UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement Under the Securities Act of 1933
(Amendment No.____)
Southern Ventures, Inc.
(Name of small business issuer in its charter)
Nevada 1883 63-1185800
State or jurisdiction of (Primary Standard (I.R.S.Employer
incorporation or organization Industrial Identification No.)
Classification Code Number)
15000 Highway 11 North, Cottondale, Alabama 35453, Phone: (205) 556-3535
(Address and telephone number of principle executive offices)
15000 Highway 11 North, Cottondale, Alabama 35453, Phone: (205) 556-3535
(Address of principal place of business or intended principal place of business)
Donald R. Karr, 1188 West Bonanza Dr., Carson City, Nevada 89706,
Phone; (702) 887-1585
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
of the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. [ ]
Calculation of Registration Fee:
Title of Each Dollar Amount Proposed Maximum Proposed Maximum Amount of
Class of to be Offering Price Aggregate Registration
Securities to Registered per Unit Offering Price Fee
be Registered
Common Shares $5,000,000 $5.00 $5,000,000 $1,515.15
Potential persons who are to respond to the collection of information contained
in this form are not required to respond unless the form displays a currently
valid OMB control number.
Item 1. Front of Registration Statement and Outside Front Cover of Prospectus
This prospectus constitutes a public offering of these securities only in those
jurisdictions where they may be lawfully offered for sale, and therein only by
persons permitted to sell such securities. These securities have not been
approved or disapproved by the Securities and Exchange Commission or any state
Securities and Exchange Commission nor has the Securities and Exchange
Commission or any state Securities and Exchange Commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
Initial Public Offering
December 18, 1997
Southern Ventures, Inc.
1,000,000 Shares
PRICE: $5.00 Per Share
Southern Ventures, Inc. (the "Company") hereby offers for sale 1,000,000 shares
at a price of $5.00 per share, the "Offering." Prior to this offering, there
has been no public market for the common stock of the Company, the "Common
Shares." There is no minimum number of shares a subscriber is required to
purchase in order to subscribe to the offering hereby. The offering price for
the Common Shares has been determined arbitrarily by the Company. See "Plan of
Distribution."
There are no underwriters involved in this offering. The Common Shares will be
sold by the Company on a "best efforts" basis through one or more officers and
directors of the Company who will not receive compensation in connection with
any offers or sales of the Common Shares. The Company may also retain licensed
broker-dealers ("Agents") to sell the Common Shares on a "best efforts" basis.
See "Plan of Distribution." The Company may terminate this offering at any
time prior to the sale of all 1,000,000 shares of Common Shares offered hereby.
An agreement to purchase the Common Shares offered hereby (the "Subscription
Agreement") accompanies this Prospectus. Subject to availability and the
Company's right to reject subscriptions, in whole or in part, for any reason,
shares of common stock may be subscribed for by completing, executing and
returning the Subscription Agreement, together with payment for all shares
subscribed for, to Southern Ventures, Inc. in the manner described under "Plan
of Distribution" herein. In the Subscription Agreement, each subscriber
represents and warrants to the Company that the subscriber (i) has received
this Prospectus and in making a subscription is only relying on the
representations set forth in this Prospectus and (ii) has indicated his or her
true state of legal residence. A subscriber does not waive any rights under
the federal securities laws by executing the Subscription Agreement. See
"Plan of Distribution" for additional information regarding the offering and
the procedures for subscribing for shares of common stock offered hereby.
Underwriting
Price to the Discounts and Proceeds to the
Shares Public Commissions (1) Issuer (2)
Per Unit 1 $5.00 $0.50 $4.50
Total 1,000,000 $5,000,000 $500,000 $4,500,000
Notes:
(1) The Common Stock offered hereby is being sold directly by the Company on a
"best efforts" basis. However if the Company retains Agents to sell the
Common Stock offered hereby the Company will pay such Agents a selling
commission of up to 10% of the gross offering proceeds attributable to
Common Stock sold by such Agents. Such potential payments to Agents are
reflected in this table and are otherwise reflected in this Prospectus.
See "Plan of Distribution."
(2) Before deducting expenses of this issue estimated at $350,000, which will
be paid from the proceeds of this offering. See "Plan of Distribution."
Item 2. Inside Front and Outside Back Cover Pages of Prospectus
INVESTMENT IN THE SECURITIES OFFERED BY THIS PROSPECTUS IS HIGHLY SPECULATIVE
DUE TO THE NATURE OF THE CORPORATION'S BUSINESS AND ITS PRESENT STAGE OF
DEVELOPMENT. The Corporation has limited operating history and was recently
incorporated to participate in the business of project acquisition and
development. Subscribers must rely upon the ability, expertise, judgment,
discretion, integrity and good faith of the management of the Corporation and
those who are not prepared to do so should not invest. The Corporation
anticipates that it will incur operating losses in the near term. See "Risk
Factors."
After giving effect to this issue, the price of each Common Share offered
hereunder exceeds the net tangible book value per common share at December 1,
1997 by $4.48, representing a dilution of 89.6%. See "Dilution."
Subscriptions for the Common Shares will be received subject to rejection or
allotment in whole or in part, and the Corporation reserves the right to close
the subscription books at any time without notice. It is expected that
certificates for the Common Shares will be available for delivery on the
closing of this offering.
TABLE OF CONTENTS
Page
Address and Telephone Number of Principal Executive Offices 3
PROSPECTUS SUMMARY 3
BUSINESS OF THE COMPANY 4
Elmore Sand & Gravel, Inc. 6
Riverside Grain Products, Inc. 10
Riverside Carbon Products, Inc. 18
Other Projects Under Development 22
Business Development 23
RISK FACTORS 24
USE OF PROCEEDS 27
DETERMINATION OF THE OFFERRING PRICE 28
DILUTION 28
SELLING SECURITY HOLDERS 29
PLAN OF DISTRIBUTION 29
LEGAL PROCEEDINGS 30
MANAGEMENT 31
PRINCIPAL SHAREHOLDERS 33
DESCRIPTION OF SECURITIES 34
CAPITALIZATION 34
INTEREST OF MANAGEMENT IN MATERIAL CONTRACTS 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 35
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 37
EXECUTIVE COMPENSATION 38
AUDITED FINANCIAL STATEMENTS 39
MANAGEMENT PREPARED SIX MONTHS FINANCIAL STATEMENTS 46
INTEREST OF NAMED EXPERTS AND COUNCIL 51
DISCLOSURE OF COMMISSION POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 51
DESCRIPTION OF PROPERTY 52
PURCHASER'S STATUTORY RIGHTS 54
MATERIAL CONTRACTS 55
Item 3. Summary Information and Risk Factors
ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES
The head and principal office of the Company is located at 15000 Highway 11
North, Cottondale, Alabama 35453, phone number (205) 556-3535. The registered
office is at 1188 West Bonanza Drive, Carson City, Nevada 89706, phone number
(702) 887-1585.
PROSPECTUS SUMMARY
The following is a summary of the principal features of this Offering and is
qualified in its entirety by information appearing elsewhere in this
Prospectus. The financial statements and other data contained herein give
effect to corporate organization that occurred prior to the date of this
Prospectus and reflect an initial public offering price of $5.00 per share of
common stock.
The Offering consists of 1,000,000 Common Shares offered at a price of $5.00
per share. Subscriptions for the Common Shares will be received, subject to
rejection or allotment in whole or in part, and the Corporation reserves the
right to close the subscription books at any time without notice. It is
expected that certificates for the Common Shares will be available at closing.
More detailed information appears elsewhere in this prospectus.
OFFERING: 1,000,000 Common Shares at $5.00 per Share. See "Plan of
Distribution".
COMPANY: The principal business of the Company is to develop and
implement projects which utilize waste or other low value
resources as raw materials in the production of value added
products related to the silica, wheat and carbon industries.
The overall strategy is to modernize these industries by
integrating new technology and control over raw material
supplies.
USE OF PROCEEDS: The Company will use the net proceeds to improve cash flow by
retiring the preferred shares issued to Mr. Bobby Harvey as a
result of the Company's acquisition of Elmore Sand & Gravel,
Inc. and Tuskegee Sand & Gravel, Inc. (collectively,
"Elmore"). See "Use of Proceeds" and "Business of the
Company".
DIRECTORS AND
MANAGEMENT: The directors of the Corporation are Bobby H. Harvey
(Chairman), Chester I. Wright III, W. Benjamin Wood, David
Tucker, Elaine Knapp, David Parsons. Bobby H. Harvey serves
as CEO and President; and Elaine Knapp serves as Secretary.
The Audit committee will consist of Bobby H. Harvey, Chester
I. Wright III and W. Benjamin Wood. The officers of the
Company are Bobby Harvey (CEO/President), Chester Wright III
(Treasurer), Elaine Knapp (Secretary), David Parsons (Vice
President), Benjamin Wood (Vice President), Ross Tucker (Vice
President), and Dennis Saunders (Vice President).
RISK FACTORS: Investment in the Common Shares must be regarded as highly
speculative due to the nature of the Company's business and
its present stage of development. The Company was recently
incorporated, and has limited operational history. This
offering is suitable only for those investors who are willing
to rely on management of the Company and who can afford to
lose their entire investment. See "Management," "Business of
the Company" and "Risk Factors".
DILUTION: After giving effect to this issue, the price of each Common
Share offered hereunder exceeds the net tangible book value
per common share at December 1, 1997 by $4.48, representing a
dilution of 89.6%. See "Dilution".
RISK FACTORS
In evaluating the Company and its business, the following risk factors should
be carefully considered before investing in the Common Shares of the Company.
The Company's actual results could differ materially from those discussed in
the Prospectus. Factors that could cause or contribute to such differences
include those discussed below, as well as those discussed elsewhere herein.
Offering Price and Lack of Established Market
Prior to this offering there has been no established trading market for the
Company's common stock. The initial public offering price of the Common Shares
offered hereby has been arbitrarily determined by the Company. There is no
representation that the common stock can be resold at the offering price, and
there can be no assurance that the price at which the Common Shares will trade
in the public market after the Offering will not be lower than the initial
public offering price. Prior to this offering there has been no market for the
common stock and no market is expected to develop. The market price of the
Common Shares could be subject to significant fluctuations in response to
factors such as variations in the Company's anticipated or actual results of
operations, limited trading volume in the Common Shares, general market
conditions or the silica and charcoal briquette industries in general. See
"Determination of Offering Price."
Control by Existing Management
Upon completion of this offering and the retiring of the preferred shares and,
assuming all 1,000,000 shares offered hereunder are sold, the officers and
directors of the Company as a group will control 61.3% of the outstanding
voting stock, see "Principal Shareholders." The Chairman and CEO of the Company
Mr. Bobby Harvey and members of his immediate family will control an aggregate
of approximately 44.9%. It should be noted that Mr. Gordon Tucker is currently
the shareholder, director and sole signing officer of National Synfuels, Inc.
("NSI") which owns 21.7% of the shares of the common stock of the Company.
Upon completion of the offering, Mr. Tucker and members of his immediate family
will control an aggregate of approximately 27.2% of the outstanding shares of
the common stock of the Company, including the stock owned by NSI. Such
control, which may have the effect of delaying, deferring or preventing a
change of control of the Company, is likely to continue for the foreseeable
future and significantly diminishes control and influence which future
stockholders may have in the Company. See "Principal Shareholders." The
purchasers of common stock pursuant to this offering will individually and
collectively be minority shareholders. It should be noted that if the Company
fails to achieve listing status on an exchange by January 16, 1997, the shares
reserved for Archer Daniels Midland may be canceled and the $2,000,000 payment
made due and payable at ADM's option. See "Material Contracts." This would
change both the percentages listed above and the total debt of the Company.
The Company has not made provision in its Articles of Incorporation to be
excluded from the Nevada Combinations With Interested Stockholders Act and the
Nevada Acquisition of Controlling Interest Act. Such acts will have the effect
of delaying or making it more difficult to effect a change in control of the
Company.
The Company's Bylaws permit stockholders to take action by written consent in
lieu of a meeting so long as holders of not less than a majority of the
outstanding shares, or such greater percentage as may be required for the
action proposed to be taken, participate in such consent.
Limited Operating History
The Company started operation on January 1, 1997 and was incorporated in the
State of Nevada on February 7, 1997. Consequently, the Company's only
operating history prior to that time was the start up activities of the
promoters in negotiating agreements with Archer Daniels Midland Company and
Sawmills in B.C., and related activities with Elmore, Southern Ventures, Inc.
(Canada), Riverside Carbon Products, Inc., and Riverside Grain Products, Inc.
Contractual Arrangements and Sources of Financing
With respect to certain projects under negotiation and those to be pursued in
the future, there can be no assurance that the Company will be able to obtain
all necessary project development agreements, construction contracts, power
sales contracts, product sales contracts, licenses and permits or satisfactory
financing commitments.
Litigation
The Company is unaware of any pending (or basis for) litigation against it, its
100% owned subsidiaries, Elmore Sand & Gravel, Inc., Tuskegee Sand & Gravel,
Inc., Southern Ventures, Inc. (Canada), Riverside Carbon Products, Inc. and
Riverside Grain Products, Inc. Further, the Company is unaware of any pending
(or basis for) litigation against any company with which it is affiliated not
already made available through other means of public disclosure. However,
there can be no assurance that material litigation will not be instituted
against the Company or its subsidiaries in the future.
Changes in Tax Law
The Company, and where applicable, investors participating with it will develop
and own particular projects primarily because of the positive revenue returns
to be expected. The Company will conduct its business in a form so as to take
advantage of all available tax shelters but, to the extent that any tax
advantages to investors and the Company are affected by future changes in tax
law, including 'accelerated cost recovery' legislation, individual financing in
the future may be structured differently. Any such law and regulation change
may have a significant impact on the Company.
Conflicts
Gordon Tucker is currently the Registered Agent, shareholder, Director and sole
signing officer of National Synfuels, Inc. The Company currently licenses
technology from National Synfuels, Inc. for use in its projects, and pays a
royalty for each ton of raw material processed in accordance with the license,
see "Material Contracts." For information on the ability to control or patent
the design technology, see "Competition."
Dividends
The Company has paid no cash dividends on common stock since its inception.
The Company currently intends to retain all earnings for use in the expansion
of its business and other corporate purposes and therefore does not anticipate
paying any cash dividends on common stock in the foreseeable future. The
payment of future dividends will be at the discretion of the Board of Directors
of the Company and will depend, among other things, upon the Company's
earnings, capital requirements and financial condition. The Company has
incurred considerable debt and will require additional debt financing to
complete the development of its business. The acquisition of such debt may
require the Company to enter into covenants which may require onerous
restrictions on the Company in payment of dividends. See "Dividend Policy."
Dependence on Key Personnel
The Company is substantially dependent upon the efforts and skills of its
executive officers and management, particularly Bobby Harvey, the Company's
CEO. Some of the officers of the Company have had experience in the
development of 'waste to chemicals' projects. The officers have also had
management experience in other areas critical to the business of the Company.
The death, disability or other loss of services of executive officers in the
short term could have a materially adverse impact on the profitability and
success of the Company. See "Management."
Sufficiency of Proceeds of the Offering and Future Capital Requirements
There is no assurance that sufficient operating funds to complete the Company's
business plan will be obtained as a result of this offering or from any other
source.
The Company has incurred substantial indebtedness to finance its development
activities. As a result, the Company is subject to the risk generally
associated with debt financing, including the risk that its cash available for
debt service will be insufficient to meet required payments of principal and
interest, the risk of increased payments or negative amortization as a result
of increases in interest rates in the case of indebtedness which bears interest
at a variable rate and the risk that indebtedness requiring balloon principal
payments may not be able to be repaid or refinanced when due. Furthermore, in
the case of indebtedness secured by the Company's real property, upon a default
by the Company in its payment obligations, the property could be foreclosed
with a consequent loss of income and asset value to the Company. The Company's
indebtedness is generally fully recourse to the Company. Accordingly, in the
event of a default by the Company under its indebtedness, the lender may
proceed against all Company assets to satisfy its debt and is not limited to
the specific real property pledged as security therefor.
On a pro forma basis after giving effect to the anticipated use of net proceeds
of the Offering, total indebtedness of the Company would have been
approximately $7.4 million. There can be no assurance that the Company will
be able to repay or refinance its indebtedness (on acceptable terms or at all)
as it becomes due.
Future growth of the Company will depend on the Company's borrowing capacity
and its ability to raise capital. There can be no assurance that the Company
will continue to have access to funds sufficient to finance future growth or,
if available, that funds will be available on terms acceptable to the Company.
Competition
The processing of selected wastes into salable products has been common for
many years. Although some companies are in the process of developing
technology to process waste materials, no identifiable company known to
management has yet entered the field of total waste utilization by controlling
the largest sources of a selected waste product such as waste wood for a
specific application. Many companies with greater financial resources than
the Company have the personnel and facilities to rapidly develop in this field.
The Company does not believe that patents are available to protect all of its
processes from use by competitors. The Company has no plans to seek patent
protection for process design or technologies.
Legislative Changes
Unforeseen changes in government legislation or regulations could negatively
impact the Company's mining operations. Currently the Company is fully
licensed to conduct its mining operations in Alabama. The Company is unaware
of any pending legislation that would prevent the Company from conducting its
mining business.
Contractual Obligations
Once the charring plants are built, the Company will assume the risk of
accepting wood waste whether or not the market for char remains strong. After
the Company starts accepting wood residue, it will face the economic viability
of wood waste disposal if this raw material is not converted to char.
Regulatory Approvals
Although some environmental and construction permits have been obtained, there
is no guarantee that the Company will successfully secure future regulatory
approvals that may be required in a timely manner, or at all. Delays in
receiving or inability to obtain regulatory approvals or required permits could
adversely affect the attainment of company goals or revenue projections.
Technology
The technology to successfully convert wood waste to chars has been proven by
the Company during tests run on a pilot scale plant. However, this technology
has not been proven on a commercial scale. There are no guarantees that
product yields obtained during pilot testing will be achieved nor that
marketable chars will be produced on a commercial scale.
Dilution
Purchasers of the Common Stock offered hereby will incur an immediate and
substantial dilution in the net tangible book value of the Common Stock from
the initial public offering price. Additional dilution will occur upon the
exercise of outstanding warrants. See "Dilution."
Shares Eligible for Future Sales
Upon consummation of this offering, the Company will have outstanding
21,897,400 shares of Common Stock. The 1,000,000 shares of common stock offered
hereby will be freely transferable without restriction or further registration
under the Securities Act of 1933, as amended (the "Securities Act").
Sales of substantial amounts of Common Shares in the public market after the
Offering, or the perception that such sales could occur, could adversely affect
the market price for the Common Shares. The shares of Common Shares held by
the existing stockholders will be eligible for sale in the public market in the
quantities and manner permitted by Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"). See "Management."
Authorization of Preferred Stock
Upon completion of this Offering, the preferred shares currently issued and
outstanding will be retired, giving the Board of Directors the authority to
issue up to 10,000,000 shares of preferred stock and to fix the rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of
the holders of the Common Shares will be subject to, and may be adversely
affected by, the rights of the holders of any preferred stock that may be
issued in the future. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, adversely affect the rights of holders of
Common Shares and under certain circumstances make it more difficult for a
third party to gain control of the Company. No shares of preferred stock will
be outstanding upon completion of the Offering, and the Company has no current
plans to issue any shares of preferred stock. See "Description of Securities."
Item 4. Use of Proceeds
The net proceeds will be used by the Corporation to improve cash flow by
retiring the preferred shares issued to Mr. Bobby Harvey as a result of the
Company's acquisition of Elmore Sand & Gravel, Inc. and Tuskegee Sand & Gravel,
Inc.; to retire part of the Company's currently outstanding debt to
shareholders; and to provide operating capital required to continue the
development of the other projects of the Company. See "Business of the
Company."
The Common Shares offered hereby is being sold on a "best efforts" basis and
there can therefore be no assurance that the Company will receive the estimated
$5.0 million in net proceeds anticipated from this offering. If all of the
Common Shares offered hereby is not sold, then the Company will be unable to
fund all the intended uses described herein for the net proceeds anticipated
from this offering without obtaining funds from alternative sources or using
working capital generated by the Company. Such alternative sources or working
capital may be unavailable to the Company. To the extent that the Company
receives less than the maximum $5.0 million in estimated net proceeds (after
the payment of all expenses related to the offering hereby), the Company will
use any net proceeds to retire the preferred shares.
The following table indicates the uses to which the Company proposes to put
these funds:
Offering
Proceeds from this Offering $5,000,000
1. Agent's Commissions and Expenses 500,000
2. Costs of this issue (including listing legal fees) 350,000
3. Retiring of 10,000,000 preferred shares 5,000,000
$5,850,000 (1)
Notes:
(1) The additional $850,000 required for the expenses of the Offering will be
raised though cash flow from operation or other means.
Item 5. Determination of Offering Price
Prior to the Offering hereby, there has been no public market for the Company's
common stock. The price to the public has been arbitrarily determined by the
Company and may not be indicative of the market price for the Common Shares
after this Offering. The Company makes no representations as to any
objectively determinable value of the Common Shares. Factors considered in
determining the Offering price were primarily based on the potential cash
flows of the projects currently under development and the stage of development
of those projects.
Item 6. Dilution
The pro forma net tangible book value of the Company at December 1, 1997, after
giving effect to the retiring of the preferred shares, was $6,286,901, or $0.30
per share. Pro forma net tangible book value per share represents the
Company's pro forma net tangible assets less total liabilities, divided by the
number of shares of common shares outstanding. The acquisition of Elmore Sand
& Gravel, Inc. and Tuskegee Sand & Gravel, Inc. during the current fiscal
period was reported as a pooling of interest in the Company's financials. The
Company considered this to conform to GAAP and the original intent of the
parties. With the subsequent planned transaction to retire the Preferred
Shares issued, the Company may restate this acquisition to fully comply with
the guidelines of APB 16 "Accounting for Business Combinations." The effects
of restating this acquisition as a purchase would step-up the basis of the
assets, increase goodwill and increase addition paid-capital. The Proforma
dilution takes this into effect. After giving effect to the sale by the
Company of the Common Shares offered hereby at an assumed initial public
offering price of $5.00 per share and the application of the net proceeds
therefrom, the pro forma net tangible book value of the Common Shares at
December 1, 1997 would have been approximately $11.3 million, or $0.52 per
share. This represents an immediate increase in pro forma net tangible book
value of the Common Shares of $0.22 per share to existing stockholders and an
immediate dilution of $4.48 per share to purchasers of common shares in the
Offering. The following table illustrates the dilution per share to the
purchasers of the Common Shares in the Offering:
Assumed initial public offering price per share........... $5.00
Pro forma net tangible book value per share as
of December 1, 1997.............................. $0.30
Increase per share attributable to the Offering........ $0.22
Pro forma as adjusted net tangible book value per
share after the Offering......................... $0.52
Dilution per share to new investors....................... $4.48
The following table sets forth, on a pro forma basis after giving effect to the
retiring of the preferred shares previously issued, the number of shares of
capital stock issued by the Company, the total consideration paid and the
average price per share paid by the existing stockholders and the new investors
purchasing shares of common shares in the Offering, assuming an initial public
offering price of $5.00 per share, before deducting underwriting discounts and
estimated offering expenses.
Shares Purchased Total Consideration Average Price
per Share
Amount Percent Amount Percent
Previous Shareholders $18,937,400 86.5% $4,286,901 38.0% $0.23
New Shareholders $1,000,000 4.6% $5,000,000 44.3% $5.00
Archer Daniels Midland $1,960,000 9.0% $2,000,000 17.7% $1.02
Company
Total $21,897,400 100.0% $11,286,901 100.0% $0.52
It should be noted that if the Company fails to achieve listing status on an
exchange by January 16, 1997, the shares reserved for Archer Daniels Midland
may be canceled and the $2,000,000 payment made due and payable at ADM's
option. See "Material Contracts." This would change both the dilution listed
above and the total debt of the Company.
Item 7. Selling Security Holders
All securities offered hereby are being sold by the Company. No other
shareholders are selling securities as a part of this Offering.
Item 8. Plan of Distribution
General
The Company is offering to sell up to 1,000,000 shares of its Common Shares.
The Common Shares will be sold by the Company on a "best efforts" basis through
one or more officers and directors of the Company who will not receive
compensation in connection with any offers or sales of the Common Shares. The
Company may also retain licensed broker-dealers ("Agents") to sell the Common
Shares on a "best efforts" basis. There are no underwriters involved in this
offering. If the Company retains Agents to sell the Common Shares offered
hereby, the Company will pay such Agents a selling commission of up to 10% of
the gross offering proceeds attributable to Common Shares sold by such Agents.
The Company and the Agents, if any, will, in all likelihood, agree to indemnify
each other against certain liabilities, including liabilities under the
Securities Act of 1933.
The Common Shares will be sold at the price of $5.00 per share. There is no
minimum number of shares a subscriber is required to purchase in order to
subscribe to the offering hereby. The Company reserves the right to withdraw,
cancel or modify the offering hereby and to reject subscriptions, in whole or
in part, for any reason.
Subscription Procedures
An agreement to purchase the Common Shares offered hereby (the "Subscription
Agreement') accompanies this Prospectus. Subject to availability and the
Company's right to reject subscriptions, in whole or in part, for any reason,
Common Shares may be subscribed for by completing, executing and returning the
Subscription Agreement, together with payment for all shares subscribed for, to
Southern Ventures, Inc., 15000 Hwy. 11N. Cottondale, AL 35453. The Company's
acceptance of a subscription shall be evidenced solely by the delivery to the
subscriber of a written confirmation of sale. Receipt by the Company of a
Subscription Agreement and/or deposit by the Company of payment for the
subscribed shares as described below shall constitute acceptance of a
subscription. The subscription payments will be deposited into the Company's
account at AmSouth Bank of Tuscaloosa by the Company.
The Company will promptly refund any monies collected and attributed to a
subscription, or portion thereof, rejected by the Company and pay to each
rejected subscriber all interest earned by the Company, if any, on such
subscriber's rejected escrowed subscription payment, or portion thereof.
However, unless the Company cancels this offering or rejects a subscription, in
whole or in part, subscribers will have no right to a return of their
subscription payment.
Stock certificates will not be issued to subscribers until such time as the
funds related to the purchase of Common Shares by such subscribers are
deposited by the Company. Until such time as stock certificates are issued to
the subscribers, the subscribers will not be considered shareholders of the
Company.
Warranties by Subscribers
In the Subscription Agreement, each subscriber represents and warrants to the
Company that the subscriber (i) has received this Prospectus and in making a
subscription is only relying on the representations set forth in this
Prospectus and (ii) has indicated his or her true state of legal residence.
Each potential investor should carefully read this Prospectus in its entirety
prior to purchasing shares of the Common Shares offered hereby. The warranty
given to the Company by each subscriber indicating that the subscriber has
received this Prospectus and is only relying on the representations set forth
herein provides the Company with some comfort that each subscriber has read
this Prospectus. To the extent permitted by federal and state securities
laws, the Company might assert its rights under this warranty to rebut a
subscriber's claim that he or she relied on any oral representations or written
representations other than those set forth in this Prospectus.
In some states, for various reasons, the Company will not obtain permission to
sell the Common Shares offered hereby. The Company will reject subscription
agreements received, if any, from residents of such states. The warranty given
by each subscriber indicating the subscriber's true state of legal residence
will assist the Company in complying with state securities laws. The Company
might assert its rights under this warranty if a misrepresentation by a
subscriber resulted in the Company selling shares of common stock in a state in
which the Company was not permitted to sell such shares in violation of such
state's securities laws. A subscriber does not waive any rights under the
federal securities laws by executing the Subscription Agreement.
Termination of Offering
The Company may terminate this Offering at any time prior to the sale of all
1,000,000 Common Shares offered hereby.
Item 9. Legal Proceedings
To the best knowledge of the Directors and officers of the Company, there is no
pending or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its subsidiaries, of a character required to be disclosed in the
Prospectus, and there is no franchise, contract or other document of a
character required to be described in the Prospectus, or to be filed as an
exhibit, which is not already described or filed; and the statements included
or incorporated in the Prospectus describing any legal proceedings or material
contracts or agreements relating to the Company fairly summarize such matters
as of the date thereof.
Neither the issue and sale of the Securities, nor the consummation of any other
of the transactions herein contemplated, nor the fulfillment of the terms
hereof, nor the delivery of shares of Southern Ventures, Inc. and Subsidiary(s)
Common Shares upon the exchange of the Securities will conflict with, result in
a breach of, or constitute a default under the charter or by-laws of the
Company or the terms of any indenture or other agreement or instrument known
to such counsel and to which the Company or any of its subsidiaries is a party
or bound, or any order or regulation known to such counsel to be applicable to
the Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over the Company or any of its subsidiaries.
Item 10. Directors, Executive Officers, Promoters and Control Persons
The names of the executive officers and directors of the Company, their
respective ages and positions with the Company are as follows:
Name Age Position with the Company
Bobby H. Harvey 60 Chairman of the Board & CEO
Chester I. Wright III 37 Treasurer and Director
E. Elaine Knapp 28 Secretary and Director
W. Benjamin Wood 31 Vice President and Director
David Parsons 49 Vice President and Director
Ross G. Tucker 35 Vice President and Director
David Tucker 37 Director
Dennis Saunders 49 Vice President
Linda Luszczak 45 Pres. of Riverside Grain Prod.
All directors hold office until the next annual shareholders
meeting of the Company or until their successors have been
elected and qualified. Executive officers serve at the
discretion of the board of directors.
Mr. Bobby Harvey Chairman , CEO and President
Mr. Harvey currently serves as Chairman, CEO and President of Southern
Ventures, Inc. Mr. Harvey also serves as the CEO and President of Elmore Sand
and Gravel, Inc. Mr. Harvey has over 25 years of experience in the silica
mining and trucking industries. Mr. Harvey bought Elmore Sand and Gravel,
Inc. from Bankruptcy Court in 1992 and has turned the operation into one of
the nation's leading silica mining operations. Prior to acquiring Elmore Sand
and Gravel, Inc., Mr. Harvey owned and operated Tuskegee Sand and Gravel, Inc.
and was a major partner in Walt's Sand and Gravel, Inc. From 1972 to 1984,
Mr. Harvey owned and operated Harvey Trucking, Inc. Mr. Harvey continues to
provides consulting to other mining operations and is highly regarded in the
silica mining industry for his expertise. Mr. Harvey also serves as the
CEO/President and Director of Elmore Sand and Gravel, Inc. and Tuskegee Sand
and Gravel, Inc.
