SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
ESSCO (USA), Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
33-0773383
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
18500 Von Karman, Suite 560, Irvine, California 92612
(Address Of Principal Executive Offices) (Zip Code)
(714) 477-6299
Company's Telephone Number, Including Area Code:
Securities To Be Registered Under 12(b) Of The Act: None.
<PAGE>
<TABLE>
<CAPTION>
Name of Each
Title of Each Exchange on Which Each Class is to be Registered
------------------------------------------------
Class to be so
Registered
- --------------
<S> <C>
______________ ______________
______________ ______________
</TABLE>
Securities to be Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class):
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ITEM 1. BUSINESS. 3
ITEM 2. FINANCIAL INFORMATION. 4
ITEM 3. PROPERTIES. 8
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. 9
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS. 10
ITEM 6. EXECUTIVE COMPENSATION. 11
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 12
ITEM 8. LEGAL PROCEEDINGS. 12
ITEM 9. MARKET PRICE OF AND DIVIDENDS OF ESSCO (USA), INC.'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS. 12
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES. 12
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED. 13
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS. 13
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 13
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. 13
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS. 14
SIGNATURES 16
EXHIBIT INDEX 17
</TABLE>
<PAGE>
ITEM 1. BUSINESS.
ESSCO (USA), Inc. (the "Registrant") was incorporated in the State of Delaware
on September 23, 1997. On October 9, 1997, Essco (USA), Inc. acquired 100% of
the issued and outstanding shares of MIDLAND, Agricultural S.A. and 49% of the
issued and outstanding shares of MIDLAND STEAMSHIPPING M. CO.
MIDLAND, Agricultural S.A. ("Midland Agricultural") was incorporated under the
laws of the Republic of Panama on November 17, 1995. Midland Agricultural is
based in Piraeus, Greece and derives its revenues from the trading of
agricultural commodities grown in the Former Soviet Union and transported and
sold to food manufacturers in various Mediterranean countries. The
agricultural commodities traded are wheat, wheat-flour, corn, barley,
sunflower seeds, beans, millets, citrus, and livestock feed. Midland
Agricultural also trades other commodities from time to time, such as
urea/fertilizer, cement, coal, steel, and timber.
MIDLAND STEAMSHIPPING M. CO. (" Midland Shipping") was incorporated according
to Greek Maritime law on September 17, 1996. Midland Shipping is based in
Piraeus, Greece and derives its revenues from one bulk carrier vessel of 3,500
mtns Dwt named "Victoria". The Victoria is managed by MIDLAND, Navigation Co.
and transports mainly agricultural commodities for Midland Agricultural.
Following the acquisition of Midland Agricultural and Midland Shipping, Essco
(USA), Inc.'s plan of operation for fiscal 1998 includes the following: (1)
Essco (USA), Inc. intends to acquire additional bulk carrier vessels for the
purpose of covering the demand for transportation of commodities and (2)
increase its agricultural commodity trading activities in the Former Soviet
Union and Mediterranean markets. Essco (USA), Inc. plans to acquire two
river-sea going vessels with about 3,000 metric tons cargo capacity and one
bulk/general vessel of 22,000 metric tons cargo capacity. In order to
increase its agricultural commodity trading activities, Essco (USA), Inc.
plans to enter agreements with farmers in the Former Soviet Union for the
future delivery of agricultural commodities at fixed quantities and prices.
Essco (USA), Inc. does not anticipate the need for material changes in the
number of its employees in the next twelve months.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS AND
CLASSES OF PRODUCTS OR SERVICES
<TABLE>
<CAPTION>
10 Months Ended Period Period
10/31/97 1996 1995
<S> <C> <C> <C>
Sales to unaffiliated customers:
Agricultural commodities
Other commodities
Transportation
Intersegment sales or transfers
Transportation
Operating profit or loss
Agricultural commodities
Other commodities
Transportation
Identifiable assets:
Agricultural commodities
Other commodities
Transportation
</TABLE>
<PAGE>
ITEM 2. FINANCIAL INFORMATION.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the Company's
Financial Statements and the related notes thereto attached hereto as pages
F-1 through F-23.
Essco (USA), Inc. is a transportation and handling company that operates
predominantly within the Black Sea and Mediterranean Sea area. The activities
of the Company include the carrying of various grain cargos from ports within
the Black Sea for delivery to mill and food processors within the
Mediterranean Sea. In addition to the transporting of cargo, the Company will
from time to time enter into management agreements with independent ship
owners to manage their vessels subject to standard operating agreements.
Essco (USA), Inc. also participates in the handling of grain commodities
through its wholly owned subsidiary. These activities include the
pre-purchase, transport and re-selling of specific grain products.
With the rapid changes taking place in Russia, Ukraine and Romania, along with
a growing demand for grain products in the Mediterranean Sea Basin, management
anticipates that with successful execution of its business plan, that Essco
(USA), Inc. could grow significantly over the next several years.
The ability of the Company to grow pursuant to its internal objectives hinges
on several factors. In part, the grain harvest(s) around the Black Sea Basin
which can be effected by climatic conditions and political factors could
potentially disrupt the Company's core shipping and handling business. In
addition, world market prices for grain commodities do fluctuate based upon,
in part, worldwide supply and demand. Lastly, in order for Essco (USA), Inc.
to capture the anticipated market share of the shipping and handling of grain
commodities within the Black/Mediterranean Sea basins, it will need to raise
capital or enter into long-term lease operating agreements to increase overall
fleet cargo capacity.
The Company's operating performance is influenced by several factors, the most
significant of which is operating efficiency. In the case of its shipping
operations, Essco has been able to traditionally maintain operating expenses
equal to 65%-80% of revenues. As a result of recent demand for vessels,
operating expenses have increased in the short-term which should be off-set as
cargo rates begin to reflect this demand.
In addition, the handling business has historically been a high volume, low
operating margin business. For the periods of 1996 and 1997 gross operating
margins have ranged from 15% to 9% and are subject to prevailing cargo rates,
and worldwide commodity prices.
It is currently estimated that 1998 should show marked improvements as a
result, in part, of certain efficiencies now being experienced by the Company.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
total revenues represented by each subsidiary of the Company's statements of
operations.
<TABLE>
<CAPTION>
TEN MONTHS ENDED OCTOBER 8, 1996 TO
OCTOBER 31, 1997 DECEMBER 31, 1996
1997% Breakdown 1996% Breakdown
<S> <C> <C>
TOTAL REVENUES: $ 14,273,575100% $ 24,491,135100%
================== ====================
Midland Agricultural $ 13,440,86094% $ 23,169,86095%
Midland Steamshipping $ 832,7156% $ 1,321,2755%
</TABLE>
<PAGE>
PERIOD ENDING OCTOBER 31, 1997
Sales for the ten months ending October 31, 1997 were $14,273,575 compared to
$20,624,285 for a similar period in 1996, a difference of $6,350,710 or 30%.
The basis for the decline in revenues can be attributed to the lower volumes
of grain commodities being handled by the Midland Agricultural subsidiary. As
a result of payment of dividends in 1996 of $255,403 as well as payment of
short-term notes of $200,000 in 1996, Midland Agricultural, is employing less
capital for the purchase of grain commodities, and is thus, recognizing lower
overall revenuesIn addition the agricultural business is somewhat cyclical
with obvious patterns to growing and harvest seasons of the grain commodities
it handles. As a result, the reduction in capital employed at the beginning
of 1997 is being demonstrated during this time period.
It is anticipated by management, that during 1998, more capital will be
Employed in the purchase of grain commodities resulting in a return to revenue
growth.
Midland Steamshipping is in part, affected by the activities of Midland
Agricultural. Given the level of cargo carried on behalf of Midland
Agricultural, the decline in overall volumes has resulted in fewer number of
trips required to transport said grains. This decline in volume has been
offset in part by higher cargo fees within the Black Sea and the Sea of Azov.
Cost of Goods sold for the period ending October 31, 1997 were $12,287,600 and
$469,320 for Midland Agricultural and Midland Steamshipping respectively.
These figures represent higher cost of goods sold as a percentage of revenues
in part due to the lower volumes being handled by the Company, and the fixed
costs associated with operations.
Selling, Administrative and Other operating expenses were down $401,339, at
$444,181 for the period ending October 31, 1997 compared to $845,520 for the
similar period in 1996. These savings are, in part, a result of lower costs
of capital, and certain variable expenses that are reduced as a result of
lower handling volumes. In addition there were one time expenses reported
during the same period in 1996.
Net Income was $633,536 or $0.13 per share for the period ended October 31,
1997 compared to a profit of $2,642,129 for a similar period in 1996.
Management attributes this decline in earnings as a result of the lower
overall volumes being handled by Midland Agricultural, and the resulting
transportation fees required.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1997, the Company had positive working capital of
$1,192,822. Management currently believes that the Company has sufficient
working capital and cash on hand to maintain its current business. In October
and November of 1997, Essco raised capital of $475,000 through the issuance of
short-term notes. It is anticipated by Management, that additional capital
will be raised, through either the issuance of shares, through bank financing,
or through leasing options to repay these notes, and fund anticipated growth.
Each of these potential sources of capital will be analyzed and compared by
Management. It is planned that any money raised through activities of the
Company will be utilized to purchase additional vessels for operations, as
well as providing additional capital to Midland Agricultural to increase the
total volume of goods being handled.
It is anticipated, that to continue to grow the business, additional capital
will be required. At its current stage, the Company continues to utilize
internally generated cash flow to fund this growth, which may cause delays in
reaching the internal operating goals set forth by Management.
The Company continues to evaluate alternative financing options in order to
continue the growth of the its shipping and handling operations which will
enable the Company to exploit the currently defined niche.
<PAGE>
PLAN OF OPERATION
Essco (USA), Inc. was formed as a vehicle to grow the existing shipping and
handling businesses of Midland Steamshipping and Midland Agricultural. Based
upon the historical operation data of these, and their predecessor companies,
it is believe that the overall shipping of agricultural goods from Former
Communist Countries bordering the Black Sea will be an opportunity for
dramatic growth.
At the current time, much of the agricultural industries of Russia, Ukraine,
and others are reeling from the lasting effects of communist control. As
these nations begin to privatize their agricultural industries, Management
expects market conditions to generate greater crop yields with lower
associated costs.
Essco (USA), Inc. intends to establish itself to service the current
marketplace, while creating a competitive advantage to grow with these crop
yields.
Based on this objective, Essco (USA), Inc. intends to add to its existing
fleet of one river/sea going vessel, two or three vessels of similar size
during 1998. These vessels will operate predominantly in the shallower seas
and waterways of the Black and Mediterranean Sea(s). To acquire these vessels
several options are available:
Raise Capital to Purchase Vessels
Utilize Bank Debt (i.e. Ship Mortgages)
Enter Into Lease Agreements
In each case the objective of entering into any such financing agreement will
be for the addition of cargo tonnage to the fleet. It is believe that with
the addition of each vessel, that certain operating efficiencies will be
recognized, thereby increase to the overall operations of the Company.
In addition to building up the shipping capabilities of the Company, Essco
will also seek to commit more capital to the handling of grain commodities.
Given current flows of monies, and payment terms required by collective and
individual farmers, it is very attractive for the Company to enter into
purchase agreements prior to planting of specific grain commodities. By
advancing a certain down payment (i.e. 25%) the Company is able to secure a
supply of goods at a pre-set price. Once executed, the Company in turn enters
into purchase agreements with food mills, processors and trading companies
that seek a reliable supply of grain commodities at a set price. The result
difference between the amount paid to the farmer, and the amount received from
the buyer is the gross profit, less operating expenses.
