<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY __, 1999
REGISTRATION NO. __________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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STAR SERVICES GROUP, INC.
(Name of Small Business Issuer in its Charter)
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<S> <C> <C>
FLORIDA 4953 65-0893224
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
STAR SERVICES GROUP, INC.
2075 NORTH POWERLINE ROAD
POMPANO BEACH, FLORIDA 33069
(954) 974-3800
----------------------------
(Address and Telephone Number
of Principal Executive Offices)
STAR SERVICES GROUP, INC.
2075 NORTH POWERLINE ROAD
POMPANO BEACH, FLORIDA 33069
----------------------------
(Address of Principal Place of Business
or Intended Principal Place of Business)
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JACK R. CASAGRANDE
CHAIRMAN OF THE BOARD
STAR SERVICES GROUP, INC.
2075 NORTH POWERLINE ROAD
POMPANO BEACH, FLORIDA 33069
(954) 974-3800
----------------------------
(Name, Address and Telephone Number of Agent for Service)
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COPIES OF ALL COMMUNICATIONS TO:
SAMUEL G. WEISS, ESQ. GARY M. EPSTEIN, ESQ.
WEISS & FEDERICI, LLP GREENBERG TRAURIG, P.A.
30 MAIN STREET 1221 BRICKELL AVENUE
PORT WASHINGTON, NEW YORK 11050 MIAMI, FLORIDA 33131
(516) 944-7749 (305) 579-0500
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<PAGE> 2
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of the 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 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE(1) PRICE(2) FEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value...... 20,000,000 shares - $125,000,000 $34,750.00
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</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act of 1933, as
amended, the proposed maximum offering price per share is not included in
this table.
(2) Estimated, in accordance with Rule 457(c) of the Securities Act of 1933,
solely for the purpose of determining the registration fee.
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 3
EXPLANATORY NOTE
This Registration Statement (the "Registration Statement") contains two
separate prospectuses. The first prospectus (the "Prospectus") relates to the
offer and issuance by the Company of 12,000,000 shares of common stock in
connection with future acquisitions of other businesses or properties. The
second prospectus (the "Registering Shareholder Prospectus") relates to the
offering of 8,000,000 shares of common stock by the shareholders of the Company
(the "Selling Shareholders") from time to time after effectiveness of the
Registration Statement. Following the Prospectus are certain alternate pages of
the Registering Shareholder Prospectus, including alternate front outside and
back outside cover pages, an alternate "Use of Proceeds" section, an alternate
"Dilution" section, an alternate "Registering Shareholders" section to replace
the "Principal and Selling Shareholders" section of the Prospectus, an alternate
"Concurrent Registration" section, an alternate "Legal Matters" section, and a
section entitled "Plan of Distribution." Each of the alternate pages for the
Registering Shareholders Prospectus included herein is labeled "Alternate page
for Registering Shareholders Prospectus." All other sections of the Prospectus
are to be used in the Selling Shareholders Prospectus. In addition, cross
references in the Prospectus will be adjusted in the Registering Shareholders
Prospectus to refer to the appropriate sections.
<PAGE> 4
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION JULY ___, 1999
PROSPECTUS
12,000,000 SHARES
COMMON STOCK
STAR SERVICES GROUP, INC.
(A FLORIDA CORPORATION)
Star Services Group, Inc. is a regional, integrated solid waste
services company that presently provides solid waste collection, transfer,
disposal and recycling services in south and central Florida.
We may offer and issue the 12,000,000 shares from time to time in
connection with future acquisitions of other businesses or properties. See "Plan
of Distribution." We will set forth in a supplement to this prospectus all
material information about our issuance of shares in connection with future
acquisitions.
Concurrently with this offering, the Company is registering for resale
8,000,000 shares pursuant to rights granted to the shareholders of the Company.
Of these 8,000,000 shares, 2,000,000 were issued by the Company in a private
placement in May 1999. See "Selling Shareholders." We will receive none of the
proceeds from the sale of these 8,000,000 shares, but will pay the expenses for
their registration. In general, the proceeds to the selling shareholders will be
the selling price of the shares sold less any discounts or commissions.
The Company may offer, from time to time, all of the shares included
in this offering. Since the shares are being offered on a delayed or continuous
basis under Rule 415 of the Securities Act of 1933 we cannot provide information
about the price of the shares or proceeds to the Company.
We cannot assure that any of the shares being offered by this
prospectus will be sold.
Our stock trades on Nasdaq's OTC Bulletin Board (R) under the symbol
"SSVC." On July 14, 1999, the closing bid price of the stock was $6 1/4.
INVESTING IN THE COMMON STOCK INVOLVES RISKS. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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PROSPECTUS DATED _______________, 1999
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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Prospectus Summary...........................................................3
The Company..................................................................3
Risk Factors.................................................................6
Use of Proceeds..............................................................11
Dividend Policy..............................................................11
Dilution.....................................................................11
Principal and Selling Shareholders...........................................12
Selected Historical Financial and Operating Data.............................19
Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................20
Results of Operations........................................................23
Disclosure Regarding Pro Forma Information...................................23
Business.....................................................................26
Management...................................................................36
Certain Relationships and Related Transactions...............................40
Description of Capital Stock.................................................41
Shares Eligible for Future Sale..............................................43
Plan of Distribution.........................................................44
Legal Matters................................................................45
Experts......................................................................45
Available Information........................................................45
Information Not Required in the Prospectus...................................1
</TABLE>
2
<PAGE> 6
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. It may
not contain all of the information that is important to you. To understand this
offering fully, you should read the entire prospectus carefully, including the
risk factors and the financial statements. Unless otherwise specified, all
references to "Star Services" or the "Company" mean Star Services Group, Inc.
and our subsidiaries, and all references to "solid waste" mean non-hazardous
solid waste.
THE COMPANY
Star Services Group, Inc. is an integrated solid waste services company
providing services in south and central Florida. We intend to expand our
operations into other areas of the eastern United States. We currently provide
solid waste collection, transfer, disposal and recycling services in the Greater
Miami, Fort Lauderdale and Palm Beach markets. We currently own and operate one
company that collects solid waste and three material recovery facilities
("MRFs"), and we operate one construction and demolition debris landfill (a "C&D
Landfill"). As of June 30, 1999, we were providing service to more than 700
commercial and industrial customers in Florida.
Star Services was formed in February 1999, to build a leading solid
waste service company in Florida and the eastern United States. We have targeted
these markets because we believe that they have strong projected economic or
population growth rates. Additionally, our senior management team has extensive
experience in acquiring, integrating and operating solid waste services
businesses in the eastern United States.
We have developed a multi-faceted strategy to develop our business in
additional markets as follows:
- Initially, we plan to make certain strategic acquisitions in
selected markets.
- In markets where suitable acquisitions candidates are not available,
we plan to start new operating companies by using relationships
established with our customers in existing markets and a sales
force dedicated to building new client relationships.
- Our operating philosophy will focus on internal growth through
exceptional service.
- We will attempt to obtain contracts and exclusive arrangements
with local or regional governmental entities.
- We may seek to acquire or operate a transfer station, landfill, MRF
or lakefill operation in order to become more vertically integrated
in a particular market.
The Company was incorporated under the laws of the State of Florida in
April 1989 under the name Bailey & Baron, Inc. for the purpose of seeking viable
businesses or enterprises with which to enter into a business combination. The
Company had no material operations until June 1999, when Star Services, was
merged (the "Merger") into the Company and the Company changed its name to Star
Services Group, Inc. The Company was the surviving corporation in the merger.
The Board of Directors and management of Star Services became the Board of
Directors and management of the surviving corporation.
Star Services had been formed in February 1999 as a holding company to
facilitate the consolidation of the operations of six companies which were under
common control, but which had operated independently. The Company acquired 100%
of the capital stock of these predecessor companies in February 1999 in exchange
for 5,000,000 shares of Star Services' common stock and they become wholly-owned
subsidiaries of Star Services.
These predecessor corporations had revenues for the year ended December
31, 1998 and the three months ended March 31, 1999 of approximately $3.5 million
and $2.2 million, respectively.
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<PAGE> 7
The six predecessor companies are:
- Delta Recycling Corp. ("Delta Recycling")
- Delta Transfer Corp. ("Delta Transfer")
- Eastern Recycling, Inc. ("ERI")
- Delta Resources Corp. ("Resources")
- Delrock Management Corp. ("Delrock")
- Delta Waste Corp. ("Delta Waste")
These companies specialize in the collection, recycling and disposal of
construction and demolition materials and also provide other solid waste
collection, recycling and waste industry services. In addition, ERI has entered
into an agreement giving it the exclusive right to excavate, dredge, mine and
remove sand products from a portion of a lake in Pompano Beach, Florida. ERI has
not yet performed any dredging operations pursuant to this agreement. Delrock
owns certain real estate used in conjunction with the Company's operations. In
April 1999, Star Services formed an additional wholly-owned subsidiary, Delta
Tall Pines Corp., to operate a MRF in Palm Beach County. See "Certain
Transactions."
In May 1999, Delta Resources agreed to purchase a C&D landfill in
Marion County, Florida for $1.8 million. Consummation of the transaction is
subject to satisfaction of certain conditions by the seller.
In June 1999, Delta Waste Corp. entered into an agreement with Waste
Management, Inc. to purchase seven solid waste collection routes and associated
equipment from Waste Management, Inc. for $5.2 million. Consummation of the
transaction is subject to regulatory approval.
Star Services Group, Inc.'s executive offices are located at 2075 N.
Powerline Road, Pompano Beach, Florida 33069, telephone no. (954) 974-3800.
4
<PAGE> 8
SUMMARY FINANCIAL DATA
The following tables present summary financial data derived from the
financial statements of the Company included elsewhere in this prospectus. The
balance sheet data for March 31, 1999 and the statement of operations data for
the three-month periods ended March 31, 1999 and 1998 have not been audited by
independent auditors, but in the opinion of management of the Company, all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation have been included. The following data should be read in
conjunction with the financial statements of the Company and related notes
thereto:
<TABLE>
<CAPTION>
AUGUST 26, 1997
(INCEPTION) THREE MONTHS ENDED
THROUGH YEAR ENDED MARCH 31,
DECEMBER 31 DECEMBER 31 ------------------------------
1997 1998 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues $ 235,596 $ 3,542,851 $ 171,654 $ 2,217,469
Income (loss) from operations $ 31,305 $ (19,319) $ (72,324) $ 117,625
Interest expense $ (1,613) $ (70,423) $ (8,250) $ (39,743)
Net income (loss) $ 29,692 $ (89,742) $ (80,574) $ 50,623
Pro forma income tax (expense) benefit $ (9,000) $ 27,000 $ 24,000 $ (27,259)
Pro forma net income (loss) $ 20,692 $ (62,742) $ (56,574) $ 50,623
Pro forma earnings (loss) per share $ 0.00 $ (0.01) $ (0.01) $ 0.01
Common shares 5,000,000 5,000,000 5,000,000 5,016,306
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
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<S> <C>
BALANCE SHEET DATA:
Cash $3,144,819
Current assets $4,139,486
Current liabilities $1,880,567
Working capital $2,258,919
Total assets $7,021,614
Long-term debt, net of current portion $1,667,274
Shareholders' equity $3,473,773
</TABLE>
5
<PAGE> 9
RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
This prospectus contains forward-looking statements that involve risks
and uncertainties. Discussions containing such forward-looking statements are
found in the material set forth under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as in the prospectus generally. Our actual
results could differ materially from those anticipated in the forward-looking
statements as a result of certain factors, including the risks described below
and elsewhere in this prospectus.
The Company Has a Short History and our Growth Strategy May Not Work
Effectively. Star Services was formed in February 1999. The operating companies
that Star Services acquired commenced operations in August 1997. Accordingly, we
have only a limited operating history on which you may evaluate our business and
prospects. You should consider the disclosures about Star Services in this
prospectus in light of the risks, expenses and difficulties that companies
frequently encounter in their early stages of development. Our recently
assembled senior management team may not be able to manage Star Services
successfully or to implement our operating and growth strategies.
The Company May Not be Able to Effectively Integrate Acquired Companies
into its Operations. Our growth and future financial performance depend on our
ability to integrate acquired businesses into our organization and operations.
Part of our strategy is to achieve economies of scale and operating efficiencies
by growing through acquisitions. We may not achieve these goals unless we are
able to acquire businesses and effectively combine their operations with our
existing operations. We may not be able to integrate our future acquisitions
successfully.
Due to Numerous Factors, the Company's Planned Expansion Could be
Curtailed. Our growth strategy includes expanding through acquisitions,
acquiring exclusive arrangements with municipalities and generating internal
growth. Whether we can execute our growth strategy depends on several factors,
including:
- the success of existing and emerging competition
- the availability of acquisition candidates
- our ability to maintain profit margins in the face of competitive
pressures
- our ability to continue to recruit, train and retain qualified
employees
- the strength of demand for our services the availability of capital
to support our growth.
Star Services may grow rapidly at times, which could significantly
strain our management, operational, financial and other resources. To maintain
and manage our growth, we will need to expand our management information systems
capabilities and our operational and financial systems and controls. We will
also need to attract, train, motivate, retain and manage additional senior
managers, technical professionals and other employees.
Failure to do any of these things would materially and adversely affect
our business and financial results.
We May Not Be Able to Locate Suitable Acquisition Candidates. Although
we have identified several acquisition candidates that we believe are suitable,
we may not be able to acquire them at prices or on terms and conditions
favorable to us. As a result, our growth could be limited.
6
<PAGE> 10
We compete for acquisition candidates with other entities, most of
which have greater financial resources than we do. Increased competition for
acquisition candidates may make fewer acquisition opportunities available to us,
and may cause us to pay more for acquisitions. Acquisition costs may increase to
levels beyond our financial capability or that would adversely affect our
operating results and financial condition. Our ability to make acquisitions may
depend in part on the relative attractiveness of our common stock as
consideration for potential acquisition candidates. This attractiveness may
depend largely on the relative market price and capital appreciation prospects
of our common stock compared to the stock of our competitors. If the market
price of our common stock is not maintained at attractive levels, it may be
difficult to make acquisitions on terms that would not create too much dilution
for our existing shareholders.
The Solid Waste Services Industry is Highly Competitive. Our industry
is highly competitive and fragmented and requires substantial labor and capital
resources. Some of the markets in which we compete or expect to compete are
served by one or more large, national solid waste companies, as well as by
numerous regional and local solid waste companies of varying sizes and
resources, some of which have accumulated substantial goodwill. We may also
compete with counties, municipalities and solid waste districts that maintain
their own waste collection and disposal operations. These operators may have
financial advantages over Star Services because of their access to user fees and
similar charges, tax revenues and tax-exempt financing. A number of our
competitors are better capitalized, have greater name recognition and are able
to provide services at a lower cost than Star Services. Our inability to compete
with governmental service providers and larger and better capitalized companies
could materially and adversely affect our business and financial results.
We expect to derive a portion of our revenue from services provided
under exclusive municipal contracts and franchise agreements. Many of these will
be subject to competitive bidding at some time in the future. We also intend to
bid on additional municipal contracts and franchise agreements. However, we may
not be the successful bidder. If we were not able to replace revenues from
contracts lost through competitive bidding with other revenues within a
reasonable time period, the lost revenues could materially and adversely affect
our business and financial results.
We face intense competition not only to provide services to customers
but also to acquire other businesses within each market. Other companies have
adopted or are likely to adopt our strategy of acquiring and consolidating
regional and local businesses. We expect that increased consolidation in the
solid waste services industry will increase competitive pressures.
The Company Has Recently Experienced Working Capital Deficits. At
December 31, 1998, Star Services had a working capital deficit of $473,090. In
managing our working capital, we generally apply the cash generated from our
operations that remains after satisfying our working capital and capital
expenditure requirements. We currently finance our working capital requirements
from internally generated funds and the net proceeds of the Private Placement.
We May Not Be Able to Obtain Financing to Fund Planned Growth. We
expect to finance future acquisitions through cash from operations, borrowings,
issuance of equity or debt securities and/or seller financing. If acquisition
candidates are unwilling to accept, or we are unwilling to issue, shares of our
common stock as part of the consideration for such acquisitions or if our common
stock does not maintain a sufficient market value, we may have to use more of
our cash or borrowings under credit facilities that Star Services may establish
in the future to fund acquisitions. Using cash for acquisitions limits our
financial flexibility and makes us more likely to seek additional capital
through future debt or equity financings. If available cash from operations and
borrowings under credit facilities that Star Services may establish in the
future are not sufficient to fund acquisitions, we will need additional equity
and/or debt financing. If we seek more debt, we will incur the risks involved in
leverage, and may have to agree to financial covenants that limit our
operational and financial flexibility. If we seek more equity, we may dilute the
ownership interests of our then-existing shareholders. We will also need to make
substantial capital expenditures to develop or acquire and to maintain new
landfills, transfer stations and other facilities. We may not have enough
capital or be able to raise or borrow enough additional capital on satisfactory
terms to meet our capital requirements.
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<PAGE> 11
Credit facilities often require a borrower to obtain the consent of the
lending banks before acquiring any other business. Under that circumstance, if
we are not able to obtain such consent, we may be unable to complete certain
acquisitions, which could inhibit our growth. Credit facilities frequently also
contain financial covenants based on current and projected financial condition
after completing an acquisition. If we cannot satisfy these financial covenants
on a pro forma basis after completing an acquisition, we would not be able to
complete the acquisition without a waiver from the lending banks. Whether or not
a waiver is needed, if the results of our future operations differ materially
from what we expect, we may no longer be able to comply with the covenants in
that type of credit facility. Our failure to comply with such covenants may
result in a default under the credit facility, which would allow our lending
banks to accelerate the date for repayment of debt incurred under the credit
facility and materially and adversely affect our business and financial results.
We Depend Highly on a Few Key Executive Officers. Star Services depends
significantly on the services of Jack R. Casagrande, our Chairman and Chief
Executive Officer, Patrick F. Marzano, our President, Richard Loss, our Chief
Financial Officer, Phillip Foreman, our Chief Operating Officer, and Thomas
Roberts, our Vice President. The departure of any of those persons might
materially and adversely affect our business and financial results. Thomas
Roberts, the Company's Vice President, has entered into a two-year employment
agreement with the Company. This agreement contains a covenant not to compete.
We may not be able to enforce this agreement.
The Limited Geographic Market in Which we Operate Could Negatively
Impact our Future Growth. We currently operate only in the state of Florida. We
expect to focus our operations in Florida and the eastern United States for at
least the foreseeable future. Therefore, our business and financial results
would be harmed by downturns in the general economy of the eastern United
States, particularly in Florida. Other factors affecting the region, such as
state regulations affecting the solid waste services industry and severe weather
conditions may also affect our business and financial results. In addition, the
costs and time involved in the permitting and scarcity of available landfills in
the Eastern United States could make it difficult for us to expand vertically in
those markets. We may not complete any acquisitions in markets other than south
or central Florida to lessen our geographic concentration.
The Solid Waste Services Industry is Subject to Extensive Governmental
Regulation. Star Services is subject to extensive and evolving environmental
laws and regulations. These have been enforced more and more stringently in
recent years because of greater public interest in protecting the environment.
These laws and regulations impose substantial costs on Star Services and affect
our business in many ways. In addition, federal, state and local governments may
change the rights they grant to and the restrictions they impose on companies in
the solid waste industry, and such changes could have a material adverse effect
on Star Services.
To own and operate landfills, we must obtain and maintain licenses or
permits and zoning, environmental and/or other land use approvals. These
licenses or permits and approvals are difficult and time-consuming to obtain and
renew, and elected officials and citizens' groups frequently oppose them. We may
not be able to obtain and maintain the permits and approvals we need to own or
operate landfills (including increasing their capacity), and failure to do so
could materially and adversely affect our business and financial results.
Extensive regulations govern the design, operation and closure of
landfills. These regulations include the regulations ("Subtitle D Regulations")
that establish minimum federal requirements adopted by the U.S. Environmental
Protection Agency in October 1991 under Subtitle D of the Resource Conservation
and Recovery Act of 1976 ("RCRA"). If Star Services fails to comply with these
regulations, we could be required to undertake investigatory or remedial
activities, curtail operations or close a landfill and/or MRF temporarily or
permanently. Future changes to these regulations may require us to modify,
supplement or replace equipment or facilities at substantial costs. If
regulatory agencies fail to enforce these regulations vigorously or
consistently, our competitors whose facilities do not comply with the Subtitle D
Regulations or their state counterparts may obtain an advantage over us. Our
financial obligations arising from any failure to comply with these regulations
could materially and adversely affect our business and financial results.
Companies in the solid waste services business are frequently subject
in the normal course of business to judicial and administrative proceedings
involving federal, state or local agencies or citizens' groups. Governmental
8
<PAGE> 12
agencies may impose fines or penalties on us. They may also attempt to revoke or
deny renewal of our operating permits, franchises or licenses for violations or
alleged violations of environmental laws or regulations, or to require us to
remediate potential environmental problems relating to waste that we or our
predecessors collected, transported, disposed of or stored. Individuals or
community groups might also bring actions against us in connection with our
operations. Any adverse outcome in these proceedings could have a material
adverse effect on our business and financial results and create adverse
publicity about Star Services.
Potential Environmental Liability in the Solid Waste Services Industry
is Potentially Large. Star Services is liable for any environmental damage that
our solid waste facilities cause, including damage to neighboring landowners or
residents, particularly as a result of the contamination of soil, groundwater or
surface water, and especially drinking water. We may be liable for damage
resulting from conditions existing before we acquired these facilities. We may
also be liable for any off-site environmental contamination caused by pollutants
or hazardous substances whose transportation, treatment or disposal that we or
our predecessors arranged. Any substantial liability for environmental damage
could materially and adversely affect our business and financial results.
Each business that we acquire or have acquired may have liabilities
that we fail to discover, including liabilities that arise from prior owners'
failure to comply with environmental laws. As a successor owner, we may be
legally responsible for these liabilities. Even if we obtain legally enforceable
representations, warranties and indemnities from the sellers of such businesses,
they may not cover fully the liabilities. Some environmental liabilities, even
if we do not expressly assume them, may be imposed on Star Services under
various legal theories. Our insurance program does not cover liabilities
associated with any environmental cleanup or remediation of our own sites. A
successful uninsured claim against Star Services could materially and adversely
affect our business and financial results.
Governmental Agencies Place Limitations on Landfill and Lakefill
Permitting and Expansion. We currently own and operate two lakefill operations
and operate a lakefill and a C&D Landfill. Our ability to meet our growth
objectives may depend in part on our ability to acquire, lease and expand
landfills and lakefills and develop new landfill and lakefill sites. We may not
be able to obtain new landfill or lakefill sites or expand the permitted
capacity of our landfills when necessary.
In some areas in which we intend to operate, suitable land for new
sites or expansion of existing landfill sites may be unavailable. Operating
permits for landfills in the states in which we operate or intend to operate
must generally be renewed at least every five years. It has become increasingly
difficult and expensive to obtain required permits and approvals to build,
operate and expand solid waste management facilities, including landfills and
transfer stations. The process often takes several years, requires numerous
hearings and compliance with zoning, environmental and other requirements, and
is resisted by citizen, public interest or other groups. We may not be able to
obtain or maintain the permits we require to expand, and such permits may
contain burdensome terms and conditions. Even when granted, final permits to
expand are often not approved until the remaining permitted disposal capacity of
a landfill is very low. Local laws and ordinances also may affect our ability to
obtain permits to expand landfills. If we were to exhaust our permitted capacity
at a landfill, our ability to expand internally would be limited, and we could
be required to cap and close that landfill and forced to dispose of collected
waste at more distant landfills or at landfills operated by our competitors. The
resulting increased costs would materially and adversely affect our business and
financial results.
Alternatives to Landfill Disposal Could Negatively Impact the Solid
Waste Services Industry. Some areas in which we operate offer alternatives to
landfill disposal, such as recycling, composting and incineration. In addition,
state and local authorities increasingly require recycling and waste reduction
at the source and prohibit the disposal of certain types of wastes, such as yard
wastes, at landfills. These developments may reduce the volume of waste in
certain areas. For example, several states have adopted plans that set goals for
percentages of certain solid waste items to be recycled. Increased use of
alternatives to landfill disposal may materially and adversely affect our
business and financial results.
The Company's Accruals for Closure and Post-Closure Costs in Connection
with its Landfills may be Inadequate. We may be required to pay closure and
post-closure costs of landfills and any disposal facilities that
9
<PAGE> 13
we own or operate. We will accrue for future closure and post-closure costs of
our owned landfills (generally for a term of 30 years after final closure of a
landfill), based on engineering estimates of consumption of permitted landfill
airspace over the useful life of any such landfill. Our obligations to pay
closure or post-closure costs may exceed the amount we accrued and reserved and
other amounts available from funds or reserves established to pay such costs.
This could materially and adversely affect our business and financial results.
Charges Related to Capitalized Expenditures. In accordance with
generally accepted accounting principles, we expect to capitalize some
expenditures and advances relating to acquisitions, pending acquisitions and
landfill development projects. We expect to expense indirect acquisition costs
such as executive salaries, general corporate overhead, public affairs and other
corporate services as we incur those costs. We expect to charge against earnings
any unamortized capitalized expenditures and advances (net of any portion
thereof that we estimate we will recover, through sale or otherwise) that relate
to any operation that is permanently shut down, any pending acquisition that is
not consummated and any landfill development project that we do not expect to
complete. Therefore, Star Services may incur charges against earnings in future
periods, which could materially and adversely affect our business and financial
results.
The Company Might be Unable to Obtain Performance or Surety Bonds,
Letters of Credit or Insurance. Municipal solid waste services contracts and
landfill and MRF closure obligations may require Star Services to obtain
performance or surety bonds, letters of credit, or other means of financial
assurance to secure our performance. Some of our existing operations require us
to maintain performance bonds. In addition, some of our existing solid waste
collection and recycling contracts may require us to obtain performance bonds.
In the future, if we are not able to obtain performance or surety bonds or
letters of credit in sufficient amounts or at acceptable rates, we may not be
able to enter into additional municipal solid waste services contracts or obtain
or retain landfill, MRF and lakefill operating permits. Any future difficulty we
encounter in obtaining insurance could also make it more difficult for us to
secure future contracts conditioned on our having adequate insurance coverage.
Our failure to obtain means of financial assurance or adequate insurance
coverage could materially and adversely affect our business and financial
results.
Commodity Risk On Resale of Recyclables. We provide recycling services.
The sale prices of and demand for recyclable waste products, particularly
wastepaper, are frequently volatile and may affect our operating results.
Potential Anti-Takeover Effect of Certain Charter and By-Law Provisions
and Florida Law. Certain provisions in our Articles of Incorporation and
By-Laws, and in the Florida Business Corporation Law may deter tender offers and
hostile takeovers and delay or prevent changes in control or management of Star
Services, including transactions in which shareholders might be paid more than
current market prices for their shares. These provisions may also limit
shareholders' ability to approve transactions that they believe are in their
best interests.
Our Shareholders Could be Subject to the Dilutive Effects Resulting
from Future Issuances of our Equity Securities. Shareholders may experience
dilution if we issue common stock upon the exercise of outstanding stock options
and warrants or as consideration for acquisitions. We may also make additional
public offerings of our common stock in the future.
No Market for the Shares. While our common stock now trades on Nasdaq's
OTC Bulletin Board(R), we cannot ensure that the market for our common stock
will be as liquid as if it traded on a national exchange or on Nasdaq's National
Market or Small Cap markets.
The Company Has Not, and Does Not Expect to Pay Dividends in the Near
Future. We do not intend to pay cash dividends on the common stock. In addition,
any credit facility that we enter into in the future may prohibit us from paying
cash dividends without the consent of our lenders.
Impact of the Year 2000. We will need to modify or replace portions of
our software so that our computer systems will function properly with respect to
dates in the year 2000 ("Year 2000") and afterwards. We expect to complete those
modifications and upgrades during 1999 at a total cost of approximately $10,000.
Because our operations rely primarily on mechanical systems such as trucks to
collect solid waste, we do not expect our
10
<PAGE> 14
operations to be significantly affected by Year 2000 issues. Our customers may
need to make Year 2000 modifications to software and hardware that they use to
generate records, bills and payments relating to Star Services. We do not rely
on vendors on a routine basis except for providers of disposal services. We take
waste to a site and are normally billed based on tonnage disposed. We believe
that if our disposal vendors encounter Year 2000 problems, they will convert to
manual billing based on scale recordings until they resolve those issues.
In assessing our exposure to Year 2000 issues, we believe our biggest
challenges lie in the following areas: Year 2000 issues at our banks, large
(typically municipal) customers and acquired businesses between the time we
acquire them and the time we implement our own systems. If Star Services and our
vendors, banks and customers do not complete required Year 2000 modifications on
time, the Year 2000 issue could materially affect our operations. We believe,
however, that in the most reasonably likely worst case, the effects of Year 2000
issues on our operations would be brief and small relative to our overall
operations. We have not made a contingency plan to minimize operational problems
if Star Services and our vendors, banks and customers do not timely complete all
required Year 2000 modifications.
USE OF PROCEEDS
Of the 12,000,000 shares that may be offered and issued by the Company
from time to time in connection with future acquisitions of other solid waste
related businesses or properties, the net proceeds of the offering or offerings
cannot be determined because the shares are being offered on a delayed or
continuous basis.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We do not
currently anticipate paying any cash dividends on the common stock. We intend to
retain all earnings to fund the operation and expansion of our business.
DILUTION
The 12,000,000 shares offered hereby may be offered from time to time
by the Company in connection with future acquisitions of other solid waste
related businesses or properties. Because the terms and times of future
acquisitions are unknown at this time, the Company is unable to determine the
dilutive effect, including any effect on the net tangible book value of the
shares, that the sales of those 12,000,000 shares will have on current equity
positions or any dilution of the purchaser's equity interest that will occur due
to additional offerings of shares by the Company. An acquisition or series of
acquisitions in which any of the 12,000,000 shares offered by the Company as
part of the purchase price would require the Company to file an amendment to the
Registration Statement of which this prospectus forms a part discussing or
disclosing the acquisition or acquisitions.
11
<PAGE> 15
PRINCIPAL SHAREHOLDERS
The following table and footnotes set forth certain information
regarding the ownership of Star Services' common stock as of July 15, 1999, and
as adjusted to reflect the sale of the shares offered by the Company and the
selling shareholders of the shares being registered hereunder by (i) persons
known by the Company to beneficially own 5% or more of the outstanding shares of
common stock, (ii) each of the Company's executive officers, (iii) each director
of the Company and (iv) all current officers and directors as a group.
<TABLE>
<CAPTION>
PERCENT OF SHARES
NUMBER OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED STOCK OWNED
------------------------------------ ----------------- ------------------
<S> <C> <C>
Casagrande, Jack R. 700,000 8.8
16224 NW 82nd Place
Miami, FL 33016
Casagrande, Rocco 531,250 6.7
62 E. Mall Drive
Melville, NY 11747
Foreman, Phillip 0 0
c/o Star Services Group, Inc.
2075 North Powerline Road
Pompano Beach, FL 33069
Greene, Charles 1,100,000 13.8
910 NW 116th Terrace
Plantation, FL 33325
Loss, Richard
c/o Star Services Group, Inc.
2075 N. Powerline Road
Pompano Beach, FL 33069
Marzano, Angelo 287,500 3.6
10476 SW 52nd Street
Cooper City, FL 33328
Marzano, Frank 1,100,000 13.8
30 Blueberry Court
Melville, NY 11747
Marzano, Patrick 1,100,000 13.8
Sea Ranch Club C
4900 N. Ocean Blvd., #821
Ft. Lauderdale, FL 33306
Roberts, Thomas 10,000 *
5386 NW 108th Way
Coral Springs, FL 33076
Weiss, Samuel 16,000 *
1197 E. Broadway
Hewlett, NY 11557
All current executive officers and
directors as a group (10 persons) 4,844,750 61.0%
</TABLE>
- -------------------
* Less than 1%.
12
<PAGE> 16
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The following tables present selected historical, supplemental and pro
forma consolidated statements of operations and balance sheet data of Star
Services and the companies it acquired for the periods indicated. Before being
acquired by Star Services Group, Inc., these companies operated as separate
businesses.
The following selected financial data as of and for the periods ended
December 31, 1997 and 1998 are derived from the Company's audited financial
statements. The selected financial data for the three-month periods ended March
31, 1999 and 1998 are derived from the Company's unaudited financial statements.
In the opinion of management, such unaudited financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary for a fair
presentation of the consolidated financial condition and result of operations as
of and for the periods presented. Operating results for the three months ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the entire fiscal year ending December 31, 1999. The financial data
below should be read in conjunction with the Company's financial statements and
related notes contained elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
AUGUST 26, 1997
(INCEPTION) THREE MONTHS ENDED
THROUGH YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31 -----------------------------
1997 1998 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 235,596 $ 3,542,851 $ 171,654 $ 2,217,469
----------- ----------- ----------- -----------
Expenses:
Direct costs 129,029 2,449,085 151,529 1,588,770
Selling and administrative 63,181 935,723 67,531 457,626
Depreciation 12,081 177,362 24,918 53,448
----------- ----------- ----------- -----------
204,291 3,562,170 243,978 2,099,844
----------- ----------- ----------- -----------
Income (loss) from operations 31,305 (19,319) (72,324) 117,625
Interest expense (1,613) (70,423) (8,250) (39,743)
----------- ----------- ----------- -----------
Income (loss) before income taxes 29,692 (89,742) (80,574) 77,882
Income taxes -- -- -- (27,259)
----------- ----------- ----------- -----------
Net income (loss) $ 29,692 $ (89,742) $ (80,574) $ 50,623
=========== =========== =========== ===========
</TABLE>
UNAUDITED PRO FORMA INCOME TAX, NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE
INFORMATION (INFORMATION FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 IS
ACTUAL):
<TABLE>
<S> <C> <C> <C> <C>
Historical income(loss) before
income taxes $ 29,692 $ (89,742) $ (80,574) $ 77,882
Pro forma income tax (expense)
benefit (9,000) 27,000 24,000 (27,259)
----------- ----------- ----------- -----------
Pro forma net income (loss) $ 20,692 $ (62,742) $ (56,574) $ 50,623
=========== =========== =========== ===========
Proforma earnings (loss) per share $ 0.00 $ (0.01) $ (.01) $ .01
=========== =========== =========== ===========
Historical weighted average shares
outstanding 5,000,000 5,000,000 5,000,000 5,016,306
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------------- -------------------------
1997 1998 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash $115,033 $ 49,149 $ 36,634 $3,144,819
Current assets $198,133 $ 751,525 $581,019 $4,139,486
Current liabilities $ 47,834 $ 1,224,615 $103,976 $1,880,567
Working capital (deficit) $150,299 $ (473,090) $477,043 $2,258,919
</TABLE>
19
<PAGE> 17
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------------- -------------------------
1997 1998 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets $588,755 $ 2,979,664 $581,019 $7,021,614
Long-term debt, net of current portion $220,229 $ 1,316,899 $273,559 $1,667,274
Stockholders' equity $320,692 $ 438,150 $617,653 $3,473,773
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this discussion together with the audited and unaudited
financial statements and other financial information contained elsewhere in this
prospectus. This prospectus contains forward-looking statements that involve
risks and uncertainties. Star Services' actual results may differ materially
from those discussed in the forward-looking statements because of various
factors, including, but not limited to, those listed in "Risk Factors" and the
matters discussed in this prospectus generally.
OVERVIEW
Star Services Group, Inc. is a regional, integrated solid waste
services company that presently provides solid waste collection, transfer,
disposal and recycling services in south and central Florida.
The Company's primary objective is to become one of the leading
companies in the environmental service industry in the eastern United States.
The Company intends to implement an aggressive program of internal growth and
acquisitions aimed at expanding the Company's existing market share and
acquiring a number of additional, established operating entities.
Star Services Group, Inc. intends to grow through both acquisitions and
internal growth. We expect a substantial part of our future growth to come from
acquiring additional solid waste collection, transfer and disposal businesses.
Additional acquisitions could continue to affect period-to-period comparisons of
our operating results. We also expect to invest in collection vehicles and
equipment, maintenance of existing equipment, and management information
systems, which should supply the infrastructure to support our growth. We expect
to fund future acquisitions through cash from operations, borrowings, the
issuance of debt or equity and/or seller financing. We do not presently have any
credit facility for acquisitions or any commitment for one.
The Company operates in several segments of the environmental services
industry: collection, recycling and disposal of construction and demolition
debris, land clearing, yard waste debris, and source separated recyclable
materials. Star Services' operations are carried out by Delta Recycling Corp.,
which was incorporated in Florida on August 26, 1997, Delrock Management Corp.,
which was incorporated in Florida on May 29, 1998, Delta Transfer Corp., which
was incorporated in Florida on August 26, 1998, Eastern Recycling, Inc., which
was incorporated in Florida on June 11, 1997, Delta Resources Corp., which was
incorporated in Florida on January 29, 1999, Delta Waste Corp., which was
incorporated in Florida in January 1999 and Delta Tall Pines Corp., which was
incorporated in Florida in April 1999.
Star Services operates MRFs which are licensed and regulated by the
State of Florida Department of Environmental Protection and various county
agencies. As MRFs, these facilities accept assorted loads of debris consisting
of construction and demolition debris, land clearing, yard waste and source
separated materials primarily from customers in the construction and demolition
industry. The incoming loads are processed using an semi-automated sorting
system to separate recyclables from the waste stream. Additional loads are also
supplied directly by the Company through its hauling operations. The reclaimed
recyclables are shipped to end user markets for re-use. Star Services owns real
estate used in conjunction with certain of its operations and also maintains a
dredge and fill permit and operates a C&D debris landfill in Titusville,
Florida. Each of the above-described operations is performed by one or more of
Star Services' subsidiaries.
20
<PAGE> 18
C&D debris enters the Company's facilities from its own roll-off
collection operation (consisting of over 500 containers in Palm Beach,
Miami-Dade and Broward Counties) and from other waste haulers. After the
material is inspected at the entrance inspection station and gate house, as
required by regulations of the Florida Department of Environmental Protection
("FDEP") and operational safety plans, the material is unloaded on the tipping
floor. The material is then sorted to remove appropriately designated recycling
materials, which are then placed in containers for storage or shipment to
markets. The remaining material is then processed or disposed of in landfills or
other facilities.
Land clearing, yard waste and wood are processed in tub grinders or
impact grinders to produce wood chips or mulch which is marketed as boiler fuel
or cover material. Large concrete, rocks and other inert material are sent to
designated tipping areas for future processing and/or disposed of in our
adjoining permitted lakefill operations. The remaining material, consisting of
dirt, fines, paper, plastics, metals, glass, drywall, broken concrete blocks,
bricks, lumber, wood and the like, is stockpiled for removal or processed
through additional screening and picking. The system first screens out fines
which are stockpiled for landfill cover material, with the remaining material
manually sorted to segregate recyclable material such as wood, plastic, glass,
ferrous and non-ferrous metals, corrugated cardboard, paper, roofing and
aggregate. The MRFs currently recycle approximately 70% to 90% of all waste that
they receive.
CONTRACTS
Our revenues consist mainly of fees we charge customers for
construction and demolition debris transfer, disposal and recycling services. A
large part of our collection revenue comes from providing service to industrial,
residential and commercial customers. These services are provided under
contracts that generally last from one month to five years. The contracts
provide a relatively stable source of revenue for Star Services.
We typically determine the prices for our solid waste services by the
collection frequency and level of service, route density, volume, weight and
type of waste collected, type of equipment and containers furnished, the
distance to the disposal or processing facility, the cost of disposal or
processing, and prices charged by competitors for similar services.
EXPENSES
Direct costs include labor, fuel, equipment maintenance and tipping
fees paid to third party disposal facilities, workers' compensation and vehicle
insurance, the cost of materials we purchase for recycling, third party
transportation expense, district and state taxes and permits, engineering and
legal services.
Selling and administrative ("S&A") expense includes management,
clerical and administrative compensation and overhead costs associated with our
marketing and sales force, professional services and community relations
expenses.
Depreciation expense includes depreciation of fixed assets over their
estimated useful life using the straight line and accelerated methods and
amortization of goodwill and other intangible assets using the straight line
method.
Star Services intends to capitalize some expenditures related to
pending acquisitions or development projects, such as legal and engineering
expenses. We intend to expense indirect acquisition costs, such as executive and
corporate overhead, public relations and other corporate services. We charge
against net income any unamortized capitalized expenditures and advances (net of
any portion that we believe we may recover, through sale or otherwise) that
relate to any operation that is permanently shut down and any pending
acquisition or landfill development project that is not completed. We routinely
evaluate all capitalized costs, and expense those related to projects that we
believe are not likely to succeed.
21
<PAGE> 19
We will have material financial obligations relating to closure costs
of any disposal facilities we may own or operate in the future. In such case,
Star Services will accrue for those obligations, based on engineering estimates
of consumption of permitted landfill airspace over the useful life of any such
landfill.
INFLATION
Inflation has not significantly affected our operations. Consistent
with industry practice, many of our contracts allow us to pass through certain
costs to our customers, including increases in landfill tipping fees and, in
some cases, fuel costs. Therefore, we believe that we should be able to increase
prices to offset many cost increases that result from inflation. However,
competitive pressures may require us to absorb at least part of these cost
increases, particularly during periods of high inflation.
SEASONALITY
Seasonality has not had a material effect on our operations and is not
expected to have a material effect in the future.
YEAR 2000 ISSUES
We will need to modify or replace portions of our software so that our
computer systems will function properly with respect to dates in the year 2000
and afterwards. We expect to complete those modifications and upgrades during
1999, at a total cost of approximately $10,000. Because our operations rely
primarily on mechanical systems such as trucks to collect solid waste, we do not
expect our operations to be significantly affected by Year 2000 issues. Our
customers may need to make Year 2000 modifications to software and hardware that
they use to generate records, bills and payments relating to Star Services. We
do not rely on vendors on a routine basis except for providers of disposal
services. We bring waste to a site and are normally billed based on tonnage
received. We believe that if our disposal vendors encounter Year 2000 problems,
they will convert to manual billing based on scale recordings until they resolve
those issues.
In assessing our exposure to Year 2000 issues, management believes our
biggest challenges lie in the following areas: Year 2000 issues at Star
Services' banks, large (typically municipal) customers, and acquired businesses
between the time Star Services acquires them and the time we implement our own
systems. If Star Services and our vendors, banks and customers do not complete
the required Year 2000 modifications on time, the Year 2000 issue could affect
our operations. We believe, however, that in the most reasonably likely worst
case, the effects of Year 2000 issues on our operations would be brief and small
relative to our overall operations. We have not made a contingency plan to
minimize operational problems if we and our vendors, banks and customers do not
timely complete all required Year 2000 modifications.
22
<PAGE> 20
RESULTS OF OPERATIONS
The financial information for Star Services included in Management's
Discussion and Analysis of Financial Condition and Results of Operations and in
the audited financial statements included elsewhere in this prospectus relates
to the following entities for the periods indicated:
<TABLE>
<S> <C>
PERIOD ENDED DECEMBER 31, 1997:
Eastern Recycling, Inc. Period June 11, 1997 (date of incorporation)
through December 31, 1997
Delta Recycling Corp. Period August 26, 1997 (date of incorporation)
through December 31, 1997
YEAR ENDED DECEMBER 31, 1998:
Eastern Recycling, Inc. Year ended December 31, 1998
Delta Recycling Corp. Year ended December 31, 1998
Delta Transfer Corp. Period August 26, 1998 (date of incorporation)
through December 31, 1998
Delrock Management Corp. Period May 29, 1998 (date of incorporation)
through December 31, 1998
</TABLE>
PERIOD ENDED MARCH 31
All of the above companies were under common control throughout the
periods prior to their consolidation into Star Services Group, Inc. in February
1999. Because the companies commenced operations in late August 1997, financial
data for 1998 and 1997 is not truly comparable. Therefore, comparisons are also
made to 1997 financial data computed on an annualized basis, based on the actual
periods of operation. No assurance can be given that the actual results would
have been as presented had the Company been in operation for the full 1997
fiscal year.
DISCLOSURE REGARDING PRO FORMA INFORMATION
Pro forma results of operations (assuming the business combination had
been effected in January 1997) are not presented because Bailey & Baron, Inc.
was inactive for the periods presented. As a result, pro forma results of
operations for the years ended December 31, 1998 and 1997, would be no different
than the historical statements of operations presented herewith.
1998 VS. 1997
Revenues
Total revenues increased to $3,542,851 in 1998 from $235,596 in 1997
($706,788 annualized). Based on the annualized 1997 revenues, this was an
increase of $2,836,063 or 401%. This increase was primarily attributable to
increased volumes, the commencement of operations by Delta Transfer Corp., price
increases as a result of increased disposal fees, and the commencement of
construction and demolition hauling and disposal operations by Delta Recycling
Corp.
Direct Costs
Total direct costs increased to $2,449,085 in 1998 from $129,029 in
1997 ($387,087 annualized). Based on annualized 1997 direct costs, this
represented an increase of $2,061,998 or 533%. The increase was principally
23
<PAGE> 21
due to increased volume, the costs of operations of newly formed Delta Transfer
Corp., increased disposal costs and the cost of operations of the hauling
operations of Delta Recycling Corp. Direct costs as a percentage of revenues
increased to 69.1% from 54.8% in 1997. The percentage increase was primarily due
to costs associated with building and maintaining the Company's infrastructure,
including equipment leasing, maintenance and depreciation cost, as well as fixed
rental costs for operating facilities which have capacities well beyond volumes
presently utilized.
