<PAGE> 1
As filed with the Securities and Exchange Commission on April 16, 1998
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
WESTSTAR ENVIRONMENTAL, INC.
(Name of small business issuer in its charter)
------------------
<TABLE>
<CAPTION>
<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.)
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)
------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
With copies to:
SCOTT RAPFOGEL, 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
------------------
</TABLE>
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]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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
Representative's Common Stock Purchase Warrants (3)....... 100,000 $.001 $100 $.03
Common Stock, $.001 par value (4)(5)..................... 100,000 $6.00 $600,000 $177.00
TOTAL..................................................... $6,350,100 $1,873.28
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Includes 150,000 shares of Common Stock which may be issued subject to
the Representative's over-allotment option.
(3) To be sold to the Representative upon the completion of the offering.
Each such Warrant is exercisable for one share of Common Stock, $.001
par value.
(4) Issuable upon exercise of the Representative's Common Stock Purchase
Warrants.
(5) 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 Representative's Common Stock Purchase
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 1 of 245 pages
Exhibit Index at Page 76
<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>
<CAPTION>
<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.............................. Not Applicable
</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.
PROSPECTUS SUBJECT TO COMPLETION: DATED APRIL 16, 1998
- ----------
1,000,000 SHARES
WESTSTAR ENVIRONMENTAL, INC.
The 1,000,000 shares of common stock, $.001 par value per share, (the
"Shares" or the "Common Stock") offered hereby are being sold by Weststar
Environmental, Inc., a Florida corporation (the "Company") at a purchase price
of $5 per Share. Prior to this offering there has been no public market for the
Common Stock and no assurance can be given that a public market will develop for
such Common Stock after this offering. The public offering price for the Common
Stock 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 Representative has advised the Company that it intends to make a
market in the Common Stock immediately after this offering, but it may
discontinue those activities at any time. The Company's Common Stock has been
tentatively authorized for listing on the NASDAQ-Small Cap Market under the
proposed symbol "WSTX" 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
Total (3)...................... $5,000,000 $500,000 $4,500,000
</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 to purchase up to 100,000
Shares, which warrants are exercisable for a period of four years,
commencing twelve months from the date of this Prospectus, 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 $363,508.29, 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 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 $5,750,000, $575,000, and $5,175,000, respectively.
------------------
The Shares 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 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
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK 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.
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 Environmental Septic 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. (An additional 150,000
Shares have been reserved for issuance
pursuant to the Representative's Over-
allotment Option.)
Offering Price....................... $5.00 per Share.
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 entitled to dividends when and as
declared by the Board of Directors from
funds legally available therefor and,
upon
6
<PAGE> 7
liquidation, are entitled to share pro
rata in any distribution to common
shareholders.
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 150,000
shares of Common Stock issuable upon the
possible exercise by the Representative
of the Over-allotment Option; or (iii)
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 offered hereby involve a high
degree of risk and substantial dilution.
Potential investors should carefully
review the entire Prospectus and
particularly, the sections entitled
"Risk Factors" and "Dilution".
Proposed NASDAQ
Symbol(1).......................... Common Stock.............. WSTX
(1) Assumes that the Common Stock 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.
7
<PAGE> 8
SUMMARY FINANCIAL INFORMATION
The following table sets forth summarized financial information
regarding the Company and B&B Environmental Septic Services, Inc., on a combined
basis for the periods indicated. This information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operation" and the audited financial statements and notes thereto set forth
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Income Statement Data: Year Ended Year Ended
(period ended) December 31, 1996 December 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues $1,777,316 $2,529,258
Net Income (Loss) (500,311) 706,108
Net Income Per Share (.33) .47
Weighted Average Number
of Shares Outstanding 1,500,000 1,500,000
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data: December 31, 1996 December 31, 1997
(at period ended) Actual Actual As Adjusted(1)
---------------- ---------------- -----------
<S> <C> <C> <C>
Current Assets $95,603 $451,762 $1,388,254
Total Assets 2,110,551 2,195,100 4,931,592
Current Liabilities 1,284,476 1,182,912 140,767
Total Liabilities 1,982,037 1,823,687 423,687
Stockholders' Equity 128,514 371,413 4,507,905
</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 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.
8
<PAGE> 9
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 and Maryland. 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 Septic Waste, Bio-Solids and Grease". 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 December 31, 1997, the Company operated as a Subchapter S corporation
under the Internal Revenue Code of 1986 as amended (the "Code"). From January 1,
1998 through the present the Company has operated as a Subchapter C corporation
under the Code.
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" within the meaning of Section 27A of the Securities
Act, 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,
9
<PAGE> 10
contemplated by or underlying any such forward-looking 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
December 31, 1997, the Company had total current assets of $451,762 and total
current liabilities of $1,182,912 or a negative working capital of $(731,150).
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 71% of the Company's revenues. The City of
Jacksonville/Jacksonville Electric Authority accounted for approximately 61.99%
of total sales in 1997 and approximately 39.4% of total sales in 1996. Food Lion
Supermarkets accounted for approximately 6.24% of total sales for 1997 and
approximately 14.74% of total sales in 1996. Roto-Rooter accounted for
approximately 2.07% of sales in 1997 and approximately 18.78% 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. 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. 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 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,
10
<PAGE> 11
Transport, Treatment and Disposal of Septic Waste, Bio-Solids and Grease - 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 67.6% and 43.2% 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 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
11
<PAGE> 12
competitors offer services not currently offered by the Company and have
capabilities not currently possessed by the Company. 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 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
12
<PAGE> 13
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 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 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
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<PAGE> 14
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 price for
the Shares has been arbitrarily determined by the Company and the Underwriter
and the price bears 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
December 31, 1997, 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 $3.20 per Share from the public offering price of $5.00
per Share. The foregoing does not assume the exercise of the Over-allotment
Option, the exercise of the Representative's Warrants, or the exercise of any
outstanding stock options and does not take into account the February 1998 sale
by the Company of an aggregate of 190,000 shares of Common Stock. The net
tangible book value of the shares of Common Stock owned by the Company's
existing stockholders will increase by approximately $1.55 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 exercise of
such latter stock options will result in additional dilution to the purchasers
of the Shares offered hereby. In the event all such 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".
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<PAGE> 15
19. No Assurance of Public Market - Prior to this offering, there has
been no public market for the Common Stock, and there is no assurance that a
public market for the Common Stock will develop after this offering. If a
trading market does in fact develop for the Common Stock offered hereby, there
is a possibility that it will not be sustained. Therefore, there can be no
assurance that any of the Shares offered hereby can be resold at or near the
offering price. The Company anticipates that upon completion of this offering,
the Company's Common Stock will be quoted on the NASDAQ - Small Cap Market. If
the Company's Common Stock is not originally or subsequently eligible for
listing, purchasers of the Shares may have difficulty in selling their Shares
should they desire to do so.
20. 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 offered hereby and
exercises, if any, of outstanding stock options, approximately 68.22% 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.
21. 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".
22. 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.
23. Representative's Warrants - In connection with this offering, the
Company has agreed to sell, for a nominal price, to the Representative, warrants
(the "Representative's Warrants") to purchase at a price of $6.00 per share, up
to 100,000 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 for a reduction of the purchase price per Share and an increase
in the number of Shares that may be purchased if, under certain circumstances,
the Company issues or sells shares of Common Stock below the then exercise price
per Share or the then market price of the
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<PAGE> 16
Common Stock. 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
The net proceeds to the Company from the offering, after deducting
underwriting discounts and commissions and offering related expenses, are
estimated to be approximately $4,136,492 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 shown below for the
purposes listed:
<TABLE>
<CAPTION>
Percent
of
Anticipated Use Approximate Amount Total
<S> <C> <C>
Debt consolidation and reduction(1) $1,400,000 33.9%
Equipment purchases(2)............................... 300,000 7.2%
Construction of grease processing facility(3) 500,000 12.1%
Acquisition and expansion(4)......................... 1,100,000 26.6%
Working capital(5)................................... 836,492 20.2%
TOTAL........................................... $4,136,492 100%
</TABLE>
- ------------------
(1) The Company intends to pay off all of its short and long term debt,
including loans made to the Company by Company officers and directors,
with the exception of the mortgage on the Deland, Florida property and
standard trade payables (see "Certain Transactions").
(2) 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.
(3) 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".
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<PAGE> 17
(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.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior to this offering, there has been no public market for the Common
Stock and there can be no assurance that a public market for the Common Stock
will develop after this offering. The Company anticipates that upon completion
of this offering that its Common Stock 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, the
Company's officers and directors, the holders of the 460,000 stock options
exercisable at $5 per share, and the holders of 5% or more (the "5% Holders") 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 without the prior consent of the Representative. The 5%
Holders have further agreed not to sell or transfer any of their Shares for an
additional 18 month period without the prior consent of the Representative or
unless the Share market price, adjusted for splits, remains above $7.50 for a
period of 20 consecutive days immediately prior to any sale by them (see
"Underwriting").
The Company paid dividends during the years ended December 31, 1997 and
December 31, 1996 in the respective amounts of $106,000 and $70,000. There are
no restrictions that limit the Company's ability to pay dividends on the Common
Stock or that are likely to do so in the future. Notwithstanding the foregoing,
for the foreseeable future, it is anticipated that any earnings
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<PAGE> 18
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".)
DILUTION
The following table sets forth as of December 31, 1997 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 Underwriter's Warrants or the exercise of the
Underwriter's Over-allotment option.
<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 1,500,000 60% $94,092 1.8% $.06
New stockholders 1,000,000 40% $5,000,000 98.2% $5.00
TOTAL 2,500,000 100% $5,094,092 100% $1.89
</TABLE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 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 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 combined audited financial
statements of the Company and B&B and the notes thereto included elsewhere in
this Prospectus:
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<PAGE> 19
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------
Actual As Adjusted
------ -----------
<S> <C> <C>
Long-term debt................................................. $ 640,775 $ 282,920
Current portion of long-term debt.............................. 314,913 11,742
Stockholders' equity
Common stock, $.001 par value;
10,000,000 shares authorized;
1,500,000 shares issued and outstanding(1);
2,500,000 shares as adjusted(1)........................... 1,500 2,500
Additional paid-in capital.................................. 92,592 4,228,084
Retained earnings........................................... 277,321 277,321
Total Stockholders' equity................................ 371,413 4,507,905
Total Capitalization........................................... $ 1,327,101 $ 4,802,567
</TABLE>
(1) Does not give effect to the Company's sale in February, 1998 of an
additional 190,000 shares of Common Stock.
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 combined basis.
The following information is intended to highlight key developments in
the Company's operations and to identify other factors affecting the Company's
combined results of operations for the years ended December 31, 1997 and
December 31, 1996. The information should be read in conjunction with the
audited financial statements and notes thereto set forth elsewhere in this
Prospectus.
19
<PAGE> 20
<TABLE>
<CAPTION>
12 MONTHS ENDED DECEMBER 31
------------------------------------------------------------
1996 % 1997 %
---- - ---- -
<S> <C> <C> <C> <C>
Revenues $1,777,316 100 $2,529,258 100
Cost of Sales $1,083,690 60.97 $766,188 30.29
Gross Profit $693,626 39.03 $1,763,070 69.71
SG&A Expense $1,002,245 56.39 $1,021,134 40.37
Operating Profit (Loss) ($308,619) (17.36) $741,936 29.34
Gain or Loss on Disposal of Fixed Assets(1) $71,517 4.02 ($35,828) 1.42
Net Income ($237,102) (13.34) $706,108 27.92
Prior Period Adjustment(2) ($263,209) (14.81)
Net Loss ($500,311) (28.15)
Net (Loss) Income per Common Share ($.33) $.47
*No. of Shares Outstanding 1,500,000 1,500,000
</TABLE>
* Gives effect to February 1998 15 for 1 stock split
(1) The loss on disposal of fixed assets for the twelve months ended
December 31, 1996 resulted from the Company's early termination of an
equipment lease. The gain on disposal of fixed assets for the twelve
months ended December 31, 1997 resulted from the allocation of part of
the purchase price from the CBP Asset Sale and Purchase Agreement (the
"Agreement") to equipment which had previously been depreciated by the
Company to values below that allocated to the equipment by the
Agreement.
(2) Certain errors, resulting in an overstatement of previously reported
assets and an understatement of expenses for the fiscal year ended
December 31, 1996 were corrected in 1997 resulting in changes to
retained earnings as of December 31, 1996 and the related Statement of
Income for the year then ended. See "Notes to Financial Statements -
Note 11".
RESULTS OF OPERATIONS
For the Years Ended December 31, 1997 and December 31, 1996
The Company's revenues were $2,529,258 for the year ended December 31,
1997, an increase of $751,942 or 42.31% over the year ended December 31, 1996.
This increase in revenues is due to several factors. Foremost, was an increase
in sales of $942,062 to the government sector. Additionally, $284,250 of
deferred revenues from the 1996 sale of a portion of the Company's grease trap
business to CBP Resources, Inc. (the "1996 Sale") was recognized in 1997. The
foregoing sales increases were offset to a certain extent however, by the
reduced revenues from the Company's grease trap business directly attributable
to the 1996 Sale.
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<PAGE> 21
Cost of sales for the year ended December 31, 1997 were $766,188 or
30.29% of gross revenues as compared to cost of sales of $1,083,690 or 60.97% 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. Fuel
costs in 1997 were down by $60,744 or 38.83% when compared to the same costs in
1996 primarily due to the decline in grease trap routes following the 1996 Sale.
Labor costs in 1997 were down $296,846 or 41.72% 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 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 $1,021,134 for the
year ended December 31, 1997 as compared to $1,002,248 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 40.37% as compared to 56.39%in 1996 reflecting the Company's
greater efficiency in expense control in relation to revenues. The Company has
replaced equipment as needed and depreciation expense remained relatively
constant at $220,517 in 1997 as compared to $226,907 in 1996. A major component
of expense is the cost of insurance, which the Company seeks to obtain at the
most competitive rates. For the year ended December 31, 1997 insurance expense
was $100,622, down from $121,955 for the year ended December 31, 1996.
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 $327,900 net cash from
operations and used $219,189 of this cash to purchase property and equipment.
The Company used $96,813 of the remaining cash funds for financing activities.
This left $11,788 in increased cash for the year ended December 31, 1997. For
the year ended December 31, 1996, the Company also used cash flow from
operations and debt to finance its operations, along with the sale of a portion
of its grease trap routes. Net cash from operations of $461,932 and net cash
from borrowings and repayments of $97,764 was used to purchase $559,380 of
property and equipment.
As a Subchapter S Corporation, taxes on profits are paid by the
individual stockholders. Dividends have been declared in the past to enable the
Company's stockholders to pay their taxes.
21
<PAGE> 22
Dividends of $106,000 were paid in the year ended December 31, 1997 compared to
$70,000 of dividends which were paid in the year ended December 31, 1996. The
Company converted to a Subchapter C Corporation as of January 1, 1998 so there
will not be a necessity 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
$713,150 as compared to a negative working capital position of $1,188,873 at the
year ended December 31, 1996. Stockholder loans of $319,634 at December 31,
1997, and $160,911 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
(net income) of $706,108 as compared to a loss of $500,311 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.
Also, equipment was written down by $205,071 to better reflect current values.
Profits (net income) as a percentage of revenues were 27.92% for 1997 and 20.63%
for 1995.
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.
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. Effective January 1, 1998 the Company became a Subchapter C
corporation and on
22
<PAGE> 23
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
October 5, 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 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 nonhazardous 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.
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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.
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
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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 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 Septic Waste, Bio-Solids and
Grease
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 $2,420,805 and $1,453,316. 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 $502,600 and $426,436.65, 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%
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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 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-Compete Agreement (the
"Consulting and Non-Compete Agreement") with CBP effective October 4, 1996. The
Consulting and Non-Compete 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 and Non-Compete Agreement. The
non-compete section of the Consulting and Non-Compete Agreement contains similar
terms to those in the Purchase Agreement with regard to geographic area,
duration and scope. In consideration of the non-compete provisions contained in
the Consulting and Non-Compete Agreement, CBP
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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 state 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 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
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<PAGE> 28
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.
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 4.3% and 18.2% of the Company's sales revenues during the
years ended December 31, 1997
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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 October 1998 (see "Use of Proceeds"). 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.
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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 5%and 3% of gross sales revenues, respectively, on research and
development.
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:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1996 1997
-------------------- --------------------
$ % $ %
--------- ----- ---------- ----
<S> <C> <C> <C> <C>
Private Sector........................ 1,009,547 56.80 819,424 32.4
Governmental.......................... 767,769 43.20 1,709,834 67.6
</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 71% of
the Company's revenues. The City of Jacksonville/Jacksonville Electric Authority
accounted for approximately 61.99% of total sales in 1997 and approximately
39.4% of total sales in 1996. Food Lion Supermarkets accounted for
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approximately 6.24% of total sales in 1997 and approximately 14.74% of total
sales in 1996. Roto Rooter accounted for approximately 2.07% of sales in 1997
and approximately 18.78% 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
remains renewable for three additional one year periods. No assurance can be
given however, that the JEA will exercise their renewal option for any of such
renewal periods. In the event the JEA decides not to renew the contract for any
of the remaining renewal periods it will reopen the contract for bidding. In
such event, 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 stores in Tennessee, West Virginia and Maryland at the
discretion of CBP Resources, Inc. See "Business - Services - Removal, Transport,
Treatment and Disposal of Septic Waste Bio-Solids and Grease". 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
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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.
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".
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.
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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 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".
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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.
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".
34
<PAGE> 35
PERSONNEL
As of April 10, 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"), a 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.
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 owned directly by the Company, is not
subject to a mortgage, and 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.
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 December 31, 1997, of approximately $292,000 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
35
<PAGE> 36
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").
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 $50,000.
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.
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:
36
<PAGE> 37
<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 at
rates satisfactory to the Company.
The term of office of each director and executive officer expires when
his successor is elected and qualified. Executive officers are elected by and
hold office at the discretion of the Board of Directors. 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.
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.
37
<PAGE> 38
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 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.
38
<PAGE> 39
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 which are satisfactory to the Company
and B&B ("D&O Insurance"). Mr. George is a practicing certified public
accountant. From 1997 to the present he has been 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 Mr. George was 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.
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.
39
<PAGE> 40
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.
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-Compete and Consulting Agreement (see "Business - Services -
Removal, Transport and Disposal of Septic Waste, Bio-Solids and Grease
- 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.
40
<PAGE> 41
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 $.001 per share. 207,500 of the Plan options are
exercisable at any time during the four year period commencing April 28, 1998.
The other 280,000 Plan options are exercisable at any time during the four year
period commencing January 1, 1999. No determinations have been made regarding
the persons to whom options will be granted in the future or the option exercise
prices.
OPTIONS/STOCK APPRECIATION RIGHT ("SAR") GRANTS
The following table sets forth information concerning individual grants
of stock options and freestanding SARs made during the fiscal year ended
December 31, 1997 to the Company's chief executive officer. No SARs were granted
by the Company during the fiscal year ended December 31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
Number of Percent of
Securities Options/SARs
Name and Underlying Granted to Exercise or
Principal Options/SARs Employees in Base Price Expiration
Position Granted (#) Fiscal Year ($/SH) Date
-------- ----------- ----------- ------ ----
<S> <C> <C> <C> <C>
Michael E. Ricks 75,000 shares 31% $5/share April 27, 2002
Chief Executive Officer
</TABLE>
41
<PAGE> 42
AGGREGATE OPTIONS/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE
There were no exercises of stock options or freestanding SAR's by the
named executive officer during 1997.
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
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 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
42
<PAGE> 43
state or jurisdiction in which the Company is engaged in business, without the
prior written consent of the Company.
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 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.
Empire Energy, Inc. ("Energy"), a company owned by several shareholders
of the Company, 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.
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.
The Company entered into a consulting agreement with Thomas C. Souran
(the "Consultant") as of January 1, 1998 (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 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
43
<PAGE> 44
the Consulting Agreement. The Consulting Agreement also contains the Company's
agreement, upon the request of the Consultant, to register the Consultant Shares
on Form S-8, at the expense of the Company, in the event the Company is eligible
to do so.
Since inception Michael E. Ricks has periodically made loans to the
Company. The aggregate outstanding principal balance of such loans is presently
$215,023. 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.
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 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. The Company paid
Yarborough Gas an additional $5,000 in March 1998 reducing the principal balance
due to $23,000.
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%. The Company intends to use part of the proceeds of
this offering to repay such loan.
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".
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.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of April 10, 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 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
44
<PAGE> 45
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 Underwriter's Common Stock Purchase 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 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 Blvd
Suite 1109
Jacksonville, Florida 32225
James Ricks 1,000(5) 1,000(5) (11) (11)
9550 Regency Blvd
Suite 1109
Jacksonville, Florida 32225
William B. Gray 82,500(6) 82,500(6) 4.3% 2.8%
9550 Regency Blvd
Suite 1109
Jacksonville, Florida 32225
</TABLE>
45
<PAGE> 46
<TABLE>
<S> <C> <C> <C> <C>
Dr. John S. Poser 12,500(7) 12,500(7) (11) (11)
9550 Regency Blvd
Suite 1109
Jacksonville, Florida 32225
Thomas F. Fey 20,000 20,000 (11) (11)
9550 Regency Blvd
Suite 1109
Jacksonville, Florida 32225
Michael J. George 5,000(8) 5,000(8) (11) (11)
9550 Regency 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 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.
46
<PAGE> 47
(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. Each of Marie Stubbs, Peggy Stubbs and William W.
Perry however, disclaim that he or she is a control person as such term is
defined under the Securities Exchange Act of 1934, as amended.
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 April 10,
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.
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
47
<PAGE> 48
of the options are exercisable at $5 per share and 27,500 options are
exercisable at $.001 per share.
REPRESENTATIVE'S WARRANTS
The Company has authorized, in connection with the Representative's
Warrants, the issuance of 100,000 shares of Common Stock and has reserved an
appropriate number of shares of Common Stock for issuance upon exercise of such
Representative's Warrants (see "Underwriting"). The 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, 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".
TRANSFER AGENT
Continental Stock Transfer & Trust Company, New York, NY will act as
the Transfer Agent for the Company's Common Stock.
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 set forth
opposite their respective names (exclusive of Shares purchased pursuant to the
Representative's Over-allotment Option).
48
<PAGE> 49
Underwriter Number of Shares
Westport Resources Investment Services, Inc. ---------
-------------------------------------------- ---------
-------------------------------------------- ---------
-------------------------------------------- ---------
-------------------------------------------- ---------
1,000,000
=========
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
offered hereby if any are purchased.
The Company has agreed to sell the Shares 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 sold pursuant to this Prospectus, including
any Shares sold to the Underwriters upon exercise of the Representative's
Over-allotment Option. $25,000 of the non-accountable expense allowance has been
paid to the Representative to date. In addition to such expense allowance, the
Company has agreed to pay certain fees and expenses of the Representative's
counsel in connection with qualification of this offering under state securities
laws.
The Underwriters, through the Representative, have advised the Company
that they propose initially to offer the Shares at the public offering price set
forth on the cover page of this Prospectus and that the Underwriters may allow
certain dealers, including dealers who are members of the National Association
of Securities Dealers, Inc. (the "NASD") and certain foreign dealers, a
concession of 5% ($.25) per Share.
The Company has granted to the Representative an option, exercisable
within 45 days from the date of this Prospectus, to purchase up to a maximum of
150,000 additional Shares on the same terms as the 1,000,000 Shares offered
hereby. The Representative may exercise this option 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 being offered
hereunder. The Representative and the other Underwriters may sell a portion of
the Shares to such persons if such persons reside in a state where the Shares
can be sold and where the Underwriters or selected dealers are permitted to sell
the Shares.
The Company's officers and directors, the holders of the Company's
460,000 stock options exercisable at $5 per share, and the holders of 5% or more
(the "5% Holders") 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 eighteen-month period after the closing of this offering without the prior
consent of the Representative. The 5% Holders have further agreed not to sell or
transfer any of their Shares for
49
<PAGE> 50
an additional eighteen month period without the prior consent of the
Representative or unless the Share market price, adjusted for splits, trades
above $7.50 for a period of 20 consecutive days immediately 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 120% of the public offering price per share, up to 100,000 Shares. The
Representative's Warrants contain anti-dilution provisions, are non-transferable
for twelve-months except to officers of the Representative or their successors,
or to other Underwriters and their officers, and will be exercisable for a
period of four years commencing twelve months from the date of this Prospectus.
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.
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 without explicit instructions from
the beneficial owners of such accounts.
None of the Underwriters nor any of their controlling persons have any
material relationship with the Company, its promoters or their controlling
persons.
50
<PAGE> 51
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.
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 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 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 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 at a level above that
which might otherwise prevail in the 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.
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 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 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,
51
<PAGE> 52
attorneys with 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.
EXPERTS
The combined financial statements of the Company and B&B as of December
31, 1997 and for the two fiscal years then ended which are included in this
Prospectus, have been examined by Reddish & White, CPA's, 34 East Call Street,
Starke, FL 32091, 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.
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.
52
<PAGE> 53
WESTSTAR ENVIRONMENTAL INC.
------------------------------------
INDEX TO FINANCIAL STATEMENTS
------------------------------------
Page
Report of Independent Certified Public Accountant......................... 54
Combined Balance Sheets as of December 31, 1997
(Audited) and December 31, 1996 (Audited)............................. 55
Combined Statement of Income and Retained Earnings
for the years ended December 31, 1997 (Audited)
and December 31, 1996 (Audited)....................................... 56
Combined Statement of Cash Flows for the years
ended December 31, 1997 (Audited) and
December 31, 1996 (Audited)........................................... 57
Notes to Financial Statements............................................. 58
53
<PAGE> 54
[REDDISH AND WHITE LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
of Weststar Environmental,Inc. and
B & B Septic and Environmental Services,Inc.
We have audited the accompanying combined balance sheet of Weststar
Environmental,Inc. (an S Corporation) and B & B Septic and Environmental
Services,Inc. as of December 31,1997 and 1996, and the related combined
statements of income,retained earnings, 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 financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Weststar
Environmental,Inc. and B & B Septic and Environmental Services,Inc. as of
December 31,1997 and 1996, and the combined results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles. Weststar Environmental,Inc., with the consent of its
shareholders, has elected under the Internal Revenue Code to be an S
Corporation. In lieu of corporation income taxes, the shareholders of an S
Corporation are taxed on their proportionate share of the Company's taxable
income. Therefore, no provision or liability for federal income taxes has been
included in these financial statements.
/s/ REDDISH & WHITE
REDDISH & WHITE,C.P.A.'S
STARKE,FLORIDA
FEBRUARY 8,1998, Except for Note 12,Part 1, as to which
the date is February 16,1998 Page 1
54
<PAGE> 55
WESTSTAR ENVIRONMENTAL,INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES,INC.
COMBINED BALANCE SHEET
DECEMBER 31,1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 6,233 $ --
Accounts Receivable-Net 407,736 27,064
Inventory 20,390 24,867
Stockholder Loan 11,000 --
Due from Southstar Environmental,Inc -- 500
Prepaid Assets 6,403 43,172
----------- -----------
TOTAL CURRENT ASSETS 451,762 95,603
PROPERTY AND EQUIPMENT-NET 1,740,828 2,009,538
OTHER ASSETS
DEPOSITS 2,510 5,410
----------- -----------
TOTAL ASSETS $ 2,195,100 $ 2,110,551
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 409,960 $ 317,845
Bank Overdraft -- 5,796
Credit Card Payable 5,279 22,088
Sales Tax Payable -- 8,016
Deferred Revenue -- 284,250
Payroll Taxes Payable 6,709 11,654
Accrued Interest 3,977 --
Dividends Payable 94,000 42,417
Accrued Compensated Absences 2,660 2,660
Payroll Payable 25,780 48,110
Stockholder Loan 319,634 160,911
Current Portion of Capital Leases 68,432 24,586
Current Portion of Long-Term Debt 246,481 356,143
----------- -----------
TOTAL CURRENT LIABILITIES 1,182,912 1,284,476
LONG-TERM LIABILITIES
Long-Term Portion of Capital Leases 174,260 62,277
Long-Term Debt 466,515 635,284
----------- -----------
TOTAL LONG-TERM LIABILITIES 640,775 697,561
----------- -----------
TOTAL LIABILITIES 1,823,687 1,982,037
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $1 par value, 200,000 shares
authorized, issued and outstanding 200,000 200,000
Discount on Issuance of Common Stock (105,908) (105,908)
Retained Earnings 277,321 34,422
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 371,413 128,514
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,195,100 $ 2,110,551
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement. 2
55
<PAGE> 56
WESTSTAR ENVIRONMENTAL,INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES,INC.
