SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE
SECURITIES EXCHANGE ACT OF 1934
CHECK THE APPROPRIATE BOX:
[ ] Preliminary information statement
[x] Definitive information statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14c-5(d) (2))
WINDSWEPT ENVIRONMENTAL GROUP, INC.
(Name of Registrant As Specified in Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[x] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which transaction applies: N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth in the amount on which
the filing fee is calculated and state how it was determined): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0- 11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
100 SWEENEYDALE AVENUE
BAY SHORE, NEW YORK 11706
--------------------------------------------------------------------------------
NOTICE OF STOCKHOLDER ACTION IN LIEU OF SPECIAL MEETING
--------------------------------------------------------------------------------
TO THE STOCKHOLDERS
OF WINDSWEPT ENVIRONMENTAL GROUP, INC.:
This Information Statement is furnished to the stockholders of Windswept
Environmental Group, Inc. (the "Company") in connection with the following
corporate action approved by the written consent of a stockholder of the Company
which owns sufficient voting securities of the Company to approve such action:
An amendment to Article FOURTH of the Restated Certificate
of Incorporation of the Company to increase the number of
authorized shares of common stock, par value $.0001 per
share, of the Company from 50,000,000 shares to 100,000,000
shares.
We are not asking you for a proxy and you are requested not to send us a
proxy. Your vote or consent is not requested or required to approve the above
amendment. This Information Statement is provided solely for your information.
This Information Statement also serves as the notice required by Section 228 of
the Delaware General Corporation Law of the taking of a corporate action without
a meeting by less than unanimous written consent of the stockholders of the
Company.
By Order of the Board of Directors
/s/ Michael O'Reilly
Michael O'Reilly
President, Chief Executive Officer and Director
August 23, 2000
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
100 Sweeneydale Avenue
Bay Shore, New York 11706
--------------------------------------------------------------------------------
INFORMATION STATEMENT
--------------------------------------------------------------------------------
General Information
This Information Statement is furnished by Windswept Environmental Group,
Inc., a Delaware corporation (the "Company"), in connection with the following
corporate action approved by a stockholder of the Company which owns sufficient
voting securities of the Company to approve such actions:
An amendment to Article FOURTH of the Restated Certificate
of Incorporation of the Company to increase the number of
authorized shares of common stock, par value $.0001 per
share, of the Company from 50,000,000 shares to 100,000,000
shares.
As more fully described in this Information Statement, the foregoing
corporate action is being taken in order to, among other things, allow the
Company to issue additional shares of its common stock, par value $.0001 per
share (the "Common Stock").
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
There are currently 38,456,254 shares of Common Stock issued and
outstanding and 11,543,746 shares of Common Stock reserved for issuance upon
exercise of options, warrants and similar rights to acquire shares of Common
Stock. On October 29, 1999, the Company entered into a Subscription Agreement
(the "Subscription Agreement") with Spotless Plastics (USA) Inc., a Delaware
corporation ("Spotless"), pursuant to which the Company sold to Windswept
Acquisition Corporation ("Acquisition Corp."), a Delaware corporation and a
wholly-owned subsidiary of Spotless, 22,284,683 shares (the "Acquisition Corp.
Common Shares") of Common Stock, and 9,346 shares of Series B Convertible
Preferred Stock, par value $.01 per share ("Series B Preferred"), of the
Company, for an aggregate subscription price of $2,500,000 or $.07904 per share
of Common Stock and $79.04 per share of Series B Preferred. Each share of Series
B Preferred has the equivalent voting power of 1,000 shares of Common Stock.
Each share of Series B Preferred is convertible into 1,000 shares of Common
Stock.
In addition, the Company and Trade-Winds Environmental Restoration, Inc.,
North Atlantic Laboratories, Inc. and New York Testing Laboratories Inc., each
of which is a wholly-owned
1
<PAGE>
subsidiary of the Company, as joint and several obligors (collectively, the
"Obligors"), borrowed $2,000,000 from Spotless. This borrowing is evidenced by a
secured convertible promissory note, dated October 29, 1999 (the "Note").
Outstanding principal under the Note bears interest at a rate equal to the
London Interbank Offering Rate ("LIBOR") plus an additional 1% and is payable
monthly. The Note matures on October 29, 2004 unless Spotless elects to defer
repayment until October 29, 2005. The outstanding principal amount and all
accrued and unpaid interest under the Note is convertible, at the option of
Spotless, in whole or in part, at any time, into shares of Common Stock at the
rate of one share of Common Stock for every $.07904 of principal and accrued
interest so converted (or, in the event that certain approvals have not been
obtained at the time of conversion, into shares of Series B Preferred at the
rate of one share of Series B Preferred for every $79.04 of principal and
accrued interest so converted). In connection with the Note, each of the
Obligors granted to Spotless a security interest in all of their respective
assets pursuant to a Security Agreement dated October 29, 1999.
In connection with the equity and debt financing provided by Acquisition
Corp. and Spotless, the Company granted options to Michael O'Reilly, the Chief
Executive Officer and President of the Company, to purchase an aggregate of
5,486,309 shares of Common Stock (the "Stock Options") pursuant to the terms of
two Stock Option Agreements dated October 29, 1999 (the "Stock Option
Agreements").
As more fully described in this Information Statement, the foregoing
corporate action is being taken in order to, among other reasons, allow the
Company to reserve shares of Common Stock for issuance upon conversion of shares
of Series B Preferred, conversion of the Note and exercise of the Stock Options.
If the number of authorized shares of Common Stock were not increased, there
would not be enough shares of Common Stock available for issuance upon
conversion of shares of Series B Preferred, conversion of the Note and exercise
of the Stock Options, among other things. See "The Transaction". In reviewing
the equity and debt financing provided by Acquisition Corp. and Spotless,
stockholders should give attention to the matters set forth under the caption
"Certain Considerations" commencing on page 11 of this Information Statement.
The approximate date upon which this Information Statement will first be
sent to stockholders is August 29, 2000.
THE ACTIONS DESCRIBED HEREIN HAVE BEEN APPROVED BY A
STOCKHOLDER OF THE COMPANY WHICH OWNS SUFFICIENT VOTING
SECURITIES TO APPROVE SUCH ACTIONS. YOUR VOTE OR CONSENT
IS NOT REQUESTED OR REQUIRED TO APPROVE SUCH ACTIONS. THIS
INFORMATION STATEMENT IS PROVIDED SOLELY FOR YOUR INFORMATION.
2
<PAGE>
TABLE OF CONTENTS
Page
INFORMATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General Information . . . . . . . . . . . . . . . . . . . . . . . . . 1
AMENDMENT TO THE CERTIFICATE OF INCORPORATION. . . . . . . . . . . . . . . 4
Proposed Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Reason for Adoption . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Transaction - Potential Advantages and Disadvantages. . . . . . . 5
THE TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Factors Considered by the Board of Directors. . . . . . . . . . . . . 9
Certain Considerations. . . . . . . . . . . . . . . . . . . . . . . . 11
Change in Control of Company. . . . . . . . . . . . . . . . . . . . . 16
No Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . 16
Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . . . 16
CERTAIN INFORMATION CONCERNING THE COMPANY . . . . . . . . . . . . . . . . 18
Description of Common Stock . . . . . . . . . . . . . . . . . . . . . 18
Information Relating to the Company's Voting Securities . . . . . . . 18
Securities Ownership of Certain Beneficial Owners and Management. . . 18
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Forward Looking Statements. . . . . . . . . . . . . . . . . . . . . . 22
Incorporation of Certain Documents by Reference . . . . . . . . . . . 23
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Appendix A - Donald & Co. Securities Inc. Fairness Opinion
dated October 26, 1999. . . . . . . . . . . . . . . . . . . . . . . A-1
3
<PAGE>
--------------------------------------------------------------------------------
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
--------------------------------------------------------------------------------
PROPOSED AMENDMENT
The Board of Directors of the Company (the "Board of Directors") has
unanimously approved the following amendment to the Company's Restated
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
and directed that such amendment be submitted to the Company's stockholders for
their approval:
RESOLVED, that paragraph (a) of Article FOURTH of the Restated Certificate
of Incorporation of the Company be amended by deleting such paragraph in its
entirety and substituting, in lieu thereof, the following:
"(a) Common Stock: One Hundred Million (100,000,000) shares of Common
Stock, par value $.0001 per share."
