U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of
The Securities Exchange Act of 1934
SOY ENVIRONMENTAL PRODUCTS, INC.AND SUBSIDAURY
----------------------------------------------
(Formerly Denom Acquisition Corp.)
(Name of Small Business Issuer)
Delaware 48-1192445
-------- ----------
(State of Incorporation) (I.R.S. Employer ID No.)
9135 Barton Street, Overland Park, Kansas 66214
-----------------------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: 1-913-599-0800
--------------
Securities and Exchange Commission File Number: 21N-10160-86
------------
Securities to be Registered under Section 12(b) of the Act: NONE
----
Title of each Class Name of each Exchange on which
to be so Registered: each Class is to be Registered:
Not Applicable Not Applicable
-------------- --------------
Securities to be Registered under Section 12(9) of the Act:
Title of each Class to be so Registered:
Common Stock, $0,001 Par Value
- ------------------------------
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
(Formerly Denom Acquisition Corp.)
Form 10-SB
Table of Contents
PART1
-----
ITEM 1: DESCRIPTION OF BUSINESS
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
ITEM 3: DESCRIPTION OF PROPERTY
ITEM 4: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
ITEM 5: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
ITEM 6: EXECUTIVE COMPENSATION
ITEM 7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 8: DESCRIPTION OF SECURITIES
PART 2
------
ITEM 1: MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
ITEM 2: LEGAL PROCEEDINGS
ITEM 3: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES
ITEM 5: INDEMNIFICATION OF OFFICERS AND DIRECTORS
PART F/S
--------
ITEM 1: FINANCIAL STATEMENTS
PART 3
------
ITEM 1: INDEX TO EXHIBITS
ITEM 2: DESCRIPTION OF EXHIBITS
<PAGE>
PART I
------
ITEM 1: DESCRIPTION OF BUSINESS
SOY ENVIRONMENTAL PRODUCTS, INC, formerly Denom Acquisition Corp., a
Delaware Corporation, hereinafter the "Company") was incorporated on January 10,
1996. On September 3, 1996 the Company entered into an agreement to acquire 100%
of the issued and outstanding shares of Common Stock of Delta Environmental,
Inc., a Delaware Corporation (hereinafter "DEI"). Said acquisition was completed
on October 21, 1996. Prior to the acquisition of DEI the Company had not engaged
in any form of commercial business activity and as a result had no operating
history. Further, prior to the acquisition of DEI, neither the Company nor any
of its Officers or Directors had any affiliation with DEI and DEI or any of its
Officers, Directors or Principal Shareholders had any affiliation with the
Company. DEI was incorporated on October 1, 1996 to engage in the development
of, ownership of interests in, and operation of biodegradable chemical
facilities.
The Company was established to develop and market consumer and
industrial products made from soybean oil. Products derived from soybean oil
possess rather unique characteristics that have value to the consumer and
industrial market segments. Soybean oil based products provide an effective
alternative to petroleum based products commonly used by the homeowner and
industry. The Company has developed and is marketing a line of environmentally
friendly products to industrial, municipal, and institutional entities. Derived
from a renewable resource, soybeans offer an environmentally preferred
alternative to petroleum and chemically based products. The Company's existing
branded line of products, as a result of comparative testing, meets or exceeds
industry standards for competing products as well as having a better
environmental profile than petro/chemical based products.
With the current trend toward products that are safer to workers as
well as safe to the environment, there exists an increasing demand for products
that are non-hazardous and non-polluting. This trend, along with the current
Federal and State regulatory posture toward the use of volatile organic
compounds, has created significant opportunities for the Company to prosper and
gain market share with its branded "SoyClean" line of environmentally friendly
products.
The Company is poised to meet the consumer demand for products that
protect the environment and offer an environmental substitute for hazardous,
toxic or volatile products. Accelerating this demand is the current federal and
state regulatory positions regarding the use of environmentally hazardous or
toxic substances. These factors will drive fulfillment of current and future
market needs and enable the Company to develop additional products that satisfy
consumer demand for environmental products.
THE COMPANY
Soy Environmental Products, Inc. is a vertically integrated
organization with ownership in the production of the raw material to sales of
the finished product. This includes a 6,000 square foot facility located in Iowa
for processing, packaging, and production of the product line. The Company's
operations include the manufacture and processing of the soybean component of
formulations as well as the marketing and sales of the "SoyClean" family of
environmental products. This integration assures the Company a steady, reliable
supply of the basic formulation ingredient for finished goods.
<PAGE>
THE PRODUCTS
The Company currently has four products in its commercial product line.
The commercial line is being used by municipalities, institutions, and
manufacturers. These products meet or exceed the competitive standards for
similar products in addition to offering ancillary benefits. One unique benefit
the commercial line offers customers is a better work environment for personnel.
"SoyClean" products give the potential for fewer work related illnesses,
injuries, and workers compensation claims. In fact, great pleasure and
satisfaction is taken whenever the Company learns that workers no longer have to
go home with headaches as a result of breathing volatile spirits in the
workplace. Various customers have also disclosed that their employees or users
of the products no longer experience skin reactions on their hands when using
"SoyClean".
Another benefit cited by customers is the reduction of administrative
time devoted to documenting and maintaining records for the use of hazardous
solvents and chemicals. The reduction of volatile compounds in manufacturing
plants by replacing petroleum based solvents with soybean based solvents reduces
the amount of emissions that are monitored and reported to the EPA or other
regulatory agencies. In some instances it allows them to cease reporting and
eliminates payment of taxes or fines levied on industrial polluters. The use of
biodegradable soy based products further reduces concerns about spills and clean
up of hazardous substances, another product benefit. This enhances the
customer's image not only with their employees but also in their local community
and state.
The Commercial product Line consists of the following Six (6) products:
SoyClean
Graffiti Remover
SoyRelease
SoyFormula
Naturen
Each of these products offer characteristics that exceed those of
competitive products while meeting or exceeding industry performance standards.
Key characteristics of these products are their biodegradable nature and lack of
volatile emissions that could harm the ozone. The products are also
characterized by the absence of harmful or explosive fumes or vapors leading to
safer operating conditions for industrial users.
SoyClean Graffiti Remover is formulated for use by municipalities,
institutions, school districts, utility companies, and law enforcement
organizations. It effectively removes graffiti from a wide range of surfaces and
is available in five package sizes. It replaces petroleum and hydrocarbon based
graffiti cleaners and it has unmatched worker and environmental safety
characteristics.
SoyRelease is a product designed for state, local, and federal
Departments of Transportation and the paving and general contracting industries.
It prevents asphalt from adhering to truck beds, paving equipment, and other
metal surfaces. SoyRelease is also effective at removing asphalt and tar from
vehicles and other surfaces. SoyRelease is a biodegradable substitute for diesel
and other petroleum based products used for cleaning at construction sites.
<PAGE>
SoyFormula is a replacement for hazardous mineral spirits or petroleum
based solvents used in the industrial and commercial manufacturing market
segments. It can be used as an industrial cleaner or parts washer and helps
industry meet compliance with environmental, health and safety standards and
regulations.
Naturen is a product formulated for printing press blanket washing as
well as other press components. It has been in use in Europe since 1991 and
meets regulatory standards for the U.S. printing industry.
In addition to the commercial product line, the Company is developing
products that it believes will meet or exceed competitive standards in the
retail consumer market. These branded products focus on common cleaning uses
found throughout the home and small businesses. The biodegradable, non-toxic
nature of these products, in addition to their effective cleaning
characteristics, position these products for consumer acceptance in the market
place.
The "SoyClean" retail line is composed of products that can be used by
the homeowner as well as industrial, commercial, and institutional settings. The
unique characteristics of the retail line is the biodegradable, non toxic nature
of the products. Again, as with all of the Company's products, a soybean
derivative is the key component of the formulation. The "SoyClean" retail line
consists of the following products:
Graffiti Remover - This biodegradable product effectively removes
graffiti from a variety of surfaces. It is effective on paints as well as
markers and has been used by numerous municipalities, schools, utilities, and
homeowners. The product is offered in three container sizes for commercial and
home use.
Barbecue Grill Cleaner - Designed to attack the build up of grease and
char on barbecue cookers and grills, this product softens and loosens the soiled
surfaces prior to rinsing.
Adhesive/Mastic Remover - Specially formulated to remove adhesive and
mastic from hard surfaces, this biodegradable product softens the adhesive or
mastic so that cleanup with water is all that is necessary.
Paint Stripper - A biodegradable product that aggressively strips
paint, varnish, and other similar finishes from a variety of surfaces. The
product is packaged in container sizes appropriate for both the homeowner and
the commercial customer.
Driveway Cleaner - This biodegradable product cleans driveways,
sidewalks, and other concrete surfaces. It is perfect for use in commercial
workshop, automotive repair shop, and by the homeowner in their garage, the
basement, or on the patio and driveway.
Lubricant - This multi-purpose lubricant is designed for use around the
home, garage, shop, factory, or office. It is a biodegradable non-toxic
lubricant that penetrates rust, loosens frozen parts, provides a light coating
for lubrication of moving parts, and protects against corrosion.
Hand Cleaner & Soap - A biodegradable, waterless hand cleaner that
effectively cleans oil, grease, grit and grime while conditioning and softening
the skin.
<PAGE>
Engine Degreaser - This product removes grease, oil, and dirt from
engines. Simply spray on the degreaser, give the product time to work, and hose
off. It is biodegradable, non-toxic with no hazardous vapors.
Bug and Tar Remover - Biodegradable and non-toxic, this product
effectively removes bugs, tar, road oil, and asphalt from vehicles and other
surfaces.
Gasket Remover - Designed for use by the auto mechanic, this product
helps loosen and clean gasket materials. Also is biodegradable and non-toxic.
Car Wash - This biodegradable product loosens dirt and grime from
vehicles and can be rinsed into the sewer. This cleaner will biodegrade in
municipal waste treatment facilities.
MARKETING
The attributes of the "SoyClean" product line are elements that promote
the products as environmentally friendly alternatives to products currently in
use. The consumer is becoming more and more environmentally conscious and this
trend continues the Company believes the appeal of "SoyClean" products will be
enhanced. The Company intends to use television and other mass media to create
awareness of its total product line.
Industrial Products
The Industrial Product Line is in the introductory/early growth stage
of a product life cycle. The Company expects demand for environmental products
by industry to continue and expand. Sales for the Industrial Line will be
directed through an in house employee sales force. The unique characteristics
and benefits of the product line to industry and the environment has the
potential to fulfill a part of the current and future demand for environmentally
safe products. The use of the products provide value to the customer in ways
that are not measured m monetary terms. The value to the customer of a product
that reduces worker exposure to harmful substances, reduces administrative
overhead, and reduces ownership concern about liabilities associated with
hazardous spills makes "SoyClean" Industrial Products a viable choice in the
marketplace.
Retail Products
The Company's Chairman has an extensive background in the Home Center
retail market segment and has been actively involved in senior management of
several major national companies involved in the sales and distribution of
retail products. This background gives the Chairman a presence with key
manufacturers' representatives who will be instrumental in taking the "SoyClean"
product line to targeted retail segments. The Company's strategy is to utilize
its management's knowledge of the distribution channels required in order to
establish a line of branded products with the appropriate retail outlets.
The Company plans to launch the Retail Product Line during the first
quarter of 1997 by concentrating on the penetration of the Home Center market
segment. This segment contains petro/chemical based products that have
applications similar to many of the "SoyClean" environmental friendly products.
It is anticipated that the reputation of the Company's Chairman
<PAGE>
within this market segment will have the effect of minimizing many of the
obstacles to market entry by new products and new companies.
The Company expects to have "SoyClean" products available in stores
such as Home Depot, Pep Boys, Payless Pharmacy, Safeway Supermarkets and other
similar national retail chains. Since the Company's retail products are price
competitive and price elastic, its strategy is to penetrate targeted markets by
educating and informing consumers about the attributes of "SoyClean". The
Company intends to get maximum exposure for "SoyClean" products by utilizing a
national advertising campaign to achieve this objective. This approach is
appropriate for mass promotion and affords efficient communication of the
message to a large number of consumers. The campaign will help establish the
"SoyClean" brand identity and convey to the consumer the availability of
products that satisfy their needs.
In summary, the Company's marketing strategy for the Industrial and
Retail Product Lines is designed to increase awareness and knowledge of
"SoyClean" benefits and value. The Company will utilize the strengths of
management to open the appropriate channels of distribution, and use cost
effective advertising and promotion techniques to create consumer awareness.
Need to Develop Market For Consumer Products
The Company has not yet established any distribution system for its
consumer products, and no assurance can be given that its consumer product will
be accepted, or that a satisfactory distribution network can be established
which will result in its consumer products being a success.
Uncertainty of Widespread Market Acceptance of Consumer Products, Limited
Marketing Experience
The Company is currently developing, and has not yet marketed, its line
of consumer products. To date, there have been no sales of consumer products,
and the Company has conducted only limited marketing activities and has limited
marketing experience with respect to its consumer products. As is typical with
new products, demand and market acceptance for the Company's consumer products
are subject to a high level of uncertainty. Achieving widespread market
acceptance for these products will require substantial marketing efforts and the
expenditure of significant funds to create brand recognition and customer demand
for such products and to cause potential customers to consider the potential
benefits of the Company's products as against the traditional products to which
they have long been accustomed.
Moreover, the Company has limited marketing capabilities and resources.
To date, substantially all of the Company's marketing activities with respect to
its consumer products have been conducted by members of management. The
prospects for the Company's consumer products will be largely dependent upon the
Company's ability to achieve market penetration for such products. Achieving
market penetration will require significant efforts by the Company to create
awareness of and demand for the Company's products and services. Accordingly,
the Company's ability to build its client base will depend on the Company's
ability to locate, hire and retain sufficient qualified marketing personnel.
There can be no assurance that the Company's consumer products will achieve
widespread market acceptance or increased sales or that the Company's efforts
will result m profitable operations.
<PAGE>
Need for Additional Development of Certain Products
The Company believes that its development work on its products is
substantially complete. However, testing of these products has been limited. The
Company anticipates that its future research and development activities combined
with experience gained from commercial production and use of the products could
result in the need for further refinement and development. The Company also
expects to modify the products for particular customer applications. There can
be no assurance that unforeseen circumstances will not require expensive
additional development of the consumer products and their applications. In
addition, the Company may in the future need to make improvements in its
industrial and consumer products in order for such products to remain
competitive.
Limited Patent and Propriety Information Protection
The Company believes that the proprietary technology used in its
products does not infringe on the proprietary rights of others. In the event
that the Company's products infringe patent or proprietary rights of others, the
Company may be required to modify its process or obtain a license. There can be
no assurance that the Company would be able to do so in a timely manner, upon
acceptable terms and conditions or at all. The failure to do so would have a
material adverse effect on the Company. In addition, there can be no assurance
that the Company will have the financial or other resources necessary to defend
a patent infringement or proprietary rights action. Moreover, if any of the
Company's products infringe patents or proprietary rights of others, the Company
could, under certain circumstances, become liable for damages, which could have
a material adverse effect on the Company. The Company also relies on proprietary
know-how and confidential information and employs various methods to protect the
processes, concepts, ideas and documentation associated with its technology.
However, such methods may not afford complete protection and there can be no
assurance that others will not independently develop such processes, concepts,
ideas and documentation. Although the Company requires all of its employees to
sign confidentiality agreements, there can be no assurance that such agreements
will be enforceable or will provide meaningful protection to the Company. There
can be no assurance that the Company will be able to adequately protect its
trade secrets or that other companies will not acquire information which the
Company considers to be proprietary. Moreover, there can be no assurance that
other companies will not independently develop Know-how comparable to or
superior to that of the Company.
Adequacy of Product Liability Insurance
The use of the Company's products entails inherent risks of adverse
effects which could expose the Company to product liability claims. Product
liability claims could have a material adverse effect on the business and
financial condition of the Company. The Company does not currently have any
product liability insurance, which means that all of the Company's assets are
subject to any product liability claim. While the Company intends to obtain and
maintain $1,000,000 in product liability insurance, there can be no assurance
that the Company will be able to maintain or obtain adequate product liability
insurance on acceptable terms or that such insurance will provide adequate
coverage against all potential claims.
<PAGE>
COMPETITION
The market for environmentally friendly chemical products is recent and
a rapidly growing segment of the U.S. economy. Numerous companies similar to the
Company have entered the market in the last few years in anticipation of the
perceived opportunities surrounding environmentally safe products and as a
result the markets for the Company's products are highly competitive. The
Company believes that its products can compete and that its management's
qualifications will enable it to compete effectively. However, many of the
current competitors in the market place have significantly longer operating
histories and greater financial resources than the Company. A significant factor
m the Company's retail products ability to compete in the market will be its
ability to secure "shelf space" with major national retail chains.
Because the Company's consumer products are new, the scope of the
Company's competition is difficult to access accurately. Currently, most
cleaners, solvents and other products competitive with those of the Company are
petroleum based and are not biodegradable. The Company will compete with
numerous well-established chemical and consumer products companies, all of which
possess substantially greater experience, financial, marketing, personnel and
other resources than the Company and have established greater recognition for
their brand names than the Company. Many of the Company's competitors have
achieved significant national, regional and local brand name and product
recognition and engage in extensive advertising and promotional programs, both
generally and in response to efforts by additional competitors to enter new
markets and/or to introduce new products. In addition, the Company believes that
these competitors have the resources to develop and have developed, are
developing, or may develop and market products directly competitive with
products incorporating the Company's technology. Current competitors or new
market entrants could produce new or enhanced products with features that render
the Company' a products obsolete or less marketable. The Company's ability to
compete successfully will depend on the Company's continuing research and
development of new and improved products and on the Company's ability to adapt
to technological changes and advances. There can be no assurance that the
Company will be able to compete successfully, that competitors will not develop
technologies or products that render the Company's products obsolete or less
marketable or that the Company will be able to successfully enhance its products
or develop new products.
MERGER AND/OR ACQUISITION OPPORTUNITIES
Even though mergers will be a path to growth and development, the
Company will seek only mergers with or acquire firms that can provide audited
financial statements, and can easily fall within the scope of the Company's
present and future growth plans. There are certain risks which may arise from
any merger situation, especially where there is an opportunity to acquire or
merge with a relative new operating entity, however, all efforts will be
exercised to minimize such risks with careful examination of the merging or to
be acquired company, its audited financial statements, as well as an analysis of
the potential for success based on present and potential competition and overall
market conditions.
<PAGE>
FACILITIES
The Company through its subsidiary Delta Environmental, Inc. leases, on
a month to month basis, approximately 3800 sq/ft of office space at its
principal place of business in Overland Park, Kansas. The lease expires on
September 30, 1997 and the annual rent is $42,000.00. The space is used for the
general administration of the Company including all marketing of the Company's
products. In addition the Company owns a 25% equity interest in a two million
gallon a year manufacturing facility in Ralston, Iowa consisting of 6,000 sq/ft
of production space plus outdoor storage tanks. The facility is co-owned and
managed by West Central Cooperative also of Ralston, Iowa. The production
facility is utilized to process Soy Bean Oil which is further distilled into
Methyl Esters and Glycerin. The Methyl Esters are then formulated with various
additives to produce the Company's final products. The Glycerin by-product is
sold to third parties for use in unrelated products. The Ralston facility is
expected to meet the production needs for the Company into the near future and
should sales exceed the current production capacity of the facility it can
easily be expanded.
EMPLOYEES
At September 30, 1996, the Company employed four full time personnel,
two administrative and two marketing employees. The Company's employees are not
covered by any collective bargaining agreements or unions.
The Company considers its relationship with is employees to be good.
INDUSTRY SEGMENTS
No information is presented as to industry segments. The Company is
presently engaged in a single line of business involved in the development of,
ownership in, and operation of biodegradable chemical facilities. Reference is
made to the financial statements included herein in response to Part F/S of this
Form 10SB for a statement of the Company's revenues and operating profits
(losses) since the date of inception.
GOVERNMENT REGULATION
The Company is regulated pursuant to the Securities Act of 1934 as well
as the rules and regulations promulgated by the Securities and Exchange
Commission. The Company is also subject to State Securities Laws in the States
where it operates as well as the States in which its securities may be sold. In
addition, since the Company is engaged m the chemical industry it may be subject
to various Federal and State laws and regulations, including but not limited to,
The Environmental Protection Agency, The Federal Trade Commission, and The
Department of Agriculture.
The Company's products do not utilize chemicals that are classified
under applicable laws as hazardous chemicals or substances. The production of
the Company's products does not currently produce waste or by-products, and none
are expected to be generated by potential new products. The Company does not
intend to maintain insurance to compensate it for any liabilities it may incur
if it were to violate environmental protection laws or regulations. However,
there can be no assurance that the Company will not incur environmental
liability arising out of the use of
<PAGE>
hazardous substances. To date, the Company does not believe that it or DEI has
incurred any such liability in their operations. The use of certain chemicals
and other substances is subject to extensive and frequently changing federal,
state, provincial and local laws and substantial regulation under these laws by
governmental agencies, including the United States Environmental Protection
Agency, the Occupational Health and Safety Administration, various state
agencies and county and local authorities acting in conjunction with federal and
state authorities. Among other things, these regulatory bodies impose
requirements to control air, soil and water pollution, to protect against
occupational exposure to chemicals, including health and safety risks, and to
require notification or reporting of the storage, use, and release of certain
hazardous chemicals and substances. The Company believes that it is in
substantial compliance with all material laws and regulations governing its
material business operations and has obtained all material licenses and permits
required for the operation of its business. There can be no assurance that the
Company in the future will be able to comply with, or continue to comply with,
current or future government regulations in every jurisdiction in which it will
conduct its material business operations without substantial cost or
interruption of its operations, or that any present or future federal, state,
provincial or local environmental protection regulations may not restrict the
Company's present and possible future activities. In the event that the Company
is unable to comply with such requirements, the Company could be subject to
substantial sanctions, including restrictions on its business operations,
monetary liability and criminal sanctions, any of which could have a material
adverse effect upon the Company's business.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Management's' Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion of the results of operations and financial
condition should be read in conjunction with the financial statements and notes
thereto appearing elsewhere in this Form 10SB and/or amendments reflecting
operations and financial condition both before and after the acquisition of DEI.
As set forth in Item 1 above, prior to October 21, 1996, the Company had no
operating history. Subsequent to October 21, 1996 all of the Company's
operations are being carried out by its wholly owned subsidiary DEI. Therefore,
all discussions below concerning the Company prior to the acquisition of DEI
relate to and reflect the operations of DEI only.
Liquidity and Capital Resources:
From the date of inception to the date of the acquisition of DEI the
Company had no revenues or operating income. As of the date of acquisition of
DEI, the Company had no tangible assets. As a result of the acquisition of DEI,
for the year ending September 30, 1996 the Company had total assets of $185,382
and total stockholders' equity of $128,591 . During the same period the Company
had current assets of $21,512 in the form of cash, and current liabilities of
$56,791. The Company's capital resources consisted of $21,512 in cash.
For the three month period ending December 31, 1996 the Company had
total assets of $248,929 and total stockholder's equity of $220,525. During the
same period the Company had current assets of $28,302 of which $26,262 was cash
and current liabilities of $28,404. At the same date current payables were
$28,404 and current receivables were $2,040. The Company currently does not have
any long term debt.
<PAGE>
Since inception the Company's (and its subsidiary) working capital
needs have been satisfied by financing activities primarily consisting of the
private placement of Common Stock. The Company anticipates meeting its working
capital needs during the current fiscal year primarily with revenues from the
sale of securities and secondarily from operations, if any. For the year ending
September 30, 1996 the Company showed an operating loss of $40,726 and for the
three month period ending December 31, 1996 an operating loss of $79,893. The
Company believes that it will require additional funds to cover the costs of
manufacturing it products, general and administrative overhead, meeting its
reporting obligations under the Exchange Act, and in order to effect the
acquisition of any entity or asset the Board of Directors deems necessary for
the growth or well being of the Company. If such funds are necessary, the
Company will seek to borrow such funds and/or raise such funds through the
private or public sale of its Common Stock. No assurances can be given that such
financing, if required, will be available, or that it can be obtained on terms
satisfactory to the Company. If the Company is unable to secure financing from
the sale of its securities or from private lenders, management believes that the
Company will be able to continue operating by realizing working capital from its
current operations and its current funding activities. In the opinion of
management inflation has not had a material affect on the operations of the
Company.
During the next 12 months the Company will establish a manufacturer's
representative organization to represent the Company's products throughout the
U.S. as well as internationally. The organizations will be responsible for
contacting and developing target markets as determined by the Company's
management. Initially the marketing efforts will concentrate on two market
segments involving large hardware/home center retail chains and the light
industrial and automotive users.
Results of Operations
From the date of inception to the date of acquisition of DEI, the
Company had no revenues or operating income. Prior to the acquisition of DEI the
Company's expenses were minimal and administrative in nature. The Results of
Operations discussed below reflect only the operations of DEI. Included herein
are audited financial statements of DEI covering the period from inception
through September 30, 1996 and unaudited consolidated statements for the three
month period ending December 31, 1996. For the year ending September 30, 1996
DEI had a net operating loss of $40,726 on total revenues of $0.00. For the
three month period ending December 31, 1996 DEI had a net operating loss of
$78,893 on total revenues of $3,133.
Absence of Historical Profitability, Continued Losses, Accumulated Deficits
The Company anticipates that its operating expenses will be increasing
so that the Company's future profitability will depend upon significant
increases in revenue from operations. There can be no assurance as to the amount
of income which the Company may be able to generate from operations. Losses have
primarily resulted from high start-up costs and initial low sales volume. Given
the Company's financial resources, its anticipated expenses, and the highly
competitive environment in which it will operate, there can be no assurance that
the Company will be able to generate sufficient revenue to fund its current or
future operations or that the Company's future operations will be profitable in
the near future or at all.
<PAGE>
ITEM 3: DESCRIPTION OF PROPERTY
The Company owns no real property and tangible personal property
consists of minor office equipment. The Company considers its exclusive license
for the promotion, use, sale, distribution and manufacturing of its "SoyClean"
products as well as its 25% equity interest in Interwest LLC, an Iowa Limited
Liability Company, which owns the Ralston, Iowa production facility to be
tangible assets.
ITEM 4: SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS & MANAGEMENT
The following table sets forth information with respect to: (i) any
person, management or otherwise, known by the Company to own beneficially more
than five percent (5%) of the Company's common stock; (ii) the shares of Common
Stock beneficially owned by each Officer & Director of the Company; and (iii)
the total of the Company's Common Stock beneficially owned by Company's Officers
and Directors as a group. Each stockholder holds the sole voting and investment
power with regard to the shares owned beneficially by such stockholder.
Name and Address of Amount and Nature Percent of Beneficial
Beneficial Ownership of Class(l) Owner
VEXTERGLEN LIMITED
Bank of Ireland (IOM) Limited 1,431,174 31.80%
16 St. George Street Douglas
Isle of Man 1M1 1PL
Capital West Investments Holding
Company, Inc., Suite 510 960,762 21.30%
2525 East Camelback Road
Phoenix, Arizona 85016
Interchem Environmental, Inc. (2)
9135 Barton Street 500,000 11.11%
Overland Park, Kansas 66214
Gary L. Haer
9135 Barton Street 200,000 04.44%
Overland Park, Kansas 66216
Lawrence L. Kohler (3)
2525 East Camelback Road, Suite 510 149,031 03.31%
Phoenix, Arizona 85016
Milton R. Barnes
2525 East Camelback Road, Suite 510 149,031 03.31%
Phoenix, Arizona 85016
<PAGE>
Sean F. Lee (4)
7113 West Sack Drive 500,000 10.00%
Glendale, Arizona 85308
George T. Bard 0 0
8347 East Las Estancias
Scottsdale, Arizona 85250
Lawrence G. Olson 0 0
214 West Vista Avenue
Phoenix, Arizona 85021
Lee E. Derr (2)
9135 Barton Street 0 0
Overland Park, Kansas 66214
All Directors and Executive (5) 700,000 14.00%
Officers as a Group (5 Persons)
Notes: Unless otherwise indicated in the footnotes below, the Company has been
advised that each person above has sole voting power over the shares indicted.
Note 1: Based upon 4,500,000 shares of Common Stock being issued and outstanding
on December 31, 1996.
Note 2: Mr. Lee E. Derr, a Director of and Consultant to the Company, is an
Officer and Director of Interchem (N.A.) Industries, Inc. and its wholly owned
subsidiary Interchem Environmental, Inc. Mr. Derr does not own any shares of
Interchem (N.A.) Industries, Inc. and therefore disclaims any beneficial
interest in the shares of the Company's Common Stock owned by Interchem
Environmental, Inc. Mr. Derr was also the incorporator of Delta Environmental,
Inc. ("DEI") which was part of the Acquisition. Mr. Derr disclaims ownership of
any shares of DEI or the Company.
Note 3: Lawrence L. Kohler is the President and majority shareholder of Capital
West Investment Holding Company, Inc. and as such has a beneficial interest the
shares of the Company's Common Stock currently owned by Capital West.
Note 4: The shares shown as being beneficially owned by Mr. Sean F. Lee are
shares available for purchase as a result of Stock Options granted to Mr. Lee
pursuant to his Employment Contract with the Company. In the event Mr. Lee
exercises all of his options the Company would have 5,000,000 shares issued and
outstanding. The 500,000 shares then owned by Mr. Lee would represent ten
percent (10%) of the Company's issued and outstanding shares of Common Stock.
Note 5: The number of shares shown includes the 500,000 shares under option to
Mr. Sean F. Lee, an Officer and Director of the Company.
<PAGE>
ITEM 5: DIRECTOS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Directors and Executive Officers of the Company and their ages are as
follows:
NAME AGE POSITION
Sean F. Lee 56 Chairman/CEO/Director
George T. Bard 67 President/Director
Gary L. Haer 43 Secretary/Director
Lee E. Derr 48 Director
Lawrence G. Olson 60 Director
All Company Directors were elected upon the closing of the acquisition
of DEI on October 21, 1996, and will remain in office until the next annual
meeting of the stockholders and until their successors have been duly elected
and qualified. There are no agreements between any parties with respect to the
election of Directors. The Company has not compensated its Directors for service
on the Board of Directors, or any committee thereof, or reimbursed for expenses
incurred for attendance at meetings of the Board of Directors and/or any
committee of the Board of Directors. Officers are appointed annually by the
Board of Directors and each Executive Officer of the Company serves at the
discretion of the Board of Directors. The Company does not have any standing
committees.
Mr. Lee E. Derr, a Director of the Company, is an officer and director
of a Public Company know as Interchem (N.A.) Industries, Inc. and Interchem
Environmental, Inc. a wholly owned subsidiary of Interchem (N.A.) Industries,
Inc. None of the other Officers and/or Directors of the Company are officers or
directors of any other publicly traded corporation, nor have any of the
Officers, Directors, Affiliates, or Promoters of the Company filed any
bankruptcy petition, been convicted of or been the subject of any criminal
proceedings, or the subject of any order, judgment, or decree involving the
violation of any state or federal securities laws within the past five years.
All authorized out of pocket expenses incurred by an Officer or
Director on behalf of the Company is subject to reimbursement upon receipt by
the Company of required documentation substantiating such expense. Their are no
current plans nor at present does the Company have any current or future
obligation to compensate the individuals serving in the capacity of a Director
of the Company. Compensation of Company Officers and Directors is at the
discretion of the Board of Directors. Mr. Sean Lee is compensated as an Officer
of the Company and Interchem (N.A.) Industries, Inc. is compensated as a
consultant to the Company. Mr. Lee Derr is President of Interchem (N.A.). See
Item 6 Executive Compensation.
The business experience of each of the persons listed above during the past five
years is as follows:
Mr. George T. Bard is a resident of Arizona and is an attorney admitted
to the California Bar. He has a Bachelors Degree from the University of Michigan
and a Law Degree from Lincoln University of San Francisco. Prior to his
involvement in the Company, in addition to practicing law, he was a Vice
President of Continental Gram and served as chief negotiator for the World
Milling Group.
<PAGE>
Mr. Sean F. Lee is a resident of Arizona and holds Degrees from Kells
College in Ireland and Hood College m Maryland. Prior to joining the Company Mr.
Lee was the Chairman and CEO of several large retailing divisions including the
Home Club of Zayre, W.R. Grace & Co., and others. He has extensive experience in
start ups as well as the initiation of many retailing endeavors.
Mr. Gary L. Haer is a resident of Kansas and holds a B.S. Degree in
Accounting from Northwest Missouri State University and a MBA from Baker
University. Prior to joining the Company Mr. Haer has held various management
positions in operations, insurance and accounting. As a Manager for Hartford
Insurance Group, he was responsible for market development and control,
financial analysis, and agency management. Part of Mr. Haer's experience
includes, since 1981, being a major partner in a diversified agriculture
operation where he was responsible for accounting, finance and operations.
During this period he served on several financial review committees for the FHA.
Since 1993, Mr. Haer has been accounting manager for Interchem (N.A.)
Industries, Inc., which developed the Company's products. Mr. Haer will also
serve as the Company's manager of Logistics and Manufacturing.
Mr. Lee E. Derr is a resident of Kansas and holds a B.S. Degree in
Finance from the University of Missouri. In addition he is a CPA and formerly
has been a Registered Financial and Operations Principal with the SEC and an
Allied Member of the New York Stock Exchange. Prior to founding Interchem (N.A.)
Industries, Inc. Mr. Derr was Vice President and CFO of B.C. Christopher and
Company, a Kansas City based Registered Securities Broker/Dealer. Mr. Derr's
responsibilities included banking relationships, accounting and tax departments,
cash management of up to $250MM per month, and liaison with the SEC, NYSE and
the CBT. In addition Mr. Derr previously served as V.P. of Finance for Wulfsberg
Electronics a division of Sundstrand Corporation. Since 1985 Mr. Derr has been
President of Interchem (N.A.) Industries, Inc. and continues today to direct all
aspects of that company's operations. The Company purchased its rights to its
"SoyClean" product line form Interchem.
Mr. Lawrence G. Olson is a resident of Arizona and holds a B.S. Degree
in Civil Engineering from the University of Southern California. He currently is
President and Owner of Olson Precast of Arizona, Inc., a precast production and
construction company of which he has been affiliated with since 1973.
