UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement Under the Securities Act of 1933
(Amendment No._2__)
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)
David Tucker, 15000 Hwy. 11 North, Cottondale, AL 35453,
Phone: (205) 556 -3535
(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. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933 check the following box. [X]
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 by direct participation 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
direct participation 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" on page 24.
AVAILABLE INFORMATION
This registration statement on Form SB-2 (No. 333-40621),
financial
statements, exhibits, and all applicable reporting requirements
may be
inspected without charge at the Public Reference Room of the
Securities and
Exchange Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C.
20549, and at the Commission's New York Regional Office located
at Seven World
Trade Center, Suite 1300, New York, New York 10048, and at its
Midwest
Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
Copies of such material may be obtained upon payment of the
appropriate fee
from the Public Reference Section of the Securities and
Exchange Commission,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the
Commission's New York Regional Office located at Seven World
Trade Center,
Suite 1300, New York, New York 10048, and at its Midwest
Regional Office, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661.
Materials filed
electronically through EDGAR may also be accessed through the
SEC's home page
on the World Wide Web at http://www.sec.gov. Upon consummation
of this
offering, the Company will become subject to the informational
requirements of
the Securities and Exchange Commission.
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 OFFERING 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% to new investors. 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.
Direct Participation Offerings
The Shares offered hereby will be sold through the direct
participation of the
officers and directors of the Company without the benefit of a
broker or
agent, unless one is engaged at some future date. A broker or
agent would
have greater access to investors and more experience with public
offerings
than the officers or directors of the Company. Without reliance
on such
individuals skilled in the promotion of public offerings, it may
require
additional time to conclude the offering, and the Company will
not have access
to market analysis usually provided by such firms.
Additionally, investors
are not afforded the benefit of third party due diligence and
verification of
corporate business plans.
Offerings With No Minimum Subscription
The Offering does not have a minimum subscription. Funds
received by the
Company will be used as received to repurchase preferred shares
from Mr. Bobby
Harvey. See "Use of Proceeds." Where no minimum offering is
required, there
can be no assurance that any minimum financial condition is met
before funds
are released to the Company. Investment in the Offering becomes
immediately
at risk
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. Prior to this offering there has been no market for the
common stock
and no market is expected to develop. There is no assurance
that the Company
will be able to achieve listing status on a national securities
exchange, the
NASDAQ system, or on the OTC Bulletin Board. Failure to achieve
a listing
status and the subsequent lack of a public trading market will
severely
restrict the ability of investors to sell their securities.
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 the Company has failed to achieve listing status on an
exchange by
January 16, 1998, and accordingly 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. See
"Dilution."
At this time, Archer Daniels Midland (ADM) has indicated that
they fully
intend to accept the shares reserved for them in satisfaction of
the
$2,000,000 note. However, the Company has yet to receive an
extension in
writing from ADM, and management cannot provide any assurances
that the
$2,000,000 will not be made due and payable.
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. At this point , the Company has fiber supply
agreements in place with some
sawmills in British Columbia, and has signed a purchase
agreement with ADM to
acquire a starch and gluten manufacturing plant in Thunder Bay,
Ontario. See
"Material Contracts."
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." No
royalties are owed or
have been paid to date.
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, who has considerable experience in the silica mining
industry. Some of
the other 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
Company does not currently carry key man life insurance on any
member of the
executive staff. 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."
Additionally, the Company has not yet entered into any
employment agreements
with any of the executive staff.
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. 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. Before
giving effect to the proceeds from this Offering, on a proforma
basis, the total indebtedness of the Company would have been
approximately $7.4 million. Of this amount, $900,000 has been
incurred to finance the Company's development activities. The
terms on the indebtedness are as follows: $450,000 company
development debt at 8%, payable on demand; $450,000 company
development debt at 8%, payable at December 31, 1998; $3,000,000
to ADM for the purchase of the starch and gluten plant with no
interest in the first year, payable in installments over three
years, see "Material Contracts;" $3,500,000 Elmore debt at
various rates and terms, generally secured by the equipment
purchased with the proceeds. 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. See
"Material Contracts," 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. The Company has currently committed
to accept
220,000 tons of wood waste per year once that charring plants
for the
briquette project have been become operational. It is
anticipated by
management that the charring plants will become operational in
1999.
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.
Indication of the type of regulatory approval required for each
of the
Company's subsidiaries is shown below.
Riverside Carbon Products- Charcoal Briquette Project:
The charcoal briquette project involves the implementation of
proprietary
thermal processing equipment which requires construction
permits, water
discharge permits and air discharge permits.
Riverside Grain Products- Starch and Gluten Plant:
Restarting the starch and gluten plant will require effluent
discharge
permits.
Elmore Sand & Gravel:
No additional permits are needed for the silica mining
operation, however,
total suspended solids must be monitored for any water discharge.
Unforeseen Required Regulatory Approvals:
Since the Company is currently in the process of developing
several projects,
(see "Business of the Company") it is not possible for
management to
anticipate all regulatory approvals required for complete
project
implementation.
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. 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."
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"),
which allows
holders of restricted securities to sell their securities by
means of ordinary
brokerage transactions in the open market after a one year
holding period
under certain conditions. See "Management." There are also
provisions of
Rile 144 which would conditionally permit the sale of
securities, without any
limitation, by a person who is not an affiliate of the Company
and who has
satisfied a two year holding period. Any sale of such
securities may have an
adverse effect on the market price of the Company's securities.
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."
The preferred shares currently issued and outstanding have a
call provision at $0.50 per share with each share having claim
to a proportional amount of the dividends paid. The shares will
be retired as the Company exercises the call, and takes
possession of the preferred shares.
Note Payable to ADM
On October 16, 1997, the Company purchased from Archer Daniels
Midland Co. (ADM) land, improvements and equipment (the plant)
in Thunder Bay, Ontario for the production of starch and gluten.
The Company paid a total consideration of $5,000,000 by issuing
a $3 million dollar installment note and a $2,000,000 demand
note fully secured by the assets acquired. The $2,000,000
demand note may be satisfied through the issuance of 9% of the
total Common Shares on a fully diluted basis or 1,960,000 shares
upon completion of the Offering. According to the contract
entered into with ADM, if the Company did not achieve listing
status on an exchange by January 16, 1998, ADM would have the
option of making the note due and payable. See "Material
Contracts." Since the Company did not achieve listing status by
January 16, 1998, the shares reserved for ADM may be canceled
and the $2,000,000 demand note may now be made due and payable.
ADM has not chosen this option and it is management's opinion
based on communications with ADM that once the listing
conditions are met, ADM will accept shares to satisfy the demand
note. However, management cannot guarantee that ADM will not
make the demand note due and payable before the Company can
satisfy the note through the issuance of Common Shares. The
Company has no means to satisfy this note prior to completing
its Initial Public Offering. If the Offering is not successful,
the Company will need to revise its corporate objectives and
seek alternative financing sources not currently considered.
Further, if payment is demanded on the note before completing
its Initial Public Offering, the Company's ability to continue
as an ongoing concern could be greatly affected.
Item 4. Use of Proceeds
The net proceeds will be used by the Corporation to make payment
to Mr. Bobby
Harvey to retire 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. 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. Retiring of 10,000,000 preferred shares
5,000,000
$5,500,000 (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. The
$500,000
commission expense will only be realized if the Company
hires an Agent.
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 the Company has failed to achieve
listing status by January 16, 1998 as required by the purchase
agreement entered into with ADM, and the shares reserved to
satisfy the $2,000,000 note by be canceled and the note made due
and payable at ADM's option. See "Material Contract." This
would change both the dilution listed above and the total debt
of the Company. See "Risk Factors- Note Payable to ADM."
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 direct
participation 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, and
who is not deemed to be a Broker under Rule 3a4-1 of the
Securities Exchange
Act of 1934. The following officers and Directors are qualified
to sell the
Common Shares offered hereby:
Bobby H. Harvey, Chairman, CEO and President; Chester I. Wright III, Director,
CFO and Treasurer; E. Elaine Knapp, Director and Secretary; David C. Parsons,
Director and Vice President; W. Benjamin Wood, Director and Vice President;
Ross G. Tucker, Director and Vice President; Dennis Saunders, Vice President;
Linda LuszczakPresident of Riverside Grain Products; David Tucker, Director.
Pursuant to Rule 3a4-1 of the Securities Exchange Act of 1934, none of the
aforementioned associated persons is:
1. subject to a statutory disqualification, as that term is
defined in Section
3(a)39 of the Act, at the time of his participation
2. compensated in connection with his participation by the
payment of
commissions or other remuneration based either directly or
indirectly on
transactions in securities
3. at the time of his or her participation an associated person
of a broker or
dealer
Further, all of the aforementioned associated persons
4. primarily perform, or are intended primarily to perform at
the end of the
offering, substantial duties for or on behalf of the issuer
otherwise than
in connection with transactions in securities
5. were not a broker or dealer, or an associated person of a
broker or dealer,
within the preceding 12 months
6. do not participate in selling an offering of securities for
any issuer more
than once every 12 months other than in reliance on paragraph
(a)4(i) or
(a)4(iii) of Rule 3a4-1 of the Securities Exchange Act of
1934, except that
for securities issued pursuant to rule 415 under the
Securities Act of
1933, the 12 months shall begin with the last sale of any
security included
within one rule 415 registration.
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.
The Company will not be registering its securities in the
following states: Kentucky, Louisiana, New Hampshire, Ohio,
Tennessee, Washington D. C., Guam.
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. The offering will be
terminated 12 months from the effective date.
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. No
director receives any compensation other than his or her salary
as an employee of the Company.
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. See "Business of
the Company." 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. The
officers and Directors as a group own 22,946,000 shares. Upon
completion of
the offering, the officers and Directors as a group will
beneficially own
12,946,000 shares, representing a total of 59.1% of the total
outstanding
shares of the Company.
Name and Adress of Beneficial Amount of Class of percent of percent of
Owner(1) Shares Shares Class prior Class after
Controlled to Offering Offering
Bobby Harvey(2) 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.(3) 4,750,000 Common 22.7 21.7
Archer Daniels Midland(4) 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) Address of beneficial owners is 15000 Highway 11 North, Cottondale, AL
35453.
(2) All of the preferred shares will be retired upon consummation of the
Offering.
(3) National Synfuels, Inc. is currently controlled by Mr. Gordon Tucker. See
"Interest of Management in Material Contracts."
(4) It should be noted that the Company has failed to achieve listing status
by January 16, 1998 as required by the purchase agreement entered into
with ADM, and the shares reserved to satisfy the $2,000,000 note by be
canceled and the note made due and payable at ABM's option. See "Material
Contract." This would change both the dilution listed above and the total
debt of the Company.
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 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"), which allows holders of restricted securities to sell
their securities
by means of ordinary brokerage transactions in the open market
after a one
year holding period under certain conditions. See
"Management." There are
also provisions of Rile 144 which would conditionally permit the
sale of
securities, without any limitation, by a person who is not an
affiliate of the
Company and who has satisfied a two year holding period. Any
sale of such
securities may have an adverse effect on the market price of the
Company's
securities.
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. (collectively, "Elmore").
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."
<PAGE>
Item 16. Description of Business
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 Sand & Gravel, Inc. and Tuskegee Sand & Gravel, Inc.
(collectively
"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.
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.
Figure 1
The Subsidiary Structure of Southern Ventures, Inc.
Elmore 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
$5 million in
1998. See "Business of the Company - Notes Regarding Financial
Projections."
Southern Ventures, Inc. issued 10 million preferred shares to
acquire Elmore.
These shares entitle the holders to 80% of the net income earned
by Elmore.
By retiring the preferred shares, Elmore will generate an
additional pretax
profit to the Common Shareholders of approximately $4.0 million
per year. See
"Business of the Company - Notes Regarding Financial
Projections." The
purchase price of $5,000,000 for Elmore was determined based
upon the
estimated fair market values at the date of acquisition of the
assets
purchased and the liabilities assumed.
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.
Capital Requirements
In addition to the proceeds of this Offering, the Company plans
to raise
$23,000,000 over the next two years through financing received
from private
lending institutions. Riverside Carbon will require
approximately $14,000,000
for the installation of a charcoal briquetting plant and working
capital.
Riverside Grain will require approximately $1,500,000 for the
installation of
new equipment at the Starch and Gluten plant and approximately
$7,500,000 to
move the starch and gluten plant to a new facility in 1999. See
"Business of
the Company - Riverside Grain Products Inc."
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 two years. If the financial goals of the
Company are
realized during this period, financial projections prepared by
management
forecast that the Company will generate net income before taxes
as shown below
over the next two years.
Net Income Before Taxes
1998 1999
Elmore $5,100,000 5,600,000
Riverside Grain $6,300,000 $12,300,000
Riverside Carbon -- $8,500,000
Total Company Net Income $11,400,000 $26,400,000
Notes Regarding Financial Projections
Capital Requirements and Net Income Before Taxes are forecasts
based on
financial projections prepared by Company management. No
outside review has
been completed regarding these projections.
The financial projections assume the following:
1. The Company will successfully raise approximately $23,000,000
through
private lending institutions over the next two years for the
purposes
outlined in "Business of the Company - Capital Requirements."
2. Loans received by the Company will have eight year terms and
10% annual
interest rates.
3. Engineering, equipment and installation costs will be as
identified and
estimated by Company management.
4. Installation of new buildings and equipment will occur in a
timely manner
as identified and estimated by Company management.
Any changes to the financial projection assumptions listed above
could cause
the Company's actual financial performance over the next two
years to
substantially differ from projected forecasts.
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
all 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 projections prepared by management
forecast that
Elmore's new plant will generate more than $20.5
million net
income before taxes over the next two years. See
"Business of
the Company - Notes Regarding Financial
Projections." This is an
average of $5.25 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.
The primary markets for Elmore's gravel are the ferrosilicon,
decorative
landscaping and construction product markets.
Currently, Elmore sand is sold to the construction industry.
Glass and
ceramic markets for high purity silica sand command better
prices but involve
higher transportation costs. The Company is actively
investigating these
markets and examining offers by potential purchasers.
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.
Before the new plant was put into operation, Elmore produced
over 110,000 tons
of silica for the ferrosilicon industry per year. This
represents about 20%
of the total U.S. market of 532,000 tons per year. As the
production from the
new plant is sold, Elmore's market share will increase
substantially. See
"Sand and Gravel Prices" in this section.
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.
Sand and Gravel 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 that Elmore may service.
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 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 will 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,
management will
evaluate transportation costs 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, management will factor the
additional equipment
costs required for such processing to determine which markets
are the most
lucrative.
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 a financial institution
by the end of
March 1998 for $2.5 million required to install new
equipment.
Markets: The Company is primarily pursuing various markets
for starch and
gluten products in North America. 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 $18.5
million net income
before taxes over the next two years. See
"Business of the
Company - Notes Regarding Financial Projections."
With Riverside
Grain's pretax cash flows exceeding $9 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 Starch and
Gluten wheat starch and gluten plant in Thunder Bay, Ontario
(the "Starch and
Gluten plant"). The Company signed a Definitive Agreement with
the Archer
Daniels Midland Co. (ADM) on October 16, 1997 to purchase the
Starch and
Gluten 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 Starch and Gluten plant has been closed since August 15,
1996. Before
shutting down, the Starch and Gluten 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
Starch and Gluten
plant by focusing on fewer product lines and recovering the 19%
of raw
materials previously wasted by discharge in the effluent stream.
The Starch
and Gluten 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 Starch and Gluten 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 Starch and
Gluten 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
100 truckloads
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 primarily in Canada and the United
States. The
Starch and Gluten plant is situated at the head of Lake
Superior, facilitating
shipment of products. It is also linked to Canada's rail
network and connects
directly to many rail lines in the United States.
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
2000 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 Starch and Gluten 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 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 Australian 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 for Wheat Gluten
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.
Future Outlook for Wheat Gluten Products
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 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 for Wheat Starch
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.
Future Outlook for Wheat Starch Products
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 $14.0
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: The Company is primarily pursuing various markets
for char and
charcoal briquettes in the United States and
Canada; at this time
no sales or distribution contracts have been signed.
Profits: Financial projectionss prepared by management
forecast that
Riverside Carbon's first combination of charring
and briquetting
plants will generate more than $8.5 million net
income before
taxes during the first year of operations. See
"Business of the
Company - Notes Regarding Financial Projections."
Management
expects that each combination of plants will
generate pretax cash
flows exceeding $8 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
$14.0 million to generate an estimated $8.5 million net income,
equaling an
annual return on investment (ROI) exceeding 50%. See "Business
of the Company
- - Notes Regarding Financial Projections." The briquetting plant
will package
45,000 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 35,000 tons of charcoal per year from 140,000
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.
Charcoal Briquette 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.
Current Manufacturers of Charcoal Briquettes
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 for Charcoal Briquettes
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.
Required Governmental Approvals, Environmental Regulations and
Costs of
Compliance
The Company is subject to various laws and regulations relating
to the
operation of its production facilities, the production,
packaging, labeling
and marketing of its products and pollution control, including
air emissions,
which are administered by federal, state, and other governmental
agencies. The
Company's production facilities are subject to inspection by the
Occupational
Safety and Health Administration and Environment Canada.
Various health and
safety regulations, employment standards, good manufacturing
practices for the
food industry, and environmental regulations will apply to
Riverside Grain's
operations.
Waste management costs to dispose of certain wastes such as
oils, solvents,
and spent lab chemicals will be incurred to maintain compliance
with
environmental regulations in Ontario. There will also be some
operating costs
attached to normal waste disposal and landfill costs.
Certificates of Approval ("COA's") are required for certain
emissions from the
Starch and Gluten plant in Ontario. COA's from previous
operations are in the
process of being assigned to Riverside Grain. There is no cost
attached to
this assignment. New COA's may be required for the new dryers
and dry
modification processes the Company plans to install at the
Starch and Gluten
plant. Similarly, COA's may be required for emissions from the
package
boiler, if a gas fired model is chosen. Application for COA's
follows the
completion of the engineering process. Costs vary, but are
generally 2% of
the cost of the actual abatement devices. Land and engineering
costs, as well
as costs related to previous approvals, are excluded from the
approval fees.
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
The following discussion should be read in conjunction with the
historical
financial statements included elsewhere in this Prospectus.
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
"Description of Business"). 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; an unsecured
note was made
payable jointly to Mr. Tucker and Mr. Harvey at a rate of
interest of 8% per
annum, on demand no sooner than December 31, 1998. The Company
has agreed to
pay recurring debts estimated to be $30,000 per year to the
benefit of Mr.
Tucker and Mr. Harvey. As of September 30, 1997 this note has
an outstanding
balance of $422,518.
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) preferred
shares of the
Company. As a result of this transaction, Mr. Harvey has been
elected
Chairman of the Board of Directors and CEO of the Company. On
October 22,
1997 Southern Ventures, Inc acquired the outstanding shares of
Elmore Sand &
Gravel and Tuskegee Sand & Gravel common stock from Mr. Harvey
in exchange for
ten million (10,000,000) preferred shares of the Company. The
preferred shares
have full voting rights as the Common and are paid equal to 80%
of the net
earnings from the mining operations owned the Company or 9%
whichever is
greater. All dividends will be cumulative and non-participating.
The Company
may call all of the preferred shares for the sum of $5,000,000
or $0.50 per
share. The Company intents to use the proceeds of its Initial
Public Offering
(see "Use of Proceeds") to call the preferred shares. The
purchase price of
$5,000,000 was determined based upon the estimated fair market
value of the
assets purchased and the liabilities assumed at the date of
acquisition.
In accordance to APB 16 "Accounting for Business Combinations",
this
transaction qualifies as a reverse acquisition. See "Discussion
and Analysis
or Plan of Operation" of the Company's mining subsidiaries
Elmore Sand &
Gravel and Inc. Tuskegee Sand & Gravel Inc.
On October 16, 1997, the Company purchased from Archer Daniels
Midland Co.
(ADM) land, improvements and equipment (the plant) in Thunder
Bay, Ontario for
the production of starch and gluten. The Company paid a total
consideration
of $5,000,000 by issuing a $3 million dollar installment note
and a $2,000,000
demand note fully secured by the assets acquired. The
$2,000,000 demand note
may be satisfied through the issuance of 9% of the total Common
Shares on a
fully diluted basis or 1,960,000 shares upon completion of the
Offering. See
"Material Contracts." Since the Company did not achieve listing
status by
January 16, 1998, the shares reserved for ADM may be canceled
and the
$2,000,000 demand note may be made due and payable. ADM has not
chosen this
option and it is management's opinion based on communications
with ADM that
once the listing conditions are met, ADM will accept shares to
satisfy the
demand note. However, management cannot guarantee that ADM will
not make the
demand note due and payable before the Company can satisfy the
note through
the issuance of Common Shares. The Company has no means to
satisfy this note
prior to completing its Initial Public Offering. If the
Offering is not
successful, the Company will need to revise its corporate
objectives and seek
alternative financing sources not currently considered.
Further, if payment
is demanded on the note before completing its Initial Public
Offering, the
Company's ability to continue as an ongoing concern could be
greatly affected.
The Company plans to file eligibility documents with the Pacific
Coast Stock
Exchange for listing. The Company is also investigating listing
on the NASDAQ
OTC Bulletin Board and will pursue with listing documents and
NASD sponsorship
when the Offering becomes effective.
As a condition of the purchase, ADM was obligated to make
repairs to any
equipment that was not operational. All electrical and
mechanical systems
have been thoroughly inspected and tested by ADM. The Company's
management
and engineers have inspected the processing systems and concur
the equipment
is in operating condition. However, the Company plans to make
improvements to
the building, heating and processing systems before the plant is
placed into
production.
Prior to closing on August 15, 1996, the plant had been in
operation for 84
years manufacturing wheat starch and gluten.
The Company entered into a royalty agreement with National
Synfuels, Inc.
whereby the Company has the sole and exclusive right to
technology that allows
wood waste to be used as raw material in the manufacture of
valuable products.
The royalty is two dollars ($2.00) per dry ton of wood processed
into charcoal
or fuels. The Company issued a sublicense to Carbon Products
Industries, Inc.
allowing the use of certain technology to convert wood waste
into activated
carbon. Carbon Products Industries, Inc. will pay the Company a
royalty of
four dollars ($4.00) per dry ton (of which the Company will pay
National
Synfuels $2.00 per dry ton) of material processed using the
Company's
technology. Various loans totaling $200,314 as of September 30,
1991 have
been made to Carbon Products Industries, Inc. The notes are
payable on demand
at an interest rate of 8% per annum. The notes are fully
secured by a thermal
process unit located on Company property.
Riverside Carbon Products, Inc., a wholly owned subsidiary, 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. The Company 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. The Company made a 25% down payment toward
the purchase
of land owned by Northwood Pulp and Timber Limited for the
construction of a
charring plant. The remaining balance of $162,000 is payable on
closing. In
management's opinion this is a binding agreement on both parties
and new
long-term financing will be obtained to secure this property.
The original
closing date has lapsed and a new closing date has been set for
on or before
February 13, 1998. The Company is actively pursuing financing
for the
construction and start-up for it's first charring plant.
Results of Operations
The Company's primary sources of financing have been from the
sale of common
stock and shareholder borrowings. The Company has various
operating capital
loans payable to Mr. Harvey at an interest rate of 8% per annum,
due on
demand. On July 31, 1997, Mr. Harvey converted $239,500 to
common stock at a
rate of $1 per share. As of September 30,1997 these operating
capital loans
had an outstanding balance of $249,733.
The pro forma revenue of the Company consists exclusively of
amounts earned by
Elmore Sand & Gravel, Inc. and Tuskegee Sand & Gravel, Inc. Pro
forma income
taxes assume that the Company had operated as a tax paying
entity, subject to
an effective combined statutory tax rate for federal and state
income taxes of
40%.
The Company believes that future cash flow from operations and
the portion of
net proceeds from this offering used for general corporate
purposes will be
adequate to fund its operations for at least the next twelve
months.
Selling, General an Administrative Expenses
Selling, general and administrative expenses consist of sales
and marketing
personnel, travel expenses, general insurance, amortization,
customer support
expenses, advertising costs, legal and accounting fees, and
compensation costs
for administration, finance, project development and general
management
personnel. Additional funds will be required through equity
and/or debt
instruments to pursue certain projects. See "Business of the
Company."
Discussion and Analysis of Recently Acquired Mining Subsidiaries
Years Ended December 31, 1994, 1995, 1996 and Nine Months Ended
September 30,
1997
Mr. Harvey acquired Elmore Sand & Gravel Inc. in 1992. During
the period of
1992-1994, production at the Tuskegee Sand & Gravel Inc.
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 - Mining Subsidiaries
The following table sets forth, for the periods indicated,
certain financial
data as a percentage of net sales:
Nine Months Ended
September, 31 Year Ended December 31
1997 1996 1996 1995 1994
Revenues................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Sales.............. 44.9% 56.6 50.4% 59.3% 57.4%
Gross Profit............ 55.1% 43.4% 49.6% 40.7% 42.6%
Selling, General and
Administrative Expenses... 9.5% 15.7% 16.0% 15.1% 15.6%
Interest Expense.......... 5.7% 3.1% 3.3% 3.8% 2.4%
Net Income................. 39.9% 24.6% 30.2% 21.8% 24.5%
Revenues - Mining Subsidiaries
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 in fiscal 1995. This increase was attributable to the
continued
effort to reach a broader customer base. Additionally,
increased production
and decreased equipment maintenance favorably impacted revenues.
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 - Mining Subsidiaries
Cost of sales consists of the cost of mining labor plus
equipment operation
costs and overhead related to the mining operations. The 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 reduced
maintenance
costs and earlier investments in equipment that improved overall
efficiency.
The 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 - Mining Subsidiaries
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 - Mining Subsidiaries
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, from 2.4% in fiscal 1994 to 3.8% in
fiscal 1995,
was due to increase in outstanding indebtedness through
investment in
equipment.
Nine Months Results of Operations - Mining Subsidiaries
The following table sets forth certain financial results for the
first nine
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 results of operations for those
periods. The nine
months information should be read in conjunction with the
audited Financial
Statements, unaudited Financial Statements and the Notes thereto.
The mining subsidiaries have 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 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 sales are generally not seasonal, extreme
weather
conditions can affect the mining, shipment and demands for
products. Because
the 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 - Mining Subsidiaries
The mining subsidiaries have financed cash requirements through
cash flows
from operations along with both short and long-term borrowings.
The mining
subsidiaries have 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 machinery. In September 1996, the
mining
subsidiaries obtained a $1,800,000 secured line of credit with
local bank at a
rate of interest of 9.75%. This line of credit was obtained to
enable the
mining subsidiaries to construct the new processing plant. In
September 1997
the outstanding credit line was converted to an installment note
at 8.5%
interest payable in equal payments of $33,707 over a 60-month
term. As of
September 30, 1997 this note has an outstanding balance of
$1,600,050.
