SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 7)
CONTINENTAL INVESTMENT CORPORATION
(Name of Issuer)
Common Stock, par value $0.50 per share
(Title of Class of Securities)
211515101
(CUSIP Number)
Stewart Rahr
152-35 10th Avenue
Whitestone, NY 11357
(718) 767-4767
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
October 19, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box: [ ]
Check the following box if a fee is being paid with the
statement: [ ]
CUSIP No. 211515101
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1) Name of Reporting Person Stewart Rahr
S.S. or I.R.S. Identification No. 126 38 8123
of Above Person
2) Check the Appropriate Box if a (a) [ ]
Member of a Group (b) [ ]
3) SEC Use Only
4) Source of Funds PF
5) Check if Disclosure of Legal
Proceedings is Required Pursuant
to Items 2(d) or 3(c) [ ]
6) Citizenship or Place of Organization United States
7) Sole Voting Power 0* shares
8) Shared Voting Power
9) Sole Dispositive Power 0 shares*
10) Shared Dispositive Power
11) Aggregate Amount Beneficially 0 shares*
Owned by Each Reporting Person
12) Check if Aggregate Amount
in Row (11) Excludes Certain Shares [ ]
13) Percent of Class Represented by
Amount in Row (11) 0%
14) Type of Reporting Person IN
CUSIP No. 211515101
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* Members of Mr. Rahr's immediate family independently own a total of
309,000 shares.
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Item 4. Purpose of the Transaction
Stewart Rahr purchased the Company's Common Stock for investment purposes.
Subsequently, following the substantial and precipitous decline in the market
value of the Company's Common Stock, Mr. Rahr entered into discussions with
members of the Company's management to determine the reasons for such decline in
market value and the nature of the Company's financial and other difficulties.
Following such discussions, on September 2, 1998, Mr. Rahr retained Western
Pacific Consulting Incorporated to provide the services of its Executive Vice
President, Gerald Guterman, to inquire further into the difficulties at the
Company. Mr. Guterman disclosed to Mr. Rahr that he is an officer of a
corporation that holds Company Common Stock.
On September 11, 1998, Mr. Guterman proposed to Richard D. Sterritt, Sr.
and R. Dale Sterritt, Jr. an agreement pursuant to which Richard D. Sterritt,
Sr. would return, or cause to be returned, to the Company certain shares of
Company Common Stock previously issued to him and to certain entities; R. Dale
Sterritt, Jr. would cause certain real property to be transferred to the
Company; Richard D. Sterritt, Sr. would cause certain notes and loans receivable
to be canceled or transferred; R. Dale Sterritt, Jr. would resign as an officer
and director of the Company; the Company would exchange all of its shares of
WasteMasters, Inc. for shares of Company Common Stock that WasteMasters, Inc.
owns, and cancel an option to exchange shares of Company stock for shares of
WasteMasters, Inc.; and Richard D. Sterritt, Sr. and R. Dale Sterritt, Jr. would
exchange general releases with the Company and others, including Mr. Guterman
and Mr. Rahr.
On October 19, 1998 the members of the Board of Directors of the
Company, Messrs. Martin G. Blahitka, Robert D. Luna and Jeffrey B. Morris (the
"Independent Directors") borrowed an aggregate $32,500 from Mr. Rahr. Messrs.
Blahitka and Luna have been directors of the Company since 1993 and Mr. Morris
has been a director of the Company since 1990. The Independent Directors used
the proceeds of the borrowing to pay the fees and expenses of counsel that they
incurred in connection with certain legal proceedings (the "Proceedings")
pending against them in connection with their acting as directors of the
Company. Mr. Rahr subsequently advance additional funds exceeding $330,000 on
behalf of the Independent Directors for the same purpose and on the same terms
described herein. Pursuant to the terms of the borrowing, the Independent
Directors agreed to repay the borrowing from any amounts payable to the
Independent Directors as indemnification from the Company in connection with the
Proceedings. The Independent Directors also agreed to use their best efforts to
cause the Company to assume the obligation to repay the borrowing and to provide
collateral security for the borrowing by granting a security interest in the
accounts receivable of the Company and its wholly-owned subsidiaries. The
Independent Directors subsequently assigned to Mr. Rahr their rights to
indemnification and/or reimbursement from the Company with respect to legal fees
and related costs incurred in connection with the Proceedings, and have no
further personal liability to Mr. Rahr therefor.
