<PAGE> 1
As filed with the Securities and Exchange Commission on August 10, 1998
Registration No. 333-50255
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WESTSTAR ENVIRONMENTAL, INC.
(Name of small business issuer in its charter)
------------------------
<TABLE>
<S> <C> <C>
FLORIDA 4953 59-3066915
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
9550 REGENCY SQUARE BOULEVARD, SUITE 1109, JACKSONVILLE, FLORIDA
32225; (904) 721-7557
(Address and telephone number of principal executive offices)
------------------------
9550 REGENCY SQUARE BOULEVARD, SUITE 1109, JACKSONVILLE, FLORIDA 32225
(Address of principal place of business or intended
principal place of business)
------------------------
MICHAEL E. RICKS, PRESIDENT
9550 REGENCY SQUARE BOULEVARD, SUITE 1109, JACKSONVILLE, FLORIDA 32225;
(904) 721-7557
(Name, address, and telephone number of agent for service)
------------------------
With copies to:
JOHN L. MILLING, ESQ. WILLIAM M. PRIFTI, ESQ.
MILLING LAW OFFICES PRIFTI LAW OFFICES
115 RIVER ROAD, BLDG. 12, SUITE 1205 220 BROADWAY, SUITE 204
EDGEWATER, NJ 07020 LYNNFIELD, MA 01940
(201) 313-1600 (781) 593-4525
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon
as practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 of the Securities
Act of 1933, check the following box. /x/
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Amount Maximum Maximum Amount of
to be Offering Price Aggregate Registration
Title of each Class of Securities Being Registered Registered Per Security(1) Offering Price(1) Fee
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value (2) ........................... 1,150,000 $ 5.00 $ 5,750,000 $ 1,696.25
Common Stock Purchase Warrants (3) .......................... 1,150,000 $ .10 $ 115,000 $ 33.93
Common Stock, $.001 par value (4) (7) ....................... 1,150,000 $ 6.00 $ 6,900,000 $ 2,035.50
Representative's Securities Purchase Warrants (5) ........... 100,000 $ .001 $ 100 $ .03
Representative's Common Stock, $.001 par value (6) (8) ...... 100,000 $ 7.25 $ 725,000 $ 213.88
Representative's Underlying Common Stock Purchase Warrants(6) 100,000 $ 0.145 $ 14,500 $ 5.00
Representative's Underlying Common Stock(7)(8) .............. 100,000 $ 6.00 $ 600,000 $ 206.88
--------- -------- ----------- ------------
TOTAL ....................................................... $14,104,600 $ 4,191.47
=========== ============
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee, all
but $2,318.19 of which has heretofore been paid.
(2) Includes 150,000 shares of Common Stock which may be issued subject to
the Representative's over-allotment option.
(3) Includes 150,000 Redeemable Common Stock Purchase Warrants which may be
issued subject to the Representative's over-allotment option. Each
such Warrant is exercisable for one share of Common Stock, $.001 par
value.
(4) Issuable upon exercise of the Redeemable Common Stock Purchase
Warrants.
(5) To be sold to the Representative upon the completion of the offering.
Each such Warrant is exercisable for securities (the "Securities")
consisting of shares of Common Stock, $.001 par value (the
"Representative's Common Stock") and warrants (the "Representative's
Underlying Warrants") to purchase additional such shares (the
"Representative's Underlying Common Stock").
(6) Issuable upon exercise of the Representative's Securities Purchase
Warrants.
(7) Issuable upon the exercise of the Representative's Underlying Warrants.
(8) Pursuant to Rule 416 there are also registered hereby such additional,
indeterminate number of shares as may become issuable by reason of the
anti-dilution provisions of the Common Stock Purchase Warrants, the
Representative's Securities Purchase Warrants, and the Representative's
Underlying Warrants.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE> 2
WESTSTAR ENVIRONMENTAL INC.
------------------------------------------------
CROSS-REFERENCE SHEET
------------------------------------------------
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS 1 THROUGH 23, PART I, OF FORM SB-2
<TABLE>
<CAPTION>
Item in Form SB-2 Prospectus Caption
----------------- ------------------
<S> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus......... Facing Page of Registration Statement; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus................. Inside Front Cover Page of Prospectus;
Outside Back Cover Page of Prospectus
3. Summary Information and Risk
Factors................................... Prospectus Summary; Risk Factors
4. Use of Proceeds.............................. Use of Proceeds
5. Determination of Offering Price.............. Outside Front Cover Page of Prospectus;
Risk Factors; Underwriting
6. Dilution..................................... Dilution
7. Selling Security Holders..................... Not Applicable
8. Plan of Distribution......................... Outside Front Cover Page of Prospectus;
Underwriting
9. Legal Proceedings............................ Business
10. Directors, Executive Officers,
Promoters and Control Persons............. Management
11. Security Ownership of Certain
Beneficial Owners and Management.......... Principal Stockholders
12. Description of Securities.................... Description of Securities
13. Interest of Named Experts and Counsel........ Experts; Legal Matters
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
14. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities........................... Underwriting
15. Organization Within Last Five Years.......... Business; Certain Transactions
16. Description of Business...................... Business; Risk Factors
17. Management's Discussion and
Analysis or Plan of Operation............. Management's Discussion and Analysis of
Financial Condition and Results of Operations
18. Description of Property...................... Business
19. Certain Relationships and
Certain Transactions...................... Certain Transactions
20. Market for Common Equity and
Related Stockholder Matters............... Outside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors;
Market for Common Equity and
Related Stockholder Matters;
Description of Securities; Underwriting
21. Executive Compensation....................... Executive Compensation
22. Financial Statements......................... Financial Statements
23. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosures..................... Experts
</TABLE>
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PROSPECTUS PRELIMINARY PROSPECTUS DATED AUGUST 10, 1998
1,000,000 SHARES OF COMMON STOCK, $.001 PAR VALUE
1,000,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
WESTSTAR ENVIRONMENTAL, INC.
The 1,000,000 shares of common stock, $.001 par value per share,
(the "Shares" or the "Common Stock") and the 1,000,000 redeemable common stock
purchase warrants (the "Redeemable Warrants") offered hereby are being sold by
Weststar Environmental, Inc., a Florida corporation (the "Company") at a
purchase price of $5 per Share and $.10 per Redeemable Warrant. Until the
completion of this offering, the Shares and the Redeemable Warrants may only be
purchased together on the basis of one Share and one Redeemable Warrant. Each
Redeemable Warrant entitles the holder to purchase one Share at a price of $6.00
per Share at any time during the four year period commencing one year from the
date of this Prospectus and is redeemable at a redemption price of $.10 per
Redeemable Warrant at any time commencing one year and thirty days from the date
of this Prospectus on thirty days prior written notice, provided that the market
price of the Common Stock equals or exceeds $8 per share for twenty consecutive
days within ten days prior to the notice of redemption (see "Description of
Securities").
Prior to this offering there has been no public market for the
Common Stock or the Redeemable Warrants and no assurance can be given that a
public market will develop for such Common Stock or the Redeemable Warrants
after this offering. The public offering price for the Common Stock and the
Redeemable Warrants does not necessarily bear any direct relationship to the
Company's assets, earnings, book value or any other established criteria of
value and was arbitrarily determined by the Company and Westport Resources
Investment Services, Inc., the Representative of the several Underwriters in
this offering (the "Representative") (see "Risk Factors - Arbitrary
Determination of Offering Price"). The Company has made application to list the
Common Stock and Redeemable Warrants for separate trading on the NASDAQ-Small
Cap Market under the proposed symbols "WSTX" and "WSTXW, respectively, upon the
closing of this offering.
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE, INVOLVE A HIGH
DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION (SEE "RISK FACTORS" AND
"DILUTION").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY (2)
--------------- -------------- -----------
<S> <C> <C> <C>
Per Share ............... $ 5.00 $ .50 $ 4.50
Per Redeemable Warrant .. $ .10 $ .01 $ .09
------------- ----------- -----------
Total (3) ............... $ 5,100,000 $ 510,000 $ 4,590,000
============= =========== ===========
</TABLE>
(see inside front cover for notes to this spread table)
------------------------
The Shares and Redeemable Warrants are being offered by the
Underwriters on a firm commitment basis, when, as and if delivered to and
accepted by the Underwriters and subject to the approval of certain legal
matters by counsel and to certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify the offering and to reject any order, in
whole or in part. It is expected that delivery of the certificates representing
the Shares and Redeemable Warrants will be made against payment therefor at the
offices of the Representative at 315 Post Road West, Westport, CT 06880 on or
about __________, 1998.
------------------------
WESTPORT RESOURCES INVESTMENT SERVICES, INC.
315 POST ROAD WEST
WESTPORT, CONNECTICUT 06880
The date of this Prospectus is __________, 1998
<PAGE> 5
Notes to Spread Table:
(1) In addition, the Company has agreed: (i) to pay the Representative a 3%
non-accountable expense allowance; (ii) to issue to the Representative,
upon the closing of this offering, warrants (the "Representative's
Warrants") to purchase up to 100,000 Shares and up to 100,000 warrants
(the "Underlying Warrants"). The Representative's Warrants are
exercisable for a period of four years, commencing twelve months from
the date of this Prospectus, at $7.25 per Share and the Underlying
Warrants are exercisable during the same time period at $6.00 per
Share; and (iii) to pay to the Representative consulting fees and
certain other items of compensation. The Company and the Underwriters
have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"1933 Act") (see "Underwriting").
(2) Before deducting expenses of the offering payable by the Company
estimated at $385,828.60, including the non-accountable expense
allowance payable to the Representative (see "Underwriting").
(3) The Company has granted the Representative an option (the
"Over-allotment Option") exercisable within 45 days from the date of
this Prospectus to purchase up to an additional 150,000 Shares and/or
up to an additional 150,000 Redeemable Warrants on the same terms,
solely to cover over-allotments, if any. If the Over-allotment Option
is exercised in full, the total "Price to Public", "Underwriting
Discount and Commissions" and "Proceeds to Company" will be $5,765,000,
$576,500, and $5,188,500, respectively.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AND REDEEMABLE WARRANTS OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
OTHERWISE MIGHT PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and a report thereon by its independent
certified public accountants. In addition, the Company may furnish unaudited
quarterly or other interim reports to its shareholders as it deems appropriate.
The Company as issuer has undertaken to make post-effective amendments
to the Registration Statement to which the Prospectus relates and to reflect
therein any facts or events arising after the date hereof which represent a
fundamental or material change in the information set forth herein or in said
Registration Statement. Any such amendments, which relate to this Prospectus,
will be disseminated to stockholders of the Company after the required filings
with the Securities and Exchange Commission have been made.
THIS PROSPECTUS CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WHICH
REPRESENT THE COMPANY'S EXPECTATIONS OR BELIEFS. THE WORDS "BELIEVE", "EXPECT",
"ANTICIPATE", "ESTIMATE", "PROJECT", "INTEND", AND SIMILAR EXPRESSIONS IDENTIFY
FORWARD-LOOKING STATEMENTS MAY INCLUDE, BUT NOT BE LIMITED TO, FUTURE RESULTS OF
OPERATIONS, GROWTH PLANS, INTEGRATION OF NEW OPERATIONS, FINANCING NEEDS,
INDUSTRY TRENDS, CONSUMER DEMAND AND LEVELS OF COMPETITION. THESE STATEMENTS BY
THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, SOME OF WHICH CANNOT
BE PREDICTED OR QUANTIFIED. FUTURE EVENTS AND ACTUAL RESULTS COULD DIFFER
MATERIALLY FORM THOSE EXPRESSED IN, CONTEMPLATED BY OR UNDERLYING ANY SUCH
FORWARD-LOOKING STATEMENTS. STATEMENTS IN THIS PROSPECTUS, INCLUDING WITHOUT
LIMITATION THOSE CONTAINED IN THE SECTIONS ENTITLED "RISK FACTORS",
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS", "BUSINESS", AND IN THE NOTES TO THE COMPANY'S FINANCIAL STATEMENTS,
DESCRIBE FACTORS, AMONG OTHERS, THAT COULD CONTRIBUTE TO OR CAUSE SUCH
DIFFERENCES.
5
<PAGE> 6
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more
detailed information and the financial statements appearing elsewhere in this
Prospectus. Prospective investors should also carefully consider the information
set forth herein under "Risk Factors". Unless otherwise indicated (i) the
information throughout this Prospectus assumes non-exercise of the
Over-allotment Option and (ii) all per share data and information in this
Prospectus relating to shares of Common Stock outstanding has been adjusted to
give effect to a fifteen-for-one forward stock split effected on February 16,
1998.
THE COMPANY
Weststar Environmental Inc. (the "Company") is a non-hazardous,
liquid waste management company that provides waste management services to
governmental, commercial and residential customers. These services include the
removal, transport, treatment and disposal of bio-solids, food service grease
and septic waste. The Company also engages in the installation, replacement and
repair of commercial and residential waste disposal systems. Plans to conduct a
third area of business devoted to the recycling of non-hazardous waste materials
are also being developed. At the present time, the Company's services are
principally provided in the southeastern United States. The goal of management
is to expand the Company's operations by conducting an aggressive acquisition
program, increasing productivity and operating efficiency, and by internal
growth.
The Company was formed under the laws of the State of Florida on
June 26, 1990. In February, 1998 the Company acquired all of the issued and
outstanding capital stock of B&B Septic and Environmental Services, Inc.
("B&B"), a Florida corporation principally engaged in the installation,
replacement and repair of waste disposal systems and wastewater treatment and
disposal. At the time of such acquisition, B&B was owned by the Company's
shareholders. Unless context requires otherwise, references herein to the
Company include the Company and its wholly-owned subsidiary, B&B (see "The
Company", "Business" and "Certain Transactions").
THE OFFERING
Securities Offered................. 1,000,000 Shares and 1,000,000 Redeemable
Warrants. (An additional 150,000 Shares
and 150,000 Redeemable Warrants have been
reserved for issuance pursuant to the
Representative's Over-allotment Option.)
Offering Price..................... $5.00 per Share
$.10 per Redeemable Warrant
Terms of Common Stock.............. Holders of the Common Stock have one
noncumulative vote for each share held.
There are no preemptive, conversion or
redemption privileges, nor sinking fund
provisions with respect to the Common
Stock. All of the Company's outstanding
shares of Common Stock are validly
issued, fully paid and non-assessable.
The holders of shares of Common Stock are
6
<PAGE> 7
entitled to dividends when and as
declared by the Board of Directors from
funds legally available therefor and,
upon liquidation, are entitled to share
pro rata in any distribution to common
shareholders (see "Description of
Securities - Common Stock").
Terms of Redeemable
Warrants......................... Holders of the Redeemable Warrants have
the right to purchase one share of Common
Stock at an exercise price of $6.00 per
share at any time during the four year
period commencing one year from the date
of this Prospectus. The Redeemable
Warrants are redeemable at a redemption
price of $.10 per Redeemable Warrant at
any time after _____, 1999 on thirty days
prior written notice, provided that the
market price of the Common Stock equals
or exceeds $8 per Share for twenty
consecutive days within ten days prior to
the notice of redemption (see
"Description of Securities - Redeemable
Warrants").
Common Stock Outstanding
as of the Date of this
Prospectus....................... 1,690,000 shares of Common Stock
(excluding 487,500 shares of Common Stock
which may be issued in connection with
outstanding options).
Common Stock Outstanding
After the Offering............... 2,690,000 shares of Common Stock. These
share amounts do not include (i) up to
487,500 shares of Common Stock issuable
upon the exercise of the Company's
outstanding options; (ii) up to 1,000,000
shares of Common Stock issuable upon
exercise of the Redeemable Warrants;
(iii) up to 150,000 shares of Common
Stock issuable upon the possible exercise
by the Representative of the
Over-allotment Option; (iv) up to 150,000
shares of Common Stock underlying 150,000
Redeemable Warrants issuable upon the
possible exercise by the Representative
of the Over-allotment Option; or (v) up
to 100,000 shares of Common Stock
issuable upon exercise of the
Representative's Warrants.
Use of Proceeds.................... The Company intends to apply the net
proceeds of this Offering to consolidate
and reduce outstanding debt, to purchase
equipment, to construct a grease
processing facility, for corporate and/or
asset acquisitions, for expansion and for
working capital (see "Use Of Proceeds").
Risk Factors and Dilution.......... The Shares and Redeemable Warrants
offered hereby involve a high degree of
risk and substantial dilution. Potential
investors
7
<PAGE> 8
should carefully review the entire
Prospectus and particularly, the sections
entitled "Risk Factors" and "Dilution".
Proposed NASDAQ
Symbols (1)....................... Common Stock WSTX
Redeemable Warrants WSTXW
- -------------
(1) Assumes that the Common Stock and Redeemable Warrants offered hereby
will be eligible for NASDAQ-Small Cap Market listing and that a
viable trading market therefor will develop, of which there can be
no assurance.
8
<PAGE> 9
SUMMARY FINANCIAL INFORMATION
The following table sets forth summarized financial information
regarding the Company and B&B Septic and Environmental Services, Inc., on a
consolidated basis for the years ended December 31, 1996 and December 31, 1997
and for the three month periods ended March 31, 1997 and March 31, 1998. The
selected financial information for the years ended December 31, 1996 and
December 31, 1997 is derived from the Company's audited financial statements.
The selected financial information for the three month periods ended March 31,
1997 and March 31, 1998 is derived from unaudited financial statements which, in
the opinion of management, include all adjustments necessary for the fair
presentation of financial position and results of operations. This information
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operation" and the audited and unaudited
financial statements and notes thereto set forth elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Income Statement Data: Year Year Three Months Three Months
(period ended) Ended Ended Ended Ended
December 31, December 31, March 31, March 31,
1996 1997 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 1,682,566 $ 2,245,008 $ 614,259 $ 527,347
Net Income (Loss) (216,061) 421,858 142,700 81,498
Net Income (Loss) Per Share (.14) .28 .10 .05
Weighted Average Number
of Shares Outstanding 1,500,000 1,500,000 1,500,000 1,525,333
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data: December 31, 1997 March 31, 1998 March 31, 1998
(at period ended) Actual Actual As Adjusted(1)
----------------- -------------- --------------
<S> <C> <C> <C>
Current Assets $ 451,762 $ 256,139 $2,983,272
Total Assets 2,195,100 2,016,279 4,743,412
Current Liabilities 1,182,912 1,011,572 38,830
Total Liabilities 1,823,687 1,515,868 38,830
Stockholders' Equity 371,413 500,411 4,704,582
</TABLE>
(1) As adjusted to reflect the sale of the Shares offered hereby. The
table does not assume the exercise of the Representative's
Over-allotment Option, the Redeemable Warrants, the Representative's
Warrants or any outstanding stock options.
ALL REFERENCES TO THE COMPANY'S COMMON STOCK AND TO ITS AUTHORIZED AND
OUTSTANDING SECURITIES THROUGHOUT THIS PROSPECTUS GIVE EFFECT TO A FORWARD SPLIT
OF THE COMPANY'S OUTSTANDING COMMON STOCK IN FEBRUARY 1998, AT THE RATE OF
FIFTEEN FOR ONE.
9
<PAGE> 10
THE COMPANY
The Company is a non-hazardous, liquid waste management company
which provides various non-hazardous, liquid waste management services to
governmental, commercial and residential customers. The Company's services are
currently provided in the states of Florida, Georgia, Alabama, Tennessee,
Kentucky, West Virginia, Pennsylvania, Maryland, Delaware, and Virginia. Such
services include the removal, transport, treatment and disposal of bio-solids,
food service grease and septic waste (see "Business - Services - Removal,
Transport, Treatment and Disposal of Bio-Solids, Grease and Septic Waste"). The
Company is also engaged in the installation, repair and replacement of
residential and commercial waste systems including drain fields, septic tanks,
and grease traps (see "Business - Services - Repair, Maintenance and
Installation of Commercial and Residential Waste Systems"). Plans to conduct a
third area of business involving the recycling of non-hazardous waste materials
are under development (see "Business - Services - Waste Recycling").
The Company was incorporated in the State of Florida on June 26,
1990 under the name Weststar Environmental Pumping and Septic Service Inc. On
March 12, 1993 its name was changed to Weststar Environmental, Inc. From
inception through the present time, the Company operated as a Subchapter S
corporation under the Internal Revenue Code of 1986 as amended (the "Code").
Upon the completion of this offering the Company plans to revoke its Subchapter
S status, whereafter it will operate as a Subchapter C corporation.
The Company believes that continuing initiatives of government
authorities relating to environmental and waste disposal problems have resulted
in significant opportunities for liquid waste management companies. Accordingly,
the Company intends to use a significant portion of the proceeds of this
offering to expand the range of services provided and the geographical area in
which its services are provided. The Company intends to do so through the
expansion of present activities and the acquisition of related businesses. No
assurance can be given, however, that the Company will be successful with any of
its expansion and acquisition plans.
The Company's principal executive offices are located at 9550
Regency Square Blvd., Suite 1109, Jacksonville, Florida 32225, telephone (904)
721-7557.
RISK FACTORS
The securities offered hereby are speculative and involve a high
degree of risk. Prospective investors, prior to making an investment decision,
should carefully consider, along with other matters referred to herein, the risk
factors contained in this section. This prospectus contains certain
"forward-looking statements" which represent the Company's expectations or
beliefs. The words "believe", "expect", "anticipate", "estimate", "project",
"intend", and similar expressions identify forward-looking statements, which
speak only as of the date such statement was made. Forward-looking statements
may include, but not be limited to, future results of operations, growth plans,
integration of new operations, financing needs, industry trends, consumer demand
and levels of competition. These statements by their nature involve substantial
risks and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results could differ materially from those expressed in,
contemplated by or underlying any such forward-looking
10
<PAGE> 11
statements. Statements in this Prospectus, including those contained in this
Risk Factors section in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations", and in the Notes to
the Company's Financial Statements, describe factors, among others, that could
contribute to or cause such differences.
1. Negative Working Capital, Possible Need for Additional Capital -
At March 31, 1998, the Company had total current assets of $256,139 and total
current liabilities of $1,011,572 or a negative working capital of ($755,433).
The Company plans to increase its present business through expansion and
acquisition. The rate at which such growth occurs depends, in part, on the
capital resources available to the Company as well as its ability to locate and
acquire suitable acquisitions. There can be no assurance that the net proceeds
generated from this offering together with cash available from operating
revenues will be sufficient to meet the Company's capital requirements for the
planned growth of its business. The Company may require additional financing to
realize such growth and there can be no assurance that such financing will be
available in the amounts required or on satisfactory terms (see "Use Of
Proceeds").
2. Dependence on Major Customers - During the Company's fiscal years
ended December 31, 1997 and December 31, 1996, three customers have accounted
for approximately 80.2% and 77.0%, respectively, of the Company's revenues. The
City of Jacksonville/Jacksonville Electric Authority accounted for approximately
70.7% of total sales in 1997 and approximately 41.6% of total sales in 1996.
Food Lion Supermarkets accounted for approximately 7.1% of total sales for 1997
and approximately 15.6% of total sales in 1996. Roto-Rooter accounted for
approximately 2.4% of sales in 1997 and approximately 19.8% of total sales in
1996. The loss of the City of Jacksonville/Jacksonville Electric Authority
and/or Food Lion Supermarkets as a customer would have a materially adverse
effect upon the business of the Company (see "Business- Customers").
3. Non-Compete Agreements; Right Of First Refusal - In connection
with the Company's October 4, 1996 Asset Sale and Purchase Agreement (the "Asset
Sale Agreement") with CBP Resources, Inc. ("CBP"), a non-affiliated Delaware
corporation, the Company and Michael E. Ricks entered into ten year non-compete
agreements with CBP. These non-compete agreements prohibit the Company and Mr.
Ricks from owning, operating or managing any businesses engaged in the grease
trap business, the recycling of waste frying oil business and/or the rendering
business or any business engaged in the sale of any related products or services
in the states of North Carolina, South Carolina, Tennessee, Virginia, West
Virginia, Maryland, Alabama and the District of Columbia and within certain
areas bordering such states (the "Prescribed Territory"). The Company's
restricted activities in these areas could have an adverse effect on the
Company's proposed expansion and acquisition plans. Notwithstanding the
foregoing, CBP has granted the Company the limited right to engage in certain
activities prohibited by the non-compete agreements in the states of Tennessee,
Alabama, West Virginia and Maryland. No assurance can be given that if
challenged, these non-compete agreements would be upheld. Non-competition
agreements are not always enforceable due to public policy limitations existing
in various states and the difficulty of obtaining injunctive relief. Courts
typically have the power to cancel or modify such agreements. The Company does
not believe any such action would be taken by a court in this instance, however,
were it to contest such agreements. The Asset Sale Agreement also contains a
right of first refusal in favor of CBP. It provides that, if at any time, during
the ten year period commencing October 4, 1996, the Company, an affiliate of the
Company
11
<PAGE> 12
or a shareholder of the Company makes an offer to sell any business within the
Prescribed Territory engaged in the grease trap business, waste frying oil
business or rendering business, that the Company will give written notice to CBP
of the terms of any such proposed sale. CBP shall thereafter have thirty days to
negotiate an agreement with the seller of such business (see "Business -
Services - Removal, Transport, Treatment and Disposal of Bio-Solids, Grease and
Septic Waste - Asset Sale Agreement - Business Restrictions").
4. Dependence on Third Party Landfills and Land Application Sites -
A portion of the waste collected by the Company is delivered to third party
landfills and/or land application sites under informal arrangements or without
long-term contracts. If these third parties increase their disposal fees and the
Company is unable to pass along the increase to its customers, or if these third
parties discontinue their arrangements with the Company and the Company is
unable to locate alternative disposal sites, the Company's business and results
of operations would be adversely affected.
5. Dependence on Government Contracts - For the years ended December
31, 1997 and December 31, 1996, approximately 75.0% and 45.5% of the Company's
revenues were derived from services provided to governmental customers and it is
anticipated that a substantial portion of the Company's future revenues will be
derived from governmental customers. Government contracts are subject to special
risks, including delays in funding; lengthy review processes for awarding
contracts; non-renewal; delay, termination, reduction or modification of
contracts in the event of changes in the government's policies or as a result of
budgetary constraints; and increased or unexpected costs resulting in losses,
all of which could have a material adverse effect on the business of the Company
(see "Business - Customers" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations").
6. Government Regulation - The waste management business is subject
to extensive and frequently changing local, state and federal laws and
substantial regulation under these laws by governmental agencies, including the
United States Environmental Protection Agency (the "EPA"), various state
agencies and county and local authorities acting in conjunction with such
federal and state entities. This extensive regulatory framework imposes
significant compliance burdens and risks on the Company. Furthermore, amendments
to existing statutes and regulations, adoption of new statutes and regulations
and the Company's expansion into other jurisdictions and waste management
services could require the Company and others in the industry to continually
alter methods of operations at costs that will likely be substantial and which
could adversely affect the Company. There can be no assurance that the Company
will be able, for economic reasons or otherwise, to comply with future laws and
regulations. The Company believes that it is presently in substantial compliance
with all material federal, state and local laws and regulations governing its
operations and that such compliance has not had any material effect upon its
capital expenditures, net income, financial condition or competitive position
(see "Business Government Regulation").
7. Significant Competition in Waste Management Industry - The waste
management industry is extremely competitive and requires substantial amounts of
capital. Although competition varies by locality and type of service, the
Company's principal sources of competition are: local companies, which provide
primarily collection services to customers in a limited geographic area; large
companies which operate over a more extensive geographic area, provide
integrated waste
12
<PAGE> 13
management services, own or operate disposal sites and engage in various waste
transfer and resource recovery activities; and municipalities and other
governmental authorities. Many of the Company's competitors are well established
and have substantially greater marketing, financial, technological and other
resources than the Company. In addition, many of the Company's competitors offer
services not currently offered by the Company and have capabilities not
currently possessed by the Company including company owned disposal sites,
greater recycling and processing capabilities, more extensive and specialized
categories and types of equipment and personnel, and in-house engineering
departments. Although it has been the Company's experience that there are
available subcontractors which possess capabilities which can be integrated with
those offered by the Company, competitors which possess these capabilities
internally may be able to provide such services more cost effectively. There can
be no assurance that the Company will have the ability to compete effectively
(see "Business - Competition").
8. Competitive Bidding - In many instances, the Company obtains
contracts for its services through the process of competitive bidding. There can
be no assurance that the Company will be successful in having its bids accepted
or, if accepted, that awarded contracts will generate sufficient revenues to
result in profitability for the Company. Additionally, inherent in the
competitive bidding process is the risk that if a bid is submitted and a
contract is subsequently awarded, actual performance costs may exceed the
projected costs upon which the submitted bid or contract price was based. To the
extent that actual costs exceed the projected costs on which bids or contract
prices were based, the Company's profitability could be materially adversely
affected.
9. Potential Environmental Liability - The Company is subject to
liability for any environmental damage that its operations may cause, including
any contamination of drinking water sources or soil. To date, the Company has
not incurred any such liability for environmental damage and does not believe
that its operation as a non-hazardous waste management company will result in
any such liability in the future. No assurance can be given however, that this
will prove to be the case. Any substantial liability for environmental damage
incurred by the Company could have a material adverse effect on the Company's
business and results of operations.
As is typically the case in the non-hazardous waste industry,
the Company is able to obtain only very limited environmental impairment
insurance regarding its operations. An uninsured or underinsured claim of
sufficient magnitude would require the Company to fund such claim from cash flow
generated by operations or other sources. There can be no assurance that the
Company would be able to fund any such claim from operations or from other
sources.
10. Extensive Permitting and Licensing Requirements - The Company is
required to obtain and maintain in effect various federal, state, and local
permits and licenses in connection with its waste collection, transportation and
disposal operations. These permits and licenses are difficult, time consuming,
and, in certain instances, are costly to obtain, may be subject to community
opposition, opposition by various local elected officials or citizens,
regulatory delays and other uncertainties. In addition, certain permits may be
subject to modification, renewal, or revocation by the issuing agencies after
issuance, which may increase the Company's obligations and reopen opportunities
for opposition relating to the permits. Moreover, from time to time, regulatory
agencies may impose moratoria on, or otherwise delay, the review or granting of
these
13
<PAGE> 14
permits or licenses or such agencies may modify the procedures or increase the
stringency of the standards applicable to the review or granting of such permits
or licenses.
There can be no assurance that the Company will be successful in
obtaining and maintaining in effect the permits and licenses required for the
successful operation and growth of its business. The failure of the Company to
obtain or maintain in effect a permit or license significant to its business
would have a material adverse effect on the Company's business and results of
operations.
11. Dependence on Acquisitions For Growth; Availability of
Acquisition Targets; Potential Liabilities Associated with Acquisitions - The
rate of future growth and profitability of the Company will be dependent, in
part, upon its ability to identify and acquire additional nonhazardous waste
management and related businesses. This strategy involves risks inherent in
assessing the values, strengths, weaknesses, risks, and profitability of
acquisition candidates, including adverse short-term effects on the Company's
reported operating results, diversion of management's attention, dependence on
retaining, hiring and training key personnel, and risks associated with
unanticipated problems or latent liabilities. There can be no assurance that
acquisition opportunities will be available, that the Company will have access
to the capital required to finance potential acquisitions, that the Company will
be able to acquire additional businesses or that any businesses acquired by the
Company will be integrated successfully into the Company's operations or prove
profitable.
In addition to the foregoing, the businesses acquired by the
Company may have liabilities that the Company does not discover or may be unable
to discover during its pre-acquisition investigations, including liabilities
arising from environmental contamination or non-compliance by prior owners with
environmental laws or regulatory requirements, and for which the Company, as a
successor owner or operator, may be responsible. Certain environmental
liabilities, even if expressly not assumed by the Company, may nonetheless be
imposed on the Company under certain legal theories of successor liability. The
Company may be required under federal, state, or local law to investigate and
remediate this contamination, if any. Any indemnities or warranties, due to
their limited scope, amount, duration, the financial limitations of the
indemnitor or warrantor, or other reasons, may not fully cover such liabilities
(see "Business - General Growth Strategy").
12. Dependence on Chief Executive Officer - The Company is highly
dependent on the services of Michael E. Ricks, the Company's president and chief
executive officer. The Company and Mr. Ricks entered into a three year
employment contract on April 28, 1997. The Company intends to acquire and
maintain key man term life insurance on Mr. Ricks upon the completion of this
offering. The face amount of the policy has not been determined and is intended
to be the maximum amount which the Company deems feasible in light of its
working capital position, based upon the cost of premiums. The loss of the
services of Mr. Ricks could have a material adverse effect on the Company (see
"Certain Transactions").
13. Control of the Company - The Common Stock offered hereby will
represent a minority of the Company's outstanding voting stock after its
issuance. Since each common share is entitled to one vote which is
non-cumulative, investors in the offering will have no effective voting voice in
the Company's management which will continue to be controlled by the Company's
current
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<PAGE> 15
shareholders. These current shareholders presently own an aggregate of 1,690,000
shares of Common Stock and own stock options exercisable for the purchase of up
to an additional 487,500 shares of Common Stock (see "Principal Stockholders"
and "Certain Transactions").
14. Ability To Manage Growth, To Integrate Acquired Businesses and
To Achieve Operating Efficiencies - The Company's strategy of growing through
acquisitions and expansion is expected to place significant burdens on the
Company's management and on its operational and other resources. The Company
will need to attract, train, motivate, retain, and supervise its senior
managers, technical professionals and other employees. Any failure to expand its
management information system capabilities, to implement and improve its
operational and financial systems and controls or to recruit appropriate
additional personnel in an efficient manner and at a pace consistent with the
Company's business growth could have a material adverse effect on the Company's
business and results of operations.
15. Bonding Requirements - The Company is required, in certain
instances, to post bid and/or performance bonds in connection with contracts or
projects with government entities and, to a lesser extent, private sector
customers. Approximately 36% of the Company's revenues for the year ended
December 31, 1997 were derived from contracts or projects which required the
Company to post bid and/or performance bonds. In addition to bid and performance
bond requirements, new legislation in various jurisdictions may require the
posting of substantial bonds or require waste management companies to provide
other financial assurances covering their activities. There can be no assurance
that personal guarantees or other security necessary to obtain bonding coverage
will be available in the future or that the Company will be able to obtain bonds
in the amounts required or have the ability to increase its bonding capacity, if
necessary or desired. In the event the Company is unable to obtain bonding
coverage there could be a materially adverse impact on the Company's operations
(see "Business - Insurance and Bonding").
16. Potential Liability and Insurance - The waste management
industry involves potentially significant risks of statutory, contractual and
common law liability. The Company carries a broad range of insurance coverage,
which the Company considers sufficient to meet regulatory and customer
requirements and to protect the Company's assets and operations. The Company
also obtains additional insurance as required on a project-by-project basis. The
Company attempts to operate in a professional and prudent manner and to reduce
its liability risks through specific risk management efforts (see "Business -
Insurance and Bonding").
17. Arbitrary Determination of Offering Price - The Offering prices
for the Shares and Redeemable Warrants have been arbitrarily determined by the
Company and the Underwriter and the prices bear no relationship to the Company's
assets, earnings, book value or other such criteria of value (see "Business" and
"Underwriting").
18. Dilution - Based on the net tangible book value of the Company
at March 31, 1998, purchasers of the Shares offered hereby will incur immediate
substantial dilution in the net tangible book value of their shares of Common
Stock of approximately $3.25 (65%) per Share from the public offering price of
$5.00 per Share. Such dilution is due, in part, to the disparity between the
consideration paid for the Company's shares by the Company's existing
shareholders and the consideration being paid by investors in this offering. The
foregoing does not assume the exercise of presently outstanding stock options,
of the Over-allotment Option, the exercise of the
15
<PAGE> 16
Redeemable Warrants, the exercise of the Representative's Warrants, or the
exercise of warrants issuable to the Representative upon its exercise of the
Representative's Warrants. The net tangible book value of each share of Common
Stock owned by the Company's existing stockholders will increase by
approximately $1.46 as a result of the consummation of this offering. As of the
date of this Prospectus, the Company has outstanding stock options to purchase
460,000 shares of Common Stock at an exercise price of $5 per share and
outstanding stock options to purchase 27,500 shares of Common Stock at an
exercise price of $.001 per share. The latter options were granted to
non-shareholder employees of the Company to instill greater work motivation and
Company loyalty. The exercise of such latter stock options will result in
additional dilution to the purchasers of the Shares offered hereby. In the event
all presently outstanding options were exercised, the total number of shares of
Common Stock outstanding after the offering would be 3,177,500 (see "Dilution",
"Management - Executive Compensation - Stock Option Plan", and "Description of
Securities - Outstanding Options").
19. No Assurance of Public Market; Effect of NASDAQ Delisting -
Prior to this offering, there has been no public market for the Common Stock or
Redeemable Warrants, and there is no assurance that a public market for the
Common Stock or Redeemable Warrants will develop after this offering. If trading
markets do in fact develop for the Common Stock and Redeemable Warrants offered
hereby, there is a possibility that they will not be sustained. Therefore, there
can be no assurance that any of the Shares or Redeemable Warrants offered hereby
can be resold at or near their offering prices. The Company anticipates that
upon completion of this offering, the Company's Common Stock and Redeemable
Warrants will be quoted on the NASDAQ - Small Cap Market. If the Company's
Common Stock and Redeemable Warrants are not originally or subsequently eligible
for listing, purchasers of the Shares and Redeemable Warrants may have
difficulty in selling their Shares and Redeemable Warrants should they desire to
do so. Any such difficulty in the attempted sale of the Shares or Redeemable
Warrants, could have an adverse effect on the market prices for such securities.
20. Exchange Act Compliance; Effect on Acquisitions - The Company
has agreed, contemporaneous with the sale of the Common Stock and Redeemable
Warrants, that it will file an application with the Securities and Exchange
Commission (the "Commission") to register its Common Stock and Redeemable
Warrants under the provisions of Section 12(g) of the Exchange Act of 1934, as
amended (the "Exchange Act"), and that it will use its best efforts to continue
to maintain such registration for a minimum of five years from the date of this
Prospectus. Such registration will require the Company to comply with periodic
reporting, proxy solicitations and certain other requirements of the Exchange
Act. If the Company seeks shareholder approval of an acquisition or business
combination at such time as the Company's securities are registered pursuant to
Section 12(g) of the Exchange Act, the Company's proxy solicitation materials
required to be transmitted to shareholders may be subject to prior review by the
Commission. Under the federal securities laws, public companies must furnish
certain information about significant acquisitions, which information may
require audited financial statements of an acquired company with respect to one
or more fiscal years, depending upon the relative size of the acquisition.
Consequently, if a prospective acquisition or combination candidate did not have
available and was unable to reasonably obtain the requisite audited financial
statements, the Company could, in the event of consummation of an acquisition or
combination with such company, be precluded from (i) any public financing of its
own securities for a period of as long as three years, as such financial
statements would be required to undertake registration of such securities for
sale to the public; and
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<PAGE> 17
(ii) registration of its securities under the Exchange Act. Consequently, it is
unlikely that the Company would seek to consummate an acquisition or business
combination with such an entity.
21. Penny Stock Regulations - In the event the Common Stock and
Redeemable Warrants are never listed or are listed but subsequently delisted
from the NASDAQ Small Cap Market they may subsequently become subject to the
rules and regulations governing penny stocks. In general, penny stocks are
equity securities (i) of companies that have net tangible assets of less than
$2,000,000 and; (ii) that have a market price of less than $5.00 (excluding
securities that are quoted on NASDAQ or are registered on a national securities
exchange provided that current price and volume information for transactions in
such securities are reported and made available to vendors under the rules of
such national securities exchange). Under the penny stock rules, broker-dealers
who recommend such securities to persons other than institutional accredited
investors (generally institutions with assets in excess of $5,000,000) must make
a special written suitability determination for the purchaser, receive the
purchaser's written agreement to a transaction prior to sale and provide the
purchaser with risk disclosure documents which identify certain risks associated
with investing in penny stocks and which describe the market therefor as well as
the purchaser's legal remedies. Further, the broker-dealer must also obtain a
signed and dated acknowledgment from the purchaser demonstrating that the
purchaser has actually received the required risk disclosure document before a
transaction in a penny stock can be consummated. These requirements may have the
effect of reducing the level of trading activity in the secondary market for
securities that become subject to the penny stock rules. If the Company's
securities become subject to the penny stock rules, investors in this offering
may find it more difficult to sell such securities which could have an adverse
effect on the market price thereof.
22. Possible Issuance of Additional Shares of Common Stock - The
Company's Articles of Incorporation authorize the issuance of 10,000,000 shares
of Common Stock. Upon the sale of all of the shares of Common Stock and
Redeemable Warrants offered hereby and exercises, if any, of outstanding stock
options, Redeemable Warrants, and Representative's Warrants approximately 54.2%
of the Company's authorized common shares will remain unissued. The Company's
board of directors has the power to issue any or all of such additional common
shares for general corporate purposes without shareholder approval. Management
presently anticipates that it may choose to issue such shares to acquire
business interests or other types of property in the future, although the
Company presently has no commitments, contracts or intentions to issue any
additional common shares except as otherwise disclosed in this Prospectus.
Potential investors should be aware that any such stock issuances may result in
a reduction of the book value or market price of the outstanding common shares.
If the Company issues any additional common shares, such issuance will reduce
the proportionate ownership and voting power of each other common shareholder.
23. Potential Sales Pursuant to Rule 144 and Otherwise; Adverse
Effect on Market Price of Common Stock. Future sales in the public market of
previously issued restricted shares of Common Stock pursuant to Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), could have a
material adverse effect on the market price of the Company's Common Stock. In
connection with the foregoing, certain Company shareholders including Company
officers and directors, certain holders of Company stock options and holders of
5% or more of the Company's outstanding Shares have agreed with the Underwriter
to a lockup of their Shares (see "Market For Common Equity And Related
Stockholder Matters", "Description Of Securities" and "Underwriting").
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<PAGE> 18
24. Dividends Not Likely - There can be no assurance that the
proposed operations of the Company will result in sufficient revenues to enable
the Company to operate at profitable levels or to generate a positive cash flow.
For the foreseeable future it is anticipated that any earnings which may be
generated from operations of the Company will be used to finance the growth of
the Company and that cash dividends will not be paid to stockholders.
25. Related Party Transactions - Since its inception, the Company
has on several occasions entered into transactions with Company officers,
directors, principal shareholders and other affiliated parties including those
transactions discussed in the "Certain Transactions" section of this Prospectus.
The Company believes that all such transactions were made on terms as fair as
those obtainable from independent third parties, were independent third parties
able and willing to enter into similar transactions with the Company, although
no assurance can be given that this is the case. In June 1998, the Company
adopted a policy which, among other things, requires all future material
transactions with affiliated parties to be approved by a majority of the
Company's independent directors who do not have an interest in the transaction
and who have access, at the Company's expense, to the Company's or independent
legal counsel.
26. Discretion in Application of Offering Proceeds; Affiliated
Persons Loans to be Paid Out of Offering Proceeds - The Company's management may
apply the proceeds of this offering for purposes other than those specified in
"Use of Proceeds" in order to accommodate changing circumstances. In addition, a
substantial portion of the proceeds of this offering will be applied to working
capital of the Company. Accordingly, the Company's management will have broad
discretion as to the application of the proceeds of this offering (see "Use of
Proceeds").
The Company intends to utilize a portion of the net offering
proceeds to pay the preponderance of its short and long term debt, including
loans made to the Company by certain officers, directors and shareholders and
entities controlled by them. These loans include loans made to the Company by
G&W Framing Contractors, Inc. (evidenced by a note in the amount of $75,000);
and by Michael E. Ricks; Yarborough Gas Inc.; and CBI, Inc. totaling
undocumented loans in the amount of $268,634. As of March 31, 1998, the
aggregate amount of principal and interest due to such affiliated or associated
persons by reason of these loans and note was $343,634. Interest continues to
accrue on these loans through the date of repayment (see "Use of Proceeds" and
"Certain Transactions").
27. Ongoing Influence of the Representative - The Representative,
through its right to select a nominee to the Company's board of directors for a
period of five years after the closing of the offering, its two year financial
consulting agreement with the Company and its right to receive a 10% acquisition
fee for introducing the Company to a party which enters into a stock or asset
acquisition with the Company, will have an ongoing influence on the Company's
future operations and activities.
28. Current Prospectus and State "Blue Sky" Registration Required to
Exercise the Redeemable Warrants - Beginning one year from the date hereof,
purchasers of the Redeemable Warrants will have the right to exercise them to
purchase shares of Common Stock but only if a current prospectus relating to
such shares of Common Stock is then in effect and only if the shares of Common
Stock are qualified for sale under the securities laws of the states in which
the respective purchasers reside. The Company intends to maintain current a
prospectus which will
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<PAGE> 19
permit the purchase and sale of the shares of Common Stock underlying the
Redeemable Warrants, but there can be no assurance that the Company will be able
to do so. Although the Company intends to seek to qualify the shares of Common
Stock underlying the Redeemable Warrants for sale in those states in which the
securities are to be offered, no assurance can be given that such qualification
will occur. The Redeemable Warrants may be deprived of any value if a current
prospectus covering the shares of Common Stock issuable upon the exercise
thereof is not filed and kept effective or if such underlying shares of Common
Stock are not, or cannot be, registered in the applicable states (see
"Description of Securities").
29. Representative's Warrants - In connection with this offering,
the Company has agreed to sell, for a nominal price, to the Representative,
four-year warrants (the "Representative's Warrants") to purchase at a price of
$7.25 per Share (145% of the public offering price), up to 100,000 Shares and
additional four-year warrants (at a price of $0.145 per warrant) to purchase at
a price of $6.00 per Share, up to 100,000 additional Shares. The
Representative's Warrants are exercisable for a four year period commencing 12
months after the effective date of this Prospectus. The Representative's
Warrants contain anti-dilution provisions which, among other things, provide,
under certain circumstances, for a reduction of the purchase price per Share and
an increase in the number of Shares that may be purchased. To the extent that
all or a portion of the Representative's Warrants are sold or exercised and all
or a portion of the underlying securities are sold, the market price of the
Company's Common Stock may be adversely affected and the Company's ability to
raise additional capital may be impaired, following exercise of such rights (see
"Underwriting").
USE OF PROCEEDS
GENERAL
The net proceeds to the Company from the offering, after deducting
underwriting discounts and commissions and offering related expenses, are
estimated to be approximately $4,203,898 without giving effect to the exercise
of the Underwriter's Over-allotment Option. The Company intends to use the net
proceeds from the offering in the approximate amounts and in the order of
priority shown below for the purposes listed:
<TABLE>
<CAPTION>
Percent
of
Anticipated Use Approximate Amount Total
--------------- ------------------ ------
<S> <C> <C>
Debt consolidation and reduction(1) ............. $1,477,038 35.13%
Construction of grease processing facility(2) ... 500,000 11.89%
Equipment purchases(3) .......................... 400,000 9.54%
Acquisition and expansion(4) .................... 1,200,000 28.54%
Working capital(5) .............................. 626,860 14.90%
TOTAL ...................................... $4,203,898 100%
</TABLE>
- ---------------
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<PAGE> 20
(1) The Company intends to pay off the preponderance of its short and
long term debt, including loans made to the Company by Company
officers, directors, and shareholders with the exception of certain
trade payables and of the mortgage on the Starke, Florida property
in the amount of $160,000 (see "Business - Property and Equipment").
(2) The facility is intended to serve as a waste treatment and recycling
prototype. The proceeds allocated for this purpose are expected to
be sufficient to construct the facility and lease the underlying
land. The Company expects such facility to be constructed and become
operational approximately three months after the completion of the
offering. Based upon results of operations, the Company intends to
build up to five more similar facilities over the next two years. No
assurance can be given, however, that this will prove to be the case
(see "Business - Services - Waste Recycling").
(3) The Company intends to purchase approximately 4 new or used tank
trailers, hereinafter referred to as "tankers", at an approximate
cost of $20,000 per tanker. Tankers are used to pump out, store and
transport liquid waste removed by the Company to environmentally
approved treatment facilities. The Company also intends to purchase
approximately 3 new tractors at an approximate cost of $60,000 per
tractor. Tractors are used to transport the tankers. In addition to
the foregoing, the Company intends to upgrade pumps and make
improvements to existing equipment. The Company presently owns 15
tankers and 4 tractors and leases 5 tractors. The Company intends to
curtail or discontinue its leasing of tractors following such
purchases.
(4) Includes costs relating to the expansion and/or acquisition of waste
management facilities or businesses including operating costs. Such
costs would include, among others, costs associated with purchase or
lease and upgrading of property, acquisition, construction,
permitting, equipment and personnel.
(5) To be used for general corporate purposes. This working capital will
also permit the Company to carry greater receivables from expected
sales increases, although no assurance can be given that this will
prove to be the case. The Company anticipates that the net proceeds
from the offering will be sufficient to meet its working capital
requirements for at least 24 months following the completion of this
offering.
Management presently intends to utilize the net proceeds of the
offering for the specific purposes set forth herein. Notwithstanding the
foregoing, none of the expenditures described above constitutes a firm
commitment by the Company. Projected expenditures are estimates or
approximations only. Future events, including changes in the economic climate or
the Company's planned business operations including the success or lack of
success of the Company's intended business activities could make shifts in the
allocation of funds necessary or desirable. Any such shifts will be at the
discretion of the board of directors of the Company. Until utilized, the net
proceeds of this offering may be invested in short-term interest bearing
obligations such as United States government obligations, bank certificates of
deposit and money market funds.
DEBT CONSOLIDATION AND REDUCTION
The following tables set forth the indebtedness of the Company
intended to be discharged by way of the application by the Company of a portion
of the proceeds of this offering. This indebtedness consists of notes payable,
loans payable (borrowings not evidenced by any written instrument), dividends
attributable to various fiscal year ends, declared but unpaid to certain
20
<PAGE> 21
shareholders, certain ordinary trade payables, and certain capital lease
obligations. The amounts of indebtedness involved have been calculated as at
March 31, 1998, so that the actual amounts paid may be somewhat more or less
than those indicated below. With respect to notes payable and loans payable,
their maturities and annual interest rates are provided. With respect to
dividends payable and trade payables, they do not bear interest as such and
their maturities are either not formally existent, inapplicable, or subject to
varying contingencies not germane to this data. With respect to capital leases,
they relate to the lease by the Company as lessee of various items of equipment
and do not bear interest as such (which is factored into the amount of the lease
rent). In the case of notes payable and loans payable which originated within
one year prior to March 31, 1998, the application of their proceeds are
provided.
Notes Payable
<TABLE>
<CAPTION>
Note and Interest Rate Amount Due Maturity
---------------------- ---------- --------
<S> <C> <C>
Unsecured note payable to a corporation.
Interest is at 18%.(1)(2) $ 75,000 Demand
Note payable to a bank in 59 monthly installments
of $3,390, including interest at 10%, commencing
October 1995. The mortgage is secured by the
Company's real property in Deland, Florida. 260,255 08/00
Mortgage payable to an individual in 150 monthly
installments of $1,000, including interest at 7%,
commencing February 1994. 77,550 07/06
Note payable to a bank in 71 monthly installments
of $1,448, including interest at 10.75%, commencing
November 1995. 53,063 09/01
Note payable to a bank in 47 monthly installments
of $1,935, including interest at 10.75%, commencing
April 1996. 48,136 02/00
Note payable to a bank in 51 monthly installments
of $602, including interest at 12%, commencing
December 1995. 14,325 01/00
Note payable to a bank in 60 monthly installments
of $735, including interest at 8.75%, commencing
September 1994. 13,546 08/99
Note payable to a bank in 51 monthly installments
of $603, including interest at 12%, commencing
December 1995. 11,353 01/00
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C> <C> <C>
Note payable to a bank in 24 monthly installments
of $2,367, including interest at 12.43%, commencing
March 1996. 3,268 02/98
Note payable to a bank in 24 monthly installments
of $2,530, including interest at 9.35%, commencing
August 1996. 9,031 07/98
Note payable to a bank in 36 monthly installments
of $2,881, including interest at 12%, commencing
February 1995. 3,698 01/98
Note payable to a bank in 36 monthly installments
of $392, including interest a 10%, commencing
October 1995. 4,293 09/98
---------
Total notes payable $ 573,518
</TABLE>
Loans Payable
<TABLE>
<CAPTION>
Creditor Interest Rate Amount Maturity
-------- ------------- ------ --------
<S> <C> <C> <C> <C>
CBI, Inc.(1)(2) 8% $ 38,000 Demand
Yarborough Gas, Inc.(1) 10% 26,611 Demand
Michael E. Ricks(3)(4) 8% 204,023 Demand
--------
Total loans payable 268,634
</TABLE>
S Corporation Dividends Payable(8)
<TABLE>
<CAPTION>
Creditor Amount
-------- ------
<S> <C> <C>
Michael E. Ricks(4) $ 78,000
James Flynn(5) 4,000
William Costello(5) 4,000
Thomas F. Fey(6) 8,000
-------
94,000
</TABLE>
Trade Accounts Payable(7)
<TABLE>
<S> <C>
Miscellaneous trade creditors 343,578
</TABLE>
22
<PAGE> 23
Capital Leases(7)
<TABLE>
<CAPTION>
Lessor Amount Maturity Application
- ------ ------ -------- -----------
<S> <C> <C> <C> <C>
Colonial Pacific Corp. $ 120,396 02/02 2 trucks
National Credit Corp. 61,306 04/00 1 truck
7 leases each under $3,500 15,606 98 to 00 miscellaneous equipment
----------
197,308
----------
Total Debt Consolidation and Reduction $1,477,038
==========
</TABLE>
Notes:
(1) Creditor is a corporation owned and controlled by unaffiliated
shareholders of the Company.
(2) Obligation was incurred subsequent to March 31, 1997. Proceeds were
applied to working capital.
(3) During the year ended December 31, 1997 dividends payable to Mr.
Ricks in the amount of $42,417 were converted into a stockholder
loan. A portion of these obligations were incurred subsequent to
March 31, 1997. Proceeds of these obligations were applied to
working capital.
(4) Creditor is a controlling shareholder, director and president of the
Company.
(5) Creditor is an unaffiliated shareholder of the Company.
(6) Creditor is a director of the Company.
(7) None of such creditors or lessors are affiliated or associated with
the Company.
(8) Under the Internal Revenue Code the net income of an S Corporation
constitutes income to its shareholders in proportion to their
shareholdings. Upon completion of this offering the Company will
cease to be an S Corporation.
MARKET FOR COMPANY SECURITIES AND RELATED SECURITYHOLDER MATTERS
Prior to this offering, there has been no public market for the
Common Stock or the stock options of the Company nor have any warrants (stock
options in tradeable form) been outstanding. There can be no assurance that a
public market for the Common Stock or the Redeemable Warrants will develop after
this offering. The Company anticipates that upon completion of this offering
that its Common Stock and the Redeemable Warrants will be traded on the NASDAQ-
Small Cap Market.
Presently, the Company has 1,690,000 shares of Common Stock issued
and outstanding which are held by approximately 22 persons. An additional
487,500 shares of Common Stock are subject to issuance upon exercise of
outstanding stock options. Upon completion of this offering, 1,500,000 of the
1,690,000 outstanding shares of Common Stock will be eligible for sale under
Rule 144 of the Securities Act of 1933, as amended. Notwithstanding the
foregoing, and except as described herein, the Company's officers and directors,
the holders of the 460,000 stock options
23
<PAGE> 24
exercisable at $5 per share (the "$5 Option Holders"), and the holders of 5% or
more (the "5% Shareholders") of the outstanding shares of the Company's Common
Stock immediately prior to the date of this Prospectus, have agreed with the
Representative not to sell any of their Shares, options, or underlying Shares
for an 18 month period following the closing of this offering (the "Initial
Lock-Up Period"). The Representative has agreed however, that the Company's
officers and directors, $5 Option Holders and 5% Shareholders can sell up to 25%
of their Shares, pursuant to Rule 144 of the General Rules and Regulations under
the 1933 Act, during the Initial Lock-Up Period, at any time subsequent to 12
months after the date of this Prospectus, provided that the Share market price,
adjusted for splits and like transactions, has closed at or above $7.50 for a
period of 20 consecutive days within 10 days of any sale by them. The 5%
Shareholders have further agreed not to sell or transfer any of their Shares for
an additional 18 month period unless the Share market price, adjusted for splits
and like transactions, has closed at or above $7.50 for a period of 20
consecutive days within 10 days of any sale by them (see "Underwriting").
The Company is an S Corporation. Accordingly, its net income is
income to its shareholders in proportion to their shareholdings. Upon completion
of this offering the Company will cease to be an S Corporation. It paid
dividends during the years ended December 31, 1997 and December 31, 1996 in the
respective amounts of $106,000 and $27,583. There are no restrictions that limit
the Company's ability to pay dividends on the Common Stock or which are likely
to do so in the future. Notwithstanding the foregoing, for the foreseeable
future, it is anticipated that any earnings which may be generated from
operations of the Company will be used to finance the growth of the Company and
that cash dividends will not be paid to stockholders (see "Risk Factors -
Dividends Not Likely").
During the year ended December 31, 1997 dividends payable to Michael
Ricks, president and a principal shareholder of the Company, in the amount of
$42,417, were converted to a stockholder loan (see "Use of Proceeds - Debt
Consolidation and Reduction").