Windswept Acquisition Corporation, a Delaware corporation ("Acquisition
Corp."), owns a majority of the issued and outstanding shares of Common Stock
and has executed a written consent approving the proposed amendment to Article
FOURTH of the Certificate of Incorporation.
ACCORDINGLY, THE VOTE OR CONSENT OF THE OTHER STOCKHOLDERS OF THE
COMPANY IS NOT REQUESTED OR REQUIRED TO APPROVE SUCH AMENDMENT.
REASON FOR ADOPTION
As of the date of this Information Statement, there are 38,456,254 shares
of Common Stock issued and outstanding. The Company's Certificate of
Incorporation currently authorizes a maximum of 50,000,000 shares of Common
Stock. The purposes of this amendment to increase the authorized shares of
Common Stock from 50,000,000 shares to 100,000,000 shares are to provide
sufficient available shares of Common Stock: (i) to permit the Company to issue
shares of Common Stock to Acquisition Corp. and its affiliates upon the
conversion of certain securities issued in connection with the Transaction (as
defined below); (ii) to permit the Company to issue shares of Common Stock upon
the exercise of the Stock Options granted to Michael O'Reilly, the Chief
Executive Officer and President of the Company, in connection with the
Transaction; and (iii) for issuance in any private or public offerings, any
acquisitions or any other issuances of shares of Common Stock by the Company as
they may be authorized pursuant to the actions of the Board of Directors. See
"The Transaction."
4
<PAGE>
THE TRANSACTION - POTENTIAL ADVANTAGES AND DISADVANTAGES
The amendment to the Certificate of Incorporation was approved in
connection with the Transaction, pursuant to the terms of the Subscription
Agreement, as more fully described below under the caption "The Transaction." In
connection with its approval of the Transaction, the Board of Directors
considered and reviewed various factors, including, without limitation, the
financial position of the Company, the fairness opinion (the "Fairness Opinion")
delivered by Donald & Co. Securities Inc. ("Donald & Co."), the Company's
results of operations, the prospects for alternative transactions, the possible
synergistic and expansion opportunities associated with the Transaction, and the
ability of the Company to secure alternative equity or debt financing, either
through prospective investors or strategic alliances. In reaching its decision
to approve the Transaction, the Board of Directors identified the following
potential benefits of the Transaction:
The determination that the Transaction is fair, from a
financial point of view, to the Company's stockholders as
determined by Donald & Co. and set forth in the Fairness
Opinion.
The determination that the Company would be refinancing its
outstanding indebtedness to Business Alliance Capital
Corporation ("BACC") at a significantly lower interest
cost.
The determination that, as a result of such refinancing,
the Company would remedy outstanding defaults with respect
to its borrowings and would not be at risk with respect to
any acceleration of its outstanding borrowings and
foreclosure on substantially all of the assets of the
Company pursuant to security interests granted by the
Company to BACC.
The belief that it is unlikely that the Company would have
adequate capital and other resources if it did not complete
the Transaction or an alternative transaction, based on the
then existing financial condition of the Company and its
inability under the Loan and Security Agreement (the "Loan
Agreement") with BACC to borrow additional funds.
The belief that the Company will be able to achieve
synergistic benefits through its association with Spotless,
including increased financial resources and an ability to
attract additional capital in the future.
The belief that Spotless could offer strategic relationships
and enhance the Company's ability to market its emergency
response and environmental remediation services to the
Northeast market.
In the course of its deliberations, the Board of Directors also reviewed
and considered several possible risks associated with the Transaction, including
the following:
5
<PAGE>
The Board of Directors recognized that as a result of the
Transaction, Spotless could determine the outcome of the
election of the directors and thereby control the Company.
Under Delaware General Corporate Law, the Company's
stockholders were not entitled to appraisal rights in
connection with the Transaction.
For additional information with respect to the foregoing factors, see "The
Transaction - Factors Considered by the Board" and "The Transaction - Certain
Considerations."
6
<PAGE>
--------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------------
GENERAL
On October 29, 1999, the Company entered into the Subscription Agreement
with Spotless, pursuant to which the Company sold to Acquisition Corp, the
22,284,683 Acquisition Corp. Common Shares, and 9,346 Series B Preferred shares
for an aggregate subscription price of $2,500,000 or $.07904 per share of Common
Stock and $79.04 per share of Series B Preferred. Each share of Series B
Preferred has the equivalent voting power of 1,000 shares of Common Stock. Each
share of Series B Preferred is convertible into 1,000 shares of Common Stock. As
of July 15, 2000, the Acquisition Corp. Common Shares represented approximately
58% of the outstanding Common Stock and the Acquisition Corp. Common Shares and
Series B Preferred shares collectively represented approximately 66% of the
voting power of the outstanding securities of the Company.
In addition, the Company and the Obligors borrowed $2,000,000 from
Spotless. This borrowing is evidenced by the Note, dated October 29, 1999.
Outstanding principal under the Note bears interest at a rate equal to LIBOR
plus an additional 1% and is payable monthly. The Note matures on October 29,
2004, unless Spotless elects to defer repayment until October 29, 2005. The
outstanding principal amount and all accrued and unpaid interest under the Note
is convertible, at the option of Spotless, in whole or in part, at any time,
into shares of Common Stock at the rate of one share of Common Stock for every
$.07904 of principal and accrued interest so converted (or, in the event that
certain approvals have not been obtained at the time of conversion, into shares
of Series B Preferred at the rate of one share of Series B Preferred for every
$79.04 of principal and accrued interest so converted). In connection with the
Note, each of the Obligors granted to Spotless a security interest in all of
their respective assets pursuant to a Security Agreement dated October 29, 1999.
As a result of the conversion features of the Series B Preferred and the
Note, as of July 15, 2000, if Acquisition Corp. were to convert its Series B
Preferred shares into Common Stock and Spotless were to convert all of the
outstanding $2 million principal amount and $84,390 accrued and unpaid interest
under the Note into Common Stock, Acquisition Corp. and Spotless would
collectively own 58,002,013 shares, or approximately 78%, of the then issued and
outstanding shares of Common Stock. As a result of the Transaction, Spotless has
sufficient voting power to approve or disapprove amendments to the Company's
Certificate of Incorporation, to elect a majority of the Board of Directors, to
control the direction and policies of the Company, including dividends,
acquisitions, mergers and consolidations, and to prevent or cause a change in
control of the Company.
All of the funds required for the Transaction were obtained from Spotless's
existing working capital line of credit with Bank One Corporation.