The primary sources of financing have been cash from operations
and bank
borrowings. The capital needs have been to (i) fund working
capital
requirements, (ii) repay indebtedness, (iii) purchase property
and equipment
for expansion and (iv) fund distributions to its existing
shareholder
primarily to satisfy his tax liabilities resulting from S
Corporation status
and investment in Southern Ventures, Inc.
Cash flows from operation were approximately $1,595,416,
$553,222, $886,340,
and $1,488,529 in fiscal 1996, 1995, 1994 and first nine 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 nine
months of 1997, operating income, decrease in prepaid interest
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, and
$1,265,564 in fiscal 1996, 1995, 1994 and first nine months of
1997,
respectively. Through the third quarter of 1997, $1,040,230 was
related to
the recent plant expansion. In fiscal 1998 the Company expects
to make
additional investments in plant expansion. Net cash provided
(used) in
financing activities was $323,796, ($229,415), ($327,988), and
$65,735 in
fiscal 1996, 1995, 1994 and first nine months 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 nine months of
1997 was
additional long-term debt for plant expansion.
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
ADM.
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 (Used as main administrative office for
Southern
Ventures, Inc.)
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.
Location: District Lot 334 & 337; Range 5; Coast District,
Houston, British
Columbia, Canada. (Includes small sawmill.)
Purpose: This property will be used to build a charcoal
briquetting
plant for the processing of wood waste into
charcoal. See
"Management Discussion and Analysis."
In the opinion of management of the Company, all properties are
adequately covered by insurance.
For terms of ownership or leasing arrangements for each property
see "Material Contracts" or "Management Discussion and Analysis."
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. These
notes are due on
demand and carry an 8% interest.
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. The preferred
shares earn a
dividend of 80% of the net cash flow of Elmore and have full
voting rights
with the Common Shares. See "Description of Securities." There
is a call
provision on the shares for $0.50 per share. However, there is
no put
provision on the preferred shares, and the Company has no
obligation to
repurchase these shares.
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. No royalties are
owed or have
been paid to date.
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. Before
the
consummation of this offering there are 67 shareholders of
record.
Upon consummation of this Offering, the Company will have
outstanding
21,897,400 shares of 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
SOUTHERN VENTURES, INC. UNAUDITED PRO FORMA FINANCIAL
STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma financial statements (i) give
effect to the
items acquired when the Company secured all equity interests of
Elmore Sand &
Gravel, Inc. and Tuskegee Sand & Gravel, Inc. in exchange for
10,000,000
shares of the Company's Preferred Stock and (ii) reflect the
effects of the
provisions of the Preferred Stock.
The purchase price of $5,000,000 is allocated to the assets
purchased and the
liabilities assumed based upon estimated fair values at the date
of
acquisition. The sum of the amounts assigned to identifiable
assets acquired
less liabilities assumed exceed the cost of the acquired
company. The values
otherwise assignable to noncurrent assets acquired have been
reduced by a
proportionate part of the excess to determine the assigned
values. For
purposes of the pro forma financial statements, such allocation
has been
estimated as follows:
Current assets ....................................... $ 1,524,184
Property, plant and equipment ........................ 6,615,883
Other non-current assets ............................. 631,951
Liabilities .......................................... (3,772,019)
--------------
$ 5,000,000
==============
The unaudited pro forma financial statements have been prepared
by the Company
based upon the historical financial statements of Southern
Ventures, Inc. and
combined statements of Elmore Sand & Gravel, Inc. and Tuskegee
Sand & Gravel,
Inc., included elsewhere in this Prospectus and certain
preliminary estimates
and assumptions deemed appropriate by management of the Company.
The pro
forma balance sheet as of September 30, 1997 gives effect to the
acquisition
as if such transaction had occurred on September 30, 1997. The
pro forma
statements of operations for the nine months ended September 30,
1996 assumes
the acquisition was completed on January 1, 1997 and a preferred
stock
dividend had been accrued from that date. These pro forma
financial
statements may not be indicative of actual results as if the
transaction had
occurred on the dates indicated or which may be realized in the
future.
Neither expected benefits nor cost efficiencies anticipated by
the Company
following consummation of the acquisition have been reflected in
such pro
forma financial statements.
The pro forma financial statements should be read in conjunction
with the
historical financial statements of Southern Ventures, Inc. and
combined
statements of Elmore Sand & Gravel, Inc. and Tuskegee Sand &
Gravel, Inc.,
including the related notes thereto, and "Management's Plan of
Operation" that
appear elsewhere in this Prospectus.
Southern Ventures and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Financial
Position
For Nine Months September 30, 1997
Southern Elmore and Pro Forma
Ventures Tuskeegee Adjustments # Pro Forma
Assets
Current assets:
Cash and cash
equivalents........... $ 64,275 455,958 520,234
Accounts receivable.... - 594,999 594,999
Inventory............. - 408,400 64,827 1 473,226
Other current
assets................ 32,638 - 32,638
Total current
Assets.............. 96,914 1,459,357 1,556,271
Intangible assets........ 104,500 - 104,500
Notes receivable......... 354,011 - 354,011
Other assets............ - 30,695 30,695
Property, plant
and equipment............ 297,059 4,399,886 2,215,997 1 6,912,942
Total assets........ $ 852,483 5,889,938 2,280,824 9,023,245
Liabilities and Share-
holders Equity
Current liabilities:
Accounts payable...... $ 199 206,690 206,888
Accrued compensation
and payroll taxes....... 396,051 18,928 414,979
Current portion of
shareholder debt......... 30,000 603,751 633,751
Total current
liabilities............ 426,250 829,369 1,255,619
Long-term liabilities,
excluding current portion
Shareholder payable...... 642,252 - 642,252
current portion.......... 162,000 - 162,000
Total liabilities... 1,230,501 - 1,230,501
Shareholder's equity:
Common stock.......... 18,937 51,000 (51,000) 2 18,937
Preferred stock....... - - 10,000 1 10,000
Additional
paid-in capital......... 499,500 - 4,990,000 1 5,489,500
Retained earnings.... (896,455) 2,668,176 (2,668,176) 2 (896,455)
Total shareholder's
equity........ (378,018) 2,719,176 2,341,158
Total liabilities
and shareholder's
equity........... $ 852,483 5,889,938 2,280,824 9,023,246
Southern Ventures and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
For Nine Months September 30, 1997
Southern Elmore and Pro Forma
Ventures Tuskeegee Adjustments # Pro Forma
Revenues................ $ - 3,125,297 3,125,297
Cost of sales........... - 1,403,324 165,409 1 1,568,733
Gross profit......... - 1,721,973 1,556,564
Selling, general and
administative expenses... 874,589 296,719 (28,822) 2 1,142,485
Interest expense, net.... 35,284 176,722 212,006
Net income
before taxes......... $ (896,455) 1,248,532 202,073
Provision for
income taxes........ - - 140,831 3 140,831
Net income........ (896,455) 1,248,532 61,242
Preferred stock
dividends......... - - 461,734 4 461,734
Income available to
common shareholders...(896,455) 1,248,532 (400,492)
Pro forma net loss per share... 5 (0.03)
Shares used to compute
net income per share.......... 13,062,188
Southern Ventures, Inc.
Notes to Unaudited Pro Forma
Financial Statements
The accompanying unaudited pro forma financial statements
present the pro
forma financial position of the Company as of September 30, 1997
and the pro
forma results of its operations for nine months ended September
30, 1997.
The unaudited pro forma financial statements also include the
historical
financial position at September 30, 1997 and results of
operations for the
nine months ended September 30, 1997, of Elmore Sand & Gravel,
Inc. and
Tuskegee Sand & Gravel, Inc.
Unaudited Pro Forma Balance Sheet Adjustments:
1. Represents the allocation of the purchase price to the assets
and
liabilities at estimated fair market values at the date of
consummation of
the acquisition.
2. Represents the elimination of historical owners' equity of
Elmore Sand &
Gravel, Inc. and Tuskegee Sand & Gravel, Inc.
Pro Forma Net [Loss]
Pro forma net [loss] gives effect to income tax considerations
assuming that
each of the subsidiary entities had been a "C" Corp. for the
period January 1,
1997 to September 30, 1997.
Unaudited Pro Forma Statement of Operations Adjustments:
1. To adjust depreciation and depletion expense to reflect
increased pro forma
value of fixed assets from the historical assets purchased.
2. To adjust management expenses to reflect an estimate of
operations and
management expenses of the combined entity.
3. To reflect federal and state income taxes assuming a 40%
statutory income
tax rate, decreased by the management expenses attributed to
the
subsidiaries.
4. To reflect an 80% preferred stock dividend.
5. Loss per share is computed based on the weighted average
number of shares
of common stock outstanding.
<PAGE>
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
Southern
Ventures, Inc. as of September 30, 1997, and the related
consolidated
statements of income, stockholders' equity, and cash flows for
the nine-month
period 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 Southern
Ventures, Inc. and
the results of their operations and their cash flows for the
period then ended
in conformity with generally accepted accounting principles.
"Arthur J. Odle"
Arthur J. Odle, CPA PC
Montgomery, Alabama
January 30, 1998
Southern Ventures and Subsidiaries
Consolidated Statement of Financial Position
September 30, 1997
Assets
Current assets:
Cash and cash equivalents........... $ 64,275
Other current assets................ 32,638
Total current Assets.............. 96,914
Intangible assets...................... 104,500
Notes receivable....................... 354,011
Property, plant and equipment.......... 297,059
Total assets...................... $ 852,483
Liabilities and Shareholders Equity
Current liabilities:
Accounts payable.................... $ 199
Accrued compensation and payroll taxes 396,051
Current portion of shareholder debt. 30,000
Total current liabilities......... 426,250
Long-term liabilities, excluding current portion
Shareholder payable.................... 642,252
current portion........................ 162,000
Total liabilities................. 1,230,501
Shareholder's equity:
Common stock........................ 18,937
Additional paid-in capital.......... 499,500
Retained earnings................... (896,455)
Total shareholder's equity........ (378,018)
Total liabilities and
shareholder's equity........... $ 852,483
The accompanying notes to consolidated financial statement are
an integral
part of this statement.
<PAGE>
Southern Ventures and Subsidiaries
Consolidated Statement of Operations
September 30, 1997
Revenues............................... $ --
Cost of sales.......................... --
Gross profit........................ --
Operating Expenses
Depreciation and amoritization...... 14,389
General and administrative expenses. 256,818
Payroll expenses.................... 603,381
Operating Loss (874,589)
Interest income........................ 13,418
Interest expense....................... (35,284)
Net income.......................... $ (896,455)
Net loss per Common Share.............. $ (0.07)
The accompanying notes to consolidated financial statement are
an integral
part of this statement.
<PAGE>
Southern Ventures and Subsidiaries
Consolidated Statement of Cash Flows
September 30, 1997
Cash provided (used) by operations:
Net income....................................$ (896,455)
Income charges (credit) not affecting cash:
Depreciation & Depletion...................... 8,889
Amortization.................................. 5,500
Changes in certain working capital components:
Decrease (increase) in other
current assets................................ (32,638)
Increase (decrease) in accounts
payable and accrued liability................. 369,250
---------
Cash provided by operations....................... (518,455)
Cash provided (used) by investing activities:
Additions to intangable assests................ (110,000)
Additions to property,
plant and equipment............................ (305,948)
Issuance of notes receivable................... (354,011)
Collections on notes receivable................ -
---------
Cash used by investing activities................ (769,959)
Cash provided by financing activities:
Proceeds from issuance
of notes payable............................... 1,108,974
Principal payments on
stockholder loans.............................. (256,722)
Principal payments on
other notes payable............................ (18,000)
Proceeds from issuance
of stock....................................... 518,437
---------
Cash provided by financing activities............. 1,352,689
Net increase (decrease) in cash................... 64,275
Cash at the beginning of the year................. -
---------
Cash at the end of the quarter.................... $ 64,275
The accompanying notes to consolidated financial statement are
an integral
part of this statement.<PAGE>
Southern Ventures and Subsidiaries
Consolidated Statement of Stockowners' Deficit
Common Stock Total
Number of Amount Additional Retained Stockholders'
Shares (at par) Paid-in Capital Deficit Deficit
Issuance of common
stock- 2/7/97 9,500,000 $ 9,500 $ 9,500
Issuance of common
stock- 6/17/97 8,937,400 8,937 8,937
Issuance of common
stock- 7/31/97 500,000 500 $499,500 500,000
Net Loss $(896,455) (896,455)
Balance at
9/31/97 18,937,400 $18,937 $499,500 $(896,455) $(378,018)
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
Organization and Description of Business
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).
These
financial statements reflect the financial position and results
of operations
of the Parent Company and its subsidiaries on a consolidated
basis, which
reflects the Company's current organizational structure.
Entity Nature of Business
Parent Company:
Southern Ventures, Inc. Provides direct management, marketing, and
research and development for its
subsidiaries.
Wholly Owned Subsidiaries:
Southern Ventures, Inc. (Canada) Central holding company for Canadian
operations. Parent to Riverside Carbon
Products, Inc. and Riverside Grain Products,
Inc.
Riverside Carbon Products, Inc. Developing a Canadian charcoal briquette
project.
Riverside Grain Products, Inc. Developing a Canadian starch and gluten
manufacturing project. Recently acquired a
plant in Thunder Bay, Canada. See
subsequent events.
Elmore Sand & Gravel, Inc. (see note 8) Open pit mining of high-grade
silica rock and sand.
Tuskegee Sand & Gravel, Inc. (see note 8) Provides equipment and labor
for Elmore Sand & Gravel, Inc. mining
activities.
Fiscal year:
The Company's fiscal year is a calendar year.
Basis of Consolidation:
The Company's financial statements have been presented on a
going concern
basis, which contemplates the realization of assets and the
satisfaction of
liabilities in the normal course of business. The consolidated
statements
include Southern Ventures, Inc. and its wholly owned
subsidiaries.
Inter-company transactions have been removed for consolidation
purposes.
Going Concern and Management's Plans:
The accompanying financial statements have been prepared in
conformity with
generally accepted accounting principles, which contemplate
continuation of
the Company as a going concern. However, the Company has
sustained
substantial operating losses since its inception. The Company
believes it has
made the necessary acquisition (see Note 8. Subsequent Events)
to continue as
a going concern, although no assurance to that effect can be
given. The
Archer Daniels Midland Company has a two million-dollar note
payable, the
Company currently has no means in which to satisfy this debt
prior to
completing its Initial Public Offering (see Note 8. Subsequent
Events). If
payment is demanded on the note before completing its Initial
Public Offering,
the Company's ability to continue as an ongoing concern could be
greatly
affected.
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 various projects purchased by the
Company.
Amortization for financial reporting purposes is determined on a
straight-line
basis, based upon an estimated useful life of fifteen years.
Income Taxes:
Income taxes are recorded in accordance with SFAS No. 109,
ACCOUNTING FOR
INCOME TAXES. This statement requires the recognition of
deferred tax assets
and liabilities to reflect future tax consequences of events
that have been
recognized in the Company's financial statements or tax returns.
Measurement
of the deferred items is based on enacted tax laws. In the
event future
consequences of differences between financial reporting basis
and tax basis of
the Company's assets and liabilities result in a deferred tax
asset, SFAS No.
109 requires an evaluation of the probability of being able to
realize the
future benefits indicated by such asset. A valuation allowance
related to a
deferred tax asset is recorded when it is more likely than not
that some
portion or the entire deferred tax asset will not be realized.
Due to the
uncertainty of the Company's ability to realize the benefit of
the deferred
tax assets, a full valuation allowance has been applied against
the deferred
tax assets at December 31, 1996.
Net Loss per Common Share:
Net loss per common share has been computed by dividing the net
loss by the
weighted average number of common shares outstanding during the
period.
Use of Estimates:
The preparation of financial statements in conformity with
generally accepted
accounting principles requires management to make estimates and
assumptions
that affect the reported amounts of assets and liabilities, the
disclosed
contingent assets and liabilities at the date of the financial
statements and
the reported amounts of revenues and expenses during the
reporting period.
Actual results could differ from those estimates.
Research and Development Costs:
Research and developments costs are charged to expenses as
incurred.
Note 2. Intangible assets
Intangible assets includes the following:
Canadian Charcoal Briquette Project $ 90,000
Firebrick Project 5,000
Canadian Starch and Gluten Project 15,000
Accumulated Depreciation and Depletion (5,500)
Total Intangible Assets $ 104,500
Note 3. Property, plant and equipment
Property, plant and equipment includes the following:
Leasehold $ 70,747
Office & Computer Equipment 30,939
Shop Equipment 10,262
Vehicles 14,000
Land 180,000
Accumulated Depreciation (8,889)
Total $ 297,059
Note 4. Related party transactions
Notes Payable - Shareholders
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%
per annum, due on demand no sooner than December 31, 1998. The
Company has
agreed to pay recurring debts estimated to be $ 30,000 per year
to the benefit
of Mr. Tucker and Mr. Harvey. As of September 30, 1997 this
note has an
outstanding balance of $422,518.
The Company has various operating capital loans payable to Mr.
Harvey at an
interest rate of 8% per annum, due on demand. On July 31, 1997,
Mr. Harvey
converted $239,500 to common stock at a rate of $1 per share.
As of September
30,1997 these operating capital loans had an outstanding balance
of $ 249,733.
Notes Receivable - Shareholders
A note receivable from Mr. David Herr, president of Carbon
Products
Industries, Inc., was acquired on January 1, 1997 from Mr.
Tucker and Mr.
Harvey. This note was for the payment of licensing agreement
given to Carbon
Products Industries, Inc. (see Note 6. Commitments and
Contingencies) and
carries an interest rate of 8% per annum. The entire principal
plus any
accrued interest shall be repaid on or before September 1, 2002.
The Company received a $100,000 promissory note with an interest
rate of 6.8%
per annum from Vice President of Sales, Dennis Saunders, for
100,000 shares of
Company stock. The entire principal plus any accrued interest
shall be repaid
on or before September 1, 2002.
Note 5. Notes payable - other
The Company made a 25% down payment toward the purchase of land
owned by
Northwood Pulp and Timber Limited with a remaining balance of
$162,000 payable
on closing. In management's opinion this is a binding agreement
on both
parties and new long-term financing will be obtained to secure
this property.
The original closing date has lapsed and a new closing date has
been set for
on or before February 13, 1998.
Note 6. Commitments and Contingencies
The Company entered into a royalty agreement with National
Synfuels, Inc.
whereby the Company has the sole and exclusive right to use
technology
patented under U.S. Patent # 4,385,905 (System and Method for
Gasification of
Solid Carbonaceous Fuels) and issued by the U.S. Patent Office
on May 31,
1983. The royalty is two dollars ($2.00) per dry ton of wood
processed into
charcoal or fuels. This agreement includes the right of the
Company to
sublicense this technology. As part of this agreement the
Company obtained
from Mr. Tucker and Mr. Harvey a contract licensing this
technology to Carbon
Products Industries, Inc. This contract was reissued as a
sublicense allowing
Carbon Products Industries, Inc. to use certain technology to
convert wood
waste into activated carbon. Carbon Products Industries, Inc.
will pay the
Company a royalty of four dollars ($4.00) per dry ton (of which
the Company
will pay National Synfuels $2.00 per dry ton) of material
processed using the
Company's technology. Various loans totaling $200,314, as of
September 30,
1991, have been made to Carbon Products Industries, Inc. The
notes are
payable on demand at an interest rate of 8% per annum. The
notes are fully
secured by a thermal process unit which is in the possession of
the Company at
it Alabama location.
Note 7. Income Taxes
Since the Company has incurred only losses since inception and
due to the
degree of uncertainty related to the use of the loss, the
Company has fully
reserved this benefit. At September 30, 1997 the Company had a
tax net
operating loss of approximately $ 896,455 available to offset
federal and
state taxable income. In accordance with Section 382 of the
Internal Revenue
Code, the use of the above loss may be subject to annual
limitations based
upon ownership changes of the Company's stock which have
occurred.
Note 8. Subsequent events
Purchase of Elmore Sand & Gravel, Inc. and Tuskegee Sand &
Gravel, Inc.
On October 22, 1997 the Company acquired all of the outstanding
shares of
common stock of Elmore Sand & Gravel, Inc. and Tuskegee Sand &
Gravel, Inc. in
exchange for 10,000,000 shares of the Company's preferred stock.
The
acquisition has been accounted for using the purchase method of
accounting and
accordingly, the accounts of Elmore Sand & Gravel, Inc. and
Tuskegee Sand &
Gravel, Inc will be reflected in the consolidated financial
statements from
the date of acquisition. The purchase price of $5,000,000 was
determined
based upon the estimated fair market values at the date of
acquisition of the
assets purchased and the liabilities assumed.
The preferred stock has the following preferences:
- -The shares have full voting rights with the Common Shares of
Southern
Ventures, Inc.
- -The dividends to be paid will be equal to 80% of the net
earnings from the
mining operations owned by Southern Ventures, Inc. or 9%
whichever is
greater.
- -All dividends will be cumulative and non-participating.
- -The shares may be redeemed by Southern Ventures, Inc. for the
sum of
$5,000,000.
In accordance to APB 16 "Accounting for Business Combinations",
this
transaction qualifies as a reverse acquisition.
Purchase of Starch and Gluten Plant.
The Company purchased a starch and gluten plant in Thunder Bay,
Ontario from
Archer Daniels Midland on October 16, 1997 for a total
consideration of
$5,000,000. Of this amount, $2,000,000 is in the form a note
payable on
demand after January 16, 1998. At ADM's option, the Company may
satisfied
this debt 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 Initial Public Offering.
<PAGE>
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
September 30, December 31
1997 1996 1995 1994
(Unaudited)
Assets
Current assets:
Cash and cash equivalents. $455,958 $167,258 $ 29,212 $ 257,324
Accounts receivable........ 594,999 553,062 580,252 421,463
Inventory....................408,400 405,837 416,087 426,337
Total current Assets.....1,459,357 1,126,158 1,025,551 1,105,124
Intangible assets.............. - 18,563 50,738 77,963
Other assets.....................30,695 227,246 92,007 38,153
Property, plant and equipment.4,399,886 3,428,491 1,951,139 1,670,574
Total assets.............5,889,938 $4,800,457 $3,119,435 $2,891,814
Liabilities and
Shareholders Equity
Current liabilities:
Accounts payable.............206,690 410,677 93,309 68,227
Accrued compensation and
payroll taxes.................18,928 42,289 19,378 14,354
Current portion of
long-term debt.............. 603,751 737,001 478,211 188,074
Notes payable................ - - 25,598 99,647
Total current liabilities..829,369 1,189,967 616,496 370,301
Long-term liabilities,
excluding current portion.... 2,341,393 1,502,387 670,035 925,431
Total liabilities........3,170,762 2,692,354 1,286,531 1,295,732
Shareholder's equity:
Common stock..................51,000 51,000 51,000 51,000
Retained earnings..........2,668,176 2,057,103 1,781,904 1,545,082
Total shareholder's
equity...................2,719,176 2,108,103 1,832,904 1,596,082
Total liabilities and
shareholder's equity...$5,889,938 $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
Nine Months ended 9/30 Year ended 12/31
1997 1996 1996 1995 1994
(Unaudited)
Revenues............ $3,125,297 $2,593,018 # $3,453,797 $2,299,586 $2,709,160
Cost of sales........ 1,403,324 1,468,195 # 1,742,042 1,363,990 1,555,668
Gross profit.......1,721,973 1,124,822 # 1,711,755 935,596 1,153,493
Selling, general and
admin. expenses..... 296,719 406,397 # 554,001 347,560 423,513
Interest expense...... 176,722 80,134 # 115,209 87,057 65,443
Net income........$1,248,532 $ 638,292 # $1,042,545 $ 500,978 $ 664,536
Net Income per
Common Share.. $ 2,448 $ 1,252 # $ 2,044 $ 982 $ 1,303
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
Nine Months ended 9/30 Year ended 12/31
1997 1996 1996 1995 1994
Cash provided (used)
by operations:
Net income...........$1,248,532 $ 638,292 $1,042,545 $ 500,978 $ 664,536
Income charges
(credit) not
affecting cash:
Depreciation &
Depletion.............294,168 201,790 303,815 271,354 261,980
Amortization...........18,563 22,275 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...........(41,937) (88,870) 27,190 (158,789) 112,665
Decrease (increase)
in prepaid
interest.............216,513 19,340 (130,546) (50,977) -
Decrease (increase)
in other
current assets......(19,961) (40,194) (4,694) (2,877) -
Increase (decrease)
in accounts payable,
notes payable
and accrued
liabilities........(227,349) 12,956 314,681 43,942 (175,116)
Cash provided by
operations..............1,488,529 765,589 1,595,416 553,222 886,340
Cash provided (used) by
investing activities:
Additions to property,
plant and equipment.(1,273,878) (671,827)(1,818,666) (601,540) (488,491)
Disposals of property,
plant and equipment....8,314 37,500 37,500 49,621 63,795
Cash used by
investing activities..(1,265,564) (634,327)(1,781,166)
(551,919) (424,696)
Cash provided by
financing activities:
Additions in
long-term debt.......1,637,852 608,486 1,599,805 479,384 859,324
Reductions in
long-term debt.......(932,095) (477,233) (503,663) (444,643) (200,859)
Distributions
to shareholders......(640,022) (132,841) (767,346) (264,156) (986,453)
Cash provided by
financing activities.. 65,735 (1,589) 323,796 (229,415) (327,988)
Net increase
(decrease) in cash...... 288,700 129,673 138,046 (228,111) 133,656
Cash at the beginning
of the year...... 167,258 29,212 29,212 257,324 123,668
Cash at the end
of the quarter........ $ 455,958 $ 158,885 $ 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.
<PAGE>
Note 2 - Property, Plant and equipment:
Property, plant and equipment includes the following:
Nine Months Ended
December 31 09/30/97 1996 1995 1994
Leasehold.............. $ 8,975 $ 8,975 $ 5,725 $ 1,825
Mining Equipment....... 646,642 646,642 603,340 535,336
New Plant.............. 1,973,637 933,406 110,066 --
Office Equipment....... 27,030 23,787 20,543 19,608
Railroad............... 143,500 143,500 143,500 143,500
Rolling Stock.......... 2,805,975 2,584,905 1,694,883 1,624,592
Service Vehicle........ 159,201 167,521 112,013 113,722
Shop Equipment......... 27,570 27,570 27,570 15,295
Trailer................ 64,810 55,476 55,476 61,564
Land................... 256,390 256,390 293,890 256,390
6,113,736 4,848,173 3,067,007 2,771,832
Accumulated Depreciation
and Depletion 1,713,850 1,419,682 1,115,867 1,101,258
$4,399,886 $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.