On October 9, 1998, Stewart Rahr commenced an action in the United States
District Court for the Eastern District of New York against R. Dale Sterritt,
Jr. and others seeking
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damages and other relief for the defendants' alleged violations of Federal
securities laws. The case was eventually transferred to the Northern District of
Texas, where it was styled Rahr v. Sterritt et al., No. 3:98-CV-0628-G (N.D.
Tex.) ("Rahr v. Sterritt"). Mr. Rahr subsequently intervened in that action as a
plaintiff on behalf of the Company.
On November 3, 1998, Mr. Rahr intervened as a plaintiff in Morris, et al.
v. Bush, et al., No. 3:98-CV-2452-G (N.D. Tex) ("Morris"), a case seeking to
enjoin individuals elected to the Company's Board of Directors in violation of
the federal proxy laws from acting as directors or holding a shareholders'
meeting without filing the required proxy materials. The suit also sought to
void the election of those individuals and to sterilize the voting rights of the
defendants and those acting in concert with them pending the filing of all
required proxy materials. On January 28, 1999, the district court issued a
preliminary injunction order in Morris, in effect preliminarily granting the
plaintiffs' requested relief. That order is currently under appeal to the United
States Court of Appeals for the Fifth Circuit.
On January 15, 1999, Mr. Rahr intervened on behalf of WasteMasters, Inc.,
as a plaintiff in Nikko Trading of America Corp. et al. v. WasteMasters, Inc.,
et al., No. 3:98-CV-0048-G (N.D. Tex) ("Nikko"), after learning of facts
establishing that the case had been fraudulent, collusive, and designed to
obtain the imprimatur of a federal district court on a settlement providing for
the issuance of 63 million shares of stock of WasteMasters, Inc. arising out of
certain debentures that the Company at one point held. Mr. Rahr sought to vacate
the consent judgment approving the settlement and, thereafter, relief unwinding
the settlement.
On March 16, 1999, after various defendants in the Morris and Nikko cases
had sought repeatedly to derail those proceedings by instituting various
fraudulent bankruptcy proceedings (including the proceedings against the
Company, discussed below) and sham state court lawsuits, the district court
granted Rahr's motions in both cases for injunction orders under the All Writs
Act, prohibiting the institution or maintenance of proceedings related to Morris
or Nikko in any venue other than the Northern District of Texas without the
district court's prior consent, and enjoining two state courts from proceeding
any further in the most recent sham lawsuits. The district court subsequently
modified these orders to include detailed findings of fact. The district court's
All Writs Act Orders are currently on appeal to the United States Court of
Appeals for the Fifth Circuit.
On April 5, 1999, the district court issued a preliminary injunction order
in Nikko prohibiting any further transfer of the WasteMasters shares
fraudulently issued pursuant to the consent judgment.
On October 8, 1999, Mr. Rahr initiated proceedings against Grant Thornton,
LLP (the Company's former financial auditors), Holland & Knight, LLP (the
Company's former outside legal counsel), and Gary L. Rowan in the Northern
District of Texas, styled Rahr v. Grant Thornton LLP, Holland & Knight LLP and
Gary L. Rowan, No. 3:99-CV-2305-G (N.D. Tex.) ("Rahr v. Grant Thornton"). The
suit alleges securities fraud, common law fraud, and various other related
causes of action.
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The Company has since asserted claims against these same defendants,
arising out of the same transactions and events, in an adversary proceedings
filed in connection with the Company's bankruptcy proceedings. That Adversary
Proceeding is styled Rahr v. Grant Thornton LLP, Holland & Knight LLP and Gary
L. Rowan, Adv. Proc. No. 00-3006 (Bankr. N.D. Tex.) (the "Adversary
Proceeding"). Pursuant to the Litigation Agreement discussed below, the Company
has engaged Mr. Rahr's counsel in Rahr v. Grant Thornton as the Company's
special counsel in the Adversary Proceeding.