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31,1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Sales $ 2,529,258 $ 1,777,316
Cost of Sales 766,188 1,083,690
----------- -----------
GROSS PROFIT 1,763,070 693,626
OPERATING EXPENSES
Salaries & Wages 155,884 94,827
Officers' Vehicle Lease 18,804 12,788
Officers' Compensation 151,099 163,631
Leases 6,104 32,242
Telephone & Utilities 43,104 77,447
Licenses 18,210 4,213
Travel 13,751 26,926
Outside Services 39,114 --
Repairs 4,486 --
Professional Fees 32,784 24,180
Rent 2,354 52,812
Life Insurance 1,057 1,057
Insurance 100,622 120,898
General & Administrative Expenses 29,321 50,606
Depreciation Expense 220,517 226,907
Bad Debt Expense 10,000 10,290
Interest Expense 173,923 103,421
----------- -----------
TOTAL OPERATING EXPENSES 1,021,134 1,002,245
----------- -----------
INCOME/(LOSS) FROM OPERATIONS 741,936 (308,619)
OTHER INCOME AND EXPENSES
Capital Gain or (Loss) on Disposal of Assets (35,828) 71,517
----------- -----------
NET INCOME/(LOSS) 706,108 (237,102)
BEGINNING RETAINED EARNINGS,as previously reported 34,422 --
Prior Period Adjustment (263,209) --
BEGINNING RETAINED EARNINGS,as Restated (12/31/96) (228,787) 341,524
DIVIDENDS (200,000) (70,000)
----------- -----------
ENDING RETAINED EARNINGS $ 277,321 $ 34,422
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement. 3
56
<PAGE> 57
WESTSTAR ENVIRONMENTAL,INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES,INC.
COMBINED STATEMENT OF CASH FLOWS
DECEMBER 31,1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/(Loss) $ 706,108 $(237,102)
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities
Depreciation 220,517 226,907
Capital Gain/ (Loss) on disposal of assets 35,828 (71,517)
(Increase) decrease in:
Accounts receivable (380,672) 151,552
Employee Receivables -- 2,407
Prepaid Assets 14,534 (14,086)
Deposits 3,159 --
Inventory 4,477 41,733
Increase (decrease) in:
Accounts payable 56,453 96,941
Accrued Interest Payable 3,977 --
Credit card payable (16,809) 22,088
Deferred Revenue (284,250) 284,250
Sales Tax Payable (8,016) 6,241
Accrued Compensated Absences -- 2,660
Unemployment Taxes Payable -- (1,518)
Payroll Payable (15,621) 5,940
Payroll Taxes Payable (11,654) (168,498)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 328,031 347,998
CASH FLOWS FROM INVESTING ACTIVITIES
Disposition of property and equipment -- 49,420
Purchases of property and equipment (219,189) (537,283)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (219,189) (487,863)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Capital Lease Obligations 225,000 --
Proceeds from Notes Payable 235,063 202,927
Loan Proceeds from Stockholders 133,545 160,911
Loan to Southstar Environmental Services,Inc -- (500)
Loan Payments to Stockholders (84,583) --
Repayment of Long-Term Debt (453,492) (173,587)
Repayment of Capital Lease Obligations (46,346) (21,987)
Dividends Paid (106,000) (27,583)
--------- ---------
NET CASH PROVIDED/(USED) FOR FINANCING ACTIVITIES (96,813) 140,181
--------- ---------
NET INCREASE IN CASH 12,029 316
CASH OVERDRAFT AT BEGINNING OF YEAR (5,796) (6,112)
--------- ---------
CASH BALANCE AT END OF YEAR $ 6,233 $ (5,796)
========= =========
</TABLE>
Supplemental schedule of noncash investing and financing activities:
Dividends declared and unpaid at year end totalled $94,000 for 1997 and $42,417
for 1996.
Capital leases totaling $37,826 were returned to vendors during 1997.
Note payable of $60,000 to a stockholder was reclassified to stockholder loans.
The accompanying notes are an integral part of this statement. 4
57
<PAGE> 58
WESTSTAR ENVIRONMENTAL,INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES,INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Weststar Environmental, Inc.
and B&B Septic and Environmental Services, Inc.(the Companies) is presented to
assist in understanding the Company's financial statements.The Companies have
common ownership and services and have been combined to present a clearer
understanding of management's operations. The financial statements and notes are
representations of the Companies management who is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
Business Activity
Weststar Environmental,Inc. is a Sub S Corporation and B&B Septic and
Environmental Services is a C Corporation engaged in waste recycling which
includes food service industries grease trap maintenance programs,the
transportation and processing of agricultural products from bio-solids,and
residential and commercial accounts.The Companies headquarters are located in
Starke,Florida and sales are generated throughout the southeastern United
States.
Method of Accounting
Assets,liabilities,revenues and expenses are recognized on the accrual basis of
accounting for financial statement presentation and the income tax basis method
of accounting for federal income tax purposes.
Accounts Receivable
Accounts receivable total $407,736 and $ 37,354 with an allowance of $10,290 for
1996.All accounts receivable are considered to be collectible as of December
31,1997.
Inventories
Inventory is valued at the lower of cost or market.
Page 5
58
<PAGE> 59
WESTSTAR ENVIRONMENTAL,INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES,INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Concluded)
Property and Equipment
Property and equipment is recorded at cost. Depreciation on machinery and
vehicles is computed using the straight-line method over estimated useful lives
of five (5) and seven (7) years. Depreciation of buildings and improvements is
computed using the straight-line method over estimated lives of fifteen (15) to
thirty (30) years.
Expenditures for major renewals and betterments that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and repairs
are charged to expense as incurred.
Cash Flows
For purposes of the statement of cash flows, the Companies consider all demand
deposits and highly liquid instruments purchased with a maturity of three months
or less to be cash equivalents.
Amounts paid during the years ended December 31, 1997 and 1996 for interest are
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Interest $ 173,923 $ 103,421
</TABLE>
S Corporation - Income Tax Status
Weststar Environmental,Inc., with the consent of its shareholders, has elected
under the Internal Revenue Code to be an S Corporation. In lieu of corporation
income taxes, the shareholders of an S Corporation are taxed on their
proportionate share of the Company's taxable income. Therefore, no provision or
liability for federal income taxes has been included in the financial
statements.
Page 6
59
<PAGE> 60
WESTSTAR ENVIRONMENTAL,INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES,INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,1997 AND 1996
NOTE 2 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Building and Improvements $ 544,825 $ 475,275
Machinery and Equipment 361,957 570,581
Vehicles 1,522,173 1,665,186
----------- -----------
Less: Accumulated Depreciation (688,127) (701,504)
----------- -----------
Total $ 1,740,828 $ 2,009,538
=========== ===========
</TABLE>
NOTE 4 - LONG-TERM DEBT
Following is a summary of long-term debt at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
Weststar Environmental,Inc.:
<S> <C> <C>
Note payable to CNB National Bank dated
February 23,1996,collateralized by equipment.
Monthly payments of $2,367 are due over
24 months at 12.43%, beginning March 23,1996. $ 11,989 $ 34,995
Note payable to First Union Bank dated
February 1994. Monthly payments of $4,892
are due over 50 months including interest
at a rate of 9.9%, commencing March 1994. 1,102 94,428
Loan dated October 1995 payable to First
Union Bank. Payments of $603 are due over
51 months with interest at a rate of prime
plus 2%, commencing December 1995 15,702 20,069
Collateralized by Equipment
Loan payable to Southtrust Bank of Central
Florida dated October 1995. Monthly payments
of $1,448 are due over 72 months and include
interest at a rate of 10.75%,commencing
April 1992.Collateralized by equipment 58,827 61,021
</TABLE>
Page 7
60
<PAGE> 61
WESTSTAR ENVIRONMENTAL, INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES, INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4 - LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Loan payable to Southtrust Bank dated
March 31, 1996. Monthly payments of
$1,935 are due over 47 months and
include interest at a rate of 10.75%,
commencing April 1, 1996.
Secured by equipment. 54,516 63,227
Loan payable to Suntrust Bank dated
July 6, 1996 Monthly payment of $2,530
are due over 24 months and include interest
at a rate of 9.35%, commencing
August 6, 1996. Secured by equipment. 17,221 44,594
Loan payable to CNB National Bank dated
December 29, 1994. Payable in 36 monthly
installments of $2,881 including interest
of 12% commencing February 1, 1995. 14,416 37,850
Note Payable to Gray Framing,Inc.
plus interest at fair market value. 125,063 --
Note payable to Register Oil dated 3/14/96
Monthly payments of $1,136 10% interest
Commencing April 16, 1996. -- 12,927
Mortgage payable to Jeannie Gagnon dated
December 1, 1992 payable in 284 monthly
installments of $891 including interest
at 9% commencing January 1, 1993.
Collateralized by Real Property. -- 98,346
Loan payable to CNB National Bank dated
May 6,1994, Payable in 36 monthly installments
of $491 including interest of 12% commencing
June 10, 1994. -- 5,254
Loan payable to First Union National Bank
dated December 1992, Payable in 60 monthly
installments of $450 including interest of
9%, Commencing January 1993. -- 5,730
</TABLE>
Page 8
61
<PAGE> 62
WESTSTAR ENVIRONMENTAL, INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES, INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4 - LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Loan payable to Chrysler Credit dated November
1993. Payable in 48 monthly installments of
$253 including interest of 7.9% commencing
January 1994. -- 1,258
Note payable to Yarborough Gas, Inc.
plus interest at fair market value. -- 60,000
B&B Septic and Environmental Services, Inc.
Note payable to Hazel Smith dated 2/1/95
Payments on interest only at a rate of 10%
per year are due, commencing February 1,1995
until note is called. -- 9,000
Loan payable to XEROX dated March, 1995
payable in 36 monthly installments of $86
including interest at 19.52% commencing
April 1995. -- 1,142
Note payable to Allen Ferguson dated June
1995. Monthly payments of $206 are due
over 77 months including interest at a rate of
15.5%,commencing July 1995. -- 9,526
Mortgage payable to Gloria Ferguson dated
January 1994. Monthly payments of $1,000
are due over 150 months at a rate of 7%
commencing February 1994. 81,130 84,886
Loan dated November 1995 payable to First
Union Bank. Payments of $602 are due over
51 months with interest at a rate of prime
plus 2%,commencing December 1995. 16,633 20,417
Loan payable to First Community Bank dated
August 1994. Payable in 60 monthly installments
of $735 including interest of 8.75% commencing
September 1994. 16,396 26,891
</TABLE>
Page 9
62
<PAGE> 63
WESTSTAR ENVIRONMENTAL, INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES, INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Note 4 - LONG-TERM DEBT (CONCLUDED) 1997 1996
----------- -----------
<S> <C> <C>
Loan payable to Southtrust Bank dated
September 1995, Payable in 36 monthly
installments of $392 including interest
of 10%, commencing October 1995. 5,339 7,491
Loan payable to Southtrust Bank dated
September 1995. Payable in 59 monthly
installments of $3,390 including
interest of 10% commencing October
1995 with a balloon due in September 2000 294,662 292,375
----------- -----------
TOTAL 712,996 991,427
Less: current maturities 246,481 356,143
----------- -----------
Long-Term Debt $ 466,515 $ 635,284
=========== ===========
</TABLE>
Following are maturities of long-term debt as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED 1997 1996
DECEMBER 31,
<S> <C> <C>
1997 $ -- $ 356,143
1998 246,481 196,230
1999 71,593 77,806
2000 59,321 61,016
2001 39,895 32,951
2002 & beyond 295,706 267,281
----------- -----------
TOTAL $ 712,996 $ 991,427
=========== ===========
</TABLE>
NOTE 5 - OBLIGATIONS UNDER CAPITAL LEASES
The Companies lease machinery under capital leases expiring in various years
through 2002. The assets and liabilities under capital leases 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.
Page 10
63
<PAGE> 64
WESTSTAR ENVIRONMENTAL, INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES, INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5 - OBLIGATIONS UNDER CAPITAL LEASE (CONCLUDED)
As of December 31, 1997 and 1996, minimum future lease payments under capital
leases are:
<TABLE>
<CAPTION>
Year ended 1997 1996
December 31,
<S> <C> <C>
1997 $ -- $ 34,191
1998 79,702 28,500
1999 79,702 23,517
2000 63,290 16,742
2001 36,270 --
2002 and Thereafter 3,023 --
----------- -----------
Total minimum lease payments 261,987 102,950
Less:amounts representing interest 19,295 16,087
----------- -----------
Net minimum lease payments 242,692 86,863
Less current portion (68,432) (24,586)
----------- -----------
Long term portion $ 174,260 $ 62,277
=========== ===========
</TABLE>
NOTE 6 - OPERATING LEASES
Throughout the year, Weststar Environmental, Inc. rents assets, on a short-term
basis, as needed for various projects.
In addition the Company leases vehicles for $1,778 per month, and a copier for
$135 per month.
Total rental expense for the years ended December 31, 1997 and 1996 was:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Autos $ 21,338 $ 13,140
Equipment 1,614 972
----------- -----------
Total $ 22,952 $ 14,112
=========== ===========
</TABLE>
Page 11
64
<PAGE> 65
WESTSTAR ENVIRONMENTAL, INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES, INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 6 - OPERATING LEASES (CONCLUDED)
Minimum annual rental payments for the remainder of these leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997 1996
----------- -----------
<S> <C> <C>
1997 $ -- $ 14,112
1998 20,465 9,408
1999 8,200 --
2000 8,200 --
2001 8,200 --
2002 4,784 --
----------- -----------
Total Future Minimum Rental Payments $ 49,849 $ 23,520
=========== ===========
</TABLE>
NOTE 7 - RELATED PARTY TRANSACTIONS
Weststar Environmental, Inc. and B & B Septic & Environmental Services, Inc.
have common ownership and management. For purposes of the combined financial
statements, intercompany transactions have been eliminated.
Consulting and engineering fees amounting to $99,950 were paid to Weststar
Environmental, Inc. by a company owned by the stockholders of Weststar
Environmental, Inc. in 1997.
A loan was made to the Company in the amount of $120,000 during 1997 by a
stockholder.
The Company made lease payments in 1997 to a stockholder for $42,000.
The Company was indebted to a stockholder amounting to $215,023 at December
31, 1997.
NOTE 8 - CONTINGENCIES
Government Regulation
Substantially all of the Companies 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 do the Companies expect
such compliance to have, any material effect upon the capital expenditures, net
income, financial condition or competitive position of the Companies. Management
believes that its current practices and procedures for the control and
disposition of such wastes comply with applicable federal,state and local
requirements.
Page 12
65
<PAGE> 66
WESTSTAR ENVIRONMENTAL,INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES,INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,1997 AND 1996
NOTE 9 - INCOME TAXES
B & B Septic and Environmental Services is a C Corporation subject to Federal
and State income taxes. B & B Septic and Environmental Services,Inc. had net
operating loss carryforwards of $127,573 available for 1997 and $117,425 for
1996 and had net income of $35,522 in 1997 and a net loss of $160,842 for 1996.
Therefore, no provision for income taxes are made as of December 31,1997 and
1996. The Company has approximately $ 278,627 of net operating losses to carry
over to 1997 and $95,051 to carryover to 1998.Net operating loss carryovers are
expected to expire in the year 2012.
NOTE 10 - ECONOMIC DEPENDENCE
The Companies derive a major portion of its revenue from two companies. The loss
of business from these companies would have a significant negative impact on its
profits.
NOTE 11 - RESTATEMENT
Certain errors, resulting in an overstatement of previously reported assets and
understatement of expense of 1996 were corrected in 1997,resulting in the
following changes to retained earnings as of December 31,1996 and the related
Statement of Income for the year then ended.
<TABLE>
<CAPTION>
RETAINED NET
EARNINGS LOSS
----------- -----------
<S> <C> <C>
As previously reported $ 34,422 $ 237,102
Understatement of Insurance (58,138) (58,138)
Overstatement of Equipment (205,071) (205,071)
----------- -----------
As Adjusted (228,787) (500,311)
=========== ===========
</TABLE>
Page 13
66
<PAGE> 67
WESTSTAR ENVIRONMENTAL, INC.
B & B SEPTIC AND ENVIRONMENTAL SERVICES, INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 12 - SUBSEQUENT EVENTS
On February 16,1998 Weststar Environmental,Inc. authorized an additional
9,900,000 shares of stock for a total of 10,000,000 authorized shares. A 15 for
1 stock issuance was made to existing shareholders resulting in 1,400,000 shares
issued for a total of 1,500,00 shares outstanding. Par value is stated at $.001
per share. B & B Septic and Environmental Services, Inc. transferred all 100,000
authorized and issued shares to Weststar Environmental, Inc. making B & B Septic
and Environmental Services, Inc. a 100% subsidiary of Weststar
Environmental,Inc.
On January 1, 1998 Weststar Environmental, Inc. was reverted back to a regular
C Corporation for income tax purposes.
NOTE 13 - RECLASSIFICATIONS
Certain reclassifications of 1996 expenses were made within the operating
expenses section of the income statement to make expenses presented in 1996 more
comparable to 1997 expense items.
Page 14
67
<PAGE> 68
================================================================================
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.....................................................
Summary Financial Information..........................................
The Company............................................................
Risk Factors...........................................................
Use of Proceeds........................................................
Market for Common Equity and
Related Stockholder Matters..........................................
Dilution...............................................................
Capitalization.........................................................
Dividend Policy........................................................
Management's Discussion and
Analysis of Financial Condition
and Results of Operations............................................
Business...............................................................
Management.............................................................
Certain Transactions...................................................
Principal Stockholders.................................................
Description of Securities..............................................
Underwriting...........................................................
Legal Matters..........................................................
Experts................................................................
Additional Information.................................................
Financial Statements...................................................
---------------------------
UNTIL __________, 1998 (90 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.
================================================================================
1,000,000 Shares
WESTSTAR ENVIRONMENTAL, INC.
------------
PROSPECTUS
------------
, 1998
================================================================================
68
<PAGE> 69
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.
69
<PAGE> 70
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 .......... $ 1,873.28
NASD Filing Fee .............................................. 1,135.01
Blue Sky Legal Fees and Expenses ............................. 25,000.00
Printing and Engraving Expenses .............................. 40,000.00
Transfer Agent's Fees and Expenses ........................... 2,500.00
Accounting Fees and Expenses ................................. 38,000.00
Legal Fees and Expenses ...................................... 95,000.00
Miscellaneous Expenses ....................................... 10,000.00
-----------
Total Estimated Expenses ................................ 213,508.29
===========
</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 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).
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.
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
70
<PAGE> 71
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.
ITEM 27. EXHIBITS
EXHIBIT NO. ITEM
- ----------- ----
1.1 Form of Agreement Among Underwriters
1.2 Form of Underwriting Agreement
1.3 Form of Selected Dealer Agreement
1.4 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. Specimen Common Stock Certificate
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
10.7 Consultant Agreement dated as of January 1, 1998 between the
Company and Thomas C. Souran
71
<PAGE> 72
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 Reddish & White, CPA's, independent certified public
accountants
27. Financial Data Schedule
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 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
72
<PAGE> 73
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.
73
<PAGE> 74
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 14th day of April, 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:
Signatures Title Date
Principal Executive Officer:
/s/ Michael E. Ricks President April 14, 1998
- ---------------------------
MICHAEL E. RICKS
Principal Financial and Accounting Officer:
/s/ Keith M. Carter Treasurer April 14, 1998
- ---------------------------
KEITH M. CARTER
A Majority of the Board of Directors:
/s/ Michael E. Ricks Director April 14, 1998
- ---------------------------
MICHAEL E. RICKS
/s/ William B. Gray Director April 14, 1998
- ---------------------------
WILLIAM B. GRAY
/s/ Keith Carter Director April 14, 1998
- ---------------------------
KEITH M. CARTER
/s/ Dr. John S. Posner Director April 14, 1998
- ---------------------------
DR. JOHN S. POSER
/s/ Thomas F. Fey Director April 14, 1998
- ---------------------------
THOMAS F. FEY
Director
- ---------------------------
MICHAEL J. GEORGE
74
<PAGE> 75
WESTSTAR ENVIORNMENTAL, INC.
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.1 Form of Agreement Among Underwriters
1.2 Form of Underwriting Agreement
1.3 Form of Selected Dealer Agreement
1.4 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. Specimen Common Stock Certificate
*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
10.7 Consultant Agreement dated as of January 1, 1998 between the
Company and Thomas C. Souran
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 Reddish & White, CPA's, independent certified public
accountants
**27. Financial Data Schedule
- ----------------------------
* To be filed by amendment.
** Filed on EDGAR.
<PAGE> 1
WESTSTAR ENVIRONMENTAL INC.
1,000,000
SHARES OF COMMON STOCK
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 ("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 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
<PAGE> 2
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. 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.
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
2
<PAGE> 3
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 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.
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
3
<PAGE> 4
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 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.
4
<PAGE> 5
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 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
5
<PAGE> 6
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 15c-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 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.
6
<PAGE> 7
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
WESTSTAR ENVIRONMENTAL INC
1,000,000 SHARES
OF COMMON STOCK
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 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. ) 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 before any underwriter expense allowances, an
aggregate of 1,000,000 shares of Common Stock, 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.
1
<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 ("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. 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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(i) The Company has prepared and filed with the Commission a registration
statement, and an amendment or amendments thereto, on Form SB-2 (No. ),
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 instrument to which the Company is a party or by which it may be bound or is
not in material violation of any law,
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<PAGE> 4
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 accounting principles applied on a basis
which is consistent in all material respects during the periods involved but
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<PAGE> 5
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.
(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.
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(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."
(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
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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) Reddish & White CPA's, 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 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
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<PAGE> 8
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 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.
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(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 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
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<PAGE> 10
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
(1st) 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
reimburse the Underwriter for its out of pocket expenses including without
limitation, its legal fees and disbursements
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<PAGE> 11
all on an accountable basis but not to exceed $50,000 (excluding 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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<PAGE> 14
(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, Reddish & White CPA's 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 Reddish & White 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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<PAGE> 16
(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.
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<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
<TABLE>
<CAPTION>
Shares of
Underwriter Common Stock
- ----------- ------------
<S> <C>
Westport Resources Investment Services, Inc.
---------
TOTAL 1,000,000
</TABLE>
21
<PAGE> 1
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 $5.00 per share
("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 $ 5.00 per share. 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 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, 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
<PAGE> 2
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 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
2
<PAGE> 3
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 15c-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
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
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 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. 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 common stock 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 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.
<PAGE> 2
(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 Company, whether or not the Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
2
<PAGE> 3
(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 y 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.
(E) No adjustment of the Exercise Price shall be made as a result of or in
connection with the issuance or sale of Securities 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.
(m) Assignability. This Warrant may not be amended except in a writing signed by
each Holder and the Company.
5
<PAGE> 6
(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
6
<PAGE> 7
PURCHASE FORM
Dated _____________________ 19_____
The undersigned hereby irrevocably elects to exercise the Warrant to the
extent of purchasing Shares 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___
7
<PAGE> 1
WESTSTAR ENVIRONMENTAL INC.
CONSULTING AGREEMENT
,1998
Dear Mr. Ricks:
This will confirm the arrangements, terms and conditions, whereby
Westport Resources Investment Services, Inc.. (hereinafter referred to as
"Consultant") has been retained by you to serve as financial consultant and
advisor to Weststar Environmental Inc. (hereinafter referred to as the
"Company"), on a nonexclusive basis for a period of 24 months commencing on the
closing date of the public offering (the "Closing"). The undersigned hereby
agree to the following terms and conditions:
1. Consulting Services. Consultant will render financial consulting and
advice pertaining to the Company's business affairs as you may from time to time
request.
2. Financing. Consultant will assist and represent you in obtaining both
short and long-term financing whether from banks or the sale of the Company's
debt or equity.
3. Wall Street Liaison. Consultant will when appropriate arrange meetings
with individuals and financial institutions in the investment community such as
security analysts, portfolio managers, and market makers and representatives of
the Company.
4. Compensation. The Company agrees to pay the Consultant in the
aggregate ,the sum of seventy-two thousand ($72,000) Dollars at the rate of
Three Thousand ($3,000) Dollars per month with the full amount payable at the
closing of the Offering.
5. Relationship. Nothing herein shall constitute Consultant as employee
or agent of the Company except to such extent as might hereafter be agreed upon
for a particular purpose. Except as expressly agreed, Consultants shall not have
the authority to obligate or commit the Company in any manner whatsoever.
6. Assignment and Termination. This Agreement shall not be assignable by
any party except to successors to all or substantially all of the business of
either the Consultant or the Company nor may this Agreement be terminated by
either party for any reason whatsoever without the prior written consent of the
other party, which consent may not be arbitrarily withheld by the party whose
consent is required.
Very truly yours,
Westport Resources Investment Services, Inc..
By:
-------------------------------
Title:
-----------------------------
Agreed and Accepted By:
Weststar Environmental Inc.
By:
--------------------------------
Michael Ricks, President
<PAGE> 1
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
NORTH STAR HOLDING CORP.
AND
WESTSTAR ENVIRONMENTAL, INC.
B&B ENVIRONMENTAL SEPTIC SERVICES, INC.