Selling and Administrative
Selling and administrative expenses increased to $935,723 in 1998 from
$63,181 in 1997. Based on annualized 1997 expenses of $189,543, this represented
an increase of $746,180 or 394%. The increase was due to the increase in
administrative overhead required to manage the Company's growth. The largest
increases came in the areas of administrative salaries, professional fees,
occupancy costs and travel. As a percentage of revenues, selling and
administrative expenses was virtually unchanged at 26.4% in 1998 as compared to
26.8% in 1997.
Depreciation
Depreciation expense increased to $177,362 in 1998 from $12,081 in
1997. Based on annualized 1997 depreciation of $36,243, this represented an
increase of $141,119 or 389%. The increase in depreciation expense was the
result of the purchase of approximately $2,000,000 of property and equipment
during 1998.
Interest Expense
Interest expense increased to $70,423 in 1998 from $1,613 in 1997.
Based on annualized 1997 interest expense of $4,839, this represented an
increase of $65,584 or 1,355%. The increased interest expense was a result of
higher debt levels resulting from the purchase of additional property and
equipment and from debt incurred in connection with the subsidiary companies'
acquisition of treasury stock.
THREE MONTHS ENDED MARCH 31, 1999 VS. THREE MONTHS ENDED MARCH 31, 1998
Revenues
Total revenues increased to $2,217,469 for the quarter ended March 31,
1999 from $171,654 for the quarter ended March 31, 1998, an increase of 1192%.
This increase was primarily attributable to revenues generated by transfer
station and landfill operations which had not commenced in the first quarter of
1998 and secondarily to a significant increase in waste collection operations.
Direct Costs
Total direct costs increased to $1,588,770 for the quarter ended March
31, 1999 from $151,529 for the quarter ended March 31, 1998, an increase of
948%. This increase was primarily attributable to the dramatic increase in all
of the Company's operating activities. The principal cost categories that showed
significant increases were disposal costs, payroll and truck operating costs.
Selling and Administrative
Selling and administrative expenses increased to $457,626 for the first
quarter of 1999 from $67,531 for the first quarter of 1998, an increase of 578%.
The increase was principally due to increases in office salaries, professional
fees and other administrative costs necessitated by the Company's growth.
24
<PAGE> 22
Depreciation
Depreciation expense increased to $53,448 for the first quarter of 1999
from $24,918 for the first quarter of 1998, an increase of 114%. The increase
was principally due to depreciation on purchases of new equipment required in
connection with development of the Company's waste collection and transfer
station operations.
Interest expense
Interest expense increased to $39,743 for the first quarter of 1999
from $8,250 for the same period in 1998, an increase of 382%. The increase was
attributable to the increased debt incurred to finance the acquisition of
property and equipment in connection with the Company's expansion of facilities
and services.
LIQUIDITY AND CAPITAL RESOURCES
Our business is capital intensive. Our capital requirements include
acquisitions and equipment purchases. We expect that we also will make capital
expenditures for landfill cell construction, landfill development and landfill
closure activities in the future. We plan to meet our capital needs through
various financing sources, including internally generated funds credit
facilities that we may establish in the future and debt and equity financings.
At inception in February 1999, Star Services issued 5,000,000 shares of
its $.01 par value common stock to acquire all of the outstanding shares of its
predecessors, Delta Recycling Corp., Delta Transfer Corp., Delrock Management
Corp., Eastern Recycling, Inc. and Delta Resources Corp. In March and April
1999, we received approximately $3,900,000 in net proceeds from the sale of
2,000,000 shares of common stock in a private placement (the "Private
Placement").
As of December 31, 1998, Star Services had a working capital deficit of
$473,090. In managing our working capital, we generally apply the cash generated
from our operations that remains after satisfying our working capital and
capital expenditure requirements. We currently finance our working capital
requirements from internally generated funds and the net proceeds of the Private
Placement.
We made approximately $2,000,000 in capital expenditures during the
year ended December 31, 1998. We expect to make capital expenditures of
approximately $2.5 million in 1999 in connection with our existing business. We
intend to fund our planned 1999 capital expenditures principally through
internally generated funds, proceeds from the Private Placement and the
establishment of a credit facility. In addition, we may make substantial
additional capital expenditures in acquiring solid waste collection and disposal
businesses. If we acquire additional landfill disposal facilities, we may also
have to make significant expenditures to bring them into compliance with
applicable regulatory requirements, obtain permits or expand our available
disposal capacity. We cannot currently determine the amount of these
expenditures because they will depend on the number, nature, condition and
permitted status of any acquired landfill disposal facilities. We believe that
the net proceeds of the Private Placement and the funds we expect to generate
from operations will provide adequate cash to fund our working capital and other
cash needs for the foreseeable future.
We derive a substantial portion of our revenues from services provided
under exclusive municipal contracts. Our single largest contract, with the City
of Deerfield Beach, accounted for approximately 7% of our revenues during the
year ended December 31, 1998. No single contract or customer accounted for more
than 5% of our revenues during the period from inception (August 26, 1997)
through December 31, 1997, for the year ended December 31, 1998 or for the three
months ended March 31, 1999.
As of March 31, 1999, the Company had incurred approximately $2.0
million of indebtedness in connection with equipment purchases. Such
indebtedness matures between April 2001 and November 2007 and bears interest at
rates between 5.9% and 11.4% per annum.
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BUSINESS
INDUSTRY OVERVIEW
The solid waste services industry has undergone significant
consolidation and integration since 1990. We believe that the following factors
are primarily responsible for the consolidation and integration of the waste
services industry:
- Increased Impact of Regulations. Stringent industry
regulations, such as the Subtitle D regulations, have caused
operating and capital costs to rise and have accelerated
consolidation and acquisition activities in the solid waste
collection and disposal industry. Many smaller industry
participants have found these costs difficult to bear and have
decided to either close their operations or sell them to
larger operators. In addition, Subtitle D requires more
stringent engineering of solid waste landfills, and mandates
liner systems, leachate collection, treatment and monitoring
systems and gas collection and monitoring systems. These
ongoing costs are combined with increased financial reserve
requirements for solid waste landfill operators relating to
closure and post-closure monitoring. As a result, the number
of solid waste landfills is declining while the average size
is increasing.
- Increased Integration of Collection and Disposal Operations.
In certain markets, competitive pressures are forcing
operators to become more efficient by establishing an
integrated network of solid waste collection operations and
transfer stations through which they secure solid waste
streams for disposal. Operators have adopted a variety of
disposal strategies, including owning landfills, establishing
strategic relationships to secure access to landfills and
capturing significant waste stream volumes to gain leverage in
negotiating lower landfill fees and securing long-term,
most-favored-pricing contracts with high capacity landfills.
- Pursuit of Economies of Scale. Larger operators achieve
economies of scale by vertically integrating their operations
or by spreading their facility, asset and management
infrastructure over larger volumes. Larger solid waste
collection and disposal companies have become more
cost-effective and competitive through control of a larger
waste stream and by gaining access to significant financial
resources to make acquisitions.
Despite the ongoing consolidation, the solid waste services industry
remains primarily regional in nature and highly fragmented. Based on published
industry sources, approximately 27% of the total revenues of the U.S. solid
waste industry is accounted for by more than 5,000 private, predominantly small
collection and disposal businesses, approximately 41% by publicly traded solid
waste companies and approximately 32% by municipal governments that provide
collection and disposal services. We expect the current consolidation trends in
the solid waste industry to continue, because many independent landfill and
collection operators lack the capital resources, management skills and technical
expertise necessary to comply with stringent environmental and other
governmental regulations and to compete with larger, more efficient integrated
operators. In addition, many independent operators may wish to sell their
businesses to achieve liquidity in their personal finances or as part of their
estate planning. We believe that the fragmented nature of the industry offers
significant consolidation and growth opportunities, including Florida and the
Eastern United States, for companies with disciplined acquisition programs,
decentralized operating strategies and access to financial resources.
STRATEGY
Our objective is to build a leading integrated solid waste services
company in Florida and other areas of the Eastern United States with high
population growth due to rapid residential and commercial development. We plan
to accomplish this using a combination of strategic acquisitions and the opening
of new operating centers in selected markets.
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GROWTH STRATEGY
- Expansion Through Acquisitions. We intend to expand the scope
of our operations by acquiring solid waste operations in new
markets and in existing or adjacent markets that are combined
with or "tuck in" to existing operations.
We intend to expand into some new geographic regions by
entering these markets through acquisitions. We intend to use
an initial acquisition in a new market as an operating base.
Then we intend to seek to strengthen the acquired operation's
presence in that market by providing additional services,
adding new customers and making "tuck-in" acquisitions. We
next intend to seek to broaden our regional presence by adding
additional operations in markets adjacent to the new location.
We are currently examining opportunities in central and
western Florida.
- New Operating Centers. In selected markets where we cannot
find a suitable acquisition candidate, we intend to start a
new operating company by using relationships developed with
customers in our existing markets and a sales force focusing
on building new client relationships. In these markets we will
start with roll-off trucks servicing construction and
demolition sites and will seek to permit transfer stations to
recycle material received from these sites and ship any
residue to landfills we intend to acquire in the future.
- Internal Growth. To generate continued internal growth, we
will focus on increasing market penetration in our current and
adjacent markets, soliciting new commercial, industrial, and
residential customers in markets where customers may elect
whether or not to receive waste collection services, marketing
upgraded or additional services to existing customers and,
where appropriate, raising prices. As customers are added in
existing markets, our revenue per truck increases, which
generally increases our collection efficiencies and
profitability.
OPERATING STRATEGY
- Decentralized Operations. We intend to manage our operations
on a decentralized basis. This places decision-making
authority close to the customer, enabling us to identify
customers' needs quickly and to address those needs in a
cost-effective manner. We believe that decentralization
provides a low-overhead, highly efficient operational
structure that allows us to expand into geographically
contiguous markets. We believe that this structure will give
us a strategic competitive advantage, and make us an
attractive buyer to many potential acquisition candidates.
Star Services' management believes that the owners of the
types of businesses it will seek to acquire often will desire
to work for the Company after the acquisition. The Company
foresees hiring many of these local managers. The Company
believes that this policy will benefit the Company by
providing a source of managers knowledgeable in the solid
waste industry to assist with the integration of the acquired
business. The Company also believes that granting an immediate
equity interest to these managers will maximize their efforts
on the Company's behalf.
We currently deliver our services from four operating
locations serving Dade, Palm Beach, Broward and Brevard
Counties, Florida. Each operating location has a location
manager, with autonomous service and decision-making authority
for that location and is responsible for maintaining service
quality, promoting safety in the operations, implementing
marketing programs, and overseeing day-to-day operations,
including contract administration. Location managers also help
identify acquisition candidates and are responsible for
integrating them into our operations and obtaining the permits
and other governmental approvals required for us to operate
the acquired business.
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ACQUISITION PROGRAM
Star Services currently services the greater Miami, Fort Lauderdale and
Palm Beach markets from its locations in Pompano Beach and Palm Beach Counties
and operates a construction and demolition landfill in Brevard County, Florida.
We will focus our acquisition program on markets in Florida and the Eastern
parts of the U.S. that generally exhibit the characteristics listed below:
- A potential revenue base of at least $15 million, usually in
areas with a population of 100,000 or more;
- A fragmented market with additional available acquisition
candidates;
- The opportunity to acquire a significant market share;
- Strong projected economic or population growth rates;
- The availability of adequate disposal capacity through
acquisition or agreements with third parties; and
- A relatively predictable regulatory environment.
We believe that our experienced management and decentralized operating
strategy make us an attractive buyer to certain solid waste collection and
disposal acquisition candidates. We have developed a set of financial,
geographic and management criteria which we will use to evaluate specific
acquisition candidates. The factors that we will consider in evaluating an
acquisition candidate include:
- The candidate's historical and projected financial
performance;
- The return on capital invested in a candidate, its margins and
capital requirements and its impact on our earnings;
- The experience and reputation of the candidate's management
and customer service providers, their relationships with local
communities and their willingness to continue as employees of
Star Services;
- Whether the geographic location of the candidate will enhance
or expand our market area or ability to attract other
acquisition candidates;
- Whether the acquisition will increase our market share or help
protect our existing customer base;
- Any potential synergies that may be gained by combining the
candidate with our existing operations; and
- The liabilities of the candidate.
Before completing an acquisition, we plan to perform extensive
environmental, operational, engineering, legal, human resources and financial
due diligence. Our management evaluates and approves all acquisitions. We will
seek to integrate each acquired business promptly in order to minimize
disruption to the ongoing operations of both Star Services and the acquired
business.
SERVICES
Commercial, Industrial and Residential Waste Services
Star Services currently serves more than 700 commercial, industrial and
residential customers.
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We provide commercial and industrial services under service agreements
with terms ranging from one month to five years. We determine fees under these
agreements based upon factors such as collection frequency, level of service,
route density, the type, volume and weight of the waste collected, type of
equipment and containers furnished, the distance to the disposal or processing
facility, the cost of disposal or processing and prices charged by competitors
in our markets for similar service. Collection of larger volumes associated with
commercial and industrial waste streams generally helps improve our operating
efficiencies, and consolidation of these volumes allows us to negotiate more
favorable disposal prices. Our commercial and industrial customers use portable
containers for storage, enabling us to service many customers with fewer
collection vehicles. Commercial and industrial collection vehicles normally
require one operator. We provide containers of between one and fifty cubic yards
to our customers.
In May 1999, Resources entered into an agreement with Holmes Dirt
Services, Inc. and its stockholders to purchase a C&D landfill in Marion County,
Florida for $1.8 million. Consummation of the transaction is subject to
satisfaction of certain conditions by the seller.
We intend to provide residential waste services under contracts with
homeowners' associations, apartment owners or mobile home park operators, or on
a subscription basis with individual households. We base residential contract
fees primarily on route density, the frequency and level of service, the
distance to the disposal or processing facility, the cost of disposal or
processing and prices charged by our competitors in that market for similar
services.
Transfer Station Services and MRFs
Star Services has an active program to acquire, develop, own and
operate transfer stations in markets sufficiently close to our existing
operations to afford operating efficiencies. Star Services believes it can
achieve operating efficiencies by:
- owning the landfills to which solid wastes, including C&D
debris, are delivered;
- hauling such wastes to Company-owned C&D MRFs;
- separating the materials delivered to the MRFs into usable
components; and
- shipping these components to end-users.
Because Star Services is involved in each phase of operations, it believes that
efficiencies in management and infrastructure are achieved.
We operate two C&D MRFs in Brevard County, Florida and one C&D MRF in
Palm Beach County, Florida where we receive, separate and transfer material
received from our own vehicles and other contractors. Both of these facilities
have permits which allow us to separate the material received and sell any
useful products such as wood, paper, metal and plastic. We believe that the MRFs
benefit Star Services by:
- concentrating the waste stream from a wider area, increasing
the volume of disposal at landfills that we operate and giving
us greater leverage in negotiating more favorable disposal
rates at other landfills;
- improving utilization of collection personnel and equipment;
and
- building relationships with municipalities and private
operators that deliver waste, which can lead to additional
growth opportunities.
Landfills
Star Services seeks to identify solid waste and C&D landfill
acquisition candidates to achieve vertical integration in markets where the
economic and regulatory environment makes such acquisitions attractive. We
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believe that in some markets acquiring landfills provides opportunities to
vertically integrate our collection, transfer and disposal operations while
improving operating margins. We evaluate landfill candidates by determining,
among other things, the amount of waste that could be diverted to the landfill
in question, whether access to the landfill is economically feasible from Star
Services' existing market areas either directly or through transfer stations,
the expected life of the landfill, the potential for expanding the landfill and
current disposal costs compared to the cost of acquiring the landfill. Where the
acquisition of a landfill is not attractive, we pursue disposal contracts with
facilities which are typically municipally controlled.
In June 1999, Delta Waste Corp., a wholly-owned subsidiary of Star
Services, has entered into an agreement with Waste Management, Inc. to purchase
seven solid waste collection routes and associated equipment from Waste
Management, Inc. for $5.2 million. Consummation of the transaction is subject to
regulatory approval.
ROYAL OAK RANCH CONSTRUCTION AND DEMOLITION DEBRIS LANDFILL
We operate the Royal Oak Ranch Construction and Demolition Debris
Landfill in Brevard County, Florida under an operating agreement with a
remaining term of 17 months. As of March 1, 1999, the Royal Oak Landfill
consisted of 42 total acres of which 36.4 acres were permitted for disposal of
C&D material. As of that date, the Royal Oak Landfill had approximately 2.4
million cubic yards of unused permitted capacity remaining, with approximately
1.5 million cubic yards available for expansion. By the terms of the operating
contract, the Royal Oak Landfill is allowed to accept up to 106,425 cubic yards
per calendar quarter. We have an option to purchase this landfill for $0.6
million.
Dredge and Fill Permits
All of our current facilities are located next to areas which have
dredge and fill permits. These permits allow us to extract sand and fill the
area created with certain specified inert materials including concrete and
ceramic and clay tiles. Customers are charged a fee for the material they
dispose of in these areas. When the land is completely filled to grade it then
can be sold for development. To date, no such sales have occurred and none are
expected to occur in the near future.
SALES AND MARKETING
We have four sales and marketing personnel operating from our executive
offices in Pompano Beach, Florida. These personnel solicit customers in our
market area with emphasis on contractors and developers. We concentrate on
providing services to these customers during the construction phase of their
construction projects and then providing solid waste collection services to them
once the project is completed. We also use our sales force to expand our
presence into areas adjacent to our existing market areas.
COMPETITION
The solid waste services industry is highly competitive and fragmented
and requires substantial labor and capital resources. The industry presently
includes four large national waste companies: Allied Waste Industries, Inc.,
Browning-Ferris Industries, Inc., Republic Services, Inc., and Waste Management,
Inc. In addition, Star Services may compete with regional companies. Casella
Waste Systems, Inc., Superior Services, Inc., Waste Connections Inc. and Waste
Industries, Inc. are public regional companies with annual revenues in excess of
$100 million. Certain of the markets in which Star Services competes or intends
to compete are served by one or more large, national solid waste companies, as
well as by numerous privately-held regional and local solid waste companies of
varying sizes and resources, some of which have accumulated substantial goodwill
in their markets. We also compete with operators of alternative disposal
facilities, including incinerators, and with counties, municipalities, and solid
waste districts that maintain their own waste collection and disposal
operations. Public sector operations may have financial advantages over Star
Services because of their access to user fees and similar charges, tax revenues
and tax-exempt financing.
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We compete for collection, transfer and disposal volume based primarily
on the price and quality of our services. From time to time, competitors may
reduce the price of their services in an effort to expand their market shares or
service areas or to win competitively bid municipal contracts. These practices
may cause Star Services to reduce the price of our services or, if we elect not
to do so, to lose business. We provide our services under service contracts with
terms ranging from one month to five years with commercial, residential and
industrial customers.
Intense competition exists not only for collection, transfer and
disposal volume, but also for acquisition candidates. We generally compete for
acquisition candidates with publicly owned regional and large national waste
management companies.
REGULATION
Introduction
Star Services' landfill and non-landfill operations, including waste
transportation, transfer stations, vehicle maintenance shops and fueling
facilities, are all subject to extensive and evolving federal, state and local
environmental laws and regulations, the enforcement of which has become
increasingly stringent in recent years. The environmental regulations affecting
Star Services are administered by the EPA and other federal, state and local
environmental, zoning, health and safety agencies. Star Services is currently in
substantial compliance with applicable federal, state and local environmental
laws, permits, orders and regulations. We do not currently anticipate any
material environmental costs necessary to bring our operations into compliance
(although there can be no assurance in this regard). We anticipate that
regulation, legislation and regulatory enforcement actions related to the solid
waste services industry will continue to increase. We attempt to anticipate
future regulatory requirements and to plan in advance as necessary to comply
with them.
The principal federal, state and local statutes and regulations that
apply to our operations are described below. All of the federal statutes
described below contain provisions that authorize, under certain circumstances,
lawsuits by private citizens to enforce the provisions of the statutes. In
addition to a penalty award by the United States, some of those statutes
authorize an award of attorneys' fees to parties that successfully bring such an
action. Enforcement actions under these statutes may include both civil and
criminal penalties, as well as injunctive relief in some instances.
The Resource Conservation and Recovery Act of 1976 ("RCRA")
RCRA regulates the generation, treatment, storage, handling,
transportation and disposal of solid waste and requires states to develop
programs to ensure the safe disposal of solid waste. RCRA divides solid waste
into two groups, hazardous and nonhazardous. Wastes are generally classified as
hazardous if they either (i) are specifically included on a list of hazardous
wastes, or (ii) exhibit certain characteristics defined as hazardous. Household
wastes are specifically designated as nonhazardous. Wastes classified as
hazardous under RCRA are subject to much stricter regulation than wastes
classified as nonhazardous, and businesses that deal with hazardous waste are
subject to regulatory obligations in addition to those imposed on handlers of
nonhazardous waste.
The EPA regulations issued under Subtitle C of RCRA impose a
comprehensive "cradle to grave" system for tracking the generation,
transportation, treatment, storage and disposal of hazardous wastes. The
Subtitle C Regulations impose obligations on generators, transporters and
disposers of hazardous wastes and require permits that are costly to obtain and
maintain for sites where such material is treated, stored or disposed of.
Subtitle C requirements include detailed operating, inspection, training and
emergency preparedness and response standards, as well as requirements for
manifesting, record keeping and reporting, corrective action, facility closure,
post-closure and financial responsibility. Most states have promulgated
regulations modeled on some or all of the Subtitle C provisions issued by the
EPA. Some state regulations impose different, additional and more stringent
obligations, and may regulate certain materials as hazardous wastes that are not
so regulated under the federal Subtitle C Regulations. From the date of
inception through March 31, 1999, Star Services did not, to our knowledge,
transport hazardous wastes under circumstances that would subject Star Services
to hazardous waste
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regulations under RCRA. Some of our ancillary operations (e.g., vehicle
maintenance operations) may generate hazardous wastes. Star Services manages
these wastes in substantial compliance with applicable laws.
In October 1991, the EPA adopted the Subtitle D Regulations governing
solid waste landfills. The Subtitle D Regulations, which generally became
effective in October 1993, include location restrictions, facility design
standards, operating criteria, closure and post-closure requirements, financial
assurance requirements, groundwater monitoring requirements, groundwater
remediation standards and corrective action requirements. In addition, the
Subtitle D Regulations require that new landfill sites meet more stringent liner
design criteria (typically, composite soil and synthetic liners or two or more
synthetic liners) intended to keep leachate out of groundwater and have
extensive collection systems to carry away leachate for treatment prior to
disposal. Groundwater monitoring wells must also be installed at virtually all
landfills to monitor groundwater quality and, indirectly, the effectiveness of
the leachate collection system. The Subtitle D Regulations also require, where
certain regulatory thresholds are exceeded, that facility owners or operators
control emissions of methane gas generated at landfills in a manner intended to
protect human health and the environment. Each state is required to revise its
landfill regulations to meet these requirements or such requirements will be
automatically imposed by the EPA on landfill owners and operators in that state.
Each state is also required to adopt and implement a permit program or other
appropriate system to ensure that landfills in the state comply with the
Subtitle D Regulations. Florida and other states in which we may operate in the
future have adopted regulations or programs as stringent as, or more stringent
than, the Subtitle D Regulations.
RCRA also regulates underground storage of petroleum and other
regulated materials. RCRA requires registration, compliance with technical
standards for tanks, release detection and reporting, and corrective action,
among other things. Certain of Star Services' facilities and operations are
subject to these requirements.
The Federal Water Pollution Control Act of 1972, as Amended (the "Clean
Water Act")
The Clean Water Act regulates the discharge of pollutants from a
variety of sources, including solid waste disposal sites and transfer stations,
into waters of the United States. If run-off from our transfer stations or
run-off or collected leachate from Star Services' owned or operated landfills is
discharged into streams, rivers or other surface waters, the Clean Water Act
would require Star Services to apply for and obtain a discharge permit, conduct
sampling and monitoring and, under certain circumstances, reduce the quantity of
pollutants in such discharge. Also, virtually all landfills are required to
comply with the EPA's storm water regulations issued in November 1990, which are
designed to prevent contaminated landfill storm water runoff from flowing into
surface waters. We believe that our facilities comply in all material respects
with the Clean Water Act requirements. Florida and other states in which we may
operate in the future have been delegated authority to implement the Clean Water
Act permitting requirements, and some of these states have adopted regulations
that are more stringent than the federal requirements. For example, states often
require permits for discharges to ground water as well as surface water.
The Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 ("CERCLA")
CERCLA established a regulatory and remedial program intended to
provide for the investigation and cleanup of facilities where or from which a
release of any hazardous substance into the environment has occurred or is
threatened. CERCLA's primary mechanism for remedying such problems is to impose
strict joint and several liability for cleanup of facilities on current owners
and operators of the site, former owners and operators of the site at the time
of the disposal of the hazardous substances, any person who arranges for the
transportation, disposal or treatment of the hazardous substances, and the
transporters who select the disposal and treatment facilities. CERCLA also
imposes liability for the cost of evaluating and remedying any damage to natural
resources. The costs of CERCLA investigation and cleanup can be very
substantial. Liability under CERCLA does not depend on the existence or disposal
of "hazardous waste" as defined by RCRA; it can also be based on the existence
of even very small amounts of the more than 700 "hazardous substances" listed by
the EPA, many of which can be found in household waste. In addition, the
definition of "hazardous substances" in CERCLA incorporates substances
designated as hazardous or toxic under the federal Clean Water Act, Clear Air
Act and Toxic Substances Control Act. If Star Services were found to be a
responsible party for a CERCLA cleanup, the enforcing agency could hold Star
Services, or any other generator, transporter or the owner or operator of the
contaminated facility, responsible
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for all investigative and remedial costs, even if others were also liable.
CERCLA also authorizes the imposition of a lien in favor of the United States on
all real property subject to, or affected by, a remedial action for all costs
for which a party is liable. CERCLA gives a responsible party the right to bring
a contribution action against other responsible parties for their allocable
shares of investigative and remedial costs. Star Services' ability to obtain
reimbursement from others for their allocable shares of such costs would be
limited by our ability to find other responsible parties and prove the extent of
their responsibility and by the financial resources of such other parties.
Various state laws also impose liability for investigation, cleanup and other
damages associated with hazardous substance releases.
The Clean Air Act
The Clean Air Act generally, through state implementation of federal
requirements, regulates emissions of air pollutants from certain landfills based
on factors such as the date of the landfill construction and tons per year of
emissions of regulated pollutants. Larger landfills and landfills located in
areas where the ambient air does not meet certain requirements of the Clean Air
Act may be subject to even more extensive air pollution controls and emission
limitations. In addition, the EPA has issued standards regulating the disposal
of asbestos-containing materials. Air permits to construct may be required for
gas collection and flaring systems, and operating permits may be required,
depending on the potential air emissions. State air regulatory programs may
implement the federal requirements but may impose additional restrictions. For
example, some state air programs uniquely regulate odor and the emission of
toxic air pollutants.
The Occupational Safety and Health Act of 1970 (the "OSH Act")
The OSH Act is administered by the Occupational Safety and Health
Administration ("OSHA"), and in many states by state agencies whose programs
have been approved by OSHA. The OSH Act establishes employer responsibilities
for worker health and safety, including the obligation to maintain a workplace
free of recognized hazards likely to cause death or serious injury, to comply
with adopted worker protection standards, to maintain certain records, to
provide workers with required disclosures and to implement certain health and
safety training programs. Various OSHA standards may apply to Star Services'
operations, including standards concerning notices of hazards, safety in
excavation and demolition work, the handling of asbestos and asbestos-containing
materials, and worker training and emergency response programs.
Flow Control/Interstate Waste Restrictions
Certain permits and approvals, as well as certain state and local
regulations, may limit a landfill or transfer station to accepting waste that
originates from specified geographic areas, restrict the importation of
out-of-state waste or wastes originating outside the local jurisdiction or
otherwise discriminate against non-local waste. These restrictions, generally
known as flow control restrictions, are controversial, and some courts have held
that some flow control schemes violate constitutional limits on state or local
regulation of interstate commerce. From time to time, federal legislation is
proposed that would allow some local flow control restrictions. Although no such
federal legislation has been enacted to date, if such federal legislation should
be enacted in the future, Florida and other states in which Star Services may
operate landfills in the future could limit or prohibit the importation of
out-of-state waste or direct that wastes be handled at specified facilities.
Such state actions could adversely affect Star Services' landfills. These
restrictions could also result in higher disposal costs for our collection
operations. If we were unable to pass such higher costs through to our
customers, our business, financial condition and operating results could be
adversely affected.
Certain state and local jurisdictions may also seek to enforce flow
control restrictions through local legislation or contractually. In certain
cases, we may elect not to challenge such restrictions. These restrictions could
reduce the volume of waste going to landfills in certain areas, which may
adversely affect our ability to operate our landfills at their full capacity
and/or reduce the prices that we can charge for landfill disposal services.
These restrictions may also result in higher disposal costs for our collection
operations. If we were unable to pass such higher costs through to our
customers, Star Services' business, financial condition and operating results
could be adversely affected.
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State and Local Regulation
Florida and states in which Star Services may operate in the future
have laws and regulations governing the generation, storage, treatment,
handling, transportation and disposal of solid waste, occupational safety and
health, water and air pollution and, in most cases, the siting, design,
operation, maintenance, closure and post-closure maintenance of landfills and
transfer stations. State and local permits and approval for these operations may
be required and may be subject to periodic renewal, modification or revocation
by the issuing agencies. In addition, many states have adopted statutes
comparable to, and in some cases more stringent than, CERCLA. These statutes
impose requirements for investigation and cleanup of contaminated sites and
liability for costs and damages associated with such sites, and some provide for
the imposition of liens on property owned by responsible parties. Furthermore,
many municipalities also have ordinances, local laws and regulations affecting
Star Services' operations. These include zoning and health measures that limit
solid waste management activities to specified sites or activities, flow control
provisions that direct or restrict the delivery of solid wastes to specific
facilities, laws that grant the right to establish franchises for collection
services and then put such franchises out for bid, and bans or other
restrictions on the movement of solid wastes into a municipality.
Permits or other land use approvals with respect to a landfill, as well
as state or local laws and regulations, may specify the quantity of waste that
may be accepted at the landfill during a given time period, and/or specify the
types of waste that may be accepted at the landfill. Once an operating permit
for a landfill is obtained, it must generally be renewed periodically.
There has been an increasing trend at the state and local level to
mandate and encourage waste reduction at the source, waste recycling, and to
prohibit or restrict the disposal of certain types of solid wastes, such as yard
wastes, leaves and tires, in landfills. The enactment of regulations reducing
the volume and types of wastes available for transport to and disposal in
landfills could prevent Star Services from operating our current and future
facilities at their full capacity.
Some state and local authorities enforce certain federal laws in
addition to state and local laws and regulations. For example, in some states,
RCRA, the OSH Act, parts of the Clean Air Act and parts of the Clean Water Act
are enforced by local or state authorities instead of by the EPA, and in some
states those laws are enforced jointly by state or local and federal
authorities.
Public Utility Regulation
In many states, public authorities regulate the rates that landfill
operators may charge. The adoption of rate regulation or the reduction of
current rates in states in which Star Services may own or operate landfills
could adversely affect our business, financial condition and operating results.
RISK MANAGEMENT, INSURANCE AND PERFORMANCE BONDS
Star Services maintains environmental and other risk management
programs appropriate for our business. Our environmental risk management program
includes evaluating existing facilities and potential acquisitions for
environmental law compliance. We do not presently expect environmental
compliance costs to increase above current levels, but we cannot predict whether
future acquisitions will cause such costs to increase. Operating practices at
all Star Services' operations emphasize minimizing the possibility of
environmental contamination and litigation. We believe that our facilities
comply in all material respects with applicable federal and state regulations.
We carry a broad range of insurance, which our management considers
adequate to protect our assets and operations. The coverage includes general
liability, comprehensive property damage, workers' compensation and other
coverage customary in the industry. These policies exclude coverage for damages
associated with environmental conditions except for certain specified types of
environmental damage, such as that caused by release of hazardous materials
resulting from explosions. Because of the limited availability and high cost of
environmental impairment liability insurance, and in light of our limited
landfill operations, we have not obtained such coverage. If Star Services were
to incur liability for environmental cleanups, corrective action or damage, our
financial condition
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could be materially and adversely affected. We will continue to investigate the
possibility of obtaining environmental impairment liability insurance,
particularly if we acquire or operate landfills other than the Royal Oak
landfill. We believe that most other landfill operators do not carry such
insurance.
Municipal solid waste collection contracts may require performance
bonds or other means of financial assurance to secure contractual performance.
Certain environmental regulations also require demonstrated financial assurance
to meet closure and post-closure requirements for landfills. We have not
experienced difficulty in obtaining performance bonds or letters of credit for
our current operations. At March 31, 1999, we had provided customers and various
regulatory authorities with surety bonds and letters of credit in the aggregate
amount of approximately $0.5 million to secure our obligations. If we were
unable to obtain surety bonds or letters of credit in sufficient amounts or at
acceptable rates, we could be precluded from entering into additional municipal
solid waste collection contracts or obtaining additional landfill operating
permits.
PROPERTY AND EQUIPMENT
As of June 30, 1999, we owned and operated one collection operation and
three MRFs and operated one C&D landfill. We lease various offices and
facilities, including our corporate offices in Pompano Beach, Florida. The real
estate owned by Star Services is not subject to material encumbrances. We own
various equipment, including waste collection and transportation vehicles,
related support vehicles, containers, and heavy equipment used in our
operations. We believe that our existing facilities and equipment are generally
adequate for our current operations. However, we expect to make additional
investments in property and equipment for expansion and replacement of assets
and in connection with future acquisitions.
EMPLOYEES
At June 30, 1999, we employed approximately 100 full-time employees,
including approximately 12 persons classified as professionals or managers,
approximately 80 employees involved in collection, transfer, disposal and
recycling operations, and approximately 8 sales, clerical, data processing or
other administrative employees.
We are not aware of any organizational efforts among our employees and
believe that our relations with our employees are good.
LEGAL PROCEEDINGS
Star Services is a party to various legal proceedings in the ordinary
course of business and as a result of the extensive governmental regulation of
the solid waste industry. Management does not believe that these proceedings,
either individually or in the aggregate, are likely to have a material adverse
effect on our business, financial condition, operating results or cash flows.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning Star
Services' executive officers and directors as of June 30, 1999:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------------------------- --- -----------------------------------------------------------
<S> <C> <C>
Jack R. Casagrande....................... 54 Chairman of the Board, Chief Executive Officer and Director
Patrick F. Marzano....................... 51 President and Director
Richard Loss............................. 36 Chief Financial Officer
Phillip Foreman.......................... 38 Chief Operating Officer and Director
Thomas R. Roberts........................ 49 Vice President, Environmental Compliance and Director
Charles D. Green......................... 63 Secretary
Angelo Marzano........................... 24 Treasurer and Assistant Secretary
Frank P. Marzano......................... 26 Director
Rick Casagrande.......................... 49 Director
Samuel G. Weiss.......................... 50 Director
</TABLE>
Jack R. Casagrande has been the Chairman, Chief Executive Officer and a
director of the Company since inception. In 1971, Mr. Casagrande founded
Industrial Waste Services, Inc. ("IWS") in Miami-Dade County, Florida and, by
1984, the company had grown to be the largest waste hauling operation in the
county and the second largest in the State of Florida. In 1984, IWS was
purchased by Attwoods, plc and Mr. Casagrande became head of U.S. operations.
During his tenure its revenues grew from $24,000,000 in 1984 to over
$300,000,000 by the end of 1993. Attwoods had become the fourth largest waste
services company in the United States prior to its acquisition by
Browning-Ferris Industries ("BFI") in December 1994. Since that time, Mr.
Casagrande has served as a business consultant to, and a director of, several
private companies. Jack R. Casagrande is the brother of Rick Casagrande.
Patrick F. Marzano is the founder, President and a director of the
Company. Mr. Marzano graduated from St. John's University in Queens, New York in
1969 with a Bachelors of Science degree in Accounting. From 1969 to 1971, Mr.
Marzano worked as a staff accountant at Price Waterhouse in New York City. In
1971, Mr. Marzano left Price Waterhouse and started his own accounting firm. Mr.
Marzano has been a certified public accountant and a partner in Geller, Marzano
& Company CPA's PC for the last twenty seven (27) years. He also has been
involved as a CEO and partner/shareholder for over twenty (20) years in several
waste companies in New York and Florida. Patrick F. Marzano is the uncle of
Angelo Marzano and the father of Frank P. Marzano.
Rich Loss became the Chief Financial Officer of the Company in July
1999. From 1996 until May of 1999, Mr. Loss served as the CFO of Atlas
Environmental, Inc. From 1991 to 1996 Mr. Loss was the Controller of Opus Media
Group Inc. Mr. Loss is a certified public accountant in the state of Florida and
began his career as a CPA with Ernst & Young.
Phillip Foreman has been the Chief Operating Officer and a Director of
the Company since July 1999. From 1988 until 1993 Mr. Foreman served as the
Regional Manager for Attwoods Florida operations and then
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<PAGE> 34
became the CEO for Attwoods U.S. solid waste operations. As a result of the
acquisition by BFI, Mr. Foreman became the Divisional Vice President for BFI's
Florida Gulf Atlantic Division, where he oversaw operations generating
$230,000,000 in annual revenues. In 1996 Mr. Foreman left BFI and has since
acted as a consultant to a number of entities in the waste industry including a
consolidation group in New Jersey, and most recently he served as the Director
of Operations for Atlas Environmental, Inc.
Thomas R. Roberts has been Vice President, Acquisitions, Compliance and
Governmental Affairs and a director of the Company since 1998. From 1995 to
1998, Mr. Roberts served as Vice President of Atlas Environmental, Inc.,
including the company's 11 solely owned facilities. Mr. Roberts is the President
of the Florida Recyclers Coalition, Inc. and serves as an instructor for the
University of Florida Center for Training, Research and Education for
Environmental Occupations (TREEO Center), co-sponsored by State of Florida
Department of Environmental Protection and the Florida Sunshine Chapter of the
Solid Waste Association of North America (SWANA). Mr. Roberts received the
"Distinguished Service Award 1998" from SWANA for his coordination of Florida's
C&D Operators Training Course. Mr. Roberts has served and serves on several
Florida Department of Environmental Protection and local counties' C&D-related
Task Forces and Technical Advisory Councils. Mr. Roberts has appeared as speaker
on C&D topics at the International WasteExpo, Florida Environmental Expo,
Recycle Florida Today, FDEP's Future of Recycling Advisory Group, Florida's
Organic Recyclers Association, and FDEP's C&D Landfill Task Force.
Charles D. Green, Secretary of the Company since inception, graduated
from Fort Lauderdale High School in 1956. He served two years in the United
States Army as a maintenance specialist for heavy equipment. In 1997, he formed
American Refuse, Inc., a waste hauling company, and in 1986 he and a partner
started Southeastern Reclamation, Inc., a recycling and hauling company. Mr.
Green is currently a Vice President of Delta Recycling Corp. and Eastern
Recycling.
Angelo Marzano, Treasurer and Assistant Secretary of the Company since
inception, graduated from Pennsylvania State University in 1997, with a Bachelor
of Science Degree in Business Logistics. Throughout his college education, he
maintained a position in several waste companies. Upon graduation, Mr. Marzano
began working at Delta Recycling Corp. Mr. Marzano is responsible for developing
the internal controls and procedures for Delta Recycling Corp. Mr. Marzano is
certified as a construction and demolition landfill and materials recovery
facility operator. Angelo Marzano is the nephew of Patrick Marzano and the
cousin of Frank P. Marzano.
Frank P. Marzano, a director of the Company since inception, graduated
from Pennsylvania State University in 1994 with a Bachelor of Science degree in
Accounting. Mr. Marzano is a Certified Public Accountant and worked at KPMG Peat
Marwick in New York City until 1996. In 1996, Mr. Marzano joined Geller, Marzano
& Company CPAs PC in Port Washington, New York. While working at Geller Marzano,
Mr. Marzano received his Masters in Taxation from Long Island University in
January 1998. Mr. Marzano is managing partner of Geller Marzano. Frank P.
Marzano is the son of Patrick Marzano and the cousin of Angelo Marzano.
Rick Casagrande, a director of the Company since inception, graduated
from Christ The King High School in Middle Village, New York in 1967. In 1971 he
was one of the co-founders of Industrial Waste Services in Miami-Dade County,
Florida. He has held various executive positions in several solid waste
management companies including American Transfer Services, Inc. He is currently
President of Total Care of Long Island. Rick Casagrande is the brother of Jack
R. Casagrande.
Samuel G. Weiss, a director of the Company since its inception, is an
attorney admitted to practice in the State of New York since 1974. He is
currently a member of the firm of Weiss & Federici, LLP., which has an office
located at 30 Main Street, Port Washington, New York 11050. Prior to becoming a
member of Weiss & Federici, LLP in 1999, Mr. Weiss was a private practitioner in
Port Washington, New York, since 1988. Mr. Weiss received his BA Degree from New
York University in 1971. Mr. Weiss received his Juris Doctor from New York
University in 1974 and his LLM in taxation from New York University in 1977. Mr.
Weiss is General Counsel and a Director of Strategic Capital Resources, Inc.
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<PAGE> 35
COMMITTEES OF THE BOARD
The Board of Directors has established an Executive Committee, an Audit
Committee and a Compensation Committee. A majority of the members of the
Executive Committee are, and both members of each of the Audit and Compensation
Committees are, independent directors who are not employees of Star Services or
one of our subsidiaries.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of Star Services do not
currently receive any compensation for attending meetings of the Board of
Directors. Each independent director receives a fee of $1,500 for attending each
Board meeting and each committee meeting (unless held on the same day as the
full Board meeting), in addition to reimbursement of reasonable expenses.
EXECUTIVE COMPENSATION
Summary Compensation Information
Star Services was incorporated in February 1999. The following table
contains information about the annual and long-term compensation earned in 1997
and 1998 by the Chief Executive Officer (the "Named Executive Officer"). No
officer was paid or earned more than $100,000 in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
SHARES
UNDERLYING
OPTIONS/ ALL
ANNUAL COMPENSATION RESTRICTED WARRANTS OTHER
YEAR SALARY BONUS OTHER STOCK GRANTED COMPENSATION
---- ------ ----- ----- ----- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack Casagrande.............. 1998 -- -- -- -- -- --
1997 -- -- -- -- -- --
</TABLE>
EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Thomas Roberts. The
agreement has a two-year term expiring on March 2001, and provides for a salary
of approximately $104,000 and $115,000, respectively, for the first and second
years of the term. The agreement contains standard confidentiality and
non-solicitation provision.
1999 STOCK OPTION PLAN
The 1999 Stock Option Plan (the "Stock Option Plan") was adopted by the
Board of Directors effective as of February 3, 1999, and was approved by the
shareholders in February 1999. The Stock Option Plan is intended to provide
employees, consultants and directors with additional incentives by increasing
their proprietary interests in Star Services. Under the Stock Option Plan, Star
Services may grant options with respect to 2,000,000 shares of Star Services
common stock. As of June 30, 1999, we had options to purchase 5,000,000 shares
of common stock outstanding at a weighted average exercise price of $.30 per
share.
The Board of Directors currently administers the Stock Option Plan. The
administrator of the Stock Option Plan determines the employees, consultants and
directors to whom options are granted (the "Optionees"), the type, size and term
of the options, the grant date, the expiration date, the vesting schedule and
other terms and conditions of the options.
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<PAGE> 36
The Stock Option Plan provides for the grant of incentive stock options
("ISOs") as defined in section 422 of the Internal Revenue Code, as amended, and
nonqualified stock options. Only Star Services employees may receive ISOs. The
aggregate fair market value, as of the grant date, of the common stock subject
to ISOs that become exercisable by any employee during any calendar year may not
exceed $100,000. Options generally become exercisable in installments pursuant
to a vesting schedule set forth in the option agreement. No option may be
granted after January 3, 2009. No option will remain exercisable later than 10
years after the grant date (or five years in the case of ISOs granted to
Optionees owning more than 10% of the total combined voting power of all classes
of Star Services' outstanding capital stock (a "Ten Percent Shareholder")). The
exercise price of ISOs granted under the Stock Option Plan must be at least the
fair market value of a share of common stock on the grant date (or 110% of such
fair market value in the case of ISOs granted to Ten Percent Shareholders).
If an Optionee with outstanding options retires or becomes disabled and
does not die within the three months after retirement or disability, the
Optionee may exercise his or her options, but generally only within the period
ending on the earlier of: (i) six months after retirement or disability; or (ii)
the expiration of the option set forth in the option agreement. If the Optionee
does not exercise his or her options within that time period, the options
terminate, and the shares of common stock subject to the options become
available for issuance under the Stock Option Plan. If the Optionee ceases to be
an employee, consultant or director of Star Services other than because of
retirement, death or disability, his or her options generally terminate on the
date such relationship terminates, and the shares of common stock subject to the
options become available for issuance under the Stock Option Plan. Each option
agreement may give Star Services the right to repurchase shares acquired by an
Optionee under the Stock Option Plan upon termination of the Optionee.
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<PAGE> 37
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Delta Tall Pines Corp., a wholly-owned subsidiary of the Company, has
entered into a lease with Tidal Wave Investment Corporation, Inc. ("TWI") for a
MRF in Palm Beach County. The lease has a term of four years commencing June 1,
1999. Payments under the lease are appropriately $20,000 per month. Messrs.
Patrick F. Marzano and Jack R. Casagrande have a minority interest in TWI. The
Company believes that the terms of the lease are no less favorable than would be
agreed to by an independent third party.
Jack R. Casagrande and Patrick F. Marzano are majority owners in J.R.