DILUTION
The following table sets forth as of March 31, 1998 the difference
between the present stockholders and the new stockholders with respect to the
number of Shares purchased from the Company in the offering, the total cash
consideration paid and the average price per Share, assuming an initial public
offering price of $5.00 per Share and before the deduction of underwriting
discounts and commissions and offering expenses payable by the Company. The
table does not assume the exercise of any outstanding stock options, including
27,500 dilutive options, the Redeemable Warrants, the Representative's Warrants
or the exercise of the Underwriter's Over-allotment option.
24
<PAGE> 25
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
---------------------- -----------------------
Percent Percent Average Price
Number of Total Amount of Total Per Share
------ -------- ------ -------- -------------
<S> <C> <C> <C> <C> <C>
Present stockholders(1) 1,690,000 62.8% $ 141,522 2.8% $ .08
New stockholders 1,000,000 37.2% $5,000,000 97.2% $ 5.00
--------- ---- ---------- ---- --------
TOTAL 2,690,000 100% $5,141,522 100% $ 1.91
</TABLE>
(1) All issuances of shares to present shareholders are historical. No
shares have been issued since March 31, 1998 to date.
[/R]
CAPITALIZATION
The following table sets forth the capitalization of the Company as
of March 31, 1998 and as adjusted to give effect to the issuance and sale by the
Company of the Shares offered hereby. The table does not assume the exercise of
the Representative's Over-allotment Option, the Redeemable Warrants, the
Representative's Warrants or any outstanding stock options. It gives effect to
the Company's February 1998 fifteen-for-one forward stock split and February 16,
1998 acquisition of B&B. This table should be reviewed in conjunction with the
December 31, 1997 and 1996 consolidated audited financial statements of the
Company and B&B, the March 31, 1998 and 1997 three-month consolidated unaudited
financial statements of the Company and B&B and the notes thereto included
elsewhere in this Prospectus:
<TABLE>
<CAPTION>
March 31, 1998(1)
--------------------------
Actual As Adjusted
---------- -----------
<S> <C> <C>
Notes payable ................................... $ 75,000 $ -0-
Current portion of long-term debt(1) ............ 122,318 -0-
Current portion of capital lease obligations .... 69,212 -0-
Long term debt, net of current portion(1) ....... 376,200 -0-
Capital lease obligations, net of current portion 128,096 -0-
Stockholders' equity
Common stock, $.001 par value;
10,000,000 shares authorized;
1,690,000 shares issued and outstanding(2);
2,690,000 shares as adjusted(1)(2) ........ 1,690 2,690
Additional paid-in capital ................... 131,902 4,343,073
Retained earnings ............................ 358,819 358,819
---------- ----------
Total Stockholders' equity ................ 500,411 4,704,582
---------- ----------
Total Capitalization ............................ $1,271,237 $4,704,582
</TABLE>
25
<PAGE> 26
(1) Does not include the mortgage note in the amount of $160,000 made by
the Company on June 3, 1998 (see "Business - Property and
Equipment") or stock issuable on the exercise of any options or
warrants, including the underwriter's over-allotment option.
(2) All issuances of shares described above are historical. No shares
have been issued since March 31, 1998 to date.
DIVIDEND POLICY
The Company, by reason of its contemplated future financial
requirements and business plans, does not contemplate or anticipate paying any
dividends upon its Common Stock in the foreseeable future. The Company presently
plans to retain earnings, to the extent that there are any, to finance the
development and expansion of its business (see "Risk Factors").
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's current operations consist of the activities of the
Company and its wholly owned subsidiary, B&B. The Company's principal business
is the removal, transportation, treatment and disposal of liquid waste; the
installation, maintenance and repair of residential and commercial waste
management systems; and the removal and disposal of food service grease from
restaurants and other food service establishments. All statistical references to
the Company under Management's Discussion and Analysis of Financial Condition
and Results of Operations are to the Company and B&B on a consolidated basis.
The following information is intended to highlight key developments
in the Company's operations and to identify other factors affecting the
Company's results of operations and its liquidity and capital resources on a
consolidated basis for the years ended December 31, 1997 and December 31, 1996
and for the three-month periods ended March 31, 1998 and 1997. The information
should be read in conjunction with the audited consolidated financial statements
and notes thereto set forth elsewhere in this Prospectus.
26
<PAGE> 27
<TABLE>
<CAPTION>
12 MONTHS ENDED DECEMBER 31 3 MONTHS ENDED MARCH 31
--------------------------------------------- -------------------------------------------
1996 % 1997 % 1998 % 1997 %
---------- ------ ---------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $1,682,566 100 $2,245,008 100 527,347 100 614,259 100
Cost of Sales $1,522,476 90.49 $1,091,196 48.61 296,821 56.29 326,032 53.08
Gross Profit $160,090 9.51 $1,153,812 51.39 230,526 43.71 288,227 46.92
SG&A Expense $518,176 30.80 $522,203 23.26 122,540 23.24 111,982 18.23
Operating Profit ($358,086) (21.29) $631,609 28.13 107,986 20.47 176,245 28.69
(Loss)
(Gain) or Loss on ($245,446) (14.59) $35,828 1.60
Disposal of Fixed
Assets(1)
Interest Expense $103,421 6.15 $173,923 7.75 26,488 5.02 33,545 5.46
Historical Net (Loss) ($216,061) (12.85) $421,858 18.78 81,498 15.45 142,700 23.23
Income Before
Income Taxes
Proforma Income Tax $76,000 4.52 ($148,000) (6.59) (28,000) (5.31) (50,000) (8.14)
(Expense) Benefit
Proforma Net Income ($140,061) (8.33) $273,858 12.19 53,498 10.14 92,700 15.09
(Loss)(2)
Proforma Net (Loss) ($.09) $.18 $.04 $.06
Income per Common
Share(2)
*No. of Shares 1,500,000 1,500,000 1,525,333 1,500,000
Outstanding
</TABLE>
* Gives effect to February 1998 15 for 1 stock split
(1) The gain on disposal of fixed assets for 1996 resulted from the sale
of routes to CBP in October of 1996. The gain of $379,000 was offset
by write-offs on equipment to a lower book value. The loss on
disposal of fixed assets for the twelve months ended December 31,
1997 resulted from the Company's early termination of an equipment
lease.
(2) The unaudited proforma information represents income tax expense
which would have been recorded had Weststar been a taxable
corporation based on the tax laws in effect during the period.
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
Results of Operations
The Company's revenues were $2,245,008 for the year ended December
31, 1997, an increase of $562,442 or 33.43% over the year ended December 31,
1996. This increase in revenues was due to an increase in sales of $942,062 to
the government sector. The foregoing sales increase was offset to a certain
extent however, by the reduced revenues from the Company's grease trap business
directly attributable to the 1996 Sale to CBP (the "Agreement").
27
<PAGE> 28
Revenues in 1997 were increasingly derived from the government
sector versus the private sector. 67.6% of revenues, or $1,709,834, were
generated by government sources for the year ended December 31, 1997 as compared
to 43.2%, or $767,769 for the year ended December 31, 1996.
Cost of sales for the year ended December 31, 1997 were $1,091,196
or 48.61% of gross revenues as compared to cost of sales of $1,522,476 or 90.49%
of gross revenues for the year ended December 31, 1996. The large improvement in
cost of sales resulted primarily from the sale of grease trap business routes in
North Carolina and South Carolina in connection with the 1996 Sale and the
discontinuation of the Company's licensing arrangement with Roto Rooter. Vehicle
operating costs in 1997 were up by $46,334 or 20.65% when compared to the same
costs in 1996 primarily due to an increase in equipment rentals and repairs.
Labor and benefit costs in 1997 were down $283,882 or 39.90% when compared to
the same costs in 1996. This decline was primarily due to the October 1996
cancellation of the Company's license agreement with Rotor Rooter which required
the Company to bear high labor costs and to the decline in labor requirements
resulting from the 1996 Sale. The Company has replaced equipment as needed and
depreciation expense remained relatively constant at $208,576 in 1997 as
compared to $214,097 in 1996. A major component of direct costs is insurance
expense, which the Company seeks to obtain at the most competitive rates. For
the year ended December 31, 1997 insurance expense was $98,222, down from
$176,636 for the year ended December 31, 1996. This large decrease was a result
of lower workman's compensation costs and a determined effort by the Company to
shop rates and get the lowest cost possible. The increased business volume with
the government and municipality sector in 1997 also resulted in a lower cost of
sales compared to 1996, thereby contributing to the higher gross margin.
Selling, general and administrative expenses were $522,203 for the
year ended December 31, 1997 as compared to $518,176 for the year ended December
31, 1996. Although the dollar amount of expenses were similar for each of 1997
and 1996, as a percentage of sales, 1997 selling, general and administrative
were 23.26% as compared to 30.80% in 1996 reflecting the Company's greater
efficiency in expense control in relation to revenues.
SG&A salary and wages for the year ended December 31, 1997 were
$306,953 as compared to $258,458 for the year ended December 31, 1996. This
18.76% increase was due to addition of a part-time accounting person and an
in-house attorney. Interest expense rose from $103,421 for the year ended
December 31, 1996 to $173,923 for the year ended December 31, 1997. This
represents a 68% increase. The increase was caused by several factors including
the Company's replacement of lower cost long term debt with more expensive short
term debt and the Company's incurring greater equipment lease fees and costs,
part of which were treated as interest expense.
Liquidity and Capital Resources
For the year ended December 31, 1997 the Company financed its
activities primarily from cash flow from operations and loans from stockholders
and other financial lenders. The Company generated $310,392 net cash from
operations and used $219,189 of this cash to purchase property and equipment.
The Company used $84,970 of the remaining cash funds for financing activities.
28
<PAGE> 29
This left $6,233 in increased cash for the year ended December 31, 1997. For the
year ended December 31, 1996, the Company used debt along with the sale of a
portion of its grease trap routes to finance its operations. Proceeds from
investing activities in the amount of $500,000 and net cash from borrowings and
repayments of $140,181 was used to purchase $608,863 of property and equipment.
During 1996, the Company sold a portion of its grease trap business
consisting of specific customer routes in North Carolina, Virginia, Tennessee,
West Virginia, South Carolina, Alabama, Maryland and the District of Columbia.
The sale price totaled $500,000 consisting of $379,000 for the customer routes
and $121,000 for a tanker truck used to service the routes. As part of the
agreement, Weststar entered into a 10-year covenant not-to-compete with the
purchaser in the specified geographic areas. All revenue from the sale was
recognized in 1996.
[/R]
As a Subchapter S Corporation, the individual stockholders pay taxes
on profits. Dividends have been declared in the past to enable the Company's
stockholders to pay their taxes. Dividends of $106,000 were paid in the year
ended December 31, 1997 compared to $27,583 of dividends which were paid in the
year ended December 31, 1996. Upon the successful completion of this public
offering, the Company plans voluntarily to revoke its Subchapter S election.
Once the Company has converted to a Subchapter C Corporation, it will no longer
be necessary to pay dividends for this purpose for fiscal 1998 and beyond. The
current working capital position (current assets less current liabilities) of
the Company at the year ended December 31, 1997 was a negative $731,150 as
compared to a negative working capital position of $962,761 at the year ended
December 31, 1996. Stockholder loans of $319,634 at December 31, 1997, and
$220,911 at December 31, 1996 are classified as current liabilities since they
were made on a demand basis, even though they are subordinated to financial
debt. Part of the proceeds from the offering is intended to be utilized to pay
off the Company's short and long term debt. This is expected to free up
approximately $25,000 per month which is currently utilized by the Company to
service such debt.
For the year ended December 31, 1997, the Company had pre-tax
profits of $421,858 as compared to a loss of $216,061 for the year ended
December 31, 1996 and pre-tax profits of $493,240 for the year ended December
31, 1995. In 1996, the Company decided to cancel its Roto Rooter license for
Jacksonville, Florida and sell a portion of its grease trap routes to CBP
Resources, Inc. These two events were a major factor contributing to this loss
in 1996. Also, net loss on disposal of assets was $133,554. Net income as a
percentage of revenues was 18.78% for 1997. Net loss as a percentage of revenues
was (12.85%) for 1996.
The Company put increased emphasis on the government sector in 1997
and expects to continue to bid on additional government jobs in the future. The
major emphasis for the Company in the next two years will be to gain access to
the yellow grease market since the current customer base gives the Company an
inroad to a readily available supply of yellow grease. In addition, the Company
plans to build belt-processing plants to allow for a more efficient method of
land applying wastewater bio-solids and brown grease. Strategic acquisitions in
the same or similar lines of business will be sought out to expand the Company's
geographical territory and increase revenues without deteriorating the Company's
net profit margin. To accomplish this task, the Company will need to expand its
management team to successfully integrate the acquired companies into a
synergistic unit.
29
<PAGE> 30
COMPARISON OF THREE (3) MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
Results of Operations
Revenues for the three (3) months ended March 31, 1998 were
$527,347, down 14.1% from revenues of $614,259 for the three (3) months ended
March 31, 1997. This decrease was due to one emergency job for $150,000 in the
first quarter of 1997 which did not recur in 1998. Discounting this job, normal
revenue from continuing operations would have been up by 13.6% in the first
quarter of 1998 as compared to 1997. Cost of Sales for the quarter ended March
31, 1998 were $296,821 or 56.29% of Sales as compared to $326,032 or 53.08% of
Sales for the quarter ended March 31, 1997. The decrease in margin was due to
labor and benefits increasing by 3.19% as a percentage of Sales.
The make-up of the Company's revenues for the first quarter of 1998
were generated by government sources (83.9%) and private sector work (16.1%).
The increased percentage of government work came mainly from the City of
Jacksonville. Management expects this reliance on government work to decrease in
the future (as a percentage of revenue) as the Company expands its proposed
additional lines of non-governmental business.
Selling, general, and administrative expenses were $122,540 or
23.24% for the first quarter of 1998 as compared to $111,982 or 18.23% for the
first quarter of 1997. This increase was mainly due to an increase in travel
expense of $9,641 for the first quarter of 1998.
Liquidity and Capital Resources
For the quarter ended March 31, 1998 the company financed its
activities from cash flow generated from operations. Cash flow of $352,916 was
used to pay-down debt by $224,862 and to make capital expenditures of $46,138.
This left $81,916 in increased cash for the end of the quarter. For the quarter
ended March 3 1, 1997, the company financed its activities exclusively with
debt. Cash provided by financing activities was $173,712, which supported
operations ($132,745) and increased cash by $39,487 at quarter end.
The Company intends to use $500,000 of the proceeds of this offering
for the construction of a grease processing facility. No material commitments
for such construction have been made by the Company. The Company anticipates
that $500,000 is wholly sufficient to build this facility and to lease the
underlying land. In the unexpected event that this amount proves to be
inadequate, the equipment will be leased rather than purchased to the extent
necessary to cure the deficiency (see "Business - Waste Recycling").
Net profits after interest expense of $26,488 for the quarter ended
March 31, 1998 were $81,498 as compared to $142,700 for the quarter ended March
31, 1997. Again, if the profit of $75,000 from the $150,000 emergency job was
eliminated, profit for the first quarter of 1997 would have been $67,700 on
Sales of $464,259 or a 14.58% margin as compared to a 15.28% margin in the first
quarter of 1998, relating to the proposed public offering.
30
<PAGE> 31
Historically the first two quarters of each year are lower than the
last two quarters of that year.
BUSINESS
GENERAL
Corporate History
The Company was incorporated in the State of Florida on June 26,
1990. In February 1994 the Company's shareholders purchased B&B from
unaffiliated third parties to take advantage of the operating efficiencies
presented by the purchase of an entity also engaged in the nonhazardous liquid
waste management field and to take advantage of B&B's tax loss carryforwards.
B&B was purchased by the Company's shareholders rather than by the Company,
since the Company was a Subchapter S corporation at the time of purchase, and
therefore unable to own B&B directly. On February 16, 1998 the B&B shareholders,
whose ownership of B&B common stock duplicated their ownership of the Company,
transferred ownership of B&B to the Company.
Effective April 29, 1997 the Company entered into an Agreement and
Plan of Reorganization (the "Plan of Reorganization") with Northstar Holding
Corporation, a Florida corporation ("Northstar"), Weststar Acquisition Corp., a
Florida corporation ("Weststar Acquisition"); B&B; B&B Acquisition Corp., a
Florida corporation ("B&B Acquisition Corp."); and Michael E. Ricks. The Plan of
Acquisition resulted in the acquisition of the Company and B&B, by Weststar
Acquisition (the "Weststar Corporate Acquisition") and B&B Acquisition (the "B&B
Corporate Acquisition"), respectively, in separate but simultaneous reverse
triangular merger transactions, whereby the surviving corporations following
such mergers were the Company and B&B. At the time of such transactions, the
Company and B&B had common ownership and common management and Northstar,
Weststar Acquisition and B&B Acquisition had common ownership and common
management. The mergers were accomplished in contemplation of the subsequent
acquisition of the Company and B&B by Northstar (the "Northstar Corporate
Acquisition"), a company without assets or liabilities which was intended to
serve as a holding company for the Company and B&B. Subsequent to the execution
of the Plan of Reorganization, but prior to the proposed Northstar Corporate
Acquisition, the parties abandoned their plans to have Northstar serve as a
holding company. In connection with the execution of the Plan of Reorganization,
Northstar's three shareholders, William Perry, Marie Stubbs and Peggy Stubbs,
transferred 1/3 of the shares of Northstar and two other companies owned by
them, Empire Energy, Inc. and Southern Trailer Manufacturing Inc., to the
shareholders of the Company. In consideration thereof, the shareholders of the
Company and B&B, who held in the aggregate 100,000 shares of each of the Company
and B&B, transferred an aggregate of 66,667 of the shares of each of the Company
and B&B to the three former shareholders of Northstar. Subsequently, effective
November 14, 1997 Northstar was merged with and into the Company with the
Company being the surviving corporation.
The Company amended its articles of incorporation on February 16,
1998 for the purpose of increasing the Company's authorized capital from 100,000
shares of common stock, $1 par value, to 10,000,000 shares of common stock,
$.001 par value. This was done in contemplation
31
<PAGE> 32
of this offering and to effect a stock split. Pursuant to such stock split, the
Company's 100,000 outstanding shares of common stock were converted at the rate
of 15-for-1 into 1,500,000 shares of common stock. Subsequent to the certificate
amendment and stock split, the Company has issued an additional 190,000 shares
of common stock (see "Certain Transactions").
Industry Overview
The U.S. non-hazardous waste collection and disposal industry
generated estimated revenues of approximately $25,000,000,000 in 1997. Industry
revenues are derived primarily from collection and hauling services, disposal
services and processing/recycling services. The non-hazardous waste industry is
regional in nature and highly fragmented. It is currently estimated that 95% of
industry revenue is accounted for by approximately 23,000 private, predominantly
small, collection and disposal businesses; 2% by municipal governments that
provide collection and disposal services; and the remainder by large,
publicly-traded non-hazardous waste companies.
As a result of increasingly strict regulation, the technical,
managerial and financial resources needed by most companies to operate a
non-hazardous waste business have grown significantly. The increase in
regulation has required, and will continue to require, commensurate increases in
technical sophistication and capital expenditures to meet new standards for the
construction and operation of waste facilities. As a result, the Company
believes that many private waste disposal facilities and companies are being
sold to larger, better capitalized companies. In addition, many municipalities
are choosing to privatize their collection and disposal services, due primarily
to the ability of the private sector to perform these operations more
efficiently and economically.
Another factor expected to affect the non-hazardous waste industry
is the increasing mandate to recycle waste materials. This mandate is expected
to reduce the volume of waste disposed in landfills, but may provide additional
revenues for collection and processing operations. The ability of industry
participants to engage profitably in recycling operations will depend in large
part on the further development of markets for recycled products and the market
prices available for recyclable materials.
The preponderance of the Industry Overview statistical data set
forth above is based upon information obtained by the Company at the 1998 Pumper
& Cleaner Environmental Exposition (the "Exposition") that was held in
Nashville, Tennessee during the period February 26-28, 1998. This data includes
the estimated revenues of $25 billion in 1997 generated by the U.S.
non-hazardous waste collection and disposal industry. The Company also obtains
various operating, equipment, methodology and statistical data from a leading
trade publication, Pumper magazine, publications of the Florida Department of
Environmental Protection including "Biosolids Management in Florida" and other
private and governmentally published literature. The Exposition, together with
the personal knowledge and experiences of Company management, also serves as the
basis for the Company's beliefs, understandings and opinions regarding the waste
management industry that are expressed throughout this Prospectus. Neither the
Company nor any persons affiliated with the Company have any previous or current
relationships with any of the speakers or other persons affiliated with the
Exposition.
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Growth Strategy
The Company believes that continuing initiatives of government
authorities relating to environmental and waste disposal problems have resulted
in significant opportunities, through internal growth and acquisition, for waste
management companies. The Company intends to use a portion of the proceeds of
this offering to expand its existing facilities, to acquire other waste
management companies or facilities, and to grow and expand the range of services
offered by the Company. Although the Company has identified certain areas for
potential growth and expansion, there can be no assurance that the Company will
be able to grow and expand its operations successfully.
The Company's growth strategy will be to add to its service lines,
to increase the capacity and service area of its existing service lines, and to
expand its geographic presence through acquisitions and internal development. In
particular, the Company intends to seek opportunities to acquire businesses that
will permit the Company to offer additional services to its existing customers,
to introduce its existing services to customers of the acquired companies, and
to offer its services to new customers in new markets. The Company also intends
to acquire businesses with facilities located in new geographic markets,
generally within reasonably close proximity to an existing Company facility. The
Company believes that strategic location of its facilities in this manner will
enable it to maximize utilization of its equipment and personnel and to satisfy
special customer needs (see "Business - Property and Equipment"). The Company
also believes that strategic acquisitions will enable the Company to achieve
economies of scale and operating efficiencies resulting from shared management,
administrative, marketing and operating staffs. There can be no assurance given
however that expected efficiencies and economies of scale will be realized.
The Company may also consider the acquisition of larger businesses
or businesses with facilities in geographic markets that are not adjacent to its
existing service facilities. The Company may effect future acquisitions by
issuing its Common Stock to the selling parties or through debt or equity
financings. To the extent that the Company issues Common Stock as consideration
for or to fund future acquisitions, the equity interests of its then current
stockholders may be diluted. Although the Company has engaged in discussions
regarding possible acquisitions from time to time, it currently has no
commitments or negotiations in progress to acquire or make investments in other
businesses. Further, no assurance can be given that desired acquisition
opportunities will be available, if at all, or on terms which the Company deems
favorable, or that if consummated, such acquired businesses can be successfully
integrated into the Company's operations or prove profitable (see "Risk Factors
- - Dependence on Acquisitions for Growth; Availability of Acquisition Targets;
Potential Liabilities Associated with Acquisitions and Ability to Manage Growth;
To Integrate Acquired Businesses and to Achieve Operating Effectiveness").
Notwithstanding the Company's intentions, increased competition for
acquisition candidates may result in fewer acquisition opportunities being made
available to the Company as well as less advantageous acquisition terms which
may increase acquisition costs to levels that are beyond the Company's financial
capability or that may have an adverse effect on the Company's business and
results of operations. Accordingly, no assurance can be given as to the number
or timing of the Company's acquisitions or as to the availability of financing
necessary to complete an acquisition. The Company also believes that a
significant factor in its ability to consummate acquisitions
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<PAGE> 34
following the offering will be the attractiveness of the Company's Common Stock
as an investment to potential acquisition candidates. Such attractiveness may,
in large part, be dependent upon the market price and capital appreciation
prospects of the Company's Common Stock compared to the equity securities of the
Company's competitors. Many of the Company's competitors for acquisitions are
larger, more established companies with significantly greater capital resources
than the Company and whose equity securities may be more attractive than the
Company's Common Stock. To the extent the Company's Common Stock is less
attractive to acquisition candidates, the Company's acquisition program may be
adversely affected.
SERVICES
Removal, Transport, Treatment and Disposal of Bio-Solids, Grease and Septic
Waste
The Company services both the public (governmental) and private
(residential/commercial) sector in the removal, transportation, treatment and
disposal of non-hazardous waste materials including bio-solids, food service
generated grease and septic waste which is processed and/or disposed of by the
Company at environmentally approved treatment and disposal sites. The Company's
waste removal, transport, treatment and disposal operations provided revenues
during the fiscal years ended December 31, 1997 and December 31, 1996 in the
respective amounts of $2,245,008 and $1,682,566. Within this service line, the
Company categorizes revenues in terms of bio-solid and septic waste removal,
transport, treatment and disposal; and brown grease removal, transport,
treatment, and disposal. Brown grease is food service generated grease that
results from, among other things, the process of washing meats, fruits and
vegetables and/or from washing dishes. During the fiscal years ended December
31, 1997 and December 31, 1996, the bio-solid and septic waste category
accounted for sales revenues of $1,918,205 and $1,026,879.35, respectively.
During the same periods, the brown grease category accounted for sales revenues
of $326,803 and $655,686.65, respectively. The Company expects the grease
category, including its proposed future operations involving yellow grease, to
experience the greatest rate of growth of any category over the next five years
(see "Business - Services - Waste Recycling"). The Company anticipates that
during this period it will become responsible for 50% or more of the Company's
operating revenues. No assurance can be given, however, that this will prove to
be the case. During the years ended December 31, 1997 and December 31, 1996, the
waste removal, transport, treatment and disposal category, as a whole, accounted
for a significant portion of the Company's sales revenue.
Asset Sale Agreement - Business Restrictions
The Company entered into an Asset Sale and Purchase Agreement (the
"Asset Sale Agreement") with CBP Resources, Inc. ("CBP"), a Delaware
corporation, as of October 4, 1996, pursuant to which the Company sold to CBP,
substantially all of the assets, excluding real property, owned by the Company
in the operation of its grease trap business in the states of North Carolina,
South Carolina, Tennessee, Virginia, West Virginia, Maryland, Alabama, and the
District of Columbia (the "Prescribed Territory"). The purchase price paid by
CBP to the Company pursuant to the Asset Sale Agreement was $500,000, $121,000
of which was allocated to the purchase of machinery and equipment with the
balance of $379,000 being allocated to the purchase of the
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<PAGE> 35
Company's grease trap business customer accounts in the Prescribed Territory.
The Asset Sale Agreement contains a non-compete provision which provides that,
for a period of ten years from October 4, 1996, the Company can not own, manage
or operate, in any capacity, any entity within the Prescribed Territory or
within a fifty-mile radius around the borders lines of the Prescribed Territory
and a one hundred mile area or radius around any operating facility owned,
operated or leased (the "Operating Facilities") by CBP (the "Extended
Territory") as of October 4, 1996 that was then engaged in the grease trap
business, the recycling of waste frying oil business, and/or the rendering
business or that was then engaged in the sale of any related products or
services including those products and services which were manufactured, sold,
distributed or provided by the Company at the time of the Asset Sale Agreement.
As of October 4, 1996, all CBP Operating Facilities were located within the
Prescribed Territory. The Company has further agreed that during such ten year
period, it will not solicit or accept orders or business relating to the
aforementioned business activities within the Prescribed Territory or the
Extended Territory, from any of its existing customers or active prospects as of
October 4, 1996 or from any former customers. Also contained in the Asset Sale
Agreement is a right of first refusal in favor of CBP. It provides that, if at
any time during the ten year period commencing October 4, 1996, the Company, an
affiliate of the Company, or any shareholder of the Company, makes an offer to
sell any business within the Prescribed Territory or Extended Territory engaged
in the grease trap business, waste frying oil business or the rendering
business, that the Company will give written notice to CBP of the terms of any
such proposed sale. CBP shall thereafter have thirty days to negotiate an
agreement with the seller of such business.
Pursuant to the Asset Sale Agreement, the Company's president,
Michael E. Ricks, entered into a four-year Consulting and Non-Competition
Agreement (the "Consulting and Non-Competition Agreement") with CBP effective
October 4, 1996. The Consulting and Non-Competition Agreement requires Michael
Ricks to assist CBP with the transition of accounts from the Company to CBP and
provides for payment to Mr. Ricks of a consulting fee of $2,500 per month for
his consulting services throughout the 48-month term of the consulting portion
of the Consulting and Non-Competition Agreement. The non-compete section of the
Consulting and Non-Competition Agreement contains similar terms to those in the
Asset Sale Agreement with regard to geographic area, duration (10 years) and
scope. In consideration of the non-compete provisions contained in the
Consulting and Non-Competition Agreement, CBP further agreed to pay Mr. Ricks
the aggregate sum of $200,000, payable in yearly $20,000 installments.
The Asset Sale Agreement contains a provision that allows CBP, at
any time during the ten year non-compete period, to discontinue servicing
accounts within the Prescribed Territory and/or Extended Territory and to
thereafter grant the Company the right to service such accounts subject to terms
and conditions to be negotiated between CBP and the Company. CBP's grant of
rights to the Company to service accounts in such manner constitutes a limited
waiver of the non-competition agreement. Each waiver is valid for one year from
the date of grant and is subject to renewal, on an annual basis, if mutually
agreed to by the parties. Pursuant to such provision, CBP has chosen, in several
instances, not to service accounts that are not within close proximity to CBP
Operating Facilities. In connection therewith, the Company is presently
servicing approximately 233 accounts in the states of Tennessee, Alabama, West
Virginia and Maryland. Most of the grease collected by the Company in such
states is presently disposed of at CBP disposal sites. Similarly, CBP permits
the Company to solicit new accounts within the Prescribed Territory and Extended
Territory with the prior approval of CBP. In addition to the foregoing, CBP has
recently
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advised the Company that it expects to be able to offer the Company additional
business in the District of Columbia and the states of Delaware, Georgia,
Maryland, Pennsylvania, Tennessee, Virginia and West Virginia. No assurance can
be given however that this will prove to be the case.
Waste Treatment
The Company engages in septic waste and brown grease treatment and
recycling through the operation of its Deland, Florida lime stabilization plant.
The Company engages in bio-solid and brown grease treatment and recycling
through its operation of the Lake Butler, Florida lime stabilization plant (see
"Business - Property and Equipment"). The bio-solids treated at Lake Butler are
derived, in part, from the wastewater treatment process which takes place at the
same plant. The treatment process removes solid material from the liquid waste.
The collected material, called bio-solids, residuals, or sewage sludge, is
valuable as a soil conditioner and fertilizer because it is high in organic
content and contains nutrients required by plants. Many agricultural operations
need soil amendments and bio-solids have some properties that are not found in
many other commercially available fertilizers, such as organic matter, trace
elements, and slow nutrient release. Bio-solids have been shown to substantially
lower fertilization costs. These factors, combined with improved regulations to
protect public health and the environment, have helped to increase the
proportion of bio-solids being used for agricultural land application. At the
present time, the Company disposes of the collected materials from the treatment
process at approximately 6 governmentally approved land application sites
located in Florida and on occasion also uses governmentally approved Florida
landfills. These land application and landfill sites are owned by third parties
and disposal is made under informal arrangements with the owners and operators
thereof. The Company believes alternative or additional sites are readily
available at competitive rates. Any change in availability or rate structure
would have an adverse effect on the Company's operations (see "Risk Factors -
Dependence on Third Party Landfills and Land Application Sites").
Bio-solids have been produced and land applied since municipalities
began to treat liquid waste about 150 years ago. Application to the land, either
for disposal or fertilization, has been a natural solution. To achieve and
maintain public acceptance, land application of bio-solids is accomplished in a
way that protects public health and the environment. The public must be
protected from exposure to harmful microorganisms or dangerous levels of
chemical pollutants, and management practices are geared to protect the
environment from harm. Land application must not cause objectionable odors or
other aesthetic problems, which may foster public opposition. To meet these
challenges, regulations at both the federal and state levels specify acceptable
treatment, management, and beneficial use practices. Land applied bio-solids
must meet regulatory limits on pollutant concentrations, requirements for
destruction of potentially harmful microorganisms, and standards for reduction
of attractiveness to vectors such as flies and rodents that can transmit the
microorganisms to humans. Land application sites also are subject to site
management requirements that provide further protection for public health and
the environment.
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Repair, Maintenance and Installation of Commercial and Residential Waste Systems
The Company installs, maintains and repairs commercial and
residential waste disposal systems including septic tanks, drain fields, and
grease traps. Septic tanks are sewage disposal tanks generally utilized on
residential property which is not connected to municipal water and sewer lines.
Drain fields are effluent disposal systems generally utilized in conjunction
with septic tank systems which are not connected to municipal sewer lines.
Grease traps are devices generally utilized by restaurants, supermarkets, food
processors, and others in the food service industry to contain, segregate and
prevent cooking grease and related waste products from entering the sewage
system. This service line provided revenues to the Company during the fiscal
years ended December 31, 1997 and December 31, 1996 in the respective amounts of
$108,453 and $324,000. The principal reason for such decline was the termination
of the Company's license agreement with Roto Rooter (see "Business -
Customers").
The commercial segment of the market generally involves grease trap
pump outs with service charges ranging from $75 - $200 per trap on a monthly
maintenance contract. The Company also handles large lift station disposal jobs
with charges ranging between $175 - $450 per station based on station size.
The residential segment of this market involves various types of
services. The Company's residential pump outs are generally based on septic tank
pump outs with service charges of $120 - $205 per septic tank pump out based on
size. Repair prices range between $125 - $400 on average for minor work and
between $1,100 - $5,000 on average for large repair work such as drain field
installations.
This line of services generally involves long-term customer
relationships. Routine maintenance of septic systems through pump outs should be
carried out every three to five years. Grease trap maintenance through pump outs
should be carried out every month based on the frequency of trap use. Commercial
lift stations should be pumped four times a year. Lift stations are utilized to
allow liquid waste to flow uninterruptedly through pipes despite changes in pipe
dimensions or pipe elevations.
The waste system repair, maintenance and installation service
category was responsible for 4.8% and 19.3% of the Company's sales revenues
during the years ended December 31, 1997 and December 31, 1996, respectively,
and is expected to continue to account for a small percentage of Company
revenues in the future. The services provided by the Company with regard to this
aspect of its business are, for the most part, similar to those provided by the
Company's competitors. The Company believes its prices to be comparable to most
of its competitors. The Company believes it has a competitive advantage,
however, with regard to quality of service but cannot say so with any certainty.
Waste Recycling
The Company's waste recycling business is in the developmental stage
and is not expected to commence material commercial operation until the Company
completes construction of a belt processing facility which is not expected to
take place prior to November 1998 (see "Use of
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Proceeds"). This project has not yet advanced beyond the planning stage. The
Company intends to build such facility in or near Jacksonville, Florida but at
the present time, an exact location for the proposed facility has not been
selected. A belt processing facility is a waste treatment processing and
recycling facility that utilizes a belt filter press system to treat and
separate waste. A belt filter press pushes the waste material through a series
of belts and rollers for the purpose of segregating certain components of the
waste material. A belt processing plant will provide the Company with a more
efficient method of treating wastewater bio-solids and brown grease than is
currently available to it through its operation of the Deland and Lake Butler
lime stabilization plants. Such a plant would result in greater efficiency in
separating solid materials from liquids thereby simplifying the recycling
process and lessening the amount of material requiring land application. The
Company's ability to process and recycle waste products would be a logical
extension of its waste collection and disposal activities and in addition to
resulting in saleable end products could be expected to save the Company
considerable disposal fees. The initial treatment and recycling facility is
expected to be devoted to the treatment of brown grease and bio-solids only.
Recovered bio-solids can be converted to compost and sold to wholesale and
retail gardening supply chains. Within the next 12 months, the Company also
intends to engage in yellow grease processing although no assurance can be given
that this will prove to be the case. Yellow grease, used to fry foods in
supermarkets, restaurants, food processors and other food services
establishments can be recycled into an end product with cosmetic industry
applications or into an end product with an agricultural industry application as
an animal feed supplement. The Company presently has a readily available source
of yellow grease from its contract with the Food Lion Supermarket chain to pump
their grease traps and from its contracts with several restaurant chains
including certain McDonald's and Hardees' franchises.
SALES AND MARKETING
To date, marketing has principally been conducted through the
efforts of the Company's management and administrative personnel, none of which
devote their full time to such marketing activities. The Company believes its
present arrangement to be adequate for its current needs. Marketing activities
have included direct mailings, advertisements, and community involvement. All
such activities have stressed the Company's provision of reasonably priced, high
quality, environmentally friendly service. Notwithstanding the restrictions
placed upon the Company by its agreement with CBP Resources, Inc. as to its
engaging in the grease trap business in the states of North Carolina, South
Carolina, Tennessee, Virginia, West Virginia, Maryland, Alabama and the District
of Columbia, CBP has subcontracted considerable grease trap business in the
restricted areas and otherwise to the Company, with whose performance CBP has
expressed its satisfaction. Based upon this, CBP has advised the Company that it
intends to expand its subcontracting business to the Company in the states of
Delaware, Georgia, Maryland, Pennsylvania, Tennessee, Virginia, West Virginia
and the District of Columbia as well as other unnamed states. In addition, the
Company is soliciting and will continue to solicit business which is not
restricted by the CBP agreement by way of the removal, transport, treatment and
disposal of septic waste and bio-solids. In this regard the Company submits bids
on municipal government contracts, solicits institutions, manufacturers and
national franchises including hospitals, manufacturers, and other appropriate
organizations, as well as grease trap business in areas not covered by the CBP
restriction.
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SUPPLIES AND SUPPLIERS
The Company's business is not dependent upon any raw materials and
as such the Company is not dependent upon sources for raw materials or upon
suppliers thereof.
SEASONAL ASPECTS
The Company does not presently experience seasonal variations in its
operating results. In the event the Company increases the geographic scope of
its operations, through acquisition or expansion, to include material activity
in northern states, it may experience seasonal fluctuations in revenues marked
by lower revenues in the winter months.
RESEARCH AND DEVELOPMENT
All of the Company's research and development activities are Company
sponsored. To date, most of such activities have related to the development and
establishment of one or more waste treatment and recycling facilities. During
fiscal 1998 the Company anticipates spending approximately 5% of its gross sales
revenues on research and development. During the fiscal years ended December 31,
1997 and December 31, 1996, the Company spent approximately $126,500 and $53,310
or approximately 6% and 3% of gross sales revenues, respectively, on research
and development. The Company is presently unable to anticipate the amount of its
expenditures in this area during the current fiscal year. Its expenditures in
this category, during the three months ended March 31, 1998, were negligible.
CUSTOMERS
The Company provides its services to governmental and private sector
customers. The Company presently derives a substantial portion of its revenues
from governmental customers and it is anticipated that a substantial portion of
the Company's future revenues will be derived from governmental customers. The
following table sets forth information relating to the approximate dollar
amounts and percentages of revenues derived from each of governmental and
private sector customers (see "Management's Discussion and Analysis"):
<TABLE>
<CAPTION>
Year Ended December 31, 3 Months Ended March 31,
-------------------------------------------- --------------------------------------------
1996 1997 1998 1997
------------------- --------------------- ------------------- -------------------
$ % $ % $ % $ %
------- ---- --------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Private Sector 917,326 54.5 561,351 25.0 84,534 16.1 184,891 30.1
Governmental 765,240 45.5 1,683,657 75.0 442,813 83.9 429,366 69.9
</TABLE>
The Company has been dependent on a small number of customers for a
significant portion of its revenues. For the years ended December 31, 1997 and
1996, revenues derived from three customers accounted for approximately 80.2%
and 75.0% respectively of the Company's revenues. The City of
Jacksonville/Jacksonville Electric Authority accounted for approximately 70.7%
of total
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sales in 1997 and approximately 41.6% of total sales in 1996. Food Lion
Supermarkets accounted for approximately 7.1% of total sales in 1997 and
approximately 15.6% of total sales in 1996. Roto Rooter accounted for
approximately 2.4% of sales in 1997 and approximately 19.8% of total sales in
1996. The non-renewal or termination of the Company's contracts with the City of
Jacksonville/Jacksonville Electric Authority and/or Food Lion Supermarkets could
have an adverse effect on the Company (see "Risk Factors - Dependence on
Government Contracts; Dependence on Major Customers").
The Company was the lowest bidder for bio-solids hauling services
for the City of Jacksonville for the contract period January 1, 1997 through
September 30, 1997 (the "Initial Contract Period") based on its hauling price
per gallon of bio-solids. The contract provided the City of Jacksonville with
the option, at its sole discretion, to renew the contract for up to four
additional one year terms. During the Initial Contract Period, on June 1, 1997,
the City of Jacksonville, transferred and assigned all of its rights under the
contract to the Jacksonville Electric Authority (the "JEA"). On October 31,
1997, the JEA and the Company agreed to exercise the first of the four annual
renewals which covers the period October 1, 1997 through September 30, 1998 (the
"Current Contract Period"). Therein, the parties agreed that the maximum payment
by the JEA to the Company for the Current Contract Period with regard to
bio-solids hauling would be $825,000. The Company provides the JEA, without
regard to dollar amount, with other services including emergency pipe bypasses,
lift station cleaning, pipe inspections and other maintenance, repair, and
emergency services (the "Other Services"). During the twelve month period ended
December 31, 1997 the JEA paid the Company an aggregate of $1,606,000 consisting
of $623,457 for bio-solids hauling and $983,317 for Other Services. The contract
was amended June 5, 1998 for the purpose of revising the renewal provisions
thereof. Pursuant to such amendment, the parties agreed to combine the three
remaining annual renewal periods under the contract into a single term of three
years ending September 30, 2001 and to renew the contract through the end of
such three year period. The contract was further amended to adjust certain
pricing terms covered by the contract. Such adjustments include the parties
agreement that the maximum payment by the JEA to the Company with regard to
bio-solids hauling for each of the three years covered by the contract extension
will not exceed $1,250,000 per contract year. The Company's ability to provide
the JEA with Other Services without regard to aggregate annual dollar amount was
not affected by the contract amendment. Other adjustments included an increase
in the per gallon price chargeable by the Company for standard bio-solids
hauling and a decrease in the per gallon price for emergency bio-solids hauling
necessitated by sewer overflows from $.14391 per gallon to $.05 per gallon. At
the conclusion of the contract term, as extended, the JEA will reopen the
contract for bidding. At such time the Company intends to re-bid for the
contract.
Effective September 1, 1996 the Company entered into a three year
service agreement (the "Service Agreement") with Food Lion Inc. ("Food Lion"), a
large multi-state supermarket chain, to service all Food Lion stores in
Virginia, Maryland (excluding the Ocean City area), Pennsylvania, Tennessee,
Kentucky, Florida, Georgia, South Carolina and North Carolina. It applies to the
period September 1, 1996 through August 31, 1999 and is cancelable by Food Lion
at any time upon thirty days prior notice. The Service Agreement principally
provides for the cleaning of external and internal grease traps at Food Lion
stores and the disposal of brown grease removed from the grease traps. The
Service Agreement is affected by the Company's September 25, 1996 agreement with
CBP Resources, Inc., pursuant to which the Company does not presently service
Food Lion stores in North Carolina, South Carolina, and Pennsylvania but
services Food Lion
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stores in Tennessee, West Virginia and Maryland at the discretion of CBP
Resources, Inc. (see "Business - Services - Removal, Transport, Treatment and
Disposal of Bio-Solids, Grease and Septic Waste"). In connection with Food Lion
stores which are serviced by CBP, the Company is occasionally requested by Food
Lion to assist CBP with services covered by the Service Agreement. In such
instances, the Company is reimbursed for their expenses. The Company has
previously operated under year to year service agreements with Food Lion.
During the period May 1995 through October 1996 the Company operated
under a license agreement with Roto Rooter. In connection therewith the Company
was principally involved with the repair, maintenance and installation of
commercial and residential waste systems. Due to high labor costs and a low
profit margin associated with such license agreement and the services performed
by the Company thereunder, the Company terminated the license agreement in
October 1996. From November 1996 to the present the Company has continued to
provide services to Roto Rooter on a subcontract basis, all of which services
involve the hauling and disposal of food service generated grease. The Company
will attempt to utilize its planned grease processing plant to expand its
business derived from Roto-Rooter. Should the Company succeed, of which there is
no assurance, it will solicit Roto-Rooter owned facilities in other areas for
their business. This will not conflict with the Company's restrictions imposed
by its agreement with CBP Resources, Inc.
COMPETITION
Although developments in the non-hazardous waste management industry
have resulted in the emergence of large, mostly private waste management
companies, the Company believes that no single company has a significant market
share of the non-hazardous waste management business in the United States,
particularly with regard to the specific services provided and intended to be
provided by the Company. Nevertheless, the non-hazardous waste management
business is extremely competitive. Although competition varies by locality and
type of service, the Company's principal sources of competition are: local
companies, which provide primarily collection services to customers in a limited
geographic area; large companies which operate over a more extensive geographic
area, provide integrated waste management services, own or operate disposal
sites and engage in various waste transfer and resource recovery activities; and
municipalities and other governmental authorities. Many of the Company's
competitors are well established and have substantially greater marketing,
financial, technological and other resources than the Company. In addition, many
of the Company's competitors offer services not currently offered by the Company
and have capabilities not currently possessed by the Company.
The Company believes that the principal competitive factors in the
industry are reputation, technical proficiency, managerial experience, financial
assurance capability (particularly as it relates to surety bonding), price and
breadth of services offered (see "Risk Factors - Significant Competition in
Waste Management Industry").
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GOVERNMENT REGULATION
The Company is subject to extensive and evolving environmental laws
and regulations. These regulations are administered by the EPA and various other
federal, state and local environmental, zoning, health and safety agencies, many
of which periodically inspect the Company's operations to monitor compliance
with these laws and regulations. The Company believes that it is presently in
substantial compliance with all material federal, state and local laws and
regulations governing its operations.
The Company's operation of waste-related facilities subjects it to
operational, monitoring, and site maintenance obligations which are complex and
sometimes costly. Governmental authorities have the power to enforce these
obligations and to obtain injunctions, revoke operating permits, require
corrective actions or impose civil or criminal penalties in case of violations.
In addition, in many instances, the Company is required to obtain state, local
and federal permits in order to operate.
The Company's business is significantly affected by federal, state,
and local environmental laws and corresponding state laws and related
regulations and enforcement practices. Since the business in which the Company
is engaged is intrinsically connected with the protection of the environment and
the potential discharge of materials into the environment, a portion of the
Company's expenditures are, directly or indirectly, related to compliance with
environmental laws.
The principal regulations applicable to the Company's operations
include the following:
THE RESOURCE CONSERVATION AND RECOVERY ACT ("RCRA"). RCRA is a
federal statute that regulates the generation, treatment, storage, handling,
transportation and disposal of hazardous and non-hazardous wastes and requires
states to develop programs to insure the safe disposal of solid wastes.
THE FEDERAL WATER POLLUTION CONTROL ACT (THE "CLEAN WATER ACT"). The
Clean Water Act establishes rules regulating the discharge of pollutants into
groundwater, streams, or other surface waters from a variety of sources,
including waste disposal sites. The Clean Water Act provides civil, criminal and
administrative penalties for violations of its provisions.
STATE AND LOCAL REGULATION. Each state in which the Company now
operates, or may operate in the future has laws and regulations governing the
generation, storage, treatment, handling, transportation and disposal of
non-hazardous waste. Furthermore, many counties and municipalities also have
ordinances, local laws and regulations affecting Company operations. These
include zoning and health measures that limit waste management activities to
specified sites or activities, flow control provisions that direct the delivery
of wastes to specific facilities, laws that grant rights to establish franchises
for collection services and then put out for bid the right to provide collection
services, and bans or other restrictions on the movement of wastes into a county
or municipality.
In addition, in order to develop, operate and expand waste
management facilities, it is generally necessary to obtain and maintain in
effect one or more operating permits as well as zoning, environmental and other
land use permits. These permits and approvals are difficult and
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<PAGE> 43
time-consuming to obtain and are frequently subject to opposition by local
elected officials or citizens. Facility operating permits may be subject to
revocation, and it may be necessary to periodically renew the permit. Revocation
or renewal of a permit may reopen opportunities for opposition to the permit.
Loss of an operating permit would require that the affected facility be shut
down until the permit is renewed or reissued, and this could have a material
adverse effect on the Company's business and financial condition.
In addition, certain states and localities may for economic or other
reasons attempt to restrict the export of waste from their jurisdiction or
require that a specified amount of waste be disposed of at facilities within
their jurisdiction. Such restrictions, if enforced, could result in higher
disposal costs for the Company (see "Risk Factors - Government Regulation").
INSURANCE
The Company carries a broad range of insurance coverage, which the
Company considers sufficient to meet regulatory and customer requirements and to
protect the Company's assets and operations. The Company's insurance coverage
currently includes $2,000,000 of comprehensive general liability insurance,
$1,000,000 of excess liability insurance and $1,000,000 of trucking liability
insurance. The Company also obtains additional insurance as required on a
project-by-project basis. The Company attempts to operate in a professional and
prudent manner and to reduce its liability risks through specific risk
management efforts, including employee training. Nevertheless, a partially or
completely uninsured claim against the Company, if successful and of sufficient
magnitude, could have a material adverse effect on the Company and its financial
condition. In addition, the inability to obtain insurance of the type and in the
amounts required could impair the Company's ability to obtain new contracts,
which are, in certain instances, conditioned upon the availability of adequate
insurance coverage.
The Company does not currently maintain environmental impairment
insurance. The Company believes that it does not require this type of insurance
and that it is common for waste management companies which do not participate in
the hazardous waste business not to maintain such insurance. Nevertheless, there
can be no assurance that hazardous substances are not or will not, unknown to
the Company, be present at the Company's facilities, or that the Company will
not incur liability for environmental damage. The Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), imposes
strict, joint and several liability on the present and former owners and
operators of facilities which release hazardous substances into the environment.
Similar liability is imposed upon the generators and transporters of waste which
contain hazardous substances. All such persons may be liable for waste site
investigation, waste site cleanup costs and natural resource damages, which
costs could be substantial, regardless of whether they exercised due care and
complied with all relevant laws and regulations. There can be no assurance that
the Company will not face claims under CERCLA resulting in substantial liability
for which the Company is uninsured, which could have a material adverse effect
on the Company.
43
<PAGE> 44
BONDING
The Company is required, in most instances, to post bid and/or
performance bonds in connection with contracts or projects with government
entities and, to a lesser extent, private sector customers. Approximately 36% of
the Company's revenues for the year ended December 31, 1997 were derived from
contracts or projects which required the Company to post bid and/or performance
bonds. In addition to bid and performance bond requirements, new or proposed
legislation in various jurisdictions may require the posting of substantial
bonds or require waste management companies to provide other financial
assurances covering the activities for certain waste management facilities.
There can be no assurance that personal guarantees or other security necessary
to obtain bonding coverage will be available in the future or that the Company
will be able to obtain bonds in the amounts required or have the ability to
increase its bonding capacity (see "Risk Factors - Bonding Requirements;
Potential Liability and Insurance").
PERSONNEL
As of July 15, 1998, the Company had 27 employees including 4
executive officers, 7 administrative employees, and 16 field employees
responsible for the Company's trucking and repair requirements. The Company
plans to add other employees in connection with its expansion and acquisition
plans. The Company considers its relationship with its employees to be
satisfactory. All of the employees work on a full time basis with the exception
of 2 executive officers who work on an as needed basis and receive no
compensation for their services as such (see "Management"). Seven of the
employees are salaried while the other compensated employees are paid on an
hourly basis. The Company's work force is non-unionized.
All of the Company's employees are leased to the Company by Staff
Leasing II, L.P. ("Staff Leasing"), an unaffiliated Delaware limited partnership
that performs certain administrative functions for the Company. Staff Leasing is
responsible for matters relating to payroll, payroll taxes, workers
compensation, and the administration, procurement and payment of certain
employee benefits. Notwithstanding the foregoing, all employees are hired by the
Company and work under the control and direction of the Company. Further, the
Company provides Staff leasing with the funds necessary to make all required
payments to and on behalf of Company employees.
PROPERTY AND EQUIPMENT
The Company presently conducts its operations from three principal
properties located in Jacksonville, Florida; Starke, Florida; and Deland,
Florida. A fourth property location, in Brunswick, Georgia is expected to become
operational in January 1999, although no assurance can be given that this will
prove to be the case. The Brunswick, Georgia property is expected to contain a
treatment/stabilization facility similar to those operated by the Company at
Deland, Florida and Lake Butler, Florida. However, unlike those sites, the
Brunswick site is expected to provide treatment services directly to third
parties in addition to treating waste collected directly by the Company.
44
<PAGE> 45
The Jacksonville, Florida property serves as the Company's corporate
and administrative headquarters and consists of approximately 1,516 square feet
of office space. The property is subject to a three year lease which commenced
on September 1, 1997. The Company considers this space adequate for its present
and anticipated future needs. The lease is renewable at the end of the three
year lease term upon mutual agreement of the parties on terms to be negotiated.
The Starke, Florida property is used principally for repair work on
Company owned vehicles and equipment and as a staging area for Company trucks.
The Company's accounting offices are also located on the property. The property
consists of approximately 4.96 acres of land and contains an approximately 5,055
square foot building which was constructed in 1989. On June 3, 1998 the Company
mortgaged the property with Prime South Bank for $160,000. The mortgage requires
the payment of interest at the annual rate of 9.5% and provides for 60 monthly
payments of $1,684.31 each along with a final principal balloon payment of
$130,789.04 due on June 3, 2003. The mortgage is personally guaranteed by Dr.
John S. Poser, a director of the Company. The mortgage proceeds are being used
as working capital. In consideration of his guarantee of the mortgage
obligation, the Company has agreed to pay Dr. Poser $500 per month so long as
his guaranty is in effect.
The Deland, Florida property is owned by the Company's wholly owned
subsidiary, B&B, is subject to a mortgage with a principal balance thereon, as
of March 31, 1998, of approximately $260,000 and is used principally as a
service site for the Company's residential and commercial operations. The
property consists of approximately 2 acres of land and contains an approximately
2,650 square foot building and an underground lime stabilization plant. The lime
stabilization plant is used to stabilize septic waste and brown grease.
The City of Lake Butler, Florida ("Lake Butler") owns a lime
stabilization plant which the Company operates on Lake Butler's behalf pursuant
to an oral agreement. In exchange for operating the plant, treating Lake
Butler's wastewater at the plant, and hauling and disposing of the sludge
created by such treatment, the Company is allowed to use the plant to treat
liquid waste generated by Company customers. The Company's operation of the
plant generated revenues for the Company during the fiscal years ended December
31, 1997 and December 31, 1996 in the approximate amounts of $18,000 and
$21,245, respectively.
The Company presently owns 15 tankers, 4 tractors, 1 belt press
unit, 1 high velocity vacuum unit, and lesser equipment needed for its present
operations. In addition to the foregoing, the Company presently leases 5
tractors. The Company intends to use part of the proceeds from this offering to
purchase 4 additional tankers and 3 tractors (see "Use of Proceeds").
EFFECT OF YEAR 2000 ON COMPUTER RECORD KEEPING
The advent of the year 2000 will, for certain organizations, unlike
the Company, create problems in creating and maintaining, utilizing their
computers, numerical records involving dates which span years in the second and
third millennia, i.e. years which begin with the digits 19 or 20. These records
include certain books of account, certain financial statements, various reports,
e.g. accounts receivable and payable aging reports, project performance progress
reports etc. The problem stems from the way many microprocessors and computer
programs use only two digits
45
<PAGE> 46
to refer to year in dates, e.g. "98" for "1998". Most chips and programs do not
accept a low number like "00" for the year "2000" or "01" for "2001", as valid
dates that follow the "99" for "1999".
The Company utilizes several microcomputers in maintaining books and
records and generating reports. However the simplicity of its operations renders
its reliance on computers minimal. It does not electronically interact with
other entities. It has a comparatively small amount of personnel, equipment,
real property, customers, work projects, vendors and the like. Records
pertaining to all of its operations could readily be maintained manually on its
computers should the need arise. However, the maintenance of all such records
can be handled on an annual "balance brought forward" basis to year "1950" or
any codes designating the years 2000, 1999 or both. Reports can be generated
either manually or by conventional programs, depending upon the millennia span
of any such report and the success of the use of artificially designated years.
The Company believes that the manual approach or the artificial year designation
approach would prove to be operationally - and cost-effective temporary
expedients.
The effect of the advent of the year 2000 will have a insignificant
effect on the Company, its services and its competitive position. Software and
microprocessors for microcomputers oriented to the year 2000 and beyond is
expected shortly to be on the market at competitive prices although the time
proximity of the availability of such items oriented to the span of millennia is
open to question.
LEGAL PROCEEDINGS
On or about January 16, 1998 Hartford Fire Insurance Company
("Hartford") filed a complaint against the Company in the Circuit Court (the
"Court") for Bradford County, Florida (Case No. 98-35-CA) seeking $76,795.78
plus interest from July 30, 1996 based upon the alleged failure of the Company
to pay Hartford for providing the Company with workers compensation insurance
for the period July 19, 1995 until July 19, 1996 and conducting a payroll audit
in connection therewith. The Company inadvertently failed to answer the
complaint in a timely manner and on or about February 11, 1998 a default
judgment was entered against the Company. The Company subsequently petitioned
the Court to set aside the default judgement and filed an answer to the
complaint. The principal amount of the claim is reflected as an account payable
on the Company's balance sheet for $76,795.78. The Company expects its set aside
petition to be granted and its answer to be accepted, although no assurance can
be given that this will prove to be the case. The Company disputes the amount
due Hartford and expects to be able to settle the claim, including all interest
due thereon, for not more than $60,000.
No other material legal proceedings are pending to which the Company
or any of its property is subject, nor to the knowledge of the Company are any
such legal proceedings threatened.
