SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant | |
Filed by a party other than the Registrant |X|
Check the appropriate box:
|X| Preliminary proxy statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
STARTECH ENVIRONMENTAL CORPORATION
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(Name of Registrant as Specified in Its Charter)
JOSEPH F. LONGO
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(c)(1) 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 computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|_| 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:
Preliminary Copy; Subject to Completion
Dated ______, 2003
SPECIAL MEETING OF SHAREHOLDERS
OF
STARTECH ENVIRONMENTAL CORPORATION
WEDNESDAY, JULY 16, 2003
===============================================================================
PROXY STATEMENT
OF
JOSEPH F. LONGO
Introduction
This proxy statement (the "Proxy Statement") and the enclosed WHITE
proxy card are being furnished to you, the shareholders of Startech
Environmental Corporation, a Colorado corporation ("Startech" or the "Company"),
in connection with the solicitation of proxies by Joseph F. Longo (the
"Shareholder") for use at a special meeting of shareholders of Startech
(including any adjournments, postponements, reschedulings or continuations of
the meeting, the "Special Meeting") called by the Shareholder for Wednesday,
July 16, 2003 at 3:00 p.m. (Eastern Daylight Time) at the principal executive
offices of the Company, located at 15 Old Danbury Road, Suite 203, Wilton,
Connecticut, 06897.
Reasons for the Special Meeting
STARTECH IS FACING A LIQUIDITY CRISIS AND IS ON THE VERGE OF BEING
DELISTED FROM THE NASDAQ SMALLCAP MARKET. AS A DIRECTOR AND THE COMPANY'S
LARGEST SHAREHOLDER, IT IS INCUMBENT UPON ME TO SEEK YOUR APPROVAL TO ADOPT THE
PROPOSALS SET FORTH BELOW AT THE SPECIAL MEETING IN AN ATTEMPT TO AVOID THE
DEMISE OF THE COMPANY AND MAXIMIZE SHAREHOLDER VALUE.
The Shareholder is soliciting proxies for use at the Special Meeting to
change the Company's board of directors (the "Board") by asking the shareholders
to adopt the following proposals at the Special Meeting (the "Proposals"):
(i) to remove all incumbent directors from the Board, other than the
Shareholder (the "Removable Directors");
(ii) to fix the number of directors at five; and
(iii) to fill the four vacancies resulting from the removal of the
Removable Directors with the persons selected by the Shareholder
(collectively, the "New Directors"), which New Directors, in the
opinion of the Shareholder, are better suited than the Removable
Directors to protect the interests of the shareholders and
maximize shareholder value.
The Shareholder believes that the Company's incumbent senior management
are accountable for the Company's liquidity crisis, the receipt of the delisting
notice from Nasdaq (which was received in January 2003 but not publicly
disclosed until May 1, 2003) and the overall unsatisfactory financial
performance of the Company over the past year-and-a-half. The Shareholder
further believes that the Removable Directors bear responsibility for allowing
the Company's senior management to erode the Company's equity below the minimum
shareholders' equity requirement of $2.5 million, as required by Nasdaq, while
refusing to accept a proposal to invest a minimum of $2 million from an outside
third party investment group (the "Investor") that would have resulted in a
substantial increase in the Company's shareholder equity and liquidity on terms
that were, in the opinion of the Shareholder, fair and reasonable to the Company
and its shareholders, considering the Company's current financially distressed
condition. Despite the Shareholder's recommendation to accept the Investor's
proposal, the Company's senior management imposed conditions on the Investor
that were impossible to meet, including a condition that the Investor agree to
have its shares voted in accordance with the recommended vote of the Board at
any meeting of the shareholders, and not at the discretion of the Investor.
Following the filing of the Shareholder's Amendment No. 1 to the
Schedule 13D, the Shareholder met with the Company's senior management in an
attempt to avoid a proxy contest. At that meeting, the Company's Chief Executive
Officer and President, Joseph S. Klimek, requested that the Shareholder obtain a
committment letter from the Investor for consideration by senior management and
the incumbent Board. The Investor subsequently delivered a letter of intent, in
the form attached as Annex A to this Proxy Statemnet, however, as of the date of
the filing of this Proxy Statement, the Investor has not received as response as
to whether the Company will accept the investment on the terms proposed.
The Shareholder has reason to believe, based on the letter of intent,
that the Investor will commit to make the equity investment in the Company on
the terms set forth in the letter of intent, so long as the Removable Directors
are removed and replaced with the New Directors. In addition, the Shareholder
believes that such an equity investment would eliminate the deficiency in
shareholders' equity as well as eliminate the current liquidity crisis. However,
at present, there can be no assurance as to whether, or on what terms, any such
investment would be completed. Any such investment would be subject to, among
other things, negotiation of definitive documentation and the approval by the
Board (excluding any directors associated with the Investor).
The Shareholder strongly believes that the failure to accept the
Investor's equity financing on the terms proposed, the failure to maintain the
minimum shareholder equity requirements for continued listing on the Nasdaq
SmallCap Market and the unsatisfactory commercial and financial performance of
the Company clearly demonstrate that the Company's senior management and the
Removable Directors are not properly suited to advance the interests of the
shareholders.
The Shareholder's objective is to compose the Board with individuals who
are not unduly influenced by management, as evidenced by what the Shareholder
believes has been the inability of the Removable Directors to solve the
shareholder equity deficiency and remove the Company from the imminent risk of
having to discontinue its operations by not accepting the terms of the equity
investment from the Investor that would have provided the Company, which is
currently in financial distress, with at least $2 million of capital, which
capital is needed to sustain the Company's operations for a significant period
of time and attempt to avoid being delisted from the Nasdaq SmallCap Market for
failure to meet the minimum shareholders' equity continued listing requirement
of $2.5 million.
The Shareholder believes that the best way to restore confidence in
Startech and turn around its fortunes is to replace the Removable Directors with
the New Directors, who in the opinion of the Shareholder, have the judgment,
experience and objectivity needed to produce maximum value for the Company's
shareholders and take actions that are in the best interests of the
shareholders, with proper independence from management. The Shareholder believes
that the New Directors are committed to addressing what is undisputedly the
Company's disappointing operating results and share price performance over the
past year-and-a-half. There can, of course, be no assurance that any damage
already done to Startech can be repaired.
