-----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, E7f0hjT1Bk36YVkttcSyaT0wCWhgo05DweKG804kTfsHvJ2kG2Z5IDE4pXZxBATg 87+ckhz1d5Fe0QYCcHvAKA== 0000950136-97-000395.txt : 19970409 0000950136-97-000395.hdr.sgml : 19970409 ACCESSION NUMBER: 0000950136-97-000395 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19970407 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: 1997 CORP CENTRAL INDEX KEY: 0001036824 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-24671 FILM NUMBER: 97575758 BUSINESS ADDRESS: STREET 1: 407 E GRAND RIVER CITY: BRIGHTON STATE: MI ZIP: 48116 BUSINESS PHONE: 8102201220 MAIL ADDRESS: STREET 1: 407 E GRAND RIVER CITY: BRIGHTON STATE: MI ZIP: 48116 SB-2 1 REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON______, 1997 REGISTRATION NO- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- 1997 CORP. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6799 (A BLANK CHECK 13-3936988 COMPANY) (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYEE INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
315 WEST 106TH STREET, 4TH FLOOR NEW YORK, NEW YORK 10025 (212) 678-6231 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Judith Haselton, President 1997 Corp. 315 West 106th Street, 4th Floor New York, New York 10025 (212) 678-6231 (Name, address, including zip code, and telephone number, including area code, of agent for service) COPIES TO: Joseph A. Smith, Esq. Epstein Becker & Green, P.C. 250 Park Avenue New York, New York 10177 (212) 351-4924 --------------- 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. [X] CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (1) OFFERING PRICE (1) REGISTRATION FEE - -------------------------------------------------------------------------------------------------------- COMMON STOCK, $0.001 PAR VALUE 30,000 $5.00 $150,000 $45.45 - -------------------------------------------------------------------------------------------------------- TOTAL $45.45 - --------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(b). -------------- 1997 CORP. 30,000 SHARES OF COMMON STOCK AT A PRICE OF $5.00 PER SHARE 1997 Corp., a Delaware corporation (the "Company"), hereby offers 30,000 shares of Common Stock, par value $.001 per share (the "Common Stock"). Prior to this offering, there has been no public market for the shares of Common Stock and there can be no assurance that such a market will develop for such securities after the completion of this offering. The offering price of the Common Stock has been arbitrarily determined by the Company and bears 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 price of the Common Stock see "Risk Factors." THE COMPANY IS CONDUCTING A BLANK CHECK OFFERING SUBJECT TO THE SECURITIES AND EXCHANGE COMMISSION'S RULE 419 OF REGULATION C UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). A MINIMUM OF 90% OF THE OFFERING PROCEEDS, AND THE SECURITIES PURCHASED BY INVESTORS WILL BE DEPOSITED INTO AN ESCROW ACCOUNT (THE "DEPOSITED FUNDS" AND "DEPOSITED SECURITIES," RESPECTIVELY). WHILE HELD IN THE ESCROW ACCOUNT, THE DEPOSITED SECURITIES MAY NOT BE TRADED OR TRANSFERRED. EXCEPT FOR AN AMOUNT UP TO 10% OF THE DEPOSITED FUNDS ($15,000), OTHERWISE RELEASABLE UNDER THE RULE, THE DEPOSITED FUNDS AND THE DEPOSITED SECURITIES MAY NOT BE RELEASED UNTIL AN ACQUISITION IS MADE WHICH MEETS THE CRITERIA SPECIFIED IN RULE 419, AND A SUFFICIENT NUMBER OF INVESTORS (I.E. A MINIMUM NUMBER OF INVESTORS REPRESENTING 80% OF THE OFFERING PROCEEDS) RECONFIRM THEIR INVESTMENT IN ACCORDANCE WITH RULE 419 PROCEDURES. PURSUANT TO THESE PROCEDURES, A NEW PROSPECTUS, WHICH DESCRIBES AN ACQUISITION CANDIDATE AND ITS BUSINESS AND INCLUDES AUDITED FINANCIAL STATEMENTS, WILL BE DELIVERED TO ALL INVESTORS. THE COMPANY MUST RETURN THE PRO RATA PORTION OF THE DEPOSITED FUNDS AND INTEREST, IF ANY, TO ANY INVESTOR WHO DOES NOT ELECT TO REMAIN AN INVESTOR. UNLESS A SUFFICIENT NUMBER OF INVESTORS ELECT TO REMAIN SO, ALL INVESTORS WILL BE ENTITLED TO THE RETURN OF THEIR PRO RATA PORTION OF THE DEPOSITED PROCEEDS AND INTEREST, IF ANY, AND NONE OF THE DEPOSITED SECURITIES WILL BE ISSUED TO INVESTORS. IN THE EVENT AN ACQUISITION IS NOT CONSUMMATED WITHIN 18 MONTHS OF THE EFFECTIVE DATE, THE DEPOSITED PROCEEDS AND INTEREST, IF ANY, WILL BE RETURNED ON A PRO RATA BASIS TO ALL INVESTORS. (SEE "INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419.") 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" ON PAGE 7 AND "DILUTION." 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 Share $5.00 $0 $5.00 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Total $150,000 $0 $150,000 =============================================================================== (1) The Shares will be offered by the Company on an "all or none, best efforts" basis for 30,000 Shares. No commissions will be paid to any member of management. See "Plan of Offering." (2) Before deducting expenses in connection with this blank check offering estimated at $20,000, including legal, accounting and filing fees and printing costs. It is estimated that all of the offering proceeds will remain for the Company's business purposes. (3) The proceeds from the offering will be deposited into escrow with the Escrow Agent (as defined). See "The Company -- Escrow of Offering Proceeds." The Common Stock is being offered by the Company, subject to prior sale, when, as and if delivered to and accepted by the Company, and subject to its right to withdraw, cancel or modify this offering and to reject any order in whole or in part. --------------- 1997 CORP. 315 WEST 106TH STREET FOURTH FLOOR NEW YORK, NEW YORK 10025 The date of this Prospectus is ______, 1997. 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 LOUISIANA, BY COORDINATION IN DELAWARE, ILLINOIS, MARYLAND, RHODE ISLAND AND SOUTH CAROLINA AND BY NOTIFICATION IN COLORADO, FLORIDA 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. THERE IS NO MINIMUM PURCHASE REQUIREMENT BY INDIVIDUAL INVESTORS OF THE SHARES BEING OFFERED. HOWEVER, UNLESS ALL OF THE SHARES ARE SOLD WITHIN NINETY (90) DAYS FROM THE EFFECTIVE DATE OF THIS PROSPECTUS, (180 days if extended by the Company) ALL SUBSCRIPTION PAYMENTS WILL BE PROMPTLY RETURNED TO SUBSCRIBERS IN FULL WITH INTEREST THEREON. THE COMPANY WILL AMEND THE PROSPECTUS FOR THE PURPOSE OF DISCLOSING ADDITIONAL STATES, IF ANY, IN WHICH THE COMPANY'S SECURITIES WILL HAVE BEEN REGISTERED OR QUALIFIED. (SEE "RISK FACTOR - RESTRICTED RESALES OF THE OFFERED SECURITIES.") THE SHARES ARE OFFERED SUBJECT TO PRIOR SALE, ACCEPTANCE OF AN OFFER TO PURCHASE, AND TO WITHDRAWAL OR CANCELLATION WITHOUT NOTICE. THE OFFERING CANNOT BE MODIFIED UNLESS AN AMENDED REGISTRATION STATEMENT IS FILED AND DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION. ALL PAYMENTS FOR THE SECURITIES SHALL BE MADE PAYABLE TO THE ORDER OF "1997 CORP. ESCROW ACCOUNT" AND SHALL BE DEPOSITED BY NOON OF THE NEXT BUSINESS DAY FOLLOWING RECEIPT IN AN ESCROW ACCOUNT FOR THE BENEFIT OF SUBSCRIBERS TO BE ENTITLED "1997 CORP. ESCROW ACCOUNT" OR A SIMILAR DESIGNATION, MAINTAINED AT CONTINENTAL STOCK TRANSFER & TRUST COMPANY AT #2 BROADWAY, 19TH FLOOR NEW YORK, NEW YORK, 10004, AS ESCROW AGENT. THE COMPANY INTENDS TO SUPPLY ITS SHAREHOLDERS WITH ANNUAL REPORTS CONTAINING FINANCIAL INFORMATION EXAMINED AND REPORTED UPON, WITH AN OPINION EXPRESSED BY INDEPENDENT CERTIFIED ACCOUNTANTS. THE COMPANY'S FISCAL YEAR END IS DECEMBER 31st. IN ADDITION, THE COMPANY MAY FURNISH UNAUDITED QUARTERLY OR OTHER INTERIM REPORTS TO ITS SHAREHOLDERS AS IT DEEMS APPROPRIATE. THE COMPANY IS SUBJECT TO THE REPORTING REQUIREMENTS OF SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 AND IN ACCORDANCE THEREWITH, WILL FILE REPORTS AND OTHER INFORMATION WITH THE SECURITIES AND EXCHANGE COMMISSION. IN THE EVENT THE COMPANY NO LONGER WOULD BE REQUIRED TO FILE REPORTS AND OTHER INFORMATION WITH THE COMMISSION UNDER THE SECURITIES EXCHANGE ACT, THE COMPANY INTENDS NONETHELESS TO CONTINUE TO FILE SUCH REPORTS. COPIED OF THESE REPORTS AND OTHER INFORMATION FILED BY THE REGISTRANT CAN BE INSPECTED AND COPIED AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE COMMISSION AT 450 FIFTH STREET, N.W., WASHINGTON, D.C. 20549, AND AT THE NEW YORK REGIONAL OFFICE OF THE SECURITIES AND EXCHANGE COMMISSION, 7 WORLD TRADE CENTER, 13TH FLOOR, NEW YORK, NEW YORK 10048. COPIES OF SUCH MATERIAL CAN BE OBTAINED FROM THE PUBLIC REFERENCE SECTION OF THE COMMISSION, WASHINGTON, D.C. 20549, AT PRESCRIBED RATES NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE TO ANY PERSON IN ANY STATE, TERRITORY, OR POSSESSION OF THE UNITED STATES IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED BY THE LAWS THEREOF, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. UNTIL 90 DAYS AFTER THE EFFECTIVE DATE OF THIS PROSPECTUS 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 OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. AS HERETOFORE INDICATED, THE SHARES OFFERED BY THIS PROSPECTUS ARE PURELY SPECULATIVE IN NATURE. THE COMPANY MAKES NO GUARANTEES, WARRANTIES OR OTHER REPRESENTATIONS TO THE CONTRARY. 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. 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 March 17, 1997 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 and other borrowing 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 offering proceeds (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. 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. None of the Company's officers, directors or promoters, and no other affiliate of the Company has had any preliminary contact or discussions with any representative of any other company regarding the possibility of an acquisition or merger between the company and such other company. The Company and its promoters know of no person or group of persons who are likely to purchase, beneficially own or control any portion of the securities of this offering. There are no plans, proposals or arrangements or understandings with respect to the sale of additional securities to affiliates, current shareholders or others following this offering, but prior to the location of a business opportunity. Prior to any merger or acquisition, the Company will provide its shareholders with a post-effective prospectus, including audited financial statements, concerning targeted entity and its business. BUSINESS EXPERIENCE OF PRINCIPALS 1 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. RETENTION OF INVESTMENT BANKER At some time following the completion of this offering, the Company may engage an 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. INVESTORS RIGHTS TO RECONFIRM INVESTMENT UNDER RULE 419 DEPOSIT OF OFFERING PROCEEDS AND SECURITIES Rule 419 requires that the net offering proceeds, after deduction for offering expenses, and all securities to be issued, be deposited into an escrow or trust account (the "Deposited Funds" and "Deposited Securities," respectively) governed by an agreement which contains certain terms and provisions specified by the Rule. Under Rule 419, the Deposited Funds and Deposited Securities will be released to the Company and to investors, respectively, only after the Company has met the following three conditions. First, the Company must execute an agreement for an acquisition(s) meeting certain prescribed criteria. Second, the Company must successfully complete a reconfirmation offering which includes certain prescribed terms and conditions. Third, the acquisition(s) meeting the prescribed criteria must be consummated (see "Prescribed Acquisition Criteria" and "Reconfirmation Offering" below). Accordingly, the Company has entered into an escrow agreement with Continental Stock Transfer & Trust Company (the "Escrow Agent") which provides that: (1) The net proceeds are to be deposited into an escrow account maintained by the Escrow Agent. The Deposited Funds and the interest or dividends thereon, if any, are to be held for the sole benefit of the investors and can be only invested in bank deposits, in money market mutual funds or federal government securities or securities for which the principal or interest is guaranteed by the federal government. (2) All securities issued in connection with the offering and any other securities issued with respect to such securities, including securities issued with respect to stock splits, stock dividends or similar rights are to be deposited directly into the escrow account promptly upon issuance. The identity of the investors are to be included on the stock certificates or other documents evidencing the securities. The securities held in the escrow account are to remain as issued and deposited and are to be held for the sole benefit of the investors who retain the voting rights, if any, with respect to the securities held in their names. The securities held in the escrow account may not be transferred, disposed of nor any interest created therein other than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order issued by a court in connection with divorce proceedings. (3) Warrants, convertible securities or other derivative securities, if any, relating to securities held in the escrow account may be exercised or converted in accordance with the terms provided; however, the securities received upon exercise or conversion together with any cash or other consideration paid in connection with the exercise or conversion, are to be promptly deposited into the escrow account. 2 PRESCRIBED ACQUISITION CRITERIA Rule 419 requires that before the Deposited Funds and the Deposited Securities can be released the Company must first execute an agreement(s) to acquire an acquisition candidate(s) meeting certain specified criteria. The agreement must provide for the acquisition of a business(es) or assets for which the fair value of the business(es) represents at least 80% of the offering proceeds. For purposes of this offering, the fair value of the business(es) or assets to be acquired must be at least $120,000. Once the acquisition agreement(s) meeting the above criteria have been executed, the Company must successfully complete the mandated reconfirmation offering, as discussed below, and consummate the acquisition(s). POST-EFFECTIVE AMENDMENT Once the agreement(s) governing the acquisition(s) of (a) business(es) meeting the above criteria has been executed, Rule 419 requires the Company to update the registration statement with a post-effective amendment. The post-effective amendment must contain information about the proposed acquisition candidates(s) and its business(es), including audited financial statements; the results of this offering; and the use of the funds disbursed from the escrow account. The post-effective amendment must also include the terms of the reconfirmation offer mandated by Rule 419. The reconfirmation offer must include certain prescribed conditions which must be satisfied before the Deposited Funds and Deposited Securities can be released from escrow. RECONFIRMATION OFFERING The reconfirmation offer must commence within five business days after the effective date of the post-effective amendment. Pursuant to Rule 419, the terms of the reconfirmation offer must include the following conditions: (1) The prospectus contained in the post-effective amendment will be sent to each investor whose securities are held in the escrow account within five business days after the effective date of the post-effective amendment; (2) Each investor will have no fewer than 20, and no more than 45 business days from the effective date of the post-effective amendment to notify the Company in writing that the investor elects to remain an investor; (3) If the Company does not receive written notification from any investor within 45 business days following the effective date, the pro-rata portion of the Deposited Funds (and any related interest or dividends) held in the escrow account on such investor's behalf will be returned to the investor within five business days by first class mail or other equally prompt means; (4) The acquisition(s) will be consummated only if a minimum number of investors representing 80% of the maximum offering proceeds elect to reconfirm their investments; (5) If a consummated acquisition(s) has not occurred within 18 months from the date of this Prospectus, the Deposited Funds held in the escrow account shall be returned to all investors on a pro-rata basis within five business days by first class mail or other equally prompt means. (6) Investors who receive their pro rata portion of the Deposited Funds will also receive their pro rata portion of their accrued interest. Investors who elect to remain investors will not receive any interest when their pro-rata portion of the Deposited Funds is released to the Company. 3 RELEASE OF DEPOSITED SECURITIES AND DEPOSITED FUNDS The Deposited Funds and Deposited Securities may be released to the Company and the investors, respectively, after the escrow agent has received a signed representation from the Company and any other evidence acceptable by the escrow agent that: (1) The Company has executed an agreement for the acquisition(s) of a business(es) for which the fair value of the business represents at least 80% of the maximum offering proceeds and has filed the required post-effective amendment; (2) The post-effective amendment has been declared effective, that the mandated reconfirmation offer having the conditions prescribed by Rule 419 has been completed and that the Company has satisfied all of the prescribed conditions of the reconfirmation offer. (3) The acquisition(s) of the business(es) with the fair value of at least 80% of the maximum proceeds is (are) consummated. THE OFFERING This prospectus relates to a total of 30,000 Common Shares (par value $.001 per share) at an offering price of $5.00 per Share (the "Shares"). This offering is made on an "all or none, best efforts" basis. The offering period is 90 days which may be extended an additional 90 days. Offering Price Per Share........................................... $5.00 Shares Offered .................................................... 30,000 Common Shares Outstanding Prior to Offering........................ 15,000 Common Shares to be Outstanding After Offering..................... 45,000 Gross Proceeds to Company.......................................... $150,000 The authorized capital stock of the Company consists of 10,000,000 shares (par value $.001 per share) and 2,000,000 preferred shares (par value $.01 per share). RISK FACTORS The securities offered hereby 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 Shares and there can be no assurance that such a market will develop after release of the Deposited Securities. Such risk factors include, among others, the following: the Company's lack of operating history and limited resources; 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 4 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). All of the gross proceeds of the offering by the Company 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 a specific business has been acquired with a fair value of at least $120,000 (80% of the gross proceeds of this offering), or (ii) to distribute the escrowed proceeds, in connection with a liquidation of the Company, to the then holders of the Shares sold in this offering. All proceeds held in the escrow account will be invested, until released, in direct investments in short-term United States government securities, including treasury bills, cash and cash equivalents. 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 in their capacities as such 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 , 1997 -------------- ACTUAL ADJUSTED(1) --------- ----------- Balance Sheet Data: Total assets.......................................................... $20,000 $150,000 Total liabilities..................................................... 0 0 Common stock and additional paid-in-capital(1)........................ 20,000 150,000 -- Accumulated deficit during development stage.......................... 0 0 --------- ----------- Total stockholders' equity including amount subject to redemption(2)...................................................... 20,000 150,000