The business of the Company will be largely dependent upon the efforts
of Mr. Sean F. Lee and Mr. Lee E. Derr. The Company does not currently have, but
intends to obtain and maintain, key-man life insurance in the amount of not less
than $1,000,000 (USD) on Mr. Lee. However, even with such insurance, Mr. Lee's
marketing skills and experience would be difficult for the Company to replace.
<PAGE>
ITEM 6: EXECUTIVE COMPENSATION
At present the Company does not maintain any form of bonus, profit
sharing, or deferred compensation plan for the benefit of any Employees,
Officers or Directors. The Board of Directors is currently considering a package
of benefits and will present a plan at the Company's next annual meeting. There
are no employment contracts with any individual working for or associated with
the Company or its subsidiary except for the Chairman/CEO, Mr. Sean F. Lee.
Mr. Lee has entered into a three year employment contract with DEI
whereby beginning January 1, 1997 he will be paid an annual salary of
$100,000.00. At such time as the gross annual revenues of the Company exceed
$5,000,000.00 the salary will increase to $150,000.00 per year and in addition
Mr. Lee will receive an override equal to nine-tenths of one percent (0.9%) of
the Company's gross revenue. Said override shall be payable quarterly. As part
of the employment agreement the Company has granted Mr. Lee an option to
purchase up to 500,000 shares of the Company's Common Stock at Thirty Three
Cents ($0.33) per share. The specific terms of the option are to be set forth in
a Stock Option Agreement which the Company has not yet prepared.
The Company has entered into a two year Consultancy Agreement with
Interchem (N.A.) Industries, Inc. whereby in exchange for consulting services
the Company, beginning January 1, 1997, will pay a monthly consulting fee in the
amount of $8333.33. Mr. Lee E. Derr, a Director of the Company, is an officer
and director of Interchem (N.A.) Industries, Inc.
<TABLE>
<CAPTION>
Name and Year Annual Annual Other Annual All Other
Principal Position Salary Bonus Compensation Compensation
<S> <C> <C> <C> <C> <C>
Sean F. Lee 1996 $0.00 $0.00 $0.00 $0.00
Chairman & CEO
George T. Bard 1996 $0.00 $0.00 $0.00 $0.00
President
Gary L. Haer 1996 $0.00 $0.00 $0.00 $0.00
Secretary/Treasurer
</TABLE>
The Officers and Directors of the Company, during 1996 after the
acquisition of DEI, did not receive any form of cash or other compensation. In
the future, in addition or in lieu of current forms of compensation, the Company
may established with each Company Officer and/or Director some form of new or
additional compensation. Said compensation may include a situation wherein an
Officer or Director could receive shares of the Company's Common Stock in lieu
of cash until such time that the Company can sustain such expenses on a cash
basis. In the event shares of the Company's Common Stock are delivered to an
Officer and/or Director as compensation, the value of the shares delivered will
be based on one or more of the following basis: the then current market value of
the shares as traded on a public exchange; the then current Book Value of the
shares; or as determined by the Company's Board of Directors. The dollar amount
of compensation due each Officer and/or Director and a formulae for valuing the
shares of the Company's Common Stock in order to determine the number of shares
to be issued as compensation will be determined by the Board of Directors prior
to the issuance of any shares of the Company's Common Stock. No dollar amount of
Officer/Director compensation or formulae for determining the value of the
shares of the Company's Commons Stock has been determined at this time and the
Board of Directors has no plans to make such a determination in the near future.
<PAGE>
ITEM 7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no arrangements between the Company and any of its
current or previous Officers, Directors, or nominees for election as a Director,
or any shareholder owning greater than five percent (5%) of the Company's
outstanding shares, nor any member of the above referenced individuals'
immediate family except as set forth below. The Company currently does not have
in force or effect any policies, procedures or controls with respect to entering
into future transactions with its Officers, Directors, Affiliates or a Related
Party.
Mr. Sean F. Lee, Chairman/CEO/Director of the Company, as a result of
his Employment Agreement has an option to purchase up to 500,000 shares of the
Company's Common Stock for Thirty Three Cents ($0.33) per share. In the event
Mr. Lee were to exercise his stock purchase options, based on the current number
of shares of Common Stock issued and outstanding, he would then own ten percent
(10%) of the Company.
Mr. Lawrence L. Kohler is the President and majority shareholder of
Capital West Investments Holding Company, Inc. and as such has a beneficial
interest in the shares of Company Common Stock currently owned by Capital West.
Capital West Investment Group and affiliate of Capital West Investments Holding
Company, of which Mr. Kohler is President, will be involved as a financial
consultant in an anticipated private placement of shares of the Company's Common
Stock and as result the Company will pay a consulting fee and/or sales
commission to Capital West Investment Group.
In September of 1996 DEI entered into a 25 year License Agreement with
Interchem Environmental, Inc. whereby Interchem granted DEI and exclusive world
wide License for the promotion, use, sale, and distribution of Interchem's
"SoyClean" products. In addition the Company has entered into a two year
Consultancy Agreement with Interchem (N.A.) Industries, Inc. whereby in exchange
for consulting services the Company, beginning January 1, 1997, will pay a
monthly consulting fee to Interchem in the amount of $8333.33. Mr. Lee E. Derr,
a Director of the Company, is an officer and director of Interchem (N.A.)
Industries, Inc.
Interchem Environmental, Inc., a Shareholder of the Company, owns a 25%
equity interest in Interwest LLC, an Iowa Limited Liability Company, which owns
the Ralston, Iowa production facility utilized in the manufacture of the
Company's "SoyClean" products.
ITEM 8: DESCRIPTION OF SECURITIES
The Company is authorized to issue 20,000,000 shares of Common Stock.
$0.001 par value per share, 8,816,992 of which were issued and outstanding as of
September 30, 1996. No preferred stock is currently authorized. Each outstanding
share of Common Stock is entitled to one vote, either in person or by proxy, on
all matters that may be voted upon by the owners thereof at all meetings of the
stockholders. Stockholders of the Company have no rights to acquire additional
shares of Common Stock or any other of the Company's securities or shares of
issued and outstanding Common Stock are fully paid and non-assessable.
<PAGE>
The holders of common stock: (i) have equal ratable nights to dividends
from funds legally available therefor, when, and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of shares of Common
Stock upon liquidation, dissolution or winding up of affairs of the Company;
(iii) do not have preemptive, subscription, conversion or redemption rights, or
sinking fund provisions applicable thereto, and (iv) are entitled to one
non-cumulative vote per share on all matters on which stockholders may vote on
at all meetings of the stockholders.
On November 8, 1996, the Company's Board of Directors authorized a
reverse split of the shares of the Company's Common Stock. On November 27, 1996,
pursuant to Company By-laws, the Company held a special meeting of shareholders
to ratify an amendment to the Company's Articles of Incorporation reflecting the
reverse spilt, at a ratio of One (1) new share for each existing Six (6) shares,
of the then existing 8,816,992 issued and outstanding shares of Common Stock. As
a result of the One for Six reverse split 1,469,500 shares of Common Stock
remained issued and outstanding as post split shares prior to the issuance of
new shares associated with the acquisition of DEI. On October 21, 1996 the
Company issued 3,030,500 new shares of 144 Restricted Common Stock in
association with the acquisition of DEI resulting in a total of 4,500,000 shares
of Common Stock issued and outstanding.
Currently there are no shares of Preferred Stock authorized,
designated, issued or outstanding. In the future should the stockholders vote in
the affirmative to amend the Company's Articles of Incorporation to authorize
shares of Preferred Stock the Company's Board of Directors would be empowered to
designate classes of the Company's Preferred Stock and to establish relative
rights, preferences, qualifications and restrictions with regard to any
designated classes. The Company's Board of Directors has total discretion as to
the issuance and the determination of the rights and privileges of any shares of
Preferred or Common Stock which may be issued in the future, which rights and
privileges may be detrimental to the rights and privileges of the holders of the
existing shares of the Company's Common Stock now issued and outstanding.
Neither the Company's nor DEI's Charter and/or by-laws contain any
provisions that would delay, defer or prevent a change in control of the Company
or its subsidiary.
PART II
-------
ITEM 1:
MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S EQUITY AND OTHER SHAREHOLDER
MATTERS
(A) Marketing Information: No shares of the Company's Common or
Preferred Stock have been registered with the Securities and Exchange Commission
or any State Securities agency or authority. There is no established public
trading market for the Company's issued and outstanding Common Stock. In the
near future the Company intends to seek sponsorship of one or more NASD Member
Registered Securities Broker/Dealers and a quotation on The National Association
of Securities Dealers NASDAQ quotation system at the Bulletin Board level.
<PAGE>
(B) Holders: The number of record holders of shares of the Company's
Common stock as of December 31, 1996 was 1098, inclusive of those brokerage
firms and/or clearing houses, if any, holding shares of the Company's Common
Stock for their clientele (with each such brokerage house and/or clearing house,
if any, being considered as one holder), The aggregate number of shares of the
Company's Common Stock issued and outstanding as of December 31, 1996 was
4,500,000. Of this amount 1,030,500 new shares were issued during 1996 pursuant
to the acquisition of DEI and said shares are deemed "restricted securities" as
defined by Rule 144 of the Securities Act, as amended. As to the balance of
outstanding shares of the Company's Common Stock, 408,900 shares, are considered
to have been issued and outstanding for more than three years and may be sold or
otherwise transferred without restriction unless held by an affiliate or
controlling stockholder of the Company. Of these shares, the Company is not
aware of any held by Affiliates, Officers, or Directors of the Company or
beneficial interests thereof. The Company has no holders of Preferred Stock.
(C) Dividends: The Company has not paid or declared any dividends upon
its shares of Common Stock since its inception and, by reason of its present
financial status and its contemplated financial requirements, does not
contemplate or anticipate paying any dividends upon its shares of Common Stock
in the foreseeable future.
ITEM 2: LEGAL PROCEEDINGS
The Company is not presently a party to any litigation of any kind or
nature whosoever, nor to the Company's best knowledge and belief is any
litigation threatened or contemplated.
ITEM 3: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
From the inception of the Company until the acquisition of DEI its
accountants were Rotenberg & Company, LLP of Rochester, New York. Due to the
change in control of the Company resulting from the acquisition of DEI the
Company's Board of Directors decided to retain as its certifying accountant the
accountants for DEI, Semple & Cooper PLC of Phoenix, Arizona. The decision to
change accountants was that solely of the Company's Board of Directors. At no
time have there been any disagreements with prior or current accountants
regarding any matter of accounting principals or practices, financial statement
disclosure, or auditing scope or procedure. None of the accounting reports
associated with the financial statements of either the Company or DEI over the
past two years or from the date of inception to the date hereof contained an
adverse opinion or disclaimer of opinion, or was modified as to uncertainty,
audit scope, or accounting principles.
ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES
On May 29, 1996 the Company filed with the U.S. Securities and Exchange
Commission a Notice of Sale of Securities pursuant to Regulation "D", Section
4(6), Rule 504. The filing reported the exchange of 8,816,992 shares of the
Company's Common Stock. On the same date the Company also filed a Form 11 with
the Department of Law of the State of New York.
<PAGE>
On November 27, 1996 3,030,500 new restricted shares of the Company's
Common Stock were issued pursuant to a stock exchange agreement with the
shareholders associated with the acquisition of DEI. 2,530,500 restricted shares
were issued to existing shareholders of DEI and 500,000 new restricted shares
were issued to new stockholders as a result of an ongoing Private Placement of
500,000 shares of DEI common stock pursuant to Regulation "D" of the Act. All
3,030,500 shares were unregistered and deemed "restricted securities"' as
defined by Rule 144 of the Securities Act, as amended. All certificates
representing the securities bear a restrictive legend preventing their transfer
except m accordance with the Securities Act, as amended, and the regulations
promulgated thereunder.
For each of the above transactions. the Company relied upon the
exemption from registration under the Securities Act of 1933, as amended (the
"Act"), as provided by Section 4(2) of the Act. With regard to the exchange of
existing and issuance of new shares totaling 3,591,100 shares of the Company's
Common Stock to the shareholders of DEI, the Company determined that each met
the standards of an "Accredited Investor" and were deemed to be "Sophisticated"
pursuant to the rules. In addition the DEI shareholders submitted to the Company
an "Investment Letter" for purposes of the exchange transaction.
The Company is currently in the process of organizing a "Private
Placement" of 1,30,000 Units at $1.50 per Unit in a limited offering made only
to "Accredited Investors" as defined in Regulation "D" under the Act. Each
Purchaser must execute a Subscription Agreement making certain representations
and warranties to the Company, including such Purchaser's qualifications as an
Accredited Investor. Each Unit consists of One Share of Common Stock and One
Redeemable Common Stock Purchase Warrant.
The Units to be offered will be on a "best efforts, 335,000 Units or
none" basis by the Company through its Officers and Directors who will not
receive any compensation in the form of commissions or finders' fees. Capital
West Investment Holding Company, a. shareholder of the Company, has been
engaged, through its affiliate Capital West Group, Inc., as a financial advisor
and is entitled to receive a Consulting fee of up to $200,000 as compensation
for its services to the Company, if all Units offered are sold. Units may also
be sold by NASD member Broker/Dealers who may receive commissions of up to 10%
of the price of the Units sold. If the minimum 335,000 Units are sold the
Company will net after selling commissions $452,250 and if all 1,350,000 Units
are sold the Company will net after selling commissions $1,822,500. A copy of
the offering memorandum is attached as an Exhibit hereto.
The Units are being offered in reliance upon exemptions from the
registration requirements of the Act, and other applicable state securities
laws. If the sale of Units, Shares, or Warrants fails to qualify for these
exemptions, purchasers may seek rescission of their purchases of such
securities. If a number of purchasers were to obtain rescission, the Company
would face significant financial demands which could adversely affect the
Company as a whole, as well as any nonrescinding purchasers.
<PAGE>
ITEM 5: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Delaware law and the Company's Certificate of
Incorporation, no director of the Company is personally liable to the company or
to the shareholders for monetary damages for any breach of fiduciary duty as a
direct of the Company. Nevertheless, a director is liable to the extent provided
by applicable law (i) for the breach of his or her duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
As permitted by the provisions of the Delaware General Corporation Laws
the Company has the power to indemnify individuals made a party to a proceeding
because they are or were a director, against liability incurred in the
proceeding, if such individuals acted in good faith and in a manner reasonably
believed to be in, or not opposed to, the best interest of the Company and, in a
criminal proceeding, they had no reasonable cause to believe their conduct was
unlawful. The Company must indemnify a director or officer who is successful on
the merits or otherwise, in the defense of any proceeding, to which they are a
party because they are or were a director or officer of the Company, against
reasonable expenses incurred by them in connection with a proceeding or claim
with respect to which such individual has been successful. The Company's
Certificate of Incorporation empowers the Board of Directors to indemnify its
officers, directors, agents or employees against any loss or damage sustained
when acting in good faith in the performance of their corporate duties.
The Company may pay for or reimburse expenses incurred by a director,
officer. employee, fiduciary, or agent of the Company who is a party to a
proceeding in advance of final disposition of the proceeding provided the
individual furnishes the Company with written affirmation that their conduct was
in good faith and in a manner reasonably believed to be in, or not opposed to,
the best interest of the Company, and to undertake to repay the advance if it is
ultimately determined that they did not meet such standard of conduct.
TRANSFER AGENT
The Company has designated OTR Inc., 317 South West Alder, Suite 1120,
Portland, Oregon 97204, as its Registrar of Stock and Transfer Agent.
<PAGE>
PART F/S
--------
FINANICAL STATEMENTS AND SUPPLEMENTARY DATA
The Audited Financial Statements for the Company from the date of
inception, January 10, 1996, to September 30, 1996 have been examined to the
extent indicated in their reports by Rotenberg & Company, LLP, independent
certified public accountants. Also included are Audited Financial Statements for
Delta Environmental, Inc. from the date of inception, September 15, 1996, to
September 30, 1996 examined to the extent indicated in their reports by Semple &
Cooper PLC, independent certified public accountants. In addition Compiled
Consolidated Balance Sheets and Income Statements for the three month period
ending December 31, 1996, by Semple & Cooper PLC, independent certified public
accountants. All Financial Statements have been prepared in accordance with
generally accepted accounting principles. The aforementioned financial
statements are included herein in response to Item 15 of this Form 10-SB.
Financial Statements
- Soy Environmental Products, Inc. and Subsidiary Consolidated
Financial Statements for the Three Month Period Ended
December 31, 1996...................................................F-1
- Delta Environmental, Inc. Financial Statement from the
date of Inception, September 15, 1996, Through
September 30, 1996.................................................F-15
- Damon Acquisition Corp. Financial Statements from
January 10, 1996 (date of inception) to
September 30, 1996.................................................F-24
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
For The Three Month Period Ended
December 31, 1996
<PAGE>
To The Stockholders and Board of Directors of
Soy Environmental Products, Inc. and Subsidiary
We have compiled the accompanying consolidated balance sheet of Soy
Environmental Products, Inc. and Subsidiary as of December 31, 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the three month period then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying consolidated financial statements and, accordingly, do
not express an opinion or any other form of assurance on them.
/s/ Semple & Cooper, P.L.C.
Phoenix, Arizona
January 20, 1997
F-1
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1996
(Unaudited)
ASSETS
Current Assets:
Cash $ 26,262
Accounts receivable 2,040
----------
Total Current Assets 28,302
----------
Investment (Note 5) 150,000
Goodwill, net (Note 1) 47,203
Organization costs, net (Note 1) 8,424
Deferred offering costs (Note 1) 15,000
----------
220,627
----------
Total Assets $ 248,929
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable (Note 5) $ 28,404
----------
Total Current Liabilities 28,404
----------
Commitments: (Note 9) -
Stockholders' Equity:
Common stock, $.001 par value, 20,000,000 shares
authorized, 4,365,988 shares issued and outstanding 4,366
Additional paid-in capital 365,959
Accumulated deficit (149,800)
----------
Total Stockholders' Equity 220,525
----------
Total Liabilities and Stockholders' Equity $ 248,929
==========
See Accountants' Compilation Report
The Accompanying Notes are an Integral Part
of the Financial Statements
F-2
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For The Three Month Period Ended December 31, 1996
(Unaudited)
Sales $ 3,133
Cost of Sales 1,552
----------
Gross Profit 1,581
General and Administrative Expenses 81,719
----------
Loss from Operations (80,138)
Miscellaneous Income 245
----------
Net Loss $ (79,893)
==========
Loss per share (Note 1) $ (.02)
==========
Weighted average shares outstanding 4,365,988
==========
See Accountants' Compilation Report
The Accompanying Notes are an Integral Part
of the Financial Statements
F-3
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For The Three Month Period Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated Stockholers'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance at September
30, 1996 8,816,922 $ 8,817 $ - $ - $ 8,817
1 for 6 reverse
stock split (7,347,434) (7,347) 7,347 - -
Reverse merger with
Delta
Environmental,
Inc. 2,700,000 2,700 182,850 (69,907) 115,643
Proceeds from
private offering,
net of costs of
$20,542 196,500 196 175,762 - 175,958
Net loss for the
three month period
ended December 31,
1996 - - - (79,893) (79,893)
--------- ---------- ---------- ---------- ----------
Balance at
December 31, 1996 4,365,988 $ 4,366 $ 365,959 $ (149,800) $ 220,525
========= ========== ========== ========== ==========
</TABLE>
See Accountants' Compilation Report
The Accompanying Notes are an Integral Part
of the Financial Statements
F-4
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Three Month Period Ended December 31, 1996
(Unaudited)
Reconciliation of Net Loss to Net Cash
Provided by Operating Activities:
Net Loss $ (79,893)
----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization 3,244
Reverse acquisition of subsidiary (99,360)
Changes in Assets and Liabilities:
Accounts receivable (2,040)
Accounts payable 28,353
----------
(69,803)
----------
Net cash provided by operating activities (149,696)
----------
Cash flows from financing activities:
Proceeds from issuance of stock 175,958
----------
Net cash provided by financing activities 175,958
----------
Net increase in cash 26,262
Cash at beginning of period -
----------
Cash at end of period $ 26,262
==========
See Accountants' Compilation Report
The Accompanying Notes are an Integral Part
of the Financial Statements
F-5
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Principles and Nature of Operations:
Nature of Corporation:
Soy Environmental Products, Inc. and Subsidiary (formerly Denom
Acquisition Corp.) is a Corporation which was duly formed and organized
under the laws of the State of Delaware on January 10, 1996. The Company
was in the development stage and had no activity from its inception
through October 21, 1996. The principal business purpose of the
Corporation is to engage in the development of, ownership of interests
in, and operation of bio-degradable chemical facilities, and to
establish national sales and distribution networks for these products.
Subsequent to the balance sheet date, the Company changed its name from
Denom Acquisition Corp. to Soy Environmental Products, Inc.
Principles of Consolidation:
The consolidated financial statements include the accounts of Soy
Environmental Products, Inc. and its wholly-owned subsidiary, Delta
Environmental Inc. All significant inter-company balances and
transactions have been eliminated in consolidation.
Deferred Offering Costs:
Deferred offering costs represent costs incurred in connection with the
Company's pending private offering of common stock. At December 31,
1996, such costs amounted to $15,000. Deferred offering costs will be
netted against the net proceeds from the private offering, or expensed
should the offering not be completed.
Goodwill:
Goodwill consists of costs incurred in relation to the reverse
acquisition of the Company and will be amortized over a five (5) year
period. The Company evaluates the estimated net realizable value of its
goodwill at each balance sheet date and records an impairment if the
carrying value exceeds the expected future net operating cash flows from
the related operation. For the three month period ended December 31,
1996, amortization expense in the amount of $2,800 was charged to
operations.
Organization Costs:
Organization costs consist of costs incurred prior to commencing
operations. These costs consist primarily of professional fees and
administrative costs, and are amortized ratably over a five (5) year
period. For the three month period ended December 31, 1996, amortization
expense in the amount of $444 was charged to operations.
F-6
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Principles and Nature of Operations:
(Continued)
Interim Financial Information:
The interim financial statements for the three month period ended
December 31, 1996 are unaudited. In the opinion of management, such
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results of the
interim period. The results of operations for the three month period
ended December 31, 1996 are not necessarily indicative of the results
for the year ending September 30, 1997.
Loss Per Common Share:
The computation of loss per common share is based on the net loss
attributable to common stockholders and the weighted average number of
common shares outstanding for the period. Common share equivalents are
not included, as they are anti-dilutive in the calculation of loss per
share.
2. Reverse Acquisition:
On September 3, 1996, the Company entered into an agreement to purchase
all of the outstanding common stock of Delta Environmental, Inc. The
acquisition was effective as of October 21, 1996.
The acquisition of Delta Environmental, Inc. was accounted for using the
purchase method of accounting and as a reverse merger since the
stockholders of Delta Environmental, Inc. received approximately ninety
(90) percent of the outstanding common stock of Soy Environmental
Products, Inc. Approximately 1,000,000 shares of common stock in the
agreement were transferred directly from the stockholders of Soy
Environmental Products, Inc. to the stockholders of Delta Environmental,
Inc.
3. Pervasiveness of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-7
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Related Party Transactions:
Leasing Arrangements:
The Company leases office space under a month-to-month operating lease
agreement with a related entity. For the three month period ended
December 31, 1996, rental expense for the office lease was $11,586.
5. Investment:
The investment consists of approximately a twenty-five (25) percent
ownership interest in Interwest, L.C., an Iowa limited liability
company. The investment will be accounted for under the equity method,
however, as of December 31, 1996, no material activity had occurred. As
of December 31, 1996, the Company has recorded a payable due in relation
to the investment in the amount of $26,000.
6. Statement of Cash Flows:
Non-Cash Financing Activities:
For the three month period ended December 31, 1996, the Company
recognized financing activities that affected stockholders' equity, but
did not result in cash receipts.
As of December 31, 1996, these non-cash activities consisted of the
following:
Reverse acquisition of Delta Environmental, Inc.'s net assets
in exchange for 3,760,600 shares of the Company's restricted
common stock.
7. Economic Dependency:
The Company purchases substantially all of its supply of soybeans and
other materials from Interwest Cooperative, a related entity.
8. Stock Options:
On September 30, 1996, the Company granted stock options for 500,000
shares of common stock exercisable at $.33 per share and expiring
September 30, 2001.
F-8
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Commitments:
License Agreement:
On September 15, 1996, Delta Environmental, Inc. entered into a
licensing agreement with Interchem Environmental, Inc. for sales of
various Interchem Environmental, Inc. products. The contract provides
for royalties at a rate of one-half of one percent (.005%) of gross
sales. In exchange for the licensing agreement, Interchem Environmental,
Inc. received 500,000 shares of Delta Environmental, Inc. stock from an
existing stockholder.
10. Subsequent Event:
Subsequent to the balance sheet date, the Company intends to initiate a
private placement pursuant to Regulation D promulgated by the Securities
and Exchange Commission. The proposed private placement will offer for
sale 1,350,000 units, each consisting of one (1) share of common stock,
and one (1) redeemable common stock purchase warrant at $1.50 per unit.
In addition, on January 1, 1997, the Company entered into a consulting
agreement with Interchem Industries, Inc., a related entity. The
agreement is for a two (2) year period, with a total commitment of
$200,000.
F-9
<PAGE>
SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Proforma Condensed Consolidated Statement of Operations:
The following unaudited Proforma Condensed Consolidated Statement of
Operations of Soy Environmental Products, Inc. gives effect to the
reverse merger with Delta Environmental, Inc. as though said merger had
occurred as of October 1, 1996. This proforma information has been
prepared based on the estimates and assumptions set forth herein and in
the notes to such statements. The unaudited Proforma Condensed
Consolidated Statement of Operations do not purport to be indicative of
the results which actually would have been obtained had the purchase
been effected on October 1, 1996, or of the results which may be
obtained in the future.
The unaudited Proforma Condensed Consolidated Statement of Operations is
based on the purchase method of accounting and treated as a reverse
merger.
SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1996 (UNAUDITED)
Historical Historical Proforma Proforma
Soy Delta(1) Entries Consolidated
----------- --------- -------- ------------
Sales $ 3,133 $ - $ 3,133
Cost of Sales 1,552 - 1,552
---------- --------- ----------
Gross Profit 1,581 - 1,581
General and Administrative
Expenses 81,719 29,181 (2) 555 111,455
---------- --------- ----------
Loss from Operations (80,138) (29,181) (109,874)
Miscellaneous Income 245 - 245
---------- --------- ----------
Net Loss $ (79,893) $ (29,181) $ (109,629)
========== ========= ==========
(1) Represents the operations of Delta Environmental, Inc. for the period from
October 1, 1996 through October 21, 1996, the date of the reverse merger.
(2) To record amortization of the goodwill created in the reverse merger.
F-10
<PAGE>
DELTA ENVIRONMENTAL, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
For The Period From The Date of
Inception, September 15, 1996
Through September 30, 1996
F-15
<PAGE>
To The Stockholders and Board of Directors of
Delta Environmental, Inc. (A Development Stage Company)
We have audited the accompanying balance sheet of Delta Environmental, Inc. (A
Development Stage Company) as of September 30, 1996, and the related statements
of operations, stockholders' equity and cash flows for the period from the date
of inception, September 15, 1996 through September 30, 1996. The financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the 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 Delta Environmental, Inc. (A
Development Stage Company) as of September 30, 1996, and the results of its
operations, and its cash flows for the period from the date of inception,
September 15, 1996 through September 30, 1996, in conformity with generally
accepted accounting principles.
/s/ Semple & Cooper P.L.C.
Phoenix, Arizona
December 31, 1996
F-16
<PAGE>
DELTA ENVIRONMENTAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
September 30, 1996
ASSETS
Current Assets:
Cash $ 21,512
----------
Total Current Assets 21,512
----------
Investment (Note 4) 150,000
License Fee (Notes 1 and 7) 5,000
Deposit (Note 8) 5,003
----------
160,003
----------
Total Assets $ 181,515
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable (Note 4) $ 56,741
----------
Total Current Liabilities 56,741
----------
Commitments: (Notes 3 and 7) -
Stockholders' Equity: (Note 6)
Common stock, $.01 par value, 10,000,000 shares
authorized, 3,645,000 shares issued and
outstanding 36,450
Additional paid-in capital 129,050
Accumulated deficit (40,726)
----------
Total Stockholders' Equity 124,774
----------
Total Liabilities and Stockholders' Equity $ 181,515
==========
The Accompanying Notes are an Integral Part
of the Financial Statements
F-17
<PAGE>
DELTA ENVIRONMENTAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
For The Period From The Date of Inception,
September 15, 1996 Through September 30, 1996
Revenues $ -
General and Administrative Expenses (40,726)
----------
Net Loss $ (40,726)
==========
The Accompanying Notes are an Integral Part
of the Financial Statements
F-18
<PAGE>
DELTA ENVIRONMENTAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
For The Period From The Date of Inception,
September 15, 1996 Through September 30, 1996
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated Stockholers'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance at September
15, 1996 - $ - $ - $ - $ -
Stock issued for
consulting services
and license fee 3,500,000 35,000 - - 35,000
Proceeds from private
offering, net of
costs of $14,500 145,000 1,450 129,050 - 130,500
Net loss - - - (40,726) (40,726)
--------- ---------- ---------- ---------- ----------
Balance at September
30, 1996 3,645,000 $ 36,450 $ 129,050 $ (40,726) $ 124,774
========= ========== ========== ========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
F-19
<PAGE>
DELTA ENVIRONMENTAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
For The Period From The Date of Inception,
September 15, 1996 Through September 30, 1996
Reconciliation of Net Loss to Net Cash
Provided by Operating Activities:
Net Loss $ (40,726)
----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Stock issued for consulting fees 30,000
Changes in Assets and Liabilities:
Accounts payable 56,741
----------
86,741
----------
Net cash provided by operating activities 46,015
----------
Cash flows from investing activities:
Purchase of investments (150,000)
Disbursements for deposit (5,003)
----------
Net cash used for investing activities (155,003)
----------
Cash flows from financing activities:
Proceeds from issuance of stock 130,500
----------
Net cash provided by financing activities 130,500
----------
Net increase in cash 21,512
Cash at beginning of period -
----------
Cash at end of period $ 21,512
==========
The Accompanying Notes are an Integral Part
of the Financial Statements
F-20
<PAGE>
DELTA ENVIRONMENTAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Principles and Nature of Operations:
Nature of Corporation:
Delta Environmental, Inc. is a Corporation which was duly formed and
organized under the laws of the State of Delaware on October 1, 1996.
The Company has been in the development stage since its inception. The
principal business purpose of the Corporation is to engage in the
development of, ownership of interests in, and operation of
biodegradable chemical facilities, and to establish national sales and
distribution networks for these products.
The accompanying financial statements reflect the activity of the
business since its inception, September 15, 1996, although the formal
incorporation was not recorded until October 1, 1996.
License Fee:
The license fee consists of costs incurred in relation to the purchase
of a license to market certain chemical compounds for bioremediation
that are based upon soy product derivatives (See Note 7). The license
will be amortized ratably over a five (5) year period. The Company
evaluates the estimated net realizable value of its license fee at each
balance sheet date and records an impairment if the carrying value
exceeds the expected future net operating cash flows from the related
operation. For the period from the date of inception, September 15,
1996, through September 30, 1996, no amortization expense was charged to
operations.
2. Pervasiveness of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. Related Party Transactions:
The Company leases office space for approximately $4,500 per month under
a month-to-month operating lease agreement with a related entity. For
the period from the date of inception, September 15, 1996 through
September 30, 1996, rental expense for the office lease was $2,228.
F-21
<PAGE>
DELTA ENVIRONMENTAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - (Continued)
4. Investment:
The investment consists of approximately a twenty-five (25) percent
interest in Interwest, L.C., an Iowa limited liability company. The
investment will be accounted for under the equity method, however, as of
September 30, 1996 no material activity had occurred. As of December 31,
1996, the Company has recorded a payable due in relation to the
investment in the amount of $26,000.
5. Statement of Cash Flows:
Non-Cash Financing Activities:
For the period from the date of inception, September 15, 1996 through
September 30, 1996, the Company recognized financing activities that
affected stockholders' equity, but did not result in cash receipts.
As of September 30, 1996, these non-cash activities consisted of the
following:
3,500,000 shares of common stock were issued in exchange for consulting
fees and a license fee valued in the amounts of $30,000 and $5,000,
respectively.
6. Private Placement:
During the period ended September 30, 1996, the Company initiated a
private placement pursuant to Regulation D promulgated by the Securities
and Exchange Commission. The private placement offered for sale 500,000
shares of $.01 par value common stock at $1.00 per share. As of the
balance sheet date the Company had sold 145,000 shares through the
private offering of which the proceeds, net of brokerage commissions
were $130,500.
7. Commitments:
License Fee:
On September 15, 1996, the Company entered into a licensing agreement
with Interchem Environmental, Inc. for sales of various Interchem
Environmental, Inc. products. The contract provides for royalties at a
rate of one-half of one percent (.005%) of gross sales and has a
duration of twenty-five (25) years. In exchange for the licensing
agreement, Interchem Environmental, Inc. received 500,000 shares of the
Company's $.01 par value common stock.
F-22
<PAGE>
DELTA ENVIRONMENTAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - (Continued)
8. Subsequent Events:
On October 21, 1996, all of the Company's outstanding common stock was
exchanged for 3,760,600 restricted shares of Soy Environmental Products,
Inc. (formerly Denom Acquisition Corp.) in a reverse merger. The
stockholders of Delta Environmental, Inc. received approximately
ninety (90) percent of the outstanding common stock of Soy Environmental
Products, Inc. after the merger. In addition, Delta Environmental, Inc.
paid approximately $50,000 to certain stockholders of Soy Environmental
Products, Inc. as a part of the merger agreement. As of September 30,
1996, approximately $5,000 of the acquisition fee had been placed on
deposit.
F-23
<PAGE>
DENOM ACQUISITION CORP.
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
TABLE OF CONTENTS
-----------------
Independent Auditor's Report 1
Balance Sheet at September 30, 1996 2
Statement of Stockholders' Equity for the Period 3
January 10, 1996 (Date of Inception) to September 30, 1996
Notes to Financial Statements 4
<PAGE>
Rotenberg & Company, LLP
- ------------------------
Certified Public Accountants & Consultants
- ------------------------------------------
500 First Federal Plaza * Rochester, N.Y. 14614
- -----------------------------------------------
(716) 546-1158 Fax (716) 546-2943
- -------------- ------------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
and Stockholders
Denom Acquisition Corp.