<PAGE> 2
TABLE OF CONTENTS
1. Definitions ........................................................... 1
2. The Mergers and Related Transactions .................................. 4
(a) The Mergers .................................................... 4
(b) The Closing .................................................... 5
(c) Actions at the Closing ......................................... 5
(d) Effect of Mergers .............................................. 5
(e) Procedure for Exchange of Shares ............................... 6
(f) Further Assurances ............................................. 6
3. Additional Agreements ................................................. 6
(a) "Piggy-Back" Registration Rights ............................... 6
(b) Payment for Accounts Payable and Taxes of Weststar and B&B ..... 6
(c) Employment Agreement of Michael Ricks .......................... 7
(d) Trading of North Star Stock .................................... 7
(e) Other Actions After Closing .................................... 7
4. Representations and Warranties of Weststar, B&B and Ricks ............. 7
(a) Organization, Qualification and Power .......................... 8
(b) Authorization of Transactions .................................. 8
(c) Capitalization ................................................. 8
(d) Noncontravention ............................................... 8
(e) Financial Statements ........................................... 9
(f) Events Subsequent to May 31, 1996 .............................. 9
(g) Undisclosed Liabilities ........................................ 9
(i) Tangible Assets ................................................ 11
(j) Owned Real Property ............................................ 11
(k) Intellectual Property .......................................... 12
(l) Inventory ...................................................... 12
(m) Real Property Leases ........................................... 12
(n) Contracts ...................................................... 13
(o) Notes and Accounts Receivable .................................. 14
(p) Powers of Attorney ............................................. 14
(q) Insurance ...................................................... 14
(r) Litigation ..................................................... 14
(s) Product Warranty ............................................... 15
(t) Product Liability .............................................. 15
(u) Employees ...................................................... 15
(v) Employee Benefits .............................................. 15
(w) Guaranties ..................................................... 17
(x) Environment, Health, and Safety ................................ 17
i
<PAGE> 3
(aa) Marketable Title ............................................... 18
(ab) Disclosure ..................................................... 18
(ac) Investment ..................................................... 18
(ad) Licenses and Permits ........................................... 18
5. Representations and Warranties of North Star .......................... 18
(a) Organization of North Star ..................................... 18
(b) Authorization of Transaction ................................... 18
(c) Noncontravention ............................................... 18
(d) Brokers' Fees .................................................. 19
(e) Investment ..................................................... 19
6. Pre-Closing Covenants ................................................. 19
(a) Satisfaction of Conditions by the Parties ...................... 19
(b) Notices and Consents ........................................... 19
(c) Operation of Business .......................................... 20
(d) Preservation of Business ....................................... 20
(e) Full Access .................................................... 20
(f) Notice of Developments ......................................... 20
(g) Exclusivity. Neither ........................................... 20
7. Conditions to Obligation to Close ..................................... 20
(a) General Obligations ............................................ 20
(b) Conditions to Obligation of North Star ......................... 21
(c) Conditions to Obligations of Weststar and B&B .................. 22
8. Indemnification ....................................................... 23
9. Termination ........................................................... 24
(a) Termination of Agreement ....................................... 24
(b) Effect of Termination .......................................... 24
10. Miscellaneous ......................................................... 24
(a) Payments Received .............................................. 24
(b) Press Releases and Announcements ............................... 25
(c) No Third Party Beneficiaries ................................... 25
(d) Entire Agreement ............................................... 25
(e) Succession and Assignment ...................................... 25
(f) Counterparts and Facsimile Execution ........................... 25
(g) Headings ....................................................... 25
(h) Notices ........................................................ 25
(i) Governing Law .................................................. 26
(j) Amendments and Waivers ......................................... 26
(k) Severability ................................................... 27
ii
<PAGE> 4
(l) Expenses ....................................................... 27
(m) Construction ................................................... 27
(n) Incorporation of Exhibits and Schedules ........................ 27
(o) Specific Performance ........................................... 27
(p) Attorneys' Fees ................................................ 28
iii
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of this 29th day of April, 1997, by, between and among NORTH
STAR HOLDING CORP, a Florida corporation ("North Star"); WESTSTAR ACQUISITION
CORP., a Florida corporation ("WAC"); B&B ACQUISITION CORP., a Florida
corporation ("BAC"); WESTSTAR ENVIRONMENTAL, INC., a Florida corporation
("Weststar"); B&B SEPTIC AND ENVIRONMENTAL SERVICES, INC., a Florida corporation
("B&B"); and MICHAEL RICKS, a resident of Florida ("Ricks").
RECITALS
The Board of Directors of North Star and the Board of Directors and
Shareholders of Weststar and B&B are of the opinion that the transactions
described herein are in the best interests of the parties and their respective
shareholders and have approved the transactions described herein. This Agreement
provides for the acquisition of Weststar and B&B in separate but simultaneous
reverse triangular merger transactions (the "Mergers" or separately the
"Weststar Merger" and the "B&B Merger"). The Mergers are intended to qualify as
tax-free reorganizations within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code, as amended. The transactions contemplated herein are
subject to conditions described in this Agreement.
NOW THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows.
1. Definitions.
"Adverse Consequences" means, with respect to Weststar and B&B, all
charges, complaints, actions, suits, proceedings, hearings, investigations,
claims, demands, judgments, orders, decrees, stipulations, injunctions, damages,
dues, penalties, fines, costs, amounts paid in settlement, liabilities,
obligations, taxes, liens, losses, expenses, and fees, including all attorneys'
fees and court costs.
"Affiliated Group" means an affiliated group within the meaning of Code
Section 1504.
"Assets" means all right, title and interest in and to all of the assets
of Weststar and B&B, including all of its (a) businesses, as a going concern,
and the names WESTSTAR ENVIRONMENTAL, INC. and B&B SEPTIC AND ENVIRONMENTAL
SERVICES, INC., and any derivation of such names, and all goodwill associated
therewith (b) real property, if any, leaseholds and subleaseholds therein,
improvements, fixtures, and fittings thereon, and easements, rights-of-way, and
other appurtenants thereto (such as appurtenant rights in and to public
streets), (c) tangible personal property (such as machinery, equipment, and
inventories), (d) Intellectual Property, goodwill associated therewith, licenses
and sublicenses granted and obtained with respect thereto, and tights
thereunder, remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions, (e) leases, subleases,
and rights thereunder, (f) contracts, franchises, licenses, indentures, and
agreements, and mortgages for
<PAGE> 6
borrowed money, instruments of indebtedness, Security Interests, guaranties,
other similar arrangements, and rights thereunder, (g) accounts, notes, and
other receivables, (h) securities, (i) claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery, rights of set off and
rights of recoupment (including any such item relating to the payment of Taxes),
(j) franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from governments and
governmental agencies, (k) books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials, (l) Cash, (m) the corporate charter,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance, and
existence of Weststar and B&B as corporations and which assets shall include but
not be limited to all assets and properties reflected on Weststar and B&B's
December 31, 1996 Balance Sheets to the extent not sold or otherwise disposed of
in the Ordinary Course of Business.
"Basis" means any past or present act, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Cash" means cash and cash equivalents/marketable securities/short term
investments.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the business
and affairs of Weststar and B&B which constitutes a trade secret or which is not
generally known to businesses which compete with Weststar and B&B.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan, or (d) Employee Welfare
Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Pin" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
2
<PAGE> 7
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statement" has the meaning set forth in Section 4(e) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, logos, trade names, and corporate names and registrations and
applications for registration thereof, (c) copyrights and registrations and
applications for registration thereof, (d) mask works and registrations and
applications for registration thereof, (e) computer software, data, and
documentation, (f) trade secrets and confidential business information,
including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data; pricing and cost
intonation. business and marketing plans, and customer and supplier lists and
information), (g) other proprietary rights, and (h) copies and tangible
embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Mergers" means both the Weststar Merger and the B&B Merger.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" or "Parties" means a party or the parties to this Agreement.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate
3
<PAGE> 8
proceedings, (c) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation, (d) liens
arising in connection with sales of foreign receivables, (e) liens on goods in
transit incurred pursuant to documentary letters of credit (f) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Shares" means the 100,000 common shares of outstanding common capital
stock of Weststar and the 100,000 common shares of outstanding common capital
stock of B&B.
"Shareholders" mean both the Weststar Shareholders and the B&B
Shareholders.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. The Mergers and Related Transactions.
(a) The Mergers. On and subject to the terms and conditions of
this Agreement at the Effective Time, WAC will merge with and into Weststar (the
"Weststar Merger") and BAC will merge with and into B&B (the "B&B Merger").
Weststar and B&B will be the corporations surviving the Mergers. The Mergers
constitute a single, indivisible transaction.
(b) The Closing. The closing of the transaction contemplated
by this Agreement (the "Closing") shall take place in Starke, Florida at the
office of Weststar, on April 29, 1997 (the "Closing Date") unless another place
or time is agreed upon in writing by the parties.
(c) Actions at the Closing. At the Closing (i) Weststar and
B&B will deliver to North Star the various certificates, instruments, and
documents referred to in Section 7(b) below; (ii) North Star will deliver to
Weststar and B&B the various certificates, instruments and documents referred to
in Section 7(c) below; and (iii) North Star, Weststar and B&B will file with the
Secretary of State of Florida Articles of Merger to consummate the Weststar
Merger and the B&B Merger (the "Articles of Merger").
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(d) Effect of Mergers.
(i) General. The Mergers shall become effective at the
time (the "Effective Time") the Articles of Merger are filed with the Secretary
of State of Florida (or at such later date designated by North Star). The
Mergers shall have the effect set forth in the Florida Business Corporation Law.
Weststar and B&B as the surviving corporations may, at any time after the
Effective Time, take any action (including executing and delivering any
document) in the name and on behalf of the parties to the Mergers in order to
carry out and effectuate the transactions contemplated by this Agreement
(ii) Certificate of Incorporation. The Articles of
Incorporation of each of the Weststar and B&B in effect at and as of the
Effective Time will remain the Articles of Incorporation of the surviving
corporations without any modification or amendment in the Mergers.
(iii) Bylaws. The Bylaws of each of Weststar and B&B in
effect at and as of the Effective Time will remain the Bylaws of the surviving
corporations without any modification or amendment in the Mergers.
(iv) Directors and Officers. The directors and officers
of each of WAC and BAC in office at and as of the Effective Time will remain the
directors and officers of the surviving corporation (retaining their respective
positions and terms of office).
(v) Conversion of Company Shares. At and as of the
Effective Time each Weststar Share and each B&B share shall be converted into
the right to receive the number of North Star Shares contained in Schedule
2(d)(v) attached hereto and made a part hereof, ("Conversion Ratio"); provided,
however, that the Conversion Ratio shall be subject to equitable adjustment in
the event of any stock split, stock dividend, reverse stock split, or similar
recapitalization. Neither Weststar nor B&B Shares shall be deemed to be
outstanding or to have any rights other than those set forth above in this
Section 2(d)(v) after the Effective Time.
(vi) WAC and BAC Shares. Each WAC Share and BAC Share
issued and outstanding at and as of the Effective Time will remain issued and
outstanding as shares of the surviving corporations.
(e) Procedure for Exchange of Shares. As soon as practicable
after the Closing, North Star will furnish to each Shareholder a stock
certificate(s) (issued in the name of each Shareholder) representing the number
of North Star Shares to which each such Shareholder is entitled.
(f) Further Assurances. At the Closing, and from time to time
thereafter, Weststar Shareholders and B&B Shareholders shall execute such
additional instruments and take such other action as North Star may request in
order more effectively to sell, transfer, and assign the transferred stock to
North Star and to confirm North Star' title thereto.
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3. Additional Agreements.
(a) Employment Agreement of Michael Ricks. At Closing, Ricks,
the current President of Weststar and B&B, will execute an employment agreement
("Employment Agreement") with North Star, or a wholly owed subsidiary of North
Star. The Employment Agreement will be comprised of the following basic terms:
i. Ricks will be employed by North Star, or a
wholly-owned subsidiary of North Star, for the three (3) year period, beginning
on the date of Closing.
ii. Ricks will receive a salary of $100,000.00 during
the first year of the Employment Agreement. Ricks' salary will be increased ten
(10%) percent for each subsequent year of the Employment Agreement.
iii. Ricks will be appointed to the Board of Directors
of North Star at the Closing. Ricks' appointment to the Board of Directors will
be subject to the approval of shareholders of North Star, which approval will be
considered at the next annual meeting of North Star shareholders.
(b) Other Actions After Closing. After the Closing, but not
later than the effective date of the Initial Public Offering, North Star will
cause Weststar to pay to the Weststar Shareholders an amount not to exceed
$317,600 in part on account of the taxable income of Weststar prior to the
Closing Date. Further, North Star will indemnify and hold harmless any
Shareholder on account of such Shareholder personally guaranteeing a corporate
obligation of B&B or Weststar.
4. Representations and Warranties of Weststar, B&B and Ricks. Weststar,
B&B and Ricks, jointly and severally, represent and warrant to North Star that
the statements contained in this Section 4 are correct and complete in all
material respects as of the date of this Agreement and will be correct and
complete as of the Closing Date and were correct on the Effective Date (as
though made then and as though the Closing Date and Effective Date were
substituted for the date of this Agreement throughout this Section 4).
(a) Organization, Qualification and Power. Both Weststar and B&B are
corporations duly organized, validly existing, and in good standing under the
laws of the state of its incorporation. Both Weststar and B&B are duly
authorized to conduct business and are in good standing under the laws of each
jurisdiction in which the nature of its businesses or the ownership or leasing
of its properties requires such qualification. Both Weststar and B&B have full
corporate power and authority to carry on the businesses in which they are
engaged and to own and use the properties owned and used by them.
(b) Authorization of Transaction. Each of Weststar and B&B have
full power and authority to execute and deliver this Agreement and to perform
the obligations hereunder. Without limiting the generality of the foregoing, the
board of directors and
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Shareholders of both Weststar and B&B have duly authorized the execution,
delivery, and performance of this Agreement. This Agreement constitutes the
valid and legally binding obligation of Weststar and B&B, enforceable in
accordance with its terms and conditions.
(c) Capitalization. The entire authorized capital of Weststar
consists of 100,000 common shares, of which 100,000 are issued and outstanding.
The entire authorized capital of B&B consists of 100,000 common shares, of which
100,000 are issued and outstanding. All of the issued and outstanding Shares
have been duly authorized and are validly issues, fully paid and nonassessable.
There are no outstanding or authorized warrants, options, rights, contracts,
calls, puts, rights to subscribe, conversion rights or other agreements or
commitments to which either Weststar or B&B is a party or which are binding upon
either Weststar or B&B providing for the issuance, disposition or acquisition
of any of its capital stock. There are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to Weststar or B&B.
Each of the Shareholders of both Weststar and B&B hold the Shares free and clear
of any restrictions on transfer (other than any restrictions under the
Securities Act of 1933) and state securities laws and the Agreement dated March
1, 1993), claims, Taxes, Security Interests, options, warrants, rights,
contracts, calls, commitments, equities and demands. No Shareholder of Weststar
or B&B is a party to any option, warrant, right, contract, call, put, or other
agreement or commitment providing for the disposition of acquisition of any
capital stock of Weststar or B&B (other than this Agreement). No shareholder of
Weststar or B&B is a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of Weststar or
B&B.
(d) Noncontravention. Except as disclosed in Schedule 4(d), neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court to which Weststar and B&B is
subject or any provision of the charter or bylaws of Weststar and B&B or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which either Weststar or B&B is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Security Interest
upon any of its assets). Neither Weststar nor B&B needs to give any notice to,
make any filing with, or obtain any consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement
(e) Financial Statements. Attached hereto as Schedule 4(e) are the
following financial statements of Weststar and B&B (collectively the "Financial
Statements"):
(i) Audited financial statements as of and for the year ended
December 31, 1995;
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(ii) Unaudited financial statements as of and for the 12 month
period ended December 31, 1996.
Except as set forth in the notes to the Financial Statements, the Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, are accurate and complete in all
material respects, and are consistent with the books and records of Weststar and
B&B (which books and records are accurate and complete in all material
respects).
(f) Events Subsequent to December 31, 1996. Since December 31, 1996,
there has not been any adverse material change in the Assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of Weststar and B&B, except as disclosed by the Financial Statements,
the notes contained in the Financial Statements, or the Exhibits and Schedules
attached to this Agreement
(g) Undisclosed Liabilities. Neither Weststar nor B&B has any
Liability (and there is no Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against any
of them, giving rise to any Liability) which is not reflected in the Financial
Statements except for Liabilities arising in the Ordinary Course of Business.
(h) Tax Matters. Except as Disclosed in Schedule 4(h);
(i) Each of Weststar and B&B have filed all Tax Returns that
it was required to file. All such Tax Returns were accurate and complete in all
material respects. All Taxes owed by Weststar and B&B as shown on any Tax Return
have been paid. Neither Weststar nor B&B currently is the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where Weststar or B&B does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the assets of Weststar or B&B that arose in
connection with any failure (or alleged failure) to pay any Tax, except for
Security Interests, if any, with respect to Taxes not due and payable.
(ii) Each of Weststar and B&B has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other third party.
(iii) Neither Weststar nor B&B, nor any director or officer
(or employee responsible for tax matters) of Weststar or B&B has any Knowledge
that any authority intends to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim concerning any
Tax Liability of Weststar or B&B either (A) claimed or raised by any authority
in writing or (B) as to which Weststar or B&B and the directors and officers
(and employees responsible for Tax matters) of Weststar and B&B have Knowledge
based upon personal contact with any agent of such authority. Schedule 4(h)
lists all federal,
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state, local, and foreign income Tax Returns filed with respect to Weststar and
B&B for taxable periods ended on or after December 31, 1992, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit. Weststar and B&B have delivered to North Star
accurate and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by
Weststar and B&B since December 31, 1992.
(iv) Neither Weststar nor B&B has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(v) Neither Weststar nor B&B has been members of an Affiliated
Group other than the Affiliated Group comprised of Weststar and B&B.
(vi) Schedule 4(h) sets forth the following information with
respect to each of Weststar and B&B: (A) the basis of Weststar and B&B in their
assets; (B) the amount of any net operating loss, net capital loss, unused
investment credit or other credit; and (C) the amount of any deferred gain or
loss allocable to Weststar or B&B arising out of any deferred intercompany
transaction.
(vii) Deferred taxes of Weststar ad B&B have been provided for
in the Financial Statements in accordance with GAAP.
(i) Tangible Assets. Each of Weststar and B&B owns or leases all
tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. To the best of their
Knowledge, each such tangible asset is free from defects (patent and latent),
has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used, the failure of which
would have a material adverse effect on Weststar or B&B.
(j) Owned Real Property. Schedule 4(j) lists and describes briefly
all real property that Weststar and B&B own. Except as disclosed in Schedule
4(j), with respect to each such parcel of owned real property:
a. the identified owner has good and marketable title to the
parcel of real property, free and clear of any Security Interest,
easement, covenant, or other restriction except for (A) installments of
special assessments not yet delinquent and (B) recorded easements,
covenants, and other restrictions which do not impair the current use,
occupancy, or value, or the marketability of title, of the property
subject thereto;
b. there are no (A) pending or threatened condemnation
proceedings relating to the property, (B) pending or threatened litigation
or administrative actions relating to the property, or (C) other matters
affecting adversely the current use,
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occupancy, or value thereof;
c. to the best of their Knowledge, the legal description for
the parcel contained in the deed thereof describes such parcel fully and
adequately, the buildings and improvements are located within the boundary
lines of the described parcels of land, are not in violation of applicable
setback requirements, zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon are subject to "permitted
nonconforming use" or "permitted non-conforming structure"
classifications), and do not encroach on any easement which may burden the
land, the land does not serve any adjoining property for any purpose
inconsistent with the use of the land, the property is not located within
any flood plain or subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have not been obtained,
and access to the property is provided by paved public right-of-way with
adequate curb cuts available;
d. all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with
the ownership or operation thereof and have been operated and maintained
in accordance with applicable laws, rules, and regulations;
e. there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties the
right of use or occupancy of any portion of the parcel of real property;
f. there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any portion thereof or
interest therein;
g. there are no parties (other than Weststar and B&B) in
possession of the parcel of real property, other than tenants under any
leases disclosed in Schedule 4(j) who are in possession of space to which
they are entitled;
h. all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of
such facilities, including gas, electricity, water, telephone, sanitary
sewer, and storm sewer, all of which services are adequate in accordance
with all applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable, appurtenant
easements benefitting the parcel of real property; and
i. each parcel of real property abuts on and has direct
vehicular access to a public road or access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of
real property.
(k) Intellectual Property. Except as set forth in Schedule 4(k),
Weststar and B&B own the Intellectual Property listed and described on Schedule
4(k) free and clear of any Security Interest or restriction on transfer.
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(l) Inventory. The inventory of Weststar and the inventory of B&B
consists of the items disclosed in Schedule 4(l). To the best of their
knowledge, and subject to normal industry standards for inventory obsolescence,
the inventory of Weststar and the inventory of B&B is merchantable and fit for
the purpose of which it was procured or manufactured, and is not slow-moving,
obsolete, damaged or defective in any way such that failure of which would have
adverse effect on Weststar and B&B.
(m) Real Property Leases. Schedule 4(m) lists and describes briefly all
real property leased or subleased to Weststar or B&B. Weststar and B&B have
delivered to North Star accurate and complete copies of the leases and
subleases listed in Schedule 4(m) (as amended to date). Except as disclosed in
Schedule 4(m), with respect to each lease and sublease listed in Schedule 4(m):
(i) the lease or sublease is legal, valid, binding, enforceable, and
in full force and effect subject to insolvency, bankruptcy and other similar
laws relating to creditors' rights and general principles of equity;
(ii) No party to the lease or sublease is in breach or default, and
no event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(iii) No party to the lease or sublease has repudiated any provision
thereof; and
(iv) Neither Weststar nor B&B has assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold.
(n) Contracts. Schedule 4(n) lists the following contracts, agreements,
and other written arrangements to which either Weststar or B&B is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
except for leases entered into in the Ordinary Course of Business by Weststar
or B&B;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of raw materials, commodities, supplies,
products, or other personal property or for the furnishing or receipt of
services which either calls for performance over a period of more than one year
or involves more than the sum of $20,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed (or
may create, incur,
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assume, or guarantee) indebtedness (including capitalized lease
obligations) or under which it has imposed (or may impose) a Security
Interest on any of its assets, tangible or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its directors, officers,
and employees in the nature of a collective bargaining agreement,
employment agreement, or severance agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have a material adverse effect on the Assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of Weststar or B&B taken as a whole; or
(viii) any other written arrangement (or group of related written
arrangements) either involving more than $20,000 or not entered into in the
Ordinary Course of Business.
Weststar and B&B have delivered to North Star an accurate and complete
copy of each written arrangement listed in Schedule 4(n). With respect to each
written arrangement so listed: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect subject to bankruptcy laws
and general principles of equity; (B) to the best of their Knowledge, no party
is in breach or default, and no event has occurred which with notice or lapse
of time would constitute a breach or default or permit termination,
modification, or acceleration, under the written arrangement; and (C) to the
best of their Knowledge no party has repudiated any provision of the written
arrangement. Neither Weststar nor B&B is a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Schedule 4(n) under the terms of this Section 4(n). No
purchase order or commitment of Weststar or B&B is in excess of normal
requirements, nor are prices provided therein in excess of current market
prices for the products or services to be provided thereunder. No supplier of
Weststar or B&B has indicated within the past year that it will stop, or
decrease the rate of, supplying materials, products, or services to them.
(o) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of Weststar and B&B are reflected properly on their books and records, are
valid receivables subject to no setoffs or counterclaims, and to the best of
their Knowledge are presently current and collectible, and will be collected in
accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the December 31, 1996 Balance
Sheet (rather than in any notes thereto).
(p) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of either Weststar or B&B.
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(q) Insurance. Weststar and B&B maintain current policies of
insurance, the premiums for which are paid to the Closing Date, providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements, if any, as may be reasonably required in the Ordinary
Course of Business. Weststar and B&B have no Knowledge of any premium
adjustments for the current coverage period to the Closing Date, and know of no
liabilities as of the Closing Date to the companies providing such coverage for
the issuance of such policies.
(r) Litigation. Schedule 4(r) sets forth each instance in which
either Weststar or B&B (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge or (ii) is a party or is threatened
to be made a party to any charge, complaint, action, suit, proceeding, hearing,
or investigation of or in any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any arbitrator.
None of the charges, complaints, actions, suits, proceedings, hearings, and
investigations set forth in Schedule 4(r) will result in any material adverse
change in the assets, liabilities, business, financial condition, operations,
results of operations, or future prospects of Weststar or B&B taken as a whole.
None of the directors and officers (and employees with responsibility for
litigation matters) of Weststar or B&B has any Knowledge that any such charge,
complaint, action, suit, proceeding, hearing, or investigation has been
threatened against Weststar or B&B.
(s) Product Warranty. Each product sold, leased or delivered by
Weststar or B&B has been in conformity with all applicable contractual
commitments and all express and implied warranties, and neither Weststar or B&B
has any Liability (and there is no basis for any present or fixture charge,
complaint, action, suit, proceeding, hearing, investigation, claim or demand
against them giving rise to any Liability) for replacement or repair thereof or
other damages in connection therewith, the failure of which would have a
material adverse effect on Weststar or B&B. To the best of their Knowledge, all
services performed by Weststar or B&B have been in conformity with all
applicable contractual commitments, and Weststar and B&B have no Liability with
regard to services, the failure of which would have a material adverse effect on
Weststar or B&B.
(t) Product Liability. Neither Weststar nor B&B has any Liability
(and there is no Basis for any present or fixture charge, complaint action,
suit, proceeding, hearing, investigation, claim, or demand against any of them
giving rise to any Liability) arising out of any injury to persons or property
as a result of the ownership, possession, or use of any product manufactured,
sold, leased, or delivered by Weststar or B&B or any services performed by
Weststar or B&B, the failure of which would have a material adverse effect on
Weststar or B&B.
(u) Employees. No key employee or group of employees has any plans
to terminate employment with Weststar or B&B. Neither Weststar nor B&B is a
party to or bound by any collective bargaining agreement, nor has it experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. To the best of their Knowledge, neither Weststar nor B&B
has committed any unfair labor practice. None of the
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directors and officers (and employees with responsibility for employment
matters) of Weststar or B&B has any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of Weststar or B&B.
(v) Employee Benefits. Schedule 4(v) lists all Employee Benefit
Plans that Weststar and B&B maintains or to which either Weststar or B&B
contributes for the benefit of any current or former employee of any of Weststar
or B&B.
(i) Each Employee Benefit Plan (and each related trust or
insurance contract) complies in form and in operation in all respects with the
applicable requirements of ERISA and the Code.
(ii) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to each
Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of
ERISA have been met with respect to each Employee Welfare Benefit Plan.
(iii) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been paid to
each Employee Pension Benefit Plan and all contributions for any period ending
on or before the Closing Date which are not yet due have been paid to each
Employee Pension Benefit Plan or accrued in accordance with the past custom and
practice of Weststar or B&B. All premiums or other payments for all periods
ending on or before the closing Date have been paid with respect to each
Employee Welfare Benefit Plan.
(iv) Each Employee Pension Benefit Plan meets the requirements
of a "qualified plan" under Code Sec. 401(a) and has received, within the last
two years, a favorable determination letter from the Internal Revenue Service.
(v) The market value of assets under each Employee Pension
Benefit Plan equals or exceeds the present value of Liabilities thereunder
(determined on a plan termination basis). No Employee Pension Benefit Plan has
been completely or partially terminated or been the subject of a Reportable
Event as to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any Employee Pension Benefit Plan has been
instituted or threatened.
(vi) There have been no Prohibited Transactions with respect
to any Employee Benefit Plan. To the best of their Knowledge, no Fiduciary has
any Liability for breach of fiduciary duty or any other failure to act or comply
in connection with the administration or investment of the assets of any
Employee Benefit Plans. No charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand with respect to the administration or the
investment of the assets of any Employee Benefit Plan (other than routine claims
for benefits) is pending or to the best of their Knowledge, threatened. None of
the
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directors and officers (and employees with responsibility for employee benefits
matters) of Weststar or B&B has any Knowledge of any Basis for any such charge,
complaint, action, suit, proceeding, hearing, investigation, claims or demand.
(vii) Weststar and B&B have delivered to North Star correct
and complete copies of (A) the plan documents and summary plan descriptions, (B)
the most recent determination letter received from the Internal Revenue Service,
(C) the most recent Form 5500 Annual Report, and (D) all related trust
agreements, insurance contracts, and other funding agreements which implement
each Employee Benefit Plan.
Neither Weststar nor B&B, contributes to, ever has contributed to, or ever
has been required to contribute to any Multiemployer Plan or has any Liability
(including withdrawal Liability) under any Multiemployer Plan. Neither Weststar
nor B&B has incurred, and none of the directors and officers (and employees with
responsibility for employee benefits matters) of Weststar and B&B have any
reason to expect that either Weststar or B&B will incur, any Liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with respect to any
Employee Pension Benefit Plan that Weststar or B&B maintains or ever has
maintained or to which any of them contributes, ever has contributed, or ever
has been required to contribute. Neither Weststar nor B&B maintains or ever has
maintained or contributes, ever has contributed, or ever has been required to
contribute to any Employee Welfare Benefit Plan providing health, accident or
life insurance benefits to former employees, their spouses, or their dependents.
(w) Guaranties. Except as disclosed in Schedule 4(w), neither
Weststar nor B&B is a guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other person (other than Weststar or
B&B).
