<PAGE> 1
SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
(AMENDMENT NO. 2)
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES
EXCHANGE ACT OF 1934
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary information statement [ ] Confidential, for use of the
Commission only (as permitted by Rule
14c-5(d)(2))
[X] Definitive information statement
</TABLE>
3CI COMPLETE COMPLIANCE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14-c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
----------------------------------------------------------------------
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
3CI COMPLETE COMPLIANCE CORPORATION
910 PIERREMONT
SUITE 312
SHREVEPORT, LOUISIANA 71106
FEBRUARY 27, 1998
INFORMATION STATEMENT
This Information Statement is being mailed to the stockholders of 3CI
Complete Compliance Corporation (the "Company") commencing on or about February
27, 1998, in connection with the previous approval by the board of directors of
the Company of the corporate actions referred to below and their subsequent
adoption by the majority stockholder of the Company. Accordingly, all necessary
corporate approvals in connection with the matters referred to herein have been
obtained, and this Information Statement is furnished solely for the purpose of
informing stockholders, in the manner required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), of these corporate actions before they
take effect. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY.
ACTIONS TAKEN
The Company, as authorized by the necessary approvals of the board of
directors and the Company's majority stockholder, has approved the adoption of
an amendment, in the form of Exhibit A hereto (the "Amendment"), to the
Company's Certificate of Incorporation, as amended, to (i) increase the
authorized preferred stock, without par value ("Preferred Stock"), of the
Company from 1,000,000 shares to 16,050,000 shares; and (ii) increase the
authorized common stock, par value $.01 per share ("Common Stock"), of the
Company from 15,000,000 shares to 40,450,000 shares. The Amendment was adopted
to facilitate the conversion of $7,000,000 of debt (the "Debt Conversion") owed
by the Company to Waste Systems, Inc. ("WSI"), the Company's largest
stockholder, in exchange for 1,000,000 shares of the Company's Series A
Convertible Preferred Stock (the "Series A Preferred Stock"), the exchange of
the Series A Preferred Stock for 7,000,000 shares of the Company's Series B
Convertible Preferred Stock (the "Series B Preferred Stock"), and the conversion
of an additional $750,000 of debt owed by the Company to WSI to 750,000 shares
of the Company's Series C Convertible Preferred Stock (the "Series C Preferred
Stock"). The form of the Certificate of Designation of the Series A Preferred
Stock is attached hereto as Exhibit B, the form of the Certificate of
Designation of the Series B Preferred Stock is attached hereto as Exhibit C, and
the form of the Certificate of Designation of the Series C Preferred Stock is
attached hereto as Exhibit D. The majority stockholder consent with respect to
the Amendment, and the Debt Conversion, will take effect 20 days after the
mailing of this Information Statement or on such other date as may be specified
by the board of directors. A complete summary of each of these matters is set
forth herein.
NO DISSENTERS' RIGHTS
None of the corporate actions described in this Information Statement will
afford to stockholders the opportunity to dissent from the actions described
herein and to receive an agreed or judicially appraised value for their shares.
<PAGE> 3
THE AMENDMENT
PURPOSE OF THE AMENDMENT AND THE DEBT CONVERSION
The Company has adopted the Amendment to increase its authorized capital
stock from 1,000,000 shares of Preferred Stock to 16,050,000 shares and to
increase its authorized Common Stock from 15,000,000 shares to 40,450,000
shares. The Amendment was adopted in connection with the Debt Conversion. The
increase in authorized Common Stock will provide the Company sufficient Common
Stock for issuance upon conversion of the Series A Preferred Stock, and for
issuance in connection with any future financing activities or corporate
acquisition using the Company's Common Stock. In addition, the Debt Conversion
will enable the Company to remain in compliance with the continued listing
requirements of the Nasdaq Small-Cap Market, which is the principal market upon
which the Common Stock is traded.
Prior to February 23, 1998, a company listed on the Nasdaq Small-Cap Market
was required to maintain a capital surplus of at least $1,000,000 (the "Capital
Surplus Requirement"). In addition, the common stock of a Nasdaq Small-Cap
Market company was required to maintain a minimum bid price of at least $1.00
(the "Minimum Bid Price Requirement"), or as an alternative, maintain capital
surplus of $2,000,000 and a market value of the company's public float of at
least $1,000,000 (the "Alternate Bid Price Requirement"). On January 24, 1997,
the Nasdaq Stock Market informed the Company that as of the Company's fiscal
year ended September 30, 1996, the Company's capital and surplus was less than
$1,000,000. The Nasdaq Stock Market informed the Company that the Company's
Common Stock would be subject to de-listing effective on the close of business
on February 7, 1997, unless the Company could provide information demonstrating
that the Company currently meets and can maintain compliance with the Capital
Surplus Requirement. On January 29, 1997, the Nasdaq Stock Market informed the
Company that the Company was not in compliance with the Minimum Bid Price
Requirement or the Alternate Bid Price Requirement. The Nasdaq Stock Market
informed the Company that the Common Stock would be de-listed unless the Company
could demonstrate compliance on or before the end of the 90 day period ended
April 29, 1997.
By letter dated February 7, 1997, the Company submitted a written plan to
come into compliance with the Capital Surplus Requirement. By letter dated
February 13, 1997, the Nasdaq Stock Market informed the Company that it had
determined that the Company should be removed from listing because the Company's
plan failed to demonstrate its ability to achieve and sustain compliance with
the Capital Surplus Requirement. By letter dated February 19, 1997, the Company
requested an oral hearing before the Nasdaq Stock Market regarding the
de-listing of its Common Stock.
On March 13, 1997, the Company attended an oral hearing before a panel of
the Nasdaq Stock Market with respect to the Company's ability to comply with and
sustain the Capital Surplus Requirement. At that hearing, the Company informed
the Nasdaq Stock Market that WSI had agreed to convert $6,000,000 of the debt
owed to WSI by the Company into 6,000,000 shares of the Company's Series A
Preferred Stock. After such debt conversion, the Company would have a positive
capital surplus of approximately $1.5 million, and therefore, the Company would
be in compliance with the Capital Surplus Requirement. The Nasdaq panel noted
that although the issue was not technically before the panel, the Company also
had failed to maintain the Minimum Bid Price Requirement for continued listing,
but that the Company could meet the Alternate Bid Price Requirement by
converting an additional amount of WSI debt into Series A Preferred Stock and
maintaining a $1,000,000 public float.
After the Nasdaq hearing, WSI agreed to convert an aggregate of $7,000,000
(a $1,000,000 increase from the originally proposed $6,000,000) of its debt from
the Company into Series A Preferred Stock pursuant to the Debt Conversion. As a
result, the Company was in continued compliance with the then existing Capital
Surplus and Alternate Bid Price Requirements.
In June 1997, WSI consummated the Debt Conversion by converting $7,000,000
of debt owed to it by the Company into 1,000,000 shares of Series A Preferred
Stock, with no par value, at $7.00 per share or $7,000,000, to WSI, the
Company's majority shareholder. The Series A Preferred Stock has cumulative
dividends from the second anniversary of the original issuance date of the
Series A Preferred Stock, at the rate of $.5775 per share per annum, and no
more, payable quarterly on the 15th day of July, October, January and
2
<PAGE> 4
April of each year, commencing with a payment on July 15, 1999, accrued from the
second anniversary of the original issuance date of the Series A Preferred
Stock. Accruals of dividends shall not bear interest.
The terms of the Series A Preferred Stock were determined through
negotiation between WSI and the Company. The shareholders of WSI believe their
interest is aligned with the interests of the Company's minority shareholders in
maintaining the listing of the Common Stock on the Nasdaq Small-Cap Market. WSI
has in the past funded the Company's cash requirements through loans to the
Company. The interest on the loans has been added to principal, with the result
that the Company has never paid any interest payments due in cash. The Company
does not have sufficient cash flow to repay the loans to WSI. Moreover, the
Company does not have a source of independent capital that can provide funds
necessary for the Company to come into compliance with the Nasdaq Small-Cap
Market's continued listing requirements. Therefore, the Company believes that
the conversion of a portion of the Company's debt to Series A Preferred Stock
was appropriate.
The Company and WSI believe that a premium to WSI is appropriate in the
conversion ratio of the Series A Preferred Stock constitutes appropriate
compensation to WSI for extending loans to the Company and for taking the
financial risk in converting its debt to equity. The $7.00 per share purchase
price for the Series A Preferred Stock is in excess of the current market price
of the Company's Common Stock. The Company and WSI believe that the Company
would have been unable to obtain $7,000,000 of financing from any other source,
and even if such a source of financing could be found, it would likely be on
terms less favorable to the Company than the terms of the Series A Preferred
Stock. The terms of the Series A Preferred Stock were approved by unanimous
consent of the Company's board of directors, including directors unaffiliated
with WSI. Therefore, the Company believes that the terms of the Series A
Preferred Stock are in the Company's best interest and are fair, from a
financial point of view, to the Company's minority shareholders.
Upon filing and approval of the Amendment, the Company will designate
7,000,000 shares as Series B Preferred Stock and exchange them for the 1,000,000
shares of Series A Preferred Stock. On February 23, 1998, the Nasdaq Small-Cap
Market capital surplus requirement for continued listing was increased to
$2,000,000 (the "New Capital Surplus Requirement"). To meet the New Capital
Surplus Requirement, on February 19, 1998, the Company and WSI agreed to convert
an additional $750,000 of debt owed to WSI by the Company into 750,000 shares of
Series C Preferred Stock to be designated and issued to WSI after the Amendment
is filed and approved. After the debt conversion the Company would have a
capital surplus of approximately $2.23 million, and therefore, the Company would
be in compliance with the New Capital Surplus Requirement.
The Series B or Series C Preferred Stock will have cumulative dividends
from the second anniversary of the original issuance date of the Series B or
Series C Preferred Stock, at the rate of $.0825 per share per annum, and no
more, payable quarterly on the 15th day of July, October, January and April of
each year, commencing with a payment on July 15, 1999, accrued from the second
anniversary of the original issuance date of the Series B or Series C Preferred
Stock. Accruals of dividends shall not bear interest. The Series B or Series C
Preferred Stock may be converted at any time on or after the second anniversary
of the original issuance thereof, in whole but not in part, into full shares of
Common Stock of the Company with a Market Price (defined below) of $7,000,000
for Series B or $750,000 for Series C based on a conversion rate determined by
(i) dividing $7,000,000 for Series B or $750,000 for Series C by the Market
Price of the Common Stock on the date of the related Conversion Notice (defined
below), (ii) plus an amount of cash determined by subtracting the quotient
calculated in (i) and subtracting from $7,000,000 for Series B or $750,000 for
Series C; provided however, that at the option of the holder, the holder may
convert the Series B or Series C Preferred Stock into solely that number of
shares of Common Stock determined as provided in (i), and forego obtaining the
additional Common Stock issuable as calculated in (ii), subject to certain
adjustments of the conversion rate for subdivision or combination of the Common
Stock.
To convert Preferred Stock into Common Stock, a holder of Preferred Stock
shall send to the Secretary of the Company a dated notice (a "Conversion
Notice") setting forth the number of shares of Preferred Stock to be converted,
along with the certificate representing the Preferred Stock to be converted.
3
<PAGE> 5
Market Price means (i) the closing sale price on the date of a Conversion
Notice of a share of Common Stock as reported on the principal securities
exchange on which the shares of Common Stock are then listed or admitted to
trading or (ii) if not so listed, the average of the closing bid and ask prices
for a share of Common Stock on that date as quoted on the Nasdaq National Market
System or Nasdaq Small-Cap Market or (iii) if not quoted on Nasdaq, the average
of closing bid and ask prices for a share of Common Stock as quoted by the
National Quotations Bureau's pink sheets or the National Association of
Securities Dealer's OTC Bulletin Board System. If the price of a share of Common
Stock shall not be so quoted, "Market Price" shall mean the fair market value of
a share of Common Stock as determined by an investment banking firm, with
expertise in the Corporation's area of business, appointed by the judge of the
269th Judicial District Court, Harris County, Texas.
WSI currently owns 5,104,448 shares of the Company's issued and outstanding
Common Stock, which represents 52.5% of the Common Stock issued and outstanding
as of February 23, 1998. WSI's percentage ownership of the Company's Common
Stock upon conversion of the Series B and Series C Preferred Stock will depend
upon the conversion rate in effect at the time of conversion. As one example, if
all of the Series B and Series C Preferred Stock were converted when the Market
Price of Common Stock was $1, assuming no other Common Stock has been issued
after February 23, 1998, WSI would own 12,854,448 shares of Common Stock, which
would represent 73.6% of the aggregate issued and outstanding Common Stock.
The exchange of Series A Preferred Stock for Series B Preferred Stock and
the conversion of debt to Series C Preferred Stock cannot be completed until the
Amendment has been filed with the Delaware Secretary of State. The Company has
taken all action required under Delaware law to approve the Amendment, however,
since stockholder approval of the Amendment was obtained by written consent
rather than at a stockholders' meeting, the Exchange Act will not permit such
filing until the expiration of 20 calendar days from the date hereof. Upon the
expiration of such 20 day period, the Company will file the Amendment and the
Certificates of Designation of the Series B Preferred Stock and the Series C
Preferred Stock with the Delaware Secretary of State, and the exchange of Series
A Preferred Stock for Series B Preferred Stock and the conversion of debt to
Series C Preferred Stock will be consummated.
The accompanying unaudited pro forma combined balance sheet is prepared as
if these transactions had occurred on December 31, 1997, and the unaudited pro
forma combined statement of income was prepared as if these transactions had
occurred on September 30, 1997 and the three months ended December 31, 1997.
On June 24, 1997, the Company and WSI entered into an Exchange Agreement in
the form of Exhibit E hereto pursuant to which the Debt Conversion was
consummated upon the issuance of 1,000,000 shares of Series A Preferred Stock in
exchange for the cancellation of $7,000,000 of debt owed to WSI by the Company.
The Company and WSI have not entered into an exchange agreement with respect to
the conversion of the Series A Preferred Stock into Series B Preferred Stock
upon the filing of the Amendment with the Delaware Secretary of State.
Nonetheless, upon the filing of the Amendment the Company intends to designate
7,000,000 shares of Series B Preferred Stock, and WSI intends to exchange all
issued and outstanding shares of Series A Preferred Stock for all 7,000,000
shares of Series B Preferred Stock. On February 19, 1998, the Company and WSI
entered into a Stock Purchase and Note Modification Agreement in the form of
Exhibit F hereto pursuant to which WSI cancelled $750,000 of debt owed to WSI
from the Company in exchange for the Company's agreement to issue 750,000 shares
of Series C Preferred Stock upon the filing of the Amendment.
The pro forma consolidated financial statements should be read in
conjunction with the financial statements of the Company contained in the Form
10-K for the fiscal year ended September 30, 1997 and the Form 10-Q for the
period ended December 31, 1997. The pro forma consolidated financial statements
are based on certain assumptions, which are subject to change. These statements
do not purport to be indicative of the financial position or results of
operations of the Company that might have occurred, nor are they indicative of
future results.
4
<PAGE> 6
3CI COMPLETE COMPLIANCE CORPORATION
CONSOLIDATED PROFORMA BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
DECEMBER 31, PROFORMA DECEMBER 31,
1997 ADJUSTMENTS 1997
------------ ----------- ------------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents................... $ $ $
Restricted cash.............................
Accounts receivable, net allowances......... 2,991,378 2,991,378
Inventory................................... 58,152 58,152
Other current assets........................ 176,987 176,987
------------ ----------- ------------
Total current assets................ 3,226,517 $ 3,226,517
------------ ----------- ------------
Property, plant and equipment, at cost........ 11,096,459 11,096,459
Accumulated depreciation.................... (2,712,327) (2,712,327)
------------ ----------- ------------
Net property, plant and equipment........... 8,384,132 $ 8,384,132
------------ ----------- ------------
Excess of cost over net assets acquired, net
of accumulated amortization................. 355,993 355,993
Other intangible assets, net of accumulated
amortization................................ 255,627 255,627
------------ ----------- ------------
Total assets........................ $ 12,222,269 $ $ 12,222,269
============ =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Bank overdrafts............................. $ 24,176 $ 24,176
Notes payable............................... 38,794 38,794
Current portion of long-term debt,
unaffiliated lenders..................... 1,330,396 1,330,396
Accounts payable............................ 1,535,526 1,535,526
Accounts payable, affiliated companies...... 409,156 409,156
Accrued liabilities......................... 1,416,118 1,416,118
Note payable majority shareholder........... 4,948,746(1) $ (750,000) 4,198,746
------------ ----------- ------------
Total current liabilities........... 9,702,912 (750,000) 8,952,912
------------ ----------- ------------
Long-term debt unaffiliated lenders, net of
current portion............................. 685,003 685,003
------------ ----------- ------------
Total liabilities................... 10,387,915 (750,000) 9,637,915
------------ ----------- ------------
Shareholders' Equity (deficit):
Preferred stock............................. 7,000,000 750,000 7,750,000
Treasury stock.............................. (7,065) (7,065)
Common stock................................ 91,549 91,549
Additional Paid-in capital.................. 20,182,543 20,182,543
Accumulated deficit......................... (25,432,673) (25,432,673)
------------ ----------- ------------
Total Shareholders' equity
(deficit)......................... 1,834,354 750,000 2,584,354
============ =========== ============
Total liabilities and shareholders'
equity(deficit)................... $ 12,222,269 $ $ 12,222,269
============ =========== ============
</TABLE>
- ---------------
(1) To reflect the conversion of $750,000 owed to WSI debt to 750,000 shares of
Series C Preferred Stock.
