Warrant Agreement described below), until 5:00 p.m., New York time on the first anniversary of such initial exercise date (the "Expiration Date"), one (1) fully paid and nonassessable share per Warrant (the "Shares"), of Class A Common Stock, $.01 par value (the "Common Stock"), of North Atlantic Acquisition Corp., a Delaware corporation (the "Company"), at the exercise price of $9.00 per Share (the "Exercise Price"), upon the surrender of this Warrant Certificate and payment of the Exercise Price at an office or agency of the Company, but subject to the conditions set forth herein and in the warrant agreement dated as of (the "Warrant Agreement") by and among the Company and American Stock Transfer & Trust Company (the "Transfer Agent"). Copies of the Warrant Agreement are on file at the office of the Corporation and are available on written request and without cost. Payment of the Exercise Price shall be made by certified or cashier's check or money order payable to the order of the Company. No Warrant may be exercised after 5:00P.M. New York Time, on the Expiration Date, at which time all Warrants evidenced hereby, unless exercised prior thereto, shall thereafter be void. The Warrants evidenced by the Warrant Certificate are part of a duly authorized issue of Warrants issued pursuant to the Warrant Agreement, which Warrant Agreement 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, obligations, duties and immunities thereunder of the Company and holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. The Warrant Agreement 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 the Warrant Agreement. The Warrant Agreement also provides that the Warrants are redeemable by the Company upon the occurrence of certain conditions set forth in the Warrant Agreement. Upon due presentment for registration of transfer of this Warrant Certificate at an office or agency of the Company, 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 as provided herein, 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. The Company may deem and treat the registered holder (s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof; and of any distribution to the holder(s) hereof; and for all other purposes, and the Company shall not be affected by any notice to the contrary. All terms used in this Warrant Certificate which are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement. IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date set forth below. NORTH ATLANTIC ACQUISITION CORP. DATED: [1995 DELAWARE NORTH ATLANTIC ACQUISITION CORP. CORPORATE SEAL] Secretary David J. Mitchell, Chairman and Chief Executive Officer Countersigned and Registered: AMERICAN STOCK TRANSFER & TRUST COMPANY By Transfer Agent Warrant Agentand Registrar Authorized Officer FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Warrant Certificate.) FOR VALUE RECEIVED,................hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ______________________________________ ______________________________________.......................................... (Please print name and address of transferee) ................................................................................ ................................................................... this Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ...................................................................... Attorney, to transfer the within Warrant Certificate on the books of North Atlantic Acquisition Corp., with full power of substitution. Dated:.................................. .................................. Signature (Insert Social Security or Other Identifying Number of Holder) .................................. Signature Guaranteed NOTE: THE ABOVE SIGNATURE SHOULD CORRESPOND EXACTLY WITH THE NAME OF THE FACE OF THIS CERTIFICATE AND MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION WITH MEMBERSHIP IN AN APPROVED SIGNATURE MEDALLION PROGRAM. FORM OF ELECTION TO PURCHASE The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase: ................ Shares of Class A Common Stock, and herewith tenders in payment for such securities a certified or cashier's check or money order payable to the order of North Atlantic Acquisition Corp. in the amount of $..............., all in accordance with the terms hereof. 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 the name of holder as specified on the face of the Warrant Certificate .............................................................. (Insert Social Security or Other Identifying Number of Holder) EX-4.4 7 EXH 4.4:FORM OF CLASS B STOCK CERTIFICATE Exhibit 4.4 NORTH ATLANTIC ACQUISITION CORP. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER, UPON REQUEST AND WITHOUT SEE REVERSE SIDE FOR CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES CERTAIN DEFINITIONS AND LIMITATIONS OF THE SHARES OF EACH CLASS AUTHORIZED TO BE ISSUED. CUSIP
This is to Certify that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS B COMMON STOCK, PAR VALUE $0.01, OF NORTH ATLANTIC ACQUISITION CORP. a corporation incorporated under the laws of the State of Delaware. The shares evidenced by this certificate are transferable only on the stock transfer books of NORTH ATLANTIC ACQUISITION CORP. by the holder hereof, in person or by attorney, upon surrender of this certificate properly endorsed. IN WITNESS WHEREOF NORTH ATLANTIC ACQUISITION CORP. has caused this certificate to be executed by the signatures of its duly authorized officers and has caused its facsimile seal to be hereunto affixed. Dated: [1995 DELAWARE NORTH ATLANTIC ACQUISITION CORP. CORPORATE SEAL] Secretary Chairman of the Board and Chief Executive Officer Countersigned and Registered: AMERICAN STOCK TRANSFER & TRUST COMPANY By Transfer Agent and Registrar Authorized Officer NORTH ATLANTIC ACQUISITION CORP. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - .......... Custodian ........... (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors JT TEN - as joint tenants with right Act .......................... of survivorship and not as (State) tenants in common
Additional abbreviations may also be used though not in the above list. For value received, _________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE __________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE. ________________________________________________________________________________ ________________________________________________________________________________ _________________________________________________________________________ Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint ________________________________________________________________________ Attorney to transfer the said Shares on the books of the within named corporation with full power of substitution in the premises. Dated: ___________________ In the presence of __________________________________________________ Signature __________________________________________________ Signature NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER. EX-4.5 8 EXH 4.5:FORM OF REPRESENTATIVE'S WARRANT Exhibit 4.5 WARRANT TO PURCHASE 80,000 UNITS (CONSISTING OF 80,000 SHARES OF CLASS A COMMON STOCK AND 80,000 REDEEMABLE CLASS A COMMON STOCK PURCHASE WARRANTS) AND 15,000 SHARES OF CLASS B EXCHANGEABLE COMMON STOCK REPRESENTATIVE'S WARRANT Dated: [CLOSING DATE] THIS CERTIFIES THAT H.J. MEYERS & CO., INC. (herein sometimes called the "Holder") is entitled to purchase from NORTH ATLANTIC ACQUISITION CORP., a Delaware corporation (the "Company"), at the respective prices and during the period hereinafter specified, up to 80,000 Units (the "Units"), each Unit consisting of one share of the Class A Common Stock, $.01 par value, of the Company (the "Class A Stock") and one Redeemable Class A Common Stock Purchase Warrants (the "Class A Warrants"), and 15,000 shares of the Class B Exchangeable Common Stock (the "Class B Stock") (such shares of Class A Stock, shares of Class B and Class A Warrants being herein sometimes collectively called the "Securities"). Each Class A Warrant is exercisable to purchase one share of Class A Stock at any time (subject to the qualification stated in clause (ii) below) commencing on [EFFECTIVE DATE + 1 YEAR] (that being the date one year