In 1996, Midland Agricultural was able to commit in excess of $1,000,000
towards the pre-purchase of grain commodities which results in profits in
excess of $2,000,000. Based on this historical performance, it is the goal of
Essco to raise sufficient capital, or enter into banking relationships,
whereby, Midland Agricultural, can contract to purchase higher volumes of
grain commodities. Furthermore, it is anticipated that by being able to roll
the capital, as well as a percentage of the operating profits into the next
growing season, that the overall volume of grain commodities purchased by the
Company should grow each season.
<PAGE>
The following table demonstrates the activities of Midland Agricultural for
the period ended October 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SHIPMENTS BY DATE QUANTITY M/T COMMODITY DESTINATION BUYER
M/V SOKOL 1/14/97 3,150 Feed Barley Selaata (Lebanon) PROALIM
M/V VICTORIA 1/18/97 1,430 Sunflower Seeds Achladi (Greece) GREEK OIL MILLS
M/V NATAVAN 2/4/97 2,980 Feed Barley Selaata (Lebanon) PROALIM
M/V VICTORIA 2/10/97 1,400 Sunflower Seeds Achladi (Greece) GREEK OIL MILLS
M/V R. BEHBUDOV 2/19/97 2,460 Sunflower Seeds Thessaloniki (Greece) GREEK FEED MILLS
M/V VICTORIA 2/28/97 1,470 Sunflower Seeds Achladi (Greece) GREEK OIL MILLS
M/V ST-1001 3/8/97 750 Sunflower Seeds Thessaloniki (Greece) GREEK FEED MILLS
M/V VICTORIA 3/19/97 1,450 Sunflower Seeds Achladi (Greece) GREEK OIL MILLS
M/V ALFA 4/4/97 2,870 Feed Barley Ravena (Italy) T.L.D. SRL
M/V VICTORIA 4/18/97 1,300 Sunflower Seeds Thessaloniki (Greece) GREEK FEED MILLS
M/V VICTORIA 5/22/97 1,950 Feed Barley Ravena (Italy) T.L.D. SRL
ADAM COMMODITIES
M/V NATAVAN 6/3/97 2,900 Feed Wheat Haifa (Israel)
ADAM COMMODITIES
M/V VOLGODON-2025 6/22/97 4,426 Feed Wheat Haifa (Israel)
M/V VICTORIA 6/28/97 1,980 Feed Barley Ravena (Italy) T.L.D. SRL
M/V AMUR-2529 7/8/97 3,450 Feed Barley Ravena (Italy) T.L.D. SRL
M/V SORMORSKITY-54 7/16/97 3,280 Feed Barley Selaata (Lebanon) PROALIM
M/V VICTORIA 7/22/97 1,975 Feed Barley Selaata (Lebanon) PROALIM
M/V KOMODOR 7/27/97 4,850 Feed Barley Ravena (Italy) T.L.D. SRL
M/V ALFA 8/2/97 2,980 Feed Wheat Selaata (Lebanon) PROALIM
M/V WATERLOO 8/8/97 2,895 Feed Wheat Haifa (Israel) KIMEL TRADING
ADAM COMMODITIES
M/V VICTORIA 8/14/97 1,950 Feed Barley Haifa (Israel)
M/V FAZUL 8/24/97 3,850 Feed Barley Alexandria (Egypt) EXIMCO
ADAM COMMODITIES
M/V VICTORIA 8/27/97 1,980 Feed Wheat Haifa (Israel)
M/V NATAVAN 9/5/97 2,706 Feed Barley Selaata (Lebanon) PROALIM
ADAM COMMODITIES
M/V VICTORIA 9/15/97 1,980 Feed Wheat Haifa (Israel)
M/V SORMORSKITY-54 9/20/97 2,780 Feed Barley Alexandria (Egypt) EXIMCO
M/V ALFA 9/28/97 2,985 Feed Barley Ashdod (Israel) KIMEL TRADING
ADAM COMMODITIES
M/V VOLGOBALT-161 10/6/97 2,775 Feed Barley Ashdod (Israel)
M/V AMUR-2529 10/8/97 2,940 Feed Wheat Selaata (Lebanon) PROALIM
M/V VOLGOBALT-184 10/11/97 2,880 Feed Barley Selaata (Lebanon) LORICO LTD.
ADAM COMMODITIES
M/V VICTORIA 10/12/97 1,980 Feed Wheat Haifa (Israel)
M/V R. BEHBUDOV 10/15/97 2,761 Feed Barley Haifa (Israel) PROALIM
M/V ALFA 10/22/97 2,982 Feed Barley Selaata (Lebanon) LORICO LTD.
M/V NATAVAN 10/26/97 2,629 Feed Wheat Selaata (Lebanon) PROALIM
M/V K. SENKEVICH 10/30/97 1,950 Sunflower Seeds Achladi (Greece) GREEK OIL MILLS
- ------------------ -------- ------------ --------------- --------------------- ----------------
Total Tonnage YTD 89,074
============
</TABLE>
Lastly, based upon prevailing market conditions, and the availability of
capital, Essco (USA), Inc. may invest in the development, or enhancement of
existing storage and loading facilities in the Port of Taganrog where the bulk
of its grain commodities are stored and loaded.
FINANCING ACTIVITIES
It is anticipated that Essco (USA), Inc. will raise additional capital in 1998
to fund the purchase of additional vessels, as well as increasing capital for
its agricultural operations. At this time, several options are being
considered, ranging from the private sale of securities subject to certain
exemptions of the Securities and Exchange Act of 1933, as amended, to the
execution of commercial banking facilities ranging from ship mortgages, to
letter of credit facilities, to the issuance of convertible debentures.
While the exact timing, form and structure of how the company will raise this
capital is still subject to investigation, negotiation and associated costs of
capital, the Company does intend to raise capital in 1998 to fund the
continued growth of its operations.
<PAGE>
ITEM 3. PROPERTIES.
Essco (USA), Inc. has certain lease obligations as well as significant fixed
assets as part of its normal course of business.
Currently, the Company is headquartered in Irvine, California, wherein it
subleases office space from C & K Capital Corporation an affiliated entity.
Currently, Essco (USA), Inc. pays monthly rent of $2,000 for use of office
facilities and equipment. It is anticipated that in 1998, the Company will
require sufficient office space that it will lease additional office space in
Irvine.
The bulk of the Company=s operations are managed from its offices in Pireaus,
Greece. Both the shipping and handling business are coordinated from these
offices totaling 180 square meters. The Company has entered into a 5 year
lease, with monthly lease payments of approximately $3,500 per month, with an
annual 10% increase during the term of the lease. (Approximate numbers are
utilized to take into considerations currency fluctuations.)
In addition, Midland Agricultural does maintain a representative office in
Taganrog, Russia. This office is responsible for communication and
coordination with growers in Southern Russia, loading of vessels and
preparation of necessary bills of lading. The Company currently leases 100
square meters under a 4 year lease, with an annual 15% increase during the
term of the lease, with an option to extend. Monthly lease payments of
approximately $2,500 are incurred per month.
Lastly, at this time, the largest fixed asset owned by the Company is the
AVictoria@ (currently being re-registered and renamed AEssco Pioneer@) which
is the only vessel currently owned. Having been built in 1976, the Victoria
is a river/sea going vessel, certified to traverse shallow seas and waterways.
These vessels have an estimated life of 25 to 35 years depending upon
maintenance. Proper insurance and registrations are current on this vessel.
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of January 15, 1998, the stock ownership of
each person known by Essco (USA), Inc. to be the beneficial owner of five
percent or more of Essco (USA), Inc.'s voting securities and each officer,
director, director nominees, and all officer's and directors as a group.
Unless otherwise indicated, each person has beneficial voting and investment
power with respect to the shares owned.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Addresses of Beneficial Owners Shares of Common Stock Beneficially Owned
Number Percentage
Christos Traios 3,250,200 67%
Director & CEO
3, IRODOTOU STR.
Piraeus-Hellas GREECE
Daniel C. Montano 600,000 12%
Director
18500 Von Karman, Suite 560
Irvine, CA 92612
Alexander G. Montano 200,000(1) 4%
Director & CFO
18500 Von Karman, Suite 560
Irvine, CA 92612
Dr. Wolfgang Priemer 50,000 1%
Director
18500 Von Karman, Suite 560
Irvine, CA 92612
Judy S. Pelton 48,000 1%
Secretary
18500 Von Karman, Suite 560
Irvine, CA 92612
Officers and directors as a group 4,128,200 85%
</TABLE>
(1) includes 100,000 shares held of record by C.K. Cooper & Company, Inc.
18500 Von Karman, Suite 560,Irvine,
CA 92612
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth the names and ages of all directors of Essco
(USA), Inc.; indicates all positions and offices with Essco (USA), Inc.; and
states each persons term of office.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Age Positions and Offices Term of Office as Director
Christos Traios 37 Director, CEO, October 9, 1997 - Present
Alexander G. Montano 26 Director, CFO September 30, 1997 - Present
Daniel C. Montano 49 Director October 9, 1997 - Present
Dr. Wolfgang Priemer 57 Director October 9, 1997 - Present
</TABLE>
Under the bylaws of Essco (USA), Inc., directors are elected at the annual
meeting of the stockholders and serve until their successors are elected and
qualified.
The following table sets forth the names and ages of all directors of Essco
(USA), Inc.; indicates all positions and offices with Essco (USA), Inc.; and
states each persons term of office.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Age Positions and Offices Term of Office as Officer
Christos Traios 37 CEO October 9, 1997 - Present
Alexander G. Montano 26 CFO September 30, 1997 - Present
Judy S. Pelton 56 Secretary October 9, 1997 - Present
</TABLE>
The business experience during the past five years of each director and
executive officer is set forth below.
Mr. Christos Traios is Chairman of the Broad, President and Chief Executive
Officer of the company. Mr, Traios founded Mill-Agro Hellas SA, and Meghael
Company in 1995 and 1996, which were predecessor companies of ESSCO. From
1986 to 1995, Mr. Traios was President and Chief Executive Officer of Nattem
Group of Companies. These companies included shipping, construction,
passenger vessels, and trading in the Black Sea and Mediterranean Sea areas.
Mr. Traios attended the Law School in Thessaloniki and is a citizen of Greece.
Mr. Daniel C. Montano is Vice Chairman of the Company and a member of the
Board of Directors. Mr, Montano has been a associated with ESSCO since its
founding in 1997. Mr. Daniel Montano has been Managing Director of Investment
Banking for C&K Capital Corporation since January 1997. Prior to that he was
Director of Investment Banking at Brookstreet Securities Corporation. From
1979 until 1994, Mr. Montano was Chairmen of the Broad and President of
Montano Securities, a USA securities firm which had ten offices across the
United States. Mr. Montano is a member of the Board of Directors of two other
publicly traded companies: Helen of Troy Corporation and DCC Compact Classics
Inc. Mr. Montano obtained his MBA from the University of Southern California
and a BS from California State University at Los Angeles. Mr. Montano also
taught at Pepperdine University and California State University at Fullerton.
Mr. Daniel Montano is the father of Mr. Alexander Montano.