On November 3, 1999, Mr. Rahr entered into a Confidentiality and Lock-Up
Agreement with the Company, pursuant to which he agreed (1) to keep confidential
any information or documents he might receive from the Company and (2) not to
acquire or dispose of any securities of or third party claims against the
Company. Mr. Rahr agreed to be bound by these terms as long as the material
information the Company provides to him remains non-public, and the Company
agreed to use its best efforts to make public disclosure of the material
information as soon as reasonably practical. The Company further agreed that,
prior to consummating any material transaction, it will make appropriate public
disclosures and/or seek appropriate court approval.
On December 3, 1999, Mr. Rahr and the Company entered into a Litigation
Agreement relating to the Rahr v. Sterritt action and the Rahr v. Grant Thornton
action (the "Actions"), both of which involve claims by Rahr individually and on
behalf of the Company. The Company agreed to engage Mr. Rahr's counsel in the
Actions as special counsel to prosecute the Company's claims therein. Mr. Rahr
and the Company agreed to pool any recovery in either action and to divide such
recovery 25% to the Company and 75% to Mr. Rahr, provided that Mr. Rahr would
pay all legal fees and expenses with regard to the prosecution of the Actions.
Under the Litigation Agreement, Mr. Rahr retained control of the prosecution of
the Actions with respect to his own claims and those belonging to the Company,
except that any settlement would require prior written approval from the Company
or from Mr. Rahr, as applicable. The Company retained the right to dismiss Mr.
Rahr's counsel at any time, and to terminate the Litigation Agreement on 10 days
advance notice.
Previously, on January 13, 1999, a group of alleged creditors had filed an
involuntary Chapter 11 bankruptcy petition against the Company in the United
States Bankruptcy Court for the Northern District of Georgia, styled In re
Continental Investment Corporation, No. 99-60676 (N.D. Ga). On March 19, 1999,
upon the Company's request, the court transferred the case to the United States
Bankruptcy Court for the Northern District of Texas. The case is currently
styled In re Continental Investment Corporation, No. 399-32947-RCM-11 (Bankr.
N.D. Tex.).
On December 6, 1999, the Company consented to relief in those proceedings
pursuant to Chapter 11 of the Bankruptcy Code. In the Order for Relief, the
Company disputed that the petitioning creditors were valid creditors of the
Company and/or have valid claims in the case, and the Company reserved all
rights to dispute those claims as part of the proceedings.
Also on December 6, 1999, Mr. Rahr and the Company entered into an
Agreement Regarding Treatment of Claims (the "Claims Agreement"), setting forth
the agreed-to treatment
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under the Plan of Mr. Rahr's equity interest in and claims as a creditor of the
Company. As provided by the Plan and the Claims Agreement, in exchange for an
additional 10% of the total pooled litigation proceeds under the Litigation
Agreement, Rahr's claims against the Company as a creditor and as an equity
interest holder would be satisfied and extinguished, and Mr. Rahr would transfer
to the Company all of his Company common stock and warrants.
On February 10, 2000, the bankruptcy court approved the Company's Plan
of Reorganization, which subsumed the matters set forth in the Claims Agreement.
Item 7. Material to be Filed as Exhibits
Exhibit A. December 6, 1999 Agreement Regarding Treatment of Claims
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: February 21, 2000 /s/ Stewart Rahr
-----------------------------------
Stewart Rahr
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Agreement Regarding Treatment of Claims
This Agreement Regarding Treatment of Claims (this "Agreement") is made on
the 6th day of December 1999 by and between Stewart Rahr ("Rahr") and
Continental Investment Corporation, a Georgia corporation ("CIC").
RECITALS:
The directors of CIC, through their counsel, have advised Rahr that they
likely will seek to have CIC convert the existing involuntary bankruptcy
proceeding filed against it into a voluntary proceeding under chapter 11 of the
United States Bankruptcy Code.
The directors of CIC, through their counsel, have advised Rahr that they
intend to submit a proposed plan of reorganization (the "Plan") to the
Bankruptcy Court.
Rahr and CIC wish to set forth their Agreement how Rahr's equity interest
in CIC and his claims as a creditor of CIC would be treated under the Plan.
AGREEMENT:
1. NATURE OF RAHR'S INTERESTS REGARDING CIC.
(a) Rahr is the owner and holder of 1,662,953 shares of the common stock of
CIC (herein, "Rahr's Equity Claim").