from the date on which the Registration Statement (as hereinafter defined) became effective) (the date on which the Registration Statement became effective is hereafter referred to as the "Effective Date"), and ending on the fifth anniversary of the Effective Date, at an exercise price (subject to adjustment as described in the warrant agreement providing for the Class A Warrants) of $9.00 per share of Class A Stock. This Representative's Warrant (this "Warrant") is issued pursuant to an Underwriting Agreement dated [EFFECTIVE DATE] between the Company and H.J. Meyers & Co., Inc. (the "Representative"), as representative of certain underwriters, including themselves (the "Underwriters"), in connection with a public offering, through the Underwriters (the "Offering"), of 800,000 Units (and up to 120,000 additional Units covered by an over-allotment option granted to the Underwriters) and 180,000 Shares of Class B Stock (and up to 22,500 additional shares of Class B Stock covered by an over-allotment option granted to the Underwriters), in consideration of $5.00 received by the Company for this Warrant. Except as otherwise expressly provided herein, the Units and the shares of Class B Stock issued upon exercise of this Warrant, the shares of Class A Stock issued upon exercise of the Class A Warrants, and the Units issued upon the exchange of the Class B Stock, shall bear the same terms and conditions described under the caption "Description Of Securities" in the registration statement (File No. 33-80647) on Form SB-2 relating to the Offering (the "Registration Statement"), except that (i) the Holder shall have registration rights under the Securities Act of 1933, as amended (the "Act"), for this Warrant, the Class A Stock, Class B Stock and the Class A Warrants, as more fully described in Section 6, and (ii) the Class A Warrants shall be exercisable only during the period commencing upon such date as this Warrant is exercised and expiring five years from the Effective Date. Each certificate evidencing the Registrable Securities (as hereinafter defined) shall bear the appropriate restrictive legend set forth below, except that any such certificate shall not bear such restrictive legend if (a) it is transferred pursuant to an effective registration statement under the Act or in compliance with Rule 144 or Rule 144A promulgated under the Act, or (b) the Company is provided with an opinion of counsel to the effect that such legend is not required in order to establish compliance with the provisions of the Act: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE REPRESENTATIVE'S WARRANT COVERING REGISTRATION RIGHTS PERTAINING TO THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE OFFICE OF THE COMPANY AT NEW YORK, NEW YORK." Unless the context otherwise requires, all references herein to a "Section" shall mean the appropriate Section of this Warrant. 1. EXERCISE PRICE AND PERIOD. The rights represented by this Warrant shall be exercised at the price and during the periods set forth below: (a) During the period from [EFFECTIVE DATE] to [EFFECTIVE DATE + 1 YEAR - 1 DAY] (the "First Anniversary Date"), inclusive, the Holder shall have no right to purchase any Securities hereunder, except that in the event of any merger or consolidation of the Company into another entity, or any sale of substantially all of the assets of the Company as an entirety, prior to the First Anniversary Date, the Holder shall have the right to exercise this Warrant at such time and into such kinds and amounts of shares of stock and other securities and property (including cash) as would be receivable by a holder of the number of shares of Class A Stock into which this Warrant and the Units and Class A Warrants thereunder might have been exercisable immediately prior thereto. (b) Between [EFFECTIVE DATE + 1 YEAR] and [EFFECTIVE DATE + 5 YEARS - 1 DAY] (the "Expiration Date"), inclusive, the Holder shall have the right to purchase Units and Class B Stock hereunder at a price of $11.00 per Unit and $11.00 per -2- share of Class B Stock (that being 110 percent of the public Offering price of the Units and shares of Class B Stock, respectively) (the "Exercise Price"). (c) Notwithstanding the provisions of Section 1(b) with respect to the Exercise Price to the contrary, the Holder may elect to exercise this Warrant, in whole or in part, by receiving Units and/or shares of Class B Stock, as the case may be, equal to the value (as herein determined) of the portion of this Warrant then being exercised, in which event the Company shall issue to the Holder the number(s) of Units and/or shares of Class B Stock, as the case may be, determined by using the following formula: X = Y(A-B) ------ A where: X = the number of such Securities to be issued to the Holder under the provisions of this Section 1(c) Y = the number of such Securities that would otherwise be issued upon such exercise A = the Current Fair Market Value (as hereinafter defined) of one unit of such Securities calculated as of the last trading day immediately preceding such exercise B = the applicable Exercise Price of such Securities As used herein, the "Current Fair Market Value" of Securities as of a specified date shall mean with respect to each unit of such Securities, (i) the average of the closing prices of such Securities sold on all securities exchanges on which such Securities may at the time be listed, or (ii) if there have been no sales on any such exchange on such day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or (iii) if on such day such Securities are not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 p.m., New York time, or (iv) if on such day such Securities are not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Current Fair Market Value is being determined and the 20 consecutive business days prior to such day. If on the date for which Current Fair Market Value is to be determined such Securities are not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, then Current Fair Market Value of such Securities shall be the highest price per unit thereof which the Company could then obtain from a willing buyer (not a current employee or director) for such Securities sold by the Company, from original issuance, as determined in good faith by the Board of Directors of the Company, unless prior -3- to such date the Company has become subject to a merger, consolidation, reorganization, acquisition or other similar transaction pursuant to which the Company is not the surviving entity, in which case the Current Fair Market Value of such Securities shall be deemed to be the per unit value received or to be received in such transaction by the holders of such Securities. (d) After the Expiration Date, the Holder shall have no right to purchase any Securities hereunder. 2. EXERCISE. The rights represented by this Warrant may be exercised, in whole or in part (with respect to Units and/or shares of Class B Stock), by the Holder at any time within the periods specified in Section 1 by: (a) surrender of this Warrant for cancellation (with the purchase form at the end hereof properly executed) at the principal executive office of the Company (or at such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company); (b) to the extent that the Holder does not use the election provided by Section 1(c), payment to the Company of the Exercise Price for the number of Units and/or shares of Class B Stock specified in the such purchase form, together with the amount of applicable stock transfer taxes, if any; and (c) delivery to the Company of a duly executed agreement signed by the person(s) designated in the purchase form to the effect that such person(s) agree(s) to be bound by all of the terms and conditions of this Warrant, including without limitation the provisions of Sections 6 and 7. This Warrant shall be deemed to have been exercised, in whole or in part to the extent specified, immediately prior to the close of business on the date on which all of the provisions of this Section 2 are satisfied, and the person(s) designated in the purchase form shall become the holder(s) of record of the Units and/or shares of Class B Stock issuable upon such exercise at that time and date. The certificates representing the Units and/or shares of Class B Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten business days, after this Warrant shall have been so exercised. 