Mr. Alexander Montano is Chief Financial Officer of ESSCO and a member of the
Board of Directors. Mr. Montano is also the Founder and President of C&K
Capital Corporation, an international financial services company. In
addition, Mr. Montano is the President of C.K. Cooper & Company, an investment
banking/securities brokerage firm that focuses primarily on the oil and gas
industry. Prior to these current activities Mr. Montano was employed by
Brookstreet Securities Corporation as Director of Research from 1995 to 1996.
From 1992 to 1995 Mr. Montano was Chief Operating Officer and Director for
Montano Securities Corporation, a nationwide USA securities brokerage and
investment banking firm with ten offices. On December 31, 1997, Mr. Montano
filed personal bankruptcy. Mr. Montano attended the University of Southern
California and is the son of Mr. Daniel Montano.
<PAGE>
Ms. Judith Pelton is the Corporate Secretary of the Company. She has worked
in the investment and securities business for over 25 years. Since January
1997 she has been a Director at C.K. Capital Corporation. From 1995 to 1996
she was employed at Brookstreet Securities in the investment banking
department. From 1984 till 1994 she was employed at Montano Securities
Corporation, her last position was as Vice President of Administration,
handling regulatory and administrative functions for this nationwide USA
securities/investment banking firm.
Wolfgang Priemer, Ph.D is a member of the Company's Board of Directors. Dr.
Priemer is managing director and shareholder of KRUPS-LOGISTIC SYSTEMS, a
young company that developed and markets a new sophisticated technology for
sorting and commissioning for a large range of products. He holds a position
as an inactive director and shareholder of a company offering the service of
outsourcing the production of parts and components for machines to Eastern
Europe including to the own subsidiary machining company in Poland with 400
employees. He holds the position of an honoree director of the foreign trade
committee of the VDMA (German machine builders association) and is a vice
director of the same committee in the BDI (Association of German Industry).
Dr. Priemer received his Master Degree in mechanical engineering from the
University of Darmstadt and his Ph.D. from the University of Fribourg in
marketing. He has twenty-five years of experience in successfully managing as
President a group of internationally operating machine building companies -
The Kolbus GmbH & Co. KG -with global turnover of then two hundred million
dollars. Dr. Priemer has a special expertise in taking over companies in
turnaround situations and making them successful. As foreign languages he
speaks German, English, French and some Spanish.
ITEM 6. EXECUTIVE COMPENSATION.
The following summary compensation table sets forth in summary form the
compensation received during each of Essco (USA), Inc.'s last three completed
fiscal years by Essco (USA), Inc.'s Chief Executive Officer. No other
executive earned in excess of $100,000.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Summary Compensation Table
- --------------------------------------
Name
And Year
principal
Position Salary ($) Bonus ($)
Christos 1997 $ 300,000 $ 0
Traios 1996 $ 300,000 $ 0
</TABLE>
The following table sets forth the Option/SAR grants in the last fiscal year.
<TABLE>
<CAPTION>
<BTB>
Option/SAR Grants in Last Fiscal Year
Individual Grants Potential realizable
Value at
Assumed rates
Of stock price
Appreciation of (f) and
Option (g)
Name Optioni/SARs Percent of total Exercise of Expiration date 5%($) 10%($) Grant date
Granted (#) Options/SARs Base price Present
Granted to ($/Sh) Value
<S> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (f)
CEO 1,000,000 100% 9.00 11/30/07 $0
Christos
Traios
</TABLE>
There were no option/SAR exercises in the last completed fiscal year.
<PAGE>
On December 1, 1997, Essco (USA), Inc. entered into a five year employment
agreement with Christos Traios to serve as Essco (USA), Inc.'s chief executive
officer. Under the employment agreement, Essco (USA), Inc. agreed to pay Mr.
Traios an annual salary of $300,000 and a bonus of 10% of the operating
profits of Essco (USA), Inc. in excess of $3,000,000 per year. The employment
agreement also granted Mr. Traios the option to acquire 1,000,000 shares of
Essco (USA), Inc.'s $.001 par value common stock at an exercise price of $9.00
per share. The non-qualified stock option expires November 30, 2007.
No other officer has a written employment agreement with Essco (USA), Inc
Essco (USA), Inc. has no annuity, pension or retirement plans or other plans
for which benefits are based on actuarial computations.
Essco (USA), Inc. has no standard arrangements by which its directors are
compensated.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On October 9, 1997, Essco (USA), Inc. acquired 100% of the issued and
outstanding shares of MIDLAND, Agricultural S.A. and 49% of the issued and
outstanding shares of MIDLAND STEAMSHIPPING M. CO. from Mr. Chistos Traios in
exchange for 3,250,200 shares of Essco (USA), Inc.'s common stock.
The following persons may be considered promoters of Essco (USA), Inc.:
Alexander G. Montano, Daniel C. Montano and C.K. Cooper & Company, Inc.
Alexander G. Montano received 100,000 shares of Essco (USA), Inc.'s common
stock (approximately 2%) in exchange for his efforts. Daniel C. Montano
received 600,000 shares of Essco (USA), Inc.'s common stock (approximately
12%) in exchange for his efforts. C. K. Cooper & Company, Inc. received
100,000 shares of Essco (USA), Inc.'s common stock (approximately 2%) in
exchange for his efforts. C.K. Cooper & Company, Inc. is a corporation over
which Alexander G. Montano exercises voting control.
ITEM 8. LEGAL PROCEEDINGS.
None.
ITEM 9. MARKET PRICE OF AND DIVIDENDS OF ESSCO (USA), INC.'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
There is no established public trading market for Essco (USA), Inc.'s $.001
par value common stock. At the present time there are no outstanding options
or warrants to purchase common stock, or securities convertible into common
stock of Essco (USA), Inc., except for the stock option covering 1,000,000
shares at an exercise price of $9.00 per share held by Mr. Christos Traios.
There are no securities outstanding that could be sold pursuant to Rule 144
under the Securities Act or that Essco (USA), Inc. has agreed to register
under the Securities Act for sale by security holders. There are no
securities that are being, or have been publicly proposed to be, publicly
offered by Essco (USA), Inc., the offering of which could have a material
effect on the market price of Essco (USA), Inc.'s common stock.
As of November 15, 1997, there were approximately 38 holders of Essco (USA),
Inc.'s common stock.
Essco (USA), Inc. has never paid any dividends and it is unlikely that Essco
(USA), Inc. will pay dividends in the next two years.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
On November 19, 1997, Essco (USA), Inc. received $476,900 in bridge financing
from DayStar Partners, L.P., a California limited partnership. Under the
terms of the bridge loan, Essco (USA), Inc. sold 47.5 Units consisting of a
$10,000 promissory note and 2,000 shares of Essco (USA), Inc.'s common stock.
The notes are due and payable six months following issuance. The transaction
was exempt from registration under Section 4(2) of the Securities Act of 1933
as a transaction by an issuer not involving any public offering.
<PAGE>
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
Essco (USA), Inc.'s authorized capital stock consists of 21 million shares of
which 20 million shares are designated common stock, with $.001 par value and
1 million shares are designated $.001 par value preferred stock. There are
presently issued and outstanding 4,884,000 shares of common stock. No
preferred stock has been issued by Essco (USA), Inc
Common Stock
There are approximately 38 holders of Essco (USA), Inc.'s common stock. The
holders of Essco (USA), Inc.'s common stock are entitled to one vote for each
share on all matters voted on by stockholders, including election of
directors. Except as otherwise required by law or provided in any resolution
adopted by Essco (USA), Inc.'s Board of Directors with respect to any series
of Preferred Stock, the holders of such shares will possess all voting power.
The shares of Essco (USA), Inc.'s common stock are free of preemptive rights
and will participate in all dividends, if any, that are declared by Essco
(USA), Inc.'s board of directors in the future.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Delaware law, a corporation may indemnify its officers, directors,
employees, and agents under certain circumstances, including indemnification
of such persons against liability under the Securities Act of 1933. A true
and correct copy of Section 145 of the Delaware General Corporation Law which
addresses indemnification of officers, directors, employees and agents is
attached hereto as Exhibit 99.1
In addition, Section 102(b)(7) of the Delaware General Corporation Law and the
Company's Certificate of Incorporation provide that a director of this
corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
except for liability (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for paying a dividend or approving a stock repurchase in violation of
Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit.
The Company's Certificate of Incorporation and Bylaws contain provisions that
no director of the Company shall be liable to the Company for monetary damages
for breach of fiduciary duty as a director involving any act or omission of
such director other than (i) for breach of director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases, or (iv) for any transaction from which the director derived an
improper personal benefit.
The effect of these provisions may be to eliminate the rights of the Company
and its stockholders (through stockholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described in clauses (i)
- - (iv) of the preceding sentence.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Not applicable.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
Attached hereto as pages F-1 through F-23 are the financial statements of
Essco (USA), Inc.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
MIDLAND AGRICULTURAL, S.A. Page
----
<S> <C>
Financial Statements:
Independent Auditors' Report F-1
Balance Sheets at December 31, 1996 and 1995 (Audited), and October 31, 1997 (Unaudited) F-2
Statements of Operations for the Year Ended December 31, 1996 and for the Period from October 1,
1995 to December 31, 1995 (Audited) and for the Ten Months Ended October 31, 1997 and 1996
(Unaudited) F-3
Statements of Stockholders' Equity for the Period from October 1, 1995 to December 31, 1995
and for the Year Ended December 31, 1996 (Audited) and for the Ten Months Ended October 31,
1997 (Unaudited) F-4
Statements of Cash Flows for the Year Ended December 31, 1996 and for the Period from October 1,
1995 to December 31, 1995 (Audited) and for the Ten Months Ended October 31, 1997 and 1996
(Unaudited) F-5
Notes to Financial Statements F-6
MIDLAND STEAMSHIPPING COMPANY
Financial Statements:
Independent Auditors' Report F-11
Balance Sheets at December 31, 1996 (Audited), and October 31, 1997 (Unaudited) F-12
Statements of Operations for the Period from October 8, 1996 to December 31, 1996 (Audited),
and for the Ten Months Ended October 31, 1997 (Unaudited) F-13
Statements of Stockholders' Equity for the Period from October 8, 1996 to December 31,
1996 (Audited), and for the Ten Months Ended October 31, 1997 (Unaudited) F-14
Statements of Cash Flows for the Period from October 8, 1996 to December 31, 1996 (Audited),
and for the Ten Months Ended October 31, 1997 (Unaudited) F-15
Notes to Financial Statements F-16
ESSCO (USA), INC.
Unaudited Proforma Consolidated Financial Statements:
Unaudited Pro Forma Condensed Consolidated Balance Sheet at October 31, 1997 F-20
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
Ten Months Ended October 31, 1997 F-21
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements F-22
</TABLE>
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Midland Agricultural, S.A.
We have audited the accompanying balance sheets of Midland Agricultural, S.A.
as of December 31, 1996 and 1995, and the related statement of operations,
cash flows and stockholders' equity for the periods 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 as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Midland Agricultural, S.A. as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the periods then ended, in conformity with generally accepted
accounting principles.
BROWN ARMSTRONG RANDALL & REYES
ACCOUNTANCY CORPORATION
Bakersfield, California
November 1, 1997
<PAGE>
<PAGE>
<PAGE>
The accompanying notes are an integral part of these financial statements.