<PAGE>
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 Sophisticated(1) $0.001
1,960,000 Common Shares April 15, 1997 Sophisticated(2) $1.020
10,000,000 Preferred Shares April 15, 1997 Sophisticated(3) $0.500
500,000 Common Shares July 31, 1997 Sophisticated(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."
All of these shareholders have been afforded nearly
unlimited access to
corporate information. 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 to be 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 the Company has failed to achieve
listing status by
January 16, 1998 as required by the purchase agreement
entered into with
ADM, and the shares reserved to satisfy the $2,000,000 note
by be canceled
and the note 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."
Mr. Harvey
is currently the CEO and President of the Company, and has
unlimited
access to corporate information. 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."
All of these shareholders have been afforded nearly
unlimited access to
corporate information. 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 are attached to end of document as follows:
Articles of Incorporation ............................ EX-3.(i)
Corporate Bylaws ..................................... EX-3.(ii)
Opinion Regarding Legality............................ EX-5
ADM Definitive Agreement ............................. EX-10.(i)
License Agreement w/ CPI ............................. EX-10.(ii)
License Agreement w/ NSI ............................. EX-10.(iii)
Northwood Woodwaste Agreement ........................ EX-10.(iv)
HFP Woodwaste Agreement .............................. EX-10.(v)
Property Leases........................................EX-10.(vi)
Receipt of Exchange................................... EX-10.(vii)
List of Subsidiary Companies ......................... EX-21
Financial Data Schedule .............................. EX-27
Permit PA14845 ....................................... EX-99.(i)
Permit PA14846 ....................................... EX-99.(ii)
Permit PE14859 ....................................... EX-99.(iii)
Permit PE14860 ....................................... EX-99.(iv)
Letter from Heartland ................................ EX-99.(v)
Mine Reserve Survey .................................. EX-99.(vi)
Subscription Agreement................................ EX-99.(vii)
Letter from Auditor....................................EX-99.(viii)
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.
(3) With respect to its offering under Rule 415 of the
Securities Act it will:
(a) File, during any period in which it offers or sells
securities, a
post-effective amendment to this registration statement
to:
(i) Include any prospectus required by Section 10(a)(3)
of the
Securities Act:
(ii) Reflect in the prospectus any facts or events which,
individually
or together, represent a fundamental change in the
information in
the registration statement; and
(iii) Include any additional or changed material
information on the plan
of distribution.
(b) For determining liability under the Securities Act,
treat each
post-effective amendment as a new registration statement
of the
securities offered, and the offering of the securities
at that time to
be the initial bona fide offering
(c) File a post-effective amendment to remove from
registration any of the
securities that remain unsold at the end of the offering.
<PAGE>
****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 the Form SB-2/A and
authorized this
registration statement to be signed on its behalf by the
undersigned, in the
City of Cottondale, State of Alabama on February 9, 1998.
Southern Ventures, Inc. a Nevada Corporation
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 stated:
"Bobby H. Harvey"
Bobby H. Harvey CEO, President and Chairman
2/9/98
"Ross G. Tucker"
Ross G. Tucker Vice President and Director
2/9/98
"Dennis H. Saunders"
Dennis H. Saunders Vice President
2/9/98
"Chester I. Wright"
Chester I. Wright III CFO, Treasurer and Director
2/9/98
"David C. Parsons"
David C. Parsons Vice President and Director
2/9/98
"David Tucker"
David Tucker Director
2/9/98
"Elaine Knapp"
E. Elaine Knapp Secretary and Director
2/9/98
"W. B. Wood"
W. Benjamin Wood Vice President and Director
2/9/98
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"
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 shareholders 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: "W. B. Wood"
Per:
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:
RIVERSIDE GRAIN PRODUCTS INC.
Per: "Linda Luszczak"
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.
"David Tucker" by "W. B. Wood"
Witness Licensee
National Synfuels, Inc.
"David Tucker" by
"Gordon 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 (eg. 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 P. Herr"
Witness Licensee
Southern Ventures, Inc.
"W. B. Wood" by "Gordon H. Tucker"
Witness Licensor
DAVIS & COMPANY
Barristers and Solicitors Patent and Trademark Agents
Established 1892
Brian F. Hiebert
Direct Line (604) 643-2917 Vancouver Office
E-mail [email protected] Telephone (604) 687-9444
File no. 63595-98173 Website www.davis.ca
May 2,1997
VIA COURIER
David Parsons
Vice-President
Southern Ventures, Inc.
2727 Phillips Road
Sooke, BC VOS 1N0
Dear Sir:
Re: Northwood Pulp and Timber Limited - Woodwaste and Option
Agreement
Enclosed for your records is an original of the Woodwaste
Agreement and an original of the Option Agreement, each of which
have been fully executed.
Please note that a new Schedule 1 has been inserted to the
Woodwaste Agreement and as Schedule A to the Option Agreement
showing the new 30 acre or 12 hectare parcel which is identified
as Parcel A. You will note that I have inserted a new page 4 in
the Woodwaste Agreement dealing with the definition of "Plant
Site" and new pages 5 and 10 in the option agreement dealing
with the definition of "Portion" to reflect this new parcel and
correcting the changed language. It does not in any way
substantively change the agreement but simply makes reference to
Parcel A rather than a cross-hatched area.
If you have any questions please give me a call.
Yours truly,
Davis & Company
Per:
Brian Hiebert
BFH/slb
Encl.
cc: Gordon H. Tucker (with encl.)
Lowell Johnson (with encl)
2800 PARK PLACE - 666 BURRARD STREET, VANCOUVER, BC CANADA V6C
2Z7
VANCOUVER TORONTO MONTREAL OTTAWA WHITEHORSE YELLOWKNIFE TOKYO
WOOD WASTE AGREEMENT
This Agreement dated April 14, 1997 is among:
RIVERSIDE CARBON PRODUCTS, INC., a British Columbia company
having an office at 2727 Phillips Road, Sooke, British Columbia,
VOS 1N0
("Riverside")
and
NORTHWOOD PULP AND TIMBER LIMITED, a federal corporation,
extra-provincially registered in British Columbia and having an
office at 5162 Northwood Pulpmill Road P.O. Box 9000, Fraser
Flats, Prince
George, British Columbia, V2L 4W2
("Northwood")
and
SOUTHERN VENTURES, INC., an Alberta corporation having an
office at 15000 Highway 11 North, Cottondale, Alabama, U.S.A.,
35435
("SVI")
BACKGROUND
A. Riverside intends to construct, own, and operate a charcoal
production plant in Houston, British Columbia (the "Charcoal
Plant").
B. Northwood owns and operates a sawmill, chip plant, and
related facilities in Houston, British Columbia (collectively,
the Mill Complex").
- - -2-
C. Northwood wishes to dispose of the Wood Waste produced at the
Mill Complex in the Charcoal Plant.
D. Northwood wishes to provide to Riverside and Riverside wishes
to take from Northwood the Wood Waste free of charge, in the
quantities, for the Term, and subject to the terms and
conditions set out in this Agreement.
E. Riverside wishes to purchase and Northwood wishes to sell to
Riverside a site for the Construction and operation of the
Charcoal Plant.
F. SVI wishes to unconditionally guarantee the obligations of
Riverside under this Agreement.
AGREEMENTS
The Parties agree:
PART 1
DEFINITIONS
1.1 Defined Terms. In this Agreement:
(a) "Affiliate" has the meaning set out in the Canada Business
Corporation Act;
(b) "Agreement means this Agreement including any extensions or
amendments to this Agreement and Schedules 1 and 2 attached to
this Agreement;
(c) "Bark" means the corky tissue in the cylindrical axis of a
tree outside of the cambium, which is composed of inner living
bark and outer dead brown bark;
(d) "BDMT" means bone dry metric tonnes which is 1000 kilograms
of moisture free, oven dried Wood Waste;
(e) "Brown Wood" means Bark and Wood Chunks;
(f) "Business Day" means any day other than Saturday, Sunday, or
a statutory holiday in British Columbia;
(g) "Charcoal Plant" has the meaning set out in Recital A;
- - -3-
(h) "Closing" has the meaning set Out in Section 16.2;
(i) "Closing Date" has the meaning set out in Section 16.2;
(j) "Event of Insolvency" means any one or more of the following:
(i) if a Party files a petition in bankruptcy or for
reorganization or for an arrangement under any applicable
bankruptcy law or under any similar laws, now or hereafter in
effect, or is adjudged by a court of competent jurisdiction
bankrupt or becomes insolvent or makes an assignment for the
benefit of its creditors or admits in writing its inability to
pay its debts generally as they become due or is dissolved or
suspends payment generally of its obligations,
(ii) if a petition is filed proposing the adjudication of a
Party as a bankrupt or its re-organization under any applicable
bankruptcy law or any similar law, now or hereafter in effect
and:
A. the Party consents to the filing thereof,
B. the petition is not discharged or denied within 60 days after
the filing thereof, or
C. the petition is not diligently defended against, or
(iii) if a receiver, receiver manager, nominee, or liquidator
(or other similar official) is appointed to take charge of a
part or of all or substantially all of the business or assets of
a Party and:
A. that Party consents to such appointment, or
B. the appointment is not discharged or withdrawn or action is
not taken by that Party to secure the discharge of that official
within 60 days after the appointment;
(k) "Force Majeure" means any cause beyond the control of a
Party which prevents the performance by a Party of any of its
duties, liabilities, and obligations under this Agreement not
caused by its default or act of commission (except lockouts) or
omission and not avoidable by the exercise of reasonable effort
or foresight by that Party, excluding lack of or insufficient
financial resources to discharge and pay monetary obligations,
but including, without limitation, strikes, lockouts, or other
labour or industrial disturbances, civil disturbances, acts,
orders, legislation, regulations, directives of or failure to
act by any governmental agency, act of a public enemy, war,
riot, sabotage, blockage, embargo, shortage of material and
supplies,
- - -4-
hurricane, flood, washout, explosion, act of God, fire, and
delays caused by a third
party;
(l) "Governmental Agency" means any federal, provincial,
municipal, local, or other governmental department, commission,
board, bureau, agency, or instrumentality, or any court, in each
case whether of, British Columbia, Canada, or any other
jurisdiction having jurisdiction over the Parties of this
Agreement;
(m)"Indemnitor" has the meaning set out in Section 14.2;
(n) "Interest" has the meaning set out in Section 16.2;
(o) "Mill Complex" has the meaning set out in Recital B;
(p) "Northwood" has the meaning set out on page 1;
(q) "Offer" has the meaning set out in Section 16.1;
(r) "Other Party" has the meaning set out in Section 14.2;
(s) "Option Agreement"' means the Option Agreement attached to
this Agreement as Schedule 2 and referred to in Section 9.1;
(t) "Parties" means Riverside, Northwood, and SVI and "Party"
means any one of them;
(u) "Permits" means all permits, licenses, and approval from all
Governmental Agencies necessary to construct and operate the
Charcoal Plant in accordance with all applicable federal,
provincial, municipal, and local laws, regulations, orders, and
by-laws;
(v) "Planer Shavings" means the wood fibres which are
mechanically planed from the outer surfaces of rough lumber in
order to bring the lumber to its finished dimensions;
(w) "Plant Site" means a thirty acre or 12 hectare portion of
the legal parcel legally described below owned by Northwood
which portion is shown as Parcel A outlined in bold on Schedule
1 attached to this Agreement and which is to be subdivided by
Riverside, at Riverside's sole cost and expense, from such legal
parcel
District Lot 334, Range 5, Coast Land Title District, Except
Plans 1160,3922, 4871 and 12307;
- - -5-
(x) "Proposed Purchaser" has the meaning set out in Section 16.1;
(y) "Sawdust" means the short wood fibres displaced by the
cutting surface of saws in the processing of logs, cants, lumber
and other wood products;
(z) "Start Up Date" means the date on which the Charcoal Plant
is fully operational and able to accept the daily equivalent of
the volumes of Wood Waste set out in Section 3.1 on a continuous
basis which date will not be later than December 31, 1997;
(aa) SVI has the meaning set out on page 1;
(bb) "Riverside" has the meaning set out on page 1;
(cc) "Term" means the term of this Agreement set out in Section
2.1;
(dd) "Wood Chips" means wood chips which are used in the
manufacturing of pulp;
(ee) "Wood Chip Fines and Overs" means Wood Chips which are
either smaller or larger than Northwood's size limitations for
Wood Chips, from time to time;
(ff) "Wood Chunks" means pieces of solid wood which are removed
from the log during various stages of the sawmilling and
chipping process;
(gg) "White Wood" means Planer Shavings, Sawdust, and Wood
Chips Fines and Overs; and
(hh) "Wood Waste" means Brown Wood and White Wood.
PART 2
TERM
2.1 Term. The term of this Agreement will be for a period of
20 years commencing on the Start Up Date and ending on the 20th
anniversary of the Start Up Date.
2.2 Commencement. Riverside will commence to accept the daily
equivalent of the volumes of Wood Waste set out in Section 3.1
on the Start Up Date. Northwood may extend the date for the
Start Up Date if requested in writing by Riverside. In deciding
whether to extend the date for the Start Up Date Northwood will
act reasonably and take into account any extensions granted to
Northwood by the Ministry of Environment, Lands and Parks for
the elimination of Northwood's beehive burner at Houston, B.C.
- - -6-
2.3 Extensions. The Term will automatically be extended in 5
year increments unless either Northwood or Riverside provides
written notice to the other of its intent to terminate this
Agreement. Such notice will be provided not less than 6 months
prior to the expiration of this Agreement or any extensions
authorized under this Agreement.
2.4 White Wood. Notwithstanding anything else contained in
this Agreement, Northwood may at Northwood's sole option, retain:
(a) a volume of White Wood for use in the Mill Complex's steam
plant, an estimate only of the volume of which is set out in
Section 3.1, which estimate may vary by as much as plus or minus
20%;
(b) a volume of Planer Shavings which have been previously
committed by Northwood to Northern Engineered Wood Products
Inc.; and
(c) the White Wood after the 5th anniversary of the Start Up
Date provided Northwood will have provided Riverside with
written notice 6 months prior of Northwood's intent to not
supply the White Wood to Riverside. If Northwood does not
provide such written notice Northwood's agreement to supply
White Wood under this Agreement will be deemed to be renewed for
3 successive 5 year. periods unless Northwood provides Riverside
with such written notice 6 months prior to the expiry of any 5
year renewal.
PART 3
QUANTITY
3.1 Volume Estimates. Subject to tile terms of this Agreement,
Northwood will provide and Riverside will accept all that amount
of Wood Waste which is in excess of internal needs of the Mill
Complex, which is estimated on an annual basis (based on 252
working days) by Northwood to be:
Estimated* Wood Waste Volume in BDMT
A. White Wood Brown Wood Total
Mill Complex 77,914 59,065 136,979
Chip Plant 9,656 14,107 23,763
(@200,000 Cubic Meters/yr)**
Sub-Total 87,570 73,172 160,742
Less Steam Plant (40,000) - (40,000)
Total 47,570 73,172 120,742
Estimated* Wood Waste Volume in BDMT
B. White Wood Brown Wood Total
Mill Complex 77,914 59,065 136,979
Chip Plant 14,576 21,298 35,874
(@300,000 Cubic Meters/yr)**
Sub-Total 92,480 80,363 172,853
Less Steam Plant (40,000) - (40,000)
Total 52,480 80,363 132,853
- - -7-
* Volume estimates include Planer Shavings previously committed
under Section 2~4~).
** Volume from Chip Plant is dependent on rate of production of
Chip Plant which can vary.
3.2 Volume Variations. The volume of Wood Waste to be provided
by Northwood to Riverside under Section 3.1 may vary depending
on, without limitation:
(a) the retention of White Wood under Section 2.4;
(b) the fluctuation in the annual volume of Wood Waste produced
by the Mill Complex, or consumed by the Mill Complexes steam
plant, due to variations in Mill Complex production as a result
of operational considerations and business decisions;
(c) the fluctuation in the annual volume of Wood Waste produced
at the Mill Complex as a result of technological changes;
(d) the fluctuations in the annual volume of Wood Waste
produced at the Mill Complex due to changes in Northwood's
Allowable Annual Cut;
(e) closures or shutdowns of Northwood's various manufacturing
facilities including without limitation, the Mill Complex, due
to labour issues, economic factors, or any other matters; and
(f) Force Majeure.
3.3 No Warranty of Quantity. Northwood does not warrant the
quantity of Wood Waste it will provide to Riverside under this
Agreement.
3.4 Changes. Northwood will promptly notify Riverside of any
anticipated changes in its operations which would substantially
affect the quantity of Wood Waste produced at the Mill Complex.
- - -8-
PART 4
QUALITY
4.1 Specifications. The Wood Waste provided under this Agreement
will be a product of sawmilling or chipping operations at the
Mill Complex and will be free of rocks, dirt, metal, and other
noncombustible material, all consistent with good milling
practice. Northwood will not be required to separate the various
Wood Waste components. It will be the sole obligation of
Riverside to inspect loads of Wood Waste prior to pickup to
determine that such Wood Waste conforms with the quality
specifications set out in this Section. Riverside may not
reject loads of Wood Waste after pick up.
PART 5
USE
5.1 Disposal. Riverside will use Wood Waste accepted under this
Agreement to produce charcoal at the Charcoal Plant and will not
use the Wood Waste for any other purpose except with the written
consent of Northwood, such consent not to be unreasonably
withheld..
PART 6
LOADING AND TRANSPORT
6.1 Loading and Hogging. Northwood will supply, own, and operate
at the Mill Complex such loading facilities as are necessary to
provide the Wood Waste volumes set out in Section 3.1. Riverside
will be responsible to hog any of the Wood Waste which is
required to be hogged.
6.2 Transportation Cost. Riverside will arrange and pay for the
pick up and transportation of Wood Waste provided under this
Agreement from the Mill Complex to the Charcoal Plant on a
continuous basis to ensure a constant flow of Wood Waste from
Northwood to Riverside and so that Wood Waste does not
accumulate at the Mill Complex in volumes exceeding the capacity
of the loading facilities set out in Section 6.1.
- - -9-
6.3 Unloading. Hours of unloading at the Charcoal Plant will be
established by Riverside which will allow for continuous Wood
Waste shipments from the Mill Complex during normal operations
and Riverside will pick up the Wood Waste committed by Northwood
to Riverside under this Agreement from Northwood on a continuous
basis during the Mill Complex's operating hours which may
include operating on a 24 hour basis.
PART 7
TITLE AND PRICE
7.1 Title. Title and risk of loss to Wood Waste will pass from
Northwood to Riverside upon loading into Riverside's
transportation equipment.
7.2 Price. Title to all Wood Waste accepted under this Agreement
will transfer from Northwood to Riverside with no payment to
Northwood from Riverside.
7.3 Other Contracts. Riverside will not enter into any agreement
with any other party in British Columbia for the acquisition of
Wood Waste that is more favorable to such other party than this
Agreement. If Riverside enters into such an agreement, Riverside
will forthwith offer to Northwood to amend this Agreement so
that this Agreement is not less favorable than such other
agreement.
PART 8
CURTAILMENT OR DISCONTINUANCE
8.l Curtailment. If, for any reason, Northwood curtails or
discontinues the operation of the Mill Complex so as to affect
its production of Wood Waste Northwood will not be liable in any
manner for failing to provide all or part of the Wood Waste
during the period of such curtailment or discontinuance.
8.2 Acceptance of Wood Waste. Riverside will under no
circumstances refuse to pick up the Wood Waste committed to
Riverside by Northwood under this Agreement.
- - -10-
PART 9
REAL ESTATE MATTERS
9.1 Real Estate Matters. Subject to this Agreement, upon
Riverside presenting evidence satisfactory to Northwood, acting
reasonably, of having secured the necessary financing to
construct and operate the Charcoal Plant the Parties will enter
into the Option Agreement whereby Riverside will have the
exclusive option to purchase the Plant Site on terms and
conditions set out in the Option Agreement. The purchase price
of the Plant Site will be $250,000. Riverside will pay 10% of
the purchase price upon execution and delivery of the Option
Agreement, which will be applied to the purchase price if the
option is exercised by Riverside or which will remain the
property of Northwood if the option is not exercised by
Riverside. All costs associated with subdividing the Plant Site
from the existing legal parcel will be entirely at the expense
of Riverside. Northwood will sell the Plant Site to Riverside on
an "as is where is" basis and Riverside will assume all
liabilities associated with the Plant Site and will indemnify
and save harmless Northwood in respect of such liabilities.
9.2 Access. Subject to this Agreement, Northwood will grant to
Riverside such access as is reasonably required by Riverside for
the purpose of vehicle access to the Mill Complex for the pick
up of Wood Waste.
PART 10
FORCE MAJEURE
10.1 Excuse. Except as set out in Section 8.2, complete
performance by either of the Parties of the duties set out in
this Agreement will be excused for so long as such complete
performance is prevented by an event of Force Majeure.
10.2 Reasonable Efforts. The Party whose complete performance is
excused under Section 10.1 will give prompt notice to the other
Party, will undertake all reasonable effort to partially perform
its obligations under this Agreement during the period in which
complete performance is excused, and will use due diligence to
remove such Force Majeure cure conditions promptly.
10.3 Term Not Extended. No period of excused or partial
performance will extend the Term unless agreed to in writing by
the Parties.
10.4 Notice and Termination. If either Party seeks to have its
performance excused, under Section 10.1, notice will be given by
that Party to the other Party setting out the basis for such
excuse of performance and the estimated duration. If a Force
Majeure continues for more than one
- - -11-
year from its commencement date, either Party may, without
penalty, terminate this Agreement
effective 30 days after written notice of termination is given
to the other Party.
PART 11
CONDITIONS
11.1 Conditions Precedent: The obligations of Northwood under
this Agreement are subject to
Riverside:
(a) not being in default of any of its covenants, terms, or
conditions contained in this Agreement;
(b) obtaining and continuing to hold the Permits in a manner
which allows Riverside to fulfill its obligations under this
Agreement; and
(c) constructing the Charcoal Plant and having the Charcoal
Plant operational on or before the Start Up Date.
PART 12
TERMINATION
12.1 Default or insolvency: If:
(a) a Party defaults in the observance of any of its covenants,
terms, or conditions contained in this Agreement and if that
default continues for 10 days after a Party has given the
defaulting Party written notice specifying such default; or
(b) if a Party suffers an Event of Insolvency;
a non-defaulting or solvent Party may, in its sole discretion
terminate this Agreement forthwith by giving the other Party
written notice of termination. This Agreement shall not be
considered an asset in the bankruptcy of an insolvent Party.
- - -12-
PART 13
REMEDIES
13.1 Arbitration. The Parties will work to resolve all disputes
arising out of or in connection with this Agreement through
direct negotiations. Any dispute which cannot be resolved by the
Parties within 60 days of the matter in dispute first being
brought to the attention of one Party by the other Party for
resolution will be submitted to arbitration under the rules of
British Columbia International Commercial Arbitration Centre.
The appointing authority for arbitration will be the British
Columbia International Commercial Arbitration Centre. The case
will be administered by the British Columbia International
Commercial Arbitration Centre in accordance with its "Procedures
for Cases under the BCICAC Rules". The place of arbitration will
be Vancouver, British Columbia.
13.2 Governing Law. The laws of the Province of British Columbia
will apply to any dispute arising under this Agreement and the
Parties will submit and attorn to the jurisdiction of the
Province of British Columbia
13.3 Solicitors Fees. Solicitors fees and disbursements arising
out of any dispute which may develop in connection with this
Agreement and which is arbitrated or otherwise litigated or
appealed will be recoverable as damages by the ultimately
prevailing Party in amounts considered reasonable by the
arbitrator or the court, as the case may be.
PART 14
WARRANTIES-LIABILITY
14.1 Warranty. Northwood warrants that it has tide and ownership
free and clear of all liens, charges, and encumbrances to any
Wood Waste provided under this agreement
14.2 Indemnification Each Party ("Indemnitor") will indemnify
and hold the other Party ("Other Party") harmless from and
against any loss, costs, claim, actions, causes of action or
damages arising from the Indemnitor's activities or obligations
under this Agreement; save and except where such loss, cost,
claim, action, cause of action, or damage arises out of the
negligence of the Other Party.
- - -13-
PART 15
CONFIDENTIALITY
15.1 No Disclosure. All information and data of any nature
acquired by any of the Parties as a result of this Agreement or
furnished by a Party to the other Party under this Agreement
will be for the sole and exclusive use and benefit of the
Parties and will not be disclosed or disseminated during a
period expiring 2 years after the Term of this Agreement and
neither of the Parties will issue any public statement relative
to the terms and conditions of this Agreement without the prior
consent of the other Party.
15.2 Exceptions. Any Party may disclose or disseminate without
consent any or all of the information referred to in Section
15.1:
(a) to its officers, directors, employees, and agents;
(b) to Affiliates and independent professional consultants if
prior to such disclosure or dissemination they agree in writing
to maintain the confidentiality of such data and information;
(c) to or in response to the requirements of any Governmental
Agency or similar authority having jurisdiction over the
disclosing Party or any stock exchange upon which such Party's
securities are listed or in response to a lawful subpoena or
other legal process;
(d) to a bank or other financial institution from whom the
disclosing Party or its Affiliate is seeking financing if prior
to such disclosure and dissemination they agree in writing to
maintain the confidentiality of such data and information; and
(e) to a potential purchaser of all or substantially all the
assets of a Party or a purchaser of a controlling interest of a
Party;
provided that if a Party intends to disclose or disseminate any
of the information and data referred to in Section 15.1 under
this Section 15.2 such Party will first give notice thereof to
the other Parties.