Capital Corp., which has recently purchased substantially all the assets of
Atlas Environmental, Inc. J.R. Capital Corp., through its various subsidiaries,
will be engaged in a similar business to that of the Company. The Company
intends to enter into a management agreement with J.R. Capital which will
provide for the Company to operate the Atlas facilities. The Company expects the
term of the agreement to be approximately five years and to provide for fees of
approximately $800,000 per annum. Management believes that such terms are no
less favorable than would be agreed to by an independent third party.
Between October 31, 1998 and March 31, 1999, certain of the Company's
predecessor made non-interest bearing loans to Partick F. Marzano and Jack R.
Casagrande in the aggregate amount of $729,969. All of such loans were repaid in
their entirety on April 1, 1999.
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<PAGE> 38
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of Star Services consists of 50,000,000
shares of common stock, par value $0.001 per share. As of June 30, 1999, there
were 8,000,000 shares of common stock outstanding.
COMMON STOCK
The holders of shares of common stock are entitled to one vote per
share held on all matters submitted to a vote at a meeting of shareholders.
Cumulative voting for the election of directors is not permitted. Subject to any
preferences to which holders of Preferred Stock are entitled, the holders of
outstanding shares of common stock are entitled to receive ratably any dividends
that the Board of Directors declares. If Star Services liquidates, dissolves or
winds up, the holders of shares of common stock are entitled to receive pro rata
all assets of Star Services that are available for distribution to shareholders.
The holders of shares of common stock do not have any preemptive, subscription,
redemption, conversion or sinking fund rights. The outstanding shares of common
stock, and the shares of common stock to be issued pursuant to this prospectus,
when issued, will be fully paid and nonassessable.
CERTAIN STATUTORY, CHARTER AND BY-LAW PROVISIONS
Number of Directors; Removal; Filling Vacancies. The Company's Articles
of Incorporation provide that the number of directors will be fixed from time to
time by a majority of the directors then in office. In addition, the Articles of
Incorporation provide that newly created directorships resulting from an
increase in the authorized number of directors, vacancies on the Board resulting
from death, resignation, retirement, disqualification or removal of directors or
any other cause may be filled only by the Board (and not by the shareholders
unless there are no directors in office), if a quorum is then in office and
present, or by a majority of the directors then in office, if less than a quorum
is then in office, or by the sole remaining director. Accordingly, the Board
could prevent any shareholder from enlarging the Board and filling the new
directorships with such shareholder's own nominees.
Advance Notice Provisions for Shareholder Nominations and Shareholder
Proposals. The By-laws establish an advance notice procedure for shareholders to
make nominations of candidates for election as director, or to bring other
business before an annual meeting of shareholders of Star Services (the
"Shareholder Notice Procedure"). In general, only persons who are nominated by
or at the direction of the Board, any committee
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<PAGE> 39
appointed by the Board, or by a shareholder who has given timely written notice
to the Secretary of Star Services, may be elected as directors. At an annual
meeting, only business that has been brought before the meeting by, or at the
direction of, the Board, any committee appointed by the Board, or by a
shareholder who has given timely written notice to the Secretary of Star
Services, may be conducted. To be timely, notice of shareholder nominations or
proposals to be made at an annual or special meeting must be received by Star
Services not less than 60 days nor more than 90 days before the scheduled date
of the meeting (or, if less than 70 days' notice or prior public disclosure of
the date of the meeting is given, then the 15th day following the earlier of the
day such notice was mailed or the day such public disclosure was made).
By requiring advance notice of nominations by shareholders, the
Shareholder Notice Procedure gives the Board an opportunity to consider the
qualifications of the proposed nominees and inform shareholders about such
qualifications. By requiring advance notice of other proposed business, the
Shareholder Notice Procedure provides a more orderly procedure for conducting
annual meetings of shareholders. It also gives the Board an opportunity to
inform shareholders in advance of any business proposed to be conducted at such
meetings, together with the Board's recommendations regarding action to be taken
with respect to such business, so that shareholders can better decide whether to
attend such a meeting or to grant a proxy regarding the disposition of any such
business.
Although the By-laws do not give the Board any power to approve or
disapprove shareholder nominations for the election of directors or proposals
for action, the Shareholder Notice Procedure may preclude a contest for the
election of directors or the consideration of shareholder proposals. It may also
discourage or deter a third party from soliciting proxies to elect its own slate
of directors or to approve its own proposal, even though consideration of such
nominees or proposals might benefit Star Services and our shareholders.
Limitation of Liability of Directors.
The Company's Articles of Incorporation provide that the Company may
indemnify its executive officers and directors to the fullest extent permitted
by law whether now or hereafter. Star Services has entered or will enter into an
agreement with each of its directors and certain of its officers wherein it has
agreed to indemnify each of them to the fullest extent permitted by law.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of the
criminal law, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b)
deriving an improper personal benefit from a transaction; (c) voting for or
assenting to an unlawful distribution; and (d) willful misconduct or a conscious
disregard for the best interests of the Company in a proceeding by or in the
right of the Company to procure a
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<PAGE> 40
judgment in its favor or in a proceeding by or in the right of a shareholder.
The statute does not affect a director's responsibilities under any other law,
such as the federal securities laws or state or federal environmental laws.
Florida Anti-Takeover Law. Florida has enacted legislation that may
deter or frustrate takeovers of Florida corporations. The Florida Control Share
Act generally provides that shares acquired in excess of certain specified
thresholds will not possess any voting rights unless such voting rights are
approved by a majority vote of a corporation's disinterested shareholders. The
Florida Affiliated Transactions Act generally requires supermajority approval by
disinterested directors or shareholders of certain specified transactions
between a corporation and holders of more than 10% of the outstanding voting
shares of the corporation (or their affiliates).
The Company's Articles of Incorporation provide that the Company shall
not be subject to the Florida Control Share Act.
TRANSFER AGENT AND REGISTRAR
Interwest Transfer & Trust Company, serves as transfer agent and
registrar for the common stock.
SHARES ELIGIBLE FOR FUTURE SALE
On the sale or other disposition of the shares being registered in this
registration statement, we will have 20,000,000 shares of common stock
outstanding. All of the shares registered hereunder will be freely saleable in
the public market after the sale or other disposition of the shares being
registered in this registration statement is completed, unless acquired by
affiliates of Star Services. The shares outstanding before completion of this
offering are saleable in the public market as follows:
2,956,000 shares* Eligible for resale in the public market in May 2000
5,000,000 shares* Will be eligible for resale in the public market after
February 2002
- --------------------
* Subject to the restrictions of Rule 144. Shares of common stock held by
Star Services' affiliates are subject to certain volume and other
limitations discussed below under Rule 144. In addition, certain
shareholders have entered into "lock-up" agreements pursuant to which they
have agreed with the Company not to sell for a certain period certain of
the Shares being registered pursuant to the registration statement of which
this Prospectus is a part.
As a result of these agreements, 3,454,000 Shares may not be sold until
May 2000 and 2,500,000 shares may not be sold until May 2001. The Company has
the discretion to release none, some or all of the Shares subject to these
lock-up agreements.
In general, under Rule 144, a person (or persons whose shares are
aggregated), including persons who may be deemed affiliates of Star Services,
who has beneficially owned his or her shares for at least one year may sell in
any three-month period a number of shares equal to the greater of 1% of the
outstanding shares of the common stock (80,000 shares as of June 30, 1999) or
the average weekly trading volume during the four calendar weeks preceding each
such sale. Sales under Rule 144 also are subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about Star Services. Under Rule 144(k), a person (or
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<PAGE> 41
PLAN OF DISTRIBUTION
The 12,000,000 shares offered hereby may be offered and issued by
the Company from time to time in connection with future acquisitions of other
businesses or properties. It is anticipated that future acquisitions by the
Company will consist principally of additional solid waste related businesses.
The consideration for acquisitions may include cash (including installment
payments), shares of Common Stock, guarantees, assumptions of liabilities or any
two or more of the foregoing, as determined from time to time by negotiations
between the Company and the owners or controlling persons of the businesses or
properties to be acquired. In addition, the Company may enter into employment
contracts and non-competition agreements with former owners and key executive
personnel of these acquired businesses. The Company at this time is engaged in
preliminary discussions with candidates for possible future acquisitions. The
Company reasonably expects the 12,000,000 shares to be offered and sold within
two years from the initial effective date of the registration.
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<PAGE> 42
The terms of a future acquisition will be determined by negotiations
between the Company's representatives and the owners or controlling persons of
the businesses or properties to be acquired, and the factors taken into account
in an acquisition may include among others the established quality and
reputation of the business and its management, gross revenues, earning power,
cash flow, growth potential, location of the business and properties to be
acquired and geographical diversification resulting from the acquisition. It is
anticipated that shares offered in connection with future acquisitions will be
valued at a price reasonably related to the current market value of the Common
Stock either at the time the terms of the acquisition are tentatively agreed
upon or at or about the time or times of delivery of the Company's shares. The
Company does not expect to receive any cash proceeds (other than cash balances
of acquired companies) in connection with any such issuances.
It is not expected that underwriting discounts or commissions will be
paid by the Company except that finder's fees, which may be in the form of
shares registered under this prospectus for the purpose of offering and issuance
in connection with future acquisitions, may be paid to persons from time to time
in connection with specific acquisitions. Any person receiving any such fees may
be deemed to be an underwriter within the meaning of the Securities Act.
A material acquisition or series of acquisitions (constituting in the
aggregate a material transaction) would require the Company to file an amendment
to the Registration Statement, of which this prospectus forms a part, discussing
or disclosing the acquisition or acquisitions and the effects on the Company.
That amendment must become effective under the Securities Act before any further
shares may be sold hereunder.
Any shares covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold pursuant to Rule 144 rather
than pursuant to this prospectus.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
such state or any exemption from registration or qualification is available and
complied with.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered
hereby will be passed upon for Star Services by Greenberg Traurig, P.A., Miami,
Florida.
EXPERTS
The financial statements of Star Services Group, Inc. and Predecessors
as of December 31, 1997 and 1998, and for the year ended December 31, 1998 and
the period from August 26, 1997 (inception) through December 31, 1997 appearing
in this prospectus and Registration Statement have been audited by Horton &
Company, LLC, independent auditors, as set forth in their reports thereon
appearing elsewhere in this prospectus and Registration Statement.
Such financial statements have been included in this prospectus and
Registration Statement in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") under the
Securities Act with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and this
offering, reference is made to the Registration Statement, including the
exhibits and schedules filed therewith, copies of which may be obtained at
prescribed rates from the Commission at its principal office at 450 Fifth Street
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: 75 Park
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Place, New York 10007, and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400 Chicago, Illinois, 60604. Descriptions contained in this Prospectus
as to the contents of any agreement or other documents filed as an exhibit to
the Registration Statement are not necessarily complete and each such
description is qualified by reference to such agreement or document.
The Company intends to furnish to its shareholders annual reports
containing financial statements audited and reported upon by its independent
public accountants.
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[Alternate page for Selling Shareholder Prospectus]
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION JULY ___, 1999
PROSPECTUS
8,000,000 SHARES
COMMON STOCK
STAR SERVICES GROUP, INC.
(A FLORIDA CORPORATION)
Star Services Group, Inc. is a regional, integrated solid waste
services company that presently provides solid waste collection, transfer,
disposal and recycling services in south and central Florida.
This prospectus includes 8,000,000 shares that have been registered for
resale pursuant to rights granted to the shareholders of the Company. Of these
8,000,000 shares, 2,000,000 were issued by the Company in a private placement in
May 1999. See "Selling Shareholders." We will receive none of the proceeds from
the sale of these 8,000,000 shares, but will pay the expenses for their
registration. We will set forth in a supplement to this prospectus all material
information about a particular offer in the future, including any changes to the
identities of the selling shareholders. In general, the proceeds to the selling
shareholders will be the selling price of the shares sold less any discounts or
commissions.
Concurrently with this offering, the Company is registering 12,000,000
shares of common stock to be offered and issued from time to time in connection
with future acquisitions of other businesses or properties.
The selling shareholders may offer, from time to time, all of their
respective shares included in this offering. Since the shares are being offered
on a delayed or continuous basis under Rule 415 of the Securities Act of 1933 we
cannot provide information about the price of the shares or proceeds to the
selling shareholders.
The selling shareholders and any brokers or dealers acting on their
behalf may be deemed underwriters under the Securities Act, in which case
commissions paid to the brokers may be deemed underwriting commissions under the
Securities Act.
We cannot assure that any of the shares being offered by this
prospectus will be sold.
Our stock trades on Nasdaq's OTC Bulletin Board (R) under the symbol
"SSVC." On July 14, 1999, the closing bid price of the stock was $6 1/4.
INVESTING IN THE COMMON STOCK INVOLVES RISKS. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------
PROSPECTUS DATED _______________, 1999
<PAGE> 45
[Alternate page for Selling Shareholder Prospectus]
USE OF PROCEEDS
We will not receive any of the proceeds of the offering of 8,000,000 of
the shares by the selling shareholders.
11
<PAGE> 46
[Alternate page for Selling Shareholder Prospectus]
DILUTION
The 8,000,000 shares offered by the selling shareholders are validly
issued, fully paid and nonassessable shares of the Company's common stock. The
sale of those 8,000,000 shares will not dilute current equity positions.
<PAGE> 47
[Alternate pages for Selling Shareholder Prospectus]
SELLING SHAREHOLDERS
The following table and footnotes set forth certain information
regarding the ownership of Star Services' common stock as of July 15, 1999, and
as adjusted to reflect the sale of the shares offered by the Company and the
selling shareholders of the shares being registered hereunder by (i) persons
known by the Company to beneficially own 5% or more of the outstanding shares of
common stock, (ii) each selling shareholder, (iii) each of the Company's
executive officers, (iv) each director of the Company and (v) all current
officers and directors as a group.
<TABLE>
<CAPTION>
PERCENT OF SHARES PERCENT OF SHARES
NUMBER OF OF COMMON NUMBER OF OF COMMON
SHARES OWNED STOCK HELD PRIOR SHARES OFFERED STOCK HELD
NAME AND ADDRESS OF SELLING SHAREHOLDER PRIOR TO OFFERING TO OFFERING HEREBY AFTER OFFERING
--------------------------------------- ----------------- ----------- ------ --------------
<S> <C> <C> <C> <C>
A&A Family Trust 93,750 1.2 93,750 *
c/o Robert Smoley, Trustee
The Miami Center, 17th Floor
201 S. Biscayne Blvd.,
Miami, FL 33131
Abbatiello, Tony 12,500 * 12,500 *
3922 Marilyn Drive
Seaford, NY 11783
Bailey, Blanche 1,000 * 1,000 *
708 Marguerite
Marshall, MN 56258
Bailey, James H. 19,000 * 975,000 *
10081 Royal Aberdeen Way
Orlando, FL 32828
Bailey, Janis 1,000 * 1,000 *
5349 110th Street
Jacksonville, FL 32244
Bailey, Joan 1,000 * 1,000 *
6 Austin Avenue
Hanover, NH 03756
Bailey, Paul 1,000 * 1,000 *
5 Wood Road
Marlboro, MA 01752
Bailey, Tom 1,000 * 1,000 *
593 Wiseria Street
Chula Vista, CA 91911
Baker, Paul 31,250 * 31,250 *
1101 NW 29th Court
Wilton Manors, FL 33311
BelCastro, Domenico 15,625 * 15,625 *
1 Jason Court
Dix Hills, NY 11746
Bender, George 15,625 * 15,625 *
3801 Segovia Blvd
Coral Gables, FL
</TABLE>
12
<PAGE> 48
<TABLE>
<CAPTION>
PERCENT OF SHARES PERCENT OF SHARES
NUMBER OF OF COMMON NUMBER OF OF COMMON
SHARES OWNED STOCK HELD PRIOR SHARES OFFERED STOCK HELD
NAME AND ADDRESS OF SELLING SHAREHOLDER PRIOR TO OFFERING TO OFFERING HEREBY AFTER OFFERING
--------------------------------------- ----------------- ----------- ------ --------------
<S> <C> <C> <C> <C>
Bender, Harry 15,625 * 15,625 *
980 NW North River Drive
Miami, FL 33136
Bladholm, Lisa 1,000 * 1,000 *
665 N. Beau Chen Drive #26
Mandeville, LA 70471
Bruno, Anthony 31,250 * 31,250 *
11860 NW 21st Street
Plantation, FL 33323
Burke, Paul 31,250 * 31,250 *
2806 Juniper Hill Court
Louisville, KY 40206
Camillo, Joseph H. 1,000 * 1,000 *
5028 Rosamind Drive #2602
Orlando, FL 32808
Caparelli, Ernest 268,750 3.7 268,750 *
3821 NW 92nd Ave.
Hollywood, FL 33024
Casagrande, Angelo 212,500 2.7 212,500 *
252 High View Lane
Media, PA 19063
Casagrande, Carl 31,250 * 31,250 *
1737 NW 126th Drive
Coral Springs, FL 33071
Casagrande, Jack R. 700,000 8.8 700,000 *
16224 NW 82nd Place
Miami, FL 33016
Casagrande, Rocco 531,250 6.7 531,250 *
62 E. Mall Drive
Melville, NY 11747
Cavo, John 31,250 * 31,250 *
1151 NW 77th Avenue
Plantation, FL 33322
Cinelli, John 15,625 * 15,625 *
520 NW 83rd Way
Pembroke Pines, FL 33024
Cohen, Patricia 1,000 * 1,000 *
203 Waymouth Harbor Cove
Longwood, FL 32779
Cohen, Stephanie 1,000 * 1,000 *
203 Waymouth Harbor Cove
Longwood, FL 32779
</TABLE>
13
<PAGE> 49
<TABLE>
<CAPTION>
PERCENT OF SHARES PERCENT OF SHARES
NUMBER OF OF COMMON NUMBER OF OF COMMON
SHARES OWNED STOCK HELD PRIOR SHARES OFFERED STOCK HELD
NAME AND ADDRESS OF SELLING SHAREHOLDER PRIOR TO OFFERING TO OFFERING HEREBY AFTER OFFERING
--------------------------------------- ----------------- ----------- ------ --------------
<S> <C> <C> <C> <C>
Cohen, Patricia Cohen C/F Jessica 1,000 * 1,000 *
203 Waymouth Harbor Cove
Longwood, FL 32779
Cooperman, William 62,500 * 62,500 *
17 Beaumont Drive
Melville, NY 11747
Costa, James 31,250 * 31,250 *
33 Suncrest Drive
Dix Hills, NY 11746
Cunningham, Louise 1,000 * 1,000 *
9152 Balmoral Mewes Square
Windermere, FL 34786
D'Onofrio, Arthur 31,250 * 31,250 *
2114 Grenada Blvd.
Coral Gables, FL 33134
DeCicco, Mary Ellen 31,250 * 31,250 *
125 W. Broadway
Long Beach, NY 11561
DeLuca, Domenico 62,500 * 62,500 *
4931 Van Buren Street
Hollywood, FL
DeMartine, Andy 62,500 * 62,500 *
112-01 Queens Blvd.
Forest Hills, NY 11375
DeRocchia, Americo 12,500 * 12,500 *
1852 Monroe Ave.
Seaford, NY 11783
Derrick, Michael 1,000 * 1,000 *
1241 Foxden Road
Apopka, FL 32712
DeSimone, Michael 187,500 2.3 187,500 *
12677 NW 17th Place
Coral Springs, FL 33071
Disner, David 1,000 * 1,000 *
17th Way North
St. Petersburg, FL 33702
Federicci, Robert 150,000 1.9 150,000 *
1775 York Avenue, Apt. 29F
New York, NY 10128
Feeley, John 175,000 2.2 175,000 *
11245 SW 129th Court
Miami, FL 33168
</TABLE>
14
<PAGE> 50
<TABLE>
<CAPTION>
PERCENT OF SHARES PERCENT OF SHARES
NUMBER OF OF COMMON NUMBER OF OF COMMON
SHARES OWNED STOCK HELD PRIOR SHARES OFFERED STOCK HELD
NAME AND ADDRESS OF SELLING SHAREHOLDER PRIOR TO OFFERING TO OFFERING HEREBY AFTER OFFERING
--------------------------------------- ----------------- ----------- ------ --------------
<S> <C> <C> <C> <C>
Geller, Norman 31,250 * 31,250 *
2 Chelsea Drive
Port Washington, NY 11050
Gorman, Bruce 31,250 * 31,250 *
36 Eleneagels Ct.
Dover, DE 19904
Greene, Charles 1,100,000 13.8 1,100,000 *
910 NW 116th Terrace
Plantation, FL 33325
Grey, Wendy 31,250 * 31,250 *
20191 E. Country Club Drive
Apt. 2302
Aventura, FL 33180
Guidi, Barbara 120,000 1.5 120,000 *
153 Plandome Court North
Manhasset, NY 11030
Hawkins, Larry 31,250 * 31,250 *
13641 Deering Bay Drive
Miami, FL 33158
Huffman, Scott 12,500 * 12,500 *
1638 Nocatee Drive
Coconut Grove, FL 33133
Hughes, Thomas 125,000 1.6 125,000 *
409 SE 28th Ave.
Pompano Beach, FL 33062
Hulteen, Mark 25,000 * 25,000 *
3000 S. Ocean Drive
Apt. 11-7
Hollywood, FL 33019
Humphrey, Harold 12,500 * 12,500 *
14130 Cypress Court
Miami, FL 33014
Janusz, Kimberly 20,000 * 20,000 *
7157 Ballantrae Court
Miami Lakes, FL 33014
Johnson, Nicole 1,000 * 1,000 *
5018 Figwood Lane
Orlando, FL 32808
Johnson, William 46,875 * 46,875 *
17971 NW 13th Street
Pembroke Pines, FL 33029
</TABLE>
15
<PAGE> 51
<TABLE>
<CAPTION>
PERCENT OF SHARES PERCENT OF SHARES
NUMBER OF OF COMMON NUMBER OF OF COMMON
SHARES OWNED STOCK HELD PRIOR SHARES OFFERED STOCK HELD
NAME AND ADDRESS OF SELLING SHAREHOLDER PRIOR TO OFFERING TO OFFERING HEREBY AFTER OFFERING
--------------------------------------- ----------------- ----------- ------ --------------
<S> <C> <C> <C> <C>
Jonza, Emil 50,000 * 50,000 *
8 Ventura Court
Lawrence, NY 11559
Lambert, James 12,500 * 12,500 *
113 Cedar Pt. Dr.
West Islip, NY 11793
Levine, Ronald 15,625 * 15,625 *
80 SW 91st Avenue
Apt. 208
Plantation, FL 33324
Lewis, Michael 1,000 * 1,000 *
632 Stonefield Loop
Heathrow, FL 32746
Liebskind, Ada 1,000 * 1,000 *
2460 Northside Drive
Clearwater, FL 34621
Lopez, Ezequial 1,000 * 1,000 *
1902 Maire Hill Drive
Conyers, GA 30094
Lopez, John 1,000 * 1,000 *
2276 Concord
Scotch Plains, NJ 07076
Lopez, Zeke 1,000 * 1,000 *
7 Norvilla
Laguan Legal, CA 92677
Mackie, Russell 31,250 * 31,250 *
2106 South Cypress Bend Drive
Apt. 204
Pompano Beach, FL 33069
Martorano, Anthony 31,250 * 31,250 *
6054 Cricket Drive
Lakeland, FL 33813
Martorano, John 31,250 * 31,250 *
5148 Hanover Drive
Lakeland, FL 33813
Marzano, Angelo 287,500 3.6 287,500 *
10476 SW 52nd Street
Cooper City, FL 33328
Marzano, Frank 1,100,000 13.8 1,100,000 *
30 Blueberry Court
Melville, NY 11747
</TABLE>
16
<PAGE> 52
<TABLE>
<CAPTION>
PERCENT OF SHARES PERCENT OF SHARES
NUMBER OF OF COMMON NUMBER OF OF COMMON
SHARES OWNED STOCK HELD PRIOR SHARES OFFERED STOCK HELD
NAME AND ADDRESS OF SELLING SHAREHOLDER PRIOR TO OFFERING TO OFFERING HEREBY AFTER OFFERING
--------------------------------------- ----------------- ----------- ------ --------------
<S> <C> <C> <C> <C>
Marzano, Katherine 90,000 1.1 90,000 *
75-50 Penelope Avenue
Middle Village, NY 11379
Marzano, Patrick 1,100,000 13.8 1,100,000 *
Sea Ranch Club C
4900 N. Ocean Blvd., #821
Ft. Lauderdale, FL 33306
Messina, Rafaele 15,625 * 15,625 *
4 Vanderbilt Parkway
Dix Hills, NY 11746
Mirabile, Len 31,250 * 31,250 *
266 Sussex Drive
Manhasset, NY 11030
Morea, Madeline 31,250 * 31,250 *
128 Revere Drive
Sayville, NY 11782
Noble, John 12,500 * 12,500 *
1041 SW 91st Ave.
Plantation, FL 33324
Parr, Steven 1,000 * 1,000 *
1235 Phyllis Lane
Hudson, FL 34669
Pecoraro, Pat 31,250 * 31,250 *
125 W. Broadway
Long Beach, NY 11561
Perkins, Randal 62,500 * 62,500 *
8230 NW 49th Court
Coral Springs, FL 33067
Pernas, Alfredo 15,625 * 15,625 *
640 N. Mashta Drive
Key Biscayne, FL 33149
Persichetti, Joe 1,000 * 1,000 *
967 Fosloria Drive
Melbourne, FL 32940
Petchauer, John 31,250 * 31,250 *
61 Trenton Avenue
E. Atlantic Beach, NY 11561
Pollina, Sandrine 31,250 * 31,250 *
196 Burns St.
Forest Hills, NY 11375
Roberts, Thomas 10,000 * 10,000 *
5386 NW 108th Way
Coral Springs, FL 33076
</TABLE>
17
<PAGE> 53
<TABLE>
<CAPTION>
PERCENT OF SHARES PERCENT OF SHARES
NUMBER OF OF COMMON NUMBER OF OF COMMON
SHARES OWNED STOCK HELD PRIOR SHARES OFFERED STOCK HELD
NAME AND ADDRESS OF SELLING SHAREHOLDER PRIOR TO OFFERING TO OFFERING HEREBY AFTER OFFERING
--------------------------------------- ----------------- ----------- ------ --------------
<S> <C> <C> <C> <C>
Sandler, Leonard 62,500 * 62,500 *
c/o Alphas Sylray Corp.
180 Madison Avenue
New York, NY 10016
Santucci, Robert 62,500 * 62,500 *
94 Castle Ridge Road
Manhasset, NY 11030
Sardinia, Sergio 31,250 * 31,250 *
3110 Brickell Ave.
Miami, FL 33129
Saunders, Mary 1,000 * 1,000 *
119-A University Boulevard
Harrisburg, VA 22801
Shore, Ronald 31,250 * 31,250 *
600 Three Islands Blvd.
Hallandale, FL 33009
Trapana, Ronald 31,250 * 31,250 *
561 Ocean Blvd.
Golden Beach, FL 33160
Velocci, Ralph 187,500 2.3 187,500 *
349 Center Island
Golden Beach, FL 33160
Wallace, Frederick 81,250 1.0 81,250 *
7815 SW 88th Terr.
Miami, FL 33156
Ward, Doug 1,000 * 1,000 *
1709 Fountain Head Drive
Lake Mary, FL 32745
Weiss, Samuel 16,000 * 16,000 *
1197 E. Broadway
Hewlett, NY 11557
Wilkinson, Pamela 1,000 * 1,000 *
9152 Balmoral Mewes Square
Windermere, FL 34786
Wilkinson, Terra 1,000 * 1,000 *
All current executive officers and
directors as a group (8 persons) 4,844,750 61.0% 4,844,750 *
</TABLE>
- ------------------
* Less than 1%.
18
<PAGE> 54
[Alternate page for Selling Shareholder Prospectus]
PLAN OF DISTRIBUTION
Any distribution of the shares offered by the Selling Shareholders, or
by pledgees, donees, transferees or other successors-in-interest, may be
effected from time to time in one or more of the following transactions (which
may involve crosses or block transactions): (i) on the NASD OTC Bulletin Board
(or on such other national stock exchanges or over-the-counter market on which
the Common Stock may be listed from time to time) in transactions which may
include special offerings, exchange distributions and/or secondary distributions
pursuant to and in accordance with the rules of such exchanges, including sales
to underwriters who will acquire the Selling Shareholders' shares for their own
account and resell them in one or more transactions or through brokers, acting
as principal or agent, (ii) in transactions other than on such exchanges or in
the over-the-counter market, or a combination of such transactions, including
sales through brokers, acting as principal or agent, sales in negotiated
transactions, or dispositions for value by any Selling Shareholder to its
partners or members (provided, however, that any dispositions to affiliates are
subject to the restrictions for future sale described in "Shares Eligible for
Future Sale"), (iii) through the issuance of securities by issuers other than
the Company convertible into, exchangeable for, or payable in such shares
(whether such securities are listed on a national securities exchange or
otherwise) or (iv) through the writing of options on the shares (whether such
options are listed on an options exchange or otherwise) other transactions
requiring delivery of the shares or the delivery of the shares to close out a
short position. Any such transactions may be effected at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. See "Selling Shareholders."
The Selling Shareholders and any such underwriters, brokers, dealers or
agents may be deemed "underwriters" as that term is defined by the Securities
Act.
Underwriters participating in any offering made pursuant to this
prospectus (as amended or supplemented from time to time) may receive
underwriting discounts and commissions, and discounts or concessions may be
allowed or reallowed or paid to dealers, and brokers or agents participating in
such transactions may receive brokerage or agent's commissions or fees.
The 12,000,000 shares offered hereby may be offered and issued by
the Company from time to time in connection with future acquisitions of other
businesses or properties. It is anticipated that future acquisitions by the
Company will consist principally of additional solid waste related businesses.
The consideration for acquisitions may include cash (including installment
payments), shares of Common Stock, guarantees, assumptions of liabilities or any
two or more of the foregoing, as determined from time to time by negotiations
between the Company and the owners or controlling persons of the businesses or
properties to be acquired. In addition, the Company may enter into employment
contracts and non-competition agreements with former owners and key executive
personnel of these acquired businesses. The Company at this time is engaged in
preliminary discussions with candidates for possible future acquisitions. The
Company reasonably expects the 12,000,000 shares to be offered and sold within
two years from the initial effective date of the registration.
44
<PAGE> 55
STAR SERVICES GROUP, INC.
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report..................................................................... F-1
Consolidated balance sheets as of December 31, 1998 and 1997 and March 31, 1999.................. F-2
Consolidated statements of operations for the year ended December 31, 1998 and for the period
August 26, 1997 (inception) through December 31, 1997 and for the three-month periods
ended March 31, 1999 and 1998............................................................... F-3
Consolidated statements of shareholders' equity for the year ended December 31, 1998 and for the
period August 26, 1997 (inception) through December 31, 1997 and for the three-month periods
ended March 31, 1999 and 1998............................................................... F-4
Consolidated statements of cash flows for the year ended December 31, 1998 and for the period
August 26, 1997 (inception) through December 31, 1997 and for the three-month periods
ended March 31, 1999 and 1998............................................................... F-5
Notes to consolidated financial statements....................................................... F-6 - F-13
</TABLE>
<PAGE> 56
INDEPENDENT AUDITORS' REPORT
The Shareholders
Star Services Group, Inc.
and subsidiaries
Pompano Beach, Florida
We have audited the accompanying consolidated balance sheets of Star Services
Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year ended December 31, 1998 and for the period August 26, 1997 (inception)
through December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Star Services
Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results
of their consolidated operations and cash flows for the year ended December 31,
1998 and for the period August 26, 1997 (inception) through December 31, 1997,
in conformity with generally accepted accounting principles
March 18, 1999, except for Note 8,
as to which the date is April 1, 1999
F-1
<PAGE> 57
STAR SERVICES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, MARCH 31,
---------------------------- -----------
1998 1997 1999
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash....................................................... $ 49,149 $ 115,033 $ 3,144,819
Accounts receivable........................................ 579,042 75,824 858,555
Prepaid expenses........................................... 123,334 7,276 136,112
----------- ----------- -----------
Total current assets................................... 751,525 198,133 4,139,486
----------- ----------- -----------
Property and equipment, at cost:
Machinery and equipment.................................... 2,351,784 394,203 2,320,257
Office furniture and equipment............................. 33,507 2,500 43,106
Structures and improvements................................ 32,291 6,000 761,657
----------- ----------- -----------
2,417,582 402,703 3,125,020
Less accumulated depreciation.............................. 189,443 12,081 242,892
----------- ----------- -----------
Net property and equipment............................. 2,228,139 390,622 2,882,128
----------- ----------- -----------
Total assets........................................... $ 2,979,664 $ 588,755 $ 7,021,614
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.......................... $ 365,265 $ 22,102 $ 481,192
Notes payable.............................................. 388,125 -- 388,125
Accounts payable........................................... 291,302 10,778 730,004
Accrued expenses........................................... 30,923 4,954 65,246
Loans from shareholders.................................... 149,000 10,000 216,000
----------- ----------- -----------
Total current liabilities.............................. 1,224,615 47,834 1,880,567
----------- ----------- -----------
Long-term debt, net of current portion........................ 1,316,899 220,229 1,667,274
----------- ----------- -----------
Shareholders' equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
5,000,000 shares issued and outstanding in 1998 and 1997,
6,467,500 shares issued and outstanding in 1999............ 50,000 50,000 64,675
Additional paid-in capital................................. 448,200 241,000 3,418,525
Retained earnings (accumulated deficit).................... (60,050) 29,692 (9,427)
----------- ----------- -----------
Total shareholders' equity............................. 438,150 320,692 3,473,773
----------- ----------- -----------
Total liabilities and shareholders' equity............. $ 2,979,664 $ 588,755 $ 7,021,614
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 58
STAR SERVICES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
AUGUST 26, 1997
(INCEPTION) THREE-MONTH PERIOD
YEAR ENDED THROUGH ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, ---------------------------
1998 1997 1999 1998
------------ ---------------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $ 3,542,851 $ 235,596 $ 2,217,469 $ 171,654
----------- ----------- ----------- ---------
Expenses:
Direct costs 2,449,085 129,029 1,588,770 151,529
Selling and administrative 935,723 63,181 457,626 67,531
Depreciation 177,362 12,081 53,448 24,918
----------- ----------- ----------- ---------
3,562,170 204,291 2,099,844 243,978
----------- ----------- ----------- ---------
Income (loss) from operations (19,319) 31,305 117,625 (72,324)
Interest expense (70,423) (1,613) (39,743) (8,250)
----------- ----------- ----------- ---------
Income (loss) before income taxes (89,742) 29,692 77,882 (80,574)
Income taxes -- -- (27,259) --
----------- ----------- ----------- ---------
Net income (loss) $ (89,742) $ 29,692 $ 50,623 $ (80,574)
=========== =========== =========== =========
</TABLE>
UNAUDITED PRO FORMA INCOME TAX, NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE
INFORMATION (INFORMATION FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 IS
ACTUAL):
<TABLE>
<S> <C> <C> <C> <C>
Historical income (loss) before income taxes $ (89,742) $ 29,692 $ 77,882 $ (80,574)
Pro forma income tax (expense) benefit 27,000 (9,000) (27,259) 24,000
----------- ----------- ----------- -----------
Pro forma net income (loss) $ (62,742) $ 20,692 $ 50,623 $ (56,574)
=========== =========== =========== ===========
Pro forma earnings (loss) per share $ (0.01) $ 0.00 $ 0.01 $ (0.01)
=========== =========== =========== ===========
Historical weighted average shares
outstanding 5,000,000 5,000,000 5,016,306 5,000,000
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 59
STAR SERVICES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1998, AND THE PERIOD
AUGUST 26, 1997 (INCEPTION) THROUGH DECEMBER 31,
1997 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1999 AND 1998
(INFORMATION FOR THREE-MONTH PERIODS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS
ISSUED PAR ADDITIONAL (ACCUMULATED
SHARES VALUE PAID-IN CAPITAL DEFICIT)
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Balance at inception, as restated for
recapitalization ................. 5,000,000 $50,000 $ 241,000 $ --
Net income .......................... -- -- -- 29,692
--------- ------- ---------- --------
Balance at December 31, 1997 ........ 5,000,000 50,000 241,000 29,692
Net capital contributed ............. -- -- 207,200 --
Net loss ............................ -- -- -- (89,742)
--------- ------- ---------- --------
Balance at December 31, 1998 ........ 5,000,000 $50,000 $ 448,200 $(60,050)
========= ======= ========== ========
Balance at January 1, 1998 .......... 5,000,000 $50,000 $ 241,000 $ 29,692
Net loss (unaudited) ................ -- -- -- (80,574)
--------- ------- ---------- --------
Balance at March 31, 1998 (unaudited) 5,000,000 $50,000 $ 241,000 $(50,882)
========= ======= ========== ========
Balance at January 1, 1999 .......... 5,000,000 $50,000 $ 448,200 $(60,050)
Issuance of common stock and capital
contributions .................... 1,467,500 14,675 2,970,325 --
Net income (unaudited) .............. -- -- -- 50,623
--------- ------- ---------- --------
Balance at March 31, 1999 (unaudited) 6,467,500 $64,675 $3,418,525 $ (9,427)
========= ======= ========== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 60
STAR SERVICES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
AUGUST 26,
1997
(INCEPTION)
YEAR ENDED THROUGH THREE-MONTH PERIOD
DECEMBER 31, DECEMBER 31, ENDED MARCH 31,
------------ ------------ ------------------------------
1998 1997 1999 1998
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................... $ (89,742) $ 29,692 $ 50,623 $ (80,574)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation.............................. 177,362 12,081 53,449 24,918
Changes in operating assets and liabilities:
Increase in accounts receivable......... (503,218) (75,824) (279,513) (1,455)
Increase in prepaid expenses............ (116,058) (7,276) (12,778) (12,527)
Increase in accounts payable............ 280,524 10,778 438,702 34,181
Increase in accrued expenses............ 25,969 4,954 34,323 877
------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities................ (225,163) (25,595) 284,806 (34,580)
------------ ------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures........................ (569,582) (158,501) (13,018) (33,733)
------------ ------------ ------------ ------------
Net cash used in investing activities. (569,582) (158,501) (13,018) (33,733)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from shareholder loans............. 527,125 10,000 67,000 -
Principal payments under loan agreements.... (142,424) (1,871) (228,118) (10,086)
Net proceeds from issuance of common stock and
capital contributions..................... 344,160 291,000 2,985,000 -
------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities................ 728,861 299,129 2,823,882 (10,086)
------------ ------------ ------------ ------------
Net increase (decrease) in cash................ (65,884) 115,033 3,095,670 (78,399)
Cash, beginning of period...................... 115,033 - 49,149 115,033
------------ ------------ ------------ ------------
Cash, end of period............................ $ 49,149 $ 115,033 $ 3,144,819 $ 36,634
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest expense paid.......................... $ 70,423 $ 1,613 $ 39,743 $ 8,250
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 61
STAR SERVICES GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(INFORMATION FOR THE PERIODS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Star Services Group,
Inc. and subsidiaries (hereinafter "STAR SERVICES GROUP, INC." or the
"Company") is presented to assist in understanding the consolidated
financial statements. The financial statements and notes are
representations of the management of Star Services Group, Inc. and
subsidiaries which 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.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Star
Services Group, Inc. ("STAR SERVICES GROUP, INC.") and of its
wholly-owned subsidiaries, Delta Recycling Corp. ("Recycling"), Delta
Transfer Corp. ("Transfer"), Delrock Management Corp. ("Delrock"),
Eastern Recycling, Inc. ("Eastern") and Delta Resources Corp.
("Resources"). Recycling, Transfer, Delrock, Eastern and Resources are
collectively referred to as the "Subsidiaries". Significant
intercompany accounts and transactions have been eliminated. On
February 4, 1999, STAR SERVICES GROUP, INC. acquired 100% of the
issued and outstanding capital stock of Recycling, Transfer, Delrock,
Eastern and Resources, thereby making them wholly-owned subsidiaries
of STAR SERVICES GROUP, INC. Prior to that date, and throughout the
years ended December 31, 1998 and 1997, all of the companies were
under common control. The capital structure for all periods has been
retroactively restated to give effect to the business combination and
the capital structure of STAR SERVICES GROUP, INC.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
HISTORY AND BUSINESS ACTIVITY
Star Services Group, Inc. was incorporated in the State of Florida on
February 3, 1999. Its corporate offices and operations are located in
Pompano Beach, Florida. The Company operates in several segments of
the environmental services industry: collection, recycling and
disposal of construction and demolition debris, land clearing, yard
waste debris, and source separated recyclable materials. The Company's
operations are carried out by Delta Recycling Corp. which was
incorporated in the State of Florida on August 26, 1997, Delrock
Management Corp. which was incorporated in the State of Florida on May
29, 1998, Delta Transfer Corp. which was incorporated in the State of
Florida on August 26, 1998, Eastern Recycling, Inc. which was
incorporated in the State of Florida on June 11, 1997, and Delta
Resources Corp. which was incorporated in the State of Florida on
January 29, 1999. Operations commenced with the incorporation of Delta
Recycling Corp. on August 26, 1997.
F-6
<PAGE> 62
Delta Recycling Corp. and Delta Transfer Corp. operate material
resource recovery facilities ("MRF"), which are environmentally
licensed and regulated by the State of Florida Department of
Environmental Protection and the Broward County Department of Natural
Resources Protection. As a MRF, these facilities accept assorted loads
of debris consisting of construction and demolition debris, land
clearing, and yard waste and source separated materials primarily from
customers in the construction and demolition debris industry. The
incoming loads are processed using an semi-automated sorting system to
separate recyclables from the waste stream. Additional loads are also
supplied by Delta Recycling Corp. through its hauling operations. The
reclaimed recyclables are shipped to end user markets for re-use.
Delta Recycling Corp. also operates a solid waste disposal service to
collect and transport materials for the industry segment. Delrock
Management Corp. owns real estate used in conjunction with the
Company's operations. Eastern Recycling, Inc. has been inactive
throughout 1997 and 1998. Delta Resources Corp. commenced operations
in February 1999 as the operator of a construction and demolition
debris landfill in Titusville, Florida.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of accounts
receivable. The Company's policies do not require collateral to support
accounts receivable. However, because of the diversity and credit
worthiness of individual accounts which comprise the total balance,
management does not believe that the Company is subject to any
significant credit risk.
The Company routinely maintains cash balances with one bank under
limits insured by the Federal Deposit Insurance Corporation (FDIC). At
December 31, 1998, the Company's cash balance with this bank did not
exceed the FDIC insured limit. At December 31, 1997, the Company's cash
balance exceeded the FDIC insured limit by approximately $15,000. There
is off-balance sheet risk to the extent that outstanding checks, when
added to the cash balance, exceed the limit insured by the FDIC. The
Company also maintains cash in a money market account with an
investment fund company. The Company has not experienced any losses in
such accounts and believes they are not exposed to any significant
credit risk on cash.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's receivables and payables are current and on normal terms
and, accordingly, are believed by management to approximate fair value.
Management also believes that notes payable, long-term debt and capital
lease obligations approximate fair value when current interest rates
for similar debt securities are applied.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is provided on
the straight-line and accelerated methods over the following estimated
useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Machinery and equipment............................. 5-10
Office furniture and equipment...................... 5
Structures and improvements......................... 5-39
</TABLE>
Maintenance, repairs and renewals which neither materially add to the
value of the equipment nor appreciably prolong its life are charged to
expense as incurred. Gains or losses on dispositions of equipment are
included in income.
F-7
<PAGE> 63
SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND FINANCING ACTIVITIES
The Company financed equipment purchases as follows:
<TABLE>
<CAPTION>
THREE-MONTH
PERIOD ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- -------------
1998 1997 1999
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Property and equipment purchased.............. $ 2,014,879 $ 402,703 $ 707,438
Long-term debt financing...................... (1,445,297) (244,202) (694,420)
----------- ----------- -----------
Capital expenditures.......................... $ 569,582 $ 158,501 $ 13,018
=========== =========== ===========
</TABLE>
During 1998, the Company received capital contributions and its subsidiaries
purchased treasury stock as follows:
<TABLE>
<S> <C>
Capital contributions.............................................. $ 411,000
Expenditures for treasury stock of subsidiaries.................... (66,840)
-----------
Net proceeds from capital contributions............................ 344,160
Debt issued to purchase treasury stock of subsidiaries ............ (136,960)
-----------
Net capital contributed............................................ $ 207,200
===========
</TABLE>
PRO FORMA INFORMATION (UNAUDITED)
The statements of operations present pro forma information (unaudited) of income
tax expense which would have been recorded had STAR SERVICES GROUP, INC.'s
subsidiaries been taxable corporations based on the tax laws in effect during
the period and the resultant pro forma effect on net income (loss) and earnings
(loss) per share.
F-8
<PAGE> 64
2. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------- -----------
1998 1997 1999
----------- ----------- -----------
<S> <C> <C> <C>
Notes payable to various financial institutions in
monthly installments totalling $33,469 in 1998
and $7,677 in 1997, including interest ranging
from 5.9% to 11.4%. The notes mature in April
2001 through November 2007. The notes are
secured by machinery and equipment................. $ 1,211,517 $ 242,331 $ 1,046,138
Mortgage payable to an individual in monthly
installments of $5,455, including interest at 8%,
through August 2003............................... 337,387 - 286,988
Notes payable to individuals in monthly
installments totalling $3,639, including interest at
7%. The notes mature in September 2001 through
November 2003 and are personally guaranteed by
the Company's majority shareholders................ 133,260 - 87,111
----------- ----------- -----------
1,682,164 242,331 1,420,237
Less current portion.............................. 365,265 22,102 499,223
----------- ----------- -----------
$ 1,316,899 $ 20,229 $ 921,014
=========== =========== ===========
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1999................................................. $ 365,265
2000................................................. 414,234
2001................................................. 344,676
2002................................................. 222,213
2003................................................. 138,731
Thereafter........................................... 197,045
----------
$1,682,164
==========
</TABLE>
3. NOTES PAYABLE
Notes payable represent uncollateralized, non-interest bearing loans
made to the Company by related parties. The notes are payable on
demand.
