As filed with the Securities and Exchange Commission on June 19, 1997.
REGISTRATION NO. 333-28211
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TRANSAMERICAN WASTE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3487422
(STATE OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10554 TANNER ROAD
HOUSTON, TEXAS 77041
(713) 956-1212
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
J. DAVID GREEN
SENIOR VICE PRESIDENT, SECRETARY AND
GENERAL COUNSEL
10554 TANNER ROAD
HOUSTON, TEXAS 77041
(713) 956-1212
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------------
COPY TO:
JEFF C. DODD
MAYOR, DAY, CALDWELL & KEETON, L.L.P.
700 LOUISIANA, SUITE 1900
HOUSTON, TEXAS 77002
(713) 225-7000
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on the Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, 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 under the Securities Act of 1933, check the following box. [ ]
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 19, 1997
PROSPECTUS
21,411,534 SHARES
TRANSAMERICAN WASTE INDUSTRIES, INC.
COMMON STOCK
------------------------------------
The shares of common stock, par value $.001 per share (the "Common
Stock"), of TransAmerican Waste Industries, Inc. (together with its
subsidiaries, the "Company"), offered hereby will be offered by certain
stockholders of the Company. See "Registering Stockholders." The Company will
receive none of the proceeds from the sale of the shares by the Registering
Stockholders but will incur certain expenses in connection with filing the
Registration Statement.
The Registering Stockholders may from time to time sell all or a
portion of the Shares of Common Stock included herein and offered by them
("Shares") in transactions in the over-the-counter market or through the
National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ")
SmallCap Market, in negotiated transactions or otherwise, at prices then
prevailing or related to the then current market price or at negotiated prices.
It is expected that the first sale of shares of Common Stock offered hereby will
take place on or about July 1, 1997; however, the decision to sell such shares
is solely in the discretion of the Registering Stockholders and therefore the
first sale may occur any time after the Registration Statement becomes
effective. The Shares offered by the Registering Stockholders may be sold
directly or through agents or broker-dealers, or in a distribution by one or
more underwriters on a firm commitment or best efforts basis. See "Plan of
Distribution." The Registering Stockholders and any agents or broker-dealers
participating in the distribution of the Shares offered by the Registering
Stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and any profit on the
sale of the Shares offered by the Registering Stockholders and any commissions
received by any such agents or broker-dealers may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Common Stock is traded over-the-counter and included in the NASDAQ
SmallCap Market under the trading symbol "WSTE." On June 17, 1997, the last
sales price for the Common Stock as reported by the NASDAQ SmallCap Market was
$1.12 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
The date of this Prospectus is June 19, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy and information statements and other information concerning the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, Room 1024, and at the following Regional Offices of the
Commission: Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains an internet web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of such site is
http://www.sec.gov. In addition, the Common Stock is listed on The Nasdaq
SmallCap Market, and such reports and other information concerning the Company
can be inspected at The Nasdaq SmallCap Market, 1735 K Street, N.W., Washington,
D.C. 20006-1506.
This Prospectus constitutes a part of a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus does not contain all of the
information included in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Reference is made to such Registration Statement, including the exhibits and
schedules thereto, for further information with respect to the Company and the
securities offered hereby. The Registration Statement may be inspected in the
Public Reference Room of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549.
The Company is a Delaware corporation. Its executive offices are
located at 10554 Tanner Road, Houston, Texas 77041, and its telephone number is
(713) 956-1212.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
are incorporated into this Prospectus by reference and made a part hereof:
Annual Report on Form 10-K for the year ended December 31, 1996; Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1997; and Current
Report on Form 8-K and Form 8-K/A dated February 18, 1997 and April 18, 1997,
respectively.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the shares of Common Stock offered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated herein by reference, or
contained in this Prospectus, shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all documents incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be directed to Tom J.
Fatjo, III, TransAmerican Waste Industries, Inc., 10554 Tanner Road, Houston,
Texas 77041, telephone (713) 956-1212.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE HEREIN INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, THE INFORMATION APPEARING HEREIN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS DOES NOT GIVE EFFECT TO THE EXERCISE OF THE
OUTSTANDING DEBENTURES, OPTIONS, WARRANTS OR OTHER SECURITIES CONVERTIBLE INTO
OR EXERCISABLE FOR COMMON STOCK. INFORMATION PROVIDED HEREBY BY THE COMPANY
CONTAINS, AND FROM TIME TO TIME THE COMPANY MAY DISSEMINATE MATERIALS AND MAKE
STATEMENTS WHICH MAY CONTAIN "FORWARD-LOOKING" INFORMATION, AS THAT TERM IS
DEFINED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "1995
ACT"). THESE CAUTIONARY STATEMENTS ARE BEING MADE PURSUANT TO THE PROVISIONS OF
THE 1995 ACT AND WITH THE INTENTION OF OBTAINING THE BENEFITS OF THE "SAFE
HARBOR" PROVISIONS OF THE 1995 ACT.
The Company cautions investors that any forward-looking statements made
by the Company are not guarantees of future performance and that actual results
may differ materially from those in the forward-looking statements as a result
of various factors, including, but not limited to, those set forth in "RISK
FACTORS" including "RISK FACTORS--Uncertainty of Forward-Looking Statements."
THE COMPANY
The Company is engaged in the collection, processing and disposal of
non-hazardous industrial and municipal solid waste. The Company has expanded its
operations primarily through the acquisition of existing businesses and by
obtaining long-term contracts to manage existing municipal landfills.
The Company currently owns or operates twelve collection, processing
and disposal facilities consisting of two municipal solid waste collection
operations, eight landfills, a solid waste transfer station and a materials
recovery facility. The Company's landfills include six municipal solid waste
landfills and two construction and demolition landfills, one of which is
permitted for expansion to accept municipal solid waste. See "The Company."
The Company's strategy is to become a leader in the non-hazardous waste
industry with its primary focus on the southern region of the United States. The
Company has expanded its operations, and will continue to expand its operations,
by privatizing municipal landfills, acquiring other selected facilities and
collection operations and increasing volume at its existing sites. During the
past three years, the Company has concentrated on acquiring selective collection
operations, landfills and obtaining management contracts for permitted disposal
sites in the southern region of the United States, and divesting all of the
Company's operations unrelated to the collection, processing or disposal of
non-hazardous solid waste. As the Company continues to seek additional disposal
facilities and collection operations, the Company will focus on acquiring and
developing businesses which are strategically positioned with the Company's
existing operations. The Company believes there is substantial value to be
realized by obtaining strategically located collection and landfill operations
as this provides the Company secure waste streams and provides operational
efficiencies to both the collection and disposal operations. The Company will
also look for strategic opportunities to enter into new markets primarily
through the acquisition of existing businesses.
THE OFFERING
Common Stock offered by the Registering Stockholders 21,411,534 shares
(includes 8,075,200 shares of Common Stock issuable
pursuant to the exercise of warrants or the conversion
of promissory notes)
Common Stock outstanding as of May 23, 1997 43,541,127 shares
NASDAQ SmallCap Market Symbol "WSTE"
Use of Proceeds The Company will not receive
any proceeds of this offering.
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RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, IN ADDITION TO THE OTHER INFORMATION APPEARING ELSEWHERE IN OR
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS, PRIOR TO MAKING AN INVESTMENT
DECISION RELATING TO THE SECURITIES OFFERED BY THIS PROSPECTUS.
RISKS RELATED TO SANIFILL ASSETS. In connection with the Company's
acquisition of certain solid waste collection and disposal assets and operations
of Sanifill, Inc. ("Sanifill") located in the Houston, Texas area (the "Sanifill
Assets"), the Company was granted access to certain information regarding the
Sanifill Assets and was given the right to conduct a due diligence
investigation. See "THE COMPANY -- Recent Developments --Acquisition of Sanifill
Assets." While the Company reviewed such information and conducted a due
diligence investigation, the amount of information the Company received was
limited and there can be no assurance that the Company has been able to fully
determine all of the risks inherent in the business and operations of the
Sanifill Assets. Some of these risks could have a material adverse effect on the
consolidated financial performance of the Company. Furthermore, the Company
received only limited representations, warranties and indemnification from the
seller of the Sanifill Assets, and therefore has limited recourse to the Seller
should the information it received prove to be inaccurate or incomplete. While
it believes it can operate the Sanifill Assets profitably, the Company cannot
determine with certainty whether the Sanifill Assets were historically
profitable under Sanifill's ownership, and notwithstanding their historical
results, there can be no assurance that the Company can successfully operate the
Sanifill Assets or integrate them into the Company's operations. The estimates
of revenues and costs derived from Sanifill's records and included in the "THE
COMPANY -- Summary Financial Data" are subject to a variety of qualifications,
including an assumption that current pricing levels, historical expense patterns
associated with the Sanifill Assets, numbers of customers and other similar
factors do not change after the acquisition of such assets. They are also
qualified by other risk factors relating to the Company as more fully set forth
herein, many or most of which would not have affected Sanifill or the Sanifill
Assets prior to the acquisition by the Company. See "RISK FACTORS -- Uncertainty
of Forward-Looking Statements." The Company has limited operating history
regarding the Sanifill Assets and only limited experience in conducting similar
collection and hauling operations, and there are no assurances that the Company
can profitably operate the Sanifill Assets. In addition, the Company incurred
additional debt in order to complete the acquisition of the Sanifill Assets. See
"THE COMPANY -- Recent Developments -- Financing Related to Sanifill." Although
the Company anticipates that cash flows generated by its existing assets and the
Sanifill Assets will be sufficient to support anticipated levels of total debt,
there can be no assurance that the Company will be able to meet its total debt
service requirements, and such debt service requirements will affect the
profitability of the Company and may impair its ability to raise additional
capital for further acquisitions or for capital investment in existing
operations.
LOSSES IN PRIOR PERIODS. The Company incurred a net loss of $11,747,000
for the fiscal year ended August 31, 1994 and net losses of $5,389,000 and
$6,917,000 for the years ended December 31, 1995 and 1996, respectively. The net
loss during fiscal 1996 was primarily attributable to the $7.7 million loss from
oil recovery and disposal operations, including a $6.5 million impairment loss,
recognized by the Company in connection with the transfer of the stock of its
oil recovery and disposal operation subsidiaries. These losses were partially
offset by (i) a $437,000 gain recognized on the sale of certain assets used in
the collection and transportation of municipal solid waste and (ii) additional
revenues resulting from the acquisition of management contracts and businesses
during 1995 and 1996 and increased waste streams at the existing facilities.
There is no assurance that the Company will operate profitably in the future.
SUBSTANTIAL INDEBTEDNESS AND RESTRICTIONS. At May 1, 1997, the Company
had approximately $44.5 million of long-term debt. See "CAPITALIZATION." The
Company's level of indebtedness has important consequences for holders of
securities issued by the Company. A significant portion of the Company's cash
flow from operations must be dedicated to the payment of interest and principal
on its indebtedness and will not be available for other purposes. There is no
assurance that the Company's cash flows from operations will be sufficient to
fund total debt service requirements in the future. This may limit the Company's
ability to fund working capital requirements, to borrow additional funds, to
issue equity securities and to dispose of assets that secure the Company's
indebtedness. Consequently, such indebtedness may adversely affect the Company's
flexibility in planning for and reacting to
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<PAGE>
changes in its business, including internal growth and possible acquisition
activities. The Company's ability to obtain additional financing in the future
for working capital, capital expenditures, acquisitions, or other purposes may
also be restricted.
NEED FOR ADDITIONAL FINANCING; NO ASSURANCE OF AVAILABLE FINANCING. The
Company requires significant capital for improvements at its existing landfills,
including expenditures necessary to bring certain of its landfills into
compliance with federal and state regulations and for the construction of
additional cells at its landfills in order to create disposal capacity required
for continued operations. The acquisition of existing, permitted disposal
facilities and collection operations also requires significant capital and other
resources. The inability of the Company to finance its capital needs could
adversely affect the Company's internal growth opportunities and acquisition
plans. The Company currently intends to raise additional capital through debt
and equity financing, the proceeds of which would be devoted to completing
acquisitions and providing working capital, but as the Company continues its
growth, it will consider all financing alternatives that may become available.