(x) Environment, Health, and Safety. Except as set forth in Schedule
4(x), neither Weststar nor B&B has received any charge, complaint, action, suit,
proceeding, notice, claim or demand asserting any violation of or failure to
comply with any federal, state or local law (including rules or regulations
promulgated thereunder) ("Environmental Laws") concerning the environment or the
use, generation, storage, manufacture, disposition, discharge, leak, emission,
escape or release of any extremely hazardous substance or any toxic, volatile,
or hazardous waste, material, or substance and, to the best of their Knowledge,
except as set forth in Schedule 4(x), Weststar and B&B are in compliance with
all Environmental Laws.
(y) Legal Compliance. Except as set forth in Schedule 4(y), neither
Weststar nor B&B has received any charge, complaint, action, suit, proceeding
notice, claim or demand asserting any violation of or failure to comply with any
law (including rules and regulations thereunder) of any federal, state, local,
or foreign government (and all agencies thereof) and to the best of their
Knowledge, Weststar and B&B are in compliance with such laws (including rules
and regulations thereunder).
(z) Brokers' Fees. Neither Weststar nor B&B has any Liability or
obligation
15
<PAGE> 20
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(aa) Marketable Title. Except as set forth in Schedule 4(aa), each
of Weststar and B&B has good and marketable title to all of the Assets, free and
clear of any Security Interest or restriction on transfer except as may be
disclosed in the Financial Statements of Weststar and B&B and the notes which
are a part of those financial statements.
(ab) Disclosure. The representations and warranties contained in
this Section 4 do not contain any untrue statement of a fact or omit to state
any material fact necessary in order to make the statements and information
contained in this Section 4 not misleading.
(ac) Investment. Shareholders are not acquiring the North Star
shares with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act of 1933.
(ad) Licenses and Permits. Schedule 4(ad) attached hereto and made a
part hereof lists all schedules and permits of Weststar and B&B. All licenses
and permits necessary for the conduct of the businesses of Weststar and B&B have
been duly obtained and are in full force and effect and there are no proceedings
pending or threatened which may result in revocation, cancellation, suspension
or adverse modification, of any thereof. The execution, delivery and performance
of this Agreement will not result in any such violation or be in conflict with
or result in any default under any of the foregoing.
5. Representations and Warranties of North Star. North Star represents and
warrants that the statements contained in this Section 5 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date and were correct on the Effective Date (as though made then and
as though the Closing Date and Effective Date were substituted for the date of
this Agreement throughout this Section 5).
(a) Organization of North Star. North Star is a corporation duly
organized, validly existing, and in good standing under the laws of Florida.
North Star is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification.
(b) Authorization of Transaction. North Star has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of North Star, enforceable
in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which North Star is subject or
16
<PAGE> 21
any provisions of its charter or bylaws or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any contact, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which North Star is
party or by which it is bound or to which any of its assets is subject. North
Star does not need to give any notice or to make any filing with or obtain any
authorization, consent or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) Brokers' Fees. North Star has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(e) Investment. North Star is not acquiring the Shares with a view
to or for sale in connection with any distribution thereof within the meaning of
the Securities Act of 1933.
6. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) Satisfaction of Conditions by the Parties. The Parties will use
their respective best efforts to take all action and to do all things necessary,
proper, or advisable to satisfy the Closing conditions set forth in Sections 6
and 7 below.
(b) Notices and Consents. The Parties will give any notices to third
parties, and the Parties will use their respective best efforts to obtain any
third party consents, assignments and assumptions required by the holders of any
indebtedness of Weststar or B&B, the lessors or lessees of any real or personal
property or assets leased by Weststar or B&B, the parties to any contract,
commitment, franchise or agreement to which Weststar and B&B is a party or
subject to any governmental, judicial or regulatory official, body or authority
having jurisdiction over Weststar or B&B, or North Star to the extent that their
consent or approval is required or necessary under the pertinent debt, lease,
contract, commitment or agreement or other document or instrument or under
applicable orders, laws, rules or regulations, for the consummation of the
transaction contemplated herein and the assumption of all such contracts,
commitments, franchises and agreements of Weststar and B&B as herein provided,
shall have granted such consent or approval. All such notices, consents,
assignments and assumptions are listed on Schedule 6(b) hereof
(c) Operation of Business. Neither Weststar nor B&B will engage in
any practice, take any action, embark on any course of inaction, or enter into
any transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing (i) Weststar and B&B shall use its best efforts to
conduct its business in such a manner that on the Closing Date the
representations and warranties of Weststar and B&B contained in this Agreement
shall be true as though such representations and warranties were made on and as
of such date; (ii) both
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<PAGE> 22
Weststar and B&B shall continue to maintain and service the tangible Assets in
the same manner as has been its consistent past practice; and (iii) Weststar
and B&B shall comply with all laws, ordinances, rules, regulations, and orders
applicable to the businesses, or Weststar and B&B's operations, assets or
properties in respect thereof, the noncompliance with which might materially
affect the businesses or the Assets.
(d) Preservation of Business. Both Weststar and B&B will keep its
business and properties substantially intact, including its present operations,
physical facilities, working conditions, and relationships with lessors,
licensors, franchisors, suppliers, customers, and employees.
(e) Full Access. Both Weststar and B&B will permit representatives
of North Star to have reasonable access during normal business hours to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to Weststar or B&B and their business.
(f) Notice of Developments. Each Party will give prompt written
notice to the other of any material development affecting the ability of such
Party to consummate the transactions contemplated by this Agreement. No
disclosure by any Party pursuant to this section, however, shall be deemed to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g) Exclusivity. Neither Weststar nor B&B will (i) solicit,
initiate, or encourage the submission of any proposal or offer from any person
relating to any (A) liquidation, dissolution, or recapitalization, (B) merger or
consolidation, (C) acquisition or purchase of securities or assets, or (D)
similar transaction or business combination involving Weststar or B&B or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. Weststar and B&B will notify North Star immediately if any person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
7. Conditions to Obligation to Close.
(a) General Obligations.
(i) North Star' Due Diligence. The parties acknowledge that
North Star, after the execution of this Agreement, will begin a due diligence
process, including but not limited to the verification through a physical
inventory of the inventories and equipment to be acquired, the completion of an
environmental audit and engineering tests of the real property to be acquired,
and such financial audit and studies as North Star deems appropriate. Weststar
and B&B agree to provide North Star with such detailed information as is
requested by North Star in performing its due diligence. If, after completion of
the due diligence process, North Star, in its sole discretion, is not satisfied
with the results of the due diligence process, North
18
<PAGE> 23
Star may terminate this Agreement without further liability and refuse to
consummate the Mergers.
(ii) Regulatory Approval. The closing of this transaction is
contingent upon the Parties being granted the approval of any regulatory agency
having jurisdiction over the parties.
(iii) Liabilities of Weststar and B&B. If the total assumed
liabilities of Weststar and B&B at closing shall exceed $1,500,000.00 or such
other amount mutually agreed upon, North Star can terminate this Agreement
without further liability and refuse to consummate the Mergers.
(b) Conditions to Obligation of North Star. The obligation of North
Star to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of Weststar and B&B set
forth in this Agreement shall be true and correct at and as of the Closing Date
and were true and correct as of the Effective Date;
(ii) Weststar and B&B shall have performed and complied with
all of their covenants hereunder in all material respects through the Closing;
(iii) Weststar and B&B shall have procured all of the third
party consents, assignments and assumptions specified in Section 6(b) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent consummation
of any of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of North Star to own, operate,
or control Weststar and B&B (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) Weststar and B&B shall have delivered to North Star a
certificate (without qualification as to Knowledge or materiality or otherwise)
to the effect that each of the conditions specified above in Section 7(b) is
satisfied in all respects;
(vi) all actions to be taken by Weststar and B&B in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
North Star;
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<PAGE> 24
(vii) North Star and Ricks shall have entered into the
Employment Agreement referenced in Section 3(c) of this Agreement;
(viii) the business, operations, assets, properties or
prospects of Weststar and B&B business shall not have been and shall not be
threatened to be materially adversely affected in any way as a result of any
event or occurrence.
North Star may waive any condition specified in this Section 7(b) if it executes
a writing so stating at or prior to the Closing.
(c) Conditions to Obligation of Weststar and B&B. The obligations of
Weststar and B&B to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties of North Star set forth
in this Agreement shall be true and correct at and as of the Closing Date and
were true and correct at and as of the Effective Date;
(ii) North Star shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and no
such judgment, order, decree, stipulation, injunction, or charge shall be in
effect) and the waiting period required by the HSR Act shall have expired or
been terminated;
(iv) North Star shall have delivered to Weststar and B&B a
certificate (without qualification as to Knowledge or materiality or otherwise)
to the effect that each of the conditions specified above in Section 7(c) is
satisfied in all respects;
(v) North Star and Ricks shall have entered into an Employment
Agreement referenced in section 3(c) of this Agreement.
8. Indemnification.
(a) All of the representations and warranties contained in this
Agreement shall survive the closing hereunder and continue in full force and
effect forever thereafter (subject to any applicable statutes of limitations.).
(b) In the event Ricks breaches any of his representations,
warranties, and covenants contained herein, then Ricks agrees to indemnify North
Star for a period of six months
20
<PAGE> 25
from and against the entirety of any Adverse Consequences North Star may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences North Star may suffer after the end of the applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach.
(c) If any third party shall notify North Star with respect to any
matter which may give rise to a claim for indemnification against the Ricks
under this Section 8, then North Star shall notify Ricks thereof promptly;
provided, however, that no delay on the part of North Star in notifying Ricks
shall relieve Ricks from any liability or obligation hereunder unless (and then
solely to the extent) Ricks thereby is damaged. In the event Ricks notifies
North Star within 15 days after North Star has given notice of the matter that
Ricks is assuming the defense thereof, (A) Ricks will defend North Star against
the matter with counsel of its choice reasonably satisfactory to North Star (B)
North Star may retain separate co-counsel at its sole cost and expense (except
that Ricks will be responsible for the fees and expenses of the separate
co-counsel to the extent North Star concludes reasonably that the counsel Ricks
has selected has a conflict of interest), (C) North Star will not consent to the
entry of any judgment or enter into any settlement with respect to the matter
without the written consent of Ricks (not to be withheld unreasonably), and (D)
Ricks will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases North Star from all Liability with
respect thereto, without the written consent of North Star (not to be withheld
unreasonably). In the event Ricks does not notify North Star within 15 days
after North Star has given notice of the matter that Ricks is assuming the
defense thereof, however, North Star may defend against, or enter into any
settlement with respect to, the matter in any manner it reasonably may deem
appropriate.
(d) The Parties shall make appropriate adjustments for Tax benefits
and insurance proceeds (reasonably certain of receipt and utility in each case)
and for the time cost of money in determining to amount of loss for purposes of
this Section 8.
(e) The foregoing indemnification provisions are in addition to,
and not in derogation of, any statutory or common law remedy North Star may have
for breach of representation, warranty, or covenant.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) The Parties hereto may terminate this Agreement by mutual
consent at any time prior to the Closing;
(ii) North Star may terminate this Agreement by giving written
notice to Weststar or B&B any time prior to the Closing in the event Weststar
and B&B is in breach, and Weststar and B&B may terminate this Agreement by
giving written notice to North Star
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at any time prior to the Closing in the event North Star is in breach, of any
material representation, warranty, or covenant contained in this Agreement in
any material respect;
(iii) Any Party may terminate this Agreement by giving written
notice to all other Parties (provided that the terminating Party is not
otherwise in breach of this Agreement) if the Closing has not occurred by April
30, 1997.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. Miscellaneous.
(a) Payments Received. Weststar and B&B agree that after the Closing
they will hold and will promptly transfer and deliver to North Star, from time
to time as and when received by them, any cash, checks with appropriate
endorsements (using their best efforts not to convert such checks into cash), or
other property that he may receive on or after the Closing which properly
belongs to the surviving corporation, including without limitation any insurance
proceeds, and will account to the other for all such receipts. From and after
the Closing, North Star shall have the right and authority to endorse without
recourse the name of Weststar or B&B on any check or any other evidences of
indebtedness received by North Star on account of the Business and the Assets.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire Agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that North Star may (i) assign
any or all of its rights and interests hereunder to one or more of its
affiliates and (ii) designate one or more of its affiliates to perform its
obligations hereunder (in any or all
22
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of which cases North Star nonetheless shall remain liable and responsible for
the performance of all of its obligations hereunder).
(f) Counterparts and Facsimile Execution. This Agreement may be
executed in one & more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument. Signed
counterparts may be delivered via facsimile transmission.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, or by facsimile transmission, and addressed to the
intended recipient as set forth below:
If to the North Star: Copy to:
William W. Perry, CEO and James W. Goodwin, Esquire
President Macfarlane Ferguson & McMullen
North Star Resources Corporation 111 E. Madison - Suite 2300
2345 Friendly Road Tampa, FL 33602
Fernandina Beach, FL 32034 (813) 273-4337
(800) 468-8607 Fax: (813) 273-4396
Fax: (904) 261-6808
If to Weststar Copy to:
Michael Ricks, President Tommy Wright, Esq.
P.O. Box 6003 P.O. Box 6003
Starke, Florida 32091 Starke, Florida 32091
(904) 964-5008 (904) 964-5008
Fax: (904) 964-2805 Fax: (904) 964-2805
If to B&B
Michael Ricks, President Tommy Wright, Esq.
P.O. Box 6003 P.O. Box 6003
Starke, Florida 32091 Starke, Florida 32091
(904) 964-5008 (904) 964-5008
Fax: (904) 964-2805 Fax: (904) 964-2805
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy,
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<PAGE> 28
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless and
until it actually is received by the individual for whom it is intended. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Florida.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties hereto. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. Each of the Parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) Construction. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
Parties intend that each representation, warranty, and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty, or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
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(o) Specific Performance. Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
(p) Attorneys' Fees. In the event of any litigation arising out of
the enforcement or interpretation of this Agreement, the prevailing party in
such litigation shall be paid by the losing party all its expenses, including
reasonable attorney's fees and all costs of litigation incurred by it.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
effective as of the date first above written.
NORTH STAR HOLDING CORP.
Attest:
By: /s/ James R. Flynn By: /s/ W. W. Perry III
----------------------------- -------------------------------
Name: JAMES R. FLYNN Name: W. W. Perry III
Title: __________________________ Title: CEO
WESTSTAR ENVIRONMENTAL, INC.
Attest:
By: /s/ Thomas E. Wright By: /s/ Michael E. Ricks
----------------------------- -------------------------------
Name: Thomas E. Wright Name: Michael E. Ricks
Title: Gen. Counsel Title: Pres/CEO
B&B SEPTIC and ENVIRONMENTAL
SERVICES, INC.
Attest:
By: /s/ Thomas E. Wright By: /s/ Michael E. Ricks
----------------------------- -------------------------------
Name: Thomas E. Wright Name: Michael E. Ricks
Title: Gen. Counsel Title: Pres/CEO
WESTSTAR ACQUISITION CORP.
Attest:
By: /s/ James R. Flynn By: /s/ W. W. Perry III
----------------------------- -------------------------------
Name: JAMES R. FLYNN Name: W. W. Perry III
Title: __________________________ Title: CEO
25
<PAGE> 30
B&B ACQUISITION CORP.
Attest:
By: /s/ James R. Flynn By: /s/ W. W. Perry III
----------------------------- -------------------------------
Name: JAMES R. FLYNN Name: W. W. Perry III
Title: __________________________ Title: CEO
By: /s/ Thomas E. Wright By: /s/ Michael Ricks
----------------------------- -------------------------------
Name: Thomas E. Wright MICHAEL RICKS
_________________________________
Name: ___________________________
26
<PAGE> 1
================================================================================
[LOGO FOR STATE OF FLORIDA DEPARTMENT OF STATE]
I certify that the attached is a true and correct copy of the Articles of
Incorporation of WESTSTAR ENVIRONMENTAL PUMPING & SEPTIC SERVICE INC., a
corporation organized under the Laws of the State of Florida, filed on June 26,
1990, as shown by the records of this office.
The document number of this corporation is L83307.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
27th day of June, 1990.
/s/ JIM SMITH
------------------------
Jim Smith
Secretary of State
================================================================================
GREAT SEAL OF THE
STATE OF FLORIDA
<PAGE> 2
FILED
1990 JUN 26 AM 8:13
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
ARTICLES OF INCORPORATION
(Subchapter S)
OF
The undersigned incorporator(s), for the purpose of forming a corporation under
the Florida General Corporation Act, hereby adopt(s) the following Articles of
Incorporation.
ARTICLE I NAME
The name of the corporation shall be: WESTSTAR ENVIRONMENTAL Pumping & Septic
Service Inc.
The principal place of business of this corporation shall be:
Rt. 5, Box 7344 Starke, FL 32091
ARTICLE II NATURE OF BUSINESS
This corporation may engage in or transact any or all lawful activities or
business permitted under the laws of the United States, the State of Florida, or
any other state, country, territory or nation.
ARTICLE III CAPITAL STOCK
The aggregate number of shares of stock and its par value that this corporation
is authorized to have outstanding at any one time is: Ten shares -- valued at
$.1O per share
ARTICLE IV TERM OF EXISTENCE
This corporation is to exist perpetually.
ARTICLE V OFFICERS DIRECTORS
The name(s) and street address(es) of the Initial officer(s) and director(s), if
any, who shall hold office the first year of the corporation's existence or
until their successor(s) is(are) elected, is(are):
Michael E. Ricks Rt. 5, Box 7344 Starke, FL 32091
Teri L. Ricks Rt. 5, Box 7344 Starke, FL 32091
<PAGE> 3
ARTICLE VI INCORPORATOR(S)
The name(s) and street address(es) of the incorporator(s) to this articles of
incorporation is(are):
Michael E. Ricks
Rt. 5, Box 7344
Starke, FL 32091
IN WITNESS WHEREOF, the undersigned incorporator(s) has(have) executed these
Articles of Incorporation this First day of June, 1990.
Signature(s) of Incorporator(s)
/s/ MICHAEL E. RICKS
-----------------------
-----------------------
-----------------------
STATE OF Florida
COUNTY OF Alachua
THE FOREGOING Instrument was acknowledged end sworn to before me this First day
June, 1990, by Michael E. Ricks
---------------------------------
(Name of incorporator)
of WESTSTAR ENVIRONMENTAL Pumping & Septic Service Inc.
----------------------------------------------------
(Name of Corporation)
Notary Public
/s/ BETTY SUE STREIT
-----------------------
My Commission Expires: 2-15-91
(SEAL)
ARTICLES OF INCORPORATION FILING FEE: $20
<PAGE> 1
[SEAL OF THE STATE OF FLORIDA]
FLORIDA DEPARTMENT OF STATE
Jim Smith
Secretary of State
March 12, 1993
Leon H. Cassels
4667 High Grove Rd.
Tallahassee, FL 32308
Re: Document Number L83307
The Articles of Amendment to the Articles of Incorporation of WESTSTAR
ENVIRONMENTAL PUMPING & SEPTIC SERVICE INC. which changed its name to WESTSTAR
ENVIRONMENTAL, INC., a Florida corporation, were filed on March 12, 1993.
Should you have any questions regarding this matter, please telephone (904)
487-6050, the Amend merit Filing Section.
Annette Hogan
Corporate Specialist
Division of Corporations Letter Number: 993A00014175
Division of Corporations - P.O. BOX 6327 -Tallahassee, Florida 32314
<PAGE> 2
FIRST ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
WESTSTAR ENVIRONMENTAL PUMPING & SEPTIC SERVICE, INC.
(Bearing Florida Charter Number: L83307 June 26, 1990)
- --------------------------------------------------------------------------------
1. ARTICLE I of the Articles of Incorporation of WESTSTAR ENVIRONMENTAL
PUMPING & SEPTIC SERVICE, INC., is amended to read as follows:
ARTICLE I NAME
The name of the corporation is: WESTSTAR ENVIRONMENTAL, INC.
2. ARTICLE III of the Articles of Incorporation is amended to read as
follows:
ARTICLE III CAPITAL STOCK
This corporation is authorized to issue ONE HUNDRED THOUSAND (100,000)
shares of stock, all of which shall be common shares with a par value of One
Dollar ($1.00) per share.
Shares of capital stock of this corporation shall be issued initially to
the following persons and in the amounts set opposite their names.
<TABLE>
<S> <C>
1. MICHAEL E. RICKS or TERI L. RICKS 71000 Shares
Rt. 5, Box 7344
Starke, Florida 32091.
</TABLE>
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ARTICLES OF AMENDMENT - WESTSTAR - PAGE TWO
<TABLE>
<S> <C>
2. WILLIAM B. GRAY or PATRICIA G. GRAY 6000 Shares
12960 Bear Paw Place
Jacksonville, Florida 32216
3. JAMES R. FLYNN, ESQUIRE or DEBRA S. FLYNN 2000 Shares
407 West Georgia Street
Starke, Florida 32091
4. THOMAS FREDRICK FEY or MARTHA D. FEY 2000 Shares
3726 N.W. 7th Avenue
Gainesville, Florida 32607
5. LESLIE DEAN CASSELS or BETTY C. CASSELS 4000 Shares
Rt. 2, Box 1177
Starke, Florida 32091
6. WILLIAM P. COSTELLO 2000 Shares
7014 West Gas Line Road
Keystone Heights, Florida 32656
7. LEON H. CASSELS or JOAN W. CASSELS 8000 Shares
4667 Highgrove Road
Tallahassee, Florida 32308
8. ERNEST E. TRIEST, JR. 5000 Shares
S.E. 31st Street
Keystone Heights, Florida 32656
</TABLE>
Every shareholder, upon the sale for cash of any new stock of this
corporation of the same kind, class or series as that which he or she already
holds, shall have a right to purchase his or her prorata share (as nearly as may
be done without the issuance of fractional shares) at the same price at which it
is offered to others.
<PAGE> 4
ARTICLES OF AMENDMENT - WESTSTAR - PAGE THREE
3. Article V of the Articles of Incorporation is amended to read as
follows:
ARTICLE V - OFFICERS AND DIRECTORS
This corporation shall have eight (8) directors initially. The number of
directors may either be increased or diminished from time to time by the by-laws
but shall never be less than three (3). The names and street addresses of the
initial directors of this corporation who shall hold office for the first year
of the corporations existence or until their successors are elected are:
1. MICHAEL E. RICKS 2. JAMES R. FLYNN
Route 5, Box 7344 407 West Georgia Street
Starke, Florida 32091 Starke, Florida 32091
3. WILLIAM B. GRAY 4. THOMAS FREDRICK FEY
12960 Bear Paw Place 3726 N.W. 7th Avenue
Jacksonville, Florida 32216 Gainesville, FL 32607
5. LESLIE DEAN CASSELS 6. LEON H. CASSELS
Route 2, Box 1177 4667 Highgrove Road
Starke, Florida 32091 Tallahassee, FL 32308
7. WILLIAM P. COSTELLO 8. ERNEST E. TRIEST, JR.
7014 W. Gas Line Road S.E. 31st Street
Keystone Heights, FL 32656 Keystone Heights, FL 32656
<PAGE> 5
ARTICLES OF AMENDMENT - WESTSTAR - PAGE FOUR
The initial officers of the corporation shall be a President, Two (2)
Vice-Presidents, a Secretary, and a Treasurer. The names and street addresses of
the initial officers of the Corporation are:
1. MICHAEL E. RICKS - PRESIDENT
Route 5, Box 7344
Starke, Florida 32091
2. WILLIAM B. GRAY - EXECUTIVE VICE-PRESIDENT
12960 Bear Paw Place
Jacksonville, Florida 32216
3. JAMES R. FLYNN - VICE-PRESIDENT
407 West Georgia Street
Starke, Florida 32091
4. TERI L. RICKS - VICE-PRESIDENT
Route 5, Box 7344 SECRETARY/TREASURER
Starke, Florida 32091
5. The Articles of Incorporation is amended to add the following Article
VII which shall read as follows:
ARTICLE VII - INDEMNIFICATION OF OFFICERS AND DIRECTORS
The corporation shall indemnify any officer or director, or any former officer
or director, to the full extent permitted by law.
<PAGE> 6
ARTICLES OF AMENDMENT - WESTSTAR - PAGE FIVE
6. The foregoing First Articles of Amendment to Articles of Incorporation
is made by the Board of Directors of this corporation before the issuance of any
shares in the corporation.
7. The foregoing First Articles of Amendment to Articles of Incorporation
was adopted by unanimous vote of the Board of Directors of this corporation on
this 15th day of February, 1993.
IN WITNESS WHEREOF the undersigned, MICHAEL E. RICKS, President/Director
and by TERI L. RICKS, Secretary/Treasurer and Director of this corporation, in
their capacities as such, have executed these First Articles of Amendment to
Articles of Incorporation on this 15th day of February, 1993.
/s/ Michael E. Ricks
-------------------------
MICHAEL E. RICKS/DIRECTOR
PRESIDENT
/s/ Teri L. Ricks
-------------------------
TERI L. RICKS/DIRECTOR
SECRETARY
[CORPORATE SEAL]
<PAGE> 1
[LETTERHEAD OF THE FLORIDA DEPARTMENT OF STATE]
February 18, 1998
WILLIAM W. PERRY III
WESTSTAR ENVIRONMENTAL INC.
9550 REGENCY SQUARE BLVD., SUITE 1109
JACKSONVILLE, FL 32225
Re: Document Number L83307
The Articles of Amendment to the Articles of Incorporation of WESTSTAR
ENVIRONMENTAL, INC., a Florida corporation, were filed on February 16, 1998.
Should you have any questions regarding this matter, please telephone (850)
487-6050, the Amendment Filing Section.
Teresa Brown
Corporate Specialist
Division of Corporations Letter Number: 598A00009320
<PAGE> 2
AMENDMENT OF THE
ARTICLES OF INCORPORATION OF
WESTSTAR ENVIRONMENTAL, INC.
Pursuant to the provisions of Section 607.1001, Florida Statutes, the
undersigned, being the President of Weststar Environmental, Inc., a Florida
Corporation (the "Company"), does hereby certify as follows:
1. The name of the Company is Weststar Environmental, Inc.
2. Article 3 of the Company's Articles of Incorporation is amended by
replacing Article 3 with the following:
"The maximum number of shares of stock authorized to be issued
by the Corporation is 10,000,000 shares of capital stock,
10,000,000 of which shares shall be common shares of the par
value of $.001 per share. Each of the common shares shall
entitle the holder thereof to one vote at any shareholders'
meeting and otherwise to participate in all such meetings and
in the assets of the Corporation. All shares shall be issued
for such consideration as may be determined from time to time
by the Board of Directors, provided that such consideration
shall have a value at least equal to the full par value of
such shares. The shares may be paid for in lawful money of the
United States of America, or in property, labor or service or
any other legal form of consideration."
3. Shareholders approval is necessary for this Amendment and approval
was granted by the shareholders at a meeting held on January 28,
1998.
4. The Amendment was adopted by the President on January 28, 1998.
IN WITNESS WHEREOF, the undersigned has placed his hand and seal of the
Company under penalty of false statement on this 10th, day of February, 1998.
Weststar Environmental, Inc.
Effective January 28, 1998
By: /s/ Michael E. Ricks
---------------------------
Michael E. Ricks Michael E. Ricks, President
9550 Regency Square Blvd.
Suite 1109
Jacksonville, FL 32225
Phone: (904) 721-7557
Fax: (904) 721-8488
<PAGE> 1
CORPORATE BYLAWS
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual shareholder meeting of this
corporation will be held on the 31st day of January, of each year or at such
other time and place as designated by the Board of Directors of the corporation
provided that if said day falls on a Sunday or legal holiday, then the meeting
will be held on the first business day thereafter. Business transacted at said
meeting will include the election of directors of the corporation.