MIDLAND AGRICULTURAL, S.A.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995, AND OCTOBER 31, 1997
<TABLE>
<CAPTION>
December 31, December 31, October 31,
1996 1995 1997
------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 365,390 $ 10,000 $ 356,556
Accounts receivable 2,530,883 - 644,400
Related party receivable - - 6,800
------------- ------------- -------------
Total Current Assets 2,896,273 10,000 1,007,756
------------- ------------- -------------
Fixed Assets - net of depreciation 28,640 - 23,011
------------- ------------- -------------
TOTAL ASSETS $ 2,924,913 $ 10,000 $ 1,030,767
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 12,484 $ - $ 86,430
Accrued employee benefits - - 10,000
------------- ------------- -------------
Total Current Liabilities 12,484 - 96,430
------------- ------------- -------------
Commitments and Contingencies
Stockholders' Equity
Common stock, $100 par value, 10,000 shares
authorized, 100 shares issued and outstanding 10,000 10,000 10,000
Retained earnings 2,902,429 - 924,337
------------- ------------- -------------
Total Stockholders' Equity 2,912,429 10,000 934,337
------------- ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,924,913 $ 10,000 $ 1,030,767
============= ============= =============
</TABLE>
<PAGE>
MIDLAND AGRICULTURAL, S.A.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND FOR THE PERIOD
FROM OCTOBER 1, 1995 TO DECEMBER 31, 1995 AND
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Year Ended Period from Ten Months Ended Ten Months Ended
December 31, October 1, 1995 to December 31, October 31, October 31,
1996 1995 1997(Unaudited) 1996(Unaudited)
------------ -------------------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Sales $ 23,169,860 $ 2,224,000 $ 13,440,860 $ 19,303,010
Cost of Sales 19,708,525 1,909,296 12,287,600 16,612,170
------------- -------------------------------- ------------------ ------------------
Gross Profit 3,461,335 314,704 1,153,260 2,690,840
------------- -------------------------------- ------------------ ------------------
Operating Expenses
General and
administrative
expenses 558,906 71,200 228,923 304,114
Provision for doubtful
accounts - - 300,000 -
------------- -------------------------------- ------------------ ------------------
Total Operating Expenses 558,906 71,200 528,923 304,114
------------- -------------------------------- ------------------ ------------------
Net Income $ 2,902,429 $ 243,504 $ 624,337 $ 2,386,726
============= ================================ ================== ==================
Net Income per Common
Share $ 29,024.29 $ 2,435.04 $ 6,243.37 $ 23,867.26
============= ================================ ================== ==================
Weighted Average Common
Shares Outstanding 100 100 100 100
============= ================================ ================== ==================
</TABLE>
<PAGE>
MIDLAND AGRICULTURAL, S.A.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 1, 1995 TO DECEMBER 31, 1995 AND
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
Common Stock Common Stock
Number of Shares Amount Retained Earning
---------------- --------------- ----------------
<S> <C> <C> <C>
Balance at October 1,
1995 - $ - $ -
Issuance of stock 100 10,000 -
Dividends - - (243,504)
Net income - - 243,504
---------------- --------------- ------------------
Balance at
December 31, 1995 100 10,000 -
Net income - - 2,902,429
---------------- --------------- ------------------
Balance at
December 31, 1996 100 10,000 2,902,429
Dividends (unaudited) - - (2,602,429)
Net income (unaudited) - - 624,337
---------------- --------------- ------------------
Balance at October 31,
1997 (unaudited) 100 $ 10,000 $ 924,337
================ =============== ==================
Total Stockholders'
Equity
---------------------
<S> <C>
Balance at October 1,
1995 $ -
Issuance of stock 10,000
Dividends (243,504)
Net income 243,504
---------------------
Balance at
December 31, 1995 10,000
Net income 2,902,429
---------------------
Balance at
December 31, 1996 2,912,429
Dividends (unaudited) (2,602,429)
Net income (unaudited) 624,337
---------------------
Balance at October 31, 1997 (unaudited)
$ 934,337
=====================
</TABLE>
<PAGE>
MIDLAND AGRICULTURAL, S.A.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND FOR THE PERIOD
FROM OCTOBER 1, 1995 TO DECEMBER 31, 1995 AND
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Ten Months Ten Months
Year Ended Year Ended Ended Ended
December31, December31, October 31, October 31,
1996 1995 1997(Unaudited) 1996(Unaudited)
------------- ------------- ---------------- ----------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 2,902,429 $ 243,504 $ 624,337 $ 2,386,726
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 6,360 - 5,629 1,000
Changes in assets and liabilities:
Decrease (increase) in trade
receivables (2,530,883) - 1,886,483 (1,548,600)
Decrease (increase) in related
party receivables - - (6,800) -
Increase (decrease) in accounts
payable 12,484 - 73,946 12,484
Increase (decrease) in accrued
employee benefits - - 10,000 -
------------- ------------- ---------------- ----------------
Net Cash Provided by Operating
Activities 390,390 243,504 2,593,595 851,610
------------- ------------- ---------------- ----------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to fixed assets (35,000) - - (35,000)
------------- ------------- ---------------- ----------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from common stock
issuance - 10,000 - -
Dividends - (243,504) (2,602,429) -
------------- ------------- ---------------- ----------------
NET CASH USED BY INVESTING
ACTIVITIES - (233,504) (2,602,429) -
------------- ------------- ---------------- ----------------
Net Increase (Decrease) in Cash and
Cash Equivalents 355,390 10,000 (8,834) 816,610
Cash and cash equivalents, beginning
of period 10,000 - 365,390 10,000
------------- ------------- ---------------- ----------------
Cash and cash equivalents, end of period
$ 365,390 $ 10,000 $ 356,556 $ 826,610
============= ============= ================ ================
</TABLE>
<PAGE>
MIDLAND AGRICULTURAL, S.A.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND FOR THE PERIOD
FROM OCTOBER 1, 1995 TO DECEMBER 31, 1995 AND FOR THE
TEN MONTHS ENDED OCTOBER 31, 1997 AND 1996
(THE INFORMATION AND AMOUNTS FOR INTERIM PERIODS ARE UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------
NATURE OF OPERATIONS
Midland Agricultural, S.A. (the "Company"), a Republic of Panama Corporation,
was formed on October 1, 1995. The Company was incorporated according to the
laws of the Republic of Panama on November 11, 1995, and registered at the
corporations' registry on November 21, 1995. The Company's headquarters is in
Athens, Greece. The Company was formerly known as Mill-AGRO Hellas, SA;
however, on May 3, 1997, the Company name was changed to Midland Agricultural,
S.A. The Company is involved in the trade of agricultural products such as
wheat, wheat-flour, corn, and barley. The Company has processing, storage,
transportation and an office in Taganrog Port (Russia) and acts as the link
between farmers in Russia and the food manufacturers in the Mediterranean
countries. The Company exclusively uses the related shipping entity, Midland
Steamshipping Company. All accounts are settled with letters of credit with
U.S. dollars.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company recognizes revenues from the sales of agricultural products in the
period of shipping and issuing of invoices. Virtually all sales are transacted
in U.S. dollars.
FIXED ASSETS
Furniture and fixtures are recorded at cost. Depreciation on furniture and
fixtures is determined using the straight-line method over the estimated
useful lives of the assets. Expenditures for maintenance and repairs are
expensed when incurred and betterments are capitalized.
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
----------------------------------------------
NET INCOME PER COMMON SHARE
Net income per common share has been computed by dividing net earnings by the
weighted average number of shares outstanding during the period.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, cash includes all cash and
investments with maturities of three months or less.
INCOME TAXES
According to Greek and Panamanian Law the Company is not subject to income
taxes.
INTERIM FINANCIAL STATEMENTS
The interim financial information as of October 31, 1997, and for the ten
months ended October 31, 1997 and 1996, is unaudited. However, in the opinion
of management, these interim financial statements include all necessary
adjustments to fairly present the results of the interim periods, and all such
adjustments are of a normal recurring nature. The interim financial statements
should be read in conjunction with the audited financial statements for the
year ended December 31, 1996 and for the period from October 1, 1995 to
December 31, 1995.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share," which will be effective for the Company beginning December 31, 1997.
SFAS 128 replaces the presentation of primary earnings per share with a
presentation of basic earnings per share based upon the weighted average
number of common shares for the period. It also requires dual presentation of
basic and diluted earnings per share for companies with complex capital
structures. Prior period financial statements provided for comparative
purposes will require restatement. This statement will not have a material
effect on financial statements presented by the Company.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting Comprehensive Income." This statement requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. SFAS 130
will be adopted by the Company for the year ended December 31, 1998. Prior
period financial statements provided for comparative purposes will be
reclassified, as required. This statement has no effect on financial
statements traditionally presented by the Company, but increases required
disclosures.
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
----------------------------------------------
NEW ACCOUNTING PRONOUNCEMENTS (Continued)
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related
Information." The statement requires the Company to report income/loss,
revenue, expense and assets by business segment including information
regarding the revenues derived from specific products and services and about
the countries in which the Company is operating. The Statement also requires
that the Company report descriptive information about the way that operating
segments were determined, the products and services provided by the operating
segments, differences between the measurements used in reporting segment
information and those used in the Company's general purpose financial
statements, and changes in the measurement of segment amounts from period to
period. SFAS 131 will be adopted by the Company for the year ended December
31, 1998.
NOTE 2 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------------------------------
The carrying amount of cash, accounts receivable, accounts payable and accrued
liabilities approximates fair value because of the short maturity of these
instruments. Virtually all accounts receivable are settled with letters of
credit within eight days from loading.
NOTE 3 - RELATED PARTY TRANSACTIONS
------------------------------
At October 31, 1997, the Company has $6,800 of related party receivables,
which is receivable from Midland Liners, Co., a company owned by the Company's
major shareholder.
At October 31, 1997, the Company had paid to C & K Capital Corporation fees in
total of $100,000 for services rendered in relation to the acquisition of
Midland Steamshipping and Midland Agricultural. In addition, the Company had
reimbursed certain legal, travel, and office expenses incurred as a result of
these services provided.
At this time, the Company continues to sublease office space from C & K
Capital Corporation at a rate of $2,000 per month, plus any extraordinary
expenses such as telephone charges, etc.
C & K Capital Corporation is a corporation owned by Mr. Alexander G. Montano,
the Chief Financial Officer of the Company, and employs Mr. Daniel C.
Montano, Vice Chairman as a managing director (see Note 7).
The Company will from time to time purchase agricultural commodities in Russia
at prevailing market prices from an agricultural company in which Mr. Christos
Traios is a shareholder.
<PAGE>
NOTE 4 - CONCENTRATIONS
--------------
SALES
Financial instruments which potentially subject the Company to concentrations
of credit risk consist primarily of sales. In the normal course, the Company
provides credit terms to its customers. Accordingly, the Company performs
ongoing credit evaluations of its customers and, if necessary, maintains
allowances for possible losses.
The following purchasers accounted for 10% or more of the Company's sales for
the periods ended:
<PAGE>
<TABLE>
<CAPTION>
Ten Months
For the Year Ended Ended
December 31, 1996 October 31, 1997
------------------- -----------------
(Unaudited)
<S> <C> <C>
Purchaser A 12% 20%
Purchaser B 24% 25%
Purchaser C 38% 11%
Purchaser D 20% -
</TABLE>
<PAGE>
MARKETS
Midland Agricultural primarily handles agricultural goods that are harvested
and delivered in Southern Russia. As a result, the business of the Company is
mpacted by items such as weather patterns, and political risk associated with
Russia.
The bulk of the Company's agricultural goods are in turn sold to various
purchasers around the Mediterranean Sea, with a predominance in nations such
as Italy, Greece, Israel, Lebanon and Egypt.