There can be no assurance that such financing will be available at all or on
terms and conditions acceptable to the Company, and interest and other costs
associated with such financing may have an adverse impact on the Company's
profitability. Thus, there can be no assurance that the Company can successfully
obtain such financing or pursue its strategy and failure to do so may limit the
Company's growth potential.
COMPETITION. The Company operates within the intensely competitive
waste disposal and collection industry. The Company faces competition from
several national waste disposal and collection companies and numerous regional
and local entities of various sizes and competitive resources, and will in the
future be confronted with such competition in each location where it intends to
expand. Several of these competitors are larger and have substantially greater
financial and other resources than the Company and are well entrenched in their
respective markets. The Company also competes with counties and municipalities
that maintain their own waste collection or disposal operations. Such counties
and municipalities may have financial advantages through their access to tax
revenue and their ability to mandate the disposal of waste collected within the
jurisdiction at the municipal facility. Competition may also be affected by the
increasing national emphasis on recycling, composting, incineration and other
waste reduction programs which could reduce the volume of refuse and garbage
deposited in landfills. In pursuing its business strategy of acquiring
operations and facilities in the waste management industry, the Company competes
for such acquisitions and management contracts with large, national companies
and with regional and local companies, many of which have significantly greater
financial resources and more established market positions than the Company. The
trend toward consolidation in the waste management industry has increased
competition for the acquisition of existing, permitted disposal facilities and
collection operations. There can be no assurance that additional facilities or
collection operations will be available for acquisition on terms the Company
deems attractive.
LIMITED OPERATING HISTORY; NO ASSURANCE OF SUCCESSFUL IMPLEMENTATION OF
BUSINESS STRATEGY. Prior to September 1994, most of the Company's revenue and
earnings were derived from its wastewater sludge treatment facility located in
Galveston, Texas. After the expiration of the contract with the sole customer of
this facility in September 1994, the Company discontinued operations of the
sludge treatment facility and redefined its focus to concentrate on acquiring
selected landfills and obtaining management contracts for permitted disposal
sites, acquiring strategically located collection operations and divesting
itself of all non-solid waste operations. The Company has a limited operating
history in solid waste landfills and collection operations, and there are no
assurances that this business ultimately will be successful. The Company is
subject to all of the risks inherent in the establishment and growth of a
developing business, including, among other things, limited access to capital,
delays in the completion of its business plan in certain markets and intense
competition.
ENVIRONMENTAL RISKS AND REGULATIONS. The Company renders services in
connection with the disposal of various wastes. Federal, state and local laws
and regulations, including the Federal Water Pollution Control Act (the "Clean
Water Act") and Subtitle D regulations of the Resource Conservation and Recovery
Act of 1976 ("RCRA"), have been enacted regulating these wastes and creating
liability for certain environmental contamination caused by such waste.
Accordingly, the Company is subject to potential liability for environmental
damage its disposal facilities or its waste management operations may cause,
particularly as a result of the contamination of water or the soil. Such
liability could include damages resulting from conditions existing prior to the
acquisition
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of such operations by the Company. Environmental laws regulate, among other
things, the transportation, storage, handling and disposal of solid waste. Under
these laws, the Company may be subject to liability for any on-site or off-site
environmental contamination caused by pollutants or substances whose
transportation, treatment or disposal was arranged by the Company or its
predecessors. Moreover, so-called "toxic tort" litigation has increased markedly
in recent years as persons allegedly injured by chemical contamination seek
recovery for various injuries, including personal injuries, property damage or
"stigma damages." These legal developments present a risk of liability should
the Company be deemed to be responsible for materials contained in its landfills
and other disposal facilities, for arranging or otherwise "brokering" the
transportation or disposal of waste to disposal facilities, for contamination or
pollution caused or increased by an evaluation, remediation or cleanup effort
conducted by it, or for an accident which occurs in the course of such
evaluation, remediation or cleanup effort. The Company, however, does not have
environmental impairment insurance (see "RISK FACTORS--Lack of Environmental
Impairment Liability Insurance"). There can be no assurance that the Company's
procedures for complying with environmental regulations will be effective at
preventing the Company from incurring a substantial environmental liability. If
the Company were to incur a substantial uninsured liability for environmental
damage, its financial condition could be materially adversely affected.
Over the past two decades, federal, state and local environmental laws
and regulations have increased the demand for services such as those provided by
the Company. In addition, the regulatory systems to which the Company and its
operations are subject are often in a state of change. A significant reduction
in the stringency of the constraints imposed by environmental laws or
regulations could adversely affect the Company's business. In addition, laws and
regulations may be promulgated in the future which may adversely affect the
Company's profitability. Furthermore, the Company may from time to time become
subject to governmental enforcement proceedings and resulting fines or other
sanctions and may incur penalties. Such expenditures could be substantial and
accordingly could have a material adverse effect on the Company's financial
condition.
OPERATING RISKS AND POSSIBLE INSUFFICIENCY OF INSURANCE. The business
of the Company exposes it to various risks, including claims for damage to
property, injuries to persons, negligence and professional errors or omissions
in the planning or performing of its services and providing of its products,
which claims could be substantial. The Company maintains $2 million of general
liability insurance and an additional $5 million of excess umbrella liability
coverage on all of its operations. The cost of these and other insurance
policies is substantial. There can be no assurances that such insurance will
continue to be adequate to meet the needs of the Company, particularly as it
pursues its acquisition strategy, or that the Company will be able to continue
to maintain or obtain adequate or required insurance coverage as its business
grows or, if obtainable, purchase it at reasonable rates. If the Company has
difficulty in maintaining or obtaining such coverage, it could be at a
competitive disadvantage with other companies, it may become exposed to
significant uninsured risks and losses, and/or may be unable to continue certain
of its operations. Under the Company's insurance policies, there are various
exclusions that are customary in the industry. Accordingly, there can be no
assurance that liabilities that may be incurred by the Company will be covered
by its insurance or that the dollar amount of such liabilities which are covered
by its insurance will not exceed the Company's policy limits. Furthermore, prior
to June 1990, the Company did not have insurance coverage for certain pollution
related activities with respect to its environmental engineering and consulting
services. A partially or completely uninsured claim, if successful, could have a
material adverse effect on the Company's financial condition and results of
operations.
LIMITED ENVIRONMENTAL IMPAIRMENT LIABILITY INSURANCE. The Company is
subject to potential liability for any environmental damage its facilities may
cause, particularly as a result of the contamination of water or the soil. The
Company maintains $1 million of environmental impairment liability insurance
covering both the sudden and the gradual onset of environmental damage (subject
to a $250,000 deductible). There can be no assurance that liabilities that may
be incurred by the Company will be covered by the insurance or that the dollar
amount of such liabilities which are covered by its insurance will not exceed
the Company's policy limit. As a result, if the Company were to incur liability
for environmental damage, its financial condition could be adversely affected.
UNCERTAINTY OF FORWARD-LOOKING STATEMENTS. Certain forward-looking
information contained in this Prospectus is being provided in reliance upon the
"safe harbor" provision of the Private Securities Litigation Reform
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Act of 1995, as set forth in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such information includes, without limitation, discussions as to estimates,
expectations, beliefs, plans and objectives concerning the Company's future
financial and operating performance. Such forward-looking information is subject
to assumptions and beliefs based on current information known to the Company and
factors that are subject to uncertainties, risks and other influences, which are
outside the Company's control, and could yield actual results differing
materially from those anticipated. The projected revenues from the Sanifill
Assets described in "THE COMPANY -- Summary Financial Data" are provided solely
for illustrative purposes and do not constitute a forecast or prediction of
actual results. For purposes of preparing the forward-looking statements,
information prepared by Sanifill was relied upon and certain assumptions were
made with respect to the consummation of the asset acquisition, general business
and economic conditions. The forward-looking statements are based on current
customers, regulations and expected market and operating conditions, and are
inherently subject to changes in economic, regulatory, operational and other
circumstances that cannot be foreseen. Any adverse changes in regulations or
market and operating conditions may have a material adverse effect on the
Company's estimates. In addition, certain assumptions made by the Company may
not materialize, and unanticipated events and circumstances may occur subsequent
to the date of these estimates. Neither the assumptions or the forward-looking
statements derived from such assumptions are warranted as being true or certain
to happen by the Company or any of its stockholders, directors, officers,
employees, affiliates or agents. Such assumptions and forward-looking statements
are provided with the expectation that they will be independently evaluated by
any potential purchaser of shares of the Company's Common Stock.
CLOSURE AND POST-CLOSURE COSTS. The Company has material financial
obligations relating to closure and post-closure costs for the disposal
facilities it owns or operates. While the precise amount of these future
obligations cannot be determined, the Company has estimated that for all its
existing facilities the total costs for final closure and post-closure
monitoring for an estimated period of up to 30 years after closure for cells
currently being utilized will approximate $6.0 million. At March 31, 1997, the
Company had accrued liabilities of approximately $4.4 million for such estimated
costs based on airspace utilized to date. The Company will continue to provide
accruals based on engineering estimates, as the available airspace is utilized.
The estimate of the total future liability is subject to change as it is based
on current economic conditions, operational results, existing regulations and a
combination of internal and external engineering specifications which may not
yet have been approved by the appropriate regulatory authorities.
FUTURE COSTS AND COMMITMENTS. The Company estimates that it may make
capital expenditures of up to approximately $7.0 million during the next twelve
months for existing operations, primarily for landfill expansion and
improvements and for equipment purchases. The Company intends to seek long-term
financing for substantially all of its capital improvements. If additional
financing should not be available, the Company would restrict its capital
expenditures to an amount available for such purposes, which the Company expects
would have an adverse impact on future revenues.
DEPENDENCE ON EXECUTIVE OFFICERS. Incorporated in 1988, the Company has
a limited operating history in the solid waste business. However, the Company's
Chief Executive Officer, Tom J. Fatjo, Jr., its Chief Operating Officer and
President, Jerome M. Kruszka, and other principal executives with the Company
have extensive personal experience in the solid waste business and related
industries. The development of the Company's business is dependent upon the
efforts and talents of its executive officers. Loss of the services of one or
more of its officers could adversely affect the Company's operations.
LITIGATION. The Company is involved in certain litigation matters that
in the event of an adverse outcome could have a material adverse effect on the
Company. For a description of the litigation matters involving the Company, see
"OPERATIONS -- Pending Litigation."
VOTING CONTROL BY PRINCIPAL STOCKHOLDERS, DIRECTORS AND OFFICERS. As of
May 23, 1997, the principal stockholders, officers and directors of the Company
beneficially owned approximately 15.3 million shares of Common Stock, which
includes options and warrants exercisable within sixty days of May 23, 1997 to
acquire 4,329,991 shares of Common Stock, representing (assuming the exercise of
such options and warrants)
6
<PAGE>
approximately 32% of the issued and outstanding shares of Common Stock.
Consequently, such persons can, if they choose to vote together, effectively
control the election of directors and all other decisions affecting the Company.
FINANCIAL ASSURANCE OBLIGATIONS. From time to time, the Company may be
required to provide performance bonds or bank letters-of-credit to secure
performance of landfill management and hauling contracts or to secure its
closure and post-closure obligations with respect to its landfills. At May 15,
1997, the Company has provided performance bonds totaling $6.9 million and
letters-of-credit totaling approximately $200,000 to secure its obligations. The
Company has arranged a $20 million performance bond line of credit, subject to
review of each contract bonded and certain other conditions. In certain cases,
the Company may be required to provide cash deposits.
POSSIBLE ADVERSE CONSEQUENCES ON MARKET PRICE OF COMMON STOCK AS A
RESULT OF SHARES ELIGIBLE FOR FUTURE SALE. Approximately 17 million of the
43,541,127 shares of Common Stock outstanding at May 23, 1997 are "restricted
securities" as such term is defined in Rule 144 promulgated under the Securities
Act, and are subject to the resale limitations of Rule 144. In addition, an
aggregate of 1,092,364 shares of the Company's authorized shares of Common Stock
are reserved for issuance upon the conversion of 10% Convertible Subordinated
Debentures ("debentures") substantially all of which would be freely tradeable.
The Registration Statement of which this Prospectus is a part, registers the
resale of 21,411,534 shares of the approximately 13,336,334 million shares of
"restricted" Common Stock and the resale of 8,075,200 million shares of the
Common Stock issuable upon the exercise of warrants or the conversion of
outstanding notes significantly increasing the number of freely traded, issued
and outstanding shares of Common Stock.