Mr. Chester I. Wright III Treasurer and Director
Before joining the Company, Mr. Wright took on the responsibility of overseeing
all operational and financial management of a real-estate office as a
comptroller for ERA American Brokers, Inc. In this position he supervised over
40 people. Mr. Wright's implementation of innovative programs and financial
management after accepting the position of comptroller of the ERA office
resulted in an increase in annual revenues from $35 million to over $50 million
in just two years. Prior to his employment at ERA, Mr. Wright was a partner in
Wright Services, Inc. where he implemented a program that tripled profits over
a four year period. Mr. Wright has been an invited speaker at regional ERA
conventions and has been published in the fields of real-estate transactions
and tax accounting.
Ms. Elaine Knapp Secretary and Director
Ms. Knapp has considerable experience in operational management of
entrepreneurial enterprises. As the president of The Underwater Connection,
Inc., Ms. Knapp was responsible for supervising all operations and management
of the company, and for insuring progress in attaining company goals. Ms.
Knapp had previously been responsible for accounting and purchasing at Synchem
International, Inc., and has been involved with the preparation and evaluation
of corporate finances. Before joining Synchem, Ms. Knapp worked for JVC Disc
America where she was responsible for developing and implementing a new system
for quality control, which required an intimate and comprehensive understanding
of every aspect of production. Ms. Knapp is also able to communicate
effectively in French, and is familiar with Norwegian, Serbo-Croatian and
American Sign Language.
Mr. W. Benjamin Wood Vice President of Public Relations and Director
Mr. Wood's previous experience at Home Box Office, Inc. and Manning, Selvage
and Lee Public Relations required the organization of national marketing
campaigns with multi-million dollar budgets. He successfully administered the
proper execution and distribution of marketing funds, and was responsible for
analyzing the campaign results to determine the effectiveness of both the
funds spent and the tactics used in the various markets. Mr. Wood has already
developed a corporate public relations and communications plan to introduce
the Company to financial markets. Mr. Wood's education is in advertising and
public relations with a B.A. in Public Relations granted by the University of
Alabama. Mr. Wood also serves as CEO and Director of Southern Ventures, Inc.
(Canada).
Mr. David Parsons Vice President of Project Development and Director
As Manager of the Environmental Assessment Branch of the B.C. Ministry of
Environment, Lands and Parks, Mr. Parsons was responsible for supervising
several senior staff members in the environmental assessment of major
industrial, mining and energy projects. Mr. Parsons has 18 years of experience
working for the Ministry of Environment and has participated in writing
environmental legislation such as the Environmental Assessment Act. Throughout
his career, Mr. Parsons has been responsible for coordinating hundreds of
environmental impact assessments. Mr. Parsons received a M.Sc. in Soil Science
and Land Use Planning from the University of British Columbia as well as a
Diploma in Elementary Education and a B.Sc. in Agriculture. Mr. Parsons also
serves as President and Director of Riverside Carbon Products, Inc.
Mr. Ross Tucker Vice President and Director
Mr. Tucker's previous experience as President of Chesapeake Capital Corp. has
given him a great deal of experience in providing management for corporate
operations. As Production Manager and Supervisor for companies such as Exact,
Inc. and Bill Rivers Corp., Mr. Tucker was responsible for the supervision of
30 shop and design personnel, and developed and implemented a production line
for the manufacturer of freezer storage units for Winn Dixie Food Products
Co. Over the last 16 years, Mr. Tucker has been involved in almost every
aspect of the fabrication industry from heavy I-beam construction and high
pressure thermal processing equipment fabrication to precision sheet metal
work and the fabrication of special alloy parts for the stealth fighter.
Mr. Tucker has received over 10 certifications including governmental welding
certifications, Statistical Processes Control and Instrumentation (SPCI),
and project management.
Dr. David Tucker Director
In addition to the administrative and management skills gained as President of
International Refractory Services, Dr. Tucker has 15 years of experience in
engineering, design and construction of projects involving chemical synthesis.
As a chemical design engineer and consultant for Midwest Pacific, Inc., Dr.
Tucker was responsible for the start-up and modification of prototype
industrial capacity plants designed to convert wood waste into oils through
ablative fast pyrolysis. Dr. Tucker has a Ph.D. in Physical Chemistry and
has performed extensive research in coal chemistry and the synthesis of
chemicals from biomass. His undergraduate degrees are in Synthetic Fuels
Science and in Aviation. He has been published frequently in technical
journals and is a member of several scientific research societies.
Mr. Dennis Saunders Vice President of Sales
Mr. Saunders previous position as general manager for Heartland Wheat Growers
(Farmland Industries) required the supervision of all operational management of
the company including sales, financial, operations, warehousing, and
distribution. Mr. Saunders was also responsible for managing the construction
of a $30 million wheat starch and gluten plant, and managed the supervision of
55 employees. As a national sales manager for ADM, Mr. Saunders was
responsible for wheat and cornstarch product sales throughout North America.
Overall, Mr. Saunders has 30 years of experience in the food products
industry. Mr. Saunders is a member of several professional associations and
has been published in the TAPPI Journal.
Ms. Linda Luszczak President of Riverside Grain Products
In her position as plant manager for ADM, Ms. Luszczak gained considerable
experience in all aspects of plant management including operating efficiency,
cost control, health and safety issues, regulatory compliance, quality
assurance, and performance management of 80 employees. During her employment
with ADM as plant manager, Ms. Luszczak was able to increase productivity by
20% while reducing manufacturing costs over a three year period. Twelve of Ms.
Luszczak's 20 years of experience in the starch and gluten industry are in
direct operational management. Ms. Luszczak's education is in chemistry with
a B.Sc. in Chemistry granted by the University of Western Ontario, and further
studies in Quality Management and Statistical Process Control at Clemson
University.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The table below identifies the control positions of the Directors and officers
of the Company and individuals (or organizations) that are known to hold more
than 5% of the common shares as of October 24, 1997, after giving effect to
sale of Common Shares offered hereby. All shares are owned directly.
Name of Beneficial Owner Amount of Class of percent of percent of
Shares Shares Class prior Class after
Controlled to Offering Offering
Bobby Harvey(1) 10,000,000 Preferred 100.0 0.0
Bobby Harvey 9,841,000 Common 47.1 44.9
Chester I. Wright III 475,000 Common 2.3 2.2
David Tucker 725,000 Common 3.5 3.3
David Parsons 475,000 Common 2.3 2.2
Elaine Knapp 475,000 Common 2.3 2.2
Ross Tucker 475,000 Common 2.3 2.2
W. Benjamin Wood 475,000 Common 2.3 2.2
David Parsons 380,000 Common 1.8 1.7
Dennis Saunders 100,000 Common 0.5 0.5
National Synfuels, Inc.(2) 4,750,000 Common 22.7 21.7
Archer Daniels Midland(3) 1,960,000 Common 9.4 9.0
Other Shareholders 766,400 Common 3.7 3.5
Previous Shareholders 20,897,400 Common 100.0 95.4
New Investors 1,000,000 Common 4.6
Total Voting Shares 21,897,400 100.0
(1) All of the preferred shares will be retired upon consummation of the
Offering.
(2) National Synfuels, Inc. is currently controlled by Mr. Gordon Tucker. See
"Interest of Management in Material Contracts."
(3) It should be noted that if the Company fails to achieve listing status on
an exchange by January 16, 1997, the shares reserved for Archer Daniels
Midland may be canceled and the $2,000,000 payment made due and payable at
ADM's option. See "Material Contracts."
Item 12. Description of Securities
The Company is authorized to issue 40,000,000 Common Shares with a par value of
$0.001, of which, as at the date hereof, 21,897,400 are issued and outstanding
as fully-paid and non-assessable. See "Prior Sales", "Material Contracts".
The holders of Common Shares are entitled to dividends if, as and when declared
by the directors, to one (1) vote per common share at meetings of the holders
of the Common Shares and, upon liquidation, to receive such assets of the
Company as are distributable to the holders of the Common Shares. All of the
Common Shares to be outstanding upon completion of this Offering will be
fully-paid and non-assessable.
The Amended Certificate of Incorporation of the Company authorizes the issuance
of 10,000,000 shares of undesignated preferred stock, par value $0.001 per
share (the "Preferred Shares"). As at the date hereof, 10,000,000 Preferred
Shares have been issued in the acquisition of Elmore Sand & Gravel, Inc. and
Tuskegee Sand & Gravel, Inc. These shares have full voting rights and
dividends equal to 80% of the net earnings from Elmore. Upon completion of
this Offering, all of the Preferred Shares currently issued will be retired,
at which time the Board of Directors has the authority, without further vote
or action by the stockholders to issue the undesignated Preferred Shares in
one or more series and (subject to the limitations prescribed by law) to fix
all rights, qualifications, preferences, privileges, limitations and
restrictions of each such series, including dividend rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series. Although
it currently has no plans to do so, the Board of Directors, without
stockholder approval, can issue preferred shares with voting and conversion
rights which could adversely affect the voting power of the holders of Common
Shares. The issuance of Preferred Shares may have the effect of delaying,
deferring or preventing a change in control of the Company. The Preferred
Shares are entitled to a priority over the Common Shares with respect to
payment of dividends and distribution of assets upon liquidation of the
Company. See "Risk Factors." The Company has no present intent to issue
shares of Preferred Shares.
CAPITALIZATION
Amount Amount
Amount Outstanding before Outstanding after
Authorized the Offering the Offering
Common Shares 40,000,000 20,897,400 21,897,400
Preferred Shares 10,000,000 10,000,000 nil
Item 13. Interest of Named Experts and Council
No expert or council engaged by the Company has an interest in the Company's
securities exceeding $50,000.
Item 14. Disclosure of Commission Position of Indemnification for Securities
Act Liabilities
The Company's Articles of Incorporation provide that, pursuant to Nevada law,
each director shall not be liable for monetary damages for breach of the
directors' fiduciary duty as a director to the Company and its stockholders.
In addition, the Company's Bylaws provide that the Company will indemnify its
directors and officers and may indemnify its employees and other agents to the
fullest extent permitted by law. The Company also contemplates entering into
indemnification agreements with its officers and directors.
The Company's Articles of Incorporation provide that no officer or director
will be personally liable to the Company or any stockholder for damages for
breach of fiduciary duty as a director or officer, except for (i) acts or
omissions that involve intentional misconduct, fraud or a knowing violation of
law or (ii) the payment of dividends in violation of the Corporation Law.
If the Corporation Law is amended or interpreted to eliminate or limit further
the personal liability of directors or officers, then the liability of all
directors and officers automatically will be eliminated or limited to the full
extent then so permitted. These provisions in the Articles of Incorporation
do not eliminate the fiduciary duties of the directors and officers and, in
appropriate circumstances, equitable remedies such as injunctive relief or
other forms of non-monetary relief will remain available under Nevada law.
In addition, these provisions do not affect responsibilities imposed under
any other law, such as the federal securities laws or state or federal
environmental laws.
The Company's Bylaws provide that the Company will indemnify its directors and
officers and may indemnify its employees and other agents to the fullest extent
permitted under the Corporation Law. The Company believes that indemnification
under its Bylaws covers at least negligence and gross negligence by indemnified
parties and permits the Company to advance litigation expenses in the case of
stockholder derivative actions or other actions, against an undertaking by the
indemnified party to repay such advances if it is ultimately determined that
the indemnified party is not entitled to indemnification. The Company intends
to seek liability insurance for its officers and directors.
Prior to the consummation of the Offering, the Company anticipates that it will
enter into separate indemnification agreements with each of its directors and
officers. These agreements will require the Company, among other things, to
indemnify such persons against certain liabilities that may arise by reason of
their status or service as directors or officers (other than liabilities
arising from actions involving intentional misconduct, fraud or a knowing
violation of law), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified and to cover
such persons under any directors' and officers' liability insurance policy
maintained by the Company. These indemnification agreements will be separate
and independent of the indemnification rights under the Bylaws and are
irrevocable.
The Company believes that these provisions of the Articles of Incorporation and
Bylaws and the indemnification agreements are necessary to attract and retain
qualified persons as directors and officers. Insofar as indemnification
pursuant to the foregoing provisions against liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers or persons controlling the Company, the Company has been
informed that, in the opinion of the Securities and Exchange Commission (the
"Commission"), such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the securities Act and will be
governed by the final adjudication of such issue.
Item 15. Organization Within Last Five Years
On January 1, 1997 the Company acquired from Mr. Gordon Tucker and Mr. Bobby
Harvey certain assets in the amount of $439,860.37; an unsecured note was made
payable jointly to Mr. Tucker and Mr. Harvey at a rate of interest of 8%.
Those assets included: automobiles, computers, office equipment and supplies,
shop equipment and supplies, leasehold improvements, real property purchase
options and interest in projects that were in the process of being developed.
The Company has obtained cash and has issued various notes payable to Mr.
Harvey with outstanding balances through June 1997 of $295,409.
On February 4, 1997 the shareholders of the Company entered into an agreement
with Mr. Bobby Harvey to participate in an IRS Code section 368(a)(1)(B)
reorganization, in which Southern Ventures, Inc. obtained 100% ownership of the
Elmore in exchange for ten million (10,000,000) shares of voting preferred
stock of Southern Ventures, Inc. As a result of this transaction, Mr. Harvey
has been elected Chairman of the Board of Directors and CEO of Southern
Ventures, Inc. (USA). On October 22, 1997 the transaction was consummated
between Mr. Harvey and Southern Ventures, Inc.
On February 7, 1997 the Company entered into a royalty agreement with National
Synfuels, Inc. whereby the Company has the sole and exclusive right to use
technology which is patented under U.S. Patent # 4,385,905 (System and Method
for Gasification of Solid Carbonaceous Fuels) issued by the U.S. Patent Office
on May 31, 1983, in exchange for a royalty of two ($2.00) dollars per dry ton
of wood processed into charcoal or fuels. This agreement includes the right
of the Company to sublicense this technology. See "Material Contracts."
Item 16. Description of Business
Executive Summary for Southern Ventures, Inc.
Southern Ventures' principal objective is to establish a highly profitable
manufacturing base in North America by modernizing specific business facilities
in declining industries and controlling raw material supplies. New
technologies will replace obsolete manufacturing techniques and substantially
reduce production costs. Control over raw material supplies will ensure
Southern Ventures' corporate stability, production efficiency and long term
growth potential.
The Company is organized to focus on rebuilding the charcoal briquette industry
and improving operations in the grain processing and mineral mining industries.
Figure 1 shows the current organizational structure of the Company.
(This figure shows the parent company SOUTHERN VENTURES (U.S.)
from which two subsidiary companies branch off. These include
ELMORE SAND GRAVEL and SOUTHERN VENTURES (CANADA). Below
SOUTHERN VENTURES (CANADA) are two additional subsidiary
companies. These are RIVERSIDE GRAIN PRODUCTS and RIVERSIDE
CARBON PRODUCTS.)
Figure 1
The Subsidiary Structure of Southern Ventures, Inc.
Elmore Sand & Gravel, Inc. is the foundation supporting the
Company's ambitious plan to establish a strong manufacturing presence in North
America. Southern Ventures, Inc. recently expanded Elmore's operations by
installing a state-of-the-art silica processing plant. The new plant uses
Company designed improvements for material handling to generate 2.5 times more
silica sand and gravel than the old plant without significantly increasing labor
or power costs.
Management anticipates the new plant will generate pretax profits exceeding $6
million in 1998.
Southern Ventures, Inc. issued 10 million preferred shares to
acquire Elmore Sand & Gravel, Inc. These shares entitle the holders to 80% of
the net income earned by Elmore Sand & Gravel, Inc. By retiring the preferred
shares, Elmore
Sand & Gravel will generate an additional pretax profit to the Common
Shareholders of approximately $4.8 million per year.
Riverside Grain Products, Inc. will directly control key raw materials for the
charring project and provide substantial new earnings by the incorporation of
new technologies into the processing of wheat flour to starch and gluten.
Riverside Grain Products, Inc. recently purchased a starch and gluten plant
from Archer Daniels Midland Company that will produce gluten for the food
industry, high-value starch for the paper industry, a new modified starch for
the production of gypsum wallboard and binder starch for the manufacture of
charcoal briquettes. Riverside Grain Products, Inc. is presently negotiating
the purchase of a flourmill that may provide wheat flour for the starch and
gluten plant in addition to semolina for the pasta industry.
Riverside Carbon Products, Inc. licenses technology designed and tested by
Southern Ventures, Inc. that simplifies the construction and operation of
furnaces which produce char from wood waste at low cost and with improved
flexibility of product output. The new furnaces operate more efficiently and
generate less pollution than the outdated equipment currently used in the
charring industry. Residues from the wood processing industry are raw material
for charcoal briquette manufacturing. The Company has obtained twenty year
commitments from major sawmills to receive this material at no cost and has
completed the acquisition of environmental permits required to construct and
operate charring plants in British Columbia, Canada. The Company has the wood
supply and intends to install new plants sufficient to dominate the charcoal
briquette market in North America.
Although the market for charcoal briquettes has averaged growth of
approximately 3% per year over the last 20 years, industry profit margins have
steadily declined. The Company will modernize the charcoal briquette industry
and generate greatly improved profits by installing new technology and
controlling all raw materials used in the manufacture of products.
The planned vertical integration of the charcoal briquette project is shown
below in Figure 2. Developing the projects indicated will give the Company
control over wood char and starch, the raw materials vital to manufacturing
charcoal briquettes.
Timber Wheat
V V
V V
Lumber <---- Sawmill Operation Flourmill ---> Semolina
(Riverside Carbon Products) (Riverside Grain Products)
V V
V Wood Waste Flour V
V V
Power <---- Charring Plants Starch Gluten Plant--> Gluten
V V "A" Starch
V Char "B" Starch V
V ---------------><--------------- V
V
Briquette Plant
(Riverside Carbon Products)
V
V
Charcoal Briquettes
Figure 2
The Vertical Integration of Charcoal Briquette Manufacture
Company management has the skills and vision required to achieve the principal
objective of establishing a strong manufacturing base in North America. By
applying new technology and vertical integration, the Company will maximize
profitability of the silica mining, starch & gluten and charcoal briquetting
industries. Product market dominance will be attained through competitive
pricing and aggressive marketing.
In addition to the proceeds of this Offering, the Company plans to raise
$33,000,000 over the next two years. Financial proformas prepared by
management forecast that the Company will generate net income before taxes as
shown below over the next five years, if the financial goals of the Company
are realized during this period.
Net Income Before Taxes
1998 1999 2000 2001 2002
Elmore $5,100,000 $5,600,000 $6,000,000 $6,600,000 $7,100,000
Riverside Grain $9,600,000 $16,300,000 $15,000,000 $22,000,000 $26,100,000
Riverside Carbon -- $13,600,000 $15,200,000 $16,900,000 $18,700,000
Total Net Income $14,700,000 $35,500,000 $36,200,000 $45,500,000 $51,900,000
If management objectives are achieved, earnings from Company operations could
be considerable, and result in substantially increased value of the Common
Shares over the next five years.
Elmore Sand and Gravel, Inc.
Status: New plant construction completed. Plant began operation in October
1997.
Production: Current production capacity is 600 tons of silica sand and gravel
per hour.
Acquisition: The silica mining operation was acquired by the issuance of 10
million preferred shares of Southern Ventures, Inc. stock with a
call provision at $0.50 per share. The Company will assume debt
of approximately $3,500,000 including completion costs of the new
plant.
Profits: Financial proformas prepared by management forecast that Elmore's
new plant will generate more than $30 million net income before
taxes over the next five years. This is an average of $6 million
pretax profit annually, an excellent cash base to launch new
projects that have even greater earnings and growth potential.
Elmore is a mining company that produces high-grade silica rock and sand from
ancient alluvial deposits in Elmore County, Alabama. Elmore is located in a
region that has consistently produced high purity silica sand and gravel.
Elmore actively leases more than two thousand acres of private and state lands
that can provide high quality materials for at least another twenty years at
maximum production levels. An independent engineering study conducted in
October 1997 estimates reserves under the Company's current lease to be
approximately 38.55 million tons with a current average value of $6.50 per ton.
Silica gravel is used in the manufacture of ferrosilicon, silicon carbide,
silicon metal and construction products. Silica sand is used in the
manufacture of industrial and optical glass, ceramics, fluxes, steel-making
molds, hydraulic fracturing, silica brick, paints and construction products.
The primary markets supplied by the Company are the ferrosilicon, decorative
landscaping and construction product markets.
Glass and ceramic markets for high purity silica sand command better prices but
involve higher transportation costs. Currently the sand produced at the mining
site is used in construction products. The Company is actively investigating
other markets and is presently examining offers by potential purchasers to
deliver sand to additional markets.
To accommodate increased demand for silica gravel, Elmore completed
construction of a new plant designed to process 600 tons of gravel and sand
per hour. The Company has identified customers for all of the gravel output.
To facilitate the sale of additional sand production, the new plant features
classification methods that allow Elmore to sell sand into markets not
currently served. New screening systems produce sand sized in several
categories according to customer specifications.
By retiring the old plant, the Company realized some immediate advantages.
Overall production increased by decreasing maintenance downtime. In addition
to cost savings each year associated with maintenance, the new plant saves
$150,000 per year in royalties paid to private landowners by being located on
lands leased from the State of Alabama.
Property Under Lease
Elmore has long-term leases in place to generate products and provide itself a
financially secure future. The leased properties are located northwest of
Elmore on the west side of Highway 143 in the area surrounding and including
Speigner Lake. The land area leased and the written or drawn designation of
land for each of those five leases are shown on the vicinity map in the
Exhibits.
Twenty-five percent of the designated land is being leased from private
landowners. The Company will hold these leases until all silica sand and
gravel deposits have been removed and processed.
The remaining fifteen hundred acres are under lease from the State of Alabama.
This state lease is for a twenty year period starting in 1985 and has five year
options for extensions that can be taken as needed.
Elmore has always exercised an excellent reclamation policy of restoring the
land to its original state by returning overburden and filling holes after
mining. Owners of adjacent properties containing significant deposits are
favorably inclined to lease their lands should the Company require additional
reserves in the long term.
Markets - Sand
In the United States, almost half of the silica sand produced is used in the
manufacture of glass. Other products include foundry sand, ground silica,
filtration sand and hydraulic fracturing sand.
Glass Sand
Silica is the principal glass-forming oxide in a glass batch. Glass
manufacturers develop model specifications for each source of silica sand used.
These specifications broadly define limits and ranges for chemical and physical
properties of the sand, which are used by the manufacturer in calculating the
desired batch mix or formula. Some specifications are critical to glassmakers
and require very stringent limits on the quantity of impurities in the sand.
For example, the total iron oxide content of a batch is extremely crucial when
making white or flint glass. Iron is present in almost every raw material used
in a glass batch and must be carefully controlled in order to obtain consistent
color in the finished product.
Foundry Sand
Foundry molds and cores are the second largest industrial use of silica sand in
terms of tons consumed. Foundry sand generally must exceed 98% SiO2 purity
levels and limits are placed on the amounts of CaO and MgO present. The more
alkaline earth oxides a sand contains, especially CaO, the more synthetic
binder is required to make a mold or core. The amount of binder needed is
called the acid demand value of a sand.
The shape of sand grains also affects the porosity of a mold. High porosity
promotes high green strength and allows the use of less binder. The more
angular the sand grains, the lower the porosity and green strength of a mold
and the more binder required to form it. Angular grains also resist compacting
because of their interlocking nature, so they produce mold densities 8 - 10%
lower than round grains.
Ground Silica
Ground silica is used as a functional fill and pigment extender in many
industrial products including paint, plastics, rubber, sealants and adhesives.
It is also the major batch component in the production of continuous strand
fiberglass. The term ground silica denotes a higher value functional filler
that modifies the end product in which it is used. The term silica flour
connotes lower value filler applications.
Filtration Sand
Specifications for silica sand used as a water filtration medium in the United
States are governed largely by the American Water Works Association. The sand
must be relatively pure and free of clay, dust, and organic matter. There are
no strict guidelines defining grain shape, except that grains should not be
elongate or flat. Angular and round grains appear to work equally well.
Hydraulic Fracturing Sand
Hydraulic fracturing sand is used to prop open fissures and voids in bedrock in
order to increase the flow of gas, oil and other fluids toward a well. The
sand should predominantly consist of durable, well-rounded silica grains with
only minor amounts of impurities such as clay, feldspar and calcite.
Markets - Gravel
Ferrosilicon
Silicon is the second most important alloying element (after manganese) for
both ferrous and nonferrous metals. Ferrosilicon is produced by smelting a
mixture of quartz, metallic iron and a reducing agent in a submerged-arc
electric furnace. The resultant ferrosilicon is used in production of steel
and cast iron. In addition to chemical composition requirements, strict
limits are set for deleterious impurities such as arsenic, sulfur and
phosphorous for different grades of ferrosilicon.
Silicon Metal
Silicon metal is used by the chemical industry to produce silicanes, silicones
and semiconductor silicone. Silicon metal production is very similar to
ferrosilicon production, except addition of metallic iron is not required.
Chemical specifications for raw material used in silicon metal production are
more restrictive than those used for ferrosilicon.
Silicon Carbide
Silicon carbide (SiC) is formed by smelting silica, carbon and a reducing
agent. Chemical purity specifications for silica material used to produce
silicon carbide are similar to those used for silicon metal production.
Approximately 1.6 tons of crushed silica is used to produce one ton of silicon
carbide.
Flux
Massive quartz, quartzite, sandstone and unconsolidated sands are used as flux
in smelting base-metal ores. Silica acts as a slagging agent for iron and
basic oxides. Silica rocks with diameters between 0.3 and 1 inch are
generally used as flux materials.
Production
Untied States production of industrial sand and gravel in 1995 increased by 3%
over 1994 levels to 28.2 million metric tons. Growth for the industry from
1993 to 1994 was 6%. Production has increased in response to greater demand
for blast, filtration and traction sand; fiber, flat and specialty glass sand;
and chemicals and filler containing silica.
Untied States export of silica sand and gravel were valued at $700 million in
1995, virtually unchanged from 1994. Industrial sand and gravel imports more
than doubled from 1994 to 1995, but accounted for less than 1% of the total
market. Domestic consumption of industrial sand and gravel in 1995 was 26.4
million tons, an increase of about 4% from 1994 levels.
The Midwest leads in industrial sand and gravel production in the United
States, producing approximately 44% of the 28.2 million metric tons, followed
by the South producing about 34% and the West with 13% of the total production.
The six states leading in the production of industrial sand and gravel, in
descending order of volume are Illinois, Michigan, New Jersey, California,
Wisconsin and Texas. Their combined production represents 50% of the national
total.
Prices
Table 1 shows the quantity and value of industrial sand and gravel sold or used
by United States producers in 1995. The average value of all industrial sand
sold in the South was $19.39 per ton. Since these prices are given as F.O.B.
the mining operation, Elmore can significantly increase overall profits by
selling sand into one of the markets listed in Table 1 instead of the concrete
industry at a rate of $2.50 per ton.
South US Total
Major Use Quantity1 Value2 Value per ton Quantity1 Value2 Value per
ton
Sand:
Glass 4,115 70,290 $17.08 10,690 174,200 $16.29
Foundry 1,050 13,000 $12.45 6,760 87,500 $12.94
Ground Silica 2,132 58,860 $27.61 4,212 115,200 $27.35
Filtration 162 2,840 $17.53 400 10,490 $26.23
Hydraulic Fracturing NA NA $30.84 1,580 53,000 $33.67
South US Total
Major Use Quantity1 Value2 Value per ton Quantity1 Value2 Value per
ton
Gravel:
Silicon, ferrosilicon NA NA $13.09 532 7,160 $13.45
Filtration NA NA $16.70 150 2,400 $16.01
Non metallurgical flux NA NA $18.77 590 8,450 $14.31
Other uses, specified 76 787 $10.36 607 3,910 $6.44
NA - Not available.
1 - Thousands of metric tons.
2 - Thousands of US dollars.
Source: US Geological Survey. Gordon P. Eaton, Director.
Table 1
Industrial Sand & Gravel Marketed in the United States in 1995, by Major End Use
Specifications
Silica sand that is mined and processed for industrial
applications must conform to the chemical and physical
specifications set by customers. Table 2 summarizes the average
minimum quantity of pure silica (SiO2) and maximum allowable
impurities (Al2O3, Fe2O3, TiO2) expressed in weight percent for
each silica market.
Application SiO2 Al2O3 Fe2O3 TiO2
Sieve Size
Glass (Flat) 99.5% 0.30% 0.04% 0.10%
200 - 30 mesh
Glass (Container) 98.5% 0.50% 0.035% 0.03%
100 - 30 mesh
Foundry Sand 98.0% NA NA NA
100 - 30 mesh
Ground Silica 97.5% 0.38% 0.10% NA
< 200 mesh
Filtration Sand 99.4% 0.19% 0.24% 0.12%
50 - 12 mesh
Ferrosilicon 98.0% 0.40% 0.20% NA
3/4" - 5"
Silicon Metal 99.8% 0.10% 0.10% 0.01%
3/4" - 5"
Silicon Carbide 99.5% 0.30% 0.10% 0.01%
3/4" - 5"
Fluxes 90.0% 1.50% 1.50% NA
1/4" - 1"
Elmore Sand & Gravel 99.6% 0.06% 0.05% 0.01%
200 mesh - 5"
Table 2
Industrial Sand & Gravel Specifications, by Application
Sales Strategy
Elmore has a diverse customer base for its gravel products and has served these
markets for more than 10 years. Ferro-silicon markets have returned strong
profit margins and have been the backbone of Elmore's operations. Management
will continue providing excellent service and quality products to its
customers. Improvements may be made in choosing markets for Elmore's sand
products. Currently, these products are marketed to the concrete and mortar
industries and net an average sales price of about $2.50 per ton, well below
the national average price for industrial sand.
Transportation cost is an important factor that must be taken into
consideration due to relatively low unit prices of various silica markets,
except for a few end uses that require a high degree of processing. Before
contacting potential customers for industrial sand products, transportation
costs will be evaluated as to their impact upon the bottom-line profitability
of that particular market.
Once favorable transportation situations are identified, potential customers
will be sent product samples for testing. Discounts to current market prices
will be offered in order to effectively penetrate selected target markets for
industrial sand.