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<PAGE> 47
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to
each of the directors and executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael E. Ricks 37 President, Chief Executive Officer,
and Director
William B. Gray 61 Chairman of the Board of Directors
and Executive Vice President
Keith M. Carter 38 Treasurer, Chief Financial Officer
and Director
James D. Ricks 42 Secretary
Dr. John S. Poser 51 Director
Thomas F. Fey 53 Director
Michael J. George 45 Director (1)
</TABLE>
- -------------------
(1) Appointment effective upon the completion of this offering and the
Company's procurement of directors and officers liability insurance
with coverage and at rates satisfactory to the directors.
Each current director was elected on January 28, 1998. Executive
officers are elected by and hold office at the pleasure of the board of
directors. The term of office of each director is one year or until his or her
successor is elected and qualified. Michael E. Ricks and James Ricks are
cousins. No other family relationship exists between any director or executive
officer of the Company or any person contemplated to become such.
Promptly upon the completion of the offering made hereby, the board
of directors intends to appoint an audit committee comprised solely of directors
independent of management. The principal functions to be performed by the audit
committee consist of confirming selection of the independent auditor, reviewing
the arrangements for and scope of the audit, reviewing the auditors' comments as
to weaknesses in internal accounting controls and management's proposed
corrective action, and serving as a conduit to the board for reporting illegal
or questionable acts of management and irregularities detected in the audit.
Some additional functions expected to be performed by the audit committee
include (1) discharging auditors, (2) reviewing the auditors' fee, (3) reviewing
with the auditors their report, their perception of the Company's accounting
personnel, and the co-operation they received, (4) reviewing significant unusual
transactions, (5) meeting with the Company's financial staff to discuss internal
accounting and auditing procedures, and (6)
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<PAGE> 48
reviewing significant press releases concerning financial matters. The members
of the audit committee are intended to be Dr. John S. Poser and Thomas F. Fey.
If and when Michael J. George joins the board, it is intended that he become a
member of the audit committee.
The following is a brief account of the business experience of each
director and executive officer of the Company during the past five years or
more.
MICHAEL E. RICKS has been the president, chief executive officer and
a director of the Company since the Company's inception in 1990. During such
period he has been exclusively engaged in waste management activities on the
Company's behalf. He has served in similar capacities for B&B since February
1994. His Company responsibilities include, but are not limited to, supervision
of other corporate officers and other corporate personnel, assisting with the
preparation of the Company's financial budget, bidding on jobs and working with
customers and potential customers, developing marketing and financial plans, and
reviewing proposed corporate and asset acquisitions. From 1989 through 1990 Mr.
Ricks was employed as an assistant general manager for Griffin Industries. From
1987 until 1989 he worked as staff manager/auditor for Independent Life
Insurance Company and during 1986 he worked as an insurance agent for Liberty
National Life Insurance Company. From 1982 through 1985 he worked for Carter's
Fried Chicken, first as an operation's manager (1982 - 1983) and later (1983 -
1985) as an owner/operator. From 1979 through 1981 he was employed as a unit
manager for Spartan Foods, Inc.
WILLIAM B. GRAY has been the chairman of the board of directors of
the Company and B&B since January 28, 1998. He served as a director of B&B from
February 1994 through April 28,1997. From April 1992 through the present he also
served as an executive vice president for the Company and from April 28, 1997
through January 28, 1998 he served as the Company's secretary and treasurer. He
served as a director of the Company from April 1992 through April 28, 1997. He
has served as an executive vice president for B&B since January 28, 1998, a
position which he also held from February 1994 through April 28, 1997. He also
served as B&B's secretary and treasurer from April 28, 1997 through January 28,
1998. From 1962 until 1992 he was employed by Otis Elevator in various
capacities including District Manager for the State of Florida (1979 - 1992),
Branch Manager (1972 -1979), Direct Service Manager for the State of Georgia
(1968 - 1972), Branch Manager - Orlando, Florida (1966 - 1968) and Sales
Engineer (1962 - 1966). Mr. Gray received a B.S. Degree in Mechanical
Engineering from Auburn University in 1959 and a Business Management Certificate
from Hartford Graduate College in 1981.
KEITH M. CARTER has been the treasurer, chief financial officer and
a director of the Company since January 28, 1998. He has also served as a
director of B&B since January 28, 1998. At the present time, Mr. Carter does not
receive salary or other compensation for his services to the Company and does
not devote his full time to the performance of his Company duties. The Company
is actively searching for a replacement for Mr. Carter as the Company's
treasurer and chief financial officer. Mr. Carter has been a practicing attorney
in the State of Florida since 1985. From 1997 through the present Mr. Carter has
worked for the law firm of Shackleford, Farrior, Stallings & Evans, P.A. From
1989 until 1997 he worked for the law firm of Mitchell & Carter, P.A., from 1986
until 1989 the law firm of Mitchell, Alley, Rywant & Vessel and from 1985 until
1986 the law firm of Butler & Burnette. Mr. Carter is a member of the
Hillsborough County Bar, Florida Bar, American Bar Association and Florida
Defense Lawyers Association. He
48
<PAGE> 49
received a B.S. Degree in Business Finance from Florida State University in
1981, and a J.D. Degree from Stetson University College of Law in 1985.
JAMES D. RICKS has been the secretary of the Company and B&B since
January 28, 1998. At the present time, Mr. Ricks does not receive salary or
other compensation from the Company for his services to the Company and does not
devote his full time to the performance of his Company duties. From May 1983 to
the present he has worked in various capacities for the Department of Insurance
for the State of Florida including field representative, special investigator
and most recently insurance administrator for the Jacksonville, Florida service
office. In this latter capacity, Mr. Ricks manages a staff of nine employees
which handles consumer questions and complaints with regard to a fifteen county
area in northeast Florida. During the period 1978 through April 1983, Mr. Ricks
worked as an insurance agent for several insurance companies.
DR. JOHN S. POSER has been a director of the Company and B&B since
January 28, 1998. From 1983 to the present he has operated a medical practice
dedicated to performing various types of plastic surgery. From 1984 to the
present he has practiced in Gainesville, Florida. He is currently affiliated
with Alachua General Hospital and North Florida Regional Hospital and is an
associate clinical professor at the University of Florida. He is a member of the
Certified American Board of Plastic Surgery, American Medical Association and
the Alachua County Medical Society. He also serves as a member of the board of
the American College of Surgeons. Dr. Poser received a B.A. Degree from the
University of Wisconsin in 1968 and a medical degree from Northwestern
University in 1973.
THOMAS F. FEY has been a director of the Company from inception
through April 28, 1997 and from January 28, 1998 to the present. He has been
director of B&B from February 1994 through April 28, 1997 and from January 28,
1998 to the present. From 1996 to the present he has worked as the
owner/operator of three McDonald's Restaurants in Georgia. From 1984 until 1996
he was employed as the Director of Operations for McDonald's Restaurants. From
1967 until 1984 he worked in various academic capacities including Associate
Director/Principal at the University of Florida Laboratory School, Assistant
Professor at the University of Florida College of Education, Assistant
Superintendent/Director of Curriculum at Ochechobee County School District,
Co-Director for National Teachers Corps Federal Project and elementary school
teacher. Mr. Fey received a Bachelor's Degree in Education from the University
of Florida in 1967, a Masters Degree in Curriculum and Instruction from the
University of Florida in 1970 and a Doctoral Degree in Administration and
Supervision from the University of Florida in 1974.
MICHAEL J. GEORGE will become a director of the Company and B&B upon
the completion of this offering and the Company and B&B's procurement of
directors and officers insurance at rates and coverage which are satisfactory to
the Directors ("D&O Insurance"). Mr. George is a practicing certified public
accountant. From September 1997 until April 1998 he was employed as senior vice
president and chief financial officer of Connectivity Technologies Inc., a
public company engaged in the manufacture and assembly of wire and cable
products. From 1984 through 1997 and from May 1998 through the present Mr.
George was and has been a partner in George and Fischer Consulting Group Inc., a
financial and managerial consulting company which he co-founded, in Jefferson,
Massachusetts. From 1974 until 1978 he worked for several firms in accounting
and/or auditing capacities. Mr. George received a B.S. Degree from Bentley
College in 1974 where he majored in accounting.
49
<PAGE> 50
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each of the Underwriters has agreed to indemnify the Company, its
officers and directors, and each person who controls it within the meaning of
Section 15 of the Securities Exchange Act of 1933 with respect to any statement
in or omission from the Registration Statement or the Prospectus or any
amendment or supplement thereto if such statement or omission was made in
reliance upon information furnished in writing to the Company by such
Underwriter specifically for or in connection with the preparation of the
Registration Statement, the Prospectus, or any such amendment or supplement
thereto. In like manner, the Company has agreed to indemnify the Underwriters
with respect to statements in or omissions from the Registration Statement or
Prospectus made by the Company (see "Underwriting").
The Florida General Corporation Act (the "Florida GCA") empowers a
corporation to indemnify its directors and officers and to purchase D&O
Insurance with respect to liability arising out of their capacity or status as
directors and officers provided that such a provision does not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve international misconduct; (iii) for a knowing
violation of law arising under the Florida GCA; or (iv) for any transaction from
which the director derived an improper personal benefit. Following the
completion of this offering, the Company intends to purchase D&O Insurance, if
such insurance is available at rates which are satisfactory to the Company.
The Florida GCA provides further that the indemnification permitted
thereunder shall not be deemed exclusive of any rights to which the directors
and officers may be entitled under the corporation's by-laws, any agreement,
vote of shareholders or otherwise.
Article 7 of the Company's Articles of Incorporation eliminates the
personal liability of officers and directors to the fullest extent permitted by
law.
The effect of the foregoing is to require the Company to indemnify
the officers and directors of the Company for any claims arising against such
persons in their official capacities if such persons acted in good faith and in
a manner that they reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the
compensation paid or accrued by the Company during the three fiscal years ended
December 31, 1997 to its chief executive officer. No other executive officer
received annual compensation in excess of $100,000 in any of such fiscal years.
50
<PAGE> 51
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------------------- -----------------------------------------------
Name and Fiscal Other Annual Options/ Restricted LTIP All Other
Principal Position Year Salary Bonus Compensation SARs Stock Awards Payouts Compensation
- ------------------ ------ ------ ----- ------------ -------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael E. Ricks 1997 $87,500(1) $0 $20,769(1)(2) 75,000(3) $0 $0 $0
Chief Executive Officer
Michael E. Ricks 1996 $87,500(1) $0 $19,171(1)(2) 0 $0 $0 $0
Chief Executive Officer
Michael E. Ricks 1995 $87,500 $0 $18,671(2) 0 $0 $0 $0
Chief Executive Officer
</TABLE>
(1) Does not include compensation paid to Mr. Ricks by CBP pursuant to a
Non-Competition and Consulting Agreement (see "Business - Services -
Removal, Transport and Disposal of Bio-Solids, Grease and Septic
Waste - Asset Sale Agreement - Business Restrictions").
(2) Represents health insurance benefits and use of Company leased
automobiles.
(3) Represents 75,000 options issued to Mr. Ricks on April 28, 1997
under the Company's 1997 Stock Option Plan. Each option is
exercisable to purchase one share of Common Stock at any time during
the four year period commencing April 28, 1998 at a price of $5 per
Share.
1997 NONSTATUTORY STOCK OPTION PLAN
The Weststar Environmental, Inc. 1997 Nonstatutory Stock Option Plan
(the "Plan"), which was adopted by the Company's Board of Directors (the
"Board") in April 1997 covers up to 1,000,000 shares of the Company's Common
Stock which are issuable upon the exercise of a like number of options. The
purpose of the Plan is to enable the Company to encourage eligible Plan
participants to contribute to the success of the Company by granting such
individuals stock options. Options granted under the Plan are not intended to
qualify as "incentive stock options" as defined in Section 422A of the Internal
Revenue Code of 1986, as amended. The Plan is presently administered by the
Board. The eligible participants under the Plan are determined at the discretion
of the Board. Subject to the express provisions of the Plan, the Board has the
complete discretion and power to determine from among eligible persons those to
whom options may be granted, the time or times at which options may be granted,
the option price, the number of shares of Common Stock to be subject to each
option and the duration of the options. Options may be granted under the Plan
from time to time until April 27, 2007 or such earlier date as may be determined
by the Board. On April 28, 1997 the Company issued an aggregate of 487,500 Plan
options including 75,000 options which were issued to the named executive.
460,000 of such options are exercisable at $5 per share and the other 27,500
options are exercisable at $.001 per share. 207,500 of the Plan options are
exercisable at any time during the four year period commencing April 28, 1998.
The other 280,000 Plan options are exercisable at any time during the four year
period commencing January 1, 1999. No determinations have been made regarding
the persons to whom options will be granted in the future or the option exercise
prices. However, the Company has adopted a policy whereby no options will be
granted having an exercise price of less than 85% of market price at the time of
grant.
51
<PAGE> 52
OPTIONS/STOCK APPRECIATION RIGHT ("SAR") GRANTS
The following table sets forth information concerning individual
grants of stock options and freestanding SARs made during the fiscal year ended
December 31, 1997 to the Company's chief executive officer. No SARs were granted
by the Company during the fiscal year ended December 31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
Number of Percent of
Securities Options/SARs
Name and Underlying Granted to Exercise or
Principal Options/SARs Employees in Base Price Expiration
Position Granted (#) Fiscal Year ($/SH) Date
--------- ------------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Michael E. Ricks 75,000 shares 31% $5/share April 27, 2002
Chief Executive Officer
</TABLE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR END OPTION/SAR VALUES
The following table sets forth information concerning exercises of
stock options (or tandem SAR's) and freestanding SAR's during the fiscal year
ended December 31, 1997 by the Company's chief executive officer and the fiscal
year end value of unexercised options and SARs. The Company has no outstanding
SARs and there were no exercises of stock options by the Company's chief
executive officer during the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
Number of
Securities Value Of
Underlying Unexercised
Unexercised In-The-Money
Shares Options/SARs Options/SARs
Acquired At Fiscal Year At Fiscal Year
On Value End (#) End ($)
Name and Exercise Realized Exercisable/ Exercisable/
Principal Position (#) ($) Unexercisable Unexercisable
------------------ -------- -------- -------------- --------------
<S> <C> <C> <C> <C>
Michael E. Ricks(1) Not applicable(1) Not applicable(1) 0/75,000(1) Not applicable(1)
Chief Executive Officer
</TABLE>
(1) At December 31, 1997 the Company's chief executive officer owned
75,000 stock options, each of which was exercisable for one share of
the Company's common stock at an exercise price of $5 per share. The
options are exercisable at any time during the four year period
which commenced April 28, 1998. None of the 75,000 options were
exercised or exercisable during the fiscal year ended December 31,
1997 and none of such options were in-the-money at December 31, 1997
based upon the exercise price of the options and the fair market
value of the Common Stock underlying the options.
52
<PAGE> 53
LONG TERM INCENTIVE PLAN AWARDS
The Company did not make any long-term incentive plan awards during
1997.
REPORT ON REPRICING OF OPTIONS/SARS
The Company did not adjust or amend the exercise price of any stock
options or SAR's during 1997.
PENSION PLANS
The Company does not presently provide pension plans for any of its
officers or directors.
EMPLOYMENT AGREEMENTS
The Company and Michael E. Ricks have entered into an employment
agreement for a term of three years commencing April 28, 1997. The agreement
provides for a base salary of $87,500 in the first year, $96,250 in the second
year and $105,000 in the third year. It also provides Mr. Ricks with health
insurance benefits and the use of a Company leased automobile (see "Certain
Transactions").
DIRECTORS' COMPENSATION
The directors of the Company are not compensated for their services
as directors.
CERTAIN TRANSACTIONS
The transactions disclosed herein were for the most part entered
into by the Company at times when the Company lacked sufficient disinterested,
independent directors to ratify such transactions or were not separately
ratified by a majority of the Company's disinterested, independent directors on
or about the effective date of each such transaction (see Risk Factor 25
"Related Party Transactions"). Notwithstanding the foregoing, the Company
believes all of the transactions disclosed in this section were made on terms as
fair as those obtainable from independent third parties, were independent third
parties able and willing to enter into similar transactions with the Company. In
addition, all of the transactions disclosed herein have been subsequently
ratified by all of the Company's disinterested, independent directors who did
not have an interest in the transactions and who had access, at the Company's
expense, to legal counsel. The Company's present independent directors are Dr.
John S. Poser and Mr. Thomas F. Fey. If and when he becomes a director, Mr.
Michael J. George will also be an independent director. No other material
transactional activities between the Company and its officers, directors, 5%
shareholders or their affiliates are presently pending nor are any such
transactions currently proposed.
53
<PAGE> 54
Since the inception of the Company Michael E. Ricks has periodically
made loans to the Company. The aggregate outstanding principal balance of such
loans is presently $204,023. The loans, which are payable on demand, require the
Company to pay interest thereon at the annual rate of 8%. The Company intends to
use part of the proceeds of this offering to repay all such loans.
During the period January 1996 through December 1997 the Company
made aggregate payments of $42,000 to William B. Gray, an officer and director
of the Company, in consideration of Mr. Gray's leasing to the Company certain
equipment owned by him including a dump truck, back-hoe and pressure washer. The
Company considers the payments required by the equipment lease to have been
reasonable.
On May 15, 1996, Yarborough Gas Inc. ("Yarborough Gas"), a company
owned by Riley Glenn Yarborough, Chuck L. Yarborough, David M. Yarborough and
Stanly H. McDonald, minority shareholders of the Company, loaned the Company
$100,000. The loan was intended to be a 90- day interest free loan. However, at
the end of the 90-day period, the Company and Yarborough Gas agreed to extend
the due date indefinitely subject to the demand for repayment by Yarborough Gas
or the Company's payment of 8% interest on the outstanding principal balance on
the loan from the extension date through the date of payment. At December 31,
1997, a balance of $31,611 was due to Yarborough Gas under the loan including
$28,000 in principal. At March 31, 1998 the balance of principal and interest
due on this loan was $26,611. The Company intends to use part of the proceeds of
this offering to repay this loan (see "Use of Proceeds - Debt Consolidation and
Reduction").
On April 28, 1997 Michael E. Ricks, the Company's president and
chief executive officer, entered into a written three year employment agreement
with the Company (the "Employment Agreement"). The Employment Agreement provides
for Mr. Ricks to receive a base salary of $87,500 in the first year, $96,250 in
the second year and $105,000 in the third year. It also provides Mr. Ricks with
health insurance and medical benefits, the use of a Company leased automobile
and the right to participate in any bonus or other incentive compensation,
profit sharing or retirement plan that the Company may institute in the future.
The Employment Agreement also contains a non-compete provision which provides
that Mr. Ricks cannot, during the three year term of the employment agreement or
upon the termination of his employment, whichever event shall occur later, and
for a period of two years thereafter, engage in any business which is in direct
competition with the Company, within any state or jurisdiction in which the
Company is engaged in business, without the prior written consent of the
Company. No assurance can be given however, as to the enforceability of such
non-compete provisions. Non-competition agreements are not always enforceable
due to public policy limitations existing in various states and the difficulty
of obtaining injunctive relief. The Employment Agreement also contains
provisions that require the Company to continue to pay Mr. Ricks all or part of
his employment compensation at the rate in effect on the date of termination,
including any compensation due under any bonus or profit sharing plans, for the
period from the date of termination through the scheduled expiration date of the
Employment Agreement, in the event of disability, certain changes in control of
the Company, and other events resulting in termination of employment without
cause.
On April 28, 1997 the Company issued stock options, exercisable at
$5 per share, to each of Michael E. Ricks, an officer and director of the
Company (75,000 options), William Perry, a
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<PAGE> 55
principal shareholder of the Company who, at the time of issuance, was a
director of the Company (75,000 options), John Stubbs, who, at the time of
issuance, was an officer and director of the Company (140,000 options), Elton
Stubbs, who, at the time of issuance, was a consultant to the Company (140,000
options), William B. Gray, an officer and director of the Company (20,000
options), Michael George, a Company nominee for director who, at the time of
issuance, had no affiliation with the Company as an officer or director (5,000
options) and Dr. John Poser, a director of the Company who, at the time of
issuance, had no affiliation with the Company as an officer or director (5,000
options) in consideration of services rendered to the Company. Such services
related to the April 29, 1997 Agreement and Plan of Reorganization between,
among others, the Company and Northstar (see "Business - General - Corporate
History"). Each of the options is exercisable for one share of the Company's
common stock at an exercise price of $5 per share. The options issued to Michael
E. Ricks, William Perry, Michael George and Dr. John Poser are exercisable at
any time during the four year period commencing April 28, 1998. The options
issued to John Stubbs and Elton Stubbs are exercisable at any time during the
four year period commencing January 1, 1999.
On October 7, 1997 G&W Framing Contractors, Inc., an inactive
company owned by William B. Gray, made a $120,000 loan to the Company to be used
for working capital purposes. The loan, which is payable on demand and reflected
by a promissory note of the Company dated October 7, 1997, requires the Company
to pay interest on the outstanding principal balance through the date of
repayment at the annual rate of 18%. At March 31, 1998 the full amount of
principal and interest due on this loan had been reduced to $75,000. The Company
intends to use part of the proceeds of this offering to repay this loan (see
"Use of Proceeds - Debt Consolidation and Reduction").
Empire Energy, Inc. ("Energy"), a company owned by several
shareholders of the Company, including Marie H. Stubbs, Michael E. Ricks, Peggy
W. Stubbs, William W. Perry, William B. Gray, Dr. John S. Poser, and Thomas F.
Fey, paid the Company $99,950 in consulting fees on November 6, 1997 in
consideration of preparation and site work done by the Company on Empire's
behalf for the purpose of enabling Empire to obtain a permit approving a parcel
of land owned by Empire to serve as a land application site for sludge. Mesdames
Marie and Peggy Stubbs and Messrs. Ricks and Perry are each beneficial owners of
in excess of 5% of the common stock of the Company and Messrs. Ricks and Gray
are officers and directors of the Company.
The Company entered into a consulting agreement with Thomas C.
Souran (the "Consultant") as of January 1, 1998 which was modified in June 1998
by addendum deleting all rights of Mr. Souran to registration by the Company of
his Company common stock (the "Consulting Agreement"). The Consulting Agreement
has a three-year term which runs through December 31, 2000. The services to be
rendered by the Consultant to the Company pursuant to the Consulting Agreement
involve business planning including the identification of prospective
acquisition candidates, business strategy evaluation and procurement of
commercial financing for the Company's business. In consideration of the
Consultant's services pursuant to the Consulting Agreement, the Company sold to
the Consultant 100,000 shares of common stock (the "Consultant Shares") at $.001
per share and agreed to reimburse him for all expenses incurred by him in the
performance of such services, subject to the Company's prior written approval.
The Consulting Agreement further provides that the Consultant shall be entitled
to receive a finder's fee from the Company on terms to be negotiated, in the
event the Company, subsequent to the completion of
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<PAGE> 56
the offering made hereby, completes a merger, acquisition, sale, financing, or
similar transaction as the result of the introduction, negotiation, or other
material assistance rendered by the Consultant in the performance of certain
duties under the Consulting Agreement.
Reference is also made herein to the Agreement and Plan of
Reorganization between, among others, the Company and Northstar, and to the
Company's February 1998 acquisition of B&B (see "Business - General - Corporate
History").
During 1997, short-term loans were made and repaid to two directors,
William B. Gray in the amount of $60,000 and Thomas F. Fey in the amount of
$55,000, each with annual interest at the rate of 12%. The proceeds were used to
discharge the Company's outstanding debt secured by a mortgage on its real
estate in Starke, Florida.
Dr. John S. Poser has guaranteed a mortgage loan to the Company in
the amount of $160,000 made in June 1998, for which guarantee the Company's
compensating him at the rate of $500 per month (see "Business - Property and
Equipment").
As of February 1998 the Company issued 50,000 shares of its common
stock, at $.001 per share, to Environmental and Financial Consulting Inc., a
corporation owned by William W. Perry, a principal shareholder of the Company,
in consideration of financial consulting services and the arrangement of a
number of commercial loans to the Company.
As of February 1998 the Company issued 100,000 shares of its common
stock to Thomas C. Souran, a principal shareholder of the Company, in
consideration of business consulting services to be rendered by him to the
Company for a three-year period pursuant to a consulting agreement entered into
between him and the Company as of February 1998.
The Company intends to apply a portion of the proceeds of the
offering made hereby to the payment of the preponderance of its present
indebtedness. Certain of the creditors who will receive such payment are
affiliated with the Company (see "Use of Proceeds - Debt Consolidation and
Reduction").
In connection with future material transactions between the Company
and affiliated parties, the Company has adopted a policy which requires that (i)
all future material affiliated transactions and loans be made or entered into on
terms that are not less favorable to the Company than those that can be obtained
from unaffiliated third parties; and (ii) all future material affiliated
transactions and loans, and any forgiveness of loans, be approved by a majority
of the Company's independent directors who do not have an interest in the
transactions and who have access, at the Company's expense, to the Company's or
independent legal counsel.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of July 15, 1998 with
respect to the ownership of the Company's Common Stock by (i) each person known
by the Company to be the beneficial owner of more than 5% of the Company's
Common Stock, (ii) each director of the Company, (iii) each person nominated to
become a director of the Company; (iv) each executive officer of the
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<PAGE> 57
Company, and (v) all directors and executive officers as a group. As with all
other references in this Prospectus to the Common Stock, this table gives effect
to the February 16, 1998 fifteen for one forward split of the outstanding Common
Stock of the Company. The percentages in the table have been calculated on the
basis of treating as outstanding for a particular holder, all shares of the
Company's Common Stock outstanding on said date and all shares of Common Stock
issuable to such holder in the event of exercise of outstanding options owned by
such holder at said date which are exercisable within 60 days of such date. The
percentage ownership set forth in the "After Offering" column assumes
non-exercise of the Underwriter's over-allotment option and does not give effect
to the shares of Common Stock issuable upon exercise of the Redeemable Warrants
and Representative's Warrants.
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially Owned Percentage Ownership
-------------------------- ---------------------------
Name and Address of Before After Before After
Beneficial Owner Offering Offering Offering(9) Offering(10)
------------------- -------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Marie H. Stubbs 406,121(1) 406,121(1) 21.4% 14%
Cottage 405
Sea Island, Georgia 31561
Michael E. Ricks 419,179(2) 419,179(2) 22.1% 14.5%
9550 Regency Square Blvd.
Suite 1109
Jacksonville, Florida 32225
Peggy W. Stubbs 306,122(3) 306,122(3) 16.1% 10.6%
5209 Leeward Cove
Amelia Island, Florida 32034
William W. Perry 273,578(4) 273,578(4) 14.4% 9.4%
9550 Regency Square Blvd
Suite 1109
Jacksonville, Florida 32225
Thomas C. Souran 100,000 100,000 5.3% 3.5%
2 Woodland Drive
Great Notch, NJ 07424
Keith M. Carter 0 0 0 0
9550 Regency Square Blvd.
Suite 1109
Jacksonville, Florida 32225
James Ricks 1,000(5) 1,000(5) (11) (11)
9550 Regency Square Blvd.
Suite 1109
Jacksonville, Florida 32225
</TABLE>
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<PAGE> 58
<TABLE>
<S> <C> <C> <C> <C>
William B. Gray 82,500(6) 82,500(6) 4.3% 2.8%
9550 Regency Square Blvd.
Suite 1109
Jacksonville, Florida 32225
Dr. John S. Poser 12,500(7) 12,500(7) (11) (11)
9550 Regency Square Blvd.
Suite 1109
Jacksonville, Florida 32225
Thomas F. Fey 20,000 20,000 (11) (11)
9550 Regency Square Blvd.
Suite 1109
Jacksonville, Florida 32225
Michael J. George 5,000(8) 5,000(8) (11) (11)
9550 Regency Square Blvd.
Suite 1109
Jacksonville, Florida 32225
All officers and directors
as a group (7 persons) 540,179(12) 540,179(12) 28.5% 18.6%
</TABLE>
- --------------
(1) John Stubbs, the husband of Marie Stubbs, has neither voting nor
investment power with regard to such Shares and disclaims any
beneficial ownership thereof. Marie Stubbs is the sister-in-law of
Peggy Stubbs.
(2) Includes 75,000 Shares issuable upon exercise of 75,000 stock option
granted by the Company to Mr. Ricks at an exercise of price of $5
per Share. The options are exercisable at any time during the four
year period commencing April 28, 1998.
(3) Elton Stubbs, the husband of Peggy Stubbs, has neither voting nor
investment power with regard to such Shares and disclaims any
beneficial ownership thereof. Peggy Stubbs is the sister-in-law of
Marie Stubbs.
(4) Includes 75,000 Shares issuable upon exercise of 75,000 stock
options granted by the Company to Mr. Perry at an exercise price of
$5 per Share. The options are exercisable at any time during the
four year period commencing April 28, 1998. Also includes 50,000
Shares owned by Environmental and Financial Consulting Inc., a
company owned by Mr. Perry. Mr. Perry acquired Environmental and
Financial Consulting Inc. on March 9, 1998.
(5) Includes 1,000 Shares issuable upon exercise of 1,000 stock options
granted by the Company to Mr. Ricks at an exercise price of $.001
per Share. The options are exercisable at any time during the four
year period commencing April 28, 1998.
(6) Includes 20,000 Shares issuable upon exercise of 20,000 stock
options granted by the Company to Mr. Gray at an exercise of price
of $5 per Share. The options are exercisable at any time during the
four year period commencing April 28, 1998. All of the Shares
presently owned by Mr. Gray and the
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<PAGE> 59
Shares which may be issued to Mr. Gray upon the exercise of any
stock options are and/or will be owned jointly by Mr. Gray and his
wife, Patricia Gray.
(7) Includes 5,000 Shares issuable upon exercise of 5,000 stock options
granted by the Company to Dr. Poser at an exercise of price of $5
per Share. The options are exercisable at any time during the four
year period commencing April 28, 1998.
(8) Includes 5,000 Shares issuable upon exercise of 5,000 stock options
granted by the Company to Mr. George at an exercise of price of $5
per Share. The options are exercisable at any time during the four
year period commencing April 28, 1998.
(9) Based upon 1,897,500 Shares issued and outstanding including 207,500
Shares issuable upon the exercise of outstanding stock options that
are exercisable within the next 60 days.
(10) Based upon 2,897,500 Shares issued and outstanding including 207,500
Shares issuable upon the exercise of outstanding stock options that
are exercisable within the next 60 days.
(11) Less than 1%.
(12) Includes 106,000 stock options held by the Company's officers and
directors, all of which are exercisable within the next 60 days.
Michael E. Ricks, Marie Stubbs, Peggy Stubbs and William W. Perry
may be deemed to control the Company by virtue of their ownership or control of
the Common Stock of the Company.
DESCRIPTION OF SECURITIES
GENERAL
Pursuant to its Articles of Incorporation, the Company is authorized
to issue 10,000,000 shares of Common Stock, $.001 par value per share. At July
15, 1998, the Company had issued and outstanding 1,690,000 shares of Common
Stock excluding 487,500 shares of Common Stock underlying outstanding stock
options, none of which were exercisable on such date.
COMMON STOCK
The holders of shares of Common Stock are entitled to dividends when
and as declared by the Board of Directors from funds legally available therefore
and, upon liquidation, are entitled to share pro rata in any distribution to
common shareholders. Holders of the Common Stock have one non-cumulative vote
for each share held. There are no pre-emptive, conversion or redemption
privileges, nor sinking fund provisions, with respect to the Common Stock. All
of the Company's outstanding shares of Common Stock are validly issued, fully
paid and non-assessable.
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<PAGE> 60
REDEEMABLE WARRANTS
The Redeemable Warrants will be issued in registered form pursuant
to an agreement, dated the date of this Prospectus (the "Warrant Agreement")
between the Company and Continental Stock Transfer & Trust Company (the "Warrant
Agent"). The following discussion of certain terms and provisions of the
Redeemable Warrants is qualified in its entirely by reference to the detailed
provisions of the Redeemable Warrant and Warrant Agreement, the forms of which
have been filed as exhibits to the registration statement of which this
prospectus forms a part. The Redeemable Warrant and the Warrant Agreement are
available for procurement and/or inspection by the public (see "Additional
Information").
One Redeemable Warrant represents the right of the registered holder
to purchase one share of Common Stock at an exercise price of $6.00 per share,
subject to adjustment (the "Purchase Price"). The Redeemable Warrants are
subject to adjustment in the Purchase Price and in the number of shares of
Common Stock and/or other securities deliverable upon the exercise thereof in
the event of certain stock dividends, stock splits, reclassifications,
reorganizations, consolidations or mergers.
Unless previously redeemed in accordance with the terms set forth
below, the Redeemable Warrants may be exercised at any time commencing one year
from the date of this prospectus and prior to the close of business on
_____________, 2003 (the "Expiration Date"). On and after the Expiration Date,
the Redeemable Warrants become wholly void and of no value. The Redeemable
Warrants may be exercised at the office of the Warrant Agent.
The Company has the right at any time after _______________, 1999 to
redeem the Redeemable Warrants, in whole, for cancellation at a price of $.10
each, by written notice mailed 30 days prior to the redemption date to each
Redeemable Warrant holder at his address as it appears on the books of the
Warrant Agent. Such notice shall only be given within 10 days following any
period of 20 consecutive days during which the closing price of the Common Stock
has equalled or exceeded $8.00 per Share, subject to adjustments for stock
dividends, stock splits and the like. If the Redeemable Warrants are called for
redemption, they must be exercised prior to the close of business on the date of
any such redemption or the right to purchase the applicable shares of Common
Stock is forfeited.
No holder, as such, of Redeemable Warrants shall be entitled to vote
or receive dividends or be deemed the holder of shares of Common Stock for any
purpose whatsoever until such Redeemable Warrants have been duly exercised and
the Purchase Price has been paid in full.
If required, the Company will file a post effective amendment to the
registration statement with the Commission with respect to the securities
underlying the Redeemable Warrants prior to the exercise of the Redeemable
Warrants and deliver a prospectus with respect to such securities to all
Redeemable Warrant holders as required by Section 10(a)(3) of the Act (see "Risk
Factors Current Prospectus and State Blue Sky Registration Required to Exercise
the Redeemable Warrants").
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<PAGE> 61
OUTSTANDING STOCK OPTIONS
There are currently outstanding under the Company's 1997 Nonstatutory
Stock Option Plan 487,500 options to purchase 487,500 shares of Common Stock.
These options are held by 15 persons. 207,500 options are exercisable for a
period of four years commencing April 28, 1998. 280,000 options are exercisable
for a period of four years commencing January 1, 1999. 460,000 of the options
are exercisable at $5 per share and 27,500 options are exercisable at $.001 per
share. Reference is made to "Description of Securities - Representative's
Warrants".
REPRESENTATIVE'S WARRANTS
The Company has authorized, in connection with the Representative's
Warrants, the issuance of 100,000 shares of Common Stock and 100,000 additional
warrants (the "Underlying Warrants"), and has reserved an appropriate number of
shares of Common Stock for issuance upon exercise of such Representative's
Warrants and such Underlying Warrants (see "Underwriting"). The Representative's
Warrants are not redeemable and contain provisions that protect the holders
thereof against dilution by adjustment of the exercise price and the number of
shares issuable upon exercise thereof in certain events, such as stock
dividends, distributions and stock splits. In the event of any capital
reorganization, reclassification, conversion of the Common Stock or
consolidation, merger or sale of all or substantially all of the assets of the
Company, the Representative's Warrants will be exercisable for the number of
shares of stock or other securities or property of the Company, or of the
corporation in to which shares of Common Stock are converted or resulting from
such consolidation or surviving such merger or to which such sale shall be made,
as the case may be, to which the shares of Common Stock issuable upon exercise
of such Representative's Warrants would have been converted if such shares had
been issued and outstanding at the time of the change. The Company is not
required to issue fractional shares, but will pay the holder of the
Representative's Warrant an amount in cash equal to such fraction multiplied by
the then current market value for the Common Stock. The holder of a
Representative's Warrant will not possess any rights as a stockholder of the
Company unless and until he exercises his Representative's Warrant (see
"Underwriting").
FLORIDA'S ANTI-TAKEOVER LAW
The Florida Business Corporation Act (the "FBCA") contains provisions
that regulate corporate takeovers. Under Florida law, corporations can elect not
be governed by Sections 607.0901 and 607.0902 of the FBCA (the "Anti-Takeover
Sections") and other laws relating thereto. The Company has made no such
election and as such is subject to the Anti-Takeover Sections. The Anti-Takeover
Sections provide, among other things, that certain transactions between the
Company and an "interested shareholder" or any affiliate of the "interested
shareholder" be approved by two-thirds of the Company's outstanding voting
shares excluding the shares beneficially owned by the "interested shareholder."
An "interested shareholder" is defined in section 607.0901 of the FBCA as any
person who is the beneficial owner of more than 10% of the outstanding voting
shares of the Company. The intended effect of the Anti-takeover Sections is to
be provide the Company with assistance in fighting unfriendly take-over
attempts.
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<PAGE> 62
TRANSFER AND WARRANT AGENT
Continental Stock Transfer & Trust Company, New York, NY will act as
the Transfer and Warrant Agent for the Company's Common Stock and Redeemable
Warrants.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement (the
"Underwriting Agreement") between the Company and Westport Resources Investment
Services, Inc., as Representative of the several Underwriters named below, the
Company has agreed to sell to the Underwriters and the Underwriters, through the
Representative, have severally but not jointly agreed to purchase from the
Company, on a firm commitment basis, the aggregate number of Shares and
Redeemable Warrants set forth opposite their respective names (exclusive of
Shares and Redeemable Warrants purchased pursuant to the Representative's
Over-allotment Option).
<TABLE>
<CAPTION>
Number of Shares
and
Underwriter Redeemable Warrants
Westport Resources Investment Services, Inc.
<S> <C>
TOTAL 1,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations are such that they are committed to purchase all of the Shares and
Redeemable Warrants offered hereby if any are purchased.
The Company has agreed to sell the Shares and Redeemable Warrants to
the Underwriters at a 10% discount from the offering price and to pay to the
Representative a non-accountable expense allowance equal to 3% of the gross
proceeds of the public offering price of the Shares and Redeemable Warrants sold
pursuant to this Prospectus, including any Shares and Redeemable Warrants sold
to the Underwriters upon exercise of the Representative's Over-allotment Option.
$40,000 of the non-accountable expense allowance has been paid to the
Representative to date. In addition to such expense allowance, the Company has
agreed to pay certain fees and expenses of the Representative's counsel in
connection with qualification of this offering under state securities laws.
The Underwriters, through the Representative, have advised the Company
that they propose to offer the Shares and Redeemable Warrants at the public
offering price set forth on the cover page of this Prospectus and that the
Underwriters may utilize the services of certain dealers, including dealers who
are members of the National Association of Securities Dealers, Inc. (the "NASD")
and certain foreign dealers. The public offering price and the amount of the
concessions
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<PAGE> 63
and reallowances, if any, provided for any broker-dealers involved in the
distribution of the securities offered hereby will not be changed until after
the initial public offering is completed.
The Company has granted to the Representative options, exercisable
within 45 days from the date of this Prospectus, to purchase up to a maximum of
150,000 additional Shares and/or up to a maximum of 150,000 additional
Redeemable Warrants on the same terms as the 1,000,000 Shares and Redeemable
Warrants offered hereby. The Representative may exercise such options only for
the purpose of covering over-allotments, if any.
Management of the Company may provide the Representative with a list of
persons who they believe may be interested in purchasing Shares and Redeemable
Warrants being offered hereunder. The Representative and the other Underwriters
may sell a portion of the Shares and Redeemable Warrants to such persons if such
persons reside in a state where the Shares and Redeemable Warrants can be sold
and where the Underwriters or selected dealers are permitted to sell the Shares
and Redeemable Warrants.
The Company's officers and directors, the holders of the Company's
460,000 stock options exercisable at $5 per share (the "$5 Option Holders"), and
the holders of 5% or more (the "5% Shareholders") of the outstanding shares of
the Company's Common Stock immediately prior to the date of this Prospectus,
have agreed with and for the Representative not to sell any of their Shares,
options or underlying Shares for the eighteen-month period (the "Initial
Eighteen-Month Period") commencing on the date of this Prospectus.
Notwithstanding the foregoing, the Representative has agreed, if at any time
during the period subsequent to 12 months after the date of this Prospectus and
on or prior to 18 months after the date of this Prospectus, that the Share
market price, adjusted for splits and like transactions, closes at or above
$7.50 for a period of 20 consecutive days within 10 days prior to any sale by
them, that officers, directors, $5 Option Holders and 5% Holders can sell up to
25% of their respective Shares pursuant to Rule 144 of the General Rules and
Regulations under the 1933 Act. The 5% Holders have further agreed with and for
the Representative not to sell or transfer any of their Shares during the
eighteen month period subsequent to the Initial Eighteen Month period unless the
Share market price, adjusted for splits and like transactions, closes at or
above $7.50 for a period of 20 consecutive days within 10 days prior to any sale
by them.
In connection with this offering, the Company has agreed to issue to
the Representative, for a purchase price of $.001 per common stock purchase
warrant, (the "Representative's Warrants"), warrants to purchase, at a price
equal to 145% of the public offering price per share, up to 100,000 Shares. The
Representative's Warrants contain anti-dilution provisions and are exercisable
for a period of four years commencing twelve months from the date of this
Prospectus. They are restricted from sale, transfer, assignment or hypothecation
for a period of twelve months from the date of this Prospectus except to
officers of the Representative or their successors, or to other Underwriters and
their officers. The holders of the Representative's Warrants will have no
voting, dividend or other rights as stockholders of the Company with respect to
shares of Common Stock underlying the Representative's Warrants until the
Representative's Warrants have been exercised. The Company has agreed, at its
sole expense, to include the Representative's Warrants and underlying shares in
the Registration Statement of which this Prospectus is a part and to keep such
Registration Statement current until all of the underlying shares have been
sold.
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<PAGE> 64
For the term of the Representative's Warrants, the holders thereof will
be given the opportunity to profit from a rise in the market value of the
Company's Common Stock, with a resulting dilution in the interest of other
stockholders. The holders of the Representative's Warrants can be expected to
exercise the Representative's Warrants at a time when the Company would be able
to obtain needed capital by an offering of its unissued capital shares on terms
more favorable to the Company than those provided by the Representative's
Warrants. Such facts may adversely affect the terms upon which the Company can
obtain additional financing. Any profit realized by the Representative upon the
sale of the Representative Warrants or shares of Common Stock issuable upon the
exercise of the Representative's Warrants may be deemed additional underwriting
compensation (see "Risk Factors - Representative's Warrants").
The Company, as part of the Underwriting Agreement, has also agreed to
enter into a two-year financial consulting agreement with the Representative
providing for compensation of $3,000 per month or $72,000 on an aggregated
basis, payable in advance at the closing of the offering. In addition, the
Company has agreed to permit the Representative to nominate one person for
election to the Company's Board of Directors for a period of five years after
the closing of the offering, such nominee to be subject to the reasonable
approval of the Company's Board. To date, no particular individual has been
nominated by the Representative to serve as a Board member.
If at any time on or before December 14, 2002, the Company completes
the acquisition of a majority of common stock or assets of or by another company
by way of a transaction with a party introduced to the Company by the
Underwriter, the Underwriter shall be paid a fee in the amount of 10% of the
total consideration paid for such acquisition.
The Underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
None of the Underwriters nor any of their controlling persons have any
material relationship with the Company, its promoters or their controlling
persons.
In connection with this offering, certain Underwriters and selling
group members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock or
Redeemable Warrants. Such transactions may include stabilization transactions
effected in accordance with Rule 104 of Regulation M, pursuant to which such
persons may bid for or purchase Common Stock or Redeemable Warrants for the
purpose of stabilizing their respective market prices. The Underwriters also may
create a short position for the account of the Underwriters by selling more
shares of Common Stock or Redeemable Warrants in connection with the offering
than they are committed to purchase from the Company, and in such case may cover
all or a portion of such short position. The Representative, on behalf of the
Underwriters, may also cover all or a portion of such short position by
exercising the Over-allotment Option. In addition, the Representative, on behalf
of the Underwriters, may impose "penalty bids" under contractual arrangements
with the Underwriters whereby it may reclaim from an Underwriter (or dealer
participating in the offering) for the account of other Underwriters, the
selling concession with respect to shares of Common Stock or Redeemable Warrants
that are distributed in the offering but subsequently purchased for the account
of the Underwriters in the open market. Any of the transactions described in
this paragraph may result in the maintenance of the price of the Common Stock or
Redeemable Warrants at levels above that which might otherwise prevail in the
64
<PAGE> 65
open market. None of the transactions described in this paragraph is required,
and, if they are undertaken they may be discontinued at any time.
The Company has agreed to indemnify the Underwriters and the
Underwriters have agreed to indemnify the Company against certain liabilities,
including liabilities arising under the Securities Act of 1933, as amended, by
reason of misstatements of, or omissions to state, material facts in this
Prospectus and the Registration Statement of which it is a part.
This Underwriting section is a summary of all of the material terms of
the Underwriting Agreement and does not purport to be complete. A copy of the
Underwriting Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part and is available at or from the
offices of the Securities and Exchange Commission for review (see "Additional
Information").
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY
PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT IN THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for the
Company's Common Stock. The initial offering price of the Common Stock and
Redeemable Warrants has been arbitrarily determined by negotiations between the
Company and the Representative. Among the factors considered in determining such
prices are prevailing market conditions generally, the Company's historical and
prospective operations and earnings, the history of the prospects for the
industry in which the Company operates, and market prices for shares of Common
Stock and Redeemable Warrants of other companies.
LEGAL MATTERS
Milling Law Offices, 115 River Road, Bldg. 12, Suite 1205, Edgewater,
NJ 07020 will render an opinion as counsel to the Company, that the securities
offered hereby, when issued and sold, will be legally issued, fully paid and
nonassessable. John L. Milling and Scott E. Rapfogel, a former associate
attorney with the Milling Law Offices, own 30,000 and 10,000 shares,
respectively, of the Company's Common Stock. Certain legal matters relating to
the sale of such securities will be passed upon for the Representative by Prifti
Law Offices, 220 Broadway, Suite 204, Lynnfield, MA 01940.
65
<PAGE> 66
EXPERTS
The consolidated financial statements of the Company and B&B as at
December 31, 1997 and 1996 and for the two fiscal years then ended which are
included in this Prospectus, have been audited by Horton & Company, L.L.C., 1680
Route 23, Suite 110, Wayne, NJ 07470, independent certified public accountants,
as set forth in their report thereon, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.
Horton & Company, L.L.C. replaced Reddish & White, CPA's, as the
Company's independent auditors effective May 26, 1998. The decision to replace
Reddish & White with Horton & Company L.L.C. was approved by the Company's board
of directors. Such change was necessitated by the NASDAQ requirement that the
Company's independent auditors be members of the AIPCA SEC Practice Section peer
review program. None of Reddish & White's reports on the financial statements of
the Company and B&B contained an adverse opinion or a disclaimer of opinion or
was qualified or modified as to uncertainty, audit scope, or accounting
principles, and there were no disagreements between the Company and Reddish &
White on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
ADDITIONAL INFORMATION
Following the completion of this offering, the Company will be subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, in accordance therewith, will file reports
and other information with the Securities and Exchange Commission (the "SEC").
Such reports, proxy statements and other information filed by the Company will
be available for inspection and copying at the Public Reference Section
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following Regional Offices: Seven World Trade Center, 13th
Floor, New York, NY 10048 and Northwestern Atrium Center, 500 West Madison
Street Suite 1400, Chicago, IL 60661. Copies of such materials can be obtained
from the Public Reference Section at prescribed rates. The SEC also maintains a
web site that will contain all information electronically filed by the Company
with the SEC. The address of such site is http://www.sec.gov.
A Registration Statement relating to the securities offered hereby has
been filed by the Company with the SEC. This Prospectus does not contain all of
the information set forth in such Registration Statement. For further
information with respect to the Company and the securities offered hereby,
reference is made to such Registration Statement, including the exhibits
thereto. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and, in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. Anyone may inspect the Registration Statement
without charge at the office of the SEC and may obtain copies of all or any part
of it from the SEC in Washington, DC, upon paying the fees prescribed by the
SEC.
66
<PAGE> 67
WESTSTAR ENVIRONMENTAL, INC.
AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report F-2
Consolidated balance sheets as of December 31, 1997 and 1996 and March 31, 1998 F-3
Consolidated statements of operations for the years ended December 31, 1997
and 1996 and for the three-month periods ended March 31, 1998 and 1997 F-4
Consolidated statements of stockholders' equity for the years ended December 31, 1997
and 1996 and for the three-month periods ended March 31, 1998 and 1997 F-5
Consolidated statements of cash flows for the years ended December 31, 1997 and 1996
and for the three-month periods ended March 31, 1998 and 1997 F-6
Notes to consolidated financial statements F-7
</TABLE>
F-1
<PAGE> 68
[HORTON & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Stockholders
Weststar Environmental, Inc. and subsidiary
Jacksonville, Florida
We have audited the accompanying consolidated balance sheets of Weststar
Environmental, Inc. and subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows 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 consolidated 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 audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Weststar
Environmental, Inc. and subsidiary as of December 31, 1997 and 1996, and the
consolidated results of their operations and cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Horton & Company, L.L.C.
-----------------------------
HORTON & COMPANY, L.L.C.
Wayne, New Jersey
June 19, 1998
F-2
<PAGE> 69
WESTSTAR ENVIRONMENTAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
------------------------- ----------
1997 1996 1998
---------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 6,233 $ -- $ 88,149
Accounts receivable 407,736 27,064 81,427
Prepaid expenses 26,793 45,563 86,563
Due from affiliates 11,000 500 --
---------- --------- ----------
Total current assets 451,762 73,127 256,139
Property and equipment, net 1,740,828 1,804,467 1,730,324
Other assets 2,510 5,410 29,816
---------- ---------- ----------
$2,195,100 $1,883,004 $2,016,279
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 125,063 $ 9,000 $ 75,000
Current portion of
long-term debt 121,418 287,143 122,318
Current portion of capital
lease obligations 68,432 24,586 69,212
Accounts payable 409,960 353,507 343,578
Accrued expenses 44,405 98,324 38,830
Dividends payable 94,000 42,417 94,000
Stockholder loans 319,634 220,911 268,634
---------- ---------- ----------
Total current liabilities 1,182,912 1,035,888 1,011,572
Long-term debt, net of
current portion 466,515 635,284 376,200
Capital lease obligations,
net of current portion 174,260 62,277 128,096
---------- ---------- ----------
1,823,687 1,733,449 1,515,868
---------- ---------- ----------
Stockholders' equity:
Common stock, $.001 par value,
10,000,000 shares authorized;
1,500,000 shares outstanding
in 1997 and 1996, 1,690,000
shares outstanding in 1998 1,500 1,500 1,690
Additional paid-in capital 92,592 92,592 139,902
Retained earnings 277,321 55,463 358,819
---------- ---------- ----------
371,413 149,555 500,411
---------- ---------- ----------
$2,195,100 $1,883,004 $2,016,279
========== ========== ==========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 70
WESTSTAR ENVIRONMENTAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------- ----------------------
1997 1996 1998 1997
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $2,245,008 $1,682,566 $ 527,347 $ 614,259
---------- ---------- ---------- ----------
Direct costs:
Labor and benefits 427,670 711,552 127,204 128,563
Vehicle operating costs 270,747 224,413 54,326 66,469
Depreciation 208,576 214,907 53,642 52,129
Insurance 98,222 176,636 22,189 27,162
Other 85,981 194,968 39,460 51,709
---------- ---------- ---------- ----------
1,091,196 1,522,476 296,821 326,032
---------- ---------- ---------- ----------
Gross profit 1,153,812 160,090 230,526 288,227
Selling and administrative
expenses 522,203 518,176 122,540 111,982
---------- ---------- ---------- ----------
Income (loss) from operations 631,609 (358,086) 107,986 176,245
---------- ---------- ---------- ----------
Other (income) expenses:
Loss on disposal of assets 35,828 133,554 - -
Gain on sale of routes - (379,000) - -
Interest expense 173,923 103,421 26,488 33,545
---------- ---------- ---------- ----------
209,751 (142,025) 26,488 33,545
---------- ---------- ---------- ----------
Net income (loss) $ 421,858 $ (216,061) $ 81,498 $ 142,700
========== ========== ========== ==========
</TABLE>
PRO FORMA INCOME TAX, NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE
INFORMATION (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Historical income (loss)
before income taxes $ 421,858 $ (216,061) $ 81,498 $ 142,700
Pro forma income tax
(expense) benefit (148,000) 76,000 (28,000) (50,000)
---------- ---------- ---------- ----------
Pro forma net income (loss) $ 273,858 $ (140,061) $ 53,498 $ 92,700
========== ========== ========== ==========
Pro forma earnings (loss)
per share $ 0.18 $ (0.09) $ 0.04 $ 0.06
========== ========== ========== ==========
Historical weighted average
shares outstanding 1,500,000 1,500,000 1,525,333 1,500,000
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE> 71
WESTSTAR ENVIRONMENTAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the year ended December 31, 1997 and 1996
(Information for the three-month periods ended
March 31, 1998 and 1997 is unaudited)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
------ ------ ---------- --------
<S> <C> <C> <C> <C>
Balances at January 1, 1996 1,500,000 $1,500 $ 92,592 $ 341,524
Dividends -- -- -- (70,000)
Net loss -- -- -- (216,061)
--------- ------ -------- ---------
Balances at December 31, 1996 1,500,000 1,500 92,592 55,463
Dividends -- -- -- (200,000)
Net income -- -- -- 421,858
--------- ------ -------- ---------
Balances at December 31, 1997 1,500,000 $1,500 $ 92,592 $ 277,321
========= ====== ======== =========
Balances at January 31, 1997 1,500,000 $1,500 $ 92,592 $ 55,463
Net income (unaudited) -- -- -- 142,700
--------- ------ -------- ---------
Balances at March 31, 1997 (unaudited) 1,500,000 $1,500 $ 92,592 $ 198,163
========= ====== ======== =========
Balances at January 1, 1998 1,500,000 $1,500 $ 92,592 $ 277,321
Stock issued in satisfaction of fees (unaudited) 190,000 190 47,310 --
Net income (unaudited) -- -- -- 81,498
--------- ------ -------- ---------
Balances at March 31, 1998 (unaudited) 1,690,000 $1,690 $139,902 $ 358,819
========= ====== ======== =========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE> 72
WESTSTAR ENVIRONMENTAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
YEAR-ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- -------------------------
1997 1996 1998 1997
--------- --------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $421,858 $(216,061) $ 81,498 $142,700
-------- ---------- --------- --------
Adjustments to reconcile net income (loss) to net cash
provided by (used in ) operating activities:
Depreciation 220,517 226,907 56,642 55,129
Loss on disposal of assets 35,828 133,554 -- --
Gain on sale of routes -- (379,000) -- --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (380,672) 151,552 326,309 (336,568)
(Increase) decrease in prepaid expenses 18,770 52,530 (36,853) 13,606
(Increase) decrease in deposits 2,900 -- -- --
(Increase) decrease in other assets -- -- (2,723) (1,424)
Increase (decrease) in accounts payable 45,110 132,603 (66,382) 588
Increase (decrease) in accrued expenses (53,919) (133,403) (5,575) (6,776)
--------- ---------- -------- ---------
Total adjustments (111,466) 184,743 271,418 (275,445)
--------- ---------- -------- ---------
Net cash provided by (used in) operating activities 310,392 (31,318) 352,916 (132,745)
--------- ---------- -------- ---------
Cash flows from investing activities:
Proceeds from sale of property and equipment -- 121,000 -- --
Capital expenditures (219,189) (608,863) (46,138) (1,480)
Proceeds from sale of routes -- 379,000 -- --
--------- ---------- -------- ---------
Net cash used in investing activities (219,189) (108,863) (46,138) (1,480)
--------- ---------- -------- ---------
Cash flows from financing activities:
Repayment of notes payable -- -- (50,063) 150,000
Proceeds from capital lease obligations 240,000 -- -- --
Proceeds from notes payable 235,063 202,927 -- 50,500
Loan proceeds from stockholders 133,545 160,911 (40,000) --
Loan payments to stockholders and affiliates (87,739) (500) -- (26,016)
Principal payments on long-term debt (453,494) (173,587) (89,415) (772)
Principal payments on capital lease obligations (46,345) (21,987) (45,384) --
Dividends paid (106,000) (27,583) -- --
--------- ----------- -------- ---------
Net cash provided by (used in) financing activities (84,970) 140,181 (224,862) 173,712
--------- ----------- -------- ---------
Net increase in cash 6,233 -- 81,916 39,487
Cash balance at beginning of period -- -- 6,233 --
--------- ----------- -------- ---------
Cash balance at end of period $ 6,233 $ -- $ 88,149 $ 39,487
--------- ----------- -------- ---------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 73
WESTSTAR ENVIRONMENTAL, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(INFORMATION FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1998
AND 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Weststar Environmental,
Inc. and subsidiary (the "Company") is presented to assist in understanding
the consolidated financial statements. The consolidated financial
statements and notes are representations of the management of Weststar
Environmental, Inc. and subsidiary which are responsible for their
integrity and objectivity. These accounting policies conform to
generally accepted accounting principals and have been consistently
applied in the preparation of the consolidated financial statements.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Weststar
Environmental, Inc. ("Weststar") and its wholly-owned subsidiary, B&B
Septic and Environmental Services, Inc. ("B&B"). Significant intercompany
accounts and transactions have been eliminated. On February 16, 1998,
Weststar acquired 100% of the issued and outstanding capital stock of B&B,
thereby making B&B a wholly-owned subsidiary of Weststar. Prior to that
date, and throughout the years ended December 31, 1997 and 1996, Weststar
and B&B were under common control as the stockholders of Weststar
Environmental, Inc. also owned 100% of the stock of B&B Septic and
Environmental Services, Inc. The capital structure of all periods presented
has been retroactively restated to give effect to the business combination
and for other changes in the capital structure which took place subsequent
to December 31, 1997, as described in Note 8.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
F-7
<PAGE> 74
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
HISTORY AND BUSINESS ACTIVITY
Weststar Environmental, Inc. is a non-hazardous, liquid waste
management company that provides waste management services to
governmental, commercial and residential customers. These services
include the removal, transport, treatment and disposal of bio-solids,
food service grease and septic waste. B&B Septic and Environmental
Services, Inc. engages in the installation, replacement and repair of
commercial and residential waste disposal and waste water treatment
systems. Plans to conduct a third area of business devoted to the
recycling of non-hazardous waste materials are also being developed.