During the period that the debentures, options and warrants are
outstanding, they may adversely affect the market price of the Company's
securities and could impair the ability of, and the terms on which, the Company
can raise additional equity capital or obtain debt financing. The Company has
registered under the Securities Act the offering of up to 4,500,000 shares of
Common Stock issuable upon the exercise of options granted or available for
grant under the Company's incentive stock option plan. The Company also has
registered under the Securities Act the offering of warrants to purchase an
aggregate of 600,000 shares of Common Stock (with an exercise price of $4.50 per
share) and the shares issuable thereunder, 1,092,364 shares of Common Stock
issuable upon the conversion of the debentures (with a conversion price of $5.50
per share), and 3,835,375 shares of Common Stock issuable upon the exercise of
outstanding Class A and Class B Warrants (with exercise prices of $4.50 per
share and $6.53 per share, respectively, prior to adjustments resulting from the
Offering and certain other transactions contemplated herein). The Registration
Statement of which this Prospectus is a part, registers the resale of 8,075,200
shares of Common Stock issuable upon the exercise of warrants or the conversion
of outstanding notes. The sale, or availability for sale, of substantial amounts
of Common Stock and/or warrants in the public market pursuant to Rule 144 or
otherwise could adversely affect the market price of the Common Stock and could
impair the Company's ability to raise additional capital through the sale of its
equity securities or debt financing. The availability of Rule 144 to the holders
of restricted securities of the Company would be conditioned on, among other
factors, the availability of certain public information concerning the Company.
In addition, the Company's growth strategy contemplates acquisitions of other
businesses and facilities in the waste management industry. The Company may
issue its securities in order to pay all or a substantial portion of the
purchase price for any such acquisitions. While there can be no assurance that
the Company will be able to consummate any acquisitions, or to pay the purchase
prices thereof in its securities, if it were to do so, investors in the
Company's securities could experience a dilution of their equity interest in the
Company.
LACK OF CASH DIVIDENDS. Since its inception, the Company has not paid
cash dividends on its Common Stock. The Company intends to retain future
earnings, if any, to provide funds for the operation of its business and,
accordingly, does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future.
DELAWARE ANTI-TAKEOVER LAW. The Company is governed by the provisions
of Section 203 of the General Corporation Law of the State of Delaware. In
general, such law prohibits a public Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of
7
<PAGE>
the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. As a result of the
application of Section 203, potential acquirors of the Company may be
discouraged from attempting to effect an acquisition transaction with the
Company, thereby possibly depriving holders of the Company's securities of
certain opportunities to sell or otherwise dispose of such securities at
above-market prices pursuant to such transactions.
THE COMPANY
GENERAL
The Company was incorporated in Delaware in August of 1988. The Company
is engaged in the collection, processing and disposal of non-hazardous
industrial and municipal solid waste. The Company has expanded its operations
primarily by acquiring existing municipal landfills and through the acquisition
of existing businesses.
The Company currently owns or operates twelve collection, processing
and disposal facilities, consisting of eight landfills, two municipal solid
waste collection operations, a solid waste transfer station and a materials
recovery facility. The Company's landfills include six municipal solid waste
landfills and two construction and demolition landfills, one of which is
permitted to expand to accept municipal solid waste.
The Company's strategy is to become a leader in the non-hazardous solid
waste industry with its primary focus on the southern region of the United
States. The Company has expanded its operations, and will continue to expand its
operations, by privatizing municipal landfills, acquiring other selected
facilities and collection operations and increasing volume at its existing
sites. In 1996, the Company expanded its focus to include selective acquisitions
of collection operations and divesting of all non-solid waste operations. During
1996, the Company transferred management and legal control of substantially all
remaining non-solid waste operations, consisting primarily of the oil recovery
and disposal operations, under the terms of contractual arrangements, in order
to address on-going operational difficulties and because such businesses are not
strategically aligned with the Company's core landfill and collection
operations.
The Company has experienced a growth in landfill disposal revenue as a
result of its operation of additional facilities. Although the Company will
continue to seek additional facilities, the Company is aggressively pursuing
additional waste streams for its existing facilities. The Company's operating
expenses increase primarily as a result of adding landfills or other operating
facilities. Increased volumes of waste at the Company's existing landfills do
not result in a proportionate increase in the Company's operating expenses, and
therefore, increased volumes of waste or additional waste streams at competitive
prices would have a positive effect on the Company's profitability. The Company
believes it can obtain these additional waste streams by providing the large
national waste collection companies, municipalities and other potential
customers with the opportunity to dispose of waste materials at competitive
prices. During 1995 and 1996, the Company entered into several agreements which
substantially increased the volume of waste at several of its existing
landfills. However, there can be no assurance that acquisitions or any
additional waste streams will continue to be available in the future.
The Company is seeking additional collection and disposal operations
that are strategically aligned with the Company's current operations or that
provide the Company the opportunity to expand into new markets. In January 1997,
the Company acquired certain assets from Sanifill, Inc. used in providing solid
waste collection and disposal services to approximately 100,000 residential and
4,000 commercial customers in the Houston, Texas metropolitan area, described in
"THE COMPANY -- Recent Developments -- Acquisition of Sanifill Assets." As the
Company continues to seek additional facilities and collection operations, the
Company will focus on acquiring and/or developing businesses which are
strategically positioned with the Company's existing operations. The Company
believes there is substantial value to be recognized by obtaining strategically
located collection and landfill operations, as this provides the Company with
secure waste streams, optimizing the value of the Company's air space and
provides efficiencies to both the collection and disposal operations. The
Company believes it can increase operating margins on the collection operations
while handling the additional waste streams by improved route
8
<PAGE>
management, increased asset utilization and other cost reduction measures. There
can be no assurance that additional residential and commercial accounts will be
available.
RECENT DEVELOPMENTS
ACQUISITION OF SANIFILL ASSETS. On January 31, 1997, the Company,
through one of its wholly owned subsidiaries, acquired the Sanifill Assets. In
connection with the acquisition of Sanifill by USA Waste Services, Inc. ("USA
Waste") in 1996, the United States Department of Justice ordered the divestiture
of the Sanifill Assets, and pursuant to the order, the Company submitted a bid
which was subsequently accepted. The total consideration for the purchase of the
Sanifill Assets was $13,600,000 in cash plus warrants to purchase 1,500,000
shares of Common Stock at an exercise price of $1.50 per share (the "USA
Warrants"). The USA Warrants are exercisable for a period of five years from the
closing date of the Company's acquisition of the Sanifill Assets. The
Registration Statement of which this Prospectus is a part registers the resale
of the shares of Common Stock issuable upon the exercise of the USA Warrants.
The Sanifill Assets consist of assets used in connection with (a) the
servicing of approximately 4,000 commercial waste collection and disposal
accounts in the Houston, Texas metropolitan area, (b) the servicing of
approximately 100,000 residential waste collection and disposal accounts in the
Houston, Texas metropolitan area, (c) a 20-acre construction and demolition
landfill located in Galveston County, Texas, (d) two office, maintenance and
parking facilities (one of which will become the Company's corporate
headquarters), and (e) preferred pricing for disposal of waste at two of USA
Waste's landfills. The preferred pricing agreement gives the Company the option
to dispose of up to two million tons of municipal solid waste, limited to
270,000 tons per year, at USA Waste's landfills at favorable prices, which in no
event shall be less favorable than the most favorable terms provided to USA
Waste's other customers.
FINANCING RELATED TO SANIFILL ACQUISITION. Financing for the
transaction was arranged through a combination of debt and equity sources.
(a) BANK FINANCING. In connection with the transaction, the Company
entered into a bank facility in the amount of $8.5 million (the "Bank Facility")
composed of (i) a $7.5 million note bearing interest at the prime rate plus 1%,
to be repaid based upon a five year amortization schedule and having a final
maturity of February 15, 1999, and (ii) a $1 million revolving line of credit at
prime rate plus 1% having a final maturity of February 15, 1998. The Bank
Facility is secured by a security interest in all assets of the Company's
subsidiary, including the Sanifill Assets. The Bank Facility is guaranteed by
the Company and personally guaranteed by Tom J. Fatjo, Jr., the Chief Executive
Officer and Chairman of the Board of the Company, and by Robert K. Moses, Jr., a
director of the Company. As consideration for his guarantee and services
provided in connection with the acquisition of the Sanifill Assets, the Company
issued Mr. Moses warrants having a term of five years to purchase a total of
three million shares of Common Stock. The exercise price of such warrants with
respect to two million shares is $1.00 per share, and the exercise price with
respect to the remaining one million shares is $1.25 per share. The Registration
Statement of which this Prospectus is a part, registers the resale of the three
million shares of Common Stock issuable upon the exercise of these warrants. In
addition, the Company granted Mr. Moses the right to designate up to three
members of the Company's Board of Directors.
(b) SHARE OFFERING. The Company raised $6,750,000 in equity financing
by issuing 11,250,000 shares of its Common Stock through a private placement
arranged by a placement agent (the "Placement Agent") at a price of $.60 per
share (the "Offering"). The Registration Statement of which this Prospectus is a
part, registers the resale of the shares of Common Stock sold pursuant to this
Offering. In addition, the Placement Agent received warrants to purchase
1,125,000 shares of the Company's Common Stock at an exercise price of $.66 per
share and the Registration Statement of which this Prospectus is a part,
registers the resale of the shares of Common Stock issuable upon the exercise of
these warrants.
(c) BRIDGE NOTES. In connection with the Company's execution of the
definitive agreement to purchase the Sanifill Assets in December, 1996, the
Company borrowed $700,000 from an investment limited partnership
9
<PAGE>
under an agreement in principle dated December 3, 1996 (the "December Note").
The December Note was to mature on the earlier of the Company's next placement
of debt or equity securities (subject to certain exceptions) or August 8, 1997,
had an interest rate of 12% per annum, and was convertible into shares of Common
Stock at $1.00 per share. The Company also issued warrants that entitled the
holder of the December Note to purchase an aggregate of 300,000 shares of the
Company's Common Stock for $0.75 per share, expiring on December 3, 2001. In
connection with the December Note, the agreement in principle stated that, among
other terms, the $1,500,000 loan made in August 1996 by the same partnership
(together with the December Note, the "Bridge Notes") would be extended to
mature on August 8, 1997, and the exercise price of 275,000 warrants issued in
connection with such loan would be reset to $1.00 per share.
On January 31, 1997, the Company repaid the December Note and exchanged
the $1,500,000 note issued by the Company in August 1996 for a $1,500,000 note
convertible into shares of the Company's Common Stock at $1.12 per share. In
connection therewith, the Company obtained certain waivers, consents and
releases necessary to consummate the acquisition of the Sanifill Assets and the
transactions related thereto. In addition, the Company repriced the 575,000
warrants previously issued as described above to such investment limited
partnership to have an exercise price of $.60 per share. The Registration
Statement of which this Prospectus is a part, registers the resale of the shares
of Common Stock issuable upon the exercise of these warrants and the conversion
of the note.
1997 STOCK PARTICIPATION PLAN. Effective January 1, 1997, the Board of
Directors of the Company approved the TransAmerican Waste Industries, Inc. 1997
Stock Participation Plan ("Participation Plan"), pursuant to which the Company
issued restricted shares of Common Stock to the executive officers and certain
key employees of the Company which were selected in the discretion of the
Compensation Committee of the Board of Directors ("Committee"). Pursuant to the
Participation Plan, the Company has issued 833,334 shares of Common Stock to
seven participants. The Registration Statement of which this Prospectus is a
part registers the resale of the shares issued pursuant to the Participation
Plan by the grantee or, in the event of a foreclosure, the bank which is a party
to the Bank Loan described below.
The shares awarded under the Participation Plan (the "Restricted
Shares") are registered in the name of the grantee but are held by the Chairman
of the Board of Directors of the Company until such time as the restrictions on
their transfer have expired. The Restricted Shares will vest in equal 20%
increments on each anniversary of the grant date over a five-year period. If the
grantee should voluntarily terminate his employment or retire, or if his
employment is terminated by the Company for any reason other than for cause, the
grantee will forfeit his right to receive any shares that are not vested at the
time of termination. In the event that the grantee is terminated for cause, he
will forfeit all rights to receive any vested or unvested shares. If the
grantee's employment is terminated due to his death or disability, or if a
change of control of the Company should occur before the grantee's employment
has been terminated, then all unvested shares will automatically become 100%
vested.