NOTE 5 - CONTINGENCIES
The Company is involved in legal actions arising in the ordinary course of
business. In the opinion of management, the Company has adequate legal
defenses or insurance coverage with respect to each of these actions and does
not believe that they will materially affect the Company's results of
operations or financial position.
<PAGE>
NOTE 6 - LEASE COMMITMENTS
The Company pays approximately $2,500 per month for 100 square meters of
office space in Taganrog. The Company just completed its first year of a four
year lease, with annual increases of 15%. The Company has the choice to
exercise an option to extend the lease for an additional four years.
NOTE 7 - SUBSEQUENT EVENT
On October 8, 1997, the Company entered into an acquisition agreement whereby
ownership was transferred from Mr. Christos Traios, to Essco (USA), Inc. for
3,250,000 shares of common stock.
Additionally, 49% of Midland Steamshipping Company common stock was acquired
by Essco (USA), Inc. Essco (USA), Inc. was formed by officers of C & K
Capital Corporation (see Note 3), who will continue as officers and board
members for Essco (USA), Inc.
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Midland Steamshipping Co.
We have audited the accompanying balance sheets of Midland Steamshipping Co.as
of December 31, 1996 and 1995, and the related statement of operations,
cash flows and stockholders' equity for the 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 statement 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 as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Midland Steamshipping Co. as
of December 31, 1996 and 1995, the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
BROWN ARMSTRONG RANDALL & REYES
ACCOUNTANCY CORPORATION
Bakersfield, California
November 1, 1997
<PAGE>
<PAGE>
<PAGE>
The accompanying notes are an integral part of these financial statements.
MIDLAND STEAMSHIPPING CO.
BALANCE SHEETS
DECEMBER 31, 1996 AND OCTOBER 31, 1997
<TABLE>
<CAPTION>
December 31, October 31,
1996 1997
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 219,436 $ 302,822
Related party receivables 155,055 -
Prepaid expenses - 68,064
------------- -------------
Total Current Assets 374,491 370,886
------------- -------------
Property and Equipment
Vessels 1,200,000 1,200,000
Furniture and fixtures 55,727 55,727
------------- -------------
1,255,727 1,255,727
Less: accumulated deprecation 125,600 334,886
------------- -------------
Total Property and Equipment 1,130,127 920,841
------------- -------------
TOTAL ASSETS $ 1,504,618 $ 1,291,727
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Loan payable $ 200,000 $ -
Accrued liabilities 45,015 5,100
Accrued employee benefits payable - 10,000
------------- -------------
Total Liabilities 245,015 15,100
------------- -------------
Commitments and Contingencies
Stockholders' Equity
Common stock, $42 par value, 100 shares authorized, 100 shares
issued and outstanding 4,200 4,200
Additional paid-in capital 1,000,000 1,000,000
Retained earnings 255,403 272,427
------------- -------------
Total Stockholders' Equity 1,259,603 1,276,627
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,504,618 $ 1,291,727
============= =============
</TABLE>
<PAGE>
MIDLAND STEAMSHIPPING CO.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION ON OCTOBER 8, 1996 TO
DECEMBER 31, 1996 AND
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
October 8,
1996 Ten Months
To Ended
December 31, October 31,
1996 1997
-------------- -------------
(Unaudited)
<S> <C> <C>
Revenues from voyages $ 1,321,275 $ 832,715
-------------- -------------
Operating expenses
Vessel expenses 779,258 469,320
General and administrative expenses 286,614 90,968
-------------- -------------
Total Operating Expenses 1,065,872 560,288
-------------- -------------
Net Income $ 255,403 $ 272,427
============== =============
Net Income per Common Share $ 2,554.03 $ 2,724.27
============== =============
Weighted Average Common Shares Outstanding 100 100
============== =============
</TABLE>
<PAGE>
MIDLAND STEAMSHIPPING CO.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 8, 1996 TO DECEMBER 31, 1996 AND
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
Common
Stock Common Additional Total
Number of Stock Paid-in Retained Stockholders
Shares Amount Capital Earnings Equity
--------- ------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Balance at October 8, 1996 - $ - $ - $ - $ -
Issuance of stock 100 4,200 - - 4,200
Assets contributed at book value - - 1,000,000 - 1,000,000
Net Income - - - 255,403 255,403
--------- ------- ----------- ---------- --------------
Balance at December 31, 1996 100 4,200 1,000,000 255,403 1,259,603
Dividends (unaudited) - - - (255,403) (255,403)
Net income (unaudited) - - - 272,427 272,427
--------- ------- ----------- ---------- --------------
Balance at October 31, 1997 (unaudited)
100 $ 4,200 $ 1,000,000 $ 272,427 $ 1,276,627
========= ======= =========== ========== ==============
</TABLE>
<PAGE>
MIDLAND STEAMSHIPPING CO.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION ON OCTOBER 8, 1996 TO
DECEMBER 31, 1996 AND
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
October 8, 1996 Ten Month
to Ended
December 31, October 31,
1996 1997
----------------- -------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 255,403 $ 272,427
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Depreciation 125,600 209,286
Changes in assets and liabilities:
Decrease (increase) in related receivables (155,055) 155,055
Decrease (increase) in prepaid expenses - (68,064)
Increase (decrease) in accrued liabilities 45,015 (29,915)
----------------- -------------
Net Cash Provided by Operating Activities 270,963 538,789
----------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of furniture and fixtures (55,727) -
----------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on note payable - (200,000)
Dividends - (255,403)
Proceeds from stock issuance 4,200 -
----------------- -------------
Net Cash Provided (Used) by Financing Activities 4,200 (455,403)
----------------- -------------
Net Increase in Cash and Cash Equivalents 219,436 83,386
Cash and cash equivalent at beginning of period - 219,436
----------------- -------------
Cash and cash equivalent at end of period $ 219,436 $ 302,822
================= =============
</TABLE>
<PAGE>
<PAGE>
MIDLAND STEAMSHIPPING CO.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION ON OCTOBER 8, 1996 TO
DECEMBER 31, 1996 AND
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997
(THE INFORMATION AND AMOUNTS FOR INTERIM PERIODS ARE UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------
NATURE OF OPERATIONS
Midland Steamshipping Co. (the "Company"), a Greek Maritime Corporation,
headquartered in Athens, was formed on September 17, 1996. The Company was
formerly known as Megahel Nautical, however, its name was changed on March 13,
1997, to Midland Steamshipping. The Company is involved in the shipping of
agricultural products. The Company primarily ships the products of a related
party Midland Agricultural, S.A. Virtually all sales are done in U.S. dollars.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE AND EXPENSE RECOGNITION
Voyage revenues and expenses are included in income at the time each voyage
leg commences. This method of accounting does not differ materially from other
acceptable accounting methods.
PROPERTY AND EQUIPMENT
Furniture and fixtures are recorded at cost. Depreciation on furniture and
fixtures is determined using the straight-line method over the estimated
useful lives of the assets, which is five years.
The Company owns one shipping vessel, which is recorded at cost and has an
estimated useful life of five years. Vessel depreciation is computed using the
straight-line method. Expenditures for maintenance and repairs of vessels are
expensed when incurred and betterments are capitalized.
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
----------------------------------------------
NET INCOME PER COMMON SHARE
Net income per common share has been computed by dividing net earnings by the
weighted average number of shares outstanding during the period.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, cash includes all cash and
investments with maturities of three months or less.
LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and/or Long-Lived Assets to be Disposed
of." This statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Impairment loss under SFAS No. 121 is
calculated as the difference between the carrying amount of the asset and its
fair value. Management reviews carrying amounts of significant assets, e.g.,
vessels, quarterly.
INCOME TAXES
According to Greek Law the Company is not subject to income taxes.
INTERIM FINANCIAL STATEMENTS
The interim financial information as of October 31, 1997, and for the ten
months ended October 31, 1997, is unaudited. However, in the opinion of
management, these interim financial statements include all necessary
adjustments to present fairly the results of the interim periods, and all such
adjustments are of a normal recurring nature. The interim financial statements
should be read in conjunction with the audited financial statements for the
period from inception on October 8, 1996 to December 31, 1996.
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
----------------------------------------------
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share," which will be effective for the Company beginning December 31, 1997.
SFAS 128 replaces the presentation of primary earnings per share with a
presentation of basic earnings per share based upon the weighted average
number of common shares for the period. It also requires dual presentation of
basic and diluted earnings per share for companies with complex capital
structures. Prior period financial statements provided for comparative
purposes will require restatement. This statement will not have a material
effect on financial statements presented by the Company.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting Comprehensive Income." This statement requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. SFAS 130
will be adopted by the Company for the year ended December 31, 1998. Prior
period financial statements provided for comparative purposes will be
reclassified, as required. This statement has no effect on financial
statements traditionally presented by the Company, but increases required
disclosures.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related
Information." The statement requires the Company to report income/loss,
revenue, expense and assets by business segment including information
regarding the revenues derived from specific products and services and about
the countries in which the Company is operating. The Statement also requires
that the Company report descriptive information about the way that operating
segments were determined, the products and services provided by the operating
segments, differences between the measurements used in reporting segment
information and those used in the Company's general purpose financial
statements, and changes in the measurement of segment amounts from period to
period. SFAS 131 will be adopted by the Company for the year ended December
31, 1998.
NOTE 2 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------------------------------
The carrying amount of cash, accounts receivable, accounts payable and accrued
liabilities approximates fair value because of the short maturity of these
instruments.
<PAGE>
NOTE 3 - RELATED PARTY TRANSACTIONS
------------------------------
At December 31, 1996, the Company had $155,055 of related party receivables.
These receivables are from companies owned by the Company's major shareholder.
NOTE 4 - CONCENTRATIONS
--------------
The largest single customer of Midland Steamshipping is its sister Company,
Midland Agricultural. This single customer accounts for approximately 60% of
voyages made during the period of 1996 through October 31, 1997.
The Company is comfortable that there is sufficient demand for river/sea going
vessels that its fleet could be employed at prevailing "day rates" should
Midland Agricultural not require the level of service it has historically
chartered.
NOTE 5 - NOTE PAYABLE
---------------
The note payable a December 31, 1996 is composed of a note due for the
purchase of Company vessels.
NOTE 6 - CONTINGENCIES
-------------
The Company is involved in legal actions arising in the ordinary course of
business. In the opinion of management, the Company has adequate legal
defenses or insurance coverage with respect to each of these actions and does
not believe that they will materially affect the Company's results of
operations or financial position.
NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
-----------------------------------------------------
During October 1996, the Company received a vessel valued at $1,200,000 in
exchange for an increase in capital of $1,000,000 and a note payable of
$200,000.
NOTE 8 - SUBSEQUENT EVENT
-----------------
On October 8, 1997, the Company entered into an acquisition agreement whereby
49% of the ownership of the Company was transferred from Mr. Christos Traios,
to Essco (USA), Inc. for 3,250,000 shares of common stock. The sister
company, Midland Agricultural, was 100% acquired by Essco (USA), Inc. in the
simultaneous transaction. The overall acquisition was structured by C & K
Capital Corporation of Irvine, California.
<PAGE>
<PAGE>
The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.