- -------------- (1) Gives effect to the sale of the Shares at the initial public offering price of $5.00 per Share (after the payment of all estimated offering expenses). See "Use of Proceeds". (2) In the event the Company consummates a Business Combination, the redemption rights afforded to the purchasers in this 5 offering 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 6,000 shares, at a per share redemption price equal to their original investment plus a pro-rata share of any interest accrued in the Escrow Account. 6 THE COMPANY BUSINESS OBJECTIVE The Company, which is a "blank check" or "blind pool" company, was formed in March 1997 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 and other 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 gross proceeds of this offering ($120,000) 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. 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 Shares offered hereby. See "Proposed Business." The Company was organized under the laws of the State of Delaware on March 17, 1997. The Company's office is located at 315 West 106th Street, Fourth Floor, New York, New York 10025 and its telephone number is (212) 678-6231. 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. See "Management." POSSIBLE RETENTION OF INVESTMENT BANKER The Company may retain an investment banking firm to aid in identifying, evaluating, structuring, negotiating and consummating a Business Combination. 7 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. NO OPERATING HISTORY; LIMITED RESOURCES; NO PRESENT SOURCE OF REVENUES The Company, incorporated on March 17, 1997, 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. 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." "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. 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 Shares 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 8 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, the time and expense incurred to comply and compliance 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 Target Business or industry 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. 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, 9 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." 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. 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 10 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. 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 Common Stock (before giving effect to 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 may have similar legal obligations to present certain business opportunities to multiple entities. There can be no assurance that any 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 may retain an independent investment banking firm to assist the Company in this regard, 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." IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION This offering involves an immediate and substantial dilution of $1.67 per share between the pro forma net tangible book value per share after the offering of $3.33 and the initial public offering price of $5.00 per share allocable to each Share. The existing stockholders of the Company acquired their 11 shares of Common 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. See "Dilution." 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, 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 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. Although the Company anticipates that the net proceeds of this offering will be sufficient to effect a Business 12 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, already be subject to all the risks inherent thereto. See "Use of Proceeds" and "Proposed Business." RECONFIRMATION RIGHTS At the time the Company executes an agreement for a potential Business Combination, the Company will offer to each of the non-affiliated public stockholders of the Company the right, for a specified period of time of not less than 20 business days and not more than 45 business days, to reconfirm his or her investment, or else his shares of Common Stock will be redeemed at a price equal to the purchase price of such shares plus any accrued interest on such purchase price in the Proceeds Escrow Account ("Liquidation Value") as of the Record Date. The Reconfirmation Offer will be described in the disclosure documentation relating to the proposed Business Combination. In connection with the Reconfirmation Offer, should non-affiliated public stockholders holding 20% or less of the Common 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 Common Stock elect to redeem their shares, the Company will not proceed with the proposed Business Combination and will not redeem any shares of Common Stock. As a result of the foregoing, the Company's ability to consummate a particular Business Combination may be 13 impaired. POSSIBLE LIQUIDATION OF THE COMPANY IF NO BUSINESS COMBINATION If the Company does not effect a Business Combination within 18 months from the date of this Prospectus, the Company will distribute to the holders of Common Stock acquired in this offering the amount of their original investment plus a pro-rata share of all interest accrued in the Funds Escrow Account. There can be no assurance that the Company will effect a Business Combination within 18 months from the date of this Prospectus. 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 of a specific form of corporate structure and compliance with certain burdensome reporting, record keeping, 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. STATE BLUE SKY REGISTRATION; RESTRICTED RESALES OF THE SECURITIES The ability to register or qualify for sale the Shares 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, 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 Louisiana, by coordination in Delaware, Illinois, Maryland, Rhode Island and South Carolina and by notification in Colorado, Florida and New York. Exemptions from registration have been obtained (or are otherwise available) in Hawaii and the District of Columbia. No resales of the Shares will be permitted while such shares remain in the Securities Escrow. 14 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." AUTHORIZATION OF ADDITIONAL SECURITIES The Company's Certificate of Incorporation authorizes the issuance of 10,000,000 shares of Common Stock. Upon completion of this offering there will be 9,955,000 authorized but unissued shares of Common Stock available for issuance. 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 will occur which may affect, among other things, the Company's ability to utilize net operating loss carry forwards, 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 2,000,000 shares of preferred stock (the "Preferred Stock"), with such designations, powers, preferences, rights, qualifications, limitations and restrictions and in 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. 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 no outstanding shares of Preferred Stock. See "Proposed Business" and "Description of Securities." 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 Common Stock. The initial public offering prices of the Shares has been arbitrarily determined by the Company and bear no relationship to any established valuation criteria such as assets, book value or prospective earnings. COMPLIANCE WITH PENNY STOCK RULES 15 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 for the Company's Shares was to drop below $5, the Shares 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 other 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 not have assets in excess of $5 million. 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 None of the 15,000 shares of Common 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"). However, such shares may be registered under the Securities Act for sale at the time of a Business Combination and will be freely tradable at that time. 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 Common 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 Common 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 Common 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 Common Stock or the availability of such shares for sale will have on the market prices for shares of Common Stock prevailing from time to time. Nevertheless, the sale of substantial amounts of Common Stock in the public market would likely adversely affect prevailing market prices for the Common Stock and could impair the Company's ability to raise capital through the sale of its equity securities. See "Shares Eligible for Future Sale." OFFERING IS SUBJECT TO PENNY STOCK RULES AND BROKER-DEALER SALES OF COMMON SHARES IN THE SECONDARY MARKET The Securities and Exchange Commission (the "Commission") has adopted regulations which define a "penny stock" to be an equity security that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 16 per share, subject to certain exceptions. Although the securities offered herein are being offered at more than $5.00 per share, the offering by virtue of it being a "blank check" company is subject to the provisions under Rule 419 of Regulation C under the Securities Act of 1933, as amended. For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the Commission relating to the penny stock market. Disclosure is also required to be made about commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The Company's "penny stock" securities are subject to Securities and Exchange Commission Rule 15g-9 of the Securities Exchange Act of 1934, as amended, which imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. PROHIBITION PURSUANT TO RULE 15G-8 UNDER EXCHANGE ACT TO SELL OR OFFER TO SELL SHARES IN RULE 419 ACCOUNT Rule 419 of Regulation C under the Securities Act of 1933, as amended, 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 an acquisition meeting specified criteria is completed. Pursuant to Rule 15g-8 under the Exchange Act, it is unlawful for any person to sell or offer to sell the Shares (or any interest in or related to the Shares) held in the Rule 419 escrow account other than pursuant to a qualified domestic relations order issued by a court in connection with divorce proceedings. As a result, contracts for sale to be satisfied by delivery of the deposited shares (e.g. contracts for sale on a when, as, and if issued basis) are prohibited. Such rule prohibits sales of other interests based on the shares, whether or not physical delivery is required. Therefore, investors will not be able to realize any return on their investment for up to 18 months from the date of this prospectus. (See "Prospectus Summary") USE OF PROCEEDS The net proceeds to the Company after deducting estimated expenses of $20,000 which will be paid from existing capital, are estimated to be $150,000. These proceeds 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 a specific business has been acquired with a fair value of at least $120,000, or (ii) to distribute the escrowed funds, in connection with a liquidation of the Company, to the then holders of the Shares sold in this offering. 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. 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 17 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 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's anticipated uses of the net proceeds from the sale of the Common Stock are quantified as follows Use Amount Percentage Escowed Proceeds(1) $150,000 100.00% (1) Represents the amount of proceeds from the sale of the shares. See "The Company -- Escrow of Offering Proceeds." The Company may seek to issue additional securities if it requires additional funds to meet its operating and administrative expenses. 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 Target Business. No cash compensation will be paid to any officer or director in their capacities as such 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. 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 Company will not pay or incur a liability for 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. 18 DILUTION The difference between the public offering price per share of Common Stock and the pro forma net tangible book value per share of Common Stock of the Company after this offering constitutes the dilution to investors in this offering. Net tangible book value per share 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 Common Stock. At March 31, 1997, net tangible book value of the Company was $20,000 or $1.33 per share of Common Stock. After giving effect to the sale of 30,000 shares of Common Stock included in the Shares offered hereby 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 $150,000 or $3.33 per share, representing an immediate increase in net tangible book value of $2.00 per share to existing stockholders and an immediate dilution of $1.67 per share to investors purchasing Shares in this offering ("New Investors"). The following table illustrates the foregoing information with respect to dilution to New Investors on a per share basis :
Public offering price per share of Common Stock(1)(2)................... $5.00 Net tangible book value per share of Common Stock before this offering.............................................................. $1.33 Increase attributable to this offering.................................. $2.00 Pro forma net tangible book value per share of Common Stock after this offering(3)...................................................... $3.33 ----- Dilution to New Investors............................................... $1.67 =====
The following table sets forth, with respect to existing stockholders and investors in this offering, a comparison of the number of shares of Common 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:
SHARES PURCHASED AVERAGE TOTAL CONSIDERATION* PRICE AMOUNT PERCENTAGE PER SHARE ------ PERCENTAGE ---------- --------- ---------- Existing Stockholders 15,000 33 12 $1.33 New Investors....... 30,000 66 88 $5.00 ------ -- -- ----- 45,000 100.0% 100 ====== ====== ===
- -------------- * Pro forma net tangible book value after this offering assumes the initial application of estimated net proceeds to the Company (after payment of expenses of approximately $20,000) of $130,000. See "Use of Proceeds." 19 CAPITALIZATION The following table sets forth the unaudited capitalization of the Company as of March 31, 1997, and as adjusted to give effect to the sale of the Shares being offered hereby:
AS HISTORICAL ADJUSTED(1) ---------- ----------- -- Common Stock, subject to possible redemption, 30,000 shares at redemption value(3).............................................. $150,000 Preferred Stock, $.01 par value, no shares issued or outstanding; 0 0 -- Common stock, $0.001 par value, 15,000 shares issued and outstanding 45,000 as adjusted; 10,000,000 shares authorized, 15 45 Additional paid in capital(2)......................................... 19,985 149,955 Accumulated deficit during the development stage...................... Total capitalization................................................ $20,000 $150,000 ========== ===========
- -------------- (1) Adjusted to give effect to the sale of 30,000 Shares offered hereby at the public offering price of $5.00 per Share and the receipt by the Company of the estimated net proceeds (after the payment of all offering expenses) of $130,000. See "Use of Proceeds." (2) 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 held by the non-affiliated public stockholders at a per share redemption price equal to such investors' initial purchase price plus a pro-rata share of all interest accrued in the Proceeds Escrow Account. 20 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, principally in connection with effecting a Business Combination, 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 liquidation of 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. 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 in their capacities as such 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. In the event that the Company does not effect a Business Combination within 18 months from the date of this Prospectus, the Company will distribute to the then holders of Common Stock acquired as part of the Shares sold in this offering the amount held in the escrow account with a pro-rata share of all interest accrued in such account. 21 PROPOSED BUSINESS INTRODUCTION The Company, a development stage entity, was formed in March 1997 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 and other 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 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 independent 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 executive officers 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 disclosure documentation in accordance with the Proxy Rules, including audited financial 22 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. 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. The Company intends to provide stockholders with disclosure documentation in accordance with Rule 419, including audited financial statements, concerning a Target Business as a part of the investment re-confirmation offer process. 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. 23 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. 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 independent 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; (vii) stage of development of the Target Business; (viii) degree of current or potential market acceptance of the Target Business, products or services; (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 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, with the possible assistance of an independent investment banking firm, 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 and documenting 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 24 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 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. The Company may also engage the services of professional firms that specialize in finding business acquisitions, 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. 