<PAGE>
As filed with the Securities and Exchange Commission on
October 15, 1996
Securities Exchange Act.
No. 0-19853
SEC Registration
No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
WORLDWIDE FOREST PRODUCTS, INC.
-------------------------------
(Name of Small Business Issuer in its Charter)
Colorado 2491
84-1097874
- ---------------- -----------
- ----------------
(State or Jurisdiction (Primary Standard Industrial (IRS
Employer
of Incorporation) Classification Code Number)
Identification No.)
Morris L. Ingram, President
101 Baremore
Louisville, Mississippi 39339
(601) 773-5200
- -------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of
Registrant's Principal Executive Offices and Principal Place of
Business)
Copies to:
Robert N. Wilkinson, Esq.
Suite 900 - Kennecott Building
Salt Lake City, Utah 84133
(801) 530-7370
Fax (801) 364-9127
Approximate date of commencement of proposed sale to the
public: As
soon as practicable after the effective date of this Registration
Statement.
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, 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. [ ].
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C>
Title of Each Class Amount to be Proposed Maximum
Proposed Maximum Amount of
of Securities to be Registered Offering Price
Aggregate Offering of Registration
Registered Per Share
Price Fee
- ------------------- ------------- ----------------
- ----------------- --------------
Common Stock 1,091,300 $5.00(1) per share
$5,456,500(1) $ 1,881.55
$.0075 par value Shares
Representative's
Warrant 1 Warrant $0.0001 per Share
$7.00 $0.01
Common Stock 70,000 $6.00 per Share
$420,000 $144.84
$.0075 par value Shares
Underlying
Representative's
Warrant
TOTAL
$2,026.39
- -----------------------------------------------------------------
- --------------------------------
</TABLE>
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 thereafter 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.
The Exhibit Index appears on page -- of the sequentially
numbered pages of
this Registration Statement. This Registration Statement,
including exhibits,
contains ___ pages.
(1)Estimated solely for the purpose of calculating the
registration fee
pursuant to Rule 457.
<PAGE>
PROSPECTUS
- -----------------------------------------------------------------
- -------------
WORLDWIDE FOREST PRODUCTS, INC.
700,000 Shares on a "firm commitment" basis
and
191,300 Shares offered by Selling Shareholders
and
Potentially an additional 200,000 Shares offered by a Selling
Shareholder
Being offered by Worldwide Forest Products, Inc. (the
"Company" or
"WWFP") pursuant to this Prospectus are 700,000 shares of the
Company's $.0075
par value common stock. Also being offered pursuant to this
Prospectus are
191,300 shares of the Company's $.0075 par value common stock
(the "Selling
Shareholder Shares"), which shares, though they are being offered
by the
holders of such Selling Shareholder Shares, are being registered
by the
Company on behalf of certain of its shareholders (the "Selling
Shareholders").
The Company has registered an additional 200,000 shares
underlying a warrant
exercisable only on the date of this Prospectus. If the Warrant
is exercised,
the additional 200,000 shares will increase the total number of
Shares being
sold by Selling Shareholders to 391,300. Upon the sale of the
Selling
Shareholder Shares, the Company will not receive any of the
proceeds from the
Selling Shareholder Shares. The Selling Shareholders are not
paying any of
the expenses of the registration or offering. The Selling
Shareholder Shares
were issued in exchange for cash, services and the conversion of
prior
outstanding debt instruments. (See "DESCRIPTION OF SECURITIES --
Selling
Shareholders."
THESE ARE SPECULATIVE SECURITIES, INVOLVE A HIGH DEGREE OF
RISK AND
IMMEDIATE AND SUBSTANTIAL DILUTION AND SHOULD BE PURCHASED ONLY
BY PERSONS WHO
CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. (SEE "RISK FACTORS."
BEGINNING ON
PAGE 4).
The offering price of the Shares has been determined by
negotiations
between the Company and Castle Securities Corp., (the
"Representative") and
was determined without recognition to any established criteria of
value.
Though the Company has applied for entry to the National
Association of
Securities Dealers Automated Quotation System ("NASDAQ"), there
is no market
for the Company's common stock as of the date of this Prospectus
and there can
be no assurance that a public market for the Company's common
stock will
arise, or if so, will be sustained to any extent. (See "RISK
FACTORS" and
"DESCRIPTION OF SECURITIES.")
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL
OFFENSE.
Price to Public Underwriting Proceeds to
Company
Discount (1) (2)(3)
- -----------------------------------------------------------------
- -------------
Per Share $ 5.00 $ 0.50 $
4.50
Aggregate Offering $3,500,000 $350,000 $3,150,000
- -----------------------------------------------------------------
- -------------
(See Notes on following page.)
Castle Securities Corp.
45 Church Street, Suite #25
Freeport, New York 11520
(516) 868-2000
Reserved NASDAQ Listing Symbol: " "
The date of this Prospectus is ___________________, 1996
(1) Does not include additional compensation to be received by
the
Representative in the form of a 3.0% non-accountable expense
allowance payable
by the Company to the Representative. In addition, the
Representative will
receive Representative's Warrants exercisable for an amount of
shares of the
Company's common stock equal to 10.0% of the total number of
Shares purchased
by the Underwriters, excluding over-allotment Shares, if any. In
addition,
the Company and the Underwriters have agreed to indemnify each
other against
certain liabilities, including liabilities which may arise under
the
Securities Act of 1933, as amended. It is anticipated that the
sale of the
Selling Shareholder Shares offered hereby will ultimately be
conducted in
regular way brokerage transactions through selected members of
the National
Association of Securities Dealers, Inc. (the "NASD") (See --
"PLAN OF
DISTRIBUTION.")
(2) Before deduction of expenses of the offering payable by
the Company,
including the Representative's non-accountable expense allowance
and financial
consulting fee, estimated at approximately $530,000.
Approximately $340,000
of the expenses of the offering have been prepaid by the Company.
Therefore,
the net offering proceeds will be reduced by approximately
$190,000 in
offering expenses yet to be paid.
(3) The Underwriters are offering a total of 700,000 Shares
subject to an
over-allotment option of an additional 70,000 Shares. The
Underwriters will
have 45 days from the date of this Prospectus to exercise the
over-allotment
option, thus the offering will continue until such date, or,
until such
earlier date as all such Shares are sold.
THE COMPANY'S OFFICERS, DIRECTORS, AND PRINCIPAL
SHAREHOLDERS MAY
PURCHASE A PORTION OF THE SHARES OFFERED HEREBY UPON THE SAME
TERMS AND
CONDITIONS AS OTHER INVESTORS IN THIS OFFERING. IF SUCH PURCHASE
ARE MADE,
THEY WILL BE MADE FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO
IMMEDIATE
RESALE OR DISTRIBUTION. THE AGGREGATE NUMBER OF SHARES WHICH MAY
BE PURCHASED
BY SUCH PERSONS SHALL NOT EXCEED 20% OF THE NUMBER OF SHARES SOLD
IN THE
OFFERING.
A SIGNIFICANT NUMBER OF SHARES MAY BE SOLD TO CUSTOMERS OF
THE
UNDERWRITERS. SUCH CUSTOMERS MAY SUBSEQUENTLY ENGAGE IN THE SALE
OR PURCHASE
OF THE SECURITIES THROUGH OR WITH THE UNDERWRITERS. ALTHOUGH
THEY HAVE NO
OBLIGATION TO DO SO, THE UNDERWRITERS MAY BECOME MARKET MAKERS
AND OTHERWISE
EFFECT TRANSACTIONS IN SECURITIES OF THE COMPANY, AND, IF THEY
PARTICIPATE IN
SUCH MARKET, MAY BE A DOMINATING INFLUENCE IN THE TRADING OF THE
SECURITIES
HEREIN. THE PRICES AND LIQUIDITY OF THE SECURITIES MAY BE
SIGNIFICANTLY
AFFECTED BY THE DEGREE, IF ANY, OF THE PARTICIPATION OF THE
UNDERWRITERS IN
SUCH MARKET, SHOULD A MARKET ARISE.
The Shares are offered by the Underwriters and the Company
subject to
prior sale, allotment, acceptance, withdrawal, cancellation or
modification of
the offer. Any modification to the offering will be made by
means of an
amendment to the Prospectus. The Underwriters and the Company
reserve the
right to withdraw or cancel the offer without notice, and to
reject any
orders, in whole or in part, for the purchase of any of the
offered Shares.
The Company will make available to its shareholders an
Annual Report on
Form 10-K containing financial information audited and reported
upon by
independent certified public accountants, and it may also provide
unaudited
quarterly or other interim reports as it deems appropriate. The
Company is a
"reporting company" under the Securities Exchange Act of 1934 and
thus will
comply with the periodic reporting requirements of the Securities
Exchange Act
of 1934. When such reports, proxy statements and other
information are filed
by the Company with the Commission they will be available for
inspection and
copying at the Public Reference Section of the Commission at Room
1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and the
Regional offices of the Commission at 230 Dearborn Street,
Chicago, Illinois
60604 and 75 Park Place, 14th Floor, New York, New York 10007, at
prescribed
rates. The Commission maintains a Web site that contains
reports, proxy and
information statements and other information regarding issuers
that file
electronically with the Commission. The address of the Web site
is
(http://www.sec.gov).
The Company will provide without charge to each person who
receives this
Prospectus, upon written or oral request of such person, a copy
of any of the
information that was incorporated by reference in the Prospectus
(not
including exhibits to the information that is incorporated by
reference unless
the exhibits are themselves specifically incorporated by
reference), by
directing such requests to Morris L. Ingram, President, Worldwide
Forest
Products, Inc., 101 Baremore, Louisville, Mississippi 39339;
telephone no.
(601) 773-5200.
ADDITIONAL INFORMATION
----------------------
A registration statement on Form SB-2, including amendments
thereto,
relating to the shares offered hereby has been filed by the
Company with the
Securities and Exchange Commission, Washington, D.C. This
Prospectus does not
contain all of the information set forth in the registration
statement and the
exhibits and schedules thereto. For further information with
respect to the
Company and the shares offered hereby, reference is made to such
registration
statement, exhibits and schedules. Statements contained in this
Prospectus as
to the contents of any contract or other document referred to are
not
necessarily complete, and in each instance reference is made to
the copy of
such contract or other document filed as an exhibit to the
registration
statement, each such statement being qualified in all respects by
such
reference. A copy of the registration statement may be inspected
without
charge at the Commission's principal offices in Washington, D.C.,
and copies
of all or any part thereof may be obtained from the Commission
upon the
payment of certain fees prescribed by the Commission.
PROSPECTUS SUMMARY
------------------
The following summary is qualified in its entirety by the
more detailed
information and financial statements (including the notes
thereto) appearing
elsewhere in this Prospectus. ON OCTOBER 14, 1994, THE COMPANY
EFFECTED A 1
SHARE FOR 25 SHARE REVERSE SPLIT. ALL DISCUSSIONS HEREAFTER
RELATE TO THE
NUMBER OF SHARES AS IF THE SPLIT HAD OCCURRED REGARDLESS OF THE
DATE OF THE
TRANSACTION BEING DESCRIBED.
The Company
- -----------
The Company is engaged, primarily through its wholly-owned
subsidiary,
Treat-All Wood Products, Inc., in the wood products business,
specializing in
the sale and manufacture of preservative treated wood products
such as utility
poles, bridge pilings and timbers, railroad cross-ties, guard
rail posts,
fence posts and sign posts.
The Company's offices are located at 101 Baremore,
Louisville,
Mississippi 39339. Its mailing address is P.O. Box 564,
Louisville,
Mississippi 39339; and its telephone number is (601) 773-5200.
The Offering:
- -------------
Pursuant to this Prospectus, the Company, through the
Underwriters, and
the Selling Shareholders are offering 700,000 and 191,300 shares
respectively
of the Company's common stock. The number of Selling Shareholder
Shares might
be increased to 391,300 in the event a 200,000 share warrant is
exercised on
the date of this Prospectus. With the exception of the shares
underlying one
warrant covering 200,000 shares exercisable on the date of this
Prospectus,
the Selling Shareholder Shares may not be sold for a period of
ninety (90)
days following the date of this Prospectus, without the consent
of the
Representative. (See "DESCRIPTION OF SECURITIES;"
"UNDERWRITING.")
Securities presently outstanding:
- ---------------------------------
Common Stock
(shares):...............................................1,486,912
Non-convertible Preferred Stock
(shares).............................5,908,205
Class A Warrants (each exercisable
for one common
share):.............................................1,080,000
Class B Warrants (each exercisable
for one common
share):...............................................792,928
Class C Warrants (each exercisable
for one common
share)................................................545,000
Stock Options (each exercisable for one
common
share):..........................................................
...0
Securities being registered:
- ---------------------------
Common Stock
(shares)..........................................1,091,300(1)(2)
Securities to be outstanding after this registration:
- ----------------------------------------------------
Common Stock
(shares)..........................................2,386,912(2)(3)
Non-Convertible Preferred Stock
(shares)....................9,508,205(2)(3)(4)
(1) Includes 700,000 shares of common stock to be newly issued
to the
purchasers in this offering (excluding over-allotment shares),
191,300 shares
of common stock currently outstanding and owned by Selling
Shareholders, and
200,000 shares of common stock underlying a warrant exercisable
only of the
date of this Prospectus.
(2) Does not give effect to up to 70,000 shares of common
stock included in
the over-allotment option and the shares underlying the
Representative's
Warrants. (See "DILUTION" and "PLAN OF DISTRIBUTION."), but does
assume the
exercise of a warrant covering 200,000 shares of common stock
exercisable only
on the date of this Prospectus.
(3) Assumes that none of the Class A, B and C Warrants are
exercised, other
than one Class A Warrant in the amount of 200,000 shares.
(4) The Preferred Stock has anti-dilution rights which provide
that each
time a share of common stock is issued, four shares of preferred
stock are to
be issued to the only preferred stockholder of the Company.
Use of Proceeds
- ---------------
Despite the fact that the Company is paying the expenses
associated with
the registration of the Selling Shareholder Shares, the Company
will not
receive any of the proceeds from the sale of the Selling
Shareholder Shares.
The approximately $2,960,000 in net proceeds represented by
the sale of
the Shares will be applied over the next twelve (12) months
substantially as
follows: $1,600,000 for repayment of loans made by existing
shareholders;
$1,000,000 for purchase of inventory; $250,000 for possible
acquisitions; and
approximately $110,000 for working capital. In the event that
the
Underwriters' over-allotment shares are sold, the estimated net
proceeds of
this offering will be approximately $3,264,500 and the additional
$304,500 in
net proceeds will be applied to general working capital purposes.
(See "USE
OF PROCEEDS" and "BUSINESS.")
RISK FACTORS
These securities involve a high degree of risk. Prospective
purchasers
should consider carefully, among other factors set forth in the
Prospectus,
the following:
LIMITED OPERATING HISTORY, OPERATING LOSSES AND LIMITED
STOCKHOLDERS'
EQUITY. The Company has only had a limited operating history and
has incurred
substantial operating losses. Through June 30, 1996, the Company
has incurred
an unaudited accumulated deficit on a consolidated basis of
$4,732,296. There
can be no assurance that the Company will be able to achieve
profitable
operations. The notes to the consolidated financial statements
disclose the
Company's current financial status and its plans to obtain
adequate funds to
continue operations. (See "FINANCIAL STATEMENTS.")
SUCCESS DEPENDENT ON MANAGEMENT. Success of the Company
depends on the
active participation of Messrs. Sorrentino and Ingram. While the
Company has
an employment agreement with Mr. Ingram, the loss of the services
of Messrs.
Sorrentino and/or Ingram could adversely affect development of
the Company's
business and its likelihood of continuing operations. (See
"MANAGEMENT.")
NEED FOR PROCEEDS OF THIS OFFERING. The Company has a need
for the
proceeds from this offering in order to provide capital for the
repayment of
debt, working and expansion capital for the Company's operations,
and to
further develop and market the Company's products. While
Management estimates
that the net proceeds from the offering will be sufficient to
meet the
Company's cash requirements for at least 12 months from the
conclusion of this
offering, the Company may be forced to seek additional funds.
There can be no
assurance that the Company will be able to successfully raise
additional funds
at an acceptable cost, if at all. (See "USE OF PROCEEDS.")
BUSINESS DEVELOPMENT AND EXPANSION RISKS. The Company is
implementing a
business plan pursuant to which it intends to become a full
service operation
(instead of a treatment service only operation), expand its line
of products
and increase its market area. The expenses arising in connection
with these
activities will be charged against income as they are incurred
and,
accordingly, will have a negative impact upon the Company's
results of
operations until such time as such expenses are offset by
increased revenues,
of which there is no assurance. (See "USE OF PROCEEDS"
"BUSINESS.")
OPERATING HAZARDS, UNINSURED RISKS AND PRODUCT LIABILITY.
Although the
Company has property and casualty insurance, the Company's
operations will be
subject to hazards and risks any of which could result in severe
damage to or
destruction of the Company's owned facilities, equipment and
inventory.
Possible legal liability exists for any or all damages resulting
and/or
perceived to result, from these and other potential risks. Any
such event, to
the extent that it was uninsured, could have an adverse effect on
the Company
and investors in this offering.
Other than the above described insurance, the Company does
not presently
have insurance to cover such hazards, nor is there any assurance
that the
Company will in the future choose to, or be able to, adequately
insure itself
against all of the risks attendant to its contemplated
activities. If the
Company incurs uninsured losses or liabilities, the Company's
funds available
for operations will be reduced and its properties and other
assets may even be
lost.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL FACTORS. Any
manufacturing and
marketing activities undertaken by the Company will be subject to
extensive
federal, state and local laws, rules and regulations controlling
not only the
acquisition of the various raw chemicals and other materials
utilized by the
Company, but the handling and distribution of such chemicals and
the
disposition of any byproducts resulting from any such activities.
The recent
trend towards extreme scrutiny with respect to materials,
chemicals or
otherwise, that possess the ability, whether properly or
improperly handled,
to damage the environment, could adversely impact the Company's
ability to do
business. Existing as well as future legislation and regulations
could cause
additional expense. Capital expenditures, restrictions and
delays in the
manufacture and marketing of chemical treatments which the
Company might
become involved. The extent to which future legislation and
regulations might
effect the Company can not be predicted. There is no assurance
that
environmental safety standards will not be imposed that are more
stringent
than those presently in effect having an adverse impact on the
Company's
operations or causing material changes in the Company's business.
The Company
is currently in compliance. However, there is no assurance that
the Company
will continue to be in compliance in the future, or that the
laws, rules
and/or regulations won't change, making it difficult if not
impossible for the
Company to comply.
NO PATENT PROTECTION. The Company's designs, products and
manufacturing
processes are not covered by patent protection. Although the
Company treats
certain of its designs, products and manufacturing processes as
proprietary,
and the Company's officers have signed confidentiality
agreements, there is no
assurance that confidentiality can or will be maintained or that
others will
not develop similar or superior designs, products or duplicate
the Company's
manufacturing processes.
COMPETITION. The Company faces substantial competition from
other
manufacturers of similar designs and products, many of which are
well
established and have significantly greater financial and other
resources than
the Company. No assurance can be given that the Company will be
able to
compete successfully. (See "BUSINESS -- Competition.")
DEPENDENCE ON SIGNIFICANT CUSTOMERS. One of the Company's
customers,
Edison Hubbard, represented approximately 16% of the Company's
revenues during
the fiscal year ended September 30, 1995. No other customer
represented more
than 10% of the Company's revenues during the fiscal years ended
September 30,
1994 and 1995. The loss of a significant customer could have a
material
adverse affect on the Company's revenues.
CONFLICTS OF INTEREST. The Company's Directors and Officers
are or may
become, in their individual capacity officers, directors,
controlling
shareholders and/or partners of other entities engaged in a
variety of
businesses. Thus, there exist potential conflicts of interest
including,
among other things, time, effort and corporate opportunity,
involved in
participation with such other business entities. The amount of
time which
some of the Company's Officers and Directors will be able to
devote to the
Company's businesses may be limited. It is not anticipated that
any of such
other businesses will be ones that are, or will be, in
competition with the
Company. (See "CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS -
Resolving Conflicts of Interest.")
GENERAL BUSINESS RISKS. The Company believes it is
important to remember
that future periods may be impacted by general economic
conditions, various
competitive factors (including price-based competition) and
competition from
other parties providing alternative wood preserving technologies.
Additionally, the results could also be affected in any given
period by
circumstantial revenue gain (i.e., not strategic or planned for),
business
interruptions or costs associated with hurricanes, ice storms,
floods, train
derailment, fire or new regulatory mandates and other similar
events outside
the control of the Company. The Company's business can also be
adversely
impacted by fluctuations in spot purchases and/or
sub-contracting. Other
considerations that can have a potentially significant impact on
the Company's
operations include: loss of a principal customer; inability to
obtain
appropriate sized pole for an order in a timely manner, changes
in EPA
regulations; market demand for the Company's product; a decline
in selling
prices; the ability to maintain certain relationships currently
providing
favorable terms and opportunities to the Company; the timing of
significant
orders; the timely availability of capital; cancellation or
rescheduling of
orders by a customer experiencing financial difficulties or for
other reasons;
unexpected return of production; the timing of expenditures in
anticipation of
increased sales; and cyclicality of revenue in the Company's
targeted markets.
LACK OF CAPITAL TO PAY DEMAND NOTES. As of June 30, 1996,
the Company
owed approximately $1,600,000 to various shareholders of the
Company evidenced
by promissory notes. The Company intends to pay off these notes
with proceeds
from this offering. In the event this offering is not
successful, the Company
will not be able to pay off these obligations and will be in
default if
demands for payment are made by the holders of certain of these
notes, some of
which are payable on demand.
LACK OF PUBLIC MARKET FOR COMPANY'S COMMON STOCK. There
presently exists
essentially no market for the Company's Common Stock. There can
be no
assurance that any market can be developed and sustained. The
investment
community could show little or no interest in the Company in the
future. As a
result, purchasers of the Company's securities may have
difficulty in selling
such securities should they desire to do so.
GOING CONCERN RISK. As disclosed in Note 11 to the
Company's financial
statements included elsewhere in this Prospectus, the Company
does not have
significant cash, nor does it currently have a source of revenues
significant
to cover its operating costs and allow it to continue as a going
concern. The
Company's ability to continue as a going concern is dependent on
the Company's
ability to complete this offering successfully or to raise
additional capital
through other means.
DILUTION. As a result of the sale of the firm commitment
Shares, and
assuming exercise of a 200,000 share Warrant on the date of this
Prospectus,
purchasers of such Shares will suffer immediate substantial
dilution in the
price of $5.00 per Share purchased by them of $3.25 per Share
(65%).
Conversely, the Company's present shareholders will receive an
immediate
benefit of $1.10 per share from the sale of the firm commitment
offering
amount. (See "DILUTION.")
EFFECT OF CURRENT AND POTENTIAL REGULATORY ACTIONS AGAINST
REPRESENTATIVE
ON THE OFFERING AND INVESTORS. On August 24, 1992, the
Representative
voluntarily ceased operations as a broker-dealer due to an
expected inability
to maintain the minimum net capital requirements of the U.S.
Securities and
Exchange Commission (the "Commission"). On December 16, 1992,
the
Representative resumed its operations and is currently in
compliance with the
net capital requirements. No assurance can be given that the
Representative
will continue to be able to meet the net capital requirements.
In the event
that a net capital deficiency reoccurs, the Representative will
not be allowed
to participate in this Offering until such time that the
deficiency is
rectified. The Representative was also the subject of (i) an
action
instituted by the NASD which has been resolved in accordance with
an Offer of
Settlement accepted by the NASD pursuant to which the
Representative and its
principal neither admitted nor denied the allegations against
them and agreed
to censure and the payment of a $4,000 fine; and (ii) a
proceeding instituted
by the State of Georgia which resulted in the assessment of fines
against the
Representative and its president. The Representative is
currently the subject
of an injunctive action commenced by the Commission in the United
States
District Court for the Southern District of New York and an
additional
disciplinary proceedings instituted by the NASD. See "Plan of
Distribution."
The foregoing proceedings may have a materially adverse effect
upon the
Representative's ability to act as the managing underwriter of
this Offering.
The Commission's action may result in disgorgement of profits by
the
Representative which will reduce or exceed the Representative's
net capital.
As a result thereof, unless the Representative is able to obtain
additional
capital to satisfy its net capital requirements, it would be
required to cease
operations. The NASD is also seeking disgorgement in its pending
action. The
Representative believes that the amount of disgorgement being
sought by the
NASD would not cause the Representative to cease operations due
to net capital
difficulties, although no assurance to this effect can be given.
If a net
capital deficiency were to arise, however, the Representative
would be
required to cease operations. The Representative's inability to
participate
in the sale of the Company's securities will have a materially
adverse effect
on the Company's ability to complete this Offering. Should the
Representative
be unable to participate, the Company may immediately suspend the
Offering and
attempt to secure another underwriter. There is no assurance
that it will be
successful in this regard. In either case, it will not resume
the revised
terms of the Offering until it has filed a post-effective
amendment and such
amendment has been declared effective. In addition to the
foregoing, any
action resulting in the suspension or cessation of the
Representative's right
to engage in business after the consummation of the Offering,
could have a
materially adverse effect on the aftermarket.
PUBLIC WILL BEAR RISK OF LOSS. The capital required by the
Company to
repay debt, continue operations and expand its business is being
sought
principally from the proceeds of this offering. Therefore,
public investors
will bear most of the risk of the Company's contemplated
continued and
expanded operations.
DIVIDENDS. No dividend has been paid on the Company's
securities since
inception and no dividends are contemplated at any time in the
foreseeable
future. Investors who anticipate the need for immediate
dividends from their
investments should refrain from purchasing any of the shares
offered hereby.
(See "DESCRIPTION OF SECURITIES.")
SHARES AND WARRANTS ELIGIBLE FOR FUTURE SALE. In exchange
for cash,
fixed assets, interest, services and/or the conversion of prior
outstanding
debt instruments, a total of 1,486,912 shares of the Company's
$.0075 par
value common stock, 1,080,000 Class A Warrants, 792,928 Class B
Warrants and
545,000 Class C Warrants were issued by the Company prior to the
date of this
Prospectus. A total of 1,407,435 shares of the Company's
outstanding common
stock are "restricted securities" and under certain circumstances
may in the
future be sold in compliance with Rule 144 adopted under the
Securities Act of
1933, as amended (the "Act"), which provides that such restricted
securities
can not be sold in the open market until two years after
originally purchased,
or unless they are registered under the Act. Future sales of
those shares
under Rule 144 could depress the market price of the Common Stock
in any
market which may exist. The Company estimates that approximately
522,471 of
the "restricted" shares have been held at least two years, and
may now be sold
in compliance with Rule 144. Any shares issued upon exercise of
the Warrants
(with the exception of one Warrant covering 200,000 shares) will
not be
registered shares and thus can not be sold in the open market
without
registration or qualifying exemption from registration. The
191,300 Selling
Shareholder Shares that are being registered in this offering
(and up to an
additional 200,000 shares underlying a warrant exercisable on the
date of this
Prospectus) may ultimately be sold in open market transactions
commencing 90
days after the effective date of this Prospectus (earlier only
with the
consent of the Representative), which transactions could depress
the market
price of the Company's common stock. (See "DESCRIPTION OF
SECURITIES --
Selling Shareholders.")
EFFECT OF SELLING SHAREHOLDERS ON WARRANTHOLDERS AND
COMPANY. The
Selling Shareholders may elect to sell their shares into the
public market, if
any, for the Company's common shares thus having a depressing or
overhanging
effect on the market price for such securities. However, with
the exception
of the possible sale of up to 200,000 shares underlying one
warrant on or
after the effective date of this Prospectus, the other Selling
Shareholders
are restricted from selling any portion of the remaining 191,300
Selling
Shareholder Shares for a period of ninety (90) days following the
effective
date of this Prospectus without the consent of the
Representative. Such sales
could impede the exercise of the Company's outstanding common
stock purchase
warrants, thus a) depriving the Company from receiving additional
working
capital, from the exercise of the Warrants at a time when working
capital
might not otherwise be available; and/or b) depriving the
Warrantholders from
realizing any economic gain from the sale of the Warrants and/or
underlying
shares. Warrantholders which may exercise their warrants in the
future will
likely exercise their warrants at prices less than the then
existing market
price of the Company's common stock. This may have a depressive
effect on
the market value of the Company's common stock and may inhibit
the ability of
the Company to raise funds at higher per share prices.
EFFECT OF EXERCISE OF WARRANTS AND CERTAIN REGISTRATION
RIGHTS. The
Company will sell to the Representative, for nominal
consideration, the
Representative's Warrant to purchase 70,000 shares of the
Company's common
stock. The Representative's Warrant will be exercisable over a
four-year
period commencing one year from the date of this Prospectus at a
price equal
to 120% of the public offering price per share. Exercise of the
Representative's Warrant can be expected to take place at a time
when the
Company would be able to obtain additional equity on terms more
favorable then
those of the warrants. At the time of such exercise, the net
tangible book
value of the Company's common stock will undergo further dilution
if the
exercise price per share is below the then net tangible asset
value of the
common stock per share. In addition, the Company has certain
obligations to
maintain the registration of the Representative's Warrant and/or
underlying
securities. These obligations may involve substantial expense to
the Company
at a time when it may not be able to afford that expense, and
could adversely
affect the terms upon which it may obtain additional financing.
Accordingly,
the existence of the Representative's Warrant and underlying
securities and
the Company's registration maintenance obligations in connection
therewith may
have a depressive effect on the market price of the common stock
(See
"UNDERWRITING").
POSSIBLE LIABILITY FOR PERSONAL INJURY AND PROPERTY DAMAGE.
The risk of
accidents occurring on the Company's property or during the
Company's
business operations which could result in personal injury or
property damage
could be significant. Although the Company intends to maintain
insurance
which management believes should be adequate to cover this risk,
there is no
assurance that it will be able to obtain such coverage at
acceptable costs, if
at all, or that, if claims are exerted, such coverage will be
sufficient to
satisfy any liability that the Company may sustain. Failure to
maintain
liability insurance coverage could have a materially adverse
affect on the
Company's business.
EFFECT OF PENNY STOCK REFORM ACT AND RULE 15g-9: POSSIBLE
INABILITY TO
SELL THE COMPANY'S SECURITIES IN THE SECONDARY MARKET. In the
event the
shares are not listed on NASDAQ or if they are listed and then
are delisted,
or if the shares are not listed on NASDAQ and the trading price
of the shares
drops below $5.00 per share, the shares will become subject to
the Penny Stock
Reform Act.
(a) Penny Stock Reform Act. In October 1990 Congress
enacted the
"Penny Stock Reform Act of 1990" (the "'90 Act") to counter
fraudulent
practices common in penny stock transactions. Pursuant to Rule
3a51-1 (the
"Rule") of the Exchange Act a security will be defined as a
"penny stock"
unless it is (i) a reported security (i.e., listed on certain
national
securities exchanges); (ii) a security registered or approved for
registration
and traded on a national securities exchange that meets certain
guidelines,
where the trade is effected through the facilities of that
national exchange;
(iii) a security listed on NASDAQ; (iv) a security of an issuer
that meets
certain minimum financial requirements ("net tangible assets" in
excess of
$2,000,000 or $5,000,000, respectively, depending on whether the
issuer has
been continuously operating for more or less than three years, or
"average
revenue" of at least $6,000,000 for the last three years); or (v)
a security
with a price of at least $5.00 per share in the transaction in
question or
that has a bid quotation (as defined in the Rule) of at least
$5.00 per share.
Pursuant to the '90 Act, brokers and/or dealers, prior to
effecting a
transaction in a penny stock, will be required to provide
investors with
written disclosure documents containing information concerning
various aspects
involved in the market for penny stocks as well as specific
information about
the subject security and the transaction involving the purchase
and sale of
that security (e.g., price quotes and broker-dealer and
associated person
compensation). Subsequent to the transaction, the broker will be
required to
deliver monthly or quarterly statements containing specific
information about
the subject security. These added disclosure requirements will
most likely
negatively affect the ability of purchasers herein to sell their
securities in
the secondary market should a market exist therefor.
(b) Rule 15g-9. Rule 15g-9 promulgated under the
Exchange Act imposes
additional sales practice requirements on broker-dealers who sell
penny stocks
to persons other than established customers. For transactions
covered by the
rule, the broker-dealer must make a special suitability
determination for the
purchaser and receive the purchaser's written agreement to the
transaction
prior to the sale. Consequently, the rule may also affect the
ability of
purchasers in this Offering to sell their securities in the
secondary market
should a market exist therefor.
CONTROL BY MANAGEMENT. Upon completion of this Offering the
Company's
officers and directors will directly or indirectly own
approximately 42.0% of
the issued and outstanding shares of the Common Stock and 100% of
the issued
and outstanding shares of Preferred Stock, and will effectively
control
approximately 88% of the voting control of the Company. The
foregoing
percentages will be increased to the extent that any shares of
Common Stock
are purchased by officers and directors in this Offering. Mr.
Sorrentino,
directly or indirectly, owns most of these shares. There are no
cumulative
voting rights under the Company's articles of incorporation.
Accordingly, the
Company's current management, if they act as a group, will be
able to elect
all of the Company's directors and continue to control the
Company for the
foreseeable future. (See "SECURITY OWNERSHIP OF MANAGEMENT,
PRINCIPAL
SHAREHOLDERS AND DESCRIPTION OF SECURITIES."
MARKET PRICE AND DIVIDEND INFORMATION
---------------------------------------
The Company's common stock was listed on the National
Association of
Securities Dealers Automated Quotation System ("NASDAQ") until
June 11, 1993
when it lost such listing due to failure to file its required
reports under
the Securities Exchange Act of 1934, as amended. The Company has
re-applied
for NASDAQ and it is anticipated that, following the closing of
this offering,
the Company's common stock will once again be listed on NASDAQ.
However, it
needs, among other things, the proceeds of this offering in order
to be
considered for requalification to the NASDAQ system.
Since June 11, 1993 when the Company's common stock was
delisted from
NASDAQ, there has been no market in the Company's common stock
and there have
been no quotations published for the Company's common stock.
On September 23, 1996, there were approximately 250 holders
of record of
the Company's common stock and one holder of the Company's
preferred stock.
While the Company has not yet paid any dividends on the
Company's common
stock, the Board of Directors of the Company presently intends to
pursue a
policy of retaining earnings, if any, for use in the Company's
operations and
to finance expansion of its business. With respect to the common
stock, the
declaration and payment of dividends in the future, of which
there can be no
assurance, will be determined by the Board of Directors in light
of conditions
then existing, including the Company's earnings, financial
condition, capital
requirements and other factors. There are presently no dividends
which are
accrued or owing with respect to the outstanding preferred stock.
However, no
assurance can be given that no dividends will be declared or paid
on the
Company's preferred stock in the future.
DILUTION
--------
The following table summarizes the comparative ownership and
capital
contributions of existing common stock shareholders and investors
in this
offering as of June 30, 1996, which is the date of the financial
statements
included in this Prospectus:
<TABLE>
<CAPTION>
Common Percent Total Total
Average Price
Shares Of Total Consideration
Consideration Per share
Owned Common Paid Paid
Shares
--------- --------- --------------
- --------------- -------------
<S> <C> <C> <C> <C>
<C>
Current
Shareholders(1) 1,686,912 70.7% $6,444,758
64.8% $ 3.82
New Investors 700,000 29.3% $3,500,000
32.2% $ 5.00
--------- ----- ------------
- ---------------
Total 2,386,912 100.0% $9,944,758
100.0%
(1) Assumes that an existing shareholder will exercise a warrant
covering 200,000 shares of
common stock on the date of this Prospectus, and treating those
200,000 shares as outstanding as
of June 30, 1996.
</TABLE>
The pro forma net tangible book value of the Company as of
June 30, 1996
was $965,290 or $0.65 per share. Pro Forma net tangible book
value per share
represents the Company's total tangible assets less its total
liabilities
divided by the number of shares of Common Stock outstanding.
Pro forma net tangible book value dilution per share
represents the
difference between the amount paid per share by purchasers of
Common Stock in
this offering and the pro forma net tangible book value per share
of Common
Stock as adjusted to give effect to this offering. After giving
effect to the
sale of the 700,000 shares of Common Stock offered by the Company
hereby at an
assumed public offering price of $5.00 per share (assuming the
Underwriters'
over-allotment option is not exercised, assuming a 200,000 share
Warrant is
exercised on the date of this Prospectus at $1.00 per share, and
after
deducting the estimated underwriting discounts and commissions
and the
estimated offering expenses which have not been prepaid), the as
adjusted net
tangible book value of the Company as of June 30, 1996 would have
been
approximately $4,165,290 or $1.75 per share of Common Stock.
This represents
an immediate increase in pro forma net tangible book value of
$1.10 per share
to existing shareholders and an immediate dilution of $3.25 per
share to new
investors in this offering. The following table illustrates the
dilution per
share to new investors as of June 30, 1996:
<TABLE>
<CAPTION>
<S>
<C> <C>
Assumed initial public offering price per
share.......................... $5.00
Pro forma net tangible book value per share as of June 30,
1996......... $0.65
Increase in pro forma net tangible book value per share
attributable to
new
shareholders.....................................................
. $1.10
As adjusted net tangible book value per share after
offering............. $1.75
Dilution per share to new shareholders
(1)............................... $3.25
=====
</TABLE>
(1) Dilution is the difference between the effective offering
price of $5.00
per share and the net tangible book value per share immediately
after the
offering.
The foregoing discussion assumes exercise of none of the
Class A, B and C
Warrants resulting in the issuance of the 2,387,928 underlying
shares (with
the exception of one Class A Warrant covering 200,000 shares),
does not take
into consideration the Underwriter's over-allotment shares or the
effect of
the shares underlying the Representative's Warrants. (See
"DESCRIPTION OF
SECURITIES.")
USE OF PROCEEDS
----------------
The net proceeds to be realized by the Company from this
offering will be
approximately $2,960,000. In the event that the Underwriters'
over-allotment
is sold, the estimated net proceeds of this offering will be
$3,264,500 and
the additional net proceeds will be applied to working capital.
Management
estimates that the net proceeds of this offering, together with
revenues from
operations, will be sufficient to meet the Company's cash
requirements for at
least 12 months from the conclusion of this offering. Management
anticipates
the net proceeds of this offering will be used substantially, and
in the order
of priority, shown below(1):
Operating Costs and Working Capital:
Repayment of Debt(2) $ 1,600,000
Inventory Purchases (3) 1,000,000
Possible Acquisitions (4) 250,000
Working Capital(3)(4)(5) 110,000
---------
Total $ 2,960,000
==========
(1) Expenses of the offering are estimated to be $529,753,
including a 3.0%
Representative's non-accountable expense allowance. Of these
amounts,
approximately $339,825 has been prepaid as of the date of this
Prospectus.
(2) Consists of approximately $863,000 to be paid to
International
Financial Industries, Inc. ("IFI") on a demand note which bears
interest at
8.0% per annum, and approximately $737,000 to be paid to
approximately 8
minority shareholders of the Company (who are not officers or
directors of the
Company) on various notes which bear interest rates ranging from
approximately
8% per annum to 12% per annum, and which mature at various dates
during the
next 13 months. The debts being paid originated more than two
years ago.
(3) To the extent less than $1,000,000 of the net offering
proceeds is
spent on inventory, the additional funds will be available for
general working
capital needs. If more than $1,000,000 is used for the purchase
of
inventory, working capital will be reduced accordingly.
(4) The Company has allocated $250,000 of the net offering
proceeds to be
used for possible acquisitions in the future. As of the date of
this
Prospectus the Company has not identified any such acquisitions.
The Company
anticipates any such future acquisitions of businesses or other
business
assets will involve businesses or assets used in the Company's
business or
industry. To the extent the Company does not use any portion or
all of this
allocation of net proceeds for possible acquisitions, proceeds
available for
working capital purposes will be increased. To the extent more
than $250,000
is required for possible acquisitions, proceeds available for
working capital
will be decreased.
(5) In the event the over-allotment shares are sold, working
capital will
be increased by approximately $304,500. The Company does not
intend to use
offering proceeds for salaries of officers and directors. But
the Company
reserves the right to use any portion of the working capital
proceeds
allocation for that purpose as well as for all other general
working capital
purposes.
The amounts set forth in the use of proceeds schedule merely
indicate the
proposed use of proceeds, and actual expenditures may vary
substantially from
these estimates depending upon the products chosen to market and
upon the
Company's ability to arrange third party financing of capital
expenditures.
Accordingly, the Company may need to seek additional funds
through loans or
other financing arrangements. Pending expenditures of the
proceeds of this
offering for the foregoing purposes, the Company may make
temporary
investments in government securities, insured certificates of
deposit and/or
in insured banking accounts.
SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------------
The selected consolidated financial data presented below
under the
captions "Consolidated Statements of Operations Data" and
"Consolidated
Balance Sheet Data" are derived from the consolidated financial
statements of
the Company and subsidiaries, which financial statements have
been audited by
Jones, Jensen & Company, independent certified public
accountants, to the
extent indicated in their report included elsewhere herein, for
the fiscal
year ended September 30, 1995. The consolidated financial
statements as of
September 30, 1995 and for the year ended September 30, 1995 and
the report
thereon, and the unaudited consolidated financial statements for
each of the
nine-month periods ended June 30, 1995 and June 30, 1996 are
included
elsewhere in this Prospectus.
The selected consolidated financial data set forth below is
qualified in
its entirety by, and should be read in conjunction with,
"Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and
the Consolidated Financial Statements, including the Notes
thereto, which
appear elsewhere in this Prospectus.
Fiscal Years Ended Nine
Months
September 30, Ended
June 30,
- ------------------------------------
1994 1995 1995
1996
(In thousands, except per
share data)
Consolidated Statements of
Operations Data:
Revenues.......................... $ 719 $1,447
$1,206 $ 767
Costs of goods sold............... 651 1,035
1,000 477
------- -------
- ------ ------
Gross profit 68 411
206 290
General administrative expenses.... 895 1,437
680 657
------ -------
- ------ ------
Net income(loss) from operations (827) (1,026)
(474) (367)
Other income (expense), net....... (57) (123)
16 (14)
------ -------
- ------ ------
Net income (loss)................. $( 884) $(1,149) $
(458) $(381)
====== =======
======= ======
Net income (loss) per share(1).... (1.04) (0.75)
(0.31) (0.22)
Weighted average common and
common equivalent shares
outstanding (2)................... 853 1,534
1,475 1,720
----- -------
- ------- ------
As of As of Pro
forma As of
September 30, June 30, June
30,
- ------------------------------------------------
1995 1996
1996(1)
(in thousands)
Consolidated Balance Sheet
Data:
Total Current Assets....... $ 231 $ 218 $
1,578
Property and Equipment, net.. 2,997 3,002
3,002
Total Liabilities.......... 2,428 2,385
785
Shareholders' equity....... 1,357 1,512
4,472
(1)Assumes no sale of the over-allotment shares.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------
Overview
- --------
Worldwide Forest Products, Inc. and its subsidiary ("WWFP"
or the
"Company"), a post-restructuring stage company, is engaged in the
wood
products business. Specifically, WWFP specializes in the
manufacture and sale
of preservative treated wood products such as utility poles,
bridge pilings
and timbers, railroad cross ties and guard rail posts.
The plant effectively began its wood preserving business in
1912.
Although undergoing several ownership changes during the
intervening time
period, the Company today has a base of assets including various
items of wood
preserving equipment, parts, rolling stock, heavy equipment, rail
track,
customer lists and inventory located in Louisville, Mississippi.
Originally
built in 1912, the Louisville plant was owned and operated by
America Creosote
Works, Inc. until February 1, 1984. At that time, its assets
were purchased
by Superior Wood Products ("SWP"). SWP discontinued operations
in 1987.
Worldwide Forest Products, Inc. was then formed in 1988 to
acquire the assets
of SWP. The plant historically manufactured and sold creosoted
materials such
as utility and transmission poles, pilings, posts, bridge
timbers, lumber,
railroad cross-ties and switch-ties.
In December, 1993 International Financial Industries, Inc.
acquired
majority control of the Company and began to integrate current
management into
the Company's operating and management team.
This implementation of the Management team's strategic
vision (the
"Plan") required a redirection of focus by the Company from
treating services
only ("TSO"), "spot buying" or "sub-contracting" to "direct bid"
or "full
service operation" ("FSO") business. Among other elements, the
principle
difference between TSO and FSO is that FSO business requires
substantial
capital commitments to fund inventory accumulation (see Revenue
subsection).
The Plan also required Management to upgrade Company
operating and
production efficiencies, quality control standards and compliance
with E.P.A.
regulations in order to meet or exceed the rigorous Utility wood
industry
buyers' standards. It concluded with an undertaking to cause the
Company to
be approved or "listed" as a preferred vendor for FSO business by
a targeted
group of buyers, which buyers represent a majority of market
demand for
utility wood in the industry. This process involved bringing in
engineer
representatives of these potential customers to the Louisville,
MS plant for
an intensive due diligence and testing examination of the
Company's
operations, quality and environmental control procedures.
As a result, the Company was successful at becoming
qualified as a
preferred vendor for most targeted buyers prospects and was
listed as an
exclusive annual supply contract bidder with certain major
utilities and
municipalities.
Phase II started in the Summer of 1994. Management focused
its marketing
efforts on its potential U.S. Customer base with the goal of
obtaining
invitations to bid for business. Buyers "let" these Requests for
Quote
("RFQs") during the Fall, 1994 bidding season and awarded the
transactions in
March, 1995. This process is similar for both utilities and
municipal buyers
of the Company's preservative treated wood product. The success
of the
marketing effort was one factor which led to a dramatic increase
in sales
between the fiscal years ending 1994 and 1995 (see following
Revenue section).
In fact, sales for the third (3rd) quarter of fiscal year 1995
totaling
$646,462 accounted for forty-four and seven-tenths percent
(44.7%) of the
fiscal year's revenue. Many of these contracts were awarded in
March, 1995
and required production to commence and end during the March to
June, 1995
time periods. As a result, the Company's working capital was
fully committed
to additional investments in inventory and accounts receivables.
To maintain the reputation it had established during this
nearly one and
a half year building period, the Company maximized its financial
capabilities
while successfully implementing its sales expansion plan.