In the event that the grantee's employment is not terminated within the
five-year vesting period, as of the expiration of such period, the Company will
issue and deliver to the grantee a certificate for all the grantee's vested
shares free of restrictions. In the event that the grantee's employment is
terminated for any reason except cause before the end of the five-year vesting
period, or in the event of a change of control of the Company regardless of
whether his employment is terminated, at such time the Committee shall issue and
deliver to grantee a certificate for all vested shares free of restrictions.
In March 1997, Lance C. Ruud, the Company's Senior Vice President and
Chief Financial Officer, resigned, effective May 1, 1997. The Compensation
Committee has granted the former Chief Financial Officer the right to purchase
his 156,250 unvested restricted shares of Common Stock issued under the
Participation Plan for $.60 per share. The right to purchase the shares expires
September 28, 1997. The Company will use the proceeds, if any, from purchase of
these shares to retire a pro rata portion of the Bank Loan (as defined below)
incurred by the Company to fund the acquisition of the Common Stock to be
distributed pursuant to the Participation Plan.
10
<PAGE>
PARTICIPATION PLAN BANK LOAN. The Company has received a bank loan in
the amount of $500,000 ("Bank Loan") to acquire 833,334 shares of Common Stock
from the Company at $.60 per share pursuant to the Participation Plan. The terms
of the Bank Loan required the Company to execute a $500,000 note bearing
interest at 9% per annum to be repaid based upon a five-year amortization
schedule. The Bank Loan is secured by the shares of the Company's Common Stock
to be granted pursuant to the Participation Plan and is guaranteed personally by
Tom J. Fatjo, Jr., the Chief Executive Officer and Chairman of the Board of the
Company.
SUMMARY OF SHARES ISSUED. The following table summarizes the total
number of shares issued or issuable pursuant to the Offering and the
transactions related to the acquisition of the Sanifill assets.
NUMBER OF
SHARES OR WARRANTS
------------------
Offering 11,250,000
USA Waste Warrants 1,500,000
Warrants Issued to Mr. Moses 3,000,000
Participation Plan 833,334
Placement Agent Warrants 1,125,000
Bridge Note Warrants 575,000
----------
Total 18,283,334
==========
PERMIT MODIFICATIONS. On March 14, 1997, the Supreme Court of Alabama
issued a favorable opinion upholding one of the Company's permit modifications
which granted the Company the right to accept up to 1,500 tons per day of
municipal solid waste at one of the Company's landfills. This opinion reversed a
lower court's imposed daily limit of approximately 300 tons per day, which had
been in effect since January 12, 1996. Additionally, the Company has obtained
regulatory approval for several of the Company's landfills to expand vertically,
which allows these sites to continue to dispose of waste in existing areas of
the landfill which would otherwise be lost rather than developing new cells.
MANAGEMENT CHANGES. Effective November 1, 1996, Thomas E. Noel resigned
as President of the Company. In February 1997, Mr. Noel resigned as a member of
the Company's board of directors.
On November 1, 1996, Jerome M. Kruszka joined the Company as Chief
Operating Officer, and on December 26, 1996, Mr. Kruszka was named President of
the Company. Mr. Kruszka began his career with Waste Management, Inc. in 1971.
Between 1971 and 1996 Mr. Kruszka held several positions at Waste Management,
Inc. and its affiliates. In 1993 Mr. Kruszka was named Division President and
General Manager for Waste Management of Alameda County after which thirteen
divisions involved in solid waste collection and transfer, recycling and
landfill operations reported to him.
The Company and Mr. Kruszka entered into a letter agreement dated
September 26, 1996 which provides that Mr. Kruszka shall be employed by the
Company to serve as Vice President of Operations for a term of three years. The
letter agreement sets forth the base salary, stock options and bonuses to be
received by Mr. Kruszka.
In February 1997, Michael L. Paxton was elected Vice President and
Corporate Controller. Mr. Paxton joined the Company in May 1993 as Assistant
Corporate Controller and was promoted to Corporate Controller in August 1995.
Mr. Paxton was formerly employed by NL Industries, Inc. and Ernst & Young,
L.L.P.
In March 1997, Lance C. Ruud, the Company's Senior Vice President and
Chief Financial Officer, resigned effective May 1, 1997. Mr. Ruud continues to
serve on the Company's Board of Directors until the next annual meeting of
stockholders to be held June 25, 1997.
In connection with the closing of the Offering, the Board of Directors
authorized the creation of a committee of officers (the "Management Committee")
to be responsible for the oversight of the day-to-day
11
<PAGE>
management of the Company. The Board of Directors appointed the members of the
Management Committee and instructed the executive officers of the Company,
including the members of the Management Committee, to consult with the members
of such committee prior to making any decision or taking any action which the
officer believes, using his best judgment, would have a significant effect on
the business of the Company or a material effect on its profitability. The
Management Committee consists of three members, who currently are Tom J. Fatjo,
Jr., J. David Green and Jerome M. Kruszka.
DIRECTOR CHANGES. During February 1997, Thomas E. Noel and R. Brian
Fifer resigned as directors of the Company.
Pursuant to the Placement Agent Agreement dated January 23, 1997
between the Company and Sanders Morris Mundy Inc. ("SMMI"), SMMI has the right
to assign one representative to serve on the Board of Directors of the Company
and on any committee thereof to which the Management Committee may be designated
to report, until at least 85% of the shares of Common Stock sold pursuant to the
Offering have been sold by the initial holders thereof or their permitted
assignees. George L. Ball was elected in February 1997 to serve on the Board of
Directors pursuant to this Agreement.
The Company also entered into an Agreement with Tom J. Fatjo, Jr. and
Robert K. Moses, Jr. pursuant to which Mr. Fatjo and Mr. Moses agreed to
guarantee the indebtedness evidenced by the Bank Facility. Pursuant to this
Agreement, Mr. Moses has the right to designate three directors to serve on the
Company's Board of Directors until the indebtedness is repaid or Mr. Moses
ceases to be a guarantor of such indebtedness and two directors until Mr. Moses
is no longer the beneficial owner of Common Stock, warrants or other securities
of the Company that constitute on a fully diluted basis 5% or more of the
outstanding securities of the Company. Mr. Moses, J. Philip Burguieres and
Richard E. Bean were elected in February 1997 to serve on the Board of Directors
pursuant to this Agreement.
Lance C. Ruud's term as a director of the Company ends at the time of
the annual meeting of stockholders to be held on June 25, 1997. The Board of
Directors has nominated Jerome M. Kruszka, the Company's President and Chief
Operating Officer, to take the position vacated by Mr. Ruud.
OTHER ACQUISITIONS.
TARGET WASTE INDUSTRIES, INC. In April 1997, the Company completed the
acquisition of all the issued and outstanding shares of capital stock of Target
Waste Industries, Inc. ("Target"), an Alabama corporation. Target conducts a
waste collection business in Mobile, Alabama. The consideration paid by the
Company for the acquisition of Target included $100,000 cash, 720,000 shares of
restricted Common Stock and the forgiveness of certain indebtedness of Target to
the Company. The Registration Statement, of which this Prospectus is a part,
registers the resale of the shares of Common Stock issued pursuant to this
transaction.
From time to time the Company enters into negotiations and letters of
intent for other potential acquisitions. Such letters are generally intended to
be non-binding and are subject to many contingencies, which may include
completion of satisfactory due diligence, negotiation of definitive agreements,
and approval of the Company's Board of Directors. The Company will continue to
pursue the acquisition of attractive disposal facilities and collection
operations.
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<PAGE>
SUMMARY FINANCIAL DATA
The following table sets forth selected historical financial
information for the Company and should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto, and the
information under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 and the Sanifill Assets
Acquired Financial Statements and the related notes thereto, and the Unaudited
Proforma Condensed Financial Statements and related notes thereto, included in
the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1977
and the Current Report on Form 8-K/A dated April 18, 1997. The information set
forth below is expressed in dollars in thousands, except per share data.
<TABLE>
<CAPTION>
HISTORICAL(1) PRO FORMA(3)
------------------------------------------------------- ---------------------------------
FISCAL YEAR ENDED THREE-MONTH THREE-MONTH
------------------------------------ PERIOD ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 1995 DECEMBER 31, 1996 MARCH 31, 1997 DECEMBER 31, 1996 MARCH 31, 1997
--------------- ----------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA: (UNAUDITED)
Revenue....................... $ 7,350 $16,022 $ 6,407 $29,907 $7,612
Operating income (loss)........ (2,409) 2,421 850 (1,326) (113)
Gain on sale of assets......... -- 437 -- -- --
Solid waste income (loss) before
income taxes................... (6,746) 838 (42) (1,326) (113)
Loss from oil recovery and
disposal operations(2)......... (701) (7,705) -- (7,705) --
Net income (loss).............. (6,939) (6,917) (59) (9,081) (113)
Income (loss) per common share $ (.34) $ (.23) $ -- $ (.22) $ --
<CAPTION>
CASH FLOW DATA:
Net cash provided (used) by:
<S> <C> <C> <C>
Operating activities....... $ (514) $ 1,977 $ 1,948
Investing activities....... (8,310) (6,738) (14,455)
Financing activities...... 6,648 4,563 14,221
---------- -------- --------
Total................. $ (2,176) $ (198) $ 1,714
========== ========= ========
<CAPTION>
DECEMBER 31 MARCH 31
--------------------------------------- --------
BALANCE SHEET DATA: 1995 1996 1997
---------- -------- --------
<S> <C> <C> <C>
Cash and cash equivalents...... $ 1,532 $ 1,334 $ 3,048
Total current assets........... 5,490 6,613 10,703
Property and equipment, net.... 20,927 27,052 37,375
Total current liabilities...... 5,019 6,473 12,206
Long-term debt, net of 20,672 24,014 31,537
restricted cash................
Total stockholders' equity..... $ 7,433 $ 1,636 $ 8,655
</TABLE>
(1) In February 1996, the Company changed its fiscal year end from August 31
to December 31.
(2) The oil recovery and disposal operations were transferred under a
contractual arrangement as of September 30, 1996, pursuant to which the
Company relinquished management and legal control of the operations.
Consequently, certain reclassifications to previously reported financial
statements were made. The loss for the year ended December 31, 1996
includes the recognition of $6.5 million impairment loss.
(3) Pro forma adjustments primarily related to (a) adjustment to
depreciation and amortization for the purchase price allocation, (b)
adjustment to reflect interest expense on the Bank Facility, and (c)
adjustment for loss contracts assumed in the acquisition of the Sanifill
Assets. Pro forma net income per share for the year ended December 31,
1996 and the three months ended March 31, 1997 assumes that all the
shares of the Company's Common Stock issued in the Offering were
outstanding for the period presented.
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<PAGE>
OPERATIONS
ACQUISITIONS AND MANAGEMENT CONTRACTS
The following table summarizes the Company's landfill management
contracts and acquisitions completed between January 1, 1995 and May 31, 1997:
<TABLE>
<CAPTION>
NAME OF TYPE OF TYPE OF TOTAL PERMITTED
DATE BUSINESS BUSINESS LOCATION TRANSACTION AREA ACREAGE
- ------------------ --------------------- -------------------- -------------------- -------------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
February 1995 Central Landfill MSW landfill Carriere, Mississippi Purchase 20 20
June 1995 TransWaste, Inc. Transfer station, Alexandria, Louisiana Purchase 20 20
materials recovery
facility and hauling
operation
July 1995 Union County Landfill MSW landfill Knoxville, Tennessee 20-year 90 55
management
contract
April 1996 Haleyville Landfill C&D landfill Haleyville, Alabama 20-year 265 192
MSW Permit management
contract
January 1997 North County Landfill C&D Landfill Dickinson, Texas Purchase 20 20
January 1997 Sanifill Hauling Residential and Houston, Texas Purchase -- --
commercial collection
operation
April 1997 Target Waste Commercial collection Mobile, Alabama Purchase -- --
Industries, Inc. operation
</TABLE>
The Company's operations involve primarily the processing and disposal
of non-hazardous industrial and municipal solid waste. Its facilities generally
operate six days per week, 52 weeks per year.