The Series C Preferred Stock has cumulative dividends from the second
anniversary of the original issuance date of the Series C Preferred Stock, at
the rate of $.0825 per share per annum, and no more, payable quarterly on the
15th day of July, October, January and April of each year, commencing with a
payment on July 15, 1999, accrued from the second anniversary of the original
issuance date of the Series C Preferred
5
<PAGE> 7
Stock. Accruals of dividends shall not bear interest. The Series C Preferred
Stock may be converted at any time on or after the second anniversary of the
original issuance thereof, in whole but not in part, into full shares of Common
Stock of the Company with a Market Price of $750,000 based on a conversion rate
determined by (i) dividing $750,000 by the Market Price of the Common Stock on
the date of the related notice to Company, (ii) plus an amount of cash
determined by subtracting the quotient calculated in (i) and subtracting from
$750,000; provided however, that at the option of the holder, the holder may
convert the Series C Preferred Stock into solely that number of shares of Common
Stock determined as provided in (i), and forego obtaining the additional Common
Stock issuable as calculated in (ii), subject to certain adjustments of the
conversion rate for subdivision or combination of the Common Stock.
6
<PAGE> 8
3CI COMPLETE COMPLIANCE CORPORATION
PROFORMA CONSOLIDATED STATEMENTS OF OPERATION
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
THREE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, PROFORMA DECEMBER 31,
1997 ADJUSTMENTS 1997
-------------- ----------- --------------
<S> <C> <C> <C>
Revenues........................................ $4,600,534 $4,600,534
Expenses:
Cost of services.............................. 3,437,167 3,437,167
Depreciation and amortization................. 294,979 294,979
Selling, general and administrative........... 767,959 767,959
---------- ---------- ----------
Net income (loss) from Operations............. $ 100,429 $ $ 100,429
Other income (expense):
Interest and other expense...................... (223,131) 78,418(1) (144,713)
---------- ---------- ----------
Loss before income taxes and accretion of stock
put........................................... (122,702) 78,418 (44,284)
---------- ---------- ----------
Income taxes....................................
---------- ---------- ----------
Net loss........................................ $ (122,702) $ 78,418 $ (44,284)(2)
========== ========== ==========
Weighted average shares outstanding............. 9,153,833 9,153,833 9,153,833
========== ========== ==========
Net loss per common share....................... $ (0.01) $ 0.01 $ (0.00)
========== ========== ==========
</TABLE>
- ---------------
(1) To remove interest expense related to the conversion of $750,000 of a WSI
promissory note to Preferred Stock as if the conversion had been completed
on October 1, 1996.
(2) The Series C Preferred Stock is cumulative and accrues $61,875 of dividends
per annum beginning on the second anniversary of original issuance. Had the
dividends accrued during the three months ended December 31, 1997, such
dividends would have aggregated $15,468.75 and would have increased the net
loss to $59,752, or $(0.1) per share.
7
<PAGE> 9
3CI COMPLETE COMPLIANCE CORPORATION
PROFORMA CONSOLIDATED STATEMENTS OF OPERATION
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
YEAR ENDED YEAR ENDED
SEPTEMBER 30, PROFORMA SEPTEMBER 30,
1997 ADJUSTMENTS 1997
-------------- ----------- -------------
<S> <C> <C> <C>
Revenues......................................... $18,789,749 $18,789,749
Expenses:
Cost of services............................... 14,285,834 14,285,834
Depreciation and amortization.................. 1,352,015 1,352,015
Selling, general and administrative............ 3,080,398 3,080,398
----------- ---------- -----------
Net income (loss) from Operations.............. 71,502 71,502
Other income (expense):
Interest and other expense....................... (1,159,690) 31,803(1) (1,127,887)
----------- ---------- -----------
Loss before income taxes and accretion of stock
put............................................ (1,088,188) 31,803 (1,056,385)
----------- ---------- -----------
Income taxes.....................................
Accretion of stock put...........................
----------- ---------- -----------
Net loss......................................... $(1,088,188) $ 31,803 $(1,056,385)(2)
=========== ========== ===========
Weighted average shares outstanding.............. 9,064,071 9,064,071 9,064,071
=========== ========== ===========
Net loss per common share........................ $ (0.12) $ 0.00 $ (0.12)
=========== ========== ===========
</TABLE>
- ---------------
(1) To remove the interest expense related to the conversion of $7,500,000 of a
WSI promissory note to Preferred Stock as if the conversion had been
completed on October 1, 1996.
(2) The Series C Preferred Stock is cumulative and accrues $61,875 of dividends
per annum beginning on the second anniversary of original issuance. Had the
dividends accrued during the fiscal year ended September 30, 1997, such
dividends would have aggregated $61,875 and would have increased the net
loss to $1,118,260, or $(.12) per share.
STOCKHOLDER APPROVAL PREVIOUSLY OBTAINED
The Company has 9,714,311 issued and outstanding shares of Common Stock,
each of which is entitled to one vote on any matter brought to a vote of the
Company's stockholders. WSI owns 5,104,448 shares, or 52.5%, of all issued and
authorized shares of the Company's Common Stock. By written consent dated
February 19, 1998, WSI approved the adoption and implementation of the
Amendment, such consent to take effect 20 days following the mailing of this
Information Statement or on such other date as may be specified by the board of
directors. Such action is sufficient to satisfy the applicable requirements of
Delaware law that such actions be approved by stockholders. Accordingly,
stockholders will not be asked to take further action on the Amendment at any
future meeting.
THE PREFERRED STOCK
Effective 20 days after the date of this Information Statement, the
Company's Certificate of Incorporation will be amended to authorize the issuance
of up to 16,050,000 share of Preferred Stock. The Board of Directors has
designated 1,000,000 shares of Preferred Stock as Series A Convertible Preferred
Stock and has entered into agreements to designate 7,000,000 shares of Preferred
Stock as Series B Convertible Preferred Stock and 750,000 shares of Preferred
Stock as Series C Convertible Preferred Stock. The rights, preferences,
privileges and voting powers of each series of Preferred Stock are set forth
below.
8
<PAGE> 10
SERIES A PREFERRED STOCK
DIVIDENDS. The holders of Series A Preferred Stock shall not be entitled to
receive any fixed dividends and shall be entitled to receive such cash dividends
as may be declared from time to time by the Board of Directors in its
discretion, from any assets legally available for the payment of dividends;
however, for so long as any shares of Series A Preferred Stock shall be
outstanding, without the written consent of the holders of a majority in
interest of the Series A Preferred Stock, the Company shall not (i) purchase or
redeem any shares of its Common Stock, or (ii) declare, pay or set apart for any
payment any dividend on its Common Stock. Notwithstanding the foregoing, the
holders of shares of Series A Preferred Stock shall be entitled to receive,
when, and if declared by the Company's Board of Directors out of assets of the
Company legally available for such payment, cumulative dividends from the second
anniversary of the original issuance date of the Series A Preferred Stock, at
the rate of $.5775 per share per annum, and no more, payable quarterly on the
15th day of July, October, January and April of each year, commencing with a
payment on July 15, 1999, accrued from the second anniversary of the original
issuance date of the Series A Preferred Stock. Such dividends shall be
cumulative from the second anniversary of the original issuance date of the
Series A Preferred Stock. Accruals of dividends shall not bear interest.
Before any dividends (other than dividends payable in capital stock ranking
junior to the Series A Preferred Stock both as to dividends and upon
liquidation) on, or any distribution in respect of, any class or classes of
stock of the Company ranking junior to the Series A Preferred Stock as to
dividends or upon liquidation, shall be declared or paid or set apart for
payment, and before any purchase or redemption of any such stock, the holders of
Series A Preferred Stock shall have received payment in full of all dividends,
if any, in arrears on the Series A Preferred Stock. No dividend shall be
declared on any series of preferred stock ranking on a parity with the Series A
Preferred Stock as to dividends unless there shall likewise be or have been
declared on the shares of Series A Preferred Stock at the time outstanding a
dividend of like kind for all dividend periods coinciding with or ending before
such dividend period, ratably in proportion to the respective annual dividend
rates per annum fixed therefor.
REDEMPTION. The shares of Series A Preferred Stock may be redeemed at any
time on or after the second anniversary of the original issuance date of the
Series A Preferred Stock at the option of the Company in whole or, from time to
time, in part, in any such case at a per share redemption price equal to $7.00,
plus accrued dividends, if any. In case of redemption of only a part of the
Series A Preferred Stock at the time outstanding, the shares to be redeemed
shall be selected by lot.
Any shares of the Series A Preferred Stock redeemed, purchased or otherwise
acquired by the Company or converted into Common Stock shall be deemed retired
and shall be canceled and may not under any circumstances thereafter be reissued
or otherwise disposed of by the Company.
CONVERSION. The Series A Preferred Stock may be converted at any time on or
after the second anniversary of the original issuance thereof into full shares
of Common Stock of the Company based on a Conversion Rate (defined below) of
Series A Preferred Stock to Common Stock equal to $7.00 divided by the Market
Price (defined below) of the Common Stock on the date of the related Conversion
Notice (defined below) (the conversion rate from time to time in effect being
hereinafter referred to as the "Conversion Rate"); provided, however, that the
Conversion Rate of Series A Preferred Stock to Common Stock shall never be
greater than 1 to 7 (i.e., all 1,000,000 shares of Series A Preferred Stock
shall be convertible into an aggregate of no more than 7,000,000 shares of
Common Stock); and provided further that the Conversion Rate of Series A
Preferred Stock to Common Stock shall never be less than 1 to 1 (i.e., all
1,000,000 shares of Series A Preferred Stock shall be convertible into no fewer
than an aggregate of 1,000,000 shares of Common Stock), subject to such
adjustments, if any, of the Conversion Rate and the securities or other property
issuable upon such conversion pursuant to the provisions set forth below. If at
any time shares of Series A Preferred Stock are presented for conversion, the
Company does not have sufficient shares of Common Stock authorized for issuance
upon conversion thereof, then the converting holder shall receive the maximum
number of shares of Common Stock available for issuance by the Company upon such
conversion, and with respect to the remaining shares of Series A Preferred Stock
that the Company is unable to convert to Common Stock, the converting holder
shall receive a note of the Company (a "Conversion Note") in a
9
<PAGE> 11
principal amount equal to the number of shares of Series A Preferred Stock that
remains unconverted times $7.00, such Conversion Note to bear interest at the
rate of 8.25% per annum, with such interest to be cumulative from the date of
original issuance of the Series A Preferred Stock. If more than one holder of
Series A Preferred Stock presents shares of Series A Preferred Stock for
conversion, and the Company does not have sufficient shares of Common Stock
authorized for issuance upon such conversion, then the number of shares of
Common Stock issuable to each such converting holder shall be allocated pro rata
among all converting holders based on the number of shares of Series A Preferred
Stock presented for conversion, and each such converting holder shall receive a
Conversion Note in the principal amount determined as provided below.
To convert Series A Preferred Stock into Common Stock, a holder of Series A
Preferred Stock shall send to the Secretary of the Company a dated notice (a
"Conversion Notice") setting forth the number of shares of Series A Preferred
Stock to be converted, along with the certificate representing the Series A
Preferred Stock to be converted. Upon receipt of a Conversion Notice and the
surrendered certificate representing the Series A Preferred Stock to be
converted into Common Stock, the Company shall cause a certificate representing
the Common Stock issued pursuant to such conversion (and, if applicable, a
Conversion Note in the principal amount determined as set forth above) to be
delivered to the converting holder, along with a certificate representing any
shares of Series A Preferred Stock that were not converted into Common Stock.
All shares of Series A Preferred Stock that have not been redeemed or
converted into Common Stock on or before the fifth anniversary of the original
issuance of the Series A Preferred Stock shall automatically, without further
action of the Company or any holder of Series A Preferred Stock, be converted
into Common Stock based on the Conversion Rate then in effect. Upon such
automatic conversion, the Company shall send a notice to each record holder of
Series A Preferred Stock that such shares of Series A Preferred Stock have been
converted into Common Stock, along with appropriate instructions for the
surrender of certificates representing Series A Preferred Stock in exchange for
certificates representing the Common Stock into which such Series A Preferred
Stock has been converted. Upon automatic conversion of Series A Preferred Stock,
the shares of Series A Preferred Stock shall no longer be considered
outstanding, and the certificates representing such Series A Preferred Stock
shall be void for all purposes except for the purpose of surrender to the
Company in exchange for the certificates representing the Common Stock into
which such Series A Preferred Stock was converted.
"Market Price" means (i) the closing sale price on the date of a Conversion
Notice of a share of Common Stock as reported on the principal securities
exchange on which the shares of Common Stock are then listed or admitted to
trading or (ii) if not so listed, the average of the closing bid and ask prices
for a share of Common Stock on that date as quoted on the Nasdaq National Market
System or Nasdaq Small-Cap Market or (iii) if not quoted on Nasdaq, the average
of closing bid and ask prices for a share of Common Stock as quoted by the
National Quotations Bureau's pink sheets or the National Association of
Securities Dealer's OTC Bulletin Board System. If the price of a share of Common
Stock shall not be so quoted, "Market Price" shall mean the fair market value of
a share of Common Stock as the holders of the Series A Preferred Stock of the
Company shall mutually agree or, in the absence of such an agreement, as
determined by an investment banking firm, with expertise in the Company's area
of business, selected by the holders of the Series A Preferred Stock and
approved by the Company, such approval not to be unreasonably withheld.
The Conversion Rate shall be subject to the following adjustments:
(i) While any shares of Series A Preferred Stock are outstanding, if
the Company shall subdivide the outstanding shares of Common Stock into a
greater number of shares of Common Stock or combine the outstanding shares
of Common Stock into a smaller number of shares of Common Stock, the
Conversion Rate in effect immediately before such subdivision or
combination, as the case may be, shall be proportionately increased or
decreased (adjusted to the nearest, or if there shall be no nearest, then
to the next lower, thousandth of a share of Common Stock), as the case may
require, such increase or decrease, as the case may be, to become effective
at the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
10
<PAGE> 12
(ii) No adjustment of the Conversion Rate shall be made by reason of
the issuance of shares of Common Stock in exchange for cash, property, or
services.
(iii) In case of any reclassification or change of outstanding shares
of Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation, or in case of any sale or conveyance to
another corporation of all or substantially all of the property of the
Company, each holder of shares of the Series A Preferred Stock then
outstanding shall have the right thereafter, so long as his conversion
right hereunder shall exist, to convert such shares into the kind and
number or amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale
or conveyance, by a holder of the number of shares of Common Stock of the
Company into which such shares of the Series A Preferred Stock might have
been converted immediately before such reclassification, change,
consolidation, merger, sale, or conveyance; provided, that effective
provision shall be made, in the articles or certificate of incorporation of
the resulting or surviving corporation or otherwise, so that the provisions
set forth herein for the protection of the conversion rights of the Series
A Preferred Stock shall thereafter be applicable, as nearly as reasonably
may be, to any such other shares of stock and other securities and property
deliverable upon conversion of the Series A Preferred Stock remaining
outstanding or other convertible preferred stock received by the holders in
place thereof; and provided, further, that any such resulting or surviving
corporation shall expressly assume the obligation to deliver, upon the
exercise of the conversion privilege, such shares, securities or property
as the holders of the Series A Preferred Stock remaining outstanding, or
other convertible preferred stock received by the holders in place thereof,
shall be entitled to receive, and to make provisions for the protection of
the conversion right as above provided. The subdivision or combination of
shares of Common Stock at any time outstanding into a greater or lesser
number of shares of Common Stock (whether with or without par value) shall
not be deemed to be a reclassification of the shares of Common Stock of the
Company for the purposes of this subparagraph (iii).
No fraction of a share of Common Stock shall be issued upon any conversion,
but, in lieu thereof, there shall be paid to the holder of shares of Series A
Preferred Stock surrendered for conversions as soon as practicable after the
date such shares of Series A Preferred Stock are surrendered for conversion, an
amount in cash equal to the same fraction of the market value of a full share of
Common Stock as shall be determined, in good faith by the board of directors of
the Company.
DISSOLUTION. In the event of the dissolution, liquidation or winding up of
the affairs of the Company, whether voluntary or involuntary, or in the event of
its insolvency, there shall be paid to the holders of the Series A Preferred
Stock an amount equal to that which would have been payable if the Series A
Preferred Stock had been redeemed on the date of such payment before any
distribution of assets or payment shall be made to the holders of any other
class of capital stock of the Company. If the assets of the Company available
for distribution to the holders of Series A Preferred Stock shall be
insufficient to permit payment to the holders of the Series A Preferred Stock of
the full amount or amounts aforesaid, then the entire assets of the Company
shall be distributed ratably among the holders of the Series A Preferred Stock
then outstanding according to the number of shares held by each. After the
amounts provided for above have been paid or distributed, any assets remaining
shall be paid to or distributed among the holders of Common Stock pro rata on a
per-share basis.
VOTING RIGHTS. Except as otherwise required by law or expressly provided
for below, the holders of Series A Preferred Stock shall have no voting rights.
If and when the Company shall be in default in the payment of dividends on the
Series A Preferred Stock, and such default continues for a period of two fiscal
quarters, then the holders of the outstanding shares of Series A Preferred
Stock, voting separately as a single class, shall become entitled to elect two
directors of the Company, such additional directors to serve in addition to the
directors then in office. Such right to elect additional directors may be
exercised (i) by action taken by the written consent of the holders of a
majority of the shares of Series A Preferred Stock then outstanding, (ii) at any
annual meeting of stockholders or (iii) within the limitations hereinafter
provided, at a special meeting of stockholders held for such purpose. If such
default shall occur more than two fiscal quarters
11
<PAGE> 13
preceding the date of the next annual meeting of stockholders as fixed by the
Bylaws of the Company, then a special meeting of the holders of the Series A
Preferred Stock may, and upon the written request of the holders of not less
than one-fourth of the number of shares of Series A Preferred Stock then
outstanding, addressed to the Secretary of the Company, shall, be called by the
Secretary of the Company, such meeting to be held within 60 days after such call
and within 60 days after the delivery to the Secretary of such request. Such
additional directors, whether elected by written consent or at an annual or a
special meeting, shall serve until the next annual meeting and until their
successors shall be duly elected and qualified, unless their term shall sooner
terminate pursuant to the provisions of this paragraph. At any meeting for the
purpose of electing such additional directors, the holders of a majority of the
shares of Series A Preferred Stock then outstanding shall constitute a quorum,
and any such meeting shall be valid notwithstanding that a quorum of the
outstanding shares of any other class or classes shall be present, the number of
directors constituting the whole board of directors shall be deemed to be
increased by a number sufficient to carry out the provisions of this paragraph.