ESSCO (USA), INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1997
<TABLE>
<CAPTION>
ESSCO ESSCO (USA),
(USA), Midland Midland Pro Forma Inc. Consolidated
Inc. Agricultural Steamshipping Adjustments Pro Forma
---------- -------------- --------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 5,393 $ 356,556 $ 302,822 $ - $ 664,771
Related party receivables - 6,800 - - 6,800
Receivables 200,000 644,400 - (98,000) (2) 746,400
Prepaid expenses - - 68,064 - 68,064
---------- -------------- --------------- -------------- -------------------
Total Current Assets 205,393 1,007,756 370,886 (98,000) 1,486,035
---------- -------------- --------------- -------------- -------------------
Vessels - - 1,200,000 - 1,200,000
Furniture and fixtures - 35,000 55,727 - 90,727
-
Less: accumulated depreciation - (11,989) (334,886) - (346,875)
---------- -------------- --------------- -------------- -------------------
Total Property and Equipment - 23,011 920,841 - 943,852
---------- -------------- --------------- -------------- -------------------
TOTAL ASSETS $ 205,393 $ 1,030,767 $ 1,291,727 $ (98,000) $ 2,429,887
========== ============== =============== ============== ===================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Loan payable $ 250,000 $ - $ - $ (98,000) (2) $ 152,000
Accrued liabilities 29,683 96,430 15,100 - 141,213
---------- -------------- --------------- -------------- -------------------
Total Current Liabilities 279,683 96,430 15,100 (98,000) 293,213
---------- -------------- --------------- -------------- -------------------
Minority interest in subsidiary - - - 651,080 (1) 651,080
---------- -------------- --------------- -------------- -------------------
Stockholders' Equity
Common stock 1,000 10,000 4,200 (2,142) (1) 13,058
Paid-in capital 49,000 - 1,000,000 (510,000) (1) 539,000
Retained earnings (124,290) 924,337 272,427 (138,938) (1) 933,536
---------- -------------- --------------- -------------- -------------------
Total Stockholders' Equity (74,290) 934,337 1,276,627 (651,080) 1,485,594
---------- -------------- --------------- -------------- -------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 205,393 $ 1,030,767 $ 1,291,727 $ (98,000) $ 2,429,887
========== ============== =============== ============== ===================
</TABLE>
<PAGE>
ESSCO (USA), INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
ESSCO
ESSCO Midland Midland Pro Forma (USA), Inc.
(USA), Inc. Agricultural Steamshipping Adjustments Pro Forma
------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Sales of agricultural
products $ - $ 13,440,860 $ - $ - $ 13,440,860
Revenue from voyages - - 832,715 - 832,715
------------- ------------- -------------- ------------- -------------
Total Revenues - 13,440,860 832,715 - 14,273,575
------------- ------------- -------------- ------------- -------------
Cost of sales - 12,287,600 469,320 - 12,756,920
General, administrative and
selling
124,290 228,923 90,968 - 444,181
Provision for
doubtful accounts - 300,000 - - 300,000
------------- ------------- -------------- ------------- -------------
Total Expenses 124,290 12,816,523 560,288 - 13,501,101
------------- ------------- -------------- ------------- -------------
Income before
minority interests
in subsidiary
earnings (124,290) 624,337 272,472 - 772,474
Minority interests in
subsidiary
earnings - - - (138,938)(1) (138,938)
------------- ------------- -------------- ------------- -------------
Net Income (Loss) $ (124,290) $ 624,337 $ 272,427 $ (138,938) $ 633,536
============= ============= ============== ============= =============
Net Income (Loss)
per Share $ $ 6,243.37 $ 2,724.27 $ .13
============= ============= ============== =============
Weighted Average Shares
Outstanding 100 100 4,904,000
============= ============== =============
</TABLE>
<PAGE>
<PAGE>
ESSCO (USA), INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997
NOTE 1 - BASIS OF PRESENTATIONS
--------------------------
The unaudited pro forma condensed consolidated balance sheet at October 31,
1997 and the unaudited pro forma condensed consolidated statement of
operations for the ten months ended October 31, 1997(collectively the "Essco
(USA), Inc. Unaudited Pro Forma Financial Statements") have been prepared from
the historical financial statements of Midland Agricultural, S.A.
(Agricultural) and Midland Steamshipping Co. (Steamshipping). The unaudited
pro forma condensed consolidated financial statements have been prepared as if
Essco (USA), Inc. had merged with Agricultural and Steamshipping on January 1,
1997. The merger has been accounted for in the Essco (USA), Inc. Pro Forma
Financial Statements using the pooling method of accounting.
The agricultural subsidiary is 100% owned, and the steamshipping subsidiary is
49% owned, the maximum allowable under Greek law to be owned by a non-Greek
company. The majority shareholder of Essco owns the 51% unconsolidated
interest of steamshipping; however, Essco management consolidates the 49%
interest because virtually all of agricultural's shipping business is done
with steamshipping.
The Essco (USA), Inc. Pro Forma Financial Statements are not necessarily
indicative of the current future financial position or results of Essco (USA),
Inc. Management believes the estimates and assumptions provide a reasonable
basis for presenting the significant effects of the transactions and that the
pro forma adjustments give appropriate effect to these estimates and
assumptions and are properly applied in the Essco (USA), Inc. Pro Forma
Financial Statements.
NOTE 2 - PRO FORMA ADJUSTMENTS
-----------------------
Unaudited pro forma condensed consolidated balance sheet and unaudited pro
forma condensed consolidated statement of operations:
(1) To effect the merger, Essco (USA), Inc. issued three million one
hundred fifty thousand (3,150,000) shares in exchange for all the issued and
outstanding shares of agricultural and 49% of the issued and outstanding
shares of steamshipping.
(2) To eliminate the loan payable to Essco by Midland Steamshipping.
<PAGE>
NOTE 3 - INCOME TAXES
-------------
These statements contain no deferred taxes nor provision for income taxes
because the subsidiaries are completely exempt from Greek income tax, while
the parent, Essco (USA), Inc., has taxable losses from its inception on
October 8, 1996 to October 31, 1997. As the parent and subsidiaries continue
into the future, management anticipates income taxes to be provided only for
the parent company earnings as the foreign subsidiaries and the U.S. parent
will most likely be majority owned by non-U.S. citizens, and it is managements
intent to re-invest earnings of its foreign subsidiaries in foreign owned
assets and business activities.
<PAGE>
The following exhibits are attached hereto and incorporated herein by
reference.
3.1 Certificate of Incorporation
3.2 By-Laws
4.1 Form of $.001 Par Value Common Stock Certificate
10.1 Employment Agreement with Christos Traios
21 Subsidiaries of Essco (USA), Inc.
27 Financial Data Schedule
99.1 8 Del. Code Ann. 145 Indemnification of officers, directors,
employees and agents
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, Essco (USA), Inc. has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
ESSCO (USA), Inc.
By: /s/Alexander G. Montano
-------------------------
Name:Alexander G. Montano
Title:Chief Financial Officer
Date: January 30, 1998
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
No. Description Page
3.1 Certificate of Incorporation
3.2 By-Laws
4.1 Form of $.001 Par Value Common Stock Certificate
10.1 Employment Agreement with Christos Traios
21 Subsidiaries of Essco (USA), Inc.
27 Financial Data Schedule
99.1 8 Del. Code Ann. 145 Indemnification of officers, directors, employees and agents
- ---- ----------------------------------------------------------------------------------
</TABLE>
<PAGE>
[Exhibit 3.1]
CERTIFICATE OF INCORPORATION
OF
ESSCO (USA), Inc.
l. The name of the corporation is ESSCO (USA), Inc
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is: to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is: Twenty-One Million (21,000,000) of which stock Twenty
Million (20,000,000) shares of the par value of $.001 each shall be common
stock and of which One Million (1,000,000) shares of the par value of $.001
each shall be preferred stock. Further, the board of directors of this
corporation, by resolution only and without further action or approval, may
cause the corporation to issue one or more classes or one or more series of
preferred stock within any class thereof and which classes or series may have
such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions adopted by the
board of directors, and to fix the number of shares constituting any classes
or series and to increase or decrease the number of shares of any such class
or series.
5. The name and mailing address of each incorporator is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
- ---------------- ----------------------------
<S> <C>
Richard O. Weed 5140 Birch Street, Suite 100
Newport Beach, CA 92660
</TABLE>
The name and mailing address of each person who is to serve as a director
until the first annual meeting of the stockholders or until a successor is
elected and qualified, is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
- -------------------- ---------------------------
<S> <C>
Alexander G. Montano 18500 Von Karman, Suite 560
Irvine, CA 92614
</TABLE>
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by statute,
the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
To authorize and cause to be executed mortgages and liens upon the real and
personal property of the corporation.
To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
<PAGE>
To designate one or more committees, each committee to consist of one or more
of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. The by-laws may provide
that in the absence or disqualification of a member of a committee, the member
or members present at any meeting and not disqualified from voting, whether or
not such member or members constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors, or in the by-laws of the
corporation, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to
all papers which may require it; but no such committee shall have the power or
authority in reference to the following matters: (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by
the Delaware General Corporation Law to be submitted to stockholders for
approval or (ii) adopting, amending or repealing any by-law of the
corporation.
When and as authorized by the stockholders in accordance with law, to sell,
lease or exchange all or substantially all of the property and assets of the
corporation, including its good will and its corporate franchises, upon such
terms and conditions and for such consideration, which may consist in whole or
in part of money or property including shares of stock in, and/or other
securities of, any other corporation or corporations, as its board of
directors shall deem expedient and for the best interests of the corporation.
8. Elections of directors need not be by written ballot unless the by-laws of
the corporation shall so provide.
Meetings of stockholders may be held within or without the State of Delaware,
as the by-laws may provide. The books of the corporation may be kept (subject
to any provision contained in the statutes) outside the State of Delaware at
such place or places as may be designated from time to time by the board of
directors or in the by-laws of the corporation.
Whenever a compromise or arrangement is proposed between this corporation and
its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
corporation under the provisions of Section 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may
be, and also on this corporation.
9. The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
10. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
any improper personal benefit.
<PAGE>
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of
forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this Certificate, hereby declaring and certifying that
this is my act and deed and the facts herein stated are true, and accordingly
have hereunto set my hand this Twenty-third day of September, 1997.
/s/ Richard O. Weed
- ----------------------
Richard O. Weed
<PAGE>
[Exhibit 3.2]
ESSCO (USA), Inc.
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington, County
of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section l. All meetings of the stockholders for the election of directors
shall be held in the City of Athens, State of Greece, at such place as may be
fixed from time to time by the board of directors, or at such other place
either within or without the State of Delaware as shall be designated from
time to time by the board of directors and stated in the notice of the
meeting. Meetings of stockholders for any other purpose may be held at such
time and place, within or without the State of Delaware, as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1997,
shall be held on the Fifteenth day of September, if not a legal holiday, and
if a legal holiday, then on the next secular day following, at 10:00 AM, or at
such other date and time as shall be designated from time to time by the board
of directors and stated in the notice of the meeting, at which they shall
elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than 15 nor more than 60 days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
<PAGE>
Section 5. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the certificate of incorporation,
may be called by the president and shall be called by the president or
secretary at the request in writing of a majority of the board of directors,
or at the request in writing of stockholders owning a majority in amount of
the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than 15 nor more than 60 days before the date
of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented
at any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the certificate of incorporation, a different vote is required in which
case such express provision shall govern and control the decision of such
question.
Section 10. Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three
years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of
stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in
writing.