-2-
If the Proposals set forth herein are adopted at the Special Meeting,
the new Board will consist of five members and will satisfy the "independence"
requirements under the Nasdaq marketplace rules. Nevertheless, in the event the
shareholders are unhappy with the performance of the new Board between the date
of the Special Meeting and the next annual meeting of shareholders in 2004 (the
"2004 Annual Meeting"), the shareholders will have the right not to elect the
Board. By adopting the Proposals at the Special Meeting, all shareholders will
get vigorous, dedicated and independent advocates. The Shareholder strongly
believes that time is of the essence and that the shareholders cannot afford to
wait until the 2004 Annual Meeting to reverse the direction of the Company.
In the opinion of the Shareholder, the New Directors will be strong
advocates for advancing shareholder interests, implementing operating
improvements, promoting board independence, corporate governance and management
accountability and maximizing shareholder value. Specifically, subject to the
exercise of their fiduciary duties, the New Directors will promote a platform in
the boardroom that includes:
o maximizing shareholder value;
o adopting a policy of greater transparency;
o focusing closely on financial performance, with a thorough
assessment of the Company's operations and business model; and
o evaluating management compensation with operating results and
shareholder return.
The Shareholder believes that Startech is in desperate need of a new
management team comprised principally of financially and commercially
sophisticated professionals with valuable investment community experience and
with executive experience operating publicly traded companies. The slate of New
Directors, in the opinion of the Shareholder, is qualified and well-positioned
to immediately and effectively begin the process of seeking to turn Startech
around. In addition, in the opinion of the Shareholder, the New Directors will
provide Startech with business competence and discipline, focus, a commitment to
transparent disclosure and credibility, and a commitment to maximize shareholder
value.
The Shareholder Platform
The Shareholder is focused on the goal of maximizing shareholder value
in which he will share proportionately with the other shareholders. The
Shareholder thinks that it is imperative that the shareholders replace the
leadership of the Board in order to achieve this goal by appointing the New
Directors who, in the opinion of the Shareholder, possess extraordinary
experience, independence and integrity, have the necessary financial and
business acumen to meet the challenges facing the Company in the future, will
champion initiatives to improve corporate democracy and will oppose any conduct
that furthers the personal benefits of management at the expense of the
shareholders. The New Directors intend to pursue these goals, subject to the
exercise of each director's fiduciary duties.
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New Directors
The New Directors, and certain information concerning their principal
occupations or employment, beneficial ownership of the Common Stock as of the
date of this Proxy Statement, and other matters are set forth below. This
information has been furnished to the Shareholder by the respective New
Directors:
Name and Age Age Primary Occupation and Other Directorships
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Peter H. Shipman 67 Mr. Shipman is a private investor, corporate
director and an experienced corporate
executive. Mr. Shipman served as President,
Chief Operating Officer and a principal of
American Banker - Bond Buyer, Inc. from 1978 to
1983 when the company was acquired by The
Thompson Corporation, a $6 billion publisher
and information provider. From 1983 to 1992,
Mr. Shipman held senior executive positions
with The Thompson Corporation, including
Chairman and Chief Executive Officer of
Thompson Financial Services, an operating
division founded by Mr. Shipman. From 1987 to
1998, Mr. Shipman was the principal owner and
chairman of a number of small sports
businesses, including Winston-Salem Baseball,
New Haven Nighthawks Hockey and Howe Sportsdata
International, which was sold to ESPN. Mr.
Shipman was appointed Chief Operating Officer
and Executive Director of the Securities and
Exchange Commission by President Ford in 1976
and in 1977 became a partner with the Wall
Street firm of Kuhn Loek. Mr. Shipman presently
serves as a director of Kestol Technologies, a
developer and distributor of sophisticated
fixed-income software for securities dealers,
brokers and asset managers, and has been a
director of The Gabelli Group, an asset
management firm, of Exchange Resources, Inc., a
computer security company, and of Kline Nursing
Homes. Mr. Shipman received a B.A. from
Dartmouth College and served as a captain in
the U.S. Marine Corps.
Henry G. Ciocca 56 Mr. Ciocca is a private investor and corporate
lawyer who has held senior executive positions
in major international corporations for over
the past twenty-five years. In 1993, Mr. Ciocca
was appointed President and Chief Executive
Officer of Markborough Development to lead the
turnaround of a $400 million real estate
company which was acquired by The Thomson
Corporation. Based upon the successful
performance of Markborough under his
leadership, in 1995 Mr. Ciocca was appointed
President, Chief Executive Officer and a
director of Markborough Properties, Inc., a
publicly traded real estate developer based in
Toronto with assets in excess of $1 billion and
a sister company of The Thomson Corporation.
During Mr. Ciocca's tenure, Markborough
Properties reduced debt and overhead, focused
on the company's core strengths and restored
credibility with customers, lenders and
investors. In 1997, Markborough Properties was
acquired by Cambridge Shopping Centres. From
1987 to 1993, and from 1997 to 1999, Mr. Ciocca
held senior executive positions (including
Executive Vice President and General Counsel)
with The Thomson Corporation, a $6 billion
global publisher and information provider. Mr.
Ciocca also has held senior executive positions
with The Nestle Company, Tetley, Inc.,
Distillers Somerset, Inc. and Sbarro, Inc. He
lives in Fairfield, Connecticut and is admitted
to practice law in New York, Connecticut and
Florida. Mr. Ciocca received a B.A. from
Canisius College and a J.D. from Notre Dame Law
School.
-4-
Name and Age Age Primary Occupation and Other Directorships
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Kenneth J. Slepicka 47 Mr. Slepicka is the Senior Portfolio Manager of
Northshore Asset Management, LLC and has held a
variety of positions in the securities industry
for the past twenty years. From 1998 to 2002,
he was a Managing Director of River Capital
Advisors, where he was responsible for the
analysis of Collateralized Debt Obligation
(CDO) structures, as well as performing credit
analysis for investment grade corporate
credits. From 1985 to 1998, Mr. Slepicka held
positions of President of SBC Futures Inc.,
(currently UBS Futures Inc.) and was
responsible for Exchange Traded Derivatives,
was also an Executive Director of SBC/O'Connor,
responsible for trading and risk management of
the Fixed Income Derivative group, and was a
Market Maker for equity options. Mr. Slepicka
has also performed risk management consulting
for institutional clients and has served on
numerous committees at the Chicago Board of
Trade, the Chicago Mercantile Exchange and the
Chicago Board of Options. Mr. Slepicka served
as Governor of the Board of Trade Clearing
Corporation and currently is a Director for
Hyperfeed Technologies. Mr. Slepicka received
his MBA in finance from the J.L. Kellogg School
of Management at Northwestern University.