4. LOANS FROM SHAREHOLDERS
Loans from shareholders represent uncollateralized, non-interest
bearing advances to the Company, payable on demand.
F-9
<PAGE> 65
5. SHAREHOLDERS' EQUITY
COMMON STOCK
As described in Note 1, on February 4, 1999, Star Services Group, Inc.
issued 5,000,000 shares of common stock to acquire all of the issued
and outstanding shares of the Subsidiaries. Prior to that date, and
throughout 1998 and 1997, all of the companies were under common
control. As a result, the business combination has been accounted for
as a recapitalization. The capital structure for all periods has been
retroactively restated to give effect to the business combination and
the capital structure of STAR SERVICES GROUP, INC.
PREFERRED STOCK
The Company's articles of incorporation provide that the Company may
authorize the issuance of up to 5,000,000 shares of preferred stock.
The preferred stock may be issued in series from time to time with such
designations, rights, preferences and limitations as the Company's
Board of Directors may determine by resolution.
6. COMMITMENTS AND CONTINGENCIES
LEASE AGREEMENTS
From inception through October 1998, the Company maintained its offices
on the site of the 50-acre material recovery facility described in the
following paragraph. During November 1998 through January 1999, the
Company leased its offices on a month-to-month basis. Effective
February 1, 1999, the Company entered into an operating lease for its
office facilities. The lease is for a three-year period ending January
2002 with an option to extend the lease for an additional three years.
The Company leases a total of approximately 80 acres of land under
operating leases on which it operates its two material recovery
facilities. The Company is leasing approximately 50 acres for a
five-year period ending in June 2002 at a monthly rental of $8,333. The
lease provides for an option to renew the lease for a second five-year
term. The Company also leases approximately 30 acres for a one-year
period ending August 1999, with a one-year option to renew. The lease
also provides for the option to purchase the facility for $4,000,000.
Rent expense under the above office and facilities leases totalled
$154,610 for the year ended December 31, 1998.
Effective February 15, 1999, Delta Resources Corp. entered into an
operating lease for approximately 90 acres of land which include a
48-acre construction and demolition landfill in Titusville, Florida.
Under the terms of the 18-month agreement, the monthly rental is $4,000
for the first four months and $8,000 per month thereafter. During the
term of the lease, the Company is to pursue certain environmental
permits, wetland issues and zoning. In the event that the Company
exercises its option to purchase the property (as described in Note 7),
$4,000 of each $8,000 payment made shall be applied against the
$600,000 purchase price. If the aforementioned permits and licenses
have not been received, the Company has the option to renew the term of
the lease for an additional 18-month period. Rent during the renewal
period shall not be applied to the purchase price.
During 1998, the Company commenced leasing four of its trucks from a
financing corporation under operating leases, which expire in various
months of 2003. The Company has the option to purchase the trucks and
trailers for the fair market value at the expiration of the lease term.
Lease expense under these operating leases for the year ended December
31, 1998 was $47,372.
F-10
<PAGE> 66
MINERAL EXTRACTION AGREEMENT
Eastern Recycling, Inc. entered into a mineral extraction agreement,
dated October 10, 1997, and amended May 26, 1998, whereby Eastern
Recycling, Inc. has the exclusive right to excavate, dredge, mine and
remove all sand products in and from a 24.1 acre lake area located in
Pompano Beach, Florida.
The parties in the contract, through Eastern Recycling, Inc., will
conduct the mining production and sale of screened mason sand, its
by-products, lawn sand, stabilizer and fill for sale to third parties.
The agreement includes the lease of approximately 6.5 acres of land
adjoining the lake area. Under the terms of the agreement, the Company
is obligated to pay a royalty of 15% of gross sales price for all
minerals and materials extracted, or $.50 per ton, whichever is
greater. Such royalty payments shall not be less than $2,500 per month.
Such payments commenced in July 1998.
Royalty and rent payments under the mineral extraction agreement
totalled $15,000 for the year ended December 31, 1998.
FUTURE MINIMUM PAYMENTS
The minimum future payments under the above lease and mineral
extraction agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDING OPERATING MINERAL
DECEMBER 31, FACILITIES EQUIPMENT EXTRACTION
---------------------------- ---------- --------- ----------
<S> <C> <C> <C>
1999........................ $ 354,202 $ 78,921 $ 30,000
2000........................ 190,085 78,921 30,000
2001........................ 131,724 78,921 30,000
2002........................ 52,655 78,921 30,000
2003........................ - 47,863 30,000
Thereafter.................. - - 120,000
--------- --------- ---------
$ 728,666 $ 363,547 $ 270,000
========= ========= =========
</TABLE>
GOVERNMENT REGULATION
Substantially all of the Company's operations are subject to federal,
state and local regulations relating to the disposition of
environmentally-sensitive waste. Compliance with these provisions has
not had, nor does the Company expect such compliance to have, any
material effect upon the capital expenditures, net income, financial
condition or competitive position of the Company. Management believes
that its current practices and procedures for the control and
disposition of such wastes comply with applicable federal, state and
local requirements.
7. INCOME TAXES
During 1998 and 1997, the Subsidiaries elected to be treated as S
Corporations under the provisions of the Internal Revenue Code and
similar provisions of state tax laws. As S Corporations, the net income
or loss of the Subsidiaries was reportable by the shareholders who were
responsible for any income taxes thereon. Therefore, no provision for
income taxes on income has been included in these financial statements.
STAR SERVICES GROUP, INC.'s acquisition of the Subsidiaries in 1999
automatically terminated their S Corporation elections.
F-11
<PAGE> 67
8. SUBSEQUENT EVENTS
PRIVATE PLACEMENT
During February 1999, STAR SERVICES GROUP, INC. commenced a private
placement under which it is offering up to 1,500,000 shares of its $.01
par value common stock at a purchase price of $2.00 per share. Under
the terms of the offering, 500,000 shares will be offered on a "best
efforts, all-or-none" basis and up to an additional 1,000,000 shares on
a "best efforts" basis. The Company may sell up to an additional
500,000 shares solely to cover over-allotments. The subscription period
will end on April 30, 1999 unless (i) extended by the Company for a
period of up to an additional 60 days, (or 90 days if the
over-allotment option is exercised) or (ii) terminated earlier, at any
time, by the Company in its sole discretion. If all of the 2,000,000
shares are sold, including the over-allotment, the Company estimates
receiving net proceeds of approximately $3,900,000. The Company
anticipates using such net proceeds to fund potential acquisitions, for
debt repayment and for working capital. As of March 31, 1999,
$2,935,000 of proceeds from the Private Placement had been received.
PLANNED MERGER
The Company is negotiating to acquire a controlling interest in a
publicly-held shell corporation. Under the terms of the proposed merger
agreement, the shell corporation, which has 1,000,000 common shares
outstanding, would issue approximately 7,000,000 unregistered shares of
its common stock in exchange for all of the outstanding common stock of
STAR SERVICES GROUP, INC. It is estimated that STAR SERVICES GROUP,
INC. will have approximately 7,000,000 shares outstanding after the
completion of the Private Placement described above. As a result of the
proposed transaction, the shareholders of STAR SERVICES GROUP, INC.
would receive approximately 88% of the public shell corporation,
thereby effecting a change in control of the public entity.
Such business combination would be accounted for as a reverse
acquisition. Under the accounting rules for a reverse acquisition, STAR
SERVICES GROUP, INC. is considered the acquiring entity. As a result,
historical financial information for periods prior to the date of the
transaction would be those of STAR SERVICES GROUP, INC.
ACQUISITION AGREEMENT
During February 1999, the Company entered into an agreement to acquire
the operations of a landfill operation in Titusville, Florida. In
connection therewith, the Company entered into an operating lease for
the landfill, as described in Note 5. In addition, the Company entered
into an option to purchase the landfill, including licenses and permits
and a noncompete agreement with the owner, for $600,000. Such option
expires July 31, 2000, but may be renewed for an additional year if the
operating lease agreement is renewed. In the event that the option to
purchase is exercised, consideration shall include a $500,000 mortgage
payable every other month over a ten-year period in installments of
$11,577 including interest at 7%. In addition, the Company entered into
a consulting agreement with the owner of the landfill to provide
consulting services to the Company for a three-year period in exchange
for a prepaid consulting fee of $100,000.
F-12
<PAGE> 68
[Alternate page for Selling Shareholder Prospectus]
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION JULY ___, 1999
PROSPECTUS
8,000,000 SHARES
COMMON STOCK
STAR SERVICES GROUP, INC.
(A FLORIDA CORPORATION)
Star Services Group, Inc. is a regional, integrated solid waste
services company that presently provides solid waste collection, transfer,
disposal and recycling services in south and central Florida.
This prospectus includes 8,000,000 shares that have been registered for
resale pursuant to rights granted to the shareholders of the Company. Of these
8,000,000 shares, 2,000,000 were issued by the Company in a private placement in
May 1999. See "Selling Shareholders." We will receive none of the proceeds from
the sale of these 8,000,000 shares, but will pay the expenses for their
registration.
Concurrently with this offering, the Company is registering 12,000,000
shares of common stock to be offered and issued from time to time in connection
with future acquisitions of other businesses or properties.
The selling shareholders may offer, from time to time, all of their
respective shares included in this offering. Since the shares are being offered
on a delayed or continuous basis under Rule 415 of the Securities Act of 1933 we
cannot provide information about the price of the shares or proceeds to the
selling shareholders.
The selling shareholders and any brokers or dealers acting on their
behalf may be deemed underwriters under the Securities Act, in which case
commissions paid to the brokers may be deemed underwriting commissions under the
Securities Act.
We cannot assure that any of the shares being offered by this
prospectus will be sold.
Our stock trades on Nasdaq's OTC Bulletin Board (R) under the symbol
"SSVC." On July 14, 1999, the closing bid price of the stock was $6 1/4.
INVESTING IN THE COMMON STOCK INVOLVES RISKS. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------
PROSPECTUS DATED _______________, 1999
<PAGE> 69
[Alternate page for Selling Shareholder Prospectus]
USE OF PROCEEDS
We will not receive any of the proceeds of the offering of the
8,000,000 shares by the selling shareholders.
11
<PAGE> 70
[Alternate page for Selling Shareholder Prospectus]
DILUTION
The 8,000,000 shares offered by the selling shareholders are validly
issued, fully paid and nonassessable shares of the Company's common stock. The
sale of those 8,000,000 shares will not dilute current equity positions.
<PAGE> 71
[Alternate page for Selling Shareholder Prospectus]
PRINCIPAL AND SELLING SHAREHOLDERS
The following table and footnotes set forth certain information
regarding the ownership of Star Services' common stock as of July 15, 1999, and
as adjusted to reflect the sale of the shares offered by the Company and the
selling shareholders of the shares being registered hereunder by (i) persons
known by the Company to beneficially own 5% or more of the outstanding shares of
common stock, (ii) each of the Company's executive officers, (iii) each director
of the Company and (iv) all current officers and directors as a group.
<TABLE>
<CAPTION>
PERCENT OF SHARES
NUMBER OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED STOCK OWNED
- ------------------------------------ ------------ -----------
<S> <C> <C>
</TABLE>
12
<PAGE> 72
<TABLE>
<CAPTION>
PERCENT OF SHARES
NUMBER OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED STOCK OWNED
- ------------------------------------ ------------ -----------
<S> <C> <C>
Casagrande, Jack R. 700,000 8.8
16224 NW 82nd Place
Miami, FL 33016
Casagrande, Rocco 531,250 6.7
62 E. Mall Drive
Melville, NY 11747
</TABLE>
13
<PAGE> 73
<TABLE>
<CAPTION>
PERCENT OF SHARES
NUMBER OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED STOCK OWNED
- ------------------------------------ ------------ -----------------
<S> <C> <C>
Phillip Foreman 0 0
c/o Star Services Group, Inc.
2075 North Powerline Road
Pompano Beach, FL 33069
Greene, Charles 1,100,000 13.8
910 NW 116th Terrace
Plantation, FL 33325
</TABLE>
15
<PAGE> 74
<TABLE>
<CAPTION>
PERCENT OF SHARES
NUMBER OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED STOCK OWNED
- ------------------------------------ ------------ -----------
<S> <C> <C>
Richard Loss
c/o Star Services Group, Inc.
2075 N. Powerline Road
Pompano Beach, FL 33069
Marzano, Angelo 287,500 3.6
10476 SW 52nd Street
Cooper City, FL 33328
Marzano, Frank 1,100,000 13.8
30 Blueberry Court
Melville, NY 11747
</TABLE>
16
<PAGE> 75
<TABLE>
<CAPTION>
PERCENT OF SHARES
NUMBER OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED STOCK OWNED
- ------------------------------------ ------------ -----------------
<S> <C> <C>
Marzano, Patrick 1,100,000 13.8
Sea Ranch Club C
4900 N. Ocean Blvd., #821
Ft. Lauderdale, FL 33306
Roberts, Thomas 10,000 *
5386 NW 108th Way
Coral Springs, FL 33076
</TABLE>
17
<PAGE> 76
<TABLE>
<CAPTION>
PERCENT OF SHARES
NUMBER OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED STOCK OWNED
- ------------------------------------ ------------ -----------------
<S> <C> <C>
Weiss, Samuel 16,000 *
1197 E. Broadway
Hewlett, NY 11557
All current executive officers and
directors as a group (10 persons) 4,844,750 61.0%
</TABLE>
- ------------------
* Less than 1%.
18
<PAGE> 77
PLAN OF DISTRIBUTION
Any distribution of the shares offered by the Selling Shareholders, or
by pledgees, donees, transferees or other successors-in-interest, may be
effected from time to time in one or more of the following transactions (which
may involve crosses or block transactions): (i) on the NASD OTC Bulletin Board
(or on such other national stock exchanges or over-the-counter market on which
the Common Stock may be listed from time to time) in transactions which may
include special offerings, exchange distributions and/or secondary distributions
pursuant to and in accordance with the rules of such exchanges, including sales
to underwriters who will acquire the Selling Shareholders' shares for their own
account and resell them in one or more transactions or through brokers, acting
as principal or agent, (ii) in transactions other than on such exchanges or in
the over-the-counter market, or a combination of such transactions, including
sales through brokers, acting as principal or agent, sales in negotiated
transactions, or dispositions for value by any Selling Shareholder to its
partners or members (provided, however, that any dispositions to affiliates are
subject to the restrictions for future sale described in "Shares Eligible for
Future Sale"), (iii) through the issuance of securities by issuers other than
the Company convertible into, exchangeable for, or payable in such shares
(whether such securities are listed on a national securities exchange or
otherwise) or (iv) through the writing of options on the shares (whether such
options are listed on an options exchange or otherwise) other transactions
requiring delivery of the shares or the delivery of the shares to close out a
short position. Any such transactions may be effected at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. See "Selling Shareholders."
The Selling Shareholders and any such underwriters, brokers, dealers or
agents may be deemed "underwriters" as that term is defined by the Securities
Act.
Underwriters participating in any offering made pursuant to this
prospectus (as amended or supplemented from time to time) may receive
underwriting discounts and commissions, and discounts or concessions may be
allowed or reallowed or paid to dealers, and brokers or agents participating in
such transactions may receive brokerage or agent's commissions or fees.
44
<PAGE> 78
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the offering are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.......................................... $ 27,800
Legal Fees and Expenses...................................................................... 85,000
Accounting Fees and Expenses................................................................. 50,000
Fees and Expenses (including Legal Fees) for qualifications under State Securities Laws...... 5,000
Registrar and Transfer Agents Fees and Expenses.............................................. 500
Miscellaneous................................................................................ 10,000
--------
Total.................................................................................... $181,300
========
</TABLE>
All amounts except the Securities and Exchange Commission registration
fee are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided in such statute. The Registrant's Articles of Incorporation provide
that the Registrant may indemnify its executive officers and directors to the
fullest extent permitted by law whether now or hereafter. The Registrant has
entered or will enter into an agreement with each of its directors and certain
of its officers wherein it has agreed to indemnify each of them to the fullest
extent permitted by law.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of the
criminal law, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b)
deriving an improper personal benefit from a transaction; (c) voting for or
assenting to an unlawful distribution; and (d) willful misconduct or a conscious
disregard for the best interests of the Registrant in a proceeding by or in the
right of the Registrant to procure a judgment in its favor or in a proceeding by
or in the right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C> <C>
3.1 - Articles of Incorporation of the Company.
3.2 - Bylaws of the Company.
5 - Opinion of Greenberg Traurig, P.A.[to be filed by amendment]
10.1 - 1999 Stock Option Plan. [to be filed by amendment]
10.2 - Employment Agreement between the Company and Thomas Roberts.
10.3 - Asset Sale Agreement between the Company and Industrial Waste Services.
10.4 - Asset Purchase and Real Estate Acquisition Agreement dated May 1999 among
Delta Resources Corp., Holmes Dirt Services, Inc. and William Holmes and
Judith Holmes.
10.5 - Lease Agreement dated February 1, 1999 between JMA Investment, Inc. and Delta
Recycling Corp.
21.1 - Subsidiaries of the Registrant.
23.1 - Consent of Horton & Company.
23.2 - Consent of Greenberg Traurig, P.A. (Included in Exhibit 5).
24.0 - Reference is made to the Signatures section of this Registration
Statement for the Power of Attorney contained therein.
27 - Financial Data Schedule [to be filed by amendment]
</TABLE>
II-1
<PAGE> 79
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Articles of Incorporation
and By-Laws of the Registrant and the laws of the State of Florida, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) To 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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(4) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under
the Securities Act of 1933, 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 registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the
time it was declared effective.
(ii) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE> 80
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Pompano
Beach, State of Florida on this ____th day of July, 1999.
STAR SERVICES GROUP, INC.
By:
-----------------------------------------
Jack R. Casagrande, Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints each of Jack R. Casagrande and
Patrick F. Marzano his true and lawful attorney-in-fact, who acting alone, with
full powers of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any or all amendments, including
any post-effective amendments, to this Registration Statement, and to file the
same, with exhibits thereto, and other documents to be filed in connection
therewith, including any registration statement pursuant to Rule 462 under the
Securities Act, with the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorney-in-fact or his substitute, acting alone,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- ------------------------------------------------- -------------
<S> <C> <C>
- ----------------------------- Chairman of the Board and Chief Executive Officer July __, 1999
Jack R. Casagrande (Principal Executive Officer)
- ----------------------------- President and Director July __, 1999
Patrick F. Marzano
- ----------------------------- Chief Financial Officer (Principal Financial and July __, 1999
Richard Loss Accounting Officer)
- ----------------------------- Director July __, 1999
Phillip Foreman
- ----------------------------- Vice President, Environmental Compliance and July __, 1999
Thomas R. Roberts Director
- ----------------------------- Director July __, 1999
Frank P. Marzano
- ----------------------------- Director July __, 1999
Rick Casagrande
- ----------------------------- Director July __, 1999
Samuel G. Weiss
</TABLE>
II-3
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
BAILEY & BARON, INC.
ARTICLE I
The name of the corporation is Bailey & Baron, Inc.
ARTICLE II
Corporate existence is deemed to have started on the date of the filing
hereof by the Secretary of State.
ARTICLE III
The Corporation shall have perpetual existence.
ARTICLE IV
PURPOSE AND PRINCIPAL PLACE OF BUSINESS
Purpose. This Corporation is organized for the purposes of transacting
any and all lawful business.
Principal Place of Business. The initial street address of the
principal place of business of the Corporation is:
11601 Grady Ave. N.
Tampa, FL 33624
ARTICLE V
CAPITAL STOCK
The amount of capital stock authorized shall consist of One Thousand
(1,000) shares of the common voting stock having no par value, payable in lawful
money of the United States of America or in property, at a just valuation to be
fixed by the Board of Directors of this
<PAGE> 2
Corporation. The capital stock of the Corporation may at any time be increased
or decreased as provided by the laws of Florida.
ARTICLE VI
INCORPORATOR
The name and street address of the Incorporator is:
David C. Baron
2650 Countryside Blvd.
Building A-105
Clearwater, FL 34621
ARTICLE VII
BOARD OF DIRECTORS
Section 1. This Corporation initially shall have two (2) directors. The
number of directors may be increased or diminished from time to time by action
in accordance with the Bylaws of the Corporation.
Section 2. The name and street address of the first members of the
Board of Directors who, unless otherwise provided by the Bylaws, shall hold
office for the first year of existence of the Corporation or until his successor
is elected and qualified are:
James H. Bailey
11601 Brady Ave. N.
Tampa, FL 33624
David C. Baron
2650 Countryside Blvd.
Building A-105
Clearwater, FL 34621
All of the directors of the Corporation shall be at least eighteen (18) years of
age.
2
<PAGE> 3
ARTICLE VIII
RESTRICTION ON TRANSFER OF STOCK
Shares of the capital stock of this Corporation shall be issued
initially to the following persons and in the amount set opposite their name:
James H. Bailey - 100 shares
David C. Baron - 100 shares
Shares held by the initial Stockholders listed above may not be resold
or otherwise transferred (other than to a revocable trust created by a
Stockholder) or encumbered without the consent of the other Stockholders and
unless such shares are first offered to the remaining Stockholders or to this
Corporation. The price and terms at which, and the time within which, such
shares may be offered and sold shall be further specified in, or as directed by,
the Bylaws of this Corporation.
IN WITNESS WHEREOF, the above-named Incorporation has subscribed his
name this 19th day of April, 1989.
----------------------------------
David C. Baron
STATE OF FLORIDA )
) SS:
COUNTY OF PINELLAS )
The foregoing Articles of Incorporation were acknowledged before me by
David C. Baron this 19th day of April, 1989.
----------------------------------
NOTARY PUBLIC
State of Florida at Large
My commission expires:
- -------------------
3
<PAGE> 4
CERTIFICATE DESIGNATING PLACE OF BUSINESS
OR DOMICILE FOR THE SERVICE OF PROCESS WITHIN
FLORIDA, NAMING AGENT UPON WHOM MAY BE SERVED
IN COMPLIANCE WITH SECTION 48.091, FLORIDA STATUTES, THE FOLLOWING IS
SUBMITTED:
FIRST -- THAT BAILEY & BARON, INC. DESIRING TO ORGANIZE OR QUALITY
UNDER THE LAWS OF THE STATE OF FLORIDA, WITH ITS PRINCIPAL PLACE OF BUSINESS IN
THE CITY OF CLEARWATER, PALM HARBOR, STATE OF FLORIDA, HAS NAMED JAMES H. BAILEY
AT 11601 GRADY AVENUE N., TAMPA, FL 33624 AS ITS AGENT TO ACCEPT SERVICE OF
PROCESS WITHIN FLORIDA.
-------------------------------------
James H. Bailey
Title: President
Date: April 18, 1989
HAVING BEEN NAMED TO ACCEPT SERVICE OF PROCESS FOR THE ABOVE-STATED
CORPORATION, AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY AGREE TO ACT
IN THIS CAPACITY, AND I FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL
STATUTES RELATIVE TO THE PROPER AND COMPLETE PERFORMANCE OF ALL MATTERS.
-------------------------------------
James H. Bailey
Resident Agent
April 18, 1989
<PAGE> 5
ARTICLE OF MERGER
OF
STAR SERVICES GROUP, INC., A FLORIDA CORPORATION
INTO
BAILEY & BARON, INC., A FLORIDA CORPORATION
Pursuant to the provisions of Sections 607.1101 and 607.1105 of the
Florida Business Corporation Act (the "Act"), STAR SERVICES GROUP, INC., a
Florida corporation ("Star Services Group"), and BAILEY & BARON, INC., a Florida
corporation ("Bailey & Baron"), adopt the following Articles of Merger for the
purpose of merging Star Services Group with and into Bailey & Baron.
FIRST: The Agreement and Plan of Merger (the "Plan of Merger") is
attached as Exhibit A.
SECOND: The Plan of Merger between Star Services Group and Bailey &
Baron was adopted by the Board of Directors and the shareholders of each of Star
Services Group and Bailey & Baron by unanimous written consent in accordance
with the provisions of Section 607.1103 of the Act as of June 21, 1999.
IN WITNESS WHEREOF, these Articles of Merger have been executed on
behalf of the parties hereto as of the 22nd day of June, 1999.
STAR SERVICES GROUP, INC.
----------------------------------
Jack Casagrande, Chairman
BAILEY & BARON, INC.
----------------------------------
Jack Casagrande, Chairman
<PAGE> 6
ARTICLES OF AMENDMENT
TO
BAILEY & BARON, INC.
THE UNDERSIGNED, being the sole director and president of Bailey &
Baron, Inc., does hereby amend its Articles of Incorporation as follows:
ARTICLE I
CORPORATE NAME
The name of the Corporation shall be Bailey & Baron, Inc.
ARTICLE II
PURPOSE
The Corporation shall be organized for any and all purposes authorized
under the laws of the state of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue perpetual.
ARTICLE IV
SHARES
The capital stock of this corporation shall consist of 50,000,000
shares of common stock, $0.001 par value.
ARTICLE V
PLACE OF BUSINESS
The address of the principal place of business of this corporation in
the State of Florida shall be 1008 Royal Aberden Way, Orlando, Florida 32828.
The Board of directors may at any time and from time move the principal office
of this corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this corporation shall be managed by its Board of
Directors. The number of such directors shall not be less than one (1) and,
subject to such minimum may be increased or decreased from time to time in the
manner provided in the By-Laws.
<PAGE> 7
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No share holder shall have any right to acquire share or other
securities of the corporation except to the extent to such right may be granted
by an amendment to these Articles of Incorporation or by a resolution of the
Board of Directors.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Anything in these Articles of Incorporation, the By-Laws, or the
Florida Corporation Act notwithstanding, by-laws not be adopted, modified,
amended or repealed by the shareholders of the Corporation except upon the
affirmative vote of a simple majority vote of the holders of all the issued and
outstanding shares of the corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1 Inspection of books. The Board of Directors shall make
the reasonable rules to determine at what times and
place and under what conditions the books of the
Corporation shall be open to inspection by shareholders
or a duly appointed representative of a shareholder.
9.2 Control Share Acquisition. The provisions relating to
any control share acquisition as contained in Florida
Statutes now, or hereinafter amended, and any successor
provision shall not be applied to the Corporation.
9.3 Quorum. The holders of shares entitled to one-third of
the votes at a meeting of shareholder's shall constitute
a quorum.
9.4 Required Vote. Acts of shareholders shall require the
approval of holders of 50.01% of the outstanding votes
of shareholders.
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the fullest extent permitted by law, no director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for damages for breach of any duty owed to the Corporation or its shareholders.
In addition the Corporation shall have the power, in its by-laws or in any
resolution of its stockholders or directors, to undertake to indemnify the
officers and directors of this corporation against any contingency or peril as
may be determined to be in the best interest of this corporation, and in
conjunction therewith, to procure, at this corporation's expense, policies of
insurance.
2
<PAGE> 8
ARTICLE XI
CONTRACTS
No contract or other transaction between this corporation and any
person, firm or corporation shall be affected by the fact that any officer or
director of this corporation is such other party or is, or at some time in the
future becomes, an officer, director or partner of such other contracting party,
or has now or hereafter a direct or indirect interest in such contract.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on August 26, 1998 and that
the number of votes cast was sufficient for approval.
IN WITNESS WHEREOF I have hereunto subscribed to and executed the
Articles of Incorporation on this 26th day of August, 1998.
The foregoing instrument was acknowledged before me on August 26, 1998,
by James H. Bailey, who is personally known to me.
- ----------------------------------
, Notary Public
- -----------
My Commission Expires:
3
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
STAR SERVICES GROUP, INC.
(A FLORIDA CORPORATION)
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
ARTICLE ONE - OFFICES.............................................................................................1
1. Registered Office...............................................................................1
2. Other Offices...................................................................................1
ARTICLE TWO - MEETINGS OF SHAREHOLDERS............................................................................1
1. Place...........................................................................................1
2. Time of Annual Meeting..........................................................................1
3. Call of Special Meetings........................................................................1
4. Conduct of Meetings.............................................................................1
5. Notice and Waiver of Notice.....................................................................1
6. Business of Special Meeting.....................................................................2
7. Quorum..........................................................................................2
8. Voting Per Share................................................................................2
9. Voting of Shares................................................................................3
10. Proxies.........................................................................................3
11. Shareholder List................................................................................4
12. Action Without Meeting..........................................................................4
13. Fixing Record Date..............................................................................4
14. Inspectors and Judges...........................................................................4
15. Voting for Directors............................................................................5
ARTICLE THREE - DIRECTORS.........................................................................................5
1. Number, Election and Term.......................................................................5
2. Vacancies.......................................................................................5
3. Powers..........................................................................................5
4. Place of Meetings...............................................................................6
5. Annual Meeting..................................................................................6
6. Regular Meetings................................................................................6
7. Special Meetings and Notice.....................................................................6
8. Quorum; Required Vote; Presumption of Assent....................................................6
9. Action Without Meeting..........................................................................6
10. Conference Telephone or Similar Communications Equipment Meetings...............................7
11. Committees......................................................................................7
12. Compensation of Directors.......................................................................7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
13. Chairman of the Board...........................................................................7
ARTICLE FOUR - OFFICERS...........................................................................................8
1. Positions.......................................................................................8
2. Election of Specified Officers by Board.........................................................8
3. Election or Appointment of Other Officers.......................................................8
4. Salaries........................................................................................8
5. Term; Resignation...............................................................................8
6. President.......................................................................................8
7. Vice Presidents.................................................................................9
8. Secretary.......................................................................................9
9. Treasurer.......................................................................................9
10. Other Officers, Employees and Agents............................................................9
ARTICLE FIVE - CERTIFICATES FOR SHARES............................................................................9
1. Issue of Certificates...........................................................................9
2. Legends for Preferences and Restrictions on Transfer............................................9
3. Facsimile Signatures...........................................................................10
4. Lost Certificates..............................................................................10
5. Transfer of Shares.............................................................................10
6. Registered Shareholders........................................................................11
7. Redemption of Control Shares...................................................................11
ARTICLE SIX - GENERAL PROVISIONS.................................................................................11
1. Dividends......................................................................................11
2. Reserves.......................................................................................11
3. Checks.........................................................................................11
4. Fiscal Year....................................................................................11
5. Seal...........................................................................................11
6. Gender.........................................................................................11
ARTICLE SEVEN - AMENDMENTS OF BYLAWS.............................................................................11
</TABLE>
ii
<PAGE> 4
STAR SERVICES GROUP, INC.
BYLAWS
ARTICLE ONE
OFFICES
1. Registered Office. The registered office of STAR SERVICES GROUP,
INC., a Florida corporation (the "Corporation"), shall be located in the City of
Miami, State of Florida, unless otherwise designated by the Board of Directors.
2. Other Offices. The Corporation may also have offices at such
other places, either within or without the State of Florida, as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine or as the business of the Corporation may require.
ARTICLE TWO
MEETINGS OF SHAREHOLDERS
1. Place. All annual meetings of shareholders shall be held at such
place, within or without the State of Florida, as may be designated by the Board
of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of shareholders may be held at such
place, within or without the State of Florida, and at such time as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
2. Time of Annual Meeting. Annual meetings of shareholders shall be
held on such date and at such time fixed, from time to time, by the Board of
Directors, provided that there shall be an annual meeting held every year at
which the shareholders shall elect a Board of Directors and transact such other
business as may properly be brought before the meeting.
3. Call of Special Meetings. Special meetings of the shareholders
shall be held if called by the Board of Directors, the President, or if the
holders of not less than fifty percent (50%) of all the votes entitled to be
cast on any issue proposed to be considered at the proposed special meeting
sign, date, and deliver to the Secretary one or more written demands for the
meeting describing the purpose or purposes for which it is to be held.
4. Conduct of Meetings. The Chairman of the Board (or in his
absence, the President or such other designee of the Chairman of the Board)
shall preside at the annual and special meetings of shareholders and shall be
given full discretion in establishing the rules and procedures to be followed in
conducting the meetings, except as otherwise provided by law or in these Bylaws.
5. Notice and Waiver of Notice. Except as otherwise provided by
law, written or printed notice stating the place, day and hour of the meeting
and, in the case of a special meeting,
<PAGE> 5
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the day of the meeting,
either personally or by first-class mail, by or at the direction of the
President, the Secretary, or the officer or person calling the meeting, to each
shareholder of record entitled to vote at such meeting. If the notice is mailed
at least thirty (30) days before the date of the meeting, it may be done by a
class of United States mail other than first-class. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid. If a meeting is adjourned to another
time and/or place, and if an announcement of the adjourned time and/or place is
made at the meeting, it shall not be necessary to give notice of the adjourned
meeting unless the Board of Directors, after adjournment, fixes a new record
date for the adjourned meeting. Whenever any notice is required to be given to
any shareholder, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether signed before, during or after the time of the
meeting stated therein, and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records, shall be equivalent to the giving
of such notice. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the shareholders need be specified in any
written waiver of notice. Attendance of a person at a meeting shall constitute a
waiver of (a) lack of or defective notice of such meeting, unless the person
objects at the beginning to the holding of the meeting or the transacting of any
business at the meeting, or (b) lack of defective notice of a particular matter
at a meeting that is not within the purpose or purposes described in the meeting
notice, unless the person objects to considering such matter when it is
presented.
6. Business of Special Meeting. Business transacted at any special
meeting shall be confined to the purposes stated in the notice thereof.
7. Quorum. Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of these shares exists
with respect to that matter. Except as otherwise provided in the Articles of
Incorporation or by law, a majority of the shares entitled to vote on the matter
by each voting group, represented in person or by proxy, shall constitute a
quorum at any meeting of shareholders, but in no event shall a quorum consist of
less than one-third (1/3) of the shares of each voting group entitled to vote.
If less than a majority of outstanding shares entitled to vote are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. After a quorum has been established at
any shareholders' meeting, the subsequent withdrawal of shareholders, so as to
reduce the number of shares entitled to vote at the meeting below the number
required for a quorum, shall not affect the validity of any action taken at the
meeting or any adjournment thereof. Once a share is represented for any purpose
at a meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be set for that adjourned meeting.
8. Voting Per Share. Except as otherwise provided in the Articles
of Incorporation or by law, each shareholder is entitled to one (1) vote for
each outstanding share held by him on each matter voted at a shareholders'
meeting.
2
<PAGE> 6
9. Voting of Shares. A shareholder may vote at any meeting of
shareholders of the Corporation, either in person or by proxy. Shares standing
in the name of another corporation, domestic or foreign, may be voted by the
officer, agent or proxy designated by the bylaws of such corporate shareholder
or, in the absence of any applicable bylaw, by such person or persons as the
board of directors of the corporate shareholder may designate. In the absence of
any such designation, or, in case of conflicting designation by the corporate
shareholder, the chairman of the board, the president, any vice president, the
secretary and the treasurer of the corporate shareholder, in that order, shall
be presumed to be fully authorized to vote such shares. Shares held by an
administrator, executor, guardian, personal representative, or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name or the name of his
nominee. Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by such person without the transfer thereof into his name. If shares stand of
record in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary of the Corporation is given
notice to the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided, then
acts with respect to voting shall have the following effect: (a) if only one
votes, in person or by proxy, his act binds all; (b) if more than one vote, in
person or by proxy, the act of the majority so voting binds all; (c) if more
than one vote, in person or by proxy, but the vote is evenly split on any
particular matter, each faction is entitled to vote the share or shares in
question proportionally; or (d) if the instrument or order so filed shows that
any such tenancy is held in unequal interest, a majority or a vote evenly split
for purposes hereof shall be a majority or a vote evenly split in interest. The
principles of this paragraph shall apply, insofar as possible, to execution of
proxies, waivers, consents, or objections and for the purpose of ascertaining
the presence of a quorum.
10. Proxies. Any shareholder of the Corporation, other person
entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact
for such persons may vote the shareholder's shares in person or by proxy. Any
shareholder of the Corporation may appoint a proxy to vote or otherwise act for
him by signing an appointment form, either personally or by his
attorney-in-fact. An executed telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of an appointment form, shall be deemed a sufficient appointment
form. An appointment of a proxy is effective when received by the Secretary of
the Corporation or such other officer or agent which is authorized to tabulate
votes, and shall be valid for up to 11 months, unless a longer period is
expressly provided in the appointment form. The death or incapacity of the
shareholder appointing a proxy does not affect the right of the Corporation to
accept the proxy's authority unless notice of the death or incapacity is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. An appointment
of a proxy is revocable by the shareholder unless the appointment is coupled
with an interest.
3
<PAGE> 7
11. Shareholder List. After fixing a record date for a meeting of
shareholders, the Corporation shall prepare an alphabetical list of the names of
all its shareholders who are entitled to notice of the meeting, arranged by
voting group with the address of, and the number and class and series, if any,
of shares held by each. The shareholders' list must be available for inspection
by any shareholder for a period of ten (10) days prior to the meeting or such
shorter time as exists between the record date and the meeting and continuing
through the meeting at the Corporation's principal office, at a place identified
in the meeting notice in the city where the meeting will be held, or at the
office of the Corporation's transfer agent or registrar. Any shareholder of the
Corporation or his agent or attorney is entitled on written demand to inspect
the shareholders' list (subject to the requirements of law), during regular
business hours and at his expense, during the period it is available for
inspection. The Corporation shall make the shareholders' list available at the
meeting of shareholders, and any shareholder or his agent or attorney is
entitled to inspect the list at any time during the meeting or any adjournment.
12. Action Without Meeting. Any action required by law to be taken
at a meeting of shareholders, or any action that may be taken at a meeting of
shareholders, may be taken without a meeting or notice if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted with respect to the subject matter thereof,
and such consent shall have the same force and effect as a vote of shareholders
taken at such a meeting.
13. Fixing Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purposes, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
(60) days, and, in case of a meeting of shareholders, not less than ten (10)
days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which the notice of the meeting is mailed or the date on which the
resolutions of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section 13, such determination
shall apply to any adjournment thereof, except where the Board of Directors
fixes a new record date for the adjourned meeting or as required by law.
14. Inspectors and Judges. The Board of Directors in advance of any
meeting may, but need not, appoint one or more inspectors of election or judges
of the vote, as the case may be, to act at the meeting or any adjournment(s)
thereof. If any inspector or inspectors, or judge or judges, are not appointed,
the person presiding at the meeting may, but need not, appoint one or more
inspectors or judges. In case any person who may be appointed as an inspector or
judge fails to appear or act, the vacancy may be filled by the Board of
Directors in advance of the meeting, or at the meeting by the person presiding
thereat. The inspectors or judges, if any, shall
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determine the number of shares of stock outstanding and the voting power of
each, the shares of stock represented at the meeting, the existence of a quorum,
the validity and effect of proxies, and shall receive votes, ballots and
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate votes, ballots and consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding at
the meeting, the inspector or inspectors or judge or judges, if any, shall make
a report in writing of any challenge, question or matter determined by him or
them, and execute a certificate of any fact found by him or them.
15. Voting for Directors. Unless otherwise provided in the Articles
of Incorporation, directors shall be elected by a plurality of the votes cast by
the shares entitled to vote in the election at a meeting at which a quorum is
present.
ARTICLE THREE
DIRECTORS
1. Number, Election and Term. The number of directors of the
Corporation shall be fixed from time to time, within the limits specified by the
Articles of Incorporation, by resolution of the Board of Directors; provided,
however, no director's term shall be shortened by reason of a resolution
reducing the number of directors. The directors shall be elected at the annual
meeting of the shareholders, except as provided in Section 2 of this Article,
and each director elected shall hold office for the term for which he is elected
and until his successor is elected and qualified or until his earlier
resignation, removal from office or death. Directors must be natural persons who
are 18 years of age or older but need not be residents of the State of Florida,
shareholders of the Corporation or citizens of the United States. Any director
may be removed at any time, with or without cause, at a special meeting of the
shareholders called for that purpose.
2. Vacancies. A director may resign at any time by giving written
notice to the Corporation, the Board of Directors or the Chairman of the Board.
Such resignation shall take effect when the notice is delivered unless the
notice specifies a later effective date, in which event the Board of Directors
may fill the pending vacancy before the effective date if they provide that the
successor does not take office until the effective date. Any vacancy occurring
in the Board of Directors and any directorship to be filled by reason of an
increase in the size of the Board of Directors shall be filled by the
affirmative vote of a majority of the current directors though less than a
quorum of the Board of Directors, or may be filled by an election at an annual
or special meeting of the shareholders called for that purpose, unless otherwise
provided by law. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, or until the next election of one
or more directors by shareholders if the vacancy is caused by an increase in the
number of directors.
3. Powers. Except as provided in the Articles of Incorporation and
by law, all corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be managed under the
direction of, its Board of Directors.
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4. Place of Meetings. Meetings of the Board of Directors, regular
or special, may be held either within or without the State of Florida.
5. Annual Meeting. The first meeting of each newly elected Board of
Directors shall be held, without call or notice, immediately following each
annual meeting of shareholders.
6. Regular Meetings. Regular meetings of the Board of Directors may
also be held without notice at such time and at such place as shall from time to
time be determined by the Board of Directors.
7. Special Meetings and Notice. Special meetings of the Board of
Directors may be called by the Chairman of the Board or by the President and
shall be called by the Secretary on the written request of any two directors.
Written notice of special meetings of the Board of Directors shall be given to
each director at least forty-eight (48) hours before the meeting. Except as
required by statute, neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting. Notices to directors shall be
in writing and delivered personally or mailed to the directors at their
addresses appearing on the books of the Corporation. Notice by mail shall be
deemed to be given at the time when the same shall be received. Notice to
directors may also be given by telegram, teletype or other form of electronic
communication. Notice of a meeting of the Board of Directors need not be given
to any director who signs a written waiver of notice before, during or after the
meeting. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting and a waiver of any and all objections to the place of
the meeting, the time of the meeting and the manner in which it has been called
or convened, except when a director states, at the beginning of the meeting or
promptly upon arrival at the meeting, any objection to the transaction of
business because the meeting is not lawfully called or convened.
8. Quorum; Required Vote; Presumption of Assent. A majority of the
number of directors fixed by, or in the manner provided in, these bylaws shall
constitute a quorum for the transaction of business; provided, however, that
whenever, for any reason, a vacancy occurs in the Board of Directors, a quorum
shall consist of a majority of the remaining directors until the vacancy has
been filled. The act of a majority of the directors present at a meeting at
which a quorum is present when the vote is taken shall be the act of the Board
of Directors. A director of the Corporation who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken shall be presumed to have assented to the action taken, unless
he objects at the beginning of the meeting, or promptly upon his arrival, to
holding the meeting or transacting specific business at the meeting, or he votes
against or abstains from the action taken.
9. Action Without Meeting. Any action required or permitted to 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 taken, is
signed by all of the members of the Board of Directors or the committee, as the
case may be, and such consent shall have the same force and effect as a
unanimous vote at a meeting. Action taken under this section is effective when
the
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last director signs the consent, unless the consent specifies a different
effective date. A consent signed under this Section 9 shall have the effect of a
meeting vote and may be described as such in any document.
10. Conference Telephone or Similar Communications Equipment
Meetings. Members of the Board of Directors may participate in a meeting of the
Board by means of 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 in such a meeting shall constitute presence in
person at the meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
the meeting is not lawfully called or convened.
11. Committees. The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its members an
executive committee and one or more other committees, each of which, to the
extent provided in such resolution, shall have and may exercise all of the
authority of the Board of Directors in the business and affairs of the
Corporation except where the action of the full Board of Directors is required
by statute. Each committee must have two or more members who serve at the
pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Article Three, may designate one or more
directors as alternate members of any committee, who may act in the place and
stead of any absent member or members at any meeting of such committee.
Vacancies in the membership of a committee shall be filled by the Board of
Directors at a regular or special meeting of the Board of Directors. The
executive committee shall keep regular minutes of its proceedings and report the
same to the Board of Directors when required. The designation of any such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or him by law.
12. Compensation of Directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
13. Chairman of the Board. The Board of Directors may, in its
discretion, choose a chairman of the board who shall preside at meetings of the
shareholders and of the directors and shall be an ex officio member of all
standing committees. The Chairman of the Board shall have such other powers and
shall perform such other duties as shall be designated by the Board of
Directors. The Chairman of the Board shall be a member of the Board of Directors
but no other officers of the Corporation need be a director. The Chairman of the
Board shall serve until his successor is chosen and qualified, but he may be
removed at any time by the affirmative vote of a majority of the Board of
Directors.
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ARTICLE FOUR
OFFICERS
1. Positions. The officers of the Corporation shall consist of a
President, a Secretary and a Treasurer, and, if elected by the Board of
Directors by resolution, a Chairman of the Board and/or one or more Vice
Presidents. Any two or more offices may be held by the same person.
2. Election of Specified Officers by Board. The Board of Directors
at its first meeting after each annual meeting of shareholders shall elect a
President, a Secretary, a Treasurer and may elect one or more Vice Presidents.
3. Election or Appointment of Other Officers. Such other officers
and assistant officers and agents as may be deemed necessary may be elected or
appointed by the Board of Directors, or, unless otherwise specified herein,
appointed by the President of the Corporation. The Board of Directors shall be
advised of appointments by the President at or before the next scheduled Board
of Directors meeting.
4. Salaries. The salaries of all officers of the Corporation to be
elected by the Board of Directors pursuant to Article Four, Section 2 hereof
shall be fixed from time to time by the Board of Directors or pursuant to its
discretion. The salaries of all other elected or appointed officers of the
Corporation shall be fixed from time to time by the President of the Corporation
or pursuant to his direction.