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 or other borrowing or a combination thereof as consideration in 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 carry forwards, 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 borrowing 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 borrowing 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 25 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 borrowing will 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, subject the Company to all the risks inherent thereto. ACQUISITION RESTRICTIONS The Company may acquire a company or business by purchasing, trading or selling the securities of such company or business. However, the Company does not intend to engage primarily in such activities. Specifically, the Company intends to conduct its activities so as to avoid being classified as an "investment company" under the Investment Company Act of 1940, and therefore avoid application of the costly and restrictive registration and other provisions of the Investment Company Act of 1940 and the regulations promulgated thereunder. Section 3(a) of the Investment Company Act excepts from the definition of an "investment company" an entity which does not engage primarily in the business of investing, reinvesting or trading in securities, or which does not engage in the business of investing, owning, holding or trading "investment securities" (defined as "all securities other than government securities or securities of majority-owned subsidiaries") the value of which exceed 40% of the value of its total assets (excluding government securities, cash or cash items). The Company intends to implement its business plan in a manner which will result in the availability of this exception from the definition of "investment company." Consequently, the company's acquisition of a company or business through the purchase and sale of investment securities will be limited. Although the Company intends to act to avoid classification as an investment company, the provisions of the Investment Company Act of 1940 are extremely complex and it is possible that it may be classified as an inadvertent investment company. The Company intends to vigorously resist classification as an investment company, and to take advantage of any exemptions or exceptions from application of the Investment Company Act of 1940, which allows an entity a one time option during any three-year period to claim an exemption as a "transient" investment company. The necessity of asserting any such resistance, or making any claim of exemption, could be time consuming and costly, or even prohibitive, given the Company's limited resources. The Company's plan of business may involve changes in its capital structure, management, control and business, especially if it consummates a reorganization as discussed above. Each of these areas is regulated by the Investment Company Act of 1940, which regulation has the purpose of protecting purchasers of investment company securities. Since the Company does not intend to register as an investment company, purchasers in the Offering will not be afforded these protections. The Company will be subject to certain reporting requirements under the Securities Exchange Act of 1934 (the "Act"). In the event the Company no longer would be required to file reports and other information with the Commission under the Securities Exchange Act, the Company intends nonetheless to continue to file such reports. Pursuant to Section 13 and 15(d) of the Act, in the event significant acquisitions take place, the Company will be required to furnish information including certified financial statements for the acquired company covering one, two or three years depending upon the relative size of the acquisition. Consequently, acquisition prospects that do not have or are unable to obtain the required certified financial statements will not be appropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable. 26 Various impediments to an acquisition of a business or company or a merger may arise such as appraisal rights afforded the shareholders of a prospective acquisition company or merger partner may arise under the laws of the state the prospective acquisition company is organized under. This may prove to be deterrent to a particular combination. Pursuant to a resolution adopted and approved by the Board of Directors, the Company will not acquire or merge with any business or company in which the Company's promoters, management or their affiliates or associates, directly or indirectly, have an ownership interest. Management has agreed that this resolution ill not be changed by management's own initiative. RULE 419 PRESCRIBED ACQUISITION CRITERIA AND RECONFIRMATION As previously discussed herein on the cover page of this Prospectus and under "Prospectus Summary," this blank check offering is subject to Rule 419 under the Act. As such, among other things, any agreement to acquire an acquisition candidate must provide for the acquisition of a business or assets for which the fair market value of the business or assets to be acquired represents at least 80% of the offering proceeds. For purposes of this blank check offering, the fair market value of the business or assets to be acquired must be at least $120,000. Once an acquisition agreement meeting the above criteria has been executed, the Company must successfully complete a reconfirmation offering as described herein under "Prospectus Summary - Investor Rights to Reconfirm Investment Under Rule 419 - Prescribed Acquisition Criteria." This offering can be said to be a so-called "blank check" due to the fact that the Company is a development stage company that has no specific business plan or purpose or has indicated that its business plan or purpose is to merge with or be acquired by an unidentified company. As mentioned previously, the Company as formed for the purpose of providing a vehicle which could be used to raise capital and seek business opportunities believed to hold a potential for profit. The Company will primarily investigate the possible acquisition of business interests by merger. consolidation, stock for stock exchange or purchase of assets. The Company hopes to be able to effect a tax-free exchange once a business opportunity, satisfactory to management is located. However, no assurance can be given that an attractive business opportunity will become available to the Company on a tax-free exchange basis, or on another basis. The Company is under no binding commitment, arrangement, or contract to acquire any business interests or products on terms attractive and acceptable to the Company. It is likely that the Company's limited funds will limit its potential acquisitions to one, or possibly two business interests or products, and as such, it is expected that the Company's interest(s) will not be very diversified. 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 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. 27 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. POSSIBLE LIQUIDATION OF THE COMPANY In the event that the Company does not effect a Business Combination within 18 months from the date of this Prospectus, the Company will distribute to the then holders of Common Stock acquired as part of the Shares sold in this offering, the amounts in the escrow account together with a pro-rata share of all interest accrued in such account. CERTAIN SECURITIES LAWS CONSIDERATIONS 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 Judith Haselton, the Company's Chairman of the Board and President at no cost to the Company. EMPLOYEES As of the date of this Prospectus, the Company employs Ms. Haselton and Mr. Campbell on a part time basis. Such persons will serve as officers and director without compensation at least until completion of a Business Combination. Epstein, Becker and Green. P.C., a firm where Mr. Campbell is special counsel, may receive fees for legal services actually rendered to the Company. MANAGEMENT DIRECTORS AND OFFICERS The current directors and officers of the Company are as follows:
NAME AGE POSITION ---- --- -------- Judith S.Haselton...................... 42 Chairman of the Board, President Richard L. Campbell.................... 41 Secretary, Treasurer, Director
28 MANAGEMENT Judith S. Haselton, Chairman of the Board, President and Director is an independent financial consultant and private investor. From February, 1987, to October, 1991, she was employed as an investment banker in the corporate finance department of Smith Barney, Inc., and from June, 1983, to February, 1987, with E.F. Hutton and Company Inc. She also served from June, 1980, to June, 1983, as a commercial banker with Bank of America NT & SA. Ms. Haselton received her Masters in Business Administration from Columbia University Graduate School of Business and her undergraduate degree from Manchester College. Richard L. Campbell, Secretary, Treasurer, and Director, is a Managing Director of Mantis Holdings, Inc., a privately held investment holdings company and since January 1, 1997, also is special counsel to the law firm of Epstein, Becker & Green, P.C. Prior to the formation of Mantis in June, 1992, Mr. Campbell was principally engaged as a corporate attorney concentrating in the areas of corporate finance and securities, and continues to act as counsel to a select number of companies in his capacity as special counsel to the firm of Epstein Becker & Green, P.C.. Mr. Campbell received his undergraduate degree from The University of Michigan, his Juris Doctorate from Wayne State University, and his Masters in Corporation Law from New York University. 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 in their capacities as such 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. 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. 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 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 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 29 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. There can be no assurance that any of the foregoing conflicts will be resolved in favor of the Company. In connection with any stockholder vote relating either to approval of a Business Combination or the liquidation of the Company 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 (and any stockholders who are affiliated with its officers and directors), have agreed to vote all of 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 (in person or by proxy) with respect to such Business Combination or liquidation. 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 offerings. CERTAIN TRANSACTIONS In March 1997, the Company issued 10,000 shares of Common Stock to Richard L. Campbell and 5,000 shares of Common Stock to Judith Haselton. Mr. Campbell paid $1.00 per share for his shares and Judith Haselton paid $2.00 per share for her shares. 30 PRINCIPAL STOCKHOLDERS The following table sets forth information as of the date hereof, and as adjusted to reflect the sale of the shares of Common Stock offered by the Company hereby, based on information obtained from the persons named below, with respect to the beneficial ownership of shares of Common Stock by (i) each person known by the Company to be the owner of more than 5% of the outstanding shares of Common Stock, (ii) each director, and (iii) all executive officers and directors as a group:
PERCENTAGE OF OUTSTANDING AMOUNT AND SHARES OF COMMON STOCK NATURE OF ------------------------- BENEFICIAL BEFORE AFTER NAME OR GROUP OWNERSHIP OFFERING OFFERING ------------- ---------- ---------- ---------- Judith Haselton 5,000 33.33% 11% 315 West 106th Street Fourth Floor New York, New York 10025 Richard L. Campbell. 10,000 66.66% 22% 407 East Grand River Brighton, Michigan 48116 All executive officers and directors as a group (two persons)............................... 15,000 100.0% 33%
- -------------- 31 DESCRIPTION OF SECURITIES COMMON STOCK The Company is authorized to issue 10,000,000 shares of Common Stock, par value $.001 per share. As of the date of this Prospectus, 15,000 shares of Common Stock are outstanding, held of record by 2 persons. The holders of Common Stock are entitled to one vote 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. Subject to the requirements of Rule 419, 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. 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. PREFERRED STOCK The Company's Certificate of Incorporation authorizes the issuance of 2,000,000 shares of "blank check" preferred stock, par value $.01 per share (the "Preferred Stock"), with such designations, powers, preferences, rights, qualifications, limitations and restrictions and in 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 Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. No shares of Preferred Stock are currently outstanding. 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. 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 AND REGISTRAR The transfer agent and registrar for the Common Stock is Continental Stock Transfer & Trust Company. SHARES ELIGIBLE FOR FUTURE SALE 32 Upon the consummation of this offering the Company will have 45,000 shares of Common Stock outstanding. All of the 15,000 presently outstanding 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 until March of 1999. However, all 15,000 shares will not likely be "restricted shares" following a Business Combination, but will continue to be subject to the restrictions of Rule 144, unless registered. 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 Common 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 Common 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 Common 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. Prior to this offering, there has been no market for the Common Stock and no prediction can be made as to the effect, if any, that market sales of restricted shares of Common 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 Common Stock may be sold in the public market would likely adversely affect prevailing market prices for the Common Stock and could impair the Company's ability to raise capital through the sale of its equity securities. PLAN OF OFFERING - ESCROW OF FUNDS The Company hereby offers the right to subscribe at $5.00 per Share on an "all or none, best efforts" basis for a total of 30,000 Shares. The directors of the Company intend to contact individuals with whom they have had previous business relationships and solicit the sale of the Shares. No commission or any other form of remuneration in connection with the sale of the Shares will be paid. There is no requirement for any minimum number of shares to be purchased by an individual purchaser. Pursuant to Rule 419, the Company is required to promptly deposit into escrow the net offering proceeds, after deduction for offering expenses. The deposited funds may not be released until an acquisition meeting certain specified criteria has been made and a sufficient number of investors reconfirm their investment in accordance with the procedures set forth in Rule 419. See "Prospectus Summary - Investor Rights to Reconfirm Under Rule 419." There are no plans, proposals, arrangements or understandings with respect to the sale of additional securities to affiliates, current shareholders or other following the registered distribution, but prior to the location of a business opportunity. METHOD OF SUBSCRIBING Persons may subscribe by filling in and signing the subscription agreement and delivering it to the Company, prior to ____________ _, 1997, unless extended for an additional 90 days at the discretion of the Board of Directors of the Company. The subscription price of $5.00 per Share must be paid in cash or by check, bank draft or postal express money order payable in United States dollars to the order of "1997 Corp.-Escrow Account ." Certificates for Shares of Common Stock subscribed for will be issued as soon as practicable after subscriptions have been accepted and promptly deposited into 33 escrow upon issuance in accordance with Rule 419. Subscriptions may not be withdrawn only made, except in accordance with applicable law (in this regard, see "Prospectus Summary - Investor Rights to Reconfirm Under Rule 419") and subscriptions for fractional share amounts will not be accepted. In the event there are only a few subscribers to the offering it is likely that no market maker will be obtained and no public market will ever develop. Thus subscribers run the risk that they may never be able to sell their Shares. There have not been any preliminary discussions or understandings between the Company and any market maker regarding the participation of any such market maker in the future trading market, if any, for the Company's securities. Subsequent to an acquisition, it is contemplated that either the President of the Company or a principal of the target company will solicit potential market makers. There can be assurances that any broker will ever agree to make a market in the Company's securities. EXPIRATION DATE The subscription offer will expire at 3:00 P.M. New York time, 90 days (which may be extended for an additional __ days at the Company's option) from the date of this prospectus, or at the Company's election on an earlier date after the acceptance of subscriptions for a total of 30,000 Shares ("Expiration Date"). RIGHT TO REJECT The Company reserves the right to reject any subscription in its sole discretion for any reason whatsoever and to withdraw this offering at any time prior to acceptance by the Company of the subscriptions received. In many States, no exemption may exist for the sale of the Company's securities nor for secondary trading. Anyone who purchases Shares may be unable to resell the securities offered herein except in states in which the securities have been "Blue-Skyed" or for which an exemption is available. Many states do not permit securities of blank check companies to trade in those states. A number of states that do permit such trading impose conditions such as the escrow of offering proceeds, and also provide purchasers the right to rescind the stock purchase. Purchasers of Shares will not have the protection afforded by states which restrict sales of securities in blank check companies. The Company only intends to register the Shares for sale in states which do not impose such restrictions. SEC RULES The Company's securities are subject to Securities and Exchange Commission Rule 15g-9 of the Securities Exchange Act of 1934, as amended, which imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of broker/dealers to sell the Company's securities and also may affect the ability of purchasers in this offering to sell their shares in the secondary market. The Securities and Exchange Commission (the "Commission") has adopted regulations which define a "penny stock" to be an equity security that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. 34 Although the securities offered herein are being offered at more than $5.00 per share, the offering by virtue of it being a "blank check" company is subject to the provisions under Rule 419 of Regulation C under the Securities Act of 1933, as amended. For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the Commission relating to the penny stock market. Disclosure is also required to be made about commissions payable to both the broker-dealer and the registered representative and current quotation for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. LEGAL MATTERS The legality of the securities being registered by the Registration Statement of which this Prospectus is a part is being passed upon by Epstein, Becker & Green, P.C., New York, New York. Richard L. Campbell, Secretary, Director and a shareholder of the Company, is special counsel to Epstein, Becker & Green, P.C. EXPERTS The financial statements included in this Prospectus have been audited by Feldman Radin & Co., P.C., 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, 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. 35 - ------------------------------------------------------------------------------- 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............................................................... 6 Risk Factors.............................................................. 7 Use of Proceeds........................................................... 16 Dilution.................................................................. 18 Capitalization............................................................ 19 Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... 20 Proposed Business......................................................... 21 Management................................................................ 28 Certain Transactions...................................................... 29 Principal Stockholders.................................................... 30 Description of Securities................................................. 31 Shares Eligible for Future Sale........................................... 31 Plan of Offering.......................................................... 32 Legal Matters............................................................. 33 Experts................................................................... 34 Additional Information.................................................... 34 Index to Financial Statements............................................. F-1 --------------- UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS, 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. 36 - ------------------------------------------------------------------------------- 1997 CORP. 30,000 SHARES --------------- PROSPECTUS --------------- APRIL ___, 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 37 PART II. INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS. 1997 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 Tenth 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. 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.............. $45.00 Fees and Expenses of Accountants.............................. 2,500.00 Fees and Expenses of Counsel.................................. 7,500.00 Printing and Engraving Expenses............................... 2,500.00 Blue Sky Fees and Expenses.................................... 5,000.00 Transfer and Warrant Agent fees............................... 1,000.00 Miscellaneous Expenses........................................ 1,455.00 Total.................................................... $20,000.00 ========== ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES. In March 1997, the Company sold 5,000 shares to Judith Haselton, and 10,000 shares to Richard L. Campbell for aggregate consideration of $20,000, which was paid in full at the time. The Company i 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. 3.1 -- Certificate of Incorporation. 3.2 -- Bylaws of the Company. 5 -- Opinion of Epstein Becker & Green, P.C. [to be filed by amendment] 10.1 -- Form of Escrow Agreement for proceeds from sale of Shares. 10.2 -- Form of Escrow Agreement for outstanding Common Stock. 23.1 -- Consent of Feldman Radin & Co., P.C. 23.2 -- Consent of Counsel. (Included in Exhibit 5). 27 -- Financial Data Schedule 28 -- Subscription Agreement for Common Stock. =============================================================================== ITEM 28. UNDERTAKINGS. The undersigned small business issuer hereby undertakes: (a)(1) 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) 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; (2) For determining liability under the Securities Act, treat each post-effective amendment as new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of an offering. (d) 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. ii (e) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (f) The undersigned registrant 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 registrant 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. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing this Amendment to Form SB-2 and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 3rd day of April, 1997. 1997 CORP. By: /s/ Richard L. Campbell --------------------------- RICHARD L. CAMPBELL SECRETARY