SOLID WASTE
COLLECTION OPERATIONS. In April 1997, the Company acquired Target which
serves approximately 450 commercial customer accounts in the Mobile, Alabama
metropolitan area, with 5 trucks and approximately 550 containers. In January
1997, the Company completed the acquisition of the Sanifill Assets which
included commercial and residential collection operations in the Houston, Texas
metropolitan area. These operations serve approximately 100,000 residential and
4,000 commercial customer accounts, with 78 trucks and approximately 5,800
containers. The Company expects to acquire additional collection operations in
the future.
MUNICIPAL SOLID WASTE DISPOSAL. The Company operates six municipal
solid waste ("MSW") landfills and one landfill permitted to accept MSW but for
which disposal cells have not been constructed. The landfills accept waste from
municipalities, private waste collection companies and the general public.
Certain of these landfills are permitted to accept non-hazardous industrial and
special waste. The Company also has the right to construct and operate a new MSW
landfill in connection with one of the C&D landfills it operates.
14
<PAGE>
CONSTRUCTION AND DEMOLITION WASTE DISPOSAL. The Company operates two
construction and demolition landfills. The landfills accept waste from
municipalities, private waste collection companies and the general public.
Construction and demolition landfills are permitted to accept dry construction
and demolition debris including bricks, metal, boards and similar material as
well as certain types of industrial waste.
SOLID WASTE TRANSFER STATION AND MATERIAL RECOVERY FACILITY. The
Company owns a transfer station and material recovery facility located in
Alexandria, Louisiana. Waste is received at this facility from collection
vehicles, the recyclable materials are sorted and sold and the remaining
material is compacted into trailers for transportation primarily to the
Company's landfills. Transfer stations reduce the cost of transportation from
collection points to landfills by improving the utilization of collection
personnel and equipment.
CUSTOMERS
The Company's customers consist primarily of municipalities, large
national waste collection companies and regional or local waste collection
companies. The City of Mobile, Alabama accounted for approximately 17% of
consolidated revenue for the year ended August 31, 1995. WMX Technologies, Inc.
("WMX") and Browning Ferris Industries, Inc. ("BFI") are customers of several of
the Company's landfills and accounted for approximately 23% and 14% of
consolidated revenue for the fiscal year ended December 31, 1996, respectively.
EMPLOYEES
On May 15, 1997, the Company employed approximately 370 full-time and
part-time employees. None of the Company's employees is covered by a collective
bargaining agreement. The Company believes that its relations with its employees
are good.
COMPETITION
The non-hazardous waste industry is highly competitive and requires
substantial capital and human resources. The Company competes for collection and
landfill business on the basis of fees, geographical locations and quality of
operations. The Company also competes to acquire facilities, enter into
management contracts and obtain financial resources. Leading competitors for
collection and disposal services and acquisition opportunities include WMX, BFI,
USA Waste, Allied Waste Industries, Inc. and numerous other national, regional
and local companies of varying sizes and competitive resources, many of which
have significantly greater resources than the Company. The Company also competes
with those counties and municipalities that maintain their own waste collection
or disposal operations. These counties and municipalities may have financial
advantages through their access to tax revenues and their ability to mandate the
disposal of waste collected within the jurisdiction at the municipal facility.
The non-hazardous waste management industry is undergoing significant
consolidation, and the Company has encountered and, will in the future encounter
substantial competition in its efforts to acquire or enter into management
contracts for landfills, transfer stations and collection operations.
LITIGATION
In June 1995, certain citizens of Chilton County, Alabama filed a
complaint against the Chilton County Commission and the Company, which claimed
that the Commission failed to comply with certain statutorily mandated
procedures pertaining to 1) the transfer of the Chilton County Landfill from the
County to the Company and 2) the approval of certain subsequent permit
modifications. Each of the parties filed a motion for summary judgment. While
the Circuit Court of Chilton County, Alabama upheld the transfer of the landfill
to the Company, it overturned the approval of certain permit modifications that
increased the allowable daily volume and expanded the permissible service area
of the facility. During 1996, the Company was permitted to continue to operate
under a daily volume limit. On March 14, 1997, the Supreme Court of Alabama
issued a favorable opinion on the merits and reversed the plaintiffs summary
judgment and upheld the permit modifications including the volume increase.
15
<PAGE>
As a result, the landfill is now permitted to accept up to 1,500 tons per day of
solid waste from an eighteen county service area.
McGinnes Industrial Maintenance Corporation ("MIMC"), a wholly owned
subsidiary of the Company, has been named as one of approximately 17
co-defendants in a lawsuit styled TAMMY FISHER WHALEN, ET AL. V. AES, INC., ET
AT., Cause No. 93-CV0211, filed in the District Court of Galveston County,
Texas, 10th Judicial District. The suit consolidated four separate proceedings
filed by seventy-four persons currently or formerly residing on real property
situated approximately five miles or more from the Company's former wastewater
sludge treatment facility located in Galveston County, Texas, and names as
defendants, in addition to MIMC, approximately 13 industrial companies located
along or near the Houston Ship Channel, two subdivisions and one engineering
firm. The suit alleges personal injury and property damages resulting from
alleged releases of hazardous and toxic substances from the Company's wastewater
sludge treatment facility. In September 1994, seventeen of the original
plaintiffs were dismissed with prejudice from the litigation. The Company, as
well as the other defendants, have agreed on an out-of-court settlement with the
majority of the remaining plaintiffs. The Company's contribution toward
settlement of the consolidated lawsuit was approximately $30,000. In March 1994,
nine additional plaintiffs filed a petition in intervention in Cause No.
93-CV0211 claiming damages of $5 billion. In October 1995, the
plaintiff-intervenors amended their petition to delete a number of allegations
and causes of actions against defendants. Although there can be no assurance as
to the outcome of any lawsuit, the Company believes that the claims made by
plaintiff-intervenors in this suit are without merit and that the exposure of
the Company in such litigation is minimal. The Company has been advised by its
outside counsel, Ford & Ferraro, L.L.P., to such effect. The Company is
vigorously defending these actions.
In addition to the foregoing, the Company is involved in other
litigation incidental to the conduct of its business, none of which management
believes is, individually or in the aggregate, material to the Company's
financial condition or results of operations.
LIABILITY INSURANCE AND BONDING
The business of the Company exposes it to various risks, including
claims for damage to property, injuries to persons, negligence and professional
errors or omissions in the planning or performing of its services and providing
of its products, which claims could be substantial. The Company maintains
$2,000,000 of general liability insurance and an additional $5,000,000 of excess
umbrella liability coverage on all of its operations. The Company also maintains
directors' and officers' liability insurance coverage in the amount of
$2,000,000 per claim and in the aggregate. Under the Company's insurance
policies there are various exclusions, which the Company believes to be
customary in the industry. Accordingly, there can be no assurance that
liabilities which may be incurred by the Company will be covered by its
insurance or that the dollar amount of such liabilities which are covered by its
insurance will not exceed the Company's policy limits. Furthermore, prior to
June 1990, the Company did not have insurance coverage for certain
pollution-related activities with respect to its former environmental
engineering and consulting services. A partially or completely uninsured claim,
if successful, could have a material adverse effect on the Company's financial
condition and results of operations.
The Company maintains $1,000,000 of environmental impairment liability
insurance (subject to a $250,000 deductible). There can be no assurance that
only liability that may be incurred by the Company will be covered by the
insurance or that the dollar amount of such liabilities which are covered by its
insurance will not exceed the Company's policy limit. As a result, if the
Company were to incur liability for environmental damage, the Company's
financial condition and results of operations could be materially and adversely
affected.
The Company has and will be required from time-to-time to obtain
financial assurance security for performance, closure and post-closure
obligations, a portion of which may be funded with cash deposits or other
collateral. The Company has obtained a $20 million performance bond
line-of-credit. This commitment is subject to a review of each contract to be
bonded and certain other conditions. In certain cases, the Company will be
required to provide cash deposits.
16
<PAGE>
ENVIRONMENTAL REGULATION
The Company is subject to extensive and evolving environmental laws and
regulations. These regulations are administered by the EPA and various other
federal, state and local environmental, zoning, health and safety agencies, many
of which periodically examine the Company's operations to monitor compliance
with such laws and regulations. The Company believes there will be continued
change in regulation and legislation related to the waste management industry,
and the Company attempts to anticipate such future regulatory requirements to
ensure compliance.
The Company's operation of landfills and other processing, treatment
and disposal facilities subjects it to operational, monitoring, site
maintenance, closure and post-closure obligations which could give rise to
increased costs for monitoring and corrective measures. Governmental authorities
have the power to enforce compliance with these regulations and to obtain
injunctions or impose civil or criminal penalties in case of violations. During
the ordinary course of its operations, the Company has from time to time
received citations and notices from such authorities that operations are not in
compliance with applicable environmental regulations. Upon receipt of such
citations or notices, the Company works with the authorities to resolve the
issues raised by such citations or notices. Failure to correct the problems to
the satisfaction of the authorities could lead to curtailed operations or
closure of a facility. None of the Company's facilities has been subjected to
significant fines nor have any been closed, temporarily or permanently, by
regulatory authorities. In connection with the Company's acquisition of existing
landfills, it may also be necessary to expend considerable time, effort and
money to renew and maintain existing permits and to obtain permits required to
increase the capacity of these landfills.
The Company's operations are subject to regulation, principally under
the following federal statutes, along with analogous state statutes:
THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 ("RCRA"). RCRA
regulates the handling, treatment, storage, transportation and disposal of
certain hazardous and nonhazardous wastes. The EPA's regulations under Subtitle
D of RCRA generally became effective on October 9, 1993 and affect both existing
and new municipal solid waste facilities. Subtitle D codifies minimum criteria
for the location, operation and design of municipal solid waste facilities, as
well as establishing standards for groundwater monitoring, landfill gas
monitoring, corrective actions, closure and post-closure monitoring and
financial assurance to ensure funding necessary to complete closure,
post-closure monitoring and, if necessary, corrective actions at these
facilities. Subtitle D allows states, with EPA approval, to implement and
enforce the regulations; otherwise the EPA will be responsible for issuing
permits and providing enforcement. In connection with the permitting process, a
landfill may be required to demonstrate that it will satisfy various other
requirements, including those relating to the protection of endangered species.
Regulated landfills that do not meet the requirements of the Subtitle D
regulations may be required to close. Many landfills reportedly have closed in
recent years because they were unable to meet those regulatory requirements. All
of the Company's planned landfill expansions or new landfill development
projects are being engineered to meet or exceed regulatory requirements.
THE FEDERAL WATER POLLUTION CONTROL ACT OF 1972 ("CLEAN WATER ACT").
The Clean Water Act established rules regulating the discharge of pollutants
into waters of the United States from a variety of sources, potentially
including waste disposal sites. For example, if leachate, stormwater run-off, or
other wastewater from the Company's disposal facilities may be discharged into
surface waters, the Clean Water Act would, in many instances, require the
Company to obtain discharge permits, conduct periodic sampling and monitoring
and, under certain circumstances, reduce the quantity of pollutants in those
discharges. Furthermore, regulations promulgated by the EPA under the Clean
Water Act impose standards on the disposal of sewage sludge in certain
circumstances, including disposal by placing sludge on a surface disposal site.
The Company does not believe that compliance with such regulations will
materially impact the Company's wastewater sludge treatment facility which
ceased accepting waste in September 1994. In addition, if development may alter
or affect "wetlands," the Company may be required to obtain a permit before such
development may be commenced. This requirement is likely to affect the
construction or expansion of many solid waste disposal sites, including some
being developed by the Company.
17
<PAGE>
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT
OF 1980 ("SUPERFUND" OR "CERCLA"). CERCLA addresses problems created by the
release or threatened release of hazardous substances into the environment.