At the present time, the Company's services are principally provided
in the southeastern United States. The Company maintains its offices
in Jacksonville, Florida. The Company owns real estate in Starke,
Florida, which is principally used for repair work on the Company's
vehicles and equipment and as a staging area for the Company's trucks.
The Company also owns real estate in Deland, Florida, which is used
for waste treatment and recycling operations.
Weststar Environmental, Inc. was incorporated under the laws of the
State of Florida on June 26, 1990. B&B Septic and Environmental
Services, Inc. was incorporated under the laws of the State of Florida
on July 5, 1989.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of accounts
receivable. The Company's policies do not require collateral to
support accounts receivable. However, because of the diversity and
credit worthiness of individual accounts which comprise the total
balance, management does not believe that the Company is subject to
any significant credit risk.
At December 31, 1997, the Company had accounts receivable from a
single municipal customer in the amount of $361,312 representing 88.6%
of the consolidated accounts receivable balance at that date. At
December 31, 1996, no single customer balance represented a
significant amount of the consolidated accounts receivable.
A single municipal customer accounted for approximately 70.7% of the
Company's revenues during the year ended December 31, 1997, and 41.6%
of the Company's revenues during the year ended December 31, 1996.
During the year ended December 31, 1996, another customer accounted
for approximately 15.6% of the Company's revenues. A majority of these
customer routes were sold during 1996 (Note 6).
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's receivables and payables are current and on normal terms
and, accordingly, are believed by management to approximate fair
value. Management also believes that notes payable, long-term debt and
capital lease obligations approximate fair value when current interest
rates for similar debt securities are applied.
F-8
<PAGE> 75
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is provided on the
straight-line method over the following estimated useful lives:
Years
-----
Building and improvements 15-40
Machinery and equipment 5-10
Vehicles 5
Depreciation expense was $220,517 and $226,907 for the years ended
December 31, 1997 and 1996, respectively.
Maintenance, repairs and renewals which neither materially add to the value
of the equipment nor appreciably prolong its life are charged to expense as
incurred. Gains or losses on dispositions of equipment are included in
income.
PRO FORMA INFORMATION (UNAUDITED)
The statements of operations present pro forma information (unaudited) of
income tax expense which would have been recorded had Weststar been a
taxable corporation based on the tax laws in effect during the period and
the resultant pro forma effect on net income (loss) and earnings (loss) per
share.
SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION
Interest paid for the years ended December 31, 1997 and 1996 was $173,923
and $103,421, respectively. Interest paid for the three-month periods ended
March 31, 1998 and 1997 was $26,488 and $33,545, respectively.
Noncash investing and financing activities consisted of the following:
During the year ended December 31, 1997, dividends payable in the amount of
$42,417 were converted to a stockholder loan. During the three-month period
ended March 31, 1998, the Company issued 190,000 shares of its common stock
to various professionals and consultants in satisfaction of $47,500 in
fees.
ACCOUNTING PRONOUNCEMENTS FOR FUTURE ADOPTION
The FASB recently issued Statement No. 130, "Comprehensive Income," which
is effective for the Company's financial statements for the year ending
December 31, 1998. In addition to net income, comprehensive income is
comprised of "other comprehensive income" which includes all charges and
credits to equity that are not the result of transactions with owners of
the Company's common stock. This Statement is not anticipated to materially
affect the Company's financial statements.
F-8
<PAGE> 76
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING PRONOUNCEMENTS FOR FUTURE ADOPTION (CONTINUED)
The FASB recently issued Statement No. 131, "Disclosures About Segments of
an Enterprise and Related Information," which is effective for the
Company's financial statements for the year ending December 31, 1998. This
statement requires reporting of summarized financial results for operating
segments as well as established standards for related disclosures about
products and services, geographic areas and major customers. Primary
disclosure requirements include total segment revenues, total segment
profit or loss and total segment assets. The Company has not yet completed
its evaluation of the impact of this statement on the Company's financial
statements.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 financial statements
to conform to the 1997 presentation.
2. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1997 1996 1998
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Building and improvements $ 544,825 $ 544,825 $ 557,825
Machinery and equipment 361,957 408,829 395,095
Vehicles 1,522,173 1,329,419 1,522,173
---------- ---------- ----------
2,428,955 2,283,073 2,475,093
Less: accumulated depreciation (688,127) (478,606) (744,769)
---------- ---------- ----------
$1,740,828 $1,804,467 $1,730,324
========== ========== ==========
</TABLE>
Property and equipment includes equipment under capital leases of $237,470
at December 31, 1997 and $58,910 at December 31, 1996. Accumulated
depreciation on equipment under capital leases was $55,399 and $11,450 at
December 31, 1997 and 1996, respectively.
3. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1997 1996 1998
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Unsecured demand note payable
to a corporation owned by one
of the Company's stockholders.
Interest is at 18%. $125,063 $ -- $75,000
Unsecured demand note payable
to an individual dated
February 1, 1995. Payments of
interest only at a rate of 10%
are due monthly. -- 9,000 --
-------- ------ -------
$125,063 $9,000 $75,000
========= ====== =======
</TABLE>
F-10
<PAGE> 77
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1997 1996 1998
<S> <C> <C> <C>
Mortgage payable to a bank in 59 monthly installments of
$3,390, including interest at 10%, commencing October 1995.
The mortgage is secured by the Company's real property in
Deland, Florida. $294,662 $292,375 $260,255
Unsecured note payable to an individual in 150 monthly
installments of $1,000, including interest at 7%, commencing
February 1994. 81,130 84,886 77,550
Note payable to a bank in 71 monthly installments of $1,448,
including interest at 10.75%, commencing November 1995. 58,827 61,021 53,063
Note payable to a bank in 47 monthly installments of $1,935,
including interest at 10.75%, commencing April 1996. 54,516 63,227 48,136
Note payable to a bank in 51 monthly installments of $602,
including interest at 12%, commencing December 1995. 16,633 20,417 14,325
Note payable to a bank in 60 monthly installments of $735,
including interest at 8.75%, commencing September 1994. 16,396 26,891 13,546
Note payable to a bank in 51 monthly installments of $603,
including interest at 12%, commencing December 1995. 15,702 20,069 11,353
Note payable to a bank in 24 monthly installments of $2,367,
including interest at 12.43%, commencing March 1996. 11,989 34,995 3,268
Note payable to a bank in 24 monthly installments of $2,530,
including interest at 9.35%, commencing August 1996. 17,221 44,594 9,031
Note payable to a bank in 36 monthly installments of $2,881,
including interest at 12%, commencing February 1995. 14,416 37,850 3,698
Note payable to a bank in 50 monthly installments of $4,892,
including interest at 9.9%, commencing March 1994. 1,102 94,428 --
Note payable to a bank in 36 monthly installments of $392,
including interest at 10%, commencing October 1995. 5,339 7,491 4,293
Mortgage payable to a bank in 284 monthly installments of $891,
including interest at 9%, commencing January 1993. The
mortgage is secured by the Company's real property in Starke,
Florida. -- 98,346 --
Notes payable to various banks, financial institutions and
individuals in monthly installments totalling $2,622,
including interest ranging between 9% and 19.5%. All such
notes matured or were repaid during 1997. -- 35,837 --
-------- ------- --------
Total 587,933 922,427 498,518
Current portion of long-term debt 121,418 287,143 122,318
-------- -------- --------
Long-term debt, net of current portion $466,515 $635,284 $376,200
======== ======== ========
</TABLE>
<PAGE> 78
4. LONG-TERM DEBT (CONTINUED)
Following are maturities of long-term debt as of December 31, 1997:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1998 $121,418
1999 71,593
2000 59,321
2001 39,895
2002 29,990
Thereafter 265,716
--------
$587,933
========
</TABLE>
Except as noted above, substantially all long-term debt is secured by
machinery, equipment and vehicles.
5. CAPITAL LEASE OBLIGATIONS
The Company leases machinery and equipment under capital leases expiring
in various years through 2002. The assets and liabilities under capital lease
obligations are recorded at the lower of the present values of the minimum
lease payments or their fair values of the assets. The assets are included in
property and equipment and are depreciated over their estimated useful lives.
As of December 31, 1997, minimum future lease payments under capital lease
obligations are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1998 $ 79,702
1999 79,702
2000 63,290
2001 36,270
2002 3,023
--------
Total minimum lease payments $261,987
Less: amounts representing interest (19,295)
---------
Net minimum lease payments 242,692
Less: current portion (68,432)
---------
$174,260
========
</TABLE>
F-12
<PAGE> 79
6. COMMITMENTS AND CONTINGENCIES
LEASE AGREEMENTS
The Company leases office space under an operating lease which commenced
September 1997 and runs through August 2000. Rent expense for office space
totalled $2,354 and $9,782 for the years ended December 31, 1997 and 1996,
respectively.
In addition, the Company leases vehicles and equipment under operating leases
which run through the year 2000.
Minimum annual rental payments under these operating leases are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Office Equipment
- ------------ ------ ---------
<S> <C> <C>
1998 $20,203 $20,465
1999 22,119 8,200
2000 15,177 8,200
2001 -- 8,200
2002 -- 4,784
------- -------
$57,499 $49,849
======= =======
</TABLE>
RELATED PARTY TRANSACTIONS
During 1997, revenues included $99,950 of consulting and engineering fees paid
by a company which is owned by the stockholders of Weststar.
During 1997, the Company rented equipment from a stockholder for $42,000.
SALE OF ACCOUNTS
During 1996, Weststar sold a portion of its grease trap business consisting of
specific customer routes in North Carolina, Virginia, Tennessee, West Virginia,
South Carolina, Alabama, Maryland and the District of Columbia. The sale price
totalled $500,000 consisting of $379,000 for the customer routes and $121,000
for a tanker truck used to service the routes. As part of the agreement,
Weststar entered into a 10-year covenant not-to-compete with the purchaser in
the specified geographic areas. All revenue from the sale was recognized in
1996.
PUBLIC OFFERING
Weststar Environmental, Inc. is in the process of preparing a registration
statement under the Securities Act of 1933. Under the terms of the proposed
registration, Weststar would offer 1,000,000 shares of its $.001 par value
common stock for sale at a purchase price of $5 per share including a detachable
warrant. It is anticipated that the shares will be offered by the underwriters
on a firm commitment basis. If successful, the offering would provide Weststar
with $4,500,000 in proceeds, net of underwriting discounts and commissions.
Upon the successful completion of the planned offering, Weststar would revoke
its election to be treated as an S Corporation (Note 7).
F-13
<PAGE> 80
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
GOVERNMENT REGULATION
Substantially all of the Company's operations are subject to federal, state
and local regulations relating to the disposition of
environmentally-sensitive waste. Compliance with these provisions has not
had, nor does the Company expect such compliance to have, any material
effect upon the capital expenditures, net income, financial condition or
competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes
comply with applicable federal, state and local requirements.
7. INCOME TAXES
B&B Septic and Environmental Services, Inc. is a corporation subject to
Federal and State income taxes. As of December 31, 1997, B&B has net
operating losses of $95,051 available for carryforward until their
expiration in the year 2012.
During the years ended December 31, 1997 and 1996, Weststar elected to be
treated as an S Corporation under the provisions of the Internal Revenue
Code and similar provisions of state tax laws. As an S Corporation, the net
income or loss of Weststar is reportable by the stockholders who are
responsible for any income taxes thereon. Therefore, no provision for
income taxes on the income of Weststar has been included in these financial
statements.
If it successfully completes the intended public offering of its common
stock during 1998, Weststar will voluntarily revoke its election to be
treated as an S Corporation, thereby becoming a taxable entity. As a
result, a deferred income tax liability would be recorded and a deferred
income tax expense recognized for the year in which the election is
terminated based on accumulated temporary differences existing at that
date.
The deferred income tax effect of revoking the S Corporation election,
based on accumulated temporary differences existing as of December 31, 1997
are as follows:
<TABLE>
<CAPTION>
CURRENT NONCURRENT
--------- ----------
<S> <C> <C>
Deferred tax assets $ 166,000 $ --
Deferred tax liabilities (166,000) (263,000)
--------- ---------
Net deferred tax liabilities $ -- $(263,000)
========= =========
</TABLE>
F-14
<PAGE> 81
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
GOVERNMENT REGULATION
Substantially all of the Company's operations are subject to federal,
state and local regulations relating to the disposition of environmentally-
sensitive waste. Compliance with these provisions has not had, nor does
the Company expect such compliance to have, any material effect upon the
capital expenditures, net income, financial condition or competitive
position of the Company. Management believes that its current practices
and procedures for the control and disposition of such wastes comply with
applicable federal, state and local requirements.
7. INCOME TAXES
B&B Septic and Environmental Services, Inc. is a corporation subject to
Federal and State income taxes. As of December 31, 1997, B&B has net
operating losses of $95,051 available for carryforward until their
expiration in the year 2012.
During the years ended December 31, 1997 and 1996, Weststar elected to be
treated as an S Corporation under the provisions of the Internal Revenue
Code and similar provisions of state tax laws. As an S Corporation, the net
income or loss of Weststar is reportable by the stockholders who are
responsible for any income taxes thereon. Therefore, no provision for
income taxes on the income of Weststar has been included in these financial
statements.
If it successfully completes the intended public offering of its common
stock during 1998, Weststar will voluntarily revoke its election to be
treated as an S Corporation, thereby becoming a taxable entity. As a
result, a deferred income tax liability would be recorded and a deferred
income tax expense recognized for the year in which the election is
terminated based on accumulated temporary differences existing at that
date.
The deferred income tax effect of revoking the S Corporation election,
based on accumulated temporary differences existing as of December 31, 1997
are as follows:
<TABLE>
<CAPTION>
CURRENT NONCURRENT
--------- ----------
<S> <C> <C>
Deferred tax assets $ 166,000 $ -
Deferred tax liabilities (166,000) (263,000)
--------- ---------
Net deferred tax liabilities $ - $(263,000)
========= =========
</TABLE>
F-14
<PAGE> 82
7. INCOME TAXES (CONTINUED)
Deferred income taxes reflect temporary differences in reporting assets
and liabilities for financial accounting and income tax purposes. These
temporary differences arise from the use of the accrual method of
accounting for financial statements and the cash method for taxes, from
different depreciation methods used for financial statement and income
tax purposes and from tax loss carryforwards.
8. STOCKHOLDERS' EQUITY
RECAPITALIZATION
On February 16, 1998, Weststar authorized a recapitalization of its equity
structure to provide for 10,000,000 authorized shares at a par value of
$.001. Simultaneous therewith, Weststar authorized a 15-for-1 stock
split to existing shareholders, resulting in a total of 1,500,000 shares
issued and outstanding. The capital structure of Weststar has been
retroactively restated for all periods presented to reflect the above
changes.
STOCK ISSUANCE
During February 1998, Weststar issued 190,000 shares of its common stock
to various professionals and consultants in satisfaction of $47,500 in
fees.
9. STOCK OPTION PLAN
The Weststar Environmental, Inc. 1997 Nonstatutory Stock Option Plan
(the "Plan"), which was adopted by the Company's Board of Directors
(the "Board") in April 1997 covers up to XXXX shares of the Company's
common stock which are issuable upon the exercise of a like number of
options. The purpose of the plan is to enable the Company to encourage
eligible plan participants to contribute to the success of the Company
by granting such individuals stock options. Options granted under the
Plan are not intended to qualify as "incentive stock options" as
defined in Section 422A of the Internal Revenue Code of 1986, as
amended. The plan is presently administered by the Board. The eligible
participants under the plan are determined at the discretion of the
Board. Subject to express provisions of the plan, the Board has the
complete discretion and power to determine from among eligible persons
those to whom options may be granted, the time or times at which
options may be granted, the option price, the number of shares of
Common Stock to be subject to each option and the duration of the
options. Option may be granted under the Plan from time to time until
April 27, 2007 or such earlier date as may be determined by the Board.
On April 28, 1997 the Company issued an aggregate of 487,500 Plan options
including 75,000 options which were issued to the named executive.
460,000 of such options are exercisable at $5 per share and the other
27,500 options are exercisable at $.001 per share. 207,500 of the Plan
options are exercisable at any time during the four year period
commencing April 28, 1998. The other 280,000 Plan options are exercisable
at any time during the four year period commencing January 1, 1999. No
determinations have been made regarding the persons to whom options will
be granted in the future or the option exercise prices.
F-15
<PAGE> 83
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
---------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary........................ 6
Summary Financial Information............. 9
The Company............................... 10
Risk Factors.............................. 10
Use of Proceeds........................... 19
Market for Company Securities and
Related Securityholder Matters.......... 23
Dilution.................................. 24
Capitalization............................ 25
Dividend Policy........................... 26
Management's Discussion and
Analysis of Financial Condition
and Results of Operations............... 26
Business.................................. 31
Management................................ 47
Certain Transactions...................... 53
Principal Stockholders.................... 56
Description of Securities................. 59
Underwriting.............................. 62
Legal Matters............................. 65
Experts................................... 66
Additional Information.................... 66
Financial Statements...................... 67
---------------------------
UNTIL __________, 1998 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
WESTSTAR ENVIRONMENTAL, INC.
1,000,000 SHARES OF
COMMON STOCK, $.001 PAR VALUE
1,000,000 REDEEMABLE COMMON
STOCK PURCHASE WARRANTS
P R O S P E C T U S
WESTPORT RESOURCES
INVESTMENT SERVICES, INC.
315 POST ROAD WEST
WESTPORT, CONNECTICUT 06880
800-935-0222
, 1998
82
<PAGE> 84
WESTSTAR ENVIRONMENTAL, INC.
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each of the Underwriters has agreed to indemnify the Company, its
officers and directors, and each person who controls it within the meaning of
Section 15 of the Securities Exchange Act of 1933 with respect to any statement
in or omission from the Registration Statement or the Prospectus or any
amendment or supplement thereto if such statement or omission was made in
reliance upon information furnished in writing to the Company by such
Underwriter specifically for or in connection with the preparation of the
Registration Statement, the Prospectus, or any such amendment or supplement
thereto.
The Florida General Corporation Act (the "Florida GCA") empowers a
corporation to indemnify its directors and officers and to purchase D&O
Insurance with respect to liability arising out of their capacity or status as
directors and officers provided that such a provision does not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve international misconduct; (iii) for a knowing
violation of law arising under the Florida GCA; or (iv) for any transaction from
which the director derived an improper personal benefit. Following the
completion of this offering, the Company intends to purchase D&O Insurance, if
such insurance is available at rates which are satisfactory to the Company.
The Florida GCA provides further that the indemnification permitted
thereunder shall not be deemed exclusive of any rights to which the directors
and officers may be entitled under the corporation's by-laws, any agreement,
vote of shareholders or otherwise.
Article 7 of the Company's Articles of Incorporation eliminates the
personal liability of officers and directors to the fullest extent permitted by
law.
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against such persons
in their official capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION
IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
83
<PAGE> 85
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of estimated expenses in connection with
the issuance and distribution of the securities being registered, other than
selling discounts and commissions:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.......................... $ 4,191.47
NASD Filing Fee.............................................................. 1,910.46
Blue Sky Legal Fees and Expenses............................................. 25,000.00
Printing and Engraving Expenses.............................................. 40,000.00
Transfer Agent's Fees and Expenses........................................... 4,000.00
Accounting Fees and Expenses................................................. 53,000.00
Legal Fees and Expenses...................................................... 95,000.00
Miscellaneous Expenses....................................................... 10,000.00
---------
Total Estimated Expenses................................................ $ 233,101.93
==========
</TABLE>
- ------------------
All such expenses will be borne by the Company.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The Company did not issue any shares of Common Stock during the years
ended December 31, 1997; December 31, 1996 and December 31, 1995. Pursuant to
the amendment of the Company's articles of incorporation on February 16, 1998,
increasing the Company's authorized capital from 100,000 shares of Common Stock,
$1 par value, to 10,000,000 shares of Common Stock, $.001 par value, the Company
authorized and effected a stock split. Pursuant to such stock split, the 100,000
outstanding shares of Common Stock, $1 par value, were converted at the rate of
15 for 1 into 1,500,000 shares of Common Stock, $.001 par value, all of which
remain currently issued and outstanding. Subsequent to the certificate amendment
and stock split, the following unregistered securities were issued by the
Company. No underwriting discounts or commissions were paid in connection with
the issuance of such securities.
As of February 1998, pursuant to the exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended, the Company
issued an aggregate of 190,000 shares of Common Stock for services rendered or
to be rendered, to Thomas C. Souran (100,000 shares), Environmental and
Financial Consulting Inc. (50,000 shares) and Milling Law Offices (40,000
shares). All of the foregoing purchasers are sophisticated investors, are
familiar with the business activities of the Company and were given full and
complete access to any corporate information requested by them and did in fact
review extensive corporation information.
The shares issued to Thomas C. Souran were issued in connection with a
January 1, 1998 Consultant Agreement between the Company and Mr. Souran. The
shares issued to Milling Law Offices were issued in connection with legal
services. The shares issued to Environmental and Financial Consulting Inc. were
issued in connection with financial consulting services rendered by
Environmental and Financial Consulting Inc. to the Company in 1997 with regard
to arranging several commercial loans for the Company. As of March 9, 1998,
William Perry, a principal shareholder of the Company, has owned Environmental
and Financial Consulting, Inc.
84
<PAGE> 86
All of such purchasers acknowledged that they were acquiring such
securities for investment. Restrictive legends were placed on all stock
certificates issued in said transactions and stop transfers were placed against
all such certificates. Exemption from registration under the Securities Act of
1933, as amended, was claimed pursuant to Section 4(2) of said Act.
During the current fiscal year and the fiscal years ended December 31,
1997, December 31, 1996, and December 31, 1995, the Company issued an aggregate
of 487,500 non-statutory stock options pursuant to the Company's 1997
Nonstatutory Stock Option Plan as set forth in the following table:
<TABLE>
<CAPTION>
Date of Number of Exercise Exercise
Optionee Issuance Options Price Period
- -------- -------- ------- ----- ------
<S> <C> <C> <C> <C>
Elton Stubbs April 28, 1997 140,000 $5 Jan. 1, 1999 - Dec. 31, 2002
John Stubbs April 28, 1997 140,000 $5 Jan. 1, 1999 - Dec. 31, 2002
Michael E. Ricks April 28, 1997 75,000 $5 Apr. 28, 1998 - Apr. 27, 2002
William W. Perry April 28, 1997 75,000 $5 Apr. 28, 1998 - Apr. 27, 2002
William B. Gray April 28, 1997 20,000 $5 Apr. 28, 1998 - Apr. 27, 2002
Michael George April 28, 1997 5,000 $5 Apr. 28, 1998 - Apr. 27, 2002
Dr. John Poser April 28, 1997 5,000 $5 Apr. 28, 1998 - Apr. 27, 2002
Wendy Stubbs April 28, 1997 10,000 $.001 Apr. 28, 1998 - Apr. 27, 2002
David Capps April 28, 1997 10,000 $.001 Apr. 28, 1998 - Apr. 27, 2002
George King April 28, 1997 1,500 $.001 Apr. 28, 1998 - Apr. 27, 2002
Joseph Baldree April 28, 1997 1,500 $.001 Apr. 28, 1998 - Apr. 27, 2002
Jeff Kirkendahl April 28, 1997 1,500 $.001 Apr. 28, 1998 - Apr. 27, 2002
Jim Ricks April 28, 1997 1,000 $.001 Apr. 28, 1998 - Apr. 27, 2002
Kristan Lowe April 28, 1997 1,000 $.001 Apr. 28, 1998 - Apr. 27, 2002
Genie Dyal April 28, 1997 1,000 $.001 Apr. 28, 1998 - Apr. 27, 2002
</TABLE>
Exemption from registration under the Securities Act of 1933, as
amended, was claimed pursuant to Section 4(2) of the Act. All of the foregoing
persons are familiar with the business prospects and financial status of the
Company and were given full and complete access to any corporate information
requested by them.
ITEM 27. EXHIBITS
EXHIBIT NO. ITEM
1.1 Revised Form of Agreement Among Underwriters
1.2 Revised Form of Underwriting Agreement
1.3 Revised Form of Selected Dealer Agreement
1.4 Revised Form of Representative's Warrant
1.5* Form of Financial Consulting Agreement
85
<PAGE> 87
2.* Agreement and Plan of Reorganization dated as of April 29,
1997 by and among the Company, Northstar Holding Corp.,
Weststar Acquisition Corp., B&B Acquisition Corp., B&B Septic
and Environmental Services, Inc. and Michael E. Ricks
3.1* Articles of Incorporation file June 26, 1990 3.2* Amendment to
Articles of Incorporation filed March 12, 1993 3.3* Amendment
to Articles of Incorporation filed February 16, 1998 3.4*
By-laws
4.1 Specimen Common Stock Certificate
4.2 Specimen Redeemable Common Stock Purchase Warrant Certificate
4.3 Form of Warrant Agreement between the Company and Warrant
Agent
5. Opinion and Consent of Counsel
10.1* Employment Agreement dated April 28, 1997 between the Company
and Michael E. Ricks
10.2* Promissory Note dated October 7, 1998 issued by the Company to
G&W Framing Contractors, Inc.
10.3* Staff Leasing Agreement, dated April 10, 1996 between the
Company and Staff Leasing II, L.P.
10.4* Asset Sale and Purchase Agreement dated as of October 4, 1996
between the Company and CBP Resources, Inc.
10.5* Agreement between the Company and Food Lion, Inc. dated August
20, 1996.
10.6 Contract dated October 31, 1997 between the Company and the
Jacksonville Electric Authority including Amendment dated June
5, 1998 and Bid Proposal Form
10.7 Consultant Agreement dated as of January 1, 1998*, including
Addendum dated as of June 15, 1998, between the Company and
Thomas C. Souran
10.8 1997 Nonstatutory Stock Option Plan
10.9 Noncompetition and Consulting Agreement dated as of October 4,
1996 between Michael E. Ricks and CBP Resources, Inc.
10.10** Mortgage note, dated October 29, 1990, made by B&B Plumbing
and Septic Services, Inc. to SouthTrust Bank of Central
Florida in the amount of $230,000.
10.11 Unsecured note, dated January 31, 1994, made by the Company to
Gloria Ferguson et al in the amount of $100,000.
10.12 Promissory note, dated October 11, 1995, made by the Company
to SouthTrust Bank of Central Florida in the amount of
$76,284.80.
10.13 Promissory note, dated March 1, 1996, made by Company to
SouthTrust Bank of Central Florida in the amount of $75,000.
10.14** Promissory note, dated October 25, 1995, made by B&B Septic
and Environmental Services, Inc. (a predecessor to the
company) to First Union National Bank of Florida in the amount
of $24,414.
86
<PAGE> 88
10.15 Promissory note, dated September 27, 1994, made by B&B
Plumbing and Septic Services, Inc. to First Community Bank in
the amount of $35,612.25.
10.16 Promissory note, dated October 25, 1995, made by the Company
to First Union National Bank in the amount of $24,414.
10.17** Promissory note, dated February 23, 1996, made by the Company
to OMB National Bank in the amount of $50,064.
10.18** Promissory note, dated July 5, 1996, made by the Company to
SunTrust Bank, North Central Florida in the amount of
$55,183.30.
10.19 Promissory note, dated December 29, 1994, made by the Company
to CNB National Bank in the amount of $86,465.75.
10.20** Promissory note, dated February 10, 1994, made by the Company
to First Union Bank of Florida in the amount of $200,000.
10.21 Promissory note, dated September 11, 1995, made by the Company
to SouthTrust Bank of Central Florida in the amount of
$12,117.70.
10.22 Mortgage note, dated June 3, 1998, made by the Company to
Primesouth Bank in the amount of $160,000.
16. Letter on Change in Certifying Accountant
21. Subsidiaries - The Company's sole subsidiary, which is
wholly-owned, is B&B Septic and Environmental Services, Inc.,
a Florida corporation
23. Consent of Horton & Company L.L.C., independent certified
public accountants
27. Financial Data Schedule (filed by Edgar)
99. Consent of Michael J. George, prospective director
- ------------------
* Previously Filed
** To be filed by Amendment
[/R]
ITEM 28. UNDERTAKINGS
(a) Rule 415 Offering
The undersigned Company will:
(1) File, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or
events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof),
which, individually or in the
87
<PAGE> 89
aggregate, represent a fundamental change in
the information set forth in the
Registration Statement; and
(iii) Include any additional or changed material
information on the plan of distribution not
previously disclosed in the Registration
Statement.
(2) For determining any liability under the Securities Act,
that each such post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering thereof.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the termination of the
offering.
(b) Indemnification
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the provisions referred to in Item 14 of this
Registration Statement, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling in connection with the securities being registered, the Company
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(c) Rule 430A
The undersigned Company will:
(1) For determining any liability under the Securities Act of
1933, treat the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company under Rule 424(b)(1) or (4) or 497(h) under
the Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act of
1933, treat each post-effective amendment that contains a form of prospectus as
a new registration statement for the securities offered therein, and that
offering of the securities at that time as the initial bona fide offering of
those securities.
88
<PAGE> 90
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form SB-2 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Jacksonville, State of Florida, on the 5th day of August, 1998.
WESTSTAR ENVIRONMENTAL INC.
By /s/ Michael E. Ricks
-----------------------------------
MICHAEL E. RICKS, President
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
Principal Executive Officer:
<S> <C> <C>
/s/ Michael E. Ricks President August 5, 1998
- -----------------------------------------------
MICHAEL E. RICKS
Principal Financial and Accounting Officer:
/s/ Keith M. Carter Treasurer August 5, 1998
- -----------------------------------------------
KEITH M. CARTER
A Majority of the Board of Directors:
/s/ Michael E. Ricks Director August 5, 1998
- -----------------------------------------------
MICHAEL E. RICKS
/s/ William B. Gray Director August 5, 1998
- -----------------------------------------------
WILLIAM B. GRAY
/s/ Keith Carter Director August 5, 1998
- -----------------------------------------------
KEITH M. CARTER
Director
- -----------------------------------------------
DR. JOHN S. POSER
/s/ Thomas F. Fey Director August 5, 1998
- -----------------------------------------------
THOMAS F. FEY
</TABLE>
89
<PAGE> 91
WESTSTAR ENVIRONMENTAL, INC.
------------------------------------
EXHIBIT INDEX
------------------------------------
1.1 Revised Form of Agreement Among Underwriters
1.2 Revised Form of Underwriting Agreement
1.3 Revised Form of Selected Dealer Agreement
1.4 Revised Form of Representative's Warrant
1.5* Form of Financial Consulting Agreement
2.* Agreement and Plan of Reorganization dated as of April 29, 1997 by and
among the Company, Northstar Holding Corp., Weststar Acquisition Corp.,
B&B Acquisition Corp., B&B Septic and Environmental Services, Inc. and
Michael E. Ricks
3.1* Articles of Incorporation file June 26, 1990
3.2* Amendment to Articles of Incorporation filed March 12, 1993
3.3* Amendment to Articles of Incorporation filed February 16, 1998
3.4* By-laws
4.1 Specimen Common Stock Certificate
4.2 Specimen Redeemable Common Stock Purchase Warrant Certificate
4.3 Form of Warrant Agreement between the Company and Warrant Agent
5. Opinion and Consent of Counsel
10.1* Employment Agreement dated April 28, 1997 between the Company and
Michael E. Ricks
10.2* Promissory Note dated October 7, 1998 issued by the Company to G&W
Framing Contractors, Inc.
10.3* Staff Leasing Agreement, dated April 10, 1996 between the Company and
Staff Leasing II, L.P.
10.4* Asset Sale and Purchase Agreement dated as of October 4, 1996 between
the Company and CBP Resources, Inc.
10.5* Agreement between the Company and Food Lion, Inc. dated August 20,
1996.
10.6 Contract dated October 31, 1997 between the Company and the
Jacksonville Electric Authority including Amendment dated June 5, 1998
and Bid Proposal Form
10.7 Consultant Agreement dated as of January 1, 1998*, including Addendum
dated as of June 15, 1998, between the Company and Thomas C. Souran
10.8 1997 Nonstatutory Stock Option Plan
10.9 Noncompetition and Consulting Agreement dated as of October 4, 1996
between Michael E. Ricks and CBP Resources, Inc.
<PAGE> 92
10.10** Mortgage note, dated October 29, 1990, made by B&B Plumbing and Septic
Services, Inc. to SouthTrust Bank of Central Florida in the amount of
$230,000.
10.11 Unsecured note, dated January 31, 1994, made by the Company to Gloria
Ferguson et al in the amount of $100,000.
10.12 Promissory note, dated October 11, 1995, made by the Company to
SouthTrust Bank of Central Florida in the amount of $76,284.80.
10.13 Promissory note, dated March 1, 1996, made by Company to SouthTrust
Bank of Central Florida in the amount of $75,000.
10.14** Promissory note, dated October 25, 1995, made by B&B Septic and
Environmental Services, Inc. (a predecessor to the company) to First
Union National Bank of Florida in the amount of $24,414.
10.15 Promissory note, dated September 27, 1994, made by B&B Plumbing and
Septic Services, Inc. to First Community Bank in the amount of
$35,612.25.
10.16 Promissory note, dated October 25, 1995, made by the Company to First
Union National Bank in the amount of $24,414.
10.17** Promissory note, dated February 23, 1996, made by the Company to OMB
National Bank in the amount of $50,064.
10.18** Promissory note, dated July 5, 1996, made by the Company to SunTrust
Bank, North Central Florida in the amount of $55,183.30.
10.19 Promissory note, dated December 29, 1994, made by the Company to CNB
National Bank in the amount of $86,465.75.
10.20** Promissory note, dated February 10, 1994, made by the Company to First
Union Bank of Florida in the amount of $200,000.
10.21 Promissory note, dated September 11, 1995, made by the Company to
SouthTrust Bank of Central Florida in the amount of $12,117.70.
10.22 Mortgage note, dated June 3, 1998, made by the Company to Primesouth
Bank in the amount of $160,000.
16. Letter on Change in Certifying Accountant
21. Subsidiaries - The Company's sole subsidiary, which is wholly-owned, is
B&B Septic and Environmental Services, Inc., a Florida corporation
23. Consent of Horton & Company L.L.C., independent certified public
accountants
27. Financial Data Schedule (filed by Edgar)
99. Consent of Michael J. George, prospective director
- ------------------
* Previously Filed
** To be filed by amendment
<PAGE> 1
EXHIBIT 1.1
WESTSTAR ENVIRONMENTAL INC.
1,000,000
SHARES OF COMMON STOCK
AND 1,000,000 REDEEMABLE WARRANTS
AGREEMENT AMONG UNDERWRITERS
, 19
Westport Resources Investment Services, Inc.
315 Post Road West
Westport, CT 06880
as Representative
GENTLEMEN:
We wish to confirm as follows the agreement among you, the undersigned
and the other members of the Underwriting Group named in Schedule I to the
Underwriting Agreement, as it is to be executed (all such parties being herein
called the "Underwriters"), with respect to the purchase by the Underwriters
severally from Weststar Environmental, Inc. ("Company") of 1,000,000 shares of
Common Stock and 1,000,000 Redeemable Warrants ("Securities") set forth in
Schedule I to the Underwriting Agreement. The number of Securities to be
purchased by each Underwriter from the Company shall be determined in accordance
with Section 2 of the Underwriting Agreement. It is understood that changes may
be made in those who are to be Underwriters and in the respective numbers of
Securities to be purchased by them, but that the Underwriting Agreement will not
be changed without our consent, except as provided herein, and in the
Underwriting Agreement. The obligations of the Underwriters to purchase the
number of Securities set opposite their respective names in Schedule I to the
Underwriting Agreement, are herein called their "underwriting obligations." The
number of Securities set opposite our name in said Schedule I, are herein called
"our Securities." For purposes of this Agreement the following definitions shall
be applicable:
(a) "Manager's Concession" shall be the compensation to you for acting
as Manager as provided in Paragraph 1 of not less than ____ percent (%) of the
underwriting discount. The Manager's Concession shall include the right to a
portion of the warrants to be issued pursuant to the Underwriting Agreement and,
the right to the nonaccountable expenses to be paid pursuant to the Underwriting
Agreement.
(b) "Underwriting Group Concession" shall mean compensation to members
of the Underwriting Group for assuming the underwriting risk and shall be not
less than ____ percent ( %) of the underwriting discount.
(c) "Dealer's Concession" shall mean compensation to Dealers, who are
members of the Selling Group and shall, as to Dealers who have executed an
agreement with you, be not less than ____ percent (%) of the underwriting
discount.
(d) "Dealer's Reallowance Concession" shall mean the compensation
allowed Dealers by Underwriters other than you and shall be one-half (1/2) of
the Dealer's Concession.
(e) It is contemplated that the underwriting discount will be ten
percent (10%) of the offering price. You, in your absolute discretion, shall
determine, within the foregoing limitations, the precise allocation of the
underwriting discount and shall notify us of same at least twenty-four (24)
hours prior to the execution of the Underwriting Agreement.
1. Authority and Compensation of Representative. We hereby authorize you, as our
Representative and on our behalf, (a) to enter into an agreement with the
Company substantially in the form attached hereto as Exhibit A ("Underwriting
Agreement"), but with such changes therein as in your judgment are not
materially adverse to the
<PAGE> 2
Underwriters, (b) to exercise all the authority and discretion vested in the
Underwriters and in you by the provisions of the Underwriting Agreement, and (c)
to take all such action as you, in your discretion, may deem necessary or
advisable in order to carry out the provisions of the Underwriting Agreement and
this Agreement and the sale and distribution of the Securities, provided,
however, that the time within which the Registration Statement is required to
become effective pursuant to the Underwriting Agreement will not be extended
more than forty-eight (48) hours without the approval of a majority in interest
of the Underwriters (including you). We authorize you, in executing the
Underwriting Agreement on our behalf, to set forth in Schedule I of the
Underwriting Agreement as our commitment to purchase the number of Securities
(which shall not be substantially in excess of the number of Securities included
in your invitation to participate unless we have agreed otherwise) included in a
wire, telex, or similar means of communication transmitted by you to us at least
twenty-four (24) hours prior to the commencement of the offering as our
finalized underwriting participation.
As our share of the compensation for your services hereunder, we will pay you,
and we authorize you to charge to our account, a sum equal to the Manager's
Concession.
2. Public Offering. A public offering of the Securities is to be made,
as herein provided, as soon after the Registration Statement relating thereto
shall become effective as in your judgment is advisable. The Securities shall be
initially offered to the public at the public offering price of $_____ per share
and ____ per Redeemable Warrant. You will advise us by telegraph or telephone
when the Securities shall be released for offering. We authorize you as
Representative of the Underwriters, after the initial public offering, to vary
the public offering price, in your sole discretion, by reason of changes in
general market conditions or otherwise. The public offering price of the
Securities at any time in effect is herein called the "Offering Price."
We hereby agree to deliver all preliminary and final Prospectuses as
required for compliance with the provisions of Rule 15c2-8 under the Securities
Exchange Act of 1934 and Section 5(b) of the Securities Act of 1933. You have
heretofore delivered to us such preliminary Prospectuses as have been requested
by us, receipt of which is hereby acknowledged, and will deliver such final
Prospectuses as will be requested by us.
3. Offering to Dealers and Group Sales. We authorize you to reserve for
offering and sale, and on our behalf to sell, to institutions or other retail
purchasers (such sales being herein called "Group Sales") and to dealers
selected by you (such dealers being herein called the "Dealers") all or any part
of our Securities as you may determine. Such sales of Securities, if any, shall
be made (i) in the case of Group Sales, at the Offering Price, and (ii) in the
case of sales to Dealers, at -the Offering Price less the Dealer's Concession.
Any Group Sales shall be as nearly as practicable in proportion to the
underwriting obligations of the respective Underwriters. Any sales to Dealers
made for our account shall be as nearly as practicable in the ratio that the
Securities reserved for our account for offering to Dealers bears to the
aggregate of all Securities of all Underwriters, including you, so reserved. On
any Group Sales or sales to Dealers made by you on our behalf, we shall be
entitled to receive only the Underwriter's Concession.
You agree to notify us not less than twenty-four (24) hours prior to
the commencement of the public offering as to the number of Securities, if any,
which we may retain for direct sale. Prior to the termination of this Agreement,
you may reserve for offering and sale, as herein before provided, any Securities
remaining unsold theretofore retained by us and we may, with your consent,
retain any Securities remaining unsold theretofore reserved by you. Sales to
Dealers shall be made under a Selected Dealers Agreement, attached hereto as
Exhibit B and by this reference incorporated herein. We authorize you to
determine the form and manner of any communications with Dealers, and to make
such changes in the Selected Dealers Agreement, as you may deem appropriate. In
the event that there shall be any such agreements with Dealers, you are
authorized to act as managers thereunder, and we agree, in such event, to be
governed by the terms and conditions of such agreements. Each Underwriter agrees
that it will not offer any of the Securities for sale at a price below the
Offering Price or allow any concession therefrom, except as herein otherwise
provided. We, as to our Securities, may enter into agreements with Dealers, but
any Dealer's Reallowance Concession shall not exceed half of the Dealer's
Concession.
2
<PAGE> 3
It is understood that any person to whom an offer may be made, as herein before
provided, shall be a member of the National Association of Securities Dealers,
Inc. ("NASD") or dealers or institutions with their principal place of business
located outside of the United States, its territories or possessions, and who
are not eligible for membership under Section 1 of the Bylaws of the NASD who
agree to make no sales within the United States, its territories or possessions,
or to persons who are nationals thereof, or residents therein, and, in making
sales, to comply with the NASD's Rules of Fair Practice.
We authorize you to determine the form and manner of any public
advertisement of the Securities.
Nothing in this Agreement contained shall be deemed to restrict our
right, subject to the provisions of this Section 3, to offer our Securities
prior to the effective date of the Registration Statement, provided, however,
that any such offer shall be made in compliance with any applicable requirements
of the Securities Act of 1933 and the Securities Exchange Act of 1934 and the
rules and regulations of the Securities and Exchange Commission thereunder and
of any applicable state securities laws.
4. Repurchases in the Open Market. Any Securities sold by us (otherwise
than through you) which, prior to the termination of this Agreement, or such
earlier date as you may determine, shall be contracted for or purchased in the
open market by you on behalf of any Underwriter or Underwriters, shall be
repurchased by us on demand at a price equal to the cost of such purchase plus
commissions and taxes, if any, on redelivery. Any Securities delivered on such
repurchase need not be the identical Securities originally sold by us. In lieu
of delivery of such Securities to us, you may (i) sell such Securities in any
manner for our account and charge us with the amount of any loss or expense, or
credit us with the amount of any profit, less any expense, resulting from such
sale, or (ii) charge our account . t with an amount not in excess of the
concession to Dealers on such Securities.
5. Delivery and Payment. We agree to deliver to you, at or before 9:00
A.M., New York, New York Time, on the Closing Date referred to in the
Underwriting Agreement, at your office, a certified or bank cashier's check
payable to your order for the offering price of the Securities less Dealer's
Concession of the Securities which we retained for direct sale by us, the
proceeds of which check shall be delivered to you, in the manner provided in the
Underwriting Agreement, to or for the account of the Company against delivery of
certificates for such Securities to you for our account. You are authorized to
accept such delivery and to give receipts therefor. You may advance funds for
Securities which have been sold or reserved for sale to retail purchasers or
Dealers for our account. If we fail (whether or not such failure shall
constitute a default hereunder) to deliver to you, or you fail to receive, our
check and/or payment for sales made by you for our account for the Securities
which we have agreed to purchase, you, individually and not as Representative of
the Underwriters, are authorized (but shall not be obligated) to make payment,
in the manner provided in the Underwriting Agreement, to or for the account of
the Company for such Securities for our account, but any such payment by you
shall not relieve us of any of our obligations under the Underwriting Agreement
or under this Agreement and we agree to repay you on demand the amount so
advanced for our account.
We also agree on demand to take up and pay for or to deliver to you
funds sufficient to pay for at cost any Securities of the Company purchased by
you for our account pursuant to the provisions of Section 9 hereof, and to
deliver to you on demand any Securities sold by you for our account, pursuant to
any provision of this Agreement.
We authorize you to deliver our Securities, and any other Securities
purchased by you for our account pursuant to the provisions of Section 9 hereof,
against sales made by you for our account pursuant to any provision of this
Agreement.
Upon receipt by you of payment for the Securities sold by us and/or
through you for our account, you will remit to us promptly an amount equal to
the Underwriter's Concession on such Securities. You agree to cause to be
delivered to us, as soon as practicable after the Closing Date referred to in
the Underwriting Agreement, such part of our Securities purchased on such
Closing Date as shall not have been sold or reserved for sale by your for our
account.
In case any Securities reserved for sale in Group Sales or to Dealers
shall not be purchased and paid for in due course as contemplated hereby, we
agree to accept delivery when tendered by you of any Securities so reserved for
our account and not so purchased and pay you the offering price less the
Dealer's and Underwriter's Concessions.
3
<PAGE> 4
6. Authority to Borrow. We authorize you to advance your funds for our
account (charging current interest rates) and to arrange loans for our account
for the purpose of carrying out this Agreement, and in connection therewith to
execute and deliver any notes or other instruments, and to hold, or pledge as
security therefor, all or any part of our Securities of the Company purchased
hereunder for our account. Any lending bank is hereby authorized to accept your
instructions as Representative in all matters relating to such loans. Any part
of our Securities held by you, may be delivered to us for carrying purposes, and
if so delivered, will be redelivered to you upon demand.
7. Allocation of Expense and Liability. We authorize you to charge our
account with, and we agree to pay (a) all transfer taxes on sales made by you
for our account, except as herein otherwise provided, and (b) our proportionate
share (based on our underwriting obligations) of all expenses in excess of those
reimbursed by the Company incurred by you in connection with the purchase,
carrying and distribution, or proposed purchase and distribution, of the
Securities and all other expenses arising under the terms of the Underwriting
Agreement or this Agreement. Your determination of all such expenses and your
allocation thereof shall be final and conclusive. Funds for our account at any
time in your hands as our Representative may be held in your general funds
without accountability for interest. As soon as practicable after the
termination of this Agreement, the net credit or debit balance in our account,
after proper charge and credit for all interim payments and receipts, shall be
paid to or paid by us, provided, however, that you, in your discretion, may
reserve from distribution an amount to cover possible additional expenses
chargeable to the several Underwriters.
8. Liability for Future Claims. Neither any statement by you, as
Representative of the Underwriters, of any credit or debit balance in our
account nor any reservation from distribution to cover possible additional
expenses relating to the Securities shall constitute any representation by you
as to the existence or nonexistence of possible unforeseen expenses or
liabilities of or charges against the several Underwriters. Notwithstanding the
distribution of any net credit balance to us or the termination of this
Agreement, or both, we shall be and remain liable for, and will pay on demand,
(a) our proportionate share (based on our underwriting obligations) of all
expenses and liabilities which may be incurred by, or for the accounts of the
Underwriters, including any liability which may be incurred by the Underwriters
or any of them, and (b) any transfer taxes paid after such settlement on account
of any sale or transfer for our account.
9. Stabilization. We authorize you, until the termination of this
Agreement, (a) to make purchases and sales of the Securities, in the open market
or otherwise, for long or short account, and on such terms, and at such prices
as you in your discretion may deem desirable, (b) in arranging for sales of
Securities, to overallot, and (c) either before or after the termination of this
Agreement, to cover any short position incurred pursuant to this Section 9;
subject, however, to the applicable rules and regulations of the Securities and
Exchange Commission under the Securities Exchange Act of 1934. All such
purchases, sales and overallotments shall be made for the accounts of the
several Underwriters as nearly as practicable in proportion to their respective
underwriting obligations; provided, however, that our net position resulting
from such purchases and sales and overallotments shall not at any time exceed,
either for long or short account, fifteen percent (15%) of the number of
Securities agreed to be purchased by us.
If you engage in any stabilizing transactions as representative of the
underwriters, you shall promptly notify us of that fact and in like manner you
agree to promptly notify and file with us any stabilizing transaction in
accordance with the requirements of Rule 17a-2(d) under the Securities Exchange
Act of 1934.
We agree to advise you from time to time, upon request, until the settlement of
accounts hereunder, of the number of Securities at the time retained by us
unsold, and we will upon request sell to you, for the accounts of one or more of
the several Underwriters, such number of our unsold Securities as you may
designate, at the Offering Price less such amount, not in excess of the
concession to Dealers, as you may determine.
10. Open Market Transactions. We agree that, except with your consent
and except as herein provided upon advice from you, we will not make purchases
or sales on the open market or otherwise, or attempt to induce others to make
purchases or sales, either before or after the purchase of the Securities, and
prior to the completion (as defined
4
<PAGE> 5
in Regulation M of the Securities Exchange Act of 1934) of our participation in
the distribution, we will otherwise comply with Regulation M. Nothing in this
Section 10 contained shall prohibit us from acting as broker or agent in the
execution of unsolicited orders of customers for the purchase or sale of any
securities of the Company.
11. Blue Sky. Prior to the initial offering by the Underwriters, you
will inform us as to the states under the respective securities or Blue Sky laws
of which it is believed that the Securities have been qualified or are exempt
for sale, but you do not assume any responsibility or obligation as to the
accuracy of such information or as to the right of any Underwriter or Dealer to
sell the Securities in any jurisdiction. We will not sell any Securities in any
other state or jurisdiction and we will not sell Securities in any state or
jurisdiction unless we are qualified or licensed to sell securities in such
state or jurisdiction. We authorize you, if you deem it inadvisable in arranging
sales of Securities for our account hereunder, to sell any of our Securities to
any particular Dealer, or other buyer, because of the securities or Blue Sky
laws of any jurisdiction, to sell our Securities to one or more other
Underwriters at the Offering Price less, in the case of a sale to any Dealer,
such amount, not in excess of the concession to Dealers thereon, as you may
determine. The transfer tax on any such sales among Underwriters shall be
treated as an expense and charged to the respective accounts of the several
Underwriters, in proportion to their respective underwriting obligations.
12. Default by Underwriters. Default by one or more Underwriters, in
respect to their obligations under the Underwriting Agreement shall not release
us from any of our obligations. In case of such default by one or more
Underwriters, you are authorized to increase, pro rata, with the other
nondefaulting Underwriters, the number of defaulted Securities which we shall be
obligated to purchase from the Company, provided, however, that the aggregate
amount of all such increases for all Underwriters shall not exceed ten percent
(10%) of such Securities, and, if the aggregate number of the Securities not
taken up by such defaulting Underwriters exceeds such ten percent (10%), you are
further authorized, but shall not be obligated, to arrange for the purchase by
other persons, who may include yourselves, of all or a portion of the Securities
not taken up by such Underwriters. In the event any such increases or
arrangements are made, the respective numbers of Securities to be purchased by
the nondefaulting Underwriters and by any such other person or persons shall be
taken as the basis for the underwriting obligations under this Agreement, but
this shall not in any way affect the liability of any defaulting Underwriters to
the other Underwriters for damages resulting from such default.
In the event of default by one or more Underwriters in respect of their
obligations under this Agreement to take up and pay for any Securities purchased
by your for their respective accounts, pursuant to Section 9 hereof, or to
deliver any such Securities sold or overallotted by you for their respective
accounts pursuant to any provisions of this Agreement, and to the extent that
arrangements shall not have been made by you for other persons to assume the
obligations of such defaulting Underwriter or Underwriters, each nondefaulting
Underwriter shall assume its proportionate share of the aforesaid obligations of
each such defaulting Underwriter without relieving any such Underwriter of its
liability therefor.
13. Termination of Agreement. Unless earlier terminated by you, the
provisions of Sections 2, 3, 4, 6, 9 and 10 of this Agreement shall, except as
otherwise provided therein, terminate thirty (30) full business days after the
effective date of the Registration Statement herein referred to, but may be
extended by you for an additional period or periods not exceeding thirty (30)
full business days in the aggregate. You may, however, terminate this Agreement,
or any provisions hereof, at any time by written or telegraphic notice to us.
14. General Position of the Representative. In taking action under this
Agreement, you shall act only as agent of the several Underwriters. Your
authority as Representative of the several Underwriters shall include the taking
of such action as you may deem advisable in respect of all matters pertaining to
any and all offers and sales of the Securities, including the right to make any
modifications which you consider necessary or desirable in the arrangements with
Dealers or others. You shall be under no liability for or in respect of the
value of the Securities or the validity or the form thereof, the Registration
Statement, the Prospectus, the Underwriting Agreement, or other instruments
executed by the Company or others of any agreement on its or their part; nor
shall you, as such Representative or otherwise, be liable under any of the
provisions hereof, or for any matters connected herewith, except for want of
good faith, and except for any liability arising under the Securities Act of
1933; and no obligation not expressly assumed by you as such Representative
herein shall be implied from this Agreement. In representing the Underwriters
hereunder, you shall act as the representative of each of them respectively.
Nothing herein
5
<PAGE> 6
contained shall constitute the several Underwriters partners with you or with
each other, or render any Underwriter liable for the commitments of any other
Underwriter, except as otherwise provided in Section 12 hereof. The commitments
and liabilities of each of the several Underwriters are several in accordance
with their respective underwriting obligations and are not joint.
15. Acknowledgment of Registration Statement, etc. We hereby confirm
that we have examined the Registration Statement (including all amendments
thereto) relating to the Securities as heretofore filed with the Securities and
Exchange Commission, that we are familiar with the amendment(s) to the
Registration Statement and the final form of Prospectus proposed to be filed,
that we are willing to accept the responsibilities of an underwriter thereunder,
and that we are willing to proceed as therein contemplated. We further confirm
that the statements made under the heading "Underwriting" in such proposed final
form of Prospectus are correct and we authorize you so to advise the Company on
our behalf. We understand that the aforementioned documents are subject to
further change and that we will be supplied with copies of any amendment or
amendments to the Registration Statement and of any amended Prospectus promptly,
if and when received by you, but the making of such changes and amendments shall
not release us or affect our obligations hereunder or under the Underwriting
Agreement.
16. Indemnification. Each Underwriter, including you, agrees to
indemnify and hold harmless each other Underwriter and each person who controls
any other Underwriter within the meaning of Section 15 of the Securities Act of
1933, as amended, to the extent of their several commitments under the
Underwriting Agreement and upon the terms that such Underwriter agrees to
indemnify and hold harmless the Company as set forth in Section 7 of the
Underwriting Agreement. The Agreement contained in this Section 16 shall survive
any termination of this Agreement Among Underwriters.
17. Capital Requirements. We confirm that our ratio of aggregate
indebtedness to net capital is such that we may, in accordance with and pursuant
to Rule 15c3-1, promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, agree to purchase the number of Securities we
may be obligated to purchase under any provision of the Underwriting Agreement
or this Agreement.
18. Miscellaneous. We have transmitted herewith a completed
Underwriters' Questionnaire on the form thereof supplied by you. Any notice
hereunder from you to us or from us to you shall be deemed to have been duly
give if sent by registered mail, telegram, teletype, telex, telecopier, graphic
scan, or other written form of telecommunication to us at our address as set
forth in the Underwriting Agreement, or to you at the address set forth on the
first page of this Agreement.
You hereby confirm that you are registered as a broker-dealer with the
United States Securities and Exchange Commission and that you are a member of
the NASD and we confirm that we are either a member of the NASD or a foreign
broker-dealer not eligible for membership under Section I of the Bylaws of the
NASD, who agrees to make no sales within the United States, its territories or
possessions, or to persons who are nationals thereof or residents therein, and,
in making sales, to comply with the requirements of the NASD's Interpretation
with Respect to Free Riding and Withholding, and with Sections 2730, 2740, and
2420 to the extent applicable to foreign nonmember brokers or dealers, and
Section 2750 of the NASD's Rules of Fair Practice.
We will comply with all applicable federal laws, the laws of the states
or other jurisdictions concerned and the Rules and Regulations of the NASD,
including, but not limited to, Section 2740 of the Rules of Fair Practice.
This instrument may be signed by the Underwriters in various
counterparts which together shall constitute one and the same agreement among
all the Underwriters and shall become effective as between us at such time as
you shall have confirmed same by returning an executed copy to us, and
thereafter, as to us and the other Underwriters, upon
6
<PAGE> 7
execution by them of counterparts which are confirmed by you. In no event,
however, shall we have any liability under this Agreement if the Underwriting
Agreement is not executed.