SIGNATURE TITLE DATE --------- ----- ---- /s/ Judith Haselton Chairman of the Board, President April 3, 1997 - ----------------------------- JUDITH HASELTON Secretary, Treasurer, Director April 3, 1997 /s/ Richard L. Campbell - ----------------------------- RICHARD L. CAMPBELL
iii [Index to Financial Statements To Come] F-1 INDEPENDENT AUDITOR'S REPORT ---------------------------- To the Stockholder of 1997 Corp. (A Development Stage Enterprise) New York, New York We have audited the accompanying balance sheet of 1997 Corp. (a development stage enterprise) as of March 31, 1997. This financial statement is 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 audit provides 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 1997 Corp. (a development stage enterprise) at March 31, 1997 in conformity with generally accepted accounting principles. Feldman Radin & Co., P.C., New York, New York March 31, 1997 F-2 1997 CORP. ---------- (A Development Stage Enterprise) -------------------------------- BALANCE SHEET ------------- MARCH 31, 1997 -------------- ASSET ----- Cash $ 20,000 ========= STOCKHOLDERS' EQUITY -------------------- Preferred stock, $.01 par value, authorized 2,000,000 shares, none issued or outstanding $ - Common stock, $.001 par value, authorized 10,000,000 shares issued and outstanding 15,000 shares 15 Paid in capital 19,985 --------- $ 20,000 ========= See notes to financial statements F-3 1997 CORP. ---------- (A Development Stage Enterprise) -------------------------------- NOTES TO FINANCIAL STATEMENT ---------------------------- MARCH 31, 1997 -------------- 1. FORMATION OF COMPANY -------------------- 1997 Corp. (a development stage enterprise) (the "Company"), was incorporated in the state of Delaware on March 17, 1997. It intends to serve as a vehicle to effect a Business Combination with a Target Business (not yet identified) which the company believes will have significant growth potential. The Company intends to utilize the net proceeds of this offering, equity securities, debt securities, bank and other borrowing or a combination thereof in effecting a Business combination. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ a. The financial statements are prepared on an accrual basis. b. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make significant estimates and assumptions that effect the reporting amount of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates. F-4 EX-3.1 2 CERTIFICATE OF INCORPORATION OF 1997 CORP EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF 1997 CORP. The undersigned, being the incorporator of 1997 Corp.(the "Corporation") hereby certifies as follows: FIRST: The name of the Corporation is 1997 Corp. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The registered agent in charge thereof is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares that this Corporation shall have authority to issue is (i) 10,000,000 shares of Common Stock, $.001 par value per share ("Common Stock"), and (ii) 2,000,000 shares of Preferred Stock, $.01 par value per share ("Preferred Stock"). There shall be no preemptive rights with respect to the Corporation's shares of stock. The following is a further statement of the designations and the powers, preferences and rights, and the relative participating, optional or other special rights, and the qualifications, limitations and restrictions granted to or imposed upon the respective classes of shares of capital stock of the Corporation or the holders thereof. COMMON STOCK 1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred Stock of any series. 1 2. Voting. The holders of Common Stock are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. 3. Dividends. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights or restrictions of any then outstanding Preferred Stock. 4. Liquidation. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders after payment of creditors and subject to any preferential rights of any then outstanding Preferred Stock. PREFERRED STOCK. Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares of Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided herein or by law. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly provided for herein or by law. Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issuance of the shares thereof, to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of the State of Delaware. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to the Preferred Stock of any other 2 series to the extent permitted by law. FIFTH: The Corporation is to have perpetual existence. SIXTH: The number of directors which shall constitute the entire Board of Directors shall be as set forth in the by-laws of the Corporation. The board of directors is expressly authorized to adopt, amend or repeal the by-laws of the Corporation. SEVENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which said application has been made, be binding on all the creditors or class of creditors, and/or on all of the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. EIGHTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. NINTH: No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (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 of the General 3 Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. TENTH: The Corporation shall indemnify its officers, directors, agents and such other parties to the full extent permitted by Delaware law. ELEVENTH: (i) Any vacancies in the Board of Directors for any reason and any newly created directorships resulting by reason of any increase in the number of directors may be filled only by the Board of Directors (unless there are no remaining directors), acting by a majority of the remaining directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of directors and until their successors are elected and qualified. (ii) Any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 75% of the voting power of all of the shares of capital stock of the Corporation then entitled to vote generally in the election of directors, voting together as a single class. TWELFTH: Special meetings of stockholders of the Corporation may be called only by (i) the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors, either upon motion of a director or upon written request by the holders of at least 50% of the voting power of all the shares of capital stock of the Corporation then entitled to vote generally in the election of directors, voting together as a single class, or (ii) the President of the Corporation. THIRTEENTH: In addition to any requirements of the General Corporation Law of Delaware (and notwithstanding the fact that a lesser percentage may be specified by the General Corporation Law of Delaware), the affirmative vote of the holders of at least 75% of the voting power of all of the shares of capital stock of the Corporation then entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders of the Corporation to amend, alter, change, adopt or repeal Articles Eleventh, Twelfth or Thirteenth hereof. FOURTEENTH: The name of the incorporator is Richard L. Campbell, whose address is 250 Park Avenue, 12th Floor, New York, New York 10177. 4 IN WITNESS WHEREOF, I hereunto set my hand this 12th day of March, 1997 and I affirm that the foregoing certificate is my act and deed and that the facts stated therein are true. --------------------------------- Richard L. Campbell, Incorporator EX-3.2 3 BY-LAWS OF 1997 CORP EXHIBIT 3.2 BY-LAWS OF 1997 CORP. (A Delaware Corporation) ARTICLE I Offices SECTION l. Registered Office. The registered office of the Corporation within the State of Delaware shall be in the City of Wilmington, County of New Castle. SECTION 2. Other Offices. The Corporation may also have any office or offices other than said registered office at such place or places, either within or without the State of Delaware, as the Board of Directors shall from time to time determine or the business of the Corporation may require. ARTICLE II Meetings of Stockholders SECTION l. Place of Meetings. All meetings of the stockholders for the election of directors or for any other purpose shall be held at any such place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of meeting or in a duly executed waiver thereof. SECTION 2. Annual Meeting. The annual meeting of stockholders, commencing with the year l998, shall be held at l0:00 A.M. on the second Tuesday of June, in each year if not a legal holiday, and if a legal holiday, then on the next succeeding day not a legal holiday, at l0:00 A.M., or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of meeting or in a duly executed waiver thereof. At such annual meeting, the stockholders shall elect, by a plurality vote, a Board of Directors and transact such other business as may properly be brought before the meeting. SECTION 3. Special Meetings. Special meetings of stockholders, unless otherwise prescribed by statute or as provided in the Certificate of Incorporation, as amended from time to time, 1 may be called at any time by the Board of Directors or the Chairman of the Board, if one shall have been elected, or the Chief Executive Officer. SECTION 4. Notice of Meetings. Except as otherwise expressly required by statute, written notice of each annual and special meeting of stockholders stating the date, place and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder of record entitled to vote thereat not less than ten nor more than sixty days before the date of the meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Notice shall be given personally or by mail and, if by mail, shall be sent in a postage prepaid envelope, addressed to the stockholder at his address as it appears on the records of the Corporation. Notice by mail shall be deemed given three (3) days after the same shall be deposited in the United States mail, postage prepaid. Notice of any meeting shall not be required to be given to any person who attends such meeting, except when such person attends the meeting in person or by proxy for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, or who, either before or after the meeting, shall submit a signed written waiver of notice, in person or by proxy. Neither the business to be transacted at, nor the purpose of, an annual or special meeting of stockholders need be specified in any written waiver of notice. SECTION 5. List of Stockholders. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city, town or village where the meeting is to be held, which place shall be specified in the notice of meeting, or, if not specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 6. Quorum, Adjournments. The holders of a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction 2 of business at all meetings of stockholders, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented by proxy at any meeting of stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy. At such adjourned meeting at which a quorum shall be present or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than thirty days, or, if after adjournment a new record date is set, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 7. Organization. At each meeting of stockholders, the Chairman of the Board, if one shall have been elected, or, in his absence or if one shall not have been elected, the President shall act as chairman of the meeting. The Secretary or, in his absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting shall act as secretary of the meeting and keep the minutes thereof. SECTION 8. Order of Business. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting. SECTION 9. Voting. Except as otherwise provided by statute or the Certificate of Incorporation, each stockholder of the Corporation shall be entitled at each meeting of stockholders to one vote for each share of capital stock of the Corporation standing in his name on the record of stockholders of the Corporation: (a) on the date fixed pursuant to the provisions of Section 7 of Article V of these By-Laws as the record date for the determination of the stockholders who shall be entitled to notice of and to vote at such meeting; or (b) if no such record date shall have been so fixed, then at the close of business on the day next preceding the day on which notice thereof shall be given, or, if notice is waived, at the close of business on the date next preceding the day on which the meeting is held. Each stockholder entitled to vote at any meeting of stockholders may authorize another person or persons to act for him by a proxy 3 signed by such stockholder or his attorney-in-fact, but no proxy shall be voted after three years from its date, unless the proxy provides for a longer period. Any such proxy shall be delivered to the secretary of the meeting at or prior to the time designated in the order of business for so delivering such proxies. When a quorum is present at any meeting, the vote of the holders of a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote thereon, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which by express provision of statute or of the Certificate of Incorporation or of these By-Laws, a different vote is required, in which case such express provision shall govern and control the decision of such question. In the case of election of directors, the nominees for director receiving the largest number of votes shall be elected, notwithstanding that such number of votes may be less than an absolute majority. Unless required by statute, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy, if there by such proxy, and shall state the number of shares voted. SECTION l0. Inspectors. The Board of Directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. SECTION ll. Action by Consent. Whenever the vote of 4 stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, by any provision of statute or of the Certificate of Incorporation or of these By-Laws, the meeting and vote of stockholders may be dispensed with, and the action taken without such meeting and vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock of the Corporation entitled to vote thereon were present and voted. ARTICLE III Board of Directors SECTION l. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute or the Certificate of Incorporation directed or required to be exercised or done by the stockholders. SECTION 2. Number, Qualifications, Election and Term of Office. The number of directors constituting the initial Board of Directors shall be not less than one (1) nor more than ten (10). Thereafter, the number of directors may be fixed, from time to time, by the affirmative vote of a majority of the entire Board of Directors or by action of the stockholders of the Corporation. Any decrease in the number of directors shall be effective at the time of the next succeeding annual meeting of stockholders unless there shall be vacancies in the Board of Directors, in which case such decrease may become effective at any time prior to the next succeeding annual meeting to the extent of the number of such vacancies. Directors need not be stockholders. Except as otherwise provided by statute or these By-Laws, the directors (other than members of the initial Board of Directors) shall be elected at the annual meeting of stockholders. Each director shall hold office until his successor shall have been elected and qualified, or until his death, or until he shall have resigned, or have been removed, as hereinafter provided in these By-Laws. SECTION 3. Place of Meetings. Meetings of the Board of Directors shall be held at such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine or as shall be specified in the notice of any such meeting. 5 SECTION 4. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such other time or place (within or without the State of Delaware) as shall be specified in a notice thereof given as hereinafter provided in Section 7 of this Article III. SECTION 5. Regular Meetings. Regular meetings of the Board of Directors shall be held at such time and place as the Board of Directors may fix. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. Notice of regular meetings of the Board of Directors need not be given except as otherwise required by statute or these By-Laws. SECTION 6. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, if one shall have been elected, or by two or more directors of the Corporation or by the Chief Executive Officer. SECTION 7. Notice of Meetings. Notice of each special meeting of the Board of Directors (and of each regular meeting for which notice shall be required) shall be given by the Secretary as hereinafter provided in this Section 7, in which notice shall be stated the time and place of the meeting. Except as otherwise required by these By-Laws, such notice need not state the purposes of such meeting. Notice of each such meeting shall be mailed, postage prepaid, to each director, addressed to him at his residence or usual place of business, by first class mail, at least two days before the day on which such meeting is to be held, or shall be sent addressed to him at such place by telegraph, cable, telex, telecopier or other similar means, or be delivered to him personally or be given to him by telephone or other similar means, at least twenty-four hours before the time at which such meeting is to be held. Notice of any such meeting need not be given to any director who shall attend such meeting, except when he shall attend for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 8. Quorum and Manner of Action. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, 6 and, except as otherwise expressly required by statute or the Certificate of Incorporation or these By-Laws, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to all of the directors unless such time and place were announced at the meeting at which the adjournment was taken, in which case such notice shall only be given to the directors who were not present thereat. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. The directors shall act only as a Board and the individual directors shall have no power as such. SECTION 9. Organization. At each meeting of the Board of Directors, the Chairman of the Board, if one shall have been elected, or, in the absence of the Chairman of the Board or if one shall not have been elected, the President (or, in his absence, another director chosen by a majority of the directors present) shall act as chairman of the meeting and preside thereat. The Secretary or, in his absence, any person appointed by the chairman shall act as secretary of the meeting and keep the minutes thereof. SECTION l0. Resignations. Any director of the Corporation may resign at any time by giving written notice of his resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION ll. Vacancies. Any vacancy in the Board of Directors, whether arising from death, resignation, removal (with or without cause), an increase in the number of directors or any other cause, shall be filled by the vote of a majority of the directors then in office, though less than a quorum, or by the sole remaining director, and only if there are no remaining directors, by the stockholders at the next annual meeting thereof or at a special meeting thereof. Each director so elected shall hold office until his successor shall have been elected and qualified. SECTION l2. Removal of Directors. Any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 75% of the voting power of all of the shares of 7 capital stock of the Corporation then entitled to vote generally in the election of directors, voting together as a single class. SECTION l3. Compensation. The Board of Directors shall have authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in their capacity as directors or otherwise. SECTION l4. Committees. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, including an executive committee, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In addition, in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Except to the extent restricted by statute or the Certificate of Incorporation, each such committee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the Board of Directors and may authorize the seal of the Corporation to be affixed to all papers which require it. Each such committee shall serve at the pleasure of the Board of Directors and have such name as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors. SECTION l5. Action by Consent. Unless restricted by the Certificate of Incorporation, any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board of Directors or such committee, as the case may be. SECTION l6. Telephonic Meeting. Unless restricted by the Certificate of Incorporation, any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means 8 of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at a meeting. SECTION 17. Contracts and Transactions Involving Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorize the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders and the transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV Officers SECTION l. Number and Qualifications. The officers of the Corporation shall be elected by the Board of Directors and shall include the Chief Executive Officer, the President, one or more Executive, Senior, or other Vice-Presidents, the Secretary and the Treasurer (who may be designated as Chief Financial Officer). If the Board of Directors wish, they may also elect as an officer of the Corporation a Chairman of the Board and may elect other officers (including one or more Assistant Treasurers and one or more Assistant Secretaries) as may be necessary or desirable for the business of the Corporation. Any two or more offices may be held by the same person, and no officer except the Chairman of the 9 Board need be a director. Each officer shall hold office until his successor shall have been duly elected and shall have qualified, or until his death, or until he shall have resigned or have been removed, as hereinafter provided in these By-Laws. SECTION 2. Resignations. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon receipt. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective. SECTION 3. Removal. Any officer of the Corporation may be removed, either with or without cause, at any time, by the Board of Directors at any meeting thereof. Such removal shall be without prejudice to a person's contract rights, if any, but the election as an officer of the corporation shall not of itself create contract rights. SECTION 4. Chairman of the Board. The Chairman of the Board, if one shall have been elected, shall be a member of the Board, an officer of the Corporation and, if present, shall preside at each meeting of the Board of Directors or the stockholders. He shall advise and counsel with the Chief Executive Officer and/or President, and in either of their absence with other executives of the Corporation, and shall perform such other duties as may from time to time be assigned to him by the Board of Directors. SECTION 5. The Chief Executive Officer. The Chief Executive Officer shall perform such duties as from time to time may be assigned to him by the Board of Directors of the Corporation. He shall, in the absence of the Chairman of the Board or if a Chairman of the Board shall not have been elected, preside at each meeting of the Board of Directors or the stockholders. He shall perform all duties incident to the office of the Chief Executive Officer. SECTION 6. The President. Unless otherwise provided by the Board of Directors of the Corporation, the President shall be the chief operating officer of the Corporation. He shall, in the absence of the Chairman of the Board and the Chief Executive Officer, or if a Chairman of the Board shall not have been elected and there shall at that time not be a Chief Executive Officer, preside at each meeting of the Board of Directors or the stockholders. He shall perform all duties incident to the office of President and chief operating officer and such other duties as 10 may from time to time be assigned to him by the Board of Directors. SECTION 7. Vice-Presidents. Each Executive, Senior, or other Vice-President shall perform all such duties as from time to time may be assigned to him by the Board of Directors, the Chief Executive Officer, or the President. At the request of the President or in his absence or in the event of his inability or refusal to act, the Vice-President, or if there shall be more than one, the Vice-Presidents in the order determined by the Board of Directors (or if there be no such determination, then the Vice-Presidents in the order of their election), shall perform the duties of the President, and, when so acting, shall have the powers of and be subject to the restrictions placed upon the President in respect of the performance of such duties. SECTION 8. Treasurer. The Treasurer shall: (a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation; (b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation; (c) deposit all moneys and other valuables to the credit of the Corporation in such depositaries as may be designated by the Board of Directors or pursuant to its direction; (d) receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever; (e) disburse the funds of the Corporation and supervise the investments of its funds, taking proper vouchers therefor; (f) render to the Board of Directors, whenever the Board of Directors may require, an account of the financial condition of the Corporation; and (g) in general, perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 9. Secretary. The Secretary shall: (a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of 11 the Board of Directors, the committees of the Board of Directors and the stockholders; (b) see that all notices are duly given in accordance with the provisions of these By-Laws and as required by law; (c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all certificates for shares of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and (e) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 10. The Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as from time to time may be assigned by the Board of Directors. SECTION 11. The Assistant Secretary. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties as from time to time may be assigned by the Board of Directors. SECTION 12. Delegation of Duties. In case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may confer for the time being the powers or duties, or any of them, of such officer upon any other officer or upon any directors. 12 SECTION l3. Officers' Bonds or Other Security. If required by the Board of Directors, any officer of the Corporation shall give a bond or other security for the faithful performance of his duties, in such amount and with such surety as the Board of Directors may require. SECTION l4. Compensation. The compensation of the officers of the Corporation for their services as such officers shall be fixed from time to time by the Board of Directors. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that he is also a director of the Corporation. SECTION 15. Loans to officers and employees; Guaranty of Obligations of Officers and Employees. The Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or any subsidiary, including any officer or employee who is a director of the Corporation or any subsidiary, whenever, in the judgment of the Board of Directors, such loan, guaranty or other assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. ARTICLE V Stock Certificates and Their Transfer SECTION l. Stock Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the Chairman of the Board or the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restriction of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, or a statement that the Corporation will furnish without charge to each stockholder who so requests the designations, preferences and relative, participating, optional or other special rights of each 13 class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. SECTION 2. Facsimile Signatures. Any of or all the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 3. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to give the Corporation a bond in such sum as it may direct sufficient to indemnify it against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. SECTION 4. Transfers of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its records; provided, however, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. Whenever any transfer of stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of transfer if, when the certificates are presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so. SECTION 5. Transfer Agents and Registrars. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars. SECTION 6. Regulations. The Board of Directors may make such additional rules and regulations, not inconsistent with these By-Laws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of 14 the Corporation. SECTION 7. Fixing the Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 8. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered on its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VI Indemnification of Directors and Officers SECTION l. General. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the 15 Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 2. Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for gross negligence or willful misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 3. Indemnification in Certain Cases. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections l and 2 of this Article VI, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. SECTION 4. Advances for Expenses. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such 16 action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall be ultimately determined that he is entitled to be indemnified by the Corporation as authorized in this Article VI. SECTION 5. Rights Not Exclusive. The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 6. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VI. SECTION 7. Definition of Corporation. For the purposes of this Article VI, references to "the Corporation" include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving corporation in the same capacity. SECTION 8. Definitions. For purposes of this Article VI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an 17 employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Article VI. ARTICLE VII General Provisions SECTION l. Dividends. Subject to the provisions of statute and the Certificate of Incorporation, dividends upon the shares of capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting. Dividends may be paid in cash, in property or in shares of stock of the Corporation, unless otherwise provided by statute or the Certificate of Incorporation. SECTION 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors may, from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors may think conducive to the interests of the Corporation. The Board of Directors may modify or abolish any such reserves in the manner in which it was created. SECTION 3. Seal. The seal of the Corporation shall be in such form as shall be approved by the Board of Directors. SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be fixed, and once fixed, may thereafter be changed, by resolution of the Board of Directors. SECTION 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or other orders for the payment of money of the Corporation shall be signed, endorsed or accepted in the name of the Corporation by such officer, officers, person or persons as from time to time may be designated by the Board of Directors or by an officer or officers authorized by the Board of Directors to make such designation. SECTION 6. Execution of Contracts, Deeds, Etc. The Board of Directors may authorize any officer or officers, agent or 18 agents, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances. SECTION 7. Voting of Stock in Other Corporations. Unless otherwise provided by resolution of the Board of Directors, the Chairman of the Board or the President or the Secretary, from time to time, may (or may appoint one or more attorneys or agents to) cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation, any of whose shares or securities may be held by the Corporation, at meetings of the holders of the shares or other securities of such other corporation. In the event one or more attorneys or agents are appointed, the Chairman of the Board or the President or the Secretary may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent. The Chairman of the Board or the President or the Secretary may, or may instruct the attorneys or agents appointed to, execute or cause to be executed in the name and on behalf of the Corporation and under its seal or otherwise, such written proxies, consents, waivers or other instruments as may be necessary or proper in the circumstances. ARTICLE VIII Amendments These By-Laws may be amended or repealed or new by-laws adopted (a) by action of the stockholders entitled to vote thereon at any annual or special meeting of stockholders or (b) unless the Certificate of Incorporation provides that only the shareholders may amend the by-laws, by action of the Board of Directors at a regular or special meeting thereof. Any by-law made by the Board of Directors may be amended or repealed by action of the stockholders at any annual or special meeting of stockholders. ARTICLE IX Emergency By-Laws SECTION 9.1. Emergency By-Laws. The emergency By-Laws provided in this Section 9.1 shall be operative during any emergency in the conduct of the business of the corporation resulting form an attack on the United States or on a locality in which the corporation conducts its business or customarily holds meeting of its Board of Directors or its stockholders, or during 19 any nuclear or atomic disaster, or during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors or a standing committee thereof cannot readily be convened for action notwithstanding any different provision in the preceding By-Laws or in the Certificate of Incorporation or in the law. To the extent not inconsistent with the provisions of this Section, the By-Laws of the Corporation shall remain in effect during any emergency and upon its termination the Emergency By-Laws shall cease to be operative. Any amendments of these Emergency By-Laws may make any further or different provision that may be practical and necessary for the circumstances of the emergency. During any such emergency: (A) A meeting of the Board of Directors or a committee thereof may be called by any officer or director of the Corporation. Notice of the time and place or the meeting shall be given by the person calling the meeting to such of the directors as it may be feasible to reach by any available means of communication. Such notice shall be given at such time in advance of the meeting as circumstances permit in the judgment of the person calling the meeting; (B) The director or directors in attendance at the meeting shall constitute a quorum; (C) The officers or other persons designated on a list approved by the Board of Directors before the emergency, all in such order of priority and subject to such conditions and for such period of time (not longer than reasonably necessary after the termination of the emergency) as may be provided in the resolution approving the list, shall, to the extent required to provide a quorum at any meeting of the Board of Directors, be deemed directors for such meeting; (D) The Board of Directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during such emergency any or all officers or agents of the corporation shall for any reason be rendered incapable of discharging their duties; (E) The Board of Directors, either before or during any such emergency, may, effective in the emergency, change the head office or designate several alternative head offices or regional offices. To the extent required to constitute a quorum at any meeting of the Board of Directors during such an emergency, the officers of the corporation who are present shall be deemed, in order of rank and within the same rank in order of seniority, directors for such meeting. No officer, director or employee acting in accordance with any Emergency By-Laws shall be liable except for willful misconduct. These Emergency By-Laws shall be subject to repeal or change by further action of the Board of Directors or by action of 20 the stockholders. 