CERCLA can impose retroactive, strict, joint and several liability on the
present or former owners or operators of facilities that release hazardous
substances into the environment. Waste generators and transporters also can be
subject to similar liability. These persons may be liable for site investigation
costs, site cleanup costs and natural resource damages, even if the original
conduct giving rise to liability was in compliance with all then-existing laws
and regulations. The costs of a CERCLA cleanup can be substantial. Liability
under CERCLA is not dependent upon the existence or disposal of "hazardous
wastes" and many of the sites on the EPA National Priorities List of Superfund
sites are municipal solid waste disposal facilities. There can be no assurance
that the Company will not face claims resulting in liability under CERCLA. The
Company expects to continue to grow in part by acquiring existing disposal
businesses. The Company conducts due diligence (including Phase I surveys) with
respect to disposal facilities that it acquires or contracts to manage to
determine whether such contain or have handled hazardous substances. There can
be no assurance that the Company is effective at detection or will prove
effective or that the facility will not have other unknown environmental
problems and related liabilities. The Company will be subject to similar risks
and uncertainties in connection with the acquisition of any closed disposal
facilities or discontinued lines of business which had been operated by
businesses acquired by the Company. Virtually all of the states have Superfund
programs similar to CERCLA that give rise to many of the obligations and
liability concerns discussed above.
THE CLEAN AIR ACT. The Clean Air Act provides for federal, state and
local regulation of emissions of air pollutants into the atmosphere. On March
12, 1996, the EPA promulgated "new source performance standards" and "emission
guidelines" for municipal solid waste disposal facilities. These regulations
impose limits on air emissions from municipal solid waste disposal facilities.
The new source performance standards apply to all municipal solid waste disposal
facilities that commenced construction after May 30, 1991, the date of the
proposed regulations. The emission guidelines are a set of provisions that are
to be adopted by the states and would apply to municipal solid waste disposal
facilities that received waste after November 8, 1987 and that meet other
criteria listed in the rule. These guidelines, combined with new programs
established under the 1990 Clean Air Act amendments, subject solid waste
disposal facilities to new reporting and operational requirements and, in some
instances, (1) require installation of methane gas recovery systems and/or (2) a
Title V operating permit.
OTHER STATE AND LOCAL REGULATION. States in which the Company operates
have laws and regulations governing waste disposal and water and air pollution
and, in most cases, regulations governing the design, operation, maintenance and
closure of waste management facilities. Subtitle D allows states to implement
their own regulatory programs if those programs meet federal standards. The full
effect of this may not be apparent for years as states establish their own
regulatory schemes.
In addition to costly and restrictive regulation, there are a number of
other factors, the long-term effects of which are unpredictable, which could
result in higher disposal facility operating costs and possible decreased demand
for disposal facilities. These factors include not only the increasing public
opposition to the siting and operation of disposal facilities, but also
increased efforts (including legislation) to reduce the volume of waste and the
dependence on landfilling for disposal by promoting waste minimization,
incineration, composting and recycling. For example, several states have enacted
laws that will require counties to adopt comprehensive plans to reduce, through
waste planning, composting and recycling or other programs, the volume of solid
waste deposited in landfills within the next few years. A number of states have
taken or propose to take steps to ban the landfilling of certain wastes, such as
yard wastes, beverage containers, newspapers, unshredded tires, lead-acid
batteries and household appliances.
LEGISLATIVE INITIATIVES. The continuing public awareness and interest
in solid waste disposal, the siting of waste facilities, and the protection of
the environment frequently lead to federal, state and local legislative
initiatives that could affect the Company's operations. The prospects for any
legislative proposal are inherently uncertain, and the Company cannot accurately
predict how its business may be affected by the adoption of new laws.
18
<PAGE>
In recent years, some states and localities have instituted waste "flow
control" requirements, under which specified solid waste collected in a
jurisdiction is required to be delivered to a governmentally designated
facility. In response to some of those enactments, the United States Supreme
Court and several lower federal courts have ruled that certain flow control
ordinances violated the Interstate Commerce Clause of the U.S. Constitution. The
U.S. Constitution grants the Congress the power to authorize certain otherwise
unconstitutional state and local actions affecting interstate commerce, and
Congress has been considering legislation that would exempt some or all flow
control requirements from Constitutional invalidity.
Some states have also adopted or considered legislation to ban,
restrict or impose special taxes on waste imported from outside the state. The
U.S. Supreme Court has struck down some such measures as unconstitutional
discrimination against interstate commerce, as have several lower federal
courts. In response to these court decisions, bills have been introduced in
Congress in the past several years to enable states to ban, restrict or
differentially tax out-of-state waste.
The Company currently cannot predict whether Congress will pass
legislation permitting flow control or restrictions on the interstate movement
of waste, or the content of any such bills that may ultimately become law.
USE OF PROCEEDS
The Company will receive no part of the proceeds of any sale or
transactions made by the Registering Stockholders with respect to the Common
Stock offered hereby. However, the resale of shares of Common Stock to be
received pursuant to the exercise of certain warrants and the conversion of
certain promissory notes is included in this Registration Statement; the Company
would receive an aggregate of approximately $7,187,820 from the exercise of
these warrants and the forgiveness of $1,500,000 plus interest thereon from the
conversion of the promissory notes.
REGISTERING STOCKHOLDERS
This Prospectus, as appropriately amended or supplemented, may be used
from time to time principally by the persons named below who received shares of
Common Stock (i) in a private placement (ii) in acquisitions made by the Company
of a business, (iii) in exchange for certain debt obligations of the Company,
(iv) upon the exercise of certain warrants, (v) pursuant to the 1997 Stock
Participation Plan, or (vi) in exchange for certain services (such persons are
herein referred to as the "Registering Stockholders"). There presently are no
arrangements or understandings, formal or informal, pertaining to the
distribution of the shares as described herein. Upon the Company being notified
by a Registering Stockholder that any material arrangement has been entered into
with a broker-dealer for the sale of shares bought through a block trade,
special offering, exchange distribution, or secondary distribution, a
supplemented Prospectus will be filed, pursuant to Rule 424 under the Securities
Act, setting forth (i) the name of each Registering Stockholder and the
participating broker-dealer(s), (ii) the number of shares of Common Stock
involved, (iii) the price at which the shares of Common Stock were sold, (iv)
the commissions paid or the discounts allowed to such broker-dealer(s), where
applicable, (v) that such broker-dealer(s) did not conduct any investigation to
verify the information set out in this Prospectus, and (vi) other facts material
to the transaction.
The following table sets forth the number of shares of Common Stock or
options or warrants to purchase Common Stock owned by each of the Registering
Stockholders. Except as indicated, none of the Registering Stockholders have had
a material relationship with the Company within the past three years other than
as a result of the ownership of the Shares or other securities of the Company.
Because the Registering Stockholder may offer all, some or none of the Shares
which they hold pursuant to the offering contemplated by this Prospectus, and
because there are currently no agreements, arrangements or understandings with
respect to the sale of any of the Shares, no estimate can be given as to the
amount of Shares that will be held by the Registering Stockholders after
completion of this offering. The Shares offered by this Prospectus may be
offered from time to time by the Registering Stockholders named below:
19
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED BEFORE SHARES OWNED AFTER
THE OFFERING REGISTERED FOR THE OFFERING
NAME NUMBER PERCENT SALE HEREBY NUMBER PERCENT
- -------------------- --------- ------- ----------- --------- -------
<S> <C> <C> <C> <C> <C>
Tom J. Fatjo, Jr.(1) 3,743,751 8.60 349,271(2) 3,404,480 7.82
Lance C. Ruud(3) 156,250 * 156,250(4) 0 *
Tom J. Fatjo, III.(5) 2,653,598 6.09 95,000(6) 2,558,518 5.88
William B. Blount(7) 168,500 * 50,000 118,500 *
C. Derek Parrish 155,000 * 50,000 105,000 *
Preston Moore, Jr.(8) 387,500 * 37,200 350,300 *
Robert E. Allen 25,000 * 25,000 0 ---
J. Evans Attwell 128,333 * 83,333 45,000 *
Joe M. Bailey 50,000 * 50,000 0 ---
Huffard Family
Partnership 150,000 * 150,000 0 ---
Susan Huffard Ball 100,000 * 100,000 0 ---
Richard E. Bean(9) 200,000 * 200,000 0 ---
Lewis E. Brazelton, III 111,600 * 111,600 0
Bonner Sewell Brown 50,000 * 50,000 0 ---
James Perry Bryan 248,000 * 248,000 0 ---
John T. Cater 50,000 * 50,000 0 ---
James W. Christmas 100,000 * 100,000 0 ---
Morton A. Cohn 316,667 * 316,667 0 ---
Dale W. Conrad &
Reba J. Conrad,
JTWROS 50,000 * 50,000 0 ---
William Cravens 142,000 * 62,000 80,000 *
Dr. William H.
Cunningham 74,400 * 74,400 0 ---
Max M. Dillard 100,000 * 100,000 0 ---
Wayne B. Duddlesten 100,000 * 100,000 0 ---
J.A. Elkins & Margaret
W. Elkins, T/I/C 116,667 * 166,667 0 ---
George R. Farris 25,000 * 25,000 0 ---
Wayne Gibbens 22,320 * 22,320 0 ---
Steve Harter 80,000 * 80,000 0 ---
John V. Hazleton, Jr.
& Bonnie C. Hazleton,
TIC 50,000 * 50,000 0 ---
Frederick A. Huttner 50,000 * 50,000 0 ---
John W. Johnson 100,000 * 100,000 0 ---
Samuel A. Jones 50,000 * 50,000 0 ---
Susan K. Keller 70,000 * 70,000 0 ---
20
<PAGE>
Richard D. Kinder 100,000 * 100,000 0 ---
Robert Larry Kinney 75,000 * 70,000 5,000 *
Frost Family I, Ltd. 100,000 * 100,000 0 ---
Mark Andrew Klein
and Kathryn Frost
Klein, TIC 25,000 * 25,000 0 ---
J. Livingston Kosberg 100,000 * 100,000 0 ---
Jerome M. Kruszka(10) 299,500 * 149,500(11) 150,000 *
Richard N. Laminack
and Mary E.