Section 2. Special Meetings. Special meetings of the shareholders will be
held when directed by the President, Board of Directors, or the holders of not
less than 10 percent of all the shares entitled to be cast on any issue proposed
to be considered at the proposed special meeting; provided that said persons
sign, date and deliver to the corporation one or more written demands for the
meeting describing the purposes(s) for which it is to be held. A meeting
requested by shareholders of the corporation will be called for a date not less
than 10 nor more than 60 days after the request is made, unless the shareholders
requesting the meeting designate a later date. The call for the meeting will be
issued by the Secretary, unless the President, Board of Directors or
shareholders requesting the meeting designate another person to do so.
Section 3. Place. Meetings of shareholders will be held
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at the principal place of business of the corporation or at such other place as
is designated by the Board of Directors.
Section 4. Record Date and List of Shareholders. The Board of Directors of
the corporation shall fix the record date; however, in no event may a record
date fixed by the Board of Directors be a date prior to the date on which the
resolution fixing the record date is adopted.
After fixing a record date for a meeting, the Secretary shall prepare an
alphabetical list of the names of all the corporation's shareholders who are
entitled to notice of a shareholders' meeting, arranged by voting group with the
address of and the number and class and series, if any, of shares held by each.
Said list shall be available for inspection in accordance with Florida Law.
Section 5. Notice. Written notice stating the place, day and hour of the
meeting, and the purpose(s) for which said special meeting is called, will be
delivered not less than 10 nor more than 60 days before the meeting, either
personally or by first class mail, by or at the direction of the President, the
Secretary or the officer or persons calling the meeting to each shareholder of
record entitled to vote at such meeting. If mailed, such notice will be deemed
to be effective when deposited in the United States mail and addressed to the
shareholder at the shareholder's address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
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The corporation shall notify each shareholder, entitled to a vote at the
meeting, of the date, time and place of each annual and special shareholders'
meeting no fewer than 10 or more than 60 days before the meeting date. Notice of
a special meeting shall describe the purpose(s) for which the meeting is called.
A shareholder may waive any notice required hereunder either before or after the
date and time stated in the notice; however, the waiver must be in writing,
signed by the shareholder entitled to the notice and be delivered to the
corporation for inclusion in the minutes or filing in the corporate records.
Section 6. Notice of Adjourned Meeting. When a meeting is adjourned to
another time or place, it will not be necessary to give any notice of the
adjourned meeting provided that the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken. At
such an adjourned meeting, any business may be transacted that might have been
transacted on the original date of the meeting. If, however, a new record date
for the adjourned meeting is made or is required, then, a notice of the
adjourned meeting will be given on the new record date as provided in this
Article to each shareholder of record entitled to notice of such meeting.
Section 7. Shareholder Quorum and Voting. A majority of the shares
entitled to vote, represented in person or by proxy, will constitute a quorum at
a meeting of shareholders.
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If a quorum, as herein defined, is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter thereof will be the act of the shareholders unless otherwise
provided by law.
Section 8. Voting of Shares. Each outstanding share will be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders.
Section 9. Proxies. A shareholder may vote either in person or by proxy
provided that any and all proxies are executed in writing by the shareholder or
his duly authorized attorney-in-fact. No proxy will be valid after the duration
of 11 months from the date thereof unless otherwise provided in the proxy.
Section 10. Action by Shareholders Without a Meeting. Any action required
or permitted by law, these bylaws, or the Articles of Incorporation of this
corporation to be taken at any annual or special meeting of shareholders may be
taken without a meeting, without prior notice and without a vote, provided that
the action is taken by the holders of outstanding stock of each voting group
entitled to vote thereon having not less than the minimum number of votes with
respect to each voting group that would be necessary to authorize or take such
action at a meeting at which all voting groups and shares entitled to vote
thereon were present and voted, as provided by law. The foregoing actions(s)
shall be
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evidenced by written consents describing the action taken, dated and signed by
approving shareholders having the requisite number of votes of each voting group
entitled to vote thereon and delivered to the corporation in accordance with
Florida Law. Within 10 days after obtaining such authorization by written
consent, notice shall be given to those shareholders who have not consented in
writing or who are not entitled to vote. Said notice shall fairly summarize the
material features of the authorized action and if the action requires the
providing of dissenters' rights, said notice shall comply with the disclosure
requirements pertaining to dissenters' rights of Florida Law.
ARTICLE II. DIRECTORS
Section 1. Function. All corporate powers, business, and affairs will be
exercised, managed and directed under the authority of the Board of Directors.
Section 2. Qualification. Directors must be natural persons of 18 years of
age or older but need not be residents of this state and need not be
shareholders of this corporation.
Section 3. Compensation. The Board of Directors will have authority to fix
the compensation for directors of this corporation.
Section 4. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken
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will be presumed to have assented to the action taken unless such director votes
against such action or abstains from voting in respect thereto because of an
asserted conflict of interest
Section 5. Number. This corporation will have 2 or more director(s).
Section 6. Election and Term. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors will hold office
until said directors will have been qualified and elected at the first annual
meeting of shareholders, or until said directors earlier resignation, removal
from office or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter, the shareholders will elect directors to hold office until the next
annual meeting. Each director will hold office for a term for which said
director is elected until said director's successor will have been qualified and
elected, said director's prior resignation, said director's removal from office
or said director's death.
Section 7. Vacancies. Any vacancy occurring in the Board of Directors will
be filled by the affirmative vote of a majority of the shareholders or of the
remaining directors even though less than a quorum of the Board of Directors. A
director elected to fill a vacancy will hold office only until the next election
of directors by the shareholders.
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Section 8. Removal and Resignation of Directors. At a meeting of
shareholders called expressly for that purpose, any director or the entire Board
of Directors may be removed, with or without cause, by a vote of the holders of
a majority of the shares then entitled to vote at an election of directors.
A director may resign at any time by delivering written notice to the
Board of Directors or its chairman or to the corporation by and through one of
its officers. Such a resignation is effective when the notice is delivered
unless a later effective date is specified in said notice.
Section 9. Quorum and Voting. A majority of the number of directors fixed
by these Bylaws shall constitute a quorum for the transaction of business. The
act of a majority of the directors present at a meeting at which a quorum is
present will be the act of the Board of Directors.
Section 10. Executive and Other Committees. A resolution, adopted by a
majority of the full Board of Directors, may designate from among its members an
executive committee and/or other committee(s) which will have and may exercise
all the authority of the Board of Directors to the extent provided in such
resolution, except as is provided by law. Each committee must have two or more
members who serve at the pleasure of the Board of Directors. The board may, by
resolution adopted by a majority of the full Board of Directors, designate one
or more directors as alternate members of any such committee who may act in the
place and
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stead of any absent member or members at any meeting of such committee.
Section 11. Place of Meeting. Special or regular meetings of the Board of
Directors will be held within or without the State of Florida.
Section 12. Notice, Time and Call of Meetings. Regular meetings of the
Board of Directors will be held without notice on such dates as are designated
by the Board of Directors. Written notice of the time and place of special
meetings of the Board of Directors will be given to each director by either
personal delivery, telegram or cablegram at least two (2) days before the
meeting or by notice mailed to the director at least five (5) days before the
meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting will constitute a waiver of notice of such
meeting and waiver of any and all objections to the place of the meeting, the
time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted nor the purpose of, regular or
special meetings of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
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A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place. Notice
of any such adjourned meeting will be given to the directors who were not
present at the time of the adjournment.
Meetings of the Board of Directors may be called by the Chairman of the
Board, the President of the corporation or any two directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
Section 13. Action Without a Meeting. Any action required to be taken at a
meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken without
a meeting if a consent in writing, setting forth the action to be so taken,
signed by all the directors, or all the members of the committee, as the case
may be, is filed in the minutes of the proceedings of the board or of the
committee. Such consent will have the same effect as a unanimous vote.
ARTICLE III. OFFICERS
Section 1. Officers. The officers of this corporation will consist of a
president, a vice president, a secretary and
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a treasurer, each of whom will be elected by the Board of Directors. Such other
officers and assistant officers and agents as may be deemed necessary may be
elected or appointed by the Board of Directors from time to time. Any two or
more offices may be held by the same person.
Section 2. Duties. The officers of this corporation will have the
following duties:
The President will be the chief executive officer of the corporation, who
generally and actively manages the business and affairs of the corporation
subject to the directions of the Board of Directors. Said officer will preside
at all meetings of the shareholders and Board of Directors.
The Vice President will, in the event of the absence or inability of the
President to exercise his office, become acting president of the organization
with all the rights, privileges and powers as if said person had been duly
elected president.
The Secretary will have custody of, and maintain all of the corporate
records except the financial records. Furthermore, said person will record the
minutes of all meetings of the shareholders and Board of Directors, send all
notices of meetings and perform such other duties as may be prescribed by the
Board of Directors or the President. Furthermore, said officer shall be
responsible for authenticating records of the corporation.
The Treasurer shall retain custody of all corporate funds
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and financial records, maintain full and accurate accounts of receipts and
disbursements and render accounts thereof at the annual meetings of shareholders
and whenever else required by the Board of Directors or the President, and
perform such other duties as may be prescribed by the Board of Directors or the
President.
Section 3. Removal and Resignation of Officers. An officer or agent
elected or appointed by the Board of Directors may be removed by the Board of
Directors whenever in the Board's judgment the best interests of the corporation
will be served thereby.
Any officer may resign at any time by delivering notice to the
corporation. Said resignation is effective upon delivery unless the notice
specifies a later effective date. Any vacancy in any office may be filled by the
Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
Section 1. Issuance. Every holder of share(s) in this corporation will be
entitled to have a certificate representing all share(s) to which he is holder.
No certificate representing share(s) will be issued until such share(s) is/are
fully paid.
Section 2. Form. Certificates representing share(s) in this corporation
will be signed by the President or Vice President and the Secretary or an
Assistant Secretary and will be sealed with the seal of this corporation.
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Section 3. Transfer of Stock. The corporation will register a stock
certificate presented for transfer if the certificate is properly endorsed by
the holder of record or by his duly authorized agent.
Section 4. Lost, Stolen, or Destroyed Certificates. If a shareholder
claims that a stock certificate representing shares issued and recorded by the
corporation has been lost or destroyed, a new certificate will be issued to said
shareholder, provided that said shareholder presents an affidavit claiming the
certificate of stock to be lost, stolen or destroyed. At the discretion of the
Board of Directors, said shareholder may be required to deposit a bond or other
indemnity in such amount and with such sureties, if any, as the board may
require.
ARTICLE V. BOOKS AND RECORDS
Section 1. Books and Records. The corporation shall keep as permanent
records minutes of all meetings of its shareholders and Board of Directors, a
record of all actions taken by the shareholders or Board of Directors without a
meeting, and a record of all actions taken by a committee of the Board of
Directors in place of the Board of Directors on behalf of the corporation.
Furthermore, the corporation shall maintain accurate accounting records.
Furthermore, the corporation shall maintain the following:
(i) a record of its shareholders in a form that permits preparation of a list of
the names and addresses of all
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shareholders in alphabetical order by class of shares showing the number and
series of shares held by each;
(ii) The corporation's Articles or Restated Articles of Incorporation and all
amendments thereto currently in effect;
(iii) The corporation's Bylaws or Restated Bylaw and all amendments thereto
currently in effect;
(iv) Resolutions adopted by the Board of Directors creating one or more classes
or series of shares and fixing their relative rights, preferences and
limitations if shares issued pursuant to those resolutions are outstanding;
(v) The minutes of all shareholders' meetings and records of all actions taken
by shareholders without a meeting for the past 3 years;
(vi) Written communications to all shareholders generally or all shareholders of
a class or series within the past 3 years including the financial statements
furnished for the past 3 years to shareholders as may be required under Florida
Law;
(vii) A list of the names and business street addresses of the corporation's
current directors and officers; and
(viii) A copy of the corporation's most recent annual report delivered to the
Department of State.
Any books, records and minutes may be in written form or in any other form
capable of being converted into written form.
Section 2. Shareholder's Inspection Rights. A shareholder of the
corporation (including a beneficial owner
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whose shares are held in a voting trust or a nominee on behalf of a beneficial
owner) may inspect and copy, during regular business hours at the corporation's
principal office, any of the corporate records required to be kept pursuant to
Section 1, of this Article of these Bylaw, if said shareholder gives the
corporation written notice of such demand at least 5 business days before the
date on which the shareholder wishes to inspect and copy. The foregoing right of
inspection is subject however to such other restrictions as are applicable under
Florida Law, including, but not limited to, the inspection of certain records
being permitted only if the demand for inspection is made in good faith and for
a proper purpose (as well as the shareholder describing with reasonable
particularity the purpose and records desired to be inspected and such records
are directly connected with the purpose).
Section 3. Financial Information. Unless modified by resolution of the
shareholders within 120 days of the close of each fiscal year, the corporation
shall furnish the shareholders annual financial statements which may be
consolidated or combined statements of the corporation and one or more of its
subsidiaries as appropriate, that include a balance sheet as of the end of the
fiscal year, an income statement for that year, and a statement of cash flow for
that year. If financial statements are prepared on the basis of generally
accepted accounting principles, the annual financial statements must also be
prepared on that basis. If the annual
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financial statements are reported on by a public accountant, said accountant's
report shall accompany said statements. If said annual financial statements are
not reported on by a public accountant, then the statements shall be accompanied
by a statement of the president or the person responsible for the corporation's
accounting records (a) stating his reasonable belief whether the statements were
prepared on the basis of generally accepted accounting principles and if not,
describing the basis of preparation; and (b) describing any respects in which
the statements were not prepared on a basis of accounting consistent with the
statements prepared for the preceding year. The annual financial statements
shall be mailed to each shareholder of the corporation within 120 days after the
close of each fiscal year or within such additional time as is reasonably
necessary to enable the corporation to prepare same, if, for reasons beyond the
corporation's control, said annual financial statement cannot be prepared within
the prescribed period.
Section 4. Other Reports to Shareholders. The corporation shall report any
indemnification or advanced expenses to any director, officer, employee, or
agent (for indemnification relating to litigation or threatened litigation) in
writing to the shareholders with or before the notice of the next shareholders'
meeting, or prior to such meeting if the indemnification or advance occurs after
the giving of such notice but prior to the time such meeting is
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held, which report shall include a statement specifying the persons paid, the
amounts paid, and the nature and status, at the time of such payment, of the
litigation or threatened litigation
Additionally, if the corporation issues or authorizes the issuance of
shares for promises to render services in the future, the corporation shall
report in writing to the shareholders the number of shares authorized or issued
and the consideration received by the corporation, with or before the notice of
the next shareholders' meeting.
ARTICLE VI. DIVIDENDS
The Board of Directors of this corporation may, from time to time declare
dividends on its shares in cash, property or its own shares, except when the
corporation is insolvent or when the payment thereof would render the
corporation insolvent, subject to Florida Law.
ARTICLE VII. CORPORATE SEAL
The Board of Directors will provide a corporate seal which will be in
circular form embossing in nature and stating "Corporate Seal", "Florida", year
of incorporation and name of said corporation.
ARTICLE VIII. AMENDMENT
These Bylaws may be altered, amended or repealed, and altered, amended or
new Bylaws may be adopted by a majority vote of the full Board of Directors.
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ARTICLE IX. CORPORATE INDEMNIFICATION PLAN
The corporation shall indemnify any person:
(1) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by, or in the
right of, the corporation) by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against such
costs and expenses, and to the extent and in the manner provided under Florida
Law.
(2) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against such costs and expenses, and to the extent and in the manner
provided under Florida Law.
The extent, amount, and eligibility for the indemnification provided
herein will be made by the Board of Directors. Said determinations will be made
by a majority
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vote to a quorum consisting of directors who were not parties to such action,
suit, or proceeding or by the shareholders by a majority vote of a quorum
consisting of shareholders who were not parties to such action, suit, or
proceeding.
The corporation will have the power to make further indemnification as
provided under Florida Law except to indemnify any person against gross
negligence or willful misconduct.
The corporation is further authorized to purchase and maintain insurance
for indemnification of any person as provided herein and to the extent provided
under Florida Law.
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EXHIBIT 10.1
<PAGE> 2
AGREEMENT made as of the 28th day April 1997 between Western
Environmental, Inc., a Florida Corporation, with principal offices at 2345
Friendly Road, Fernandina Beach, Florida 32034 (hereinafter referred to as the
"Company"); and Michael E. Ricks, residing at 6249 Lake Drive, Starke, Fl 32091
(hereinafter referred to as the "Employee").
WITNESSETH:
WHEREAS, the Employee shall be employed by the Company as Chief Executive
Officer and
WHEREAS, the Employee has the requisite experience, background and skill
and is willing to formalize his relationship with the Company on the terms and
subject to the conditions herein contained.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereby agrees as follows:
1. Recitals confirmed. All of the recitals hereinabove stated are
confirmed by all of the parties hereto as being in all respects true and correct
and the same are hereby incorporated herein by reference into this agreement
(the "Agreement").
2. Employment. The Company hereby confirms its employment of the Employee
and the Employee hereby confirms his employment by the Company as the Chief
Executive Officer of the company. The Employee shall, in the performance of his
duties, be at all times subject to the direction, supervision and authority of
the Company's Board of Directors.
3. No Breach of Obligation. The Employee represents and warrants to the
Company that he has the requisite skill and experience and is ready, willing and
able to perform those duties attendant to the position for which he is hired or
which may be assigned to him; and that his entry into this Agreement with the
Company does not constitute a breach of any prior agreement between the Employee
and any person, firm or corporation contain any restriction or impediment to the
ability of the Employee to perform those duties for which he was hired or
<PAGE> 3
which may be assigned to or reasonably expected of him. The Company acknowledges
that the employee has other business interest.
4. Services. During the full term of this Agreement, the Employee shall
perform to the best of his ability the following services and duties, in such
manner and at such time as the Company may direct; the following being included
by way of example and not by way of limitation:
(a) The Employee shall, together and in connection with the other
executive officers of the Company, supervise and direct all administrative
aspects of and share responsibility for the conduct and supervision of all
administrative areas of the Company's operation;
(b) The Employee shall aid and assist the administration of the
Company's sales, marketing programs and other similar and related aspects of the
Company's operations;
(c) The Employee shall promote the Company's relations with its
clients, employees, potential clients and others;
(d) The Employee shall consult with and advise the other officers
and employees of the Company, either orally, or, at the request of the company,
in writing, with respect such matters as the Board of Directors shall be
requested from time to time, relating to the management and operation of the
Company, sales, marketing and the institution of programs and systems designed
to increase the efficiency of the Company's business and overall management and
operation of the Company.
5. Exclusivity. The Employee agrees that during the term of this Agreement
he will impart and devote substantially all of his time, energy, skill and
attention to the performance of his duties hereunder. This paragraph shall not
exclude the Employee from serving as an executive officer and/or serving on the
Board of Directors of another company or companies not
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<PAGE> 4
engaged in similar business ventures not in direct competition with the company
or subsidiaries if such investments shall be of a passive nature or shall be in
securities of a publicly owned entity.
6. Place of Performance. The Employee agrees to perform his duties
hereunder at the offices of the Company, in Fernandina Beach, Florida, and
agrees, to the extent that it shall be determined necessary and advisable in the
sole discretion of the Company's Board of Directors to travel to any place in
the United States or to any foreign country where his presence is or may
reasonably be temporarily required for the performance of his duties hereunder.
7. Compensation. The Company hereby agrees to compensate the Employee and
the Employee hereby accepts for the performance of the services by the Employee
and duties required by the Employee under Paragraph 3 hereof and his other
obligations hereunder as follows:
(a) Salary. Subject to review and upward adjustment from time to
time by the Board of Directors, the Company shall pay to the Employee an annual
salary of eighty-seven thousand dollars, ($87,500) during the first year of the
term of this Agreement. During the second and the third year, the Employee's
salary will increase ten percent (10%) per year. Such salary shall be payable
monthly in accordance with the regular payroll practice of the company;
(b) Bonus. The Employee shall be entitled to participation in a
bonus or other incentive compensation, profit sharing or retirement plan that
the Company shall institute or make generally available to its executives;
(c) Expenses, Accommodations, Insurance, and Medical Benefits. The
Company shall pay to the Employee and/or furnish the Employee with the expenses,
accommodations, insurance and medical benefits referenced in Paragraph 10 of
this Agreement; and
(d) Vacation and Automobile. The Employee shall be entitled to the
use of an
3
<PAGE> 5
automobile and vacations as provided in Paragraph 11 of this Agreement;
(e) Severance. The Company shall pay the Employee the severance
compensation enumerated in Paragraph 15(c) of this Agreement
8. Representation and Warranties of the Employee. By virtue of his
execution hereof, and in order to induce the Company to enter into this
Agreement, The Employee hereby represents and warrants as follows:
(a) The Employee is not presently actively engaged in any business,
employment or venture which is or may be in conflict with the business of the
Company;
(b) The Employee has full power and authority to enter in this
Agreement, to enter into the employ of the Company and to otherwise perform this
Agreement in the time and manner contemplated; and
(c) The Employee's compliance with the terms and conditions of this
Agreement in the time and manner contemplated herein will not conflict with any
instrument or agreement pertaining to the transaction contemplated herein, and
will not conflict in, result in a breach of or constitute a default under any
instrument to which he is a party.
9. Representation and Warranties of the Company. By virtue of the
execution of this Agreement, the Company hereby represents and warrants to the
Employee as follows:
(a) the Company has full power, right and authority to execute and
perform this Agreement in the time and manner contemplated; and
(b) The execution and performance of this Agreement will not result
in a breach of or violate the provisions of any contract or agreement to which
the Company is a party.
10. Expenses, Accommodations, Insurance, Medical Benefits, and etc.
(a) The Company and the Employee hereby agree and consent that
during the term of this Agreement, the Company shall furnish the Employee
memberships as shall be suitable to
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<PAGE> 6
the character of his position and adequate for and reasonably designed to
enhance the performance of his duties. The Company and the Employee further
agree that the Employee shall receive reimbursement for all expenses incurred by
the Employee in connection with the performance of his duties hereunder subject
to compliance with the Company's procedures; and the Company shall pay to the
Employee directly or reimburse the Employee for all other reasonable, necessary
and proven expenses and disbursements incurred by the Employee for and on behalf
of the Company in the performance of the Employee's duties during the term of
this Agreement.
(b) The Employee agrees and consents to being the subject of such
policy or policies of disability income and/or key man insurance as the Company
shall, in its sole discretion, elect to carry on Employee's life. The Company
shall be the owner and beneficiary of any such policy and/or policies and shall
pay premiums thereon; and the Employee agrees and consents to such arrangement.
Notwithstanding the foregoing, and so long as adequate and customary
arrangements are made with respect thereto, the Employee's spouse and/or
children may be named co-beneficiaries on such split-dollar insurance policies
or policies as the Employee reasonably desires. The Company shall have the right
and option of selecting the carrier(s) of such insurance and the form thereof
(i.e. whole life, term, etc.). Upon the termination of the Employee's employment
for any reason provided in this Agreement, he shall have the right to purchase
any and all policies owned by the Company on his life, subject to the terms of
this Agreement, upon paying the Company within (30) days of such termination an
amount equal to cash value, including the cash value of dividend additions or
deposits, if any, of such policy as of the date such right is exercised, less
the amount of any policy loan with accrued interest. The Company, upon such
payment, shall execute the instruments necessary to transfer such policies to
the Employee.
11. Vacations and Automobile. During the term of this Agreement, the
Employee shall
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<PAGE> 7
receive four (4) weeks of vacation per year at such time as he shall elect. The
Employee hereby agrees to utilize his best efforts to take his vacation time in
non-consecutive weeks, The Employee shall be entitled to accumulate any unused
vacation time from year to year during of the term of this Agreement; and upon
termination shall be paid the full value thereof at the salary rate in effect on
the date of termination. The Employee shall be Entitled to the use of an
automobile and all expense necessary to operate and maintain such auto.
12. Proprietary Rights. The Employee shall at no time before or after the
termination of his employment hereunder use or divulge or make known to anyone
without the express written consent of the Board of Directors of the Company
(except to those duly authorized by Company to have access thereof) any
marketing systems, programs or methods, customer or client lists, computer
programs, configurations, systems or procedures, ideas, formulae, inventions,
discoveries, improvements, secrets, processes or technical or other information
of the Company or any accounts, customer or client lists, transactions of
business affairs of the Company. All ideas, marketing systems, computer
programs, configurations, systems or procedures, programs or methods, formulae,
inventions, discoveries, improvements, secrets or processes whether or not
patentable or copyrightable, made or developed by the Employee during the term
of this Agreement or within one year after its expiration or termination and
relating to the business of the Company shall be the exclusive property of the
Company, whether or not any claim of the Employee to compensation under
Paragraph 7 hereof have been or will be satisfied, and the Employee agrees to
provide the Company at its request and expense such instruments and evidence as
it may reasonably request to perfect, enforce and maintain the Company's rights
to such property. At the conclusion of his employment by the Company, the
Employee shall forthwith surrender to the Company all letters, brochures,
agreements and documents of every character relating to the business affairs and
properties of the Company and
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<PAGE> 8
then in his possession and shall not, without the company's prior written
consent, retain or disclose any copies thereof
13. Disability. If during the term of this Agreement and in the opinion of
the Board of Directors of the Company as confirmed by competent medical
evidence, the Employee shall become physically or mentally incapacitated to
perform his duties for the company hereunder for a continuous period then the
following shall apply (a) for the first year of such disability the Employee
shall receive his full salary; (b) for the second and third year of the
Employee's disability the Employee shall receive fifty (50%) percent of his full
salary; (but in no event beyond the termination date of this agreement), the
Employee shall receive Fifty (50) percent of his full salary. Upon the
Employee's resumption of full employment, he shall commence again to receive his
full salary. The Employee hereby agrees to submit himself for appropriate
medical examination by his personal physician as necessary to implement and give
effect to the purposes of this paragraph 13. In event of termination as provided
herein, the full term compensation provisions of paragraph 8 shall apply.
14. Competition. During the three (3) year term of this agreement, or upon
the termination of his employment, whichever event shall occur later and for a
period of twenty-four (24) consecutive months thereafter, the Employee shall
not, without the prior express written consent of the Company, engage (either as
an employee, consultant, agent proprietor, officer, director, partner, or
stockholder, of any corporation, firm or business) in any business which is in
direct competition of threatening to be in competition with the Company within
any other state or other jurisdiction in which the Company is engaged in such
operations.
The Employee further convenants that during the stated term of this
Agreement and for the twenty-four (24) month period thereafter, he will not
solicit any clients or customers, known by him to be clients or customers of the
Company, for competitive employment by the Company without cause or a
termination of the employment by the Employee because of breach of
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<PAGE> 9
agreement by the Company.
15. Term and Termination. This Agreement shall be deemed to be effective
as of the date of its execution and shall continue in full force and effect
until the last day of the month after the third (3rd) anniversary thereof unless
sooner terminated as hereinafter set forth:
(a) Termination by the Company for Cause.
(1) The Company may terminate the Employee's employment for
cause (as defined in sub-paragraph (b) below) upon compliance with the
provisions of sub-paragraph (c). Upon such termination, the Company shall have
no further obligations to the Employee, except for the compensation or other
benefits due for a period prior to the date of Termination.
(2) "Cause" shall mean: (I) the Employee's willful and continued
failure to perform any of his duties with the Company (other than as a result of
the Employee's incapacity due to illness or injury, as defined in paragraph 13
after a demand for performance is delivered to the Employee by the board of
Directors (by a duly adopted resolution), which specifically identified the
manner in which the Board of Directors believes that the Employee has not
performed any of his duties; or (ii) the Employee's willful engaging in
misconduct which is materially injurious to the Company, monetarily or
otherwise. For purposes of this sub-paragraph (b), no act or failure to act on
the Employees part shall be considered "willful" unless the act of failure to
act by the Employee is done in bad faith and with absolute certainty that such
action or omission was not in or opposed to the best interest of the Company,
and any failure by the Employee to perform any of the Employee duties set forth
herein shall be conclusively deemed not to be a willful failure to perform where
the failure results from the Employee's illness or injury as set forth in a
written opinion of the Employee's personal physician.