5. Term; Resignation. The officers of the Corporation shall hold
office until their successors are chosen and qualified. Any officer or agent
elected or appointed by the Board of Directors or the President of the
Corporation may be removed, with or without cause, by the Board of Directors.
Any officers or agents appointed by the President of the Corporation pursuant to
Section 3 of this Article Four may also be removed from such officer positions
by the President, with or without cause. Any vacancy occurring in any office of
the Corporation by death, resignation, removal or otherwise shall be filled by
the Board of Directors, or, in the case of an officer appointed by the President
of the Corporation, by the President or the Board of Directors. Any officer of
the Corporation may resign from his respective office or position by delivering
notice to the Corporation. Such resignation is effective when delivered unless
the notice specifies a later effective date. If a resignation is made effective
at a later date and the Corporation accepts the future effective date, the Board
of Directors may fill the pending vacancy before the effective date if the Board
provides that the successor does not take office until the effective date.
6. President. The President shall be the Chief Executive Officer of
the Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. In the absence of the Chairman of the Board
or in the event the Board of Directors shall not have designated a chairman of
the board, the President shall preside at meetings of the shareholders and the
Board of Directors.
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7. Vice Presidents. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors shall prescribe or as the President may
from time to time delegate.
8. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the shareholders and record all the proceedings
of the meetings of the shareholders and of the Board of Directors in a book to
be kept for that purpose and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the shareholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or President, under whose supervision he shall be. He shall keep in safe custody
the seal of the Corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it.
9. Treasurer. The Treasurer shall have the custody of corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors at its regular meetings or when the
Board of Directors so requires an account of all his transactions as treasurer
and of the financial condition of the Corporation unless otherwise specified by
the Board of Directors, the Treasurer shall be the Corporation's Chief Financial
Officer.
10. Other Officers, Employees and Agents. Each and every other
officer, employee and agent of the Corporation shall possess, and may exercise,
such power and authority, and shall perform such duties, as may from time to
time be assigned to him by the Board of Directors, the officer so appointing him
and such officer or officers who may from time to time be designated by the
Board of Directors to exercise such supervisory authority.
ARTICLE FIVE
CERTIFICATES FOR SHARES
1. Issue of Certificates. The Corporation shall deliver
certificates representing all shares to which shareholders are entitled; and
such certificates shall be signed by the Chairman of the Board, President or a
Vice President, and by the Secretary or an Assistant Secretary of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof.
2. Legends for Preferences and Restrictions on Transfer. The
designations, relative rights, preferences and limitations applicable to each
class of shares and the variations in rights, preferences and limitations
determined for each series within a class (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the Corporation will furnish the
shareholder a full statement of this information on
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request and without charge. Every certificate representing shares that are
restricted as to the sale, disposition, or transfer of such shares shall also
indicate that such shares are restricted as to transfer and there shall be set
forth or fairly summarized upon the certificate, or the certificate shall
indicate that the Corporation will furnish to any shareholder upon request and
without charge, a full statement of such restrictions. If the Corporation issues
any shares that are not registered under the Securities Act of 1933, as amended,
and registered or qualified under the applicable state securities laws, the
transfer of any such shares shall be restricted substantially in accordance with
the following legend:
"THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME."
3. Facsimile Signatures. The signatures of the Chairman of the
Board, the President or a Vice President and the Secretary or Assistant
Secretary upon a certificate may be facsimiles, if the certificate is manually
signed by a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. In case any officer who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer at
the date of the issuance.
4. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
5. Transfer of Shares. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
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6. Registered Shareholders. The Corporation shall be entitled to
recognize the exclusive rights of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Florida.
7. Redemption of Control Shares. As provided by the Florida
Business Corporation Act, if a person acquiring control shares of the
Corporation does not file an acquiring person statement with the Corporation,
the Corporation may redeem the control shares at fair market value at any time
during the 60-day period after the last acquisition of such control shares. If a
person acquiring control shares of the Corporation files an acquiring person
statement with the Corporation, the control shares may be redeemed by the
Corporation only if such shares are not accorded full voting rights by the
shareholders as provided by law.
ARTICLE SIX
GENERAL PROVISIONS
1. Dividends. The Board of Directors may from time to time declare,
and the Corporation may pay, dividends on its outstanding shares in cash,
property, or its own shares pursuant to law and subject to the provisions of the
Articles of Incorporation.
2. Reserves. The Board of Directors may by resolution create a
reserve or reserves out of earned surplus for any proper purpose or purposes,
and may abolish any such reserve in the same manner.
3. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
4. Fiscal Year. The fiscal year of the Corporation shall be fixed
by the Board of Directors and may be otherwise changed from time to time by
resolution of the Board of Directors.
5. Seal. The corporate seal shall have inscribed thereon the name
and state of incorporation of the Corporation. The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
6. Gender. All words used in these Bylaws in the masculine gender
shall extend to and shall include the feminine and neuter genders.
ARTICLE SEVEN
AMENDMENTS OF BYLAWS
Unless otherwise provided by law, these Bylaws may be altered, amended
or repealed or new Bylaws may be adopted by action of the Board of Directors.
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made this ___ Day of March, 1999, by and between
DELTA RECYCLING CORP., (hereinafter referred to as "EMPLOYER") a Florida
corporation having its principal offices located at 2075 N. Powerline Road,
Pompano Beach, Florida and THOMAS ROBERTS, residing at 5386 N.W. 108th Way, Cord
Springs, Florida 33076 (hereafter referred to as "EMPLOYEE").
WHEREAS, EMPLOYER is in the construction debris recycling and landfill
business; and WHEREAS, EMPLOYEE has for many years been engaged in the
construction debris recycling and landfill business; and
WHEREAS, the EMPLOYEE desires to be engaged as an executive EMPLOYEE of
the EMPLOYER;
WHEREAS, the EMPLOYER desires to employ the EMPLOYEE under the terms of
this Agreement; and
WHEREAS, the EMPLOYEE and EMPLOYER desire to have their rights,
obligation and duties specified herein; and
WHEREAS, EMPLOYER and EMPLOYEE desire to set forth the terms and
conditions on which EMPLOYEE shall be employed by, and provide his services to
EMPLOYER.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. EMPLOYMENT.
EMPLOYER hereby employs EMPLOYEE in its business and EMPLOYEE
agrees to work for EMPLOYER for a two (2) year period commencing on March 17,
1999 and terminating
<PAGE> 2
on the ___ day of March, 2001. The period of such employment is hereby called
the "Employment Period".
2. CORPORATE OFFICE, DUTIES AND RESPONSIBILITIES
A. EMPLOYEE shall serve in the capacity as Senior Vice
President of the EMPLOYER, subject at all times to the direction and control of
the Board of Directors of EMPLOYER. EMPLOYEE's primary responsibility shall be
that of Environmental Compliance Officer overseeing the Company's facilities and
wrong with the various regulatory agencies regarding permits, renewals,
modifications and compliance and as an Acquisition Officer assisting in
identifying and investigating acquisition candidates for the Company in the
construction debris recycling and landfill industry. EMPLOYEE shall-also serve
as Legislative Affairs Officer and make diligent efforts to stay abreast and
informed of all new developments and regulations in the construction and
demolition debris recycling and landfill operations in the State of Florida and
other states in which the Company operates. EMPLOYEE shall perform his regular
duties at an office located in or within thirty (30) miles of Pompano Beach,
Florida, or at such other location as shall be mutually agreed upon in writing
by the EMPLOYER and EMPLOYEE. EMPLOYEE shall devote substantially all of his
business time and energies to the business of EMPLOYER and shall use his best
efforts, skills and abilities to promote the Company's interests. EMPLOYEE shall
serve as a Director of EMPLOYER, its subsidiaries and its parent with no
additional compensation.
B. The Company will provide the EMPLOYEE with the necessary
tools and assistance for the EMPLOYEE to perform his duties.
C. The EMPLOYEE will report directly to, the persons
designated by the Board of Directors who shall initially be the EMPLOYER'S
President and Chairman.
D. Nothing contained herein shall prevent the EMPLOYEE from
investing in passive investments or activity when not required to be available
to the EMPLOYER.
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<PAGE> 3
3. COMPENSATION.
As Compensation for all services rendered by EMPLOYEE to
EMPLOYER hereunder:
A. Base Compensation: During the term of this Agreement,
EMPLOYER shall pay to EMPLOYEE a base compensation at the rate of One Hundred
Four Thousand ($104,000.00) dollars for the first year of employment and the sum
of One Hundred Fourteen Thousand Nine Hundred ($114,900.00) for the second year
of employment. EMPLOYEE shall be paid in the same manner as the Company's other
EMPLOYEEs, but in no event less frequently than twice per month during the term
hereof. EMPLOYEE shall not be compensated for his duties as a MEMBER of the
Board of Directors, unless the Board of Directors subsequently agrees TO
compensate him. ALL compensation payments shall be subject to income tax
withholding and other applicable taxes.
B. Discretionary Bonus. EMPLOYEE shall be entitled to receive
a Discretionary Bonus in AN amount to be determined by the Board of Directors in
its sole discretion, considering EMPLOYEE's performance of his duties and the
growth of EMPLOYER, to be payable in cash or Common Stock. Nothing in this
subparagraph should be viewed as requiring the Board to give EMPLOYEE a
Discretionary Bonus in any year.
C. Accrued Vacation Days. Upon termination for any reason
other than the expiration of this Agreement, EMPLOYEE shall be entitled to be
paid for any accrued but unused vacation days .
4. EXPENSES.
EMPLOYER will reimburse EMPLOYEE for all reasonable expenses
incurred subject to the submission of satisfactory receipts and verifying the
expense in form acceptable to the Internal Revenue Service.
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5. AUTOMOBILE:
EMPLOYEE shall receive an monthly automobile allowance of
Seven Hundred ($700-00) Dollars. EMPLOYEE shall furnish EMPLOYER with proof of
insurance.
6. FRINGE BENEFITS:
EMPLOYEE shall be entitled and receive benefits under all
fringe benefit plans maintained by EMPLOYER, including, but not limited to
disability insurance, and related benefits hall give EMPLOYEE the except for
health insurance which EMPLOYEE hereby waives. EMPLOYER shall give EMPLOYEE the
opportunity to participate in all private placements and stock option plans
provided by EMPLOYER in accordance with their terms and the Securities laws. The
EMPLOYEE's other benefits shall be no less than those received by other officers
of EMPLOYEE.
7. DISABILITY:
In the event that the EMPLOYEE shall become totally disabled
(totally disabled having the meaning set forth in Section 10(d) hereof), the
EMPLOYEE shall receive his full salary for three (3) months of continuous total
disability, and one-half (1/2) salary for the next three (3) months of
continuous total disability, and no salary thereafter unless ft Board of
Directors of EMPLOYER elect to continue these payments. Such amounts shall be
reduced by the amount of any disability insurance payments actually received by
EMPLOYEE.
8. VACATIONS.
EMPLOYEE shall be entitled to three (3) weeks of paid vacation
per year. Such vacations shall be taken at such times as sea be mutually
convenient to EMPLOYER and EMPLOYEE. Vacation time must be taken within each
employment year for which it applies and
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<PAGE> 5
cannot be accrued or carried forward, unless the EMPLOYER specifically agrees in
writing. EMPLOYEE's vacation shall vest on a pro-rata basis during each year of
employment.
9. RESTRICTIVE COVENANT AND CONFIDENTIALITY AGREEMENT.
A. EMPLOYEE acknowledges that EMPLOYER has and will make
available to EMPLOYEE confidential information, which derives independent
economic value from not being known to third parties, and which is subject to
reasonable efforts by EMPLOYER to maintain its confidentiality. The EMPLOYER's
confidential information includes information relating to the organization and
management of EMPLOYER and its operating affiliates together with confidential
customer lists, customer contacts, price lists and other confidential
information relating to the EMPLOYER.
B. The EMPLOYEE hereby covenants and agrees with the EMPLOYER
that EMPLOYEE will not, at any time for any cause whatsoever, divulge or
disclose to any person or persons not connected with EMPLOYER any of its
confidential information relating to the EMPLOYEEs methods, system, techniques
of operation, customer lists, trade secrets, price is% or business policies or
other confidential information of any kind or nature pertaining to the business
of EMPLOYER or its operating affiliates. It is expressly understood by the
EMPLOYEE that the EMPLOYER's confidential information, including all of the
above mentioned items, are considered trade secrets of EMPLOYER and are
important material and confidential and greatly affect the effective and
successful conduct of the business and goodwill of the EMPLOYER.
C. EMPLOYEE agrees during the term of this Agreement, and for
a period of one (1) year he will not solicit the EMPLOYER'S customers during the
time of his employment, for the purposes of inducing said customers to utilize
another carting or sanitation company, construction or demolition, recycling
company or program or C & D landfill business. EMPLOYEE has been specifically
informed of this paragraph and its significance and understands its importance
to the EMPLOYER. Upon termination of EMPLOYEE Is engagement, for reasons
consistent with ft parties' obligations under this Agreement, the EMPLOYEE
agrees not to
5
<PAGE> 6
directly or indirectly induce or attempt to induce for a twelve (12) months
period any of the EMPLOYER'S EMPLOYEEs or independent contractors to cease
employment with the EMPLOYER for the purpose of engaging in or becoming engaged
in, directly or indirectly, in the construction or demolition recycling, refuse
collection and disposal business, C & D landfill business, either as contractor,
principal, partner, joint venturer, agent, EMPLOYEE, salesman, adviser, or as a
director, or officer, or any corporation or association, or in any other manner
or capacity whatsoever in any city, area or territory within Dade, Broward,
Brevard, and/or Palm Beach Counties in Florida or any other county in which
EMPLOYER has an active business. This restriction applies only to markets in
which the EMPLOYER then has an active business.
D. All records, files, memoranda, customer lists, price lists,
and all documents of any nature whatsoever relating to the business in which the
EMPLOYER is engaged, which EMPLOYEE my prepare, use, come in contact with OR
which am located in any EMPLOYER office or agency without prior consent and
shall be turned over to the EMPLOYER upon termination of the EMPLOYEE's
engagement by the EMPLOYER. This provision notwithstanding, EMPLOYEE may retain
any personal notes or files, such as his personal calendar, So long as he
continues to refrain from disclosing any confidential information contained
therein to any third Party.
E. The above restrictions have been thoroughly discussed with
the EMPLOYEE and it is the EMPLOYEE's understanding and belief that these
restrictions are reasonable to protect the EMPLOYER's business and goodwill.
F. The parties hereto acknowledge and agree that, in the event
of an actual of threatened violation by any person of any of the restrictions of
this Agreement, the EMPLOYER will suffer irreparable harm, and the EMPLOYER will
be without adequate remedy at law. EMPLOYEE consents to the EMPLOYER restraining
said violation or threatened violation by obtaining injunctive or mandatory
relief, owned in an action or proceeding instituted by any court of competent
jurisdiction, said injunctive relief shall include, but not be limited to, a
6
<PAGE> 7
temporary restraining order and preliminary injunction without the posting of a
bond of any kind. Nothing contained heron shall be construed as prohibiting the
EMPLOYER from pursuing any other remedies available to the EMPLOYER for- such
breach or threatened breach, including the recovery of damages from such person.
G. The parties to this Agreement acknowledge that the
restrictions imposed by the provisions of this Section "9" are fair and
reasonable and are reasonable required for the protection of the EMPLOYER,
However, in the event that any of the provisions of this Section 9 relating to
the period of restriction shall be deemed to exceed the maximum period of time
which a court of competent jurisdiction would deem valid and enforceable, said
period shall be deemed to be the maximum time which a court of competent
jurisdiction shall be convened. Each of the subsections of this Section "19" is
independent of each other subsection and the invalidity of any subsection shall
have no effect on the validity or effectiveness of any Other subsection.
Specifically the non-solicitation requirements shall continue to apply, even if
the restrictive covenant provisions are deleted.
H. For the purposes of this Section the term "EMPLOYER" shall
include the present corporation and all affiliates and subsidiaries of EMPLOYER
for which the EMPLOYEE performed services directly or indirectly or from which
HE acquired confidential information in the course of his duties during the term
of his employment hereunder.
10. TERMINATION.
The employment of EMPLOYEE by EMPLOYER hereunder may be
terminated for the reasons as provided below:
(a) EMPLOYER and EMPLOYEE may terminate this Agreement or the
Term of Employment at any time by mutual agreement.
(b) EMPLOYEE may terminate the Term of Employment at any time
by giving thirty days notice to EMPLOYER, effective at the end of such thirty
day period.
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<PAGE> 8
(c) This Agreement will automatically terminate in the event
of the death of EMPLOYEE.
(d) EMPLOYER may terminate the Term of Employment by thirty
days advance notice to EMPLOYEE after the continuous inability of EMPLOYEE to
perform his duties hereunder for A period of twelve (12) weeks because of a
disability as defined herein. The term 'disability' shall mean a physical or
mental illness or injury that incapacitates EMPLOYEE and prevents him from
performing his customary duties for EMPLOYER for a period in excess of ninety
(90) days. If EMPLOYEE recovers from any disability after the EMPLOYER has given
notice of termination, re-employment by EMPLOYER shall only be with the mutual
written consent of the parties.
(e) EMPLOYER may terminate this Agreement without cause upon
thirty (30) days written notice.
(f) EMPLOYER may terminate the Term of Employment only for
good cause as determined in good faith by the Board of Directors as follows:
i. any conduct by the EMPLOYEE involving fraud or
dishonesty;
ii. any attempt by the EMPLOYEE to secure any personal
profit in connection with the business of the Company;
iii. conviction of a misdemeanor or felony;
iv. any material and willful failure or refusal by the
EMPLOYEE to perform the essential duties of Ws position with the Company or to
follow the direction given by any of the senior ranking officers of the Company
to whom the EMPLOYEE normally reports and which causes a material adverse impact
on the EMPLOYER, however, this provision shall not
8
<PAGE> 9
apply to any direction the EMPLOYEE reasonably believes would result in A
violation of law OR regulation.
v. any breach of the provisions of PARAGRAPH "9"
hereof during the time the EMPLOYEE is employed of the Company; or
vi. any other acts or omissions of EMPLOYEE that are
inconsistent with the exercise of reasonable business judgment that have in the
reasonable view of the Board of Directors, a material and adverse impact on the
EMPLOYER. If the employment relationship of EMPLOYEE with the EMPLOYER is
terminated under SECTION 10(E), EMPLOYEE shall receive in addition to any other
benefits to which he is entitled, twelve (12) months severance pay or his
monthly pay for the remainder of the term of this Agreement whichever is less.
If EMPLOYEE'S employment is terminated under SECTION 10(A), 10(B) or 10(F), he
will not be entitled to any severance pay. If EMPLOYEE's employment is
terminated under Section 10(c) his estate Will receive one (1) month of
severance pay.
11. BENEFIT.
This Agreement shall be binding upon the parties hereto, their
legal representatives, heirs, successors, and assigns and neither party may
assign this Agreement without prior written consent of the other party.
12. NO ALIENATION AND ASSIGNMENT.
EMPLOYEE shall not under any circumstances have any option or
right to require payments hereunder otherwise than in accordance with the terms
hereof To the extent allowed by law, EMPLOYEE shall not have any power of
anticipation, alienation or assignment of payments contemplated hereunder, and
all rights and benefits of EMPLOYEE shall be for the sole personal benefit of
EMPLOYEE and no other person shall acquire any right, title or interest
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<PAGE> 10
hereunder by reason of any &-de, assignment or transfer by or claim or judgment
or bankruptcy proceedings against EMPLOYEE.
13. ENTIRE AGREEMENT.
This instrument contains the entire agreement between the
EMPLOYER and EMPLOYEE and may not be changed or terminated orally.
14. SEVERABILITY.
If any provision of this Agreement is held to be
unenforceable, the remainder of the Agreement shall nevertheless remain in full
force and effect.
15. NO WAIVER.
Failure to insist upon strict compliance with any of the
terms, covenants or conditions of this Agreement not be deemed a waiver of such
terms, covenant or condition, nor shall any waiver or relinquishment of such
right or power at any other time or times.
16. NOTICES.
Any notice required or permitted to be, given hereunder to
either Party hereto must be in writing and sent by certified mail, return
receipt requested or by hand or overnight delivery service, to such party at his
or its address as hereinabove set forth. If a party subsequently designates a
different address by notice similarly given, then to that address. Notice shall
not be effective until the date of delivery.
17. FLORIDA LAW.
This Agreement has been made in the State of Florida, shall be
interpreted and construed in accordance with the laws of that State, and the
courts of that State shall have exclusive jurisdiction of any and all disputes
which may arise hereunder or in connection herewith.
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<PAGE> 11
18. COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
any one of which shall be deemed to be the original, although the others are not
produced.
19. CAPTIONS.
The captions herein contained have been inserted for
convenience and reference only, and in no way define, limit or describe the
scope and intent of any Article hereof.
20. MODIFICATIONS IN WRITING.
No change, modifications, discharge or termination of any of
the provisions of this Agreement or obligations thereunder, shall be valid
unless in writing and signed and acknowledged by the parties hereto.
]N WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above-written.
DELTA RECYCLING CORP.
By:
------------------------------------
---------------------------------------
THOMAS ROBERTS
11
<PAGE> 1
EASTERN DIVESTITURE
ASSET SALE AGREEMENT
BY AND BETWEEN
STAR SERVICES GROUP, INC.
AND
WASTE MANAGEMENT, INC.
JUNE ___ 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I TRANSFER OF ASSETS.............................................1
1.1 Assets................................................................1
1.2 Excluded Assets.......................................................2
1.3 Purchase Price; Payment; Adjustment...................................2
1.4 Excluded Liabilities..................................................3
1.5 Time and Place of the Closing.........................................4
1.6 Procedure at the Closing..............................................4
1.7 Non-Assignment of Certain Contracts...................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................5
2.1 Organization and Qualification........................................5
2.2 Authority.............................................................5
2.3 Consents and Approvals; No Violation..................................5
2.4 Intentionally Omitted]................................................6
2.5 Litigation............................................................6
2.6 Tax Matters...........................................................6
2.7 Compensation and Benefit Plans........................................6
2.8 Leases, Contracts and Agreements......................................7
2.9 Environmental Matters.................................................7
2.10 Title to Properties; Encumbrances.....................................7
2.11 Compliance With Laws and Defects in Permits...........................7
2.12 No Broker's or Finder's Fees..........................................7
2.13 Condition of the Assets...............................................7
2.14 No Other Representations..............................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................8
3.1 Organization, Existence and Good Standing.............................8
3.2 Authority.............................................................8
3.3 Consents and Approvals; No Violation..................................8
3.4 No Broker's or Finder's Fees..........................................9
3.5 Litigation............................................................9
3.6 Capabilities..........................................................9
3.7 Independent Investigation.............................................9
3.8 No Other Representations.............................................10
ARTICLE IV COVENANTS OF THE COMPANY AND THE PURCHASER....................10
4.1 Conduct of the Business by the Company...............................10
4.2 Purchaser's Representations and Warranties...........................10
4.3 Permit and License Issuance..........................................11
4.4 Access to Assets, Personnel, Books and Records.......................11
</TABLE>
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<TABLE>
<S> <C>
4.5 Reasonable Best Efforts..............................................11
ARTICLE V CONDITIONS TO THE CLOSING.....................................12
5.1 Conditions to the Obligations of Each Party..........................12
5.2 Conditions to the Obligations of the Purchaser.......................12
5.3 Conditions to the Obligations of the Company.........................13
ARTICLE VI ADDITIONAL AGREEMENTS.........................................13
6.1 Bound by Final Judgment..............................................13
6.2 Further Assurances...................................................13
6.3 Non-Solicitation.....................................................13
6.4 Accounts Receivable..................................................14
6.5 Settlement...........................................................14
6.6 Billings.............................................................14
ARTICLE VII TERMINATION; AMENDMENT; WAIVER................................14
7.1 Termination..........................................................14
7.2 Effect of Termination................................................15
7.3 Extension; Waiver....................................................15
ARTICLE VIII REMEDIES......................................................15
8.1 Remedies for Breach of Representations, Warranties and Covenants.....15
8.2 Survival Exclusivity.................................................16
ARTICLE IX MISCELLANEOUS.................................................16
9.1 Amendment and Modification...........................................16
9.2 Waiver of Compliance; Consents.......................................16
9.3 Notices..............................................................17
9.4 Assignment...........................................................17
9.5. Governing Law........................................................18
9.6 Arbitration..........................................................18
9.7 Process..............................................................19
9.8 Counterparts.........................................................20
9.9 Interpretation.......................................................20
9.10 Entire Agreement.....................................................20
9.11 Waiver...............................................................20
9.12 Disclosure...........................................................20
9.13 Expenses.............................................................20
9.14 No Third Party Beneficiaries.........................................21
9.15 Severability.........................................................21
9.16 Time of Essence......................................................21
</TABLE>
ii
<PAGE> 4
EXHIBITS
Exhibit A Glossary
Exhibit B Allocation of Purchase Price
SCHEDULES
Schedule 1.1 Assets
Schedule 1.3(a) Assumed Liabilities
Schedule 2.3 Consents and Approvals
Schedule 2.9 Environmental Matters
Schedule 3.3 Consents and Approvals
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<PAGE> 5
ASSET SALE AGREEMENT
TIES ASSET SALE AGREEMENT (this "Agreement") is entered into as of June
___, 1999 by and between Star Services Group, Inc., a Florida corporation (the
"Purchase"), and Waste Management, Inc., a Delaware corporation (the "Company").
For purposes of this Agreement and where the context requires, references to the
"Company" shall include the Company and its applicable subsidiaries.
RECITALS
WHEREAS, the Company is subject to that certain Final Judgment filed
December 31, 1998, with the United States District Court, Eastern District of
New York, Case No. 98 CV7168 (FB) (MDG) (the "Final Judgment"), pursuant to
which the Company is required to divest certain of its assets;
WHEREAS, in accordance with the terms of the Final Judgment the Company
agrees to sell to the Purchaser and the Purchaser agrees to purchase from the
Company, certain Assets (as defined below) of the Company consisting of certain
routes in Dade and Broward Counties, Florida, together with the trucks and
containers related thereto, upon the terms and conditions set forth herein;
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Glossary attached as Exhibit A; and
NOW, THEREFORE, in consideration of the respective representations,
warranties and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE I
TRANSFER OF ASSETS
1.1 ASSETS. Subject to the terms and conditions set forth herein, at
the Closing (as defined below) the Company agrees to and will sell, transfer,
assign and deliver to the Purchaser, and the Purchaser agrees to and will
purchase from the Company, all of the Company's right, title and interest in and
to:
(a) the trucks and containers listed on Schedule 1.1. (the
"Operating Assets");
(b) the customer lists, customer contracts and equipment leases
listed on Schedule 1.1;
(c) the right but not the obligation to employ the Company's
employees; and
(d) all operating and billing data, files, documents and
records directly related to (a) and (b) above (the "Records");
<PAGE> 6
in each case solely to the extent such assets (i) directly relate to the
Business, and (ii) with respect to (a) and (b) above, are set forth on Schedule
1.1 (collectively, the "Assets").
1.2 EXCLUDED ASSETS. Anything to the contrary in Section 1.1
notwithstanding, the Assets shall exclude the following assets of the Company
(collectively, the "Excluded Assets");
(a) the cash consideration to be paid by the Purchaser and the
Company's other rights under this Agreement;
(b) any shares of capital stock of or owned by the Company or any
Affiliate;
(c) the corporate minute books and stock records of the Company or
any Affiliate;
(d) all cash and cash equivalents and investments, whether
short-term or long-term, of the Company or any Affiliate, including but
not limited to prepaid expenses, insurance policies, bank accounts,
certificates of deposit, treasury bills and securities;
(e) all receivables of the Company or any Affiliate, including,
without limitation, all trade and customer accounts receivable,
including but not limited to receivables arising from service, sales,
notes receivable and insurance proceeds receivable (regardless of
whether billed or invoiced prior to the Closing Date(s));
(f) all right, title and interest in and to any financial
responsibility, financial assurance or similar mechanisms required to
be maintained by owners or operators of routes and hauling operations
pursuant to Environmental Laws to assure among other things
performance;
(g) all real property and all title insurance policies and
commitments, deeds and surveys covering any real property; and
(h) all assets not expressly listed in Schedule 1.1.
1.3 PURCHASE PRICE; PAYMENT; ADJUSTMENT.
(a) As consideration for the Assets, the Purchaser agrees, subject
to the terms, conditions and limitations set forth in this Agreement:
(i) to pay to the Company in the manner specified below, the
total sum of $5,200,000 (the "Purchase Price"); and
(ii) to assume and discharge when lawfully due those
liabilities, contracts, commitments and other obligations of the
Company and its Affiliates set forth in Schedule l.3(a) (the
"Assumed Liabilities").
(b) The parties agree that the consideration for the Assets shall
be allocated as set forth on Exhibit B, which allocation shall be used
by the Company and the Purchaser
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<PAGE> 7
as the basis for reporting asset values and other items for purposes
of all required federal, state and local tax returns (including any
tax returns required to be filed under Section 1060(b) of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated
thereunder). The Company and the Purchaser shall not assert, in
connection with any audit or any other proceeding with respect to
federal, state and local taxes, any asset values or other items
inconsistent with the allocations agreed upon in this Section 1.3(b).
(c) The Company agrees that in the event the revenues (as
determined in accordance with GAAP) generated for the 31 day period
beginning with the day after Closing (the "Adjustment Period") by the
customer accounts sold by the Company to the Purchaser pursuant to this
Agreement (the "Actual Revenues") are less than $310,000 (the "Revenue
Threshold") then, subject to the terms of this Section 1.3(c), the
Company shall either (i) pay to the Purchaser an amount equal to (x)
the Revenue Threshold less the Actual Revenues (the difference being
the "Revenue Shortfall") multiplied by fifteen (15), or (ii) assign
additional customer contracts to the Purchaser with monthly revenues
equal to any Revenue Shortfall. The Purchaser agrees not to increase
prices for such customers, or give any indications that it intends to
increase prices, prior to the end of the Adjustment Period.
Notwithstanding the other provisions of this Section 1.3(c),
appropriate offsetting adjustments to the Revenue Shortfall shall be
made for business lost or decreased due to service or operation issues
or other matters within the control of the Purchaser. The Purchaser
shall provide written notice to the Company within three days after the
Purchaser has knowledge that any such business is lost or otherwise
decreased. The Company shall have the right to investigate the reasons
underlying any lost or decreased business and the Purchaser shall
cooperate with such investigation including but not limited by making
available all documents and records relating to such business and
permitting the Company to meet with such customers. The Purchaser shall
use all commercially reasonable efforts to retain all customers and
revenues sold by the Company to the Purchaser pursuant to this
Agreement.
1.4 EXCLUDED LIABILITIES. The Purchaser shall have no responsibility
whatsoever with respect to the following liabilities, contracts, commitments and
other obligations of the Company (the "Excluded Liability"):
(a) any obligation of the Company for federal, state or local
income tax liability (including interest and penalties) arising from
the operations of the Company up to the Time of Closing or arising out
of the sale by the Company of the Assets pursuant to this Agreement;
(b) any obligation of the Company for expenses incurred in
connection with the sale of the Assets pursuant to this Agreement; and
(c) any liability or obligation of the Company with respect to or
arising Out Of any employee benefit plan or any other plans or
arrangements for the benefit of any employees of the Company.
3
<PAGE> 8
1.5 TIME AND PLACE OF THE CLOSING. Subject to Section 7.1 below, the
Closing of the sale of the Assets (the "Closing") shall take place at the
offices of the Company at 10:00 A.M., local time, on or about June 30, 1999,
(the "Time of Closing"); provided, however, that if any of the conditions
precedent set forth in this Agreement have not been satisfied or waived by said
date, then the Closing shall take place on a subsequent date, mutually
determined by the Purchaser and the Company.
1.6 PROCEDURE AT THE CLOSING. At the Closing, the following actions
will be taken by the parties and the completion of each action shall be a
further condition to the Closing:
(a) the Company shall deliver to the Purchaser, in the form
specified herein or (absent such specification) as may be otherwise
reasonably satisfactory to the Purchaser, such bills of sale, contract
and leasehold assignments, receipts and other instruments, as shall be
sufficient to vest in the Purchaser good and indefeasible title to the
Assets, free and clear of all liens and encumbrances, except as
otherwise set forth herein;
(b) the Purchaser shall deliver to the Company the full amount
of the Purchase Price by wire transfer of immediately available funds;
and
(c) the Purchaser shall deliver to the Company, in such form as in
each case is reasonably satisfactory to the Company, instruments as
shall be sufficient to effect the assumption by the Purchaser of the
Assumed Liabilities.
1.7 NON-ASSIGNMENT OF CERTAIN CONTRACTS. Notwithstanding anything to
the contrary in this Agreement, to the extent that the assignment hereunder of
any Contract (as defined below) shall require the consent of any third party,
neither this Agreement nor any action taken pursuant to its provisions shall
constitute an assignment or an agreement to assign if such assignment or
attempted assignment would constitute a breach thereof or result in the loss or
diminution thereof; provided, however, that in each such case, the Company shall
use commercially reasonable efforts to obtain the consent with respect to
material Contracts of such other party to such assignment to the Purchaser. If
any Contract is not assigned, the Company shall reasonably cooperate with the
Purchaser to provide the Purchaser with the rights and benefits (subject to the
obligations) under such Contracts unless a customer shall object.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed in the Disclosure Schedules to this
Agreement, the Company hereby makes the representations and warranties set forth
in this Article 11 to the Purchaser.
2.1 ORGANIZATION AND QUALIFICATION.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
The Company has all requisite
4
<PAGE> 9
corporate power and authority to carry on its business as it is now
being conducted, and to own, lease and operate the Assets, and to
perform all its obligations under the agreements and instruments to
which it is a party or by which it is bound. The Company is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which
the Assets owned, leased or operated by it or the nature of the
business conducted by it make such qualification necessary, except in
such jurisdictions where the failure to be duly qualified or in good
standing does not and would not result in a Material Adverse Effect.
(b) True, correct and complete copies of the Organizational
Documents of the Company, with all amendments thereto through the date
of this Agreement, have been made available by the Company to the
Purchaser.
2.2 AUTHORITY. The Company has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. To the extent required under applicable law, the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Company's board of directors and shareholders and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Company, and this Agreement
constitutes the legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms except as may be limited by
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally, and except that enforceability of the
obligations of the Company under this Agreement may be subject to general
principles of equity.
2.3 CONSENTS AND APPROVALS; NO VIOLATION. Except as provided in the
Final Judgment, no filing or registration with, and no permit, authorization,
consent or approval of, any party, including any Governmental Authority, is
necessary for the consummation of the transactions contemplated by this
Agreement. The Purchaser is advised, however, that the Permits are required to
operate certain of the Assets, and the Permits currently held by the Company may
not be assignable to the Purchaser and any Permits obtained by the Purchaser to
operate and own the Assets may be on terms different or even less favorable than
those held by the Company. Except as set forth in the Final Judgment neither the
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby, nor the complian6e by the Company with any of the
provisions hereof will, as of the Time of Closing, (i) conflict with or result
in any breach of any provision of the Organizational Documents of the Company,
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, contract, agreement, commitment, bond, mortgage,
indenture, license, lease, pledge agreement or other instrument or obligation to
which the Company is a party or by which the Company or any of its properties or
assets may be bound, (iii) give rise to any lien, charge or other encumbrance on
any of the Assets, or (iv) violate any law, regulation, judgment, order, writ,
injunction or decree applicable to the
5
<PAGE> 10
Company or any of the Assets; except in each case for breaches, violations,
defaults, liens, charges or encumbrances as do not and would not result in a
Material Adverse Effect.
2.4 [INTENTIONALLY OMITTED]
2.5 LITIGATION. Except for the Final Judgment, and for those Orders,
proposed Orders and Proceedings that do not and would not result in a Material
Adverse Effect, (i) the Company is not subject to any Order or proposed Order in
which relief is sought involving, affecting, or relating to the ownership,
operation or use of the Assets, or which would prevent, delay, or make illegal
the transactions contemplated by this Agreement, and (ii) there are no
Proceedings pending or, to the Knowledge of the Company, threatened against,
involving, affecting, or relating to the Assets or the Company's ownership,
operation or use of the Assets.
2.6 TAX MATTERS. All federal, state, county and local income, payroll,
sales, use, property, franchise and other taxes, (excluding any transfer,
documentary stamp, or other taxes payable by a party hereto at Closing pursuant
to this Agreement) including interest and penalties thereon, due from the
Company for all periods prior to the Time of Closing with respect to the Assets
(collectively, "Taxes") have been fully paid. No deficiency or adjustment in
respect of any Tax that was assessed against the Company that might result in an
Encumbrance on any of the Assets remains unpaid and no claim, assessment or
audit is pending or, to the Knowledge of the Company, threatened with respect to
any Taxes whose assessment might result in an Encumbrance on any of the Assets.
2.7 COMPENSATION AND BENEFIT PLANS. The parties hereby agree that the
Purchaser is not assuming any of the Benefit Plans (as defined below) nor shall
it be deemed a successor employer with respect to any of the Benefit Plans. The
term "Benefit Plans" shall mean collectively any (i) "cafeteria plan" as
described in Section 125 of Internal Revenue Code of 1986, (ii) "employee
welfare benefit plans", as defined in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended, ("ERISA"), or (iii) "employee pension
benefit plan" as defined in Section 3(2) of ERISA whether insured or otherwise.
2.8 Leases, Contracts and Agreements. The Company has made available to
the Purchaser true and correct copies of all leases, subleases, licenses,
commitments,, contracts and agreements (whether written or oral) listed on
Schedule 1.1 (the "Contracts"). All of the Contracts are, to the Company's
Knowledge, in full force and effect. In each case to the Company's Knowledge,
all rent and other payments by the Company under the Contracts are current,
there are no existing defaults by the Company under the Contracts, and no
termination, condition or other event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default or a basis for force majeure or other claim of
excusable delay or non-performance thereunder.
2.9 ENVIRONMENTAL MATTERS. To the Knowledge of the Company, as of the
date of this Agreement:
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(a) the Company has not received written notice from any
Governmental Authority or unaffiliated third party alleging a material
violation of applicable Environmental Laws; and
(b) the Assets and the operations of the Company prior to Closing
are not in material violation with the requirements of any applicable
Environmental Laws that would give rise to a Material Adverse Effect.
2.10 TITLE TO PROPERTIES; ENCUMBRANCES. The Company has good and
indefeasible title to all of the Assets, except for those Assets disposed of for
fair market value in the ordinary course of business in accordance with this
Agreement. To the Knowledge of the Company, all of the Assets are free and clear
of all Encumbrances. The trucks and containers listed on Schedule 1.1 consist of
the trucks and containers used by the Company to service the Contracts.
2.11 COMPLIANCE WITH LAWS AND DEFECTS IN PERMITS. To the Knowledge of
the Company, the Company is in compliance in all material respects with all
laws, rules and regulations of Governmental Authorities applicable to the Assets
(other than Environmental Laws that are governed by the representations set
forth in Section 2.9).
2.12 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker,
person or firm has acted directly or indirectly on behalf of the Company in
connection with this Agreement or the transaction contemplated herein, and no
such person or entity is or will be entitled to any broker's or finder's fee or
any other commission or similar fee or expense, directly or indirectly, in
connection with this Agreement or the transaction contemplated herein.
2.13 CONDITION OF THE ASSETS. The Assets will be operational at the
Time of Closing.
2.14 NO OTHER REPRESENTATIONS. The Company is not making any
representations or warranties, expressed or implied, of any nature whatsoever
except as specifically set forth in this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby makes the representations and warranties set forth
in this Article III to the Company.
3.1 ORGANIZATION, EXISTENCE AND GOOD STANDING. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has the corporate power to own its
properties and carry on its business as it is now being conducted and to own,
lease and operate the Assets, and to perform all its obligations under the
agreements and instruments to which it is a party or by which it is bound. The
Purchaser is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which the
assets owned, leased or operated by it or the nature of the business conducted
by it make such qualification necessary, except in such jurisdictions where the
failure to be duly qualified or in good standing does not and would not
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result in a material adverse effect on the Purchaser or its ability to
consummate the transactions contemplated herein.
3.2 AUTHORITY. The Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. `The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by the board of directors of the Purchaser and no other
corporate proceedings on the part of the Purchaser are necessary to authorize
this Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Purchaser and
constitutes the legal, valid and binding agreement of the Purchaser enforceable
against the Purchaser in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally, and except that enforceability of the
obligations of the Purchaser under this Agreement may be subject to general
principles of equity.
3.3 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth on
Schedule or as provided in the Final Judgment no filing or registration with,
and no permit authorization, consent or approval of, any party, including any
Governmental Authority, is necessary for the consummation of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, nor the
compliance by the Purchaser with any of the provisions hereof will, as of the
Time of Closing, (i) conflict with or result in any breach of any provision of
the Organizational Documents of the Purchaser, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, contract,
agreement, commitment, bond, mortgage, indenture, license, lease, pledge
agreement or other instrument or obligation to which the Purchaser is a party or
by which the Purchaser or any of its properties or assets may be bound, or (iii)
violate any law, regulation, judgment, order, writ, injunction or decree
applicable to the Purchaser or any of the Assets; except in each case for
breaches, violations and defaults as do not and would not result in a material
adverse effect on the Purchaser or the Purchaser's ability to consummate the
transactions contemplated herein.
3.4 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker,
person or firm has acted directly or indirectly on behalf of the Purchaser in
connection with this Agreement or the transaction contemplated herein, and no
such person or entity is or will be entitled to any broker's or finder's fee or
any other commission or similar fee or expense, directly or indirectly, in
connection with this Agreement or the transaction contemplated herein.
3.5 LITIGATION. Except for the Final Judgment, and for those Orders,
proposed Orders and Proceedings that do not and would not result in a material
adverse effect on the Purchaser or its ability to consummate the transactions
contemplated herein, (i) the Purchaser is not subject to any Order or proposed
Order in which relief is sought involving, affecting, or relating to the
ownership, operation, or use of the Assets, or which would prevent, delay, or
make illegal the transactions contemplated by this Agreement, (ii) there are no
Proceedings pending or, to the
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knowledge of the Purchaser, threatened against, involving, affecting, or
relating to the Purchaser or the Purchaser's ownership, operation, or use of the
Assets.
3.6 CAPABILITIES. The Purchaser can and will use the Assets as part of
a viable, ongoing business or businesses engaged in waste hauling. The Purchaser
has (i) the capability and intent of competing effectively in the waste hauling
business in the relevant markets where the Assets are located, and (ii) the
managerial, operational and financial capability to complete the transactions
contemplated herein in accordance with this Agreement and to compete effectively
in the waste hauling business in the relevant markets where the Assets are
located.
3.7 INDEPENDENT INVESTIGATION. The Purchaser has conducted its own
independent investigation of the Assets. The Purchaser acknowledges that it has
had access to the Company's and its Affiliates' personnel and to any and all
environmental, zoning and other permit documents and information and has
inspected the Assets and any and all financial, operational and other documents
and information that the Purchase has requested or otherwise determined is
necessary as part of the Purchaser's due diligence review of the Assets and the
Business. The Purchaser has been provided all information and documentation it
has requested and has received answers to all questions asked of the Company's
and its Affiliates' personnel. The Purchaser acknowledges that, except as
otherwise expressly set forth herein, THE ASSETS ARE CONVEYED "AS IS, WHERE IS"
AND "WITH ALL FAULTS", AND THE COMPANY HAS NOT MADE, AND THE COMPANY HEREBY
EXPRESSLY DISCLAIMS AND NEGATES, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, OF ANY KIND OR NATURE WHATSOEVER, RELATING TO THE ASSETS (INCLUDING BUT
NOT LIMITED TO, ANY IMPLIED OR EXPRESSED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE). THE PURCHASER ACKNOWLEDGES THAT ENVIRONMENTAL PERMITS
ARE REQUIRED TO OWN AND OPERATE CERTAIN OF THE ASSETS. THE PURCHASER ASSUMES ALL
RISK AND LIABILITY ASSOCIATED WITH OBTAINMENT OF ENVIRONMENTAL PERMITS NECESSARY
TO OPERATE THE ASSETS. IF ANY ENVIRONMENTAL PERMITS ARE ISSUED TO THE PURCHASER,
THE PURCHASER UNDERSTANDS AND ACKNOWLEDGES THAT THEY MAY CONTAIN DIFFERENT OR
LESS FAVORABLE TERMS THAN THOSE ENVIRONMENTAL PERMITS CURRENTLY HELD BY THE
COMPANY. The Purchaser shall execute and deliver to the Company at Closing a
certificate and agreement of the Purchaser repeating and confirming the
foregoing as of the Time of Closing.
3.8 NO OTHER REPRESENTATIONS. The Purchaser is not making any
representations or warranties, expressed or implied, of any nature whatsoever
except as specifically set forth in this Agreement.
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ARTICLE IV
COVENANTS OF THE COMPANY AND THE PURCHASER
4.1 CONDUCT OF THE BUSINESS BY THE COMPANY. From the date hereof until
the Time of Closing, except as provided for in, or contemplated by, this
Agreement, the Company covenants and agrees that it will:
(a) operate the Assets and the Business in the ordinary and usual
course in all material respects in accordance with past practices;
(b) not (i) sell, transfer, or otherwise dispose of any of the
Assets, except in the ordinary course of business and consistent with
past practices, (ii) create or permit to exist any new material lien on
the Assets, (iii) enter into any material joint venture, partnership,
or other similar arrangement or form any other new material arrangement
relating to the Assets, or (iv) except in the ordinary course of
business and consistent with past practices, enter into any other
material agreement related to the Assets; and
(c) not take any action that would make any representation and
warranty of the Company hereunder inaccurate in any material respect
at, or as of the time prior to, the Time of Closing.