7
<PAGE>
In connection with the Transaction, the Company increased the size of its
Board of Directors, effective as of October 26, 1999, from five (5) to nine (9)
directors and accepted, with effect as of October 26, 1999, the resignation of
JoAnn O'Reilly as a director of the Company. The Board of Directors appointed
each of Peter A. Wilson, Charles L. Kelly, Jr., Ronald B. Evans and Brian S.
Blythe as new directors. The Board of Directors also appointed, effective as of
the date which is ten (10) days after the filing with the Securities and
Exchange Commission (the "SEC") and transmission to the stockholders of the
Company of an Information Statement pursuant to Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
promulgated thereunder, John J. Bongiorno as a director of the Company. The
continuing directors are Michael O'Reilly, Kevin Phillips, Anthony Towell and
Samuel Sadove.
The Company has granted to Mr. O'Reilly an option to purchase 2,674,714
shares of Common Stock at an exercise price of $.07904 per share, the fair
market value at the date of grant, which vests and becomes exercisable in equal
installments on each of the first, second and third anniversaries of October 29,
1999. The Company has also granted to Mr. O'Reilly an option to purchase
2,811,595 shares of Common Stock at an exercise price of $.07904 per share, the
fair market value at the date of grant, which is exercisable on or after October
29, 2006 (the "Conversion Date Option"); provided, that the exercisability of
such option will be accelerated if and to the extent that Spotless converts or
exchanges the Note. Mr. O'Reilly currently holds 177,333 shares of Common Stock,
vested options to purchase 3,350,000 shares of Common Stock and options which
have not yet vested to purchase 5,486,309 shares of Common Stock. The vested
options to purchase 3,350,000 shares of Common Stock include the option to
purchase 2,000,000 shares of Common Stock, exercisable at $.01 per share,
granted to Mr. O'Reilly on September 12, 1996 which vested and became
exercisable because a change in control of the Company occurred as a result of
the Transaction.
In connection with the execution and delivery of the Subscription
Agreement, the Company also entered into an Amended and Restated Employment
Agreement (the "Employment Agreement") with Mr. O'Reilly pursuant to which he
will be employed by the Company as Chief Executive Officer and President for a
term of five years, subject to renewal of successive periods of one year each,
at a salary of $260,000 per year plus an annual bonus equal to 2.5% of the
Company's Pre-Tax Income (as that term is defined in the Employment Agreement).
Pursuant to the Employment Agreement, the Company has also agreed to purchase
(unless such purchase would impair the capital of the Company) in a single
transaction any or all shares of Common Stock held by Mr. O'Reilly on October
29, 1999 and any shares issuable to him pursuant to options outstanding on
October 29, 1999 (to the extent vested) (the "O'Reilly Shares") (i) upon the
expiration of the Employment Agreement, (ii) if Mr. O'Reilly is terminated by
the Company other than for cause, death or disability or (iii) if Mr. O'Reilly
terminates the Employment Agreement by reason of Resignation for Good Reason (as
that term is defined in the Employment Agreement). The purchase price applicable
to any such purchase shall be at a price mutually agreed upon. If the parties
are not able to agree upon a purchase price, then the purchase price will be
determined based upon a procedure using the appraised value of the Company at
the time such obligation to purchase arises.
Additionally, pursuant to a letter agreement, dated as of October 29, 1999,
between Michael O'Reilly and Spotless (the "Letter Agreement"), Mr. O'Reilly has
the right, upon receipt of notice
8
<PAGE>
that Spotless and its affiliates have acquired a beneficial ownership of
more than seventy-five percent (75%) of the outstanding shares of Common Stock
(on a fully diluted basis), to require Spotless to purchase, in a single
transaction, the O'Reilly Shares. As a condition precedent to requiring the
Company or Spotless, as the case may be, to repurchase the O'Reilly Shares, Mr.
O'Reilly must forfeit the Conversion Date Option, except to the extent that the
Conversion Date Option is at that time vested and exercisable. The purchase
price applicable to any such purchase would be determined in the same manner as
provided in the Employment Agreement.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
In connection with approval of the Transaction, the Board of Directors has
considered the relative values of the Company, the financial condition of the
Company, the Company's relationship with BACC, the Company's need for additional
capital before it can accept additional projects, the potential benefits of the
Transaction and the risks of the Transaction to the Company's existing
stockholders. The Board of Directors has identified several potential benefits
of the Transaction, including the following:
The Board of Directors determined that the amount paid by Spotless to
acquire the shares of Common Stock and Series B Preferred pursuant to the
Subscription Agreement and the terms and conditions of the Note are fair, from a
financial point of view, to the Company's stockholders. The arms-length
negotiation with Spotless resulted in the Company selling to Spotless the shares
of Common Stock for $.07904 per share and Series B Preferred for $79.04 per
share. The Board of Director's determination that the Transaction is fair, from
a financial point of view, to the Company's stockholders was supported by the
Fairness Opinion prepared by Donald & Co. obtained by the Company for purposes
of valuing the Transaction. The Fairness Opinion concluded that the Transaction
is fair, from a financial point of view, to the Company and its stockholders.
Based on the foregoing, and after giving consideration to the Company's business
and operations prior to the Transaction and the market for the Common Stock, the
Board of Directors determined that the Transaction is fair, from a financial
point of view, to the stockholders of the Company. The full text of the Fairness
Opinion is attached as Appendix A to this Information Statement. On February 17,
2000, Donald & Co. consented to the inclusion of the Fairness Opinion in this
Information Statement. STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS
ENTIRETY.
Prior to the Transaction, the Company was in default under certain
provisions of the Loan Agreement with BACC. At that time, the total amount of
funds available under the Loan Agreement had been borrowed by the Company. As a
result of the default, the aggregate interest and fees the Company was paying to
BACC under the Loan Agreement amounted to approximately 29% per annum of the
outstanding balance. Additionally, such default entitled BACC to exercise
certain rights under the Loan Agreement, including the legal right to foreclose
on the Company's assets and to accelerate payment of the outstanding balance of
the Loan Agreement, which could have forced the Company out of business
(although, as of the date of Transaction, BACC had not exercised such right).
Prior to the Transaction, there was no assurance that BACC would continue to
forebear the exercise of its rights under the Loan Agreement. In addition, the
Company declined certain projects where the high cost of financing would have
reduced the profit to minimal amounts or eliminate any such profit.
9
<PAGE>
In early 1999, in an attempt to bolster the Company's deteriorating
financial position, the Board of Directors directed Michael O'Reilly to
investigate alternative sources of financing for the Company. Under the Loan
Agreement, the Company was unable to incur any additional indebtedness. The
level of the Company's indebtedness had important consequences to the
stockholders of the Company. Those consequences included the following: (i) the
Company was unable to obtain necessary debt financing for working capital,
capital expenditure or other purposes; (ii) cash flow from operations dedicated
to payment of principal and interest on its indebtedness was not available for
other purposes; (iii) the Company's level of indebtedness limited its
flexibility in planning for or reacting to changes in its business; (iv) the
Company's high level of indebtedness made it more vulnerable in the event of a
downturn in its business or the economy in general; and (v) had the Company been
unable to service its debt requirements, BACC could have foreclosed on
substantially all of the Company's assets or required the Company to sell its
assets in order to meet its debt service requirements, which sales could have
been made at prices below the then market value of such assets. Had the Company
been unable to generate cash flow from operations or obtain additional financing
for debt service requirements, the Company faced substantial liquidity problems.
Based on the foregoing, the Board of Directors has determined that the
Transaction eliminated or substantially reduced the foregoing consequences
associated with the Loan Agreement with BACC.