Laminack, T/I 25,000 * 25,000 0 ---
Neil Lande 100,000 * 100,000 0 ---
Michael P. and
Helen C. Lawlor 100,000 * 100,000 0 ---
Kenneth L. and
Linda P. Lay 100,000 * 100,000 0 ---
Roger P. Linstedt 200,000 * 200,000 0 ---
Stan L. McLelland 114,867 * 114,867 0 ---
Bruce R. McMaken 12,648 * 12,648 0 ---
Nancy Goins McNeil 50,000 * 50,000 0 ---
Atlantis Software
Company Employees
Profit Sharing Plan 25,000 * 25,000 0 ---
Arete Partners, L.P. 816,037 1.9 816,037 0 ---
John R. Meyer 100,000 * 100,000 0 ---
Cockspur, Inc. 50,000 * 50,000 0 ---
Ben T. Morris(12) 70,000 * 70,000 0 ---
Robert K. Moses, Jr.(13) 2,000,000 4.47 1,875,000 125,000 *
John I. Mundy(14) 56,000 * 50,000 6,000 *
Katherine Halliday
O'Neil 50,000 * 50,000 0 ---
John M. O'Quinn 333,333 * 333,333 0 ---
Julie O'Quinn 30,000 * 30,000 0 ---
Jack C. Pester 50,000 * 50,000 0 ---
Humbert B. Powell, III 25,000 * 25,000 0 ---
Leroy E. Quigley 50,000 * 50,000 0 ---
Audre J. Rapoport 74,400 * 74,400 0 ---
Leonard Rauch 100,000 * 100,000 0 ---
Rush H. Record 86,333 * 83,333 3,000 *
Roy T. Rimmer, Jr. 50,000 * 50,000 0 ---
21
<PAGE>
Rex C. Ross and
Adrian T. Ross 50,000 * 50,000 0 ---
Darrell Royal 15,600 * 18,600 0 ---
Nolan Ryan 50,000 * 50,000 0 ---
Don A. Sanders(15) 573,667 * 416,667 157,000 *
Bret D. Sanders 20,000 * 70,000 0 ---
Laura K. Sanders 70,000 * 70,000 0 ---
Brad D. Sanders 70,000 * 70,000 0 ---
Christine M. Sanders 70,000 * 70,000 0 ---
Katherine U. Sanders 266,667 * 266,667 0 ---
Quinlan Quiros
Schnitzer 50,000 * 50,000 0 ---
Stephen D. Scott 500,000 1.12 500,000 0 ---
Bruce Slovin 100,000 * 100,000 0 ---
Talbot M. Smith 50,000 * 50,000 0 ---
Sheldon Stein 50,000 * 50,000 0 ---
Matthew G. Stuller,
Sr. 333,333 * 333,333 0 ---
Larry Temple 8,928 * 8,928 0 ---
Jack I. Tompkins 50,000 * 50,000 0 ---
David Towery 50,000 * 50,000 0 ---
Charles B. Tubbs 62,000 * 62,000 0 ---
J. Richard Walton 50,000 * 50,000 0 ---
J-All Partnership 100,000 * 100,000 0 ---
George L. Ball(16) 216,667 * 166,667 50,000 *
J. Philip Burguieres(17) 83,333 * 83,333 0 ---
Alan G. Cummings 50,000 * 50,000 0 ---
Thomas W. Custer 100,000 * 100,000 0 ---
Louis Del Homme 150,000 * 150,000 0 ---
Don L. Fitch, IRRA 80,000 * 80,000 0 ---
Carolyn Frost Keenan 100,000 * 100,000 0 ---
Tanglewood Family
Limited Partnership 50,000 * 50,000 0 ---
Brede C. Klefos, IRA 25,000 * 25,000 0 ---
Ed McAninch 100,000 * 100,000 0 ---
Michael W. Mitchell,
IRA 70,000 * 70,000 0 ---
David Preisler 50,000 * 50,000 0 ---
22
<PAGE>
Sherri Spicer 100,000 * 100,000 0 ---
William M. Wheless,
III, 25,000 * 25,000 0 ---
James O. Goff 263,552 * 263,552 0 ---
Richard A. Roh 46,400 * 46,400 0 ---
Michael W. &
Mary C. Meshad,
JTWROS 46,400 * 46,400 0 ---
Willie R. &
Barbara P. Carpenter,
JTWROS 46,400 * 46,400 0 ---
Karl W. &
Annie J. Metz 46,400 * 46,400 0 ---
Walter D. Harris 46,400 * 46,400 0 ---
Neil E. &
Ann F. Wimberley,
JTWROS 46,400 * 46,400 0 ---
Charles A. &
Elizabeth P. Mason,
JTWROS 46,400 * 46,400 0 ---
Stephen A. &
Beverly C. Davis,
JTWROS 46,400 * 46,400 0 ---
David R. Lane 85,248 * 85,248 0 ---
Donald R. Loup 85,015 * 85,015 0 ---
Ernest F. Strauss 85,015 * 85,015 0 ---
Nathaneil J. Bordelon 18,382 * 18,382 0 ---
Tomy Dean Whitfield 13,786 * 13,786 0 ---
Violet Alsobrooks
Whitfield 4,687 * 4,687 0 ---
Joseph K. Whitfield 9,099 * 9,099 0 ---
R. H. "Bill" Strain 66,600 * 66,600 0 ---
Bentley B. Mackay, Jr. 13,786 * 13,786 0 ---
Mark S. Riley 9,158 * 9,158 0 ---
John W. Barton, Sr. 9,157 * 9,157 0 ---
David M. Ellison, Jr. 9,157 * 9,157 0 ---
Brendan F. Couhig 9,158 * 9,158 0 ---
J. David Green(18) 75,000 * 75,000(19) 0 ---
Michael L. Paxton(20) 53,850 * 41,250(21) 12,600 *
Barbara Kiser 29,063 * 29,063(22) 0 ---
Jack Courtney 200,000 * 200,000 0 ---
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
SHARES ISSUABLE UPON
THE CONVERSION OF
SHARES ISSUABLE PROMISSORY NOTES OR THE SHARES ISSUABLE
UPON THE EXERCISE OF EXERCISE OF UPON THE EXERCISE OF
WARRANTS OR OPTIONS WARRANTS OR OPTIONS WARRANTS OR OPTIONS
OWNED BEFORE REGISTERED FOR OWNED AFTER
NAME THE OFFERING SALE HEREBY THE OFFERING
<S> <C> <C> <C>
Sanders Morris Mundy, Inc. 1,125,000 1,125,000 0
Robert K. Moses, Jr. 3,000,000 3,000,000 0
St. James Capital Partners, L.P. 1,500,000 1,500,000 0
U.S.A. Waste Services, Inc. 1,500,000 1,500,000 0
St. James Capital Corp. 190,036 190,036 0
SV Capital Partners, L.P. 127,035 127,035 0
Charles E. Underbrink 153,412 153,412 0
Guadalupe Funding Company 155,107 155,107 0
Thomas M. Vertin 119,295 119,295 0
Dennis J. LaValle 75,078 75,078 0
Equity Resource Group of
Indian River County, Inc. 18,462 18,462 0
Blake T. Liedtke 28,290 28,290 0
1959 Trust for
Robert Tilly Arnold 21,344 21,344 0
George V. Burkholder 8,197 8,197 0
Pinkye Lou Blair Estate Trust 3,693 3,693 0
The Lillie C. Cullen Estate
Trust for Isaac Arnold, Jr. 10,673 10,673 0
The Hugh Roy Cullen Estate
Trust for Isaac Arnold, Jr. 10,673 10,673 0
Todd M. Binet 2,660 2,660 0
Titus H. Harris, Jr. 1,846 1,846 0
James Hansen 1,627 1,627 0
Isaac Arnold, Jr. 3,253 3,253 0
Harry H. Cullen Management
Trust, Legacy Trust
Company, Trustee 8,133 8,133 0
Ronald E. Clark 9,759 9,759 0
Scott Crist 1,627 1,627 0
</TABLE>
*less than 1% of the issued and outstanding shares
24
<PAGE>
(1) Tom J. Fatjo, Jr. is the Chief Executive Officer, Chairman of the Board and
principal stockholder of the Company.
(2) Includes 349,271 shares of Common Stock issued pursuant to the 1997 Stock
Participation Plan. Such shares are pledged as security for the Bank Loan;
see "THE COMPANY -- Recent Developments -- Participation Plan Bank Loan,"
and as a result may be subject to foreclosure and resale by Langham Creek
Bank (the "Bank"). The Registration Statement, of which this Prospectus is
a part, registers the resale of such shares by the grantee pursuant to the
Participation Plan or the Bank upon foreclosure.
(3) Lance C. Ruud is a director of the Company and is the son-in-law of Tom J.
Fatjo, Jr., the Chief Executive Officer, Chairman of the Board and
principal stockholder of the Company.
(4) Includes 156,250 shares of Common Stock issued pursuant to the 1997 Stock
Participation Plan. Such shares are pledged as security for the Bank Loan;
see "THE COMPANY -- Recent Developments -- Participation Plan Bank Loan,"
and as a result may be subject to foreclosure and resale by Langham Creek
National Bank (the "Bank"). The Registration Statement, of which this
Prospectus is a part, registers the resale of such shares by the grantee
pursuant to the Participation Plan or the Bank upon foreclosure.
(5) Tom J. Fatjo, III is the Vice President - Treasurer of the Company and son
of Tom J. Fatjo, Jr., Chief Executive Officer, Chairman of the Board and
principal stockholder of the Company. Tom J. Fatjo, III and Ben F. Barnes
are the co-trustees of the Fatjo Family Trust, which trust owns 80% of the
outstanding common stock of FFAP. In their capacity as co-trustees, Mr.
Fatjo and Mr. Barnes share voting and investment power over the assets of
such trust. Includes 2,146,480 shares owned of record by FFAP, 8,000 shares
held in trust for the benefit of Tom J. Fatjo, III - IRA and 8,000 shares
held in trust for the benefit of Mary C. Fatjo - IRA.
(6) Includes 95,000 shares of Common Stock issued pursuant to the 1997 Stock
Participation Plan. Such shares are pledged as security for the Bank Loan;
see "THE COMPANY -- Recent Developments -- Participation Plan Bank Loan,"
and as a result may be subject to foreclosure and resale by Langham Creek
National Bank (the "Bank"). The Registration Statement, of which this
Prospectus is a part, registers the resale of such shares by the grantee
pursuant to the Participation Plan or the Bank upon foreclosure.
(7) William B. Blount is a director of the Company.
(8) Preston Moore, Jr. is a director of the Company.
(9) Richard E. Bean is a director of the Company.
(10) Jerome M. Kruszka is President and Chief Operating Officer of the Company.
(11) Includes 87,500 shares of Common Stock issued pursuant to the 1997 Stock
Participation Plan. Such shares are pledged as security for the Bank Loan;
see "THE COMPANY -- Recent Developments -- Participation Plan Bank Loan,"
and as a result may be subject to foreclosure and resale by Langham Creek
National Bank (the "Bank"). The Registration Statement, of which this
Prospectus is a part, registers the resale of such shares by the grantee
pursuant to the Participation Plan or the Bank upon foreclosure.
(12) Ben T. Morris is the Chief Executive Officer and a director and shareholder
of Sanders Morris Mundy Inc. ("SMMI"). SMMI is party to that certain
Placement Agent Agreement pursuant to which it has the right to designate
one representative to serve on the Board of Directors of the Company
(currently George L. Ball). In addition, SMMI received warrants to purchase
1,125,000 shares of the Company's Common Stock.
(13) Robert K. Moses, Jr. is a director of the Company.
(14) John I. Mundy is a director and shareholder of SMMI. SMMI is party to that
certain Placement Agent Agreement pursuant to which it has the right to
designate one representative to serve on the Board of Directors of the
Company (currently George L. Ball). In addition, SMMI received warrants to
purchase 1,125,000 shares of the Company's Common Stock.
(15) Don A. Sanders is the Chairman of the Executive Committee and a director
and shareholder of SMMI. SMMI is party to that certain Placement Agent
Agreement pursuant to which it has the right to designate one
representative to serve on the Board of Directors of the Company (currently
George L. Ball). In addition, SMMI received warrants to purchase 1,125,000
shares of the Company's Common Stock.
(16) George L. Ball is a director of the Company.
(17) J. Philip Burguieres is a director of the Company.
(18) J. David Green is Senior Vice President, Secretary and General Counsel of
the Company.
(19) Includes 75,000 shares of Common Stock issued pursuant to the 1997 Stock
Participation Plan. Such shares are pledged as security for the Bank Loan;
see "THE COMPANY -- Recent Developments -- Participation Plan Bank Loan,"
and as a result may be subject to foreclosure and resale by Langham Creek
National Bank (the "Bank"). The Registration Statement, of which this
Prospectus is a part, registers the resale of such shares by the grantee
pursuant to the Participation Plan or the Bank upon foreclosure.
(20) Michael L. Paxton is Vice President and Controller of the Company.
(21) Includes 41,250 shares of Common Stock issued pursuant to the 1997 Stock
Participation Plan. Such shares are pledged as security for the Bank Loan;
see "THE COMPANY -- Recent Developments -- Participation Plan Bank Loan,"
and as a result may be subject to foreclosure and resale by Langham Creek
National Bank (the "Bank"). The Registration Statement, of which this
Prospectus is a part, registers the resale of such shares by the grantee
pursuant to the Participation Plan or the Bank upon foreclosure.
(22) Includes 29,063 shares of Common Stock issued pursuant to the 1997 Stock
Participation Plan. Such shares are pledged as security for the Bank Loan;
see "THE COMPANY -- Recent Developments -- Participation Plan Bank Loan,"
and as a result may be subject to foreclosure and resale by Langham Creek
National Bank (the "Bank"). The Registration Statement, of which this
Prospectus is a part, registers the resale of such shares by the grantee
pursuant to the Participation Plan or the Bank upon foreclosure.
25
<PAGE>
DESCRIPTION OF SECURITIES
AUTHORIZED STOCK
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, par value $.001 per share, and 5,000,000 shares of
Preferred Stock, par value $.001 per share.