If a vacancy shall occur in the board of directors by reason of the death,
resignation, or inability to act of any such additional director, such vacancy
shall be filled only by vote of the holders of the outstanding shares of Series
A Preferred Stock, voting separately as a single class, acting by written
consent or at any annual meeting or at a special meeting of the holders of
shares of the Series A Preferred Stock requested, called and held in the same
manner as the special meeting hereinabove referred to. Whenever a default in the
Company's obligations to pay dividends on the Series A Preferred Stock has been
cured by the Company, then the right of the holders of the Series A Preferred
Stock to elect directors shall thereupon cease, and, if any such additional
directors were elected by the holders of shares of Series A Preferred Stock,
voting separately as a class, the term of such directors shall then terminate,
and the number of directors constituting the whole board of directors shall be
reduced by the number of such terminated directors. The above provisions for the
vesting of such voting rights in the holders of Series A Preferred Stock shall
apply, however, in case of any subsequent default under this paragraph.
EXCLUSION OF OTHER RIGHTS. Except as otherwise required by law, the shares
of Series A Preferred Stock shall not have any preferences or relative
participating, optional or other special rights except as specifically set forth
above. No shares of any class of the corporation's capital stock shall have more
preemptive or subscription rights.
RESTRICTIONS ON TRANSFER. The Series A Preferred stock and the Common Stock
issuable upon conversion thereof will not be registered under the Securities Act
of 1933 (the "Securities Act"), and as such, will be restricted securities as
defined in Rule 144 under the Securities Act. The Company has no obligation to
register the Series a Preferred Stock or the Common Stock issuable upon
conversion thereof under the securities Act. The certificates representing the
Series A Preferred Stock and the Common Stock issuable upon conversion thereof
will bear restrictive legends setting forth those restrictions on
transferability.
SERIES B AND C PREFERRED STOCK
DIVIDENDS. The holders of shares of Series B or C Preferred Stock shall be
entitled to receive, when, and if declared by the Company's Board of Directors
out of assets of the Company legally available for such payment, cumulative
dividends from the second anniversary of the original issuance date of the
Series B or C Preferred Stock, at the rate of $ .0825 per share per annum, and
no more, payable quarterly on the 15th day of July, October, January and April
of each year, commencing with a payment on July 15, 1999, of dividends accrued
from the second anniversary of the original issuance date of the Series B or C
Preferred Stock. Such dividends shall be cumulative from the second anniversary
of the original issuance date of the Series B or C Preferred Stock. Accruals of
dividends shall not bear interest. For so long as any shares of Series B or C
Preferred Stock shall be outstanding, without the written consent of the holders
of a majority in interest of the Series B or C Preferred Stock, the Company
shall not (i) purchase or redeem any shares of its Common Stock, or (ii)
declare, pay or set apart for any payment any dividend on its Common Stock.
Before any dividends (other than dividends payable in capital stock ranking
junior to the Series B or C Preferred Stock both as to dividends and upon
liquidation) on, or any distribution in respect of, any class or classes of
stock of the Company ranking junior to the Series B Preferred Stock as to
dividends or upon liquidation, shall be declared or paid or set apart for
payment, and before any purchase or redemption of any
12
<PAGE> 14
such stock, the holders of Series B or C Preferred Stock shall have received
payment in full of all dividends, if any, in arrears on the Series B or C
Preferred Stock. No dividend shall be declared on any Series of preferred stock
ranking on a parity with the Series B or C Preferred Stock as to dividends
unless there shall likewise be or have been declared on the shares of Series B
or C Preferred Stock at the time outstanding a dividend of like kind for all
dividend periods coinciding with or ending before such dividend period, ratably
in proportion to the respective annual dividend rates per annum fixed therefor.
REDEMPTION. The shares of Series B or C Preferred Stock may be redeemed at
any time on or after the second anniversary of the original issuance date of the
Series B or C Preferred Stock at the option of the Company in whole or, from
time to time, in part, in any such case at a per share redemption price equal to
$1.00, plus accrued dividends, if any. In case of redemption of only a part of
the Series B or C Preferred Stock at the time outstanding, the shares to be
redeemed shall be selected by lot.
Any shares of the Series B or C Preferred Stock redeemed, purchased or
otherwise acquired by the Company or converted into Common Stock shall be deemed
retired and shall be canceled and may not under any circumstances thereafter be
reissued or otherwise disposed of by the Company.
CONVERSION OF SERIES B OR C PREFERRED STOCK. The Series B or C Preferred
Stock may be converted at any time on or after the second anniversary of the
original issuance thereof, in whole but not in part, into full shares of Common
Stock of the Company with a Market Price (defined below) of $7,000,000 for
Series B Preferred Stock or $750,000 for Series C Preferred Stock based on a
Conversion Rate (the "Conversion Rate") determined by (i) dividing $7,000,000
for Series B Preferred Stock or $750,000 for Series C Preferred Stock by the
Market Price of the Common Stock on the date of the related Conversion Notice
(defined below), (ii) plus an amount of cash determined by subtracting the
quotient calculated in (i) and subtracting from $7,000,000 for Series B
Preferred Stock or $750,000 for Series C Preferred Stock; provided however, that
at the option of the holder, the holder may convert the Series B or C Preferred
Stock into solely that number of shares of Common Stock determined as provided
in (i), and forego obtaining the additional Common Stock issuable as calculated
in (ii), subject to such adjustments, if any, of the Conversion Rate and the
securities or other property issuable upon such conversion pursuant to the
provisions set forth below.
To convert Series B or C Preferred Stock into Common Stock, a holder of
Series B or Series C Preferred Stock shall send to the Secretary of the Company
a dated notice (a "Conversion Notice") setting forth the number of shares of
Series B or C Preferred Stock to be converted, along with the certificate
representing the Series B or C Preferred Stock to be converted. Upon receipt of
a Conversion Notice and the surrendered certificate representing the Series B or
C Preferred Stock to be converted into Common Stock, the Company shall cause a
certificate representing the Common Stock issued pursuant to such conversion to
be delivered to the converting holder, along with a certificate representing any
shares of Series B or C Preferred Stock that were not converted into Common
Stock.
All shares of Series B or C Preferred Stock that have not been redeemed or
converted into Common Stock on or before the fifth anniversary of the original
issuance of the Series B Preferred Stock shall automatically without further
action of the Company or any holder of Series B or C Preferred Stock, be
converted into Common Stock based on the Conversion Rate then in effect. Upon
such automatic conversion, the Company shall send a notice to each record holder
of Series B or C Preferred Stock that such shares of Series B or C Preferred
Stock have been converted into Common Stock along with appropriate instructions
for the surrender of certificates representing Series B or C Preferred Stock in
exchange for certificates representing the Common Stock into which such Series B
or C Preferred Stock has been converted. Upon automatic conversion of Series B
or C Preferred Stock pursuant to this paragraph, the shares of Series B or C
Preferred Stock shall no longer be considered outstanding, and the certificates
representing such Series B or C Preferred Stock shall be void for all purposes
except for the purpose of surrender to the Company in exchange for the
certificates representing the Common Stock into which such Series B or C
Preferred Stock was converted.
Market Price means (i) the closing sale price on the date of a Conversion
Notice of a share of Common Stock as reported on the principal securities
exchange on which the shares of Common Stock are then listed or admitted to
trading or (ii) if not so listed, the average of the closing bid and ask prices
for a share of Common
13
<PAGE> 15
Stock on that date as quoted on the Nasdaq National Market System or Nasdaq
Small-Cap Market or (iii) if not quoted on Nasdaq, the average of closing bid
and ask prices for a share of Common Stock as quoted by the National Quotations
Bureau's pink sheets or the National Association of Securities Dealer's OTC
Bulletin Board System. If the price of a share of Common Stock shall not be so
quoted, "Market Price" shall mean the fair market value of a share of Common
Stock as determined by an investment banking firm, with expertise in the
Corporation's area of business, appointed by the judge of the 269th Judicial
District Court, Harris County, Texas.
The Conversion Rate shall be subject to the following adjustments:
(i) While any shares of Series B or C Preferred Stock are outstanding,
in case the Company shall subdivide the outstanding shares of Common Stock
into a greater number of shares of Common Stock or combine the outstanding
shares of Common Stock into a smaller number of shares of Common Stock, the
Conversion Rate in effect immediately before such subdivision or
combination, as the case may be, shall be proportionately increased or
decreased (adjusted to the nearest, or if there shall be no nearest, then
to the next lower, thousandth of a share of Common Stock), as the case may
require, such increase or decrease, as the case may be, to become effective
at the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(ii) No adjustment of the Conversion Rate shall be made by reason of
the issuance of shares of Common Stock in exchange for cash, property, or
services.
(iii) In case of any reclassification or change of outstanding shares
of Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation, or in case of any sale or conveyance to
another corporation of all or substantially all of the property of the
Company, each holder of shares of the Series B or C Preferred Stock then
outstanding shall have the right thereafter, so long as his conversion
right hereunder shall exist, to convert such shares into the kind and
number or amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale
or conveyance, by a holder of the number of shares of Common Stock of the
Company into which such shares of the Series B or C Preferred Stock might
have been converted immediately before such reclassification, change,
consolidation, merger, sale, or conveyance, and shall have no other
conversion rights under these provisions; provided, that effective
provision shall be made, in the articles or certificate of incorporation of
the resulting or surviving corporation or otherwise, so that the provisions
set forth herein for the protection of the conversion rights of the Series
B or C Preferred Stock shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and other securities
and property deliverable upon conversion of the Series B or C Preferred
Stock remaining outstanding or other convertible preferred stock received
by the holders in place thereof; and provided, further, that any such
resulting or surviving corporation shall expressly assume the obligation to
deliver, upon the exercise of the conversion privilege, such shares,
securities or property as the holders of the Series B Preferred Stock
remaining outstanding, or other convertible preferred stock received by the
holders in place thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provisions for the protection of the
conversion right as above provided. The subdivision or combination of
shares of Common Stock at any time outstanding into a greater or lesser
number of shares of Common Stock (whether with or without par value) shall
not be deemed to be a reclassification of the shares of Common Stock of the
Company for the purposes of this subparagraph (iii).
No fraction of a share of Common Stock shall be issued upon any conversion,
but, in lieu thereof, there shall be paid, to the holder of shares of Series B
or C Preferred Stock surrendered for conversion as soon as practicable after the
date such shares of Series B or C Preferred Stock are surrendered for
conversion, an amount in cash equal to the same fraction of the market value of
a full share of Common Stock as shall be determined, in good faith by the board
of directors of the Company.
DISSOLUTION. In the event of the dissolution, liquidation or winding up of
the affairs of the Company, whether voluntary or involuntary, or in the event of
its insolvency, there shall be paid to the holders of the Series B or C
Preferred Stock an amount equal to that which would have been payable if the
Series B or C
14
<PAGE> 16
Preferred Stock had been redeemed on the date of such payment before any
distribution of assets or payment shall be made to the holders of any other
class of capital stock of the Company. If the assets of the Company available
for distribution to the holders of Series B or C Preferred Stock shall be
insufficient to permit payment to the holders of the Series B or C Preferred
Stock of the full amount or amounts aforesaid, then the entire assets of the
Company shall be distributed ratably among the holders of the Series B or C
Preferred Stock then outstanding according to the number of shares held by each.
After the amounts provided for above have been paid or distributed, any assets
remaining shall be paid to or distributed among the holders of Common Stock pro
rata on a per share basis.
VOTING RIGHTS. Except as otherwise required by law or expressly provided
for below, the holders of Series B Preferred Stock shall have no voting rights.
Except as otherwise required by law, the holders of Series C Preferred Stock
shall have no voting rights. If and when the Company shall be in default in the
payment of dividends on the Series B Preferred Stock, and such default continues
for a period of two fiscal quarters, then the holders of the outstanding shares
of Series B Preferred Stock, voting separately as a single class, shall become
entitled to elect two directors of the Company, such additional directors to
serve in addition to the directors then in office. Such right to elect
additional directors may be exercised (A) by action taken by the written consent
of the holders of a majority of the shares of Series B Preferred Stock then
outstanding, (B) at any annual meeting of stockholders or (C) within the
limitations hereinafter provided, at a special meeting of stockholders held for
such purpose. If such default shall occur more than two fiscal quarters
preceding the date of the next annual meeting of stockholders as fixed by the
Bylaws of the Company, then a special meeting of the holders of the Series B
Preferred Stock may, and upon the written request of the holders of not less
than one-fourth of the number of shares of Series B Preferred Stock then
outstanding, addressed to the Secretary of the Company, shall, be called by the
Secretary of the Company, such meeting to be held within 60 days after such call
and within 60 days after the delivery to the Secretary of such request. Such
additional directors, whether elected by written consent or at an annual or a
special meeting, shall serve until the next annual meeting and until their
successors shall be duly elected and qualified, unless their term shall sooner
terminate pursuant to the provisions of this subparagraph. At any meeting for
the purpose of electing such additional directors, the holders of a majority of
the shares of Series B Preferred Stock then outstanding shall constitute a
quorum, and any such meeting shall be valid notwithstanding that a quorum of the
outstanding shares of any other class or classes shall be present, the number of
directors constituting the whole board of directors shall be deemed to be
increased by a number sufficient to carry out the provisions of this
subparagraph. If a vacancy shall occur in the board of directors by reason of
the death, resignation, or inability to act of any such additional director,
such vacancy shall be filled only by vote of the holders of the outstanding
shares of Series B Preferred Stock, voting separately as a single class, acting
by written consent or at any annual meeting or at a special meeting of the
holders of shares of the Series B Preferred Stock requested, called and held in
the same manner as the special meeting hereinabove referred to. Whenever a
default in the Company's obligations to pay dividends on the Series B Preferred
Stock has been cured by the Company, then the right of the holders of the Series
B Preferred Stock to elect directors shall thereupon cease, and, if any such
additional directors were elected by the holders of shares of Series B Preferred
Stock, voting separately as a class, the term of such directors shall then
terminate and the number of directors constituting the whole board of directors
shall be reduced by the number of such terminated directors. The above
provisions for the vesting of such voting rights in the holders of Series B
Preferred Stock shall apply, however, in case of any subsequent default under
this subparagraph.
EXCLUSION OF OTHER RIGHTS. Except as otherwise required by law, the shares
of Series B or C Preferred Stock shall not have any preferences or relative
participating, optional or other special rights except as specifically set forth
above. No shares of any class of the corporation's capital stock shall have more
preemptive or subscription rights.
15
<PAGE> 17
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning any person who was
the beneficial owner of five percent or more of the Company's outstanding Common
Stock as of February 23, 1998. The table also shows information concerning
beneficial ownership by all directors, by each of the executive officers of the
Company and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNERSHIP* OF CLASS
--------------------- --------
<S> <C> <C>
Waste Systems, Inc.(1)...................................... 5,104,448(2) 52.5(2)
910 Pierremont, Suite 312 Shreveport, Louisiana 71106
River Bay Corporation....................................... 565,500(3) 5.8%
P.O. Box 13313 Jackson, Mississippi 39236
American Medical Technologies, Inc.......................... 680,818(4) 7.0%
5847 San Felipe, Suite 900 Houston, Texas 77057
Charles D. Crochet(5)....................................... 158,209 1.6%
910 Pierremont, Suite 312 Shreveport, Louisiana 71106
Dr. Werner Kook............................................. -- --
910 Pierremont, Suite 312 Shreveport, Louisiana 71106
Dr. Clemens Pues............................................ -- --
910 Pierremont, Suite 312 Shreveport, Louisiana 71106
Juergen Thomas.............................................. -- --
910 Pierremont, Suite 312 Shreveport, Louisiana 71106
Curtis W. Crane............................................. -- --
910 Pierremont, Suite 312 Shreveport, Louisiana 71106
Valerie L. Banner........................................... -- --
910 Pierremont, Suite 312 Shreveport, Louisiana 71106
David J. Schoonmaker........................................ -- --
910 Pierremont, Suite 312 Shreveport, Louisiana 71106
All directors and executives as a group (7 persons)......... 158,209 1.6%
</TABLE>
- ---------------
* The number of shares beneficially owned by each director or executive
officer is determined under rules of the Securities and Exchange Commission
(the "Commission"), and the information is not necessarily indicative of
beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which the
individual has the sole or shared voting power or investment power and also
any shares which the individual has the right to acquire within 60 days of
the date hereof through the exercise of any stock option or other right.
Unless otherwise indicated, each person has the sole investment and voting
power (or shares such powers with his or her spouse) with respect to the
shares set forth in the table.
(1) A schedule 13D dated April 17, 1995, reflects that WSI is the beneficial
owner of 5,104,448 shares. Such Schedule 13D reflects that WSI is owned 50%
by Rethmann V & B GmbH & Co., a German corporation
16
<PAGE> 18
controlled by members of the Rethmann family in Germany, and 50% by Gustav
Dieter Edelhoff, Gustav Edelhoff, Heike Edelhoff-Kirchhoff and Heidemarie
Edelhoff, members of the Edelhoff family in Germany. The Rethmann Family and
the Edelhoff Family share voting and dispositive power with respect to the
shares beneficially owned by WSI. The Company has been advised that the
interests in WSI owned by the members of the Edelhoff family have been
transferred to Lobbe Holding GmbH & Co., a German corporation controlled by
members of the Edelhoff family.
(2) Does not include up to 7,000,000 shares of Common Stock issuable upon
conversion of the Series A Preferred Stock.
(3) A Schedule 13D dated October 20, 1994, reflects that River Bay Corporation,
a Mississippi corporation, is the beneficial owner of 865,500 shares and has
sole voting and dispositive power with respect to such shares. The Company
repurchased 300,000 shares from River Bay Corporation in October 1997.
(4) Beneficial ownership determined based solely on filings made under the
Exchange Act.