Management
recognizes that capital constraints are a key factor leading to
failure to
perform on a committed contract. Because RFQs are released as a
result of
years of budgetary planning at the municipal or utility
management decision
making level, the industry looks with disdain upon any treated
wood products
supplier which fails to perform on a contract commitment.
Therefore, the
Company suspended its aggressive pursuit of its FSO marketing
plan to avoid
such problems.
However, the Company now recognizes the extent to which a
reintroduction
of its FSO marketing plan may be able to directly generate
additional sales.
It intends to wait until adequate financing is in place to
sustain the demand
which the Company believes, although there is no assurance, may
arise from
another implementation of its FSO Marketing plan.
Revenue
- -------
The Company's revenue increased 101.1% from the fiscal year
ended
September 30, 1994, to the fiscal year ended September 30, 1995:
$719,194
versus $1,446,526 respectively. Successful implementation of the
Company's
marketing plan is evidence by this revenue increase. Revenue
declined 36.4%
for the nine months ended June 30, 1996 as compared to the nine
months ended
June 30, 1995: $767,124 versus $1,206,480 respectively. In
Management's
opinion, this was primarily due to a necessary strategic decision
to convert
most business from FSO to "treating service only" ("TSO") as a
means of
preserving capital until such time as the Company is able to
employ sufficient
capital to conduct the more capital intensive FSO line of
business.
Therefore, the Company is currently embarked on an
aggressive TSO
marketing and business origination campaign, the capital
requirements for
which is significantly lower than for FSO business. When
adequate capital
funding arrangements are finally in place, the Company intends to
devote more
resources to the FSO service business (a higher margin, higher
capital
requirement line). Additionally, the Company believes utilities
are showing
increased desires to satisfy their treated wood needs by using
FSO supply
contract relationships.
Revenue during the fiscal year ended September 30, 1995
peaked at June
30, 1995. The Company believes this evidences the success of the
marketing
plan implemented in 1994. The quarterly totals also reflect the
less
predictable revenue mix associated with spot purchases and
sub-contracting
(i.e., there is a significant fluctuation of revenue over the
seven quarters
presented in the table presented later in this section of the
Prospectus).
The Company can provide no assurances that this trend will be
reversed in the
future.
Thereafter, the momentary decline was followed by a steady
revenue build-
up evidencing the Company's successful marketing shift from the
more capital
intensive FSO type business to the less capital intensive TSO
business,
although the Company can provide no assurances that this trend
will continue
until such time as capital availability allows the Company to add
additional
FSO volume.
Revenue analysis in the industry is typically expressed in
terms of
revenue per cubic foot. One cubic foot of FSO revenue is
approximately $7.75.
One cubic foot of TSO revenue is approximately $3.25. The
Company's ultimate
goal is to have revenue from FSO business represent approximately
eighty
percent (80%) of its total, and TSO business the other twenty
percent (20%).
Stated in a volume-related alternative, the Company would like to
see half of
its cubic foot volume of product be from FSO business, the other
half from TSO
business. An increase in revenue due to an increase in FSO
business does not
necessarily result in an increase in net profits.
The primary market for the Company's product has been the
continental
United States. However, some overseas sales have been made in
the 1994 and
1995 fiscal years totaling 4% and 24% respectively. The Company
intends to
avail itself of any future international opportunities,
especially given the
expertise gained by management with prior export sales. However,
the capital
requirements for this type of business usually exceed those from
any other
type of sale by the Company. It is transactions of this type,
capital
intensive sales opportunities, that lend credibility to and
justification of
management's decision to shift from the FSO to TSO production
until the
Company's available capital is substantially enhanced.
Generally, the Company focuses its efforts on the Southeast
and Northeast
quadrants of the U.S. for the majority of its business. The
Company's success
in the Northeast was a direct result of its effective
implementation of the
marketing plan discussed above. Electric transmission and
telephone utility
companies comprise the bulk of the targeted customers in these
regions.
Approximately 75% of the Company's 1995 revenue was derived from
these two
regions. Repeat business represented 39% of the 1995 fiscal year
revenue.
Edison Hubbard represented approximately 16% of the Company's
revenues during
the fiscal year ended September 30, 1995. No other customer
represented more
than 10% of the Company's revenue during the fiscal years ended
September 30,
1994 and 1995, or in the nine month period ended June 30, 1996.
Cost of Goods Sold
- ------------------
The Company's cost of goods sold increased 59.0% between the
fiscal years
ended September 30, 1994 and September 30, 1995: $651,243 versus
$1,035,214
respectively. Cost of goods sold declined 52.3% for the nine
months ended
June 30, 1996 from the nine-months ended June 30, 1995: $476,954
versus
$999,520 respectively. In Management's opinion, this was
primarily due to a
strategic decision to convert most business from FSO to TSO as a
means of
preserving capital until such time as the Company would be able
to employ
sufficient capital to conduct the more capital intensive FSO line
of its
business.
Since TSO business involves treating white wood owned by
others, the
Company's purchase of white wood declined significantly as a
percentage of
revenue for the nine months ended June 30, 1996. This
relationship causes the
cost of goods to decline as a percentage of sales.
As the mix between FSO and TSO business shifts, these types
of analytical
relationships will persist. Additionally, to the extent the
Company is
successful in moving toward greater vertical integration, further
appealingly
counter intuitive ratios will continue to arise, but not until
such time as
sufficient capital is available to the Company. For the
nine-month period
ended June 30, 1996, the ratio of FSO revenue to TSO revenue is
approximately
fifty-fifty. In terms of volume, the ratio is approximately
twenty-eighty,
respectively.
Factors which, if implemented, would bring about greater
operating and
financial efficiencies and positively impact Cost of Goods Sold
and Gross
Profit include: (1) buying "green wood" and removing the bark at
a Company
owned debarking facility; (2) shipping-in more raw material and
shipping-out
more finished product by rail line; (3) removing water from the
wood by dry
kiln versus steam, which significantly reduces its weight; (4)
having
sufficient capital; (5) the revenue mix; and, (6) increasing
volume. Perhaps
the last one, volume, can overwhelmingly have the most dramatic
effect on both
operating and financial efficiencies. One of the Company's
longer-term
objectives is to increase volume through direct sales, broker
sales and other
means. See a more detailed discussion on these points in the
sections which
follow.
Gross Profit
- ------------
The Company's gross profit increased 505.3% between the
years ended
September 30, 1994 and September 30, 1995: $67,951 versus
$411,312
respectively. This was primarily a volume related circumstance
(i.e., fixed
costs remained relatively constant as volume increased). Gross
profit
increased 40.2% between the nine months ended June 30, 1996 as
compared to the
nine months ended June 30, 1995: $290,170 versus $206,960
respectively.
However, the increase in gross profit is attributable to a change
in
accounting practices which in the nine months ended June 30, 1996
resulted in
approximately $191,463 of expenses being reclassified as general
and
administrative expenses rather than as a cost of goods sold.
Gross profit fluctuated significantly during the quarters
presented in
the table later in this section of the Prospectus. One factor
explaining this
outcome is the relatively stable fixed costs incurred to handle
varying levels
of production. During the most recent four quarters presented in
the table,
the trend away from the more capital intensive (attributed
primarily to white
wood purchases, freight and handling) FSO type business to the
less capital
intensive TSO business led to a declining gross profit
percentage. Although
the Company can provide no assurances this trend will subside,
the Company
expects the Cost of Goods to level off over time as a percentage
of revenue
until such time as the Company deems it prudent to generate
additional FSO
business.
Results of Operations
- ---------------------
The following table sets forth Cost of Goods Sold, Gross
Profit, General
and Administrative Expense, Net Income (Loss) from Operations,
Other Income
(Expenses) and Net Income data of the Company expressed as a
percentage of
Revenue:
Fiscal Years Ended Nine Months
Ended
September 30, June 30,
------------- ---------
Category 1994 1995 1995
1996
- -----------------------------------------------------------------
- -------------
Revenue ................... 100.0% 100.0% 100.0%
100.0%
Cost of Goods Sold......... 90.6% 71.6% 82.8%
62.2%
------ ------ ------
- ------
Gross Profit............... 9.4% 28.4% 17.2%
37.8%
General & Administrative..... 124.4% 99.3% 56.5%
85.7%
------ ------ ------
- ------
Net Income(Loss)from
Operations.............. (115.0)% (70.9)% (39.3)%
(47.9)%
Other Income (Expense)..... (7.9)% (8.5)% 1.3%
(1.8)%
------ ------ ------
- -------
Net Income................. (122.9)% (79.4)% (38.0)%
(49.7)%
Note: the net operating loss (NOL) carry forward at September
30, 1995 of
approximately $5,150,000 may be used to offset future taxable
income. Because
the Company cannot reasonably estimate the timing of the future
benefit, no
tax benefit has been or is being reported for any of the above
periods.
Considerations Potentially Impacting Above Discussion; Operating
and financial
Efficiencies
- -----------------------------------------------------------------
- ------------
Raw Material: the potential exists for cost savings in two
respects. To the
extent the Company is able to (1) buy "barky wood" and remove its
bark to
create "white wood" at a Company owned and operated debarking
facility (the
"Pole Mill"), profit customarily paid to an outsider for such
service would be
retained by the Company; and, (2) to the extent the Company
establishes a Pole
Mill, the in-bound freight handling costs associated with the
Purchase of
white wood would be avoided. While the Company can make no
assurances it will
reactivate its Pole Mill, it has recently concluded an agreement
to form a
Joint Venture with a barky wood supplier to bring the Company's
Pole Mill in
Louisville, MS back on line. (See "BUSINESS-Marketing
Arrangement with Kemper
Pressure Treated Forest Products, Inc."). With a working capital
investment
of approximately one million dollars ($1,000,000) for Pole Mill
inventory and
minor reactivation costs, the Company expects to be able to
reduce its costs
of white wood (on a current dollar basis) from an average of four
dollars and
sixty-two ($4.62) per cubic foot to approximately four dollars
($4.00) per
cubic foot, or three dollars and seventy cents ($3.70) per c.f.
for the white
wood, plus thirty cents ($.30) per c.f. - to debark).
Wood Drying: there are currently three commonly practiced
methodologies for
extracting water from white wood utilized by the industry today:
(1) steam it
out in a steamer (typically an eighteen hour process with a
maximum capacity
of 4,500 cubic feet per steaming cycle); (2) bake it out in a dry
kiln
(typically a seventy hour process with a maximum capacity of
10,000 cubic feet
per drying cycle); or, (3) let the wood sit and naturally dry
(typically a six
month process with capacity constrained only by capital
limitations). Each
methodology has certain advantages and disadvantages.
The single most significant disadvantage to each method is as
follows: (1)
steaming - the least amount of water is removed, resulting in a
heavier pole,
and increased freight costs; (2) dry kiln - the limit on pole
size; a dry kiln
operator is typically limited to processing poles no longer than
forty-five
feet; and, (3) natural drying - the enormous amounts of capital
invested in
wood held in inventory for periods lasting six months or longer.
The single most significant advantage to each method is as
follows: (1)
steaming - the short cycle time, as it relates to volume; (2) dry
kiln - the
lightweight white wood that results - a critical freight related,
competitive
pricing issue; and, (3) natural drying - no volume limitations.
While the Company currently steams wood in its own facility and
purchases dry
kilned wood, its goal is to move all its shorter white wood
drying to the dry
kiln process and continue to steam the longer white wood. The
Company does
not at this time utilize the natural drying process. While the
Company can
make no assurances it will benefit from a Joint Venture Agreement
for the
construction of a Dry Kiln on a related company's land, the
negotiations to
conduct an agreement to form a Joint Venture to construct and
operate a Dry
Kiln are currently being finalized by the Company and the related
company. A
joint marketing plan has been entered into with this related
company known as
Kemper Pressure Treated Forest Products, Inc. to provide dry kiln
services in
return for debarking services.
Freight: the Company uses truck, rail and occasionally ships to
move finished
product to its customer. The weight, volume and pole length
considerations
impact the freight equation. Truck freight is usually
constrained by weight
and/or pole length, before volume becomes a constraining
consideration.
However, trucking carries the highest per-cubic foot ("c.f.")
cost to move the
wood based on their two or three dollar per mile transportation
fees. Rail
freight is more typically constrained by volume, before weight or
length. The
key to effective rail cost management is in negotiating volume
commitments
with a single carrier to drive the rate down. These agreements
usually
require shipments to be spread evenly over the year. Movement by
ship has the
fewest constraints, but is typically used only for international
deliveries.
Trucking rates are generally priced using a "dollar times miles
per trip"
approach, subject to weight and length limitations. There are
rarely volume
discounts available in trucking. Trucking is usually the least
cost effective
means of moving production, but often times the only alternative
for certain
destinations. On the other hand, movement of production by rail
can lead to
significant volume discounts, driving the freight per c.f. down.
The Company
currently has an agreement negotiated with a major rail carrier
that includes
a designated fleet of fixed-arm, customized utility wood rail
cars capable of
volume maximization and loading time reductions. To the extent
the Company is
able to funnel more volume through rail means, its freight cost
per cubic foot
will continue to decline, enhancing margins, pricing strategies
and customer
development.
The Company typically utilizes truck and rail lines to transport
raw material
and finished product to and from its Louisville, Mississippi
operations.
While it can provide no assurance of reduced freight costs, the
Company has a
rail head on the property, and the Company intends to maximize
volume shipped
by rail.
Capital: to the extent the Company acquires additional
substantial capital at
its disposal, many cost reduction strategies now in the planning
and pre-
implementation stage could then proceed. New opportunities could
then be
considered. Larger direct bid business could be bid (see
discussion below in
the Revenue Mix section). Additionally, the Company would be
positioned to
take advantage of market pricing aberrations and would be able to
invest
heavily in deeply discounted green or white wood, as the
marketplace permits.
These types of savings would favorably and directly impact the
Cost of Goods
Sold, Gross Profit and Net Income.
Revenue Mix: The Company looks to three primary sources for its
revenue
generation: (1) spot purchasing; (2) sub-contracting or broker
business; and,
(3) direct bid business. Each type of business has its own
distinct
characteristics. Spot purchases are sporadic and fall within a
range between
two thousand dollars ($2,000) and thirty thousand dollars
($30,000). They
are, however, useful in filling volume shortfalls in the
production cycle
(i.e., its more efficient to run the steamer at one hundred
percent capacity
than at eighty-five percent capacity. Subcontract or broker
business involves
the Company being awarded a portion of someone else's direct bid
business.
While this type of business generally involves more substantial
volume than
spot order business, it can cause volume to be compressed into a
short or
shorter periods. Currently, most of the Company's revenue is
generated from
this source. Direct bid business usually involves three
elements. It: (1)
is long-term; (2) provides steady-volume, and (3) demands
substantial monetary
commitments. It is not uncommon for annual direct bid order
awards to begin
at one-quarter million dollars ($250,000) and to increase to as
much as ten
million dollars ($10,000,000). This type of business is expected
to be relied
upon more heavily by the Company as a key to its plans for future
growth and
success.
Volume: Its impact cannot be understated. The principal impact
volume has on
preservative wood treating is to enable operating, production and
productivity
efficiencies to be maximized. Examples include: (1) running the
Pole Mill
full time removing bark from the green wood, thereby minimizing
the white wood
costs to the Company; (2) filling the steamer or dry kiln to
maximize
allowable capacity before extracting the water; (3) loading the
treating
cylinder to maximum allowable capacity before preservative
treating the white
wood, thereby minimizing the treated cost per cubic foot; (4)
maintaining the
treating chemicals at constantly high temperatures and thereby
avoiding the
additional diesel or gas fuel related cost of reheating the
chemicals and
water when they cool off between production runs; (5) loading
rail cars to
maximum volume, thereby achieving lower freight costs per c.f.
delivered; and,
(6) the lower per c.f. labor costs associated with additional
business.
Two significant benefits derived from increased volume are the
goodwill and
higher visibility it brings to the Company in the marketplace,
possibly
leading to additional business.
General and Administrative
- ---------------------------
General and administrative ("G&A") costs consist primarily
of supervisory
and administrative salary, commissions, insurance, depreciation,
amortization,
professional fees, accounts receivable financing, freight,
utilities, travel
and other miscellaneous costs. G&A expenses increased 60.6%
between the years
ended September 30, 1994 and September 30, 1995: $894,765 versus
$1,436,981
respectively. This was primarily a volume related circumstance.
G&A expenses
decreased 4.0% between the nine months ended June 30, 1995 and
June 30, 1996:
$681,430 versus $657,654 respectively. The Company believes this
outcome is a
result of the enhanced cost control implemented during 1995.
Management will
continue to strive for more efficiency in this area.
Other Income (Expenses), net
- ------------------------------
Other income (expense), net consists primarily of gain on
forgiveness of
debt in the fiscal year ended September 30, 1995, gain on sale of
assets,
interest income and interest expense. Other income(expense), net
increased
between the years ended September 30, 1994 and September 30,
1995: $(123,348)
versus ($56,886) respectively. Other Income (Expense), net
decreased between
the nine months ended June 30, 1995 and June 30, 1996: $16,326
versus
$(13,652) respectively. This outcome arose due to no gain on
sale of assets
in the most recently concluded period.
Provision for Income Taxes
- --------------------------
Given the Company's net operating loss ("NOL") carry forward
totaling
approximately $5,150,000 through September 30, 1995 no provision
(or benefit)
for income taxes was made in any period reported. In the opinion
of
management, future benefits arising from utilization of the NOL
carry forward
cannot be reasonably be estimated. No deferred asset has been
established.
Quarterly Results of Operations
- -------------------------------
The following table set forth certain unaudited quarterly
financial
information in dollars and as a percentage of revenue for each of
the
Company's last seven fiscal quarters. In the opinion of
management, all
adjustments, consisting only of normal recurring adjustments,
necessary for a
fair presentation of the information are set forth herein.
<TABLE>
<CAPTION>
Fiscal 1995 Quarters Ended
Fiscal 1996 Quarters Ended
- -----------------------------------------------------------------
- -----------
Category Dec.31, Mar. 31, June 30, Sept.
30, Dec. 31, Mar.31, June 30
1994 1995 1995 1995
1995 1996 1996
<S> <C> <C> <C> <C>
<C> <C> <C>
Revenue $ 338,048 $ 221,970 $ 646,462 $
240,046 $ 174,176 $ 272,098 $ 320,850
Costs of goods sold 220,408 355,955 423,157
35,694 86,665 154,577 235,712
------- ------- -------
- ------ ------ ------- -------
Gross Profit $ 117,640 $(133,985) $ 233,305 $
204,352 $ 87,511 $ 117,521 $ 85,138
General & Administ. 91,439 80,491 177,795
1,087,256 204,572 212,853 240,229
------ ------- --------
- --------- -------- ------- -------
Net Income (Loss)
from Operations 26,201 (214,476) 45,510
(882,904) (117,061) (95,332) (155,091)
Other Income(Expense) ( 682) 23,568 (6,560)
(139,674) (47) (2,547) (11,058)
------- ------- -------
- -------- ------- ------- --------
Net Income (Loss) 25,519 (190,908) 38,950
(1,022,578) (117,108) (97,879) (166,149)
Net Income (Loss)
per Share $ 0.02 ($0.12) $ 0.02
($0.67) ($0.06) ($0.06) ($0.10)
Weighted Average
Common Stock
Outstanding(000s) 1,535 1,535 1,535
1,535 1,720 1,720 1,720
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF
REVENUE
- -----------------------------------------------------------------
- ----------
Fiscal 1995 Quarters Ended
Fiscal 1996 Quarters Ended
- -----------------------------------------------------------------
- -----------
Category Dec.31, Mar. 31, June 30, Sept.
30, Dec. 31, Mar.31, June 30
1994 1995 1995 1995
1995 1996 1996
<S> <C> <C> <C> <C>
<C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0%
100.0% 100.0% 100.0%
Cost of Goods Sold 65.2% 160.4% 65.6% 14.9%
49.8% 56.8% 73.5%
------- ------ ------ ------
------ ------ ------
Gross Profit 34.8% (60.4)% 34.5% 85.1%
50.2% 43.2% 26.5%
General & Adminstra. 27.0% 36.3% 27.5% 452.9%
117.4% 78.3% 74.9%
------- ------- ------ -------
------- ------ -------
Net Income (Loss)
from Operations 7.8% (96.7)% 7.0% (367.8)%
(67.2)% (35.1)% (48.4)%
Other Income
(Expense) (2.0)% 10.7% (1.0)% (58.1)%
0.0% (.9)% (3.4)%
------ ------- ------- -------
------- ------- -------
Net Income (Loss) 7.6% (87.6)% 6.0% (425.9)%
(67.2)% (36.0)% (51.8)%
</TABLE>
General and Administrative
- --------------------------
General and Administrative expenses fluctuated as a
percentage of revenue
during the quarters presented above from a low of 27.0% to a high
of 452.9%.
The increase in the quarter ending September 30, 1995 can be
primarily
attributed to depreciation and amortization, salaries,
professional fees and
commissions. While no assurances can be provided that so wide a
range of
outcome will be avoided in the future, the Company expects recent
focus on TSO
type business to narrow it significantly.
The Company believes that future periods may be impacted by
general
economic conditions, various competitive factors (including
price-based
competition) and competition from other parties providing
alterative wood
preserving technologies. Additionally, the results could also be
affected in
any given period by circumstantial revenue gain (i.e., not
strategic or
planned for), business interruptions or costs associated with
hurricanes, ice
storms, floods, train derailment, fire or new regulatory mandates
and other
similar events outside the control of the Company. One other
consideration
important to consider is the impact fluctuations in spot
purchases and/or sub-
contracting can have on the results.
Other considerations that can have potentially significant
impact on the
Company's operations include: loss of a principal customer;
inability to
obtain appropriate sized pole for an order in a timely manner,
changes in EPA
regulations; market demand for the Company's product; a decline
in selling
prices; the ability to maintain certain relationships currently
providing
favorable terms and opportunities to the Company; the timing of
significant
orders; the timely availability of capital cancellation or
rescheduling of
orders by a customer experiencing financial difficulties;
unexpected return of
production; the timing of expenditures in anticipation of
increased sales;
cyclicality of revenue in the Company's targeted markets.
Net Income (Loss) From Operations
- ---------------------------------
The Company's Gross Profit has fluctuated from a loss of
60.4% to a
profit of 85.1%. While the Company can provide no assurance that
a particular
outcome will be achieved, the Company's recent focus on TSO
related business
is expected to narrow this wide range of outcomes.
Liquidity and Capital Reserves
- ------------------------------
At the time IFI acquired control of the Company in December,
1993 it
made a working capital bridge loan to the Company totaling one
million one
hundred thousand dollars ($1,100,000). Subsequent to this
funding, IFI
arranged for other short term loans from various individuals
and/or entities.
The amounts remaining outstanding, along with accrued interest,
are expected
to be repaid with proceeds from this offering. This offering is
also expected
to provide the Company with additional working capital. Together
with
existing funds, anticipated cash flow from operations and amounts
available
under its various financing facilities, the Company believes the
net proceeds
from the sale of common stock in this offering will be sufficient
to meet its
working capital needs for the next twelve (12) months.
In addition to looking for funds provided by operations to
finance its
activities, the Company has had a multi-year accounts receivable
financing
arrangement with Prestige Capital, the balance of which currently
is
approximately $25,000. Amounts available for borrowing under
this existing
facility is limited to the lower of the commitment amount or a
borrowing base
amount calculated on the balance of accounts receivable.
However, the Company
constantly entertains discussions for the purpose of obtaining
large dollar
amounts or more favorably priced funding facilities.
While no assurance can be provided by the Company that its
efforts will
be successful, the Company is actively pursuing other funding
vehicles,
including but not limited to, purchase order financing and
equipment
sale/leaseback type concepts. Agreements for these types of
financing
arrangements will only be entered into if in the Company's
opinion, they
provide a cheaper and/or more stable form of financing.
BUSINESS
--------
The Company
- -----------
On November 19, 1987, the Company was initially formed as
Bond Street
Corporation, a Colorado corporation ("BSC"). BSC's corporate
chapter
authorized it to evaluate, structure and complete a merger with,
or
acquisition of, prospects consisting of private companies,
partnerships or
sole proprietorships. BSC completed a "best efforts' two hundred
and fifty
thousand (250,000) share initial "blank check" public offering of
$.0001 par
value, common stock at an offering price of one dollar ($1.00)
per share on
September 13, 1990. Total gross offering proceeds raised were
$250,000.
On September 18, 1990, the Company entered into a Plan and
Agreement of
Reorganization ("Agreement") to acquire 100% of the issued and
outstanding
shares of Treat-All Wood Products, Inc., a Mississippi
corporation ("TAWP").
In December, 1993 International Financial Industries, Inc.
("IFI")
acquired majority control of the Company. IFI believed that a
core of a solid
business existed at the Company. IFI further believed that its
expertise,
coupled with a new management team it intended to assemble at the
Company
(collectively referred to as "Management'), would lead the
Company into the
future while carrying out certain strategy reorganizations. The
basis of and
subsequent implementation of Management's strategic vision will
be addressed
in the text which follows.
History and Organization
- ------------------------
Treat-All Wood Products, Inc., ("TAWP"), the Company's
wholly owned
subsidiary, was formed in November, 1988 under the laws of the
State of
Mississippi for the purpose of acquiring the assets of Superior
Wood Products,
Inc. ("SWP") and operating a wood preserving business. These
assets included
various items of wood preserving equipment, parts, rolling stock,
heavy
equipment, railroad and inventory located in Louisville,
Mississippi. TAWP
engaged in the wood products business, specializing in the sale
and
manufacture of preservative treated wood products such as utility
poles,
bridge pilings and timbers, railroad cross-ties and guard rail
posts.
Originally built in 1912, the Louisville plant was owned and
operated by
American Creosote Works, Inc. until February 1, 1984, when its
assets were
purchased by SWP. SWP discontinued operations in 1987. The
plant
historically manufactured and sold creosote treated materials
such as utility
and transmission poles, pilings, posts, bridge timbers, lumber,
railroad
cross-ties and switch-ties.
Executive Offices
- -----------------
The Company's and its subsidiary's executive offices are
located at 101
Baremore Street, Louisville, MS 39339. The mailing address is
P.O. Box 564,
Louisville, MS 39339. The Company's and its subsidiary's
telephone and
facsimile numbers at such address, respectively, are (601)
773-5200 and (601)
773-9339. Unless the context otherwise requires, the term
"Company" as used
herein refers to the WWFP and is wholly-owned subsidiary,
Treat-All Wood
Products, Inc. ("TAWP").
Facilities/Properties
- ----------------------
The Company maintains its manufacturing and service
facilities on
approximately 100 acres located at 101 Baremore Street,
Louisville,
Mississippi. The facility is located in the East Central part of
Mississippi,
approximately 90 miles from Jackson, Mississippi and 50 miles
from the Alabama
border. Electricity, water and sewer services are provided by
Louisville
Utilities. Natural gas is provided by Mississippi Valley Gas Co.
Telephone
service is provided by South Central Bell, and, South Rail Co., a
regional
railroad, as a spur running into the plant to facilitate rail
shipment both
inbound and outbound. The plant is accessible on its south and
east sides by
paved highway or city street. This facility is improved by
several buildings
housing its pressure treating systems, boiler system, pump and
vacuum systems,
water treatment system, pole processing system, cross-tie
manufacturing system
and plant offices. The Company owns this property in fee simple
title.
Currently, the plant's annual production capacity is $15,000,000
to
$18,000,000 in annual revenues based on current market prices per
cubic foot
of treated wood, depending on product mix and assuming market
demand warrants
running operations at capacity. As of the date of this
Prospectus, the plant
is operating at a $1,400,000 to $1,500,000 annual production
level (i.e. as
would be reflected in financial statements under the heading
"Revenues").
Agreement for Management Services
- ----------------------------------
On November 30, 1993 the Company engaged Source Management
Services, Inc.
("SMS"), a Delaware corporation) as a management advisor for the
purpose of
assisting the Company in achieving its business plan via the
development and
implementation of long-term fiscal and management policy and
assistance with
general oversight of the Company. In exchange for SMS's
services, the Company
agreed to pay SMS on an hourly basis at the rate of one hundred
fifty dollars
($150.00) per hour, exclusive of expenses.
Introduction
- -------------
While having prior experience in this business and this
industry (see
Management section), Management embarked on a study of the
various components,
which in aggregate comprise the preservative treated wood
industry. A brief
discussion of each of those components and Management's
conclusion about the
best way to address each component will follow. The dollar
amounts provided
below are generally indicative of normal marketplace supply and
demand
conditions, but no assurance can be provided that they are
representative of
the actual price the Company will pay. To facilitate comparative
information,
an effort will be made to convert all amounts to "per-cubic-foot"
terminology.
To further facilitate the discussion, types of production will be
limited to
distribution poles (generally fifteen to forty-nine [15' - 49']
feet in
length) or transmission poles (generally fifty to one hundred
[50' to 100']
feet in length). These are more commonly referred to as
telephone or utility
poles by the general public.
General - Wood Classification
- ----------------------------
It is common within the industry to usually describe wood in
two ways.
The first way is by referring to a two part classification
system. The first
("1st") part, its class, refers to the approximate circumference
six feet up
from the fattest end of the pole (its "base"). Class 1 poles are
the fattest,
Class 7 and up, the thinnest. The second ("2nd") part of the
classification
refers to the length of the pole (i.e., 45', as in forty-five
feet long). The
most commonly ordered pole by the utility industry is "4/40"s.
This is the
pole seen along many neighborhood roads in America.
The second way to describe wood also has two parts. The
1st part refers
to harvested wood with bark as "barky wood" and wood without bark
- - debarked -
as ("white wood" or "green wood"). the 2nd part refers to the
drying method
the green wood has undergone. Steam dried green wood is also
referred to as
"green wood." Dry kiln dried wood is called "white wood."
Manufacturing Costs - Raw Material - Wood
- ------------------------------------------
The first step in the process begins with trees in a forest
being
harvested and brought to market as "barkies," a tree with its
bark intact.
These trees are selectively marketed or pre-sorted by a "marker"
who specifies
trees for harvest. A good marking will result in a nearly one
hundred percent
(100%) usable truckload, minimizing waste. The harvested barkies
are then:
(1) sold by the flat-bed semi-trailer truckload for seventy-four
dollars
($74.00) per ton to a Pole Mill operator, transportation
included; (2) sold by
the truckload for seventy-four dollars ($74.00) per ton to an
operator of a
wood treating facility (with a Pole Mill facility),
transportation included
(see Freight section, below); or, (3) processed further by the
harvester and
be converted to white wood (through debarking or early-phase
manufacturing) at
the harvester's Pole Mill facility.
The approximate calculation to convert a truckload of
barkies to a cost-
per-cubic foot (both before and after the bark removal) would be
solvable
using these current factors: approximately seventy-four dollars
($74.00) per
ton; twenty-five (25) tons per truckload; twenty-five percent
(25%) by weight,
wasted in the debarking process; and, sixty (60) pounds per cubic
foot
("c.f.") in "green" or more commonly, "white" wood (broadway
defined as
debarked poles). To determine the cost per c.f. of this wood,
begin by taking
the $74.00 per ton cost times 25 tons per truckload, equaling one
thousand
three hundred seventy-five dollars ($1,375.00) per truckload.
Then, compute
thirty-seven thousand five hundred (37,500) pounds of usable
green wood (by
multiplying seventy-five percent [75%] remaining after waste and
debarking - a
complement to the stated waste of twenty-five percent [25%] - of
the original
truck loaded barky weight of 50,000 pounds). Then, the 37,500
pounds would be
reduced by twenty percent (20.0%) for the culled wood [crooked
poles, split
poles, knotted poles, termite damaged poles and other damage]
resulting in
30,000 pounds. Then the 30,000 pounds is divided by 60 pounds
per c.f. to
determine the sellable c.f. of wood from an average truckload,
equaling five
hundred (500) c.f. The computation would conclude by dividing a
total cost of
$1,850 by the saleable 500 c.f., resulting in a three dollars and
seventy
cents ($3.70) in-bound cost per c.f. to the Mill operator from
the harvester.
A truckload of barkies is not always sorted precisely (by
either length
or thickness). To the extent a Mill operator-treater has an
order for a
certain number of specified-size poles, it must cull them from
the truckload
or truckloads of barky wood it receives. While there is
potential for certain
inefficiencies (i.e., inventory build-up of undesirable
slow-moving lengths
and/or thicknesses), the overall economics support this form of
acquiring raw
material (see Manufacturing Costs - Pole Mill/Purchases section).
Generally
however, many truckloads of barky wood will ultimately provide a
pole treater
with the specific range of pole sizes needed. It's important to
remember that
although the Company does have a Pole Mill, it is not currently
operating and,
therefore, does not purchase barky wood from harvesters.
The Company's geographic location places it in the center
of the
Southeast wood-basket heartland (generally considered to be
Alabama, Western
Florida, Georgia, Louisiana and Mississippi). The type of wood
most commonly
harvested for telephone pole preservative treating purposes is
Southern Yellow
Pine. While the Company has no formal supply agreements, it has
rarely
experienced difficulties in obtaining the necessary quantities of
this wood
type for its production. The Company remains convinced there is
reasonable
availability of poles able to be purchased on acceptable terms
and therefore
declines at this time to either enter long-term supply contracts
or purchase
timberland for harvesting purposes.
Manufacturing Costs - Pole Mill Operations/Purchases
- -----------------------------------------------------
Mill operators buy "barky wood" at approximately $3.70 per
c.f. currently
(See Manufacturing Costs - Raw Material - Wood section) and
remove the bark to
create "white or green wood." Bark removal is the function of a
"Pole Mill"
or debarking facility. Pole Mill operators generally incur
thirty cents
($.30) in costs per c.f. to remove bark and charge fifty cents
($.50) per c.f.
for their service. To be clear, the phrases "green wood" or
"white wood" are
sometimes used interchangeably, but can differ in meaning. The
term "green
wood" can also suggest water remains in the wood, whether it's
before drying
(in a debarked state) or after drying by steam. However, it is
more commonly
referred to as "white wood."
Additionally, Pole Mill operators customarily sort wood by
the above
described classification system as a means of adding value (as
much as one
dollar and seventy-two cents [$1.72] per c.f.) to enhance their
profit on the
purchase of barky wood. When an order is placed with a Pole Mill
operator,
the buyer almost always incurs a freight charge (of fifteen cents
[$.15] to
twenty-five cents [$.25] per c.f.) to have the white wood order
delivered.
The total will vary with distance traveled by the truck, but
range between two
dollars ($2.00) and three dollars ($3.00 per mile, two hundred
dollar
($200.00) minimum. White wood from the Pole Mill operators
usually sells for
$4.62 per c.f., plus freight.
As can be seen in the above discussion, certain cost
efficiencies can be
realized with the introduction of Pole Mill capabilities. They
can encourage
treaters and steamers to vertically integrate their operations.
Profit
customarily paid to an outsider for such service could be
retained by the
Company; and, (2) to the extent the Company reactivates its Pole
Mill, the in-
bound freight and handling costs associated with the purchase of
white wood
would be avoided.
While the Company can make no assurances it will reactivate
its Pole
Mill, it has recently concluded an agreement to form a Joint
Venture with a
barky wood supplier to bring the Company's Pole Mill in
Louisville, MS back on
line. With a working-capital investment of approximately one
million dollars
($1,000,000) for Pole Mill inventory and minor reactivation
costs, the Company
expects to be able to reduce its cost of white wood (on a current
dollar
basis) from an average of four dollars and sixty-two cents
($4.62) per cubic
foot, plus in-bound freight to approximately four dollars ($4.00)
per cubic
foot ($3.70 per c.f. for the white wood, plus thirty cents [$.30]
per c.f. -
to debark). The Company has allocated $1,000,000 of the offering
proceeds to
purchase inventory.
Highlighting this savings potential using revenue as a focal
point, white
wood generates approximately seven dollars and seventy-five cents
($7.75) per
c.f. of FSO source revenue. The white wood cost can range from
$4.00 per c.f.
(If the treater has a Pole Mill operation), to as much as $4.62,
plus at least
$.15 per c.f. for freight (if the treater buys from a Mill
operator). This
potential savings of seventy-seven cents ($.77, which equals
$4.62 + $.15 -
$4.00) is equal to ten and three-tenths percent (10.3%) of
revenue. The
potential impact on Gross Profit is substantial.
Manufacturing Costs - Wood Drying
- ---------------------------------
There are currently three commonly practiced methodologies
for extracting
water from white wood utilized by the industry today: (1)
steaming the water
out in a steamer (typically an eighteen hour process with a
maximum capacity
of 4,500 cubic feet per steaming cycle); (2) bake it out in a dry
kiln
(typically a seventy hour process with a maximum capacity of
10,000 cubic feet
per drying cycle); or, (3) let the wood sit and naturally dry
(typically a six
month process with capacity constrained only by capital
limitations). Each
methodology has certain advantages and disadvantages.
The single most significant disadvantage to each method is as
follows:
(1) steaming - the least amount of water is removed, resulting in
a heavier
pole, a freight issue; (2) dry kiln - the limit on pole size, a
dry kiln
operator is typically limited to processing poles no longer than
forty-five
feet; and, (3) natural drying - the enormous amounts of capital
invested in
wood held in inventory for periods lasting as long as six months.
The single
most significant advantage to each method is as follows: (1)
steaming - the
short cycle time, as it relates to volume; (2) dry kiln - the
lightweight
white wood that results - a critical freight related, competitive
pricing
issue; and, (3) natural drying - no volume limitations.
While the Company currently steams wood in its own facility
and purchases
dry kilned wood, its goal is to move all its shorter length white
wood pole
drying to the dry kiln process and continue to steam the longer
white wood.
The Company does not at this time utilize the natural drying
process. While
the Company can make no assurances it will benefit from a Joint
Venture
agreement for the construction of a Dry Kiln facility on a sister
company's
land, the negotiations to conclude an agreement to form a Joint
Venture to
construct and operate a Dry Kiln are currently being finalized by
the sister
company. A joint marketing plan has been entered into with this
sister
company to provide dry kiln services in return for debarking
services, once
the Company's Pole Mill is brought on line.
Manufacturing Costs - Freight
- ------------------------------
The Company uses truck rail and occasionally ships to move
finished
product to its customer. The weight, volume and pole length
considerations
impact the freight equation. Truck freight is usually
constrained by weight
and/or pole length, before volume becomes a constraining
consideration.
However, trucking carries the highest per-cubic-foot cost per
mile traveled,
based on its approximate dollar ($1.50) per mile transportation
fees (i.e.,
the freight charge to deliver a legally loaded flatbed with 750
c.f. of
treated poles, delivering to a customer 400 miles would average
eighty cents
[$.80] per c.f.). Minimum trucking rates are usually two hundred
dollars
($200.00) per trip. One other factor is that a
self-loading/unloading truck
runs an additional one hundred seventy-five dollars $175.00) per
delivery, an
option usually expected by buyers.
On the other hand, rail freight is more typically
constrained by volume,
before weight or length. A fifty foot (50') rail car can be
loaded on average
with two thousand eight hundred (2,800) c.f. of treated poles.
The cost of a
fifteen hundred (1,500) mile delivery (say . . . Louisville,
Mississippi to
Wellesley, Massachusetts) would run about three thousand one
hundred dollars
($3,100.00). While the delivery cost per c.f. is about one
dollar eleven
cents ($1.11) and higher than the trucking rate per c.f., almost
four times
more miles were covered. This fact allows the Company to be
competitive or
even undercut some competitors in the more distant markets of the
Northeast.
The key to effective rail cost management is in negotiating
volume commitments
with only one or two carriers to drive the rate down. These
agreements
usually require shipments to be spread evenly over the year.
Movement by ship
has the fewest constraints, but is typically used only for
international
deliveries.
Trucking rates are generally priced using a "dollars times
miles per
trip" approach, subject to weight and length limitations. There
are rarely
volume discounts available in trucking. This is usually the
least cost
effective means of moving production, but often times the only
alternative for
certain destinations. On the other hand, movement of production
by rail can
lead to significant volume discounts, driving the freight per
c.f., per mile
down. The Company currently has a very favorable agreement
negotiated with a
major rail carrier that includes a designated fleet of fixed-arm,
customized
utility wood rail cars capable of volume maximization and loading
time
reductions. They also include satellite tracking capabilities,
so that a
customer can know exactly where a particular shipment is at any
given time.
To the extent the Company is able to funnel more volume through
rail means,
its freight cost per cubic foot will continue to decline,
enhancing margins,
pricing strategies and client development. Currently, less than
fifty percent
(50%) of the Company's production is moved by rail with a goal of
increasing
the rail portion significantly.
The Company typically utilizes truck and rail lines to
transport raw
material and finished product to and from its Louisville,
Mississippi
operations. While it can provide no assurance of reduced freight
costs, the
Company has a rail head on the property and intends to maximize
volume shipped
by rail.
Manufacturing Cost - Creosote
- -----------------------------
Most wood leaving the Company's yard has been pressure
treated with a
creosote or coal-tar preservative in the auto clave (a large, air
tight
cylinder) at the Company's facility. "Creosote" is a generic
term applied to
certain distillates of tars. As used in the wood-preserving
industry, coal-
tar creosote or "creosote" denotes a distillate of coal-tar
produced by high
temperature carbonization of bituminous coal; it consists
principally of
liquid and sold aromatic hydrocarbons and contains appreciable
quantities of
tar acids and tar bases. It is heavier than water and has a
continues boiling
rage of at least 125 degrees Centigrade, beginning at about 100
degrees
Centigrade.
During the past year, the Company has paid between one
dollar nine cents
($1.09) and one dollar nineteen cents ($1.19) per gallon. A
gallon of
creosote at 225 degree centigrade weighs approximately 9.08
pounds. Although
subject to customer specifications, generally, eight-tenths
(8/10ths) of one
gallon of creosote is absorbed (or pressure injected) into one
(1) c.f. of
white wood.
Revenue Mix - General
- ---------------------
The Company manufactures and sells pine and hardwood
products such as
utility and transmission poles, pilings, bridge timbers, mining
ties and guard
rail posts. The Company looks to three primary sources for its
revenue
generation: (1) spot purchasing; (2) sub-contracting or broker
business; and
(3) direct bid business. Each type of business has its own
distinct
characteristics.
Spot purchases are sporadic and fall within a rate between
two thousand
dollars ($2,000) and thirty thousand dollars ($30,000). They
are, however,
useful in filling volume shortfalls in the production cycle
(i.e., it's more
efficient to run the steamer at one hundred percent [100%]
capacity than at
eighty-five percent [85%]).
Sub-contract or broker business involves the Company being
awarded a
portion of someone else's direct bid business. While this type
of business
generally involves more substantial volume than spot order
business, it can
cause volume to be compressed into short periods. Currently,
most of the
Company's revenue is generated from this source.
Direct bid business usually involves three elements. It:
(1) is long-
term; (2) provides steady-volume, and (3) demands substantial
monetary
commitments. It is not uncommon for annual direct bid order
awards to begin
at one-quarter million dollars ($250,000) and increase to as much
as ten
million dollars ($10,000,000). This type of business is expected
to be relied
upon more heavily by the Company as a key to its plans for future
growth and
success.
Service Mix - General
- ----------------------
The Louisville, MS operations are capable of providing the
following
services in the market place (1) framing - the process readying a
pole by
shaving or drilling to customer specifications; (2) branding a
pole (with WWFP
name and others, if specified); (3) steaming to dry wood; and;
(4) treating
wood with creosote based preservative.
The respective charges by the Company for these services
currently range
from: (1) framing and branding - twelve cents ($.12) per c.f.;
(2) inspection
- - eleven cents ($.11) per c.f.; (3) steaming - forty-five cents
($.45) per
c.f.; and, (4) treating - between two dollars and ten cents
($2.10) and two
dollars and thirty cents ($2.30) per c.f. These charges are
subject to
negotiation.
Stated in terms of the two primary sources of revenue of the
Company, one
cubic foot of FSO revenue ranges approximately from $7.50 to
$13.50 (usually a
function of pole length and freight), and averages approximately
$7.75 per
cubic foot. One cubic foot of TSO revenue is approximately
$3.25. An
increase in the amount of FSO revenue does not necessarily result
in an
increase in net profit. The Company's ultimate goal is to have
revenue from
FSO business represent approximately eighty percent (80%) of its
total revenue
and revenue from TSO business, the other twenty percent (20%).
Stated in a
volume-related alternative, the Company would like to see half of
its cubic
foot volume of production be from FSO business, the other half
from TSO
business.
Marketing Plan
- --------------
Upon IFI's taking control of the Company, Management strove
to upgrade
operating and production efficiencies, quality control standards
and
compliance with Environmental Protection Agency regulations in
order to meet
or exceed the rigorous Utility wood industry buyers' standards.
It involved
an undertaking to cause the Company to be approved as a preferred
vendor for
"full service treating" ("FSO") business by a targeted group of
buyers.
Implementation of Management's strategic vision (the "Plan")
required a
redirection of focus by the Company from treating services only
("TSO"), "spot
buying" or, "sub-contracting," to "direct bid" or "FSO" business.
Among other
elements, the principal difference between TSO and FSO is that
FSO business
requires substantial capital commitments to fund inventory
accumulation.
The Plan also required Management to upgrade Company
operating and
production efficiencies, quality control standards and compliance
with E.P.A.
regulations in order to meet or exceed the rigorous Utility wood
industry
buyers' standards. It concluded with an undertaking to cause the
Company's to
be approved or "listed" as a preferred vendor for FSO business by
a targeted
group of buyers, which represent a majority of market demand for
utility wood
in the industry. This process involved bringing in engineer
representatives
of these potential customers to the Louisville, MS plant for an
intensive due
diligence and testing examination of the Company's operations,
quality and
environmental control procedures.
As a result, the Company was successful at becoming
qualified as a
preferred vendor foremost every targeted buyer prospect and was
listed as a
exclusive annual supply contract bidder with these utilities and
municipalities.