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to us a counterpart hereof.
Very truly yours,
____________________________________________
Attorney-in-Fact
for the several Underwriters
named in Schedule I
to the Underwriting Agreement
Confirmed as of the date first above written.
Westport Resources Investment Services, Inc.
As Representative
By ___________________________________________
Vice President
7
<PAGE> 1
EXHIBIT 1.2
WESTSTAR ENVIRONMENTAL INC
1,000,000 SHARES
OF COMMON STOCK AND 1,000,000 REDEEMABLE WARRANTS
UNDERWRITING AGREEMENT
, 19
Westport Resources Investment Services, Inc.
315 Post Road West
Westport, CT 06880
Dear Sirs:
Weststar Environmental Inc.. a Florida corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters"), one million shares of Common Stock and one million
Redeemable Warrants of the Company (the "Securities"). The Company hereby
confirms the agreement made by it with respect to the purchase of the Securities
by the Underwriter, which Securities are more fully described in the
Registration Statement referred to below. Westport Resources Investment
Services, Inc. is referred to herein as the "Underwriter" or the
"Representative."
You have advised the Company that the Underwriters desire to act on a
firm commitment basis to publicly offer and sell the Securities for the Company
and that you are authorized to execute this Agreement. The Company confirms the
agreement made by it with respect to the relationship with the Underwriters as
follows:
1. Filing of Registration Statement with S.E.C. and Definitions. A Registration
Statement and Prospectus on Form SB-2 (File No.333-50255) with respect to the
Securities has been carefully and accurately prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the published rules and regulations (the "Rules and Regulations")
thereunder or under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and has been filed with the Securities and Exchange Commission
(the "Commission") and such other states that the Underwriter deems necessary in
its discretion to so file to permit a public offering and trading thereunder.
Such registration statement, including the prospectus, Part II, and all
financial schedules and exhibits thereto, as amended at the time when it shall
become effective, is herein referred to as the "Registration Statement," and the
prospectus included as part of the Registration Statement on file with the
Commission that discloses all the information that was omitted from the
prospectus on the effective date pursuant to Rule 430 A of the Rules and
Regulations with any changes contained in any prospectus filed with the
Commission by the Company with the Underwriters consent after the effective date
of the Registration Statement, is herein referred to as the "Final Prospectus."
The prospectus included as part of the Registration Statement of the Company and
in any amendments thereto prior to the effective date of the Registration
Statement is referred to herein as a "Preliminary Prospectus."
2. Discount, Delivery, and Sale of the Securities
(a) Subject to the terms and conditions of this Agreement, and on the
basis of the representations, warranties, and agreements herein contained, the
Company agrees to sell to, and the Underwriters agree to buy from the Company at
a purchase price of $______ per share and $______ per redeemable warrant before
any underwriter expense allowances, an aggregate of 1,000,000 shares of Common
Stock and 1,000,000 Redeemable Warrants, on a firm commitment basis the "Initial
Securities"..
It is understood that the Underwriters propose to offer the Securities
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement becomes
effective.
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<PAGE> 2
(b) Delivery of the Securities against payment of the purchase price
therefor by certified or official bank check or checks or wire transfer in
next-day funds, payable to the order of the Company shall take place at the
offices of the clearing broker for the Underwriter at New York City, within
three (3) business days after the Securities are first traded (or such other
place as may be designated by agreement between you and the Company) at 11:00
A.M., New York time or such time and date as you and the Company may agree upon
in writing, such time and date of payment and delivery for the Securities being
herein called the "Initial Closing Date."
The Company will make the certificates for the shares of Common Stock
and Redeemable Warrants to be purchased by the Underwriters hereunder available
to the Underwriter for inspection and packaging at least two (2) full business
days prior to the Initial Closing Date. The certificates shall be in such names
and denominations as the Underwriter may request to the Company in writing at
least two (2) full business days prior to any Closing Date.
(c) In addition, subject to the terms and conditions of this Agreement
and on the basis of the representations, warranties and agreements herein
contained, the Company grants an option to the Underwriters to purchase up to an
additional 150,000 shares of Common Stock and/or 150,000 Redeemable Warrants
("Option Securities") at the same terms as the Underwriters shall pay for the
Initial Securities being sold by the Company pursuant to the provisions of
Section 2(a) hereof. This option may be exercised from time to time, for the
purpose of covering overallotments, within forty-five (45) days after (i) the
effective date of the Registration Statement if the Company has elected not to
rely on Rule 430A under the Rules and Regulations or (ii) the date of this
Agreement if the Company has elected to rely upon Rule 430A under the Rules and
Regulations, upon written notice by the Underwriter setting forth the number of
Option Securities as to which the Underwriter is exercising the option and the
time and date at which such certificates are to be delivered. Such time and date
shall be determined by the Underwriter but shall not be earlier than four (4)
nor later than ten (10) full business days after the date of the exercise of
said option. Nothing herein shall obligate the Underwriter to make any
overallotment.
(d) Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered at the closing by the
Company to the Underwriters against payment of the purchase price by the
Underwriters by certified or bank cashier's checks or wire transfer in next day
funds payable to the order of the Company.
(e) The information set forth under "Underwriting" in any preliminary
prospectus and Prospectus relating to the Securities and the information set
forth in the last paragraph on the front cover page, under the last paragraph on
page 2 concerning stabilization and over-allotment by the Underwriters, and
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriter to the Company for inclusion therein,
and you represent and warrant to the Company that the statements made therein
are correct.
(f) On the Initial Closing Date, the Company shall issue and sell to
the Representative, warrants (the "Representative's Warrants") at a purchase
price of $.001 per Representative's Warrant, which shall entitle the holders
thereof to purchase an aggregate of 100,000 shares of Common Stock and 100,000
Redeemable Warrants. The shares of common stock issuable upon the exercise of
the Representative's Warrants are hereafter referred to as the "Representative's
Securities" or "Representative's Warrants." The shares of common stock issuable
upon exercise of the redeemable warrants are hereinafter referred to
collectively as the "Warrant Shares". The Representative's Warrants shall be
exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at a price equaling one hundred
forty five percent (145%) of the initial public offering price of the
Securities. The form of Representative's Warrant Certificate shall be
substantially in the form filed as an Exhibit to the Registration Statement.
Payment for the Representative's Warrant shall be made on the Initial Closing
Date.
3. Representations and Warranties of the Company.
(a) The Company represents and warrants to you as follows:
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<PAGE> 3
(i) The Company has prepared and filed with the Commission a
registration statement, and an amendment or amendments thereto, on Form SB-2
(No.333-50255), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities, the Representative's
Warrant and the Warrant Shares (sometimes referred to herein collectively as the
"Registered Securities"), under the Act, which registration statement and
amendment or amendments have been prepared by the Company in conformity with the
requirements of the Act, and the Rules and Regulations. The Company will
promptly file a further amendment to said registration statement in the form
heretofore delivered to the Underwriter and will not file any other amendment
thereto to which the Underwriter shall have objected verbally or in writing
after having been furnished with a copy thereof. Except as the context may
otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, any schedules, exhibits and all other
documents filed as a part thereof or that may be incorporated therein
(including, but not limited to those documents or information incorporated by
reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Rules and Regulations), is
hereinafter called the "Registration Statement," and the form of prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations, is hereinafter called the "Prospectus."
(ii) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Prospectus or the
Registration Statement and no proceeding for an order suspending the
effectiveness of the Registration Statement or any of the Company's securities
has been instituted or is pending or threatened. Each such Prospectus and/or any
supplement thereto has conformed in all material respects with the requirements
of the Act and the Rules and Regulations and on its date did not include any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading, in light of the circumstances
under which they were made and (i) the Prospectus and/or any supplement thereto
will contain all statements which are required to be stated therein by the Act
and Rules and Regulations, and (ii) the Prospectus and/or any supplement thereto
will not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances under which they were
made; provided, however, that no representations, warranties or agreements are
made hereunder as to information contained in or omitted from the Prospectus in
reliance upon, and in conformity with, the written information furnished to the
Company by you as set forth in Section 2(e) above.
(iii) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of its incorporation,
with full power and authority (corporate and other) to own its properties and
conduct its businesses as described in the Prospectus and is duly qualified to
do business as a foreign corporation in good standing in all other jurisdictions
in which the nature of its business or the character or location of its
properties requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the business, properties or
operations of the Company and the subsidiaries as a whole.
(iv) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, the Option Securities and the
Representative's Securities and to enter into this Agreement, the
Representative's Warrant dated as of the initial closing date to be exercised
and delivered by the Company to the Representative (the "Representative's
Warrant Agreement"), and to consummate the transactions provided for in such
agreements, and each of such agreements has been duly and properly authorized,
and on the Initial Closing Date will be duly and properly executed and delivered
by the Company. This Agreement constitutes and on the Initial Closing Date the
Representative's Warrant Agreement will then constitute valid and binding
agreements, enforceable in accordance with their respective terms (except as the
enforceability thereof may be limited by bankruptcy or other similar laws
affecting the rights of creditors generally or by general equitable principles
and except as the enforcement of indemnification provisions may be limited by
federal or state securities laws).
(v) Except as disclosed in the Prospectus, the Company is not in
violation of its respective certificate or articles of incorporation or bylaws
or in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material bond, debenture, note
or other evidence of indebtedness or in any material contract, indenture,
mortgage, loan agreement, lease, joint venture, partnership or other agreement
or
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<PAGE> 4
instrument to which the Company is a party or by which it may be bound or is not
in material violation of any law, order, rule, regulation, writ, injunction or
decree of any governmental instrumentality or court, domestic or foreign; and
the execution and delivery of this Agreement, the Representative's Warrant
Agreement ;and the consummation of the transactions contemplated therein and in
the Prospectus and compliance with the terms of each such agreement will not
conflict with, or result in a material breach of any of the terms, conditions or
provisions of, or constitute a material default under, or result in the
imposition of any material lien, charge or encumbrance upon any of the property
or assets of the Company pursuant to, any material bond, debenture, note or
other evidence of indebtedness or any material contract, indenture, mortgage,
loan agreement, lease, joint venture, partnership or other agreement or
instrument to which the Company is a party nor will such action result in the
material violation by the Company of any of the provisions of its respective
certificate or articles of incorporation or bylaws or any law, order, rule,
regulation, writ, injunction, decree of any government, governmental
instrumentality or court, domestic or foreign, except where such violation will
not have a material adverse effect on the financial condition of the Company.
(vi) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus and the Company will have the adjusted
capitalization set forth therein on the Initial Closing Date; all of the shares
of issued and outstanding capital stock of the Company set forth therein have
been duly authorized, validly issued and are fully paid and nonassessable; the
holders thereof do not have any rights of rescission with respect therefor and
are not subject to personal liability for any obligations of the Company by
reason of being stockholders under the laws of the State in which the Company is
incorporated; none of such outstanding capital stock is subject to or was issued
in violation of any preemptive or similar rights of any stockholder of the
Company; and such capital stock (including the Securities, the Option Securities
and the Representative's Securities) conforms in all material respects to all
statements relating thereto contained in the Prospectus.
(vii)The Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement or as
described in the Prospectus. The Securities, the Option Securities and the
Representative's Securities are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable and will conform to the respective
descriptions thereof contained in the Prospectus; except for payment of the
applicable purchase price paid upon exercise of the options or warrants, as the
case may be the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities, the Option Securities and the Representative's
Securities has been duly and validly taken; and the certificates representing
the Securities, the Option Securities and the Representative's Securities will
be in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities, the Option Securities and the Representative's
Securities to be sold by the Company hereunder, the Underwriter will acquire
good and marketable title to such Securities, Option Securities and
Representative's Securities free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction of any kind
whatsoever other than restrictions as may be imposed under the securities laws.
(viii) The Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described or referred
to in the Prospectus or which are not materially significant or important in
relation to its business or which have been incurred in the ordinary course of
business; except as described in the Prospectus all of the leases and subleases
under which the Company holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and the Company is not
in material default in respect of any of the terms or provisions of any of such
leases or subleases, and no claim has been asserted by anyone adverse to the
Company's rights as lessor, sublessor, lessee or sublessee under any of the
leases or subleases mentioned above or affecting or questioning the Company's
right to the continued possession of the leased or subleased premises or assets
under any such lease or sublease; and the Company owns or leases all such
properties as are necessary to its operations as now conducted and as
contemplated to be conducted, except as otherwise stated in the Prospectus.
(ix) The financial statements, together with related notes, set forth
in the Prospectus fairly present the financial position and results of
operations of the Company at the respective dates and for the respective periods
to which they apply. Said statements and related notes have been prepared in
accordance with generally accepted
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<PAGE> 5
accounting principles applied on a basis which is consistent in all material
respects during the periods involved but any stub period has not been audited by
an independent accounting firm. There has been no material adverse change or
material development involving a prospective change in the condition, financial
or otherwise, or in the prospects, value, operation, properties, business or
results of operations of the Company whether or not arising in the ordinary
course of business, since the date of the financial statements included in the
Registration Statement and the Prospectus.
(x) Subsequent to the respective dates as of which information is given
in the Prospectus as it may be amended or supplemented, and except as described
in the Prospectus, the Company has not, directly or indirectly, incurred any
liabilities or obligations, direct or contingent, not in the ordinary course of
business or entered into any transactions not in the ordinary course of
business, which are material to the business of the Company as a whole and there
has not been any change in the capital stock of, or any incurrence of long term
debts by, the Company or any issuance of options, warrants or rights to purchase
the capital stock of the Company or declaration or payment of any dividend on
the capital stock of the Company or any material adverse change in the condition
(financial or other), net worth or results of operations of the Company as a
whole and the Company has not become a party to, any material litigation whether
or not in the ordinary course of business.
(xi) To the knowledge of the Company, there is no pending or
threatened, action, suit or proceeding to which the Company is a party before or
by any court or governmental agency or body, which might result in any material
adverse change in the condition (financial or other), business or prospects of
the Company as a whole or might materially and adversely affect the properties
or assets of the Company as a whole nor are there any actions, suits or
proceedings against the Company related to environmental matters or related to
discrimination on the basis of age, sex, religion or race which might be
expected to materially and adversely affect the conduct of the business,
property, operations, financial condition or earnings of the Company as a whole;
and no labor disturbance by the employees of the Company individually exists or
is, to the knowledge of the Company, imminent which might be expected to
materially and adversely affect the conduct of the business, property,
operations, financial condition or earnings of the Company as a whole.
(xii) Except as may be disclosed in the Prospectus, the Company has
properly prepared and filed all necessary federal, state, local and foreign
income and franchise tax returns, has paid all taxes shown as due thereon, has
established adequate reserves for such taxes which are not yet due and payable,
and does not have any tax deficiency or claims outstanding, proposed or assessed
against it.
(xiii) The Company has sufficient licenses, permits, right to use trade
or service marks and other governmental authorizations currently required for
the conduct of its business as now being conducted and as contemplated to be
conducted and the Company is in all material respects complying therewith.
Except as set forth in the Prospectus, the expiration of any such licenses,
permits, or other governmental authorizations would not materially affect the
Company's operations. To its knowledge, none of the activities or businesses of
the Company are in material violation of, or cause the Company to materially
violate any law, rule, regulations, or order of the United States, any state,
county or locality, or of any agency or body of the United States or of any
state, county or locality.
(xiv) The Company has not at any time (i) made any contributions to any
candidate for political office in violation of law, or failed to disclose fully
any such contribution, or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasi public duties, other than payments required or allowed by applicable law.
(xv) Except as set forth in the Prospectus the Company knows of no
outstanding claims for services either in the nature of a finder's fee,
brokerage fee or otherwise with respect to this financing for which the Company
or the Underwriters may be responsible, or which may affect the Underwriter's
compensation as determined by the National Association of Securities Dealers,
Inc. ("NASD") except as otherwise disclosed in the Prospectus or known by the
Underwriters.
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(xvi) The Company has its property adequately insured against loss or
damage by fire and maintains such other insurance as is customarily maintained
by companies in the same or similar business.
(xvii) The Representative's Warrants herein described are duly and
validly authorized and upon delivery to the Representative in accordance
herewith will be duly issued and legal, valid and binding obligations of the
Company, except as the enforceability thereof may be limited by bankruptcy or
other similar laws affecting the rights of creditors generally or by equitable
principles, and except as the enforcement of indemnification provisions may be
limited by federal or state securities laws.
The Representative's Securities issuable upon exercise of any of the
Representative's Warrants have been duly authorized, and when issued upon
payment of the exercise price therefor, will be validly issued, fully paid and
nonassessable.
(xviii) Except as set forth in the Prospectus, no default exists in the
due performance and observance of any term, covenant or condition of any
material license, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, stockholders agreement, note, loan
or credit agreement, purchase order, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which the property or assets (tangible or intangible) of the Company is
subject or affected.
(xix) To the best of the Company's knowledge it has generally enjoyed a
satisfactory employer-employee relationship with its employees and, to the best
of its knowledge, is in substantial compliance in all material respects with all
federal, state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours. To the best of the Company's knowledge, there are no pending
investigations involving the Company, by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. To the best of the Company's
knowledge, there is no unfair labor practice charge or complaint against the
Company pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or to its knowledge involving the Company, or any predecessor entity, and none
has ever occurred. To the best of the Company's knowledge, no representation
question is pending respecting the employees of the Company, and no collective
bargaining agreement or modification thereof is currently being negotiated by
the Company. To the best of the Company's knowledge, no grievance or arbitration
proceeding is pending or to its knowledge threatened under any expired or
existing collective bargaining agreements of the Company. No labor dispute with
the employees of the Company is pending, or, to its knowledge is imminent; and
the Company is not aware of any pending or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors which
may result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company.
(xx) Except as may be set forth in the Registration Statement, the
Company does not maintain, sponsor or contribute to any program or arrangement
that is an "employee pension benefit plan," an "employee welfare benefit plan,"
or a "multiemployer plan" as such terms are defined in Sections 3(2), 3(l) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute,
now or at any time previously, to a defined benefit plan, as defined in Section
3(35) of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Internal Revenue Code (the "Code"), which could subject the Company
to any tax penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all material reporting,
disclosure and other requirements of the Code and ERISA as they relate to any
such ERISA Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply with
Code Section 401 (a), stating that such ERISA Plan and the attendant trust are
qualified thereunder. The Company has never completely or partially withdrawn
from a "multiemployer plan."
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(xxi) None of the Company, or any of its employees, directors,
stockholders, or affiliates (within the meaning of the Rules and Regulations)
has taken or will take, directly or indirectly, any action designed to or which
has constituted or which might be expected to cause or result in, under the
Exchange Act, or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities,
Option Securities, Representative's Securities or otherwise.
(xxii) None of the patents, patent applications, trademarks, service
marks, trade names, copyrights, and licenses and rights to the foregoing
presently owned or held by the Company, are in dispute or, to the best knowledge
of the Company's management are in any conflict with the right of any other
person or entity. The Company (i) except as disclosed in the Prospectus owns or
has the right to use, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing, and except as set forth in the Prospectus or otherwise disclosed
to the Underwriter in writing, to the best knowledge of the Company's management
is not obligated or under any liability whatsoever to make any material payments
by way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any patent, trademark, service mark, trade name, copyright,
know-how, technology or other intangible asset, with respect to the use thereof
or in connection with the conduct of its business or otherwise.
(xxiii) Except as disclosed in the Prospectus the Company owns and has
adequate right to use to the best knowledge of the Company's management all
trade secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
designs, processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual property") required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company. The Company is not aware of
any such development of similar or identical trade secrets or technical
information by others. The Company has valid and binding confidentiality
agreements with all of its officers, covering its intellectual property (subject
to the equitable powers of any court), which agreements have remaining terms of
at least two years from the effective date of the Registration Statement except
where the failure to have such agreements would not materially and adversely
effect the Company's business taken as a whole. The Company has good and
marketable title to, or valid and enforceable leasehold estates in, all items of
real and personal property stated in the Prospectus, to be owned or leased by it
free and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects, or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus and liens for taxes not yet due
and payable.
(xxiv) Horton & Company L.L.C., whose reports are filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(xxv) The Company has agreed to cause to be duly executed agreements
pursuant to which each of the Company's officers and directors and holders of
more than 5% shareholders and holders of 460,000 Incentive Stock Options
exercisable at $5 per share and their underlying shares and any person or entity
deemed to be an affiliate of the Company pursuant to the Rules and Regulations
has agreed not to, directly or indirectly, sell, assign, transfer, or otherwise
dispose of any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or subscribe
for any shares of Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) for a period of not less than eighteen (18) months
following such effective date without the prior written consent of the
Underwriter. The Company will cause the Transfer Agent, as defined below, to
mark an appropriate legend on the face of stock certificates representing all of
such securities and to place "stop transfer" orders on the Company's stock
ledgers.
(xxvi) The Registered Securities have been approved for listing on
NASDAQ or an Exchange.
(xxvii) Except as set forth in the Prospectus or disclosed in writing
to the Underwriter (which writing specifically refers to this Section), no
officer or director of the Company, holder of 5% or more of securities of the
Company or any "affiliate" or "associate" (as these terms are defined in Rule
405 promulgated under the Rules and
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<PAGE> 8
Regulations) of any of the foregoing persons or entities has or has had, either
directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchases from or sells
or furnishes to the Company any goods or services, or (ii) a beneficiary
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus under
"Certain Transactions" or disclosed in writing to the Underwriter (which writing
specifically refers to this Section) there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company, and
any officer, director, principal stockholder of the Company, or any partner,
affiliate or associate of any of the foregoing persons or entities.
(xxviii) Any certificate signed by any officer of the Company, and
delivered to the Underwriter or to the Underwriter's counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriter
as to the matters covered thereby.
(xxix) Each of the minute books of the Company has been made available
to the Underwriter and contains a complete summary of all meetings and actions
of the directors and stockholders of the Company, since the time of its
incorporation and reflect all transactions referred to in such minutes
accurately in all respects.
(xxx) Intentionally left blank.
(xxxi) Except and only to the extent described in the Prospectus or
disclosed in writing to the Underwriter (which writing specifically refers to
this Section), no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have the
right to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or to require
the Company to file a registration statement under the Act and no person or
entity holds any anti-dilution rights with respect to any securities of the
Company. Except as disclosed in the Prospectus, all rights so described or
disclosed have been waived or have not been triggered with respect to the
transactions contemplated by this Agreement and the Representative's Warrant
Agreement (including the warrants issuable thereunder).
(xxxii) The Company has not entered into any employment agreements with
its executive officers, except as disclosed in the Prospectus.
(xxxiii) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Registered Securities pursuant to
the Prospectus and the Registration Statement, the issuance of the Underwriter's
Warrants, the performance of this Agreement, the Representative's Warrant
Agreement, and the transactions contemplated hereby and thereby, including
without limitation, any waiver of any preemptive, first refusal or other rights
that any entity or person may have for the issue and/or sale of any of the
Securities, the Option Securities and the Underwriter's Securities, except such
as have been or may be obtained under the Act, otherwise or may be required
under state securities or blue sky laws in connection with the Underwriter's
purchase and distribution of the Securities, the Option Securities, the
Representative's Securities and the Underwriter's Warrants to be sold by the
Company hereunder or may be required by the Rules of the National Association of
Securities Dealer, Inc. ("NASD").
(xxxiv) All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or businesses may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company, enforceable
against the Company, in accordance with their respective terms. The descriptions
in the Registration Statement of agreements, contracts and other documents are
accurate and fairly present the information required to be shown with respect
thereto by Form SB-2, and there are no contracts or other documents which are
required by the Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not
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<PAGE> 9
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be copies.
(xxxv) Within the past five (5) years, none of the Company's
independent public accountants has brought to the attention of the Company's
management any "material weakness" as defined in the Statement of Auditing
Standard No. 60 in any of the Company's internal controls.
4. Covenants of the Company. The Company covenants and agrees with you that:
(a) It will cooperate in all respects in making the Prospectus
effective and will not at any time, whether before or after the effective date,
file any amendment to or supplement to the Prospectus of which you shall not
previously have been advised and furnished with a copy or to which you or your
counsel shall have reasonably objected or which is not in material compliance
with the Act and the Rules and Regulations or applicable state law.
As soon as the Company is advised thereof, the Company will advise you,
and confirm the advice in writing, of the receipt of any comments of the
Commission or any state securities department, when the Registration Statement
becomes effective if the provisions of Rule 430A promulgated under the Act will
be relied upon, when the Prospectus has been filed in accordance with said Rule
430A, of the effectiveness of any posteffective amendment to the Registration
Statement or Prospectus, or the filing of any supplement to the Prospectus or
any amended Prospectus, of any request made by the Commission or any state
securities department for amendment of the Prospectus or for supplementing of
the Prospectus or for additional information with respect thereto, of the
issuance of any stop order suspending the effectiveness of the Prospectus or any
order preventing or suspending the use of any Prospectus or any order suspending
trading in the Common Stock of the Company, or of the suspension of the
qualification of the Securities, the Option Securities or the Representatives
Securities for offering in any jurisdiction, or of the institution of any
proceedings for any such purposes, and will use its best efforts to prevent the
issuance of any such order and, if issued, to obtain as soon as possible the
lifting or dismissal thereof.
The Company has caused to be delivered to you copies of such Prospectus, and the
Company has consented and hereby consents to the use of such copies for the
purposes permitted by law. The Company authorizes you and the dealers to use the
Prospectus and such copies of the Prospectus in connection with the sale of the
Securities, the Option Securities and the Representative's Securities for such
period as in the opinion of your counsel and our counsel the use thereof is
required to comply with the applicable provisions of the Act and the Rules and
Regulations. The Company will prepare and file with the states, promptly upon
your request, any such amendments or supplements to the Prospectus, and take any
other action, as, in the opinion of your counsel, may be necessary or advisable
in connection with the initial sale of the Securities, the Option Securities and
the Underwriter's Securities and will use its best efforts to cause the same to
become effective as promptly as possible.
The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to rule
424(b)(1) or pursuant to Rule 424(b)(3) not later than the Commission's close of
business on the earlier of (i) the second business day following the execution
and delivery of this Agreement, and (ii) the fifth business day after the
effective date of the Registration Statement.
In case of the happening, at any time within such period as a
Prospectus is required under the Act to be delivered in connection with the
initial sale of the Securities, the Option Securities and the Representative's
Securities of any event of which the Company has knowledge and which materially
affects the Company, or the securities thereof, and which should be set forth in
an amendment of or a supplement to the Prospectus in order to make the
statements therein not then misleading, in light of the circumstances existing
at the time the Prospectus is required under the Act to be delivered, or in case
it shall be necessary to amend or supplement the Prospectus to comply with the
Act, the Rules and Regulations or any other law, the Company will forthwith
prepare and furnish to you copies of such amended Prospectus or of such
supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a
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<PAGE> 10
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they are made. The preparation and furnishing of any
such amendment or supplement to the Prospectus or supplement to be attached to
the Prospectus shall be without expense to you.
The Company will to the best of its ability comply with the Act, the
Exchange Act and applicable state securities laws so as to permit the initial
offer and sales of the Securities, the Option Securities and the Representatives
Securities under the Act, the Rules and Regulations, and applicable state
securities laws.
(b) It will cooperate to qualify the Securities and the Option
Securities and the Representative's Securities for initial sale under the
securities laws of such jurisdictions as you may designate and will make such
applications and furnish such information as may be required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities. The Company will, from time to time, prepare and file
such statements and reports as are or may be required to continue such
qualification in effect for so long as the Underwriter may reasonably request.
(c) So long as any of the Securities, the Option Securities or the
Representative's Securities remain outstanding in the hands of the public, the
Company, at its expense, will annually furnish to its shareholders a report of
its operations to include financial statements audited by independent public
accountants, and will furnish to the Underwriter as soon as practicable after
the end of each fiscal year, a balance sheet of the Company as at the end of
such fiscal year, together with statements of operations, shareholders' equity,
and changes in cash flow of the Company for such fiscal year, all in reasonable
detail and accompanied by a copy of the certificate or report thereon of
independent public accountants.
(d) It will deliver to you at or before the Initial Closing Date three
signed copies of the Registration Statement including all financial statements
and exhibits filed therewith, whether or not incorporated by reference. The
Company will deliver to you, from time to time until the effective date of the
Prospectus, as many copies of the Prospectus as you may reasonably request. The
Company will deliver to you on the effective date of the Prospectus and
thereafter for so long as a Prospectus is required to be delivered under the Act
and the Rules and Regulations as many copies of the Prospectus, in final form,
or as thereafter amended or supplemented, as you may from time to time
reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Securities and the Option Securities substantially in the manner set forth under
"Use of Proceeds" in the Prospectus. No portion of the proceeds shall be used,
directly or indirectly, to acquire any securities issued by the Company, without
the prior written consent of the Underwriter.
(f) As soon as it is practicable, but in any event not later than the
first (lst) day of the fifteenth (15th) full calendar month following the
effective date of the Registration Statement, the Company will make available to
its security holders and the Underwriter an earnings statement (which need not
be audited) covering a period of at least twelve (12) consecutive months
beginning after the effective date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations.
(g) Non-Accountable Expense Allowance and other Costs and Expenses.
The Company shall pay to the Underwriter at each closing date, and to
be deducted from the purchase price for the Securities and the Option
Securities, an amount equal to three percent (3%) of the gross proceeds received
by the Company from the sale of the Securities and the Option Securities at such
closing date less in the case of the Initial Closing Date, the sum of $40,000
previously paid by the Company. If the sale of the Securities by the Underwriter
is not consummated for any reason not attributable to the Underwriter, or if (i)
the Company withdraws the Registration Statement from the Commission or does not
proceed with the public offering, or (ii) the representations in Section 3
hereof are not correct or the covenants cannot be complied with, or (iii) there
has been a materially adverse change in the condition, prospects or obligations
of the Company or a materially adverse change in stock market conditions from
current conditions, all as determined by the Underwriter, then the Company shall
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<PAGE> 11
reimburse the Underwriter for its out of pocket expenses including without
limitation, its legal fees and disbursements all on an accountable basis but not
to exceed $75,000 (including the $40,000 previously paid by the Company), and if
any excess remains from the advance previously paid, such excess will be
returned to the Company.
Costs and Expenses. Subject to the provisions above the Company will
pay all costs and expenses incident to the performance of this Agreement by the
Company including, but not limited to, the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement and Prospectus (including the fee of the Commission, any securities
exchange and the NASD in connection with the filing required by the NASD
relating to the offering of the Securities contemplated hereby); all expenses,
including fees of counsel, which shall be due and payable on the Closing Date in
connection with the qualification of the Securities under the state securities
or blue sky laws; the cost of furnishing to you copies of the Prospectus, this
Agreement, the cost of printing the certificates representing the Securities and
of preparing and photocopying the Underwriting Agreement and related
Underwriting documents, the cost of three underwriter's bound volumes, any
advertising costs and expenses, including but not limited to the Company's
expenses on "road show" information meetings and presentations, prospectus
memorabilia, issue and transfer taxes, if any. The Company will also pay all
costs and expenses incident to the furnishing of any amended Prospectus of or
any supplement to be attached to the Prospectus.
(h) As a condition of the closing, the Company shall obtain from its officers
and directors of the Company written commitments restricting the sale of 100% of
their common stock for (12) months after the closing.
(i) During a date five years after the date hereof, the Company will make
available to its shareholders, as soon as practicable, and deliver to the
Underwriter:
(1) as soon as they are available, copies of all reports
(financial or other) mailed to shareholders;
(2) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
(3) every press release and every material news item or
article of interest to the financial community in respect of the
Company or its affairs which was prepared and released by or on behalf
of the Company; and
(4) any additional information of a public nature concerning
the Company (and any future subsidiaries) or its businesses which the
Underwriter may request.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(j) The Company will maintain a Transfer Agent and, if necessary under
the jurisdiction of incorporation of the Company, a Registrar (which may be the
same entity as the Transfer Agent) for its Common Stock.
(k) The Company will furnish to the Underwriter or on the Underwriter's
order, without charge, at such place as the Underwriter may designate, copies of
each Preliminary Prospectus, the Final Prospectus the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriter may request.
(1) Neither the Company nor any of its officers, directors,
stockholders or any of its affiliates will take, directly or indirectly, any
action designed to, or which might in the future reasonably be expected to cause
or result in stabilization or manipulation of the price of any of the Company's
securities.
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<PAGE> 12
(m) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
(n) The Company shall cause the Securities to be listed on the NASDAQ
Small Cap Market or on an exchange for a period of five (5) years from the date
hereof, and use its best efforts to maintain the listing of the Securities to
the extent they are outstanding.
(o) As soon as practicable, (i) before the effective date of the
Registration Statement, file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities and (ii) but in no event
more than 30 days from the effective date of the Registration Statement, take
all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and/or Moody's OTC Manual and to continue such
inclusion for a period of not less than five years if the securities are not
listed on an exchange. The Company also agrees to take such steps as may be
necessary to comply with the requirements of any state to be in compliance with
the aftermarket provisions of Section 18 of the Securities Act of 1933, as
amended, and as further amended by the National Securities Markets Improvement
Act of 1996.
(p) Until the completion of the distribution of the Securities, the
Company shall not without the prior written consent of the Underwriter and its
counsel which consent shall not be unreasonably withheld or delayed, issue,
directly or indirectly, any press release or other communication or hold any
press conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in 'the ordinary course of
the Company's business consistent with past practices with respect to the
Company's operations.
(q) Until the earlier of (i) five (5) years from the date hereof or
(ii) the sale to the public of the Warrant Shares, the Company will not take any
action or actions which may prevent or disqualify the Company's use of Form SB-2
(or other appropriate form) for the registration under the Act of the Warrant
Shares and the Representative's Securities.
5. Conditions of the Underwriter's Obligations. The obligation of the
Underwriters to offer and sell the Securities and the Option Securities is
subject to the accuracy (as of the date hereof, and as of the Closing Dates) of
and compliance with the representations and warranties of the Company to the
performance by it of its agreement and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective as and when
cleared by the Commission, and you shall have received notice thereof, on or
prior to any closing date no stop order suspending the effectiveness of the
Prospectus shall have been issued and no proceedings for that or similar purpose
shall have been instituted or shall be pending, or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the Commission; any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel to the Underwriter; and
qualification, under the securities laws of such states as you may designate, of
the issue and sale of the Securities upon the terms and conditions herein set
forth or contemplated and containing no provision unacceptable to you shall have
been secured, and no stop order shall be in effect denying or suspending
effectiveness of such qualification nor shall any stop order proceedings with
respect thereto be instituted or pending or threatened under such law.
(b) On any closing date and, with respect to the letter referred to in
subparagraph (iii), as of the date hereof, you shall have received:
(i) the opinion, together with such number of signed or facsimile
copies of such opinion as you may reasonably request, addressed to you by the
Milling Law Offices, counsel for the Company, in form and substance reasonably
satisfactory to the Underwriter and William M. Prifti, Esq., counsel to the
Underwriter, dated each such closing date, to the effect that:
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<PAGE> 13
(A) The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the jurisdiction in which it is
incorporated and has all necessary corporate power and authority to carry on its
business as described in the Prospectus.
(B) The Company is qualified to do business in each jurisdiction in
which conducting its business requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
Company's business or assets.
(C) The Company has the full corporate power and authority to enter
into this Agreement, the Representative's Warrant Agreement and to consummate
the transactions provided for therein and each such Agreement has been duly and
validly authorized, executed and delivered by the Company. Each of this
Agreement and the Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other party thereto, constitutes a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency or
similar laws governing the rights of creditors and to general equitable
principles, and provided that no opinion need be given as to the enforceability
of any indemnification or contribution provisions, and none of the Company's
execution or delivery of this Agreement, or the Representative's Warrant
Agreement, its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its business as
described in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, conflicts with or will conflict with or results or will
result in any material breach or violation of any of the terms or provisions of,
or constitutes or will constitute a material default under, or result in the
creation or imposition of any material lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company pursuant to the terms
of (A) the articles of incorporation or by-laws of the Company, (B) to the
knowledge of such counsel, any material license, contract, indenture, mortgage,
deed of trust, voting trust agreement, stockholders' agreement, note, loan or
credit agreement or any other agreement or instrument to which the Company is a
party or by which it is or may be bound, or (C) to the knowledge of such
counsel, any statute, judgment, decree, order, rule or regulation applicable to
the Company, whether domestic or foreign.
(D) The Company had authorized and outstanding capital stock as set
forth in the Prospectus under the heading "Capitalization" as of the date set
forth therein, and all of such issued and outstanding shares of capital stock
have been duly and validly authorized and issued, and to the knowledge of such
counsel are fully paid and nonassessable, and to the knowledge of such counsel
no stockholder of the Company is entitled to any preemptive rights to subscribe
for, or purchase shares of the capital stock and to the knowledge of such
counsel none of such securities were issued in violation of the preemptive
rights of any holders of any securities of the Company.
(E) To the knowledge of such counsel, the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities, except
for this Agreement, the Representative's Warrant Agreement, and except as
described in the Prospectus. The Common Stock, the Warrants and the
Representative's Warrants each conforms in all material respects to the
respective descriptions thereof contained in the Prospectus. The outstanding
shares of Common Stock, the Redeemable Warrant and the Warrant Stock and the
Representative's Warrant Stock, upon issuance and delivery and payment therefore
in the manner described herein, the Warrant Agreement and the Representative
Agreement, as the case may be, will be, duly authorized, validly issued, fully
paid and nonassessable. There are no preemptive or other rights to subscribe for
or to purchase, or any restriction upon the voting or transfer of, any shares of
Common Stock pursuant to the Company's articles of incorporation, by-laws, other
governing documents or any agreement or other instrument known to such counsel
to which the Company is a party or by which it is bound.
(F) The certificates representing the Securities comprising the Common
Stock are in due and proper form and and the Representative's Warrant has been
duly authorized and reserved for issuance and when issued and delivered in
accordance with the respective terms of the Warrant Agreement and
Representative's Warrant Agreement, respectively, will duly and validly issued,
fully paid and nonassessable.
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(G) To the knowledge of such counsel, there are no claims, suits or
other legal proceedings pending or threatened against the Company in any court
or before or by any governmental body which might materially affect the business
of the Company or the financial condition of the Company as a whole, except as
set forth in or contemplated by the Prospectus.
(H) Based on oral and/or written advice from the staff of the
Commission, the Registration Statement has become effective and, to the
knowledge of such counsel, no stop order suspending the effectiveness of the
Prospectus is in effect and no proceedings for that purpose are pending before,
or threatened by, federal or by a state securities administrator.
(I) To the knowledge of such counsel, there are no legal or
governmental proceedings, actions, arbitrations, investigations, inquiries or
the like pending or threatened against the Company of a character required to be
disclosed in the Prospectus which have not been so disclosed, questions the
validity of the capital stock of the Company or this Agreement or the
Representative's Warrant Agreement or might adversely affect the condition,
financial or otherwise, or the prospects of the Company or which could adversely
affect the Company's ability to perform any of its obligations under this
Agreement, or the Representative's Warrant Agreement.
(J) To such counsel's knowledge, there are no material agreements,
contracts or other documents known to such counsel required by the Act to be
described in the Registration Statement and the Prospectus and filed as exhibits
to the Registration Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits thereto, and to such
counsel's knowledge (A) the exhibits which have been filed are correct copies of
the documents of which they purport to be copies; (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company is a party or by
which it is bound, including any document to which the Company is a party or by
which it is bound incorporated by reference into the Prospectus and any
supplement or amendment thereto, are accurate in all material respects and
fairly represent the information required to be shown by Form SB-2.
(K) No consent, approval, order or authorization from any regulatory
board, agency or instrumentality having jurisdiction over the Company, or its
properties (other than registration under the Act or qualification under state
or foreign securities law or approval by the NASD) is required for the valid
authorization, issuance, sale and delivery of the Securities, the Option
Securities or the Representative's Warrant.
(L) The statements in the Prospectus under "Risk Factors- Dependence on
Key Personnel" "Management-Limitation of Liability" "Description of the
Securities," and "Shares Eligible For Future Sale" have been reviewed by such
counsel, and insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions, are correct in
all material respects.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not certified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the Closing Date and on any later date on which
Option Shares are to be purchased, the Registration Statement and any amendment
or supplement, when such documents became effective or were filed with the
Commission (other than the financial statements including the notes thereto and
supporting schedules and other financial and statistical information derived
therefrom, as to which such counsel need express no comment) contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or at the Closing Date or any later date on which the Option Shares are to be
purchased, as the case may be, the Prospectus and any amendment or supplement
thereto (other than the financial statements including the notes thereto and
other financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a
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<PAGE> 15
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
Such opinion shall also cover such other matters incident to the
transactions contemplated hereby and the offering Prospectus as you or counsel
to the Underwriter shall reasonably request. In rendering such opinion, to the
extent deemed reasonable by them, such counsel may rely upon certificates of any
officer of the Company or public officials as to matters of fact of which the
maker of such certificate has knowledge.
(ii) a certificate, signed by the Chief Executive Officer and the
Principal Financial or Accounting Officer of the Company dated the Closing Date,
to the effect that with regard to the Company, each of the conditions set forth
in Section 5(d) have been satisfied.
(iii) a letter, addressed to the Underwriter and in form and substance
satisfactory to the Underwriter in all respects (including the nonmaterial
nature of the changes or decreases, if any, referred to in clause (D) below),
from, Horton & Company L.L.C.dated, respectively, as of the effective date of
the Registration Statement and as of the Closing Date, as the case may be:
(A) Confirming that they are independent public accountants with
respect to the Company and its consolidated subsidiaries, if any, within the
meaning of the Act and the applicable published Rules and Regulations.
(B) Stating that, in their opinion, the financial statements, related
notes and schedules of the Company and its consolidated subsidiaries, if any,
included in the Registration Statement examined by them comply as to form in all
material respects with the applicable accounting requirements of the Act and the
published Rules and Regulations thereunder.
(C) Stating that, with respect to the period from December 31, 1997, to
a specified date (the specified date") not earlier than five (5) business days
prior to the date of such letter, they have read the minutes of meetings of the
stockholders and board of directors (and various committees thereof) of the
Company and its consolidated subsidiaries, if any, for the period from December
31, 1997 through the specified date, and made inquiries of officers of the
Company and its consolidated subsidiaries, if any, responsible for financial and
accounting matters and, especially as to whether there was any decrease in
sales, income before extraordinary items or net income as compared with the
corresponding period in the preceding year; or any change in the capital stock
of the Company or any change in the longterm debt or any increase in the
short-term bank borrowings or any decrease in net current assets or net assets
of the Company or of any of its consolidated subsidiaries, if any, and further
stating that while such procedures and inquiries do not constitute an
examination made in accordance with generally accepted auditing standards,
nothing came to their attention which caused them to believe that during the
period from December 31, 1997, through the specified date there were any
decreases as compared with the corresponding period in the preceding year in
sales, income before extraordinary items or net income; or any change in the
capital stock of the Company or consolidated subsidiary, if any, or any change
in the long term debt or any increase in the short-term bank borrowings (other
than any increase in short-term bank borrowings in the ordinary course of
business) of the Company or any consolidated subsidiary, if any, or any decrease
in the net current assets or net assets of the Company or any consolidated
subsidiary, if any; and
(D) Stating that they have carried out certain specified procedures
(specifically set forth in such letter or letters) as specified by the
Underwriter (after consultations with Horton & Company L.L.C. CPA's relating to
such procedures), not constituting an audit, with respect to certain tables,
statistics and other financial data in the Prospectus specified by the
Underwriter and such financial data not included in the Prospectus but from
which information in the Prospectus is derived, and which have been obtained
from the general accounting records of the Company or consolidated subsidiaries,
if any, or from such accounting records by analysis or computation, and having
compared such financial data with the accounting records of the Company or the
consolidated subsidiaries, if any, stating that they have found such financial
data to agree with the accounting records of the Company.
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(c) All corporate proceedings and other legal matters relating to this
Agreement, the Prospectus and other related matters shall be satisfactory to or
approved by counsel to the Underwriter and you shall have received from the
Milling Law Offices a signed opinion dated as of each closing date, with respect
to the incorporation of the Company, the validity of the Securities, the form of
the Prospectus, (other than the financial statements together with related notes
and other financial and statistical data contained in the Prospectus or omitted
therefrom, as to which such counsel need express no opinion), the execution of
this Agreement and other related matters as you may reasonably require.
(d) At each closing date, (i) the representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects with the same effect as if made on and as of such closing date; (ii)
the Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations and in all material respects conform to the
requirements thereof, and neither the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary, in light of the
circumstances under which they were made, in order to make the statements
therein not misleading; (iii) there shall have been since the respective dates
as of which information is given no material adverse change in the business,
properties or condition (financial or otherwise), results of operations, capital
stock, longterm debt or general affairs of the Company from that set forth in
the Prospectus, except changes which the Prospectus indicates might occur after
the effective date of the Prospectus, and the Company shall not have incurred
any material liabilities or material obligations, direct or contingent, or
entered into any material transaction, contract or agreement not in the ordinary
course of business other than as referred to in the Prospectus and which would
be required to be set forth in the Prospectus; and (iv) except as set forth in
the Prospectus, no action, suit or proceeding at law or in equity shall be
pending or threatened against the Company which would be required to be set
forth in the Prospectus, and no proceedings shall be pending or threatened
against the Company or any subsidiary before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company.
(e) On the Initial Closing Date, the Company shall have executed and
delivered to the Underwriter, (i) the Representatives' Warrant Agreement
substantially in the form filed as an Exhibit to the Registration Statement in
final form and substance satisfactory to the Underwriter, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(f) On or before the Initial Closing Date, the Securities shall have
been duly approved for listing on an exchange or on NASDAQ, Small Cap Market.. .
(g) On or before the Initial Closing Date, there shall have been
delivered to the Underwriter all of the Lock-up Agreements required to be
delivered pursuant to Section 3(a)(xxv) and 4(h), in form and substance
satisfactory to the Underwriter and Underwriter's counsel.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Underwriter may terminate this
Agreement or, if the Underwriter so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
6. Conditions of the Company's Obligations. The obligation of the Company to
sell and deliver the Securities is subject to the following:
(a) The provisions regarding the effective date, as described in
Section 10.
(b) At the Initial Closing Date, no stop order suspending the
effectiveness of the Prospectus shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission or by any state
securities department.
16
<PAGE> 17
(c) Tender of payment by the Underwriter in accord with Section 2
hereof.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and its employees and each person, if any, who controls you within the meaning
of the Act, against any losses, claims, damages or liabilities, joint or several
(which shall, for any purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), to which
each Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission made in the Prospectus, or such amendment or supplement to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, which is in reliance upon and in conformity
with written information furnished by the Company to you specifically for use in
the preparation thereof, and provided further that the indemnity agreement
contained in this subsection (a) shall not inure to the benefit of you with
respect to any person asserting any such loss, claim, damage or liability who
has purchased the Securities which are the subject thereof if you or any
participants failed to send or give a copy of the Prospectus to such person at
or prior to the written confirmation of the sale of such Securities to such
person and except that, with respect to any untrue statement or omission or any
alleged untrue statement or omission, made in any Pre-Effective Prospectus, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Underwriter ( or to any person controlling any such underwriter)
from whom the person asserting any such loss, claim, damage or liability
purchased the securities concerned to the extent that such untrue statement or
omission, or alleged untrue statement or omission, has been corrected in a later
Pre-Effective Prospectus or in the Final Prospectus unless the Underwriter
circulated a later Pre-Effective Prospectus or the Final Prospectus to such
person
(b) Each Underwriter will indemnify and hold harmless the Company, each
of its directors, each of its officers, each person, if any, who controls the
Company within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission was made in the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by you specifically for use in the preparation thereof. This indemnity
will be in addition to any liability which any Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party, similarly notified, to assume the
defense thereof, subject to the provisions herein stated, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that, if the indemnified party is you or a person who controls you, the fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically
17
<PAGE> 18
authorized in writing by the indemnifying party or (ii) the named parties to any
such action (including any impleaded parties) include both you or such
controlling person and the indemnifying party and you or such controlling person
shall have been advised by such counsel that there is a conflict of interest
which would prevent counsel for the indemnifying party from representing the
indemnifying party and you or such controlling person (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of you or such controlling person, it being understood, however, that
the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
or which are consolidated into the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for you and all such
controlling persons, which firm shall be designated in writing by you). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnified party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnified party.
8. Contribution. In order to provide for just and equitable
contribution tinder the Act in any case in which (i) the indemnifying party
makes a claim for indemnification pursuant to Section 7 hereof but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 7 provide for
indemnification in such case, or (ii) contribution under the Act may be required
on the part of the Underwriters, then the Company and the Underwriters in the
aggregate shall contribute to the aggregate losses, claims, damages, or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) in either such case (after contribution
from others) in such proportions that the Underwriters are responsible in the
aggregate for that portion of such losses, claims, damages or liabilities
determined by multiplying the total amount of such losses, claims, damages or
liabilities times the difference between the public offering price and the
commission to the Underwriter and dividing the product thereof by the public
offering price, and the Company, if applicable, shall be responsible for that
portion of such losses, claims, damages or liabilities times the commission to
the Underwriters and dividing the product thereof by the public offering price;
provided, however, that the Underwriters shall not be required to so contribute
any amount in excess of the underwriting discount applicable to the Securities
purchased by the Underwriters hereunder if such allocation is not permitted by
applicable law, then the relative fault of the Company and the Underwriters in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. No person
guilty of a fraudulent misrepresentation (within the meaning of Section 12(2) of
the Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. The foregoing contribution agreement shall in
no way affect the contribution liabilities of any person having liability under
Section 12 of the Act other than the Company and the Underwriter. As used in
this paragraph, the term "Underwriters" includes any person who controls the
Underwriters within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this paragraph is not permitted by law, then any
Underwriter and each person who controls any Underwriter shall be entitled to
contribution from the Company, to the full extent permitted by law.
9. Effective Date. This Agreement shall become effective at 10:00 a.m.
New York time on the next full business day following the effective date of the
Registration Statement, or at such other time after the effective date of the
Prospectus as you in your discretion shall first commence the public offering of
any of the Securities covered thereby, provided, however, that at all times the
provisions of Sections 7, 8, 9 and 11 shall be effective.
10. Termination.
(a) This Agreement, may be terminated at any time prior to the Closing
Date by you if in your judgment it is impracticable to offer for sale or to
enforce contracts made by you for the sale of the Securities agreed to be sold
hereunder by reason of (i) the Company as a whole having sustained a material
loss, whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action, order
or decree, (ii) trading in securities of the Company having been suspended by a
state securities administrator or by the Commission, (iii) material governmental
restrictions having been imposed on trading in securities generally (not in
force and effect on the date hereof) or trading on the New York Stock Exchange,
18
<PAGE> 19
American Stock Exchange, or in the over-the-counter market shall have been
suspended, (iv) a banking moratorium having been declared by federal or New York
State authorities, (v) an outbreak or escalation of hostilities or other
national or international calamity having occurred, (vi) the passage by the
Congress of the United States or by any state legislative body, of any act or
measure, or the adoption of any orders, rules or regulations by any governmental
body or any authoritative accounting institute or board, or any governmental
executive, which is believed likely by you to have a material impact on the
business, financial condition or financial statements of the Company; or (vii)
any material adverse change having occurred, since the respective dates as of
which information is given in the Prospectus, in the condition, financial or
otherwise, of the Company as a whole, whether or not arising in the ordinary
course of business, (viii)Michael Ricks ceases to be employed by the Company in
his present capacity; (ix) the Securities are not listed the American Stock
Exchange or any other exchange or on NASDAQ.
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 10 or in Section 9, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
11. Representations, Warrants and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company (or its officers) and the Underwriter set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation made by or on behalf of the Underwriter, the Company, or
any of their officers or directors and will survive delivery of and payment for
the Securities.
Notices. All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to you, will be mailed,
delivered or telephoned and confirmed to you at, Westport Resources
Investment Services, Inc. 315 Post Road West, Westport, Ct. 06880,
Attn: John Lane, Vice President; and to Weststar Environmental Inc.,
9550 Regency Square Boulevard, Jacksonville, FL 32225, Attn: Michael
Ricks, President.
Parties in Interest. This Agreement is made solely for the benefit of
the Underwriter(s), and the Company, and their respective controlling
persons, directors and officers, and their respective successors,
assigns, executors and administrators. No other person shall acquire or
have any right under or by virtue of this Agreement.
14. Headings. The Section headings in this Agreement have been inserted
as a matter of convenience of reference and are not a part of this Agreement.
15. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Connecticut, without giving effect
to conflict of law principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which together shall constitute one and the same
instrument.
19
<PAGE> 20
If the foregoing correctly sets forth the understanding between the
Company and you, as Representative of the several underwriters, please so
indicate in the space provided below for such purpose, whereupon this letter and
your acceptance shall constitute a binding agreement between us.
Very truly yours,
Weststar Environmental Inc.
By ________________________________
(Authorized Officer)
Michael Ricks, President
Accepted as of the date first above written:
Westport Resources Investment Services, Inc.
As Representative of the several Underwriters
By ________________________________
(Authorized Officer)
John D. Lane, Vice President
20
<PAGE> 21
EXHIBIT A
SCHEDULE I
UNDERWRITERS
Shares of
Underwriter Common Stock
and Redeemable Warrants
Westport Resources Investment Services, Inc.
TOTAL 1,000,000
<PAGE> 1
EXHIBIT 1.3
EXHIBIT B
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. NO
OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE
CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND ANY
SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY
KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE
DATE. YOUR EXECUTION HEREOF WELL INVOLVE NO OBLIGATION OR COMMITMENT OF ANY KIND
UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE.
WESTSTAR ENVIRONMENTAL INC.
SELECTED DEALERS AGREEMENT
, 1998
Dear Sirs:
1. Westport Resources Investment Services, Inc. named as the
Underwriter ("Underwriter") in the enclosed preliminary Prospectus, proposes to
offer on a firm commitment basis, subject to the terms and conditions and
execution of the Underwriting Agreement, 1,000,000 shares of common stock at
$per share and 1,000,000 Redeemable Warrants at $ per Warrant ("Securities") of
the above Company. The Securities are more particularly described in the
enclosed preliminary Prospectus, additional copies of which will be supplied in
reasonable quantities upon request. Copies of the definitive Prospectus will be
supplied after the effective date of the Registration Statement.
2. The Underwriter is soliciting offers to buy, upon the terms and
conditions hereof, a part of the Securities from Selected Dealers, including you
who are to act as principal and who are (i) registered with the Securities and
Exchange Commission ("Commission") as broker-dealers under the Securities
Exchange Act of 1934, as amended ("1934 Act"), and members in good standing with
the National Association of Securities Dealers, Inc. ("NASD"), or (ii) dealers
or institutions with their principal place of business located outside the
United States, its territories and possessions who are not eligible for
membership in the NASD and who agree to make no sales within the United States,
its territories or possessions or to persons who are nationals thereof or
residents therein and, in making sales, to comply with the NASD's Interpretation
with Respect to FreeRiding and Withholding and with Sections 2730, 2740,2420, to
the extent applicable to foreign nonmember brokers or dealers, and Section 2750
of the NASD's Rules of Fair Practice. The Securities are to be offered at a
public price of $ per share and $ per Redeemable Warrant. Selected Dealers will
be allowed a concession of $... per share , except as provided below. You will
be notified of the precise amount of such concession prior to the effective date
of the Registration Statement. You may reallow not in excess of $ per share and
$ per Redeemable Warrant to dealers who meet the requirements set forth in this
Section 2. This offer is solicited subject to the issuance and delivery of the
Securities and their acceptance by the Underwriter, to the approval of legal
matters by counsel and to the terms and conditions as herein set forth.
3. Your offer to purchase may be revoked in whole or in part without obligation
or commitment of any kind by you and any time prior to acceptance and no offer
may be accepted by us and no sale can be made until after the registration
statement covering the Securities has become effective with the Commission.
Subject to the foregoing,
<PAGE> 2
upon execution by you of the Offer to Purchase below and the return of same to
us, you shall be deemed to have offered to purchase the number of Securities set
forth in your offer on the basis set forth in paragraph 2 above. Any oral notice
by us of acceptance of your offer shall be immediately followed by written or
telegraphic confirmation preceded or accompanied by a copy of the Prospectus. If
a contractual commitment arises hereunder, all the terms of this Selected
Dealers Agreement shall be applicable. We may also make available to you an
allotment to purchase Securities, but such allotment shall be subject to
modification or termination upon notice from us any time prior to an exchange of
confirmations reflecting completed transactions. All references hereafter in
this Agreement to the purchase and sale of Securities assume and are applicable
only if contractual commitments to purchase are completed in accordance with the
foregoing Selling concessions will be lost however, if any of the offered
securities purchased by you are resold within 45 days of the effective date of
the registration statement and reacquired by the managing underwriter by reason
of stabilization activities in connection with this offering.( Please note that
the concession must be repaid to the syndicate and will result in a sale price
to you that is equal to the public offering price.)
4. You agree that in reoffering said Securities, if your offer is
accepted after the effective date, you will make a bona fide public distribution
of same. You will advise us upon request of Securities purchased by you
remaining unsold and we shall have the right to repurchase such Securities upon
demand at the public offering price without paying the concession with respect
to any Securities so repurchased. Any of the Securities purchased by you
pursuant to this Agreement are to be subject to the terms hereof. Securities
shall not be offered or sold by you below the public offering price before the
termination of this Agreement.