21 EX-10.1 4 ESCROW AGREEMENT EXHIBIT 10.1 ESCROW AGREEMENT (FUNDS) This ESCROW AGREEMENT is made as of this __th day of March, 1997 by and between 1997 Corp. with a place of business at 315 West 106th Street, Fourth Floor, New York, New York 10025 (the "Company"), and Continental Stock Transfer & Trust Company with a principal place of business at 2 Broadway, 19th Floor, New York, New York 10004, in its capacity as escrow agent only (the "Escrow Agent"). W I T N E S S E T H: WHEREAS, the Company intends to consummate the initial public offering (the "Offering") of up to an aggregate of 30,000 shares of the Company's common stock, par value $.001 per share (the "Common Stock") as more fully described in the Company's Registration Statement on Form SB-2 under the Securities Act of 1933, as amended (File No. ________), as declared effective by the Securities and Exchange Commission on _______, 1997 (the "Registration Statement"); WHEREAS, in accordance with the terms of the offering as set forth in the Registration Statement, the gross proceeds from the sale of the Shares are required to be placed directly in an escrow account; and WHEREAS, the Company wishes to appoint the Escrow Agent as the escrow agent for such account, on the terms and conditions set forth below in order to comply with the requirements of Rule 419 of Regulation C of the Rules and Regulations established by the Securities and Exchange Commission; NOW, THEREFORE, in consideration of the mutual promises and obligations set forth below, and for other valuable consideration the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows: I. Appointment of Escrow Agent and Creation of Account. The Company hereby appoints the Escrow Agent as escrow agent hereunder and directs it to hold those assets described in Exhibit A attached hereto, together with any additional assets which may be deposited with the Escrow Agent from time to time to be held pursuant to this Agreement and all income earned from investment of the assets described in Exhibit A and any additions thereto (collectively, the "Escrow Assets") , in a separate account in the name of "1997 Corp. - Escrow Account" (the "Escrow Account"). The Escrow Account shall be invested, administered and distributed in accordance with the terms set forth below. Contemporaneously with the closing of the Offering, the Company shall deposit with the Escrow Agent those assets listed on Exhibit A. 1. Initial Funding of Escrow Account. The Escrow Account shall be initially funded with the proceeds from the sale of Shares by the Company. All funds from the initial sale of Shares by the Company shall be deposited directly in the Escrow Account by wire transfer, check or money order. 2. Investment of Escrow Assets. The Escrow Assets shall be invested in accordance with the instructions set forth in Exhibit C attached hereto. Such instructions may be modified only by a written certificate executed by an authorized officer of the Company and delivered to the Escrow Agent; however, this Escrow Agreement may not be altered by the Board of Directors of the Company in terms of the investment instructions, except as may be required by the Board of Directors to fulfill their fiduciary obligations. Escrow Agent shall make monthly accounting of such investments, the income received therefrom, and the then existing balance of the Escrow Account to the Company. 3. Distribution from Escrow Account. The Escrow Agent shall make distributions from the Escrow Account in accordance with the requirements set forth in Exhibit D attached hereto. Such instructions may be modified only by a written certificate executed by authorized officers of the Company, and delivered to the Escrow Agent. In addition, this Escrow Agreement may not be altered by the Board of Directors of the Company in terms of its distribution instructions, except as may be required by the Board of Directors to fulfill their fiduciary obligations. The Escrow Agent is authorized to make distributions in reliance on the instructions it receives. Written notice of each disbursement from the Escrow Agent shall be provided to the Company within ten (10) days of each such disbursement. Upon the final distribution of all of the Escrow Assets, this Agreement shall terminate and the Escrow Agent shall have no further obligations or liabilities hereunder. 4. Compensation of Escrow Agent. The Escrow Agent shall receive fees determined in accordance with, and payable as specified in, the Schedule of Fees attached hereto as Exhibit E (the "Fee Schedule"). The Escrow Agent shall have no duties or 2 liabilities under this Agreement unless and until full payment of the fee set forth in Exhibit E. The Escrow Agent shall be reimbursed by the Company for all expenses, disbursements and advances incurred or made by the Escrow Agent in preparation, administration and enforcement of this Agreement, including, but not limited to, reasonable legal fees and expenses. The Company shall be liable for all payments due to the Escrow Agent under this Agreement. 5. Responsibilities and Rights of the Escrow Agent. To induce the Escrow Agent to act hereunder, it is further agreed by the undersigned that: (a) The Escrow Agent undertakes to perform only such duties as are expressly set forth herein. Without limiting the generality of the foregoing, the Escrow Agent shall have no duty or responsibility as regards any: (i) security as to which a default in the payment of principal or interest has occurred, to give notice of default, make demand for payment or take any other action with respect to such default; and (ii) loss occasioned by delay in the actual receipt of notice of any payment, redemption or other transaction regarding any item in the Escrow Assets as to which it is authorized to take action hereunder. The Escrow Agent may consult with counsel and shall be fully protected with respect to any action taken in good faith in accordance with such advice. The Escrow Agent shall have no liability or responsibility for any misstatement in, or omission from, the Prospectus. (b) The Escrow Agent shall not be under any duty to give the Escrowed Assets held by it hereunder any greater degree of care than it gives its own similar property and shall not be required to invest any funds held hereunder except as directed pursuant to this Escrow Agreement. In the event that there is a change in the investment instructions resulting in uninvested funds, such uninvested funds held hereunder shall not earn or accrue interest. (c) The Escrow Agent does not make any representation or warranty with regard to the creation or perfection, hereunder or otherwise, of a security interest in the Escrow Assets or regarding the negotiability or transferability of, or existence of other interests in the Escrow Assets. The Escrow Agent shall have no responsibility at any time to ascertain whether or not any security interest exists in the Escrow Assets or any part thereof or to file any financing statement under the Uniform Commercial Code of any state with respect to the Escrow Assets or any part thereof. (d) The Escrow Agent is hereby authorized to comply with any judicial order or legal process which stays, 3 enjoins, directs or otherwise affects the transfer or delivery of the Escrow Assets or any party hereto and shall incur no liability for any delay or loss which may occur as a result of such compliance. (e) The Escrow Agent shall have no duty or responsibility with regard to any loss resulting from the investment, reinvestment, sale or liquidation of the Escrow Assets in accordance with the terms of this Agreement. The Escrow Agent need not maintain any insurance with respect to the Escrow Assets. (f) The Escrow Agent shall in no event be liable in connection with its investment or reinvestment of any cash held by it hereunder in good faith, in accordance with the terms hereof, including, without limitation, any liability for any delays (not resulting from its gross negligence or willful misconduct) in the investment or reinvestment of the Escrowed Assets, or any loss of interest incident to any such delays. (g) Except as otherwise expressly provided herein, the Escrow Agent is authorized to execute instructions and take other actions pursuant to this Agreement in accordance with its customary processing practices for similar customers and, in accordance with such practices the Escrow Agent may retain agents, including its own subsidiaries or affiliates, to perform certain of such functions. The Escrow Agent shall have no liability under this Agreement for any loss or expense other than those occasioned by the Escrow Agent's gross negligence or willful misconduct and in any event its liability shall be limited to direct damages and shall not include any special or consequential damages. All collection and receipt of funds or securities and all payment and delivery of funds or securities under this Agreement shall be made by the Escrow Agent as agent, at the risk of the other parties hereto with respect to their actions or omissions and those of any person other than the Escrow Agent. In no event shall the Escrow Agent be responsible or liable for any loss due to force beyond its control, including, but not limited to, acts of God, flood, fire, nuclear fusion, fission or radiation, war (declared or undeclared), terrorism, insurrection, revolution, riot, strikes or work stoppages for any reason, embargo, government action, including any laws, ordinances, regulations or the like which restrict or prohibit the providing of the services contemplated by this Agreement, inability to obtain equipment or communications facilities, or the failure of equipment or interruption of communications facilities, and other causes whether or not of the same class or kind as specifically named above. In the event that the Escrow Agent is unable substantially to perform for any of the reasons described in the immediately preceding sentence, 4 it shall so notify the other parties hereto as soon as reasonably practicable following its actual knowledge of the same. (h) This Escrow Agreement expressly sets forth all the duties of the Escrow Agent with respect to any and all matters pertinent hereto. No implied duties or obligations shall be read into this agreement against the Escrow Agent. Notwithstanding any provisions of this Agreement to the contrary, the Escrow Agent shall not be bound by, or have any responsibility with respect to, any other agreement or contract among the Company and the Representatives (whether or not the Escrow Agent has knowledge thereof). (i) It is understood and agreed that should any dispute arise with respect to the payment and/or ownership or right of possession of the Escrow Assets, or should the Escrow Agent in good faith be in doubt as to what action it should take hereunder, the Escrow Agent is authorized and directed to retain in its possession, without liability to anyone, all or any part of the Escrow Assets until such dispute shall have been settled either by mutual agreement by the parties concerned or by the final order, decree or judgment of any court or other tribunal of competent jurisdiction in the United States of America and time for appeal has expired and no appeal has been perfected, but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings. Any such court order shall be accompanied by a legal opinion by counsel for the presenting party satisfactory to the Escrow Agent to the effect that said court order is final and nonappealable. (j) The Escrow Agent shall be entitled to rely upon any order, judgment, certification, demand, notice, instrument or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of the service thereof. Without limiting the foregoing, in the event of any alteration of investment or distribution instructions, the Escrow Agent shall have no responsibility to determine whether the requested alteration was required by the Board of Directors of the Company to fulfill its fiduciary obligations. The Escrow Agent may act in reliance upon any instrument or signature believed by it to be genuine and may assume that any person purporting to give receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so. (k) The Company shall hold the Escrow Agent and its agents harmless from, and indemnify and reimburse the Escrow Agent and its agents for all claims, liability, loss and expense (including reasonable out-of-pocket and incidental expenses and legal fees), incurred by the Escrow Agent or them in connection 5 with the Escrow Agent or their acting under this Agreement, provided that the Escrow Agent or they, as the case may be, have not acted with gross negligence or willful misconduct with respect to the events resulting in such claims, liability, loss, and expense. (l) The Company acknowledges and agree that, except as otherwise provided in this Section 6(l), the Escrow Agent shall not be responsible for taking any steps, including without limitation, the filing of forms or reports, or withholding of any amounts in connection with any tax obligations of the Company or any other party in connection with the Escrow Assets; provided, however, that the Escrow Agent shall be entitled to take any action such as withholding, that it deems appropriate to ensure compliance with its obligations under any applicable tax laws. In no event shall the Escrow Agent be required to distribute funds from the Escrow Account to either the shareholders or the Company unless the appropriate Internal Revenue Service Form W-8 or Form W-9 are received. Notwithstand ing the foregoing, the Escrow Agent shall supply any information or documents as may be reasonably requested by the Company in connection with the Company's preparation of its tax returns for the Escrow Account. Upon any distribution of Escrow Assets in accordance with the instructions set forth in Exhibit D attached hereto, the Escrow Agent shall prepare and deliver to each person receiving a distribution a completed Form 1099, and shall supply any necessary information as may reasonably be requested in writing by such persons. (m) The Escrow Agent does not have any interest in the Escrow Assets deposited hereunder but is serving as escrow holder only and having only possession thereof. The Company shall pay or reimburse the Escrow Agent upon request for any transfer taxes or other taxes relating to the Escrow Assets incurred in connection herewith and shall indemnify and hold harmless the Escrow Agent from any amounts that it is obligated to pay in the way of such taxes. This paragraph shall survive notwithstanding any termination of this Escrow Agreement or the resignation of the Escrow Agent. (n) The Escrow Agent makes no representation as to the validity, value, genuineness or the collectability of any security or other document or instrument held by or delivered to it. (o) The Escrow Agent shall not be called upon to advise any party as to the wisdom in selling or retaining or taking or refraining from any action with respect to any securities or other property deposited hereunder. 6 (p) No printed or other matter in any language (including without limitation prospectuses, notices, reports and promotional material) which mentions the Bank's name or the rights, powers, or duties of the Escrow Agent shall be issued by the other parties hereto or on such parties, behalf unless the Escrow Agent shall first have given its specific written consent thereto. Notwithstanding the foregoing sentence, the Escrow Agent hereby specifically consents to the use of its name as Escrow Agent as necessary to effectuate the Company's public offering and a business combination of the Company. (q) The Company authorizes the Escrow Agent, for any securities held hereunder, to use the services of any United States central securities depository it deems appropriate, including, but not limited to, the Depositary Trust Company and the Federal Reserve Book Entry System. 6. Instructions: Fund Transfers. (a) The Escrow Agent is authorized to rely and act upon all instructions given or purported to be given by one or more officers, employees or agents of the Company (i) authorized by or in accordance with a corporate resolution delivered to the Escrow Agent or (ii) described as authorized in a certificate delivered to the Escrow Agent by the appropriate Secretary or Assistant Secretary or similar officer (each such officer, employee or agent or combination of officers, employees and agents authorized pursuant to clause (i) or described pursuant to clause (ii) of this Section 6(a) is hereinafter referred to as an "Authorized Officer"). (The term "instructions" includes, without limitation, instructions to sell, assign, transfer, deliver, purchase or receive for the Escrow Account any and all stocks, bonds and other securities or to transfer all or any portion of the Escrow Assets.) The Escrow Agent may also rely and act upon instructions when bearing or purporting to bear the signature or facsimile signature of any of the individuals designated by an Authorized Officer regardless of by whom or by what means the actual or purported facsimile signature or signatures thereon may have been affixed thereto if such facsimile signature or signatures resemble the facsimile specimen or specimens from time to time furnished to the Escrow Agent by any of such Authorized Officers, Secretary or an Assistant Secretary or similar officer). In addition, and subject to subsection 6(b) hereof, the Escrow Agent may rely and act upon instructions received by telephone, telex, TXW facsimile transmission, bank wire or other teleprocess acceptable to it which the Escrow Agent believes in good faith to have been given by an Authorized Officer or which are transmitted with proper testing or authentication pursuant to terms and conditions which the Escrow Agent may specify. The Escrow Agent shall incur no liability to the Company or otherwise for having acted in 7 accordance with instructions on which it is authorized to rely pursuant to the provisions hereof. Any instructions delivered to the Escrow Agent by telephone shall promptly thereafter be confirmed in writing by an Authorized Officer but the Escrow Agent shall incur no liability for a failure to send such confirmation in writing, the failure of any such written confirmation to conform to the telephone instruction which it received, the failure of any such written confirmation to be signed or properly signed, or its failure to produce such confirmation at any subsequent time. The Escrow Agent shall incur no liability for refraining from acting upon any instructions which for any reason it, in good faith, is unable to verify to its own satisfaction. Unless otherwise expressly provided, all authorizations and instructions shall continue in full force and effect until canceled or superseded by subsequent authorizations or instructions received by the Escrow Agent's safekeeping account administrator. The Escrow Agent's authorization to rely and act upon instructions pursuant to this paragraph shall be in addition to, and shall not limit, any other authorization which the Company may give to it hereunder. (b) With respect to written or telephonic instructions or instructions sent by facsimile transmission to transfer funds from the Escrow Account in accordance herewith (such instructions hereinafter referred to as "Transfer Instructions"), the security procedure agreed upon for verifying the authenticity of Transfer Instructions is a callback by the Escrow Agent to any of the persons designated below, whether or not any such person has issued such Transfer Instruction. (It is recommended that the persons designated below not be persons who generally issue Transfer Instructions; whenever possible, the Escrow Agent will endeavor to call someone other than the issuer of the Transfer Instructions). With respect to Transfer Instructions given by the Company pursuant to its authority under this Agreement: Name/Title Telephone No. Judith Haselton, President (212) 678-6231 Richard L. Campbell, Secretary (212) 351-4922 Alternatively, at the Escrow Agent's option, the callback may be made to any person designated in the certified resolutions or other certificates or documentation furnished to it by a party in connection with the Escrow Account as authorized to issue Transfer Instructions or otherwise transact business with respect to the Escrow Account for that party. The Company shall implement any other authentication method or procedure or security device required by the Escrow Agent at any time or from time to time. 8 7. Stockholder Redemption. In the event a stockholder exercises his or her redemption right upon the Business Combination of the Company, the funds to repay said stockholder shall be distributed directly from the Escrow Account. As soon as practicable after the Company receives notice from a stockholder that the stockholder is exercising its redemption rights, the Company shall instruct the Escrow Agent to transfer, and (so long as the Escrow Agent has received an Internal Revenue Service Form W-8 or Form W-9) the Escrow Agent shall so transfer, the funds owed to the stockholder; such instructions to include the amount to be transferred and delivery instructions. These instructions shall comply with Section 6 of this Escrow Agreement. 