<PAGE>
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be five directors. The directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then
an election of directors may be held in the manner provided by statute. If,
at the time of filling any vacancy or any newly created directorship, the
directors then in office shall constitute less than a majority of the whole
board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or under the
direction of its board of directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings, both
regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors shall
be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of
the stockholders to fix the time or place of such first meeting of the newly
elected board of directors, or in the event such meeting is not held at the
time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the president on 5
days' notice to each director, either personally or by mail or by facsimile
communication; special meetings shall be called by the president or secretary
in like manner and on like notice on the written request of two directors
unless the board consists of only one director; in which case special meetings
shall be called by the president or secretary in like manner and on like
notice on the written request of the sole director.
Section 8. At all meetings of the board, a majority of directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be
the act of the board of directors, except as may be otherwise specifically
provided by statute or by the certificate of incorporation. If a quorum shall
not be present at any meeting of the board of directors the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
<PAGE>
Section 10. Unless otherwise restricted by the certificate of incorporation
or these by-laws, members of the board of directors, or any committee
designated by the board of directors, may participate in a meeting of the
board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.
In the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any
such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the board of
directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to
all papers which may require it; but no such committee shall have the power or
authority in reference to the following matters: (i) approving or adopting,
or recommending to the stockholders, any action or matter expressly required
by the General Corporation Law of Delaware to be submitted to stockholders for
approval or (ii) adopting, amending or repealing any by-law of the
corporation. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the board of
directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of incorporation
or these by-laws, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any,
of attendance at each meeting of the board of directors and may be paid a
fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of incorporation
or by law, any director or the entire board of directors may be removed, with
or without cause, by the holders of a majority of shares entitled to vote at
an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be
given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed
to such director or stockholder, at his address as it appears on the records
of the corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by facsimile
telecommunication.
Section 2. Whenever any notice is required to be given under the provisions
of the statutes or of the certificate of incorporation or of these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
<PAGE>
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of
incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice-presidents,
a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and agents
as it shall deem necessary who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the board.
Section 4. The salaries of all officers and agents of the corporation shall
be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of
the corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board
of directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to
some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his inability
or refusal to act, the vice-president (or in the event there be more than one
vice-president, the vice-presidents in the order designated by the directors,
or in the absence of any designation, then in the order of their election)
shall perform 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 perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of directors
and all meetings of the stockholders and record all the proceedings of the
meetings of the corporation and of the board of directors in a book to be kept
for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by his signature or by the signature of such
assistant secretary. The board of directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing
by his signature.
<PAGE>
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as may be ordered
by the board of directors, taking proper vouchers for such disbursements, and
shall render to the president and the board of directors, at its regular
meetings, or when the board of directors so requires, an account of all his
transactions as treasurer and of the financial condition of the corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the board of
directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the corporation.
Section 14. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. Certificates shall be signed by, or
in the name of the corporation by, the chairman or vice-chairman of the board
of directors, or the president or a vice-president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation.
If the corporation shall be authorized to issue more than one class of stock
or more than one series of any class, the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights shall be set forth in full or summarized on the
face or back of the certificate which the corporation shall issue to represent
such class or series of stock, provided that, except as otherwise provided in
section 202 of the General Corporation Law of Delaware, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General
Corporation Law of Delaware or a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
<PAGE>
Section 2. Any of or all the signatures on a certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
it may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates or
uncertificated shares, the board of directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative,
to advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and
issuance of new equivalent uncertificated shares or certificated shares shall
be made to the person entitled thereto and the transaction shall be recorded
upon the books of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting:
provided, however, that the board of directors may fix a new record date for
the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive right
of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
<PAGE>
Section 2. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation shall
be signed by such officer or officers or such other person or persons as the
board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by resolution of
the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors, employees
and agents to the extent permitted by the General Corporation Law of Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new by-laws
may be adopted by the stockholders or by the board of directors, when such
power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
<PAGE>
[Exhibit 4.1]
NUMBER SHARES
____________ _____________
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEPTEMBER 23, 1997
ESSCO (USA), INC.
20,000,000 SHARES COMMON STOCK 1,000,000 SHARES PREFERRED STOCK
$.001. PAR VALUE EACH $.001 PAR VALUE
EACH
THIS CERTIFIES THAT______________________________________________ IS THE
REGISTERED
HOLDER OF __________________________________________________ Shares of the
Common Stock of
ESSCO (USA), Inc.
HEREINAFTER DESIGNATED "THE CORPORATION", TRANSFERABLE ON THE SHARE REGISTER
OF THE CORPORATION UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED OR
ASSIGNED.
This certificate and the shares represented thereby shall be subject to all of
the provisions of Certificate of Incorporation and the By-laws of said
Corporation, a copy of which is on file at the office of the Corporation and
made a part hereof as fully as though the provisions of said Certificate of
Incorporation and By-laws were imprinted in full on this certificate, to all
of which the holder of this certificate, by accptance hereof assents and
agrees to be bound.
Any stockholder may obtain from the principal office of the Corporation, upon
request and without charge, a statement of the number of shares constituting
each class or series of stock and the designation thereof; and a copy of the
powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
and the By-laws.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED
OFFICERS.
DATED:
_________________________________
SECRETARY
_________________________________
PRESIDENT
<PAGE>
[Exhibit 10.1]
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 1st day of
December, 1997, by and between ESSCO (USA), Inc., a Delaware corporation (the
"Company"), and Christos Traios (the "Executive").
WHEREAS, the Company desires to retain the services of the Executive as Chief
Executive Officer of the Company and the Executive desires to render such
services on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Employment Term. The Company employs the Executive and the Executive
accepts employment by the Company, upon the terms and subject to the
conditions set forth in this Agreement, until November 30, 2002; provided,
however, that such employment may be sooner terminated pursuant to the terms
of this Agreement.
2. Management of the Company. The Executive shall devote the Executive's
time, best efforts, attention and skill to, and shall perform faithfully,
loyally and efficiently the Executive's duties as Chief Executive Officer of
the Company. Further, the Executive will punctually and faithfully perform
and observe any and all rules and regulations which the Company may now or
shall hereafter reasonably establish governing the Executive's conduct and the
conduct of the Company's business which are consistent with this Agreement.
3. Compensation; Benefits. In consideration of the services rendered to the
Company by the Executive, the Company shall pay the Executive a salary at the
annual rate of Three Hundred Thousand Dollars ($300,000) (the "Salary"). The
Salary shall be payable in accordance with the normal payroll practices of the
Company then in effect. In addition to Salary, the Executive shall be entitle
to an annual bonus equal to ten percent (10%) of the annual operating profits
of the Company in excess of Three Million Dollars ($3,000,000) per year (the
"Bonus"). The Salary, Bonus, and all other forms of compensation paid to the
Executive hereunder, shall be subject to all applicable taxes required to be
withheld by the Company pursuant to federal, state or local law. The
Executive shall be solely responsible for income taxes imposed on the
Executive by reasons of any cash or non-cash compensation and benefits
provided by this Agreement.
In addition to the Salary, during the Employment Term, the Executive shall be
entitled to: (i) all legal and religious holidays, and two (2) weeks paid
vacation per annum. The Executive shall arrange for vacations in advance at
such time or times as shall be mutually agreeable to the Executive and the
Company's Board of Directors. The Executive may not receive pay in lieu of
vacation; (ii) participate in all employee benefit plans and/or arrangements
adopted by the Company relating to pensions, hospital, medical, dental,
disability and life insurance, deferred salary and savings plans, and other
similar employee benefit plans or arrangements to the extent that the
Executive meets the eligibility requirements for any such plan as in effect
from time to time; (iii) payment by the Company directly, or reimbursement by
the Company for, reasonable and customary business and out-of-pocket expenses
incurred by the Executive in connection with the performance by the Executive
of the Executive's duties under this Agreement in accordance with the
Company's policies and practices for reimbursement of such expenses, as in
effect from time to time, including, without limitation, reasonable and
necessary travel, lodging, entertainment and meals incurred by the Executive
in furtherance of the Company's business and at the Company's request.
In addition to the payment of Salary, the Company hereby grants to the
Executive, One Million (1,000,000) non-qualified stock options (collectively,
the "Stock Options"). Each Stock Option provides the Executive with the right
to purchase one share of the Company's $.001 par value common stock at $9.00
per share. The Stock Options are non-transferable, vest immediately in
Executive, and expire at the close of business on November 30, 2007.
<PAGE>
4. Termination of Employment. The Executive's employment hereunder shall
terminate upon the earliest to occur of any the following events, on the dates
and at the times specified below:
(i) the close of business on November 30, 2002 (the "Expiration Date");
(ii) the close of business on the date of the Executive's death ("Death");
(iii) the close of business on the Termination Date (as defined below)
specified in the Notice of Termination (as defined below) which the Company
shall have delivered to the Executive due to the Executive's Disability.
"Disability" shall mean if (i) the Executive is absent from work for 30
calendar days in any twelve-month period by reason of illness or incapacity
whether physical or otherwise) or (ii) the Company reasonably determines that
the Executive is unable to perform his duties, services and responsibilities
by reason of illness or incapacity (whether physical or otherwise) for a total
of 30 calendar days in any twelve-month period during the Employment Term.
The Executive agrees, in the event of any dispute under this Section, and
after receipt by the Executive of such Notice of Termination from the Company,
to submit to a physical examination by a licensed physician selected by the
Company. The Executive may seek a second opinion from a licensed physician
acceptable to the Company. If the results of the first examination and the
second examination are different, a licensed physician selected by the
physicians who have performed the first and second examinations shall perform
a third physical examination of the Executive, the result of which shall be
determinative for purposes of this Section;
(iv) the close of business on the Termination Date specified in the Notice of
Termination which the Executive shall have delivered to the Company to
terminate his employment ("Voluntary Termination");
(v) the close of business on the Termination Date specified in the Notice of
Termination which the Company shall have delivered to the Executive to
terminate the Executive's employment for Cause. "Cause" as used herein means
termination based on (i) the Executive's material breach of this Agreement,
(ii) conviction of the Executive for (a) any crime constituting a felony in
the jurisdiction in which committed, (b) any crime involving moral turpitude
whether or not a felony), or (c) any other criminal act against the Company
involving dishonesty or willful misconduct intended to injure the Company
(whether or not a felony), (iii) substance abuse by the Executive, (iv) the
failure or refusal of the Executive to follow one or more lawful and proper
directives of the Board of Directors delivered to the Executive in writing, or
(v) willful malfeasance or gross misconduct by the Executive which discredits
or damages the Company.
Any purported termination by the Company or the Executive (other than by
reason of Death or on the Expiration Date) shall be communicated by written
Notice of Termination to the other. As used herein, the term "Notice of
Termination" shall mean a notice which indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. After receipt of a
Notice of Termination, the Executive shall continue to be available to the
Company on a part-time basis at reasonable and customary hourly rates to
assist in the necessary transition.
As used herein, the term "Termination Date" shall mean, (i) in the case of
Death, the date of the Executive's death, (ii) in the case of expiration of
the term hereof, the Expiration Date, or (iii) in all other cases, the date
specified in the Notice of Termination.