- - -14-
PART 16
RIGHT OF FIRST REFUSAL
16.1 Right of First refusal. If Riverside should make or receive
a bona fide offer to or from an independent third party dealing
at arm's length with Riverside (the "Proposed Purchaser") to
dispose of all or part of Riverside's interest in the Charcoal
Plant (the "Interest"), which offer Riverside or the Proposed
Purchaser desires to accept, Riverside will first offer (the
"Offer") such Interest in writing to Northwood upon terms no
less favourable than those offered by the Proposed Purchaser or
intended to be offered by Riverside, as the case may be. The
Offer will specify the price and terms and conditions of such
sale, the name of the Proposed Purchaser (which term will, in
the case of an intended offer by Riverside, mean the person
firm, or corporation to whom Riverside intends to offer its
Interest). If, within a period of 30 days of receipt of the
Offer, Northwood notifies Riverside in writing that it will
accept the same, Riverside will be bound to sell such Interest
to Northwood at the price and on the terms and conditions of the
Offer. If Northwood fails to notify Riverside before the
expiration of the time limited therefor that it will purchase
the Interest offered, Riverside may sell such Interest to the
Proposed Purchaser at the price and on the terms and conditions
specified in the Offer for a period of 60 days, provided that
the terms of this Section 16.1 will again apply to such Interest
if the sale to the Proposed Purchaser is not completed within
the said 60 days. Any sale under this Section 16.1 will be
conditional upon the Proposed Purchaser delivering a written
undertaking to Northwood, in form and content satisfactory to
its counsel, to be bound by the terms and conditions of this
Agreement
16.2 Closing. If Northwood purchases the Interest or any part
thereunder Section 16.1 the closing (the "Closing") of that
transaction shall take place on the 20th Business Day after the
date of the acceptance of the Offer by Northwood (The "Closing
date") at Northwood's offices in Prince George, British
Columbia, at 10:00 a.m. At the Closing, Riverside will deliver
or cause to be delivered to Northwood:
(a) an executed Bill of Sale together with any other
documentation Northwood may reasonably require in favor of
Northwood transferring the Interest or any part thereof, as the
case may be, from Riverside to Northwood, free and clear of all
liens, charges, and encumbrances, save and except those, if any,
that Northwood has agreed to accept;
(b) if required, discharges, in a form reasonably satisfactory
to Northwood's solicitors, of all liens, charges, and
encumbrances against the Interest or any part hereof;
(c) all books, records, documents, computer disks, and other
information relating to the interest; and
- - -15-
(d) a release, in a form satisfactory to Northwood's solicitors
of all claims which Riverside may have against Northwood under
the Agreement or otherwise.
At the Closing Northwood shall table or cause to be tabled a
certified cheque or bank draft for the purchase price of the
Interest or any part thereof. When the items referred to above
have been delivered the Closing shall be complete.
16.3 Prohibition on disposal. Notwithstanding any other
provision of this Agreement, Riverside will not be entitled to
dispose of its Interest or any part thereof if Riverside is at
such time in default under this Agreement, unless prior to or
concurrently with such disposal ceases to be in default under
this Agreement.
16.4 Further Prohibition. Notwithstanding any other provision of
this Agreement, Riverside will not be entitled to dispose of its
Interest or any part thereof without first obtaining:
(a) the consent of Northwood if such action would permit any
other person, firm, or corporation to accelerate or demand the
payment of any indebtedness of Northwood; or
(b) the consent of any other person, firm, or corporation if
such is required by any agreement by which Northwood is bound or
any permit, license, or approval held by Northwood.
16.5 Representations and Warranties. If Riverside disposes of
its Interest or any part thereof to Northwood under Section
16.1, Riverside will be deemed to represent and warrant to
Northwood effective as of the Closing of such disposal that:
(a) the Interest or any part thereof is beneficially owned by
Riverside free and clear of all liens, charges, and
encumbrances, save and except those, if any, that Northwood has
agreed in writing to accept;
(b) no person, firm, or corporation has any agreement or option
or any right capable of becoming an agreement or option (apart
from the Proposed Purchaser and this Agreement) for the purchase
from Riverside of the Interest or any part thereof; and
(c) the disposal of the Interest or any part thereof will not
result in a breach of any agreement, indenture, deed, debenture,
mortgage, bond, or other document or instrument to which
Riverside is a party or by which it is bound; and
(d) Riverside is not a non-resident for the purposes of the
Income Tax Act (Canada) or any successor legislation.
- - -16-
The above representations and warranties will survive the
Closing of the said sale and purchase and any termination or any
expiration of this Agreement.
PART 17
SVI GUARANTEE
17.1 SVI Guarantee. In consideration of Northwood entering into
this Agreement with Riverside and otherwise dealing with
Riverside and for other good and valuable consideration (the
receipt and sufficiency of which is acknowledged) SVI covenants
and agrees with Northwood to unconditionally and irrevocably
guarantee to Northwood the performance by Riverside of all of
Riverside's covenants and agreements under this Agreement and
the Option Agreement and any agreements contemplated by the
Option Agreement from time to time Northwood will be entitled to
make demand under this guarantee upon any default by Riverside
under this Agreement. Northwood will not be bound to exhaust its
remedies against Riverside before calling upon SVI's guarantee.
PART 18
GENERAL
18.1 Assignment. This Agreement may not be assigned by a Party
without the written consent of the other Parties, such consent
not to be unreasonably withheld.
18.2 Further Assurances. Each of the Parties will, upon the
reasonable request of the other Party, make, do, execute, or
cause to be made, done, or executed all further and other lawful
acts, deeds, things, devices, documents, instruments, and
assurances whatever for the better and more perfect and absolute
performance of the terms and conditions of this Agreement.
18.3 Entire Agreement. This Agreement will constitute the entire
agreement among the Parties.
18.4 Amendments. This Agreement may be modified or amended only
by written instrument executed by a duly authorized
representative of each Party.
18.5 Severance. If any covenant, obligation, or provision
contained in this Agreement will be invalid or unenforceable,
the remainder of this Agreement will not be affected thereby and
each covenant, obligation, and provision of this Agreement will
separately be valid and enforceable to the fullest extent
permitted by law.
18.6 Captions. The captions In this Agreement are for
convenience of reference only and will not affect the
construction or interpretation of this Agreement.
- - -17-
18.7 Waiver. Failure by any Party, at any time, to require
strict performance by another Party of any provision of this
Agreement will in no way affect that Party's right to enforce
such provision at any other time nor will any waiver by any
Party of any provision of this Agreement at any time be held to
be a waiver of such provision at any other time or of any other
provision.
18.8 Counterparts. This Agreement, and any amendments or
modifications to this Agreement or extensions of this Agreement,
may be executed in any number of counterparts, each of which
will be considered to be an original, but all of which will
constitute one and the same document.
18.9 Included Words. Wherever the singular or masculine is used
in this Agreement, the same will be deemed to include the plural
or the feminine or the body corporate where the context so
requires.
18.10 Division of Agreement. This Agreement is divided into
Parts and Sections, illustrated as follows:
PART 1
1.1
Section
(a)
Section;
(i)
Section; and
A. Section.
18.11 Expiry of Time Period. In this Agreement, if any period
ends on a day other than a Business Day, that period will be
extended to the next following Business Day.
18.12 Remedies Cumulative. The specific remedies to which any
Party may resort are cumulative and not exclusive of any other
remedies to which the Party may be lawfully entitled and any
Party will be entitled to pursue any and all of its remedies
concurrently, consecutively, and alternatively.
18.13 Time of Essence. Time is of the essence of this Agreement.
18.14 Successors and Assigns. This Agreement will be binding
upon the Parties and the Parties' successors and permitted
assigns.
18.15 Independent Contractor. Each Party is an independent
contractor and will not be an agent, employee, partner, or be
considered to have any other relationship in this Agreement.
- - -18-
18.16 Notices. In this Agreement:
(a) any notice or communication required or permitted to be
given under this Agreement will be in writing and will be
considered to have been given if delivered by hand transmitted
by facsimile transmission or mailed by prepaid registered post
in Canada, to the address or facsimile transmission number of
each Party set out below:
(i) if to Riverside:
Riverside Carbon Products Inc.
2727 Phillips Road
Sooke, British Columbia
V0S 1N0
Attention: President
Fax No: (250) 642-2659
(ii) if to Northwood:
Northwood Pulp and Timber Limited
P.O. Box 158
Morice River Road
Houston, British Columbia
V0J 1Z0
Attention: General Mangaer
Fax No: (250) 845-5294
(iii) if to SVI:
Southern Ventures Inc.
15000 Highway 11 North
Cottondale, Alabama 35453
U.S.A.
Attention: President
Fax No.:(205)556-3635
or to such other address or facsimile transmission number as any
Party may designate in the manner set out above; and
- - -19-
(b) notice or Communication will be considered to have been
received;
(i) if delivered by hand during business hours on a Business
Day, upon receipt by a responsible representative of the
receiver, and if not delivered during business hours, upon the
Commencement of business on the next Business Day;
(ii) if sent by facsimile transmission during business hours on
a Business Day, upon the sender receiving confirmation of the
transmission, and if not transmitted during business hours, upon
the commencement of business on the next Business Day; and
(iii) if mailed by prepaid registered post in Canada upon the
fifth Business Day following posting; except that, in the case
of a disruption or an impending or threatened disruption in
postal services every notice or communication will be delivered
by hand or sent by facsimile transmission.
The Parties have executed this Agreement on tile date appearing
below.
RIVERSIDE CORBON PRODUCTS, INC
By: David Parsons, President
"David Parsons"
Per Autohorized Signatory
Date: "April 14, 1997"
NORTHWOOD PULP AND TIMBER LIMITED
By: "Des Gelz" By: "Michael O'Neil"
Per Authorized Signatory
Date: "April 30, 1997"
SOUTHERN VENTURES, INC.
By: David Parsons, Vice-President
"David Parsons"
Per Authorized Signatory
Date: "April 14, 1997"
WELDWOOD
Weldwood of Canada Limited
P.O. Box 2179, Vancouver, B.C.. V6B 3V8
Tel: (604) 687-7366
Fax: (604) 662-2798
Street Address: 1055 W. Hastings Street V6E 2E9
For Direct Contact, Tel:
Fax:
2 May 1997
Riverside Carbon Products, Inc.
2727 Phillips Road
Sooke, B.C. V0S 1N0
Attention: Mr. David C. Parsons President
Dear:
Re: Fiber Supply Contract
We enclose for your records a fully executed copy of the Fiber
Supply Agreement entered into between Houston Forest Products
Company and Riverside Carbon Products, Inc. and Southern
Ventures, Inc.
Yours truly,
WELDWOOD OF CANADA LIMITED
per:
"Gregory J. Jones"
Gregory J. Jones
Corporate Solicitor
/k
Encl.
FIBER SUPPLY AGREEMENT
BETWEEN
RIVERSIDE CARBON PRODUCTS INC.
AND
SOUTHERN VENTURES
AND
HOUSTON FOREST PRODUCTS COMPANY
- - -1-THIS AGREEMENT made and entered into as of the 1st day of
May 1997
BETWEEN:
RIVERSIDE CARBON PRODUCTS INC., a corporation having an office
at 2727 Phillips Road, Sooke, British Columbia V0S 1N0
(hereinafter referred to as "RIVERSIDE")
OF THE FIRST PART
AND:
HOUSTON FOREST PRODUCTS COMPANY, a joint venture operation of
Weldwood of Canada Limited and West Fraser Mills Limited having
an office at
P.O. Box 5000, Houston, B.C. V0J 1Z0
(hereinafter referred to as "HFP")
OF THE SECOND PART
AND:
SOUTHERN VENTURES, INC., a corporation having an office at 15000
Highway 11 North, Cottondale, Alabama U.S.A. 35435
(hereinafter referred to as "SVI")
OF THE THIRD PART
WHEREAS:
A. RIVERSIDE intends to construct, own and operate a facility
for making charcoal from Wood Waste at a new plant at or near
Houston, British Columbia,( hereinafter referred to as the
"Charcoal Plant");
B. HFP owns and operates a sawmill facility at or near Houston,
British Columbia
(hereinafter referred to as the Sawmill ) which produces Wood
Waste as a by-product of its operations;
- - -2-
C. RIVERSIDE requires a secure, long-term supply of Wood Waste
for the purpose of making charcoal;
D. HFP wishes to provide to RIVERSIDE and RIVERSIDE wishes to
take from HFP the Wood Waste, free of charge, in the quantity,
for the term and subject to the terms and conditions set out in
this Agreement; and
E. SVI wishes to unconditionally guarantee the obligations of
RIVERSIDE under this Agreement.
NOW THEREFORE in consideration of the mutual promises, covenants
and terms herein contained the parties hereby agree as follows:
1. DEFINITIONS
1.01 Agreement, means this agreement including any extensions or
amendments thereto.
1.02 Bone-Dry Tonnes or BDT means 1000 kilograms of moisture
free oven dried Wood Waste determined by using standard moisture
test sampling.
1.03 Brownwood Residue or Bark means the corky tissue in the
cylindrical axis of a tree, outside the cambium, which is
composed of inner living bark and outer dead brown bark.
1.04 Force Majeure means any causes or events beyond the
reasonable control of a Party, including fire, lightning, flood,
extreme weather conditions, riot, civil commotion, war, strike,
lockout or other labour disputes, acts of God, substantial loss
of or damage to equipment, shortage of material and supplies,
and any law, regulation or order by any governmental body or
authority of competent jurisdiction, which prevents the
performance by a Party of any of its duties, liabilities and
obligations under this Agreement and not caused by its default
or act of commission ( except lockouts) or omission and not
avoidable by the exercise or reasonable efforts or foresight by
that Party.
1.05 Indemnitor has the meaning set out in Section 12.02.
1.06 Parties means RIVERSIDE, HFP and SVI and "Party" means any
one of them;
1.07 Permits means all permits, licences and approvals from all
governmental agencies necessary to construct and operate the
Charcoal Plant in accordance with all applicable federal,
provincial, municipal and local laws, regulations, orders and
by-laws;
1.08 Planer Shavings, means the wood fibres which are
mechanically planed from the outer surfaces of rough lumber in
order to bring the lumber to its finished dimensions.
- - -3-
1.09 Raw Material, means Sawdust and Planer Shavings.
1.10 Sawdust means the short wood fibres displaced by the
cutting surfaces of saws in the processing of logs, cants,
lumber and other wood products and shall include wood chips
which are smaller than the size limitations for use in the
manufacture of pulp.
1.11 Term, means the term of this Agreement as set forth in
paragraph 2.01.
1.12 Wood Waste, means Bark and Raw Material.
2. TERM
2.01 Term. The Term of this Agreement shall begin as of the date
hereof and shall continue for the subsequent twenty (20)
consecutive years thereafter, unless extended as provided in
paragraph 2.02, or is terminated in accordance with the
provisions contained in this Agreement.
2.02 Extensions. The Term will automatically be extended in five
(5) year increments unless either Party provides written notice
to the other Party of its intent to terminate this Agreement.
Such notice will be provided not less than six (6) months prior
to the expiration of the Agreement or any extensions authorized
under this Agreement.
3- QUANTITY
3.01 Wood Waste Commitment. Subject to the terms of this
Agreement, HFP shall provide to RIVERSIDE, and RIVERSIDE will
accept all that amount of Wood Waste produced at the Sawmill,
which is in excess of the internal needs of HFP as specified in
paragraph 3.05, and subject to paragraphs 3.02 and 3.03, which
is estimated on an annual basis by HFP to be approximately
73,899 BDT, comprised of approximately 42,343 BDT/annum of Bark
and approximately 31,556 BDT/annum of Raw Material.
3.02 HFP Option. HFP shall retain an option to withdraw and
redirect the volume of Raw Material to be provided hereunder for
other or more economic purposes and accordingly notwithstanding
paragraphs 2.02 and 3.01, the obligation of HFP to supply the
Raw Material component of the Wood Waste shall be for a period
of five (5) years only from the commencement of the Term. HFP
shall have the option at its sole discretion to extend the
supply of Raw Material hereunder for such further period or
periods of five years each. HFP shall exercise its option by
providing notice to RIVERSIDE not less than six months prior to
the expiration of each five year period, of its intention to
withdraw or continue the supply of Raw Material pursuant to this
Agreement. In the event HFP exercises its option to withdraw the
Raw Material portion of the Wood Waste the estimated volume of
Wood Waste provided by HFP pursuant to paragraph 3.01 shall be
reduced accordingly.
3.03 Quantity Warranty. HFP does not warrant the quantity of
Wood Waste it will provide to Riverside hereunder. The quantity
of Wood Waste to be delivered may vary and shall be subject to
- - -4-
a) the withdrawal of the Raw Material component pursuant to
paragraph 3.02;
b) fluctuations in the annual volume of Wood Waste produced
at the Sawmill due to variations in mill production as a
result of operational considerations and normal business
economic decisions;
c) fluctuations in the annual volume of Wood Waste produced at
the Sawmill as a result of technological change in the Sawmill;
d) fluctuations in the annual volume of Wood Waste produced at
the Sawmill due to changes in the HFP's Allowable Annual Cut;
e) mill closures or shutdowns due to labour issues or any
matters beyond the control of HFP; and
f) Force Majeure.
3.04 HFP agrees that it will use reasonable efforts to ensure
that fluctuations in the production of Wood Waste as a result of
causes enumerated in paragraphs 3.03(b) and 3.03(c) will not
decrease the annual quantity of Wood Waste to be delivered
hereunder by an amount greater than 20% of the estimated annual
volume in paragraph 3.01.
3.05 Use of Wood Waste. Subject to paragraph 3.02, HFP shall not
use Wood Waste for any purpose other than supplying Wood Waste
to RIVERSIDE and shall not sell Wood Waste to any third party;
PROVIDED however that HFP may use up to 20,000 BDT per annum of
Raw Material as required for its internal needs to generate heat
for buildings and lumber drying at the Sawmill and HFP's planer
mill..
306 Changes. HFP shall, within a reasonable period of time,
notify RIVERSIDE of any anticipated changes in its operations
which would substantially affect the quantity of Wood Waste
produced at the Sawmill and made available to RIVERSIDE.
4. QUALITY
4.01 Specifications. The Wood Waste provided hereunder shall be
a product of milling operations at the Sawmill or other mutually
agreed upon sources and shall, consistent with good normal
milling practices, be essentially free of rocks, dirt, metal,
and other noncombustible material. It will be the sole
obligation of RIVERSIDE to inspect loads of Wood Waste prior to
pick-up to determine that such Wood Waste conforms with the
quality specifications set out in this paragraph. RIVERSIDE may
not reject loads of Wood Waste after pick-up.
4.02 Wood Waste Separation. RIVERSIDE shall not require HFP to
keep separate the various Wood Waste components included under
this Agreement.
5. USE
5.01 disposal Riverside will use Wood Waste accepted under this
Agreement to produce charcoal at the Charcoal Plant and will not
use the Wood Waste for any other purpose except with the written
consent of HFP, such consent not to be unreasonably withheld.
- - -5-
<PAGE>
6. MEASUREMENT
6.01 Weighing Methodology. RIVERSIDE shall determine the weight
of each truck load of Wood Waste by weighing the loaded truck
and trailer and deducting the actual weight of the empty truck
and trailer. All scales and related equipment shall be
maintained by RIVERSIDE in good order and condition. RIVERSIDE
shall maintain accurate records of the weight of each load of
Wood Waste and allow HFP to inspect such records and equipment
at reasonable times.
6.02 Wood Waste Commitment Determination. The net as delivered
weight of Wood Waste shall be the basis for determining annual
and monthly deliveries and quantities committed under this
Agreement.
6.03 The number of Bone-Dry Tonnes of Wood Waste delivered by
HFP to RIVERSIDE will be determined by standard moisture
sampling done by RIVERSIDE. The test sample shall be prepared so
as to be representative of the entire load and shall be tested
in accordance with standard moisture testing procedures
generally in effect in the Forest Industry. RIVERSIDE agrees to
advise HFP as soon as reasonably practicable, in writing, of the
green weight of Wood Waste, the moisture content and the
Bone-Dry Tonnes resulting.
6.04 HFP shall be entitled to inspect Riverside's procedures and
records for the determination of bone-dry weight of Wood Waste.
If in the opinion of HFP there exists a material error in
Riverside's methods or practices for determining bone-dry
weights, and if RIVERSIDE agrees that such a material error
exists, then RIVERSIDE will make such modifications as may be
mutually agreed upon between the parties to conform with the
standard moisture sampling usually prescribed in the Forest
Industry in British Columbia.
7. LOADING AND TRANSPORT.
7.01 Loading. HFP will supply, operate and maintain title to
such loading facilities at the Sawmill as are necessary to
provide the Wood Waste volume set out in paragraph 3.01.
RIVERSIDE will be responsible to hog the Wood Waste.
7.02 transportation Costs. RIVERSIDE shall arrange and pay for
the pick-up and transportation of Wood Waste from the Sawmill to
the Charcoal Plant on a continuous basis to ensure a constant
flow of Wood Waste from HFP to RIVERSIDE and so that Wood Waste
does not accumulate at the Sawmill in volumes exceeding the
capacity of the loading facilities set out in paragraph 7.01.
7.03 Unloading. Hours of unloading of Wood Waste at the
Charcoal Plant shall be established by RIVERSIDE and shall allow
for continuous Wood Waste shipments from the sawmill during all
operating hours of the Sawmill and RIVERSIDE will pick-up the
Wood Waste committed by HFP to RIVERSIDE under this Agreement
from HFP on a continuous basis during the Sawmill's operating
hours which may include operating on a 24 hour basis.
- - -6-
7.04 Stockpiling. Unless necessitated by (i) transportation
delays, (ii) Sawmill equipment malfunctions, or (iii) requested
by RIVERSIDE stockpiling of Wood Waste by HFP will not be
permitted; provided however if stockpiling is requested by
RIVERSIDE then the incremental Wood Waste handling costs
reasonably incurred by HFP as a result of the stockpiling shall
be paid by RIVERSIDE.
8. TITLE AND PRICE
8.01 Title. Title and risk of loss of Wood Waste shall pass
from HFP to RIVERSIDE upon loading of the Wood Waste into
Riversides transportation equipment.
8.02 Price. Title to all Wood Waste accepted hereunder shall
transfer from HFP to RIVERSIDE with no payment to HFP from
RIVERSIDE.
8.03 Other Contracts. RIVERSIDE has not entered into any
agreement with any other party in British Columbia for the
acquisition of Wood Waste that is more favourable for such other
party than this Agreement is for HFP. If RIVERSIDE hereafter
enters into such an agreement, RIVERSIDE will forthwith offer to
HFP to amend this Agreement so that this Agreement is not less
favourable than such other agreement, with any dispute as to
HFP's right to and the terms of such amendment to be resolved
pursuant to paragraph 10.01.
9. CURTAILMENT OR DISCONTINUANCE
9.01 Curtailment. If for any reason HFP curtails or discontinues
the operation of the Sawmill so as to effect its production of
Wood Waste, HFP shall not be liable in any manner for failing to
provide all or part of the Wood Waste during the period of such
curtailment or discontinuance.
9.02 RIVERSIDE shall under no circumstances refuse to pick-up
Wood Waste committed to RIVERSIDE by HFP under this Agreement
10. REMEDIES
10.01 Arbitration. The Parties will work to resolve all
disputes arising out of or in connection with this Agreement
though direct negotiations. Any dispute which cannot be resolved
by the Parties within sixty days of the matter in dispute first
being brought to the attention of one Party by the other Party
for resolution will be submitted to arbitration under the rules
of the British Columbia International Commercial Arbitration
Centre (the BCICAC). The appointing authority for arbitration
shall be the BCICAC and the case shall be administered by the
BCICAC in accordance with its Procedures for Cases under BCICAC
Rules". The place of arbitration shall be Vancouver, B.C.
Canada. The arbitration shall be conducted by a panel of three
arbitrators, one chosen by each party, the third selected by
mutual agreement of the first two.
10.02 Solicitors Fees. Solicitor's fees and disbursements
arising out of any dispute which may develop in connection with
this Agreement and which is arbitrated or otherwise litigated or
- - -7-
<PAGE>
appealed shall be recoverable as damages by the ultimate
prevailing party in amounts deemed to be reasonable by the
arbitrator or the court, as the case may be.
11. FORCE MAJEURE
11.01 Excuse. Except as set out in paragraph 9.02, complete
performance by either of the Parties of the duties set out in
this Agreement will be excused for so long as such complete
performance is prevented by an event of Force Majeure.
11.02 Reasonable Efforts. The Party whose complete performance
is excused under paragraph 11.01 will give prompt notice to the
other Party, will undertake all reasonable efforts to partially
perform its obligations under this Agreement during the period
in which complete performance is excused, and will use due
diligence to remove such Force Majeure conditions promptly.
11.03 Term not extended. No period of excused or partial
performance will extend the term unless agreed to in writing by
the Parties.
11.04 Notice and Termination. If either Party seeks to have
it's performance excused under paragraph 11.01, notice will be
given by that Party to the other Patty setting out the basis for
such excuse of performance and the estimated duration. If a
Force Majeure continues for more than one year from its
commencement date, either Party may without penalty terminate
this Agreement effective thirty (30) days after written notice
of termination is given to the other Party.
12. WARRANTIES - INDEMNITIES
12.01 Warranty. HFP warrants that it has title and ownership to
any Wood Waste provided hereunder.
12.02 Indemnification. Each Party ("Indemnitor") will indemnify
and hold the other Party ("Other Party") harmless from and
against any loss, costs, claims, actions, causes of action or
damages arising from the Indemnitor's or its agent's, servant's
or contractor's activities or obligations hereunder; save and
except where such loss, costs, claims, actions, causes of action
or damages arise out of the negligence of the Other Party.
13. CONDITIONS
13.01 Conditions Precedent. The obligations of HFP under
this Agreement are subject to
RIVERSIDE:
(a) not being in default of any of its covenants, terms or
conditions contained herein;
(b) receiving from the Ministry of Environment for British
Columbia on or before January 31,1997, a Waste Management Permit
for the operation of the Charcoal Plant at or near Houston,
British Columbia;
(c) continuing to hold the Permits in a manner which allow
RIVERSIDE to fulfill its obligations under this Agreement;
- - -8-
(d) constructing the Charcoal Plant and having the Charcoal
Plant fully operational and able to accept the daily equivalent
of the volume of Wood Waste set out in paragraph 3.01 on a
continuous basis on or before December 31,1997, (the "Start-up
Date") unless an extension to the Start-up Date is granted by
HFP. HFP may extend the Start-up Date if requested in writing by
RIVERSIDE. In deciding whether to extend the Start-up Date, HFP
will act reasonably taking into consideration the status of the
Charcoal Plant construction and any extension that may be
granted to HFP by the Ministry of Environment, Lands and Parks
for the elimination of HFP's beehive burner located in Houston,
B.C.
13.02 Default. Except as provided in paragraph 13.03 hereof,
if;
a) either party should fail or neglect to perform or observe any
of the terms and conditions contained herein (the "Defaulting
party") and (such failure or neglect referred to hereinafter as
a "default") such default shall continue after written notice of
the default from the other Party for fifteen days or up to
thirty days where the Defaulting party is making reasonable
efforts to remedy the default;
b) a bankruptcy or receivership proceeding, whether voluntary or
involuntary, shall be commenced against the Party; or
c) assignment of a Party's property shall be made for the
benefit of any of its creditors;
then, in any such events, the non-defaulting or solvent Party
may, in its sole discretion, by written notice, terminate this
Agreement forthwith.
13.03 Other Remedies. The rights to terminate set forth in this
Article 13 are not exclusive remedies and are without prejudice
to any other remedy available to a Party at Law or in equity
including a right to damages or to specific performance. Where
this Agreement is terminated pursuant to this Article 13, the
right of either Party to damages as defined and limited by this
Agreement, shall survive.