Rochester, New York
We have audited the accompanying balance sheet of Denom Acquisition
Corp. (a Delaware Corporation) as of Sepember 30, 1996, and the related
statement of stockholders' equity for the period January 10, 1996 (date of
inception) to September 30,1996. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet and statement of
stockholders' equity are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosers 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 presentation of the balance sheet and statement of
stockholders' equity. We beleive that our audit provides a reasonable basis for
our opinion.
In our opinion, the balance sheet and statement of stockholders' equity
present fairly, in all material respects, the financial position of Denom
Acquisition Corp. as of September 30, 1996, in conformity with generally
accepted accounting principles.
Rotenburg & Company, LLP
Rochester, New York
October 4, 1996
<PAGE>
DENOM ACQUISITION CORP.
(A Delaware Corporation)
Rochester, Mew York
BALNCE SHEET AT SEPTEMBER 30, 1996
----------------------------------
ASSESTS
-------
Cash and Cash Equivalents $ ---
Accounts Receivable ---
Marketable Securities ---
Inventory ---
Organizational Expense 8,817
Start-Up Costs 50
------
Total Assets $8,867
------------ ======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities
- -----------
Accounts Payable $ ---
Accrued Expense ---
Customer Deposits and Advances ---
Delaware Franchise Taxes Payable and Accrued 50
------
Total Liabilities $ 50
----------------- ------
Stockholders' Equity
- --------------------
Common Stock: $.001 Par; 20,000,000 Shares Authorized, 8,817
8,816,992 Shares Issued and Oustanding ---
Additional Paid in Capital ---
Retained Earnings ---
------
Total Stockholders' Equity $8,817
-------------------------- ------
Total Liabilities and Stockholders' Equity $8,867
------------------------------------------ ======
The Accompanyng Notes are an integral part of this financial statement and
should be read in conjunction therewith.
-2-
<PAGE>
DENOM ACQUISITION CORP.
(A Delaware Corporation)
Rochester, New York
STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD
------------------------------------------------
JANUARY 10, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 1996
----------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Number Par Common Paid In Retained Stockholders'
of Shares Value Stock Capital Earnings Equity
--------- ------ ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance - January 10, 1996 --- $ --- $ --- $ --- $ --- $ ---
Common Stock Issued on January 12, 1996 8,816,992 .001 8,817 --- --- 8,817
- ---------------------------------------
Net Income for the Period
- -------------------------
January 10, 1996 to September 30, 1996 --- --- --- --- --- ---
--------------------------------------
Distribution - May 27, 1996 --- --- --- --- --- ---
- --------------------------- ---------- ------ ------- ------ ------- -------
Balance - September 30, 1996 8,816,992 $ .001 $ 8,817 $ --- $ --- $ 8,817
========= ====== ===== ====== ======= ========
The accompanying notes are an integral part of this financial statement and should be read in conjunction therewith.
</TABLE>
-3-
<PAGE>
DENOM ACQUISITION CORP.
(A Delaware Corporation)
Rochester, New York
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Note A - Summary of Significant Accounting Policies
- ---------------------------------------------------
Method of Accounting
--------------------
The corporation maintains its books and prepares its financial
statements on the accrual basis of accounting.
Note B - Scope of Business
- --------------------------
The corporation was formed on January 10, 1996 under the laws of the
State of Delaware. The corporation has been inactive since its
formation and has never conducted any business.
Note C - Organization Expenses
- ------------------------------
Organizational expenses represent management, consulting, legal,
accounting, and filing fees, incured to date in the formation of the
corporation.
Note D - Delaware State Franchise Taxes Payable and Accrued
- -----------------------------------------------------------
All corporations formed under Delaware state law, whether active or
inactive, are subject to annual minimum Delaware State franchise taxes
and filing fees. The corporation has provided for these costs for the
period January 10, 1996 through September 30, 1996 and are included in
start-up costs.
Note E - Issuance of Common Stock
- ---------------------------------
On January 12, 1996, the corporation issued 8,816,992 shares of its
common stock to Denom Holding Company (the former stockholders of
Cactus Patch Farms Inc.) in exchange for all of its assets for and in
consideration of Denom Holding Company funding certain legal and other
expenses of the corporation.
A summary of the assigned fair value of the assets received in
exchange for the corporation's common stock follows:
Various Stock Securities $ ---
Organization Expenses of Forming,
the Corporation (See Note C) 8,817
-----
Total $8,817
======
Note F - Distribution to stockholders
- -------------------------------------
On May 27, 1996, the corporation transferred all of its tangible
assets (stock securities) to ERR Holding Company for the benifit of
stockholders of record as of May 20, 1996, for and in consideration of
ERR Holding Company funding certain legal and other expenses of the
corporation. Said stock securities had no carrying value on the
corporate books and had no ascertainable fair value at the date of the
distribution.
-4-
<PAGE>
PART III
--------
ITEM I: INDEX TO EXHIBITS
The following exhibits are filed with this Registration Statement:
EXHIBIT NUMBER EXHIBIT NAME
- -------------- ------------
1 CERTIFICATE OF INCORPORATION OF SOY ENVIRONMENTAL PRODUCTS,
INC., FORMERLY DENOM ACQUISITION CORP.
2 CERTIFICATE OF INCORPORATION OF DELTA ENVIRONMENTAL, INC.
3 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF
SOY ENVIRONMENTAL PRODUCTS, INC., FORMERLY DENOM ACQUISITION
CORP.
4 BY-LAWS OF SOY ENVIRONMENTAL PRODUCTS, INC., FORMERLY DENOM
ACQUISITION CORP.
5 BY-LAWS OF DELTA ENVIRONMENTAL, INC.
6 AGREEMENT AND PLAN OF REORGANIZATION DATED SEPTEMBER 3, 1996
BY AND BETWEEN SOY ENVIRONMENTAL PRODUCTS, INC., FORMERLY
DENOM ACQUISITION CORP. AND THE SHAREHOLDERS OF DELTA
ENVIRONMENTAL, INC.
7 LICENSE AGREEMENT DATED SEPTEMBER 15, 1996 BY AND BETWEEN
INTERCHEM ENVIRONMENTAL, INC. AND DELTA ENVIRONMENTAL, INC.
8 COPY OF REGULATION "D" FILING WITH THE SECURITIES AND EXCHANGE
COMMISSION DATED MAY 29, 1996
9 COPY OF FORM M-11 FILED WITH THE STATE OF NEW YORK, DEPARTMENT
OF LAW, DATED, MAY 29, 1996.
10 LETTERS OF PERMISSION BY CERTIFIED PUBLIC ACCOUNTANTS.
11 COPY OF CURENT PRIVATE PLACEMENT MEMORANDUM
ITEM 2: DESCRIPTION OF EXHIBITS
See Item 1, Part III above.
<PAGE>
SIGNATURES
In accordance with section 12 of the Securities Exchange Act of 1934,
the Company Caused this registration statement to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Phoenix, State of Arizona on
the 31 day of January, 1997
SOY ENVIRONMENTAL PRODUCTS, INC.
BY:/s/ Sean F. Lee Dated: January 31, 1997
-----------------------------
SEAN F. LEE, CHAIRMAN & CEO
CERTIFICATE OF INCORPORATION
OF
Denom Acquisition Corp.
FIRST: The name of this corporation is Denom Acquisition Corp.
SECOND: Its registered office in the State of Delaware is to be located at
Three Christina Centre, 201 N. Walnut Street, Wilmington DE 19801, County of New
Castle. The registered agent in charge thereof is The Company Corporation,
address "same as above."
THIRD: The nature of the business and the objects and purposes proposed
to be transacted, promoted and carried on, are to do any or all of the things
herein mentioned, as fully and to the same extent as natural persons might or
could do, and in any part of the world, viz:
The purpose of the corporation is to engage in any lawful act of
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The amount of the total authorized capital stock of this
corporation is divided into 20,000,000 shares of stock at .0010 par value.
FIFTH: The name and mailing address of the incorporator is as follows:
Regina Cephas, Three Christina Centre, 201 N. Walnut St.,
Wilmington DE 19801
SIXTH: The Directors shall have power to make and to alter or amend the
By-Laws; to fix the amount to be reserved as working capital, and to authorize
and cause to be executed, mortgages and liens without limit as to the amount,
upon the property and franchise of the Corporation.
With the consent in writing, and pursuant to a vote of the holders
of a majority of the capital stock issued and outstanding, the Directors shall
have the authority to dispose, in any manner, of the whole property of this
corporation.
The By-Laws shall determine whether and to what extent the
accounts and books of this corporation, or any of them shall be open to the
inspection of the stockholder; and no stockholder shall have any right of
inspecting any account, or book or document of this Corporation, except as
conferred by the law of the By-Laws, or by resolution of the stockholders.
The stockholders and directors shall have power to hold their
meetings and keep the books, documents, and papers of the Corporation outside of
the State of Delaware, at such places as may be from time to time designated by
the By-Laws or by resolution of the stockholders or directors, except as
otherwise required by the laws of Delaware.
SEVENTH: Directors of the corporation shall not be liable to either the
corporation or its stockholders for monetary damages for a breach of fiduciary
duties unless the breach involves : (1) a director's duty of loyalty to the
corporation or its stockholders; (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (3)
liability for unlawful payments of dividends or unlawful stock purchase or
redemption by the corporation; or (4) a transaction from which the director
derived an improper personal benefit.
I, THE UNDERSIGNED, for the purpose of forming a Corporation under the laws of
the State of Delaware, do make, file, and record this Certificate and do certify
that the facts herein are true; and I have accordingly hereunto set my hand.
DATED: January 10, 1996 /s/ Regina Ciphas
DELAWARE REGISTRY, LTD.
CERTIFICATE OF INCORPORATION
OF
DELTA ENVIRONMENTAL, INC.
FIRST: The name of this Corporation is DELTA ENVIRONMENTAL, INC.
- --------------------------------------------------------------------------------
SECOND: Its registered office in the State of Delaware is to be located at 2316
Baynard Boulevard, County of New Castle. The Registered Agent in charge thereof
is DELAWARE REGISTRY. LTD., 2316 Baynard Boulevard, Wilmington, Delaware 19802.
THIRD: The purpose of this 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 amount of the total authorized capital stock of this corporation is
ONE HUNDRED THOUSAND AND NO/100 Dollars ($100,000.00) divided into 10,000,000
shares, of ONE CENT , ($ 0.01) each.
FIFTH: The names and mailing addresses of each of the incorporator or
incorporators are as follows:
NAME MAILING ADDRESS
LEE DERR 9315 BARTON ST. OVERLAND PARK,KS
- ---------------------------- ---------------------------------
66214
---------------------------------
SIXTH: Provisions for the management of the business and for the conduct of
the affairs of this corporation and provisions creating, defining, limiting, and
regulating the powers of this corporation, the directors, and the stockholders
are as follows:
(1) The board of directors shall have the power to make, adopt,
alter, amend, and repeal the by-laws of this corporation without the assent or
vote of the stockholders, including, without limitation, the power to fix, from
time to time, the number of directors which shall constitute the whole board of
directors of this corporation subject to the right of the stockholders to alter,
amend and repeal the by-laws made by the board of directors.
(2) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the board of directors of this
corporation are hereby expressly empowered to exercise all such powers and to do
all such acts and things as may be exercised or done by this corporation;
subject, nevertheless, to the provisions of the statutes of the State of
Delaware and of the Certificate of Incorporation as they may be amended,
altered, or changed from time to time and to any by-laws provided, however, that
no by-law so made shall invalidate any prior act of the board of directors which
would have been valid if such by-law had not been made.
SEVENTH: A director of this corporation shall have no personal liability to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate the
liability of a director (i) for any breach of the director's duty or 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 Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
I/WE, THE UNDERSIGNED, for the purposes of forming a Corporation
under the laws of the State of Delaware, do make, file, and record this
Certificate, and do certify that the facts herein stated are true, and I/we have
accordingly hereunto set my/our respective hand(s) and seal(s).
DATED: SEPTEMBER 30, 1996 /s/ Lee Derr
---------------------------- ----------------------------------------
Lee Derr
<PAGE>
CERTIFICATE OF INCORPORATION
OF
DELTA ENVIRONMENTAL, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
- ------ "corporation") is
DELTA ENVIRONMENTAL, INC.
SECOND: The address, including street, number, city, and county, of
- ------- the registered office of the corporation in is 9135 Barton
St., City of Overland Park, State of Kansas agent of the
corporation in the State of Delaware is Delaware Registry,
Ltd.
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 the State of Delaware.
FOURTH: The total number of shares of stock which the corporation
- ------- shall have authority to issue is Ten Thousand (10,000) all of
which are without par value. All such shares are of one class
and are shares of Common Stock.
FIFTH: The name and the mailing address of the incorporator are as
- ------ follows:
NAME MAILING ADDRESS
Lee Derr 8690 Woodland
Lenexa, KS 66220
SIXTH: The corporation is to have perpetual existence.
- ------
<PAGE>
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 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
holders of this corporation, as the case may be, agree to any
corporation as consequence of such compromise or arrangement,
the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and
also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
- ------- affairs of the corporation, and in further definition,
limitation and regulation of the powers of the stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the corporation, and in further definition
limitation and regulation of the powers of the
corporation shall be vested in its Board of Directors.
The number of directors which shall constitute the
whole Board of Directors shall be fixed by, or in the
manner provided in, the By-Laws. The phrase "whole
Board" and the phrase "total number of directors" shall
be deemed to have the same meaning, to wit, the total
number of directors which the corporation would have if
there were no vacancies. No election of directors need
be by written ballot.
2. After the original or other By-Laws of the corporation
have been adopted, amended, or repealed, as case may
be, in accordance with the provisions of Section 109 of
the General Corporation Law of the State of Delaware,
and, after the corporation has received any payment for
any of its stock, the power to adopt, amend or repeal
the By-Laws of the corporation may be exercised by the
Board of Directors of the corporation; provided,
however, that any provision for
2
<PAGE>
the classification of directors of the corporation for
staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General
Corporation Law of the State of Delaware shall be set
forth in an initial By-Law or in a By-Law adopted by
the stockholders entitled to vote of the corporation
unless provisions for such classification shall be set
forth in this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue
only one class of stock, each outstanding share shall
entitle the holder thereof to notice of, and the right
to vote at, any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one
class of stock, no outstanding share of any class of
stock which is denied voting power under the provisions
of the certificate of incorporation shall entitle the
stockholders except as the provisions of paragraph (2)
of subsection (b) of section 242 of the General
Corporation Law of the State of Delaware shall
otherwise require; provided, that no share of any such
class which is otherwise denied voting power shall
entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said
class.
NINTH: The personal liability of the directors of the corporation is
- ------ hereby eliminated to the fullest extent permitted by the
provisions of paragraph (7) of subsection (b) of Section 102
of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by the
- ------ provisions of Section 145 of the General Corporation Law of
the State of Delaware, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have
power to indemnify under said section from and against any and
all of the expenses, liabilities or other maters referred to
in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other
rights to which those indemnified 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.
3
<PAGE>
ELEVENTH: From time to time any of the provisions of this certificate or
incorporation may be emended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at
the time in force may be added or inserted in the manner and
at the time prescribed by said laws, and all rights at any
time conferred upon the stock holders of the corporation by
this certificate of incorporation are granted subject to the
provisions of this Article ELEVENTH.
Signed on September 15, 1996,
------------
/s/Lee Derr
- -----------------------------
Incorporator
4
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF
DENOM ACQUISITION CORP.
PURSUANT TO THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
DENOM ACQUISITION CORP., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
FIRST: The name of the Corporation is DENOM ACQUISITION CORP.
SECOND: The Certificate of Incorporation of the Corporation was
filed with the Department of State on January 10, 1996.
THIRD: That the amendment to the Corporation's Certificate of
Incorporation set forth in the following resolution was duly adopted by the
unanimous written consent of the Corporation's Board of Directors on the 8th day
of November, 1996:
RESOLVED, that Article First of the Certificate of
incorporation of the Corporation, relating to the Name of the Corporation, be
amended to read as follows:
FIRST: The name of this Corporation is SOY ENVIRONMENTAL
PRODUCTS, INC.
RESOLVED, that Article Fourth of the Certificate of
Incorporation of the Corporation, relating to the total authorized capital stock
of the Corporation, be amended to read as follows-.
FOURTH: The amount of the total authorized capital stock of
this corporation is divided into 20,000,000 shares of stock at $.001 par value.
All such shares are of one class and are shares of common stock. The 8,816,992
issued shares of common stock of the corporation each with a $.001 par value
which are outstanding on the effective date of this amendment are hereby changed
into 1,469,499 issued shares of common stock of the corporation each with a
$.001 par value with the terms of the change being at the rate of 1 new issued
share of common stock with a $.001 pare value for each 6 existing issued shares
of common stock each with a $.001 par value.
FOURTH: That the foregoing amendment of the Certificate of
Incorporation of the Corporation was duly adopted and approved by stockholders
holding more than fifty percent (50%) of the outstanding stock of the
Corporation at a special meeting of Stockholders held on November 27, 1996
pursuant to notice duly given according to the by-laws of the Corporation.
FIFTH: That the foregoing amendment of the Certificate of Incorporation
of the Corporation was duly adopted in accordance with the provisions of Section
242 of Title 8 of the Delaware Code of 1953.
IN WITNESS WHEREOF, Denom Acquisitions Corp. has caused this
Certificate to be signed and attested by its duly authorized Officers, this 27th
day of November 1996.
BY: /s/ George T. Bard BY: /s/ Gary L. Haer
----------------------------- ------------------------
George T. Bard, President Gary L. Haer, Secretary
BYLAWS OF
DENOM ACQUISITION CORP.
ARTICLE I--Offices
The principal office of the corporation shall be located in the State of New
York in the County of Monroe. The corporation may have such other offices,
either within or outside the state, as the Board of Directors may designate or
as the business of the corporation may require from time to time. The registered
office of the corporation may be, but need not be, identical with the principal
office, and the address of the registered office may be changed from time to
time by the Board of Directors.
ARTICLE II--Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders shall be held
at 4:00 o'clock PM. on the Third Tuesday in the month of January in each year,
beginning with the year 1997. If the day fixed for the annual meeting shall be a
legal holiday, such meeting shall be held on the next succeeding business day.
Section 2. Special Meetings. Special meetings of the shareholders, for any
purpose, unless otherwise prescribed by statute, may be called by the president
or by the Board of Directors, and shall be called by the president at the
request of the holders of not less than one-tenth of all the outstanding shares
of the corporation entitled to vote at the meeting.
Section 3. Place of Meeting. The Board of Directors may designate any place as
the place for any annual meeting or for any special meeting called by the Board
of Directors. A waiver of notice signed by all shareholders entitled to vote at
a meeting may designate any place as the place for such meeting. If no
designation is made, or if a special meeting shall be called otherwise than by
the Board, the place of meeting shall be the registered office of the
corporation.
Section 4. Notice of Meeting. Written or printed notice stating the place, day
and hour of the meeting, and, in case of a special meeting, the purposes for
which the meeting is called, shall be delivered not less than ten nor more than
fifty days before the date of the meeting, either personally or by mail, by or
at the direction of the president, or the secretary, or the officer or persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting, except that if the authorized capital stock is to be increased at least
thirty days notice shall be given. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the shareholder
at his address as it appears on the stock transfer books of the corporation,
with postage thereon prepaid. If requested by the person or persons lawfully
calling such meeting, the secretary shall give notice thereof at corporate
expense.
1
<PAGE>
Section 5. Closing of Transfer Books or Fixing of Record Date. For the purpose
of determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors may provide that the stock
transfer books shall be closed for any stated period not exceeding fifty days.
If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten days immediately preceding such meeting.
In lieu of closing the stock transfer books the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than fifty days, and, in case of a meeting
of shareholders, not less than ten days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof except where the determination has been made
through the closing of the stock transfer books and the stated period of the
closing has expired.
Section 6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each.
For a period of ten days prior to such meeting, this list shall be kept on file
at the principal office of the corporation and shall be subject to inspection by
any shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
Section 7. Quorum. Fifty One Percent (51%) of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a quorum of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been
2
<PAGE>
transacted at the meeting as originally notified. The shareholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
If a quorum is present, the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders, unless the vote of a greater number or
voting by classes is required by law or the articles of incorporation.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote by
proxy executed in writing by the shareholder or his or her duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 9. Voting of Shares. Each outstanding share, regardless of class, shall
be entitled to one vote, and each fractional share shall be entitled to a
corresponding fractional vote on each matter submitted to a vote at a meeting of
shareholders. Cumulative voting shall not be allowed.
Section 10. Voting of Shares by Certain Holders. Neither treasury shares, nor
shares of its own stock held by the corporation in a fiduciary capacity, nor
shares held by another corporation if a majority of the shares entitled to vote
for the election of Directors of such other corporation is held by this
corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time.
Shares standing in the name of another corporation may be voted by such
officer, agent or proxy as the bylaws of such corporation may prescribe or, in
the absence of such provision, as the Board of Directors of such corporation may
determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him or her, either in person or by proxy, without a transfer of such
shares into his or her name. Shares standing in the name of a trustee may be
voted by him or her, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him or her without a transfer of such shares
into his or her name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his or her name if authority to
do so be contained in an appropriate order of the court by which such receiver
was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the
3
<PAGE>
name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
Section 11. Informal Action by Shareholders. Any action required to be taken at
a meeting of the shareholders, or any other action which may be taken at a
meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders.
ARTICLE III--Board of Directors
Section 1. General Powers. The business and affairs of the corporation shall be
managed by its Board of Directors, except as otherwise provided by statute or
the articles of incorporation.
Section 2. Number, Tenure and Qualifications. The number of Directors of the
corporation shall be not less than three nor more than five, unless a lesser
number is allowed by statute. Directors shall be elected at each annual meeting
of shareholders. Each director shall hold office until the next annual meeting
of shareholders and thereafter until his or her successor shall have been
elected and qualified.
Directors need not be residents of this state or shareholders of the
corporation. Directors shall be removable in the manner provided by statute.
Section 3. Vacancies. Any director may resign at any time by giving written
notice to the president or to the secretary of the corporation. Any vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining Directors though not less than a quorum. A director
elected to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office. Any Directorship to be filled by the affirmative vote of
a majority of the Directors then in office or by an election at an annual
meeting or at a special meeting of shareholders called for that purpose, and a
director so chosen shall hold office for the term specified in Section 2 above.
Section 4. Regular Meetings. A regular meeting of the Board of Directors shall
be held without other notice than this bylaw immediately after and at the same
place as the annual meeting of shareholders. The Board of Directors may provide
by resolution the time and place for the holding of additional regular meetings
without other notice than such resolution.
Section 5. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the president or any two Directors. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place as the place for holding any special meeting of the Board of Directors
called by them.
4
<PAGE>
Section 6. Notice. Notice of any special meeting shall be given at least seven
days previous thereto by written notice delivered personally or mailed to each
director at his or her business address, or by notice given at least two days
previously by telegraph. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail so addressed, with postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company. Any director
may waive notice of any meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice of waiver of notice of such
meeting.
Section 7. Quorum. A majority of the number of Directors fixed by Section 2
shall constitute a quorum for the transaction of business at any meeting of the
Board of Directors, but if less than such majority is present at a meeting, a
majority of the Directors present may adjourn the meeting from time to time
without further notice.
Section 8. Manner of Acting. The act of the majority of the Directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors.
Section 9. Compensation. By resolution of the Board of Directors, any director
may be paid any one or more of the following: expenses, if any, of attendance at
meetings; a fixed sum for attendance at each meeting; or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 10. Informal Action by Directors. Any action required or permitted to be
taken at a meeting of the Directors may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by all of the
Directors entitled to vote with respect to the subject matter thereof. Such
consent shall have the same force and effect as a unanimous vote of the
Directors.
ARTICLE IV--Officers and Agents
Section 1. General. The officers of the corporation shall be a president, one or
more vice presidents, a secretary and a treasurer. The salaries of all the
officers of the corporation shall be fixed by the Board of Directors.
One person may hold any two offices, except that no person may
simultaneously hold the offices of president and secretary.
5
<PAGE>
Section 2. Election and Term of Office. The officers of the corporation shall be
elected by the Board of Directors annually at the first meeting of the Board
held after each annual meeting of the shareholders.
Section 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will be
served thereby.
Section 4. Vacancies. A vacancy in any office, however occurring, may be filled
by the Board of Directors for the unexpired portion of the term.
Section 5. President. The president shall:
(a) subject to the direction and supervision of the Board of Directors,
be the chief executive officer of the corporation;
(b) shall have general and active control of its affairs and business
and general supervision of its officers, agents and employees; and
( c) the president shall have custody of the treasurer's bond, if any.
Section 6. Vice Presidents. The vice presidents shall:
(a) assist the president; and
(b) shall perform such duties as may be assigned to them by the
president or by the Board of Directors.
Section 7. Secretary. The secretary shall:
(a) keep the minutes of the proceedings of the shareholders and the
Board of Directors;
(b) see that all notices are duly given in accordance with the
provisions of these bylaws or as required by law;
(c) be custodian of the corporate records and of the seal of the
corporation and affix the seal to all documents when authorized by the Board of
Directors;
(d) keep at its registered office or principal place of business a
record containing the names and addresses of all shareholders and the number and
class of shares held by each, unless such a record shall be kept at the office
of the corporation's transfer agent or registrar;
(e) sign with the president, or a vice president, certificates for
shares of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;
(f) have general charge of the stock transfer books of the corporation,
unless the corporation has a transfer agent; and
(g) in general, perform all duties incident to the office as secretary
and such other duties as from time to time may be assigned to him or her by the
president or by the Board of Directors.
Section 8. Treasurer. The treasurer shall:
(a) be the principal financial officer of the corporation;
(b) perform all other duties incident to the office of the treasurer
and, upon request of the Board, shall make such reports to it as may be required
at any time;
6
<PAGE>
(c) be the principal accounting officer of the corporation; and
(d) have such other powers and perform such other duties as may be from
time to time prescribed by the Board of Directors or the president;
ARTICLE V--Stock
Section 1. Certificates. The shares of stock shall be represented by
consecutively numbered certificates signed in the name of the corporation by its
president or a vice president and the secretary, and shall be sealed with the
seal of the corporation, or with a facsimile thereof. No certificate shall be
issued until the shares represented thereby are fully paid.
Section 2. Consideration for Shares. Shares shall be issued for such
consideration, expressed in dollars (but not less than the par value thereof, if
any) as shall be fixed from time to time by the Board of Directors. Such
consideration may consist, in whole or in part of money, other property,
tangible or intangible, or in labor or services actually performed for the
corporation, but neither promissory notes nor future services shall constitute
payment or part payment for shares.
Section 3. Transfer of Shares. Upon surrender to the corporation or to a
transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and such documentary stamps as may be required by law, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate. Every such transfer of stock shall be
entered on the stock book of the corporation which shall be kept at its
principal office, or by its registrar duly appointed.
Section 4. Transfer Agents, Registrars and Paying Agents. The Board may at its
discretion appoint one or more transfer agents, registrars and agents for making
payment upon any class of stock, bond, debenture or other security of the
corporation.
ARTICLE VI--Indemnification of Officers and Directors
Each director and officer of this corporation shall be indemnified by the
corporation against all costs and expenses actually and necessarily incurred by
him or her in connection with the defense of any action, suit or proceeding in
which he or she may be involved or to which he or she may be made a party by
reason of his or her being or having been such director or officer, except in
relation to matters as to which he or she shall be finally adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in the
performance of duty.
7
<PAGE>
ARTICLE VII--Miscellaneous
Section 1. Waivers of Notice. Whenever notice is required by law, by the
articles of incorporation or by these bylaws, a waiver thereof in writing signed
by the director, shareholder or other person entitled to said notice, whether
before or after the time stated therein, or his or her appearance at such
meeting in person or (in the case of a shareholders' meeting) by proxy, *hall be
equivalent to such notice.
Section 2. Seal. The corporate seal of the corporation shall be in the form
impressed on the margin hereof.
Section 3. Fiscal Year. The fiscal year of the corporation shall be as
established by the Board of Directors.
Section 4. Amendments. The Board of Directors shall have power to make, amend
and repeal the bylaws of the corporation at any regular meeting of the Board or
at any special meeting called for the purpose.
APPROVED:
/s/ Morris Diamond
----------------------------------------
DATED: Jan 12, 1996 Director:
/s/ Suzanne Luxenberg
----------------------------------------
Director:
/s/ Shirley Diamond
----------------------------------------
Director:
BY-LAWS
-------
OF
--
DELTA ENVIRONMENTAL, INC.
-------------------------
ARTICLE I
OFFICES
-------
Section 1.
REGISTERED OFFICE. The registered office of the
corporation shall be located at such place in the State of
Kansas as the Board of Directors may from time to time
authorize by duly adopted resolution.
Section 2.
OTHER OFFICES. The corporation may also have offices at
such other places, either within or without the State of
Kansas as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE I[[
STOCKHOLDERS
------------
Section 1.
ANNUAL MEETING. An annual meeting of the stockholders of
the corporation for the election of directors and the
transaction of such other business as may properly come
before such meeting, shall be held on the first Tuesday in
February of each year, if not a legal holiday, and if a
legal holiday, then on the next secular day following, at
10:00 o'clock in the morning, or at such other date and
time as the Board of Directors shall designate or as the
stockholders may agree.
Section 2.
SPECIAL MEETINGS. Special meetings of the stockholders may
be called at any time by the President, by the Board of
Directors or by the holders of not less than one-fifth of
all of the outstanding shares of stock of the corporation
entitled to be voted at such meeting.
1
<PAGE>
Section 3.
PLACE OF MEETING. Meetings of the stockholders may be held
at any place within or without the State of Kansas as
shall be specified in the notice of meeting or a waiver of
notice thereof, or if not so specified, at the registered
office of the corporation in Kansas.
Section 4.
LIST OF STOCKHOLDERS. At least ten (10) days before each
meeting of stockholders, the Secretary shall prepare a
complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the
address of each stockholder 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 (10) days
prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be
specified in the notice of meeting or, if not so
specified, at the place where the meeting is to be held.
Such list shall also be produced and kept open at the time
and place of the meeting and shall be subject to
inspection by any stockholder during the whole time of the
meeting.
Section 5.
NOTICE. Written notice of each meeting of stockholders
stating the place, day and hour of the meeting and, in
case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given not less than
ten (10) nor more than sixty (60) days before the date of
the meeting, either personally or by mail, or at the
direction of the President, or the Secretary or the
officer or persons calling the meeting, to each
stockholder of record entitled to vote at such meeting. If
mailed, notice of a stockholders' meeting shall be deemed
given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it
appears on the records of the corporation.
Section 6.
WAIVER OF NOTICE. Whenever notice is required to be given
under any provision of the Kansas General Corporation
Code, the articles of incorporation or these By-laws, a
written waiver thereof, signed by the stockholder entitled
to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Neither the
business to be transacted at,
2
<PAGE>
nor the purpose of any annual or special meeting of the
stockholders need be specified in any written waiver of
notice unless so required by the articles of incorporation
or these Bylaws. Attendance of a stockholder at a meeting
of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends such
meeting 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 7.
QUORUM. Except as otherwise provided by law or by the
articles of incorporation, at all meetings of the
stockholders of this corporation, the holders of a
majority of the outstanding shares entitled to vote
thereat present in person or by proxy shall constitute a
quorum. The affirmative vote of a majority of shares
represented at any meeting, in person or by proxy, may
adjourn any meeting of stockholders until a quorum is
present. In all matters other than the election of
directors, every decision of a majority of shares of stock
entitled to vote on the subject matter and represented in
person or by proxy at a meeting at which a quorum is
present shall be valid as an act of the stockholders
unless a larger vote is required by the articles of
incorporation, these By-laws or the laws of the State of
Kansas then in effect. Directors shall be elected by a
plurality of the votes of the shares present in person or
by proxy at the meeting and entitled to vote on the
election of directors.
Section 8.
ADJOURNED MEETINGS. Any stockholders' meeting may be
adjourned from time to time until its business is
completed, and notice need not be given of the adjourned
meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken; provided,
however, that if the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder of
record entitled to vote thereat. At any adjourned meeting
the corporation may transact any business which might have
been transacted at the original meeting.
3
<PAGE>
Section 9.
PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another
person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer
period, and then only within in the period specified.
Section 10.
ELECTION OF DIRECTORS. All elections of directors shall be
by written ballot.
Section 11.
ACTION BY CONSENT. Any action required to be taken at any
annual or special meeting of stockholders of the
corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without
a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by all the holders of
outstanding stock entitled to vote thereon. The Secretary
shall file such consents with the minutes of the meetings
of the stockholders.
Section 12.
INSPECTORS. At all meetings of the stockholders, upon the
request of the holders and/or proxies of holders of a
majority of the shares entitled to vote and represented in
person or by proxy at such meeting, the person presiding
at such meeting shall appoint two or more persons who are
not directors to serve as voting inspectors. The voting
inspectors shall receive and canvass all votes cast at the
meeting and certify the results. Unless required in
accordance with this paragraph, voting inspectors need not
be appointed.
Section 13.
INSPECTORS' OATH. Voting inspectors, before performing
their duties, shall take and subscribe the following oath
before an officer authorized by law to administer oaths:
"I do solemnly swear that I will execute the duties of an
inspector of the election, if any, now to be held, and any
other duties of a voting inspector, with strict
impartiality and according to the best of my ability." If
an officer authorized by law to
4
<PAGE>
administer oaths is not present at the meeting, the
foregoing oath shall be subscribed to in writing by the
voting inspectors, witnessed by the person presiding and
filed with the minutes of the meeting.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1.
POWER AND AUTHORITY. 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 powers of the corporation and do all
such lawful acts and things as are not by statute, or by
the articles of incorporation, or by these By-laws
directed or required to be exercised or done by the
stockholders.
Section 2.
NUMBER AND TERM. The Board of Directors shall consist of
three persons. The directors shall be elected at the
annual meeting of stockholders, except as provided herein.