Phase II started in the Summer of 1994. Management focused
its marketing
efforts on its potential U.S. customer base with the goal of
obtaining
invitations to bid for business. Buyers "let" these Requests for
Quote
("RFQs") during the Fall, 1994 bidding season and award the
transactions in
March , 1995. This process is similar for both utilities and
municipal buyers
of the Company's preservative treated wood product. The speed
and degree to
which success of the marketing effect was greeted by buyer
surprised
Management. It was one factor which led to a dramatic increase
in sales
between the fiscal years ending 1993 and 1995 (see Management
Discussion and
Analysis section). In fact, sales for the third (3rd) quarter of
fiscal year
1995 totaling $646,462 account for forty-four and seven-tenths
percent (44.7%)
of fiscal year 1995's revenue. Many of these contracts were
awarded in March,
1995 and required production to commence and end during the March
to June,
1995 time periods. As a result, the Company's working capital
was fully
committed to additional investments in inventory and accounts
receivables.
To maintain the reputation it had established during this
nearly one and
a half year building period, the Company maximized its financial
capabilities
while successfully implementing its sales expansion plan.
Management
recognizes that capital restraints are the key factor leading to
performance
failure on a committed contract. Because RFQs are released as a
result of
years of budgetary planning at the municipal or utility
management decision
making level, the industry looks like disdain upon any supplier
who fails to
perform on a contract commitment. Therefore, WWFP suspended its
aggressive
pursuit of it FSO marketing plan to avoid such potential
performance failure.
However, the Company now recognizes the extent to which a
reintroduction
of its FSO marketing plan may be able to directly generate
additional sales.
It intends to wait until adequate additional financing is in
place to sustain
the demand, if any, arising from a re-implementation of its FSO
Marketing
plan.
Until then, the Company has embarked on an aggressive TSO
marketing and
business origination campaign, the capital requirement for which
is
significantly lower than for FSO business. When adequate capital
funding
arrangements are finally negotiated, the Company intends to
exploit its
marketing plan by devoting more resources to the FSO service
business (a
higher margin, higher capital requirement type line). The
Company has
allocated $1,000,000 of the net proceeds of this offering to be
used for the
purchase of inventory to enable the Company to re-enter the FSO
business.
Additionally, industry trends indicate utilities are showing
increased desire
to satisfy their wood need by way of FSO supply contract
relationships.
International
- -------------
The primary market for the Company's product has been the
continental
United States. However, some prior sales have been made overseas
in the year
ended September 30, 1995 and for the nine months ended June 30,
1996. They
were $263,999 (18.3% of revenue) and $24,561 (3.2%),
respectively. The
Company intends to avail itself of any future international
opportunities,
especially given the expertise gained by management with prior
export sales.
However, the capital requirements for this type of business
usually exceed
those from any other type of sale by the Company. It is
transactions of this
type, capital intensive sales opportunities, that lend
credibility and
justification to management's decision to shift from the FSO to
TSO
production.
Manufacturing Cost - White Wood
- -------------------------------
Management relented to a strategic decision to convert most
business from
FSO to TSO as a means of preserving capital until such time as
the Company
would be able to employ sufficient capital to conduct the more
capital
intensive FSO line of its business. Since TSO business involves
treating
white wood owned by others, the Company's purchase of white wood
declined
significantly as a percentage of revenue for the nine months most
recently
ended. This relationship causes the cost of goods to decline as
a percentage
of sales.
As the mix between FSO and TSO business shifts, these types
of unexpected
analytical relationships will persist. Additionally, the extent
the Company
is successful at moving toward greater vertical integration,
further
counterintuitive ratios will continue to arise. But, not until
such time as
sufficient capital is available to the Company. for the most
recently ended
nine month period, the ratio of FSO revenue to TSO revenue is
approximately
fifty-fifty (50%/50%). In terms of volume, the ratio is
approximately twenty-
eight (20%/80%), respectively.
External Factors - Competition
- -------------------------------
The Company faces significant competition from at least 75
other
companies engaged in its business. The Company believes that
many of these
competitors have significantly greater financial and other
resources than the
Company. The Company may also face competition from future
entrants into the
industry and the markets it plans to serve, and is aware that
other companies
may be considering entering the preservative treated wood
products market.
There is no assurance that the Company's products will meet
with public
acceptance in new markets or with continued acceptance in current
markets.
The Company believes that it will achieve significant name
recognition
particularly in the domestic marketplace and, to a lesser degree,
in the
international marketplace.
General Business Factors
- ------------------------
The Company believes it's important to remember that future
periods may
be impacted by general economic conditions, various competitive
factors
(including price-based competition) and competition from other
parties
providing alternative wood preserving technologies.
Additionally, the results
could also be affected in any given period by circumstantial
revenue
fluctuations (i.e., not strategic or planned for), business
interruptions or
unplanned for costs associated with hurricanes, ice storms,
floods, train
derailment, fire or new regulatory mandates and other similar
events outside
the control of the Company. One other consideration important
for the reader
to consider is the impact fluctuations in sport purchasers and or
sub-
contracting can have on the results.
Other consideration that could have potentially significant
impact on the
Company's operations include: loss of a principal customer;
inability to
obtain appropriate sixed pole for an order in a timely manner;
changes in EPA
regulations; market demand for the Company's product; a decline
in selling
prices; the ability to maintain certain relationships current
providing
favorable terms and opportunities to the Company; the timing of
significant
orders; the timely availability of capital; cancellation of
rescheduling of
orders by a customer experiencing financial difficulties;
unexpected return of
production; the timing of expenditures in anticipation of
increased sales;
cyclicality of revenue in the Company's targeted markets and
costs of a public
offering.
Liquidity and Capital Reserves
- ------------------------------
To the extent the Company is able to add substantial capital
for its
disposal, many cost reduction strategies now in the planning and
pre-
implementation stage could proceed forthwith. New opportunities
could then be
considered. Larger direct bid business could be bid (see
discussions above).
Additionally, the Company would be positioned to take advantage
of market
price aberrations and able invest heavily in deeply discounted
green or white
wood, as the marketplace permits. These types of savings would
favorably and
directly impact the Cost of Goods Sold, Gross Profit and Net
Income.
Together with existing funds, anticipated cash flow from
operations and
amounts available under its various financing facilities the
Company believes
the net proceeds form the sale of common stock will be sufficient
to meet its
working capital need for the next twelve (12) months.
In addition to looking to fund provided by operations to
finance its
activities, the Company has had a multi-year accounts receivable
financing
arrangement. Amounts available for borrowing under this existing
facility is
limited to the lower of the commitment amount or a borrowing base
amount
calculated on the level of accounts receivable. However, the
Company
constantly entertains discussions for the purpose of obtaining
larger dollar
amount or more favorably priced facilities.
While no assurance can be provided by the Company that its
efforts will
be successful, the Company is actively pursuing other funding
vehicles,
including, but not limited to, purchase order financing and
equipment
sale/leaseback type concepts. Agreements for these types of
financing
arrangements will only be entered into if in the Company's
opinion, they
provide a cheaper and/or more stable form of funding.
Environmental Compliance
- -------------------------
The Company's business is subject to Federal and State
regulations
regulating the discharge of certain material into the
environment. These
regulations impact the Company's as well as its competitors. The
Company must
and has qualified for a multitude of operating permits from these
organizations. Management estimates compliance with these
environmental
regulations will not cost the Company more than approximately one
and a half
percent (1.5%) of revenues annually. Management further views
this cost as a
cost of doing business. Further, based upon the Company's
previously stated
environmental expenditures and facility upgrades, it anticipates
no future
material capital expenditures being required to comply with
existing or
proposed environmental regulations.
Currently, the Company's wood preserving facility includes:
(1) concrete
"drip pads" to catch and recycle the preservative; (2) an
approved and
certificated waste water treatment system; and (3) creosote
sludge shipments
to licensed hazardous waste facilities. The Company's drip pad
and its waste
water treatment system were installed under EPA supervision.
These systems
were subsequently approved and certified under a permit issued by
EPA. By EPA
definition, the volume of sludge produced by the plant is so
insignificant
that the plant is considered to be a "zero discharge" facility.
As of the
date of this Prospectus, the Company's cost of properly disposing
of sludge is
approximately ninety-two cents ($.92) per pound.
Management estimates that at full capacity production, this
cost will
total approximately $2,500.00 per month. Currently, the Company
has no formal
sludge disposal contracts, however, the Company has encountered
no difficulty
whatsoever in obtaining proper sludge disposal services, and
anticipate none
in the future.
Awards and Professional Affiliations
- -------------------------------------
In 1991, The Company was granted the Bell Communications
Research
("Bellcore") hammer-stamp signifying compliance with Bellcore's
high quality
standards for utility poles used in several Bell System operating
companies in
the Northeast. The Bell System is renowned in the industry for
its rigorous
quality assurance standards. Currently, the Company is
undergoing an internal
review in order to comply with the new ISO 9002 quality standard.
The Company actively participates in the American Wood
Producers
Association ("AWPA") and the Southern Pine Council ("SPC").
Members of
Management serve on various committees, institutes and rule
making bodies of
these organizations.
Employees
- ---------
As of the date of this Prospectus, the Company employs 14
persons on a
full time basis, all of whom work for the Company's subsidiary,
Treat-All.
Other than the Company's management personnel, employees are
either clerical
or semi-skilled laborers neither of which require lengthy or
expensive
training. The eight surrounding counties (within 32-mile radius
of Winston
County) provide a labor source of people who have extensive
experience in
logging, saw milling, pressure treating, trucking and operating
heavy
equipment. The plant is non-union with average wages of
approximately $5.50
per hour.
The Company also uses contract labor on an as needed basis.
The number
of contract laborers used by the Company generally fluctuates
from
approximately 5 to 15. There is no assurance that sufficient
contract
laborers will be available to the Company as and when needed.
New Facilities or Plant Operations
- ----------------------------------
The Company intends to reactivate its Pole Mill through the
Joint Venture
discussed above, providing this offering is successful. The Pole
Mill can be
operated by five (5) employees, who can produce approximately
five thousand
($5,000) c.f. of white wood (peeled poles) in an eight hour
shift. The cost
information was previously discussed.
A second avenue that will potentially provide production and
freight
efficiencies is the completion of the Dry Kiln facility at a
related company
known as Kemper Pressure Treated Forest Products, Inc.
Operating Efficiencies/Volume Related
- -------------------------------------
The Company is constantly striving to increase its TSO and
FSO volume.
The impact volume has on efficiency cannot be understated. The
principal
impact volume has on a preservative wood treating business is to
enable
operating, production and productivity efficiencies to be
maximized. Examples
would include: (1) running the Pole Mill full time removing bark
from the
green wood, thereby minimizing the white wood costs to the
Company; (2)
filling the steamer or dry kiln to maximum allowable capacity
before
extracting the water; (3) loading the treating cylinder to
maximum allowable
capacity before preservative treating the white wood, thereby
minimizing the
treated cost per cubic foot; (4) maintaining the treating
chemicals at
constantly high temperatures and thereby avoiding the additional
diesel or gas
fuel related cost of reheating the chemicals and water when they
cools off
between production runs; (5) loading rail cares to maximum
volume, thereby
achieving a lower freight costs per c.f. delivered; and, (6) the
lower per
c.f. labor costs associated with additional business.
Two significant benefits derived from increased volume are
the goodwill
and higher visibility it brings to the Company in the
marketplace. Thereby,
possibly, although these is no assurance that such would occur,
lead to
additional business.
Factors which, if implemented, would bring, in the opinion
of the
Company, of which there is no assurance, about greater operating
and financial
efficiencies and positively impact Cost of Goods sold an Gross
Profit include:
(1) buying "green wood" and removing the bark at a Company owned
debarking
facility; (2) shipping-in more raw material and shipping-out more
finished
product by rail line; (3) removing water from the wood by dry
kiln versus
steam, which significantly reduces its weight; (4) having
sufficient
additional capital; (5) the revenue mix; and (6) increasing
volume. Perhaps
the last one, volume, can overwhelmingly have the most dramatic
effect on both
operating and financial efficiencies. One of the Company's
longer-term
objectives is to increase volume through direct sales, broker
sales and other
means.
Marketing Arrangement with Kemper Pressure Treated Forest
Products, Inc.
- -----------------------------------------------------------------
- ------
Kemper Pressure Treated Forest Products, Inc. (""KPT") and
the Company
entered into a marketing plan (the "Plan") as of September 3,
1996, which is
terminable by either party. The purpose of the Plan is to
formalize the
understanding between the parties regarding their respective
joint venture
projects; KPT's Dry Kiln joint venture and the Company's Pole
Mill joint
venture.
In accordance with this Plan each party to will guarantee
the other
first-in-line positioning with respect to production, after joint
venturer
needs have been satisfied. KPT will be assured pole debarking
services from
the Company's Pole Mill joint venture at the then current,
independent, third-
party selling price ($.50 cents per cubic foot, as of the date of
this Plan).
Each party recognizes the mutual benefit to the other by
entering into
this agreement and acknowledges that they do not directly compete
with one
another. This is a treating chemical related issue. KPT's
preservative
treating chemical is pentachlorophenol, and the Company's
creosote. A buyer's
purchasing criteria will typically determine the preferred
chemical.
Marketing efforts by both companies will include offering
the other
company's treating service. Also, strategic marketing
relationships with
industry-wide brokers will be jointly pursued, granting brokers
access of both
companies' treating services.
The Company and KPT should be considered to be related
parties due to the
fact that Brian Sorrentino is also the Chief Financial Officer
and Chairman of
the Board of Directors of KPT, Morris Ingram is also the
President and a
director of KPT, and Mr. Sorrentino owns 80% of a company known
as
Consolidated Financial Industries, Inc. which owns 100% of KPT.
MANAGEMENT
----------
The executive officers, key employees and directors of the
Company and
their ages and positions with the Company or its subsidiaries are
as follows:
Name Age Position(s) with Company or
Subsidiary
- ----- ---
- ----------------------------------------
Morris L. Ingram 51 President, Chief Executive Officer,
and Director
Brian L.Sorrentino 39 Chief Financial Officer, Director and
Chairman
Rodney Nicholas 40 V.P., Production Manager and Director
The Company has no knowledge of any arrangement or
understanding in
existence between any officer named above and any other person
pursuant to
which any such officer was or is to be elected to such office or
offices. All
officers of the Company serve at the pleasure of the Board of
Directors. All
Officers of the Company will hold office until the next Annual
Meeting of the
Company. There is no person who is not a designated Officer who
is expected
to make any significant contribution to the business of the
Company except as
may be engaged under contract for consulting services.
The following sets forth biographical information for at
least the past
five years as to the business experience of each Officer and
Director of the
Company.
Morris L. Ingram - President, C.E.O., and Director. Morris L.
Ingram, age 51,
is a graduate of Mississippi State University with a
baccalaureate degree in
banking and finance and attended Cumberland Law School in
Birmingham, Alabama.
Following his university studies, Mr. Ingram served as
Vice-President of two
banks, during which time he developed the first Braille checking
account
system to clear the Federal Reserve.
Mr. Ingram has served as the President, Chief Executive Officer
and as a
director of the Company and its wholly-owned subsidiary,
Treat-All Wood
Products, Inc. since September, 1994. From June 1994 until
September 1994,
Mr. Ingram served as a consultant to the Company. From
approximately June
1992 until June 1994, Mr. Ingram was unemployed while he was
recovering from
serious injuries he sustained in an automobile accident. From
1989 until June
1992, Mr. Ingram was General Sales Manager for Philadelphia
Treated Products.
For much of the past 15 years Mr. Ingram has been in the treated
wood business
handling operations and quality programs for several large
utility pole
producing companies. Mr. Ingram set up and operated a fully
functional EDI
system within the Bell organization responsible for over 30,000
utility poles
a year. During this time he also designed the utility pole
component for Bell
to install the cable system in Philadelphia, PA.
Mr. Ingram is co-author of the British specification for kiln
drying of
southern yellow pine and he assisted in the development of the
specifications
for the ISO 9000 standard for treating in Ireland. He also,
co-authored the
major specification for Bell Canada's quality control program.
Mr. Ingram a
standing and active member of the American Wood Producers
Association (AWPA)
T-4 subcommittee which writes the specification for utility poles
in North
America. He is also an active member of the advisory board of
the Mississippi
State Forest Products Utilization Laboratory at Mississippi State
University,
one of the most recognized research labs in North America.
Brian L. Sorrentino - Chief Financial Officer and Director.
Brian L.
Sorrentino, age 39, has served as the Chief Financial Officer and
as Chairman
of the Board of Directors of the Company and its wholly-owned
subsidiary,
Treat-All Wood Products, Inc. since August, 1994. From June,
1986 until July,
1992, Mr. Sorrentino was an office manager and a securities
account executive
for J.W. Grant Company, a securities brokerage firm with
headquarters in
Colorado. From August, 1992 until October, 1993, Mr. Sorrentino
worked as an
account executive with Tamarron Securities, a securities
brokerage firm in its
Washington D.C. office. In December 1993, Mr. Sorrentino
purchased control of
the Company through IFI. Mr. Sorrentino has provided services to
the Company
on behalf of Source Management Services since December 1993.
During his
career at various securities firms, he engaged in securities
brokerage,
trading, investment banking, and other related financial services
for
customers nationwide.
Rodney Nicholas - Vice President. Mr. Nicholas, age 40, is the
Vice President
and Plant Manager of the Company's wholly-owned subsidiary,
Treat-All Wood
Products, Inc., having been elected to such office on May 6,
1991. From
October 1, 1987, until May 6, 1991, Mr. Nicholas was employed by
Philadelphia
Treated Products as Quality and Coordinating Manger. For more
than five years
prior to that job, he was employed by Crown Zellerbach Corp. as a
Plant
Supervisor overseeing the pole machine operations of the company.
Mr. Nicholas is a graduate of Mississippi State University with a
degree in
Wood Technology.
EXECUTIVE COMPENSATION
---------------------
None of the Company's executive officers or directors (the
"Named
Executive Officers") received aggregate cash compensation of
$100,000 or more
during the fiscal year (12 months) ended September 30, 1995.
The following Summary Compensation Table sets forth certain
information
concerning compensation of the Company's Chief Executive Officer,
Morris
Ingram, during the fiscal year ended September 30, 1995. Mr.
Ingram became
Chief Executive Officer of the Company on September 1, 1995.
Summary Compensation Table
- ---------------------------
Annual Compensation
- -------------------------------------------
Name and Principal Position Fiscal Year Salary($)
Bonus($)
- -----------------------------------------------------------------
- -------------
Morris Ingram, President and 1995 $38,685
$-0-
Chief Executive Officer
and Director
There were no stock awards, restricted stock awards, stock
options, stock
appreciation rights, long-term incentive plan compensation or
similar rights
granted to any Named Executive officer during any of the
Company's last three
fiscal years. None of the Named Executive Officers presently
holds directly
any stock options or stock purchase rights.
Except as disclosed below, the Company has no retirement,
pension profit
sharing or other plan covering its Officers and Directors.
Employment Contracts
- --------------------
The Company presently has an employment contract in effect
with the
President and Chief Executive Officer, Morris Ingram which can be
terminated
by either party on 10 days' written notice. Mr. Ingram serves at
the pleasure
of the Board of Directors. Mr. Ingram was employed as the
President of the
Company on January 1, 1995. Mr. Ingram has oversight of all
operations of the
plant including, but not limited to, the shipment and treatment
of wood
products, solicitation of bids for service, sales and maintenance
of books and
records pursuant to the operation of the plant and as required by
the Board of
Directors. Mr. Ingram receives a salary of $38,500 per year and
a stock
incentive package as outlined below; employer will assign to the
employee on a
fiscal quarterly basis two percent of the outstanding shares of
the Company's
common stock if the production exceeds 45,000 c.f. of treated
wood for the
preceding quarter; 4% of the outstanding shares of the Company's
common stock
if production exceeds 75,000 c.f. of treated wood for the
preceding quarter;
6% of the outstanding shares of the Company's common stock if
production
exceeds 120,000 c.f. of treated wood for the preceding quarter;
8% of the
outstanding shares of the Company's common stock if production
exceeds 150,000
c.f. of treated wood for the preceding quarter; and 10% of the
outstanding
shares of the Company's common stock if production exceeds
180,000 c.f. of
treated wood for the preceding quarter. The accumulated shares
of common
stock assigned to the employee under this agreement shall not
exceed 20% of
the Company's outstanding common stock.
Stock Option Plans
- --------------------
As of the date of this Prospectus, the Company has no
outstanding stock
options held directly by its Named Executive Officers, and the
Company has
adopted no formal stock option plans for its officers, directors
and/or
employees. The Company reserves the right to adopt one or more
stock options
plans in the future.
SECURITY OWNERSHIP OF MANAGEMENT AND
PRINCIPAL SHAREHOLDERS
-------------------------------------
As of September 12, 1996 there were 1,486,912 shares of
Common Stock and
5,908,205 shares of Non-convertible Preferred Stock issued and
outstanding as
well as 1,080,000 Class A Warrants, 792,928 Class B Warrants and
545,000 Class
C Warrants outstanding.
The following table sets forth, as of September 12, 1996,
the common
stock ownership of each person known by the company to be the
beneficial owner
of five percent or more of the Company's common and preferred
stock, all
Directors individually and all Directors and Officers of the
Company as a
group. Except as noted, each person has sole voting and
investment power with
respect to the shares shown.**
<TABLE>
<CAPTION>
Amount of Beneficial
Ownership
- ------------------------------
% of
Percent of Class(2)
Common Stock (1) Common
Stock(1) Class (1) After
Name and Address of Beneficial Owner Before Offering After
Offering Before Offering Offering
- ------------------------------------- ---------------
- -------------- --------------- --------
<S> <C> <C>
<C> <C>
Brian L. Sorrentino (3) 1,885,025
1,885,025 48.3% 40.9%
Morris Ingram 50,000 50,000
1.3% 1.1%
Rodney Nicholas (4) -0- -0-
0.0% 0.0%
International Finance Industries,Inc(4) 1,884,567
1,884,567 48.3% 40.9%
1250 24th Street, N.W.
Washington, D.C. 20037
Dale L.Hill (5) 261,169 261,169
6.7% 5.7%
5056 Westgrove Dr.
Dallas, Texas 75248
Michael Baghdoian (6) 249,000 249,000
6.4% 5.4%
13479 Northline
Southgate, Michigan 48195
David L.Wise (7) 240,337 240,337
6.2% 5.2%
406 West Durango Blvd.
San Antonio, Texas 78204
Barry Pope (8) 230,000 -0-
5.9% 0.0%
650 Old Fannin Road #D9
Jackson, Mississippi 39208
All Directors (9) 1,935,025 1,935,025
49.6% 42.0%
and Officers as Group
(3 persons)
(1) Except as noted below in this footnote, calculations
assume exercise and conversion of all
outstanding 1,080,000 Class A Warrants, 792,928 Class B Warrants,
545,000 Class C Warrants. All
common and preferred shares held by the Officers, Directors and
Principal Shareholders listed
above are "restricted or control securities" and as such are
subject to limitations on resale.
The shares may be sold pursuant to Rule 144 under certain
circumstances.
Rule 13d-3 under the Securities Exchange Act of 1934,
involving the determination of
beneficial owners of securities, includes as beneficial owners of
securities, among others, any
person who directly or indirectly, through any contract,
arrangement, understanding relationship
or otherwise has, or shares, voting power and/or investment power
with respect to such
securities; and, any person who has the right to acquire
beneficial ownership of such security
within sixty days through means, including, but not limited to,
the exercise of any option,
warrant or conversion of a security. Any securities not
outstanding which are subject to such
options, warrants or conversion privileges shall be deemed to be
outstanding for the purpose of
computing the percentage of outstanding securities of the class
owned by such person, but shall
not be deemed to be outstanding for the purpose of computing the
percentage of the class by any
other person.
(2) Assumes no exercise of the Underwriters' over allotment
option to purchase up to 70,000
additional shares of common stock, or the Representative's
Warrants to purchase up to 70,000
shares of common stock.
(3) Includes 458 shares held of record by Mr. Sorrentino, and
additional shares held of
record by International Finance Industries, Inc. as disclosed in
note (5) below. Mr. Sorrentino
is the President, a director and controlling shareholder of
International Finance Industries,
Inc. As such he holds dispositive power over the corporation's
shares.
(4) International Finance Industries, Inc. holds of record
259,567 common shares, 5,908,205
preferred shares, 750,000 Class A Warrants, 500,000 Class B
Warrants and 375,000 Class C
Warrants.
(5) Includes 49,532 shares owned of record by Mr. Hill,
125,000 shares held by First
Interstate Bank of Texas, Trustee of the Dale L. Hill IRA
Rollover Trust, and 8,637 shares owned
in three trusts for Mr. Hill's children, in which Mr. Hill serves
as Trustee. This also includes
shares underlying 26,000 Class A Warrants, 26,000 Class B
Warrants and 26,000 Class C Warrants
held of record by Mr. Hill. Mr. Hill disclaims beneficial
ownership over 10,000 additional
shares owned of record by two of his children.
(6) Includes shares underlying 48,000 Class A Warrants,
38,000 Class B Warrants and 28,000
Class C Warrants held of record by Mr. Baghdoian.
(7) Includes 24,337 shares held of record by Mr. Wise,
109,333 shares held by Douglas P. Snow
as Trustee of the Wise Childrens' Trust, 6,667 shares owned by
Trinity Asset Corporation and
100,000 shares owned by Pennyrile Forest Products, Inc. Mr. Wise
as President of Trinity Asset
Corporation has dispositive power over that corporation's shares.
The Company believes Mr. Wise
has dispositive power over Pennyrile Forest Products, Inc.
shares.
(8) Includes shares underlying 200,000 Class A Warrants which
are only exercisable on the
date of this Prospectus.
(9) All Directors and Officers as a Group (3 Persons) own of
record or beneficially 310,025
common shares, 5,908,205 preferred shares, warrants to purchase
1,625,000 shares of common stock
(750,000 Class A Warrants, 500,000 Class B Warrants and 375,000
Class C Warrants).
** All shares are "restricted securities" and as such are subject
to limitations on resale. The
shares may be sold pursuant to Rule 144 under certain
circumstances. There are no contractual
arrangements or pledges of the Company's securities, known to the
Company, which may at a
subsequent date result in a change of control of the Company.
</TABLE>
The foregoing table and footnotes relate only to the
Company's Common
Stock. Effective December 1, 1993, the Company's Board of
Directors approved
the issuance of 1,000,000 shares of the Company's preferred stock
to
International Financial Industries, Inc. ("IFI"). Shares of
preferred stock
vote together with common stock. The preferred stock has
antidilution rights
which require that whenever the Company issues one additional
share of common
stock that the Company must issue 4 additional shares of
preferred stock to
IFI. This enables IFI to maintain at least 79.89% or more of the
voting
control of the Company. As of the date of this Prospectus there
are 5,908,205
shares of the Company's preferred stock outstanding. Following
the successful
closing of this offering, there will be 9,508,205 shares of the
Company's
preferred stock outstanding (assuming the over allotment shares
are not sold,
and no warrants, other than one Class A Warrant for 200,000
shares, are
exercised).
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
-----------------------------------------------------
Bridge Note Payable - International Financial Industries, Inc.
- -------------------------------------------------------------
The Company has entered into a bridge financing agreement
with
International Financial Industries, Inc. ("IFI") in the amount of
$1,100,000
as a line of credit. The loan has been used for working capital
and is to be
repaid in full from the proceeds of this offering. The loan
bears interest at
8.0% per annum and is secured with certain real estate,
equipment, machinery
and rolling stock of the Company. As of June 30, 1996, the
principal balance
owing was $863,061. Brian Sorrentino is President, CEO and
Chairman of the
Board of Directors of IFI. Mr. Sorrentino also owns 90% of the
outstanding
stock of IFI. In the fiscal year ended September 30, 1995, the
Company
accrued $88,691 interest to IFI on this line of credit.
Consulting Fee Paid to IFI
- ---------------------------
In connection with establishing the line of credit from IFI,
the Company
agreed to pay IFI a $145,000 consulting fee. One-half of the
consulting fee
was paid in the fiscal year ended September 30, 1994. In the
fiscal year
ended September 30, 1995 the Company paid the other one-half of
the consulting
fee ($72,500) to IFI.
Notes Payable - Related Parties
- ----------------------------------
The Company has a note payable to a principal shareholder of
the Company,
Michael Baghdoian, in the principal amount of $250,000. The note
is
unsecured, bears interest at 8.0% per annum, and is to be repaid
in full from
the proceeds of this offering.
The Company also has borrowed funds from 7 other minority
shareholders of
the Company that total approximately $485,909 in amount. These
notes vary in
principal amount from $25,000 to $100,000 and vary in interest
rates from 8%
per annum to 12% per annum. More specific terms of these notes
are summarized
in the footnotes to the Company's financial statements contained
elsewhere in
this Prospectus.
Agreement with Source Management Services
- -----------------------------------------
On November 30, 1993, the Company engaged Source Management
Services, of
Washington, D.C. ("SMS"), as a management advisor for the purpose
of assisting
the Company in achieving its business plan with regard to the
development of
long term fiscal and management policy and the assistance with
general
oversight of Management. In exchange for SMS's services, the
Company agreed
to pay to SMS on an hourly basis at the rate of $150 per hour,
exclusive of
expenses. SMS is a company owned by Brian Sorrentino. In the
fiscal year
ended September 30, 1994, the Company paid $63,658 to SMS. In
the fiscal year
ended September 30, 1995, the Company paid $37,500 to SMS.
Future Transactions
- -------------------
Any future transactions, including loans, between the
Company and any of
its officers, directors, affiliates and principal shareholders
will be on
terms no less favorable to the Company than can be obtained from
unaffiliated
third parties. Any such transactions will be subject to approval
of a
majority of the Board of Directors, including a majority of the
independent,
disinterested directors.
Resolving Conflicts of Interest
- -------------------------------
The Board of Directors has determined that its Directors are
to disclose
all conflicts of interest and all corporate opportunities to the
entire Board
of Directors. Any transaction involving a conflict of interest
engaged in by
the Company shall be on terms not less favorable that could be
obtained from
an unrelated third party. A director will only be allowed to
pursue a
corporate opportunity in the event it is first disclosed to the
Board of
Directors and the Board determines that the Company shall not
pursue the
corporate opportunity. (See "RISK FACTORS - Conflicts of
Interest.")
DESCRIPTION OF SECURITIES
----------------------
Common Stock
- ----------------
The authorized capital stock of the Company consists of
10,000,000 shares
of $.0075 par value common stock; and 40,000,000 shares of $.005
par value
voting Preferred Stock. All shares have equal voting rights and
are not
assessable. Voting rights are not cumulative, and, therefore,
the holders of
more than 50% of the common stock of the Company could, if they
chose to do
so, elect all of the Directors.
Upon liquidation, dissolution or winding up of the Company,
the assets of
the Company, after the payment of liabilities and after the
satisfaction of
all claims by shareholders of the Company's preferred stock will
be
distributed pro rata to the holders of the common stock. The
holders of the
common stock do not have preemptive rights to subscribe for any
securities of
the Company and have no right to require the Company to redeem or
purchase
their shares. The shares of common stock presently outstanding
are, and the
shares of common stock to be sold pursuant to this offering will
be, upon
issuance, fully paid and nonassessable.
Holders of common stock are entitled to share equally in
dividends when,
as and if declared by the Board of Directors of the Company, out
of funds
legally available therefor after payment of any dividends to the
holders of
the Company's preferred stock. The Company has not paid any cash
dividends on
its common stock, and it is unlikely that any such dividends will
be declared
in the foreseeable future.
Common Stock Purchase Warrants
- ------------------------------
Class A, B and C Callable Common Stock Purchase Warrants
("IPO Warrants")
were issued in connection with the Company's initial public
offering. These
IPO Warrants expired unexercised. Subsequently, new Class A, B
and C Common
Stock Purchase Warrants were issued in connection with the
Company's
engagement of International Financial Industries, Inc. and in
connection with
various other transactions. The Class A, B and C warrants
entitle the holder
to purchase one share of common stock at a price of $1.00, $2.00
and $4.00,
respectively. The Class A Warrants will expire on December 1,
1996 (with the
exception of the Class A Warrants held by Barry Pope which are
exercisable on
the date of this Prospectus only). The Class B Warrants expire
on December 1,
1997. The Class C Warrants Expire on December 1, 1998. The
expiration dates
of the Class A, B and C Warrants may be extended by a majority
vote of the
Board of Directors.
The warrants have been issued pursuant to a Warrant
Agreement between the
Company and American Securities Transfer Incorporated, Denver,
Colorado (the
"Warrant Agent"). The Company has authorized and reserved for
issuance the
shares of common stock issuable upon exercise of the warrants.
In the event of liquidation, dissolution or winding up of
the Company,
holders of the warrants will not be entitled to participate in
the assets of
the Company. Holders of the warrants will have no voting,
preemptive,
liquidation or other rights of a shareholder, and no dividends
will be
declared on the warrants.
Preferred Stock
- ---------------
The Company is authorized to issue 40,000,000 shares of
preferred stock,
$.005 par value. The preferred stock may be issued in series
from time to
time with such designation, rights, preferences and limitations
as the Board
of Directors of the Company may determine by resolution. The
rights,
preferences and limitations of separate series of preferred stock
may differ
with respect to such matters as may be determined by the Board of
Directors,
including, without limitation, the rate of dividends, amounts
payable on
liquidation, sinking fund provisions (if any), conversion rights
(if any), and
voting rights. The potential exists, therefore, that preferred
stock might be
issued which would grant dividend preferences and liquidation
preferences to
preferred shareholders over common shareholders.
Unless the nature of a particular transaction and
applicable statutes
require such approval, the Board of Directors has the authority
to issue
preferred shares without shareholder approval. The issuance of
preferred
stock may have the affect of delaying or preventing a change in
control of
the Company without any further action by shareholders.
In connection with the Company's engagement of IFI, the
Company issued to
IFI 259,567 shares of common stock and 1,000,000 shares of
preferred stock.
(See "BUSINESS -- Agreement with International Financial
Industries, Inc.").
This series of preferred stock has no right to dividends or
amounts payable on
liquidation. It is not convertible to common stock. The
preferred stock is
entitled to one vote per share, and votes together with the
common stock. The
preferred stock was issued with anti-dilution rights which
provide that each
time one additional share of common stock is issued, an
additional 4 shares of
preferred stock are issued to IFI, without additional
consideration being paid
therefor. This enables IFI to maintain a minimum of
approximately 80% voting
control of the Company. As of the date of this Prospectus there
are 5,908,205
shares of preferred stock issued and outstanding. Upon the
successful closing
of this offering there will be 9,508,205 shares of the Company's
preferred
stock issued and outstanding (assuming the over allotment shares
are not sold,
and no warrants, other than one Class A Warrant for 200,000
shares, are
exercised).
Reports to Shareholders
- ------------------------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the
Company will furnish annual reports to shareholders which will
include audited
financial statements reported on by its certified public
accountants. In
addition, the Company may issue unaudited quarterly or other
interim reports
to shareholders as it deems appropriate.
Transfer Agent
- ---------------
The Company has retained American Securities Transfer,
Incorporated, 1825
Lawrence Street, Suite 444, Denver, Colorado, 80201-1596, as
Transfer Agent
for the Company's common stock, preferred stock and warrants.
UNDERWRITING
--------------
The Company has entered into an Underwriting Agreement (the
"Agreement")
with the Representative, Castle Securities Corp., 45 Church
Street, Suite 25,
Freeport, New York 11520, which provides that the latter together
with the
participating underwriters listed in Schedule A to the Agreement
("Underwriters") shall serve as the Underwriters in connection
with this
offering of a total of 700,000 shares of the Company's $.0075 par
value common
stock (the "Shares"). Under the Agreement, the Underwriters have
committed to
purchase, subject to certain conditions precedent, on a "firm
commitment"
basis, a total of 700,000 shares from the Company at a price of
$4.50 per
Share for a total of $3,150,000 (the "firm commitment Shares").
Additionally
under the Agreement, the Company has given the Underwriters an
option to
purchase up to 70,000 additional Shares on like terms during the
forty-five
day period commencing with the date of this Prospectus (the
"over-allotment
Shares"). The Underwriters may exercise this option solely to
cover over-
allotments in the sale of the shares of common stock. The
Underwriters may
allow to certain dealers who are members of the National
Association of
Securities Dealers, Inc., concessions of up to 90% of the
underwriting
discount per Share.
The Underwriters named below, represented by Castle
Securities Corp.,
have severally agreed, subject to the terms and conditions of the
Agreement,
to purchase from the Company the respective number of Shares set
forth
opposite their names below. The Underwriters are committed to
take and pay
for all of the Shares underwritten by them and offered hereby, if
any are
taken.
Underwriter Number of Shares
- ----------- ----------------
Castle Securities Corp.
----------------
- ---------------------- ----------------
- ---------------------- ----------------
- ---------------------- ----------------
Total: 700,000
The Representative has advised the Company that the
Underwriters propose
to offer the Shares to the public at the offering price set forth
on the
coverage page of this Prospectus. After the initial public
offering, the
public offering price, concessions and re-allowances may be
changed by the
Representative.
The Underwriting Agreement provides for a reciprocal
indemnification
between the Company and the Underwriters against certain civil
liabilities,
including the liability under the Securities Act of 1933, as
amended. The
Securities and Exchange Commission considers the indemnification
of parties in
regard to securities transactions to be against public policy and
therefore
unenforceable.
The Company has agreed to pay to the Representative a
non-accountable
allowance equal to 3.0% of the gross proceeds received by the
Company from the
offering ($115,500) assuming the sale of all of the firm
commitment and over-
allotment Shares offered hereby), $15,000 of which has already
been paid, for
expenses in connection with this offering.
The Company has entered into an agreement with the
Representative
retaining the Representative as financial consultant for a period
of one year
from the date of this Prospectus. The Representative shall
perform consulting
services relating to shareholder relations, assisting in long
term financial
planning, corporate reorganization and expansion, possible
acquisition
opportunities, capital structure, borrowings and other financial
assistance.
The Company will pay a financial consulting fee to Castle
Securities Corp.
from the proceeds of the offering. The amount of the financial
consulting fee
is equal to 1% of the amount of gross proceeds raised in this
offering plus an
additional 1% of gross proceeds raised in this offering directly
through
Castle Securities Corp. or any member underwriter brought into
this offering
by Castle Securities Corp.
Should the Company within five (5) years from the date of
this
Prospectus, enter into any agreement or understanding with any
person and/or
entity introduced by the Representative to the Company within
five (5) years
from the date of this Prospectus involving (i) the sale of all or
substantially all of the assets and properties of the Company,
(ii) the merger
or consolidation of the Company (other than a merger or
consolidation effected
for the purpose of changing the Company's domicile) or (iii) the
acquisition
by the Company of the assets or stock of another business entity,
which
agreement or understanding is thereafter consummated, whether or
not during
such five (5) year period, the Company, upon such consummation,
shall pay to
the Representative an amount equal to the following percentages
of the
consideration paid by the Company in connection with such
transaction:
5% of the first $1,000,000, or portion thereof, of such
consideration;
4% of the second $1,000,000, or portion thereof, of such
consideration;
and,
3% of such consideration in excess of the first $2,000,000
of such
consideration.
The fee payable to the Representative will be in the same
form of
consideration as that paid by or to the Company, as the case may
be, in such
transaction.
The Agreement also provides that the Company will issue
Representative's
warrants to the Representative to purchase at 120% of the public
offering
price of the Shares, 70,000 shares of the Company's common stock
(the
"Representative's Warrants"). The Representative's Warrants may
not be
transferred for one year from the date of this Prospectus, except
to officers
or partners of the Representative. The exercise period
pertaining to the
Representative's Warrants is for a four year period commencing
twelve months
after the date of this Prospectus.
The holders of the Representative's Warrants or the
securities underlying
the same will have the right to require the Company to include
the
Representative's Warrants and the securities underlying such
warrants in any
registration statements relating to the Company's securities, as
the case may
be, for a period of seven years commencing upon the date of this
Prospectus.
In addition, at any time during the five year period commencing
upon the date
of this Prospectus, holders of 50% of the Representative's
Warrants or the
securities underlying the same will have the right to require the
Company to
prepare and file one registration statement so as to permit the
public
offering of the Representative's Warrants and/or the underlying
securities, at
the expense of the Company, (with the exception that all
underwriting
commissions and discounts attributable to any shares so
registered will be
borne by the selling party).
The holders of the Representative's Warrants will have the
opportunity to
profit from a rise in the market value of the Company's stock
with the
resulting dilution in the interests of the other stockholders of
the Company.
Such facts may adversely affect the terms on which the Company
can obtain
additional financing. To the extent that the Representative or
other
Underwriters realize any gain from the resale of the
Representative's Warrants
and/or underlying securities, such gain may be deemed additional
underwriting
compensation.
Pricing the Offering
- --------------------
As of the date of this Prospectus, there is no public market
for the
Company's common stock. The offering price of the Shares was
determined
between the Company and the Representative with no recognition to
any
established criteria of value. In determining the offering price
and the
number of shares to be offered, the Company and the
Representative considered
such factors as the financial condition of the Company, its net
tangible book
value, its operating history, condition of the market in the
Company's common
stock and general condition of the securities market.
Accordingly, the
offering price set forth on the cover page of this Prospectus
should not be
considered an indication of the actual value of the Company. The
price bears
no relation to the Company's assets, book value, earnings or net
worth or any
other traditional criterion of value.
Even though the Company has retained the Underwriters to
conduct this
public offering, there is no assurance an active market will
develop or
continue in the Company's securities such that subscribers will
be able to
resell their Shares following this offering.
Purchases by Officers, Directors and Principal Shareholders
- ------------------------------------------------------------
Officers, Directors and principal shareholders of the
Company and persons
associated with them may be sold some of the Shares being offered
pursuant to
this Prospectus. While it is anticipated that Officers,
Directors and
principal shareholders may purchase up to 20% of the Shares sold,
such
purchases may not be made in a manner inconsistent with a public
offering of
the Company's Shares. Any securities purchased by Officers,
Directors and
principal shareholders will be purchased for investment purposes
only and not
for the purpose of redistribution. Moreover, it is not intended
for the
proceeds from this offering will be utilized, directly or
indirectly, to
enable anyone, including Officers and Directors, to purchase the
Shares
offered. To the extent such persons purchase Shares in the
offering, the
number of Shares required to be purchased by the general public
such that the
amount for closing is reached will be reduced by like amount.
Purchase by
Officers and Directors of up to 20% of the Shares sold will
result in
management increasing its control of the Company. Consequently,
this offering
could close with a substantially greater percentage of shares
being held by
present shareholders and with lesser participation by the public
than would
otherwise be the case. (See "PROSPECTUS SUMMARY" and "SECURITY
OWNERSHIP OF
MANAGEMENT AND PRINCIPAL SHAREHOLDERS.")
Distribution of Selling Shareholders Shares
- -------------------------------------------
A total of 191,300 of the currently outstanding shares of
the Company's
common stock are being registered in this offering, along with
200,000 shares
underlying an option held by Barry Pope. The Selling
Shareholders are not
paying any of the offering expenses in connection with the
registration of the
Selling Shareholders Shares. Upon the sale of the Selling
Shareholders
Shares, the Company will not have received any of the sale
proceeds.
In the event that the one Class A Warrant covering 200,000
shares which
is exercisable only on the date of this Prospectus is exercised,
the shares
underlying that warrant will be immediately available for resale.
All of the
remaining 191,300 Selling Shareholder Shares are not available
for resale into
any public market for a period of ninety (90) days from the date
of this
Prospectus, unless the Representative consents to an earlier sale
of said
shares.
Following is a list of the Selling Shareholders; the number
of shares
which they own and/or into which the securities that they
currently hold may
be exercised/converted; and, the number of the Company's shares
that they own
and/or into which the securities that they currently hold may be
exercised/converted that are not being registered concurrently
with the
Shares:
<TABLE>
<CAPTION>
Nature of any
position, office, or
or other material
Shares of
relationship which the
$.0075 par value Shares of $.0075 par
Shares Retained and, security holders has had
Common Stock value Common Stock
if 1% or more, the within the past 3 yrs. w/
owned prior to offered for the Selling
Percentage of Class the Company or any of its
Selling Shareholder this offering Shareholder's account
owned after offering predecessor or affiliates
- ------------------- ---------------- -----------------------
- -------------------- ------------------------
<S> <C> <C>
<C> <C>
Robert L.Green Jr. 107,500 30,000(1)
77,500(1) None
James R.Laurence 30,000 5,000
25,000 None
Craig Mahlberg 90,000 20,000
70,000 None
William Mahon 5,000 2,000
3,000 None
Richard Wagner 15,000 6,000
9,000 None
Robert Rynarzewski 10,000 4,000
6,000 None
Donald R. and
Camelia Clark 19,500 14,700
4,800 None
Theodore L. Tarson 5,000 2,000
3,000 None
Robert Stoltz 4,000 1,600
2,400 None
Howard Edelman 20,000 8,000
12,000 None
Gary Hendrix 20,000 8,000
12,000 None
Michael Mihalko 40,000 16,000
24,000 None
Kathleen Carter 30,000 12,000
18,000 None
Barry Pope (2) 230,000 30,000
-0- None
Brian Pope 20,500 20,500
-0- None
Charles Dunn 10,000 10,000
-0- None
Robert N.Wilkinson 1,500 1,500
-0- Attorney
------------ -----------------
- ----------------- ----------------
TOTAL 658,300 191,300
266,700
(1) Includes 12,500 shares held in the Howrey & Simon Self
Employment Retirement Plan (SERP)
for the benefit of Robert L. Green, Jr.
(2) Barry Pope holds 200,000 Class A Warrants exercisable
only on the date of this
Prospectus. If Mr. Pope exercises the warrants the underlying
shares will be registered and sold
as additional Selling Shareholder Shares. These shares have not
been included in the 30,000
Selling Shareholders Shares total for Mr. Pope.
</TABLE>
There is no formal plan for the distribution of the Selling
Shareholders
Shares. Management expects that Selling Shareholders Shares will
be sold
through normal brokerage transactions. Though the Company is
bearing the
costs associated with the registration of the Selling
Shareholders Shares, it
will not pay any expenses associated with the transactions by
which the
Selling Shareholders Shares are sold.