(5) Includes 6,500 shares held in the name of Mr. Crochet's son, Chase Crochet.
Also included are 112,500 shares which Mr. Crochet has the right to acquire
pursuant to the stock options.
CERTAIN TRANSACTIONS
Set forth below is information concerning the direct and indirect interests
in the transactions discussed in this Information Statement by each person who
was a director or officer of the Company at any time since the beginning of the
Company's last fiscal year.
Dr. Werner Kook has served as chairman of the board of the Company since
October 1995. Dr. Kook has served as a senior officer of various waste
management companies controlled by the Rethmann family in Europe for the past
five years. Members of the Rethmann family and its affiliates own 50% of the
outstanding shares of capital stock of WSI.
Juergen Thomas has served as a director of the Company since February 1994.
Mr. Thomas has served for over 15 years as chief financial officer of various
companies associated with the Edelhoff family in Germany. The Edelhoff family
and its affiliates own 50% of the outstanding capital stock of WSI.
Dr. Clemens Pues has served as a director and vice president of the Company
since October 1995. Dr. Pues has been working with the AIR Lippewerk Recycling
GmbH, a wholly-owned subsidiary of the Rethmann Kreislaufwirtschaft GmbH & Co.
KG, since September 1994.
MATERIAL INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference: The Company's
annual report on Form 10-K for the fiscal year ended September 30, 1997; and the
Company's quarterly report on Form 10-Q for the fiscal quarter ended December
31, 1997.
OTHER MATTERS
The Company's annual report on Form 10-K covering the year ending September
30, 1997 and the Company's quarterly report on Form 10-Q covering the quarter
ending December 31, 1997 accompany this Information Statement.
By Order of the Board of Directors
/s/ CURTIS W. CRANE
CURTIS W. CRANE
February 27, 1998
17
<PAGE> 19
EXHIBIT INDEX
Exhibit A Form of Amendment to the Certificate of Incorporation of 3CI
Complete Compliance Corporation
Exhibit B Form of Certificate of Designation of Series A Preferred Stock
Exhibit C Form of Certificate of Designation of Series B Preferred Stock
Exhibit D Form of Certificate of Designation of Series C Preferred Stock
Exhibit E Form of Exchange Agreement
Exhibit F Form of Stock Purchase and Note Modification Agreement
<PAGE> 1
EXHIBIT A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
3CI COMPLETE COMPLIANCE CORPORATION
3CI Complete Compliance Corporation (the "Corporation"), a corporation
organized and existing under and by virtue of the Delaware General Corporation
Law (the "DGCL"), does hereby certify:
First: That the Board of Directors of the Corporation, by unanimous written
consent pursuant to Section 141(f) of the DGCL, duly adopted resolutions setting
forth a proposed amendment to the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation"), declaring such amendment to be
advisable and calling a meeting of the shareholders of the Corporation for
consideration thereof. The amendment adopted provides as follows:
That Article 4 of the Certificate of Incorporation shall be amended to read
in its entirety as follows:
"4. The total number of shares of stock which the corporation shall
have authority to issue is 56,500,000 shares, of which 40,450,000 shares
shall be common stock, par value $.01 per share, and 16,050,000 of which
shares shall be preferred stock, without par value. The designations,
rights, preferences, privileges and voting powers of the preferred stock,
and any restrictions and qualifications thereof, shall be determined by the
Board of Directors."
Second: That such amendment was duly adopted in accordance with the
provisions of Sections 228 and 242 of the Delaware General Corporation Law.
Third: This Certificate of Amendment shall become effective upon the filing
hereof in the Office of the Secretary of State of the State of Delaware.
In Witness Whereof, the Corporation has caused this Certificate of
Amendment to be duly executed by its President and attested to by its Secretary
as of , 1998.
<TABLE>
<S> <C>
ATTEST: 3CI COMPLETE COMPLIANCE
CORPORATION
By: By:
- -------------------------------------------- --------------------------------------------
Name: Curtis W. Crane Name: Charles D. Crochet
Secretary President
</TABLE>
<PAGE> 1
EXHIBIT B
3CI COMPLETE COMPLIANCE CORPORATION
CERTIFICATE OF DESIGNATIONS
OF
SERIES A PREFERRED STOCK
We, Charles D. Crochet and Curtis W. Crane, the President and Secretary,
respectively, of 3CI Complete Compliance Corporation, a Delaware corporation
(the "Corporation") do hereby certify that the following resolution of the Board
of Directors of the Corporation has been duly adopted in accordance with
authority expressly accorded to the Board of Directors by Article 4 of the
Certificate of Incorporation, as amended, of the Corporation (the "Certificate
of Incorporation"), and in accordance with the provisions of Section 151 of the
Delaware General Corporation Law:
RESOLVED, that the Board of Directors of the Corporation, pursuant to
authority expressly vested in it by the provisions of the Certificate of
Incorporation of the Corporation, hereby establishes a series of preferred stock
of the Corporation, authorizes the issuance thereof, and hereby fixes the
designations, rights, preferences, privileges and voting powers, in addition to
those set forth in the Certificate of Incorporation, as follows:
1. Designation of Series. One million shares of the preferred stock,
without par value, of the Corporation shall constitute a series of preferred
stock designated as Series A Preferred Stock (the "Series A Preferred Stock")
with the designations, rights, preferences, privileges and voting powers set
forth below:
2. Dividends.
(a) The holders of Series A Preferred Stock shall not be entitled to
receive any fixed dividends and shall be entitled to receive such cash dividends
as may be declared from time to time by the Board of Directors in its
discretion, from any assets legally available for the payment of dividends;
however, for so long as any shares of Series A Preferred Stock shall be
outstanding, without the written consent of the holders of a majority in
interest of the Series A Preferred Stock, the Corporation shall not (i) purchase
or redeem any shares of its common stock, par value $.01 per share ("Common
Stock"), or (ii) declare, pay or set apart for any payment any dividend on its
Common Stock. Notwithstanding the foregoing, the holders of shares of Series A
Preferred Stock shall be entitled to receive, when, and if declared by the
Corporation's Board of Directors out of assets of the Corporation legally
available for such payment, cumulative dividends from the second anniversary of
the original issuance date of the Series A Preferred Stock, at the rate of
$.5775 per share per annum, and no more, payable quarterly on the 15th day of
July, October, January and April of each year,commencing with a payment on July
15, 1999, accrued from the second anniversary of the original issuance date of
the Series A Preferred Stock. Such dividends shall be cumulative from the second
anniversary of the original issuance date of the Series A Preferred Stock.
Accruals of dividends shall not bear interest.
(b) Before any dividends (other than dividends payable in capital stock
ranking junior to the Series A Preferred Stock both as to dividends and upon
liquidation) on, or any distribution in respect of, any class or classes of
stock of the Corporation ranking junior to the Series A Preferred Stock as to
dividends or upon liquidation, shall be declared or paid or set apart for
payment, and before any purchase or redemption of any such stock, the holders of
Series A Preferred Stock shall have received payment in full of all dividends,
if any, in arrears on the Series A Preferred Stock. No dividend shall be
declared on any series of preferred stock ranking on a parity with the Series A
Preferred Stock as to dividends unless there shall likewise be or have been
declared on the shares of Series A Preferred Stock at the time outstanding a
dividend of like kind for all dividends periods coinciding with or ending before
such dividend period, ratably in proportion to the respective annual dividend
rates per annum fixed therefor as herein or in the Certificate of Incorporation
provided.
B-1
<PAGE> 2
3. Redemption. The Series A Preferred Stock shall be subject to redemption
by the Corporation as follows:
(a) The shares of Series A Preferred Stock may be redeemed at any time
on or after the second anniversary of the original issuance date of the
Series A Preferred Stock at the option of the Corporation in whole or, from
time to time, in part, in any such case at a per share redemption price
equal to $7.00, plus accrued dividends, if any.
(b) Notice of every redemption of Series A Preferred Stock shall be
given by mailing notice not less than 30 days before the date fixed for
such redemption to each holder of record of shares of Series A Preferred
Stock so to be redeemed, and shall be sufficiently given if the Corporation
shall cause a copy thereof to be mailed to such holders of record at their
respective addresses as the same shall appear on the books of the
Corporation, by first class mail, postage prepaid; provided, however, that
the failure to mail such notice to one or more of such holders shall not
affect the validity of such redemption as to the other holders.
(c) In case of redemption of only a part of the Series A Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected
by lot.
(d) If any notice of redemption shall have been duly given or if the
Corporation shall have granted to a bank or trust company irrevocable
written authorization promptly to give or complete such notice, and if, on
or before the redemption date specified therein, all funds necessary for
such redemption shall have been deposited by the Corporation with the bank
or trust company designated in such notice, in trust for the pro rata
benefit of the holders of the shares so called for redemption, then,
notwithstanding that any certificate for shares so called for redemption
shall not have been surrendered for cancellation, from and after the time
of such deposit (or from and after the redemption date if such notice shall
fail to state that the holders of the shares so called for redemption may
receive their redemption price at any time after such deposit) all shares
with respect to which such deposit shall have been made shall no longer be
deemed to be outstanding, and all rights with respect to such shares
forthwith shall cease and terminate, except only the right of the holders
of the certificates therefor, upon surrender thereof, to receive the
redemption price thereof out of the funds so deposited, without interest,
and the right to exercise, on or before the close of business on the date
fixed for redemption, any privileges of conversion applicable to the Series
A Preferred Stock. Any interest accrued on such funds shall be paid to the
Corporation from time to time.
(e) All funds so set aside or deposited, as the case may be, and
unclaimed at the end of one year from such redemption date shall be
released or repaid to the Corporation, after which the holders of the
shares so called for redemption shall look only to the Corporation for the
payment thereof; provided, however, that any funds set aside or deposited
which shall not be required for redemption because of the exercise of any
privilege of conversion after the date of setting aside or deposit, as the
case may be, shall be released or repaid to the Corporation immediately
after such exercise.
(f) Any shares of the Series A Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation or into Common Stock shall be deemed
retired and shall be canceled and may not under any circumstances
thereafter be reissued or otherwise disposed of by the Corporation, and the
Corporation shall from time to time and at least once each year cause all
such shares to be retired in the manner provided by law.
4. Conversion of Series A Preferred Stock.
(a) The Series A Preferred Stock shall be convertible at the option of the
record holder thereof, at any time after the second anniversary of the original
issuance thereof, in whole, or from time to time in part, in the manner
hereinafter provided, into Common Stock. Except as otherwise specifically
provided herein, no payment or adjustment shall be made upon such conversion for
dividends on any shares of Series A Preferred Stock which shall be converted or
for the declaration or payment of any dividend on or other distribution in
respect of any shares of Common Stock issuable upon such conversion.
B-2
<PAGE> 3
(b) The Series A Preferred Stock may be converted at any time on or after
the second anniversary of the original issuance thereof into full shares of
Common Stock of the Corporation based on a Conversion Rate (defined below) of
Series A Preferred Stock to Common Stock equal to $7.00 divided by the Market
Price (defined below) of the Common Stock on the date of the related Conversion
Notice (defined below) (the conversion rate from time to time in effect being
hereinafter referred to as the "Conversion Rate"); provided, however, that the
Conversion Rate of Series A Preferred Stock to Common Stock shall never be
greater than 1 to 7 (i.e., all 1,000,000 shares of Series A Preferred Stock
shall be convertible into an aggregate of no more than 7,000,000 shares of
Common Stock); and provided further that the Conversion Rate of Series A
Preferred Stock to Common Stock shall never be less than 1 to 1 (i.e., all
1,000,000 shares of Series A Preferred Stock shall be convertible into no fewer
than an aggregate of 1,000,000 shares of Common Stock), subject to such
adjustments, if any, of the Conversion Rate and the securities or other property
issuable upon such conversion pursuant to the provisions of subparagraph (f)
hereof. If at any time shares of Series A Preferred Stock are presented for
conversion, the Company does not have sufficient shares of Common Stock
authorized for issuance upon conversion thereof, then the converting holder
shall receive the maximum number of shares of Common Stock available for
issuance by the Company upon such conversion, and with respect to the remaining
shares of Series A Preferred Stock that the Company is unable to convert to
Common Stock, the converting holder shall receive a note of the Company (a
"Conversion Note") in a principal amount equal to the number of shares of Series
A Preferred Stock that remains unconverted times $7.00, such Conversion Note to
bear interest at the rate of 8.25% per annum, with such interest to be
cumulative from the date of original issuance of the Series A Preferred Stock.
If more than one holder of Series A Preferred Stock presents shares of Series A
Preferred Stock for conversion, and the Company does not have sufficient shares
of Common Stock authorized for issuance upon such conversion, then the number of
shares of Common Stock issuable to each such converting holder shall be
allocated pro rata among all converting holders based on the number of shares of
Series A Preferred Stock presented for conversion, and each such converting
holder shall receive a Conversion Note in the principal amount determined as
provided in this paragraph (b).
(c) To convert Series A Preferred Stock into Common Stock, a holder of
Series A Preferred Stock shall send to the Secretary of the Company a dated
notice (a "Conversion Notice") setting for the number of shares of Series A
Preferred Stock to be converted, along with the certificate representing the
Series A Preferred Stock to be converted. Upon receipt of a Conversion Notice
and the surrendered certificate representing the Series A Preferred Stock to be
converted into Common Stock, the Corporation shall cause a certificate
representing the Common Stock issued pursuant to such conversion (and, if
applicable, a Conversion Note in the principal amount determined as set forth in
paragraph (b) above) to be delivered to the converting holder, along with a
certificate representing any shares of Series A Preferred Stock that were not
converted into Common Stock.
(d) All shares of Series A Preferred Stock that have not been redeemed or
converted into Common Stock on or before the fifth anniversary of the original
issuance of the Series A Preferred Stock shall automatically, without further
action of the Company or any holder of Series A Preferred Stock, be converted
into Common Stock based on the Conversion Rate then in effect. Upon such
automatic conversion, the Company shall send a notice to each record holder of
Series A Preferred Stock that such shares of Series A Preferred Stock have been
converted into Common Stock, along with appropriate instructions for the
surrender of certificates representing Series A Preferred Stock in exchange for
certificates representing the Common Stock into which such Series A Preferred
Stock has been converted. Upon automatic conversion of Series A Preferred Stock
pursuant to this paragraph, the shares of Series A Preferred Stock shall no
longer be considered outstanding, and the certificates representing such Series
A Preferred Stock shall be void for all purposes except for the purpose of
surrender to the Company in exchange for the certificates representing the
Common Stock into which such Series A Preferred Stock was converted.
(e) Market Price means (i) the closing sale price on the date of a
Conversion Notice of a share of Common Stock as reported on the principal
securities exchange on which the shares of Common Stock are then listed or
admitted to trading or (ii) if not so listed, the average of the closing bid and
ask prices for a share of Common Stock on that date as quoted on the Nasdaq
National Market System or Nasdaq Small-Cap
B-3
<PAGE> 4
Market or (iii) if not quoted on Nasdaq, the average of closing bid and ask
prices for a share of Common Stock as quoted by the National Quotations Bureau's
pink sheets or the National Association of Securities Dealer's OTC Bulletin
Board System. If the price of a share of Common Stock shall not be so quoted,
"Market Price" shall mean the fair market value of a share of Common Stock as
the holders of the Series A Preferred Stock of the Corporation shall mutually
agree or, in the absence of such an agreement, as determined by an investment
banking firm, with expertise in the Corporation's area of business, selected by
the holders of the Series A Preferred Stock and approved by the Corporation,
such approval not to be unreasonably withheld.
(f) The Conversion Rate shall be subject to the following adjustments:
(i) While any shares of Series A Preferred Stock are outstanding, in
case the Corporation shall subdivide the outstanding shares of Common Stock
into a greater number of shares of Common Stock or combine the outstanding
shares of Common Stock into a smaller number of shares of Common Stock, the
Conversion Rate in effect immediately before such subdivision or
combination, as the case may be, shall be proportionately increased or
decreased (adjusted to the nearest, or if there shall be no nearest, then
to the next lower, thousandth of a share of Common Stock), as the case may
require, such increase or decrease, as the case may be, to become effective
at the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(ii) No adjustment of the Conversion Rate shall be made by reason of
the issuance of shares of Common Stock in exchange for cash, property, or
services.
(iii) In case of any reclassification or change of outstanding shares
of Common Stock, or in case of any consolidation or merger of the
Corporation with or into another corporation, or in case of any sale or
conveyance to another corporation of all or substantially all of the
property of the Corporation, each holder of shares of the Series A
Preferred Stock then outstanding shall have the right thereafter, so long
as his conversion right hereunder shall exist, to convert such shares into
the kind and number or amount of shares of stock and other securities and
property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance, by a holder of the number of shares of Common
Stock of the Corporation into which such shares of the Series A Preferred
Stock might have been converted immediately before such reclassification,
change, consolidation, merger, sale, or conveyance, and shall have no other
conversion rights under these provisions; provided, that effective
provision shall be made, in the articles or certificate of incorporation of
the resulting or surviving corporation or otherwise, so that the provisions
set forth herein for the protection of the conversion rights of the Series
A Preferred Stock shall thereafter be applicable, as nearly as reasonably
may be, to any such other shares of stock and other securities and property
deliverable upon conversion of the Series A Preferred Stock remaining
outstanding or other convertible preferred stock received by the holders in
place thereof; and provided, further, that any such resulting or surviving
corporation shall expressly assume the obligation to deliver, upon the
exercise of the conversion privilege, such shares, securities or property
as the holders of the Series A Preferred Stock remaining outstanding, or
other convertible preferred stock received by the holders in place thereof,
shall be entitled to receive pursuant to the provisions hereof, and to make
provisions for the protection of the conversion right as above provided.
The subdivision or combination of shares of Common Stock at any time
outstanding into a greater or lesser number of shares of Common Stock
(whether with or without par value) shall not be deemed to be a
reclassification of the shares of Common Stock of the Corporation for the
purposes of this subparagraph (iii).