Each director so elected shall hold office until the next
succeeding annual meeting of stockholders and until his
successor is duly elected and qualified, or until his
earlier death, resignation or removal.
Section 3.
VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of
directors may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole
remaining director. Any directors so chosen to fill such
vacancies or newly created directorships shall hold office
until the next election of directors and until their
successors are elected and qualified, or until their
earlier death, resignation or removal.
Section 4.
MEETINGS. All meetings of the Board of Directors may be
held within or without the State of Kansas as may be
provided in the resolution or notice calling such meeting.
Regular meetings of the Board of Directors shall be held
at such times
5
<PAGE>
as the Board of Directors may from time to time provide
and without any notice other than the resolution or action
providing therefor. Special meetings of the Board of
Directors may be held at any time upon the call of any
member of the Board.
Section 5.
NOTICE OF SPECIAL MEETINGS. Written notice of all special
meetings of the Board of Directors shall be given to each
director, which notice shall state the time, place and
purpose of such meeting. Such notice shall be mailed,
postage prepaid, at least five (5) days before such
meeting, addressed to the last known residence or place of
business of each director or, at least twenty-four (24)
hours before such meeting, shall be sent to him or her at
such place by telegraph, cable, telecopier or similar
means or personally served on him or her.
Section 6.
WAIVER OF NOTICE. A written waiver of notice, signed by
the director entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to
notice. Neither the business to be transacted at, nor the
purpose of any annual or special meeting need be specified
in any written waiver of notice unless so required by the
articles of incorporation or these By-laws. Attendance of
a director at any meeting, whether regular or special,
shall constitute a waiver of notice of such meeting except
where a director attends a meeting 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 7.
QUORUM. A majority of the total number of directors shall
constitute a quorum for the transaction of business, and
the act of a majority of the directors present at a
meeting at which a quorum shall be present shall be an act
of the Board of Directors except as may be otherwise
specifically required by law or the articles of
incorporation or these By-laws; and if less than a quorum
be present at any meeting, those present may adjourn from
time to time to a later date until a quorum shall be
present.
6
<PAGE>
Section 8.
TELEPHONE MEETING. Members of the Board of Directors or
any committee designated by the Board of Directors may
participate in meetings by means of conference telephone
or similar communications equipment whereby all
participants can hear each other and such participation
shall constitute presence in person at the meeting.
Section 9.
COMMITTEES OF DIRECTORS. The Board of Directors may by
resolution or resolutions adopted by a majority of the
whole Board of Directors designate two or more directors
to constitute an executive committee, finance committee or
such other committee or committees as the Board of
Directors may from time to time deem advisable. Except to
the extent restricted by law, any said committee shall
have and may exercise all of the authority of the Board of
Directors in the management of the corporation to the
extent provided in said resolutions. The Board 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 the absence or
disqualification of a member of a committee, the member or
members 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 absent
or disqualified member. All committees shall keep regular
minutes of their proceedings and report the same to the
Board of Directors when required.
Section 10.
ACTION BY CONSENT. Any action which is required or
permitted to be taken at a meeting of the directors or of
any committee thereof may be taken without a meeting if
consents in writing, setting forth the action so taken,
are signed by all members of the Board or of the
committee, as the case may be. Such consents shall have
the same force and effect as a unanimous vote at a meeting
duly held. The Secretary shall file such consents with the
minutes of the meetings of the Board of Directors or the
committee, as the case may be.
7
<PAGE>
Section 11.
COMPENSATION OF DIRECTORS. Unless otherwise restricted by
law or by the articles of incorporation, the Board of
Directors shall have the authority to fix the
compensation, if any, of directors. The directors may be
paid their expenses, if any, of attendance at each meeting
of the Board of Directors or any committee. No such
payment shall preclude any director from serving the
corporation in any other capacity and receiving
compensation therefore. Members of special or standing
committees may be paid like compensation for attending
committee meetings.
Section 12.
REMOVAL OF DIRECTORS. At a meeting called expressly for
that purpose, the entire Board of Directors or any member
thereof may be removed, with or without cause, by the vote
of the holders of a majority of the shares then entitled
to vote at an election of directors. If the articles of
incorporation provide for cumulative voting, and if less
than the entire Board is to be removed, no one of the
directors may be removed without cause if the votes cast
against his removal would be sufficient to elect him if
then cumulatively voted at an election of the entire Board
of Directors. If the articles of incorporation or these
By-laws provide that the Board of Directors shall be
classified, then the stockholders may effect the removal
of a director only for cause.
ARTICLE IV
OFFICERS
--------
Section 1.
NUMBER. The officers of this corporation shall be
appointed by the Board of Directors and shall consist of a
President, a Secretary, and a Treasurer. The Board of
Directors may also choose and appoint Vice Presidents and
one or more Assistant Secretaries, and such additional
officers and agents, if any, as it may deem necessary from
time to time. Unless otherwise restricted by law, the
articles of incorporation or these By-laws, any two or
more offices, except those of President and Vice
President, may be held by one and the same person.
8
<PAGE>
Section 2.
QUALIFICATION. The officers need not be members of the
Board of Directors and they need not be residents of the
State of Kansas.
Section 3.
TERM. Each officer shall hold office at the pleasure of
the Board of Directors until his successor is duly elected
and qualified or until his earlier death, resignation or
removal. Any officer elected or appointed by the Board of
Directors may be removed at any time, with or without
cause, by the affirmative vote of a majority of the Board
of Directors.
Section 4.
COMPENSATION. The compensation of all officers of the
corporation shall be fixed by or in the manner prescribed
by the Board of Directors.
Section 5.
EXPENSE REIMBURSEMENT. The corporation may adopt, from
time to time, a policy with respect to reimbursement of
expenses incurred on behalf of the corporation by its
officers and/or employees. Reimbursement of such expenses
shall be in accordance with the requirements imposed by
the Internal Revenue Code for substantiation of such
expenses as deductible business expenses to the
corporation. Should the expenses paid by any officer or
employee exceed the amount determined by the corporation
to be the maximum amount reimbursed by the corporation, it
shall be the policy of this corporation to encourage the
officer or employee of the corporation to incur said
expense without reimbursement if the officer or employee
deems the expense to be in the best interests of the
corporation.
ARTICLE V
DUTIES OF OFFICERS
Section 1.
PRESIDENT. The President shall be the principal executive
officer of the corporation, and subject to the control and
direction of the Board of Directors, shall in general
supervise and control all of the business and affairs of
the corporation. The President may sign certificates for
shares of the corporation, and may sign all notes,
agreements or other
9
<PAGE>
instruments in writing made and entered into for or on
behalf of the corporation, except in cases where the
signing thereof shall be expressly delegated by the Board
of Directors or by these By-laws to some other officer or
agent of the corporation, or shall be required by law to
be otherwise signed or executed; and in general the
president shall perform all duties incident to the office
of president and such other duties as may be prescribed by
the Board of Directors from time to time.
Section 2.
VICE PRESIDENT. The Vice Presidents, if any, in the order
of their seniority, shall perform all of the duties of the
President in the event of the death, disability or absence
of the President and such other duties, if any, as may be
prescribed by the Board of Directors from time to time.
Section 3.
SECRETARY. The Secretary shall keep an accurate record of
the proceedings of the meetings of the stockholders and
directors, shall give notice of the meetings of the
stockholders and of the directors required by law and by
these By-laws, shall countersign all certificates of
stock, shall attach the corporate seal thereto, and to all
other instruments requiring it, and shall perform such
duties as are usually incident to the office of the
Secretary and such other duties as may be prescribed by
the Board of Directors from time to time.
Section 4.
ASSISTANT SECRETARIES. The Assistant Secretaries, if any,
in the order of their seniority, shall perform all of the
duties of the Secretary in the event of the death,
disability or absence of the Secretary, and such other
duties, if any, as may be prescribed by the Board of
Directors from time to time.
Section 5.
TREASURER. The Treasurer, if any, shall have charge of the
funds of the corporation, shall keep an accurate account
of all transactions of the corporation, of all moneys
received and paid out, and shall deposit or cause to be
deposited all funds of the corporation in the
corporation's name in such banking institution or
institutions as may be designated by the Board of
10
<PAGE>
Directors. The Treasurer shall, when requested, make a
report to the stockholders at the annual meeting thereof,
shall make reports to the President and to the Board of
Directors whenever so directed by the President or the
Board of Directors, and shall perform such other duties as
are usually incident to the office of the Treasurer and
such other duties as may be prescribed by the Board of
Directors from time to time.
Section 6.
ASSISTANT TREASURERS. The Assistant Treasurers, if any, in
the order of their seniority, shall perform all of the
duties of the Treasurer in the event of the death,
disability or absence of the Treasurer and such other
duties, if any, as the Board of Directors may from time to
time assign to them.
ARTICLE VI
STOCK CERTIFICATES
------------------
AND THEIR TRANSFER
------------------
Section 1.
STOCK CERTIFICATES. Certificates representing shares of
the corporation shall be in such form as may be determined
by the Board of Directors. Such certificates shall be
signed by the President or Vice President and by the
Treasurer or an Assistant Treasurer, if any, or the
Secretary or an Assistant Secretary. Any or all of the
signatures on a certificate may be a facsimile.
Section 2.
LOST CERTIFICATES. The Board of Directors may authorize
the issuance of a new certificate or certificates of stock
in place of any certificate theretofore issued by the
corporation and alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by
the person claiming that the certificate of stock has been
lost, stolen or destroyed. When authorizing such issue of
a new certificate or certificates, the corporation 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 or her
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.
11
<PAGE>
Section 3.
TRANSFER OF STOCK. The shares of stock of the corporation
shall be transferable only upon its books by the
registered holders thereof in person or by their duly
authorized attorneys or legal representatives, and upon
such transfer the be surrendered to the corporation by the
person in charge of the stock and ledgers, or to such
other person as the may designate, by whom they shall be
certificates shall thereupon be issued. expressly provided
by the statutes of the State of Kansas, the corporation
shall be entitled to treat the holder of record of any
share or shares of stock as the absolute owner thereof for
all purposes and, accordingly, shall not be bound to
recognize any legal, equitable or other claim to or
interest in such shares or shares on the part of any other
person whether or not it shall have express or other
notice thereof.
ARTICLE VII
FIXING RECORD DATE
------------------
Section 1.
STOCKHOLDERS' MEETING. In order to determine the
stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, the
Board of Directors may fix, in advance, a record date,
which shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of
directors and which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting;
provided, however, that if no record date is so fixed, the
record date for determining stockholder entitled to notice
of or to vote at a meeting of stockholders shall be at the
close of the business on the day next preceding the day on
which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of said
meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
12
<PAGE>
Section 2.
STOCKHOLDER ACTION BY WRITTEN CONSENT. In order to
determine the stockholders entitled to express consent to
corporate action in writing without a meeting, the Board
of Directors may fix, in advance, a record date, which
shall not precede or and shall not be more than ten (10)
days after the date upon which the resolution fixing the
record date is adopted by the Board of Directors. In no
record date is so fixed, the record date for determining
stockholders entitled to consent in writing, when no prior
action by the Board is required by statute, shall be the
first date on which a signed written consent is delivered
to the corporation by delivery to its registered office in
Kansas, its principal place of business or an officer or
agent of the corporation having custody of the book in
which stockholder minutes are kept. If no record date is
so fixed and prior action by the Board is required by
statute, the record date for determining stockholders
entitled to consent in writing shall be the close of
business on the day on which the Board of Directors adopts
the resolution taking such prior action.
Section 3.
OTHER CORPORATE ACTIONS. In order to determine the
stockholders 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 precede the date
upon which the resolution fixing the record date is
adopted by the Board of Directors and shall not be more
than sixty (60) days prior to any such action proposed to
be taken; provided, however, that if no record date is so
fixed, the record date for determining stockholders for
any such purpose shall be the close of business on the day
on which the Board of Directors adopts the resolution
relating thereto.
13
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 1.
DIVIDENDS. Subject to the provisions of statute and the
articles 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
capital stock of the corporation, unless otherwise
provided by statute or the articles 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
they were 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 end
on the last day of December of each year, unless and until
the same shall be modified 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
may 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 designations.
14
<PAGE>
Section 6.
EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of Directors
may authorize any officer or officers, agent or agents, to
enter into or execute and deliver in the name and on
behalf of the corporation 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
President 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 stockholder 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. If one or more attorneys or agents are
appointed, the President may instruct the person or
persons so appointed as to the manner of casting such
votes or giving such consent. The President 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 IX
INDEMNIFICATION
---------------
Section 1.
A director of the corporation shall not be personally
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 the provisions of K.S.A. 17-6424 and
amendments thereto, or (iv) for any transaction from which
the director derived an improper personal benefit.
15
<PAGE>
Section 2.
To the full extent permitted and in the manner prescribed
by the laws of the State of Kansas (except for Section
17-6305(f) of the Kansas General Corporation Code) as the
same presently exists, the corporation shall (i) indemnify
any person who is or was 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, by reason of the fact
that such person is or was a director or officer of the
corporation, or is or was a director or officer of the
corporation 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 such person in connection with,
arising out of or resulting from such action, suit or
proceeding (except that the corporation shall not
indemnify any such person against judgments, fines and
amounts paid in settlement with respect to an action to or
in the right of the corporation); and (ii) pay to such
person expenses incurred in defending any such action,
suit or proceeding in advance of the Final disposition of
such action, suit, or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such
amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the
corporation as authorized in this Article LX.
Section 3.
All rights provided any person by this Article IX shall be
contract rights. No amendment, alteration, addition,
change or repeal of this Article IX, of any other
provisions of the Articles of Incorporation or of the
By-laws shall in any way impair or reduce the rights to
indemnification, advancement of expenses or limitation of
liability provided by this Article IX to such person with
respect to any acts or omissions of such person occurring
prior to the time of such amendment, alteration, addition,
change or repeal.
Section 4.
The right to indemnification, payment of expenses incurred
in defending a proceeding in advance of its final
disposition and limitation of liability conferred in this
Article IX shall not be exclusive of any other right to
which any person may have or hereinafter acquire under any
statute, provision of this Articles of Incorporation or
the By-laws of the corporation, agreement,
16
<PAGE>
vote of stockholders or disinterested directors or
otherwise, both as to action in such person's 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 or officer and shall inure to
the benefit of the heirs, executors and administrators of
such a person.
Section 5.
Without limiting the foregoing, the corporation is
authorized to enter into indemnification agreements with
such of the persons specified in Section 2 of this Article
IX as the Board of Directors may from time to time
determine, to provide greater rights to indemnification
and advancement of expenses than that expressly permitted
under the Kansas General Corporation Code.
Section 6.
The corporation may 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 or incurred by such person in
any such capacity, or arising out of his or her status as
such, whether or not the corporation would have the power
to indemnify such person against such liability under the
provisions of this Article IX or the Kansas General
Corporation Code.
Section 7.
Notwithstanding the provisions of Section 2 hereof, if the
Kansas General Corporation Code is amended after the
formation of the corporation to permit greater rights to
indemnification, advancement of expenses or limitation of
liability than that provided in this Article IX, then the
persons specified in Section 2 hereof shall be granted
such greater rights to the full extent permitted by the
Kansas General Corporation Code as so amended.
17
<PAGE>
Section 8.
In the event that any part of this Article IX shall be
found in any action, suit or proceeding to be invalid or
ineffective, the validity and the effect of the remaining
parts shall not be affected and the corporation shall
indemnify the persons specified in Section 2 hereof to the
full extent required by the remaining parts of this
Article IX, and to the full extent permitted by the Kansas
General Corporation Code.
ARTICLE X
AMENDMENTS
----------
These By-laws may be amended, altered or repealed and new
By-laws may be adopted by resolution of the Board of
Directors or by the stockholders.
Delta Environmental, Inc.
______________________________________, Secretary
18
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of September 3,
1996, made and entered into by and among Denom Acquisition Corp., a corporation
organized and existing under the laws of the State of Delaware (hereinafter
called "DAC"), and those persons set forth on Exhibit "A" hereof (hereinafter
called "Sellers").
WITNESSETH:
-----------
WHEREAS, DAC and Sellers deem it advisable that a reorganization
be effected consisting of the acquisition by DAC from Sellers of all of the
issued and outstanding shares of common stock of Delta Environmental, Inc., a
corporation organized and existing under the laws of the State of Delaware
(hereinafter called "Delta"), all in accordance with the applicable statutes of
the States of Delaware and upon the terms and subject to the conditions set
forth in this Agreement and Plan of Reorganization (hereinafter called the
"Agreement"), for the purpose of carrying out a tax-free reorganization within
the meaning of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, DAC and Sellers each in consideration that the
other join herein, hereby represent, warrant and agree as follows:
1. Exchange of Shares. Subject to the terms and conditions hereof,
and in reliance on the respective representations and warranties of each party
to the other hereunder, DAC agrees to issue its shares to Sellers and Sellers
agree to assign, transfer and deliver to DAC at the Closing (as defined in
paragraph 5 below) all of the issued and outstanding shares of common stock of
Delta. Sellers will assign, transfer and deliver the number of shares set
opposite their names on Exhibit "A".
2. Exchange Ratio. The total shares to be issued to Sellers shall
be 4,091,100 restricted shares of common stock, $.001 par value of DAC as
follows:
(a) 6,363,594 existing restricted shares of common stock to be
reverse split at a ratio of One new share for each Six existing
shares pursuant to the terms set forth herein, resulting in
1,060,600 shares of post split restricted common stock;
<PAGE>
(b) 2,530,500 newly issued post split restricted shares of
common stock
( c) 500,000 newly issued post split restricted shares of
common stock to be held in reserve in order to be made available
to future shareholders of Delta resulting from Delta's current
ongoing private placement of 500,000 shares of Delta common stock.
3. Representations. Warranties and Agreements of Sellers. Sellers
jointly and severally represent and warrant to and agree with DAC that:
(a) Delta is duly organized and existing under the laws of the
State of Delaware and is in good standing, and is authorized and
qualified to own and operate its properties and assets and conduct
its business as, and in all jurisdictions where, such properties
and assets are owned and operated and such business conducted.
Delta has duly filed any and all certificates and reports required
to be filed to date by the laws of Delaware and any other
applicable law.
(b) Delta has authorized 10,000,000 shares of common stock,
$0.01 par value, of which 3,591,100 shares of common stock are
issued and outstanding. All such outstanding shares were validly
issued and are fully paid and non assessable, and free from any
restrictions, liens, encumbrances, rights, title and interests in
others. There are no other shares of stock, convertible or other
securities, or rights, warrants or options with respect to any
share of stock or securities of Delta authorized, issued or
outstanding.
( c) Neither Delta nor any of its directors, officers, agents
or employees, is in material violation of any applicable law,
rule, regulation or requirement of any governmental authority in
any way relating to Delta's business or operations. Consummation
of the transactions contemplated hereby, and continuation of
Delta's business in the same manner as heretofore conducted by it
will be in material compliance with all presently applicable laws,
rules, regulations and requirements of all governmental
authorities without the necessity for any license
<PAGE>
or permit or other action or permission in the nature thereof, or
any registration with, or consent of, any governmental authority.
(d) Delta is not in default under or in violation of any
provision of its Articles of Incorporation or Bylaws and Delta is
not in material default under or in violation of any restriction,
lien, encumbrance, indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability relating to
Delta's business, to which it is a party or by which it is bound,
or to which its assets are subject. Neither the execution and
delivery of this Agreement nor the consummation of the
transactions contemplated hereby will conflict with or result in a
breach of or constitute a default under any provision of the
Articles of Incorporation or Bylaws of Delta or any restriction,
lien, encumbrance, indenture, contract, lease, sublease, loan
agreement, note or other material obligation or liability to which
Sellers or it is a party or by which Sellers or it is bound, or to
which any of their or its assets are subject, or result in the
creation of any lien or encumbrance upon said assets.
(e) Delta's unaudited financial statements dated September 30,
1996, attached hereto as Exhibit "B", is correct and complete and
fairly present the financial condition of Delta at the date
described therein, and have been prepared in accordance with
generally accepted accounting principles consistently applied.
(f) Except as shown on Exhibit "B", Delta has no liabilities
of any nature, whether absolute, accrued, contingent or otherwise,
including, without limitation, any tax liabilities, other than
liabilities incurred after December 31, 1996, in the ordinary
course of business as a result of transactions or occurrences
which do not and will not either singularly or in the aggregate
have a material adverse effect on the financial or business
condition of Delta. The property and assets presently owned by
Delta include all properties and assets of every kind, class and
description, real and personal, tangible and intangible, known and
unknown, or shown on the books of or used in the business of Delta
and all properties and
<PAGE>
assets in which Delta had any night, title or interest on
September 30, 1996 except as changed in the ordinary course of
business, none of such changes being materially adverse.
(g) All buildings, fixtures and equipment owned or used by
Delta are in reasonably good and sound condition and are in
compliance with all laws, rules, regulations and requirements of
governmental authorities.
(h) Delta enjoys peaceful and undisturbed possession under all
leases to which it is a party. All such leases are valid, freely
assignable and enforceable in accordance with their terms, and no
party thereto is in default thereunder.
(i) No one other than Delta has any night, title, interest,
restriction, lien or encumbrance in, on or to the business
conducted by it.
(j) Delta does not have any material obligation, liability,
contract, agreement, lease, sublease, commitment or understanding
of any kind, nature, or description, fixed or contingent, due or
to become due, existing or inchoate, other than those reflected in
Exhibit "B".
(k) Except as disclosed on Exhibit "C", there are no suits or
proceedings at law or in equity, or before any governmental agency
or arbitrator, pending, or to the knowledge of Sellers,
threatened, anticipated or contemplated, which in any way
adversely affects Delta or its business and there are no
unsatisfied or outstanding judgments, orders, decrees or
stipulations affecting Delta or its assets or to which Delta is or
may become a party which in any way affects Delta. There are no
claims against Sellers or Delta pending, or to the knowledge of
Sellers, threatened, anticipated or contemplated, which, if valid,
would constitute or result in a breach of any representation,
warranty or agreement set forth herein.
(l) To the best of the knowledge of the Sellers, since the
date of Incorporation of Delta:
<PAGE>
(i) Neither Delta nor any of its current or former
directors, officers or employees nor any third party acting on
behalf of Delta have, directly or indirectly, made any bribes,
kickbacks, or any other payments of a similar or comparable
nature, whether lawful or not, to any person or entity, public
or private, regardless of form, whether in money, property or
services, to obtain favorable treatment in securing business
or to obtain special concessions or to pay for favorable
treatment for business already secured or for special
concessions already obtained;
(ii) No funds or property of any kind of Delta was
donated, loaned, or made available, directly or indirectly,
for the benefit of, or for the purpose of opposing, any
government or subdivision thereof, political party, candidate
or committee, either domestic or foreign;
(iii) No officer, employees contractor or agent of
Delta was compensated, directly or indirectly, by Delta for
time spent or expenses incurred in performing services for the
benefit of, or for the purpose of opposing, any government or
subdivision thereof, political party, candidate or committee,
either domestic or foreign;
(iv) Delta has not made any loan, donation, or other
disbursement, directly or indirectly, to officers or employees
of Delta or others for contributions made, or to be made,
directly or indirectly, for the benefit of, or for the purpose
of opposing, any government or subdivision thereof, political
party, candidate or committee, either domestic or foreign; and
(v) Delta has not, or any other entity acting on
behalf of Delta, maintained or maintains a bank account, or
any other account of any kind, whether domestic or foreign,
which account was not reflected in the corporate books and
records, or which account was not listed, titled or identified
in the name of Delta.
<PAGE>
(m) Since September 30, 1996, there has not been:
(i) Any material adverse change in the properties,
assets, business, affairs or prospects of Delta nor, to the
knowledge of Sellers, are any such changes threatened,
anticipated, or contemplated;
(ii) Any actual or, to the knowledge of Sellers,
threatened, anticipated, or contemplated damage, destruction,
loss, conversion, termination. cancellation, default or taking
by eminent domain or other action by governmental authority
which has affected or may hereafter affect the properties,
assets, business, affairs or prospects of Delta,
(iii)Any material and adverse dispute, pending or, to
the knowledge of Sellers, threatened, anticipated or
contemplated of any kind with any customer, supplier, source
of financing, employee, landlord. subtenant or licensee of
Delta or any pending or, to the knowledge of Sellers,
threatened, anticipated or contemplated occurrence or
situation of any kind, nature or description which is
reasonably likely to result in any reduction in the amount, or
any change in the terms or conditions, of the business with
any substantial customer, supplier or source of financing;
(iv) Any pending or, to the knowledge of Sellers,
threatened, anticipated or contemplated occurrence or
situation of any kind, nature or description peculiar to the
business of Delta and materially and adversely affecting the
properties, assets, business affairs or prospects of Delta; or
(v) Any reduction of capital, redemption of stock or
dividend or distribution with respect to stock by Delta.
(n) Sellers have not taken any action which may result in DAC
having any responsibility, obligation, or liability for any finder
or broker fees, commission or other compensation payable in
connection with any of the transactions contemplated hereby.
<PAGE>
(o) Delta's Board of Directors has Authorized the execution,
delivery and performance of this Agreement by Sellers. All present
and previous stockholders, directors and officers of Delta will at
any time or from time to time hereafter execute whatever minutes
of meetings or other instruments and take whatever action DAC may
deem necessary or desirable to effect, perfect or confirm of
record or otherwise in DAC, full right, title and interest in and
to the business, properties and assets of Delta or to carry out
the intent and purpose of the transactions contemplated hereby.
(p) The corporate record books of Delta are in good order,
complete, accurate, up-to-date, with all necessary signatures, and
set forth all meetings and actions taken by the stockholders and
directors, including all actions set forth in all certificates of
votes of stockholders or directors furnished to anyone at any
time. The copies of Delta's Articles of Incorporation and Bylaws
which have been delivered to DAC are complete and correct.
(q) The stock transfer books and stock ledgers of Delta are in
good order, complete, accurate, and up to date, and with all
necessary signatures, and set forth all stock and securities
issued, transferred and surrendered. No duplicate certificate has
been issued at any time heretofore. No transfer has been made
without surrender of the proper certificate duly endorsed. All
certificates surrendered have been duly canceled and are attached
to the proper stubs with all necessary stock powers attached
thereto.
(r) Delta owns all assets, properties, real estate, equipment,
material, inventory, raw materials, copyrights, rights of
reproduction, trademarks, trade names, trademark applications,
service marks, patent applications, patents, and patent license
rights, all whether registered or unregistered, U.S. or foreign,
inventions, franchises, discoveries, ideas, research, engineering,
methods, practices, processes, systems. formulas, designs,
drawings, products, projects,
<PAGE>
permits, improvements, developments, know-how, and trade secrets
which are used in or necessary for the conduct of its business,
without conflict or infringement of any, and subject to no
restriction, lien, encumbrance, right, title or interest in
others. All of the foregoing stand in the name of Delta and not in
the name of any stockholder, director, officer, agent, partner or
employee or anyone else known to Sellers, and none of the same
have any night, title, interest, restriction, lien or encumbrance
therein, or thereon or thereto.
(s) Sellers are the owners, free and clear of any claim, lien,
charge or encumbrance or restriction, of all of the issued and
outstanding shares of common stock of Delta and Sellers now have
and will have, at the Closing, full power and authority and the
legal night to sell such shares to DAC pursuant to this Agreement.
(t) Sellers have not made any material misstatement of fact or
omitted to state any material fact necessary or desirable to make
complete, accurate and not misleading every representation,
warranty and agreement set forth herein.
(u) Since the date of incorporation, there has not been:
(i) Any increase in the compensation, including, but
not limited to, bonus or percentage compensation payments,
payable to or to become payable by Delta to any of its
officers, employees or agents; or
(ii) Any labor strike or demands for collective
bargaining directly affecting Delta.
(v) The assets of Delta on the Closing Date shall include
current assets, inventory, machinery and equipment, office
furniture and fixtures, good will, leases and other assets set
forth on Exhibit "B".
(w) For a minimum of three years following the Close, Sellers
will cause DAC to timely file with the Securities and Exchange
Commission pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934, a Form 10-K for the
<PAGE>
end of each fiscal year and a Form I O-Q for each of the first
three quarters of each year, and during such period will not cause
DAC to file a Form 15 pursuant to either Rule 12h-3 or 15d-6
electing to suspend its duty to file. Sellers will also cause DAC
to hold an annual meeting of shareholders for the election of
directors within 180 days after the end of each fiscal year end,
and within 180 days after the end of each fiscal year end, will
provide DAC's shareholders with the audited financial statements
of DAC as of the end of the fiscal year just completed prior
thereto. Such financial statements shall be those required by Rule
14a-3 under the Securities Exchange Act of 1934, and shall be
included in an annual report 10 meeting the requirements of such
Rule. In addition, Sellers agree that within 30 days of the
Closing they will cause DAC to submit information about DAC to be
included in various securities manuals, including Moody's
Over-the-Counter Manual and/or Standard & Poor's Standard
Corporation Records to facilitate the secondary trading in DAC's
common shares.
(x) No information furnished by Sellers to be used in
connection with any filing with the Securities and Exchange
Commission will contain when made or furnished, any untrue
statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained therein
not misleading.
(y) Each of the representations, warranties and agreements of
Sellers is true and correct in every respect as of the date hereof
Sellers will exonerate and I indemnify DAC against all claims,
suits, obligations, liabilities and damages, including, without
limitation of the foregoing, reasonable attorney's fees, based
upon, arising out of or resulting from any breach of any of the
representations, warranties or agreements of Sellers herein or any
certificate delivered pursuant hereto, or non fulfillment of any
of their undertakings hereunder or thereunder or any actual or
alleged occurrence or situation in any way inconsistent herewith
or therewith.
<PAGE>
(z) Every representation, warranty and agreement of Sellers
set forth in this Agreement, and any certificate delivered
pursuant hereto and every one of the rights and remedies of DAC
for any one or more breaches hereof shall survive and not be
deemed waived by the Closing for a period of two years after the
Closing, and shall be effective regardless of any investigation
that may have been made at any time by or on behalf of DAC.
4. Representations. Warranties and Agreements of DAC. DAC
represents and warrants to and agrees with Sellers that:
(a) DAC is duly organized and validly existing under the laws
of the State of Delaware and is in good standing, and is
authorized and qualified to own and operate its properties and
assets and conduct its business as, and in all jurisdictions
where, such properties and assets are owned and operated and such
business conducted. DAC has duly filed any and all certificates
and reports required to be filed to date by the laws of Delaware
and any other applicable law.
(b) The shares of DAC's common stock to be issued and
delivered to Sellers pursuant to this Agreement will, upon
issuance and delivery pursuant hereto be duly authorized, validly
issued, fully paid and non assessable.
( c) DAC has full right, power and authority to execute,
deliver and perform the terms of this Agreement. This Agreement
has been duly authorized by DAC and, when approved by its
shareholders, will constitute the binding obligation enforceable
in accordance with its terms.
(d) DAC has authorized 20,000,000 shares of common stock.
$0.001 par value per share, of which 8,816,992 shares of common
stock are issued and outstanding. All such outstanding shares were
validly issued and are fully paid and non-assessable. There are no
other shares of stock, convertible or other securities, or rights,
warrants or options with respect to any shares of stock or
<PAGE>
securities of DAC authorized, issued or outstanding. DAC has not
granted any right of first refusal or any option to any
underwriter, finder, broker or participant.
(e) DAC's audited financial statements dated September 30,
1996, which is attached hereto as Exhibit "D", is correct and
complete and fairly present the financial condition of DAC at the
dates described therein, and have been prepared in accordance with
generally accepted accounting principles consistently applied.
(f) DAC is not in default under or in violation of any
provision of its Certificate of Incorporation or Bylaws and DAC is
not in material default under or in violation of any restriction,
lien, encumbrance, indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability relating to DAC's
business, to which it is a party or by which it is bound, or to
which its assets are subject. Neither the execution and delivery
of this Agreement nor consummation of the transactions
contemplated hereby will conflict with or result in a breach of or
constitute a default under any provision of DAC's Certificate of
Incorporation or Bylaws or any restriction, lien, encumbrance,
indenture, contract, lease, sublease, loan agreement, note or
other material obligation or liability to which it is a party or
by which it is bound, or to which any of its assets are subject,
or result in the creation of any lien encumbrance upon its assets.
(g) DAC has not taken any action which may result in Sellers
having any liability, obligation or liability for any finder or
broker fees, commission or other compensation payable in
connection with any of the transactions contemplated hereby.
(h) Neither DAC nor any of its directors, officers, agents or
employees, is in material violation of any applicable law, rule,
regulation or requirement of any governmental authority in any way
relating to DAC's business or operations. DAC has filed all
reports with the Securities and Exchange Commission which have
been required to be filed pursuant to either the Securities Act of
1933 or the
<PAGE>
Securities Exchange Act of 1934. None of such reports contained
when made or furnished, any untrue statement of a material fact or
omitted to state any material fact necessary to make the
statements contained therein not misleading. Consummation of the
transactions contemplated hereby will be in compliance with all
presently applicable laws, rules, regulations and requirements of
all governmental authorities without the necessity for any license
or permit or other action or permission in the nature thereof, or
any registration with, or consent of, any governmental authority.
(i) Except as shown on Exhibit "E," DAC has no liabilities of
any nature, whether absolute, accrued, contingent or otherwise,
including, without limitation, any tax liabilities, other than
liabilities incurred after September 30, 1996, in the ordinary
course of business as a result of transactions or occurrences
which do not and will not either singularly or in the aggregate
have a material adverse effect on the financial or business
condition of DAC. The properties and assets presently owned by DAC
include all properties and assets of every kind, class and
description, real and personal, tangible and intangible, known and
unknown, or shown on the books of or used in the business of DAC
and all properties and assets in which DAC had any night, title or
interest on September 30, 1996, except as changed in the ordinary
course of business, none of such changes being materially adverse.
(j) DAC does not have any material obligation, liability,
contract, agreement, lease, sublease, commitment or understanding
of any kind, nature, or description, fixed or contingent, due or
to become due, existing or inchoate, other than those reflected in
Exhibit "D".
(k) There are no suits or proceedings at law or in equity, or
before any governmental agency or arbitrator, pending, or to the
knowledge of DAC's officers, threatened, anticipated or
contemplated, which in any way adversely
<PAGE>
affects DAC and there are no unsatisfied or outstanding judgments,
orders, decrees or stipulations affecting DAC or its assets or to
which DAC is or may become a party which in any way affects DAC.