8. Resignation or Removal of Escrow Agent. (a) The Escrow Agent may resign at any time by giving written notice to the Company. The Company may remove the Escrow Agent upon written notice to the Escrow Agent. Such resignation or removal shall take effect upon delivery of the Escrow Assets to a successor escrow agent designated in writing by the Company, and the Escrow Agent shall thereupon be discharged from all obligations under this Agreement, and shall have no further duties or responsibilities in connection herewith. The obligations of the Company to the Escrow Agent and the rights of the Escrow Agent under Sections 5, 6(c), and 6(h) hereof shall survive termination of this Agreement or the resignation or removal of the Escrow Agent. (b) In the event that the Escrow Agent submits a notice of resignation, its only duty, until a successor Escrow Agent shall have been appointed and shall have accepted such appointment, shall be to safekeep the Escrow Assets, and hold, invest and dispose of the Escrow Assets in accordance with this Agreement, until receipt of a designation of successor Escrow Agent or a joint written disposition instrument by the other parties hereto or a Final Order of a court of competent jurisdiction, but without regard to any notices, requests, instructions, demands or the like received by it from the other parties hereto after such notice shall have been given, unless the same is a direction that the Escrow Assets be paid or delivered in its entirety out of the Escrow Account. The Escrow Agent, upon submission of its resignation in accordance with this subparagraph (b) may deposit the Escrow Assets with a court of competent jurisdiction if the Escrow Agent deems such action advisable. The resignation of the Escrow Agent will take effect on the earlier of (a) the appointment of a successor (including a court of competent jurisdiction) or (b) the day which is 30 days after the date of delivery of its written notice of resignation to the other parties hereto. If, at the time the Escrow Agent has not received a designation of a successor Escrow Agent, the 9 Escrow Agent's sole responsibility after that time shall be to safe-keep the Escrow Assets until receipt of a designation of a successor Escrow Agent or a joint written disposition instrument by the other parties hereto or a final order of a court of competent jurisdiction. 9. Notices. Unless expressly provided herein to the contrary, notices hereunder shall be in writing, and delivered by telecopier, overnight express mail, first-class postage prepaid, delivered personally or by receipted courier service. All such notices which are mailed shall be deemed delivered upon receipt if the addressee is the Escrow Agent, but shall be deemed delivered upon mailing if otherwise, all such notices shall be addressed as follows (or to such other address as any party hereto may from time to time designate by notice duly given in accordance with this paragraph): (a) If to the Company, to: 1997 Corp. 315 West 106th Street Fourth Floor New York, New York 10025 Attention: Judith Haselton, President If to the Escrow Agent, to: Continental Stock Transfer & Trust Co. 2 Broadway 19th floor New York, New York 10004 Attn: Steve Nelson 10. Miscellaneous. (a) Choice of Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the law of the State of New York applicable to agreements made and to be performed in New York. The parties to this Agreement hereby agree that jurisdiction over such parties and over the subject matter of any action or proceeding arising under this Agreement may be exercised by a competent Court of the State of New York sitting in New York City or by a United States Court sitting in the Southern District of New York, exclusively. The parties agree that delivery or mailing of any process or other papers in the manner provided herein, or in such other manner as may be permitted by law, shall be valid and sufficient service thereof. (b) Benefits and Assignment. Nothing in this Agreement, expressed or implied, shall give or be construed to give any person, firm or corporation, other than the parties 10 hereto and their successors and assigns, any legal claim under any covenant, condition or provision hereof; all the covenants, conditions, and provisions contained in this Agreement being for the sole benefit of the parties hereto and their successors and assigns. No party may assign any of its rights or obligations under this Agreement without (i) the written consent of all the other parties, which consent may be withheld in the sole discretion of the party whose consent is sought and (ii) the written agreement of the transferee that it will be bound by the provisions of this Agreement. (c) Counterparts. This Agreement may be executed in several counterparts, each one of which shall constitute an original, and all collectively shall constitute but one instrument. (d) Amendment and Waiver. This Agreement may be modified only by a written amendment signed by all the parties hereto, and no waiver of any provision hereof shall be effective unless expressed in a writing signed by the party to be charged. (e) Headings. The headings of the sections hereof are included for convenience of reference only and do not form part of this Agreement. (f) Entire Agreement. This Agreement contains the complete agreement of the parties with respect to its subject matter and supersedes and replaces any previously made proposals, representations, warranties or agreements with respect thereto by any of the parties hereto. (g) Separability. Any provisions of this Agreement which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or enforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11. Additional Documentation. This Agreement shall not become effective (and the Escrow Agent shall have not responsibility hereunder except to return the Escrow Assets to the Company) until the Escrow Agent shall have received from the Company the following: (i) Certified resolutions of its board of directors authorizing the making and performance of this Agreement; and 11 (ii) A certificate as to the names and specimen signatures of its officers or representatives authorized to sign the Agreement and notices, instructions and other communications hereunder. 12 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. 1997 CORP. By: --------------------------- Name: Judith Haselton Title: President Agreed and accepted: CONTINENTAL STOCK TRANSFER & TRUST COMPANY as Escrow Agent By: ------------------------------- Name: Title: 13 EXHIBIT A to ESCROW AGREEMENT ESCROW ASSETS ------------- One Hundred Fifty Thousand Dollars U.S. ($150,000) 14 EXHIBIT B TO ESCROW AGREEMENT INTENTIONALLY OMITTED 15 EXHIBIT C TO ESCROW AGREEMENT INVESTMENT INSTRUCTIONS ----------------------- The Escrow Agent shall invest the Escrow Assets in bank deposits, a registered investment company that holds itself out as a "money market fund" meeting the conditions of paragraphs (c)(2), (c)(3) and (c)(4) of Rule 2a-7 under the Investment Company Act or short-term United States government securities, including treasury bills, cash and cash equivalents. 16 EXHIBIT D TO ESCROW AGREEMENT DISBURSEMENT INSTRUCTION 1. Release of Escrow Assets to the Company. The Escrow Agent shall release the Escrow Assets to the Company upon receipt by the Escrow Agent of: (i) Written notice from the Company that the Company has completed a transaction or series of trans actions in which the Company has entered into a specific line of business, and a written certification 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 exceeds eighty percent of the offering proceeds described in Exhibit A, as required by the Registration Statement; and (ii) More than twenty percent of the shareholders of the Company have not elected to redeem their Common Stock, as required by the Registration Statement; and (iii) All other actions required to be performed by the Company for the release of the Escrow Assets have been met. 2. Distribution of Escrow Assets as to Stockholders. The Escrow Agent shall disburse the Escrow Assets to the purchasers of record of the Company's Common Stock in the Offering if: (a) The Company has not met the conditions for release of the Escrow Assets to the Company within 18 months from the effective date of the Registration Statement; or (b) The Company delivers written notice to the Escrow Agent that part of the Escrow Assets should be distributed to those holders of record of the Company's Common Stock sold in the Offering electing to have their shares redeemed in accordance with the terms set forth in the Registration Statement, as set forth in such notice. 3. Method of Release of Escrow Assets to the Company. Upon the occurrence of receipt by the Escrow Agent of the written notice required paragraph 1 above, the Escrow Agent shall wire transfer the Escrow Assets to the Company in accordance 17 with the wire transfer instructions of the Company set forth in such notice. 4. Method of Distribution of Escrow Assets to Stockholders. Upon the occurrence of either of the events specified in Section 2(a) or 2(b) above, the Escrow Agent shall distribute the Escrow Assets to the holders of record of the Company Common Stock sold in the Offering by mail in accordance with and to the address specified in the books and records of the Company. The written notice required by Section 2 (a) or 2(b), as the case may be, shall include the name and address of each such holder, together with the percentage of the Escrow Assets to be distributed thereto. 18 EXHIBIT E TO ESCROW AGREEMENT FEE SCHEDULE ------------ One Thousand ($1,000.00)Dollars Escrow Agent fee to CONTINENTAL STOCK TRANSFER & TRUST COMPANY to be paid at Closing. 19 EX-10.2 5 ESCROW AGREEMENT (STOCK) EXHIBIT 10.2 ESCROW AGREEMENT (STOCK) This ESCROW AGREEMENT is made as of this __th day of March, 1997 by and between 1997 Corp. with a place of business at 315 West 106th Street, Fourth Floor, New York, New York 10025 (the "Company"), and Continental Stock Transfer & Trust Company with a principal place of business at 2 Broadway, 19th Floor, New York, New York 10004, in its capacity as escrow agent only (the "Escrow Agent"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company intends to consummate the initial public offering (the "Offering") of an aggregate of 30,000 shares (the "Shares") of the Company's common stock, par value $.001 per share (the "Common Stock") as more fully described in the Company's Registration Statement on Form SB-2 under the Securities Act of 1933, as amended (File No. ________), as declared effective by the Securities and Exchange Commission on _______, 1997 (the "Registration Statement"); WHEREAS, in accordance with the terms of the offering as set forth in the Registration Statement, the Shares are required to be placed directly in an escrow account; and WHEREAS, the Company wishes to appoint the Escrow Agent as the escrow agent for such account, on the terms and conditions set forth below in order to comply with the requirements of Rule 419 of Regulation C of the Rules and Regulations established by the Securities and Exchange Commission; NOW, THEREFORE, in consideration of the mutual promises and obligations set forth below, and for other valuable consideration the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows: I. Appointment of Escrow Agent and Creation of Account. The Company hereby appoints the Escrow Agent as escrow agent hereunder and directs it to hold those assets described in Exhibit A attached hereto, together with any additional assets which may be deposited with the Escrow Agent from time to time to be held pursuant to this Agreement and any additions thereto 1 (collectively, the "Escrow Assets"), in a separate account in the name of "1997 Corp. - Stock Escrow Account" (the "Escrow Account"). The Escrow Account shall be administered and distributed in accordance with the terms set forth below. Contemporaneously with the closing of the Offering, the Company shall deposit with the Escrow Agent those assets listed on Exhibit A. 1. Initial Deposit into Escrow Account. Certificates representing all Shares sold by the Company shall be deposited directly in the Escrow Account by the Company. 2. Distribution from Escrow Account. The Escrow Agent shall make distributions from the Escrow Account in accordance with the requirements set forth in Exhibit D attached hereto. Such instructions may be modified only by a written certificate executed by authorized officers of the Company, and delivered to the Escrow Agent. In addition, this Escrow Agreement may not be altered by the Board of Directors of the Company in terms of its distribution instructions, except as may be required by the Board of Directors to fulfill their fiduciary obligations. The Escrow Agent is authorized to make distributions in reliance on the instructions it receives. Written notice of each distribution from the Escrow Agent shall be provided to the Company within ten (10) days of each such distribution. Upon the final distribution of all of the Escrow Assets, this Agreement shall terminate and the Escrow Agent shall have no further obligations or liabilities hereunder. 3. Compensation of Escrow Agent. The Escrow Agent shall receive fees determined in accordance with, and payable as specified in, the Schedule of Fees attached hereto as Exhibit E (the "Fee Schedule"). The Escrow Agent shall have no duties or liabilities under this Agreement unless and until full payment of the fee set forth in Exhibit E. The Escrow Agent shall be reimbursed by the Company for all expenses, disbursements and advances incurred or made by the Escrow Agent in preparation, administration and enforcement of this Agreement, including, but not limited to, reasonable legal fees and expenses. The Company shall be liable for all payments due to the Escrow Agent under this Agreement. 4. Responsibilities and Rights of the Escrow Agent. To induce the Escrow Agent to act hereunder, it is further agreed by the undersigned that: (a) The Escrow Agent undertakes to perform only such duties as are expressly set forth herein. Without limiting the generality of the foregoing, the Escrow Agent shall have no duty or responsibility as regards any loss occasioned by delay in the actual receipt of notice of any payment, redemption or other 2 transaction regarding any item in the Escrow Assets as to which it is authorized to take action hereunder. The Escrow Agent may consult with counsel and shall be fully protected with respect to any action taken in good faith in accordance with such advice. The Escrow Agent shall have no liability or responsibility for any misstatement in, or omission from, the Prospectus. (b) The Escrow Agent shall not be under any duty to give the Escrowed Assets held by it hereunder any greater degree of care than it gives its own similar property except as directed pursuant to this Escrow Agreement. (c) The Escrow Agent does not make any representation or warranty with regard to the creation or perfection, hereunder or otherwise, of a security interest in the Escrow Assets or regarding the negotiability or transferability of, or existence of other interests in the Escrow Assets. The Escrow Agent shall have no responsibility at any time to ascertain whether or not any security interest exists in the Escrow Assets or any part thereof or to file any financing statement under the Uniform Commercial Code of any state with respect to the Escrow Assets or any part thereof. (d) The Escrow Agent is hereby authorized to comply with any judicial order or legal process which stays, enjoins, directs or otherwise affects the transfer or delivery of the Escrow Assets or any party hereto and shall incur no liability for any delay or loss which may occur as a result of such compliance. (e) The Escrow Agent need not maintain any insurance with respect to the Escrow Assets. (f) Except as otherwise expressly provided herein, the Escrow Agent is authorized to execute instructions and take other actions pursuant to this Agreement in accordance with its customary processing practices for similar customers and, in accordance with such practices the Escrow Agent may retain agents, including its own subsidiaries or affiliates, to perform certain of such functions. The Escrow Agent shall have no liability under this Agreement for any loss or expense other than those occasioned by the Escrow Agent's gross negligence or willful misconduct and in any event its liability shall be limited to direct damages and shall not include any special or consequential damages. All collection and receipt of securities and all delivery of securities under this Agreement shall be made by the Escrow Agent as agent, at the risk of the other parties hereto with respect to their actions or omissions and those of any person other than the Escrow Agent. In no event shall the Escrow Agent be responsible or liable for any loss due to force beyond its control, including, but not limited to, acts of God, 3 flood, fire, nuclear fusion, fission or radiation, war (declared or undeclared), terrorism, insurrection, revolution, riot, strikes or work stoppages for any reason, embargo, government action, including any laws, ordinances, regulations or the like which restrict or prohibit the providing of the services contemplated by this Agreement, inability to obtain equipment or communications facilities, or the failure of equipment or interruption of communications facilities, and other causes whether or not of the same class or kind as specifically named above. In the event that the Escrow Agent is unable substantially to perform for any of the reasons described in the immediately preceding sentence, it shall so notify the other parties hereto as soon as reasonably practicable following its actual knowledge of the same. (g) This Escrow Agreement expressly sets forth all the duties of the Escrow Agent with respect to any and all matters pertinent hereto. No implied duties or obligations shall be read into this agreement against the Escrow Agent. Notwithstanding any provisions of this Agreement to the contrary, the Escrow Agent shall not be bound by, or have any responsibility with respect to, any other agreement or contract among the Company and the Representatives (whether or not the Escrow Agent has knowledge thereof). (h) It is understood and agreed that should any dispute arise with respect to the payment and/or ownership or right of possession of the Escrow Assets, or should the Escrow Agent in good faith be in doubt as to what action it should take hereunder, the Escrow Agent is authorized and directed to retain in its possession, without liability to anyone, all or any part of the Escrow Assets until such dispute shall have been settled either by mutual agreement by the parties concerned or by the final order, decree or judgment of any court or other tribunal of competent jurisdiction in the United States of America and time for appeal has expired and no appeal has been perfected, but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings. Any such court order shall be accompanied by a legal opinion by counsel for the presenting party satisfactory to the Escrow Agent to the effect that said court order is final and nonappealable. (i) The Escrow Agent shall be entitled to rely upon any order, judgment, certification, demand, notice, instrument or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of the service thereof. Without limiting the foregoing, in the event of any alteration of distribution instructions, the Escrow Agent shall have no responsibility to determine whether the requested alteration was required by the Board of Directors of the Company 4 to fulfill its fiduciary obligations. The Escrow Agent may act in reliance upon any instrument or signature believed by it to be genuine and may assume that any person purporting to give receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so. (j) The Company shall hold the Escrow Agent and its agents harmless from, and indemnify and reimburse the Escrow Agent and its agents for all claims, liability, loss and expense (including reasonable out-of-pocket and incidental expenses and legal fees), incurred by the Escrow Agent or them in connection with the Escrow Agent or their acting under this Agreement, provided that the Escrow Agent or they, as the case may be, have not acted with gross negligence or willful misconduct with respect to the events resulting in such claims, liability, loss, and expense. (k) The Company acknowledges and agree that, except as otherwise provided in this Section 6(k), the Escrow Agent shall not be responsible for taking any steps, including without limitation, the filing of forms or reports, or withholding of any amounts in connection with any tax obligations of the Company or any other party in connection with the Escrow Assets; provided, however, that the Escrow Agent shall be entitled to take any action such as withholding, that it deems appropriate to ensure compliance with its obligations under any applicable tax laws. (l) The Escrow Agent does not have any interest in the Escrow Assets deposited hereunder but is serving as escrow holder only and having only possession thereof. The Company shall pay or reimburse the Escrow Agent upon request for any transfer taxes or other taxes relating to the Escrow Assets incurred in connection herewith and shall indemnify and hold harmless the Escrow Agent from any amounts that it is obligated to pay in the way of such taxes. This paragraph shall survive notwithstanding any termination of this Escrow Agreement or the resignation of the Escrow Agent. (m) The Escrow Agent makes no representation as to the validity, value, genuineness or the collectability of any security or other document or instrument held by or delivered to it. (n) The Escrow Agent shall not be called upon to advise any party as to the wisdom in selling or retaining or taking or refraining from any action with respect to any securities or other property deposited hereunder. 