Douglas R. Ballew 39 Mr. Ballew is the Chief Financial Officer of
Northshore Asset Management, LLC, an investment
management group located in Chicago, Illinois
with assets under management of over $200
million. He is responsible for all aspects of
the accounting and financial activities of the
organization. Prior to joining Northshore, he
was Director of Finance for McCord Group, Inc.
from 1998 to 2002 with revenue of $850 million.
From 1990 to 1997, Mr. Ballew held a variety of
positions with AMSTED Industries with revenue
of $1.2 billion. Mr. Ballew has a broad range
of experience in the manufacturing, finance and
service industries. Mr. Ballew is a graduate of
Valparaiso University with a B.S. in
Accounting. He is a Certified Public Accountant
in the state of Illinois and Nebraska. He is
also a member of the American Institute of
Certified Public Accountants and the Illinois
CPA Society.
Each of the New Directors is a citizen of the United States.
Except as set forth in this Proxy Statement, to the best knowledge of
the Shareholder, none of New Directors, any of the persons participating in this
Proxy Solicitation on behalf of the Shareholder, the New Directors and, with
respect to items (i), (vii) and (viii) of this paragraph, any associate (within
the meaning of Rule 14a-1 of the Securities Exchange Act of 1934) of the
foregoing persons (i) owns beneficially, directly or indirectly, any securities
of the Company, (ii) owns beneficially, directly or indirectly, any securities
of any parent or subsidiary of the Company, (iii) owns any securities of the
Company of record but not beneficially, (iv) has purchased or sold any
securities of the Company within the past two years, (v) has incurred
indebtedness for the purpose of acquiring or holding securities of the Company,
(vi) is or has within the past year been a party to any contract, arrangement or
understanding with respect to any securities of the Company, (vii) since the
beginning of the Company's last fiscal year has been indebted to the Company or
any of its subsidiaries in excess of $60,000 or (viii) has any arrangement or
understanding with respect to future employment by the Company or with respect
to any future transactions to which the Company or any of its affiliates will or
may be a party. In addition, except as set forth in this Proxy Statement, to the
best knowledge of the Shareholder, none of the New Directors, any of the persons
participating in this Proxy Solicitation on behalf of the Shareholder, the New
Directors and any associates of the foregoing persons, has had or is to have a
direct or indirect material interest in any transaction or proposed transaction
with the Company in which the amount involved exceeds $60,000, since the
beginning of the Company's last fiscal year.
-5-
Except as set forth in this Proxy Statement, to the best knowledge of
the Shareholder, none of New Directors, since the beginning of the Company's
last fiscal year, has been affiliated with (i) any entity that made or received,
or during the Company's current fiscal year proposes to make or receive,
payments to or from the Company or its subsidiaries for property or services in
excess of five percent of either the Company's or such entity's consolidated
gross revenues for its last full fiscal year, or (ii) any entity to which the
Company or its subsidiaries were indebted at the end of the Company's last full
fiscal year in an aggregate amount exceeding five percent of the Company's total
consolidated assets at the end of such year. None of the New Directors are or
during the Company's last fiscal year has been affiliated with any law or
investment banking firm that has performed or proposes to perform services for
the Company.
To the best knowledge of the Shareholder, the New Directors do not hold
any position or office with the Company or have any family relationship with any
executive officer or director of the Company or have been involved in any
proceedings, legal or otherwise, of the type required to be disclosed by the
rules governing this solicitation.
Douglas R. Ballew and Kenneth J. Slepicka are both principals of and are
associated with the Investor.
Each of the New Directors has consented to being named herein to fill
the vacancies on the Board (if Proposal One is adopted at the Special Meeting)
and has agreed to stand for election as a director at the 2004 Annual Meeting.
Although the Shareholder has no reason to believe that any of the New
Directors will be unable to serve as a director, if any New Director is not
available to serve, the Shareholder expects that the remaining New Directors,
upon taking office, will fill the vacancy with an individual willing to consider
and implement the Shareholder's proposals to maximize shareholder value.
Plans of the Shareholder and the New Directors
The Shareholder expects that if the Removable Directors are removed from
the Board and the New Directors fill the vacancies remaining as a result
thereof, the New Directors will immediately begin the process of seeking to
repair the damage done to the Company. Since the damage is extensive, this will
not be an easy task and no one should expect an overnight turnaround. The
Shareholder believes, however, that by harnessing the experience and expertise
of the New Directors, and by re-energizing employees, it should be possible to
set a major turnaround in motion.
The New Directors have reviewed Startech's public disclosures about its
business operations and financial condition with a view to developing a
turnaround strategy for the Company, if appointed at the Special Meeting. Once
appointed as directors, the New Directors will have a fiduciary obligation to
act in an appropriately deliberate, fully-informed basis that they believe to be
in the best interests of Startech and its shareholders. Subject to these
considerations, the Shareholder expects that, once elected as directors of
Startech, the New Directors will take the following actions:
Management. At the management level, the New Directors will take action,
including the following, in an attempt to repair the damage done to Startech:
o Appoint Henry G. Ciocca as the Chief Executive Officer and
President within a reasonable time following the Special Meeting;
o Retain members of management who, in the opinion of the New
Directors, are qualified and committed to rebuilding Startech;
o Build a cohesive team of employees to maximize shareholder value;
o Immediately implement plans to enhance Startech's financial and
business disclosure; and
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o Aggressively review all existing management compensation
arrangements.
Business. At the business level, the New Directors will take action,
including the following, in an attempt to repair the damage done to Startech:
o Make profitability and shareholder value the top priority of the
Company;
o Secure equity financing necessary to solve the Company's
liquidity crisis and the potential delisting from the Nasdaq
SmallCap Market and secure an investment banking relationship to
meet future financial requirements and growth;
o Immediately launch an aggressive and focused sales and marketing
program;
o Aggressively reduce administrative and operating costs; and
o Set reasonable, but aggressive sales, operating and financial
targets for the business and hold management accountable.
Corporate Governance. At the corporate governance level, the Shareholder
expects that the New Directors, if appointed, will adopt and follow corporate
governance policies that meet or exceed all of the requirements of the
Sarbanes-Oxley Act of 2002, the rules and regulations of the Securities and
Exchange Commission and the Nasdaq listing guidelines (including the recently
proposed amendments to those guidelines).