In order to satisfy some industries, further processing of industrial sand may
be necessary. In these cases, costs of the additional equipment required for
such processing will be factored in the determination of which markets are the
most lucrative to enter.
Riverside Grain Products Inc.
Status: Archer Daniels Midland Co. (ADM) signed a Definitive Agreement to
sell a starch and gluten plant to the Company for $5.0 million.
Included is a 5 year contract for the right to purchase
straight-run flour at market price from ADM on payment terms net
90 days.
Production: A target of 51,000 tons of wheat flour each year will be processed
to produce starch and gluten products. The Company plans to
install waste recovery systems to achieve high utilization of raw
materials.
Capital: Total capital required, including plant purchase, interim
operation capital and construction financing, is approximately
$8.0 million. ADM has accepted an equity position of $2.0
million in the Company as partial remuneration for the purchase
of the starch and gluten plant. ADM has agreed to finance the
remaining $3.0 million owed over a two year period. The Company
expects to complete negotiations with an investment bank by the
end of November 1997 for $3.0 million required to install new
equipment.
Markets: North America, Europe and Asia. The Company is pursuing various
markets for starch and gluten products. A sales agreement has
been signed with Heartland Wheat Growers, L.P. to purchase
unmodified starch for the manufacture of dextrinized and oxidized
starch. A distribution agreement has been offered by Raisio
Chemicals to market Riverside Grain's cationic starch output.
Profits: Financial proformas prepared by management forecast that Riverside
Grain will generate more than $88.5 million net income before taxes
over the next five years. With Riverside Grain's pretax cash flows
exceeding $12 million per year, the Company will have the
opportunity to quickly expand all subsidiary operations.
Riverside Grain was formed by the Company to manage and operate the Ogilvie
wheat starch and gluten plant in Thunder Bay, Ontario (the "Ogilvie plant").
The Company signed a Definitive Agreement with the Archer Daniels Midland Co.
(ADM) on October 16, 1997 to purchase the Ogilvie plant. As a condition in the
Definitive Agreement, ADM was obligated to repair equipment and buildings and
restore the plant to operational capacity. All electrical and mechanical
systems have been thoroughly inspected and tested by ADM. Company management
and engineers have inspected the buildings and processing systems and concur
the plant is in operating condition.
The Ogilvie plant has been closed since August 15, 1996. Before shutting down,
the Ogilvie plant had been operating for 84 years. During the last ten years
of operation, the plant experienced low profitability manufacturing a large
number of commodity products to satisfy a variety of customer needs. The
manpower and packaging costs dedicated to the production of many low-priced
products resulted in poor overall operating efficiency and high operating
costs per unit of raw material processed.
Management will significantly increase profitability of the Ogilvie plant by
focusing on fewer product lines and recovering the 19% of raw materials
previously wasted by discharge in the effluent stream. The Ogilvie plant will
produce the following primary product lines:
* Wheat gluten for the food industry
* Cationic starch for the paper industry
* Dextrinized starch for the mining and wall board industries
* Large granule starch for the carbonless paper industry
* B-grade starch for the gypsum wallboard industry
* Protein for the animal feed industry
Producing cationic starch will increase profit margins. Cationic starch offers
much higher revenues than the commodity starches previously manufactured.
Prior to August 1996, the Ogilvie plant averaged $413.50 and 4.0 man-hours per
ton of product sold. In 1998, the plant is expected to average $530.00 and 1.5
man-hours per ton upon implementing management's strategy of streamlining
operations and manufacturing products with higher market values.
Recovering plant effluents will increase efficiency. Approximately 19% of the
raw materials processed in the past were discarded as waste. This loss of raw
material adversely effected the previous owner's ability to maintain a profit.
Riverside Grain will install ultrafiltration and reverse osmosis systems to
recover these materials which can then be added to the B-grade starch and
protein products. These systems will not only recover additional product but
will also greatly reduce waste disposal and water utility fees.
Product quality is influenced by raw material quality. Prior management was
limited in their ability to manufacture value-added products, due to the poor
quality of flour received from the previous owner's flour mills. Current
management has corrected this problem by negotiating contracts with ADM for
delivery of high quality flour on a "by request" basis with 90 day terms.
Riverside Grain is not bound to one supplier for its flour.
The method by which gluten is dried greatly affects its market value.
Management believes that by installing gluten spray dryers, Riverside Grain
will compete in global markets that would otherwise not be accessible.
Management has received several inquires from potential customers willing to
pay premium prices for spray dried gluten.
Plant improvements are scheduled to be completed by May 1998. The Ogilvie
plant will then process approximately 51,000 tons of Canadian wheat flour each
year to produce 6,100 tons of gluten, 16,100 tons of cationic starch, 7,400
tons of dextrinized starch, 4,600 tons of large granule starch, 14,100 tons of
B-grade starch and 700 tons of animal feed proteins.
Management is negotiating contracts to purchase approximately 600 tons per
month of unmodified A-grade starch. This starch will be processed in addition
to the starch derived from wheat flour. Management anticipates excellent
profit margins will be generated by converting the unmodified starch to
high-value starch.
Production will be marketed in Canada, the United States and Europe although
discussions are on-going with several major Asian buyers of specialty gluten
and starch products. The Ogilvie plant is situated at the head of Lake
Superior, facilitating shipment of products to overseas markets. It is also
linked to Canada's rail network and connects directly to many rail lines in
the United States.
The contractual agreement between ADM and the Company states that Riverside
Grain must start and operate the present facility. Management intends to
operate the existing equipment at full capacity as soon as possible, doubling
previous output. This will be accomplished by moving existing equipment and
operations into a new modern facility to be built in Thunder Bay. Management
believes that sufficient cash will be available in 1999 to construct the new
facility. The current plant will operate until such time the new plant is
complete.
Riverside Grain has negotiated with ADM to purchase straight-run flour under
contract for 5 years. The flour will contain a minimum of 11.5% protein.
Price will fluctuate proportionately with the wheat market. Provisions in the
contract will allow Riverside Grain 90 days after flour delivery to complete
payment.
The Ogilvie plant will employ 30 people in Thunder Bay. More than $1,000,000
in annual salaries and taxes will be added to the local economy of this region.
Wheat Gluten
Wheat gluten is the natural water-insoluble protein portion of wheat endosperm
that is separated in the form of a protein-lipid starch complex during wet
processing of wheat flour. Commercial wheat gluten has an average composition
of 72.5% protein, 14.7% carbohydrates, 6.4% moisture, 5.7% total fat and 0.7%
ash.
Wheat gluten is unique among cereal and other plant proteins because it forms a
cohesive and viscoelastic mass suitable for breadmaking and allows wheat flour
dough to retain leavening gases. These properties define gluten's superior
performance in a variety of products compared to other protein sources.
Gluten consumption in the United States doubled from 1985 to 1995, illustrated
below. Consumer preferences shifted to multi-grain and reduced-calorie bread
products that require fortification with gluten, resulting in increased demand.
(This figure shows the steady increase of wheat gluten consumption in the
United States with totals doubling from 1985 to 1995.)
Figure 3
US Consumption of Wheat Gluten
Wheat gluten prices in the United States ranged between $1,000 and $1,500 per
ton for the last twenty years. Prices from 1977 to 1995 are graphically
illustrated below.
(This figure shows a graph of gluten prices in the United States, with prices
ranging from $1,000 to $1,500 per ton.)
Figure 4
US Price of Wheat Gluten
Produced at more than 50 plants worldwide, wheat gluten is the second largest
source of protein for all food applications. Approximately 600,000 tons were
produced in 1994, of which 18% were manufactured in North America.
Wheat gluten imported to the United States has doubled over the past 10 years
from the European Economic Community (EEC) and Australia. Manufacturers in
these countries are subsidized for their starch production, resulting in low
operating costs and competitive prices for gluten delivered to United States
markets.
Markets
Baking represents the predominant market for wheat gluten, accounting for 63%
oftotal usage worldwide. In the EEC, flour fortification ranks second to
baking, followed by pet food applications. North American markets for gluten
are shown below.
(This pie chart shows the North American Gluten Markets in 1994.
It shows the percentages of applications for total gluten use:
Baking = 68%, Pet Food = 13%, Flour = 11%, Other = 5%, Cereals =
2% and Seafood = 1%.)
Figure 5
Gluten Markets
Bakery Products
Many wholesale and large retail bakeries use wheat gluten to fortify dough when
making thinly-sliced bread, whole wheat bread, multi-grain bagels, salad rolls,
hamburger buns and pizza crust. Wheat gluten enhances the ability of wheat
dough to retain gas and give good oven spring and final loaf volume.
Pet Foods
Wheat gluten supplies protein and specific amino acids to pet foods. Wheat
gluten facilitates binding chunks of meat and absorbing natural meat juices.
It also acts as stiffening or texturing agent in semi-moist food products
imitating the appearance of marbled meat intended for domestic animals.
Meat Products
Due to the binding property and meat-like characteristics of wheat gluten, it
improves the use of beef, pork and lamb by restructuring less desirable fresh
meat cuts into more palatable steak-type products. Wheat gluten assists
binding turkey pieces to produce intact loaves with good slicing qualities.
Calf Milk Replacers
Calf milk replacers are artificial milk or milk imitations that are designed to
feed weaned calves. Calves need milk replacers that are held in stable
non-viscous emulsion and are palatable. The objective is to achieve protein
quality in the replacers equivalent to that of casein. Water soluble wheat
gluten is commercially used as a protein replacer for skimmed milk in calf milk
formulas.
Films and Coatings
Edible and odor free gluten films and coatings are used to wrap, package or
encase cheese, sandwiches and hors d'oeuvres. In confectionery products,
edible films serve as oxygen and moisture barriers. In other applications,
wheat gluten films and coatings extend the shelf life of foods by offering a
selective barrier against the transmission of gases, moisture and solutes.
Other Non-Food Uses
Wheat gluten has special applications in the manufacture of cigarette filters,
pharmaceutical tablets and paper coatings. As a component of cigarette filter
material, gluten has a high adsorption rate of tar, shows no resistance to
smoke passage and does not interfere with the taste of cigarette smoke. In
pharmaceutical tablets, gluten acts as a binder. In paper coatings, gluten
enhances whiteness, optical brightness, printability and water retention
capacity.
Many other non-food applications are possible for wheat gluten, including
detergent formulation, adhesives for plywood and ceramics, slow release
pharmaceuticals, medical bandages and gloves, dry cell batteries, textiles,
leather, rubber, thermal recording materials, fuel cells and fire retardant
polyurethane foam. Wheat gluten is a multi-functional, annually renewable
protein product.
Competition
Archer Daniels Midland Company (ADM) is one of the world's leading gluten
producers with plants in Candiac, Quebec, Keokuk, Iowa and Europe. The two
North American plants combined produce 24,000 tons per year. ADM has been in
the gluten industry for many years, including previous ownership of Ogilvie
Mills and General Mills. During this time they established a loyal customer
base and integrated internal markets by acquiring companies such as bakeries
that use gluten as raw material.
In addition to the gluten manufactured in North America, ADM markets some of
its European gluten in the United States and Canada. Due to European subsidies
on starch production, ADM is able to produce gluten at lower costs than North
American manufacturers. However, new agreements signed between the United
States and the EEC may make it difficult for ADM to import gluten
competitively. Currently, ADM markets all of its gluten through direct sales
and brokerage firms.
Midwest Grain Company (Midwest Grain) is a major manufacturer of gluten in the
United States with plants in Atchison, Kansas as well as Pekin, Illinois. The
Pekin location has been shut down due to high operating costs and low priced
imports. The Atchison location continues to produce approximately 12,000 tons
of gluten per year. This plant uses spray dryers to manufacture gluten for
Japanese markets where better prices are received for the product.
Since the Atchison plant was one of the first gluten manufacturing operations
in the United States, Midwest Grain has retained a loyal customer base for many
years. Midwest Grain sells most of its output through distributors.
Manildra Milling (Manildra), an Australian owned company, has been in the North
American market for many years with plants in Hamburg, Iowa and Minneapolis,
Minnesota. Combined production of these plants exceeds 16,000 tons of gluten
per year. Manildra is one of the leading suppliers in the United States, and
is the largest Austrailian importer of gluten to the U.S.
The remainder of the gluten consumed in North America is imported from Europe
and Australia. Approximately 22,000 tons comes from Europe and 25,000 tons
from Australia. European gluten is available at low prices because of the
subsidies received by manufacturers for starch production. Most gluten
imported from Europe, however, is not as high quality as domestic gluten and
is therefore consumed mainly in the pet food industry.
Sales Strategy
Riverside Grain plans to produce approximately 6,100 tons of gluten per year.
Riverside Grain will price gluten slightly below current market levels to
effectively penetrate selected target markets. These markets include the
bread, pet food, cereal, pasta and other food industries.
Riverside Grain will use a direct sales approach to aggressively capture market
share in these industries. Three experienced salespeople will work strategic
North American locations to focus efforts on leading purchasers of gluten.
Potential customers include Weston, Corporate Foods, McGavin and Kellogg in
Canada and Interstate, Earthgrains, Flowers and Heinz in the United States.
These companies purchase gluten in large quantities as commodity raw materials.
Since their decisions to buy are base primarily on price, management believes
Riverside Grain will quickly sell all initial production of gluten by offering
a 2% discount on current market prices.
Sales efforts will be concentrated in Canada and the United States to minimize
freight costs and maximize advantages created by restrictions these countries
have placed on gluten imports. Canadian restrictions keep overseas gluten
prices between 7 and 10% higher than domestic gluten.
Management believes gluten prices in the United States will steadily climb
throughout 1998 as gluten supplies tighten. This will present many
opportunities for export since, under NAFTA, Riverside Grain will enjoy full
access to United States markets without restriction.
All gluten output not sold through direct sales will be marketed through
commodity brokers and distributors. These brokers and distributors may find
channels leading to smaller niche markets than those targeted by Riverside
Grain's sales force. Niche markets usually offer higher prices for gluten than
large commodity markets.
The baking industry consumes approximately 70% of the gluten in North America.
Riverside Grain will announce its re-entry into the marketplace by advertising
in periodicals that reach a majority of baking companies, including Milling and
Baking News. Riverside Grain also intends to establish memberships with the
Institute of Food Technology, the Association of Bakery Engineers and the
International Wheat Gluten Association. Such memberships provide access to
current industry trends and statistical product information, as well as promote
a high profile and stable presence in the gluten industry.
While quantities of gluten purchased by large consumers remain fairly
consistent throughout a given year, prices for gluten fluctuate frequently.
Consumers generally elect signing 3 to 12 month contracts that fix both
quantity and price. Most would prefer gluten prices to change in relation to
wheat prices within a given contractual period. This would assure customers
that gluten prices are based on fair market value.
Management believes that by establishing a floating price structure based on
the price of wheat, Riverside Grain will successfully procure long term
contracts which require little renegotiation and inspire strong customer
loyalty. Furthermore, a floating price structure will allow Riverside Grain
to maintain steady profit margins and accurately prepare for future expansions
that may be initiated.
Outlook
Pacific Rim markets for gluten continue to grow at a rapid pace. These markets
place greater emphasis on high quality and pay premium prices for gluten with
particular specifications. Gluten made from Canadian spring wheat imparts
higher protein content and better functionality than gluten made in other parts
of the world and is preferred by Japanese markets. Riverside Grain intends to
approach Sumitomo and Yuasa as well as other distributors to market its
spray-dried gluten in Japan and nearby countries. Management is confident that
profit increases of at least 10% may be achieved by selling to these markets.
Mexico, Central America and South America also present excellent opportunities
for future growth. Improvements in bread-making technologies have resulted in
stronger demand for gluten in these countries. For example, Bimbo Foods in
Mexico uses approximately 3,000 tons of gluten per year in the manufacture of
its bakery products. Riverside Grain will continue researching such markets to
monitor profitable opportunities as they arise.
Riverside Grain will employ an experienced technical staff to enhance customer
service and explore niche markets for modified gluten. The pasta, aquaculture,
dairy products and meat analogue industries will be evaluated to determine
whether such value-added products may be manufactured to obtain even higher
returns than are currently projected.
Wheat Starch
Wheat starch is unique due to its bimodal size distribution with distinctive
fractions of large and small granules. Classification methods may be used to
separate the large and small sizes. Large granule size starches are used in
the carbonless and corrugated paper industries. Small granule size starches
are used in cosmetics and construction products.
Markets
The total market for starch in North America exceeded 2.5 million tons in 1996.
Current applications for wheat starch include:
Bakery Products
Adhesives
Animal Feed
Charcoal Briquettes
Construction
Corrugation
Carbonless Paper
Laundry Starch
White Paper
Textiles
Wall Paper Adhesives
Winding Paper for Cores and Tubes
Wheat starch cooks at lower temperatures than cornstarch or waxy maize. This
reduces the quantity of chemicals required to decrease starch gelatinization
temperatures.
Wheat starch offers excellent binding characteristics to adhesives, textiles,
charcoal briquettes, ceiling tiles and paper products. The extremely white
color of wheat starch transfers appearance benefits to various industrial and
food applications. Riverside Grain's target markets for wheat starch are the
paper, mining, gypsum wallboard, charcoal briquette and food industries.
Paper
Wheat starch enhances the retention of fiber and increases the internal
strength of paper. In carbonless paper, wheat starch acts as a blocking agent,
spacing layers apart and preventing premature release of ink. Wheat starch
increases surface strength and improves printing properties in size pressing
applications. When used for surface coating, it binds coating particles to
the paper surface.
Corrugating
In the corrugating industry, wheat starch is used as adhesive to bind cardboard
box paper layers. Starch is placed on the flute tips of the corrugated piece
between the outer layers.
Gypsum Wallboard
Gypsum wallboard is comprised of gypsum crystals, paper and binder. Wheat
starch allows the gypsum crystals to be absorbed by the paper and enhances
durability.
Charcoal Briquettes
B-starch is used to bind char and fly ash particles in charcoal briquettes.
Starch is injected as slurry into paddle mixers that blend the constituents and
form a charcoal paste. The paste is briquetted and dried to produce charcoal
briquettes.
Food Industry
Wheat starch is often preferred over cornstarch in food applications due to
superior color, flavor profile, physical properties and functionality. Wheat
starch adds "lightness" to fine pastries, cakes and specialty products. It is
used as a thickening agent in sauces, gravies and puddings. The low moisture
and bland flavor characteristics of wheat starch make it an excellent carrier
in blending dry ingredients. Wheat starch is a better "puffing" agent than
cornstarch for puffed cereals.
Competition
Archer Daniels Midland Co. produces 135,000 tons of wheat starch per year at
plants in Candiac, Quebec and Keokuk, Iowa for the paper and corrugation
industries. ADM currently supplies Provincial Paper in Thunder Bay and Avenor
Paper in Dryden.
Manildra Milling produces 70,000 tons of wheat starch per year at plants in
Minnesota and Iowa. Value-added starches are not manufactured. Food grade
starches are sold to General Mills and Pillsbury under long-term contracts.
B-grade starch is sold to an ethanol producer at low prices. The balance of
Manildra's starch is sold as a commodity mainly to the ceiling tile industry.
Midwest Grain produces 60,000 tons of wheat starch per year at a plant in
Kansas. Approximately 30% is consumed by the potable alcohol industry. The
balance is chemically modified to achieve value-added starches. Large granule
starch production is dedicated to Appleton Paper for the manufacture of
carbonless paper.
Several cornstarch manufacturers including Casco, National, Staley and
Minnesota Corn are potential competitors for starch supply to paper mills.
Riverside Grain will pursue competitive advantages over these companies by
providing expert technical and customer service.
Sales Strategy
Riverside Grain will produce approximately 28,100 tons of wheat starch per
year. Cationic starch will comprise 57% of starch production. Raisio
Chemicals Inc. has agreed to market all output of cationic starch to the
coated paper industry.
Riverside Grain will sell dextrinized starch to the mining industry and to the
wallboard industry for special applications. Large granule starch will be sold
to the carbonless paper industry. The primary target market for B-grade starch
will be the gypsum wallboard industry.
Riverside Grain will use a direct sales approach to aggressively capture market
share in targeted industries. Three experienced salespeople will work
strategic North American locations to focus efforts on leading purchasers of
wheat starch.
Potential customers for industrial applications include Avenor Paper,
Provincial Paper, Domtar Corrugating and Sunoco Paper. Potential customers
for food applications include Weston, Kellogg, General Mills and Pillsbury.
These companies purchase starch in large quantities as commodity raw materials.
Since their decisions to buy are base primarily on price, management believes
Riverside Grain will quickly sell all initial production of starch by offering
a 5% discount on current market prices.
Sales efforts will be concentrated in Canada and the United States to keep
freight costs as low as possible. Canadian markets are preferred due to higher
market pricing than the United States.
Advertising for starch products will be minimal. Riverside Grain will become a
member of the Technical Association of the Pulp and Paper Industries, the
Institute of Food Technology and the Association of Bakery Engineers to promote
a high profile and stable presence in the starch industry.
Riverside Grain will offer top-notch customer service. A technical department
will be devoted to assisting customers and coordinating sales activities with
production. Research and development will be ongoing to establish Riverside
Grain as the leading company of high quality wheat starch.
Outlook
Markets for modified starch represent the best opportunities for Riverside
Grain to maximize long-term profits. Specialty starches for the food industry
offer premium prices and will be the first modified starch markets explored.
Japanese markets for value-added starch will be evaluated with the assistance
of Yuasa Trading, a commodity broker and distribution company. Value-added
starch prices are sufficiently high in Japan to cover freight costs and earn
enhanced profits.
Starch markets in Latin and South America are expanding rapidly due to
technological improvements developed in the paper and corrugating industries.
Numerous exporting opportunities are anticipated to be available by the end of
1998.
Riverside Carbon Products, Inc.
Status: Environmental permits allowing the first charring and briquetting
plants to be built have been obtained and 20 year raw material
contracts have been signed. Management anticipates that additional
contracts for wood waste will be signed over the next three years,
providing enough raw material to build at least four more charring
and briquetting plant combinations.
Production: A target of 55,000 tons of char to be produced each year from
220,000 bone-dry tons of wood waste residues. The Company plans to
produce 88,000 tons of charcoal briquettes from this char.
Capital: The total capital required, including interim operation capital and
construction financing, is approximately $23.2 million for the
first combination of charring and briquetting plants. Management
estimates that each future combination of plants will require about
$20.0 million to install.
Markets: North America, Europe and Asia. The Company is pursuing various
markets for char and charcoal briquettes; at this time no sales or
distribution contracts have been signed.
Profits: Financial proformas prepared by management forecast that Riverside
Carbon's first combination of charring and briquetting plants will
generate more than $64.0 million net income before taxes over the
next five years. Management expects that each combination of
plants will generate pretax cash flows exceeding $12 million per
year. With the raw materials and markets to support the
installation of at least 5 combinations of plants, Riverside Carbon
has enormous earning and growth potential.
Riverside Carbon was formed by the Company to utilize wood fiber residuals
("hogfuel") generated at Canadian sawmill operations and by-product starch in
the manufacture of charcoal briquettes.
For many sawmills, disposal of hogfuel poses severe environmental concerns.
Air pollution from wood burning in "beehive" burners and leachate
contamination from wood storage in landfills has been under heavy scrutiny in
Canada over the last decade. Stringent government regulations have been
enacted, resulting in the demand to cease such practices and find alternate
uses for waste wood.
Riverside Carbon has obtained the environmental permits necessary to construct
and operate two charring plants in northwestern British Columbia, each capable
of processing up to 220,000 bone-dry tons of hogfuel per year. Fiber supply
agreements have been signed with two sawmills to support the first charcoal
plant. Signed agreements with sawmills to support the second plant are being
investigated and negotiations for an additional 500,000 bone-dry tons per year
are also being pursued. The Company has enough wood fiber under contract to
meet its initial production goals.
The initial charring and briquetting plants require a total investment of $23.2
million to generate an estimated $13.6 million net income, equaling an annual
return on investment (ROI) exceeding 50%. The briquetting plant will package
88,000 tons of charcoal briquettes per year for sale in the United States and
Canada. These figures are only projections of potential operations and are not
based on any actual sales. Potential partnerships with major producers of
briquettes are being discussed as a way to facilitate construction and
financing of the new plants.
Raw Materials
Negotiations continue with forest products companies regarding long-term
commitments to provide wood residue to Riverside Carbon for the purpose of
making charcoal. Current plans include construction of charring plants at
Houston and Carnaby in northwestern British Columbia. Each plant will produce
approximately 55,000 tons of charcoal per year from 220,000 bone-dry tons of
hogfuel. Environmental permits were issued in January 1997 allowing
construction of these plants. These figures are projections and do not reflect
any actual production.
Market Information
The barbecue industry is the only significant market for charcoal briquettes.
Approximately 869 thousand tons of briquettes were consumed by Americans during
barbecue events in 1996. This represented more than $525 million in sales,
averaging approximately $605 per ton.
The total tonnage of charcoal briquettes sold over the last 5 years has
increased by about 3 percent per year. Charcoal briquette sales in the United
States are graphically represented in Figure 6 below.
(Figure 6 shows the annual production of charcoal briquettes in the United
States from 1967 to 1996. The production varies from 350,000 tons per year in
1967 to 870,000 tons per year in 1997. A curve is drawn though the data points
to illustrate the market trends over the period shown.)
Figure 6
Production of Charcoal Briquettes in the United States from 1967 to 1996.
Production
Due to the wide array of types and blends of wood used as raw materials, many
customized "recipes" for briquettes have been developed by the charcoal
industry. However, all briquette manufacturers incorporate the following eight
stages in production:
1. Preparing - Brands (unburned wood) and tramp metal can seriously damage
machinery and cause expensive downtime. Brands are removed manually or with
vibrating grates. Heavy duty electromagnets are positioned over the feed belts
to remove tramp metals before wood enters the hammermills.
2. Crushing - Hammermills and screening systems reduce raw material to the
appropriate size distribution. Consistent particle size with a screen analysis
from 1/8" to 200 mesh is necessary for maximum strength, minimum starch and
best burning qualities.
3. Feeding - Variable speed feeders are used to assure accurate metering of
charcoal, starch and water. Charcoal level indicators are located above the
feeders in surge bins with holding capacity of twice hourly production capacity.
4. Mixing - Paddle mixers are used to blend the basic ingredients of char,
starch and water. The mixer should provide good retention time and thorough
mixing to produce a paste with the consistency of moist earth from which a high
quality briquette may be formed with less starch.
5. Forming - Specifications chosen for briquette presses depend on the raw
materials and plant capacity. Briquette presses produce standard size (1.5"
1.5" x 1.0") pillow-shaped briquettes.
6. Drying - Oscillating spreaders or distributing conveyors ensure briquettes
are evenly dispersed across the width of the dryers to the desired depth.
Properly dried briquettes are stronger, easier to light and more stable in
storage.
7. Packaging - Vibratory feeders with grates for removing fines uniformly draw
briquettes from holding bins to packaging equipment. Feeders are readily
adjustable to match packaging rates with package sizes. A wide variety of
types and sizes of baggage scales and closing systems are available to meet
plant specifications and marketing requirements.
8. Storing - As most charcoal briquettes are sold during the summer months,
significant warehouse space is needed to service the cyclical market
requirements without idle capacity in winter months. Sufficient space to store
up to one-half annual production may be required.
Characterization
Charcoals for industrial use and retail sale are usually manufactured under
specifications which fit the ranges of carbon 75 - 85%, ash 18 - 23%, volatile
matter 10 - 25% and moisture <6%. The properties exhibited by charcoal
briquettes may be adjusted by changing the recipe of char, ash, starch and
water in the paddle mixers.
A typical charcoal briquette contains 87% charcoal, 8% starch binder and 5%
moisture. The calorific value of charcoal is practically equivalent to that of
carbon. Charcoal with a high content of volatile material may be expected to
have a slightly greater calorific value than that with a low content of
volatile matter.
Current Manufacturers
Two companies manufacture more than 90% of all charcoal briquettes consumed in
the United States. Kingsford Products Company is the dominant producer,
controlling more than 50% of the total United States market.
Many companies sell charcoal briquettes under private labels. Royal Oak
produces the briquettes distributed by approximately 90% of the private label
companies included in the "Other" category depicted in Figure 7.
(This pie chart shows the major U.S. briquette producers as of
1993. The chart shows the various companies' percentages of the
market: Kingsford = 50%, Safeway = 20%, Imperial = 20% and Royal Oak = 10%)
Figure 7
Major Charcoal Briquette Manufacturers in the United States.
Sales Strategy
All Riverside Carbon charcoal briquette products will be sold to independent
marketing companies under long-term contracts. The Company is pursuing various
markets for both char and charcoal briquettes, at this time no sales or
distribution contracts have been signed.
Future Developments
Company engineers are researching a binder which will give charcoal briquettes
a plastic-like coating. The briquettes will be easy to light, easy to handle
and very clean.
Property in British Columbia
Every effort is being made to locate the charcoal plants as close to the source
of wood residue as possible, to minimize the cost of transporting heavy, wet
wood residue. To this end, options to purchase land from participating
sawmills in Houston have been arranged. Both mills have agreed that these
options may be exercised upon issuance of environmental permits and
finalization of fiber supply agreements.
Roughly seven acres of land are required at each site to provide adequate space
for project buildings, road and rail transport, fiber storage facilities and
effluent disposal fields. Locations and site plans for each facility are
included in the Exhibits section.
Other Projects Under Development
The following projects are being developed by management as potential projects
only.
Briquetting Facility
Riverside Carbon is investigating the possibility of building a briquetting
operation in Thunder Bay, Ontario. The briquetting operation would be located
within a few kilometers of Riverside Grain's starch and gluten plant. Charcoal
briquettes would be packaged and shipped from Thunder Bay to wholesale
distributors in Europe. Starch transportation costs would be eliminated,
greatly reducing overall freight costs to service European markets.
Flourmill
The Company is negotiating the purchase of a flourmill in the northern United
States. Present negotiations involve the seller acquiring an equity position
in the Company. The purchase price for the mill is approximately $8.0 million.
The seller has indicated willingness to discuss terms which involve half of the
final purchase price being payable in common shares of the Company. Management
does not expect the negotiations to be finalized until after the Offering is
completed. The flourmill is currently operating and earning strong profits.
Grain Terminal
The Company is evaluating the acquisition of an industrial grain terminal. An
independent subsidiary operating under the direction of Southern Ventures, Inc.