3. TRANSFER OF WARRANT. (a) During the period from [EFFECTIVE DATE] to the First Anniversary Date inclusive, this Warrant shall not be transferred, sold, assigned or hypothecated, except that during such period this Warrant may be transferred (i) to successors in interest of the Holder, or (ii) in whole or in part to any one or more shareholders, directors or officers of the Holder, in each case subject to compliance with applicable Federal and state securities laws and Interpretations of the Board of Governors of the National Association of Securities Dealers, Inc. (b) Between [EFFECTIVE DATE + 1 YEAR] and the Expiration Date inclusive, this Warrant shall be freely transferable, in whole or in part, subject to the other terms and conditions hereof and to compliance with applicable federal and state securities laws. -4- (c) Any transfer of this Warrant permitted by this Section 3 shall be effected by: (i) surrender of this Warrant for cancellation (with the assignment form at the end hereof properly executed) at the office or agency of the Company referred to in Section 2; (ii) delivery of a certificate (signed, if the Holder is a corporation or partnership, by an authorized officer or partner thereof), stating that each transferee designated in the assignment form is a permitted transferee under this Section 3; and (iii) delivery of an opinion of counsel stating that the proposed transfer may be made without registration or qualification under applicable federal or state securities laws. This Warrant shall be deemed to have been transferred, in whole or in part to the extent specified, immediately prior to the close of business on the date the provisions of this Section 3(c) are satisfied, and the transferee(s) designated in the assignment form shall become the holder(s) of record at that time and date. The Company shall issue, in the name(s) of the designated transferee(s) (including the Holder if this Warrant has been transferred in part) a new Warrant or Warrants of like tenor and representing, in the aggregate, rights to purchase the same numbers of Securities as are then purchasable under this Warrant. Such new Warrant or Warrants shall be delivered to the record holder(s) thereof within a reasonable time, not exceeding ten business days, after the rights represented by this Warrant shall have been so transferred. As used herein (unless the context otherwise requires), the term "Holder" shall include each such transferee, and the term "Warrant" shall include each such transferred Warrant. 4. COVENANTS OF THE COMPANY. The Company covenants and agrees that all Units and all shares of Class B Stock which may be issued upon exercise of this Warrant, and all Units, Class A Stock, Class B Stock and all Class A Warrants which may be issued upon exercise of the Units or the Class B Stock, shall, upon issuance in accordance with the terms hereof, be duly and validly issued, fully paid and non-assessable, with no personal liability attaching to the Holder thereof. The Company further covenants and agrees that during the period within which this Warrant may be exercised, the Company shall at all times have authorized and reserved a sufficient number of shares of Class A Stock for issuance upon exercise of the Units, either received upon exercise of this Warrant or upon exchange of the Class B Stock that are received under the exercise of this Warrant, and all of the Class A Warrants received under the Units. 5. SHAREHOLDERS' RIGHTS. This Warrant shall not entitle the Holder to any voting rights or other rights as a shareholder of the Company. 6. REGISTRATION RIGHTS. (a) CERTAIN DEFINITIONS. As used herein, the term: (i) "Registrable Securities" shall mean this Warrant, and/or any or all of the Units, shares of Class A Stock, shares of Class B Stock and/or Class A Warrants issued -5- or issuable upon exercise of this Warrant, and/or any or all of the shares of Class A Stock issued or issuable upon exercise of such Class A Warrants, as the same shall be so designated by the Holder. (ii) "50% Holder" shall mean the Holder(s) of at least 50 percent of the total number of shares of Class A Stock comprising the Registrable Securities (whether or not this Warrant or any Class A Warrants have been exercised), and shall include any Holder or combination of Holders. (b) "PIGGYBACK" REGISTRATION. From the date hereof until the Expiration Date, the Company shall advise the Holder, whether the Holder holds this Warrant or has exercised this Warrant and holds any of the Securities, by written notice at least four weeks prior to the filing of any post-effective amendment to the Registration Statement (unless the Company determines that to comply with Federal securities law it must file such post-effective amendment in less than four weeks' time, in which case the Company shall give the Holder the most notice practicable under the circumstances), or of any new registration statement or post-effective amendment thereto under the Act (other than a registration statement on Form S-8 or its counterpart), or any Notification on Form 1-A under the Act, covering any securities of the Company, whether for its own account or for the account of others, and shall, upon the request of the Holder, include in any such post-effective amendment or new registration statement such information as may be required to permit a public offering of any or all of the Registrable Securities of the Holder, all at no expense whatsoever to the Holder, except that each Holder whose Registrable Securities are included in such registration shall bear the fees of its own counsel and any underwriting discounts or commissions applicable to the Securities sold by it. (c) DEMAND REGISTRATION. (i) If any 50% Holder shall give notice to the Company, at any time after the First Anniversary Date and prior to the Expiration Date, to the effect that such 50% Holder desires to register under the Act any Registrable Securities under such circumstances that a public distribution (within the meaning of the Act) of any such securities shall be involved, then the Company shall promptly, but no later than 30 days after receipt of such notice, file a post-effective amendment to the Registration Statement or a new registration statement under the Act, to the end that Registrable Securities of such 50% Holder may be publicly sold under the Act as promptly as practicable thereafter, and the Company shall use its best efforts to cause such registration to become effective as soon as possible; provided, however, that such 50% Holder shall furnish the Company with appropriate information in connection therewith as the Company may reasonably request in writing; and provided further that the Company shall then have available current financial statements (unless the unavailability of current financial statements results from the Company's fault or neglect). The 50% Holder may, at its option, cause Registrable Securities to be included in such regis- -6- tration under this Section 6(c) on a maximum of two occasions during the four-year period beginning on the First Anniversary Date and ending on the Expiration Date. (ii) Within ten days after receiving any such notice pursuant to this Section 6(c), the Company shall give notice to each other Holder (whether such Holder holds a Warrant or has exercised the Warrant and holds any of the Securities), advising that the Company is proceeding with such post-effective amendment or new registration statement and offering to include therein Registrable Securities held by such other Holders, provided that they shall furnish the Company with such appropriate information in connection therewith as the Company shall reasonably request in writing. (iii) All costs and expenses (including without limitation, legal, accounting, printing, mailing and filing fees) of the first such registration effected under this Section 6(c) shall be borne by the Company, except that the Holder(s) whose Registrable Securities are included in such registration shall bear the fees of their own counsel and any underwriting discounts or commissions applicable to the securities