(g) No fraction of a share of Common Stock shall be issued upon any
conversion, but, in lieu thereof, there shall be paid, to the holder of shares
of Series A Preferred Stock surrendered for conversion as soon as practicable
after the date such shares of Series A Preferred Stock are surrendered for
conversion, an amount in cash equal to the same fraction of the market value of
a full share of Common Stock as shall be determined, in good faith by the board
of directors of the Corporation.
5. Dissolution. In the event of the dissolution, liquidation or winding up
of the affairs of the Corporation, whether voluntary or involuntary, or in the
event of its insolvency, the assets of the Corporation
B-4
<PAGE> 5
shall be distributed among the holders of its capital stock in accordance with
the following schedule of priorities and preferences:
(a) There shall be paid to the holders of the Series A Preferred Stock
an amount equal to that which would have been payable pursuant to Section
3(a) if the Series A Preferred Stock had been redeemed on the date of such
payment before any distribution of assets or payment shall be made to the
holders of any other class of capital stock of the Corporation. If the
assets of the Corporation available for distribution to the holders of
Series A Preferred Stock shall be insufficient to permit payment to the
holders of the Series A Preferred Stock of the full amount or amounts
aforesaid, then the entire assets of the Corporation shall be distributed
ratably among the holders of the Series A Preferred Stock then outstanding
according to the number of shares held by each.
(b) After the amounts provided by subparagraph (a) above have been
paid or distributed, any assets remaining shall be paid to or distributed
among the holders of Common Stock pro rata on a per-share basis.
(c) Neither the consolidation, nor merger of the Corporation into or
with another corporation or corporations, nor the merger or consolidation
of another corporation or corporations with or into the Corporation, nor a
reorganization of the Corporation, nor the purchase or redemption of all or
part of the outstanding shares of any class or classes of the stock of the
Corporation, nor a sale or transfer of the property and business of the
Corporation as, or substantially as, an entity, shall be deemed a
liquidation, dissolution, or winding up of the affairs of the Corporation,
within the meaning of any of the provisions of this Section 5.
6. Voting Rights.
(a) Generally. Except as otherwise required by law or expressly provided
for herein, the holders of Series A Preferred Stock shall have no voting rights.
(i) Defaults on Series A Preferred Stock. If and when the Corporation
shall be in default in the payment of dividends on the Series A Preferred
Stock, and such default continues for a period of two fiscal quarters, then
the holders of the outstanding shares of Series A Preferred Stock, voting
separately as a single class, shall become entitled to elect two directors
of the Corporation, such additional directors to serve in addition to the
directors then in office. Such right to elect additional directors may be
exercised (A) by action taken by the written consent of the holders of a
majority of the shares of Series A Preferred Stock then outstanding, (B) at
any annual meeting of stockholders or (C) within the limitations
hereinafter provided, at a special meeting of stockholders held for such
purpose. If such default shall occur more than two fiscal quarters
preceding the date of the next annual meeting of stockholders as fixed by
the Bylaws of the Corporation, then a special meeting of the holders of the
Series A Preferred Stock may, and upon the written request of the holders
of not less than one-fourth of the number of shares of Series A Preferred
Stock then outstanding, addressed to the Secretary of the Corporation,
shall, be called by the Secretary of the Corporation, such meeting to be
held within 60 days after such call and within 60 days after the delivery
to the Secretary of such request. Such additional directors, whether
elected by written consent or at an annual or a special meeting, shall
serve until the next annual meeting and until their successors shall be
duly elected and qualified, unless their term shall sooner terminate
pursuant to the provisions of this subparagraph. At any meeting for the
purpose of electing such additional directors, the holders of a majority of
the shares of Series A Preferred Stock then outstanding shall constitute a
quorum, and any such meeting shall be valid notwithstanding that a quorum
of the outstanding shares of any other class or classes shall be present,
the number of directors constituting the whole board of directors shall be
deemed to be increased by a number sufficient to carry out the provisions
of this subparagraph. If a vacancy shall occur in the board of directors by
reason of the death, resignation, or inability to act of any such
additional director, such vacancy shall be filled only by vote of the
holders of the outstanding shares of Series A Preferred Stock, voting
separately as a single class, acting by written consent or at any annual
meeting or at a special meeting of the holders of shares of the Series A
Preferred Stock requested, called and held in the same manner as the
special meeting hereinabove referred to.
B-5
<PAGE> 6
Whenever a default in the Corporation's obligations to pay dividends on the
Series A Preferred Stock has been cured by the Corporation, then the right
of the holders of the Series A Preferred Stock to elect directors shall
thereupon cease, and, if any such additional directors were elected by the
holders of shares of Series A Preferred Stock, voting separately as a
class, the term of such directors shall then terminate, and the number of
directors constituting the whole board of directors shall be reduced by the
number of such terminated directors. The above provisions for the vesting
of such voting rights in the holders of Series A Preferred Stock shall
apply, however, in case of any subsequent default under this subparagraph.
7. Exclusion of Other Rights. Except as otherwise required by law, the
shares of Series A Preferred Stock shall not have any preferences or relative
participating, optional or other special rights except as specifically set forth
herein. No shares of any class of the corporation's capital stock shall have
more preemptive or subscription rights.
IN WITNESS WHEREOF, this Certificate of Designation has been signed by
Charles D. Crochet and Curtis W. Crane, the President and the Secretary,
respectively, of the Corporation, as of the 24th day of June, 1997.
3CI COMPLETE COMPLIANCE
CORPORATION
By:
------------------------------------
Charles D. Crochet, President
ATTEST:
- --------------------------------------
Curtis W. Crane, Secretary
B-6
<PAGE> 1
EXHIBIT C
3CI COMPLETE COMPLIANCE CORPORATION
CERTIFICATE OF DESIGNATIONS
OF
SERIES B PREFERRED STOCK
We, Charles D. Crochet and Curtis W. Crane, the President and Secretary,
respectively, of 3CI Complete Compliance Corporation, a Delaware corporation
(the "Corporation") do hereby certify that the following resolution of the Board
of Directors of the Corporation has been duly adopted in accordance with
authority expressly accorded to the Board of Directors by Article 4 of the
Certificate of Incorporation, as amended, of the Corporation (the "Certificate
of Incorporation"), and in accordance with the provisions of Section 151 of the
Delaware General Corporation Law:
Resolved, that the Board of Directors of the Corporation, pursuant to
authority expressly vested in it by the provisions of the Certificate of
Incorporation of the Corporation, hereby establishes a series of preferred stock
of the Corporation, authorizes the issuance thereof, and hereby fixes the
designations, rights, preferences, privileges and voting powers, in addition to
those set forth in the Certificate of Incorporation, as follows:
1. Designation of Series. Seven million shares of the preferred stock,
without par value, of the Corporation shall constitute a series of preferred
stock designated as Series B Preferred Stock (the "Series B Preferred Stock")
with the designations, rights, preferences, privileges and voting powers set
forth below:
2. Dividends.
(a) The holders of Series B Preferred Stock shall not be entitled to
receive any fixed dividends and shall be entitled to receive such cash
dividends as may be declared from time to time by the Board of Directors in
its discretion, from any assets legally available for the payment of
dividends; however, for so long as any shares of Series B Preferred Stock
shall be outstanding, without the written consent of the holders of a
majority in interest of the Series B Preferred Stock, the Corporation shall
not (i) purchase or redeem any shares of its common stock, par value $.01
per share ("Common Stock"), or (ii) declare, pay or set apart for any
payment any dividend on its Common Stock. Notwithstanding the foregoing,
the holders of shares of Series B Preferred Stock shall be entitled to
receive, when, and if declared by the Corporation's Board of Directors out
of assets of the Corporation legally available for such payment, cumulative
dividends from the second anniversary of the original issuance date of the
Series B Preferred Stock, at the rate of $.0825 per share per annum, and no
more, payable quarterly on the 15th day of July, October, January and April
of each year, commencing with a payment on July 15, 1999, of dividends
accrued from the second anniversary of the original issuance date of the
Series B Preferred Stock. Such dividends shall be cumulative from the
second anniversary of the original issuance date of the Series B Preferred
Stock. Accruals of dividends shall not bear interest.
(b) Before any dividends (other than dividends payable in capital
stock ranking junior to the Series B Preferred Stock both as to dividends
and upon liquidation) on, or any distribution in respect of, any class or
classes of stock of the Corporation ranking junior to the Series B
Preferred Stock as to dividends or upon liquidation, shall be declared or
paid or set apart for payment, and before any purchase or redemption of any
such stock, the holders of Series B Preferred Stock shall have received
payment in full of all dividends, if any, in arrears on the Series B
Preferred Stock. No dividend shall be declared on any series of preferred
stock ranking on a parity with the Series B Preferred Stock as to dividends
unless there shall likewise be or have been declared on the shares of
Series B Preferred Stock at the time outstanding a dividend of like kind
for all dividends periods coinciding with or ending before such dividend
period, ratably in proportion to the respective annual dividend rates per
annum fixed therefor as herein or in the Certificate of Incorporation
provided.
C-1
<PAGE> 2
3. Redemption. The Series B Preferred Stock shall be subject to redemption
by the Corporation as follows:
(a) The shares of Series B Preferred Stock may be redeemed at any time
on or after the second anniversary of the original issuance date of the
Series B Preferred Stock at the option of the Corporation in whole or, from
time to time, in part, in any such case at a per share redemption price
equal to $1.00, plus accrued dividends, if any.
(b) Notice of every redemption of Series B Preferred Stock shall be
given by mailing notice not less than 30 days before the date fixed for
such redemption to each holder of record of shares of Series B Preferred
Stock so to be redeemed, and shall be sufficiently given if the Corporation
shall cause a copy thereof to be mailed to such holders of record at their
respective addresses as the same shall appear on the books of the
Corporation, by first class mail, postage prepaid; provided, however, that
the failure to mail such notice to one or more of such holders shall not
affect the validity of such redemption as to the other holders.
(c) In case of redemption of only a part of the Series B Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected
by lot.
(d) If any notice of redemption shall have been duly given or if the
Corporation shall have granted to a bank or trust company irrevocable
written authorization promptly to give or complete such notice, and if, on
or before the redemption date specified therein, all funds necessary for
such redemption shall have been deposited by the Corporation with the bank
or trust company designated in such notice, in trust for the pro rata
benefit of the holders of the shares so called for redemption, then,
notwithstanding that any certificate for shares so called for redemption
shall not have been surrendered for cancellation, from and after the time
of such deposit (or from and after the redemption date if such notice shall
fail to state that the holders of the shares so called for redemption may
receive their redemption price at any time after such deposit) all shares
with respect to which such deposit shall have been made shall no longer be
deemed to be outstanding, and all rights with respect to such shares
forthwith shall cease and terminate, except only the right of the holders
of the certificates therefor, upon surrender thereof, to receive the
redemption price thereof out of the funds so deposited, without interest,
and the right to exercise, on or before the close of business on the date
fixed for redemption, any privileges of conversion applicable to the Series
B Preferred Stock. Any interest accrued on such funds shall be paid to the
Corporation from time to time.
(e) All funds so set aside or deposited, as the case may be, and
unclaimed at the end of one year from such redemption date shall be
released or repaid to the Corporation, after which the holders of the
shares so called for redemption shall look only to the Corporation for the
payment thereof; provided, however, that any funds set aside or deposited
which shall not be required for redemption because of the exercise of any
privilege of conversion after the date of setting aside or deposit, as the
case may be, shall be released or repaid to the Corporation immediately
after such exercise.
(f) Any shares of the Series B Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation, or converted into Common Stock shall
be deemed retired and shall be canceled and may not under any circumstances
thereafter be reissued or otherwise disposed of by the Corporation, and the
Corporation shall from time to time and at least once each year cause all
such shares to be retired in the manner provided by law.
4. Conversion of Series B Preferred Stock.
(a) The Series B Preferred Stock shall be convertible at the option of
the record holder thereof, at any time after the second anniversary of the
original issuance thereof, in whole, or from time to time in part, in the
manner hereinafter provided, into Common Stock. Except as otherwise
specifically provided herein, no payment or adjustment shall be made upon
such conversion for dividends on any shares of Series B Preferred Stock
which shall be converted or for the declaration or payment of any dividend
on or other distribution in respect of any shares of Common Stock issuable
upon such conversion.
C-2
<PAGE> 3
(b) The Series B Preferred Stock may be converted at any time on or
after the second anniversary of the original issuance thereof, in whole but
not in part, into full shares of Common Stock of the Corporation with a
Market Price (defined below) of $7,000,000 based on a Conversion Rate (the
"Conversion Rate") determined by (i) dividing $7,000,000 by the Market
Price of the Common Stock on the date of the related Conversion Notice
(defined below), (ii) plus an amount of cash determined by subtracting the
quotient calculated in (i) and subtracting from $7,000,000; provided,
however, that at the option of the holder, the holder may convert the
Series B Preferred Stock into solely that number of shares of Common stock
determined as provided in (i), and forego obtaining the additional Common
Stock issuable as calculated in (ii), subject to such adjustments, if any,
of the Conversion Rate and the securities or other property issuable upon
such conversion pursuant to the provisions of subparagraph (f) hereof.
(c) To convert Series B Preferred Stock into Common Stock, a holder of
Series B Preferred Stock shall send to the Secretary of the Company a dated
notice (a "Conversion Notice") setting for the number of shares of Series B
Preferred Stock to be converted, along with the certificate representing
the Series B Preferred Stock to be converted. Upon receipt of a Conversion
Notice and the surrendered certificate representing the Series B Preferred
Stock to be converted into Common Stock, the Corporation shall cause a
certificate representing the Common Stock issued pursuant to such
conversion to be delivered to the converting holder, along with a
certificate representing any shares of Series B Preferred Stock that were
not converted into Common Stock.
(d) All shares of Series B Preferred Stock that have not been redeemed
or converted into Common Stock on or before the fifth anniversary of the
original issuance of the Series B Preferred Stock shall automatically,
without further action of the Company or any holder of Series B Preferred
Stock, be converted into Common Stock based on the Conversion Rate then in
effect. Upon such automatic conversion, the Company shall send a notice to
each record holder of Series B Preferred Stock that such shares of Series B
Preferred Stock have been converted into Common Stock, along with
appropriate instructions for the surrender of certificates representing
Series B Preferred Stock in exchange for certificates representing the
Common Stock into which such Series B Preferred Stock has been converted.
Upon automatic conversion of Series B Preferred Stock pursuant to this
paragraph, the shares of Series B Preferred Stock shall no longer be
considered outstanding, and the certificates representing such Series B
Preferred Stock shall be void for all purposes except for the purpose of
surrender to the Company in exchange for the certificates representing the
Common Stock into which such Series B Preferred Stock was converted.
(e) Market Price means (i) the closing sale price on the date of a
Conversion Notice of a share of Common Stock as reported on the principal
securities exchange on which the shares of Common Stock are then listed or
admitted to trading or (ii) if not so listed, the average of the closing
bid and ask prices for a share of Common Stock on that date as quoted on
the Nasdaq National Market System or Nasdaq Small-Cap Market or (iii) if
not quoted on Nasdaq, the average of closing bid and ask prices for a share
of Common Stock as quoted by the National Quotations Bureau's pink sheets
or the National Association of Securities Dealer's OTC Bulletin Board
System. If the price of a share of Common Stock shall not be so quoted,
"Market Price" shall mean the fair market value of a share of Common Stock
as determined by an investment banking firm, with expertise in the
Corporation's area of business, appointed by the judge of the 269th
Judicial District Court, Harris County, Texas.
(f) The Conversion Rate shall be subject to the following adjustments:
(i) While any shares of Series B Preferred Stock are outstanding,
in case the Corporation shall subdivide the outstanding shares of Common
Stock into a greater number of shares of Common Stock or combine the
outstanding shares of Common Stock into a smaller number of shares of
Common Stock, the Conversion Rate in effect immediately before such
subdivision or combination, as the case may be, shall be proportionately
increased or decreased (adjusted to the nearest, or if there shall be no
nearest, then to the next lower, thousandth of a share of Common Stock),
as the case may require, such increase or decrease, as the case may be,
to become effective at the opening
C-3
<PAGE> 4
of business on the day following the day upon which such subdivision or
combination becomes effective.
(ii) No adjustment of the Conversion Rate shall be made by reason
of the issuance of shares of Common Stock in exchange for cash,
property, or services.
(iii) In case of any reclassification or change of outstanding
shares of Common Stock, or in case of any consolidation or merger of the
Corporation with or into another corporation, or in case of any sale or
conveyance to another corporation of all or substantially all of the
property of the Corporation, each holder of shares of the Series B
Preferred Stock then outstanding shall have the right thereafter, so
long as his conversion right hereunder shall exist, to convert such
shares into the kind and number or amount of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance, by a holder of the number of
shares of Common Stock of the Corporation into which such shares of the
Series B Preferred Stock might have been converted immediately before
such reclassification, change, consolidation, merger, sale, or
conveyance, and shall have no other conversion rights under these
provisions; provided, that effective provision shall be made, in the
articles or certificate of incorporation of the resulting or surviving
corporation or otherwise, so that the provisions set forth herein for
the protection of the conversion rights of the Series B Preferred Stock
shall thereafter be applicable, as nearly as reasonably may be, to any
such other shares of stock and other securities and property deliverable
upon conversion of the Series B Preferred Stock remaining outstanding or
other convertible preferred stock received by the holders in place
thereof; and provided, further, that any such resulting or surviving
corporation shall expressly assume the obligation to deliver, upon the
exercise of the conversion privilege, such shares, securities or
property as the holders of the Series B Preferred Stock remaining
outstanding, or other convertible preferred stock received by the
holders in place thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provisions for the protection of the
conversion right as above provided. The subdivision or combination of
shares of Common Stock at any time outstanding into a greater or lesser
number of shares of Common Stock (whether with or without par value)
shall not be deemed to be a reclassification of the shares of Common
Stock of the Corporation for the purposes of this subparagraph (iii).