The Board of Directors believes that the Company will be able to achieve
synergistic benefits through its association with Spotless which has prior and
current experience in the management and operation of service-oriented
businesses. The long-term strategy of the Company is expected to focus on
environmental, emergency and disaster response-related activities. The Company
expects to benefit from Spotless's experience and expertise with service
oriented businesses. In addition, pursuant to the Letter Agreement, Spotless has
agreed that it will present to the Company any acquisition opportunities of
environmental remediation or disaster remediation businesses, in the United
States or its territories, before making such acquisition on its own behalf.
In addition to the synergistic benefits, the Board of Directors believes
that the Company will be able to achieve other benefits through its association
with Spotless. Included in such benefits are (a) increased financial resources,
and (b) an ability of Spotless to finance additional capital at competitive
rates in the future. The Board of Directors believes that the capital
contribution, the increase in the Company's capital base, and the relationship
with Spotless, will improve the Company's ability to explore potential future
acquisitions, and thereby enhance the Company's long- term growth prospects. The
Board of Directors believes that it is unlikely that the Company would have had
adequate resources or capital to implement its business plan if it did not
complete the Transaction, based on the then existing financial condition of the
Company.
The Board of Directors believes that a strategic relationship with Spotless
may provide increased recognition in the services industry and other benefits
accruing from an association with a company whose businesses are similar in
nature to the Company's business. These factors were in the view of the Board of
Directors supportive of the fairness to stockholders of the Transaction.
The Board of Directors also reviewed and considered several possible risks
associated with
10
<PAGE>
the Transaction, including, among others, the assumption of debt and the
change in control that will result from the Transaction. For a description of
such possible risks, see "- Certain Considerations" immediately below. Based on
the foregoing considerations as well as those discussed elsewhere herein, the
Board of Directors determined that the transactions contemplated by the
Transaction were fair and in the best interest of the Company and its
stockholders.
CERTAIN CONSIDERATIONS
In addition to the other information contained in this Information
Statement, the Company's stockholders should be aware of the following risks
related to the Transaction and the Company.
Considerations Relating to Future Operating Results
DUE TO THE NATURE OF THE COMPANY'S BUSINESS AND THE INTENSE REGULATORY CLIMATE
IN WHICH IT OPERATES, THE COMPANY'S SERVICES ARE SUBJECT TO EXTENSIVE FEDERAL,
STATE AND LOCAL LAWS AND REGULATIONS THAT ARE CONSTANTLY CHANGING. These
regulations impose stringent guidelines on companies that handle hazardous
materials as well as other companies involved in various aspects of the
environmental remediation services industry. Failure to comply with applicable
federal, state and local regulations could result in substantial costs to the
Company, the imposition of penalties or in claims not covered by insurance, any
of which could have a material adverse effect on the Company's business.
In addition to the burdens imposed on operations by various environmental
regulations, federal law imposes strict liability upon present and former owner
and operators of facilities that release hazardous substances into the
environment and the generators and transporters of such substances, as well as
persons arranging for the disposal of such substances. All such persons may be
liable for the costs of waste site investigation, waste site clean up, natural
resource damages and related penalties and fines. Such costs can be substantial.
ENVIRONMENTAL REMEDIATION OPERATIONS MAY EXPOSE THE COMPANY'S EMPLOYEES AND
OTHERS TO DANGEROUS AND POTENTIALLY TOXIC QUANTITIES OF HAZARDOUS PRODUCTS. Such
products can cause cancer and other debilitating diseases. Although the Company
takes extensive precautions to minimize worker exposure and has not experienced
any such claims from workers or others, there can be no assurance that, in the
future, it will avoid liability to persons who contract diseases that may be
related to such exposure. Such persons potentially include employees, persons
occupying or visiting facilities in which contaminants are being, or have been,
removed or stored, persons in surrounding areas, and persons engaged in the
transportation and disposal of waste material. In addition, the Company is
subject to general risks inherent in the construction industry. It may also be
exposed to liability from the acts of its subcontractors or other contractors on
a work site.
THE FAILURE TO OBTAIN AND MAINTAIN REQUIRED GOVERNMENTAL LICENSES, PERMITS AND
APPROVALS COULD HAVE A SUBSTANTIAL ADVERSE AFFECT ON THE COMPANY'S OPERATIONS.
The remediation industry is highly regulated. The Company is required to have
federal, state and local governmental licenses, permits and approvals for its
facilities and services. There can be no assurance as to the successful outcome
of any pending application or demonstration testing for any such license, permit
or
11
<PAGE>
approval. In addition, the Company's existing licenses, permits and
approvals are subject to revocation or modification under a variety of
circumstances. Failure to obtain timely, or to comply with the conditions of,
applicable licenses, permits or approvals could adversely affect the Company's
business, financial condition and results of operations. As the Company's
business expands and as new procedures and technologies are introduced, it may
be required to obtain additional operating licenses, permits or approvals. It
may be required to obtain additional operating licenses, permits or approvals if
new environmental legislation or regulations are enacted or promulgated or
existing legislation or regulations are amended, reinterpreted or enforced
differently than in the past. Any new requirements that raise compliance
standards may require the Company to modify its procedures and technologies to
conform to more stringent regulatory requirements. There can be no assurance
that the Company will be able to continue to comply with all of the
environmental and other regulatory requirements applicable to its business.
THE COMPANY IS DEPENDENT ON THE SUCCESSFUL DEVELOPMENTAL AND COMMERCIAL
ACCEPTANCE OF ITS PROCEDURES AND TECHNOLOGIES. The Company is constantly
developing, refining and implementing its procedures and technologies for
environmental remediation. Its operations and future growth are dependent, in
part, upon the acceptance and implementation of these procedures and
technologies. There can be no assurance that successful development of future
procedures and technologies will occur or, even if successfully developed, that
the Company will be able to successfully commercialize such procedures and
technologies. The successful commercialization of the Company's procedures and
technologies may depend in part on ongoing comparisons with other competing
procedures and technologies and more traditional treatment, storage and disposal
alternatives, as well as the continuing high cost and limited availability of
commercial disposal options. There can be no assurance that the Company's
procedures and technologies will prove to be commercially viable or
cost-effective or, if commercially viable and cost-effective, that the Company
will be successful in timely securing the requisite regulatory licenses, permits
and approvals for any such technologies or that such technologies will be
selected for use in future projects. The Company's inability to develop,
commercialize or secure the requisite licenses, permits and approvals for its
procedures and technologies on a timely basis could have a material adverse
effect on its business, financial condition and results of operations.
A SUBSTANTIAL PORTION OF THE COMPANY'S REVENUES IS GENERATED AS A RESULT OF
REQUIREMENTS ARISING UNDER FEDERAL AND STATE LAWS, REGULATIONS AND PROGRAMS
RELATED TO PROTECTION OF THE ENVIRONMENT. Environmental laws and regulations
are, and will continue to be, a principal factor affecting demand for the
Company's services. The level of enforcement activities by federal, state and
local environmental protection agencies and changes in such laws and regulations
also affect the demand for such services. If the requirements of compliance with
environmental laws and regulations were to be modified in the future, the demand
for the Company's services, and its business, financial condition and results of
operations, could be materially adversely affected.
THE COMPANY IS SUBJECT TO QUARTERLY FLUCTUATIONS IN OPERATING RESULTS. The
Company's revenue is dependent on its contracts and the timing and performance
requirements of each contract. Its revenue is also affected by the timing of its
clients' planned remediation activities and need for its services. Due to this
variation in demand, the Company's quarterly results fluctuate. Accordingly,
specific quarterly or interim results should not be considered indicative of
results to be expected for
12
<PAGE>
any future quarter or for the full year. It is possible that in future
quarters, the operating results will not meet the expectations of securities
analysts and investors. In such event, the price of the Company's common stock
could be materially adversely affected.