sold by them. All costs and expenses of the second such registration effected under this Section 6(c) shall be borne by the Holder(s) whose Registrable Securities are included in such registration. (iv) The Company shall cause each registration statement or post-effective amendment filed pursuant to this Section 6(c) to remain current under the Act (including the taking of such steps as are necessary to obtain the removal of any stop order) for a period of at least six months (and for up to an additional three months if requested by the Holder(s)) from the effective date thereof, or until all the Registrable Securities included in such registration have been sold, whichever is earlier. (d) FURTHER RIGHTS. The registration rights provided by this Section 6 may be exercised by the Holder either prior or subsequent to its exercise of this Warrant. A 50% Holder may, at its option, request registration pursuant to Section 6(b) and/or pursuant to Section 6(c), and its request for registration under one such Section shall not affect its right to request registration under the other. The registration rights provided by this Section 6 shall supersede and be prior in right to any registration rights granted by the Company to other holders of its outstanding securities. (e) FURTHER OBLIGATIONS OF COMPANY. With respect to all registrations under this Section 6, the Company shall: (i) supply prospectuses and such other documents as the Holder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities; (ii) use its best efforts to register and qualify the Registrable Securities for sale in such states as the Holder designates (provided, however, that in no event shall the Company be required to qualify as a foreign corporation or a dealer in securities or to execute a general consent to service of process); and (iii) do any and all other acts and things which may be necessary or desirable to enable the Holder to consummate the public sale or other disposition of the Registrable Securities. -7- 7. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. As used in this Section 7, the term "Liabilities" shall mean any and all losses, claims, damages and liabilities, and actions and proceedings in respect thereof, including without limitation all reasonable costs of defense and investigation and all attorneys' fees. Whenever pursuant to Section 6 a registration statement relating to any Registrable Securities is filed under the Act, or amended or supplemented, the Company shall indemnify and hold harmless each Holder of Registrable Securities included in such registration statement, amendment or supplement (each, a "Distributing Holder"), and each person (if any) who controls (within the meaning of the Act) the Distributing Holder, and each underwriter (within the meaning of the Act) of such Registrable Securities, and each person (if any) who controls (within the meaning of the Act) any such underwriter, from and against all Liabilities, joint or several, to which the Distributing Holder or any such controlling person or underwriter may become subject, under the Act or otherwise, insofar as such Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such registration statement, or any preliminary prospectus or final prospectus constituting a part thereof, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company shall not be liable in any such case to the extent that any such Liabilities arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary prospectus, final prospectus, or amendment or supplement thereto, in reliance upon and in conformity with written information furnished by such Distributing Holder or by any other Distributing Holder for use in the preparation thereof. The foregoing indemnity shall be in addition to any other liability which the Company may otherwise have. (b) INDEMNIFICATION BY HOLDER. The Distributing Holder(s) shall indemnify and hold harmless the Company, and each of its directors, each nominee (if any) named in any preliminary prospectus or final prospectus constituting a part of such registration statement, each of its officers who have signed such registration statement and such amendments or supplements thereto, and each person (if any) who controls the Company (within the meaning of the Act) against all Liabilities, joint or several, to which the Company or any such director, nominee, officer or controlling person may become subject, under the Act or otherwise, insofar as such Liabilities arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in such registration statement, preliminary prospectus, final prospectus, or amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent that such Liabilities arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary prospectus, final prospectus or amendment or supplement -8- thereto in reliance upon and in conformity with written information furnished by such Distributing Holder(s) for use in the preparation thereof. The foregoing indemnity shall be in addition to any other liability which the Distributing Holder(s) may otherwise have. (c) PROCEDURE. Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party, give the indemnifying party notice of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 7. In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. (d) LIMITATION. Notwithstanding the foregoing, if the Registrable Securities are to be distributed by means of an underwritten public offering, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with such underwriting are in conflict with the provisions of this Section 7, the provisions of such underwriting agreement shall be controlling, provided that the Holder is a party to such underwriting agreement. 8. ANTI-DILUTION. In the event that the outstanding Units, shares of Class A Stock, shares of Class B Stock or Class A Warrants are at any time increased or decreased in number, or changed into or exchanged for a different number or kind of shares or other security of the Company or of another corporation through reorganization, merger, consolidation, liquidation, recapitalization or, in the case of Class A Stock or Class B Stock, stock split, reverse split, combination of shares or stock dividends payable with respect to such common stock, appropriate adjustments shall be made in the number and kind of such securities then subject to this Warrant, and in the Exercise Price of this Warrant, effective as of the date of such occurrence, so that the position of the Holder upon exercise of this Warrant shall be the same as it would have been had it owned immediately prior to the occurrence of such event the Units, Class A Stock, Class B Stock and the Class A Warrants subject to this Warrant; provided, however, that in no event shall two adjustments be made for the same event. For example, if the Company declares a 2-for-1 stock dividend or stock split, then the number of Units then subject to this Warrant shall be doubled, the per Unit Exercise Price shall be reduced by 50 percent. -9- 9. GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such State. 