(b) Rahr has paid (1) $50,000 in October 1998 to John Carney & Associates as
legal fees for Carney's representation of J. B. Morris, Robert Luna, and
Martin Blahitka in connection with MORRIS V. BUSH and STERRITT V. BLAHITKA,
(2) $25,000 to Carrington, Coleman, Sloman & Blumenthal, L.L.P. ("CCSB") on
12/13/98 as a retainer for CCSB's representation of Morris, Luna, and
Blahitka in those same causes, (3) $42,506.88 on 2/8/99 to CCSB for same
purposes, and (4) $73,613.86 on 2/24/99 to CCSB for same purposes. Rahr
believes that in undertaking the MORRIS V. BUSH suit, each of Morris, Luna,
and Blahitka did so in the capacity of a CIC director who had been
illegally removed from office by Dale Sterritt and those working in concert
with Dale Sterritt, and each of them did so for the benefit of CIC and in
order to stop what he regarded to be, based on information that Rahr and
his agents had brought to light, looting, waste, and mismanagement of CIC's
assets by Dale Sterritt and those working in concert with him. Rahr
believes that in defending the STERRITT V. BLAHITKA suit, Morris, Luna, and
Blahitka were acting in the interests of and for the benefit of CIC and in
order to stop what each of them regarded to be, based on information that
Rahr and his agents had brought to light, looting, waste, and mismanagement
of CIC's assets by Dale Sterritt and those working in concert with him.
Accordingly, Rahr believes he has a valid claim against CIC for the amounts
so paid by Rahr, whether by way of reimbursement, contribution,
subrogation,
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indemnity, or otherwise (herein, as same may be increased pursuant to
subparagraph (c) below, "Rahr's Reimbursement Claim").
(c) Rahr has been advised that CCSB has outstanding invoices for its work on
behalf Messrs. Morris, Blahitka, and Luna totaling $192,862.91. Rahr has
agreed to pay these amounts, believes they arise from precisely the
circumstances described in subparagraph (b) above, and believes that such
payment likewise will give rise to a valid claim by Rahr against CIC.
2. AGREEMENT BETWEEN RAHR AND CIC REGARDING PROSECUTING LITIGATION.
At or near the time of this Agreement, Rahr and CIC are entering into a separate
agreement (the "Litigation Agreement") setting forth the manner in which Rahr
and CIC shall prosecute their respective claims in RAHR V. STERRITT, ET AL. and
RAHR V. GRANT THORNTON, LLP, ET AL. (both pending in the United States District
Court for the Northern District of Texas, Dallas Division), shall pool any and
all amounts recovered by either or both of them in such causes, and shall
allocate such recovery among themselves.
3. TREATMENT OF RAHR'S EQUITY AND REIMBURSEMENT CLAIMS UNDER PLAN.
Rahr agrees to the proposed treatment of Rahr's Equity Claim and Rahr's
Reimbursement Claim, as set forth in the Plan, such that Rahr shall receive an
additional 10% of the recovery proceeds that are pooled under the Litigation
Agreement.
4. MISCELLANEOUS.
(a) If the Plan setting forth the foregoing treatment of Rahr's claims is not
finally approved by the bankruptcy court on or before May 30, 2000, then
this Agreement shall expire and be of no further force or effect, unless
extended in writing by Rahr and CIC or unless otherwise ordered by the
bankruptcy court.
(b) To induce Rahr to enter into this Agreement, CIC represents and warrants
that the information it has furnished to Rahr pursuant to a letter
agreement concerning confidentiality entered into on November 3, 1999 is
accurate in all material respects, and that CIC has disclosed to Rahr all
material facts about the status of negotiations concerning the so-called
Ben Hill Site.
(c) This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas and any and all applicable federal laws.
AGREEMENT REGARDING TREATMENT OF CLAIMS - PAGE 2
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IN WITNESS WHEREOF, Rahr and CIC have signed this Agreement.
CONTINENTAL INVESTMENT CORPORATION
________________________________ By:____________________________________
Stewart Rahr, by his attorney, Name:
Lawrence J. Fossi, with permission Title:
AGREEMENT REGARDING TREATMENT OF CLAIMS - PAGE 3