THE COMPANY'S OPERATIONS ARE AFFECTED BY WEATHER CONDITIONS. While the Company
provides its services on a year-round basis, the services it performs outdoors
or outside of a sealed environment may be adversely affected by inclement
weather conditions. Extended periods of rain, cold weather or other inclement
weather conditions may result in delays in commencing or completing projects, in
whole or in part. Any such delays may adversely affect the Company's operations
and financial results and may adversely affect the performance of other projects
due to scheduling and staffing conflicts.
THE COMPANY MUST CORRECTLY MANAGE ITS GROWTH. The Company is currently pursuing
a business plan intended to further expand its business. Any future growth may
place significant demands on the Company's operational, managerial and financial
resources. There can be no assurance that its current management and systems
will be adequate to address any future expansion of its business. In such event,
any inability to manage the Company's growth effectively could have a material
adverse effect on its business, financial condition and results of operations.
THE COMPANY'S ABILITY TO PERFORM UNDER ITS CONTRACTS AND TO SUCCESSFULLY BID FOR
FUTURE CONTRACTS IS DEPENDENT UPON THE CONSISTENT PERFORMANCE OF EQUIPMENT AND
FACILITIES IN CONFORMITY WITH SAFETY AND OTHER REQUIREMENTS OF THE LICENSES AND
PERMITS UNDER WHICH IT OPERATES. The Company's equipment and facilities are
subject to frequent routine inspections by the regulatory authorities issuing
such licenses and permits. In the event any of the key equipment and facilities
were to be shut down for any appreciable period of time, either due to equipment
breakdown or as the result of regulatory action in response to an alleged safety
or other violation of the terms of the licenses under which the Company
operates, its business, financial condition and results of operations could be
materially adversely affected.
The Company is increasingly pursuing large, multi-year contracts as a method of
achieving more predictable revenue, more consistent utilization of equipment and
personnel, and greater leverage of sales and marketing costs. These larger
projects impose significant risks if actual costs are higher than those
estimated at the time of bid. A loss on one or more of such larger contracts
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, the failure to obtain, or a
delay in obtaining, targeted large, multi-year contracts could result in
significantly less revenue for the Company than anticipated.
THE ENVIRONMENTAL REMEDIATION INDUSTRY IS HIGHLY COMPETITIVE AND THE COMPANY
FACES SUBSTANTIAL COMPETITION FROM OTHER COMPANIES. Many of the Company's
competitors have greater financial, managerial, technical and marketing
resources than the Company has. To the extent that competitors possess or
develop superior or more cost effective environmental remediation solutions or
field service capabilities, or otherwise possess or acquire competitive
advantages compared to the Company, its ability to compete effectively could be
materially adversely affected.
13
<PAGE>
THE COMPANY'S FUTURE SUCCESS DEPENDS ON ITS CONTINUING ABILITY TO ATTRACT,
RETAIN AND MOTIVATE HIGHLY QUALIFIED MANAGERIAL, TECHNICAL AND MARKETING
PERSONNEL. The Company is highly dependent upon the continuing contributions of
key managerial, technical and marketing personnel. Employees may voluntarily
terminate their employment with the Company at any time, and competition for
qualified technical personnel, in particular, is intense. The loss of the
services of any of its key managerial, technical or marketing personnel,
especially Michael O'Reilly, its chief executive officer, could materially
adversely affect the Company's business, financial condition and results of
operations.
THE COMPANY SOMETIMES HAS A CONCENTRATION OF CREDIT RISK. The Company contracts
with a limited number of customers that are involved in a wide range of
industries. A small number of customers may therefore be responsible for a
majority of revenues at any time. While management assesses the credit risk
associated with each proposed customer prior to the execution of a definitive
contract, no assurances can be given that such assessments will be correct and
that the Company will not incur substantial, noncollectible accounts receivable.
THE LOSS OF ANY MAJOR CUSTOMER COULD HAVE A MATERIALLY ADVERSE IMPACT ON THE
COMPANY. The Company is dependent upon its relationships and contracts with two
customers that accounted for approximately 30% of its revenues in fiscal 2000.
While the Company intends to increase the amount of work performed for entities
other than these two customers, it expects to continue to be significantly
dependent on these customers for the foreseeable future.
IN ORDER TO SUCCESSFULLY BID ON AND SECURE CONTRACTS TO PERFORM ENVIRONMENTAL
REMEDIATION SERVICES OF THE NATURE OFFERED BY THE COMPANY TO ITS CUSTOMERS, IT
OFTEN MUST PROVIDE SURETY BONDS WITH RESPECT TO EACH PROSPECTIVE AND, UPON
SUCCESSFUL BID, ACTUAL PROJECTS. The number and size of contracts that the
Company can perform is directly dependent upon its ability to obtain bonding.
This ability to obtain bonding, in turn, is dependent, in material part, upon
the Company's net worth and working capital. There can be no assurance that the
Company will have adequate bonding capacity to bid on all of the projects which
it would otherwise bid upon were it to have such bonding capacity or that it
will in fact be successful in obtaining additional contracts on which it may
bid.
COST OVERRUNS ON PROJECTS CALLING FOR FIXED PRICE PAYMENTS COULD HAVE MATERIALLY
ADVERSE EFFECTS ON THE COMPANY. Cost overruns on projects covered by such
contracts, due to such things as unanticipated price increases, unanticipated
problems, inefficient project management, inaccurate estimation of labor or
material costs or disputes over the terms and specifications of contract
performance, could have a material adverse effect on the Company and its
operations. There can be no assurance that cost overruns will not occur in the
future and have a material adverse effect on the Company. In addition, in order
to remain competitive in the future, the Company may have to agree to enter into
more fixed price and per unit contracts than in the past.
THE COMPANY CANNOT GIVE ANY ASSURANCE THAT IT WILL BE ABLE TO SECURE ADDITIONAL
FINANCING TO MEET ITS FUTURE CAPITAL NEEDS. The Company's long term capital
requirements will depend on many factors, including, but not limited to, cash
flow from operations, the level of capital expenditures, working capital
requirements and the growth of its business. Historically, the Company has
relied
14
<PAGE>
upon commercial borrowings, debt and equity securities offerings and
borrowings from shareholders and affiliates of shareholders to fund its
operations and capital needs. The Company may need to incur additional
indebtedness to fund the capital needs related to its growth. To the extent
additional debt financing cannot be raised on acceptable terms, the Company may
need to raise additional funds through public or private equity financings. No
assurance can be given that additional debt or equity financing will be
available or that, if either or such financing is available, the terms of such
financing will be favorable to the Company or to its stockholders without
substantial dilution of their ownership and rights. If adequate funds are not
available, the Company may be required to curtail its future operations
significantly or to forego market expansion opportunities.
Considerations Relating to the Company's Securities
THE COMPANY IS CONTROLLED BY ONE MAJOR STOCKHOLDER. Currently, one major
stockholder owns an aggregate of approximately 58% of the Company's Common Stock
and holds approximately 77% of its voting power. If this major stockholder
converted all of its convertible preferred stock and its convertible note, it
would own approximately 78% of the then outstanding Common Stock. Accordingly,
such major stockholder is able to control the Board of Directors and thereby
determine the corporate policy and the direction of the Company's operations.