Transition. The Shareholder believes the management transition that will
occur if the New Directors are appointed will be a smooth one because the New
Directors will be able to leverage the experience and expertise of the
Shareholder with respect to his knowledge of the operations of the Company and
its industry.
The Flawed Investment Process and its Implications
The Shareholder understands that beginning in or around September 2002,
the Chief Financial Officer of the Company was approached by the Investor with a
significant investment in the equity securities of the Company. In November
2002, after not having received a return call from the Chief Financial Officer,
the Investor wrote to the Shareholder and the other members of the Board about
the proposed investment. Soon thereafter, the Shareholder understands that the
parties agreed to work diligently to work towards finalizing the terms of an
investment.
In February 2003, the Investor informed senior management and the Board
that, as a precondition to its investment, it would require a reconfiguration of
the Board for the following reasons: (1) in the opinion of the Investor, the
substance and character of the Board required adjustment to display to the
financial community a greater degree of investment experience, success and
sophistication; and (2) the Investor desired to obtain representation on the
Board that had some measure of significance. In addition, the Investor provided
the names and biographical information of the two individuals it desired to have
serve on the Board (the "Investor Designees"). Thereafter, the Shareholder
informed Messr. Klimek and Kevin M. Black, the Senior Vice President, General
Counsel, Secretary and a Director of the Company (together, the "Senior
Executive Directors") and the other members of the Board that he supported a
reconfiguration; nevertheless, at a meeting of the Board, the Removable
Directors chose not to accept the terms of the reconfiguration which decision,
in the opinion of the Shareholder, was based solely on the instructions of
Messr. Black. The foregoing notwithstanding, the Board elected at the meeting to
reconfigure the Board at the Annual Meeting in March 2003 in a way that would
almost certainly require further changes if the Company accepted the proposed
terms of the reconfiguration of the Board by the Investor in the future.
However, it is the understanding of the Shareholder that the Investor was led to
believe by the Senior Executive Directors that the Company was flexible and
willing to work with the Investor to work towards a solution to the Investor's
terms with regard to reconfiguring the Board regardless of the changes to be
made to the Board at the Annual Meeting.
-7-
During March 2003, senior management informed the Investor that the
Investor Designees would not, in their opinion, qualify as "independent" under
the Nasdaq marketplace rules and therefore, the Company could not accept the
Board reconfiguration. However, the Company later agreed with the Investor that
the Investor Designees would be considered "independent" but decided not to
accept the terms of the investment anyway.
In April 2003, the Investor communicated to senior management and the
Board the exact nature of its proposed Board reconfiguration. In addition, the
Investor, through its own research, rebutted the assumption made by the Company
that the Investor Designees would not be "independent" under the Nasdaq
marketplace rules. It is the understanding of the Shareholder that in response
to the proposed Board reconfiguration by the Investor, senior management
informed the Investor that based on conversations with the Company's listing
agent at Nasdaq, Nasdaq would not permit the investment on the Investor's
proposed terms. Soon thereafter, Messr. Klimek asked the Investor to execute a
term sheet prepared by Startech that (i) did not include the proposed Board
reconfiguration and (ii) asked the Investor to acquiesce that as long as the
shares issued to the Investor were held by a source controlled by the Investor,
the Investor would agree to vote its shares in accordance with the recommended
vote of the Board for any proposal to be voted upon at a meeting of the
shareholders, rather than at the discretion of the Investor, thus effectively
asking the Investor to give up its right to vote the shares purchased in its own
discretion at meetings of the shareholders. Thereafter, the Investor informed
the Company of the unacceptability of the term sheet and reminded the Company
that it would be a waste of time and money to execute a term sheet given that a
definitive purchase agreement was already being negotiated and finalized.
On May 29, 2003, the Shareholder filed an amendment to his Schedule 13D
with the Securities and Exchange Commission to disclose his intention to call
the Special Meeting and file this Proxy Statement. On May 30, 2003, Messr.
Klimek requested a meeting with the Shareholder to discuss the matters set forth
in the Schedule 13D in more detail. On June 2, 2003, the Shareholder met with
the Senior Executive Directors, as requested by Messr. Klimek, in an attempt to
resolve the need for a proxy contest and to better understand the intention of
the Shareholder. On June 5, 2003, the Company appeared before the Nasdaq Appeals
Panel in an attempt to avoid being delisted from the Nasdaq SmallCap Market.
Shortly thereafter, the Investor provided the Company with a letter of intent,
in the form attached as Annex A, indicating the terms on which it would agree to
move forward with its equity investment. On June 10, 2003, the Shareholder
provided Messr. Klimek with a letter indicating that, in the opinion of the
Shareholder, the paramount priority of the Company was to obtain the financing
necessary to continue the Company's operations.
As of the date of this Proxy Statement, the Company has neither accepted
nor rejected the terms proposed by the Investor in the letter of intent.
Based on the foregoing, without the investment from the Investor, in the
opinion of the Shareholder, the Company will:
1. have to operate with limited cash flows for the foreseeable
future and will soon face a liquidity crisis; and
2. continue to suffer a decrease in shareholders equity, which will
result in the Company being delisted from the Nasdaq SmallCap
Market.
The Shareholder has reason to believe, based on the letter of intent,
that the Investor will commit to make the equity investment in the Company on
the terms set forth in the letter of intent, so long as the Removable Directors
are removed and replaced with the New Directors. In addition, the Shareholder
believes that such an equity investment would eliminate the deficiency in
shareholders' equity as well as eliminate the current liquidity crisis. However,
at present, there can be no assurance as to whether, or on what terms, any such
investment would be completed. Any such investment would be subject to, among
other things, negotiation of definitive documentation and the approval by the
Board (excluding any directors associated with the Investor).
-8-
For the reasons set forth above, in the opinion of the Shareholder, the
Removable Directors are accountable for not obtaining a significant equity
investment from the Investor, or any other investor, and accordingly, are
responsible for any further demise in the financial condition, operations and
results of the Company that may result therefrom.
In the opinion of the Shareholder, the combination self-interest and
lack of transparency, coupled with the lack of confidence those traits have
caused in the financial community, as evidenced by the decrease in the price of
the Common Stock, may not be repaired in the immediate future by the incumbent
Board so long as the Removable Directors are a part thereof. These problems are,
in the opinion of the Shareholder, too deep-rooted and undermine the trust that
we, as the Company's shareholders, are entitled to place in the Board.
Accordingly, the Shareholder believes that immediate change is necessary.