4.2 PURCHASER'S REPRESENTATIONS AND WARRANTIES. From the date hereof
until the Time of Closing, except AS provided for in, or contemplated by, this
Agreement, or, except as consented to or approved by the Company in writing, the
Purchaser covenants and agrees that it will and will cause each of its
Subsidiaries not to take any action that would make any representation and
warranty of the Purchaser hereunder inaccurate in any material respect at, or as
of any time prior to, the Time of Closing.
4.3 PERMIT AND LICENSE ISSUANCE. The Company will cooperate (but shall
not be required to expend any sum of money), and will cause its Affiliates to
cooperate (but shall not be required to expend any sum of money), with the
Purchaser as necessary to facilitate the issuance of any permits and licenses
necessary for the Purchaser to operate the Assets; provided, however, the
Purchaser shall use its best efforts to obtain the issuance of such new permits
and licenses as expeditiously as possible.
4.4 ACCESS TO ASSETS, PERSONNEL, BOOKS AND RECORDS. The Company agrees
that at reasonable times prior to Closing, the Purchaser (including any of the
Purchaser's agents, representatives, contractors, or employees) may (i) enter
upon the Company's premises and make, at the Purchaser's sole cost, risk, and
expense, any inspections of the Assets which the Purchaser may desire, and (ii)
discuss with the Company's officers, agents and representatives, and review the
Company's contracts, books and records concerning, the Company's premises and
the Assets. The Purchaser shall not cause or permit damage to the Company's
premises or the Assets. Upon termination of this Agreement, for any reason
whatsoever, the Purchaser shall cause the Company's premises and the Assets to
be restored to their condition existing prior to any of the Purchaser's
(including the Purchaser's agents', contractors', representatives' and
employees') activities. This obligation shall survive the termination of this
Agreement
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notwithstanding anything to the contrary herein. THE PURCHASER AGREES TO INDENMY
AND HOLD THE COMPANY AND ITS AFFILIATES HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, CLAIMS, DEMANDS, SUITS, JUDGMENTS, OR DAMAGES ASSERTED AGAINST THE
COMPANY OR ANY OF ITS AFFILIATES FOR PERSONAL INJURY, DEATH, OR LOSS OF OR
DAMAGE TO PROPERTY AND TO PAY ALL COSTS AND EXPENSES (INCLUDING REASONABLE
ATTORNEY'S FEES) WHICH THE COMPANY OR ANY OF ITS AFFILIATES MAY SUSTAIN P--'4-LM
DUE TO THE SOLE NEGLIGENCE OR WILLFUL MISCONDUCT OF THE COMTANY) ARISING OUT OF
OR RESULTING FROM ANY ACTS OR OMISSIONS OF THE PURCHASER OR ANY OF THE
PURCHASER'S AGENTS, CONTRACTORS, REPRESENTATIVES OR EMPLOYEES IN CONNECTION WITH
ANY SUCH INSPECTIONS, TESTS, SURVEYS, AND STUDIES PRIOR TO THE CLOSING;
REGARDLESS OF WHETHER SUCH INJURIES, DEATH, LOSSES OR DAMAGES ARE CAUSED IN PART
BY THE NEGLIGENCE OF THE COMPANY OR ANY OF ITS AFFILIATES, BUT SUCH INDEMNITY
PROVIDED HEREIN SHALL NOT BE APPLICABLE TO ANY OCCURRENCE RESULTING FROM THE
SOLE NEGLIGENCE OR WILLFUL MISCONDUCT OF THE COMPANY OR ANY OF ITS AFFILIATES.
4.5 Reasonable Best Efforts. The Company and the Purchaser will use
their reasonable best efforts to obtain the satisfaction of the conditions to
Closing set forth in this Agreement and to cooperate with and take such actions
reasonably requested by all Governmental Authorities with respect to and in
connection with any review contemplated by the Final Judgment.
ARTICLE V
CONDITIONS TO THE CLOSING
5.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the
Company and Purchaser to consummate the transactions contemplated hereby are
subject to the satisfaction of the following conditions:
(a) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation
of the transactions contemplated hereby;
(b) the Purchaser shall have received all permits and licenses
listed on Schedule 3.3; and
(c) there shall have been received all consents and approvals with
respect to the transactions contemplated hereby as required by the
Final Judgment.
5.2 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligations of
the Purchaser to consummate the transactions contemplated hereby are subject to
the satisfaction of the following further conditions:
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(a) The representations and warranties of the Company contained in
Article II and in any document delivered in connection herewith shall,
as of the Time of Closing, be true and correct in all material
respects.
(b) The covenants and agreements of the Company contained in this
Agreement to be performed on or before the Closing in accordance with
this Agreement shall have been duly performed in all material
respects.
(c) The Purchaser shall have received at the Time of Closing a
certificate(s), dated the day of the Closing and validly executed by or
on behalf of the Company, to the effect that the conditions set forth
in clauses (a) and (b) above have been satisfied.
(d) The Purchaser shall have competed its due diligence review of
the Assets to Purchaser's reasonable satisfaction; provided, however,
that on June 29, 1999 this condition shall cease to be a condition to
the Purchaser's obligations to consummate the transactions
contemplated hereby.
5.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of
the Company to consummate the transactions contemplated hereby are subject to
the satisfaction of the following further conditions:
(a) The representations and warranties of the Purchaser contained
in Article III and any document delivered in connection herewith
shall, as of the Time of Closing, be true and correct in all material
respects, except for representations and warranties that speak as of a
specified date, which need only be true and correct in all material
respects as of the specified date.
(b) The covenants and agreements of the Purchaser contained in
this Agreement to be performed on or before the Closing in accordance
with this Agreement shall have been duly performed in all material
respects.
(c) The Company shall have received at the Closing a
certificate(s), dated the day of the Closing and validly-executed by or
on behalf of the Purchaser, to the effect that the conditions set forth
in clauses (a) and (b) above have been satisfied.
(d) The parties shall have entered into a disposal agreement
regarding the waste generated by the Contracts and the routes to be
assigned pursuant to this Agreement in form satisfactory to the
Company.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 BOUND BY FINAL JUDGMENT. The Company and the Purchaser hereby agree
to be bound by the provisions of the Final Judgment with respect to the
transactions contemplated by this Agreement.
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6.2 FURTHER ASSURANCES. The Company and the Purchaser shall execute and
deliver to the other, at the Closing or thereafter, any other instrument not
otherwise inconsistent with this Agreement which may be requested by the other
and which is reasonably appropriate to perfect or evidence any of the sales,
assignments, transfers or conveyances contemplated by this Agreement or to
transfer any Assets or to obtain any consents or licenses necessary for the
Purchaser to operate the Assets in the manner operated by the Company prior to
Closing, but in no event shall the Company be obligated to expend any sum of
money to effect any transfer or obtain any consent.
6.3 NON-SOLICITATION. The Company and its Affiliates shall not directly
or indirectly solicit for a period of one (1) year after Closing any customer
with respect to business under the Contracts assigned to the Purchaser pursuant
to Section 1.1(b) of this Agreement. The Company agrees and acknowledges that
the restriction contained in this Section 6.3 is reasonable in scope and lie
Company agrees and acknowledged duration and is necessary to protect the
Purchaser. The Company agrees and acknowledges that any breach of this Section
6.3 may cause irreparable injury to the Purchaser and upon any breach or
threatened breach of any provision of this Section 6.3, the Purchaser shall be
entitled to injunctive relief, specific performance or equitable relief-,
provided, however, that this shall in no way limit any other remedies which the
Purchaser may have as a result of such breach or relating to or under such
customer contracts, including the right to seek monetary damages. The parties
agree to mediate in good faith any disputes under this Section 6.3 prior to
pursuing other available remedies. The Company agrees to use commercially
reasonable efforts to enforce the Company's rights with respect to
noncompetition covenants granted by sellers of the Assets to the Company if
requested by the Purchaser; provided, however, that the Purchaser agrees to
assume and pay all costs, expenses and liabilities incurred by the Company and
its Affiliates relating to such enforcement.
6.4 ACCOUNTS RECEIVABLE. From and after the Time of Closing, the
Company and the Purchaser each agree to transfer or deliver, promptly after the
receipt thereof, any cash received as payment of accounts receivable due to the
other party for services rendered and sales occurring prior to the Closing, in
the case of the Company, and subsequent to the Closing, in the case of the
Purchaser.
6.5 SETTLEMENT. The purchaser agrees to (i) use its best efforts to
acquire all rights and claims, if any, of Atlas Environmental against Sanifill,
Inc. and other Affiliates of the Company in connection with the Purchaser's
contemplated acquisition of Atlas Environmental (the "Atlas Claims") and (ii)
grant to the Company, Sanifill, Inc. and the other Affiliates of the Company a
fall and final release, settlement and waiver of all such Atlas Claims in form
satisfactory to the Company, Sanifill, Inc. and the other Affiliates of the
Company in their sole discretion.
6.6 BILLINGS. At the request of the Purchaser, the Company shall
prepare and perform all customer billings for a period of sixty (60) days after
Closing. The Company shall provide the Purchaser with a tape of its customer
database relating to the Assets following the Company's final billing.
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ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Time of Closing:
(a) by mutual written consent executed by the parties and duly
authorized by the board of directors of the Company and board of
directors of the Purchaser;
(b) by the Purchaser if there is an inaccuracy or breach of any
representation, warranty or covenant of the Company set forth in this
Agreement which breach has not been cured within fifteen (15) days
following receipt by the Company of written notice of such breach and
which breach results in or can reasonably be anticipated to result in
a Material Adverse Effect on the Assets or a material adverse effect
on the ability of the Company to consummate the transaction
contemplated herein;
(c) by the Company if there is an inaccuracy or breach of any
representation, warranty or covenant of the Purchaser set forth in this
Agreement which breach has not been cured within fifteen (15) days
following receipt by the Purchaser of written notice of such breach and
which breach results in or can reasonably be anticipated to result in a
material adverse effect on the ability of the Purchaser to consummate
the transactions contemplated herein;
(d) by the Purchaser or the Company if the Closing shall not
have occurred, other than through the failure of any such party to
fulfill its obligations hereunder, on or before July 31, 1999 or such
later date as may be agreed to in writing by the Purchaser and the
Company; provided, however, that such date may be extended for a period
not to exceed sixty (60) days with respect to specific Assets to the
extent necessary to obtain any required governmental approvals; or
(e) by the Purchaser or the Company if any Governmental Authority
shall have enacted, issued, promulgated, enforced or entered any law,
regulation or order (whether temporary, preliminary or permanent) that
is in effect and has the effect of making the consummation of the
transactions contemplated hereby illegal or otherwise prohibiting
consummation of such transactions.
7.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 1.1 hereof, this Agreement
shall thereafter be of no further force and effect, without any liability on the
part of any party or its directors, officers or shareholders; provided, however,
that nothing contained in this Section 7.2 shall relieve any party from
liability for any breach or violation of this Agreement, subject to Article VIII
hereof.
7.3 EXTENSION; WAIVER. At any time prior to the Time of Closing, the
parties may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document, certificate
or writing delivered pursuant hereto, or (iii) waive compliance with any
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of the agreements or conditions contained herein. Any agreement on the part of
any party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE VIII
REMEDIES
8.1 REMEDIES FOR BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Upon execution of this Agreement through and including the
Closing, the exclusive remedy of the Purchaser for any material
inaccuracy or breach of any representation this Agreement by the
Company shall be termination of this Agreement by the Purchaser in
accordance with and subject to Article VII. This Article VIII shall not
apply to any fraudulent misrepresentation by the Company or to any
material breach of any covenant in this Agreement by the Company.
(b) In addition to and without in any way limiting the rights and
remedies otherwise available to the Company, in the event of any
material inaccuracy or breach of any representation, warranty,
covenant or agreement of the Purchaser set forth in this Agreement,
the Company may recover any and all Damages incurred by the Company.
8.2 SURVIVAL EXCLUSIVITY. The representations and warranties contained
in this Agreement and the certificates and other documents delivered pursuant to
this Agreement shall terminate at Closing. The covenants and agreements
contained in this Agreement and the certificates and other documents delivered
pursuant to this Agreement shall survive Closing to the extent applicable
including but not limited to the agreements set forth in Section 1.3(c). Such
representations, warranties, covenants and agreements contained herein are
exclusive, and the parties hereto confirm that they have not relied upon any
other representations, warranties, covenants and agreements as an inducement to
enter into this Agreement or otherwise. The Purchaser hereby waives, from and
after Closing, to the fullest extent permitted by law, any and all rights,
claims, actions or causes of action it may have against the Company and its
Affiliates relating to the subject matter of this Agreement and the certificates
and other documents delivered pursuant to this Agreement, other than claims of
fraud and rights, claims, actions and causes of actions arising out of a breach
of any covenant or agreement of the Company which survives Closing. Further, the
Purchaser waives, releases and covenants not to sue the Company for any Damages
of any kind or character, arising under any Environmental Law (statutory,
regulatory, common law, or otherwise) relating to any Damage, including without
limitation, strict liability, incurred or allegedly incurred by the Purchaser.
In addition, the Purchaser covenants and agrees that it shall not file any
claims with any insurer of the Company for recovery under any insurance policies
covering the Company and does hereby waive, irrevocably and forever and to the
fullest extent permitted by law, any lights the Purchaser may have to recover
under such insurance policies.
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ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT AND MODIFICATION. Except as provided otherwise in this
Agreement, this Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto.
9.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of the Purchaser on the
one hand, or the Company, on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived by the Company or the
Purchaser, respectively, only by a written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section.
9.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered in person, by telecopy, by an
overnight express delivery service Federal Express) or by registered or
certified mail (postage prepaid, return receipt requested) to the other party at
the following addresses (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof):
(a) if to the Company, to:
Waste Management, Inc.
1001 Fannin Street
Suite 4000
Houston, Texas 77002
Attn: Greg Sangalis
with a required copy to:
Marcus A. Watts
Locke Liddell & Sapp LLP
3400 Chase Tower
600 Travis
Houston, Texas 77002
(b) if to the Purchaser, to:
Star Services Group, Inc.
2075 North Powerline Rd.
Pompano Beach, Florida 33069
Attn: Jack R. Casagrande
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with a required copy to:
Weiss & Federici
30 Main Street
Port Washington, New York 11050
Attn: Samuel Weiss
9.4 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective executors, administrators, heirs, successors and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties; provided, however, that the Purchaser may
assign, in whole or in part, its rights and obligations under this Agreement to
any of its Affiliates, but such assignment shall not relieve the Purchaser of
any of its duties, obligations or liabilities under this Agreement.
9.5. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas (regardless of the laws that might otherwise govern under
applicable Texas principles of conflicts of law) as to all matters, including
but not limited to, matters of validity, construction, effect, performance and
remedies.
9.6 ARBITRATION.
(a) Any claim, action, dispute or controversy of any kind
arising out of or relating to this Agreement or concerning any aspect
of performance by any party under the terms of this Agreement
("Dispute") shall be resolved by mandatory and binding arbitration
administered by the American Arbitration Association (the "AAA")
pursuant to the Federal Arbitration Act (Title 9 of the United States
Code) in accordance with this Agreement and the then-applicable
Commercial Arbitration Rules of the AAA. The parties acknowledge and
agree that the transactions evidenced and contemplated hereby involve
"commerce" as contemplated in Section 2 of the Federal Arbitration Act.
If Title 9 of the United States Code is inapplicable to any such
Dispute for any reason, such arbitration shall be conducted in
accordance with the laws of the State of Texas, this Agreement and the
then-applicable Commercial Arbitration Rules of the AAA. To the extent
that any inconsistency exists between this Agreement and the foregoing
statutes or rules, this Agreement shall control. Judgment upon the
award rendered by the arbitrators acting pursuant to this Agreement may
be entered in, and enforced by, any Court having jurisdiction;
provided, however, that the arbitrators shall not amend, supplement or
reform in any manner any of the rights or obligations of any party
hereunder or the enforceability of any of the terms of this Agreement.
Any arbitration proceedings under this Agreement shall be conducted in
Houston, Texas.
(b) Upon the request by written notice delivered in accordance
with Section 9.3 of the Agreement, whether made before or after the
institution of any legal proceeding, but prior to the expiration of the
statutory time period within which any party
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must respond under receipt of valid service of process in order to
avoid a default judgment any Dispute shall be resolved by mandatory
and binding arbitration in accordance with the terms of this
Agreement. Within ten (10) days of a party's receipt of such notice,
each party shall submit the name of a qualified arbitrator. The two
named arbitrators shall agree on a third arbitrator. If a replacement
arbitrator is necessary for any reason, such replacement arbitrator
shall be appointed by the AAA.
(c) Any party to this Agreement may bring as summary proceedings
(including, without limitation, a plea in abatement or motion to stay
further proceedings) an action in Court to compel arbitration of any
Dispute in accordance with this Agreement.
(d) All statutes of limitation that would otherwise be applicable
shall apply to any arbitration proceeding. Any attorney-client
privilege and other- protection against disclosure of privileged or
confidential information including, without limitation, any protection
afforded the work-product of any attorney, that could otherwise be
claimed by any party shall be available to, and may be claimed by, any
such party in any arbitration proceeding. No party waives any attorney
client privilege or any other protection against disclosure of
privileged or confidential information by reason of anything contained
in, or done pursuant to, the arbitration provisions of this Agreement.
Each party agrees to keep all Disputes and arbitration proceedings
strictly confidential, except for disclosure of information to the
parties' legal counsel or auditors or those required by applicable
law.
(e) The arbitration shall be conducted and concluded as soon
as reasonably practicable, based on a schedule established by the
arbitrators. Any arbitration award shall be based on and accompanied by
findings of fact and conclusions of law, shall be conclusive as to the
facts so found and shall be confirmable by any Court having
jurisdiction over the Dispute as to whether such award correctly
applied applicable law.
(f) Each party shall bear its own expenses, including, without
limitation, expenses of counsel incident to any arbitration and the
costs of its selected arbitrator. The expenses of the third arbitrator
and the AAA shall be borne by the parties. The arbitrators shall have
the power and authority to award expenses to the prevailing party if
the arbitrators elect to do so.
(g) In order for an arbitration award to be conclusive, binding
and enforceable under this Agreement, (i) the arbitration award must
be in accordance with the terms and provisions of this Agreement, and
(ii) the arbitration must follow the procedures set forth in this
Agreement.
(h) Each of the parties hereto specifically agrees that it has
a duty to read this Agreement and agrees that it is charged with notice
and knowledge of the terms of this Agreement, that it has in fact read
the Agreement and is fully informed and has full notice and knowledge
of the terms, conditions and effect of this Agreement, that it has been
represented by independent legal counsel of its choice throughout the
negotiations prior to its execution of this Agreement and has received
the advice of its attorney in entering
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<PAGE> 23
into this Agreement and it recognizes that certain of the terms of
this Agreement result in one party assuming the liability inherent in
some aspects of the transaction and relieving the other party of its
responsibility for such liability. Each party hereto agrees and
covenants that it will not contest the validity or enforceability of
any indemnity or exculpatory provision of this Agreement on the basis
that the party had no notice or knowledge of such provisions or that
the provision is not "conspicuous."
9.7 PROCESS. Any process against the Purchaser or the Company in, or
in connection with, any suit, action or proceeding arising out of or relating to
this Agreement or any of the transactions contemplated by this Agreement may be
served personally or by certified mail at the address set forth in Section 9.3
with a required copy by certified mail to the last known address of the counsel
of the Purchaser or the Company, as the case may be, with the same effect as
though served on it personally.
9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.9 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
9.10 ENTIRE AGREEMENT. This Agreement, including the exhibits hereto,
and the instruments and schedules referred to herein, embody the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants, or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
9.11 WAIVER. A provision of this Agreement may be waived only by a
written instrument executed by or on behalf of the party waiving compliance. The
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by any party of any condition, or of any breach of any term,
covenant, representation or warranty contained in this Agreement in any one or
more instances, shall be construed to be a waiver of an other condition or of
any other breach of the same or any other term, covenant, representation or
warranty.
9.12 DISCLOSURE. The parties hereto shall not, prior to the Closing,
make any public disclosure of the transactions contemplated hereby or in
connection herewith without the written consent of the other party, which will
not be unreasonably withheld, except (i) as required by law or the rules of the
New York Stock Exchange, (ii) by the Company to other bidders on the Assets of
information relating to the Assets but not the terms of this Agreement and (iii)
by the parties to such Governmental Authorities and other third parties for the
purpose of obtaining any necessary consents and approvals and satisfying any
other conditions to Closing.
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9.13 EXPENSES. Except as otherwise provided in this Agreement, the
Purchaser shall pay all expenses incurred by the Purchaser in connection with
entering into and carrying out its obligations pursuant to this Agreement,
including all its attorneys' fees, and the Company shall pay all expenses
incurred by the Company in connection with entering into and carrying out its
obligations pursuant to this Agreement, including all its attorneys' fees.
9.14 NO THIRD PARTY BENEFICIARIES. No person or entity other than the
Company and the Purchaser and their respective executors, administrators, heirs,
successors and permitted have or be construed to have any legal or equitable
right, remedy or claim under or in respect of or by virtue of any provision of
this Agreement or in reliance hereon.
9.15 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions hereof shall not be affected or
impaired thereby.
9.16 TIME OF ESSENCE. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
STAR SERVICES GROUP, INC.
By: Patrick F. Marzano
----------------------------------
Title: President
--------------------------------
WASTE MANAGEMENT, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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<PAGE> 26
EXHIBIT A
GLOSSARY
For the purposes of this Agreement, the following terms shall have the
meanings specified or referred to below when capitalized (or if not capitalized,
unless the context clearly requires otherwise) when used in this Agreement.
"Affiliate" means, with respect to a specified Person, (a) any Entity
of which such Person is an executive officer, director, partner, trustee or
other fiduciary or is directly or indirectly the Beneficial Owner of 10% or more
of any class of equity security thereof or other financial interest therein; (b)
if such Person is an individual, any relative or spouse of such individual, or
any relative of such spouse (such relative being related to the individual in
question within the second degree) and any Entity of which any such relative,
spouse, or relative of spouse is an executive officer, director, partner,
trustee or other fiduciary or is directly or indirectly the Beneficial Owner of
10% or more of any class of equity security thereof or other financial interest
therein; (c) if such Person is an Entity, any director, executive officer,
partner, trustee or other fiduciary or any direct or indirect Beneficial Owner
of 10% or more of any class of equity security of, or other financial interest
in, such Entity; or (d) any Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control with
the Person specified. For purposes of this definition, "executive officer" means
the president any vice president in charge of a principal business unit,
division or function such as sales, administration, research and development, or
finance, and any other officer, employee or other Person who performs a policy
making function or has the same duties as those of a president or vice
president. For purposes of this definition, "control" (including "controlling",
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. When used without reference to a particular Person,
"Affiliate" means an Affiliate of the Company.
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 of
the General Rules and Regulations promulgated under the Securities Exchange Act
of 1934 as in effect as of the date of this Agreement.
"Business" means the operation of the hauling assets listed on
Schedule 1.1.
"Damages" includes damages, losses, shortages, liabilities, payments,
obligations, penalties, claims, causes of action, litigation, demands, defenses,
judgments, suits, proceedings, costs, disbursements or expenses (including,
without limitation, fees, disbursements and expenses of attorneys, accountants
and other professional advisors and of expert witnesses and costs of
investigation, testing and preparation).
"Encumbrances" means title exceptions which materially adversely affect
the use of Assets for their intended uses or purposes in the Business.
A-1
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"Entity" means any corporation (including any non-profit corporation),
general partnership, limited partnership, joint venture, joint stock
association, estate, trust, cooperative, foundation, union, syndicate, league,
consortium, coalition, committee, society, firm company or other enterprise,
association, organization or entity of any nature, other than a Governmental
Authority.
"Environmental Laws" means any and all applicable laws, rules, or
regulations, in effect as of the date of Closing of any applicable Governmental
Authority that relate to health, the environment or a community's right to know.
"Environmental Permits" means any permit license, registration,
approval, or other authorization directly relating to the operation of the
Assets required by any Environmental Law.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America, consistently applied. As applied to the Company,
GAAP means those accounting principles and practices (a) which are recognized as
such by the Financial Accounting Standards Board, (b) which are applied for all
periods in a manner consistent with the manner in which such principles and
practices were applied to the most recent audited financial statements of the
Company furnished to the Purchaser, and (c) which are consistently applied for
all periods.
"Governmental Authority" means any foreign governmental authority, the
United States of America, any State of the United States, any local authority
and any political subdivision of any of the foregoing, any multi-national
organization or body, any agency, department commission, board, bureau, court or
other authority of any of the foregoing, or any quasi-governmental or private
body exercising, or purporting to exercise, any executive, legislative,
judicial, administrative, police, regulatory or taxing authority or power of any
nature.
"Governmental Authorization" means any permit Environmental Permit,
license, franchise, approval, certificate, consent, ratification, permission,
confirmation, endorsement, waiver, certification, registration, qualification or
other authorization issued, granted, given or otherwise made available by or
under the authority of any Governmental Authority or pursuant to any Legal
Requirement.
"Knowledge" means, when applicable to the Company, the actual, current
conscious knowledge of Don Chappel, Dan Sama and Mickey Donofrio. No reference
to the Company's "knowledge" or similar references in any representation or
warranty contained in this Agreement shall be deemed to imply that the Company
has made any investigation or review in connection therewith.
"Legal Requirement" means any law, statute, ordinance, decree,
requirement, order, treaty, proclamation, convention, rule or regulation (or
interpretation of any of the foregoing) of, and the terms of any Governmental
Authorization issued by, any Governmental Authority, including without
limitation any requirement of Environmental Laws.
"Material Adverse Effect" shall mean any material adverse change in the
condition or operations of the Assets, taken as a whole.
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<PAGE> 28
"Order" means any order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, sentence, subpoena, writ or
award issued, made, entered or rendered by any court, administrative agency or
other Governmental Authority or by any arbitrator.
"Organizational Documents" means, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a general partnership, the partnership agreement
establishing such partnership with respect to a joint venture, the joint venture
agreement establishing such joint venture; with respect to a limited
partnership, the limited partnership agreement and certificate of limited
partnership for such entity; with respect to a trust, the instrument
establishing such trust; and with respect to any other Entity, any charter
document or other document executed, adopted, approved, ratified or filed in
connection with the formation, creation, constitution or organization of such
Entity, in each case including any and all amendments or modifications thereof.
"Person" means any individual, Entity or Governmental Authority.
"Proceeding" means any action, suit, litigation, arbitration, lawsuit,
claim, proceeding (including any civil, criminal, administrative, investigative
or appellate proceeding and any informal proceeding), prosecution, contest,
hearing, inquiry, inquest, audit. examination, investigation, challenge,
controversy or dispute commenced, `brought, conducted or heard by or before, or
otherwise involving, any Governmental Authority or any arbitrator.
"Property" or "Properties" includes any property (whether real or
personal) which the Company currently or in the past has leased, operated or
owned or managed in any manner including without limitation any property
acquired by foreclosure or deed in lieu thereof and property now held as
security for a loan or other indebtedness by the Company.
A-3
<PAGE> 1
ASSET PURCHASE AND REAL ESTATE
ACQUISITION AGREEMENT
THIS ASSET PURCHASE AGREEMENT is executed and delivered as of May,
1999 among DELTA RESOURCES CORP., a Florida corporation, and/or its assigns
("Buyer"), WILLIAM HOLMES and JUDITH HOLMES, together hereinafter referred to as
("HOLMES"), and HOLMES DIRT SERVICES, INC., a Florida corporation hereinafter
referred to as ("HDS") (HOLMES and HDS are hereinafter collectively referred to
as "Seller" or "Sellers") (Buyer and Seller collectively referred to as the
"Parties").
W I T N E S S E T H:
WHEREAS, Buyer, has actively participated in the environmental services
industry in Florida, operating in the areas of owning, operating and
maintaining construction and demolition debris recycling and landfilling
services; and
WHEREAS, William and Judith Holmes own that certain real property
which, in the aggregate, amounts to approximately 46 total acres, the combined
total of which is located near Altoona, Marion County, Florida, more
particularly identified and described in EXHIBIT "A" attached hereto (the "Real
Property"), of which approximately 13 acres of the Real Property is fully
licensed, permitted and zoned to be owned, operated and maintained as a
Construction and Demolition (C&D) Debris Landfill and Sand Mining Operation"
operated by HDS; and
WHEREAS, HDS owns various fixtures and items of personal property
located on the Real Property, which items are more particularly identified and
described in Exhibit "B" attached hereto (the "Fixtures and Personal Property");
and
WHEREAS, HDS is the owner or holder of all the permits and licenses
necessary for the operation of the Real Property maintained as a Construction &
Demolition Debris Landfill and Sand Mining operation and Lake Fill operation;
and
WHEREAS, Buyer desires to acquire the Assets from Sellers and Sellers
desire to sell such assets to Buyer as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations, warranties and obligations in this Agreement, the
parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings: Agreement means this Agreement, as it may be amended from time to
time.
1.2 Assets means only the real property, fixtures and personal property,
and the licenses and permits.
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1.3 Closing means generally the execution and delivery of those documents and
funds necessary to effect the sale of the Assets from Sellers to Buyer.
1.4 Closing Date means the date on which the Closing occurs.
1.5 Contracts, Contractual Rights and Agreements means all service contracts,
agreements or other instruments concerning the Assets, the Real Property and/or
the Operational Property which shall be transferred by Sellers to Buyer at
Closing.
1.6 Effective Date means the date on which all of the Parties have executed
this Agreement.
1.7 Escrow Date means the party described as such herein and any successor
escrow agent.
1.8 Governmental Approval means any permit, license, variance, certificate,
consent, letter, clearance, closure, exemption, decision, action or approval of
a governmental authority.
1.9 improvements means any buildings, structures or other improvements situated
on the Real Property.
1.10 Inspection Period means the period of time which expires at 5:00 PM on the
thirtieth (30th) or sixtieth (60th) day (as applicable) after the Effective
Date. If such expiration date is a weekend or national holiday, the Inspection
Period shall expire at 5:00 IM on the next immediately succeeding business day.
1.11 licenses and Permits means those licenses and permits issued by and applied
for with the State of Florida, or by such other county, municipality or other
local authority, as may be required for the Operational Property to be engaged
in the business of C&D Debris Landfilling and Sand Mining.
1.12 Materials means all financial records, economic data, Contracts,
Contractual Rights and Agreements, plans, drawings, specifications, soil test
reports, environmental reports, surveys, and similar documentation, if any,
owned by or in the possession of Sellers with respect of the Assets, which
Sellers may lawfully transfer to Buyer except that, as to such records,
Materials shall include any photocopies.
1.13 Permitted Exceptions means only the following interests, liens and
encumbrances:
(a) Liens for ad valorem and any other taxes relating to the property or
operation not yet due;
(b) Encumbrances, easements and restrictions of record as shown on the
Title Commitment which a licensed title company will accept; and
(c) Other matters determined by Buyer to be acceptable.
1.14 Purchase Price means the consideration agreed to be paid by Buyer to
Sellers for the purchase of the Assets as set forth in Section 3.1 (subject to
adjustments as provided herein).
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1.15 Real Property, Fixtures and Personal Property means the various fixtures
and items of personal property located on the Real Property, which items are
more particularly identified and described in Exhibit "B" attached hereto (the
"Fixtures and Personal Property").
1.16 Title Defect means any exception in the Title Insurance Commitment of
proposed Title Insurance Policy or any matter disclosed by the Survey, or any
other lien, encumbrance or defect becoming known to Buyer, other than a
Permitted Exception.
1.17 Title Insurance means an ALTA Form B Owners Policy of Title Insurance for
the full Purchase Price insuring marketable title in Buyer in fee simple,
subject only to the Permitted Exceptions, issued by Attorney's Title Insurance
Fund, Inc., or such other similar title insurance company (the "Title Company").
1.18 Title Insurance Commitment means a binder whereby the Title Company agrees
to issue the Title Insurance to Buyer.
1.19 Transaction Documents means this Agreement, the General Warranty Deed
conveying the Real Property, the Bill of Sale conveying the Personal Property,
the Non-compete Agreement and all other documents required or appropriate in
connection with the transaction contemplated hereby.
1.20 Recitations Adopted. The recitations set forth above in the "Whereas"
clauses are hereby adopted and incorporated herein as part of this Agreement.
2. DELIVERY OF ASSETS
Delivery of Assets. Upon the terms and subject to the conditions set forth
in this Agreement, Sellers shall, at the Closing, sell, assign, convey, transfer
and deliver the Assets to Buyer. Sellers shall make such transfer of the Assets
to Buyer free and clear of all liens, security interests, encumbrances, adverse
claims, liabilities, pledges, charges, voting trusts, equities and other
restrictions of any nature whatsoever except for the Permitted Exceptions. In
furtherance of such transfer of the Assets, the Parties shall have executed and
delivered at the Closing a General Warranty Deed, a Bill of Sale, a Non-compete
Agreement and any and all other documents necessary to effect the transfer
thereof in such form as shall be agreed upon by the Parties.
3. PURCHASE PRICE
3.1 Purchase Price. In accordance with Section 3.2 below, at the Closing, in
consideration of the sale of the Assets to Buyer in accordance with this
Agreement, Buyer shall pay the Sellers the aggregate sum of One Million Eight
Hundred Thousand Dollars ($1.8 Million). Such consideration Holmes Dirt Service
to Delta Resources shall be allocated between the Assets and the Sellers as
follows:
(a) One Hundred Thousand ($100,000.00) Dollars to HOLMES for the 934,136
thousand cubic yards of Air Space;
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<PAGE> 4
(b) One Million Five Hundred and Forty Thousand ($1,540,000.00) Dollars to
HOLMES for the Real Property;
(c) One Hundred Thousand Dollars ($100,000.00) to HOLMES for the
Non-compete Agreement (the "Non-compete Agreement") from HOLMES in favor of the
Buyer;
(d) Six Thousand ($6,000.00) Dollars to HOLMES as per Exhibit B for the
purchase of the Fixtures and Personal Property;
(e) One Hundred and Four Thousand ($104,000.00) Dollars to HDS as per
Exhibit B for the purchase of the Fixtures and Personal Property;
(f) Fifty Thousand ($50,000.00) Dollars to HDS for all of their right, title
and interest in and to the licenses and permits owned or controlled by HDS.
3.2 Payment of Purchase Price. The Parties agree that the Purchase Price for the
acquisition of the Assets shall be payable in a Promissory Note as follows:
(a) An aggregate of Four Hundred Forty Thousand ($440,000.00) Dollars will
be paid by certified check at Closing. A Promissory Note and Mortgage payable to
HOLMES in the amount of One Million Three Hundred and Sixty Thousand Dollars
($1,360,000.00), which shall be delivered from Buyer to Sellers on the Closing
Date (as described hereinafter, the "Promissory Note"). The Promissory Note
shall bear interest at the annual rate of 7.75 percent (7.75%) to be amortized
over a 20-year period and such principal and interest shall be payable in
consecutive quarterly installments (see attached Amortization Schedule C-1).
The Promissory Note will balloon the earlier of seven (7) years and the then
remaining principal balance and unpaid interest, if any will be payable in full
or the landfill space being fully utilized. See Promissory Note marked EXHIBIT
D-1 attached hereto and made a part hereof. The Promissory Note will be
guaranteed by DELTA RESOURCES CORP. See the Guaranty marked EXHIBIT D-2. See
Mortgage Agreement marked Exhibit D-3. attached hereto and made a part hereof.
(b) The Promissory Note shall be secured by a mortgage which shall have
a thirty (30) day grace period, providing for late charges in the event payment
is more than ten (10) days late, shall provide for right of prepayment in whole
or in part without penalty, shall permit acceleration in event of transfer of
property, shall provide for insurance having the name of the seller as an
additional insured, provide that all notices of environmental inspections by
governmental agencies be provided to the seller, and such other provisions
normal and customary with this type of transaction.
3.3 Adjustments to the Purchase Price. The Purchase Price shall be adjusted as
of the Closing Date by:
(a) subtracting the portion of the current year's real and tangible
personal property taxes for the period from January I of that year, through the
Closing Date (if the amount of the current year's property taxes are not
available on the Closing Date, such taxes will be prorated based upon the prior
year's assessment); and
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(b) subtracting the amount of operating, utility and other deposits,
if any.
(c) The Purchase Price Air Space set forth in Paragraph 3.1 shall be
adjusted and increased during the 7 years of this Agreement, conditional upon
the following:
The total Purchase Price shall increase to $2,200,000 with either
Vertical Expansions (40ft. above existing grade) or Horizontal Expansion
(minimum of 10 acres to the North (see amortization schedule attached hereto and
made a part hereof marked Exhibit "C-2"); and
The total Purchase Price shall increase to $2,600,000 for Vertical and
Horizontal Expansion (see amortization schedule attached hereto and made a part
hereof marked Exhibit "C-3").
3.4 Closing Costs.
(a) At or prior to Closing, the Sellers shall pay:
(i) Sellers' attorneys' fees relating to the sale of the
Assets;
(ii) Documentary stamp and intangible taxes imposed, by the
State of Florida and/or other governmental entities upon the
transfer of the Assets to Buyer as contemplated hereby;
(iii) Cost of satisfying any and all liens, fines, claims or
other encumbrances on or against the Assets;
(iv) Cost of title insurance (with a title agent selected by
the Seller) and the costs, if any, of curing title defects and
recording any curative title documents as same relate to the Real
Property; and
(b) At or prior to Closing, the Buyer shall pay:
(i) Buyer's attorneys' fees;
(ii) Cost of preparation of the Survey;
(iii) Cost of Buyer's due diligence inspection, including,
without limitation, the costs associated with a Phase 1, modified
Phase I and/or Phase II environmental site assessment to be
conducted for the Real Property and obtained by Buyer;
(iv) Cost of recording the deed (excluding documentary stamps
on the deed and intangible tax due to be paid by the Sellers);
(v) Documentary stamp and intangible taxes imposed by the
State of Florida and/or other governmental entities upon delivery
of the Promissory Note from Buyer to Sellers customarily paid by
BUYER.
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3.5 Prorations. All other matters of income and expense associated with the
Assets shall be prorated as of the Closing Date. At Closing, provisions
reasonably acceptable to the Buyer for payment of applicable sales and use tax,
if any, such amounts are due for the month of Closing will be agreed upon in
order to assure that said sales and use has or will be paid.
3.6 Pre-Closing Submissions. To the extent not previously provided, the Buyer
agrees to provide the Seller with the latest available versions of the following
pre-closing submittals within ten (10) days of the date hereof-
(i) a true and correct copy of the survey of the property;
(ii) a true and correct copy of all licenses, permits,
certificates of occupancies and any other governmental approvals,
certificates, consents, exemptions, decisions, actions or approval of
any governmental body;
(iii) all engineering plans, topographic surveys, drawings and
specifications;
(iv) a list of all contracts and agreements;
(v) copies of the last year tax bills;
(vi) all environmental reports that are in the care, custody
and control of the Seller;
(vii) all Financial statements and records; and
(viii) a Certificate of Good Standing of the corporation from
the State of Florida.
3.7 Right of Offset. Buyer shall have the right to offset against the next due
payment on and mortgage any loss, cost, damage or expense incurred by Buyer as a
result of a breach of any representation or warranty set forth in this Agreement
or any other Agreement between the parties including, but not limited to,
unpaid, undisclosed liabilities, taxes, fines or penalties.
4. INSPECTION PERIOD, FINANCING CONTINGENCY AND CLOSING
4.1 Inspection Period of Buyer.
(a) Buyer agrees that it will have the period of time from the Effective
Date to 5:00 p.m. on the thirtieth (30th) day following the Effective Date to
physically inspect the Assets, review the economic data, review copies of the
Contracts, Contractual Rights and Agreements, review the Licenses and Permits
and Zoning and to otherwise conduct its due diligence review of the Assets and
the Materials. Buyer hereby agrees to indemnify and hold Sellers harmless from
any damages, liabilities or claims for property damage or personal injury
arising out of such inspection and investigation by Buyer or its agents or
independent contractors. If, at any time during the Inspection Period, for "Good
Cause" Buyer determines in its sole and absolute
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discretion that the Assets are unsatisfactory to Buyer, then Buyer shall notify
Sellers or Sellers' attorney in writing prior to the expiration of the
Inspection Period that it has elected not to proceed to Closing hereunder and to
terminate this Agreement, and in that event, the Parties shall be released from
all further rights and obligations under this Agreement. ("Good Cause" shall
include, without limitation, environmental restrictions or other impediments to
Buyer's contemplated use of the Real Property.) At or prior to expiration of the
initial thirty (30) days following the Effective Date, the Buyer shall, at its
election, have an additional thirty (30) days within which to extend the
Inspection Period and continue its inspection of the Property. In order to
extend the Inspection Period, the Buyer or Buyer's attorney shall have delivered
notice of such extension at or before 5:00 P.M. on the thirtieth (30th) day
following the Effective Date to Sellers or Sellers' attorney. Thereafter, Buyer,
at its election, in its sole and absolute discretion, may elect to cancel this
Agreement which election shall be made by written notice to Sellers or Sellers'
attorney given at or before 5:00 P.M. on the sixtieth (60') day following the
Effective Date. If either of such notices is not timely given, Buyer will be
deemed to have elected to Close.
(b) Throughout the Inspection Period, Buyer, its agents and
representatives, at any time and from time to time, may contract for the
services of persons (the "Site Reviewers") to perform environmental site
assessments ("Site Assessments") on the Real Property. The Site Assessments may
be performed at any time or times, upon reasonable notice, and under reasonable
conditions established by Sellers which do not impede the timely and efficient
performance of the Site Assessment. Sellers hereby grant access to the Real
Property to perform both above and below the ground testing for environmental
conditions and such other tests on the Real Property as may be reasonably
necessary in the reasonable opinions of the Site Reviewers to conduct the Site
Assessment. Sellers shall, upon request, supply to the Site Reviewers such
historical and operational information regarding the Real Property as may be in
their respective possessions to facilitate the Site Assessment and will make
available for meetings with the Site Reviewers appropriate personnel having
knowledge of such matters.
(c) Buyer, through its officers or other authorized representatives,
shall have the right to reasonable access to all Materials for the purpose of
reviewing and copying the same. The materials will be made available upon
reasonable notice given by the Buyer to the Seller.
(d) In appreciation of the contingent status of the Property during the
Inspection Report, Buyer shall in good faith inform Sellers as soon as possible
of Buyer's intent to cancel this Agreement in the event such decision has been
made by Buyer prior to the expiration of the Inspection Period.
4.2 Time and Place of Closing. Unless otherwise agreed in writing by the
Sellers and Buyer, Closing on the transactions contemplated hereby shall take
place at the offices of Seller's counsel in Florida, at 10:00 A.M., as soon as
practical but not later than the first business day that is thirty (30) days
from the later of, the end of the Inspection Period, or any extension thereof.
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5. WARRANTIES, REPRESENTATION AND COVENANTS OF SELLERS
Sellers warrant and represent as follows as of the date of this
Agreement and as of the Closing and, where indicted, covenants and agrees as
follows:
5.1 Organization; Authority. The Corporation is duly formed and authorized
pursuant to the laws of the State of Florida, and Sellers have full power and
authority to enter into and perform this Agreement in accordance with its terms,
and the persons executing this Agreement and other Transaction Documents have
been duly authorized to do so on behalf of Sellers.
5.2 Authorization; Validity. The execution and delivery of this Agreement and
the consummation of the transaction contemplated by this Agreement have been
duly and validly authorized by the Sellers. This Agreement has been duly and
validly executed and delivered by Sellers and (assuming the valid execution and
delivery of this Agreement by Buyer) constitutes a legal, valid and binding
agreement of Sellers enforceable against Sellers in accordance with its terms.
Title. Sellers are the owners in fee simple of all Assets and own the Real
Property that is subject only to the Permitted Exceptions. All of the Assets are
owned by Sellers, free and clear from any liens, claims or encumbrances except
for the liens and encumbrances listed on the attached Schedule of Liens and
Encumbrances. The buyer shall either assume the indebtedness or satisfy the debt
at closing. The buyer shall exercise it best efforts to obtain a release of the
seller from the obligation. Further:
(a) There are no proceedings or amendments pending and brought by or,
to the best of Sellers' knowledge, threatened by any third party which would
result in a change in the allowable uses of any of the Real Property or which
would modify the right of Buyer to use the Real Property for the conduct of the
a construction and demolition debris recycling and landfill and sand mining
Operation Business after the Closing Date. The parties may agree to file an
amendment to the permit to allow the expansion of the permit in accordance with
the amounts, set out in the prior provisions.
(b) Sellers have made available to Buyer all engineering, geologic and
other similar reports, documentation and maps relating to the Real Property in
the possession or control of Sellers.
(c) No third parties have any rights to possession or use of the Assets,
nor does any third party have any future right to occupy or possess all or any
part of the Assets.
(d) Neither the Sellers as it relates to the Real Property, nor the Real
Property, now is or ever have been involved in any litigation or administrative
proceeding seeking to impose fines, penalties or other liabilities or seeking
injunctive relief for violation of any applicable laws relating to the
environment.
(e) No portion of the Real Property contains any areas that could be
characterized as disturbed, undisturbed or man-made wetlands or as "waters of
the United States" pursuant to any
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Applicable Laws or the procedural manuals of the Environmental Protection
Agency, U.S. Army Corps of Engineers or the Florida Department of Environmental
Protection, whether such characterization reflects current conditions or
historic conditions which have been altered without the necessary permits or
approvals.
(f) Sellers have provided to the government agencies requiring the
same, all material reports, notices, filings and other disclosures required by
Applicable Laws and all such reports, notices, filings and other documents were
complete and accurate in all material respects at the time provided to said
Government agencies.