(Canada) would be established to run the terminal. Grain cleaning and drying
equipment would allow the Company to procure contract grown wheat, thereby
providing a secure raw material supply for the flour mill and controlled
profitability through vertical integration of operations.
Recreational Park
Southern Ventures Inc. (Canada) has submitted a bid to the Ontario Ministry of
Citizenship, Culture and Recreation for the acquisition of the Big Thunder
Sports Park in Thunder Bay, Ontario. The bid was submitted in October 1997.
An equity position was not proposed. Management expects that the bid may be
accepted before the completion of this Offering.
Owning Big Thunder Sports Park would provide the Company with excellent
marketing and advertising opportunities. International skiing competitions
draw global attention. Big Thunder Sports Park hosted the World Nordics in
1995. Events were televised around the world and thousands of spectators and
tourists visited the park.
Management intends to develop the existing facilities to establish Big Thunder
Sports Park as a high performance center and a four seasons resort. Each phase
of development will be financed with cash flows generated from the park.
Management predicts that Big Thunder Sports Park will generate pretax profits
exceeding $1.0 million per year by 2002.
Business Development
On September 9, 1996, Southern Ventures, Inc. (Canada) was incorporated in
Alberta, Canada. Southern Ventures, Inc. (USA) started operation on January 1,
1997, was incorporated under the Laws of the State of Nevada on February 7,
1997 and became the parent of Southern Ventures, Inc. (Canada).
The Company's formation incurred expenses in connection with the initial
offering and development of various projects. On January 1, 1997 the Company
acquired from Mr. Gordon Tucker and Mr. Bobby Harvey certain assets in the
amount of $439,860.37; an unsecured note was made payable jointly to Mr. Tucker
and Mr. Harvey at a rate of interest of 8%. Of this amount approximately
$110,000 was for the acquisition of certain developing projects. The Company
also spent an additional $274,000 in the first quarter of 1997 in further
development these and other projects (see Additional Projects Under
Consideration). In the second quarter of 1997 the company spent $280,653 on
additional research and development of the same projects.
The Company currently has the rights to use patent number 4,385,905 (System and
Method for Gasification of Solid Carbonaceous Fuels) issued by the US Patent
Office on May 31, 1983 to Company founder, Mr. Gordon Tucker and owned by
National SynFuels, Inc. A contract licensing technology to Carbon Products
Industries, Inc. (CPI) was acquired on January 1, 1997 from Mr. Tucker and Mr.
Harvey that allows CPI to use certain technology developed by the Company to
convert wood waste into activated carbon. CPI will pay the Company a royalty
of $4.00 per dry ton of material processed using the Company's technology.
On February 4, 1997 the shareholders of the Company entered into an agreement
with Mr. Bobby Harvey to participate in an IRS Code section 368(a)(1)(B)
reorganization, in which Southern Ventures, Inc. obtained 100% ownership of the
Elmore in exchange for ten million (10,000,000) shares of voting preferred
stock of Southern Ventures, Inc. As a result of this transaction, Mr. Harvey
has been elected Chairman of the Board of Directors and CEO of Southern
Ventures, Inc. (USA). On October 22, 1997 the transaction was consummated
between Mr. Harvey and Southern Ventures, Inc.
Mr. Harvey acquired Elmore in 1992. During the period of 1992 to 1994,
production at the Tuskegee Sand & Gravel facility was gradually phased out and
the Elmore facility was brought to full production capacity. By the beginning
of 1994, the Tuskegee mining operation had ceased mining operations and the
Elmore site was running at full production capacity of 200 tons per hour. The
new plant, built at a cost of approximately $2 million, started production on
October 21, 1997 and is producing at a rate of 400 tons per hour with 600 tons
per hour expected by February of 1998.
The Company currently has on average 35 full-time employees and one part time
employee.
Principal Office of Southern Ventures, Inc. is located at:
15000 Hwy. 11N, Cottondale, Alabama 35453
The registered office is located at:
1188 West Bonanza Drive, Carson City, Nevada 89706
List of Subsidiary Companies
Registered Office of Southern Ventures, Inc. (Canada) is located
at:
3700, 400 Third Avenue S.W., Calgary, Alberta, T2P 4H2
Principal Office of Riverside Carbon Products, Inc. is located
at:
2727 Phillips Rd. Sooke, British Columbia V0S 1N0
The Registered Office is located at:
3700, 400 Third Avenue S.W., Calgary, Alberta, T2P 4H2
Principal Office of Elmore Sand & Gravel, Inc. is located at:
2036 Maron Spillway Rd. P.O. Box 558 Elmore, Alabama 36025
The Registered Office is located at:
2036 Maron Spillway Rd. P.O. Box 558 Elmore, Alabama 36025
Principal Office of Tuskegee Sand & Gravel, Inc. is located at:
2036 Maron Spillway Rd. P.O. Box 558 Elmore, Alabama 36025
The Registered Office is located at:
2036 Maron Spillway Rd. P.O. Box 558 Elmore, Alabama 36025
Principal Office of Riverside Grain Products, Inc. is located at:
2727 Phillips Rd. Sooke, British Columbia V0S 1N0
The Registered Office of Riverside Grain Products, Inc. is
located at:
Suite 4220, Bay Wellington Tower, 181 Bay Street, Toronto,
Ontario M5J 2T3<PAGE>
Item 17. Management's Discussion and Analysis or Plan of
Operation
Company Background
On September 1, 1996, Southern Ventures, Inc. (Canada) was incorporated in
Alberta. The Company was incorporated in the State of Nevada on February 7,
1997 and became the parent of Southern Ventures, Inc. (Canada) (see
"Business of the Company"). The Company's formation incurred expenses in
connection with the initial offering and development of various projects. On
January 1, 1997 the Company acquired from Mr. Gordon Tucker and Mr. Bobby
Harvey certain assets in the amount of $ 439,860.37; an unsecured note was
made payable jointly to Mr. Tucker and Mr. Harvey at a rate of interest of 8%.
On February 4, 1997 the shareholders of the Company entered into an agreement
with Mr. Bobby Harvey to participate in an IRS Code section 368(a)(1)(B)
reorganization, in which Southern Ventures, Inc. obtained 100% ownership of the
Elmore in exchange for ten million (10,000,000) shares of voting preferred
stock of Southern Ventures, Inc. As a result of this transaction, Mr. Harvey
has been elected Chairman of the Board of Directors and CEO of Southern
Ventures, Inc. (USA). On October 22, 1997 the transaction was consummated
between Mr. Harvey and Southern Ventures, Inc.
Mr. Harvey acquired Elmore Sand & Gravel Inc. in 1992. During the period of
1992-1994, production at the Tuskegee Sand & Gravel facility was gradually
phased out and the Elmore facility was brought to full production capacity. By
the beginning of 1994, the Tuskegee Sand & Gravel, Inc. had ceased mining
operations and the Elmore site was running at full production capacity as it
remains today.
Tuskegee Sand & Gravel's present business is to lease equipment operations to
Elmore Sand & Gravel. Production at the Elmore site has steadily increased by
expanding the number of work shifts and by decreasing plant downtime. Elmore
generated an average net income of $142,197 per month based on current 1997
earnings. Management expects the new processing plant to increase net income.
Excellent margins assure sufficient earnings to sustain the ambitious growth
program planned by the Company.
Results of Operations
The following table sets forth, for the periods indicated, certain financial
data as a percentage of net sales:
Year Ended December 31
1996 1995 1994
Revenues.............................. 100.0% 100.0% 100.0%
Cost of Sales......................... 50.4% 59.3% 57.4%
Gross Profit....................... 49.6% 40.7% 42.6%
Selling, General and
Administrative Expenses............... 16.0% 15.1% 15.6%
Interest Expense...................... 3.3% 3.8% 2.4%
Net Income............................. 30.2% 21.8% 24.5%
Revenues
Revenues consist of gross sales of products less discounts, refunds and
returns. Revenues increased 50.2% to $3.4 million in fiscal 1996 from $ 2.3
million for fiscal 1995. This increase was attributable to the Company's
continued effort to reach a broader customer base. Additionally, revenues
were favorably impacted by increased production and decreased equipment
maintenance. The total amount of rock and sand sold was 450,651 tons, 417,249
tons, and 646,219 tons in 1994, 1995 and 1996 respectively. In 1996 the
total tons sold represented a 64% increase in production from 1995. Revenues
decreased to $2.3 million in fiscal 1995 from $2.7 million in fiscal 1994.
The decrease was attributable to the sale of higher priced inventory during
fiscal 1994.
Gross Profit Margin
Cost of sales consists of the cost of mining labor plus equipment operation
costs and overhead related to the Company's mining operations. The Company's
gross profit margin (gross profit as a percentage of net sales) increased to
49.6% in fiscal 1996 from 40.7% in fiscal 1995. This increase was due to the
Company's reduced maintenance costs and earlier investments in equipment that
improved overall efficiency. The Company's gross profit margin decreased to
40.7% in fiscal 1995 from 42.6% in fiscal 1994, primarily as a result of
reduction (sale) of higher priced inventory during fiscal 1994.
Selling, General an Administrative Expenses
Selling, general and administrative expenses consist of the sales and marketing
personnel, travel expenses, general insurance, amortization, customers support
expense, advertising, the compensation cost for administration, finance,
project development and general management personnel, and legal and accounting
fees. Selling, general and administrative expenses as a percentage of net
sales were 16% in fiscal 1996. Selling, general and administrative expenses
as a percentage of net sales were 15.1% in fiscal 1995. This lower percentage
was primarily the result of the increase in customer-related services,
management fees, and professional fees. Selling, general and administrative
expenses as a percentage of net sales decreased to 15.1% in fiscal 1995 from
15.6% in fiscal 1994 due primarily to the decrease in sales commissions.
Interest Expense
Interest expense as a percentage of net sales decreased to 3.3% in fiscal 1996
from 3.8% in fiscal 1995. This lower percentage was primarily the result of net
sales for fiscal 1996 increasing 50% from fiscal 1995. The interest expense
decrease was additionally offset by the increase in future investment in plant
and equipment, including the continuing construction of a new plant, which
began in the third quarter of 1996. The increase in interest expense as a
percentage of net sales to 3.8% in fiscal 1995 from 2.4% in fiscal 1994 was
due to increase in outstanding indebtedness through investment in equipment.
Six Months Results of Operations
The following table sets forth certain financial results for the first six
months of 1997 and 1996. In the opinion of management, this unaudited
information is presented on the same basis as the audited Financial Statements
appearing elsewhere in this Prospectus and includes all adjustments, consisting
only of normal recurring adjustments and accruals necessary for a fair
presentation of the Company's results of operations for those periods. The
quarterly information should be read in conjunction with the audited Financial
Statements, unaudited Quarterly Financial Statements and the Notes thereto.
The Company has experienced in the past and will experience in the future
quarterly variations in net sales and net income. Thus, operating results for
any particular quarter are not necessarily indicative of results for any future
period. Factors that have affected quarterly operating results include
customer relationships and labor costs, product mix, the level of operating
expenses, the condition of the mining industry, the economy in general and
competitive considerations. Most of the Company's revenue in each quarter
results from orders received in that quarter. In addition, the timing of
individual orders and shipments, customer buying patterns, including potential
seasonal considerations affect quarterly results. Although the Company's
sales are generally not seasonal, extreme weather conditions can affect the
mining, shipment and demands for products. Because the Company's expenses
are relatively fixed in the short term, variations in the timing of sales
could cause significant fluctuations in operating results from quarter to
quarter and may result in lower earnings or cash flows for a given quarter
than expected.
Liquidity and Capital Resources
The Company has financed its cash requirements through cash flows from
operations along with both short and long-term borrowings. The Company has
outstanding loans at interest rates at various spreads above the bank's cost of
funds for financing equipment. These credit facilities are secured by various
pieces of the Company's machinery. In September 1996, the Company obtained a
$1,800,000 secured line of credit with Colonial Bank at a rate of interest of
9.75%. This line of credit was obtained to enable to the Company to construct
the new processing plant. Through March 1997, the committed line of credit
consists of a total outstanding balance of $1,306,400. The Company has
outstanding loans at an interest rate of 8% payable to Mr. Tucker and Mr.
Harvey with balances through March 1997 of $436,389 and $295,409 respectively.
The Company's primary capital needs have been to (i) fund working capital
requirements, (ii) repay indebtedness, (iii) purchase property and equipment
for expansion (iv) fund distributions to its existing shareholder primarily to
satisfy his tax liabilities resulting from S Corporation status and (v) fund
project development and research . The Company's primary sources of financing
have been cash from operations, shareholder borrowings and bank borrowings.
The Company believes that its cash flow from operations, available lines of
credit and the portion of the net proceeds from this offering used for general
corporate purposes will be adequate to fund its operations for at least the
next twelve months. Additional funds will be required through equity and/or
debt instruments to pursue certain projects. See 'Business of the Company.'
Cash flows from operation were approximately $1,595,416, $553,222, $886,340,
$975,510 in fiscal 1996, 1995, 1994 and first six months of 1997, respectively.
Cash flows in fiscal 1996 were primarily provided by operating income,
increases in accounts payable and an increase in prepaid interest. For fiscal
1995, cash flows from operations were primarily provided by operating income
and decreases in accounts receivable. For the first six months of 1997,
operating income and accrued payroll liabilities primarily provided cash flows
from operations. Net cash was primarily used in investing activities for
expenditures related to facilities and equipment and was $1,781,166, $551,919,
$424,696, $1,256,252 in fiscal 1996, 1995, 1994 and first six months of 1997,
respectively. Through the second quarter of 1997, investments increased
$459,232 through the acquisition of certain assets and developed projects from
the Company's shareholders and $796,979 related to the recent plant
expansion. In fiscal 1997 the Company expects to make additional investments
in plant expansion. Net cash provided (used) in financing activities was
$323,796, ($229,415), ($327,988), $979,726 in fiscal 1996, 1995, 1994 and
first half of 1997, respectively. The net cash used in financing activities
in fiscal 1996, consisted of payments to outstanding debts and distributions
to shareholders. Cash provided by financing activities in fiscal 1996 and the
first six months of 1997 was additional long-term debt for plant expansion and
developed of Company projects.
Item 18. Description of Property
Gluten / Starch Mill -- Thunder Bay, Ontario Canada
Industry Segment: Food Processing
Location: 675 Vickers Street, Thunder Bay, Ontario
Legal Description: Plan 778 Lot 5 Lot 8 to 15 and plan M81 Lots 18 to 20 &
Plan 78 PT Lots 53 to 60 RP 55R9453 part 1 Prop. code: 522 Type: HI
The property, located on the banks of the Kaministikwia River, consists of
approximately 8 acres and includes the following buildings:
2-story main office building
Grain elevator structures formerly operated by Saskatchewan Wheat Pool and by
Ogilvie.
Feed mill
Boiler house
5 story smutts and plant proper with attached offices and dryers.
4 story warehouse
Anamet waste treatment facility
4 silos for bulk flour receipt
Associated trackage
Dock which runs along the warehouse, plant and feed mill
The property consist of the original gluten/starch plant as well as the former
Saskatchewan Wheat pool (SWP)-8 site. The main processing building was built
in 1912. Buildings of this vintage are usually quite sturdy.
Plant History
The processing building and warehouse are situated on the edge of the
Kaministiquia River which is dredged to a depth of 27 feet. A new steel dock
with tiebacks was installed in the late 1960's. The dock should be in good
condition since this type of dock has an average 70 to 80 year life span. The
dock is part of the former SWP-8 holdings.
There are rail lines on the property that are served by the major U.S. and
Canadian rail companies. Products manufactured at the facility are A-starch,
B-Starch and wheat gluten. The plant's flour throughput on average is
approximately 145 tonnes per day.
The mill was closed by ADM in 1996 due to continuous operating losses. Since
1996, both ADM and the City of Thunder Bay have been actively searching for a
suitable purchaser. The plant at this time remains out of operation.
Southern Ventures, Inc. -- Cottondale, Alabama.
Industry Segment: None
Location: 15000 Hwy. 11 North Cottondale, Alabama USA
Legal Description:
US HW 11
BEG SE COR NW/4; TH W 482.8
TO POB; TH W 95.9; NW ALG N
ROW US HWY 11 290.4; NW 255.6;
ELY ALG OLD VANCE RD 398.4; S
35 21S O8W
The property located at 15000 Highway 11 North, Cottondale, Alabama (lot
29-07-35-0-001-004.002) is approximately 4.2 acres and has three buildings
erected on the site. The initial living room of the main building has been
expanded to 3000 square feet of office space. The main shop space connected
to the office building measures 3000 square feet and is used as a product
demonstration facility.
Elmore Sand & Gravel, Inc. Elmore, Alabama
Industry Segment: Surface Mining
Location: 2036 Maron Spillway Elmore, Alabama USA
Riverside Carbon, Inc.
Houston: District Lot 334 & 337; Range 5; Coast District.
(Includes small sawmill.)
Item 19. Certain Relationships and Related Transactions
There is no family relationship between any of the directors or between any
director and any executive officer of the Company except that Dr. David Tucker
and Mr. Ross Tucker are brothers.
INTEREST OF MANAGEMENT IN MATERIAL CONTRACTS
On January 1, 1997 the Company acquired from Mr. Gordon Tucker and Mr. Bobby
Harvey certain assets in the amount of $439,860.37; an unsecured note was made
payable jointly to Mr. Tucker and Mr. Harvey at a rate of interest of 8%. Those
assets included: automobiles, computers, office equipment and supplies, shop
equipment and supplies, leasehold improvements, real property purchase option
and, interest in projects that were in the process of being developed.
The Company obtained cash and issued various notes payable to Mr. Harvey with
outstanding balances through June 1997 of $295,409.
On February 4, 1997 the shareholders of the Company entered into an agreement
with Mr. Bobby Harvey to participate in an IRS Code section 368(a)(1)(B)
reorganization, in which Southern Ventures, Inc. obtained 100% ownership of the
Elmore in exchange for ten million (10,000,000) shares of voting preferred
stock of Southern Ventures, Inc. As a result of this transaction, Mr. Harvey
has been elected Chairman of the Board of Directors and CEO of Southern
Ventures, Inc. (USA). On October 22, 1997 the transaction was consummated
between Mr. Harvey and Southern Ventures, Inc.
On February 7, 1997 the Company entered into a royalty agreement with National
Synfuels, Inc. whereby the Company has the sole and exclusive right to use
technology which is patented under U.S. Patent # 4,385,905 (System and Method
for Gasification of Solid Carbonaceous Fuels) issued by the U.S. Patent Office
on May 31, 1983, in exchange for a royalty of two ($2.00) dollars per dry ton
of wood processed into charcoal or fuels. This agreement includes the right
of the Company to sublicense this technology.
Item 20. Market for Common Equity and Related Stockholder Matters
Prior to this Offering there has been no established trading market for the
Common Shares. The initial public offering price of the Common Shares offered
hereby has been arbitrarily determined by the Company. There is no
representation that the Common Shares can be resold at the offering price, and
there can be no assurance that the price at which the Common Shares will trade
in the public market after the Offering will not be lower than the initial
public offering price. Prior to this Offering there has been no market for the
Common Shares and no market is expected to develop.
Upon consummation of this Offering, the Company will have outstanding
21,897,400 Common Shares. The 1,000,000 Common Shares offered hereby will be
freely transferable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"). Additionally,
20,897,400 shares are owned by insiders of the Company and could be registered
pursuant to Rule 144 under the Securities Act.
Item 21. Executive Compensation
Executive Compensation
The following table sets forth a summary of all compensation to be paid by the
Company for fiscal 1997 to the Company's executive officers whose total annual
salary and bonus for such year exceeds $100,000 (together, the "Named Executive
Officers").
Summary Compensation Table
Name Position with the Company Compensation(1)
Salary Bonus
Bobby H. Harvey Chairman of the Board & CEO 260,000 --
(1) The Company does not currently have any other benefits or bonus plans. It
is anticipated that the Named Executive Officers will not receive any
compensation beyond their salaries before the completion of the Offering.
No options were granted to nor exercised by any Named Executive Officer at the
time of this Offering.
Item 22. Financial Statements
Auditor's Report
Elmore Sand & Gravel Inc. and Tuskegee Sand & Gravel Inc
Report of Arthur J. Odle, CPA PC, Independent Auditors
To The Board of Directors
Southern Ventures, Inc.
Cottondale, Alabama
We have audited the accompanying consolidated balance sheets of
Elmore Sand & Gravel Inc. and Tuskegee Sand & Gravel Inc. as of
December 31, 1996, 1995, and 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for
each of the three years then ended. 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 audits.
We conducted our audits 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 or 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.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Elmore Sand & Gravel Inc. and Tuskegee Sand & Gravel Inc. as
of December 31, 1996, 1995, and 1994 and the results of their
operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
"Arthur J. Odle"
Arthur J. Odle, CPA PC
Montgomery, Alabama
May 15, 1997
Elmore Sand & Gravel, Inc. and Tuskegee Sand & Gravel, Inc.
Consolidated Statement of Financial Position
December 31
1996 1995 1994
Assets
Current assets:
Cash and cash equivalents........... $ 167,258 $ 29,212 $ 257,324
Accounts receivable................. 553,062 580,252 421,463
Inventory........................... 405,837 416,087 426,337
Total current Assets.............. 1,126,158 1,025,551 1,105,124
Goodwill............................... 18,563 50,738 77,963
Other assets........................... 227,246 92,007 38,153
Property, plant and equipment.......... 3,428,491 1,951,139 1,670,574
Total assets...................... $4,800,457 $3,119,435 $2,891,814
Liabilities and Shareholders Equity
Current liabilities:
Accounts payable.................... $ 410,677 $ 93,309 $ 68,227
Accrued compensation and payroll taxes 42,289 19,378 14,354
Current portion of long-term debt... 737,001 478,211 188,074
Notes payable....................... -- 25,598 99,647
Total current liabilities......... 1,189,967 616,496 370,301
Long-term liabilities, excluding
current portion........................ 1,502,387 670,035 925,431
Total liabilities................. 2,692,354 1,286,531 1,295,732
Shareholder's equity:
Common stock........................ 51,000 51,000 51,000
Retained earnings................... 2,057,103 1,781,904 1,545,082
Total shareholder's equity........ 2,108,103 1,832,904 1,596,082
Total liabilities and
shareholder's equity........... $4,800,457 $3,119,435 $ 2,891,814
The accompanying notes to consolidated financial statement are an integral part
of this statement.
Elmore Sand & Gravel, Inc. and Tuskegee Sand & Gravel, Inc.
Consolidated Statement of Operations
December 31
1996 1995 1994
Revenues............................... $3,453,797 $2,299,586 $2,709,160
Cost of sales.......................... 1,742,042 1,363,990 1,555,668
Gross profit........................ 1,711,755 935,596 1,153,493
Selling, general and
administrative expenses................ 554,001 347,560 423,513
Interest expense....................... 115,209 87,057 65,443
Net income.......................... $1,042,545 $ 500,978 $ 664,536
Earnings per Common Share.............. $ 2,044.21 $ 982.31 $ 1,303.01
The accompanying notes to consolidated financial statement are
an integral part of this statement.
Elmore Sand & Gravel, Inc. and Tuskegee Sand & Gravel, Inc.
Consolidated Statement of Cash Flows
December 31
1996 1995 1994
Cash provided (used) by operations:
Net income........................ $ 1,042,545 $ 500,978 $ 664,536
Income charges (credit) not
affecting cash:
Depreciation & Depletion.......... 303,815 271,354 261,980
Amortization...................... 32,175 27,225 22,275
Changes in certain working
capital components:
Decrease (increase) in inventory.. 10,250 10,250 --
Decrease (increase) in
accounts receivable............... 27,190 (158,789) 112,665
Decrease (increase) in
prepaid interest.................. (130,546) (50,977) --
Decrease (increase) in
other current assets.............. (4,694) (2,877) --
Increase (decrease) in
accounts payable, notes payable
and accrued liabilities........... 314,681 (43,942) (175,116)
Cash provided by operations............ 1,595,416 553,222 886,340
Cash provided (used) by investing activities:
Additions to property,
plant and equipment................. (1,818,666) (601,540) (488,491)
Disposals of property,
plant and equipment................. 37,500 49,621 63,795
Cash used by investing activities...... (1,781,166) (551,919) (424,696)
Cash provided by financing activities:
Additions in long-term debt......... 1,599,805 479,384 859,324
Reductions in long-term debt........ (503,663) (444,643) (200,859)
Distributions to shareholders....... (767,346) (264,156) (986,453)
Cash provided by financing activities.. 323,796 (229,415) (327,988)
Net increase (decrease) in cash........ 138,046 (228,111) 133,656
Cash at the beginning of the year...... 29,212 257,324 123,668
Cash at the end of the year............ $ 167,258 $ 29,212 $ 257,324
The accompanying notes to consolidated financial statement
are an integral part of this statement.
Elmore Sand & Gravel, Inc. and Tuskegee Sand & Gravel, Inc.
Consolidated Statement of Shareholder's Equity
Retained
Shares Amount Earnings Total
Balance at December 31, 1993....... 510 51,000 $ 1,866,998 $ 1,917,998
Net Income...................... 664,536
Distributions to shareholders... (986,453)
Balance at December 31, 1994....... 510 51,000 $ 1,545,082 $ 1,596,082
Net Income...................... 500,978
Distributions to shareholders... (264,156)
Balance at December 31, 1994....... 510 51,000 $ 1,781,904 $ 1,832,904
Net Income...................... 1,042,545
Distributions to shareholders... (767,346)
Balance at December 31, 1994....... 510 51,000 $ 2,057,103 $ 2,108,103
The accompanying notes to consolidated financial statement
are an integral part of this statement.
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant accounting policies
Description of Business:
Opening pit mining of high grade silica rock and sand.
Fiscal Year:
The Company's fiscal year is a calendar year.
Basis of consolidation:
The consolidated statements include Elmore Sand and Gravel, Inc. and Tuskegee
Sand and Gravel, Inc. Inter-company transactions were eliminated for
consolidation purposes. Both corporations are solely owned by one shareholder.
Recognition of revenue:
Revenue recognized FOB Plant.
Lease and Royalty Commitments:
The leases obligate the Company to pay royalties, maintenance and reclamation
costs. There are approximately two thousand acres currently under long-term
leases.
Inventory:
Inventories are stated at the lower of cost or market, determined by using the
last-in, first-out (LIFO) method.
Property, plant and equipment:
Property, plant and equipment are recorded at cost. Depreciation for financial
reporting purposes is determined on a straight-line basis use half-year
convention based upon a estimated useful lives ranging form three to fifteen
years.
Goodwill:
Goodwill of $148,500 represents amounts relating to assets acquired in excess
of value when Elmore Sand and Gravel Inc. was acquired in 1992.
Income taxes:
Both corporations have elected Chapter S of the Internal Revenue Code for
income tax reporting. Accordingly, no provisions are made for Federal and
State income taxes.
Note 2 - Property, Plant and equipment:
Property, plant and equipment includes the following:
December 31 1996 1995 1994
Leasehold........................... $ 8,975 $ 5,725 $ 1,825
Mining Equipment.................... 646,642 603,340 535,336
New Plant........................... 933,406 110,066 --
Office Equipment.................... 23,787 20,543 19,608
Railroad............................ 143,500 143,500 143,500
Rolling Stock....................... 2,584,905 1,694,883 1,624,592
Service Vehicle..................... 167,521 112,013 113,722
Shop Equipment...................... 27,570 27,570 15,295
Trailer............................. 55,476 55,476 61,564
Land................................ 256,390 293,890 256,390
4,848,173 3,067,007 2,771,832
Accumulated Depreciation and Depletion 1,419,682 1,115,867 1,101,258
$3,428,491 $ 1,951,139 $ 1,670,574
Note 3 - Long Term Debt
The Company has outstanding loans at interest rates at various spreads above
the banks' cost of funds for financing equipment. These credit facilities are
secured by various pieces of the Company's machinery.
In September 1996, the Company obtained a $1,800,000 secured line of credit
with a local bank at a rate of interest of 9.75%. Through December 1996, the
committed line of credit consists of a total outstanding balance of
$722,452..90.
Note 4 - Common Shares
The outstanding stock for Elmore Sand and Gravel, Inc. is 1,000 shares at $1.00
par. value and Tuskegee Sand and Gravel, Inc. outstanding stock is 500 shares
at $100.00 par value. For calculating the earnings per share on the
Consolidated Statement of Financial Position an aggregated number of 510
shares is used.
Note 5 - Subsequent Activities
On February 4, 1997 the shareholders of the Company entered into an agreement
with Southern Ventures, Inc. to participate in an IRS Code section 368(a)(1)(B)
reorganization, in which Southern Ventures, Inc. will obtain 100% ownership in
the Company's outstanding stock in exchange for voting stock in Southern
Ventures, Inc.
Six Months Financial Statements
(1) This column represents the combined information of the parent company
Southern Ventures, Inc. and its subsidiaries Elmore Sand & Gravel and
Tuskegee Sand & Gravel. Since operations for the parent company began in
January 1, 1997 this is the first month in which its operations are
represented. The acquisition of the aforementioned subsidiaries is
represented through the pooling method.
(2) For comparative purposes only. This financial information includes only the
subsidiaries Elmore Sand & Gravel, Inc. and Tuskegee Sand & Gravel, Inc.
This is consistent with the prior period report, which included only these
subsidiaries.
Southern Ventures, Inc.
Consolidated Statement of Financial Position
June 30
1997(1) 1997(2) 1994
Assets
Current assets:
Cash and cash equivalents........... $ 135,801 $ 121,192 $ 265,462
Accounts receivable................. 641,256 641,256 514,663
Inventory........................... 405,837 405,837 416,087
Total current Assets............. 1,182,894 1,168,285 1,196,213
Intangible assets...................... 110,046 3,713 35,888
Notes receivable....................... 231,955 -- --
Other assets........................... 250,551 246,281 81,789
Property, plant and equipment.......... 4,141,010 4,029,358 2,015,412
Total assets................... $5,916,456 $5,447,637 $3,329,301
Liabilities and Shareholders Equity
Current liabilities:
Accounts payable.................... $ 213,354 $ 213,354 $ 96,530
Accrued compensation and payroll taxes 376,296 44,260 24,645
Current portion of long-term debt... 698,304 698,304 436,249
Notes payable....................... 731,797 -- --
Total current liabilities......... 2,019,741 955,918 557,424
Long-term liabilities,
excluding current portion.............. 2,033,926 2,033,926 305,228
Total liabilities................. 4,053,677 2,989,845 862,651
Shareholder's equity:
Common stock........................ 18,437 51,000 51,000
Preferred stock..................... 10,000 -- --
Additional paid-in capital.......... 41,000 -- --
Retained earnings................... 1,793,342 2,406,792 2,267,956
Total shareholder's equity........ 1,862,779 2,457,792 2,466,650
Total liabilities and
shareholder's equity........... $5,916,456 $5,447,637 $3,329,301
The accompanying notes to consolidated financial statement are an integral
part of this statement.