Recent Financial Performance
In fiscal 2002, the Company suffered its largest operating loss in the
history of the Company's operations. In the opinion of the Shareholder, based on
the manner in which senior management is presently operating the Company, the
Company will suffer from an operating loss of similar proportions in fiscal
2003. The Shareholder attributes the loss to the lack of sales and excessive
operating costs.
The Special Meeting
As permitted under the Colorado Business Corporation Act (the "Act") and
the Company's Bylaws (the "Bylaws"), the Shareholder has called the Special
Meeting for Wednesday, July 16, 2003 at 3:00 p.m. (Eastern Daylight Time) at the
principal executive offices of the Company, located at 15 Old Danbury Road,
Suite 203, Wilton, Connecticut, 06897. In accordance with the Act and the
Bylaws, the Shareholder has provided the Company with a written demand that the
Company immediately send notice of the Special Meeting to the shareholders of
record and entitled to vote at the Special Meeting. As of June 11, 2003, the
Company has refused to send notice of the Special Meeting to the shareholders.
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES OF COMMON
STOCK YOU OWN. THE SHAREHOLDER URGES YOU TO MARK, SIGN, DATE AND RETURN THE
ENCLOSED WHITE PROXY CARD PROMPTLY IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH
BELOW.
PLEASE DO NOT SIGN ANY PROXY CARD YOU MAY RECEIVE FROM STARTECH OR THE
REMOVABLE DIRECTORS.
You are urged to mark, sign and date the enclosed WHITE proxy card and
return it in the enclosed envelope whether or not you plan to attend the Special
Meeting. If you need assistance voting your shares of common stock, please call
the Shareholder's information agent, _____________________ at (___) ___-____ or,
if you are a bank or broker, please call collect at (___) ___-____. Please sign,
date and mail the enclosed WHITE proxy card. Only your last dated and signed
proxy card will count.
This Proxy Statement, together with the accompanying WHITE proxy card,
will first be furnished to the Company's shareholders on or about without a
proxy card, 2003; however, the Shareholder may distribute this Proxy Statement
without a proxy card to the shareholders on or about June 12, 2003.
-9-
The Proposals
The Shareholder is soliciting proxies from the holders of shares of
Common Stock to remove each of the Removable Directors, to fix the number of
directors at five and to appoint the New Directors to fill four vacancies on the
Board.
The Shareholder recommends that you vote FOR each Proposal by checking
the appropriate boxes and signing, dating and returning the enclosed WHITE proxy
card.
PROPOSAL ONE
REMOVAL OF REMOVABLE DIRECTORS
Proposal One provides for the removal of each of the Removable Directors
from the Board. Accordingly, if Proposal One is adopted by the shareholders at
the Special Meeting, each of the following persons will be removed from the
Board of Directors:
o Joseph S. Klimek;
o Kevin M. Black;
o Thomas E. Atkins;
o John E. Joyner;
o Brendan J. Kennedy;
o Richard M. Messina; and
o any of their successors, and any other director appointed prior
to the Special Meeting.
If shareholders adopt this proposal at the Special Meeting and the
directors set forth above are removed, six vacancies will be created on the
Board of Directors. However, as set forth in Proposal Two, the Shareholder is
proposing that if Proposal One is adopted by the shareholders at the Special
Meeting, the number of directors will be fixed at five, resulting in only four
vacancies to be filled on the Board.
Pursuant to Article IV, Section 4.12 of the Bylaws, "any director or
directors of the corporation may be removed at any time, with our without cause,
in the manner provided by the laws of the state of the corporation's
incorporation." The Company is incorporated under the laws of the State of
Colorado. Pursuant to applicable provisions in ss.7-108-108 of the Colorado law,
directors may be removed by the Company's shareholders as follows:
o the shareholders may remove one or more directors with or without
cause unless the articles of incorporation provide that directors
may be removed only for cause (see ss.7-108-108(1));
o a director may be removed only if the number of votes cast in
favor of removal exceeds the number of votes case against
removal; except that, if cumulative voting is in effect, a
director may not be removed if the number of votes sufficient to
elect the director under cumulative voting is voted against such
removal (see ss.7-108-108(3)); and
o a director may be removed by the shareholders only at a meeting
called for the purpose of removing him or her, and the meeting
notice shall state that the purposes, or one of the purposes, of
the meeting is removal of the director (see ss.7-108-108(4)).
As indicated in ss.7-108-108(1) of the Colorado law, the articles of
incorporation of the Company do not provide that directors may be removed only
for cause. In addition, the articles of incorporation and Bylaws do not allow
cumulative voting, as contemplated by ss.7-108-108(3) of the Colorado law.
Thus, pursuant to ss.7-108-108(3), the removal of directors requires
that the number of votes cast in favor of removal of a director exceeds the
number of votes case against removal of such director.
For the reasons set forth herein, the Shareholder recommends a vote
"FOR" this Proposal One.
-10-
PROPOSAL TWO
FIXING THE NUMBER OF DIRECTORS AT FIVE
If Proposal One is adopted and approved by the shareholders at the
Special Meeting, the Shareholder is asking that the shareholders fix the number
of directors that may serve on the Board at five. If the shareholders approve
this Proposal, the number of vacancies on the Board, following the removal of
the Removable Directors, will be four.
Pursuant to ss.7-108-103(2) of the Colorado laws, the Bylaws can
establish a range for the size of the Board by fixing a minimum and maximum
number of directors. At present, Section 4.1 of the Bylaws provides that the
Board consist of not less than 3 nor more than 7 directors. In addition, that
same section provides that if a range is established, the number of directors
may be fixed or changed from time to time within the range by the shareholders
or the board of directors. Accordingly, the Shareholder is asking that the
shareholders fix the number of directors at five.
For the reasons set forth herein, the Shareholder recommends a vote
"FOR" this Proposal Two.
PROPOSAL THREE
APPOINTMENT OF NEW DIRECTORS TO FILL THE VACANCIES ON THE BOARD
If Proposal One is adopted at the Special Meeting, but regardless of
whether Proposal Two is adopted at the Special Meeting, the Shareholder is
asking the shareholders fill four of the vacancies at the Special Meeting with
the New Directors. Accordingly, if this Proposal Three is adopted by the
shareholders at the Special Meeting, the following persons will constitute the
entire Board:
o Peter H. Shipman;
o Henry G. Ciocca;
o Douglas R. Ballew;
o Kenneth J. Slepicka; and
o Joseph F. Longo.