5.3 Commissions. Sellers have neither dealt with nor does it have any knowledge
of any broker or other party who has or may have any claim against Sellers or
the Property for a brokerage commission or finder's fee, his assigns, heirs or
successor in interests or like payment arising out of or in connection with the
transaction provided herein, and Sellers agree to indemnify Buyer from any such
claim arising by, through or under Sellers.
5.4 Sale Agreements. The Property is not subject to any outstanding
agreement(s) of sale, option(s), or other right(s), of third parties to acquire
any interest therein, except for Permitted Exceptions and this Agreement.
5.5 Litigation. There is no litigation or proceeding pending, or to the best of
Sellers' knowledge, threatened against Sellers relating to the Property.
5.6 Leases; Agreements; Contracts. There are no leases, agreements or contracts
affecting the Assets, oral or written, and any such leases, agreements or
contracts or modifications thereof entered into between the date of this
Agreement and the Closing Date will be made with the consent of Buyer. Copies of
such documents, which have been delivered to Buyer, are, to the best knowledge
of Sellers, true, correct and complete copies thereof. Between the date hereof
and the Closing Date, Sellers will not terminate or modify the contracts,
Contractual Rights and Agreements or other such existing leases, agreements or
contracts without the consent of Buyer. No party to any such instruments has
asserted any claim of default or offset against Sellers with respect thereto and
no event has occurred or failed to occur which would in any way materially
affect the validity or enforceability of any of same.
5.7 Financial Statements. Each of the operating statements of the Sellers
delivered or to be delivered to Buyer hereunder presents fairly in all material
respects the financial condition, results of operations as of and for the
periods referenced therein. Sellers covenant to furnish Buyer with unaudited
updated monthly reports for interim periods promptly after such statements are
first made available to Sellers.
5.8 Environmental.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) the term "Hazardous Material" shall mean any material,
waste or substance, including, without limitation, petroleum products that,
whether by their nature or use, are subject to regulation under any
Environmental. Requirements; (ii) the term "Environmental
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Requirement" shall collectively mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980(42 U.S.C. 9601, et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. 1801, et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. 6901, et. seq.), the Toxic Substances
Control Act (15 U.S.C. 2601, et seq.), the Clean Air Act (42 U.S.C. 7401, et
seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251, et seq.), the
Florida Air and Water Pollution Control Act, Section 403.011-403.4153, Florida
Statutes, the Pollutant Spill Prevention and Control Act, Section 376.011-17,
376.19-21, 376.30-.319, Florida Statutes, the Resource Recovery and Management
Act, Section 403.702-403.7893, Florida Statutes, the Florida Safe Drinking Water
Act, Section 403.85040-').90, Florida Statutes, any regulation pursuant thereof,
or any other Law addressing environmental, health or safety issues of or by any
Governmental Authority; (iii) the term "Governmental Authority" shall mean the
Federal government, or any state or other political subdivision thereof, or any
agency or body of the Federal government, or any state or other political
subdivision thereof, or any court asserting jurisdiction over Sellers, which is
exercising executive, legislative, judicial, regulatory or administrative
functions; and (iv) the term "Offsite Facility" shall mean any offsite waste
disposal facility, site or location utilized by or associated with the business
of Sellers or the Purchased Assets.
(b) Except as set forth in Schedule 5.9 hereto, (i) no Hazardous
Material has been or is currently located at, in, on, under or about any Real
Property in a manner which violates any Environmental Requirement, or which
requires investigation, cleanup or corrective action of any kind under any
Environmental Requirement; (ii) there has been no release, emission, discharge,
leaching, dumping or disposal of any Hazardous Material by Sellers in the
conduct of their business or otherwise which has adversely affected the quality
or quantity of groundwater in a. manner which is reasonably expected to form the
basis of a claim, at law or in equity, against Sellers or, after the Closing,
against the Buyer, by any Person, nor are Sellers aware of, nor have they
received notice of any such claim; (iii) no releasing, emitting, discharging,
leaching, dumping or disposing of any Hazardous Material by Sellers or others
in, on or from any Real Property has occurred, is occurring or, to the best of
Sellers' knowledge, may occur in the conduct of its business or otherwise in
violation of any Environmental Requirement or zoning law or regulation; (iv)
Sellers have all applicable federal, state and local permits, certifications,
licenses or approvals, including zoning approvals, and is in material compliance
with such permits, certification, licenses and approvals required pursuant to
any Environmental Requirement; (v) Sellers are not aware of, nor have Sellers
received notice of, any violation, lien, complaint, suit, order or other
obligation with respect to any past, present or future event concerning the
environmental condition of any Real Property, its business or the Assets; nor
has any such notice been issued by any Governmental Authority which has not been
fully satisfied and complied with in a timely fashion as required by
Environmental Requirements; (vi) to the best of Sellers' knowledge, there has
been no release or threatened release of Hazardous Material at, in, on or from
any Offsite Facility; (vii) neither the execution of this Agreement, nor the
Environmental Requirement, or consent order or similar agreement with any
Governmental Authority, to perform any environmental investigation or cleanup,
or to install additional pollution control equipment at any Real Property, or to
amend or modify its business and/or its' operations and equipment, or permits,
certifications, licenses or approvals held by it; (viii) there has been no
investigation, litigation, directive or administrative enforcement proceeding,
nor
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have any settlements been reached by or with any Governmental Authority or
public or private party alleging the release, threatened release, disposal,
storage or use of any Hazardous Material at any Real Property or, to the best of
Sellers' knowledge, any Offsite Facility; (ix) there are no underground storage
tanks, asbestos-containing materials, polychlorinated biphenyls or urea foam
insulation present at any Real Property at levels or in a condition in violation
of any Environmental Requirement; and (x) the Real Property does not contain any
wetlands, as defined in the Clean Water Act and regulations promulgated
thereunder, 33 C.F. R. 328.3 or any state analogue thereof, or other especially
environmentally sensitive or protected areas or species of flora or fauna.
(c) To the best of Sellers' knowledge, there has been no environmental
investigation, study, audit, test, review or other analysis conducted in
relation to the current or prior business of the Sellers or of the Real Property
which has not been delivered to the Buyer.
5.9 Maintenance and Operation of Assets. From and after the date hereof and
until the Closing, Sellers covenant to keep and maintain and operate the Assets
substantially in the manner in which it is currently being maintained and
operated and covenants not to cause or permit any waste of the Assets nor
undertake any action with respect to the operation thereof outside the ordinary
course of business without Buyer's prior written consent. Sellers covenant to
make all necessary repairs and replacements until the Closing so that the Assets
shall be of substantially the same quality and condition at the time of Closing
as on the date hereof Sellers covenant not to remove from the Improvements or
the Real Property any article included in the Personal Property. Sellers
covenant to maintain such casualty and liability insurance on the Assets as it
is presently being maintained.
5.10 Condemnation. Neither the whole nor any portion of the Real Property,
including access thereto or any easement benefiting the Real Property, is
subject to temporary requisition of use by any governmental authority or has
been condemned, or taken in any proceeding similar to a condemnation proceeding,
nor is there now pending any condemnation, expropriation, requisition or similar
proceeding against the Real Property or any portion thereof Sellers have
received no notice nor has any knowledge that any such proceeding is
contemplated.
5.11 Governmental Matters. Sellers have not entered into any commitments or
agreements with any Governmental authorities or agencies affecting the Assets
that have not been disclosed in writing to Buyer and Sellers have received no
notices from any such governmental authorities or agencies of uncured violation
at the Real Property of building, fire, air pollution or zoning codes, rules
ordinances or regulations, environmental and hazardous substances laws, or other
rules, ordinances or regulations relating to the Property. Sellers shall be
responsible for the remittance of all sales and use tax for periods occurring
prior to the Closing Date directly to the appropriate State Department of
Revenue.
5.12 Repairs. Sellers have received no notice of any requirements or
recommendations by any lender, customer. insurance companies, or governmental
body or agencies requiring or recommending any repairs or work to be done on the
Real Property `which have not already been completed.
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5.13 Consent, and Approvals; No Violation. Neither the execution and delivery of
this Agreement by Sellers nor the consummation by Sellers of the transactions
contemplated hereby will (a) require Sellers to file or register with, notify,
or obtain any permit, authorization, consent, or approval of, any governmental
or regulatory authority other than as set forth herein; (b) conflict with or
breach any provision of the organizational documents of Sellers; (c) violate or
breach any provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which Sellers are a
party, or by which Sellers, or any of the Assets may be bound; or (d) violate
any order, writ, injunction, decree, judgment statute, law or ruling of any
court or governmental authority applicable to Sellers or any of the Assets.
5.14 Foreign Investment and Real Property Tax Act. Sellers are not "foreign
persons" within the meaning of Sections 1445 or 897 of the Code, and have
furnished Buyer with their federal tax identification number, and at closing
will execute and deliver to Buyer an affidavit regarding the same, or if Sellers
fail to execute and deliver such affidavit, Buyer may deduct and withhold from
the Purchase Price such amounts as may be required by Buyer in order to satisfy
its tax withholding obligations.
5.15 No Untrue Statement. Neither this Agreement nor any Exhibit, Schedule nor
any written statement or Transaction Document furnished or to be furnished by
Sellers to Buyer in connection with the transaction contemplated by this
Agreement contains or will contain any known untrue statement of material fact
or omits or will omit any known material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.
5.16 Licenses and Permits. The Real Property shall be as of the Closing, fully
licensed and permitted, including required zoning approvals for the construction
of and operation as a C&D Debris Landfill. Sellers as of the Closing shall have
obtained from the State of Florida Department of Environmental Protection the
following: (a) an Environmental Resource Permit for storm/surface water systems
or evidence of an exemption from all the appropriate governmental agencies; and
(b) a Modified C&D Debris Construction and Operational General Permit for the
ongoing operations of the Real Property.
5.17 Complete Disclosure. This Agreement and the Schedules hereto and all other
documents and information furnished to Buyer and its representatives pursuant
hereto or pursuant to the negotiation of this transaction or the investigations
of or the employees or representatives of the Buyer, do not and will not include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading. If either or both
Sellers become aware of any fact or circumstance which would change a
representation or warranty of the Sellers in this Agreement or any other
statement made or document provided to Buyer, the party with such knowledge
shall promptly give written notice of such fact or circumstance to Buyer. None
of (a) such notification, (b) any pre-Closing investigation made by Buyer or the
Sellers, their respective properties, businesses or assets, or (c) the Closing
contemplated by this
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Agreement, shall relieve Sellers of their obligations under this Agreement,
including their representations and warranties made in this Section 5.
5.18 Noncompete Agreement. At Closing, HOLMES and HDS, its shareholders, each
agree to execute a noncompete agreement in favor of the Buyer. Set agreement
will provide that the Seller will not own, operate, or apply for permits for a
landfill within 100 miles of the subject site for a period of three (3) years.
In the event of non payment of the promissory note or uncured violation of the
mortgage provisions securing the promissory note, the Noncompete Agreement shall
be terminated.
5.19 No Public Announcement. Between the date of this Agreement and the Closing
Date, Sellers shall not, without the prior written consent of each of the Buyer,
make any oral or written announcement concerning this transaction except as may
be required by applicable laws including, but not limited to, the Securities
Laws.
6. WARRANTIES, REPRESENTATIONS AND COVENANTS OF BUYER
Buyer hereby warrants and represents as of the date of this Agreement
and as of the Closing and where indicated covenants and agrees as follows:
6.1 Organization; Authority. Buyer is a corporation duly organized, validly
existing and in good standing under laws of Florida and has full power and
authority to enter into and perform this Agreement in accordance with its terms,
and the persons executing this Agreement and other Transaction Documents on
behalf of Buyer have been duly authorized to do so.
6.2 Authorization; Validity. The execution, delivery and performance of this
Agreement and the other Transaction Documents have been duly and validly
authorized by the Board of Directors of Buyer. This Agreement has been duly and
validly executed and delivered by Buyer and (assuming the valid execution and
delivery of this Agreement by Sellers) constitutes a legal, valid and binding
agreement of Buyer.
6.3 Commissions. Buyer has neither dealt with nor does it have any knowledge of
any broker or other party who has or may have any claim against Buyer or Sellers
for a brokerage commission or finder's fee or like payment arising out of or in
connection with the transaction provided herein; and Buyer agrees to indemnify
Sellers from any such claims arising by, through or under Buyer.
6.4 No Public Announcement. Between the date of this Agreement and the Closing
Date, Buyer shall not, without the prior written consent of the Sellers, make
any oral or written announcement concerning this transaction except as may be
required by applicable law, including but not limited to, the Securities Laws.
6.5 Knowledge of Business Operations. Buyer represents to Sellers that Buyer is
knowledgeable in the operation of C&D Debris Landfills and in carrying out its
due diligence will, in addition to reliance on the information supplied by
Sellers under the term of this Agreement, rely on its own expertise in such
matters.
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7. TITLE MATTERS AND SURVEY
Title Insurance. Within twenty (20) days after execution of this Agreement
by the last to sign of Sellers and Buyer, Sellers shall deliver the Title
Insurance Commitment to Buyer. Buyer will have fifteen (15) days from receipt of
the Title Commitment (including legible copies of all recorded exceptions noted
therein) and Survey to notify Sellers in writing of any Title Defects,
encroachments or other matters not acceptable to Buyer which are not permitted
by this Agreement. Sellers shall use diligent efforts to cure the Title Defects
and/or objections by the Closing Date (as it may be extended). If Sellers elect
not to cure or if such Title Defects and/of objections are not cured, Buyer
shall have the right and Sellers shall have the obligation, in lieu of my other
remedies, as follows: (i) Buyer may refuse to purchase the Property, terminate
this Agreement and receive a return of the Earnest Money Deposit plus all
interest thereon from the Escrow Agent; in the event such amount is not paid
from Sellers to Buyer within fifteen (15) days of the delivery to Sellers of
Buyer's decision to terminate this Agreement, Buyer shall have the right without
any further acknowledgment by Sellers to file a lien in the amount of any
Earnest Money Deposit, plus interest at the maximum rate allowed by law, costs,
and reasonable attorney's fees associated with the same, against the Property,
which lien shall be valid, enforceable and subject only to the Permitted
Exception; or (ii) cure such Title Defects and deduct the cost thereof from the
purchase price, down payment first; and (iii) waive such Title Defects and/or
objections and close the purchase of the Property subject to them.
7.1 Miscellaneous Title Matters. If a search of the title discloses judgments,
bankruptcies or other returns against other persons having names the same as or
similar to that of Sellers, Sellers shall on request deliver to Buyer an
affidavit stating, if true, that such judgments, bankruptcies or the returns are
not against Sellers. Sellers further agree to execute and deliver to the Title
Insurance agent at Closing such documentation, if any, as the Title Insurance
underwriter shall reasonably require to evidence that the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized and that there are no mechanics' liens on the Property
or parties in possession of the Property other than tenants under the Leases and
Sellers.
7.2 Survey. If Buyer desires a survey of the Real Property, Buyer may order
same surveyed to show the following:
(a) the exact boundary lines of the Real Property;
(b) the location thereon of all, if any, buildings, improvements, and
easements now existing;
(c) the number of acres in the Real Property;
(d) the location of any buildings, fences or other improvements which
encroach on the Real Property;
(e) the location of any improvements on the Real Property which encroach on
any neighboring property or on any property which is subject to any
easement or right-of-way;
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(f) all building lines established in respect of the Real Property; and
(g) all public access to the Real Property, and representing that the
boundaries of the Real Property are contiguous with the boundaries of all
adjoining parcels (the "Survey").
(h) the topography of the Property.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligations of Sellers hereunder are subject to the completion,
satisfaction, or at their option, waiver, on or prior to the Closing Date, of
the following conditions:
8.1 Representations and Warranties. The representations and warranties of Buyer
contained in this Agreement shall be accurate on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of such date; and each and all of the terms, covenants and conditions of
this Agreement to be complied with and performed by Buyer on or before the
Closing Date shall have been duly complied with and performed.
8.2 Consents. All necessary notices to, consents of and filings with any
governmental authority or agency or other third party relating to the
consummation of the closing or the other transactions contemplated herein to be
made or obtained by Buyer shall have been obtained and made.
8.3 No Adverse Proceeding. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or, to the best of
Buyer's knowledge, threatened to restrain or prohibit any of the transactions
contemplated by this Agreement.
8.4 Noncompete Agreement. William Holmes shall have executed and delivered at
the Closing Non-compete Agreement in a form to be agreed upon by the Parties.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer hereunder are subject to the completion, satisfaction
or, at their option, waiver, on or prior to the Closing Date, of the following
conditions:
9.1 Representations and Warranties. The representations and warranties of
Sellers contained in this Agreement shall be accurate on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date, and Buyer shall have received a certificate from
Sellers to that effect, or setting forth any discrepancies in such
representations and warranties which have arisen since the date of this
Agreement. The foregoing notwithstanding, Sellers agree that no limitation of
any representations and warranties set forth in the certificate contemplated in
the first sentence of this Section 9.1 shall restrict Buyer's right to terminate
this Agreement if any representation or warranty of either or both Sellers is
inaccurate as of the Closing Date.
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9.2 Buyer Approvals. This Agreement and the transactions contemplated hereby
shall have been approved by the requisite vote of the Board of Directors and
shareholders, if required, of Buyer.
9.3 No action or proceeding before a court or any other governmental agency or
body shall have been instituted or threaten ed to restrain or prohibit any of
the transactions contemplated by this Agreement, and no governmental agency or
body shall have taken any other action or made any request of Buyer as a result
of which the management of Buyer deems it inadvisable to proceed with the
transactions hereunder.
9.4 General Release. Sellers shall have delivered to Buyer an instrument dated
the Closing Date releasing the Buyer from any and all claims of Sellers against
the Buyer arising out of events which occurred prior to the Closing (but not
including any claims pursuant to this Agreement).
9.5 Owners' Policy. The Title Company shall have issued the preliminary title
commitment and shall have agreed to issue the Owners' Policy in each case in
accordance with Article 3 and otherwise acceptable to Buyer.
9.6 Non-compete Agreement. HOLMES shall have executed and delivered at the
Closing a Non-compete Agreement in a form to be agreed upon by the Parties.
9.7 Environmental Review. Buyer, through its authorized representatives, must
have completed a review (including, without limitation, all testing, inspections
and other procedures, review of existing files of, and discussions with,
governmental agencies and officials having jurisdiction over the Real Property,
permits and licenses) of the environmental and land use practices, procedures,
operations and activities related to the Assets; the results of which review,
without limiting the generality of the foregoing, reflects compliance with all
Applicable Laws, discloses no actual or probable violations, compliance
problems, required capital expenditures or other substantive environmental, land
use or real Property-related concerns and are otherwise satisfactory in all
respects to Buyer in its sole discretion.
9.8 Licenses and Permits; Transferability of Permits. Sellers shall have
complied with Section 5.17 and the permits and licenses referred to in Section
5.17 shall have been issued. Buyer shall have determined, in its sole
discretion, that prior to, or as a result of, this transaction, all of the
permits required for the operation of the Business have been transferred to
Buyer or will be transferred to Buyer without a public hearing before any
governmental body.
9.9 Certificates. Sellers shall have delivered to Buyer a certificate to the
effect that each of the conditions specified in this Article 9 have been
satisfied in all respects.
9.10 General. All actions taken by Sellers in connection with the consummation
of the transactions contemplated hereby and all certificates, opinions and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Buyer.
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9.11 Audit. An audit has been completed for the Corporations last two (2) fiscal
years; the parties will split the cost. If the audit is not complete but the
parties reasonably believe that the audits will be completed within thirty (30)
days, the Closing may proceed.
10. POSSESSION; RISK OF LOSS; DAMAGE OR CONDEMNATION
10.1 Possession. Occupancy and possession of the Assets will be transferred to
Buyer at the conclusion of the Closing.
10.2 Risk of Loss. All risk of loss to the Assets shall remain upon Sellers
until the conclusion of the Closing. If, before the occupancy and possession of
the Assets has been transferred to Buyer, any material portion of the Assets is
damaged by fire or other casualty and will not be restored by the Closing Date
or if any material portion of the Real Property is taken by eminent domain or
similar doctrine , or there is a material obstruction of access to the
Improvements by virtue of a taking by eminent domain, Sellers shall, within ten
(10) days of such damage or taking, notify Buyer thereof and Buyer shall have
the option to:
(a) terminate this Agreement upon notice to Sellers given within ten (10)
business days after such notice from Sellers; or
(b) proceed with the purchase of the Real Property, in which event Sellers
shall assign to Buyer all Sellers' right, title and interest in all amounts due
or collected by Sellers under the insurance policies or as condemnation awards.
In such event, the Purchase Price shall be reduced by the amount of any
insurance deductible to the extent it reduced the insurance proceeds payable.
11. POST-CLOSING COVENANTS
11.1 Taxes
(a) Sellers irrevocably agree to indemnify Buyer against, and to hold
Buyer harmless from:
(i) any and all federal, state, local and other taxes related
to the Assets arising from the audit, examination, review or other
adjustment of tax liabilities for periods ending on or prior to the
Closing Date;
(ii) any and all taxes, interest, penalties, additions to tax
(or additional amounts imposed with respect to any such interest,
penalties, or additions to tax) related to the Assets imposed with
respect to any federal, state, local or other taxes for periods ending
on or before the closing Date; and
(iii) any and all federal, state, local, or other taxes of
Buyer arising as the result of any payment by the Sellers to Buyer in
fulfillment of its obligation pursuant to this Section 10.1(a).
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(b) SELLERS agree that they shall be responsible, at their sole expense,
for the preparation of any required federal, state, local and other income and
franchise tax returns for the tax periods beginning January 1, 1999 and ending
on its Closing Date. Buyer agrees to cooperate with Seller in the preparation of
such returns. Sellers further agree that they shall pay all taxes (including all
penalties and interest, if any) due for such tax period. Prior to filing the
returns provided for in this paragraph, Seller agrees to allow Buyer 20 business
days to review and approve its returns, approval of which will not unreasonably
be withheld.
11.2 Further Assurance. From time to time on and after the Closing and without
further consideration, the parties hereto shall each deliver or cause to be
delivered to any other party at such times and places as shall be reasonably
requested, such additional instruments as any of the others may reasonably
request for the purpose of carrying out this Agreement and the transaction
contemplated hereby. Sellers, also without further consideration, agree to
cooperate with Buyer on and after the Closing Date in furnishing to Buyer
information, evidence, testimony, and other assistance in connection with
Buyer's efforts to obtain all necessary permits and approvals and in connection
with any actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date. Sellers
acknowledge and agree that, from and after the Closing, Buyer shall be entitled
to possession of all documents, books, records (including tax records),
agreements and financial and operating data of any sort related to Assets.
11.3 Survival. The covenants in this Article II shall survive the Closing.
12. NON-ASSUMPTION OF LIABILITIES
12.1 Non-Assumption of Liabilities. Buyer shall not, by the execution and
performance of this Agreement or otherwise, assume, become responsible for or
incur any liability or obligation of any nature of the Sellers whether legal or
equitable, matured or contingent, known or unknown, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, whether arising out of occurrences
prior to, at or after the date of this Agreement. The Buyer does hereby agree to
assume only the outstanding indebtedness listed on Schedule E of this Agreement
for Sale.
Sellers hereby agree to indemnify Buyer, its respective successors and
assigns from and against all of the above liabilities and obligations in
accordance with Section. I'). I below. Sellers shall, by the Closing Date,
either (a) discharge, (b) obtain novations, in form and substance satisfactory
to Buyer discharging Buyer as obligors, on, or (c) make other arrangements
satisfactory to Buyer, in Buyer's sole judgment, to hold harmless Buyer from any
claim, obligation, duty or liability on or with respect to all non-assumed
liabilities.
13. INDEMNIFICATION
13.1 Indemnification by Sellers. Sellers agree that they will, jointly and
severally, indemnify, defend (as to third-party claims only), protect and hold
harmless Buyer and its respective officers, shareholders, directors, divisions,
subdivisions, affiliates, subsidiaries, agents, employees, successors and
assigns at all times from and after the date of this Agreement, from and
against all liabilities claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, losses, costs and expenses whatsoever
(including specifically, but without
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<PAGE> 19
limitation, court costs, reasonable attorneys' fees and expenses, and expenses
of investigation) whether equitable or legal, matured or contingent, known or
unknown, foreseen or unforeseen, ordinary or extraordinary, patent or latent,
whether arising out of occurrences prior to, at or after the date of this
Agreement, but not after closing, incurred as a result of or incident to, except
for those set out in this Agreement:
LIMITATION FOR CLAIMS ACCRUING PRIOR TO TRANSFER
(a) any breach of, misrepresentation in, untruth in or inaccuracy in the
representations and warranties by either or both Sellers (including, without
limitation, those relating to the environmental condition of the Real Property
and Sellers' environmental compliance) set forth herein or in the Schedules,
Exhibits or certificates attached hereto or delivered pursuant hereto;
(b) nonfulfillment or nonperformance of any agreement, covenant or
condition on the part of either or both Sellers made in this Agreement and to be
performed on or before the Closing Date;
(c) the matters set forth in Section 12.1;
(d) the existence of liabilities of the Sellers; and
(e) any claim by a third party that, if true, would mean that a
condition for indemnification by Sellers under any of subsections (a) through
(e) of this Section 13.1 had been satisfied.
13.2 Sellers' Indemnification of Buyer for Environmental Matters. Seller hereby
agrees that it shall indemnify, defend, save and hold harmless the Indemnified
Parties against and from, and to reimburse the Indemnified Parties with respect
to, any and all damages, claims, liabilities, lost costs and expenses
(including, without limitation, reasonable paralegal, experts' and attorneys'
fees and expenses, whether in court, out of court, in bankruptcy or
administrative proceedings or on appeal), penalties, or fines, incurred by or
asserted against the Indemnified Parties by reason or arising out of.
(a) the breach of any representation or undertaking of Sellers under this
Section;
(b) any Environmental Condition that exists as of the date of this
Agreement or as of the date of the Closing on or arising from the Property or
any facilities or operations on the Property, except as otherwise stated in this
Agreement;
(c) any obligation or liability arising out of or resulting from
non-compliance by Sellers with, or remedial work imposed upon Sellers under any
Law relating to protection of the environmental; the use, transport, disposal,
handling or storage of hazardous or toxic materials, pollutants, contaminants,
or wastes including, without limitation:
(i) any obligations, loss, cost, expense, claim or liability
arising out of any investigation, monitoring, clean-up, containment,
removal, storage, or
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<PAGE> 20
restoration work required by, or incurred by Buyer or any entity or
person as required by Environmental Requirement or any environmental
governmental agencies, and
(ii) any claims of third parties for loss, injury, expense, or
damage arising out of the handling of any Hazardous Materials on,
under, in, above, to, or from the Property.
(d) any claim by a third party that, if true, would mean that a condition for
indemnification by Seller under subsections (a), (b) or (c) of Section 13.3 had
been satisfied.
Notwithstanding anything in this Agreement, the covenants, representations,
warranties set forth in Section 5.9 and the indemnities and undertakings of
Sellers set forth in this Section shall survive the Closing and the delivery of
the Deed to the Buyer.
(e) This indemnity shall not extend to matters which may reasonably
discovered as a result of the environmental assessment and surveys performed by
the Buyer pursuant to its due diligence inspection prior to the closing of the
transaction as set forth in the scope of services between Delta and SCS
Engineering (see attached scope of service) Exhibit F.
13.3 Indemnification by Buyer. Buyer agrees that it will indemnify, defend,
protect and hold harmless Sellers, their successors and assigns, at all times
from and after the date of this Agreement from and against all liabilities,
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
penalties, losses costs and expenses whatsoever (including specifically, but
without limitation, court costs, reasonable attorneys' fees and expenses and
reasonable expenses of investigation) incurred by Sellers as a result of or
incident to:
(a) any breach of, misrepresentation in, untruth in or inaccuracy in the
representations and warranties set forth herein, or in the Schedules or
certificates attached hereto or delivered pursuant hereto by Buyer;
(b) nonfulfillment or nonperformance of any agreement, covenant or
condition on the part of Buyer made in this Agreement; and any claim by a third
party that, if true, would mean that a condition for indemnification by Buyer
under subsections (a) or (b) of Section 13.3 had been satisfied.
Any claim by third parties arising from the maintenance and operation of the
assets after the closing of the sale.
13.4 Buyer's Indemnification of Sellers for Environmental Matters. Buyer hereby
agrees that it shall indemnify, defend, save and hold harmless the Indemnified
Parties against and from, and to reimburse the Indemnified Parties with respect
to, any and all damages, claims, liabilities, lost costs and expenses
(including, without limitation, reasonable paralegal, experts' and attorneys'
fees and expenses, whether in court, out of court, in bankruptcy or
administrative proceedings or on appeal), penalties, or fines, incurred by or
asserted against the Indemnified Parties by reason or arising out of:
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<PAGE> 21
(a) the breach of any representation or undertaking of Buyer under this
Section;
(b) any Environmental Condition that exists after the date of the closing
on or arising from the Property or any facilities or operations on the Property,
except as otherwise stated in this Agreement;
(c) any obligation or liability arising out of or resulting from
non-compliance by Buyer with, or remedial work imposed upon Buyer, other than
resulting from seller act, under any Law relating to protection of the
environmental; the use, transport, disposal, handling or storage of hazardous or
toxic materials, pollutants, contaminants, or wastes including, without
limitation:
(i) any obligations, loss, cost, expense, claim or liability,
arising out of any investigation, monitoring, clean-up, containment,
removal, storage, or restoration work required by, or incurred by
Buyer or any entity or person as required by any Environmental
Requirement or any environmental governmental agencies, and
(ii) any claims of third parties for loss, injury, expense, or
damage arising out of the handling of any Hazardous Materials on,
under, in, above, to, or from the Property.
(d) any claim by a third party that, if true, would mean that a condition
for indemnification by Seller under subsections (a), (b) or (c) of Section 13.3
had been satisfied.
13.5 Procedure for Indemnification with Respect to Third Party Claim
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") or if any party who may make a claim for
indemnification under this Agreement otherwise becomes aware of any matter that
may give rise to such a claim or wishes to make such a claim (whether or not
related to a Third Party Claim), then the Indemnified Party shall promptly
notify each indemnifying party thereof in writing, provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party is thereby prejudiced.
(b) Any Indemnifying Party shall have the right to defend the Indemnified
Party against Third Party Claim with counsel of its choice satisfactory to the
Indemnified Party so long as:
(i) the Indemnifying Party notifies the Indemnified Party in
writing within a reasonable time after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirely of any
adverse consequences (which will include,
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<PAGE> 22
without limitation, all losses, claims, liens, and attorneys' fees and
related expenses) the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third
Party Claim.
(ii) The Indemnifying Party provides the Indemnified Party
with evidence acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against
the Third Party claim and fulfill its indemnification obligations
hereunder;
(iii) settlement of, or adverse judgment with respect to the
Third Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential custom or
practice adverse to the continuing business interests of the
Indemnified Party; and
(iv) the Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 13.
(i) the Indemnified Party may retain separate counsel at its
sole costs and expense and participate in the defense of the Third
Party Claim;
(ii) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying
Party (which will not be unreasonably withheld); and
(iii) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party
(which will not be unreasonably withheld).
(d) In the event or to the extent that any of the conditions set forth in
Section 13 above is or becomes unsatisfied, however:
(i) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim and any matter it may deem appropriate in
its sole discretion and the Indemnified Party need not consult with,
or obtain any consent from, any Indemnifying Party in connection
therewith (but will keep the Indemnifying Party reasonably informed
regarding the progress and anticipated cost thereof);
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<PAGE> 23
(ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the
Third Party Claim (including attorneys' fees and expenses); and
(iii) the Indemnifying Party will remain responsible
for any adverse consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this
Section 13; and
(iv) the Indemnifying Party shall be deemed to have waived any
claim that its indemnification obligation should be reduced because of
the matter in which the counsel for the Indemnified Party handled the
Third Party Claim.
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 Non-disclosure by Sellers. Sellers recognize and acknowledge that they have
had in the past, currently have, and in the future may possibly have, access to
certain confidential information that is valuable, special and unique assets of
the Business. Sellers agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except to authorized representatives of Buyer,
unless such information becomes known to the public generally through no fault
of Sellers. In the event of a breach or threatened breach by Sellers of the
provisions of this Section, Buyer shall be entitled to an injunction restraining
Sellers from disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting Buyer from pursuing any other
available remedy for such breach or threatened breach, including, without
limitation, the recovery of damages. The provisions of this Section shall apply
at all times prior to the Closing Date and for a period of one year following
the Closing.
14.2 Non-disclosure by Buyer. Buyer recognizes and acknowledges that it has had
in the past, currently has, and prior to the Closing Date, will have access to
certain confidential information of the Sellers. Buyer agrees that, except as
may be required by Applicable Laws or other legal process, it will not disclose
such confidential information to any person, firm, corporation, association, or
other entity for anv purpose or reason whatsoever, prior to the Closing Date
without Sellers' prior written consent. In the event of a breach or threatened
breach by Buyer of the provisions of this Section. Sellers shall be entitled to
an injunction restraining Buyer from disclosing in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting Sellers from pursuing any other available remedy for such breach or
threatened breach, including, without limitation, the recovery of damages. The
provisions of this Section shall apply at all times prior to the Closing Date
and for a period of one year following the termination of this Agreement without
a Closing having occurred.
15. BREACH, REMEDIES
15.1 Breach by Sellers. In the event of a beach of Sellers' covenants or
warranties and failure by Sellers to cure such breach after notice within the
time provided for Closing, in addition to remedies provided under law and
elsewhere in this Agreement, Buyer may, at Buyer's election
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<PAGE> 24
(i) terminate this Agreement; (ii) enforce this Agreement by suit for specific
performance; or (iii) waive such breach (if discovered prior to the Closing) and
close the purchase of the Assets contemplated.
15.2 Breach By Buyer. In the event of a breach of Buyer's covenants or
warranties herein and failure of Buyer to cure such breach after notice within
the time provided for Closing, in addition to remedies provided under law and
elsewhere in this Agreement, Sellers, at Sellers' election, may (i) terminate
this Agreement; and (ii) shall have the right to recover damages arising from
such breach.
16. GENERAL
16.1 Assignment; Binding Effect, Amendment. This Agreement and the rights of the
parties hereunder may be assigned by the Buyer. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of the
corporate parties hereto, and the respective heirs and legal representations of
Sellers. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, the successors of the corporate parties hereto, and the
respective heirs and legal representatives of Sellers. This Agreement, upon
execution and delivery, constitutes a valid and binding agreement of the parties
hereto enforceable in accordance with its terms and may be modified or amended
only by a written instrument executed by all parties hereto.
16.2 Entire Agreement. This Agreement is the final, complete and exclusive
statement and expression of the agreement among the parties hereto with relation
to the subject matter of this Agreement, it being understood that there are
no oral representations, understandings or agreements covering the same subject
matter as this Agreement. This Agreement supersedes, and cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous
discussions, correspondence, or oral or written agreements of any kind.
16.3 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
16.4 Notices. All notices or other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, by overnight courier or
by delivering the same in person to such party.
If to Buyer, addressed to at: Delta Resources Corp.
2075 N. Powerline Road
Pompano Beach, FL 33069
Attn: Patrick F. Marzano
with a copy to: Philip T. Medico, Jr., Esq.
2075 N. Powerline Road
Pompano Beach, FL 33069
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<PAGE> 25
with a copy to: Samuel G. Weiss, Esq.
30 Main Street
Port Washington, NY 11050
If to HDS, addressed to at: Holmes Dirt Services, Inc.
P.O. Box 321
Tavares, Florida 32778
If to Holmes, addressed to at: William Holmes
Judith Holmes
P.O. Box 321
Tavares, Florida 32778
with a copy to: Frank Gaylord, Esq.
P.O. Drawer 2047
Eustis, Florida 32727-2047
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier. subject to signature verification, and
three business days after the deposit in the U.S. Mail of a writing addressed as
above and sent first class mail, certified, return receipt requested, or when
actually received, if earlier. Any party may change the address for notice by
notifying the other parties of such change in accordance with this Section 16.4.
16.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Florida, without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Florida or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Florida.
16.6 Appointment of Agent. Sellers agree that Holmes Dirt Service, Inc. will
maintain a registered agent in the State of Florida to accept and acknowledge
service of process. Each party agrees that service of process or notice in any
such action, suit or proceeding shall be effective if in writing and delivered
to the address provided in Section 16.6 for such party, in the manner prescribed
in such Section.
16.7 No Waiver. No delay of or omission in the exercise of any right, power or
remedy accruing to any party as a result of any breach or default by any other
party under this Agreement shall impair any such right, power or remedy, nor
shall it be construed as a waiver of or acquiescence in any such breach or
default, or of or in any similar breach or default occurring later; nor shall
any waiver of any single breach or default be deemed a waiver of any other
breach of default occurring before or after that waiver.
16.8 Time of the Essence. Time is of the essence of this Agreement.
16.9 Captions. The headings of this Agreement are inserted for convenience only,
shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
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<PAGE> 26
16.10 Severability. In case any provisions of this Agreement shall be invalid,
illegal or unenforceable, it shall, to the extent possible, be modified in such
manner as to be valid, legal and enforceable but so as most nearly to retain the
intent of the parties, If such modification is not possible, such provision
shall be severed from this Agreement. In either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
16.11 Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local or foreign statute
shall be deemed to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The word "including" means including,
without limitation. The parties intend that 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 other representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) that the party has not breached shall not detract from or mitigate
the fact the party is in breach of the first representation, warranty or
covenant.
16.12 Standstill Agreement. Unless and until this Agreement is terminated
without the Closing having taken place, Sellers will not directly or indirectly
solicit offers for any of the Assets, or respond to inquiries from or negotiate
with third parties who express or who have heretofore expressed an interest in
acquiring such assets.
16.13 Attorneys' Fees. In the event either party hereunder files a suit in
connection with this contract or any provision contained herein, then the party
which prevails in such action shall be entitled to recover, in addition to all
other remedies or damages, reasonable attorneys' fee and paralegals' fee
(including those incurred out of court, at trial or in any appellate or
bankruptcy proceedings) and costs of court incurred in such suit.
16.14 Memorandum of Contract. Upon the request of either party hereto, the
parties shall both execute a Memorandum of Contract in recordable form which may
then be recorded by either party in the Public Records of Brevard County,
Florida. If either party fails to so execute the memorandum of Contract the
attorney for the other party is hereby granted a power of attorney to execute
such document.
16.15 Contract to Survive. It is understood and agreed that any and all
representations, warranties, covenants and agreements contained herein, whether
to be performed before or after the Closing Date, shall not be deemed to be
merged into or waived by the instruments of Closing, but shall expressly survive
Closing and shall be binding upon the party obligated thereby from and after the
Closing Date.
IN WITNESS WHEREOF, the parties hereto have execute this Agreement as
of the day and first above written.
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BUYER:
Witnesses: DELTA RESOURCES CORP., a Florida
corporation
By:
- -------------------------- ------------------------------------
Its:
- -------------------------- -----------------------------------
SELLERS:
Holmes Dirt Services, Inc.
Witnesses A Florida corporation
By:
------------------------------------
- --------------------------
Its:
- -------------------------- -----------------------------------
---------------------------------------
Judith Holmes
---------------------------------------
William Holmes
27
<PAGE> 28
STATE OF FLORIDA )
) SS
COUNTY OF Lake )
The foregoing instrument was acknowledged before me this day of _____, 1999 by
Judith Holmes, President of Holmes Dirt Services, Inc., who is personally known
to me or who produced a valid Driver's License as identification and who did
take an oath.
-----------------------------------
Notary Public
STATE OF FLORIDA )
) SS
COUNTY OF Lake )
The foregoing instrument was acknowledged before me this ______ day of
___________ 1999 by William Holmes, who is personally known to me or who
produced a valid Driver's License as identification and who did take an oath.
-----------------------------------
Notary Public
STATE OF FLORIDA )
) SS
COUNTY OF Lake )
The foregoing instrument was acknowledged before me this ____ day of __________,
1999 by Judith Holmes, who is personally known to me or who produced a valid
Driver's License as identification and who did take an oath.
-----------------------------------
Notary Public
28
<PAGE> 29
STATE OF FLORIDA )
) SS
COUNTY OF Lake )
The foregoing instrument was acknowledged before me this ______ day of
___________ 1999 by Judith Holmes, President of Holmes Dirt Services, Inc., who
is personally known to me or who produced a valid Driver's License as
identification and who did take an oath.
-----------------------------------
Notary Public
STATE OF FLORIDA )
) SS
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this ______ day of
___________ 1999 by ________________, THE ____________ of the DELTA RESOURCES
CORP. who is personally known to me or who produced a valid Driver's License as
identification and who did take an oath.
-----------------------------------
Notary Public
29
<PAGE> 30
EXTENSION AGREEMENT
The parties to the agreement agree to extend the contract and the time
for closing this agreement for a period of the sooner of ninety days, October
12, 1999, or fifteen days after the governmental approval, a letter resolving
the ground water conditions and the above ground storage tank issue as set out
below:
Permit v. Zoning
Difference between the DEP Permit and Marion Counting Zoning Holmes
will request Marion County to approve the zoning consistent with the existing
DEP Permit. The changes to the Zoning will provide the Special Use Permit will
expire in August, 2003 and the foot print of the Permit will be the description
provided in the DEP permit consisting of 13.1 acres.
Ground Water
Mr. Springstead will provide information for clarification of the
ground water issues raised by the SCS report to the mutual satisfaction of the
parties.
Storage Tank
The above ground storage tank will either be permitted or removed. The
area will be tested and freed of contaminants as certified by an engineer.
All the remaining terms and conditions of the agreement are hereby ratified and
incorporated herein.
Dated Monday, July 12, 1999
Seller: Buyer:
- -------------------------------- ------------------------------------
Judith A. Holmes Delta Resources Corporation
By Patrick F. Marzano, President
- --------------------------------
William J. Holmes
30
<PAGE> 1
TRIPLE NET LEASE
2075 SUITE 1, N. POWERLINE ROAD
POMPANO BEACH, FLORIDA 33069
THIS LEASE IS MADE AS OF THE 1ST DAY OF FEBRUARY, 1999, BY AND
BETWEEN JMA INVESTMENT, INC. THE ADDRESS OF WHICH IS 2175 N. POWERLINE RD SUITE
4, POMPANO BEACH, FL. 33069, AS LESSOR, AND DELTA RECYCLING CORP., ADDRESS OF
WHICH IS 2075, SUITE 1, N. POWERLINE ROAD, POMPANO BEACH, FL. 33069, AS LESSEE.
IN CONSIDERATION OF the rents to be paid and the mutual covenants,
promises, and agreements herein set forth, Lessor and Lessee agree as follows:
Lessor hereby leases unto Lessee the building premises situated in the
City of Pompano Beach, County of Broward, State of Florida, in an industrial
area commonly known as COPANS POWERLINE INDUSTRIAL CENTER, ALSO described on
exhibit "A", Tract "A", of plat recorded as Capital Industrial Park, Plat Book I
1 6, Page 49, hereafter referred to as premises.
SECTION 1
TO HAVE AND HOLD FOR A TERM OF THREE (3) YEARS FROM AND AFTER THE
COMMENCEMENT OF THE TERM OF THIS LEASE WHICH SHALL BEGIN ON THE 1ST DAY OF
FEBRUARY, 1999 AND SHALL CONTINUE THROUGH THE 31ST DAY OF JANUARY, 2002.
Notwithstanding the terms of this Section immediately set forth above.
Lessee shall have the option to extend this lease for (1) added
consecutive term of (3) three years provided Lessee is not in default under any
of the terms of this Lease. This option may be exercised by the Lessee by giving
written notice thereof to the Lessor by hand delivery or certified mail, return
receipt requested, at least 90 days prior to termination of each term of this
Lease. For each of the Three years of the option period(s), the minimum net
rental as defined in 3.01 and 3.02 of this Lease, shall be the minimum net
rental for the immediate preceding year plus $.42 per square foot annually
(3,960 X .42) to be paid as set forth in Section 3.01 and all other applicable
sections.
SECTION 1.01: The leased premises shall consist of a masonry), building
exterior of approximately 3,960 square feet, (99' across by a depth of 40').
SECTION 1.02: The exterior portion of the exterior wars and the roof of
the leased premises and the area beneath said premises are not demised
hereunder, and the use together with the right to install, maintain, use, repair
and replace pipes, ducts, conduits, wires, structural elements leading through,
over or under the leased premises in locations which will not materially
interfere with Lessee's use hereof and serving other parts of Copans/Powerline
Industrial Center are hereby reserved unto the Lessor.
SECTION 2
POSSESSION AND COMMENCEMENT OF TERMS
SECTION 2.01: Lessee acknowledges that possession of the leased
premises will be delivered to it in as is condition without any representations
by Lessor, or any person, firm or corporation on behalf of Lessor as to the
condition thereof and Lessee accepts possession of said premises as outlined
above. Any alterations or modifications of the leased premises desired by Lessee
shall be accomplished in accordance with plans and specifications prepared by
Lessee and approved by Lessor in writing and at Lessee's sole cost and expense
and subject to Lessor's approval as stipulated in Section 8.
SECTION 2.02: The Lease will commence on the date specified in Section
1. It is contemplated that the Premises will be ready for occupancy by the
Lessee on or prior to the Commencement Date. However, in the event that the
Lessor is unable to deliver possession of the Premises to the Lessee on or
before said date, then and in such event the Lessor agrees to deliver possession
of the Premises to the Lessee as soon as practicable thereafter, but no later
than one (1) month from February l, 1999 and the rental under this Lease will be
abated
<PAGE> 2
proportionately and the Lessee will be relieved of the liability for paying the
same during such time Lessee does not have possession. In no event shall the
Lessor have any claim for damages (except for abatement of rent as herein
specified) on account of the failure of the Lessor to deliver possession of the
Premises to the Lessee on or before said date.