10. AMENDMENT OR WAIVER. Any provision of this Warrant may be amended, waived or modified upon the written consent of the Company and any 50% Holder; provided, however, that such amendment, waiver or modification applies by its terms to each Holder; and provided further, that a Holder may waive any of its rights or the Company's obligations to such Holder without obtaining the consent of any other Holder. -10- IN WITNESS WHEREOF, NORTH ATLANTIC ACQUISITION CORP. has caused this Warrant to be signed by its duly authorized officers under its corporate seal and to be dated as of the date set forth on the first page hereof. NORTH ATLANTIC ACQUISITION CORP. ________________________________________ David J. Mitchell Chairman of the Board and Chief Executive Officer (Corporate Seal) Attest: ________________________________ Secretary -11- PURCHASE FORM (TO BE SIGNED ONLY UPON EXERCISE OF WARRANT) The undersigned, the Holder of the foregoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, ________ Units (each Unit consisting of one share of the Class A Common Stock, $.01 par value per share, of NORTH ATLANTIC ACQUISITION CORP. (the "Company") and one Class A Common Stock Purchase Warrants of the Company (each such Class A Warrant exercisable to purchase one share of Class A Common Stock)) and/or ________ shares of Class B Exchangeable Common Stock, $.01 per share, of the Company (each such share exchangeable for two Units at the time of a Business Combination), and (i) herewith makes payment of an aggregate of $____________ therefor and/or (ii) pursuant to Section 1(c) of such Warrant hereby tenders the right to exercise such Warrant to the extent of ________ Units and/or ________ shares of Class B Stock of the Company. The undersigned requests that the certificates for any such Units and such shares of Class B Stock be issued in the name(s) of, and delivered to, the person(s) whose name(s) and address(es) are set forth below: Dated: _____________________ ___________________________________ ___________________________________ Address Signatures guaranteed by: ________________________________ Taxpayer Identification Number: ________________________________ -12- TRANSFER FORM (TO BE SIGNED ONLY UPON TRANSFER OF WARRANT) FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto ___________________________________________ the right to purchase Units (each comprised of one share of the Class A Common Stock, $.01 par value, of NORTH ATLANTIC ACQUISITION CORP. (the "Company") and one Class A Common Stock Purchase Warrant of the Company) and shares of Class B Exchangeable Common Stock, $.01 par value, of the Company (each exchangeable for two Units at the time of a Business Combination) of the Company represented by the foregoing Warrant to the extent of _______ Units and _______ shares of Class B Stock, and appoints ________________________ attorney to transfer such rights on the books of the Company, with full power of substitution in the premises. Dated: ________________________ ___________________________________ ___________________________________ ___________________________________ Address Signatures guaranteed by: ________________________________ Taxpayer Identification Number: ________________________________ -13- EX-4.7 9 EXH 4.7:FORM OF UNIT CERTIFICATE Exhibit 4.7 NUMBER UNITS NORTH ATLANTIC ACQUISITION CORP. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CUSIP SEE RERVERSE SIDE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT for value received (the "Registered Holder") is the owner of the number of Units specified above, transferable only on the books of North Atlantic Acquisition Corp. (the "Corporation") by the Registered Holder thereof in person or by his or her duly authorized attorney, on surrender of this Unit Certificate properly endorsed. Each Unit consists of one (1) share of the Corporation's Class A Common Stock, par value $.01 per share (the "Class A Stock"), and one (1) redeemable Class A Common Stock purchase warrant (the "Warrants") to purchase one (1) share of Class A Common Stock for $9.00 per share (subject to adjustment) at any time on or after the consummation of a Business Combination by the Corporation and before 5:00 P.M. New York time on July 2, 2002, (the "Expiration Date"). The terms of the Warrants are governed by a Warrant Agreement dated as of (the "Warrant Agreement") between the Company and American Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"), and re subject to the terms and provisions contained therein, all of which terms and provisions the Registered Holder of this Unit Certificate consents to by acceptance hereof. Copies of the Warrant Agreement are on file at the office of the Corporation and are available to any Registered Holder on written request and without cost. The Warrant shall be void unless exercised before 5:00 P.M., New York time, on the Expiration Date. This certificate is not valid unless countersigned and registered by the Transfer Agent, Warrant Agent, Warrant Agent and Registrar of the Corporation. The Warrants and the shares of Class A Common Stock of the Corporation represented by this Unit Certificate shall be nondetachable and not separately transferable until such date as shall be determined by H.J. Meyers & Co., Inc. (the "Separation Date"). IN WITNESS WHEREOF, the Corporation has caused this Unit Certificate to be duly executed, manually or by facsimile, by two of its officers thereunto duly authorized and a facsimile of its corporate seal to be imprinted herein. Dated: By: By: [1995 DELAWARE NORTH ATLANTIC ACQUISITION CORP. CORPORATE SEAL] Secretary David J. Mitchell, Chairman and Chief Executive Officer Countersigned and Registered: AMERICAN STOCK TRANSFER & TRUST COMPANY By Transfer Agent Warrant Agentand Registrar Authorized Officer North Atlantic Acquisition Corp. This certificate certifies that for value received the Registered Holder hereby is entitled, at and after such time, as H.J. Meyers & Co., Inc. may determine that the Class A Common Stock and the Class A Warrants, which comprise the Units, shall be separately transferable (the "Separation Date") to exchange each Unit represented by this Unit Certificate for Class A Common Stock certificates representing one share of Class A Common Stock and one Class A Warrant Certificate representing one Class A Warrant upon surrender of this Unit Certificate to the Transfer Agent at the office of the Transfer Agent together with any documentation required by such Transfer Agent. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - .......... Custodian ........... (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors JT TEN - as joint tenants with right Act .......................... of survivorship and not as (State) tenants in common
Additional abbreviations may also be used though not in the above list. For value received, _________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE __________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE. ________________________________________________________________________________ ________________________________________________________________________________ _________________________________________________________________________ Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint _______________________________________________________________ Attorney to transfer the said Shares on the books of the within named corporation with full power of substitution in the premises. Dated: ___________________ ________________________________________________________ NOTICE: THE ABOVE SIGNATURE SHOULD CORRESPOND EXACTLY WITH THE NAME ON THE FACE OF THIS UNIT CERTIFICATE OR WITH THE NAME OF THE ASSIGNEE APPEARING IN THE ASSIGNMENT FORM ABOVE AND MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM. EX-10.3 10 LICENSE, DATED AUGUST 25, 1995 Exhibit 10.3 AMENDED AND RESTATED LICENSE AGREEMENT THIS AGREEMENT is made as of the 9th day of May, 1997, by and between Bright Licensing Corp., a New York corporation with a place of business at 64 Village Drive, Dix Hills, New York 11746 ("Licensor"), and Orion Acquisition Corporation I, a Delaware corporation with a place of business at 850 Third Avenue, New York, New York 10022 ("Licensee"). W I T N E S S E T H WHEREAS, Licensee was formed and initially capitalized by Bright Capital Limited ("Bright") to serve as a vehicle to effect a merger, exchange of capital stock asset acquisition or other business combination ("Business Combination") with an operating business using Bright's proprietary risk allocation structure, as described on EXHIBIT A hereto (the "Structure"); WHEREAS, Licensee intends to finance the Business Combination, in whole or in part, with the proceeds of a public offering of its securities (the "Offering") and in connection therewith Licensee has filed a Registration Statement of Form SB-2 (the "Registration Statement") with the United States Securities and Exchange Commission (the "SEC"), which Registration Statement has been amended from time to time, but has not yet become effective; WHEREAS, Licensor is the owner of the servicemarks "SMA2RT" and "Specialized Merger and Acquisition Allocated Risk Transaction" (collectively, the "Servicemarks") (the "Servicemarks" and the "Structure" are collectively referred to herein as the "Intellectual Property"); WHEREAS, Licensee sees valuable marketing and other commercial advantage arising from using the Structure and the Servicemarks to market the