If the directors set forth in Proposal One are removed at the Special
Meeting, six vacancies will be created on the Board; provided, however, that if
Proposal Two is adopted by the shareholders, only four vacancies will be created
on the Board. Unless otherwise specified in the articles of incorporation of the
Company, pursuant to ss.7-108-110(1) of the Colorado law, vacancies on the Board
may be filled by:
o the shareholders;
o the board of directors; or
o if the directors in office constitute fewer than a quorum of the
board, they may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office.
There is no provision in the Company's articles of incorporation
governing the manner in which vacancies on the board of directors or filled. The
foregoing notwithstanding, Article IV, Section 4.4 of the By-Laws of the Company
currently provides that any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors through
less than a quorum of the Board of Directors. Accordingly, in the event the
directors set forth in Proposal One are removed at the Special Meeting, Joseph
F. Longo, the sole remaining member on the Board, will be permitted under
Colorado law and the Bylaws to fill any vacancies on the Board.
-11-
The foregoing notwithstanding, the Shareholder has no intention of
taking control of the Company on his own nor does the Shareholder intend to seek
any managerial role as an executive officer of the Company. Therefore, the
Shareholder believes that the shareholders of the Company have the right to
approve the appointment of the New Directors to fill the vacancies on the Board
if Proposal One is approved at the Special Meeting.
For the reasons set forth herein, the Shareholder recommends a vote
"FOR" this Proposal Three.
Information About the Shareholder
The Shareholder is presently a director of the Company as well as its
largest shareholder. As of the date of this Proxy Statement, the Shareholder is
the beneficial owner of an aggregate of 2,041,878 shares of Common Stock, which
represents approximately 18.03% of the issued and outstanding shares of Common
Stock (based on 11,323,202 shares of outstanding as of February 7, 2003, based
on information publicly disclosed by the Company in its definitive proxy
statement on Schedule 14A (the "Annual Meeting Proxy Statement"), filed with the
Securities and Exchange Commission (the "SEC") on February 14, 2003).
The Shareholder is a founder of Startech Corporation, a predecessor of
the Company, which was founded in 1994. The Shareholder has been a director of
the Company since 1995. From November 1995 until his retirement on January 11,
2002, the Shareholder was the Chief Executive Officer and President of Startech.
Prior to Startech, the Shareholder was a founder and Chief Operating Officer of
the International Dynetics Corp., a waste industry capital equipment
manufacturing company with multinational customers from 1969 to 1990. Prior
thereto, the Shareholder was Manager of New Product and Business Development for
AMF from 1959 to 1969. The Shareholder has been awarded many United States and
foreign patents on waste-industry, capital equipment inventions all of which
have been successfully commercialized and many of which are in operation today.
In addition, the Shareholder is a mechanical engineer and operating business
executive, with more than 30 years of waste industry management experience.
The Shareholder has no present intention of assuming any role as an
executive officer of the Company in the event the proposals set forth herein are
adopted by the shareholders at the Special Meeting.
Forward Looking Statements
Some of the statements contained in this Proxy Statement may constitute
"forward-looking statements," which for this purpose includes all statements
that are not of historical facts. The actual future financial performance of
Startech could differ materially from those anticipated by these forward-looking
statements. Particularly given the condition to which Startech has been reduced
under the current Board and management, there can be no assurance that the
Shareholder or the New Directors will succeed in their efforts to turn Startech
around.
The Shareholder may quote or refer to independent industry research
reports, financial analyst reports and newspaper articles in this Proxy
Statement. To the extent such a quote is included in this Proxy Statement, the
Shareholder has not sought or obtained the consent of the quoted source to the
use of such quote as proxy soliciting material.
AUDITORS
According to information contained in the Annual Meeting Proxy
Statement, at the Annual Meeting, the Board and the Company's shareholders
appointed Kostin, Ruffkess & Company, LLC as independent accountants to examine
the financial statements of the Company for the fiscal year ending October 31,
2003. Kostin, Ruffkess & Company, LLC has served as the independent accountant
for the Company since 1996.
-12-
OTHER MATTERS
Proxy Solicitation
This proxy solicitation is being made by the Shareholder and not on
behalf of the Board or management of the Company.
Mailing Date
This proxy statement and form of proxy card is first being sent or given
to the shareholders on or about __________, 2003.
Record Date
Pursuant to ss.7-107-107(1) of the Colorado law, the Bylaws may fix or
provide the manner of fixing a future date as the record date for one or more
voting groups in order to determine the shareholders entitled to notice of and
to vote at the Special Meeting. Section 2.7 of the Bylaws sets forth the manner
of fixing a record date. Pursuant thereto, the record date may be set in one of
three ways: (1) by order of the Board to close the stock transfer books of the
Company, (2) in lieu of closing the stock transfer books, the Board may fix a
date that is not less than ten and not more than fifty days before the date of
the Special Meeting as the record date or (3) if the Board does not set the
record date in accordance with (1) or (2) above, the record date shall be the
date on which notice of the Special Meeting is mailed to the shareholders.
On May 29, 2003, the Shareholder provided the Company with a letter
demanding that the Company immediately send notice of the Special Meeting to the
shareholders of record and entitled to vote, in accordance with applicable laws.
Accordingly, the shareholders of record on ________, 2003 (the "Record Date"),
the date set as the record date pursuant to Section 2.7 of the Bylaws, shall be
entitled to notice of and to vote at the Special Meeting.
Proxy Solicitation Costs
All expenses in connection with solicitation of proxies will be borne by
the Shareholder. The Shareholder will pay brokers, nominees, fiduciaries, or
other custodians their reasonable expenses for sending proxy material to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Shareholder expects to solicit proxies by mail, but other employees of the
Shareholder may also solicit in person, by telephone, by telegraph or by mail.
The Shareholder has retained ________________________ (the "Solicitation
Agent") to solicit proxies on the Shareholder's behalf in connection with the
Special Meeting. The Solicitation Agent will receive a fee of approximately
$___________, together with reimbursement of its reasonable out-of-pocket
expenses, and will be indemnified against certain liabilities and expenses,
including certain liabilities under the federal securities laws. The estimated
fee for the Solicitation Agent is $________ to $_________, depending on the
complexities of the solicitation.
The Solicitation Agent will solicit proxies from individuals, brokers,
banks, bank nominees, and other institutional holders. The Shareholder has
requested banks, brokerage houses, and other custodians, nominees, and
fiduciaries to forward all solicitation materials to the beneficial owners of
the shares they hold of record. We will reimburse these record holders for their
reasonable out-of- pocket expenses in so doing. It is anticipated that the
Solicitation Agent will employ approximately __ persons to solicit the Company's
shareholders for the Special Meeting. For any questions you may have on proxy
voting, please call the Solicitation Agent at (___)___-____.