(3) Termination for Cause shall be effected only if (I) the
Company has delivered to the Employee a copy of a Notice of Termination which
complies with Paragraph 16 hereof and which gives the Employee, at least thirty
(30) business days' prior notice, the
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<PAGE> 10
opportunity, together with the Employee's counsel, to be heard before the Board
of Directors and (ii) the Board of Directors (after such notice and opportunity
to be heard), adopts a resolution concurred in but not less that two-thirds of
all of the directors of the Company then in office, including at least
two-thirds of all the directors who are not officers of the Company, that in the
good faith opinion of the Board of Directors, the Employee was guilty of conduct
set forth above in clause (I) and (ii) of the first sentence of subparagraph
(b), and specifying the particulars thereof in detail.
(b) Termination by the Employee for Good Reason.
(1) The Employee may terminate his employment for Good Reason
(as defined in subparagraph (b) below) by giving the Company a Notice of
Termination which complies with Paragraph 16 hereof. Upon such termination the
Employee shall have the rights described in sub-paragraph (c) hereof.
(2) "Good Reason": shall mean: (i) the Employee being removed,
or not being re-elected, as a director, or as President as described in
employment by the Company for Cause or Disability or by the Employee without
Good Reason; (ii) the assignment to the Employee, without his express written
consent, of any duties other than those permitted by Paragraph 4; (iii) the
Company's requiring the Employee to maintain his principal office or conduct his
principal activities anywhere other than at the Company's principal executive
offices, (iv) the failure of the Company to obtain the assumption and agreement
to perform this Agreement by any successor as contemplated in Paragraph 8
hereof; (v) repudiation by the Company of any material obligation of the Company
under Paragraph 7 hereof; or (vi) the delivery of a Notice of Termination by the
Company pursuant to paragraph 16(a)(3), above (except that the delivery of such
Notice shall be retroactively deemed not to constitute Good Reason within sixty
(60) days after the Board of Directors shall make the determination
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<PAGE> 11
described in paragraph 16(a)(3) (after the opportunity to be heard provided for
therein) and such determination is not thereafter reversed by an arbitration
decision or final judgement of a court of competent jurisdiction.
(c) Termination by Change or Control. In the event the Company
experiences a Change of Control as hereinafter defined, the Employee shall have
the right and option, in his sole unfettered discretion, to declare this
Agreement breached by the Company. Upon the occurrence of such a course of
action, the Employee shall be entitled to receive all of the compensation and
remuneration provided in Subparagraph (c) of this Paragraph.
16.
(1) Change in Control. For purposes of this Agreement a Change in
Control will be deemed to have occurred
(a) if following (I) a tender or exchange offer for voting
securities of the Company, (ii) a proxy contest for the election of directors of
the Company or (iii) a merger or consolidation or sale of all or substantially
all of the business or assets of the Company, the directors of the Company
immediately prior to the initiation of such event cease to constitute a majority
of the board of directors of the Company upon the occurrence of such event or
within one year after such event, or
(b) if any "person" or "group" (as defined under the beneficial
ownership rules of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act
of 1934 and Rule 13d3 thereunder) acquires ownership or control, or power to
control, twenty-five percent (25%) or more of the outstanding voting securities
of the Company without prior approval or ratification by a majority of the
Company's directors in office at the time of such event.
(d) The Employees Rights Upon Certain Termination. If the
Company terminates the Employee's employment hereunder, otherwise than for cause
pursuant to Paragraph 15(a) or for Disability pursuant to Paragraph 1, or if the
Employee terminates his
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<PAGE> 12
employment for Good Reason pursuant to paragraph 15(b) or pursuant to Paragraph
15(c):
(1) The Company shall continue to pay to the Employee his
full base compensation, at the rate in effect on the Date of Termination, for
the period (the "Post Termination Period") from the Date of Termination until
April, 2000, the expiration date of this agreement. Notwithstanding anything to
the contrary which may be contained herein, if the Employee shall have died
prior to April, 2000, then, in such event, such payment of the Employee's full
base compensation pursuant to this paragraph 16 shall continue to be made to the
Employee's estate until April, 2000.
(2) The Employee shall be entitled to the full amount which
would have been due him under any bonus or profit sharing plan, or similar
arrangement, in which he was participating prior to the Date of Termination, for
the full three (3) year term of this Agreement, without any proration or
reduction because of the Employees not being employed during the full term;
(3) The Employee shall also be entitled to the full amount
of any contingent compensation or benefit which would have become vested had his
employment continued throughout the Post-Termination Period;
(4) The Company shall also pay to the Employee an amount
equal to all legal fees and expenses incurred by the Employee as a result of
such termination (including) all fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or enforce
or retain any right or benefit provided by this agreement);
(5) The Company shall maintain full force and effect, for
the Employee; continued benefit throughout the Post-Termination Period, all life
and health insurance and other benefit plans in which the Employee was entitled
to participate immediately prior to the Date of Termination, provided that the
Employee continued
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<PAGE> 13
participation is possible under the general terms and conditions of such plans.
If the Employee's participation in any such plan is barred for any reason
whatsoever, the Company shall arrange to provide the Employee with benefits
substantially similar to those which he is entitled to receive under such plan;
(6) The Employee shall not be required to mitigate the
amount of any payment provided for in this Paragraph 15 be reduced by any
compensation earned by the Employee in any manner after the Date of Termination.
16. Notice of Termination. Any purported termination of the Employee's
employment shall be communicated by written Notice of Termination from one party
to the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in specific detail
the facts and circumstance claimed to provide a basis for termination of the
Employee's employment under the provision so indicated. No purported termination
by the Company of the Employee's employment under the provision so indicated. No
purported termination by the Company if the Employee's employment shall be
effective if it is not affected pursuant to a Notice of Termination satisfying
the requirements of this paragraph 16.
17. Date of Termination. "Date of Termination" shall mean the date on
which Notice of Termination is given.
18. Successors; Binding Agreement.
(a) The Company shall require any purchased of all or substantially
all of the business of the Company, by agreement or form and substance
satisfactory to the Employee, to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such purchase had taken place. If no agreement the full amount
will become due and payable. As used in this agreement,
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<PAGE> 14
"Company" shall mean the Company as hereinabove defined, and any successor to
the Company's business or assets which executes and delivers this Agreement
provided for in the Paragraph 18(a) or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and to be
enforceable by the Employee's personal and legal representative, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Employee's devisee, legatee or other designee or, if there be no such designee,
to his estate.
19. Arbitration. The Employee shall have the right to submit any
determination by the Board of Directors terminating his employment for Cause, or
any other dispute hereunder, to arbitration by a single arbitrator in
Jacksonville, Florida under the laws of the American Arbitration Association.
Any award in such arbitration may be enforced in any court of competent
jurisdiction.
20. Entire Agreement. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter thereof, shall supersede any
prior agreements and understandings between the parties with respect to such
subject matter, and no statement, representation, warranty or covenant has been
made by either party except as expressly set forth herein.
21. Modification. This Agreement shall not be changed or terminated
orally. All of the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective heirs and
personal representatives of the Employee and the successors and assigns of the
Company.
22. Laws of the State of Florida. This Agreement is being delivered in the
state of Florida
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<PAGE> 15
and shall be construed and enforced in accordance with the laws of the State of
Florida, irrespective of the state of incorporation of the Company or the place
domicile or residence of the Employee. In the event of a controversy arising out
of the interpretation, construction, performance or breach of this Agreement,
the parties hereby agree and consent to the jurisdiction and venue of the
Circuit Court of the State of Florida, Duval County and/or the United Stated
District Court for the Northern District of Florida and further agree and
consent that personal service or process in any such action or proceeding
outside of the County of Duval shall be tantamount to service in person within
the County of Duval and Shall confer personal jurisdiction upon either of said
courts.
23. Notices. Any notice to be given by any party hereunder to any other
shall be in writing, mailed by certified or registered mail, return receipt
requested, shall be addressed to the other at his address as hereinbefore stated
or to such other address as may have been furnished by any party to the other in
writing, and shall be deemed to be given on the date of mailing thereof in
accordance with the foregoing.
24. Additional Instruments. Each of the parties shall from time to time,
at the request of the others, execute, acknowledge and deliver to the other
party any and all further instruments that may be reasonably required to give
full effect and force to the provisions of this Agreement
25. Originals. This Agreement may be executed in counterparts each of
which so executed shall be deemed an original and constitute one and the same
agreement.
26. Address of Parties. Each party shall at all time keep the other
informed of its principal place of business or residence if different from that
stated herein, and shall promptly notify the other of any change, giving the of
the new principal place of business or residence.
27. Modification and Waiver. A modification or waiver of any of the
provisions of this Agreement shall be effective only if made in writing and
executed with the same formality
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<PAGE> 16
as this Agreement. The failure of any party to insist upon strict performance of
any of the provisions of this Agreement shall not be constructed as a waiver of
any subsequent default of the same or similar nature or of any other nature or
kind.
28. Remedies on Breach. The Employee hereby agrees that it may not be
possible for the Company to be adequately compensated in damages for any breach
by the Employee of any of the representations, warranties, terms or any
conditions contained in this Agreement and accordingly the Employee hereby
agrees and consents that in the event of any such breach, the Company, in
addition to any other remedies it may have, shall be entitled to injunction or
other equitable relief restraining such breach.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ATTEST:
WESTSTAR ENVIRONMENTAL, INC.
BY: /s/ WILLIAM B. GRAY BY: /s/ WILLIAM PERRY
------------------------- --------------------------
William B. Gray William Perry
Secretary
(Corporate Seal)
[CORPORATE SEAL]
BY: /s/ MICHAEL E. RICKS
--------------------------
Michael E. Ricks, Employee
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<PAGE> 1
WESTSTAR ENVIRONMENTAL, INC.
PROMISSORY NOTE - DEMAND
$120,000 1 1/2% Interest Per Month
October 7, 1997
On demand, or no later than ninety (90) days, the undersigned, Weststar
Environmental, Inc., a Florida corporation promises to pay to G&W Framing
Contractors, Inc. or order at Jacksonville, Florida, the sum of One Hundred
Twenty Thousand Dollars ($120,000), together with interest at a rate of 1 1/2%
per month.
All payments shall be payable in lawful currency of United States of
America. The undersigned agrees to pay all costs of collection, including
reasonable attorney's fees.
This note may be prepaid at any time or from time in whole or in part
without penalty, premium, or permission. Any payment under Section shall be
applies to the principal of the Note.
If, for any reason, the principal amount of One Hundre Twenty Thousand
($120,000.00) and along with the accrued interest, is not paid within said (90)
day period, then the total amount due will accrue interest until paid at the
rate of one and one half percent (1.5%) per month.
Weststar Environmental, Inc.
BY: /s/ John A. Stubbs
------------------------
John A. Stubbs, C.E.O.
9550 REGENCY SQUARE BLVD., SUITE 1109 o JACKSONVILLE, FL 32225
PH (904) 721-7557 o FAX (904) 721-8488
<PAGE> 1
[LOGO] SL
---------
STAFF
LEASING
STAFF/CLIENT LEASING AGREEMENT
- --------------------------------------------------------------------------------
1.The Parties: This Agreement is made between Weststar Environmental, Inc.
("Client") with its principal office located at Rt. 4, Starke, Fl. 32091
and
[ ] Staff Leasing, L.P.,
[X] Staff Leasing II, L.P.,
[ ] Staff Leasing III, L.P.,
[ ] Staff Leasing IV, L.P.or
[ ] Staff Leasing V. L.P.
("Staff"), a Delaware limited partnership, with its principal office located
at 600 301 Boulevard West, Bradenton, Florida 34205 or such other location as
shall be identified in a written notice addressed to Client. Collectively,
Client and Staff are referred to as "the parties".
2. Proposal means the Proposal for services presented to Client by Staff.
That Proposal is attached hereto and made an integral part hereof in accordance
with paragraph 19 of this Agreement.
3. Leasing Relationship:
A. The parties agree that Staff will lease employees to Client and that
this leasing arrangement will apply to all existing employees of Client employed
in Florida as well as to any new employees in Florida that are leased to Client
by Staff. Client and Staff shall enter into separate agreements with Staff or an
affiliate of Staff with respect to employees of Client that are employed by
Client in other states. Pursuant to Florida Statutes Chapter 468, Staff reserves
a right of direction and control over the leased employees. While Staff has a
statutory right to reserve direction and control over the leased employees, the
parties recognize that these employees will work at Client's site under the
actual control or direction of Client. Staff has the authority to hire,
terminate, discipline and reassign the leased employees. However, Client has the
right to accept or cancel the assignment of any leased employee, provided that
such rejection or cancellation is not otherwise prohibited by law (including,
but not limited to, applicable anti-discrimination laws). Client also has the
right to direct and control the leased employees in order to conduct its
business, discharge fiduciary responsibilities or comply with any licensure,
regulatory, statutory or other legal requirement. Client is solely responsible
for the quality, adequacy and safety of all goods produced or services performed
by the leased employees.
B. If an employment decision is to be made regarding any leased employee,
Client will provide the information necessary for Staff to make a reasonable and
informed decision. If Staff finds it necessary to conduct an investigation
before a decision can be made, Client shall cooperate fully in that
investigation. If Client does not comply with any of these obligations, or if
Client fails to provide adequate or accurate information for Staff to make an
informed decision or if Client unilaterally chooses to makes decision regarding
a leased employee, Client will be fully responsible for the decision in
question.
C. Staff will only provide the services set forth herein and will not
provide any other services, including but not limited to the making of decisions
related to strategic, operational or other matters concerning Client's business.
Such decisions shall exclusively be the responsibility of Client and Staff shall
bear no responsibility or liability for any actions or inactions by Client. When
implementing such decisions as are outside the scope of this Agreement, even if
the actions are implemented by leased employees, Client shall be acting solely
on its own volition and responsibility. Further, if Staff provides leased or
Staff supervisors to Client such supervisors' scope of employment is strictly
limited. Supervisors' actions which are in violation of law will be outside the
scope of their responsibility.
D. Staff will give written notice of the relationship between Staff and
Client to each leased employee it assigns to perform services at Client's
worksite. If for any reason this Agreement is terminated, Staff will notify all
leased employees of the termination of this Agreement and Client also shall
notify all employees of the termination of this Agreement and shall inform them
that they are no longer covered by Staffs benefits or workers' compensation
policy.
E. Client agrees that, since it controls the work site and the scheduling
of employees, it will obtain and accurately report to Staff the total number of
hours worked by each employee and their exempt and non-exempt status, and it
will verify such hours and report them in accordance with the requirements of
the Fair Labor Standards Act and/or any applicable state or local law. Client
assumes full responsibility for the accuracy of such reports and shall maintain
such records of hours worked for a period of seven (7) years. Client shall not
withhold a payment of wages absent express permission from an assigned employee
and it will not violate any applicable law pertaining to the payment of wages.
Client shall not make any taxable payment of any kind, except profit sharing or
pension plan distributions pursuant to the terms of a qualified plan, to any
assigned employee. Client agrees to immediately forward to Staff any garnishment
orders, involuntary deduction orders, notices of IRS liens and other forms of
legal process affecting the payment of wages to assigned employees and to
cooperate with Staff in responding thereto.
F. If pursuant to state, local or federal law, an employee is required to
possess or maintain a special license or be supervised by a supervisor who is
required to possess or maintain a special license, Client will be responsible
for verifying such licensure or providing such required supervision, unless
Staff specifically agrees to a different arrangement.
G. Client shall be responsible for the implementation and enforcement of
any and all work site procedures that exist for the purpose of preventing the
misappropriation, theft or embezzlement of Client's personal, real or
intellectual property.
<PAGE> 2
4. Regulatory Compliance:
A. Staff: For any employee leased to Client under this Agreement Staff is
responsible for and hereby agrees to comply with the following:
(i) all rules and regulations governing the reporting, collection
and payment of federal and state payroll taxes on wages paid under this
Agreement, including, but not limited to: a) federal income tax withholding
provisions of the Internal Revenue Code; b) state and/or local income tax
withholding provisions, if applicable; c) Federal Insurance Contributions Act
(FICA); d) Federal Unemployment Tax Act (FUTA) and e) applicable state
unemployment tax provisions;
(ii) applicable workers' compensation laws including, but not
limited to: a) procuring workers' compensation insurance; b) completing and
filing all required reports; and c) administering, managing and otherwise
processing claims and related procedures;
(iii) the Fair Labor Standards Act;
(iv) Internal Revenue Code ss.4980B (COBRA);
(v) Section 1324A(b) of the Immigration Reform and Control Act of
1986, assuming that Client has provided to Staff all necessary and accurate
documentation required by law;
(vi) the Consumer Credit Protection Act, Title III; and
(vii) all rules and regulations governing administration,
procurement and payment of all other employee benefits specified in the Proposal
or covered by this Agreement. Because of requirements imposed by law, Client
will be required to furnish Staff with certain information regarding its
ownership structure and compensation packages of its principals and key
executives. Client warrants that to the best of its knowledge and belief that
such information will be correct.
B. Client: For any employee leased to Client under this Agreement, Client
is responsible for and hereby agrees to comply with the following:
(i) the Occupational Safety and Health Act (OSHA) and related or
similar federal, state or local regulations;
(ii) government contracting requirements as regulated by, including,
but not limited to, a) Executive Order 11246, b) Vocational Rehabilitation Act
of 1973, c) Vietnam Era Veterans' Readjustment Assistance Act of 1974, d)
Walsh-Healy Public Contracts Act, e) Davis-Bacon Act. f) the Service Contract
Act of 1965 and g) any and all similar, related, or like federal, state, or
local laws, regulations, ordinances and statutes;
(iii) professional licensing and liability;
(iv) fidelity bonding requirements;
(v) Internal Revenue Code ss.ss.414(m), (n), & (o). Client agrees to
integrate and coordinate the terms of any extant Client-sponsored benefit plans
so that Staff's plans remain in compliance with all applicable laws;
(vi) Worker Adjustment and Retraining Notification Act ("WARN");
(vii) laws affecting assignment of and ownership of intellectual
property rights including, but not limited to, inventions, whether patentable or
not and patents resulting therefrom, copyrights and trade secrets;
(viii) laws affecting the maintenance, storage and disposal of
hazardous materials. Client shall properly maintain all Material Safety Data
Sheets on an ongoing basis during the term of this Agreement; and
(ix) the Fair Labor Standards Act, Title VII of the Civil Rights Act
of 1964, as amended, the Family and Medical Leave Act of 1993, the Age
Discrimination in Employment Act, the Americans With Disabilities Act (including
provisions thereunder relating to Client's premises), the Florida Civil Rights
Act, the Florida AIDS Act and any other federal, state, county, or local laws,
regulations, ordinances and statutes which govern the employer/employee
relationship.
5. Full Disclosure: Staffs obligations hereunder are expressly conditioned
upon Client's full and accurate disclosure of any and all information requested
by Staff both before and after the execution of this Agreement. Client's failure
to provide full and accurate information shall be a breach of this Agreement.
6. Term of Agreement: This Agreement shall commence on the date it is
executed and shall remain in force and effect for a term of one (1) year
("Initial Term"). Following the Initial Term, this Agreement shall remain in
full force and effect for successive monthly terms (the "Extended Term") until
either (i) the Agreement is renewed for an additional term of a fixed duration
(the "Fixed Term") or (ii) the Agreement is terminated.
7. Client Deposit: If Staff has requested a deposit as a condition
precedent to entering into this Agreement, then any monies of Client on deposit
with Staff shall be applied by Staff to any default in payment by Client under
the terms of this Agreement. On termination of this Agreement, any balance
remaining in the deposit account of Client shall be remitted to Client on or
before sixty (60) days after termination of this Agreement, provided that Client
has performed all of its obligations under the terms of this Agreement.
8. Client Check: Client specifically authorizes Staff to conduct a credit
and background reference check on Client and such officers or owners of Client
as Staff deems appropriate.
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<PAGE> 3
9. Payment:
A. Client will pay Staff the amount(s) specified in the Proposal,
which will be invoiced on a periodic basis. Any amounts not paid when due are
subject to a late penalty of up to 10% of the amount due per month or fraction
thereof that remains outstanding (should the 10% late penalty exceed the maximum
allowed by law, the late penalty shall be the maximum amount allowed by law).
Under no circumstances shall any amounts advanced by Staff and which are not
paid by Client on a timely basis, be deemed a loan to Client. Past due amounts
are delinquent obligations. Staff assumes responsibility for the payment of
wages to the leased employees without regard to payments by Client to Staff,
although in doing so Staff does not waive or limit any claim against Client. If
Client defaults in paying the amounts due Staff and Staff continues to pay wages
to Client's wages at a rate not below the statutory minimum wage. Client shall
fully indemnify and hold Staff harmless from any and all claims made by
employees for wages in excess of the amount paid by Staff and any and all legal
fees and expenses incurred in defense of such claims. Unless agreed otherwise in
writing. Client agrees to collect, verify and transmit to Staff's administrative
office no less than three (3) business days before each Staff payroll date any
information required to determine correctly and accurately the amount of the
payment due Staff. Additionally, Client must immediately inform Staff of any
situation in which payment will not be immediately forthcoming, and Staff has
the discretion in such circumstances to require a Client to terminate the
employment of persons for whom payment by Client to Staff will not be made.
B. Client shall pay for services rendered under this Agreement with
bank wire transfers, through Automatic Clearing House (ACH) transfer, negotiable
bank drafts, cashier's check or other method acceptable by Staff. Payment shall
have been made only when Staff has received final, irrevocable credit at its
bank.
C. Staff may adjust the fees set forth in the Proposal to Client as
a result of any statutory changes in the minimum wage, employee taxes, sales tax
or workers' compensation rates, which adjustment shall be effective on the date
of the mandated change.
10. No Collective Bargaining Agreements: Client warrants that there are
no collective bargaining agreements binding upon Client or affecting employees
who are or may be leased and that there are no pending or threatened organizing
efforts affecting the same or unfair labor practices against Client.
11. Workers' Compensation:
A. Insurance Coverage: Employees leased by Staff to Client shall be
covered by workers' compensation insurance in compliance with applicable law,
and as specified in the Proposal. Client understands and agrees that Staff shall
not cover any employee with workers' compensation insurance coverage until that
employee has completed and submitted to Staff an employment information report
and the report has been reviewed, the employee approved for hire and an employee
identification number has been issued by Staff. For employees hired on a day
that is not a business day, coverage will be deemed to have been provided as of
the date of hire so long as the appropriate information is submitted to Staff
before noon of the first business day following the date of hire. Client shall
indemnify and hold Staff harmless from the consequences of (i) employing any
person who has not been hired in accordance with Staffs employment and hiring
procedures and (ii) utilizing any independent contractor on Client's work-site.
Further, Client agrees to require any independent contractor it utilizes to
provide evidence of workers' compensation coverage before the independent
contractor commences work at the worksite. Client acknowledges that Staff's
workers' compensation carrier or Staff is entitled to periodically audit the
employee classification lists, employee rolls and financial records relating
thereto for each Client location to make sure that employees are classified
properly and all employees are being reported for workers' compensation
purposes. In the event that Staff finds that employees have been misclassified
or have not been reported, Client will promptly reimburse Staff, upon invoice,
for charges which otherwise would have been payable by Client had such employees
been properly classified or reported. Staff retains the responsibility for the
management of workers' compensation claims, claims filings and related
procedures. Client agrees to cooperate with Staff in that regard, including in
regard to the notification of injuries required by this Agreement or by law.
B. Notification of Injury; Reinstatement of Workers: If an employee
is injured at an assigned worksite, Client agrees to notify Staff within
forty-eight (48) hours at (800)456-9184 and to cooperate in conducting any
investigation following the accident, to provide transportation to a medical
facility and, if required due to medical restrictions, to permit the employee
(where reasonably possible and permitted by law) to work in a modified-duty
capacity until such time as the employee is no longer medically restricted from
resuming duties performed prior to the accident. Further, Client agrees to
cooperate with Staff in making reasonable accommodations which may be required
of either of them by the Americans With Disabilities Act in providing any leave
required of either of them by the Family and Medical Leave Act or any other
applicable law and in restoring a leased employee to his or her job at the
conclusion of any such leave.
12. Employee Benefits:
A. Staff will provide benefits to those employees covered by this
Agreement who are determined by Staff to be in an eligible class pursuant to the
provisions of each applicable benefit plan as outlined in the Proposal. In
addition to the standard benefit package, Staff may make available additional
optional benefits for those employees covered by this Agreement. In order to be
eligible for such benefits, the employee must meet the eligibility requirements
established by the insurance plan designated in the Proposal. If for any reason
the participation requirements are not met Staff has the right to terminate this
Agreement or to modify it by striking this provision.
B. Client shall retain responsibility for the current COBRA
participants on Client's group health plan in effect on the effective date of
this Agreement.
13. Insurance:
A. Automobile: Client shall obtain and maintain automobile liability
insurance for all owned, non-owned and hired vehicles used in connection with
the work performed on its premises or in connection with its business, and will
cause its insurance carrier to issue a certificate of Insurance evidencing same
to Staff and allowing not less than thirty (30) days' notice of
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cancellation or material change. The policy shall insure against liability for
bodily injury and property damage, with a minimum combined single limit of Three
Hundred Thousand Dollars ($300,000.00) and Uninsured Motorist or PIP equivalent
coverage of at least the minimum limits required by the State where a "no fault"
law shall apply.
B. General Liability: Client shall obtain and maintain general
liability insurance and cause its insurance carrier to issue a Certificate of
Insurance evidencing same to Staff and allowing not less than thirty (30) days'
notice of cancellation or material change. The minimum requirement shall be
Three Hundred Thousand Dollars $300,000.00) combined single limit including, but
not limited to, where applicable, premises, operations, products, completed
operations, contract and broad form property damage, independent contractors,
personal injury, host liquor, and full liquor liability. If Client renders
professional services, it shall obtain and maintain throughout the term and any
succeeding terms of this Agreement, professional liability coverage as
applicable, and will cause its insurance carrier to issue a Certificate of
Insurance evidencing same to Staff allowing not less than thirty (30) days'
notice of cancellation or material change. Unless otherwise speed to, such
policy shall have a combined single limit of not less than Three Hundred
Thousand Dollars ($300,000.00). With regard to insurance referenced in this
paragraph, additional coverage may be required at Staff's discretion based on
size or nature of Client's business.
14. Subrogation and Indemnification: Each party hereby waives any claim in
its favor against the other party by way of subrogation or indemnification which
may arise during the term of this Agreement for any and all loss of or damage to
any of its property or for bodily injury, which loss, damage, or bodily injury
is covered by insurance to the extent that such loss or damage is recovered
under such policies of insurance as required herein. The subrogation and
indemnification concept set forth in this provision is intended to apply only to
insurance matters, and nothing in this provision is intended to alter the
indemnification rights set forth elsewhere in this Agreement.
15. Employee Safety: Where required by applicable state law, Staff shall
retain a right of direction and control over the management of safety, risk and
hazard control involving leased employees performing work at Client's work
sites. Such retained right includes the right to perform safety inspections of
Client's equipment and premises and to promulgate and administer employment and
safety practices. However, liability for employee safety is a responsibility for
Client, who controls the worksite and its business operations. Client
acknowledges that it is responsible for maintaining a safe working environment,
and shall provide, at its expense, all necessary personal protective equipment
and training required under federal or state law or regulation and shall
establish and maintain such safety programs, safety policies and safety
committees as may be required by law. Staff, Staff's workers' compensation and
liability insurance carriers or their assignees have the right to survey the
Client's worksite(s) to look for unsafe conditions or unsafe acts which may lead
to accidents. However, the retention of such right by Staff does not relieve
Client of any obligations that it has pursuant to Federal or Florida's
Occupational Safety and Health Act or any other federal, state or local law
intended to provide employees at Client's worksite with a safe work environment.