Offering; WHEREAS, Licensee wishes to obtain a non-exclusive, one-time license to use the Intellectual Property to market the Offering during its initial public sale of its securities, and Licensor is willing to permit such use by Licensee in accordance with the terms and conditions of this Agreement; WHEREAS, on August 25, 1995 Bright entered into a License Agreement for the Servicemarks with Licensee (the "Prior Agreement); WHEREAS, in July 1996, Bright assigned to Licensor all of its right, title and interest in and to the Intellectual Property, including its rights under the Prior Agreement; WHEREAS, Licensor and Licensee desire to amend and restate in its entirety the Prior Agreement, which hereafter shall be null and void and superseded and replaced in its entirety by this Agreement; NOW, THEREFORE, in consideration of the premises recited hereinabove which are hereby incorporated into the terms of this Agreement and the promises and mutual covenants herein contained, the parties agree as follows: 1. GRANT OF LICENSE. Licensor grants to Licensee a non-exclusive, non-transferable license to use the Intellectual Property in the United States to market the Offering, and Licensee accepts the license subject to the terms and conditions herein contained. The license granted herein shall be for a one-time use only in the Offering, and shall not be available to Licensee, or its officers, directors, employees or affiliates, for any other use or subsequent offerings of its or any other entities' securities. For the purposes of this Agreement, the term "affiliate" shall mean any person or entity that directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, Licensee or any of its officers or directors. 2. CONSIDERATION. In consideration for Licensor's grant of the license set forth herein, Licensor shall receive a license fee from Licensee in the amount of $100,000, $10,000 of which was paid on the date of the Prior Agreement. The balance of the license fee in the amount of $90,000, shall be due and payable upon, and subject to, the closing of the Offering. 3. OWNERSHIP OF MARK. Licensee acknowledges the proprietary nature of the Structure and the ownership of the Intellectual Property by Licensor, agrees that it will do nothing inconsistent with such ownership, and that all use of the Intellectual Property by Licensee shall inure to the benefit of Licensor. Licensee agrees that nothing in this License shall give Licensee any right, title or interest in the Intellectual Property other than the right to use the Intellectual Property in accordance with this Agreement and Licensee agrees that it will not attack the title of Licensor to the Intellectual Property, or otherwise attack the validity of this Agreement. 4. FORM OF USE. Licensee agrees to use the Intellectual Property only in the form and manner and with the appropriate legends, and not to use any other mark in combination with the Intellectual Property without the prior written consent of Licensor. 5. QUALITY STANDARDS. Licensee agrees that the nature and quality of the services rendered by Licensee in connection with the Intellectual Property and all related advertising, promotional and other related uses of the mark by Licensee shall conform to standards set by and under the strict and unilateral control of Licensor. In this regard, Licensee shall provide Licensor with copies of all documents or materials using the Intellectual Property prior to their use, for Licensor's review and approval, which approval shall apply to, without limitation, the selection of -2- (and approval of any changes in) the officers and directors of Licensee, the structure of the Offering, the escrow agent for the SMA2RT offering, the investment banker for the SMA2RT offering, the underwriter for the SMA2RT offering, copies of any letters of intent or underwriting agreements relating to or involving SMA2RT offerings, as well as copies of any and all comment letters received from the SEC and state securities or "blue sky" authorities in respect thereof, and any and all responses thereto. 6. QUALITY MAINTENANCE. Licensee agrees to cooperate with Licensor in facilitating Licensor's control of the nature and quality of Licensee's use of the Intellectual Property, to permit reasonable inspection of Licensee's operations related to its use of the Intellectual Property, and to supply Licensor with specimens of all uses of the Intellectual Property upon request. Licensee shall comply with all applicable laws and regulations pertaining to the use of the Intellectual Property as contemplated by this Agreement. 7. INFRINGEMENT PROCEEDINGS. Licensee agrees to notify Licensor of any unauthorized use of the Intellectual Property promptly as it comes to Licensee's attention. Either party shall have the right and discretion to bring proceedings, whether in law or equity, against such unauthorized use, at its sole expense. 8. TERM. The License granted hereunder shall commence as of the date hereof and shall continue for a period of one (1) year thereafter, unless sooner terminated as provided herein; provided, however, that in the event that the Licensee successfully closes its Offering, the Licensee shall have the right to continue to use the Intellectual Property until the earlier of: (i) the closing date of the Business Combination or (ii) the liquidation of the offering proceeds held in the escrow account. 9. TERMINATION. Licensor shall have the right to terminate the License granted hereunder upon fifteen (15) days' written notice to Licensee in the event of nay affirmative act of insolvency by Licensee, or upon the appointment of any receiver or trustee to take possession of the property of Licensee or upon the winding up, sale, consolidation, or merger of Licensee, or upon the breach of any material provisions hereof by Licensee (which breach is not cured within thirty (30) days after written notice thereof by Licensor). Notwithstanding any of the foregoing or anything to the contrary in this Agreement, in the event that the Licensee does not close its Offering within thirty (30) days from the date that the SEC has advised the Licensor that it has no further comment on the Registration Statement and that the Licensee may request that the Registration Statement be declared effective, or the Registration Statement has not been declared effective within sixty (60) days from the date hereof, then the License granted hereunder may be immediately terminated by written notice of either Licensor or Licensee and thereupon shall be of no further force and effect. -3- Licensee shall give Licensor, as and when it receives same, all copies of any correspondence it receives from the SEC and will otherwise advise Licensor of the content of any oral or written communications it receives or otherwise initiates or participates with the SEC. In addition, it shall be a condition to the continuing validity of the License granted hereunder that each person becoming an officer of director of Licensee subsequent to the date hereof specifically acknowledge and agree on the date of their appointment or election to the provisions of this Agreement. Licensor shall provide Licensor with written notice within three (3) days of the appointment or election of any new officers or directors of Licensee, and shall provide to Licensor, together with such notice, such person's written acknowledgement and agreement to the provisions of this Agreement. Licensor shall have the right to terminate the License granted hereunder immediately in the event that any such written notice to Licensee does not include the required undertaking referred to above. 10. EFFECT OF TERMINATION. Upon termination of the Licensee granted hereunder, Licensee agrees to immediately discontinue all use of the Intellectual Property and any items derived therefrom, or confusingly similar thereto, and that all rights in the Intellectual Property and goodwill contained therewith shall remaining the property of Licensor. Licensee's obligations under Sections 3 and 10 of this Agreement shall survive any termination of this Agreement and/or the License granted hereunder. 