<PAGE>
5. Employee Covenants.
Trade Secrets and Proprietary Information. The Executive agrees and
- ----------------------------------------------
understands that due to the Executive's position with the Company, the
- ---------
Executive will be exposed to, and has received and will receive, confidential
- -------
and proprietary information of the Company or relating to the Company's
business or affairs collectively, the "Trade Secrets"), including but not
limited to technical information, product information and formulae, processes,
business and marketing plans, strategies, customer information, other
information concerning the Company's products, promotions, development,
financing, expansion plans, business policies and practices and other forms of
information considered by the Company to be proprietary and confidential and
in the nature of trade secrets. Trade Secrets shall not include any such
information which (A) was known to the Executive prior to his employment by
the Company or (B) was or becomes generally available to the public other than
as a result of a disclosure by the Executive in violation of the provisions of
this Section. Except to the extent that the proper performance of the
Executive's duties, services and responsibilities hereunder may require
disclosure, the Executive agrees that during the Employment Term and at all
times thereafter the Executive will keep such Trade Secrets confidential and
will not disclose such information, either directly or indirectly, to any
third person or entity without the prior written consent of the Company. This
confidentiality covenant has no temporal, geographical or territorial
restriction. On the Termination Date unless the Executive remains as an
employee of the Company thereafter in which case, on the date which the
Executive is no longer an employee of the Company), the Executive will
promptly supply to the Company all property, keys, notes, memoranda, writings,
lists, files, reports, customer lists, correspondence, tapes, disks, cards,
surveys, maps, logs, machines, technical data, formulae or any other tangible
product or document which has been produced by, received by or otherwise
submitted to and retained by the Executive in the course of his employment
with the Company. Any material breach of the terms of this paragraph shall be
considered Cause.
Prohibited and Competitive Activities. The Executive and the Company
- -----------------------------------------
recognize that due to the nature of the Executive's engagement hereunder and
- --------
the relationship of the Executive to the Company, the Executive has had and
will have access to, has had and will acquire, and has assisted and may
continue to assist in, developing confidential and proprietary information
relating to the business and operations of the Company and its affiliates,
including, without limitation, Trade Secrets. The Executive acknowledges that
such information has been and will be of central importance to the business of
the Company and its affiliates and that disclosure of it to, or its use by,
others (including, without limitation, the Executive (other than with respect
to the Company's business and affairs)) could cause substantial loss to the
Company.
The Executive and the Company also recognize that an important part of the
Executive's duties will be to develop good will for the Company and its
affiliates through the Executive's personal contact with Clients (as defined
below), employees, and others having business relationships with the Company,
and that there is a danger that this good will, a proprietary asset of the
Company, may follow the Executive if and when the Executive's relationship
with the Company is terminated. The Executive accordingly agrees as follows:
(i) Prohibited Activities. The Executive agrees that the Executive will not
at any time during the Employment Term: (A) (other than in the course of the
Executive's employment) disclose or furnish to any other person or, directly
or indirectly, use for the Executive's own account or the account of any other
person, any Trade Secrets, no matter from where or in what manner he may have
acquired such Trade Secrets, and the Executive shall retain all such Trade
Secrets in trust for the benefit of the Company, its affiliates and the
successors and assigns of any of them, (B) directly or through one or more
intermediaries, solicit for employment or recommend to any subsequent employer
of the Executive the solicitation for employment of, any person who, at the
time of such solicitation, is employed by the Company or any affiliate, (C)
directly or indirectly, whether for the Executive's own account or for the
account of any other person, solicit, divert, or endeavor to entice away from
the Company or any entity controlled by the Company, or otherwise engage in
any activity intended to terminate, disrupt, or interfere with, the Company's
or any of its affiliates' relationships with, Clients, or otherwise adversely
affect the Company's or any of its affiliates' relationships with Clients or
other business relationships of the Company or any affiliate thereof, or (D)
publish or make any statement critical of the Company or any shareholder or
affiliate of the Company or in any way adversely affect or otherwise malign
the business or reputation of any of the foregoing persons (any activity
described in clause (A), (B), (C) or (D) of this Section being referred to as
a Prohibited Activity"); provided, however, that if in the written opinion of
Counsel, the Executive is legally compelled todisclose Trade Secrets to any
tribunal or else stand liable for contempt or suffer other similar censure or
penalty, then the disclosure to such tribunal of only those Trade Secrets
which such counsel advises in writing are legally
<PAGE>
required to be disclosed shall not constitute a Prohibited Activity provided
that the Executive shall give the Company as much advance notice of such
disclosure as is reasonably practicable. As used herein, the term "Clients"
shall mean those persons who, at any time during the Executive's course of
employment with the Company (including, without limitation, prior to the date
of this Agreement) are or were clients or customers of the Company or any
affiliate thereof or any predecessor of any of the foregoing.
(ii) Non-Competition. By and in consideration of the Company's entering into
this Agreement, the Executive agrees that the Executive will not, during the
Employment Term and for a period of eighteen months thereafter, engage in any
Competitive Activity. The term "Competitive Activity" means engaging in any
of the following activities: (A) serving as a director of any Competitor (as
defined below), (B) directly or indirectly through one or more intermediaries,
either (X) controlling any Competitor or (Y) owning any equity or debt
interests in any Competitor (other than equity or debt interests which are
publicly traded and, at the time of any acquisition thereof by the Executive,
do not in the aggregate exceed 5% of the particular class of interests of such
Competitor then outstanding) (it being understood that, if interests in any
Competitor are owned by an investment vehicle or other entity in which the
Executive owns an equity interest, a portion of the interests in such
Competitor owned by such entity shall be attributed to the Executive, such
portion determined by applying the percentage of the equity interest in such
entity owned by the Executive to the interests in such Competitor owned by
such entity), (C) employment by (including serving as an officer, director or
partner of), providing consulting services to (including, without limitation,
as an independent contractor), or managing or operating the business or
affairs of, any Competitor or (D) participating in the ownership, management,
operation or control of or being connected in any manner with any Competitor.
The term "Competitor" as used herein (i) during the Employment Term, means any
person (other than the Company, Parke Industries, Inc. or any of their
respective affiliates) that competes, either directly or indirectly with any
of the business conducted by the Company or any affiliate.
Remedies. The Executive agrees that any breach of the terms of this Section
- ---------
would result in irreparable injury and damage to the Company for which the
Company would have no adequate remedy at law. The Executive therefore agrees
that in the event of said breach or any threat of breach, the Company shall be
entitled to an immediate injunction and restraining order to prevent such
breach and/or threatened breach and/or continued breach by the Executive
and/or any and all persons and/or entities acting for and/or with the
Executive, without having to prove damages. The terms of this paragraph shall
not prevent the Company from pursuing any other available remedies to which
the Company may be entitled at law or in equity for any breach or threatened
breach hereof, including but not limited to the recovery of damages from the
Executive. the provisions of this Section 8 shall survive any termination of
this Agreement. The existence of any claim or cause of action by the Executive
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of the covenants
and agreements of this Section.
Proprietary Information and Inventions. The Executive agrees that any and all
- ---------------------------------------
inventions, discoveries, improvements, processes, formulae, business
application software, patents, copyrights and trademarks made, developed,
discovered or acquired by him prior to and during the Employment Term, solely
or jointly with others or otherwise, which relate to the business of the
Company, and all knowledge possessed by the Executive relating thereto
collectively, the "Inventions"), shall be fully and promptly disclosed to the
Board of Directors and to such person or persons as the Board of Directors
shall direct and the Executive irrevocably assigns to the Company all of the
Executive's right, title and interest in and to all Inventions of the Company
and all such Inventions shall be the sole and absolute property of the Company
and the Company shall be the sole and absolute owner thereof. The Executive
agrees that he will at all times keep all Inventions secret from everyone
except the Company and such persons as the Board of Directors may from time to
time direct. The Executive shall, as requested by the Company at any time and
from time to time, whether prior to or after the expiration of the Employment
Term, execute and deliver to the Company any instruments deemed necessary by
the Company to effect disclosure and assignment of the Inventions to the
Company or its designees and any patent applications (United States or
foreign) and renewals with respect thereto, including any other instruments
deemed necessary by the Company for the prosecution of patent applications,
the acquisition of letters patent and/or the acquisition of patents or
copyrights in any and all countries and to vest title thereto in the Company
or its nominee.
<PAGE>
6. Representations and Warranties of the Executive. The Executive represents
and warrants to the Company that:
(i) The Executive's employment by the Company as contemplated will not
conflict with, and will not be constrained by, any prior or current
employment, consulting agreement or relationship, whether written or oral; and
(ii) The Executive does not possess confidential information arising out of
any employment, consulting agreement or relationship with any person or entity
other than the Company which could be utilized in connection with the
Executive's employment by the Company.
7. Binding Effect or Assignment. This Agreement shall inure to the benefit
of and be binding upon the parties and their respective heirs, executors,
representatives, states, successors and assigns, including any successor or
assign to all or substantially all of the business and/or assets of the
Company, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise; provided, however, that the Executive, or
any beneficiary or legal representative of the Executive, shall not assign all
or any portion of the Executive's rights or obligations under this Agreement
without the prior written consent of the Company.
8. Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt.
9. Amendment and Modification. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by each of the Executive and the Company.
No such waiver or discharge by either party hereto at any time or any waiver
or discharge of any breach by the other party hereto of, or compliance with,
any condition or provision of this agreement to be performed by such other
party, shall be deemed a waiver or discharge of similar or dissimilar
provisions or conditions, or a waiver or discharge of any breach of any
provisions, at the same or at any prior or subsequent time.
10. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of California without giving effect to
the conflict of law principles of that state.
11. Severability. In the event that any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other portion of this Agreement, and this Agreement shall be construed as if
such provision had never been contained herein.
12. Withholding Taxes. Notwithstanding anything contained herein to the
contrary, all payments required to be made hereunder by the Company to the
Executive, or his estate or beneficiaries, shall be subject to the withholding
of such amounts as the Company may reasonably determine it should withhold
pursuant to any applicable federal, state or local law or regulation.
13. Arbitration of Disputes. The parties hereto mutually consent to the
resolution by arbitration of all claims and controversies arising out of or
relating to this Agreement.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes any and all prior agreements, written or
oral, understandings and arrangements, either oral or written, between the
parties with respect to the subject matter, and shall, as of the date hereof,
constitute the only employment agreement between the parties.
16. Further Assurances. Each party shall do and perform, or cause to be done
and performed, all further acts and things and shall execute and deliver all
other agreements, certificates, instruments, and documents as any other party
reasonably may request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated.
17. Construction. The headings in this Agreement are for reference purposes
only and shall not limit or otherwise affect the meaning or interpretation of
this Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed
as of the date first above written.
"Company"
ESSCO (USA), Inc., a Delaware corporation
By: /s/ Alexander G. Alexander
-----------------------------
Name: Alexander G. Montano
Title: Chief Financial Officer
"Executive"
By: /s/ Christos Traios
---------------------
Name: Christos Traios
<PAGE>
[Exhibit 21]
Subsidiaries of the Registrant
MIDLAND, Agricultural S.A. a company organized under the laws of the Republic
of Panama.
MIDLAND STEAMSHIPPING M. CO. a company organized according to Greek Maritime
law.
ESSCO, Commodities Inc., a company organized under the laws of Delaware.
<PAGE>
[Exhibit 27]
<PAGE>
[Exhibit 99.1]
DELAWARE CODE
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IV. DIRECTORS AND OFFICERS
145. Indemnification of officers, directors, employees and agents;
insurance.
(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which the person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by the person in connection with the defense or settlement of such action or
suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsections (a) and (b) of this section, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because the person
has met the applicable standard of conduct set forth in subsections (a) and
(b) of this section. Such determination shall be made (1) by a majority vote
of the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions,
if any, as the board of directors deems appropriate.
<PAGE>
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear
and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