Upon notification by Staff to Client of an unsafe working condition, Client
shall within a reasonable period of time take the necessary steps to rectify the
unsafe condition or correct the violation.
16. Indemnification by Client: Client agrees to indemnify, hold harmless,
protect and defend Staff, all of Staff's subsidiaries, affiliates and parent
entities and Staff's partners, agents, attorneys and employees from any and all
claims, expenses, damages (including compensatory and punitive damages) and
liabilities arising from or related to (i) alleged acts, errors or omissions by
Client; (ii) alleged violations of any statute, law or regulation by Client;
(iii) breaches of contact attributed to any leased employee or Client; (iv)
Client's failure to perform any of its obligations under this Agreement; or (v)
alleged failure to pay severance payments to leased employees. All indemnity
obligations of Client hereunder are without monetary limit and without regard to
the cause thereof, including the negligence of Staff, whether the negligence is
sole, joint, comparative or contributory. If such indemnification is for any
reason not available or insufficient to hold Staff harmless, Client agrees to
contribute to the losses involved in such proportion as is appropriate to
reflect the relative benefits received (or anticipated to be received) by Client
and by Staff with respect to the matters contemplated by this Agreement or, if
such allocation is judicially determined to be unavailable, in such proportion
as is appropriate to reflect not only such relative benefits, but also other
equitable considerations such as the relative fault of Client, on the one hand,
and of Staff, on the other hand; provided, however, that Client shall be
responsible for all losses which in the aggregate are in excess of the amount of
all fees (not including pass through payroll costs) actually received by Staff
from Client during the one year period immediately preceding the claim that gave
rise to such losses.
17. Termination:
A. This Agreement is terminable by either party with thirty (30)
days' written notice. Any breach, violation or default of any term or condition
of this Agreement by Client shall give Staff the absolute right to terminate
this Agreement by giving written notice of termination to Client. The
termination date shall be deemed to be the date on which the breach, violation
or default occurred, notwithstanding the fact that Staff delivers notice of
termination to Client subsequent to the date of such incident.
B. In addition to any other breach, violation or default by Client
hereunder, the following shall be deemed breaches, violations or defaults under
the terms of this Agreement:
(i) Client's failure to pay any monies required under the
terms and conditions of this Agreement when due;
(ii) Client's failure to comply with any reasonable directive
regarding health and safety from Staff, Staffs Workers' Compensation carrier or
any government agencies;
(iii) Client's failure to provide any insurance required under
the terms of this Agreement;
(iv) Client's misrepresentation of workers' compensation
classifications or inaccurate reporting of employment rolls, employee payroll
hours, pay rate or salary;
(v) any financial condition of Client's that fits the
definition of financial distress under WARN;
(vi) the filing by or against Client of a petition for
reorganization or bankruptcy, receivership, insolvency or the making by Client
of any assignment for the benefit or creditors; and/or
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(vii) at Staff's discretion, Client's failure to report
payroll for a period in excess of one payroll period or the closing by Client of
any facility or operation.
C. If this Agreement is terminated, the provision for health care
continuation coverage shall be governed by Internal Revenue Code ss.4980B
(COBRA). Both parties shall cooperate to avoid the possibility of a loss of
employment qualifying event under Internal Revenue Code ss.4980B.
D. If this Agreement is terminated and if, and only if, the affected
employees are entitled to the payment of any accrued vacation, sick or personal
leave, Client shall be liable for the payment thereof and will make such
payments directly to Staff. However, if Client continues to employ such affected
employee(s) after termination of this Agreement, Client shall be liable, if at
all, to the employee(s) for same.
E. The indemnification and contribution provisions of this Agreement
shall survive indefinitely the expiration or other termination of this
Agreement.
F. Upon the termination of this Agreement for any reason, the
parties shall continue to have the following obligations through and including
the termination date:
(i) Staff shall have the obligation for wages and benefits payable
to the employees through and including the termination date. If for any reason
(whether or not required by applicable law) Staff makes any payment to any of
the employees after this Agreement has been terminated, Staff shall be entitled
to full reimbursement for such expenditures;
(ii) All obligations of Staff under this Agreement to maintain
workers' compensation insurance coverage and health care coverage on behalf of
the employees shall cease, effective as of the termination date. All such
employees shall be immediately informed by Client that they are no longer
covered by Staff's workers' compensation policy. Client shall immediately assume
all federal, state and local obligations of an employer to the employees which
are not in conflict with state or federal law and shall immediately assume full
responsibility for providing workers' compensation coverage. Staff shall
immediately be released from such obligations as are permitted by law. It is the
intent of the parties that, to the extent allowed by law, they be placed in
their respective positions immediately before their entry into this Agreement in
the event of a termination or Client's failure to pay Staff; and
(iii) Client shall have the obligation to pay all fees payable in
accordance with the provisions of this Agreement which are attributable to the
period ending on the termination date.
18. Third Party Rights: This Agreement is intended solely for the mutual
benefit of the parties hereto and does not create any rights of any kind in a
third party. Staff reserves the right to from time to time assign its rights,
duties and obligations hereunder to another of the limited partnerships
identified in paragraph 1 above and to any successor thereto.
19. Integration: This Agreement constitutes the entire agreement between
the parties with regard to this subject matter and supersedes any and all
agreements, whether oral or written, between the parties with respect to its
subject matter. Client acknowledges that it has not been induced to enter into
this Agreement by any representation or warranty not set forth in this Agreement
including but not limited to any statement made by any marketing agent of Staff.
Client acknowledges that Staff has made no representation that Staffs services
will improve the performance of Client's business.
20. Waiver: Failure by either party at any time to require performance by
the other party or to claim a breach of any provision of this Agreement will not
be construed as a waiver of any subsequent breach nor affect the effectiveness
of this Agreement, nor any part thereof, nor prejudice either party as regards
to any subsequent action.
21. Attorney's Fees: In the event that any action is brought by either
party hereto as a result of a breach or default in any provision of this
Agreement, the prevailing party in such action shall be awarded attorney's fees
and costs incurred by such party in such action in addition to any other relief
to which the party may be entitled.
22. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, without regard to principles
of conflicts of law. Client hereby irrevocably submits itself to the personal
jurisdiction of the courts in and for Manatee County, Florida or in the United
States District Court for the Middle District of Florida, unless a party elects
to arbitrate a dispute as provided in paragraph 23, and Client hereby waives, to
the fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of venue of any such action in such court and any claim that
any such action, suit or proceeding has been brought in an inconvenient forum.
The parties hereby (i) agree not to elect a trial by jury of any issue triable
of right by a jury, and (ii) waive any right to trial by jury fully to the
extent that any such right shall now or hereafter exist. This waiver of right to
trial by jury is separately given, knowingly and voluntarily, by each of the
parties hereto, and this waiver is intended to encompass individually each
instance and each issue as to which the right to a jury trial would otherwise
accrue. Further, Client hereby certifies that no representative or agent of
Staff has represented, expressly or otherwise, that Staff will not seek to
enforce this waiver of right to jury trial provision.
23. Arbitration: If there is a dispute between the parties concerning any
aspect of their relationship, either party to such dispute may elect to
arbitrate the dispute by serving written notice upon the other. Once arbitration
is elected by a party, such election is binding on both parties and the dispute
shall be resolved by an arbitrator selected from a panel provided by the
American Arbitration Association. The cost of arbitration shall be borne equally
by the parties. If both parties agree, the first panel may be rejected in its
entirety, and a second panel may be sought. The rules and procedures utilized by
the American Arbitration Association shall be applied to the arbitration. The
arbitrator's decision shall be final, conclusive and binding, except as
permitted by the Federal Arbitration Act.
24. Intellectual Property Rights: Client shall own any and all
intellectual property rights incident to any and all process, products,
inventions and so on that are created or invented by an individual leased to
Client and who was directed by Client to create
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or develop such process, product, etc. Client shall bear any and all costs
associated with any copyrights or trademarks that Client chooses to obtain to
protect Client's intellectual property rights.
25. Duty to Cooperate: If an employee or a government agency or entity
files any type of claim, lawsuit or charge against Staff, Client or both then
Client and Staff shall cooperate with each other in the defense of any such
claim, lawsuit or charge. Staff and Client will make available to each other
upon request any and all documents that either party has in its possession which
relate to any such claim, lawsuit or charge. However, neither party shall have
the duty to cooperate with the other if the dispute is between the parties
themselves nor shall this provision preclude the raising of cross claims or
third party claims between Client and Staff, if the circumstances justify such
proceedings. The parties agree that this provision shall survive the termination
of this Agreement.
25. Severability: Should any term, warranty, covenant, condition, or
provision of this Agreement be held to be invalid or unenforceable, the balance
of this Agreement shall remain in force and shall stand as if the unenforceable
part did not exist. The captions in this Agreement are provided for convenience
only and are not part of the terms and conditions of this Agreement.
27. Modification and Implementation: Any modifications to this Agreement
must be in writing and executed by Staff and Client to be enforceable.
28. Remedies not Exclusive: The rights and remedies of this Agreement
herein provided shall not be exclusive and Staff shall have rights and remedies
now or hereafter provided by law in addition to those provided for in this
Agreement. Institution of an action to effect collection of payment of an amount
in default at law or the obtaining of a judgment in such action shall not be
deemed to be an election by Staff nor shall it bar Staff from pursuing other
remedies available to it at law or in equity.
29. No Partnership or Agency: Nothing set forth herein shall be deemed to
create a partnership or joint venture between Client and Staff, and no fiduciary
duty shall arise from the relationship created herein. In no event may Client
act as an agent of Staff unless specifically authorized to do so in writing.
30. Counterparts: This Agreement may be signed in one of more
counterparts, each of which when executed shall be deemed an original and
together shall constitute one and the same instrument.
CLIENT STAFF
WESTSTAR ENVIORNMENTAL, INC. STAFF LEASING II, L.P.
By: /s/ Michael E. Ricks By: /s/ John Fanning
- ----------------------------- -----------------------------
Signature Signature
MICHAEL E. RICKS JOHN FANNING
- ----------------------------- -----------------------------
Typed/Printed Name Typed/Printed Name
SENIOR
PRESIDENT/CEO VICE PRESIDENT
- ----------------------------- -----------------------------
Title Title
DATE: April 10, 1996 DATE: April 10, 1996
------------------------ ------------------------
Florida Department of Business and Professional Regulation Employee Leasing
Company Group License #GL 22
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<PAGE> 1
ASSET SALE AND PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 4th day of October,
1996, by and between CBP RESOURCES, INC., a Delaware corporation ("Buyer"), and
WESTSTAR ENVIRONMENTAL, INC. (f/k/a WESTSTAR ENVIRONMENTAL PUMPING AND SEPTIC
SERVICE, INC.), a Florida corporation ("Seller").
WITNESSETH:
WHEREAS, for the consideration and upon the terms and conditions set forth
herein, the Buyer desires to purchase from the Seller and the Seller desires to
sell to the Buyer, substantially all of the assets, excluding real property
owned and utilized by the Seller in the operation of its grease trap business in
the States of North Carolina, South Carolina, Tennessee, Virginia, West
Virginia, Maryland, Alabama and District of Columbia (hereinafter referred to as
the "Business");
NOW, THEREFORE, for and in consideration of the above premises, the mutual
covenants hereinafter contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties do hereby
agree as follows:
1. Sale and Transfer of the Assets.
Terms of Transfer. Subject to the terms and conditions herein set
forth, Seller agrees to sell, convey, assign, transfer and deliver to Buyer as
the same exist on the Closing Date the following (the "Assets"):
(i) "Equipment." Those certain vehicles and related accessories
listed on Schedule 1(a)(i) attached hereto and incorporated herein by
reference;
(ii) "Accounts." Any and all contracts, agreements, arrangements,
including accounts and orders, related to the Business between Seller and
customers, suppliers and other third parties as described on Schedule
1(a)(ii);
(iii) "Business Records." All books and records relating to the
Business, including but not limited to all credit flies, books of account,
contracts, files, papers, books, warranty records, customer payment
records, purchase orders, customer orders and all other public and
confidential business records related to the Business conducted in the
Prescribed Territory described in Section 12 herein, except those files
which Seller is required by law to keep (in which case a copy shall be
delivered to Buyer); and
(iv) "Goodwill." All rights, title and interest in and to the lists
and
<PAGE> 2
information concerning suppliers and customers and others having business
with Seller, methods, processes, trademarks, patents and intellectual
property rights used in connection with the Assets.
All of the Assets shall be sold and delivered free and clear of any liens,
claims, pledges, security interests, mortgages or encumbrances of any kind,
except liens for current taxes not yet delinquent, liens imposed by law and
incurred in the ordinary course of the Business for obligations not yet due to
carriers, warehousemen, laborers, materialmen, and the like, and defects in
title, none of which, individually or in the aggregate, materially interfere
with the use of the Assets. Seller shall indemnify and hold Buyer harmless
against and from any and all liabilities and all Costs, as defined in Section
15, incurred by Buyer and arising out of or attributable to any such liens,
claims, pledges, security interests, mortgages, interests or defects in title.
The sale, conveyance, assignment, transfer and delivery of the Assets shall be
effected by bills of sale, assignments, or other instruments in such reasonable
or customary form as shall be requested by the Buyer and its counsel and are
reasonably satisfactory to Seller and its counsel. Seller shall at any time from
and after the Closing Date, upon the reasonable request of Buyer, execute,
acknowledge and deliver such additional conveyances, assignments, transfers or
other instruments, as may be reasonably required to assign, transfer or convey
the Assets to Buyer as contemplated by this Agreement.
2. Consideration. Buyer agrees that, subject to the terms and conditions
of this Agreement, and in full consideration for the aforesaid sale, transfer,
conveyance, assignment and delivery of the Assets to Buyer, provided that the
transactions contemplated by this Agreement are consummated, Buyer shall pay to
Seller by its company check at Closing the purchase price of Five hundred
Thousand dollars ($500,000.00).
3. Contracts with Key Customers. Buyer and Seller understand and agree
that the ability to continue to provide services to Seller's customers after the
Closing is a critical and integral part of the transaction described herein.
Accordingly, Seller shall, at its earliest opportunity, arrange for meetings to
occur prior to closing between representatives of Buyer, Seller and key
customers (specifically Food Lion) to allow the parties to explain the proposed
transaction and determine the willingness of those customers to continue to work
with Buyer after the Closing. For a period to be determined by Buyer after the
Closing, Buyer shall give good faith consideration to including on its invoices
to Food Lion wording to identify Buyer as "A Weststar Affiliate."
4. Right of First Refusal. In the event that, at any time after the
Closing, Seller, or any affiliate, or any of their shareholders should receive a
bona fide offer to purchase, or should they (or any of them) offer for sale, any
business engaged in the grease trap business, waste frying oil ("yellow grease")
business or the rendering business, Seller shall give written notice to Buyer of
the terms of any such offer or proposed sale. Buyer shall then have thirty (30)
days to negotiate with the seller of such business toward a definitive
agreement. Seller agrees to use its good faith best efforts to negotiate with
Buyer in this
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<PAGE> 3
regard.
5. Assumption of Certain Obligations. Buyer shall assume, pay, perform,
defend or discharge those certain liabilities and obligations of the Seller
arising out of the Accounts and as specifically disclosed and described on
Schedule 1(a)(ii), attached hereto; provided, however, that, except as
specifically disclosed and described herein, Buyer shall not assume or pay, and
Seller shall continue to pay, perform and satisfy all other liabilities and
obligations of Seller or any affiliate or their Shareholders, including, but not
limited to, any duty to any employee to pay wages, compensation or health,
unemployment or pension benefits of any kind and all past, current or future
taxes that may be imposed or levied on the Seller related to the Business or any
deficiencies, interest or penalties in connection therewith and Seller shall
indemnify and hold Buyer harmless against and from any and all such liabilities
and all Costs, as defined in Section 15, incurred by Buyer and arising out of or
attributable to any such liabilities, all in accordance with Section 15 hereof.
6. Closing. Subject to the conditions herein, the closing ("Closing") of
the sale contemplated herein shall take place at the offices of Buyer on or
before October 18, 1996 (the "Closing Date"). The transactions contemplated by
this Agreement shall be deemed to be effective as of the close of business on
the Closing Date. At the Closing, the parties hereto will deliver such
consideration, instruments and documents as are required hereunder, together
with opinions of counsel on behalf of Buyer and Seller in form reasonably
satisfactory to the party receiving such opinion.
7. Representations and Warrantees of Seller. Seller represents, warrants
and agrees as follows:
(a) Corporate and Other Matters. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida.
The Business is duly registered and authorized to do business in Florida and any
other jurisdiction(s) where it does business. Seller has the corporate power to
enter into and perform its obligations under this Agreement. All necessary
corporate action required to be taken to authorize the execution, delivery and
performance of this Agreement by Seller has been fully and validly taken. This
Agreement constitutes the valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms.
(b) Title to Properties; Condition of Assets. The Seller has good and
marketable title to all its properties and Assets, free and clear of all liens,
mortgages and encumbrances, and no claims have been made or threatened which, if
substantiated, would make this subparagraph untrue. The Equipment being sold to
Buyer hereunder is in good operating condition and repair and is substantially
fit for the purposes for which it is being utilized. The Seller has not received
any notice of violation of any applicable zoning regulation, ordinance or other
law, order, regulation, or requirement relating to its operations of its owned
or leased properties used at the Business which has not been complied with or
corrected. Not by way of limitation, no officer or employee of Seller has
received any
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<PAGE> 4
notification from the Occupational Safety and Health Administration, the
Environmental Protection Agency or from any other governmental body or agency
indicating that Seller's Business is or may be in violation of any law,
regulation or requirement.
(c) Warrantees as to Assets. Seller hereby agrees to assign to Buyer to
the extent possible all rights of Seller in and to any and all warrantees,
guarantees, and representations (express or implied) made or given by suppliers
or manufacturers in connection with Seller's acquisition of the Assets.
(d) Compliance with Law; Authorizations. Seller has not received any
notice of any violation of or non-compliance with any law, rule, regulation,
order, ordinance or requirement applicable to Seller's operation of the
Business and, to the best of the knowledge of the Seller, no such violation or
non-compliance exists. Seller owns, holds, possesses or lawfully uses in the
operation of the Business all licenses, permits, easements, rights,
applications, filings, registrations and other authorizations ("Authorizations")
which are in any manner necessary for it to conduct the Business as previously
conducted by Seller, free and clear of all liens, charges, restrictions and
encumbrances and in compliance with laws and regulations of any governmental
entities. All such Authorizations are listed on Schedule 7(d). None of such
Authorizations will be adversely affected by consummation of the transactions
contemplated hereby. All such Authorizations are renewable by their terms or in
the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
(e) Taxes. Seller has filed or caused to be filed, within the time and in
the manner prescribed by law, all federal, state, local and foreign tax returns
and tax reports required to be filed by it. Such returns and reports are
accurate and complete in all material respects. All federal, state, local and
foreign income, profits, franchise, sales, use, occupancy, excise and other
taxes and assessments (including interest and penalties) reflected on such
returns payable by, or due from, the Seller on or prior to the date hereof have
been fully paid, including without limitation 1995 and prior years' ad valorem
taxes on the Assets. All 1996 personal and ad valorem property taxes on the
Assets shall be prorated between the Buyer and Seller at Closing and shall be
paid by Buyer within such time and in the manner prescribed by law. Seller will
comply with all statutes regarding payment of taxes, the failure of which could
adversely affect either the Assets or Buyer.
(f) No Breach. The execution, delivery and performance of this Agreement
by Seller does not and will not violate, conflict with or result in the breach
of any term, condition or provision of, or require the consent of any other
person under
(i) any existing law, ordinance, or governmental rule or regulation
to which Seller is subject,
(ii) any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or
authority which is
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<PAGE> 5
applicable to Seller,
(iii) the charter documents of Seller, or
(iv) any mortgage, indenture, agreement, contract, commitment,
lease, plan, Authorization (as defined in Section 7(d)), or other
instrument, document or understanding, oral or written, to which Seller is
a party, or by which the Assets are bound or may be affected.
No authorization, approval or consent of and no registration or filing
with, any governmental or regulatory official, body or authority is required in
connection with the execution, delivery or performance of this Agreement by
Seller.
(g) No Brokers. The negotiations relative to this Agreement and the
transactions contemplated hereby have not been carried on by the Seller
utilizing the services of any person or firm or in any manner which could give
rise to any valid claim against either of the parties hereto for a brokerage
commission, finder's fee or other like payment to any person or entity. Seller
shall be responsible for and indemnify Buyer against any claims for payment(s)
to any business broker with regard to this transaction.
(h) Environmental Matters.
(i) For purposes of this section, "Environmental Laws" means any
federal, state or local statute, regulation, permit, license or order
relating to the discharge, release, threatened release, treatment,
storage, disposal or manufacture of Hazardous Substances or otherwise
relating to the pollution or contamination of the environment and
protection of health. "Hazardous Substances" means petroleum, petroleum
products, any hazardous or noxious pollutant material, substance or solid
waste, and any hazardous wastes and hazardous substances as determined in
the Comprehensive Environmental Response Compensation and Liability Act as
amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C.
ss.9601, et seq.; the Resource Conservation Recovery Act as amended, 42
U.S.C. ss.6901, et seq.; the Toxic Substances Control Act as amended, 15
U.S.C. ss.2601, et seq.; and the Clean Water Act as amended, 33 U.S.C.
ss.1251, et seq.
(ii) The Seller is in compliance in all material respects with all
applicable Environmental Laws.
(iii) No lien has attached to, and no known basis exists for the
attachment or assertion of a lien against the Assets or any personal
property of the Seller related to the Business pursuant to any
Environmental Laws.
(iv) The Seller has received no written or oral notice of any
violation of any Environmental Law with respect to the Assets which would
require any remedial
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<PAGE> 6
action under any Environmental Law.
(v) In the operations of the Business, the Seller has utilized
appropriately licensed haulers and transporters to dispose of any
Hazardous Substance.
(vi) The Seller is not aware of any past or present events,
conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent continued compliance with any
Environmental Laws that are currently applicable to the Seller, or which
may give rise to any common law or legal liability under any Environmental
Laws, or which might otherwise form the basis for any claim, action, suit,
proceeding, hearing or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened
release into the environment of any Hazardous Substance by the Business.
(vii) The Seller is in compliance with and has made any required
reports pursuant to any federal, state or local hazardous chemicals or
community right-to-know laws concerning Hazardous Substances including
those required by federal, state or local Occupational Safety and Health
Administration Hazard Communication Standards.
(i) Financial Statements. Seller has delivered to Buyer true, correct and
complete copies of the balance sheet of the Business for the period ending
December 31, 1995, and at December 31, 1994, and the related statements of
income and cash flow for the periods then ended and will deliver to buyer any
subsequent interim financial statements prepared by or for Seller relating to
the Business, all of which have been prepared in accordance with generally
accepted principles consistently applied throughout the periods described. Such
balance sheets fairly present the financial position, assets and liabilities of
Seller at the dates indicated.
(j) No Litigation. Except as listed on any Schedule 7(j), no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the best knowledge of Seller, threatened against Seller or which
relates to the Assets or the transactions contemplated by this Agreement, or
does Seller know of any reasonably likely basis for any such litigation,
arbitration, investigation or proceeding, the result of which could have an
adverse affect on Seller, the Assets or the Business.
(k) Outstanding Agreements. Except as listed on any Schedule attached
hereto, the Seller is not a party to and is not bound by any contract or
agreement adversely affecting the Business. Seller, with regard to the Business,
has performed all of the obligations required to be performed by it to date and
is not in default in any material respect under any of the agreements, leases,
contracts or other documents to which it is a party. No party with whom Seller
has an agreement which is of importance to the Business
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<PAGE> 7
\
of Seller is in default thereunder. Except as specifically disclosed, all
contracts and agreements related to the Business are assignable without the
consent or approval of any other party.
(l) Delivery of Information to Buyer. The Seller has delivered to Buyer
complete and correct copies or summary descriptions of such, if any, of the
following, as the Seller possesses with regard to the Business: all policies of
insurance in force with respect to the Equipment; and all presently existing
contracts and commitments of the Seller.
8. Representations and Warrantees of Buyer. Buyer represents and warrants
that Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer has the corporate power
to enter into and perform its obligations under this Agreement. This Agreement
constitutes the valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms.
9. Conduct of Business Pending Closing. Seller agrees that pending the
Closing and, except as otherwise consented to or approved by Buyer in writing:
(a) Ordinary Course. Seller shall carry on the Business diligently, in the
ordinary course and substantially in the same manner as heretofore. Seller shall
use its best efforts to conduct the operations of the Business in such a manner
that on the Closing Date the representations and warranties of Seller contained
in this Agreement shall be true as though such representations and warranties
were made on and as of such date.
(b) Business and Goodwill. Seller shall use its best efforts to keep
available the services of the present employees and agents of the Business, to
preserve the organization of the Business intact, and to preserve for Buyer the
goodwill of Seller's Business suppliers, customers, and others having business
relations with it. Seller shall not provide any confidential information
concerning the Business or its properties or assets to any third party.
(c) Compliance. Seller will duly comply with all provisions of leases and
with all applicable laws, rules, ordinances and regulations which if violated
might impair the conduct of the Business or impose material liability on itself
as the owner of such Business. Seller shall cooperate with Buyer and use its
best efforts to cause all of the conditions to the obligations of Buyer and
Seller under this Agreement to be satisfied on or prior to the Closing Date.
(d) Maintenance. Seller will continue all normal repairs, servicing,
replacement, maintenance and upkeep of the Equipment. Seller will maintain all
insurance now in force covering the Equipment.
(e) Material Transactions. Within the Prescribed Territory described
herein, Seller will not enter into any material transaction, contract or
commitment other than in
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<PAGE> 8
the ordinary course of business.
(f) Disclosures. Seller shall promptly disclose to Buyer any information
contained in its representations and warranties or the Schedules which, because
of an event occurring after the date hereof, is incomplete or is no longer
correct; provided, however, that none of such disclosures shall be deemed to
modify or amend the representations and warranties of Seller or the schedules
hereto for the purposes of Section 10 hereof, unless Buyer shall have consented
thereto in writing.
(g) Access. Seller shall give to Buyer's officers, employees, counsel,
accountants and other representatives free and full access to and the right to
inspect, during normal business hours, all of the premises, properties, assets,
records, contracts and other documents of or pertaining to the Business and
shall permit them to consult with the officers, employees, accountants, counsel
and agents of Seller for the purpose of making such investigation of the Seller
as Buyer shall desire to make, provided that such investigation shall not
unreasonably interfere with Seller's business operations. Seller shall furnish
to Buyer all such documents and copies of documents and records with respect to
Seller's affairs as Buyer shall from time to time reasonably request and shall
permit Buyer and its agents to make such physical inventories and inspections of
the Assets and Real Estate as Buyer may request from time to time.
10. Conditions Precedent to Buyer's Obligations. The obligations of the
Buyer under this Agreement shall, at the option of the Buyer, be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
(a) Representations and Warranties True at Closing; Performance. All
representations and warranties of the Seller contained in this Agreement shall
be deemed to have been repeated at and as of the Closing, and shall then be true
and correct in all material respects; and the Seller shall have performed and
complied with all covenants, agreements and conditions required in this
Agreement to be performed or complied with by it at or prior to the Closing.
(b) Assignments and Bills of Sale. The Seller shall have delivered to the
Buyer duly executed bills of sale, documents of transfer and any other
instruments necessary to effect and evidence the transfer of the Assets to the
Buyer pursuant to Section 1 including, but not limited to, a General Assignment
and Bill of Sale.