There are no claims against DAC pending, or to the knowledge of
DAC's officers, threatened, anticipated or contemplated, which, if
valid, would constitute or result in a breach of any
representation, warranty or agreement set forth herein.
(1) To the best of the knowledge of DAC, since the date of
Incorporation of DAC:
(i) Neither DAC nor any of its current or former
directors, officers or employees nor any third party acting on
behalf of DAC have, directly or indirectly, made any bribes,
kickbacks, or any other payments of a similar or comparable
nature, whether lawful or not, to any person or entity, public
or private, regardless of form, whether in money, property or
services, to obtain favorable treatment in securing business
or to obtain special concessions or to pay for favorable
treatment for business already secured or for special
concessions already obtained;
(ii) No funds or property of any kind of DAC was
donated, loaned, or made available, directly or indirectly,
for the benefit of, or for the purpose of opposing, any
government or subdivision thereof, political party, candidate
or committee, either domestic or foreign;
(iii)No officer, employee, contractor or agent of DAC
was compensated, directly or indirectly, by DAC for time spent
or expenses incurred in performing services for the benefit
of, or for the purpose of opposing, any government or
subdivision thereof, political party, candidate or committee,
either domestic or foreign;
(iv) DAC has not made any loan, donation, or other
disbursement, directly or indirectly, to officers or employees
of DAC or others for
<PAGE>
contributions made, or to be made, directly or indirectly, for
the benefit of, or for the purpose of opposing, any government
or subdivision thereof, political party, candidate or
committee, either domestic or foreign; and
(v) DAC has not, or any other entity acting on behalf
of DAC, maintained or maintains a bank account, or any other
account of any kind whether domestic or foreign, which account
was not reflected in the corporate books and records, or which
account was not listed, titled or identified in the name of
DAC.
(m) The corporate record books of DAC are in good order,
complete, accurate, up to date, with all necessary signatures, and
set forth all meetings and actions set forth in all certificates
of votes of stockholders or directors furnished to anyone at any
time. The copies of DAC's Certificate of Incorporation and Bylaws
which have been delivered to Sellers are complete and correct.
(n) The stock transfer books and stock ledgers of DAC are in
good order, complete, accurate, and up to date, and with all
necessary signatures, and set forth all stock and securities
issued, transferred and surrendered. No duplicate certificate has
been issued at any time heretofore without an indemnity agreement
and/or bond being posted. No transfer has been made without
surrender of the certificate duly endorsed. All certificates so
surrendered have been duly canceled and are attached to the proper
stubs with all necessary stock powers attached thereto.
(o) DAC has filed with the appropriate governmental agencies
all tax returns required to be filed by it and there are no unpaid
assessments nor, to the best of DAC's knowledge, proposed
assessments of Federal, state or local taxes pending against DAC.
All liability for taxes shown on Federal and State tax returns
filed have been paid or the liability there for has been provided
for in the attached financial statements, and all Federal and
state income or franchise taxes
<PAGE>
for periods subsequent to the periods covered by said returns
likewise have been paid or adequately accrued except for current
year taxes not yet due.
(p) The Board of Directors' Meeting provided for in paragraph
6 will be duly called, convened and conducted in accordance with
all applicable requirements of the corporation laws of the State
of Delaware and in accordance and compliance with all applicable
provisions of the Certificate of Incorporation and Bylaws of DAC
and the resolutions to be adopted by the Board of Directors at the
Board of Directors' Meeting when adopted, will constitute the duly
authorized actions of DAC and will be in full force and effect as
of the Closing date hereof.
(q) No information furnished by DAC to be used in connection
with any filing to be made with the Securities and Exchange
Commission will contain when made or furnished, any untrue
statement of a material fact or will omit to state a material fact
necessary to make the statements contained therein not misleading.
(r) Each of the representations, warranties and agreements of
DAC is true and correct in every respect as of the date hereof DAC
will exonerate and indemnify Sellers against all claims, suits,
obligations, liabilities and damages, including, without
limitation of the foregoing, reasonable attorney's fees, based
upon, arising out of or resulting from any breach of any of the
representations,warranties or agreements of DAC herein or any
certificate delivered pursuant hereto, or non fulfillment of any
of its undertakings hereunder or thereunder, or any actual or
alleged occurrence or situation in any way mconsistent herewith or
therewith.
(s) Every representation, warranty and agreement of DAC set
forth in this Agreement, and any certificate delivered pursuant
hereto and every one of the rights and remedies of Sellers for any
one or more breaches hereof shall survive and not be deemed waived
by the Closing for a period of two years after the
<PAGE>
Closing, and shall be effective regardless of any investigation
that may have been made at any time by or on behalf of Sellers.
5. The Closing.
(a) The exchange of Sellers' shares in Delta to DAC shall
occur at such time and place as shall be fixed by the mutual
consent of the parties. However such date shall be no later than
October 21, 1996. Said Date is sometimes herein referred to as the
"Closing".
(b) At the Closing:
(i) Sellers shall deliver to DAC certificates
evidencing not less than 100% of the issued and outstanding
shares of Delta, in each case duly endorsed for transfer in
blank or accompanied by a blank stock power or with such other
endorsements or instruments of transfer as DAC may reasonably
request, together with other documents and matters referred to
in subparagraphs (a)(11), and (111) of paragraph 7; and
(ii) DAC shall deliver certificates to Sellers
representing the shares of common stock of DAC to be delivered
pursuant to Paragraph 2 hereof, together with other documents
and matters refer-red to in subparagraph (b)(ii) of paragraph
7.
6. Actions Before and After the Closing.
(a) After the date of this Agreement and prior to the Closing
and except as may be first approved in writing by DAC or Sellers,
as the case may be, or as otherwise permitted or contemplated by
this Agreement:
(i) The business of DAC and Delta shall be conducted
only in the usual and ordinary course without the creation of
indebtedness for money borrowed, except in the ordinary course
of business;
(ii) No change shall be made in the Articles of
Incorporation or Bylaws of DAC or Delta;
<PAGE>
(iii)No shares of stock of any class of DAC or Delta
shall be authorized for issuance or issued or delivered from
treasury and no agreement for such issuance or delivery
thereof shall be entered into; except for the Private
Placement of a maximum of 500,000 shares of Delta's common
stock currently underway by Delta.
(iv) No dividend or other distribution and no
redemption of any shares of stock of any class shall be made
by either DAC or Delta;
(v) No increases shall be made in the compensation
(including any bonus or profit-sharing payment) payable or to
become payable by either DAC or Delta to an employee;
(vi) No contract or commitment shall be entered into by
or on behalf of DAC or Delta except in the ordinary course of
business;
(vii)Each party will continue in effect present
insurance coverage on all its properties, assets, business and
personnel;
(viii) No general increases shall be made in wages or
benefits of any group of employees as a result of collective
bargaining or otherwise; and
(ix) Neither DAC or Delta will (so far as within its
control and except in the ordinary course of business) subject
any property or assets to any material lien, claim, charge,
option or encumbrance nor will it do or omit to do any act
which will cause a material breach in any contract, agreement,
lease, commitment or obligation to which it is a party or by
which it is bound.
(b) The Parties hereto agree that each of them will fully
cooperate each with the other and their respective counsel and
accountants in connection with any steps required to be taken as
part of their obligations under this Agreement.
<PAGE>
( c) Delta and DAC will call a meeting of its respective Board
of Directors for the purpose of voting upon and authorizing this
Agreement and the transactions contemplated hereby. At such
meeting the Directors of DAC shall be asked to consider and vote
upon the following actions:
(1) Approval of this Agreement and the issuance of new
shares of common stock to Sellers pursuant to this Agreement;
and
(ii) Approval to reverse split the issued and
outstanding shares of Delta's common stock at a ratio One new
share for each Six existing shares; and
(iii)Approval of a change of DAC's name to Soy
Environmental Products, Inc.; and
(iv) Resignation of current directors and election of
Sellers' designees as new directors of DAC.
(d) Within Sixty (60) days following the Closing, DAC will
obtain the consent of shareholders owning at least a majority of
the outstanding common shares for the following actions:
(i) Amending the Certificate of Incorporation to change
the name of the corporation to Soy Environmental Products,
Inc.
(ii) Amending the Certificate of Incorporation to
decrease the authorized and issued and outstanding shares of
common stock by ratio of One new share for each Six existing
shares and after such decrease to increase the number of
authorized shares of common stock to 20,000,000.
(iii)Electing Sellers designees as directors of DAC.
(iv) Approval of this transaction.
(v) Approval of the appointment of new Auditors as
directed by DAC.
<PAGE>
(vi) Any other business which the new Directors of DAC
deem appropriate.
7. Conditions of DAC's and Sellers' Performance.
(a) The obligation of DAC to consummate this Agreement is
subject to the satisfaction at the Closing, by DAC in writing,
of each of the following conditions:
(ii) All proceedings taken in connection with the
transactions contemplated herein and all instruments and
documents required in connection therewith or incident thereto
shall be satisfactory in form to legal counsel for DAC.
(ii) The representations and warranties of Sellers
contained in this Agreement or in any certificate or document
delivered to DAC pursuant hereto shall be deemed to have been
made again at the Closing and shall then be true in all
material respects; Sellers shall have performed and complied
with all agreements and conditions required by this Agreement
to be performed or complied with by them prior to or at the
Closing; and DAC shall have been furnished with certificates
of appropriate officers of Delta dated at the Closing date,
certifying to the fulfillment of the foregoing conditions and
further certifying that neither Delta or Sellers are parties
to any litigation or have knowledge of any claim, brought or
threatened, seeking to recover damages or to prevent Delta or
Sellers from continuing to use Delta's assets or to conduct
its business in the manner the same were used or conducted
prior thereto, and which litigation or claim is likely to
result in any judgment, order, decree or settlement which will
materially and adversely affect the financial condition or
business of Delta.
(iii)Sellers shall have executed and delivered to DAC
investment letters in the form set forth in Exhibit "F"
hereto.
<PAGE>
(iv) Owners of not less than 100% of the issued and
outstanding shares of common stock of Delta shall have
executed this Agreement either personally or pursuant to power
of attorney.
(b) The obligation of Sellers to consummate this Agreement is
subject to the satisfaction at the Closing, or waiver by Sellers
in writing, of each of the following conditions:
(i) All proceedings taken in connection with the
transactions contemplated herein and all instruments and
documents required in connection therewith or incident thereto
shall be satisfactory in form to counsel for Sellers.
(ii) The representations and warranties of DAC
contained in this Agreement or in any certificate or document
delivered to Sellers pursuant hereto shall be deemed to have
been made again at the Closing and shall then be true in all
material respects; DAC shall have performed and complied with
all agreements and conditions required by this Agreement to be
formed or complied with by it prior to or at the Closing; and
Sellers shall have been furnished with certificates of
appropriate officers of DAC dated at the Closing date,
certifying to the fulfillment of the foregoing conditions and
further certifying that DAC is not a party to any litigation
or has knowledge of any claim, brought or threatened, seeking
to recover damages or to prevent DAC from continuing to use
its assets or to conduct its business in the manner the same
were used or conducted prior thereto, and which litigation or
claim is likely to result in any judgment, order, decree or
settlement which will materially and adversely affect the
financial condition or business of DAC.
(iii)DAC's directors shall have resigned and appointed
Seller's designees as directors.
<PAGE>
8. Termination and Amendment.
(a) This Agreement may be terminated by either party upon
written notice if the Closing referred to in Section 5 hereof
shall not have occurred on or prior to October 21, 1996.
(b) This Agreement may be terminated by either party at any
time prior to the time fixed for Closing in Section 5 hereof upon
written notice to the other party:
(i) If the representations, warranties and agreements
or conditions of this Agreement to be complied with or
performed by Sellers (in the case of DAC) or DAC (in the case
of Sellers) on or before the Closing shall not, in any
material respect have been complied with or performed and such
material noncompliance or nonperformance shall not have been
waived by the party giving notice of termination or shall not
have been cured by the defaulting party or cure thereof
commenced and diligently prosecuted thereafter by such party
Ten (10) days after written notice of such material
noncompliance or nonperformance is given by the nondefaulting
party;
(ii) If any governmental action is commenced to prevent
the consummation of the transactions contemplated hereby; or
(iii)By mutual consent of the parties.
( c) Any representation, warranty, agreement or condition of
this Agreement may be waived at any time by the party entitled to
the benefit thereof by action taken by the Board of Directors of
DAC or authorized committees or officers thereof or by Sellers and
evidenced by a written waiver executed by any such party.
<PAGE>
(d) In the event of termination, this Agreement shall be of no
further force or effect and no obligation, right or liability
shall arise hereunder and each party shall bear its own costs
incurred in connection with this Agreement.
9. Separability. If any term or provision of this Agreement
including the exhibits hereto or the application thereof to any person, property
or circumstances shall to any extent be invalid or unenforceable, the remainder
of this Agreement including the exhibits or the application of such term or
provision to persons, property or circumstances other than those invalid and
unenforceable shall not be affected thereby, and each term and provision of this
Agreement and the exhibits shall be valid and enforced to the fullest extent
permitted by law,
10. Notices. Any notice hereunder shall be deemed given, and any
instrument delivered, only two days after they have been mailed by registered or
certified mail, postage prepaid, or Twelve (12) hours after such notice has been
sent by straight telegram, telegraphic charges prepaid as follows:
Name Address
---------------------------------
To DAC: Denom Acquisition Corp.
c/o Ron Conquest
4647 North 32nd Street, Suite 205
Phoenix, Arizona 85018
To Sellers: Delta Environmental, Inc.
c/o George T. Bard, President
2525 East Camelback Rd., Suite 510
Phoenix, Arizona 85016
Except that any of the foregoing may from time to time by written notice to the
others designate another address which shall thereupon become its effective
address for the purposes of this paragraph.
11. Entire Agreement and Amendments. This Agreement, including the
exhibits referred to herein as a part hereof, contains the entire understanding
of the parties hereto with
<PAGE>
respect to the subject matter contained herein and may be amended only by a
written instrument executed by Sellers and DAC or their respective successors or
assigns. There are no restrictions, promises, warranties, covenants, or
undertakings other than those expressly set forth herein. The section and
paragraph headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
12. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
13. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon Sellers and DAC and their respective successors but shall
not inure to the benefit of anyone other than the parties signatory to this
Agreement and their respective successors.
14. Merger of Agreements. All representations, warranties,
agreements and other inducements to this Agreement or the transactions
contemplated hereby, whether oral or written, prior to the execution and
delivery hereof, have been included herein, or in the exhibits hereto, and shall
be deemed to have been fully performed and discharged to the extent not included
herein or therein. This Agreement including the exhibits hereto sets forth all
rights, remedies, obligations and liabilities of the parties, and no term or
provision hereof or thereof, including, without rotation, the terms and
provisions contained in this sentence, shall be waived, modified or altered as
to impose any additional night or remedy, and no custom, payment, act,
knowledge, extension of time, favor or indulgence, gratuitous or otherwise, or
words or silence at any time, shall impose any additional obligation or grant
any additional night or remedy or be deemed a waiver or release of any
obligation, liability, night or remedy except as set forth in a written
instrument properly executed and delivered by the party sought to be charged,
expressly stating that it is, and to the extent to which it is, intended to be
so effective. No assent, express or implied, by either party or waiver by either
party, to or of, any breach of any term or provision of this Agreement or of the
exhibits shall be deemed to be an assent or waiver to or of such or any
succeeding breach of the same or any other such term or provision. All
representations, warranties, and agreements made herein by anyone shall survive
the Closing to the extent provided in this Agreement.
<PAGE>
15. Applicable Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Arizona.
IN WITNESS THEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
SELLERS, STOCKHOLDERS OF DELTA
TARXLAN, INC. DENOM ACQUISITION CORP.
BY:/S/ Lee Derr BY: /s/ Ron Conquest
----------------------------- --------------------------------
LEE DERR, PRESIDENT RON CONQUEST, PRESIDENT
CAPITAL WEST INVESTMENT HOLDING COMPANY, INC.
BY:/s/ Lawrence L. Kohler
-----------------------------
LAWRENCE L. KOHLER, PRESIDENT
BY:/s/ Milton R. Barnes BY:/s/ Lawrence L. Kohler
----------------------------- --------------------------------
Milton R. Barnes, Individually Lawrence L. Kohler, Individually
LICENSE AGREEMENT
THIS AGREEMENT, made the 15th day of September, 1996.
------ ---------- ----
BETWEEN:
Interchem Environmental, Inc.
9135 Barton St.
Overland Park, KS 66214
(hereinafter called the "Licensor")
OF THE FIRST PART
AND:
Delta Environmental, Inc.
2525 East Camelback Rd., Suite 510
Phoenix, AZ 85016
(hereinafter called the "Licensee")
OF THE SECOND PART
WHEREAS the Licensor warrants that it is a holder of the exclusive sales rights
in the world for SoyClean(TM) Solvent, SoyClean(TM) Graffti Remover,
SoyRelease(TM) Solvent, and Naturen(R) (hereinafter called the ("Product");
AND WHEREAS the Licensor warrants that such sales rights are fully assignable by
it;
AND WHEREAS the Licensor further warrants that it has the right to license as
set forth herein;
AND WHEREAS the Licensee is desirous of obtaining the exclusive sales rights for
the Product for the world (hereinafter called the "Territory") and the Licensor
has agreed to permit the Licensee to be the sole exclusive distributor of the
Product on the terms and conditions more particularly herein described;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of ONE
DOLLAR ($1.00), the mutual covenants and premises contained herein, and other
good and valuable considerations (the receipt, adequacy, and sufficiency of
which are hereby acknowledged), the parties hereto agree as follows:
ARTICLE 1.00 - TERM AND QUOTA REQUIREMENTS
- ------------------------------------------
1
<PAGE>
1.01 The Licensor hereby grants and assigns unto the said Licensee the sole
and exclusive right to distribute and/or sell the said Product in the
Territory when and as the said Licensee shall think fit, for its own
benefit absolutely, subject to the terms of this agreement.
1.02 The Licensee hereby accepts the sole and exclusive right to distribute
and/or sell the Product as aforementioned and agrees to use its best
efforts to do all reasonable matters necessary to promote customer
interest in, and effect the sale of the Product within the
aforementioned Territory.
1.03 It is hereby agreed that the exclusive license granted herein shall be
for an initial probationary term of twenty-five (25) years commencing
with the date hereof, provided, however, that the said agreement shall
be extended for a further five (5) years at the Licensor's sole
discretion based on the performance of the Licensee during the initial
term.
ARTICLE 2 - TERMINATION
- --------------------------
2.01 It is hereby agreed that if the Licensee shall become bankrupt or
insolvent, or enter into any composition with his creditors or shall
make any default in performing any of the agreements herein contained,
then in any such case it shall be lawful for the Licensor by notice in
writing to the Licensee, to revoke this license, which shall thereupon
be void, without prejudice to any right or action or remedy of the
Licensor in respect of any antecedent breach of any agreement herein
contained.
2.02 Except as otherwise provided, the failure of either party to perform
any provision of this Agreement after thirty (30) days notice have been
given by the other party shall automatically terminate this Agreement.
ARTICLE 3.00 - ROYALTY
- ----------------------
3.01 On all orders sold by the Licensee with the Licensor pursuant to this
agreement, the Licensee shall pay the Licensor as follows:
Royalty shall be determined to be one-half of one percent
(0.005%) of gross sales.
Licensee shall also transfer free and clear to Licensor an amount of
five Hundred Thousand shares of Delta Environmental, Inc. common stock.
2
<PAGE>
ARTICLE 4.00 - TERRITORY DEFINITION AND EXCLUSIVITY
- ---------------------------------------------------
4.01 Subject to the terms herein set out, it is hereby agreed that the
Licensee shall have the sole and exclusive license to sell the Product
within the Territory. In applying and construing the phraseology, "sell
within the Territory," it is hereby agreed that for the purpose of
construing this agreement, a sale will be deemed to have been made in
the Territory if the order was obtained by the Licensee, and was placed
in the Territory notwithstanding the fact that the units purchased may
be shipped to other provinces and countries for use or installation.
The Licensee hereby agrees not to sell, or to offer for sale, the
Product outside the specific area detailed above without the prior
written permission of the Licensor.
4.02 Subject to the terms of this agreement, it is hereby agreed that the
Licensor will refer and forward all inquiries originating from the
Territory (concerning purchase of, and other matters related to the
Invention) to the Licensee, at the address set out in Article 7.04
below. It is further agreed that all inquiries concerning the Product
from any source or points or origin which might, in any way, result in
a sale and ultimate delivery of units of the Product to anywhere in the
Territory, shall be referred and forwarded by the Licensor to the
Licensee at the address set out in Article 7.04 below.
4.03 Subject to the terms of this agreement, it is hereby agreed that so
long as this agreement remains in full force and effect, no other
person, partnership, corporation, or other legal entity shall be
granted a license to sell the Product within the Territory.
ARTICLE 5.0 - WARRANTIES
- -------------------------
5.01 The Licensor warrants that it is the holder of the exclusive sales
rights for the Territory for the Product.
5.02 The Licensor further warrants that such sales rights are fully
assignable.
5.03 The Licensor further warrants that it has the right to assign such
license as set forth herein.
3
<PAGE>
5.04 The Licensor hereby warrants that, if an any time hereafter during the
continuance of this agreement, the Licensor shall make any further
improvements in the Product or in the mode of using same, the Licensor
shall become the owner of owners of any such improvement, then, in
every case the Licensor shall communicate such improvement to the
Licensee, and give it full information respecting the mode of using
same and the Licensee shall be entitled to use same without paying any
further sum in respect of such improvements and information, provided
however that the Licensee shall pay an appropriate price for such
improved units of the Product.
5.05 The parties hereto agree to use their best efforts to carry out the
provisions of this agreement, but in the event of accidents, fires,
delays in manufacturing, delays of carriers, acts of god, governmental
actions, state of war, or any other cause beyond the control of either
party, neither party shall be required to perform nor incur liability
to the other resulting from the inability to perform. The parties agree
that performance shall only be required at the extension of time due to
such circumstances.
5.06 The Licensor hereby warrants and agrees that the rights and/or
privileges granted to the Licensee under the terms of this agreement
shall apply to any improved version of the Product and/or any other
Product which the Licensor and/or Patentee may from time to time
invent, purchase, or otherwise acquire and grant rights to Licensee.
5.07 The Licensor hereby warrants and agrees that the Licensor will take
whatever legal steps are necessary in order to prevent any third
parties from selling the Product within the Territory.
The Licensor further warrants and agrees that it will take whatever
legal steps are necessary in order to protect the trademark of the
Product.
ARTICLE 6.0 - ADVERTISING
- --------------------------
6.01 It is hereby understood and agreed that the Licensee shall be
responsible for arranging and paying for the advertising of the Product
in the Territory.
6.02 The Licensee undertakes to ensure that all advertising material used in
the Territory will conform to local, state, and federal advertising
regulations.
6.03 The Licensor hereby warrants and agrees that it will supply the
Licensee with any of all literature which it may from time to time have
in its possession with regard to the operation and use of the Product.
6.04 The Licensee is hereby granted the right to use the name in any or all
advertising which it may from time to time publish, and it may also
refer to itself in any or all advertising as having the exclusive sales
rights of the Product in the Territory.
4
<PAGE>
6.05 The Licensor agrees to use its best efforts to promote the Product
within the Territory and in this regard to be responsible for all
industry oriented editorials.
ARTICLE 7.00 - GENERAL CONTRACT PROVISIONS
- ------------------------------------------
7.01 In the event that at any time either party shall deem the other party
to be in default under any terms of this agreement, the one party shall
give to the other party written notice of such default, and the other
party shall have thirty (30) days from the date of such notice to
remedy such default. The parties shall have the right to arrange for
arbitration on any matter alleged to be in default, if the other party
shall disagree, provided that, during the period of alleged default,
the party acting in default shall comply with and rectify the complaint
until the date determined by arbitration.
7.02 Interchem Environmental, Inc. shall be granted one seat on the Board of
Directors of Delta Environmental, Inc.
7.03 This agreement contains the entire agreement between the parties, and
no representations, inducements, or agreements, oral or otherwise, not
embodied herein shall have any force or effect.
7.04 Any agreement hereafter made shall be ineffective to change, modify,
add or discharge in whole or in part, the obligations and duties under
this Agreement unless such agreement is in writing and signed by each
party hereto.
7.05 Any notice given pursuant to this agreement be either of the parties
hereto to the other party, shall be given by sending it by registered
mail properly addressed as follows:
Licensor:
Interchem Environmental, Inc.
9135 Barton St.
Overland Park, KS 66214
Licensee:
Delta Environmental, Inc.
2525 E. Camelback Rd., Suite 510
Phoenix, AZ 85016
Any party may change the address at which notices are to be sent by
written notice of such change of address to the other party.
7.06 The Licensee shall not assign its rights and obligations arising under
this agreement without first obtaining the written consent of the
Licensor.
5
<PAGE>
7.07 Time shall be of the essence of this agreement, and every part thereof.
7.08 This agreement shall be interpreted and construed in accordance with
the alws of the State of Kansas.
7.09 The invalidity of any particular provision of this agreement shall not
affect any other provisions thereof, but the agreement shall be
construed as if such invalid provisions were omitted.
7.10 This agreement shall be binding upon and to the benefit of the parties
hereto, for themselves and their respective legal personal
representatives, successors, and assigns.
IN WITNESS WHEREOF the parties hereto have executed these presents.
DELTA ENVIRONMENTAL, INC.
/s/ Kasandra M. Romo By: /s/ S. F. Lee
- ------------------------------ ---------------------------------
Witness Licensor
INTERCHEM ENVIRONMENTAL, INC.
/s/ Lee Derr
- ------------------------------ ---------------------------------
Director Director
THE CORPORATE SEAL OF
Interchem Environmental, Inc.
- ----------------------------------
was hereunto affixed in the presence of:
/s/ Gary Haer
- -----------------------------------
THE CORPORATE SEAL OF
Delta Environmental, Inc.
- ----------------------------------
was hereunto affixed in the presence of:
/s/ Kasandra M. Romo
- ----------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
NOTICE OF SALE OF SECURITIES
PURSUANT TO REGULATION D,
SECTION 4(6), AND/OR
UNIFORM LIMITED OFFERING EXEMPTION
- --------------------------------------------------------------------------------
Name of Offering ([ ] check if this in an amendment and name has changed, and
indicate change.)
DENOM ACQUISITION CORP.
- --------------------------------------------------------------------------------
Filing Under (Check box(es) that apply): [x]Rule 504 [ ]Rule 505 [ ]Rule 506
[ ]Section 4(6) [ ]ULOE
Type of Filing: [x] New Filing [ ] Amendment
- --------------------------------------------------------------------------------
A. BASIC IDENTIFICATION DATA
- --------------------------------------------------------------------------------
1. Enter the information requested about the issuer
- --------------------------------------------------------------------------------
Name of Issuer ([ ] check if this is an amendment and name has changed, and
indicate change.)
DENOM ACQUISITION CORP.
- --------------------------------------------------------------------------------
Address of Executive Offices (Number and Street, City, State, Zip Code)
2541 MONROE AVE. Suite #301 ROCHESTER, N.Y. 14618
- --------------------------------------------------------------------------------
Telephone Number (Including Area Code)
716-244-1840
- --------------------------------------------------------------------------------
Address of Principal Business Operations (Number and Street, City, State, Zip
Code)
(if different from Executive Offices)
- --------------------------------------------------------------------------------
Telephone Number (Including Area Code)
- --------------------------------------------------------------------------------
Brief Description of Business
Bottled Water Distribtion & Aquaculture
- --------------------------------------------------------------------------------
Type of Business Organization
[x]corporation [ ]limited partnership, already formed
[ ]business trust [ ]limited partnership, to be formed
[ ]other (please specify):
- --------------------------------------------------------------------------------
Month Year
Actual or Estimated Date of Incorporation or Organization: 01 1996
[x] Actual [ ] Estimated
Juristiction of Incorporation or Organization:
(Enter two-letter U.S. Postal Service abbreviation for State:
CN for Canada; FN for other foreign jurisdiction) DE
<PAGE>
- --------------------------------------------------------------------------------
A. BASIC IDENTIFICATION DATA
- --------------------------------------------------------------------------------
2. Enter the information requested for the following:
* Each promoter of the issuer, if the issuer has been organized within the
past five years;
* Each beneficial owner having the power to vote or dispose, or direct the
vote or disposition of, 10% or more of a class of equity securities of the
issuer;
* Each executive officer and director of corporate issuers and of corporate
general and managing partners of partnership issues; and
* Each general and managing partner of partnership issuers.
- --------------------------------------------------------------------------------
Check Box(es) that Apply; [ ]Promoter [x]Beneficial Owner
[x] Executive Officer [x]Director [ ]General and/or Managing Partner
- --------------------------------------------------------------------------------
Full Name (Last name first, if individual)
DIAMOND, MORRIS
- --------------------------------------------------------------------------------
Business or Residence Address (Number and Street, City, State, Zip Code)
105 SOUTHERN PARKWAY ROCHESTER, NEW YORK 14618
- --------------------------------------------------------------------------------
Check Box(es) that Apply; [ ]Promoter [x]Beneficial Owner
[x] Executive Officer [x]Director [ ]General and/or Managing Partner
- --------------------------------------------------------------------------------
Full Name (Last name first, if individual)
DIAMOND, SHIRLEY
- --------------------------------------------------------------------------------
Business or Residence Address (Number and Street, City, State, Zip Code)
105 SOUTHERN PARKWAY ROCHESTER, NEW YORK 14618
- --------------------------------------------------------------------------------
Check Box(es) that Apply; [ ]Promoter [x]Beneficial Owner
[x] Executive Officer [x]Director [ ]General and/or Managing Partner
- --------------------------------------------------------------------------------
Full Name (Last name first, if individual)
LUXENBERG, SUSANNE
- --------------------------------------------------------------------------------
Business or Residence Address (Number and Street, City, State, Zip Code)
20 CASTLEBAR ROAD ROCHESTER, NEW YORK 14610
- --------------------------------------------------------------------------------
Check Box(es) that Apply; [ ]Promoter [x]Beneficial Owner
[ ] Executive Officer [ ]Director [ ]General and/or Managing Partner
- --------------------------------------------------------------------------------
Full Name (Last name first, if individual)
SOUTHWARD INVESTMENT
- --------------------------------------------------------------------------------
Business or Residence Address (Number and Street, City, State, Zip Code)
2541 MONROE AVE. ROCHESTER, NEW YORK 14618
- --------------------------------------------------------------------------------
Check Box(es) that Apply; [ ]Promoter [x]Beneficial Owner
[ ] Executive Officer [ ]Director [ ]General and/or Managing Partner
- --------------------------------------------------------------------------------
Full Name (Last name first, if individual)
TRAMDOT DEVELOPMENT CORP.
- --------------------------------------------------------------------------------
Business or Residence Address (Number and Street, City, State, Zip Code)
2541 MONROE AVE. ROCHESTER, NEW YORK 14618
- --------------------------------------------------------------------------------
Check Box(es) that Apply; [ ]Promoter [x]Beneficial Owner
[ ] Executive Officer [ ]Director [ ]General and/or Managing Partner
- --------------------------------------------------------------------------------
Full Name (Last name first, if individual)
LIVINGSTON REALTY CORP.
- --------------------------------------------------------------------------------
Business or Residence Address (Number and Street, City, State, Zip Code)
105 SOUTHERN PARKWAY ROCHESTER, NEW YORK 14618
2 of 8
<PAGE>
- --------------------------------------------------------------------------------
B. INFORMATION ABOUT OFFERING
- --------------------------------------------------------------------------------
1. Has the issuer sold, or does the issuer intend to sell, to non-accredited
investors in this offering?...................................Yes [x] No [ ]
Answer also in Appendix, Column 2, if filing under ULOE.
2. What is the minimum investment that will be accepted from any
individual?...................................................$ .10
--------------
3. Does the offering permit joint ownership of a single unit?....Yes [x] No [ ]
4. Enter the information requested for each person who has been or will be paid
or given, directly or indirectly, any commission or similar remuneration for
solicitation of purchasers in connection with sales of securities in the
offering. If a person to be listed is an associated person or agent of a
broker or dealer registered with the SEC and/or with a state or states, list
the name of the broker or dealer. If more than five (5) persons to be listed
are associated persons of such a broker or dealer, you may set forth the
information for that broker or dealer only.
3 of 8
<PAGE>
- --------------------------------------------------------------------------------
C. OFFERING PRICE, NUMBER OF INVESTORS, EXPENSES AND USE OF PROCEEDS
- --------------------------------------------------------------------------------
1. Enter the aggregate offering price of securities included in this offering
and the total amount already sold. Enter "0" if answer is "none" or "zero."
If the transaction is an exchange offering, check this box [x] and indicate
in the columns below the amounts of the securities offered for exchange and
already exchanged.
<TABLE>
<CAPTION>
Aggregate Amount Already
Type of Security Offering Price Sold
<S> <C> <C>
Debt............................................................................$ .00 $ .00
--------- ---------
Equity..EXCHANGE OF 8,816,992 COMMON SHARES.....................................$ 8816.99 $ 8816.99
--------- ---------
[x] Common [ ] Preferred
Convertible Securities (including warrants).....................................$ .00 $ .00
--------- ---------
Partnership Interests...........................................................$ .00 $ .00
--------- ---------
Other (Specify _________________)...............................................$ .00 $ .00
--------- ---------
Total.......................................................................$ 8816.99 $ 8816.99
--------- ---------
</TABLE>
Answer also in Appendix, Column 3, if filing under ULOE.
2. Enter the number of accredited and non-accredited investors who have
purchased securities in this offering and the aggregate dollar amounts of
their purchases. For offerings under Rule 504, indicate the number of persons
who have purchased securities and the aggregate dollar amount of their
purchases on the total lines. Enter "0" if answer is "none" or "zero."
<TABLE>
<CAPTION>
Aggregate
Number Dollar Amount
Investors of Purchases
<S> <C> <C>
Accredited Investors............................................................ 0. $ .00
--------- ---------
Non-Accredited Investors........................................................ 1,075. $ 8816.99
--------- ---------
Total (for filings under Rule 504 only)..................................... 1,075. $ 8816.99
--------- ---------
</TABLE>
Answer in Appendix, Column 4, if filing under ULOE.