5. Payment for Securities which you purchase hereunder shall be made by
you on or before three (3) business days after the date of each confirmation by
certified or bank cashier's check payable to the Underwriter. Certificates for
the Securities shall be delivered as soon as practicable after delivery
instructions are received by the Underwriter.
6. A registration statement covering the offering has been filed with
the Securities and Exchange Commission in respect to the Securities. You will be
promptly advised when the registration statement becomes effective. Each
Selected Dealer in selling Securities pursuant hereto agrees (which agreement
shall also be for the benefit of the Company) that it will comply with the
applicable requirements of the Securities Act of 1933 and of the Securities
Exchange Act of 1934 and any applicable rules and regulations issued under said
Acts. No person is authorized by the Company or by the Underwriter to give any
information or to make any representations other than those contained in the
Prospectus in connection with the sale of the Securities. Nothing contained
herein shall render the Selected Dealers a member of the Underwriting Group or
partners with the Underwriter or with one another.
7. You will be informed by us as to the states in which we have been
advised by counsel the Securities have been qualified for sale or are exempt
under the respective securities or blue sky laws of such states, but we have not
assumed and will not assume any obligation or responsibility as to the right of
any Selected Dealer to sell Securities in any state. You agree not to sell
Securities in any other state or jurisdiction and to not sell Securities in any
state or jurisdiction unless you are qualified or licensed to sell securities in
such state or jurisdiction.
8. The Underwriter shall have full authority to take such action as it
may deem advisable in respect of all matters pertaining to the offering or
arising thereunder. The Underwriter shall not be under any liability to you,
except such as may be incurred under the Securities Act of 1933 and the rules
and regulations thereunder, except for lack of good faith and except for
obligations assumed by us in this Agreement, and no obligation on our part shall
be implied or inferred herefrom.
9. Selected Dealers will be governed by the conditions herein set forth
until this Agreement is terminated. This Agreement will terminate when the
offering is completed. Nothing herein contained shall be deemed a commitment on
our part to sell you any Securities; such contractual commitment can only be
made in accordance with the provisions of paragraph 3 hereof.
10. You represent that you are a member in good standing of the NASD
and registered as a broker-dealer with the Commission, or that you are a foreign
broker-dealer not eligible for membership under Section 1 of the Bylaws of the
NASD who agrees to make no sales within the United States, its territories or
possessions or to persons who are
2
<PAGE> 3
nationals thereof or residents therein and, in making sales, to comply with the
NASD's interpretation with Respect to FreeRiding and Withholding and with
Sections 2730, 2740, 2420 to the extent applicable to foreign nonmember brokers
and dealers, and Section 2750 of the NASD's Rules of Fair Practice. Your
attention is called to and you agree to comply with the following: (a) Article
III, Section 1 of the Rules of Fair Practice of the NASD and the interpretations
of said Section promulgated by the Board of Governors of the NASD including
Section 2740 and the interpretation with respect to "Free-Riding and
Withholding;" (b) Section 10(b) of the 1934 Act and Regulation M, 10b-10 of the
general rules and regulations promulgated under the 1934 Act; and (c) Rule
15c2-8 of the general rules and regulations promulgated under the 1934 Act
requiring the distribution of a preliminary Prospectus to all persons reasonably
expected to be purchasers of the Securities from you at least 48 hours prior to
the time you expect to mail confirmations. You, as a member of the NASD, by
signing this Agreement, acknowledge that you are familiar with the cited laws
and rules and agree that you will not directly and/or indirectly violate any
provisions of applicable law in connection with your participation in the
distribution of the Securities.
11. In addition to compliance with the provisions of paragraph 10
hereof, you will not, until advised by us in writing or by wire that the entire
offering has been distributed and closed, bid for or purchase Securities in the
open market or otherwise make a market in the Securities or otherwise attempt to
induce others to purchase the Securities in the open market. Nothing contained
in this paragraph 11 shall, however, preclude you from acting as agent in the
execution of unsolicited orders of customers in transactions effectuated for
them through a market maker.
12. You understand that the Underwriter may in connection with the
offering engage in stabilizing transactions. If the Underwriter contracts for or
purchases in the open market in connection with such stabilization any
Securities sold to you hereunder and not effectively placed by you, the
Underwriter may charge you the Selected Dealer's concession originally allowed
you on the Securities so purchased and you agree to pay such amount to us on
demand.
13. We agree that without your consent we will not sell to any account
over which we exercise discretionary authority any of the Securities which we
purchase and which are subject to the terms of this Agreement.
14. By submitting an Offer to Purchase you confirm that you may, in
accordance with Rule 15c3-1 adopted under the 1934 Act, agree to purchase the
number of Securities you may become obligated to purchase under the provisions
of this Agreement.
15. All communications from you should be directed to us at 315 Post
Road West, Westport, Ct. 06880 Attn: John D. Lane, Vice President ,
(1-800-935-0222 or 203-221-6450) and fax (203-291-7931) (All communications from
us to you shall be directed to the address to which this letter is mailed.)
Very truly yours,
Westport Resources Investment Services, Inc.
By _________________________________________
(Authorized Officer)
3
<PAGE> 4
OFFER TO PURCHASE
The undersigned does hereby offer to purchase (subject to the right to
revoke as set forth in paragraph 3) ______________ * Securities in accordance
with the terms and conditions set forth above. We hereby acknowledge receipt of
the Prospectus referred to in the first paragraph thereof relating to such
Securities. We further state that in purchasing such Securities we have relied
upon such Prospectus and upon no other statement whatsoever, written or oral.
____________________________________________
By _________________________________________
(Authorized Officer)
*If a number appears here which does not correspond with what you wish to offer
to purchase, you may change the number by crossing out the number, inserting a
different number and initializing the change.
4
<PAGE> 1
EXHIBIT 1.4
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT AS TO SUCH
SECURITIES FILED UNDER THE ACT, OR AN EXEMPTION FROM REGISTRATION, AND
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER MAY REQUIRE AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HEREOF THAT SUCH REGISTRATION IS
NOT REQUIRED AND THAT SUCH LAWS ARE COMPLIED WITH.
VOID AFTER 3:30 P.M., EASTERN TIME, ON 2002
REPRESENTATIVE'S
WARRANT TO PURCHASE
COMMON STOCK AND REDEEMABLE WARRANTS
WESTSTAR ENVIRONMENTAL INC.
This is to Certify That, FOR VALUE RECEIVED, Westport Resources Investment
Services, Inc. (the "Holder") is entitled to purchase, subject to the provisions
of this Warrant, from Weststar Environmental Inc. ("Company"), a Florida
corporation, at any time on or after 1998, and not later than 3:30 p.m., Eastern
Time, on , 2002 ,100,000 shares of Common Stock and 100,000 Redeemable Warrants
of the Company ("Securities") exercisable at a purchase price for the Securities
which is 145% of the public offering price. The number of Securities to be
received upon the exercise of this Warrant and the price to be paid for the
Securities may be adjusted from time to time as hereinafter set forth. The
purchase price of a Security in effect at any time and as adjusted from time to
time is hereinafter sometimes referred to as the "Exercise Price." This Warrant
is or may be one of a series of Warrants identical in form issued by the Company
to purchase an aggregate of 100,000 shares of Common Stock and 100,000
Redeemable Warrants. The Securities, as adjusted from time to time, underlying
the Warrants are hereinafter sometimes referred to as "Warrant Securities". The
Securities issuable upon the exercise hereof are in all respects identical to
the securities being purchased by the Underwriter for resale to the public
pursuant to the terms and conditions of the Underwriting Agreement entered into
on this date between the Company and Holder.
(a) Exercise of Warrant. Subject to the provisions of Section (g) hereof, this
Warrant may be exercised in whole or in part at anytime or from time to time on
or after , 1998, but not later than 3:30 p.m., Eastern Time on , 2002, or if ,
2002 is a day on which banking institutions are authorized by law to close, then
on the next succeeding day which shall not be such a day, by presentation and
surrender hereof to the Company or at the office of its stock transfer agent, if
any, with the Purchase Form annexed hereto duly executed and accompanied by
payment of the Exercise Price for the number of shares of Common Stock or
Redeemable Warrants as specified in such Form, together with all federal and
state taxes applicable upon such exercise. The Company agrees to provide notice
to the Holder that any tender offer is being made for the Securities no later
than the day the Company becomes aware that any tender offer is being made for
the Securities. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the right of the Holder to purchase the balance of the
securities purchasable hereunder along with any additional Redeemable Warrants
not exercised. Upon receipt by the Company of this Warrant at the office of the
Company or at the office of the Company's stock transfer agent, in proper form
for exercise and accompanied by the total Exercise Price, the Holder shall be
deemed to be the holder of record of the Securities issuable upon such exercise,
notwithstanding that the
<PAGE> 2
stock transfer books of the Company shall then be closed or that certificates
representing such Securities shall not then be actually delivered to the Holder.
(b) Reservation of Securities. The Company hereby agrees that at all
times there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of Securities as shall be required for issuance or delivery
upon exercise of this Warrant. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all
Securities upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. As
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all Securities issuable upon the exercise of the Warrants to be
listed (subject to official notice of issuance) on all securities exchanges on
which the common stock issued to the public in connection herewith may then be
listed and/or quoted on he American Stock Exchange or on NASDAQ Small Cap
Marketplace or any other exchange.
(c) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as
follows:
(1) If the Securities are listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange, the current value
shall be the last reported sale price of the common stock on such exchange on
the last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average of the closing bid and asked prices
for such day on such exchange; or
(2) If the Securities are not so listed or admitted to unlisted trading
privileges, the current value shall be the mean of the last reported bid and
asked prices reported by the National Association of Securities Dealers
Automated Quotation System (or, if not so quoted on NASDAQ or by the National
Quotation Bureau, Inc.) on the last business day prior to the date of the
exercise of this Warrant; or
(3) If the Securities are not so listed or admitted to unlisted trading
privileges and bid and asked prices are not so reported, the current value shall
be an amount, not less than book value, determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company, such determination
to be final and binding on the Holder.
(d) Exchange, Assignment or Loss of Warrant. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations entitling the
Holder thereof to purchase (under the same terms and conditions as provided by
this Warrant) in the aggregate the same number of Securities purchasable
hereunder. This Warrant may not be sold, transferred, assigned, or hypothecated
until after one year from the effective date of the registration statement
except that it may be (i) assigned in whole or in part to the officers of the
"Underwriter(s)", and (ii)transferred to any successor to the business of the
"Underwriter(s)." Any such assignment shall be made by surrender of this Warrant
to the Company, or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and with funds sufficient to pay
any transfer tax; whereupon the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in-such instrument of
assignment, and this Warrant shall promptly be canceled. This Warrant may be
divided or combined with other Warrants which carry the same rights upon
presentation hereof at the office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants issued in
substitution for or replacement of this Warrant, or into which this Warrant may
be divided or exchanged. Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the
2
<PAGE> 3
Company, whether or not the Warrant so lost, stolen, destroyed, or mutilated
shall be at any time enforceable by anyone.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) Notices to Warrant Holders. So long as this Warrant shall be
outstanding and unexercised (i) if the Company shall pay any dividend exclusive
of a cash dividend, or make any distribution upon the common stock or (ii) if
the Company shall offer to the holders of common stock for subscription or
purchase by them any shares of stock of any class or any other rights, or (iii)
if any capital reorganization of the Company, reclassification of the capital
stock of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or transfer of all or substantially all of the
property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then, in any such case, the Company shall cause to be delivered to the
Holder, at least ten (10) days prior to the date specified in (x) or (y) below,
as the case may be, a notice containing a brief description of the proposed
action and stating the date on which (x) a record is to be taken for the purpose
of such dividend, distribution or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, lease, dissolution,
liquidation or winding up is to take place and the date, if any, is to be fixed,
as of which the holders of common stock of record shall be entitled to exchange
their common stock for equivalent securities or other property deliverable upon
such reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(g) Adjustment of Exercise Price and Number of Shares Deliverable.
(A)(i) Except as hereinafter provided, in the event the Company shall,
at any time or from time to time after the date hereof, issue any common stock
as a stock dividend to the holders of common stock, or subdivide or combine the
outstanding common stock into a greater or lesser number of shares (any such
issuance, subdivision or combination being herein call a "Change of Shares"),
then, and thereafter upon each further Change of Shares, the Exercise Price of
the common stock issuable upon the exercise of the Warrant and the Redeemable
Warrant in effect immediately prior to such Change of Shares shall be changed to
a price (including any applicable fraction of a cent to the nearest cent)
determined by dividing (i) the sum of (a) the total number of shares of Common
Stock outstanding immediately prior to such Change of Shares, multiplied by the
Exercise Price in effect immediately prior to such Change of Shares, and (b) the
consideration, if any, received by the Company upon such issuance, subdivision
or combination by (ii) the total number of shares of common stock outstanding
immediately after such Change of Shares; provided, however, that in no event
shall the Exercise Price be adjusted pursuant to this computation to an amount
in excess of the Exercise Price in effect immediately prior to such computation,
except in the case of a combination of outstanding common stock.
For the purposes of any adjustment to be made in accordance with this
Section (g) the following provisions shall be applicable:
(I) Common stock issuable by way of dividend or other distribution on
any capital stock of the Company shall be deemed to have been issued immediately
after the opening of business on the day following the record date for the
determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(II) The number of shares of common stock at any one time outstanding
shall not be deemed to include the number of shares issuable (subject to
readjustment upon the actual issuance thereof) upon the exercise of options,
rights or warrants and upon the conversion or exchange of convertible or
exchangeable securities.
(ii) Upon each adjustment of the Exercise Price pursuant to this
Section (g), the number of shares of common stock purchasable upon the exercise
of each Warrant shall be the number derived by multiplying the number of shares
of common stock purchasable immediately prior to such adjustment by the Exercise
Price in effect prior to such adjustment and dividing the product so obtained by
the applicable adjusted Exercise Price.
3
<PAGE> 4
(B) In case of any reclassification or change of outstanding Securities
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value or as a result
of a subdivision or combination), or in case of any consolidation or merger of
the Company with or into another corporation other than a merger with a
"Subsidiary" (which shall mean any corporation or corporations, as the case may
be, of which capital stock having ordinary power to elect a majority of the
Board of Directors of such corporation (regardless of whether or not at the time
capital stock of any other class or classes of such corporation shall have or
may have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned by the Company or by one or more Subsidiaries)
or by the Company and one or more Subsidiaries in which merger the Company is
the continuing corporation and which does not result in any reclassification or
change of the then outstanding shares of Common Stock or other capital stock
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value or as a result
of subdivision or combination) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such successor or purchasing
corporation, as the case may be, shall make lawful and adequate provision
whereby the Holder of each Warrant then outstanding shall have the right
thereafter to receive on exercise of such Warrant the kind and amount of
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of
securities issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and shall
forthwith file at the principal office of the Company a statement signed by its
President or a Vice President and by its Treasurer or an Assistant Treasurer or
its Secretary or an Assistant Secretary evidencing such provision. Such
provisions shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section
(g)(A). The above provisions of this Section (g)(B) shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(C) Irrespective of any adjustments or changes in the Exercise Price or
the number of Securities purchasable upon exercise of the Warrants, the Warrant
Certificates theretofore and thereafter issued shall, unless the Company shall
exercise its option to issue new Warrant Certificates pursuant hereto, continue
to express the Exercise Price per share and the number of shares purchasable
thereunder as the Exercise Price per share and the number of shares purchasable
thereunder as expressed in the Warrant Certificates when the same were
originally issued.
(D) After each adjustment of the Exercise Price pursuant to this
Section (g), the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Exercise Price as so adjusted, (ii) the number of Securities purchasable upon
exercise of each Warrant, after such adjustment, and (iii) a brief statement of
the facts accounting for such adjustment. The Company will promptly file such
certificate in the Company's minute books and cause a brief summary thereof to
be sent by ordinary first class mail to each Holder at his last address as it
shall appear on the registry books of the Company. No failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity thereof except as to the holder to whom the Company failed to mail such
notice, or except as to the holder whose notice was defective. The affidavit of
an officer or the Secretary or an Assistant Secretary of the Company that such
notice has been mailed shall, in the absence of fraud, be prima facie evidence
of the facts stated therein. The provisions of this subsection may be waived by
the parties.
(E) No adjustment of the Exercise Price shall be made as a result of or
in connection with the issuance of a stock dividend or the combination or
subdivision of the common stock if the amount of said adjustment shall be less
than $.10, provided, however, that in such case, any adjustment that would
otherwise be required then to be made shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment that shall
amount, together with any adjustment so carried forward, to at least $.10. In
addition, Holders shall not be entitled to cash dividends paid by the Company
prior to the exercise of any Warrant or Warrants held by them.
4
<PAGE> 5
(F) In the event that the Company shall at any time prior to the
exercise of all Warrants declare a dividend consisting solely of shares of
Common Stock or otherwise distribute to its stockholders any assets, property,
rights, evidences of indebtedness, the Holders of the unexercised Warrants shall
thereafter be entitled, in addition to the Securities or other securities and
property receivable upon the exercise thereof, to receive, upon the exercise of
such Warrants, the same property, assets, rights, evidences of indebtedness,
that they would have been entitled to receive at the time of such dividend or
distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this Section (g).
(G) Notwithstanding any other provision in this Agreement the Company
shall include such Underwriter's Warrants in the Registration Statement relating
to this offering and shall keep such Registration Statement current at least
until the expiration of the Underwriter's warrants or shall bear all of the
costs of a new registration statement in the event the Underwriter's Warrants
are to be exercised.
(h) Continuing Effect of Agreement. The Company's agreements with
respect to the Warrant Securities in this Warrant will continue in effect
regardless of the exercise or surrender of this Warrant.
(i) Notices. Any notices or certificates by the Company to the Holder
and by the Holder to the Company shall be deemed delivered if in writing and
delivered personally or sent by certified mail, to the Holder, addressed to him
or sent to, Westport Resources Investment Services, Inc., or, if the Holder has
designated, by notice in writing to the Company, any other address, to such
other address, and, if to the Company, addressed to Weststar Environmental Inc.,
9550 Regency Square Boulevard, Jacksonville, Florida 32225. The Company may
change its address by written notice to Westport Resources Investment Services,
Inc.
(j) Limited Transferability. This Warrant Certificate and the Warrant
may not be sold, transferred, assigned or hypothecated for a one-year period
after the effective date of the Registration Statement except to underwriters of
the Offering referred to in the Underwriting Agreement or to individuals who are
either partners or officers of such an underwriter or by will or by operation of
law. The Warrant may be divided or combined, upon request to the Company by the
Warrant holder, into a certificate or certificates evidencing the same aggregate
number of Warrants. The Warrant may not be offered, sold, transferred, pledged
or hypothecated in the absence of any effective registration statement as to
such Warrant filed under the Act, or an exemption from the requirement of such
registration, and compliance with the applicable federal and state securities
laws. The Company may require an opinion of counsel satisfactory to the Company
that such registration is not required and that such laws are complied with. The
Company may treat the registered holder of this Warrant as he or it appears on
the Company's book at any time as the Holder for all purposes. The Company shall
permit the Holder or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its books
showing the registered holders of Warrants.
(k) Transfer to Comply With the Securities Act of 1933. The Company may
cause the following legend, or one similar thereto, to be set forth on the
Warrants and on each certificate representing Warrant Securities, or any other
security issued or issuable upon exercise of this Warrant not theretofore
distributed to the public or sold to underwriters for distribution to the public
pursuant to Sections (h) or (i) hereof; unless counsel satisfactory to the
Company is of the opinion as to any such certificate that such legend, or one
similar thereto, is unnecessary:
"The warrants represented by this certificate are restricted securities
and may not be offered for sale, sold OR otherwise transferred unless an opinion
of counsel satisfactory to the Company is obtained stating that such offer,
sale or transfer is in compliance wrath state and federal securities law.
(l) Applicable Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Connecticut, without giving effect to
conflict of law principles.
5
<PAGE> 6
(m) Assignability. This Warrant may not be amended except in a writing signed by
each Holder and the Company.
(n) Survival of Indemnification Provisions. The indemnification provisions of
this Warrant shall survive until ____________, 2005
Weststar Environmental Inc.
By ________________________________
Michael Ricks, President
Date: ________________________
Attest:
_______________________________
, Secretary
<PAGE> 7
PURCHASE FORM
Dated 19
------ ---
The undersigned hereby irrevocably elects to exercise the Warrant to the
extent of purchasing ______ Shares of Common Stock and/or ________ Redeemable
Warrants and hereby makes payment of $ in payment of the actual exercise
price thereof.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name
------------------------------------------------------------------------
(please typewrite or print in block letters)
Address
------------------------------------------------------------------------
Signature
------------------------------------------------------------------------
ASSIGNMENT FORM
FOR VALUE RECEIVED,
------------------------------------------------------------------------
hereby sells, assigns and transfers unto
Name
------------------------------------------------------------------------
(please typewrite or print in block letters)
Address
------------------------------------------------------------------------
the right to purchase common stock as represented by this Warrant to the extent
to which such right is exercisable and does hereby irrevocably constitute and
appoint, ___________ attorney, to transfer the same on the books of the Company
with full power of substitution in the premises.
Signature
------------------------------------------------------------------------
Dated: 19
------ ---
<PAGE> 1
EXHIBIT 4.1
NUMBER
SHARES
WESTSTAR ENVIRONMENTAL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
CUSIP 961533 10 6
See Reverse Side For Certain Definitions
COMMON STOCK
This Certifies that
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
Weststar Environmental, Inc. (The "Corporation"). The shares represented by this
certificate are transferable only on the stock transfer books of the Corporation
by the holder of record hereof, or by the holder's duly authorized attorney or
legal representative, upon the surrender of this certificate properly endorsed.
This certificate is not valid until countersigned by the Corporation's transfer
agent and registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by the facsimile signature of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
Dated
[GRAPHIC]
/S/ JIMMY RICKS /S/ MICHAEL E. RICKS
Secretary President
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
2 BROADWAY
NEW YORK, NEW YORK 10004
TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE> 2
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ...Custodian...
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
Act......................
(State)
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
Additional abbreviations may also be used though not in the above list
</TABLE>
For value received hereby sell, assign and transfer unto
-------------------------
- ----------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
- -------------------------------------------------------------------------------
- ----------------------------------------------------------------------- Shares
represented by the within Certificate, and so hereby irrevocably
constitute and appoint
- ----------------------------------------------------------------------- Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated , 19
--------------------------- ---------
In presence of
--------------------------------------------
- --------------------------------------------
<PAGE> 1
EXHIBIT 4.2
NUMBER
WARRANTS
WESTSTAR ENVIRONMENTAL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
REDEEMABLE COMMON STOCK PURCHASE WARRANT
CUSIP 961533 11 4
See Reverse Side For Certain Definitions
This Certifies that, for value received
or registered assigns, is the owner of the number of Redeemable Common Stock
Purchase Warrants (hereinafter referred to as "Warrants") set forth above. Each
Warrant entitles the owner thereof to purchase at any time commencing
__________, 1999 at Continental Stock Transfer & Trust Company or its successor
as Warrant Agent, one fully paid and nonassessable share of the Common Stock,
$.001 par value (the "Common Stock") of Weststar Environmental, Inc., a Florida
corporation (the "Company"). Each Warrant entitles the owner thereof to purchase
one share of the Common Stock at a purchase price of $6.00 per share until 5:00
P.M., New York City time, on ___________, 2003 upon the presentation and
surrender of this Warrant Certificate with the Form of Election to Purchase duly
executed. The number of Warrants evidenced by this Warrant certificate (and the
number of shares which may be purchased upon exercise hereof) set forth above,
and the purchase price set forth above, are the number and purchase price as of
_________, 1998 based on the shares of Common Stock of the Company as
constituted at such date.
The provisions of this Warrant are continued on the reverse side hereof
and such continued provisions shall for all purposes have the same effect as
though fully set forth in this place.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent and
Registrar.
WITNESS the facsimile seal of this Corporation and the facsimile
signature of its duly authorized officers.
Dated
[GRAPHIC]
/S/ JIMMY RICKS /S/ MICHAEL E. RICKS
Secretary President
COUNTERSIGNED
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
2 BROADWAY
NEW YORK, NEW YORK 10004
WARRANT AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE> 2
Weststar Environmental, Inc.
WARRANT CERTIFICATE
This Warrant Certificate Is subject to all of the terms,
provisions and conditions of an agreement dated as , 1998 ("Warrant
Agreement") between the Company and the Warrant Agent, which Warrant Agreement
is hereby incorporated herein by reference and made a part hereof and to which
Warrant Agreement reference Is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Warrant Agent, the Company and the holders of the Warrant Certificates. Copies
of the Warrant Agreement are on file at the office of the Warrant Agent and may
be obtained on request of any warrant holder from either the Company or the
Warrant Agent.
As provided in the Warrant Agreement, the purchase price and
the number of shares of Common Stock which may be purchased upon the exercise of
the Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment.
This Warrant Certificate, with or without other Warrant
Certificates, upon surrender to the Warrant Agent may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor and date evidencing
Warrants entitling the holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered shall have entitled such holder to purchase. If this
Warrant Certificate shall be exercised In part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants unexercised.
No fractional shares of Common Stock will be issued upon the
exercise of any Warrant or Warrants evidenced hereby; upon the exercise of such
Warrant or Warrants, the Company shall Issue the largest number of whole shares
of Common Stock purchasable upon exercise. The Company will pay a cash
equivalent In respect to any such fraction of a share to which the holder hereof
would otherwise be entitled in accordance with the terms of the Warrant
Agreement. By his acceptance of the Warrant Certificate, the holder hereof
expressly waives any right he may have to receive a certificate for any fraction
of a share upon exercise hereof,
ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Warrant Certificate)
Continental Stock Transfer & Trust Company
2 Broadway
New York, N.Y. 10004
The undersigned hereby Irrevocably elects to exercise
__________________________________________________Warrants represented by this
Warrant Certificate to purchase the shares of Common Stock issuable upon the
exercise of such Warrants and requests that certificates for such shares be
issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- --------------------------------------------------------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- --------------------------------------------------------------------------------
(Please print name and address)
Date: , 19
------------------------------------------------- -----------
- --------------------------------------------------------------------------------
Signature
(Signature must conform in all respect to name of holder specified on the face
of this Warrant Certificate)
- --------------------------------------------------------------------------------
Signature Guaranteed
No holder of this Warrant Certificate shall be entitled to
vote or receive dividends or subscription rights or be deemed the holder of
shares of Common Stock for any purpose, nor shall anything contained in the
Warrant Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote,
give or withhold consent to any action by the Company (whether upon any
recapitalization, issue of shares, reclassification of shares, consolidation,
merger, conveyance or otherwise), receive notice of meetings or other actions
affecting stockholders (except for notices provided for in the Warrant
Agreement), until the Warrants evidenced by this Warrant Certificate shall have
been exercised and the Common Stock purchasable upon the exercise hereof shall
have become deliverable as provided In the Warrant Agreement, at which time the
person or persons In whose name or names the certificate or certificates for
such Common Stock shall be Issued shall be deemed the holder or holders of
record of such shares of Common Stock for all purposes.
Under certain conditions set forth in the Warrant Agreement,
commencing ________, 1999, the Warrants evidenced hereby will be redeemable in
whole but not In part, for $.10 per Warrant at the option of the Company, upon
30 days written notice.
Every holder of this Warrant Certificate by accepting the same
consents and agrees with the Company, the Warrant Agent, and with every other
holder of a Warrant Certificate that:
(a) the Warrant Certificates are transferable only on the
registry books of the Warrant Agent If surrendered to the Warrant Agent at the
address on the reverse hereof, duly endorsed, or accompanied by a proper
Instrument of transfer; and
(b) the Company and the Warrant Agent may deem and treat the
person In whose name the Warrant Certificate Is registered as the absolute owner
thereof and of the Warrants evidenced thereby (notwithstanding any notation of
ownership or other writing on the Warrant Certificate made by anyone other than
the Company or the Warrant Agent) for all purposes whatsoever, and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
For value received
------------------------------------------------
hereby sell, assign and transfer unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Warrant Certificate, together with all the right, title and interest
therein, and does hereby irrevocably constitute and appoint
- -----------------------------------------------------
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Date: , 19
--------------------------------------------------- ----------
- -------------------------------------------------------------------------------
Signature
(Signature must conform in all respect to name of holder specified on the face
of this Warrant Certificate)
- --------------------------------------------------------------------------------
Signature Guaranteed
<PAGE> 1
EXHIBIT 5
[MILLING LAW OFFICES LETTERHEAD]
July 30, 1998
Securities and Exchange Commission
450 Fifth Street
Washington, DC 20549
Re: Weststar Environmental, Inc.
Registration Statement on Form SB-2, No. 333-50255
Dear Sirs:
As counsel to Weststar Environmental, Inc. (the "Company"), we have
examined the certificate of incorporation, the by-laws and other relevant
corporate documents of the Company with reference to the 1,690,000 shares of its
common stock, par value $.001, per share, presently issued and outstanding (the
"Outstanding Stock") and to the proposed issuance and sale of an additional
1,150,000 shares of common stock, including 150,000 shares reserved for issuance
at the underwriter's option to cover over-allotments (collectively the "Offered
Stock") and 1,150,000 common stock purchase warrants to purchase 1,150,000
shares of common stock (the "Underlying Stock"), including 150,000 warrants
reserved for issuance at the underwriter's option to cover over-allotments
(collectively the "Warrants"). Based upon such examination, it is our opinion
that:
(1) The Company has been duly incorporated and is validly existing as a
corporation under the laws of the State of Florida with an authorized
capitalization as set forth in the prospectus forming a part of the above
captioned registration statement (the "Registration Statement").
(2) The Outstanding Stock is validly issued, fully paid and
non-assessable shares of common stock of the Company; the Offered Stock and the
Underlying Stock have been duly authorized and, when issued in accordance with
the terms of the Registration Statement, will be validly issued, fully paid and
non-assessable shares of common stock of the Company; and the Warrants have been
duly authorized and, when issued in accordance with the terms of the
Registration Statement, will be validly issued and will constitute valid and
subsisting contractual commitments of the Company.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and we further consent to the reference therein to us as
counsel to the Company and as having passed upon the legality of the securities
being offered pursuant to the Registration Statement.
Very truly yours,
MILLING LAW OFFICES
By /s/ John L. Milling
JOHN L. MILLING
JLM/mxh
<PAGE> 1
EXHIBIT 5
[MILLING LAW OFFICES LETTERHEAD]
July 30, 1998
Securities and Exchange Commission
450 Fifth Street
Washington, DC 20549
Re: Weststar Environmental, Inc.
Registration Statement on Form SB-2, No. 333-50255
Dear Sirs:
As counsel to Weststar Environmental, Inc. (the "Company"), we have
examined the certificate of incorporation, the by-laws and other relevant
corporate documents of the Company with reference to the 1,690,000 shares of its
common stock, par value $.001, per share, presently issued and outstanding (the
"Outstanding Stock") and to the proposed issuance and sale of an additional
1,150,000 shares of common stock, including 150,000 shares reserved for issuance
at the underwriter's option to cover over-allotments (collectively the "Offered
Stock") and 1,150,000 common stock purchase warrants to purchase 1,150,000
shares of common stock (the "Underlying Stock"), including 150,000 warrants
reserved for issuance at the underwriter's option to cover over-allotments
(collectively the "Warrants"). Based upon such examination, it is our opinion
that:
(1) The Company has been duly incorporated and is validly existing as a
corporation under the laws of the State of Florida with an authorized
capitalization as set forth in the prospectus forming a part of the above
captioned registration statement (the "Registration Statement").
(2) The Outstanding Stock is validly issued, fully paid and
non-assessable shares of common stock of the Company; the Offered Stock and the
Underlying Stock have been duly authorized and, when issued in accordance with
the terms of the Registration Statement, will be validly issued, fully paid and
non-assessable shares of common stock of the Company; and the Warrants have been
duly authorized and, when issued in accordance with the terms of the
Registration Statement, will be validly issued and will constitute valid and
subsisting contractual commitments of the Company.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and we further consent to the reference therein to us as
counsel to the Company and as having passed upon the legality of the securities
being offered pursuant to the Registration Statement.
Very truly yours,
MILLING LAW OFFICES
By /s/ John L. Milling
JOHN L. MILLING
JLM/mxh
<PAGE> 1
EXHIBIT 10.6
CONTRACT
THIS CONTRACT Executed this 31st day of October, 1997, by and between the
JACKSONVILLE ELECTRIC AUTHORITY, Jacksonville, Florida, hereinafter called the
OWNER, and WESTSTAR ENVIRONMENTAL, INC., hereinafter called the CONTRACTOR,
WITNESSETH:
WHEREAS, CONTRACTOR was the lowest and best responsible bidder for
biosolids hauling services for the City of Jacksonville ("City") for the initial
term January 1, 1997 through September 30, 1997, with up to four (4) annual
renewals at the discretion of the City (the "Contract"); and
WHEREAS, during said initial year, CONTRACTOR performed said biosolids
hauling services in accordance with specifications hereinafter referred to at a
price not to exceed $0.01157/gallon; and
WHEREAS, on June 1, 1997, the City transferred ownership and operation of
its water and wastewater utility to OWNER, at the same time the City transferred
and assigned all contracts related to said utility, including said Contract to
OWNER; and
WHEREAS, the OWNER and the CONTRACTOR have agreed to exercise the first of
the four (4) annual renewals and CONTRACTOR shall perform said biosolids hauling
services, pursuant to specifications, for compensation not to exceed
$0.01184/gallon, all other prices remaining unchanged; and
<PAGE> 2
WHEREAS, pursuant to said renewal the OWNER's maximum indebtedness, for
the first annual renewal period from October 1, 1997 through September 30, 1998
shall be a total amount not to exceed $825,000.00; and
WHEREAS, said Contract should reflect contract assignment, the first
annual renewal, and incorporation of OWNER's contractual terms and conditions;
now, therefore
IN CONSIDERATION of the Contract and for the mutual promises herein
contained and for other good and valuable consideration the parties agree that:
1. The above stated recitals are true and correct and, by this reference,
are incorporated herein and made a part hereof.
2. The Contract between the City and the CONTRACTOR has been transferred
and assigned by the City to the OWNER and the OWNER shall replace the City in
said Contract. Wherever said Contract refers to the "City of Jacksonville" or
the "City," these terms shall mean the "Jacksonville Electric Authority" or
"JEA" as the text permits or dictates.
3. That CONTRACTOR is the lowest and best responsible bidder for biosolids
hauling services for Jacksonville Electric Authority for period October 1, 1997
through September 30, 1998 in accordance with plans and specifications
hereinafter referred to, and has been awarded the contract for said work
pursuant to award made September 11, 1997.
4. The CONTRACTOR will, at its own cost and expense, do the work required
to be done and furnish the materials required to be furnished on said work in
accordance with plans and specifications previously approved by the City of
Jacksonville, numbered CS-0010-97, with bid opening date of October 30, 1996,
designated as "City of Jacksonville, Florida, Department of Public Utilities,
Biosolids Hauling" and strictly in accordance with the advertisement calling for
bids, plans, specifications, blueprints, requirements of the said City
-2-
<PAGE> 3
of Jacksonville and the Jacksonville Electric Authority in JEA Invitation For
Bids No. WSC-361-97, proposal of the said CONTRACTOR, and award therefor, now on
file in the office of the Director of Procurement of the Jacksonville Electric
Authority (hereinafter called "Contract Documents"), all of which are hereby
especially referred to and, by reference, made a part hereof to the same extent
as if fully set out herein, for the total sum not to exceed EIGHT HUNDRED
TWENTY-FIVE THOUSAND AND 00/100 DOLLARS ($825,000.00) at and for the prices and
on the terms contained in the CONTRACTOR's said proposal for the doing of said
work and the said award therefor, and the Contract Documents hereinabove
specifically referred to and made a part of this Contract. This Contract may be
renewed for up to three (3) additional one (1) year periods at OWNER's sole
discretion, upon mutually acceptable terms and conditions.
5. During the term of the Contract, OWNER and CONTRACTOR are encouraged to
identify ways to reduce the total life-cycle cost to OWNER of the supplies or
services provided by the CONTRACTOR. OWNER and CONTRACTOR may negotiate Contract
amendments that allow such reductions in total costs including, but not limited
to the sharing of savings resulting from implementation of cost-reducing
initiatives between OWNER and CONTRACTOR.
6. OWNER encourages CONTRACTOR to employ firms certified as Jacksonville
Electric Authority Minority Business Enterprise ("MBE") firms as subcontractors
to the maximum extent practical. During the term of the Contract, OWNER and
CONTRACTOR may negotiate Contract amendments that support and allow the
employment of such MBE firms by CONTRACTOR including, but not limited to changes
in the price to OWNER of the supplies or services supplied by CONTRACTOR.
-3-
<PAGE> 4
7. On the faithful performance of this contract by the CONTRACTOR, the
OWNER will pay the CONTRACTOR in accordance with the terms and on the conditions
stated in said proposal, award, plans and specifications, and the said Contract
Documents hereinabove specifically referred to and, by reference, made a part
hereof.
[The remainder of this page has been left blank intentionally.]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have duly executed this contract,
in duplicate, the day and year first above written.
ATTEST: JACKSONVILLE ELECTRIC AUTHORITY
/s/ Maxine M. Wiggins By /s/ Walter P. Bussells
- ------------------------------ ---------------------------
Maxine M. Wiggins Walter P. Bussells
Its Administrative Assistant Managing Director
OWNER
WESTSTAR ENVIRONMENTAL, INC.
By /s/ Michael E. Ricks
- ------------------------------ ---------------------------
Sign Name Sign Name
Michael E. Ricks
- ------------------------------ ---------------------------
Print or Type Name Print or Type Name
Its Pres./CEO
- ------------------------------ ---------------------------
Title Title
CONTRACTOR
I hereby certify that the expenditure contemplated by the foregoing
contract has been duly authorized, and provision has been made for the payment
of the monies provided therein to be paid.
/s/ John J. Wolfel
---------------------------
JOHN J. WOLFEL
Controller 4308
Jacksonville Electric Authority
Form Approved:
/s/ Neill McArthur
- ------------------------------
Assistant General Counsel
<PAGE> 6
AMENDMENT NUMBER 1
TO
CONTRACT NUMBER 4308
THIS AMENDMENT NUMBER 1, made and entered into this 5th day of June, 1998,
by and between the JACKSONVILLE ELECTRIC AUTHORITY, a body politic and corporate
in Jacksonville, Florida ("OWNER") and WESTSTAR ENVIRONMENTAL, INC., a
corporation authorized to do business in the State of Florida ("CONTRACTOR"),
WITNESSETH:
WHEREAS, on October 31, 1997, OWNER and CONTRACTOR entered into a contract
under which CONTRACTOR would provide biosolids hauling services and OWNER would
pay compensation in an amount not to exceed $825,000 (the "Contract"); and
WHEREAS, the term of said Contract was from October 1, 1997 through
September 30, 1998 and could be renewed for three (3) additional one (1) year
periods at OWNER's sole discretion; and
WHEREAS, said Contract should be amended to combine the three remaining
annual renewals into a single term of three years ending September 30, 2001, and
renewing the Contract accordingly; and
WHEREAS, said Contract should be further amended to adjust certain unit
prices per gallon as more specifically provided herein; and
WHEREAS, said Contract should be further amended so the OWNER's maximum
indebtedness for each of the three (3) years in the renewal term, shall not
exceed $1,250,000, subject to availability of lawfully appropriated funds; and
<PAGE> 7
WHEREAS, said Contract should be amended to provide that price increases
for subsequent fiscal years shall be negotiated and may be adjusted but the
maximum increases shall not exceed changes in the Consumer Price Index for the
prior calendar year; now therefore
IN CONSIDERATION of the Contract and for the mutual promises herein
contained and for other good and valuable consideration the parties agree that:
1. The above stated recitals are true and correct and, by this reference,
are incorporated herein and made a part hereof.
2. Section 3 of the Contract is amended, in part, to read as follows:
"3. That CONTRACTOR is the lowest and best responsible bidder for
biosolids hauling services for Jacksonville Electric Authority for
period October 1, 1997 through September 30, 2001 in accordance with
plans and specifications hereinafter referred to, and has been
awarded the Contract for said work pursuant to award made September
11, 1997 and May 12, 1998."
3. On page 1 of the Contract Documents, the Unit Price as reflected in
Part I shall be increased from $0.01157/gallon to $0.01388/gallon; and the Unit
Price reflected in Part II, Item 2, shall be decreased from $0.14391/gallon to
$0.05/gallon.
4. Section 4 of the Contract is amended, in part, to read as follows:
"4. The CONTRACTOR will, at its own cost and expense, do the work
required to be done and furnish the materials required to be
furnished on said work in accordance with plans and specifications
previously approved by the City of Jacksonville, numbered
CS-00l0-97, with bid opening date of October 30, 1996, designated as
"City of Jacksonville, Florida, Department of Public Utilities,
Biosolids Hauling" and strictly in accordance with the advertisement
calling for bids, plans, specifications, blueprints, requirements of
the said City of Jacksonville in said Bid Number CS-0010-97 and the
Jacksonville Electric Authority in JEA Invitation For Bids No.
WSC-361-97, proposal of the said CONTRACTOR, and award therefor, all
of
-2-
<PAGE> 8
which are now on file in the office of the Director of Procurement
of the Jacksonville Electric Authority (hereinafter called Contract
Documents), and all of which are hereby especially referred to and,
by this reference, made a part hereof to the same extent as if fully
set out herein, for the total sum not to exceed:
(a) EIGHT HUNDRED TWENTY-FIVE THOUSAND AND 00/100 DOLLARS
($825,000.00) for the October 1, 1997-September 30, 1998 Contract
year; and
(b) ONE MILLION TWO HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($1,250,000.00) for the October 1, 1998-September 30, 1999 Contract
year, subject to availability of lawfully appropriated funds; and
(c) ONE MILLION TWO HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($1,250,000.00) for the October 1, 1999-September 30, 2000 Contract
year, subject to availability of lawfully appropriated funds; and
(d) ONE MILLION TWO HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($1,250,000.00) for the October 1, 2000-September 30, 2001 Contract
year, subject to availability of lawfully appropriated funds;
for a total maximum indebtedness not to exceed FOUR MILLION
SEVENTY-FIVE THOUSAND AND 00/100 DOLLARS ($4,575,000.00), subject to
availability of lawfully appropriated funds at and for the prices
and on the terms contained in the CONTRACTOR's said proposal for the
doing of said work and the said award therefor, and the Contract
Documents hereinabove specifically referred to and made a part of
this Contract."
5. Price increases for subsequent Contract years will be negotiated and
may be adjusted with maximum increases not to exceed any increase in the
Consumer Price Index for the prior calendar year.
6. On page 4 of the Contract Documents, paragraph 14 is amended, in part,
to read as follows:
-3-
<PAGE> 9
"14. FACILITY LOCATIONS. Services rendered by the Contractor may
involve, but not be limited to, the following areas:
* * *
"Sewer District 2. District 2 WRF Area, Jacksonville Port
Authority; Blount Island and Airport WWTF"
"Sewer District 3. Southwest WRF Area, Youth Development
Center WRF"
7. On pages 4 and 5 of the Contract Documents, Paragraph 15 is amended, in
part, to read as follows:
"15. WORK AND QUANTITIES
"In all parts below, payment for mileage and travel time is not
allowed. Payment shall be based ONLY on the unit prices listed
below:
* * *
"PART 2 OTHER FACILITIES
* * *
"Item 2. The rate for sewerage handling (utilizing Weststar's or
JEA's pumps, hauling and then unloading) is $0.05 per
gallon, adjusted annually for inflation in accordance
with Paragraph 25. This rate shall apply Monday through
Sunday.
Item 3. The rate of $0.05 per gallon shall apply at all times,
with the one following exception:
A rate multiplier of 1.1 shall be utilized if less than
24 hours notice is given for mobilization, and then only
during the first period of non-normal work hours (i.e.
during the first period of 4:00 PM to 6:00 AM). For
example, if service is requested to begin at 10 PM with
less than 24 hours of notification, this multiplier
would only applicable from 10 PM to 6 AM the next day.
-4-
<PAGE> 10
"Item 4. Notification can be made by telephone or other means.
"Item 5. A mobilization fee of $3O0 per tractor trailer
combination shall be paid if that combination does not
haul a minimum of 2 loads. This mobilization fee shall
not be paid for conditions beyond the control of JEA
(e.g., Weststar equipment breakdown)."
8. On page 6 of the Contract Documents, paragraph 16 is amended, in part,
to read as follows:
"16. EMERGENCY NOTIFICATION - The Contractor shall be required to
respond within 24 hours after notification, and must be able to
service the various facilities and/or pump stations. Most facilities
will be serviced on a scheduled weekly or daily basis, with all
other work being performed on an as needed basis. Work will normally
be scheduled between 7:30 AM to 4:00 PM Monday through Friday. The
Contractor must, however, be prepared to respond to weekend and
extended hour emergencies as required, and will be compensated as
outlined in Paragraph 15, Part 2, item 3. In the event of an
industrial spill or emergency situation, the Contractor must be able
to respond within two hours of notification. The notification
requirement does not apply to Part I activities which shall be
performed seven (7) days per week. If the Contractor's office is out
of town, the Contractor shall provide a toll-free telephone number
for City personnel to schedule daily hauling requirements."
SAVE AND EXCEPT as expressly amended herein, the terms and conditions of
the October 31, 1997 Contract shall remain in full force and effect.
[The remainder of this page has been left blank intentionally.]
-5-
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have duly executed this instrument,
in duplicate, the day and year first above written.
ATTEST: JACKSONVILLE ELECTRIC AUTHORITY
/s/ Karen D. Perkins By /s/ Walter; P. Bussells
- -------------------------------- ---------------------------
Signature Walter P. Bussells
Managing Director and
Karen D. Perkins Chief Executive Officer
- --------------------------------
Type/print Name
Staff Support Assistant
- --------------------------------
Title
OWNER
WESTSTAR ENVIRONMENTAL, INC.
By /s/ William B. Gray
- -------------------------------- ---------------------------
Sign Name Sign Name
William B. Gray
- -------------------------------- ---------------------------
Print or Type Name Print or Type Name
Its Ex. Vice President
- -------------------------------- -----------------------
Title Title
CONTRACTOR
I hereby certify that the expenditure contemplated by the foregoing
instrument has been duly authorized, and provision has been made for the payment
of the monies provided therein to be paid.
/s/ John J. Wolfel
---------------------------
JOHN J. WOLFEL
Controller
Jacksonville Electric Authority
Form Approved:
/s/ Neill McArthur
- --------------------------------
Assitant General Counsel
<PAGE> 12
Bid Number: CS-001O-97
Bid Date: October 30, 1996
BID PROPOSAL
FOR THE
CITY OF JACKSONVILLE, FLORIDA
DEPARTMENT OF PUBLIC UTILITIES
BIOSOLIDS HAULING
COMPANY NAME: WESTSTAR ENVIRONMENTAL, INC.
----------------------------------------------
BID PROPOSAL FORM
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART/ITEM UNIT PRICE TOTAL PRICE
--------- ---------- -----------
<S> <C> <C> <C>
I 38,500,OOO gallons x $ .01157/gallon x 0.75 = $334,083.75
II/1 500,000 gallons x $ .0842/gallon x 0.025 = $ 1,115.00
II/2 50,000 gallons x $ .14391/gallon x 0.025 = $ 179.89
III/1 500 hours x $ 350/hour x 0.0125 = $ 2,187.50
III/2 500 hours x $ 299/hour x 0.0125 = $ 1,868.75
III/3 500 hours x $ 99/hour x 0.0125 = $ 618.75
III/4 500 hours x $ 335/hour x 0.0125 = $ 2,093.75
IV/l 67,500,000 gallons x $ .0139/gallon x 0.05 = $ 46,912.50
IV/2 22,500 tons x $ 6.50/ton x 0.05 = $ 7,312.50
V 26,500 tons x $ 5.00/ton x 0.05 = $ 6,625.00
GRAND TOTAL- PARTS I THROUGH V: $402,997.39
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
Page 2 Bid Number: CS-OOl0-97
Bid Date: October 30, 1996
BID PROPOSAL
FOR THE
CITY OF JACKSONVILLE, FLORIDA
DEPARTMENT OF PUBLIC UTILITIES
BIOSOLIDS HAULING
1. INTENT - The City of Jacksonville requires the services of a Contractor to
remove biosolids, sand, grit and/or grease from the various water
reclamation facilities (WRF's), pump stations, and other City-owned
facilities within the City limits and haul it to 1) the Buckman Biosolids
Disposal Facility (BDF) for further processing, 2) approved land disposal
site(s) provided by the Contractor, or 3) the Trail Ridge Landfill. All
material going to approved land disposal site(s) must be stabilized,
applied, injected, and/or buried in accordance with 40 CFR Part 503, FAC
Chapter 62-640, and provisions of this specification. All material going
to the landfill must pass a "paint filter test" as a measure of free
liquid present. It is understood that the quantities shown are estimated
and are to be used for award of bids only. No minimum quantities are being
guaranteed for any of the work shown.
WESTSTAR ENVIRONMENTAL, INC (Company Name) has carefully examined the bid
documents and agrees to furnish all labor, material, equipment, and
appurtenances necessary to accomplish the required services as outlined
below. Prior to a Notice to Proceed being issued, land application
permit(s) must be obtained from the appropriate agency(ies); see Items 22
through 24. In Duval County, these agencies include but may not be limited
to:
Regulatory & Environmental Services Department (RESD)
421 W. Church Street, Suite 412
Jacksonville, Florida 32202-4111
904.630.3461
Florida Department of Environmental Protection (FDEP)
7825 Baymeadows Way, Suite B-200
Jacksonville, Florida 32256-7577
904.448.4330
2. SUCCESSFUL BIDDER - Bidder is required to bid on all items. Award will be
based on the lowest, responsive, and responsible bid. Parts I through V of
Item 15 will be weighted as follows: 75%, 5%, 5%, 10%, and 5%,
respectively. If a Part is comprised of several Items, the weighted
percentage has been equally distributed between the Items. If the lowest
bidder is unable to perform at any time during the contract period, the
City will utilize the second lowest, responsive and responsible bidder to
fulfill its needs. Should a bidder be awarded the Contract and then fail
to perform, they will not be allowed to bid on future work.
3. REFERENCES - The bidder must submit endorsement letters from a minimum of
three (3) cities, counties, districts, or corporations for whom the bidder
has successfully conducted similar business for a minimum of two (2) years
for each entity.
4. BONDS - A Cashier's Check or Bid Bond (Appendix A) properly executed by the
undersigned and by qualified surety in the sum of $50,000, made payable to
the Tax Collector, City of Jacksonville, Florida, which the undersigned
Bidder hereby deposits as a guarantee of good faith and agrees to
<PAGE> 14
Page 3 Bid Number: CS-OOl0-97
Bid Date: October 30, 1996
forfeit to the City of Jacksonville, not as a penalty, but as fixed and
liquidated damages in the event they fail to enter into Contract, or fail
to furnish the Performance Bond (Appendix B) required within ten (10) days
after receipt of the contract. The Performance Bond amount shall be equal
to the Bid price rounded up to the nearest $25O,O00 (ie, Bid = $600,000,
Performance Bond = $750,000).
5. NON-DISCRIMINATION PROVISION - In compliance with Section 4 of Ordinance
69-630-653, the bidder shall upon affixing their signature to the proposal
form, and/or the acceptance of a Purchase Order, certify that their firm
meets and agrees to the following provisions which shall become a part of
the contract.
a. The Contractor represents that their company has adopted and will
maintain a policy of non-discrimination as defined by ordinance of
the City of Jacksonville throughout the term of this contract.
b. The Contractor agrees that on written request, reasonable access
will be permitted to company records of employment, employment
advertisement, application forms and other pertinent data and
records by the Executive Director of Community Relations Commission
of the City of Jacksonville, for the purpose of investigation to
ascertain compliance with the non-discrimination provisions of this
contract. However, the Contractor shall not be required to produce
for inspection any records covering periods of time more than one
year prior to the date of this contract.
c. The Contractor agrees that if any of the obligations of this
contract are to be performed by a subcontractor, then the provisions
of (a) and (b) of this section shall be incorporated into and become
a part of the subcontract.
6. REPAIR OF WORK AREAS - The Contractor shall replace with new or repair any
damaged City equipment or structures immediately to the satisfaction of
the City. The intent of this paragraph is to insure the safe and
continuous operations of the Treatment Division.
7. ACCESS TO CONTRACTOR'S OPERATING AREA AND RECORDS - The Contractor shall
provide immediate access to its disposal sites, staging areas, storage and
treatment facilities, and to its operating records as required by the City
and applicable regulatory agencies.
8. INDEMNIFICATION AGREEMENT - The City will require the following
indemnification clause to be made part of the Agreement entered into with
the selected Contractor.
In consideration of Ten Dollars ($10.00), receipt and sufficiency of which
is hereby acknowledged by the Contractor, the Contractor and any of its
subcontractors shall indemnify and save harmless and defend the City from
all suits or actions of every name and description brought against the
City based on personal injury, bodily injury (including death) or property
damages (including destruction) received or claims and expenses to be
received or sustained by any person or contractors arising from or in
connection with any negligent act or omission of the Contractor or its
subcontractors, its agents, employees, or assigns in providing the
services called for herein.
9. INSURANCE REQUIREMENTS - The Consultant shall procure and maintain during
the term of the project, insurance of the types and in the minimum amounts
stated below:
<PAGE> 15
Page 4 Bid Number: CS-OOl0-97
Bid Date: October 30, 1996
<TABLE>
<CAPTION>
SCHEDULE LIMITS
-------- ------
<S> <C>
Worker's Compensation Statutory/$1,000,000
---------------------
Florida Statutory Coverage & Employer's
Liability (Incl. Appropriate Federal Acts)
Comprehensive General Liability $1,000,000 CSL and
------------------------------- $2,000,000 Aggregate
Premise-Operations; Products-Completed
Operations P.D.; Contractual Liability;
Independent Contractors
(The City of Jacksonville shall be
named as an additional insured under
all of the above Comprehensive General
Liability coverage)
Auto Liability $1,000,000 CSL, BI,
-------------- and PD
(including owned, non-owned and hired)
Professional Liability Insurance $500,000
--------------------------------
Valuable Papers $100,000
---------------
(The City of Jacksonville must be named
as an additional insured under Valuable
Papers coverage.)
</TABLE>
Said insurance shall be written by an insurer holding a current
certificate of authority pursuant to Chapter 624, Florida Statutes. Prior
to commencing any work on the Project, Certificates of Insurance approved
by the City's Division of Insurance and Risk Management evidencing the
maintenance of said insurance shall be furnished to the City. The
insurance shall provide that no material alteration or cancellation,
including expiration and non-renewal, shall be effective until thirty (30)
days after receipt of written notice by the City.
10. ORDERS - Blanket Purchase Orders shall be issued based on requirements.
Individual pumping/hauling/disposal assignments will be issued by the
Division Chief, Operations or Maintenance Manager, Superintendents, or
their designee.
11. PAYMENT - The Contractor shall submit invoices for each month by the 15th
day of the following month. Each invoice shall be delineated by area as
described in Item 14 and shall show the quantities managed for each
Part/Item described in Item 15. No requests for early payment will be
accepted, regardless of the Contractor's cash flow. The Contractor shall
submit a copy of all speeding violations for vehicles associated with this
contract with the monthly pay request.
The Contractor shall submit driver tickets for each load hauled. The
driver's ticket shall show the date, driver's name, truck and trailer
number, the locations(s) hauled from, the location hauled to (disposal
site), the number of hauls for that date, and the gallons of biosolids
removed on each haul, and each load ticket shall be signed by a Division
representative. Invoicing for sand, grit and/or grease removal, in
addition to the above requirements, shall show the number of hours for
that date.
<PAGE> 16
Page 5 Bid Number: CS-0010-97
Bid Date: October 30, 1996
12. CONTRACT MODIFICATIONS - The City reserves the right to modify the
contract requirements. These modifications may include [ILLEGIBLE]
unloading procedures, etc. [ILLEGIBLE].
13. SCOPE - The biosolids will be waste [ILLEGIBLE] or waste [ILLEGIBLE] and
primary biosolids. The biosolids will be malodorous. When required, sand,
grit and/or grease shall be removed from various City-owned wastewater
system structures such as, but not limited to: manholes, grit chambers,
clarifiers, aeration tanks, wet wells, chlorine contact chambers, and
digesters. Where applicable, sand, grit and/or grease, may be either in a
liquid (pumpable) state or in a solid (non-pumpable) state which may
require excavation by personnel and equipment provided by the Contractor.
Therefore, an hourly cost (to be billed for pumping time only, no travel
time, mobilization time, or disposal time or mileage may be billed) is to
be provided in the proposal by the bidder for both situations. It is
estimated that work performed in removing and hauling sand, grit and/or
grease in the liquid and/or solid state will require the approximate
number of hours listed in Part III, during a year; however, there is no
[ILLEGIBLE].