5 (o) No printed or other matter in any language (including without limitation prospectuses, notices, reports and promotional material) which mentions the Escrow Agent's name or the rights, powers, or duties of the Escrow Agent shall be issued by the other parties hereto or on such parties, behalf unless the Escrow Agent shall first have given its specific written consent thereto. Notwithstanding the foregoing sentence, the Escrow Agent hereby specifically consents to the use of its name as Escrow Agent as necessary to effectuate the Company's public offering and a business combination of the Company. 5. Instructions: Fund Transfers. (a) The Escrow Agent is authorized to rely and act upon all instructions given or purported to be given by one or more officers, employees or agents of the Company (i) authorized by or in accordance with a corporate resolution delivered to the Escrow Agent or (ii) described as authorized in a certificate delivered to the Escrow Agent by the appropriate Secretary or Assistant Secretary or similar officer (each such officer, employee or agent or combination of officers, employees and agents authorized pursuant to clause (i) or described pursuant to clause (ii) of this Section 5(a) is hereinafter referred to as an "Authorized Officer"). (The term "instructions" includes, without limitation, instructions to sell, assign, transfer, deliver, purchase or receive for the Escrow Account any and all stocks, bonds and other securities or to transfer all or any portion of the Escrow Assets.) The Escrow Agent may also rely and act upon instructions when bearing or purporting to bear the signature or facsimile signature of any of the individuals designated by an Authorized Officer regardless of by whom or by what means the actual or purported facsimile signature or signatures thereon may have been affixed thereto if such facsimile signature or signatures resemble the facsimile specimen or specimens from time to time furnished to the Escrow Agent by any of such Authorized Officers, Secretary or an Assistant Secretary or similar officer). In addition, and subject to subsection 7(b) hereof, the Escrow Agent may rely and act upon instructions received by telephone, telex, TXW facsimile transmission, bank wire or other teleprocess acceptable to it which the Escrow Agent believes in good faith to have been given by an Authorized Officer or which are transmitted with proper testing or authentication pursuant to terms and conditions which the Escrow Agent may specify. The Escrow Agent shall incur no liability to the Company or otherwise for having acted in accordance with instructions on which it is authorized to rely pursuant to the provisions hereof. Any instructions delivered to the Escrow Agent by telephone shall promptly thereafter be confirmed in writing by an Authorized Officer but the Escrow Agent shall incur no liability for a failure to send such confirmation in writing, the failure of any such written 6 confirmation to conform to the telephone instruction which it received, the failure of any such written confirmation to be signed or properly signed, or its failure to produce such confirmation at any subsequent time. The Escrow Agent shall incur no liability for refraining from acting upon any instructions which for any reason it, in good faith, is unable to verify to its own satisfaction. Unless otherwise expressly provided, all authorizations and instructions shall continue in full force and effect until canceled or superseded by subsequent authorizations or instructions received by the Escrow Agent's safekeeping account administrator. The Escrow Agent's authorization to rely and act upon instructions pursuant to this paragraph shall be in addition to, and shall not limit, any other authorization which the Company may give to it hereunder. (b) With respect to written or telephonic instructions or instructions sent by facsimile transmission to transfer securities from the Escrow Account in accordance herewith (such instructions hereinafter referred to as "Transfer Instructions"), the security procedure agreed upon for verifying the authenticity of Transfer Instructions is a callback by the Escrow Agent to any of the persons designated below, whether or not any such person has issued such Transfer Instruction. (It is recommended that the persons designated below not be persons who generally issue Transfer Instructions; whenever possible, the Escrow Agent will endeavor to call someone other than the issuer of the Transfer Instructions). With respect to Transfer Instructions given by the Company pursuant to its authority under this Agreement: Name/Title Telephone No. Judith Haselton, President (212) 678-6231 Richard L. Campbell, Secretary (212) 351-4922 Alternatively, at the Escrow Agent's option, the callback may be made to any person designated in the certified resolutions or other certificates or documentation furnished to it by a party in connection with the Escrow Account as authorized to issue Transfer Instructions or otherwise transact business with respect to the Escrow Account for that party. The Company shall implement any other authentication method or procedure or security device required by the Escrow Agent at any time or from time to time. 6. Stockholder Redemption. In the event a stockholder exercises his or her redemption right upon the Business Combination of the Company, following the return of the funds to said stockholder from the Funds Escrow created of even date herewith between the Company and the Escrow Agent, the 7 Shares which are the subject of the redemption shall be cancelled. 7. Resignation or Removal of Escrow Agent. (a) The Escrow Agent may resign at any time by giving written notice to the Company. The Company may remove the Escrow Agent upon written notice to the Escrow Agent. Such resignation or removal shall take effect upon delivery of the Escrow Assets to a successor escrow agent designated in writing by the Company, and the Escrow Agent shall thereupon be discharged from all obligations under this Agreement, and shall have no further duties or responsibilities in connection herewith. The obligations of the Company to the Escrow Agent and the rights of the Escrow Agent under Sections 5, 6(c), and 6(h) hereof shall survive termination of this Agreement or the resignation or removal of the Escrow Agent. (b) In the event that the Escrow Agent submits a notice of resignation, its only duty, until a successor Escrow Agent shall have been appointed and shall have accepted such appointment, shall be to safekeep the Escrow Assets, and hold, invest and dispose of the Escrow Assets in accordance with this Agreement, until receipt of a designation of successor Escrow Agent or a joint written disposition instrument by the other parties hereto or a Final Order of a court of competent jurisdiction, but without regard to any notices, requests, instructions, demands or the like received by it from the other parties hereto after such notice shall have been given, unless the same is a direction that the Escrow Assets be paid or delivered in its entirety out of the Escrow Account. The Escrow Agent, upon submission of its resignation in accordance with this subparagraph (b) may deposit the Escrow Assets with a court of competent jurisdiction if the Escrow Agent deems such action advisable. The resignation of the Escrow Agent will take effect on the earlier of (a) the appointment of a successor (including a court of competent jurisdiction) or (b) the day which is 30 days after the date of delivery of its written notice of resignation to the other parties hereto. If, at the time the Escrow Agent has not received a designation of a successor Escrow Agent, the Escrow Agent's sole responsibility after that time shall be to safe-keep the Escrow Assets until receipt of a designation of a successor Escrow Agent or a joint written disposition instrument by the other parties hereto or a final order of a court of competent jurisdiction. 8. Notices. Unless expressly provided herein to the contrary, notices hereunder shall be in writing, and delivered by telecopier, overnight express mail, first-class postage prepaid, delivered personally or by receipted courier service. All such notices which are mailed shall be deemed delivered upon receipt 8 if the addressee is the Escrow Agent, but shall be deemed delivered upon mailing if otherwise, all such notices shall be addressed as follows (or to such other address as any party hereto may from time to time designate by notice duly given in accordance with this paragraph): (a) If to the Company, to: 1997 Corp. 315 West 106th Street Fourth Floor New York, New York 10025 Attention: Judith Haselton, President If to the Escrow Agent, to: Continental Stock Transfer & Trust Co. 2 Broadway 19th floor New York, New York 10004 Attn: Steve Nelson 9. Miscellaneous. (a) Choice of Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the law of the State of New York applicable to agreements made and to be performed in New York. The parties to this Agreement hereby agree that jurisdiction over such parties and over the subject matter of any action or proceeding arising under this Agreement may be exercised by a competent Court of the State of New York sitting in New York City or by a United States Court sitting in the Southern District of New York, exclusively. The parties agree that delivery or mailing of any process or other papers in the manner provided herein, or in such other manner as may be permitted by law, shall be valid and sufficient service thereof. (b) Benefits and Assignment. Nothing in this Agreement, expressed or implied, shall give or be construed to give any person, firm or corporation, other than the parties hereto and their successors and assigns, any legal claim under any covenant, condition or provision hereof; all the covenants, conditions, and provisions contained in this Agreement being for the sole benefit of the parties hereto and their successors and assigns. No party may assign any of its rights or obligations under this Agreement without (i) the written consent of all the other parties, which consent may be withheld in the sole discretion of the party whose consent is sought and (ii) the written agreement of the transferee that it will be bound by the provisions of this Agreement. 9 (c) Counterparts. This Agreement may be executed in several counterparts, each one of which shall constitute an original, and all collectively shall constitute but one instrument. (d) Amendment and Waiver. This Agreement may be modified only by a written amendment signed by all the parties hereto, and no waiver of any provision hereof shall be effective unless expressed in a writing signed by the party to be charged. (e) Headings. The headings of the sections hereof are included for convenience of reference only and do not form part of this Agreement. (f) Entire Agreement. This Agreement contains the complete agreement of the parties with respect to its subject matter and supersedes and replaces any previously made proposals, representations, warranties or agreements with respect thereto by any of the parties hereto. (g) Separability. Any provisions of this Agreement which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or enforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10. Additional Documentation. This Agreement shall not become effective (and the Escrow Agent shall have not responsibility hereunder except to return the Escrow Assets to the Company) until the Escrow Agent shall have received from the Company the following: (i) Certified resolutions of its board of directors authorizing the making and performance of this Agreement; and (ii) A certificate as to the names and specimen signatures of its officers or representatives authorized to sign the Agreement and notices, instructions and other communications hereunder. 10 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. 1997 CORP. By: -------------------------------- Name: Judith Haselton Title: President Agreed and accepted: CONTINENTAL STOCK TRANSFER & TRUST COMPANY as Escrow Agent By: ------------------------------- Name: Title: 11 EXHIBIT A to ESCROW AGREEMENT ESCROW ASSETS Up to Thirty Thousand (30,000) Shares of Common Stock of the Company 12 EXHIBIT B TO ESCROW AGREEMENT INTENTIONALLY OMITTED 13 EXHIBIT C TO ESCROW AGREEMENT INVESTMENT INSTRUCTIONS ----------------------- Intentionally Left Blank 14 EXHIBIT D TO ESCROW AGREEMENT DISBURSEMENT INSTRUCTION 1. Release of Escrow Assets to the Company. The Escrow Agent shall release the Escrow Assets to the Shareholders upon receipt by the Escrow Agent of: (i) Written notice from the Company that the Company has completed a transaction or series of trans actions in which the Company has entered into a specific line of business, and a written certification 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 exceeds eighty percent of the offering proceeds of $150,000, as required by the Registration Statement; and (ii) More than twenty percent of the shareholders of the Company have not elected to redeem their Common Stock, as required by the Registration Statement; and (iii) All other actions required to be performed by the Company for the release of the Escrow Assets have been met. 2. Distribution of Escrow Assets back to the Company. The Escrow Agent shall disburse the Escrow Assets back to the Company if: (a) The Company has not met the conditions for release of the Escrow Assets to the shareholders within 18 months from the Effective Date of the Registration Statement; or (b) The Company delivers written notice to the Escrow Agent that part of the Escrow Assets should be cancelled and returned to the Company as a result of less than 20% of the Company's holders of Common Stock sold in the Offering electing to have their shares redeemed in accordance with the terms set forth in the Registration Statement as set forth in such notice. 15 3. Method of Release of Escrow Assets to the Company. Upon the occurrence of receipt by the Escrow Agent of the written notice required paragraph 1 above, the Escrow Agent shall deliver in customary fashion the Escrow Assets to the shareholders in accordance with the shareholder list held by the Escrow Agent. 4. Method of Distribution of Escrow Assets to Stockholders. Upon the occurrence of either of the events specified in Section 2(a) or 2(b) above, the Escrow Agent shall distribute the Escrow Assets to the Company and/or the holders of record of the Company Common Stock sold in the offering by mail in accordance with and to the address specified in the books and records of the Company. The written notice required by Section 2 (a) or 2(b), as the case may be, shall include the name and address of each such holder, together with the percentage of the Escrow Assets to be distributed thereto. 16 EXHIBIT E TO ESCROW AGREEMENT FEE SCHEDULE One Thousand ($1,000.00)Dollars Escrow Agent fee to CONTINENTAL STOCK TRANSFER & TRUST COMPANY to be paid at Closing. 17 EX-23.1 6 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Exhibit 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1997 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 March 31, 1997, relating to the financial statements of 1997 Corp., which is contained in that Prospectus. We also consent to the reference to us under the caption "Experts" in the Prospectus. New York, New York April 7, 1997 Feldman Radin & Co., P.C., EX-27 7 FINANCIAL DATA SCHEDULE
5 OTHER DEC-31-1997 MAR-31-1997 20,000 0 0 0 0 20,000 0 0 20,000 0 0 0 0 15 19,985 20,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00.00 00.00
EX-28 8 SUBSCRIPTION AGREEMENT EXHIBIT 28 SUBSCRIPTION AGREEMENT ---------------------- Judith Haselton, President 1997 Corp. 315 West 106th Street Fourth Floor New York, New York 10025 Dear Sir or Madam: The undersigned hereby acknowledges receipt of the Prospectus of 1997 Corp., Inc. (the "Company"). The undersigned is over 18 years of age. The undersigned subscriber represents and warrants that the Shares purchased are for his/her own account and not for redistribution on behalf of the Company. I hereby subscribe for the following number of Shares. A. Number of Shares subscribed for - ----------------------------- B. Price per Share $5.00 C. Total subscription price (Line A x Line B)_______________________ Enclosed is my check, bank draft or postal or express money order for the full subscription price stated on Line C above, which has been made payable to "1997 Corp.- Escrow Account." It is understood that this Subscription is subject to allotment. The Company reserves the right to reject all or any portion of this subscription in its sole discretion for any reason whatsoever by refunding all monies paid thereon without interest. The cashing of any check, bank draft or postal or express money order will not be deemed to be an acceptance in whole or in part of any subscription. In the event less than 30,000 Shares are sold within the time allotted for such sale, then the funds deposited will be promptly refunded in full without interest to the subscriber by the Company. Name in which Stock Very truly yours, Certificate should be issued, if other than --------------------------- mine alone: Signature - ------------------------------ - ----------------------------- Print Name --------------------------- - ------------------------------ - ----------------------------- Social Security Number Address Taxpayer ID Number: -----END PRIVACY-ENHANCED MESSAGE-----