14. SVI GUARANTEE
14.01 SVI Guarantee. In consideration of HFP entering into this
Agreement with RIVERSIDE and otherwise dealing with RIVERSIDE
and for other good and valuable consideration (the receipt and
sufficiency whereof is acknowledged) SVI covenants and agrees
with HFP to unconditionally and irrevocably guarantee to HFP the
performance by RIVERSIDE of all of Riverside's covenants and
agreements under this Agreement from time to time. HFP will be
entitled to make demand under this guarantee upon any default by
RIVERSIDE under this Agreement. HFP will not be bound to exhaust
its remedies against RIVERSIDE before calling upon SVI's
guarantee.
15. MISCELLANEOUS
15.01 Further Assurances. Each of the Parties shall, upon the
reasonable request of any other Party hereto, make, do, execute
or cause to be made, done or executed all further and other
lawful acts, deeds, things, devices, documents, instruments, and
assurances whatever for the better and more perfect and absolute
performance of the terms and conditions of this Agreement.
- - -9-
15.02 Entire Agreement. This Agreement shall constitute the
entire agreement between the Parties.
15.03 Amendments. This Agreement may be modified or amended
only by written instrument executed by a duly authorized
representative of each Party.
15.04 Severability. If any covenant, obligation or provision
contained in this Agreement shall be invalid or unenforceable
the remainder of this Agreement shall not be affected thereby
and each covenant, obligation and provision of this Agreement
shall separately be valid and enforceable to the fullest extent
permitted by law.
15.05 Captions. The captions used herein are for convenience of
reference only and shall not affect the construction or
interpretation of this Agreement.
15.06 No Waiver. Failure by a Party, at any time, to require
strict performance by the other Party of any provision of this
Agreement will in no way affect that Party's right to enforce
such provision at any other time nor will any waiver by a Party
of any provision hereof at any time be held to be a waiver of
such provision at any other time or of any other provision.
15.07 Counterparts. This Agreement, and any amendments or
modifications thereto or extensions thereof, may be executed in
any number of counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the same
document.
15.08 Successors and Assigns. This Agreement shall be binding
upon any purchaser or transferee of the sawmill or the Charcoal
Plant. If either Party transfers or sells assets which might
affect the supply or use of Wood Waste hereunder, said Party
shall promptly notice the other Party and neither Party shall
transfer or sell such assets unless and until the transferee or
purchaser of those assets first assumes all or a pro rata share
of the obligations of the transferor or the vendor under this
Agreement.
15.09 Governing Law. The laws of the Province of British
Columbia shall apply to any dispute arising under this Agreement.
15.10 Notices. Any notice required or permitted to be given
pursuant to this Agreement or by law shall be in writing signed
by an authorized representative of the Party giving such notice
and shall be hand delivered, sent by registered mail or by
telefacsimile to the other Party at such address as set forth
below:
if sent to RIVERSIDE to:
RIVERSIDE CARBON PRODUCTS INC.
2727 Phillips Road
Sooke, British Columbia V0S 1N0
Attention : Mr. David Parsons, President
Telefacsimile Number: (250) 642-2659
- - -10-
if sent to SVI to:
SOUTHERN VENTURES, INC.
15000 Highway 11 North
Cottondale, Alabama, 35453
Attention: Mr. Gordon Tucker, President
Telefacsimile Number: (205) 556-3635
if sent to HFP to:
HOUSTON FOREST PRODUCTS COMPANY
Box 5000, Houston, B.C. V0J 1Z0
Attention: General Manager
Telefacsimile Number: (604) 845-5301
Any notice or other communication so given or made shall be
deemed to have been given or made and to have been received on
the day of delivery, if hand delivered or if sent by
telefacsimile on the day faxed, provided such day is a business
day for the recipient and, if not on the first business day of
the recipient thereafter, or if sent by registered post on the
seventh business day following the date of mailing.
Any Party may from time to time change its address for notice by
notice to the other Party given ion the manner aforesaid.
IN WITNESS WHEREOF the Parties have caused this Agreement to be
executed by their duly authorized representatives as of the day
and year first above written.
HOUSTON FOREST PRODUCT COMPANY
By: "Andrew S. Gray" Date: "May 1, 1997"
Title: "President"
RIVERSIDE CARBON PRODUCTS INC.
By: "David C. Parsons" Date: "April 29, 1997"
Title" "President"
SOUTHERN VENTURES, INC.
By: "David C. Parsons" Date: "April 29, 1997"
Title: "Vice President"
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
<MULTIPLIER> 1
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 64,275
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 96,914
<PP&E> 297,059
<DEPRECIATION> 8,889
<TOTAL-ASSETS> 852,483
<CURRENT-LIABILITIES> 426,250
<BONDS> 0
0
0
<COMMON> 18,937
<OTHER-SE> (396,955)
<TOTAL-LIABILITY-AND-EQUITY> 852,483
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 874,589
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,284
<INCOME-PRETAX> (896,455)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
[Crest Symbol]
BRITISH
COLUMBIA
JAN 29, 1997
REGISTERED MAIL
Riverside Carbon Products, Inc.
A Division of Southern Ventures, Inc.
2727 Phillips Road
Sooke, BC VOS 1N0
Dear Permittee: File: PA-14845
Enclosed is Permit PE- 14859 issued under the provisions of the
Waste Management. Act. Your attention is respectfully directed
to
the terms and conditions outlined in the Permit. An annual
permit
fee will be determined according to the Waste Management Permit
Fees Regulation.
This Permit does not authorize entry upon, crossing over, or use
for any purpose of private or Crown lands or works, unless and
except as authorized by the owner of such lands or works. The
responsibility for obtaining such authority shall rest with the
Permittee. This Permit is issued pursuant to the provisions of
the Waste Management Act to ensure compliance with Section 34(3)
of that statute, which makes it an offense to discharge waste
without proper authorization. It is also the responsibility of
the Permittee to ensure that all activities conducted under this
authorization are carried out with regard to the rights of third
parties, and comply with other applicable legislation that may
be
in force.
This Permit may be appealed by persons who consider themselves
aggrieved by this decision in accordance with Part 5 of the
Waste
Management ACT. Written notice of intent to appeal must he
received by the Regional Waste Manager within twenty-one (21)
days of the date of this letter.
Administration of this Permit will be carried out by staff from
our Regional Office located at 3726 Alfred Avenue, Smithers, B.
C.. Plans, data and reports pertinent to the Permit are to be
submitted to the Regional Waste Manager at Box 5000, Smithers,
B.C. V0J 2N0.
Yours truly,
"F. Rhebergen"
F. Rhebergen, P. Eng.
Assistant Regional Waste Manager
Skeena Region
enclosure
Ministry of BC Environment
Environment, Skeena Region
Lands and Parks
Mailing/Location Address: Telephone:(250) 847-7260
Box 5000 Facsimile: (250) 847-7591
3726 Alfred Avenue
Smithers BC V0J 2N0
<PAGE>
[crest symbol]
PROVINCE OF BRITISH COLUMBIA
Environmental Protection
Box 5000
Smithers
British Columbia V0J 2N0
Telephone: (250)847-7260
Fax: (250) 847-7591
MINISTRY OF ENVIRONMENT,
LANDS AND PARKS
PERMIT
PA-14845
Under the Provisions of the Waste Management Act
Riverside Carbon Products, Inc.
A Division of Southern Ventures, Inc.
2727 Phillips Road
Sooke, British Columbia VOS 1N0
is authorized to discharge air contaminants to the air from a
charring plant processing up to 210,000 bone-dry tonnes/year of
wood residue and located approximately 6 km west of Houston,
British Columbia, subject to the conditions listed below.
Contravention of any of these conditions is a violation of the
Waste Management Act and may result in prosecution.
1. Authorized DISCHARGES
1.1
This subsection applies to the discharge of air contaminants
from
the WET SCRUBBERS STACK. The site reference number for this
discharge is E224345.
1.1.1
The maximum authorized rate of discharge is 1800 m3/minute. The
discharge may occur for up to 24 hours/day, 350 days/year.
1.1.2
The characteristics of the discharge shall be equivalent to or
better than:
Parameter Maximum Value Unit
Total Particulate 10 mg/m3
NOx 15 mg/m3
Co 20 mg/m3
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 1 of 5 Assistant Regional Waste Manager
PERMIT.. PA-14845
<PAGE>
1.1.3
The works authorized are wet scrubbers, fans, a stack and
related
appurtenances located approximately as shown on the attached
Site
Plan
1.1.4
The authorized works must be complete and in operation when
discharge commences.
1.1.5
The location of the facilities from which the discharge
originates and the location of the point of discharge is
District
Lot 334, Range 5, Coast District.
1.2
This subsection applies to the discharge of air contaminants
from
the RAILCAR LOADER BAGHOUSE. The site reference number for this
discharge is E224444.
1.2.1
The maximum authorized rate of discharge is 283 m3/minute. The
discharge may occur for up to 1 hour/day, 350 days/year.
1.2.2
The characteristics of the discharge shall be equivalent to or
better than:
Parameter Maximum Value Unit
Total Particulate 12 mg/m3
1.2.3
The works authorized are a rail car loader, a baghouse and
related appurtenances located approximately as shown on the
attached Site Plan.
1.2.4
The authorized works must be complete and in operation when
discharge commences.
1.2.5
The location of the facilities from which the discharge
originates and the location of the point of discharge is
District
Lot 334, Range 5, Coast District.
2.
GENERAL REQUIREMENTS
.2.1. Standard Temperature and Pressure
All air and gaseous volumes specified in this Permit are at
standard conditions. These are:
Standard Temperature 293.15K
Standard Pressure 101.325 kPa
Water Vapor zero
2.2. Bypasses
The discharge of air contaminants which has bypassed the
designated treatment works is prohibited unless the approval of
the Regional Waste Manager is obtained and confirmed in writing.
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 2 of 5 Assistant Regional Waste Manager
PERMIT.. PA-14845
<PAGE>
2.3. Maintenance of Works and Emergency Procedures
The Permittee shall inspect the pollution prevention/control
works regularly and maintain them in good working order. In the
event of an emergency or condition beyond the control of the
Permittee which prevents the continued operation of the approved
method of pollution prevention/control, the Permittee shall
immediately notify the Regional Waste Manager and take
appropriate remedial action.
2.4. Process Modifications
The Permittee shall notify the Regional Waste Manager prior to
implementing any changes that may affect the quality and/or
quantity of the discharges.
2.5. Plans - New Works
Plans and specifications of the works authorized in Sub-Sections
1.1.3 and 1.2.3 shall be certified by a qualified professional
licensed to practice in the Province of British Columbia, and
submitted to the Regional Waste Manager. A qualified
professional
must certify that the works have been constructed in accordance
with the plans before discharges commence.
2.6. Environmental Impact
Inspections of the discharges will be carried out by
Environmental Protection Program personnel as a part of the
routine permit inspection procedure. Based on these inspections
and any other information available to the Regional Waste
Manager
on the effect of the discharges on the receiving environment,
the
Permittee may be required to undertake additional monitoring
and/or install additional pollution prevention/control works.
2.7. Fugitive Dust Control
The Permittee shall suppress fugitive dust created within the
operation area. The measured dustfall data will be compared to
the Ministry Objective value of 1.75 mg/dm2.d. If the measured
ambient air quality compares unfavourably to the Objective
value,
the Regional Waste Manager will evaluate the sensitivity of the
receiving environment, the contribution of the Permittee's
dustfall sources to the measured ambient values, plus any other
pertinent information and may, at his discretion, require the
Permittee to implement additional control measures on fugitive
dust sources.
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 3 of 5 Assistant Regional Waste Manager
PERMIT.. PA-14845
<PAGE>
3. MONITORING AND REPORTING REQUIREMENTS
3.1.
Discharge Monitoring
The Permittee shall semi-annually sample the wet scrubber
discharge (Section 1.1.3 of this Permit), to determine the
discharge rate (in m3/min), the particulate matter concentration
(in mg/rn ), the carbon monoxide concentration (in mg/m3) and
the
nitrogen oxides concentration (in mg/m3). Sampling shall be
carried out under representative operating conditions of the
charring plant. Based on sampling results, the Regional Waste
Manager may modify sampling frequency requirement at a later
date.
3.2. Monitoring Procedure
3.2.1. Source Testing Procedures (Particulates)
Source testing procedures for the determination of particulate
matter concentration and the rate of discharge (flow rate) are
to
be carried out in accordance with those procedures described in
the latest version of "British Columbia Field Sampling Manual
for
Continuous Monitoring plus the Collection of Air, Air-Emissions.
Water. Wastewater. Soil. Sediment. and Biological Samples
(Section (G: Stationary Air Emissions Testing). November 1996
Edition (Permittee)". Alternative test methods may be used
provided that the alternative test methods are authorized by the
Regional Waste Manager prior to performing the actual source
testing.
Copies of the above mentioned manual are available from Queen's
Printer Publications Centre, 2nd Floor, 563 Superior Street,
Victoria, BC V8V 4R6 (1-800-663-6105). A copy of the manual is
also available for review at any Environmental Protection office.
3.2.2. Source Testing Procedures (Carbon Monoxide and Nitrogen
Oxides)
Source testing procedures for the determination of carbon
monoxide and nitrogen oxides concentrations are to be carried
out
in accordance with those procedures described in the latest
version of "British Columbia Field Sampling Manual for
Continuous
Monitoring plus the Collection of Air Air-Emissions Water
Wastewater, Soil. Sediment. and Biological Samples (Section G:
Stationary Air Emissions Testing). November 1996 Edition
(Permittee)". Alternative test methods may be used provided that
the alternative test methods are authorized by the Regional
Waste
Manager prior to performing the actual source testing.
Copies of the above mentioned manual are available from Queen's
Printer Publications Centre, 2nd Floor, 563 Superior Street.
Victoria. B.C V8V 4R6
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 4 of 5 Assistant Regional Waste Manager
PERMIT.. PA-14845
<PAGE>
PROVINCE OF BRITISH COLUMBIA
Environmental Protection
(1-800-663-6105). A copy of the manual is also available for
review at any environmental Protection office.
3.3. Sampling Location and Techniques
All sampling locations, techniques and equipment require the
consent of the Regional Waste Manager prior to use. Sampling and
monitoring data, which also should include rate of discharge
measurements, shall be accompanied by process data relevant to
the operation of the sources) of the emissions and to the
performance of the pollution abatement equipment involved in the
testing.
3.4. Reporting
Maintain data of analyses and flow measurements for inspection
and submit the data, suitably tabulated in both electronic and
hard copy formats, to the Regional Waste Manager within 30 days
of sampling
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 5 of 5 Assistant Regional Waste Manager
PERMIT.. PA-14845
<PAGE>
Map showing site
<PAGE>
[Crest Symbol]
BRITISH
COLUMBIA
JAN 31, 1997
REGISTERED MAIL
Riverside Carbon Products, Inc.
A Division of Southern Ventures, Inc.
2727 Phillips Road
Sooke, BC VOS 1N0
Dear Permittee: File: PA-14846
Enclosed is Permit PA-14846 issued under the provisions of the
Waste Management. Act. Your attention is respectfully directed
to
the terms and conditions outlined in the Permit. An annual
permit
fee will be determined according to the Waste Management Permit
Fees Regulation.
This Permit does not authorize entry upon, crossing over, or use
for any purpose of private or Crown lands or works, unless and
except as authorized by the owner of such lands or works. The
responsibility for obtaining such authority shall rest with the
Permittee. This Permit is issued pursuant to the provisions of
the Waste Management Act to ensure compliance with Section 34(3)
of that statute, which makes it an offense to discharge waste
without proper authorization. It is also the responsibility of
the Permittee to ensure that all activities conducted under this
authorization are carried out with regard to the rights of third
parties, and comply with other applicable legislation that may
be
in force.
This Permit may be appealed by persons who consider themselves
aggrieved by this decision in accordance with Part 5 of the
Waste
Management ACT. Written notice of intent to appeal must he
received by the Regional Waste Manager within twenty-one (21)
days of the date of this letter.
Administration of this Permit will be carried out by staff from
our Regional Office located at 3726 Alfred Avenue, Smithers, B.
C.. Plans, data and reports pertinent to the Permit are to be
submitted to the Regional Waste Manager at Box 5000, Smithers,
B.C. V0J 2N0.
Yours truly,
"F. Rhebergen"
F. Rhebergen, P. Eng.
Assistant Regional Waste Manager
Skeena Region
enclosure
Ministry of BC Environment
Environment, Skeena Region
Lands and Parks
Mailing/Location Address: Telephone:(250) 847-7260
Box 5000 Facsimile: (250) 847-7591
3726 Alfred Avenue
Smithers BC V0J 2N0
<PAGE>
[crest symbol]
PROVINCE OF BRITISH COLUMBIA
Environmental Protection
Box 5000
Smithers
British Columbia V0J 2N0
Telephone: (250)847-7260
Fax: (250) 847-7591
MINISTRY OF ENVIRONMENT,
LANDS AND PARKS
PERMIT
PA-14846
Under the Provisions of the Waste Management Act
Riverside Carbon Products, Inc.
A Division of Southern Ventures, Inc.
2727 Phillips Road
Sooke, British Columbia VOS 1N0
is authorized to discharge air contaminants to the air from a
charring plant processing up to 210,000 bone-dry tonnes/year of
wood residue and located near Carnaby Crossing, approximately 16
km southwest of New Hazelton, British Columbia, subject to the
conditions listed below. Contravention of any of these
conditions
is a violation of the Waste Management Act and may result in
prosecution.
1. Authorized DISCHARGES
1.1
This subsection applies to the discharge of air contaminants
from
the WET SCRUBBERS STACK. The site reference number for this
discharge is E224784.
1.1.1
The maximum authorized rate of discharge is 1800 m3/minute. The
discharge may occur for up to 24 hours/day, 350 days/year.
1.1.2
The characteristics of the discharge shall be equivalent to or
better than:
Parameter Maximum Value Unit
Total Particulate 10 mg/m3
NOx 15 mg/m3
Co 20 mg/m3
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 1 of 5 Assistant Regional Waste Manager
PERMIT.. PA-14846
<PAGE>
1.1.3
The works authorized are wet scrubbers, fans, a stack and
related
appurtenances located approximately as shown on the attached
Site
Plan
1.1.4
The authorized works must be complete and in operation when
discharge commences.
1.1.5
The location of the facilities from which the discharge
originates and the location of the point of discharge is Lot 1,
District Lots 735, 736, 811 and 815, Plan 11686,Cassiar Land
District.
1.2
This subsection applies to the discharge of air contaminants
from
the RAILCAR LOADER BAGHOUSE. The site reference number for this
discharge is E224785.
1.2.1
The maximum authorized rate of discharge is 283 m3/minute. The
discharge may occur for up to 1 hour/day, 350 days/year.
1.2.2
The characteristics of the discharge shall be equivalent to or
better than:
Parameter Maximum Value Unit
Total Particulate 12 mg/m3
1.2.3
The works authorized are a rail car loader, a baghouse and
related appurtenances located approximately as shown on the
attached Site Plan.
1.2.4
The authorized works must be complete and in operation when
discharge commences.
1.2.5
The location of the facilities from which the discharge
originates and the location of the point of discharge is Lot 1,
District Lots 735, 736, 811 and 815, Plan 11686,Cassiar Land
District.
2. GENERAL REQUIREMENTS
.2.1. Standard Temperature and Pressure
All air and gaseous volumes specified in this Permit are at
standard conditions. These are:
Standard Temperature 293.15K
Standard Pressure 101.325 kPa
Water Vapor zero
2.2. Bypasses
The discharge of air contaminants which has bypassed the
designated treatment works is prohibited unless the approval of
the Regional Waste Manager is obtained and confirmed in writing.
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 2 of 5 Assistant Regional Waste Manager
PERMIT.. PA-14846
<PAGE>
2.3. Maintenance of Works and Emergency Procedures
The Permittee shall inspect the pollution prevention/control
works regularly and maintain them in good working order. In the
event of an emergency or condition beyond the control of the
Permittee which prevents the continued operation of the approved
method of pollution prevention/control, the Permittee shall
immediately notify the Regional Waste Manager and take
appropriate remedial action.
2.4. Process Modifications
The Permittee shall notify the Regional Waste Manager prior to
implementing any changes that may affect the quality and/or
quantity of the discharges.
2.5. Plans - New Works
Plans and specifications of the works authorized in Sub-Sections
1.1.3 and 1.2.3 shall be certified by a qualified professional
licensed to practice in the Province of British Columbia, and
submitted to the Regional Waste Manager. A qualified
professional
must certify that the works have been constructed in accordance
with the plans before discharges commence.
2.6. Environmental Impact
Inspections of the discharges will be carried out by
Environmental Protection Program personnel as a part of the
routine permit inspection procedure. Based on these inspections
and any other information available to the Regional Waste
Manager
on the effect of the discharges on the receiving environment,
the
Permittee may be required to undertake additional monitoring
and/or install additional pollution prevention/control works.
2.7. Fugitive Dust Control
The Permittee shall suppress fugitive dust created within the
operation area. The measured dustfall data will be compared to
the Ministry Objective value of 1.75 mg/dm2.d. If the measured
ambient air quality compares unfavourably to the Objective
value,
the Regional Waste Manager will evaluate the sensitivity of the
receiving environment, the contribution of the Permittee's
dustfall sources to the measured ambient values, plus any other
pertinent information and may, at his discretion, require the
Permittee to implement additional control measures on fugitive
dust sources.
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 3 of 5 Assistant Regional Waste Manager
PERMIT.. PA-14846
<PAGE>
3. MONITORING AND REPORTING REQUIREMENTS
3.1. Discharge Monitoring
The Permittee shall semi-annually sample the wet scrubber
discharge (Section 1.1.3 of this Permit), to determine the
discharge rate (in m3/min), the particulate matter concentration
(in mg/rn ), the carbon monoxide concentration (in mg/m3) and
the
nitrogen oxides concentration (in mg/m3). Sampling shall be
carried out under representative operating conditions of the
charring plant. Based on sampling results, the Regional Waste
Manager may modify sampling frequency requirement at a later
date.
3.2. Monitoring Procedure
3.2.1. Source Testing Procedures (Particulates)
Source testing procedures for the determination of particulate
matter concentration and the rate of discharge (flow rate) are
to
be carried out in accordance with those procedures described in
the latest version of "British Columbia Field Sampling Manual
for
Continuous Monitoring plus the Collection of Air, Air-Emissions.
Water. Wastewater. Soil. Sediment. and Biological Samples
(Section (G: Stationary Air Emissions Testing). November 1996
Edition (Permittee)". Alternative test methods may be used
provided that the alternative test methods are authorized by the
Regional Waste Manager prior to performing the actual source
testing.
Copies of the above mentioned manual are available from Queen's
Printer Publications Centre, 2nd Floor, 563 Superior Street,
Victoria, BC V8V 4R6 (1-800-663-6105). A copy of the manual is
also available for review at any Environmental Protection office.
3.2.2. Source Testing Procedures (Carbon Monoxide and Nitrogen
Oxides)
Source testing procedures for the determination of carbon
monoxide and nitrogen oxides concentrations are to be carried
out
in accordance with those procedures described in the latest
version of "British Columbia Field Sampling Manual for
Continuous
Monitoring plus the Collection of Air Air-Emissions Water
Wastewater, Soil. Sediment. and Biological Samples (Section G:
Stationary Air Emissions Testing). November 1996 Edition
(Permittee)". Alternative test methods may be used provided that
the alternative test methods are authorized by the Regional
Waste
Manager prior to performing the actual source testing.
Copies of the above mentioned manual are available from Queen's
Printer Publications Centre, 2nd Floor, 563 Superior Street.
Victoria. B.C V8V 4R6
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 4 of 5 Assistant Regional Waste Manager
PERMIT.. PA-14846
<PAGE>
PROVINCE OF BRITISH COLUMBIA
Environmental Protection
(1-800-663-6105). A copy of the manual is also available
for review at any environmental Protection office.
3.3. Sampling Location and Techniques
All sampling locations, techniques and equipment require the
consent of the Regional Waste Manager prior to use. Sampling and
monitoring data, which also should include rate of discharge
measurements, shall be accompanied by process data relevant to
the operation of the sources) of the emissions and to the
performance of the pollution abatement equipment involved in the
testing.
3.4. Reporting
Maintain data of analyses and flow measurements for inspection
and submit the data, suitably tabulated in both electronic and
hard copy formats, to the Regional Waste Manager within 30 days
of sampling
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 5 of 5 Assistant Regional Waste Manager
PERMIT.. PA-14846
<PAGE>
Map showing site
<PAGE>
[Crest Symbol]
BRITISH
COLUMBIA
JAN 29, 1997
REGISTERED MAIL
Riverside Carbon Products, Inc.
A Division of Southern Ventures, Inc.
2727 Phillips Road
Sooke, BC VOS 1N0
Dear Permittee: File: PE-14859
Enclosed is Permit PE-14859 issued under the provisions of the
Waste Management. Act. Your attention is respectfully directed
to
the terms and conditions outlined in the Permit. An annual
permit
fee will be determined according to the Waste Management Permit
Fees Regulation.
This Permit does not authorize entry upon, crossing over, or use
for any purpose of private or Crown lands or works, unless and
except as authorized by the owner of such lands or works. The
responsibility for obtaining such authority shall rest with the
Permittee. This Permit is issued pursuant to the provisions of
the Waste Management Act to ensure compliance with Section 34(3)
of that statute, which makes it an offense to discharge waste
without proper authorization. It is also the responsibility of
the Permittee to ensure that all activities conducted under this
authorization are carried out with regard to the rights of third
parties, and comply with other applicable legislation that may
be
in force.
This Permit may be appealed by persons who consider themselves
aggrieved by this decision in accordance with Part 5 of the
Waste
Management ACT. Written notice of intent to appeal must he
received by the Regional Waste Manager within twenty-one (21)
days of the date of this letter.
Administration of this Permit will be carried out by staff from
our Regional Office located at 3726 Alfred Avenue, Smithers, B.
C.. Plans, data and reports pertinent to the Permit are to be
submitted to the Regional Waste Manager at Box 5000, Smithers,
B.C. V0J 2N0.
Yours truly,
"F. Rhebergen"
F. Rhebergen, P. Eng.
Assistant Regional Waste Manager
Skeena Region
enclosure
Ministry of BC Environment
Environment, Skeena Region
Lands and Parks
Mailing/Location Address: Telephone: (250) 847-7260
Box 5000 Facsimile: (250) 847-7591
3726 Alfred Avenue
Smithers BC V0J 2N0
<PAGE>
[crest symbol]
PROVINCE OF BRITISH COLUMBIA
Environmental Protection
Box 5000
Smithers
British Columbia V0J 2N0
Telephone: (250)847-7260
Fax: (250) 847-7591
MINISTRY OF ENVIRONMENT,
LANDS AND PARKS
PERMIT
PE-14859
Under the Provisions of the Waste Management Act
Riverside Carbon Products, Inc.