3. If this filing is for an offering under Rule 504 or 505, enter the
information requested for all securities sold by the issuer, to date, in
offerings of the types indicated, in the twelve (12) months prior to the
first sale of securities in this offering. Classify securities by type listed
in Part C-Question 1.
<TABLE>
<CAPTION>
Type of Dollar Amount
Type of offering Security Sold
<S> <C> <C>
Rule 505........................................................................ $ .00
--------- ---------
Regulation A.................................................................... $ .00
--------- ---------
Rule 504........................................................................ common $ 8816.99
--------- ---------
Total....................................................................... common $ 8816.99
--------- ---------
</TABLE>
4. A. Furnish a statement of all expenses in connection with the issuance and
distrubution of the securities in this offering. Exclude amounts relating
solely to organization expenses of the issuer. The information may be given
as subject to future contingencies. If the amount of an expenditure is not
known, furnish an estimate and check the box to the left of the estimate.
<TABLE>
<S> <C> <C>
Transfer Agent's Fees............................................................... [ ] $ .00
---------
Printing and Engraving Costs........................................................ [ ] $ 1100.00
---------
Legal Fees.......................................................................... [ ] $ 3000.00
---------
Accounting Fees..................................................................... [ ] $ 1500.00
---------
Engineering Fees.................................................................... [ ] $ .00
---------
Sales Commissions (specify finders' fees separately)................................ [ ] $ .00
---------
Other Expenses (identify)....PRINTING & MAILING..................................... [ ] $ 750.00
---------
Total........................................................................... [ ] $ 6350.00
---------
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
C. OFFERING PRICE, NUMBER OF INVESTORS, EXPENSES AND USE OF PROCEEDS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
b. Enter the difference between the aggregate offering price given in response
to Part C - Question 1 and total expenses furnished in response to Part C -
Question 4.a. This difference is the "adjusted gross proceeds to the issuer.".. $ 2466.99
---------
</TABLE>
Indicate below the amount of the adjusted gross proceeds to the issuer used or
proposed to be used for each of the purposes shown. If the amount for any
purpose is not known, furnish an estimate and check the box to the left of the
estimate. The total of the payments listed must equal the adjusted gross
proceeds to the issuer set forth in response to Part C - Questions 4.b above.
<TABLE>
<CAPTION>
Payments to
Officers,
Directors, & Payments to
Affiliates Others
<S> <C> <C>
Salaries and fees.................................................................[ ] $ .00 [ ] $ .00
--------- ---------
Purchase of real estate...........................................................[ ] $ .00 [ ] $ .00
--------- ---------
Purchase, rental or leasing and installation of machinery and equipment...........[ ] $ .00 [ ] $ .00
--------- ---------
Construction or leasing of plant buildings and facilities.........................[ ] $ .00 [ ] $ .00
--------- ---------
Acquisition of other businesses (including the value of securities involved in this
offering that may be used in exchange for the assets or securities of another
issuer pursuant to a merger)......................................................[ ] $ .00 [ ] $ .00
--------- ---------
Repayment of indebtedness.........................................................[ ] $ .00 [ ] $ .00
--------- ---------
Working capital...................................................................[ ] $ .00 [ ] $ 2466.99
--------- ---------
Other (specify):__________________________________________________________________[ ] $ .00 [ ] $ .00
--------- ---------
__________________________________________________________________________________
______________________________________________________________________________....[ ] $ .00 [ ] $ .00
--------- ---------
Column Totals.....................................................................[ ] $ .00 [ ] $ 2466.99
--------- ---------
Total Payments Listed (column totals added)....................................... [ ] $ 2466.99
---------
</TABLE>
- --------------------------------------------------------------------------------
D. FEDERAL SIGNATURE
- --------------------------------------------------------------------------------
The issuer has duly caused this notice to be signed by the undersigned duly
authorized person. If this notice is filed under Rule 505, the following
signature constitutes an undertaking by the issuer to furnish to the U.S.
Securities and Exchange Commission, upon written request of its staff, the
information furnished by the issuer to any non-accredited investor pursuant to
paragraph (b)(2) of Rule 502
- --------------------------------------------------------------------------------
Issuer (Print or Type) Signature Date
DENOM ACQUISITION CORP. /s/ Morris Diamond 5-29-96
- --------------------------------------------------------------------------------
Name of Signer (Print or Type) Title of Signer (Print or Type)
MORRIS DIAMOND PRESIDENT
- --------------------------------------------------------------------------------
- -----------------------------------ATTENTION------------------------------------
Intentional misstatements or ommissions of fact constitute federal criminal
violations. (See 18 U.S.C. 1001.)
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
E. STATE SIGNATURE
- --------------------------------------------------------------------------------
1. Is any party described in 17 CFR 230.252(c), (d), (e) or (f) presently
subject to any of the disqualification provisions of such rule..............
Yes [ ] No [x]
See Appendix, Column 5, for state response.
The undersigned issuer hereby undertakes to furnish to any state
administrator of any state in which this notice is filed, a notice on Form D
(17 CFR 239.500) at such times as required by state law.
3. The undersigned issuer hereby undertakes to furnish to the state
administrators, upon written request, information furnished by the issuer to
offerees.
4. The undersigned issuer represents that the issuer is familiar with
conditions that must be satisfied to be entitled to the Uniform limited
Offering Exemption (ULOE) of the state in which this notice is filed and
understands that the issuer claiming the availability of this exemption has
the burden of establishing that these conditions have been satisfied.
The issuer has read this notification and knows the contents to be true and has
duly caused this notice to be signed on its behalf by the undersigned duly
authorized person.
- --------------------------------------------------------------------------------
Issuer (Print or Type) Signature Date
DENOM ACQUISITION CORP. /s/ Morris Diamond 5-29-96
- --------------------------------------------------------------------------------
Name (Print or Type) Title (Print or Type)
MORRIS DIAMOND PRESIDENT
- --------------------------------------------------------------------------------
6
<PAGE>
<TABLE>
<CAPTION>
1 2 3 4 5
Disqualification
Type of security under State ULOE
Intend to sell and aggregate (if yes, attach
to non-accredited offering price Type of investor and explanation of
investors in State offered in state amount purchased in State waiver granted)
(Part B-Item 1) (Part C-Item 1) (Part C-Item 2) (Part E-Item 1)
- ----------------------------------------------------------------------------------------------------------------
Number of Number of
Accredited Non-Accredited
State Yes No COMMON Investors Amount Investors Amount Yes No
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AL NO NO
AK NO NO
AZ NO 3 .33 NO
AR NO NO
CA NO 12 2.58 NO
CO NO 3 .30 NO
CT NO 8 2.22 NO
DE NO NO
DC NO NO
FL NO 47 9.79 NO
GA NO 1 .10 NO
HI NO NO
ID NO NO
IL NO 2 5.60 NO
IN NO NO
IA NO NO
KS NO NO
KY NO 1 .32 NO
LA NO NO
ME NO NO
MD NO 7 1.30 NO
MA NO 9 6.15 NO
MI NO NO
MN NO NO
MS NO NO
MO NO 1 .64 NO
7
<PAGE>
MT NO NO
NE NO NO
NV NO 1 .10 NO
NH NO 1 .10 NO
NJ NO 18 3.94 NO
NM NO NO
NY NO 916 8559.17 NO
NC NO 1 .10 NO
ND NO NO
OH NO 8 109.67 NO
OK NO 1 .32 NO
OR NO 1 .10 NO
PA NO 14 4.41 NO
RI NO 1 .10 NO
SC NO 1 .10 NO
SD NO NO
TN NO 1 .10 NO
TX NO 5 1.06 NO
UT NO NO
VT NO 1 .10 NO
VA NO 2 3.23 NO
WA NO 4 97.50 NO
WV NO NO
WI NO NO
WY NO NO
PR NO NO
</TABLE>
8
STATE OF NEW YORK
DEPARTMENT OF LAW
ISSUER STATEMENT
(Section 359-e Gen. Bus. Law)
<TABLE>
<CAPTION>
<S> <C>
Name of Principal
Issuer Denom Acquisition Corp. Office 2541 Monroe Ave., Suite 301, Rochester, NY 14618
---------------------------------- ---------------------------------------------------
Street Address City,State, Zip
Telephone Number 716-244-1840
This form is not t be used by issuers engaged in any aspect of real estate or
mortgage financing unless they also obtain a letter upon written application
pursuant to Section 352e or g. Theatrical Syndication must comply with Article
26-A of the General Business Law.
1. Issuer is [ x ] an existing; [ ] a proposed; [x] corporation; [ ] general partnership;
[ ] limited partnership; [ ] other (specify ______________________________________organized under the
laws of Delaware on 1/10/96 . The entire offering is [ ] intrastate, [x ] interstate.
2. The business of the issuer is (described briefly) Bottled Water Distribution & Aquculture______
---------------------------------------------------------------------------------
3. Issuer proposes to offer [ x] stock; [ ] bonds; [ ] notes; [ ] partnership interests;
[ ] other (specify) .
---------------------------------------------------------------------
4. The securities will be sold [ x ] by the officers and directors of the
issuer; [ ] N.Y. registered broker [ ] by an underwriter; [ ] by salesmen
employed by issuer. The securities will be sold on a [ x ] best efforts
basis; [ ] firm commitment. If by an underwriter or broker, indicate the
names of underwriters or syndicate manager
.
5. Total amount of offering: $ 8,816.99 Anticipated offering expenses total $none
consisting of: Selling: $ None ; Other: $ Organizational expense $6,350.00 Working
capital $ 2,466.99 .
6. State use of the net proceeds to be obtained: Organizational expense and working
-------------------------------------------------------
capital
-------
** Found on the fee receipt you received for your original filing.
=================================================================================
- -------------------------------------------------------------------------------------------------------------------
Filing is incomplete without a copy of offering Filing Fee Enclosed as Follows:
literature. If not available, please explain. total amount of offering
Indicate to whom you wish the fee receipt sent. under $500,000 . . . . . . . . . . . . . . . . $ 200
( ) Attorney ( X ) Issuer
over $500,000 . . . . . . . . . . . . . . . . $ 800
Personal checks not accepted. Attorney's check, Send remittance to:
certified check, bank check, money order only, Bureau of Investor Protection and
payable to the N.Y.S. Department of Law. Securities
N.Y. Department of Law
120 Broadway
New York, NY 10271
</TABLE>
<PAGE>
7. If the securities are being offered partly or entirely for the account of
selling holders, please check [ ]. Indicate the details of the secondary
offering below for each seller.
Anticipated
Name of Seller Address Dollar Amount Offered
N/A
<TABLE>
<CAPTION>
<S> <C> <C>
8. Has registrant, any officer, director or principal or partner ever
A. been suspended or expelled fro membership in any securities or
commodities exchange, association or securities or commodities
dealers or investment advisors? .................................... Yes [ ] No [x]
B. had a license or registration as a dealer, broker, investment
advisor or salesman, futures commission merchant, associated
person, commodity pool operator, or commodity trading advisor
denied, suspended or revoked? ...................................... Yes [ ] No [x]
C. been enjoined or restrained by any court or government agency
from:
1. the issuance, sale or offer for sale of securities or
commodities? ................................................. Yes [ ] No [x]
2. rendering securities or commodities advice? ................... Yes [ ] No [x]
3. handling or managing trading accounts?......................... Yes [ ] No [x]
4. continuing any practices in connection with securities or
commodities? .................................................. Yes [ ] No [x]
D. been convicted of any crime (other than minor traffic)? ............ Yes [ ] No [x]
E. used or been known by any other name? .............................. Yes [ ] No [x]
F. been the subject of any professional disciplinary proceeding? ...... Yes [ ] No [x]
G. been adjudged a bankrupt or made a general assignment for
benefit of creditors; or been an officer, director or principal of any
entity which was reorganized in bankruptcy, adjudged a bankrupt
or made a general assignment for benefit of creditors? ............. Yes [ ] No [x]
H. had an offering of securities within the last three years or been an
officer, director, principal or partner of any entity which had an
offering of securities within the last three years.................. Yes [ ] No [x]
I. If the answer to any of the above is "YES", attach a statement of
full particulars.
9. Are there any outstanding judgments (not including judgments involving
domestic relations) against the issuer or any officer, director, principal
or partner thereof? If yes, attach statement of full particulars....... Yes [ ] No [x]
</TABLE>
10. List names and residence addresses of all employees (officers and directors
not included) of Issuer who are selling in N.Y.S., N.Y. Form M-2 must be
filed for each person listed.
---------------------------------------------------------------------------
NONE
11. Limited Partnerships are required to submit a list of all limited partners
as soon as the offering is completed. This may be done in letter form.
12. If the Issuer is a limited partnership, list all of the general partners:
NOT A PARTNERSHIP
<PAGE>
13. The information set forth below should be provided for each officer,
director, principal or partner. In the case of a corporate general partner,
information must be provided for all officers. If not enough space is
provided, use continuation sheets. Do not refer to prospectus or offering
literature. SEC biographies can be substituted for employment history only.
a. Name: Morris Diamond Title:President
Home Address: 105 Southern Parkway Phone 716-244-1840
Place of Birth: Rochester, N.Y. Date of Birth: 7/11/20
Social Security #:###-##-#### Prior home addresses for past five years:
-----------------------------------------------------------------------
Same as Above
Following is my complete employment and business affiliation record for
the past five years: Indicate periods of self-employment and
unemployment. Include all corporations or other entities where you hold
or held a substantial equity or controlling interest.)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------- --------------- -------------------------------------------------- --------------------------------
From To Employer or Business Affiliation Position Held and
- ---------------- -------------- ------------------------------------------------- -------------------------------
Mo. Yr. Mo. Yr. Name Address Type of Business
- ----------------- --------------- -------------------------------------------------- --------------------------------
105 Southern Parkway
Jan 80 Dec 95 Self-Employed Rochester, NY 14618 Business Counseling
- ----------------- --------------- -------------------------------------------------- --------------------------------
- ----------------- --------------- -------------------------------------------------- --------------------------------
- ----------------- --------------- -------------------------------------------------- --------------------------------
- ----------------- --------------- -------------------------------------------------- --------------------------------
- ----------------- --------------- -------------------------------------------------- --------------------------------
</TABLE>
a. Name: Shirley Diamond Title: Secretary
Home Address: 105 Southern Parkway Phone 716-473-6718
Place of Birth: Rochester, N.Y. Date of Birth: 6/17/23
Social Security #:###-##-#### Prior home addresses for past five years:
-----------------------------------------------------------------------
Same as Above
Following is my complete employment and business affiliation record for
the past five years: Indicate periods of self-employment and
unemployment. Include all corporations or other entities where you hold
or held a substantial equity or controlling interest.)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------- --------------- -------------------------------------------------- --------------------------------
From To Employer or Business Affiliation Position Held and
- ---------------- -------------- ------------------------------------------------- -------------------------------
Mo. Yr. Mo. Yr. Name Address Type of Business
- ---------------- -------------- ------------------------------------------------- -------------------------------
105 Southern Parkway
Jul 84 Dec 95 Tramdot Development Rochester, NY Investments President
- ----------------- --------------- -------------------------------------------------- --------------------------------
Corp.
- ----------------- --------------- -------------------------------------------------- --------------------------------
- ----------------- --------------- -------------------------------------------------- --------------------------------
- ----------------- --------------- -------------------------------------------------- --------------------------------
</TABLE>
<PAGE>
c. Name: Suzanne Luxenberg Title: Asst. Secretary
Home Address: 20 Castlebar Rd. Roch.N.Y. Phone 716-442-3678
Place of Birth: Rochester, N.Y. Date of Birth: 6/17/47
Social Security #:###-##-#### Prior home addresses for past five years:
-----------------------------------------------------------------------
Same as Above
Following is my complete employment and business affiliation record for
the past five years: Indicate periods of self-employment and
unemployment. Include all corporations or other entities where you hold
or held a substantial equity or controlling interest.)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------- --------------- -------------------------------------------------- --------------------------------
From To Employer or Business Affiliation Position Held and
- ---------------- -------------- ------------------------------------------------- -------------------------------
Mo. Yr. Mo. Yr. Name Address Type of Business
- ---------------- -------------- ------------------------------------------------- -------------------------------
MS 2541 Monroe Ave. Rm 305 President
Jan 89 Dec 95 Acquisition Corp. Roch., NY House Builder
- ----------------- --------------- -------------------------------------------------- --------------------------------
- ----------------- --------------- -------------------------------------------------- --------------------------------
- ----------------- --------------- -------------------------------------------------- --------------------------------
- ----------------- --------------- -------------------------------------------------- --------------------------------
- ----------------- --------------- -------------------------------------------------- --------------------------------
</TABLE>
The use of power of attorney is not acceptable. If all signatures are not
available at time of filing, you must submit the proper total fee and all
information required by Item 13. Note in your letter of transmittal that
counterpart forms with missing signatures will be submitted within 30 days of
filing.
Limited Partnerships must supply one signature for each general partner. One
signature by an officer of a corporate general partner is sufficient, however,
all selling officers must sign.
Each of the undersigned, constituting all officers, directors, partners, and
controlling principals of the registrant do hereby state and represent that all
statements contained herein are true and correct and understands that any false
statement shall constitute a violation of Art. 23-A of the General Business Law.
Signature Name and Title (please type of print) Date
- --------------------- ------------------------------------- --------
/s/Morris Diamond Morris Diamond President 5-29-96
- --------------------- ------------------------------------- --------
/s/Shirley Diamond Shirley Diamond Secretary 5-29-96
- --------------------- ------------------------------------- --------
/s/Suzanne Luxenberg Suzanne Luxenberg Asst. Secretary 5-29-96
- --------------------- ------------------------------------- --------
To complete this filing a State Notice and Further State Notice must be filed
with the Secretary of State in Albany. In the case of a non-resident issuer, a
Consent to Service of Process must be filed with the Secretary of State.
All changes or amendments to this form must be submitted on NY Form M-3 with a
$20 fee.
<PAGE>
NYS DEPARTMENT OF STATE GAIL S. SHAFER
MISCELLANEOUS RECORDS BUREAU Secretary of
State
162 Washington Avenue
Albany, NY 12231-0001
A fee of $75 must accompany EACH State Notice and EACH Further State Notice.
This form constitutes two distinct notices and must be filed in DUPLICATE. All
remittances must be by cash, certified check, attorney's check, postal money
order or bank draft, payable to Department of State. Exception: Attorney's
checks will be accepted only for amounts up to and including $250. Mail
completed form and fee to the Miscellaneous Records Bureau at the above address.
DO NOT SEND OFFERING LITERATURE to the Secretary of State.
================================================================================
State Notice under 359-e, subd. 2 of the General Business Law of the State of
New York (This notice to be filed by every security broker or dealer prior to
engaging in the business of selling or offering for sale securities to the
public in the State of New York.)
Name of Dealer 1 Denom Acquisition Corp.
---------------------------------------------------------
or
Broker 2
Business Address 2541 Monroe Ave. Suite 301, Rochester, New York 14618
---------------------------------------------------------
or
Post Office Address:
If a Corporation, the State or Country in which Incorporated Delaware
--------------
If a Partnership, the Names of the General Partners
================================================================================
Further State Notice under 359-e, subd. 8 of the General Business Law of the
State of New York (This notice to be filed for each issue to be offered, except
those specifically exempted by 359-f.)
Name of Dealer 1 Denom Acquisition Corp.
---------------------------------------------------------
or
Broker 2
or
Syndicate Manager 3
Business Address 2541 Monroe Ave. Suite 301, Rochester, New York 14618
---------------------------------------------------------
or
Post Office Address:
If a Corporation, the State or Country in which Incorporated Delaware
--------------
Name of Security or Securities (Class) Common
Name of Issuer of Securities Denom Acquisition Corp.
Post Office Address of Issuer of Securities
2541 Monroe Ave. Suite 301, Rochester, NY 14618
---------------------------------------------------
The State of Country in which Organized Delaware
--------------
================================================================================
<TABLE>
<CAPTION>
<S><C>
1 A dealer is an issuer that is offering its own securities for sale.
2 A broker is any othe rperson or firm offering the issuer's securities for sale.
3 A syndicate manager is a broker who is managing other brokers, all of whom are offering the issuer's securities for sale.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Rotenberg & Company, LLP Jerald J. Rotenberg, C.P.A.*
- ------------------------ Joseph C. Ange, Jr., C.P.A.
Certified Public Accountants & Consultants James H. Cohen, C.P.A.
- ------------------------------------------ Rocco N. Platino, C.PA.*
500 First Federal Plaza * Rochester, N.Y. 14614 John L. Worboys, C.P.A.
- ----------------------------------------------- Ralph 0. Hinchliffe, C.PA.
(716) 546-1158 Fax (716) 546-2943 William J. Friedman, C.P.A.
- -------------- ------------------ Sally Darling, C.P.A.
---------------------
Stanley Underberg, C.P.A.
Howard M. Davidson, C.P.A., PFS
Thomas F. Englert, C.P.A.
Robert P Nasso, C.P.A.
----------------------
* Also Licensed in Florida
</TABLE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of Denom
Acquisition Corp. on Form 10-SB of our report dated October 4, 1996 relating to
the financial statements of Denom Acquisition Corp. appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in
such Prospectus.
/s/ Rotenberg & Company, LLP
Rochester, New York
October 4, 1996
<PAGE>
<TABLE>
<S> <C>
Rotenberg & Company, LLP Jerald J. Rotenberg, C.P.A.*
- ------------------------ Joseph C. Ange, Jr., C.P.A.
Certified Public Accountants & Consultants James H. Cohen, C.P.A.
- ------------------------------------------ Rocco N. Platino, C.PA.*
500 First Federal Plaza * Rochester, N.Y. 14614 John L. Worboys, C.P.A.
- ----------------------------------------------- Ralph 0. Hinchliffe, C.PA.
(716) 546-1158 Fax (716) 546-2943 William J. Friedman, C.P.A.
- -------------- ------------------ Sally Darling, C.P.A.
---------------------
Stanley Underberg, C.P.A.
Howard M. Davidson, C.P.A., PFS
Thomas F. Englert, C.P.A.
Robert P Nasso, C.P.A.
----------------------
* Also Licensed in Florida
</TABLE>
January 21, 1997
The Board of Directors
Denom Acquisition corp.
Park Place
Suite 205
4647 N. 32nd Street
Phoenix, Arizona 85018
We were the Independent Auditors for Denom Acquisition corp. and
represented the Company during its formation on January 10, 1996 and issued our
report on the financial statements as of September 30, 1996. We have not
represented the Company since that date. At no time have there been any
disagrements between Rotenberg & Company, LLP and Denom Acquisition Corp.
regarding any matter of accounting principals or practices, financial statement
disclosure, or auditing scope or procedure. The accounting reports associated
with our financial statements did not contain an adverse opinion nor a
disclaimer of opinion. It was not modified as to uncertainty, audit scope, or
accounting principles.
Very truly yours,
/s/ William J. Friedman, PTR
William J. Friedman
ROTENBERG & COMPANY, LLP
WJF/tt
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read and agree with the comments in Part 2 Item 3 of Form
10-SB of Soy Environmental Products, Inc. and Subsidiary (formerly
Denom Acquisition Corp.) dated January 31, 1997.
Semple & Cooper, P.L.C.
Phoenix, Arizona
January 21, 1997
Confidential No.________ Limited Offering Memorandum
SOY ENVIRONMENTAL PRODUCTS, INC.
$2,025,000
1,350,000 Units
Each Consisting of One Share of Common Stock
and One Redeemable Common Stock Purchase Warrant
$1.50 Per Unit
5,000 Units ($7,500) Minimum Subscription
Soy Environmental Products, Inc. (the "Company") is a Delaware
corporation which recently acquired rights to manufacture and market certain
products of Interchem Environmental, Inc., a Kansas corporation ("Interchem").
The Company acquired rights to consumer and industrial products such as cleaning
solvents and lubricants which are made from soybean oil which are both
biodegradable and non-toxic. The Company intends to use the proceeds of this
offering (the "Offering") to produce and market its line of consumer products,
continue and increase development and research into new products, and pay
ongoing operating expenses.
The Units are offered on a "best efforts, 335,000 Units or none" basis
by the Company through its officers and directors, assisted by Capital West
Investment Group, Inc. ("Capital West"). No commissions will be paid to the
Company's officers and directors, but consulting fees of up to $200,000 may be
paid to Capital West. Shares may be sold by licensed brokers or dealers who are
members of the National Association of Securities Dealers ("NASD") who will
receive commissions of up to 10% of the proceeds from Shares sold by them. See
"PLAN OF PLACEMENT" and "RELATED PARTY TRANSACTIONS."
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), THE SECURITIES ACT OF ARIZONA OR
THE SECURITIES LAWS OF ANY OTHER JURISDICTION IN RELIANCE UPON THE EXEMPTIONS
FROM REGISTRATION PROVIDED BY SECTIONS 3(b), 4(2) and 4(6) OF THE ACT AND
REGULATION D PROMULGATED THEREUNDER AND THE COMPARABLE EXEMPTIONS FROM
REGISTRATION PROVIDED BY OTHER APPLICABLE SECURITIES LAWS.
THESE ARE SPECULATIVE SECURITIES WHICH INVOLVE A HIGH DEGREE OF
RISK. ONLY THOSE WHO CAN BEAR THE LOSS OF THEIR ENTIRE INVESTMENT
SHOULD INVEST IN THE SHARES.
THIS OFFERING IS RESTRICTED TO PERSONS WHO ARE "ACCREDITED INVESTORS."
EACH INVESTOR WILL BE REQUIRED TO MAKE REPRESENTATIONS THAT SUCH INVESTOR IS AN
"ACCREDITED INVESTOR" AS THAT TERM IS DEFINED PURSUANT TO THE ACT, AND IS
FAMILIAR WITH AND UNDERSTANDS THE TERMS OF THIS OFFERING. SEE "REQUIREMENTS FOR
PURCHASERS" AND "RISK FACTORS."
SALE SELLING PROCEEDS TO
PRICE COMMISSIONS COMPANY
(1) (2)(3)
- --------------------------------------------------------------------------------
Per Unit $ 1.50 $ 0.15 $ 1.35
Minimum $ 502,500 $ 50,250 $ 452,250
Maximum $2,025,000 $202,500 $1,822,500
- --------------------------------------------------------------------------------
(Footnotes on Page ii)
SOY ENVIRONMENTAL PRODUCTS, INC.
9135 Barton Street
Overland Park, Kansas 66214
The Date of this Memorandum is January 20, 1997
<PAGE>
(1) The Company reserves the right to waive the 5,000 Unit minimum for
any investor. The Offering is not underwritten. The Units are offered on a
"best-efforts, 335,000 Units or none" basis by the Company through its officers
and directors. Unless a minimum of 335,000 Units is sold during the Offering
Period, as defined below, the Offering will be terminated and all funds returned
to subscribers, without interest or deduction. Officers and directors of the
Company will not receive any compensation in addition to their regular
compensation for the placement of Units, either in the form of commissions or
finders' fees. Capital West Investment Group, Inc. ("Capital West") has been
engaged as a financial adviser to provide advice regarding raising equity
capital by the Company, among other things, and is entitled to receive
consulting fees of up to $200,000 as compensation for its services to the
Company, even if all Units offered are sold by officers and directors of the
Company. Units may also be sold by NASD-member brokers or dealers who enter into
a Participating Dealer Agreement with the Company, who may receive commissions
of up to 10% of the price of Units sold. Due diligence expenses and expenses of
this Offering will be paid out of the proceeds of this Offering. See "PLAN OF
PLACEMENT."
(2) The Offering will terminate on the earliest of: (a) the date the
Company, in its discretion, determines; or (b) the date upon which all Units
have been sold; or (c) March 31, 1997, or such date as may be extended from time
to time by the Company, but not later than ninety days thereafter (the "Offering
Period"). All proceeds from the sale of the Units will be deposited in an escrow
account (the "Escrow Account") to be maintained at Republic National Bank in
Phoenix, Arizona ("Escrow Agent"). Upon receipt of at least $502,500, the Escrow
Agent will disburse funds to the Company from the Escrow Account. Thereafter,
until the Offering is fully subscribed or terminated, all subscription proceeds
will be paid directly to the Company. If less than $502,500 is deposited into
the Escrow Account after the conclusion of the ninety (90) day Offering Period,
and any extension thereof, all funds held in the Escrow Account will be returned
to the subscribers with interest. See "PLAN OF PLACEMENT - Escrow Account
Arrangement."
(3) Proceeds are determined prior to deduction of costs and expenses
associated with this offering, including filing, printing, legal, accounting,
blue sky and other fees (excluding the Advisory Fee, estimated to total
approximately $60,000) all of which will be paid from Offering proceeds. See
"USE OF PROCEEDS."
------------------------------------------------
THIS LIMITED OFFERING MEMORANDUM ("MEMORANDUM") IS NOT A "PROSPECTUS"
AS THAT TERM IS DEFINED IN SECTION 12(10) OF THE ACT. EXCEPT AS OTHERWISE
INDICATED, THIS MEMORANDUM SPEAKS AS OF ITS DATE. NEITHER THE DELIVERY HEREOF,
NOR ANY SALE MADE HEREUNDER, SHALL CREATE AN IMPLICATION THAT THE AFFAIRS OF THE
COMPANY HAVE CONTINUED WITHOUT CHANGE SINCE SUCH DATE.
The Shares are offered subject to receipt and acceptance by the Company
to prior sale and to the Company's right to reject any order in whole or in part
and to withdraw, cancel or modify the offer without notice.
THIS OFFERING IS NOT UNDERWRITTEN. THE SECURITIES OFFERED HEREBY WILL
NOT BE OFFERED OR SOLD BY MEANS OF ANY FORM OF GENERAL ADVERTISEMENT OR
GENERAL SOLICITATION. THE OFFERING PRICE HAS BEEN ARBITRARILY SET BY THE
MANAGEMENT OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT ANY OF THE
SECURITIES WILL BE SOLD.
- ii -
<PAGE>
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY, NOR HAS ANY SUCH
REGULATORY BODY REVIEWED THIS OFFERING MEMORANDUM FOR ACCURACY OR COMPLETENESS.
BECAUSE THESE SECURITIES HAVE NOT BEEN SO REGISTERED, THERE ARE SEVERE
RESTRICTIONS ON THEIR TRANSFERABILITY OR RESALE BY AN INVESTOR. EACH PROSPECTIVE
INVESTOR SHOULD PROCEED ON THE ASSUMPTION THAT HE MUST BEAR THE ECONOMIC RISKS
OF THE INVESTMENT FOR AN INDEFINITE PERIOD, SINCE THE SECURITIES MAY NOT BE SOLD
UNLESS, AMONG OTHER THINGS, THEY ARE SUBSEQUENTLY REGISTERED UNDER THE
APPLICABLE SECURITIES ACTS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
FURTHER, THERE IS NO PUBLIC MARKET FOR THE SECURITIES AND NONE IS LIKELY TO
DEVELOP.
Any reproduction or distribution of this Memorandum, in whole or in
part, or the divulgence of any of its contents is prohibited. No person is
authorized to give any information or make any representation not contained in
the Memorandum and any information or representation not contained herein must
not be relied upon. Nothing in this Memorandum should be construed as legal or
tax advice.
All of the information provided herein has been provided by the
Management of the Company. The Company makes no express or implied
representation or warranty as to the accuracy or completeness of this
information or, in the case of projections, estimates, future plans or forward
looking statements, as to their attainability or the accuracy or completeness of
the assumptions from which they are derived, and it is expected that each
prospective investor will pursue his or her own independent investigation. It
must be recognized that estimates of the Company's performance are necessarily
subject to a high degree of uncertainty and may vary materially from actual
results.
No general solicitation will be conducted and no offering literature or
advertising in whatever form will or may be employed in the offering of the
securities, except for this Memorandum (including amendments and supplements to
this Memorandum), the exhibits hereto and documents summarized herein. No one
has been authorized to give any information or to make any representation with
respect to the Company or the Shares which is not contained in this Memorandum.
Prospective investors should not rely on any information not contained in this
Memorandum.
This Memorandum does not constitute an offer to sell or a solicitation
of an offer to buy to anyone in any jurisdiction in which such offer or
solicitation would be unlawful or is not authorized or in which the person
making such offer or solicitation is not qualified to do so. This Memorandum
does not constitute an offer if the prospective investor is not qualified under
applicable securities laws.
Certain provisions of various documents, reports and studies are
summarized or cited in this Memorandum but prospective investors should not
assume that the summaries, reports or studies are complete or accurate. Such
summaries, reports and studies are qualified in their entirety by reference to
the texts of the original documents which will be made available to prospective
investors by the Company. The Company takes no responsibility for the contents,
estimates or conclusions of documents, reports or studies prepared by third
parties.
- iii -
<PAGE>
This Offering is made subject to withdrawal, cancellation or
modification by the Company without notice. The Company reserves the right to
reject any subscription or to allot to any prospective investor less than the
number of shares applied for by such prospective investor.
By acceptance of this Memorandum, prospective investors recognize and
accept the need to conduct their own thorough investigation and due diligence
before considering a purchase of the Shares.
NASAA LEGEND
- ------------
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING INCLUDING THE MERITS AND
RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
FOR ARIZONA RESIDENTS ONLY:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
THE STATE OF ARIZONA, AND THEY THEREFORE HAVE THE STATUS OF SECURITIES ACQUIRED
IN AN EXEMPT TRANSACTION UNDER SECTION 44-1844(1) OF THE SECURITIES ACT OF THE
STATE OF ARIZONA. THESE SECURITIES CANNOT BE RESOLD WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF THE STATE OF ARIZONA UNLESS EXEMPTION THEREFROM IS
AVAILABLE.