Litigation Involving Representative
- --------------------------------------
The Securities Bureau of the State of Georgia (the "Bureau")
commenced an
investigation into the Representative's participation in the sale
of
securities of Sun Reporter Inc. ("Sun"). The Bureau alleged that
sales of
such securities were made in violation of Georgia Securities
Laws. In 1991 a
hearing was held before a Referee appointed by the Bureau with
respect to the
allegations. The Referee delivered a report to the Bureau
recommending
findings against the Representative directing it to (i) cease and
desist from
violations of the Georgia Securities Act of 1973; (ii) file
acceptable
supervisory guidelines with the Commissioner; (iii) pay a civil
penalty in the
amount of 25,000; and (iv) abide by a suspension of the Georgia
registration
until the civil penalty is paid. The Representative's president,
in the same
action, was ordered to cease and desist from violating the
Georgia Securities
Act of 1973 and to pay a $10,000 fine. He was also barred from
association
with a registered dealer, a limited dealer or an investment
adviser until the
civil penalty is paid. The Referee's report was adopted in whole
by the
Commissioner of Securities and an order was issued adopting the
Referee's
recommendations. On December 10, 1991, the Representative an its
president
filed a Notice of Appeal with the Superior Court of Fulton
County, State of
Georgia with respect to the aforementioned order seeking reversal
thereof on
the grounds that neither the record nor applicable law supported
the
Commissioner's findings that the Representative (i) committed
violations in
connection with the sale of unregistered securities; (ii) engaged
in a device,
scheme and artifice to defraud; (iii) failed to exercise diligent
supervision
over its employees; and (iv) violated various sections of the
Georgia
Securities Laws. The Representative and its president also
claimed that the
findings against them were excessive, arbitrary, capricious and
not rationally
related to the acts complained of. The appeal was denied. The
Representative
has subsequently filed a new appeal seeking to set aside the
decision. In
October 1993 the Representative and its president entered into a
settlement
with the State of Georgia whereby they agreed to withdraw their
appeal, pay
the fines in installments and the State of Georgia agreed to lift
the
suspension and bar. The Order entered in this matter on December
10, 1991,
was so modified. The Representative's president has paid his
fine in full.
In October 1991 the NASD instituted disciplinary proceedings
against the
Representative and one of its officers in connection with market
making
activities on behalf of Emergency Records, Inc. The NASD has
accepted the
Representative's and the Officer's Offer of Settlement pursuant
to which
neither the Representative nor its officer admitted or denied the
allegations
against them and agreed to censure and the payment of a $4,000
fine.
On September 13, 1994, the commission's New York Regional
Office
commenced an action in the United States District Court for the
Southern
District of New York against, among others, the Representative,
its president
and one of its former employees, alleging violations of Sections
5 (a) and (c)
and 17 (a) of the Securities Act and Sections 10(b) and 15 (c) of
the Exchange
Act and Rules 10b-3, 10b-5, 10b-6 and 15c1-2 thereunder in
connection with the
initial public offering and after market of the securities of
U.S.
Environmental, Inc., formerly known as Windfall Capital Corp.
The complaint
alleges that they acted as statutory underwriters and engaged in
a scheme to
manipulate the market for these securities, conspired to offer
and sell
securities fraudulently with out a valid registration statement
filed or in
effect or without an exemption from registration, and engaged in
fraudulent
conduct. The complaint seeks injunctive relief, disgorgement of
gains the
Representative, its president and former employee received as a
result of the
conduct alleged in the complaint and prejudgment interest
thereon. In
addition, the Commission can also institute an administrative
proceeding
pursuant to Sections 15 (b) (4) and 19 (h) of the Exchange Act
against the
Representative for the violations of the Securities Act and
Exchange Act
Sections and Rules referred to above. These actions could result
in, among
other things, the Representative's inability to participate in or
complete the
distribution of the securities offered hereby as a result of its
potential
prohibition from participation in the distribution of securities
of an issuer
either as an underwriter or as a selling group member. Moreover,
disgorgement
of any gains previously realized in such transactions could have
an adverse
impact on the Representative's capital and thus its ability to
continue to
conduct a securities business.
A disciplinary proceeding by the Market Surveillance
Committee (the
"Committee") of the NASD against the Representative, its
president and two
former employees of the Representative, alleging that in
connection with the
Representative acting as market maker for the securities of
Reshone
International Investment Group, Ltd., they (i) used manipulative,
deceptive
and other fraudulent devices to create actual or apparent active
trading in
the securities and to arbitrarily and artificially establish and
maintain the
price of the stock; (ii) charged excessive markups; and (iii)
provided
inadequate supervision. After a hearing, the Committee, in its
decision dated
February 7, 1996, found the Representative and its president to
have committed
the alleged violations and imposed the following sanctions: the
Representative and its president were, jointly and severally
fined $25,000;
the Representative and its president were, jointly and severally
required to
make restitution to specified customers of $19,373.56 plus
interest, less
payments made by one of the other Respondents; the Representative
and its
president were censured; the Representative's president to be
suspended for
thirty (30) day in all capacities from association with a broker
dealer and
required to re-qualify as a General Securities Principal within
ninety (90)
days of the decision. The Representative and its president
appealed the
Decision to the National Business Conduct Committee of the NASD
and a hearing
of the appeal as held in June 1996 and they are awaiting a
decision on the
appeal. On appeal, the sanctions imposed by Committee can be
upheld,
reversed, reduced or increased.
In addition to the sanctions, the NASD could censure the
Representative or
suspend or expel the Representative from membership in the NASD.
If the
Representative were suspended it would have to cease offering the
shares until
the end of the suspension period. During this period, the
Company could
attempt to obtain a new underwriter but there is no assurance
that it would be
successful in such an attempt. If the Representative were
expelled it would
have to cease offering and the Company would have the same
options are in the
case of a suspension. Any suspension or expulsion could have a
materially
adverse effect on the aftermarket. Depending upon the degree of
the
Representative's participation and/or the number of market
makers, purchasers
of the shares could have difficulty in selling their securities.
Any
administrative proceeding instituted by the Commission as a
result of the
injunctive proceeding could result in the suspension or
revocation of the
Representative's broker dealer registration with the same effect
as noted
above.
Furthermore, as a result of the Commission's action, the
NASD proceeding
and/or any Commission administrative proceeding, the
Representative's
president, who is also its Financial and Operations Principal
("FINOP"), could
be suspended or barred from association with a broker dealer. If
that were to
occur, the Representative would be required to obtain a new FINOP
in order to
continue its operations. The Representative believes that such
an individual
could be obtained, although there is no assurance to that effect.
LEGAL PROCEEDINGS
-------------------
There is no material, pending litigation not incidental to
the business
to which the Company or its subsidiary is a part or against any
of its
Officers of Directors as a result of their capacities with the
Corporation.
LEGAL MATTERS
----------------
The legalities of the securities of the Company offered will
be passed on
for the Company by Robert N. Wilkinson, Esq., Gateway Tower East
Suite 900, 10
East South Temple, Salt Lake City, Utah 84133. Mr. Wilkinson
owns 1,500
shares of the Company's common stock, all of which are being
registered by the
Company at the Company's expense and being offered pursuant to
this
Prospectus. Robert C. Beers, P.C. and Stephen W. Wilk, Esq. 3
Linden Street,
Selden, New York, 11784 have acted as counsel for the
Representative.
EXPERTS
------------
The financial statements as of September 30, 1995, and for
the year then
ended included in this Prospectus, have been audited by Jones,
Jensen &
Company, independent public accountants, as stated in their
report appearing
herein and elsewhere in the registration statement have been so
included in
reliance upon such report given upon the authority of that firm
as experts in
accounting and auditing.
FINANCIAL STATEMENTS
------------------
A Partnership of JONES, JENSEN
Professional Corporations & COMPANY
R. Gordon Jones, CPA PC ------------
Mark F. Jensen, CPA, PC Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Shareholders
Worldwide Forest Products, Inc.
We have audited the accompanying consolidated balance sheet of
Worldwide
Forest Products, Inc. and subsidiary as of September 30, 1995 and
the related
consolidated statements of operations, stockholders' equity and
cash flows for
the years ended September 30, 1995 and 1994. These financial
statements are
the responsibility of the Company's management. Our
responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing
standards. Those standards require that we plan and perform the
audit to
obtain reasonable assurance about whether the financial
statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit
also includes assessing the accounting principles used and
significant
estimates made by management, as well as evaluating the overall
financial
statement presentation. We believe that our 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
Worldwide Forest
Products, Inc. and subsidiary at September 30, 1995, and the
consolidated
results of their operations and their cash flows for the years
ended September
30, 1995 and 1994, in conformity with generally accepted
accounting
principles.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
June 10, 1996
349 South 200 East, Suite 500, Salt Lake City, Utah
84111
Telephone (801) 328-4408, Facsimile (801) 328-4461
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
C O N T E N T S
Independent Auditors' Report
3
Consolidated Balance Sheet
4
Consolidated Statements of Operations
6
Consolidated Statements of Stockholders' Equity
7
Consolidated Statements of Cash Flows
8
Notes to the Consolidated Financial Statements
10
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Consolidated Balance Sheet
ASSETS
-------
September 30,
1995
- -------------
CURRENT ASSETS
Cash $
20,577
Accounts receivable
89,336
Inventory
120,332
- --------------
Total Current Assets
230,245
- --------------
PROPERTY AND EQUIPMENT (Note 3)
Property and equipment, net
2,997,128
- -------------
OTHER ASSETS
Deferred costs (Note 1)
292,325
Deposits
18,601
Pre-paid interest, net (Note 4)
247,347
- -------------
Total Other Assets
558,273
- -------------
TOTAL ASSETS $
3,785,646
=============
See accompanying notes and independent auditors' report.
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
September 30,
1995
- -------------
CURRENT LIABILITIES
Accounts payable $
291,402
Accrued expenses
257,373
Current portion of long-term debt (Note 5)
37,533
Notes payable - related parties (Note 6)
735,909
Bridge note payable-related party (Note 7)
1,031,379
- ------------
Total Current Liabilities
2,353,596
- ------------
LONG-TERM LIABILITIES
Notes payable (Note 5)
74,764
- ------------
Total Liabilities
2,428,360
- ------------
COMMITMENTS AND CONTINGENCIES (Note 8)
-
- ------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.005 par value, 40,000,000 shares
authorized, 4,511,672 shares issued and outstanding
22,558
Common stock, $.0075 par value; 10,000,000 shares
authorized, 1,185,448 shares issued and outstanding
8,891
Additional paid-in capital
6,012,950
Accumulated deficit
(4,687,113)
- -------------
Total Stockholders' Equity
1,357,286
- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $
3,785,646
=============
See accompanying notes and independent auditors' report.
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Consolidated Statements of Operations
For the Years Ended For the Nine
Months Ended
September 30, June
30,
-----------------------
- -------------------------
1995 1994 1996
1995
----------- ---------- ----------
- ------------
(Unaudited)
(Unaudited)
REVENUES $ 1,446,526 $ 719,194 $ 767,124
$ 1,206,480
COST OF GOODS SOLD 1,035,214 651,243 476,954
999,520
---------- ---------- ----------
- ------------
GROSS PROFIT 411,312 67,951 290,170
206,960
---------- ---------- ----------
- ------------
GENERAL AND
ADMINISTRATIVE EXPENSES
Salaries and wages 511,622 280,784 92,580
4,051
Payroll taxes 20,412 32,615 9,053
9,856
Insurance 47,177 38,135 29,382
31,700
Depreciation 287,551 270,911 217,628
215,663
Amortization 154,724 - 118,326
116,043
Professional fees 186,713 112,045 67,164
162,243
Accounts receivable factoring 59,575 - 32,768
30,879
Freight and postage 39,927 27,894 47,765
30,029
Travel and entertainment 21,124 61,286 14,187
24,307
Utilities and telephone 30,093 30,135 15,640
23,370
Bank fees 19,577 7,803 6,964
15,191
Bad debt expense 10,769 - 59
-
Taxes, penalties and interest 13,139 7,237 517
9,420
Other general & administra. 34,578 25,920 5,621
8,678
--------- ---------- -----------
- ------------
TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES 1,436,981 894,765 657,654
681,430
----------- ---------- -----------
- ------------
NET INCOME (LOSS) FROM
OPERATIONS (1,025,669) (826,814) (367,484)
(474,470)
----------- ----------- ------------
- ------------
OTHER INCOME (EXPENSE)
Gain(loss)on sale of assets 10,492 34,180 -
32,175
Interest income - 562 -
-
Interest expense (133,840) (91,628) (13,652)
(15,850)
------------ ---------- -----------
- -----------
TOTAL OTHER INCOME
(EXPENSE) (123,348) (56,886) (13,652)
16,325
------------ ---------- -----------
----------
NET INCOME (LOSS) $(1,149,017) $ (883,700) $ (381,136)
$ (458,145)
------------ ----------- ------------
- ------------
NET LOSS PER SHARE $ (0.75) $ (1.04) $ (0.22)
$ (0.31)
------------ ---------- ------------
- ------------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,534,716 853,633 1,719,912
1,475,088
------------ ----------- ------------
- ------------
See accompanying notes and independent auditors' report.
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Additional
-------------- ------------
Paid-In Accumulated
Shares Amount Shares
Amount Capital Deficit
--------- ---------- ----------
- ----------- ---------- ----------
<S> <C> <C> <C> <C>
<C> <C>
Balance,
September 30, 1993 776,556 $ 3,883 251,669 $
1,888 $4,866,139 $(2,654,396)
Common stock
issued for cash - - 135,000
1,012 268,978 -
Preferred stock issued
(Note 9) 540,000 2,700 -
- (2,700) -
Net loss for the
year ended
September 30, 1994 - - -
- - (883,700)
----------- ----------- -----------
- ---------- ----------- ----------
Balances,
September 30, 1994 1,316,556 6,583 386,669
2,900 5,132,417 (3,538,096)
Common stock issued
to satisfy debt - - 50,000
375 64,625 -
Common stock issued
as payment of interest - - 389,571
2,922 386,649 -
Common stock issued
to satisfy debt - - 7,500
56 7,444 -
Common stock issued to
satisfy debt - - 164,333
1,232 87,846 -
Common stock issued as
payment for interest - - 12,500
94 12,406 -
Common stock issued
to satisfy debt - - 42,375
318 74,682 -
Common stock issued
for cash - - 25,000
188 49,812 -
Common stock issued
for cash - - 82,500
619 154,381 -
Common stock issued
for goods or services - - 10,000
75 19,925 -
Common stock issued
to satisfy debt for
goods or services - - 15,000
112 38,738 -
Preferred Stock issued
(See Note 9) 3,195,116 15,975 -
- (15,975) -
Net loss for the
year ended
September 30, 1995 - - -
- - (1,149,017)
----------- --------- ----------
- ----------- ----------- -----------
Balances,
September 30, 1995 4,511,672 $ 22,558 1,185,448 $
8,891 $6,012,950 (4,687,113)
---------- --------- ----------
- ---------- ----------- ------------
See accompanying notes and independent auditors' report.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE FOREST PRODUCTS, INC.
Consolidated Statements of Cash Flows
For the Years Ended
For the Nine Months Ended
September 30,
June 30,
-------------------------
- -------------------------------
1995 1994
1996 1995
----------- ------------
- ------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C>
<C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) $(1,149,017) $ (883,700)
$ (381,136) $ (458,145)
Adjustments to reconcile net
income (loss) to net cash used
in operating activities:
Depreciation and amortization 442,275 270,911
335,954 331,706
Common stock issued for
goods or services 58,850 -
7,500 23,850
Changes in assets and liabilities
net of effect of acquisitions:
(Increase) decrease in accounts
receivable 83,246 376,029
- 19,116
(Increase) decrease in deferred
costs (9,654) (285,012)
(7,500) (52,459)
(Increase) decrease in inventory 5,861 (55,181)
(13,186) (70,242)
(Increase) decrease in deposits
and prepaid expenses - (1,040)
(113,084) (163,638)
Increase (decrease) in accounts
payable (322,061) (227,989)
33,928 (226,610)
Increase (decrease) in accrued
expenses (149,910) (39,571)
(105,177) (363,609)
---------- ----------
---------- ------------
Net Cash Provided By (Used)
in Operating Activities (1,040,410) (845,553)
(242,701) (960,031)
----------- -----------
---------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property and
equipment (210,000) -
(5,075) (200,000)
Disposal of property and
equipment 91,825 60,390
- 80,000
---------- -------------
------------ ------------
Net Cash Provided by (Used)
in Investing Activities $ (118,175) $ 60,390
$ (5,075) $ (120,000)
See accompanying notes and independent auditors' report.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE FOREST PRODUCTS, INC.
Consolidated Statements of Cash Flows
For the Years Ended
For the Nine Months Ended
September 30,
June 30,
--------------------------
-----------------------------
1995 1994
1996 1995
-------------- -----------
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
<C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Principal payments on notes
payable $ (48,361) $ (346,525)
$ (309,658) $ (35,000)
Cash proceeds from notes
payable 1,005,755 877,297
344,000 988,103
Cash proceeds from issuance
of common stock 205,000 269,990
192,857 110,160
------------
- -------------- ------------ -------------
Net Cash Provided by (Used)
in Financing Activities 1,162,394 800,762
227,199 1,063,263
-----------
- --------------- ----------- --------------
NET INCREASE (DECREASE)
IN CASH 3,809 15,599
(20,577) (16,768)
CASH, BEGINNING OF PERIOD 16,768 1,169
20,577 16,768
------------ -------------
------------ --------------
CASH, END OF PERIOD $ 20,577 $ 16,768
$ - $ -
------------
- ------------- ------------ -------------
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR
Income taxes $ - $ -
$ - $ -
Interest $ - $ -
$ - $ -
NONCASH FINANCING ACTIVITIES
Common stock issued as
interest $ 402,071 $ -
$ 21,852 $ 402,071
Common stock issued to pay
off debt $ 236,578 $ -
$ 251,300 $ 226,579
Common stock issued for
goods or services $ 58,850 $ -
$ 7,500 $ 23,850
See accompanying notes and independent auditors' report.
</TABLE>
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Notes to Consolidated Financial Statements
September 30, 1995
NOTE 1 - ORGANIZATION AND HISTORY
Worldwide Forest Products, Inc.
- ---------------------------------
Worldwide Forest Products, Inc. (the Company) was incorporated
under the laws
of the State of Colorado on November 19, 1987, as Bond Street
Corporation, and
on September 29, 1990, changed its name to Worldwide Forest
Products, Inc. The
Company was formed to locate and acquire new and developing
business entities.
Treat-All Wood Products, Inc.
- -------------------------------
Treat-All Wood Products, Inc. (Treat-All), the Company's
wholly-owned
subsidiary, was incorporated under the laws of the State of
Mississippi on
November 23, 1988. Treat-All was formed to purchase a
non-operating wood
processing plant. Treat-All is primarily in business to treat
wood and forest
products for sale in wholesale and retail markets.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the
accrual method of
accounting in accordance with generally accepted accounting
principles.
b. Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company
considers all highly
liquid debt instruments purchased with a maturity of three months
or less to
be cash equivalents.
c. Inventories
The inventory is carried at its lower of cost or market, with
cost being
determined using the first-in-first-out method and consists of
wood and
preservative chemicals.
d. Property and Equipment
All property and equipment is stated at cost. Expenditures for
maintenance,
repairs and minor renewals are charged to operations as incurred.
Depreciation is computed using the straight-line method based
upon the
estimated useful lives of the assets which are 20 years for
buildings, 10 to
20 years for equipment and 5 years for vehicles.
e. Deferred Costs
Deferred costs represent consulting, legal, and accounting costs
incurred in
conjunction with preparing the Company's records for a public
stock offering.
The costs will be written off at the time of the offering.
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Notes to Consolidated Financial Statements
September 30, 1995
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
f. Provision for Taxes
The Company accounts for income taxes under Statement of
Financial Accounting
Standards No. 109 (FAS 109). Under FAS 109 the asset and
liability method is
used in calculating deferred income taxes.
At September 30, 1995, the Company had net operating loss
carryforwards of
approximately $5,150,000 that may be offset against future
taxable income
through 2010. Because the Company cannot reasonably estimate the
future
benefit of the carryforward, no deferred tax asset has been
reported.
Utilization of the net operating losses may be subject to a
substantial annual
limitation due to the ownership change limitations provided by
the Internal
Revenue Code of 1986 and similar state provisions. The annual
limitation may
result in the expiration of net operating losses before
utilization.
g. Concentrations of Risk
The Company's customer base consists primarily of utility
companies who
purchase treated poles for utility lines.
h. Revenue Recognition
Revenue is recognized when the product is shipped to the customer
and billed.
i. Reverse Stock Split
On October 14, 1994, the Company's shareholders approved a one
for twenty-five
(1-for-25) share reverse stock split. All references to shares
outstanding
and net loss per share have been adjusted to reflect the effects
of this
reverse stock split on a retroactive basis.
j. 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
reporting period.
Actual results could differ from those estimates.
k. Principles of Consolidation
The consolidated financial statements include those of Worldwide
Forest
Products, Inc. and its wholly-owned subsidiary, Treat-All Wood
Products, Inc.
All significant intercompany accounts and transactions have been
eliminated.
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Notes to Consolidated Financial Statements
September 30, 1995
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)
l. Net Loss Per Share
The computations of net loss per share of common stock are based
on the
weighted average number of common shares outstanding at the date
of the
consolidated financial statements. Common stock equivalents are
not
considered in the computation of the weighted average number of
common shares
outstanding because they would decrease the net loss per common
share.
Net loss per share also includes common stock and common stock
warrants issued
during the twelve months immediately preceding the proposed stock
offering
(see Note 13) as if these shares had been outstanding for all
periods
presented.
m. Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board issued a
new statement
titled "Accounting for Impairment of Long-Lived Assets." This
new standard is
effective for fiscal years beginning after December 15, 1995 and
would change
the Company's method of determining impairment of long-lived
assets. Although
the Company has not performed a detailed analysis of the impact
of this new
standard on the Company's financial statements, the Company does
not believe
that adoption of the new standard will have a material effect on
the financial
statements.
In October 1995, the Financial Accounting Standards Board issued
a new
statement titled "Accounting for Stock-Based Compensation." This
new standard
is effective for fiscal years beginning after December 15, 1995.
The standard
encourages, but does not require, companies to recognize
compensation expense
for grants of stock, stock options, and other equity instruments
to employees
based on fair value. Companies that do not adopt the fair value
accounting
rules must disclose the impact of adopting the new method in the
notes to the
financial statements. Transactions in equity instruments with
non-employees
for goods or services must be accounted for on the fair value
method.
Although the Company has not performed a detailed analysis of the
impact of
this new standard on the Company's financial statements, the
Company does not
believe that adoption of the new standard will have a material
effect on the
financial statements.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment is summarized by major classifications as
follows:
1995
------
Land $ 603,017
Buildings 1,351,156
Machinery and equipment 1,861,309
Furniture and fixtures 37,789
Autos and light trucks 139,237
----------
Balance Forward 3,992,508
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Notes to Consolidated Financial Statements
September 30, 1995
NOTE 3 - PROPERTY AND EQUIPMENT (Continued)
Balance Forward 3,992,508
Less accumulated depreciation (995,380)
----------
Net property and equipment $ 2,997,128
-----------
The Company expensed $287,551 and $270,911 in depreciation for
the years ended
September 30, 1995 and 1994, respectively.
NOTE 4 - PRE-PAID INTEREST
Pre-paid interest represents the value of common stock issued to
induce an
investor to make a working capital loan to the company. The
amount is being
amortized over a two year period. The amortization expense was
$154,724 for
the year ended September 30, 1995.
NOTE 5 - NOTES PAYABLE
Notes payable consist of the following:
1995
------
Note payable to General Motors Acceptance Corp.
due in monthly installments of $404, including interest
at 13.12% per annum, with a maturity date of May 1996,
secured by a vehicle.
$ 5,782
Note payable to General Motors Acceptance Corp.,
due in monthly installments of $399, including interest
at 13.12% per annum, with a maturity date of May 1996,
secured by a vehicle.
5,714
Note payable to General Motors Acceptance Corp.,
due in monthly installments of $472, including interest
at 13.12% per annum, with a maturity date of May 1996,
secured by a vehicle.
6,293
Note payable to B&G Equipment, due in monthly
installments of $2,250, including interest at 8.5% per
annum, with a maturity date of December 1999, secured
by equipment.
94,508
- ---------
Total notes payable
112,297
Less: current portion
(37,533)
- ---------
Total long-term obligations
$ 74,764
- ---------
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Notes to Consolidated Financial Statements
September 30, 1995
NOTE 5 - NOTES PAYABLE (Continued)
Maturities of long-term debt are as follows:
1996 $ 37,533
1997 21,491
1998 23,391
1999 25,458
2000 4,424
---------
Total $ 112,297
---------
NOTE 6 - NOTES PAYABLE - RELATED PARTIES
The notes payable to related parties consist of the following:
1995
------
Note payable to a shareholder, due on demand, with an
interest rate of 8% per annum, secured by warrants.
$ 25,000
Note payable to a shareholder, due on demand, with an
interest rate of 8% per annum, secured by equipment.
70,000
Note payable to a shareholder, due on demand in
common stock, no interest, unsecured.
39,480
Note payable to a shareholder, due from proceeds of
proposed stock offering, with an interest rate of 12% per
annum, unsecured.
100,000
Note payable to a shareholder, due on demand, to
be paid in common stock, no interest, unsecured.
75,804
Note payable to a shareholder, due on demand, with
interest, secured.
75,625
Note payable to a shareholder, due from proceeds of
proposed stock offering, with an interest rate of 12%
per annum, unsecured.
100,000
Note payable to a shareholder, due from proceeds of
proposed stock offering, with an interest rate of 8%
per annum, unsecured.
250,000
----------
Total notes payable to related parties
735,909
Less: current portion
(735,909)
----------
Total long-term related party obligations
$ -
----------
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Notes to Consolidated Financial Statements
September 30, 1995
NOTE 7 - RELATED PARTY TRANSACTIONS
Bridge Note Payable
- ---------------------
The Company has entered into a bridge financing agreement with
International
Financial Industries (IFI), which shares common ownership with
the Company, in
the form of a line of credit. The balance outstanding on the
line of credit
was $1,031,379 at September 30, 1995. The line is to be used for
working
capital and will be repaid out of the proceeds of the proposed
stock offering
(see Note 13). The line bears an 8% interest rate per annum.
Agreement for Management Services
- -----------------------------------
On November 30, 1993, the Company engaged Source Management
Services, Inc.
(SMS), a Delaware corporation, as a management advisor for the
purpose of
assisting the Company in achieving its business plan via the
development and
implementation of long-term fiscal and management policy and
assistance with
general oversight of the Company. In exchange for SMS's
services, the Company
agreed to pay SMS on an hourly basis at the rate of one hundred
fifty dollars
($150.00) per hour, exclusive of expenses.
NOTE 8 - DISPUTED DEBTS
The Company is currently disputing a debt to the City of
Louisville,
Mississippi, which was entered into by Superior Wood Products,
Inc. (Superior)
in 1986 in the amount of $227,000. Superior was purchased by the
Company in
November of 1988. The Company's legal counsel is under the
opinion that the
result of litigation would be favorable to the Company for
several reasons.
First, the Bill of Sale between the Company and Superior
indicated that the
property of Superior would be purchased "subject to" and "not in
assumption
of" certain indebtedness of Superior to third parties, including
the
indebtedness to the City of Louisville. Also, the Company and
the Company's
legal counsel persistently attempted to obtain documents from the
City,
including a security agreement. However, the city attorney has
notified the
Company's legal counsel that the City does not have possession of
a security
agreement, and therefore, could not furnish a copy. According to
the
Company's legal counsel, the defenses available to the Company
for
consideration include laches, estoppel, statutes of limitations,
and
recoupment of any personal property taxes paid by the Company.
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Notes to Consolidated Financial Statements
September 30, 1995
NOTE 9 -PREFERRED STOCK
The preferred stock has no right to dividends or amounts payable
on
liquidation. It is not convertible to common stock. The
preferred stock is
entitled to one vote per share, and votes together with the
common stock. The
preferred stock was issued with anti-dilution rights which
provide that each
time one additional share of common stock is issued, an
additional 4 shares of
preferred stock are issued to IFI, without additional
consideration. This
enables IFI to maintain a minimum of approximately 80% voting
control of the
Company.
NOTE 10 - STOCK PURCHASE WARRANTS
The Company currently has three types of stock purchase warrants
outstanding.
The outstanding warrants are summarized as follows:
Exercise Price
Warrants per Share
Expiration Date
----------- ------------
- --------------
A Warrants 812,000 $1
Various
B Warrants 562,000 $2
December 1, 1997
C Warrants 437,000 $4
December 1, 1998
At September 30, 1995, all warrants were exercisable.
NOTE 11 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted
accounting principles applicable to a going concern which
contemplated the
realization of assets and liquidation of liabilities in the
normal course of
business. However, the Company does not have significant cash,
nor does it
currently have a source of revenues sufficient to cover its
operating costs
and allow it to continue as a going concern. It is intent of the
Company to
seek additional financing through equity transactions, a public
offering, and
to re-negotiate some of its debt.
NOTE 12 - INTERNATIONAL SALES
The primary market for the Company's product has been the
continental United
States. However, some overseas sales (Saudi Arabia) have been
made in the
1995 and 1994 fiscal years totaling $264,000 and $29,000,
respectively.
NOTE 13 - SUBSEQUENT EVENTS AND INTERIM FINANCIAL INFORMATION
Common Stock Issuances
- ----------------------
Subsequent to September 30, 1995, the Company has issued a total
of 334,464
shares of common stock to various individuals as consideration
for loans to
the Company, conversions of debt, and for services.
<PAGE>
WORLDWIDE FOREST PRODUCTS, INC.
Notes to Consolidated Financial Statements
September 30, 1995
NOTE 13 - SUBSEQUENT EVENTS AND INTERIM FINANCIAL INFORMATION
(Continued)
Stock Warrants
- --------------
On March 1, 1996, the Company issued an additional 200,000 class
A stock
purchase warrants with an exercise price of $1.00 per share.
There warrants
are exercisable only on the date of the public offering.
Joint Marketing Plan
- ---------------------
Worldwide Forest Products, Inc. and Kemper Pressure Treated
Forest Products,
Inc. entered into a Joint Marketing Plan on September 3, 1996.
This Plan
guarantees each company first-in-line production positioning with
respect to
the other's Joint Venture (a Pole Mill and Dry Kiln,
respectively), after
joint venturer needs have been satisfied. The cost to each
company will be
the other's normal third-party selling price for the service.
Additionally,
marketing efforts by each company will include offering the
other's
preservative treating service (i.e. creosote vs.
pentachlorophenol,
respectively). This chemical difference precludes competition
between the
companies.
Proposed Public Offering of Common Stock
- ----------------------------------------
In September 1996, the Company entered into an agreement with an
underwriter
(the "Underwriter"), whereby the Underwriter has agreed in
principle to act as
underwriter in a secondary public offering of up to 1,161,300
shares of the
Company's common stock (1,091,300 shares intended to be offered
to the public
and 70,000 shares for which the Underwriter has the option to
purchase to
cover overallotments, if any)
Interim Financial Information
- -------------------------------
The accompanying unaudited financial statements have been
prepared in
accordance with generally accepted accounting principles for
interim financial
information and with the instructions to Form SB-2 and Item
310(b) of
Regulation SB. Accordingly, they do not include all of the
information and
footnotes required by generally accepted accounting principles
for complete
financial statements. In the opinion of management, all
adjustments
(consisting of normal recurring accruals) considered necessary
for a fair
presentation have been included. Operating results for the
nine-months ended
June 30, 1996 are not necessarily indicative of the results that
may be
expected for the year ended September 30, 1996.
<PAGE>
<PAGE>
- -----------------------------------------------------------------
- ----------
No person is authorized to give any information or to
make any
representation other than those contained in this Prospectus, and
if given or
made such information or representation must not be relied upon
as having
been authorized. This Prospectus does not constitute an offer to
sell or a
solicitation of an offer to buy any securities other than the
Shares offered
by this Prospectus or an offer to sell or a solicitation of an
offer to buy
the Shares in any jurisdiction to any person to whom it is
unlawful to make
such offer or solicitation in such jurisdiction.
- -----------------------------------------------------------------
- ----------
TABLE OF CONTENTS
-----------------
Page
----
Prospectus.......................................................
.......
Risk
Factors..........................................................
..
Dilution.........................................................
.......
Use of
Proceeds.........................................................
Selected Consolidated Financial
Data....................................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.......................................................
.....
Business.........................................................
.......
Marketing........................................................
.......
Competition......................................................
.......
Employees........................................................
.......
Patents, Trademarks and
Licenses........................................
Environmental Compliance and Environmental
Matters..........................................................
.....
Facilities.......................................................
.......
Management.......................................................
.......
Executive
Compensation..................................................
Security Ownership of Management and
Principal
Shareholders................................................
Certain Relationships and Related Party
Transactions.....................................................
.....
Description of Securities
..............................................
Underwriting.....................................................
.......
Legal
Proceedings......................................................
.
Legal
Matters..........................................................
.
Experts..........................................................
.......
Financial
Statements....................................................
UNTIL , 1996 (25 DAYS) AFTER THE DATE OF THIS
PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A
PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR
SUBSCRIPTIONS.
700,000 Shares
and
391,300 Shares Offered
By Selling Shareholders
WORLDWIDE FOREST PRODUCTS, INC.
Common Stock
------------------
PROSPECTUS
------------
, 1996
-------
Representative:
CASTLE SECURITIES CORP.
45 Church Street, Suite #25
Freeport, New York 11520
(516) 868-2000
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The estimated expenses of the offering, all of which are to
be borne by
the Company are as follows:
SEC Filing
Fee......................................................$ 1,882
NASD Filing
Fee...................................................... 1,046
NASDAQ Filing
Fee.................................................... 7,187
Printing
Expenses....................................................
2,500*
Accounting Fees and
Expenses........................................ 334,825*
Legal Fees and
Expenses............................................. 25,000*
Blue Sky Fees and
Expenses.......................................... 10,000*
Registrar and Transfer Agent
Fees................................... 2,000*
Non-Accountable Expenses
Allowance.................................. 105,000**
Financial Consulting
Fee............................................ 40,000*
Miscellaneous....................................................
... 7,500*
Total
.......................................................$
529,753*
========
* Estimated
**If the Underwriters' over-allotment option is exercised, the
non-accountable
expense allowance will be $115,500; therefore, the total expenses
of the
offering would be approximately $540,253.
Of the estimated $529,753 in offering expenses,
approximately $339,825
have been prepaid by the Company. The Company estimates that its
net offering
proceeds will be reduced by approximately $189,928 in offering
expenses
($200,428 in the event the over-allotment sold).
Item 14. Indemnification of Directors and Officers.
The only statute, charter provision, bylaw, contract, or
other
arrangement under which any controlling person, Director or
Officer of the
Company is insured or indemnified in any manner against any
liability which he
may incur in his capacity as such, is as follows:
Article X of the Registrant's Articles of Incorporation,
filed November
19, 1987, states as follows:
Subject to the fullest rights of indemnification and limitation
of liability
granted by the Colorado Corporation Code as it may be amended
from time to
time;
1. ..The corporation may indemnify any person who is a party
or is
threatened to be made a party to any threatened, pending or
completed action,
suit or proceeding, whether civil, criminal, administrative, or
investigative
(other than an action by or in the right of the corporation), by
reason of the
fact that he is or was a director, officer, employee, fiduciary
or agent of
the corporation or is or was serving at the request of the
corporation as a
director, officer, employee, fiduciary, or agent of another
corporation,
partnership, joint venture, trust, or other enterprise, against
expenses
(including attorney fees), judgments, fines, and amount paid in
settlement
actually and reasonably incurred by him in connection with such
action, suit
or proceeding, if he acted in good faith and in a manner he
reasonably
believed to be in the best interests of the corporation and, with
respect to
any criminal action of proceeding, had no reasonable cause to
believe his
conduct was unlawful. The termination of any action, suit or
proceeding by
judgment, order, settlement, or conviction or upon a plea of nolo
contendere
or its equivalent shall not of itself create a presumption that
the person did
not act in good faith and in a manner which he reasonably
believed to be in
the best interests of the corporation and, with respect to any
criminal action
or proceeding, had reasonable cause to believe his conduct was
unlawful.
2. . .The corporation may indemnify any person who is a
party or is
threatened to be made a party to any threatened, pending or
completed action
or suit by or in the right of the corporation to procure a
judgment in its
favor by reason of the fact that he is or was a director,
officer, employee,
fiduciary or agent of another corporation, partnership, joint
venture, trust
or other enterprise against expenses (including attorney fees)
actually and
reasonably incurred by him in connection with the defense or
settlement of
such action or suit if he acted in good faith and in a manner he
reasonably
believed to be in the best interests of the corporation; but no
indemnification shall be made in respect of any claim, issue or
matter as to
which such person has been adjudged to be liable for negligence
or misconduct
in the performance of his duty to the corporation unless and only
to the
extent that the court in which such action or suit was brought
determines upon
application that, circumstances of the case, such person is
fairly and
reasonably entitled to indemnification for such expenses which
such court
deems proper.
3.. . .To the extent that a director, officer, employee,
fiduciary or
agent of the corporation has been successful on the merits in
defense of any
action, suit or proceeding referred to in (1) or (2) of this
Article X or in
the defense of any claim, issue, or matter therein, he shall be
indemnified
against expenses (including attorney fees) actually and
reasonably incurred by
him in connection therewith.
4. . . Any indemnification under (1) or (2) of this Article
X (unless
ordered by a court) and as distinguished from (3) of this Article
X, shall be
made by the corporation only as authorized in the specific case
upon a
determination that indemnification of the director, officer,
employee,
fiduciary or agent is proper in the circumstances because he has
met the
applicable standard of conduct set forth in (1) or (2) above.
Such
determination shall be made by the Board of Directors by a
majority vote of a
quorum consisting of directors who were not parties to such
action, suit or
proceeding, or, if a quorum of disinterested directors so
directs, by
independent legal counsel in a written opinion, or by the
shareholders.
5. . . .Expenses (including attorney fees) incurred in
defending a civil
or criminal action, suit or proceeding may be paid by the
corporation in
advance of the final disposition of such action, suit or
proceeding as
authorized in (3) or (4) of this Article X upon receipt of an
undertaking by
or on behalf of the director, officer, employee, fiduciary or
agent to repay
such amount unless it is ultimately determined that he is
entitled to be
indemnified by the corporation as authorized in this Article.
6.. . .The indemnification provided by this Article X shall
be deemed
exclusive of any other rights to which those indemnified may be
entitled under
any agreement vote of shareholders or disinterested directors,
otherwise, and
any procedure provided for by any of the foregoing, both as to
action in his
official capacity and as to action in another capacity while
holding such
office, and shall continue as to a person who has ceased to be a
director,
officer, employee, fiduciary or agent and shall inure to the
benefit of heirs,
executors, and administrators of such a person.
7.. . . The corporation may purchase and maintain insurance
on behalf of
any person who is or was a director, officer, employee, fiduciary
or agent of
the corporation or who is or was serving at the request of the
corporation as
a director, officer, employee, fiduciary or agent of another
corporation,
partnership, joint venture, trust, or other enterprise against
any liability
asserted against him and incurred by him in any such capacity or
arising out
of his status as such, whether or not the corporation would have
the power to
indemnify him against such liability under provisions of this
Article X.
8.. . .To the fullest extent provided in said Act (the
Colorado
Corporations Code), the directors of the corporation shall not be
liable to
the corporation or its shareholders for monetary damages.
The Underwriting Agreement provides for a reciprocal
indemnification
between the Company and the Underwriters against certain civil
liabilities,
including the liability under the Securities Act of 1933, as
amended.
Insofar as indemnification for liabilities arising under the
Securities
Act of 1933 may be permitted to directors, officers or persons
controlling the
Company pursuant to the foregoing provisions, the Company has
been informed
that in the opinion of the Securities and Exchange Commission
such
indemnification is against public policy as expressed in the Act
and is
therefore unenforceable.
Item 15. Recent Sales of Unregistered Securities.
During the past three years, the Company sold securities
which were not
registered under the Securities Act of 1933, as amended, as
follows:
<TABLE>
<CAPTION>
Number of
Shares
$.0075 Par
Value
Name Date Common Stock *
Total Consideration
- ---------------------- ------ ---------
- -------------------- -------------------
<S> <C> <C>
<C>
International Financial Industries Inc. 12/01/93 259,567
Note 1
Robert T.Green 03/22/95 107,500
$205,000
Dr. Michael Baghdoian 09/01/95 125,000
Note 2
James R.Laurence 08/20/95 30,000
Note 3
Craig Maulberg 11/08/95 90,000
Note 4
William Mahon 12/14/95 5,000
Note 5
Richard Wagner 12/08/95 15,000
Note 6
Robert Rynarzewski 12/22/95 10,000
Note 7
Donald R.Clark 01/11/96 19,500
Note 8
Theodore Tarson 12/21/95 5,000
Note 9
Robert Stoltz 12/13/95 4,000
Note 10
Howard Edelman 03/15/96 20,000
Note 11
Gary Hendrix 12/03/95 20,000
Note 12
Michael Mihilko 10/24/95 40,000
Note 13
Kathleen Carter 10/24/95 30,000
Note 14
Barry Pope 06/01/95 23,000
Note 15
Brian Pope 06/01/95 20,500
Note 16
Charles Dunn 06/01/95 10,000
Note 17
Robert N.Wilkinson 06/30/96 1,500
Note 18
Robert Breauz 06/30/96 17,869
Note 19
John R. Carvell 06/30/96 10,000
Note 20
Youness Hendifar 06/30/96 5,822
Note 21
Rubin Seymour 06/30/96 11,973
Note 22
Mark Solomon 06/30/96 20,000
Note 23
Stephen D.Weiss 06/30/96 8,800
Note 24
(1) Issued as partial consideration for $1,100,000 line of
credit to the Company. In addition,
International Financial Industries, Inc. was issued 1,000,000
shares of the Company's preferred
stock (now 5,908,205 preferred shares due to anti-dilution voting
rights), 750,000 Class A
Warrants, 500,000 Class B Warrants and 325,000 Class C Warrants
in connection with establishing
this line of credit.
(2) Issued as partial consideration for $250,000 loan to the
Company.
(3) Issued as partial consideration for $100,000 loan to the
Company.
(4) Issued as partial consideration for $200,000 loan to the
Company.
(5) Issued as partial consideration for $25,000 loan to the
Company.
(6) Issued as partial consideration for $75,000 loan to the
Company.
(7) Issued as partial consideration for $50,000 loan to the
Company.
(8) Issued as partial consideration for $40,000 loan to the
Company.
(9) Issued as partial consideration for $25,000 loan to the
Company.
(10) Issued as partial consideration for $20,000 loan to the
Company.
(11) Issued as partial consideration for $100,000 loan to the
Company.
(12) Issued as partial consideration for $100,000 loan to the
Company.
(13) Issued as partial consideration for $100,000 loan to the
Company.
(14) Issued as partial consideration for $75,000 loan to the
Company.
(15) Issued in connection with settlement of breach of contract
litigation. Barry Pope was also
issued 200,000 Class A Warrants in connection with settlement of
the litigation, which warrants
are exercisable only on the date of the Prospectus.
(16) Issued in connection with settlement of breach of contract
litigation.
(17) Issued as payment for legal services in settlement of the
breach of contract litigation.
(18) Issued as payment for $7,500 of legal services.
(19) Issued in connection with the conversion of approximately
$53,607.30 debt (including any
accrued interest). Also received 35,736 Class B Warrants.
(20) Issued in connection with the conversion of approximately
$65,832.40 debt (including any
accrued interest). Also received 20,000 Class B Warrants.
(21) Issued in connection with the conversion of approximately
$17,465.75 debt (including any
accrued interest). Also received 11,644 Class B Warrants.
(22) Issued in connection with the conversion of approximately
$35,919.00 debt (including any
accrued interest). Also received 22,946 Class B Warrants.
(23) Issued in connection with the conversion of approximately
$73,930.00 debt (including any
accrued interest). Also received 40,000 Class B Warrants.
(24) Issued in connection with the conversion of approximately
$26,400.00 debt (including any
accrued interest). Also received 17,600 Class B Warrants.
</TABLE>
With respect to the sales made, the Registrant relied on
Section 4(2) of
the Securities Act of 1933, as amended. No advertising or
general
solicitation was employed in offering the shares. The securities
were offered
to officers, directors and the persons named above, who had
access to
information either by virtue of their relationship with the
Registrant, or, by
information and the opportunity to make investigation and inquiry
provided to
each of the investors, including their purchaser representative
where
applicable, by the Company and its officers and directors. The
securities
were offered for investment purposes only and not for the purpose
of resale or
distribution, and the transfer thereof was appropriately
restricted by the
Registrant.
Item 16 Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed as part of this
Registration Statement
pursuant to Item 601 of the Regulation S-B:
Exhibit No. Title
- ----------- ---------
1.1 Underwriting Agreement
1.2 Agreement Among Underwriters
1.3 Selling Agreement
1.4 Financial Consulting Agreement
1.5 Representative's Stock Purchase Warrant
3.1 Articles of Incorporation
3.2 Amendment to Articles of Incorporation (May 9,
1989)
3.3 Amendment to Articles of Incorporation (October 1,
1990)
3.4 By-laws
4.1 Statement Establishing a Series of Preferred Stock
5.0 Opinion of Robert N. Wilkinson, Esq. regarding the
legality of
the securities being registered
23.1 Consent of Robert N. Wilkinson, Esq.
23.2 Consent of Jones, Jensen & Company
24.1 Power of Attorney
27.1 Financial Data Schedule
(b) Financial statement schedules:
All applicable information is included in the basic
financial
statements.
Item 17. Undertakings.
------------
Insofar as indemnification for liabilities arising under the
Securities
Act of 1933 may be permitted to directors, officers and
controlling persons of
the Company pursuant to the foregoing provisions, or otherwise,
the Company
has been advised that in the opinion of the Securities and
Exchange Commission
such indemnification is against public policy as expressed in the
Act and is,
therefore, unenforceable. In the event that a claim for
indemnification
against such liabilities (other than the payment by the Company
of expenses
incurred or paid by a director, officer or controlling person of
the Company
in the successful defense of any action, suit or proceeding) is
asserted by
such director, officer or controlling person in connection with
the securities
being registered, the Company will, unless in the opinion of its
counsel the
matter has been settled by controlling precedent, submit to a
court of
appropriate jurisdiction the question whether such
indemnification by it is
against public policy as expressed in the Act and will be
governed by the
final adjudication of such issue.