14 [ILLEGIBLE] - Services rendered by the Contractor may involve, but not be
limited to the following areas:
Sewer District 1 - Buckman WRF Area
Sewer District 2 - District 2 WRF Area
Sewer District 3 - Southwest WRF Area, Youth Development Center WRF,
Shadowrock WRF
Sewer District 4 - Arlington East WRF Area
Sewer District 5 - Mandarin WRF Area, Beauclerc WRF
15. WORK AND QUANTITIES
In all parts below, payment for mileage and travel time is not allowed.
Payment shall be based ONLY on the unit prices listed below.
PART I. BIOSOLIDS TO THE BUCKMAN BDF
Remove and haul biosolids seven (7) days per week from the Southwest and
Mandarin WRF to the Buckman BDF:
UNIT PRICE TOTAL PRICE
38,500,000 gallons x $.01157 / gallon x 0.75 = $334,083.75
PART II OTHER FACILITIES
Item 1. Remove and haul biosolids on an as-needed basis from various
City owned, non-regional facilities to the Buckman BDF:
UNIT PRICE TOTAL PRICE
500,000 gallons x $.08429/ gallon x 0.025 = $1,115.00
Item 2. Remove and haul biosolids on an as-needed basis from various
City-owned sites of sanitary sewer overflows to the Buckman
BDF:
UNIT PRICE TOTAL PRICE
50,000 gallons x $.14391/ gallon x 0.025 = $179.89
<PAGE> 17
Page 6 Bid Number: CS-0010-97
Bid Date: October 30, 1996
PART III SAND, GRIT, AND/OR GREASE
Item 1. Remove, stabilize, and dispose of sand, grit and/or grease in
a liquid form from various City-owned sites at approved land
disposal site(s). NO TRAVEL TIME:
UNIT PRICE TOTAL PRICE
500 hours x $350/hour x 0.0125 = $2,187.50
Item 2. Remove and haul sand, grit and/or grease in a liquid form from
various City-owned sites to the Buckman BDF. NO TRAVEL TIME:
UNIT PRICE TOTAL PRICE
500 hours x $299/hour x 0.0125 = $1,868.75
Item 3. Remove, stabilize, and dispose of sand, grit and/or grease in
a solid form from various City-owned sites at approved land
disposal site(s). "Solid" is defined as that material which
can not be pumped. NO TRAVEL TIME:
UNIT PRICE TOTAL PRICE
500 hours x $99/hour x 0.0125 = $ 618.75
Item 4. Remove and haul sand, grit and/or grease in a solid form from
various City-owned sites to the Buckman BDF. "Solid" is
defined as that material which can not be pumped. NO TRAVEL
TIME:
UNIT PRICE TOTAL PRICE
500 hours x $335/hour x 0.0125 = $2,093.75
Contractor will be paid only when equipment commences work at pumping site
and continue to be paid while equipment is working continuously at the
pumping site. No payment of any kind will be made to the Contractor while
traveling to or from the pumping site or to, at, or from the disposal
site. No payment will be made for clean up time for the Contractor's
equipment. The Contractor called out to a site to perform work under this
part only to be told that the work is no longer necessary, shall be paid
for one (1) hour at said rate as a cancellation charge to cover
mobilization expenses.
PART IV BIOSOLIDS LAND APPLICATION
Provide all personnel, equipment, structures, power, and chemicals, if
necessary, to remove and stabilize in accordance with CFR Part 503 and FAC
Chapter 62-640, and dispose of biosolids at approved land disposal
site(s).
Item 1. Liquid form - Approximately 2% solids
UNIT PRICE TOTAL PRICE
67,500,000 gallons x $.0139/gallon x 0.05 = $46,912.50
Item 2. Solid form - Approximately 20% solids
UNIT PRICE TOTAL PRICE
22,500 tons x $6.50 /ton x 0.05 = $7,312.50
PART V BIOSOLIDS TO LANDFILL
Remove and haul biosolids (approximately 20% solids) up to six (6) days
per week from the Buckman BDF to the Trail Ridge Landfill.
UNIT PRICE TOTAL PRICE
26,500 tons x $5.00 /ton x 0.05 = $6,625.00
<PAGE> 18
Page 7 Bid Number: CS-0010-97
Bid Date: October 30, 1996
16. EMERGENCY NOTIFICATION - The Contractor shall be required to respond
within 24 hours after notification, and must be able to service the
various facilities and/or pump stations. Most facilities will be serviced
on a scheduled weekly or daily basis, with all other work being performed
on an as needed basis. Work will normally be scheduled between 7:30 AM to
4:00 PM, Monday through Friday. The Contractor must, however, be prepared
to respond to weekend and extended hour emergencies as required, and will
be compensated at 1.5 times the base hourly rate (this also applies to
cancellation charges for weekend call outs). In the event of an industrial
spill or emergency situation, the Contractor must be able to respond
within two hours of notification. The notification requirement does not
apply to Part I activities which shall be performed seven (7) days per
week. If the Contractor's office is out of town, the Contractor shall
provide a toll-free telephone number for City personnel to schedule daily
hauling requirements.
17. SPILLS - The Contractor shall be responsible for responding within one
hour of a spill involving its own or sub-contracted vehicles and/or
personnel. "Response" is defined as having equipment and personnel at the
site of the spill and having started clean-up operations. One or more
personnel evaluating the spill site does NOT constitute a response. A
Spill Response Plan must be submitted as part of the bid package. More
than three spills during any twelve month period shall be considered just
cause to implement Item 26.
Care shall be taken when connecting, disconnecting, loading, and unloading
to prevent the spillage of any materials. It is the responsibility of the
Contractor and its employees to leave loading and unloading areas at least
as clean as when they arrived. If necessary, any loading and unloading
area shall be washed down and the bar screen at the Buckman BDF cleaned by
the Contractor before departing the area.
18. LOADING AND UNLOADING - The loading and unloading of the materials
previously mentioned shall be the responsibility of the Contractor. The
City shall be responsible for having personnel to operate City-owned
pumping equipment to load the biosolids, sand, grit and/or grease at the
appropriate sites, where that equipment is permanently installed. The
Contractor is responsible for furnishing all necessary pumping equipment
for loading biosolids and/or other materials when such equipment is not
available at the site. Where sand, grit and/or grease removal is required,
the Contractor is responsible to furnish all personnel, pumping equipment
and facilities, including power to drive said equipment. Loading and
unloading at all facilities shall be limited to the hours between 6 AM and
5 PM. Permission to enter the Buckman WRF after 5 PM must be obtained from
Operations personnel at 904.630.4215 or Industrial Pretreatment personnel
at either 904.630.4233 or 904.630.4231 by 4 PM.
19. CERTIFICATIONS - The successful bidder must provide the following
information prior to Notice to Proceed:
a. Truck (tractor) and tanker trailer numbers.
b. Capacity certification corresponding to tanker trailer number.
c. Certification of maximum tractor + trailer weight when empty and
loaded.
d. Florida Department of Transportation weight restriction(s) for this
type of vehicle.
e. 4" x 6" color photographs (non-returnable) of each tractor and trailer
to be used.
Also, before additional trailers not listed above may be used, notice,
including the above information, shall be provided in writing to the
address below at least five (5) working days prior to their use:
<PAGE> 19
Page 8 Bid Number: CS-OOl0-97
Bid Date: October 30, 1996
Industrial Pretreatment
2221 Buckman Street
Jacksonville, FL 32206-3396
20. EQUIPMENT - The Contractor shall, at the time of bid, have sufficient
equipment to haul 150,000 gallons of biosolids per day from all facilities
to the Buckman BDF. In addition, within five (5) calendar days of
notification of the need for such service, the Contractor must be able to
provide equipment to haul and stabilize up to 750,000 gallons of liquid at
approximately 2% solids or 250 wet tons of cake at approximately 20%
solids per day from the WRF's to approved land disposal site(s). Volumes
are based on 90 days of use but are not guaranteed. All vehicles shall
comply with Florida Department of Transportation regulations including
weight restrictions. Individual tanker trailers may have baffles but shall
NOT be compartmentalized and must be equipped with all necessary hose and
coupling devices required to connect to City facilities. Each tractor and
tanker whether owned or leased by the Contractor shall have company
placards mounted on both sides of each for identification purposes. The
storage of equipment, tractors, trailers, etc. at WRF's is not permitted.
The Contractor must designate tankers to be used to haul biosolids for the
City's facilities. These tankers can not be used to haul other materials
such as septic tank and/or grease trap waste. This is to ensure proper
billing or payment. The quantity of biosolids hauled from outside
facilities shall be compared to volumes received at the Buckman BDF.
Discrepancies shall be investigated. If it is determined that the
Contractor has discharged non-City materials and claimed it to be City
materials, the Contractor shall have triple the applicable discharge price
deducted from their next invoice. Three or more confirmed false claims
during any twelve month period shall be considered just cause to implement
Item 26.
21. BREAKDOWN - The removal of biosolids is an essential operation within the
City's treatment facilities and there is minimal storage capacity
available. There shall be no allowance for the breakdown of the
Contractor's equipment. The Contractor shall provide sufficient equipment
and personnel to transport the maximum daily quantities as requested by
Division personnel or the volumes listed in Item 20, whichever is greater,
at all times taking into consideration equipment breakdown. If on ANY day
the Contractor fails to transport the maximum daily quantities as
requested by Division personnel, liquidated damages in the amount of
$1,000 shall be paid to the City. If the Contractor fails on Day 2 to haul
same, damages in the amount of $2,500 shall be paid to the City for a
cumulative total of $3,500. If the Contractor fails on Days 3 through 5,
to haul same, damages in the amount of $5,000 each day shall be paid to
the City for a cumulative total of $18,500. Liquidated damages shall be
subtracted from the subsequent bill. A negative balance shall be carried
over to the following month(s). If after Day 5 the Contractor fails to
transport the maximum daily quantities as requested by Division personnel,
this Contract may be canceled immediately.
22. STABILIZATION - The biosolids stabilization method shall be in conformance
with 40 CFR Part 503 and FAC Chapter 62-640. Prior to the Notice to
Proceed, the Contractor shall develop and have FDEP review a written plan
which addresses where and how stabilization will occur and shall include
the equipment and chemicals to be used. This plan shall be submitted to
the City. Acceptance of the plan by this Division shall not in any way
make the City responsible or liable for the method, manner or means
selected by the Contractor for its stabilization of biosolids nor for any
failure by the Contractor to properly stabilize the biosolids in
accordance with applicable laws, rules and regulations, including but not
limited to license, permit and other similar requirements. This plan shall
also detail how odors associated with the stabilization process are to be
minimized. If the Contractor
<PAGE> 20
Page 9 Bid Number: CS-OOl0-97
Bid Date: October 30, 1996
stabilization system is not operational and accepting the City's material
within five (5) calendar days after written or faxed notification,
liquidated damages in the amount of $5,000 per day shall be paid to the
City. After ten (10) calendar days, liquidated damages paid to the City
shall increase to $10,000 per day.
23. DISPOSAL - The biosolids disposal method and site(s) shall be in
conformance with 40 CFR Part 503 and FAC Chapter 62-640. Approval by the
Division shall not in any way make the City responsible or liable for the
method, manner or means selected by the Contractor for its utilization of
the site nor for any failure by the Contractor to utilize said site in
accordance with applicable laws, rules and regulations, including but not
limited to license, permit and other similar requirements. Further, the
Contractor shall assume full responsibility for disposal procedures,
permits, and inspection by all duly appointed local, State, and Federal
authorities. All biosolids, sand, grit and/or grease shall be properly
stabilized and disposed of prior to the completion of work each day.
The minimum requirements for site availability are for 90 days of land
application based on the quantities listed in Item 19. The Bidder's
agricultural plan must include strategies for acquiring additional site(s)
to service the entire contract period. This paragraph does not exempt the
bidder from the site requirements of the State, nor the approval
requirements set forth herein.
All sampling for land application shall be performed by the Contractor.
Any analyses shall be performed by the City.
24. AGRICULTURAL USE PLAN - The Contractor will provide all information,
measurements, drawings, etc. to obtain land application permit(s) and will
at a minimum include the following information/documentation:
a. maps showing the extent of the property to be utilized and its
acreage;
b. indications of all surface waters included on the site(s) proposed
and an explanation of their exclusion from the acreage calculations,
and the set backs proposed (these must be in accordance with 40 CFR
Part 503 and FAC Chapter 62-640);
c. the crop to be grown on the property during operation (if any);
d. a notarized statement from the property owner certifying compliance
with the limitations of 40 CFR Part 503 and FAC Chapter 62-640;
e. a sample of the monthly report to be submitted to the regulatory
agency(ies) and the Wastewater Division by the Contractor denoting
the monthly, year to date, and cumulative application of biosolids
(gallons and dry tons per acre) including metals (Cd, Cu, Pb, Ni,
Zn), nitrogen, and phosphorus, and the ground water depth at the
time of each application;
f. notation of any public buildings within 100 feet of the application
area, and indication of the buffer area the Contractor plans to
maintain around the buildings;
g. location of all wells, both public and private, with indication of
buffer area which the Contractor will maintain;
h. groundwater survey of the site(s); and
i. topographic grade of the site(s).
25. TERM OF AGREEMENT- The initial period of this contract shall be from
January 1,1997 through September 30, 1997 and may be renewed for four (4)
additional one year periods with mutual consent of both parties and
pending availability of funds. The unit prices listed on the bid form
shall remain firm for the initial period of the contract. Price increases
may be negotiated [ILLEGIBLE] renewal period. The maximum increase
allowable shall be based upon the Producer [ILLEGIBLE] for the 12
<PAGE> 21
Page 10 Bid Number: CS-OOl0-97
Bid Date: October 30, 1996
month period prior to renewal. Renewal is at the sole discretion of the
City of Jacksonville based upon acceptable performance by the supplier
during the preceding year and is subject to the availability of funds.
26. CANCELLATION OF CONTRACT - The Division may cancel the contract in whole
or in part for any reason upon thirty (30) days written notice and without
legal and financial recourse by the Contractor. The Contractor shall be
paid for all services completed through the effective date of contract
cancellation.
27. ROUTING - Tractor trailer combinations approaching or leaving the Buckman
WRF shall utilize Talleyrand Avenue and 8th Street or Duval Street.
Tractor trailer combinations approaching or leaving the Southwest WRF
shall utilize Timiquana Boulevard, Catoma Street, and 118th Street.
Tractor trailer combinations approaching or leaving the Mandarin WRF shall
utilize Hartley Road, Pine Acres Road, and Hampton Road to the facility
entrance. Vehicles not following these routes may be reported to the
Contractor's headquarters. Three routing violations within a three month
period may be considered just cause to implement Item 26.
28. RANDOM SPEED CHECKS - In order to protect public safety, the Division may
coordinate random speed checks with the Jacksonville Sheriff's Office,
primarily on the routes described in Item 27 but may include the WRF
property. Three speeding violations for all vehicles regardless of
location within a twelve month period may be considered just cause to
implement Item 26. Submission of speeding violation documents shall be in
accordance with Item 11.
29. PROTESTS - Any potential Bidder with questions regarding these
Specifications shall submit them in writing via certified mail at least 15
calendar days prior to Bid opening. By submission of a Bid, all
Contractors agree that the provisions contained herein are acceptable and
shall not be protestable.
30. CHAPTER 7 & 11 - The Contractor shall notify the City via certified mail
within fourteen (14) calendar days of filing for protection from creditors
during liquidation (Chapter 7) or reorganization (Chapter 11). Proof of
filing shall be provided. Send notification and proof to:
Alan Flood, P.E., Project Engineer
Treatment Division
2221 Buckman Street
Jacksonville, Florida 32206-3396
Failure to notify may be considered just cause to implement Item 26.
<PAGE> 1
EXHIBIT 10.7
ADDENDUM TO CONSULTANT AGREEMENT
ADDENDUM, dated June 15, 1998 to the Consultant Agreement, made as of
January 1, 1998 between Weststar Environmental, Inc. (the "Corporation") and
Thomas C. Souran (the "Consultant").
WHEREAS, the Corporation and the Consultant entered into a Consultant
Agreement (the "Agreement") dated as of January 1, 1998, which provided in
Section 3.4 thereof for the Corporation to register the Consulting Stock, as
such term is defined in the Agreement, on Form S-8 under the Securities Act of
1933, as amended, upon the request of the Consultant; and
WHEREAS, certain services being provided by the Consultant pursuant to
the Agreement involve capital raising transactions; and
WHEREAS, the General Instructions regarding the use of Form S-8
expressly prohibit the use of such Form in connection with stock received in
connection with capital raising transactions; and
WHEREAS, the parties deem it necessary and desirable to delete Section
3.4 of the Agreement.
NOW, THEREFORE, WITNESSETH, that the parties hereby agree that Section
3.4 of the Agreement is deemed to be deleted from the Agreement and of no
further force and effect. All other terms and conditions of the Agreement,
however, continue with full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed the above Addendum
as of the day and year first written above.
WITNESS: WESTSTAR ENVIRONMENTAL, INC.
/s/ William B. Gray By /s/Michael Ricks
- ------------------------------ --------------------------------
MICHAEL RICKS, President
/s/ Rose Borrelli /s/ Thomas C. Souran
- ------------------------------ --------------------------------
THOMAS C. SOURAN
<PAGE> 1
EXHIBIT 10.8
WESTSTAR ENVIRONMENTAL, INC.
1997 NONSTATUTORY STOCK OPTION PLAN
SECTION 1
PURPOSE AND SCOPE OF PLAN
The purpose of this Plan is to advance the interests of Weststar
Environmental, Inc. (the "Company") and its stockholders by helping the Company
obtain the services of key management employees, officers, directors,
consultants and advisors upon whose judgment, initiative, and efforts the
Company is substantially dependent, and to provide those persons with further
incentives to advance the interests of the Company. These goals will be
effectuated by granting Options to purchase stock to such persons. Such Options
are not intended to qualify as Incentive Stock Options under Section 422A of the
Internal Revenue Code of 1986, as amended.
SECTION 2
CERTAIN DEFINITIONS
Unless the context otherwise requires, the following defined terms
(together with other capitalized terms defined elsewhere in this Plan) will
govern the construction of this Plan, and of any stock option agreements entered
into pursuant to this Plan:
A. "1933 Act" means the federal Securities Act of 1933, as amended;
B. "Board of Directors" means the Board of Directors of the Company;
C. "Code" means the Internal Revenue Code of 1986, as amended
(references herein to Sections of the Code are intended to refer to Sections of
the Code as enacted at the time of this Plan's adoption by the Board of
Directors and as subsequently amended, or to any substantially similar successor
provisions of the Code resulting from recodification, renumbering or otherwise);
D. "Committee" means the committee of two or more Directors, appointed
by the Board of Directors pursuant to subsection 3(a), below, to administer and
interpret this Plan; provided that the term "Committee" will refer to the Board
of Directors during such times as no Committee is appointed by the Board of
Directors;
E. "Common Stock" means shares of the Company's Common Stock, $.001 par
value;
F. "Company" means Weststar Environmental, Inc. a Florida corporation,
and/or its Subsidiaries;
G. "Eligible Participant" means a person who, on the Grant Date as
hereinafter defined, is a key management employee, officer, director, consultant
or advisor rendering bona fide services
<PAGE> 2
to the Company provided, however, that such services are not rendered in
connection with the offer or sale of securities in a capital raising
transaction;
H. "Grant Date" means the date on which the Option is deemed to be
granted to the Optionee, as determined by the Committee.
I. "Option" means an Option granted pursuant to this Plan entitling the
option holder to acquire shares of Common Stock issued by the Company pursuant
to the valid exercise of the Option;
J. "Option Price" with respect to any particular Option means the
exercise price at which the Optionee may acquire each share of the Option Stock
called for under such Option;
K. "Option Stock" means Common Stock issued or issuable by the Company
pursuant to the valid exercise of an Option;
L. "Optionee" means an Eligible Participant to whom Options are granted
hereunder;
M. "Plan" means this 1997 Nonstatutory Stock Option Plan of the
Company;
N. "Stock Option Agreement" means an agreement between the Company and
an Optionee, in form and substance satisfactory to the Committee in its sole
discretion, consistent with this Plan;
O. "Subsidiary" has the same meaning as "Subsidiary Corporation" as
defined in Section 424(f) of the Code;
SECTION 3
ADMINISTRATION OF PLAN
(a) This Plan shall be administered by a Committee appointed by the
Board of Directors for such purpose. Such Committee shall consist of not less
than two members of the Board of Directors. No member of the Committee or the
Board of Directors shall vote on any matter that affects the specific right of
such member to receive Options under the Plan or the terms of any Options
receivable by such member under the Plan.
(b) The Committee shall have full authority and discretion to
determine, consistent with the provisions of this Plan, the Eligible
Participants to be granted Options, the times at which Options shall be granted,
the Option Price of the shares subject to each Option, the number of shares
subject to each Option, the period during which each Option shall be
exercisable, and the terms to be set forth on each Option certificate. The
Committee shall also have the authority and power to impose such contractual
restrictions, conditions, limitations and forfeitures relating to such Options
and the shares subject to each Option as the Committee shall determine. The
Committee shall have full authority and discretion to adopt and revise such
rules and procedures as it shall deem necessary for the administration of this
Plan.
2
<PAGE> 3
(c) The Committee's interpretation and construction of any provisions
of this Plan or any Option granted hereunder shall be final, conclusive, and
binding.
SECTION 4
ELIGIBILITY AND AWARD OF STOCK OPTIONS
(a) The Committee may, from time to time, determine the Eligible
Participants who shall be granted Options under this Plan. An Eligible
Participant who has been granted an Option may be granted an additional Option
or Options under this Plan if the Committee shall so determine. The granting of
an Option under this Plan shall not affect any outstanding stock option
previously granted to an Optionee under this Plan or any other plan of the
Company.
(b) Additional Options may be granted by the Committee, at any time and
from time to time, to new Optionees, or to then Optionees, or to a greater or
lesser number of Optionees, and may include or exclude previous Optionees.
Options granted need not contain similar provisions.
SECTION 5
SHARES OF STOCK SUBJECT TO PLAN
Subject to the provisions of Section 12 of this Plan, the number of
shares that may be issued pursuant to the Options granted by the Committee under
this Plan shall not exceed one million (1,000,000) shares of the Common Stock of
the Company. Such shares may be authorized and unissued shares or shares
previously acquired or to be acquired by the Company and held in treasury. Any
shares subject to an Option under this Plan that expires for any reason or is
terminated unexercised as to such shares may again be subject to an Option under
this Plan.
SECTION 6
STOCK OPTION AGREEMENTS
Options granted pursuant to this Plan shall be authorized by the
Committee and shall be evidenced by such Stock Option Agreements or other
agreements, in such form as the Committee, shall, from time to time, approve.
Such agreements shall comply with and be subject to the terms and conditions of
this Plan.
SECTION 7
OPTION PRICE
(a) Each Option shall state the number of shares to which it pertains
and shall state the Option Price, which shall not be less than the par value of
the Common Stock.
(b) The Option Price shall be payable in United States dollars upon the
exercise of the Option and may be paid in cash or by check.
3
<PAGE> 4
(c) The cash proceeds from the sales of Common Stock pursuant to the
exercise of Options are to be added to the general funds of the Company and used
for its corporate purposes.
SECTION 8
TERM AND EXERCISE OF OPTIONS
(a) Subject to the provisions of Section 11, below, the terms of
exercisability of each Option granted hereunder shall be determined by the
Committee at its discretion.
(b) An Option may be exercised to the extent exercisable by: (i) giving
written notice of exercise to the Company, specifying the number of full shares
of Option Stock to be purchased and accompanied by full payment of the Option
Price thereof; and (ii) giving assurances satisfactory to the Company that the
shares of Option Stock to be purchased upon such exercise are being purchased
for investment and not with a view to resale in connection with any distribution
of such shares in violation of the 1933 Act; provided, however, that in the
event the Option Stock called for under the Option is registered under the 1933
Act, or in the event resale of such Option Stock without such registration would
otherwise be permissible, this second condition will be inoperative if, in the
opinion of counsel for the Company, such condition is not required under the
1933 Act, or any other applicable law, regulation or rule of any governmental
agency.
SECTION 9
NONTRANSFERABILITY
All Options granted under this Plan shall be nontransferable by the
Optionee, otherwise than by will or the laws of descent and distribution, and
shall be exercisable during the Optionee's lifetime, only by him or her.
SECTION 10
REQUIREMENTS OF LAW
The granting of Options and the issuance of shares of Common Stock upon
the exercise of an Option shall be subject to all applicable laws, rules, and
regulations and shares shall not be issued except upon approval of proper
government agencies or stock exchanges as may be required.
SECTION 11
DEATH OF OPTIONEE
In the event of the death of an Optionee such deceased Optionee's legal
heirs or estate shall have the right to exercise all outstanding Options to the
extent that such deceased Optionee was entitled to exercise them at the date of
his or her death.
4
<PAGE> 5
SECTION 12
ADJUSTMENTS
(a) Except as described in Section 12(b) below, in the event of any
change in the number of outstanding shares of Common Stock by reason of any
stock dividend or split, recapitalization, reclassification, merger,
consolidation, combination, or exchange of shares, or other similar corporate
change, then if the Committee shall determine, in its sole discretion, that such
change necessarily or equitably requires an adjustment in the number of shares
subject to each outstanding Option and the Option Prices or in the maximum
number of shares subject to this Plan, such adjustments shall be made by the
Committee and shall be conclusive and binding for all purposes of this Plan. No
adjustment shall be made in connection with the issuance by the Company of any
warrants, rights, or options to acquire additional shares of Common Stock or of
securities convertible into Common Stock.
(b) The Company is currently contemplating an initial public offering
of shares of its Common Stock. In connection therewith and prior to any such
initial public offering of shares of its Common Stock, the Company expects to
engage in a forward stock split (the "Stock Split") thereby increasing the
number of outstanding shares of its Common Stock. In the event such Stock Split
is in the amount of 20:1 or any lesser proportion no adjustment in the number of
shares subject to each outstanding option at the time of the Stock Split shall
be made pursuant to Section 12(a) above. However, should such Stock Split result
in an increase of outstanding shares of Common Stock at a rate of greater than
20:1, then the change in the number of outstanding shares of Common Stock
attributable to the Stock Split shall be subject to Section 12(a) above, but
only with regard to that part of the change in the number of outstanding shares
which is directly attributable to the Stock Split being at a rate of greater
than 20:1.
SECTION 13
CLAIM TO STOCK OPTION, OWNERSHIP, OR CONTRACTUAL RIGHTS
No person shall have any claim or right to be granted Options under
this Plan. No Optionee, before issuance of the stock, shall be entitled to
voting rights, dividends, or other rights of stockholders except as otherwise
provided in this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any person any right to continue any relations with the
Company as an independent contractor.
SECTION 14
UNSECURED OBLIGATION
Optionees under this Plan shall not have any interest in any fund or
specific asset of the Company by reason of this Plan. No trust fund shall be
created in connection with this Plan or any award thereunder, and there shall be
no required funding of amounts that may become payable to any Optionee.
5
<PAGE> 6
SECTION 15
EXPENSES OF PLAN
The expenses of administering the Plan shall be borne by the Company.
SECTION 16
INDEMNIFICATION
Each person who is or shall have been a member of the Committee or of
the Board of Directors shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred in connection with or resulting from any claim, action,
suit, or proceeding to which the person may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid in satisfaction of judgment in any
such action, suit, or proceeding against the person, provided the Company shall
be given an opportunity, at its own expense, to handle and defend the action on
the individual's own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power than the Company may have to indemnify them or
hold them harmless.
SECTION 17
AMENDMENT AND TERMINATION
Unless this Plan shall theretofore have been terminated as hereinafter
provided, no Options may be granted after April 27, 2007. The Board of Directors
may terminate this Plan or modify or amend this Plan in such respect as it shall
deem advisable, provided, however, that the Board of Directors may not without
prior approval by the Company's Shareholders:
(a) Increase the aggregate number of shares of Common Stock as to which
Options may be granted under the Plan except as provided in Section 12, above;
and
(b) Extend the period during which Options may be granted.
SECTION 18
APPLICABILITY OF PLAN TO OTHER OUTSTANDING STOCK OPTIONS
This Plan shall not affect the terms and conditions of any other stock
options heretofore granted to any person under any other Company plan relating
to statutory or nonstatutory stock options, nor shall it affect any of the
rights of any person to whom such a statutory or nonstatutory stock option was
granted.
6
<PAGE> 7
SECTION 19
EFFECTIVE DATE OF PLAN
The plan shall become effective as of April 28, 1997.
7
<PAGE> 1
EXHIBIT 10.9
NORTH CAROLINA
GUILFORD COUNTY
CONSULTING AND
NONCOMPETITION AGREEMENT
THIS CONSULTING AND NONCOMPETITION AGREEMENT (the "Agreement") is made as
of the 4th day of October, 1996, by and between CBP RESOURCES, INC.,
("Company"), a Delaware corporation with its principal office in Greensboro,
North Carolina and MICHAEL E. RICKS, of Starke, Florida ("Consultant").
W I T N E S S E T H:
WHEREAS, Consultant has been and is a shareholder, director and employee
of Weststar Environmental, Inc. (f/k/a Weststar Environmental Pumping and Septic
Services, Inc.), a Florida corporation ("Weststar"); and
WHEREAS, pursuant to that certain Asset Purchase and Sale Agreement dated
of even date between Company and Weststar (the "Asset Agreement"), Company has
acquired certain assets from Weststar used in certain states in connection with
its grease trap business ("the Acquisition"); and
WHEREAS, Company desires to retain the Consultant's services, upon and
subject to the terms and conditions set forth below; and
WHEREAS, Consultant has knowledge of or will, through his association with
the Company, become familiar with the Company's methods, business practices,
business culture and environment, Company technology and overall business
approach to the Rendering Business (as that term is hereinafter defined); and
WHEREAS, as a result of consulting for and with the Company, consultant
will obtain the confidential business information and trade secrets described
herein, which
<PAGE> 2
information (1) derives independent economic value from not being generally
known to the public or to other persons who can obtain economic value from its
disclosure or use; and (2) has been and will continue to be the subject of
efforts that are reasonable under the circumstances to maintain the secrecy of
such information; and
WHEREAS, the Company would suffer and be subject to loss of customers,
suppliers and other business relations in the event Consultant should enter into
competition against or with the Company and/or use the confidential information
Consultant will have access to in connection with his duties and
responsibilities hereunder, and Consultant acknowledges that the terms and
conditions of this Agreement are reasonably necessary to protect the Company's
interests and that the Company would not enter into this Consulting Agreement
without such covenants from and by the Consultant;
NOW, THEREFORE, Company and Consultant hereby agree as follows:
ARTICLE I
Consulting Agreement
1.01 Consulting. Company hereby retains Consultant, and Consultant hereby
agrees to provide the services described herein, subject to the terms and
conditions contained herein.
1.02 Duties. Consultant shall assist Company with the transition of the
Accounts (as defined and described in the Asset Agreement) from Weststar to the
Company and shall perform such reasonable services in connection with such
transition and maintenance of such Accounts as directed by Company and such
other and further duties as Company may reasonably assign to Consultant from
time to time. Consultant agrees to perform his
2
<PAGE> 3
responsibilities diligently, faithfully and in a competent, professional manner,
and to devote his best efforts to the performance of said responsibilities.
Consultant agrees to observe all rules, policies and regulations, as they apply
in the performance of his responsibilities.
1.03 Compensation. As consideration for the services to be performed
hereunder, Company shall pay Consultant a consulting fee of $2,500.00 per month
for a period of forty-eight (48) months from the date of this Agreement. Such
payments shall commence on the last day of the month following the date hereof
and shall continue on the last day of each month thereafter for a total of 48
months.
1.04 Reimbursement of Expenses. Company will reimburse Consultant for all
reasonable and customary travel and other expenses incurred by him in the
performance of any duties hereunder as requested by the Employer, subject to
verification of such expenses and Consultant's compliance with Company's rules
and policies and Internal Revenue Code regulations, with regard to such
expenses.
1.05 Term. The term of consulting hereunder shall be for a period of four
(4) years beginning on the date of execution of this Agreement (the "Term").
1.06 Termination.
(a) Termination With Cause. The term of this Consulting Agreement may be
terminated upon immediate notice by Company by reason of one or more of the
following occurrences (each of which, for purposes hereof defined as "with
cause"):
(i) conviction of, or pleading guilty or no contest to, a felony or a
crime involving moral turpitude damaging to the business reputation
of Company, whether or not committed in the performance of
Consultant's responsibilities
3
<PAGE> 4
hereunder;
(ii) commission of an act of fraud upon, or an act evidencing intentional
bad faith towards Company or any of its affiliates which results in
damage to the business of Company; or
(iii) breach by Consultant of any material duty or obligation assigned to
Consultant by Company hereunder, as to which Company shall have
given Consultant ten (10) days written notice and which shall not
have been cured within said ten (10) day period; or
(iv) breach by Consultant of any of his agreements or covenants contained
in Sections 2.01, 2.02 or 2.03 hereunder for which no notice shall
be required.
(b) Termination Upon Death. The term of consulting shall terminate
immediately at the death of the Consultant. If the relationship created
hereunder is terminated by Company with cause or by the death of the Consultant,
the Consultant shall be entitled only to that portion of consideration earned
prior to the date of such termination. Termination of this Consulting Agreement
pursuant to this Section 1.05 shall not affect the obligations of Consultant
under Article II hereunder.
ARTICLE II
Noncompetition Agreement
2.01 Covenant Not to Compete. For and in consideration of the Acquisition
and the amounts to be paid by Company to Consultant pursuant to Section 2.04
hereunder and other good and valuable consideration, the receipt and sufficiency
of which is hereby expressly acknowledged, Consultant covenants and agrees that
for a period of ten (10) years
4
<PAGE> 5
after the date of this Agreement (the "Noncompetition Period"), Consultant will
not, in the Geographic Area (as defined hereinbelow), directly or indirectly,
either for himself or for any other person, partnership, corporation or company:
(a) engage in or in any way compete with Company in the business of
inedible or edible rendering, reducing or extracting fats or other
animal products, or in the buying, collecting, transporting,
manufacturing or dealing in fat, bones, tallow, cracklings, grease,
waste restaurant grease or other waste products provided by retail
or wholesale meat stores, slaughter houses, packing houses, hotels
or restaurants, or in the operation of fat and bone routes, grease
routes or trap grease routes or any related goods and services (all
activities set forth in this Section 2.01(a) are individually
referred to herein as a "Covered Activity" and collectively referred
to herein as the "Covered Activities" or the "Rendering Business");
or
(b) solicit, or accept orders or business of any kind relating to the
Covered Activities as specified in subparagraph (a) hereof (i) from
any customer or active prospect of Company or Weststar; or (ii) from
any former customer of Weststar.
The term "engage in" shall include having any direct or indirect interest in any
enterprise, whether as an officer, director, employee, investor, partner, joint
venturer, sole proprietor, principal, agent, representative, independent
contractor, consultant, or owner (other than by passive ownership of less than
5% of the stock or other securities of a publicly held corporation whose stock
is traded on a national securities exchange or in an over-the-
5
<PAGE> 6
counter market).
In performing the covenants of this Section 2.01, the Consultant shall
not, without limitation, conduct any activity prohibited in this Section 2.01 in
the following areas (the "Geographic Areas") during the Noncompetition Period:
the states of North Carolina, South Carolina, Tennessee, Virginia, West
Virginia, Maryland, Alabama and District of Columbia, together with a fifty (50)
mile area or radius around such states, together with a territory within a one
hundred (100) mile radius of any operating facility owned, leased, or operated
by the Company during and as of the expiration of the Noncompetition Period.
The parties intend that each Geographic Area listed above be considered
independently and separate and distinct from each of the other listed Geographic
Areas. The parties acknowledge and agree that given the nature of Company's
business and the knowledge and experience Consultant has of and with Company and
its business, that the covenants were arrived at as a result of arms length
bargaining, that the consideration arrived at herein being paid to Consultant in
exchange for such agreement, and the Non-Competition Period, Geographic Areas
and Covered Activities are reasonable, and the parties hereby waive the right to
assert the unreasonableness of such restrictions.
2.02 Confidentiality.
(a) Consultant recognizes and acknowledges that he may, during his
consulting with Company hereunder, be privy to confidential,
proprietary and non-public information of the Company, including,
but not limited to, information relating to Company's financial
condition and results, operations, plans and activities, proprietary
and trade secret information, customer lists and other
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<PAGE> 7
commercial aspects of its business ("Confidential Information").
Accordingly, Consultant covenants that he will hold such
Confidential Information in a fiduciary capacity for the benefit of
Company and will not, either during his consulting or at any time
thereafter either directly or indirectly use for his own benefit or
divulge, disclose or communicate Confidential Information to any
person, firm, corporation, association or other entity except in the
ordinary course of Company's business with the knowledge and consent
of Company and except for any disclosure made by Consultant to his
attorneys or accountants or as may otherwise be required by law
(including any disclosure ordered by a court of competent
jurisdiction). Consultant shall take all appropriate steps to
safeguard such Confidential Information against disclosures, misuse,
loss or theft.
(b) Company and Consultant agree that such Confidential Information to
which Consultant had or may have access shall not be considered
confidential if and to the extent that the information is, or
becomes through no fault or action of Consultant, published or part
of the public domain. Upon request by Company, Consultant will
promptly return to Company, as its property, all records related to
such Confidential Information in whatever form they may exist, which
are in Consultant's custody, possession or control. Additionally,
during his consulting and for a period of six (6) years thereafter,
and upon request of Company, Consultant will sign any additional
documents reasonable and necessary to give effect to any secrecy or
other agreements
7
<PAGE> 8
relating to Confidential Information between Company and any other
party.
2.03 Inducement of Employees and Business Relations. During Consultant's
consulting Term hereunder, and for a Period not to exceed ten (10) Years from
the date of this Agreement, Consultant shall not, directly or indirectly,
induce, attempt to induce or aid others in inducing an employee of the Company
to leave the employ of Company or in any way interfere with the relationship
between Company and an employee of Company or induce or attempt to induce any
customer, supplier, licensee or other business relation of Company to cease
doing business with Company, or in any way interfere with the relationship
between any customer or business relation and the Company.
2.04 Consideration. As consideration for the agreements of Consultant
under Section 2.01, 2.02 and 2.03 hereinabove, Company shall pay to Consultant
the sum of Two Hundred Thousand and 00/100 Dollars ($200,000.00) payable as
follows (collectively, the "Noncompete Payments").
(i) Twenty Thousand Dollars payable on the date hereof; and
(ii) Twenty Thousand Dollars ($20,000.00) each year payable on the
annual anniversary date of the first Noncompete Payment for a total of ten (10)
years.
2.05 Payment Following Death of Consultant. Notwithstanding any other
provision of this Agreement, if the Consultant dies prior to Noncompete Payments
beginning under Section 2.04 or after such Noncompete Payments begin but prior
to the end of the time that all Noncompete Payments are paid as provided in
Section 2.04, the Noncompete Payments shall be paid in full as provided in
Section 2.04 and Company's obligation to make such payments shall not be
extinguished. If Consultant is survived by a spouse, any amounts
8
<PAGE> 9
payable under Section 2.04 above shall, following Consultant's death, be paid to
such surviving spouse in accordance with the schedule set forth in Section 2.04.
If such surviving spouse should die before receiving all of such payments, all
remaining payments shall he paid to the estate of the surviving spouse in
accordance with the schedule set forth in Section 2.04. If Consultant is not
survived by a spouse, Company shall, following Consultant's death, pay any
amounts payable under Section 2.04 above to the estate of Consultant in
accordance with the schedule set forth in Section 2.04.
2.06 Remedies. The parties hereto agree that Company would suffer
irreparable harm that would not be adequately remedied by money damages from a
breach by Consultant of any of the covenants or agreements contained in this
Agreement. Therefore, in the event of the actual or threatened breach by
Consultant of any of the provisions of Sections 2.01, 2.02 or 2.03 of this
Agreement, Company or its successors or assigns may, in addition and
supplementary to any other rights and remedies existing in its favor, apply to
any court of law or equity of competent jurisdiction for specific performance or
injunctive relief in order to enforce, or prevent any violation of the
provisions of Sections 2.01, 2.02 or 2.03 hereof (including the extension of the
noncompetition period by a period equal to the length of the violation of this
Agreement plus the length of court proceedings necessary to stop such
violation). In the event of any alleged breach or violation by Consultant of any
of the provisions of Sections 2.01, 2.02 or 2.03 of this Agreement, the
Noncompetition Period described above will be tolled until such alleged breach
or violation is resolved. The Consultant agrees that these restrictions are
reasonable. In addition to any other relief or damages available to Company,
Consultant covenants and agrees that he shall return one
9
<PAGE> 10
hundred percent (100%) of the Noncompete Payments paid to him by Company
hereunder plus interest at the rate of ten percent (10%) from the time such
payment was made if any part of this Agreement is determined to be unenforceable
by a court of law. This Section 2.06 is not a liquidated damages provision and
is not intended to limit in any way the availability of additional equitable or
legal relief for the types of breaches discussed in this Section 2.06 where
circumstances and applicable legal principles support such relief, nor limit in
any way the availability of any legal or equitable relief for the breaches of
any other provisions of this Agreement.
ARTICLE III
Miscellaneous
3.01 Severability. If any provision or clause of this Agreement or portion
thereof shall be held by any court or other tribunal of competent jurisdiction
to be illegal, void or unenforceable in such jurisdiction, the remainder of such
provisions shall not thereby be affected and shall be given full effect without
regard to the invalid portion. It the intention of the parties that, and the
parties agree that as an essential part of the bargained for consideration of
this Agreement, if any court construes any provision or clause of this
Agreement, or any portion thereof, to be illegal, void or unenforceable because
of the duration of such provision, or the area or matter covered thereby, such
court shall reduce the duration, area or matter of such provision and, in its
reduced form, such provision shall then be enforceable to the greatest extent
permitted by law and shall be enforced.
3.02 Assignment. This Agreement shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement may
be assigned by
10
<PAGE> 11
Company without the consent of Consultant but may not be assigned by Consultant.
3.03 No-Waiver. Failure by either Company or Consultant to exercise any
remedy available to either party in the event of a default by the other shall
not be deemed to be a waiver of any other default, or of any repetition of the
initial default.
3.04 Amendments. No amendment or modification of this Agreement shall be
deemed effective unless and until executed in writing by both parties hereto.
3.05 Entire Agreement; Counterparts. This Agreement contains the entire
agreement between Consultant and Company with reference to Consultant's
relationship with Company. This Agreement may be executed as counterpart
documents each of which shall be deemed to be an original Agreement. The terms
and conditions of the Asset Agreement are hereby incorporated by reference, and
any breach of either Agreement shall constitute a breach of the other Agreement.
3.06 Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
3.07 Governing Law. This Agreement shall be governed in accordance with
the laws of the State of North Carolina.
3.08 Representation. The parties each warrant and represent to the other
that this Agreement is duly authorized and constitutes a valid and legally
binding obligation, enforceable in accordance with its respective terms, except
as such enforcement may be limited by: (i) applicable bankruptcy, insolvency,
fraudulent conveyance, moratorium or other similar laws presently in effect
concerning the enforcement of creditors' rights generally, and (ii) the effect
of rules of law governing the availability of equitable remedies
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<PAGE> 12
including, without limitation, injunction and specific performance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
COMPANY:
CBP RESOURCES, INC.
/s/ Lusk D. Sachet By: /s/ David Post
- -------------------------- --------------------------
Witness Vice President
CONSULTANT:
/s/ Jim R. Ricks /s/ Michael E. Ricks
- -------------------------- --------------------------
Witness Michael E. Ricks
12
<PAGE> 1
EXHIBIT 10.11
PROMISSORY NOTE-FIXED INTEREST
WITH INSTALLMENT PAYMENTS
$100,000.00 7% Interest Per Annum
January 31, 1994
In installments, as set forth, for value received, the undersigned,
Weststar Environmental, Inc. and B & B Plumbing and Septic Service, Inc.
promises to pay to William R. Ferguson, Gloria Ferguson and Alan R. Ferguson to
order at P. 0. Box 686 Maggie Valley, North Carolina, 28751, the sum of One
Hundred Thousand Dollars ($100,000.00) together with interest from the date
above on the unpaid principal balance due at a rate of Seven percent (7%) per
annum. Payments shall be payable monthly in installments of One Thousand Dollars
($1,000.00) beginning on February 28, 1994 and on the first day of each month
thereafter and the final payment of One Thousand Five Hundred Fifteen Dollars
and Thirty Eight Cents ($1,515.38).
Should interest not be paid when due it shall thereafter bear interest at
the same rate as the principal. All payments shall be payable in lawful currency
of the United States of America. The undersigned agrees to pay all costs of
collection including reasonable attorney's fees.
Weststar Environmental, Inc. and B & B Plumbing & Septic Service, Inc.
BY: /s/ Michael E. Ricks
----------------------------
Michael E. Ricks
President
<PAGE> 1
EXHIBIT 10.12
INSTALLMENT NOTE
$ 76,274.80 DeLand FL 10/11/95
- --------------------------------------------------------------------------------
(City) (State) (Date)
For value received, the undersigned (whether one or more, hereinafter
called the "Obligors") promise(s) to pay to the order of SouthTrust Bank of
Central Florida (hereinafter called the "Bank" or, together with any other
holder of this note, the "Holder"), at any office of the Bank in DeLand, FL, or
at such other place Holder may designate, the principal sum of TWELVE THOUSAND
ONE HUNDRED SEVENTEEN AND 70/100 Dollars together with interest thereon at the
rate and on the date(s) provided below from the date of this note (or other
interest accrual date shown below) until maturity, and with interest the unpaid
principal balance after maturity at the rate which is 2 percent per annum in
excess of the rate stated below or the maximum rate allowed by law, whichever
is less, [Illegible] maturity until said indebtedness is paid in full. Interest
will accrue beginning on the date of this note unless another date is shown
here: _______________________________
INTEREST RATE. The above-stated sum shall accrue interest as follows
(check applicable box(es)):
|_| Variable Rate --
Interest from date
Interest will accrue on the above-stated principal sum
at the rate per annum which is ___________ percentage
points in excess [of] the Index Rate. Unless another
rate is made applicable below, the "Index Rate" is the
rate of interest designated by the Bank periodically as
its Base Rate. The Base Rate is not necessarily the
lowest rate charged by the Bank. The Base Rate on the
date of this note is _____ percent.
|_| (check box if applicable) The "Index Rate" is the
weekly auction average yield of ______ -week U.S.
Treasury Bills at the [most] recent auction prior
to the date the Index Rate is calculated. The
Index Rate on the date of this note is ______
percent.
The rate of interest payable under this note will change
to reflect any change in the Index Rate:
|_| on any day the Index Rate changes.
|_| on the day each payment of interest is due as
provided below.
|_| on the ___________ day of each month hereafter.
|_| _________________________________________________
Obligors may prepay this note in full at any time
without penalty.
|X| Fixed Rate --
Interest from date
Interest will accrue on the above-stated principal sum
at the rate of 10.750 percent per annum.
Interest on the principal sum will be calculated at the rate set forth
above on the basis of a |X| 360 |_| 365 day year and the actual number of days
elapsed by multiplying [the] principal sum by the per annum rate set forth
above, multiplying the product thereof by the actual number of days elapsed, and
dividing the product so obtained by |X| 360 |_| 365.
PAYMENT SCHEDULE. The above-stated principal sum and interest thereon
shall be paid as follows (check applicable box(es)).
|_| Installments
of Principal,
Interest Paid
Separately
The Obligors promise to pay the above-stated principal
sum in _____ consecutive
|_| monthly installments |_| quarterly installments
|_| ________ installments in the amount [of]
$_________________ each, beginning _____________ and
continuing on the same day of each month, quarter, or
other period (as applicable) thereafter until
__________________ at which time the unpaid balance of
the principal sum and all accrued but unpaid interest
thereon shall be due and payable.
The Obligors promise to pay accrued interest on the
principal sum
|_| monthly |_| quarterly |_| ____________ beginning
______________ and continuing on the same day of each
month, quarter, or other period (as applicable)
thereafter until maturity.
|X| Installments
or Principal and
Interest
The Obligors promise to pay the above-stated principal
sum and interest thereon in 71 consecutive
|X| monthly installments |_| quarterly installments
|_| _______________ installments in the amount $1,448.36
each, beginning NOVEMBER 11, 1995 and continuing on the
same day of each month, quarter, or other period (as
applicable) thereafter until OCTOBER 11, 2001 at which
time the unpaid balance of the principal sum and all
accrued but unpaid interest thereon shall be due and
payable.
LOAN FEE. (This provision applicable only if completed):
A loan fee in the amount of $937.50 has been |X| included in the amount of
this note and paid to the Bank from the loan proceeds. |_| paid [to] the Bank by
cash or check at closing. The loan fee is earned by the Bank when paid and is
not subject to refund except to the extent required by law.
LATE CHARGE.
If any scheduled payment is in default 10 days or more, Obligors agree to
pay a late charge equal to 5% of the amount of the payment which is in default,
but not less than $[Illegible] or more than the maximum amount allowed by
applicable law.
PREPAYMENT.
If the interest rate on this note is a variable rate, Obligors may prepay
this note in full at any time without premium or penalty. If the interest rate
on this note is a fixed rate, unless the paragraph which follows is applicable,
prepayment of the principal sum of this note in whole or in part is not
permitted.
|_| If this box is checked, and if the interest rate on this note is a fixed
rate, Obligors may not prepay this note in whole or in part during the first
year after the date of this note. Thereafter, prepayment will be permitted on
any scheduled payment date on condition that the amount of the prepayment must
equal the sum of (a) the principal amount [prepaid] plus (b) accrued interest on
the amount prepaid plus (c) a premium equal to 1% of the principal amount
prepaid multiplied times the number of years or parts of a year remaining until
final scheduled maturity of this note. No prepayment premium need by paid if
prepayment is made within one year prior to the final scheduled maturity of this
note.
If prepayment in full without penalty or premium is required to be
permitted by applicable law, the foregoing provisions will not apply and
prepayment will be allowed accordance with such law.
COLLATERAL.
This note is secured by every security agreement, pledge, assignment,
stock power, mortgage, deed of trust, security deed and/or other instrument
covering personal or [Illegible] property (all of which are hereinafter included
in the term "Separate Agreements") which secures an obligation so defined as to
include this note, including without limitation all [such] Separate Agreements
which are of even date herewith and/or described in the space below. In
addition, as security for the payment of any and all liabilities and obligations
of [Illegible] Obligors to the Holder (including this note and the indebtedness
evidenced by this note and all extensions, renewals and modifications thereof,
and all writings delivered substitution therefor) and all claims of every nature
of the Holder against the Obligors, whether present or future, and whether
joint, several, absolute, contingent, mature, liquidated, unliquidated, and
direct or indirect (all of the foregoing are hereinafter included in the term
"Obligations") the Obligors hereby assign to the Holder and grant to [Illegible]
Holder a security interest in and security title to the property (the
"Collateral") described below. (Describe Separate Agreements and Collateral.)
As further described in Security Agreement dated OCTOBER 11, 1995
Secured by 1995 BALD Trailer ID# FLT3619HH and all attachments thereto
The Obligors are jointly and severally liable for the payment of this note
and have subscribed their names hereto without condition that anyone else should
sign or become bound hereon and without any other condition whatever being made.
The provisions printed on the back of this page are a part of this note. The
provisions of this note are binding on the heirs, executors, administrators,
successors and assigns of each and every Obligor and shall inure to the behalf
of the Holder, its successors and assigns. This note executed under the seal of
each of the Obligors and of the indorsers, if any.
The provisions on the reverse side are a part of this note.
CAUTION - IT IS IMPORTANT THAT YOU THOROUGHLY READ THE
CONTRACT BEFORE YOU SIGN IT.
Address of Obligor:
1485 W. Kepler Road Weststar Environmental, Inc. (SEAL)
DeLand, FL 32724
By /s/ Michael E. Ricks President & CEO
---------------------------------------
Michael E. Ricks Title
No. _______________________ Signature __________________________ (SEAL)
Officer: Marie Jeffreys
Branch Downtown DeLand Signature __________________________ (SEAL)
SF52709 (c) SouthTrust Corporation Rev 11/90
<PAGE> 1
EXHIBIT 10.13
INSTALLMENT NOTE
75,000.00 DeLand FL 03/01/96
- --------------------- ------------------------------------------------------
(City) (State) (Date)
For value received, the undersigned (whether one or more, hereinafter called the
"Obligors") promise(s) to pay to the order of SouthTrust Bank of Florida,
National Association (hereinafter called the "Bank" or, together with any other
holder of the note, the "Holder"), at any office of the Bank in DeLand, FL, or
at such other place as the Holder may designate, the principal sum of
SEVENTY-FIVE THOUSAND AND NO/100 Dollars together with interest thereon at the
rate and on the date(s) provided below from the date of this note (or other
interest accrual date shown below) until maturity, and with interest on the
unpaid principal balance after maturity at the rate which is 2 percent per annum
in excess of the rate stated below or the maximum rate allowed by law, whichever
is less, from maturity until said indebtedness is paid in full. Interest will
accrue beginning on the date of this note unless another date is shown here:
________________________________________________________
INTEREST RATE.
The above-stated sum shall accrue interest as follows (check applicable
box(es)):
|_| Variable Rate -- interest from date
Interest will accrue on the above-stated principal sum at the rate per annum
which is ____________ percentage points in excess of the Index Rate. Unless
another rate is made applicable below, the "Index Rate" is the rate of interest
designated by the Bank periodically as its Basic Rate. The Base Rate is not
necessarily the lowest rate charged by the Bank. The Base Rate on the date of
this note is ____________ percent.
|_| (check box if applicable) The "Index Rate" is the weekly auction average
yield of ____________ week U.S. Treasury Bills at the most recent auction prior
to the date the Index Rate is calculated. The Index Rate on the date of this
note is ____________ percent.
The rate of interest payable under this note will change to reflect any change
in the Index Rate:
|_| on any day the Index Rate changes.
|_| on the day each payment of interest is due as provided below.
|_| on the ____________ day of each month hereafter.
|-| _____________________________________________________________
Obligors may prepay this note in full at any time without penalty.
|X| Fixed Rate -- interest from date
Interest will accrue on the above-stated principal sum at the rate of 10.750
percent per annum.
Interest on the principal sum will be calculated at the rate set forth
above on the basis of a |X| 360 |_| 365 day year and the actual number of days
elapsed by multiplying the principal sum by the per annum rate set forth above,
multiplying the product thereof by the actual number of days elapsed, and
dividing the product so obtained by |X| 360 |_| 365.
PAYMENT SCHEDULE.
The above-stated principal sum and interest thereon shall be paid as follows
(check applicable box(es)):
|_| Installments of Principal, Interest Paid Separately
The Obligors promise to pay the above-stated principal sum in ____________
consecutive |_| monthly installments |_| quarterly installments |_| ____________
installments in the amount of $____________ each, beginning ____________ and
continuing on the same day of each month, quarter, or other period (as
applicable) thereafter until ____________, at which time the unpaid balance of
the principal sum and all accrued but unpaid interest thereon shall be due and
payable.
The Obligors promise to pay accrued interest on the principal sum: |_| monthly
|_| quarterly |_| ____________ beginning ____________ and continuing on the same
day of each month, quarter, or other period (as applicable) thereafter until
maturity.
|X| Installments of Principal and Interest
The Obligors promise to pay the above-stated principal sum and interest
thereon in 47 consecutive |X| monthly installments |_| quarterly installments
|_| ____________ installments in the amount of $1,935.34 each, beginning
APRIL 1, 1996 and continuing on the same day of each month, quarter, or other
period (as applicable) thereafter until MARCH 1, 2000 at which time the unpaid
balance of the principal sum and all accrued but unpaid interest thereon shall
be due and payable.
LOAN FEE. (This provision applicable only if completed):
A loan fee in the amount of $937.50 has been |X| included in the amount of
this note and paid to the Bank from the loan proceeds. |_| paid to the Bank by
cash or check at closing. The loan fee is earned by the Bank when paid and is
not subject to refund except to the extent required by law.
RATE CHARGE.
If any scheduled payment is in default 10 days or more, Obligors agree to
pay a late charge equal to 5% of the amount of the payment which is in default,
but not less than $.50 or more than the maximum amount allowed by applicable
law.
PREPAYMENT.
If the Interest rate on this note is a variable rate, Obligors may prepay
this note in full at any time without premium or penalty. If the interest rate
on this note is a fixed rate, unless the paragraph which follows is applicable,
prepayment of the principal sum of this note in whole or in part is not
permitted.
|_| If this box is checked, and if the interest rate on this note is a fixed
rate, Obligors may not prepay this note in whole or in part during the first
year after the date of this note. Thereafter, prepayment will be permitted on
any scheduled payment date on condition that the amount of the prepayment must
equal the sum of (a) the principal amount prepaid plus (b) accrued interest on
the amount prepaid plus (c) a premium equal to 1% of the principal amount
prepaid multiplied times the number of years or parts of a year remaining until
final scheduled maturity of this note. No prepayment premium need be paid if
prepayment is made within one year prior to the final scheduled maturity of this
note.
If prepayment in full without penalty or premium is required to be
permitted by applicable law, the foregoing provisions will not apply and
prepayment will be allowed in accordance with such law.
COLLATERAL.