FOR CALIFORNIA RESIDENTS ONLY:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN QUALIFIED WITH THE
CALIFORNIA DEPARTMENT OF CORPORATIONS NOR HAS THE CALIFORNIA DEPARTMENT OF
CORPORATIONS PASSED UPON THE ADEQUACY OR ACCURACY OF THIS MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE CALIFORNIA
COMMISSIONER OF CORPORATIONS DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF THESE
SECURITIES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF SECURITIES, OR ANY
INTEREST THEREIN OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
- iv -
<PAGE>
FOR FLORIDA RESIDENTS ONLY:
RESIDENTS OF THE STATE OF FLORIDA WHO SUBSCRIBE FOR SHARES HAVE THE
RIGHT, PURSUANT TO SECTION 517.061(11)(A)(5) OF THE FLORIDA SECURITIES ACT, TO
WITHDRAW THEIR SUBSCRIPTIONS AND RECEIVE A FULL REFUND OF ALL MONIES PAID WITHIN
THREE DAYS AFTER RECEIPT OF THIS PRIVATE PLACEMENT MEMORANDUM OR WITHIN THREE
DAYS AFTER THE FIRST TENDER OF MONEY OR OTHER CONSIDERATION TO THE ISSUER, OR AN
ESCROW AGENT, WHICHEVER OCCURS LATER.
FOR ILLINOIS RESIDENTS ONLY:
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECRETARY
OF THE STATE OF ILLINOIS OR THE STATE OF ILLINOIS, NOR HAS THE SECRETARY OF THE
STATE OF ILLINOIS OR THE STATE OF ILLINOIS PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FOR NEW YORK RESIDENTS ONLY:
THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED
BY THE ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF
THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT
OF A MATERIAL FACT AND DOES NOT OMIT ANY MATERIAL FACT NECESSARY TO MAKE THE
STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS
PURPORTED TO BE SUMMARIZED HEREIN.
FOR UTAH RESIDENTS ONLY:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UTAH SECURITIES ACT
AND ARE OFFERED AND SOLD PURSUANT TO AN EXEMPTION THEREFROM. THE SECURITIES
CANNOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH
ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
The information contained in this Memorandum has been supplied by the Company
and is included herein in reliance on its representations.
During the course of the Offering and prior to sale, each offeree of the Units
and his or her professional adviser(s), if any, are invited to ask questions
concerning the terms and conditions of the Offering and to obtain any additional
information necessary to verify the accuracy of the information set forth
herein. Such information will be provided to the extent the Company possesses
such information or can acquire it without unreasonable effort or expense.
- v -
<PAGE>
EACH PROSPECTIVE INVESTOR WILL BE GIVEN AN OPPORTUNITY TO ASK QUESTIONS
OF, AND RECEIVE ANSWERS FROM, MANAGEMENT OF THE COMPANY CONCERNING THE TERMS AND
CONDITIONS OF THIS OFFERING AND TO OBTAIN ANY ADDITIONAL INFORMATION, TO THE
EXTENT THE COMPANY POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT
UNREASONABLE EFFORTS OR EXPENSE, NECESSARY TO VERIFY THE ACCURACY OF THE
INFORMATION CONTAINED IN THIS MEMORANDUM. IF YOU HAVE ANY QUESTIONS WHATSOEVER
REGARDING THIS OFFERING, OR DESIRE ANY ADDITIONAL INFORMATION OR DOCUMENTS TO
VERIFY OR SUPPLEMENT THE INFORMATION CONTAINED IN THIS MEMORANDUM, PLEASE WRITE
OR CALL EITHER:
SOY ENVIRONMENTAL PRODUCTS, INC. CAPITAL WEST INVESTMENT
9135 BARTON STREET GROUP, INC.
OVERLAND PARK, KANSAS 66214 2525 EAST CAMELBACK ROAD, SUITE 510
(913) 599-0800 PHOENIX, ARIZONA 85016
(602) 954-7711
TABLE OF CONTENTS
SUMMARY OF THE OFFERING....................................................... 1
REQUIREMENTS FOR PURCHASERS................................................... 3
RISK AND OTHER IMPORTANT FACTORS.............................................. 5
USE OF PROCEEDS.............................................................. 12
THE BUSINESS................................................................. 13
THE ACQUISITION.............................................................. 19
MANAGEMENT................................................................... 19
AFFILIATES....................................................................20
MANAGEMENT COMPENSATION...................................................... 20
INDEMNIFICATION OF DIRECTORS AND OFFICERS.....................................21
CAPITALIZATION............................................................... 22
DILUTION..................................................................... 22
PRINCIPAL SHAREHOLDERS....................................................... 23
LITIGATION................................................................... 24
DESCRIPTION OF UNITS AND REGISTRATION RIGHTS................................. 25
PLAN OF PLACEMENT............................................................ 26
LEGAL MATTERS................................................................ 27
EXPERTS...................................................................... 27
ADDITIONAL INFORMATION....................................................... 27
FINANCIAL STATEMENTS.........................................................F-1
CONSUMER PRODUCTS DESCRIPTIONS...............................................P-1
SUBSCRIPTION AGREEMENT.......................................................S-1
- vi -
<PAGE>
SUMMARY OF THE OFFERING
The following material is intended to summarize information contained
elsewhere in this Limited Offering Memorandum (the "Memorandum"). This summary
is qualified in its entirety by express reference to this Memorandum and the
materials referred to herein. Each prospective subscriber should carefully
review the entire Memorandum and all materials referred to herein and conduct
his or her own due diligence before subscribing for Units.
The Company
- -----------
The Company recently purchased exclusive rights to manufacture and
market solvents and other cleaning products from Interchem Environmental, Inc. a
Kansas corporation ("Interchem"). The Company intends to manufacture and sell
non-toxic, biodegradable consumer and commercial cleaning solvents and other
products made from soybean oil, including graffiti removers, paint strippers,
lubricants and other products. The Company's principal administrative offices
are located at 9135 Barton Street, Overland Park, Kansas 66214, telephone (913)
599-0800. The research, development and manufacturing facility, of which the
Company is a minority owner, is located in Ralston, Iowa, and the Company
maintains a separate marketing office in metropolitan Phoenix, Arizona.
SoyClean(R) Products - Effective, Non-toxic and Biodegradable
- -------------------------------------------------------------
The Company's products, which are derived from soybean oil, are
primarily cleaning solvents which are cost effective, non-toxic and
biodegradable. The Company's products provide an effective alternative to
petroleum-based products commonly used for both consumer and industrial
purposes. The Company currently has four commercial products: SoyClean(R)
Graffiti Remover, SoyRelease3(TM) asphalt remover, SoyFormula3(TM) solvent, and
Naturen(R) print machinery cleaner. The Company is developing comparable
products for home use as well as additional products for both consumer and
commercial use.
The Offering
- ------------
The Company is offering 1,350,000 Units, at a price of $1.50 per Unit,
in a limited offering made only to "Accredited Investors" as defined in
Regulation D under the Act. Each purchaser must execute a Subscription Agreement
making certain representations and warranties to the Company, including such
purchaser's qualification as an Accredited Investor.
The Offering is made by the Company on a "best efforts, 335,000 Units
or none" basis requiring a minimum of 335,000 Units totaling $502,500 to be
sold. The minimum investment is $7,500 (5,000 Units), which may be waived by the
Company.
Risk Factors
- ------------
See "RISK AND OTHER IMPORTANT FACTORS" in this Memorandum for certain
factors which could adversely affect an investment in the Units. Those factors
include the lack of operating history, lack of any established market for
consumer products, lack of a significant market for Interchem's products, and
lack of a significant market or liquidity for Units or Shares.
Use of Proceeds
- ---------------
Proceeds from the sale of the Units will be used to market the
Company's consumer products, provide capital for research and development, and
provide working capital. Proceeds may also be used
- 1 -
<PAGE>
to pay costs associated with obtaining additional financing for the Company from
public or private sources. See "USE OF PROCEEDS."
Escrow Account for Minimum Offering Proceeds
- --------------------------------------------
The Company has established an Escrow Account at Republic National Bank
in Phoenix, Arizona, into which subscription proceeds will be placed. At least
335,000 Units must be sold before the Company can utilize proceeds from the sale
of Units. After the minimum numbers of Units are sold, all proceeds will be
delivered directly to the Company. See "PLAN OF PLACEMENT - Escrow Account
Arrangement."
The Units
- ---------
Each Unit is comprised of One Share and One Common Stock Purchase
Warrant.
Shares. 1,350,000 Shares of the Company's Common Stock, $0.01 par
value, are being offered. Upon completion of the Offering, between 4,835,000 and
5,850,000 Shares will be outstanding. See "DESCRIPTION OF UNITS AND REGISTRATION
RIGHTS."
Warrants. 1,350,000 Warrants are being offered as a part of Units. Each
Warrant will entitle the holder to purchase one Share for a period of three
years at a price of $1.80. The Warrant is redeemable at the Company's option
upon satisfaction of certain conditions.
Registration Rights
- -------------------
Purchasers receive the right to "piggyback" the registration of a total
of 25% of the Shares they purchase in the Offering or acquire upon the exercise
of Warrants in up to two Company registrations of its equity securities during
the next three years. See "DESCRIPTION OF UNITS AND REGISTRATION RIGHTS -
Registration Rights."
Stockholders
- ------------
Upon sale of the minimum and maximum number of Shares in the Offering,
shares of the Company's Common Stock will be held as follows:
Minimum Maximum
------- -------
Present Shareholders 90% 70%
New Shareholders 10% 30%
Registrar
- ---------
OTR, Inc., 1130 South West Morrison, Suite 250, Portland, Oregon is the
Company's Registrar and Transfer Agent, and will serve as Registrar and Transfer
Agent with respect to the Units, Shares and Warrants.
Subscription Period
- -------------------
The subscription period for the offering will terminate on March 31,
1997 (unless extended by the Company to a date not later than 90 days following
such date). Offering proceeds will be delivered directly to the Company, and
will not be held in an Escrow Account.
- 2 -
<PAGE>
REQUIREMENTS FOR PURCHASERS
Prospective purchasers of the Units offered by this Offering Memorandum
should give careful consideration to certain risk factors described under "RISK
AND OTHER IMPORTANT FACTORS," and especially to the speculative nature of this
investment and the limitations described under that caption with respect to the
lack of a readily available market for the Units, the Shares or the Warrants and
the resulting long-term nature of any investment in the Company. Only persons
who are "Accredited Investors" having adequate means to assume such risks and of
otherwise providing for their current needs and contingencies should consider
purchasing Units.
General Suitability Standards
- -----------------------------
The Units will not be sold to any person unless such prospective
purchaser or his or her duly authorized representative shall have presented in
writing to the Company in a Subscription Agreement that:
(a) The prospective purchaser has adequate means of providing
for his or her current needs and personal contingencies and has no need for
liquidity in the investment of the Units;
(b) The prospective purchaser's overall commitment to
investments which are not readily marketable is not disproportionate to his or
her net worth and the investment in the Units will not cause such overall
commitment to become excessive; and
(c) The prospective purchaser is an "Accredited Investor" (as
defined below).
Each person acquiring Units will be required to represent that he or
she is purchasing it for his or her own account for investment purposes and not
with a view to resale or distribution. See "SUBSCRIPTION FOR UNITS."
Accredited Investors
- --------------------
The Company will conduct the offering in such a manner that Units may
be sold only to "Accredited Investors" as that term is defined in Regulation D
promulgated under the Securities Act of 1933 (the "Securities Act"). In summary,
a prospective investor will qualify as an "Accredited Investor" if he meets any
one of the following criteria:
(a) Any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his purchase, exceeds
$1,000,000;
(b) Any natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and who has a
reasonable expectation of reaching the same income level in the current year;
(c) Any bank as defined in Section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934 (the "Exchange Act"); any insurance company as
defined in Section 2(13) of the Exchange Act; any investment company registered
under the Investment Company Act of
- 3 -
<PAGE>
1940 or a business development company as defined in Section 2(a)(48) of that
Act; any Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958; any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000; any employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons who are Accredited Investors;
(d) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(e) Any organization described in Section 501(c)(3)(d) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(f) Any director or executive officer, or general partner of
the issuer of the securities being sold, or any director, executive officer, or
general partner of a general partner of that issuer;
(g) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Section
506(b)(2)(ii) of Regulation D adopted under the Act; and
(h) Any entity in which all of the equity owners are
Accredited Investors.
Other Requirements
- ------------------
No subscription for Units will be accepted from any investor unless he
is acquiring the Units for his own account (or accounts as to which he has sole
investment discretion), for investment and without any view to sale,
distribution or disposition thereof.
Each prospective purchaser of Units may be required to furnish such
information as the Company may require to determine whether any person or entity
purchasing Units is an Accredited Investor who may purchase Units.
- 4 -
<PAGE>
RISK AND OTHER IMPORTANT FACTORS
INVESTMENT IN THE UNITS INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE
UNDERTAKEN ONLY BY PERSONS WHOSE FINANCIAL RESOURCES ARE SUFFICIENT TO ENABLE
THEM TO ASSUME SUCH RISK AND TO RETAIN AN INVESTMENT IN A NON-LIQUID FORM FOR AN
INDEFINITE PERIOD OF TIME.
IN ANALYZING THIS OFFERING, POTENTIAL INVESTORS SHOULD GIVE CAREFUL
CONSIDERATION TO THE FOLLOWING FACTORS:
Absence of Historical Profitability; Continued Losses; Accumulated Deficit
- --------------------------------------------------------------------------
Although Interchem has a history of commercial sales, sales of the
Company's products have not generated profits. The Company anticipates that its
operating expenses will be increasing because of the development and marketing
of consumer products, so that the Company's future profitability will depend
upon significant increases in revenue from operations. There can be no assurance
as to the amount of income which the Company may be able to generate from
operations. Losses to date have primarily resulted from start-up costs. Given
the Company's financial resources, its anticipated expenses and the highly
competitive environment in which it will operate, there can be no assurance that
the Company will be able to generate sufficient revenue to fund its current or
future operations or that the Company's future operations will be profitable in
the near future or at all.
Need to Develop Market For Consumer Products
- --------------------------------------------
All sales of the Company's products by Interchem have been to
industrial users. The Company has not yet established any distribution system
for its consumer products (which are in the development stage), and no assurance
can be given that its consumer products will be accepted, or that a satisfactory
distribution network can be established which will result in its consumer
products being a success.
Uncertainty of Widespread Market Acceptance of Consumer Products; Limited
- -------------------------------------------------------------------------
Marketing Experience
- --------------------
The Company is currently developing, and has not yet marketed or sold,
its line of consumer products. which the Company's president, Sean F. Lee, has
extensive experience in sales of consumer products, and the Company has
conducted only limited marketing activities and has limited marketing experience
with respect to its consumer products. As is typical with new products, demand
and market acceptance for the Company's consumer products are subject to a high
level of uncertainty. Achieving widespread market acceptance for these products
will require substantial marketing efforts and the expenditure of significant
funds to create brand recognition and customer demand for such products and to
cause potential customers to consider the potential benefits of the Company's
products (primarily their non-toxic and biodegradable characteristics) as
against the traditional products to which they have long been accustomed.
Moreover, the Company has limited marketing capabilities and resources.
To date, substantially all of the Company's marketing activities with respect to
its consumer products have been conducted by members of management. The
prospects for the Company's consumer products will be largely dependent upon the
Company's ability to achieve market penetration for such products. Achieving
market penetration will require significant efforts by the Company to establish
a distribution network and to create awareness of and demand for the Company's
products. Accordingly, the Company's ability to
- 5 -
<PAGE>
build its customer base will depend on the Company's ability to locate, hire and
retain sufficient qualified distributors or other marketing personnel. There can
be no assurance that the Company's consumer or industrial products will achieve
widespread market acceptance or increased sales or that the Company's efforts
will result in profitable operations. See "The Business - Marketing."
Need for Additional Development of Certain Products
- ---------------------------------------------------
The Company believes that its development work on its initial line of
consumer products is substantially complete. However, testing of these products
has been limited. The Company anticipates that its future research and
development activities combined with experience gained from production and use
of the products could result in the need for further refinement and development.
The Company also expects to modify the products for further and particular
customer applications. There can be no assurance that unforeseen circumstances
will not require extensive additional development of consumer or industrial
products and their applications. In addition, the Company may in the future need
to make improvements in its industrial and consumer products in order for such
products to remain competitive.
Limited Propriety Information Protection
- ----------------------------------------
The Company believes that it uses certain proprietary technology in its
products and that its technology does not infringe the proprietary rights of
others. Although the Company has received no claims of infringement, it is
possible that infringement of existing or future patents or proprietary rights
may occur. In the event that the Company's products infringe patent or
proprietary rights of others, the Company may be required to modify its process
or obtain a license. There can be no assurance that the Company would be able to
do so in a timely manner, upon acceptable terms and conditions, or at all. The
failure to do so would have a material adverse effect on the Company. In
addition, there can be no assurance that the Company will have the financial or
other resources necessary to defend a patent infringement or proprietary rights
action. Moreover, if any of the Company's products infringe patents or
proprietary rights of others, the Company could, under certain circumstances,
become liable for damages, which could have a material adverse effect on the
Company. The Company also relies on proprietary know-how and confidential
information and employs various methods to protect the processes, concepts,
ideas and documentation associated with its technology. However, such methods
may not afford complete protection and there can be no assurance that others
will not independently develop such processes, concepts, ideas and
documentation. Although the Company requires all of its employees to sign
confidentiality agreements, there can be no assurance that such agreements will
be enforceable or will provide meaningful protection to the Company. There can
be no assurance that the Company will be able to adequately protect its trade
secrets or that other companies will not acquire information which the Company
considers to be proprietary. Moreover, there can be no assurance that other
companies will not independently develop know-how comparable to or superior to
that of the Company. See "The Business."
Dependence on Governmental Contracts
- ------------------------------------
The Company expects that a portion of revenues from sales of its
industrial products in the future will be derived from sales to municipalities,
government contractors and other government institutions. The Company expects
that a significant portion of the funds which may be expended by municipal and
other government institutions for the Company's industrial products would come
from governmental or agency funding and budgets. Therefore, the Company's
success in marketing its industrial products will depend in some part on its
ability to convince such institutions to allocate limited funds available from
- 6 -
<PAGE>
such sources to the purchase of the Company's products. These government
entities are subject to relatively long and cyclical budgetary processes which
will tend to lengthen the time required to complete any sales of the Company's
products to such entities. Competition for such funds is intense and the
competing pressures for public funds could result in the inability of the
Company to obtain government contracts. In addition, government contracts are
subject to special risks, including delays in funding; lengthy review processes
for awarding contracts; non-renewal; delay, termination, reduction or
modification of contracts in the event of changes in the government's policies
or as a result of budgetary constraints; and increased or unexpected costs
resulting in losses. Any or all of the foregoing could have a material adverse
effect on the Company.
Furthermore, many government contracts are subject to a process of
competitive bidding. There can be no assurance that the Company will be
successful in obtaining awards under such bidding, and if it is, that awarded
contracts will generate sufficient revenues to result in profitability for the
Company. Additionally, inherent in the competitive bidding process is the risk
that if a bid is submitted and a contract is subsequently awarded, actual
performance costs may exceed the projected costs on which bids or contract price
was based. To the extent that actual costs exceed the projected costs on which
bids or contract prices were based, the Company's profitability could be
adversely affected. See "The Business Marketing."
Dependence on Third Party Suppliers and Manufacturers
- -----------------------------------------------------
To date, the Company has purchased substantially all of its supply of
soybeans and other materials from Interwest Cooperative, although such materials
are available from other third-party suppliers and manufacturers. The Company
believes that there are numerous available sources of supply for the Company's
raw materials. While the Company attempts to maintain alternative sources for
the Company's raw materials, the Company's business is subject to the risk of
price fluctuations and possible delays in delivery of raw materials. Failure by
suppliers to continue to supply the Company with raw materials on commercially
reasonable terms, or at all, would have a material adverse effect on the
Company. The Company generally does not maintain long-term supply agreements
with its suppliers or manufacturers and purchases raw materials and parts
pursuant to purchase orders in the ordinary course of business. Failure or delay
by suppliers and manufacturers in supplying necessary raw materials and
components to the Company would adversely affect the Company's operations and
the Company's ability to obtain and deliver products on a timely and competitive
basis. See "The Business - The Products."
Dependence on Management
- ------------------------
The business of the Company will be largely dependent upon the efforts
of its Chief Executive Officer, Sean Lee and consulting services provided by Lee
Derr through Interchem. The Company does not currently have, but intends to
obtain and maintain, key-man life insurance in the amount of not less than
$1,000,000 on Mr. Lee. However, even with such insurance, Mr. Lee's marketing
skills and experience would be difficult for the Company to replace.
- 7 -
<PAGE>
Competition; Technological and Product Obsolescence
- ---------------------------------------------------
The markets for the products of the Company are highly competitive.
Because the Company's consumer products are new, the scope of the Company's
competition is difficult to access accurately. Currently, most cleaners,
solvents and other products competitive with those of the Company are
petroleum-based, are toxic and are not biodegradable. Management believes that
the non-toxic, biodegradable nature of its products will appeal to a segment of
the market. The Company will compete with numerous well-established chemical and
consumer products companies, all of which possess substantially greater
experience, financial, marketing, personnel and other resources than the Company
and have established greater recognition for their brand names than the Company.
Many of the Company's competitors have achieved significant national, regional
and local brand name and product recognition and engage in extensive advertising
and promotional programs, both generally and in response to efforts by
additional competitors to enter new markets and/or to introduce new products. In
addition, the Company believes that these competitors have the resources to
develop and have developed, are developing, or may develop and market products
directly competitive with products incorporating the Company's technology.
Current competitors or new market entrants could produce new or enhanced
products with features that render the Company's products obsolete or less
marketable. The Company's ability to compete successfully will depend on the
Company's continuing research and development of new and improved products and
on the Company's ability to adapt to technological changes and advances in the
sports equipment and footwear industry. There can be no assurance that the
Company will be able to compete successfully, that competitors will not develop
technologies or products that render the Company's products obsolete or less
marketable or that the Company will be able to successfully enhance its products
or develop new products.
Government Regulation
- ---------------------
The Company's products do not utilize chemicals that are classified
under applicable laws as hazardous chemicals or substances. However, the
production of the Company's products does not currently produce toxic waste or
by-products, and none are expected to be generated by potential new products.
The Company does not intend to maintain insurance to compensate it for any
liabilities it may incur if it were to violate environmental protection laws or
regulations. However, there can be no assurance that the Company will not incur
environmental liability arising out of the use of hazardous substances. To date,
the Company does not believe that it has incurred any such liability in their
operations. The use of certain chemicals and other substances is subject to
extensive and frequently changing federal, state, provincial and local laws and
substantial regulation under these laws by governmental agencies, including the
United States Environmental Protection Agency, the Occupational Health and
Safety Administration, various state agencies and county and local authorities
acting in conjunction with federal and state authorities. Among other things,
these regulatory bodies impose requirements to control air, soil and water
pollution, to protect against occupational exposure to chemicals, including
health and safety risks, and to require notification or reporting of the
storage, use and release of certain hazardous chemicals and substances. The
Company believes that it is in substantial compliance with all material laws and
regulations governing its material business operations and has obtained all
material licenses and permits required for the operation of its business. There
can be no assurance that the Company in the future will be able to comply with,
or continue to comply with, current or future government regulations in every
jurisdiction in which it will conduct its material business operations without
substantial cost or interruption of its operations, or that any present or
future federal, state, provincial or local environmental protection regulations
may not restrict the Company's present and possible future activities. In the
event that the Company is unable to comply with such requirements, the
- 8 -
<PAGE>
Company could be subject to substantial sanctions, including restrictions on its
business operations, monetary liability and criminal sanctions, any of which
could have a material adverse effect upon the Company's business.
Adequacy of Product Liability Insurance
- ---------------------------------------
The use of the Company's products entails inherent risks of adverse
effects which could expose the Company to product liability claims. Product
liability claims could have a material adverse effect on the business and
financial condition of the Company. The Company does not currently have any
product liability insurance, which means that all of the Company's assets are
subject to any product liability claim. While the Company intends to obtain and
maintain $1,000,000 in product liability insurance, there can be no assurance
that the Company will be able to maintain or obtain adequate product liability
insurance on acceptable terms or that such insurance would provide adequate
coverage against all potential claims.
Possible Inadequacy of Funds
- ----------------------------
Offering proceeds of from $502,500 to $2,025,000 will be realized. If
only the minimum Offering is sold, or if certain assumptions contained in
Management's plans for expansion prove to be incorrect, the Company may have
inadequate funds to develop its business according to its plans. Nevertheless,
the Company will have access to, and use of, all funds raised if at least
335,000 Units are sold.
No Dividends
- ------------
The Company has not paid any dividends since its inception, and the
Company does not expect to pay dividends at any time in the foreseeable future.
Control by Management and Capital West
- --------------------------------------
Upon completion of the minimum Offering, existing Management and their
affiliates (including Interchem) by virtue of their ownership or control of
2,631,174 Shares and Capital West and its affiliates by virtue of their
ownership or control of 1,258,824 Shares will control 80.5% of the voting power
of the outstanding shares of the Company's Common Stock. If the maximum number
of Units is sold, Management will control 66.5% of the voting power. See
"PRINCIPAL SHAREHOLDERS." For practical purposes, current Shareholders of the
Company will continue effectively to control all affairs and policies of the
Company after the completion of this offering.
Substantial Dilution
- --------------------
The net tangible book value of the Company's outstanding shares of
Common Stock as of December 31, 1996 was ($164,898) or ($0.04) per share. Net
tangible book value per share is equal to the Company's total tangible assets
less its total liabilities, divided by the total number of outstanding shares.
After giving effect to the sale of the minimum of 335,000, and the maximum
1,350,000, Units offered by the Company hereby at a price of $1.50 per Unit, and
the application of the net proceeds from that sale, the pro forma net tangible
book value of each of the Company's shares of Common Stock as of December 31,
1996 would have been approximately $0.12 per share (minimum) to $0.33 per share
(maximum). This represents an immediate increase in net tangible book value of
from $0.08 to $0.29
- 9 -
<PAGE>
per share to existing shareholders and an immediate dilution of from $0.88 to
$0.67 per Share to purchasers of Units in this Offering.
Limited Transferability and Liquidity
- -------------------------------------
In order to satisfy the requirements of the exemptions from
registration under the Act and applicable state securities laws, each investor
must acquire his Units, Shares and Warrants for investment purposes only and not
with a view towards distribution. Consequently, certain conditions of the Act
must be satisfied prior to any sale, transfer or other disposition of the Units,
Shares or Warrants. Some of these conditions may include a minimum holding
period, availability of certain reports, including financial statements, from
the Company, limitations on the percentage of Units, Shares or Warrants sold and
the manner in which they are sold. The Company will be under no obligation to
ensure that any of these conditions can be met. The Company can prohibit any
sale, transfer or disposition unless it receives an opinion of counsel provided
at the holder's expense, in form satisfactory to the Company stating that the
proposed sale, transfer or other disposition will not result in a violation of
applicable federal and state securities laws and regulations. No public market
exists for the Units, Shares or Warrants and no market is expected to develop.
Consequently, owners of the Units, Shares and Warrants may have to hold their
investment indefinitely and may not be able to liquidate their investments in
the Company or pledge them as collateral for a loan in the event of an
emergency.
Compliance with Securities Laws
- -------------------------------
The Units are being offered hereunder in reliance upon exemptions from
the registration requirements of the Act, the Arizona Securities Act and other
applicable state securities laws. If the sale of Units, Shares or Warrants fails
to qualify for these exemptions, purchasers may seek rescission of their
purchases of such securities. If a number of purchasers were to obtain
rescission, the Company would face significant financial demands which could
adversely affect the Company as a whole, as well as any nonrescinding
purchasers.
Offering Price
- --------------
The price of the Units offered hereby has been determined by the
Company, considering such matters as the state of development of the business of
the Company and the general condition of the cleaning products industry. The
offering price and return thereon bear little relationship to the assets, net
worth, or any other objective criteria of value applicable to the Company.
No Underwriter; Escrow
- ----------------------
The Units are offered on a "best efforts, 335,000 Units or none" basis
by officers of the Company with the financial advice of Capital West. However,
the Company can give no assurance that any Units will be sold. Subscription
proceeds will be deposited into the Escrow Account until the minimum offering
proceeds of $502,500 have been received.
Long-Term Nature of Investment
- ------------------------------
An investment in the Units will be long-term and non-liquid. As
discussed above, the offer and sale of the Units will not be registered under
the Act or any foreign or state securities laws by reason of exemptions from
such registration which depends in part on the investment intent of the
investors.
- 10 -
<PAGE>
Prospective investors will be required to represent in writing that they are
purchasing the Units for their own account for long-term investment and not with
a view toward resale or distribution. Accordingly, purchasers of Units must be
willing and able to bear the economic risk of their investment for an indefinite
period of time. In addition, no market currently exists for the Units, the
Shares or the Warrants, it is unlikely that a market will exist at any time in
the foreseeable future, and such securities may be transferred only if certain
requirements are satisfied, none of which can be assured. It is likely that
investors will not be able to liquidate their investment in the event of an
emergency.
Limitations on Registration Rights
- ----------------------------------
Although purchasers of Units receive the right to "piggyback" the
registration of 25% of the Shares they purchase in the Offering with one Company
registration of its equity securities, there is no assurance that the Company
will register equity securities. See "DESCRIPTION OF UNITS AND REGISTRATION
RIGHTS." The foregoing "piggyback" registration rights are also subject to
certain conditions contained the Subscription Agreement included herein at page
S-1. Those conditions include, in the event of an underwritten registration of
the Company's equity securities, the right of the underwriter to determine that
the distribution all or a specified portion of such shares concurrently with the
securities being distributed by such underwriter for the Company will materially
and adversely affect the distribution of such securities by such underwriter, in
which case the underwriter may exclude such shares from registration. Such
exclusion does not prejudice a purchaser's right, however, to cause such shares
to be registered in future Company registrations as long as such registrations
take place within five years, the term of such registration rights.
No Projections
- --------------
The Company has not prepared any projections for investors regarding
the Company's anticipated financial performance. Because no audited or reviewed
financial statements for Interchem were ever prepared, no reliable base exists
upon which projections might be made. Accordingly, no projections must be
utilized or relied upon in any way in connection with the offer or sale of
Units. Future operating results are impossible to predict and no representation
or warranty of any kind is made by the Company or Management respecting future
operations.
- 11 -
<PAGE>
USE OF PROCEEDS
The Company seeks to raise from $500,000 to $2,025,000 from sale of the
Units. If the minimum of 335,000 Units, or the maximum of 1,350,000 Units is
sold, the Company intends to apply these proceeds substantially as set forth
herein, subject only to reallocation by Management in the best interests of the
Company.
Sources
-------
<TABLE>
<CAPTION>
Minimum Percent of Maximum Percent of
Amount Proceeds Amount Proceeds
------ -------- ------ --------
<S> <C> <C> <C> <C>
Proceeds from sale $ 502,500 100% $2,025,000 100%
of Shares
Application of Proceeds
-----------------------
Offering Expenses:
Offering Expenses (1) 40,000 7.96% 60,000 2.96%
Financial Advisory Fee
or Commissions (2) 49,647 9.88% 200,000 9.88%
Total Offering Expenses & Fees 89,647 17.84% 260,000 12.84%
--------- ------- --------- -------
Net Offering Proceeds 412,853 82.16% 1,765,000 87.16%
--------- ------ --------- ------
Marketing (including sales materials) 225,000 44.78% 680,000 33.58%
Research & Development 0 0% 185,000 9.14%
Operating Capital 187,853 37.38% 900,000 44.44%
---------- ------- ---------- -------
TOTAL APPLICATION
OF PROCEEDS $ 502,500 100.00% $2,025,000 100.00%
========== ======= ========== =======
</TABLE>
Footnotes
(1) Includes estimated filing, printing, legal, accounting, blue sky and
other fees and related expenses.
(2) A portion of this Offering is being sold by officers and directors of
the Company, who will not receive any compensation for their efforts.
No sales fees or commissions will be paid to such officers and
directors. Consulting fees of up to $200,000 will be paid to Capital
West for its efforts on behalf of the Company. Shares may also be sold
by brokers or dealers who are members of the NASD and who enter into a
Participating Dealer Agreement with the Company. Such brokers or
dealers may receive commissions up to ten percent (10%) of the price of
Shares sold.
- 12 -
<PAGE>
THE BUSINESS
Soy Environmental Products, Inc. (the "Company") was established to
develop and market consumer and industrial products made from soybean oil.
Products derived from soybean oil possess rather unique characteristics which
Management believes have significant value to the consumer and industrial market
segments. Soybean oil based products provide an effective alternative to
petroleum based products commonly used by consumers and industry. The Company
has acquired or developed, and is marketing, a line of environmentally friendly
products to industrial, municipal, and institutional entities. Derived from a
renewable resource - soybeans - they offer an environmentally preferred
alternative to the petroleum and chemically based products currently available.
The Company's lines meet or exceed industry standards for competing products
and, because they are non-toxic and biodegradable, have a safer environmental
impact than petro/chemical based products.
Management believes that there is an evident trend toward products that
are safer to humans as well as safe to the environment, and that there is
increasing demand for products that are non-hazardous and non-polluting. This
trend, along with the current Federal and state regulatory posture toward the
use of volatile organic compounds, has created significant opportunities for the
Company to gain market share with its SoyClean(R) line of environmentally
friendly products.
The Company's products are also available to meet the consumer demand
for products that protect the environment and offer an environmental substitute
for hazardous, toxic, non-biodegradable, or volatile products. Current
regulatory positions of federal, state and local governments regarding use of
environmentally hazardous or toxic substances are also enhancing demand for
products with non-toxic and biodegradable characteristics. Management believes
that these factors will significantly influence current and future market needs
and enable the Company to develop additional "environmentally friendly"
products.
The Company
- -----------
Soy Environmental Products, Inc. is a vertically integrated
organization with ownership in the production of the raw material to sales of
the finished products. The Company is involved in the manufacture and processing
of the soybean components of its formulations as well as the marketing and sales
of the SoyClean(R) family of environmentally friendly products. The Company is a
part owner of a 6,000 square-foot methyl ester facility located in Ralston,
Iowa. The plant, built in 1996, utilizes modern computer technology in the
processing, packaging and production of soybean-based products. Management
believes that this integration assures the Company of a steady, reliable supply
of the basic formulation ingredient for its final products.