In the event that shareholders approve the Proposals set forth above at
the Special Meeting, the Shareholder intends to seek reimbursement from the
Company for its costs, including legal fees and related expenses.
-13-
Voting Procedures
The shares represented by the accompanying proxy will be voted as
directed with respect to each of the proposals set forth in the proxy statement,
OR, if no direction is indicated, your shares will be voted as follows:
o FOR the removal from the Board all persons other than the
Shareholder (if adopted, this proposal would result in the
removal from the Board of Directors of Joseph S. Klimek, Kevin M.
Black, Thomas E. Atkins, John E. Joyner, Brendan J. Kennedy and
Richard M. Messina, or any of their successors, and any other
director appointed prior to the Special Meeting) (see Proposal
One); and
o FOR the fixing of the number of directors at five, if Proposal
One is adopted (see Proposal Two); and
o FOR the appointment of Peter H. Shipman, Henry G. Ciocca, Douglas
R. Ballew and Kenneth J. Slepicka to fill the vacancies created
as a result of the removal of directors, if Proposal One is
adopted and regardless of whether Proposal Two is adopted. (see
Proposal Three);
Revoking Your Proxy
You may revoke your proxy at any time before it is voted at the Special
Meeting. In order to revoke your proxy, you may either:
o sign and timely return another proxy card bearing a later date;
o provide written notice of the revocation to the Secretary of the
Company; or
o attend the Special Meeting and vote in person;
except, in each case, as to any matter or matters upon which, prior to such
revocation, a vote shall have been cast pursuant to the authority conferred by
such proxy.
Quorum
As set forth in Article IV, Section 4 of the articles of incorporation,
a majority of the shares of Common Stock entitled to vote, represented in person
or by proxy, shall constitute a quorum at the Special Meeting. Abstentions will
be treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum, but as unvoted for purposes of determining
the approval of the matters submitted to the shareholders. Therefore,
abstentions are effectively a vote against the proposal. If a broker indicates
on the proxy that it does not have discretionary authority as to certain shares
to vote on a particular matter, those shares will not be considered as present
and entitled to vote with respect to that matter.
Votes Required for Each Proposal
Assuming a quorum is present, the vote required and method of
calculation for the proposals to be considered at the Special Meeting are as
follows:
o Proposal One. The removal of the Removable Directors from the
Board requires that the number of votes cast in favor of removal
exceeds the number of votes case against removal.
o Proposal Two. The fixing of the number of directors at five
requires the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on Proposal Two,
a quorum being present.
o Proposal Three. The appointment of the New Directors to fill the
vacancies on the Board of Directors, if Proposal One is adopted,
requires a plurality of the votes cast in favor of each New
Director.
-14-
You may vote "FOR," "AGAINST," or "ABSTAIN" from voting on the matters
set forth under Proposals One, Two and Three.
Inspector of Elections
The Shareholder will appoint an inspector to act at the Special Meeting
who shall ascertain the number of shares outstanding and the voting powers of
each, determine the shares represented at the Special Meeting and the validity
of the proxies and ballots, count all votes and ballots, determine and retain
for a reasonable period a record of the disposition of any challenges made to
any determinations by such inspector and certify a determination of the number
of shares represented at the Special Meeting and the count of all votes and
ballots.
Voting of Shares by the Shareholder
The Shareholder, a director of the Company, directly and beneficially
has the power to vote approximately 15.38% of the total voting power of the
Common Stock and intends to vote "FOR" each Proposal at the Special Meeting.
Recommendation of Vote
Your vote at the Special Meeting is very important, no matter how many
or how few shares you own. Please sign and date the enclosed WHITE proxy card
and return it in the enclosed postage-paid envelope promptly.
Proxies of Startech or the Removable Directors
Please do not return any proxy card sent to you by STARTECH AND/OR THE
REMOVABLE DIRECTORS (other than the Shareholder).
Even if you vote on any proxy card that is submitted to you by Startech
hereafter, you can easily change your vote and revoke that proxy by signing,
dating and returning the enclosed WHITE proxy card. Only your latest dated proxy
will count at the Special Meeting.
Available Information
If you have any questions concerning this Proxy Statement, would like to
request additional copies of this Proxy Statement or need help voting your
shares, please contact the Shareholder at (203) 762-3945 or contact or the
Solicitation Agent at (___) ___-____.
Shareholder Proposals for the 2004 Annual Meeting
The Company's proxy statement with respect to the 2003 annual meeting
indicates that the 2004 annual meeting is expected to be held on or about March
5, 2004 and that if any shareholder wishes to submit a proposal for inclusion in
the proxy statement for the Company's 2004 annual meeting, the rules of the
United States Securities and Exchange Commission require that such proposal be
received at the Company's principal executive office by October 17, 2003.
Information Regarding the Company
The information concerning the Company contained in this Proxy Statement
has been taken from or is based upon documents and records on file with the SEC
and other publicly available information. The Shareholder has no knowledge that
would indicate that statements relating to the Company contained in this Proxy
Statement in reliance upon publicly available information are inaccurate or
incomplete.
-15-
THIS PROXY IS SOLICITED ON BEHALF OF JOSEPH F. LONGO
The undersigned shareholder of Startech Environmental Corporation, a
Colorado corporation (the "Company"), hereby appoints Joseph F. Longo and Henry
G. Ciocca or if only one is present, then that individual, with full power of
substitution, to vote all shares of common stock, no par value of the Company
which the undersigned is entitled to vote at the special meeting of shareholders
to be held at 15 Old Danbury Road, Suite 203, Wilton, Connecticut, 06897 on
Wednesday, July 16, 2003 at 3:00 p.m. (Eastern Daylight Time), and at any
adjournment thereof, hereby ratifying all that said proxies or their substitutes
may do by virtue hereof, and the undersigned authorizes and instructs said
proxies to vote as follows:
(1) Proposal to removal each of the following persons from the Board of
Directors of the Company:
Joseph S. Klimek John E. Joyner
Kevin M. Black Brendan J. Kennedy
Thomas E. Atkins Richard M. Messina
FOR [ ] (except as marked to the contrary)
WITHHELD [ ] (a shareholder may withhold authority to vote for any
nominees by lining through or otherwise striking out
the name of such nominees)
(2) Proposal to fix the number of directors at five:
FOR: [ ] AGAINST: [ ] ABSTAIN: [ ]
(3) Proposal to fill four of the vacancies on the Board of Directors with each
of the following persons:
Peter H. Shipman
Henry G. Ciocca
Douglas R. Ballew
Kenneth J. Slepicka
FOR [ ] (except as marked to the contrary)
WITHHELD [ ] (a shareholder may withhold authority to vote for any
nominees by lining through or otherwise striking out
the name of such nominees)
If you plan to attend the special meeting, please check this box:
The SHAREHOLDER recommends a vote "FOR" each of the foregoing proposals. If any
other business is properly presented at the Special Meeting, this Proxy shall be
voted in accordance with the judgment of the proxy holder. This Proxy is
solicited on behalf of the shareholder and may be revoked prior to its use.