Southern Ventures, Inc. and Subsidiaries
Unaudited Consolidated Statement of Operations
June 30
1997(1) 1997(2) 1994
Revenues............................... $ 2,055,380 $ 2,055,380 $ 1,795,648
Cost of sales.......................... 873,155 873,155 978,470
Gross profit........................ 1,182,225 1,182,225 817,178
Selling, general and
administrative expenses................ 804,233 205,261 268,034
Interest expense....................... 138,265 123,786 45,862
Net income.......................... $ 239,728 $ 853,179 $ 503,318
Earnings per Common Share.............. $ 0.01 $ 0.05 $ 0.03
Outstanding common stock of 18,437,400 shares.
The accompanying notes to consolidated financial statement are an integral
part of this statement.
Southern Ventures, Inc. and Subsidiaries
Unaudited Consolidated Statement of Cash Flows
June 30
1997(1) 1997(2) 1994
Cash provided (used) by operations:
Net income........................ $ 239,728 $ 853,179 $ 503,318
Income charges (credit) not
affecting cash:
Depreciation & Depletion.......... 201,737 196,112 134,421
Amortization...................... 18,517 14,850 14,850
Changes in certain working
capital components:
Decrease (increase) in inventory.. -- -- --
Decrease (increase) in
accounts receivable............... (88,193) (88,193) 65,589
Decrease (increase) in
prepaid interest.................. 10,694 10,694 26,536
Decrease (increase) in
other current assets.............. (33,998) (29,728) (13,318)
Increase (decrease) in
accounts payable, notes payable
and accrued liabilities........... 136,684 (195,352) (17,111)
Cash provided by operations............ 485,168 761,562 711,285
Cash provided (used) by investing activities:
Additions to intangible assets...... (110,000) -- --
Additions to property,
plant and equipment................. (914,256) (796,979) --
Disposals of property,
plant and equipment................. -- -- 37,500
Additions to other non-current assets (231,955) -- --
Cash used by investing activities...... (1,256,212) (796,979) 37,500
Cash provided by financing activities:
Additions in long-term debt......... 761,793 761,793 23,663
Reductions in long-term debt........ (268,951) (268,951) (430,432)
Increase in notes payable........... 731,797 -- --
Proceeds from issuance of stock..... 18,437 -- --
Distributions to shareholders....... (503,491) (503,491) (105,766)
Cash provided by financing activities.. 739,586 (10,648) (512,535)
Net increase (decrease) in cash........ (31,457) (46,066) 236,250
Cash at the beginning of the period.... 167,258 167,258 29,212
Cash at the end of the period.......... $ 135,801 $ 121,192 $ 265,462
The accompanying notes to consolidated financial statement
are an integral part of this statement.
Notes to Consolidated Financial Statements
Six Months Financial Statements
Note 1 - Summary of Significant accounting policies
Description of Business:
Opening pit mining of high grade silica rock and sand, manufacturing of starch
and gluten, charcoal, charcoal briquettes and related charcoal based products.
Fiscal Year:
The Company's fiscal year is a calendar year.
Basis of consolidation:
The consolidated statements include Elmore Sand and Gravel, Inc., Tuskegee Sand
and Gravel, Inc. and Southern Ventures, Inc. The pooling method was used for
the accounting of the acquisition of these subsidiaries. Inter-company
transactions were eliminated for consolidation purposes.
Recognition of revenue:
Revenue recognized FOB plant.
Lease and Royalty Commitments:
The leases obligate the Company to pay royalties, maintenance and reclamation
costs. There are approximately two thousand acres currently under long-term
leases.
Inventory:
Inventories are stated at the lower of cost or market, determined by using the
last-in, first-out (LIFO) method.
Property, plant and equipment:
Property, plant and equipment are recorded at cost. Depreciation for financial
reporting purposes is determined on a straight-line basis, based upon an
estimated useful life ranging from three to fifteen years.
Intangible assets:
Intangible assets consist of goodwill and various project purchased by Company.
Goodwill of $148,500 represents amounts relating to assets acquired in excess
of value when Elmore Sand and Gravel Inc. was acquired in 1992.
Income taxes:
Subsidiaries Elmore Sand & Gravel, Inc. and Tuskegee Sand & Gravel, Inc. have
to date elected Chapter S of the Internal Revenue Code for income tax
reporting. See Note 5 - Subsequent Activities.
Note 2 - Property, Plant and equipment:
Property, plant and equipment includes the following:
June 30, 1997 June 30, 1996
Leasehold...................................... $ 78,975 $ 5,725
Mining Equipment............................... 646,642 633,161
New Plant...................................... 1,496,738 228,491
Office Equipment............................... 50,045 22,761
Railroad....................................... 143,500 143,500
Rolling Stock.................................. 2,805,975 1,706,174
Service Vehicle................................ 181,531 148,953
Shop Equipment................................. 37,832 27,570
Trailer........................................ 64,810 55,476
Land........................................... 256,390 293,890
5,762,429 3,265,700
Accumulated Depreciation and Depletion......... 1,621,419 1,250,288
$ 4,141,010 $ 2,015,412
Note 3 - Intangible Assets
Intangible Assets include the following:
June 30, 1997 June 30, 1996
Goodwill....................................... $ 148,500 $ 148,500
BC Briquette Project........................... 90,000 -
Firebrick Project.............................. 5,000 -
Thunder Bay Project............................ 15,000 -
258,500 148,500
Accumulated Depreciation and Depletion......... 148,454 112,612
$ 110,046 $ 35,888
Note 4 - Long Term Debt
The Company has outstanding loans at interest rates at various spreads above
the bank's cost of funds for financing equipment. These credit facilities are
secured by various pieces of the Company's machinery. In September 1996, the
Company obtained a $1,800,000 secured line of credit with Colonial Bank at a
rate of interest of 9.75%. The line of credit was obtained to enable the
company to construct the new processing plant. Through June 1997, the
committed line of credit consists of a total outstanding balance of
$1,306,400 The Company has outstanding loans at an interest rate of 8%
payable to Mr. Tucker and Mr. Harvey and various notes for operation capital
loans payable to Mr. Harvey with balances through June 1997 of $425,325 and
$295,409 respectively.
Note 5 - Subsequent Activities
On February 4, 1997 the shareholders of the Company entered into an agreement
with Mr. Bobby Harvey to participate in an IRS Code section 368(a)(1)(B)
reorganization, in which Southern Ventures, Inc. obtained 100% ownership of the
Elmore in exchange for ten million (10,000,000) shares of voting preferred
stock of Southern Ventures, Inc. As a result of this transaction, Mr. Harvey
has been elected Chairman of the Board of Directors and CEO of Southern
Ventures, Inc. (USA). On October 22, 1997 the transaction was consummated
between Mr. Harvey and Southern Ventures, Inc.
On July 31, 1997 five hundred thousand (500,000) shares of common stock were
sold at a price of one ($1) dollar per share.
Item 23. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not Applicable.
Item 24. Indemnification of Directors and Officers
The Company's Articles of Incorporation provide that, pursuant to Nevada law,
each director shall not be liable for monetary damages for breach of the
directors' fiduciary duty as a director to the Company and its stockholders. In
addition, the Company's Bylaws provide that the Company will indemnify its
directors and officers and may indemnify its employees and other agents to the
fullest extent permitted by law. The Company also contemplates entering into
indemnification agreements with its officers and directors.
The Company's Articles of Incorporation provide that no officer or director
will be personally liable to the Company or any stockholder for damages for
breach of fiduciary duty as a director or officer, except for (i) acts or
omissions that involve intentional misconduct, fraud or a knowing violation of
law or (ii) the payment of dividends in violation of the Corporation Law. If
the Corporation Law is amended or interpreted to eliminate or limit further
the personal liability of directors or officers, then the liability of all
directors and officers automatically will be eliminated or limited to the full
extent then so permitted. These provisions in the Articles of Incorporation
do not eliminate the fiduciary duties of the directors and officers and, in
appropriate circumstances, equitable remedies such as injunctive relief or
other forms of non-monetary relief will remain available under Nevada law. In
addition, these provisions do not affect responsibilities imposed under any
other law, such as the federal securities laws or state or federal
environmental laws.
The Company's Bylaws provide that the Company will indemnify its directors and
officers and may indemnify its employees and other agents to the fullest extent
permitted under the Corporation Law. The Company believes that indemnification
under its Bylaws covers at least negligence and gross negligence by indemnified
parties and permits the Company to advance litigation expenses in the case of
stockholder derivative actions or other actions, against an undertaking by the
indemnified party to repay such advances if it is ultimately determined that
the indemnified party is not entitled to indemnification. The Company intends
to seek liability insurance for its officers and directors.
Prior to the consummation of the Offering, the Company anticipates that it will
enter into separate indemnification agreements with each of its directors and
officers. These agreements will require the Company, among other things, to
indemnify such persons against certain liabilities that may arise by reason of
their status or service as directors or officers (other than liabilities
arising from actions involving intentional misconduct, fraud or a knowing
violation of law), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified and to cover
such persons under any directors' and officers' liability insurance policy
maintained by the Company. These indemnification agreements will be separate
and independent of the indemnification rights under the Bylaws and are
irrevocable.
Item 25. Other Expenses of Issuance and Distribution
The following are the estimated expenses:
Audit $13,000
Equipment Appraisal $5,000
Filing Fee $3,000
Engineering Report (Reserves) $5,000
Printing $75,000
Postage $38,000
State Filing Fees $40,000
Advertising $46,000
Web Site Development $5,000
Legal Fees $120,000
Total $350,000
Item 26. Recent Sales of Unregistered Securities
Table 9 lists the names and shares purchased within the last three years.
Number of Offering
Shares Sold Class of Shares Date Sold Class of Purchaser Price
18,437,400 Common Shares April 15, 1997 Insider(1) $0.001
1,960,000 Common Shares April 15, 1997 Insider(2) $1.020
10,000,000 Preferred Shares April 15, 1997 Insider(3) $0.500
500,000 Common Shares July 31, 1997 Insider(4) $1.000
Table 9
Recent Sales of Unregistered Securities
(1) All of the shares sold in the indicated offering were sold to directors,
officers and insiders of the Company or their families and close personal
friends who, through their relationship with a director, officer or insider
of the Company, have intimate knowledge of the business of the Company and
therefor meet the definition of "sophisticated investor." These shares were
sold at per value and relied on the Private Offering Exemption from
registration under Section 4(2) of the Securities Act.
(2) The Company has negotiated the purchase of a starch and gluten plant in
Thunder Bay, Ontario from ADM for a total consideration of $5,000,000. Of
this amount, $2,000,000 is paid through the issuance of common shares of the
Company equaling 9% of the total Common Shares on a fully diluted basis or
1,960,000 shares upon completion of the Offering. It should be noted that
if the Company fails to achieve listing status on an exchange by January 16,
1997, the shares reserved for Archer Daniels Midland may be canceled and the
$2,000,000 payment made due and payable at ADM's option. See "Material
Contracts." ADM qualifies as a "sophisticated investor" and as a result of
the transaction has become an insider of the Company. The shares were
therefor sold pursuant to the Private Offering Exemption from registration
under Section 4(2) of the Securities Act.
(3) The Company has negotiated the purchase of Elmore Sand & Gravel, Inc. and
Tuskegee Sand & Gravel, Inc. from its Chairman and CEO, Mr. Bobby H. Harvey
through the issuance of 10,000,000 Preferred Shares under an IRS Code
section 368(a)(1)(B) reorganization. See "Material Contracts" and
"Management's Discussion and Analysis or Plan of Operation." The shares
were issued pursuant to the Private Offering Exemption from registration
under Section 4(2) of the Securities Act.
(4) All of the shares sold in the indicated offering were sold to directors,
officers and insiders of the Company or their families and close personal
friends who, through their relationship with a director, officer or insider
of the Company, have intimate knowledge of the business of the Company and
therefor meet the definition of "sophisticated investor." These shares were
sold at per value and relied on the Private Offering Exemption from
registration under Section 4(2) of the Securities Act.
Item 27. Exhibits
Exhibits attached to end of document. Exhibits filed in paper form are:
1. A Woodwaste Agreement and Option Agreement between Rivereside Carbon
Products, Inc., Southern Ventures, Inc. and Northwood Pulp and Timber
Limited.
2. A Fiber Supply Contract between Riverside Carbon Products, Inc. and
Weldwood of Canada Limited.
Additionaly, from the Assistant Regional Manager of the Skeena Region of
the British Columbia Ministry of Environment, Lands and Parks:
3. Permit PA-14845
4. Permit PE-14859
5. Permit PA-14846
6. Permit PE-14860
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering of those securities.
SIGNATURES -----------------------
In accordance with the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements of filing on Form SB-2 and
authorized this registration statement to be signed on its behalf
by the undersigned, in the City of Cottondale, State of Alabama on
October 30, 1997.
Southern Ventures, Inc., a Nevada Corporation
By (Signatures and title) "Elaine Knapp Sec/Dir", "David Tucker Dir",
"Chet Wright Tres/Dir", "Ross G. Tucker VP/Dir", "W.B.Wood Dir"
"Dennis H. Saunders VP", "David C. Parsons VP", "Bobby H.Harvey"
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in
the capacities and on the dates listed:
"Bobby H. Harvey" "Chester I. Wright" "Elaine Knapp"
Bobby Harvey Chester I. Wright E. Elaine Knapp
CEO, President and Treasurer and Director Secretary and Director
Director
"10/27/97" "10/29/97" "10/29/97"
"Ross G. Tucker" "David C. Parsons" "W. B. Wood"
V.P. and Director V.P. and Director V.P. and Director
"10/29/97" "97/10/30" "10/29/97"
"Dennis H. Saunders" "David Tucker"
Dennis H. Saunders David Tucker
V.P. Director
"10/30/97" "10/29/97"
Corporate Seal Affixed 10/30/97
Articles of Incorporation
(PURSUANT TO NRS 78)
STATE OF NEVADA
Filed in the office of the
Secretary of State of the
STATE OF NEVADA
FEB. 07 1997
C2581-97
DEAN HELLER SECRETARY OF STATE
1. NAME OF CORPORATION: Southern Ventures, Inc.
2. RESIDENT AGENT:
Name of Resident Agent: Resident Agents of Nevada, Inc.
Street Address: 1188 West Bonanza Drive, Carson City, 89706
3. SHARES: (number of shares corporation is authorized to issue)
Number of shares with par value: 50,000,000 Par value: .001
Number of shares without par value: 0
4. GOVERNING BOARD: shall be styled as [Directors] Trustees
The FIRST BOARD OF DIRECTORS shall consist of [1] member(s) and
the name(s) and address(es) is (are) as follows:
Gordon H. Tucker 3636 Rainbow Drive Tuscaloosa, AL 35405
5. PURPOSE (optional):
6. OTHER MATTERS: Number of pages attached [0]
7. SIGNATURE(S) OF INCORPORATOR(S):
Donald R. Karr
1188 West Bonanza Drive
Carson City, NV 89706
"Donald R. Karr"
[SIGNATURE]
State of NEVADA County of CARSON
[2-7, 1997] by
Donald R. Karr
as incorporator of
Southern Ventures, Inc.
"S.L. Osheroff"
S.L. OSHEROFF
NOTARY PUBLIC- NEVADA
Appt. Recorded in CARSON CITY
My Appt. Exp. OCT. 7, 2000
8. CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT:
I, Resident Agents of Nevada, Inc. hereby accept appointment as
Resident Agent for the above named corporation.
"Donald R. Karr"
Signature of Resident Agent Donald R. Karr, President Date:
[2-7-97]
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock) Filed by:
[Southern Ventures, Inc.]
Name of Corporation
We the undersigned [Gordon H. Tucker] and
President or Vice President
[Elaine Knapp] of [Southern Ventures, Inc.]
Secretary or Assistant Secretary Name of Corporation
do hereby certify:
That the board of Directors of said corporation at a meeting
duly convened, held on the [10th] day of [April , 1997], adopted
a resolution to amend the original articles as follows:
Article [3] is hereby amended to read as follows:
Number of Common Shares with par value: 40,000,000 Par
Value: .001
Number of Shares without par value: 0
Number of Class A Preferred Shares: 10,000,000 Par Value: .001
Whose voting powers, designations, preferences, limitations,
restrictions and relative rights shall be prescribed by the
Board of Directors.
The number of shares of the corporation outstanding and
entitled to vote on and amendment to the Articles of
Incorporation is [9,533,250]; that the said change(s) and
amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of
stock outstanding and entitled to vote thereon.
"Gordon H. Tucker"
President or Vice President
"Elaine Knapp"
Secretary or Assistant Secretary
State of [Alabama]
County of [Tuscaloosa]
On [July 29, 1997], personally appeared before me, a Notary
Public,
[Elaine Knapp and Gordon H. Tucker], who Acknowledged that they
executed the above instrument.
Acknowledged that they executed the above instrument.
"Katherine W. Duncan" My Commission Expires March 4, 1998
Signature of Notary
BYLAWS
OF
Southern Ventures, Inc.
ARTICLE I - OFFICES
Section 1. Principal Executive Office. The principal office of
the Corporation is hereby fixed in Carson City in the State of
Nevada.
Section 2. Other Offices. Branch or subordinate offices may be
established by the Board of Directors at such other places as
may be desirable.
ARTICLE II - SHAREHOLDERS
Section 1. Place of Meeting. Meetings of shareholders shall be
held either at the principal executive office of the corporation
or at any other location within or without the State of Nevada
which may be designated by written consent of all persons
entitled to vote thereat.
Section 2. Annual Meetings. The annual meeting of shareholders
shall be held on such day and at such time as may be fixed by
the Board; provided, however, that should said day fall upon a
Saturday, Sunday, or legal holiday observed by the Corporation
at its principal executive office, then any such meeting of
shareholders shall be held at the same time and place on the
next day thereafter ensuing which is a full business day. At
such meetings, directors shall be elected by plurality vote and
any other proper business may be transacted.
Section 3. Special Meetings. Special meetings of the
shareholders may be called for any purpose or purposes permitted
under Chapter 78 of Nevada Revised Statutes at any time by the
Board, the Chairman of the Board, the President, or by the
shareholders entitled to cast not less than twenty-five percent
(25%) of the votes at such meeting. Upon request in writing to
the Chairman of the Board, the President, any vice-president or
the Secretary, by any person or persons entitled to call a
special meeting of shareholders, the Secretary shall cause
notice to be given to the shareholders entitled to vote, that a
special meeting will be held not less than thirty-five (35) nor
more than sixty (60) days after the date of the notice.
Section 4. Notice of Annual or Social Meeting. Written notice
of each annual meeting of shareholders shall be given not less
than ten (10) nor more than sixty (60) days before the date of
the meeting to each shareholder entitled to vote thereat. Such
notice shall state the place, date and hour of the meeting and
(i) in the case of a special meeting the general nature of the
business to be transacted, or (ii) in the case of the annual
meeting, those matters which the Board, at the time of the
mailing of the notice, intends to present for action by the
shareholders, but, any proper matter may be presented at the
meeting for such action. The notice of any meeting at which
directors are to be elected shall include the names of the
nominees intended, at the time of the notice, to be presented by
management for election.
Notice of a shareholders' meeting shall be given either
personally or by mail or, addressed to the shareholder at the
address of such shareholder appearing on the books of the
corporation or if no such address appears or is given, by
publication at least once in a newspaper of general circulation
in Carson County, Nevada.
An affidavit of mailing of any notice, executed by the
Secretary, shall be prima facie evidence of the giving of the
notice.
Section 5. Quorum. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at
any meeting of shareholders. If a quorum is present, the
affirmative vote of the majority of shareholders represented and
voting at the meeting on any matter, shall be the act of the
shareholders. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding withdrawal of enough
shareholders to leave less than a quorum, if any action taken
(other than adjournment) is approved by at least a majority of
the number of shares required as noted above to constitute a
quorum. Notwithstanding the foregoing, (1 ) the sale, transfer
and other disposition of substantially all of the corporations
properties and (2) a merger or consolidation of the corporation
shall require the approval by an affirmative vote of not less
than two-thirds (2/3) of the corporation's issued and
outstanding shares.
Section 6. Adjourned Meeting and Notice Thereof. Any
shareholders meeting, whether or not a quorum is present, may be
adjourned from time to time. In the absence of a quorum (except
as provided in Section 5 of this Article), no other business may
be transacted at such meeting.
It shall not be necessary to give any notice of the time and
place of the adjourned meeting or of the business to be
transacted thereat, other than by announcement at the meeting at
which such adjournment is taken; provided, however when a
shareholders meeting is adjourned for more than forty-five (45)
days or, if after adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be
given as in the case of an original meeting.
Section 7. Voting. The shareholders entitled to notice of any
meeting or to vote at such, such meeting shall be only persons
in whose name shares stand on the stock records of the
corporation on the record date determined in accordance with
Section 8 of this Article.
Section 8. Record Date. The Board may fix, in advance, a record
date for the determination of the shareholders entitled to
notice of a meeting or to vote or entitled to receive payment of
any dividend or other distribution, or any allotment of rights,
or to exercise rights in respect to any other lawful action. The
record date so fixed shall be not more than sixty (60) nor less
than ten (10) days prior to the date of the meeting nor more
than sixty (60) days prior to any other action. When a record
date is so fixed, only shareholders of record on that date are
entitled to notice of and to vote at the meeting or to receive
the dividend, distribution, or allotment of rights, or to
exercise of the rights, as the case may be, not withstanding any
transfer of shares on the books of the corporation after the
record date. A determination of shareholders of record entitled
to notice of or to vote at a meeting of shareholders shall apply
to any adjournment of the meeting unless the Board fixes a new
record date for the meeting. The Board shall fix a new record
date if the meeting is adjourned for more than forty-five (45)
days.
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a
meeting of shareholders shall be the close of business on the
business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business
day next preceding the day on which notice is given. The record
date for determining shareholders for any purpose other than as
set in this Section 8 or Section 10 of this Article shall be at
the close of the day on which the Board adopts the resolution
relating thereto, or the sixtieth day prior to the date of such
other action, whichever is later.
Section 9. Consent of Absentees. The transactions of any
meeting of shareholders, however called and noticed, and
wherever held, are as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present either in
person or by proxy, and if, either before or after the meeting,
each of the persons entitled to vote not present in person or by
proxy, signs a written waiver of notice, or a consent to the
holding of the meeting or an approval of the minutes thereof.
All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 10. Action Without Meeting. Any action which, under any
provision of law, may be taken at any annual or special meeting
of shareholders, may be taken without a meeting and without
prior notice if a consent in writing, setting forth the actions
to taken, shall be signed by the holders of outstanding shares
having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
Unless a record date for voting purposes be fixed as provided in
Section 8 of this Article, the record date for determining
shareholders entitled to give consent pursuant to this Section
10, when no prior action by the Board has been taken, shall be
the day on which the first written consent is given.
Section 11. Proxies. Every person entitled to vote shares has
the right to do so either in person or by one or more persons
authorized by a written proxy executed by such shareholder and
filed with the Secretary not less than five (5) days prior to
the meeting.
Section 12. Conduct of Meeting The President shall preside as
Chairman at all meetings of the shareholders, unless another
Chairman is selected. The Chairman shall conduct each such
meeting in a businesslike and fair manner, but shall not be
obligated to follow any technical, formal or parliamentary rules
or principles of procedure. The Chairman's ruling on procedural
matters shall be conclusive and binding on all shareholders,
unless at the time of ruling a request for a vote is made by the
shareholders entitled to vote and represented in person or by
proxy at the meeting, in which case the decision of a majority
of such shares shall be conclusive and binding on all
shareholders without limiting the generality of the foregoing,
the Chairman shall have all the powers usually vested in the
chairman of a meeting of shareholders.
Article III-DIRECTORS
Section 1. Powers. Subject to limitation of the Articles of
Incorporation,
of these bylaws, and of actions required to be approved by the
shareholders, the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or
under the direction of the Board. The Board may, as permitted
by law, delegate the management of the day-to-day operation of
the business of the corporation to a management company or other
persons or officers of the corporation provided that the
business and affairs of the corporation shall be managed and al]
corporate powers shall be exercised under the ultimate direction
of the Board. Without prejudice to such general powers, it is
hereby expressly declared that the Board shall have the
following powers:
(a) To select and remove all of the officers, agents and
employees of the corporation, prescribe the powers and duties
for them as may not be inconsistent with law, or with the
Articles of Incorporation or by these bylaws, fix their
compensation, and require from them, if necessary, security for
faithful service.
(b) To conduct, manage, and control the affairs and business of
the corporation and to make such rules and regulations therefore
not inconsistent with law, with the Articles of Incorporation or
these bylaws, as they may deem best.
(c) To adopt, make and use a corporate seal, and to prescribe
the forms of certificates of stock and to alter the form of such
seal and such of certificates from time to time in their
judgment they deem best.
(d) To authorize the issuance of shares of stock of the
corporation from time to time, upon such terms and for such
consideration as may be lawful.
(e) To borrow money and incur indebtedness for the purposes of
the corporation, and to cause to be executed and delivered
therefor, in the corporate name, promissory notes, bonds,
debentures, deeds of trust, mortgages, pledges, hypothecation or
other evidence of debt and securities therefor.
Section 2. Number and Qualification of Directors. The authorized
number of directors shall be 11 until changed by amendment of
the Articles or by a bylaw duly adopted by approval of the
outstanding shares amending this Section 2.
Section 3. Election and Term of Office. The directors shall be
elected at each annual meeting of shareholders but if any such
annual meeting is not held or the directors are not elected
thereat, the directors may be elected at any special meeting of
shareholders held for that purpose. Each director shall hold
office until the next annual meeting and until a successor has
been elected and qualified.
Section 4. Chairman of the Board. At the regular meeting of the
Board, the first order of business will be to select, from its
members, a Chairman of the Board whose duties will be to preside
over all board meetings until the next annual meeting and until
a successor has been chosen
Section 5. Vacancies. Any director may resign effective upon
giving written notice to the Chairman of the Board, the
President, Secretary, or the Board, unless the notice specified
a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be
elected to take office when the resignation becomes effective.
Vacancies in the Board including those existing as a result of a
removal of a director, shall be filled by the shareholder at a
special meeting, and each director so elected shall hold office
until the next annual meeting and until such director's
successor has been elected and qualified.
A vacancy or vacancies in the Board shall be deemed to exist in
case of the death, resignation or remove of any director or if
the authorized number of directors be increased, or if the
shareholders fail, at any annual or special meeting of
shareholders at which any directors are elected, to elect the
full authorized number of directors to be voted for the meeting.
The Board may declare vacant the office of a director who has
been declared of unsound mind or convicted of a felony by an
order of court.
The shareholders may elect a director or directors at any time
to fill any vacancy or vacancies. Any such election by written
consent requires the consent of a majority of the outstanding
shares entitled to vote. If the Board accepts the resignation of
a director tendered to take effect at a future time, the
shareholder shall have power to elect a successor to take office
when the resignation is to become effective.
No reduction of the authorized number of directors shall have
the effect of removing any director prior to the expiration of
the director's term of office.
Section 6. Place of Meeting. Any meeting of the Board shall be
held at any place within or without the State of Nevada which
has been designated from time to time by the Board. in the
absence of such designation meetings shall be held at the
principal executive office of the corporation.
Section 7. Regular Meetings. Immediately following each annual
meeting of shareholders the Board shall hold a regular meeting
for the purpose of organization, selection of a Chairman of the
Board, election of officers, and the transaction of other
business. Call and notice of such regular meeting is hereby
dispensed with.
Section 8. Special Meetings. Special meetings of the Board for
any purposes may be called at any time by the Chairman of the
Board, the President, or the Secretary or by any two directors.
Special meetings of the Board shall be held upon at least four
(4) days written notice or forty-eight (48) hours notice given
personally or by telephone, telegraph, telex or other similar
means of communication. Any such notice shall be addressed or
delivered to each director at such director's address as it is
shown upon the records of the Corporation or as may have been
given to the Corporation by the director for the purposes of
notice.
Section 9. Quorum. A majority of the authorized number of
directors
constitutes a quorum of the Board for the transaction of
business, except to adjourn as hereinafter provided. Every act
or decision done or made by a majority of the directors present
at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board, unless a greater number be
required by law or by the Articles of Incorporation. A meeting
at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any
action taken is approved by at least a majority of the number of
directors required as noted above to Constitute a quorum for
such meeting.
Section 10. Participation in Meetings by Conference Telephone.
Members of the Board may participate in a meeting through use of
conference telephone or similar communications equipment, so
long as all members participate in such meeting can hear one
another.
Section 11. Waiver of Notice. The transactions of any meeting of
the Board, however called and noticed or wherever held, are as
valid as though had at a meeting duly held after regular call
and notice if a quorum be present and if, either before or after
the meeting , each of the directors not present signs a written
waiver of notice, a consent to holding such meeting or an
approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made part
of the minutes of the meeting.
Section 12. Adjournment. A majority of the directors present,
whether
or not a quorum is present, may adjourn any directors' meeting
to another time and place. Notice of the time and place of
holding an adjourned meeting need not be given to absent
directors if the time and place be fixed at the meeting
adjourned. If the meeting is adjourned for more than forty-eight
(48) hours, notice of any adjournment to another time or place
shall be given prior to the time of the adjourned meeting to the
directors who were not present at the time of adjournment.
Section 13. Fees and Compensation. Directors and members of
committees may receive such compensation, if any, for their
services, and such reimbursement for expenses, as may be fixed
or determined by the Board.
Section 14. Action Without Meeting. Any action required or
permitted to be taken by the Board may be taken without a
meeting if all members of the Board shall individually or
collectively consent in writing to such action. Such consent or
consents shall have the same effect as a unanimous vote of the
Board and shall be flied with the minutes of the proceedings of
the Board.