11. NOTICES. All notices and other communications herein provided for shall be sent by postage prepaid, registered, or certified mail, return receipt requested, or delivered personally or by overnight carrier to the parties at their respective addresses as set forth on the first page of this Agreement or to such other address as either party shall give to the other party in the manner provided herein for given notice. Notice by mail shall be considered given on the date received. Notice personally delivered or by overnight carrier shall be considered given at the time it is delivered. 12. ASSIGNABILITY. No right or obligation under this Agreement shall be assignable by Licensee without the prior written consent of Licensor. 13. SUCCESSOR AND PERMITTED ASSIGNS. This Agreement shall inure to the benefit of and be binding upon each of the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer upon any persons, other than the parties hereof, Bright and their respective successors and permitted assigns, any rights or remedies under or by any reasons thereof. -4- 14. MODIFICATION OR AMENDMENT. Any modification or amendment of any provision of this Agreement must be in writing, signed by the parties hereto, and dated subsequent to the date hereof. 15. WAIVER. The failure by either party to exercise any of its rights under this Agreement or to require the performance of any term of provision of this Agreement, or the waiver by either party or any breach of this Agreement, shall not prevent a subsequent breach of the same or any other term of provision of this Agreement. Any waiver of the performance of any of the terms or conditions of this Agreement shall be effective only if in writing and signed by the party against whom such waiver is to be enforced. 16. VALIDITY. Licensee represents to Licensor that it has full authority to execute and to perform this Agreement in accordance with its terms; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of Licensee and no further authorization or approval, whether of the stockholders or directors of Licensee or governmental bodies or otherwise, is necessary in order to enable Licensee to enter into and perform the same; and this Agreement constitutes a valid and binding obligation enforceable against Licensee in accordance with its terms. If any of the terms and provisions of this Agreement are deemed by a court of competent jurisdiction to be invalid or unenforceable, such terms or provisions shall not invalidate the rest of this Agreement which shall nonetheless remain in full force and effect as if such invalidated or unenforceable terms and provisions had not been made part of this Agreement. 17. HEADINGS. Headings are included solely for convenience of reference and are not to be considered part of this Agreement. 18. NO JOINT VENTURE. This is an agreement between separate legal entities and neither party is the agent of the other for any purpose whatsoever. The parties do not intend to create a partnership or joint venture between themselves. Neither party shall have the right to bind the other party to any agreement with a third party or to incur any obligation or liability on behalf of the other party. 19. COMPLETE AGREEMENT. This Agreement contains the entire Agreement between the parties concerning the subject matter hereof and there are no collateral or precedent representations, agreements or conditions not specifically set forth herein. This Agreement supersedes the prior Agreement in its entirety. 20. LAW GOVERNING AGREEMENT. The validity of this Agreement and the rights, obligations and relations of the parties hereunder shall be construed and determined under and in accordance with the -5- laws of the State of New York without giving effect to the conflict of laws rules of such State. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. BRIGHT LICENSING CORP. ORION ACQUISITION CORPORATION I By:___________________________ By:___________________________ Dominic Bassani David Jan Mitchell President Chief Executive Officer ACKNOWLEDGED AND AGREED: ______________________________ David Jan Mitchell ______________________________ C. Thomas McMillen ______________________________ A. J. Nassar -6- EXHIBIT A Essentially, a SMA2RT deal is a blind pool that consists of two sets of securities which allow the investor to either: 1. Purchase a security (the "Secured Security") of which all of the proceeds are placed into an escrow for the benefit of the investor and which will be returned if the company does not effect a business combination; 2. Purchase a separate security (the "Risk Security") that is either exchangeable or convertible into the Secured Security upon the successful completion of a business combination and whose proceeds are not escrowed and are totally at risk. In addition, the proceeds of this security are used to pay the offering expenses, including license fees and underwriting discounts as well as provide working capital for the stated purpose of concluding a business combination; 3. Lastly, the investors in the Risk Security will achieve a higher rate of return than those in the Secured Security due to the fact that their conversion rate will be substantially less than the price paid by the secured holders. Therefore, SMA2RT essentially allocates the risk in the transaction to different securities and structures their convertibility into the eventual common stock at the completion of a business combination which will provide different levels of return on investment based not upon the total investment but based upon the risk as represented by the different securities. The SMA2RT structure does not include, without limitation, the following: A "blind pool" securities offering exempt under Rule 419 which consists of "Units" registered with the SEC at the time of the effective date of the offering, with each Unit consisting of one share of common stock and one "Class A Warrant," where (i) no separate Risk Security is registered at the time of the IPO; or (ii) 10% or more of the proceeds of the sale of the Units are not required to be escrowed; or A "blind pool" securities offering for a specified industry or business area, structured as a GKN SPAC type of transaction, such as the transactions which Mr. Mitchell has previously acted as principal; or A "blind pool" securities offering not exempt under Rule 419, as currently in effect. -7- EX-10.5 11 CLASS B STOCK OPTION AGREEMENT Exhibit 10.5 CLASS B STOCK OPTION AGREEMENT NORTH ATLANTIC ACQUISITION CORP. CLASS B STOCK OPTION AGREEMENT made as of the day of June, 1997, between NORTH ATLANTIC ACQUISITION CORP., a Delaware corporation, with principal offices at 850 Third Avenue, 10th Floor, New York, New York 10022 (hereinafter called the "Corporation"), and _____________________, having an address ________ ________________________________________________________ (hereinafter called the "Optionee"). WHEREAS, the Corporation desires, by affording the Optionee an opportunity to purchase Class B Stock which are exchangeable into units consisting of one share of Class A common stock and one Series A Warrant to purchase one share of Class A common stock (hereinafter called "Class B Stock"), as hereinafter provided. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows: 1. GRANT OF OPTION. The Corporation hereby irrevocably grants to the Optionee a option (hereinafter called the "Option") to purchase all or any part of an aggregate of Fifteen Thousand (15,000) shares of Class B Stock. 2. VESTING. The Option shall be exercisable prior to or upon the consummation of a Business Combination as described in the Corporation's Registration Statement on Form SB-2 (No. 33-80647). The option shall expire upon the consummation of a Business Combination. 3. OPTION PRICE. The exercise price of the options shall be $10.00 per share of Class B Stock purchased. 4. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of this Option Agreement, in the event the Optionee desires to exercise the Option, he shall deliver written notice to the Corporation as set forth herein on the form attached hereto as EXHIBIT A. Such notice shall state the intention to exercise the Option and the number of Shares in respect of which the Optionee intends to exercise the Option. Upon receipt of such notice, the Corporation shall, within five (5) business days of its receipt of such notice, provide the Optionee with instructions concerning the exercise of the Option and the payment for the shares of Class B Stock to be acquired pursuant to the exercise of the Option. 