The undersigned Company 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 of 1933:
(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;
(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 of 1933, 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 any registration by means of a
post-effective
amendment any of the securities being registered which remain
unsold at the
termination of the offering.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933,
the
Registrant has duly caused this Form SB-2 Registration Statement
to be signed
on its behalf of the undersigned thereunto duly authorized, in
the City of
Louisville, State of Mississippi on the 3rd day of October, 1996.
WORLDWIDE FOREST PRODUCTS,
INC.
By /s/ Morris L. Ingram
- --------------------------------
Morris L. Ingram, President
and CEO
Pursuant to the requirements of the Securities Act of 1933,
this Form SB-
2 Registration Statement has been signed by the following persons
in the
capacities and on the dates indicated.
Signature Title Date
- ---------- --------- ------
/s/ Brian L. Sorrentino Chief Financial Officer 10/3/96
- ----------------------- (Principal Financial and
Brian L. Sorrentino Accounting Officer),and
Chairman of the Board of
Directors
/s/ Morris L. Ingram President, Chief Executive 10/3/96
- ----------------------- Officer and Director
Morris L. Ingram
/s/ Rodney Nicholas Vice President-Operations, 10/3/96
- ---------------------- Secretary, Treasurer and
Rodney Nicholas Director
EXHIBIT INDEX
Exhibit No. Title
Page
- ------------ ------------------
----
1.1 Underwriting Agreement
1.2 Agreement Among Underwriters
1.3 Selling Agreement
1.4 Financial Consulting Agreement
1.5 Representative's Stock Purchase Warrant
3.1 Articles of Incorporation
3.2 Amendment to Articles of Incorporation (May 9,
1989)
3.3 Amendment to Articles of Incorporation (October 1,
1990)
3.4 By-laws
4.1 Statement Establishing a Series of Preferred Stock
5.0 Opinion of Robert N. Wilkinson,Esq. regarding the
legality
of the securities being registered
23.1 Consent of Robert N. Wilkinson, Esq.
23.2 Consent of Jones, Jensen & Company
24.1 Power of Attorney
27.1 Financial Data Schedule
Exhibit 1.1
700,000 Shares
WORLDWIDE FOREST PRODUCTS, INC.
UNDERWRITING AGREEMENT
---------------------
199
Castle Securities Corp.
As Representative of the several Underwriters
named in Schedule A hereto
45 Church Street, Suite #25
Freeport, New York 11520
The undersigned, WORLDWIDE FOREST PRODUCTS, INC. (the
"Company"), a
Colorado corporation, hereby confirms its agreement with you and
the other
underwriters named in Schedule A annexed hereto.
SECTION 1. Underwriters and Representative. The term
"Underwriters" as
used herein, will mean and refer collectively to you and to the
other several
Underwriters named in Schedule A annexed hereto and the term
"Representative"
will refer to you in your capacity as the Representative of the
several
Underwriters. Any reference to you in this Agreement shall be
solely in your
capacity as the Representative.
SECTION 2. Description of Shares. When the Registration
Statement (as
hereinafter defined) shall become effective and at the Closing
Time (as
hereinafter defined), the Company's authorized capital stock will
be
10,000,000 shares of Common Stock, $.0075 par value per share
(the "Common
Stock"), and 40,000,000 shares of Preferred Stock, $.005 par
value per share,
(the "Preferred"), as more fully described below, of which no
more than
1,486,912 shares of Common Stock and 5,908,205 shares of
Preferred are
presently issued and outstanding. In addition, 1,080,000 Class A,
792,928
Class B and 545,000 Class C Common Stock Purchase Warrants with
each of such
Warrants entitling the holders thereof to purchase one (1) share
of Common
Stock at a price of $1.00, $2.00 and $4.00, respectively, at any
time (except
200,000 Class A Warrants held by one warrant-holder which can
only be
exercisable on the date of the Prospectus pertaining to the
Offering set forth
herein) until December 1, 1996, December 1, 1997 and December 1,
1998,
respectively, are also presently issued and outstanding. The
Company proposes
to issue and to sell to the Underwriters an aggregate of 700,000
Shares of
Common Stock of the Company (the "Shares"). The Company also
proposes to grant
to the Underwriters an option (hereinafter described) to purchase
up to an
additional 70,000 Shares of Common Stock on the terms and for the
purposes set
forth in Section 5(b) hereof. The 450,000 Shares which the
Underwriters have
agreed to purchase hereunder from the Company hereinafter
sometimes are called
the "Firm Shares", the 700,000 Shares which the Underwriters have
an option to
purchase under Section 5(b) hereof hereinafter are sometimes
called the
"Option Shares", and the Firm Shares and the Option Shares are
hereinafter
sometimes together called the "Shares".
The Preferred which has been issued to one (1) holder has no
right to
dividends, amounts payable on liquidation and conversion to
Common Stock.
1,000,000 of the Preferred entitles the holder thereof to one (1)
vote per
share and provides that each time one (1) additional share of
Common Stock is
issued, the holder is to receive four (4) shares of Preferred at
no additional
consideration.
SECTION 3. Representations and Warranties. The Company
represents and
warrants to each Underwriter that:
(
i
) A registration statement (SEC File No. ) on Form SB-2,
relating
to the Shares, including a preliminary prospectus, has been
carefully prepared
by the Company under the provisions of the Securities Act of
1933, as amended
(the "Act"), the General Rules and Regulations and the General
Instructions to
Form SB-2 (collectively referred to as the "Rules and
Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder,
and has been
filed with the Commission. The Company has so prepared and filed
one or more
amendments to the Registration Statement and proposes to file a
further
amendment (the "Final Amendment"), if required, to such
registration
statement, including a proposed final prospectus, necessary to
permit the
registration statement to become effective. Copies of such
registration
statement and amendments, including the Final Amendment, and of
each related
preliminary prospectus and such proposed final prospectus have
been delivered
to the Representative. Such registration statement, including
financial
statements and exhibits, and prospectus, as amended and revised
at the time
such registration statement becomes effective, herein
respectively are called
the "Registration Statement" and the "Prospectus", except that if
the
prospectus filed by the Company pursuant to Rule 424(b) of the
Rules and
Regulations shall differ from the prospectus included in the
Registration
Statement, the term "Prospectus" shall mean the prospectus filed
pursuant to
Rule 424(b) from and after the date on which it shall have been
filed. The
date on which the Registration Statement becomes effective is
hereinafter
called the "Effective Date".
(ii) The Commission has not issued an order preventing
or suspending
the use of any preliminary prospectus with respect to the Shares,
and each
preliminary prospectus has complied in all material respects with
the
requirements of the Act and the Rules and Regulations and, as of
its date, did
not include any untrue statement of a material fact or omit to
state a
material fact necessary to make the statements therein not
misleading.
(iii) From the Effective Date until completion of the
public
offering of the Shares or such longer period as the Prospectus
may be required
to be delivered in connection with sales by the Underwriters or a
dealer, the
Prospectus (as amended or supplemented, if the Company shall have
filed with
the Commission any amendment or supplement thereto) will comply
with the
provisions of the Act and the Rules and Regulations, will contain
all
statements required to be stated therein in accordance with the
Act and the
Rules and Regulations, will not contain any untrue statement of a
material
fact and will not omit to state a material fact required to be
stated therein
or necessary in order to make the statements therein not
misleading; provided,
however, that the representations and warranties in this
paragraph (iii) do
not apply to any statements in or omissions from the Prospectus
based upon and
made in conformity with information furnished in writing to the
Company by the
Representative specifically for use in connection with the
preparation of the
Prospectus. The Company acknowledges that the statements set
forth in the
table and the textual paragraph immediately below the table on
the cover page
of the Prospectus, the first paragraph of page , the paragraph
of page ,
the last paragraph of page , and under the heading
"Underwriting" in the
Prospectus constitute the only information so furnished by the
Representative.
(iv) The Company is, and at the Closing Time (as
hereinafter
defined) will be, a corporation duly organized, validly existing
and in good
standing under the laws of the State of Colorado. The Company
has, and at the
Closing Time (as hereinafter defined) will have, the power and
authority to
conduct all of the activities conducted by it, to own or lease
all of the
assets owned or leased by it and to conduct its business as
described in the
Registration Statement and the Prospectus. The Company is, and at
the Closing
Time (as hereinafter defined) will be, duly licensed or qualified
to do
business and in good standing as a foreign corporation in all
jurisdictions in
which the nature of the activities conducted by it or the
character of the
assets owned or leased by it makes such license or qualification
necessary,
except where failure to be so licensed or to qualify will not
materially
affect the Company's business, properties or financial condition.
A complete
and correct copy of the charter, including all amendments
thereto, and of the
by-laws of the Company has been delivered to you, and no changes
therein will
be made subsequent to the date hereof and prior to the Closing
Time (as
hereinafter defined).
(v) Subsequent to the date hereof and prior to the
Closing Time (as
hereinafter defined), the Company will not acquire any of its
equity
securities and will not issue any of its equity securities or any
other
securities of whatsoever nature. Except as set forth or referred
to in the
Registration Statement and the Prospectus, the Company does not
have
outstanding, and at the Closing Time (as hereinafter defined)
will not have
outstanding, any options to purchase, or any rights or warrants
to subscribe
for, or any securities or obligations convertible into, or any
contracts or
commitments to issue or sell, shares of the Common Stock or any
such warrants,
convertible securities or obligations.
(vi) No holders of Common Stock or of any securities of
the Company
exercisable for or convertible into Common Stock have the right
to include
such Common Stock or securities in the Registration Statement,
except for such
rights as have been surrendered or waived or as set forth or
referred to in
the Registration Statement and the Prospectus.
(vii) The consolidated financial statements of the
Company included
as part of the Registration Statement and the Prospectus present
fairly the
consolidated financial position and the consolidated results of
operations of
the Company as of the respective dates thereof for the respective
periods
covered thereby, all in conformity with generally accepted
accounting
principles applied on a consistent basis throughout the periods
presented.
Jones, Jensen & Company, who have reported on such financial
statements, are
independent accountants with respect to the Company as required
by the Act and
the Rules and Regulations. No other financial statements are
required to be
included in the Registration Statement and the Prospectus.
(viii) Subsequent to the respective dates as of which
information is
set forth in the Registration Statement and the Prospectus and
prior to the
Closing Time (as hereinafter defined), except as set forth in or
contemplated
by the Registration Statement and the Prospectus, (A) the Company
has not
incurred and will not have incurred any material liabilities or
obligations,
direct or contingent, other than in the ordinary course of
business, and has
not entered into and will not have entered into any material
transactions
other than as contemplated in the Registration Statement and the
Prospectus,
(B) the Company has not and will not have paid or declared any
dividends or
other distribution on its capital stock and (C) there has not
been and will
not have been any material adverse change in the business,
financial
conditions or results of operations of the Company, or in the
book value of
the assets of the Company, arising from any reason whatsoever.
(ix) Except as set forth in or contemplated by the
Registration
Statement and the Prospectus, the Company does not have, and at
the Closing
Time (as hereinafter defined) will not have, any material
contingent
obligations.
(x) The Company has one (1) subsidiary corporation and,
except as
set forth in the Registration Statement and Prospectus, it does
not have any
equity interest in any partnership, joint venture, association or
other
entity.
(xi) Except as set forth in the Registration Statement
and the
Prospectus, there are no actions, suits or proceedings pending,
or to the
knowledge of the Company threatened, against or affecting the
Company or its
business, financial condition, results of operations or material
properties,
or any of its principal officers, before or by any federal or
state court,
commission, regulatory body, administrative agency or other
governmental body,
domestic or foreign, wherein an unfavorable ruling, decision or
finding would
materially and adversely affect the Selling Shareholder and/or
the Company or
its business, financial condition, results of operations or
material
properties.
(xii) The Company is not in violation of its respective
charter or
by-laws. Neither the execution and delivery of this Agreement,
nor the issue
and sale of the Shares or the Representative's Warrants (as
hereinafter
defined hereunder, nor the consummation of any of the
transactions
contemplated herein, nor the compliance by the Company with the
terms and
provisions hereof has conflicted with or will conflict with, or
has resulted
in or will result in a breach of, any of the terms and provisions
of, or has
constituted or will constitute a default under, or has resulted
in or will
result in the creation or imposition of any lien, charge or
encumbrance upon
any property or assets of the Company pursuant to the terms of
any indenture,
mortgage, deed or trust, note, loan or credit agreement or any
other agreement
or instrument to which the Company is a party or by which the
Company may be
bound or to which any of the property or assets of the Company is
subject; nor
will such action result in any violation of the provisions of the
charter or
the by-laws of the Company or any statute or any order, rule or
regulation
applicable to the Company of any court or of any federal, state
or other
regulatory authority or other government body having jurisdiction
over the
Company.
(xiii) The outstanding Common Stock has been, and the
Shares, and
the Shares issuable upon exercise of the Representative's
Warrants (as
hereinafter defined) will be, validly issued, fully paid and
non-assessable.
The description in the Registration Statement and the Prospectus
of the Shares
is, and at the Closing Time (as hereinafter defined) will be, in
all material
respects complete and accurate. The issuance and sale of the
Shares and the
Representative's Warrants (as hereinafter defined) have been duly
and validly
authorized.
(xiv) All issued and outstanding securities of the
Company have been
duly authorized and validly issued and the Common Stock is fully
paid and
non-assessable; the holders thereof are not subject to personal
liability by
reason of being such holders; and none of such securities were
issued in
violation of the pre-emptive rights, if any, of any holders of
any security of
the Company.
(xv) The Company has good and marketable title to all
properties and
assets described in the Prospectus as owned by it, free and clear
of all
liens, charges, encumbrances or restrictions, except such liens,
changes,
encumbrances or restrictions as are described in the Registration
Statement
and the Prospectus or are not material to the business of the
Company. The
Company has valid, subsisting and enforceable leases for the
material
properties described in the Prospectus as leased by it with such
exceptions as
are not material and do not materially interfere with the use
made and
proposed to be made of such properties by the Company.
(xvi) There is no document or contract of a character
required to be
described in the Registration Statement or the Prospectus or to
be filed as an
exhibit to the Registration Statement which is not described or
filed as
required. No statement, representation, warranty or covenant made
by the
Company in this Agreement or made in any certificate or document
required by
this Agreement to be delivered to you was, when made, inaccurate,
untrue or
incorrect.
(xvii) All taxes which are due from the Company have
been paid in
full (or adequate accruals for the payment thereof have been
provided for in
their accounting records), and the Company does not have any
material tax
deficiency or claim outstanding proposed or assessed against it.
SECTION 4. Finders. The Company and the Representative
represent that no
one has acted as a finder in connection with this offering.
SECTION 5. (a) Purchase, Sale and Delivery of the Purchased
Shares
Closing Time.
(
i
) On the basis of the representations and warranties contained in
this Agreement and subject to the terms and conditions herein set
forth, the
Company agrees to sell to the several Underwriters, and each of
the several
Underwriters agrees, severally and not jointly, to purchase from
the Company,
the number of Firm Shares set forth opposite the name of such
Underwriter in
Schedule A hereto at and for a purchase price of $ for each
Firm Share.
(ii) Delivery of the certificates for Shares shall be
made to you
for the accounts of the respective Underwriters, at the offices
of Castle
Securities Corp., 45 Church Street, Suite #25, Freeport, New York
11520,
against payment by you on behalf of the respective Underwriters
of the
purchase price therefor to the Company by certified or official
bank checks
payable in New York Clearing House funds to the order of the
Company, at 10:00
a.m., Eastern Standard Time, on the third (3) business day
following the
Effective Date, or on such other time and business day (Saturdays
not being
considered business days for the purposes of this Agreement) not
later than
the fifth (5) business day following the Effective Date as you
and the Company
shall determine, which time and date are herein called the
"Closing Time". The
cost of original issue tax stamps, if any, in connection with the
issuance and
delivery of the Firm Shares by the Company to the respective
Underwriters
shall be borne by the Company. The Company will pay and save each
Underwriter,
and any subsequent holder of the Firm Shares, harmless from any
and all
liabilities with respect to or resulting from any failure or
delay in paying
federal and state stamp and other transfer taxes, if any, which
may be payable
or determined to be payable in connection with the original
issuance or sale
to such Underwriter of the Firm Shares.
(iii) Certificates representing the Shares shall be
registered in
such names and shall be in such denominations as the
Representative shall
request at least two full business days prior to the Closing Time
and shall
be made available to the Representative for checking and
packaging, at the
offices of American Securities Transfer, Incorporated, at least
one full
business day prior to the Closing Time.
(b) Purchase, Sale and Delivery of the Option Shares.
(
i
) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein
set forth,
the Company hereby grants to the respective Underwriters an
option (the
"Option") to purchase up to an aggregate of 70,000 Option Shares.
Said Option
may be exercised in whole or in part at any time (but not more
than once)
within forty-five (45) days after the date of the Prospectus.
Option Shares
shall be purchased, severally and not jointly, by the
Underwriters in the same
proportion as each Underwriter has agreed to purchase the Firm
Shares (as
adjusted by the Representative to eliminate fractions and to
provide that no
Underwriter shall be obligated to purchase Option Shares other
than in
integral multiples of 100 Shares) at and for a purchase price of
$ for each
Option Share. The Option may be exercised only for the purpose of
covering any
over-allotments which may have been made in connection with the
distribution
and sale of the Firm Shares.
(ii) The Option is exercisable by you at any one time
for the
purchase of all or part of the Option Shares covered thereby and
by notice,
given by you to the Company in the manner provided in Section 14
hereof,
setting forth the number of Option Shares as to which the Option
is being
exercised and the date (which shall be no more than five (5) full
business
days after the date of such notice) and time for delivery of, and
payment for
the Option Shares. The date and time set forth in such notice is
herein called
the "Option Closing Time". After the Option Closing Time the
Option shall
lapse to the extent, if any, that it shall not have been
exercised.
(iii) Upon the exercise of the Option, the Company
shall sell to
the respective Underwriters the aggregate number of Option Shares
specified in
the notice exercising such Option and the Underwriters severally
shall
purchase from the Company the number of Option Shares specified
in such
notice. The obligations of the Underwriters under this Agreement
are several
and not joint.
(iv) Delivery of the Option Shares with respect to
which the Option
shall have been exercised shall be made to you for the accounts
of the
respective Underwriters, at the offices of Castle Securities
Corp., 45 Church
Street, Suite #25, Freeport, New York 11520, against payment by
you on behalf
of the respective Underwriters of the purchase price therefor to
the Company
by certified or official bank checks payable in New York Clearing
House funds
to the order of the Company, at the Option Closing Time. The cost
of original
issue tax stamps, if any, in connection with the issuance and
delivery of the
Option Shares by the Company to the respective Underwriters shall
be borne by
the Company. The Company will pay and save each Underwriter, and
any
subsequent holder of Option Shares, harmless from any and all
liabilities with
respect to or resulting from any failure or delay in paying
federal and state
stamp and other transfer taxes, if any, which may be payable or
determined to
be payable in connection with the original issuance or sale to
such
Underwriters of the Option Shares.
(v) Certificates representing the Shares with respect
to which the
Option shall have been exercised shall be registered in such
names and shall
be in such denominations as the Representative shall request at
least two full
business days prior to the Option Closing Time and shall be made
available to
the Representative for checking and packaging, at the office of
American
Securities Transfer Incorporated, at least one full business day
prior to the
Option Closing Time.
(vi) The obligation of the respective Underwriters to
purchase and
pay for Option Shares at the Option Closing Time shall be subject
to
compliance as at the Option Closing Time with all the conditions
specified in
Section 10 hereof and the delivery to you of the opinions,
certificates and
letters specified in Section 10 hereof.
(c) Sale of Warrants to the Representative.
(
i
) At the Closing Time the Company shall issue and sell to the
Representative, for a price of $.0001 per Warrant (the
"Representative's
Warrant"), to purchase 70,000 Shares for a period of four (4)
years commencing
one (1) year from the Effective Date of the Registration
Statement at an
exercise price in cash equal to 120% of the public offering price
per Warrant.
The Representative's Warrant shall be substantially in the form
of such
Warrant filed an exhibit to the Registration Statement. The
Representative's
Warrant and the securities underlying said Warrant are covered by
the
Registration Statement.
(ii) Moreover, the Company agrees that upon written
request of the
Representative or its specific duly authorized designee, or
together with the
Representative's or its specific duly authorized designee's
consent, the
holders of at least 50% of the Representative's Warrants and/or
the holders of
the underlying securities made at any time after 12 months
following the
Effective Date and prior to 5 years after the Effective Date the
Company will
file no more than one Registration Statement under the Act or
Offering
Statement under Regulation A (or any successor thereto)
registering or
qualifying the Representative's Warrants and/or the underlying
securities, and
the Company agrees to use its best efforts to cause the filing to
become
effective. The expenses of such registration or qualification,
including but
not limited to printing charges (including sufficient number of
Prospectuses
to permit the sale of the securities), all legal fees and
disbursements of the
Company's counsel and all accounting fees, and all filing and
miscellaneous
expenses, will be borne by the Company except for sales
commissions and
non-accountable expenses incurred if the Representative's and/or
the
underlying securities, are sold and fees and expenses of their
counsel.
(iii) The Company further agrees that if at any time or
times during
a period of six (6) years commencing one (1) year from the
Effective Date it
should file a Registration Statement or Offering Statement with
the Commission
pursuant to the Act regardless of whether the Representative or
its specific
duly authorized designee or the holders of the Representative's
Warrants
and/or the underlying securities shall have theretofore availed
themselves of
the right
hereinabove
provided, the Company at its own expense will offer in
writing not less than 30 days prior to filing such Registration
Statement or
Offering Statement, the Representative or its specific duly
authorized
designee and/or the holders of the Representative's Warrants
and/or the
underlying securities the opportunity to register or qualify the
Representative's Warrants and/or the underlying securities,
limited, in the
case of a Regulation A offering, to the amount of any available
exemption, but
unless such registration or qualification includes all of the
Representative's
Warrants and/or the underlying securities it will not relieve the
Company of
such foregoing obligation to register or qualify the same. In the
event the
Company so notifies the Representative or its specific duly
authorized
designee and/or the holders of the Representative's Warrants
and/or the
underlying securities, they shall notify the Company in writing
within 15 days
of receipt of the Company's notice of their desire to have the
Representative's Warrants and/or the underlying securities
registered or
qualified and, further, advising the Company of their intended
method of
distribution. Moreover, they shall furnish such other data or
information as
the Company or its counsel shall reasonably require, and they may
request that
the registration or qualification be deferred up to 90 days.
(iv) In addition to the rights
hereinabove
provided, the Company
will cooperate with the Representative or its specific duly
authorized
designee or the holders of the Representative's Warrants and/or
the underlying
securities in preparing any additional Registration Statement or
Offering
Statement required to sell or transfer the Representative's
Warrants and/or
the underlying securities and will supply information required
therefore, but
such additional Registration Statement or Offering Statement
shall be at the
expense of the holders of the Representative's Warrants and/or
the underlying
securities and not at the expense of the Company.
SECTION 6. Offering of the Shares. The Underwriters agree
to offer the
Shares to the public as soon after the Registration Statement
becomes
effective as the Representative deems advisable at the initial
offering price
and upon the other terms set forth in the Prospectus.
SECTION 7. Registration Statement and Prospectus.
(a) The Company, without charge, will deliver to you two
fully signed
copies of the Registration Statement and of each amendment
thereto, including
all financial statements and exhibits, and to you for delivery to
each
Underwriter, the number of conformed copies of the Registration
Statement and
of each amendment thereto, excluding exhibits, as you reasonably
may request.
(b) The Company has delivered to you for delivery to each
Underwriter and
to prospective dealers, without charge, as many copies as you
have requested
of each preliminary prospectus heretofore filed with the
Commission, and will
deliver to you for delivery to each Underwriter and to others
whose names and
addresses are furnished by such Underwriter or a prospective
dealer, without
charge, on the Effective Date, and thereafter from time to time
during the
period in which the Prospectus is required by law to be delivered
in
connection with the sales by an Underwriter or a dealer, as many
copies of the
Prospectus (and, in the event of any amendment of or supplement
to the
Prospectus, of such amended or supplemented Prospectus) as you
reasonably may
request for the purposes contemplated by the Act.
(c) The Company has authorized the Underwriters to use, and
make
available for use by prospective dealers, the preliminary
prospectuses, and
authorizes the Underwriters and the prospective dealers to use
the Prospectus,
as from time to time amended or supplemented, in connection with
the sale of
Shares in accordance with the applicable provisions of the Act,
the applicable
Rules and Regulations and applicable state law until completion
of the public
offering of the Shares and for such longer period as the
Prospectus is
required to be delivered in connection with sales of the Shares
by an
Underwriter or a dealer.
SECTION 8. Covenants. (a) The Company covenants and agrees
with each
Underwriter that:
(
i
) Promptly after the execution and delivery of this Agreement,
the
Company will file the Final Amendment, if required, with the
Commission.
Thereafter, the Company will not, either prior to the Effective
Date or
thereafter during such period as the Prospectus is required to be
delivered
under the Act in connection with sales of the Shares by an
Underwriter or
dealer, file any amendment of or supplement to the Registration
Statement or
the Prospectus unless a copy thereof shall first have been
submitted to the
Representative, and the Representative shall not have objected
thereto in a
timely manner.
(ii) The Company will use its best efforts to cause the
Registration
Statement to become effective, and will promptly advise you (A)
when the
Registration Statement or any post-effective amendment thereto
shall have
become effective, or any amendments or supplements to the
Prospectus shall
have been filed with the Commission, (B) of any request of the
Commission for
any amendment or supplement to the Registration Statement or the
Prospectus or
for additional information and the nature and substance thereof,
(C) of the
initiation or threat by the Commission of any proceeding for
issuance of any
stop order suspending the effectiveness of the Registration
Statement or of
any order preventing or suspending the use of any preliminary
prospectus or
prohibiting the offer or sale of any of the Units or Shares or
Preferred or of
the initiation of any proceedings for such purpose, and (D) of
receipt by the
Company or any representative or attorney of the Company of any
other
communication from the Commission relating to the Company, the
Registration
Statement, any preliminary prospectus or the Prospectus. The
Company will use
its best efforts to prevent the issuance of any stop order or any
order
preventing or suspending the use of the Registration Statement or
Prospectus
and if such order is issued, to obtain the lifting thereof as
promptly as
possible.
(iii) If at any time when a prospectus is required to
be delivered
under the Act an event shall have occurred as a result of which
it is
necessary to amend or supplement the Prospectus in order to make
the
statements therein not untrue or misleading or to make the
Prospectus comply
with the Act and the Rules and Regulations, the Company forthwith
will
prepare, submit to the Representative, file with the Commission
and deliver to
you for delivery to the Underwriters and dealers (whose names and
addresses
the Representative will furnish to the Company) to whom Units may
have been
sold by the Underwriters, and to other dealers upon request,
without charge,
either amendments or supplements to the Prospectus, so that the
statements in
the Prospectus, as so amended or supplemented, will not be untrue
or
misleading. Delivery by Underwriters of such amendments or
supplements to the
Prospectus shall not constitute a waiver of any of the conditions
precedent to
the Closing as set forth in Section 10 hereof.
(iv) The Company will comply with all of the provisions
of any
undertakings contained in the Registration Statement.
(v) The Company will use its best efforts to qualify or
register the
Shares for sale under the securities or "blue sky" laws of such
jurisdictions
as you and the Company shall mutually agree upon, and will make
such
applications, file such documents and furnish such information as
may be
required for such purpose and to comply with such laws so as to
continue such
qualification in effect so long as required for the purposes of
the
distribution of the Shares; provided, however, that the Company
shall not be
required to qualify as a foreign corporation or subject itself to
taxation in
any jurisdiction or to file a consent to service of process in
any
jurisdiction in any action other than one arising out of the
offering or sale
of the Shares.
(vi) During the period of five years commencing on the
Effective
Date, the Company will furnish to you and each other Underwriter
who may so
request copies of such financial statements and other periodic
and special
reports as the Company may from time to time distribute generally
to the
holders of any class of its capital stock, and will furnish to
the
Representative and each other Underwriter who may so request a
copy of each
annual or other report it shall be required to file with the
Commission.
(vii) The Company will make generally available to its
security
holders as soon as practicable, and in any event no later than
sixty (60) days
after twelve (12) months subsequent to the Effective
Date,
an earnings
statement of the Company, which will be in reasonable detail but
need not be
audited, and will cover a period of twelve months commencing
after the
Effective Date. Such earnings statement shall comply with the
requirements of
Section 11(a) of the Act and the Rules and Regulations, as in
effect at the
time of the issuance thereof.
(viii) Prior to the Closing Time, the Company will not
issue,
directly or indirectly, without your prior consent, any press
release or other
communication or hold any press conference with respect to the
Company or its
activities or the offering of the Shares.
(ix) During the period of 10 days commencing on the
date hereof, the
Company will not at any time, directly or indirectly, take any
action designed
to or which will constitute or which might reasonably be expected
to cause or
result in the stabilization of the price of the Common Stock to
facilitate the
sale or resale of any of the Shares.
(x) The Company will apply the net proceeds from the
offering
substantially in the manner set forth under "Use of Proceeds" in
the
Prospectus.
(xi) The Company shall, at its cost and expense, take
all necessary
and appropriate action such that (A) the Common Stock is included
in the
NASDAQ System not later than the Closing Time, and (B) the Common
Stock remain
included in the NASDAQ System for at least five (5) years from
the Closing
Time; provided however, that the Company meets and continues to
meet all
National Association of Securities Dealers, Inc. ("NASD")
requirements for
inclusion of the Company's securities in the NASDAQ System; and
provided
further, that the Company may, at its option and in its sole
discretion, list
the Common Stock for trading on the New York Stock Exchange or
the American
Stock Exchange and, in the event thereof, the Company may, at its
option and
in its sole discretion, have its Common Stock removed from the
NASDAQ System.
(xii) For a period of five years commencing on the
Effective Date,
the Company shall continue to employ the services of a firm of
independent
certified public accountants acceptable to the Representative in
connection
with the preparation of the financial statements to be included
in any
Registration Statement to be filed by the Company hereunder, or
any amendment
or supplement thereto. For the purposes of the foregoing, Jones,
Jensen &
Company and any regional accounting firm shall be deemed to be
acceptable to
the Representative.
(xiii) For a period of five years commencing on the
Effective Date,
the Company shall continue to appoint a Transfer Agent for the
Common Stock,
which entities shall agree to provisions of Paragraph 9(b) of the
Representative's Warrant, and whom shall be acceptable to the
Representative;
and further provided that any subsequent transfer and/or warrant
agent agrees
in writing to abide by any provisions of Paragraph 9(b) of the
Representative's Warrant.
(xiv) For a period of five years following the
Effective Date of the
Registration Statement, the Company shall, at its sole cost and
expense, if
requested by the Representative, instruct its Transfer Agent to
furnish to the
Representative daily transfer sheets as to the Common Stock and a
list of the
holders of Common Stock whenever such a list shall have been
prepared during
said period. The Representative covenants and agrees to hold the
information
in the foregoing materials in confidence and not use or disclose
same to the
detriment of the Company. Nothing herein shall be deemed to
prohibit
disclosure of such information by the Representative pursuant to
lawful
process served upon the Representative.
(xv) The Company will, within thirty days after the
Closing Time,
apply for listing in Standard and Poor's Corporation Records, and
will use its
best efforts to have itself listed in such reports for a period
of not less
than five (5) years from the Closing Time.
(xvi) Within ten days after the end of the first three
month period
following the Effective Date, the Company, if required, will
prepare and file
with the Securities and Exchange Commission a report on Form SR
as prescribed
by Rule 463 of Regulation C under the Securities Act of 1933.
(xvii) Within thirty days after the Closing Time, the
Company will
prepare and file with the Securities and Exchange Commission a
Registration
Statement on Form 8-A with respect to its securities pursuant to
and as
contemplated by Section 12(g) of the Securities Exchange Act of
1934, as
amended, regardless of whether the Company would be required
otherwise by the
terms of such Section to file said Statement, and the Company
will file a
request for acceleration of the Effective Date under Section
12(g) in
connection therewith. The Company shall thereafter comply with
all periodic
reporting and proxy solicitation requirements imposed by the
Commission
pursuant to the 1934 Act.
(xix) The Company will deliver to you and your counsel
bound
volumes of copies of all documents and appropriate correspondence
filed or
received from the Securities and Exchange Commission and the
NASD, and all
closing documents.
(xx) At the Closing Time, the Company shall enter into
a financial
consulting agreement with you pursuant to which you will receive
a consulting
fee in an amount equal to one (1%) percent of the total dollar
amount of the
contemplated offering payable at Closing, plus an amount equal to
one (1%)
percent based solely upon the amount raised by the
Representative, for
services for a period of one (1) year from the Effective Date
which shall
include, but not be limited to, advising the Company regarding
shareholder
relations including the preparation of the annual report and
other releases,
assisting in long-term financial planning, advice in connection
with corporate
re-organizations and expansion and capital structure, and other
financial
assistance.
(xxi) Should the Company within seven (7) years from
the Effective
Date, enter into any agreement or understanding with any person
and/or entity
introduced by the Representative to the Company within five (5)
years from the
Effective Date involving (
i
) the sale of all or substantially all of the
assets and properties of the Company, (ii) the merger or
consolidation of the
Company (other than a merger or consolidation effected for the
purpose of
changing the Company's domicile) or (iii) the acquisition by the
Company of
the assets or stock of another business entity, which agreement
or
understanding is thereafter consummated, whether or not during
such five (5)
year period, the Company, upon such consummation, shall pay to
the
Representative an amount equal to the following percentages of
the
consideration paid by the Company in connection with such
transaction:
5% of the first $1,000,000, or portion thereof, of such
consideration;
4% of the second $1,000,000, or portion thereof, of such
consideraton
;
and,
3% of such consideration in excess of the first $2,000,000
of such
consideration.
The fee payable to the Representative will be in the same
form of
consideration as that paid by or to the Company, as the case may
be, in such
transaction.
(xxii) For a period of five (5) years following the
Effective Date
or until such time as the securities of the Company are listed on
the New York
Stock Exchange or the American Stock Exchange, the Company shall
cause its
legal counsel to provide the Representative with a list, to be
updated at
least annually, of those states in which the securities of the
Company may be
traded in non-issuer transactions under the Blue Sky laws of the
states.
SECTION 9. Expenses. (a) The Company will pay and bear all
costs, fees,
taxes and expenses incident to the performance of the obligations
of the
Company under this Agreement, including, but not limited to the
expenses and
taxes incident to (
i
) the issuance, sale and delivery to the Underwriters of
the Shares to be purchased by the Underwriters, the preparation,
printing and
filing under the Act, and the delivery to the Underwriters, of
the
Registration Statement (including all exhibits thereto), each
preliminary
prospectus and the Prospectus, all amendments and supplements to
the
Registration Statement and the Prospectus, the Agreement Among
Underwriters,
this Agreement and the Selling Agreement, (ii) the issuance of
the Shares and
the preparation and delivery of certificates evidencing the
Shares, (iii) the
registration or qualification of the Shares for offer and sale
under the
securities or "blue sky" laws of the various jurisdictions
referred to in
Section 8(a)(v) above, including the fees and disbursements of
counsel in
connection therewith and the preparation and printing of
preliminary or
supplementary blue sky memoranda; (iv) the furnishing to the
Representative
and the Underwriters of copies of the Registration Statement,
each preliminary
prospectus, the Prospectus and all amendments and supplements to
the
Prospectus, and of the other documents required by this Agreement
to be so
furnished, including costs of shipping and mailing, (v) the
filing
requirements of the NASD, (vi) all transfer taxes, if any, with
respect to the
sale and delivery of the Shares to the several Underwriters and
(vii) the fees
and expenses of counsel for the Company and of the Company's
accountants, the
Transfer Agent for the Common Stock and any special agents
appointed for the
transfer of the Shares. The Company further agrees that, in
addition to the
expenses payable pursuant to this Section 9, it will pay to the
Representative
on the Closing Date on a non-accountable basis a sum equal to
three (3%)
percent of the Total Price to the Public of the Shares of which,
as of the
date hereof, the sum of $20,000 has been paid.
(b) The Company shall also bear the cost of investigative
reports (such
as Bishop's Reports) of the Company's principal executive
officers, directors
and substantial shareholders.
SECTION 10. Conditions of Your Obligations. Your
obligations hereunder
to purchase and pay for the Firm Shares are subject (as of the
date hereof and
as of the Closing Time) to the accuracy of and compliance with
the
representations and warranties of the Company and, to the
accuracy of the
statements of the Company and of officers of the Company made
pursuant to the
provisions hereof, to the performance by the Company of its
covenants and
agreements hereunder, and to the following additional conditions:
(a)(
i
) The Registration Statement shall have become effective not
later
than 5:00 p.m., Eastern Standard Time, on the date of this
Agreement, or at
such later time or on such later date as you may agree to in
writing; (ii) at
or prior to the Closing Time, no stop order suspending the
effectiveness of
the Registration Statement shall have been issued by the
Commission and no
proceeding for that purpose shall have been initiated or shall be
threatened
or contemplated by the staff of the Commission; (iii) no stop
order suspending
the effectiveness of the qualification or registration of the
Units under the
securities or "blue sky" laws of any jurisdiction (whether or not
a
jurisdiction which you shall have specified) shall be threatened
or
contemplated by the authorities of any such jurisdiction or shall
have been
issued and shall remain in effect; (iv) any request for
additional information
on the part of the staff of the Commission or any such
authorities shall have
been complied with to the satisfaction of the staff of the
Commission or such
authorities; and (v) after the date hereof no amendment or
supplement to the
Registration Statement or the Prospectus shall have been filed
unless a copy
thereof was first submitted to the Representative and the
Representative did
not object thereto.
(b) Since the respective dates as of which information is
given in the
Registration Statement and Prospectus, (
i
) there shall not have been any
change in the capital stock of the Company or any material change
in the
long-term debt of the Company, except as set forth in or
contemplated by the
Registration Statement and Prospectus, (ii) there shall not have
been any
material adverse change in the general affairs, management,
financial position
or results of operations of the Company, whether or not arising
from
transactions in the ordinary course of business, in each case
other than as
set forth in or contemplated by the Registration Statement or
Prospectus, and
(iii) the Company shall not have sustained any material
interference with its
business or properties from fire, explosion, flood or other
casualty, whether
or not covered by insurance, or from any labor dispute or any
court or
legislative or other governmental action, order or decree, which
is not set
forth in the Registration Statement and Prospectus, if in the
reasonable
judgment of the Representative any such development referred to
in clauses
(
i
), (ii) or (iii) makes it impracticable or inadvisable to
consummate the
sale and delivery of the Units by the Underwriters at the public
offering
price.
(c) Since the respective dates as of which information is
given in the
Registration Statement and the Prospectus, there shall have been
no litigation
instituted against the Company or any of its officers or
directors, and since
such dates there shall be no proceeding instituted or threatened
against the
Company or any of its officers or directors, before or by any
federal, state
or county court, commission, regulatory body, administrative
agency or other
governmental body, domestic or foreign, in which litigation or
proceeding an
unfavorable ruling, decision or finding would materially and
adversely affect
the business, material properties, financial condition or results
of
operations of the Company.
(d) Each of the representations and warranties of the
Company contained
herein shall be true and correct at the Closing Time as if made
at the Closing
Time, and all covenants and agreements herein contained to be
performed on the
part of the Company and all conditions herein contained to be
fulfilled or
complied with by the Company at or prior to the Closing Time
shall have been
duly performed, fulfilled or complied with.
(e) At the Closing Time, Robert N. Wilkinson, Esq., counsel
for the
Company, shall furnish to you an opinion in form and substance
satisfactory to
you, dated as of the date of its delivery, to the effect that:
(
i
) The Company (A) has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Colorado, (B)
is duly qualified and in good standing as a foreign corporation
in each
jurisdiction in which the nature of the activities conducted by
it or the
character of the assets owned or leased by it as described in the
Prospectus
required such qualification, except where failure to so qualify
would not
materially affect the Company's business, properties or financial
condition,
and (C) has all requisite corporate power and authority to own or
lease its
properties and conduct its business as described in the
Prospectus.
(ii) To counsel's best knowledge, no authorization,
approval,
consent or license of any governmental or regulatory body, agency
or
instrumentality (other than registration under the Act or
qualification under
state securities or "blue sky" laws) is required in connection
with the
authorization, issuance, transfer, sale or delivery of the
Shares, in
connection with the execution, delivery and performance of this
Agreement by
the Company, or in connection with the taking of any action
contemplated
herein, or if so required, all such authorizations, approvals,
consents and
licenses, specifying the same, have been obtained and are in full
force and
effect.
(iii) The Company's authorized capitalization is set
forth in the
Registration Statement and the Prospectus. The outstanding shares
of the
Common Stock (including the Shares) have been duly authorized and
validly
issued, are fully paid and non-assessable, and have not been
issued in
violation of any pre-emptive rights. The description of the
Common Stock
contained in the Registration Statement and the Prospectus
conforms to the
rights set forth in the charter and the by-laws of the Company.
The
Representative's Warrants have been duly authorized and validly
issued.
(iv) The certificates representing the Shares are in
due and proper
form.
(v) The Company has full corporate power and authority
to enter into
this Agreement, and this Agreement has been duly authorized,
executed and
delivered by or on behalf of the Company and constitutes the
legal, valid and
binding obligation of the Company subject to customary insolvency
and
enforceability
exceptions and except for Section 12 hereof.
(vi) The Registration Statement and the Prospectus
comply as to form
in material respects, with the requirements of the Act and the
Rules and
Regulations (except that no opinion need be expressed as to
financial
statements, schedules and other financial data contained in the
Registration
Statement or the Prospectus).
(vii) The Registration Statement has become effective
under the Act,
and, to the knowledge of such counsel, no stop order suspending
the
effectiveness of the Registration Statement has been issued and
no proceeding
for that purpose has been instituted or is threatened, pending or
contemplated.
(viii) The execution and delivery of this Agreement by
the Company,
the consummation by the Company of the transactions herein
contemplated and
the compliance with the terms of this Agreement do not and will
not conflict
with or result in a breach of any of the terms or provisions of,
or constitute
a default under, the charter or by-laws of the Company, or any
indenture,
mortgage or other agreement or instrument known to such counsel
to which the
Company is a party or by which it or any of its properties is
bound, or, to
best knowledge of such counsel, any existing law, rule,
regulation or judgment
or order or decree, of any government, governmental body or
court, domestic or
foreign, having jurisdiction over the Company or any of its
respective
properties.
(ix) The letter in which such opinion is stressed shall
also state
that:
(a) such counsel has participated in the
preparation of the
Registration Statement and the Prospectus and nothing has come to
the
attention of such counsel to lead it to believe that, both as of
the Effective
Date and as of the Closing Time, either the Registration
Statement or the
Prospectus, or any amendment or supplement thereto, contained or
contains any
untrue statement of a material fact or omitted or omits to state
a material
fact required to be stated therein or necessary to make the
statements therein
not misleading (except that no statement need be expressed as to
financial
statements, schedules and other financial data contained in the
Registration
Statement or the Prospectus).
(b) such counsel is familiar with all contracts or
other
documents referred to in the Registration Statement and the
Prospectus and
such contracts or other documents are fairly summarized or
disclosed therein,
or filed (or incorporated by reference) as exhibits thereto as
required, and
such counsel does not know of any contracts or other documents
required to be
summarized of disclosed or filed which have not been summarized
or disclosed
or filed.
(c) to the best of the knowledge of such counsel
and except as
set forth in the Registration Statement and Prospectus, the
Company does not
own any shares of stock or other equity securities issued by any
corporation
and does not have any equity interest in any firm, partnership,
joint venture,
association or other entity.
(x) Such counsel knows of no suits or claims, not
covered by
insurance, threatened or pending against the Company in any court
or before or
by any governmental body which would materially affect the
business of the
Company or its financial condition except as forth in or
contemplated by the
Prospectus.
Such opinion shall be to such further effect with respect to
other legal
matters relating to this Agreement and the sale of the Units
hereunder as the
Representative reasonably may request. In rendering such
opinions, such
counsel may rely upon certificates of officers of the Company and
of public
officials. In rendering such opinion, such counsel may rely as to
all matters
of law other than the laws of the United States upon opinions of
counsel
satisfactory to you, in which case the opinions shall state that
such counsel
has no reason to believe that you and they are not entitled so to
rely.
(f) The Company shall supply and deliver to you and your
counsel at your
and their respective offices, all information reasonably required
to enable
you to make such investigation of the Company and its business
prospects as
you or your counsel shall desire and shall make available to you
at your
offices such person(s) as you shall deem reasonably necessary and
appropriate
in order to verify or substantiate any such information supplied.
You shall
have the right to review any materials prepared in connection
with the
offering of securities of the Company conducted prior to the
Public Offering
for compliance with applicable Federal and State Securities Laws.
(g) Concurrently with the execution and delivery of this
Agreement,
Jones, Jensen & Company shall have furnished to you a letter,
dated to within
three (3) business days of the Effective Date, addressed to you
and in form
and substance satisfactory to you. At the Closing Time, Jones,
Jensen &
Company shall have furnished to you a letter, dated as of the
date of its
delivery, which shall confirm, on the basis of a review in
accordance with the
procedures set forth in the letter from such firm referred to in
the preceding
sentence, that nothing has come to its attention during the
period from the
date of its previous letter, to a date not more than three (3)
days prior to
the Closing Time which would require any change in its letter
dated the date
hereof if it were required to be dated and delivered at the
Closing Time.