THE COMPANY DOES NOT ANTICIPATE PAYING ANY CASH DIVIDENDS FOR THE FORESEEABLE
FUTURE. The Company expects that future earnings, if any, will be used to
finance growth. The payment of any future cash dividends by the Company will be
dependent upon the earnings of the Company, its financial requirements and other
relevant factors. Further, prior to paying any dividends on the Common Stock,
the Company is required to pay quarterly dividends on the Series A Convertible
Preferred Stock, par value $.01 per share, of the Company (the "Series A
Preferred"). The Company is currently in arrears on such divided payments. Upon
conversion of the Series A Preferred into Common Stock, dividends on the Series
A Preferred shall no longer accrue and all accrued and unpaid dividends, and any
accrued and unpaid interest thereon, as of the date of such conversion, shall be
paid in cash.
FUTURE SALES OF SUBSTANTIAL AMOUNTS OF THE COMPANY'S COMMON STOCK IN THE PUBLIC
MARKET COULD HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF ITS COMMON STOCK. As
of July 15, 2000, the Company had 38,456,254 shares of Common Stock outstanding.
The existence of a large number of shares eligible for sale could have an
adverse effect on the market price of the Company's Common Stock and its ability
to raise additional equity capital on terms beneficial to it.
THE COMPANY HAS EXPERIENCED SIGNIFICANT OPERATING LOSSES AND MAY CONTINUE TO
INCUR LOSSES IN THE FUTURE. These loses could adversely affect the market value
of the Common Stock. The Company had net operating losses of approximately $2.26
million in fiscal 2000 and $1.31 million in fiscal 1999. As of April 30, 2000,
the Company had an accumulated deficit of $34,553,869. Even though the Company
has taken steps in an effort to reduce costs and expenses and to increase
revenues, it may not become profitable at any time in the foreseeable future.
THE MARKET PRICE OF THE COMMON STOCK HAS FLUCTUATED CONSIDERABLY AND WILL
PROBABLY CONTINUE TO DO SO. The stock markets have experienced extreme price and
volume fluctuations, and
15
<PAGE>
the market price for the Common Stock has been historically volatile. The
market prices of the Common Stock could be subject to wide fluctuations in the
future as well in response to a variety of events or factors, some of which may
be beyond its control. These could include, without limitation:
- future announcements of new competing technologies and procedures;
- changing policies and regulations of the federal state, and local
governments;
- the status of patent protection and other intellectual property rights;
- quarterly fluctuations in the Company's financial results;
- liquidity of the market for the Company's securities;
- public perception of the Company and its entry into new markets; and
- general conditions in the Company's industry and the economy.
THE COMPANY'S CHARTER CONTAINS AUTHORIZED, UNISSUED PREFERRED STOCK THAT MAY
INHIBIT A CHANGE OF CONTROL OF THE COMPANY UNDER CIRCUMSTANCES THAT COULD
OTHERWISE GIVE ITS STOCKHOLDERS THE OPPORTUNITY TO REALIZE A PREMIUM OVER
PREVAILING MARKET PRICES OF THE COMPANY'S SECURITIES. The Company's Certificate
of Incorporation and By-laws contain provisions that could make it more
difficult for a third party to acquire the Company under circumstances that
could give stockholders an opportunity to realize a premium over then-prevailing
market prices of its securities. The Company's Certificate of Incorporation
authorizes the Company's Board of Directors to issue preferred stock without
stockholder approval and upon terms as the Board may determine. The rights of
holders of common stock are subject to, and may be adversely affected by, the
rights of future holders of preferred stock. Section 203 of the Delaware General
Corporation Law makes it more difficult for an "interested stockholder"
(generally, a 15% stockholder) to effect various business combinations with a
corporation for a three-year period after the stockholder becomes an "interested
stockholder." In general, these provisions may discourage a third party from
attempting to acquire the Company and, therefore, may inhibit a change of
control of the Company.
CHANGE IN CONTROL OF COMPANY
A change in control of the Company occurred upon the closing of the
Transaction. See "The Transaction General." As discussed above, Acquisition
Corp. and Spotless are in a position to determine the outcome of the election of
directors and thereby control the Company.
NO APPRAISAL RIGHTS
Under the applicable provisions of the Delaware General Corporation Law,
the Company's stockholders are not entitled to any dissenters' appraisal rights
in connection with the Transaction or any other transaction described in this
Information Statement.
REGULATORY REQUIREMENTS
The Company is not aware of any federal or state regulatory requirements
that must be complied with or regulatory approval that must be obtained in
connection with the Transaction, other than the filing of: (i) a Certificate of
Amendment to the Company's Certificate of Incorporation
16
<PAGE>
pursuant to the applicable provisions of the Delaware General Corporation
Law; (ii) this Information Statement on Schedule 14C with the SEC; and (iii) an
Information Statement pursuant to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder as a result of a change in majority of directors of
the Board of Directors.
17
<PAGE>
--------------------------------------------------------------------------------
CERTAIN INFORMATION CONCERNING THE COMPANY
--------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK
Holders of the Common Stock are entitled to one vote for each share held by
them of record on the books of the Company in all matters to be voted on by the
Company's stockholders. No cumulative voting of the Common Stock is permitted.
Holders of the Common Stock do not have any conversion, preemptive or
preferential rights with respect to the Common Stock. The holders of the Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available for the payment of
dividends. There are no redemptive or sinking fund provisions applicable to the
Common Stock. The Common Stock is eligible for trading on the OTC Electronic
Bulletin Board of the NASD under the symbol WEGI.
INFORMATION RELATING TO THE COMPANY'S VOTING SECURITIES
The outstanding voting securities of the Company include the Common Stock,
the Series A Preferred and the Series B Preferred. As of July 15, 2000, there
were 38,456,254 shares of Common Stock, 1,300,000 shares of Series A Preferred
and 9,346 shares of Series B Preferred issued and outstanding. Shares of Series
A Preferred are convertible, on a share-for-share basis, into shares of Common
Stock, and each share of Series B Preferred is convertible into 1,000 shares of
Common Stock. Holders of the Common Stock are entitled to one vote on all
matters presented to stockholders for each share registered in their respective
names, and holders of the Series A Preferred and the Series B Preferred are
entitled to one vote on all matters presented to stockholders for each share of
Common Stock issuable upon conversion of each share of Series A Preferred and
Series B Preferred, respectively, registered in their respective names.