A Division of Southern Ventures, Inc.
2727 Phillips Road
Sooke, British Columbia VOS 1N0
is authorized to discharge air contaminants to the air from a
charring plant processing up to 210,000 bone-dry tonnes/year of
wood residue and located near Carnaby Crossing, approximately 16
km southwest of New Hazelton, British Columbia, subject to the
conditions listed below. Contravention of any of these
conditions
is a violation of the Waste Management Act and may result in
prosecution.
1. Authorized DISCHARGES
1.1
This subsection applies to the discharge of effluent from a FLOW
EQUALIZATION BASIN. The site reference number for this discharge
is E224786.
1.1.1
The maximum authorized rate of discharge is 700 m3/day. The
discharge may occur for up to 24 hours/day, 350 days/year.
1.1.2
The characteristics of the discharge shall be equivalent to or
better than:
Parameter Maximum Value Unit
BOD5 10 mg/L
TSS 15 mg/mL
pH 6.5 - 8.5
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 1 of 6 Assistant Regional Waste Manager
PERMIT.. PE-14859
<PAGE>
1.1.3
The works authorized are wet scrubbers, 2 pressurized fabric
filters, 2 activated charcoal filters, 2 zeolite filters, aa
sediment basin, a flow equalization basin, a spill contingency
pond, 2 ground disposal fields and related appurtenances located
approximately as shown on the attached Site Plan
1.1.4
The authorized works must be complete and in operation when
discharge commences.
1.1.5
The location of the facilities from which the discharge
originates and the location of the point of discharge is Lot 1,
District Lots 735, 736, 811 and 815, Plan 11686, Cassiar Land
District.
2. GENERAL REQUIREMENTS
2.1. Bypasses
The discharge of effluent which has bypassed the designated
treatment works is prohibited unless the approval of the
Regional
Waste Manager is obtained and confirmed in writing.
2.2 Maintenance of Works and Emergency Procedures
The PERMITTEE shall inspect the pollution prevention/control
works regularly and maintain them in good working order. In the
event of an emergency or condition beyond the control of the
Permittee which prevents the continued operation of the approved
method of pollution prevention/control, the Permittee shall
immediately notify the Regional Waste Manager and take
appropriate remedial action.
2.3 Process Modifications
The Permittee shall notify the Regional Waste Manager prior to
implementing any changes that may affect the quality and/or
quantity of the discharge.
2.4 Plans - New Works
Plans and specifications of the works authorized in Sub-S
section
1.1.3 shall be certified by a qualified professional licensed to
practice in the Province of British Columbia, and submitted to
the Regional Waste Manager. A qualified professional must
certify
that the works have been constructed in accordance with the
plans
before discharge commences.
2.5 Sedimentation Basin
a) The Permittee shall maintain a minimum freeboard of
0.5 m and ensure that there is no surface overflow
from the sedimentation basin to the environment.
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 2 of 6 Assistant Regional Waste Manager
PERMIT.. PE-14859
<PAGE>
b) Surface runoff drainage shall be diverted away from the
sedimentation basin.
c) The residue removed from the sedimentation basin shall be
disposed of in a manner approved by the Regional Waste
Manager.
2.6. Operation of The flow Equalization Basin
a) The Permittee shall maintain a minimum freeboard of 0.5 m and
ensure that there is no surface overflow from the flow
equalization basin to the environment.
b) The depth of water in the flow equalization basin shall be
maintained at a minimum of 0.5 metre above the accumulated
sediment.
c) Surface runoff drainage shall be diverted away from the flow
equalization basin.
d) The Permittee shall recycle treated effluent from the flow
equalization basin to the plant to the maximum extent
practicable.
e) The residue shall be removed from the flow equalization basin
at a frequency and disposed of in a manner acceptable to the
Regional Waste Manager.
2.7. Environmental Impact
Inspections of the discharge will be carried Out by
Environmental
Protection Program personnel as a part of the routine permit
inspection procedure. Based on these inspections and any other
information available to the Regional Waste Manager on the
effect
of the discharge on the receiving environment, the Permittee may
he required to undertake additional monitoring and/or install
additional pollution prevention/control works.
2.8. Spill Management and Reporting
The Permittee shall operate the charring plant so as to avoid
spillage of all process materials, including but not limited to
wood residue leachate, process condensate or fuel oils. Spillage
shall be collected in the spill contingency pond for recycling
or
treatment. All spills to the environment (as defined in the
Spill
Reporting Regulation) shall be reported immediately in
accordance
with the Spill Reporting Regulation. Notification shall be via
the Provincial Emergency Program at 1-800-663-3456.
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 3 of 6 Assistant Regional Waste Manager
PERMIT.. PE-14859
<PAGE>
3. MONITORING AND REPORTING REQUIREMENTS
The Permittee shall carry out the following monitoring programme
as outlined in Sub-Sections 3.1 through 3.5 below.
3.1. Discharge Monitoring
**SAMPLING LOCATION**
Effluent discharged to the ground disposal fields from the flow
equalization basin.
**SAMPLING PARAMETERS**
Specific conductance, pH (a), **SAMPLE WEEKLY**
BOD5, TSS, Microtox EC50, **SAMPLE MONTHLY (b)**
phenols, resin & fatty acids, total organic carbons (TOC,
filtered), polycyclic aromatic hydrocarbons (PAH), total
extractable hydrocarbons (TEH), **SAMPLE ANNUALLY (c)**
flow measurement (d)
NOTES:
(a) FIELD parameters: pH, specific conductance
(b) At the time of monthly sampling, the Permittee shall also
obtain pH and specific conductance of the sampled effluent
discharge.
(c) Annual samples shall be taken two weeks after the
commencement of fall rains, or in the month of October,
whichever
comes first.
(d) Refer to Sub-Section 3.3 below.
3.2. Analytical Procedures
3.2.1. Analyses of Chemical Parameters
Analyses of the Chemical parameters are to be carried out in
accordance with procedures described in the latest version of
"British Columbia Environmental Laboratory Manual for the
Analysis of Water Wastewater, Sediment and Biological
Materials. (March 1994 Permittee Edition)", or by suitable
alternative procedures as authorized by the Regional Waste
Manager.
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 4 of 6 Assistant Regional Waste Manager
PERMIT.. PE-14859
<PAGE>
A copy of the above manual may he purchased from Queen's Printer
Publications Centre, 2nd Floor, 563 Superior Street, Victoria,
British Columbia, V8V 4R6 (1-800-663-6105). A copy of the manual
is also available for inspection at all Environmental Protection
offices.
3.2.2. Microtox EC50 Analyses
Analyses for determining the toxicity of liquid effluent using
Microtox EC50 test shall he carried out in accordance with the
procedures described in the "Biological Test Method; Toxicity
Test Using Luminescent Bacteria (Photobacterium Dilosphoreum)",
Environment Canada, Report EPS 1/RM/24, November 1992.
Copies of the above mentioned manual are available from
Environmental Protection Publications, Conservation and
Protection, Environment Canada, Ottawa, Ontario, KiA 0H3, and
are
also available for inspection at all Environmental Protection
offices.
3.3. Flow Measurement
The Permittee shall provide and maintain a suitable flow
measuring device at the outlet of the flow equalization basin,
and record once per day the effluent volume discharged over a
24-hour period. Whenever practicable, flow measurement shall be
carried out within the same period as chemical/toxicity test
samples being taken.
Alternate flow measurement methods may be approved by the
Regional Waste Manager provided that all parameters and
calculations are included in the annual reports.
3.4. Grab Sampling
The Permittee shall obtain a grab sample of the effluent as
outlined in Sub-Section 3.1. Proper care should he taken in
sampling, storing and transporting the samples to adequately
control temperature and avoid contamination, breakage, etc.
Sampling is to be carried out in accordance with procedures
described in British Columbia Field Sampling Manual For
Continuous Monitoring plus the Collection of Air, Air-Emission,
Water Wastewater Sediment, and Biological Samples -November 1996
Edition (Permittee)"
A copy of the above manual may be purchased from Queen's Printer
Publications Centre, 2nd Floor, 563 Superior Street, Victoria,
British Columbia, V8V 4R6 (1-800-663-6105). A copy of the manual
is also available for inspection at all Environmental Protection
offices.
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 5 of 6 Assistant Regional Waste Manager
PERMIT.. PE-14859
<PAGE>
3.5. Reporting
The Permittee shall submit an annual report which includes a
summary of the monitoring programme results, data interpretation
and trend analyses, as well as an evaluation of the impacts of
the discharge on the receiving environment in the previous year.
This report is to be in a format which is suitable for review by
the public or government agencies. Annual reports shall be
submitted to the Regional Waste Manager by February 28 for the
previous calendar year
Date Issued: JAN 29 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 6 of 5 Assistant Regional Waste Manager
PERMIT.. PE-14859
<PAGE>
Map showing site
<PAGE>
[Crest Symbol]
BRITISH
COLUMBIA
JAN 31, 1997
REGISTERED MAIL
Riverside Carbon Products, Inc.
A Division of Southern Ventures, Inc.
2727 Phillips Road
Sooke, BC VOS 1N0
Dear Permittee: File: PE-14860
Enclosed is Permit PE-14860 issued under the provisions of the
Waste Management. Act. Your attention is respectfully directed
to
the terms and conditions outlined in the Permit. An annual
permit
fee will be determined according to the Waste Management Permit
Fees Regulation.
This Permit does not authorize entry upon, crossing over, or use
for any purpose of private or Crown lands or works, unless and
except as authorized by the owner of such lands or works. The
responsibility for obtaining such authority shall rest with the
Permittee. This Permit is issued pursuant to the provisions of
the Waste Management Act to ensure compliance with Section 34(3)
of that statute, which makes it an offense to discharge waste
without proper authorization. It is also the responsibility of
the Permittee to ensure that all activities conducted under this
authorization are carried out with regard to the rights of third
parties, and comply with other applicable legislation that may
be
in force.
This Permit may be appealed by persons who consider themselves
aggrieved by this decision in accordance with Part 5 of the
Waste
Management ACT. Written notice of intent to appeal must he
received by the Regional Waste Manager within twenty-one (21)
days of the date of this letter.
Administration of this Permit will be carried out by staff from
our Regional Office located at 3726 Alfred Avenue, Smithers, B.
C.. Plans, data and reports pertinent to the Permit are to be
submitted to the Regional Waste Manager at Box 5000, Smithers,
B.C. V0J 2N0.
Yours truly,
"F. Rhebergen"
F. Rhebergen, P. Eng.
Assistant Regional Waste Manager
Skeena Region
enclosure
Ministry of BC Environment
Environment, Skeena Region
Lands and Parks
Mailing/Location Address: Telephone: (250) 847-7260
Box 5000 Facsimile: (250) 847-7591
3726 Alfred Avenue
Smithers BC V0J 2N0
<PAGE>
[crest symbol]
PROVINCE OF BRITISH COLUMBIA
Environmental Protection
Box 5000
Smithers
British Columbia V0J 2N0
Telephone: (250)847-7260
Fax: (250) 847-7591
MINISTRY OF ENVIRONMENT,
LANDS AND PARKS
PERMIT
PE-14860
Under the Provisions of the Waste Management Act
Riverside Carbon Products, Inc.
A Division of Southern Ventures, Inc.
2727 Phillips Road
Sooke, British Columbia VOS 1N0
is authorized to discharge air contaminants to the air from a
charring plant processing up to 210,000 bone-dry tonnes/year of
wood residue and located near Carnaby Crossing, approximately 16
km southwest of New Hazelton, British Columbia, subject to the
conditions listed below. Contravention of any of these
conditions
is a violation of the Waste Management Act and may result in
prosecution.
1. Authorized DISCHARGES
1.1
This subsection applies to the discharge of effluent from a FLOW
EQUALIZATION BASIN. The site reference number for this discharge
is E224786.
1.1.1
The maximum authorized rate of discharge is 700 m3/day. The
discharge may occur for up to 24 hours/day, 350 days/year.
1.1.2
The characteristics of the discharge shall be equivalent to or
better than:
Parameter Maximum Value Unit
BOD5 10 mg/L
TSS 15 mg/mL
pH 6.5 - 8.5
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 1 of 6 Assistant Regional Waste Manager
PERMIT.. PE-14860
<PAGE>
1.1.3
The works authorized are wet scrubbers, 2 pressurized fabric
filters, 2 activated charcoal filters, 2 zeolite filters, aa
sediment basin, a flow equalization basin, a spill contingency
pond, 2 ground disposal fields and related appurtenances located
approximately as shown on the attached Site Plan
1.1.4
The authorized works must be complete and in operation when
discharge commences.
1.1.5
The location of the facilities from which the discharge
originates and the location of the point of discharge is Lot 1,
District Lots 735, 736, 811 and 815, Plan 11686, Cassiar Land
District.
2. GENERAL REQUIREMENTS
2.1. Bypasses
The discharge of effluent which has bypassed the designated
treatment works is prohibited unless the approval of the
Regional
Waste Manager is obtained and confirmed in writing.
2.2 Maintenance of Works and Emergency Procedures
The PERMITTEE shall inspect the pollution prevention/control
works regularly and maintain them in good working order. In the
event of an emergency or condition beyond the control of the
Permittee which prevents the continued operation of the approved
method of pollution prevention/control, the Permittee shall
immediately notify the Regional Waste Manager and take
appropriate remedial action.
2.3 Process Modifications
The Permittee shall notify the Regional Waste Manager prior to
implementing any changes that may affect the quality and/or
quantity of the discharge.
2.4 Plans - New Works
Plans and specifications of the works authorized in Sub-S
section
1.1.3 shall be certified by a qualified professional licensed to
practice in the Province of British Columbia, and submitted to
the Regional Waste Manager. A qualified professional must
certify
that the works have been constructed in accordance with the
plans
before discharge commences.
2.5 Sedimentation Basin
a) The Permittee shall maintain a minimum freeboard of 0.5 m
and ensure that there is no surface overflow from the
sedimentation basin to the environment.
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 2 of 6 Assistant Regional Waste Manager
PERMIT.. PE-14860
PAGE
<PAGE>
b) Surface runoff drainage shall be diverted away from the
sedimentation basin.
c) The residue removed from the sedimentation basin shall be
disposed of in a manner approved by the Regional Waste
Manager.
2.6. Operation of The flow Equalization Basin
a) The Permittee shall maintain a minimum freeboard of 0.5 m and
ensure that there is no surface overflow from the flow
equalization basin to the environment.
b) The depth of water in the flow equalization basin shall be
maintained at a minimum of 0.5 metre above the accumulated
sediment.
c) Surface runoff drainage shall be diverted away from the flow
equalization basin.
d) The Permittee shall recycle treated effluent from the flow
equalization basin to the plant to the maximum extent
practicable.
e) The residue shall be removed from the flow equalization basin
at a frequency and disposed of in a manner acceptable to the
Regional Waste Manager.
2.7. Environmental Impact
Inspections of the discharge will be carried Out by
Environmental
Protection Program personnel as a part of the routine permit
inspection procedure. Based on these inspections and any other
information available to the Regional Waste Manager on the
effect
of the discharge on the receiving environment, the Permittee may
he required to undertake additional monitoring and/or install
additional pollution prevention/control works.
2.8. Spill Management and Reporting
The Permittee shall operate the charring plant so as to avoid
spillage of all process materials, including but not limited to
wood residue leachate, process condensate or fuel oils. Spillage
shall be collected in the spill contingency pond for recycling
or
treatment. All spills to the environment (as defined in the
Spill
Reporting Regulation) shall be reported immediately in
accordance
with the Spill Reporting Regulation. Notification shall be via
the Provincial Emergency Program at 1-800-663-3456.
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 3 of 6 Assistant Regional Waste Manager
PERMIT.. PE-14860
<PAGE>
3. MONITORING AND REPORTING REQUIREMENTS
The Permittee shall carry out the following monitoring programme
as outlined in Sub-Sections 3.1 through 3.5 below.
3.1. Discharge Monitoring
**SAMPLING LOCATION**
Effluent discharged to the ground disposal fields from the flow
equalization basin.
**SAMPLING PARAMETERS**
Specific conductance, pH (a), **SAMPLE WEEKLY**
BOD5, TSS, Microtox EC50, **SAMPLE MONTHLY (b)**
phenols, resin & fatty acids, total organic carbons (TOC,
filtered), polycyclic aromatic hydrocarbons (PAH), total
extractable hydrocarbons (TEH), **SAMPLE ANNUALLY (c)**
flow measurement (d)
NOTES:
(a) FIELD parameters: pH, specific conductance
(b) At the time of monthly sampling, the Permittee shall also
obtain pH and specific conductance of the sampled effluent
discharge.
(c) Annual samples shall be taken two weeks after the
commencement of fall rains, or in the month of October,
whichever
comes first.
(d) Refer to Sub-Section 3.3 below.
3.2. Analytical Procedures
3.2.1. Analyses of Chemical Parameters
Analyses of the Chemical parameters are to be carried out in
accordance with procedures described in the latest version of
"British Columbia Environmental Laboratory Manual for the
Analysis of Water Wastewater, Sediment and Biological Materials.
(March 1994 Permittee Edition)", or by suitable alternative
procedures as authorized by the Regional Waste Manager.
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 4 of 6 Assistant Regional Waste Manager
PERMIT.. PE-14860
<PAGE>
A copy of the above manual may he purchased from Queen's Printer
Publications Centre, 2nd Floor, 563 Superior Street, Victoria,
British Columbia, V8V 4R6 (1-800-663-6105). A copy of the manual
is also available for inspection at all Environmental Protection
offices.
3.2.2. Microtox EC50 Analyses
Analyses for determining the toxicity of liquid effluent using
Microtox EC50 test shall he carried out in accordance with the
procedures described in the "Biological Test Method; Toxicity
Test Using Luminescent Bacteria (Photobacterium Dilosphoreum)",
Environment Canada, Report EPS 1/RM/24, November 1992.
Copies of the above mentioned manual are available from
Environmental Protection Publications, Conservation and
Protection, Environment Canada, Ottawa, Ontario, KiA 0H3, and
are
also available for inspection at all Environmental Protection
offices.
3.3. Flow Measurement
The Permittee shall provide and maintain a suitable flow
measuring device at the outlet of the flow equalization basin,
and record once per day the effluent volume discharged over a
24-hour period. Whenever practicable, flow measurement shall be
carried out within the same period as chemical/toxicity test
samples being taken.
Alternate flow measurement methods may be approved by the
Regional Waste Manager provided that all parameters and
calculations are included in the annual reports.
3.4. Grab Sampling
The Permittee shall obtain a grab sample of the effluent as
outlined in Sub-Section 3.1. Proper care should he taken in
sampling, storing and transporting the samples to adequately
control temperature and avoid contamination, breakage, etc.
Sampling is to be carried out in accordance with procedures
described in British Columbia Field Sampling Manual For
Continuous Monitoring plus the Collection of Air, Air-Emission,
Water Wastewater Sediment, and Biological Samples -November 1996
Edition (Permittee)"
A copy of the above manual may be purchased from Queen's Printer
Publications Centre, 2nd Floor, 563 Superior Street, Victoria,
British Columbia, V8V 4R6 (1-800-663-6105). A copy of the manual
is also available for inspection at all Environmental Protection
offices.
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 5 of 6 Assistant Regional Waste Manager
PERMIT.. PE-14860
<PAGE>
3.5. Reporting
The Permittee shall submit an annual report which includes a
summary of the monitoring programme results, data interpretation
and trend analyses, as well as an evaluation of the impacts of
the discharge on the receiving environment in the previous year.
This report is to be in a format which is suitable for review by
the public or government agencies. Annual reports shall be
submitted to the Regional Waste Manager by February 28 for the
previous calendar year
Date Issued: JAN 31 1997 [stamp]
Date Amended: "F. Rhebergen"
(most recent) F. Rhebergen, P. Eng.
Page: 6 of 5 Assistant Regional Waste Manager
PERMIT.. PE-14860
<PAGE>
Map showing site
<PAGE>
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
Exhibit II : 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 an 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 upto 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. Agregate 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 an 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 upto 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. Agregate 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 an 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 upto 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. Agregate 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 an 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 upto 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. Agregate 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 an 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 upto 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. Agregate 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 an 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 upto 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. Agregate 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 an 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 upto 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. Agregate 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 an 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 upto 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. Agregate 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)
Michealson and Associates
Attorneys and Councellors at Law
1771 E. Flamingo Road, Ste 212 B
Las Vegas, Nevada 89119
Paul R Michaelson
Denise M. Mitchell, Paralegal
Phone: (702) 731-2333
Fax: (702) 731-2337
VIA: UPS Express Mail
Mr. Bobby Harvey
Southern Ventures, Inc.
15000 Highway 11 North
Cottondale, Alabama 3545~
RE: Opinion Letter
Dear Mr. Harvey:
Please find enclosed the Opinion of counsel Letter.
Should you have any questions, please feel free to give me a call
Best Regards,
"Paul R. Michaelson"
Paul R. Michaelson
PRM/dmm
Enclosure
<PAGE>
Michealson and Associates
Attorneys and Councellors at Law
1771 E. Flamingo Road, Ste 212 B
Las Vegas, Nevada 89119
Paul R Michaelson
Denise M. Mitchell, Paralegal
Phone: (702) 731-2333
Fax: (702) 731-2337
December 22, 1997
Southern Ventures, Inc.
Attn: Bobby Harvey, CEO and President
15000 Highway 11 North
Cottondale, Alabama 35453
RE: Opinion of counsel on Securities Offering for Southern
Ventures, Inc. (SB-2 Registration Statement Under the Securities
Act of 1933)
Dear Mr. Harvey:
I have acted as Special Counsel for Southern Ventures, Inc., a
Nevada corporation ("Company"), in connection with the Company's
proposed issuance and public offering of up to 1,000,000 shares
of common stock. The shares will be offered to the public at an
offering price of $ 5.00 per share to raise an aggregate maximum
offering amount of $ 5,000,000.
In connection with rendering the opinion stated below
("Opinion"), I have examined originals or photocopies of the
following documents:
1. A copy of undated draft of the Offering Prospectus
("Prospectus"), Form SB-2, which you provided me on December 16,
1997 under a certificate of the corporate secretary and which
has
or will be registered with the U.S. Securities and Exchange
Commission on Form SB-2 under the Securities Act of 1933;
2. A copy of the Articles of Incorporation of the Company as
filed with the Nevada Secretary of State's office on February 7,
1997 ("Articles") together with one amendment dated April 10,
1997 under a certificate of the corporate secretary dated
December 16, 1997;
3. A copy of the Bylaws of the Company under certificate of the
corporate secretary dated December 16, 1997;
4. A copy of all resolutions and minutes of the shareholders
and
directors of the Company under certificate of the corporate
secretary dated December 16, 1997;
page two
re: Opinion Letter, Southern Ventures, Inc.
5. A certificate of the corporate secretary and treasurer
regarding the current authorized and issued stock of the Company
dated December 19, 1997;
6. Incumbency and Signature Certificate of the Company dated
December 9 1997
I have assumed that the Articles of Incorporation, Bylaws and
other documents provided herein were duly adopted by the
directors of the Company at a meeting properly noticed or at a
meeting where such notice was waived by all directors entitled
to
receive such notice. I have assumed the authenticity of all
documents submitted to me as originals, the conformity to the
original documents of any documents submitted to me as certified
or photostatic copy, the authenticity of the originals of such
latter documents, the genuineness of all signatures and the
legal
capacity of the natural persons who signed or who will sign the
documents.
I have relied upon the Company's certifications provided herein
as well as representations and assurances of future conduct set
forth in the Prospectus. I assume, therefore, that the factual
description contained in the Prospectus is a fair and complete
statement of material facts of the public offering of the
Southern Ventures, Inc. and I have relied on the factual
description contained therein as the basis for the Opinion
contained herein. I assume that the Prospectus will be properly
executed and filed with the Securities and Exchange Commission
as
well as any State Securities Commission, where required.
I have further. assumed that the above-mentioned documents have
not been, and will not be, rescinded, modified or amended in any
manner. I assume that the above-listed documents are the only
documents material to the subject matter covered by the
documents
listed above which relate to the issuance and public offering of
Southern Ventures, Inc. and which are material to the Opinion
expressed herein. I have not undertaken any independent
investigation or verification of the matters set forth in any of
the above-mentioned documents, but have relied solely upon such
representations for the purpose of this Opinion. I have also
relied, without investigation, on factual representations made
by
Officers, Directors and other personnel of the Company
Although I have been provided for my information and inspection
with a copy of the Prospectus, I have not been asked, nor have I
endeavored, to review or comment upon the Prospectus. I assume
that the Prospectus complies with the requirements of federal
and
state securities laws.
I am admitted to the Bar in the State of Nevada, and in
rendering
this Opinion hereinafter stated, I have relied on the applicable
laws of the State of Nevada as those laws presently exist and as
they have been applied and interpreted by courts having
jurisdiction within the State of Nevada. I express no opinion as
to the laws of any other jurisdiction or of the United States of
America.
page three
re: Opinion Letter, Southern Ventures, Inc.
Based upon the foregoing and to the extent indicated above, I am
of the opinion that the sale of the 1,000,000 shares of common
stock has been duly authorized and the common stock, when
issued,
sold and paid for as described in the Prospectus, will be
legally
and validly issued, fully paid and nonassessable
This Opinion is effective as of the date hereof. No extension of
my Opinion may be made by implication or otherwise. I express no
opinion other than as herein expressly set forth. This opinion
letter is provided for the sole purpose of presentation to the
Securities and Exchange Commission with the Company's Form SB-2
Registration Statement and is not to be otherwise quoted in
whole
or in part without the express written consent of this firm.
Yours truly,
"Paul R. Michaelson"
Paul R. Michaelson
Attorney at Law
STATE OF ALABAMA )
) SAND AND GRAVEL LEASE
ELMORE COUNTY )
This AGREEMENT is made and entered into on this 7-24-1996,
between HARPER LUMBER L.L.C. (hereinafter referred to as
"Harper") and ELMORE SAND & GRAVEL CO., (hereinafter referred
to
as "Elmore Sand")
WITNESSETH:
Harper, for and in consideration of the sum of Ten and 00/100
Dollars and other valuable consideration to Harper in hand paid
by Elmore Sand, the receipt of which is hereby acknowledged, and
in further consideration of the payments to be made hereunder
and
the agreements hereinafter contained, Harper hereby leases,
grants 1 bargains, sells and conveys to Elmore Sand all of the
sand and gravel, collectively referred to herein as "SAID
MATERIALS" in, on, upon and under the following described real
estate in Elmore County, Alabama, to-wit:
All that parcel of land in the Northeast Corner of the Northeast
1/4 of the Northwest 1/4 of Section 11, Township 18, Range 17
containing approximately 20 acres.