(h) Concurrently with the execution and delivery of this
Agreement and at
the Closing Time, there shall be furnished to you an accurate
certificate,
dated the date of its delivery, signed on behalf of the Company
by each of the
chief executive officer and the chief financial officer of the
Company, in
form and substance satisfactory to you, to the effect that:
(
i
) Each signer of such certificate has carefully examined the
Registration Statement and (A) as of the date of such
certificate, the
statements in the Registration Statement and the Prospectus are
true and
correct in all respects and neither the Registration Statement
nor the
Prospectus omits to state a material fact required to be stated
therein or
necessary in order to make the statements therein not untrue or
misleading and
(B) in the case of the certificate delivered at the Closing Time,
since the
Effective Date no event has occurred as a result of which it is
necessary to
amend or supplement the Prospectus in order to make the
statements therein not
untrue or misleading.
(ii) No stop order suspending the effectiveness of the
Registration
Statement has been issued by the Commission and no proceeding for
that purpose
has been initiated or is threatened by the staff of the
Commission, and no
stop order suspending the effectiveness of the qualification or
registration
of the Units under the securities or "blue sky" laws of any
jurisdiction
(whether or not a jurisdiction you shall have specified) is
threatened or
contemplated by the authorities of any such jurisdiction or has
been issued
and remains in effect.
(iii) The conditions, separately set forth in such
certificate,
contained in subsections (a), (b) and (c) of this Section 10 have
been
complied with.
(iv) Each of the representations and warranties of the
Company
contained in this Agreement were when originally made and are at
the time such
certificate is dated true and correct.
(v) Each of the covenants required herein to be
performed by the
Company on or prior to the date of such certificate has been duly
and timely
performed in all respects and each condition herein required to
be complied
with by the Company on or prior to the date of such certificate
has been duly
and timely complied with in all respects.
(
i
) The Company shall have furnished to you such certificates, in
addition to those specifically mentioned herein, as you
reasonably may have
requested as to the accuracy and completeness at the Closing Time
of any
statement in the Registration Statement or the Prospectus, in
respects, as to
the accuracy at the Closing Time of the representations and
warranties of the
Company, as to the performance by the Company of its obligations
hereunder,
or as to the fulfillment of the conditions concurrent and
precedent to your
obligations hereunder.
(j) sale of the Shares by the Company to the several
Underwriters shall
be consummated simultaneously at the Closing Time in accordance
with the terms
hereof.
SECTION 11. Indemnification; Contribution. (a) The Company
agrees to
indemnify and hold harmless each Underwriter and each person, if
any, who
controls any Underwriter within the meaning of Section 15 of the
Act, and each
and all of them, from and against any and all losses, claims,
damages,
liabilities or actions, joint or several (including any
investigation, legal
and other expenses incurred in connection with, and any amount
paid in
settlement of, any action, suit or proceeding or any claim
asserted), to which
they or any of them may become subject under the Act, the
Securities Exchange
Act of 1934, as amended (the "Exchange Act") or other federal or
state
statutory law or regulation, at common law or otherwise, insofar
as such
losses, claims, damages, liabilities or actions arise out of, or
are based
upon, any untrue statement or alleged untrue statement of a
material fact
contained in the Registration Statement, any preliminary
prospectus, the
Prospectus or any amendment or supplement thereto, or the
omission or alleged
omission to state therein a material fact required to be stated
therein or
necessary to make the statements therein not misleading;
provided, however,
that (1) the indemnity agreements of the Company contained in
this Section
11(a) shall not apply to any such losses, claims, damages,
liabilities or
actions if such statement or omission was made in reliance upon
and in
conformity with information furnished in writing to the Company
by or on
behalf of any Underwriter for use in such preliminary prospectus,
the
Registration Statement or the Prospectus, or such amendment or
supplement, as
specified in Section 3(iii) hereof, and (2) the indemnity
agreements contained
in this Section
1l
(a) with respect to any preliminary prospectus shall not
inure to the benefit of any Underwriter from whom the person
asserting any
such losses, claims, damages, liabilities or actions purchased
the Units which
are the subject thereof if at or prior to the written
confirmation of the sale
of the Units a copy of the Prospectus (or the Prospectus as
amended or
supplemented) was not sent or delivered to such person and the
untrue
statement or omission of a material fact contained in such
preliminary
prospectus was corrected in the Prospectus (or the Prospectus as
amended or
supplemented), unless such failure to deliver the Prospectus was
a result of
noncompliance by the Company with the provisions of Section 7(b).
(b) Each Underwriter agrees to indemnify and hold harmless
the Company,
its directors, its officers who shall have signed the
Registration Statement,
and each person, if any, who controls the Company within the
meaning of
Section 15 of the Act, to the same extent as the foregoing
indemnity from the
Company to such Underwriter, but only insofar as such losses,
claims, damages,
liabilities or actions arise out of or are based upon any
statement in or
omission or alleged omission from the Registration Statement, and
preliminary
prospectus, the Prospectus or any amendment or supplement thereto
in reliance
upon and in conformity with information furnished in writing to
the Company by
or on behalf of the Underwriters specifically for use in
connection with the
preparation of the Registration Statement, any preliminary
prospectus or the
Prospectus or any such amendment or supplement thereto; provided,
however,
that the aggregate amount which may be recovered from each
Underwriter
pursuant to the indemnification granted hereby shall be limited
to the total
price at which the Units purchased by such Underwriter hereunder
were offered
to the public.
(c) Any party which proposes to assert the right to be
indemnified under
this Section 11 will, promptly after receipt of notice of
commencement of any
action, suit or proceeding against such party in respect of which
a claim is
to be made against an indemnifying party under this Section 11,
notify each
such indemnifying party of the commencement of such action, suit
or
proceeding, enclosing a copy of all papers served, but the
omission so to
notify such indemnifying party of any such action, suit or
proceeding shall
not relieve it from any liability which it may have to any
indemnified party
otherwise than under this Section 11. In case any such action,
suit or
proceeding shall be brought against any indemnified party and it
shall notify
the indemnifying party of the commencement thereof, the
indemnifying party
shall be entitled to participate in and, to the extent that it
shall wish,
jointly with any other indemnifying party similarly notified, to
assume the
defense thereof, with counsel satisfactory to such indemnified
party, and
after notice from the indemnifying party to such indemnified
party of its
election so to assume the defense thereof the indemnifying party
shall not be
liable to such indemnified party for any legal or other expenses,
other than
reasonable costs of investigation subsequently incurred by such
indemnified
party in connection with the defense thereof. The indemnified
party shall have
the right to employ its counsel in any such action, but the fees
and expenses
of such counsel shall be at the expense of such indemnified party
unless (
i
)
the employment of counsel by such indemnified party has been
authorized by the
indemnifying parties, (ii) the indemnified party shall have
reasonably
concluded that there may be a conflict of interest between the
indemnifying
parties and the indemnified party in the conduct of the defense
of such action
(in which case the indemnifying parties shall not have the right
to direct the
defense of such action on behalf of the indemnified party) or
(iii) the
indemnifying parties shall not in fact have employed counsel to
assume the
defense of such action, in each of which cases the fees and
expenses of
counsel shall be at the expense of the indemnifying parties. An
indemnifying
party shall not be liable for any settlement of any action or
claims effected
without its written consent.
(d) In order to provide for just and equitable contribution
in
circumstances in which the indemnification provided for in
Section 11(a) or
Section 11(b) for any reason is held to be unavailable from the
Company or the
Underwriters, the Company, and the Underwriters shall contribute
to the
aggregate losses, claims, damages and liabilities (including any
investigation, legal and other expenses incurred in connection
with, and any
amount paid in settlement of, any action, suit or proceeding or
any claims
asserted, but after deducting any contribution received by the
Company from
persons other than the Underwriters, such as persons who control
the Company
within the meaning of the Act or the Exchange Act, officers of
the Company who
signed the Registration Statement and directors of the Company,
who may also
be liable for contribution) to which the Company, and one or more
of the
Underwriters may be subject in such proportion so that the
Underwriters are
responsible for that portion represented by the percentage that
the
underwriting discount appearing on the cover page of the
Prospectus bears to
the public offering price appearing thereon, and the Company is
responsible
for the balance; provided, however, that (
i
) in no case shall any Underwriter
(except as may be provided in the Agreement Among Underwriters)
be responsible
for any amount in excess of the underwriting discount applicable
to the Units
purchased by such Underwriter hereunder and (ii) no person guilty
of
fraudulent misrepresentation (within the meaning of Section
1l
(f) of the Act)
shall be entitled to contribution from any person who was not
guilty of such
fraudulent misrepresentation. For purposes of this Section
1l
(d), each person,
if any, who controls an Underwriter within the meaning of the Act
shall have
the same rights to contribution as such Underwriter, and each
person, if any,
who controls the Company within the meaning of the Act, each
officer of the
Company who shall have signed the Registration Statement and each
director of
the Company shall have the same rights to contribution as the
Company, subject
in each case to clauses (
i
) and (ii) of this Section 11(d). Any party entitled
to contribution will, promptly after receipt of notice of
commencement of any
action, suit or proceeding against such party in respect of which
a claim for
contribution may be made against another party or parties under
this Section
11(d), notify such party or parties from whom contribution may be
sought, but
the omission so to notify such party or parties from whom
contribution may be
sought shall not relieve the party or parties from whom
contribution may be
sought from any other obligation it or they may have hereunder or
otherwise
than under this Section 11(d). No party shall be liable for
contribution with
respect to any action or claim settled without its consent.
(e) The respective indemnity and contribution agreements by
the
Underwriters and the Company contained in this Section 11, and
the covenants,
representations and warranties of the Company set forth in
Sections 3, 8 and
10 hereof, shall remain operative and in full force and effect
regardless of
(
i
) any investigation made by any Underwriter or on its behalf or
by or on
behalf of any person who controls an Underwriter or the Company
or any
controlling person of the Company or any director or any officer
of the
Company, (ii) acceptance of any of the Shares and Warrants
comprising the
Units and payment therefor or (iii) any termination of this
Agreement, and
shall survive the delivery of the Shares and Warrants comprising
the Units,
and any successor of any Underwriter, or the Company or of any
person who
controls an Underwriter or the Company, as the case may be, shall
be entitled
to the benefit of such respective indemnity and contribution
agreements.
SECTION 12. Termination. Agreement (except for the
provisions of Sections
9 and 11 hereof) may be terminated by the Representative or by
the
Underwriters who have agreed to purchase in the aggregate at
least 50% of the
Firm Shares by notifying the Company at any time,
(a) prior to the earliest of (
i
) 11 a.m., Eastern Standard Time, on the
day following the Effective Date, (ii) the time of release by the
Representative for publication of the first newspaper
advertisement which is
subsequently published with respect to the Units, or (iii) the
time when the
Units are first generally offered by the Representative to
dealers by letter
or telegram,
(b) at or prior to the Closing Time if any of the conditions
specified in
Section 10 hereof shall not have been fulfilled when and as
required by this
Agreement to be fulfilled, or
(c) at or prior to the Closing Time if, in the judgment of
the
Representative or in the judgment of such Underwriters, as the
case may be,
payment for and delivery of the Shares is rendered impracticable
or
inadvisable because (
i
) additional material adverse governmental restrictions
not in force and effect on the date hereof shall have been
imposed upon the
trading in securities generally established on the New York Stock
Exchange,
the American Stock Exchange, NASDAQ or trading in securities
generally on such
Exchanges or NASDAQ shall have been suspended, or a banking
moratorium shall
have been established by federal or state authorities, or any
other similar
event or occurrence shall have happened which, in the discretion
and judgment
of any of such Underwriters, restricts materially adversely a
free market for
securities, or (ii) a war or other national calamity, major
catastrophe, a
substantial material and adverse change in national,
international or world
affairs, civil riot, act of God, order of a duly constituted
authority to any
armed forces of the United States to engage in any major
hostilities with any
foreign nation or power, regardless of any formal declaration of
war, or
similar event or occurrence, shall have occurred which, in the
discretion and
judgment of any of such Underwriters, has materially adversely
disrupted or
will materially adversely disrupt the financial markets of the
United States,
or (iii) in the discretion of any of such Underwriters,
substantial and
material adverse changes in the condition of the securities
market (either
generally or with reference to the sale of the securities to be
offered by the
Company hereunder) or the business condition of the Company shall
have
occurred or shall be likely to occur.
If this Agreement is terminated pursuant to any of the
provisions hereof,
except as otherwise provided herein, the Company shall not be
under any
liability (including, without limitation, liability for loss of
profits) to
any Underwriter and no Underwriter shall be under any liability
to the
Company, except that the Representative shall be reimbursed for
all of its out
of pocket expenses, including but not limited to its attorney
fees, up to an
amount not to exceed the sum of $20,000, or that (
i
) if this Agreement is
terminated by the Representative because of any failure or
refusal on the part
of the Company to comply with the terms or to fulfill any of the
conditions of
this Agreement, the Underwriters will be entitled to the sum of
$20,000
including the sum of $20,000 that the Representative has been
paid by the
Company pursuant to Section 9(a) hereof, for all reasonable
out-of-pocket
expenses (including the fees and disbursements of their counsel)
reasonably
incurred by them which shall be itemized in writing to the
Company, and (ii)
no Underwriter who shall have failed or refused to purchase the
Units agreed
to be purchased by it hereunder, without some reason sufficient
hereunder to
justify its cancellation or termination of its obligations
hereunder, shall be
relieved of liability to the Company or the other Underwriters
for damages
occasioned by its default.
SECTION 13. Default of Underwriters. (a) If one or more of
the
Underwriters shall fail (other than for a reason sufficient to
justify the
termination of this Agreement) to purchase the Shares agreed to
be purchased
by such Underwriters, the Representative may find one or more
substitute
underwriters to purchase such Shares or make such other
arrangements as it may
deem advisable or one or more of the remaining Underwriters may
agree to
purchase such Shares in such proportions as may be approved by
the
Representative, in each case upon the terms herein set forth. If
no such
arrangements have been made within 24 hours after the Closing
Time and
(
i
) the aggregate number of Shares to be purchased by the
defaulting
Underwriters shall not exceed 10% of the Shares to be purchased
by all the
Underwriters, each of the non-defaulting Underwriters shall be
obligated to
purchase such Shares on the terms herein set forth in proportion
to their
respective obligations hereunder, or
(ii) the aggregate number of the Shares to be purchased
by the
defaulting Underwriters shall exceed 10% of the Shares to be
purchased by all
the Underwriters, the Company shall be entitled to an additional
period of 24
hours within which to find one or more substitute underwriters
satisfactory to
the Representative to purchase such Shares upon the terms set
forth herein.
(b) In any such case, either the Representative or the
Company shall have
the right to postpone the Closing Time for a period of not more
than five
business days in order that necessary changes and arrangements
may be effected
by the Representative and the Company. If none of the
non-defaulting
Underwriters or the Company shall make arrangements pursuant to
this Section
13 within the period stated for the purchase of the Shares which
the
defaulting Underwriters agreed to purchase, this Agreement shall
terminate
without liability on the part of any non-defaulting Underwriter
to the Company
and without liability on the part of the Company to the
Underwriters, except
as provided in Sections 9 and 12 hereof. The provisions of this
Section 13
shall not in any way affect the liability of any defaulting
Underwriter to the
Company or the non-defaulting Underwriters arising out of such
default. A
substitute underwriter hereunder shall become an Underwriter for
all purposes
of this Agreement.
SECTION 14. Notice. Except as otherwise expressly provided
in this
Agreement, (a) whenever advice or a notice, objection,
designation, request or
report is given or is required by the provisions of this
Agreement to be given
to the Company, such advice, notice, objection, designation,
request or report
shall be in writing, or by telegraph confirmed in writing,
addressed to the
Company, and delivered at 101
Baremore
, Louisville, Mississippi 39339 and (b)
whenever advice or a notice, objection, designation, request or
report is
given or is required by the provisions of this Agreement to be
given to you or
the Underwriters, such advice, notice, objection, designation,
request or
report shall be in writing, addressed to you and delivered at 45
Church
Street, Suite #25, Freeport, New York 11520, or at such other
address as a
party hereto may give notice in accordance herewith.
SECTION 15. Miscellaneous. (a) This Agreement is made solely
for the
benefit of the Underwriters and that of the Company, the
Company's directors,
the Company's officers who shall have signed the Registration
Statement and
any controlling person referred to in Section 11, and their
respective
successors and assigns, and no other person, partnership,
association or
corporation shall acquire or have any right under or by virtue of
this
Agreement. The term "successor" or the term "successors and
assigns" as used
in this Agreement shall not include any buyer, as such, of any of
the Units
from the Underwriters. All of the obligations of the Underwriters
hereunder
are several and not joint.
(b) Promptly upon obtaining knowledge thereof, the
Representative will
advise the Company of the receipt by any of the Underwriters, by
the
Representative or by counsel for the Representative of any
communication from
the Commission relating to the Registration Statement, any
preliminary
prospectus or the Prospectus.
(c) This Agreement shall supersede any agreement or
understanding, oral
or in writing, express or implied, between the Company and you
relating to the
sale of any of the Units.
(d) No change, amendment or supplement to, or waiver of,
this Agreement
or any term, provision or condition herein, shall be valid or of
any effect
unless in writing and signed by the party against whom such is
asserted.
(e) This Agreement shall be governed by and construed in
accordance with
the laws of the State of New York and shall also be subject to
the exclusive
jurisdiction of the Courts of said State.
Please confirm that the foregoing correctly sets forth the
agreement
between the Company and you.
Very truly yours,
WORLDWIDE FOREST PRODUCTS,
INC..
- ---------------------------------
By: Brian L.
Sorrentino
, Chairman
Accepted as of the date first above written
Castle Securities Corp.
- -------------------------------
By: Michael T.
Studer
, President
Acting on behalf of itself and as the
Representative of the other Underwriters
named in Schedule A attached hereto.
<PAGE>
SCHEDULE A
Number of
Name Address
Shares
- -------- ---------
- -------
Castle Securities Corp. 45 Church Street, Suite #25
Freeport, New York 11520
Exhibit 1.2
700,000 Shares
WORLDWIDE FOREST PRODUCTS, INC.
AGREEMENT AMONG UNDERWRITERS
------------------------------
New
York, New York
1996
Castle Securities Corp.
45 Church Street, Suite #25
Freeport, New York 11520
Dear Sirs:
We wish to confirm as follows our agreement with you with respect
to (a) the
purchase by you and the other underwriters, including ourselves
(the
"Underwriters"), named in Schedule A to the Underwriting
Agreement described
below, severally and not jointly from Worldwide Forest Products,
Inc. a
Colorado corporation, (the "Company"), of an aggregate of 700,000
shares of
Common Stock, $.0075 par value per share of the Company (the
"Firm Shares"),
(b) the grant by the Company of an option to purchase up to an
aggregate of
70,000 additional shares of Common Stock (the "Option Shares")
upon the terms
set forth in the Underwriting Agreement (the Firm Shares and the
Option Shares
so purchased or to be purchased are hereinafter called the
"Shares"), and (c)
the public offering and sale of the Shares. The obligations of
the several
underwriters to purchase Shares pursuant to the Underwriting
Agreement are
hereinafter called their "underwriting obligations".
1. Authority of Representative
---------------------------
We authorize you as our Representative and on our behalf to:
(a) execute the Underwriting Agreement in substantially the
form annexed
hereto as Exhibit A, with such changes therein as you may approve
(the
"Underwriting Agreement"), including changes in those who are to
be
Underwriters and the respective number of Firm Shares to be
purchased by them,
but not without our approval any change in the number or price of
the Firm
Units to be purchase by us except as contemplated thereby or
hereby;
(b) cause the public offering of the Shares to be made on the
effective
date of the Registration Statement, or as soon thereafter as in
your judgment
is advisable, at the public offering price set forth on the cover
page of the
Prospectus (the "initial public offering price"), provided that
the time
within which the Registration Statement is required to become
effective
pursuant to the Underwriting Agreement will not be extended more
than 24 hours
by you without the approval of a majority in interest (including
yourselves)
of the Underwriters;
(c) fix the concessions to the dealers and, in your
discretion, change
them and the public offering price after commencement of the
public offering;
(d) take, in your discretion, such action as is authorized or
contemplated
by the Underwriting Agreement, including designating and
postponing the
Closing Date and exercising on behalf of the Underwriters any
right of
termination of the Underwriting Agreement, and determine, in your
discretion,
the compliance with the requirements of Section 9 of the
Underwriting
Agreement of the certificates, letters and opinions delivered to
your pursuant
thereto;
(e) approve on behalf of the Underwriters the filing of any
amendments or
supplements to the Registration Statement or the Prospectus;
(f) during the term of this Agreement or during such longer
period as may
be necessary to cover a short position incurred for the accounts
of the
several Underwriters pursuant to this Section l(f), (
i
) buy and sell Shares,
in addition to sales of Shares made pursuant to Section l(h) or
l(
i
), in the
open market or otherwise, on a "when-issued" basis or otherwise
for either
long or short account, on such terms and at such prices as you
shall deem
desirable and (ii) in arranging for sales of Shares pursuant to
Section l(h)
or l(
i
), over-allot and cover any such over-allotment, at your
discretion, by
purchasing Units, exercising the over-allotment option referred
to in Section
4(b) of the Underwriting Agreement or both, it being understood
that you may
have made purchases of outstanding securities prior to the
execution of this
Agreement and that all such purchases and sales and
over-allotments shall be
made for the accounts of several Underwriters as nearly as
practicable in
proportion to their respective underwriting obligations relative
to Firm
Shares; provided, however, that our net position resulting from
such purchases
and sales and over-allotments shall not at any time exceed,
either for long or
short account, 10% of the aggregate initial public offering price
of the
Shares which we are or become obligated to purchase, and if you
engage in any
such transactions to file with the Securities Exchange Act of
1934, as amended
(the "Exchange Act");
(g) determine the form and manner of any public advertisement
of the
public offering of the Shares;
(h) reserve for sale and sell on our behalf to institutions
or other
persons selected by you, at the public offering price, such
number of Shares
purchased by us from the Company as you shall determine; such
sales shall be
made for the respective accounts of the several Underwriters as
nearly as
practicable in proportion to their underwriting obligations;
(
i
) reserve for sale and sell under Selling Agreements
substantially in
the form annexed hereto as Exhibit B, with such changes therein
as you may
make pursuant to authority granted to you herein (the "Selling
Agreements"),
on our behalf such number of Shares as you shall determine to
dealers selected
by you who are members of the National Association of Securities
Dealers, Inc.
(the "NASD"), and among whom you may include any of the
Underwriters, or to
foreign banks, dealers or institutions not registered under the
Exchange Act
which agree to make no sales within the United States, its
territories or
possessions or to persons who are citizens thereof or residents
therein and in
making sales to comply with the NASD's interpretation with
respect to free
riding and withholding; such sales shall be made for the account
of each
underwriter for whose account Shares have been reserved as nearly
as
practicable in the proportion that the number of Shares of such
Underwriter
reserved for such sales bears to the total number of Shares so
reserved;
(j) if you deem it inadvisable in arranging sales of Shares
for our
account hereunder to sell Shares to any particular dealer or
other buyer
because of the securities or "blue sky" laws of any jurisdiction,
sell such
Shares to one or more Underwriters (
i
) in the case of sales for resale to
dealers, at the public offering price less such amount, not in
excess of the
concession to dealers, as you may determine and (ii) in the case
of all other
sales, at the public offering price, the transfer tax, if any, on
any such
sales among Underwriters shall be treated as an expense and
charged to the
respective accounts of several Underwriters in proportion to
their respective
underwriting obligations;
(k) advance your own funds as set forth in Section 3,
charging current
interest rates, or arrange loans for our account in connection
with the
purchase, carrying and sale of the Shares, and in connection
therewith hold or
pledge as security therefor all or any of the Shares held by you
for our
account;
(1) file a request for acceleration of the effective date of
the
Registration Statement which, if no review of the Registration
Statement has
been or will be made by the Commission's staff, will confirm that
we are aware
of our responsibilities under the Exchange Act and the Securities
Act of 1933,
as amended (the "Securities Act"), and applicable rules and
regulations
thereunder; and, to the extent you deem advisable, file any
notice,
application or other document required by the securities or "blue
sky" laws or
regulations of any jurisdiction in connection with the offering
of the Shares;
(m) except as otherwise expressly provided therein or herein,
exercise all
the authority and discretion vested in the Underwriters or in you
by the
provisions of the Underwriting Agreement and take all such action
as you may
believe necessary or desirable to carry out the intent and
provisions of the
Underwriting Agreement and of this Agreement; and
2. Provisions Governing Reserved and Retained Shares.
------------------------------------------------
(a) You will advise us from time to time of the number of
Shares purchased
by us from the Company reserved for sale pursuant to Sections
l(h) and l(
i
)
and the Shares which have been over-allotted, purchased or sold,
as the case
may be, for our account pursuant to Section l(f). Your failure to
so advise us
shall not relieve us of any obligation hereunder or under the
Underwriting
Agreement.
(b) We shall retain for direct sale the Shares not so
reserved and
reserved Shares which, at our request and in your discretion, you
release to
us for direct sale.
(c) At your request, we will release to you any of the Shares
retained by
us, including any released to us pursuant to Section 2(b), then
unsold for
sale by you pursuant to Sections l(h) and l(
i
).
3. Delivery and Payment.
---------------------
(a) On the Closing Date and subject to the provisions of this
Section 3,
acting as our agent, you will pay the Company, for our account,
for the number
of Firm Shares which we have agreed to purchase upon delivery
thereof to you;
with respect to any Option Shares which we become obligated to
purchase, on
the Option Closing Date and subject to the provisions of this
Section 3,
acting as our agent, you will pay the Company for our account,
for all such
Option Shares upon delivery thereof to you. We hereby authorize
you' as our
Representative, at your option, to select either of the
alternatives outlined
in clauses (
i
) and (ii) of the next succeeding paragraph with respect to Firm
Shares and either of the alternatives outlined in clauses (iii)
and (iv) of
the next succeeding paragraph with respect to Option Shares.
(b) We will deliver to you at such office as you may
designate, at or
before 8:30 a.m., New York time, on the Closing Date referred to
in the
Underwriting Agreement a certified or official bank check,
payable to the
order of Royce Investment Group Inc., in New York Clearing House
funds, in an
amount equal to the aggregate initial public offering price less
the aggregate
concession to dealers in respect of (
i
) that portion of the Firm Shares which
we have agreed to purchase which has not been reserved pursuant
to Sections
l(h) and l(
i
) or (ii) the Firm Shares which we have agreed to purchase. As
promptly as possible thereafter you shall make delivery to us of
that portion
of the Firm Shares which we have agreed to purchase which has not
been
reserved pursuant to Sections l(h) and l(
i
). On notice from you we will
deliver to you, in such form and at such time and place as you
shall direct,
funds in an amount equal to the aggregate initial public offering
price less
the aggregate concession to dealers in respect of (iii) that
portion of any
Option Shares which we become obligated to purchase which has not
been
reserved pursuant to Sections l(h) and l(
i
) or (iv) the Option Shares which we
have become obligated to purchase. As promptly as possible
thereafter you
shall make delivery to us of that portion of the Option Shares
which we have
agreed to purchase which has not been reserved pursuant to
Sections l(h) and
l(
i
). Upon receipt by you of payment for the Shares sold for our
account which
have been paid for by us, you will promptly remit to us a sum
equal to the
amount paid by us for such Shares. If we are a participant of The
Depository
Trust Company you may, in your discretion, deliver our Shares
through their
facilities.
(c) At any time on or after the Closing Date we shall, on
demand:
(
i
) accept delivery of any of the Shares held by you for our
account
and, to the extent not previously paid, pay to you the aggregate
public
offering price, less the aggregate concession to dealers, with
respect
thereto;
(ii) deliver against payment therefor any Shares sold
or
over-allotted for our account pursuant to Section 1(f);
(iii) accept delivery of Shares purchased for our
account pursuant
to Section 1(f) and reimburse you for any amount paid by you
therefor;
(iv) accept delivery, for carry purposes only, of any
Shares held by
you for our account which have been reserved for sale but not
sold and paid
for, and, if we shall have received payment from you in respect
of any such
Shares, reimburse you for the full amount which you shall have
paid us in
respect thereof;
(v) redeliver to you any Shares delivered to us
pursuant to the next
preceding clause; and
(vi) pay such transfer taxes, if any, as may be
assessed and paid
after the Closing Date on account of any sale or transfer for our
account.
(d) If we fail (whether or not such failure shall constitute
a default
hereunder) to deliver to you, or you fail to receive, our check
in the
required amount for the Shares which we have agreed to purchase
at the time
and in the manner provided in this Section 3, you, individually
and not as
Representative, are authorized (but shall not be obligated) to
make payment to
the Company for such Shares for our account, but any such payment
shall not
relieve us of any of our obligations under the Underwriting
Agreement or under
this Agreement, and we agree to pay you on demand the amounts so
advanced for
our account.
(e) If, pursuant to the provisions of Section l(f) and prior
to the
termination of the Selling Agreements or prior to such earlier
date as you may
determine, you purchase or contract to purchase in the open
market or
otherwise any Shares which were retained by or released to us for
direct sale
(including any Shares represented by certificates which may have
been issued
on registration of transfer or exchange of certificates
originally
representing such Shares) we authorize you, at your election,
either to (
i
)
charge our account with an amount equal to the concession to
dealers with
respect to such Shares, which amount shall be credited against
the cost of
such Shares, (ii) require us to repurchase such Shares at a price
equal to the
cost of such purchase, including commissions and transfer taxes,
if any, on
the
redelivery
, or (iii) sell such Shares for our account at such prices and
upon such terms and to such persons, including any of the
Underwriters, as you
may determine, charging the amount of any loss and expense or
crediting the
amount of any profit, less any expense, resulting from such sale
to our
account.
(f) We authorize you to charge to our account our
proportionate share
(based on the underwriting obligations of the Underwriters) of
all expenses,
including all transfer taxes paid on our behalf on sales or
transfers made for
our account pursuant to any provisions of this Agreement,
incurred by you
under the terms of this Agreement or in connection with the
purchase, carrying
and sale of the Shares. Your determination of such expenses and
your
allocation thereof shall be final and conclusive.
(g) Funds for our account at any time in your hands as
Representative may
be held in your general funds without accountability for
interest.
(h) We agree to pay our proportionate share of any
unforeseen expenses or
liabilities of, or charges against, the several Underwriters.
(
i
) You may establish such reserves as you may deem advisable
against any
expenses or claims not ascertained, and the determination by you
of the
amounts so to be paid to or by us shall be final and conclusive.
4. Representative's Compensation.
------------------------------
We authorize you to charge to our account, as compensation
for your
services in connection with this underwriting, including the
purchase from the
Company of the Shares and the management of the offering, an
amount equal to
$ per Unit for each Firm Unit which we have agreed to purchase
and each
Option Unit which we become obligated to purchase under the
Underwriting
Agreement.
5. Underwriter's Representations and Agreements.
--------------------------------------------
(a) We have not effected and will not effect any
transaction in
violation of the provisions of Rule
10b
- -6 under the Exchange Act applicable to
this offering, and we will not, until such time as we have
distributed the
Shares which we purchase from the Company and the provisions of
Section l(f)
have been terminated, bid for, purchase, sell or deal in, or
attempt to induce
others to purchase Shares, other Shares of Common Stock of the
Company, or
Warrants except (
i
) as provided in this Agreement, the Selling Agreements and
the Underwriting Agreement or otherwise approved by you, (ii) in
brokerage
transactions not involving solicitation of the customer's order
and (iii) in
connection with option and option-related transactions which are
consistent
with the "no-action" positions set forth in Release No. 34-17609
under the
Exchange Act. An opening uncovered writing transaction in options
to acquire
Shares, other Shares of Common Stock of the Company for our
account or for the
account of a customer shall be deemed, for purposes of the
preceding sentence,
to be a sale of Shares or other Shares of Common Stock of the
Company which is
not unsolicited. The term "opening uncovered writing transaction"
means in
opening sale transaction where the seller intends to become a
writer of an
option to purchase any Shares or other Shares which it does not
own or have
the right to acquire upon exercise of conversion or option
rights.
(b) We will file with you, within five business days
following the date
of termination of any stabilizing transaction of which you shall
have notified
us, duplicate originals of a report "not as manager" on Form X
- -17A
- -1 in
accordance with the requirements of Rule
17a
- -2(e) under the Exchange Act.
(c) We have examined the Registration Statement and the
preliminary
prospectus as amended to date, and are familiar with the terms of
the offering
which are to be reflected in the proposed final amendment to the
Registration
Statement. We confirm that the information relating to us which
has been
furnished by us to the Company for use therein is correct.
(d) We represent that we are a member in good standing of
the NASD, or,
if we are not such a member, we are a foreign bank, dealer or
institution not
registered under the Exchange Act which agrees to make no sales
within the
United States, its territories or possessions or to persons who
are citizens
thereof or residents therein (except participation in group sales
under
Section l(h) hereof), and in making sales to comply with the
NASD's
interpretation with respect to free riding and withholding. In
connection with
any purchase or sale of any of the Shares with respect to which a
selling
concession, discount or other allowance is received or granted by
us, we agree
(
i
) to comply with Section 2740 of the Conduct Rules of the NASD
and (ii) if
we are not a member of the NASD to comply as through we were a
member with the
provisions of Sections 2730 and 2750 of such Conduct Rules and to
comply with
Section 2420 thereof as that section applies to a non-member
broker or dealer
in a foreign country. We are and shall continue to be in
compliance with all
securities laws and the rules and regulations promulgated
thereunder, and all
requirements of the NASD the Board of Governors of the Federal
Reserve System
and securities exchanges applicable to us.
(e) We, and any affiliate of ours engaged in the retail
distribution of
securities which is used by us in connection with the offering of
the Shares,
will comply with the applicable provisions of the Selling
Agreement. We will
not sell any Shares at a price less than the public offering
price except to
persons who have entered into the Selling Agreement.
(f) We understand and agree that compliance with the
securities or "blue
sky" laws in each jurisdiction where we shall offer or sell any
of the Shares
shall be our sole responsibility and that you assume no
responsibility as to
the eligibility of the Shares for sale or our right to sell the
Shares in any
jurisdiction.
(g) Default by any one or more of the Underwriters in
respect of their
several obligations under the Underwriting Agreement shall not
release us from
any of our obligations, except as expressly set forth in the
Underwriting
Agreement. In case of such default by one or more Underwriters,
you are
authorized either to increase, pro rata in accordance with the
underwriting
obligations of the other non-defaulting Underwriters, the number
of Shares
which we shall be obligated to purchase from the Company, or to
make such
other arrangements among the Underwriters or otherwise as you may
determine,
provided that the aggregate of all such increases and the
increases in the
underwriting obligations of the other non-defaulting Underwriters
shall not
exceed 10% of the total number of Shares which the Underwriters
are obligated
to purchase; and, if the aggregate number of Shares not taken up
by such
defaulting Underwriters exceeds 10% of the total number of Shares
which the
Underwriters were obligated to purchase, you are further
authorized, but shall
not be obligated, to arrange for the purchase by other persons,
who may
include yourselves, of all or a portion of the number of Shares
not taken up
by such Underwriters. In the event any such arrangements are
made, the
respective number of Shares to be purchased by the non-defaulting
Underwriters
and by any such other person or person shall be taken as the
basis for the
underwriting obligations under this Agreement, but this shall not
in any way
affect the liability of any defaulting Underwriter to the other
Underwriters
for damages resulting from such default.
(h) In the event of the failure of one or more Underwriters
to accept
delivery of any pay for any Shares purchased by you for their
respective
accounts pursuant to Section l(f) or to deliver any of such
Shares sold or
over-allotted by you for their respective accounts pursuant to
Section l(f),
and to the extent that arrangements shall not have been made by
you for other
persons to assume such obligations of such defaulting Underwriter
or
Underwriters, you are authorized to increase, pro rata in
accordance with the
initial underwriting obligations of the non-defaulting
Underwriters, our
obligation hereunder insofar as it relates to such Shares,
without relieving
any such defaulting Underwriter of its liability therefor.
(
i
) For a period of 40 days after the Effective Date of the
Registration
Statement, or until completion of the public offering of the
Shares, whichever
is later, we will provide a copy of the Prospectus to any person
making a
written request therefor.
6. Indemnification, Liabilities, Claims and Contributions.
-----------------------------------------------------
(a) We will indemnify and hold harmless each other
Underwriter and each
person, if any, who controls such Underwriter within the meaning
of Section 15
of the Securities Act to the extent that, and upon the terms upon
which, each
Underwriter agrees to the Underwriting Agreement to indemnify and
hold
harmless the Company and the Selling Shareholders.
(b) We will pay, upon your request, our proportionate share,
based upon
our underwriting obligation, of any losses, damages, liabilities
or expenses,
joint or several, paid or incurred by any Underwriter to any
person other than
an Underwriter, arising out of or based upon any untrue statement
or alleged
untrue statement of any material fact contained in the
Registration Statement,
the Prospectus, any amendment or supplement thereto or any
preliminary
prospectus or any other selling or advertising material approved
by you for
use by the Underwriters in connection with the sale of the
Shares, or the
omission or alleged omission to state therein a material fact
required to be
stated therein or necessary to make the statements therein not
misleading
(other than an untrue statement or alleged untrue statement or
omission or
alleged omission made in reliance upon and in conformity with
written
information furnished to the Company by an Underwriter
specifically for use
therein) and such proportionate share of any legal or other
expenses
reasonably incurred by you or with your consent in connection
with
investigating or defending any claim or action in respect of such
loss,
damage, liability or expense. In determining the amount of our
obligation
under this Section 6(b), appropriate adjustment may be made by
you to reflect
any amounts received from the Company by any one or more
Underwriters in
respect of such claim pursuant to Section 10 of the Underwriting
Agreement or
otherwise. There shall be credited against any amount paid or
payable by us
pursuant to this Section 6(b) any loss, damage, liability or
expense which is
incurred by us as a result of any such claim asserted against us,
and if such
loss, damage, liability or expense is incurred by us subsequent
to any payment
by us pursuant to this Section 6(b), appropriate provision shall
be made to
effect such credit, by refund or otherwise. If any such claim is
asserted, you
may take such action in connection therewith as you deem
necessary or
desirable, including retention of counsel for the Underwriters
and in your
discretion separate counsel for any particular Underwriter or
group of
Underwriters. In determining amounts payable pursuant to this
Section 6(b) and
loss, damage, liability or expense incurred by any person
controlling any
Underwriter within the meaning of Section 15 of the Securities
Act which has
been incurred by reason of such control relationship shall be
deemed to have
been incurred by such Underwriter. Any Underwriter may elect to
retain at its
own expense its own counsel. You may settle or consent to the
settlement of
any such claim with the approval of a majority in interest of the
Underwriters
on advice of counsel retained by you. Whenever you receive notice
of the
assertion of any claim to which the provisions of this Section
6(b) would be
applicable, you will give prompt notice thereof to each
Underwriter. You will
also furnish each Underwriter with periodic reports, at such
times as you deem
appropriate, as to the status of such claim and the action taken
by you in
connection therewith. If any Underwriter or Underwriters default
in their
obligation to make payments under this Section 6(b), each
non-defaulting
Underwriter shall be obligated to pay its proportionate share of
all defaulted
payments, based upon such Underwriter's underwriting obligation
as related to
the underwriting obligations of all non-defaulting Underwriters.
Nothing
herein shall relieve a defaulting Underwriter from liability for
its default.
(c) We will pay, upon your request, our proportionate share,
based on our
underwriting obligation, of any liabilities incurred in respect
of any claim
or claims asserted against the Underwriters or any of them, based
on any claim
that the Underwriters, or any of them, constitute an association,
unincorporated business or other separate entity, including in
each case such
proportionate share of any expenses incurred in defending against
such claim
or claims.
(d) The provisions of this Section 6 shall survive the
termination of
this Agreement or any of the provisions hereof.
7. Position of the Representative.
------------------------------
As Representative, you shall have no liability to us
hereunder or under
any agreement you are authorized hereby to execute and deliver as
Representative; or in respect of the value of the Shares or the
validity or
the form thereof or of the Registration Statement, the
Underwriting Agreement
or other instruments executed by the Company or others; or for or
in respect
of the delivery of the Shares, or for the performance by the
Company or by
others of any agreement on its or their part; nor shall you as
Representative
or otherwise be liable under any of the provisions hereof or for
any matters
connected herewith, except for want of good faith, and except for
any
liability arising under the Securities Act; and no obligation not
expressly
assumed by you as Representative shall be implied from this
Agreement. In
taking action under this Agreement, you shall act only as agent
of the several
Underwriters and in representing the Underwriters hereunder you
shall act as
the Representative of each of them respectively.
8. Termination.
-----------
(a) This Agreement and the Selling Agreements shall
terminate 30 days
from the date hereof unless extended (for an additional period or
periods not
exceeding in the aggregate 30 days) or sooner terminated (at any
time not
prior to the termination of the Selling Agreements) by you by
notice to us to
such effect; provided, however, that no such termination of this
Agreement
shall terminate or otherwise alter or affect the rights and
obligations of the
several Underwriters under Sections 3(c)(ii), 3(c)(iii) and 5(b)
and that you
may, prior to the termination of this Agreement, terminate all or
any of the
provisions of Sections 1(f), 1(h) and 1(
i
).
(b) Upon termination of this Agreement, (
i
) you shall deliver to us any
Shares held for our account pursuant to the provisions of
Sections l(f), l(h)
or l(
i
), provided that if the aggregate value, determined in your
discretion,
of all such Shares of all Underwriters does not exceed 10% of the
aggregate
amount payable to the Company by the Underwriters, you are
authorized in your
discretion to sell such Shares for the accounts of the several
Underwriters at
such prices, on such terms and in such manner as you may
determine and (ii)
our account under this Agreement shall be settled and paid in
accordance with
Section 3.
9. Miscellaneous.
------------
(a) Nothing herein contained shall constitute us as partners
with you or
with the other Underwriters, and our obligations and the
obligations of each
other Underwriters are several in accordance with their
respective
underwriting obligations and are not joint. If for Federal income
tax purposes
the Underwriters as a group should be deemed to constitute a
partnership, then
each Underwriter as a member of the group (as opposed to the
Underwriters
individually) elects to be excluded from the application of
Subchapter
K,
Chapter 1, Subtitle A, of the Internal Revenue Code of 1954, as
amended, and
agrees not to take any position inconsistent with such election.
You, as
Representative of the Underwriters, are authorized, in your
discretion, to
execute and file on behalf of the Underwriters such evidence of
such election
as may be required by the Internal Revenue Service.
(b) Any notice from you to us and from us to you shall be
deemed to have
been duly given if mailed by registered mail or telegraphed to us
at our
address set forth in the Underwriters' Questionnaire or to you
addressed to
you at Castle Securities Corp., 45 Church Street, Suite #25,
Freeport, New
York 11520, attention: Michael T.
Studer
.
(c) The section headings in this Agreement have been inserted
as a matter
of convenience and reference and are not a part of this
Agreement.
(d) This Agreement shall be governed by and construed in
accordance with
the laws of the State of New York.
(e) No undertaking by you in your capacity as an Underwriter
shall limit
your powers and authority in your capacity as the Representative.
(f) Terms used herein which are deemed in the Underwriting
Agreement and
not defined herein shall have the meaning attributed thereto in
the
Underwriting Agreement.
10. Effectiveness of this Agreement.
--------------------------------
This Agreement is being executed by us in duplicate and
delivered to you.
Upon your confirmation hereof and of agreements in identical form
with each of
the other Underwriters, this Agreement shall constitute a valid
and binding
contract between us.
Very truly yours,
----------------------------
Attorney-in-fact for each of
the several Underwriters
named
In Schedule I to the Under-
writing Agreement.
Confirmed as of the date first written.
Castle Securities Corp.
as Representative
By:
--------------------
Exhibit 1.3
700,000 Shares
WORLDWIDE FOREST PRODUCTS, INC.
SELLING AGREEMENT
, 1996
Dear Sirs:
We have purchased or agreed to purchase, subject to the
terms and
conditions of our Underwriting Agreement with Worldwide Forest
Products' Inc.
(the "Company") an aggregate of 700,000 Shares (the "Shares") of
the Company's
Securities as described below. The offering is more fully
described in the
Prospectus.
The public offering price of the Shares is $ per Share.
The Shares are being offered for sale, when, as if delivered
to and
accepted by us as Underwriter and subject to the approval of our
counsel and
to the other terms and conditions hereof, to selected dealers at
the public
offering price thereof less a concession (which may be changed)
not in excess
of $ per Unit, payable as hereinafter provided. No deduction
from this
concession will be made for expenses other than for the cost
incurred in
advancing funds on your behalf due to your failure to deliver
your check in
payment of your portion of the Shares in the type of funds and on
the date
specified in this Agreement. Dealers to whom Shares are sold in
accordance
with this Agreement (the "Dealers") may re-allow a concession not
in excess of
$ per Unit, to brokers or dealers who are members of the National
Association
of Securities Dealers, Inc. ("NASD") or to foreign banks, dealers
or
institutions not registered under the Securities Exchange Act of
1934, as
amended (the "Exchange Act") which agree to make no sales within
the United
States, its territories or possessions or to persons who are
citizens thereof
or residents therein and in making sales to comply with the
NASD's
interpretation with respect to
freeriding
and withholding. Dealers with our
consent as Underwriter may sell Shares to Dealers at the public
offering price
thereof or at such price less all or part of the concession to
Dealers.
Dealers may not sell Shares at less than the public offering
price except to
persons who have entered into an agreement with us in this form.
We are advising you by telegram or by fax of the number of
Shares
reserved for purchase by you. Applications for Shares in excess
of the amount
so reserved will be received only subject to allotment by us in
our
discretion.
We have been advised by the Company that a Registration
Statement in
respect of the Shares has become effective under the Securities
Act of 1933,
as amended (the "Securities Act"). Neither you nor any other
person is
authorized by the Company or by us to give any information or
make any
representation other than those contained in the Prospectus in
connection with
the sale of the Shares. No dealer is authorized to act as agent
for us or the
Company when offering the Shares to the public or otherwise.
You may offer the Shares on the public offering date subject
to the
foregoing and to the conditions of the Underwriting Agreement
referred to
above. Additional copies of the Prospectus will be supplied in
reasonable
quantities upon request.