5. NON-TRANSFERABILITY OF OPTION. The Option shall not be transferable otherwise than by will or the laws of descent and distribution of the state wherein the Optionee is domiciled at the time of his death. The Option may be exercised, during the lifetime of the Optionee only by him. The Option may not be assigned, transferred, pledged, or hypothecated in any way, shall not be assignable by operation of law, and shall not be subject to execution, attachment, or similar process. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of the Option contrary to the provisions hereof, and the levy of any execution, attachment, or similar process upon the Option, shall be null and void and without effect. 6. CHANGES IN CAPITAL STRUCTURE. In the event that a dividend shall be declared upon the Corporation's common stock payable in common shares, the number of shares then subject to the Option shall be adjusted by adding to each such share the number of shares which would be distributable in respect thereof if such shares had been outstanding on the date fixed for determining the shareholders of the Corporation entitled to receive such share dividend. In the event that the outstanding shares shall be changed into or exchanged for a different number of shares or other securities of the Corporation or of another corporation, whether through reorganization, recapitalization, split-up, combination of shares, merger, or consolidation, then there shall be substituted for each share subject to the Option the number and kind of shares or other securities into which each outstanding share shall have been so changed or for which each such share shall have been exchanged. In the event there shall be any change, other than as specified in this paragraph, in the number or kind of outstanding shares or of any shares or other securities into which such shares shall have been changed or for which they shall have been exchanged, then if the Board of Directors shall, in its sole discretion, determine that such change equitably requires an adjustment in the number or kind of shares theretofore reserved for the grant of options pursuant to the Plan but not yet subject to option and of the shares then subject to an option or options, such adjustments shall be made by the Board of Directors and shall be effective and binding for all purposes of the Plan and of each option outstanding thereunder, including the Option. In the case of any such substitution or adjustment as provided for in this paragraph, the aggregate purchase price for all shares issuable upon exercise of the Option prior to such substitution or adjustment and all shares or other securities adjusted pursuant to this paragraph shall be equal to the aggregate purchase price for all shares issuable upon exercise of the option prior to such substitution or adjustment. No adjustment or substitution provided for in this paragraph shall require the Corporation to sell a fractional share, and the total substitution or adjustment with respect to the Option shall be limited accordingly. Upon any adjustment made pursuant to this paragraph, the Corporation will, upon request, deliver to the Optionee or to the Successors of the Optionee a certificate of its Treasurer setting forth the purchase price thereafter in effect and the number and kind of shares or other securities thereafter purchasable on the exercise of the Option. 10. SALE OF THE CORPORATION. In the case of a Sale of 2 the Corporation as herein defined, in the discretion of the Board of Directors options previously granted and vested shall remain exercisable for a period of twenty (20) days from the date notice of such Sale is given to the Optionees. Upon the expiration of the twenty (20) day period, all then unexercised options shall be permanently cancelled. For purposes of this paragraph, a Sale shall be deemed to occur upon the happening of any one of the following: (i) A sale of all or substantially all of the Corporation's assets outside the ordinary course of business; (ii) An offer to purchase at least a majority of the Corporation's issued and outstanding common stock or an offer to the Corporation's shareholders to tender for sale at least a majority of the Corporation's issued and outstanding common stock, which offer is accepted or tender made with respect to at least a majority of the Corporation's issued and outstanding shares of common stock; (iii) The merger or consolidation of the Corporation with another corporation or entity; (iv) A dissolution or liquidation of the Corporation. 12. LISTING AND REGISTRATION OF SHARES. The Corporation shall, within forty five days (45) after the exercise of all of the Options granted hereby and the Class B Stock Options granted to Mr. C. Thomas McMillen [David J. Mitchell], use its best efforts to register shares of Class B Stock underlying the Option by causing to be filed with the Commission, a registration statement (the "Registration Statement") on Form S-1, Form S-2 or Form S-3 if the use of such form is then available. If the Corporation determines in good faith judgment of the Corporation's counsel that the filing of a registration stsatement would require the disclosure of material information which the Corporation has a good faith business purpose for preserving as confidential or the Corporation is unable to comply with Commission requirements, the Corporation shall not be required to commence using its best efforts to effect a registration pursuant to this Section until the date upon which such material information is disclosed to the public (it being understood that nothing herein shall require such disclosure) or ceases to be material. 13. GENERAL. The Corporation shall at all times during the term of the Options reserve and keep available such number of shares of Class B Stock as will be sufficient to satisfy the requirements of this Option Agreement, shall pay all original issue and transfer taxes with respect to the issue and transfer of the shares of Class B Stock pursuant hereto and all other fees and expenses necessarily incurred by the Corporation in connection 3 therewith, and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Corporation, shall be applicable thereto. 14. NOTICES. All notices under the Plan shall be in writing, and if to the Corporation, shall be delivered to the Treasurer of the Corporation or mailed to its principal office, addressed to the attention of the Treasurer; and if to the Optionee, shall be delivered personally or mailed to the Optionee at the address appearing in the payroll records of the Corporation or its subsidiaries. Such addresses may be changed at any time by written notice to the other party. IN WITNESS WHEREOF, the Corporation has caused this Option Agreement to be duly executed by its officer thereunto duly authorized, and the Optionee has hereunto set his hand and seal, all on the date and year first written above. NORTH ATLANTIC ACQUISITION CORP. By:____________________________________ DAVID J. MITCHELL, Chief Executive Officer ____________________________________ 4 EXHIBIT A NOTICE OF INTENTION TO EXERCISE OPTIONS Name:____________________________________ Date:_________________ Street Address:__________________________ City:_________________ State:___________________________________ Zip Code:_____________ I intend to exercise the Option granted to me by North Atlantic Acquisition Corp. on June , 1997. Number of shares subject to the Option I intend to exercise: ________________________________________ Total payment to be required upon exercise:__________________ _______________________________ Optionee Signature 5 EX-23.1 12 CONSENT OF BDO SEIDMAN, LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS North Atlantic Acquisition Corp. New York, New York We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated November 12, 1996, relating to the financial statements of North Atlantic Acquisition Corp., which is contained in that Prospectus. We also consent to the reference to us under the caption "Experts" in the Prospectus. BDO Seidman, LLP New York, New York June 11, 1997 -----END PRIVACY-ENHANCED MESSAGE-----