This lease 15 for the term beginning 7/24/1996 and ending
7/24/2000 and upon the following conditions and terms:
1. Elmore Sand has the right to enter upon said lands during
said period of time, to pass and repass over the same at will,
on
foot, by trucks, automobiles, machines and by draglines,
dredges,
or pipelines for the purpose of prospecting for said materials,
digging, mining, processing, storing, conveying, removing and
shipping the said materials from the said land.
2. Elmore Sand shall have the right to use said land and the
water on and thereunder for prospecting, developing, working,
hauling, digging, washing, mining, processing, removing and
shipping the said materials or any of them; to construct and use
washing and processing facilities; to dispose of and place on
said land all water, mud, debris and residue resulting from the
washing process; and to construct, maintain and use such roads
as
may be necessary or convenient in connection with Elmore Sand's
operations on said land; and
3. Elmore Sand shall have the right to construct and maintain
on said land such roadways power lines, pipelines and equipment
and such buildings and structures as may be necessary or
convenient for use as offices, storage of supplies and for
housing machinery 3 equipment arid facilities used in the
operations carried on hereunder.
4. The parties shall mutually define and locate the tract upon
which said mining activities shall be conducted, which lies
within the above-described process. Elmore Sand shall be
responsible for the maintenance of the right-of-way road for
ingress and egress.
5. In addition to the herein granted rights to mine sand and
gravel from the premises, Elmore Sand shall have the right to
stockpile and process sand and gravel on these premises mined by
it on the lands of third parties.
6. Elmore Sand shall begin mining operations as soon as
practical. At the end of said term, all of Elmore Sand's rights
shall expire except as herein otherwise stated.
7. After Elmore Sand begins mining operations, Elmore Sand
agrees to keep accurate records of all materials shipped from
said land, and Elmore Sand shall pay Harper royalties at the
rate
of twenty cents ($.20) a ton for all sand, and twenty-five cents
($.25) a ton for all gravel mined on the premises which is
shipped from the premises and five cents ($.05) a ton for any
material mined elsewhere, which is processed and shipped from
the
premises. Elmore Sand shall give monthly written accounting to
Harper for all materials shipped from said lands. These monthly
accounting payments are to be made to Harper on or before the
15th day of the following month. The process of accounting and
payment by the 15th of each and every month thereafter will
continue for the remainder of the lease term. Elmore Sand shall
pay Harper Five hundred and No/l00 Dollars ($500.00) a month in
prepaid royalties for any months in which no materials are
shipped from the premises. These prepaid royalties shall cease
once the materials to be mined on the premises are exhausted.
All
prepaid royalties shall be credited on the sums due Harper from
Elmore Sand for materials shipped from the premises.
8. Payment under this agreement shall be made to:
Harper Lumber L.L.C.
Box 748
Wetumpka, Al 36092
unless Harper shall notify Elmore Sand in writing of the name
and
address of any other person or persons to whom remittance should
be made under this agreement.
10. If default be made in the payment of royalties resulting
from
the shipping of materials from said land, Harper shall give
Elmore Sand written notice of such default and if such default
is
not remedied within ten (10) days from the receipt of such
notice
by Elmore Sand, Harper shall have the right, at its option, to
terminate this agreement If default is made, I, Bobby Harvey, do
contract, together with my heirs and assigns, to pay the amount
of the default to Harper, together with any necessary costs of
collection. Harper hereby represents and warrants to Elmore Sand
that it owns the above described land in fee simple, it warrants
and agrees to defend the title to the same and agrees to
indemnify Elmore Sand against any and all claims now existing or
which may be made as to the said minerals or any of them.
12. Elmore Sand shall have the right at any time during the
term of this agreement and for two (2) years after the
expiration
or termination of said agreement to remove all of its properties
and facilities from the said land.
13. Elmore Sand, in its mining operations, shall comply with
all existing laws and regulations, including those laws and
regulations governing reclamation of lands. Elmore Sand's
reclamation obligation shall include its hereby-agreed
obligation
not to leave any stockpile sand and gravel on the premises. At
the termination of Elmore Sand's mining activities or at the
expiration of the lease or extended term thereof, whichever
should first occur, Elmore Sand shall thereupon reclaim said
land
in accordance with applicable laws and regulations governing the
reclamation of land Said reclamation shall be completed within
two (2) years after Elmore Sand ceases its activities on said
land or within six (6) months after said lease expires,
whichever
shall first occur.
14. Any notice, which may be required or permitted under this
agreement, shall be sufficient if sent by mail postage prepaid,
to the parties at the following address:
Harper: Harper Lumber L.L.C.
PO Box 748 Wetumpka, AL 36092
Elmore Sand: Elmore Sand & Gravel Co., Inc.
P.O. Box 558
Elmore Alabama 36025
15. This agreement shall be binding upon the parties hereto,
their respective successors, assigns, heirs, executors, and
administrators.
IN WITNESS whereof, we, Harper Lumber L.L.C. and Elmore Sand &
Gravel Co., Inc. have caused this instrument to be signed in
duplicate in its names and behalf on the date first herein above
written.
HARPER LUMBER L.L.C.
BY: " Larry C. McGinn "
Larry C. McGinn
A member of said Limited Liability
Company
ELMORE SAND & GRAVEL CO., INC.
BY: "Bobby H. Harvey"
Bobby H. Harvey
Its President
STATE OF ALABAMA
ELMORE COUNTY
I, Janice Tanner a Notary Public in and for said State at large,
do hereby certify that LARRY C. MCGINN, whose name as a member
of
said limited liability company of Harper Lumber L.L.C., a
limited
liability company, is signed to the foregoing Sand and Gravel
lease, and who is known to me, acknowledged before me on this
day
that, being informed of the contents of the lease, he, as such
member and with full authority, executed the same voluntarily,
on
the day the sane bears date.
Given under my hand and seal this 24 day of July 1996.
"Janice Tanner"
Notary Public
MY COMMISSION EXPIRES
JANUARY 03, 1999
STATE OF ALABAMA
MACON COUNTY
I, Janice Tanner, a Notary Public in and for said State at large
do hereby certify that BOBBY H. HARVEY, whose name as President
of ELMORE SAND & GRAVEL CO INC., a corporation, is signed to the
foregoing Sand and Gravel Lease and who is known to me,
acknowledged before me on this day that being informed of the
contents of the lease, he, as such officer, and with full
authority, executed the same voluntarily, on the day the same
bears date.
Given under my hand and seal
this 24th day of July 1996.
" Janice Tanner"
Notary Public
MY COMMISSION EXPIRES
JANUARY 03, 1999
- ----------------------------------------------------------------
STATE OF ALABAMA )
) SAND AND GRAVEL LEASE
ELMORE COUNTY )
THIS AGREEMENT is made and entered into on this February 17,
1995, between EDSEL H. OWSLEY, CHARLES M. OWSLEY, CHARLOTTE
BARNES, AND MARGARET O. TILL (hereinafter referred to as
"Owsley") and ELMORE SAND & GRAVEL CO. INC. (hereinafter
referred
to as "Elmore Sand".
WITNESSETH:
Owsley, for and in consideration of the sum of Ten and 00/100
Dollars and other valuable consideration to Owsley in hand paid
by Elmore Sand, the receipt of which is hereby acknowledged, and
in further consideration of the payments to be made hereunder
and
the agreements hereinafter contained, Owsley hereby leases,
grants, bargains, sells and conveys to Elmore Sand all of the
sand and gravel, collectively referred to herein as "SAID
MATERIALS" in, on, upon and under the following described real
estate in Elmore County, Alabama, to-wit.
A parcel of land containing 26 acres, more or less, being in the
Northeast quarter of the Northwest quarter of Section 13,
Township 18 North, Range 17 East; then a parcel of land
containing 10 acres, more or less, being in the Southeast
quarter
of Southwest quarter of Southwest quarter of Section 12,
Township
18 North, Range 17 East: then a parcel of land containing 11
acres, more or less, being in the South half of the Southwest
quarter of Section 121 Township 18 North, Range 17 East Elmore
County, Alabama.
This lease is for the term beginning February 20, 1995 and
ending
January 1, 1998 and upon the following conditions and terms:
1. Elmore Sand has the right to enter upon said lands during
said period of time, to pass and repass over the same at will,
on
foot, by trucks, automobiles, machines and by draglines,
dredges,
or pipelines for the purpose of prospecting for said materials,
digging, mining, removing and shipping the said materials from
the said land
2. Elmore Sand shall have the right to use said land and the
water on and thereunder for prospecting, developing, working,
hauling, digging, removing and shipping the said materials or
any
of them; and to construct, maintain and use such roads as may be
necessary or convenient in connection with Elmore Sand's
operations on said land.
3. The Parties shall mutually define and locate the tract upon
which said mining activities shall be conducted, which lies
within the above described premises. Elmore Sand shall be
responsible for the maintenance of the right-of-way road for
ingress and egress.
4. Elmore Sand shall begin mining operations as soon as
practical. At the end of said term, all of Elmore Sand's rights
shall expire except as herein otherwise stated.
5. After Elmore Sand begins mining operations, Elmore Sand
agrees to keep accurate records of all materials shipped from
said land and Elmore Sand shall pay Owsley at the rate of twenty
cents ($.20) a ton for all sand and twenty-five cents ($.25) a
ton for all gravel mined on the premises and removed from the
premises. Elmore Sand shall give written accounting to Owsley
for all materials shipped from said lands and payment is to be
made to Owsley on or before the 15th day of the following month,
accompanied by Elmore Sand's written accounting along with
payment check. The process of accounting and payment by 15th of
each and every month thereafter will continue.
6. Payment under this agreement shall be made to:
Edsel H. Owsley
P.O. Box 128
Elmore, Alabama 36025
unless Owsley shall notify Elmore Sand in writing of the name
and
address of any other person or persons to whom remittance should
be made under this agreement.
7. If default be made in the payment of royalties resulting
from
the shipping of materials from said land, Owsley shall give
Elmore Sand written notice of such default and if such default
is
not remedied within ten (10) days from the receipt of such
notice
by Elmore Sand, Owsley shall have the right at his option to
terminate this agreement.
8. Owsley hereby represents and warrants to Elmore Sand that
they own the above described land in fee simple, and they
warrant
and agree to defend the title to the same and agree to indemnify
Elmore Sand against any and all claims now existing or which may
be made as to the said minerals or any of them.
9. Elmore Sand shall have the right at any time during the term
of this agreement and for six (6) months after the expiration or
termination of said to remove all of its properties and
facilities from the said land.
10. Elmore Sand, in its mining operations, shall comply with
all
then existing laws and regulations, including those laws and
regulations governing reclamation of lands. At the termination
of Elmore Sand's mining activities or at the expiration of the
lease or extended term thereof, whichever should first occur,
Elmore Sand shall thereupon reclaim said land in accordance with
applicable laws and regulations governing the reclamation of
land. Said reclamation shall be completed within six (6) months
after said lease expires1 whichever shall first occur.
11. Any notice which may be required or permitted under this
agreement shall be sufficient if sent by mail postage prepaid,
to
the parties at the following address:
Owsley: Edsel H. Owsley
P.O. Box 128
Elmore, Alabama 36025
Elmore Sand: Elmore Sand & Gravel Co., Inc.
P.0. Box 558
Elmore, Alabama 36025
12. This agreement shall be binding upon the parties hereto,
their respective successors, assignees, heirs, executors, and
administrators.
IN WITNESS WHEREOF, we, Charles W. Owsley, Charlotte Barnes, and
Margaret O. Till, by our Attorney-in-Fact, Edsel H. Owsley, and
Edsel H. Owsley, individually, and Elmore Sand & Gravel Co.,
Inc.
have caused this instrument to be signed in duplicate in their
names and behalf on the date first herein above written.
By: "Edsel H. Owsley"
Edsel H. Owsley, As Attorney-in-Fact
for Charles W. Owsley, Charlotte Barnes, and Margaret O. Till
ELMORE SAND & GRAVEL CO., INC
BY: "Bobby H. Harvey"
Its President
STATE OF ALABAMA
ELMORE COUNTY
I, Edsel H. Owsley, a Notary Public in and for said State at
Large do hereby certify that EDSEL H. OWSLEY, AS
ATTORNEY-IN-FACT
FOR CHARLES M. OWSLEY, CHARLOTTE BARNES, AND MARGARET O. TILL,
whose name is signed to the foregoing Sand and Gravel Lease, and
who is known to me, acknowledged before me on this day that,
being informed of the contents of the lease, he, in his capacity
as Attorney-in-Fact, executed the same voluntarily, on the day
the same bears date.
Given under my hand and seal this February 28, 1995.
"Janice Tanner"
Janice Tanner Notary Public
MY COMMISSION EXPIRES ON JANUARY 03, 1999
STATE OF ALABAMA
ELMORE COUNTY
I, Edsel H. Owsley, a Notary Public in and for said State at
- -large, do here by certify that EDSEL H. OWSLEY, INDIVIDUALLY,
whose name is signed to the forgoing Sand and Gravel Lease, and
who is known to me, acknowledged before me on this day that,
being informed of the contents of the lease, he executed the
same voluntarily, on the day the same bears date.
Given under my hand and seal this February 28, 1995.
"Janice Tanner"
Janice Tanner Notary Public
MY COMMISSION EXPIRES
JANUARY 03, 1999
STATE OF ALABAMA
MACON COUNTY
I, Wm. M. Russell. Jr., a Notary Public in and for said State at
large, do hereby certify that BOBBY H. HARVEY, whose name as
President of ELMORE SAND & GRAVEL CO., INC., a corporation, is
signed to the foregoing Sand and Gravel Lease, and who is known
to me, acknowledged before me on this day that, being informed
of
the contents of the lease, he as such officer, and with full
authority, executed the same voluntarily, on the day the same
bears date.
Given under my hand and seal this February 17, 1995.
"Wm. Russell"
Wm. Russell Notary Public
- ----------------------------------------------------------------
STATE OF ALABAMA
ELMORE COUNTY
SAND & GRAVEL CONTRACT
THIS CONTRACT is made and entered into on this the 15th day of
September, 1995, by and between STEPHEN C. ROGERS, MARY EMILY
COLVIN, EMILY S. ROGERS and CYNTHIA R. SHEARER (hereinafter
called "Rogers") and ELMORE SAND & GRAVEL CO., INC., a
corporation, (hereinafter called "ELMORE). WITNESSETH
Rogers, for and in consideration of the sum of $10.00 cash and
other good and valuable consideration in band paid by Elmore to
Rogers, the receipt of which is hereby acknowledged and in
further consideration of the payments to be made hereunder and
the agreements hereinafter contained and set forth. does here-by
give and grant unto Elmore, subject to the other terms and
provisions of this Contract, the exclusive right and license to
mine and remove all. of the sand and gravel, (hereinafter called
the materials) located in, on, upon, and under the following
described lands located in Elmore County, Alabama, to-wit:
All that portion of the Rogers property located west of Alabama
Highway Number 143 In section 34, Township 19 North, Range 17
East, as shown in the diagram attached as Exhibit "A", said land
being situated in Elmore County, Alabama, and being here after
called "the lands". PROVIDED HOWEVER, Elmore shall leave a 250
foot setback along. the northern side of the property and 150
foot setback along the western side o~ the previously subdivided
property known as the 'Rogers or Speigner Plat". No mining,
stocking or other activities permitted under this Contract shall
he carried on the setback areas.
1. This Contract shall commence on September 1, 1995 and shall
terminate on August 31, 2000. PROVIDED HOWEVER, this Contract
shall also terminate once the materials are exhausted.
2. Elmore has the right to: (1) enter upon the lands to pass
and
repass over the same at Will, on foot, by trucks, automobile,
machines, and by draglines, dredges, or pipelines for the
purpose
of prospecting for and mining the materials; (2) dig, mine,
process, store, convey, remove, and ship the materials from the
land: (3) use the land, and the waters located thereon and
thereunder for prospecting, developing, working, hauling,
digging
washing, mining, processing, removing and shipping the
materials;
(4) construct and use washing and processing facilities on the
land; (5) dispose of and place on the land all water, mud,
debris, and residue resulting from the washing process; (6)
construct, maintain and use such roads as may be necessary or
convenient in connect on with Elmore's operations on the land;
(7) construct and maintain on the land such roadways, power
lines, pipelines, and equipment, and such buildings and
structures as may be necessary or convenient for use as offices,
storage of supplies, and for housing machinery, equipment, and
facilities used in the operations carried on hereunder; and (8)
stockpile and process sand and gravel on the lands which is has
mined on the lands of third parties.
3. The parties shall mutually define and locate the area of the
lands upon which mining activities shall be conducted. If Elmore
elects to erect a structure on the land, or erect a road or
other
improvements on the land, the parties shall mutually agree upon
the site for the same. Elmore shall at all times be responsible
for the maintenance of any and all right-of-way roads and other
improvements made to or on the lands by Elmore.
4. Elmore shall begin mining operations as soon as practical.
However, Elmore shall give Rogers ninety (90) days notice prior
to the commencement of mining activities so that Rogers may cut
and remove timber from the property to be Mined
5. Elmore agrees to keep accurate records of all materials
shipped from the land and accurate records of all materials
mined
elsewhere, but subsequently placed on the lands and thereafter
shipped from the lands. Rogers shall have the right to inspect
these records at all reasonable times Elmore shall pay a royalty
for materials shipped from the lands as follows: (a) "Twenty
cents ($.20) a ton for sand, (b) twenty-five cents ($.25) for
all gravel. Elmore shall pay Rogers a royalty for materials
mined elsewhere, but subsequently placed on the lands and
thereafter shipped from the lands at the rate of five cents
($.05) a ton. Elmore shall give Rogers a monthly written
accounting with respect to all materials shipped or materials
mined elsewhere, but subsequently placed on the lands and
thereafter shipped from the lands. The monthly accounting, and
payments due hereunder are to be and delivered to Rogers on or
before the 15th day of the following month. The process of
accounting and payment by 15th of each and every month
thereafter
will continue for the remainder of the term of this Contract.
Once mining operations commence on the lands Elmore shall pay
Rogers $500.00 a month as an advance or pre-paid royalty for any
month in which no materials are shipped from the lands. The
prepaid royalty shall cease once the materials to be mined on
the
lands are exhausted, it, being agreed that at such time this
Contract and all rights of Elmore hereunder shall cease and
terminate. All prepaid or advance royalties shall be credited
to
the sums due Rogers from Elmore for materials thereafter shipped
from the lands. All payments due Rogers under this Contract
shall
be made to:
Mrs. Emily S. Rogers
Number 5 Bedford Place
Tuscaloosa, Alabama 35406
unless Rogers shall notify Elmore in writing of the name
and address of any other person or persons to whom remittance
should be made under this Contract.
6. Elmore shall pay all severance taxes or any other taxes
incidental to the mining operation which may be due or payable
because of such operation and shall also pay all ad valorem
taxes
on any machinery or chattels placed on the property by Elmore.
Rogers shall pay all ad valorem taxes assessed against the real
property by the state, the county, and any school district
during
the existence of this Contract
7. It is anticipated that Elmore will place two house trailers
on the lands. Elmore shall pay Rogers $50.00 a month for each
trailer as long as a trailer remains on the lands. It is
agreed,
however, that Elmore shall be responsible for the conduct of all
persons using the house trailers.
8. If default be made in the payments due under this Contract
Rogers shall give Elmore written notice of such default and it
such default is not remedied within ten (10) days from the
receipt of such notice by Elmore, Rogers shall have the right to
terminate this Contract.
9. Rogers hereby represents and warrants to Elmore that Rogers
owns the land in fee simple, and warrants and agrees to defend
the title to the same and to indemnify Elmore against any and
all
claims now existing or which may be made as to the materials.
10. Any and all improvements, additions, and repairs to or on
the
lands shall be made at the sole cost of Elmore. All such
improvements, additions, arid repairs of whatever kind and
nature
which are not removed from the lands by Elmore shall revert to,
and become the property of Rogers. PROVIDED, HOWEVER, Elmore
shall have the right at any time during the term of this
Contract, and for 60 days after the expiration or termination of
this Contract, to remove all of its properties and facilities
from the said land.
11. Elmore shall comply with all existing laws and regulations,
including, without limitation, all laws, rules, and regulations
governing reclamation of the lands. Elmore's reclamation
obligations shall include, but shall not be limited to its
hereby
agreed obligation not to leave any stockpile of sand or gravel
on
the lands, nor any piles of mud, debris, or residue resulting
from the washing process permitted hereunder. At the
termination
of Elmore's mining activities, or at the expiration or
termination of this Contract, whichever event shall first occur,
Elmore shall reclaim the land in accordance with applicable laws
and regulations governing the reclamation of land. Said
reclamation shall be completed within one (1) year after Elmore
ceases its activities on said land or within six (6) Months
after
this Contract expires or is terminated, whichever event shall
first occur.
12. Elmore shall observe and comply with all rules regulations
laws, and ordinances now in effect, or which may be enacted
during the term of this Contract or any county, state,
municipal,
or federal authorities having jurisdiction over the lands, or
the
subject matter of this Contract, and Elmore agrees to indemnify
and fully relieve Rogers from any compliance therewith or
liability for violation thereof.
13. Elmore shall indemnify Rogers and save Rogers free and
harmless from and against all mechanics' liens and notices
thereof relating to the property on account of any labor
performed or of materials furnished at the request of Elmore, or
for or on behalf of Elmore during the term thereof. Should any
lien or notice be filed, Elmore shall promptly discharge the same
14. Elmore hereby covenants and agrees to indemnify Rogers and
save and hold Rogers free and harmless from and against any and
all Suits, actions, causes of action, claims, and demands
whatsoever made or asserted against Rogers by any party for
injuries to or the death of any person, or damage to or loss of
property alleged or claimed to have been caused by, or to have
arisen out of or in connection with, or to be incidental to the
use or occupation of the property by Elmore, except for injury,
death damage, or loss caused by the negligence of Rogers.
Elmore
further covenants and agrees to pay, liquidate (discharge, and
satisfy any and all judgments, awards, and expenses which may be
rendered against or incurred by Rogers on account of injuries to
or the death of any person o~ on account of loss or damage to
any
property whatsoever, alleged or claimed to have been caused by
or
to have arisen out of or in connection with 9r to be incidental
to the use of occupation of the property by Elmore, including,
but not limited to, all costs of suit, reasonable attorneys'
fees, and reasonable expenses in connection therewith.
15. Elmore, at its sole cost, provide Rogers insurance under a
policy of insurance insuring Rogers against loss or damage as a
result of Elmore's use and occupancy of the property. The
insurance policy shall be with a company acceptable to Rogers
and
shall name Rogers as a named insured and provide Rogers
insurance
coverage in the amount of $1,000,000.00 per occurrence.
Evidence of the required insurance policy shall be deposited
with
Rogers during the term of this Contract and it is expressly
agreed that Elmore shall maintain the insurance policy during
the
entire term of this Contract. If the insurance policy shall
lapse
or be canceled this Contract shall be and become null and void
and all rights and benefits granted Elmore hereunder shall
terminate without notice to Elmore.
16. Any notice which may be required or permitted 'under this
Contract shall be sufficient if sent by mail postage prepaid, ~c
the parties at the following address
IF TO ROGERS:
Mrs. Emily S. Rogers Number 5 Bedford Place
Tuscaloosa, Alabama 35406
17. Rogers and Rogers' agents and employees may, at any time.
And
from time to time, enter on and upon the lands and inspect the
land
18. Elmore shall have no right to sublease, assign pledge,
mortgage, convey, or otherwise transfer or encumber this
Contract, or any of its rights hereunder. If Elmore breaches
this covenant this Contract shall be void and all rights of
Elmore hereunder shall cease and terminate without further
notice
to Elmore.
19. If Elmore breaches any one or more of the conditions or
covenants of this Contract, Rogers, at Rogers option, may
terminate this Contract and declare the same null and void as to
the remaining term thereof
20. This Contract is made and is accepted in the State of
Alabama
and shall be governed and construed under and in accordance with
the laws of the State of Alabama.
21. This Contract sets forth all of the promises, agreements,
conditions, covenants, and understandings between Rogers and
Elmore. Relative to the subject matter of this Contract and the
party agree that there are no other promises agreements,
conditions, covenants, or understandings either oral or written,
between them other than those set forth in this Contract. The
parties further agree that the terms of this Contract may not be
altered or amended except by an instrument in writing executed
by
all of the parties hereto.
22. The provisions of the Contract shall insure to the benefit
of, and shall be fully binding upon all of the parties hereto,
and their respective successors, assigns, and legal
representatives
23. It is agreed that time is and shall be of the essence of
this
Contract. However, the failure of Rogers to insist, in one or
more instances, upon the strict performance by Elmore of any of
the provisions of this Contract shall not be construed as a
waiver of any future breach of such provisions.
IN WITNESS WHEREOF, the parties have executed this instrument on
the date first herein above written.
"Stephen C. Rogers"
Stephen C. Rogers
"Emily S. Rogers"
Emily S. Rogers
"Mary Emily Colvin"
Mary Emily Colvin
"Cynthia R. Shearer"
Cynthia R. Shearer
ELMORE SAND & GRAVEL CO. INC
BY: ITS PRESIDENT
STATE OF ALABAMA
COUNTY OF DALLAS
I, the undersigned authority, a Notary Public in and for the
State of Alabama at Large, do hereby certify that Stephen C.
Rogers, whose name is signed to the foregoing instrument, and
who
is known to me, acknowledged before me on this day that, being
informed of the contents of said instrument, he executed the
same
voluntarily on the day the same bears date
Given under my hand and seal this 15th day of September, 1995
(Signed)
NOTARY PUBLIC STATE OF ALABAMA AT LARGE
OF ALABAMA AT LARGE
STATE OF ALABAMA
COUNTY OF Jefferson
I, the undersigned authority, a Notary Public in and for said
county, in said State, do hereby certify that Mary Emily Colvin,
whose name is signed to the foregoing instrument, and who is
known to me, acknowledged before me on this day that, being
informed of the contents of said instrument, she executed the
same voluntarily on the day the same bears date
Given under my hand and seal this 26th day of September 1995.
(SIGNED)
NOTARY PUBLIC
My Commission Expires June 15, 1999
STATE OF ALABAMA
COUNTY OF _______
I, the undersigned authority, a Notary Public in and for county,
in said State, do hereby certify that Emily S. Rogers whose
name
is signed to the foregoing instrument, and who is known to me,
acknowledged before me on this day that, being informed of the
contents of said instrument she executed the same voluntarily on
the day the same bears date.
Given under my hand and seal this 29 day of September 1995.
(Signed)
NOTARY PUBLIC
My Commission Expires April 23, 1996
STATE OF ALABAMA
COUNTY OF Jefferson
I, the undersigned authority, a Notary Public in and for county,
in said State, do hereby certify that Cynthia R. Shearer whose
name is signed to the foregoing instrument, and who is known to
me, acknowledged before me on this day that, being informed of
the contents of said instrument she executed the same
voluntarily on the day the same bears date.