This note is secured by every security agreement, pledge, assignment,
stock power, mortgage, deed of trust, security deed and/or other instrument
covering personal or real property, (all of which are hereinafter included in
the term "Separate Agreements") which secures an obligation so defined as to
include this note, including without limitation all such Separate Agreements
which are of even date herewith and/or described in the space below. In
addition, as security for the payment of any and all liabilities and obligations
of the Obligors to the Holder (including this note and the indebtedness
evidenced by this note and all extensions, renewals and modifications thereof,
and all writings delivered in substitution therefor) and all claims of every
nature of the Holder against the Obligors, whether present or future, and
whether joint, several, absolute, contingent, matured, liquidated, unliquidated,
and direct or indirect (all of the foregoing are hereinafter included in the
term "Obligations") the Obligors hereby assign to the Holder and grant to the
Holder a security interest in and security title to the property (the
"Collateral") described below: (Describe Separate Agreements and Collateral.)
As further described in Security Agreement dated MARCH 1, 1996
The Obligors are jointly and severally liable for the payment of this note
and have subscribed their names hereto without condition that anyone else should
sign or become bound hereon and without any other condition whatever being made.
The provisions printed on the back of this page are a part of this note. The
provisions of this note are binding on the heirs, executors, administrators,
successors and assigns of each and every Obligor and shall inure to the behalf
of the Holder, its successors and assigns. This note, executed under the seal of
each of the Obligors and of the indorsers, if any.
The provisions on the reverse side are a part of this note.
CAUTION - IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT
BEFORE YOU SIGN IT.
Address of Obligor:
- --------------------------------------------------
- --------------------------------------------------
No.
-----------------------------------------------
Officer: Marie A. Jeffreys
-----------------------------------------
Branch: Downtown
------------------------------------------
Weststar Environmental Services, Inc. (SEAL)
- ------------------------------------------------------------------
By /s/ Michael E. Ricks President
---------------------------------------------------------------
Michael E. Ricks Title
Signature (SEAL)
---------------------------------------------------------
Signature (SEAL)
---------------------------------------------------------
<PAGE> 1
EXHIBIT 10.15
- --------------------------------------------------------------------------------
P & B PLUMBING & SEPTIC SERV, INC.
P.O. BOX 1389
DELAND, FL. 32721-1389
BORROWER'S NAME AND ADDRESS
"I" includes each borrower above, jointly and severally.
- --------------------------------------------------------------------------------
FIRST COMMUNITY BANK
2240 SOUTH VOLUSIA AVENUE
ORANGE CITY, FLORIDA 32763
note
#36
LENDER'S NAME AND ADDRESS
"You" means the lender, its successors and assigns
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loan Number 12000184
---------------
Date 9-27-94
----------------------
Maturity Date 9-27-99
-------------
Loan Amount $ 35,612.25
-------------
Renewal Of
---------------
- --------------------------------------------------------------------------------
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of ***THIRTY FIVE THOUSAND, SIX HUNDRED AND
TWELVE & 25/100*** Dollars $35,612.25
|X| Single Advance: I will receive all of this principal sum on 9-27-94. No
additional advances are contemplated under this note.
|_| Multiple Advance: The principal sum shown above is the maximum amount of
principal I can borrow under this note. On _______________________________
_____________ I will receive the amount of $ _____________________________
and future principal advances are contemplated.
Conditions: The conditions for future advances are _______________________
__________________________________________________________________________
__________________________________________________________________________
|_| Open End Credit: You and I agree that I may borrow up to the maximum
principal sum more than one time. This feature is subject to all
other conditions and expires on ___________________________________.
|X| Closed End Credit: You and I agree that I may borrow (subject to all
other conditions) up to the maximum principal sum only one time.
INTEREST: I agree to pay interest on the outstanding principal balance from
9-27-94 at the rate of 9.25% per year until 9-27-99.
|X| Variable Rate: This rate may then change as stated below.
|X| Index Rate: The future rate will be 1.50% ABOVE the following index
rate: THE PRIME RATE AS ESTABLISHED BY FIRST COMMUNITY BANK ______________
__________________________________________________________________________
|_| No Index: The future rate will not be subject to any internal or
external index. It will be entirely in your control.
|X| Frequency and Timing: The rate on this note may change as often as
DAILY
A change in the interest rate will take effect ON THE DAY OF CHANGE
|X| Limitations: During the term of this loan, the applicable annual
interest rate will not be more than THE MAXI- % or less than 9.25%.
Effect of Variable Rate: A change in the interest rate will have the
following effect on the payments: MUM ALLOWED BY LAW
|_| The amount of each scheduled payment will change.
|_| The amount of the final payment will change.
|_| ______________________________________________________________________
ACCRUAL METHOD: Interest wilt be calculated on a 365 DAY basis.
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note
owing after maturity, and until paid in full, as stated below:
|_| on the same fixed or variable rate basis in effect before maturity (as
indicated above).
|X| at a rate equal to THE MAXIMUM ALLOWED BY LAW.
|X| LATE CHARGE: If a payment is made more than 10 days after it is due, I
agree to pay a late charge of 5.00% OF PAYMENT DUE
|X| ADDITIONAL CHARGES: In addition to interest, I agree to pay the following
charges which |X| are |_| are not included in the principal amount above
LOAN FEE 350.00 DOC STAMPS $124.25 RECORDING FEES $138.00
PAYMENTS: I agree to pay this note as follows:
|_| Interest: I agree to pay accrued interest __________________________________
__________________________________________________________________________
|_| Principal: I agree to pay the principal ____________________________________
__________________________________________________________________________
|X| Installments: I agree to pay this note in 60 payments. The first payment
will be in the amount of $735.07 and will be due 10-27-94. A payment of
$737.07 will be due ON THE 27TH DAY OF EACH MONTH thereafter. The final
payment of the entire unpaid balance of principal and interest will be due
9-27-99.
PURPOSE: The purpose of this loan is WORKING CAPITAL
ADDITIONAL TERMS:
SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS
<PAGE> 1
EXHIBIT 10.16
RE: 0000383 Date: 10/25/95 Acct No.
$24,414.00
- ------------------------
CREDITOR: FIRST UNION NATIONAL BANK OF FLORIDA,
2494 ENTERPRISE RD
ORANGE CITY, FL 32763
BORROWER(S): WEST STAR ENVIROMENTAL INC. /s/ MER
WESTSTAR ENVIRONMENT INC. /s/ MER
407 W. GEORGIA ST
STARKE, FL 32091
FOR VALUE RECEIVED, I the Borrower (which means everyone who signs below as
borrower, jointly and severally), promise to pay FIRST UNION NATIONAL BANK OF
FLORIDA, or order, the principal amount of this loan as stated above (the Amount
Financed, plus the prepaid finance charge, if any, as disclosed in the
itemization of Amount Financed), together with interest from the date of this
Note on the unpaid principal balance at the interest rate for a fixed or
variable rate loan disclosed below until fully paid. "I," "me," and "my" refer
to Borrower(s) while "you" and "your" refer to FIRST UNION NATIONAL BANK OF
FLORIDA.
___ If indicated, this is a fixed rate loan and my Interest Rate is ___________.
_X_ If indicated, this is a variable rate loan and my Initial Interest Rate
is 10. 75% which is tied to the Wall Street Journal (WSJ) "Prime Rate."
The Initial Interest Rate is computed as follows: Prime Rate of 8.75% Plus
2.00 Percentage Points.
- --------------------------------------------------------------------------------
====================================== ---------------------------------------
ANNUAL Total of Payments.
PERCENTAGE The amount I will
RATE FINANCE CHARGE Amount Financed. have paid after I
The cost of my The dollar amount The amount of have made all
credit as a yearly the credit will credit provided to payments as
rate. cost me. me or on my behalf. scheduled.
====================================== ---------------------------------------
11.35% $6,643.08 $24,114.00 $30,757.08
- --------------------------------------------------------------------------------
I have the right to receive at this time an itemization of the Amount Financed:
( ) I want an itemization. ( /s/ MER) I do no want an itemization.
-------- --------
(initials) (initials)
My payment schedule will be:
- --------------------------------------------------------------------------------
No. of Payments Payment Amount Frequency Due Date
- --------------------------------------------------------------------------------
51 $603.08 Monthly 12/20/95
- --------------------------------------------------------------------------------
No. of Payments Payment Amount Frequency Due Date
- --------------------------------------------------------------------------------
Variable Rate.
If my loan, as indicated above, has a variable rate, my interest rate may
increase during the term of my loan based on movement of the WSJ Prime Rate. My
interest rate will not increase more than once each month and not more than 6
percentage points during the term of my loan to a maximum of 18%. If my loan is
secured by a principal dwelling for a term greater than one year, disclosures
about the variable rate have been provided to me earlier.
|_| If indicated, my loan has multiple payments for a term of more than 60
months. Any increase in my interest rate will increase the number of
payments and may increase the payment amounts. If my loan were for $10,000
for 144 months at 12% and the interest rate increased to l2.50% in three
months, my regular payment would increase by $7.30 beginning with my
Sixty-First payment.
|X| If indicated, my loan has multiple payments for a term of 60 months or
less. Any increase in my interest rate will increase the number of
payments. If my loan were for $10,000 for 60 months at 12% and the
interest rate increased to 12.50% in three months, I would have to make
one additional payment of $196.56.
|_| If indicated, my loan has a single payment. Any increase in my interest
rate will increase the amount due at maturity. If my loan were for $10,000
at 12% for 90 days, and my interest rate increased to 12.25% in 20 days,
then my final payment would increase by $4.80.
Security. I am giving a security interest in:
|_| the goods or property being purchased.
|X| other (describe): 84 GMC TRUCK
Collateral securing other loans with you may also secure this loan, except
my principal dwelling or household goods.
Filing Fees. $28.25
Prepayment. If I pay off early, I may have to pay a penalty, and I will
not be entitled to a refund of any part of the prepaid finance charge.
Late charges. If you receive any payment 10 days or more after the due
date, I agree to pay you a late charge of 5% of my payment.
Assumption. If this loan is for the purchase of property used as my
principal dwelling, someone buying my principal dwelling cannot assume the
remainder of my loan on the original terms.
I may see my contract documents for any additional information about
nonpayment, default, any required repayment in full before the scheduled
due date, and prepayment refunds and penalties.
- --------------------------------------------------------------------------------
INSURANCE DISCLOSURES
- --------------------------------------------------------------------------------
I understand that credit life and credit disability insurance are not
required to get this loan. If I want any of these insurance coverages, I must be
sure that the insurance coverage benefit is indicated, that the amount of the
premium is filled in, and that I have signed below. If I request credit life
insurance or credit disability insurance, I have the right to rescind the
insurance policy or certificate of insurance by giving written notice to the
insurance company within 15 days from the date I received the policy or
certificate. The term and/or amount of any insurance I request is as follows:
<TABLE>
<CAPTION>
INSURED TYPE PREMIUM TERM LIFE DISABILITY
#1 #2 IN MOS. COVERAGE MONTHLY BENEFIT
<S> <C> <C> <C> <C> <C> <C>
____ ____ Credit Life _____________ _________ ____________________ ______________
Credit disability is
limited to a maximum
Credit of 60 monthly
____ Disability _____________ _________ benefits. ______________
</TABLE>
If this loan is secured, I may obtain property insurance from anyone I choose
who is acceptable to you.
I request coverage(s) checked for the premiums shown above
- -----------------------------------------------------------------------------
Signature of Insured #1 (Life only or Life and Disability)
I request coverage(s) checked for the premiums shown above
- -----------------------------------------------------------------------------
Signature of Insured #2 (Life only)
- -----------------------------------------------------------------------------
PROPERTY AS SECURITY
To secure payment of this Note I grant you a security interest in the
collateral described below, or in the Mortgage as indicated by the date below or
on Schedule A, plus all additions, replacements or accessions to, and proceeds
of the collateral. This collateral will secure any other loans with you, now or
in the future unless the collateral is used as a principal dwelling or household
goods. Any additional collateral is listed on the attached Schedule A.
- -----------------------------------------------------------------------------
1984 GMC PUMP TRUCK SER # 1GDP9C1J3EV543104
- -----------------------------------------------------------------------------
NOTICE: SEE OTHER SIDE FOR IMPORTANT INFORMATION. The reverse side has an
arbitration provision that limits my or a Guarantor's rights to a trial in a
court of law. Each Borrower acknowledges receipt of a copy of this Note, fully
completed prior to signing and further acknowledges that this [ILLEGIBLE]
<PAGE> 1
EXHIBIT 10.19
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$86,465.75 12-29-1994 01-01-1998 0716457371 04a0 131 920578 25 [illegible]
- ----------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- ----------------------------------------------------------------------------------------------------
</TABLE>
Borrower: Weststar Environmental, Inc. Lender: CNB National Bank
(TIN: 593066915) Starke Office
P O Box 6003 P O Box 6008
Starke, FL 32091 606 West Madison Street
Starke, FL 32091
[Stamp]
PAID
MAR 31 1998
CNB
NATIONAL BANK
<TABLE>
<CAPTION>
=======================================================================================
Principal Amount: $86,465.75 Interest Rate: 12.000% Date of Note: December 29, 1994
<S> <C> <C>
</TABLE>
PROMISE TO PAY. Weststar Environmental, Inc. ("Borrower") promises to pay to CNB
National Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Eighty Six Thousand Four Hundred Sixty Five &
75/100 Dollars ($86,465.75), together with interest at the rate of 12.000% per
annum on the unpaid principal balance from December 29, 1994, until paid in
full.
PAYMENT. Borrower will pay this loan in 36 payments of $2,881.44 each payment.
Borrower's first payment is due February 1, 1995, and all subsequent payments
are due on the same day of each month after that. Borrower's final payment will
be due on January 1,1998, and will be for all principal and all accrued interest
not yet paid. Payments include principal and interest. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing. Unless otherwise agreed or required by applicable law, payments will
be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower understands that Lender is entitled to a
minimum interest charge of $15.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments under the payment schedule. Rather, they will reduce the
principal balance due and may result in Borrower making fewer payments.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to perform promptly at the time
and strictly in the manner provided in this Note or any agreement related to
this Note, or in any other agreement or loan Borrower has with Lender. (c)
Borrower defaults under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations under
this Note or any of the Related Documents. (d) Any representation or statement
made or furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect. (a) Borrower becomes insolvent, a receiver
is appointed for any part of Borrower's property, Borrower makes an assignment
for the benefit of creditors, or any proceeding is commenced either by Borrower
or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any of the events described in this default section occurs with
respect to any guarantor of this Note. (h) Lender in good faith deems itself
insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the interest rate on this Note to 18.000% per annum, if
and to the extent that the increase does not cause the interest rate to exceed
the maximum rate permitted by applicable law. Lender may hire or pay someone
else to help collect this Note if Borrower does not pay. Borrower also will pay
Lender the amount of these costs and expenses, which includes, subject to any
limits under applicable law, Lender's reasonable attorneys' fees and Lender's
legal expenses whether or not there is a lawsuit, including reasonable
attorneys' fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. This Note has been delivered to Lender and accepted by Lender
in the State of Florida. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of Bradford County, the
State of Florida. Lender and Borrower hereby waive the right to any jury trial
in any action, proceeding, or counterclaim brought by either Lender or Borrower
against the other. This Note shall be governed by and construed in accordance
with the laws of the State of Florida.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, end transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all such
accounts.
GARNISHMENT. Borrower consents to the issuance of a continuing writ of
garnishment or attachment against Borrower's disposable earnings, in accordance
with Section 222.11, Florida Statutes, in order to satisfy, in whole or in part,
any money judgment entered in favor of Lender.
COLLATERAL. This Note is secured by 1984 Kenworth Tractor Id# 1NKKL29X6EJ358523;
1977 Fruehauf Trailer Id# UNX557502; 1988 Kenworth K100 Tractor Id#
1XKED59XXJJ373344; 1988 Kenworth K100 Tractor Id# 1XKED59X3JJ373347; 1988
Kenworth K100 Tractor Id# 1XKED59X7JJ373348; 1988 Kenworth K100 Tractor Id#
1XKED59X3JJ373346.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as "charge or collect"), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Florida
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.
BORROWER:
Weststar Environmental, Inc.
By: /s/ Michael E. Ricks
----------------------------------
Michael E Ricks, President
================================================================================
Fixed Rate. installment. LASER PRO. Reg. U.S. Pat. & T.M. Off., Ver.
3.19(c) 1994 CFI ProServices, Inc. All
rights reserved. (FL-D20 WESTSTAR.LN C6.OVL)
[STAMP]
Florida documentary stamp tax
required by law in the amount
of $302.75 has been paid or
will be paid directly to the
Department of Revenue
Certificate of Registration #
59-2496482-22-01.
<PAGE> 1
EXHIBIT 10.21
INSTALLMENT NOTE
$12,117.70 DeLand FL 09/11/95
- --------------------------------------------------------------------------------
(City) (State) (Date)
For value received, the undersigned (whether one or more, hereinafter
called the "Obligors") promise(s) to pay to the order of SouthTrust Bank of
Central Florida (hereinafter called the "Bank" or, together with any other
holder of this note, the "Holder"), at any office of the Bank in DeLand, FL, or
at such other place Holder may designate, the principal sum of TWELVE THOUSAND
ONE HUNDRED SEVENTEEN AND 70/100 Dollars together with interest thereon at the
rate and on the date(s) provided below from the date of this note (or other
interest accrual date shown below) until maturity, and with interest the unpaid
principal balance after maturity at the rate which is 2 percent per annum in
excess of the rate stated below or the maximum rate allowed by law, whichever is
less, from maturity until said indebtedness is paid in full. Interest will
accrue beginning on the date of this note unless another date is shown here:
_______________________________
INTEREST RATE. The above-stated sum shall accrue interest as follows
|_| Variable Rate -- (check applicable box(es)):
Interest from date
Interest will accrue on the above-stated principal sum
at the rate per annum which is ___________ percentage
points in excess [of] the Index Rate. Unless another
rate is made applicable below, the "Index Rate" is the
rate of interest designated by the Bank periodically as
its Base Rate. The Base Rate is not necessarily the
lowest rate charged by the Bank. The Base Rate on the
date of this note is _____ percent.
|_| (check box if applicable) The "Index Rate" is the
weekly auction average yield of ______ -week U.S.
Treasury Bills at the [most] recent auction prior
to the date the Index Rate is calculated. The
Index Rate on the date of this note is ______
percent.
The rate of interest payable under this note will change
to reflect any change in the Index Rate:
|_| on any day the Index Rate changes.
|_| on the day each payment of interest is due as
provided below.
|_| on the ___________ day of each month hereafter.
|_| _________________________________________________
Obligors may prepay this note in full at any time
without penalty.
|X| Fixed Rate -- Interest will accrue on the above-stated principal sum
Interest from date at the rate of 10.000 percent per annum.
Interest on the principal sum will be calculated at the rate set forth
above on the basis of a |X| 360 |_| 365 day year and the actual number of days
elapsed by multiplying [the] principal sum by the per annum rate set forth
above, multiplying the product thereof by the actual number of days elapsed, and
dividing the product so obtained by |X| 360 |_| 365.
PAYMENT SCHEDULE. The above-stated principal sum and interest thereon
|_| Installments shall be paid as follows (check applicable box(es)).
of Principal,
Interest Paid The Obligors promise to pay the above-stated principal
Separately sum in _____ consecutive
|_| monthly installments |_| quarterly installments
|_| ________ installments in the amount [of]
$_________________ each, beginning _____________ and
continuing on the same day of each month, quarter, or
other period (as applicable) thereafter until
__________________ at which time the unpaid balance of
the principal sum and all accrued but unpaid interest
thereon shall be due and payable.
The Obligors promise to pay accrued interest on the
principal sum
|_| monthly |_| quarterly |_| ____________ beginning
______________ and continuing on the same day of each
month, quarter, or other period (as applicable)
thereafter until maturity.
|X| Installments The Obligors promise to pay the above-stated principal
or Principal and sum and interest thereon in 35 consecutive
Interest
|X| monthly installments |_| quarterly installments
|_| _______________ installments in the amount $391.83
each, beginning OCTOBER 11, 1995 and continuing on the
same day of each month, quarter, or other period (as
applicable) thereafter until SEPTEMBER 11, 1998 at which
time the unpaid balance of the principal sum and all
accrued but unpaid interest thereon shall be due and
payable.
LOAN FEE. (This provision applicable only if completed):
A loan fee in the amount of $75.00 has been |X| included in the amount of
this note and paid to the Bank from the loan proceeds. |_| paid [to] the Bank by
cash or check at closing. The loan fee is earned by the Bank when paid and is
not subject to refund except to the extent required by law.
LATE CHARGE.
If any scheduled payment is in default 10 days or more, Obligors agree to
pay a late charge equal to 5% of the amount of the payment which is in default,
but not less than $.50 or more than the maximum amount allowed by applicable
law.
PREPAYMENT.
If the interest rate on this note is a variable rate, Obligors may prepay
this note in full at any time without premium or penalty. If the interest rate
on this note is a fixed rate, unless the paragraph which follows is applicable,
prepayment of the principal sum of this note in whole or in part is not
permitted.
|_| If this box is checked, and if the interest rate on this note is a fixed
rate, Obligors may not prepay this note in whole or in part during the first
year after the date of this note. Thereafter, prepayment will be permitted on
any scheduled payment date on condition that the amount of the prepayment must
equal the sum of (a) the principal amount [prepaid] plus (b) accrued interest on
the amount prepaid plus (c) a premium equal to 1% of the principal amount
prepaid multiplied times the number of years or parts of a year remaining until
final scheduled maturity of this note. No prepayment premium need by paid if
prepayment is made within one year prior to the final scheduled maturity of this
note.
If prepayment in full without penalty or premium is required to be
permitted by applicable law, the foregoing provisions will not apply and
prepayment will be allowed accordance with such law.
COLLATERAL.
This note is secured by every security agreement, pledge, assignment,
stock power, mortgage, deed of trust, security deed and/or other instrument
covering personal or real property (all of which are hereinafter included in the
term "Separate Agreements") which secures an obligation so defined as to include
this note, including without limitation all [such] Separate Agreements which are
of even date herewith and/or described in the space below. In addition, as
security for the payment of any and all liabilities and obligations of the
Obligors to the Holder (including this note and the indebtedness evidenced by
this note and all extensions, renewals and modifications thereof, and all
writings delivered substitution therefor) and all claims of every nature of the
Holder against the Obligors, whether present or future, and whether joint,
several, absolute, contingent, mature, liquidated, unliquidated, and direct or
indirect (all of the foregoing are hereinafter included in the term
"Obligations") the Obligors hereby assign to the Holder and grant to the Holder
a security interest in and security title to the property (the "Collateral")
described below. (Describe Separate Agreements and Collateral.)
As further described in Security Agreement dated SEPTEMBER 11, 1995
The Obligors are jointly and severally liable for the payment of this note
and have subscribed their names hereto without condition that anyone else should
sign or become bound hereon and without any other condition whatever being made.
The provisions printed on the back of this page are a part of this note. The
provisions of this note are binding on the heirs, executors, administrators,
successors and assigns of each and every Obligor and shall inure to the behalf
of the Holder, its successors and assigns. This note executed under the seal of
each of the Obligors and of the indorsers, if any.
The provisions on the reverse side are a part of this note.
CAUTION - IT IS IMPORTANT THAT YOU THOROUGHLY READ THE
CONTRACT BEFORE YOU SIGN IT.
Address of Obligor:
[Illegible] Road B & B PLUMBING & SEPTIC SERVICES, INC.
DeLand, FL 32724 n/k/a B & B SEPTIC & ENVIRONMENTAL
SERVICES, INC.
By /s/ Michael E. Ricks President
---------------------------------------
Michael E. Ricks Title
No. _______________________ Signature __________________________ (SEAL)
Officer: Marie Jeffreys
Branch Downtown DeLand Signature __________________________ (SEAL)
SF52709 (c) SouthTrust Corporation Rev 11/90
<PAGE> 1
EXHIBIT 10.22
This instrument prepared by:
Wesley R. Poole, Esquire
POOLE & POOLE, P.A.
303 Centre Street, Suite 200
Fernandina Beach, Florida 32034
MORTGAGE
THIS IS A BALLOON MORTGAGE AND THE FINAL PAYMENT OR THE PRINCIPAL BALANCE DUE
UPON MATURITY IS $130,789.04, TOGETHER WITH ACCRUED INTEREST, IF ANY, AND ALL
ADVANCEMENTS MADE BY THE MORTGAGEE UNDER THE TERMS OF THIS MORTGAGE.
THIS MORTGAGE, executed the 3rd day of June, 1998, by WESTSTAR
ENVIRONMENTAL, INC., F/K/A WESTSTAR ENVIRONMENTAL PUMPING & SEPTIC SERVICE,
INC., a Florida corporation, Rt. 5, Box 7344, Starke, FL 32091, hereinafter
called the Mortgagor, which term shall include the heirs, legal representatives,
successors and assigns of the Mortgagor wherever the context so requires or
admits, to PRIMESOUTH BANK, a Division of The Blackshear Bank, P.O. Box 919,
Waycross, GA 31502, hereinafter called the Mortgagee, which term shall include
the heirs, legal representatives, successors and assigns of the Mortgagee
wherever the context so requires or admits.
WITNESSETH: That for divers good and valuable considerations, and also in
consideration of the aggregate sum named in the promissory note of even date
herewith hereinafter described, the Mortgagor does hereby grant, bargain, sell,
alien, remise, release, convey and confirm unto the Mortgagee, its heirs,
successors and assigns, all the certain piece, parcel or tract of land, of which
the Mortgagor is now seized and possessed and in actual possession, situate in
the County of Bradford and State of Florida, described as follows:
All at that certain lot, piece or parcel of land situate, lying and being
in the County of Bradford and State of Florida and being further described
on Exhibit "A", attached hereto and by reference made a part hereof.
Tax Parcel No. 04705-0-02200
TO HAVE AND TO HOLD the same, together with all and singular the
tenements, hereditaments and appurtenances thereunto belonging or in anywise
appertaining and the reversion and reversions, remainder and remainders, rents,
issues and profits thereof and also all the estate, right, title, interest,
property, possession, claim and demand whatsoever as well in law as in equity of
the Mortgagor in and to the same and every part and parcel thereof unto the
Mortgagee, and its successors and assigns, in fee simple.
And the Mortgagor, for itself, and its heirs, legal representatives,
successors and assigns, hereby covenant with the Mortgagee, its heirs, legal
representatives, successors and assigns, that the Mortgagor is indefeasibly
seized of said land in fee simple; that the Mortgagor has power and lawful right
to convey the same in fee simple as aforesaid; that it shall be lawful for the
Mortgagee, its heirs, legal representatives, successors and assigns, at all
times peaceably and quietly to enter upon, hold, occupy and enjoy said land and
every part thereof; that said land is free from all encumbrances; that the
Mortgagor, its heirs, legal representatives, successors and assigns, will make
such further assurances to perfect the fee simple title to said land in the
Mortgagee, its heirs, legal representatives, successors and assigns, as may
reasonably be required; and that the Mortgagor does hereby fully warrant the
title to said land and every part thereof and will defend the same against the
lawful claims of all persons whomsoever.
PROVIDED ALWAYS, that if the Mortgagor shall pay unto the Mortgagee the
certain promissory note, of which the following in words and figures is a true
copy, to-wit:
<PAGE> 2
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------
WESTSTAR ENVIRONMENTAL, INC. PRIMESOUTH BANK, A ACCOUNT #: TIN #59-3066915
9550 REGENCY SQ BLVD, STE 1109 DIVISION OF THE Loan Number
JACKSONVILLE, FL 32225 BLACKSHEAR BANK Date JUNE 3, 1998
POST OFFICE BOX 919 Maturity Date JUNE 3, 2003
WAYCROSS, GA 31502 Loan Amount $160,000.00
Renewal Of
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS CLASS CODE: 10 1E
"I" includes each borrower "You" means the lender,
above, joint and severally. its successors and assigns.
- -----------------------------------------------------------------------------------------
</TABLE>
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of ONE HUNDRED SIXTY THOUSAND AND NO/100 * * * *
* * * * * * Dollars $160,000.00
|X| Single Advance: I will receive all of this principal sum on JUNE 3, 1998. No
additional advances are contemplated under this note.
|_| Multiple Advance: The principal sum shown above is the maximum amount of
principal I can borrow under this note. On _____________________ I will
receive the amount of $_________________ and future principal advances are
contemplated.
Conditions: The conditions for future advances are _______________________
__________________________________________________________________________
__________________________________________________________________________
|_| Open End Credit: You and I agree that I may borrow up to the maximum
amount of principal more than one time. This feature is subject to all
other conditions and expires on ____________________________________.
|_| Closed End Credit: You and I agree that I may borrow up to the maximum
only one time (and subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from JUNE
3, 1998 at the rate of 9.500% per year until JUNE 3, 2003.
|_| Variable Rate: This rate may then change as stated below.
|_| Index Rate: The future rate will be ______________ the following index
rate: ____________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
|_| No Index: The future rate will not be subject to any internal or
external index. It will be entirely in your control.
|_| Frequency and Timing: The rate on this note may change as often as
_____________________________________________.
A change in the interest rate will take effect_______________________.
|_| Limitations: During the term of this loan, the applicable annual
interest rate will not be more than ____________________% or less than
______________________%. The rate may not change more than
_______________________% each ___________________________.
Effect of Variable Rate: A change in the interest rate will have the
following effect on the payments:
|_| The amount of each scheduled payment will change. |_| The amount of
the final payment will change.
|_| _____________________________________________________________________.
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/360 basis.
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note
owing after maturity, and until paid in full, as stated below;
|X| on the same fixed or variable rate basis in effect before maturity (as
indicated above),
|_| at a rate equal to __________________________________________________.
|X| LATE CHARGE: If a payment is made more than 10 days after it is due, I
agree to pay a late charge of 5.000% OF THE LATE PAYMENT WITH A MINIMUM OF
$10.00 AND A MAXIMUM OF $50.00.
|X| ADDITIONAL LATE CHARGES: In addition to interest, I agree to pay the
following charges which |_| are |X| are not included in the principal
amount above: SEE SETTLEMENT STATEMENT FOR ITEMIZATION OF CLOSING COSTS.
PAYMENTS: I agree to pay this note as follows:
|_| Interest: I agree to pay accrued interest __________________________________
__________________________________________________________________________
|_| Principal: I agree to pay the principal ____________________________________
__________________________________________________________________________
|X| Installments: I agree to pay this note in 60 payments. The first payment
will be in the amount of $1,684.31 and will be due JULY 1, 1998. A payment
of $1,684.31 will be due ON THE 1ST DAY OF EACH MONTH thereafter. The
final payment of the entire unpaid balance of principal and interest will
be due JUNE 3, 2003.
|_| If checked, and this loan is secured by a first lien on real estate, then
any accrued interest not paid when due (whether due by reason of a
schedule of payments or due because of lenders demand) will become part of
the principal thereafter, and will bear interest at the interest rate in
effect from time to time as provided for in this agreement.
ADDITIONAL TERMS:
ALL OTHER TERMS AND CONDITIONS AS DESCRIBED IN LOAN AGREEMENT DATED 6/3/98.
PERSONAL GUARANTY OF JOHN S POSER.
- --------------------------------------------------------------------------------
|X| SECURITY: This note is separately secured by (describe separate document by
type and date): FIRST MORTGAGE DATED 6/3/98 ON R/E AND IMPROVEMENTS.
(This section is for your internal use. Failure to list a separate security
document does not mean the agreement will not secure this note.)
- --------------------------------------------------------------------------------
PURPOSE: The purpose of this loan is BUSINESS: OPERATING CAPITAL
SIGNATURES AND SEALS: IN WITNESS WHEREOF, I HAVE SIGNED MY NAME AND AFFIXED MY
SEAL ON THIS 3rd DAY OF JUNE, 1998. BY DOING SO, I AGREE TO THE TERMS OF THIS
NOTE (INCLUDING THOSE ON PAGE 2). I HAVE RECEIVED A COPY ON TODAY'S DATE.
Signature for Lender WESTSTAR ENVIRONMENTAL, INC. (Seal)
X BY: /s/ Michael E. Ricks
- ----------------------------- --------------------------------- (Seal)
G. BRUCE TISON MICHAEL E RICKS, PRESIDENT
- ----------------------------- --------------------------------- (Seal)
--------------------------------- (Seal)
(page 1 of 2)
<PAGE> 3
DEFINITIONS: As used on page 1, "|X|" means the terms that apply to this loan.
"I," "me" or "my" means each Borrower who signs this note and each other person
or legal entity (including guarantors, endorsers, and sureties) who agrees to
pay this note (together referred to as "us"). "You" or "your" means the Lender
and its successors and assigns.
APPLICABLE LAW: The law of the state of Georgia will govern this note. Any term
of this note which is contrary to applicable law will not be effective, unless
the law permits you and me to agree to such a variation. If any provision of
this agreement cannot be enforced according to its terms, this fact will not
effect the enforceability of the remainder of this agreement. No modification of
this agreement may be made without your express written consent. Time is of the
essence in this agreement.
PAYMENTS: Each payment I make on this note will first reduce the amount I owe
you for charges which are neither interest nor principal. The remainder of each
payment will then reduce accrued unpaid interest, and then unpaid principal. If
you and I agree to a different application of payments, we will describe our
agreement on this note. I may prepay a part of, or the entire balance of this
loan without penalty, unless we specify to the contrary on this note. Any
partial prepayment will not excuse or reduce any later scheduled payment until
this note is paid in full (unless, when I make the prepayment, you and I agree
in writing to the contrary).
INTEREST: Interest accrues on the principal remaining unpaid from time to time
until paid in full. If I receive the principal in more than one advance, each
advance will start to earn interest only when I receive the advance. The
interest rate in effect on this note at any given time will apply to the entire
principal advanced at that time. You and I may provide in this agreement for
accrued interest not paid when due to be added to principal. Notwithstanding
anything to the contrary, I do not agree to pay and you do not intend to charge
any rate of interest that is higher than the maximum rate of interest you could
charge under applicable law for the extension of credit that is agreed to here
(either before or after maturity). If any notice of interest accrual is sent and
is in error, we mutually agree to correct it, and if you actually collect more
interest than allowed by law and this agreement, you agree to refund it to me.
INDEX RATE: The index will serve only as a device for setting the rate on this
note. You do not guarantee by selecting this index, or the margin, that the rate
on this note will be the same rate you charge on any other loans or class of
loans to me or other borrowers.
ACCRUAL METHOD: The amount of interest that I will pay on this loan will be
calculated using the interest rate end accrual method stated on page 1 of this
note. For the purpose of interest calculation, the accrual method will determine
the number of days in a "year." If no accrual method is stated, then you may use
any reasonable accrual method for calculating interest.
POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate"
(shown on page 1) applies, the term "maturity" means the date of the last
scheduled payment indicated on page 1 of this note or the date you accelerate
payment on the note, whichever is earlier.
SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that
you will make only one advance of principal. However, you may add other amounts
to the principal if you make any payments described in the "PAYMENTS BY LENDER"
paragraph below, or if we have agreed that accrued interest not paid when due
may be added to principal.
MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect
that you will make more than one advance of principal. If this is closed end
credit, repaying a part of the principal will not entitle me to additional
credit.
PAYMENTS BY LENDER. If you are authorized to pay, on my behalf, charges I am
obligated to pay (such as property insurance premiums), then you may treat those
payments made by you as advances and add them to the unpaid principal under this
note, or you may demand immediate payment of the charges.
SET-OFF: I agree that you may set off any amount due and payable under this note
against any right I have to receive money from you.
"Right to receive money from you" means:
(1) any deposit account balance I have with you;
(2) any money owed to me on an item presented to you or in your
possession for collection or exchange; and
(3) any repurchase agreement or other nondeposit obligation.
"Any amount due and payable under this note" means the total amount of
which you are entitled to demand payment under the terms of this note at the
time you set off. This total includes any balance the due date for which you
properly accelerate under this note.
If my right to receive money from you is also owned by someone who has not
agreed to pay this note, your right of set-off will apply to my interest in this
obligation and to any other amounts I could withdraw on my sole request or
endorsement. Your right of set-off does not apply to an account or other
obligation where my rights are only as a representative. It also does not apply
to any Individual Retirement Account or other tax-deferred retirement account.
You will not be liable for the dishonor of any check when the dishonor
occurs because you set off this debt against any of my accounts. I agree to hold
your harmless from any such claims arising as a result of your exercise of your
right of set-off.
REAL ESTATE OR RESIDENCE SECURITY: If this note is secured by real estate or a
residence that is personal property, the existence of a default and your
remedies for such a default will be determined by applicable law, by the terms
of any separate instrument creating the security interest and, to the extent not
prohibited by law and not contrary to the terms of the separate security
instrument, by the "Default" and "Remedies" paragraphs herein.
DEFAULT: I will be in default if any one or more of the following occur: (1) I
fail to make a payment on time or in the amount due; (2) I fail to keep the
property insured, if required; (3) I fail to pay, or keep any promise on any
debt or agreement I have with you; (4) any other creditor of mine attempts to
collect any debt I owe him through court proceedings; (5) I die, am declared
incompetent, make an assignment for the benefit of creditors, or become
insolvent (either because my liabilities exceed my assets or I am unable to pay
my debts as they become due); (6) I make any written statement or provide any
financial information that is untrue or inaccurate at the time it was provided;
(7) I do or fail to do something which causes you to believe that you will have
difficulty collecting the amount I owe you; (8) any collateral securing this
note is used in a manner or for a purpose which threatens confiscation by a
legal authority; (9) I change my name or assume an additional name without first
notifying you before making such a change; (10) I fail to plant, cultivate and
harvest crops in due season; (11) any loan proceeds are used for a purpose that
will contribute to excessive erosion of highly erodible land or to the
conversion of wetlands to produce an agricultural commodity, as further
explained in 7 C.P.R. Part 1940, Subpart G, Exhibit M.
REMEDIES; If I am in default on this note you have, but are not limited to, the
following remedies:
(1) You may demand immediate payment of all I owe you under this note
(principal, accrued unpaid interest and other accrued charges).
(2) You may set off this debt against any right I have to the payment of
money from you, subject to the terms of the "Set-Off" paragraph
herein.
(3) You may demand security, additional security, or additional parties
to be obligated to pay this note as a condition for not using any
other remedy.
(4) You may refuse to make advances to me or allow purchases on credit
by me.
(5) You may use any remedy you have under state or federal law.
By selecting any one or more of these remedies you do not give up your right to
later use any other remedy. By waiving your right to declare an event to be a
default, you do not waive your right to later consider the event as a default if
it continues or happens again.
COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection,
replavin or any other or similar type of cost if I am in default. In addition,
if you hire an attorney to collect this note, I also agree to pay any fee, not
to exceed 15 percent of the principal and interest then owed, you incur with
such attorney plus court costs (except where prohibited by law). To the extent
permitted by the United States Bankruptcy Code. I also agree to pay the
reasonable attorney's fees and costs you incur to collect this debt as awarded
by any court exercising jurisdiction under the Bankruptcy Code.
WAIVER; I give up my rights to require you to do certain things. I will not
require you to:
(1) demand payment of amounts due (presentment);
(2) obtain official certification of nonpayment (protest);
(3) give notice that amounts due have not been paid (notice of
dishonor); or
(4) give me notice prior to seizure of my personal property when you are
seeking to foreclose a secured interest in any of my personal
property used to secure a commercial transaction,
I waive any defenses I have based on suretyship or impairment of
collateral.
OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if someone
else has also agreed to pay it (by, for example, signing this form or a separate
guarantee or endorsement). You may sue me alone, or anyone else who is obligated
on this note, or any number of us together, to collect this note. You may do so
without any notice that it has not been paid (notice of dishonor). You may
without notice release any party to this agreement without releasing any other
party. If you give up any of your rights, with or without notice, it will not
affect my duty to pay this note. Any extension of new credit to any of us, or
renewal of this note by all or less then all of us will not release me from my
duty to pay it. (Of course, you are entitled to only one payment in full.) I
agree that you may at your option extend this note or the debt represented by
this note, or any portion of the note or debt, from time to time without limit
or notice and for any term without affecting my liability for payment of the
note. I will not assign my obligation under this agreement without your prior
written approval.
CREDIT INFORMATION: I agree and authorize you to obtain credit information about
me from time to time (for example, by requesting a credit report) and to report
to others your credit experience with me (such as a credit reporting agency). I
agree to provide you, upon request, any financial statement or information you
may deem necessary. I warrant that the financial statements and information I
provide to you are or will be accurate, correct and complete.
NOTICE: Unless otherwise required by law, any notice to me shall be given by
delivering it or by mailing it by first class mail addressed to me at my last
known address. My current address is on page 1. I agree to inform you in writing
of any change in my address. I will give any notice to you by mailing it first
class to your address stated on page 1 of this agreement, or to any other
address that you have designated.
<TABLE>
<CAPTION>
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BORROWER'S INTEREST
DATE OF PRINCIPAL INITIALS PRINCIPAL PRINCIPAL INTEREST INTEREST PAID
TRANSACTION ADVANCE (not required) PAYMENTS BALANCE RATE PAYMENTS THROUGH:
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
/ / $ $ $ % $ / /
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/ / $ $ $ % $ / /
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/ / $ $ $ % $ / /
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/ / $ $ $ % $ / /
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/ / $ $ $ % $ / /
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/ / $ $ $ % $ / /
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</TABLE>
<PAGE> 4
which note provides for payment of interest, but which interest is not evidenced
by interest coupons or interest coupon notes, it being understood that wherever
coupons, interest coupons, or interest coupon notes, are referred to in this
present mortgage, the interest mentioned in said note is intended; and shall
duly, promptly and fully perform, discharge, execute, effect, complete, comply
with and abide by each and every the stipulations, agreements, conditions and
covenants of said promissory notes and of the interest coupons referred to
therein and of this mortgage, then this mortgage and the estate hereby created
shall cease and be null and void.
It is understood that each of the words, note, mortgagor and mortgagee
respectively, whether in the singular or plural anywhere in this mortgage, shall
be singular if one only and shall be plural jointly and severally if more than
one, and that the word their as used anywhere in this mortgage shall be taken to
mean his, her or its, wherever the context so implies or admits.
And the Mortgagor, for itself and his heirs, legal representatives,
successors and assigns, hereby jointly and severally covenants and agrees to and
with the Mortgagee, its legal representatives, successors and assigns:
1. To pay all and singular the principal and interest and the various and
sundry sums of money payable by virtue of said promissory notes, interest coupon
notes and this mortgage, each and every, promptly on the days respectively the
same severally become due.
2. To pay all and singular the taxes, assessments, levies, liabilities,
obligations and encumbrances of every nature and kind now on said described
property, and/or that hereafter may be imposed, suffered, placed, levied or
assessed thereupon, and/or that hereafter may be levied or assessed upon this
mortgage and/or the indebtedness secured thereby, each and every, when due and
payable according to law, before they become delinquent, and before any interest
attaches or any penalty is incurred; and in so far as any thereof is of record
the same shall be promptly satisfied and discharged of record and the original
official document (such as, for instance, the tax receipt or the satisfaction
paper officially endorsed or certified) shall be placed in the hands of the
Mortgagee within ten days next after payment; and in the event that any thereof
is not so paid, satisfied and discharged, the Mortgagee may as any time pay the
same or any part thereof without waiving or affecting any option, lien, equity
or right under or by virtue of this mortgage, and the full amount of each and
every such payment shall be immediately due and payable and shall bear interest
from the date thereof until paid at the maximum rate per annum allowed by law,
and together with such interest shall be secured by the lien of this mortgage.
3. To place and continuously keep on the buildings now or hereafter
situate on said land hazard insurance as required by Mortgagee in the usual
standard policy form, in a sum not less than FULL INSURABLE VALUE Dollars,
$_________, in such company or companies as may be approved by the Mortgagee;
and all such insurance policies on any of said buildings, any interest therein
or part thereof, in the aggregate sum aforesaid or in excess thereof, shall
contain the usual standard mortgages clause making the loss under said policies,
each and every, payable to the Mortgagee as its interest may appear, and each
and every such policy shall be promptly delivered to and held by the Mortgagee;
and, not less than ten days in advance of the expiration of each policy, to
deliver to the Mortgagee a renewal thereof, together with a receipt for the
premium of such renewal; and there shall be no such insurance placed on any of
said buildings, any interest therein, or part thereof, unless in the form and
with the loss payable as aforesaid; and in the event any sum of money becomes
payable under such policy or policies the Mortgagee shall have the option to
receive and apply the same on account of the indebtedness secured hereby or to
permit the Mortgagor to receive and use is or any part thereof for other
purposes without thereby waiving or impairing any equity, lien or right under or
by virtue of this mortgage; and in the event the Mortgagor shall for any reason
fail to keep the said premises so insured, or fall to deliver promptly any of
said policies of insurance to the Mortgagee, or fail promptly to pay fully any
premium therefor, or in any respect fail to perform, discharge, execute, effect,
complete, comply with and abide by this covenant, or any part hereof, the
Mortgagee may place and pay for such insurance or any part thereof without
waiving or affecting any option, lien, equity or right under or by virtue of
this mortgage, and the full amount of each and every such payment shall be
immediately due and payable and shall bear interest from the date thereof until
paid at the maximum rate per annum allowed by law, and together with such
interest shall be secured by the lien of this mortgage.
<PAGE> 5
4. To permit, commit or suffer no waste, impairment or deterioration of
said property or any part thereof.
5. To pay all and singular the costs, charges and expenses, including
reasonable lawyer's fees and cost of abstracts of title, incurred or paid at any
time by the Mortgagee because and/or in the event of the failure on the part of
the Mortgagor to duly, promptly and fully perform, discharge, execute, effect,
complete, comply with and abide by each and every the stipulations, agreement,
conditions and covenants of said promissory notes. Interest coupon notes and
this mortgage, any or either, and said costs, charges and expenses, each and
every, shall be immediately due and payable, whether or not there be notice,
demand, attempt to collect or suit pending; and the full amount of each and
every such payment shall bear interest from the date thereof until paid at the
maximum rate per annum allowed by law; and all said costs, charges and expenses
so incurred or paid, together with such interest, shall be secured by the lien
of this mortgage.
6. That (a) in the event of any breach of this mortgage or default on the
part of the Mortgagor, or (b) in the event any of said sums of money herein
referred to be not promptly and fully paid within ten days next after the same
severally become due and payable, without demand or notice, or (c) in the event
each and every the stipulations, agreements, conditions and covenants of said
promissory notes and said interest coupons and this mortgage, any or either, are
not duly, promptly end fully performed, discharged, executed, effected,
completed, complied with and abided by; then, in either or any such event, the
said aggregate sum mentioned in said promissory notes then remaining unpaid,
with interest accrued, and all moneys secured hereby, shall become due and
payable forthwith, or thereafter, at the option of the Mortgagee, as fully and
completely as if all of the said sums of money were originally stipulated to be
paid on such day, anything in said promissory notes, interest coupons and/or in
this mortgage to the contrary notwithstanding; and thereupon or thereafter at
the option of the Mortgagee, without notice or demand, suit at law or in equity,
theretofore, or thereafter begun, may be prosecuted as if all moneys secured
hereby had matured prior to its institution.
7. That in the event that at the beginning of or at any time pending any
suit upon this mortgage, or to foreclose it, or to reform it, and/or to enforce
payment of any claims hereunder, the Mortgagee shall apply to the court having
Jurisdiction thereof for the appointment of a Receiver, such court shall
forthwith appoint a Receiver of said mortgaged property all and singular,
including all and singular the rants, income, profits, issues and revenues from
whatever source derived, each and every of which, it being expressly understood,
is hereby mortgaged as if specifically set forth and described in the granting
and habendum clauses hereof, and such Receiver shall have all the broad and
effective functions and powers in any wise entrusted by a court to a Receiver,
and such appointment shall be made by such court as an admitted equity and a
matter of absolute right to the Mortgagee, and without reference to the adequacy
or inadequacy of the value of the property mortgaged or to the solvency or
insolvency of the Mortgagor and/or of the defendants, and that such rents,
profits, income, issues and revenues shall be applied by such Receiver according
to the lien and/or equity of the Mortgagee and the practice of such court.
8. To duly, promptly and fully perform, discharge, execute, effect,
complete, comply with and abide by each and every the stipulations, agreements,
conditions and covenants in said promissory notes and said interest coupon notes
and in this mortgage set forth.
9. If all or any part of the property encumbered hereby is cold or
transferred without Mortgagee's prior written consent, Mortgagee may, at its
option, declare all of the sum secured hereby to be immediately due and payable.
Mortgagee shall have waived such option to accelerate if, prior to the sale or
transfer, Mortgagee and the persons to whom the mortgaged property is to be sold
or transferred reach an agreement in writing that the credit of such person is
satisfactory to Mortgagee and that the interest payable on the sum secured
hereby shall be at such a rate as Mortgagee shall request.
IT IS MUTUALLY COVENANTED AND AGREED by and between the Mortgagor and the
Mortgagee that this mortgage and the note secured hereby constitute a Florida
contract and shall be construed according to the laws of that State.
<PAGE> 6
WITNESS the hand and seal of the Mortgagor the day and year first above
written.
THIS IS A BALLOON MORTGAGE AND THE FINAL PAYMENT OR THE PRINCIPAL BALANCE DUE
UPON MATURITY IS $130,789.04 TOGETHER WITH ACCRUED INTEREST, IF ANY, AND ALL
ADVANCEMENTS MADE BY THE MORTGAGEE UNDER THE TERMS OF THIS MORTGAGE.
SIGNED, SEALED and DELIVERED WESTSTAR ENVIRONMENTAL, INC.
IN the presence of: F/K/A WESTSTAR ENVIRONMENTAL
PUMPING & SEPTIC SERVICE, INC.
/s/ Elaine B. Wheeler /s/ Michael E. Ricks
- ------------------------------- ------------------------------
ELAINE B. WHEELER MICHAEL E. RICKS, President
- -------------------------------
Printed Name Witness
/s/ Mary Ann Howat
- -------------------------------
MARY ANN HOWAT
- -------------------------------
Printed Name of Witness
STATE OF NASSAU
COUNTY OF NASSAU
The foregoing instrument was acknowledged before me this 3rd day of June,
1998, by MICHAEL E. RICKS, President of Weststar Environmental, Inc., F/K/A
Weststar Environmental Pumping & Septic Service, Inc., a Florida corporation,
who is personally known to me or who has produced current Fl. drivers license as
proof of identification.
/s/ Elaine B. Wheeler
- -------------------------------
Printed Name of Notary: ELAINE B. WHEELER
My Commission Expires:
[SEAL] ELAINE B. WHEELER
My Commission CC420814
Expires: Dec. 19, 1998
Bonded by HAI
800-422-1555
<PAGE> 7
Schedule A
A parcel of land lying in the NW 1/4 of Section 5, Township 7 South, Range 22
East, Bradford County, Florida; said parcel being more particularly described as
follows:
Commence at the intersection of the Northerly boundary of said Section 5 with
the Easterly boundary of the R/W of State Road 200 (U.S. 301), said intersection
being 939.57 feet Westerly of the Northeast corner of said NW 1/4 on a Bearing
of North 89 degrees, 55 minutes and 22 seconds West; thence South 89 degrees, 55
minutes and 22 seconds East, along said Northerly boundary and along the
Northerly boundary of the right of way of a 60 foot road, 474.67 feet to the
Easterly boundary of the right of way of said 60 foot road; thence South 01
degree, 24 minutes and 50 seconds East, along last aforesaid Easterly boundary
and parallel with the Easterly boundary of said NW 1/4 a distance of 905.00 feet
for the Point of Beginning. From Point of Beginning thus described continue
South 01 degree, 24 minutes and 50 seconds East, along the Easterly boundary of
said 60 foot road and parallel with the Easterly boundary of said NW 1/4, a
distance of 472.51 feet to an iron pipe located at the Northwest corner of Lot 4
of Deerwood Subdivision (Plat Book 3, Page 34) of the public records of said
County; thence North 88 degrees, 09 minutes and 40 seconds East, along the
Northerly boundary of said Lot 4 and along the Northerly boundary of Deerwood
Subdivision, 464.75 feet to a concrete monument located on the Easterly boundary
of said NW 1/4 (also being the Northeast corner of said Deerwood Subdivision);
thence North 01 degree, 24 minutes and 50 seconds West, along last aforesaid
Easterly boundary; 457.00 feet; thence North 89, degrees, 55 minute. and 22
seconds West, parallel with the Northerly boundary of said Section 5, a distance
of 464.90 feet to the Point of Beginning. This property is intended to be the
same as lots 22, 23, 24 and 25 as shown on the attached Map.
TOGETHER WITH a non-exclusive easement for ingress, egress and utilities over
and across the entire Proposed 60' Roadway shown on the attached Map and with an
undivided four-sixteens (4/l6ths) right, title and interest in said Roadway
which is more particularly described as a strip of land 60.00 feet in width
lying in the NW 1/4 of Section 5, Township 7 South, Range 22 East, and being a
portion of Lot 12 of Deerwood Subdivision as per plat recorded in Plat Book 3,
Page 34 of the public records of Bradford County, Florida; said strip of lying
30.00 feet on each side of the following described centerline; COMMENCE at the
intersection of the Northerly boundary of said Section 5 with the Easterly
boundary of the right of way of State Road 200 (U.S. 301), said intersection
being 939.57 feet Westerly of the Northeast corner of said NW 1/4 on a Bearing
of North 89 degrees, 55 minutes and 22 seconds West, thence South 33 degrees, 42
minutes end 40 seconds West, along said Easterly boundary, 36.03 feet West to
the Point of Beginning of said centerline. From Point of Beginning thus
described run South 89 degrees, 55 minutes and 22 seconds East, parallel with
said Northerly boundary 465.39, feet; thence South 01 degrees, 24 minutes and 50
seconds East, parallel with the Easterly boundary of said NW 1/4, a distance of
1328.06 feet to the end of said centerline.
<PAGE> 1
EXHIBIT 16.
[LETTERHEAD OF REDDISH AND WHITE, CERTIFIED PUBLIC ACCOUNTANTS]
July 21, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Weststar Environmental, Inc.
Registration Statement on Form SB-2, No. 333-50255
Dear Sirs:
This letter will serve to confirm that our replacement by Horton & Company as
auditors of Weststar Environmental, Inc. ("the Company"), approved by the
Company's board of directors, was necessitated by the NASDAQ requirement that
the Company's independent auditors be members of the AIPCA SEC Practice Section.
We are not members. None of our reports on the financial statements of the
Company and B&B contained an adverse opinion or a disclaimer of opinion or was
qualified or modified as to uncertainty, audit scope, or accounting principles,
and there were no disagreements between the Company and us on any matter of
accounting principles or practices, financial statement, disclosure, or auditing
scope or procedure.
We are prepared to provide any further information at your request.
Sincerely,
/s/ Reddish & White, CPA's
REDDISH & WHITE, CPA'S
<PAGE> 1
EXHIBIT 23
[HORTON & COMPANY LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the prospectus constituting a part of
this Registration Statement on Form SB-2 of our report dated June 19, 1998,
relating to the consolidated financial statements of Weststar Environmental,
Inc. and subsidiary for the years ended December 31, 1997 and 1996, which is
contained in the Prospectus.
We also consent to the reference to us under the caption "Experts" in the
prospectus.
/s/ Horton & Company, LLC
Horton & Company, L.L.C.
Wayne, New Jersey
July 8, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
WESTSTAR ENVIRONMENTAL, INC.
APPENDIX A TO ITEM 601(c) OF REGULATION S-B
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1997 DEC-31-1998 MAR-31-1998 MAR-31-1997
<CASH> 6,233 0 88,149 39,487
<SECURITIES> 0 0 0 0
<RECEIVABLES> 307,736 45,563 81,427 363,632
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 451,762 73,127 256,139 435,076
<PP&E> 2,428,955 2,283,073 2,475,093 2,284,553
<DEPRECIATION> (688,127) (478,606) (744,769) (533,735)
<TOTAL-ASSETS> 2,195,100 1,883,004 2,016,279 2,192,728
<CURRENT-LIABILITIES> 1,182,912 1,035,888 1,011,572 1,128,309
<BONDS> 1,823,687 1,733,449 1,515,868 1,900,473
0 0 0 0
0 0 0 0
<COMMON> 1,500 1,500 1,690 1,500
<OTHER-SE> 369,913 148,055 357,129 290,755
<TOTAL-LIABILITY-AND-EQUITY> 2,195,100 1,883,004 2,016,279 2,192,728
<SALES> 0 0 0 0
<TOTAL-REVENUES> 2,245,008 1,682,566 527,347 614,259
<CGS> 0 0 0 0
<TOTAL-COSTS> 1,091,196 1,522,476 296,821 326,032
<OTHER-EXPENSES> 558,031 651,730 122,540 111,982
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 173,923 103,421 26,488 33,545
<INCOME-PRETAX> 421,858 (216,061) 81,498 142,700
<INCOME-TAX> 148,000 (76,000) 28,000 50,000
<INCOME-CONTINUING> 273,858 (140,061) 53,498 92,700
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 273,858 (140,061) 53,498 92,700
<EPS-PRIMARY> 0.18 (0.09) 0.04 0.06
<EPS-DILUTED> 0.18 (0.09) 0.04 0.06
</TABLE>
<PAGE> 1
EXHIBIT 99
CONSENT
I hereby consent to the use of the references to me contained in the
Prospectus constituting part of this Registration Statement on Form SB-2 (No.
333-50255) of Weststar Environmental, Inc.
/s/ Michael J. George
------------------------------------
MICHAEL J. GEORGE
Jacksonville, Florida
July 30, 1998