(g) No fraction of a share of Common Stock shall be issued upon any
conversion, but, in lieu thereof, there shall be paid, to the holder of
shares of Series B Preferred Stock surrendered for conversion as soon as
practicable after the date such shares of Series B Preferred Stock are
surrendered for conversion, an amount in cash equal to the same fraction of
the market value of a full share of Common Stock as shall be determined, in
good faith by the board of directors of the Corporation.
5. Dissolution. In the event of the dissolution, liquidation or winding up
of the affairs of the Corporation, whether voluntary or involuntary, or in the
event of its insolvency, the assets of the Corporation shall be distributed
among the holders of its capital stock in accordance with the following schedule
of priorities and preferences:
(a) There shall be paid to the holders of the Series B Preferred Stock
an amount equal to that which would have been payable pursuant to Section
3(a) if the Series B Preferred Stock had been redeemed on the date of such
payment before any distribution of assets or payment shall be made to the
holders of any other class of capital stock of the Corporation. If the
assets of the Corporation available for distribution to the holders of
Series B Preferred Stock shall be insufficient to permit payment to the
holders of the Series B Preferred Stock of the full amount or amounts
aforesaid, then the entire assets of the Corporation shall be distributed
ratably among the holders of the Series B Preferred Stock then outstanding
according to the number of shares held by each.
(b) After the amounts provided by subparagraph (a) above have been
paid or distributed, any assets remaining shall be paid to or distributed
among the holders of Common Stock pro rata on a per-share basis.
C-4
<PAGE> 5
(c) Neither the consolidation, nor merger of the Corporation into or
with another corporation or corporations, nor the merger or consolidation
of another corporation or corporations with or into the Corporation, nor a
reorganization of the Corporation, nor the purchase or redemption of all or
part of the outstanding shares of any class or classes of the stock of the
Corporation, nor a sale or transfer of the property and business of the
Corporation as, or substantially as, an entity, shall be deemed a
liquidation, dissolution, or winding up of the affairs of the Corporation,
within the meaning of any of the provisions of this Section 5.
6. Voting Rights.
(a) Generally. Except as otherwise required by law or expressly provided
for herein, the holders of Series B Preferred Stock shall have no voting rights.
(i) Defaults on Series B Preferred Stock. If and when the Corporation
shall be in default in the payment of dividends on the Series B Preferred
Stock, and such default continues for a period of two fiscal quarters, then
the holders of the outstanding shares of Series B Preferred Stock, voting
separately as a single class, shall become entitled to elect two directors
of the Corporation, such additional directors to serve in addition to the
directors then in office. Such right to elect additional directors may be
exercised (A) by action taken by the written consent of the holders of a
majority of the shares of Series B Preferred Stock then outstanding, (B) at
any annual meeting of stockholders or (C) within the limitations
hereinafter provided, at a special meeting of stockholders held for such
purpose. If such default shall occur more than two fiscal quarters
preceding the date of the next annual meeting of stockholders as fixed by
the Bylaws of the Corporation, then a special meeting of the holders of the
Series B Preferred Stock may, and upon the written request of the holders
of not less than one-fourth of the number of shares of Series B Preferred
Stock then outstanding, addressed to the Secretary of the Corporation,
shall, be called by the Secretary of the Corporation, such meeting to be
held within 60 days after such call and within 60 days after the delivery
to the Secretary of such request. Such additional directors, whether
elected by written consent or at an annual or a special meeting, shall
serve until the next annual meeting and until their successors shall be
duly elected and qualified, unless their term shall sooner terminate
pursuant to the provisions of this subparagraph. At any meeting for the
purpose of electing such additional directors, the holders of a majority of
the shares of Series B Preferred Stock then outstanding shall constitute a
quorum, and any such meeting shall be valid notwithstanding that a quorum
of the outstanding shares of any other class or classes shall be present,
the number of directors constituting the whole board of directors shall be
deemed to be increased by a number sufficient to carry out the provisions
of this subparagraph. If a vacancy shall occur in the board of directors by
reason of the death, resignation, or inability to act of any such
additional director, such vacancy shall be filled only by vote of the
holders of the outstanding shares of Series B Preferred Stock, voting
separately as a single class, acting by written consent or at any annual
meeting or at a special meeting of the holders of shares of the Series B
Preferred Stock requested, called and held in the same manner as the
special meeting hereinabove referred to. Whenever a default in the
Corporation's obligations to pay dividends on the Series B Preferred Stock
has been cured by the Corporation, then the right of the holders of the
Series B Preferred Stock to elect directors shall thereupon cease, and, if
any such additional directors were elected by the holders of shares of
Series B Preferred Stock, voting separately as a class, the term of such
directors shall then terminate, and the number of directors constituting
the whole board of directors shall be reduced by the number of such
terminated directors. The above provisions for the vesting of such voting
rights in the holders of Series B Preferred Stock shall apply, however, in
case of any subsequent default under this subparagraph.
7. Exclusion of Other Rights. Except as otherwise required by law, the
shares of Series B Preferred Stock shall not have any preferences or relative
participating, optional or other special rights except as specifically set forth
herein. No shares of any class of the corporation's capital stock shall have
more preemptive or subscription rights.
C-5
<PAGE> 6
IN WITNESS WHEREOF, this Certificate of Designation has been signed by
Charles D. Crochet and Curtis W. Crane, the President and the Secretary,
respectively, of the Corporation, as of the 4th day of June, 1997.
3CI COMPLETE COMPLIANCE
CORPORATION
By:
----------------------------------
Charles D. Crochet, President
ATTEST:
- ------------------------------------
Curtis W. Crane, Secretary
C-6
<PAGE> 1
EXHIBIT D
3CI COMPLETE COMPLIANCE CORPORATION
CERTIFICATE OF DESIGNATION
OF
SERIES C PREFERRED STOCK
We, Charles D. Crochet and Curtis W. Crane, the President and Secretary,
respectively, of 3CI Complete Compliance Corporation, a Delaware corporation
(the "Corporation") do hereby certify that the following resolution of the Board
of Directors of the Corporation has been duly adopted in accordance with
authority expressly accorded to the Board of Directors by Article 4 of the
Certificate of Incorporation, as amended, of the Corporation (the "Certificate
of Incorporation"), and in accordance with the provisions of Section 151 of the
Delaware General Corporation Law:
RESOLVED that the Board of Directors of the Corporation, pursuant to
authority expressly vested in it by the provisions of the Certificate of
Incorporation of the Corporation, hereby establishes a series of preferred stock
of the Corporation, authorizes the issuance thereof, and hereby fixes the
designations, rights, preferences, privileges and voting powers, in addition to
those set forth in the Certificate of Incorporation, as follows:
1. Designation of Series. Seven hundred fifty thousand shares of the
preferred stock, without par value, of the Corporation shall constitute a series
of preferred stock designated as Series C Preferred Stock (the "Series C
Preferred Stock") with the designations, rights, preferences, privileges and
voting powers set forth below:
2. Dividends.
(a) The foregoing, the holders of shares of Series C Preferred Stock shall
be entitled to receive, when, and if declared by the Corporation's Board of
Directors out of assets of the Corporation legally available for such payment,
cumulative dividends from the second anniversary of the original issuance date
of the Series C Preferred Stock, at the rate of $.0825 per share per annum, and
no more, payable quarterly on the 15th day of July, October, January and April
of each year, commencing with a payment on July 15, 1999, of dividends accrued
from the second anniversary of the original issuance date of the Series C
Preferred Stock. Such dividends shall be cumulative from the second anniversary
of the original issuance date of the Series C Preferred Stock. Accruals of
dividends shall not bear interest. For so long as any shares of Series C
Preferred Stock shall be outstanding, without the written consent of the holders
of a majority in interest of the Series C Preferred Stock, the Corporation shall
not (i) purchase or redeem any shares of its common stock, par value $.01 per
share ("Common Stock"), or (ii) declare, pay or set apart for any payment any
dividend on its Common Stock.
(b) Before any dividends (other than dividends payable in capital stock
ranking junior to the Series C Preferred Stock both as to dividends and upon
liquidation) on, or any distribution in respect of, any class or classes of
stock of the Corporation ranking junior to the Series C Preferred Stock as to
dividends or upon liquidation, shall be declared or paid or set apart for
payment, and before any purchase or redemption of any such stock, the holders of
Series C Preferred Stock shall have received payment in full of all dividends,
if any, in arrears on the Series C Preferred Stock. No dividend shall be
declared on any series of preferred stock ranking on a parity with the Series C
Preferred Stock as to dividends unless there shall likewise be or have been
declared on the shares of Series C Preferred Stock at the time outstanding a
dividend of like kind for all dividends periods coinciding with or ending before
such dividend period, ratably in proportion to the respective annual dividend
rates per annum fixed therefor as herein or in the Certificate of Incorporation
provided.
D-1
<PAGE> 2
3. Redemption. The Series C Preferred Stock shall be subject to redemption
by the Corporation as follows:
(a) The shares of Series C Preferred Stock may be redeemed at any time
on or after the second anniversary of the original issuance date of the
Series C Preferred Stock at the option of the Corporation in whole or, from
time to time, in part, in any such case at a per share redemption price
equal to $1.00, plus accrued dividends, if any.
(b) Notice of every redemption of Series C Preferred Stock shall be
given by mailing notice not less than 30 days before the date fixed for
such redemption to each holder of record of shares of Series C Preferred
Stock so to be redeemed, and shall be sufficiently given if the Corporation
shall cause a copy thereof to be mailed to such holders of record at their
respective addresses as the same shall appear on the books of the
Corporation, by first class mail, postage prepaid; provided, however, that
the failure to mail such notice to one or more such holders shall not
affect the validity of such redemption as to the other holders.
(c) In case of redemption of only a part of the Series C Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected
by lot.
(d) If any notice of redemption shall have been duly given or if the
Corporation shall have granted to a bank or trust company irrevocable
written authorization promptly to give or complete such notice, and if, on
or before the redemption date specified therein, all funds necessary for
such redemption shall have been deposited by the Corporation with the bank
or trust company designated in such notice, in trust for the pro rata
benefit of the holders of the shares so called for redemption, then,
notwithstanding that any certificate for shares so called for redemption
shall not have been surrendered for cancellation, from and after the time
of such deposit (or from and after the redemption date if such notice shall
fail to state that the holders of the shares so called for redemption may
receive their redemption price at any time after such deposit) all shares
with respect to which such deposit shall have been made shall no longer be
deemed to be outstanding, and all rights with respect to such shares
forthwith shall cease and terminate, except only the right of the holders
of the certificates therefor, upon surrender thereof, to receive the
redemption price thereof out of the funds so deposited, without interest,
and the right to exercise, on or before the close of business on the date
fixed for redemption, any privileges of conversion applicable to the Series
C Preferred Stock. Any interest accrued on such funds shall be paid to the
Corporation from time to time.
(e) All funds so set aside or deposited, as the case may be, and
unclaimed at the end of one year from such redemption date shall be
released or repaid to the Corporation, after which the holders of the
shares so called for redemption shall look only to the Corporation for the
payment thereof; provided, however, that any funds set aside or deposited
which shall not be required for redemption because of the exercise of any
privilege of conversion after the date of setting aside or deposit, as the
case may be, shall be released or repaid to the Corporation immediately
after such exercise.
(f) Any shares of the Series C Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation or converted into Common Stock shall
be deemed retired and shall be canceled and may not under any circumstances
thereafter be reissued or otherwise disposed of by the Corporation.
4. Conversion of Series C Preferred Stock.
(a) The Series C Preferred Stock shall be convertible at the option of
the record holder thereof, at any time after the second anniversary of the
original issuance thereof, in whole, or from time to time in part, in the
manner hereinafter provided, into Common Stock. Except as otherwise
specifically provided herein, no payment or adjustment shall be made upon
such conversion for dividends on any shares of Series C Preferred Stock
which shall be converted or for the declaration or payment of any dividend
on or other distribution in respect of any shares of Common Stock issuable
upon such conversion.
(b) The Series C Preferred Stock may be converted at any time on or
after the second anniversary of the original issuance thereof, in whole but
not in part, into full shares of Common Stock of the
D-2
<PAGE> 3
Corporation with a Market Price (defined below) of $750,000 based on a
Conversion Rate (the "Conversion Rate") determined by (i) dividing $750,000
by the Market Price of the Common Stock on the date of the related
Conversion Notice (defined below), (ii) plus an amount of cash determined
by subtracting the quotient calculated in (i) and subtracting from
$750,000; provided however, that at the option of the holder, the holder
may convert the Series C Preferred Stock into solely that number of shares
of Common Stock determined as provided in (i), and forego obtaining the
additional Common Stock issuable as calculated in (ii), subject to such
adjustments, if any, of the Conversion Rate and the securities or other
property issuable upon such conversion pursuant to the provisions of
subparagraph (f) hereof.
(c) To convert Series C Preferred Stock into Common Stock, a holder of
Series C Preferred Stock shall send to the Secretary of the Company a dated
notice (a "Conversion Notice") setting for the number of shares of Series C
Preferred Stock to be converted, along with the certificate representing
the Series C Preferred Stock to be converted. Upon receipt of a Conversion
Notice and the surrendered certificate representing the Series C Preferred
Stock to be converted into Common Stock, the Corporation shall cause a
certificate representing the Common Stock issued pursuant to such
conversion to be delivered to the converting holder, along with a
certificate representing any shares of Series C Preferred Stock that were
not converted into Common Stock.
(d) All shares of Series C Preferred Stock that have not been redeemed
or converted into Common Stock on or before the fifth anniversary of the
original issuance of the Series C Preferred Stock shall automatically
without further action of the Company or any holder of Series C Preferred
Stock, be converted into Common Stock based on the Conversion Rate then in
effect. Upon such automatic conversion, the Company shall send a notice to
each record holder of Series C Preferred Stock that such shares of Series C
Preferred Stock have been converted into Common Stock along with
appropriate instructions for the surrender of certificates representing
Series C Preferred Stock in exchange for certificates representing the
Common Stock into which such Series C Preferred Stock has been converted.
Upon automatic conversion of Series C Preferred Stock pursuant to this
paragraph, the shares of Series C Preferred Stock shall no longer be
considered outstanding, and the certificates representing such Series C
Preferred Stock shall be void for all purposes except for the purpose of
surrender to the Company in exchange for the certificates representing the
Common Stock into which such Series C Preferred Stock was converted.
(e) Market Price means (i) the closing sale price on the date of a
Conversion Notice of a share of Common Stock as reported on the principal
securities exchange on which the shares of Common Stock are then listed or
admitted to trading or (ii) if not so listed, the average of the closing
bid and ask prices for a share of Common Stock on that date as quoted on
the Nasdaq National Market System or Nasdaq Small-Cap Market or (iii) if
not quoted on Nasdaq, the average of closing bid and ask prices for a share
of Common Stock as quoted by the National Quotations Bureau's pink sheets
or the National Association of Securities Dealer's OTC Bulletin Board
System. If the price of a share of Common Stock shall not be so quoted,
"Market Price" shall mean the fair market value of a share of Common Stock
as determined by an investment banking firm, with expertise in the
Corporation's area of business, appointed by the judge of the 269h Judicial
District Court, Harris County, Texas.
(f) The Conversion Rate shall be subject to the following adjustments:
(i) While any shares of Series C Preferred Stock are outstanding,
in case the Corporation shall subdivide the outstanding shares of Common
Stock into a greater number of shares of Common Stock or combine the
outstanding shares of Common Stock into a smaller number of shares of
Common Stock, the Conversion Rate in effect immediately before such
subdivision or combination, as the case may be, shall be proportionately
increased or decreased (adjusted to the nearest, or if there shall be no
nearest, then to the next lower, thousandth of a share of Common Stock),
as the case may require, such increase or decrease, as the case may be,
to become effective at the opening of business on the day following the
day upon which such subdivision or combination becomes effective.
D-3
<PAGE> 4
(ii) No adjustment of the Conversion Rate shall be made by reason
of the issuance of shares of Common Stock in exchange for cash,
property, or services.
(iii) In case of any reclassification or change of outstanding
shares of Common Stock, or in case of any consolidation or merger of the
Corporation with or into another corporation, or in case of any sale or
conveyance to another corporation of all or substantially all of the
property of the Corporation, each holder of shares of the Series C
Preferred Stock then outstanding shall have the right thereafter, so
long as his conversion right hereunder shall exist, to convert such
shares into the kind and number or amount of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance, by a holder of the number of
shares of Common Stock of the Corporation into which such shares of the
Series C Preferred Stock might have been converted immediately before
such reclassification, change, consolidation, merger, sale, or
conveyance, and shall have no other conversion rights under these
provisions; provided, that effective provision shall be made, in the
articles or certificate of incorporation of the resulting or surviving
corporation or otherwise, so that the provisions set forth herein for
the protection of the conversion rights of the Series C Preferred Stock
shall thereafter be applicable, as nearly as reasonably may be, to any
such other shares of stock and other securities and property deliverable
upon conversion of the Series C Preferred Stock remaining outstanding or
other convertible preferred stock received by the holders in place
thereof; and provided, further, that any such resulting or surviving
corporation shall expressly assume the obligation to deliver, upon the
exercise of the conversion privilege, such shares, securities or
property as the holders of the Series C Preferred Stock remaining
outstanding, or other convertible preferred stock received by the
holders in place thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provisions for the protection of the
conversion right as above provided. The subdivision or combination of
shares of Common Stock at any time outstanding into a greater or lesser
number of shares of Common Stock (whether with or without par value)
shall not be deemed to be a reclassification of the shares of Common
Stock of the Corporation for the purposes of this subparagraph (iii).
(g) No fraction of a share of Common Stock shall be issued upon any
conversion, but, in lieu thereof, there shall be paid, to the holder of
shares of Series C Preferred Stock surrendered for conversion as soon as
practicable after the date such shares of Series C Preferred Stock are
surrendered for conversion, an amount in cash equal to the same fraction of
the market value of a full share of Common Stock as shall be determined, in
good faith by the board of directors of the Corporation.