Given under my hand and seal this 26 day of September 1995.
(Signed)
NOTARY PUBLIC
My Commission Expires June 15, 1999
- ---------------------------------------------------------------
STATE OF ALABAMA )
ELMORE COUNTY ) SAND AND GRAVEL LEASE
This agreement is made and entered into on this day November 4,
1997 between PAUL F. SKINNER (hereinafter referred to as
"Skinner" and ELMORE SAND AND GRAVEL, INC. (hereinafter referred
to as "Elmore S&G).
WITNESSETH:
Skinner, for and in consideration of the sum of Twenty Five
Thousand and 00/100 Dollars (25,000.00), which shall apply as a
down payment on future royalties, and other valuable
consideration to Skinner in hand paid by Elmore S&G, the receipt
of which is hereby acknowledged, and in further consideration of
the mining royalty payments to be made hereunder and the
agreements hereinafter contained, Skinner hereby leases, grants,
bargains, sells and conveys to Elmore S&G all of the sand and
gravel, collectively referred to herein as "SAID MATERIALS" in,
on, upon and under the following described Skinner owned real
estate in Elmore County Alabama, to-wit:
The Southwest Quarter of the Southwest Quarter of Section 33,
Township 20N, Range 17E1 Parcel 09, Elmore County Alabama,
totaling approximately 415 acres,
ALSO the Northwest Quarter of Section 4, Township 19N, Range
17E,
Parcel
02, Elmore County, Alabama, totaling approximately 164 acres,
more or less as
shown by Survey made by William C. Sheffield, Jr., Registered
Land Surveyor
No. 9044, dated March 8, 1995.
LESS the five (~) plats situated in Parcel 02 above sold by
Skinner since the above recording to relatives and/or others
totaling approximately 45 acres; the description attached hereto.
This property is the same property as that conveyed by Warranty
Deed to O.G. Skinner by J.B. Lane and wife, Ethel Lane recorded
on November 25, 1942, in the office of the Judge of Probate of
Elmore County, Alabama, in Deed Record R-56, Page 261.
This property is the same property as that conveyed by Warranty
Deed to O.C. Skinner by J.J. Strength, a widower, recorded on
November 10, 1960, in the office of the Judge of Probate of
Elmore County, Alabama, in Deed Record R-135, Page 493.
This lease is for the term ending 10 years after the signing of
this agreement, or 11/4/97 and upon the following conditions and
terms: with the option extend 5 additional years.
1. Elmore S&G has the right to enter upon said lands during
said
period of time, to pass and repass over the same at will, on
foot, by trucks, automobiles, machines and by draglines,
dredges,
conveyors, screens or pipelines for the purpose of prospecting
for said materials, digging, mining, removing and shipping the
said materials from the said land.
2. Elmore S&G shall have the right to use said land and water
on
and thereunder for prospecting, developing, working, hauling,
digging, removing and, shipping the said materials 9r any of
them: and to construct, maintain and use such roads as may be
necessary or convenient in connection with Elmore S&G's
operation
of said land.
3. At this point, Elmore S&G shall not be required to make any
special efforts to keep the airborne road dust created from its
truck travel to a minimum during working hours. If dust control
becomes requested by Skinner in the future, such as watering the
road to keep the dirt damp during dry weather conditions, Elmore
S&G may be entitled to a reduction in the royalty rate to offset
the additional operational costs.
4. The Parties shall mutually define and locate the tract
upon
which said mining activities shall be conducted, which lies
within the above described premises. Elmore S&G shall be
responsible for the maintenance of the right of-way road for
ingress and egress.
5. Elmore S&G shall begin mining operations as soon as
practical. At the end of said term, all of Elmore S&G1s rights
shall expire as herein other wise stated.
After Elmore S&G begins mining operations, Elmore S&G agrees to
keep accurate records of all materials shipped from said land,
and Elmore S&G shall pay Skinner royalties at the rate of 50
cents per ton for all materials sized 1/2u and over only, and
mined on the premises and removed from the premises. Elmore S&G
shall give written accounting to Skinner for all materials
shipped from said lands and payment is to be made to Skinner on
or before the 1 5th day of the following month, accompanied by
Elmore S&G's written accounting along with payment check. The
process of accounting and payment by the 15th of each and every
month thereafter will continue.
7. Payment under this agreement shall be made to:
Paul F. Skinner
855 Newton Street
Prattville, Alabama 36067
Unless Skinner shall notify Elmore S&G in writing of the name
and
address of any other person or persons to whom remittance should
be made under this agreement.
8. If default be made in the payment of royalties resulting
from
the shipping of materials from said land. Skinner shall give
Elmore S&G written notice of such default and if such default is
not remedied within ten (10) days from the receipt of such
notice
by Elmore S&G, Skinner shall have the right, at his option, to
terminate this agreement.
9. Skinner hereby represents and warrants to Elmore S&G that he
owns the above described land in fee simple, that the same is
not
his homestead, and he warrants and agrees to defend the title to
the same and agrees to indemnify Elmore S&G against any and all
claims now existing or which may be made as to the said minerals
or any of them.
10. Skinner hereby agrees that he will not, nor will he allow
any other person, persons, companies nor business access to the
site for any purpose, such as mining, well drilling, utilities
or
roads construction, or any other business or recreation without
the written permission of Elmore S&G.
11. Skinner shall retain the right to authorize access to the
site for hunting purposes and all permission to hunt on said
property shall be given by Skinner. Skinner may elect a proxy to
act on his behalf in his absence and shall notify Elmore S&G of
said election. Skinner agrees not to allow hunting to any person
during Elmore S&G's working hours, whether regular, overtime,
weekend or holidays.
12. Elmore S&G shall have the right at any time during the term
of this agreement and for six (6) months after the expiration,
termination or default of same to remove all of its properties
and facilities from the said land.
13. Elmore S&G, in its mining operation, shall comply with all
the existing laws and regulations, including those laws and
regulations governing the reclamation of lands. At the
termination of Elmore S&G's mining activities or at the
expiration of the lease or extended term thereof, whichever
should first occur, Elmore S&G shall thereupon reclaim said land
in accordance with applicable laws and regulations governing the
reclamation of land. Said reclamation shall be completed within
six (6) months after said lease expires, whichever shall first
occur.
14. Any notice which may be required or permitted under this
agreement shall be sufficient if sent by mail, postage prepaid,
to the parties at the following address:
Lessor: Paul F. Skinner (334) 365-7960
855 Newton Street
Prattville, Alabama 36067
Lessee: Elmore Sand & Gravel, Inc. (334) 285-1805
P.O. Box 558
Elmore, Alabama 36025
15. This agreement shall be binding upon the parties hereto,
their respective successors, assigns, heirs, executors, and
administrators.
IN WITNESS WHEREOF, both Skinner and Elmore S&G have caused this
instrument to be signed in duplicate in their names and behalf
on
the date first herein written.
"Paul F. Skinner" (L.S.)
Paul F. Skinner
ELMORE SAND & GRAVEL INC.
By: (Signed) Bobby H. Harvey (L.S.)
Its President
State of Alabama )
Elmore County )
I, Janice H. Tanner, a Notary Public in and for said State at
Large, do hereby certify that Paul F. Skinner, whose name is
foregoing Sand and Gravel Lease, and who is known to me.
acknowledged before me on this day that, being informed of the
contents of executed the same voluntarily, on the day the same
bears date:
Given under my hand and seal this November 4, 1997
"Janice Tanner"
Notary Public
I, Janice H. Tanner, a Notary Public in and for said State at
Large, do hereby certify that Bobby H. Harvey, whose name as
President of Elmore Sand and gravel, Inc. a corporation, is
signed to the forgoing sand and Gravel Lease, and who is known
to
me, acknowledged before me on this day that, being informed of
the contents of executed the same voluntarily, on the day the
same bears date:
Given under my hand and seal this November 4, 1997
"Janice Tanner"
Notary Public
STATE OF ALABAMA
ELMORE COUNTY
- -----------------------------------------------------------------
- -------------------------------------------------
EXCLUSIVE SAND AND GRAVEL LEASE
THIS LEASE AGREEMENT made this 25th day of November, 1995 by and
between the State of Alabama, Department of Corrections,
hereinafter referred to as "LESSOR" and Kitty D. Hartley,
hereinafter referred to as "LESSOR" or their successors,
WITNESSETH AS FOLLOWS:
LESSOR does hereby lease to LESSEE under the terms and
conditions
set out herein below, the exclusive right to mine, extract, dig,
excavate, remove and take away all merchantable and marketable
sand and gravel from the following described property, together
with the right to remove any and all top soil or over burden
above said sand and gravel, said property being located in
Elmore
County, Alabama, to-wit:
TRACT I
LEGAL DESCRIPTION - SPEIGNER LAKE AREA - ELMORE COUNTY, ALABAMA:
Begin at the Southeast corner of Section 3. T18N, R17E, Elmore
County, Alabama; thence approximately N 45' w, 7467 feet more or
less to the Northwest corner of said Section 3;
thence continue approximately N 45o W, 3734 feet more or less to
the center of Section 33, T19N, Rl7E;
thence North along the center of Section 33, 2640 feet more or
less to the Southeast corner of the SW1/4 of Section 28;
thence West along the South line of Section 28, 1320 feet more
or
less to the Southwest corner of the SE1/4 of the SW1/4 of
Section
28;
thence North along said quarter section line, 1320 feet more or
less to the Northwest corner of the SE 1/4 of the SW1/4 of
said Section 28,
thence Easterly 3960 feet more or less to the South right-of-way
line of the L & N Railroad;
thence Southeasterly along said South right-of-way to the East
line of said Section 26;
thence South along said East section line, l320 feet more or
less
to the Northwest corner of Section 34;
thence East along the North line of said Section 34, 1320 feet
more or less to the Northeast corner of the NW1/4 of the NW 1/4
of said Section 34;
thence South along said quarter section line, 2640 feet more or
less to the Southeast corner of the SW1/4 of the NW1/4 of
Section
34,
thence East along the East-West half section line, l320 feet
more
or less to the center of Section 34;
thence approximately S 45o E. 3734 feet more or less to the
Southeast corner of said Section 34;
thence East along the North line of Section 2, T19N, R18E,
1000
feet more or less to the South right-of-way line of the L & N
Railroad
thence Southeasterly along said railroad right-of-way to the
South line of said Section 2;
thence West along the South line of Section 2 to the Southwest
corner of Section 2, TI8N, R17E, the point of beginning.
Said described property lying in Sections 2 and 3, Tl8N, R17E,
and in Sections 28, 33 and 34, Tl9N, Rl7E, Elmore
County,
Alabama, and containing 1314 acres more or less.
Situated within this described parcel of real property is the
Alabama Department of Corrections' Swine Production Unit and it
is specifically understood and agreed to by LESSOR and LESSEE
that LESSEE will not excavate, nor mine, nor place equipment
within 300 feet of the outside perimeter of the said unit, and
that this area which the said unit occupies and 300 feet in all
directions is excluded and excepted from this lease.
Situated within this described parcel of real property is the
Draper Firearms Firing range and it is specifically understood
and agreed to by LESSOR and LESSEE that LESSEE will not
excavate,
nor mine; nor place equipment within 150 feet of the Outside
perimeter of the said Range and that this area which the said
Range occupies and 150 feet in all directions is excluded and
excepted from this lease.
COVENANT OF TITLE
LESSOR covenants that it has a good right end title to the lands
and property leased, and the full right to lease the same and
that the LESSEE shall have quiet and peaceable possession
of
the same during the continuance of this lease.
DEFINITION OF SAND AND GRAVEL
It is agreed between the parties hereto that the words sand and
gravel as used herein shall and do include all sand, clay,
gravel
and rock, and each of them or any and all kinds or combinations
thereof whether for construction, industrial, chemical,
agricultural or any other use, located on the above-described
lands.
ADDITIONAL MINERALS
If any minerals other than sand and gravel, as herein defined,
shall be found on the leased premises during the term hereof,
the
same shall remain the property of the LESSOR, except that LESSEE
shall have the first right and option to mine or excavate said
minerals under such terms and conditions as may be agreed upon
by
the parties.
TERMS AND CONSIDERATION
This lease shall be for a term of TWENTY (20) YEARS from the
date
hereof. A royalty of $0.20 per ton by weight, for all sand and
$0.25 per ton for all gravel, will be paid to the LESSOR by the
20th day of the month following shipment. A tabulation of the
proceeding month's shipments will be made from dray tickets
issued to each separate carrier leaving the property. Official
railroad scale weights will be used to verify shipments made by
rail.
The LESSOR shall grant the LESSEE three (3) additional options
of
five (5) years each. The royalty to be paid by LESSEE to LESSOR
shall be renegotiated by the parties each time the LESSEE
chooses
to exercise its additional options and set out in writing as an
addendum to this Lease Agreement.
Production will begin within Eight (8) months of the date of
this
contract. A minimum royalty payment of $l,500.00 per month will
begin during the NINTH month whether or not the production and
sale of material has begun. Any and all payments of this nature
will be considered as prepaid royalty which will be credited
against future shipments, and such payments will be payable for
the life of this lease and any extensions thereof whether
production ever begins or stops at any time.
The LESSEE shall have the right to stockpile or store such
material on the property covered by the lease at no cost other
than the royalty paid as stated above. LESSEE shall have SIX
(6)
MONTHS to sell and remove such stockpiled material after the
expiration of the lease; or any renewal or cancellation thereof.
In the event any stockpiled material remains on the premises
beyond this SIX (6) MONTHS period, the LESSEE, at its option
shall pay to LESSOR a reasonable rent which shall he
negotiated by the parties or shall donate the stockpiled
materials to the LESSOR.
RECORDS
The LESSEE agrees to keep accurate and accountable records
showing the quantity of sand and gravel removed from the
premises
under the terms hereof which said records shall be open and
available for the inspection of and audit by LESSOR, or its duly
authorized representative, at reasonable intervals during the
business hours of LESSEE, for the purpose of determining the
quantity of such sand and gravel removed from the premises.
ROADWAYS
As part of the rights of ingress and egress granted hereunder,
and to carry on his operation hereunder, LESSEE shall have the
rights to make use of all roadways presently existing on the
promises, or on adjoining lands of LESSOR as aforesaid, and
shall
further have the right to build and maintain any new roadways
(vehicular or rail) as may be necessary for the production,
access to or removal of material from the premises, and in the
construction of such roadways LESSEE may use such materials as
may be necessary for such construction mined or obtained from
the premises free of charge and without royalty payment thereon.
BUILDING AND MACHINERY
LESSEE shall have the right to construct or erect any and all
buildings and/or plants on the leased premises as may be
reasonably necessary or useful for the mining, storing,
production, processing and removal of the sand and gravel
acquired hereunder. LESSEE shall have the further right to
place
on the premises such machinery and equipment as may be
reasonably
necessary or useful to his operations. LESSEE shall have the
right to remove said buildings, plants or equipment and
machinery
from the premises at any time during the term hereof at his
discretion.
CONTROL AND CONTAINMENT OF FLOWING WATER
The level of water in Speigner Lake will be controlled by then
order to maintain a constant flow of water In Mortar Creek below
the dam. It is anticipated that low levels will be maintained
during the time when rainfall and rising creek levels may be
anticipated. The general manager for the LESSEE at the mining
site will be the only person authorized to direct a change in
levels of the lake and prison authorities will be notified of
anticipated changes with as much advance notice as possible. An
adequate water flow will be maintained in Mortar Creek below the
dam to provide sample water for the prison irrigation system.
LESSEE agrees to conduct its operations at all times in such a
manner as to not interfere with the prison system irrigation
system. In the event LESSEE causes LESSOR to be unable to
irrigate its crops. LESSOR shall notify LESSEE in writing of
same and LESSEE shall have three (3) days to cure said breach of
this Agreement. If the situation is not cured within three
(3)
days, LESSEE shall pay to LESSOR a penalty of $500.00 per day
for each day after the expiration of the three (3) day period
that LESSOR is unable to irrigate its crops. LESSEE shall not
be
liable if LESSORS inability to irrigate its crops is the result
of natural causes (such as lack of flowing water in Mortar
Creek).
The LESSOR will inform the LESSEE of a safe distance from the
bottom of the darn from which the LESSEE may mine without the
danger of "blowout" condition. The determination of the
distance
will be based on hydraulic engineering studies that define the
seepage network below the dam.
WATER RIGHTS
LESSEE shall have the right to enter upon and into any water
surface located on the premises, such as lakes, ponds, streams,
creeks or rivers, and erect or cause to be erected or placed
thereon any dredge, boat, barge., pump or other necessary
equipment for the mining or removal of any sand and
gravel
covered by such water surface.
LESSEE shall have the right to use all water sources located on
the leased premises and to drill water wells thereon for use in
the conduct of his operations. As to any well dug by LESSEE
upon
termination hereof, LESSEE shall leave on the premises such well
and well casing therein for the use of LESSOR, but LESSEE may
remove any and all pumps, motors or other well equipment.
LAND USE
LESSEE shall have the right to clear such trees, brush and
undergrowth from such portions of the premises as may be
reasonably necessary to explore for materials, locate pits,
quarries and other removal areas and to locate stockpile and
equipment areas and plants. LESSOR shall have the right to sell
and/or remove all merchantable timber from the leased premises
within a reasonable time, not to exceed SIX (6) MONTHS from the
date hereof, so long as such timber removal is done as
expeditiously as possible and does not unreasonably interfere
with LESSEE'S operations hereunder.
LESSEE agrees to conform to and observe all orders and
regulations lawfully issued and enforced by state and federal
authorities with regard to the pollution of live streams and
rivers on the premises or adjoining lands and with regard to the
reclamation of the lands heretofore described.
INSPECTION OF PREMISES
LESSOR, its agent and authorized representatives, shall have the
right of entering upon and inspecting the operations of LESSEE
on
the premises at any reasonable time during normal business
hours.
REMOVAL OF IMPROVEMENTS AND EQUIPMENTS
Upon the termination of or surrender of this Lease, LESSEE shall
have the right to remove from the premises any and all
equipment,
machinery, tools, materials and supplies or other property of
the
LESSEE, including buildings and plants, within a reasonable and
economically feasible period of time. Any such property totally
abandoned by LESSEE shall become the property of LESSOR,
provided
that LESSOR gives LESSEE notice in writing of its opinion that
such has been abandoned and grants LESSEE a reasonable time to
remove said property.
INDEMNIFICATION OF LESSOR
LESSEE agrees to supply and provide all necessary machinery,
equipment and supplies to take and remove the sand and gravel
conveyed hereunder with no cost, expense or liability on the
part
of the LESSOR. LESSEE further agrees to hold LESSOR harmless
and
indemnify LESSOR from liability, claims or demands of third
parties or employees of LESSEE arising out of or caused by the
negligence of LESSEE or his operations hereunder. LESSEE
further
agrees to conduct his operations at all times in such a manner
as to not cause undue damage to the property of LESSOR, such
damage being inconsistent with normal sand and gravel
excavation and removal.
LESSEE further agrees to exercise caution to see that no sewage
lines passing through this area are damaged, and agrees to
repair
or replace at her expense. Any sewage lines damaged by LESSEE
during the term of this lease.
LESSEE agrees not to use explosive materials in its operation
hereunder without first notifying LESSOR of his intentions to do
so.
TAXES
LESSEE agrees to pay all contributions, levies, taxes and other
assessments resulting from its operations hereunder, for which
it
or LESSOR shall become liable with respect to wages for
employees
of LESSEE, social security and state taxes.
WAIVER OF RIGHTS
Each party hereto expressly reserves the right to waive any
breach of the conditions hereof as its option, but any such
waiver shall extend only to the particular breach so waived and
shall not limit the rights of the parties as to future breach
hereof.
EXHAUSTION OF MATERIALS
In the event that all materials sand and gravel deposits on the
leased premises shall be exhausted prior to termination hereof,
then in such event LESSEE shall notify LESSOR in writing of
such exhaustion, accompanied by a professional geologist
report. If
LESSOR finds after expert inspection, that the material deposits
have been exhausted, then this Lease Agreement is thereby
terminated.
<PAGE>
DEFAULT
If either party shall default in the substantial performance or
observation of the terms and conditions hereof, and such default
shall continue for a period of thirty (30) days after written
notice thereof, the aggrieved party may institute appropriate
proceedings in a Court of competent jurisdiction to enforce the
terms and conditions hereof or to cancel and terminate the
obligators hereunder. However, LESSEE shall net be held
responsible for delays or casualties caused by any act of God or
natural conditions beyond LESSEE'S control
HEIRS AND SUCCESSORS IN INTEREST
All of the obligations and rights hereunder shall extend to and
be binding upon, and every benefit hereunder shall inure to, the
heirs, executors, administrators, successors or assigns of the
parties. LESSEE shall have the right to assign this lease with
the written consent of the Commissioner of the Alabama
Department of Corrections pursuant to Section 4l-l6-59, Code of
Alabama; (1975).
AMENDMENTS
The parties hereto reserve the right to make mutually agreeable
amendments hereto which may be required in order to comply with
applicable State or federal laws affecting the rights and
obligations hereunder, provided however, that if such
requirements of law make it economically unfeasible to comply
hereunder all guarantee of payments hereunder shall terminate.
EXCLUSIVE RIGHTS
The rights and privileges granted hereunder to explore mine and
remove sand and gravel shall be exclusive to LESSEE and LESSOR
covenants hereby not to grant any similar or conflicting rights
to anyone else during the term hereof. Nor shall LESSOR have
any right to remove any sand and gravel hereby conveyed for or
on
behalf of itself during the term hereof without the written
agreement and consent of LESSEE. LESSOR further covenants that
it will not create or grant any encumbrances or other rights
which will restrict or decrease the complete rights of
LESSEE
hereunder or unreasonably effect the successful operations and
rights of LESSEE hereunder.
FENCES AND LIVESTOCK
LESSOR agrees to maintain all fences and or gaps located upon
the
premises and not allow livestock to interfere with the
operations
of LESSEE hereunder, and agrees that LESSEE shall not be liable
for the death or injury of any livestock allowed on the premises
caused by LESSEE'S operation. LESSEE agrees to conduct his
operations at all times in such a manner as to not interfere
with
LESSOR'S livestock operations. LESSEE agrees to repair any
damage to fences or gaps caused by him and not necessary to the
operations and rights herein set forth.
EASEMENTS AND RIGHTS OF WAY
At the request of the LESSEE, LESSOR agrees to grant any and all
easements or rights of way necessary to provide electricity,
gas,
water or other utility service reasonably necessary for the
LESSEE'S operations hereunder to utility companies or other
third
parties, said easements and/or rights of way to be effective
during the entire term hereof, including any renewals. The
costs of providing said utility service to the premises or
locations thereon, exclusive of the value of said easements or
rights of way shall be borne by the LESSEE.
DISCLAIMER OF WARRANTY
The LESSOR hereby expressly disclaims makes no warranty of
quantity of sand and gravel on said premises. The LESSOR
further disclaims and makes no warranty regarding the type,
nature, suitability, merchantability, marketability,
specifications, or fitness for a particular purpose of the sand
and gravel on said premises.
NOTICES
Any notice or consent required hereunder, to be in writing shall
be deemed sufficient and timely if the same is placed in the
United States mail, certified mail, return receipt and
postmarked
within the time allowed hereunder, addressed to the party to be
so notified at its usual and customary business address.
IN WITNESS WHEREOF, the parties have hereunder to set their
hands
and seals or caused this instrument to be executed with full
and absolute authority to do so on the day herein above first
recited.
LESSEE
"Kittye D. Hartley"
Kittye D. Hartley
LESSOR
ALABAMA DEPARTMENT OF CORRECTIONS
BY:
"Fred V. Smith"
Fred V. Smith. Commissioner
Receipt of Exchange
This document is to confirm receipt by the Secretary of Southern
Ventures, Inc. of Bobby Harvey's interest in shares of Elmore
Sand and Gravel, Inc. and Tuskegee Sand and Gravel, Inc. This
interest represents 100% of the existing shares in these
companies. It is acknowledged that all certificates are being
held as collateral at Colonial Bank located in Prattville,
Alabama. Bobby Harvey's interest in these shares is to be
exchanged for ten million Preferred Shares of Southern Ventures,
Inc. Preferred Stock authorized February 7, 1997 represented by
share certificate number 01, dated October 22, 1997. This
exchange will be effective as of October 22, 1997.
"Elaine Knapp"
Elaine Knapp
Secretary
Date 10/22/97
"Bobby Harvey"
Bobby Harvey
Individual
Date 10/22/97
"Benjamin Wood "
Benjamin Wood
Vice President
Date 10/22/97
(Corporate Seal)
Southern Ventures, Inc.
Southern Ventures, Inc.
15000 Highway 11 North
Cottondale, AL 35453
STOCK PURCHASE AGREEMENT AND SIGNATURE PAGE
(All investors must sign this Stock Purchase Agreement)
Number of Shares Being Purchased: x $5.00 per Share
Total Purchase Price for Shares: $
- ---------------------------------------------------------------
PURCHASER DATA: (Must be completed in full)
- ---------------------------------------------------------------
Full Name of Subscriber: (Do not use initials)
First Name: Middle Initial:
Last Name:
Residence Address (Do Not use P.O. Box)
Street:
City:
State: Zip Code:
Residence Phone: Business Phone:
Social Security Number or Tax I.D. Number:
- ---------------------------------------------------------------
SIGNIFICANT DISCLOSURE
- ---------------------------------------------------------------
THIS STOCK PURCHASE IS MADE PURSUANT TO, AND IS SUBJECT TO, THE
TERMS AND CONDITIONS OF THE QUALIFICATION APPROVED BY THE
SECURITIES COMMISSIONS OF THE STATES IN WHICH THE SHARES ARE
BEING OFFERED.
- ---------------------------------------------------------------
SIGNATURE MUST BE IDENTICAL TO THE NAME OF REGISTERED OWNER
Printed Name of Purchaser:
Signature of Purchaser: Date:
Printed Name of Purchaser
(if more than one):
Signature of Purchaser
(if more than one): Date:
STOCK CERTIFICATE INFORMATION
The Name you wish to appear on the Stock Certificate:
The address where you would like the Stock Certificate sent:
(If same as address above, enter "SAME".)
Address:
City:
State:
Zip:
# # #
AUDITOR'S REPORT
Southern Ventures, 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
Southern Ventures, Inc. as of September 30, 1997, and the
related consolidated statements of income, stockholders' equity,
and cash flows for the nine-month period 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 of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Southern Ventures, Inc. and the results of their operations
and their cash flows for the period then ended in conformity
with generally accepted accounting principles.
"Arthur J. Odle"
Arthur J. Odle, CPA PC
Montgomery, Alabama
January 30, l998