Cumulative voting is not permitted.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 15, 2000, certain information
concerning the beneficial ownership of each class of the Company's voting stock
by (i) each beneficial owner of 5% or more of the Company's voting stock, based
on reports filed with the SEC and certain other information; (ii) each of the
Company's executive officers, directors and director nominees and (iii) all
executive officers, directors and director nominees of the Company as a group:
18
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Beneficially Owned and Percent of Class (1)
---------------------------------------------------------------------------------------
Percent
of Percent Percent % of
Name and Address of Common Common Series A of Series B of Voting Voting
Beneficial Owner Stock Stock Preferred Series A Preferred Series B Power Power
-------------------- ------- ------ --------- -------- --------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Spotless Group Limited (2) . . . . . 58,002,722 (3) 78.2% - - 9,346 100% 58,002,722 76.9%
Michael O'Reilly (4) . . . . . . . . 3,527,333 (5) 8.4% - - - - 3,527,333 6.7%
Samuel Sadove (4). . . . . . . . . . 461,000 (6) 1.2% - - - - 461,000 *
Anthony Towell (4) . . . . . . . . . 1,726,712 (7) 4.3% - - - - 1,726,712 3.4%
Brian S. Blythe (8). . . . . . . . . - (9) - - - - - - -
John J. Bongiorno (8). . . . . . . . - (10) - - - - - - -
Ronald B. Evans (8). . . . . . . . . - (11) - - - - - - -
Charles L. Kelly, Jr. (8). . . . . . - (12) - - - - - - -
Peter A. Wilson (8). . . . . . . . . - (13) - - - - - - -
Dr. Kevin Phillips (14). . . . . . . 1,300,839 (15) 3.3% 650,000 50% - - 1,300,839 2.6%
All directors, director
nominees and executive
officers as a group
( 9 individuals) . . . . . . . . . . 7,015,884 (16) 15.6% 650,000 50% - - 7,015,884 12.8%
* Less than 1%
<FN>
(1) Beneficial ownership is determined in accordance with the rules of the
SEC. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of Common Stock subject
to options or warrants held by that person that are currently exercisable
or will become exercisable within 60 days after July 15, 2000 are deemed
outstanding, while such shares are not deemed outstanding for purposes of
computing percentage ownership of any other person. Unless otherwise
indicated in the footnotes below, the persons and entities named in the
table have sole voting and investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
(2) The address of Spotless Group Limited ("Spotless Group") is c/o Spotless
Plastics (USA) Inc., 150 Motor Parkway, Suite 413, Hauppauge, New York
11788. Spotless Group directly owns 100% of the voting stock of Spotless
Plastics Pty. Ltd., a company organized under the laws of Victoria,
Australia, which in turn directly owns 100% of the voting stock of
Spotless. Spotless directly owns 100% of the voting stock of Acquisition
Corp.
(3) Includes 22,284,683 shares of Common Stock sold to Acquisition Corp.
pursuant to the Subscription Agreement, 9,346,000 shares of Common Stock
issuable upon conversion of the 9,346 shares of Series B Preferred held
by Acquisition Corp., 25,304,352 shares of Common Stock issuable upon
conversion of the outstanding principal of the Note and 1,067,687 shares
of Common Stock issuable upon conversion of the accrued and unpaid
interest related to the Note. Spotless Group, Spotless and Acquisition
Corp. may be deemed to share the voting and investment power over all of
these shares. The Company does not currently have a sufficient number of
authorized, unissued and unreserved shares of Common Stock to issue upon
conversion of the Series B Preferred or the Note. The Board of Directors
and Acquisition Corp., the majority stockholder of the Company, have
approved an
19
<PAGE>
amendment to the Company's Certificate of Incorporation increasing
the number of authorized shares of Common Stock from 50,000,000 to
100,000,000. The amendment will become effective upon its filing with
the Office of the Secretary of State of Delaware, and such filing will be
made not less than 20 days after the Company sends this Information
Statement to its stockholders in compliance with the proxy rules of the
Exchange Act.
(4) The address for this person is c/o Windswept Environmental Group, Inc.,
100 Sweeneydale Ave., Bay Shore, New York 11706.
(5) Includes 177,333 shares of Common Stock directly held by Mr. O'Reilly
and options under which he may purchase 3,350,000 shares of Common Stock
which are exercisable within 60 days. Does not include 11,000 shares of
Common Stock directly held by JoAnn O'Reilly, the wife of Mr. O'Reilly,
options under which she may purchase 300,000 shares of Common Stock which
are exercisable within 60 days, as to each of which Mr. O'Reilly
disclaims beneficial ownership, and the shares of Common Stock issuable
upon conversion of the Closing Date Option and the Conversion Date
Option. The Closing Date Option and the Conversion Date Option have not
yet vested and are not exercisable within 60 days. In addition, should
such options vest and become exercisable, as discussed in footnote 3
above, the Company does not have sufficient number of authorized,
unissued and unreserved shares of Common Stock to issue upon conversion
of such options.
(6) Includes 11,000 shares of Common Stock directly by held by Mr. Sadove
and options under which he may purchase 450,000 shares of Common Stock
which are exercisable within 60 days.
(7) Includes 24,533 shares of Common Stock directly held by Mr. Towell,
9,066 shares of Common Stock held jointly by Mr. Towell and his wife,
Jacqueline Towell, options under which he may purchase 650,000 shares of
Common Stock which are exercisable within 60 days, 666,667 shares of
Common Stock issuable upon conversion of the outstanding principal of a
$100,000 demand convertible note directly held by Mr. Towell which is
convertible within 60 days and 376,447 shares of Common Stock issuable
upon conversion of accrued and unpaid interest on the convertible note.
(8) The address for this person is c/o Spotless Enterprises Inc., 150 Motor
Parkway, Suite 413, Hauppauge, New York 11788.
(9) Excludes shares beneficially held by Spotless Group. Mr. Blythe is a
director and executive officer of Spotless Group and may be deemed to
share voting or investment power with respect to these shares. Mr. Blythe
disclaims beneficial ownership of these shares.
(10) Excludes shares beneficially held by Spotless Group. Mr. Bonjiorno is a
director and executive officer of Spotless Group and may be deemed to
share voting or investment power with respect to these shares.
Mr. Bonjiorno disclaims beneficial ownership of these shares.
Mr. Bonjiorno will be appointed to the Board of Directors of the Company,
effective as of the date which is ten (10) days after the filing with the
SEC and transmission to the
20
<PAGE>
stockholders of the Company of the Information Statement pursuant
to Section 14(f) of the Exchange Act, and Rule 14f-1 promulgated
thereunder. See "The Transaction-General."
(11) Excludes shares beneficially held by Spotless Group. Mr. Evans is a
director and executive officer of Spotless Group and may be deemed to
share voting or investment power with respect to these shares. Mr. Evans
disclaims beneficial ownership of these shares.
(12) Excludes shares held of record by Acquisition Corp. and beneficially held
by Spotless. Mr. Kelly is an executive officer of Acquisition Corp. and
Spotless and may be deemed to share voting or investment power with
respect to these shares. Mr. Kelly disclaims beneficial ownership of
these shares.
(13) Excludes shares beneficially held by Spotless Group. Mr. Wilson is a
director and executive officer of Spotless Group and may be deemed to
share voting or investment power with respect to these shares. Mr. Wilson
disclaims beneficial ownership of these shares.
(14) The address for Dr. Phillips is c/o FPM Group Ltd., 909 Marconi Avenue,
Ronkonkoma, New York 11779.
(15) Includes 245,839 shares of Common Stock directly held by Dr.
Phillips, options under which he may purchase 405,000 shares of Common
Stock that are exercisable within 60 days and 650,000 shares of Common
Stock issuable upon conversion of 650,000 shares of Series A Preferred
directly held by Dr. Phillips.
(16) Includes options under which members of the group may purchase an
aggregate of 4,855,000 shares of Common Stock which are exercisable
within 60 days, 666,667 shares of Common Stock issuable upon conversion
of a demand convertible note held by a member of the group, 376,447
shares of Common Stock issuable upon conversion of accrued interest
related to the convertible note and 650,000 shares of Common Stock
issuable upon conversion of 650,000 shares of Series A Preferred
directly held by a member of the group. Does not include (a) any
shares of Common Stock issuable upon exercise of the Closing Date Option
or the Conversion Date Option and (b) shares of Common Stock directly
held by JoAnn O'Reilly and the options under which JoAnn O'Reilly may
purchase shares of Common Stock, as to each of which Michael O'Reilly
disclaims beneficial ownership.