5. Dissolution. In the event of the dissolution, liquidation or winding up
of the affairs of the Corporation, whether voluntary or involuntary, or in the
event of its insolvency, the assets of the Corporation shall be distributed
among the holders of its capital stock in accordance with the following schedule
of priorities and preferences:
(a) There shall be paid to the holders of the Series C Preferred Stock
an amount equal to that which would have been payable pursuant to Section
3(a) if the Series C Preferred Stock had been redeemed on the date of such
payment before any distribution of assets or payment shall be made to the
holders of any other class of capital stock of the Corporation. If the
assets of the Corporation available for distribution to the holders of
Series C Preferred Stock shall be insufficient to permit payment to the
holders of the Series C Preferred Stock of the full amount or amounts
aforesaid, then the entire assets of the Corporation shall be distributed
ratably among the holders of the Series C Preferred Stock then outstanding
according to the number of shares held by each.
(b) After the amounts provided by subparagraph (a) above have been
paid or distributed, any assets remaining shall be paid to or distributed
among the holders of Common Stock pro rata on a per share basis.
(c) Neither the consolidation, nor merger of the Corporation into or
with another corporation or corporations, nor the merger or consolidation
of another corporation or corporations with or into the Corporation, nor a
reorganization of the Corporation, nor the purchase or redemption of all or
part of the
D-4
<PAGE> 5
outstanding shares of any class or classes of the stock of the Corporation,
nor a sale or transfer of the property and business of the Corporation as,
or substantially as, an entity, shall be deemed a liquidation, dissolution,
or winding up of the affairs of the Corporation, within the meaning of any
of the provisions of this Section 5.
6. Voting Rights. Except as otherwise required by law, the holders of
Series C Preferred Stock shall have no voting rights.
7. Exclusion of Other Rights. Except as otherwise required by law, the
shares of Series C Preferred Stock shall not have any preferences or relative
participating, optional or other special rights except as specifically set forth
herein. No shares of any class of the corporation's capital stock shall have
more preemptive or subscription rights.
IN WITNESS WHEREOF, this Certificate of Designation has been signed by
Charles D. Crochet and Curtis W. Crane, the President and the Secretary,
respectively, of the Corporation, as of the day of , 19 .
3CI COMPLETE COMPLIANCE
CORPORATION
By:
----------------------------------
Charles D. Crochet, President
ATTEST:
- ------------------------------------
Curtis W. Crane, Secretary
D-5
<PAGE> 1
EXHIBIT E
EXCHANGE AGREEMENT
BETWEEN
3CI COMPLETE COMPLIANCE CORPORATION
AND
WASTE SYSTEMS, INC.
DATED AS OF JUNE 24, 1997
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE 1
THE EXCHANGE
1.1. Exchange............................................................ 1
1.2. Closing............................................................. 1
1.3. Effective Date...................................................... 2
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1. Representations and Warranties of the Company....................... 2
2.1.1. Organization and Standing................................... 2
2.1.2. Agreement Authorized and its Effect on Other Obligations.... 2
2.1.3. Validity of Stock........................................... 2
2.1.4. Capitalization.............................................. 3
2.1.5. Reports and Financial Statements............................ 3
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF WSI
3.1. Representations and Warranties of WSI............................... 3
3.1.1. Organization and Standing................................... 3
3.1.2. Agreement Authorized and its Effect on Other Obligations.... 4
3.1.3. Ownership of Notes.......................................... 4
3.1.4. Investment Intent........................................... 4
3.1.5. Investor Sophistication..................................... 4
ARTICLE 4
ADDITIONAL AGREEMENTS OF THE COMPANY
4.1. Further Assurances.................................................. 5
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1. Conditions Precedent to Obligations of WSI.......................... 5
5.1.1. Representations and Warranties True at Closing Date......... 5
5.1.2. No Material Litigation...................................... 5
5.1.3. Opinion of Counsel.......................................... 5
5.2. Conditions Precedent to Obligations of the Company.................. 6
5.2.1. Representations and Warranties of WSI True at Closing
Date........................................................ 6
5.2.2. No Material Litigation...................................... 6
5.2.3. Opinion of Counsel.......................................... 6
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 6
MISCELLANEOUS
6.1. Entirety............................................................ 7
6.2. Counterparts........................................................ 7
6.3. Notices and Waivers................................................. 7
6.4. Termination of Representations, Warranties, etc..................... 7
6.5. Table of Contents and Captions...................................... 8
6.6. Successors and Assigns.............................................. 8
6.7. Severability........................................................ 8
6.8. Applicable Law...................................................... 8
</TABLE>
-ii-
<PAGE> 4
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (this "Agreement"), dated as of June 24, 1997, among 3CI
Complete Compliance Corporation, a Delaware corporation (the "Company") and
Waste Systems, Inc., a Delaware Corporation ("WSI").
WITNESSETH:
WHEREAS, the Company and certain of its affiliates are the Makers of (i) a
promissory note dated September 30, 1995, in the original principal amount of
$8,000,000 (the "1995 Note"), and a promissory note dated December 20, 1996, in
the original principal amount of $2,700,000 (the "1996 Note"), in each case,
payable to the order of WSI (the 1995 Note and the 1996 Note are collectively
referred to herein as the "Notes"); and
WHEREAS, all interest due under the Notes has, in accordance with the terms
of the Notes, been converted to principal; and
WHEREAS, the Company is authorized to issue up to 1,000,000 shares of its
preferred stock, without par value;
WHEREAS, the Company and WSI have agreed that the Company will issue to WSI
1,000,000 shares of its Series A Preferred Stock in the form of the Certificate
of Designation of Series A Preferred Stock attached hereto as Exhibit A (the
"Series A Preferred Stock"), in exchange for the cancellation of the 1996 Note
and a reduction in the principal amount of the 1995 Note.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and to prescribe the terms and
conditions of the exchange contemplated hereby, the parties hereto hereby agree
as follows:
ARTICLE 1
THE EXCHANGE
1.1. Exchange. Upon the terms and subject to the conditions set forth in
this Agreement, the Company agrees to issue and deliver to WSI 1,000,000 shares
of its Series A Preferred Stock, in exchange for the cancellation of the 1996
Note and a reduction of the principal amount of the 1995 Note in an amount equal
to $7,000,000 minus the principal amount of the 1996 Note as of January 1, 1997.
1.2. Closing. The closing of the transactions contemplated hereby (the
"Closing") will occur as soon as practicable after the date hereof (the "Closing
Date"). At the Closing, the Company will deliver to WSI a certificate
representing 1,000,000 shares of the Series A Preferred Stock. WSI will cancel
1996 Note and reduce the outstanding principal balance on the 1995 Note in
accordance with the provisions of this Agreement.
1.3. Effective Date. The effective date of the cancellation of the 1996
Note and the reduction in the principal amount of the 1995 Note described in
Section 1.1 shall be January 1, 1997 (the "Effective Date").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
2.1. Representations and Warranties of the Company. The Company hereby
represents and warrants as follows:
2.1.1. Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Delaware, has full requisite corporate power and authority to
carry on its business as it is currently conducted, and to own and operate
the properties
<PAGE> 5
currently owned and operated by it, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties
owned or the nature of the business conducted by it would make such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not have a material adverse effect on its
financial condition, properties or business.
2.1.2. Agreement Authorized and its Effect on Other Obligations. The
execution and delivery of this Agreement has been authorized by the board
of directors of the Company, the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company, and this Agreement is a valid
and binding obligation of the Company, enforceable against the Company
(subject to normal equitable principles) in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights of
creditors generally. The consummation of the transactions contemplated by
this Agreement will not conflict with or result in a violation or breach of
any term or provision of, nor constitute a default under (i) the
Certificate of Incorporation or Bylaws of the Company or (ii) any
obligation, indenture, mortgage, deed of trust, lease, contract or other
agreement to which the Company or any of its subsidiaries is a party or by
which any of them or their properties are bound.
2.1.3. Validity of Stock. On the Closing Date, the Series A Preferred
Stock to be issued to WSI hereunder will be in due and proper form, will be
duly authorized by all necessary corporate action on the part of the
Company, and will be validly issued, fully paid and non-assessable shares
of Series A Preferred Stock, free of preemptive rights. Upon delivery of
the shares of Series A Preferred Stock, WSI will acquire valid and
marketable title to such shares of Series A Preferred Stock, free and clear
of any encumbrances. The Common Stock issuable upon conversion of the
Series A Preferred Stock has been duly authorized by all the necessary
corporate acts on the part of the Company and when issued will be validly
issued, fully paid and nonassessable shares of Common Stock of the Company
free of preemptive rights. Upon delivery of the shares of Common Stock upon
conversion of the Series A Preferred Stock, WSI will acquire valid
marketable title to such Common Stock free and clear of any encumbrances.
2.1.4. Capitalization. As of the Effective Date and the Closing Date,
the authorized capitalization of the Company will consist of 15,000,000
shares of Common Stock and 1,000,000 shares of preferred stock, without par
value ("Preferred Stock").
2.1.5. Reports and Financial Statements. The Company has furnished to
WSI true and complete copies of its annual report filed with the Commission
pursuant to the Exchange Act for the fiscal year ended September 30, 1996
(the "10-K"), and (ii) the Company's quarterly report filed with the
Commission for the fiscal quarter ended March 31, 1997 (the "10-Q"). The
consolidated financial statements of the Company and its consolidated
subsidiaries included in the 10-K and the 10-Q were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved and fairly present the consolidated financial
position for the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and changes in
financial position of the periods then ended, and the 10-K and 10-Q did not
contain any untrue statement of a material fact or fail to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Since September 30, 1996, the Company has filed with the
Commission all material reports, registration statements and other material
filings required to be filed with the Commission under the rules and
regulations of the Commission.
2
<PAGE> 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF WSI
3.1. Representations and Warranties of WSI. WSI represents and warrants as
follows:
3.1.1. Organization and Standing. WSI is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, has full requisite corporate power and authority to carry on its
business as it is currently conducted, to own and operate the properties
currently owned and operated by it, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties
owned or the nature of the business conducted by it would make such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not have a material adverse effect on its
financial condition, properties or business.
3.1.2. Agreement Authorized and its Effect on Other Obligations. The
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of WSI,
and this Agreement is a valid and binding obligation of WSI enforceable
(subject to normal equitable principles) in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights of
creditors generally. The consummation of the transactions contemplated by
this Agreement will not conflict with or result in a violation or breach of
any term or provision of, or constitute a default under (i) the Certificate
of Incorporation or Bylaws of WSI or (ii) any obligation, indenture,
mortgage, deed of trust, lease, contract or other agreement to which WSI or
any of its subsidiaries is a party or by which any of them or their
properties are bound.
3.1.3. Ownership of Notes. WSI owns the Notes free and clear of any
encumbrances or rights of any third parties and has the full right and
authority to cancel the indebtedness represented thereby as contemplated by
this Agreement. Upon consummation of the transactions contemplated hereby,
the portion of the debt evidenced by the Notes repaid upon issuance of the
Series A Preferred Stock shall no longer be outstanding.
3.1.4. Investment Intent. WSI is acquiring the shares of Series A
Preferred Stock solely for its own account and not with a view to the
public distribution thereof. WSI acknowledges that the shares of Series A
Preferred Stock being issued hereunder will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and agrees that
it will only re-offer or resell the shares of Series A Preferred Stock in
compliance with the requirements of Rule 144 promulgated under the
Securities Act, in accordance with any other available exemption from the
registration requirements of the Securities Act, or pursuant to a valid
registration statement under the Securities Act. WSI acknowledges that upon
acquisition of the shares of Series A Preferred Stock (other than in
connection with a registered offering thereof), and until such time, if
any, as WSI has received an opinion of counsel to WSI, in form and
substance satisfactory to the Company, that it is no longer necessary or
advisable, the certificate(s) representing such Series A Preferred Stock
shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY OTHER APPLICABLE SECURITIES LAWS."
3.1.5. Investor Sophistication. WSI acknowledges and understands that
it must bear the economic risk of this investment for an indefinite period
of time. WSI has experience in analyzing and investing in
3
<PAGE> 7
entities like the Company, can bear the economic risk of its investment,
including the full loss of its investment, and by reason of its business or
financial experience, has the capacity to evaluate the merits and risks of
its investment and to protect its own interests in connection with the
purchase of Series A Preferred Stock from the Company.
ARTICLE 4
ADDITIONAL AGREEMENTS OF THE COMPANY
4.1. Further Assurances. The Company hereby covenants and agrees to take
all actions within its power after the date hereof to effect the transactions
contemplated by this Agreement, including but not limited to the filing with the
Delaware Secretary of State of a certificate of designations relating to the
Series A Preferred Stock.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1. Conditions Precedent to Obligations of WSI. The obligation of WSI to
consummate and effect the transactions contemplated hereby shall be subject to
the satisfaction of the following conditions or to the waiver thereof by WSI:
5.1.1. Representations and Warranties True at Closing Date. The
representations and warranties of the Company herein contained shall be, in
all material respects, true as of and at the Closing Date with the same
effect as though made at such date; and the Company shall have performed
and complied, in all material respects, with all covenants required by this
Agreement to be performed or complied with by the Company before the
Closing Date.
5.1.2. No Material Litigation. No suit, action or other proceeding
shall be pending or threatened before any court or governmental agency in
which it will be, or it is, sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
5.1.3. Opinion of Counsel. WSI shall have received a favorable
opinion, dated as of the Closing Date, from Porter & Hedges, L.L.P.,
counsel for the Company, in form and substance satisfactory to WSI, to the
effect that (i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware; (ii) all proceedings required to be taken by or on the part of
the Company to authorize the execution of this Agreement and the
implementation of the transactions contemplated hereby have been taken;
(iii) this Agreement has been duly executed and delivered by, and is the
legal, valid and binding obligation of the Company and is enforceable
against the Company in accordance with its terms, except as enforceability
may be limited by (a) equitable principles of general applicability or (b)
bankruptcy, insolvency, reorganization, fraudulent conveyance or similar
laws affecting the rights of creditors generally; and (iv) the Series A
Preferred Stock, when issued, will have been duly authorized by all
necessary corporate action on the part of the Company, and will be validly
issued, fully paid and nonassessable shares of Series A Preferred Stock,
free of preemptive rights. Such opinion also shall cover such other matters
incident to the transactions herein contemplated as WSI may reasonably
request.
5.2. Conditions Precedent to Obligations of the Company. The obligations of
the Company to consummate the transactions contemplated hereby shall be subject
to the satisfaction of the following conditions or to the waiver thereof by the
Company.
5.2.1. Representations and Warranties of WSI True at Closing Date. The
representations and warranties of WSI herein contained shall be, in all
material respects, true as of and at the Closing Date with the same effect
as though made at such date; and WSI shall have performed and complied in
all
4
<PAGE> 8
material respects with all covenants required by this Agreement to be
performed or complied with by it before the Closing Date.
5.2.2. No Material Litigation. No suit, action or other proceeding
shall be pending or threatened before any court or governmental agency in
which it will be, or it is, sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
5.2.3. Opinion of Counsel. The Company shall have received a favorable
opinion, dated the Closing Date, from Blanchard, Walker, O'Quinn & Roberts,
counsel to WSI, in form and substance satisfactory to the Company, to the
effect that (i) WSI has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware; (ii)
all corporate or other proceedings required to be taken by or on the part
of WSI to authorize the execution of this Agreement and the implementation
of the transactions contemplated hereby have been taken; (iii) this
Agreement has been duly executed and delivered by, and is the legal, valid
and binding obligation of WSI, and is enforceable against WSI in accordance
with its terms, except as enforceability may be limited by (a) equitable
principles of general applicability or (b) bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws affecting the rights
of creditors generally. Such opinion shall also cover such other matters
incident to the transactions herein contemplated as the Company and its
counsel may reasonably request.
ARTICLE 6
MISCELLANEOUS
6.1. Entirety. This Agreement embodies the entire agreement among the
parties with respect to the subject matter hereof, and all prior agreements
between the parties with respect thereto are hereby superseded in their
entirety.
6.2. Counterparts. Any number of counterparts of this Agreement may be
executed and each such counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one instrument.
6.3. Notices and Waivers. Any notice or waiver to be given to any party
hereto shall be in writing and shall be delivered by courier, sent by facsimile
transmission or first class registered or certified mail, postage prepaid,
return receipt requested as follows:
IF TO THE COMPANY
<TABLE>
<S> <C>
Addressed to: With a copy to:
3CI Complete Compliance Corporation Porter & Hedges, L.L.P.
910 Pierremont, Suite 312 700 Louisiana, 35th Floor
Shreveport, Louisiana 71106 Houston, Texas 77210-4744
Attn: Charles D. Crochet Attention: Samuel N. Allen
Facsimile: (713) 228-1331
</TABLE>
IF TO WSI
<TABLE>
<S> <C>
Waste Systems, Inc. Blanchard, Walker, O'Quinn & Roberts
910 Pierremont, Suite 312 Bank One Tower
Shreveport, Louisiana 77106 P.O. Drawer 1126
Attn: Dr. Clemens Pues Shreveport, Louisiana 71163
Attn: Robert Johnson
Facsimile:
</TABLE>
5
<PAGE> 9
Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, with return receipt requested, shall be deemed
to be received on the third business day after so mailed, and if delivered by
courier or facsimile to such address, upon delivery during normal business hours
on any business day.
6.4. Termination of Representations, Warranties, etc. The respective
representations and warranties of the Company and WSI contained herein shall
expire on the Closing Date.
6.5. Table of Contents and Captions. The table of contents and captions
contained in this Agreement are solely for convenient reference and shall not be
deemed to affect the meaning or interpretation of any article, section, or
paragraph hereof.
6.6. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
6.7. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
6.8. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Louisiana.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed in their respective corporate names by their respective duly authorized
representatives, all as of the day and year first above written.
3CI COMPLETE COMPLIANCE CORPORATION
By:
-------------------------------------
Charles D. Crochet, President
WASTE SYSTEMS, INC.
By:
-------------------------------------
Dr. Clemens Pues
6
<PAGE> 1
EXHIBIT F
STOCK PURCHASE AND NOTE MODIFICATION AGREEMENT
BETWEEN
3CI COMPLETE COMPLIANCE CORPORATION
AND
WASTE SYSTEMS, INC.