Section 15. Committees. The board may appoint one or more
committees, each consisting of two or more directors, and
delegate to such committee any of the authority of the Board
except with respect to:
(a) The approval of any action which requires shareholders'
approval of the outstanding shares;
(b) The filling of vacancies on the Board or on any committees;
(c) The fixing of compensation of the directors for serving on
the Board
or approval of the or on any committee; its express terms
(d) The amendment or repeal of bylaws or the adoption of new
bylaws
(e) amendment or repeal of any resolution of the Board which by
is not so amendable or repealable by a committee of the board;
(f) A distribution to the sreholders of the corporation;
(g) The appointment of other committees of the Board or the
members thereof.
Any such committee must be appointed by resolution adopted by a
majority of the authorized number of directors and may be
designated by an Executive Committee or by such other name as
the Board shall specify. The Board shall have the power to
prescribe the manner in which proceedings of any such committee
shall be conducted. Unless the Board or such committee shall
otherwise provide, the regular or special meetings and other
actions of any such committee shall be governed by the
provisions of this Article applicable to meetings and actions of
the Board. Minutes shall be kept of each meeting of each
committee.
ARTICLE IV - OFFICERS
Section 1 Officers. The officers of the corporation shall be a
president, a secretary and a treasurer. The corporation may also
have, at the discretion of the Board, one or more
vice-presidents, one or more assistant vice presidents, one or
more assistant secretaries, one or more assistant treasurers and
such other officers as may be elected or appointed in accordance
with the provisions of Section 3 of this Article.
Section 2. Election. The officers of the corporation, except
such officers as may be elected or appointed in accordance with
the provisions of Section 3 or Section 5 of this Article, shall
be chosen annually by, and shall serve at the pleasure of, the
Board, and shall hold their respective offices until their
resignation, removal or other disqualification from service, or
until their respective successors shall be elected.
Section 3. Subordinate Officers. The Board may elect, and may
empower the President to appoint, such other officers as the
business of the corporation may require, each of whom shall hold
office for such period, have such authority, and perform such
duties as are provided in these bylaws or as the Board, or the
President may from time to time direct.
Section 4. Removal and Resignation. Any officer may be removed,
either with or without cause, by the Board of Directors at any
time, or, except in the case of an officer chosen by the Board,
by any officer upon whom such power of removal may be conferred
by the Board.
Any officer may resign at any time by giving written notice to
the corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time
specified therein. The acceptance of such resignation shall be
necessary to make it effective.
Section 5. Vacancies. A vacancy of any office because of death,
resignation, removal, disqualification, or any other cause shall
be filled in the manner prescribed by these bylaws for the
regular election or appointment to such office.
Section 6. President. The President shall be the chief
executive officer and general manager of the corporation. The
President shall preside at all meetings of the shareholders and,
in the absence of the Chairman of the Board at all meetings of
the Board. The president has the general powers and duties of
management usually vested in the chief executive officer and the
general manager of a corporation and such other powers and
duties as may be prescribed by the Board.
Section 7. Vice Presidents. In the absence or disability of the
President, the vice presidents in order of their rank as fixed
by the Board or, if not ranked, the vice president designated by
the Board, shall perform all the duties of the President, and
when so acting shall have all the powers of, and be subject to
all the restrictions upon the President. The Vice Presidents
shall have such other powers and perform such other duties as
from time to time may be prescribed for them respectively by the
President or the Board.
Section 8. Secretary. The Secretary shall keep or cause to be
kept, at the principal executive offices and such other place as
the Board may order, a book of minutes of all meetings of
shareholders, the Board, and its committees, with the time and
place of holding, whether regular or special, and, if special,
how authorized, the notice thereof given, the names of those
present at Board and committee meetings, the number of shares
present or represented at shareholders' meetings, and
proceedings thereof. The Secretary shall keep, or cause to be
kept, a copy of the bylaws of the corporation at the principal
executive office of the corporation.
The Secretary shall keep, or cause to be kept, at the principal
executive office, a share register or a duplicate share
register, showing the names of the shareholders and their
addresses, the number and classes of shares held by each, the
number and date of certificates issued for the same, and the
number and date of cancellation of every certificate surrendered
for cancellation.
The Secretary shall give, or cause to be given, notice of all
the meetings of the shareholders and of the Board and any
committees thereof required by these bylaws or by law to be
given, shall keep the seal of the corporation in safe custody,
and shall have such other powers and perform such other duties
as may be prescribed by the Board
Section 9. Treasurer. The Treasurer is the chief financial
officer of the corporation and shall keep and maintain, or cause
to be kept and maintained, adequate and correct accounts of the
properties and financial transactions of the corporation, and
shall send or cause to be sent to the shareholders of the
corporation such financial statements and reports as are by law
or these bylaws required to be sent to them.
The Treasurer shall deposit all monies and other valuables in
the name and to the credit of the corporation with such
depositories as may be designated by the Board. The Treasurer
shall disburse the funds of the corporation as may be ordered by
the Board, shall render to the President and directors, whenever
they request it, an account of all transactions as Treasurer and
of the financial conditions of the corporation, and shall have
such other powers and perform such other duties as may be
prescribed by the Board.
Section 10. Agents. The President, any vice-president, the
Secretary or Treasurer may appoint agents with power and
authority, as defined or limited in their appointment, for and
on behalf of the corporation to execute and deliver, and affix
the seal of the corporation thereto, to bonds, undertakings,
recognizance, consents of surety or other written obligations in
the nature thereof and any said officers may remove any such
agent and revoke the power and authority given to him.
ARTICLE V - OTHER PROVISIONS
Section 1. Dividends. The Board may from time to time declare,
and the corporation may pay, dividends on its outstanding shares
in the manner and on the terms and conditions provided by law,
subject to any contractual restrictions on which the corporation
is then subject.
Section 2. Inspection of By-laws. The Corporation shall keep in
its Principal Executive Office the original or a copy of these
bylaws as amended to date which shall be open to inspection to
shareholders at all reasonable times during office hours. If the
Principal Executive Office of the Corporation is outside the
State of Nevada and the Corporation has no principal business
office in such State, it shall upon the written notice of any
shareholder furnish to such shareholder a copy of these bylaws
as amended to date.
Section 3. Representation of Shares of Other Corporations.
The President or any other officer or officers authorized by the
Board or the President are each authorized to vote, represent,
and exercise on behalf of the Corporation all rights incident to
any and all shares of any other corporation or corporations
standing in the name of the Corporation. The authority herein
granted may be exercised either by any such officer in person or
by any other person authorized to do so by proxy or power of
attorney duly executed by said officer.
ARTICLE VI - INDEMNIFICATION
Section 1. Indemnification in Actions by Third Parties. Subject
to the limitations of law, if any, the corporation shall have
the power to indemnify any director, officer, employee and agent
of the corporation who was or is a party or is threatened to be
made a party to any proceeding (other than an action by or in
the right of to procure a judgment in its favor) against
expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such
proceeding, provided that the Board shall find that the
director, officer, employee or agent acted in good faith and in
a manner which such person reasonably believed in the best
interests of the corporation and, in the case of criminal
proceedings, had no reasonable cause to believe the conduct was
unlawful, The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere shall
not, of itself create a presumption that such person did not act
in good faith and in a manner which the person reasonably
believed to be in the best interests of the corporation or that
such person had reasonable cause to believe such person's
conduct was unlawful.
Section 2. Indemnification in Actions by or On Behalf of the
Corporation. Subject to the limitations of law, if any, the
Corporation shall have the power to indemnify any director,
officer, employee and agent of the corporation who was or is
threatened to be made a party to any threatened, pending or
completed legal action by or in the right of the Corporation to
procure a judgment in its favor, against expenses actually and
reasonable incurred by such person in connection with the
defense or settlement, if the Board of Directors determine that
such person acted in good faith, in a manner such person
believed to be in the best interests of the Corporation and with
such care, including reasonable inquiry, as an ordinarily
prudent person would use under similar circumstances.
Section 3. Advance of Expenses. Expenses incurred in defending
any proceeding may be advanced by the Corporation prior to the
final disposition of such proceeding upon receipt of an
undertaking by or on behalf of the officer, director, employee
or agent to repay such amount unless it shall be determined
ultimately that the officer or director is entitled to be
indemnified as authorized by this Article.
Section 4 Insurance. The corporation shall have power to
purchase and maintain insurance on behalf of any officer,
director, employee or agent of the Corporation against any
liability asserted against or incurred by the officer, director,
employee or agent in such capacity or arising out of such
person's Status as such whether or not the corporation would
have the power to indemnify the officer, or director, employee
or agent against such liability under the provisions of this
Article.
ARTICLE VII - AMENDMENTS
These bylaws may be altered, amended or repealed either by
approval of a majority of the outstanding shares entitled to
vote or by the approval of the Board; provided however that
after the issuance of shares, a bylaw specifying or changing a
fixed number of directors or the maximum or minimum number or
changing from a fixed to a flexible Board or vice versa may only
be adopted by the approval by an affirmative vote of not less
than two-thirds of the corporation's issued and outstanding
shares entitled to vote.
THIS AGREEMENT made as of the 11th day of November, 1997.
BETWEEN:
ADM AGRI-INDUSTRIES, LTD., a corporation incorporated under the
laws of Ontario (herein called the "Vendor")
OF THE FIRST PART
AND
RIVERSIDE GRAIN PRODUCTS INC. a corporation incorporated under
the laws of Ontario (herein called the "Purchaser")
OF THE SECOND PART
AND
SOUTHERN VENTURES, INC.a corporation incorporated
under the laws of Alberta (herein called "SVI")
OF THE THIRD PART
WHEREAS the Vendor has agreed to sell to the Purchaser and the
Purchaser has agreed to purchase from the Vendor all of the
right, title and interest in and to all of the tangible assets
which make up the Vendor's starch and gluten manufacturing
facility and adjacent Saskatchewan Wheat Pool #8 facility in
Thunder Bay, Ontario on and subject to the terms and conditions
herein contained;
NOW THEREFORE THIS AGREEMENT WITNESSETH, in consideration of the
covenants, agreements, representations, warranties and payments
herein provided for and other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged by
each of the parties hereto), the parties hereto covenant and
agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Agreement, unless the context requires otherwise:
"Agreement" means this Agreement, including the Schedules
attached hereto, and all instruments supplemental hereto or in
amendment or confirmation hereof;
"Assets" means, collectively, the Real Property, Equipment and
Facility Information;
"Business Day" means a day other than a Saturday, Sunday or any
statutory holiday in the Province of Ontario;
"Closing" means the completion of the purchase and sale of the
Assets, to be held at the offices of the solicitors for the
Purchaser in the City of Toronto on the Closing Date, in
accordance with the terms and conditions of this Agreement;
"Closing Date" means 10:00 o'clock a.m. (Toronto time) on the
fifth Business Day following the execution of this Agreement
excluding the day of execution or such other date as is
agreeable to both parties;
"Equipment" means:
(a) all processing, drying and packaging equipment
(b) all machinery and spare parts
(c) all vehicles/pallet trucks
(d) all laboratory equipment and computer hardware ( other than
that donated to charities at the time of the shut down)
(e) all furniture and fixtures, and
(f) all other equipment
owned by the Vendor and used in connection with the Facilities
as of the last day of operation prior to the shut down on
September 1, 1996 ( which the parties agree was June 30, 1996)
including, without limitation, the equipment listed and
described in Schedule "A" attached hereto;
"Facilities" means the starch and gluten manufacturing facility
and adjacent Saskatchewan Wheat Pool #8 facility located on the
Real Property;
"Facility Information" means all files, records and other
documentation of the Vendor pertaining to the Facilities
(including products made and processes used at the Facilities)
whether contained in hard copy or on computer diskette
including, without limitation, the information listed in
Schedule "B";
"Flour Supply Agreement" means the form of supply contract
attached hereto as Schedule "C";
"GST" means the Goods and Services Tax as provided for in Part
IX of the Excise Tax Act, R.S.C. 1985, c. E15 as amended;
"Parties" means, collectively, the Vendor and the Purchaser;
"Person" means any individual, corporation, partnership, trust
or unincorporated association;
"Promissory Note" means the form of promissory note attached
hereto as Schedule "D";
"Purchase Price" means the purchase price for the Assets
determined in accordance with sections 2.2;
"Real Property" means the real property described in Schedule
"E" and includes all buildings, improvements and fixtures
located thereon as of June 30, 1996;
"Security Instruments" means such documents as are reasonably
required to grant to the Vendor a first ranking security
interest in the Assets under the Personal Property Security Act
(Ontario) and a first charge/ mortgage with respect to the Real
Property.
1.2 Gender and Number
Words importing the singular include the plural and vice versa,
and words importing gender include all genders.
1.3 Entire Agreement
This Agreement, including the Schedules attached hereto,
together with the other agreements and documents to be delivered
hereunder, constitute the entire agreement between the Parties
pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties and there are no
warranties, representations or other agreements between the
Parties in connection with the subject matter hereof except as
specifically set forth herein and therein. No supplement,
modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the Party to be bound
thereby. No waiver of any of the terms and conditions of this
Agreement shall be deemed to or shall constitute a waiver of any
other term or condition (whether or not similar) nor shall such
waiver constitute a continuing waiver unless otherwise expressly
provided.
1.4 Currency
Unless otherwise indicated, all references in this Agreement to
monies shall be references to lawful money of the United States.
1.5 Headings
The headings contained herein are included solely for
convenience and are not intended to be full or accurate
descriptions of the contents thereof and shall not be considered
part of this Agreement.
1.6 Successors and Assigns
This Agreement shall enure to the benefit of and be binding upon
each of the Parties hereto and their respective successors and
assigns, as the case may be. Neither party may assign any of
its rights or obligations hereunder without the prior written
consent of the other party, such consent not to be unreasonably
or arbitrarily withheld or delayed.
1.7 Time of the Essence
Time shall be of the essence of this Agreement.
1.8 Applicable Law
This Agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario and the laws of Canada
applicable therein.
1.9 Further Assurances
From time to time subsequent to the Closing Date, each party to
this Agreement covenants and agrees that it will at all times
after the Closing Date, at the expense of the requesting party,
promptly execute and deliver all such documents, including,
without limitation, all such additional conveyances, transfers,
consents and other assurances and do all such other acts and
things as the other party, acting reasonably, may from time to
time request be executed or done in order to better evidence or
perfect or effectuate any provision of this Agreement or of any
agreement or other document executed pursuant to this Agreement
or any of the respective obligations intended to be created
hereby or thereby.
1.10 Schedules
The following Schedules are attached to and form a part of this
Agreement:
Schedule "A" list and description of Equipment
Schedule "B" Facility Information
Schedule "C" form of the Flour Supply Contract
Schedule "D" form of the Promissory Note
Schedule "E" description of the Real Property
Schedule "F" dates and amounts of installment payments
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale
The Vendor hereby agrees to sell, transfer, assign and set over
to the Purchaser and the Purchaser hereby agrees to purchase and
acquire from the Vendor the Assets free and clear of all liens
and charges except those set forth in subsection 4.1(d) (ii),
(iii), (iv) and (v), on and subject to the terms and conditions
of this Agreement. For greater certainty, the Purchaser shall
have the right to use the Facility Information in perpetuity.
2.2 Purchase Price and Allocation
The price payable by the Purchaser to the Vendor for the Assets
shall be Five Million Dollars ($5,000,000) which the parties
agree shall be allocated as follows:
(a) for the Real Property, the sum of Two Million Dollars
($2,000,000), and
(b) for the Equipment, the sum of Three Million Dollars
($3,000,000).
2.3 Payment of the Purchase Price
The amounts referred to in Section 2.2 shall be paid and
satisfied as follows:
(a) Three Million Dollars ($3,000,000) in installments by wire
transfer of funds on the dates and in the amounts set out in
Schedule "F" to an account designated by the Vendor;
(b) The balance of the Purchase Price, being Two Million
Dollars ($2,000,000), by the issuance and delivery on Closing of
the Promissory Note.
(c) Subject to Section 2.3(d), the Vendor agrees to assign the
Promissory Note to Southern Ventures Inc. (Nevada) in exchange
for voting common shares of Southern Ventures Inc. (Nevada)
equal to nine percent (9%) of the issued and outstanding shares
of Southern Ventures Inc. (Nevada) on a fully diluted basis; and
(d) In the event that (i) the shares referred to in subsection
2.3(c) are not delivered to the Vendor by January 16, 1997; (ii)
at the time of delivery there is not a minimum of twenty million
(20,000,000) common shares of Southern Ventures Inc. (Nevada)
issued and outstanding with not less than thirty percent (30%)
of such shares listed for public trading on a U.S. or Canadian
Stock Exchange; or (iii) the initial public offering was not for
at least two million (2,000,000) common shares of Southern
Ventures Inc. (Nevada) at a minimum price of Two Dollars ($2.00)
per share, the Promissory Note shall, in lieu of the issuance of
such shares, be immediately due and payable in full by the
Purchaser to the Vendor in cash.
2.4 Adjustments
(a) The Vendor and Purchaser acknowledge that the purchase price
set out in section 2.2 is based on the equipment used in
connection with the Facilities as of June 30, 1996. The Vendor
and Purchaser agree to reduce the portion of the Purchase Price
described in subsection 2.3(a) to reflect any Equipment that is
not delivered to the Purchaser on Closing or that in any
material respect is not as represented and warranted in section
4.1. The adjustment for missing equipment will be based on the
value assigned to such equipment in Schedule "A". The
adjustment for equipment that in any material respect is not as
represented in section 4.1 will be based on the expense required
to remedy same.
(b) Realty taxes, including local improvement rates, shall be
apportioned and allowed to the Closing Date, the Closing Date to
be apportioned to the Purchaser.
2.5 GST Provisions
(a) Each of the Vendor and the Purchaser represents and warrants
to the other that it is duly registered under Part IX of the
Excise Tax Act (Canada) and shall continue to be a registrant
for GST purposes at the Closing Date. The GST registration
number of the Vendor is BN 100054527 RT 0001 and the GST
registration number of the Purchaser is BN 88616 5166 RT 0001.
Since its registration, the Purchaser has never ceased to be
registered and is entitled to produce the election provided by
167(1) of the Excise Tax Act (Canada).
(b) The Vendor and the Purchaser undertake at the closing to
sign the joint election prescribed by subsection 167(1) of the
Excise Tax Act (Canada) and the Purchaser undertakes to file
such election in the manner and within the time prescribed
therefor.
(e) The Purchaser will indemnify and hold harmless the Vendor
for all taxes, interest, and penalties which the Vendor may be
required to pay should the joint election described above not be
available. Each of the Vendor and the Purchaser undertake to
notify the other of any notice of assessment as soon as
practical following receipt. The Vendor will be under no
obligation to contest any notice of assessment received in this
respect but will cooperate with the Purchaser should the latter
decide to contest such a notice.
ARTICLE 3
ASSUMPTION OF LIABILITIES
3.1 Excluded Assets and Liabilities
The Vendor hereby acknowledges and agrees that the Purchaser:
(a) is purchasing only the Assets and the Purchaser is not
acquiring any other assets or property of the Vendor; and
(b) is not assuming any obligation or liability of the Vendor
except as expressly and specifically provided for in this
Agreement.
3.2 Employment Obligation
For certainty, the Purchaser shall assume no responsibility for
any employee of the Vendor and the Purchaser shall not be
obligated to offer employment to any employee of the Vendor.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Vendor
The Vendor hereby represents and warrants to the Purchaser, with
the intent that the Purchaser shall rely thereupon in entering
into this Agreement and in concluding the purchase and sale
contemplated herein, both on the execution and delivery of this
Agreement and as at the Closing Date (unless otherwise
specified) as follows:
(a) Status of the Vendor The Vendor is duly incorporated and
validly subsisting under the laws of its jurisdiction of
incorporation, is validly extraprovincially registered in each
province of Canada in which it carries on business (other than
its jurisdiction of incorporation, if applicable), is in good
standing and has all necessary corporate power and capacity to
own and dispose of the Assets, to execute and deliver this
Agreement and to carry out the terms and conditions of this
Agreement to the full extent;
(b) Authority to Sell The execution and delivery of this
Agreement and the completion of the transaction contemplated
hereby has been duly and validly authorized by all necessary
shareholder and corporate action on the part of the Vendor, and
this Agreement constitutes a legal, valid and binding obligation
of the Vendor, enforceable against the Vendor in accordance with
its terms except as may be limited by laws of general
application affecting the rights of creditors;
(c) Conformity with Laws To the actual knowledge of the
directors and officers of the Vendor and of
Archer-Daniels-Midland Milling Co. (including Mr. Craig Hamlin),
i) the Vendor has complied, in all material respects, with all
laws, statutes, ordinances, regulations, rules, judgments,
decrees and orders applicable to the Facilities, ii) the
Equipment currently complies, in all material respects, with the
requirements of all applicable laws, statutes, ordinances,
regulations, rules, judgments, decrees and orders, iii) there
are no outstanding work orders or deficiency notices affecting
the Real Property and iv) the present use of the Real Property
as a starch and gluten manufacturing facility and grain handling
facility may be lawfully continued;
(d) Assets The Vendor owns and possesses and has a good and
marketable title to the Assets free and clear of all registered
restrictions, mortgages, liens, charges, pledges, security
interests, encumbrances or other claims whatsoever except for
the following:
(i) any registered restrictions or covenants that run with the
Real Property providing that such are complied with;
(ii) any municipal agreements and registered agreements with
publicly regulated utilities that run with the Real Property
providing such have been complied with;
(iii) any minor easements affecting the Real Property for
drainage, storm or sanitary sewers or for the supply of utility
lines, telephone lines, or other services to the Real Property
provided such easements do not materially affect the intended
use of the Real Property; and
(iv) any other encumbrances which do not secure or relate to a
debt of the Vendor or a debt guaranteed by the Vendor and which
do not materially effect the use of the Assets for their
intended purpose.
The Assets are substantially all of the assets that were situate
in or about the Facilities on June 30, 1996;
(e) Repair The Facilities and Equipment were in working
condition and were adequate and suitable for the purposes for
which they were being used as of June 30, 1996 and will be in
working condition as of the Closing Date;
(f) Effect of Sale Neither the execution and delivery of this
Agreement nor the completion of the purchase and sale
contemplated herein will constitute a breach by the Vendor of
any law, bylaw or regulation of the Province of Ontario or of
Canada or of any contract or agreement to which the Vendor is a
party or by which it is bound or which would result in the
creation of any lien, encumbrance or other charge on any of the
Assets;
(g) No Litigation or Proceedings There is no litigation or
administrative or government proceeding or inquiry pending or to
the actual knowledge of the directors and officers of the Vendor
or of Archer-Daniels-Midland Milling Co. (including Mr. Craig
Hamlin) threatened against or relating to the Assets;
(f) Canadian Resident The Vendor is not a nonresident of Canada
within the meaning of the Income Tax Act (Canada);
(g) Labour Agreements The Vendor is not party to any agreement
with any labour union or employee association nor are such
agreements presently under negotiation nor have any of them made
commitments to, or conducted negotiations with, any labour union
or employee association regarding any future agreements relative
to the Assets.
4.2 Representations and Warranties of the Purchaser
The Purchaser represents and warrants to the Vendor, with the
intent that the Vendor shall rely thereupon in entering into
this Agreement and in concluding the purchase and sale
contemplated herein, both on the execution and delivery of this
Agreement and as at the Closing Date (unless otherwise
specified), as follows:
(a) Status of Purchaser The Purchaser is duly incorporated and
validly subsisting under the laws of its jurisdiction of
incorporation, is, to the extent required, extra-provincially
registered in each province in Canada in which it carries on
business (other than its jurisdiction of incorporation, if
applicable), is in good standing and has all necessary corporate
power and capacity to execute and deliver this Agreement and to
carry out the terms and conditions of this Agreement to the full
extent; and
(b) Authority to Purchase The execution and delivery of this
Agreement and the completion of the transaction contemplated
hereby has been duly and validly authorized by all necessary
shareholder and corporate action on the part of the Purchaser,
and this Agreement constitutes a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms except as limited to laws of general
application affecting the rights of creditors.
4.3 Survival of the Vendor's Representations, Warranties and
Covenants
To the extent that they have not been fully performed at or
prior to Closing, all representations, warranties and covenants
made by the Vendor in this Agreement shall survive the time of
Closing and any investigation at any time made by or on behalf
of the Purchaser and shall continue in full force and effect for
the benefit of the Purchaser following Closing.
4.4 Survival of the Purchaser's Representations, Warranties and
Covenants
To the extent that they have not been fully performed at or
prior to Closing, all representations, warranties and covenants
made by the Purchaser shall survive the time of Closing and any
investigation at any time made by or on behalf of the Vendor and
shall continue in full force and effect for the benefit of the
Vendor following Closing.
ARTICLE 5
COVENANTS OF THE VENDOR
5.1 Access to the Assets
The Vendor shall forthwith upon execution of this Agreement:
(a) make available to the Purchaser and its authorized
representatives and, if requested by the Purchaser, provide
copies to the Purchaser of all Facility Information;
(b) afford the Purchaser and its authorized representatives
every reasonable opportunity to have free and unrestricted
access to the Assets to conduct such tests and investigations,
at its expense, as it deems relevant; and
(c) at the request of the Purchaser, execute such consents,
authorizations and directions as may be necessary to enable the
Purchaser or its authorized representatives to obtain full
access to all files and records relating to any of the Assets
maintained by governmental or other public authorities;
The exercise of any rights of inspection by or on behalf of the
Purchaser under this section shall not mitigate or otherwise
affect any of the representations and warranties of the Vendor
hereunder, which shall continue in full force and effect as
provided in section 4.3. Any damage to the Assets occasioned by
the tests and investigations referred to in section 5.1(b) shall
be for the account of the Purchaser.
5.2 Ordinary Course
From and after the execution and delivery of this Agreement
until the Closing, the Vendor shall maintain the Assets in
accordance with good practice.
5.3 Insurance
From the date of this Agreement until the Closing, the Vendor
shall maintain in full force and effect current policies of
insurance in respect of the Assets.
5.4 Permits and Licenses
The Vendor shall assist the Purchaser in obtaining or
transferring to the Purchaser any and all licenses and permits
of the Vendor required by any municipal, federal or provincial
law, bylaw and regulation for the operation of the Assets. Any
transfer fees relating to such licenses or permits payable in
connection therewith shall be for the account of the Purchaser.
5.5 Indemnity
The Vendor agrees to indemnify and hold harmless the Purchaser
from and against:
(a) any and all liabilities of the Vendor, whether accrued,
absolute, contingent or otherwise, as a result of or arising
directly or indirectly out of or in connection with any
employees or former employees of the Vendor whose employment is
not agreed to be assumed by the Purchaser pursuant to the terms
and conditions of this Agreement;
(b) any and all damage or deficiencies resulting from any
misrepresentation, breach of warranty or nonfulfilment of any
covenant on the part of the Vendor under this Agreement;
(c) any breach or non-performance by the Vendor of any covenant
to be performed by it that is contained in this Agreement or in
any agreement, certificate or other document delivered pursuant
hereto;
(d) any and all liabilities, claims, damages or losses suffered
or incurred by the Purchaser as a result of or arising from the
failure of the Vendor to comply with the requirements of any
applicable bulk sales legislation in respect of the purchase and
sale of the Assets; and
(e) any and all actions, suits, proceedings, demands,
assessments, judgments, orders, costs and reasonable legal and
other expenses incident to any of the foregoing.
except to the extent the Vendor has been prejudiced by the
Purchaser's failure to notify the Vendor of such liability,
damage, breach or claim within a reasonable period of time
following the Purchaser becoming aware of same. Notwithstanding
anything in this Agreement to the contrary, the Vendor
acknowledges notice of and agrees to indemnify and hold harmless
the Purchaser from and against any liability or claim arising in
connection with the purported transfer of lots 10 and 11, Plan
W-778 City of Thunder Bay from Saskatchewan Pool Elevators
Limited to Saskatchewan Wheat Pool by instrument number 178490
and the purported transfer of lots 10 and 11, Plan W-778 City of
Thunder Bay from Saskatchewan Wheat Pool to 976088 Ontario Inc.
by instrument number 337332.
5.6 Flour Supply Agreement
The Vendor shall execute the Flour Supply Agreement prior to or
at Closing.
ARTICLE 6
COVENANTS OF THE PURCHASER
6.1 Taxes
The Purchaser shall be liable for all provincial sales/transfer
taxes, if any, with respect to the purchase of the Equipment and
Real Property hereunder and shall pay the same to the provincial
collection authorities within the time prescribed by the laws of
the Province of Ontario. The Purchaser acknowledges that
notwithstanding any other term or condition of this Agreement,
the Purchase Price is exclusive of GST and the Purchaser shall
pay the same in addition to the amounts payable hereunder when
due and payable.
6.2 Unpaid Purchase Price
The Purchaser covenants to execute the Promissory Note and the
Security Instruments prior to or at Closing.
6.3 Flour Supply Agreement
The Purchaser covenants to execute the Flour Supply Agreement
prior to or at Closing.
6.4 Insurance
From the Closing date until the Purchase Price has been paid in
full, the Purchaser shall:
(a) maintain the Assets in at least as good a condition as when
the Purchaser took possession, ordinary wear and tear excepted;
(b) maintain general liability and "all risk" property insurance
with respect to the Assets and their operation, which insurance
shall name the Vendor as an additional insured party (primary to
any insurance maintained by the Vendor) and as loss payee
("all-risk" property insurance only) and be in such amounts and
with such companies as is reasonably acceptable to the Vendor;
and
(c) except as otherwise expressly provided for herein, defend,
indemnify and hold the Vendor, its affiliated companies and
their respective directors, officers, employees and agents
harmless from and against any and all claims, demands, actions,
causes of action, judgments, awards, fees (including attorney's
fees), costs and any other liability whatsoever arising out of
or in any way connected with the Assets and occurring or
accruing on or after the Closing Date excepting any such claim,
demand, action, cause of action, judgment, award, fee, cost or
other liability to the extent same is caused by the negligence
or willful default of the Vendor, its affiliated companies or
their respective directors, officers, employees or agents.