</FN>
</TABLE>
21
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FORWARD LOOKING STATEMENTS
Statements contained in this Information Statement include "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Exchange Act. Forward-looking statements involve
known and unknown risks, uncertainties and other factors which could cause the
actual results, performance and achievements, whether expressed or implied by
such forward-looking statements, not to occur or be realized. Such
forward-looking statements generally are based upon the Company's best estimates
of future results, performance or achievement, based upon current conditions and
the most recent results of operations. Forward-looking statements may be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "believe," "estimate," "anticipate," "continue" or similar terms,
variations of those terms or the negative of those terms. Potential risks and
uncertainties include, among other things, such factors as:
- the market acceptance and amount of sales of the Company's services,
- the Company's success in increasing revenues and reducing expenses,
- the frequency and magnitude of environmental disasters or
disruptions resulting in the need for the types of services the
Company provides,
- the extent of the enactment, enforcement and strict interpretations of
laws relating to environmental remediation,
- the competitive environment within the industries in which the Company
operates,
- the Company's ability to raise additional capital,
- the Company's ability to attract and retain qualified personnel, and
- the other factors and information disclosed and discussed under the
Certain Considerations and in other sections of this Information
Statement.
Investors should carefully consider such risks, uncertainties and other
information, disclosures and discussions which contain cautionary statements
identifying important factors that could cause actual results to differ
materially from those provided in the forward-looking statements. The Company
undertakes no obligation to publicly update or revise any forward- looking
statements, whether as a result of new information, future events or otherwise.
22
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents and other materials, which have been filed by the
Company with the SEC, are incorporated into and specifically made part of this
Information Statement by this reference:
- The Company's Annual Report on Form 10-KSB for the fiscal year ended
April 30, 2000.
All documents filed by the Company with the SEC, after the date of
this Information Statement, pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act, shall also be deemed to be incorporated by reference
in this Information Statement and to be part hereof from the respective dates
of filing of such documents.
Any statement incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Information Statement to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Information Statement.
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By: /s/ Michael O'Reilly
---------------------------------------------
Name: Michael O'Reilly
Title: Chief Executive Officer and President
23
<PAGE>
APPENDIX A
Donald & Co. Securities Inc.
Park Avenue Tower
65 East 55th Street
New York, New York 10022
October 26, 1999
Board of Directors
Windswept Environmental Group, Inc.
100 Sweeneydale Avenue
Bay Shore, New York, 11706
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to Windswept Environmental Group, Inc.
("Windswept" or the "Company") and its shareholders, of the proposed equity and
debt financing (the "Financing") of the Company by Spotless Plastics (USA), Inc.
("Spotless"). We assume for purposes of our opinion that the Financing as
ultimately embodied in the final versions of the Financing Documentation
(hereinafter defined) will not materially differ from the terms set forth in the
October 25, 1999 drafts of such documentation.
Pursuant to the Financing Documentation, the Financing is to consist of the
following equity and debt components:
Equity: In consideration of an aggregate purchase price of $2.5
million, Spotless is to receive (i) all shares of the Company's common
stock which are authorized but not issued and not reserved for issuance
pursuant to outstanding options, warrants, rights, securities or
commitments, constituting 22,284,683 shares of common stock; and (ii)
9,346 shares of Series B Convertible Preferred Stock, each share of
which would have powers, preferences, privileges and voting and economic
rights equivalent to that number of shares of common stock into which it
is convertible, and each share of which would be convertible at any time
at the option of Spotless pursuant to the formula set forth in the
Certificate of Designation respecting such preferred stock into a
minimum of one thousand shares of common stock. As a result of the
equity investment, Spotless will have beneficial ownership of a majority
of the issued and outstanding shares of common stock of the Company.
Debt: Spotless is loaning to the Company $2 million through a secured,
convertible promissory note bearing interest at the rate of LIBOR plus
1%.
The proceeds of the equity and debt financings are to be utilized by the
Company to repay
A-1
<PAGE>
outstanding indebtedness to Business Alliance Capital Corporation, amounts
due to taxing authorities for sales tax and payroll tax liabilities, suppliers
and other creditors and for working capital purposes.
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, (i) the Letter of Intent dated September 13, 1999 between
Windswept and Spotless; (ii) drafts, dated October 25, 1999, consisting of (A)
Subscription Agreement (without schedules appended) between Windswept and
Spotless, (B) Form of Convertible Note made by Windswept, Trade-Winds
Environmental Restoration, Inc., North Atlantic Laboratories, Inc. and New York
Testing Laboratories, Inc. for the benefit of Spotless, (C) Security Agreement,
(D) Stock Option Agreement between Windswept and Michael O'Reilly relative to
2,811,595 shares of common stock of Windswept, (E) Stock Option Agreement
between Windswept and Michael O'Reilly relative to 2,674,714 shares of common
stock of Windswept, (F) Employment Agreement between Windswept and Michael
O'Reilly, (G) Letter Agreement between Spotless and Michael O'Reilly respecting
sale of the common stock of Windswept and corporate opportunities and (H)
Certificate of the Designation, Powers, Preferences and Rights of the Series B
Convertible Preferred Stock (all of such documents collectively referred to
herein as the "Financing Documents"); (ii) certain publicly available
information concerning the Company, including its annual report on Form 10-KSB
for the year ended April 30, 1999 and its quarterly report on Form 10-QSB/A for
the quarter ended July 31, 1999; (iii) certain financial forecasts concerning
the business and organization of the Company; (iv) certain publicly available
information with respect to certain other companies that we believe to be
comparable in certain respects to the Company and the trading markets for such
other companies' securities; and (v) certain publicly available information
concerning the nature and terms of certain other transactions that we consider
relevant to our inquiry. We have discussed the foregoing items and issues,
including business operations, financial conditions and prospects of the
Company, with certain officers and employees of the Company, as well as other
matters we believe relevant to our inquiry. We have conducted such other
studies, analysis, inquiries and investigations, and considered such other
matters, as we deemed relevant and appropriate.
In our review and in rendering our opinion, we have assumed and relied upon
the accuracy and completeness of all information provided to us or publicly
available. We have neither independently verified or assumed responsibility for
verifying any of such information. We have assumed that the financial
projections we have received have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of management as to future
financial performance. We have not made, obtained, or assumed any responsibility
for making or obtaining, any independent evaluations or appraisals of any of the
assets or liabilities of the Company including, without limitation, assets or
liabilities related to the environmental operations of the Company.
Our opinion is necessarily based on financial, economic, market and other
conditions as they exist on, and information made available to us as of the date
hereof. It should be understood that, although subsequent developments may
affect this opinion, we do not have any obligation to update, revise or reaffirm
this opinion. Furthermore, our opinion does not address the Company's underlying
business decision to effect the Financing, and should not be read as implying
any conclusion as to the price or trading range of the stock of the
post-Financing entity. Our opinion is based on the assumption that agreements to
be entered into will conform in all material respects to the Financing
Documentation.
A-2
<PAGE>
The opinion expressed herein was prepared for use of the Board of Directors
and does not constitute a recommendation to any stockholder as to how such
stockholder should vote. This letter and our opinion expressed herein are not to
be quoted, summarized or referred to, in whole or in part, without our prior
written consent.
Based upon and subject to the foregoing, it is our opinion that as of the
date hereof, the Financing is fair, from a financial point of view, to the
Company and its stockholders.
Very truly yours,
DONALD & CO. SECURITIES INC.
By: /s/ Stephen A. Blum
---------------------------------
Stephen A. Blum, President
A-3