DATED AS OF FEBRUARY 19, 1998
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE 1
THE CONSIDERATION
1.1. Purchase and Sale................................................... 2
1.2. Modification of 1995 Note........................................... 2
1.3. Reinstatement of 1995 Note Principal Amount......................... 2
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
2.1. Representations and Warranties of the Company....................... 2
2.1.1. Organization and Standing................................... 3
2.1.2. Agreement Authorized and its Effect on Other Obligations.... 3
2.1.3. Validity of Stock........................................... 3
2.1.4. Capitalization.............................................. 3
2.1.5. Reports and Financial Statements............................ 4
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF WSI
3.1. Representations and Warranties of WSI............................... 4
3.1.1. Organization and Standing................................... 4
3.1.2. Agreement Authorized and its Effect on Other Obligations.... 4
3.1.3. Ownership of 1995 Note...................................... 5
3.1.4. Investment Intent........................................... 5
3.1.5. Investor Sophistication..................................... 5
ARTICLE 4
ADDITIONAL AGREEMENTS OF THE COMPANY
4.1. Further Assurances.................................................. 6
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1. Conditions Precedent to Obligations of WSI.......................... 6
5.1.1. Representations and Warranties of the Company True Through
Issuance Date............................................... 6
5.1.2. No Material Litigation...................................... 6
5.1.3. Opinion of Counsel.......................................... 6
5.2. Conditions Precedent to Obligations of the Company.................. 7
5.2.1. Representations and Warranties of WSI True Through Issuance
Date........................................................ 7
5.2.2. No Material Litigation...................................... 7
5.2.3. Opinion of Counsel.......................................... 7
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 6
MISCELLANEOUS
6.1. Entirety............................................................ 8
6.2. Counterparts........................................................ 8
6.3. Notices and Waivers................................................. 8
6.4. Termination of Representations, Warranties, etc..................... 8
6.5. Table of Contents and Captions...................................... 9
6.6. Successors and Assigns.............................................. 9
6.7. Severability........................................................ 9
6.8. Applicable Law...................................................... 9
</TABLE>
-ii-
<PAGE> 4
STOCK PURCHASE AND NOTE MODIFICATION AGREEMENT
STOCK PURCHASE AND NOTE MODIFICATION AGREEMENT (this "Agreement"), dated as
of February 19, 1998, among 3CI Complete Compliance Corporation, a Delaware
corporation (the "Company") and Waste Systems, Inc., a Delaware Corporation
("WSI").
WITNESSETH:
WHEREAS, the Company and certain of its affiliates are the Makers of (i) a
promissory note dated September 30, 1995, in the original principal amount of
$8,000,000 (the "1995 Note"), and a promissory note dated December 20, 1996, in
the original principal amount of $2,700,000 (the "1996 Note"), in each case,
payable to the order of WSI;
WHEREAS, all interest due under the Notes has, in accordance with the terms
of the Notes, been converted to principal;
WHEREAS, the Company is authorized to issue up to 1,000,000 shares of its
preferred stock, without par value;
WHEREAS, the Company issued to WSI 1,000,000 shares of its Series A
Preferred Stock in exchange for the cancellation of the 1996 Note and a
reduction in the principal amount of the 1995 Note in an amount equal to
$7,000,000 minus the principal amount of the 1996 Note as of January 1, 1997;
WHEREAS, the Company has issued all authorized shares of preferred stock
and the Company desires to be able to designate additional series of, and to
issue additional shares of, preferred stock;
WHEREAS, the Company has received all stockholder and board of director
approvals necessary to amend the Company's Certificate of Incorporation to
increase the authorized Preferred Stock to 16,050,000 shares and Common Stock to
40,450,000 (the "Amendment"), but is unable to file such Amendment until at
least twenty days after it has distributed an Information Statement listing the
requirements of the Securities Exchange Act of 1934 to its stockholders;
WHEREAS, such Information Statement is currently expected to be distributed
to the Company's stockholders on or about February 24, 1998, and the Amendment
is expected to be filed on or about the twentieth day following the actual date
of distribution;
WHEREAS, the Company desires to sell to WSI, and WSI desires to purchase
from the Company 750,000 shares of Series C Preferred Stock (the "Series C
Preferred Stock") in the form of the Certificate of Designation of Series C
Preferred Stock attached hereto as Exhibit A on the terms and conditions herein
set forth;
WHEREAS, WSI intends to modify the 1995 Note to reflect a reduction in its
principal amount equal to the $750,000 purchase price of the Series C Preferred
Stock;
WHEREAS, the Company intends to file the Certificate of Designation of
Series C Preferred Stock within seven days after the filing of the Amendment;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and to prescribe the terms and
conditions of the transactions contemplated hereby, the parties hereto hereby
agree as follows:
ARTICLE 1
THE CONSIDERATION
1.1. Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, the Company agrees to sell to WSI, and WSI agrees to
purchase and accept from the Company, 750,000 shares of the Company's Series C
Preferred Stock. The purchase price for such shares, due at the date of this
Agreement, shall be $750,000 payable by WSI by reduction of the principal amount
of the 1995 Note by
<PAGE> 5
$750,000. The Company agrees to file the Certificate of Designation of Series C
Preferred Stock within seven days following the filing of the Amendment and to
issue to WSI certificates representing 750,000 shares of the Company's Series C
Preferred Stock as soon as practicable after the filing of the Certificate of
Designation of Series C Preferred Stock (the "Issuance Date").
1.2. Modification of 1995 Note. As consideration for the purchase and sale
in Section 1.1, on the date of this Agreement, WSI agrees to modify the 1995
Note by reducing its principal amount by $750,000 effective as of the date of
this Agreement.
1.3. Reinstatement of 1995 Note Principal Amount. If the 750,000 shares of
the Company's Series C Preferred Stock described in Section 1.1 are not issued
to WSI within ninety days of the date of this Agreement, the $750,000 principal
amount of the 1995 Note shall automatically be reinstated and this Agreement
shall be null and void.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
2.1. Representations and Warranties of the Company. The Company hereby
represents and warrants as follows:
2.1.1. Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Delaware, has full requisite corporate power and authority to
carry on its business as it is currently conducted, and to own and operate
the properties currently owned and operated by it, and is duly qualified or
licensed to do business and is in good standing as a foreign corporation
authorized to do business in all jurisdictions in which the character of
the properties owned or the nature of the business conducted by it would
make such qualification or licensing necessary, except where the failure to
be so qualified or licensed would not have a material adverse effect on its
financial condition, properties or business.
2.1.2. Agreement Authorized and its Effect on Other Obligations. The
execution and delivery of this Agreement has been authorized by the board
of directors of the Company, the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company, and this Agreement is a valid
and binding obligation of the Company, enforceable against the Company
(subject to normal equitable principles) in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights of
creditors generally. The consummation of the transactions contemplated by
this Agreement will not conflict with or result in a violation or breach of
any term or provision of, nor constitute a default under (i) the
Certificate of Incorporation or Bylaws of the Company or (ii) any
obligation, indenture, mortgage, deed of trust, lease, contract or other
agreement to which the Company or any of its subsidiaries is a party or by
which any of them or their properties are bound.
2.1.3. Validity of Stock. On the Issuance Date, the Series C Preferred
Stock to be issued to WSI hereunder will be in due and proper form, will be
duly authorized by all necessary corporate action on the part of the
Company, and will be validly issued, fully paid and non-assessable shares
of Series C Preferred Stock, free of preemptive rights. Upon delivery of
the shares of Series C Preferred Stock, WSI will acquire valid and
marketable title to such shares of Series C Preferred Stock, free and clear
of any encumbrances. The Common Stock issuable upon conversion of the
Series C Preferred Stock has been duly authorized by all the necessary
corporate acts on the part of the Company and when issued will be validly
issued, fully paid and nonassessable shares of Common Stock of the Company
free of preemptive rights. Upon delivery of the shares of Common Stock upon
conversion of the Series C Preferred Stock, WSI will acquire valid
marketable title to such Common Stock free and clear of any encumbrances.
2.1.4. Capitalization. As of the Effective Date, the authorized
capitalization of the Company will consist of 15,000,000 shares of Common
Stock and 1,000,000 shares of preferred stock, without par value.
2
<PAGE> 6
As of the Issuance Date, the authorized capitalization of the Company will
consist of 40,450,000 shares of Common Stock and 16,050,000 shares of
preferred stock, without par value.
2.1.5. Reports and Financial Statements. The Company has furnished to
WSI true and complete copies of its annual report (the "10-K") filed with
the Commission pursuant to the Exchange Act for the fiscal year ended
September 30, 1997, and (ii) the Company's quarterly report (the "10-Q")
filed with the Commission for the fiscal quarter ended December 31, 1997
(the 10-K and 10-Q collectively, the "Disclosure Documents"). The
consolidated financial statements of the Company and its consolidated
subsidiaries included in the Disclosure Documents were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved and fairly present the
consolidated financial position for the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and changes in financial position of the periods then ended, and
the 10-K and 10-Q did not contain any untrue statement of a material fact
or fail to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. Since September 30, 1997, the Company has
filed with the Commission all material reports, registration statements and
other material filings required to be filed with the Commission under the
rules and regulations of the Commission.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF WSI
3.1. Representations and Warranties of WSI. WSI represents and warrants as
follows:
3.1.1. Organization and Standing. WSI is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, has full requisite corporate power and authority to carry on its
business as it is currently conducted, to own and operate the properties
currently owned and operated by it, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties
owned or the nature of the business conducted by it would make such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not have a material adverse effect on its
financial condition, properties or business.
3.1.2. Agreement Authorized and its Effect on Other Obligations. The
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of WSI,
and this Agreement is a valid and binding obligation of WSI enforceable
(subject to normal equitable principles) in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights of
creditors generally. The consummation of the transactions contemplated by
this Agreement will not conflict with or result in a violation or breach of
any term or provision of, or constitute a default under (i) the Certificate
of Incorporation or Bylaws of WSI or (ii) any obligation, indenture,
mortgage, deed of trust, lease, contract or other agreement to which WSI or
any of its subsidiaries is a party or by which any of them or their
properties are bound.
3.1.3. Ownership of 1995 Note. WSI owns the 1995 Note free and clear
of any encumbrances or rights of any third parties and has the full right
and authority to cancel the indebtedness represented thereby as
contemplated by this Agreement. Upon consummation of the transactions
contemplated hereby, the portion of the debt evidenced by the 1995 Note
repaid upon issuance of the Series C Preferred Stock shall no longer be
outstanding.
3.1.4. Investment Intent. WSI is acquiring the shares of Series C
Preferred Stock solely for its own account and not with a view to the
public distribution thereof. WSI acknowledges that the shares of Series C
Preferred Stock being issued hereunder will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and agrees that
it will only re-offer or resell the shares of Series C Preferred Stock in
compliance with the requirements of Rule 144 promulgated under the
Securities Act,
3
<PAGE> 7
in accordance with any other available exemption from the registration
requirements of the Securities Act, or pursuant to a valid registration
statement under the Securities Act. WSI acknowledges that upon acquisition
of the shares of Series C Preferred Stock (other than in connection with a
registered offering thereof), and until such time, if any, as WSI has
received an opinion of counsel to WSI, in form and substance satisfactory
to the Company, that it is no longer necessary or advisable, the
certificate(s) representing such Series C Preferred Stock shall bear a
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY OTHER APPLICABLE SECURITIES LAWS."
3.1.5. Investor Sophistication. WSI acknowledges and understands that
it must bear the economic risk of this investment for an indefinite period
of time. WSI has experience in analyzing and investing in entities like the
Company, can bear the economic risk of its investment, including the full
loss of its investment, and by reason of its business or financial
experience, has the capacity to evaluate the merits and risks of its
investment and to protect its own interests in connection with the purchase
of Series C Preferred Stock from the Company.
ARTICLE 4
ADDITIONAL AGREEMENTS OF THE COMPANY
4.1. Further Assurances. The Company hereby covenants and agrees to take
all actions within its power after the date hereof to effect the transactions
contemplated by this Agreement, including but not limited to the filing with the
Delaware Secretary of State of the Amendment and the certificate of designation
relating to the Series C Preferred Stock.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1. Conditions Precedent to Obligations of WSI. The obligation of WSI to
consummate and effect the transactions contemplated hereby shall be subject to
the satisfaction of the following conditions or to the waiver thereof by WSI:
5.1.1. Representations and Warranties of the Company True Through
Issuance Date. The representations and warranties of the Company herein
contained shall be, in all material respects, true as of the date of this
Agreement and through and including the Issuance Date with the same effect
as though made at such date, except as affected by transactions permitted
or contemplated by this Agreement, and the Company shall have performed and
complied, in all material respects, with all covenants required by this
Agreement to be performed or complied with by the Company before the
Issuance Date.
5.1.2. No Material Litigation. No suit, action or other proceeding
shall be pending or threatened before any court or governmental agency in
which it will be, or it is, sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
5.1.3. Opinion of Counsel. WSI shall have received a favorable
opinion, dated as of the date of this Agreement, from Porter & Hedges,
L.L.P., counsel for the Company, in form and substance satisfactory to WSI,
to the effect that (i) the Company has been duly incorporated and is
validly existing as a
4
<PAGE> 8
corporation in good standing under the laws of the State of Delaware; (ii)
all proceedings required to be taken by or on the part of the Company to
authorize the execution of this Agreement and the implementation of the
transactions contemplated hereby have been taken; (iii) this Agreement has
been duly executed and delivered by, and is the legal, valid and binding
obligation of the Company and is enforceable against the Company in
accordance with its terms, except as enforceability may be limited by (a)
equitable principles of general applicability or (b) bankruptcy,
insolvency, reorganization, fraudulent conveyance or similar laws affecting
the rights of creditors generally; and (iv) the Series C Preferred Stock,
when issued, will have been duly authorized by all necessary corporate
action on the part of the Company, and will be validly issued, fully paid
and nonassessable shares of Series C Preferred Stock, free of preemptive
rights. Such opinion also shall cover such other matters incident to the
transactions herein contemplated as WSI may reasonably request.
5.2. Conditions Precedent to Obligations of the Company. The obligations of
the Company to consummate the transactions contemplated hereby shall be subject
to the satisfaction of the following conditions or to the waiver thereof by the
Company.
5.2.1. Representations and Warranties of WSI True Through Issuance
Date. The representations and warranties of WSI herein contained shall be,
in all material respects, true as of the date of this Agreement and through
and including the Issuance Date with the same effect as though made at such
date, except as affected by transactions permitted or contemplated by this
Agreement, and WSI shall have performed and complied, in all material
respects, with all covenants required by this Agreement to be performed or
complied with by WSI before the Issuance Date.
5.2.2. No Material Litigation. No suit, action or other proceeding
shall be pending or threatened before any court or governmental agency in
which it will be, or it is, sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
5.2.3. Opinion of Counsel. The Company shall have received a favorable
opinion, dated the date of this Agreement, from Blanchard, Walker, O'Quinn
& Roberts, counsel to WSI, in form and substance satisfactory to the
Company, to the effect that (i) WSI has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Delaware; (ii) all corporate or other proceedings required to be
taken by or on the part of WSI to authorize the execution of this Agreement
and the implementation of the transactions contemplated hereby have been
taken; (iii) this Agreement has been duly executed and delivered by, and is
the legal, valid and binding obligation of WSI, and is enforceable against
WSI in accordance with its terms, except as enforceability may be limited
by (a) equitable principles of general applicability or (b) bankruptcy,
insolvency, reorganization, fraudulent conveyance or similar laws affecting
the rights of creditors generally. Such opinion shall also cover such other
matters incident to the transactions herein contemplated as the Company and
its counsel may reasonably request.
ARTICLE 6
MISCELLANEOUS
6.1. Entirety. This Agreement embodies the entire agreement among the
parties with respect to the subject matter hereof, and all prior agreements
between the parties with respect thereto are hereby superseded in their
entirety.
6.2. Counterparts. Any number of counterparts of this Agreement may be
executed and each such counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one instrument.
5
<PAGE> 9
6.3. Notices and Waivers. Any notice or waiver to be given to any party
hereto shall be in writing and shall be delivered by courier, sent by facsimile
transmission or first class registered or certified mail, postage prepaid,
return receipt requested as follows:
IF TO THE COMPANY
<TABLE>
<S> <C>
Addressed to: With a copy to:
3CI Complete Compliance Corporation Porter & Hedges, L.L.P.
910 Pierremont, Suite 312 700 Louisiana, 35th Floor
Shreveport, Louisiana 71106 Houston, Texas 77210-4744
Attn: Charles D. Crochet Attention: Samuel N. Allen
Facsimile: (713) 228-1331
</TABLE>
IF TO WSI
<TABLE>
<S> <C>
Waste Systems, Inc. Blanchard, Walker, O'Quinn & Roberts
910 Pierremont, Suite 312 Bank One Tower
Shreveport, Louisiana 77106 P.O. Drawer 1126
Attn: Dr. Clemens Pues Shreveport, Louisiana 71163
Attn: Robert Johnson
Facsimile: (318) 227-2967
</TABLE>
Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, with return receipt requested, shall be deemed
to be received on the third business day after so mailed, and if delivered by
courier or facsimile to such address, upon delivery during normal business hours
on any business day.
6.4. Termination of Representations, Warranties, etc. The respective
representations and warranties of the Company and WSI contained herein shall
expire on the Issuance Date.
6.5. Table of Contents and Captions. The table of contents and captions
contained in this Agreement are solely for convenient reference and shall not be
deemed to affect the meaning or interpretation of any article, section, or
paragraph hereof.
6.6. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
6.7. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
6.8. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Louisiana.
6
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed in their respective corporate names by their respective duly authorized
representatives, all as of the day and year first above written.
3CI COMPLETE COMPLIANCE
CORPORATION
By:
----------------------------------
Charles D. Crochet, President
WASTE SYSTEMS, INC.
By:
----------------------------------
Dr. Clemens Pues
7