(c) Corporate Matters. The Buyer shall have received from Seller (i) a
Certificate of Existence for the Seller from the Secretary of State of Florida
and (ii) a copy of the resolutions of the board of directors and/or shareholders
of the Seller, authorizing the execution, delivery and performance by the Seller
of this Agreement and the other documents required hereby, certified by the
Secretary or an Assistant Secretary of the Seller.
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<PAGE> 9
(d) Key Employee Arrangements. Buyer shall have concluded arrangements
with such employees of Seller as Buyer may desire to secure the continued
consulting services of such individuals with Buyer following the Closing.
Specifically, Buyer shall have entered into a Consulting and Non-Compete
Agreement with Michael Ricks on such terms reasonably satisfactory to Buyer and
such individual.
(e) Key Customer Arrangements. The Buyer shall have secured approval from
certain key customers of Seller on or before Closing upon terms reasonably
satisfactory to it for the acquisition of the Assets. Buyer shall exert its best
efforts to secure such approval upon terms reasonably satisfactory to it.
(f) Legislation. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any domestic or foreign governmental
branch, agency or body which would make the transactions contemplated hereby or
which would otherwise have a material adverse effect on the Seller after the
Closing.
(g) Approval of Schedules. The Buyer shall have reviewed and approved the
information disclosed in all of the Schedules referred to herein which have been
prepared by the Seller.
11. Conditions Precedent to Seller's Obligations. All obligations of
Seller under this Agreement are subject to the fulfillment prior to Closing of
the condition that Seller shall not have discovered any material error,
misstatement or omission (which has not been cured) in the representations and
warranties by Buyer contained in this Agreement. All representations and
warranties of Buyer contained in this Agreement shall be true as of the Closing
and all obligations and agreements required by this Agreement to be performed by
Buyer shall have been performed.
12. Noncompetition. For ten (10) years from and after the Closing Date
(the "Noncompetition Period"), Seller shall not directly or indirectly own,
manage, operate, join, control or participate in the ownership, management,
operation, or control of, as a principal, shareholder, owner, consultant or
otherwise, any entity located within the Prescribed Territory (as hereinafter
defined) that is engaged in the grease trap business, the recycling of waste
frying oil business (or "yellow grease business") and the rendering business and
any related products or services currently or previously manufactured, sold,
distributed or provided by Seller's Business as of the Closing Date ("Business
Activities"). For purposes of this Agreement, the term "Prescribed Territory"
shall mean the area within the State(s) 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 the border lines of such
states together with a one hundred (100) mile area or radius around any
operating facility owned, leased or operated by Buyer as of the Closing Date.
Further, Seller agrees that during such ten (10) year Noncompetition Period
within the Prescribed Territory, Seller shall not solicit or accept orders or
business relating to the Business Activities from (i) any customer or active
prospect of the Business as of the Closing
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<PAGE> 10
Date or (ii) any former customer of the Business. Seller acknowledges that a
breach of any of the covenants contained in this Section 12 may result in
material irreparable injury to the Buyer for which there is no adequate remedy
at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the Buyer
shall be entitled, in addition to any other relief to which the Buyer may be
entitled, to obtain a temporary restraining order and/or preliminary and
permanent injunctions restraining the Seller from engaging in activities
prohibited by this Section 12 or such other relief as may be required to
specifically enforce any of the covenants in this Section 12. The Seller hereby
agrees and consents that such injunctive relief may be sought in any state or
federal court of record in the State of North Carolina.
In the event that, during the Noncompetition Period, Buyer decides to
discontinue providing grease trap services to any Account(s) located within the
Prescribed Territory, Buyer shall notify Seller by letter (in form as set forth
in Schedule 12 attached hereto) that Seller shall have the right to provide
those services to such Account(s), subject to the terms and conditions in such
written notice. Buyer shall use good faith efforts to economically organize any
such Accounts as to which such notice is given.
13. Tax Matters: Allocation of Purchase Price. The Buyer and the Seller
agree to allocate the aggregate purchase price in accordance with the allocation
requirements of Section 1060 of the Internal Revenue Code of 1986 and the
regulations thereunder ("the Code"). The Buyer and the Seller have considered
the values and have determined that the respective fair market values of the
Assets, subject to adjustments at Closing as provided in Section 2(b), are as
follows:
<TABLE>
<CAPTION>
Assets Value
------ -----
<S> <C>
Accounts $379,000.00
Equipment and Machinery 121,000.00
TOTAL $500,000.00
</TABLE>
Each party agrees that all returns, schedules and forms (including Federal
income tax returns, schedules and forms) filed by them with respect to taxes
will be consistent with actual market values of the Assets. The Buyer and the
Seller further agree to timely file Form 8594 and to comply with all reporting
requirements as required under Section 1.1601T(h) of the Temporary Regulations
promulgated under Section 1060 of the Code.
14. Employment Matters. Except for the Consulting Agreement between Buyer
and the individual referred to in Section 10(d), which Agreement shall be
executed and delivered at Closing, Buyer shall have no obligation to hire any of
the other employees employed by Seller in connection with the business. Seller
shall retain the sole liability, which Buyer does not assume, for all salaries,
compensation, vacation time, sick time and other benefits accrued for the
benefit of its employees prior to the Closing Date.
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15. Indemnification. The liability of any party in respect of a breach of
a representation, warranty, covenant, indemnity or Agreement contained in or
arising in connection with this Agreement shall be governed by the terms of this
Section
(a) Indemnification by Seller. Seller and the individual shareholders of
Seller whose signatures appear on the signature page of this Agreement
(collectively referred to as "Seller" for purposes of this Section 15), agree to
indemnify and hold Buyer harmless against and from any and all taxes, claims,
liabilities, damages, losses, costs and expenses, including without limitation
reasonable attorneys' fees and other expenses of defending any actions or
claims, amounts of judgments and amounts paid in settlement (collectively, all
of the foregoing being called "Costs"), incurred by Buyer and arising out of, or
attributable to (i) any breach of any representation, warranty or covenant made
by Seller herein or in any certificate furnished by Seller pursuant hereto; (ii)
the existence of any lien, claim, pledge, security interest, mortgage, interest
or minor defect in title subject to which the Assets are delivered to Buyer
pursuant to this Agreement; (iii) any claim, known or unknown, arising out of,
or by virtue of, or based upon Seller's business and operations (including,
without limitation, any product liability or warranty claim arising out of the
sale or delivery of merchandise) prior to the Closing; (iv) any nonfulfillment
of any agreement of Seller hereunder; or (v) any claim arising out of or by
virtue of or based upon Seller's operation of the Business prior to the Closing
Date. Buyer shall, promptly after the service of process in a lawsuit or after
it receives notice from any third party that such party intends to assert a
claim which could result in indemnification hereunder, give Seller notice of
such claim. "Promptly" for purposes of this Section shall mean giving notice
within thirty (30) days. Seller shall have the right to assume the defense of
any such claim or lawsuit asserted against Buyer by a third party, with counsel
reasonably satisfactory to Buyer, and in such event, Seller will not be liable
to Buyer for any further legal or other expenses incurred by Buyer in connection
with the defense thereof, other than the reasonable cost of investigation or
assistance required by Buyer. Buyer may, however, participate actively, at its
sole expense, in any such lawsuit and may, during the pendency of any such
action, withhold any amounts due to Seller (as herein defined under this or any
related Agreement to offset any amount or cost as to which Seller may be
required to indemnify Buyer. If Seller so assumes the defense of any such claim
or lawsuit, all costs of the defense thereof shall thereafter be borne by Seller
and it shall have the authority to compromise and settle such claim or lawsuit
or to appeal (or cause Buyer to appeal) any adverse judgment or ruling with the
cost of such appeal to be paid by Seller; provided, however, that if any such
compromise or settlement would divest Buyer of any Asset transferred pursuant to
this Agreement or if Buyer may have any unindemnified liability arising out of
such claim or lawsuit, Seller shall have the authority to compromise or settle
such claim or lawsuit only with the written consent of Buyer, which consent
shall not be unreasonably withheld. Buyer, and Seller will cooperate fully with
each other with respect to discovery, inquiries or investigations in connection
with any claim or lawsuit (including, without limitation, any products liability
claim) for which indemnity is sought hereunder.
(h) Indemnification by Buyer. Buyer agrees to indemnify and hold Seller
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<PAGE> 12
harmless against any and all Costs, as defined in Section 15(a), incurred by
Seller and arising out of or attributable to (i) any breach of any
representation, warranty or covenant made by Buyer herein or in any certificate
furnished by Buyer pursuant hereto, (ii) any nonfulfillment of any agreement of
Buyer hereunder, or (iii) any claim arising out of or by virtue of or based upon
Buyer's operation of the Business of the Seller after the Closing date, except
to the extent that such claim is one as to which Seller is required to indemnify
Buyer pursuant to this Agreement or any other document or agreement executed and
delivered pursuant hereto. Seller shall, promptly after the service of process
in a lawsuit or after it receives notices from any third party that such party
intends to assert a claim which could result in indemnification hereunder, give
Buyer notice of such claim. "Promptly" for purposes of this Section shall mean
giving notice within thirty (30) days. Buyer shall have the right to assume the
defense of any such claim or lawsuit asserted against Seller by a third party,
with counsel reasonably satisfactory to Buyer, and in such event, Buyer will not
be liable to Seller for any further legal or other expense incurred by Buyer in
connection with the defense thereof, other than the reasonable cost of
investigation or assistance required by Seller. If Buyer assumes the defense of
any such claim or lawsuit, all costs of the defense thereof shall thereafter be
borne by Buyer and it shall have the authority to compromise and settle such
claim or lawsuit or to appeal (or cause Seller to appeal any adverse judgment
or ruling with the cost of such appeal to be paid by Buyer. Buyer shall have
the right to approve any out-of-court settlement (which approval shall not be
unreasonably withheld) of any claim or lawsuit for which it does not assume the
defense, if Buyer is to be liable to Seller for indemnification hereunder with
respect thereto. Seller and Buyer will cooperate fully with each other with
respect to discovery, inquiries or investigations in connection with any claim
or lawsuit (including, without limitation, any products liability claim) for
which indemnity is sought hereunder.
16. Bulk Sales. The parties hereto acknowledge that they are not complying
with the Bulk Sales Act of the State of North Carolina or the State of Florida
in connection with this transaction. However, Seller hereby agrees to indemnify
Buyer pursuant to the terms and provisions of Section 15 from and against any
claim, loss, damage, or liability arising from said failure to comply.
17. Survival of Representations and Warranties. The representations and
warranties contained herein shall survive for a period of thirty-six (36)
months after the Closing.
18. Further Assurances. From time to time hereafter and without further
consideration, Seller shall execute and deliver such additional or further
instruments of conveyance, assignment and transfer and take such actions as
Buyer may reasonably request in order to more effectively convey and transfer
to Buyer the Assets sold to Buyer hereunder or as shall be reasonably
necessary or appropriate in connection with the carrying out of Seller's
obligations hereunder or the purposes of this Agreement. From time to time
hereafter and without further consideration, Buyer shall execute and deliver
such additional or further instruments of assumption and take such actions as
Seller may
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reasonably request in order to more effectively consummate the assumption of
the obligations of Buyer specified herein or as shall be reasonably necessary or
appropriate in connection with the carrying out of Buyer's obligations hereunder
or the purposes of this Agreement.
19. Announcements and Press Releases. Any press release or other public
announcement concerning this Agreement or the transactions contemplated herein
shall be approved by both Seller and Buyer.
20. Amendments. This Agreement may be amended or modified, only by a
written instrument executed by Buyer and Seller acting through their respective
duly authorized officers.
21. Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, all of which together shall constitute one and the same
instrument.
22. Parties Bound. This Agreement shall inure to the benefit of and be
binding upon Seller and Buyer and their respective successors and permitted
assigns.
23. Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified mail with postage prepaid:
If to Seller:
Weststar Environmental, Inc.
Route 5, Box 7344
Starke, FL 32901
If to Buyer:
CBP Resources, Inc.
P.0. Box 20687
Greensboro, NC 27420
Attn: President
With a copy to:
Marc L. Isaacson
Isaacson & Isaacson
P.0. Box 1888
Greensboro, NC 27402
24. Entire Agreement. This Agreement sets forth the entire understanding
of the
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parties with respect to the subject matter hereof. Any previous agreements or
understandings between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement.
25. Applicable Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of North Carolina.
26. Headings. The heading to the sections of this Agreement are inserted
for convenience only and shall not affect the meaning or interpretation of this
Agreement.
27. Termination. This Agreement may be terminated and abandoned by the
mutual consents of the Boards of Directors of Buyer and Seller at any time
prior to the Closing Date, and the Board of Directors of either party may waive
any of the conditions of the obligations of any other party under this Agreement
upon a determination that any such waiver shall not be adverse to its best
interests or those of its Shareholders. This Agreement may be terminated by the
Board of Directors of either party, upon written notice to the other party, if
any of the conditions to a party's obligations to consummate the transaction
contemplated hereunder as provided, in the case of the Buyer in Section 10, and
in the case of the Seller in Section 11, shall not be reasonably capable of
being satisfied on or before the Closing Date.
28. Severability. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, covenants and restrictions contained in this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the day and year first above written.
SELLER
WESTSTAR ENVIRONMENTAL, INC.
By: /s/ Michael E. Ricks,
------------------------
President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
14
<PAGE> 15
BUYER:
CBP RESOURCES, INC.
By: /s/ David Evans
------------------------
Vice President
Michael E. Ricks individually joins in the execution of this Agreement for
the purposes described herein.
/s/ Michael E. Ricks
---------------------------
Michael E. Ricks
B & B Plumbing and Septic Service, Inc., a Florida corporation and an
affiliate of Weststar Environmental Pumping and Septic Services, Inc., joins in
the execution of this Agreement to evidence its consent to and joinder in
Seller's representations, warranties and covenants herein.
B & B PLUMBING AND SEPTIC SERVICE, INC.
By: /s/ Michael E. Ricks
------------------------
President
15
<PAGE> 16
Schedule 1(a)(i)
Equipment
1 1989 Freightliner Tractor vin 1FUPACYB1KH341388 (Weststar unit #28)
1 Pump Trailer unknown manufacturer SN FLT3627-HH (Weststar unit # 222)
<PAGE> 1
[Letterhead of Food Lion]
August 20, 1996
Mike Ricks
Weststar Environmental, Inc.
407 West Georgia Street
P.O. Box 6003
Starke, FL 32091
Dear Mike:
Effective September 1, 1996, I am accepting your proposal to service all Food
Lion stores in Virginia, Maryland (excluding the Ocean City Area), and
Pennsylvania as well as Tennessee, Kentucky, Florida, Georgia, South Carolina
and North Carolina by cleaning the internal and external grease traps on a
quarterly basis at $71 per trap. The time frame for this service should be
monitored as it may become necessary to clean the internal traps more
frequently. In our previous agreements, we looked at the 750 to 1,000 gallon
trap as standard or a single trap charge and the 1,500 gallon trap as a double
with a double trap charge. Effective with this agreement we will look at all
traps as being equal.
It is also acknowledged that Weststar will be affiliated with Carolina By
Products with Weststar held responsible for the quality and timeliness expected.
The installation of jets on the service trucks will allow for cleaning of the
lines.
The first route service should be a combination of service needs and evaluation
of equipment. After which I would like a summary of your evaluation and any
recommendations.
The billing should be set up in statement form, billed weekly, payable in 30
days from invoice date.
This service agreement will apply for three (3) years beginning 9/1/96 through
8/31/99. If for any reason Food Lion is not satisfied with the service provided,
the agreement will be void 30 days after notification.
It will be necessary for you to check with all the Maintenance Supervisors for
the new areas of service since I know we do have stores with special needs or
requirements. I have noted the Maintenance Supervisor's mailbox extensions for
your convenience.
<PAGE> 2
Page 2
If there is anything that does not meet with your understanding of the program,
please do not hesitate to call.
Sincerely,
EXTRA LOW PRICES AND MORE
/s/ Lorna Rash
LORNA RASH
Store Maintenance Office Manager
LR/ae
cc: Susan Sollenberger
Reid Soady
Steve Millard
Divisional Maintenance Managers - Steve Millard #5219, Reid Soady #5368
Maintenance Supervisors - Stan Watson #5326, Mike Craven #5048, Bill Faith
#5346, Mark Banks #5403
Enclosure - List of Stores by Supervisor
<PAGE> 1
CONTRACT
THIS CONTRACT Executed this 31st day of Oct, 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 that 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 and 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. The 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 the 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 (herein after 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 Contact. 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 for 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 Contact by CONTRACTOR, the OWNER
shall 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
By
- ----------------------------- -----------------------------
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./C.E.O.
- ----------------------------- ----------------------------
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 10/12/97
-------------------------------
JOHN J. WOLFEL
Controller 4308
Jacksonville Electric Authority
Form Approved:
/s/ Neil McArthur Jr.
- -----------------------------
Assistant General Counsel
<PAGE> 1
---------------------------
CONSULTANT AGREEMENT
---------------------------
CONSULTANT AGREEMENT, made as of January 1, 1998 between Weststar
Environmental, Inc. (the "Corporation"), and Thomas C. Souran (the
"Consultant").
WHEREAS, the Corporation wishes to assure itself of the services of the
Consultant for the period provided in this Agreement, and the Consultant is
willing to provide its services to the Corporation for the said period under the
terms and conditions hereinafter provided.
NOW, THEREFORE, WITNESSETH, that for and in consideration of the
premises and of the mutual promises and covenants herein contained, the parties
hereto agree as follows:
1. ENGAGEMENT
The Corporation agrees to and does hereby engage the Consultant, and
the Consultant agrees to and does hereby accept engagement by the Corporation in
connection with the operation of the business and affairs of the Corporation,
for the three-year period commencing on January 1, 1998 and ending on December
31, 2000. The three-year period during which Consultant shall serve in such
capacity shall be deemed the "Engagement Period" and shall hereinafter be
referred to as such.
2. SERVICES
2.1 The Consultant shall render to the Corporation the services
described below, with respect to which the Consultant shall apply his best
efforts and devote such time as shall be reasonably necessary to perform its
duties hereunder and advance the interests of the Corporation. The Consultant
shall report to the chief executive officer of the Corporation and to such
persons as the chief executive officer shall direct.
2.2 The services rendered by the Consultant to the Corporation, for
which he shall be compensated hereunder, shall under no circumstances include
the following:
a. Any activities which could be deemed by the Securities and
Exchange Commission to constitute investment banking or any
other activities requiring the Consultant to register as a
broker-dealer under the Securities Exchange Act of 1934.
b. Any activities which could be deemed to be in connection
with the offer or sale of securities in a capital-raising
transaction.
2.3 The services to be rendered by the Consultant to the Corporation
shall consist of the following:
<PAGE> 2
2.3.1 Corporate Planning
a. Develop an in-depth familiarization with the
Corporation's business objectives and bring to its
attention potential or actual opportunities which
meet those objectives or logical extensions thereof.
b. Alert the Corporation to new or emerging high
potential forms of marketing and distribution of its
services which could either be acquired or developed
internally.
c. Comment on the Corporation's commercial development
including such factors as its position in its
competitive environment, its financial performance as
compared to that of its competition, financing
impacts of its alternative strategies, its
maximization of its operational viability, etc.
d. Identify prospective suitable merger or acquisition
partners for the Corporation, perform appropriate
diligence investigations with respect thereto, advise
the Corporation with respect to the desirability of
pursuing such prospects, and assist the Corporation
in any negotiations which may ensue therefrom.
2.3.2 Business Strategies
a. Evaluate business strategies and recommend changes
where appropriate.
b. Critically evaluate the Corporation's performance in
view of its corporate planning and business
objectives.
2.3.3 Commercial Financing
a. Review and comment upon the Corporation's annual and
quarterly financial statements and reports and other
financial disclosures and publications.
b. Develop, in conjunction with the Corporation's
financial personnel and advisers, periodic
projections of its cash needs commensurate with its
projected growth in operations and revenues.
c. Attempt to arrange for commercial financing to meet
the Corporation's projected cash needs by way of
accounts receivable financing and/or factoring,
purchase order financing, equipment financing,
equipment lease financing (closed-end option), sale
and leaseback transactions, institutional commercial
financing (business finance plans, bank letters of
credit [standby], lines of credit, and other
institutional financial accommodation), governmental
financing (US Small Business Administration, State
Economic Authorities, etc.).
2
<PAGE> 3
3. COMPENSATION
3.1 In consideration of the Consultant's having entered into this
agreement, the Corporation agrees to sell to the Consultant 100,000 shares of
common stock of the Corporation, $.001 par value (the "Consulting Stock"). The
price shall be at the per share rate of the par value of the Consulting Stock.
The said price shall be paid and the certificates for the Consulting Stock shall
be delivered as soon as possible, and in all events promptly, following the date
hereof. The terms of the Consulting Stock shall be as follows:
a. The Consulting Stock shall be issued in the name of
the Consultant.
b. The Consultant warrants and represents that he is
knowledgeable concerning the business, financial
condition and prospects of the Corporation and that
he is acquiring the Consulting Stock solely for the
purposes of investment and without a view toward the
resale or distribution thereof.
c. The Corporation warrants and represents that the
Consulting Stock, at the time of its issuance by the
Corporation to the present holders thereof, was duly
and validly issued, fully paid and non-assessable.
3.2 The Corporation shall reimburse Consultant for those expenses,
incurred in connection with its engagement by the Corporation, which shall have
been previously approved by the Corporation in writing, which approval shall not
be unreasonably withheld.
3.3 In the event that the Corporation shall hereafter complete a
merger, acquisition, sale, financing, or similar activity by reason of the
introduction, negotiation, or other assistance rendered by the Consultant under
Sections 2.3.1.d or Section 2.3.2.c hereof, which assistance is material to the
completion of such activity, the Corporation shall compensate the Consultant by
way of consideration which shall have been theretofore negotiated and agreed to
between them, which compensation shall be separate and unrelated to the
Consultant Stock for which provision is made hereunder.
3.4 In the event that the Consultant shall request that the Corporation
file and bring to effectiveness, and the Corporation is eligible to file and
bring to effectiveness, a registration statement (including a reoffer
prospectus) on Form S-8 under the Securities Act of 1933, as amended, with
respect to the Consulting Stock, the Corporation shall forthwith do so at its
expense.
4. SECRETS
Consultant agrees that any trade secrets or any other like information
of value relating to the business and/or filed of interest of the Corporation or
any of its affiliates, or of any corporation or other legal entity in which the
Corporation or any of its affiliates has an ownership interest of more than
twenty-five percent (25%), including but not limited to, information relating to
inventions, disclosures, processes, systems, methods, formulae, patents, patent
applications, machinery, materials, research activities and plans, costs of
production, contract forms, prices volume of sales, promotional methods, list of
names or classes of customers, which it has heretofore acquired during its
engagement by the Corporation or any of its affiliates or which it may hereafter
acquire during the Engagement Period as the result of any disclosures to it, or
in any other way, shall be
3
<PAGE> 4
regarded as held by the Consultant and it personnel in a fiduciary capacity
solely for the benefit of the Corporation, its successors or assigns, and shall
not at any time, either during the term of this Agreement or thereafter, be
disclosed, divulged, furnished, or made accessible by the Consultant and it
personnel to anyone, or be otherwise used by them, except in the regular course
of business of the Corporation or its affiliates. Information shall for the
purposes of this Agreement be considered to be secret if not by trade generally,
even though such information may be disclosed to one or more third parties
pursuant to distribution agreements, joint venture agreements and other
agreements entered into by the Corporation or any of its affiliates.
5. ASSIGNMENT
This Agreement may be assigned by the Corporation as part of the sale
of substantially all of its business, provided, however, that the purchaser
shall expressly assume all obligations of the Corporation under this Agreement.
Further, this Agreement may be assigned by the Corporation to an affiliate,
provided that any such affiliate shall expressly assume all obligations of the
Corporation's under this Agreement, and provided further that the Corporation
shall then fully guarantee the performance of the Agreement by such affiliate.
Consultant agrees that if this Agreement is so assigned, all the terms and
conditions of this Agreement shall obtain between assignee and himself with the
same force and effect as if said Agreement had been made with such assignee in
the first instance. This Agreement shall not be assigned by the Consultant
without the express written consent of the Corporation.
6. SURVIVAL OF CERTAIN AGREEMENTS
The covenants and agreements set forth in Article 4 and Article 5 shall
survive the expiration of the Engagement Period and shall all survive
termination of this Agreement and remain in full force and effect regardless of
the cause of such termination.
7. NOTICES
7.1 All notices or permitted to be given hereunder shall be delivered
by hand, telecopier, or recognized courier service to the party to whom such
notice is required or permitted to be given hereunder. Any delivered to the
address designated for such delivery by such party, notwithstanding the refusal
of such party or other person to accept such delivery.
7.2 Any notice to the Corporation or to any assignee of the Corporation
shall be addressed as follows:
Weststar Environmental, Inc.
9550 Regency Square Blvd., Suite 1109
Jacksonville, Florida 32225
Telecopier: 904-721-7557
7.3 Any notice to Consultant shall be addressed as follows:
Thomas C. Souran
Two Woodland Drive
Great Notch, NJ 07024
Telecopier: 973-785-1928
4
<PAGE> 5
7.4 Either party may change the address to which notice to it is to be
addressed, by notice as provided herein.
8. APPLICABLE LAW
This Agreement shall be interpreted and enforced in accordance with the
laws of New Jersey and all disputes arising hereunder shall be settled by
arbitration before the American Arbitration Association.
9. INTERPRETATION
Whenever possible, each Article of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
Article is unenforceable or invalid under such law, such Article shall be
ineffective only to the extent of such unenforceability or invalidity, and the
remainder of such Article and the balance of this Agreement shall in such event
continue to be binding and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed the above
Agreement as of the day and year first above written.
WITNESS: WESTSTAR ENVIRONMENTAL, INC.
/s/ William Perry By /s/ Michael Ricks
- ------------------------- -----------------------------
MICHAEL RICKS, President
/s/ John L. Milling /s/Thomas C. Souran
- ------------------------- -----------------------------
THOMAS C SOURAN
5
<PAGE> 1
[REDDISH AND WHITE LETTERHEAD]
CONSENT OF INDEPENDENT CERTIFIED 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 February 8 and February
16, 1998, relating to the combined financial statements of Weststar
Environmental, Inc. and B&B Septic and Environmental Services, Inc., which is
contained in the Prospectus.
We also consent to the reference to us under the caption "Experts" in the
prospectus.
/s/ Reddish and White
REDDISH AND WHITE
Certified Public Accountants
Starke, Florida
April 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JAN-03-1998 JAN-03-1997
<PERIOD-END> JAN-03-1998 JAN-03-1997
<CASH> 6,233 (5,796)
<SECURITIES> 0 0
<RECEIVABLES> 407,736 27,064
<ALLOWANCES> 0 0
<INVENTORY> 20,390 24,867
<CURRENT-ASSETS> 451,762 95,603
<PP&E> 2,428,955 2,711,042
<DEPRECIATION> 688,127 701,504
<TOTAL-ASSETS> 2,195,100 2,110,551
<CURRENT-LIABILITIES> 1,182,912 1,284,476
<BONDS> 640,775 697,561
0 0
0 0
<COMMON> 200,000 200,000
<OTHER-SE> 171,413 (71,486)
<TOTAL-LIABILITY-AND-EQUITY> 2,195,100 2,110,551
<SALES> 0 0
<TOTAL-REVENUES> 2,529,258 1,777,316
<CGS> 0 0
<TOTAL-COSTS> 766,188 1,083,690
<OTHER-EXPENSES> 847,211 898,824
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 173,923 103,421
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 741,936 (308,619)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 706,108 (237,102)
<EPS-PRIMARY> 3.531 (1.860)
<EPS-DILUTED> 0 0
</TABLE>