ARTICLE 7
CONDITIONS PRECEDENT
7.1 Conditions Precedent to the Obligation of the Purchaser
The obligation of the Purchaser to complete the agreement of
purchase and sale of the Assets on and subject to the terms and
conditions of this Agreement shall be subject to the following
conditions precedent that:
(a) the Vendor's representations and warranties contained in
this Agreement shall be true in all material respects at and as
of the time of Closing as if such representations and warranties
were made at and as of such time;
(b) the Vendor shall have performed and complied with all of the
terms and conditions of this Agreement to be performed or
complied with by the Vendor prior to or at the time of Closing;
(c) the Vendor shall have delivered to the Purchaser a
certificate of an authorized signatory of the Vendor dated the
time of Closing, certifying (in such detail as the Purchaser may
reasonably specify) to the fulfilment of the conditions set
forth in subsections 7.1(a) and (b) hereof;
(d) the Purchaser shall be satisfied that i) all necessary
approvals, licenses, certifications, authorizations and permits
required for the uses to which the Assets will be put by the
Purchaser have been obtained by the Purchaser, ii); there is no
litigation or administrative or government proceeding or inquiry
threatened against or relating to the Assets or their intended
use or any basis for any such action, iii) there is no
contaminant in the air, the ground or in other improvements in
the areas or vicinities where any of the Assets are (or were)
located or elsewhere on the Real Property and there has been no
release of any contaminant as a result of the operation of the
Assets other than as may have been done in compliance with all
laws, bylaws and regulations relating to the environment and iv)
all wastes and other materials and substances disposed of,
treated or stored utilizing the Assets, whether a contaminant or
not, have been disposed of, treated and stored in compliance
with all laws, bylaws and regulations in effect at the
applicable time;
(e) the Purchaser shall be satisfied that the Facilities comply,
in all material respects, with all laws, statutes, ordinances,
regulations, rules, judgments, decrees, orders and restrictive
covenants applicable to the Facilities, ii) the Equipment
currently complies, in all material respects, with the
requirements of all applicable laws, statutes, ordinances,
regulations, rules, judgments, decrees, orders and restrictive
covenants, iii) there are no outstanding work orders or
deficiency notices affecting the Real Property, iv) the present
use of the Real Property as a starch and gluten manufacturing
facility and grain handling facility may be lawfully continued,
v) the Facilities and Equipment do not encroach on any property
owned by others and vi) the rights of ingress and egress to the
Real Property are adequate for the intended use of the Real
Property; and
(f) the Purchaser shall be satisfied that the Vendor has not
knowingly withheld from the Purchaser any facts relating
specifically to the Assets which, considered as a whole, would
be adverse to the Purchaser, except facts which are public
information or are generally known in the industry in which the
Vendor operates.
7.2 Benefit of Purchaser's Conditions Precedent
Each of the conditions precedent set forth in section 7.1 hereof
is for the exclusive benefit of the Purchaser and any such
condition precedent may be waived in whole or in part by the
Purchaser at or prior to the time of Closing by notice in
writing to the Vendor.
7.3 Conditions Precedent to the Obligation of the Vendor
The obligation of the Vendor to complete the agreement of
purchase and sale of the Assets on and subject to the terms and
conditions of this Agreement shall be subject to the following
conditions precedent that:
(a) the Purchaser's representations and warranties contained in
this Agreement shall be true at and as of the time of Closing as
though such representations and warranties were made as of such
time;
(b) the Purchaser shall have performed and complied with the
terms and conditions of this Agreement to be performed or
complied with by the Purchaser at or prior to the time of
Closing; and
(c) the Purchaser shall have delivered to the Vendor a
certificate of an authorized signatory of the Purchaser dated
the time of Closing, certifying (in such detail as the Vendor
may reasonably specify) to the fulfilment of the conditions set
forth in subsections 7.3(a) and (b) hereof.
7.4 Benefit of Vendor's Conditions Precedent
Each of the conditions precedent set forth in section 7.3 hereof
is for the exclusive benefit of the Vendor and any such
condition precedent may be waived in whole or in part by the
Vendor at or prior to the time of Closing by notice in writing
to the Purchaser.
7.5 Planning Act
This Agreement shall be effective to create an interest in the
property only if the Vendor complies with the subdivision
control provisions of the Planning Act by Closing and the Vendor
covenants to proceed diligently at his expense to obtain any
necessary consent by Closing.
ARTICLE 8
CLOSING
8.1 Time of Closing
Subject to the terms and conditions hereof, the purchase and
sale of the Assets shall be completed at the Closing on the
Closing Date.
8.2 Documents to be Delivered by the Vendor
The Vendor shall deliver or cause to be delivered to the
Purchaser's solicitors on the Closing Date:
(a) all conveyances and transfers in form and content
satisfactory to the Purchaser including the statements
contemplated by Section 50(22) of the Planning Act, appropriate
to effectively vest a good and marketable title to the Assets in
the Purchaser to the extent contemplated by this Agreement, and
immediately registrable in all places where registration of such
instruments is required;
(b) all consents or approvals, required to be obtained by the
Vendor for the purpose of validly assigning the Assets or any
part thereof;
(c) possession of the Assets, including vacant possession of the
Real Property and, except as otherwise indicated by the
Purchaser, all Facility Information;
(d) the certificate of the Vendor to be given under paragraph
7.1(c) hereof;
(e) duly executed unconditional and registrable discharges, or
evidence to the satisfaction of the Purchaser, acting
reasonably, as to discharge or termination of any and all
obligations and liabilities which the Purchaser has not agreed
to assume and which may be enforceable against any of the
Assets;
(f) sworn declaration of possession by an officer of the Vendor
in a form satisfactory to the Vendor's counsel and Purchaser's
counsel;
(g) the Flour Supply Agreement duly executed by the Vendor; and
(h) such other documents, instruments or other writings in form
and content satisfactory to the Purchaser acting reasonably
required to give effect to the provisions of this Agreement.
8.3 Documents to be Delivered by the Purchaser
On the Closing Date the Purchaser shall deliver or cause to be
delivered to the Vendor's solicitors:
(a) a wire transfer of funds to an account designated by the
Vendor for the portion of the Purchase Price payable on the
Closing Date;
(b) the certificate of the Purchaser to be given under paragraph
7.3(c) hereof;
(c) the Promissory Note and the Security Instruments duly
executed by the Purchaser;
(d) the Flour Supply Agreement duly executed by the Purchaser;
and
(e) such other documents, instruments or other writings in form
and content satisfactory to the Vendor acting reasonably
required to give effect to the provisions of this Agreement.
8.4 Deliveries and Trust Conditions
Any documents or money required to be delivered or paid
hereunder may be delivered or paid to the Parties or their
respective solicitors on such trust conditions (for similar
commercial transactions in Toronto, Ontario) as may be agreed to
by the vendor's solicitors and the purchaser's solicitors,
acting reasonably.
ARTICLE 9
GENERAL
9.1 Risk of Loss
From the execution and delivery of this Agreement until the time
of Closing, the Assets shall be and remain at the risk of the
Vendor. In the event of substantial damage prior to Closing,
the Purchaser may either terminate this Agreement or take the
proceeds of any insurance and complete the transaction. No
insurance will be transferred on Closing.
9.2 Notices
Any notice or other communication required or permitted to be
given hereunder to any party shall be in writing and shall be
given by facsimile or other means of electronic communication or
by hand delivery as hereinafter provided. Any such notice or
other communication, if sent by facsimile or other means of
electronic communication, shall be deemed to have been received
on the first Business Day following the sending, or if delivered
by hand shall be deemed to have been received at the time it is
delivered to the applicable address noted below either to the
individual designated below or to an individual at such address
having apparent authority to accept deliveries on behalf of the
addressee. Notice of change of address or name shall also be
governed by this section. Notices and other communications
shall be addressed as follows:
the Vendor ADM Agri-Industries, Ltd.
950 Mill Street
Montreal, Quebec, Canada H3C 1Y4
Attention: John Neufeld
Telecopier: (514) 846 8500
with a copy
to: Archer-Daniels-Midland Company
P.O. Box 1470
Decatur, Il. 62525
Attention: General Counsel
Telecopier: (217) 424 6196
the Purchaser Riverside Grain Products Inc.
and SVI: c/o Macleod Dixon
BCE Place, 181 Bay Street
Bay Wellington Tower
Suite 4220, P.O. Box 792
Toronto, Ontario
Attention: Michael R. Moher
Telecopier: 416 360 8277
9.3 Announcements
No announcement with respect to this Agreement will be made to
any person by the Vendor or the Purchaser without the prior
written consent and approval of the other. Notwithstanding the
foregoing, the Purchaser may disclose the existence of this
Agreement to those persons the Purchaser deems necessary in
order to procure any required licenses, permits or approvals or
to procure contracts with suppliers, purchasers or labourers.
9.4 Confidentiality
Except with the express written consent of the other party first
had and obtained, a party shall not disclose orally or in
writing to any third party the subject matter of the
negotiations between the Purchaser and the Vendor or any
information received from the other party in connection with the
transaction except as required to satisfy the conditions
precedent and the parties shall retain this Agreement and any
other relevant material as confidential. Such information will
be distributed to the employees of the Vendor and Purchaser on a
need to know basis only. The parties acknowledge that the
existence of an agreement in principle has been disclosed to
various government and political officials in Thunder Bay,
Ontario.
9.5 Expenses
The parties shall each bear their own expenses with respect to
the transaction contemplated by this Agreement.
9.6 Counterparts and Execution and Delivery
This Agreement may be executed in counterparts, each of which
when so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such
original counterpart. Each of the Parties acknowledges and
agrees that delivery of a facsimile or other means of electronic
communication of this Agreement executed by any Party, without
any further act by such Party, shall be satisfactory and valid
execution and delivery of this Agreement by that Party.
9.7 Guarantee by SVI
SVI represents that it is the registered and beneficial owner of
all of the issued shares of the Purchaser. SVI warrants that
the representations and warranties of the Purchaser are true and
guarantees the timely performance of all of the Purchaser's
obligations under this Agreement. The representations,
warranties and covenants of SVI shall survive the time of
Closing and shall continue in full force and effect for the
benefit of the Vendor following Closing. The Vendor shall not
be bound to exhaust its recourse against the Purchaser before
being entitled to pursue its remedies against SVI. SVI waives
any right to require the Vendor to proceed against the Purchaser.
IN WITNESS WHEREOF the Parties hereto have executed this
Agreement as of
the day and year first above written.
ADM AGRI-INDUSTRIES, LTD. RIVERSIDE GRAIN PRODUCTS INC.
Per: "D.J. Smith" Per: "Linda Luszczak"
Per: "D.J. Schmalz"
SOUTHERN VENTURES, INC.
Per: "Bobby Harvey"
Per: "Elaine Knapp"
SCHEDULE "A"
LIST AND DESCRIPTION OF EQUIPMENT
ATTACHED TO AND FORMING PART OF THE AGREEMENT BETWEEN
ADM AGRI-INDUSTRIES, LTD., RIVERSIDE GRAIN PRODUCTS INC. AND
SOUTHERN VENTURES, INC. DATED AS OF NOVEMBER 11, 1997
SCHEDULE "B"
FACILITY INFORMATION
ATTACHED TO AND FORMING PART OF THE AGREEMENT BETWEEN
ADM AGRI-INDUSTRIES, LTD., RIVERSIDE GRAIN PRODUCTS INC. AND
SOUTHERN VENTURES, INC.AS OF NOVEMBER 11, 1997
1. All files related to operation and maintenance of the plant,
eg.:
- -plant operation, training and safety manuals
- -starch, gluten and waste treatment equipment specifications,
warranties, operating and maintenance procedure manuals
- -plant drawings including blue prints, technical drawings and
designs
2. Maintenance and equipment files including Affidavits of
Manufacture for all tanks and other pressure vessels
3. Laboratory files including all files relating to process and
finished product
4. All files related to service contracts for the plant
- -rail siding agreements
- -rail shipping agreements
- -chemical supply agreements
- -hydro and natural gas agreements
5. All files related to financial aspects of the plant
- -annual/monthly/daily production and sales records
6. All files related to regulatory compliance of the plant
- -water supply
- -waste treatment and discharge
- -municipal, provincial and federal taxation
7. Real property files including surveys
8. Supplier files and records
9. Proprietary manufacturing information and knowhow,
instruction manuals, inventions, inventor's notes, research
data, formulae, processes, trade secrets, and any other
technology or intellectual property necessary for the Purchaser
to operate the Facilities.
SCHEDULE "C"
FLOUR SUPPLY AGREEMENT
ATTACHED TO AND FORMING PART OF THE AGREEMENT BETWEEN
ADM AGRI-INDUSTRIES, LTD., RIVERSIDE GRAIN PRODUCTS INC. AND
SOUTHERN VENTURES, INC.AS OF NOVEMBER 11, 1997
FLOUR SUPPLY AGREEMENT
THIS AGREEMENT made as of the day of , 1997.
B E T W E E N:
ADM AGRI-INDUSTRIES, LTD.
(hereinafter called "the Supplier")
OF THE FIRST PART
A N D:
RIVERSIDE GRAIN PRODUCTS INC.
(hereinafter called "the Consumer")
OF THE SECOND PART
1. Supply
1.1 The Supplier agrees to sell to the Consumer and the Consumer
agrees to buy from the Supplier all flour requested by the
Consumer during the term of this Agreement on the following
terms and conditions.
1.2 The Supplier agrees to supply straight-run flour at 11.5
pro-min (the "Product").
1.3 Title to and risk of loss of the Product shall pass to the
Consumer on delivery of the Product into Consumer's facility
located at 625 New Vickers, Thunder Bay, Ontario (the
"Facility").
2. Term of Agreement
2.1 This Agreement shall be for a period of five (5) years
commencing on the 1st day of October, 1997 to and including the
30th day of September, 2002.
2.2 This Agreement shall thereafter be automatically renewed for
successive periods of one (1) year each on the same terms and
conditions as contained herein unless written notice of
termination is delivered by either party to the other not less
than one (1) year prior to expiration of the initial term herein
or ninety (90) days prior to the expiration of any renewal term,
as the case may be.
3. Price
3.1 The initial milling conversion fee for each unit of Product
delivered to the Consumer will be Seventy-five Dollars ($75.00).
The milling conversion fee shall be reviewed and subject to
adjustment annually. An example of the total price formula for
each unit of Product is attached as Appendix A, which is
attached hereto, and by this reference is incorporated herein.
3.2 The Consumer agrees that the terms of payment shall be net
ninety (90) days from the date of delivery. Late Charges maybe
applied to overdue accounts at the rate of 1% per month,
compounded monthly.
3.3 All Prices herein are exclusive of all taxes, fees, duties
or charges imposed by any lawful authority upon the purchase and
sale of the Product hereunder; such taxes, fees, duties or
charges being for the account of the Consumer.
3.4 All references in this Agreement to monies shall be
references to lawful money of Canada.
4. Delivery
4.1 Deliveries shall be made into the Facility.
5. Insurance/Liability/Indemnity
5.1 During the term of this Agreement or any renewal thereof,
the Supplier and the Consumer shall, each at its own expense,
maintain comprehensive general liability insurance for bodily
injury, death and property damage (including products liability
insurance) with a limit of not less than Five Million Dollars
($5,000,000.00) per occurrence.
5.2 The Supplier shall be liable for and shall indemnify the
Consumer against all claims, demands, losses or damages caused
by or attributable to the Product or its transportation,
handling, care, storage, resale or other use, which accrue prior
to delivery to the Consumer, unless caused by the negligence or
non-performance of this Agreement by the Consumer. The Consumer
shall bear all risk, be solely liable for and indemnify the
Supplier against all claims, demands, losses or damages caused
by or attributable to the Product, which accrue after delivery
to the Consumer, unless caused by the negligence or
non-performance of this Agreement by the Supplier.
6. Other
6.1 Any notice contemplated pursuant to this Agreement may be
given by the Consumer or the Supplier to the other and such
notice may be delivered personally or by mail. Notice, if
delivered personally, shall be deemed to have taken place on the
date delivered; if by mail, delivery shall be deemed to have
taken place five (5) business days after date of mailing.
Notice to the parties shall be directed as follows:
if to the Supplier: ADM Agri Industries, Ltd.
7585 Dambro Crescent
Mississauga, Ontario
Attn: John Neufeld
Telecopier:
if to the Consumer:
Telecopier:
6.2 The Supplier and the Consumer agree that neither shall be
liable in damages or otherwise nor shall this Agreement be
cancelled for failure to carry out the terms of the Agreement in
whole or in part, caused directly or indirectly by or in
consequence of the action of any governmental or other similar
authority or the enforcement of any regulation or by fire,
storm, flood, or rebellion, insurrection, riots, civil commotion
or any other event beyond the reasonable control of the Supplier
or the Consumer.
6.3 This Agreement shall be governed by the laws of the Province
of Ontario.
6.4 This Agreement may not be assigned by either party without
the express written consent of the other party, which consent
shall not be unreasonably withheld.
6.5 Upon failure of either party to comply with any of the terms
or conditions in this Agreement, the other party may provide
written notice ("Default Notice") to the defaulting party
specifying any such failure and suspend further performance on
its part until such term or condition has been complied with.
If the defaulting party fails to rectify the failure specified
in the Default Notice within thirty (30) days or receipt of the
Default Notice, the non-defaulting party may, without prejudice
or waiver of any of its legal remedies, terminate this Agreement
by written notice to the defaulting party.
6.6 The failure of either party to exercise any right granted
hereunder shall not impair or be deemed to be a waiver of such
part's privilege of exercising such right at any subsequent time
or times, except where specifically stated.
6.7 This contract forms the entire agreement between the parties
and any amendments thereto shall be mutually agreed upon in
writing.
6.8 The parties acknowledge that there are no representations or
warranties other than those obtained in this Agreement.
IN WITNESS WHEREOF the parties have hereunto affixed their
corporate seals under the hands of their proper officers duly
authorized in that behalf as of the date first above written.
ADM AGRI-INDUSTRIES, LTD.
Per: "D.J. Smith"
Per:"N/A"
RIVERSIDE GRAIN PRODUCTS INC.
Per:"Linda Luszczak" 11/18/97
Per:
APPENDIX A
ALL COSTS IN CANADIAN $
Wheat (Minneapolis futures @ T. Bay) $205.98 To reflect time
period booked
Basis (established by Canadian Wheat Board) 0 Current
value to meet preferred specifications
Extraction (wheat/flour) 1.38 Metric tonnes of wheat to
yield 1 MT flour (CWB standard)
Gross Wheat (/MT Flour $284.25
Millfeed value ($/MT) $80.00 Values reflecting time period
booked (mutually agreed)
Millfeed Credit (.38 MT) ($30.40)
Net Bulk Flour Cost $253.85
Conversion Fee $75.00 Covering all costs of wheat acquisition,
manufacture, administration & outbound freight (to be reviewed
annually)
Net delivered flour cost $318.85
Volume (MT) 0 Volume & delivery period to be specified at time
of booking
Contract No. To be established for each booking
SCHEDULE "D"
FORM OF PROMISSORY NOTE
ATTACHED TO AND FORMING PART OF THE AGREEMENT BETWEEN
ADM AGRI-INDUSTRIES, LTD., RIVERSIDE GRAIN PRODUCTS INC. AND
SOUTHERN VENTURES, INC.AS OF NOVEMBER 11, 1997
SCHEDULE "E"
DESCRIPTION OF REAL PROPERTY
ATTACHED TO AND FORMING PART OF THE AGREEMENT BETWEEN
ADM AGRI-INDUSTRIES, LTD., RIVERSIDE GRAIN PRODUCTS INC. AND
SOUTHERN VENTURES, INC.AS OF NOVEMBER 11, 1997
1) Lots 1 to 16, Plan W-778
2) Part 1 on Reference Plan 9453 (Lots 53 to 60, Plan W-78 aka
1389)
3) Parcels 3543 and 3544 (Lots 17 to 21, Plan M-81)
4) Any rights of the Vendor to any adjoining water lot.
SCHEDULE "F"
DATE AND AMOUNTS OF INSTALLMENT PAYMENTS
ATTACHED TO AND FORMING PART OF THE AGREEMENT BETWEEN
ADM AGRI-INDUSTRIES, LTD., RIVERSIDE GRAIN PRODUCTS INC. AND
SOUTHERN VENTURES, INC.AS OF NOVEMBER 11, 1997
__________________________________
License Agreement
__________________________________
this agreement made this 2nd day of January, 1997
between:
Southern Ventures, Inc.
15000 Hyw. 11 North
Cottondale, Alabama 35453
(hereinafter called the 'Licensee')
of the first part
and
National Synfuels, Inc.
1600 - 609 Granville Street
Vancouver, B.C. V7Y 1C3
Canada
(hereinafter called 'Licenser')
of the second part
WHEREAS the Licenser is engaged in the research, development
and manufacture of certain commercial and industrial equipment
(herein called the 'Equipment') and processes for, inter alia,
the production of chemicals from carbonaceous materials;
AND WHEREAS the Licenser in the course of its operations has
obtained 'know how', patents, developed secret processes and
formulae for the manufacture and operation of the Equipment and
has acquired technical data consisting principally of reports,
drawings, specifications, blueprints and written descriptions of
manufacturing processes for the Equipment (all of which is
hereinafter called the 'Licensed Processes') and is willing to
grant the right to use said Licensed Processes within the
Licensed Area.
AND WHEREAS the Licensee desires to engage in the manufacture
and use of the Equipment in the Licensed Area.
AND WHEREAS the Licensee desires to acquire the aforesaid right
to use said Licensed Processes belonging to the Licenser in a
Licensed Area;
NOW THEREFORE the parties hereto mutually covenant and agree as
follows:
1. Definitions
As used in this agreement, the following terms shall have the
following definitions unless the context clearly requires
otherwise:
a) 'Licensed Area' means the Chemical Synthesis Unit (CSU)
situated at 'All Southern Ventures, Inc. Projects,' based on
patent #4,385,905 'Gasification of Solid Carbonaceous Fuels' or
modifications thereof as required by the Licencee for
implementation of its projects.
b) 'Licensed Processes' means the Licenser's manufacturing
processes and systems for producing and assembling the Equipment
developed or acquired by the Licenser prior to the date of this
agreement and any information either written or oral which could
reasonably be construed as relating thereto.
c) 'Licensed Processes' means any and all Equipment or systems
produced under any Licensed Process.
2. Secret Processes
a) Licenser hereby grants to Licensee the exclusive and
perpetual right to manufacture and use the Licensed Processes
within a Licensed Area. The Licensed Processes shall be
transferred to the Licensee as soon as possible after the date
of this agreement; such transfer to be completed not later than
ninety (90) days from the date of this agreement, in the form of
reports, drawings, designs, specification, blueprints and
written descriptions of manufacturing processes which will be
delivered to Licensee.
b) By such grant, Licensee agrees not to disclose the Licensed
Processes to any one else for any use whatsoever. By such
grant, Licenser shall have the exclusive right to prevent the
unauthorized use of the Licensed Processes and the unauthorized
use and sale of the Licensed Processes in any Licensed Area.
c) Licenser shall furnish in good faith the data and other
material sufficient to transfer the Licensed Processes covered
by this agreement. Licenser warrants that the processes,
formulae, technical data and know how will be sufficient and
suitable for the production of the equipment to a quality
comparable to the quality now produced by the Licenser, provided
that Licensee at all times conforms strictly with the processes,
formulae, technical data and 'know how' transferred to it by
Licenser and provided that Licensee at all times installs and
uses the Equipment required and purchases and uses the raw
materials the standard of quality required.
d) The rights and license herein granted shall include the right
to grant sub-licenses thereunder with minimum covenants and
restrictions defined herein.
e) Nothing contained in this paragraph shall be construed to
grant to Licensee any right to use the Licensed Processes or to
use or sell the Licensed Processes outside any Licensed Area.
f) Licenser agrees to disclose to Licensee all developments or
improvements of the Licensed Processes that Licenser may develop
or acquire during the term of this agreement. Licensee agrees
to disclose to Licenser all technical data and information
relating to any and all developments or improvements of the
Licensed Processes that Licensee may develop or acquire during
the term of this agreement.
3. License Fee and Royalty
As consideration for the rights granted hereunder, the Licensee
shall pay to Licenser a license fee of Four Thousand Seven
Hundred an Fifty Dollars ($4,750.00) for the right to an
unlimited number of Licensed Areas as defined in Paragraph 1.(a)
plus a Royalty Fee of Two Dollars ($2.00) per ton of material
processed for each Licensed Area.
4. Term
Unless otherwise terminated as herein set out, the term of this
Agreement shall be twenty (20) years from the date of this
Agreement or such other date as the parties shall mutually agree
at which time this Agreement shall terminate.
5. Disclosure
Licensee agrees not to disclose, and to use its best efforts,
and to take all actions necessary, to prevent its employees and
suppliers from disclosing the Licensed Processes or any
information relating thereto transferred under this agreement to
any person, firm, corporation or other business entity unless
and until Licensee has obtained the prior written approval of
Licenser and upon request, will execute a Secrecy Agreement with
Licenser.
6. Indemnity
Licensee shall hold Licenser free from any liability or
responsibility in connection with claims of any persons caused
by or arising from any defect in or failure of any products
manufactured by Licensee under the Licensed Processes covered by
this agreement. Licensee further agrees to reimburse Licenser
for any claims paid by Licenser in good faith under order of any
court to any person with respect to the products manufactured by
Licensee under the Licensed Processes covered by this agreement.
7. Cancellation
a) Licenser shall have the right to cancel this agreement :
(i) for breach or default of any of its provisions if Licensee
fails to remedy such breach or default within thirty (30) days
after Licensee has received notice from Licenser, specifically
pointing out the nature of such breach or default, or
(ii) in the event that Southern Ventures, Inc. or its
subsidiaries, or any sub-licensee no longer retains control of
the Plant Operating Agreement for any CSU.
b) Any notification required or permitted herein shall be
accomplished by registered letter with return receipt. The date
stamped by the Post Office Administration on the return receipt
of the registered letter will be legally considered to attest
the fact in case of controversies and shall be deemed to have
been received within seven (7) days thereafter. Notices shall
be sent to the Licenser and to the Licensee at the addresses
herein before set out or to such other addresses as either party
may notify to the other. If a party changes its address, notice
thereof must be given in writing to the other party.
c) The failure of a party to give notice in writing to the
other party or non fulfillment of any term or condition of this
agreement shall not constitute a waiver thereof, nor shall the
waiver in writing of any breach or non fulfillment of any term
or condition of this agreement constitute a waiver of any other
breach or non fulfillment of that or any other term or condition
of this agreement.
8. Reversion of Rights
a) In the event
(i) of the cancellation of this agreement as provide for
herein, or
(ii) of the expropriation or nationalization of the operations
of the Licensee, or
(iii) of the filing of a petition of bankruptcy or insolvency
by the Licensee, or the appointment of a receiver for
substantially all of the property of the Licensee, or
(iv) that Southern Ventures, Inc. or one of its subsidiaries,
or any sub-licensee no longer retains control of the Plant
Operating Agreement for any CSU, or
(v) that any of the primary equipment of any plant is seized or
falls into the hands of a third party,
all properties, including all rights, titles and interests
granted by Licenser to Licensee under the terms of this
agreement shall immediately revert to Licenser.
b) In the circumstances of any reversion as set forth in
subparagraph (a) above, Licensee agrees to forbear from using
the Licensed Processes immediately upon receiving notice thereof
from Licenser. Licensee further agrees that said forbearance
from the use and exploitation of the Licensed Processes shall be
binding upon its successors and assigns.
9. Arbitration
Unless otherwise settled by the parties, all disputes,
controversies or differences which may arise between the parties
out of or in relation to or in connection with this agreement
shall be finally settled by arbitration pursuant to the
appropriate arbitration legislation of the Licensed Area.
10. Miscellaneous
a) Nothing contained herein or done hereunder shall be construed
as constituting either party the agent of the other in any sense
of the word whatsoever.
b) 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.
e) 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.
f) Time shall be of the essence of this agreement and every part
thereof.
g) The validity of any particular provision of this agreement
shall not affect any of the provisions thereof, but the
agreement shall be construed as if such invalid provisions were
omitted.
h) This agreement shall be binding upon and inure to the benefit
of the parties hereto, for themselves and their legal personal
representatives, successors and assigns.
in witness whereof the parties hereto have executed these
presents.
Southern Ventures, Inc.
______"W. Benjamin Wood"______________ by
________"David Tucker"__________ Witness Licensee
National Synfuels, Inc.
_________"Gordon H. Tucker"___________ by
________"David Tucker"___________________ Witness Licenser
License Agreement
THIS AGREEMENT made this 25th day of February, 1997
BETWEEN:
CPII Carbon Products Industries Inc.
Suite 3400, 425 - 1st Street S.W.
Calgary, Alberta T2P 3L8
Canada
(hereinafter called the `Licensee')
OF THE FIRST PART
AND
Southern Ventures, Inc.
15000 Highway 11 North
Tuscaloosa, Alabama 35453
(hereinafter called `Licenser')
OF THE SECOND PART
WHEREAS the Licenser is engaged in the research, development
and manufacture of certain commercial and industrial equipment
(herein call the `Equipment') and processes for, inter alia, the
production of chemicals from carbonaceous materials, namely, but
not limited to the production of chars and oils from wood wastes
(e.g. sawdust, bark, shavings), scrap tires, pulp mill sludges
and municipal sewage sludges;
AND WHEREAS the Licenser in the course of its operations has
obtained `know how', patents, developed secret processes and
formulae for the manufacture and operation of the Equipment and
has acquired technical data consisting principally of reports,
drawings, specifications, blueprints and written descriptions of
manufacturing processes for the Equipment (all of which is
hereinafter called the `Licensed Processes') and is willing to
grant the right to use said Licensed Processes within the
Licensed Area;
AND WHEREAS the Licensee desires to engage in the manufacture
and use of the Equipment in the Licensed Area;
AND WHEREAS the Licensee desires to acquire the aforesaid
right to use said Licensed Processes belonging to the Licenser
in a Licensed Area;
NOW THEREFORE the parties hereto mutually covenant and agree
as follows:
1. Definitions
As used in this agreement, the following terms shall have the
following definitions unless the context clearly requires
otherwise:
a) `Licensed Area' means the Chemical Synthesis Unit (CSU)
situated at all CPII Carbon Products Industries Inc. projects in
location within a province of Canada subsequently to the date of
this agreement.
b) `Licensed Processes' means the Licenser's manufacturing
processes and systems for producing and assembling the Equipment
developed or acquired by the Licenser prior to the date of this
agreement and any information either written or oral which could
reasonably be construed as relating thereto.
c) `Licensed Processes' means any and all Equipment or systems
produced under any Licensed Process.