The Plant-Soybean Processing
- ----------------------------
Interwest Cooperative, of which Company is a minority owner, owns and
operates the soybean processing plant located in Ralston, Iowa which produces
the base ingredient for the Company's products. West Central Cooperative, the
majority owner of the facility, provides all or most of the crude soybean oil
used in processing, from its facility adjacent to the methyl ester facility. The
raw soybean oil is treated with methanol and sodium hydroxide. Mixing and
processing separates heavy glycine from a methyl ester layer. Washing that
methyl ester three or four times pulls out excess caustic materials and ethanol.
The waste water is then separated, and a vacuum drying process pulls out excess
moisture. The resultant soybean methyl ester is a natural solvent which is the
primary ingredient for the Company's
- 13 -
<PAGE>
cleaning products, and possesses characteristics much like diesel fuel. The
Company then formulates the SoyClean(R) soybean oil ester with various additives
to create products having cleaning characteristics, fragrances, flashpoints and
other properties as desired. Specific formulations are trade secrets of the
Company.
The Products
- ------------
General. The Company's products are formulated from soybean oil, which
contains enzymes having similar emulsive qualities to petroleum. The Company's
non-toxic and biodegradable products have cleaning qualities which are as
effective as petroleum-based toxic cleaning solvents, and are priced
competitively. In addition to being environmentally friendly, SoyClean(R)
products are child-safe (they are harmless if ingested) and have a higher flash
point (are less volatile) than petroleum-based products.
The Company currently has four products in its commercial product line.
The commercial line is being used by municipalities, institutions, and
manufacturers. These products meet or exceed the competitive standards for
similar products in addition to offering ancillary benefits, primarily due to
the fact that the Company's products are not toxic and are biodegradable.
Management believes that its commercial line of cleaning products
offers customers a safer work environment for their personnel, and that
SoyClean(R) products give the potential for fewer work related illnesses,
injuries, and workers compensation claims than commonly used petroleum-based
products which are toxic. The Company has received testimonials from users who
indicate that they do not experience skin reactions on their hands when using
SoyClean(R) products.
Customers have also cited as a benefit the reduction of administrative
time devoted to documenting and maintaining records for the use of hazardous
solvents and chemicals. The reduction of volatile compounds in manufacturing
plants by replacing petroleum-based solvents with the Company's non-toxic
soybean-based products reduces the amount of emissions that are monitored and
reported to the EPA or other regulatory agencies. In some instances, use of
SoyClean(R) products enables industrial users to cease reporting and eliminates
payment of taxes or fines levied on industrial polluters. Use of the Company's
biodegradable soy-based products further reduces concerns about spills and clean
up of hazardous substances.
Commercial. The Company's commercial line consists of the following
products:
SoyClean(R) Graffiti Remover
SoyRelease3(TM)
SoyFormula3(TM)
Naturen(R)
Each of these products offers cleaning performance characteristics which exceed
those of competitive products while meeting or exceeding industry performance
standards. Each of these products is biodegradable and does not produce volatile
emissions that could harm the ozone. The products do not produce harmful or
explosive fumes or vapors, which results in safer operating conditions for
industrial users.
SoyClean(R) Graffiti Remover is formulated for use by municipalities,
institutions, school districts, utility companies, and law enforcement
organizations. It effectively removes graffiti from a wide range
- 14 -
<PAGE>
of surfaces and is available in five package sizes. It can replace existing
petroleum and hydrocarbon- based graffiti cleaners and affords users superior
worker and environmental safety characteristics.
SoyRelease3(TM) is a product designed for state, local, and federal
departments of transportation and the paving and general contracting industries.
It prevents asphalt from adhering to truck beds, paving equipment, and other
metal surfaces. SoyRelease3(TM) is also effective at removing asphalt and tar
from vehicles and other surfaces. SoyRelease3(TM) is a biodegradable substitute
for diesel and other petroleum- based products used for cleaning at construction
sites.
SoyFormula3(TM) is a replacement for hazardous mineral spirits or
petroleum-based solvents used in the industrial and commercial manufacturing
market segments. It can be used as an industrial cleaner or parts washer and can
help industrial users comply with environmental, health and safety regulations.
Naturen(R) is a cleaning solvent formulated for printing press blanket
washing as well as cleaning other press components. It has been in use in Europe
since 1991 and meets all regulatory standards for the printing industry.
Consumer. In addition to its commercial product line, the Company is
developing products that will meet or exceed competitive standards in the retail
consumer market. These products focus on common cleaning uses found throughout
the home. The products are or will be biodegradable and non-toxic, in addition
to being effective cleaners. Generally, the Company's consumer products will be
adaptations of its existing commercial products. The Company intends to develop
a full consumer line of 24 products, primarily packaged in 11-ounce spray
bottles, 22-ounce bottles, and one gallon bulk containers.
The SoyClean(R) retail consumer line is composed of products that can
be used by the homeowner as well as industrial, commercial, and institutional
settings. Each of the Company's consumer products is biodegradable and
non-toxic. As with all of the Company's products, a soybean derivative is the
key component of the formulation. More detailed descriptions and information as
to existing consumer products are set forth in this Memorandum beginning at page
P-1.
The Company's initial SoyClean(R) retail line consists of the
following:
Driveway, Sidewalk and Patio Cleaner - This biodegradable product
cleans oil and grease spots from driveways, sidewalks, patios and other
concrete surfaces.
SoyLube(TM) Lubricant - This multi-purpose lubricant is designed for
use around the home, garage, shop, factory, or office. It is a
biodegradable, non-toxic lubricant that penetrates rust, loosens frozen
parts, and provides a light coating for lubrication of moving parts.
SoyLube(TM) also protects against corrosion.
Graffiti Remover - This biodegradable product effectively removes
graffiti from a variety of surfaces. It is effective on paints as well
as markers and has been used by numerous municipalities, schools,
utilities, and homeowners. The product is offered in three container
sizes for consumer use.
- 15 -
<PAGE>
Barbecue Grill Cleaner - Designed to attack the buildup of grease and
char on barbecue cookers and grills, this products softens and loosens
the soiled surfaces prior to rinsing.
Adhesive/Mastic Remover - Specially formulated to remove adhesive and
mastic from hard surfaces, this biodegradable product softens the
adhesive or mastic, so that cleanup with water is all that is
necessary.
Paint Stripper - A biodegradable formulation that aggressively strips
paint, varnish, and other similar finishes from a variety of surfaces.
The Company intends to add the following additional consumer products
in 1997:
Hand Cleaner - A biodegradable, waterless, hand cleaner that
effectively cleans oil, grease, grit, and grime while conditioning and
softening the skin.
Engine Degreaser - This product removes grease, oil, and dirt from
engines. It is formulated to be sprayed on, given time to work, and
hosed off.
Bug and Tar Remover - This product removes bugs, tar, road oil, and
asphalt from vehicles and other surfaces.
Gasket Remover - Designed for use by the auto mechanic, this product
helps loosen and clean gasket materials.
Car Wash - This product loosens dirt and grime from vehicles and,
because it is biodegradable, can be rinsed into the sewer, as it will
biodegrade in municipal waste treatment facilities. This product is
expected to be available in the first quarter of 1997.
Hand Soap - This natural cleaner is effective in cleaning soiled hands
while gently conditioning the skin. This product is also expected to be
available in the first quarter of 1997.
Marketing
- ---------
The Company's products are promoted as environmentally friendly
alternatives to products currently in use. Management believes that the consumer
is becoming more environmentally conscious, and expects this trend to continue
and enhance the appeal of SoyClean(R) products.
Commercial Products. The Company's commercial product line is in the
introductory/early growth stage of the product life cycle and the Company
expects demand for environmental products by industry to expand. The
characteristics and benefits of the Company's products to industry and the
environment are designed to fulfill a perceived demand for
environmentally-friendly products. The use of the Company's commercial products
provides value to the customer in ways that are difficult to quantify in
monetary terms. However, Management believes that the value of a customer of
effective products that reduce worker exposure to harmful substances, reduce
administrative overhead, and reduce ownership concern about liabilities
associated with hazardous spills, gives the Company's products a significant
advantage.
- 16 -
<PAGE>
Consumer Products. The Company's Chief Operating Officer, Sean Lee, has
an extensive background in the home center retail market segment and was
actively involved as senior management in several firms. This background will
enable the Company to directly contact key manufacturers' representatives who
Management believes will be instrumental in introducing the SoyClean(R) product
line to targeted retail segments. The Company's strategy is to utilize Mr. Lee's
knowledge of distribution channels to establish its product line in appropriate
retail outlets.
The Company plans to launch its consumer retail product line in January
1997. Initially, the Company intends to penetrate the home center market
segment. Most of the products competing with the Company's consumer products are
petro/chemical based products that have applications similar to many of the
SoyClean(R) products, but no competitive products are both non-toxic and
biodegradable. The Company believes that the experience and reputation of its
Chief Operating Officer within this market segment will eliminate many of the
obstacles to market entry by new products and new companies.
Since the Company's retail products are price competitive, its strategy
is to penetrate targeted markets by educating and informing consumers about the
non-toxic and biodegradable attributes of SoyClean(R), as well as its safety and
lower flash point. If funding permits, the Company intends to utilize a national
advertising campaign to provide exposure for SoyClean(R) products, which will
afford efficient communication of the Company's message to a large number of
consumers.
Management believes that the marketplace is now ready for a
concentrated effort to replace the prevailing toxic and non-biodegradable
products that currently dominate the market with non-toxic, biodegradable
products made from naturally derived sources. The Company recently launched its
SoyClean(R) line of products, all of which are made from American soybeans, to
meet an increasing demand for safe, environmentally friendly cleaners, solvents,
lubricants, paint strippers, etc. Virtually all competitive products contain
toxic and environmentally damaging substances. The Company's products are cost
competitive and just as effective as other brands. The significant difference is
the inherent safety of SoyClean(R) products.
The Company will not depend on public awareness and concern to continue
to emerge on its own. Management intends to engage in advertising and public
relations campaigns to educate consumers and create an awareness of the lack of
toxicity and the biodegradability of SoyClean(R) products. The Company will
market its products through traditional channels, in addition to publicizing and
educating consumers as to the benefits of SoyClean(R) products and the hazards
posed by competitive products.
In summary, the Company's marketing strategy for both its commercial
and consumer product lines is designed to increase awareness and knowledge of
the cleaning qualities of SoyClean(R) products, as well as the safety benefits
and environmental value of being non-toxic and biodegradable. The Company will
utilize contacts and experience of management to open the appropriate channels
of distribution, and use cost-effective promotion techniques.
Distributors. The Company intends to establish a network of established
independent distributors who will sell its SoyClean(R) products, together with
other products normally marketed by them. Management believes that it can
establish an effective network to distribute its products in appropriate
markets.
Marketing Towards Women. Management believes that key customers of
SoyClean(R) products will be women and intends to inform and reach out to women.
Not only are women key purchasers of all
- 17 -
<PAGE>
household items, but the Company believes that generally women are more
environmentally conscious than men. If women are convinced that the Company's
products are effective and are also safer for the environment, Management
believes that consumers will make the switch from the more established brands.
Controversy. In its marketing, the Company intends to emphasize the
controversies that are currently arising over the use of dangerous products. The
recent controversy regarding the dangers of WD40 lubricant illustrates how
perceptions are changing.
In December, 1996, the NBC news program "Dateline" ran a report which
focused on the flash point of WD40, a product with which SoyClean(R) Penetrant
and Lubricant will directly compete. According to the report, many people have
been seriously injured by WD40 exploding.
The Company believes that a growing awareness of dangers in existing
products will help convince consumers that SoyClean(R) products will satisfy
their demand for safer, more environmentally friendly products.
Environmental Management by State Officials. The Company's advertising
and public relations campaigns will stress the difficulty of safely disposing of
toxic and non-biodegradable products. Few, if any, state established procedures
exist for safely disposing of toxic products from the home. The Company intends
to inform consumers that once one buys a toxic product, it may never disappear.
The Company intends to center all of its marketing around one simple
strategy that it believes will convince consumers to give up their current
brands. The price is right, the products biodegradable, and the products are
non-toxic. There is no reason to stay with a product that does not meet all of
those specifications.
Introduction of Products by Market. SoyClean(R) products will be
provided to the markets for which they are best suited. For instance, the
Company intends to introduce products first to Home Centers, then Automotive,
then Food and Drug and finally Variety Discount stores. However, all products
may not need to be available to every source. For example, SoyClean(R) Penetrant
and Lubricant would be suitable for all such markets, but SoyClean(R) cleaning
fluids will not be available until distribution begins to Food and Drug stores.
Competition
- -----------
The market for environmentally friendly chemical products has only
recently developed. Management believes it is a rapidly growing segment of the
U.S. economy. Numerous companies similar to the Company have entered the market
in the last few years in anticipation of the perceived opportunities surrounding
environmentally safe products. The Company believes that its products can
compete effectively; however, many of the competitors in the market place have
significantly longer operating histories and greater financial resources than
the Company. A significant factor in the Company's retail products ability to
compete in the market will be its ability to secure "shelf space" with major
national retail outlets.
Merger and/or Acquisition Opportunities
- ---------------------------------------
- 18 -
<PAGE>
Even though mergers may be a potential path to growth and development,
the Company will seek only mergers with or acquire firms that can provide
audited financial statements, and can easily fall within the scope of the
Company's present and future growth plans. There are certain risks which may
arise from any merger situation, especially where there is an opportunity to
acquire or merge with a relative new operating entity, however all efforts will
be exercised to minimize such risks with careful examination of the merging or
to be acquired company, its audited financial statements, as well as an analysis
of the potential for success based on present and potential competition and
overall market conditions.
THE ACQUISITION
Soy Environmental Products, Inc. was formerly known as Denom
Acquisition Corp., a Delaware corporation, which was incorporated on January 10,
1996. On September 3, 1996, the Company entered into an agreement to acquire
(the "Acquisition") 100% of the issued and outstanding shares of common stock of
Delta Environmental, Inc., a Delaware corporation ("DEI"). The Acquisition was
completed on October 21, 1996, and the transaction resulted in the exchange and
issuance to: (a) the shareholders of DEI of 2,530,500 restricted Shares (56.23%
of total current outstanding Shares); and (b) new shareholders of 500,000
restricted Shares (11.11% of total amount outstanding Shares). Prior to the
Acquisition of DEI the Company had not engaged in any form of commercial
business activity and as a result had no operating history. Further, prior to
the Acquisition, neither the Company nor any of its then Officers or Directors
had any affiliation with DEI and DEI or any of its Officers, Directors or
Principal Shareholders had any affiliation with the Company. DEI was
incorporated on October 1, 1996 to engage in the development of, ownership of
interests in, and operation of biodegradable chemical facilities.
MANAGEMENT
Sean F. Lee, 56, is the Chairman of the Board of Directors and Chief Executive
Officer of the Company. Mr. Lee holds degrees from Kells College in Ireland and
Hood College in Maryland. Prior to joining the Company Mr. Lee was the Chairman
and Chief Executive Officer of several large retailing operations including the
Home Club division of Zayre, W.R. Grace, and others. He has extensive experience
in start up and initiation of many retailing endeavors.
George T. Bard, President and a Director of the Company, is a resident of
Arizona and is an attorney admitted to the bar in California. He is 67 years old
and has a bachelors degree from the University of Michigan and a law degree from
Lincoln University in San Francisco. Prior to this Company he was a Vice
President with Continental Grain, serving as chief negotiator for the world
milling group.
Gary L. Haer, 43, is a Director and Secretary of the Company, and also serves as
its Manager of Logistics and Manufacturing. Since 1993, Mr. Haer has been
accounting manager for Interchem Industries (N.A.), Inc., which developed the
Company's products. He has been involved in agribusiness since 1981 as an owner
and partner in his own vertically integrated business. Mr. Haer holds an
accounting degree from Northwest Missouri State University, and an MBA from
Baker University.
Lawrence G. Olson, 60, became a Director of the Company in December, 1996. He is
the President and owner of Olson Precast of Arizona, Inc. of Phoenix, Arizona, a
concrete production and construction company which he has been affiliated since
1973. Mr. Olson received his B.S. in civil engineering from the University of
Southern California.
- 19 -
<PAGE>
Lee E. Derr, Jr. became a Director of the Company in December 1996. He is
President of Interchem Industries (N.A.), Inc., from which the Company purchased
the rights to its products. As President of Interchem since 1985, he has
directed all aspects of that company's operations. Mr. Derr is 48 years old and
is a certified public accountant with a bachelor's degree in finance from the
University of Missouri and post-graduate work at Wichita State University.
All Company Directors were elected upon the closing of the Acquisition
of DEI on October 21, 1996, and will remain in office until the next annual
meeting of the shareholders and until their successors have been duly elected
and qualified. There are no agreements with respect to the election of
Directors. The Company has not compensated its Directors for service on the
Board of Directors, or any committee thereof, or reimbursed for expenses
incurred for attendance at meetings of the Board of Directors and/or any
committee of the Board of Directors. Officers are appointed annually by the
Board of Directors, and each Executive Officer of the Company serves at the
discretion of the Board of Directors. The Company does not have any standing
committees.
Mr. Lee E. Derr, a Director of the Company, is an officer and director
of Interchem Environmental, Inc. which is publicly-held and from which the
Company acquired rights to its products. None of the other Officers and/or
Directors of the Company are officers or directors of any other publicly traded
corporation, nor have any of the Officers, Directors, Affiliates or Promoters of
the Company filed any bankruptcy petition, been convicted of or been the subject
of any criminal proceedings, or the subject of any order, judgment, or decree
involving the violation of any state or federal securities laws within the past
five years.
AFFILIATES
Interchem Environmental, Inc. is a public company which sold rights to
the Company's products to the Company. Interchem also provides consulting
services to the Company through Lee Derr. Interchem also owns a portion of the
facility (the "Production Facility") which manufactures and processes soybeans.
Interwest Cooperative is an Iowa cooperative which provides
substantially all of the Company's supply of soybeans and other raw materials.
Interwest Cooperative also owns a majority of Interwest, L.C., an Iowa limited
liability company, which owns the Production Facility.
MANAGEMENT COMPENSATION
The Company has agreed to pay Sean Lee an initial base salary of
$100,000 per year, which will increase to $150,000 per year, plus 0.9% of gross
revenues when the Company's revenues equal $5,000,000. Each of the Company's
employees will be eligible to receive bonuses if and when they are awarded by
the Board of Directors. All employees are covered by comprehensive health
insurance. No directors who are members of Management will receive any
directors' fees. Each director will be entitled to reimbursement of expenses
incurred while conducting Company business. Each director may also be a
shareholder in the Company and as such will share in the profits of the Company
when and if dividends are paid. In addition to the Company's employees,
Interchem is providing consulting services to the Company.
- 20 -
<PAGE>
Consulting Agreement
- --------------------
The Company and Interchem Industries (N.A.), Inc. ("Interchem") have
entered into a Consultancy Agreement dated December, 1996 whereby Interchem
agreed to provide the Company with such consulting and advisory services as the
Company requires from time to time, including services in administrative,
management, marketing and finance to be provided by Lee Derr. The Company is
obligated to pay Interchem $8,333.33 each month for its two-year term which
commences January 1, 1997.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Delaware law and the Company's Certificate of
Incorporation, no director of the Company is personally liable to the Company or
to the stockholders for monetary damages for any breach of fiduciary duty as a
director of the Company. Nevertheless, a director is liable to the extent
provided by applicable law (i) for the breach of his or her duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporations Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
As permitted by Delaware law, the Company has the power to indemnify
individuals made parties to a proceeding because they are or were a director,
against liability incurred in the proceeding, if such individuals acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interest of the Company and, in a criminal proceeding, if they had no reasonable
cause to believe their conduct was unlawful. Indemnification is limited to
reasonable expenses incurred in connection with the defense of any proceeding to
which such person is a party because he or she is or was a director or officer
of the Company, against reasonable expenses incurred by such person in
connection with a proceeding or claim with respect to which such person has been
successful. The Company's Certificate of Incorporation empowers the Board of
Directors to indemnify its officers, directors, agents or employees against any
loss or damage sustained when acting in good faith in the performance of their
corporate duties.
The Company may pay for or reimburse expenses incurred by a director,
officer, employee, fiduciary, or agent of the Company who is a party to a
proceeding in advance of final disposition of the proceeding provided the
individual furnishes the Company with written affirmation that such person's
conduct was in good faith and in a manner reasonably believed to be in, or not
opposed to, the best interest of the Company, and to undertake to repay the
advance if it is ultimately determined that such person did not meet such
standard of conduct.
- 21 -
<PAGE>
CAPITALIZATION
(PRO-FORMA, UNAUDITED)
The following table sets forth the capitalization of the consolidated
Company as of December 31, 1996 and as of completion of the Offering, as
adjusted to reflect the sale of all of the Shares offered by the Company. The
table set forth below is based upon the unaudited consolidated financial
statements of the Company.
<TABLE>
<CAPTION>
Company Company
Outstanding at Outstanding
December 31, 1996 After Offering
----------------- --------------
(unaudited) Minimum Maximum
------- -------
<S> <C> <C> <C>
COMMON SHARES, $0.01 par value:
authorized 20,000,000 shares;
issued and outstanding: 4,500 4,835 5,850
4,500,000 Shares; to be outstanding:
4,835,000 Shares (Minimum);
5,850,000 Shares (Maximum).
ADDITIONAL PAID-IN CAPITAL $ 416,518 $ 829,371 $2,181,518
SHARE CAPITAL $ 421,018 $ 834,206 $2,187,368
DEFICIT (79,893) (79,893) (79,893)
CURRENT LIABILITIES 28,404 28,404 28,404
LONG-TERM LIABILITIES - - -
------------ ------------ -------
TOTAL STOCKHOLDERS'
EQUITY AND LIABILITIES $369,529 $782,717 $2,135,879
</TABLE>
DILUTION
The net pro forma tangible book value of the outstanding shares of
Common Stock of the Company as of December 31, 1996 was ($164,898) or $0.04 per
share. Net tangible book value per share of Common Stock is equal to the
Company's total tangible assets less its total liabilities, divided by the total
number of outstanding shares of Common Stock. After giving effect to the sale of
the 335,000 Units (minimum), and all 1,350,000 Units (maximum) offered by the
Company hereby at a price of $1.50 per Unit, and the application of the net
proceeds from that sale, the pro forma net tangible book value of the Company's
Common Stock as of December 31, 1996 would have been approximately $577,751 or
$0.12 per share (minimum) to $1,929,898, or $0.33 (maximum). This represents an
immediate increase in net tangible book value of from $0.08 to $0.29 per share
to existing shareholders and an immediate dilution of from $0.88 to $0.67 per
Share to purchasers of Units in this Offering.
- 22 -
<PAGE>
PRINCIPAL SHAREHOLDERS
The table which follows contains certain information as of December 31,
1996 relating to the Company as to the number of shares of Common Stock
beneficially owned by (i) each person known by the Company to own beneficially
more than 5% of the Company's Common Stock, (ii) each person who is a Director
of the Company and (iii) all persons as a group who are Directors and Officers
of the Company, and as to the percentage of the outstanding shares held by them
on such dates and as adjusted to give effect to this Offering, based upon
4,500,000 shares of Common Stock being issued and outstanding on December 31,
1996.
<TABLE>
<CAPTION>
Current After Offering
------- --------------
Name and Address Shares Percentage (Minimum) (Maximum)
- ---------------- ------ ---------- Percentage Percentage
---------- ----------
<S> <C> <C> <C> <C>
VEXTERGLEN LIMITED(1) 1,431,174 31.80% 29.60% 24.46%
Bank of Ireland (IOM) Limited
16 St. George Street
Douglas
Isle of Man 1M1 1PL
Capital West Investments 960,762 21.35% 19.87% 16.42%
Holding Company, Inc., Suite 510
2525 East Camelback Road
Phoenix, Arizona 85016
Interchem Environmental, Inc. (2) 500,000 11.11% 10.34% 8.55%
9135 Barton Street
Overland Park, Kansas 66214
Gary L. Haer 200,000 4.44% 4.14% 3.42%
9135 Barton Street
Overland Park, Kansas 66214
Lawrence L. Kohler (3) 149,031 3.31% 3.08% 2.55%
Suite 510
2525 East Camelback Road
Phoenix, Arizona 85016
Milton R. Barnes 149,031 3.31% 3.08% 2.55%
Suite 510
2525 East Camelback Road
Phoenix, Arizona 85016
Sean F. Lee (4) 500,000 11.11% 10.34% 8.55%
7113 West Sack Drive
Glendale, Arizona 85308
</TABLE>
- 23 -
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
George T. Bard 0 0.0% 0% 0%
8347 East Las Estancias St.
Scottsdale, Arizona 85250
Lawrence G. Olson 0 0.0% 0% 0%
214 West Vista Avenue
Phoenix, Arizona 85021
Lee E. Derr (2) 0 0.0% 0% 0%
9135 Barton Street
Overland Park, Kansas 66214
All Directors and Executive (5) 700,000 15.56% 14.48% 11.97%
Officers as a Group (5 Persons)
</TABLE>
Notes: Unless otherwise indicated in the footnotes below, the Company has been
advised that each person above has sole voting power over the shares indicated.
Note 1: Vexterglen Limited is an Isle of Man corporation, and the beneficial
ownership of its shares has not been disclosed. Shares now owned by Vexterglen
Limited were formerly held by Trxian Limited, a non-U.S. corporation, of which
Lee E. Derr was an officer. Mr. Derr disclaims any beneficial ownership or
control of Vexterglen Limited, or knowledge of the equity ownership of that
company.
Note 2: Mr. Lee E. Derr, a Director of and Consultant to the Company, is an
officer and director of Interchem Environmental, Inc. a public company with over
3000 stockholders. Mr. Derr does not own any shares of Interchem Environmental,
Inc. and therefore disclaims any beneficial interest in the Shares of the
Company Common Stock owned by Interchem. Mr. Derr was also the incorporator of
Delta Environmental, Inc. ("DEI") which was a part of the Acquisition. Mr. Derr
disclaims ownership of any shares of DEI or the Company.
Note 3: Lawrence L. Kohler is the President and majority shareholder of Capital
West Investment Holding Company, Inc., the parent company of Capital West
Investment Group, Inc. and as such has a beneficial interest the Capital West
shares of Company Common Stock.
Note 4: The shares shown as being beneficially owned by Mr. Sean Lee are share
options pursuant to Mr. Lee's employment contract with the Company. In the event
Mr. Lee exercises all of his options the Company would have 5,000,000 shares
issued and outstanding. The 500,000 shares then owned by Mr. Lee would represent
ten percent (10%) of the Company's issued and outstanding shares of Common
Stock.
Note 5: The number of shares shown includes the 500,000 shares under option to
Mr. Sean Lee, an Officer and Director of the Company.
LITIGATION
The Company is not presently a party to any litigation, nor to the
knowledge of management is any litigation threatened against the Company which
may materially affect the business of the Company or its assets.
- 24 -
<PAGE>
DESCRIPTION OF UNITS AND REGISTRATION RIGHTS
The Units offered hereby are 1,350,000 Shares of Common Stock, $0.01
par value and one Warrant to acquire one share of Common Stock. The Company's
authorized capital consists of 20,000,000 shares of Common Stock, $0.01 par
value, of which 4,500,000 Shares are currently issued and outstanding. Upon
completion of this Offering, between 5,002,500 and 6,525,000 Shares will be
issued and outstanding.
The Shares are equal in all respects, and upon completion of the
Offering, the Common Stock will comprise the only class of capital shares which
the Company will have issued and outstanding.
Each Common Shareholder is entitled to one vote for each share held on
each matter submitted to a vote of the Shareholders. Shares do not have
cumulative voting rights with respect to the election of directors or otherwise.
Shares are not redeemable and do not have conversion rights. The Shares
currently outstanding are, and the Shares to be issued upon completion of this
Offering will be, fully paid and nonassessable.
In the event of the dissolution, liquidation or winding up of the
Company, the assets then legally available for distribution to the holders of
the Company's Shares will be distributed ratably among such holders in
proportion to their shareholdings.
Holders of Shares are entitled to dividends when, as and if declared by
the Board of Directors out of funds legally available therefor. The Company has
never paid any such dividends. Future dividend policy is subject to the
discretion of the Board of Directors and will depend upon a number of factors,
including among other things, the capital requirements and the financial
condition of the Company. The Company has no present plans to pay dividends in
the foreseeable future.
Warrants
- --------
Each Unit includes one Warrant to acquire one Share of Common Stock at
a price of $1.80 per Share. Warrants may be exercised at any time prior to a
date three years after their issuance.
Registration Rights
- -------------------
If, at any time within three (3) years from the date of purchase, the
Company proposes to register any of its equity securities under the Act on a
form and in a manner which would permit registration of the Shares purchased in
this offering for sale to the public under the Act, the Company will use its
best efforts to effect the registration under the Act, to the extent requisite
to permit the disposition of the Shares so to be registered, of those Shares
which the Company is requested to register by a purchaser of the Shares (a
"Purchaser") up to a total of twenty-five percent (25%) of the Shares which were
purchased by Purchaser in this offering (the "Piggyback Registration Rights").
The Piggyback Registration Rights are limited to two (2) such
registrations by the Company. The Company may elect to withdraw its registration
of equity securities without prejudice, however, to the rights of a Purchaser to
request registration in a subsequent such registration. If the proposed
registration involves an underwritten offering of the securities, under certain
conditions the underwriter can cause all or a portion of the Shares which the
Purchaser wishes to register in such registration to be excluded from
- 25 -
<PAGE>
the registration. Purchaser's registration rights do not apply to registrations
effected by the Company in connection with mergers, acquisitions, exchange
offers, and certain other situations described in the Subscription Agreement.
The Company will pay most of the expenses of such registrations but it will not
pay underwriting discounts and commissions.
Additional details regarding the registration procedures, notices,
notices of election to register Shares, underwriting terms, restrictions on
sales of Shares, preparation of the registration statement and investigation of
information regarding the Company, indemnifications of Purchaser and by
Purchaser, and the like are set out in the Subscription Agreement, and should be
read and understood by Purchaser, preferably with the advice of counsel, prior
to entering into the Subscription Agreement and purchasing the Shares.
Purchaser's Piggyback Registration Rights summarized in this section are
modified in their entirety by and subject to the terms contained in the
Subscription Agreement. See "Exhibit S-1."
Transfer Agent and Registrar Agent
- ----------------------------------
OTR, Inc., 1130 South West Morrison, Suite 250, Portland, Oregon 97205
will act as Transfer Agent and Registrar for the Company's Units, Shares of
Common Stock, and Warrants.
PLAN OF PLACEMENT
The Units are offered directly by officers and directors of the Company
on the terms and conditions set forth in this Memorandum. Units may also be
offered by NASD brokers and dealers. The Company offers the Units on a "best
efforts, 335,000 Units or more" basis with respect to the minimum Offering and
on a "best efforts" basis with respect to the remaining Units offered. The
Company will use its best efforts to sell the Units to investors. There can be
no assurance that all or any of the Units offered will be sold.
Escrow Account Arrangement
- --------------------------
Commencing on the date of this Memorandum until the Company has
received subscriptions for the purchase of 335,000 Units totaling $502,500 (the
"Closing"), all funds received by the Company in full payment of subscriptions
for Shares will be deposited in an Escrow Account established with Republic
National Bank, Phoenix, Arizona (the "Escrow Account").
If at least 335,000 Units totaling $502,500 has not been subscribed for
on or before March 31, 1997, subject to the right of the Company to extend the
Offering for an additional ninety (90) days, then the Company will cancel all
existing subscriptions and all funds paid on account of such subscriptions will
be released from the Escrow Account and returned promptly to each subscriber,
with interest. Any extension of the termination date of the Offering will be
without notice to subscribers or offerees. After the Closing, the Company will
continue the Offering until all 1,350,000 Units are sold, or until the Company
terminates the Offering. After the Closing, all subscription funds will be
delivered directly to the Company, and be available for its use.
Subscriptions for Units are subject to rejection by the Company at any
time prior to the earlier of acceptance or the end of the Offering period.
- 26 -
<PAGE>
How to Subscribe for Units
- --------------------------
A Purchaser of Units must complete, date, execute, and deliver to the
Company the following documents:
1. Two fully executed Subscription Agreements;
2. Check payable to "Republic National Bank - Soy Impound
Account" in the amount of $1.50 per Unit for each Unit
purchased as called for in the Subscription Agreement (minimum
purchase of 5,000 Shares, or $7,500).
Purchasers of Units will receive an Investor Subscription Package
containing two copies of the Subscription Agreement.
Subscribers may not withdraw subscriptions (i) deposited to the Escrow
Account prior to the Closing (until March 31, 1997, subject to the right of the
Company to extend the Offering for an additional ninety days), or (ii) tendered
to the Company after the Closing.
LEGAL MATTERS
Certain matters in connection with the Shares being offered hereby are
being passed upon for the Company by Titus, Brueckner & Berry, P.C., Scottsdale,
Arizona.
EXPERTS
The Audited Financial Statements for the Company from the date of
inception to September 30, 1996 have been examined to the extent indicated in
their reports by Rotenberg & Company, LLP, independent certified public
accountants. Also included are Audited Financial Statements for Delta
Environmental, Inc. from the date of inception to September 30, 1996, examined
to the extent indicated in their reports by Semple & Cooper PLC, independent
certified public accountants. In addition, Compiled (Unaudited) Balance Sheets
and Income Statements of the combined Company for the three month period ending
December 31, 1996 have been prepared by Semple & Cooper PLC, independent
certified public accountants. All Financial Statements have been prepared in
accordance with generally accepted accounting principals.
ADDITIONAL INFORMATION
Each prospective investor may ask questions and receive answers
concerning the terms and conditions of this Offering and obtain any additional
information which the Company possesses, or can acquire without unreasonable
effort or expense, to verify the accuracy of the information provided in this
Memorandum. The principal executive offices of the Company are located at 9135
Barton Street, Overland Park, Kansas, and its telephone number is (913)
599-0800. Capital West Investment Group, Inc., which is acting as a consultant
to the Company for this offering, is located at 2525 East Camelback Road, Suite
510, Phoenix, Arizona 85016, and Capital West's telephone number is (602)
954-7711. Further information may be obtained from the Company or from Capital
West. In addition, Mr. Sean F. Lee, Chief Executive Officer of the Company, will
make himself available to respond to questions or to provide further
information. He may be reached at 8855 North Black Canyon Hwy., Suite 200,
Phoenix, Arizona 85021 by telephone at (602) 997-1990.
- 27 -