(Continued and to be dated and signed on the other side.)
-16-
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS ONE, TWO AND THREE.
FOR THIS PROXY TO BE VALID, PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
Dated:____________, 2003
----------------------------
(Signature of Stockholder)
----------------------------
(PRINT NAME)
Your signature should appear
the same as your name appears
herein. If signing as
attorney, executor,
administrator, trustee or
guardian, please indicate the
capacity in which signing.
When signing as joint
tenants, all parties to the
joint tenancy must sign. When
the proxy is given by a
corporation, it should be
signed by an authorized
officer.
-17-
ANNEX A
[NORTHSHORE LETTERHEAD]
June 6, 2003
Startech Environmental Corporation
15 Old Danbury Road, Suite 203
Wilton, CT 06897-2525
Attention: Joseph S. Klimek
Re: Investment in Startech Environmental Corporation
------------------------------------------------
Gentlemen:
We have been informed by Mr. Longo that discussions have taken place over the
past several days in an attempt to come to an agreement, without the need for a
proxy contest, between Mr. Longo and Startech. It is our understanding that
although conditional proposals were examined by each side, during those
discussions, no definitive commitments were made. After considering the status
of the ongoing discussions and the requests of Messrs. Klimek and Black for a
formal written proposal that will be presented to the Board of Directors of
Startech, we are providing this letter, which has been reviewed and approved by
each member of the proposed board listed in Mr. Longo's Schedule 13D/A filing.
This letter summarizes Northshore's intention to proceed with a proposed equity
investment in Startech. We strongly believe that the terms upon which we would
be willing to make an investment, as set forth below, will give Startech the
best opportunity to unlock its potential value to the benefit of Startech and
its current shareholders.
1. The Investment. Northshore would commit to make an equity investment of
at least $2 million and up to $3 million in Startech. The specific terms
and conditions of such an equity investment would be subject to the
execution of a definitive purchase agreement, in substantially the form
previously agreed to between Startech and Northshore, which definitive
purchase agreement would include, without limitation, the conditions set
forth herein.
2. Board Representation. As previously discussed, Northshore would require
that the Board of Directors of Startech be reduced to five members,
which Board would consist of the following five individuals: Joseph F.
Longo, Peter H. Shipman, Henry G. Ciocca, Douglas R. Ballew and Kenneth
J. Slepicka.
3. Repricing of Options. Because it will be to the detriment to the
shareholders of Startech, Northshore will not agree to management's
request of Klimek, Black and DeRochie to have the price of their stock
options reduced.
4. Management Severance. Northshore would agree to severance payments to
Messrs. Klimek, Black and DeRochie, the senior executive offices that
are currently serving under employments agreements with Startech, as
follows:
Joseph Klimek agreement until the end of calendar year 2003
Kevin Black agreement until the end of calendar year 2003
Robert DeRochie until the end of October 2003
Northshore would require that at the time of closing of its equity
investment, the existing employment agreements would be terminated and
the senior executive offices would enter into consulting agreements with
Startech, in a form that is satisfactory to Northshore.
-18-
5. Other Transactions; Authorization; Inconsistent Obligations. (a) Until
the date that is four months from the date this letter is executed by
both parties, Startech will not (and will not permit any person or
entity which it controls to) (i) seek, entertain or negotiate any terms
of a Strategic Transaction (as defined below) with any party other than
Northshore, (ii) give any information concerning its business to any
such party or (iii) enter into any agreement inconsistent with this
letter of intent or a proposed transaction with Northshore. A "Strategic
Transaction" means (i) any form of acquisition, direct or indirect,
whether by purchase, merger, stock sale (primary or secondary) or any
other structure, of any significant (5% or greater in the aggregate)
portion of Startech's consolidated business or a significant (5% or
greater in the aggregate) equity interest therein or (ii) any
arrangement whereby effective operating control of Startech's
consolidated business or a portion thereof is granted to another party.
During such period, Startech will promptly notify Northshore of the
content and identity of any proposal or communication it receives from
any such person concerning any Strategic Transaction.
(b) Startech is not a party to or bound by any agreement or stipulation
which is or would be breached (or under which any other change in
rights, interests or obligations would be triggered) by Startech's entry
into this letter of intent or by consummation of a proposed agreement,
or which requires or would require a consent of another party to such
entry or consummation.
6. Expenses. Each party will bear its own expenses relating to a proposed
transaction, including, without limitation, the fees and expenses of its
counsel, accountants and consultants, whether or not a transaction is
consummated; provided, however, that Northshore shall be entitled to
receive reasonable fees and expenses incurred in connection with its
efforts to consummate a transaction if a transaction is not consummated.
7. Binding and Non-Binding Provisions. Paragraphs 5 through 7 of this
letter of intent are intended to be legally binding and the remainder of
this letter of intent is not intended to be legally binding. Except for
paragraphs 5 through 7, neither party will have any legal or enforceable
obligations with respect to a transaction itself or any matter
preliminary thereto, unless and until complete, written definitive
agreements are negotiated, executed and delivered. This paragraph 7
states the entire understanding of the parties as to the legal status of
this letter of intent, and can be modified or waived only by a further
writing signed by both parties expressly modifying or waiving this
paragraph 7.
If Startech agrees to each of the foregoing, please confirm by signing in the
space provided below and returning a signed copy to me, via facsimile, overnight
courier, etc.
Very truly yours,
NORTSHORE ASSET MANAGEMENT, LLC
-------------------------------
Robert Wildeman
cc: The Board of Directors
AGREED TO AND ACCEPTED:
STARTECH ENVIRONMENTAL CORPORORATION
By: ______________________________
Name:
Title:
-19-