COMMON STOCK
Subject to the prior rights of the holders of any Preferred Stock which
has been issued and is outstanding or may be issued in the future, the holders
of the Common Stock are entitled to receive dividends from funds of the Company
legally available therefor, when, as and if declared by the Board of Directors
of the Company, and are entitled to share ratably in all of the assets of the
Company available for distribution to holders of Common Stock upon the
liquidation, dissolution or winding up of the affairs of the Company. As of May
23, 1997, there were approximately 375 holders of record and approximately 3,600
beneficial owners of the Common Stock. Holders of the Common Stock do not have
any preemptive, subscription, redemption or conversion rights. Holders of the
Common Stock are entitled to one vote per share on all matters which they are
entitled to vote upon at meetings of stockholders or upon actions taken by
written consent pursuant to Delaware law. The holders of Common Stock do not
have cumulative voting rights, which means that the holders of more than 50% of
such outstanding shares can elect all of the directors of the Company subject to
certain stockholder agreements. All of the shares of the Common Stock currently
issued and outstanding are, and the shares of the Common Stock to be issued upon
the consummation of this offering, when paid for in accordance with the terms
hereof, will be, fully paid and nonassessable. In September 1991, the Company
authorized and effected a one for three reverse stock split of its outstanding
shares of Common Stock. No dividends have been paid to holders of the Common
Stock since the inception of the Company, and no dividends are anticipated to be
declared or paid in the foreseeable future.
PREFERRED STOCK
The Board of Directors of the Company has the authority, without
further action by the holders of the outstanding Common Stock, to issue
Preferred Stock from time to time in one or more classes or series, to fix the
number of shares constituting any class or series and the stated value thereof
if different from the par value, and to fix the terms of any such series or
class, including dividend rights, dividend rate, conversion or exchange rights,
voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price and the liquidation preference of such class
or series. The Company has no present plans to issue any series or class of
Preferred Stock.
DELAWARE ANTI-TAKEOVER LAW
The Company is governed by the provisions of Section 203 of the General
Corporation Law of the State of Delaware, an anti-takeover law enacted in 1988.
In general, this law prohibits a public Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
"Business combination" is defined to include mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is defined as a person who, together with affiliates and
associates, owns (or, within the prior three years, did own) 15% or more of the
corporation's voting stock.
26
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock covered hereby may be offered and sold from
time to time by the Registering Stockholders. Resales may be made pursuant to
this Prospectus, as amended or supplemented, pursuant to Rule 145(d) under the
Securities Act, or pursuant to an exemption from the Securities Act. The Company
may consent to the use of this Prospectus for a limited period of time by the
Registering Stockholders and subject to limitations and conditions that may be
varied by agreement between the Company and the Registering Stockholders.
Any commissions paid or concessions allowed to any broker-dealer, and,
if any broker-dealer purchases such shares as principal, any profits received on
the resale of such shares, may be deemed to be underwriting discounts and
commissions under the Securities Act. Printing, certain legal, filing and other
similar expenses of this offering will be paid by the Company. Registering
Stockholders will bear all other expenses of this offering, including brokerage
fees, any underwriting discounts and commissions.
Registering Stockholders may sell Common Stock being offered hereby
from time to time in transactions (which may involve crosses and block
transactions) on The Nasdaq SmallCap Market or such other securities exchange on
which the Common Stock may be listed, in negotiated transactions or otherwise,
at market prices prevailing at the time of sale or at negotiated prices.
Registering Stockholders may sell some or all of the shares in transactions
involving broker-dealers, who may act solely as agent and/or may acquire shares
as principal. Broker-dealers participating in such transactions as agent may
receive commissions from Registering Stockholders (and, if, they act as agent
for the purchaser of such shares, from such purchaser), such commissions
computed in appropriate cases in accordance with the applicable rules of The
Nasdaq SmallCap Market or such other securities exchange on which the Common
Stock may be listed, which commissions may be negotiated rates where permissible
under such rules. Participating broker-dealers may agree with Registering
Stockholders to sell a specified number of shares at a stipulated price per
share and, to the extent such broker-dealer is unable to do so acting as agent
for Registering Stockholders, to purchase as principal any unsold shares at the
price required to fulfill the broker-dealer's commitment to Registering
Stockholders.
In addition or alternatively, shares of Common Stock may be sold by
Registering Stockholders and/or by or through other broker-dealers in special
offerings, exchange distributions or secondary distributions pursuant to and in
compliance with the governing rules of The Nasdaq SmallCap Market or such other
securities exchange on which the Company's Common Stock may be listed, and in
connection therewith, commissions in excess of the customary commission
prescribed by the rules of such securities exchange may be paid to participating
broker-dealers, or, in the case of certain secondary distributions, a discount
or concession from the offering price may be allowed to participating
broker-dealers in excess of such customary commission. Broker-dealers who
acquire shares as principal thereafter may resell such shares from time to time
in transactions (which may involve crosses and block transactions and which may
involve sales to and through other broker-dealers, including transactions of the
nature described in the preceding two sentences) on The Nasdaq SmallCap Market
or such other securities exchange on which the Common Stock may be listed, in
negotiated transactions or otherwise, at market prices prevailing at the time of
sale or at negotiated prices, and, in connection with such resales, may pay to
or receive commissions from the purchasers of such shares.
In offering the shares of Common Stock covered hereby, the Registering
Stockholders and any broker-dealers and any other participating broker-dealers
who execute sales for the Registering Stockholders may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any profits realized by the Registering Stockholders and the
compensation of such broker-dealer may be deemed to be underwriting discounts
and commissions. In addition, any shares covered by this Prospectus which
qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than
pursuant to this Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold hereunder in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states the Common Stock may not be sold hereunder unless it has been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and complied with.
27
<PAGE>
LEGAL OPINIONS
Certain legal matters relating to the Common Stock offered hereby are
being passed upon for the Company and the Registering Stockholders by Mayor,
Day, Caldwell & Keeton, L.L.P., 700 Louisiana, Suite 1900, Houston, Texas 77002.
EXPERTS
The audited consolidated financial statements and schedules
incorporated by reference in this Prospectus and elsewhere in the registration
statement, to the extent and for the periods indicated in their reports, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
28
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITERS, AGENTS OR DEALERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AT ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
TABLE OF CONTENTS
PAGE
Prospectus Summary........................................................ 1
Available Information..................................................... 2
Incorporation of Certain Documents By Reference........................... 2
Risk Factors.............................................................. 3
The Company............................................................... 8
Operations................................................................ 14
Use of Proceeds........................................................... 19
Registering Stockholders.................................................. 19
Description of Securities................................................. 26
Plan of Distribution...................................................... 27
Legal Opinions............................................................ 28
Experts................................................................... 28
21,411,534 SHARES
TRANSAMERICAN WASTE
INDUSTRIES, INC.
Common Stock
PROSPECTUS
JUNE 19, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this offering, other than
underwriting discounts and commissions, are:
Securities and Exchange Commission registration filing fee..... $ 7,098.25
Blue Sky qualification fees and expenses, including legal fees. $ 10,000.00
Printing and engraving expenses................................ 2,000.00
Accounting fees and expenses................................... 10,000.00
Legal fees and expenses........................................ 25,000.00
Miscellaneous.................................................. 1,000.00
-------------
Total.......................................................... $ 55,098.25
=============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Certificate of Incorporation and the By-laws of the
Registrant provide that the Registrant shall indemnify its officers, directors
and certain others to the fullest extent permitted by the General Corporation
Law of the State of Delaware. Section 145 of the General Corporation Law of the
State of Delaware provides in pertinent part as follows:
(a) A 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 or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
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 or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, 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 or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.
(b) A 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 or agent of the corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' 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 or not opposed to the best
interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation unless
and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of
II-1
<PAGE>
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnification for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections
(a) and (b) of this section, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under subsection (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made (1) 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 (2) if such a quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the corporation as authorized
in this section. Such expenses (including attorneys' fees) incurred by
other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against 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 against such
liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had the power and
authority to indemnify its directors, officers, employees or agents, so
that any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on,
or involves
II-2
<PAGE>
services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed
to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in
this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
In accordance with section 102(a)(7) of the General Corporation Law of
the State of Delaware, the Restated Certificate of Incorporation of the
Registrant eliminates the personal liability of the Registrant's directors to
the Registrant or its stockholders for monetary damages for breach of their
fiduciary duties as a director, with certain limited exceptions set forth in
said Section 102(a)(7).
ITEM 16. EXHIBITS.
Reference is made to the Exhibit Index which immediately precedes the
exhibits filed with this Registration Statement.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) to include any 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 from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the
II-3
<PAGE>
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS, ON JUNE 18, 1997.
TRANSAMERICAN WASTE INDUSTRIES, INC.
By: /S/ J. DAVID GREEN
J. David Green
Senior Vice President, General
Counsel and Secretary
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
* Chief Executive Officer and June 18, 1997
Tom J. Fatjo, Jr. Chairman of the Board
(Principal Executive Officer)
* Vice President and Corporate June 18, 1997
Michael L. Paxton Controller (Principal Accounting
Officer)
* Director June 18, 1997
Lance C. Ruud
* Director June 18, 1997
Ben B. Barnes
* Director June 18, 1997
William B. Blount
* Director June 18, 1997
Preston Moore, Jr.
* Director June 18, 1997
Ed L. Romero
* Director June 18, 1997
John V. Singleton, Jr.
* Director June 18, 1997
Robert K. Moses, Jr.
* Director June 18, 1997
George L. Ball
* Director June 18, 1997
Richard E. Bean
* Director June 18, 1997
Philip Burguieres
*By Power of Attorney
/S/ J. DAVID GREEN
J. David Green, Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
1 None
2 None
4.1 Restated Certificate of Incorporation as amended. Incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form
S-1 (File No. 33-41017).
4.2 Certificate of Amendment of Restated Certificate of Incorporation of the
Company, dated March 23, 1993. Incorporated by reference to Exhibit 3.2 of
the Company's Annual Report on Form 10-K for the year ended August 31,
1993.
4.3 Certificate of Elimination of the Registrant, dated October 11, 1993,
incorporated by reference to Exhibit 3.3 to the Registrant's Annual Report
on Form 10-K for the year ended August 31, 1993.
4.4 Amended and Restated Bylaws of the Registrant incorporated by reference to
Exhibit 4.2 to the Registrant's Registration Statement on Form S-8 (File
No. 33-57326).
5.1* Opinion of Mayor, Day, Caldwell & Keeton, L.L.P., as to legality of
issuance of Common Stock.
8 None
12 None
15 None
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of Mayor, Day, Caldwell & Keeton, L.L.P. (included in Exhibit
5.1).
24.1 Power of Attorney
25 None
26 None
27 None
28 None
*Indicates documents filed herewith.
EXHIBIT 5.1
MAYOR, DAY, CALDWELL & KEETON, L.L.P.
700 LOUISIANA, SUITE 1900
HOUSTON, TEXAS 77002-2778
(713) 225-7000
TELECOPIER (713) 225-7047
100 CONGRESS AVENUE
SUITE 1500
AUSTIN, TEXAS 78701-4042
(512) 320-9200 JUNE 18, 1997
TELECOPIER (512) 320-9292
TransAmerican Waste Industries, Inc.
314 North Post Oak Lane
Houston, Texas 77024
Ladies and Gentlemen:
We have acted as counsel for TransAmerican Waste Industries, Inc. (the
"Company") in connection with the registration and proposed sale of shares (the
"Shares") of Common Stock, par value $.001 per share, of the Company ("Common
Stock"), all as described in the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended ("Registration Statement") to which this opinion is an exhibit.
In such capacity, we have familiarized ourselves with the Certificate of
Incorporation, as amended and restated, and Bylaws of the Company, as amended
and restated, and have examined all statutes and other records, instruments and
documents pertaining to the Company that we have deemed necessary to examine for
the purposes of this opinion.
Based upon our examination as aforesaid, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware; and
2. The Shares are duly authorized, validly issued, fully paid and
nonassessable shares of the Common Stock.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the use
of our name in the Registration Statement under the caption "Legal Opinions."
Very truly yours,
MAYOR, DAY, CALDWELL & KEETON, L.L.P.
/s/ Mayor, Day, Caldwell & Keeton, L.L.P.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of (1) our report dated March 27, 1997,
included in the Company's Form 10-K for the year ended December 31, 1996, and
(2) our report dated April 11, 1997, included in the Company's Form 8-K/A,
pertaining to the financial statements of the Sanifill Assets Acquired and to
all references to our Firm included in this registration statement.
Arthur Andersen LLP
/s/ Arthur Andersen LLP
Houston, Texas
June 19, 1997