SECTION 3
BASIC RENTAL
SECTION 3.01: In consideration of the leasing aforesaid, Lessee hereby
covenants and agrees to pay Lessor at such place as Lessor may hereafter from
time to time designate in writing, a minimum net rental for the original term of
the Lease in a total amount of Ninety Thousand Six Hundred Sixty Six Dollars
00/100 Dollars ($90,666.00) payable monthly in advance on the first day of each
and every month in monthly installments as set forth below:
Year One - $28,584.00- $2,382.00 per month***
Year Two - $30,222.00- $2,518.50 per month***
Year Three - $31,860.00- $2,655.00 per month***
*Plus state sales tax.
**Plus additional costs as described in Sections 4.01 6.02 and 10.01 Lessor
estimates first year costs at $1.96 s.f. for the purpose of computing first year
monthly rent. First month's total rent is $3,200.14) THE RENTAL PAYMENTS SHALL
BE MADE BY LESSEE AT THE OFFICE OF LESSOR WITHOUT ANY PRIOR DEMAND AND WITHOUT
ANY DEDUCTIONS OR SET-OFFS EXCEPT AS OTHERWISE PROVIDED HEREIN. LESSEE AGREES TO
PAY LESSOR A 10% LATE FEE FOR ALL PAYMENTS RECEIVED AFTER THE FIFTH DAY OF EVERY
MONTH.
SECTION 4
TAXES, ASSESSMENTS, AND UTILITIES
SECTION 4.01: Lessee agrees to pay to Lessor its proportionate share of
all taxes and assessments which have been or may be levied or assessed by any
lawful authority, for any calendar year during the term hereof, against the land
and buildings presently and/or at any time during the term of this Lease.
Lessee's proportionate share shall be equal to the product obtained by
multiplying such taxes and assessments by a fraction, which numerator shall be
the number of square feet of floor area in the leased premises, and the
denominator of which shall be the total number of square feet of constructed
leaseable floor area. Any tax and/or assessment of any kind or nature presently
or hereafter imposed by the State of Florida or any political subdivision
thereof or any governmental authority having jurisdiction thereover upon,
against or with respect to the rentals payable by tenant to Lessor, or on the
income of Lessor, or with respect to the Lessors, or the individuals or entities
which form the Lessor's interest herein, ownership of the land and buildings
presently and/or at any time during the term of the Lease, either by way of
substitution for all or any part of the taxes and assessments levied or assessed
against such land and such buildings or in addition thereto, shall be deemed to
constitute a tax and/or assessment against such land and such buildings for the
purposes of this Section and Lessee shall be obligated to pay the proportionate
share thereof as provided herein. In addition Lessee shall also be obligated to
pay any sales tax imposed by any governmental authority on the payment by Lessee
or on the receipt by Lessor an any and all payments from Lessee. If the sales
tax is separately assessed, the Lessee shall pay that amount imposed on the
individual payments of Lessee. if the sales tax is not separately assessed, the
Lessee shall pay its proportionate share monthly as provided herein.
SECTION 4.02: Lessee's share of all of the aforesaid taxes and
assessments levied or assessed for or during the term hereof, and determined by
Lessor, shall be paid in monthly installments on or before the first day of each
calendar month, in advance, in an amount estimated by Lessor, provided that in
the event Lessor is required under any mortgage covering the land and
improvements leased to Lessee to escrow real estate taxes, Lessor may, but shall
not be obligated to, use the amount required to be escrowed as a basis for its
estimate of the monthly installments due from Lessee hereunder. Upon receipt of
all tax bills and assessment bills attributable any calendar year during the
term hereof, Lessor shall furnish Lessee with written statement of the actual
amount of Lessee's share of the taxes and assessments for such year
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together with copies of the tax bills and assessment bills attributable to such
calendar year. In the event no tax bill is available, Lessor may compute the
amount of such tax. If the total amount paid by Lessee under this Section for
any calendar year during the term of this Lease shall be less than the actual
amount due from Lessee for such year, as shown on such statement, Lessee shall
pay to Lessor the difference between the amount paid by Lessee and the actual
amount due, such deficiency to be paid with in ten (10) days after demand
therefore by Lessor, and if the total amount paid by Lessee hereunder for such
calendar year exceeds such actual amount due from Lessee for such calendar year,
such excess shall be credited against the next installment of taxes and
assessments due from Lessee to Lessor hereunder. All amounts due hereunder shall
be payable to Lessor as rent at the place where the fixed annual rental is
payable. For the calendar years in which this Lease commences and terminates,
the provisions of this Section shall apply, and Lessee's liability for it
proportionate share of any taxes and assessments for such years shall be subject
to a prorata adjustment based on the number of days of said calendar year during
which the term of this Lease is in effect. A copy of a tax bill or assessment
bill submitted by Lessor to Lessee shall at all times be sufficient evidence of
the amount of taxes and/or assessments assessed or levied against the property
to which such bill relates. Prior to or at the commencement of the term of this
Lease and periodically thereafter during the term hereof, Lessor shall notify
Lessee in writing of Lessor's estimate of Lessee's monthly installments due
hereunder. Lessor's and Lessee's obligations under this Section shall survive
the expiration of the term of this Lease. AR payments due from Lessee shall be
due as rent, including any default provisions set forth in Section 18 herein,
and all rights provided to Landlords for defaults in rental payments under
Florida law.
SECTION 4.03: Lessee also agrees to pay all charges made against the
premises for gas, heat, electricity and all other utilities separately metered
during the period of this Lease as the same shall become due.
SECTION 4.04: In the event any or all of the foregoing utilities are to
be paid from an escrowed fund required to established by Lessor or its financial
institution under the terms of financing, the Lessor shall notify Lessee and
Lessee shall be required to include with the additional monthly payments
referred to in section 4.02 a monthly amount to satisfy the estimated monthly
utility costs for the leased premises only. If the utilities, when due, exceed
the total amount then in the utility escrow, then the Lessee shall, upon demand,
pay any deficiency to Lessor. If such payments by Lessee, over the term of the
Lease, exceed the amount of the utilities paid from the escrow, such excess
shall be refunded by Lessor to Lessee at the expiration of the Lease term, or
when such excess is refunded by the financial institution to Lessor, whichever
first occurs. The utility escrow shall be adjusted as often as necessary to
provide sufficient funds to pay current utilities.
SECTION 5
USE OF PREMISES
SECTION 5.01: It is understood and agreed between the parties that the
leased premises during the continuance of this Lease shall be used and occupied
for USES PER ZONING CODE (Lessor represents zoning as I-1) only and for no other
purpose without the prior written consent of Lessor. Lessee agrees that it will
not use or permit any person to use the leased premises or any part thereof for
any use or purpose in violation of the laws of the United States, the State of
Florida, the ordinances or other regulation of the City of Pompano Beach or of
any other lawful authorities. During the original term or any extended term, the
Lessee will keep the leased premises and every part thereof and the area
adjacent to the lease premises (including service areas and landscaping and
parking areas), orderly, neat, safe, and clean and free from rubbish and dirt,
and at all times shall store all trash, garbage, or any other material solely
within the leased premises and shall arrange for the regular pickup of such
trash and garbage at Lessee's expense. Lessee shall not bum any trash or garbage
at any time in or about the building. Lessee shall not store or leave any
material outside of the building at any time. All signs and advertising
displayed in and about the premises shall be such only as to advertise the
business carried on upon the premises and Lessor shall control the location,
character and size thereof. No signs shall be displayed except as approved in
writing by Lessor and as a condition of Lessor's approval the sign must conform
to the Lessor's sign criteria; and no awning shall be installed or used on the
exterior of said building unless approved in writing by the Lessor. After (30)
days
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written notice of breach of the use of the premises and failure to remedy breach
or Lessee failure to undertake to remedy breach and continue until remedied,
Lessor shall have the right to terminate this lease forthwith and to re-enter
and repossess the leased premises, or to cure the breach, and to charge the
tenant with the cost of cure, to be paid as rent within ten (`10) days written
notice from Landlord.
SECTION 6
OPERATION AND MAINTENANCE OF COMMON AREAS
SECTION 6.01: The manner in which the parking and adjacent common areas
shall be maintained and operated and the expenditures therefore shall be at the
sole discretion of the Lessor and the use of such areas and facilities shall be
subject to such regulations as Lessor shall make from time to time. Lessor shall
not impose such regulations that would have an adverse, negative effect on the
operation of the Lessee's business.
SECTION 6.02: Lessee agrees to pay as rent to Lessor in the manner
hereinafter provided, but not more often than once monthly, Lessee's
proportionate share of all costs and expenses of every kind and nature paid or
incurred by Lessor in operating, equipping, policing and protecting, lighting,
insuring repairing, replacing and maintaining the common areas. Such costs and
expenses shall include, but not be limited to, illumination and maintenance of
the premises, signs, cleaning, lighting, line painting, landscaping, sewer and
premiums for liability and property insurance; and an amount equal to Lessee's
proportionate share of fifteen percent (15%) of the total of all of the
foregoing costs and expenses to cover administrative cost. Any utilities
furnished or supplied to any Lessee or the building which are not separately
metered, shall be considered a cost to maintain the common areas and shall be
included as part of such cost. For the purpose hereof, any charges for utilities
contained in the foregoing costs and expenses shall be at the same rates as the
rates for comparable service from applicable utility company serving the area in
which the premises is located. The proportionate share to be paid by Tenant
shall be computed on the basis that the total number of square feet of floor
area in the leased premises bears to the total number of square feet of
constructed leasable floor area at the premises.
Lessee's proportionate share of such costs and expenses for each lease
year and partial lease year shall be paid as rent in monthly installments on the
1st day of each calendar month, in advance, in an amount estimated by Lessor.
Within ninety (90) days after the end of each lease year or partial lease year,
Lessor shall furnish Lessee with a statement of the actual amount of Lessee's
proportionate share of such costs and expenses for such period. If the total
amount paid by Lessee under the Section for any calendar year shall be less than
the actual amount due from Lessee for such years as shown on such statement,
Lessee shall pay to Lessor the difference between the amount paid by Lessee and
the actual amount due, such deficiency to be paid within ten (10) days after the
furnishing of each such statement, and if the total amount paid by Lessee
hereunder for any such calendar year shall exceed such actual amount due from
Lessee for such calendar year, such excess shall be credited against the next
installment due from Lessee to Lessor under this Section 6.02.
SECTION 7
MAINTENANCE AND REPAIRS OF LEASED PREMISES
SECTION 7.01: lessor shall keep and maintain the foundation and
exterior walls of the building and roof in which the leased premises are located
and the structural (weight bearing) improvements on the portions of the leased
premises including A/C compressor, electrical systems and breakers (unless such
systems are overloaded by Lessee); exclusive of doors, door frames, door checks,
windows, and exclusive of window frames located in exterior building walls, in
good repair except that Lessor shall not be called upon to make an), such
repairs occasioned by the act of negligence of Lessee, its agents, employees,
invites, licensees, or contractors, except to the extent that Lessor is
reimbursed therefore under any policy of insurance permitting waiver of
subrogation in advance of loss. Lessor shall not be called upon to make any
other appurtenances, except as may be required under Section 11 and 12 hereof,
and Lessee shall be responsible for all maintenance and repair of any and all
other improvements on the demised premises. Should Lessee fail to perform or
fail to undertake to perform and complete within reasonable time any such
maintenance or repair upon thirty (30) days written notice to Lessee,
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and Lessee shall pay for any such repair or maintenance as rents due with the
immediate following rental payment.
SECTION 7.02: Except as provided in Section 7.01 of this lease, Lessee
shall keep and maintain in good order, condition and repair (including
replacement of parts and equipment if necessary) the leased premises and every
part thereof and any and all appurtenances thereto wherever located, including,
but without limitation, the exterior and interior portion of all doors, door
checks, windows, plate window, store front, all plumbing and sewage facilities
within the leased premises, including free flow up to the main sewer line,
fixtures, heating and air conditioning and electrical systems (whether or not
located in the leased premises), sprinkler system, walls, floor and ceilings.
The plumbing and sewage facilities shall not be used for any other purpose than
that for which they are constructed, and no foreign substance of any kind shall
be introduced therein. Lessee hereby agrees to be responsible for any expenses
incurred in connection with any breakage, stoppage or damage resulting from a
violation of this provision by Lessee, its agents, employees, invites, licensees
or contractors. Lessee shall keep and maintain the leased premises in a clean
sanitary and safe condition in accordance with the laws of the State of Florida
in accordance with all directions, rules and regulations of the health officer,
fire marshall, building inspector, or other proper officials of the governmental
agencies having jurisdiction, at the sole cost and expense of Lessee, and Lessee
shall comply with all requirements of law, ordinance and otherwise, affecting
said premises. If Lessee refuses to or neglects to commence or complete repairs
or undertake and complete in a reasonable time required by Section 7.02 hereof
promptly upon demand, nonpayment by Lessee of rental or any other charge due to
Lessor under this Lease. At the time of the expiration of the tenancy created
herein, Lessee shall surrender the premises in good condition, reasonable wear
and tear, loss by fire or any other unavoidable casualty excepted, so long as
any such fire loss is fully covered by insurance as required under this Lease.
Lessee, at its own expense, shall install and maintain fire
extinguishers and other fire protection devices as may be required from time to
time by any agency having jurisdiction thereof and the insurance underwriters
insuring the building in which the leased premises are located.
SECTION 7.03: All damages or injury done to the premises by the Lessee,
or by any person who may be in or upon the premises with the consent, invitation
or license of the Lessee, shall be repaired and paid for by the Lessee.
SECTION 8
ALTERATIONS
SECTION 8.01: Lessee agrees that the leased premises shall not be
altered, improved, or changed without the written consent (which shall not be
unreasonably withheld) of Lessor, and that unless otherwise provided by written
agreement, all alterations, improvements and changes which may be desired by the
Lessee and so consented to by the Lessor shall be done either by or under the
direction of the Lessor, but at the cost of Lessee. All alterations, fixtures
additions and improvements made in or to the building or the premises, except
movable office furniture and office equipment put in at the expense of the
Lessee, shall, unless otherwise provided by written agreement, be the property
of the Lessor and remain upon the be surrendered with the premises; provided,
however, the Lessor may designate by written notice to Lessee those alterations,
and additions, to be removed, and Lessee shall repair any damage to the leased
premises caused by such removal. Lessee shall reimburse Lessor for any repairs
necessitated by Lessee's removal of designated items, as rent herein.
SECTION 9
LIENS
SECTION 9.01: Lessee shall keep the leased premises free from any and
all hens arising out of any work performed, materials famished, or obligations
incurred by or for Lessee, and agrees to bond against or discharge any
mechanic's or materialman's lien within thirty (30) days after written request
therefore by Lessor. Lessee shall reimburse Lessor for any and all costs and
expenses which may be incurred by Lessor by reason of filing of any such liens
and/or the removal of same, such reimbursement to be made within ten (10) days
after receipt by Lessee
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from Lessor of a statement setting forth the amount of such costs and expenses.
The failure of Lessee to pay any such amount to Lessor within said ten (10) day
period shall carry with it the same consequences as failure to pay any
installment of rental.
SECTION 10
INSURANCE INDEMNIFY AND ATTORNEY FEES
SECTION 10.01: Lessee shall, during the entire term hereof, keep in
full force and effect a policy of public liability and property damage insurance
with respect to the leased premises, and the business operated by Lessee and any
subtenants of Lessee in the leased premises, including steam boiler insurance if
applicable, in which the limits of public liability coverage shall be not less
than Five Hundred Thousand Dollars ($500,000.00) per occurrence, and in which
the limit of the property damage liability coverage shall not be less than Three
Hundred Thousand Dollars ($300,000.00). The policy shall name Lessor and any
other parties in interest designated by Lessor, and Lessee as insured and shall
contain a clause that the insurer will not cancel or change the insurance
without first giving the Lessor thirty (30) days prior written notice. Such
insurance may be furnished by Lessee under any blanket policy carried by it or
under a separate policy therefor. The insurance shall be with an insurance
company approved by Lessor and a copy of the paid-up policy evidencing such
insurance or a certificate of insurer certifying to the insurance of such policy
shall be delivered to Lessor prior to commencement of Lease term and up renewals
not less than thirty (30) days prior to the expirations of such coverage. Any
such policy shall contain a waiver of subrogation endorsement as to the lessee.
Lessee shall provide a copy of the subject insurance policy upon Lessor's
written request.
SECTION 10.02: Lessor agrees, during the ten-n hereof, to carry
insurance against fire, vandalism, malicious mischief, and such other perils as
are from time to time included in a standard extended coverage endorsement and,
at Lessors' option, special extended coverage endorsements including rental
interruption insurance equal to twelve (12) full months of rental and tax
obligations, insuring the improvements of the premises, in an amount determined
solely by Lessor, but not less than one hundred per cent (100%) of the full
replacement cost, if available, and with or without deductible, at the option of
Lessor. Lessee agrees from time to time, to pay to Lessor, Lessee's
proportionate share of the cost of such insurance, such payment to made within
ten (10) days after receipt of a written statement from Lessor setting forth
such costs and copy of insurance premium bill. The proportionate share to be
paid by Lessee shall be computed on the basis that the total number of square
feet of floor area in the leased premises bears to the number of square feet of
constructed leasable floor area at the premises.
Lessee shall not carry any stock of goods or do anything in or about
said premises which will in any way tend to increase the insurance rates above
current levels on said premises and/or building of which they are a part. If
Lessee installs any electrical equipment that overloads the lines in the leased
premises, Lessee shall at its own expense make whatever changes are necessary to
comply with the requirements of the insurance underwriters and governmental
authorities having jurisdiction.
SECTION 10.03: Lessee covenants to defend and indemnify Lessor, and
save it harmless (except for loss or damage resulting from the negligence of
Lessor, its agents or employees) from and against any and all claims, actions,
damages, liability and expense, including attorneys' fees and costs, in
connection with any loss, damage or injury resulting from or out of any
occurrence in, upon or at the leased premises or the occupancy of use by Lessee
of the leased premises or any part thereof, or arising from or out of Lessee's
failure to comply with Section 7.01 or 7.02 hereof, or occasioned wholly or in
part by any act or omission of Lessee, its agents, contractors, employees,
servants, customers, or licensees. For the purpose hereof, the leased premises
shall include the service areas adjoining the same and the loading platform area
allocated to the use of Lessee.
In case Lessor should without active fault on his part be made a party
to any litigation commenced by or against Lessee, then Lessee shall defend,
indemnify and hold it harmless and shall pay all costs, expenses and reasonable
attorneys fees that may be incurred in enforcing the Lessee's covenants and
agreements in this Lease. Should any attorney be employed to collect any monies
under this Lease, including rent and otherwise, whether or not litigation is
instituted, the Lessor shall receive from Lessee, Lessor's reasonable attorneys'
fees and costs, through all
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appellate and post judgment proceedings. The prevailing party shall be entitled
to recover reasonable attorney's fees and costs, through all appellate and
post-judgment proceedings.
SECTION 11
DESTRUCTION OF LEASED PREMISES
SECTION 11.01: In the event the leased premises shall be partially or
totally destroyed by fire or other casualty insured under the insurance carried
by Lessor pursuant to Section 10.02 of this Lease, as to become partially or
totally untenantable, the damage to the leased premises shall promptly be
repaired by Lessor, to the extent of any proceeds received from such insurance,
unless Lessor shall elect not to rebuild as hereinafter provided, and a just and
proportionate part of the fixed minimum rental and all other charges shall be
abated, annually until so repaired. In no event shall Lessor be required to
repair or replace Lessee's merchandise, trade fixtures, furnishings, or
equipment. If more than thirty-five percent (35%) of the leased premises or more
than thirty-five percent (35%) of the floor area of the: building in which the
leased premises are located shall be destroyed by fire or other casualty, then
Lessor may elect whether to repair or rebuild the leased premises or the
building of which the leased premises are a part, as the case may be, or to
terminate this Lease by giving written notice to Lessee of it election to so
terminate, such notice to be given within thirty (30) days after the occurrence
of such damage or destruction. If less than 35% of the leased premises is
destroyed by fire or other casualty, the rent shall be abated by the percentage
of the leased space which is unusable until restored by Lessor. In the event of
total or partial destruction while repairs are being made, Lessee must be able
to operate his business and derive benefit from the use of the remaining space.
Notwithstanding the foregoing, if the restoration work cannot be accomplished is
Sixty (60) days Lessee shall have the option to terminate the Lease upon notice
to Lessor. If any restoration work is not completed within Sixty (60) days
Lessee shall have the further option of terminating the Lease. No rent will be
due and payable during any period in which the leased premises are being
restored by Lessor.
SECTION 11.02: Each party hereto does hereby remise, release, and
discharge the other party hereto and any officer, agent, employee, or
representative of such, of and from any liability whatsoever hereinafter arising
from loss, damage, or injury caused by fire or other casualty from which
insurance (permitting waiver of liability and containing a waiver of
subrogation) is carried by the injured party at the time of loss, damage, or
injury to the extent of any recovery by the injured party under such insurance.
SECTION 12
EMINENT DOMAIN
SECTION 12.01: In the event, during the term of this Lease, proceedings
shall be instituted under the power of eminent domain which shall result in the
taking of any part of the leased premises or the floor area of the building in
which the leased premises are a part, or the taking of a material portion of the
parking area so the number of spaces is thereby reduced to such an extent that
Lessee's business is significantly and adversely affected, and which shall
result in an eviction total or partial of the Lessee therefrom, then at the time
of such eviction, this Lease shall be void and the term above demised shall
cease and terminate; and if Lessee shall thereafter continue in possession of
the premises or any part thereof, it shall be a Lease from month to month and
for no longer term, anything in this instrument to the contrary notwithstanding.
If there is only a partial taking, not including a portion of the building or
reducing parking to the extent described in the previous sentence, the Lessor
shall restore the parking to the extent necessary to permit Lessee to continue
the use of the premises and there shall be no reduction in the monthly rental.
Provided further, that the whole of any award for any portion of the premises,
or the building taken by reason of said condemnation proceedings shall be the
sole property of, and be payable to the Lessor and provided further, that the
whole of any award for loss of business and for removal and relocation expenses
in any condemnation proceedings shall be the sole property of, and be payable to
the Lessee. It is further agreed that in any such condemnation proceedings the
Lessor and Lessee shall each seek its own award and at its own expense.
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SECTION 13
ASSIGNMENT
SECTION 13.01: Lessee shall not assign or sublet the demised premises
or any part thereof without first obtaining the Lessor's written consent (not to
be unreasonably withheld) except that the Lessee may, without Lessor's consent,
assign or sublet all or any part of the premises to wholly or substantially
owned subsidiaries of the Lessee, for a use permitted pursuant to Section 5.01
hereof, and provided that Lessee is not at such time in default hereunder and
provided further that such successor shall execute an instrument in writing
assuming all of the obligations and liabilities to the Lessor, and provided
further that such assignment or subletting shall not operate to release Lessee
from it's obligations under the lease. If Lessee is a corporation, any
cumulative transfer of a majority interest of the outstanding stock of the
Lessee, during the term of the Lease shall be deemed an assignment.
SECTION 14
INSPECTION OF PREMISES
SECTION 14.01: Lessee agrees to permit Lessor and the authorized
representatives of Lessor to enter the demised premises at reasonable times
during business hours for the purpose of inspecting the same.
SECTION 15
FIXTURES AND EQUIPMENT
SECTION 15.01: All fixtures and equipment paid for by the Lessor and
all fixtures and equipment which may be paid for and placed on the premises by
the Lessee from time to time but which are so incorporated and affixed to the
buildings that their removal would involve damage or structural change to the
buildings, shall be and remain the property of the Lessor.
SECTION 15.02: All furnishings, equipment and fixtures other than those
specified in Section 15.01, which are paid for and placed on the premises by
Lessee from time to time (other than those which are replacements for fixtures
originally paid for by Lessor) shall remain the property of the Lessee.
SECTION 16
NOTICE OF DEMANDS
SECTION 16.01: All notices to or demands upon Lessor or Lessee directed
or required to be given under any of the provisions hereof shall be in writing.
Any notices or demands from Lessor to Lessee shall be deemed to have been duly
and sufficiently given if a copy thereof has been mailed by United States mail
in an envelope properly stamped and addressed to Lessee at the address of the
demised premises, or at such other address as Lessee may have last furnished in
writing to the Lessor for such purpose, and any notices or demands from Lessee
to Lessor shall be deemed to have been duly and sufficiently given if mailed by
United States mail in an envelope properly stamped and addressed to Lessor at
the address last furnished by written notice from Lessor to Lessee. The
effective date of such notice shall be on business day following the delivery of
the same to the United States Post Office for mailing.
SECTION 17
BANKRUPTCY
SECTION 17.01: Lessee covenants and agrees that if any one or more of
the following events occur, namely;
(a) Lessee shall be adjudged a bankrupt or insolvent or
trustee shall be appointed for Lessee after a petition has been
filed for Lessee's reorganization or arrangement under the
Federal Bankruptcy Laws, as now or hereafter amended, or under
the laws of any State, and any such adjudication or appointment
shall not have been vacated or stayed or set aside with thirty
(30) days from the date of the entry or granting thereof; or
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(b) Lessee shall file, or consent to any petition in
bankruptcy or arrangement under the Federal Bankruptcy Laws, as
now or hereafter amended, or under the laws of any State; or
(c) A decree or order appointing a receiver of the property
of Lessee shall be made and such decree or order shall not have
been vacated, stayed or set aside within thirty (30) days from
the date of the entry or granting thereof or Lessee shall apply
for or consent to the appointment of a receiver for Lessee; or
(d) Lessee shall make any assignment for the benefit of
creditors; then it shall be lawful for Lessor subject to Federal
U.S. Bankruptcy laws, at his election to declare the term of the
Lease ended, and the said premises and the buildings and
improvements then situated thereon or any part thereof, either
with or without process of law, to re-enter, and Lessee and all
persons occupying in or upon the same under it to expel, remove
and put out, and the said premises and the buildings and
improvements then situated thereon again to repossess and enjoy.
SECTION 18
DEFAULT, RE-ENTRY AND DAMAGES
SECTION 18.01: In case any rent or other payments required to be made
by Lessee shall be due and remain unpaid for more than fifteen (15) days after
due without notice, or if default be made in any of the other covenants,
agreements, stipulations or conditions herein contained and such default shall
continue for a period of thirty (30) days after written notice of such default
and Lessee fails to cure said default or undertake to cure said default and
complete the correction of the default within a reasonable time, or if the
leased premises shall be deserted or vacated, Lessor, in addition to all other
rights or remedies it may have, shall have the immediate right to re-enter and
may remove all persons and property from the premises. Such property may be
removed and stored in any other place in the building in which the leased
premises are situated, or in any other place, for the account of, and at the
expense and the risk of Lessee. Lessee hereby waives all claims for damages
which may be caused by the re-entry of Lessor and taking possession of the
premises or storing of furniture and property as herein provided, and will save
Lessor harmless from any loss, costs, or damages occasioned thereby, and no such
re-entry shall be considered or construed to be a forcible entry, on the part of
the Lessor. In any action pursuant to Section 18, of this Lease, the prevailing
party shall be entitled to payment by of its reasonable attorneys fees and costs
from the first demand made by the attorney, through all litigation including
appellate and post judgment proceedings.
SECTION 18.02: Should Lessor elect to re-enter as herein provided or
should it take possession pursuant to legal proceedings to pursuant to any
notice provided for by law, it may either terminate this Lease or it may from
time to time, without terminating this Lease, re-let the premises or any part
thereof for such term or terms and at such rental or rentals and upon such other
terms and conditions as Lessor in its sole discretion may deem advisable, with
the right to make alterations and repairs to the premises. Rentals received by
Lessor from such reletting shall be applied as follows:
First, to the payment of any indebtedness, other than rent due
hereunder from Lessee to Lessor, including all damages sustained by
Lessor as a result of the default of Lessee;
Second, to the payment of rent or other payments required of Lessee
for taxes, insurance or utilities due and unpaid hereunder;
Third, to the payment of any other sum specified in Section 3.02
hereof,
Fourth, to the payment of any cost of such re-letting; and
Fifth, to the payment of the costs of any alterations or repairs to the
premises; and the residue, if any, shall be held by Lessor and applied
in payment of future rent as the same may become due and payable
hereunder. Should such rentals
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received from such re-letting during any month be less than that
amount agreed to be paid that month by Lessee hereunder the Lessee
shall pay such deficiency to Lessor. Such deficiency shall be
calculated and paid monthly. No such re-entry or taking possession of
the premises by Lessor shall be construed as an election on its part
to terminate this Lease unless a written notice of such intention be
given to Lessee or unless the termination thereof be decreed by a
court of competent jurisdiction. Notwithstanding any such re-letting
without termination, Lessor may at any time thereafter. elect to
terminate this lease for such previous breach. Should Lessor at any
time terminate this Lease for any breach, in addition to any other
remedy it may recover from Lessee all damages it may incur by reason
of such breach, including the cost of recovering the premises, and
including the worth at the time of such termination of the excess, if
any, of the amount of rent and other payments required of Lessee
hereunder and charges equivalent to rent reserved in this Lease for
the remainder of the stated term, over the then reasonable rental
value of the premises for the remainder of the stated term.
SECTION 18.03 In the event of default, the Lessor may declare the
entire balance of the rent for the remainder of the term to be immediately due
and payable and may collect the same by distress or otherwise and Lessor shall
have a Lessor's hen on the property of the Lessee which is located in the leased
Premises or elsewhere and in order to protect its interest in the said property
Lessor may, without first obtaining a distress warrant, lock up the leased
Premises in order to protect said interest in the property, or the Lessor may
terminate this Lease and retake possession of the leased Premises or enter the
leased Premises and relet the same without termination, in which latter event
the Lessee covenants and agrees to pay any deficiency after Lessee is credited
with the rent thereby obtained less all repairs and expenses (including the
expenses of obtaining possession), or the Lessor may resort to any two or more
of such remedies or rights, and adoption of one or more such remedies or rights
shall not necessarily prevent the enforcement of others concurrently or
thereafter.
SECTION 19
SURRENDER OF PREMISES ON TERMINATION
SECTION 19.01: Whenever this Lease shall be terminated, whether by
lapse of time, forfeiture, or in any other way, Lessee will yield and deliver up
the demised premises, including the building and improvements thereon and the
fixtures and equipment belonging to Lessor therein contained peaceably to Lessor
in as good repair as when taken, except for reasonable and normal wear and tear.
SECTION 20
PERFORMANCE BY LESSOR OF THE COVENANTS OF LESSEE
SECTION 20.01: Should Lessee at any time fail to do any of the things
required to be done by it under the provisions of this Lease, Lessor, at it's
option, and in addition to any and all other rights and remedies of Lessor in
such event, may but shall not be required to) do the same or cause th same to be
done, and the reasonable amount of any money expended by Lessor in connection
therewith shall be due from Lessee to Lessor as additional rent on or before the
next rental due date bearing interest at the rate of eighteen percent (I 8%)
from the date of payment until the repayment thereof to Lessor by Lessee. On
default in such payment, Lessor shall have the same remedies as on default in
payment of rent. Likewise in the event Lessor fails to perform or undertake to
perform any of its obligations under this Lease, Lessee may do the same or cause
the same to be done and charge Lessor for any reasonable amount of any money
expended by Lessee bearing interest at the same rate until paid.
SECTION 21
RIGHTS TO MORTGAGE
SECTION 21.01: Lessor reserves the right to subject and subordinate
this Lease at all times, to the hen of any mortgage or mortgages now or
hereafter placed upon Lessor's interest in the said premises and on the land and
buildings of which the said premises are a part or upon any
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<PAGE> 11
building hereafter placed upon the land of which the leased premises form a
part. Lessee covenants and agrees to execute and deliver upon demand such
further instrument or instruments subordinating this Lease to the lien of any
such mortgages or proposed mortgages and hereby irrevocably appoints Lessor the
attorney-in-fact of Lessee to execute in compliance with this Section 21.01 and
deliver any such instrument or instruments for and in the name of Lessee. Any
failure to provide notice to the mortgagee as set forth therein shall not
constitute a material breach of this agreement.
SECTION 21.02: Lessee agrees that it will, at any time and from time to
time, within ten (10) days following written notice by Lessor, execute,
acknowledge and deliver to Lessor a statement in writing certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect and stating the
modifications), and the date to which the rent, additional rent and any other
payments due hereunder from Lessee have been paid in advance, if any, and
stating whether or not there are defenses or offsets claimed by the Lessee and
whether or not to the best knowledge of the Lessee the Lessor is in default in
performance of any term, covenant or condition contained in this Lease, and if
so, specifying each such default of which the Lessee may have knowledge and if
requested, such financial information concerning Lessee and Lessee's business
operations (and any guarantor, if the Lease be guaranteed). The failure of
Lessee to execute, acknowledge and deliver to Lessor a statement in accordance
with the provisions of this section within said ten (10) day period shall
constitute an acknowledgment, which may be relied on by any person holding or
proposing to acquire an interest in the Premises or this Lease from or through
the Lessor, that this Lease is unmodified and in full force and effect and shall
constitute, as to any person entitled as aforesaid to rely upon such statements,
waiver of any defaults which may exist prior to the date of such notice.
SECTION 22
COVENANTS OF QUIET ENJOYMENT
SECTION 22.01: Lessor covenants and agrees to and with Lessee that at
all times when Lessee is not in default under the terms of and during the term
of this lease, Lessee's quiet and peaceable enjoyment of the leased premises
shall not be disturbed or interfered with by Lessor or any person claiming by,
through or under Lessor.
SECTION 23
SECURITY DEPOSIT
SECTION 23.01: The Lessor herewith does not acknowledge the receipt of
Six Thousand Dollars ($6,000.00) to be retained as security for the faithful
performance of all of the covenants, conditions and agreements of this Lease,
but in no event shall the Lessor be obliged to apply the same upon rents or
other charges in arrears or upon damages for the Lessee's failure to perform the
said covenants, conditions, and agreements; the Lessor may so apply the security
at its option; and the Lessor's right to the possession of the premises for
nonpayment of rent or for any other reason shall not in any event be affected by
reason of the fact that the Lessor holds this security. The said sum if not
applied toward the payment of rent or other charges in arrears or toward the
payment of damages suffered by the Lessor by reason of the Lessee's breach of
the covenants, conditions, and agreements of this Lease shall be returned to the
Lessee when this Lease is terminated, according to these terms, and in no event
is the said security to be returned until the Lessee has vacated the premises,
delivered possession to the Lessor, and Lessor has inspected said premises
within fifteen (15) days.
In the event that the Lessor repossesses itself of the said premises
because of the Lessee's default or because of the Lessee's failure to carry out
the covenants, conditions and agreement of the Lease, the Lessor may apply the
said security upon all damages suffered or which shall accrue thereafter by
reason of the Lessee's default or breach. The Lessor shall not be obliged to
keep the said security segregated from its own funds and there shall be paid no
interest on said security deposit.
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SECTION 24
HOLDING OVER
SECTION 24.01: In the event Lessee herein holds over after the
termination of this Lease, thereafter the tenancy shall be from month to month
in the absence of a written agreement to the contrary, subject to all the
conditions, provisions and obligations of this Lease insofar as the same are
applicable to a month to month tenancy but at monthly rental double the monthly
rental stipulated in Section 3.01.
SECTION 25
REMEDIES NOT EXCLUSIVE; WAIVER
SECTION 25.01: Each and everyone of the rights, remedies and benefits
provided by this Lease shall be cumulative, and shall not be exclusive of any
other of said rights, remedies and benefits allowed by law.
SECTION 25.02: One or more waivers of any covenant or condition by
Lessor shall not be construed as a waiver of a further or subsequent breach of
the same covenant or condition, and the consent or approval by Lessor to or of
any act by Lessee requiring Lessor's consent or approval shall not he deemed to
waive or render unnecessary Lessor's consent or approval to or of any subsequent
similar act by Lessee.
SECTION 26
RIGHT TO SHOW PREMISES
SECTION 26.01: The Lessee hereby agrees that for a period commencing
ninety (90) days prior to the termination of this Lease. The Lessor may show the
premises to prospective Lessees, and ninety (90) days prior to the termination
of this Lease, Lessor- may display about said premises the usual and ordinary
"For Lease" signs.
SECTION 27
LESSEE'S PROPERTY
SECTION 27.01: Lessee shall be responsible for and shall pay before
delinquency all municipal county, state and federal taxes assessed during the
term of this Lease against any interest or personal property of any kind, owned
by or placed in, upon the leased premises by Lessee.
SECTION 27.02: To the extent not covered by Lessors Hazard Insurance,
Lessor shall not be responsible or liable to the Lessee for any loss or damage
that may be occasioned by or through the acts or omissions of pm sons occupying
adjoining premises, or any part of the premises adjacent to or connected with
the premises hereby leased or any part of the building of which the leased
premises are a part, or for any loss or damage resulting to the Lessee or its
property from bursting, stoppage, or leaking of water, gas, sewer or steam
pipes, or for any damage or loss of property on or within the leased premises
from any cause whatsoever.
SECTION 27.03: Lessee shall give immediate notice to Lessor in case of
fire or other casualty in the leased premises, or in the building of which the
premises are a part, or of defects therein or in any fixtures or equipment.
SECTION 27.04: Lessee shall keep the Premises, or cause the Premises to
be kept, free of hazardous materials. Without limitation to the foregoing,
Lessee shall neither cause nor permit: (i) the Premises to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose, produce or
process hazardous materials, except in compliance with all applicable federal
state and local laws of regulations, nor (ii) a release of hazardous materials
onto the Premises or any other property as a result of any intentional or
unintentional act or emission on the part of Lessee or any Lessee or sublessee.
Lessee shall defend, indemnify and hold harmless Lessor, and Lessor's employees,
agents, officers and directors, from and against any claims, demands, penalties,
fines, liabilities, settlements, damages, costs or expenses of any kind of
nature, known or unknown, contingent or otherwise (including, without
limitation, accountants, and attorneys fees at both the trial and appellate
levels, consultant fees, investigation and laboratory fees, court
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<PAGE> 13
costs and litigation expenses), arising out of, or in any way related to any of
the following caused by Lessee: (i) the presence, disposal release or threatened
release of any hazardous materials which are on, from or affecting soil, water,
vegetation, building, personal property, persons, animals or otherwise; (ii) any
personal injury, including wrongful death, or damage to property, real or
personal arising out of or related to such hazardous materials: (iii) any
lawsuit brought, threatened or settled of governmental order related to such
hazardous materials; and (iv) any violation of laws, orders, regulations,
requirements or demands of governmental authorities or of any policies or
requirements of Lessor which are based upon or in any way related to such
hazardous materials. The term "Hazardous Material" includes, without limitation,
any flammable explosive, radioactive materials, hazardous materials, hazardous
wastes, hazardous of toxic substances or related materials defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. 960 et seq.), the Hazardous Materials Transportation Act,
as amended (42 U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act,
as amended (42 U.S.C. 9601 et seq.), the regulations adopted and publications
promulgated pursuant to the foregoing and any other federal, state or local
environmental law, ordinance, rule or regulation. The provisions herein shall be
in addition to any and all other obligations and liabilities Lessee may have to
Lessor at law or in equity under any of the documents executed in connection
with this Lease, and shall survive the termination of this Lease.
SECTION 28
MISCELLANEOUS
SECTION 28.01: This Lease shall be governed by and construed in
accordance with the laws of the State of Florida. If any provision of this Lease
or the application thereof to any person or circumstances shall, to and extent,
be invalid or unenforceable, the remainder of this Lease shall not be affected
thereby and each remaining provision of the Lease shall be valid and enforceable
to the fullest extent permitted by the law.
SECTION 28.02: The captions of this Lease are for convenience only and
are not to be construed as part of this Lease and shall not be construed as
defining or limiting in any way the scope of intent of the provisions hereof.
SECTION 28.03: Whenever herein the singular member is used, the same
shall include the plural and the masculine gender shall include the feminine and
neuter genders.
SECTION 28.04: This Lease shall constitute the entire agreement of the
parties hereto; all prior agreements between the parties, whether written or
oral, are merged herein and shall be of no force and effect. This Lease cannot
be changed, modified or discharged orally but only by an agreement in writing
signed by the party against whom enforcement of the change, modification or
discharge is sought.
SECTION 28.05: In any matter in which Lessor's consent is required
under this lease, said consent shall not be unreasonably withheld.
SECTION 28.06: In the event any proceedings are brought for the
foreclosure of or in the event of exercise of the power of sale under mortgage
made by Lessor- covering the leased premises, Lessee shall, at the option and
request of Purchaser, attorney to the Purchaser upon any such foreclosure or
sale and recognize such Purchaser as the Lessor under this Lease.
SECTION 28.07: In the event of any transfer or transfers of Lessor's
interest in the premises, the transferor shall be automatically relieved of any
and all obligations and liabilities on the part of Lessor accruing from and
after the date of such transfer.
SECTION 28.08: All rights and liabilities herein given to or imposed
upon the respective parties hereto shall extend to and bind the several
respective heirs, executors, administrators, successors, and assigns of the said
parties; and if there shall be more than one Lessee, they shall all be bound
jointly and severally by the terms, covenants and agreements therein. No rights,
however, shall inure to the benefit of any assignee of Lessee unless the
assignment to such assignee has been approved by Lessor in writing as provided
in Section 13.01 hereof.
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SECTION 28.09: Lessor intends to initially refer to the development in
which the leased premises are located at the premises. Lessor hereby reserves
the right, at any time and from time to time, without notice to Lessee, to
change the name of said development or any of the buildings located therein at
Lessor's discretion.
SECTION 28.10: This agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective heirs, administrators,
executors, representatives, successors and permitted assigns.
SECTION 28.11: No payment by Lessee or receipt by Lessor of a lesser
amount than the monthly rent herein stipulated shall be deemed to be other than
on account of the earliest stipulated rent, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as rent
be deemed an accord and satisfaction, and Lessor shall accept such check or
payment without prejudice to Lessor's right to recover the balance of such rent
or pursue any other remedy provided in this Lease.
SECTION 28.12: The submission of this Lease for examination does not
constitute a reservation of or option for the leased premises, and this Lease
shall become effective as a Lease only upon execution and delivery thereof by
Lessor and Lessee.
SECTION 28.13: The parties acknowledge that this lease agreement is
being entered into contingent upon early termination of existing tenant's lease
agreement with JMA Investment, Inc. This agreement will be binding only if
Lessor delivers possession of the Premises on or before March 15, 1999.
Thereafter, this lease agreement may only be extended in writing by Delta
Transfer Corp.
IN WITNESS THEREOF, the Lessor and Lessee have executed this Lease as
of the date set forth at the outset hereof.
WITNESSES: LESSOR:
JMA INVESTMENT, INC.
By:
- ------------------------------- -----------------------------------
DAVID BENZAKEN, PRESIDENT
- -------------------------------
LESSEE:
DELTA RECYCLING, CORP.
By:
- ------------------------------- -----------------------------------
PATRICK MARZANO, PRESIDENT
- -------------------------------
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SECTION 28.09: Lessor intends to initially refer to the development in
which the leased premises are located at the premises. Lessor hereby reserves
the right, at any time and from time to time, without notice to Lessee, to
change the name of said development or any of the buildings located therein at
Lessor's discretion.
SECTION 28.10: This agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective heirs, administrators,
executors, representatives, successors and permitted assigns.
SECTION 28.11: No payment by Lessee or receipt by Lessor of a lesser
amount than the monthly rent herein stipulated shall be deemed to be other than
on account of the earliest stipulated rent, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as rent
be deemed an accord and satisfaction, and Lessor shall accept such check or
payment without prejudice to Lessor's right to recover the balance of such rent
or pursue any other remedy provided in this Lease.
SECTION 28.12: The submission of this Lease for examination. does not
constitute a reservation of or option for the leased premises, and this Lease
shall become effective as a Lease only upon execution and delivery thereof by
Lessor and Lessee.
IN WITNESS THEREOF, the Lessor and Lessee have executed this Lease as
of the date set forth at the outset hereof.
WITNESSES: LESSOR:
JMA INVESTMENT, INC.
By:
- ------------------------------- -----------------------------------
DAVID BENZAKEN, PRESIDENT
- -------------------------------
LESSEE:
DELTA RECYCLING, CORP.
By:
- ------------------------------- -----------------------------------
PATRICK MARZANO, PRESIDENT
- -------------------------------
15
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ADDENDUM
Reference is hereby made to certain Lease contract dated February, 1999 by and
between DELTA TRANSFER CORP., (Lessee) and JMA INVESTMENT, INC., (Lessor). The
following items represent changes to, and further agreements.
1. Lessee after one (1) year can vacate lease premises with four (4) months
written notice after the twelfth month of occupancy.
16
<PAGE> 1
Exhibit 21.1
Delta Recycling Corp.
Delta Transfer Corp.
Eastern Recycling, Inc.
Delta Resources Corp.
Delrock Management Corp.
Delta Waste Corp.
Delta Tall Pines Corp.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the prospectus constituting a part of this
Registration Statement on Form S-1 of our report dated March 18, 1999, except
for Note 8 as to which the date is April 1, 1999, relating to the consolidated
financial statements of Star Services Group, Inc. and subsidiaries for the year
ended December 31, 1998 and for the period August 26, 1997 (inception) through
December 31, 1997, which is contained in the Prospectus.
We also consent to the reference to us under the caption "Experts" in the
prospectus.
/s/ Horton & Company, L.L.C.
Horton & Company, L.L.C.
Wayne, New Jersey
July 16, 1999