Payment for Shares purchased by you is to be made at such
office as we
may designate at the public offering price, on 1996, or at such
later date as
we may advise, ("Closing Time") by certified or official bank
check in New
York Clearing House funds payable to the order of Castle
Securities Corp.
against delivery of certificates for the Shares. The concession
to which you
shall be entitled will be paid to you upon the termination of
this Agreement.
If you are a participant of The Depository Trust Company we may,
in our
discretion, deliver your Shares through their facilities.
This Agreement will terminate 30 days after the date hereof
but, upon
notice to you, may be extended by us for an additional period or
periods not
exceeding in the aggregate 30 days or may be terminated by us at
any time.
In connection with any purchase or sale of any of the Shares
with respect
to which a selling concession, discount or allowance is received
or granted by
you, you agree (
i
) to comply with Section 2740 of the Conduct Rules of the
NASD and (ii) if you are not a member of the NASD to comply, as
though you
were a member, with the provisions of Sections 2730 and 2750 of
such Conduct
Rules and to comply with Section 2420 thereof as that section
applied to a
non-member broker or dealer in a foreign country.
In the event that prior to the termination of this Agreement
(or prior to
such earlier date as we may determine) we purchase or contract to
purchase for
our syndicate account, in the open market or otherwise, or
receive against any
such purchaser or contract to purchase, any Shares theretofore
delivered to
you, we reserve the right to withhold the above-mentioned
concession to
Dealers on such Shares if sold to you at the public offering
price, or if such
concession has been allowed to you through your purchase at a net
price, you
agree to repay such concession upon our demand, plus, in each
case, brokerage
commissions and transfer taxes paid in connection with such
purchase or
contract to purchase.
You represent that you have not effected and will not effect
any
transactions in violations of the provisions of Rule
lOb
- -6 under the
Securities Exchange Act of 1934 applicable to this offering and
you agree that
you will not, until the completion of the distribution by you of
the Shares
which you acquire pursuant to this Agreement, bid for, purchase,
sell or deal
in, or attempt to induce others to purchase Shares, other Shares
of Common
Stock, Warrants or options to purchase Shares or other Shares of
Common Stock
of the Company, Warrants or any security convertible or
exchangeable for
Shares of Common Stock of the Company except (
i
) as provided in this Agreement
and the Underwriting Agreement or otherwise approved by us, (ii)
in brokerage
transactions not involving solicitation of the customer's order
and (iii) in
connection with option and option related transactions which are
consistent
with the "no-action" positions set forth in Release No. 34-17609
under the
Exchange Act. An opening uncovered writing transaction in options
to acquire
Shares, other Shares of Common Stock or Warrants for your account
or for the
account of a customer shall be deemed, for purposes of the
preceding sentence,
to be a sale of Shares, other Common Stock, or Warrants which is
not
unsolicited. The term "opening uncovered writing transaction"
means an opening
sale transaction where the seller intends to become a writer of
an option to
purchase any Shares, other Shares of Common Stock or Warrants
which it does
not own or have the right to acquire upon exercise of conversion
or option
rights.
You agree to advise us from time to time upon request, prior
to the
termination of this Agreement, of the number of Shares purchased
by you
hereunder remaining unsold and you will, upon our request, sell
to for us,
such number of unsold Shares as we may designate, at the public
offering price
less an amount to be determined by us not in excess of the
concession to
Dealers.
Notwithstanding the termination of this Agreement or the
distribution of
any amount to you, you agree to pay your proportionate share of
any claim,
demand or liability asserted against you and the other Dealers to
whom Shares
are sold in accordance with the terms of this Agreement or any of
them, or
against us as Underwriter, based on any claim that such Dealers
or any of them
constitute an association, unincorporated business or other
separate entity,
including in each case your proportionate share of any expense
incurred in
defending against any such claim, demand or liability.
As Underwriter, we shall have full authority to take such
action as we may
deem advisable in respect of all matters pertaining to the
offering. We shall
not be under any liability to you, except for lack of good faith
and for
obligations expressly assumed by us in this Agreement; provided,
however, that
nothing in this sentence shall be deemed to relieve us from any
liability
imposed by the Securities Act.
You agree for a period of 25 days after the effective date
of the
Registration Statement, or until completion of the public
offering of the
Shares, whichever is later, to provide a copy of the Prospectus
to any person
making a written request therefor.
This offer of Shares to Dealers is made in each jurisdiction
only by us
as we may lawfully sell the Shares to Dealers in such
jurisdiction. Upon
application to us, we will inform you as to the jurisdictions in
which we
believe the Shares have been qualified for sale under the
respective
securities or "blue sky" laws of such jurisdictions. You
understand and agree
that compliance with securities or "blue sky" laws in each
jurisdiction where
you shall offer or sell any of the Shares shall be your sole
responsibility
and that we assume no responsibility as to the eligibility of the
Shares for
sale or your right to see Shares in any jurisdiction.
Please advise us whether or not you agree to purchase all of
any part of
the Shares reserved for you and, if you so agree, please confirm
your purchase
by signing in the manner indicated on the following page and
returning to us
the duplicate copy of this letter enclosed herewith.
Very truly yours,
Castle Securities Corp.
Acting on behalf of itself as
Underwriter
By:
- -----------------------
Exhibit 1. 4
FINANCIAL CONSULTING AGREEMENT
AGREEMENT made this
th
day of 1996, by and between CASTLE SECURITIES
CORP., 45 Church Street, Suite #25, Freeport, New York, a New
York corporation
(hereinafter referred to as "Castle") and WORLDWIDE FOREST
PRODUCTS, INC., 101
Baremore
, Louisville, Mississippi, a Colorado corporation (hereinafter
referred to as "the Company").
WITNESSETH
:
WHEREAS, the Company is filing a registration statement with
the
Securities and Exchange Commission ("SEC") in connection with a
proposed
public offering of its securities to be underwritten by Castle;
and
WHEREAS, as part of the underwriting agreement the Company
has agreed to
retain Castle as a financial consultant;
NOW, THEREFORE in consideration of the promises and mutual
covenants
herein set forth it is agreed as follows:
1. The Company hereby retains Castle as a financial
consultant and Castle
shall provide to the Company when requested by the Company from
time to time
during normal business hours consultation concerning but not
limited to
shareholder relations, including preparation of the annual report
and other
releases, assisting in long term financial planning, corporate
reorganization
and expansion, possible acquisition opportunities, capital
structure,
borrowings
and other financial assistance. Notwithstanding the foregoing,
Castle shall be under no obligation to provide services hereunder
more
frequently than sixteen hours during each month during the term
hereof.
2. This agreement shall become effective upon the Effective
Date of the
Company's public offering and shall continue for a period of one
(1) year
thereafter.
3. As compensation for its services, the Company shall, at
the closing of
the Company's public offering, pay Castle a sum equal to one (1%)
percent of
the total proceeds of the offering and an amount equal to one
(1%) of the
total dollar amount of sales effected by Castle and/or any
broker/dealer
procured by Castle.
4. Castle covenants that all information concerning the
Company, including
proprietary information, which it obtains knowledge of as a
result of the
services rendered pursuant to this contract shall be kept
confidential and
shall not be used by Castle except for the direct benefit of the
Company or
disclosed by Castle to any third party without the prior written
approval of
the Company.
5. Castle and the Company hereby acknowledge that Castle is
an independent
contractor. Castle shall not hold itself out as, nor shall it
take any action
from which others might infer that it is a partner of agent of or
a joint
venturer of the Company. In addition, Castle shall take no action
which binds,
or purports to bind, the Company.
6. This Agreement contains the entire agreement between the
parties. It
may not be changed except by agreement in writing signed by the
party against
whom enforcement of any waiver, change, discharge, or
modification is sought.
Waiver of or failure to exercise any rights provided by this
Agreement in any
respect shall not be deemed a waiver of any further or future
rights.
7. In the event of any dispute of or under the terms of this
Agreement,
then and in such event, each party hereto agrees for itself, its
successors
and assigns, that the same shall be submitted to the American
Arbitration
Association in the City of New York or in Nassau County, New York
for their
decision and determination in accordance with the rules and
regulations then
obtaining of the said Association. Each of the parties agrees
that such
decision and/or award which may be made by the Association may be
entered as
judgment of the Courts of the State of New York, and shall be
enforceable as
such.
8. This Agreement shall be construed according to the laws of
the State of
New York.
9. This Agreement shall be binding upon the parties, their
successors and
assigns; provided, however, that Castle shall not permit any
other person or
entity to assume its obligations hereunder without the prior
written approval
of the Company which approval shall not be unreasonably withheld
and notice of
the Company's position shall be given within ten (10) days after
approval has
been requested.
IN WITNESS WHEREOF, the parties hereto have executed or
caused these
present to be executed as of the day and year first above
written.
CASTLE SECURITIES CORP.
By:
------------------------
WORLDWIDE FOREST PRODUCTS,
INC.
By:
-------------------------
EXHIBIT 3.1
<LETTERHEAD OF THE DEPARTMENT OF STATE FOR THE STATE OF COLORADO
APPEARS>
I, Natalie Meyer, Secretary of State of the State of
Colorado hereby
certify that the prerequisites for the issuance of this
certificate have been
fulfilled in compliance with law and are found to conform to law.
Accordingly, the undersigned, by virtue of the authority
vested in me by
law, hereby issues A CERTIFICATE OF INCORPORATION TO BOND STREET
CORPORATION.
<SEAL FOR THE STATE OF COLORADO APPEARS>
/S/ Natalie Meyer
- -------------------------------
Secretary of State
<SEAL OF THE STATE OF COLORADO APPEARS>
DATED: November 19, 1987
<SECRETARY OF STATE STAMP OF THE STATE OF COLORADO APPEARS>
ARTICLES OF INCORPORATION
OF
BOND STREET CORPORATION
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned incorporator, being a natural person of
the age of
eighteen (18) years or more, and desiring to form a corporation
under the laws
of the State of Colorado, does hereby sign, verify and deliver in
duplicate to
the Secretary of State of the State of Colorado these ARTICLES OF
INCORPORATION.
ARTICLE I
NAME
The name of the corporation shall be BOND STREET
CORPORATION.
ARTICLE II
PERIOD OF DURATION
This corporation shall exist perpetually unless dissolved
according to
law.
ARTICLE III
PURPOSE
The purpose for which this corporation is organized is to
transact any
lawful business or businesses for which corporations may be
incorporated
pursuant to the Colorado Corporation Code.
ARTICLE IV
CAPITAL
The aggregate number of shares which this corporation shall
have the
authority to issue is one hundred million (100,000,000) shares,
with a par
value of $0.001 per share, which shares shall be designated
common stock. No
share shall be issued until it has been paid for, and it shall
thereafter be
nonassessable. The corporation may also issue up to 40,000,000
shares of non-
voting preferred stock at a par value of $0.001 per share. The
preferred
stock of the Corporation shall be issued in one or more series as
may be
determined from time to time by the Board of Directors. In
establishing a
series, the Board of Directors shall give to it a distinctive
designation so
as to distinguish it from the shares of all other series and
classes, shall
fix the number of shares in such series, and the preferences,
rights and
restrictions thereof. All series shall be alike except that
there may be
variation as to the following: (1) the rate of dividend; (2) the
price at and
the terms and conditions on which shares shall be redeemed; (3)
the amount
payable upon shares in the event of involuntary liquidation; (4)
the amount
payable upon shares in the event of voluntary liquidation; (5)
sinking fund
provisions for the redemption of shares; and (6) the terms and
conditions on
which shares may be converted if the shares of any series are
issued with the
privilege of conversion.
ARTICLE V
PREEMPTIVE RIGHTS
A shareholder of the corporation shall not be entitled to a
preemptive
right to purchase, subscribe for, or otherwise acquire any
unissued or
treasury shares of stock of the corporation, or any options or
warrants to
purchase, subscribe for or otherwise acquire any such unissued or
treasury
shares, or any shares, bonds, notes, debentures, or other
securities
convertible into or carrying options or warrants to purchase,
subscribe for or
otherwise acquire any such unissued or treasury shares.
ARTICLE VI
CUMULATIVE VOTING
The shareholders shall not be entitled to cumulative voting.
ARTICLE VII
SHARE TRANSFER RESTRICTIONS
The corporation shall have the right to impose restrictions
upon the
transfer of any of its authorized shares or any interest therein.
The Board
of Directors is hereby authorized on behalf of the corporation to
exercise the
corporation s right to so impose such restrictions.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The initial registered office of the corporation shall be at
7899 West
Frost Drive, Littleton, CO 80123 and the name of the initial
registered agent
at such address is George G. Andrews. Either the registered
office or the
registered agent may be changed in the manner provided by law.
ARTICLE IX
INITIAL BOARD OF DIRECTORS
The initial Board of Directors of the corporation shall
consist of three
(3) directors, and the names and addresses of the persons who
shall serve as
directors until their successors are elected and shall qualify
are:
George G. Andrews, 7899 West Frost Drive, Littleton, CO 80123;
Arthur Crabb, 2749 S. 94th East Ave., Tulsa, OK 74129;
Alan J. Woydziak, 9103 West Progress Ave., Littleton, CO 80123
The number of directors shall be fixed in accordance with
the bylaws.
ARTICLE X
INDEMNIFICATION
Subject to the fullest rights of indemnification and
limitation of
liability granted by the Colorado Corporation Code as it may be
amended from
time to time;
1. The Corporation may indemnify any person who was or
is a party or
is threatened to be made a party to any threatened, pending, or
completed
action, suit or proceeding, whether civil, criminal,
administrative , or
investigative (other than an action by or in the right of the
corporation), by
reason of the fact that he is or was a director, officer,
employee, fiduciary
or agent of another corporation, partnership, joint venture,
trust, or other
enterprise, against expenses (including attorney fees),
judgments, fines, and
amounts paid in settlement actually and reasonably incurred by
him in
connection with such action, suit, or proceeding, if he acted in
good faith
and in a manner he reasonably believed to be in the best
interests of the
corporation and, with respect to any criminal action or
proceeding, had no
reasonable cause to believe his conduct was unlawful. The
termination of any
action, suit or proceeding by judgment, order, settlement, or
conviction or
upon a plea of nolo contendere or its equivalent shall not of
itself create a
presumption that the person did not act in good faith and in a
manner which he
reasonably believed to be in the best interests of the
corporation and, with
respect to any criminal action or proceeding, had reasonable
cause to believe
his conduct was unlawful.
2. The corporation may indemnify any person who was or
is a party or
is threatened to be made a party to any threatened, pending, or
completed
action or suit by or in the right of the corporation to procure a
judgment in
its favor by reason of the fact that he is or was a director,
officer,
employee, or agent of the corporation or is or was serving at the
request of
the corporation as a director, officer, employee, fiduciary or
agent of
another corporation, partnership, joint venture, trust or other
enterprise
against expenses (including attorney fees) actually and
reasonably incurred by
him in connection with the defense or settlement of such action
or suit if he
acted in good faith and in a manner he reasonably believed to be
in the best
interests of the corporation; but no indemnification shall be
made in respect
of any claim, issue, or matter as to which such person has been
adjudged to be
liable for negligence or misconduct in the performance of his
duty to the
corporation unless and only to the extent that the court in which
such action
or suit was brought determines upon application that, despite the
adjudication
of liability, in view of all circumstances of the case, such
person is fairly
and reasonably entitled to indemnification for such expenses
which such court
deems proper.
3. To the extent that a director, officer, employee,
fiduciary or
agent of a corporation has been successful on the merits in
defense of any
action, suit or proceeding referred to in (A) or (B) of this
Article X or in
defense of any claim, issue, or matter therein, he shall be
indemnified
against expenses (including attorney fees) actually and
reasonably incurred by
him in connection therewith.
4. Any indemnification under 1 or 2 of this Article
(unless ordered
by a court) and as distinguished from 3 of this Article shall be
made by the
corporation only as authorized in the specific case upon a
determination that
indemnification of the director, officer, employee, fiduciary or
agent is
proper in the circumstances because he has met the applicable
standard of
conduct set forth in 1 or 2 above. Such determination shall be
made by the
Board of Directors by a majority vote of a quorum consisting of
directors who
were not parties to such action, suit or proceeding, or, if such
a quorum is
not obtainable or, even if obtainable, if a quorum of
disinterested directors
so directs, by independent legal counsel in a written opinion, or
by the
shareholders.
5. Expenses (including attorney fees) incurred in
defending a civil
or criminal action, suit, or proceeding may be paid by the
corporation in
advance of the final disposition of such action, suit or
proceeding as
authorized in 3 or 4 of this Article upon receipt of an
undertaking by or on
behalf of the director, officer, employee, fiduciary or agent to
repay such
amount unless it is ultimately determined that he is entitled to
be
indemnified by the corporation as authorized in this Article.
6. The indemnification provided by this Article shall
not be deemed
exclusive of any other rights to which those indemnified may be
entitled under
any bylaw, agreement, vote of shareholders or disinterested
directors, or
otherwise, and any procedure provided for by any of the
foregoing, both as to
action in his official capacity and as to action in another
capacity while
holding such office, and shall continue as to a person who has
ceased to be a
director, officer, employee, fiduciary or agent and shall inure
to the benefit
of heirs, executors, and administrators of such a person.
7. The corporation may purchase and maintain insurance
on behalf of
any person who is or was a director, officer, employee, fiduciary
or agent of
the corporation or who is or was serving at the request of the
corporation as
a director, officer, employee, fiduciary or agent of another
corporation,
partnership, joint venture, trust, or other enterprise against
any liability
asserted against him and incurred by him in any such capacity or
arising out
of his status as such, whether or not the corporation would have
the power to
indemnify him against such liability under provisions of this
Article.
8. To the fullest extent provided in said Act, the
Directors of the
Company shall not be liable to the Corporation or its
Shareholders for
monetary damages.
ARTICLE XI
TRANSACTIONS WITH INTERESTED DIRECTORS
No contract or other transaction between the corporation and
one (1) or
more of its directors or any other corporation, firm,
association, or entity
in which one (1) or more of its directors are directors or
officers are
financially interested shall be either void or voidable solely
because of such
relationship or interest, or solely because such directors are
present at the
meeting of the Board of Directors or a committee thereof which
authorizes,
approves or ratifies such contract or transaction, or solely
because their
votes are counted for such purpose if:
(A) The fact of such relationship or interest is disclosed
or known to
the Board of Directors or committee which authorizes, approves,
or ratifies
the contract or transaction by a vote or consent sufficient for
the purpose
without counting the votes or consents of such interested
directors.
(B) The fact of such relationship or interest is disclosed
or known to
the shareholders entitled to vote and they authorize, approve, or
ratify such
contract or transaction by vote or written consent; or
(C) The contract or transaction is fair and reasonable to
the
corporation.
Common or interested directors may be counted in determining
the presence
of a quorum at a meeting of the Board of Directors or a committee
thereof
which authorizes, approves, or ratifies such contract or
transaction.
The officers, directors and other members of management of
this
Corporation shall be subject to the doctrine of corporate
opportunities only
insofar as it applies to business opportunities in which this
Corporation has
expressed an interest as determined from time to time by this
Corporation s
Board of Directors as evidenced by resolutions appearing in the
Corporation s
minutes. Once such areas of interest are delineated, all such
business
opportunities within such areas of interest which come to the
attention of the
officers, directors, and other members of management of this
Corporation shall
be disclosed promptly to this Corporation and made available to
it. The Board
of Directors may reject any business opportunity presented to it
and
thereafter any officer, director or other member of management
may avail
himself of such opportunity. Until such time as this
Corporation, through its
Board of Directors, has designated an area of interest, the
officers,
directors and other members of management of this Corporation
shall be free to
engage in such areas of interest on their own and this doctrine
shall not
limit the rights of any officer, director and other members of
management of
this Corporation shall be free to engage in such areas of
interest on their
own and this doctrine shall not limit the rights of any officer,
director or
other member of management of this Corporation to continue a
business existing
prior to the time that such area of interest is designated by the
Corporation.
This provision shall not be construed to release any employee of
this
Corporation (other than an officer, director, director or member
of
management) from any duties which he may have to this
Corporation.
ARTICLE XII
VOTING OF SHAREHOLDERS
With respect to any action to be taken by shareholders of
this
corporation, a vote or concurrence of the shares entitled to vote
thereon, or
of any class or series, shall be required.
ARTICLE XIII
INCORPORATOR
The name and address of the incorporator is as follows:
Roger V. Davidson, 1401 Walnut St., Suite 200, Boulder, CO 83002
IN WITNESS WHEREOF, the above named incorporator signed
these ARTICLES OF
INCORPORATION on November 5, 1987.
/S/ Roger V. Davidson
- ------------------------------------
STATE OF COLORADO )
) ss.
COUNTY OF BOULDER )
I, the undersigned, a Notary Public, hereby certify that on
November 5,
1987, the above named incorporator personally appeared before me
and being by
me first duly sworn declared that he is the person who signed the
foregoing
document as incorporator, and that the statements therein
contained are true.
WITNESS my hand and official seal.
/S/ Susan L. Cline
- ------------------------------------
10-27-90
- ------------------------------------
My commission expires
<NOTARY SEAL APPEARS>
EXHIBIT 3.2
<LETTERHEAD OF THE STATE OF COLORADO DEPARTMENT OF STATE APPEARS>
CERTIFICATE
I, NATALIE MEYER, Secretary of State of the State of
Colorado hereby
certify that the prerequisites for the issuance of this
certificate have been
fulfilled in compliance with law and are found to conform to law.
Accordingly, the undersigned, by virtue of the authority
vested in me by
law, hereby issues A CERTIFICATE OF AMENDMENT TO BOND STREET
CORPORATION.
DATED: MAY 9, 1989.
/S/ Natalie Meyer
- -------------------------------
Secretary of State
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF BOND STREET CORPORATION
<DATE STAMP OF THE STATE OF COLORADO DEPARTMENT OF STATE SHOWING
FILED ON MAY
9, 1989, APPEARS>
Pursuant to the provisions of the Colorado Corporations Act,
the Articles
of Incorporation of Bond Street Corporation are to be amended as
follows:
a. Name of Corporation: Bond Street Corporation
b. The Amendments so adopted:
1. Articles IV entitled Capital shall be amended to
read as
follows:
The aggregate number of shares which this corporation shall
have the
authority to issue is Five Hundred Million (500,000,000) shares,
with a par
value of $.0001 per share, which shares shall be designated
common stock. No
share shall be issued until it has been paid for, and it shall
thereafter be
nonassessable. The corporation may also issue up to 40,000,000
shares on non-
voting preferred stock at a par value of $.0001 per share. The
preferred
stock of the Corporation shall be issued in one or more series as
may be
determined from time to time by the Board of Directors. In
establishing a
series, the Board of Directors shall give to it a distinctive
designation so
as to distinguish it from the shares of all other series and
classes, shall
fix the number of shares in such series, and the preferences,
rights and
restrictions thereof. All shares of any one series shall be
alike except that
there may be variation as to the following: (1) the rate of
dividend; (2) the
price at and the terms and conditions on which shares shall be
redeemed; (3)
the amount payable upon shares in the event of involuntary
liquidation; (4)
the amount payable upon shares in the event of voluntary
liquidation; (5)
sinking fund provisions for the redemption of shares; and (6) the
terms and
conditions on which shares may be converted if the shares of any
series are
issued with the privilege of conversion.
C. The Amendment was adopted unanimously by the Board of
Directors of
the Corporation on April 19, 1989.
D. The Amendment was submitted to a vote of shareholders on
April 19,
1989 and unanimously approved.
E. The Amendment does not provide for an exchange,
reclassification or
cancellation of issued shares.
F. The Amendment affects an increase in the amount of
stated capital as
the number of authorized common shares has been increased.
/S/ George G.
Andrews
- --------------------------------
President
/S/ Alan J.
Woydziak
- --------------------------------
Secretary
The undersigned, being first duly sworn, states that the
statements
contained in these Articles of Amendment are true and correct.
/S/ George G.
Andrews
- --------------------------------
On this 4th day of May, 1989 George G. Andrews, who is known
to me,
appeared before me and after first being sworn, executed this
instrument as
his free and voluntary act.
<SIGNATURE OF
NOTARY APPEARS>
My Commission Expires: 11/4/90
EXHIBIT 3.3
<LETTERHEAD OF THE STATE OF COLORADO DEPARTMENT OF STATE APPEARS>
CERTIFICATE
I, NATALIE MEYER, Secretary of State of the State of
Colorado hereby
certify that the prerequisites for the issuance of this
certificate have been
fulfilled in compliance with law and are found to conform to law.
Accordingly, the undersigned, by virtue of the authority
vested in me by
law, hereby issues A CERTIFICATE OF AMENDMENT TO WORLDWIDE FOREST
PRODUCTS,
INC., FORMERLY KNOWN AS BOND STREET CORPORATION.
DATED: OCTOBER 1, 1990.
/S/ Natalie Meyer
- -------------------------------
Secretary of State
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF BOND STREET CORPORATION
<DATE STAMP OF THE STATE OF COLORADO DEPARTMENT OF STATE SHOWING
FILED ON
OCTOBER 1, 1990, APPEARS>
Pursuant to the provisions of the Colorado Corporation Code,
the
undersigned corporation adopts the following Articles of
Amendment to its
Articles of Incorporation:
First: The name of the corporation is Bond Street
Corporation.
Second: The following amendments were adopted unanimously by
the Board of
Directors of the corporation on September 29, 1990 and adopted by
a vote of
the shareholders of the corporation, on September 29, 1990, in a
sufficient
number and in the manner provided by the Colorado Corporation
Code:
ARTICLE I
NAME
The name of the corporation shall be Worldwide Forest
Products, Inc.
ARTICLE V
CAPITAL
The aggregate number of shares which this corporation shall
have the
authority to issue is Ten Million (10,000,000) shares, with a par
value of
$.005 per share, which shares shall be designated common stock.
No share
shall be issued until it has been paid for, and it shall
thereafter be
nonassessable. The corporation may also issue up to Forty
Million
(40,000,000) shares of voting preferred stock at a par value of
$.005 per
share. The preferred stock of the Corporation shall be issued in
one or more
series as may be determined from time to time by the Board of
Directors. In
establishing a series, the Board of Directors shall give to it a
distinctive
designation so as to distinguish it from the shares of all other
series and
classes, shall fix the number of shares in such series, and the
preferences,
rights and restrictions thereof. All shares in a series shall be
alike. Each
series may vary in the following respects: (1) the rate of
dividend; (2) the
price at and the terms and conditions on which shares shall be
redeemed; (3)
the amount payable upon shares in the event of involuntary
liquidation; (4)
the amount payable upon shares in the event of voluntary
liquidation; (5)
sinking fund provisions for the redemption of shares; (6) the
terms and
conditions on which shares may be converted if the shares of any
series are
issued with the privilege of conversion and (7) voting powers.
ARTICLE XIII
CLASS VOTING BY COMMON AND PREFERRED STOCK
At each meeting of the shareholders of the corporation, the
presence in
person or by proxy of the holders of a majority in number of the
issued and
outstanding shares of common stock and a majority in number of
the issued and
outstanding preferred stock shall be necessary to constitute a
quorum for the
transaction of any business. The affirmative vote of the holders
of a
majority in the number of the issued and outstanding shares of
common stock
and a majority in number of the issued and outstanding shares of
preferred
stock shall be necessary to adopt any resolution, carry any
motion, or take
any corporate action which requires the vote of the shareholders.
All remaining Articles of the Corporation shall remain in
full force and
effect.
Third: A copy of the resolutions titled Minutes of the
Board of
Directors Meeting of Bond Street Corporation," which establishes
and
designates the Class A, Class B and Class C Convertible Preferred
Stock and
fixes and determines the relative rights and preferences thereof,
is attached
hereto.
Said resolution was adopted by the Board of Directors of the
Corporation
on the 29th day of September, 1990 pursuant to its Articles of
Incorporation.
Upon acceptance and filing of this statement by the Colorado
Secretary of
State, the resolution attached hereto shall become effective and
shall
constitute an Amendment to the Corporation s Articles of
Incorporation.
Fourth: These amendments do not provide for an exchange,
reclassification
or cancellation of issued shares.
Sixth: These amendments do not affect the amount of stated
capital.
Dated this 29th day of September, 1990.
BOND STREET CORPORATION
/S/ George G. Andrews
---------------------
George G. Andrews,
President
/S/ Alan J. Woydziack
---------------------
Alan J. Woydziack,
Secretary
VERIFICATION
------------
State of Colorado )
) ss.
County of Boulder )
I, Roger V. Davidson, a Notary Public, hereby certify that
on the 29th
day of September, 1990, personally appeared before me, George G.
Andrews, who,
being by me first duly sworn, declared that he signed the
foregoing document
as the Director of the corporation named therein, and that he is
eighteen
years of age or more, and that the statements contained therein
are true.
In witness whereof, I have hereunto set my hand and official
seal this
29th day of September, 1990.
/S/ Roger V. Davidson
---------------------
Notary Public
11/4/90
----------------------
My commission expires
EXHIBIT 3.4
BY-LAWS
OF
BOND STREET CORPORATION
ARTICLE I
Registered Office, Registered Agent
-----------------------------------
and Corporate Seal
------------------
Section 1. Business Offices. The registered office of the
Corporation
shall be at 7899 West Frost Drive, Littleton, Colorado 80123, and
the name of
the registered agent at such address is George G. Andrews. Other
offices may
be established from time to time by resolution of the Board of
Directors, both
within and outside the State of Colorado.
Section 2. Seal. The seal for the Corporation shall have
inscribed
thereon the name of the Corporation, and the words Colorado and
Seal, and
shall be in such form as may be approved by the Board of
Directors, which
shall have the power to alter the same at pleasure.
ARTICLE II
Share and Transfer Thereof
--------------------------
Section 1. Certificates. The shares of this Corporation
shall be
represented by certificates signed by the president or vice
president and the
secretary or an assistant secretary of the Corporation, and may
be sealed with
the seal of the Corporation or a facsimile thereof. The
signatures of the
president or vice president and the secretary or assistant
secretary upon a
certificate may be facsimiles if the certificate is countersigned
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
certificates 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 its issue.
Section 2. Regulation. The Board of Directors may make such
rules and
regulations as it may deem appropriate concerning the issuance,
transfer and
registration of certificates for shares of the corporation,
including the
appointment of transfer agents and registrar.
Section 3. Cancellation of Certificates. No new
certificates evidencing
shares shall be issued unless and until the old certificate or
certificates in
lieu of which the new certificate is issued shall be surrender
for
cancellation, except as provided in Section 4 of this Article II.
Section 4. Lost, Stolen or Destroyed Certificates. In case
of lose or
destruction of any certificate of shares, another certificate may
be issued in
its place upon satisfactory proof of such loss or destruction,
and , at the
discretion of the Corporation, upon giving to the corporation a
satisfactory
bond of indemnity issued by a corporate surety in an amount and
for a period
satisfactory to the Board of Directors.
Section 5. Close of Transfer Book and 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 purpose, the Board of Directors may provide that the stock
transfer
books shall be closed for a stated period, but not to exceed, in
any case,
fifty (5) days. If the stock transfer books shall be closed for
the purpose
of determining shareholders entitled to notice of or to vote at a
meeting of
shareholders, such books shall be closed for at least ten (10)
days
immediately preceding such meeting. In lieu of closing the stock
transfer
books, 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 (50) 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 the Board of
Directors do
not order the stock transfer books closed, or fix in advance a
record date, as
provided above, then the record date for the stock transfer books
closed, or
fix in advance a record date, as provided above, then the record
date for the
determination of 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 for the determination of shareholders for any
proper purpose,
shall be thirty (30) days prior to the date on which the
particular action,
requiring such determination of shareholders, is to be taken.
Section 6. Transfer of Shares. Subject to the terms of any
shareholder
agreement relating to the transfer of shares or other transfer
restrictions
contained in the Articles of Incorporation or authorized therein,
shares of
the corporation shall be transferable on the books of the
corporation by the
holder thereof in person or by his duly authorized attorney, upon
the
surrender and cancellation of a certificate or certificates of a
like number
of shares. Upon presentation and surrender of a certificate for
shares
properly endorsed and payment of all taxes therefor, the
transferee shall be
entitled to a new certificate or certificates in lieu thereof.
As against the
corporation, a transfer of shares can be made only on the books
of the
corporation and in the manner hereinabove provided, and the
corporation shall
be entitled to treat the holder of record of any share as the
owner thereof
and shall not be bound to recognize any equitable or other claim
to or
interest in such share on the part of any other person, whether
or not it
shall have express or other notice thereof, save as expressly
provided by the
statutes of the State of Colorado.
Section 7. Transfer Agent. Unless otherwise specified by
the Board of
Directors by resolution, the Secretary of the corporation shall
act as
transfer agent of the certificates representing the shares of
stock of the
corporation. He shall maintain a stock transfer book, the stubs
in which
shall set forth among other things, the names and addresses of
the holders of
all issued shares of the corporation, the number of shares held
by each, the
certificate numbers representing such shares, the date of issue
of the
certificates representing such, and whether or not such shares
originate from
original issue or from transfer. Subject to Article III, Section
7, the names
and addresses of the shareholders as they appear on the stubs of
the stock
transfer book shall be conclusive evidence as to who are the
shareholders of
record and as such entitled to receive notice of the meetings of
shareholders;
to vote at such meetings; to examine the list of the shareholders
entitled to
vote at meetings; to receive dividends; and to own, enjoy and
exercise any
other property or rights deriving from such shares against the
corporation.
Each shareholder shall be responsible for notifying the Secretary
in writing
of any change in his name or address and failure to do so will
relieve the
corporation, its directors, officers and agents, from liability
for failure to
direct notices or other documents, or pay over or transfer
dividends or other
property or rights, to a name or address other than the name and
address
appearing on the stub of the stock transfer book.
ARTICLE III
Shareholders and
----------------
Meetings Thereof
----------------
Section 1. Shareholders of Record. Only shareholders of
record on the
books of the Corporation shall be entitled to be treated by the
Corporation as
holders-in-fact of the shares standing in their respective names,
and the
Corporation shall not be bound to recognize any equitable or
other claim to,
or interest in, any shares of the part of any other person, firm,
or
corporation, whether or not it shall have express or other notice
thereof,
except if expressly provided by the laws of Colorado.
Section 2. Meetings. Meetings of shareholders shall be held
at the
registered office of the Corporation in the State of Colorado, or
any other
place designated by a vote of the majority of directors.
Section 3. Annual Meeting. The annual meeting of
shareholders of the
corporation for the election of directors, and for the
transaction of such
other business as may properly come before the meeting, shall be
held at such
time as may be determined by the Board of Directors by resolution
in
conformance with Colorado law. If the election of Directors
shall not be held
on the day designated herein for any annual meeting of the
shareholders, the
Board of Directors shall cause the election to be held at a
special meeting of
the shareholders as soon thereafter as may be convenient.
Section 4. Special Meetings. Special meetings of
shareholders may be
called by the president or, in the absence of the president, by
the vice
president, the board of directors, or the holders of not less
than one-tenth
(1/10) of all shares entitled to vote on the subject matter for
which the
meeting is called.
Section 5. Notice. Written or printed notice stating the
place, day and
hour of the shareholders meeting, and, in case of a special
meeting of
shareholders, the purpose or purposes for which the meeting is
called, shall
be delivered not less than ten (10) days or more than fifty (50)
days before
the date of the meeting, either personally or by mail, by or at
the direction
of the president, the secretary, the board of directors, or the
officer or
persons calling the meeting, to each shareholder of record
entitled to vote at
such meeting, except that if the authorized capital stock is to
be increased,
at least thirty (30) days notice shall be given. 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.
Failure to
deliver such notice or obtain a waiver thereof shall not cause
the meeting to
be lost, but it shall be adjourned by the shareholders present
for a period
not to exceed sixty (60) days until any deficiency in notice or
waiver shall
be supplied.
Section 6. Voting of Shares. Each outstanding share
entitled to vote on
any matter presented at a meeting shall be entitled to one vote
and each
fractional share shall be entitled to a corresponding fractional
vote, in
person or by proxy, on each such matter submitted to a vote of
such shares
cumulative voting, if any.
Section 7. Voting Record. The officer or agent having charge
of the stock
transfer books for shares of this Corporation shall make, at
least ten (10)
days before each meeting of shareholders, a complete list of the
shareholders
entitled to vote at such meeting or any adjournment thereof,
arranged in
alphabetical order, with the address of and the number of shares
held by each,
which list, for a period of ten (10) day prior to such meeting,
shall be kept
on file at the principal office of the Corporation, whether
within or outside
Colorado, and shall be subject to inspection by any shareholder
at any time
during usual business hours. Such list shall also be produced
and kept open
at the time and place of the meeting and shall be subject to the
inspection of
any shareholder during the whole time of the meeting. The
original stock
transfer books shall be prima facie evidence as to who are the
shareholders
entitled to examine such list or transfer book or to vote at any
meeting of
shareholders.
Section 8. Quorum. A quorum at any meeting of shareholders
shall consist
of a majority of the shares of the Corporation entitled to vote
thereat,
represented in person or by proxy. If a quorum is present, the
affirmative
vote of a majority of the shares represented at the meeting and
entitled to
vote on the subject matter shall be the acto of the shareholders,
unless the
vote of a grater number or voting by classes is required by law,
the Articles
of Incorporation or these By-Laws.
Section 9. Manner of Acting. If a quorum is present, the
affirmative
vote of the majority of the shares represented at the meeting and
entitled to
vote on the subject matter shall be the act of the shareholders,
unless the
vote of a greater proportion or number or voting by classes is
otherwise
required by statute or by the Articles of Incorporation or these
Bylaws.
Section 10. Proxies. A shareholder may vote either in
person or by
proxy, executed in writing by the shareholder, or by his duly
authorized
attorney in fact. No proxy shall be valid after eleven (11)
months from the
date of its execution, unless otherwise provided in the proxy.
All proxies
must be filed with the Secretary at or before the time of the
meeting.
Section 11. Ex-Officio Chairman. The president of the
Corporation shall
be ex-officio chairman at all meetings of the shareholders.
Section 12. Voting of Shares by Certain Holder. Shares
standing in the
name of another corporation may be voted by such officer, agent
or proxy as
the Bylaws of such corporation may prescribe, or, in the absence
of such
provision, as the Board of Directors of such other corporation
may determine.
Shares standing in the name of a deceased person, a minor ward or
an
incompetent person, may be voted by his administrator, executor,
court
appointed guardian or conservator. 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. Shares standing in the name of a receiver may be voted by
such
receiver, and shares held by or under the control of a receiver,
and shares
held by or under the control of a receiver may be voted by such
receiver
without the transfer thereof into his name if authority so to do
be contained
in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to
vote such
shares until the shares have been transferred into the name of
the pledgee,
and thereafter the pledgee shall be entitled to vote the shares
so
transferred. Neither shares of its own stock belonging to this
corporation,
nor shares of its own stock held by it in a fiduciary capacity,
nor shares of
its own stock held by another corporation if the majority of
share entitled to
vote for the election of directors of such corporation is held by
this
corporation may be voted, directly or indirectly, at any meeting
and shall not
be counted in determining the total number of outstanding shares
at any given
time. Redeemable shares which gave been called for redemption
shall not be
entitled to vote on any matter and shall not be deemed
outstanding shares on
and after the date on which written notice of redemption has been
mailed to
shareholders and a sum sufficient to redeem such shares has been
deposited
with a bank or trust company with irrevocable instruction and
authority to pay
the redemption price to the holders of the shares upon surrender
or
certificates therefor.
ARTICLE IV
Directors, Powers and Meetings
------------------------------
Section 1. Board of Directors. The business and affairs of
the
Corporation shall be managed by a board of three (3) directors,
who need not
be shareholders of the Corporation or residents of the State of
Colorado and
who shall be elected at the annual meeting of shareholders or
some adjournment
thereof. Directors shall hold office until their successors
shall have been
elected and shall qualify; however, no provision of this section
shall
qualify; however, no provision of this section shall be
restrictive upon the
right of the Board of Directors to fill vacancies or upon the
right of
shareholders to remove directors as is hereinafter provided.
Section 2. Annual Meeting. The annual meeting of the Board
of Directors
shall be held at the same place as, and immediately after, the
annual meeting
of shareholders, and no notice shall be required in connection
therewith. The
annual meeting of the Board of Directors shall be for the purpose
of electing
officers and the transaction of such other business as any come
before the
meeting.
Section 3. Special Meetings; Notice. Special meetings of
the Board of
Directors may be called at any time by the president, a vice
president, or by
and director, and may be held within or outside the State of
Colorado at such
time and place as the directors may determine, or as the notice
or waiver of
notice may specify. Notice of such meetings shall be mailed to
the last known
address of each director at least three (3) days prior to the
date fixed for
the meeting. Special meetings of the Board of Directors may be
held at any
time that all directors are present in person, and presence of
any director at
a meeting shall constitute waiver of notice of such meeting
except as
otherwise provided by law. Unless specifically required by law,
the Articles
of Incorporation or these By-Laws, neither the business to be
transacted at
nor the purpose of, any special meeting of the Board of Directors
need be
specified in the notice or waiver of such meeting.
Section 4. Quorum. A quorum at all meetings of the Board of
Directors
shall consist of a majority of the number of directors then fixed
by these By-
Laws, but a smaller number may adjourn from time to time without
further
notice until a quorum be secured. The act of the majority of
directors
present at a meeting at which a quorum is present shall be the
act of the
Board of Directors, unless the act of a greater number is
required by the
Statutes of this State or the Articles of Incorporation or these
By-Laws.
Section 5. Special Voting Requirements. A two-thirds (2/3)
vote of the
Board of Directors shall be required to amend those By Laws. A
two thirds
(2/3) vote of the Board of Directors shall be required to set
salaries,
bonuses, dividends, and directors fees.
Section 6. Vacancies. Any vacancy occurring in the Board of
Directors
may be filled by the affirmative vote of a majority of the
remaining directors
even though there be less than a quorum at any meeting of the
Board of
Directors called to fill that vacancy. A director elected to
fill a vacancy
shall be elected for the unexpired term of his predecessor in
office, and
shall hold such office until his successor is duly elected and is
qualified.
Any directorship to be filled by reason of an increase in the
number of
directors shall be filled by election at an annual meeting, or at
a special
meeting of shareholders called for that purpose.
Section 7. Fees and Expenses. Directors may receive such
fees as may be
established by appropriate resolution of the Board of Directors
for attendance
at such regular and special meetings of the board, and, in
addition thereto,
shall receive reasonable traveling expense, if any is required,
for attendance
at such meetings.
Section 8. Removal of Directors. The shareholders may, at a
meeting
called for the express purpose of removing directors, remove the
entire board
or any lesser number with or without cause by a vote of the
holders of the
majority of the shares then entitled to vote for an election of
directors.
Section 9. Participation by Electronic Means. Except as may
be otherwise
provided by the Articles of Incorporation or Bylaws, members of
the Board of
Directors or any committee designated by such Board may
participate in a
meeting of the Board or committee by means of conference
telephone or similar
communications equipment by which all persons participating in
the meeting can
hear each other at the same time. Such participation shall
constitute
presence in person at the meeting.
Section 10. Presumption of Assent. A director of the
corporation who is
present at a meeting of the Board of Directors at which action on
any
corporate matter is taken shall be presumed to have assented to
the action
taken unless his dissent shall be entered in the minutes of the
meeting or
unless he shall file his written dissent
to
such action with the person acting
as the Secretary of the meeting before the adjournment thereof or
shall
forward such dissent by registered mail to the Secretary of the
corporation
immediately after the adjournment of the meeting. Such right to
dissent shall
not apply to a director who voted in favor of such action.
ARTICLE V
Officers
--------
Section 1. Officers-Elections. The elective officers of the
Corporation
shall be a president, one or more vice presidents, a secretary,
and treasurer,
who shall be elected by the Board of Directors at its first
meeting after the
annual meeting of shareholders. Unless removed in accordance
with procedures
established by law and these By-Laws, the said officers shall
serve until the
next succeeding annual meeting of the Board of Directors and
until their
respective successors are elected and shall qualify. Any two
officers, but
not more than two, may be held by the same person at the same
time, except
that one person may not simultaneously hold the office of
president and vice
president, or that of president and secretary.
Section 2. Additional Officers. The board may elect or
appoint a general
manager, one or more assistant secretaries and one or more
assistant
treasurers as it may deem advisable, who shall hold office during
the pleasure
of the board, and shall be paid such compensation as may be
directed by the
board.
Section 3. Powers. All officers of the Corporation shall,
respectively,
exercise and perform such powers, duties, and functions as are
generally
exercised by the like officers in corporate affairs and as may be
directed by
the Board of Directors.
Section 4. Compensation. All officers of the Corporation
may receive
salaries or other compensation if so ordered and fixed by the
Board of
Directors. The board shall have authority to fix salaries in
advance for
stated periods or render the same retroactive, as the board may
deem
advisable.
Section 5. Delegation of Duties. In the event of absence or
inability of
any officer to act, the Board of Directors may delegate the
powers or duties
of such officer to any other officer, director or person whom it
may select.
Section 6. Removal of Officers. An officer or agent may be
removed by a
two-thirds (2/3) vote of the Board of Directors at a meeting
called for that
purpose whenever in its judgment the best interests of the
Corporation will be
served thereby, by such removal shall be without prejudice to the
contract
rights, if any, of the person so removed. Election or
appointment of an
officer or agent shall not of itself create contract rights.
ARTICLE VI
Finance
-------
Section 1. Reserve Funds. The Board of Directors, in its
uncontrolled
discretion, may set aside, from time to time, out of the net
profit or earned
surplus of the Corporation, such sum or sums as it deems
expedient as a
reserve fund to meet contingencies, for equalizing dividends, for
maintaining
any property of the Corporation, and for any other purpose.
Section 2. Banking. The monies of the Corporation shall be
deposited in
the name of the Corporation in such bank or banks or trust
company or trust
companies, as the Board of Directors shall designate, and may be
drawn out
only on checks signed in the name of the Corporation by such
person persons as
the Board of Directors by appropriate resolution may direct.
Notes and
commercial paper, when authorized by the board, shall be signed
in the name of
the Corporation by such officer or officers or agent or agents as
shall
thereunto be authorized from time to time by the Board of
Directors.
Section 3. Fiscal Year. The fiscal year of the Corporation
shall be
determined by an appropriate resolution of the Board of
Directors.