2. Secret Processes
a) Licenser hereby grants to Licensee the perpetual right to
manufacture and use the Licensed Processes within the Licensed
Area. The Licensed Processes shall be transferred to the
Licensee as soon as possible after the date of this agreement;
such transfer to be completed not later than ninety (90) days
from the date of this agreement, in the form of reports,
drawings, designs, specification, blueprints and written
descriptions of manufacturing processes which will be delivered
to the Licensee.
b) By such grant, Licensee agrees not to disclose the Licensed
Processes to anyone else for any use whatsoever. By such grant,
Licenser shall have the exclusive right to prevent the
unauthorized use of the Licensed Processes and the unauthorized
use and sale of the Licensed Area.
c) Licenser shall furnish in good faith the data and other
material sufficient to transfer the Licensed Processes covered
by this agreement. Licenser warrants that the processes,
formulae, technical data and `know how' will be sufficient and
suitable for production of the Equipment to a quality comparable
to the quality now produced by the Licenser, provided that
Licensee at all times conforms strictly with the processes,
formulae, technical data and `know how' transferred to it by
Licenser and provided that Licensee at all times installs and
uses the Equipment required and purchases and uses the raw
materials the standard of quality required.
d) The rights and license herein granted shall not include the
right to grant sub-licenses thereunder unless approved by
Licenser.
e) Nothing contained in this paragraph shall be construed to
grant to Licensee any right to sell the Licensed Processes
within any Licensed Area or to use or sell the Licensed
Processes outside any Licensed Area.
f) Licenser agrees to disclose to Licensee all developments or
improvements of the Licensed Processes that Licenser may develop
or acquire during the term of this agreement. Licensee agrees
to disclose to Licenser all technical data and information
relating to any and all developments or improvements of the
Licensed Processes that Licensee may develop or acquire during
the term of this agreement.
3. License Fee and Royalty
As consideration for the rights granted hereunder, Licenser
acknowledges payment of the license fee of Fifty Thousand
Dollars (US$50,000) by David Herr on behalf of the Licensee for
the right to an unlimited number of Licensed Areas as defined in
Paragraph 1.(a). Licensee shall pay to Licenser a royalty fee
of Five Dollars (US$5.00) per ton of material processed for each
Licensed Area. Licensee has the right, at any time this
agreement remains in effect, to pay an additional Two Million
Dollars (US$2,000,000), at which time the royalty fee will
immediately be reduced to Two Dollars and Fifty Cents (US$2.50)
per dry ton of material processed for each Licensed Area.
4. Term
Unless otherwise terminated as herein set out, the term of this
Agreement shall be twenty five (25) years from the date of this
Agreement or such other date as the parties shall mutually agree
at which time this Agreement shall terminate. Licensee shall
have an option to renew this Agreement for an additional 25
years.
5. Disclosure
Licensee agrees not to disclose, and to use its best efforts,
and to take all actions necessary, to prevent its employees and
suppliers from disclosing the Licensed Processes or any
information relating thereto transferred under this agreement to
any person, firm, corporation or other business entity unless
and until Licensee has obtained the prior written approval of
Licenser and upon request, will execute a Secrecy Agreement with
Licenser.
6. Indemnity
Licensee shall hold Licenser free from any liability or
responsibility in connection with claims of any persons caused
by or arising from any defect in or failure of any products
manufactured by Licensee under the Licensed Processes covered by
this agreement. Licensee further agrees to reimburse Licenser
for any claims paid by Licenser in good faith under order of any
court to any person with respect to the products manufactured by
Licensee under the Licensed Processes covered by this agreement.
7. Cancellation
a) Licenser shall have the right to cancel this agreement:
(i) for breach or default of any of its provisions if Licensee
fails to remedy such breach or default within thirty (30) days
after Licensee has received notice from Licenser, specifically
pointing out the nature of such breach or default, or
(ii) in the event that CPII Carbon Products Industries Inc. or
its subsidiaries no longer retains control of the Plant
Operating Agreement for any CSU.
b) Any notification required or permitted herein shall be
accomplished by registered letter with return receipt. The date
stamped by the Post Office Administration on the return receipt
of the registered letter will be legally considered to attest
the fact in case of controversies and shall be deemed to have
been received within seven (7) days thereafter. Notices shall
be sent to the Licenser and to the Licensee at the addresses
herein before set out or to such other addresses as either party
may notify to the other. If a party changes its address, notice
thereof must be given in writing to the other party.
c) The failure of a party to give notice in writing to the
other party or non fulfillment of any term or condition of this
agreement shall not constitute a waiver thereof, nor shall the
waiver in writing of any breach or non fulfillment of any term
or condition of this agreement constitute a waiver of any other
breach or non fulfillment of that or any other term or condition
of this agreement.
8. Reversion of Rights
a) In the event
(i) of the cancellation of this agreement as provided for
herein, or
(ii) of the expropriation or nationalization of the operations
of the Licensee, or
(iii) of the filing of a petition of bankruptcy or insolvency
by the Licensee, or the appointment of a receiver for
substantially all of the property of the Licensee, or
(iv) that CPII Carbon Products Industries Inc. or one of its
subsidiaries no longer retains control of the Plant Operating
Agreement for any CSU, or
(v) that any of the primary equipment of any plant is seized
or falls into the hands of a third party,
all properties, including all rights, titles and interests
granted by Licenser to Licensee under the terms of this
agreement shall immediately revert to Licenser.
b) In the circumstances of any reversion as set forth in
subparagraph (a) above, Licensee agrees to forbear from using
the Licensed Processes immediately upon receiving notice thereof
from Licenser. Licensee further agrees that said forbearance
from the use and exploitation of the Licensed Processes shall be
binding upon its successors and assigns.
9. Arbitration
Unless otherwise settled by the parties, all disputes,
controversies or differences which may arise between the parties
out of or in relation to or in connection with this agreement
shall be finally settled by arbitration pursuant to the
appropriate arbitration legislation of the Licensed Area.
10. Miscellaneous
a) Nothing contained herein or done hereunder shall be
construed as constituting either party the agent of the other in
any sense of the word whatsoever.
b) 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.
c) 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.
d) Time shall be of the essence of this agreement and every
part thereof.
e) The validity of any particular provision of this agreement
shall not affect any of the provisions thereof, but the
agreement shall be construed as if such invalid provisions were
omitted.
f) This agreement shall be binding upon and inure to the
benefit of the parties hereto, for themselves and their legal
personal representatives, successors and assigns.
IN WITNESS WHEREOF the parties hereto have executed these
presents.
CPII Carbon Products Industries Inc.
"David Tucker: by: "David Herr"
Witness Licensee
Southern Ventures, Inc.
"W. Benjamin Wood" by: "Gordon H. Tucker"
Witness Licenser
Principal Office of Southern Ventures, Inc. is located at:
15000 Hwy. 11N, Cottondale, Alabama 35453
The registered office is located at:
1188 West Bonanza Drive, Carson City, Nevada 89706
LIST OF SUBSIDIARY COMPANIES
Registered Office of Southern Ventures, Inc. (Canada) is located at:
3700, 400 Third Avenue S.W., Calgary, Alberta, T2P 4H2
Principal Office of Riverside Carbon Products, Inc. is located at:
2727 Phillips Rd. Sooke, British Columbia V0S 1N0
The Registered Office is located at:
3700, 400 Third Avenue S.W., Calgary, Alberta, T2P 4H2
Principal Office of Elmore Sand & Gravel, Inc. is located at:
2036 Maron Spillway Rd. P.O. Box 558 Elmore, Alabama 36025
The Registered Office is located at:
2036 Maron Spillway Rd. P.O. Box 558 Elmore, Alabama 36025
Principal Office of Tuskegee Sand & Gravel, Inc. is located at:
2036 Maron Spillway Rd. P.O. Box 558 Elmore, Alabama 36025
The Registered Office is located at:
2036 Maron Spillway Rd. P.O. Box 558 Elmore, Alabama 36025
Principal Office of Riverside Grain Products, Inc. is located at:
2727 Phillips Rd. Sooke, British Columbia V0S 1N0
The Registered Office of Riverside Grain Products, Inc. is
located at:
Suite 4220, Bay Wellington Tower, 181 Bay Street, Toronto, Ontario M5J 2T3
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 135,801 167,258
<SECURITIES> 0 0
<RECEIVABLES> 641,256 553,062
<ALLOWANCES> 0 0
<INVENTORY> 405,837 405,837
<CURRENT-ASSETS> 1,182,894 1,126,158
<PP&E> 5,762,429 3,067,007
<DEPRECIATION> 1,621,419 1,115,867
<TOTAL-ASSETS> 5,916,456 4,800,457
<CURRENT-LIABILITIES> 2,019,751 1,189,967
<BONDS> 0 0
0 0
10,000 0
<COMMON> 18,437 51,000
<OTHER-SE> 1,834,341 2,057,103
<TOTAL-LIABILITY-AND-EQUITY> 5,916,456 4,800,457
<SALES> 2,055,380 1,692,743
<TOTAL-REVENUES> 2,055,380 3,453,797
<CGS> 873,155 1,742,042
<TOTAL-COSTS> 873,155 1,742,042
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 138,265 115,209
<INCOME-PRETAX> 239,738 1,042,545
<INCOME-TAX> 0<F2> 0 <F1>
<INCOME-CONTINUING> 239,728 1,042,545
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 239,728 1,042,545
<EPS-PRIMARY> 0.01 2,044
<EPS-DILUTED> 0.01 2,044
<FN> 1 Prior to 1997 the Company was operated as an IRS chapter S corporation.
<FN> 2 Management does not expect to incur an income tax liability during 1997.
</TABLE>
Mine Reserves Test
GUNDLACH INDUSTRIAL
14216 30th Avenue SE
Mill Creek, WA 98012-5002
(425) 316-0996
November 4, 1997
Bobby Harvey
Elmore Sand & Gravel, Inc.
P0 Box 558
Elmore, AL 36025 Fax: (334) 285-1808
Re: State Leased Lard Area North of Speigner Lake
Sand and Gravel Analysis & Expected Mining Life
Project: Elmore Sand & Gravel, Inc.
Elmore, Alabama
Dear Bobby:
The following pages summarize the tests and estimates of your
expected mining
life on the remaining, un-mined State of Alabama land to the
west and north of
Speigner lake, including the lake itself.
Based on the new plant production capacity of 600 TPH (tons per
hour), I
estimate a mining life of:
13.75 years - for the land area of approximately 615 acres
9.5 years - for Lake Speigner, of approximately 427 acres
Not attached to this report, but in addition to the above mining
life are:
7.7 years - for the remaining State lease south of the lake;
approximately 350 acres
.4 years - for the new Scott property lease across the
railroad tracks; 20 acres
3.9 years - for the possible new Skinner lease in Deatsville;
160 acres
This total land committed in mining leases could produce gravel and sand for
at least the next 35.26 years at the new production rate of 1.2 million tons
per year.
The attached reports also identify: Gravel and water depths
Color of the rock
Percentage of gravel VS sand
Fe (iron) content of the sample taken.
Hopefully, this information will serve useful in selecting which area to mine
next, estimating how much gravel is expected in each area, and the expected
quality of the gravel.
Thank you for the opportunity to be of service.
Sincerely
"John Gundlach"
John Gundlach
cc: Southern Ventures, Inc.
Calculated State Land Lease Area & Estimated Sand & Gravel Pit Life
Expectancy
State of Alabama Leased Land
Hole # Area Represented Estimated Estimated
Sq. Ft. Acres Tons S&G Pit Life Yrs
1 900,000 20.66 918,000 0.77
2 975,000 22.38 596,700 0.50
3 900,000 20.66 550,800 0.46
4 1,008,000 23.14 514,080 0.43
5 2,497.500 57.33 1,910,588 1.59
6 2,520,000 57.85 2,570,400 2.14
7 3,060,000 70.25 2,184,840 1.82
8 3,330,000 76.45 2,377,620 1.98
9 3.330,000 76.45 339,660 0.28
10 6,640,000 152.43 4,063,680 3.39
12 405,000 9.30 227,205 0.19
13 360,000 8.26 257,040 0.21
Lake 18,630,000 427.69 11,401,560 9.50
Roads 864,000 19.83 - -
- -----------------------------------------------------------------
12 45,419,500 1,042.69 27,912,173 23.26
Rodger's (Adjacent) Property
For informational purposes only. Tested to see if sufficient
gravel for possible lease.
Rodger's (Adjacent) Property
Hole # Area Represented
Sq. Ft. Acres
11 613,744 14.09
14 310,219 7.12
15 262,444 6.02
16 531,895 12.21
17 640,800
14.71 --------------------------------------------
5 2,359,102 54.16
Other Leased Property
Hole # Area Represented Estimated
Estimated
Sq. Ft. Acres Tons S&G Pit
Life Yrs
So. Lake 15,246,000 350.00 9,330,552 7.70
Scott RR 871,200 20.00 522,067 0.40
Skinner 4,194,828 96.30 786,530 3.90
- -----------------------------------------------------------------
Other 20,312,028 466.00 10,639,149 12.00
- -----------------------------------------------------------------
Total 65,731,528 1,509.00 38,551,321 35.26
Tonnage based on "oversized" gravel output only.
<PAGE>
ROCK PRODUCT DEPTH ANALYSIS
CRVT = Calculated Vein Thickness (ft.)
Test Hole #1 Test Hole #2
Material Depth (ft.) Material Depth (ft.)
Overburden 0' to -10' Overburden 0' to -13.5'
Rock -10' to -25'(+) Rock -10' to -21'(+)
Water (?) @-18' Water (?) @-17.5'
Color 3M Color 2BW
CRVT (ft.) 20 CRVT (ft.) 12
Area (ft2) 900,000 Area (ft2) 975,000
Total Mining Tons 918,000 Total Mining Tons 596,700
Est'd Pit Life (wks) 38.25 Est'd Pit Life (wks) 24.86
Est'd Pit Life (yrs) 0.77 Est'd Pit Life (yrs) 0.50
Est'd Tons of Gravel 449,820 Est'd Tons of Gravel 280,449
Est'd Tons of Sand 468,180 Est'd Tons of Sand 468,180
% Fe 1.670% % Fe 0.605%
Agg. Size % of Retained Agg. Size % of Retained
Oversize 3% Oversize 7%
3/4" 11% 3/4" 14%
1/2" 26% 1/2" 25%
#4 49% #4 47%
Sand 51% Sand 53%
Notes:
1. Holes were dug by a bucket excavator, random pit run samples taken from
the middle of the CRV.
2. Water was noticed at depth identified, started seeping into the dug test
hole. It is assumed that water will fill up to that level.
3. The rock chemical analysis was performed by Globe Metallurgical, Inc.;
Selma, AL.
4. Due to the limits of the backhoe digging depth, an extra 5 ft. of estimated
rock bed depth was added to the actual measurement for calculating the
estimated gravel life only. (if rock was at the bottom of the hole)
5. Aggregate size sampling was performed by Elmore Sand & Gravel lab technician.
6. Used 102 lb/ft3 density for pit run material.
7. Estimated pit life based on 600 TPH production, 40 hours per week, 50 weeks
per year.
8. Estimated tons of sand (or) gravel based on sample percentage.
9. Color codes: 1B (brown) 2BW (brown-white) 3M (mixed) 5W (white)
ROCK PRODUCT DEPTH ANALYSIS
CRVT = Calculated Vein Thickness (ft.)
Test Hole #3 Test Hole #4
Material Depth (ft.) Material Depth (ft.)
Overburden 0' to -13.0' Overburden 0' to -20'
Rock -13' to -20.5' Rock -20' to -25'(+)
Water (?) @-12.5' Water (?) none
Color 4WB Color 3M
CRVT (ft.) 12 CRVT (ft.) 10
Area (ft2) 900,000 Area (ft2) 1,008,000
Total Mining Tons 550,800 Total Mining Tons 514,080
Est'd Pit Life (wks) 22.95 Est'd Pit Life (wks) 21.42
Est'd Pit Life (yrs) 0.46 Est'd Pit Life (yrs) 0.43
Est'd Tons of Gravel 319,464 Est'd Tons of Gravel 190,210
Est'd Tons of Sand 231,336 Est'd Tons of Sand 323,870
% Fe 0.280% % Fe 0.698%
Agg. Size % of Retained Agg. Size % of Retained
Oversize 10% Oversize 11%
3/4" 20% 3/4" 15%
1/2" 35% 1/2" 23%
#4 58% #4 37%
Sand 42% Sand 63%
Notes:
1. Holes were dug by a bucket excavator, random pit run samples taken from the
middle of the CRV.
2. Water was noticed at depth identified, started seeping into the dug test
hole. It is assumed that water will fill up to that level.
3. The rock chemical analysis was performed by Globe Metallurgical, Inc.;
Selma, AL.
4. Due to the limits of the backhoe digging depth, an extra 5 ft. of estimated
rock bed depth was added to the actual measurement for calculating the
estimated gravel life only. (if rock was at the bottom of the hole)
5. Aggregate size sampling was performed by Elmore Sand & Gravel lab technician.
6. Used 102 lb/ft3 density for pit run material.
7. Estimated pit life based on 600 TPH production, 40 hours per week, 50 weeks
per year.
8. Estimated tons of sand (or) gravel based on sample percentage.
9. Color codes: 1B (brown) 2BW (brown-white) 3M (mixed) 5W (white)
ROCK PRODUCT DEPTH ANALYSIS
CRVT = Calculated Vein Thickness (ft.)
Test Hole #5 Test Hole #6
Material Depth (ft.) Material Depth (ft.)
Overburden 0' to -6' Overburden 0' to -5'
Rock -6' to -10'(+) Rock -5' to -20'(+)
Water (?) none Water (?) @-7'
Color 5W Color 3M
CRVT (ft.) 15 CRVT (ft.) 20
Area (ft2) 2,497,500 Area (ft2) 2,520,000
Total Mining Tons 1,910,588 Total Mining Tons 2,570,400
Est'd Pit Life (wks) 79.61 Est'd Pit Life (wks) 107.10
Est'd Pit Life (yrs) 1.59 Est'd Pit Life (yrs) 2.14
Est'd Tons of Gravel 1,089,035 Est'd Tons of Gravel 1,362,312
Est'd Tons of Sand 821,553 Est'd Tons of Sand 1,208,088
% Fe 0.116% % Fe 0.055%
Agg. Size % of Retained Agg. Size % of Retained
Oversize 14% Oversize 9%
3/4" 23% 3/4" 18%
1/2" 36% 1/2" 31%
#4 57% #4 53%
Sand 43% Sand 47%
Notes:
1. Holes were dug by a bucket excavator, random pit run samples taken from the
middle of the CRV.
2. Water was noticed at depth identified, started seeping into the dug test
hole. It is assumed that water will fill up to that level.
3. The rock chemical analysis was performed by Globe Metallurgical, Inc.;
Selma, AL.
4. Due to the limits of the backhoe digging depth, an extra 5 ft. of estimated
rock bed depth was added to the actual measurement for calculating the
estimated gravel life only. (if rock was at the bottom of the hole)
5. Aggregate size sampling was performed by Elmore Sand & Gravel lab technician.
6. Used 102 lb/ft3 density for pit run material.
7. Estimated pit life based on 600 TPH production, 40 hours per week, 50 weeks
per year.
8. Estimated tons of sand (or) gravel based on sample percentage.
9. Color codes: 1B (brown) 2BW (brown-white) 3M (mixed) 5W (white)
ROCK PRODUCT DEPTH ANALYSIS
CRVT = Calculated Vein Thickness (ft.)
Test Hole #7 Test Hole #8
Material Depth (ft.) Material Depth (ft.)
Overburden 0' to -12' Overburden 0' to -6'
Rock -12' to -21'(+) Rock -6' to -15'(+)
Water (?) @-12' Water (?) @-10'
Color 5W Color 4WB
CRVT (ft.) 14 CRVT (ft.) 14
Area (ft2) 3,060,000 Area (ft2) 3,330,000
Total Mining Tons 2,184,840 Total Mining Tons 2,377,620
Est'd Pit Life (wks) 91.035 Est'd Pit Life (wks) 99.07
Est'd Pit Life (yrs) 1.82 Est'd Pit Life (yrs) 1.98
Est'd Tons of Gravel 1,048,723 Est'd Tons of Gravel 1,260,139
Est'd Tons of Sand 1,136,117 Est'd Tons of Sand 1,117,481
% Fe 0.030% % Fe 0.208%
Agg. Size % of Retained Agg. Size % of Retained
Oversize 9% Oversize 10%
3/4" 14% 3/4" 18%
1/2" 25% 1/2" 30%
#4 48% #4 53%
Sand 52% Sand 47%
Notes:
1. Holes were dug by a bucket excavator, random pit run samples taken from the
middle of the CRV.
2. Water was noticed at depth identified, started seeping into the dug test
hole. It is assumed that water will fill up to that level.
3. The rock chemical analysis was performed by Globe Metallurgical, Inc.;
Selma, AL.
4. Due to the limits of the backhoe digging depth, an extra 5 ft. of estimated
rock bed depth was added to the actual measurement for calculating the
estimated gravel life only. (if rock was at the bottom of the hole)
5. Aggregate size sampling was performed by Elmore Sand & Gravel lab technician.
6. Used 102 lb/ft3 density for pit run material.
7. Estimated pit life based on 600 TPH production, 40 hours per week, 50 weeks
per year.
8. Estimated tons of sand (or) gravel based on sample percentage.
9. Color codes: 1B (brown) 2BW (brown-white) 3M (mixed) 5W (white)
ROCK PRODUCT DEPTH ANALYSIS
CRVT = Calculated Vein Thickness (ft.)
Test Hole #9 Test Hole #10
Material Depth (ft.) Material Depth (ft.)
Overburden 0' to -8' Overburden 0' to -14.5'
Rock -8' to -10' Rock -14.5' to -21'(+)
Water (?) none Water (?) @-14.5'
Color 2BW Color 3M
CRVT (ft.) 2 CRVT (ft.) 12
Area (ft2) 3,330,000 Area (ft2) 6,640,000
Total Mining Tons 339,660 Total Mining Tons 4,063,680
Est'd Pit Life (wks) 14.15 Est'd Pit Life (wks) 169.32
Est'd Pit Life (yrs) 0.28 Est'd Pit Life (yrs) 3.39
Est'd Tons of Gravel 163,037 Est'd Tons of Gravel 2,641,392
Est'd Tons of Sand 176,623 Est'd Tons of Sand 1,422,288
% Fe 0.405% % Fe 0.419%
Agg. Size % of Retained Agg. Size % of Retained
Oversize 6% Oversize 16%
3/4" 18% 3/4" 28%
1/2" 30% 1/2" 45%
#4 48% #4 65%
Sand 52% Sand 35%
Notes:
1. Holes were dug by a bucket excavator, random pit run samples taken from the
middle of the CRV.
2. Water was noticed at depth identified, started seeping into the dug test
hole. It is assumed that water will fill up to that level.
3. The rock chemical analysis was performed by Globe Metallurgical, Inc.;
Selma, AL.
4. Due to the limits of the backhoe digging depth, an extra 5 ft. of estimated
rock bed depth was added to the actual measurement for calculating the
estimated gravel life only. (if rock was at the bottom of the hole)
5. Aggregate size sampling was performed by Elmore Sand & Gravel lab technician.
6. Used 102 lb/ft3 density for pit run material.
7. Estimated pit life based on 600 TPH production, 40 hours per week, 50 weeks
per year.
8. Estimated tons of sand (or) gravel based on sample percentage.
9. Color codes: 1B (brown) 2BW (brown-white) 3M (mixed) 5W (white)
ROCK PRODUCT DEPTH ANALYSIS
CRVT = Calculated Vein Thickness (ft.)
Test Hole #12 Test Hole #13
Material Depth (ft.) Material Depth (ft.)
Overburden 0' to -3.5' Overburden 0' to -6'
Rock -3.5' to -13'(+) Rock -6' to -15'
Water (?) @-3.5' Water (?) @-6'
Color 3M Color 2BW
CRVT (ft.) 11 CRVT (ft.) 14
Area (ft2) 405,000 Area (ft2) 360,000
Total Mining Tons 227,000 Total Mining Tons 257,040
Est'd Pit Life (wks) 9.47 Est'd Pit Life (wks) 10.71
Est'd Pit Life (yrs) 0.19 Est'd Pit Life (yrs) 0.21
Est'd Tons of Gravel 140,867 Est'd Tons of Gravel 128,520
Est'd Tons of Sand 86,338 Est'd Tons of Sand 128,520
% Fe N/A % Fe N/A
Agg. Size % of Retained Agg. Size % of Retained
Oversize 16% Oversize 17%
3/4" 29% 3/4" 25%
1/2" 43% 1/2" 36%
#4 62% #4 50%
Sand 38% Sand 50%
Notes:
1. Holes were dug by a bucket excavator, random pit run samples taken from the
middle of the CRV.
2. Water was noticed at depth identified, started seeping into the dug test
hole. It is assumed that water will fill up to that level.
3. The rock chemical analysis was performed by Globe Metallurgical, Inc.;
Selma, AL.
4. Due to the limits of the backhoe digging depth, an extra 5 ft. of estimated
rock bed depth was added to the actual measurement for calculating the
estimated gravel life only. (if rock was at the bottom of the hole)
5. Aggregate size sampling was performed by Elmore Sand & Gravel lab technician.
6. Used 102 lb/ft3 density for pit run material.
7. Estimated pit life based on 600 TPH production, 40 hours per week, 50 weeks
per year.
8. Estimated tons of sand (or) gravel based on sample percentage.
9. Color codes: 1B (brown) 2BW (brown-white) 3M (mixed) 5W (white)
ROCK PRODUCT DEPTH ANALYSIS
CRVT = Calculated Vein Thickness (ft.)
Test Hole # Lake Test Hole #1
Material Depth (ft.) Material Depth (ft.)
Overburden N/A Overburden 0' to -4'
Rock N/A Rock -4' to -13'(+)
Water (?) @ 0' Water (?) @-5'
Color N/A Color 3M
CRVT (ft.) 12 CRVT (ft.) 14
Area (ft2) 18,630,000 Area (ft2) 613,744
Total Mining Tons 11,401,560 Total Mining Tons 438,213
Est'd Pit Life (wks) 475.065 Est'd Pit Life (wks) 18.26
Est'd Pit Life (yrs) 9.5 Est'd Pit Life (yrs) 0.37
Est'd Tons of Gravel 5,700,780 Est'd Tons of Gravel 148,992
Est'd Tons of Sand 5,700,780 Est'd Tons of Sand 289,221
% Fe N/A % Fe N/A
Agg. Size % of Retained Agg. Size % of Retained
Oversize N/A Oversize 11%
3/4" N/A 3/4" 16%
1/2" N/A 1/2" 24%
#4 50% #4 34%
Sand 50% Sand 66%
Notes:
1. Holes were dug by a bucket excavator, random pit run samples taken from the
middle of the CRV.
2. Water was noticed at depth identified, started seeping into the dug test
hole. It is assumed that water will fill up to that level.
3. Test holes #11 and #17 are not located on State leased property. Information
is for rock quantity analysis of adjacent owner's property only.
4. Due to the limits of the backhoe digging depth, an extra 5 ft. of estimated
rock bed depth was added to the actual measurement for calculating the
estimated gravel life only. (if rock was at the bottom of the hole)
5. Aggregate size sampling was performed by Elmore Sand & Gravel lab technician.
6. Used 102 lb/ft3 density for pit run material.
7. Estimated pit life based on 600 TPH production, 40 hours per week, 50 weeks
per year.
8. Estimated tons of sand (or) gravel based on sample percentage.
9. Color codes: 1B (brown) 2BW (brown-white) 3M (mixed) 5W (white)
ROCK PRODUCT DEPTH ANALYSIS
CRVT = Calculated Vein Thickness (ft.)
Test Hole #7
Material Depth (ft.)
Overburden 0' to -3'
Rock -3' to -8'
Water (?) none
Color 2BW
CRVT (ft.) 5
Area (ft2) 640,800
Total Mining Tons 163,404
Est'd Pit Life (wks) 6.81
Est'd Pit Life (yrs) 0.14
Est'd Tons of Gravel 91,506
Est'd Tons of Sand 71,898
% Fe N/A
Agg. Size % of Retained
Oversize 23%
3/4" 33%
1/2" 42%
#4 56%
Sand 44%
Notes:
1. Holes were dug by a bucket excavator, random pit run samples taken from the
middle of the CRV.
2. Water was noticed at depth identified, started seeping into the dug test
hole. It is assumed that water will fill up to that level.
3. Test holes #11 and #17 are not located on State leased property. Information
is for rock quantity analysis of adjacent owner's property only.
4. Due to the limits of the backhoe digging depth, an extra 5 ft. of estimated
rock bed depth was added to the actual measurement for calculating the
estimated gravel life only. (if rock was at the bottom of the hole)
5. Aggregate size sampling was performed by Elmore Sand & Gravel lab technician.
6. Used 102 lb/ft3 density for pit run material.
7. Estimated pit life based on 600 TPH production, 40 hours per week, 50 weeks
per year.
8. Estimated tons of sand (or) gravel based on sample percentage.
9. Color codes: 1B (brown) 2BW (brown-white) 3M (mixed) 5W (white)
Heartland (Logo)
Wheat Growers L.P.
Mr. Dennis Saunders
Vice President
Southern Ventures, Inc.
17377 Goldenrod Avenue
Lakeville, MN 55044
Dear Dennis:
As discussed, we are pleased to be supplying Heartstar A wheat
starch to Southern Ventures, Riverside Grain Products plant.
We will supply 4.5 million pounds of Heartstar A from our Kansas
City, MO warehouse over the next 5 - 6 months as you requested.
Riverside Grain will provide their own trucks for pickup at the
K.C. warehouse. The price for this order will be $.0875/lb. FOB
our warehouse in 2,000 lb. Superbags, stretchwrapped, on pallets
and truckload quantities. The timing for delivery of this order
is up to Riverside Grain but please arrange for pickup dates and
times through Linda Cole at 800-WHEAT-01.
It is my understanding that as your business picks up you may be
interested in increasing this order size. We would like to
discuss this with you further as we move ahead.
Thanks again for your business. We look forward to working with
you.
Sincerely,
"Richard Heil"
Richard Heil
Sales Manager
Heartland Wheat Growers
cc: Ray Pardun, Farmland
C. Wright, SVI