Section 4. Dividends. Subject to the provisions of the
Articles of
Incorporation and the laws of the State of Colorado, the Board of
Directors
may declare dividends whenever, and in such amounts, as in the
Board s opinion
the condition of the affairs of the corporation shall render such
advisable.
ARTICLE VII
Contracts, Loans and Checks
---------------------------
Section 1. Execution of Contracts. Except as otherwise
provided by
statute or by these Bylaws, the Board of Directors may authorize
any officer
or agent of the corporation to enter into any contract, or
execute and deliver
any instrument in the name of, and on behalf of the corporation.
Such
authority may be general or confined to specific instances and,
unless so
authorized, no officer, agent or employee shall have any power to
bind the
corporation for any purpose, except as may be necessary to enable
the
corporation to carry on its normal and ordinary course of
business.
Section 2. Loans. No loans shall be contracted on behalf of
the
corporation and no negotiable paper shall be issued in its name
unless
authorized by the Board of Directors. When so authorized, any
officer or
agent of the corporation may effect loans and advances at any
time for the
corporation may effect loans and advances at any time for the
corporation form
any bank, trust company or institution, firm, corporation or
individual. An
agent so authorized may make and deliver promissory notes or
other evidence of
indebtedness of the corporation and may mortgage, pledge,
hypothecate or
transfer any real or personal property held by the corporation as
security for
the payment of such loans. Such authority, in the Board of
Directors
discretion, may be general or confined to specific instances.
Section 3. Checks. Checks, notes, drafts, and demands for
money or other
evidence of indebtedness issued in the name of the corporation
shall be signed
by such person or persons as designated by the Board of Directors
and in the
manner the Board of Directors prescribes.
Section 4. Deposits. All funds of the corporation not
otherwise employed
shall be deposited from time to time to the credit of the
corporation in such
banks, trust companies or other depositories as the Board of
Directors may
select.
ARTICLE VII
Waiver of Notice
----------------
Any shareholder, officer or director may waive, in writing,
any notice
required to be given by law or under these By-Laws, whether
before or after
the time stated therein.
ARTICLE IX
Action by Directors or
Shareholders
Without a Meeting
-----------------
Nothing in these By-Laws contained shall be construed so as
to prevent
any action required to be taken at a meeting of the directors or
shareholders
of this Corporation, or any action which may be taken at a
meeting of
directors or shareholders, to be taken without a meeting if a
consent in
writing, setting forth the action so taken shall be signed by all
of the
directors or shareholders entitled to vote with respect to the
subject
matter thereof.
ARTICLE X
Amendments
----------
These By-Laws may be altered, amended, or repealed at any
regular meeting
of the Board of Directors or a special meeting of the Board of
Directors
called for that purpose upon a proper motion and adequate vote.
The above By-Laws approved and adopted by the Board of
Directors this
22nd day of November, 1987.
/S/ Alan J. Woydziak
--------------------
Secretary
Exhibit 4.1
STATEMENT ESTABLISHING A SERIES
OF
PREFERRED STOCK
Worldwide Forest Products, Inc., a Colorado corporation
(the "Company"),
by unanimous consent of the Board of Directors of the Company on
October 4,
1996 has adopted this Statement Establishing a Series of
Preferred Stock for
the purpose of clarifying the rights and preferences of the
Company's
Preferred Stock which is currently issued and outstanding and
held by
International Financial Industries, Inc. ("IFI"), as well as all
additional
shares of Preferred Stock to be issued to IFI.
The Company is authorized to issue 40,000,000 shares of
Preferred Stock,
$.005 par value. The Preferred Stock may be issued in series from
time to time
with such designations, rights, preferences and limitations as
the Board of
Directors of the Company may determine by resolution. The rights,
preferences
and limitations of separate series of Preferred Stock may differ
with respect
to such matters as may be determined by the Board of Directors,
including,
without limitation, the rate of dividends, amounts payable on
liquidation,
sinking funds provisions (if any), which would grant dividend
preferences and
liquidation preferences to preferred shareholders over common
shareholders. On
or about December 1, 1993 a total of 1,000,000 shares of the
Company's
Preferred Stock was issued to IFI. The Board of Directors of the
Company has
approved this Statement for the purpose of ratifying and
clarifying the rights
and preferences of the Preferred Stock. The Company hereby
authorizes,
ratifies and approves this series of Preferred Stock to include
20,000,000
shares of the 40,000,000 authorized shares. This series of
Preferred Stock
shall be designated Series A Nonconvertible Preferred Stock, and
it shall have
the powers, designations, preferences and relative,
participating, optional or
other special rights of, and qualifications, limitations or
restrictions upon
said shares as set forth below:
1. Dividends. The holders of the Series A Nonconvertible
Preferred Stock
shall not be entitled to receive any dividends.
2. Liquidation Preference. In the event of any liquidation,
dissolution
or winding up of the Company, either voluntary or involuntary,
the holders of
the Series A Nonconvertible Preferred Stock shall not be entitled
to receive
any distribution of any of the assets or surplus funds of the
Company by
reason of their ownership of Series A Nonconvertible Preferred
Stock.
3. Nonconvertible. The Series A Nonconvertible Preferred
Stock shall be
nonconvertible. It shall not be convertible into any shares of
common stock of
the Company or into any other securities of the Company.
4. Redemption. The Series A Nonconvertible Preferred Stock
has no
mandatory redemption feature. It may only be redeemed through the
negotiation
and agreement of the Company and the holders of the Series A
Nonconvertible
Preferred Stock.
5. Voting Rights. Except as otherwise provided by law, the
holders of the
Series A Nonconvertible Preferred Stock and the Company's Common
Stock shall
vote together as one class on all matters to be voted on by the
stockholders
of the Company on the following basis: each holder of Series A
Nonconvertible
Preferred Stock and each holder of common stock shall be entitled
to one vote
per share held by such holder on the record date for the
determination of
stockholders entitled to vote.
6. Anti-Dilution Provisions. At the time this series of
Preferred Stock
was first issued on December 1, 1993 to IFI, the Company agreed
with IFI that
the Series A Nonconvertible Preferred Stock would be accompanied
by
anti-dilution rights. Since that time, the Company and IFI have
interpreted
that provision to require that each time the Company issues one
additional
share of the Company's common stock, that the Company shall issue
four
additional shares of the Company's Preferred Stock to the
holder(s) of the
Company's Series A Nonconvertible Preferred Stock to be divided
among them on
a pro rata basis. All additional shares of Preferred Stock being
issued
pursuant to this anti-dilution provision, shall be issued without
any
additional consideration being paid to the Company.
7. Amendment. Except as otherwise required by law or
provided herein, any
term of this Statement may be amended and the observance of any
term hereof
may be waived (either generally or in a particular instance in
either
retroactively or prospectively) only with the written consent of
holders of
not less than 75% of the voting interests of the issued and
outstanding shares
of Series A Nonconvertible Preferred Stock.
This Statement was approved and ratified by the Board of
Directors of the
Company by unanimous consent resolution on October 4, 1996.
- -------------------------
Morris
Ingram
, President
- --------------------------
Rodney Nicholas,
Secretary
RNW
\
AGRS
\0142
Exhibit 5.0
Robert N. Wilkinson
ATTORNEY A T LAW
GATEWAY TOWER EAST SUITE 900
10 EAST SOUTH TEMPLE
SALT LAKE CITY. UTAH 84133
TEL. (801 ) 530-7370
FAX(801)364-9127
October 3, 1996
Securities and Exchange
Commission
450 Fifth Street,
N.W.
Washington, DC 20549
Re: Registration and Issuance of Worldwide Forest Products, Inc.,
Common Stock
Gentlemen:
I have acted as counsel to Worldwide Forest Products, Inc.
(the "Company")
in providing this opinion with respect to the issuance of Seven
Hundred
Thousand shares (700,000) of the Company's common stock and
potentially an
additional Seventy Thousand (70,000) over-allotment shares (the
"Shares")
pursuant to the terms and conditions of the Company's
Registration Statement
on Form SB-2 (the "Registration Statement").
In connection with this representation, I have examined the
original, or
copies identified to my satisfaction, of such minutes,
agreements, corporate
records and filings and other documents necessary to my opinion
contained in
this letter. I have also relied as to certain matters of fact
upon
representations made to me by officers and agents of the Company.
Based upon
and in reliance on the foregoing, it is my opinion that:
1. The Company has been duly incorporated and is validly
existing and in
good standing as a corporation under the laws of the State of
Colorado.
2. The Shares will be, when issued in accordance with the
Company's
Registration Statement and the related Prospectus, to the extent
representing
previously unissued shares, duly and validly issued and fully
paid and
non-assessable under the Colorado Corporation Code; and the
shareholders of
the Company have no preemptive rights to acquire additional
shares of the
Company's common stock in respect to the Shares.
Sincerely yours,
/s/ Robert N.Wilkinson
Robert N. Wilkinson
RNW
/
mh
RNW
\
LTRS
\0534
Exhibit 23.1
Robert N. Wilkinson Esq.
ATTORNEY AT LAW
GATEWAY TOWER EAST SUITE 900
10 EAST SOUTH TEMPLE
SALT LAKE CITY, UTAH 84133
TEL. (801) 530-7370
FAX(801)364-9127
October 3, 1996
Worldwide Forest Products, Inc.
101
Baremore
Louisville, Mississippi 39339
Gentlemen:
I have acted as counsel to Worldwide Forest Products, Inc.
(the
"Company"), in connection with the preparation of the Company's
Registration
Statement on Form SB-2.
I hereby consent to the use of my name in the Prospectus
forming the part
of the Registration Statement to which this letter is attached as
an exhibit,
and therein being disclosed as counsel to the Company in
rendering an opinion
concerning the legality of the issuance of the securities covered
by the
Registration Statement.
Sincerely yours,
/s/ Robert N. Wilkinson
Robert N. Wilkinson
RNW
/
mh
RNW
\
LTRS
\0533
Exhibit 23 . 2
A PARTNERSHIP OF [Logo] JONES JENSEN
PROFESSIONAL CORPORATIONS & COMPANY
R. Gordon Jones, CPA, PC Certified Public Accountants
Mark F. Jensen, CPA PC
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
September 17, 1996
Worldwide Forest Products, Inc.
Germantown, Maryland
Dear Sirs:
We hereby consent to the use of our audit report dated June 10,
1996 in the
form SB-2 registration statement of Worldwide Forest Products,
Inc.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
349 South 200 East, Suite 500, Salt Lake City, Utah 84111
Telephone (801) 328-4408, Facsimile (801) 328-4461
Exhibit 24.1
POWER OF ATTORNEY
WORLDWIDE FOREST PRODUCTS, INC.
700,000
SHARES
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and
appoints Castle Securities Corp., 45 Church Street, Suite #25,
Freeport, New
York 11520 the true and lawful agent and attorney-in-fact of the
undersigned,
with full power to appoint a substitute or substitutes to act
hereunder, with
respect to all matters arising in connection with the
undersigned's acting as
one of the Underwriters of the proposed offering of the
above-captioned
securities, with full power and authority to execute and deliver
for and on
behalf of the undersigned all such agreements, contracts,
consents and other
documents in connection therewith as said agent and
attorney-in-fact, full
power and authority to act in the premises, including, without
limiting the
generality of the foregoing, power and authority to execute, by
facsimile
signature, and deliver an Agreement Among Underwriters relating
to such
offering and to appoint a substitute or substitutes to act
hereunder with the
same power and authority as said agent and attorney-in-fact,
would have if
personally acting. The undersigned hereby ratifies and confirms
all that said
agent and attorney-in-fact, or any substitute or substitutes, may
do by virtue
hereof.
This appointment shall remain in full force and effect
until revoked by
the undersigned in writing.
WITNESS the due execution hereof at , this day of
, 1996
- -----------------------
(Firm Name)
By:
- ---------------------
(Title)
By:
- ---------------------
(Title)
CORPORATE
SEAL
See reverse side for instructions and procedures in connection
with the
proposed offering.
<PAGE>
Castle Securities Corp. will advise the Syndicate Department
of the
signer of the Power of Attorney on the reverse side hereof by
telegram or
communication via Graphic Scanning, not later than 6:00 p.m., New
York time,
on the day preceding the proposed offering, of the anticipated
terms as
follows:
(a) Amount of Units to be underwritten by such firm.
(b) Public offering date.
(c) Closing date.
(d) Public offering price.
(e) Underwriters' discount.
(f) Gross spread and breakdown of management fee, underwriting
fee, selling
concessions and
reallowance
.
Unless the Syndicate Department of Castle Securities Corp.,
45 Church
Street, Suite #25, Freeport, New York 11520 receives a telegram
or
communication via Graphic Scanning revoking the Power of Attorney
not later
than 9:30 a.m., New York time, on the day of the proposed
offering, the power
and authority granted by the Power of Attorney may be exercised
in accordance
with the terms thereof.
A copy of the Agreement Among Underwriters as executed (with
facsimile
signatures) will be sent to the Syndicate Department of the
signer of the
Power of Attorney promptly after execution.
<PAGE>
CORPORATE ACKNOWLEDGMENT
STATE OF )
COUNTY OF )SS.:
On this day of , 1996, before me, a notary public duly
commissioned
and sworn, personally appeared , to me known and known to me to
be identical
person whose name is affixed to the above instrument, who, being
duly sworn,
did dispose and say that he resides at that he is of
, the
corporation described in and which executed the foregoing Power
of Attorney,
that he knows the seal of the said corporation, that the seal
affixed to said
instrument is such corporate seal, that it was affixed by
authority of the
Board of Directors of said corporation as the free and voluntary
act and deed
of said corporation for the uses and purposes set forth, and that
he, being
informed of the contents of said Power of Attorney, acknowledges
that the
statements contained therein are true and that he signed his name
thereto by
like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official
seal the day in this acknowledgment first above written.
--------------
Notary Public
My commission
expires:
PARTNERSHIP ACKNOWLEDGMENT
STATE OF )
COUNTY OF ) SS.:
On this day of , 1996, before me, a notary public duly
commissioned
and sworn, personally appeared , one of the members of the
firm , to
me known and known to me to be the individual described in and
who executed
the foregoing Power of Attorney who' being by me duly sworn, did
depose and
say that he executed, and was duly authorized to execute, the
same as the free
and voluntary act and deed of said firm for the uses and purposes
therein set
forth, and that he, being informed of the contents of said Power
of Attorney,
acknowledges that he signed his name thereto.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official
seal the day in this acknowledgment first above written.
-----------------
Notary Public
My Commission Expires:
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 20,577
<SECURITIES> 0
<RECEIVABLES> 89,336
<ALLOWANCES> 0
<INVENTORY> 120,332
<CURRENT-ASSETS> 230,245
<PP&E> 3,992,508
<DEPRECIATION> 995,380
<TOTAL-ASSETS> 3,785,646
<CURRENT-LIABILITIES> 2,353,596
<BONDS> 1,879,585
22,558
0
<COMMON> 8,891
<OTHER-SE> 6,012,950
<TOTAL-LIABILITY-AND-EQUITY> 3,785,646
<SALES> 1,446,526
<TOTAL-REVENUES> 1,446,526
<CGS> 1,035,214
<TOTAL-COSTS> 1,035,214
<OTHER-EXPENSES> 1,436,981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 133,840
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,149,017)
<EPS-PRIMARY> (0.75)
<EPS-DILUTED> (0.75)
</TABLE>
Exhibit 1.5
No sale, offer to sell or transfer of the securities
represented by this
certificate or any interest therein shall be made unless a
registration
statement under the Federal Securities Act of 1933, as amended,
with respect
to such transaction is then in effect, or the issuer has received
an opinion
of counsel satisfactory to it that such transfer does not require
registration
under that Act.
This Warrant will be void after 3:00 p.m. New York time on
________,2001.
STOCK PURCHASE WARRANT
To Subscribe for and Purchase Shares of Common
Stock
WORLDWIDE FOREST PRODUCTS, INC.
(Transferability Restricted as Provided in Paragraph 9
Below)
THIS CERTIFIES THAT, for value received, CASTLE SECURITIES
CORP.,
("Castle") or registered assigns, is entitled to subscribe for
and purchase
from Worldwide Forest Products, Inc., incorporated under the laws
of the state
of Colorado, (the "Company") up to______________ fully paid and
non-
assessable shares of Common Stock, at the "Warrant Price" and
during the
period hereinafter set forth, subject, however, to the provisions
and upon the
terms and conditions hereinafter set forth. This Warrant is one
of an issue
of the Company's Stock Purchase Warrants (herein called the
"Warrants"),
identical in all respects except as to the names of the holders
thereof and
the number of Shares purchasable thereunder, representing on the
original
issue thereof rights to purchase up to 70,000 Shares.
1. As used herein:
(a) "Common Stock" or "Common Shares" shall initially
refer to the
Company s common stock, $.0075 par value, as more fully set forth
in Section 5
hereof.
(b) "Common Share" Price shall, subject to adjustment
pursuant to
Section 4 hereof, be $6.00.
(c) "Castle" shall refer to CASTLE SECURITIES CORP.
(d) "Underwriting Agreement" shall refer to the
Underwriting
Agreement dated ___________, 1996 between the Company and the
Underwriter.
(e) "Warrants" shall refer to Warrants to purchase an
aggregate of
up to 70,000 Shares issued to Castle or its designees by the
Company pursuant
to the Underwriting Agreement (including the Warrants represented
by this
Certificate), as such may be adjusted from time to time in
connection with
the transfer, partial exercise, exchange of any Warrants or in
connection with
lost, stolen, mutilated or destroyed Warrant certificate, if
any, or to
reflect an adjusted number of Shares.
(f) "Underlying Securities shall refer to and include
the Common
Shares.
(g) "Holders" shall mean the registered holder of such
Warrants or
any issued Underlying Securities.
(h) "Warrant Price" is the amount required to purchase
one (1) share
of Common Stock hereunder and shall be $6.00 which is subject to
adjustment
pursuant to Section 4 hereof.
(i) "Registration Statement" shall mean the Company s
Registration
Statement filed with the Securities and Exchange Commission under
Commission
File Number 33- as amended.
(j) "Closing Date" shall mean the third business day
after the
expiration of the offering pursuant to the Registration
Statement.
2. The purchase rights represented by this Warrant may
be exercised
by the holder hereof, in whole or in part at any time, and from
time to time,
during the period commencing _______________, 1997 (the
Commencement Date
until _______, 2001 (the "Expiration Date"), by the presentation
of this
Warrant, with the purchase form attached duly executed at the
Company s office
(or such office or agency of the Company as it may designate in
writing to the
Holder hereof by notice pursuant to Section 14 hereof), and upon
payment by
the Holder to the Company in cash, or by certified check or bank
draft of the
Warrant Price for such Common Shares. The Company agrees that
the Holder
hereof shall be deemed the record owner of such Underlying
Securities as of
the close of business on the date on which this Warrant shall
have been
presented and payment made for such Common Shares as aforesaid.
Certificates
for the Underlying Securities so purchased shall be delivered to
the Holder
hereof within a reasonable time, not exceeding fifteen (15) days,
after the
rights represented by this Warrant shall have been so exercised.
If this
Warrant shall be exercised in part only, the Company shall, upon
surrender of
this Warrant for cancellation, deliver a new Warrant evidencing
the rights of
the Holder hereof to purchase the balance of the Common Shares
which such
Holder is entitled to purchase hereunder. Exercise in full of
the rights
represented by this Warrant shall not extinguish the rights
granted under
Section 9 hereof. Nothing herein shall permit the exercise of
this Warrant
for Common Shares prior to ______________, 1997.
3. Subject to the provisions of Sections 8, 9, and 12
hereof, (i)
this Warrant is exchangeable at the option of the Holder at the
aforesaid
office of the Company for other Warrants of different
denominations entitling
the Holder thereof to purchase in the aggregate the same number
of Common
Shares as are purchasable hereunder; and (ii) this Warrant may be
divided or
combined with other Warrants which carry the same rights, in
either case, upon
presentation hereof at the aforesaid office of the Company
together with a
written notice, signed by the Holder hereof, specifying the names
and
denominations in which new Warrants are to be issued, and the
payment of any
transfer tax due in connection therewith.
4. Subject and pursuant to the provisions of this
Section 4, the
Warrant Price and number of Common Shares subject to this Warrant
shall be
subject to adjustment from time to time as set forth hereinafter
in this
Section 4.
(a) In case the Company shall (i) declare a dividend or
make a
distribution on its outstanding shares of Common Stock, (ii)
subdivide or
reclassify its outstanding shares of Common Stock into a greater
number of
shares, or (iii) combine or reclassify its outstanding Common
Stock into a
smaller number of shares, or (iv) the outstanding shares of
Common Stock of
the Company are at any time changed into or exchanged for a
different number
or kind of shares or other security of the Company or of another
corporations
through reorganization, merger, consolidation, liquidation or
recapitalization, the appropriate adjustments in the number and
kind of such
securities subject to this Warrant shall be made and the Exercise
Price in
effect at the time of the record date for such dividend or
distribution or of
the effective date of such subdivision, combination,
reclassification,
reorganization, merger, consolidation, liquidation or
recapitalization shall
be proportionally adjusted so that the Holder of this Warrant
exercised after
such date shall be entitled to receive the aggregate number and
kind of Shares
which, if this Warrant had been exercised by such Holder
immediately prior to
such date, he would have owned upon such exercise and been
entitled to receive
upon such dividend, distribution, subdivision, combinations,
reclassification,
reorganization, merger, consolidation, liquidation or
recapitalization, the
Exercise Price in effect at the time of the record date for such
dividend or
distribution or of the effective date of such subdivision,
combination or
reclassification shall be proportionally adjusted so that the
Holder of this
Warrant exercised after such date shall be entitled to receive
the aggregate
number and kind of Shares which, if this Warrant had been
exercised by such
Holder immediately prior to such date, he would have owned upon
such exercise
and been entitled to receive upon such dividend, distribution,
subdivision,
combination or reclassification. For example, if the Company
declares a 2 for
1 stock distribution and the Exercise Price immediately prior to
such event
was $7.20 per Share and the number of Shares purchasable upon
exercise of this
Warrant was 28,875, the adjusted Exercise Price immediately after
such event
would be $3.60 per Share and the adjusted number of Shares
purchasable upon
exercise of this Warrant would be $57,750. Such adjustment shall
be made
successively whenever any event listed above shall occur.
(b) In case the Company shall hereafter distribute
without
consideration to all holders of its Common Stock evidence of its
indebtedness
or assets (excluding cash dividend or distributions and dividends
or
distributions referred to in Subsection (a) above) or
subscription rights or
warrants, then in each such case the Exercise Price in effect
thereafter shall
be determined by multiplying the number of shares issuable upon
exercise of
the Representative s Warrant by the Per Share Exercise Price in
effect
immediately prior thereto, multiplied by a fraction the numerator
of which
shall be the total number of shares of Common Stock then
outstanding
multiplied by the current market value price per share of Common
Stock (as
defined in Subsection (d) below), less the fair market value (as
determined by
the Company s Board of Directors) of said assets, or evidences of
indebtedness
so distributed or of such rights or warrants, and the denominator
of which
shall be the total number of shares of Common Stock outstanding
multiplied by
such current market price per share of Common stock. Such
adjustment shall be
mad whenever any such distribution is made and shall become
effective
immediately after the record date for the determination of
shareholder
entitled to receive such distribution.
(c) Whenever the Exercise Price payable upon exercise of
the
Representative s Warrant is adjusted pursuant to Subsection (a)
or (b) above,
the number of Shares purchasable upon exercise of this
Representative s
Warrant shall simultaneously be adjusted by multiplying the
number of Shares
issuable upon exercise of this Representative s Warrant by the
Exercise Price
in effect on the date hereof and dividing the product so obtained
by the
Exercise Price, as adjusted.
(d) For the purpose of any computation under Subsection
(b) above,
the current market price per share at any date shall be the price
of the
Common Stock on the business day next preceding the event
requiring an
adjustment hereunder and shall be (A) if the principal trading
market for such
Common Stock is listed on any consolidated tape, the price shall
be the
closing price set forth on such consolidated tape or (B) if the
principal
market for such Common Stock is the over-the-counter market, the
high bid
price on such date as set for by NASDAQ or, if the Common Stock
is not quoted
on NASDAQ, the high bid price as set forth on the NASD's Bulletin
Board or in
the NATIONAL QUOTATION BUREAU sheet listing such Common Stock for
such day.
Notwithstanding the foregoing, if there is no reported closing
price or high
bid price, as the case may be, on a date prior to the event
requiring an
adjustment hereunder, then the current market price shall be
determined as of
the latest date prior to such day for which such closing price or
high bid
price is available.
(e) No adjustment in the Exercise Price shall be
required unless such
adjustment would require an increase or decrease of at least 1%
in such price:
provided, however, that any adjustment which by reason of this
Subsection (i)
are not required to be made shall be carried forward and taken
into account
and included in determining the amount of any subsequent
adjustment required
to be made hereunder. All calculations under this Section 4
shall be made to
the nearest cent or to the nearest one-hundredth of a share, as
the case may
be. Anything in this Section 4 to the contrary notwithstanding,
the Company
shall be entitled, but shall not be required, to make such
changes in the
Exercise Price, in addition to those required by this Section 4,
as it shall
determine, it its sole discretion, to be advisable in order that
any dividend
or distribution in shares of Common Stock, hereinafter made by
the Company
shall not result in any Federal income tax liability to the
holders of the
Common Stock or securities convertible into Common Stock
(including Warrants
issuable upon exercise of the Representative s Warrant).
(f) Whenever the Exercise Price is adjusted, as herein
provided, the
Company shall promptly cause a notice setting forth the adjusted
Exercise
Price and adjusted number of Shares issuable upon exercise of the
Representative s Warrant to be mailed to the Holder, at its
address set forth
herein and shall cause a certified copy thereof to be mailed to
the Company s
Transfer Agent, if any. The Company may retain a firm of
independent
certified public accountants elected by the Board of Directors
(who may be the
regular accountants employed by the Company to make any
computation required
by this Section 4, and a certificate signed by such firm shall be
conclusive
evidence of the correctness of such adjustment.
(g) In the event that at any time, as a result of any
adjustment made
pursuant to the provisions of this Section 4, the Holder of
Representative's
Warrant thereafter shall become entitled to receive any shares of
the Company,
other than Common Stock, thereafter the number of such other
shares so
receivable upon exercise of the Representative s Warrant shall be
subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as
practicable to the provisions with respect to the Common Stock
contained in
Subsections (a) to (e) inclusive, above.
(h) Until this Warrant is exercised, the Underlying
Securities, the
Warrant Price and Common Share Price shall be determined
exclusively pursuant
to the provisions hereof.
5. For the purposes of this Warrant, the terms Common
Shares or
Common Stock shall mean (i) the class of stock designated as the
Common
Stock, $.0075 par value, of the Company on the date set forth on
the first
page hereof or (ii) any other class of stock resulting from
successive changes
or re-classifications of such Common Stock consisting solely of
changes in par
value, or from no par value to par value, or from par value to no
par value.
If at any time, as a result of an adjustment made pursuant to
Section 4, the
securities or other property obtainable upon exercise of this
Warrant shall
include shares or other securities of the Company other than
Common Shares or
securities of another corporation or other property: thereafter,
the number of
such other shares or other securities or property so obtainable
shall be
subject to adjustment from time to time in a manner and on terms
as nearly
equivalent as practicable to the provisions with respect to the
Common Shares
contained in Section 4 and all other provisions of this Warrant
with respect
to Common Shares shall apply on like terms to any such other
shares or other
securities or property. Subject to the foregoing, and unless the
context
requires otherwise, all references herein to Common Shares shall,
in the event
of an adjustment pursuant to Section 4, be deemed to refer also
to any other
securities or property then obtainable as a result of such
adjustments.
6. The Company covenants and agrees that:
(a) During the period within which the rights
represented by
the Warrant may be exercised, the company shall, at all times,
reserve and
keep available out of its authorized capital stock, solely for
the purposes of
issuance upon exercise of this Warrant, such number of its Common
Shares as
shall be issuable upon the exercise of this Warrant and at its
expense will
obtain the listing thereof on all national securities exchanges
on which the
Common Shares are then listed; and if at any time the number of
authorized
Common Shares shall not be sufficient to effect the exercise of
this Warrant
included therein, the Company will take such corporate action as
may be
necessary to increase its authorized but unissued Common Shares
to such number
of shares as shall be sufficient for such purpose; the Company
shall have
analogous obligations with respect to any other securities or
property
issuable upon exercise of this Warrant.
(b) All Common Shares which may be issued upon
exercise of the
rights represented by this Warrant included herein will, upon
issuance be
validly issued, fully paid, nonassessable and free from all
taxes, liens and
charges with respect to the issuance thereof; and
(c) All original issue taxes payable in respect of
the issuance
of Common Shares upon the exercise of the rights represented by
this Warrant
or shall be borne by the Company but in no event shall the
Company be
responsible or liable for income taxes or transfer taxes upon the
transfer of
any Warrants or the transfer of any Underlying Securities.
7. Until exercised, this Warrant shall not entitle the
Holder hereof
to any voting rights or other rights as a shareholder of the
Company, except
that the Holder of this Warrant shall be deemed to be a
shareholder of this
Company for the purpose of bringing suit on the ground that the
issuance of
shares of stock of the Company is improper under the Delaware
Business
Corporation Law.
8. This Warrant shall not be sold, transferred assigned
or
hypothecated for a period of twelve (12) months from the
effective date of the
Company s right offering with respect to which this Warrant has
been issued,
except to officer or partners of Castle. In no event shall this
Warrant be
sold, transferred, assigned or hypothecated except in conformity
with the
applicable provisions of the Securities Act of 1933, as then in
force (the
Act ), or any similar Federal statute then in force, and all
applicable Blue
Sky laws.
9. The holder of this Warrant, by acceptance hereof,
agrees that,
prior to the disposition of this warrant or of any such
securities theretofore
purchased upon the exercise hereof, under circumstances that
might require
registration of such securities under the Act, or any similar
Federal statute
then in force, such holder will give written notice to the
Company expressing
such holder s intention of effecting such disposition, and
describing briefly
such holder s intention as to the disposition to be made of this
Warrant
and/or the securities theretofore issued upon exercise hereof.
Promptly upon
receiving such notice, the Company shall present copies thereof
to its counsel
and to Robert C. Beers P.C. and Stephen W. Wilk. Esq., 3 Linden
street,
Selden, New York 11784 and the provisions of the following
subdivisions shall
apply:
(a) If, in the opinion of the Company s counsel,
the proposed
disposition does not require registration under the Act or
qualification
pursuant to Regulation A promulgated under the Act, or any
similar Federal
statue then in force, of this Warrant and/or the securities
issuable or issued
upon the exercise of this Warrant, the Company shall as promptly
as
practicable, notify the holder thereof of such opinion, whereupon
such holder
shall be entitled to dispose of this Warrant and/or such
securities
theretofore issued upon the exercise hereof, all in accordance
with the terms
of the notice delivered by such holder to the Company.
(b) If, the opinion of the Company s counsel, such
proposed
disposition requires such registration or qualification under the
Act, or
similar Federal statute then in effect, of this Warrant and/or
the securities
issuable or issued upon the exercise of this Warrant, the Company
shall
promptly give written notice to all then holders of the Warrants,
at the
respective addresses thereof shown on the books of the Company,
of a proposed
registration or qualification under the Act, or any similar
Federal statute
then in force, and the Company shall, as expeditiously as
possible, use its
best efforts to effect such registration or qualification under
the Act or
similar statute, at the sole expense of the Company, on one
occasion only, for
a period not to exceed five (5) years from the effective date of
the Company s
rights offering, of (i) the securities issuable or issued upon
the exercise of
this Warrant, and (ii) all such securities of the Company
issuable of issued
upon the exercise of Warrants, the holders of which shall have
made written
requests to the Company for the registration or qualification
thereof within
thirty (30) days after the giving of such written notice by the
Company, all
to the extent requisite to permit the sale of the securities
referred to in
the foregoing clauses (i) and (ii), upon the terms of offering
supplied in
writing to the Company by the holders thereof, and upon the
effectiveness of
such registration or qualification. The Company shall not be
required to
effect more than one such registration or qualification pursuant
to the
foregoing provisions nor shall it be required to effect such
registration or
qualification unless requested by Castle or its specific
authorized designees
or, together with the consent of Castle or its specific
authorized designees,
the holders of at least 50% of Castle s Warrants and/or the
holders of the
Warrants upon exercise thereof shall pay the exercise price to
the transfer
agent of record, which agent shall not release said funds to the
issuer until
such time as the underlying securities have been delivered to
Castle and/or
holders thereof. Castle and/or holders of the Warrants shall not
be required
to exercise such Warrants prior to the date the Registration
Statement has
been cleared by the SEC and State Securities Departments (the
"Exercise Date")
but in no event shall such exercise date occur at a date
subsequent to the
termination of this Warrant. In addition to such rights, in the
case of any
proposed registration or qualification of Common Stock or other
securities of
the Company under the Act, or similar Federal statute then in
force, at any
time within seven (7) years from the effective date of the
Company s public
offering, the Company will give at least thirty (30) days prior
written notice
of the filing thereof to (i) each holder of Warrants and (ii)
each holder of
underlying securities who shall have received the same upon the
exercise of
Warrants previously held by such holder. If, and to the extent
requested by
any such holder in writing withing twenty (20) days after receipt
of any such
notice, the Company will use its best efforts, at its expense, to
register all
or any part of the securities issuable or issued upon the
exercise of the
Warrants referred to in the foregoing clause (i) and/or the
securities
referred to in the foregoing clause (ii) under such Act or
statute, limited,
in the case of a qualification under Regulation A, to the amount
of any
available exemption, concurrently with the registration or
qualification of
such other stock or securities, in a manner appropriate to permit
the
distribution of such securities by such holder upon the terms of
offering
supplied by such holder concurrently with the making of the
aforesaid written
request. In the event the underlying securities are to be
registered, Castle
and/or the holders of the Warrants upon exercise thereof shall
pay the
exercise price to the transfer agent of record, which agent shall
not release
said funds to the issuer until such time as the underlying
securities have
been delivered to Castle and/or holders thereof. Castle and/or
holders of the
Warrants shall not be required to exercise such warrants prior to
the date the
Registration Statement has been cleared by the SEC and State
Securities
Departments ("the Exercise Date") but in no event shall such
exercise date
occur at a date subsequent to the termination of this Warrant.
10. (a) The Company will indemnify and hold harmless the
Holders of
this Warrant or the securities issuable or issued upon the
exercise hereof and
each person who controls a Holder within the meaning of Section
15 of the Act
(the Holders ), individually and jointly as the case may be,
from and against
any and all losses, claims, damages, expenses or liabilities,
joint or several
to which they or any of them may become subject under the Act or
under any
other statute or at common law or otherwise and, except as
hereinafter
provided, will reimburse the Holders for any legal or other
expenses
(including the cost of any investigation and preparation)
reasonably incurred
by them or any one then in connection with investigating or
defending any
litigation or claim whether or not resulting in any liability,
only insofar as
such losses, claims, damages, expenses, liabilities or actions
arise out of or
are based upon any untrue statement or alleged untrue statement
of a material
fact contained in the Registration statement or any amendment
thereto or in
any Blue Sky application or arise out of or are based upon the
omission or
alleged omission to state therein a material fact required to be
stated
therein necessary to make the statements therein not misleading,
all as of the
date when the Registration Statement or any amendment thereto,
the filing of
any such Blue Sky application as the case may be, becomes
effective or any
untrue statement or alleged untrue statement of a material fact
contained in
the Preliminary Prospectus or Prospectus (as amended or as
supplemented
thereto), or arise out of or are based upon the omission or
alleged omission
to state therein a material fact required to be stated therein or
necessary in
order to make the statements therein, not misleading; provided,
however, that
the indemnity agreement contained in this subsection (a) shall
not apply to
amounts paid in settlement of any such litigation if such
settlement is
effected without the consent of the Company, nor shall it extend
to the
Holders in respect of any such losses, claims, damages, expenses,
liabilities,
or actions arising out of, or based upon any such untrue
statement or alleged
untrue statement, or any such omission, if such statement or
omission was made
in reliance upon and in conformity with, written information
furnished to the
Company by the Holders on their behalf specifically for use in
connection with
the preparation of the Registration Statement, the Prospectus, or
any such
amendment thereof or supplement thereto or Blue Sky Application.
The Holders agree after their receipt of written notice
of the
commencement of any action against the Holders or any of them, in
respect of
which indemnity may be sought from the Company on account of the
Indemnity
agreement contained in this subsection (a), to notify the Company
within ten
(10) days in writing of the commencement thereof and to supply a
copy of any
legal documents served upon such Holders in connection with such
action. The
omission of the Holder to so notify the Company of any such
action shall
relieve the Company from any liability which it may have to the
Holders. In
case any such action shall be brought against the Holders, the
Holders shall
promptly notify the Company of the commencement thereof and the
Company shall
be entitled to participate in (and, to the extent it shall wish,
to direct)
the defense thereof at its own expense but such defense shall be
conducted by
counsel of recognized standing and reasonably satisfactory to the
Holders who
are defendants in such litigation. The Holders shall have the
right to employ
separate counsel in any such action and to participate in the
defense thereof
subject to the Company s reasonable right to approve such counsel
which will
not be unreasonably withheld, but the fees and expenses of such
counsel shall
not be at the expense of the Company unless (i) the employment of
such counsel
has been specifically authorized by the Company, or (ii) the
Company shall not
have employed counsel to have charge of the defense of such
action, or (iii)
there is a conflict of interest which would prevent counsel for
the
Company from representing both the Company and the Holders, in
any of which
cases the Company shall not have the right to direct the defense
of such
action on behalf of the Holders. It is understood that,
regardless of whether
such counsel is representing all of the parties entitled to
indemnification
under this subsection (a), the Company shall not be liable, under
clause (iii)
above, for the fees and expenses of more than one separate
counsel who shall
be approved by the Holders. The Company agrees to notify the
Holders promptly
of the commencement of any litigation or proceeding against them
or against
any of their respective officers or directors of which they may
be advised, in
connection with the issue and sale of any of the securities, and
to furnish
the Holders, at the Holders' request, with copies of all
pleadings therein and
to permit the Holders to be observers therein and to apprise them
of all of
the developments therein, all at the Company s expense.
(b) The Holders or Holder, as the case may be, will
indemnify and
hold harmless the Company, the directors of the Company, the
officers of the
Company who shall have signed the Registration Statement and each
person, if
any, who controls the Company within the meaning of Section 15 of
the Act,
from and against any and all losses, claims, damages, expenses or
liabilities,
joint or several, to which they or any of them may become subject
under the
Act or under any other statute or at common law or otherwise and,
except as
hereinafter provided, will reimburse the Company and such
officers or
controlling person indemnified for as above for any legal or
other expenses
(including the cost of any investigation and preparation)
reasonably incurred
by them or any of them in connection with investigating or
defending any
litigation or claims whether or not resulting in any liability,
only insofar
as such losses, claims, damages, expenses, liabilities or actions
arise out of
or are based upon any untrue statement or alleged untrue
statement of a
material fact contained in the Registration Statement or any
amendment thereto
or in any Blue Sky application or arise out of or are based upon
the omission
or alleged omission to state therein a material fact required to
be stated
therein or necessary to make the statement or alleged untrue
statement of a
material fact contained in the Preliminary Prospectus or the
Prospectus (as
amended or as supplemented if the Company shall have filed with
the Commission
any amendments thereof or supplements thereto), or the omission
or alleged
omission to state therein a material fact necessary in order to
make the
statements therein, in the light of the circumstances under which
they were
made, not misleading, but only if insofar as such statement or
omission was
made in reliance upon information furnished in writing to the
Company by or on
behalf of the Holders or Holder, as the case may be, specifically
for use in
connection with the preparation of the Registration Statement,
the Preliminary
Prospectus or the Prospectus, or any such amendment thereof or
supplement
thereto or Blue Sky application. This indemnity agreement is in
addition to
any other liability which the Holders may have to the Company.
The Holders
shall not be liable for amounts paid in settlement of any such
litigation, if
such settlement was effected without their consent, which consent
will not be
unreasonably withheld. In case of the commencement of any
action, respect of
which indemnity may be sought from the Holders on account of
their indemnity
agreement contained in this subsection (b), the Company, and each
person
agreed to be indemnified by the Holders shall have the same
obligation to
notify the Holders and the Holders shall have the same right to
participate in
and, to the extent that they shall wish, to direct, as set forth
in subsection
(a) above, the defense of such action at their own expense but
such defense
shall be conducted by counsel of recognized standing and
reasonably
satisfactory to the Company or such other person agreed to be
indemnified by
the Holders. The Holders agree to notify the Company promptly of
the
commencement of any litigation or proceeding against them in
connection with
the issue or sale of any of the securities of the Company.
(c) The respective indemnity agreements of the
Company, and the
Holders contained in subsections (a) and (b) above, and the
representations
and warranties of the Company set forth in this Warrant, shall
remain
operative and in full force and effect, regardless of any
investigation made
by the Holders or on their behalf or the Company or any
controlling person of
the Company or any director or any officer of the Company, and
shall survive
the delivery of the securities issuable upon exercise of this
Warrant, and any
successor of the Holders, or the Company or any controlling
person of the
Holders or the Company, as the case may be, shall be entitled to
the benefit
of these respective indemnity agreements.
11. If this Warrant, or any of the securities issuable
pursuant
hereto, require qualification or registration with, or approval
of, any
governmental official or authority (other than registration under
the Act, or
any similar Federal statute at the time in force), before such
shares may be
issued on the exercise hereof, the Company, at its expense, will
take all
requisite action in connection with such qualification, and will
use its best
efforts to cause such securities and/or this Warrant to be duly
registered or
approved, as may be required. The foregoing will not require the
Company to
consent to service of process except in connection with the sale
of the
securities in any jurisdiction.
12. This Warrant is exchangeable, upon its surrender by
the
registered holder at such office or agency of the Company as may
be designated
by the Company, for new Warrants of like tenor, representing, in
the
aggregate, the right to subscribe for and purchase the number of
units or
Common Shares as the case may be that may be subscribed for and
purchased
hereunder, each of such new Warrants to represent the right to
subscribe for
and purchase such number of units or Common Shares as the case
may be as shall
be designated by the registered holder at the time of such
surrender. Upon
receipt of evidence satisfactory to the Company of the loss,
theft,
destruction or mutilation of this Warrant, and, in the case of
any such loss,
theft or destruction, upon delivery of a bond of indemnity
satisfactory to the
Company, or in the case of such mutilation, upon surrender or
cancellation of
this Warrant, the Company will issue to the registered holder a
new Warrant of
like tenor, in lieu of this Warrant, representing the right to
subscribe for
and purchase the number of Common Shares that may be subscribed
for and
purchased hereunder. Nothing herein is intended to authorize the
transfer of
this Warrant except as permitted under Paragraph 8.
13. Every holder hereof, by accepting the same, agrees
with any
subsequent holder hereof and with the Company that this Warrant
and all rights
hereunder are issued and shall be held subject to all of the
terms,
conditions, limitations and provisions set forth in this Warrant,
and further
agrees that the Company and its transfer agent may deem and treat
the
registered holder of this Warrant as the absolute owner hereof
for all
purposes and shall not be affected by any notice to the contrary.
14. All notices required hereunder shall be given by
first-class
mail, postage prepaid; if given by the holder hereof, addressed
to the Company
at 101 Baremore, Louisville, Mississippi 39339 or such other
address as the
Company may designate in writing to the holder hereof; and if
given by the
Company, addressed to the holder at the address of the holder
shown on the
books of the Company.
15. The Company will not merge or consolidate with or
into any other
corporation, or sell or otherwise transfer its property, assets
and business
substantially as an entirety to another corporation, unless the
corporation
resulting from such merger or consolidation (if not the Company),
or such
transferee corporation, as the case may be, shall expressly
assume, by
supplemental agreement satisfactory in form to Castle, the due
and punctual
performance and observance of each and every covenant and
condition of this
Warrant to be performed and observed by the Company.
16. This Warrant shall be construed in accordance with
and governed
by the laws of the State of New York, except with respect to the
validity of
this Warrant, the issuance of Warrant Shares upon exercise hereof
and rights
and duties of the Company with respect to registration of
transfer which shall
be governed by the laws of the State of Colorado.
Notwithstanding anything to
the contrary, the courts of the State of New York shall have
jurisdiction of
any dispute or claim concerning or arising out of or touching
upon this
Warrant.
IN WITNESS WHEREOF, NY TEST ENVIRONMENTAL INCORPORATED
has caused
this Warrant to be signed by its duly authorized officers under
its corporate
seal, to be dated ________________, 1996.
WORLDWIDE FOREST PRODUCTS,
INC.
By
- -----------------------------
Authorized Officer
Attest:
- -----------------------
Secretary
(Corporate Seal)
PURCHASE FORM
To Be Executed
Upon Exercise of Warrant
The undersigned hereby exercises the right to purchase
_____________
Common Shares, evidenced by the within Warrant, according to the
terms and
conditions thereof, and herewith makes payment of the purchase
price in full.
The undersigned requests that certificates for such shares and
warrants shall
be issued in the name set forth below.
Dated: _________________________, 19
- -------------------------------------
Signature
- ------------------------------------
Print Name of Signatory
- ------------------------------------
Name to whom certificates are
to
be issued if different from
above
Address:
----------------------------
----------------------------
Social Security No._________
or other identifying number
If said number of shares shall not be all the shares
purchasable under
the within Warrant, the undersigned requests that a new Warrant
for the
unexercised portion shall be registered in the name of:
- ------------------------------------
(Please Print)
Address:
- ----------------------------
- ----------------------------
Social Security No. or
other
identifying number
- ------------------------------------
Signature
FORM OF ASSIGNMENT
FOR VALUE RECEIVED ___________________________, hereby sells
assigns and
transfers to ______________________ Soc. Sec. No.
(____________________) the
within Warrant, together with all rights, title and interest
therein, and does
hereby irrevocably constitute and appoint ____________________
attorney to
transfer such Warrant on the register of the within named
Company, with full
power of substitution.
- -------------------------------
Signature
Dated:__________________________, 19__
Signature Guaranteed:
- -----------------------------------
